Investors Reacting Cautiously to PNC Financial Services Group’s Strong Results and Guidance

Goldman Sachs analyst Richard Ramsden predicts that investors will respond neutrally to PNC Financial Services Group, Inc.’s recent solid results and updated FY24 guidance. The bank reported a 2% year-over-year revenue increase to $5.411 billion, slightly below the consensus estimate, while the adjusted EPS of $3.30 exceeded expectations. Looking ahead to FY24, PNC expects a 4% decline in net interest income, revenue to decrease by 1%-2%, and average loans to drop by less than 1%.

Ramsden highlights that PNC’s guidance for the third quarter of 2024 indicates a slightly lower pre-provision net revenue (PPNR) compared to consensus estimates. The updated FY24 guidance suggests a 2% lower PPNR at the midpoint than what the Street anticipated. The analyst emphasizes the importance of management’s comments on various factors such as assumptions, NII trajectory, expense trends, credit outlook, and potential for reserve releases. Ramsden particularly expects inquiries on losses in consumer and corporate segments and any recent credit trend deterioration.

Additionally, commercial real estate net charge-offs (NCOs) saw an increase to 1.28%, prompting a rise in the office CRE reserve ratio. Ramsden maintains a Neutral rating on PNC with a price target of $165. As of the last check, PNC shares were up 4.66% at $176.89. Investors interested in exposure to PNC stock can consider IShares U.S. Regional Banks ETF IAT and Invesco Exchange-Traded Fund Trust II Invesco S&P Ultra Dividend Revenue ETF RDIV.