NII Growth to Aid PNC Financial's Q4 Earnings, High Costs to Hurt

The PNC Financial Services Group, Inc. PNC is scheduled to report fourth-quarter 2024 earnings on Jan. 16, before the opening bell. The bank’s fourth-quarter 2024 revenues and earnings are expected to have improved from the year-ago quarter’s reported level.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.In the last reported quarter, PNC’s earnings outpaced the Zacks Consensus Estimate, driven by a rise in fee income and higher loan balance. However, a decline in NII and an increase in provisions for credit losses, along with a rise in expense base, were major headwinds. The company has an impressive earnings surprise history. It surpassed estimates in each of the trailing four quarters, with an average earnings surprise of 7.63%.The PNC Financial Services Group, Inc Price and EPS Surprise The PNC Financial Services Group, Inc price-eps-surprise | The PNC Financial Services Group, Inc QuoteNow, let us discuss factors that might have influenced PNC Financial’s fourth-quarter performance.Net Interest Income (NII): In the fourth quarter, the Federal Reserve cut interest rates by 50 basis points to 4.25-4.5%. This, along with the rate cut in September, is likely to have offered some support to PNC Financial’s NII as the rise in funding/deposit costs declined. In the fourth quarter, the Federal Reserve lowered interest rates by 50 basis points to 4.25-4.5%, following a rate cut in September. This reduction, along with the easing of funding and deposit costs, is likely to have supported PNC Financial's net interest income.In the fourth quarter, management anticipates NII to rise around 1% from $3.4 billion reported in the third quarter of 2024.The Zacks Consensus Estimate for NII of $3.45 billion indicates a sequential rise of 1.2%. Our estimate for the metric is pegged at $3.43 billion.Loans: With greater clarity on the Fed's rate cut trajectory and a stabilizing macroeconomic environment, lending conditions are likely to have strengthened. The Fed's latest data shows steady demand for commercial and industrial loans, real estate loans, and consumer loans in the first two months of the quarter. As a result, the company’s lending activity is expected to have seen an improvement in the to-be-reported quarter.The company expects average loans to remain stable in the fourth quarter of 2024 from the third quarter’s reported figure of $319.6 billion. Our estimate for the metric is pegged at $320.1 billion.Non-Interest Revenues: Mortgage rates in the fourth quarter of 2024 were close to 6.8%, slightly higher than the 6.2% observed at the end of the third quarter. Despite the central bank's interest rate cuts, mortgage rates did not decline significantly. As a result of these fluctuations, refinancing activities and origination volumes did not experience significant growth. This might have limited the company's mortgage revenue growth in the quarter-to-be reported. The Zacks Consensus Estimate for the residential and commercial mortgage revenues in the fourth quarter of 2024 is pegged at $141.2 million, indicating a decline of 22% sequentially.Global mergers and acquisitions (M&As) experienced a strong rebound in the fourth quarter of 2024 following a sluggish 2023 and 2022. Deal value and volume were bolstered by solid financial performance, robust U.S. economic growth, buoyant markets and interest rate cuts. The anticipation of reduced regulatory oversight on M&As under the incoming Trump administration further fueled deal-making activity, while signs of recovery were evident in the capital markets. However, persistent geopolitical challenges and competitive pressures are likely to have limited PNC’s ability to fully capitalize on market opportunities and expand its capital markets and advisory revenues.The Zacks Consensus Estimate for the capital markets and advisory revenues in the fourth quarter of 2024 is pegged at $295.8 million, indicating a 20.2% decline sequentially.The Zacks Consensus Estimate for card and cash management revenues is pinned at $689.3 million, indicating a sequential decline of 1.2%.Management expects overall fee income to decline 5-7% in the fourth quarter compared with $1.95 billion reported in the third quarter of 2024. The Zacks Consensus Estimate for non-interest income in the fourth quarter of 2024 is pegged at $2 billion, indicating a 1% decline sequentially. Our estimate for the metric is pegged at $1.99 billion.Expenses: PNC’s expenses are expected to have continued flaring up during the fourth quarter due to its investments in franchise expansion, technology and digitalization, which might have hindered its bottom-line growth.Management expects adjusted non-interest expenses to increase 2-3% in the fourth quarter compared with $3.3 billion reported in the third quarter of 2024. Our estimate for the metric is pegged at $3.4 billion.Asset Quality: PNC Financial is likely to have set aside a huge amount of money for potential delinquent loans (mainly commercial loan defaults), given the expectations of higher for longer interest rate backdrop.Management expects net charge-offs to be around $300 million compared with the third-quarter 2024 reported figure of $286 million. Our estimate for the metric is pegged at $299.7 million. The Zacks Consensus Estimate for non-performing assets in the fourth quarter of 2024 is pegged at $2.69 billion, indicating an increase of 2.9% from the previous quarter. Our estimate for the metric is pegged at $2.3 billion.What Our Model Unveils for PNCOur proven Zacks model predicts an earnings beat for PNC Financial this time around. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That's the case here.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Earnings ESP: PNC Financial has an Earnings ESP of +1.68%.Zacks Rank: The company currently carries a Zacks Rank of 3.The Zacks Consensus Estimate for fourth-quarter earnings has moved marginally upward in the past seven days at $3.30 per share. It suggests a year-over-year rise of 4.43%.The consensus estimate for quarterly revenues of $5.47 billion indicates a 2.1% increase from the prior-year quarter’s reported figure.Other Stocks to ConsiderHere are some other bank stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post earnings beat this time around.The Earnings ESP for Texas Capital Bancshares, Inc. TCBI is +2.04% and it carries a Zacks Rank #3 at present. The company is slated to report its fourth-quarter 2024 results on Jan. 23. You can see the complete list of today’s Zacks #1 Rank stocks here.Over the past seven days, the Zacks Consensus Estimate for TCBI’s quarterly earnings has moved downward.First Horizon Corporation FHN has an Earnings ESP of +3.18% and carries a Zacks Rank #2 at present. The company is scheduled to release its fourth-quarter 2024 earnings on Jan. 16.  FHN’s quarterly earnings estimates have moved upward in the past 30 days.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report Texas Capital Bancshares, Inc. 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