Rise in Net Interest Income to Support PNC Financial's Q3 Earnings

The PNC Financial Services Group, Inc. PNC is scheduled to report its third-quarter 2024 earnings on Oct.15, before the opening bell. The bank’s third-quarter 2024 revenues are expected to have improved from the year-ago quarter’s reported level, while earnings are expected to have declined.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.In the second quarter, PNC’s earnings outpaced the Zacks Consensus Estimate, driven by a rise in fee income, higher loan balance and reduced expenses. However, a decline in net interest income (NII) and an increase in provisions for credit losses acted as a spoilsport. The company has a decent earnings surprise history. It surpassed estimates in each of the trailing four quarters, with an average earnings surprise of 9.41%.  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 third-quarter performance.Loans: The clarity on the Fed’s rate cut path and the stabilizing macroeconomic backdrop are likely to have provided support to the lending scenario. According to the latest data from the Fed, the demand for commercial and industrial and consumer loans was modest in the first two months of the quarter, while demand for commercial real estate remained subdued.The company’s lending book is likely to have been positively impacted by modest demand in commercial and industrial and consumer loans while the subdued commercial real estate loan demand might have offset the growth to some extent.The company expects average loans to remain stable in the quarter under review compared with the second quarter’s reported figure of $319.9 billion. Our estimate for the metric is pegged at $320.9 billion. Net Interest Income: On Sept.18, the Federal Reserve cut the interest rates by 50 basis points to 4.75-5% for the first time since March 2020. While the rate cut is not expected to significantly affect PNC’s NII in the quarter under review, greater clarity on the Fed’s rate cut path, along with a stabilizing macroeconomic environment, is likely to have aided the lending outlook. Management expects NII to rise at the higher end of growth of 1-2% in the third quarter. The company reported NII of $3.3 billion in the second quarter of 2024. The Zacks Consensus Estimate for NII of $3.36 billion indicates a sequential rise of 1.8%. Our estimate for the metric is pegged at $3.36 billion. Non-Interest Revenues: In the third quarter, the company expected to have witnessed an improvement in consumer spending. However, PNC's card and cash management revenues are unlikely to have benefited from this rise in consumer activity. The Zacks Consensus Estimate for the metric is pinned at $698.3 million, indicating a sequential decline of 1.1%.As the central bank lowered the interest rates, mortgage rates started to come down. The rates declined to almost 6.2% by the end of the third quarter. Although mortgage origination volume remained subdued in the quarter under review, refinancing activities witnessed a significant surge supported by lower mortgage rates. This is likely to have supported PNC’s residential and commercial mortgage revenues. The Zacks Consensus Estimate for the residential and commercial mortgage revenues is pegged at $138.2 million, indicating a rise of 5.5% sequentially.Global mergers and acquisitions (M&A) in the third quarter of 2024 showed improvement after subdued 2023 and 2022. Both deal value and volume were decent during the quarter, driven by solid financial performance, higher chances of a soft landing of the U.S. economy, buoyant markets and interest rate cuts. Also, green shoots were observed in the capital markets. Thus, the company’s capital markets and advisory revenues are likely to have improved. The Zacks Consensus Estimate for the capital markets and advisory revenues is pegged at $292.3 million, indicating 7.5% growth sequentially.Management expects overall fee income to rise 1-2% in the third quarter. The company reported overall fee income of $1.77 billion in the second quarter of 2024. However, the Zacks Consensus Estimate for non-interest income is pegged at $1.99 billion, indicating a 5.8% decline sequentially. Our estimate for the metric is pegged at $1.94 billion.Expenses: PNC’s expenses are expected to have continued flaring up during the third 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 3-4% in the third quarter. PNC reported adjusted non-interest expenses of $3.2 billion in the second quarter of 2024. Our estimate for the metric is pegged at $3.4 billion.Asset Quality: PNC Financial is expected to have set aside substantial money for potential bad loans, given the expectations of an economic slowdown. Our estimate for provision for credit losses is pegged at $219.4 million for the third quarter.Management expects net charge-offs to be between $250 million and $300 million in the third quarter compared with the year-ago quarter’s $262 million. Our estimate for the metric is pegged at $257.3 million. The Zacks Consensus Estimate for non-performing assets of $2.56 billion indicates an increase of nearly 1% from the previous quarter. Our estimate for the metric is pegged at $2.3 billion.What Our Model Unveils for PNC?Our 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 +2.23%.Zacks Rank: The company currently carries a Zacks Rank of 3.The Zacks Consensus Estimate for third-quarter earnings has moved upward by 1.5% in the past 30 days at $3.28 per share. It suggests a year-over-year decline of 8.9%.The consensus estimate for quarterly revenues of $5.36 billion indicates a 2.4% 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 Citizens Financial Group, Inc. CFG is +3.12% and it carries a Zacks Rank #3 at present. The company is slated to report its third-quarter 2024 results on Oct. 16. You can see the complete list of today’s Zacks #1 Rank stocks here.Over the past seven days, the Zacks Consensus Estimate for CFG’s quarterly earnings has moved 1.3% north.First Horizon Corporation FHN has an Earnings ESP of +3.18% and carries a Zacks Rank #3 at present. The company is scheduled to release its third-quarter 2024 earnings on Oct. 16.  FHN’s quarterly earnings estimates have been unchanged over the past 60 days.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.7% per year. So be sure to give these hand picked 7 your immediate attention. See them 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 First Horizon Corporation (FHN): Free Stock Analysis Report Citizens Financial Group, Inc. (CFG): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks