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PNC Financial reported better than expected fourth quarter earnings before the bell on Friday. $PNC saw higher interest income and a rise in non-interest income, reporting after Citigroup,  Wells Fargo $WFC and JPMorgan $JPM. The bank released around $254 million linked to the release of previous credit loan provisions;

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PNC Financial Services Group Inc NYSE: PNC · Reported Before Open Friday

$3.26 Beat $2.61 EPS Expected AND $4.21 Bil Beat $4.20 billion Revenue Forecast

Earnings

PNC Financial Services Group (NYSE: PNC) reported fourth-quarter net income was $1.46 billion, or $3.26 a share, compared with $1.38 billion, or $2.97 a share, in the year-earlier quarter and well ahead of the FactSet consensus called for earnings of $2.61 a share. Revenue totaled $4.21 billion, compared with $4.32 billion a year ago ahead of forecasts of $4.2 billion

PNC Financial Services Group Inc NYSE: PNC

Market Reaction Close 154.70 ▼ 6.71 (-4.16%)

Highlights

Bill Demchak, president, chairman and CEO, said in a statement that "PNC had a notable year in 2020 amid the many challenges of the pandemic." "We achieved solid financial results, grew loans and deposits, delivered positive operating leverage, and maintained our strong capital position," Demchak said. "Nonetheless, net income from continuing operations decreased as we built substantial reserves to address the uncertain economic environment that still remains."

  • Revenue from interest on loans was $2.42 billion compared with $2.49 billion a year earlier.
  • Non-interest revenue came to $1.78 billion against $1.83 billion. Wall Street forecasr interest-related revenue of $2.48 billion and non-interest revenue of $1.67 billion.
  • The company said that in the quarter it recaptured $254 million that it had provisioned for credit losses, "reflecting improvements in macroeconomic factors."
  • PNC had provisioned $52 million for credit losses in the third quarter.
  • Average deposits increased sequentially by $8.9 billion, or 3%, to $359.4 billion due to growth in both commercial and consumer deposits.

Our balance sheet finished the year in a very strong position, record levels of capital and liquidity and significant credit reserves. In addition, we grew tangible book value per share of 17% year-over-year. While the economy improved modestly this quarter and we’re encouraged by the roll out of the vaccines, we continue to operate amidst the pandemic, a low rate environment, and weak loan demand, - Bill Demchak

Outlook

Conference Call with Robert Q. Reilly — Executive Vice President and Chief Financial Officer

  • Looking ahead at the first quarter of 2021 compared to the fourth quarter of 2020, we expect total average loans to be stable to down modestly. Inside of that, PPP loans are expected to be up approximately $2 billion.
  • We expect NII to be down approximately 1%, which includes the impact of two fewer days in the first quarter.
  • Excluding the impact of PPP, net interest income is expected to decline approximately 3%.
  • We expect total non-interest income to be down mid-single digits. Within that, other non-interest income is expected to be between $275 million and $325 million.
  • We expect total non-interest expense to be down in the mid-single digit range. In regard to net charge-offs,
  • We expect first quarter levels to be between $200 million and $250 million.

Looking at the full year 2021 guidance, we thought it would be helpful to provide our expectation for PNC’s standalone performance excluding any one-time costs related to the BBVA USA transaction.

For the full year 2021 compared to the full year 2020 results, we expect average loan growth to be down in the low-single digit range. The significant increase in loan utilization during the beginning of the pandemic elevated average loan balances in 2020 as you know, which created a difficult backdrop for the full year average loan growth comparison. '

However, we do expect to have loan growth throughout 2021 resulting in low-single digit spot growth for the year. We expect total revenue to be stable. We expect expenses to be stable. This represents — I’m sorry — I back that up, we expect revenues to be stable and this represents a current net interest income forecast of down modestly, but we acknowledge potential deposit growth and further rate steepening in excess of our current forecast, it is plausible and that’s relative to revenues. We expect our expenses to be stable and we expect our effective tax rate to be approximately 17%.

BBVA

In the second quarter of 2020 PNC sold their passive stake — passive equity stake in BlackRock. In November, announced thier plan to redeploy those proceeds to acquire BBVA USA. PNC in November said it would acquire the U.S. banking operations of Spain's BBVA for $11.6 billion cash, making it the biggest regional bank by assets under management in the U.S. The transaction is expected to close in mid-2021 and will increase PNC's total assets by an estimated $102 billion, creating the fifth largest bank by assets.

Source: PNC Earnings Release 

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