PNC Bank Earnings Hurt by Fall in Fee Income and Higher Credit Loss Provisions

PNC Financial reported worse than expected fourth quarter earnings before the market Wednesday along after JPM, Wells Fargo, Wells Fargo, Bank of America, Goldman Sachs and Citigroup all reported earlier.  Non-interest income fell 8.2% year over year to $2.08 billion due to falling fee income components, except for card and cash management fees, and lending and deposit services fees. PNC reported provision for credit losses of $408 million in the fourth quarter and net loan charge-offs were $224 million, up 80.6% year over year.

pnc bank atm

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

PNC Q4 2023 Earnings

Q4 2022 earnings before the bell; conference call at 10 a.m. ET Wednesday

  • Net income $1.55 billion, higher than $1.31 billion in the prior-year quarter.
  • Adj EPS $3.49 (est $3.96)
  • Revenue $5.76B (est $5.71B) up 12.4% year over year.
  • Loans $326.03B (est $319.41B) grew 3.4% sequentially
  • Net interest income (NII) $3.68 billion up 28.7% from the year-ago quarter. Attributable to higher interest-earning asset yields and balances, partially offset by higher funding costs. The net interest margin increased 65 basis points to 2.92%.
  • Non-interest income fell 8.2% year over year to $2.08 billion.
  • Non-interest expenses totaled $3.47 billion, declining 8.4% from the year-ago figure.
  • The efficiency ratio was 60% compared with 74% in the year-ago quarter. A lower efficiency ratio indicates higher profitability.
  • Provision for credit losses of $408 million in the fourth quarter against the recapture of credit losses of $327 million in the year-earlier quarter.
  • Net loan charge-offs were $224 million, up 80.6% year over year.
  • Non-performing loans decreased 20% year over year to $1.99 billion.
  • Allowance for credit losses declined 1.7% to $5.44 billion.

PNC: Stock Market Reaction

  • $153.415 ▼ -8.435(5.21%)) Morning
  • $153.415 ▼ -6.105(3.83%) YTD
  • $153.415 ▼ -63.63 (29.34%) Over year
  • $153.415 ▼ -0.295 (0.19%) Over 5 years
  • 52wk High $211.18
  • 52wk Low $140.85

Capital Position Weakened, Profitability Ratios Improve

  • As of Dec 31, 2022, the Basel III common equity tier 1 capital ratio was 9.1% compared with 10.3% as of Dec 31, 2021.
  • Return on average assets and average common shareholders’ equity were 1.10% and 14.19%, respectively, compared with 0.93% and 9.61% witnessed in the prior-year quarter.

Share Repurchases and Dividends

In the fourth quarter of 2022, PNC Financial returned $1.2 billion of capital to shareholders through dividends on common shares of $0.6 billion and share repurchases amounting to $0.6 billion.

Higher rates increase margins

PNC’s net interest income (NII) $3.68 billion up 28.7% from the year-ago quarter. Attributable to higher interest-earning asset yields and balances, partially offset by higher funding costs. The net interest margin increased 65 basis points to 2.92%.

The brighter outlook for bank profits coincides with higher Treasury yields. The benchmark 10-year Treasury yield has risen dramatically for the year-to-date, with higher interest rates boosting banks income from their core lending businesses.  The bank’s net interest margin, a measure of what it collects on loans minus what it pays for deposits rises with rates.

About PNC

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

Source: PNC Earnings Release 

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