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PNC Financial (PNC) Q3 Earnings Beat, Provisions Decline

PNC Financial (PNC) Q3 Earnings Beat, Provisions Decline

PNC Financial PNC pulled off third-quarter 2020 positive earnings surprise of 62% on prudent expense management. Earnings per share of $3.39 surpassed the Zacks Consensus Estimate of $2.09. Also, the figure was 15% higher than the prior-year level.

Shares of PNC Financial gained 1.5% in pre-market trading as investors reacted positively to the decline in expenses and lower provisions. A full day’s trading session will depict a better picture.

Moreover, decent fee income aided revenue growth. However, a lower net interest margin and decrease in loans were undermining factors.

Segment-wise, quarterly net income in Corporate & Institutional Banking and Retail banking climbed 4% and 53%, year over year, respectively. Further, the Other segment reported a 69% rise in net income, while the Asset Management Group segment registered a whopping 98% growth.

Fee Income Aids Revenues, Loans Decline, Expenses Fall

Total revenues for the reported quarter came in at $4.28 billion, up 1% year over year. The top line surpassed the Zacks Consensus Estimate of $3.97 billion.

Net interest income declined 1% from the year-ago quarter to $2.48 billion. The fall is attributable to lower yields on earning assets, partially offset by lower rates on deposits and borrowings and higher average earning assets. However, the net interest margin contracted 45 basis points to 2.39% due to lower yields on earning assets, partially muted by lower funding costs.

Non-interest income was up 3% year over year to $1.8 billion on higher asset management, corporate services, residential mortgage and other income. This was partially muted by lower income from consumer services and service charges on deposits.

PNC Financial’s non-interest expenses totaled $2.53 billion, down 4% from the year-ago figure. This decline primarily resulted from the fall in marketing and other costs, partly offset by higher personnel expenses.

Efficiency ratio was 59% compared with

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Lower Interest Income to Mar PNC Financial (PNC) Q3 Earnings

Lower Interest Income to Mar PNC Financial (PNC) Q3 Earnings

PNC Financial PNC is scheduled to report third-quarter 2020 earnings, before the opening bell, on Oct 14. The company’s revenues and earnings are likely to have witnessed a year-over-year decline.

In the last reported quarter, the company reported loss on higher provisions due to the coronavirus pandemic’s crippling impact on the economy. Lower revenues on decline in fee income and decrease in loans were undermining factors.

The company’s activities in the to-be-reported quarter were adequate to win analysts’ confidence. As a result, its Zacks Consensus Estimate for earnings of $1.99 has moved up 11.8% in the past seven days. Nevertheless, the figure indicates a 32.3% decline from the year-ago reported figure. The consensus estimate for sales is pegged at $3.96 billion, suggesting a decline of 11.8% year over year.

The PNC Financial Services Group, Inc Price and EPS Surprise

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 Quote

Now let’s discuss the factors that are likely to have impacted the company’s third-quarter results:

Lower Net Interest Income (NII): The Fed continued to keep interest rates at near zero in order to shield the U.S. economy from the coronavirus outbreak-related mayhem. This is likely to have substantially hurt net interest margin and NII.

Also, per the Fed’s latest data, the loan balance is likely to have been affected by a fall in commercial & industrial and consumer loans on a sequential basis.

The Zacks Consensus Estimate for average interest earning assets of $397.3 billion for the quarter indicates 1.2% sequential fall. The consensus estimate for net interest income is $2.47 billion, suggesting 2.1% fall sequentially.

Notably, management expects average loans to decline in the low-single-digit range on a sequential basis in the third quarter and NII to be down 1%.

Muted Non-Interest Revenues: The quarter

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