PNC Financial Services Group Inc.’s stock rose with other bank shares on Tuesday despite missing its second-quarter revenue target.
Citi analyst Keith Horowitz said the weakness in PNC
PNC,
stock in premarket trades seemed “overdone” because its net interest income growth projection “was expected to come down, and if anything not as bad as feared.”
The bank’s second-quarter expenses were higher than expected, but that was due mostly to marketing expenses to grow its business, Horowitz said.
The bank earnings touched off gains across the board as bank ETFs moved up. PNC stock is up by 2%.
Pittsburgh-based PNC said net income for the three months ending June 30 rose to $1.5 billion, or $3.36 a share, compared with $1.496 billion, or $3.39 a share, in the year-earlier period. The bank beat the analyst profit forecast of $3.29 a share by seven cents a share.
Revenue increased to $5.293 billion from $5.116 billion but was below the expectation of $5.449 billion.
Jefferies analyst Ken Usdin said PNC’s third-quarter outlook has implied potential pre-provision net revenue of $1.97 billion, below the consensus estimate of $2.07 billion, on lower revenues. PNC’s net interest income is expected to drop by 3% to 4% in the coming quarter, he said.
Usdin reiterated a hold rating on PNC and said the firm’s second-quarter pre-provision net revenue was below consensus targets on lower fees, which was partially offset by better net interest income.
Looking back at the second quarter, net interest income of $3.5 billion fell by $75 million, or 2%, from the previous quarter. PNC said increased funding costs as well as lower loan and securities balances offset higher yields on interest-earning assets.
Loans were stable but deposits fell by 2%, the bank said in a statement. Net interest margins fell by 5 basis points.
Average loans increased 4%, with growth in residential-mortgage, home-equity, commercial and credit-card loans.
Fee income declined by 6% amid a $58 million decline in mortgage servicing. Noninterest income fell 50%.
The bank set aside $146 million for loan losses, down from $235 million in the first quarter. The stock has fallen 19% in the year to date, while the S&P 500
SPX,
has gained 17.8%.
Also on Tuesday, Bank of America Corp.
BAC,
and Morgan Stanley
MS,
released second-quarter earnings results that topped expectations.
Also read: Bank of America’s stock rises after second-quarter earnings and revenue beat expectations
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