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The PNC Financial Services Group, Inc. PNC is scheduled to report first-quarter 2025 earnings on April 15, before market open. Its revenues and earnings are expected to have improved on a year-over-year basis.
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In the fourth quarter, PNC’s earnings beat the Zacks Consensus Estimate, driven by higher revenues and a fall in provision for credit losses and expenses. However, a lower loan balance was an undermining factor.
The company has an impressive earnings surprise history. It surpassed estimates in each of the trailing four quarters, with the average earnings surprise being 9.77%.
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
Factors to Impact PNC Financial’s Q1 Performance
Net Interest Income (NII): In the first quarter, the Federal Reserve kept interest rates unchanged at 4.25-4.5% after cutting those by 100 basis points last year. The relatively lower rates are likely to have led to the stabilization of funding/deposit costs. Also, the yield curve steepened during the quarter. This is expected to have supported PNC’s net interest margin (NIM) and NII to some extent.
Nonetheless, the lending scenario was not very impressive as Trump’s tariff plan resulted in uncertainty across the markets. Per the Federal Reserve’s latest data, demand for commercial and industrial loans, real estate loans and consumer loans in the first two months of the quarter was decent. As a result, PNC Financial’s lending activity is expected to have seen some improvement.
The company expects average loans to decline 1% sequentially. Further, NII is anticipated to decrease 2-3% from the $3.5 billion in the fourth quarter of 2024.
The Zacks Consensus Estimate for NII of $3.45 billion indicates a sequential fall of 2.1%. Our estimate for the metric is the same as the consensus number.
Non-Interest Revenues: Mortgage rates in the first quarter remained range-bound and hovered near the 7% mark. This is likely to have led to some improvement in mortgage originations and refinancing. Thus, PNC’s mortgage revenues are likely to have witnessed growth. The Zacks Consensus Estimate for the residential and commercial mortgage revenues is pegged at $132.6 million, indicating a rise of 8.7% sequentially. Our estimate for the metric is $137.3 million.
Further, the quarter witnessed heightened market volatility and client activity because of uncertainty related to Trump’s tariff plans. Also, the performance of the equity markets was subdued. Hence, PNC Financial’s asset management and brokerage income is likely to have recorded a modest rise. The consensus estimate for the metric is pegged at $374.7 million, which is relatively stable sequentially. We project asset management and brokerage income to be $370.2 million.
However, headwinds related to tariff plans hurt global mergers and acquisitions (M&As) as the markets witnessed extreme volatility because of the ambiguity of its implications on the economy and the Fed’s monetary policy. As such, deal value and volume were decent. Thus, the consensus estimate for the company’s capital markets and advisory income of $308.5 million indicates an 11.4% decline. We project the metric to be $326.3 million.
Further, the Zacks Consensus Estimate for card and cash management revenues is pinned at $690.7 million, indicating a slight sequential decline. Also, the consensus estimate for lending and deposit services stands at $324.5 million, suggesting a fall of 1.7%. Our estimates for card and cash management revenues and lending and deposit services are $701.5 million and $324.1 million, respectively.
Management expects fee income to be stable sequentially.
The Zacks Consensus Estimate for non-interest income is pegged at $2.02 billion, indicating a 1.1% decline from the last quarter. Our estimate for the metric is pegged at $2.04 billion.
Expenses: PNC’s expenses are expected to have continued flaring up during the first 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 decrease 2-3% from $3.5 billion in the fourth quarter of 2024. Our estimate for non-interest income is pegged at $3.43 billion.
Asset Quality: PNC Financial is likely to have set aside a substantial amount of money for potential delinquent loans (mainly commercial loan defaults), given the expectations of higher for longer interest rate backdrop and tariff-related uncertainty. We expect provisions for credit losses to be $249.9 million, indicating a sequential jump of 60.2%.
Management expects net charge-offs to be around $300 million, up from $250 million in the fourth quarter of 2024.
The Zacks Consensus Estimate for non-performing assets (NPAs) is pegged at $2.38 billion, indicating an increase of 1.1% from the previous quarter. Also, the consensus estimate for non-performing loans (NPLs) is pinned at $2.36 billion, suggesting a rise of 1.5%. Our estimates for NPAs and NPLs are $2.34 billion and $2.3 billion, respectively.