Strong Net Income Growth for PNC
We are maintaining our fair value estimate for the firm after solid second-quarter results.
No-moat-rated PNC Financial Services (PNC) reported solid second-quarter results, which fit well within our overall thesis for the firm. Net income was up 9% quarter over quarter, while revenue was up 6.5%, leading to diluted earnings per share of $2.72 for the quarter, compared with $2.43 last quarter, or 12% growth. The expansion in net interest income was a bit ahead of our original projections, largely owing to rate hikes occurring ahead of our original expectations. Meanwhile, the credit environment remains pristine, expenses remained controlled, and loan growth remained moderate. We would expect this to continue as we await a rebound in overall loan growth, particularly within commercial and industrial, or C&I, loans for the industry as a whole. Even so, expanding net interest margins, little to no expansion in credit costs, a lower tax rate, and the release of excess capital should all make 2018 an excellent year for most banks. After making a number of minor adjustments throughout our model, we are maintaining our fair value estimate of $139 per share.
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Eric Compton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.