Financial stock to watch: PNC Financial Services Group Inc (NYSE: PNC)

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PNC Financial Services Group Inc (NYSE: PNC) stock recovered over 1.2% on 20th April, 2020 (as of 11:53 am GMT-4; Source: Google finance) but fell over 36.4% in this year to date. Despite an interim rally in the stock, earnings are not that great as the company reported net income for the first quarter of $915 million compared with the year-ago quarter’s $1.27 billion. Net interest income of $2.5 billion was up 1% compared to the fourth quarter, due to lower funding costs, as well as higher loan and security balances. The net interest margin expanded to 2.84%, up 6 basis points linked quarter, in large part due to lower rates paid on deposits.

PNC in the first quarter of FY 20 has reported the adjusted earnings per share of $1.95, beating the analysts’ estimates for the adjusted earnings per share of $1.38, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue of $4.5 billion in the first quarter of FY 20, beating the analysts’ estimates for revenue of $4.4 billion.

Moreover, on the asset side, loan balances of $265 billion at March 31 were up 10% compared to December 31, 2019 on the back of an increase in commercial loan balances of approximately $24 billion, mainly due to higher utilization of loan commitments. Investment securities of $91 billion increased 4% linked quarter. Further, the cash balances at the Federal Reserve as of 31, 2020 were $20 billion, declined by $3.6 billion from year-end, in part due to the benefits from the regulatory tailoring rules on the company’s liquidity, effective January 1, 2020. On the liability side, deposit balances of $305 billion at March 31 were up 6% compared to December 31, 2019. A high proportion of the commercial loan draws were placed back with the company in the form of deposits, and as a result, non-interest-bearing deposits rose 12% linked quarter.

Total borrowed funds rose $13 billion on the back pf higher FHLB borrowings and increased debt issuance activity during the quarter. At the end of March, 2020, the Basel III common equity Tier 1 ratio was estimated to be 9.4%, which reflected the impact of the tailoring rules, including the decision to opt out of AOCI, as well as the election to phase in CECL’s impact on the estimated regulatory capital.

Additionally, during the January-March period, the company hd repurchased 10.1 million common shares for $1.4 billion. Furthermore, the company had distributed dividends of $0.5 billion. Notably, the company has temporarily suspended share buybacks through the second quarter of 2020, after the “unprecedented challenge” from the coronavirus pandemic.

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