PNC Financial Services Group

This is our first report on PNC Financial Services Group, a major bank and financial service company. The bank reported steady loan figures at $325 billion during Q2, while deposits declined by 2% to $426 billion, and borrowed funds saw a $3 billion increase. The estimated CET1 ratio stood at 9.5% as of June 30, 2023, marking a 30 basis point rise quarter-over-quarter. The company returned approximately $700 million of capital to shareholders in the quarter, consisting of $600 million in common dividends and $100 million from share repurchases. Despite a rise in the accumulated other comprehensive loss by $400 million during Q2, the tangible book value rose 1% to $77.80. An anticipated increase in securities yields is expected to further enhance the tangible book value from AOCI accretion. In H1 2023, revenue grew 11% year-on-year due to higher interest rates and overall business growth, while noninterest expense grew 4%. PPNR increased by 24%. Net income for Q2 stood at $1.5 billion. However, total revenue of $5.3 billion marked a 6% decrease from Q1 2023. Noninterest income declined by 12%, impacted by lower fee income and negative Visa fair value adjustments. Despite the lower revenues, expenses were well controlled, only increasing by 2% linked quarter. PNC has targeted a $450 million continuous improvement program goal for the year and continues to focus on strong expense management and efficiencies, especially in anticipation of 2024. The company reports robust credit quality, with nonperforming loans making up less than 1% of total loans, and total delinquencies down by 9% linked quarter. We initiate coverage on the stock of PNC Financial Services Group with a ‘Hold’ rating.