As the first major regional bank to report earnings following a crisis among smaller lenders, PNC Financial Services Group Inc. was always going to be closely watched for signs of spreading pain.
(Bloomberg) — As the first major regional bank to report earnings following a crisis among smaller lenders, PNC Financial Services Group Inc. was always going to be closely watched for signs of spreading pain.
And while the bank avoided the issues that plagued some of its regional lender peers, its downward revision to its revenue forecast didn’t inspire investor confidence. After an initial surge on better-than-expected profit, the shares dropped as much as 3% on Friday.
PNC’s weaker guidance “was primarily NII-driven, consistent with our call on the group overall for reduced NII guides coming into the quarter,” Compass Point analyst David Rochester said.
The guidance revisions illustrate how rate hikes by the Fed have hurt some banks, eroding the value of securities while making it more expensive to win over and retain depositors. Other lenders are likely to trim revenue projections next week, UBS Group AG analysts led by Erika Najarian wrote in a note.
Revenue is poised to increase 4% to 5% this year, Pittsburgh-based PNC said Friday in a first-quarter earnings presentation. That’s down from a previous forecast of 6% and 8%. Total loans at year-end are forecast to grow 1% to 3%, compared with a previous projection of 2% to 4%. The company expects full-year net interest income to be up 6% to 8%, also lower than initially forecast.
“At this point, visibility remains challenging and our full-year NII guidance assumes the continuation of the recent intensity on deposit pricing which is being driven by recent events,” Chief Financial Officer Robert Reilly said during the earnings conference call.
PNC is the second-largest regional lender in the US by assets behind US Bancorp, and is among the nation’s eight biggest banks. Its results came in ahead of announcements by almost all other regional lenders, a possible indicator of the sector’s strength.
PNC earlier said first-quarter profit rose to $3.98 a share from $3.47 a year earlier, exceeding the $3.66 average estimate of 23 analysts surveyed by Blomberg. Net interest income was $3.59 billion, missing the consensus estimate from analysts.
The bank’s shares traded down about 0.94% to $120.27 at 3:22 p.m. in New York trading, compared with a 0.73% decline for the KBW Bank Index. PNC has plunged about 24% this year.
“Ultimately, over time, we expect the dynamics playing out the banking system today to contribute to changes in the competitive landscape,” Chief Executive Officer Bill Demchak said on the call. “While it’s still early innings, we believe that PNC will be a beneficiary from this process.”
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