Tags: PNC | Financial | Services | PNC

PNC Financial Services: Growth Despite Crisis

By    |   Wednesday, 25 Apr 2012 05:18 PM

PNC Financial Services (PNC) faces much the same environment of its peers in the commercial banking sector. Having survived the credit crisis, PNC nevertheless managed to make key acquisitions, a strategy that puts it in a position now to improve results.

PNC Financial Services is engaged in retail banking, corporate and institutional banking, asset management, and residential mortgage banking. It provides services nationally and in its primary geographic markets in Pennsylvania, Ohio, New Jersey, Michigan, Illinois, Maryland, Indiana, Kentucky, Florida, Washington, D.C., Delaware, Virginia, Missouri, Wisconsin and Georgia. It also operates internationally.

At the end of 2011, PNC’s consolidated total assets, deposits and total shareholders’ equity were $271.2 billion, $188 billion and $34.1 billion, respectively.

In June 2011, PNC agreed to acquire RBC Bank (USA), the U.S. retail banking subsidiary of Royal Bank of Canada, for $3.45 billion. The bank has more than 400 branches in North Carolina, Florida, Alabama, Georgia, Virginia and South Carolina.

Also in June, PNC acquired 19 branches in the greater Tampa, Fla. area from BankAtlantic, a subsidiary of BankAtlantic Bancorp. Finally, in December of last year, the bank acquired 27 branches in the northern metropolitan Atlanta, Ga. area from Flagstar Bank.

PNC also holds an equity investment in investment manager BlackRock. “Our investment in BlackRock is a key component of our diversified revenue strategy,” management told investors in a recent filing.

“The diversity of our revenue streams should enable us to achieve a solid performance in an environment that will continue to be affected by regulatory reform headwinds and implementation challenges,” PNC management added.

“Looking to 2012, we see opportunities for growth as a result of our larger franchise and the pending acquisition, our ability to cross-sell our products and services to existing clients and our progress in adding new clients.”

PNC Financial is a $34.62 billion stock in a sector, commercial banks, where the average size is $27.85 billion. It has a trailing 12-month P/E of 11.9, compared to 9.73 for the sector.

PNC’s five-year projected price-to-earnings-growth (PEG) ratio is 1.88, higher than the sector average of 1.05. Its projected earnings per share growth for the coming year is 11.69 percent, close to the average for its sector.

Strong growth


Analysts are mixed on PNC’s prospects. Sandler O’Neill rates the stock as a buy, as do the analysts at Merrill Lynch and Jeffries. Morgan Stanley rates PNC at outperform. Most of the remaining banks are neutral on the share.

S&P analysts on April 18 chose to keep a buy recommendation on PNC. “We think organic loan and revenue growth are strong, and we expect above-peer growth in 2012, also aided by asset management,” its analysts write.

“On our strong revenue growth outlook, we raise our target price by $2 to $70, based on a premium to peers.”

PNC Financial next reports on July 18.

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2012-18-25
Wednesday, 25 Apr 2012 05:18 PM
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