PNC Earnings: Management Guidance Remains Unchanged Despite Tariff Uncertainty

Morningstar’s Metrics for PNC Financial Services Group

• Fair Value Estimate: $181.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

What We Thought of PNC Financial Services Group’s Earnings

PNC Financial Services Group PNC reported decent first-quarter results, with earnings per share of $3.51, about 13% higher on a year-over-year basis. While management didn’t change its guidance much, investors should remain cognizant of the economy facing considerable turbulence in 2025 from tariff-related disruptions.

Why it matters: Tariff disruptions didn’t show up in the first quarter, but we think the effect will be more visible in future ones. The bank kept its allowance for loan losses as a percentage of loans roughly flat on a sequential basis, reported at 1.64%.

• NII declined around 1% from the prior quarter. We still believe the bank should see strong improvement here in future quarters, driven by the continued impact of its repricing of fixed-rate long-duration securities and locking in receive-fixed swaps at higher yields.
• We don’t expect to see a strong recovery in loan growth this year because of additional uncertainty around tariff policy and a higher probability of a mild recession.

The bottom line: We plan on maintaining our $181 per share fair value estimate for narrow-moat-rated PNC Financial after incorporating first-quarter results, and we believe the shares are slightly undervalued.

• We were skeptical about the rally in US bank stocks after the presidential election, given the uncertainty around the Trump administration’s policies and the healthy valuations in the sector. Bank stocks have corrected by more than 20% and valuations look much more appealing now.

Key stats: We expect annual expense growth to remain under 2%, despite the bank’s focus on branch expansion for the next few years in the faster-growing southeast and southwest markets. Management has consistently proved it can control expenses and deliver on its efficiency initiatives.

• We think expense control will be vital to maintaining PNC’s long-term profitability targets.