PNC Earnings: Solid Third Quarter, but Lackluster Guidance for the Fourth

Key Morningstar Metrics for PNC Financial Services

• Fair Value Estimate: $191.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

What We Thought of PNC Financial Services’ Earnings

PNC Financial Services PNC reported solid third-quarter results that included strong net interest income and capital markets and advisory fees growth. Earnings per share came in at $4.35, up 25% from the prior-year quarter.

Why it matters: While the results were strong, the bank’s fourth-quarter guidance was a little disappointing, and the shares are down nearly 3% in Oct. 15 intraday trading.

• Updated guidance points to 1.5% sequential growth in fourth-quarter net interest income, a slowdown from over 2.0% sequential growth in the previous two quarters.
• The new guidance also implies higher expense growth for 2025. PNC now expects 1.5%-1.8% growth instead of 1.0%. While this is higher than our expectation, the bank is also seeing 2% higher fee income growth for 2025. In addition, the bank’s expansion efforts will take time to yield higher revenue growth.

The bottom line: As we incorporate earnings and guidance, we will maintain our $191 fair value estimate for narrow-moat-rated PNC. We assess the shares as slightly undervalued.

• We think PNC’s expansion efforts will lead to a bank with a better scale. More importantly, the bank is also focusing on increasing fee income penetration to its lending clients.
• As it continues to increase its cross-selling of card and treasury management products to its retail and commercial clients, the bank should generate higher profits per customer and improve its return profile.

Key stats: PNC increased card and cash management fee income by 6.0% year over year in the third quarter, much faster than the 1.6% growth in loan balances.