PNC Financial earnings report, estimates and outlook

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With fourth quarter earnings reports in full swing, I was recently quoted in the Pittsburgh Business Times by reporter Patty Tascarella about the possibility of PNC Financial Services Group beating estimates for the twelfth consecutive quarter.

I told her I was curious to hear if the company still has their balance sheet positioned for an increase in short-term interest rates sometime in 2015. PNC CEO William Demchak has consistently said they have purposely not gone “out the curve” in the securities book in order to take advantage when rates finally rise. I also added that I was curious about the company’s outlook for energy-related loans. They currently boast minimal exposure to energy, which should serve them well, especially if oil prices continue to fall.

It turns out they were able to keep their winning streak alive, reporting earnings of $1.84 per share for the quarter – beating the Street consensus of $1.74. A gain on sale of their Washington, DC regional headquarters accounted for a large portion of the earnings beat, and the tax rate was low due to a large contribution by the company to the PNC Foundation. So the “quality” of the outperformance was low due to the nonrecurring nature of these items. The company maintained good control on expenses during the quarter as well. They also reiterated their minimal exposure to energy patch. All in all, another good quarter for the company.

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