Earnings Preview: PNC Financial Services

Apr.22.09 | About: PNC Financial (PNC)

PNC Financial Services (NYSE:PNC) is slated to report Q1 earnings before the market open on Thursday, April 23, with a conference call scheduled for 9:00 am ET.

Guidance

Analysts are looking for EPS of 42c on revenue of $3.52B. The consensus range is 23c-64c for EPS, and $3.41B-$3.65B for revenue, according to First Call.

Analyst Views

Earlier this month Bernstein initiated coverage of PNC with a fairly bullish note. The firm believes PNC has managed the credit cycle better than its peers, and appears poised to benefit from the downturn over the long-term due to its acquisition of National City Corp., a regional bank. However, Bernstein is concerned about PNC's low TCE levels, later stage credit exposure, and pressures on its market-sensitive fee revenue. But the firm, which initiated PNC with an Outperform rating, predicts that the bank's pre-provision profit will offset its higher credit costs, allowing it to generate positive EPS in 2009 and 2010. Bernstein views the stock's risk/reward ratio as positive.

Earlier this month PNC sold $4.2B of National City's deposits and 57 of its western Pennsylvania bank branches to First Niagara (NASDAQ:FNFG) in exchange for a deposit premium of 1.3%. The deal is expected to increase PNC's EPS by about 20% in 2010. In light of PNC's acquisition of National City, investors may be concerned about a recent statement by analyst Meredith Whitney on Bloomberg TV, who said many regional banks' large exposure to commercial real estate would make it more difficult for them to pass the government's stress test. In addition, Barron's predicted last month that the government's Public-Private Investment Program may force regional banks to take larger loan-loss provisions because of their above-average loan exposure to real estate and commercial construction.