Feb. 25, 2014, 12:59 PM
- With bank capital levels really no longer in question, don't expect any big pops in the banks surrounding the stress tests and CCAR results, says Citi in its "2014 CCAR Playbook." If anything - given that the stress tests are supposedly tougher this year - the risk to banks could be on the downside.
- The team expects the stress test results - which looks at bank balance sheets under different scenarios - sometime around March 7 and the CCAR results - on which the Fed approves/disapproves capital return plans - about a week later.
- Look for modestly higher average gross payout ratios of 62% vs. 55% last year. Individual banks: BAC 11% dividend (payout ratio) + 32% buyback for 43%; BBT 33% dividend +19% buyback; FITB 32% dividend + 37% buyback; JPM 27% dividend + 18% buyback; WFC 28% dividend + 43% buyback; GS 14% dividend + 78% buyback for an industry-leading payout ratio of 91%; MTB 34% dividend + 0% buyback; MS 17% dividend + 36% buyback; PNC 31% dividend + 49% buyback; USB 30% dividend +46% buyback.
- Related ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAI, IAT, SEF, IYG, FXO, PFI, KBWB, RKH, QABA, FINU, FNCL, KCE, KRU, RWW, KBWR, RYF, PSCF, KRS, FINZ, KBWC
Feb. 20, 2014, 3:29 PM
- Expecting dividends to grow 49% on average for the banks subject to the Fed's stress tests (about the same as last year), Markit, says Citigroup (C) and Bank of America (BAC) will lead the way with 400% boosts. "They are the last of the major banks paying minimal dividends ... change is overdue."
- While 400% is a big number, Citi and BofA will continue to lag their peers in terms of yield (400% growth on a penny just leads to a nickel).
- Also expected to have a significant pop is Morgan Stanley (MS) - a doubling of the payout to $0.10 per share and a 1.4% yield. Others in the top 5 in increases are Zions Bancorp (ZION) with a 75% boost to $0.07 and Regions Financial (RF) up 67% to $0.05.
- The others: KEY +27%, HBAN +20%, BK +20%, STI +20%, COF +17%, DFS +15%, AXP +13%, STT +12%, JPM +11%, CMA +11%, PNC +9%, USB +9%, GS +9%, FITB +8%, WFC +7%, NTRS +6%, and no soup for BBT and MTB where the dividends are expected to be flat at $0.23 and $0.70 per share, respectively.
- As for ETFs, the dividend jumps are expected to have the biggest impact on the XLF which would see a 25% increase in payout: The ETF has 81 companies, but the top 5 holdings - BofA, Wells, JPM, Citi, USB - make up 41% of assets. In contrast, just two CCAR banks make up the top five holdings of the KBE and it should see a more muted increase of just 18%.
- Related ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, PFI, KBWB, RKH, QABA, FNCL, FINU, KRU, RWW, KBWR, RYF, PSCF, KRS, FINZ
Jan. 17, 2014, 12:37 PM
- PNC Financial (PNC +3%) enjoys a second day of big gains following its earnings report on Thursday morning.
- Upgraded to Buy late yesterday by Sandler O'Neill, PNC gets additional boosts from an upgrade to Buy at Rafferty Capital (with price target lifted to $93 from $81).
- BMO Capital retains its Market Perform rating, but lifts the price target to $88, while Bernstein and RayJay raise to $90.
Jan. 16, 2014, 3:59 PM
- About the only green on the screen in the regional bank sector (KRE -0.9%) is PNC Financial (PNC +2.7%) after this morning's earnings beat. Sandler O'Neill is impressed enough to lift its rating to Buy with price target of $93.
- Boding well for earnings in 2014? $130M remain in repurchase reserves - a number management (on the earnings call) says should come down thanks to settlements with the GSEs.
Jan. 16, 2014, 8:38 AM
- Net interest income of $2.27B falls 7% Y/Y, with NIM of 3.38% down from 3.85% a year ago.
- Noninterest income of $1.8B grows 10% Y/Y and 7% from last quarter thanks to a benefit of mortgage repurchase obligations which boosted income by $158M this year after a $254M hit a year ago. Mortgage banking income of $147M falls 42% Y/Y. Asset management income of $364M up 21%.
- Noninterest expense of $2.55B falls 10% Y/Y, the comparison helped by some extraordinary charges a year ago. Personnel expenses of $1.2B fall 1%.
- Basel Tier 1 common capital ratio of 10.5% vs. 9.6% at the start of 2013. Tangible book value per share of $54.68 vs. $49.18 at the start of the year.
- CC at 10 ET
- Q4 results, press release
- PNC flat premarket
Jan. 16, 2014, 6:38 AM
Jan. 16, 2014, 12:05 AM
Jan. 15, 2014, 5:30 PM
Jan. 7, 2014, 2:47 PM
- Fairly lukewarm on the large cap regional banking sector (KRE +0.7%) amid pricey valuations and the likelihood 2014 estimates are set to be trimmed after Q4 earnings reports, Citi's Keith Horowitz does have a favorite ...
- BB&T Corporation (BBT +1.4%) deserves a premium multiple, says Horowitz, thanks to its above-average returns and quality of the management team.
- The rest? Wells Fargo (WFC -0.1%) is likely to beat Q4 estimates due to lower expenses (the bank has been busy cutting mortgage staff), but Horowitz is Neutral on the name. U.S. Bancorp (USB +1%) is Neutral as well thanks to its premium valuation. Also not meriting a Buy rating are Fifth Third (FITB +0.4%), M&T (MTB +0.8%), and PNC Financial (PNC +0.9%).
- JPMorgan today upgrades BB&T to a Buy with $42 price target.
Jan. 2, 2014, 11:22 AM
Dec. 17, 2013, 4:19 AM
- The Fed intends to use its own estimates about the effect of a recession on bank balance sheets in its stress tests. Previously, the Fed has relied on data from the firms themselves.
- The central bank could project that bank assets would grow during a slump, as has happened in the past three recessions, rather than fall, as the banks have predicted.
- With such a finding, the Fed could require banks to hold more loss-absorbing capital or limit shareholder payouts. (Fed letter)
- Tickers: GS, JPM, BAC, BK, AXP, COF, C, FITB, MS, PNC, RF, STT, STI, USB, WFC.
- ETFs of interest: KBE, KBWB, KRE, KCE, KBWC, XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ.
Dec. 16, 2013, 2:57 PM
- Alongside upgrades to Citi and Fifth Third, Evercore removes its Buy rating on PNC Financial (PNC +0.3%). "Ongoing productivity improvements in newer markets [are] unlikely to offset continued spread revenue headwinds and limited expense flexibility," writes analyst Andrew Marquardt. At 11.5x 2014 EPS, valuation isn't unattractive, he says, but mixed near-term fundamentals and the potential for disappointment (his estimates are below consensus) has him moving to the sidelines.
Dec. 6, 2013, 9:17 AM
- The agreement resolves substantially all indemnification and repurchase obligations on 900K loans originated and sold by PNC to Freddie Mac (FMCC) between 2000 and 2008. PNC will pay Freddie $89M (less credits of $8M).
- This follows an agreement in principal between PNC and Fannie Mae. Both deals require final approvals from the FHFA.
- Press release
Nov. 27, 2013, 1:42 PM
- American Express (AXP +0.4%), Discover (DFS +0.3%), U.S. Bancorp (USB +0.2%), and Wells Fargo (WFC -0.1%) are best positioned to be allowed large capital returns (about 70%) after the Fed's early 2014 stress tests, says Credit Suisse's Moshe Orenbuch, while Ciitgroup (C +0.2%) and PNC Financial (PNC +0.9%) are likely to show the biggest improvement from last year.
- Overall, his team expects large cap bank capital returns to be 65% next year vs. about 48% in 2013. The median dividend payout ratio is expected at 22%, level with this year.
- Orenbuch notes the CCAR will be tougher this time around - notably by assuming a global, not just domestic meltdown, and assuming a significant reversal in the property market - with commercial real estate exposure particularly harshly judged.
- Balanced against that and likely winning, however, are far stronger capital positions of the banks, says Orenbuch.
- Financial and banking ETFs: FAS, XLF, FAZ, UYG, KRE, KBE, VFH, IYF, IPF, SEF, IAI, IAT, IYG, FXO, PFI, IXG, KBWB, RKH, QABA, KCE, FINU, RWW, KRU, RYF, KBWR, AXFN, PSCF, KRS, FNCL, FINZ, KBWX, KBWC
Nov. 8, 2013, 10:41 AM
- Up sharply as interest rates fly higher (the 10-year is up 15 basis points to 2.75%) are the life insurers - all of whom have had their investment returns more than a little constrained by puny yields. IAK +2.4%
- MetLife (MET +5.9%), Prudential (PRU +4.5%), Lincoln National (LNC +6.8%), Hartford (HIG +3.1%).
- Also set to benefit from a steeper yield curve (if we're to believe their models) are the banks, and they're leading the S&P 500 higher. The TBTFs: Bank of America (BAC +3.3%), JPMorgan (JPM +3.1%), CItigroup (C +3.3%), Wells Fargo (WFC +2.6%). The regionals (KRE +3.4%): Huntington (HBAN +2.6%), Regions (RF +4.2%), PNC (PNC +2.8%), FIfth Third (FITB +3.4%), First Niagara (FNFG +2%), Keycorp (KEY +3.5%), Zions (ZION +4.1%), Comerica (CMA +3.1%).
- The XLF +1.9%.
- FInancial sector ETFs: FAS, XLF, FAZ, UYG, KRE, KBE, VFH, IYF, KIE, SEF, IAT, IAI, IYG, IAK, FXO, PFI, KBWB, RKH, QABA, RWW, FINU, RYF, KRU, KBWR, PSCF, KBWP, KBWI, KRS, FINZ, FNCL
Oct. 16, 2013, 7:57 AM
- We've heard from some of the TBTF banks, but what do the regionals have to say? PNC net income of $1B is down from $1.1B in Q2.
- Net interest income of $2.2B is off 1% from Q2 as net interest margin of 3.47% fell 9 basis points.
- Noninterest income of $1.7B is off 6.6% from Q2, with mortgage banking income falling 20% to $193M. Total loans up 2% Q/Q, up 6% Y/Y, led by a 9% increase in commercial lending.
- Expenses of $2.4B are flat with last quarter and down 9% from a year ago, mostly thanks to charges related to the redemption of trust preferred securities.
- Tier 1 capital ratio of 10.4% is up from 10.1% last quarter.
- Conference call at 10 ET.
- Q3 results, press release.
- Shares +2.1% premarket.
PNC vs. ETF Alternatives
PNC Financial Services Group Inc is a financial services company. It operates in six segments: Retail Banking; Corporate & Institutional Banking; Asset Management Group; Residential Mortgage Banking; BlackRock; and Non-Strategic Assets Portfolio.
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