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5 Buy-Rated Banks With Increased Upside: FBR (Update 1)

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4. PNC Financial Services Group

Shares of PNC Financial Services Group (PNC - Get Report)closed at $59.63 Friday, returning 4% year-to-date, after sliding 3% during 2011. Based on a quarterly payout of 35 cents, the shares have a dividend yield of 2.35%.

The Pittsburgh lender reported fourth-quarter net income of $493 million, or 85 cents a share, declining from $826 million, or $1.55 a share in the third quarter, and $798 million, or $150 a share, in the fourth quarter of 2010, mainly because of "$156 million after tax, or $.30 per diluted common share, of residential mortgage foreclosure-related expenses primarily as a result of ongoing governmental matters and a noncash after-tax charge of $129 million, or $.24 per diluted common share, related to redemption of trust preferred securities."

PNC expects to complete its purchase of RBC Bank (USA) from Royal Bank of Canada (RY) in March, bringing on 400 branches in southern states, and the company has said that it "does not intend to issue any shares of common stock as part of the purchase price" of $3.45 billion.

During the fourth quarter, the company purchased 27 branches in the Atlanta area from Flagstar Bancorp (FBC).

Please see TheStreet's earnings coverage for regional banks, for additional details on PNC's fourth quarter.

Paul Miller on Thursday raised his price target for PNC to $68 from $60, saying that "the real story behind this earnings release was the guidance management provided surrounding the RBC branch acquisition," and that the expected "mid-high single digit percentage increases in revenue combined with mid-single-digit increases in expenses," should force consensus earnings estimates "rise from their current level near $6.30."

With "material loan growth, continued declines in credit costs, and the Durbin amendment having a smaller impact than initially estimated (a common theme among banks that have reported thus far)," Miller raised his 2012 operating EPS estimate for PNC to $6.80 from $6.20.

PNC's shares trade for nine times Miller's 2012 EPS estimate and for 1.3 times their tangible book value of $44.38, according to SNL Financial.

Interested in more on PNC Financial Services Group? See TheStreet Ratings' report card for this stock.

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