This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

PNC Is 'Goldilocks' Among Big Banks: Oppenheimer

NEW YORK ( TheStreet) -- The Federal Reserve's stress tests confirmed that PNC Financial Services Group (PNC - Get Report) is "not too big and not too small," according to Oppenheimer analyst Terry McEvoy," supporting a higher valuation for the bank's shares.

PNC Financial Services group of Pittsburgh had $301 billion in total assets and an estimated Tier 1 common equity ratio at the end of the third quarter, on which the stress tests were based.

The bank sailed through the first round of stress tests, with the Federal Reserve projecting that under a "severely adverse scenario," with a brutal recession beginning in 2013, PNC would have relatively slight losses totaling $1.4 billion through the end of 2014, with a minimum Tier 1 common equity ratio of 8.7%.

That indicates plenty of excess regulatory capital above the minimum Tier 1 common equity ratio needed for banks to be considered well-capitalized under the stress tests. Among the 18 large financial holding companies going through the first round of stress tests, only three had higher projected minimum Tier 1 common equity ratios under the severely adverse scenario, including American Express (AXP), and the trust and custody giants Bank of New York Mellon (BK ) and State Street (STT).

McEvoy in a report late Wednesday said the bank's "ideal size combined with PNC's diverse revenue stream should support future multiple expansion."

PNC's shares closed at $65.93 Wednesday, trading for 1.3 times tangible book value, and for 9.6 times the consensus 2014 earnings estimate of $6.84 a share, among analysts polled by Thomson Reuters.

"We believe the valuation gap between other high-quality banks (i.e., USB and BBT) and PNC will narrow, especially as the market begins to appreciate the merits behind the RBC bank deal," McEvoy wrote. The analyst rates PNC "outperform," with a 12- to 18-month price target of $72.00.

Shares of BB&T (BBT - Get Report) of Winston-Salem, N.C., closed at $31.57 Wednesday, trading for twice tangible book value, and for 10.0 times the consensus 2014 EPS estimate of $3.15.

U.S. Bancorp (USB - Get Report) of Minneapolis closed at $34.22 Thursday, trading for 2.7 times tangible book value, and for 10.4 times the consensus 2014 EPS estimate of $3.29.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BBT $34.00 0.00%
PNC $85.35 0.00%
USB $41.65 0.00%
AAPL $93.24 0.00%
FB $117.81 0.00%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs