- PNC reports second-quarter earnings of 98 cents a share, missing the consensus estimate of $1.24.
- Second-quarter results include mortgage putback charges of $284 million, or 54 cents, and $119 million in other charges for trust preferred redemptions and merger integration expenses.
- Net interest income grows 10% sequentially, reflecting a full quarter benefit the March 2 RBC Bank (USA) acquisition; net interest margin expands to 4.08%.
Based on a 40-cent quarterly payout, the shares have a dividend yield of 2.62%. PNC's shares trade for nine times the consensus 2013 EPS estimate of $6.78. The consensus 2012 EPS estimate is $5.94. Stifel Nicolaus analyst Christopher Mutascio rates PNC a "Buy," with a $74 price target, and said after the earnings announcement that if the mortgage repurchase charges and merger expenses were backed out, "we can arrive at a quarterly EPS run rate going forward of $1.74 assuming the company has fully accounted for higher loan repurchase demands/putbacks within the 2Q12 reserve build." The analyst was impressed with PNC's net interest margin expansion, "easily exceeded our expectations of 3.87%," adding that "of the $235 million sequential quarter increase in net interest income, we estimate that one-third ($80 million) was derived from higher accretable yield) and two-thirds ($155 million) was driven by core margin expansion." Mutascio estimates that "the company's core net interest margin (excluding accretable yield) increased 8-10 basis points during the quarter, which bucks the trend from the margin compression we have seen from most banks reporting 2Q12 results thus far." Stifel Nicolaus estimates that PNC will earn $6.00 a share for all of 2012, followed by 2013 EPS of $6.90. Mutascio said that his price target "represents 10.7x our 2013 EPS estimate of $6.90 and 1.5x our 4Q13 estimated tangible book value per share of $50.16, which we believe to be reasonable valuation metrics for a company that is generating above peer
Email. Follow @PhilipvanDoorn