PNC Financial Upgraded: Analyst Highlights Company's Ability To Capitalize Opportunities From Market Dislocations

BofA Securities analyst Ebrahim H. Poonawala upgraded PNC Financial Services Group, Inc. PNC to Buy from Neutral, raising the price objective to $200 from $185.

Despite a premium valuation often being a barrier for the analyst, the revised FY25/26 estimates imply a 14% annual EPS growth, making the risk/reward attractive.

With shares trading at 11.2x/9.9x FY25/26 EPS and 1.6x YE25 TBV, compared to a 15% ROTCE outlook, Poonawala writes that the investment potential looks promising.

The analyst remains upbeat on the company’s ability to navigate a range of macroeconomic outcomes while capitalizing on growth opportunities arising from potential market dislocations.

PNC appears on track to deliver solid NII growth (forecast 7.7%/6.0% FY25/26), the analyst adds.

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According to the analyst, the company is better positioned relative to most peers to defend NII (repricing of low-yielding bonds, swap maturities, floating rate debt), with the management reiterating its expectation for delivering record NII in FY25.

Although M&A potential often weighs on buyers, PNC Financial’s case is different: a deal announcement could act as a positive catalyst, Poonawala writes.

This is due to the shareholder base’s awareness of management’s proactive deal-making stance and their strong track record with previous transactions.

With a solid stock currency, solid balance sheet, and absence of regulatory issues, PNC is well-positioned as a preferred partner for regional banks exploring strategic options.

The analyst lowered FY24 EPS from $13.29 to $13.12.

Price Action: PNC shares are trading higher by 2.15% to $171.99 at last check Thursday.

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