PNC Financial Gains 17% in a Year: How to Approach the Stock Now?
The PNC Financial Services Group, Inc. PNC shares have gained 17% in the past year compared with the industry 's growth of 31.4%. Its peers, Bank of America Corporation BAC and Citigroup Inc. C, have gained 13.8% and 28.5%, respectively, in the same time frame.
Price Performance
While PNC Financial Services has delivered a decent return over the past year, it has lagged behind the industry average. As investors weigh opportunities in the financial sector, it's worth evaluating whether PNC presents a compelling value at current levels or if patience could yield a better entry point.
What's Aiding PNC's Performance?
Acquisitions & Partnerships: PNC Financial has adopted an aggressive, forward-leaning strategy focused on growth, diversification and innovation. This week, PNC Financial's subsidiary, PNC Bank, entered a definitive agreement to acquire Aqueduct Capital Group. The acquisition will enhance the primary fund placement capabilities of PNC Financial's subsidiary, Harris Williams.
In 2024, PNC partnered with Plaid through a bilateral data access agreement, allowing its customers across the United States to share their financial data with various financial applications securely. In the same year, PNC Financial extended its partnership with TCW Group to offer private credit solutions to middle-market companies. This partnership enabled the bank to gain a significant share of the expanding private credit market.
Going forward, the continuation of such efforts to diversify the company's business mix is likely to drive sustainable profits.
Footprint Expansion Efforts: In a strategic move to strengthen its domestic presence, PNC Financial is set to expand its branch network across the United States. The company announced plans to invest $1.5 billion in opening more than 200 branches across 12 U.S. cities, including Austin, Dallas, Denver, Houston, Miami and San Antonio, and renovate 1,400 existing locations by 2030.
With the addition of these branches, PNC Financial will solidify its position as one of the largest retail banks in the United States.
Solid Loan & Deposit Balances: PNC benefits from a strong balance sheet position. Though total deposits and loans declined year over year in the first quarter of 2025, the metrics witnessed a five-year (2019-2024) CAGR of 8.1% and 5.6%, respectively. Capitalizing on growth opportunities, in October 2023, the company acquired loan commitments from Signature Bank worth approximately $16 billion. This is expected to support loan growth in the upcoming quarters. Also, the expectation of further rate cuts in 2025 is likely to influence the loan demand positively in the upcoming period. A well-diversified deposit base will strengthen its financial position. Growth in interest-bearing commercial deposits is expected to aid the company's deposit base in the forthcoming period.
Impressive Capital Distribution: PNC Financial continues to progress with its capital distribution strategy. In July 2024, the company sequentially hiked quarterly cash dividends on common stock by 3.2% to $1.60 per share. PNC Financial has raised its dividend four times in the past five years. At present, PNC has a dividend yield of 3.68%.
Likewise, Bank of America and Citigroup increased their dividends in July 2024. BAC raised its quarterly dividend 8.3% to 26 cents per share, whereas C hiked its quarterly dividend 6% to 56 cents per share.
Apart from regular dividend hikes, the company has a share repurchase program in place. A 100-million share repurchase plan was authorized in the second quarter of 2022. As of March 31, 2025, the company had remaining board authority to repurchase up to 40.5 million common shares.
What's Hurting PNC Growth
Relatively Higher Interest Rates: PNC's performance is influenced by the Fed's interest rate cuts and overall economic growth.
The Fed lowered the interest rates by 100 basis points in 2024 in response to moderating inflation and softening growth, but has kept them steady since then. As such, interest rates are likely to stay higher for a longer time.
Subdued economic growth is likely to suppress loan demand, particularly in areas like commercial lending and mortgages. As demand for loans weakens, banks like PNC Financial, Bank of America and Citigroup can see lower NII growth, a key driver of bank earnings. Additionally, the expectations of higher for longer interest rates are likely to cause a spike in delinquency rates, mainly in the consumer loan portfolio. This will, thereby, hurt the company's asset quality.
Elevated Expense Base: Steadily rising non-interest expenses are concerning for PNC Financial. The company's non-interest expenses have witnessed a five-year (2019-2024) CAGR of 5%. The rising trend continued in the first quarter of 2025. The bank's rising expense base due to technological advancement and branch expansion efforts is likely to continue affecting bottom-line growth.
Expense Trend
How to Approach PNC Stock Now
Efforts to expand footprints through branch expansion, and rising loans and deposits balances are likely to support PNC Financial. The continuation of strategic acquisitions and partnerships to diversify the company's business mix is expected to drive sustainable profits.
Sales Estimates
Image Source: Zacks Investment Research
Earnings Estimates
Image Source: Zacks Investment Research
However, its rising expense base is concerning. Also, given relatively higher interest rates, the company's NII might be under pressure in the near term.
Hence, investors should not rush to buy the PNC stock now; instead, they should keep this Zacks Rank #3 (Hold) stock on their radars and wait for an attractive entry point. Those who already own the PNC stock in their portfolio can hold on to it because it is less likely to disappoint over the long term, given its strong fundamentals.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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