PNC Earnings: Funding Pressure Is Increasing, but Should Be Manageable

Narrow-moat-rated PNC Financial Services, our first look at larger-regional-bank results, reported slightly weaker results than the largest banks that have already reported. While the largest banks kept their revenue outlooks intact, PNC is now expecting growth of 4%-5% (down from 6%-8% previously), with the decline driven by a weakening net interest income outlook. We are not surprised to see the market penalize a bank that shows any weakness, but we would caution investors to not overreact. The bigger picture remains that despite the recent banking turmoil, the deposit base remained intact for PNC. While the increment hit to profitability is there, it is expected to be manageable. The bank is still set to increase revenue and NII in 2023, and we would still expect a high-teens return on tangible equity.