PNC Earnings: NII Pressure in 2024 Should Be Partially Offset by Recovery in Noninterest Income

Narrow-moat-rated PNC Financial reported middling results in the fourth quarter as earnings came in at $1.85 per share compared with FactSet’s consensus estimate of $2.12 per share. We note that the fourth-quarter results were adversely impacted by an FDIC special assessment charge of $515 million for uninsured deposits of certain failed banks during the banking turmoil in early 2023 and workforce reduction charges of $150 million. Excluding these nonrecurring charges, the bank reported earnings per share of $3.16 per share, which was largely in line with our expectations. The shares of the bank have rallied more than 30% from their October-end lows as the market got excited about the prospects of interest rate cuts by the Fed in 2024. While the bank is not as cheap as it was a few months ago, we still believe there is around a 15% margin of safety for investors. We do not plan to materially change our $175 fair value estimate for PNC Financial as we fully incorporate the fourth-quarter results.