PNC Financial (PNC - Free Report) reported positive earnings surprise of 0.8% in first-quarter 2019. Earnings per share of $2.61 surpassed the Zacks Consensus Estimate of $2.59. Further, the bottom line reflects a 7.4% jump from the prior-year quarter.

Shares of PNC Financial gained around 1% in pre-market trading session on investors’ optimism following the results. Higher revenues, driven by easing margin pressure and escalating fee income, aided the results. However, rise in costs and provisions were headwinds.

The company’s net income for the quarter came in at $1.27 billion compared with $1.24 billion in the prior-year quarter.

Segment wise, on a year-over-year basis, quarterly net income at Corporate & Institutional Banking and Asset Management Group declined 11% and 17%, respectively. However, Retail Banking and Other, including the BlackRock segments, reported 15% and 12% rise in net income, respectively.

Higher Revenues Recorded, Partly Offset by Elevated Costs

Total revenues for the reported quarter came in at $4.29 billion, climbing 4% year over year. Additionally, the top-line figure beat the Zacks Consensus Estimate of $4.24 billion.    

Net interest income jumped 5% from the year-ago quarter to $2.48 billion. Elevated loan and securities yields, and balances were partly mitigated by growth in deposit and borrowing costs. Additionally, net interest margin expanded 7 basis points to 2.98%.

Non-interest income was up 3% year over year to $1.81 billion due to higher consumer services income, corporate services, service charges on deposits and other income, partially offset by lower income from asset management and residential mortgage.

PNC Financial’s non-interest expenses totaled $2.58 billion, up 2% from the year-ago figure. The surge primarily stemmed from higher personnel and marketing expenses.

As of Mar 31, 2019, total loans were up 3% sequentially to $232.3 billion. Also, total deposits improved 1% to $271.2 billion.

Credit Quality: A Mixed Bag

Non-performing assets declined 11% to $1.79 billion, year over year. Yet, net charge-offs increased 20% to $126 million.

Provision for credit losses more than doubled from the prior-year quarter to $189 million. Additionally, allowance for loan and lease losses increased 3% to $2.7 billion.

Steady Capital Position

As of Mar 31, 2019, the Basel III common equity Tier 1 capital ratio, effective Jan 1, 2018, was 9.8% compared with 9.6% as of Mar 31, 2018.

Share Repurchase

In the Jan-Mar quarter, PNC Financial repurchased 5.9 million common shares for $725 million. Further, dividends of $438 million were distributed.

Our Viewpoint

PNC Financial displayed an impressive performance in the Mar-end quarter. Increase in margins along with improving lending scenario are likely to support its top line. Moreover, the company is well poised to grow on the back of its diverse revenue mix. It remains on track to execute its strategic goals, including technology initiatives, which bodes well for the long term. However, rise in expenses and provisions remain concerns.

Currently, PNC Financial carries a Zacks Rank #3 (Hold).

The PNC Financial Services Group, Inc Price, Consensus and EPS Surprise

The PNC Financial Services Group, Inc Price, Consensus and EPS Surprise | The PNC Financial Services Group, Inc Quote

Among other major banks, Bank of America (BAC  - Free Report) is scheduled to report first-quarter results on Apr 16, while U.S. Bancorp (USB  - Free Report) will report on Apr 17 and Citigroup (C - Free Report) on Apr 15.