PNC Financial upgraded to Hold by HSBC on 'attractive relative valuation'

On Thursday, PNC Financial Services Group Inc. (NYSE: NYSE: PNC ) received an upgrade from HSBC, moving from a 'Reduce' rating to a 'Hold'. The firm also increased its price target on the stock to $155.00, up from the previous $141.00.

"The upgrade results from a more attractive relative valuation versus most large cap banks in our coverage and the incorporation of a higher long-term ROE assumption in our valuation framework," said the analyst.

The adjustment in the long-term ROE is based on the anticipation that PNC, along with other banks, may be able to operate with lower capital levels than previously expected. This follows the potential softening or resubmission of the Basel III endgame proposal. Additionally, PNC's stock no longer commands a significant price-to-earnings (PE) premium over its peers, although it still remains above US Bancorp (NYSE: USB ) and Truist.

HSBC forecasts that net interest income (NII) growth for PNC will pick up in the second half of 2024. The bank is also positioned to repurchase shares more quickly than initially anticipated when coverage began in September 2023. While only minor adjustments have been made to the earnings estimates in the latest research note, the analyst highlighted that the current adjusted earnings per share (EPS) estimates for 2024 and 2025 are respectively 12% and 15% above the initial figures at the start of coverage.

PNC's strengths were noted, including its solid market position with middle market and corporate clients, a disciplined approach to credit quality, and a consistent track record of generating solid returns on equity across various economic cycles. The analyst also suggested that PNC could become a potential consolidator in the banking sector if the regulatory environment for bank mergers and acquisitions becomes more favorable.

InvestingPro Insights

In light of the recent upgrade and price target increase for PNC Financial Services Group by HSBC, it's worth noting some additional insights provided by InvestingPro. PNC has demonstrated a commitment to shareholder returns, having raised its dividend for 13 consecutive years and maintained dividend payments for an impressive 54 years. This aligns with the analyst's view of the bank's solid market position and disciplined approach to credit quality.

InvestingPro Data also reveals a strong performance trend, with PNC's stock trading near its 52-week high, reflecting a large price uptick over the last six months. The company's market capitalization stands at $63.64 billion, with a Price/Earnings (P/E) ratio of 12.38, indicating that the stock may still be reasonably valued despite recent gains. Moreover, PNC's revenue for the last twelve months as of Q4 2023 was reported at $20.75 billion, showcasing stable financial performance.

For investors seeking further insights and analysis, there are additional InvestingPro Tips available that could provide a deeper understanding of PNC's financial health and market position. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to these valuable tips.

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