PNC Retains Safest Bank Status Despite Earnings Stumble

PNC Financial Services Group Inc. (NYSE: PNC) is taking another breather after its earnings report today. The bank is rather important because it was one of our own picks which made up the 7 Safest Banks in America earlier this year. Today’s drop is actually the second day in a row that shares have fallen and the shares are now almost 10% off of their recent highs.

The bank reported earnings above its consensus targets at $1.64 EPS versus estimates of about $1.60 EPS and versus last year’s report of $1.55 EPS. PNC sold 5 million shares of Visa Inc. (NYSE: V) and took a $137 million pre-tax gain. PNC still holds a stake worth close to $1 billion in Visa shares.

One concern is that the bank said that loan growth slowed with the addition of only $1.5 billion to $182 billion in total, and this appears to be slowest loan growth in at least a year. Deposits were lower as well since retail CDs and time deposits dropped.

The bank’s book value grew by $2.41 from the prior sequential quarter to $66.41 per common share, which means that PNC is now back to trading at a discount to its book value.  PNC’s balance sheet remained core funded with a loan-to-deposit ratio of 88% and it retained a strong bank holding company liquidity position. Its Tier 1 common capital ratio rose to roughly 9.5% from 9.3% just one quarter ago. PNC also restated a goal of being within a Basel III Tier 1 common capital ratio range of between 8.0% to 8.5% by the end of 2013 without the benefit of phase-ins.

PNC shares are down 3.8% at $60.55 so far on the day with a market cap of just over $32 billion. Its stock has traded in a range of $48.80 to $67.89 over the last 52-weeks.

Today’s drop does represent a 10% pullback from the peak and shares are back close enough to where they were when we named it one of America’s safest banks.

JON C. OGG