Oppenheimer Sees PNC's Q3 Results Lower Than Consensus Estimates

Despite reporting better-than-expected Q2 EPS, Oppenheimer sees Q3 earnings of PNC Financial Services Group Inc PNC lower than consensus.

"[W]e see EPS as something similar to the core 2Q16 EPS of $1.77. vs consensus of $1.80," analyst Ben Chittenden wrote in a note.

"PNC has a solid track record and well-regarded management. However, near term we still see downside to EPS estimates as consensus PPE expectations need to come in. With provisions likely increasing from here, it will be harder to show EPS growth," Chittenden continued.

The analyst welcomed management's move of not chasing loan growth, a big positive for long-term investors. However, given stable PPE and rising credit costs, the Chittenden is concerned that earnings outlook is still getting squeezed.

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PNC's Q2 results were better than expected: $1.82 versus Oppenheimer/consensus estimate of $1.73/$1.75. Oppenheimer arrived at core EPS of $1.77 for the second quarter, implying a 10.7 percent core ROTCE versus 11.1 percent in the second quarter of 2015.

"A touch better for the quarter, but continues to show how tough an environment it is for banks right now. It's particularly true if rates stay low for longer after all these years," Chittenden added.

Net interest margin was weaker than expected at 2.70 percent versus consensus 2.74 percent. Thus, the company revised its 2016 guidance for total revenues to flat given the rate outlook.

Core fees were $1.72 billion versus Oppenheimer/consensus $1.68 billion/$1.69 billion estimates. On the credit front, NCOs were $134 million versus Oppenheimer/consensus $125 million/$152 million estimates.

Chittenden has a Perform rating on PNC shares.