Since the beginning of the year, PNC Financial Services (NYSE:PNC) has had quite an outstanding performance, rising by around 30.20%, beating the S&P 500’s return of only 14.42%. Famous investors, including Richard Pzena, Brian Rogers and Mario Gabelli, have added more PNC Financial Services (NYSE:PNC) shares to their portfolios in the first quarter of 2013. Is PNC Financial Services (NYSE:PNC) still a sweet pick for us now? Let’s take a closer look.
Manage to grow even during the crisis
PNC Financial Services (NYSE:PNC) offers diversified financial services, including retail banking, corporate and institutional banking, and residential mortgage and asset management, serving several main markets such as Pennsylvania, New Jersey, Illinois, North Carolina and Florida. Indeed, PNC Financial Services (NYSE:PNC) had quite a powerful franchise across the U.S., with its footprint covering nearly 50% of the U.S. population. It ranked seventh in the U.S. in terms of deposits ($213 billion), and fifth in terms of branches (2,881), and ATMs (7,282).
From 2008-2010 PNC Financial Services (NYSE:PNC) managed to increase its tangible book value per share by as much as 40%, higher than the tangible book value growth of Wells Fargo & Co (NYSE:WFC) at 25% and JPMorgan Chase & Co. (NYSE:JPM) at 22% during the same period. PNC also experienced the highest growth in its tangible book value in the period of 2009-2012. While its tangible book value per share increased by 97%, the tangible book value per share of Wells Fargo & Co (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) rose by only 66% and 42%, respectively, in the past four years. In the first quarter of 2013, its loan loss reserves, including purchased impaired loans, was 2.45%, lower than JPMorgan Chase & Co. (NYSE:JPM)’s loan loss reserves of 2.85% but higher than Wells Fargo & Co (NYSE:WFC) loan loss reserve of 1.97%.
Concentrating on commercial lending
The majority of the company’s deposits, around $65.93 billion, were money market deposits. The demand deposits ranked second, with $34.34 billion while the retail certificates of deposits came the third with more than $26.6 billion. In 2012, its net interest income was $9.78 billion, with the net interest margin of 3.94%. What I like about PNC is its heavy lending in the commercial areas, including retail, manufacturing, healthcare, financial services, etc. The commercial loans were $83 billion, or 44.7% of the total loans. Home Equity was the second biggest loan category, with $35.92 billion in loans, while residential real estate and commercial real estate came in at only $15.24 billion and $18.65 billion, respectively.
Highest earnings valuation among its much bigger peers
PNC is trading at $75.90 per share, with a market cap of $40.20 billion. The market values PNC at around 11 times its forward earnings and 1.08 times its book value. Compared to JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC), PNC has the highest earnings valuation. JPMorgan Chase & Co. (NYSE:JPM) is trading at $54 per share, with a market cap of $204.60 billion. The market values JPMorgan Chase & Co. (NYSE:JPM) cheaper, at 9.04 times its forward earnings and 1.04 times its book value. JPMorgan Chase & Co. (NYSE:JPM) has the global leading position in Consumer & Business Banking, Mortgage Banking and Card, Merchant Services & Auto. The company reported that it was the #1 in ATM network and #2 in branches. It also holds the #2 spot in mortgage origination and is the biggest credit card issuer in the U.S. In the first quarter 2013, its net interest margin stayed at 2.37%. JP Morgan’s capital plan had been approved by the Fed to buy back as much as $6 billion in shares through the first quarter of next year, yielding as much as 2.93% for its shareholders. Moreover, JP Morgan also announced that it would raise its quarterly dividend from $0.30 per share to $0.38 per share, pushing the annualized dividend to $1.52 per share. The dividend yield is 2.8% at its current trading price.
