Rise in NII & Fee Income to Aid PNC Financial's Q2 Earnings

The PNC Financial Services Group, Inc. PNC is scheduled to report second-quarter 2025 earnings on July 16, before market open. Its revenues and earnings are expected to have improved on a year-over-year basis.

In the first quarter, PNC’s earnings beat the Zacks Consensus Estimate, driven by a rise in fee income, net interest income (“NII”) and the loan balance. However, an increase in expenses and provision for credit losses acted as a spoilsport.

The company has an impressive earnings surprise history. Its earnings surpassed estimates in the trailing four quarters, the average surprise being 8.39%.

The PNC Financial Services Group, Inc Price and EPS Surprise

The PNC Financial Services Group, Inc price-eps-surprise | The PNC Financial Services Group, Inc Quote

Factors to Impact PNC Financial’s Q2 Performance

NII: In the second quarter, the Federal Reserve kept interest rates unchanged at 4.25-4.5%. This is likely to have offered some support to PNC’s NII in the quarter to be reported, as the funding/deposit costs stabilized.

The lending scenario was impressive despite the uncertainty surrounding Trump’s tariff plans. Per the Federal Reserve’s latest data, demand for commercial and industrial loans, real estate loans and consumer loans in the first two months of the quarter was solid. As a result, PNC Financial’s lending activity is expected to have seen improvement.

The company expects average loans to rise 1% sequentially. Further, NII is anticipated to rise 1-2% in the second quarter of 2025.

The Zacks Consensus Estimate for NII of $3.55 billion indicates a sequential rise of 2%. Our model projection is the same as the consensus estimate. We project average loans to rise 1.4% sequentially.

Non-Interest Revenues: Despite interest rate cuts by the Fed in 2024, mortgage rates did not come down meaningfully. In the second quarter, mortgage rates fluctuated, but they remained in the mid-to-upper 6% range. As such, refinancing activities and origination volume did not witness significant growth. This is likely to have adversely affected PNC’s mortgage revenues in the second quarter of 2025.

The Zacks Consensus Estimate for the residential and commercial mortgage revenues is pegged at $130.4 million, indicating a decline of 2.7% sequentially. Our estimate for the metric is $136.5 million.

Further, the quarter has witnessed heightened market volatility and client activity because of uncertainty related to Trump’s tariff plans. Also, the performance of the equity markets was modest. Hence, PNC Financial’s asset management and brokerage income is likely not to have witnessed significant growth. The consensus estimate for the metric is pegged at $387.8 million, indicating a marginal decline sequentially. We project asset management and brokerage income to be $373.4 million.

Global mergers and acquisitions (M&As) activity in the second quarter of 2025 was more impressive than previously expected. Following the Trump announcement of sweeping tariffs, markets plunged in early April, rattling business confidence. But as trade demands eased and policy direction became clearer, deal-making activities resumed in the last month of the quarter.

The consensus estimate for the company’s capital markets and advisory income of $304.4 million indicates a slight sequential decline. We project the metric to be $325 million.

Further, the Zacks Consensus Estimate for card and cash management revenues is pinned at $726.4 million, indicating a 4.9% sequential rise. The consensus estimate for lending and deposit services is pegged at $315.1 million, indicating a slight decline from the prior quarter’s actual. Our estimates for card and cash management revenues and lending and deposit services are $694 million and $314.6 million, respectively.

Management expects fee income to rise 1-3% from the first quarter of 2025.

The Zacks Consensus Estimate for non-interest income is pegged at $2.04 billion, indicating a 3.4% rise from the last quarter. Our projection for the metric is the same as the consensus estimate.

Expenses: PNC’s expenses are expected to have continued flaring up during the second quarter due to its investments in franchise expansion, technology and digitalization, which might have hindered the bottom-line growth. However, the company’s cost-containment measures might have offset the rise to some extent.

Management expects adjusted non-interest expenses to be stable compared with the first quarter. Our estimate for non-interest expenses is pegged at $3.43 billion.

Asset Quality: PNC Financial is likely to have set aside a substantial amount of money for potential delinquent loans (mainly commercial loan defaults), given the expectations of a higher volume for a longer interest rate backdrop and tariff-related uncertainty. We expect provisions for credit losses to be $252.5 million, indicating a sequential jump of 15.3%.

Management expects net charge-offs to be around $300 million, up from $205 million in the first quarter of 2025.  

The Zacks Consensus Estimate for non-performing assets (NPAs) is pegged at $2.38 billion, indicating an increase of 2.2% from the previous quarter. Also, the consensus estimate for non-performing loans (NPLs) is pinned at $2.33 billion, implying a rise of 1.8%. Our estimates for NPAs and NPLs are $2.39 billion and $2.25 billion, respectively.

What Our Model Unveils for PNC

Our proven model predicts an earnings beat for PNC Financial this time. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That is exactly the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: PNC Financial has an Earnings ESP of +0.18%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

PNC Financial’s Q2 Earnings & Sales Expectations

The Zacks Consensus Estimate for second-quarter earnings per share has moved marginally lower in the past seven days to $3.56. This implies a year-over-year rise of 7.9%.

The Zacks Consensus Estimate for quarterly revenues of $5.62 billion indicates a 3.8% year-over-year increase.

PNC projects total revenues to increase 1-3% from the $5.5 billion reported in the first quarter of 2025.

Other Bank Stocks to Consider

Here are a couple of other bank stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this time:

The Earnings ESP for Northern Trust Corporation NTRS is +0.49% and it sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company is slated to report second-quarter 2025 results on July 23.Over the past seven days, the Zacks Consensus Estimate for NTRS' quarterly earnings has been revised upward to $2.06 per share.

Prosperity Bancshares, Inc. PB is also scheduled to announce second-quarter 2025 results on July 23. The company has a Zacks Rank #3 at present and an Earnings ESP of +1.33%. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Quarterly earnings estimates for PB have been unchanged at $1.40 per share over the past week.

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This article originally published on Zacks Investment Research (zacks.com).

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