Magazine article American Banker

PNC Wins Analysts' Applause for Shift to Fee Businesses

Magazine article American Banker

PNC Wins Analysts' Applause for Shift to Fee Businesses

Article excerpt

PNC Bank Corp. is winning a following on Wall Street as a company poised for a big jump in net income.

The Pittsburgh company has just completed a restructuring to better capitalize on core banking operations and noninterest income opportunities, said Carla A. D'Arista, a banking analyst at Friedman, Billings, Ramsey & Co.

PNC will see earnings accelerate by 8% to 11% for each of the next two years, compared with 1% annual growth from 1993 through 1997, Ms. D'Arista said.

The increase is possible because PNC now derives 95% of its profits from traditional areas like lending and newer, fee-income sources.

A few years ago, more than half of profits came from less consistent sources like investments, corporate loan spreads, and derivatives gains.

PNC should excel at asset management and mutual fund servicing, said Sally Pope Davis, a banking analyst with Goldman, Sachs & Co.

The company's growth in those areas "is among the most robust in the industry," Ms. Davis said.

Despite the positive assessments, PNC shares fell back Thursday $1.50, to $58.50.

The slide was part of general selloff that started at the beginning of the week.

Markets were rattled early Thursday by word that unemployment claims fell in April, a sign that the economy is charging along and that rates could head upward.

Investors also sold in anticipation of a noon speech by Federal Reserve Chairman Alan Greenspan.

Indeed, the tone of morning trading had "a negative bias," said Phil Cuthbertson, head trader at Keefe, Bruyette & Woods Inc. …

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