On Wednesday, Baird made a positive adjustment to PNC Financial's (NYSE:PNC) outlook, with analyst David George increasing the price target to $195.00, up from the prior $175.00, while reaffirming an Outperform rating on the stock.
The firm's analysis highlighted PNC's performance in the recent quarter, noting that core pre-provision net revenue (PPNR) was largely in line with market expectations. This outcome was attributed to a balance between strong net interest income (NII) and softer fees, alongside well-managed expenses.
The report pointed out that NII benefited from notable net interest margin (NIM) expansion, which was partly driven by approximately $3.8 billion in securities repositioning.
Baird underscored PNC's expectation for a record NII in fiscal year 2025, spurred by fixed asset repricing. Additionally, the bank's loss of sale amounting to $497 million was more than compensated for by a roughly $754 million gain from the sale of VISA Class B shares valuation in the quarter.
The bank's common equity tier 1 (CET1) ratio was also a highlight, reaching approximately 8.7%, a slight increase from around 8.4% in the first quarter of 2024. While credit quality, particularly in commercial real estate (CRE) office space, showed some struggle during the quarter, Baird does not foresee a significant impact on earnings.
This is due to a robust multi-tenant reserve of about 15.5%, despite approximately 52% of PNC's multi-tenant office book being criticized and loan loss severity remaining significant.
In summary, Baird's assessment of PNC Financial's quarterly report was favorable, emphasizing the bank's solid execution and positive financial indicators, which support the raised price target and continued Outperform rating.
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