BofA Securities analyst Ebrahim H. Poonawala has upgraded PNC Financial Services Group, Inc. (PNC) to ‘Buy’ from ‘Neutral’, raising the price objective to $200 from $185. Despite PNC’s premium valuation, which often acts as a deterrent for investors, Poonawala believes the revised FY25/26 estimates, indicating a 14% annual EPS growth, make the risk/reward proposition attractive.
With shares currently trading at 11.2x/9.9x FY25/26 EPS and 1.6x YE25 TBV, compared to a projected 15% ROTCE, Poonawala highlights the promising investment potential. He remains optimistic about PNC’s ability to navigate a range of macroeconomic scenarios while taking advantage of potential growth opportunities arising from market disruptions.
Poonawala expects PNC to deliver solid NII growth (forecast at 7.7%/6.0% FY25/26), emphasizing the company’s strong position relative to peers in defending NII. The analyst underscores that PNC’s management has reiterated its expectation of delivering record NII in FY25, driven by their strategy to reprice low-yielding bonds, manage swap maturities, and leverage floating rate debt.
While M&A potential often poses concerns for buyers, Poonawala sees PNC’s case differently. He believes a deal announcement could serve as a positive catalyst, given the shareholder base’s awareness of management’s proactive deal-making approach and their strong track record in previous transactions.
Poonawala highlights PNC’s solid stock currency, robust balance sheet, and absence of regulatory issues, making it an ideal partner for regional banks seeking strategic options. The analyst did, however, lower FY24 EPS from $13.29 to $13.12.
Following the news, PNC shares rose by 2.15% to $171.99 at the close of trading on Thursday.
