Results Diverge at Two Big Regional Banks -- WSJ
17 January 2019 - 7:02PM
Dow Jones News
By Allison Prang
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 17, 2019).
Fourth-quarter earnings results varied at two of the U.S.'s
largest regional banks, while both reported a drop in expenses and
increase in revenue.
U.S. Bancorp said earnings were $1.10 a share, up from 97 cents
a share a year earlier. PNC Financial Services Group said earnings
were $2.75 a share, down from $4.18 a share. PNC said that in the
fourth quarter of 2017, its earnings included a $900 million
benefit from the new tax law and other items.
Analysts polled by FactSet expected U.S. Bancorp to report
earnings of $1.06 a share and PNC to report earnings of $2.79 a
share.
PNC and U.S. Bancorp's results fall in line with others in the
industry in feeling the benefits of higher interest rates. JPMorgan
Chase & Co. and Wells Fargo & Co., which both reported
results Tuesday, had higher revenue from lending as a result of
increased interest rates, they said.
Total net revenue at U.S. Bancorp increased 4.1% to $5.83
billion and PNC's rose 1.9% to $4.34 billion.
Net interest income -- or the difference between the interest
collected versus the interest paid -- on a taxable-equivalent basis
at U.S. Bancorp rose 3.2% to $3.3 billion. Net interest income rose
5.8% at PNC to $2.48 billion.
U.S. Bancorp said higher interest rates boosted net interest
income but added that higher deposit costs affected results. PNC
echoed U.S. Bancorp and said that while its yields on loans were
higher, it also had increased borrowing and deposit costs.
As rates rise, banks are able to make more money on their loans,
but customers also demand higher interest rates on their
deposits.
U.S. Bancorp's net interest margin, which measures how
profitable a bank is, was 3.15%, unchanged from the third quarter.
Compared with the fourth quarter a year earlier, it expanded by
0.04 percentage point.
PNC reported a net interest margin of 2.96%, a drop of 0.03
percentage point from the third quarter but up 0.08 percentage
point from the fourth quarter a year earlier. The margin narrowed
from the third quarter because of a change in how it calculates
some interest-earning assets, PNC said.
Noninterest expenses at U.S. Bancorp dropped 16% to $3.28
billion in the fourth quarter. A year earlier, U.S. Bancorp
recorded $825 million in costs that included settling a regulatory
issue, among other items.
PNC's noninterest expenses fell 16% to $2.58 billion, largely
because of the comparison to the year-earlier period, which
included expenses such as a $200 million contribution to the
company's foundation.
Sandler O'Neill + Partners said in an analyst note previewing
banks' fourth-quarter earnings results that recent rate increases
from the Federal Reserve could help banks' net interest margins but
said they expect the flattening yield curve in the latter part of
2018 to hurt results.
Both banks reported their fourth-quarter results before the
market opened Wednesday. Shares of U.S. Bancorp gained 2.4% to
$49.11. PNC shares added 0.9% to $121.21.
Write to Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
January 17, 2019 02:47 ET (07:47 GMT)
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