UPDATE: BMO Capital Upgrades PNC Financial (PNC) to Outperform
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(Updated - September 19, 2016 8:53 AM EDT)
BMO Capital upgraded PNC Financial (NYSE: PNC) from Market Perform to Outperform with a price target of $101. Analyst Lana Chan highlighted compelling valuation and said accelerating loan growth and steady fee income growth should turn PNC to a more revenue-driven story over the next few years.
"After two years of constant downward estimate revisions, we believe that PNC is finally poised for some upside, driven by fee income, tight expense management, and acceleration in loan growth over the next few years," said Chan.
The analyst continued, "PNC is on track to keep noninterest expense stable for the second year in a row in 2016. Through its Continuous Improvement Program (CIP), it has reduced annual expenses by more than $1 billion over the past three years, which has allowed it to invest heavily in technology and infrastructure. We believe management will target another year of flat expenses in 2017, which will be helped by the fact that 80% of its $1.2 billion in technology and infrastructure spending will be completed by year-end 2016. Consensus is currently modeling 2% expense growth in 2017."
Chan added, "PNC has posted low-single-digit loan growth for much of the last year and a half, mostly driven by the commercial segment, while core consumer loans have been flat. Management believes there are opportunities to accelerate the consumer side by “selling better” to its existing customer base. Currently, loan growth expectations for PNC are fairly modest (we estimate 2% for 2016 and 3% for 2017). New initiatives to reinvigorate consumer lending are expected to change the trajectory of consumer lending in 2017 and beyond."
Shares of PNC Financial closed at $89.39 yesterday.
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