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PNC Financial’s shares declined despite sales beat

 

Thursday, January 19, 2023

The news shaping the markets today

Ukraine’s interior minister and other senior ministry officials were among the 14 people that were killed during a helicopter crash outside Kyiv. The RUB/USD pair rose in forex trading this morning.


Australia’s consumer inflation expectations increased to 5.6% in January, from 5.2% in the previous month, exerting pressure on the AUD/USD forex pair.


Japan’s trade deficit widened to ¥1,448.5 billion in December, from ¥603.1 billion in the year-ago month. However, markets were expecting for a wider gap of ¥1,652.8 billion, sending the JPY/USD pair higher in forex trading this morning.


New Zealand’s food prices increased 11.3% year-over-year in December, recording the highest annual rise since 1990, which exerted pressure on the NZD/USD forex pair.


The American Petroleum Institute said US stockpiles of crude oil grew by 7.615 million barrels in the week ended January 13, after a record gain of 14.865 million barrels in the prior week. US crude oil prices traded lower this morning.

 

What’s happening: Shares of PNC Financial Services Group Inc fell on Wednesday after the company released results for the fourth quarter.

What happened: The bank reported upbeat sales for its latest quarter, while earnings missed expectations.

PNC Financial reported a sharp increase in provisions for credit losses during the quarter.

How were the results: The Pittsburgh, Pennsylvania-based bank reported a decline in earnings, while sales grew from the year-ago period for the three months ended December 31.

  • Revenues grew to $5.76 billion, from $5.55 billion in the third quarter and $5.13 billion in the year-earlier period. The figure topped Wall Street expectations of $5.71 billion.
  • Adjusted earnings fell to $3.49 per share, from $3.78 in the previous quarter and $3.78 in the year-ago period. The figure missed the consensus estimates of $3.96 per share.

Why it matters: There was a sharp rise in investments and deposits during the covid-19 pandemic era, when interest rates were low. However, with spiking inflation, the Federal Reserve started hiking interest rates, which resulted in a decline in investment banking revenues.

PNC’s total noninterest expenses came in at $3.47 billion, from $3.28 billion in the prior quarter and compared to $3.79 billion in the year-earlier quarter.

PNC’s net interest income grew for the seventh quarter in a row, rising 29% to $3.68 billion. Its average loans rose to $321.9 billion, from $313.0 billion in the prior quarter, while average deposits increased to $434.9 billion, from $439.2 billion in the third quarter.

The bank increased its provision for credit losses to $408 million during the fourth quarter, versus a release of $327 million in the previous year.

How shares responded: PNC Financial’s shares fell 6% to close at $152.07 on Wednesday, following the release of quarterly results. The bank’s stock had added over 1% over the past month.

What to watch: Investors will keep an eye on the Federal Reserve’s interest rate decision, due on February 1, which might impact the bank’s performance in the current quarter.

The markets today

The US dollar will be in focus ahead of a basket of major economic reports

Context: The US dollar index edged lower on Wednesday, as traders digested economic data and the Bank of Japan’s decision.

Details: Data released on Wednesday showed US retail sales contracting higher-than-expected in December. Retail sales in the US fell 1.1% in December, after a 1% decline in November and compared to market expectations of a 0.8% contraction.

A separate report also showed producer prices in the US declining more than projected in December. Producer prices for final demand fell 0.5% in December, versus a 0.2% increase a month ago and compared with market estimates of a 0.1% decline.

The decline in retail sales, along with easing inflation, could encourage the Fed to scale back the pace of rate hikes at next month’s meeting.

Investors also assessed the Bank of Japan’s decision to hold its ultra-low interest rates and a bond yield cap. The decision resulted in a sharp decline in the Japanese yen on Wednesday. However, the yen pared most of the losses later in the session and the USD/JPY settled only slightly lower at 128.92 on Wednesday.

The EUR/USD forex pair rose around 0.1% to 1.0797 on Wednesday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, traded slightly lower at 102.36 on Wednesday.

Benchmark 10-year notes fell to the lowest level since September 13, while two-year yields hit the lowest mark since October 4.

What are expectations: Traders await data on building permits, housing starts and initial jobless claims from the US today. Housing Starts in the US, which fell 0.5% in November, are expected to decline 1.9% in December. Analysts expect building permits to increase 3.6% in December, following a 10.6% decline in the November. The number of people filing new claims for jobless benefits, which fell by 1,000 to 205,000 in the week ending January 7, is expected to increase to 207,000 in the latest week.

Other Markets: European indices closed mixed on Wednesday, with the CAC 40 and STOXX Europe 600 up by 0.09% and 0.23%, respectively, and the FTSE 100 and DAX 40 down by 0.26% and 0.03%, respectively.

Support & resistances for today

Technical Levels News Sentiment
GBP/USD  – 1.2321 and 1.2338 Positive
AUD/USD – 0.6897 and 0.6912 Positive
Gold – 1905.29 and 1909.94 Positive
Copper   – 4.2011 and 4.2121 Negative
S&P 500 – 3938.76 and 3947.03 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0795, -0.02%) Dow ($33,373, -0.04%) Brent ($84.18, -0.9%)
GBP/USD (1.2332, -0.13%) S&P500 ($3,945, -0.03%) WTI ($78.55, -1.2%)
USD/JPY (128.373 -0.43%) Nasdaq ($11,474, -0.01%) Gold ($1,909, 0.1%)

What else to watch today

Indonesia’s value of loans and interest rate decision, Eurozone’s current account and ECB monetary policy meeting accounts, Spain’s balance of trade, Italy’s current account, South Africa’s SACCI business confidence index and building plans passed, Turkey’s gross foreign exchange reserves and Central Bank of Turkey’s interest rate decision, Brazil’s unemployment rate, Canada’s new motor vehicle sales and wholesale sales, US Philadelphia Fed manufacturing index, continuing jobless claims, natural gas stocks change, gasoline stocks, crude oil stocks change and distillate stocks, as well as Argentina’s balance of trade.


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