Tuesday, February 9, 2016

PNC warning: Mortgage slowdown ahead

It's also tough to find good help these days, says Pa.'s largest bank

PNC warning: Mortgage slowdown ahead

PNC Bank CEO William Demchak.
PNC Bank CEO William Demchak.

Bank-watcher R. Scott Siefers, analyst for Sandler O'Neill + Partners, New York, has cut his 2013 profit target for PNC Financial Services Group, Pennsylvania's largest bank, to $6.57 a share from his previous $6.78 after new chief executive William Demchak "backed off" earlier projections and warned home lending won't grow as quickly as expected -- both because of "lower (loan) volume levels," and also "the difficulty in finding talented employees" to handle mortgage loans.

Siefers is still recommending the stock after a "solid" quarter in which PNC posted "cleaner" sales and profit numbers than was its custom under previous CEO Jim Rohr. The analyst blames accounting fallout from earlier mergers, but also credits Demchak's acknowlegement that "investors' frustration with the complexity in PNC's recent numbers" has been a factor in the bank's low share price multiple, less than 10x earnings, which is below other big banks for a company with PNC's profitability, rising sales and continuing expense cuts.

PNC loans should rise about 5% this year, led by business (commercial & industrial) lending, according to Siefers. The bank will continue to cut jobs and expenses. Starting next year he expects PNC to plow more profits into higher dividends and share buybacks to prop up PNC's share price.

ALSO: PNC has cut costs by (1) cutting back on marketing and (2) "reducing incentive compensation costs" as investment banking (for example, mortgage sales) declines, writes Anthony Polini, analyst at Raymond James & Associates, in a report to clients. 

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PhillyDeals posts interviews, drafts and updates that Joseph N. DiStefano writes alongside his Sunday and Monday columns and ongoing articles about Philadelphia-area business.

DiStefano studied economics, history and a little engineering at Penn. He taught writing and research at St. Joe’s. He has written for the Inquirer since 1989, except when he left a few times to work at Bloomberg and elsewhere. He wrote the book Comcasted, and raised six kids with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com, 215.854.5194, @PhillyJoeD. Read his blog posts at http://www.philly.com/PhillyDeals and his Inquirer columns at http://www.philly.com/philly/columnists/joseph-distefano/. Bloomberg posts his items at NH BLG_PHILLYDEAL.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

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