PNC Financial (NYSE:PNC) has had a solid run since the election, with the shares still up more than 25% from the start of November on investor enthusiasm over the prospect of lower tax rates, stronger economic growth, less regulation, and reflation. While PNC management is still finding it challenging to grow lending in the current environment, management is looking to address this issue while also looking for ways to build up its fee-generating businesses and continue on with its branch operation improvement strategy.
Modeling isn't particularly easy right now, as the
Street seems more than happy to factor in the benefits of a lot of
policy shifts that have been only vaguely outlined so far. To that end, I
am factoring in drivers like improving spreads and lower deposit betas,
but I haven't yet changed my tax rate assumptions for PNC. My
assumptions work out to mid single-digit mid-term and long-term earnings
growth and a low double-digit return on tangible equity, and PNC is not
particularly cheap on either an absolute or relative basis.
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PNC Financial Waiting For Multiple Drivers To Get Into Gear