PNC's Core Banking Ops Are Under Pressure, But M&A Optionality Is A Plus

This is a tough time to model PNC (PNC), as the company’s decision to sell its large position in BlackRock (BLK) reduces near-term earnings and only adds to the burden of excess liquidity in a low-rate environment. I continue to believe that PNC management will prove themselves good stewards of capital, and will likely look to use that excess capital to acquire one or more banking franchises to accelerate the company’s development into a national commercial-focused banking giant.

PNC shares have underperformed since my last update, and I can see how ongoing uncertainty regarding the use of that excess capital may weigh on the shares for some time – no doubt there will be some investors pushing the company to forget about empire-building and just return the capital in the form of a big buyback and/or special dividend. While there’s above-average modeling uncertainty here (given the significant impact that a large acquisition could have on future financials), I believe PNC remains undervalued and underappreciated as a high-quality bank in a challenging operating environment.

Read more here:
PNC's Core Banking Ops Are Under Pressure, But M&A Optionality Is A Plus