PNC Financial Services Group

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PNC Financial Services Group

• Covering Analyst Matthew Miller Email
  Miller24_at_uoregon.edu

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Business Overview

• Founded in 1852 as The Pittsburgh Savings and
  Trust Company
• One of the largest diversified providers of
  financial services in the U.S.
• Strong loan and customer growth in 2012

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PNC is Growing
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Improving Credit Metrics
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Scope

• 2,881 Branches
• 7,282 ATM Machines
• 18 States, Washington D.C.

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Geographic Scope of Operations
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Revenue Breakdown
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Revenue Breakdown
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Financial Services Industry

• Consolidating
• Changing regulatory environment
• Sustained low interest rates
• Projected 5.2 growth 2012-2017

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Consolidation
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Regulatory Environment

• Basel III
• Draft regulation published
• Implementation
• Began 1 January 2013
• End 1 January 2019

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Low Interest Rates

• Current prime rate is 3.25
• Expected to remain low
• Shrinking net interest margin

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Comparable Analysis

• Growth, risk, and products and services
• U.S. Bancorp 22.5
• CIBC 22.5
• J.P. Morgan 20
• Toronto Dominion Bank 20
• Wells Fargo 15

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Comparable Valuation
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Excess Return Model

• Values only the equity
• No WACC
• No Working Capital
• Reasons for not doing a DCF
• Interest
• Debt
• Working Capital

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Excess Return Model
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Excess Return Model Assumptions
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Final Valuation
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Questions?
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Recommendation

• Based on my analysis I have found PNC to be
  significantly undervalued. Therefore I am
  recommending a buy for all portfolios

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Appendix 1 Payout Ratio
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Appendix 2 Dividend Yield
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Appendix 3 Projected Dividend