PNC Financial Services Group reported third-quarter profit that beat analysts’ estimates as the lender cut costs to counter a decline in revenue.
Net income rose 3.4% to $1.07 billion, or $1.90 a share, from $1.04 billion, or $1.79, a year earlier, the Pittsburgh bank said Wednesday. The average estimate of 29 analysts surveyed by Bloomberg was for adjusted earnings of $1.78 a share. Revenue declined 1.7% to $3.78 billion, missing estimates.
Banks are stepping up efforts to bolster fee businesses and control costs amid dwindling expectations that the Federal Reserve will raise benchmark interest rates this year. Chief Executive Officer William Demchak boosted PNC’s cost-savings goal to $500 million annually from $400 million in July as he closes branches and reduces expenses tied to technology investments.
“Expenses remain top of mind," John McDonald, an analyst at Sanford C. Bernstein & Co., said in an Oct. 1 note. “Amid disappointment over the Fed’s recent decision not to hike, investors are seeking evidence of credible hopes for operating leverage over the next year as a bridge to the benefits of higher rates."
Asset-management revenue fell 8.5% to $376 million from a year earlier partly because of stock-market declines, the bank said. Noninterest income from residential mortgage banking slid 11% to $125 million on lower loan sales and as the bank made less money from hedging on mortgage-servicing rights. Noninterest expenses fell less than 1% to $2.35 billion on lower marketing costs.
“Expenses were down, deposits were up, and we continued to execute on our strategic priorities designed to deepen customer relationships and grow our diverse fee businesses," Demchak said in a news release on third-quarter results.
PNC shares have fallen 2.9% this year, compared with the 5.1% decline of the 24-company KBW Bank Index. U.S. bank stocks slumped in September as bond traders pushed back expectations for a rate increase until next year.
Higher interest rates will allow banks to earn larger spreads on the deposits they have collected. While the Fed’s efforts to reduce rates stabilized asset prices and helped lenders access cheap debt in the wake of the credit crisis, prolonged low rates have crimped banks’ margins. Lenders including Bank of America and U.S. Bancorp have said they plan to boost cost-cutting measures.
JPMorgan Chase posted third-quarter earnings Tuesday that missed analysts’ estimates as a slump in trading and mortgage banking drove revenue lower. Bank of America said Wednesday that it swung to a $4.51 billion profit in the quarter as expenses declined.