PNC and Huntington impress with earnings

Results from retail bankers have shocked analysts in what seems to be a long overdue comeback from recent economic turmoil.

By Benzinga Apr 19, 2012 5:51PM
Image: Cash machine (© Compassionate Eye Foundation/Getty Images/Getty Images)By Katey Stapleton, Benzinga Staff Writer

Execution is no foreign word for financial services companies PNC (PNC) and Huntington Bancshares (HBAN), which earned high marks Wednesday for their first-quarter performances.

Analysts have upped price targets for the stocks in positive reports throughout the past week -- and competitors have something to talk about as well.

PNC reported first-quarter income of $811 million, while Huntington flaunted a 21% income increase to $153.3 million.

For PNC, the tides have turned for the better, as the banking giant noted higher-than-expected purchase accounting from its Royal Bank of Canada (RYacquisition and a better core net-interest margin. This prompted a price target change from Jefferies, and some encouraging estimate increases.

The new estimates reflect higher revenue potential and planned investments related to Royal Bank of Canada, the Jefferies analysts said in a report.

Even though optimism is on PNC's side at the moment, the financial corporation has much to work on in the future if it wants to really reel in investor conviction. Expenses were still above expectations due to home foreclosures and higher growth revenues.

Regardless of the improvements that need to be made, most analysts view the stock as promising. Citi recently noted that PNC is positioned for strong results in its second quarter, depending upon another round of strong mortgage banking and purchase accounting.

From positive results at one corporation to an utterly shocking upside at Huntington, things are looking good in the retail banking world. On its earnings call, Huntington CFO Don Kimble literally stunned analysts with the company's first upside surprise since early 2010 as it outperformed its peers by approximately 1.5%.

In the call, Kimble shared two items that significantly impacted the stellar results: an $11.4 million gain from Huntington Bancshares' FDIC-assisted purchase of Fidelity Bank in Dearborn, Mich., and a $23.5 million addition to litigation reserves.

With such astounding numbers to report, it is no wonder that Citi saw the results as a quality beat, and Bank of America raised its price target from to $7 $6.50 on the shares.

"We believe 1Q12 results showed solid momentum, as top-line gains outpaced growth in expenses," Bank of America shared after the call. Analysts said they remained cautious on the sector as a whole, given its strong stock performance this year and the potential for an economic slowdown in the second half of the year. Nonetheless, the analysts said, "we believe HBAN is the one of the best positioned mid-sized regionals for 2012."

As things continue to improve for both Huntington and PNC, other financial companies are feeling the love as well. U.S. Bancorp (USB) recently impressed with its first-quarter results, and is moving market share in a low-growth environment.

Sterne Agee beamed about the financial service, as USB continues to set itself apart with a diversified earnings stream, modest market sensitive revenues and robust loan growth. The research firm increased its price target on shares from $32 to $34.

Banking retailers have given analysts a reason to see light at the end of the tunnel, as far as earnings go. As they forge into the coming months, each has improvements to make on a long-term comeback.

PNC closed Thursday at $64.60, up 6% this year, while Huntington closed at $6.45 and USB closed at $31.22.

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