PNC Financial Services Group Covering Analyst: Matthew Miller

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

PNC is Growing

Improving Credit Metrics

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

Geographic Scope of Operations

Revenue Breakdown

Financial Services Industry ›Consolidating ›Changing regulatory environment ›Sustained low interest rates ›Projected 5.2% growth

Consolidation

Regulatory Environment ›Basel III –Draft regulation published ›Implementation –Began 1 January 2013 –End 1 January 2019

Low Interest Rates ›Current prime rate is 3.25 ›Expected to remain low –Shrinking net interest margin

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%

Comparable Valuation

›Values only the equity –No WACC –No Working Capital ›Reasons for not doing a DCF –Interest –Debt –Working Capital Excess Return Model

Excess Return Model Assumptions

Final Valuation

Questions?

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

Appendix 1: Payout Ratio

Appendix 2: Dividend Yield

Appendix 3: Projected Dividend