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PNC Financial Services (PNC), Bank of America Corp (BAC), Wells Fargo & Co (WFC): Key Goals for This Big Bank

While many banks have begun to shy away from mortgages in the face of rising rates, PNC actually saw its originations of mortgages grow 31% in the second quarter of this year, while market leader Wells Fargo & Co (NYSE:WFC) watched originations climb only 3%. Keep an eye on whether PNC’s originations outpace the market’s average growth, which stood at 25% in the most recent quarter, according to the Mortgage Bankers Association.

It is worth mentioning that, somewhat troublingly, refinanced mortgages represented 76% of PNC’s total mortgage originations in the first half of the year, compared against the industry average of 69%. As mortgage rates rise, PNC anticipates that refinancing will fall 73% by the end of 2014. On the bright side, PNC has seen its applications for new mortgages grow 29% year over year, versus 12% for the industry.

Expense management

Finally, Demchak noted that one key focus of PNC was its ability to diligently manage its expenses. He said the company wanted to move “from the middle of the pack to an industry leader” in the area of expense management. While PNC still trails its peers in its efficiency ratio — expenses divided by revenue, a number you always want to be low — it has watched its expense management improve significantly year over year:

Expense Ratio Q2 2012 Q1 2013 Q2 2013
PNC (NYSE: PNC) 73% 61% 60%
Wells Fargo (NYSE: WFC) 58% 58% 57%
Sun Trust 69% 64% 67%
US Bancorp  51% 51% 51%

Source: Company SEC filings.

In all five areas highlighted by Demchak, PNC is making good headway on its goals. Knowing any company’s top priorities, and understanding its ability to successfully carry them out, is crucial before you decide to purchase a stock. PNC will announce its third-quarter earnings on October 16, and any investor considering an investment in this bank will want to see whether it has continued its diligent execution in these five key areas.

The article 5 Key Goals for This Big Bank originally appeared on and is written by Patrick Morris.

Fool contributor Patrick Morris owns shares of Bank of America and US Bancorp. The Motley Fool recommends and owns shares of Bank of America and Wells Fargo. It also owns shares of PNC Financial Services. 

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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