PNC Financial Services (NYSE:PNC)’s closest peers are U.S. Bancorp (NYSE:USB) and Fifth Third Bancorp (NASDAQ:FITB). These two stocks are valued at about the same levels as PNC in earnings terms, with trailing P/Es in the 11-12 range. Earnings numbers have been more modest at these two banks, and in fact Fifth Third Bancorp (NASDAQ:FITB) experienced a decline in net income in its most recent quarter compared to the same period in the previous year. That stock does trade at a small discount to PNC, but we still think that we would avoid it for now. U.S. Bancorp (NYSE:USB) has been managing slow growth, and given that the stock is trading in value territory as well as that factor we’d be interested in examining its recent reports more closely. All three of these banks offer dividend yields between 2% and 2.5%.
We can also compare PNC to Wells Fargo & Co (NYSE:WFC) and to JPMorgan Chase (NYSE:JPM). These two megabanks pay slightly higher yields, closer to 3% in each case. JPMorgan Chase actually looks quite interesting from a value perspective: it trades at 9 times earnings, whether we consider trailing results or forecasts for 2014, and couples this valuation with reported growth on both top and bottom lines last quarter compared to the first quarter of 2012. Wells Fargo & Co (NYSE:WFC) has also been recording decent performance, but it turns out to be valued at similar levels to the first three banks we discussed here, at a premium to JPM. We wouldn’t rule it out as an investment, but particularly with a P/B ratio of 1.4 it wouldn’t be as high a priority.
While earnings have risen at PNC from their levels a year ago, a closer look at the bank’s quarterly report suggests that investors shouldn’t count on further rises in net income. Given that the stock’s earnings multiples are about in line with its peers, then, we aren’t sure what Griffin and his team see in it. Of PNC’s peers, JPMorgan Chase appears to be the most worthy of further research given that a quick look shows it trading at a discount to other banks and with its business looking at least steady as well.
Disclosure: I own no shares of any stocks mentioned in this article.