Tuesday, September 11, 2012

Oppenheimer Upgrades PNC Financial Services (NYSE:PNC)

PNC Financial Services(NYSE:PNC)’s acquisition of Royal Bank of Canada’s retail division in the United States will start yielding dividends in the second half of the year, Oppenheimer & Co said on Monday.

Oppenheimer upgraded Pittsburgh-based PNC on Monday to Outperform from Perform and setting a price target of $75 in a year's time. The shares in the company are currently trading at about $64, and has risen 9 percent so far this year.

PNC bought the retail assets of RBC in March for $3.45 billion. Oppenheimer analyst, Terry McEnvoy said that the acquisition formed an ideal platform for the bank to expand its market share in the south-eastern part of the country.

Benefits from the acquisition should become more evident in the second half of the year, bringing an increase in net interest income, or income collected on loans, of 10 percent to 12 percent during the period, Oppenheimer said.

In the second quarter, PNC'S net interest income jumped 17 percent, boosted by contributions from the RBC purchase.

PNC is ahead of both larger and smaller rivals in creating financial products and capitalizing on changes in banking practices, Oppenheimer said.

Shares of PNC Financial Services Group rose 81 cents, or 1.3 percent, to $64.61 in midday trading. They have traded between $44.74 and $67.89 over the past 52 weeks.

While home prices have shown an uptrend, banks in the U.S. are under pressure from state-owned entities such as Freddie Mac and Fannie Mae to buy back more home mortgages.

However the bank has a solid revenue stream and its robust market price should be able to outweigh these negative pressures.

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