BofA Securities analyst Ebrahim H. Poonawala upgraded PNC Financial Services Group, Inc. (NYSE:PNC) to Buy from Neutral, raising the price objective to $200 from $185.

Despite a premium valuation often being a barrier for the analyst, the revised FY25/26 estimates imply a 14% annual EPS growth, making the risk/reward attractive.

With shares trading at 11.2x/9.9x FY25/26 EPS and 1.6x YE25 TBV, compared to a 15% ROTCE outlook, Poonawala writes that the investment potential looks promising.

The analyst remains upbeat on the company's ability to navigate a range of macroeconomic outcomes while capitalizing on growth opportunities arising from potential market dislocations.

PNC appears on track to deliver solid NII growth (forecast 7.7%/6.0% FY25/26), the analyst adds.

According to the analyst, the company is better positioned relative to most peers to defend NII (repricing of low-yielding bonds, swap maturities, floating rate debt), with the management reiterating its expectation for delivering record NII in FY25.

Although M&A potential often weighs on buyers, PNC Financial's case is different: a deal announcement could act as a positive catalyst, Poonawala writes.

This is due to the shareholder base's awareness of management's proactive deal-making stance and their strong track record with previous transactions.

With a solid stock currency, solid balance sheet, and absence of regulatory issues, PNC is well-positioned as a preferred partner for regional banks exploring strategic options.

The analyst lowered FY24 EPS from $13.29 to $13.12.

Price Action: PNC shares are trading higher by 2.15% to $171.99 at last check Thursday.

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