7 Things You Need to Know About PNC Financial

For we bank investors, it's easy to focus on the big ones. They're attention hogs, almost constantly in the news, whether for positive or negative reasons.

As such, we can be forgiven for sometimes thinking they constitute the entire investable-banking universe. But there's a whole other level of publicly held banks out there that also deserve investor attention: regional banks.

Regional banks are big enough and dynamic enough to conduct serious business -- and therefore exhibit serious growth -- without all the unneeded drama that can come along with being "too big to fail."

Without further ado, then, here are seven of my favorite things about PNC Financial (NYSE: PNC  ) : a regional bank that doesn't steal headlines, but may just steal your investor's heart.

1. Solid share-price performance over the past year
Since March of last year, PNC has returned 4.1% in share-price gains to its stockholders. Not stellar, but very solid.

PNC may be no Bank of America (NYSE: BAC  ) when it comes to share-price appreciation -- returning 31.79% to its shareholders in the past year versus B of A's 100% -- but PNC also doesn't come with many of the same drawbacks as B of A, including a recent $10 billion payout to Fannie Mae for poorly vetted mortgages doled out in the run-up to the financial crisis. Size isn't everything.

2. Great year-to-date share-price performance
PNC has been cooking on all burners since the start of 2013, returning a big 11.27% to its shareholders already. In a reversal of roles, and potentially investor fortunes, B of A shares have only gone up by 4.41% since the beginning of the year.

3. Spot-on valuation
PNC's price-to-book ratio is 0.99, which is right in the pocket. As a personal rule of thumb, I try to buy into a company with a P/B right around 1.0, with the hope of someday selling at around 2.0.

PNC's P/B of 0.99 tells me the bank may be undervalued just a bit, but not so much that red flags are going up. For a bank throwing up red flags, check out Citigroup (NYSE: C  ) , which has a P/B of 0.75: low enough to raise suspicions that something more serious than simple investor fussiness is manifesting itself.

4. Great fourth-quarter performance
PNC grew its fourth-quarter net income at a giant 50.8% year over year, on just 5.8% revenue growth. Now that's bang for your banking buck, and even beats the Q4 performance of Wells Fargo (NYSE: WFC  ) , which grew its year-over-year net income by 23.9% on 8.1% revenue growth. Wells' performance is great, and PNC's is even better.

5. Fabulous stress-test results
The Federal Reserve just released results from the 2013 stress tests, or Comprehensive Capital Analysis and Review. The CCAR puts banks through a simulated, severe economic downturn -- along the lines of what the country experienced in 2008 -- and measures how well they perform.

For 2013, PNC went into the CCAR with an actual Tier 1 common ratio of 9.5%, a stressed minimum of 8.7%, and a stressed minimum with proposed capital actions of 8.6%. The Fed only asks that banks have a stressed minimum somewhere above 5%, and the median average performance this year was 7.7%. Good capitalization equates to good strength.

6. A solid dividend, with the potential for more
Doing so well on the stress test not only means the bank is well positioned for any potential economic downturn, but it also means it will likely increase its dividend. Last year, PNC increased its dividend by 17% post-CCAR.

The bank hasn't announced what it proposed and was approved for, but it's almost certain investors will see something in addition to the already-solid 2.4% PNC pays.

7. A promising new CEO
On February 14, PNC announced it's getting a new CEO. After 15 years of steady managing, Jim Ruhr is stepping aside, and William Demchak is taking his place. Demchak is currently PNC's president, and came to the bank from JPMorgan Chase in 2002. 

Demchak is brainy and has a reputation for candor. And at the spry age of just 50, he holds out the promise for vigorous, thoughtful leadership for the bank moving far forward into the future. Leadership counts. Demchak could be PNC's Jamie Dimon, sans the hubris and too-big-to-fail drama we spoke about earlier.

Foolish bottom line
There you have it: Seven straightforward ways to think about PNC Financial, one of the investing world's unsung banks. Writing this makes me wonder why I'm not invested in PNC myself -- a situation I may soon have to rectify.

Looking for more in-depth analysis on PNC? Check out this Motley Fool premium report, written by our in-house PNC specialist and senior banking analyst -- Anand Chokkavelu.

In this no-nonsense report, Anand will tell you discover why this 160 year-old bank is such an intriguing upstart story, what makes PNC a much safer investment than most too-big-to-fail banks, as well as how Dodd-Frank could potentially hamper operations for this up-and-coming bank.

For immediate access to this Motley Fool special report, click here now.


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