Enduring criticism can be tough, especially when your competitors are vaulting ahead and leaving you in the dust. PNC Financial
Not too long ago, PNC was getting criticized for its slow net interest income growth. However, PNC decided not to lose its head. As CEO Jim Rohr put it, "We didn't take subprime bets, we didn't rely on exotic product plays ... that strategy served us well."
The third quarter has been rough for many banks. Citigroup's
PNC, along with Wells Fargo
That 50% of revenue from fee income provides very valuable diversification and allows the banks to stay disciplined through credit cycles. All of the banks I mentioned in the 50/50 Club increased their income in Q3, despite being in one of the toughest banking environments of the past decade.
PNC has an easier time than many other banks do of staying disciplined in environments such as the current one, because 58% of its revenues come from fee-based businesses. They allow the company to earn high returns on capital without taking too many risks.
And those businesses have been performing extremely well.
PNC's non-performing assets as a percentage of total assets increased a mere 2 basis points to 0.22% from 0.20% last quarter. And the loan-to-deposit ratio remained among the lowest of its peers at 84%.
Unfortunately, the stock market doesn't seem to appreciate PNC's superior business franchise. Even as competitors such as State Street
Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates hearing your comments, concerns, and complaints. The Motley Fool has a disclosure policy.