Using Veritas to Construct the "Per…

29-04-2017 Hits:94615 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:85526 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:85900 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:90000 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:88436 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:88177 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:59312 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:87770 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:87309 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:87657 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:94068 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:91350 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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PNC has reported strong accounting earnings for Q3-09 and lower charge-offs as well as lower 90 day lates. The press and the blogs were all over it as a news search in Google reveals:

PNC Financial Services profit jumps 88% - MarketWatch PNC Financial Services Group (NYSE:PNC) said that its third-quarter net profit jumped to $467 million, or $1.00 a share, ...

The sell side jumps on the bandwagon as well... Wells Fargo Upgrades PNC Financial Services Group (PNC) to Outperform; Raises ... (subscription)

As a result their share jumped more than 10%.

But, and there is always a but, if we look at the bigger picture things really don't look so rosy...

As a matter of fact, if anyone really bothered to look at the numbers offered (not even the real 10Q numbers, but the numbers offered in the conference call), one would realize that there was no real improvement in asset quality, despite lower charge-offs. As a matter of fact, asset quality AND loan quality got worse, not better - both quarter over quarter and year over year!!! This was the crux of the share price collapse in PNC to begin with. What the hell is wrong with those charged with analyzing these companies??? 

The BoomBustBlog PNC Financial Results Review - 3Q09

PNC Financial Services (PNC) reported strong earnings growth in 3Q2009 primarily off lower loan provisioning for loan losses and lower non-interest expenses. Lower provision for losses despite a substantial rise in non-performing assets, and contracting interest earning assets (which declined 3.1% q-o-q in 3Q2009- at the sharpest rate among all leading banks which have reported their 3Q2009 earnings till date) raise concerns over sustainability of continuing growth in returns to shareholders in the near-to-medium term.

PNC reported 3Q2009 net profit per diluted share of $1.0 compared with net profit per diluted share of $0.14 per share in 2Q09, well ahead of both our and consensus estimates.From an operational standpoint, they outperformed our estimates - kudos to management!

PNC's total net revenues increased 1.5% q-o-q to around $4,048 million in 3Q09 compared with $3,987 million in 2Q09. Non-interest income increased 1.2% q-o-q to $1,826 million in 3Q09 primarily due to growth in asset management fees (up 16.3% q-o-q to $242 million) and other income (up 5.7% q-o-q to $314 million) partially offset by reduction in mortgage fees which decreased 15.5% q-o-q to $207 million off lower loan refinancing volumes. In 3Q09, non-interest revenues accounted for 45.1% of the total net revenues against 45.3% and 39.5% in 2Q09 and 3Q08, respectively.

Net interest income increased 1.8% q-o-q to $2,222 million in 3Q09 compared with $2,182 million in 2Q09 off higher net interest margin (NIM) which increased 16bps q-o-q to 3.76% in 3Q09 compared with 3.60% in 2Q09. The growth in NIM was primarily due to interest rate on deposit which declined from 1.25% in 2Q09 to 1.04% at the end of 3Q09. This positive impact was offset by decline in average earning assets, down a significant 3.1% q-o-q to $243.2 billion in 3Q09 compared with $235.7 billion in 2Q09. The management forecasts a flat net interest income for 4Q09 (compared with 3Q09) due to marginal improvement in NIM off benefit from re-pricing of its high interest rates on deposits.

In 3Q-09 PNC's net charge-offs declined to $650 million (down 18.2% q-o-q) or 1.59% of average loans on an annualized basis compared with $795 million, or 1.89% of average loans in 2Q09. Nevertheless, nonperforming assets (NPAs) grew 19.1% q-o-q to $5.6 billion or 3.50% of total loans as of September 30, 2009 led by increase in nonperforming commercial loans (up 26.2% q-o-q) and residential real estate loans (up 40.4% q-o-q) in 3Q09. 

Click to enlarge


Non-interest expenses declined 10.5% q-o-q to $2,379 million in 3Q09 compared with $2,658 million in 2Q09 primarily due to lower acquisition and integration costs (non-recurring), reversal of $66 million of an indemnification charge related to Visa litigation (non-recurring), and FDIC assessment of $133 million in the 2Q09 (will probably recur over several quarters). PNC realized cost savings of around $200 million in 3Q09 off its acquisition of National City Corporation (NCC), in line with the Company's two years goal of reducing annualized non-interest expenses by $1.2 billion. Consequently, the Bank's efficiency ratio improved considerably by 790 basis points q-o-q to 58.8% in 3Q09 as compared to 66.7% and 68.4% in 2Q09 and 3Q08, respectively.

Net income available to common shareholders were $467 million in 3Q09 compared with meager $65 million in 2Q09. 


Asset Quality - No real improvement seen despite lower charge-offs

PNC's credit losses shrunk in 3Q09, with gross charge-offs declining to $738 million (annualized charge-off rate of 1.8%) in 3Q09 from $881 million (annualized charge off rate of 2.1%) in 2Q09, while the provisions for loan losses totalled $914 million in 3Q09 (annualized rate of 2.3%) against $1,087 million (annualized rate of 2.6%) in 2Q09.


However, nonperforming loans increased significantly to $5,126 million (3.19% of total loans) at the end of 3Q09 from $4,156 million (2.52% of total loans) at the end of 2Q09 and remained comparatively high when compared with $841 million (1.12% of total loans) at the end of 3Q08. Total non-performing assets also increased to $5,644 million (3.51% of total loans) in 3Q09 compared with $4,656 million (2.82% of total loans) at the end of 2Q09. However, the 90 days past due loans declined to $875 million at the end of 3Q09 from $1,043 million at the end of 2Q09. The surge in tangible equity and contraction in 90 days past due loans led to moderate decline in Texas ratio to 50.0% in 3Q09 against 51.7% in 2Q09. This is, however, considerably higher compared to 19.9% in 3Q08.



Loans and Deposits - continuing to contract in 3Q2009

In 3Q09, PNC's total loan portfolio declined to $162.0 billion at the end of 3Q09 from $168.9 billion in 2Q09. The decline in loans was driven by 8.0% decrease in commercial, 3.6% decline in commercial real estate, and a relatively modest decline in consumer loans, owing to tough lending and credit environment. Further, the total deposits also declined to $183.8 billion in 3Q09 from $190.4 billion in 2Q09 primarily on the back of divestiture of its 61 branches (and $4.1 billion of deposits and $800 million of loans) in September 2009. Consequently, the loan-to-deposit ratio increased 73bps q-o-q to 87.4% at the end of 3Q09 compared with 86.6% in 2Q09.


Tier 1 capital

In 3Q09, tier 1 common ratio and tier 1 risk-based capital ratio improved 20bps and 30bps q-o-q to 5.5% and 10.8%, respectively, largely owing to the increase in retained earnings and decline in risk weighted assets.

At this point, our forensic research on PNC still stands sans the surprisingly positive EPS performance from the quarter. Asset quality and the potential for significant future loan losses still loom ahead. Subscribers can download the following analysis history. There is a free public option at the bottom. I would also like to note that I have re=opened the monthly retail subscription option and will start allowing analysts to interact (on a limited basis) with professional subscribers in the discussion and comment forums.

PNC Report 050508 revised PNC Report 050508 revised 2008-08-30 06:38:42 711.95 Kb

PNC Report_update final - Pro PNC Report_update final - Pro 2008-10-15 13:21:22 590.98 Kb

PNC Report_update final - Retail PNC Report_update final - Retail 2008-10-15 13:21:38 337.21 Kb

PNC SCAP Results recast using FDIC and NY Fed data - Pro PNC SCAP Results recast using FDIC and NY Fed data - Pro 2009-05-15 07:31:21 455.37 Kb

PNC SCAP Results recast using FDIC and NY Fed data - Retail PNC SCAP Results recast using FDIC and NY Fed data - Retail 2009-05-15 07:30:25 395.18 Kb

PNC Simulated Government Stress Test PNC Simulated Government Stress Test 2009-05-01 13:09:19 664.87 Kb

PNC Stress Test Pro PNC Stress Test Pro 2009-04-13 02:10:17 3.11 Mb

PNC Stress Test Retail PNC Stress Test Retail 2009-04-13 02:11:08 323.51 Kb

PNC Stress Test update - Professional PNC Stress Test update - Professional 2009-04-21 15:55:56 3.00 Mb

PNC Stress Test update - Retail PNC Stress Test update - Retail 2009-04-21 15:53:52 777.50 Kb

PNC stress test write up - public lite PNC stress test write up - public lite 2009-07-27 02:37:11 995.30 Kb