PNC draws inflow into corporate bonds on its portfolio purchase from ex-Signature Bank

Corporate bonds issued by PNC Financial Services Group Inc. drew in fresh capital in a bullish reaction by Wall Street to the bank’s purchase of a portfolio from the former Signature Bank, according to a data provider in the space.

Investors bought about $22.5 million in PNC’s
bonds later in the day as news filtered out that the bank’s fourth-quarter earnings would get a boost of 10 cents a share from the portfolio deal, BondCliQ Media Services reported.

During the day, some money flowed out of PNC bonds, but cash channeled into the debt increased for the balance of the session.

While PNC bonds saw some outflows during the session, the bank’s bonds drew in more buyers than sellers on Tuesday.

BondCliQ Media Services

During the trading day, PNC’s stock fell 0.2% as it withstood deeper losses in the bank sector as investors reacted negatively to a spike in bond yields.

While investors waded into PNC bonds on Tuesday, the price difference, or spread, between Treasury notes has widened on three of its bonds in the trading week ending on Tuesday. (See chart below)

Spreads of three PNC corporate bonds have risen amid jitters around higher interest rates and bank earnings and weak stock prices in the third quarter.

BondCliQ Media Services

The blue and red lines reflect the spread between PNC bonds and five-year Treasury notes, while the orange line reflects their spread against 10-year Treasuries.

When spreads widen, investors are less bullish on buying corporate debt than Treasurys, causing yields to rise in relation to government-issued bonds.

Despite this trend, PNC still drew in more investor dollars on its corporate debt on Tuesday, as investors shrugged off the trend of larger spreads, lower bond prices and higher yields on the debt.

The action in the corporate bond market on Tuesday came after PNC said it’s purchasing a $16.6 billion portfolio of Signature Bridge Bank NA commitment facilities from the Federal Insurance Deposit Corp. for an undisclosed sum.

The deal, which closed on Monday, is expected to add to PNC’s earnings including a boost of 10 cents a share in its fourth-quarter results, the bank said.

The FDIC set up Signature Bridge Bank after it was appointed receiver of New York-based Signature Bank on March 12.

PNC said the deal won’t have a material impact on PNC’s total assets, capital ratios or tangible book value per share.

PNC stock is down 24% in 2023, compared to a 10.8% gain by the S&P 500.

Citing the ex-Signature Bank deal, Citi analyst Keith Horwitz increased his 2024 earnings per share estimate for PNC by 70 cents to $13.55 a share, above the FactSet consensus of $12.25 a share, and raised his 2025 earnings projection by 75 cents to $16.40 a share. He reiterated a buy rating on PNC and a target price of $145 a share.

Also read: Bank stocks end Q3 with mixed results as Citi analyst hits buy button on ‘attractive entry point’ for sector

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