Top banking analyst Mike Mayo sees this regional bank gaining deposits from the crisis

Published Tue, Mar 14 202311:34 AM EDT

Hakyung Kim @https://www.linkedin.com/in/hakyungkim/@hakyungkim_

It's "business as usual" for PNC , according to Wells Fargo analyst Mike Mayo, who said after an onsite meeting with PNC's CEO that the Pittsburgh-based regional bank is well-positioned for gains. "Our meetings with top PNC executives were remarkable for the degree it felt like any other day in the midst of such market turmoil. PNC should benefit from a flight to quality," Mayo wrote in a Monday client note. The analyst, who began his career at the Federal Reserve in 1988, reiterated his overweight rating on PNC, and maintained his price target of $198 per share, implying 52% upside from Monday's close. PNC shares had declined more than 19% in the month through March 13, but briefly rallied as much as 6.6% early Tuesday in the wake of federal regulators' backstop of Silicon Valley Bank and Signature Bank depositors late Sunday. PNC 1D mountain PNC shares rise on Tuesday morning There should not be any contagion from the recent bank failures "to the largest banks such as PNC, which have far more sophisticated ALM and liquidity management processes," Mayo wrote, referring to asset-liability management. Wells Fargo also believes that funding is strong for PNC, and expects it to see increases in both consumer and commercial deposits. Pricing on loan and deposits may ease incrementally, Mayo adds, which would further benefit PNC. PNC's operating efficiency is also improving, according to Mayo. "First, it is closing physical locations (over 100 branches in 2023 and 1,000 ATMs). Second, it has been tight with spending given anticipation of a recession. Third, it continues to self-fund tech investments, aided by a decade of modernization that created greater scalability," he wrote. To be sure, Mayo notes that PNC is not risk-free, with large banks potentially subject to additional regulation following SVB's failure. "Before recent events, PNC indicated the move from non-interest bearing to interest bearing deposits had accelerated," Mayo continued. "In addition, credit remains strong though office ($9B exposure, 25% of CRE) needs watching," he said, referring to commercial real estate loans. —CNBC's Michael Bloom contributed to this report.