After the Fed's Rate Cut, PNC Could See a Mortgage Refinance Boom

The financials sector has had a steady year, with a 10.82% year-to-date (YTD) gain, which is good for fourth-best among the S&P 500’s 11 sectors. But in the wake of the Federal Reserve cutting its benchmark interest rate this week—something the central bank hasn’t done since December 2024—there could be much more in store for financials throughout the second half of the year and into 2026. With the expectation that Wednesday’s cut could be the start of a prolonged rate-cutting cycle, financials are an obvious beneficiary of this adjusted monetary policy. That’s because, with the cost of borrowing coming down, companies can restructure their existing debt, take on new capex spending at lower rates and perhaps, with freed-up cash flow, increase their mergers and acquisitions (M&A) activity. However, I’m more focused on how the Fed’s rate cuts could impact an otherwise stalled U.S. housing market that has been dealing with historically high unaffordability. According to the Consumer Financial Protection Bureau (CFPB), earlier this year, the number and dollar volume of new mortgages opened each month to purchase or refinance a primary residence, vacation home, or investment property was near their lowest levels since at least 2006. However, some promising data have been revealed in the lead-up to this week’s FOMC meeting. While 30-year fixed-rate mortgages were already approaching their lowest levels in nearly a year, CNBC reported that refinancing demand surged nearly 60%. And with more cuts expected through the remainder of 2025, super regional banks such as PNC Financial Services Group NYSE: PNC could see outsized impacts from increased loan originations. PNC Has Been on an M&A Tear Perhaps that looming mortgage refinance windfall is something PNC was looking to get ahead of, when earlier this month the super regional bank announced its $4.1 billion acquisition of FirstBank (and its 120 retail branches and has approximately $26 billion in assets), which expanded PNC’s presence into Colorado and Arizona, two of the most desirable housing markets in the United States. Returning to the previously cited CFPB data, while loan originations as a whole are approaching historic lows, certain pockets of the country are still seeing outsized mortgage demand. Arizona, for example, saw a year-over-year increase of nearly 32% in originations. The move to acquire FirstBank makes PNC the largest bank in the Denver market. It will also give the company more than 70 branches in Arizona while growing its consolidated assets to roughly $575 billion. In doing so, PNC has cemented its status as a serial acquirer. Over the past 19 years, the financial services company has acquired 24 other companies. From 2017 to 2019, it brought six companies under its umbrella. The recent acquisition of FirstBank marks the second big M&A move for the bank this year, but also just the second since 2022. Nonetheless, the value of its collective subsidiaries and core businesses has been directly reflected by PNC’s growth in market cap and stock valuation. Before that torrent of acquisitions began in 2006, the bank had a market cap of $18.12 billion. PNC’s market cap has surged to $80.20 billion, good for an increase of nearly 343% in fewer than 20 years. Over the same period, the company’s stock has rewarded shareholders with similar growth. Before that run of acquisitions began, PNC traded for less than $64 per share. Its current price of $203.77 per share reflects an appreciation of 221%. The Proof Is in the Pudding The result, that growth has resulted in a swelling of both the company’s balance sheets and income statements. Since 2016, PNC has seen an increase of: 56% in total assets 50% in net income 85% in earnings per share (EPS) That growth in EPS was particularly pronounced when the company reported Q2 earnings on July 16, announcing $3.85 per share, beating Wall Street’s EPS consensus of $3.56. According to the company’s most recent earnings call, in Q2, PNC saw its strongest loan growth since Q4 2022. Based on a very attractive forward price-to-earnings multiple of 13.35, PNC’s earnings are expected to grow 12.69% next year, from $15.37 per share to $17.32 per share. Much of that concerns the realized effects of the aforementioned M&A activity and projections surrounding increased loan origination activity. PNC’s upward revision to its forward guidance for net interest income increased from 6% to 7%. Institutional ownership stands at nearly 84%, while short interest is just 1.82%. PNC’s dividend currently yields 3.34%, with the company having increased its payout for 14 consecutive years.Should You Invest $1,000 in The PNC Financial Services Group Right Now?Before you consider The PNC Financial Services Group, you'll want to hear this.MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and The PNC Financial Services Group wasn't on the list.While The PNC Financial Services Group currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.View The Five Stocks Here