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Insider Weekends: The Prince of Darkness Makes A $1 Million Purchase

  • January 29, 2023

One of the largest regional banks and financial services institutions in the United States, The PNC Financial Services Group (PNC) and William “Bill” Demchak (the company’s CEO, Chairman, and President) are both well known. During his time as Managing Director (among various other executive positions) at JP Morgan (JPM), Bill Demchak was one of the earlier embracers of credit default swaps. Credit default swaps had a key role to play in the financial crisis of 2008, thus earning Mr. Demchak the title “the prince of darkness.” When we saw Mr. Demchak make his first insider purchase since becoming the CEO of PNC in 2013, we decided to take a closer look at the company.

The PNC Financial Services Group is headquartered in Pittsburgh, Pennsylvania, and through its banking subsidiary (PNC Bank) has over 2,500 branches throughout the country. The company offers a wide variety of financial services, ranging from retail banking and corporate banking to asset management. The stock has fallen more than 20% during the last year and is back to pre-pandemic levels, which made the CEO’s purchase even more interesting.

Previously, Mr. Demchak had sold nearly $20 million worth of PNC Financial Services in 2019 for an average price of $152, but chose to purchase shares recently at a similar price of $153. In total he sold nearly $33 million worth of stock in 2019 and the size of his current purchase pales in comparison to those sales. During the last three years he has only been selling a portion of his restricted stock units to cover tax liabilities associated with the vesting.

Much has changed since Mr. Demchak’s sale in 2019, not just including the COVID-19 pandemic. In Q2 2020 (ended June 30, 2020) PNC  sold their equity investment in BlackRock (BLK) resulting in net proceeds of $14.2 billion. And in June 2021, PNC acquired the bank holding company BBVA USA Bancshares for $11.5 billion, eventually merging BBVA Bank into PNC Bank.

PNC currently has $557.2 billion in assets (as of Q4 2022, ended on December 31, 2022) – a slight decrease from the $559.5 billion in Q3 2022 but relatively stable when compared to the $557.1 billion in Q4 2021. Loans did increase both on a sequential and on a YoY basis to $326 billion. Q4 2022 results themselves were a mixed bag, especially considering the company missed EPS estimates by $0.47 and average deposits declined slightly (by 1%) from the previous quarter.

PNC did manage to deliver a return on equity of 14.19%, another slight decrease from the 14.97 % in the previous quarter. Expenses also grew by 6% compared to the prior quarter. On a more positive note, PNC saw revenue increase by 4% to $5.76 billion from Q3 2022 to Q4 2022 and net interest income also grew by 6% over the same time period.

When we wrote about another bank, Silicon Valley Bank (SIVB), earlier this month, we discussed how SVB chose to decrease their provision for credit losses, but PNC instead chose to increase their provision for credit losses to $408 million in Q4 2022, a large increase from the $241 million in the prior quarter. Net loan charge-offs were just 28 basis points of annualized average loans, sitting at $224 million. On account of a challenging stock market, net unrealized losses on investment securities were $4.4 billion, a sharp decrease from the net unrealized gains of $0.7 billion in Q4 2021.  PNC attributes much of this (especially the increased provision for credit losses) to worsening economic and market conditions, but also states that the provision for credit losses grew due to loan growth as well.

As we mentioned when we wrote about Silicon Valley Bank, current market conditions and the possibility of a recession keeps us from starting a position in The PNC Financial Services Group. The company currently has a dividend yield of 3.68% and trades at a price/book of 1.5.

Welcome to edition 657 of Insider Weekends. Insider buying increased last week with insiders purchasing $14.78 million of stock compared to $8.84 million in the week prior. Selling also increased to $511.82 million compared to $465.61 million in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week dropped to 34.63. In other words, insiders sold almost 35 times as much stock as they purchased. The Sell/Buy ratio this week was favorable compared to the prior week when the ratio stood at 52.67.

Notable Insider Buys:

1. LendingTree, Inc. (TREE): $38.32

Chairman & CEO Douglas R. Lebda acquired 65,062 shares of this online loan company, paying $32.03 per share for a total amount of $2.08 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for LendingTree, Inc. here.

P/E: 24.1Forward P/E: 30.66Industry P/E: 11.02
P/S: 0.47Price/Book: 2.37EV/EBITDA: 131.04
Market Cap: $489.94MAvg. Daily Volume: 284,06552 Week Range: $17.6 – $130.66

2. The PNC Financial Services Group, Inc. (PNC): $163.17

President/CEO William S. Demchak acquired 6,550 shares of this diversified financial services company, paying $153.38 per share for a total amount of $1 million. Mr. Demchak increased his stake by 1.37% to 482,924 shares with this purchase.

You can view the list of recent insider transactions for The PNC Financial Services Group, Inc. here.

P/E: 11.78Forward P/E: 10.52Industry P/E: 11.02
P/S: 3.17Price/Book: 1.43EV/EBITDA: N/A
Market Cap: $65.43BAvg. Daily Volume: 2,391,32952 Week Range: $143.52 – $214.5

3. Golden Entertainment, Inc. (GDEN): $39.31

Director Terrence Wright acquired 20,090 shares of this casino operator, paying $49.74 per share for a total amount of $999,300. Mr. Wright increased his stake by 48.38% to 61,616 shares with this purchase.

You can view the list of recent insider transactions for Golden Entertainment, Inc. here.

P/E: 13.94Forward P/E: 14.89Industry P/E: 15.07
P/S: 1Price/Book: 3.18EV/EBITDA: 8.29
Market Cap: $1.12BAvg. Daily Volume: 153,43152 Week Range: $32.53 – $59.96

4. Banc of California, Inc. (BANC): $17.24

Director James Andrew Barker acquired 48,435 shares of this bank holding company, paying $16.53 per share for a total amount of $800,830. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for Banc of California, Inc. here.

P/E: 9.12Forward P/E: 9.74Industry P/E: 11.02
P/S: 2.82Price/Book: 1.06EV/EBITDA: N/A
Market Cap: $1.02BAvg. Daily Volume: 325,09352 Week Range: $14.86 – $20.62

5. Coinbase Global, Inc. (COIN): $61.37

Director Tobias Lutke acquired 6,612 shares of this cryptoeconomy focused broker, paying $54.38 per share for a total amount of $359,561. These shares were purchased indirectly by 7910240 Canada Inc.

You can view the list of recent insider transactions for Coinbase Global, Inc. here.

P/E: 6.28Forward P/E: -6137Industry P/E: 11.02
P/S: 3.19Price/Book: 2.47EV/EBITDA: 106.26
Market Cap: $16.07BAvg. Daily Volume: 16,225,15952 Week Range: $31.55 – $217.49

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. FirstCash Holdings, Inc (FCFS): $90.53

Director Douglas Richard Rippel sold 286,282 shares of this retail pawn stores operator for $89.88, generating $25.73 million from the sale.

You can view the list of recent insider transactions for FirstCash Holdings, Inc here.

P/E: 20.86Forward P/E: 14.82Industry P/E: 11.02
P/S: 1.69Price/Book: 2.33EV/EBITDA: 9.69
Market Cap: $4.19BAvg. Daily Volume: 223,48052 Week Range: $58.3 – $100

2. DocuSign, Inc. (DOCU): $59.25

Director Daniel D. Springer sold 147,008 shares of this e-signature solution provider for $55.08, generating $8.09 million from the sale.

You can view the list of recent insider transactions for DocuSign, Inc. here.

P/E: N/AForward P/E: 27.43Industry P/E: 24.57
P/S: 4.89Price/Book: 25.43EV/EBITDA: -970.04
Market Cap: $11.91BAvg. Daily Volume: 5,765,15752 Week Range: $39.57 – $131.907

3. Bowlero Corp. (BOWL): $13.51

Shares of this bowling entertainment center were sold by 2 insiders:

  • Chief Executive Officer Thomas F. Shannon sold 505,613 shares for $14.13, generating $7.15 million from the sale.
  • Chief Financial Officer Brett I. Parker sold 32,500 shares for $14.50, generating $471,250 from the sale.

You can view the list of recent insider transactions for Bowlero Corp. here.

P/E: N/AForward P/E: 19.58Industry P/E: 15.07
P/S: 2.33Price/Book: N/AEV/EBITDA: 12.64
Market Cap: $2.24BAvg. Daily Volume: 814,19352 Week Range: $6.96 – $15.28

4. MGM Resorts International (MGM): $41.01

Shares of this casino operator were sold by 2 insiders:

  • CEO and President William Hornbuckle sold 120,000 shares for $41.00, generating $4.92 million from the sale. These shares were sold indirectly by a trust.
  • Chief Operating Officer Corey Ian Sanders sold 60,000 shares for $40.00, generating $2.4 million from the sale.

You can view the list of recent insider transactions for MGM Resorts International here.

P/E: 13.53Forward P/E: 68.35Industry P/E: 15.07
P/S: 1.25Price/Book: 3.29EV/EBITDA: 23.04
Market Cap: $15.75BAvg. Daily Volume: 4,504,16352 Week Range: $26.41 – $49

5. HubSpot, Inc. (HUBS): $358.84

Chief Technology Officer Dharmesh Shah sold 20,000 shares of this cloud-based customer relationship management (CRM) platform for $352.23, generating $7.04 million from the sale.

You can view the list of recent insider transactions for HubSpot, Inc. here.

P/E: N/AForward P/E: 126.8Industry P/E: 24.57
P/S: 10.69Price/Book: 19.1EV/EBITDA: -212.96
Market Cap: $17.43BAvg. Daily Volume: 749,06052 Week Range: $245.03 – $596.17

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

Disclaimer: Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.