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F500-2021-120-PNC Financial Services Group

Boasting nearly $470 billion in assets, the financial services group provides banking and wealth management to a diverse array of individuals and businesses. PNC received regulatory approval to acquire BBVA USA, which is expected to close in June 2021. Upon closing, the company will have a presence in 29 of the 30 largest markets in the U.S.

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F500-2020-151-PNC-Financial

The Pittsburgh-based diversified financial services company has retail and commercial banking, mortgage, lending, and wealth management businesses, and operates a retail bank branch network across the Mid-Atlantic, Midwest, and Southeast. In May, PNC made headlines by selling its roughly $17 billion stake in financial giant BlackRock.

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PNC Financial Services, which operates in the U.S., traces its origins as far back as 1852. Its retail banking segment provides consumers and small businesses with checking and savings accounts, residential mortgages, credit cards, and other services. PNC’s corporate and institutional banking segment serves midsize and large companies, as well as nonprofits and government entities. Its third segment, the asset management group, provides high- and ultrahigh-net-worth customers with investment management and other services.

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PNC Financial Services Group (PNC): Company Profile, Stock Price, News, Rankings

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PNC Financial Services Group

pnc financial services group

Greetings, and welcome to the PNC Financial Services Group Q1 2026 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to Bryan Gill, Executive VP and Director of Investor Relations. Thank you, Bryan. You may begin.

Well, good morning. Welcome to today's conference call for The PNC Financial Services Group. I am Bryan Gill, the Director of Investor Relations for PNC, and participating on this call are PNC's Chairman and CEO, Bill Demchak, and Rob Reilly, Executive Vice President and CFO. Today's presentation contains forward-looking information. Cautionary statements about this information, as well as reconciliations of non-GAAP measures, are included in today's earnings release materials as well as our SEC filings and other investor materials. These are all available on our corporate website, pnc.com, under Investor Relations. These statements speak only as of April 15th, 2026, and PNC undertakes no obligation to update them. Now I'd like to turn the call over to Bill.

Thank you, Bryan, and good morning, everyone. As you've seen, we're off to a really strong start this year. We achieved a great deal this quarter, and we continue to build upon the strength of our franchise. As you know, we completed the acquisition of FirstBank early in the quarter, and we're well on our way to a mid-June conversion. Our financial performance was solid. Organic loan growth hit a three-year high. Net interest margin expanded meaningfully. We had 13% year-over-year fee income growth. Our credit quality remains strong, and we returned significant capital to shareholders. Importantly, beyond the financial results, we continue to see strong momentum across our businesses with notable increased client activities. We continue to make meaningful investments in our technology and our branch network.

While we recognize that there are many market concerns out there, from energy prices to AI to private credit, we are not seeing anything that suggests these issues are broadly impacting our customers or our credit quality in the near term. Specifically, in regard to the increased attention on banks' exposure to non-depository financial institutions, Rob's going to walk through some of the details as it relates to our exposure, but the soundbite you ought to walk away with here is that we don't see any loss content in this book, and certainly don't see any exposure to a systemic event, which, by the way, we don't expect. Were there to be one, a systemic event and private credit, I can't speak to what other banks have in this category, as the definition seems to capture random things.

We are very outsized in our corporate receivables financing relative to others, which is a low-spread business with negligible risk. Importantly, the bulk of our loans actually have nothing to do with private credit, despite the regulatory category in which they reside. Overall, our focus remains on disciplined execution of our strategy, which is clearly reflected in our results this quarter. Looking ahead, we are entering into the second quarter with a lot of momentum, and we continue to be excited about the opportunities in front of us. Finally, as always, I want to thank our employees for everything they do for our company and our customers. With that, I'll turn it over to Rob to take you through the numbers. Rob?

Thanks, Bill, and good morning, everyone. Our balance sheet is on slide four and is presented on an average basis. As Bill just mentioned, during the first quarter, we successfully completed our acquisition of FirstBank, and as a result, our overall balance sheet growth includes the impact of the acquisition, which represented $15 billion in loans and $22 billion in deposits. For the linked quarter, loans of $351 billion grew by $23 billion or 7%. Investment securities of $145 billion increased $2 billion or 2%. Deposit balances were up $19 billion or 4%, an average $458 billion. Borrowings increased by $3 billion or 4% to $63 billion. Our tangible book value was $109.42 per common share, down 3% linked quarter due to the acquisition, but up 9% compared with the same period a year ago. We continue to be well-positioned with capital flexibility.

During the quarter, we returned $1.4 billion of capital to shareholders. Common dividends and share repurchases were approximately $700 million each. We continue to expect quarterly repurchases to be in the range of $600 million-$700 million going forward. We remain well-capitalized with an estimated CET1 ratio of 10.1%, down 50 basis points from year-end 2025. The decline was primarily driven by the FirstBank acquisition, accounting for roughly 40 basis points, with the remainder attributable to strong loan growth. Regarding the recent Basel III proposal, we expect the changes to be a net positive for our CET1 ratio relative to the current framework. Our initial assessment reflects a reduction of approximately 10% of our RWAs or $45 billion-$50 billion. The reduction amount is the same under both the revised standardized and the expanded methodologies, in line with our previous expectations. Slide five shows our loans in more detail.

Loan balances averaged $351 billion in the first quarter, an increase of $23 billion or 7% linked-quarter. The growth reflected both higher commercial and consumer balances. Compared to the same period a year ago, average loans increased $34 billion or 11%, and the total average loan yield of 5.5% decreased 10 basis points linked-quarter. On a spot basis, loans increased $29 billion or 9% from year-end, including $15 billion from the FirstBank acquisition and $14 billion of growth in legacy PNC loans. Specific to our legacy business, C&I loans increased $15 billion, driven by broad-based growth across businesses, reflecting strong new production and higher utilization rates. CRE balances reached an inflection point and increased approximately $100 million, and we expect moderate growth through the remainder of the year. Consumer loans declined $1 billion due to lower residential mortgage balances. Slide six covers our deposit balances in more detail.

Average deposits were $458 billion, up $19 billion or 4%, driven by the addition of FirstBank balances and partially offset by a reduction in brokered CDs. Excluding those items, deposit trends were consistent with typical seasonality, as growth in consumer balances more than offset a seasonal decline in commercial deposits. Non-interest-bearing balances continue to represent 22% of total deposits. Our total rate paid on interest-bearing deposits decreased 18 basis points to 1.96% in the first quarter, reflecting lower rates. Turning to slide seven, we highlight our income statement trends. Comparing the first quarter to the most recent fourth quarter, and again, including the impact of the FirstBank acquisition, total revenue was $6.2 billion and grew $94 million or 2%. Non-interest expense of $3.8 billion increased $165 million, or 5%, of which $97 million was integration expense. Excluding integration costs, non-interest expense increased 2% and PPNR grew 1%.

Provision was $210 million, and our effective tax rate was 19%. As a result, our first quarter net income was $1.8 billion, or $4.13 per common share, and $4.32 when adjusted for integration costs. Turning to slide eight, we detail our revenue trends. First quarter revenue increased $94 million or 2% compared to the prior quarter. Net interest income of $4 billion increased $230 million or 6%. The growth was driven by the addition of FirstBank, as well as lower funding costs and commercial loan growth. Our net interest margin was 2.95%, an increase of 11 basis points. Non-interest income of $2.2 billion decreased $136 million or 6%. Inside of that, fee income decreased $44 million or 2% linked quarter. Looking at the details, asset management and brokerage increased $9 million or 2% due to higher average equity markets and client activity.

Capital Markets and Advisory revenue declined $26 million or 5%, reflecting lower M&A advisory activity off elevated fourth quarter levels, partially offset by higher underwriting and trading revenue. Card and Cash Management increased $5 million or 1% as higher Treasury Management revenue was partially offset by seasonally lower credit card activity. Lending and Deposit Services decreased by $2 million or 1%. Mortgage revenue decreased $30 million or 20%, largely attributable to a $31 million decline in MSR valuations, given the heightened rate volatility during the quarter. Other non-interest income of $125 million included $32 million of Visa derivative costs, as well as negative private equity valuations, partially offset by $28 million of net security gains. Compared to the same period a year ago, we've demonstrated strong momentum across our franchise. Importantly, fee income grew $240 million or 13%, driven by broad-based growth in our businesses.

Turning to slide nine, first quarter expenses increased $165 million or 5% linked-quarter, which included $97 million of integration costs. Non-interest expense excluding the impact of integration expense increased $68 million or 2% as the addition of FirstBank's operating expenses more than offset lower legacy PNC expenses. We remain focused on expense management, and as we've previously stated, we have a goal to reduce costs by $350 million in 2026 through our Continuous Improvement Program, which is independent of the FirstBank acquisition. This program will continue to fund a significant portion of our ongoing business and technology investments. Our credit metrics are presented on slide 10. Overall credit quality remains strong. Our NPL and delinquency ratios each improve on both a linked-quarter and year-over-year basis, reflecting the strong credit quality we continue to see across our portfolio.

The linked quarter growth and balances was entirely attributable to the addition of FirstBank. Non-performing loans increased $25 million or 1% and represented 0.62% of total loans, down from 0.67% last quarter. Total delinquencies increased $115 million to $1.6 billion, and our accruing loans past due declined to 0.43%, down from 0.44% last quarter. Total net loan charge-offs of $253 million included $45 million of purchase accounting related to the acquisition. Excluding these acquired charge-offs, our NCO ratio was 24 basis points. At the end of the first quarter, our allowance for credit losses totaled $5.5 billion, or 1.52% of total loans. I want to take a moment to cover the details of our NDFI loans, which are highlighted on slide 11. We've discussed this topic at recent investor conferences, and importantly, nothing has changed in terms of the composition of the book or the underlying risk.

NDFI loans continue to represent our lowest-risk loans. Approximately 90% of our NDFI loans are investment-grade or investment-grade equivalent, and all have robust collateral monitoring requirements. Because there's been a lot of focus on the regulatory reporting category of business credit intermediaries, we've further broken out the components in detail on the slide. This category for PNC includes asset securitizations, primarily trade receivable securitizations, of which PNC is an industry-leading provider. These are loans to bankruptcy-remote subsidiaries of corporate borrowers secured by diversified pools of receivables. These loans represent approximately 80% of the business credit intermediaries category for PNC. The remaining 20% of our business credit intermediaries category, approximately $7 billion, is mostly comprised of CLOs secured by private credit provider assets. These are well-structured assets, all supported by senior positions with substantial excess collateral.

Again, we've been in these businesses for a long time, and we've experienced virtually no losses going back 25+ years. We feel very good about the risk content of our NDFI loans and, based on the composition of these low-risk assets, expect zero losses going forward. To summarize, PNC reported a strong first quarter, and we're well positioned for the remainder of 2026. Regarding our view of the overall economy, our base case assumes GDP growth to be approximately 1.9% in 2026 and the unemployment rate to drift slightly higher to 4.6% by year-end. We do not expect the Federal Reserve to cut rates during 2026. Our outlook for the second quarter of 2026 compared to the first quarter of 2026 is as follows.

We expect average loans to be up 2%-3%, net interest income to be up approximately 3%, fee income to be up 2.5%, other non-interest income to be in the range of $150 million-$200 million. Taking the component pieces of revenue together, we expect total revenue to be up approximately 3.5%. We expect non-interest expense, excluding integration expenses, to be up approximately 2%, and we expect second quarter net charge-offs to be approximately $225 million. Considering our first quarter operating results, second quarter expectations, and current economic forecast, our outlook for the full year 2026 compared to 2025 results is as follows. We expect full year average loan growth to be up approximately 11%. We expect full year net interest income to be up approximately 14.5%. We expect non-interest income to be up approximately 6%.

Taking the component pieces of revenue together, we expect total revenue to be up approximately 11%, non-interest expense, excluding integration expenses, to be up approximately 7%, and we expect our effective tax rate to be approximately 19.5%. As a reminder, our expectation for non-recurring merger and integration costs is approximately $325 million. We recognized $98 million in the first quarter and anticipate approximately $150 million in the second quarter, with the remaining balance to be recognized in the second half of the year. With that, Bill and I are ready to take your questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Ebrahim Poonawala with Bank of America. Please proceed with your questions.

I guess maybe, Rob, Bill, just if you could talk about deposit growth. As we think about a period we've not been here in a better part of the last 15 years, where rates are higher for longer, I think as you mentioned in the forward curve, we may not get any rate cuts. Just give us a sense of the algorithm to grow core deposits in this environment. How do you think about it? What's the approach, and how difficult do you think it's going to be for PNC and the industry to actually grow low-cost core deposits?

I guess I would just frame it a bit different and talk about growth in DDA accounts and retail clients broadly, which in turn causes deposits to grow. I don't think about the average balance somebody holds as a function of how high rates are and how competitive outside alternatives are. Think about total shots on goal as the number of retail clients we have. Our focus has been on growing retail clients, which is the key to growing deposits long term. The particular rate environment where rates are just kind of steady for a period of time and people are fighting to expand, you see at the margin, and you've heard competitors talk about this, that in certain price categories, people are paying up to maintain balances and/or attract new clients. Look, we're opening branches. We've opened eight so far this year.

Our digital acquisition has been really strong. We just need to continue that, and that ultimately will lead to deposit growth.

We do, Ebrahim, just as a reminder, we do have deposit growth expectations for the year.

We had a good first quarter, sort of staying at these levels with some incremental growth in the back half of 2026.

Understood. Got it. I guess maybe just separately around what the energy prices would mean for the consumer. Just talk to us if we saw some decline in sentiment over the course of the last month. Are you as constructive when you think about just growth outlook? Obviously, the guidance suggests nothing's dramatically changed. I'm wondering, we came in with a lot of excitement around the tax incentives for businesses, consumers. Is all of that more or less mostly intact?

Look, I don't know that we can square for you the headline surveys on consumer confidence or small business confidence, which are all not great, how we square that with what we actually see. When you look through at spending patterns, growth in savings, activity levels, loan growth, everything we see day to day in our business is almost at complete odds with the surveys you see on confidence.

Yeah, I would just add to that, in terms of sentiment, obviously there has to be a higher level of concern. To Bill's point, the activity hasn't changed.

Thank you. Our next question comes from the line of Scott Siefers with Piper Sandler. Please proceed with your questions.

Morning, guys. Thanks for taking the question. I actually wanted to.

Sort of follow up on that sentiment question and also about what it suggests for loan growth. You had pretty good performance in the first quarter. When I look at the guidance, it doesn't necessarily imply much growth in future quarters off the first quarter base. I inferred at least that your commentary on utilization rates sounded good. Sounds like they're increasing. You seeing anything specifically that would cause you to be conservative or you just sort of approaching with an abundance of caution?

Well, sure. I can answer that, Scott. Yeah, clearly we saw more than what we expected in terms of loan growth in the first quarter. On an average basis, that's going to pull into the second quarter. On a spot basis going into the second quarter, we actually see it sort of staying flattish because we do have some paydowns that are coming that will offset continued new production. That gets you through the second quarter. When you look at the back half of the year, we're pointing to growth, but not at the rate that we've seen in the first quarter nor that we expect in the second quarter. To your point, that is related to concerns that ultimately end up reducing the visibility of what can happen in the second half.

Long story short, you've followed us long enough. We're never going to go out there and say loan growth is going to be this big number. We can't predict it.

We banked some in the first quarter, so we put that in the.

Starting base and go forward. If we're pleasantly surprised, that'll be great.

Perfect. Okay, good. Thank you. Rob, maybe just some expanded thoughts on how capital management might change should these Fed proposals or NPRs indeed come through. How much more aggressively might you think about things or what are sort of the governing factors you think about? You get this big relief, but then unclear the ratings agencies are necessarily on board. What are sort of the puts and takes you see or the kind of factors you think as you walk through that?

Yeah, sure, Scott. Under both methodologies, we see a reduction in our RWAs of about 10%, as I mentioned in the opening comments.

Which is a good thing. We're still in the proposal stage or comment stage rather, of the proposal. We have to work through all the nuances there. At first blush, because AOCI is blended in under both methodologies over the five years, upfront there is no AOCI. It's close to a full point of capital for us.

The other issue, you mentioned the rating agencies and inside of their rating methodologies, they look at risk-weighted assets. I haven't actually thought through the notion of, hey, we have less, so does this actually just pull through to how they're going to look at us as well? I kind of think it will.

I don't know if we've gotten to that discussion point with the rating agencies. They had adjusted their expectations with the change of these proposals. They've worked the numbers down under the current framework, so it's logical to expect that it would extend into the new methodologies. We'll see.

Okay. Perfect. All right. Thank you guys very much.

Thank you. Our next question comes from the line of Manan Gosalia with Morgan Stanley. Please proceed with your questions.

Hey, good morning. Thanks for taking my questions. Maybe just to follow up on the capital question. You noted that the ERBA adoption benefit is similar to adopting the revised standardized approach.

Would it still make sense to adopt the ERBA as it relates to maybe the flexibility that it could give you in managing the business going forward, maybe if you wanted to lean in on the investment-grade credit side or lower LTV CRE? I just wanted to know how to think about this going forward.

Yeah, I think you're right. On the surface, the ERBA because of the benefit coming through investment-grade equivalent loans which are sort of our wheelhouse, that makes that methodology appealing. We're still in the analysis stage here. There's still a lot of nuances to figure out and obviously in terms of if there's any changes after the comment period. You're on the right track.

Got it. And maybe if I can ask the loan growth question and maybe compare to the NII guide. So I guess you're pretty close to the 3% NIM number you had indicated, and you're taking the loan growth guide up by three percentage points, and then the NII guide is going up, but maybe to a lesser extent. Is there anything that we should be thinking about on loan spreads or deposit rates that you're baking in now that's different to where we were at the start of the year?

No. Let's start at the beginning. I'd say the short answer to your question is, it's loan mix on the new production piece. If you go back to January when we called for 8% average loan growth, what we did is we just used average spreads on the new production through 2026. Where we find ourselves today after the first quarter is we've generated, on a relative basis, a much higher volume of higher credit quality deals, which by definition carry relatively lower spreads, still attractive spreads, still attractive returns, particularly given the non-credit portion of those relationships. It's just a mix change that when we look out for the full year, we'll have higher volume on relatively lower spreads. As you point out, that results in higher NII than we thought in January, which is a good thing.

As far as NIM, so we might as well cover NIM because someone will ask the question. We saw a nice increase there in the first quarter relative to our expectations. We still expect to go above 3% in the second half. As you pointed out, we're at 2.95%, so if we're going to be above 3% in the second half, you can do the math there in between. Most of the expansion of that is still coming from the fixed rate asset repricing that continues to be very strong.

Thank you. Our next question comes from the line of John Pancari with Evercore. Please proceed with your questions.

On the fee side, I know your capital markets revs decreased a bit off the particularly solid fourth quarter, particularly on the M&A front. Can you maybe update us on the outlook here in terms of pipelines and how you'd be thinking about M&A and your other capital markets revenue just given the current backdrop? Thanks.

Yeah, sure. I missed the first part of the question, but it was all about capital markets.

He was just saying that Harris Williams drove.

Oh, Harris Williams. Oh, okay. Yeah. Sorry.

No, I've got that. Yeah. Harris Williams had a strong quarter actually in the first quarter. It was off the elevated levels of the fourth quarter, but higher than what we expected. The good news is their pipelines are strong, so going into the second quarter, we expect them to be at the levels that they've been at the first quarter, which, again, is more than what we thought. Strong activity there, and that is leading to the guide. In the second quarter, we have Capital Markets essentially being at the same level. More importantly, for the full year, still up double digits.

Got it. Okay, great. On the capital front, I appreciate the buyback color in terms of the expectation for the second quarter. Maybe just more broadly, if you could talk about capital allocation priorities and Bill, maybe if you could just give us the old update again on where you stand on M&A interest, just given the backdrop we're in and the activity and the regulatory posture to deals? I just want to get your updated thoughts. Thanks.

Real simply, right? We obviously like to use our capital on clients and our business. We have increased our buyback just given capacity to do so. We have, and you should expect that we will continue to have healthy dividends. In the ordinary course, we'd otherwise be giving back more capital to shareholders than perhaps we have in the last handful of years. Rob, is that accurate?

The M&A side, the noise and activity levels, forgetting about us, just kind of what I see going on around us seems to have died down. We're focused on growing our company organically. We have great momentum on that. We keep our eyes open, but you've heard me say a lot of times, I just don't think there's going to be a lot of activity, particularly with us. It's an easy year for banks. People are happy to do what they want to do, and we're not going to push on a string, nor do we need to.

Got it. All right. Thanks. Well, appreciate it.

Thank you. Our next question comes from the line of Ken Usdin with Autonomous Research. Please proceed with your question.

Hi. Thanks. Good morning. Hey, I was just wondering, obviously, we see the outlook for the cost still intact for the year and then higher first to second. Can you just remind us the expected closing of FirstBank and then the magnitude of saves you're expecting, and then how that cascades to a run rate as you get through the rest of the year? Thanks.

Oh, yeah. Sure, Ken. Again, our full year guide holds in terms of expenses up 7%, which includes the operating expenses of FirstBank. You didn't ask the question, though, in terms of how the expenses have fallen in the quarter. Some people have asked that. Relative to the first quarter, we spent a little less than we expected. That will fall into the second quarter, largely around technology investments and the timing of those investments. On FirstBank itself, everything's going well. We're still planning to convert mid-June. Everything's holding there. We expect, as I'd said, $325 million or so of integration charges. We'll see the decline of their run rate, obviously, in terms of the second half of 2026.

There'll be some residual integration charges in the second half, but the majority will be completed in the second quarter, which in my comments I pointed out will be about $150 million. That's all in our guidance. That's all there. It's on track, and we feel good about it.

Got it. I would assume that the cost saves would run rate by the fourth quarter.

Okay, cool. Great. Rob, can you actually dig on that point a little bit, does the push off of some spending from first to second? That was going to be my follow-up, actually.

Does that demonstrate the flexibility that you guys have? Go ahead. Thank you.

No. Well, of course, we have flexibility, but that wasn't what drove it. It was just in terms of the timing can slip into the second quarter in terms of what we plan to do in the last couple of weeks of the first quarter. Nothing major.

Thank you. Our next question has come from the line of David Chiaverini with Jefferies. Please proceed with your questions.

Hi. Thanks for taking the question. On deposit pricing competition, are there any differences in competitiveness by geography in your footprint?

I was going to say in our retail memo, Midwest. There were comments on just the Midwest being kind of tight with high promo offers by a few of the competitors. It depends. In part of the country, you have people doing big promo CDs.

PNC Financial Services Group (PNC) Q1 2026 Earnings Call Transcript

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