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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

Meetings, and welcome to The PNC Financial Services Group earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If you'd like to ask a question during this time, please press star then one on your telephone keypad. If you'd like to withdraw your question, please press star two on your telephone keypad. If anyone should require operator assistance, please press star zero. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Bryan Gill. Thank you, Bryan. You may begin.

Good morning and welcome to today's conference call for The PNC Financial Services Group. I am Bryan Gill, the Director of Investor Relations for PNC. Participating in this call are PNC 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 October 15th, 2025, 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 had an excellent quarter, building on a great year so far. Our results for the third quarter reflect an impressive performance across the entire franchise. We reported net income of $1.8 billion or $4.35 per share. We grew customers, loans, and deposits, and continued to deepen relationships across our businesses and geographic footprint, with positive trends in our legacy and fast-growing expansion markets. Our NII growth trajectory continued as expected, coupled with very strong fee growth and well-controlled expenses. As a result, we delivered record revenue and PPNR, as well as another quarter of positive operating leverage. Credit quality continues to remain strong, with a net charge-off ratio of only 22 basis points. While there are obvious potential downside risks to the U.S. economy, our customers remain on solid footing.

From a consumer perspective, spending has been remarkably resilient across all segments, and corporate clients are expressing cautious optimism about their business outlook. Ultimately, this is driving a sound economy. Looking at our business lines, we continue to execute on our strategic priorities. In retail banking, consumer DDAs grew 2% year-over-year, including 6% growth in the Southwest, driven by strength across our branch and digital channels. Customer activity in the quarter remained robust, with record debit card transactions and credit card spend, as well as record levels of investment assets in PNC Wealth Management, our newly rebranded brokerage business. We continue to invest in our future growth, and by the end of the year, we will have opened more than 25 new branches. Importantly, we remain on track to complete our 200+ branch builds by the end of 2029.

In C&IB, we saw record non-interest income, driven by broad-based performance across fee income categories, and pipelines remain strong. Within our asset management business, we continue to see client growth and positive net flows from both legacy and expansion markets, with the expansion markets growing at a faster pace. Before I pass it over to Rob, I wanted to say how excited we are about the recent announcement to acquire FirstBank. Kevin Classen and his team have built a premier bank in the Colorado region, with a focus on strong customer service and an enviable branch network. Upon closing, this deal will propel PNC to the number one market share position in retail deposits and branches in Denver. It will also more than triple our branch footprint in Colorado, while adding additional presence in Arizona.

Finally, as always, I'd like to thank our employees for everything they do for our company. With that, Rob will take you through the quarter. Rob?

Thanks, Bill, and good morning, everyone. Our balance sheet is on slide four, and it's presented on an average basis. For the linked quarter, loans of $326 billion grew $3 billion, or 1%. Investment securities of $144 billion increased $3 billion, or 2%. Our cash balance at the Federal Reserve was $34 billion, an increase of $3 billion. Deposit balances were up $9 billion, or 2%, and averaged $432 billion. Borrowings increased $1 billion to $66 billion. AOCI, as of September 30th, improved $605 million, or 13% compared with the prior quarter, and was -$4.1 billion. Our tangible book value of $107.84 per common share increased 4% linked quarter and 11% compared to the same period a year ago. We remain well capitalized with an estimated CET1 ratio of 10.6% and an estimated CET1 ratio, inclusive of AOCI, of 9.7% at the quarter end.

We continue to be well positioned with capital flexibility. During the quarter, we returned $1 billion of capital to shareholders, which included $679 million in common dividends and $331 million of share repurchases. We expect fourth quarter share repurchases to continue to be in the range of $300 million and $400 million. Slide five shows our loans in more detail. During the third quarter, we delivered solid loan growth. Balances averaged $326 billion, an increase of $3 billion, or 1% compared to the second quarter. Average commercial loans inc&reased $3.4 billion, or 2%, driven by growth in the C&I portfolio, partially offset by a decline in commercial real estate loans of $1 billion. Growth in C&I was driven by strong new production, particularly in corporate banking and business credit. During the third quarter, utilization remained slightly above 50%.

Commercial real estate balances declined $1 billion, or 3%, as we continue to reduce certain exposures. Consumer loans were stable, as growth in auto and credit card balances was offset by a decline in residential real estate loans. The total loan yield of 5.76% increased six basis points compared with the second quarter. Slide six details our investment securities and swap portfolios. During the third quarter, average investment securities increased approximately $3 billion, or 2%, driven by purchasing activity late in the previous quarter. Our securities yield was 3.36%, an increase of 10 basis points. As of September 30th, our duration was 3.4 years. Regarding our swaps, active receive fixed rate swaps totaled $45 billion on September 30th, with a receive rate of 3.64%. Forward starting swaps were $9 billion, with a receive rate of 4.11%.

Importantly, our securities portfolio is well positioned for a steepening yield curve that will support substantial NII growth in 2026. Slide seven covers our deposit balances in more detail. Average deposits increased $9 billion, or 2% during the quarter, driven by particularly strong growth in commercial interest-bearing deposits, which were up 7%. Non-interest-bearing balances of $93 billion were stable and were 21% of total deposits. Total commercial deposits grew approximately $9 billion, or 5% linked quarter. The growth was due in part to seasonality, but also reflective of both new and expanded client relationships. Our total rate paid on interest-bearing deposits increased eight basis points to 2.32% in the third quarter, reflecting the outsized growth in interest-bearing deposits and the resulting change in our deposit mix, along with slightly higher consumer rates paid.

Going forward, we anticipate our rate paid on deposits will decline in the fourth quarter because of the full quarter impact of the September Fed rate cut and our expectation for additional cuts in October and December. Turning to slide eight, we highlight our income statement trends. Comparing the third quarter to the second quarter, total revenue was a record $5.9 billion and was up $254 million, or 4%. Non-interest expense of $3.5 billion increased $78 million, or 2%, which allowed us to deliver more than 200 basis points of positive operating leverage and record PPNR of $2.5 billion. Provision was $167 million and declined $87 million compared to the second quarter. Our effective tax rate was 20.3%. Third quarter net income was $1.8 billion, or $4.35 per diluted share.

In the first nine months of the year, compared to the same time last year, we've demonstrated strong momentum across our franchise. Total revenue increased $1 billion, or 7%, driven by record net interest income and record fee income. Non-interest expense increased $213 million, or 2%, reflecting increased business activity, as well as continued investments in technology and branches. Net income grew $638 million, resulting in diluted EPS growth of 17%. Turning to slide nine, we detail our revenue trends. Third quarter revenue increased $254 million, or 4% compared to the prior quarter. Net interest income of $3.6 billion increased $93 million, or 3%. The growth reflected the continued benefit of fixed-rate asset repricing, loan growth, and one additional day in the quarter. Our net interest margin was 2.79%, a decline of one basis point, reflecting the outsized commercial deposit growth I previously mentioned.

Importantly, our expectation is for NIM to continue to grow going forward, and we still expect to exceed 3% during 2026. Non-interest income of $2.3 billion increased $161 million, or 8%. Inside of that, fee income increased $175 million, or 9% linked quarter, reflecting broad-based growth across categories. Looking at the details, asset management and brokerage income increased $13 million, or 3%, driven by higher equity markets and included positive net flows. Capital markets and advisory revenue increased $111 million, or 35%, driven by an increase in M&A advisory activity, as well as higher underwriting and loan syndication revenue. Card and cash management revenue was stable, as seasonally higher credit and debit card activity was offset by lower merchant services. Lending and deposit services revenue increased $18 million, or 6%, due to increased activity and client growth.

Mortgage revenue increased $33 million, or 26%, reflecting elevated MSR hedging activity and higher residential mortgage production. Other non-interest income of $198 million included negative Visa derivative fair value adjustments of $35 million, primarily related to Visa's September announcement of a litigation escrow funding. Notably, we continue to see strong momentum across our lines of business and throughout our markets. Year-to-date, non-interest income of $6.3 billion grew $337 million, or 6% compared to the same period last year. Turning to slide 10, our third quarter expenses were up $78 million, or 2% linked quarter. The growth was largely in personnel costs, which increased $81 million, or 4%, and included higher variable compensation related to increased business activity. Equipment expense increased $22 million, or 6%, reflecting higher depreciation related to investments in technology and branches. Importantly, all other categories declined or remained stable.

Year-to-date non-interest expense increased by $213 million, or 2%. As we previously stated, we have a goal to reduce costs by $350 million in 2025 through our continuous improvement program, and we're on track to achieve that goal. As you know, this program funds a significant portion of our ongoing business and technology investments. Our credit metrics are presented on slide 11. Overall credit quality remains strong. Non-performing loans of $2.1 billion were stable linked quarter. Total delinquencies of $1.2 billion declined $70 million, or 5%, compared with June 30th, reflecting lower commercial and consumer delinquencies. Net loan charge-offs were $179 million, down $19 million, and represent a net charge-off ratio of 22 basis points. Provision was $167 million, resulting in a slight release of loan reserves, primarily due to an improved outlook for our CRE portfolio, reflecting both lower loss rates and continued runoff.

At the end of the third quarter, our allowance for credit losses totaled $5.3 billion, or 1.61% of total loans. In summary, PNC reported a solid third quarter. Regarding our view of the overall economy, we're expecting real GDP growth to be below 2% in 2025 and unemployment to peak above 4.5% in mid-2026. We expect the Fed to cut rates three consecutive times, with a 25 basis point decrease at the October, December, and January meetings. Looking at the fourth quarter of 2025 compared to the third quarter of 2025, we expect average loans to be stable to up 1%. Net interest income to be up approximately 1.5%. Fee income to be down approximately 3% due to elevated third-quarter capital markets and MSR levels. 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 stable to down 1%. We expect non-interest expense to be up between 1% and 2%. We expect fourth-quarter net charge-offs to be in the range of $200 million-$225 million. Bill and I are ready to take your questions.

Thank you. I'll be conducting a question and answer session. If you'd like to be placed into the question queue, 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'd 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. Once again, that's star one to be placed into the question queue. Our first question today is coming from Scott Siefers from Piper Sandler. Your line is now live.

Morning, everybody. Thank you for taking the question. Rob, I was hoping you could please expand upon your thoughts on the margin performance and outlook. I guess, in particular, hoping you could especially touch on that idea of the third-quarter commercial deposit growth, sort of what it might have done to the third-quarter margin, and then why what occurred with the third-quarter margin, meaning just like compression, isn't necessarily representative of the path you'd expect going forward. I think you suggested we could still get to like a 3% number at some point in 2026. Maybe sort of the what happened with that deposit growth, what effect did it have, and then what are we looking for going forward?

Yeah, sure, Scott. Good morning. Let's start with the last part there first. As I mentioned in the comments, we do still expect our NIM to continue to expand and hit the 3% and above sometime during 2026. No change there in terms of the trajectory. The difference in the quarter was the outsized commercial interest-bearing deposit growth. We grew $9 billion, which was easily the most that we've ever grown commercial interest-bearing deposits in any quarter, particularly in 2025. Even though we kept our rate paid on commercial interest-bearing deposits flat, actually down a basis point in the quarter, it affected our NIM because of the mix change. Commercial interest-bearing deposits, as you know, are priced higher than consumers.

When you put that into the weighted average, that costs us 4 basis points, 4 or 5 basis points on our NIM that would have otherwise been there had we not grown those deposits. I think it's a good question to make sure you understand what's going on there. It's also a good point for us to point out that NIM is an outcome, not something that we manage to. This is a good example. Lots of our commercial clients want to put deposits with us. We can do that in an NII accretive way. It costs us a couple of basis points in NIM, and that's a good thing. Going forward, continue to expect NIM to expand. It's just that outsized growth sort of on an apples-to-apples basis reset at the weighted average.

Yeah. Okay. Perfect. Thank you for that, Rob. I was hoping you could just touch on expenses and just a little more thought on why they go up in the fourth quarter. I guess, just given the revenue backdrop, at least from my perspective, you might have thought maybe a little more lift in the third quarter. I'm just not sure how all the accruals work.

It kind of feels like the full year would be okay, but, you know, curious to hear any of your thoughts in there.

I think the full year is the way to look at it because, you know, there are some seasonal aspects to some of our expenses. They don't fall uniformly in each quarter. The difference is, you know, back in July, when we gave full-year guidance, we expected expenses to be up for the full year 1%. We're pointing now to 1.5%. You've got to go back to July. The non-interest income expectation was up 4.5%, and we're pushing 6%. That delta in terms of the outperformance on the fees drove our expenses a little bit higher, but those, as you know, are good expenses.

Yeah. Perfect. Okay. Wonderful. Thank you very much.

Thank you. Next question is coming from Betsy Graseck from Morgan Stanley. Your line is now live.

Bill, I wanted to understand a little bit about how you're thinking about scale in this environment. I know you've spoken about that recently, but we've had some deals since then. What should we be anticipating as we move forward here in this timeframe where we have opportunities to maybe move the needle more than we have in the past?

I think you should look at our organic growth success. You know, we're particularly in the new markets where we've laid out a path, importantly, to be able to grow our retail franchise at the pace we grow our C&I franchise. That's the whole long term, you know, when we talk about scale, when you have two giants gathering up retail share. Unless we can keep pace, share in C&I doesn't necessarily do us any good. We're on track to do that. You know, we did the FirstBank acquisition because it was kind of a really focused retail gather dominance in a particular state or a couple of markets, opportunity to accelerate what we were doing. You shouldn't expect that to be the norm. You shouldn't expect us to chase a deal frenzy. We'll look at things should they arise, but we'll be selective as we've always been.

Okay. Rob, on the C&I loan growth, very impressive. I just want to understand, how much of that is NDFI versus non? Separately, on the CRE, commercial real estate runoff, how much longer should we anticipate that's going to continue? It's obviously taking away from some of the balances here. I'm wondering when we're going to get to CRE actually growing. Thanks.

That's a good question. Let's answer the second one first in terms of the commercial real estate balances. We would expect that to inflect at the beginning of next year. We're near the end in terms of the sort of the rundown of those balances. We are doing new deals, but as we work through, obviously, the issues in office, etc., we'd expect that to turn positive going into 2026. The first part of the question was,

Oh, the NDFI. Yeah. No growth there. All the growth that we had in C&I was outside of that. I know there's a lot of focus on NDFI. We still feel this isn't part of your question, but it's implied. Feel very good about the credit quality there, the composition. As you know, the vast majority of ours is in asset securitization, bankruptcy remote investment-grade clients. To the extent that we're involved with private equity, it's in capital commitment lines that have very low loss rates. NDFI is not part of our story this quarter.

Thank you. Next question is coming from John Pancari from Evercore ISI. Your line is now live.

Just on back to the margin and NII, I just want to see if you can, you know, I appreciate the color you gave around the deposit dynamics and what impacted the blended deposit cost for the quarter. Maybe if you could talk about the left side of the balance sheet in terms of your updated thoughts around a fixed asset repricing opportunity. Has that changed at all given the moves along the curve in the 10-year? Also, we've had a couple of banks flag some tightening loan spreads on the commercial front. Want to see if you're also seeing that impact and how that could impact your loan yields as you look out.

Yeah, sure. Why don't I broaden that out a little bit for NII? NII for the full year, we're pointing to up 6.5%. As we go into 2026, as we said previously, we expect that trajectory to continue and actually increase. PNC on a standalone basis, not including FirstBank, we'll have these numbers for you in January. PNC Bank on a standalone basis in 2026, consensus for NII is growth of about $1 billion, and we see that and we agree with that. We'll have more for you in an update, obviously, in January. The point is that our NII trajectory is in place. The fixed-rate asset repricing is still there, going into 2026 with momentum.

Hey John, part of the shortfall against previous guys in the third quarter was simply this shift. Into the fourth quarter is this shift on our expectation of Fed cuts. What's hitting us is if they cut late in the fourth quarter, our deposits don't necessarily catch up in the first. What happens is we'll make a little less in the fourth quarter, make a little more in the first quarter. Nothing has changed whatsoever in our NII outlook. The only thing that's changed is like a month shifting on when we had cuts, which affects where it lands.

With the end of the calendar year in December, we have the negative effect of those cuts occurring in December and the positive happening after December. That explains why the delta of our expectations in NII for Q4 were different than July.

Got it. Okay. Thank you. That's very helpful. Thanks for the color on the 2026 NII. That was going to be my part to the question. Therefore, my follow-up would be around the loan growth outlook. What are you seeing right now in terms of broader commercial loan demand? We've had some banks flag still some lackluster commercial demand and not yet seeing CapEx pull through. What are you seeing on that front? Are you seeing some strengthening there, or is it still somewhat a wait-and-see type of approach?

At the margin, I guess a little strengthening. What we've seen activity in is M&A, financing, syndications. Utilization, I was thinking, Rob, really hasn't changed.

Yeah, it hasn't gone down because we had the pickup in the second quarter. It was sustained to the third quarter.

First into second, and then we've held it.

We continue to see some solid growth in unfunded commitments.

You kind of back all the moving parts out in the sense that, okay, utilization didn't change. We actually grew balances, asset real estate at a pretty healthy clip, and our pipelines are strong. I had to kind of just rephrase my question that things, I guess, feel good in loan growth outside of this, you know, waiting for the inflection in real estate.

As Bryan just mentioned, I don't know if you'd heard that, our DE&I continues to grow, so our commitments continue to grow. They're unfunded, in some part, but when clients put those in place, there's the expectation that they're going to use them.

Got it. Okay. Thanks so much, Rob. Appreciate it. Thanks, Bill.

Thank you. Next question today is coming from Ebrahim Poonawala from Bank of America. Your line is now live.

Hey, good morning. I guess maybe, Rob or Bill, would love to get your perspective on how you're thinking about the right level of capital for PNC. If I look at the adjusted for your AOCI at 9.7%, one of the larger banks brought down kind of where they're operating the bank to 10%, 10.5% yesterday. Not that that should dictate where you run the bank, but I would love to hear if you think 9.5%-10% is the right place. Is it 9%? Just how are you thinking about it? Is there still, Moody's, of course, upgraded some of your ratings or the outlook recently? Is there a push and pull with the rating agencies around this topic? Thanks.

Oh, sure. Yeah, Ebrahim, good question. You know, right now, you know, our CET1 is 10.6%, on AOCI adjusted just below 10%. So we're in a good position relative to our capital. You know, we had always said that our operating guideline with the Basel III and rules and capital rules is still fluid, that we would operate between 10% and 10.5%. We're at the high end of that. Given some recent developments, the Moody's that you had cited that was previously a binding constraint, it's possible that we would work to the lower end of those ranges and possibly even lower. We'll assess all that with our board as we go into the new year.

Yeah, we're going to have to do some work because some of the thought process on the rating agencies has actually changed. You know, we'll see what happens with risk-weighted assets and anything that comes out in Basel III proposals. It's in flux, and we are at the high end of whatever that flux might be.

Got it. Just on the other side of it, I'm not sure, Rob, if you laid out what your expectations on GDP growth going into next year were, but between loan demand picking up or credit worsening, what do you see as the more likely outcome? Do you expect just between the tax bill and overall and rate cuts to drive loan demand higher, or are you seeing more increasing businesses come under pressure of a somewhat stagnant economy that could lead to more credit issues?

Yeah, I think, and Bill may want to jump in here too. I think, as Bill said in his opening comments, despite some of the obvious things going on around the world, the economy looks pretty good. As we go into 2026, we see some strength around the loan growth possibilities that we just talked about, and credit quality is very good. Criticized assets are down. Non-performers are flat. Delinquencies are down. Charge-offs are down. Our expectation for charge-offs are down. You know, feel pretty good going into the new year.

Yeah, the survey that we just did in partnership with Bloomberg with corporate CFOs surprised us to the upside. The majority were bullish, not just on their own. Actually, the vast majority were bullish, not just on their own company, but on the economy, which kind of surprised me. A big part of that theme was the ability and the work sets they've done to kind of work through tariffs, whatever they might be, and sharpen up their own companies, both in terms of resiliency and just cost efficiencies. The consumer remains healthy. Deposits are growing. We've got a whole bunch of things that could land on us, but none of them are there and none of them are certain.

All the leading indicators of the credit are positive.

Thank you. Next question is coming from Chris McGratty from KBW. Your line is now live.

Great. Good morning. Rob, maybe start on slide seven, the $9 billion of commercial interest-bearing. I'm interested in what, in your opinion, drove the surge this quarter and whether that's you bringing in more on the balance sheet, if there's a change in behavior. What's the, I guess, the outlook as well?

Yeah, it's a combination of things, as these things usually are. It's more deposits coming from existing and new corporate clients. In some instances, we did see what were previously our customers had deposits on sweep accounts going into money markets coming on balance sheet because the rates coming down on the money market made it almost a tie, or less in terms of putting it with us. All else being equal, they have a relationship with us. They like it with us.

Okay. My follow-up would be just year over year, you know, most of the growth has been in commercial. I guess, what are your expectations heading into next year with lower rates in terms of mix of deposit growth for the company?

We expect further deposit growth going into next year. Of course, in January, we'll give you our full 2026 outlook. Don't expect big mix changes like we saw here in the third quarter. That could always happen, but that's unusual. I would expect the mix to be fairly stable going into the end of the year and into next year. We could see a little increase in non-interest-bearing deposits in the fourth quarter. We see that sometimes, but that's sort of on the margin.

Thank you. Next question is coming from Erika Najarian from UBS. Your line is now live.

Hi. Good morning. Just want to, worth repeating, Rob, given sort of the stock reaction. I just wanted to make sure that investors are taking away the right thing from your response to Pancari's question. You're expecting 6.5% net interest income growth in 2025, you know, given the momentum in, you know, what Bill mentioned, retail deposits, remixing, also fixed-rate asset repricing. You expect 2026 NII growth to be better than that 6.5% excluding FirstBank.

Bill wanted to add the word comfortably. I'm.

There seems to be a lot of confusion because, you know, NIM went down, totally explained by deposits, and then NII felt a little light as we go into our guide because of this issue of when rate cuts are. There's absolutely nothing that has changed on our trajectory of forward NII growth. We will be comfortably above $1 billion on top of this year for 2026's number.

Right. It's just a timing difference, right? I mean, later cuts, and you know, so far goes down, and then it takes time to reprice deposits. Okay.

I think you got to, we hit you with two things, right? We confused you with deposit growth. Just isolate that for a second. We're getting corporate, yeah, and NIM. We get corporate deposits in at SOFR minus something, and we put them on deposit at the Fed at SOFR plus something. We have no supplemental leverage, you know, issues in our company. It's just money in the pocket. It hurts our NIM when we do that. We do that all day long. It's riskless money in our pocket. The NII on a go, you know, the totality of our NII repricing that occurs because of the way we position the balance sheet has not changed at all. All that's changed is one month on our expectations of Fed cuts.

We come out ahead, actually, a little bit. Just a little bit, but just to complete the story.

Got it. Just the second question, just to switch gears, and this is for Bill and Rob to chime in as well. I thought it was important given all the recent headlines and also investor concerns about NDFI to ask. Jamie at the JPMorgan call, even what kind of questions to ask the banks in order for investors to assess the risk. I'll ask you, what questions should investors be asking in order to be comfortable with the NDFI risk on bank balance sheets? We're hearing that frequency and severity should be much lower than direct lending, and the loss history has been pretty pristine, like Rob reiterated. What even are those questions that we should ask to really make sure that we're investing in the right underwriters as we think about the potential cycle turn?

Yeah. If you want to go down that hole, it is worth discussing. The category is the wrong category because there's a whole bunch of things that they bucketed into, you know, non-bank financials. One of which, which is by far our largest holdings, are securitizations to corporates, where we basically securitize bankruptcy remote receivables for investment-grade corporates. That is very low risk of default and extremely low loss given default. Inside of securitization, we just saw an example of something in the auto space that went bad, where it looks like the underlying collateral was highly correlated with the actual corporate itself, right? You had auto loans with an auto loan maker, and you might have, we'll have to see what comes out of it, some not very careful, you know, filing of UCC filings and title tracking. I think that's a wild anomaly.

It certainly has nothing to do with our book. The other things you look at, we have capital commitment lines that are effectively diversified receivables from large pension funds and investors that there's never been a loss on. I think that's a pretty safe business. Other people will have other things in that bucket, but that's the vast majority of what we have in the bucket.

Thank you. Next question is coming from Gerard Cassidy from RBC Capital Markets. Your line is now live.

In your opening comments, you talked about, if I heard it correctly, you had record debit transactions this quarter, as well as I think you said credit card activity as well. Can you just give us some color behind that and what you think how that might continue to flow into the first part of next year?

Yeah, the credit and debit spend, interestingly, is across all buckets, more credit in the lower-income buckets. I don't know that that can continue. Eventually, they're going to hit limitations. Most of the consumer spend that has grown year on year is coming, I think, from the wealth effect in the higher end of our wealthy clients, right, who see stock market value and everything else. It continues to climb. That's one of the reasons I remain pretty comfortable with the economy. As long as there's consumer spend, and we don't have a big crack in employment that, you know, it's weakening, but thus far hasn't really fallen, I think the economy's fine.

I'd add to that, Gerard. I'd add that just for PNC, you know, we continue to add, particularly in our newer markets, debit card and credit card users. That's a big part of why, you know, we're doing what we're doing there as well.

Even by account cohort, we're seeing more total volume. Even by account cohort, the consumer still continues to spend, and we grew card balances for the first time in a while.

Yeah, largely on new customers and not pushing on credit to do that, just kind of our new card launches.

Got it. As a follow-up, there's been real optimism about the tailwind that we're all expecting with the regulatory changes that are underway. There was a notice of proposed rulemaking today on MRAs, matters that require attention and safety and soundness. Hopefully, they're not going to be using them for ticky-tacky stuff and it helps everybody, yourself and all the others, as we go forward. Bill, or Rob, can you give us some color on what you're hearing in terms of the encouragement coming out of Washington and how the regulators are working with the industry rather than against the industry? If you could also tie in, you made a comment a moment ago about Moody's and the rating agencies. Do you think they're going to be the capital binding constraint going forward and not the actual bank regulators when it comes to CET1 ratios?

PNC Financial Services Group (PNC) Q3 2025 Earnings Call Transcript

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