PNC Financial Services Group Inc at Barclays Global Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jason Goldberg - Barclays Bank PLC - Analyst : We'll put up the first ARS question while everyone gets settled in. But maybe, Bill, maybe the best place to start, we've seen some weaker economic data in the last few weeks. A rate cut next week is probably inevitable. Maybe just walk through kind of your current economic assumptions and whether it's soft landing, your views on that, and is that still kind of the base case?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Well, I guess you teed it up right off the bat. So we're just going to dive right in. Shifting to three rate cuts, you still talk to two rate cuts. How does that kind of impact the NII outlook? And how would your NII outlook be impacted that the Fed maybe starts to be more aggressive?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. Well, we see the next ARS question. You mentioned [swoosh]. I think you coined that term in late last year. But so far, it's kind of a --

Question: Jason Goldberg - Barclays Bank PLC - Analyst : But I guess we saw NII and NIM, I think, inflect in the second quarter, unless you confirm that. But I guess maybe more color in terms of how you see NII playing out. Do you expect sequential fuses in Q3, Q4? You've got record NII in 2025. And you've given some guidance of, I think, up 1% to 2% in Q3, down 4% for the full year. But just given the evolving rate hike backdrop you talked to, any update you want to provide on just how you're thinking about all that?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : I guess others have kind of been more kind of cautious on their NII outlook. What's kind of giving you confidence to guide to the upper end of the range for Q3?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : It's interesting. We've been asking this margin question for a lot of the regional banks, presenters in a small sample size. But so far, you have the biggest uplift as is expected by this audience in 2025 NIM for what it's worth. No pressure up. But I think some of the NII support maybe comes through some of the actions you took last quarter, obviously, time and security portfolio restructuring aided by the Visa gains. Can you maybe talk to kind of other potential actions you could take in terms of lock in higher yields to kind of help you achieve that 2025 record NII number you expect? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 4:00PM, PNC.N - PNC Financial Services Group Inc at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. Maybe throw up the next ARS question, but maybe shifting gears to deposits. Just given where we are in the rate cycle, how has deposit pricing been behaving? Are there certain markets or products where you still need to pay up to maintain customer balances?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : So the Fed say cuts next week. You don't intend to lower consumer deposit pricing.

Question: Jason Goldberg - Barclays Bank PLC - Analyst : One of the questions we've been asking the audience for all the regional banks is just their deposit data expectations for each company. So for you guys, it looks like 40% to 50% kind of beta range, which is not so far off where you've been for the last couple of years in the cycle. I'm not sure if that's through the cycle, how you're thinking about it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 4:00PM, PNC.N - PNC Financial Services Group Inc at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Helpful. Maybe shifting gears to loan growth. You alluded to earlier how you kind of took it out of the guidance. We've been waiting for a while for it to come back up. Maybe just talk to in terms of kind of your expectations there, what are you hearing from clients when you expect to pick up activity?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Yes. And then on the consumer side, you've been talking for a while now, I guess, wanting to be bigger in that side of the house, kind of leaning more into credit card, maybe more recently. Can you talk to -- you recently launched that PNC Cash Unlimited card. How's that going? What do you want to accomplish there, and maybe any client metrics? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 4:00PM, PNC.N - PNC Financial Services Group Inc at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Maybe turning to fee income, you slightly reduced the full-year outlook for fee income due to softness in mortgage and loan rate of capital market fees. On the second quarter call, maybe just talk to kind of what you're seeing in the third quarter and anything to suggest maybe you could do a little bit better than that?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : So I think the guide was up 1% to 2%. You're saying up 2% or more?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. And I guess, maybe sticking with fee income.

Question: Jason Goldberg - Barclays Bank PLC - Analyst : I guess you guys recently announced changes in asset management. Maybe just talk about that business in terms of -- is that something you expect kind of growth to accelerate, and what do you want to accomplish there?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. And maybe shifting gears to expenses. PNC has obviously been very good there. I think core expenses -- we have up 1% since 2021. A what do you think is the right kind of normalized growth rate for PNC? And can you talk about this record NII in 2025? Do have to pull the bottom line? Or are you going to maybe step up expense growth? How should we think about that?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. And I guess maybe more nearer term, you guided to the upper end on fee income per up. How should we think about the expense guide, about 3% to 4%? Is that also at the upper end as a result?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : No good deed goes unpunished. Maybe we'll shift to the next ARS question about credit quality. And as the audience answers that, maybe just talk about the credit outlook, commercial consumer customer bases? Are there any areas of the portfolio you're watching more closely, obviously, outside of office CRE? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 4:00PM, PNC.N - PNC Financial Services Group Inc at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays Bank PLC - Analyst : I guess on the office front, you're obviously seeing pressure across the industry. I guess, where do you think we are in the office credit cycle? Any factors you think result in easing pressure on the book? Obviously, you have the advantage of Midland. Any more precise insights in terms of what's going on there?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : So I guess, how do we think about -- so early stages, I guess, of the law cycle, but big reserve. So as charge-offs materialize, how do we think about that reserve? Does the reserve rate decline? Are you going to have to add additional reserves? Keep it the same? Grow it?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : And then, I guess the story as you've talked about through the cycle, loan losses of 40 to 50 basis points. I think you're closer to 30 basis points in the first half of the year.

Question: Jason Goldberg - Barclays Bank PLC - Analyst : So I guess, do you ever think we'd get to 40 to 50? Is that range too high? How do you think about that?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : The room thinks you don't get there next year either. Maybe put up the next ARS question. As the audience responds to this, Bill, I'll ask you. I guess by the end game proposal, there's obviously been some breaking news on Friday. I know (inaudible) speaks tomorrow. It sounds like we'll get a proposal next week. It feels like Category 3 banks get the worst of it all because it seems like you're still going to get stuck with the RWA inflation and still get stuck with losing the AOCI opt-out provision. Just, I guess, any thoughts in terms of how you think this plays out, just how this impacts your capital planning?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. And then -- you mentioned [8% to 7%] CET1 give back on AOCI. Just how are you thinking about capital polarization? And is there a capital ratio you're targeting?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : That will be the next question, don't worry. We're going to have your comments on that.

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Interestingly, looking at that slide, it seems like the room is actually in favor of you acquiring additional banks. Maybe just talk to how you assess the current environment for bank M&A. Obviously, there are some regulatory uncertainties. But at what point do you think bank M&A makes sense?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : And I guess, would your preference be kind of in market, out of market, more consumer focused? Because there's desire to build that up. I guess, in terms of, should properties come available at the prices that you're interested in, where would your focus lie?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. And I guess, on that related topic, earlier this year -- I think you read -- or you wrote in an interview, you're not shy about your thoughts on scale in kind of the mega bank and how banks of your size fit into the world. I guess, how do you solve for that if you're reluctant to maybe do acquisitions in the near term? I guess, how do you solve for that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 4:00PM, PNC.N - PNC Financial Services Group Inc at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays Bank PLC - Analyst : I guess, on that notion, and you touched on it but maybe got more into it, just the growth opportunity provided by the BBVA expansion market. Can you just give us an update on how things are progressing there, and what's left that you've done?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : I have a little bit of time left. So I'm going to maybe ask you some bigger-picture questions, while I get you to answer your thoughts. But we've seen some of the bank peers do these credit risk transfer transactions and also some of the credit risk. What are your thoughts on that?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Interesting. Maybe another bigger-picture question. We recently saw one of your smaller regional bank peers announced their strategic capital raise from another bigger northern bank.

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Is that -- given your comments earlier, is that something you think we'd see from others? And is that an alternative to traditional bank M&A, just given the regulatory economic backdrop?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. Any questions from the audience? Five minutes remaining. Bill, maybe a high level, obviously, a lot of uncertainties in the environment now, rates, economy, regulation, credit, elections, and what for. Why should investors get excited about PNC, this environment? And I guess maybe what excites you most about the future?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : I guess, with that, I mean, have you noticed, I guess, any incremental changes in the competitive landscape of bigger banks now opening branches in your markets. Non-banks seem to be getting a bit more aggressive. I imagine it's getting harder, not easier, to kind of keep going.

Question: Jason Goldberg - Barclays Bank PLC - Analyst : I guess in that vein, you kind of mentioned acquiring smaller banks at these prices may not make the most sense. How about the merger of equals? Clearly, you're facing the same pressure as other banks your size are. There's certainly synergies that could be derived. Any thoughts around that?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Right. On that note, please join me in thanking Bill for his time today.