PNC Financial Services Group Inc at UBS Financial Services Conference Transcript

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

Question: Erika Najarian - UBS Securities LLC - Analyst : Before we go more into how the company is doing, could you please maybe address the recent departure of Mike Lyons to Fiserv? What does it imply for how the companies run, if anything? And what could it imply about succession and succession timing?

Question: Erika Najarian - UBS Securities LLC - Analyst : Okay. Let's pivot maybe into talking about business sentiment now that we're 22 days into a new administration, moving fast --

Question: Erika Najarian - UBS Securities LLC - Analyst : Very fast. Has business sentiment changed at all? Because clearly, there are crosscurrents of positives and more negative like tariffs?

Question: Erika Najarian - UBS Securities LLC - Analyst : Great. So maybe I'll dial back to November because you had such a great update on your national expansion plan. So first, can we talk about the momentum you're seeing in your newer Sunbelt markets acquired from BBVA?

Question: Erika Najarian - UBS Securities LLC - Analyst : Okay. Well. So in that vein, how are you thinking about rolling out the branch build-out through 2029 that you mentioned in November? And will you initially focus on a certain market or two? Or will it be more broadly executed? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 4:20PM, PNC.N - PNC Financial Services Group Inc at UBS Financial Services Conference

Question: Erika Najarian - UBS Securities LLC - Analyst : Well, Miami, it's definitely a growth market. (multiple speakers)

Question: Erika Najarian - UBS Securities LLC - Analyst : Absolutely. So you have been pursuing this new market expansion for a number of years. And recently, you've talked about organic market build-outs in places like Dallas, Kansas City, Minneapolis, Denver or Houston. And like you said, many other higher-growth areas. Walk us through how the economics work in terms of realizing a return on your investment. And how much time does it take to build a meaningful client book and deposit presence?

Question: Erika Najarian - UBS Securities LLC - Analyst : So you got into these markets with RPOs. It's relationship production offices, for those not familiar. Talk to us about how you seek to build talent in each of these new markets. And maybe talk about how many senior bankers you've hired since the de novo efforts have begun.

Question: Erika Najarian - UBS Securities LLC - Analyst : Where are you going next?

Question: Erika Najarian - UBS Securities LLC - Analyst : So Rob, I wanted to double-click on something that you said. How much are these expansion markets, both acquired and organic, contributing to PNC's growth versus your legacy markets? I just wanted to pull up a very staggering stat that you shared last November, which is that Texas and California are closing in on Pennsylvania as your largest growth state, and you have been in Texas for eight years, in California for four, which is like five minutes. And you, of course, have been in Pennsylvania for 160 years.

Question: Erika Najarian - UBS Securities LLC - Analyst : If I was in front of a Bloomberg terminal, I'd be anticipating getting lots of chats saying, why then is loan growth only expected to be 2% to 3%? I mean, C&I lending is 56% of your book, and you've received the same investor feedback as I have in terms of that number potentially be conservative?

Question: Erika Najarian - UBS Securities LLC - Analyst : Yeah. And we'll get a little bit more into that. In terms of commercial line utilization which you and Bill have talked about, are there any leading indicators that we should look at in terms of what could indicate higher commercial line usage?

Question: Erika Najarian - UBS Securities LLC - Analyst : And just to complete the circle on the loan growth discussion, of course, consumer ex card has not been a contributor total loan growth for the industry. And maybe give us an update on how you feel portfolio trends will shape up for the year in resi, home equity, auto?

Question: Erika Najarian - UBS Securities LLC - Analyst : Got it. Moving to the other side of the balance sheet. Another part of your forecast that investors thought was conservative is the slight deposit growth average of 1% to 2%. We talked about your expansion effort, the DDA centricity of it. And you mentioned previously that since 2011, your expansion markets have produced $110 billion of deposits away from your legacy footprint. Your money center peers have all seemed to be particularly excited for deposit growth reacceleration in '25. Again, could you unpack this expectation further more?

Question: Erika Najarian - UBS Securities LLC - Analyst : To that end, if we do start settling into a neutral rate, when does noninterest-bearing deposit growth return?

Question: Erika Najarian - UBS Securities LLC - Analyst : It's been a while since we've had a neutral rate that's not zero. How should we think about PNC's natural cost of deposits, especially since so much has happened to the banks since that time?

Question: Erika Najarian - UBS Securities LLC - Analyst : To that end, you've talked a lot about normalizing net interest margin, or NIM, towards 3%. What's the rate backdrop that's ideal for achieving this normalized level? And could you approach this by year end?

Question: Erika Najarian - UBS Securities LLC - Analyst : That's great. Thank you for that.

Question: Erika Najarian - UBS Securities LLC - Analyst : So Bill has talked about the importance of treasury management and treasury management technology for a very long time before that was a thing. Even when rates were zero, nobody wanted to hear about deposit growth. So could we talk about TM growth and how that business is helping you penetrate clients in new markets?

Question: Erika Najarian - UBS Securities LLC - Analyst : And that's helpful, actually. Thank you for that. So capital markets momentum for '25. Harris Williams was, of course, a nice stand-alone franchise when you bought it a while back. How integrated would you say the capital markets and advisory arm is within the rest of the commercial bank, especially given all the new clients that you're adding from international (multiple speakers)?

Question: Erika Najarian - UBS Securities LLC - Analyst : Since you and Bill began your tenure, PNC has been excellent at using continuous improvement to reinvest back to the company. As we think about 2025, what are those investment priorities?

Question: Erika Najarian - UBS Securities LLC - Analyst : So speaking of technology, clearly, AI is a huge conversation, unavoided. What are the use cases now within the bank? And what are the best use cases for the future?

Question: Erika Najarian - UBS Securities LLC - Analyst : Got it. So everyone's favorite question. You've not been shy about the importance of scale. So what's your mindset today in terms of build versus buy?

Question: Erika Najarian - UBS Securities LLC - Analyst : And how conscious would you be of not allowing the organic momentum to be disrupted? So going back, I remember when you were expanding into those new markets, pre-pandemic, before you bought BBVA. And then you bought BBVA and it seemed seemless, like we don't know where (multiple speakers)

Question: Erika Najarian - UBS Securities LLC - Analyst : So deregulation has clearly been another theme that we can't avoid. What's on the docket for change that could benefit you guys the most? And where do you guys think Washington should focus?

Question: Erika Najarian - UBS Securities LLC - Analyst : So in general, what would move the needle speaking of capital on your buyback cadence of $100 million to $200 million a quarter? So you gave this number with your loan growth guide. If we see better loan growth, do we toggle it back? Or would you still buy back? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 4:20PM, PNC.N - PNC Financial Services Group Inc at UBS Financial Services Conference

Question: Erika Najarian - UBS Securities LLC - Analyst : (Conference Instructions) So as you think about the opportunities ahead, which seems plentiful, your two closest peers, [cut, three] recently drew lines in the sand on medium-term ROTCE targets. One at the mid-teens with lots of capital, and one at the high teens with less excess capital. Where do you think PNC fall?

Question: Erika Najarian - UBS Securities LLC - Analyst : We haven't talked about commercial credit much during this conference. You guys, in particular, have a lot of reserves on your CRE portfolio relative to peers. What would cause you to start releasing reserves in this book?

Question: Erika Najarian - UBS Securities LLC - Analyst : And so finally, Bill has stated that he's never been more excited about the opportunities ahead for the company. So do you think PNC has any unique positioning moving forward that could result in differentiated growth and performance? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 4:20PM, PNC.N - PNC Financial Services Group Inc at UBS Financial Services Conference

Question: Erika Najarian - UBS Securities LLC - Analyst : That's great. Any questions in the room? If not, that was very PNC-esque, it was productive --

Question: Erika Najarian - UBS Securities LLC - Analyst : It was high quality and it was efficient.