PNC Financial Services Group Inc Q1 2025 Earnings Call Transcript

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

Question: John Pancari - Evercore ISI - Analyst : On the loan growth front, solid end-of-period loan growth in C&I as you cited. And I know you cited higher line utilization and improved loan production. Can you just give us a little more color around the drivers and what specific areas in C&I? And is there any of that transient in terms of potential line draws just to fund some inventory buildup ahead of tariffs? And therefore, more of a pull forward or anything like that? And is any of it maybe precautionary line draws given the recessionary backdrop?

Question: John Pancari - Evercore ISI - Analyst : And then separately, on the capital markets front, understandably trends there are pressured given the backdrop and you saw that pressure this quarter. Can you talk maybe perhaps about pipelines that you expect? Are you seeing any erosion in any of the pipelines either on the M&A side or capital market side, just given the uncertainty, any deals getting pulled or the pipelines remaining robust and it's just a matter of getting the pig through the python.

Question: Bill Carcache - Wolfe Research, LLC - Analyst : Bill and Rob, I appreciate your commentary around the uncertain environment leading you to keep your reserve rate relatively flat. If we were to go down the mild recession path and unemployment rose, say, slightly above 5%, can you speak to how you're thinking about the level of expense leverage that you have? And what are the areas where you would look to achieve efficiencies should you need to?

Question: Bill Carcache - Wolfe Research, LLC - Analyst : That's helpful. And it's interesting in light of all the commentary around how companies are putting investments on hold given the uncertain environment to see your spot utilization has been increasing since the beginning of the year. Could you speak to perhaps the potential for increased opportunities in loan growth, if credit spreads were to continue to widen as capital markets become a less attractive option for some of your clients?

Question: Betsy Graseck - Morgan Stanley & Co. LLC - Analyst : Bill, I did want to just ask a few questions regarding the President role. And I wanted to understand a little bit more about what you are expecting Mark to be doing for PNC and I know there's many of us on the call who know Mark well with what he's been doing over at BlackRock for many years, but there might be others who are a little bit less familiar with him. So maybe you could help us understand why Mark is the right person for this role. And does this have -- and how you anticipate he will be growing the business as President?

Question: Betsy Graseck - Morgan Stanley & Co. LLC - Analyst : Just also wondering about the opportunities for doing more with private credit. I don't know if that's part of the equation here as well given what you're doing already with private credit side and what Mark brings to the table there?

Question: Scott Siefers - Piper Sandler & Co. - Analyst : Rob, I think in the past, you've talked about a 3% margin by the end of the year. It kind of feels to me like based on the first quarter result, maybe you got out of the gate a bit quicker than you would have thought, which is helpful. But just sort of given all the moving parts these days, maybe if you could sort of refresh your thoughts on that number and anticipated path to get there. I can put together a couple of the pieces with what Bill had said about the forward curve, more rate cuts, et cetera, I would be curious to hear your thoughts.

Question: Scott Siefers - Piper Sandler & Co. - Analyst : Okay. And then maybe just a little bit of a ticky tack one, the slightly higher net charge-off expectation into the second quarter. I mean it's not huge by any means, but it's a little higher than you've run recently. Anything in particular driving that? Or is that just kind of standard normalization?

Question: Ebrahim Poonawala - BofA Global Research (US) - Analyst : I guess maybe -- so you talked about loan growth and sort of client sentiment there. Just talk to us around the agility across the customer base, be it consumer or commercial, given concerns, maybe we are in a recession, we could fall into a recession. I'm just wondering how you look at the balance sheets for your customers. And like how bad do things need to go where the credit outlook deteriorates in a meaningful way.

Question: Ebrahim Poonawala - BofA Global Research (US) - Analyst : And I guess maybe, Rob, for you, so you mentioned the where the NIM may exit, I guess, '25. Just talk to us about how you're thinking about balance sheet management from an ALCO perspective. You took some actions, I guess, middle or late last year to lock in the NII or the record NII for '25. I'm just wondering how are you thinking about like from a cash or the bond to book, are things that you're doing as you think about just the forward outlook beyond '25?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : I had a follow-up on the question about the new President, Mark Wiedman, you described. So I think you said exactly what you are doing currently at PNC is what you'll still be doing. So my question to you is, how do you get them? I mean, there are so many people leaving the bank industry for private equity and nonbanks and fintech and sometimes anywhere they can get to. And so why is he coming to such a heavily regulated industry with so much oversight, with so much skepticism, with so much cynicism, with so much questioning, it's a slog being in the banking industry, and he's choosing to come. So what in the world was your sales pitch to him to get him to come to keep PNC doing exactly what it's doing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 15, 2025 / 2:00PM, PNC.N - Q1 2025 PNC Financial Services Group Inc Earnings Call

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : You mentioned scale matters, and you've not -- the first time you said that, what's your current appetite for getting that greater scale? You said scale matters more than ever before, I think, in the history of banking. We have not seen that much consolidation. I imagine -- so where do you stand?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Last short follow-up. You said you would not issue shares at this price. So does that mean you would be accelerating share buybacks?

Question: Ken Usdin - Autonomous US - Analyst : I was just wondering, obviously, you talked about in the first quarter, we saw a little bit softer capital markets, M&A and trading. And there's an obviously expectation in the guide that things get better from here, albeit with the uncertainty. So can you just talk us through like just how that advisory outlook fields. And I guess maybe if you flesh out the fees a little bit more, just what expectations drive that second -- that kind of from here improvement that's in the full year guide?

Question: Ken Usdin - Autonomous US - Analyst : And then just one question on the deposit side, getting to this point of stability of DDAs and such. But when you think about the new rate environment, what do you see as far as your ability to continue to ratchet down deposit pricing and what do you think the mix of deposits looks like as well?

Question: Erika Najarian - UBS Securities LLC - Analyst : Just a few follow-up questions. So Bill, nobody really asked this question much until we saw the Mike Lyons announcement. But to follow up with all the questions about Mark, how much time are you going to give PNC in your current role, do you think as we think about the succession planning?

Question: Erika Najarian - UBS Securities LLC - Analyst : Yes. I mean, I guess -- I mean, it's a very direct question clearly, but Jamie Dimon often talks about being around for a few more years. I often have to look up your age as you always look so much younger than your actual age. I always think you're like 52. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 15, 2025 / 2:00PM, PNC.N - Q1 2025 PNC Financial Services Group Inc Earnings Call

Question: Erika Najarian - UBS Securities LLC - Analyst : Okay. That's great. That's the answer I think your investors wanted to hear because given the announcement of Mark coming in, right, I think that question ramped back up. So that was the first question. Okay, you'll be around for a while, fair. Second question is a quick follow-up, Rob. I'm sorry if I missed this during prepared remarks, but what is the unemployment rate that your reserve is implying in terms of what it's built on?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Can you share with us -- you guys have done a good job in attacking your commercial real estate challenges and working through that portfolio. And at the same time, you've been able to keep your noninterest expense growth in check. Can you carve out of that, what is it costing you to work through these commercial real estate problems? So none of us expect them to end anytime real soon. But are there some expense savings coming once you get through that process in a couple of years, maybe?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : And then a broader question, Bill, on your comment about share repurchases. Can you give us your thoughts and opinions about what's going on in regulatory environment, we have a number of nominees for the different regulatory agencies. The Treasury Secretary has been quite outspoken about having the regulations eased up a bit. What are your thoughts on that? And could that influence even more buybacks once you get to know what your CET1 ratio could be after Basel III endgame comes out?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : And can you just remind us, obviously, your CET1 ratio is similar to your regional peers in terms of the minimum. And what kind of comfort or what kind of buffer do you guys like to keep above that required level?

Question: John McDonald - Truist Securities Inc. - Analyst : A couple of quick clarifications. Just -- sorry, one more on the buyback. So the idea is buybacks accelerating, Rob, but within the context of your capital ratio still growing a bit near term until you get more clarity?

Question: John McDonald - Truist Securities Inc. - Analyst : And then on the fee income outlook for the year. You mentioned in the beginning comments, we just pointing out the obvious risk that you've got some market-sensitive fees in there, and it kind of depends on the macro. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 15, 2025 / 2:00PM, PNC.N - Q1 2025 PNC Financial Services Group Inc Earnings Call

Question: John McDonald - Truist Securities Inc. - Analyst : Okay. And then maybe just a quick update strategy-wise, just how things are going on the national expansion and some of the consumer initiatives, the new card product?

Question: John McDonald - Truist Securities Inc. - Analyst : And you were going to just make a comment on the card book and how that's going with the new product and credit card? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 15, 2025 / 2:00PM, PNC.N - Q1 2025 PNC Financial Services Group Inc Earnings Call

Question: Matt O'Connor - Deutsche Bank Securities Inc. - Analyst : Just to follow up on the rate sensitivity. I think you said little impact from if rates are a little bit higher or lower than what you expected. But just conceptually, how is the balance sheet positioned here for movements on both the short and long end as you think about more medium term? And then kind of what's the goal? Like you talked about locking in some of the fixed rate assets you priced in the next couple of years, but which way are you trying to lean?

Question: Matt O'Connor - Deutsche Bank Securities Inc. - Analyst : Yes, that's helpful. And then just on the short end, like I assume more cuts is helpful to a certain point, not that the market is predicting this now, but like what's that point where you're like, hey, if we get below 3 or whatever it is, then we kind of run out of room to reprice deposits, for example. Like what's that tipping point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 15, 2025 / 2:00PM, PNC.N - Q1 2025 PNC Financial Services Group Inc Earnings Call