PNC Financial Services Group Inc Q2 2025 Earnings Call Transcript

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

Question: David George - Robert W. Baird & Co., Inc. - Analyst : Question on the pick up you had in loan growth in the quarter. A lot of it looks like it's coming from commercial. There's a pick up in the line of credit utilization, but would like to get some color and context around that growth and how sustainable you think it might be. And then I've got a quick follow up as well.

Question: David George - Robert W. Baird & Co., Inc. - Analyst : To that end, staying on NII. Between the pick up and loan growth, Rob, and you added, as you mentioned, added to securities portfolio towards the end of the quarter, and your inherent positioning with asset repricing and swaps coming off, presumably, you continue to be in a pretty favorable NII position going into the back half and in the next year. Just want to get a sense as to how you're thinking about the trajectory of NII in the back half and then into '26.

Question: Christopher McGratty - Keefe, Bruyette & Woods - Analyst : Bill, kind of a big picture question for you. It feels like we're at a really important spot for the industry given what's happening in Washington, the political environment and the deregulatory environment. I'm interested in how are your updated views of how this may play out for PNC. You've talked about the benefits but also the frustration with scale over the years and also balancing with what is seemingly a little bit better organic growth outlook.

Question: John Pancari - EVERCORE ISI - Analyst : Just wanted to get some additional color on your fee income outlook for the full year. Your fee trends came in pretty solidly in the second quarter. You cited the upside capital markets and a little bit of upside in other, but you had nudged your fee guidance is lower. It looks like the street was already there, but you nudged that you lowered the economic uncertainty. If you could maybe just elaborate what's keeping you from getting a little bit more confident there. I know you said that you're seeing record pipelines in your capital markets business. So maybe can you just talk about the puts and takes there and the rationale in nudging that lower.

Question: John Pancari - EVERCORE ISI - Analyst : And then just separately, we're been hearing some of the banks citing somewhat higher or intensifying competitive pressure around loan pricing. A couple of the banks are citing tighter spreads that's impacting some of their fixed asset, loan pricing benefit. Can you maybe talk about what you're seeing out there in terms of loan pricing, particularly as loan growth is accelerating and I know your loan yields were flat this quarter. Is competition at all impacting that or is that really just the swap dynamics?

Question: Scott Siefers - Piper Sandler Companies - Analyst : Let's see. Rob, I just wanted to ask a little on the margin dynamics. I think in the past, you all have talked about the margin potentially expanding up to like 2.90% by the end of the year. That's something you're still sort of pointing towards or hoping to achieve? I guess as I think of things that the asset repricing story, it's pretty much become self-evident at this point. It's terrific. I would imagine deposit benefits just get tougher if the Fed isn't cutting as aggressively. I think you said you only have the one rate cut in December in your model. So maybe how you're thinking about that trajectory would be great, please.

Question: Scott Siefers - Piper Sandler Companies - Analyst : And then I guess a small one. Any rationale behind the thought that third quarter charge offs would increase? I guess it feels like there's been a couple quarters in a row where the expectation has turned out to be worse than the reality which is a good thing, but just curious if there's anything behind the thinking there.

Question: Scott Siefers - Piper Sandler Companies - Analyst : Yeah. No, it seems that way.

Question: Ebrahim Poonawala - BofA Global Research - Analyst : I guess, sorry if I missed this, Rob. Just talk to us how you're thinking about capital levels means yes, a bunch of like regulatory changes sort of on the comp, but as we think about the right target CET1 for PNC in a world where banks triple your size are seeing requirements coming lower, how do you think about it? Like I was going back, there've been times when you operated with a 9.5% CET1. Just what the thought process is even if you're not willing to sort of commit to a certain target today? Would love to hear how you think about your capital relative to larger peers just as we think about just the relative competitive advantage versus disadvantage.

Question: Ebrahim Poonawala - BofA Global Research - Analyst : We've heard that. So thanks for mentioning that. And I guess just one follow up. Like on loan growth and capital markets, like is momentum picking up as we think about this conversation with clients and all of these? I'm just trying to get a sense of is there upside to growth outlook for the back half into '26. Should we be excited about that or is it still early days yet? We're still watching tariffs closely and like where do you kind of shake out between those two views?

Question: Steven Alexopoulos - TD Securities - Analyst : I want to start maybe following up on what you just said in response to Ebrahim's question. So the commercial loan growth is coming from the newer markets, the higher growth MSAs. Is this really a function of new bankers and share gains? Are you guys seeing broad-based improved optimism across those faster growing MSAs? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 16, 2025 / 2:00PM, PNC.N - Q2 2025 PNC Financial Services Group Inc Earnings Call

Question: Steven Alexopoulos - TD Securities - Analyst : So more specific to PNC. Okay. Hey Bill, this is my first time on your call, and I wanted to take a minute and revisit the scale argument. We just had the big four banks report. When I look at your results compared to them, you guys are very efficient, right? You look at the retail banks, really solid good organic growth, growing checking accounts. But you don't have the complexity of a $1 trillion plus bank. To me, you seem to be in the sweet spot, but I know you. You've talked quite a bit about needing more scale. What's the benefit to doing a larger deal moving much above your current size because you seem to be in a great spot right now?

Question: Betsy Graseck - Morgan Stanley - Analyst : 4% positive operating leverage, very impressive, and I just wanted to get, and I know you've always got continuous improvement. Every year, wash, rinse, repeat, helping drive that buzz. How does AI impact the degree to which you can get even more efficient from here? Is it just starting and we have to wait five years, or is it heavily embedded already in the results and it's here today or some other answer? I just wondering. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 16, 2025 / 2:00PM, PNC.N - Q2 2025 PNC Financial Services Group Inc Earnings Call

Question: Betsy Graseck - Morgan Stanley - Analyst : So it's early days?

Question: Matt O-Connor - Deutsche Bank - Analyst : I just wanted to get any thoughts you have on deposit pricing and how you're thinking about growth. Slide 7 shows just a very modest tick up in the rate paid, I think as you gre, the brokered. And just thoughts going forward. You've got plenty of deposits to grow loans given that loan to deposit ratio is so low, but my guess is you want to grow deposits still.

Question: Matt O-Connor - Deutsche Bank - Analyst : And then just on the DDA accounts, and sorry if you've disclosed this, but do you give the level of the DDA accounts and any split between kind of the growth markets and the legacy markets in terms of growth rates?

Question: Kenneth Usdin - Autonomous Research - Analyst : Just a question. Rob, you've mentioned and it's on one of the slides about starting to lock in higher yields and repricing risk and it just -- it looks like it wasn't a lot of new activity with the swaps book and the securities book was flat. So I'm just wondering if you can kind of help us understand what you might be able to do as you look further out and start to think about protecting NII as you look ahead. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 16, 2025 / 2:00PM, PNC.N - Q2 2025 PNC Financial Services Group Inc Earnings Call

Question: Kenneth Usdin - Autonomous Research - Analyst : And then just one follow up on the fees. I know you covered the fee categories and such, but just like within that capital markets business, you've got Harris Williams and you've got kind of the other related capital market stuff. I think you said in the past that Harris Williams has kind of been fairly steady, but just wondering what you're seeing across the two sides of those businesses and what activity feels like underneath the surface.

Question: Bill Carcache - Wolfe Research - Analyst : Following up on the acceleration and loan production comments, are you hearing anything from clients on whether bonus depreciation and the tax bill could serve as a potential catalyst for incremental loan growth from your commercial clients?

Question: Bill Carcache - Wolfe Research - Analyst : And then on the topic of charging fintechs for consumer bank data, can you discuss how you're thinking about fintech data access fees?

Question: Bill Carcache - Wolfe Research - Analyst : And then Bill, following up on your scale comments, does seeing some of your competitors enter into M&A transactions make you feel a greater sense of urgency in any way? Do you worry about falling behind certain peers by perhaps not taking advantage of a favorable regulatory environment under the current administration at a time where others are more active?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Could you share some light on the loan growth and how much you would consider from your traditional middle market relationship based sources? and if you -- by the way, if you mentioned utilization already, I might have missed it, but how the utilization did compared to more capital markets oriented type loan growth? And by the way, I thought you said you weren't going to have any loan growth. Are you assuming no loan growth this year? So I guess that's a bit more than expected, but I guess what I'm getting at is you said the loan growth might not all repeat. You have a disproportionate amount from your CIB. So it sounds like more of your loan growth is that capital markets variety as opposed to that kind of bread and butter middle market loan. Is that a correct conclusion, and if not, if you could educate me? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 16, 2025 / 2:00PM, PNC.N - Q2 2025 PNC Financial Services Group Inc Earnings Call

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : So is loan growth back to the industry or is it back for PNC? I mean you're implying market share gains more than it's coming back to the industry or is the appetite of your clients increasing?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : And the two words where you said not repeating, what did you mean by that?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : I thought -- in reference to loan growth, you said something to not repeating, or maybe I misheard that.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : So the market share you're saying is more a permanent driver of loan growth. The tariff driven part of that loan growth waits to be seen.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Bill, your comments about the BPI making the letter to the rating agencies about the capital requirements may turn out to be the binding and straight rather than the regulatory requirements. In your guys' estimation based upon your working experience with both the regulators and the credit agencies, rating agencies, do they kind of work together or is this kind of a divide that is something new or do they ignore one another in the past? How is this going to maybe play out is what I'm trying to get at?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Possibly the capital framework conference next week in Washington might shed some light on that possibly. And Bill and Rob, your guys' thoughts on this one. It's more of a macro question. Obviously, there's been a lot of talk about stablecoin. You got the Coin Act down in Washington that's likely to be passed very soon. What are your guys' view on stablecoins and how it may impact the payments business for PNC as well as deposits? Any thoughts there?

Question: Saul Martinez - HSBC - Analyst : Just a real quick one on your retail lending strategy. You -- auto book has grown a bit. Cards are sort of flattish to down. Can you just give us an update on what your -- what the strategy is here? What you're doing? Do you expect these businesses to grow? Is it important to grow and do you need to or does it make sense to look at inorganic growth for this to be -- for these businesses to become relevant as a part of your business mix? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 16, 2025 / 2:00PM, PNC.N - Q2 2025 PNC Financial Services Group Inc Earnings Call

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Bill or Rob, can you guys come in -- obviously, they had the big meeting up at Carnegie Mellon. I think it was yesterday with the AI investments. What could that mean for the Pennsylvania or the Pittsburgh area in terms of economic activity and obviously, I assume you guys will benefit from that as well?