PNC Financial Services Group Inc Q3 2025 Earnings Call Transcript

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

Question: R. Scott Siefers - Piper Jaffray Inc - Analyst : Good 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, then why, what occurred with the third quarter margin, meaning just slight compression isn't necessarily representative of the path you'd expect going forward. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2025 / 3:00PM, PNC.N - Q3 2025 PNC Financial Services Group Inc Earnings Call I think you suggested we could still get to like a 3% number at some point in 2026. So maybe sort of the -- what happened with that deposit growth, what effect did it have? And then what are we looking for going forward?

Question: R. Scott Siefers - Piper Jaffray Inc - Analyst : Yes. Okay. Perfect. Thank you for that, Rob. And then 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, I guess from my perspective, might have thought maybe a little more lift in the third quarter. I'm just not sure how all the accruals work. So it kind of feels like the full year would be okay, but curious to hear any of your thoughts in there.

Question: R. Scott Siefers - Piper Jaffray Inc - Analyst : Yeah. Perfect. Okay, wonderful. Thank you very much.

Question: Betsy Graseck - Morgan Stanley - Analyst : Hi, good morning. 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. And what should we be anticipating as we move forward here in this time frame where we have opportunities to maybe move the needle more than we have in the past?

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. And then, Rob, on the C&I loan growth, very impressive. Just want to understand how much of that is NDFI versus non. And then separately, on the CRE, commercial real estate runoff, how much longer should we anticipate that's going to continue because it's obviously taking away from some of the balances here. I'm wondering when we're going to get to CRE actually growing.

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay, thank you.

Question: John Pancari - Evercore Inc - Analyst : Good morning.

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

Question: John Pancari - Evercore Inc - Analyst : Got it. Okay. That's very helpful. And 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? Are you -- we've had some banks flag still some lackluster commercial demand and not yet seeing CapEx pull through. What are you seeing on

Question: John Pancari - Evercore Inc - Analyst : And we continue to see some solid growth in unfunded commitments.

Question: John Pancari - Evercore Inc - Analyst : Got it. Okay, thanks so much, Rob. Appreciate it. Thanks, Bill.

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : 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 AOCI at 9.7%, one of the larger banks brought down kind of where they're operating the bank to 10%, 10.5% yesterday. So as a result, not that, that should dictate where you run the bank, but I would love to hear, do you think is 9.5% to 10% is the right place? Is it 9%? Just how are you thinking about it? And is there still -- Moody's, of course, upgraded some of your ratings or the outlook recently. So is there a push and pull with the rating agencies around this topic? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2025 / 3:00PM, PNC.N - Q3 2025 PNC Financial Services Group Inc Earnings Call

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Got it. And 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, like what do you see as the more likelier outcome? Like do we -- 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 and that could lead to more credit issues?

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Right, thank you.

Question: Christopher McGratty - Keefe Bruyette & Woods Inc - Analyst : Oh great, good morning. Rob, maybe start on slide 7, 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 bring in more on the balance sheet, if there's a change in behavior? What's the, I guess, the outlook as well?

Question: Christopher McGratty - Keefe Bruyette & Woods Inc - Analyst : Okay. And then my follow-up would be just year-over-year, 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.

Question: Christopher McGratty - Keefe Bruyette & Woods Inc - Analyst : Okay, thank you.

Question: Erika Najarian - UBS AG - Analyst : Hi, good morning. Just 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. So you're expecting 6.5% net interest income growth in 2025, given the momentum in what Bill mentioned, retail deposits remixing, also fixed rate asset repricing, you expect '26 NII growth to be better than that 6.5%, excluding FirstBank.

Question: Erika Najarian - UBS AG - Analyst : Comfortably. Okay. Perfect.

Question: Erika Najarian - UBS AG - Analyst : Right. It's just a timing difference, right? I mean, later cuts and SOFR goes down and then it takes time to reprice deposits.

Question: Erika Najarian - UBS AG - Analyst : Got it. And just a second question, just to switch gears, and this is for Bill and Rob 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. So 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. So 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?

Question: Erika Najarian - UBS AG - Analyst : Got it, thank you.

Question: Gerard Cassidy - RBC Capital Markets Inc - Analyst : Hi Bill. Hi Rob.

Question: Gerard Cassidy - RBC Capital Markets Inc - Analyst : 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?

Question: Gerard Cassidy - RBC Capital Markets Inc - Analyst : Got it. And then 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. So hopefully, they're not going to be using them for ticky-tacky stuff and helps everybody yourself and all the others as we go forward. But 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? Then 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? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2025 / 3:00PM, PNC.N - Q3 2025 PNC Financial Services Group Inc Earnings Call

Question: Gerard Cassidy - RBC Capital Markets Inc - Analyst : And based on your guys' experience working with both the regulators and the rating agencies, is there a preference on which one you'd rather have be the binding constraint? Not to put you on the spot, but if you don't want to answer it, that's fine too.

Question: Gerard Cassidy - RBC Capital Markets Inc - Analyst : Sounds good. Appreciate the color. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2025 / 3:00PM, PNC.N - Q3 2025 PNC Financial Services Group Inc Earnings Call

Question: Ken Usdin - Autonomous Research - Analyst : Great, thanks a lot. Hey, Rob, I just wanted to ask if you could talk a little bit more. You mentioned that deposit costs should be down in the fourth. And just furthering the discussion about the commercial growth that you saw this quarter, knowing that's just simply a higher rate product. Can you kind of just tell us how then you expect the wholesale track to compare with the retail track as you get down to this next phase of the rate cycle?

Question: Ken Usdin - Autonomous Research - Analyst : Right. Okay. And then on -- just on the commercial growth, it's interesting that you get this new business, you say that it's partially new customer. So just wondering like you keep it at the Fed for now. Do you presume this also leads to incremental loan growth? Do you eventually get the confidence that it's sticky deposit growth and you put in securities and kind of lock in some more? Just coming back to that discussion of it's good to get the extra deposit growth. Do you assume it's sticky and kind of what's the best way to maximize on higher cost deposit opportunities like what's happened in the wholesale side this quarter?

Question: Ken Usdin - Autonomous Research - Analyst : Well, I guess that's still the timing debate, right? You get some great extra deposit growth, but we're still waiting for the great step-up on the loan growth side. It was really good this quarter, but that's part of this just like slight timing disconnect with the rates paid versus just sitting in cash. So I guess people are just still looking to understand like what kind of inflection do you expect on the loan side. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2025 / 3:00PM, PNC.N - Q3 2025 PNC Financial Services Group Inc Earnings Call

Question: Ken Usdin - Autonomous Research - Analyst : Absolutely. Okay, great. Thanks, guys.

Question: Mike Mayo - Wells Fargo Securities LLC - Analyst : Hey, Bill, could you expand more on the potential benefits of less regulation, the cost of MRAs? Like how much could this potentially save in expenses when you throw it all in together, like the examination of the MRAs, the -- more of the ticky-tacky process-oriented stuff and they're moving more towards just plain old financial strength like in the old days, like how much do you spend? How many people are dedicated to some of those efforts that might go away at some point?

Question: Mike Mayo - Wells Fargo Securities LLC - Analyst : No, we all -- that's our job is to try to quantify these things. But just as far as how much of your time it takes, if you go back, say, 20 years ago, how much time you spent on these things and then after the financial crisis, how much time you spent. And then two years ago, I think peak regulation, how much time you spent and now kind of where you are today, like how would you thought something like that?

Question: Mike Mayo - Wells Fargo Securities LLC - Analyst : So half of the time that you spend with your Board is on regulatory matters?

Question: Mike Mayo - Wells Fargo Securities LLC - Analyst : All right. We'll stay tuned. Thank you.

Question: Matthew O'Connor - Deutsche Bank - Analyst : Hi, Bill, I want to follow up on your comment about not chasing M&A. I guess if that's the case and you've got all this capital and operating leverage and desire to get bigger, like thoughts on just leaning in from an organic point of view, whether it's an additional ramp-up in branches, maybe leveraging the deal bankers? Or just how are you thinking about organic opportunities to maybe accelerate some of the growth? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2025 / 3:00PM, PNC.N - Q3 2025 PNC Financial Services Group Inc Earnings Call

Question: Matthew O'Connor - Deutsche Bank - Analyst : That's helpful. And then just specifically on the pace of the branch openings. I mean, if you step back and say, we thought in the next M&A cycle, there might be something bigger we could do at a reasonable price. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2025 / 3:00PM, PNC.N - Q3 2025 PNC Financial Services Group Inc Earnings Call Now that's probably not going to be the case. So let's kind of double or triple down the efforts. I mean, I know there's always so much you can build at a time, but you're a big company, lots of REITs. I would think you could do multiples of kind of what you've put out there if you wanted.

Question: Matthew O'Connor - Deutsche Bank - Analyst : Okay. All those details were helpful. Thank you.