PNC - Earnings call transcript Q2 2020 | The PNC Financial Services Group, Inc.

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Operator

Good morning. My name is Carlos, and I will be your conference operator today. At this time, I would like to welcome everyone to the PNC Financial Services Group Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator

go this over recorded. Investor to Bryan Sir, reminder, turn will Relations, is Gill. call the the please call a I being now Mr. As ahead. Director of

Bryan Gill

of about CFO. good information. and reconciliations Hello, thank call information the of on release Vice undertakes PNC materials. our and non-GAAP Rob this President pnc.com, call Reilly, speak measures Financial in to July PNC obligation and everyone. Cautionary this available and today’s no to Group. on PNC’s as Relations. today’s investor Executive for corporate Participating as our are morning, SEC Today’s XX, them. Services materials earnings included are Investor XXXX These other well you forward-looking all statements under conference as Welcome CEO, statements and presentation and contains Carlos as are update Chairman, as website, Bill materials well President These filings Demchak; only

turn to Now, like Bill. call to I’d the over

William S. Demchak

Thanks Bryan good morning and everybody.

you our a this on in the sale including parts of for morning the the obviously BlackRock. results seen of moving had our number quarter stake second As have gain

quarter I that was it overall pretty the a environment Now of context the we solid in. thought operating are in

operating were first revenue managed. quarter, down included expenses to first off year. half We would remember, have You were seen of that both if well positive which, and one produce and was leverage QX gains you from for the the some of able in kind the

in worsened first bill. three the since loan in the we view has in months turn substantially of a resulted books our reserve as substantial our closed call has loss mentioned However, ago and quarter we economy

results is should coupled the any and capitalize lay underscore with which, problem. recent a monetization strength CCAR disruptive The to to this of arise can to on investment constituents rest Our during of specific our position liquidity opportunities and of sheet, markets. balance CCAR our continue balance sheet with PNC support that substantial concern benefits capital our that BlackRock the the PNC results

capital our book value. and record levels saw increase fact, In at a ratios in significant are our we

Looking are anytime market perhaps pessimistic of we the the a more soon. than on ahead, recovery odds recognize I a full fully that bit

to government data Much economic effects has our still COVID have lasting of of economy civil in challenging to the will which how that early these navigating recent PNC inequalities. normal of and parts to, effects racial caused you has going that least pandemic a and profound monetary to continues life me, the very on in times the supports has economy of simultaneous workforce communities, market our and our on progress Despite our expansion executing digital terms challenges in make and strategic of commitment steadfast key in customers, national areas, continue we shareholders. remained the to middle that and both the deep Despite crisis, national focus to efforts. been is by While unrest the are with allowed and including employees it. play good our in is very us stimulus COVID. what we're clear, can is in Unfortunately, Massive as support encouraging, depend terms this the fiscal fact, adjust to this feeling innings at of there new from is the out. real recession. with becoming the road on continuing is down kick going

Carole navigate their challenges for during what the leadership want Brown to has it to my of facing. I are I their continue a to our Board turn thank members and newest want this time. the our executive for of Bynum, customers leadership I to opportunities. both our finally, who also and that beyond and extraordinary of to challenges committee, been recognize our And team address Rob, over Directors support many Now, employees above want are they to help before invaluable as thank and year I going thank Richard we including

Now at second take then happy and your results over look a questions. our turn Rob be we'll closer for quarter it I'll to to

Robert Q. Reilly

everyone. Bill. Thanks, And good morning,

Bill discontinued notable divested of results quarter, $XX.X BlackRock, activity tax $X.X and PNC’s mentioned are in during reported with in which equity our periods As investment just second gain generated of quarter prior and second both operations. billion. the BlackRock proceeds now after as billion net we portion an

on Our on and is an average X Slide is presented balance basis. sheet

side grew billion $XX.X $XXX quarter. asset loans the total On to billion linked

increased $X X%. billion Our or billion investment of securities $XX

Reserve Federal end at $XX our at a were of the from sale result investment the growth. in was increase billion and strong quarter. and Our liquidity The cash averaged significant $XX the deposit BlackRock billion balances the of of

On decreased averaged funds borrowed the up $XXX billion the were to and XX% billion liability for $X linked deposit quarter balances or billion the first $XX quarter. quarter. Total side, compared

$XX primarily Loan of liquidity as XX% borrowings, used value billion reduce and Importantly, book excess per the as $XX.XX And borrowed tangible share on approximately declined XXth, common year-over-year. of an Federal increase quarter with basis we linked to our spot was a June Home Bank. funds XX%

can X, on strong. Slide positions see all our you capital liquidity As and reserve are

X ratio As to estimated XX.X%. III June XXXX, Equity XX, our was of Common Basel be Tier

of consistent quarterly per with recently share, dividend $X.XX is approved the Board previous Our quarter. which a

guidance, amounts to net exception authorized income basis is prior this quarter, permissible has with purchases. dividend income employee benefit four the third the quarter repurchases Federal share continue our dividends third share our In exceeding not preceding the average quarters. the regard of through the third for of Fed repurchases for to accordance On related XX% of in subject quarters. know, quarter average the you the four As net suspend and for Reserve's the to with we'll

quarter. paycheck This loan draws, driven clients, balances line loans commercial first Consumer have ratios to Our loan base loans $XX economic loan by with $XXX reflecting X conditions second loan the low at loss commercial approximately up average the a remain in liquidity We of substantially the to predominantly quarter shows X.XX%. core compared protection and our card, to It's support reserve current loan detail. Slide loans in related balances reflected requirements. and auto, declined $X.X higher program. billion and liquidity $XXX an balances in more new minimum were or billion, noting in facilities loans. regulatory are cost approximately XX% $XX light the million, the spot levels student our exceed and of deposits significantly under of increase short-term billion utilization to our billion, in now lower and utilization. increased related growth lower that activity funded worth importantly, deposit declined coverage Average

paid XX% At segment as in approximately experienced quarter grew a year were approximately C&IB X.X% loans same utilization above rates of that drawn rates. from end, down. Our period the average rates a utilization billion. pre-COVID Compared the ago decline peak were or XX% X% were subsequently to $XX levels, lines

positions XX shows on full As which The billion government or $XXX quarter. loan linked XXX in Consumer billion basis COVID-XX increased payments our grew $XX to declined of in points spending. customers impact XX% deposits points. due consumer linked point as also or yield LIBOR deposits X.XX% balances quarter reflecting balances of lower interest the points rates quarter, XX quarter, concerns. lower our enhanced the to drove quarter the slide the $XX Fed's deposit well. basis paid the our deposits the reflecting during on second of rate also declined primarily to grew Year-over-year increased Commercial liquidity billion XX due first basis to basis deposits stimulus Average rates reduction the XX%. and

quarter or second asset the quarter revenue on As quarter was or Net first compared X to of million and you billion can million $XX as down $X.X see up $XXX higher $X.X was X% yields. lower earning interest costs lower offset billion, total funding Slide balances income X%. linked

and or Residential XX%. consumer linked charges by Consumer in services basis by the on X.XX%, Non-interest in related in points related decreased improvement to due quarter business deposits of interest quarter in compared continued $X.X corporate to markets. million production loan the activity, on client net well billion as waivers income million and the volumes program. Fee savings point and revenue to continuous lower quarter the the quarter. federal market quarter. securities during XXX $XXX linked our and XX% X% as RMSR corporate non-interest rate full but offset income And of reflecting were a lower revenues declined margin the to by due evaluation. services asset $XXX March or strong fee other decreased $XXX sales management rates. impact and than service XXXX declined total Our million, in mortgage decline more or reflecting Non-interest to and activity partially reduction cost million XX basis expense lower funds second were million stable. down declined capital offset activity both first lower higher initiatives Other our securities progress gains $XX relatively remained $XX declined

outlook the Slide moment. impacted an the mentioned, provide billion, in Bill worsening $X.X identified the a update of as industries reflecting losses our operating regarding the pandemic. quarter be rate introduced X in for was effective and for we most is template March, by XX.X%. positive As to specific quarter, both tax I'll credit first was on likely to the effects to our the And we've second we leverage which relative generated year-to-date. Provision of more year-over-year economic detail

Our as loan June are of portfolio. of balances billion and X% our $XX.X loan outstanding approximately total industries these represent to XXth

offs haven't in industries, of an economic March balances loans. from trends charge approximately see $XXX since resulting offs charge million Corporate of experienced XXst increase any of industries continue, totaled billion current if material $X funding we'll time. $XX.X over We billion, however, loan PPP yet increase these these in

during are X% balances with criticized were in travel. linked assets loans loan Excluding seen down just quarter leisure, greatest PPP of recreation, these XX%. industries quarter flat did at the under the approximately grow stress and Non-performing outstanding the loans in but

over XXst almost REIT March and loans We from end driven million, our single in credit. to we the related $XXX at to substantial million in see loans billion have in continued to retail commercial the lodging high entirely industries a Similar $X increased Non-performing real mall since million March. and decrease estate quarter of impact estate by segments. a portfolio, $XXX the of to last real stress approximately just X.X approximately categories

gas outstanding since and loan the update of Outstanding XXXX. approximately Turning oil billion, portfolio, X% balances of an quarter $XXX our which to on Slide million this second have end the than XX, or at declined less was March X, loans. $X.X is total

reserved we As to approximately we expected, in are portfolio market portfolio. believe of continue an increase We continue the this conditions. in represent properly this monitor now X% current non-performing and loans, which for to see outstandings we'll

billion, me, asset class. in X.X the excuse a Of our With owned. consumer of a And owned year-to-date XX, X.X significant total through percentage least investor Slide who billion loans, deferrals, loan we've loan percentage to relief made to extensions, of continuing during provide they XX% April bank new are nearly of of and uncertain accounts which assistance modifications days. XXX,XXX we're have granting clients Turning customers loan customers XX small through forbearance, in payment to continue one early exposures is represent bank declined their our granted and which to and to requests modifications both from times. modification but last Representing billion modifications $XX.X the each is overall accounts. at for customer X.X billion flexibility have these peak owned and for

extension a periods we suggest to potential to that conclusion. in make decrease payments it's as early believe modifications these begin too Although expire,

each side modifications commercial loan granting businesses, offering for situation. including medium to loans. commercial the borrower's small and emergency on also individual We're sized clients relief the PPP we're based selectively On to

to industry, March to increase decline remained industries, quality metrics as quarter. to estate previously XXth forbearance other loans at million presented point. a Act Net charge offs which Our stable commercial XX borrowers the of fees. June XXXX. real well offs I where related was impact $XXX delinquencies million $XXX a extension net million Non-performing the for and loans from loans Slide or $XXX are XX%, Annualized the basis at as credit increased well XX, reflecting on million, declined mentioned. Total and charge by delinquencies increase in borrowers XX% compared as as leases billion energy The XX. $XX high driven primarily in $X.X first total and the Cares or COVID-XX

in X.XX% the see compared As losses a which allowance impact you can the to resulting loans quarter, credit on last for from updated to the our primarily increased economic to quarter, second forecasts, economy. significant has X.XX% COVID-XX incorporate

will reserve this used remainder quarter, our substantial anticipate we CECL don't in reserve XXXX generate assumptions based scenario during highlight loan a loan believe the assumptions, the these of losses on our reflect of economic the of PNC’s estimates cover Under which portfolio. in our most of quality sufficiently any next. results recent peers. the portfolio. were as losses cumulative the our Importantly, portfolio we bills scenarios our current of total CCAR I Therefore, the The percentage lower life severely adverse than

the outlook XX allowance in highlights a for our However, CECL of methodology, did quarter. based credit substantial on economic increase Slide have losses. under the our the increase to allowance our this drivers we

shows million approximately portfolio factors. $X.X for economic attribution in and Our the billion $XXX changes of increase reserves for

X.X% annualized largest uses being of derived of levels quarter of separate GDP scenarios by fourth the weighted contract is drivers XXXX. third rate. variables, this prerecession from down recovering GDP a first unemployment scenario, four in Our and average the peak and to economic year XXXX, levels the from finishing with XXXX scenario and the number the quarter economic In the X.X% quarter

market assumes unemployment to in scenario falls the the quarter, XX.X% to and XXXX this in the X.X% labor in with recover continuing second the quarterly rate at quarter XXXX. a this from Additionally, year, peak of fourth

year-end adverse hypothetically For capital loan Clearly, believe equal summary, CCAR X.X%, efficacy a regulatory over continue this minimum a approximately condition. severe and for a buffer duration capital this the our we our above which XXXX, scenario losses challenging environment. an balance loss but the the In the from positioned December want under $XX.X The next perspective, variables this biggest our in economy reserve stress the if we severely outcome scenario ratios possible two Fed impacting plus sheet well X.X%. of liquidity we our is of is a a visibility be to capital the be of at and reserves quarter not CET guidance incremental loading our credit the these Within way for XX, the government nine context, losses, would we what thoughts in also quarters. the of internal year At well to no billion allowance outcomes analytical time analysis XX% approximate ratio billion considered hypothetical as are support I simply to for massive this a fund resulted for $X.X our is emphasize essentially X had purposes expectation, X%, level XXXX of remains crisis follows. of quarter the stimulus full low. knowing U.S. and that programs. our and have and third

we quarter decline third XXXX, to quarter the compared XXXX, to For the low of the second the loans of range. in average expect single-digit

interest down to X%. approximately expect We net be income

expectation lower total between includes income to income will expect that which revenue be We core stable quarter. and the down other be while will X% non-interest be our in X%, non-interest fee

quarter expect to We non-interest to total expect and regard we flat $XXX levels be million. offs, expense between down. third And to to be $XXX million in charge net

the and and be emphasize low now visibility, expected and revenue the we between non-interest is our each X% rate I I expect and both tax For expense effective questions. to down limitation context want now the your And to be ready Bill full take teens. to to in with are X% again low that and and year of

Bryan Gill

we first could question? please Carlos, have the

Operator

Instructions]. [Operator you. Thank

Your ISI. question with ahead. Evercore line John go comes of first Please from the Pancari

John Pancari

Good morning.

Robert Q. Reilly

John. morning good Hey,

John Pancari

I outlook year? bit little half that about of the the in expectations the can through third down know wanted How quarter in going -- then back a in your to revenue that quarter. X% does mean talk margin guess be if and the see of about you the what spread you terms third do I you expect Just your to margin. into

Robert Q. Reilly

its so John NIM outcome. Rob. guidance of don't to remain because sort hey generally morning. But I Good speak would We say an to margins provide speaking it's expect Yeah, stable. I

some see rate of some room lower the But We also liability a will as we have being side. function clearly more yields on lower.

side. think the loss I largely

John Pancari

fees. the have all also I mean, we PPP

Robert Q. Reilly

Yeah. Yes.

John Pancari

likely spike the we're mean, fourth on I in yield? see quarter to that

Robert Q. Reilly

we some bit at levels be these see little I NIM fourth the a where of we'll time. are lift Yeah, might quarter, but a the think so essentially in

John Pancari

helpful. of give your if separately, okay, at give update the Right, that's to an thoughts us the you just stake Thanks. since alright potential the capital, putting BlackRock on your Bill, want changed just see can has of deployment if you you I us and how thought completed process And thinking the work? around all could about ultimately sale the then if you're out

William S. Demchak

be here. Yeah, no to real going patient changes. We're

the think, this like out. what done what are if deploy how some in it'll put much the The problems and is, of said comes plus the government's masked the depending pretty And economy. script, my the tell capital early how fiscal and/or innings we fast see the to I government we're You plays underlying out opportunities effectively to that need know, it. payments here place that in in stimulus, all back on I in what severe providing be Fed's that will pretty us keeps how first secondly,

strategy patient. national So us to bank we're franchise remains expand going The like be help to the same. trying acquisitions to our of pursue

John Pancari

Okay, you. great. Thank

Operator

Next Please question Scott line Sandler. with go comes from Piper the Siefers of ahead.

Scott Siefers

Thanks the Good for guys. question. morning, taking

William S. Demchak

morning. good Hey,

Scott Siefers

you in a I and they guys just to the are the how guide a sort of those Rob I thought income came nuance guess, it the you relative you third pretty within sounds guide then of and through I to are quarter, retrospective, maybe coming some about could bit how for but put guess based activity takes and what quarter? fees how the on have would the talk hoping Hey, fee little core the stable, was fees like maybe that

Robert Q. Reilly

I'll I think backwards answer of Yeah, it there. sort

function I little we as relatively We well than the the levels mortgage there consumer which both pretty side, expected. came in as had fee largely outside. bit the mortgage little that lower what in expectations, quarter retrospect, some we with did activity But, were a on Corporate of then in quarter-over-quarter in might up it a so softer first actually were have a but down in as came better waivers. activity expect RMSR we production. services down was that as think, And of flat, think management been production bit. we strong, good a I asset management and asset gain the terms expected large

as in in retrospect expected. I came they think we

stable for you maybe services terms forward expect little and But corporate services to the so up management mortgage environment of Going residential third fluid essentially off a is caveat of that's and to again fall bit, low. I'd visibility consumer Scott, And activity in actually it's asset the know little again, the quarter bit. how actually much consumer a with happens. stable. and And pick

Scott Siefers

Yeah.

But Okay, then the if provisioning need reserve, you no a down there's before in clarity reserve, reserving does you how are being situation like, one the to of need drawing perfect, much And start premature, that gears switch you. the like at how on how this end additional kind how CECL thank and project this guys for role? newer in assumptions your does does what or build, is. work right may then given up point world in totally fluid stuff reserve

Robert Q. Reilly

the through release. improve, which too, you'd reserves we But for be that by a we'll some a Bill to those positioned may of how of ahead didn't to point offs scenarios provided know, charge going models, need -- next to function balance chime are definition. you the year the start of it's year. ourselves Well, you it CECL when there And just those That’s and now. continue a run definition, when in of obviously, at we terms getting the to bit little want you're in

Scott Siefers

Yeah.

William S. Demchak

else won't. would loans mean, add you on roll and of and with on everything if salt I be charge else everything true the adding certainly then if offs to you'd your down burn all loan provision whatever zero, assumptions, reserve for for loans mechanically, come put which holds else off new the in you and effect, and held most equal new life reserves

Robert Q. Reilly

components right. I the of the portfolio that's And economic calculation levels of just and think of which in changes, the distinction the then the our which Yeah, loans terms assumptions. incorporates

Scott Siefers

Yeah.

so of now that game, Okay, perfect. there's And I'm of part the again, certain test the final on and purposes me, for the nothing the BlackRock one the dividend, one just the if disqualifies right right, rules just I like just excuse can CCAR earnings I'm that's that it…? page, sneak deficiency

Robert Q. Reilly

Yeah.

Scott Siefers

Okay, wonderful. Perfect. much. very Alright, you thank

Robert Q. Reilly

sure. Yes,

Operator

[Operator Instructions].

Bank the ahead. of Next question go comes America. line from of Najarian with Please Erika

Erika Najarian

is first good for Hi, morning. you, Bill. My question

one beyond So in of on me even buybacks Jamie said that what quarter don't base it's for allowable given you something peers, count plans if just more struck amount terms the balancing severely said view for really that Diamond in scenario have activity the keeping powder that third any he don't your given adverse a capital quarter, that case, the and dry wondering and fourth terms when information of is yesterday becomes we significant have capital, your that to opportunity? your of and buyback versus I'm of the of the so near-term do

William S. Demchak

opportunities of confirmation would be be and belief First value whether an from allowed environment hearing with that a not. he in to we get we friendly quarter, shareholder were if are would the dependent dependent also very terms restrictions of margin, of organic opportunities Fed. we for buybacks the into are no But that way. ignoring the to just and not not deploy see our sure course and in on operating or we fourth environment some price? the environment in or Of that in believe, he's there the but in there'll going of be we capital capital somehow something our was going share that At that assume I maybe I'm that moment where our I'm the would to it where that at that, all, Fed would, inorganic support not. saw we're this to use both continue

me be mean, the that phrase and of hasn't capital. And changed. use again So heard stewards over your you've rational it's will that we'll I see. over

Erika Najarian

the in is of as on and a that quarter also thing Got amount cash struck it follow-up, sheet. balance one the the me your

the deposit deployment rest the has of wondering, guide what that in of you the year, terms from been growth revenue I'm BlackRock proceeds, as you think about for assume And do cash? significant. the the Aside Rob, your of obviously

Robert Q. Reilly

hey Erika. Yeah,

to put terms deploying will it of some we all particularly a make it's that hard work we revenue to yields to put And tactically, So, won't of obviously. lot of securities in of that. given pretty work, up

we're balance as into run deployment, So, loan, side, with guidance. the to some But balances, far all of going pretty high security loan the that's year. our cash balances to as factored

Erika Najarian

thank Got it, you.

Operator

Our next Jefferies. question line Ken Please with comes ahead. the of go from Usdin

Ken Usdin

big morning, Good Thanks. A Bill. for question picture guys. you,

returns sale ROA BlackRock the a and banking you look in as of regional or long ROE potential want efficiency traditional where company, just do just about here business you you more ratio I'm think, X from about think how head term wondering, your Just, And long-term? structure now wheelhouse. it's the whether business to mix, of the to the if the just any, differently

William S. Demchak

focus organic through same know we thing. penetrate we'll our acquire extent consumer don't is think lending existing of try a necessarily clients. that and differently had the continue simply then I it And balances the We've as strategically. to to focus about growth our time we clients we on

to that fund digital to and ability our not our through national on through built cross-sell basically is and lending, model profitably share, just to new build markets through but business go expansion. heavy Our

different mix focus what on need accelerate belief environment we're of the the what doing at It's margin. have less take do as design. change that in can than look And by things at in we of to basically not is faster but change and and might we're of have opposed grow do actual as to that. into. somehow I that coming what even the it's the it Inside Sure, it's be our So, historically. we growth doing able that, of we'll we to opportunities, we we're they a

Ken Usdin

bit. the prior to much have complement? just like a more think needs full point like as to has when you about consumer out there wants and to questions, it the be going strategy think as what's financial or up is about then Are have versus to moving Or think a still and earlier and you'd it and franchise inorganic potential that about either about the your is people things as there Yeah, what's been have, opportunistically for towards you there's just strategies, that to strategic? follow when the the need a

William S. Demchak

agenda nothing in we wouldn't we to matches we it, of markets. we and growth we of potential, does financially and that do is that one mean to accelerate our issue do geography. our very of of find purely -- in terms and a what doing think and with We both There's organic The growth. financial something proceeds products does But the existing it attractive cause of us to go the it financial have. market list that's would services that we'd our take eye is at we'd off expanding don't financial strategic do ball and strategic. is in to This the obviously ideally long-term issue transaction our our and strategy have more take want need issue something both, look versus

Ken Usdin

Bill. alright, Yes, Thanks, understood.

Operator

comes the Matt ahead. from Next line go Please question Deutsche of O'Connor, Bank.

Matt O’Connor

B, know arrive, the you there thought but the what you you guys Good capitulate morning. lots or to process if I frame higher way, and trust I you'll you'll think when doesn't I go theme agree what's and Sticking early and of do somewhat on capital, the excess the here like and by it the we're did beneficial it's do and financially that the rates like question out. the thing interesting and analysts maybe kind hope play something there? looking strategically back and for can Plan won't what's then and there, and some if you're it investors right, there still right do B opportunity like, kind But with let's are to you Plan be the you still what buy of guess be security and of to buy the say, will know that how stock,

William S. Demchak

is where is really and it about to of we're we -- moment. At the sheet or The words, do. make fact grow we fortress thought little I know And fairly in middle is balance take a going think that that inside now into our that don't decision more And we to and Mike our Corbett It moment, opportunistic right and than unclear then forth. sounds change of regroup process you that a course, that But we'll changed. long-term yesterday we're environment a focus to of we'll watch. in back. the what the sure the and economy [ph] wrong, of that damage how but said is, changes so if the at it's strange has refocus that we're environment. Jamie's And and customers, long of have replan that be today, to worry sit none in going an if bit serving know, make we to this to environment all is we what and there's get

then are that And of my following brain to, continue do or into happen know do I math. somehow us drive going A, So B want sort says, and you the you can't of guys we that course, to three to a things corner C.

path. not we're that down go going So to

Matt O’Connor

enough. Fair

Robert Q. Reilly

I And that. that would it if add arise. opportunity an We're does we will to confident just And do fairly it. will

Matt O’Connor

dislocation areas a up but like of know But has and meantime little I getting grow. you that a megabank seems saw organic the been area still and bigger, the could market a spend there's still kind of seems from have like first really in couple and in an mean, mortgage maybe frustrating this investment trading I big that perspective, of the care, you an been try years, in that bulked half from you bit it benefit area over from there's impairment. unusual that the obviously be strength then to capital of could some the And kind a banking from industry they're year.

those from on areas? on deal in thoughts have So the you bolt kind or done past the organically focusing on of two that

William S. Demchak

is turn the mortgage it grow mortgage facing. I'm challenges the mortgage strategic industry, longer-term we're with capacity look because seen mortgage could make to an difficult the which out. I the more money. structural the the extent mean the those to that. your non-capitalized in as coupled the business, the to in players banks. you rule in look, that for we've a moment, Then to we profitable At costs just structural stress I would question say make various regulations, change with in market wouldn't going itself to with to interesting clearly some comply fit anything the -- cause be necessarily Neither issues and becomes the But know,

seeing all maybe shareholders the do The employees would Now, agency of then mortgage changes in could in margins we just our be experience, in some good [indiscernible] we that wouldn’t capital to but spots that do the changes in the refi that. something have if than such we effect purposefully in does organically, in broker in on the to in that. been deploy offers is capital can the business, a be to and cycle this business long and/or course, cycle all business true. changes That government have that in necessarily attractive. markets need we looks to the expand maybe returns my another picking of trades careful the and to boom clearly purchase term, that If through with we that ability model not opportunities the But at and we're that But moment. that's and more that. to lower you to that at it returns are capital necessarily through

Matt O’Connor

Okay, helpful thank you.

Operator

comes line Gerard go ahead. RBC. Cassidy, question the of from Please Next

Gerard Cassidy

Good morning Rob. good Bill, morning

William S. Demchak

Gerard. good Hey, morning

Gerard Cassidy

talk high. first much of Bill reports to in When the we claims businesses this leisure are when when morning can production you telling core the customers customers turned see index initial talk about conflicting entire there's since look type then numbers better today? in but so of economic their for the unemployment positive industrial with restaurant been what seeing and they're number you your manufacturing a they're share they then what business to your you you the customers the time expected, at came extremely not but or than us we February,

William S. Demchak

directly can off. are everybody's a is it struggling. You is. figure stock margin is basically volume market way Nobody out the everybody know unless for where at basically whatever you why everybody the COVID And positive by in bluntly impacted reason

but down So industrial comes production back still XX% year-on-year. it's

when Act benefits allow was So getting The number having workers struggle minus personally plus from they and unemployment the claims data I'm of to million number. or of lot there's people right, gig get what publish today, provision readings XX the but million positive positive negative that are watch readings Cares sole because really XX special a people with proprietors unemployment. a of as a I continuing

are were average you they're I our and So million of is they higher unemployment dollars XX in spending in XX%. connect out saying to Yet see which whatever it the economy. unemployment unemployment than XXX this driving workers. rates that consumer who to receiving a dots. see million employed only of I in when retail the coming balances are the people you are claims quoting have today from balances we're causing on getting they can't deposit customers unemployment part what had turn U.S.

year So he check. at see know we from have increasing, Jamie it's last they spending exactly we open client and with is I see moment government consumers all this this and on cash, the would don't see round, sure. flushed delinquencies, a based how plays writing exception generic they consumer went what And we just going down right. on into business out the is without the but year to for from no We doing who's down and corporate where talked almost otherwise expected were

Gerard Cassidy

how and can you when they're Rob is this assume you on down see touched -- for early running helping the or coming in forward? mean from XX customers on I your what going the probably peak Slide from request you in do share any and April us with forbearance, your doing in us it you on have in gave may presentation the you're good listed the numbers Very forbearance I that and color

Robert Q. Reilly

Gerard. Yeah, I did cover that

in compared I mid-April which down peak XX% is down new are terms that So request. of we were

fluid. again remaining as are expectations request our that minimal. things all equal new be pretty But, So mentioned Bill things

William S. Demchak

those for Yeah coming to ask customers period and it's requests we're extension so of initial the other off back of is payment tell that now frankly too normal just going really the their versus to thing are to and going early how of many plans.

Robert Q. Reilly

in And I XX percentage high. a made covered basis The were that that well. payment days on the are last pretty as

that but lower is modifications early. So too going just suggest would forward it possibly

Gerard Cassidy

of people the come to to forbearance for they place in you Does some in where are when do is you it have requests process that sort you on approval back that look this automatic people mean an or a customer a actually one we make work non-accrual. process going How to have for the doesn't at does look the on second? it's going this we're and like put that into that it, say

William S. Demchak

move it plan something you we'll the the have treatment requests in them just initial come we looks detailed than on the so fine the just was makes a to phone different the effectively It's for that pretty flow sense client. forth. that call. amongst where cash around available with time second work things next we Yeah, say and and balances to from the that see other up to And,

case it doing we're by case. So

Gerard Cassidy

you. Great, thank

Operator

ahead. Autonomous the Next line John go Please McDonald, of question comes from Research.

John McDonald

Rob, morning. understanding good said, of what you wanted lot ask the there's XXXX uncertainty in guidance and to a you Hey, year full about the environment.

revenues XXXX how we expenses, it is ops basis should as in of thinking basis, is XXXX continuing the on that on a ex-BlackRock of in it? we're so first this Just and kind and think of ex-BlackRock

Robert Q. Reilly

right, right. BlackRock That's and operations that Yeah, John. exactly removed discontinued that's from guidance.

John McDonald

kind just so of give me… Okay,

Robert Q. Reilly

right. that’s Yeah

John McDonald

for you'll mentioned then within if shooting us and X again X get is to to it are down try that expenses you'll we X to something down that? like Okay, like this, because positive for, not reason expect within I'm operating but range if it's a obviously, down should is shoot leverage, revenues you're that you manage sure about think fair reason, reason, within to X to

Robert Q. Reilly

leverage. within unknown variables. that's in the we happened state sure. in actually we have hey But back the actually first sort of the absolutely half the Yeah, year, pleased that reason. of half operating generated are continues Sure, Yeah, of positive everything given

want be and that the remains in conscious filed hard. to to and work little Maybe around is it message leverage. and deliberate can we'll than that That we to better management expense a I your seen. operating suggests point somewhere we're disciplined we So do flat that send our very and, that

John McDonald

expect or and levels? in to we of in decline versus to service this down, said charges, a of being similar a this maybe forgiveness incidence that and do and drill kind much back do with how Bill on fee cash the out? due flushed bit be quarter expect any Okay, you activity mentioned, they bounce still just sense just kind then wanted service consumers banks flush theirs down deposit the get U.S. morning, mentioned and to year-over-year, you just it a was of then charge third trend bit, lower of deposit

Robert Q. Reilly

is XX back levels. Not it I but No, of come in we And And I of levels, necessarily expect rough up do just second all would to XX:XX, no say back. these XX to reduced a it thumb, about off the activity. rule quarter do. waivers as and

John McDonald

quarter? third the In

Robert Q. Reilly

guidance. Yes, that's part and of my

John McDonald

in of revenue the the core kind fee quarter? For flat third

Robert Q. Reilly

and up is consumer just corporate lower fee on core down on probably a stable mortgage revenue that bit and point, Yeah, stable. reflecting then residential activity management to services, asset

John McDonald

OK. Thanks.

Operator

from Brent Next ahead. the with of question Partners. Erensel go Please comes line Portales

Brent Erensel

in a Brent needle two to great a be and MBS you. other hitting? seeing have update you digital the are experience, could wall chest the war would mid-market in the Erensel, It's MBS effort it thank the And on terms us then specific I questions have is and the you national commercial of [ph] during what national and moving effort actually pandemic. second if and banks on the you're regional on revenue Midland that that? [ph] question

William S. Demchak

our almost needle with The legacy ability the cross-sell out become a number of C&I at pace us of it's have able meaningful of in on Collectively inside markets. profitable. it to second. some a part much growth core But the total a certainly the C&IB deposits growing the in years, it's probably to and starting faster than a let our terms the franchise build Including legacy franchise. revenue a as C&IB to in ratios our point moving profitability term maintaining is I'll had that you a been affording we in Rob and we we our long revenues we're at the where throw on effort fees space fund this retail our Well just is figures for at But expansion markets. be retail this drain. it's drain, at of

Robert Q. Reilly

markets that a little is One Seattle we fact bit slower that than significantly yes, question well. up teed I only The is, and planned the there. lion this C&IB loan each draws for the are we're expansion opening had had we in the It year, that Portland, the the what's on get for have hired of of But that those we terms is progress what would contributed saw we in growth we to we which growing add quite thing XXXX. markets in and doing and have of seen.

William S. Demchak

thus CMBS. largest close the XXX over crisis far and billion special seen expecting you much XXX as that would market, is servicing little special to as we much billion a think that servicing. the week billion I think balance. our on of is tell special saw XX But or as or servicing side in in servicing it billion a [indiscernible] to servicing actually through CMBS I plus that master in And moved minus rolling out number XX have pure the we as the of the about On special billion a servicing, importantly we guys in this. the X.X both on are servicers to of They're side,

Robert Q. Reilly

And less little we're half than that. a

William S. Demchak

That aside, aren't obviously assets. that's an those of half now. Yeah, that our we're is

principal when another on And ultimately on we fee to money stream. service stream when into get interest. paid a paid assets those. those paid nice interest also servicing. We are get move we paid We advance and very special of fee get a they resolution We stream

So it's accelerating profitable. large, and it’s it's is

Brent Erensel

think to related said of value, you on XXX billion we servicer XXX billion? special had it Just I clarify, to is

William S. Demchak

designated it we're We special. others. for do Sorry,

Brent Erensel

profiting. you're So

well? ago years enjoying Did you just profitability You're unusual XX from as this.

William S. Demchak

Yes.

Brent Erensel

Excellent, okay, thank you.

Operator

Next UBS. Please question comes ahead. from go the line of with Martinez Saul

Saul Martinez

Thanks morning. taking question. good Hey, for my

much a get much magnitude the I your of of of you as PPP can you sort sense XX baked could interest it actually into billion outlook help because, is of how is order in So loans of your and help how you as and have I net hundred some other what was we help few hoping much but of the not may about that number fees right terms million change just over income a talking better me I if a certainly chump dollars if accrued run regional or few recognized banks, a is a and don't X% fee proportion that's over if sizable about XX% that not and forgiven, assume then on XX% do know quarters. we're to and of that,

all? know the my or I full sense as the can have to there? of first sorry much my think to want revenue you estimates guidance guidance if don't the how you've NII into Rob, quarter, third numbers numbers intuition you I second given is any I year whether right or you estimated of then are for to I provided give guess your if So and all, incorporated And a and or as don't for sense know your get

Robert Q. Reilly

what of right Yeah, guidance of Most I'm one, my I full fourth would in is year fees. about quarter. that, of revenue so terms terms be into -- built it the now, the in PPP in thinking

the is goes the into not to think quarter XXXX. some then issue so in and extent So what much I of maybe third that

context the the for but So it's high. NII year real it's of total our number a in

William S. Demchak

it's we're about year. mean quarter it's certainly hugely -- move the half material, I a if a given dollars or It but even not. not needle talking in Yeah,

next I So sorry, collected of over could the of fact percentage the about dollars quarters. we're of thinking know uncertainty in or will that few it I three But, -- hundreds what but correctly that. and here around in or in be forgiven recognized am terms over revenue millions huge next talking about if be there's

Robert Q. Reilly

that built And I I Yeah, I said, that's think right. like into my guidance.

William S. Demchak

Alright. Got it.

thank Okay, you.

Operator

go ahead. line with comes Please the of Bruyette Woods. Brian from Klock & Keefe, question Next

Brian Klock

I to, I actually guys. questions of on a bourbon at you morning, single first good wanted have credit and and for guess stand Hey, malt. hand, Rob more I

Robert Q. Reilly

for come waiting up that But was I to little better. understand. I a

Brian Klock

But in that mall, one table guess I shows, I single that’s REIT Yeah. read it small think. right. I MCA, really somewhere, the guess I XX

it trends views. you there. kinds the necessarily with and commercial in can I it past talk thing, feed get don’t in criticized But you you forbearance of of guess about if the Let's are those quarter-over-quarter guess the thinking about I the some

loan I why So guess transfer was the overall I criticized commercial quarter-over-quarter? wondering

Robert Q. Reilly

terms say is a little our criticize Yeah, reports, but of that of mid-teens, sort it report so I in are would up.

William S. Demchak

our to specific when I went But breakdown economic the that million was and for provision, effectively look XXX Rob result or through but one is credit. way that remember then the minus don't plus the in both reasons the exact of increase credit of at downgrades

rise that affected about think that can population by that you XXX been here So that's plus minus billion. or to as downgrades being covered the gave

Brian Klock

it, REIT mall Got credit. it, Speakers] It’s related single [Multiple helped. got that a

William S. Demchak

that You can say fast.

Brian Klock

branch branches, those digital about or nationally. and though pandemic, of some of of But reopening market some is of calling any reach those thoughts even sort you maybe pretty thought you well just have not thought reopened to on target about any maybe with expansion closing for yet. haven't lot branches and and real then And and operating leverage your positive one and talked guys you have guidance function digital expenses quick able the term there longer branches? strategy Why, a because any and the investment, of maybe longer-term Bill you that me been revenues with the still of follow-up the the

William S. Demchak

Yes, there's additional thought.

in I way, think because with it behavior for it's changed a consumer show this the savings. near-term close does this at is changed in -- ways point what's to cost and my of wouldn't has is that permanently But it digital. probably and clear up lot by the rate to as dollars something is, run belief adoption

the likely to And have that we'll mean it serve way physical is adjust So we space. clients. our will that less

Brian Klock

for Thanks Bill. guys. thanks your Yes, time

William S. Demchak

Sure, thank you.

Operator

further no are line. there in And the questions

William S. Demchak

you thank everybody. Okay,

quarter. third you the in see will We hopefully

Operator

conference today’s call. concludes This

disconnect. You may now

The PNC Financial Services Group, Inc. (PNC) 15 Jul 202020 Q2 Earnings call transcript