Earnings call transcript Q4 2022

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Bryan Gill

Good morning. Welcome to today's conference call for the PNC Financial Services Group. Participating on this call are PNC's Chairman, President and CEO, Bill Demchak; and Rob Reilly, Executive Vice President and CFO.

Today's presentation contains forward-looking information. Cautionary statements about this information as well as reconciliations of non-GAAP measures are included in today's earnings release materials as well as our SEC filings and other investor materials. on website, available Relations. under all are our pnc.com, corporate Investor These statements January to no of only update XXXX, These as undertakes XX, speak and PNC them. obligation

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

Bill Demchak

our power good coast-to-coast morning, franchise. and during is year strong Thanks, Bryan, Main company, reflects Street everybody. our the and and year our our a XXXX successful for of the model performance bank

billion grew in Inside For and net expenses, or time operating reported the the year positive full during share. we year, we leverage substantial $XX.XX rate at full revenue of record XXXX. $X.X that, rising environment loans we generated per controlled rapidly the in for income a resulting while same

billion both income Growth a Turning per share. interest of net X% $X.XX to income results generated net increase the our or contributed in for and fourth income fee quarter, revenue. to in $X.X we

primarily business businesses. increased expenses this to compensation were advisory our due in elevated quarter, from particularly X% up Our activity,

more X% Rob grew as and a loans is Average both going to growth driven few minutes. in outlook detail on as by our well commercial fourth the in quarter, expenses during consumer. quarter our provide

our up disciplined For loans full average to in and manner. book were year, continue we grow the loan a XX%,

ahead, build a a methodology. in are our and loss under As shallow we loan this quarter look with drove reserves for company modest increase an we in the recession operating Accordingly, the expectation our outlook in XXXX. in provision CECL the

normalized remain credit metrics credit the solid. levels trend environment our as continues overall towards Importantly, to quality

quarter an expected outside pushing volatility quarter-to-quarter commercial one it's low, been outsized in see loss with range. us and the to that on this add I'd having our surprising so charge-offs we of with saw fourth credit not

We to continue growth. manage levels our support liquidity to

stable, and wholesale liquidity. bolster relatively borrowings Our our increased to we've remain deposits

to shareholders capital repurchases our bringing we capital the annual return of quarter, billion $X.X $X through total During to share returned billion. dividends, and

these markets continues and to growth our influence see powerful the across within progress markets. opportunities we in expectations, exceed BBVA Our new our business of lines

We with bankers new been relationships, continue we and of hire. able quality been to thrilled to we've customer generate have the

it our we momentum, communities fourth country, results solid and move we across our XXXX. for generated position a and as delivered summary, a quarter for further built into customers post-acquisition strong put the on shareholders In was of ourselves in our strength financial as

I possible. want success always, for they thank to As to employees make our everything do our

Rob more with Rob? And that, to turn over it details. to provide I'll

Rob Reilly

and Thanks, Bill, good morning, everyone.

X%, $XXX basis. X%. and balance Cash grew Federal for is billion Reserve Our the Loans $X.X X quarter. linked period-end average down fourth $X an presented or quarter increase is on essentially or of securities average billion sheet stable. $X on deposit the Investment Slide our while billion at balances were declined billion, $XX X% were And remained billion quarter. deposits during the totaled balances and an

Average in we bolstered borrowed quarter, quarter funds are our third with borrowings Home in fourth average liquidity these and the increased Bank $XX Loan as Federal proactively reflected late balances. our billion

funds borrowed billion lower by $X partially debt, senior was September $X of The FHLB increase spot XX. approximately by period-end of we debt. total $X by and basis, compared a billion our subordinated borrowings offset billion On increased to driven

as an And XXXX. of value increase book quarter. At year-end, well X.X% linked common remain X% ratio our of we estimated tangible was XX, CETX December per share, with an of $XX.XX capitalized

of approximately $XXX capital be to million shareholders during to well shares. common quarter, of continue returned $XXX the We positioned X.X million billion of million and repurchases through dividends flexibility, share $X.X we or capital with

our to expanded average period increased loans billion, year XX% loan as ability as detail. ago, franchise. to more same on a Compared Slide well reflecting coast-to-coast demand opportunities or our X shows our increased loans and have in the $XX capitalize

reflecting During loans loan quarter, spot to we both and billion solid third increase billion or or X% the quarter an $XXX grew compared in $XX of X%. the a $X loans. Loan fourth basis, On averaged balances growth growth. billion, delivered commercial consumer

more strong both broad-based by billion grew $X production at banking period than corporate asset-based end, loans our businesses. Commercial driven in lending and new

quarter. utilization Importantly, portfolio remained stable C&IB our within rates linked

the balances, X.XX% Consumer by loans yields credit higher mortgage increased increased driven interest basis auto equity September lower by rates. third loan XX to home $X XX, driven and compared by of billion and compared higher points residential card offset loans to quarter, partially

Slide $XXX Fourth XXXX, quarter. pricing pressures. environment in X and balances competitive deposits modestly, covers generally the detail. linked more Throughout deposits were amidst averaged billion quarter our inflationary and deposit have stable declined

of the interest deposits beta And interest-bearing. our was cumulative December in interest-bearing XX%. was shift deposit December we at into deposits XX% from portfolio to continue environment, as non-interest-bearing interest-bearing increased non-interest rate mix rising XX% our Overall, And our Given on quarter. as see rate result, the and X.XX% XX, XX, fourth bearing. paid during a a to

details average billion which X Slide basis, the $XXX by X%. increase third billion securities $X included largely fourth of $X or fourth quarter was of settled portfolio. securities elevated the securities an our The driven activity purchase quarter, our in forward billion in On quarter. starting that grew late

X% yields driven And $XXX to well yield as purchase as higher were XX increased X.XX% $X On new The premium our the a by increased exceeded spot during portfolio quarter. X.XX%. yields reinvestment and on or quarter, basis, linked billion securities lower points basis securities billion amortization.

to fourth reflecting end improved quarter, of the and accumulated losses accretion billion income our the At other comprehensive the unrealized securities of on $XX.X swaps.

accrete account going impact X% changes. Importantly, rate of quarter of taking the will we per back into estimate to forward without approximately continue that AOCI

on income Slide the statement to X. Turning

net X% share. third can $X.XX $X.X million Revenue XXXX $XXX billion, you was or $XXX the fourth increased income see, As up And XX.X%. million effective Expenses million quarter. $XXX a loan weaker a the build. or or with our per growth, of rate was as in million X%. fourth reserve economic was reported the quarter, Provision quarter was resulted reflecting in impact continued tax which $XXX compared

to $X XXXX. to our highlight due X. interest Non-interest than trends. Within total grew market-sensitive fees interest both $XX.X revenue loan that, revenue and more net management was We XX% compared record In growth. lower XXXX, as growth. offset billion declined income to a Turning income XX% rates X% strong higher and increased billion and and Slide strong or card cash

costs. X.XX%. on The margin interest assets balances points up loan more a as higher Net quarter, and higher Looking increase XX benefit basis of billion $XXX million to total an million net of was fourth yields by X% $X.X offset the interest increased X%. linked was funding at closely were $X.X And result, billion, was interest-earning revenue or quarter. partially of increased $XXX income

income quarter. was X% $XX Fee $X.X million increased linked billion and or

loan or Looking driven brokerage markets. X% the at lower or by the average higher decreased strong advisory equity by offset $XX activity. grew reflecting fees and loan deposit Markets lower reflecting increased fees, detail, commitment acquisition fees, million impact of and higher million and partially services new or loan merger production. and XX%, our due million syndication Advisory Capital $X asset management Lending primarily $XX to revenue X%,

of million by third to fair resulting quarter, revenue by activities. RMSR non-interest adjustments, million, $XX declined banking a positive linked compared change Visa million. Residential $XX in quarter, commercial value partially a quarter in lower driven $XX valuation fourth increased Other reflecting negative mortgage adjustment and a the offset income commercial valuation mortgage higher adjustment

Turning to X. Slide

on X% variable benefits. million impacts quarter were growth costs, also The up market medical $XXX personnel higher costs included business million compensation as quarter as fourth largely $XXX which higher Fourth Our quarter. related to in expenses plans or personnel long-term well increased linked seasonally increased was reflecting compensation activity. incentive

of expenses balance the and going lower expense linked quarter our majority forward in as higher impairments well marketing The these impairments of included various as and are assets our guidance. remaining in The spend expenses increase will on included investments.

program, savings know, you $XXX continuous had and goal our in cost goal. million As we XXXX that of we through exceeded improvement a

forward will CIP million. increasing investments. our portion business be and funds This goal program Looking technology XXXX, ongoing significant we to of $XXX our a to annual

linked are and presented represent continue total X% or Slide to delinquencies Our on than of loans million, to were million compared large and billion $X.X one part less quarter. loan $X quarter, in driven billion Net leases by $XXX commercial loans. charge-offs increase linked credit. XX. $XXX September credit million Non-performing or X% million XX decreased X% declined metrics of $XX Total an of of $XXX for loans

impact average was basis $XXX of million The reflected to economic loans quarter. the continued Provision points for million XX increase growth. charge-offs third net quarter. quarter the annualized loan fourth weaker outlook well as a in in $XXX the fourth compared Our was the as to

allowance loans. quarter, losses fourth our our billion or the and now $X.X During million, reserves increased $XXX credit X.X% of total total for

overall In in in now economy, decline GDP. quarter and mild PNC summary, in our strong In a fourth view X% the full regard XXXX XXXX. to reported of expecting recession year a resulting real a we're

funds in and assumption Our rate includes Fed in increase path basis both a February March. XX point

Following that, the pause rate point Fed XXXX, actions basis when expect XX we we a December expect cut. until to

interest follows: Looking loan ahead, loan growth XXXX Total of to year expect equates XXXX growth as that, which income up of non-interest for the income XX% is X% to up to range growth net of to XX% X%. outlook we X%, our X%. compared X% X%. is to X% to for results spot to expectation be our be stable to of full be revenue Inside and to to in average

approximately and we Based expect X% XXXX. effective between this XX%. expect rate generate guidance, up be be on we'll operating to solid X% our Expenses we to and in leverage positive tax

average XXXX quarter of to be to equates expect first X% spot loan to stable, X%. Looking quarter of to which growth of at loans fourth we compared XXXX,

down income activity. fewer securities quarter to million $XXX excluding down income be between X% X% quarter. and interest due be Visa Other X% be client income in seasonally X%, two first Fee million, net lower to $XXX Net to and the to non-interest to to activity. reflecting days

non-interest million. quarter to be be and expect to We $XXX expect X%, we down charge-offs X% approximately net total to expense first

Bill And ready to I and take with are your questions. that,

Operator

first question Our with is Evercore. Instructions] John the ahead. go Pancari line [Operator from Please of

John Pancari

morning. Good

I now. trend if How deposit expectation wonder there? can -- your updated And of the total I the give thought next the then now on that in is do of give your that to you the know you year? a XX% to you that updated course trending costs What's it's us maybe deposits know little potentially cumulative maybe where going also can over XX% I mix, expect you're see us non-interest-bearing just On thoughts the income if managed over to? XX beta, where on more around the side, XX%,

Rob Reilly

a go don't Sure. that. with the Why first mix interest-bearing, environment, expect expectations I second one we down seeing big track. I'd on our in around into in We're rising Consistent 'XX, go to rate But right was mix. at our there. in now previous terms that of low right over surprise cycles and of the non-interest-bearing. course imagine XX%. more take No bit the previous it's the a will we're XX%

good think think way of I a about it. So sort that's to

We terms finished top we the betas, expected. year In the right you're of of where right. on

and past And of we forward, As going And to you we course, bit, lagged don't rises, for outcome. control know, a expect maybe that be of we'll to 'XX historical historical most will but that for sort betas nothing start compress the industry. of and lag tracking unusual. for increases an us that particularly

Bill Demchak

-- our an John, guide, a NII to our track fourth little annualized at trying light to that. into in dig we look Goldman I if you're and thought comment made that quarter we to a might

loans. It's from on coming All of from the It's that funding. spread pressure. coming not

we're So, spreads we've We been widen been seen just surprised, corporate -- in credit. I've surprised. haven't

scenario what going guess are spreads disconnect would you have that there's to to widen is we is -- forecasted say current for Either that give. this or to I CECL going wrong. is I our corporate So, something

basically right Maybe of in this and CECL. where mild we guide now, widening So recession get we against are. spreads kind in some put we

in a they have disconnect they numbers, but we So, are what of are. the little bit

Rob Reilly

Yes. NII. terms And full to course, that in of guidance gets, year for the of our

So would the prepared they everybody loan economy the into spreads if is be, upside should, as that we to get would for. widen that Bill's point

John Pancari

XX%. to would that to provide widening upside XX% So that

Bill Demchak

Yes.

It's thought of betas deposit on this. assumption change none all healthy any on this on our kind is We think NII in in change quarter. deposits the We had driven So, that. of by continue pretty growth. or

loans invest new We ability, of we've a growth. done in markets into invest our as are the of client markets grab this kind that make new bunch particularly credit have good new years, to new for in loans, whole clients, an into

we're struggles The is because public kind problem expect now gap right we've seen forecasting. the of the way the the economy, we seen haven't return given in way we spreads might markets, the

John Pancari

it. Got

given side, credit the $XXX What can commercial separately was in related size credit seeing then and or other issue? lumpiness your color industry? were Are give of And increase the portfolio the of of other you us the to developments you areas one more is that the on any Okay. on credit? the the just What a flagging charge-offs. little that million size

Bill Demchak

That face BBVA the credit in one It's been for both on working We've and been a us has while. we're in. here, right? jump Can that in credit PNC staring a it.

it outsized. as had reserves shows We up big it. against So

elevation something seen you've non-performers what delinquencies As and staring down. the it we going quarter, this been in but but that. our a wouldn't This off through call our and is snake, read charged it I going is know of this I and kind there into showing don't you we've that's at

Rob Reilly

category. with problematic anything or trend underlying No asset Yes.

John Pancari

What was that industry?

Rob Reilly

Telecommunications.

Operator

McDonald with Research. Please is question ahead. John Autonomous from next of go the line Our

John McDonald

just are cut the later, rate on rate question hikes where how on kind the wanted today do the that's NII beginning in be swap are you -- it how follow John the just hikes book rate off I from where reminder Building influencing you impact in on maybe us from would of and interest to you? rolls up kind just NII remind And of Can helpful? of here a of you and how Rob, small there. positioning? year,

Rob Reilly

Well, sure.

February we points We Let of in follow December, hikes largely point 'XX and but benefit basis some me try and that that have positioned each XX in the definitely, I from March. -- up. mean, to we're in basis a I'll then that, performance. can play XX won't do two that to rate cut we expect cover the

between more when year difficult forecasting is into full pointing that, away, guidance terms right of always well to year, XX% in We're in of a So, This jumped we're in positioned than say, and we against will grow most. and NII. it's we'll range year-over-year. XX% that our difficult. for this terms I particular,

from sentiment we because about. that difficult peers heard that that uncertainties of Really You've some already know reported. our all the have of all

at what in all that everything out upside loan about we where put But a uncertainties, can and bit to talked we that's -- I maybe we're variable. of how the positioned. But around in management all change in our billion of our terms we we or so. with know So of big we've terms between $XX course, terms some rate Bill of of think manage No spreads. achieve. balance swaps the and that's part That's the little disclosed fixed that we now

Bill Demchak

course think or to the John, -- the that, way our DVXX anything, simplest about we The is if we positions as sensitivity decreased. the through for long the year, of have

the that So in book. securities book swap both think of and the terms about

that we So remain asset-sensitive, position. largely with happy

roll but of The over of look they that in off swaps swaps a kind the and couple changes bulk them mean I time, it's of themselves with and big irrelevant securities. mix to years. separately, very at -- short, they're

Rob Reilly

X.X.

John McDonald

you just could the of for on that revenues that outlook are some a you XXXX, the tailwinds fee headwinds a gave maybe little Rob, that as to and outcome non-interest leading follow-up, the for income? Okay. unpack of the And bit

Rob Reilly

John. Sure, Yes. Yes.

So where of just expect our see do growth, is we terms good markets, categories and to mid-single-digit growth in we capital consistent which expect expectations. with the

in headwinds digits Our as will cash well two production. and probably steady be offset given the and by be as management, card our management up single markets high then mortgage continuing equity those Eddie, will lower asset

we put full into our that's year. together, all X% stable and you up for to So, that how get the

Operator

Please of is Gerard question from with next RBC. go ahead. line Cassidy Our the

Gerard Cassidy

lending on that you glad just camp framed issues, any there's are just kept terms us the you book CECL of the on because there capacity, in the coming way the it that many relative loan I think in commercial described. I'm Bill, you that thoughts than back much maybe outlook. which spreads guys meaning the But of that lower referenced to has spreads your capacity is normal? spreads, too to

Bill Demchak

there's going what's our on, in I competition retail there's irrational in you. on -- just categories. mean the categories, sure end There's honest isn't be which -- certain not with I'm focus. smaller really to asset certain

In been there corporate way opportunity just we grow market particularly and any you've where the the change. clients, hasn't markets, seen any in change of sort any there in larger aren't have cross-sell, but the been outlook all the this down, of hasn't the gap to new space, public respect there hasn't with real economy. Spreads been going this in at to kind ultimately

charge-offs, if won't defaults -- real be. there there's and probably and until And

one So things know going don't these is. it of one to which give, is just I

Gerard Cassidy

been the noticed of No, in in had pretty I Very inflows Table your steady. supplement, XX non-performance the good.

real So, capital your to repurchases? a there's follow-up, you evidence the outlook in then for me, real can as just excuse us with and remind dividends upcoming yet. share And shareholders -- year returning

Rob Reilly

that in and non-performers, finish just which NPAs at look but spot, take Yes. and to the our the Gerard down. up are the credit our on delinquencies, to point, on your also a supplement, you

the indicators So very strong. still are leading

repurchases, to Yes, couple program a on going 'XX. our share into One we of repurchase things. are the is share continue

be was relative will to in than fourth quarter a what 'XX, million. reduced did it be of the less we $XXX rate likely in what XXXX we at to Secondly, which and did

things from rate we're and all given we lower? of the One the that is, A when is, capital just ratios go the that, smart year seeing, XX% and slows X%. your one plays deployment repurchases in secondly, as uncertainties need couple of tactical of why terms But obviously, to our out. to about be capital logically,

said, that there's you have definition, capital guidelines, But get repurchases. pace by operating those to flexibility. of So, flexibility, slow a we lot as All know. closer we we of still the as

it. as present use lot allowed the we And with that stress we're circumstances plan buffer, of themselves. a to around capital flexibility So, flexibility

Operator

Carcache of from Research. Please Wolfe the is Bill with line question next go ahead. Our

Bill Carcache

Rob. and Bill

Following in funds could up recession you'd mild your Fed cuts swaps level? rates great. normalizes, broadly to you on expect NIM in be X% Fed protection you're can That economy ultimately how on you give into, downside this if a say, environment? about your to and say, speak where would commentary, the the settle color Any pushes thinking the to somewhere X.X%

Rob Reilly

write have The your we in an question -- of all obviously terms that NIM obviously, -- It's in of I get that lot. say down there. terms to a would I outcome. assumptions

don't it. We guide don't manage to we it. to So necessarily

take just that you when -- where think lived at That's and of can I step quarter 'XX the from we year XXX finished X.XX%. finished see the you we a back, at up X.XX%. all

So that basis swings or occurred. We going forward. point XX jump that's expect so, a kinds those don't of

X that So like going about And I way more X sort forward, it. of basis now of we're off point these the swings levels. or probably that's think

Bill Carcache

perhaps Separately, it. back could broadly PNC? to just Can specifically speak to risk, and it you non-interest-bearing pre-COVID as levels. at level that been some that return industry the environment. pre-GFC this in Got the levels relates more mix there's we deposits of even see But time concern not to and deposits both to

Bill Demchak

look, environment. unknown of an I we're mean, a bit in

through have Fed the QT. We going

the Fed deposits through absorbing facility. have We their repo reverse

the We have, our case, least loans. at to grow in ability

where So scenario you deposits a see could scarce. get

we forward look model and of to that terms years after priced -- draw are are point, in harder the that's that to you stability and the on pre-COVID. had of can that We've our and Rob's to than this kind some of guide upside of downside some that, coming year best forecast in our

doing you've seen So, our best, our best expectations. we're and

Rob Reilly

Yes, And to and our with consistent we've the I has occurred historically between in mix is consistent what and seen perfectly that far, shift right. the so interest-bearing non-interest-bearing expectations. think with regard that's

Bill Carcache

into I rate a Rob. wanted If and been weaker for Bill square one bit with a and dig basically sort recession having economic expectation mild I squeeze helpful, may your unchanged one. that little in reserve and to outlook in of That's last your sequentially.

the it really growth most reserve driven. So of was suggests that build

around little with does actually hold still to reasonable bit higher drift that it that the could levels? mild a Or scenario, recession Any thoughts Maybe reserve would if rate likely be would would here? help. from challenging, your more outlook consistent expect economic your that current grow it

Bill Demchak

Yes.

of are weighted that we forecast third here, the the pieces So start that just but a notion we we for -- than basic moving more today hold lot the against heavily the with fully a had recessionary reserved we book forecast quarter. in we that

quarter And in large the were particularly remember, one. we Those reserved. lumpier mentioned the charge-offs we ones, way that took already a this

of inside is than non-performers way. So have but actually more right, that less of the maybe kind up ends our total you ratio we build, The it book think same, think. percentage, we that a as of -- have lower

now against been but loan to that -- XX, coming -- both nonetheless of process relative the XX and CECL. conservative CECL just in of also we terms we this of have at sit our then now remind In day to a book. first today we using think to to I'd what at We've wherever composition you correctly, fairly others or our approach

Operator

question Graseck line go with Stanley. next of from Our Morgan ahead. Betsy Please is the

Betsy Graseck

mentioned I that this And that know wanted positive a expenses you the activities to I capital markets, bit a is a of part like net revenue associated was with so to talk quarter the generating that expense and PPOP. was about there little side.

leave So aside. expenses let's those

not understand bit off what behind on dig outlook revenues coming talk wanted expenses little with in of drivers to is and based those for the and that people were a to the been now into today. I about come increasing did higher expecting what your what commensurate more XXXX then have

Rob Reilly

start there. can Sure. I

fourth higher inside to the And with the the regard business the the of in So expenses, biggest to that, activity. personnel point, comp driver variable of was quarter expense. increase your associated

than higher did we expected. that, we some came that... to addition they Outside a medical but seasonally, of little have in that have what would we expenses In bit expect

Bill Demchak

seasonal. wise Lane

Rob Reilly

Well, Well, essentially. Seasonal. sure.

Bill Demchak

through basically burn your... You

Rob Reilly

that. takes then Company The Yes, and over deductibles the deductibles. like the after

at in the assets, happens, the spend, but little sort would investments in expected. that took higher that and part wasn't a question. your we season, seasonally timing than you look it anything year, various singular that -- what of is of this was was on terms that of the stand impairments It marketing which So happens and There Outside a. that's of bit when out. how that falls we that,

Bill Demchak

was. We off to with crypto. everything we there Yes, do wrote had

Rob Reilly

Well, that was That it. was part it. part of of

these we in to wants Bill thing. going that and there of maybe shows needs down items with But in our say occupancy, forward, handful took that I our So right-sized questions. or equipment in answer we technology, There's kind anything of that wasn't that some single. would up were facilities space for a expense

the margin… on So,

Bill Demchak

I'll talk about that.

Rob Reilly

Yes, sure. And reduced then another the margin on on of the margin, rates, the of -- into -- those that I'm I'd our giving Bill's sorry, say going sort but 'XX, just some helped. going me into question, impairments so expense

that X% guide in X% is 'XX. all stays our So how That's all of connected. to

Bill Demchak

bit. a charge-offs, But didn't high. They up couple spend we've of while get a at something And the it's projects quarter as occupancy, what of the -- a money. kind with else not to which has the then lumpy of flushed they I was with that I'm but do artificially finally of them none went been fourth we call Everything to marketing right-sized expense that frustrating mean are a the in anything books. are, our tech kind stuff quarter line going business function on in of comp out. staring little that are they're hit for hits this work we we is how because kind great. We new

Rob Reilly

reserved to point. your largely we're And

Betsy Graseck

Okay.

related guide X% and towards really whatever X% I X% gone, up is your the more that crypto is thing, expenses as about to for X% total into onetime that's to year down think revenues the next zero. done to and one a So of

Rob Reilly

why positive and my that's I in to leverage we strong operating in 'XX. point said comments, -- opening And

Betsy Graseck

separately, bit earlier been your doing little then been et that nice the some migrating And lending, right. All down CETX talked we know fact Okay. the you've as cetera. a about and capital I has

to And there density, it's just Just is is there? you some going I it like changes wanted Is loan Or looks a on something about else there gone RWA how just wanted the that bit. think understand to growth? RWA factors? in understand, up

on is robust. then to how CETX pretty just And demand about I'm like drive still borrowing for -- as willing you're what to wondering think low we the is that

Rob Reilly

on a it's couple the increase, of Well, things driven. loan so in terms entirely say RWA I that. of would

a 'XX, had that lot in a with in fourth average growth we've lot growth X% loan quarter So, of in loans. the

key the RWA that's the driver So of increase.

about We've is an guideline operating ratio CET between X%. and Our X.X% of at talked X.X%.

we're still operating and to be. place a guidelines that's our above good So,

Betsy Graseck

Okay.

the X.X% So how really, that's should we low, read it.

Rob Reilly

Yes.

Operator

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

Ken Usdin

the I category threes you about guys come starting of getting about was to that Or to wondering you TLAC the and be just to then if have could talk a for issue? the the still that for or would rules down how potential notice thinking you final either wait and ahead do consider phase-in period?

Bill Demchak

it let's and we walk about to it, this phase-in happen talking mean lot happening way, disagree that the the happen, but this, there'd path a suggest and the Where say it. down should by lot people around people down road a of a I not period. be somehow with

total in in it loan increase. to parts company And a our against likely our wholesale borrowings the to course Practically, fulfill see our course borrowings growth what TLAC at the the business, our clients we're of of is that opportunity right? ability to grow going wholesale all requirement. to increase be as of constrained going deposits, we ordinary in look growth new You're

in the is take more about. you But think in than it'll that year. we're numbers we -- of talking next way about All to the

Rob Reilly

we more towards as normalize mix. to of normalized terms move In

Bill Demchak

Yes.

simplest know, mid... our about the in and to -- that think the is wholesale So maybe I don't way debt ran. historically

Rob Reilly

XX%. to XX%

Bill Demchak

and going say, was to mid-teens, Yes, running we're X%. I

loan there. if So in what we that's normalize home

time, through our requirement purposely -- get without that it's normalize and we to trying borrowings it. to fulfill do we're As likely going

and Just people be the other funding way because that's will we institutions.

Rob Reilly

see just it, on tailoring that's don't Yes. chance our there'd reduced some a but there's path. be played and add I'd our which to necessary case. would reasonable We problematic, out. not a there's particularly be it also lot to we be -- to that, It's still think it's in

Ken Usdin

that you book, securities about to to borrowings, can getting funding earning thinking your how around book good portfolio? follow-on growth talk a as back on And growth I quarter. you're about assets about is know you some front you're just know loan incrementally, still I the XX%. Yes. of percentage this The wholesale point it. saw

wholesale would how growth well? continue that the use of as to vis-à-vis to go that borrowings you expect support So to

Bill Demchak

invest you purposely your in borrow security Look, then wouldn't book. and securities to hold wholesale a in

of to the we LCR we need requirements, manage inside hold However, that liquidity have all ourselves the to, and high-quality assets. requirements also liquid

total fade over growth of in have to That of book of roll loan see of terms So, simply terms book and likely in that the time we LCR. is cash of part liquidity because percentage down. the in satisfy securities what will securities some we

going we and liquidity we and we're -- lens more "Hey, it's right? the isn't to the buy treasuries," that deposits. continue to We'll say, borrow run. do happen. to value of we'll do stresses That hedge But going of our money book use practically, let's So inside some that, other not of LCR continue to that to to that

Operator

go Mike Our Fargo next is Mayo Wells with the of ahead. Instructions] question from [Operator line Securities. Please

Mike Mayo

basis leverage unpunished, have the no last mean I in Well, year did you XXX I points. positive category goes deed of guess operating good of

basis points positive year points, XXX guiding between You're and XXX quarter. guess, operating charge-offs basis were XX leverage for I your this below every

your shares off You're some X.X one and results yet, your below buying was from guidance month fell back consensus. ago

like and that subject your the were there. giving all uncertainties or stop guidance don't to anything out Now

a in past more what's about changed the month. bit little But just

reserve saying it's And to guess, into on decision and X%, you of lean unemployment, end because rate CECL-driven I guess reserves, a securities relative the your of the maybe some top So maybe over is going maybe this purchases assumption, your where that's I that part to. think drove you're NII the yields?

Bill Demchak

Yes.

overcomplicating thing can changed ago that one it. new Mike, So, loans. the out you're on that a we from One was thing earn go We month right? and business, grow And basically and we thought we'd know, spread only.

you the have and, bullish reserve widened you would that. full we cross-sell those thing book we've not take gain clients, a loan. of changed. earning is that because the that's loan not Our course, spreads The what expect clients, That's that ability only doing of to otherwise life when the in more been never on really of moment process

The The analysis they will of simply spreads are noise. loans, our rise is wrong. going will question that year next quarter are be or expenses on this for tempered CECL whether guide maybe by to

We a we about bit never be. is guide provision felt and what our we on anomalous. charge-offs was to going haven't the charge-off We quarter this talk

going I So the nothing's of, I I That's what loan really production. factor changed other sweat hey, actually thought earn on can was than new it. to earn

Mike Mayo

your the for or too on So you're And. guide NII reserves year? CECL saying you're conservative either

Bill Demchak

is is right? are but given forecast economic bite a but on to economic our So or sound haven't spreads our -- the And reserves forecast. worsened in Well, number I either -- CECL my wrong. simple put -- widen you we we going

statement. I think that's a fair

Rob Reilly

there's an So, inconsistent.

Mike Mayo

interest rates expect You the economy give the -- out by turn is the the release everything because CEO in about way, economists a such gauge detailed and and to you maybe to what your else. this outlook come

lot a So of you give detail.

Bill Demchak

get asked book. we You out nicely. securities just stayed the coming the same We in re-price you book income of basically book, question securities growing position much to on pretty the all and year. the see It's the a --

It's market We a haven't invest tough into into. it. to invested

going Xs is don't cost If Fed -- to flat your you is go marginal want believe the basically going on deposit-funded If cut I road something you Fed Today back the to got out today, that just buy funds, down and money, to that to carrying into you're to institution, and believe. right? which on of fundamentally to theory what negative. effect Fed the you in go a the against are

on So going moment, think I the I of out and figured to at course just think through the the year. that's the is be market investable of kind

And so, at environment, the out there's to a upside plays I along go way my moment, we view no on there's that the in choosing book. But think, our securities mistake. is this run in

Mike Mayo

level? it's I clarification, for assuming know above X%. an you reserved One more of unemployment of are what business, existing your rate book

Rob Reilly

X.X%.

Operator

Yes.

question next from of is Poonawala ahead. America. Bank Our Ebrahim with line Please of go the

Ebrahim Poonawala

balance think about the And how with the much yield in I outlook? factor you've years guide, NII in for spreads. X% to where morning, a this and do Or management that, invest impacting not to sub-XXX tied X%, like maybe you the think about the in the years things how shake world wait just right sheet inversion spoken to curve now NII headed was like XX On Wanted not of out? XX so extensively a the you get to the do next?

Bill Demchak

Yes.

rolls when So, existing -- the security our in when only yield book down. reinvestment of will we that impacts what the a bit is NII guide be terms and

seen So rise on book yield you've is XXX-something. to wherever now that what from the

Rob Reilly

the Yes, total book.

Bill Demchak

reinvesting to off, on continues fours, high -- as with that we're handles securities. And things five as increase we roll

where to if Fed look it's just if I an to I Look, really think head X%, and five be be of going to in environment don't for the years, you the buy. the to funds don't we're I that around XX-year is going implication have true. five the long-term rates year happen. goes to X%, which in where just short-term think don't bounce at

inflation going we're get think X% but get cut cut long-term, we level. think rates to I might higher three think struggle will and front it's control, be and I it will going think will from -- to a under some I they under I to stay likely rise will

cut going or to going they're is back and I are go therefore, that assumption to think this two one. But to just absurd. rates

of So back therefore that the to me, is on end curve investable.

not own rally could as it it's Good as for to the it me. long right, who You're there. people

Mike Mayo

we of ratio. guess when outlook. deposit in world of terms that, just I loan-to-deposit the And some fair. gave not the but growth that's to lot at tied room of I No, sure in. we sense, saying those not explicit it Yes. makes I'm live if look mean a again, is And still guidance I'm you

Just additional run thought off, about more deposits how of you're give us rate-sensitive thinking creating sort smaller a letting around sheet, balance excess capital? a having

Bill Demchak

obviously run competitive in term, earnings could, near let increase the by and being with -- we off. there's deposits less deposits Look,

ratio. We We loan-to-deposit could to increase do have our that. liquidity the

the of doing that course The damaging you're that in is, challenge with your long-term franchise.

are And So, in we But use and how not that the maybe sense. price deposits. core runoff, how the process that's relationship logic that's grow if that if deposits that's you're customers we or losing makes maintain you're that we out figuring a in -- deposits the of losing deposits that mistake.

Ebrahim Poonawala

question, That's Bill. fair. And if I one last may,

that of terms whether a recession? like Like can you the quarters credit just depth well or version a and until of we're do now? the a you normalization uncertainty, not that assess the think know about next few months are we're In to how few into difference macro not conclusively between getting we from the some of downturn -- over going into or

Bill Demchak

We've ourselves GDP a could given see you mean, our there's stale ticking in quarters, what know environment. to up unemployment how mean because have of I full best couple lot a forecast. into don't terms of not low really think employment "recession" probably for charge-offs you'll I heading levels. look, but even a that And high that's Technically, might Yes. be. of here. unknowns to about we charge-off environment I

Rob Reilly

We've particularly for to just we put full can year, terms the what at your together it's beginning, think Well, year. the I difficult do. this we said of what in really it's point

Operator

ahead. Please is from Instructions] Bank. go Matt of the [Operator line next O'Conor Our with question Deutsche

Matt O'Connor

costs. like in then you called impacts We I I could And fees some and think how on out there aggregate, were I lumpy -- the of guess, think intense both just the circle from much lumpiness had which some long-term back impairment? was the comp. also just plan,

flesh of out that would kind be the just helpful. costs, could you aggregate If lumpy

Rob Reilly

-- we have numbers. Without don't specific Yes.

of in they You and in just the terms quarter of and equipment quarter. it third break against line. occupancy swung impairments line benefit within The can as then long them effect the the a term fourth the down it in the our see us was

the quarters two just the but numbers, big not So increase. delta between drove the

Matt O'Connor

separately, obviously, mean, seems regional And over time, X% to close kind X.X% of thoughts all CETX size? the of agencies reiterate kind don't from XX%. on or behind of building know your you heard banks themes pressure they're to I it It then target regulators kind the any And the Okay. your any earlier rating I the capital below just when building just and I like you, if the the on that size billion interesting be ones just are to or -- to But for all note been in of kind seem below just ones the that thoughts run X% cycle. we conservatism able $XXX are in closer running to being bigger it's XX%? Company banks where assets, but higher, are the to

Rob Reilly

drawn thoughts is you that want typically guidelines thing just only to only answer? the for of banks reacting I capital terms the Do Well, have the buffer. stress in all -- only the the are --

that. levels. relative -- just you capital look it's to stress stress at they the But the how to absolute opposed to then, So reaction. level my got that's as the And levels

Matt O'Connor

feel a and going point guess I agencies, the with stuff bit But rating with at little with whatever Okay. the like is current in comfortable X% kind but the that's environment? hopeful behind-the-scene down feel regulators, you on X% you time, maybe of drifting the over

Bill Demchak

Yes.

Rob Reilly

Yes.

Operator

is of ahead. Vivek line question next with JPMorgan. Please from Our Juneja the go

Vivek Juneja

they Just did? color the a couple ones. How criticized how on those quick assets, of Any quarter? did in

Rob Reilly

all. big at Yes, not flat, change a relatively

Vivek Juneja

the expect protection, of clear therefore, I and you would synonymous swaps And sort that and for later see cuts? going the you dead securities but and side on on signs sort on swaps death, a terms think terms whole to adding off, even to a Bill, in that expressing question given of rates. of more in until not protection of beat to just lot horse your NII view of rate hold swap you're yet potential of

Bill Demchak

carry forward doing of be are cut. carry have not by to those doing the Yes. put in It's due sometime they'll mean, there'll of Vivek, notion negative of it's there -- a of I the mean protection, a fixed a come lot a what strange this banks they'll a that. I eat you're because and that guy, negative And starting hope they'll course swaps is on is me time to bit income

It's -- is. do the they It as you protection. sense at my makes is the everything the when So, priced downside That's mean that to forward where invest same moment the I trade. no choosing on at to me. yield curve curve effectively

and upside sell sell away use buy downside we can and we it, protection. some can options I -- buy can

And have a we're look just during out terms be in of feel year. the it the to long. As going like a that view when the We're rates to practical are you're asset of moment supposed asset not widely sensitive. in wildly rates XXXX bounds we're like if XXXX not decade matter, sensitive. while not you Particularly, go-forward to doesn't

we sit. that's where So,

Operator

any are there the this And closing remarks. on at turn no for presentation back the I'll line Gill further time. Bryan to questions

Bryan Gill

Well, the all call joining thank you for today.

IR you. and the have help other any you be you to reach we'll Thank follow-ups, out to team, please out. If happy

Bill Demchak

everybody. Thanks,

Rob Reilly

you. Thank

PNC Financial Services (PNC) 18 Jan 232022 Q4 Earnings call transcript