PNC - Earnings call 4 2023 | The PNC Financial Services Group, Inc.

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Operator

Well, good morning, and welcome to today's conference call for the PNC Financial Services Group. I'm Brian Gill, the Director of Investor Relations for PNC and 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. These are all available on our corporate website, pnc.com, under Investor Relations. as to XX, update only undertakes and speak obligation no them. statements of XXXX, January PNC These

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

William Demchak

you, morning, good Brian, Thank everyone. and

for performed During banking in the delivered operating and the finish environment quarter. challenging a solid industry, during well PNC fourth XXXX and volatile the

share $XX.XX for quarter, year we a impact staff initiative fourth that of we $XX.XX expenses amidst the XXXX. the grow to diluted franchise. Throughout the the full deepen disruption, to the in and per diluted share coast-to-coast to For and compared FDIC in related per fourth continue the completed earned across base XXXX, adjusting quarter year special all our assessment, our relationships reduction and customer we

record us and which of revenue modest amount expenses, core to adjusted a generated operating . allowed positive controlled Importantly, leverage. deliver we

we to points. in per an For $XXX to going is share the few through but highlight a I'd a $X.XX like moment, income diluted adjusted per and reported fourth share on the financials take or Rob $X.XX in quarter, million you basis. net

First, capital as Signature, loans in we is closed which commitment earnings. accretive immediately to from acquisition of October, on we the announced the early

saw we as we noninterest a the income during quarter, growth Secondly, expected, driven in markets meaningful and from capital fourth rebound by primarily advisory fees.

This discuss are the Third, in XXXX. our addition realize in minutes. to positioned we that million our to Rob $XXX for we expense CIP and a XXXX will actions in is completed workforce, savings to of savings reduce few target

over while to adequately particularly our growing time, reserved. key initiatives. XXXX, expenses remained quality were charge-offs to we top Fourth, reflecting are we discipline in continue increase our And to stable thoughtful growth us. credit sheet, in we as quarter, the to CRE the segment a expect accordingly, remains during Expense office credit continue invest balance even for priority for strong our approach targeting

position, capital our increased value fourth a shares. Finally, intangible book during repurchased we saw and AOCI in solid of the our quarter, improvement amount modest

a cycle our delivering and run as strategy, to well believe value in feel we our the our on the And focus very company drive through of beyond. XXXX. growth summary, are enter strength we and sheet In balance the with positioned and deliver we we good about year capabilities our coming performance and shareholder

And always, I meet do everything it the Rob. for and thank of I'll to turn customers to employees our possible. our to As with want over needs make our they that, success

Robert Reilly

good and Bill, Thanks, morning, everyone.

balances Loans basis and deposits average $X.X or commitment is capital higher compared and securities Our balance to FHLB and at billion. $X issuances. Slide the funds the and includes average the $X declined senior $XX average to Investment loans. increased billion an presented debt billion Cash billion third Borrowed Federal X% billion on increased borrowings X%. sheet parent and signature X on increased acquired billion is and $XXX $X billion quarter. Reserve to were $XX $XXX which driven billion by company up

linked up CETX book quarter. an of interest year increased well And requirements. ago. billion compliant estimated of AOCI period. quarter reach value period impact the basis PNC through proposed common $X.X bank the metrics primarily expect $XX.XX of we holding linked compliance to the improved in same rate and with XX% of well during favorable level increased negative billion course debt quarter tangible We the X% capitalized as of year-end, phase-in normal company was fully the the XX ratio long-term with compared funding At reflecting XX, end, share, $X.X advance with to our at X.X% to movements per December a remain to which quarter. Accordingly, points

be would ratio based CETX capital above rules Our year-end, is our risk-based current which fully phased-in of at estimated requirement the proposed X%. approximately expanded X.X% on well new

to We with well be flexibility. capital positioned continue

approximately share dividends, $XXX quarter, shows we of more Compared third billion, shareholders. total $X activity of the to with were increased returned average consumer. quarter, loan loans higher modest the Capital a by acquisition repurchase detail. our balances or billion the common Signature when million increase resumed we $XXX of commercial million of in Commercial $XXX roughly the and X.X modest loans million portfolio. of of by X% And million Slide capital loan During balances shares. X in commitment driven to $XXX driven growth an combined

equity $X Excluding driven the demand. X% declined loan lower commercial loans signature $X billion Consumer and portfolio, loans quarter the utilization grew loan and from by or impact billion average full million, yields soft $XXX home driven partially offset to lower XX loan X.XX% balances. the card and fourth by balances, And by quarter. approximately higher increased in basis credit mortgage points residential

was from deposits our expectations. to in covers as deposits. partially in consumer a quarter X by in during Slide with to slightly consolidated were the XX% $XXX quarter, billion mix, $X.X consistent grew quarter, In deposits in XX% the deposits third fourth noninterest-bearing seasonal growth detail. more offset regard Average the down deposits our decline commercial billion in and

expect of We current continue noninterest-bearing near a our portion deposits levels. to stabilize to

quarter, up paid interest-bearing in prior X.XX% X.XX% quarter. rate current the deposits Our from increased on during to the fourth

cumulative line the quarter. deposit XX, with As XX% beta in our was our expectation and for of December

remain at the betas expect rates calls in while mid-XXXX, will which interest we to first begin And forecast to occur to previously, the cut paid drift on believe stated rate we modestly current level. at current deposits higher, decline. for rate we point As our

X% to $XXX than Average paydowns and activity by was portfolio lower-yielding details X.XX%, increased X investment more basis X of billion and portfolio maturities. purchase yield The securities swap Slide points runoff offset the our investment curtailed of portfolios. decreased and as reflecting security securities. securities

duration XX, X.X was December of years. As the portfolio the securities investment of

to the X.X X commercial and swaps $XX the weighted was portfolio received X.X% points rate totaled on duration swap loan XX. billion basis The of fixed Our average fixed our years. book December point into the received of increased portfolio

the lower reflecting $X.X by rates. interest quarter, improved fourth billion AOCI in

and rate lower as we book improvement expect Importantly, accretion. from a roll meaningful off, continued securities AOCI to tangible value swaps

was on workforce X. share, quarter after FDIC Fourth or $XXX pretax statement expenses to income net per Turning reduction quarter. to of tax, special noncore million assessment and $X.XX $XXX incurred charges Slide the related income or which included the the the million $XXX million in fourth

Noninterest million by a of net of million $XXX million expenses. of adjusted Total Noninterest Excluding included declined points. $X.X of increased was X or of million. $XXX revenue XX% interest was noncore and noncore expenses, Net income margin EPS $XXX increased to income to our the X% $X.XX. interest third XXXX. X.XX%, million $XXX basis $X.X modestly X%. expense compared And billion billion decline $XX or increased or quarter

was expense compared Core was effective expense $XXX $XXX in was quarter grew noninterest to million grew and our noninterest well X%. million year or X%. increased and rate Core Provision the XXXX. controlled tax revenue was and X% XX.X%. fourth $X.X billion XXXX Full

positive Importantly, X% and an our growth management and on adjusted disciplined of deliver CIP basis. expense operating savings leverage to us PPNR modest allowed

Fee as of quarter. to $XX and highlight increased driven the $X.X Slide revenue We third billion down revenue linked or modestly. interest was income compared or billion million fee X. strong million Turning our quarter income up income net X% X% trends. by quarter $XXX was with $X.X was Fourth

M&A and Looking $XXX increased as advisory driven at detail, markets higher million capital advisory by or fees. the and fees expected XX%, rebounded

grew or commercial rights. reflecting or residential $XX servicing due And market net the Management mortgage mortgage Asset decrease in to declined Brokerage X%, XX%, million revenue and favorable revenue million conditions. $XX primarily of a and valuation

quarter the million or increased $XX Other negative $XX of in negative gains noninterest included million adjustment also and to quarter. [indiscernible] adjustments valuation XX% value The million fourth $XXX sales. fair adjustment income compared included million favorable third $XXX and a on

owned at an of unrecognized billion. B December PNC XX, gain million X.X Visa Class shares reminder, a approximately $X.X As with

to Turning Slide X.

expense $XXX of impairments. included noninterest $X.X quarter billion business billion noncore Core increased linked asset activity, up or reflecting million and million $X.X X% was and of fourth noninterest charges. Our higher $XXX million expense seasonality quarter, of $XXX

non-branch related square of were footprint $XX in the quarter, charges, or XXXX, we incurred million our X by building impairment write-offs. feet XX%. which During we Notably, million approximately large reduced to

For the in Expense controlled or CIP expense which full increase our million, in noninterest million increased well X%. $XXX to midyear was $XXX due billion we exceeded. core million the to of year, $XX goal part $XX.X growth

generated we points year. of result, XX a basis positive As adjusted full the operating for leverage

reduction annual target $XXX and that technology related the XXXX, $XXX CIP actions program in significant million. portion of is to our completed Looking a ongoing workforce forward XXXX. our drive million cost savings will This year-end, as we funds investments. to business of of And

$XXX a actions, expense together, of reflected that few Taken I are million our guidance implementing in which of all we're will in cover XXXX minutes. management

presented are metrics Slide Our XX. credit on

slight CRE. a quality credit increased a quarter we or our $XX and and overall uptick Nonperforming NPLs linked across see remains loans delinquencies. million million $XX strong in did increase in X% portfolio, included While

billion or expectations. the of were seasonally $X.X low fourth Total end the and increased loan million included million have quarter. The resolved. charge-offs higher in delinquencies, quarter in our $XXX already which majority the delinquencies been of consumer came increase at of X% $XX Net linked

or XX, XX. and loan for stress to Our credit the $X.X office XX net fourth most on annualized where September was totaled total our continue quarter December billion losses net is charge-off were we to stable ratio X.X% million. CRE $XX basis points. And average loans portfolio of The charge-offs allowance loans see with and

this on losses portfolio. future expect to continue We

we've we believe potential for adequately reserved However, losses. those

total loans XX, of inside were and of our December that, portfolio. reserves the on XX.X% office portfolio X.X% office As multi-tenant the of on

CRE ensure is of million office current we'll flat Criticized full or increased of slides. the in X% to update this level Importantly, office a loans and they our and review monitor overall payoffs. appendix quarter, assumptions to portfolio Naturally, $XXX quarter. approximately linked reflect X% conditions loans reflecting a market nonperforming continue portfolio our higher included and declined linked were

in X%. less solid year fourth In in full view and a mild quarter In mid-XXXX economy, expecting PNC overall we're a our of of starting reported contraction a summary, to real recession the than regard GDP with XXXX.

Fed expect X.X% cut rate expect rates. between X.XX% unchanged federal mid-XXXX, to begin remain We to funds through we when and the the to

expect basis with XXXX We XX basis and December. of a point in XX July, points in November reduction decrease a

of outlook our to X% for expect ahead, loan which compared to growth X%. Looking follows: [indiscernible] loan average is we XXXX of as to spot growth XXXX X%, full equates approximately year results

Inside noninterest X%. interest net X% our to to up of Core income be to range the we down rate be Total noninterest expect X% to stable, and expectation to stable effective be in X% income to for is be to tax of XX.X%. our to X%. that, approximately down be and expenses revenue and

as X% down is net stable, X%, interest quarter be the X% million, loans million advisory quarter Visa markets for income revenue to we fourth of to first activity as noninterest capital fee in outlook to be as be and client income elevated income to follows: and of quarter component excluding well total we activity. be X% the Taking down $XXX quarter X%. of XXXX fourth compared to and $XXX levels. XXXX to to the to of to Our the expect expect average down due pieces lower seasonally first be X% revenue together, to range Other

We noninterest to be expense X% expect down to total X%. core

million be expect I $XXX your $XXX We between take Bill first questions. and that, And ready to million. are with quarter net to charge-offs and

Operator

first comes question with McDonald Autonomous Instructions] Our from Research. [Operator John

John McDonald

currently? you spot Bill bit on the there. HX X about for to outlook drivers better to your of loan XXXX, than up Rob a seeing outlook thought the some X and And color Wanted of the what give seems growth in could we're percent I ask guidance

Robert Reilly

John, Yes. Sure. Rob. it's

of outlook, mentioned. X%, on being on that the we X% most spot the year. have growth some back We see of side being to year, the you most as that but modest. the . loans commercial and throughout of the up so On pretty Consumer, do average end X%,

John McDonald

like income sounds curve interest than Okay. a rate cuts, has. assuming X what you're Rob, bit net the the forward little And on less guidance, it

or you be wondering more assuming. played NII update relatively of sensitivity rate outlook, to kind neutral? cuts would the we on Just sensitivity you're please? if that than what there, the equal curve helpful Could else out, saw all what Is the forward us the

Robert Reilly

the into know, it's -- we've is we've Yes, John. position. balance neutral as Sure, sheet short relatively sensitivity neutral worked answer hard because, to a you our get

the the expect variance So terms don't that obviously, the going expectations is lot own out, The of not as a but pricing question, year [indiscernible]. of a on deposit on and be lot of in to terms our and variance. big plays forwards how behaves . of impact in we

Operator

from Our Evercore. next Pancari question comes John with

John Pancari

really the revenue, On certainly capital this quarter. numbers came markets the in solid

off X% to and are year through markets income trajectory full noninterest the this XXXX up year. level? your you look of about in you the into context As guidance X% thinking of for How capital the

Robert Reilly

Yes.

is that expecting did Harris in the our and Markets, bulk Capital quarter Williams, the M&A the we rebound we fourth business. with advisory get So in that of were our

as expect are pipelines we far goes, guidance good. As the 'XX

We fourth quarter quarters of range the on the expect be QX in and quarter soft in going would anomalies sort of of and see to XXXX. a The quarterly 'XX the QX basis the what first of through were we XXXX.

look a the 'XX, take 'XX, through the the the be quarter So at quarter of range to would quarterly of that's 'XX. first of we and run what fourth rate expect

John Pancari

All it. right. Got

Robert Reilly

even math about there. the up save you help you I'll XX% it's -- I'll year-over-year.

John Pancari

guidance peers. about pan relatively better you XXX . which at your negative the put, and -- And your basis right. leverage outlook you're points environment How points if that versus Do rate think sustain basis the it does the the revenue or XXX then negative screens not could worse. you sustainable operating -- actually if midpoint that using modeling All can expected Yes. out be on the of worse? leverage? if Or guidance is operating XXXX is as well for your implies

William Demchak

the we're cuts for NII fairly neutral -- our not. a rate of as toward forecast to Look, function or

So be ought same. outcome the the to

Robert Reilly

to Yes. position We John. we -- worked expenses took would have hard. some add to that, actions Well, stable ourselves I so year-over-year. to The

the a feel revenue of fairly fees, then Bill a that's as good and guidance. pointed basis So the we on the out about outside NII And is on rates the relative side, predictable lot.

So that's is going we think occur. to what

William Demchak

anywhere, steepness the and of of all assumptions best as front our good betas, noninterest-bearing -- at there's deposit we on those going pretty our end end to a to forecast yield the ability where I about relates it's the it curve of bit ultimately, conservative long shift the continued think to of variance interest-bearing if as be of our We've the the rates to curve on the things. the curve. the versus And the be little tried opposed of to side to is. feel

Operator

Siefers Our Piper next Scott question from Sandler. with comes

Robert Siefers

NII where And hoping of I be share perhaps thoughts on context in curious for see I some sort I ultimately you and to updated thereafter. I be know a month just bottom. record magnitude there. you NII guess could rebound think last sort that thoughts I'd of might that just your be was XXXX. might more updated I when of able importantly, might around suggested any

Robert Reilly

Yes. Sure, Scott. Yes.

of do So cuts beyond. as first time NII see and there year, down the the we going half then pointed from the around of out, growing we troughing the in and

go 'XX. lot the And back of continues So is a then gives where rate where repricing as the grow 'XX and we in record think assets about around now, confidence now. to a our effect down into us then of on bit we that of are get fixed will what are we NII compounded

a out think. what we ago, laid and we what that's month still So that's

Robert Siefers

Perfect.

sounds pricing. Fed the the And just what's of you're -- sense ease the I guess around vis-a-vis way for on starts deposit up? pace on time of cost expecting way then like the right down of betas the sort to on what deposit cutting were It they deposit notion the the Okay. your

Robert Reilly

this sort consumer even [indiscernible] we we Well, then get alluding rate what some I in to the continue is though see drift high -- earlier, about talked could commercial could on we would was of some the on fast. say consumer, core the up to there side And paid we and Bill cuts. the and

have it a . out. that's obviously, and variable, play So we'll to -- big

Operator

from comes Manan Stanley. question with Morgan next Gosalia Our

Manan Gosalia

the behind loaded. more loan I being for outlining mentioned the also back-end recession on can more and outlook comments Because growth your appreciate about us assumptions some a thinking it? give midyear. you're But you mild color Thanks how you macro on

out as So really rates in of is we down -- big to CNI recession. like as a and it maybe uptick come mild that XQ come begin

So both could consumer color us on more I commercial was there. and some you hoping give

Robert Reilly

just on follow would I that. say So just up to

So the yes, of year. back half

A in the little fourth and activity, lower part utilization, just a in the consumer, of to And the to commercial more not maybe of now spot sort and X% up and a increase economic side, in which quarter. bit slow, bit lot, steady uptick and X% third being then then X%. that is expected resi. some pickup in the nothing see we average On general big bit just big little there, on little the growth, card less in a a auto right

Manan Gosalia

NPLs. pretty had into like on Got on last looks been credit criticized things then it CRE criticized just from this both some side, it. And And quarter quarter move NPLs. loans and you the steady have

think it outlook with next just is do lumpy? us? NCOs the stage, this at think should few up? and Or to you the have likely rates new remain So more, ticking is for be worst behind scrubbed down, you the come books you it do question over the given quarters is steady guys to The

William Demchak

Well, set have think NPL not come. it, outcome as we've We correctly, a if we but that on yet these charge-offs. have to you is with P&L off. the run actually we'll and them on eventually, go charge through work and loans remember reserved won't we're created against the charges to It to maturing reserve the because for loans dealing already but them,

Robert Reilly

at much. first movement And the key To is the Yes. the occur, number . percentage, that's key that will number, changed the The just it's point, but has Bill's criticized to bucket. there charge-offs criticized that's would which that the nonperforming or to I that add look not to of number.

Operator

with Cassidy RBC. Gerard next [Operator question from Instructions] Our comes

Gerard Cassidy

slightly. Rob, private in the been commercial guys as ex to guys lending? growth for here that, And out. that signature them much as you you have credit guys you see equity with more the as when you private balance well? as customers the down prospects But you the have XXXX, customers? second, share competition competitors know much Can out from recently you pointed you you in loan on you part -- in with purchase well them us do growth have have market, So aggressive as was quarter do share can I the talked, about us as of

William Demchak

space. in that that utilization. in We at the types of don't loans play don't was unsecured we the compete leverage with head-to-head signature and much because of typically them saw we the with are that decline Most

and portfolio forward, I it, at from is are with private our go term Williams just between lending our that what in do client more credit managers kind of private more up we markets and call companies and Harris probably As if they're into a do. and for them. move private would say that hands treasury the on We they with serve and we large, their do equity of on. base and on moving with longer and what management concern them or and they clients largest [indiscernible] in scale business of

I at could they up in competing certain things. with end are the And So clients. we them margin, good guess,

Robert Reilly

not But so much today.

William Demchak

Yes.

Gerard Cassidy

I see.

those Okay. guys ownership Visa. position monetize thoughts And gave recall thinking on gain. the are with the correctly, updated your think comments the your of I give that. Visa you your the what 'XX you unrealized then, of and Rob, I first us Can to with permitted quarter are you follow-up in owners shares If us

Robert Reilly

orchard. sure, Yes,

X.X shares. So million -- we billion unrealized our position is have gains, $X.X have

to holders out, a maybe the vote the pointed [indiscernible] at the this up enable shareholders month approve As of to there's to Visa XX%. end action monetize by to an you

that when move is So we'll be should under monetization would . we vote whatever our We approved. see don't forward it is with be allowed then the scheduled approved, that. plans control

Operator

question Research. with from next Our Carcache Bill Wolfe comes

Bill Carcache

out levels the cutting would be Following reserves? starts late to up could a soft mid-XX, to you of you look we releasing established? rates reserve the cycle on start play to in already if in that sort concerns lead are maintain that possibly and credit, likely want still would to the landing to scenario you've be like Or what position Fed the expect

Robert Reilly

Bill, Rob. it's

what first, expect we So occur. are our for to reserves appropriate

two, running which substantially that's historically X.X% things one. should So yes, We're if sure. number side. high Number right now, the at is improve on

and be out normal, definition if lower. things of could So we normalize your

Bill Carcache

yet. corresponding the your Got necessarily should it. some would between released? reserve levels, P&L we lag would to kind reserves charge-off charge-offs? If hit go increase recession your Bill, the up on were good expect be to And of when actually the but get scenario we there haven't comment feeling path, about charge-offs about down then, seen occur in we the those that mild following peak the and with concurrent releases would when rates Or

William Demchak

to for that. P&L, scenario hit expectation So charge-offs P&L. we've our seems a a confusion of on assumes don't recession. best take remember, charge-offs be a provisions that the lot in hit we mild of There future provided The and

everything neutralized happen our us. to scenario effectively through, P&L might if fully . to that our we're comes but So because for they're the true, reserved will hit against not the provision. flow debit Charge-offs

Bill Carcache

Understood.

Robert Reilly

pointing out. out. pointing worth worth That's That's

William Demchak

There confusion make . always you be that do But -- on seems to that. sense? some does

Bill Carcache

No, of as that allowing through credit where losses alluded was releasing some going that environment Yes. is -- necessarily you indeed flow the I reserves. those to understand. deteriorate, have sort does I I if guess without some allowing of to with

the even those of flow different charge-offs so before through the was and would timing before releasing. though they've your to those reserves And thoughts of on maintain And established allow pieces. kind higher reserves, ultimately hoping . of just kind I get to they

William Demchak

So our of that's view the time. dependent it's at a mechanical calculation economy on the

the of got at right? we expect if today, happen. we are and was than that expectation, right But where a we for higher worse occur portfolio be the current providing now, would somehow level economy the the you to thought So we to than our a charge-offs place don't remainder

. you worse economy the mild if recession, the reserve simply is our expect put, to is a increase. then if So economy worse, than would total

Robert Reilly

it's per forward-looking [indiscernible]. Because

Bill Carcache

that you a light feel you you are capital about And pieces? of return. about point level you're higher And thinking Endgame you III of XX. thinking all basis a thinking of I from light If that slightly to that, of Can one a Understood. sort on how in one Slide speak in at? moving Basel I of in appreciate X.X% pushback it's impact squeeze that the some would XXX you how underlying received. last all Or buybacks is are target comfortable then -- the buffer? running could

William Demchak

more X.X% we're so at of going to pull We we're base, that moment, active be and the continue time. our to and X.X of that run will said We'll explicit the easy would expect in be we first. a that be back on Endgame on this assuming capital, the low, think, relief proposal still some be certain think buy if inside Basel we'd the risk-weighted flexibility there capital be to that see. -- AOCI earnings. we new we back on might is we number market now reproposed, some going and appear to it and commentary categories what operating goes than during into the the then given such does accrete period we'll in answer know We're know certainty to would have up. I what too grow going higher so to I Having question would assets III an we asset don't and have, between that, in risk isn't environment, that share more for certain There certain. substantial maybe repurchase

Robert Reilly

would that. just to I And add

sorry, repurchases -- saw quarter, under a in the do -- of fourth the more that, indications. we first depending bit You quarter. share would $XXX market just million we little on bought maybe did expect to least In at we

Operator

Erika Our UBS. from Najarian comes with next question

L. Erika Penala

neutral A question were had XX ask at about completely way. of to you Nike it's first earnings everything 'XX. you surprises for at is investors abstract you put -- outcome, lot back together X Swish it it just I Nike I 'XX. NII, but the wanted in that this your the it put in this said a least a will, cut lot that of understand together to points forward I does if on looking guys 'XX. that Goldman, you And But But at that embedded overlay wanted think basis swaps meaningfully graphic rate curve of really until don't just fixed XQ is under XQ sort I the excited to Swish, investors the that this the follow-up I just on season, mature Slide seem of may. X receipts Rob, like if the really slides, when

So swap maturity guess, really cuts is, you it that the like lower keep part repricing knows side the what it people like fixed way record sooner. still I those feels is dynamics? I way. question happen the Fed And because of of potentially to terms trough have mechanical deposit possible in could steeper. about thinking right why of net it in that and in on it is like a that who can interest rate this the be that talking liability Nike sounds ask and Am have to the repricing Swish But about, than expected if 'XX income the side, 'XX

William Demchak

be We purposely deeper. line we when exactly the to it we because don't occur. that trough be to might thick a little that know don't bit expect drew know I

I think is of all maturities them the ways, 'XX market. those and taking And rate in of the We're replacing commentary on our what fixed are. assets know we some mechanical. at assets simply

on balance the we and sheet, lower. So one assets virtually are the fixed curve of than is all of reasons level at our highlight somewhat of rate our the is in our peers short the that that sheet shorter steepness and balance show also yield form, a

which big or the and third a quarter -- of market troughs week think expects, yields So the whether rise the is in the rate knows. fixed the curve, second gives pickup or who fourth in quarter in that than we slope week have I earning to turn first sooner the it what

L. Erika Penala

X%, I it's guidance to a worried like though that from after would be right? a new significant quarter perfect the sort So second have first progression X.X% quarter. timing, it don't average imply interest are of something third of just NII or your get think record income, and the to would pretty that It's your net terms investors would be to about in like that, quarter, that there.

So that's build sort of can that that? reach investors because you believe -- you stage that set think bridge I'm to trying really to for guys that I the

William Demchak

that, Swish to guidance. think still it say, What still think. if accurate. the you . I to the want with it's Swish, I else I consistent it's call think our accurate, And that is

Operator

from Ken comes Usdin Jefferies. Our next question with

Kenneth Usdin

of of receive Just in a answer adds? follow-up like and X this move or how terms fixed. Thanks. billion trying change to that whether terms on in thoughts that Any Couple Page of forward. any deck. last on utilize dollar in changes the of the terminations you of new that swap And decline quarter, book

William Demchak

that don't this changes I we know quarter. had

Robert Reilly

Going that Ken? into 'XX. QX the Is question,

Kenneth Usdin

and to go this to kind of just swaps any terminate You yet quarter remind the us and any after. add still what's of understanding new of --

Robert Reilly

We terminated down. some. But in We added normal some the net course. all that's

William Demchak

think question. to you we're at. missing get are your What I trying

Kenneth Usdin

quarterly. we at you've just outside to trying was I get just made maturity portfolio which inside what normal in the the of see changes disclosures I the think Yes. of schedule,

And the then you way about us wondering some forward. swaps, you Just add new did just terminate ones? remind did

William Demchak

exposure. when you the terminated reposition some that you, times -- loss at original and remind we And of to we'll to do to just you basically X.X a have contract. lock where life We simply and added the in terminate

Kenneth Usdin

Exactly. Yes.

it. Okay. Got

Second see, that on Good in fourth the you to fee improvement saw. markets all, capital the the quarter, question, just of first outlook.

this what Williams, a of year, see growth is pieces expect Just that growth And et you other expected fee in to driver of wondering how your do in next year? pipelines Harris your much cetera?

Robert Reilly

earlier, on said year-over-year mentioned growth rebound to what is in are the activity. a good. of nice I our capital I support Pipelines Harris They as Williams just close which XX%, Ken, markets, earlier.

of clients, up so that mortgage that's gains, but asset down our terms for some In about be market-dependent. Lending down digits. in that And There good will hedge number of and management a to cash flattish, down. be charges the of and other if service we was bit, fee the will items of gains. lower flattish deposits. digit and our Card be up hedge that's outside low lower on include that fees, mid-single did services, overdraft then reduce 'XX mid-single deposit mid-single for reflective you . charges that clients, to will categories, a anticipated management digits,

Operator

Mike Our Mayo Wells Fargo. next comes from question with

Michael Mayo

ever your just et mattered. December to knew quote matters words. for all Bill, We and it mattered cetera, the and to intents than [indiscernible] knew I purposes, regulation more and eliminated brand technology tailoring and March today et skill X, the mini We has crisis. cetera. scale prior

Scale before. than -- important heard reversed. say will you seemed You're just speech, say whole than could I I've more it more is a give be was but ever. never going to passioned it the ever that this like speech,

mean, And out. operating had get XXXX, do I in positive lines, chance when now? But I that. leverage So along talking why you with further a those scale if think you better could you're you

if I talking and about maybe could. out help there, think inorganic organic but you're you expansion, me

William Demchak

happened That line terms what of environment just X if organic in trust look X kind growth. at of you year bluntly that or necessarily your mini Goliath financial We've years top in this safe. seen post the Look, of at history are has a deposits their trend No, March, on back ensure crisis. to the accelerated the words of I as deposit regulatory was. a bank share don't of corporates where crisis function

corporate embedded lose uphill. deposits. and with . we've deposits And And aren't you services so those you management relationship a treasury other primary seen with that corporate net-net flow if deeply

and combine the you liquidity, removal and of cost when and that with requirements of think matters. regulation I technology, some scale tiering the capital the of

banks of think we a ubiquitous on standard think easy. us, that crisis. quasi struggle conversation perhaps clients. think I with Above crisis, and with corporate that just move below into the we -- support us, such need to that net but level with that people mini -- we are it's is But in barely from the the terms coast-to-coast brand, benefited have are seeing of next times I I giant

I critical. it's think

Michael Mayo

does mean? what desire. So the and that identified need so you've Okay,

what it mean. mean? So does that Does

William Demchak

Yes.

are from our newer forth. we gaining so in all over markets loans forms a pace. acquisition see naturally, fees And share to deposits and So at client to to that time, growth on we rapid

see going differentiation of time, you're across the played this a clear market. think dynamic I through to out

banks be consolidation player a to not going think natural for to we we strong force scale are partners, I'm But are that there's longer term, I in going the partner. that where strong think are looking and a I issue. I think industry an of matters.

Michael Mayo

seeing And marketing triple can you we double with et then? opportunistic if you City you and What advertise do can't Super during Bowl, cetera, get you since the there? do do Do or then, get spend? you've how you start the ubiquity, been done, deals your organic National

William Demchak

there's have which to I simplifies You a process. just the -- execute. mean

with to I there's there's what to how see a period that should they're side, franchise. happening see of the there's people in X,XXX take couple that but That's there's react some be about There's There's do people can you banks. which the to if in I play If trends. grow, I the of the we I a opportunities [indiscernible]. the we opportunities couple come -- can issues time, would deteriorating there's deposit something going to we'll we and know or down have banking can when own, riding and losing. that, might and some of execute realization I way think We're one over our in time. inorganic kind what the that share in matters. scale confident back, other industry all than to But a right? winners. trends. I'm that a people know clear on go neutral pursue the and longer large what's the country from on banks probably will today, just

Michael Mayo

"Well, I deal one saying, want because of say got e-mails what people kind I they to Just PNC if don't of I'm I own know follow-up. do. stock you that? to afraid several do from What might

William Demchak

should our my explanation. at is simplest history they look think I

everybody, way. our I don't them. before, the think I somebody once I want math come I asked think opportunities chase and don't that will I and assure still do think to question to we'll have

boards One as politicians, yay of of aware banks public about am. part reason this regulators, the say I as of aware, to I happen. happening in to the just doesn't It stupid the . mean the reasons the is consolidation. going public what's other people vocal being and it. the I'm in need make And the something of for industry to think going banking it's pursuit do of

Operator

America. Our Bank next question from Ebrahim of with comes Poonawala

Ebrahim Poonawala

your doing regulatory I a M&A? today guess DOJ deals we philosophical see of just need Or is to could towards a the just conducive pickup sort with around think different M&A. I deal very Mike, on one you maybe up guess activity. for do we backdrop do discussion approach bank larger follow in before

William Demchak

talk a good because there's answer I good done they'll various along been mergers, listen speeches you I that if talk think that that need also M&A, the for metrics. the about recognition of to outcomes don't to carefully bad the have and think and simple several but mergers bad outcomes about they'll

So put deals wouldn't. get approved differently, think will I others certain and

we fact, we is, think and than an stronger we're institution that we doing in one what I in as have might that the result know proven acquirer acquire. the

Ebrahim Poonawala

to will things could model your of is taking that a customers mild middle how down path, the you weakness that informing we get. I'm your just step we just you theoretical are that believe seeing the across versus And that back leads a go view of in I once knows the bad Understood. and Because recession just the year. have around around who that wondering your how reserving recession, much guess

is So assumption whether across Or seeing I your your customers? just conservatism? recession the are to hear you love weakness just would

William Demchak

a not customers. with It's metrics, credit it's mean decrease see I of margin clients. not -- -- profit seen terms margins in certain We've you the the concern with

the economy weakening, the districts, It's we kind of and pace. alarming a forth that how of gotten definitely the inputs, what at If Fed you so is at expected has monetary look surveys not soft with given are Fed had tight coming policy. out

from So actually the strength into mild ultimately that strong see employment which of the kind see consumer a the remaining recession, market of through thing we and economy is just recession. spending. the labor deeply keeps We that, going

of path we for of So this thought following of time what is kind the period now. some

Ebrahim Poonawala

it. one And go Got ahead. follow-up. quick Yes,

Robert Reilly

to Bill. to to that just going add I was

a whole lot So slowdown I have technically of we mean, hit credit a credit increased and can without structure. adding continue or a risk recession

Ebrahim Poonawala

expect towards you more CDs we different? Understood. mix thing, of -- should in interest-bearing just from to the deposits And just stabilize they a If from is Rob, deposits view your rates not mentioned move are you funds if why advocate, should devil's noninterest-bearing here? stabilize or playing X%-plus expect that your to one Fed world, remain towards we

Robert Reilly

here percentages. part decline happened think watching in base the is been that much individuals terms our in Well, that I terms Why better we've the is that of relative year absolute the run of think largely for so deposits. on long. it's noninterest-bearing it's in been we obviously, and because businesses And of noninterest-bearing and

not of consumer pay through transaction on There's services they're higher So institution side, deposits in something necessarily shopping or . for terms they rate. their around accounts. for a the the small

Operator

Deutsche Bank. Matt question next from with comes O'Connor Our

Matthew O'Connor

your question. picture wondering bigger of growth, Just on bit thoughts kind of medium-term a loan a

next be that this are obviously of like you structural year. there think you But in out details some the for -- You deleveraging. couple as to camp the gave years, needs

any normally growth just GDP effect? where be? it that that might thoughts So or below be have Or you on loan would

William Demchak

lot think ancillary don't activities don't conclusion be structural I on big of any there's kind the mean took make going on, here. back the We're I some prior to to obviously the of point, of banks of that a anymore. delevering they my on seeing sense the lending coming stimulus

maybe but here. deleveraging there's groups, not certain industry by So across the

Matthew O'Connor

the rates lot right? they've structurally bit, even guess met And higher if almost last little than years. a still been go a customers, for Look, down from XX I they're I've

like demand that. on structure But higher rate and that's just if out you just thoughts about if impact on factors. So there. meaningful lots a Obviously, lending think the there's have of

William Demchak

on growth? Sorry, loan

Matthew O'Connor

you the the as with much borrowers, consumer right, borrow to mortgage about afford think Right, obvious. potentially as higher. Correct. is same most can't rates Obviously, for corporate they just

like more commercial on side. thinking So the

William Demchak

up Well, I our their has occur. think the facilities redo that at the client the day, needs corporate generic price end gone of and will to and

of by really the look higher just low where going we're and rate back at our composition activity to of of the saw if equity the kind we the that is at wayside of environment. of free, kind on America. of cost book, a markets bread leverage that's capital you the private go some of butter think I But in the

see of wouldn't would So the a the in higher. end decline necessarily growth that we because loan is rate expect front simply I [indiscernible]

Operator

Our question Point. from Dave with next Compass Rochester comes

David Rochester

the in ratio mentioned building Just have more than to than to any on normally advantage back adjusted you of But you maybe on might your know today. CETX retain you get position a to capital I keep M&A more curious is Just that you taking which might bigger better muted thoughts this there, opportunities, the how year? your activity inorganic buyback for would discussion. plan X.X% you buffer that. balance the also

William Demchak

grow mute maybe absent Well, is return to where changes. I it, capital and going otherwise low, those use still faster to X.X up some, compliance could of we're grow. too shows we below III something Endgame Basel our there we're going -- be the it's thoughts might going it consistent. in to growing are because so be Whether or mean growing both to we're

David Rochester

Okay.

expect to rest muted maybe year, first the remain quarter. So buyback of not just activity would the for you the

William Demchak

It We else could don't probably There's much think know that. the go does, I it's is still equal, they all We what We're going depending mean, X.X they up the elections, through repropose could change. too change is through it air. All know, too our right? in to we materially. Fed don't could to the AOCI. look, burning have low. that's

we learn. So of what -- adapt based on stated we'll we course and

David Rochester

you with are thinking Okay. you materially cuts. out least the . And first first are rates a down guide, the couple can in assuming some then lag of the the you're more of gate right your those Or on cut? at of sort move commercial like back for baking in betas deposit you

William Demchak

It'd fast. be pretty

Operator

Juneja Vivek from JPMorgan. comes with question next Our

with a have from do We Mike question Fargo. Mayo Wells

Michael Mayo

delta Just loan why which your you're to a near rate? smaller talked Is and trying you've as effort deployed market. growth effect all that and I far Is Street Bank middle as peer commercial the put loan in that. your Nashville cities the and Is the areas about know growth it all kind scale these growth, like it on it of how when that you share by comes it punching versus growth? commercial the versus follow-up each in much your we you're smaller mean bucket commercial to competitors? weight share I to teams of market Main loan city? And gain

William Demchak

it Look, markets. was we're [indiscernible]. And percentage more losing markets new shots in than that's more old we're on goal I would just in a tell you the that there's pitches. more the than winning on winning true are than because today We're higher at we

there with have not loan-based years somewhat may said loan we importantly, them cross-sell growth the we've higher, where in that's new as into growth -- total So go is in our markets. into leading tepid. growth products other we those are the world a we outpaces services. markets and including that fully and as markets And and and we in markets, those might TM new be fact us Fee-based growth staffed, actually for products these credit new differentiates this

we into sight any growing as another just we of particular It's pipelines, we that at in one. each what at don't there's I So have that we're than market. line faster winning look product out that's know look something stands clients.

Michael Mayo

if private competitors be faster there your How growth now? much right capital much, no last How would loan follow-up. commercial were

William Demchak

companies I slow leverage lose because the of cost sometimes is But extent given to going a down the are which taken of. a to that's to client private, were think will in the I credit with the something And know, as I And business. that a of us guys think credit. way you then private the directly. may that margin of be lot mean inside business we impacts they lender capital, kind private. taken we that only partner

Robert Reilly

would A structure be the loan. be -- margin. -- wasn't that's that If that that conventional available would a it otherwise right

Operator

have a JPMorgan. question we . Vivek with Juneja from And

Vivek Juneja

what of thinking commentary et that? point the loan the of I thinking growth, Fed especially of triangulating at mild your your deposits putting peaking, those cetera, as Bill, are factors. about or other mean locking you recession, question What's that given for rates some about growing, there, your all you. some keeps when yields on all

William Demchak

think the itself. near of market's term, in the Well, got we ahead

I think of kind of clear happy until to inflation Fed we're or neutral. actions, we're and here the outcome stay clear

running Vivek, expectation simply what in the the here, 'XX I think could Fed calendar supply think with and of fact lot a is a is We'll you're issues. the inflation the the expectation the lot does funds their inflation longer against still I tail course my of Fed of somewhat, a while is will to have that have through not notwithstanding versus see action to be own Fed rate of going My rate. the going goal. and because ease

we we remain get short, the given a don't how going money the burning we and probably to opportunity typically think just hot the that to meeting. work story because see a put durations . here market long So last is invest little bit desire post in to and better got Fed

Vivek Juneja

turns see And higher got losing Do one, -- do loans. you that second one you've companies requirements increasing of to the for How lot to private private which spreads on on see as share hands going market not and that capital private the translating competition hand, creating Or do given high? hand, the think maintain way. so that other balance from spreads, staying you into hand, you course so talked that? is other the credit about a you you But that, obviously, other the out, returns. do maintaining into and on

William Demchak

before, So sure having the capital. capital of I'm shop. from that, different and the they the third some chase X activity But don't you of return opportunity private us are leverage order get environment. that could capital return gives it is on and of because of lending us kind high. I I'll capital time. Didn't effect talking Lending lending on that, said with private credit. inside And you've equity relationship, the money in your moment and we own an kind a fees that sake on again, return give heard money compete of for big price the great through annuity-like cycle, fees put additive yields a try investment now. from client you TM, it adequate relationship. with it, to What the of get universes credit a we're about this is the doesn't for in not doesn't return a don't period in that sees that's there's and Private credit know a we on a at on particularly markets-related get

Operator

this are There no further questions at time.

Unknown Executive

free if thank to reach Okay. much any for this in Thank out good Well, and you very luck follow-ups, you, quarter. call. IR to the you the team. participating And feel have

Robert Reilly

Thanks, everybody.

William Demchak

you. Thank

Operator

does participation That call for that Have everyone. for please disconnect ask the day, We conclude a great your you today. thank and you conference line. your

The PNC Financial Services Group, Inc. (PNC) 16 Jan 242023 Q4 Earnings call transcript