Commercial lending, fee businesses boost PNC's 1Q profits

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Growth in commercial lending and various fee businesses lifted first quarter profits at PNC Financial Services Group, even as the Pittsburgh company beefed up its provision for loan losses.

Net income increased 2.6% year over year to $1.3 billion. Earnings per share were $2.61, meeting the mean expectation of analysts surveyed by FactSet Research Systems.

"PNC delivered a very good first quarter. Year over year, we grew net income, and compared with fourth quarter 2018, net interest income was stable despite two fewer days, our net interest margin expanded and we kept expenses flat,” Chairman, President and CEO William Demchak said in a press release. “While the provision increased reflecting our solid loan growth, overall credit quality remained strong.”

The $386 billion-asset company more than doubled its provision for credit losses to $189 million in the first quarter to keep pace with loan growth. Compared with last year’s first quarter, net charge-offs rose 20% to $136 million, due to higher charge-offs in its auto and credit card portfolios.

Nonperforming loans fell 10% from last year to $1.6 billion and represented 0.71% of total loans, compared with 0.83% last year.

Average loans increased 3% to $228.5 billion. Commercial loans grew 4% to $154.7 billion, while consumer loans rose 1% to $73.8 billion.

Net interest income rose 5% to $2.5 billion. The net interest margin expanded 7 basis points to 2.98%.

Noninterest income increased 3% to $1.8 billion. PNC saw yearly growth in fee income from consumer services and corporate services, while asset management income fell.

Noninterest expenses rose 2% to $2.6 billion.

Average deposits rose 3% to $267.2 billion, but they also became more expensive. Non-interest-bearing deposits fell 8% to $71.4 billion, while interest-bearing deposits increased 7% to $195.8 billion. PNC said that growth in consumer deposits, through its national digital retail strategy, and a shift in commercial deposits drove that trend.

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