PNC offsets modest loan growth with wider margins, strong fee income
PNC Financial Services Group in Pittsburgh said ongoing investments in its retail and middle-market businesses paid off in the third quarter, and fee income and lower federal taxes helped the bottom line, too.
Net income for the $380.1 billion-asset PNC rose 24% year over year to $1.4 billion. Earnings per share were $2.82, beating the mean estimate of analysts polled by FactSet Research Systems by 9 cents.
Net interest income increased 5% to $2.5 billion, and the net interest margin expanded 15 basis points to 2.99% as PNC benefited from higher interest rates paired with modest loan growth. Meanwhile, noninterest income increased 6% to $1.9 billion.
Earnings in PNC’s retail banking unit increased 21% to $283 million, partly the result of lower federal taxes compared with a year earlier. Net interest income in PNC’s retail banking unit increased 22% to $1.3 billion, but noninterest income declined 3% to $622 million.
Average retail loans increased 1.6% to $74.1 million as credit cards, auto loans, residential mortgages and unsecured installment loans grew, while home equity and education loans declined. Average deposits in that business increased 2.3% to $161.8 million and reflected a shift to more demand and savings deposits and away from money market deposits and CDs, the company said.
Earnings in PNC’s corporate and institutional banking business rose 26% to $665 million. Net interest income for that business remained mostly flat at $925 million, while noninterest income increased 6.6% to $592 million as merger and acquisition advisory fees and treasury management revenue rose.
Average loans in that business unit expanded 3% to $137.4 billion on strength in corporate banking, business credit and equipment finance. Average deposits ticked up about 1% to $88.1 billion.
"We grew average loans and deposits and continued to add new clients,” President and CEO Bill Demchak said in a press release Friday. “We're experiencing success with our national initiative to expand our middle-market capabilities in faster growing markets, and we launched our national retail digital strategy with a high-yield savings offer to be supported by an ultrathin retail network."
Asset management revenues also increased 15% to $486 million in the third quarter, the result of a lower federal tax rate on its earnings from its stake in BlackRock and higher equity markets.
Overall, nonperforming loans fell 10% to $1.7 billion. Net charge-offs fell 14% to $91 million and represented 0.16% of average loans, compared with 0.19% last year.