PNC ups guidance after logging loan growth, finally

Bloomberg

PNC Financial Services Group is upping its guidance for loan growth in 2025, after more than two years of stubbornly-stagnant borrower activity.

The Pittsburgh-based bank is now forecasting a 1% rise in average loans for the year, a shift from its previous estimate that loans would remain stable. The uptick marks a turn for PNC, which logged its highest quarter-over-quarter average loan growth, at 2%, since the end of 2022.

PNC reeled in $3.85 in diluted earnings per share, beating the consensus analyst estimate of $3.55, the company announced Wednesday morning in its second-quarter earnings report.

"The strength of our franchise resulted in strong loan and revenue growth even through an uncertain macro environment, while expenses remained well controlled," said Chairman and CEO Bill Demchak in a prepared statement.

PNC also expects net interest income to grow by some 7% in 2025, at the high end of its previously-guided 6% to 7%. Noninterest income, though, is forecast to grow by 4% to 5%, potentially down from the previous projection of 5%.

Revenue in the second quarter was up 5% from the previous year, boosted by fee income and fixed- asset repricing, as banks continue to recover from the rapid rise of interest rates in 2022 and 2023.

Noninterest income growth, though, was flat from the previous year. While card and cash management helped lift fees for the bank, residential and commercial mortgage revenue was down.

Capital markets and advisory fees were a surprise standout in second-quarter performance, notching an 18% rise from the same time last year, and 5% increase from the prior quarter. The $15 million growth in the last three months marked an increase in capital markets activity late in the quarter, the bank said.

Read more on PNC: PNC | American Banker

Last quarter, the bank was still grappling with uncertainty from Trump administration tariff policies. Demchak said in the first-quarter earnings report that the trade proposals had thrown a wrench into strategic activities like mergers and acquisitions.

But the volatility also bolstered trading movement, which has helped financial institutions with investment banking arms log more fees. Citigroup and JPMorganChase said yesterday that a jump in markets activity had helped push up earnings in the second quarter.

Additionally, as some of the outcomes of the tariffs have become more clear, companies' appetite to make moves has increased.

PNC saw commercial and industrial borrowing pick up by 4% from the previous quarter, offset by a decline in commercial real estate loans. Wells Fargo, which reported second-quarter earnings yesterday, has also started to see the beginnings of loan growth.

Even while PNC predicts loan growth will outpace previous expectations, it's not all sunshine ahead.

In its cautionary statement, PNC added that "the higher tariffs are, the longer they remain in place, and the more uncertainty around them, the weaker growth will be and the higher the unemployment rate. The longer trade disputes persist, the greater the likelihood of near-term recession."

How PNC could get bigger

The $559 billion-asset PNC has been eyeing scale for years.

Demchak has repeatedly mentioned PNC's interest in acquiring another bank, if it had the "right core retail deposits in the right markets." But in February, he said valuations were too high, and in April, he said the "liberation day" tariff policy proposals, and uncertainty around interest rates, had likely tabled bank M&A for a time.

But, he said, the megabank was still keeping its eyes out for acquisition opportunities in the future.

"In the long run, I think there's going to be big consolidation," Demchak said on the company's first-quarter earnings call. "In the course of that consolidation, if we outperform in our organic growth, we will have the right to be an acquirer."

The company's last bank purchase was its purchase of BBVA USA in 2021, which grew market share in the South and Southeast. Last year, the bank said it would spend some $1.5 billion on branch growth and renovation, and it has leaned into payments technology. In May, PNC announced it had acquired Aqueduct Capital Group, a Charlotte, North Carolina-based broker-dealer focused on raising capital for private equity, private credit and real asset managers.

In the spring, the bank tapped former BlackRock executive Mark Wiedman as its new president, charged with helping the bank prepare for opportunities to scale. Wiedman told American Banker in April that PNC "thrives in periods of distress and disruption."

"Opportunity favors the prepared mind, so I think PNC is in a great position in the event of more market disruption," Wiedman said at the time. "When things get a little messier, that's when PNC can actually move. So that is exciting for me, in terms of what I'm going to be coming here to do."