Even as PNC Financial Services Group prepares to enable the trading of cryptocurrencies through its mobile app, CEO Bill Demchak warned Friday about various threats associated with stablecoins.
In September, the $553.5 billion-asset company revealed that it was
Stablecoins, which are often pegged to the U.S. dollar, have drawn particular attention from regulators because of their explosion in popularity. These assets are used by crypto traders to transfer the value of their more speculative holdings instantly on exchanges without cashing out into hard dollars. Demchak said on a call with analysts Friday that he’s wary about their reliability.
“There's the risk, I think, that people are aware of with certain of the stablecoins having, let's call it, suspicious collateral behind them,” Demchak said.
The market capitalization of stablecoins was estimated to be $114.9 billion in July, up from $16 billion just one year prior, in a recent paper by Tim Massad, a senior fellow at the Brookings Institution and a former Treasury official in the Obama administration.
Central bankers are worried that the unregulated market for stablecoins could undermine sovereign currencies and the ability to set monetary policies around the world, according to the paper.
Demchak said Friday that if regulators don’t act, there is a risk over time of more savings, both domestically and in emerging markets, being tied to stablecoins.
“That would affect the economy and the ability to control the money supply long term,” Demchak said. “I know that's what the various regulatory bodies are looking at.”
Already, between 10% and 15% of PNC’s clients are moving money in and out of crypto exchanges, and the bank is looking to get into the business, he said.
“I don't have to opine on whether I think that's a good investment or a bad investment,” Demchak said. “They're interested in it, and our surveys confirm that.”
The Pittsburgh company reported $2.3 billion in noninterest income during the third quarter, accounting for about 45% of its revenue. A total of $213 million of the noninterest income came from BBVA USA, which PNC recently acquired.
Excluding business from BBVA, PNC generated noninterest income that was 10% higher from the previous three months. Including BBVA, noninterest income climbed 12%.
PNC has put teams in place to boost fee income from the BBVA assets and accounts, Demchak said. “We have an opportunity for fee momentum early on,” he said.
PNC’s revenue totaled about $5.2 billion during the third quarter, an increase of 21% from a year ago. The bank reported nearly $1.5 billion in quarterly profits, a 2.7% decline from the same period in 2020, as noninterest expenses rose 41%, due mostly to the costs associated with converting BBVA’s operation. PNC finished converting BBVA onto its system during the third quarter.
There were some signs of loan growth, and draws by business clients from credit lines ticked up slightly to their highest level since December 2020.
“What we're seeing for the first time is not just the new money going out the door,” Demchak said, “but we're starting to see that move in utilization."
