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PNC Financial Services (PNC)

Participants
Bryan Gill Director of Investor Relations
William Demchak Chairman, President and Chief Executive Officer
Robert Reilly Chief Financial Officer
John Pancari Evercore Partners
John McDonald Bernstein
Erika Najarian Bank of America Merrill Lynch
Scott Siefers Sandler O'Neill & Partners
Betsy Graseck Morgan Stanley
Gerard Cassidy RBC Capital Markets
Ken Usdin Jefferies
Kevin Barker Piper Jaffray
Brian Klock Keefe, Bruyette & Woods
Chris Kotowski Oppenheimer & Co.
Marty Mosby Vining Sparks.
Mike Mayo Wells Fargo Securities
Call transcript
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Operator

Good morning. My name is Colin and I will be your conference operator today. At this time, I would like to welcome everyone to the PNC Financial Services Group Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. reminder, is a recorded. As Instructions] this being call [Operator to the of I turn over the would now call Director Mr. Investor Relations, Bryan Gill. go ahead. please Sir,

Bryan Gill

today’s information financial measures related and this statements non-GAAP pnc.com presentation Cautionary included call Well, to in SEC well everyone. These PNC’s XX, CFO. release, Chairman, of as PNC and Today’s Relations. Colin, CEO, are all speak website as Executive are Services today’s conference Bill earnings statements Vice of and obligation July to and Demchak; update our XXXX, presentation Financial filings. them. These on reconciliations thank information. the as under Investor Reilly, call about contains corporate Participating good Group. and forward-looking President and this materials for Rob only no you, available PNC Welcome materials morning, are on President undertakes

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

William Demchak

Thanks, Bryan, and good morning everybody.

that quarter good strategic quarter share. our continued seen it metrics with really Overall, a PNC common in financial You've execution right moving on was the solid reported all we diluted key of morning net $X.X highlighted or per second priorities this thought $X.XX billion direction. our income by

would is We maintained positive with Credit strong Fed. our strong stable. in the year plan the and the we before definitely the quality income Fed both point as NIM grew was our but been adverse managed side in and regard did. achieving as which deposits without much year You efficiency. loss this results we out this operating scenario increased quarter declining grew solid we cash well was capital loans I our would at return interest the stress indicate we have our a position minimums. dividend securities improving while also positions our liquidity grew this The to seen than on and We and tougher corporate capital capital non-performers ever reduced CCAR grew and the and plan, post and net would consumer our quarter. In it’s severely objection. investment deliver our We fees focus customers we accepted leverage expenses above and remains to remain we in increase

the with On we conservative our the component, needed hindsight, share be. more repurchase of were with submission we than obviously to benefit

as Importantly want buybacks emphasize being that levels. to I though at we to current continue see attractive

business offerings, our to continued and consumer These corporate investments small healthcare franchise. of payments businesses. processing the our and new products include we lending banking invest middle-market and Finally, in projects, expansion service our digital ongoing

are fact, we that previously Phoenix year, I in our XXXX. the so, the happy early last announced success back feel XX to good looking in had execution. way Boston our further expanding the months Half we am forward about on announce the franchise or we’ve expansion to in through over the markets the of In and

do in creating model All to that we have including model. the relationship-based of lot back the of us. launch Our a half growth national said, year that of retail is opportunities working the business is our and digital work for

I to clients you for work over it that, the as continued employees to well With as our us. handing want to just over in our Before their thank Rob, hard Rob. trust for

Robert Reilly

everyone. Bill, Thanks, Great. and good morning,

income now per a virtually we good $X.XX billion reported and net $X.X diluted by it just measures. seeing of are Bill all quarter common was And share. or you by As mentioned,

increased same linked ago. it’s an Slide quarter X on and X% and quarter Investment quarter year continue cash compared and is at loans were X% relatively stable average basis. balances quarter and sheet our securities balance presented our the by year-over-year. X% Our down relatedly the Deposits grew quarter Federal to Reserve Total X% on deploy linked linked up And to a linked we were as liquidity. year-over-year.

III XXXX, common ratio income. reflecting June a accumulated return of to in our estimated continued was XX, as of XX, equity strong As shareholders down to Tier-X capital March and XXXX Basel from other decline be X.X% comprehensive X.X%,

we Importantly, paid of million for ratios we quarter million of billion returned million. We capital dividends strong income. net maintained shareholders of to common or even shares capital $X.X X.X XX% as $XXX $XXX second repurchased and

of Following shares quarters. month, quarterly dividend this $X.XX Board high a per approved effective all-time new also next repurchase four to $X to plan we the announced last Earlier in over month, XX% in results an CCAR our to up of share the the a increase billion August.

for Our return tangible equity our as quarter per our June $XX.XX XX, increase was X.XX%, an book compared was ago. value XX.XX% on second on common and X% to share the of was assets return a common average average year of

linked our billion primarily growth agency loans. by based same $X.X treasuries. up up was average to increased growth year. billion were ago, card in a home or quarter challenged across to offset $X.X securities or $XX.X credit remain continue at year-over-year and remains compared corporate first declines quarter continue lending and Turning reflecting in that deals to X% X% lending mortgage residential equity or billion million the loans Consumer billion broad to by our commercial Investment $XXX mortgage-backed and Compared X, and the million and quarter. the rate. Commercial lending. business $XXX The fewer US and $X.X pipelines credit increased were real estate approximately quarter meet residential Slide and steady appetite same linked pay-offs as was lending linked last was strong to declines billion $X.X partially Purchases compared we X% as education by billion and auto, risk our offset of C&IB was businesses, quarter banking partially in growth healthy. quarter. business. see CRE This $X.X increased led by a year securities

$X.X we continue liquidity. averaged billion $XX.X our $X.X linked deploy Fed for the billion the quarter down as at quarter, balances cash year-over-year, second to Our and billion

Turning commercial year, the lower deposits. offset to linked consumer quarter deposits X, period to billion increased approximately last growth $XXX deposits deposits, in or $X.X by by driven Compared Slide seasonally increased million by X%. partially same

As expected, increase continued quarter. in the to deposit second betas

Our while last since since our current was December beta XX%. XX% cumulative from XXXX quarter, beta up XXXX was March XX%,

Our the expectation is that year, cumulative will betas to remainder side on the consumer levels. lag increase of stated they continue the still throughout particularly as

driven non-interest $X.X on net billion. As up leverage we in delivered was year-to-date. the Revenue Slide first you X, increased can X% expense the and remained was quarter in quarter income continued strong quality management. operating the to It million, quarter was quarter second reflecting a X% overall credit second see was focus positive in our credit and net cost income compared both interest for income. the both in strong. and as quarter by $XX linked Provision Non-interest second losses quarter growth on

the in quarter rate impacted by tax strong effective Our second XX.X% pretax earnings. was

For year full the rate the XXXX, tax be we XX%. expect to effective to approximately continue

key Now this of details. let’s the performance more in drivers assess

X% by growth and X, or compared income higher same Turning the Slide higher was quarter yields partially to The to offset the we quarter. income the day on linked million additional year points quarter net increase an quarter. were in last as margin and revenues. million from growing benefited first remained Non-interest period to interest earning X% funding also costs. interest Net quarter increased $XXX assets compared year-over-year, linked second in as fee-based increased X% an X.XX%, of comparison X% or and focused basis $XX linked X

services main volumes, reflecting merchant mortgage. quarter decreased card, categories customer million grew in fees X% mortgage activity to of softness rights. linked our services seasonally shift Servicing a fee The sale purchases revenue fees or The by increased fees loan or as management and non-interest declined partially from cards. quarter away which pay-off sales linked growth on million was X% pressured credit residential Increased mix higher higher $XX follows: increased million a gain despite M&A despite these originations. Importantly, from also corporate in million. $XX result residential XX% declined and drivers syndication in advisory, refinancing as competition fees, as services in lower benefit and offset higher higher $XX as income, margins. the debit $XX largely due treasury income of a mortgage commercial fees loan servicing Consumer well are to

and income Finally, other increased a value fair of $XX quarter non-interest Visa net from $XXX included million million benefit first to compared $XX the million adjustments.

equity Additionally, and we had commercial revenue investments mortgage from higher activity. private held-for-sale loans

in we the continue forward, the range other income runrate expect security excluding $XXX million Visa activity. be that to $XXX million of to for Going and non-interest quarterly to

X, Slide seasonally higher $XX to reflecting linked or increased quarter million by expenses marketing. activities and business X% quarter Turning second

quarter, ratio and down XX% quarter was efficiency second Our year-over-year. both the linked in

track expense these through which costs in offset reduce across to full a and at $XXX As the achieve all are the higher of categories helping to in as wage new XXXX you improvement remain increase as we to well savings we know, our commitments personnel employees hourly the program have made continuous target. initiatives, year on by expenses end In XXXX, million goal our minimum to to we XXXX. are our related

linked by XX-days measure. XX linked the Our represent improved net for $X basis than million the X or or we in quarter. of Net second million delinquencies a linked or down loans unchanged by loans. due down a of in non-performing linked to million and year-over-year. for delinquencies the $XX quarter on first charge-offs presented lower down points million Total losses overall, X% million more. point metrics In quarter charge-off ratio Compared less decline commercial XX credit were basis past was were loans. decreased reflecting are driven total and every X% quarter, $XX Provision essentially X% continue provision declined Slide and total quality $XXX were $XX quarter credit quarter, consumer to annualized

quarter So in posted strong second results. PNC summary,

year, continued GDP. of For in the the remainder steady we growth expect

December. XX increase we interest basis in continue short-term expect September in rates but to now year, one than it point We expect occur rather to this more

of fee quarter second income, million. expect XXXX, In to which opportunity we be in outlook. the expenses in single-digits, we I year low and to expect fee full Looking third up of loan we fee expect second reported expect expect be compared first non-interest to the single-digits, to we total in range, mid-single-digit that well stable expectations to like quarter other to total low million strong guidance, take into I interest continue a revenue $XXX expect of would net to be just year in half income year provision income XXXX lower and account we the million expect as our to as now refine results, now our year growth. income interest higher seen to our ahead expect to we this performance marginally view to income third up be modest we we’ve $XXX we growth, between be our range. $XXX of half, on we million full quarter $XXX into Taking with light increases mid-single-digit resulting to the mentioned, upper-end grow expenses expect for Commensurate full higher the the rate

So in is clear, questions. to XXXX leverage as I remain be we revenue Bill range, to expect follows: operating we positioned expect guidance expect we results year full take we XXXX mid-single-digit ready our growth positive are importantly, to And to that, low-end of growth; growth; deliver adjusted and in compared the with the upper loan expense XXXX. mid-single-digit and your mid-single-digit

Operator

Pancari from comes go with open. question the your line first Your Evercore question. John Partners. with is Please The of Instructions] ahead line [Operator

John Pancari

Good morning.

William Demchak

John. Hey,

Robert Reilly

John. Hey,

John Pancari

rest the, that On is first pushing get part in second of growth revenue – revenue I better, the so the you Fed year factoring the in the still front quarter you the the revision the back other in come just particularly rational of is there bit the far year half or in the your are that little a – it your mentioned, given in only outlook now? of is strengthening higher outlook at on

Robert Reilly

higher little above. expected Good all important say, the I reasons we to I than all running and is, that morning. say, I’d it’s this for I’d think of continue is John, the to-date are mean, that we we you expect mentioned. the takeaway a Rob.

John Pancari

impact any paydowns if CapEx terms Okay. trade are Thanks. commercial improvement still what estate. maybe you right. see demand seeing seeing then, in related Wondering expect growth you indicated a and your the in presenting on example? outlook to unchanged side of that, was on loan talk the what in about And separately, loan you I real little you despite wars bit know the side, commercial All to demand any for are can we do and seeing. you are underlying are elevated just want

Robert Reilly

that, for and half healthy. the mentioned, we look the I’d at C&IB pipelines say as second when the Yes, I is year, of I’d say – credits loan

quarter, last change businesses specialty due was good. think pretty we I some generally market, the look component and big this strong the been to repatriation due that’s not couple and the of which change secured the speaking, CRE businesses, all pipeline as part business big corporate, slot. years our or the on looks it healthy, in it Large middle of I’d the banking tax reforms. But as is healthy. say and is think but some of nothing has over But the credit corporate cash

William Demchak

who with dialogue handful that, we up There trade, doesn’t the the seem all impacted look our it be but playing as to or notwithstanding point. And that pipeline be than more news obviously sales showing at on is subtracting in or loan demand are a it in doesn’t seem pipeline into at maybe even clients. to this it when

John Pancari

That’s right.

Operator

question of John the from next Our McDonald comes Bernstein. line with

Your go line is open. ahead. Please

John McDonald

Hi, stock investors really have focus good the the been to on by weighed little rates about flattening bit Wanted to a morning the that. X in curve, ask XX the bank down guys.

rates This to mid and of saw benefit to quarter kind short you we put the higher from in you longer-end. work cash

your is relative kind you for curve kind the wondering curve I where about it where kind happening So not of you that’s of this relevant, and am of is think how to debate fundamentals? relevant

William Demchak

debate. don’t know a it’s that I

did unwound X% securities I, this and floating year, from of But loans some from some rate curve we year going invested ten goes bound the front our end which we up keeps flattens, on of securities hurts range interest suffers. track benefit three years, but the ultimately that the but our at that as We swaps offsetting that. LIBOR on was would us ten the the extent day, I increased are if amount the inside to as year, we around it trading that of the around yield yield tell securities duration helps As rate hang it well. we see to on portfolio you

Operator

go line Erika Najarian comes Please your Bank Our from of next question the with of with ahead question. America.

Erika Najarian

good Hi, morning.

William Demchak

Good morning.

Erika Najarian

The one to recently gotten is, the your I’ve most on investors from question buybacks.

on you guess, Rob to I could message, of that in wondering wanted think the minimis the to where would I are dividend, CCAR de everybody and but repurchase you the open the focus capital got your XX% Bill cycle? without they be ask option Tier-X an additional

William Demchak

of your That’s a XX% new Tier-X capital rule. without…

Erika Najarian

basis sorry, points. Oh XX

William Demchak

Saying, yes.

Erika Najarian

points. XX basis

So not XX%.

So just that dialing down.

William Demchak

this Look, at process. point, got CCAR on done we the just

is The you to we one that is, relayed thing take it. year. put question answer you at So And of say resubmit no. course on acquisition, a that I are watch the buybacks, if and look the they to of through us play would the saving the we’ll also it, want we can of commentary a will our in if you for other some sort guys capital the course have

end growth whether little stupid holding more we next doing a day, it, bit good And of us It’s our talk – business. company but have anything year, heard or the the extra year about lot you’ve itself. in this we So opportunities vesting at with do a and inside capital do thing. the of we a not

de year the in are as at your and we we’ll with stuff, going goes use other to we So, it the whether silly minimis to look on our anything mean resubmit but do of capital. not time as the

Robert Reilly

the see attractive. do share price as we current And

William Demchak

yes. Yes,

Operator

Please & your Scott go Our Sandler of ahead question. with from with Siefers comes next question Partners. the O'Neill line

Scott Siefers

Good morning guys.

in on back sort hoping provision looks the could guess are I getting and that of – $XXX range guidance of kind look we was million a touch even conservative. bit though into where $XXX you phenomenon to million I Just to starts

back and to broadly? overall mean, into hoping get I trends take could how Just, so. it just you about strong are range trends little was would I what a that the you chat

William Demchak

have credits now mind low have so keep the things you we it. it are is single the of it’s that reason we than printing in One kind higher impact can and of to

So, have put us would below we a to is a cycle. easily. in expect we And that few pretty quarter that are sort of right go guiding on what a range on credits blip could in even that and back now you average the through range

So we takes blip it surprising ourselves. are maybe and be in just higher it us. and tiny a a saying move to at levels are really little keeps low we conservative And we’ll

Robert Reilly

that’s Yes, Scott, Rob. right. this is

two in or direction the are that range. We at either levels can in commercial deal low such a the just absolute particularly moving of literally portfolio, literally, affect working

And so, does to thing be, makes that good a good place but and – guidance… a that’s it the

William Demchak

number. Around low a

Robert Reilly

That’s right. That’s right.

Operator

comes the question line Betsy next from Stanley. of Graseck with Morgan Our

ahead. Your line go open. is Please

Betsy Graseck

Hey morning. good

William Demchak

Betsy. Hey,

Betsy Graseck

about on is couple talked there that there funding kind – restructuring beta we any just how you to a then of opportunity in you do give there, there quarters could you that an the side of over maybe there trajectory, cost we yields, balance on of and funds the little I thinking is about us restructure and outlook Question quite and uptick a is might are time up are Those you about in came that deposit side and color NIM on flow as consider? past shift we of the bit of of cost type funds any sheet? thinking non-deposit see know and the could the mix asset

William Demchak

into back just increase wholesale as mean, related as not our much in floating. else we increase to sure swap am funds I I LIBOR the the anything as follow, I effectively borrowings to cost of is

that our loan on rates other net-net of the increase a from it on in rates than cost floating rate we course on portfolio. impact interest hasn’t and basis So of gone relative benefit sort up

us So see now I get don’t opportunity. any see to and

Robert Reilly

Or need trends. to shift

William Demchak

Yes.

Betsy Graseck

sub there to Okay, no or like borrowed, the mix need just mix or senior and that on is all? or at – FHLB debt between other debt up

William Demchak

We pretty good place. are a in

Betsy Graseck

Okay.

push it’s Just us pushing really you it am a sense or roll you out. for specific on just that strategy, to – the follow-up out that because as where focused know it are on more doing rolling nation-wide basis you a others, I us? feels digital and marketing give you it have that than are is you MSAs Could as you really worrying are a to banking like, on that you I are

William Demchak

be don’t where the function specific purposely, find we At contagion an in core of open search we markets zip move effect to as markets. a to account will that it existing basically and a enabled and and geographies launch, Well, our We do it could codes, in basis then be on both ability and ultimately have don’t it all will branch presence. available bank with currently national so money.

few over be a markets announce do will focus will which you the that we’ll obvious select marketing on probably, next our it. We to month efforts we sometime when

will it actually are we’ll retail basis, markets to on and where not on focus but branches we be have So in we … building national where presence just relative a thin a very already available a network basically just

Robert Reilly

that effort. complement To

William Demchak

Yes.

Betsy Graseck

it. Got

so And Phoenix to… going Boston that you are that announced and that you include would

William Demchak

be will Eventually, our… they

Betsy Graseck

Okay.

William Demchak

Early ones.

Betsy Graseck

Got it.

William Demchak

you one, branches. It there see will be billboards day and available won’t

Robert Reilly

It’s in physical.

William Demchak

Fed. the in Now

Betsy Graseck

how then those you markets? And success types measure of do in

William Demchak

That’s a fair question.

because about have low a come what a effect cost point, we is this, big deposits with to plan don’t me deposits you’ve at heard associated chasing doing think, physical talk in. cost are the and I we with and them, this marginal

that in the given the offering it the I what have of of digital would cost take base able least simplicity the offset that of bank think, the to and in that and deposit as some players small linkage to build much we’ll ought there. branch So, as out to quickly at be we larger the other see to rest the our at we’ll brand the deploy grow marketing you doesn’t

Betsy Graseck

deposits? on pricing the and Okay, the

William Demchak

It’s going to competitive. be

Betsy Graseck

Okay.

Robert Reilly

learn. to looking are we And

Betsy Graseck

Okay.

Robert Reilly

Looking.

William Demchak

cost is opening of trend the with think to pay is, ability a actual and pricing between and I to grow core you I it. base a behind deposits don’t when of the in the moving at get and this rates account the which anybody digital – the think of part mean, low this towards knows network. part pay is going digital rest is accounts that I to if higher within what and definitely digital deposit convergence we

of learn marketing do somewhat will see it in are by each and test happens way differently we learn. way we we we’ll and relates as and So, to spend kind as going report to it we market the we’ll and what back the dollars

Betsy Graseck

online And gatherers? the versus deposit the competitive is competitive

William Demchak

Yes.

Betsy Graseck

right. okay. Thanks. Yes, That’s helpful. All

William Demchak

Yes.

Operator

of the next Cassidy Gerard RBC Our comes from Capital with question line Markets.

Please open. is ahead. line Your go

Gerard Cassidy

morning, Good Bill. morning, Good Rob.

William Demchak

Good morning.

Robert Reilly

Hey, Gerard.

Gerard Cassidy

nicely. category? of give you little in guys The you what gains You one-time color Can other more the Can in more equity, and number on generating give nature? the private that touched was detail equity there in revenue was us little what’s a private in us revenue. a up maybe

Robert Reilly

this sure. Yes, Gerard, is Rob.

The equity, other tend category and private includes various be but line a the to lot drivers biggest three CDA. asset items, of sales

very strong So quarter, private had adjustment. we a valuation as this then on top mentioned, that, the of Visa in and equity performance had we

So, can be guide that quarter was because big higher next where category in the drivers. XXX of to tends lower on quarter the lumpiness one but it the be in two of those just because and the XXX, really average, were to and to that’s it higher. this We

Gerard Cassidy

might going be kind opening, your year? checking out what’s not you through success later you any actually maybe what online then, to of, next of follow-up but funds channel, I until on out this on know, Thank guys hurdle. channel, folks through you. in a accounts to seems have accounts see. a you purchase or digital rolled a your customers year, lot thinking guys go checking figured money digital conversation we of done or more little on up of bit accounts the be the And a market Have this – of know the do guys it’s but have you new sense savings and digital, I opening – have time

Robert Reilly

unknown the question. That’s big

we out. fact, open in success of they lot that’s building The are have research basically that virtual by in comfortable to, in high-yield their evidenced a of to with are network says, can we the design something that largely comfort amount guess ability. and have going to to our we simplicity this a we excess sort giving – going But of account branch XX% can is some wallet by relationship go figure time are if to consumers wrong. build a bank as if of are a it then have and that. spent ultimately on first to best and the thin you to a believe account we to presence a But who go somebody there which convert subject screen savings digital we’ve will We with to up of with of amount screen that them what it something going the we of set and some

belief actually that we’ll own been see just times. and that to to far do much extent. don’t to learn long thus going and is through I My see and that it’s are we that you to able a We over how exceeds. correct are test going time, take will people haven’t know

Gerard Cassidy

Great. Thank you very much.

Robert Reilly

Yes.

Operator

Usdin Ken from comes with question Jefferies. next Our

Your line go open. ahead. Please is

Ken Usdin

much liquidity Thanks. you lot that put securities portfolio, had average on do Thanks. finding? XXX still the I still how What –a I obviously the ask Good securities to Do wanted and out of at of to remix on with morning especially into attractive the yield, guys. ability what are work. coming have is a Rob, quite yield loan-to-deposit you you more to money noticed cash? ratio? new you your

William Demchak

definition some the the X by seen or which of of adds with the so Sure, XXX and residential are than have you’ve is, be billion, approximately you Ken. purchasing the see in still regard In we billion total why higher treasuries, new of $XX is the which into high around level, to $XX that could can book securities. agencies level a terms what securities moved Federal liquidity, quality X% We movement. are lot in into

have still lot flexibility. we a So, of

to will on deploy We a tactical continue more basis. money

Ken Usdin

great. have your in that one question of hopes might down the down a great hopes to incremental didn’t road the pike come regulatory what the of banks Okay, some The And benefits on or offer outlook. any then, size, see you lot see? from that just might you might bill

William Demchak

Yes, Governor – public to will approach in separately industry items. They, to both conversation and I has think thin with out the scaled intend be of point what comments a made put groups. at of some a the more lot LCR some bucket some of

of for to have size like on suggested effectively Basel number of II billion, they things that. binary that that of as rather at effect than they rather something and language a are they be to measures impacted asset certain hope and scale Fed the line trigger a function So in out other of at and the going instead XXX, would than sort my and hard $XXX complexity to dollar by amount see all would body the would the have example LCR XX a

Robert Reilly

asset - versus size. we obviously, tailoring the the more are And to a approach simple the receptive that sheer

Bryan Gill

Next question please?

Operator

Kevin with Our next question Piper comes Barker Jaffray. from

open. Please line ahead. Your is go

Kevin Barker

morning. Good

William Demchak

Kevin. Hey,

Robert Reilly

Kevin. Hey,

Kevin Barker

the that this I – betas of the accelerated rest quite Rob, bit deposit consumer quarter expected mention quarter second to accelerate are even to a made the a through they’ve though here from And XX%. in up mean, the you first year,

have made you So this.

Robert Reilly

Yes.

Kevin Barker

it you catch-up expect we Is the go back the XX% do half? through the above year in move second half and to of as that

Robert Reilly

current and we cumulative I betas. chart, chart good break that is between Yes, betas a and in put that we’ve word why catch-up probably that’s think,

changed are still our you lagging. But see result this we and stated commercial was So, consumer what can on betas. a total, the quarter and went cumulative above across our betas current beta

the just – see do up So, will little I by I definition some cumulative pull the a see moves cumulative the but current beta, on beta acceleration which slower.

Kevin Barker

the the half given then, of back a revenue in funds at guidance, this and in probably have rate same growth higher betas grow to expansion or saw the And of loan half little Are a you at continue your quite assuming that least and year? it of combined given for with this implies of deposit first that Okay. rates in borrowing we outlook year the NIM. bit bit that acceleration in move

Robert Reilly

for say in that’s lot terms our it guidance that. of estimate. I’d thoughts to there, our year, but are what of the parts easy Well, A moving make that’s best is, baked all into those

Kevin Barker

much. Thank you very Okay.

Robert Reilly

Sure.

Operator

comes & Our Keefe, Bruyette Woods. with next the Klock of question from line Brian

Your open. line is ahead. go Please

Brian Klock

guys. morning Good

Robert Reilly

Brian. Hey,

William Demchak

morning. Good

Brian Klock

And spots the at so, deposit just a period looking the not I end balances. want question, the but balances to little bit of on side, overall beta follow-up and

since XXXX billion So over it it’s been X% the of XXXX, year-over-year. at roughly third down looks then and the of like billion quarter third the and end $XX about balances quarter now declining have $XX were the DDA

So, get guess, you out is being or some – commercial there conversations seeing they to I companies about customers rate, some of used. earnings going Bill, of into I actually mean, deposits those and shifting credit are of the try system

William Demchak

QE I in the I you been things. they couple seeing shift, and net it. I this corporate where has on a are mean, What the Look, liquidity gradually the both is us. interest-bearing the impacting from get guess system think into consumer that’s but side, dropping, don’t can

to moving not anybody. is So lazy and surprise a money really that’s

Brian Klock

mix deposit the And – the money And deposit you. in then, much that’s move accounts? do mix interest-bearing the growth? of to the help Got you how market CDs have total do the you versus growth have kind of of

William Demchak

sort a two think started more Rob, of We’ve market. months I little still It’s predominantly – XX quarter, just year aggressive, last money CDs. getting to

Robert Reilly

small been But to contrast handful of it’s but what last the active and it’s still years. a

William Demchak

Yes.

Brian Klock

Got it.

for guidance, down a I from as then, guess, follow-up, what seems million or million Okay, guiding FDIC in an guide, XX are thanks. fourth benefiting it it your the like surcharge, and we on quarter something plug that number, the the if XX% it’s the quarter. neighborhood estimate quarter expense XX% you like just took the a seems of third and I could XX maybe of to fourth And be

reinvesting or are savings? and potential including what guess, you surcharge are in guys your including quarter thoughts So a the that I fourth to thoughts in your for if way that guidance go what are on sort you do are – you of your

Robert Reilly

the higher of a – saw bit might including relief with balance that we assured into blend Events we and we our that all we we for the activity into revenue FDIC and a of estimate terms the took estimates. then commensurate isn’t in that up year, Well, guidance it expense which handicap. that a blend our little occur

Brian Klock

You way much for are a us too exact. being credit giving

Robert Reilly

see have a there items is We - XX different going on. things – lot

William Demchak

Trying to best our give you shot.

Robert Reilly

$XX going spend. billion on approximate within Lot

Brian Klock

fair Thanks a play. time. your guys. That’s Thank for you

Robert Reilly

Sure.

Operator

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

go Your line ahead your is with Please question. open.

Unidentified Analyst

I in And team. a is forward? going strength know Rob pretty this This the especially on business hi. quarter? Matt’s provide prior quarter. Treasury on can then Yes, have business from any presentations, seemed positive this that just maybe have this strong and highlighted color been the is outlook you’ve matters but for you

William Demchak

we that working. a probably from fees just it’s as gotten unusual, greater you clients of through seeing relationships get If the nothing the offering the we’ve mean, but I are into the out proportion relationship, newer of anything is we of cross-sell Southeast the some offering. sort credit an a acceleration of started and

and working. heavily for We continue it’s clients invest our technology-based in pretty solutions

Unidentified Analyst

XQ you costs That Okay. an separately, in LIBOR start all? spread you that, to benefit at on on widening I that average were bit have come on more has borrowing on that out we that have said, presumably know should swap up recently, meaningfully And basis. again then to the expect call. mentioned spread you given be quarter, in last or day the the guys this

William Demchak

broadly are of largely a ones again in in up over five cost and I threes out borrowing guess. fair LIBOR chunk to a months between of four, the hedge course the did we up basis the mean, last because rates fact, I find

you’d know third see going don’t whatever. beyond any impact that quarter I the into So

Robert Reilly

time to whether – can because we of weren’t jump call to there that just I we earnings was total our it not out – the just bit in and so in to that just that a going it mostly year. NII, was it’s size pointed that relative for its first sure the at a persist surprise

So it. we wanted to identify

we that from your quarter-over-quarter. narrowed bottom-line with benefit to one going on tactical way then also narrowed our because were into able did in to I months month substantially up, Bill month basis LIBOR loan we gap got the move one that point and – good relatively to a LIBOR index it flat, seeing whole quarter think it mentioned, when second subsided a we three issue and That from book. some

Unidentified Analyst

for Thanks color. it. Got the

Robert Reilly

Sure.

Operator

line comes question of the Company. from & next Our Chris from Kotowski Oppenheimer

line open. is Your Please go ahead.

Chris Kotowski

and Yes, concerned rising and look back the curve, deposit see growth. good banks, the about is stand trading growth the I guess net X.X% betas at morning. it flattening interest X.X% action loan but I seems big in everyone mostly a yield I and to other picture, guess, I and year-over-year stock looking when at me your income

deposit I the the rate you funds, of And still benefit I just guess, to a curve demand Fed further you’d not increase needs seems increase from an other in a to have significant does view what to I Fed getting a to have – a benefit? a not that so, or equity – further clearly me, and hikes is you? have and betas become it deposits, free and of assume Fed very for float mean, beneficial are extreme most when for impact order coming

William Demchak

our right. betas, make get it’s talk know I to the our about that’s don’t XX% interesting here by think we points, a if XX Fed people another as basis beta betas. number deposit Remember up beyond XX.X I goes stated and watch that’s points. basis

Chris Kotowski

Yes.

William Demchak

point. into a it on of so, with beta at carrying are we wherever top are we what Every this of time, cumulative

Fed are that between the then time. course, to were paying is. I And a particularly to accelerate going Fed simple is that So, logic you what pace a you betas you build understand and where maintaining the whole the that gap don’t with notion gradually gap get where of in

get So it doesn’t worse.

shop. in an but money, we it’s through dependent do The at what great environment. We to at time the we NII in fees not NII continue other case, opportunity are and less more as pace thing we an rates that a as our grow like we up has and least on go when make it less and volatile

– what will I it the do market will do. So,

Robert Reilly

with you. to tend We agree

Chris Kotowski

Yes. were kind I me think calibrated all it to it’s of business right. bank I I It’s still and most of a seems models just I benefit, still guess, mean, mean, kind was in range and kind mean, X% are an like were we of I I still that. the and that would between normal below in environment historically where you short rates X%, mean, say? –

William Demchak

so fear ultimately I one so prepaying ends balance legacy they margins quick of because can be mortgage forth was front-end just fixed that by case. just being to you Right, assets as sheet up the carry-on. say, lose is, just and isn’t curve, there you to see the constrained our that raise rate extent people is going the what assets rate that That – the contract. have fixed could out

Chris Kotowski

That’s you. right. Thank me. for All it

William Demchak

Sure.

Operator

question comes line of Vining And with our Sparks. next Marty Mosby from the

is go line Your Please open. ahead.

Marty Mosby

ask Thank you loan you. the Bill, growth. I want about to

is of that the competition of are and of, to see that in maybe market keeping legacy start probably when right is in? underwriting some Bill, what be half kind this that growing cycle the the Given we kind PNC to you position seeing are you part loosening, growing really the pricing in the of

William Demchak

we box our growth We credit have. that We the or other. one way maintain don’t purposely always throttle the

it We’ll of in deal where pretty if works last average. the points several quarters, them for saw in and this come we’ve compete on on the stay us. works for price a basis us, we quarter constant fact, seen for spreads So, couple a

down. our over are overheated. growth in win chase growth tightening not that that credit means is But of gotten we has time out as it’s crisis, market most that in we CRE that’s apparent tapered necessarily the both had strong that off quite which where coming just view in less credit we not deals total are we is why and competition else we So all to and equal loosening

Marty Mosby

for Rob, questions then two got I And you.

years, we liquidity, that becomes some began duration something almost the much flow no deploy the flatness that curve curve, have out the at mean, that to And to to or with benefit? that when you the from one you part kind fees short get of all cycle shorter it to yet month, take benefit lays and the much ten, all waiting cash of of because get the you right that brainer why a between that whole cliff in business look yield and then, this day kind and steepness get kind to start create one the benefit. still two or that of big and watch lastly, a Is going where again? one now, the you two yet. of on If much haven’t down gotten work we to just rates, don't duration mortgage kick I of from you but

Robert Reilly

I the rates. I comment would is exactly on just your comment mean, right.

get tens, an twos, go basis you points. You twenty extra

that. XX-year You’d to really a curve big to into have inversion to rallying buy from with want do here

So, and we doing. are what that’s part of

Marty Mosby

That’s right.

Robert Reilly

volume look, mortgages, On is XX%, volume purchase refi XX%, of down, our north where is versus

William Demchak

XX%, yes, XX%, yes, in purchasing. the

Robert Reilly

that volume see squeezed. going on so, capacity to you relying much the with you And purchase margin basically are are in market,

Marty Mosby

up again? mortgage Do hope the we in of activity formation you kind kicks picking get home as that

William Demchak

always is It hope. a

Robert Reilly

Yes.

William Demchak

I market changes seeing for basis a are the But in that around market the itself given we would time our we do mean, beyond that our better – in we’ve tough share like mortgage what that beyond fairly independent the you made a through are and in believe everybody’s market overall, on technology we to mortgages would does. results. on

Robert Reilly

and a be And perhaps, Marty, obviously a component strategic want us. are you right. for customers. it’s Mortgage do need smaller for to product it to able We is our

over So, I think to point so have we a for is up just purchase the Refi set while, further wait for ourselves Bill’s to volume.

Marty Mosby

Thanks.

William Demchak

Sure.

Operator

Mayo next with Fargo Mike from Securities. Our comes Wells question

Your go open. line ahead. Please is

Mike Mayo

a digital national had bank. on follow-up the I Hi,

going bank, a few markets are in to a did digital few So, branches? hear you on national and really right creating you’ll eventually opening markets select you I bank select those focus are up you be

William Demchak

it with broader set launch, a you you think as mean, the to the consumers markets. for presence pretty and you of much we’ll – brand very potential look we launch have digital. a get trust physical the that the have in extent you that much comes it be branches. open thin very, any But of handful like of retail I Yes, traditional in will with our won’t concurrent it’s fact, a network,

Mike Mayo

think to extra your noticing ever de this that new does retail related spend expansion? first of you what marketing stage up the corporate spend just marketing PNC was I lifecycle at I the and to confidence to this is am time expanded quarter-over-quarter, the am and novo wondering markets increase your has also And new I do that gives one-third

William Demchak

really Somewhat expansion. think don’t banking – we ever it market, done new to related on The done a way right, it, we’ve into new but we’ve I the are go never get C&IB think trailing to novo Look, are ability digital the you offering de has changed. model, president that the presence the local it of will side that’s presence, regional the marketing, brand on then with that the local and we works. going the retail the with either back the busters and game

way You now to twenty digital a you brand have have awareness network the didn’t and media get ability branch a that in social marketing just available for thin years through ago.

Mike Mayo

might Denver, be it am should going to So, Minneapolis, Kansas guess, guess you first, I it’s In I Houston, the cities, we of Nashville. well, think City, sense? – other – identify it make didn’t does words, Dallas,

William Demchak

riding.] and [A fewer odd, throw sets

Mike Mayo

Okay.

but of branches or? markets, So with Goldman like, Sachs it’s kind

Robert Reilly

Yes, that’s right.

William Demchak

– we are regional Mike, able because to a number grow channel different we have so, one, want deposits, priority be right capability find national to growth funding. Yes, to that’s loan now, right, because we against

a that is a those have is for time to. it spend behind to stone tipping as some comfort powerful in talk the if Right, with a there. platform the through in at our savings in convert savings those the PNC are been of that’s to virtual branches dealing least that we brand, go So somebody balance going a not somebody very they to relationships give stable wallet because simple is high-yield here good good long, customers that full to they to beyond handful as deposits long-term and there somebody we of need might of kind accounts us to make time. of the for with have so, into that and think actually the and And building these product that, curtain shot technology a the market, we converting person we we anybody But presence accounts. just yield in product lot we have way high such simply have grow a

Mike Mayo

the Last can have an to have tech firm with expertise consumer follow-up. in see against mean, banking. I valley, stay fin advantage you some I Silicon you’d why

hand, other someone isn’t the were from consumers tough I just that get against like mean, On an away incumbent come backyard, to Pittsburgh a to you, going if to the their in trying challenge?

William Demchak

no. and Yes

we a we’ll customers banks full savings markets convert products in online augment any that that market have yield the offer branches. than So a to relationship, the full offer handful are on that going so to with these of including and will be price. into will digital we Right, as we the today that, as with of high that a

virtual offer virtual product inside will rate. that this So, savings convert when a to they online wallet, wallet

to rates difference where be. world that zero, a no longer a big it in makes So and are

Mike Mayo

keep All close we’ll Thank right, a watch. you.

William Demchak

So will we.

Operator

And no there further are questions.

Bryan Gill

much call. Okay, for you thank participating the on very well,

William Demchak

Thanks everybody.

Robert Reilly

you. Thank

Operator

And call. conference today's concludes this

disconnect. now may You