PNC FINANCIAL SERVICES GROUP, INC. Q1 FY2025 earnings call

• Current Environment: Increased volatility due to tariffs, monitoring and evaluating impact on economy and clients.
• Financial Results: Strong first quarter with net income of $1.5 billion or $3.51 per share. Loan growth in C&I, net interest margin expanded.
• Balance Sheet: Tangible book value increased to $100.40 per common share, CET1 ratio estimated at 10.6% as of March 31, and $800 million of capital returned to shareholders.
• Credit Quality: Strong, non-performing loans stable, provision $219 million reflecting macroeconomic factors.
• New Appointment: Mark Wiedman appointed president, bringing deep financial services experience.

Loans: Average loan balances of $317 billion declined $2 billion or 1% linked quarter, but period-end total loans grew over $2 billion or 1%. C&I loans were $181 billion on March 31, an increase of $5 billion or 3%. Net Interest Income: $3.5 billion, decreased $47 million or 1% linked quarter, with net interest margin at 2.78%, an increase of three basis points. Fee Income: $1.8 billion, decreased $30 million or 2% linked quarter. Asset management and brokerage income increased $17 million or 5%, while capital markets and advisory fees decreased $42 million or 12%. Revenue contribution: Net interest income contributed $3.5 billion (63.6% of total revenue), fee income contributed $1.8 billion (32.7% of total revenue), other non-interest income contributed $137 million (2.5% of total revenue).

• Full-year 2025 guidance unchanged, but tariffs may pressure non-interest income.
• Average loans expected to be stable (2%-3% spot loan growth).
• Full-year net interest income expected up 6%-7%, non-interest income up ~5%, total revenue up ~6%, non-interest expenses up ~1%, effective tax rate ~19%.
• Second quarter 2025: Average loans expected up ~1%, net interest income up 1%-2%, fee income up 1%-3%, other non-interest income $150M-$200M, total revenue up 1%-3%, non-interest expense stable, net charge-offs ~$300M.

• Uncertainty from tariffs raises potential recession concerns, which could pressure non-interest income.
• Fluidity of news makes it difficult to accurately assess economic outcomes and impact on portfolios.

Q: On the loan growth front, can you give more color around the drivers in C&I and potential transient line draws?

A: Rob and Bill discuss C&I loan growth drivers, utilization normalization, and no indication of clients purposely building inventory for tariffs.

Q: On capital markets trends, any erosion in pipelines?

A: Rob mentions capital markets were lighter than expected, but Harris Williams M&A advisory pipeline close to 20% higher than last year.

Q: On the new President Mark Wiedman, what is expected of him?

A: Bill states Mark brings broad skills, managed through crises, advised on balance sheets, and will run businesses.

Q: On NIM outlook, refresh thoughts on path to 3%?

A: Rob says they still expect to approach 3%, with Q1 at 2.78% and targeting 2.9% in Q4.

Q: On higher net charge-offs in Q2, what's driving it?

A: Rob explains it's due to lumpiness of CRE office charge-offs, which can fall into different quarters.