The PNC Financial Services Group, Inc. Q4 FY2025 earnings call

• 2025 was a successful year with $7 billion net income, $16.59 per share. Strong performance across lines of business with record revenue, 5% operating leverage, and 21% EPS growth.
• Closed acquisition of FirstBank in January 2025, excited about the opportunity and welcoming FirstBank employees.
• Ended 2025 with momentum, including client growth and branch expansion, poised to accelerate growth in 2026.
• Expect to generate positive operating leverage in 2026, with FirstBank's integrated results expected to add ~$1 per share to 2027 results.
• Pursuing a large investment agenda including technology, payments, consumer rewards, and branch expansions.

For the fourth quarter, loans averaged $328 billion, growing $2 billion or 1% linked quarter. Investment securities were $142 billion, decreasing $2 billion or 2%. Deposit balances averaged $440 billion, up $8 billion or 2%. Total revenue in Q4 was a record $6.1 billion, growing $156 million or 3%. Net interest income was $3.7 billion, increasing $83 million or 2%, with a net interest margin of 2.84%. Non-interest income was $2.3 billion, increasing $73 million or 3%. Full-year 2025 saw total revenue increase $1.5 billion or 7%, net income of $7 billion, and diluted EPS of $16.59 per share.

• Full-year 2026 average loan growth expected ~8%, total revenue up ~11%, net interest income up ~14%, non-interest income up 6%, non-interest expense up ~7% excluding ~$325 million integration expense, effective tax rate ~19.5%, expecting 400 basis points positive operating leverage.
• First-quarter 2026 average loans expected up ~5%, net interest income up ~6%, fee income down 1-2%, other non-interest income $150-200 million, total revenue up 2-3%, non-interest expense up ~4% excluding integration, first-quarter net charge offs ~$200 million, diluted common shares average ~4.06 billion.

• Exogenous variables as a potential risk, including unexpected credit card rates or other unforeseen events. The base economy is expected to have tailwinds, but exogenous factors could impact operations.

Q: Just a question, actually, straight to capital. On buyback front, I know you bought back $400 million in fourth quarter. You guided to this $600 million to $700 million in the deck. And then Rob, in your comments there, it sounds like you were pointing to that 6 to $700 million quarterly pace as something that could continue?

A: Yes. John, you're spot on there. 600 to 700 is a quarterly pace that we expect to continue through 'twenty six.

Q: Hey, Rob, was hoping you could maybe sort of delve into your thoughts on NII momentum for the year. It can be a little little noisy. Given that, you know, you had some stand alone thoughts previously. I think you all had been saying, you know, up like $1 billion or more of growth, if I recall, correctly. Now we've got First Thanks into the guidance. Maybe you can just sort of bridge the gap and go through any places where you're feeling incrementally know, better or or worse or or any change on how you see NII projecting through the year?

A: Sure. So our guidance with First Bank for the year, as you've seen, is up 14% in NII. Inside of that to your question, PNC stand alone, we're somewhere between 7.58% which is comfortably above the $1 billion that we said in the earnings call in the third quarter. So we feel good about it. Perfect.

Q: Bill, could I ask you to unpack a little bit In your prepared remarks, you commented very quickly on the investments that you've been making We all know in the branches and in technology, etcetera. Could you give us a sense as to how far along in this investment trajectory you are I mean, I know technology is ongoing, right? But like it was pretty quick, and I was hoping we could unpack a little bit where you are relative to where you want to be. And how first Bank integrates into all that.

A: Yeah. You know, I I I guess you know, in its simplest form, our new initiative CapEx expense, all embedded in our guidance. Rob Reilly: Is higher this year than it's ever been. I think if you depending on how you how you wanna how you wanna look at tech spend, maybe spend $3.5 billion and it's going to go up 10% plus or minus. For the year. And inside of that, AI is 20% of that increase. Beyond what we spend already. Most of it is just the number of things we have to drive momentum Right? So we're we're with the ongoing branch build and that will continue. So it's putting us in front of more clients. Rebuild of our our payments capabilities Think of it as along the same lines of the rebuild of our online banking where breaking it down to micro services, so it's more resilient and and faster to be able to change Modernization of our data centers, so we're always on All of our applications will be cloud native and will run-in a synchronous transmission between backup data centers. Continued investments in people in the new markets, including investments in people inside of the Colorado, Arizona markets. To take advantage of the First Bank footprint. All of that's inside of the guide we gave and all of that the ability to do that and still control expenses kind of comes on the back of this continuous improvement program. We're going to execute again in 2026 and a lot of the savings in 2026 coming out of our automation efforts. Some of which are related to AI. But some of which are just straight up automation. To allow us to continue the investment profile we've had for years.