• Full Year Earnings: $6 billion or $13.74 per share.
• Fee Income Growth: Increased by 6% for the year.
• Capital Returned to Shareholders: $3 billion through dividends and share buybacks.
• Tangible Book Value Per Share: Increased by 12% year-over-year.
• Fourth Quarter Net Income: $1.6 billion or $3.77 per share.
• Fourth Quarter Total Revenue: $5.6 billion, a 2% increase from the previous quarter.
• Net Interest Income (Q4): $3.5 billion, a 3% increase from the previous quarter.
• Net Interest Margin (Q4): 2.75%, an increase of 11 basis points.
• Noninterest Expense (Q4): $3.5 billion, a 5% increase from the previous quarter.
• Provision for Credit Losses (Q4): $156 million.
• Effective Tax Rate (Q4): 14.6%.
• Average Loan Balances: $319 billion, stable compared to the previous quarter.
• Deposit Balances: Increased by $3 billion to $425 billion.
• Allowance for Credit Losses: $5.2 billion or 1.64% of total loans.
• CRE Office Portfolio Reserves: Increased to 13% as of December 31.
• 2025 Revenue Growth Outlook: Expected to be up approximately 6%.
• 2025 Net Interest Income Growth Outlook: Expected to be up 6% to 7%.
• 2025 Noninterest Income Growth Outlook: Expected to be up approximately 5%.
• 2025 Noninterest Expense Growth Outlook: Expected to be up approximately 1%.

• Warning! GuruFocus has detected 8 Warning Sign with PNC.

Release Date: January 16, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PNC Financial Services Group Inc (NYSE:PNC) reported a solid fourth quarter and a strong year, with full-year earnings of $6 billion or $13.74 per share.
• The company achieved record revenue and grew fee income by 6%, demonstrating strong performance across its franchise.
• PNC maintained expense discipline, delivering positive operating leverage and increasing tangible book value per share by 12% compared to the previous year.
• The company returned $3 billion of capital to shareholders through dividends and share buybacks, showcasing strong capital management.
• PNC's businesses, particularly in expansion markets, are performing exceptionally well, with record revenue in noninterest income and significant growth in consumer DDA and brokerage revenue.

Negative Points

• Loan demand remained soft throughout the year, impacting overall growth potential.
• The yield on total loans decreased by 26 basis points to 5.87% in the fourth quarter, primarily due to lower short-term rates.
• Commercial loans declined roughly $5 billion on a period-end basis, reflecting lower CRE balances and utilization rates.
• Noninterest expense increased by $179 million or 5% in the fourth quarter, including noncore items and higher marketing spend.
• The office CRE portfolio continues to face stress, with expectations of additional charge-offs due to challenges in the sector.

Q & A Highlights

Q: What are PNC's expectations for industry deposit growth in 2025, and how does PNC plan to gain market share in retail deposits? A: Robert Reilly, CFO, stated that PNC expects industry deposits to grow slightly by 1% to 2% over the year, with some seasonality in commercial deposits. PNC's organic efforts in expansion markets are progressing well, and the growth in consumer DDA accounts bodes well for gaining market share.

Q: Can you elaborate on the net interest income (NII) guidance for 2025 and the factors influencing it? A: Reilly explained that the NII guidance is conservative, assuming stable average loans for the year. The decline in the first quarter is primarily due to fewer days and seasonal commercial deposit fluctuations. The fixed-rate asset repricing will continue throughout 2025, contributing to the NII growth.

Q: How does PNC view loan demand and growth in light of the current economic environment? A: CEO William Demchak noted that while there are indications for increased utilization, PNC remains conservative in its loan growth forecasts due to ongoing uncertainties. The company is focused on client growth and maintaining flexibility without relying on loan growth to meet its financial targets.

Q: What are the main drivers of the 5% fee income growth outlook for 2025? A: Reilly highlighted that asset management, capital markets, and advisory services are expected to grow mid-single to high-single digits. Card and treasury management fees are also projected to increase, while mortgage revenue is expected to decline by approximately 10%.

Q: How is PNC managing its liquidity and capital levels, and what are the plans for share buybacks in 2025? A: Reilly mentioned that PNC maintains strong liquidity and capital flexibility, with a CET1 ratio of 10.5%. The company plans to continue share buybacks at the current pace of $100 million to $200 million per quarter, which is sustainable even with potential loan growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.