Inquiring about the capital markets pipeline, specifically if there's erosion in M&A or capital markets given uncertainty, or if pipelines remain robust.

Rob Reilly stated that while Q1 capital markets were lighter, Harris Williams (M&A advisory) had a good quarter and their pipeline is nearly 20% higher than last year, indicating robust activity. “Harris Williams in particular, their pipeline right now is close to 20% higher than it was this time last year. So the pipelines look good, John.”

Asking about PNC's expense leverage and areas for efficiency if a mild recession (unemployment slightly above 5%) were to occur.

Rob Reilly stated confidence in the current expense plan for positive operating leverage. Bill Demchak added that more Fed rate cuts in a mild recession could provide NII upside, offsetting some concerns. “The other offset under some presumption that we actually went into a mild recession and the forward curve is correct, and there's 4 cuts this year. We actually have -- with more cuts -- an amount of upside in our NII just at the margin. So I don't know that a mild recession dramatically changes our outcome here.”

Seeking clarification on Mark Wiedman's role as President, why he's the right person, and how he will grow the business, specifically if it implies a shift towards asset management or private credit.

Bill Demchak explained Mark brings broad skills, managed through crises, is tech-forward, and is a great talent. He clarified that Mark's appointment does not change PNC's strategy or imply a move into asset management or private credit. “Mark is going to come in and be the President, he's going to run our businesses. He comes in with a broad-based skill set. He's managed through crisis. He's advised on balance sheet. He's a student of the market, he's tech forward, he's been with a fast-growing company and he's a great talent.”

PNC

PNC Financial Services Group (PNC) Q1 FY25 earnings call: guidance and Q&A

Earnings call· Mar 2025 (Q1 FY25)· Financials· Apr 15, 2025

Source: earnings call transcript

Executive summary

The PNC Financial Services Group, Inc. Q1 FY25 — Strong Performance with Positive Operating Leverage and Record NII Outlook

The PNC Financial Services Group delivered a strong first quarter, marked by solid earnings and balance sheet growth despite increased market volatility and tariff uncertainty. The company achieved positive operating leverage and remains on track for record net interest income for the full year, supported by disciplined expense management and expanding net interest margin. Management is actively monitoring the evolving economic landscape while continuing to focus on organic growth and capital returns.

Highlights

Net income of $1.5 billion or $3.51 per share.
Spot C&I loans grew 3% to $181 billion.
Net interest margin expanded 3 basis points to 2.78%.
Tangible book value increased 5% linked quarter to $100.40 per common share.
Estimated CET1 ratio of 10.6% as of March 31.

Concerns

Increased market volatility due to tariff uncertainty, raising recession concerns.
Total revenue decreased $115 million or 2% linked quarter due to seasonality.
Noninterest income could be pressured throughout the balance of the year due to tariffs.
Capital Markets and advisory fees decreased $42 million or 12% linked quarter.
Other noninterest income included $40 million of negative Visa derivative adjustments.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year Net Interest Income	record NII high materiality	FY25	High
Full-year Average Loans	stable (equates to spot loan growth of 2% to 3%) high materiality	FY25	High
Full-year Net Interest Income Growth	up 6% to 7% high materiality	FY25	High
Full-year Noninterest Income Growth	up approximately 5% high materiality	FY25	Medium
Full-year Total Revenue Growth	up approximately 6% high materiality	FY25	Medium
Full-year Noninterest Expenses Growth	up approximately 1% high materiality	FY25	High
Full-year Effective Tax Rate	approximately 19% medium materiality	FY25	High
Q2 FY25 Average Loans Growth	up approximately 1% medium materiality	Q2 · FY25	High
Q2 FY25 Net Interest Income Growth	up 1% to 2% medium materiality	Q2 · FY25	High
Q2 FY25 Fee Income Growth	up 1% to 3% medium materiality	Q2 · FY25	High
Q2 FY25 Other Noninterest Income	$150 million and $200 million medium materiality	Q2 · FY25	High
Q2 FY25 Total Revenue Growth	up 1% to 3% medium materiality	Q2 · FY25	High
Q2 FY25 Noninterest Expense Growth	stable medium materiality	Q2 · FY25	High
Q2 FY25 Net Charge-offs	approximately $300 million medium materiality	Q2 · FY25	High
Q4 FY25 Net Interest Margin	approach 3% (2.90% range) high materiality	Q4 · FY25	Medium

PNC operating KPIs by quarter

PNC operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	This call Mar 2025 Q1 FY25	Jun 2026 Q2 FY26	Sep 2026 Q3 FY26	Change vs prior quarter
Common equity tier 1 ratio (CET1)	10.5% We remain well capitalized with an estimated CET1 ratio of 10.5% as of December 31. Source: earnings call transcript	10.6% We remain well capitalized with an estimated CET1 ratio of 10.6% as of March 31. Source: earnings call transcript	9.9% And we remain well capitalized with an estimated CET1 ratio of 9.9%. Source: earnings call transcript	9.8% We remain well capitalized with an estimated CET1 ratio of 9.8%. Source: earnings call transcript	-0.1 pt
Net interest margin	2.75% Net interest income grew by $113 million or 3%, and our net interest margin was 2.75%, an increase of 11 basis points. Source: earnings call transcript	2.78% And our net interest margin was 2.78%, an increase of 3 basis points. Source: earnings call transcript	2.96% Our net interest margin was 2.96%, an increase of 1 basis point. Source: earnings call transcript	2.94% Our net interest margin was 2.94% and decreased 2 basis points. Source: earnings call transcript	0 pt
Return on tangible common equity (ROTCE)	—	—	17.9% Our tangible book value was $111 per common share, up 2% linked-quarter and up 7% compared with the same period a year ago, and our return on tangible common equity at 17.9% in the second quarter. Source: earnings call transcript	18%+ And our return on tangible common equity was more than 18% in the third quarter. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Risks & headwinds

Increased volatility due to tariff uncertainty over the past two weeks

roiling the markets and raising concerns of a potential recession

Mitigation:continue to monitor and evaluate the situation, communicating with our clients to gauge their understanding

Potential for disruption in client activity due to tariffs balance of the year

noninterest income could be pressured throughout the balance of the year

Mitigation:closely monitor this as these factors continue to develop

Lower M&A advisory and trading revenue Q1 FY25

Capital Markets and advisory fees decreased $42 million or 12% linked quarter.

Mitigation:Pipelines for M&A advisory (Harris Williams) are strong.

Negative Visa derivative adjustments Q1 FY25

$40 million impact on other noninterest income.

Potential for higher probability of recession if tariffs are implemented as proposed and remain in effect Future, if tariffs persist

it's quite possible the probability of a recession will go up

Mitigation:actively assessing our portfolios and analyzing a wide range of factors, both positive and negative, that could impact our commercial and consumer exposures.

What to watch in Q2 FY25

Full-year Net Interest Income Growth

next quarter

Current on track for record NII / up 6% to 7%

Target Confirmation of "record NII" and "6% to 7% growth"

Why it matters

NII is a primary driver of bank profitability, and achieving record NII would signal strong core earnings power despite macro headwinds.

Importantly, we remain on track to deliver positive operating leverage and achieve record NII for the year.

Find out whether PNC delivers this. Inve re-checks your case every morning.

Q&A highlights

Seeking more color on the drivers of strong C&I loan growth, specifically if it's transient due to inventory build ahead of tariffs or precautionary draws for a recessionary backdrop.

Rob Reilly noted broad-based growth and increased utilization as expected, not massive shifts. Bill Demchak added that clients aren't explicitly building inventory for tariffs, but working capital lines inherently finance inventory.

“It's interesting. In all the dialogue that I've kind of had with clients, nobody is saying they're purposely building inventory in advance of the tariffs. Having said that, most of our lines finance working capital. So almost definitionally, there's some inventory build going on.”

asked by John Pancari · answered by William Demchak

2 min read 7 chapters

Detailed narrative

Economic Environment and Tariff Uncertainty

Management highlighted increased market volatility due to uncertainty regarding tariffs, which has raised concerns about a potential recession. While the situation is fluid, PNC is actively monitoring and assessing potential impacts on client businesses and portfolios. The company emphasizes its strong balance sheet, diversified business mix, and client selection as foundations for performance in uncertain times.

Strategic Focus and Leadership Addition

PNC continues to focus on organic growth opportunities, providing superior products and services, and deepening client relationships. The company announced the appointment of Mark Wiedman as President, bringing deep financial services experience to complement the existing team and support the current strategic game plan without changing the overall strategy.

Balance Sheet Strength and Capital Management

PNC maintained a strong balance sheet, with tangible book value increasing 5% linked quarter to $100.40 per common share. The estimated CET1 ratio stood at 10.6% as of March 31, with approximately $800 million returned to shareholders through dividends and share repurchases during the quarter. Management expressed confidence in capital flexibility and a willingness to accelerate buybacks at current share prices.

Loan Growth Dynamics

While overall average loans declined 1% linked quarter, spot loans increased 1%, driven by a 3% rise in C&I loans to $181 billion. This C&I growth was broad-based, reflecting higher utilization rates (up 80 bps to 50.3%) and new loan production, marking the largest increase since Q4 2022. Management noted that while some inventory build might be occurring, it's not explicitly tariff-driven.

Net Interest Income and Margin Expansion

Net interest income decreased 1% linked quarter to $3.5 billion, primarily due to fewer days in the quarter, but was partially offset by lower funding costs and fixed-rate asset repricing. The net interest margin expanded 3 basis points to 2.78%. Management reiterated confidence in achieving record NII for the full year and approaching a 2.90% NIM by Q4 FY25, supported by balance sheet management actions.

Expense Management and Efficiency

Noninterest expense declined 3% linked quarter to $3.4 billion, partly due to seasonality and Q4 asset impairments. PNC remains focused on expense management, targeting $350 million in cost reductions for 2025 through its continuous improvement program, which also funds ongoing business and technology investments. The company expects to achieve positive operating leverage for the full year.

Credit Quality and Reserves

Credit quality remains strong, with nonperforming loans stable and net charge-offs down to $205 million (26 bps NCO ratio), largely due to timing of CRE office resolutions. The allowance for credit losses totaled $5.2 billion (1.64% of total loans), reflecting increased downside weightings in CECL scenarios and considerations for tariffs. The current reserve implies an unemployment rate of 5% in its economic scenarios.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.