Bill Demchak is hoping the Trump administration ushers in a less activist regulatory posture toward banks after it takes over next week.
"Let us do our jobs," Demchak, who has served as chairman and CEO of the Pittsburgh-based PNC Financial Services Group since April 2014, said Thursday on a conference call with analysts. "The banking industry does a lot of good for this country."
Demchak criticized regulators for devoting time and resources to issues that are secondary to safety and soundness. "We've repeatedly emphasized this notion of focus on the core risks," he said. "We spend too much energy on things that do not affect the safety and soundness of a banking institution and not enough, as we saw a year ago, on things that do."
While he didn't mention the agency by name, Demchak singled out two controversial initiatives — overdraft fees and credit card reward programs — being pursued by the Consumer Financial Protection Bureau. "The government has to get off of the assumption that somehow the banking industry is the piggybank to cure the ills of the world, all of the silliness around canceling fees and rebating and all the other stuff," Demchak said. "I think they've got to get back to following the law. That will be a good thing."
PNC ranks among the nation's largest consumer lenders, reporting more than $100 billion in average consumer loans as of Dec. 31, 2024.
Demchak's comments came as the $560 billion-asset PNC posted an 84% increase in fourth-quarter profits from a year ago, powered by tight expense control, a brightening credit forecast and a strong contribution from its corporate and institutional banking group.
Earnings for the three months ending Dec. 31 amounted to $3.77 per share, beating analysts' consensus estimate of $3.32, according to Truist Securities.
PNC's full-year profit of $6 billion rose about 5% from 2023.
"This was a solid quarter for PNC," Kyle Sanders, who covers PNC for Edward Jones, wrote in a research note Thursday. Sanders is forecasting dividend increases and accelerated share repurchase activity given PNC's strong capital position and anticipated earnings growth.
PNC reported record full-year revenue totaling $21.6 billion. It expects to beat that number by about 6% in 2025, predicting increases in both spread and noninterest income. "I have never been more excited about the opportunities in front of us to grow our franchise and deliver value for our stakeholders," Demchak said.
PNC spent most of 2024 in expansion mode. It announced a
While Demchak did not explicitly rule out a foray into the merger-and-acquisition market, he said PNC's strategy would likely remain focused on de novo expansion in 2025.
"The challenge is, and you are going to hear this on every earnings call, everybody is an acquirer, nobody's a seller," Demchak said. "I think the mindset you run into is, hey, we will hang out. We'll make more money next year, and we'll worry about whether we have a long-term franchise somewhere later. … That's an environment where as an honest buyer that's growing, it's tough to force an outcome, and we don't intend to try to do that."
Even with its growth plan in full swing, PNC kept operating expenses under control in 2024. Full-year noninterest expenses totaled $13.5 billion, down about 3% from 2023. "We had a 2024 goal of $450 million in cost savings from our continuous improvement program, which we exceeded," Chief Financial Officer Robert Reilly said on the conference call. PNC's cost-save target for 2025 is $350 million, Reilly added.
PNC reported nonperforming loans totaling $2.3 billion, or 0.73% of total loans. While nonperformers were up from the 0.68% reported at year-end 2023, they were down on a linked-quarter basis. The fourth-quarter provision for credit losses was down 76% from the same period in 2023 due to what the company described as "improved macroeconomic factors and portfolio activity."
"Credit quality was strong and the provision of $156 million finished well below estimates for [approximately] $300 million," Truist Securities analyst John McDonald wrote in a research note.
PNC continued to shrink its closely watched office portfolio. Office loans totaled $6.7 billion on Dec. 31, down 16% from year-end 2023 and 7% from Sept. 30, 2024. Office charge-offs were $62 million for the three months ended Dec. 31. That number was up 15% from the same period in 2023 but down significantly from the June 30, 2024, peak of $106 million.
While workers around the country are gradually returning to offices, the sector's overall outlook still remains in a "wait-and-see mode," Dan Mullinger, head of PNC Real Estate, said in a press release last month. Indeed, according to Reilly, PNC has increased its reserves for office loans and is bracing for a pickup in charge-offs. "We do expect more, so we just need to work through it," Reilly said on the conference call.
Mullinger sounded more hopeful about the prospects for CRE overall. "There is a real opportunity for 2025 to be the start of a return to normal activity in the commercial real estate marketplace," Mullinger said.
PNC's CRE portfolio totaled $33.6 billion on Dec. 31, about 11% of total loans.
PNC's fourth-quarter results were driven in large part by increased revenue from its corporate and institutional banking group, up 12% from the same period in 2023 to $1.37 billion, and noninterest income, which saw 4% year-over-year growth to $2.04 billion. "We grew customers, deepened relationships and continued to support all of our constituents," Demchak said.
PNC's loans totaled $316.5 billion at Dec. 31, down about 2% from year-end 2023. The company is predicting loan growth to be flat in 2025, though it is seeing some hopeful signs, Demchak said. He noted that originations of commercial lines of credit, a good barometer of future borrowing, are running high.
"Our unfunded commitment growth has been strong all year including in the fourth quarter," Reilly said. "Those are lines commercial customers are establishing that they're paying for, which is probably the strongest indication of borrowing intent."
Deposits of $426.7 billion were up 1.3% from Dec. 31, 2023. The increase occurred even as PNC reduced the rates it is paying in response to recent Federal Reserve interest rate cuts. PNC reported a fourth-quarter net interest margin of 2.75%. Reilly said he believes the NIM will approach 3% by the end of 2025.
