PNC's Profit Rises on Growth in Commercial Lending -- Update
October 13 2017 - 11:52AM
Dow Jones News
By Christina Rexrode
PNC Financial Services Group Inc. posted better-than-expected
third-quarter earnings Friday, helped by strong commercial lending
growth that bucked an industrywide trend.
Net income at the Pittsburgh-based bank rose 13% and revenue
rose 8%. In addition to loan growth, the bank's results were also
helped by higher interest rates and lower-than-expected
expenses.
PNC is the first major regional bank to report results this
quarter, but it is unclear if it will be a bellwether or an
exception. PNC has posted better commercial loan growth than many
of its peers throughout the year. Commercial lending growth has
slipped across the industry, a disappointment to banks that had
expected it to take off after the Trump election. PNC's commercial
lending rose 7% from a year ago.
CEO William Demchak said the loan growth was partly a result of
the bank's continued expansion of its commercial banking
operations. "We haven't changed our credit standards here," Mr.
Demchak said in a call with analysts.
The market's reaction was muted. Shares, which hit an all-time
high this week, fell about 0.8% in early trading. Corporate fees
were lower and PNC also had to increase its provision for credit
losses. It said the latter move was partly because customers were
hit by Hurricanes Harvey and Irma.
Like other big regionals, PNC is fighting to not be lumped in
with the biggest universal banks.
Asked what he would like to change about regulations, Mr.
Demchak replied, "LCR, LCR and LCR," a reference to the so-called
liquidity coverage ratio. That requires bigger banks to maintain
enough cash to meet their liquidity needs for 30 days. He said he
hoped the new administration would judge banks not just by asset
size but by the riskiness of their activities, rather than lumping
in PNC with "people that are four times our size."
Since the financial crisis, banks that have more than $50
billion in assets are subject to harsher regulations, including
Federal Reserve stress test. But that encompasses a wide range. PNC
has assets of $375 billion, while J.P. Morgan Chase & Co., the
largest U.S. bank and Mr. Demchak's former employer, has $2.56
trillion.
Overall, PNC's net income was $1.11 billion, or $2.16 per share,
compared with $988 million, or $1.84 a share, a year earlier.
Analysts polled by FactSet were predicting the bank would earn
$2.13 a share. Revenue was $4.13 billion, up from $3.83
billion.
Mr. Demchak also said he expects interest rates to drift higher
as the Fed unwinds its balance sheet, but it was too early to guess
any of the details.
The Federal Reserve has raised short-term rates four times since
late 2015, which has already benefited PNC. Net interest income and
its net interest margin, a measure of profitability, were up both
over the quarter and the year.
Allison Prang contributed to this article.
Write to Christina Rexrode at christina.rexrode@wsj.com
(END) Dow Jones Newswires
October 13, 2017 11:37 ET (15:37 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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