PNC 3Q16 Earnings Call Notes

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PNC Financial Services Group’s (PNC) CEO William Demchak on Q3 2016 Results

Commercial lending appears to be on a stable path despite h.8 data

“We actually don’t expect a big change. We’ve kind of said stable, but slower growth for a while, and that’s what we’ve experienced and kind of what we see in the pipeline into the fourth quarter. I mean, I think, Rob can jump in here. If we look at the mix, we still got some growth on a large corporate on the back of M&A. We interestingly, for the first time in a while, saw some healthy growth in middle market, which we hadn’t seen for a while, continue to see real estate balance growth.
So it’s – on the C&I side, it’s kind of steady as it goes. And I’m not exactly sure, what’s happened with peers and with the H8 data. But as it relates to what we’re able to do with existing and new clients, we seem to be on a steady path.“

Not seeing any signs of stress in CRE. Former CMBS product now being structured as life insurance assets

“ Our real estate business has been fairly consistent for a number of years, where we kind of work with Class A developers and markets and products and that continues. Now, we have seen a slowdown in the origination of new projects and a pickup of balance related – balances related to permanent lending.
So think of the product that historically might have gone into CMBS is now being structured more like what we would call life insurance product, much lower leverage, better loan to value, and you’ll see that in our permanent lending line.
So we’re not seeing stress. In fact, our portfolio actually on a credit metric basis continues to improve. We would tell you that we monitor it pretty closely. We’re clearly seeing some signs of weakness in multifamily. In a couple of markets, we see some signs of weakness down in Houston on the back of oil and gas. But against our book, we feel pretty good about it.

Robert Reilly

Majority of energy related credit pressures have subsided

“Borrowing any dramatic changes in energy prices, we believe the majority of the energy-related credit pressures we’ve experienced in 2016 have largely subsided. In summary, PNC had a successful quarter, driven by growth in revenue and well-managed expenses. We grew loans and deposits and continued to deliver significant shareholder returns. We believe the U.S. economy will continue to grow at a steady pace, and our plans assume a 25 basis point increase in short-term interest rates by the Federal Reserve in December.”