PNC Financial 4Q16 Earnings Call Notes

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The PNC Financial’s (PNC) CEO Bill Demchak on Q4 2016 Results

Our loan growth trailed our peers last year because of risk management

“In our view for the most part of ’16 neither the credit, and certainly, not the rate markets offered us an attractive risk or reward opportunity. So we maintained higher than usual cash balances and our loan growth trailed peers.”

Extra regulatory costs probably don’t go away no matter what happens to the regulation

“The only other thing I’d say is that, that the regulatory burden as it relates to, if you’re thinking CCAR or heightened expectations or three lines of defense, they are certainly a lot of that, much of which by the way, we would keep and go through the exercise anyway. But there’s also a lot of regulatory costs that probably were missing from the industry historically. I’m thinking about to build an AML costs as we put bodies in operations and investment technologies as it relates to AML. I’m thinking about general compliance with consumer laws, independent of where and what happens to the CFPB, it’s clear that that we all had work to do on that. We are done investing in that by and large, but I don’t think those costs go away, no matter nor should they, no matter what really happens to the regulation.”

Rob Reilly

We’re expecting two rate increases one in June and one in December

“So, yeah, so on the revenue side, up mid-single digits, again around the loan growth that we have there. The rate backdrop, as I’ve mentioned, we have built into our plans two rate increases in 2017, one in June and one in December both 25 basis points.”

Middle market hasn’t really been borrowing

“So, there is loan demand out there coming from the BB+, BBB kind of sweet spot client for us, we’ll lend into that. But the issue in middle market for the last two years or three years, as they just haven’t borrowed. The borrowings you’ve seen have been largely large corporate and that’s been M&A related and/or share price, share repurchase which is driven leverage. I think there is a big opportunity for this country for kind of middle to small large size corporate to start investing in themselves and to grow.”

Reason I’m cautious is that nothing has really happened yet

“What I’m cautious about is nothing has actually happened yet, other than there has been a move in rates, right, and it changes sentiment. And I think we need to start seeing some of confirmations get through. We need to see real progress on tax reform. We need to see real progress on infrastructure, spending bills of state and local, and then all of a sudden, this thing takes flight, but right now, it’s just people talking about it.”