The PNC Financial Services Group NYSE: PNC reported what management described as a “really strong start” to 2026, highlighted by the completion of its FirstBank acquisition early in the first quarter and solid organic loan growth in its legacy franchise. On the company’s Q1 2026 earnings call, Chairman and CEO Bill Demchak and CFO Rob Reilly pointed to expanding net interest margin, strong year-over-year fee income growth, and what they characterized as stable credit quality and deposit costs, while reiterating full-year guidance that incorporates acquisition-related integration expenses.
FirstBank acquisition adds scale; conversion planned for mid-June
Reilly said PNC completed the FirstBank acquisition during the first quarter, adding “$15 billion in loans and $22 billion in deposits.” The company said it remains on track for a “mid-June conversion,” which Demchak also referenced in his prepared remarks.
On expenses and integration, Reilly said non-interest expense rose 5% from the fourth quarter to $3.8 billion, including $97 million of integration expense. PNC reiterated its expectation for “non-recurring merger and integration costs” of approximately $325 million for 2026, with $98 million recognized in the first quarter and about $150 million anticipated in the second quarter, and the remainder in the second half of the year.
Asked about cost saves and run-rate timing, Reilly said that by the fourth quarter was “a good place to start” for the cost saves to run rate, while emphasizing the conversion and integration plan was “on track.”
Balance sheet growth led by legacy loan growth plus acquisition impact
On an average basis, PNC reported first-quarter loans of $351 billion, up $23 billion, or 7%, from the prior quarter. Reilly said spot loans increased $29 billion, or 9%, from year-end, including $15 billion from FirstBank and $14 billion of growth in legacy PNC loans. Within legacy loan growth, C&I loans increased $15 billion, which Reilly said was driven by “broad-based growth across businesses,” including strong new production and higher utilization.
Commercial real estate balances “reached an inflection point” and rose by about $100 million, and Reilly said PNC expects “moderate growth” for the rest of the year. Consumer loans declined $1 billion due to lower residential mortgage balances.
On deposits, average balances were $458 billion, up $19 billion, or 4%, reflecting FirstBank balances and a reduction in brokered CDs. Excluding those items, Reilly said trends were consistent with typical seasonality, as consumer deposit growth offset a seasonal decline in commercial deposits. Non-interest-bearing deposits remained 22% of total deposits, and PNC’s total rate paid on interest-bearing deposits declined 18 basis points to 1.96%.
In response to questions about growing core deposits in a higher-for-longer rate environment, Demchak said the bank’s focus is on “growth in DDA accounts and retail clients broadly,” describing the key driver as increasing the number of retail clients—“total shots on goal.” He pointed to branch expansion and “really strong” digital acquisition, noting PNC had opened eight branches so far in 2026 and plans to open 55 for the year, as referenced by Reilly on the call.
Net interest margin expands; fee income up year over year
PNC reported first-quarter net income of $1.8 billion, or $4.13 per common share, and $4.32 per share when adjusted for integration costs. Total revenue was $6.2 billion, up 2% from the fourth quarter, as net interest income increased 6% to $4.0 billion.
Reilly said the net interest margin was 2.95%, up 11 basis points, driven by FirstBank, lower funding costs, and commercial loan growth. Reilly also addressed the outlook for margin, saying PNC still expects to be “above 3% in the second half,” with much of the expansion coming from fixed-rate asset repricing.
Non-interest income declined 6% sequentially to $2.2 billion, while fee income decreased 2% from the fourth quarter. Segment details included:
- Asset management and brokerage increased 2% on higher average equity markets and client activity.
- Capital Markets and Advisory fell 5% as lower M&A advisory activity off elevated fourth-quarter levels was partially offset by higher underwriting and trading revenue.
- Mortgage revenue declined 20%, which Reilly attributed largely to a $31 million decline in MSR valuations amid heightened rate volatility.
Demchak and Reilly emphasized that the year-over-year trend was stronger: Reilly said fee income rose $240 million, or 13%, compared with the same period a year earlier, calling it “broad-based growth” across businesses.
On capital markets, Reilly said Harris Williams had a strong first quarter, albeit below the fourth quarter, and said pipelines were strong. He said PNC expects second-quarter capital markets revenue to be “essentially…at the same level” as the first quarter, and indicated the full-year expectation remains “up double digits.”
Credit metrics improve; management downplays private credit-related concerns
Management said credit quality remained strong. Reilly reported non-performing loans rose $25 million to 0.62% of total loans, improving from 0.67% in the prior quarter. Accruing loans past due declined to 0.43% from 0.44% last quarter. Net charge-offs were $253 million, including $45 million related to purchase accounting from the acquisition; excluding those acquired charge-offs, Reilly said the net charge-off ratio was 24 basis points. The allowance for credit losses ended the quarter at $5.5 billion, or 1.52% of total loans.
A key theme in the call was PNC’s exposure to non-depository financial institutions (NDFIs) and, more broadly, market concerns about private credit. Demchak said the “soundbite” for PNC’s NDFI exposure was that the company does not see “any loss content in this book” and does not see exposure to a systemic event. Reilly added that “nothing has changed” in the composition or underlying risk and called NDFI loans “our lowest-risk loans,” with about 90% investment-grade or investment-grade equivalent and robust collateral monitoring.
Reilly said PNC’s “business credit intermediaries” category is largely asset securitizations, “primarily trade receivable securitizations,” representing about 80% of the category. The remaining 20%, or about $7 billion, is “mostly comprised of CLOs secured by private credit provider assets,” which he described as senior positions with substantial excess collateral. He said the bank has experienced “virtually no losses going back 25+ years” in these businesses and expects “zero losses going forward.”
In the Q&A, Demchak went further, telling analysts that private credit-related exposure “isn’t even on the page” of what concerns him from a risk standpoint, adding that he worries more about sectors like trucking and areas dependent on fuel and discretionary spending.
Capital, Basel III proposal, and outlook for 2026
PNC said it returned $1.4 billion to shareholders in the quarter, split roughly evenly between common dividends and share repurchases. Reilly said the company expects quarterly repurchases to remain in a $600 million to $700 million range. PNC’s estimated CET1 ratio was 10.1%, down 50 basis points from year-end 2025, which Reilly attributed primarily to the FirstBank acquisition (about 40 basis points) and strong loan growth.
On the Basel III proposal, Reilly said the company expects the changes to be “a net positive” for CET1 relative to the current framework, with an initial assessment of an RWA reduction of about 10%, or $45 billion to $50 billion. In Q&A, he added that under both methodologies “upfront there is no AOCI,” which he said is “close to a full point of capital” for PNC, while noting the proposal remains in the comment stage.
For its macro view, Reilly said PNC’s base case assumes GDP growth of about 1.9% in 2026, unemployment drifting slightly higher to 4.6% by year-end, and no Federal Reserve rate cuts in 2026.
PNC’s second-quarter outlook versus the first quarter included expectations for:
- Average loans up 2% to 3%
- Net interest income up approximately 3%
- Fee income up 2.5%
- Other non-interest income in a $150 million to $200 million range
- Total revenue up approximately 3.5%
- Non-interest expense (excluding integration) up approximately 2%
- Net charge-offs of approximately $225 million
For full-year 2026 versus 2025, Reilly reiterated guidance for average loan growth of about 11%, net interest income up about 14.5%, non-interest income up about 6%, total revenue up about 11%, non-interest expense (excluding integration) up about 7%, and an effective tax rate of approximately 19.5%.
On the operating environment, Demchak acknowledged negative headline sentiment but said business trends seen in PNC’s day-to-day activity “are almost at complete odds” with consumer and small business confidence surveys, adding that spending has “accelerated.”
About The PNC Financial Services Group NYSE: PNC
The PNC Financial Services Group, Inc is a diversified financial services company headquartered in Pittsburgh, Pennsylvania, offering a broad range of banking, lending, investment and wealth management services. PNC operates a national banking franchise with a significant retail branch network and dedicated capabilities for commercial, institutional and government clients. Its services are designed to serve individuals, small businesses, corporations and public sector entities across the United States.
PNC's core business activities include consumer and business banking, residential mortgage lending, corporate and institutional banking, asset management and wealth advisory services.
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