What The PNC Financial Services Group (PNC) Said on Its Q3 Earnings Call

The PNC Financial Services Group NYSE: PNC reported third-quarter 2026 net income of $2.1 billion and adjusted diluted earnings per share of $5.09, as the bank cited broad loan growth, expansion-market momentum and continued growth in client relationships.

PNC generated a return on tangible common equity of more than 18% during the quarter. Chairman and CEO Bill Demchak said the company’s businesses were seeing “robust growth,” supported by expansion markets and the conversion of FirstBank.

“We are bringing new clients into the franchise, expanding relationships across businesses and markets, and converting that activity into durable growth in loans, deposits, and fee income,” Demchak said.

Loan and Deposit Growth Accelerates

Average loans rose $9 billion, or 2%, from the second quarter to $372 billion. On a spot basis, loans increased $11 billion during the quarter. Through the first nine months of 2026, PNC added $47 billion of loans, or 14%; approximately $15 billion of that growth came from the FirstBank acquisition, while more than $30 billion was generated organically, according to Chief Financial Officer Rob Reilly.

Commercial and industrial loan balances increased $9 billion, or 4%, reflecting broad-based growth and higher utilization. Commercial real estate balances rose $2 billion, or 4%, on new production. Consumer loans declined $1 billion, as credit-card growth was more than offset by lower residential mortgages and the transfer of PNC’s student loan portfolio to held for sale.

PNC stopped originating student loans last year and said the sale of the remaining portfolio is expected to have a de minimis financial impact.

Demchak said approximately half of the quarter’s loan growth occurred in the final two weeks of the period, meaning the company did not receive the full net interest income benefit from those balances in the third quarter. He said loan pipelines remained strong, though higher interest rates could eventually constrain capital spending and borrowing demand.

In Corporate & Institutional Banking, PNC added about 500 client relationships year to date in expansion markets. Those markets contributed to 5% average C&IB loan growth during the quarter and 17% growth from a year earlier. Demchak said expansion-market C&I lending has been growing two to three times faster than in legacy markets.

Average deposits increased $4 billion, or 1%, to $461 billion. Period-end deposits rose $17 billion from June 30, driven primarily by an $11 billion increase in commercial interest-bearing deposits and $7 billion growth in brokered certificates of deposit. Non-interest-bearing deposits totaled $101 billion, representing 22% of total deposits.

Revenue Mix and Margin Outlook

Total third-quarter revenue was $6.6 billion, down 5% from the second quarter, while non-interest expense declined 8% to $3.8 billion. Excluding integration costs and significant items in both periods, revenue declined 1% and expenses fell 3%, producing positive operating leverage, Reilly said.

Net interest income increased about $100 million, or 2%, to $4.2 billion, supported by commercial loan growth and higher yields on interest-earning assets. Net interest margin declined 2 basis points to 2.94%.

Reilly said the margin was constrained by growth in high-credit-quality, lower-spread loans, as well as higher funding costs. Executives emphasized that these relationships can generate additional fee income and broader client engagement, even if their loan spreads reduce reported margin.

PNC expects net interest margin to reach 3% or more in the fourth quarter based on anticipated loan growth and fixed-rate securities repricing, although Demchak said that figure should not be viewed as formal margin guidance. Reilly said the company expects 2027 net interest income to exceed its projected annualized exit run rate for 2026, and indicated that consensus estimates of $1 billion to $1.1 billion of 2027 growth above 2026 were a reasonable range.

Fee income declined 6% from the second quarter to $2.1 billion, mainly because capital markets and advisory revenue fell 25% following elevated second-quarter activity. However, capital markets fees were up 40% year to date. PNC expects total fourth-quarter fee income to rise about 3.5% sequentially, including an expected roughly 15% increase in capital markets revenue.

Costs, Capital and Credit

PNC said it remains on track to reduce costs by $350 million in 2026 through its continuous improvement program, separate from the FirstBank acquisition. For the fourth quarter, adjusted non-interest expense is expected to rise about 5% sequentially, partly due to revenue-driven expenses in capital markets and private equity, as well as seasonality.

The company returned $1.4 billion of capital to shareholders during the quarter, including approximately $800 million in common dividends and $560 million in share repurchases. PNC expects fourth-quarter repurchases to be at approximately the same level. Its estimated common equity tier 1 ratio was 9.8%, slightly below its 10% target because loan growth increased risk-weighted assets, Reilly said.

Credit quality remained generally strong, though nonperforming loans rose $167 million, or 8%, to $2.2 billion. The increase included the pull-through of previously reserved commercial real estate office loans and one large commercial credit in the service-provider sector. Total delinquencies declined to $1.3 billion, or 0.34% of total loans, from 0.39% in the prior quarter.

Net charge-offs were $257 million, or 28 basis points of average loans, including $35 million related to the student loan transfer. Excluding that item, underlying charge-offs were consistent with the second quarter. PNC’s allowance for credit losses was $5.4 billion, or 1.42% of total loans.

Outlook and Strategic Priorities

For full-year 2026, PNC expects average loan growth of about 13.5%, net interest income growth of 15.5%, non-interest income growth of approximately 10.5% and total revenue growth of approximately 13.7% versus 2025. It expects non-interest expense to increase about 9.5% and its effective tax rate to be roughly 19.5%.

PNC’s economic base case assumes GDP growth above 2% in 2026, modest job gains and a steady unemployment rate. The company expects two additional 25-basis-point Federal Reserve rate increases, at the December 2026 and March 2027 meetings.

Demchak also said PNC’s current organic growth and planned artificial-intelligence transformation make the company hesitant to pursue a large acquisition. While he did not rule out smaller transactions, he said the company’s technology and AI-related organizational changes were strategically more important than adding scale through a major deal.

About The PNC Financial Services Group (NYSE:PNC)

The PNC Financial Services Group, Inc is a diversified financial services company headquartered in Pittsburgh, Pennsylvania. Through its banking and financial services businesses, PNC serves consumers, small and mid-sized businesses, corporations, government entities and institutional clients across the United States.

PNC's principal activities include retail banking, corporate and institutional banking, and asset management. Its products and services include deposit accounts, consumer and business lending, mortgages, credit cards, treasury management, investment banking, commercial finance, wealth management and investment advisory services.

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