The PNC Financial Services Group (PNC) Morgan Stanley US Financials, Payments & CRE Conference 2024 summary

Guidance and interest rate outlook

• No changes to guidance for Q2 or full year; guidance assumes two rate cuts now expected in November and December, not July.

• Asset sensitivity was reduced through swaps and duration management, making the balance sheet neutral to short-term rate moves.

• NIM and NII are expected to bottom in Q2 and rise in the second half as fixed-rate assets reprice, with record NII projected for 2025.

• Majority of 2025 NII growth will come from rollover and repricing of securities and swaps.

• Neutral to short-term rates, asset-sensitive to medium/long-term; higher rates benefit repricing, but even moderate rates are favorable.

Deposits and loan growth

• Deposit balances are stable and outperforming expectations, with non-interest-bearing deposits higher than at Q1 end.

• Deposit mix has settled in the mid-20% range, and rate-seeking behavior has slowed.

• Commercial loan growth has been sluggish but is expected to pick up in the second half of 2024, driven by increased utilization and new client acquisition, especially in the Southwest.

• New credit facilities are being established, indicating anticipated borrowing within a year.

• Consumer loan growth is muted, but auto and card segments are targeted for expansion, leveraging a large consumer base and new product offerings.

Commercial real estate and credit quality

• CRE portfolio is stable outside of office; multifamily and hotels are performing well, but multi-tenant office remains under pressure.

• Office exposure is under $5 billion, with 14.5% reserves against criticized loans; about a third of the way through resolving office issues.

• Charge-offs are expected as office maturities occur, but reserves are considered adequate and are managed in real time.

• Net charge-offs remain below underwriting levels, with only modest increases in consumer delinquencies and some pressure in healthcare and transportation.