PNC Financial Services Group Inc. posted better-than-expected third-quarter earnings Friday, helped by strong commercial lending growth that bucked an industrywide trend.
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Net income at the Pittsburgh-based bank rose 13% and revenue rose 8%. In addition to loan growth, the bank's results were also helped by higher interest rates and lower-than-expected expenses.
PNC is the first major regional bank to report results this quarter, but it is unclear if it will be a bellwether or an exception. PNC has posted better commercial loan growth than many of its peers throughout the year. Commercial lending growth has slipped across the industry, a disappointment to banks that had expected it to take off after the Trump election. PNC's commercial lending rose 7% from a year ago.
CEO William Demchak said the loan growth was partly a result of the bank's continued expansion of its commercial banking operations. "We haven't changed our credit standards here," Mr. Demchak said in a call with analysts.
The market's reaction was muted. Shares, which hit an all-time high this week, fell about 0.8% in early trading. Corporate fees were lower and PNC also had to increase its provision for credit losses. It said the latter move was partly because customers were hit by Hurricanes Harvey and Irma.
Like other big regionals, PNC is fighting to not be lumped in with the biggest universal banks.
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Asked what he would like to change about regulations, Mr. Demchak replied, "LCR, LCR and LCR," a reference to the so-called liquidity coverage ratio. That requires bigger banks to maintain enough cash to meet their liquidity needs for 30 days. He said he hoped the new administration would judge banks not just by asset size but by the riskiness of their activities, rather than lumping in PNC with "people that are four times our size."
Since the financial crisis, banks that have more than $50 billion in assets are subject to harsher regulations, including Federal Reserve stress test. But that encompasses a wide range. PNC has assets of $375 billion, while J.P. Morgan Chase & Co., the largest U.S. bank and Mr. Demchak's former employer, has $2.56 trillion.
Overall, PNC's net income was $1.11 billion, or $2.16 per share, compared with $988 million, or $1.84 a share, a year earlier. Analysts polled by FactSet were predicting the bank would earn $2.13 a share. Revenue was $4.13 billion, up from $3.83 billion.
Mr. Demchak also said he expects interest rates to drift higher as the Fed unwinds its balance sheet, but it was too early to guess any of the details.
The Federal Reserve has raised short-term rates four times since late 2015, which has already benefited PNC. Net interest income and its net interest margin, a measure of profitability, were up both over the quarter and the year.
Allison Prang contributed to this article.
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(END) Dow Jones Newswires
October 13, 2017 11:37 ET (15:37 GMT)