PNC Financial Services Group Inc.'s second-quarter earnings and revenue topped estimates, helped by higher interest rates and growth in commercial lending.
"This is a pretty good quarter for us," William Demchak, PNC's chairman and chief executive officer, said in a call with analysts.
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PNC's shares, however, fell about 0.7% in morning trading, though other banks were down more, including J.P. Morgan and Citigroup. Shares of Wells Fargo & Co., which also reported second-quarter results Friday, slipped almost 2%.
Pittsburgh-based PNC said it continues to expect loans to be up by mid-single digits for the full year. Analysts took that as an encouraging sign, especially amid industrywide questions about whether an election-fueled rally in bank stocks will translate into more bank lending. PNC officials said Friday they expect continued steady growth in U.S. gross domestic product.
The bank also announced it would expand corporate-lending offices into new regions. In an interview, PNC's head of corporate banking, Terry Begley, said businesses are creating "decent" growth in loan demand but are concerned by uncertainty around health care, taxes and other Washington debates. "They can live with different government policies," Mr. Begley said, referring to corporate customers, "but they want to know what it is."
Loans at the bank grew 4% from a year ago to $218 billion, fueled mostly by commercial lending, where PNC focuses most of its business. Part of that was due to the bank's purchase earlier this year of a portfolio of construction, transportation and other loans.
Over all PNC reported earnings of $1.09 billion, or $2.10 per share, up from $966 million, or $1.82 per share, in the year-earlier quarter. Revenue jumped 7% to $4.06 billion. Analysts polled by Thomson Reuters had forecast earnings of $2.02 per share on revenue of $3.99 billion.
PNC is the first major regional bank to report results this quarter. Its results came on the same day as those of bigger banks including J.P. Morgan Chase & Co. and Citigroup Inc. Both of those banks were hurt by weaker trading, a volatile business that doesn't impact most of the regional banks.
PNC also benefited from the Federal Reserve's decision to raise interest rates three times since December, which allows banks to charge more on loans. PNC's net interest income grew 9% compared with a year ago. Net interest margin, a key measure of lending profitability, was also higher.
Instinet analyst Bill Carcache said PNC results "set a high bar" for the regional banks that will report next week. But Terry McEvoy, an analyst at Stephens Inc., noted that the better-than-expected earnings were helped by a lower loan-loss provision, "which typically [is] not rewarded by investors."
PNC also announced it would open middle-market offices in Denver, Houston and Nashville next year. It recently expanded into Dallas, Kansas City and Minneapolis as well.
But another part of Mr. Demchak's strategy is to focus more on consumers. He acknowledged that the bank had historically underinvested in consumer lending and noted new consumer products, including a cash-reward credit card. "We have a lot of work to do," he said, "and it's going to take a while."
Still, that doesn't mean raising deposit rates for consumers any time soon. Like most other banks, PNC has been r eluctant to pass those higher rates along to deposit customers.
Mr. Demchak said he thinks "we're still a couple [Fed] moves away" before banks have to notably increase deposit rates for retail customers. And while some online lenders might be offering much higher rates, he said they represent only a tiny percentage of consumer deposits.
PNC previously experimented with higher promotional rates on some deposit products, but pulled away from that strategy to focus, it said, on customers who want a long-term relationship with the bank.
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(END) Dow Jones Newswires
July 14, 2017 13:17 ET (17:17 GMT)