Q3 2026 PNC Financial Services Group Inc Earnings Call

October 15, 2026

Speaker #1: Greetings, and welcome to the PNC FINANCIAL SERVICES GROUP, Q3, 2026 earnings conference call. At this time, all participants ready to listen-only mode. A question and answer session will follow the formal presentation.

Speaker #1: You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #1: If anyone should require operator assistance, please press star zero on your telephone keypad. It's not my pleasure to turn the call over to Bryan Gill, Executive Vice President and Director of Investor Relations.

Speaker #1: Bryan, please go ahead.

Speaker #2: Well, good morning, and welcome to today's conference call for the PNC FINANCIAL SERVICES GROUP. I am Bryan Gill, Director of Investor Relations for PNC, and participating on this call are PNC's Chairman, CEO Bill Demchek, and Rob Reilly, Executive Vice President and CFO.

Bryan Gill: Well, good morning and welcome to today's conference call for The PNC Financial Services Group. I am Bryan Gill, Director of Investor Relations for PNC, and participating on this call are PNC's Chairman, CEO, Bill Demchak, and Rob Reilly, Executive Vice President and CFO. Today's presentation contains forward-looking information. Cautionary statements about this information, as well as reconciliations of non-GAAP measures, are included in today's earnings release materials, as well as our SEC filings and other investor materials. These are all available on our corporate website, pnc.com, under Investor Relations. These statements speak only as of 15 October 2026, and PNC undertakes no obligation to update them. Now I'd like to turn the call over to Bill.

Speaker #2: Today's presentation contains forward-looking information. Cautionary statements about this information, as well as reconciliations of non-GAAP measures, are included in today's earnings release materials as well as our SEC filings and other investor materials.

Speaker #2: These are all available in our corporate website, pnc.com, under Investor Relations. These statements speak only as of October 15, 2026, and PNC undertakes no obligation to update them.

Speaker #2: Now, I'd like to turn the call over to Bill.

Speaker #3: Thank you, Bryan, and good morning, everyone. The PNC delivered another strong quarter, reflecting the consistent execution of our strategy and the strength of our franchise.

Bill Demchak: Thank you, Bryan, and good morning, everyone. PNC delivered another strong quarter reflecting the consistent execution of our strategy and the strength of our franchise. As you saw, we generated $2.1 billion of net income, or $5.09 per diluted share as adjusted, while delivering a return on tangible common equity of more than 18%. Rob's going to take you through the financial results in more detail in a second. But I wanted to start off by highlighting the substantial client momentum we've been experiencing all year, which has continued through the Q3. All of our businesses are experiencing robust growth, in part driven by the high growth rates of our expansion markets and most recently the successful conversion of FirstBank. In Corporate and Institutional Banking, our national platform continues to generate impressive growth.

William Demchak: Thank you, Bryan, and good morning, everyone. PNC delivered another strong quarter reflecting the consistent execution of our strategy and the strength of our franchise. As you saw, we generated $2.1 billion of net income, or $5.09 per diluted share as adjusted, while delivering a return on tangible common equity of more than 18%. Rob's going to take you through the financial results in more detail in a second. But I wanted to start off by highlighting the substantial client momentum we've been experiencing all year, which has continued through the Q3. All of our businesses are experiencing robust growth, in part driven by the high growth rates of our expansion markets and most recently the successful conversion of FirstBank. In Corporate and Institutional Banking, our national platform continues to generate impressive growth.

Speaker #3: As you saw, we generated $2.1 billion of net income, or $5.09 per diluted share, as adjusted, while delivering a return on tangible common equity of more than 18%.

Speaker #3: Rob's going to take you through the financial results in more detail in a second. But I wanted to start off by highlighting the substantial client momentum we've been experiencing all year, which is continued through the third quarter.

Speaker #3: All of our businesses are experiencing robust growth, in part driven by the high growth rates of our expansion markets and most recently the successful conversion of First Bank, and corporate and institutional banking, our national platform continues to generate impressive growth.

Speaker #3: Expansion markets have added approximately $500 new client relationships year to date, contributing materially to a 5% average CNIB loan growth during the quarter, a 17% growth year over year.

Bill Demchak: Expansion markets have added approximately 500 new client relationships year to date, contributing materially to a 5% average C&IB loan growth during the quarter and 17% growth year over year. Beyond loans, capital markets fees are up 40% year to date, and treasury management revenue is up 8%. In Retail Banking, we continue to grow clients organically, adding 215,000 net new checking accounts so far in 2026, with total accounts up 2% year over year, including 6% growth in our Southwest markets. And we continue to deepen relationships with credit card balances up 12% and brokerage assets up 9% year over year. At the same time, we continue to invest in capabilities to enhance our franchise with the introduction of both a new mobile app and total rewards program, as well as our continued branch expansion.

William Demchak: Expansion markets have added approximately 500 new client relationships year to date, contributing materially to a 5% average C&IB loan growth during the quarter and 17% growth year over year. Beyond loans, capital markets fees are up 40% year to date, and treasury management revenue is up 8%. In Retail Banking, we continue to grow clients organically, adding 215,000 net new checking accounts so far in 2026, with total accounts up 2% year over year, including 6% growth in our Southwest markets. And we continue to deepen relationships with credit card balances up 12% and brokerage assets up 9% year over year. At the same time, we continue to invest in capabilities to enhance our franchise with the introduction of both a new mobile app and total rewards program, as well as our continued branch expansion.

Speaker #3: Beyond loans, capital markets fees are up 40% year to date, and Treasury management revenue is up 8%. In retail banking, we continue to grow clients organically, adding 215,000 net new checking accounts so far in 2026, with total accounts up 2% year over year, including 6% growth in our Southwest markets.

Speaker #3: And we continue to deepen relationships with credit card balances up 12% and brokerage assets up 9% year over year. At the same time, we continue to invest in capabilities to enhance our franchise with the introduction of both a new mobile app and total rewards program, as well as our continued branch expansion.

Speaker #3: Asset management fees are up approximately 10% year to date, and assets under administration total a half a trillion dollars. Favorable equity markets have obviously helped here, but once again, our expansion markets have accelerated our growth.

Bill Demchak: Asset management fees are up approximately 10% year to date, and assets under administration total a half a trillion dollars. Favorable equity markets have obviously helped here, but once again, our expansion markets have accelerated our growth. In these markets, AUM is growing five times faster than our legacy markets, albeit off a smaller base. When we step back and look at the year as a whole, we have grown considerably faster than we anticipated coming into 2026. 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. As we enter the final quarter of the year, we remain focused on disciplined growth, prudent risk management, and continued investment in the capabilities that strengthen our competitive position. As always, I would like to thank our employees for their hard work and commitment.

William Demchak: Asset management fees are up approximately 10% year to date, and assets under administration total a half a trillion dollars. Favorable equity markets have obviously helped here, but once again, our expansion markets have accelerated our growth. In these markets, AUM is growing five times faster than our legacy markets, albeit off a smaller base. When we step back and look at the year as a whole, we have grown considerably faster than we anticipated coming into 2026. 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. As we enter the final quarter of the year, we remain focused on disciplined growth, prudent risk management, and continued investment in the capabilities that strengthen our competitive position. As always, I would like to thank our employees for their hard work and commitment.

Speaker #3: And these markets, AUM is growing five times faster than our legacy markets, albeit off a smaller base. When we step back and look at the year as a whole, we have grown considerably faster than we anticipated coming into 2026.

Speaker #3: 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.

Speaker #3: As we enter the final quarter of the year, we remain focused on disciplined growth, prudent risk management, and continued investment in the capabilities that strengthen our competitive position.

Speaker #3: As always, I would like to thank our employees for their hard work and commitment. And with that, I'll turn the call over to Rob to take you through the details of the quarter.

Bill Demchak: And with that, I will turn the call over to Rob to take you through the details of the quarter. Rob?

William Demchak: And with that, I will turn the call over to Rob to take you through the details of the quarter. Rob?

Speaker #3: Rob?

Speaker #4: Thanks, Bill, and good morning, everyone. Our balance sheet is on slide 5 and is presented on an average basis. For the length quarter, loans of $372 billion grew by $9 billion or 2%.

Rob Reilly: Thanks, Bill, and good morning, everyone. Our balance sheet is on slide 5 and is presented on an average basis. For the linked quarter, loans of $372 billion grew by $9 billion or 2%. Security balances increased 3% to $151 billion. Average deposits increased $4 billion or 1% to $461 billion, and the borrowings increased $7 billion to $86 billion. However, on a spot basis, deposits increased $17 billion and borrowed funds declined $6 billion, reflecting continued optimization of our funding mix. Our tangible book value was $108 per common share, down 3% linked quarter, entirely driven by the decline in AOCI, and was stable compared with the same period a year ago. We remain well capitalized with an estimated CET1 ratio of 9.8%. We continue to be well-positioned with capital flexibility.

Speaker #4: Security balances increased 3% to $151 billion. Average deposits increased $4 billion or 1% to $461 billion. And the borrowings increased $7 billion to $86 billion.

Speaker #4: However, on a spot basis, deposits increased $17 billion, and borrowed funds declined $6 billion. Reflecting continued optimization of our funding mix. Our tangible book value was $108 per common share, down 3% leaned quarter, entirely driven by the decline in AOCI.

Speaker #4: And was stable compared with the same period a year ago. We remain well-capitalized, with an estimated CET-1 ratio of 9.8%. We continue to be well-positioned with capital flexibility, during the quarter we returned $1.4 billion of capital to shareholders, which included approximately $800 million of common dividends, and $560 million of share repurchases.

Rob Reilly: During the quarter, we returned $1.4 billion of capital to shareholders, which included approximately $800 million of common dividends and $560 million of share repurchases. Going forward, we expect Q4 repurchases to approximate the same level. Our return on tangible common equity was more than 18% in Q3. Slide 6 shows our loans in more detail. During Q3, average loans increased $9 billion or 2% to $372 billion. C&I balances increased $9 billion or 4%, reflecting broad-based growth across our businesses and higher utilization. Commercial real estate balances increased $2 billion or 4%, driven by strong new production. Consumer loans declined $1 billion or 1%, as growth in credit card was more than offset by lower residential mortgages, as well as the transfer of our student loan portfolio to held for sale.

Speaker #4: Going forward, we expect fourth quarter repurchases to approximate this same level. And our return on tangible common equity was more than 18% in the third quarter.

Speaker #4: Slide 6 shows our loans in more detail. During the third quarter, average loans increased $9 billion or 2% to $372 billion. CNI balances increased $9 billion or 4%, reflecting broad-based growth across our businesses and higher utilization.

Speaker #4: Commercial real estate balances increased $2 billion or 4%, driven by strong new production. Consumer loans declined $1 billion or 1%, as growth in credit card was more than offset by lower residential mortgages, as well as the transfer of our student loan portfolio to Held for Sale.

Speaker #4: You may recall we stopped originating student loans last year, and the transfer represents the final step in exiting this non-strategic business. We expect the sale to have a de minimis financial impact.

Rob Reilly: You may recall we stopped originating student loans last year, and the transfer represents the final step in exiting this non-strategic business. We expect the sale to have a de minimis financial impact. In regard to loans overall, spot loans grew $11 billion in the quarter, contributing to the strong loan growth we have had throughout the year, all of which substantially exceeded what we expected at the beginning of the year. Through the first 9 months of 2026, we have added $47 billion or 14%. While approximately $15 billion came through the FirstBank acquisition, more than $30 billion of the growth has been generated organically, reflecting strong client activity and execution across our franchise. Slide 7 details our investment securities and swap portfolios. We continue to maintain a high-quality, short-duration position. During Q3, average investment securities increased $4 billion or 3%.

Speaker #4: In regard to loans overall, spot loans grew $11 billion in the quarter, contributing to the strong loan growth we've had throughout the year. All of which substantially exceeded what we expected at the beginning of the year.

Speaker #4: Through the first nine months of 2026, we've added $47 billion or 14%, while approximately $15 billion came through the First Bank acquisition, more than $30 billion of the growth has been generated organically, reflecting strong client activity and execution across our franchise.

Speaker #4: Slide 7 details our investment securities and swap portfolios. We continue to maintain a high-quality, short-duration position. During the third quarter, average investment securities increased $4 billion or 3%.

Speaker #4: Our securities yield was 3.59%, an increase of 14 basis points. And as of September 30, our duration was 4.1 years. Looking ahead, we expect approximately $5 billion of fixed-rate securities to run off during the fourth quarter, at a weighted average yield of 2.65%.

Rob Reilly: Our securities yield was 3.59%, an increase of 14 basis points. As of 30 September, our duration was 4.1 years. Looking ahead, we expect approximately $5 billion of fixed rate securities to run off during Q4 at a weighted average yield of 2.65%. Our receive-fixed swap portfolio totaled $83 billion at quarter end, with an average received fixed rate of 3.92%, which increased 17 basis points from last quarter. Importantly, we have a clear path for continued fixed rate asset repricing over the next several years. Overall, we remain well-positioned for a rising rate environment, which will support net interest income, capital generation, and balance sheet flexibility. Slide 8 covers our deposit balances in more detail. Average deposits increased $4 billion to $461 billion during Q3, driven by growth in interest-bearing balances. Non-interest-bearing deposits were $101 billion and represented 22% of total deposits.

Speaker #4: Our received fixed swap portfolio totaled $83 billion at quarter end, with an average received fixed rate of 3.92%, which increased 17 basis points from last quarter.

Speaker #4: Importantly, we have a clear path for continued fixed-rate asset repricing over the next several years. Overall, we remain well-positioned for a rising rate environment, which will support net interest income, capital generation, and balance sheet flexibility.

Speaker #4: Slide 8 covers our deposit balances in more detail. Average deposits increased $4 billion to $461 billion during the third quarter, driven by growth in interest-bearing balances.

Speaker #4: Non-interest-bearing deposits were $101 billion and represented 22% of total deposits. Notably, period end deposits increased $17 billion or 4% compared to June 30. The strong growth was driven by commercial interest-bearing deposits, which increased $11 billion or 7%.

Rob Reilly: Notably, period-end deposits increased $17 billion or 4% compared to 30 June. The strong growth was driven by commercial interest-bearing deposits, which increased $11 billion or 7%. In addition, brokered CDs grew $7 billion. The commercial deposit growth was due in part to seasonality, but also reflective of both new and expanded client relationships. In regard to deposit costs, our total rate paid on interest-bearing deposits increased seven basis points to 1.98%, including brokered CDs. Excluding brokered CDs, the rate paid increased five basis points to 1.96%. The increase was primarily driven by mix as growth was concentrated in interest-bearing balances. Turning to slide 9, we highlight our income statement trends comparing Q3 to Q2 2026. Total revenue was $6.6 billion, a decrease of $313 million or 5%, while non-interest expense decreased $347 million or 8% to $3.8 billion.

Speaker #4: In addition, brokered CDs grew $7 billion. The commercial deposit growth was due in part to seasonality, but also reflective of both new and expanded client relationships.

Speaker #4: In regard to deposit costs, our total rate paid on interest-bearing deposits increased 7 basis points to $1.98%, including brokered CDs. Excluding brokered CDs, the rate paid increased 5 basis points to $1.96%.

Speaker #4: The increase was primarily driven by a mix as growth was concentrated in interest-bearing balances. Turning to slide 9, we highlight our income statement trends, comparing the third quarter to the second quarter of 2026.

Speaker #4: Total revenue was $6.6 billion. A decrease of $313 million or 5%, while non-interest expense decreased $347 million or 8% to $3.8 billion. Excluding integration costs and significant items from both quarters, revenue declined $61 million, or 1%, as higher net interest income was more than offset by lower non-interest income.

Rob Reilly: Excluding integration costs and significant items from both quarters, revenue declined $61 million or 1% as higher net interest income was more than offset by lower non-interest income. On the same basis, non-interest expense decreased $113 million or 3%, reflecting disciplined expense management. We generated positive operating leverage and grew PPNR. Provision was $189 million, stable with the previous quarter. Our effective tax rate was 20%. Q3 net income was $2.1 billion or $5.09 per common share as adjusted to exclude the impact of $48 million of after-tax integration costs and significant items. Importantly, we continue to demonstrate strong momentum across the franchise. Through the first nine months of the year, PPNR increased $1.2 billion or 17% compared to the same period last year, driving 19% growth in diluted EPS. Turning to slide 10, we detail our revenue trends.

Speaker #4: On the same basis, non-interest expense decreased $113 million, or 3%, reflecting disciplined expense management. We generated positive operating leverage and grew PPNR, provision was $189 million, stable with the previous quarter.

Speaker #4: Our effective tax rate was 20%. Third quarter net income was $2.1 billion, or $5.09 per common share, as adjusted, to exclude the impact of $48 million of after-tax integration costs and significant items.

Speaker #4: Importantly, we continue to demonstrate strong momentum across the franchise. Through the first nine months of the year, PPNR increased 1.2 billion or 17%, compared to the same period last year, driving 19% growth in diluted EPS.

Speaker #4: Turning to slide 10, we detail our revenue trends. Third quarter net interest income of $4.2 billion increased approximately $100 million or 2%, driven by commercial loan growth and higher yields on interest-earning assets, partially offset by increased funding costs.

Rob Reilly: Q3 net interest income of $4.2 billion increased approximately $100 million, or 2%, driven by commercial loan growth and higher yields on interest-earning assets, partially offset by increased funding costs. Our net interest margin was 2.94% and decreased two basis points. The modest decline in net interest margin was largely a function of the mix in loan growth, and to a lesser extent, increased funding costs. Consistent with what we have seen throughout the year, loan growth during Q3 continued to be concentrated in high credit quality, lower spread loans. While these loans generate attractive overall economics through fee income and broader client engagement, by definition, they constrain NIM. Importantly, the underlying drivers of NII growth remain strong, and based on our expectations for loan growth, we calculate that our net interest margin will reach 3% or above in Q4.

Speaker #4: Our net interest margin was 2.94% and decreased 2 basis points. The modest decline in net interest margin was largely a function of the mix in loan growth and, to a lesser extent, increased funding costs.

Speaker #4: Consistent with what we've seen throughout the year, loan growth during the third quarter continued to be concentrated in high credit quality lower-spread loans, again, while these loans generate attractive overall economics through fee income and broader client engagement, by definition they constrain NIM.

Speaker #4: Importantly, the underlying drivers of NII growth remain strong, and based on our expectations for loan growth, we calculate that our net interest margin will reach 3% or above in the fourth quarter.

Speaker #4: Fee income was 2.1 billion and decreased $137 million or 6%. Looking at the details, asset management and brokerage increased $7 million or 2%, driven by higher average equity markets and increased client activity.

Rob Reilly: Fee income was $2.1 billion and decreased $137 million or 6%. Looking at the details, asset management and brokerage increased $7 million or 2%, driven by higher average equity markets and increased client activity. Capital markets and advisory revenue decreased $144 million, or 25%, reflecting elevated Q2 activity. Card and cash management revenue decreased $3 million as higher treasury management product revenue was more than offset by FirstBank integration-related fee waivers. Lending and deposit services increased $12 million, or 3%, reflecting increased client activity. Mortgage revenue decreased $9 million, or 6%, primarily driven by lower residential volumes. Other non-interest income was $214 million and included a - $25 million impact from significant items related to net Visa activity. Notably, we continue to see strong momentum across our lines of business and throughout our markets.

Speaker #4: Capital markets and advisory revenue decreased $144 million or 25%, reflecting elevated second-quarter activity. Card and cash management revenue decreased $3 million as higher Treasury management product revenue was more than offset by First Bank integration-related fee waivers.

Speaker #4: Lending and deposit services increased $12 million or 3%, reflecting increased client activity. Mortgage revenue decreased $9 million or 6%, primarily driven by lower residential volumes.

Speaker #4: In other non-interest income was $214 million and included a negative 25 million impact, from significant items related to net visa activity. Notably, we continue to see strong momentum across our lines of business and throughout our markets.

Speaker #4: And through the first nine months of the year, our non-interest income totaled $7.3 billion, up $979 million or 15%, compared to the same period last year.

Rob Reilly: Through the first 9 months of the year, our non-interest income totaled $7.3 billion, up $979 million, or 15%, compared to the same period last year. Turning to slide 11, Q3 expenses decreased $347 million, or 8%, compared with Q2. Q3 results included $27 million of integration costs, compared to $261 million of integration costs in significant items in Q2. Excluding these items from both quarters, non-interest expense decreased $113 million or 3%. We remain focused on expense management, and we are on track to reach our goal to reduce costs by $350 million in 2026 through our continuous improvement program, which, as a reminder, is independent of the FirstBank acquisition. This program will continue to fund significant portions of our ongoing business and technology investments. Our credit metrics are presented on slide 12. Overall credit quality remains strong.

Speaker #4: Turning to slide 11, third quarter expenses decreased $347 million or 8%, compared with the second quarter. Third quarter results included $27 million of integration costs, compared to $261 million of integration costs and significant items in the second quarter.

Speaker #4: Excluding these items from both quarters, non-interest expense decreased $113 million or 3%. We remain focused on expense management, and we're on track to reach our goal to reduce costs by $350 million in 2026 through our continuous improvement program.

Speaker #4: Which, as a reminder, is independent of the First Bank acquisition. And this program will continue to fund significant portions of our ongoing business and technology investments.

Speaker #4: Our credit metrics are presented on slide 12. Overall credit quality remains strong. Non-performing loans increased $167 million or 8% to $2.2 billion. The increase was primarily driven by the pull-through of previously reserved CRE office loans as well as one large commercial credit.

Rob Reilly: Non-performing loans increased $167 million, or 8%, to $2.2 billion. The increase was primarily driven by the pull-through of previously reserved CRE office loans, as well as one large commercial credit. Total delinquencies declined $135 million to $1.3 billion and now represent 0.34% of total loans, down from 0.39% last quarter. Net charge-offs were $257 million, or 28 basis points of average loans, and included $35 million associated with the student loan transfer. Excluding that impact, underlying net charge-offs remained consistent with our prior quarter. At the end of Q3, our allowance for credit losses totaled $5.4 billion, or 1.42% of total loans. To summarize, PNC reported a strong Q3 2026, and we are well-positioned for the remainder of the year.

Speaker #4: Total delinquencies declined $135 million to $1.3 billion and now represent 0.34% of total loans. Down from 0.39% last quarter. Net charge-offs were $257 million or 28 basis points of average loans and included $35 million associated with the student loan transfer.

Speaker #4: Excluding that impact, underlying net charge-offs remained consistent with our prior quarter. At the end of the third quarter, our allowance for credit losses totaled $5.4 billion or 1.42% of total loans.

Speaker #4: To summarize, PNC reported a strong third quarter of 2026, and we're well-positioned for the remainder of the year. Regarding our view of the overall economy, our base case assumes GDP growth to be above 2% in 2026.

Rob Reilly: Regarding our view of the overall economy, our base case assumes GDP growth to be above 2% in 2026, with continued modest job gains and the unemployment rate holding steady. We expect the Fed to increase rates two additional times with a 25-basis-point increase at the December 2026 and March 2027 meetings, ultimately reaching a range between 4.25% and 4.5%. For ease of comparability with our prior guidance, our full-year outlook excludes the impact of FirstBank integration charges and significant items. Considering our reported 9-month operating results, Q4 expectations, and current economic forecasts, our outlook for the full year 2026 compared to 2025 results is as follows. We expect a full-year average loan growth of approximately 13.5%. We expect full-year net interest income to be up 15.5%. We expect non-interest income to be up approximately 10.5%.

Speaker #4: With continued modest job gains and the unemployment rate holding steady. We expect the Fed to increase rates two additional times, with a 25 basis point increase at the December 2026 and March 2027 meetings, ultimately reaching a range between 4.25 and 4.5%.

Speaker #4: For ease of comparability with our prior guidance, our full-year outlook excludes the impact of First Bank integration charges and significant items. Considering our reported nine-month operating results, fourth-quarter expectations, and current economic forecast, our outlook for the full year 2026, compared to 2025, results is as follows.

Speaker #4: We expect a full-year average loan growth of approximately 13.5%. We expect full-year net interest income to be up 15.5%. We expect non-interest income to be up approximately 10.5%.

Speaker #4: Taking the component pieces of revenue together, we expect total revenue to be up approximately 13.7%. Non-interest expense to be up approximately 9.5%. And we expect our effective tax rate to be approximately 19.5%.

Rob Reilly: Taking the component pieces of revenue together, we expect total revenue to be up approximately 13.7%, non-interest expense to be up approximately 9.5%, and we expect our effective tax rate to be approximately 19.5%. Our outlook for Q4 2026 compared to Q3 2026 is as follows. We expect average loans to be up approximately 2.5%, net interest income to be up approximately 4%, fee income to be up approximately 3.5%, other non-interest income to be approximately $250 million. We expect adjusted non-interest expense to increase approximately 5%, and we expect Q4 net charge-offs to be approximately $250 million. With that, Bill and I are ready to take your questions.

Speaker #4: Our outlook for the fourth quarter of 2026, compared to the third quarter of 2026, is as follows. We expect average loans to be up approximately 2.5%.

Speaker #4: Net interest income to be up approximately 4%. Fee income to be up approximately 3.5%. Other non-interest income to be approximately $250 million. We expect adjusted non-interest expense to increase approximately 5%.

Speaker #4: And we expect fourth-quarter net charge-offs to be approximately $250 million. With that, Bill and I are ready to take your questions.

Speaker #1: Thank you. And I'll be conducting a question-and-answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to be placed into question queue, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing *1. One moment please while we poll for questions. Our first question today is coming from John Pancari from Evercore ISI. Your line is now live.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment, please, while we pull up a question.

Speaker #1: Our first question today is coming from John Pancary from Evercore ISI. Your line is now live.

Speaker #2: Good morning. Is she preaching the color that you gave on the margin dynamics? You saw the compression in the quarter, but in deposit costs up seven pips or five pips extra brokered.

John Pancari: Morning.

Bill Demchak: Hey. Good morning, John.

William Demchak: Hey. Good morning, John.

John Pancari: Appreciate the color that you gave on the margin dynamics. You saw the compression in the quarter, and deposit costs up seven bips or five bips, ex brokered. Can you maybe discuss, given the deposit dynamics but also your continued growth in the lower spread, higher quality loans, maybe just discuss the confidence in that 3% or higher margin by Q4 and maybe just how you think of those dynamics impacting the margin as you look at 2027. I guess maybe just a little bit of color on what the trade-off is, how you are looking at the lower spread, higher quality loans in terms of the impact on NII and as you look out from here. Thanks.

Speaker #2: Can you maybe discuss given the deposit dynamics, but also your continued growth in the lower spread, higher quality loans? Maybe just discuss the confidence in that 2% or higher margin by the fourth quarter, and maybe just how you think of that.

Speaker #2: There's dynamics impacting the margin as you look at 2027. And I guess maybe just a little bit of color on what the trade-off is, how you're looking at the lower spread, higher quality loans in terms of the impact on NII and as you look out from here.

Speaker #2: Thanks.

Speaker #3: Good. Thanks, John. I'll hit it. I'm not going to talk about them because it's an outcome. So Rob kind of says, "Hey, we'll be over three." That's on a forecast.

Bill Demchak: Thanks, John. I will hit it. I am not going to talk about NIM because it is an outcome. Rob kind of says, "Hey, we will be over 3." That is not a forecast. Many things could change that. I will talk about NII, though. Couple things happened. One is 50% of our loan growth occurred in the last two weeks of the quarter. We did not get the benefit of that in NII, even though we sort of saw it in pipeline. That rolls forward in kind of Rob's forecast. The other thing, somewhat surprisingly, is spreads overall, where spreads on average decline was around 3 basis points or so.

William Demchak: Thanks, John. I will hit it. I am not going to talk about NIM because it is an outcome. Rob kind of says, "Hey, we will be over 3." That is not a forecast. Many things could change that. I will talk about NII, though. Couple things happened. One is 50% of our loan growth occurred in the last two weeks of the quarter. We did not get the benefit of that in NII, even though we sort of saw it in pipeline. That rolls forward in kind of Rob's forecast. The other thing, somewhat surprisingly, is spreads overall, where spreads on average decline was around 3 basis points or so.

Speaker #3: Many things could change that. I will talk about NII, though. The couple of things happened. One is 50% of our loan growth occurred in the last two weeks of the quarter.

Speaker #3: So we didn't get the benefit of that in NII, even though we saw it sort of saw it in pipeline. So that rolls forward and kind of Rob's forecast.

Speaker #3: The other thing somewhat surprisingly is spreads overall or spreads on average decline was around three basis points or so. And some of that was kind of high-yielding loans paying down, and some of it was just new production as we've talked about and kind of higher quality stuff dropping the average.

John Pancari: Yeah.

Bill Demchak: Some of that was kind of high-yielding loans paying down, and some of it was just new production, as we have talked about, and kind of higher quality stuff dropping the average, which has surprised us at the margin. The third piece, we did not have some escrow balances we thought we would have, which would impact non-interest bearing. You stick a calendar end date on this stuff and you miss by something, then you get it back. We are confident with the momentum and where we are going and the growth and all the above.

William Demchak: Some of that was kind of high-yielding loans paying down, and some of it was just new production, as we have talked about, and kind of higher quality stuff dropping the average, which has surprised us at the margin. The third piece, we did not have some escrow balances we thought we would have, which would impact non-interest bearing. You stick a calendar end date on this stuff and you miss by something, then you get it back. We are confident with the momentum and where we are going and the growth and all the above.

Speaker #3: Which is surprised us at the margin. And then the third piece, we didn't have some escrow balances we thought we'd have, which would impact non-interest bearing.

Speaker #3: So like you stick a calendar end date on this stuff and you miss by something and you get it back, we're confident with the momentum and where we're going and the growth and all the above.

Speaker #4: Which is part of our guide.

Rob Reilly: Which is part of our guide.

Speaker #3: Yeah. All that's embedded and kind of what we put out there forward.

Bill Demchak: Yeah. All that is embedded in kind of what we have put out there forward.

William Demchak: Yeah. All that is embedded in kind of what we have put out there forward.

Speaker #4: Yeah. You know, John, I just would add to that a little bit. In terms of NIM, generally speaking, everything that we thought would happen in the quarter happened.

Rob Reilly: Yeah. John, I would add to that a little. In terms of NIM, generally speaking, everything that we thought would happen in the quarter happened. Rate paid went up exactly what we thought on core deposits. The brokered CDs added to that a bit, but we didn't expect to do brokered CDs. As you know, we just toggle between the cheapest wholesale funding. The difference was the high credit quality, low spread loans came in hotter than what we thought, and that constrained NIM. That's the biggest difference in terms of NIM relative to our expectations. When we go forward into Q4, our calculation is to reach 3% or higher on NIM even though we don't give NIM guidance. The reason and the easy way to understand that is we see loan yields going up. We see that offset by deposit costs going up.

Speaker #4: Rate paid went up exactly what we thought on core deposits. The brokerage CDs added to that a bit, but we didn't expect to do brokerage CDs.

Speaker #4: As you know, we just toggle between the cheapest wholesale funded. The difference was the high credit quality, low spread loans came in hotter than what we thought.

Speaker #4: And that constrained them. That's the biggest difference in terms of NIM relative to our expectations. When we go forward, into the fourth quarter, our calculation is to reach three or higher on NIM.

Speaker #4: Even though we don't give NIM guidance, but the reason and the easy way to understand that is we see loan yields going up. We see that offset by deposit costs going up.

Speaker #4: So they offset each other. And then the securities fixed rate repricing will be the delta that lifts NIM. And that's just a calculation.

John Pancari: They offset each other, and then the securities fixed rate repricing will be the delta that lifts NIM. That's just a calculation. Got it. All right. Thank you for that. I appreciate it. On the lower spread lending and higher quality loans, could you just maybe elaborate a little more in terms of the type of lending? You gave a little bit of color there on the spread, but maybe the average origination yield. I know you've talked about the trade-off on fee income as well, and then higher quality from the credit side. Maybe give us an idea of the type of credit loss assumption as you put these loans on your books.

Rob Reilly: They offset each other, and then the securities fixed rate repricing will be the delta that lifts NIM. That's just a calculation.

Speaker #2: Got it. All right. Thank you for that. I appreciate it. And then on the lower spread lending and higher quality loans, can you just maybe elaborate a little bit more in terms of the type of lending and you gave a little bit of color there on the spread, but maybe the average origination yield and I know you've talked about the trade-off on fee income as well and then higher quality from the credit side.

John Pancari: Got it. All right. Thank you for that. I appreciate it. On the lower spread lending and higher quality loans, could you just maybe elaborate a little more in terms of the type of lending? You gave a little bit of color there on the spread, but maybe the average origination yield. I know you've talked about the trade-off on fee income as well, and then higher quality from the credit side. Maybe give us an idea of the type of credit loss assumption as you put these loans on your books.

Speaker #2: Maybe give us an idea of the type of credit loss assumption as you put these loans on your books.

Speaker #3: Sorry. Credit loss assumption?

Bill Demchak: Sorry, credit loss assumption?

William Demchak: Sorry, credit loss assumption?

Speaker #4: Very low.

Rob Reilly: Very low.

Speaker #3: Yeah. A lot of growth in the corporate finance book broadly. I think every category in our breakdown of corporate loans increases this quarter.

Bill Demchak: Yeah. A lot of growth in the corporate finance book broadly. I think every category in our breakdown of corporate loans increased this quarter.

William Demchak: Yeah. A lot of growth in the corporate finance book broadly. I think every category in our breakdown of corporate loans increased this quarter.

Speaker #4: That's right. Except other.

Rob Reilly: That is right. Except other.

Speaker #3: Yeah. Except other. Growth in pace by growth in real estate on a percentage basis. Also, just pay down of higher spread loans had an impact, right?

Bill Demchak: Yeah, except other.

William Demchak: Yeah, except other.

Rob Reilly: Possible.

Bill Demchak: Paced by growth in real estate on a percentage basis. Also, just pay down of higher spread loans had an impact. It is hard for new production to actually drop the total average spread by 3. What we saw was the mix of our existing loans, the pay downs bias towards riskier stuff paying off, which is kind of a good thing, but it drops our spread.

William Demchak: Paced by growth in real estate on a percentage basis. Also, just pay down of higher spread loans had an impact. It is hard for new production to actually drop the total average spread by 3. What we saw was the mix of our existing loans, the pay downs bias towards riskier stuff paying off, which is kind of a good thing, but it drops our spread.

Speaker #3: It's hard for new production to actually drop the total average spread by three. And so what we saw was the mix of our existing loans with pay downs biased towards riskier stuff pay it off, which is kind of a good thing, but it drops our spread.

Speaker #4: Yeah. No, that's right. And we're a leader in trade receivables, asset-backed that's been strong all year. But what we point to, John, and we said this on the second quarter call, you got to see capital market fees are up 40%.

John Pancari: Yeah. No, that's right. We are a leader in trade receivables, asset-backed.

Rob Reilly: Yeah. No, that's right. We are a leader in trade receivables, asset-backed.

Rob Reilly: Yeah.

Rob Reilly: That's been strong all year. What we point to, John, and we said this on the Q2 call, you got to see capital market fees are up 40%.

Bill Demchak: Yeah.

William Demchak: Yeah.

Speaker #4: So when you put that together, a lot of those loans are driving those fees. So together, accreted to NII, accreted to earnings, accreted to ROTCE, not necessarily NII because of the fee portion of that.

Rob Reilly: When you put that together, a lot of those loans are driving those fees. Together, accreted to NII, accreted to earnings, accreted to ROTCE. Not necessarily NII because of the fee portion of that. If you just look at NII and NIM in isolation, you are not seeing the whole transaction.

Speaker #4: So if you just look at NII and NIM in isolation, you're not seeing the whole transaction.

Speaker #2: Got it. Okay. Very helpful. Thank you. Next question is coming from Scott Seifers from TD Cowen. Your line is now live.

Bill Demchak: Got it. Okay. Very helpful.

John Pancari: Got it. Okay. Very helpful.

Operator: Thank you. Next question is coming from Scott Siefers from TD Cowen. Your line is now live.

Speaker #5: Thank you, guys. Morning for taking the question. I guess the first question, so you guys have just a lot of really good lending momentum, particularly in CNI.

Scott Siefers: Thank you, guys. Morning, thanks for taking the question.

Scott Siefers: Thank you, guys. Morning, thanks for taking the question. First question. You guys have a lot of really good lending momentum, particularly in C&I. I was hoping you could speak broadly to client sentiment and how, if at all, their thinking is being impacted by higher rates. I think Bill, you mentioned a second ago, half of the quarter's total loan growth occurred in the last 2 weeks. I am guessing not much, but would love to hear your thoughts there. Is there a tipping point in your mind where higher rates do start to impact the growth dynamic and client health, et cetera? How do you think about those crossroads?

Operator: Morning

Scott Siefers: First question. You guys have a lot of really good lending momentum, particularly in C&I. I was hoping you could speak broadly to client sentiment and how, if at all, their thinking is being impacted by higher rates. I think Bill, you mentioned a second ago, half of the quarter's total loan growth occurred in the last 2 weeks. I am guessing not much, but would love to hear your thoughts there. Is there a tipping point in your mind where higher rates do start to impact the growth dynamic and client health, et cetera? How do you think about those crossroads?

Speaker #5: I was hoping you could speak broadly to client sentiment and how, if at all, their thinking is being impacted by higher rates.

Speaker #5: I'm guessing I think Bill, you mentioned a second ago, like half of the quarter's total loan growth occurred in the last two weeks. So I guess I'm guessing not much, but would love to hear your thoughts there.

Speaker #5: And then, is there sort of a tipping point in your mind where higher rates do start to impact the growth dynamic and client health, etc.?

Speaker #5: How do you think about those crossroads?

Speaker #3: Yeah, Rob and I were talking about this last night, actually—just what does this spurt at the end of the quarter necessarily mean or not mean?

Bill Demchak: Yeah. Rob and I were talking about this last night, actually, just what does this spurt at the end of the quarter necessarily mean or not mean? I do not think we came to a conclusion.

William Demchak: Yeah. Rob and I were talking about this last night, actually, just what does this spurt at the end of the quarter necessarily mean or not mean? I do not think we came to a conclusion.

Speaker #3: I don't think we came to a conclusion. I would tell you part of the outsized, if not, we had loan growth everywhere. I was going to say part of the outsized, if not all of it—though, just the pace of it—is in our new markets.

Rob Reilly: Right.

Bill Demchak: I would tell you part of the outsized, if not. We had loan growth everywhere. I was going to say part of the outsized, if not all of it, though, just the pace of it is in our new markets. The new clients that we are onboarding at a record pace and our model is working. That's just driving volume. Intuitively, higher rates, this goes forward, is going to crimp CapEx and otherwise slow borrowing. We are not seeing any instance of that yet, and our pipelines remain strong.

William Demchak: I would tell you part of the outsized, if not. We had loan growth everywhere. I was going to say part of the outsized, if not all of it, though, just the pace of it is in our new markets. The new clients that we are onboarding at a record pace and our model is working. That's just driving volume. Intuitively, higher rates, this goes forward, is going to crimp CapEx and otherwise slow borrowing. We are not seeing any instance of that yet, and our pipelines remain strong.

Speaker #3: The new clients that we are onboarding that are record pace and our model is working. So that's just driving volume. Intuitively, higher rates this goes forward is going to crimp CapEx and otherwise slow borrowing.

Speaker #3: But we're not seeing any instance of that yet, and our pipelines remain strong.

Speaker #4: And we'll see. You have to imagine some of that is in anticipation of rates going up on the margin, at least a piece of it.

Rob Reilly: We will see. You got to imagine some of that is in anticipation of rates going up on the margin, at least a piece of it.

Speaker #4: But we don't know. Yeah, the pipeline is strong. That's true.

Bill Demchak: Yeah.

William Demchak: Yeah.

Rob Reilly: We do not know.

Bill Demchak: The pipeline is still strong.

William Demchak: The pipeline is still strong.

Rob Reilly: Yeah, the pipeline is strong. That is true.

Speaker #2: Okay. Perfect. And then maybe to drop it down, I guess, a little bit of a follow-up on some of the feed dynamics. I think at the larger banks, this notion of a sort of a cooling in the capital markets activity since call it post-Labor Day has been a big factor.

Scott Siefers: Okay, perfect. Then maybe to drop it down, I guess a little bit of a follow-up on some of the fee dynamics. I think at the larger banks, this notion of a cooling in capital markets activity since post Labor Day has been a big factor. Just curious how you are thinking about things like particularly at Harris Williams. It seems like very good activity, but just how you are thinking about the overall capital markets trajectory.

Speaker #2: Just curious how you're thinking about things, particularly at Harris Williams. Seems like very good activity, but just how you're thinking about the overall capital markets trajectory.

Speaker #4: Yeah, yeah. No, we feel good about it. Like I said, we've had a very good year to date. We had a really strong second quarter that we didn't expect to continue into the third quarter.

Rob Reilly: Yeah. No, we feel good about it. Like I said, we have had a very good year to date. We had a really strong Q2 that we did not expect to continue into Q3. But the pipelines are good. I imagine we will get into the fee walk down, but we expect capital markets fees to be up almost 15% quarter-over-quarter in Q4, reflecting those pipelines. So it looks good.

Speaker #4: But the pipelines are good. We expect— I imagine we'll get into the fee walkdown— but we expect capital markets fees to be up almost 15% quarter over quarter in the fourth quarter, reflecting those pipelines.

Speaker #4: So it looks good.

Speaker #2: All right. Terrific. Thank you very much.

Scott Siefers: Great. Terrific. Thank you very much.

Speaker #4: Sure.

Rob Reilly: Sure.

Speaker #2: Thank you. Next question is coming from Eric in Nigeria from UBS. Your line is now live.

Operator: Thank you. Next question is coming from Erika Najarian from UBS. Your line is now live.

Speaker #1: Yes. Thank you. Hey. Just as a follow-up on that, I got a few questions on the run rate of expense growth in the fourth quarter, but it sounds like I'm going to be answering my own question, Rob.

Erika Najarian: Yes, thank you.

Erika Najarian: Yes, thank you. Hey. Just as a follow-up on that, I got a few questions on the run rate of expense growth in Q4, but it sounds like I am going to be answering my own question, Rob. With the capital markets trajectory up 15% quarter-over-quarter, that is really that related to Cap markets. So that is not necessarily a pull-through as we think about expense growth in 2027, right?

Rob Reilly: Erika.

Erika Najarian: Hey. Just as a follow-up on that, I got a few questions on the run rate of expense growth in Q4, but it sounds like I am going to be answering my own question, Rob. With the capital markets trajectory up 15% quarter-over-quarter, that is really that related to Cap markets. So that is not necessarily a pull-through as we think about expense growth in 2027, right?

Speaker #1: With the capital markets trajectory up 15% quarter over quarter, that's really related to capital markets. So that's not necessarily a pull for us as we think about expense growth in 2027, right?

Speaker #4: Yeah, that's right. That's right. Well done.

Rob Reilly: That is right. Well done.

Speaker #1: Got it. Yay, gold star. And just on net interest income, some of your peers, unfortunately—JP Morgan and BofA—gave previews on net interest income growth for the year.

Erika Najarian: Got it. Gold star. On net interest income, some of your peers, unfortunately, JP Morgan and B of A gave previews on net interest income growth for the year. Correct me if I am wrong, Rob, but I am calculating something like 10% ex FirstBank net interest income growth for 2026. The Street is at about 6.5%. Given the momentum that you have in your new markets, and you mentioned that you are well-positioned for a rising rate environment, should the rate of NII growth slow down by that much in 2027?

Speaker #1: And correct me if I'm wrong, Rob, but I'm calculating something like 10% ex-First Bank net interest income growth for 2026. The Street is at about 6.5%.

Speaker #1: Given the momentum that you have in your new markets, and you mentioned that you're well positioned for a rising rate environment, should the rate of NII growth slow down by that much in '27?

Speaker #4: Did you say unfortunately the peers at talked about 2027?

Rob Reilly: Did you say unfortunately, the peers had talked about 2027?

Speaker #1: Unfortunately, they've already previewed the '27, so now we kind of have to ask you about '27, even though it's still October.

Erika Najarian: Unfortunately, they have already previewed 2027, so now we kind of have to ask you about 2027, even though it is still October.

Speaker #4: Right.

Rob Reilly: Right.

Speaker #3: So, that was a very long way to ask whether we had guidance on NII for 2027.

Bill Demchak: That was a very long way to ask whether we had guidance on NII for 2027.

William Demchak: That was a very long way to ask whether we had guidance on NII for 2027.

Erika Najarian: I got to try. I got to shoot my shot.

Speaker #1: I’ve got to try. I’ve got to shoot my shot.

Speaker #4: Yeah, I think I can help you out there. So, as you mentioned, in regard to 2027 NII, obviously that's out there a ways.

Rob Reilly: Yeah, I think I can help you out there. As you mentioned, in regard to 2027 NII, obviously, that's out there a way. So it's a bit premature for guidance, certainly precision guidance. But in fairness, given the certainty around the fixed-rate asset repricing, which has been part of our story in 2026, will be in 2027 and beyond that. And the magnitude of that, it does add some certainty that you typically wouldn't have this far in advance. So when we look at it, clearly in 2027, we'll exceed in net interest income our annualized run rate of what we project to finish 2026 in. And when we look at the consensus in terms of where you are, you sort of hit it. That's $1 billion to $1.1 billion above 2026 in terms of growth. And I think we would agree with that range.

Speaker #4: So it's a bit premature for guidance, certainly precision guidance. But in fairness, given the certainty around the fixed-rate asset repricing—which has been part of our story in '26, will be in '27 and beyond that—and the magnitude of that, it does add some certainty that you typically wouldn't have this far in advance.

Speaker #4: So when we look at it, clearly in '27, we will exceed in net interest income our annualized run rate of what we project to finish 2026 in.

Speaker #4: And when we look at the consensus in terms of where you are, you sort of hit it. That's $1 billion to $1.1 billion above 2026 in terms of growth.

Speaker #4: And I think we would agree with that range. When we get out into January, of course, we'll have more precision around it. But the fixed-rate asset repricing, and the mechanical nature of that, is real.

Rob Reilly: When we get out into January, of course, we'll have more precision around it. But the fixed-rate asset repricing and the mechanical nature of that is real. It continues for PNC, and the magnitude is big.

Speaker #4: It continues for PNC, and the magnitude is big.

Speaker #1: Got it. Thank you.

Erika Najarian: Got it. Thank you.

Speaker #2: Thank you. Next question today is coming from Anand Gosalia from Morgan Stanley. Your line is now live.

Operator: Thank you. Next question today is coming from Manan Gosalia from Morgan Stanley. Your line is now live.

Speaker #5: Hey, good morning. Can you talk about some of the deposit beta dynamics you expect from here? Just given that the rate beta on core deposits was up, and we're going to get further Fed tightening.

Manan Gosalia: Hey, good morning. Can you talk about some of the deposit beta dynamics you expect from here? Just given that the rate beta on core deposits was up, we are going to get further Fed tightening. Anything different going on with the start of this rate hike cycle relative to the prior one?

Speaker #5: Is there anything different going on with the start of this rate hike cycle relative to the prior one?

Speaker #4: Hi. Good morning. No, I don't think so. I think, in terms of our expectations around betas within an increasing rate cycle, we'll see what we've seen in the past.

Rob Reilly: Good morning, Manan. No, I do not think so. I think in terms of our expectations, in terms of betas within an increasing rate cycle, we will see what we have seen in the past. So on the front-

Speaker #4: So on the front.

Speaker #3: One exception, though, Rob. You got to remember the back in whatever it was, '23. I try to forget.

Bill Demchak: One exception, though, Rob. You got to remember that back in whatever it was, 2023, I try to forget.

William Demchak: One exception, though, Rob. You got to remember that back in whatever it was, 2023, I try to forget.

Speaker #4: Yeah. Yeah.

Rob Reilly: Yeah.

Bill Demchak: The big change was driven by non-interest bearing moving to interest bearing. Most of that, the excess deposits out of the system coupled with the kind of base balances are, I would say, pretty constant. So now we are going to see base interest rate betas move

William Demchak: The big change was driven by non-interest bearing moving to interest bearing. Most of that, the excess deposits out of the system coupled with the kind of base balances are, I would say, pretty constant. So now we are going to see base interest rate betas move

Speaker #3: The big change was driven by non-interest-bearing moving to interest-bearing. Most of that, right, the excess deposits out of the system coupled with the kind of base balances or I would say pretty constant and so now we're going to see face interest rate betas move in conjunction with history probably.

Rob Reilly: Yeah

Bill Demchak: in conjunction with history, probably.

William Demchak: in conjunction with history, probably.

Speaker #3: But the impact of that being a lot less than it once was.

Rob Reilly: Yeah, right.

Bill Demchak: But the impact of that being a lot less than it once was.

William Demchak: But the impact of that being a lot less than it once was.

Speaker #4: Yeah. I mean, that was a special time for all of us when rates went up 500 basis points. So set that one aside. In terms of a typical rising rate environment, we'll see increased betas on the corporate side for sure.

Rob Reilly: Yeah. That was a special time for all of us when rates went up 500 basis points. Set that one aside in terms of a typical rising rate environment. We will see increased betas on the corporate side for sure, on the wealth side, less so on the lower end consumer retail side. But I think we will settle out in some sort of cumulative beta in the mid-50s like we have done in the past.

Speaker #4: On the wealth side, less so on the lower and consumer retail side. But I think we'll settle out in some sort of cumulative beta in the mid-50s like we've done in the past.

Speaker #3: And part of the drive is just deposit flows from corporates, which come in naturally at a higher beta, higher rate. And we've seen growth.

Bill Demchak: Part of the drive is just deposit flows from corporates which come in naturally at a higher beta, higher rate. We have seen growth, some of it is seasonal, some of it just coming on the back of loan growth, in effect, growth in deposits coming through corporate flows that at the margin raise your interest-bearing deposit cost even though it is all profitable. It is part of that big jump you said for spot.

William Demchak: Part of the drive is just deposit flows from corporates which come in naturally at a higher beta, higher rate. We have seen growth, some of it is seasonal, some of it just coming on the back of loan growth, in effect, growth in deposits coming through corporate flows that at the margin raise your interest-bearing deposit cost even though it is all profitable. It is part of that big jump you said for spot.

Speaker #3: Some of it's seasonal. Some of it just coming on the back of loan growth, in effect, growth in deposits coming through corporate flows that at the margin raise your interest-bearing deposit cost even though it's all profitable.

Speaker #3: As part of that big jump you said for SPY. That's at the end of the quarter.

Rob Reilly: Yeah.

Bill Demchak: That is at the end of the quarter.

William Demchak: That is at the end of the quarter.

Speaker #4: No, that's right. That's right, and that's good stuff.

Rob Reilly: No, that is right. That is good stuff.

Speaker #3: Yeah.

Bill Demchak: Yeah.

William Demchak: Yeah.

Speaker #5: Got it. So, as we think about that comment you made on 50% of the growth coming in the last two weeks of the quarter, is there any more color you can provide on what drove that?

Manan Gosalia: Got it. I guess as we think about that comment you made on 50% of the growth coming in the last 2 weeks of the quarter, any more color on what drove that? Was it because the long end of the curve went up, it became more expensive to borrow in the capital markets? Any comment on the sustainability of that level of growth

Speaker #5: Was it because, long into the curve, it went up? Did it become more expensive to borrow in the capital markets? Any comment on the sustainability of that level of growth into the end of the year?

Bill Demchak: Yeah

William Demchak: Yeah

Manan Gosalia: into the end of the year and next?

Speaker #3: You have to remember that somebody doesn’t wake up and say, “Am I going to do a syndication today?” So these are in the works, and it’s a pipeline.

Bill Demchak: You got to remember that somebody doesn't wake up and say, "I'm going to do a syndication today.

William Demchak: You got to remember that somebody doesn't wake up and say, "I'm going to do a syndication today.

Rob Reilly: Yeah.

Bill Demchak: They're in the works, and it's a pipeline, and they kind of hit on that point. Things just don't happen quickly enough for one of the economic factors to have caused everybody to go in 2 weeks in the lending market, right? That happens in the bond market, but not in the lending market.

William Demchak: They're in the works, and it's a pipeline, and they kind of hit on that point. Things just don't happen quickly enough for one of the economic factors to have caused everybody to go in 2 weeks in the lending market, right? That happens in the bond market, but not in the lending market.

Speaker #3: And they kind of hit on that point. So, I can't—things just don't happen quickly enough for one of the economic factors to have caused everybody to go in two weeks.

Speaker #3: And the lending market, right, that happens in the bond market, but not in the lending market.

Speaker #5: Got it. Very helpful. Thank you.

Manan Gosalia: Got it. Very helpful. Thank you.

Speaker #2: Thank you. The next question is coming from Ken Hewson with Autonomous Research. Your line is now live.

Operator: Thank you. Next question is coming from Ken Usdin from Autonomous Research. Your line is now live.

Speaker #6: Hey, thanks. Just one quick follow-up. And Rob, I'll take you up on the fee line breakdown. But as it relates to that, I mentioned the capital markets.

Ken Usdin: Hey, thanks. Hey, just one quick follow-up. Rob, I will take you up on the fee line breakdown.

Rob Reilly: Yeah, I figured as much.

Ken Usdin: You mentioned the capital markets. Capital markets were going to be up, but wouldn't that have been already contemplated in your full year guide? Just wondering on that 5% step-up in the expenses. Are you also just maybe pulling forward some other investments into the Q4 too? Or is there some seasonality in there as well? Just wanted to kind of flush that out. Then, if you could give the fee lines, that would be great too. Thank you.

Speaker #6: Yeah, capital markets—we're going to be up. But wouldn't that have already been contemplated in your full-year guide? So, just wondering about that 5% step up in expenses. Are you also maybe pulling forward some other investments into the fourth quarter, too?

Speaker #6: Or is there some seasonality in there as well? Just wanted to kind of flush that out. And then, yeah, if you give the fee lines, that would be great too.

Speaker #6: Thank you. So when we did that, what happened?

Speaker #4: Yeah, sure. Of course, Ken. Why don't we do that? Complete the fee forecast. So, for the fourth quarter, we say fees will be up approximately 3.5%. Inside of that, relative to our categories.

Rob Reilly: Yeah, sure. Of course, Ken. Why don't we do that? Complete the fee forecast. So for the Q4, we say fees will be up approximately 3.5%. Inside of that relative to our categories, capital markets is the big mover, up about 15%. Mortgage will be down. Mortgage isn't a big category for us, but obviously given where rates are and the seasonality, that'll be down. Then the other categories, asset management, credit card, and treasury management, lending and deposit services, I would say are all stable. Maybe they could do a little better, but that's just what we're thinking at the moment. So that's the fees. On the expenses, part of it is taking up actually what we expect to do not only in capital markets, but also in our private equity. You'll see that our other non-interest income guide is up for the Q4.

Speaker #4: Capital markets is the big mover, up about 15%. Mortgage will be down. Mortgage is a big category for us, but obviously, given where rates are and the seasonality of that, it'll be down.

Speaker #4: And then the other categories, asset management, credit card and treasury management, lending and deposit services. I would say are all stable. Maybe they could do a little better, but that's just what we're thinking at the moment.

Speaker #4: So that's the fees. On the expenses, part of it is actually taking up what we expect to do, not only in capital markets but also in our private equity. You'll see that our other non-interest income guide is up for the fourth quarter.

Speaker #4: We'll do a little bit better there than we thought. So there's some revenue-driven expenses as part of that, but also some seasonality. The important part, obviously, and you know this, is the deposit operating leverage that we're pointing to, still in excess of 4%—between 4.5%—which is fantastic.

Rob Reilly: We'll do a little bit better there than we thought. So there's some revenue-driven expenses as part of that but also some seasonality. The important part, obviously, and you know this, is the positive operating leverage that we're pointing to, still in excess of 4%, between 4% and 4.5%, which is fantastic.

Speaker #6: Absolutely. And just to follow up, with the AOCI move, it's no longer in your materials, but do you have what the CET-1 was with AOCI?

Ken Usdin: Absolutely. Just to follow up, with the AOCI move, it's no longer in your materials, but do you have what the CET1 was with AOCI? I heard it's on the deck that you're going to keep the $600 million buyback in the Q4. Anything to think about as we go forward if you're obviously generating a lot of organic capital, and the push and pull between where your capital ratios are and your ability to continue that type of buyback. Thanks, Rob.

Speaker #6: And I heard, saw on the deck, that you're going to keep the $600 million buyback in the fourth quarter. Anything to think about as we go forward?

Speaker #6: You're obviously generating a lot of organic capital, and there's a push and pull between where your capital ratios are and your ability to continue that type of buyback.

Speaker #6: Thanks, Rob.

Speaker #4: Yeah. Sure. So we feel good about our capital position. We rounded down to 9.8. Our target is 10. And that was simply a result of loans coming in higher than we expected, which drove up RWAs.

Rob Reilly: Yeah, sure. So we feel good about our capital position. We rounded down to 9.8%. Our target is 10%. That was simply a result of loans coming in higher than we expected, which drove up RWAs. So we did have a meaningful repurchase in Q3. We expect to do something similar to that in Q4. So feel good about capital. On the AOCI front, naturally you got to think about the Basel III rules that are just around the corner or somewhere along those lines, which will increase us including AOCI, but obviously the benefit of the risk weightings will increase our capital ratings by about a point or so. So feel good about that positioning. Loading AOCI into the CET1 ratio is a little bit of a stale measure because of those Basel III considerations.

Speaker #4: So, we did have a meaningful repurchase in the third quarter. We expect to do something similar to that in the fourth quarter. So, we feel good about capital.

Speaker #4: On the AOCI front, naturally, you’ve got to think about the Basel III rules that are just around the corner, or somewhere along those lines, which will include AOCI. That will obviously increase us, but the benefit of the private ratings will increase our capital ratings by about a point or so.

Speaker #4: So feel good about that positioning. Loading AOCI into the CET-1 ratio is a little bit of a stale measure because of those Basel III considerations.

Speaker #4: But if we did that, we'd drop to low 9s. But certainly above 9 and still a pretty healthy TCE ratio.

Rob Reilly: But if we did that we would drop to low nines, but certainly above nine and still a pretty healthy TCE ratio.

Speaker #6: Got it. Great. Thanks, Rob.

Ken Usdin: Got it. Great. Thanks a lot.

Speaker #4: Sure.

Rob Reilly: Sure.

Speaker #2: Thank you. Next question is coming from Ebrahim Punawala from Bank of America. Your line is now live.

Operator: Thank you. Next question is coming from Ebrahim Poonawala from Bank of America. Your line is now live.

Speaker #7: Hey, good morning. I just wanted to go back. Bill, I think you mentioned—you gave two stats in your opening remarks: 500 new commercial clients and 215,000 checking account clients year to date.

Ebrahim Poonawala: Hey, good morning.

Rob Reilly: Morning.

Ebrahim Poonawala: I just wanted to go back. Bill, I think you mentioned you gave two stats in your opening remarks, 500 new commercial clients and 215,000 checking account clients year to date. Just talk to us in terms of one, should we measure low-cost deposits as a way to measure whether or not that strategy is working out and client conversion is being successful? And tied to that, how hard or difficult is it to convert those clients into driving core deposit growth, low-cost deposit growth?

Speaker #7: Just talk to us in terms of, one, should we measure low-cost deposits as a way to measure whether or not that strategy is working out and client conversion is being successful?

Speaker #7: And tied to that, how hard or difficult is it to convert those clients into driving core deposit growth, low-cost deposit growth?

Speaker #3: So, separate the two. Retail share has been a real focus, and so we're proud of the DDA growth. Part of that's coming on the back of the branch builds and just more presence in markets.

Bill Demchak: Well, separate the two. Retail share has been a real focus, and so we are proud of the DDA growth. Part of that is coming on the back of the branch builds and just more presence in markets. Part of it is being good at what we do. Ultimately, yes, that drives growth in non-interest bearing and interest bearing and full relationships. You will hear as we go forward some of the things we are going to do in credit card that kind of cement the full relationship with these new clients. But that is to come. On the C&IB side, we are adding the same kind of clients we always have had, right? This is not sort of a new segment of something we are trying to do. We are just doing what we have always done in new markets and gaining share. All of which kind of just builds the franchise.

William Demchak: Well, separate the two. Retail share has been a real focus, and so we are proud of the DDA growth. Part of that is coming on the back of the branch builds and just more presence in markets. Part of it is being good at what we do. Ultimately, yes, that drives growth in non-interest bearing and interest bearing and full relationships. You will hear as we go forward some of the things we are going to do in credit card that kind of cement the full relationship with these new clients. But that is to come.

Speaker #3: Part of it is being good at what we do. Ultimately, yes, that drives growth in non-interest-bearing and interest-bearing, and full relationships. You'll hear, as we go forward, some of the things we're going to do in credit card that kind of cement the full relationship with these new clients.

Speaker #3: But that's to come on. The CNIB side, we're adding the same kind of clients we always have had, right? We don't this isn't sort of a new segment of something we're trying to do.

William Demchak: On the C&IB side, we are adding the same kind of clients we always have had, right? This is not sort of a new segment of something we are trying to do. We are just doing what we have always done in new markets and gaining share. All of which kind of just builds the franchise. My whole point in the introduction is the client momentum and growth in this company has never been as fast as this. As good as this, yeah. We are executing. That growth effectively replicates, right? We are not changing what we do, so it just replicates who we are in a larger size, which is what we have been pursuing.

Speaker #3: We just doing what we've always done. In new markets and gaining share. All of which kind of just builds the franchise. So my whole point in the introduction is the client momentum in growth in this company has never been as fast as this, as good as this.

Bill Demchak: My whole point in the introduction is the client momentum and growth in this company has never been as fast as this.

Ebrahim Poonawala: As good.

Bill Demchak: As good as this, yeah. We are executing. That growth effectively replicates, right? We are not changing what we do, so it just replicates who we are in a larger size, which is what we have been pursuing.

Speaker #3: Yeah. We're executing. And that growth effectively replicates right? We're not changing what we do. So it just replicates who we are in a larger size.

Speaker #3: Which is what we've been pursuing.

Speaker #7: Got it. Got it. And I guess maybe we're just moving to expenses. I think we debate whether AI, AI deployment, is going to boost productivity and maybe that will lead to lower expense growth for the banks.

Ebrahim Poonawala: Got it. I guess maybe just moving to expenses, I think we debate whether AI deployment is going to boost productivity. Maybe that will lead to lower expense growth for the banks versus there is a lot of discussion about spend on cyber risk due to AI. If you do not mind, where do you shake out on sort of, at least as we think about the next 12 to 24 months, is the cost drag a bigger thing, bigger deal than the productivity gains?

Speaker #7: Versus there's a lot of discussion about spend on cyber risk due to AI. Just if you don't mind, where do you shake out on sort of at least as we think about the next 12 to 24 months, is the cost drag a bigger thing, bigger deal than the productivity gains?

Speaker #3: No. I mean, it's such a long answer to that. I want to figure out how to address it. Look, the incremental cyber costs associated with the AI frontier models I think you see in our run rate today.

Bill Demchak: No. There is such a long answer to that. I want to figure out how I address that. Look, the incremental cyber costs associated with the AI frontier models, I think you see in our run rate today. The cost as we work towards, I am going to call it an agentic workforce, the fundamental transformation of the company into one that has an ability to deploy agents across workloads. Today, you see that mostly in creeping depreciation expense on the back of all of our data center rebuilds, remembering that we put GPU chips in our data centers. Much of the work in preparation for all this was done in past years. So our data lake and data configuration all in one place, one source of truth, digitized policies, procedures, papers, HR systems that recognize agents as employees, the risk framework on access control, all of that stuff has been built.

William Demchak: No. There is such a long answer to that. I want to figure out how I address that. Look, the incremental cyber costs associated with the AI frontier models, I think you see in our run rate today. The cost as we work towards, I am going to call it an agentic workforce, the fundamental transformation of the company into one that has an ability to deploy agents across workloads. Today, you see that mostly in creeping depreciation expense on the back of all of our data center rebuilds, remembering that we put GPU chips in our data centers.

Speaker #3: The cost as we work towards—I'm going to call it an agentic workforce, that fundamental transformation of the company into one that has an ability to deploy agents across workloads.

Speaker #3: Today, you see that mostly in creeping depreciation expense on the back of all of our data center rebuilds. Remembering that we put GPU chips in our data centers.

Speaker #3: Much of the work in preparation for all this was done in past years. So our data lake and data configuration all in one place, one source of truth digitized policies, procedures, papers, HR systems that recognize agents as employees, the risk framework on access control, all of that stuff has been built.

William Demchak: Much of the work in preparation for all this was done in past years. So our data lake and data configuration all in one place, one source of truth, digitized policies, procedures, papers, HR systems that recognize agents as employees, the risk framework on access control, all of that stuff has been built.

Speaker #3: What comes next is the re-engineering of the company using AI harnesses, which would speed the development and ultimately lower the cost associated with technology development and maintenance.

Bill Demchak: What comes next is the re-engineering of the company using AI harnesses, which would speed the development and ultimately lower the cost associated with technology development and maintenance, followed quickly by product development delivery that aids revenue. We have been purposefully quiet on all of the above. I think one of our peers said it, we will show up when we have something positive to show you.

William Demchak: What comes next is the re-engineering of the company using AI harnesses, which would speed the development and ultimately lower the cost associated with technology development and maintenance, followed quickly by product development delivery that aids revenue. We have been purposefully quiet on all of the above. I think one of our peers said it, we will show up when we have something positive to show you.

Speaker #3: Followed quickly by product development, delivery that aids revenue. We've been purposefully quiet on all of the above. I think one of our peers said it.

Speaker #3: We'll show up when we have something positive to show you. And quit talking about that till it shows up. But I would assure everyone that we have a well-thought-out program that isn't about bells and whistles, that will ultimately allow for a transformation of this company.

Ebrahim Poonawala: Right

Bill Demchak: quit talking about that till it shows up. I would assure everyone that we have a well-thought-out program that is not about bells and whistles that will ultimately allow for a transformation of this company.

William Demchak: quit talking about that till it shows up. I would assure everyone that we have a well-thought-out program that is not about bells and whistles that will ultimately allow for a transformation of this company.

Speaker #4: Well, and especially when you talk about it in a two-year or three-year time frame.

Ebrahim Poonawala: Well, especially when you talk about it in a 2-year, 3-year time frame.

Rob Reilly: Well, especially when you talk about it in a 2-year, 3-year time frame.

Speaker #3: Yeah.

Bill Demchak: Yeah.

William Demchak: Yeah.

Speaker #7: And that's helpful because I think there's a sense of banks kind of falling behind on agentic AI, especially on the revenue and the client side.

Ebrahim Poonawala: That is helpful because I think there is a sense of banks falling behind on agentic AI, especially on the revenue and the client side. It sounds like you are already far along in terms of maybe we wait and watch in terms of what is to come. Thank you.

Speaker #7: But sounds like you're already far along in terms of maybe we'll wait and watch in terms of what's to come. Thank you.

Speaker #3: Yeah. What I would okay.

Bill Demchak: Yeah. What I would. Okay.

William Demchak: Okay.

Speaker #7: Go ahead.

Ebrahim Poonawala: Go ahead.

Speaker #3: What I would say is that it's so easy to get hooked on the bells and whistles and cool toys that come with AI. But to succeed long-term, I think you need to have the core infrastructure that allows you to do this at scale and importantly allows you to do it yourself without vendor support, without compute cost coming from third parties.

Bill Demchak: What I would say is that it is so easy to get hooked on the bells and whistles and cool toys that come with AI. But to succeed long term, I think you need to have the core infrastructure that allows you to do this at scale, and importantly, allows you to do it yourself without vendor support, without compute costs coming from third parties, and with your own personnel instead of vendors. And that is the path we are pursuing.

William Demchak: What I would say is that it is so easy to get hooked on the bells and whistles and cool toys that come with AI. But to succeed long term, I think you need to have the core infrastructure that allows you to do this at scale, and importantly, allows you to do it yourself without vendor support, without compute costs coming from third parties, and with your own personnel instead of vendors. And that is the path we are pursuing.

Speaker #3: And with your own personnel, instead of vendors. And that's the path we're pursuing.

Speaker #7: Understood. Thank you.

Ebrahim Poonawala: Understood. Thank you.

Speaker #1: Thank you. As a reminder, that's star one to be placed into question Q. Our next question today is coming from Gerard Cassidy from RBC Capital Markets.

Operator: Thank you. As a reminder, that is star one to be placed into question queue. Our next question today is coming from Gerard Cassidy from RBC Capital Markets. Your line is now live.

Speaker #1: Your line is now live.

Speaker #6: Bill, hi, Rob.

Gerard Cassidy: Good. Hi, Rob.

Speaker #4: Morning, Gerard.

Rob Reilly: Morning, Gerard.

Speaker #6: Gerard.

Rob Reilly: Gerard.

Speaker #7: Bill, talking about bells and whistles on AI and all the toys that go with it, what's your guys' view? A lot of managements have been asked this question on these third-quarter calls about the AI agentic agents moving deposits around and forcing deposit costs up for the industry.

Gerard Cassidy: Bill, talking about bells and whistles on AI and all the toys that go with it, what is your guys' view? A lot of managements have been asked this question on these Q3 calls about the AI agentic agents moving deposits around and forcing deposit costs up for the industry. What is your take on that?

Speaker #7: What's your take on that?

Speaker #3: So I mean, at its most basic form, there's no question that deposit movement is going to become more efficient. By the way, that's happened progressively for years.

Bill Demchak: At its most basic form, there's no question that deposit movement is going to become more efficient. By the way, that's happened progressively for years. Is it going to accelerate? Maybe. But at some point in time, given the movement in technology, you're going to see more competition in deposits. It's not showing up in the moment. The current attempts at this with some of the new agentic applications that have come out where frankly, they try to come in and transact on your behalf inside of your accounts. Incredibly unsafe.

William Demchak: At its most basic form, there's no question that deposit movement is going to become more efficient. By the way, that's happened progressively for years. Is it going to accelerate? Maybe. But at some point in time, given the movement in technology, you're going to see more competition in deposits. It's not showing up in the moment. The current attempts at this with some of the new agentic applications that have come out where frankly, they try to come in and transact on your behalf inside of your accounts. Incredibly unsafe.

Speaker #3: And as it can accelerate, maybe. But at some point in time, given the movement in technology, you're going to see more competition in deposits.

Speaker #3: It's not shown up in the moment. The current attempts at this with some of the new agentic applications that have come out where frankly, they try to come in and transact on your behalf inside of your accounts.

Speaker #3: Incredibly unsafe. It isn't going to happen—a bad idea. Yeah. And for that to ultimately take place, there's going to have to be laws passed on liability shifting.

Rob Reilly: Bad idea.

Bill Demchak: It isn't going to happen. Bad idea. For that to ultimately take place, there's going to have to be laws passed on liability shifting. It's going to have to happen through secure connections and authentication and human in the loop. So it's big splashy headlines, cool thing, not going to happen on my watch that something can come in here and transact on your behalf without you knowing it. It's incredibly dangerous thing. Independent of the fact I run a bank.

William Demchak: It isn't going to happen. Bad idea. For that to ultimately take place, there's going to have to be laws passed on liability shifting. It's going to have to happen through secure connections and authentication and human in the loop. So it's big splashy headlines, cool thing, not going to happen on my watch that something can come in here and transact on your behalf without you knowing it. It's incredibly dangerous thing. Independent of the fact I run a bank.

Speaker #3: It's going to have to happen through secure connections and authentication and human-in-the-loop. So big splashy headlines, cool thing, not going to happen on my watch that something can come in here and transact on your behalf without you knowing it.

Speaker #3: It's an incredibly dangerous thing. Independent of the fact that I run a bank, I would just, yeah, I would just advise everybody that that's probably bad.

Rob Reilly: Obviously

Bill Demchak: I would just advise everybody that that's probably bad. But your basic premise, look, there's been capital market portals that allow you to shop money market funds for a basis point. You can sweep into a deposit account, you can put it in a money fund, you can move it here. All that stuff's going to get easier, and this is going to happen over time. To win in that period of time, we're going to have to offer our clients technology that is as good as these third-party providers, so we can allow them to do what they want. Importantly, we're going to need to produce it cheaply to keep their business.

William Demchak: I would just advise everybody that that's probably bad. But your basic premise, look, there's been capital market portals that allow you to shop money market funds for a basis point. You can sweep into a deposit account, you can put it in a money fund, you can move it here. All that stuff's going to get easier, and this is going to happen over time. To win in that period of time, we're going to have to offer our clients technology that is as good as these third-party providers, so we can allow them to do what they want. Importantly, we're going to need to produce it cheaply to keep their business.

Speaker #3: But your basic premise, I mean, look, it's things have gotten more there's been capital market portals that allow you to shop money market funds for a basis point.

Speaker #3: You can sweep into a deposit account. You can put it in a money fund. You can move it here. All that stuff's going to get easier.

Speaker #3: And this is going to happen over time. And to win in that period of time, we're going to have to offer our clients technology that is as good as these third-party providers, so we can allow them to do what they want.

Speaker #3: And importantly, we're going to need to produce it cheaply. To keep their business.

Speaker #4: And maintain the service aspects of a transaction account.

Rob Reilly: And maintain the service aspects of a transaction account.

Speaker #3: Yeah.

Bill Demchak: Yeah.

William Demchak: Yeah.

Speaker #7: Very good. And coming back to your opening comments, Bill, you were talking about coming into the year, how the client momentum has been stronger than you had maybe originally anticipated.

Gerard Cassidy: Very good. Coming back to your opening comments, Bill, you were talking about coming into the year, how the client momentum has been stronger than you had originally anticipated. Can you try to frame out where, aside from the new business, I understand you got the 500 new client relationships that you identified, but from the existing relationships, where is the economic. I know it is AI related probably, but what are you guys seeing in terms of what is driving this momentum? Do you think it is sustainable going into 2027?

Speaker #7: Can you try to frame out where, aside from the new business—I understand you've got the 500 new client relationships that you identified—but from the existing relationships, where's the economic? I know it's AI-related, probably, but what do you guys see in terms of what's driving this momentum?

Speaker #7: And do you think it's sustainable going into '27?

Speaker #3: Look, I mean, clearly we're not large in the data center finance space, but there is impact from the capital that has gone into data centers and tangential businesses, and that's driven some of it.

Bill Demchak: Look, clearly we are not large in the data center finance space, but there is impact from the capital that has gone into data centers and tangential businesses, and that has driven some of it. I also think, we see this in some of the activity in Harris Williams. I think people have basically gotten used to an uncertain world. They kind of have to get on with their business. Everybody was kind of holding and waiting and waiting to see, have just figured out this is a new norm. The economy is ripping. So there is opportunity sets for people. I think that is what is driving it. The clouds are as dark as they ever were, but the economy is still strong. People are investing into it. I think it is more complicated than that.

William Demchak: Look, clearly we are not large in the data center finance space, but there is impact from the capital that has gone into data centers and tangential businesses, and that has driven some of it. I also think, we see this in some of the activity in Harris Williams. I think people have basically gotten used to an uncertain world. They kind of have to get on with their business. Everybody was kind of holding and waiting and waiting to see, have just figured out this is a new norm. The economy is ripping. So there is opportunity sets for people. I think that is what is driving it. The clouds are as dark as they ever were, but the economy is still strong. People are investing into it. I think it is more complicated than that.

Speaker #3: But I also think we see this in some of the activity in Harris Williams. I think people have basically gotten used to an uncertain world.

Speaker #3: And so they kind of have to get on with their business. And so everybody was kind of holding and waiting and waiting to see, and just figured out this is the new norm.

Speaker #3: And the economy's ripping, so there's opportunity sets for people. I think that's what's driving it. I mean, the clouds are as dark as they've ever been, but the economy is still strong.

Speaker #3: And people are investing in it. I think it's more complicated than that.

Speaker #4: Well, I'd add to that. So, what Bill just described—I think all the banks are benefiting from. I think we're benefiting from that, obviously, as well.

Rob Reilly: Well, I would add to that. What Bill just described, I think all the banks are benefiting from. I think we are benefiting from that obviously as well. In addition, PNC might be a little bit different because of the compounded success of our expansion markets, which just keep showing up.

Speaker #4: But in addition, PNC might be a little bit different because of the compounded success of our expansion markets, which just keeps showing up.

Speaker #3: Yeah. That's just volume. Yeah. That's share gain as well. Yeah.

Bill Demchak: That is just all you got.

William Demchak: That is just all you got.

Rob Reilly: Yeah.

Bill Demchak: That share gain is

William Demchak: That share gain is

Rob Reilly: It just keeps, yeah.

Speaker #4: It just keeps showing up. Yeah, it just keeps showing up. And it is driving our numbers higher than industry averages. You see it in the H8 data.

Bill Demchak: strong.

William Demchak: strong.

Rob Reilly: Yeah. It just keeps showing up, and it is driving our numbers higher than industry averages. You see it in the H.8 data. You see it in the momentum.

Speaker #4: You see it in the momentum.

Gerard Cassidy: Coming back to that, Rob, on the growth with those 500 new client relationships, are you replacing their banks, or are you just a complement to maybe an existing banking relationship that these new customers have?

Speaker #7: And coming back to that, Rob, with the growth from those 500 new client relationships, are you replacing their banks, or are you just complementing an existing banking relationship that these new customers have?

Speaker #3: It's both.

Bill Demchak: It's both.

William Demchak: It's both.

Speaker #4: It's both, for sure.

Rob Reilly: It's both, for sure.

Bill Demchak: We have a definition in terms of what is a primary client, and it's basically enough share of wallet to check that box as opposed to just doing ancillary businesses.

William Demchak: We have a definition in terms of what is a primary client, and it's basically enough share of wallet to check that box as opposed to just doing ancillary businesses.

Speaker #3: We have a definition internally of what is a primary client and it's basically enough share of wallet to check that box as opposed to just doing ancillary business with them.

Speaker #4: Yeah, yeah. For the larger corporates, it's typically a multi-bank deal. For the smaller middle market, we'll be the new bank in some instances.

Rob Reilly: Yeah, the larger corporates, it is typically a multi-bank deal.

Bill Demchak: Yeah.

William Demchak: Yeah.

Rob Reilly: The smaller middle market, we will be the new bank in some instances.

Speaker #7: Great. Thank you, guys.

Gerard Cassidy: Great. Thank you, guys.

Speaker #4: Sure.

Bill Demchak: Sure.

Speaker #1: Thank you. Next question is coming from Mike Lyle from Wells Fargo. Your line is now live.

Operator: Thank you. Next question is coming from Mike Mayo from Wells Fargo. Your line is now live.

Speaker #5: Hi. Just more questions on the commercial loan growth. Just maybe slice and dice a few different ways. So for every $100 of additional commercial loan growth, how much would you say is additional industry growth versus market share?

Mike Mayo: Hi, just more questions on the commercial loan growth. Just maybe slice and dice it a few different ways. For every $100 of additional commercial loan growth, how much would you say is additional industry growth versus market share? Because I think the industry is picking up the commercial loan growth. Then how much of it would you say is AI CapEx related versus non-AI CapEx related or other? Then the third part would be how much of this would be new markets in the, say, the Texas or the Southwest? Thank you.

Speaker #5: Because I think the industry is picking up the commercial loan growth. And then how much of it would you say is kind of AI capex-related versus non-AI capex-related or other?

Speaker #5: And then the third part would be how much of this would be kind of new markets in, say, the Texas or the Southwest? Thank you.

Speaker #3: Oh, easy question.

Bill Demchak: All easy questions.

William Demchak: All easy questions.

Speaker #4: Yeah, let me.

Rob Reilly: Yeah, absolutely.

Speaker #3: So let's do it this way, Rob.

Bill Demchak: Let's do it this way, Rob.

William Demchak: Let's do it this way, Rob.

Rob Reilly: Yeah, that might be a take-home assignment.

Speaker #4: Oh, so that might be a take-home assignment.

Speaker #3: Yeah. What was the new markets growth rate was what was it? 2, 3 times the legacy markets? Yeah.

Bill Demchak: What was the new market's growth rate, what was it, two, three times the legacy markets?

William Demchak: What was the new market's growth rate, what was it, two, three times the legacy markets?

Rob Reilly: In C&IB.

Bill Demchak: Yeah.

William Demchak: Yeah.

Speaker #4: Yeah. Yeah.

Rob Reilly: Yeah.

Speaker #3: So, take that—all that excess growth rate is pure share, is one way to think of it. It's hard to come up with an answer on how much of the AI capex is driving loan growth broadly across the economy, because there's clearly tangential effects on any sort of heavy equipment, transportation, energy, component producers.

Bill Demchak: So take all that excess growth rate, it is pure share.

William Demchak: So take all that excess growth rate, it is pure share.

Rob Reilly: Yeah

Bill Demchak: is one way to think of it. It is hard to come up with an answer on how much of the AI CapEx is driving loan growth broadly across the economy because there is clearly tangential effects on any sort of heavy equipment, transportation, energy component producer.

William Demchak: is one way to think of it. It is hard to come up with an answer on how much of the AI CapEx is driving loan growth broadly across the economy because there is clearly tangential effects on any sort of heavy equipment, transportation, energy component producer.

Speaker #4: Ecosystem.

Mike Mayo: Ecosystem

Rob Reilly: Ecosystem

Bill Demchak: yeah, that is driving it. So I just do not know that I have an accurate answer to that.

William Demchak: yeah, that is driving it. So I just do not know that I have an accurate answer to that.

Speaker #3: Yeah. That's driving this. I just don't know that I have an accurate answer to that.

Speaker #5: And.

Mike Mayo: And how.

Speaker #3: Maybe the negative of it, Mike, is the more worrisome thing, right? So if the capex broadly slows down related to AI, do we think, even though we don't lend directly to that, that it would slow our loan growth?

Bill Demchak: Maybe the negative of it, Mike, is the more worrisome thing, right? So if the CapEx broadly slows down related to AI, do we think even though we do not lend directly to that it would slow our loan growth? Yes.

William Demchak: Maybe the negative of it, Mike, is the more worrisome thing, right? So if the CapEx broadly slows down related to AI, do we think even though we do not lend directly to that it would slow our loan growth? Yes.

Speaker #3: Yes, it does. Yeah.

Mike Mayo: A knock-on effect.

Rob Reilly: A knock-on effect.

Speaker #4: Yeah.

Bill Demchak: Yeah.

Mike Mayo: Yeah. What is the size of the new markets versus the legacy? I guess it is growing two to three times faster off a smaller base.

Speaker #5: And what's the size of the new markets versus the legacy? I mean, I guess it's growing two to three times faster off a smaller base.

Speaker #4: Well, right now, in corporate banking, the majority of our in-market loans are in the expansion markets.

Rob Reilly: Well, right now in corporate banking, the majority of our in-market loans are in the expansion markets.

Speaker #3: So the balance is actually bigger.

Bill Demchak: The balances are actually bigger.

William Demchak: The balances are actually bigger.

Speaker #4: Yeah.

Rob Reilly: Yeah.

Speaker #3: Yeah.

Speaker #4: Yeah.

Bill Demchak: Yeah.

Mike Mayo: So you are growing two

Bill Demchak: It is a quick call.

Rob Reilly: It is a quick call. Yeah.

Speaker #3: To quick call-in.

Speaker #4: Yeah.

Rob Reilly: Yeah.

Speaker #3: Yeah.

Bill Demchak: Yeah.

William Demchak: Yeah.

Speaker #5: So you're growing two to three times faster in the new markets and the new markets at this point are bigger than the legacy markets.

Mike Mayo: So you are growing two to three times faster in the new markets, and the new markets at this point are bigger than the legacy markets.

Speaker #4: X our national businesses. Yeah, that's true.

Rob Reilly: Ex our national businesses. Yeah, that is true.

Speaker #5: And as far as taxes, or the Southwest in particular—because that's been a hot area recently—how fast is that growing? Is that two to three times faster, or is it even still faster?

Mike Mayo: As far as Texas or the Southwest in particular, because that has been a hot area recently, how fast is that growing? Is that the two to three times faster or is it even still faster?

Bill Demchak: That is the obvious one and it is growing at that rate. California is growing.

William Demchak: That is the obvious one and it is growing at that rate. California is growing.

Speaker #3: It's that's the obvious one. And it's growing at that rate. But California is growing.

Speaker #4: And Florida.

Rob Reilly: Florida.

Speaker #3: Florida? Yeah, the businesses are getting out of Colorado.

Bill Demchak: Florida. Yes. The business we are getting out of Colorado.

William Demchak: Florida. Yes. The business we are getting out of Colorado.

Speaker #5: And then there is some industry tailwind, though, right, with capex picking up overall. I mean, how much is that contributing? And do you think this is kind of a multi-year change?

Mike Mayo: There is some industry tailwind though with CapEx picking up overall. How much is that contributing and do you think this is kind of a multi-year change? Because just go back a couple of years ago, there was not much growth and now there is growth again. Is this one quarter, one year, the next five years? I know nobody has a crystal ball, but you are closer to it than we are.

Speaker #5: Because if you go back a couple of years ago, there wasn't much growth, and now there's growth again. Is this just one quarter, or one year?

Speaker #5: The next five years? I know nobody has a crystal ball, but you're closer to it than we are.

Speaker #3: Yeah, look, I think it has legs for the time being. I think there are a lot of things that could knock the legs out. Pipelines are strong.

Bill Demchak: Yeah. Look, I think it has legs for the time being. I think there's a lot of things that could knock the legs out. Pipelines are strong, activity levels are strong. That's going to continue. But we all see stuff that can cause that to stop. I can't see out that far, Mike, any better than you can.

William Demchak: Yeah. Look, I think it has legs for the time being. I think there's a lot of things that could knock the legs out. Pipelines are strong, activity levels are strong. That's going to continue. But we all see stuff that can cause that to stop. I can't see out that far, Mike, any better than you can.

Speaker #3: Activity levels are strong, and that's going to continue. But we all see things that could cause that to stop. I can't see out that far, Mike, any better than you can.

Speaker #5: All right. Great. Thank you.

Mike Mayo: All right, great. Thank you.

Speaker #1: Thank you. Next question is coming from David Caverini from Jefferies. Your line is now live.

Operator: Thank you. Next question is coming from David Chiaverini from Jefferies. Your line is now live.

Speaker #6: Hi, thanks for taking the questions. Can you remind us of PNC's sensitivity to rates and the positioning of the balance sheet?

David Chiaverini: Hi, thanks for taking the questions. Can you remind us of PNC's sensitivity to rates and positioning of the balance sheet?

Speaker #4: Yeah, we're on record, and you can see that in terms of our guidance. We've worked hard relative to short-term rates that were pretty neutral.

Rob Reilly: Yeah. We are on record and you can see that in terms of our guidance. We have worked hard relative to short-term rates that were pretty neutral. Anything that happens in the short term in terms of rate increases for 2026 in particular. Obviously, and we have said this before and it is obvious, the steeper the yield curve in a good economy is better for us because of this fixed-rate asset repricing dynamic that if we can price these loans that are on our books at higher levels that is accretive. We are well-positioned for that environment and that is part of our confidence in terms of our NII growth.

Speaker #4: So, anything that happens in the short term in terms of rate increases for '26 in particular, we don't see it in this way. Obviously—and we've said this before, and it's obvious—the steeper the yield curve in a good economy is better for us because of this fixed-rate asset repricing dynamic.

Speaker #4: If we can price these loans that are on our books at higher levels, that's accretive. So we're well positioned for that environment.

Speaker #4: And that's part of our confidence in terms of our NII growth.

Speaker #6: Thanks for that. And then, hitting on credit quality – solid trends overall. You mentioned the NPL increase, CRE office, and one large commercial credit.

David Chiaverini: Thanks for that. Hitting on credit quality, solid trends overall. You mentioned about the NPL increase, CRE office and one large commercial credit. If you are able to share or willing to share what industry was the large commercial credit in and your outlook from here on credit?

Speaker #6: If you're able to share, or willing to share, what industry was the large commercial credit in? And your outlook from here on credit?

Speaker #4: Sure. And on the one large credit, it's in the service providers. You can see that in our detail of loans. Nothing particularly thematic about it.

Rob Reilly: Sure. On the one large credit, it is in the service providers. You can see that in our detail of loans. Nothing particularly thematic about it, just a company that has hit some cash flow issues. The other part of the NPLs that is important to point out is the continued pull-through of the already reserved CRE office loans. We have worked that book down pretty well. We still have a lot of reserves, but as we had said for years that will flow through non-performers and ultimately charge-offs. Again, that has all been paid for. Outside of that, credit quality is good. Consumer, you can see that in the consumer numbers, delinquencies are down. C&I, corporate with the occasional deal or two, very strong.

Speaker #4: It's just a company that's hit some cash flow issues. The other part of the NPLs that's important to point out is the continued pull-through of the already reserved CRE office loans.

Speaker #4: So we've worked that book down pretty well. We still have a lot of reserves, but as we have said for years, that'll flow through non-performers and ultimately charge us.

Speaker #4: But again, that's all been paid for. Outside of that credit quality, it's good. Consumer that you can see that in the consumer numbers delinquencies are down.

Speaker #4: CNIB corporate, with the occasional deal or two, has been very strong.

Speaker #6: Graham, maybe if I can squeeze one more question, it's just on the M&A appetite—where your latest thoughts are there. The first bank acquisition clearly is seeing some nice tailwinds and success, but could you provide your latest thoughts on the M&A front?

David Chiaverini: Graham, maybe if I can squeeze one more question is just on the M&A appetite, what your latest thoughts are there. FirstBank acquisition clearly is seeing some nice tailwinds and success there, but provide your latest thoughts on the M&A front.

Speaker #3: Sure, I'll take that. So, a couple of things. One is our organic growth is surprising even us. You see that in the client numbers and the pace.

Bill Demchak: Sure. I'll take that. So a couple of things. One is our organic growth is surprising even us. You see that in the client numbers in the pace and size of pipelines. Two, as I look into the foundation we are putting forth on AI and the necessary organizational change and efficiencies that will come with that, I'm hesitant to slow that down which would perhaps necessarily be the case were we to do an acquisition of any size. Put differently, I think the world's going to change in the next couple of years and we want to lead that. If that gets slowed down because we otherwise got into some big M&A deal, I think you could destroy massive value.

William Demchak: Sure. I'll take that. So a couple of things. One is our organic growth is surprising even us. You see that in the client numbers in the pace and size of pipelines. Two, as I look into the foundation we are putting forth on AI and the necessary organizational change and efficiencies that will come with that, I'm hesitant to slow that down which would perhaps necessarily be the case were we to do an acquisition of any size. Put differently, I think the world's going to change in the next couple of years and we want to lead that. If that gets slowed down because we otherwise got into some big M&A deal, I think you could destroy massive value.

Speaker #3: And the size of pipelines. And two, as I look into the foundation we are putting forth on AI and the necessary organizational change and efficiencies that will come with that, I’m hesitant to slow that down.

Speaker #3: Which would perhaps necessarily be the case where we do an acquisition of any size. So, put differently, I think the world's going to change in the next couple of years, and we want to lead that.

Speaker #3: If that gets slowed down because we otherwise got into some big M&A deal, I think you could destroy massive value. That doesn't—there's always small things, and Rob always says this.

Bill Demchak: There's always small things and Rob always says this, we see everything that shows up and you can never say never and maybe there's some small thing, but at the moment, our momentum is fantastic. The transformation we're going to go through, I think, is strategically more important than bulk.

William Demchak: There's always small things and Rob always says this, we see everything that shows up and you can never say never and maybe there's some small thing, but at the moment, our momentum is fantastic. The transformation we're going to go through, I think, is strategically more important than bulk.

Speaker #3: We see everything that shows up, and you can never say never. Maybe there's some small thing, but at the moment our momentum is fantastic.

Speaker #3: And the transformation we're going to go through, I think, is strategically more important than bulk.

Speaker #4: And it needs to stay top of mind.

Rob Reilly: Needs to stay top of mind.

Speaker #3: Yes.

Bill Demchak: Yes.

William Demchak: Yes.

Speaker #6: Very helpful. Thank you.

David Chiaverini: Very helpful. Thank you.

Speaker #1: Thank you. Next question comes from Chris McGrady from KBW. Your line is now live. Hello, Chris. Perhaps he is on mute.

Operator: Thank you. Next question today is coming from Chris McGratty from KBW. Your line is now live. Hello, Chris. Perhaps your phone is on mute.

Speaker #7: Yep, there we go. Sorry about that. More of a question on risk tolerance—can you prepare remarks? You talked about the growth in the quarter as high-quality, lower risk.

Chris McGratty: Oh, there we go. Sorry about that. More of a question on risk tolerance. In your prepared remarks, you talked about the growth in the quarter was high quality, lower risk. I guess, is there any change in either PNC's or client risk tolerance that you are observing with the changes in the macro and the rates recently? Thanks.

Speaker #7: I guess, is there any change in either PNCs or client risk tolerance that you're observing with the changes in the macro and the rates recently?

Speaker #7: Thanks.

Speaker #3: None inside of the way we're deploying capital. I'm not sure I understood client risk tolerance question.

Bill Demchak: None inside of the way we are deploying capital. I am not sure I understood client risk tolerance question.

William Demchak: None inside of the way we are deploying capital. I am not sure I understood client risk tolerance question.

Rob Reilly: Maybe I can take on that.

Speaker #7: I guess that's more of a demand for credit. Yeah, yeah.

Chris McGratty: I guess that is more the demands of credit.

Speaker #3: You'll hear us say this over and over again for years. We kind of stay inside of our basic structures and types of clients.

Bill Demchak: You will hear us say this over and over again for years. We kind of stay inside of our basic structures and types of clients and grow the book through increasing clients as opposed to jumping into new risky buckets.

William Demchak: You will hear us say this over and over again for years. We kind of stay inside of our basic structures and types of clients and grow the book through increasing clients as opposed to jumping into new risky buckets.

Speaker #3: And grow the book through increasing clients, as opposed to jumping into new, risky buckets.

Speaker #7: Thank you.

Chris McGratty: Thank you.

Speaker #1: Thank you. We have reached the end of our question and answer session. I'll just turn the floor back over for any further or closing comments.

Operator: Thank you. We have reached the end of our question and answer session. I would like to turn the floor back over for any further closing comments.

Speaker #3: Well, thank you all for joining our call today and for your interest in PNC. Please feel free to reach out to the IR team if you have any additional questions.

Bryan Gill: Well, thank you all for joining our call today and your interest in PNC, and please feel free to reach out to the IR team if you have any additional questions.

Speaker #3: Thanks, everybody.

Bill Demchak: Thanks, everybody.

William Demchak: Thanks, everybody.

Speaker #6: Thank you.

Rob Reilly: Thank you.

Speaker #1: Thank you. That does conclude today's teleconference and webcast. Let me just connect your line after this time and have a wonderful day. We thank you for your participation today.

Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.