The Pnc Financial Services Group, Inc.’s 2026 NIM and CRE Growth Timelines Clash in Q4 Earnings Call

Date of Call: Jan 16, 2026

Financials Results

• Revenue: $6.1B (record) for Q4, up 3% sequentially; full year revenue increased $1.5B or 7% YOY
• EPS: $4.88 per diluted share for Q4; full year EPS $16.59 per share, up 21% YOY

Guidance:

• Full year 2026 average loan growth expected to be approximately 8%.
• Total revenue expected to be up approximately 11% YOY.
• Net interest income expected to be up approximately 14% YOY.
• Noninterest income expected to grow 6% YOY.
• Noninterest expense (excluding $325M integration cost) expected to be up approximately 7% YOY.
• Effective tax rate expected to be approximately 19.5%.
• Expect approximately 400 basis points of positive operating leverage, nearly all driven by PNC stand-alone.
• Q1 2026 average loans expected up ~5% sequentially; total revenue up 2% to 3%.
• Q1 2026 net charge-offs expected to be ~$200M.
• FirstBank acquisition results will be integrated by end of 2026, adding ~$1 per share to 2027 results.

Business Commentary:

Financial Performance and Growth:

• PNC Financial Services Group reported net income of $7 billion or $16.59 per share for 2025, with record revenue growth and 5% operating leverage.
• The strong performance was driven by growth across all business lines, significant client growth, and ongoing branch expansion.

Loan and Deposit Trends:

• Average loan balances increased by 1% in the linked quarter, driven by higher commercial balances, while deposit balances rose by 2%.
• The growth in loans was due to higher commercial balances and broad-based new production across C&I, while deposits saw seasonal growth in commercial deposits.

Capital Management and Shareholder Returns:

• PNC returned $1.1 billion of capital to shareholders in the quarter, including $676 million in common dividends and $400 million in share repurchases.
• The company plans to increase its quarterly share repurchases to a range of $600 million to $700 million, reflecting its capital flexibility and strong financial position.

Acquisition and Integration of FirstBank:

• PNC completed the acquisition of FirstBank, with the purchase price estimated at $4.2 billion, and expects the integration to add approximately $1 per share to 2027 results.
• The acquisition expands PNC's presence in high-growth communities in Colorado and Arizona, with progress being made on conversion and integration scheduled for June 2026.

Non-Interest Income and Expense Management:

• Noninterest income increased by 3% compared to the prior quarter, with fee income up 3%, driven by higher equity markets and positive client net flows.
• The company managed expenses effectively, with a focus on controlling noninterest expenses, which increased by 2% for the full year 2025.

Sentiment Analysis:

Overall Tone: Positive

• CEO: 'by virtually all measures, 2025 was a successful year for PNC' and 'we're poised to accelerate that growth in 2026'. CFO: 'PNC reported a strong fourth quarter, which contributed to a very successful 2025. We're well positioned to continue this momentum into 2026.' Guidance shows strong growth across loans, revenue, and operating leverage.

Q&A:

• Question from John Pancari (Evercore ISI Institutional Equities): Clarification on buyback pace of $600M-$700M per quarter for 2026.
  Response: Confirmed that $600M-$700M per quarter share repurchase pace is expected to continue through 2026.

• Question from John Pancari (Evercore ISI Institutional Equities): Target CET1 ratio and medium-term ROTCE target.
  Response: CET1 expected to be ~10.2-10.3% after FirstBank, with a stated target of 10%. ROTCE exit rate into 2026 is ~17%, expected to reach ~18% by end of 2026 and higher thereafter.

• Question from Robert Siefers (Piper Sandler & Co.): NII momentum for 2026, including impact of FirstBank.
  Response: Full-year NII guidance is up 14% with FirstBank; PNC stand-alone is 7.5% to 8%, comfortably above prior expectations.

• Question from Robert Siefers (Piper Sandler & Co.): Deposit cost outlook with Fed rate cuts.
  Response: Rate paid on interest-bearing deposits expected to continue decreasing in Q1 2026, with further declines expected after anticipated July and September rate cuts, but NII is not materially impacted by timing of cuts.

• Question from Betsy Graseck (Morgan Stanley): Progress on technology and branch investment initiatives and integration with FirstBank.
  Response: Investment spend (e.g., tech, AI, branches) is embedded in guidance; savings from continuous improvement program (CIP) fund ongoing investments, with AI expected to drive ~40 bps operating leverage by 2030.

• Question from Gerard Cassidy (RBC Capital Markets): Approach to managing ROTCE and potential risks for 2026.
  Response: ROTCE is an outcome, not a target; current ~17% expected to rise to ~18% by end of 2026 and beyond. Risks are largely exogenous (e.g., geopolitical), with economy and consumer tailwinds expected.

• Question from L. Erika Penala (UBS Investment Bank): Impact of Fed cuts and removed leverage lending limits on direct lending; advisory (capital markets) opportunities.
  Response: Leverage lending guidance allows PNC to make more smart/specialized loans. Capital markets did well in 2025; 2026 outlook is high single-digit growth, with strong advisory backlog.

• Question from Steven Chubak (Wolfe Research, LLC): Capital markets pipeline and growth outlook.
  Response: Middle market M&A and credit activity has opened up; 2026 capital markets revenue expected to be up high single digits.

• Question from Steven Chubak (Wolfe Research, LLC): Normalized NIM potential and sustainability above 300 bps.
  Response: NIM could reach ~3% in late 2026 (second half) assuming upward-sloping yield curve; in a severely inverted curve, it would not sustain that level.

• Question from Kenneth Usdin (Bernstein Autonomous LLP): Fee growth categories and FirstBank contribution.
  Response: Noninterest income up 6% in 2026, with specific categories: asset management (mid-single digits), capital markets (high single digits), card/cash management (mid- to high single digits), others low single digits. FirstBank adds ~$100M in fees.

• Question from Michael Mayo (Wells Fargo Securities, LLC): Distinction between national and regional banks and sufficiency of investment spend.
  Response: National banks compete nationwide; PNC's tech spend is on par and focused on optimizing existing businesses, not building new tech empires, which is sufficient for competitiveness.

• Question from Saul Martinez (HSBC Global Investment Research): Loan growth assumptions and conservatism.
  Response: Full-year average loan growth guide is 8% (including FirstBank); PNC stand-alone is ~4%. Growth driven by C&I momentum, CRE stabilization expected in H1 2026, and controlled consumer loan growth.

• Question from Christopher McGratty (Keefe, Bruyette, & Woods, Inc.): Potential upside from FirstBank in 2027.
  Response: Synergies on revenue side possible as FirstBank clients adopt more PNC products/services, but not heavily built into current $1 per share run rate estimate.

• Question from Matthew O'Connor (Deutsche Bank AG): Interest rate positioning and securities book strategy.
  Response: PNC's NII is largely neutral to rate changes; positioning is balanced. Use forward-starting swaps to lock reinvestment rates, reducing exposure to rate volatility.

• Question from Ebrahim Poonawala (BofA Securities): Long-term competitiveness in capital markets and wealth management.
  Response: Focus on private capital client coverage; continue growing fixed income (high grade) and debt syndication capabilities, but no major shifts or M&A plans in equities. Capital markets is a significant business (~$2B annually).

• Question from Ebrahim Poonawala (BofA Securities): Stablecoin legislation and potential risks to deposits.
  Response: Opposes paying interest on stablecoins; believes they should be regulated as money market funds if interest is paid, not as payment mechanisms. Crypto industry lobbying is strong, but banks are advocating for clear regulatory boundaries.

Contradiction Point 1

Net Interest Margin (NIM) Normalization Timeline

Contradiction on when NIM will exceed 3%.

What is the outlook for capital markets and NIM normalization? - Steven Chubak (Wolfe Research)

2025Q4: NIM is forecast to reach 3% in the second half of 2026 (around late Q3), assuming a normal yield curve; inversion could limit it. - William Demchak(CFO)

How will Q3 commercial deposit growth impact margins and the path to a 3% NIM by 2026? - Robert Siefers (Piper Sandler)

2025Q3: The forward trajectory for NIM expansion remains unchanged, with an expectation to exceed 3% during 2026. - Robert Reilly(CFO)

Contradiction Point 2

Loan Growth assumptions for 2026

Contradiction on drivers and timing of CRE loan growth.

What are the assumptions regarding loan growth and the level of conservatism applied? - Saul Martinez (HSBC)

2025Q4: Growth driven by C&I momentum, expected CRE stabilization in H1 2026, and deliberate management of consumer loans... - Robert Reilly(CFO)

What factors drove the strong C&I loan growth, particularly in Non-Fund-Based Lending (NDFI), and when is Commercial Real Estate (CRE) loan growth expected to turn positive? - Betsy Graseck (Morgan Stanley)

2025Q3: CRE loan balances are expected to begin growing at the start of 2026 after a period of runoff. - Robert Reilly(CFO)

Contradiction Point 3

Deposit Cost Sensitivity to rate cuts

Contradiction on deposit betas and cost responsiveness to rate environment.

How is the company positioning for interest rates and managing its securities book strategy? - Matthew O’Connor (Deutsche Bank)

2025Q4: NII is largely insensitive to the timing of rate cuts. - Robert Reilly(CFO)

How will wholesale and retail deposit betas compare with further rate declines? - Kenneth Usdin (Bernstein Autonomous)

2025Q3: Retail deposit betas are slower to adjust because rates paid on them are already low. Corporate and institutional deposit betas can move more quickly. The overall rate paid on deposits is expected to decline in Q4. - Robert Reilly(CFO)

Contradiction Point 4

Net Interest Income (NII) Growth Guidance

Guidance for NII growth appears inconsistent between quarters.

What is the outlook for NII momentum and deposit costs in 2026? - Robert Siefers (Piper Sandler)

2025Q4: NII guidance is up 14% for full-year 2026 (PNC standalone contributes 7–8%). - Robert Reilly(CFO), William Demchak(CEO)

What is your updated outlook for NII growth in 2026? - Christopher McGratty (Keefe, Bruyette, & Woods)

2025Q2: Full year 2026 NII growth is expected to be in the 6-7% range. - Robert Reilly(CFO)

Contradiction Point 5

Non-Interest Income (Fee) Growth Guidance

Guidance for non-interest income growth differs significantly.

What are the fee growth drivers and FirstBank’s NII contribution? - Kenneth Usdin (Bernstein Autonomous)

2025Q4: Noninterest income growth of 6% is driven by: asset management (mid-single digits), capital markets (high single digits), card/cash management (mid-to-high single digits), and others. - Robert Reilly(CFO)

What are the main factors driving non-interest income growth in 2026? - Robert Siefers (Piper Sandler)

2025Q2: Non-interest income growth is expected to be in the low-to-mid single digits for 2026. - Robert Reilly(CFO)