The PNC Financial (PNC) Q2 2024 Earnings Report

Overview and trend synthesis (Q2 2024 vs Q1 2024 and vs prior year where data available):
- Revenue: approximately $5.4 billion in Q2 2024, up 5% sequentially and contributing to a positive operating leverage profile. Total revenue growth was led by higher NII and stronger fee income, partially offset by significant items.
- Net Interest Income (NII): $3.3 billion in Q2 2024, up 1% QoQ, marking the first uptick in NII in six quarters. NII benefited from higher asset yields and a stabilizing balance sheet; NIM was 2.6%, up 3 basis points QoQ.
- Net Income and EPS: Net income of about $1.46 billion and diluted EPS of $3.39 for the quarter, reflecting a $0.09 net EPS benefit from significant items that largely offset one another across the quarter.
- Deposits and liquidity: Average deposits were roughly $417 billion, essentially flat QoQ, with non-interest bearing deposits at 23% of total deposits; the bank noted deposits stabilized year-over-year with modest drift lower but a stabilization in deposit pricing as rates stay high.
- Balance sheet and capital: CET1 ratio estimated at 10.2% as of 6/30/2024; Basel III end-game fully phased-in CET1 around 8.4% with AOCI impact; AOCI negative $7.4 billion (improved vs. March 31). Tangible book value per share rose modestly (+$89.12 QoQ, +4%). The company returned approximately $700 million to shareholders in the quarter and approved a $0.05 dividend increase to $1.60 per share.
- Credit quality: Non-performing loans (NPLs) increased by $123 million (5%) QoQ to about $1.3 billion; allowance for credit losses remained at 1.7% of total loans; annualized net charge-offs (NCO) were $262 million in Q2 (including $106 million in CRE office). CRE office reserve levels remained a focus, with 10.3% reserves on total office loans and 15.5% on multi-tenant loans in the CRE office portfolio; reserves are deemed adequate.
- Expenses and efficiency: Non-interest expenses were $3.4 billion, up $23 million QoQ due in part to a $120 million PNC Foundation expense; CIP target increased to $450 million for the year to fund ongoing transformation efforts. Core expense reductions were reiterated, with positive operating leverage in the quarter and the year.
- Guidance: For 2024, the bank guided a NII decline of about 4% year-over-year, with non-interest income up 3-5% and core non-interest expense down ~1%, and full-year effective tax rate around 18.5%. The firm expects third-quarter NII up 1-2% QoQ driven by deposit dynamics, with third-quarter loan growth stabilizing and charges in the CRE office portfolio continuing to be monitored.
- Management tone: Management emphasized balance-sheet strength, capital flexibility, and ongoing investments in growth initiatives (e.g., new consumer cards like PNC Cash Unlimited and more cards to come), while maintaining a disciplined cost structure and a focus on continuous improvement.