PNC Third-Quarter Lending Revenue Misses Estimates as Costs Beat

(Bloomberg) -- PNC Financial Services Group Inc. reported third-quarter revenue that missed analysts' estimates while the bank did a better job of keeping expenses in check than expected.

Non-interest expenses of $3.75 billion beat the $3.77 billion average estimate of analysts surveyed by Bloomberg, while revenue of $6.56 billion compared with the $6.58 billion estimate for total income from interest and fees.

Higher interest rates cut both ways for net interest income, what the bank earns on loans and securities minus funding costs. While commercial loans increased at the Pittsburgh-based company, especially after the acquisition of FirstBank Holding Co. in January, and other interest-earning assets generated higher yields, funding costs also increased, according to a statement Thursday.

PNC's bigger rivals, which reported results earlier this week, offered an optimistic outlook for 2027, assuming further rate hikes will fuel already strong growth in NII. JPMorgan Chase & Co. forecast a 10% increase in NII next year, excluding trading activities, and Bank of America Corp. expects NII to be 8% higher than this year.

Net interest income at PNC rose 2.4% from the second quarter to $4.21 billion. That fell short of the consensus estimate of $4.23 billion.

"Our strategy continues to drive growth across our businesses, as we deepen our presence in key markets and expand our reach nationally," Chief Executive Officer Bill Demchak said in the statement.

For regional banks, investors are eager to see if the bond-market selloff since August will resurface the issue of paper losses on their securities portfolios. That was at the center of industry turmoil in 2023, making banks vulnerable to deposit outflows and constraining their ability to deploy capital.

PNC got a head start on reducing paper losses in the second quarter, selling some securities at a loss and taking a one-time $139 million charge. In the third quarter, its average investment securities rose to $151.4 billion, up 3% from the prior quarter. The increase resulted from the bank's decision to buy more residential mortgage-backed securities, according to the statement.