PNC Reports 5% Revenue Gain in Q2

PNC Financial Services (PNC 0.54%), one of the largest diversified financial institutions in the United States, released its second quarter 2025 earnings on July 16, 2025. The company reported earnings per share of $3.85, which was above analyst expectations of $3.55. Revenue also exceeded forecasts, coming in at $5.7 billion compared to the $5.6 billion expected. This period saw solid loan growth, improved asset quality, margin expansion, and careful cost control, leading to a positive assessment of the quarter overall.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Focus

PNC Financial Services operates as a full-service bank providing lending, deposit, treasury management, and investment services across the United States. The company has a national branch network and focuses on both consumer and commercial banking segments, as well as asset management and corporate banking services.

In recent years, it has emphasized regulatory compliance, capital management, expansion into new markets, and digital transformation. Success in these areas requires maintaining strong capital and liquidity levels, offering competitive products, growing its customer base, and integrating new technologies. Regulatory oversight and responsible risk management are also core to its operating model.

Quarter Highlights: Financial and Strategic Performance

The quarter featured the strongest loan growth since late 2022, with total average loans rising 2% from the previous quarter to $322.8 billion, and up 1% from a year ago. Commercial loans grew 3% compared to the prior quarter, supported by a 4% increase in Commercial & Industrial lending, though this was partly offset by a 4% decline in Commercial Real Estate loans. Consumer loans were stable over the period. Notably, the Asset Management Group reported a 16% rise in new client acquisition, contributing to record quarterly revenue in Treasury Management.

The company’s net interest margin, which measures how much it earns on loans and investments versus what it pays for deposits, expanded to 2.80%, reflecting benefits from repricing and ongoing deposit discipline. Net interest income, the amount earned from lending and investing after paying depositors, grew by 8% over last year and by 2% from the previous quarter. Fee income also rose 7% from a year earlier, driven by increases in asset management and brokerage ($391 million, up 7%), capital markets and advisory ($321 million, up 18%), and card and cash management services ($737 million, up 4%).

Operating leverage turned positive at 4%, indicating that revenue growth outpaced expense growth. Costs were tightly controlled, with total noninterest expense flat from the previous quarter and up only 1% from the year before. The efficiency ratio, which compares expenses to revenue and is a measure of cost control, improved to 59.8% from 62.0% in the prior year. Personnel and marketing expenses both increased 6% year over year, reflecting investments in growth and employee compensation, but “other” expenses declined by 14%.

Credit quality remained solid. Nonperforming loans--those at risk of default--declined to 0.65% of total loans, down from 0.78% a year ago. Net charge-offs, which represent loans the bank considers uncollectible, were 0.25% of average loans, down from 0.33% the prior year. The company’s reserve for credit losses decreased to 1.62% of loans, reflecting sustained asset quality. However, the commercial real estate office portfolio remained a potential risk: office loan balances have fallen to $5.8 billion from $7.5 billion last year, and over half of this segment is classified as criticized, with 21.0% of office loans nonperforming and a reserve coverage ratio of 16.6%. Provision for credit losses increased 8% year over year to $254 million, driven by scenario modeling and a cautious approach to emerging risks.

Capital and liquidity positions stayed strong. The Common Equity Tier 1 (CET1) capital ratio was 10.5%, above regulatory minimums. Tangible book value per share grew 17% year over year to $103.96. The company raised its quarterly dividend by 6% to $1.70 per share, signaling financial confidence. Share repurchases have also increased, although management indicated these would not deviate dramatically from recent trends. The positive return on average tangible common equity stood at 15.6%, reflecting the company’s ability to earn a high return on shareholder capital.

Products, Trends, and Operational Updates

The period saw continued investment in retail branch modernization. The bank is in the process of a $1.5 billion program to upgrade its network, with the goal of supporting customer growth nationwide. New consumer checking accounts grew 2% year over year, and in the Southwest region alone, the increase was 6%. The Asset Management product suite, which provides investment management and advisory services, continued to attract customers, driving fee growth and raising brokerage assets to $87 billion.

The commercial banking business, including lending, deposit services, and treasury management, recorded higher client activity. Treasury management offerings facilitate cash flow, liquidity, and payments for businesses, and posted record revenue this period. The company also introduced new credit and debit card offerings, resulting in record transaction volumes. Card and cash management services saw year-over-year revenue growth, highlighting the bank’s focus on providing diverse solutions for both consumers and businesses.

Credit quality benefited from ongoing reductions in problem loans, especially in nonperforming and delinquent categories. Delinquencies remained stable at 0.40% of total loans. Management highlighted steady asset quality despite the risks associated with commercial real estate, especially in the office sector, where risk metrics remain elevated. The bank has actively managed down its exposure to higher-risk office loans by reducing balances and building reserves.

Fee income streams, including capital markets services and mortgage-related activities, showed mixed results. The capital markets business posted an 18% increase in fees year over year, helped by robust advisory pipelines. Mortgage revenue was flat compared to a year earlier. “Other” noninterest income fluctuated, up 55% from the previous quarter but down 36% from last year, reflecting some volatility in nonrecurring items.

Looking Ahead: Guidance and Expectations

Management provided forward guidance for both the third quarter and full fiscal year. For fiscal 2025, average loans are expected to rise about 1% (an increase from previous guidance of “stable”). Net interest income is projected to increase 7%, while noninterest income is now forecast to grow by 4–5%. Total revenue is expected to rise by about 6%, with noninterest expense up just 1% and an effective tax rate near 19%.

For third quarter 2025, the company projects average loans up about 1%, net interest income to grow 3%, fee income up 3–4%, and total revenue to be up 2–3% compared to the second quarter. Noninterest expense is expected to rise by around 2%. Net charge-offs--an indicator of loan losses--are forecast to increase to between $275 million and $300 million, mainly reflecting commercial real estate volatility. Management cited caution regarding ongoing economic and policy risks, such as trade disputes, regulatory developments, and credit costs.

The quarterly dividend was raised 6% to $1.70 per share.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.