How did PNC's third quarter 2024 earnings compare with the prior quarter and the prior year?

Net income was $1.505 billion ($3.49 diluted EPS), up from $1.477 billion ($3.39) in 2Q24 but down from $1.570 billion ($3.60) in 3Q23. The sequential improvement reflected higher net interest and fee income, while the year-over-year decline mainly reflected lower other noninterest income tied to Visa derivative adjustments and higher personnel costs.

What drove the Visa-related impact on results, and why does it matter for comparisons?

PNC recorded $128 million of negative Visa Class B derivative fair value adjustments in 3Q24, primarily tied to litigation escrow funding. The prior quarter included a $754 million Visa exchange gain and related significant items, so reported other noninterest income fell $263 million sequentially to $69 million. Excluding these items, underlying revenue trends were stronger than the reported figures suggest.

Is PNC's credit quality deteriorating?

Modestly. Net charge-offs rose to $286 million from $262 million, mainly due to lower commercial recoveries, and nonperforming loans increased $75 million to $2.6 billion, driven by commercial real estate. Total delinquencies were stable at $1.3 billion, and the allowance held at 1.65% of total loans, so the trend warrants monitoring but did not signal a sharp reversal.

What is PNC's outlook and capital return posture?

Management said it is well positioned to capitalize on opportunities and expects record net interest income in 2025. The CET1 ratio is an estimated 10.3%, and the SCB for the period beginning October 1, 2024 is the regulatory minimum of 2.5%. Fourth quarter share repurchases are expected to approximate recent quarterly averages, and the board declared a $1.60 quarterly dividend payable November 5, 2024.

PNC 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed October 15, 2024. Cited figures are marked; the original filing is the authoritative source.

PNC Financial Services Group reported third quarter 2024 net income of $1.5 billion^a, or $3.49 per diluted share, compared with $1.48 billion ($3.39) in the second quarter of 2024 and $1.57 billion ($3.60) in the third quarter of 2023.

The quarter delivered 1% positive operating leverage: total revenue was essentially flat at $5.4 billion^b (up $21 million sequentially) while noninterest expense fell 1% to $3.3 billion. Net interest income rose 3% to $3.4 billion, with net interest margin up 4 basis points to 2.64%. Fee income grew 10% sequentially to $1.95 billion, led by capital markets and advisory revenue, which rose 36%.

Results were held back by $128 million^c of negative Visa derivative fair value adjustments, and the prior quarter had benefited from $141 million of significant items, so the sequential comparison in other noninterest income is distorted. Credit quality showed modest deterioration. Net charge-offs rose to $286 million (0.36% annualized) from $262 million, mainly due to lower commercial recoveries, and nonperforming loans increased to $2.6 billion, driven by commercial real estate.

The allowance for credit losses held steady at 1.65% of total loans. Balance sheet trends were stable, with average loans flat at $319.6 billion^d and average deposits up 1% to $422.1 billion. Capital strengthened: the CET1 ratio reached an estimated 10.3%, tangible book value per share rose 9% to $96.98, and AOCI improved $2.4 billion to a negative $5.1 billion, mainly on lower rates.

PNC returned $0.8 billion to shareholders and declared a $1.60 quarterly dividend, and management said it expects to achieve record net interest income in 2025. For investors, the key takeaways are a solid core earnings profile supported by fee growth and NIM expansion, offset by lower quarterly earnings versus the prior-year quarter, a modest uptick in credit costs, and improving capital and book value metrics. The filing is a furnished (not filed) 8-K containing the earnings press release and financial supplement, both unaudited.

02—Key points

Key Highlights

Net income of $1.5 billion and diluted EPS of $3.49, up from $3.39 in 2Q24 but down from $3.60 in 3Q23
Positive operating leverage of 1%: revenue held at $5.4 billion while noninterest expense declined 1% to $3.3 billion
Net interest income rose 3% to $3.4 billion and NIM expanded 4 bps to 2.64%
Fee income grew 10% to $1.95 billion, driven by capital markets and advisory (+36% sequentially) and mortgage servicing rights valuation
Net charge-offs increased to $286 million (0.36% annualized) and nonperforming loans rose to $2.6 billion, led by commercial real estate; ACL steady at 1.65% of loans
CET1 ratio improved to an estimated 10.3%, tangible book value per share rose 9% to $96.98, and AOCI improved $2.4 billion to -$5.1 billion
Quarterly dividend of $1.60 per share declared; $0.8 billion returned to shareholders in the quarter

03—Questions

Frequently Asked Questions

How did PNC's third quarter 2024 earnings compare with the prior quarter and the prior year?
Net income was $1.505 billion ($3.49 diluted EPS), up from $1.477 billion ($3.39) in 2Q24 but down from $1.570 billion ($3.60) in 3Q23. The sequential improvement reflected higher net interest and fee income, while the year-over-year decline mainly reflected lower other noninterest income tied to Visa derivative adjustments and higher personnel costs.
What drove the Visa-related impact on results, and why does it matter for comparisons?
PNC recorded $128 million of negative Visa Class B derivative fair value adjustments in 3Q24, primarily tied to litigation escrow funding. The prior quarter included a $754 million Visa exchange gain and related significant items, so reported other noninterest income fell $263 million sequentially to $69 million. Excluding these items, underlying revenue trends were stronger than the reported figures suggest.
Is PNC's credit quality deteriorating?
Modestly. Net charge-offs rose to $286 million from $262 million, mainly due to lower commercial recoveries, and nonperforming loans increased $75 million to $2.6 billion, driven by commercial real estate. Total delinquencies were stable at $1.3 billion, and the allowance held at 1.65% of total loans, so the trend warrants monitoring but did not signal a sharp reversal.
What is PNC's outlook and capital return posture?
Management said it is well positioned to capitalize on opportunities and expects record net interest income in 2025. The CET1 ratio is an estimated 10.3%, and the SCB for the period beginning October 1, 2024 is the regulatory minimum of 2.5%. Fourth quarter share repurchases are expected to approximate recent quarterly averages, and the board declared a $1.60 quarterly dividend payable November 5, 2024.

04—Continue

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