PNC profits spike

Pittsburgh bank lays out plan to expand into new markets digitally

Pittsburgh Post-Gazette

PNC Financial Services Group saw profits climb 25 percent in the second quarter as Pittsburgh’s biggest bank benefited from higher fee income and higher interest rates.

The bank also laid out its plans to move more deeply into digital banking — with just a few branches in some new markets to give customers a place to find help.

Net income for the quarter was $1.28 billion, up from $1.03 billion in the same three months last year. Per-share profits jumped 30 percent to $2.72 from $2.10, topping analysts’ consensus estimate of $2.58.

Revenue rose 7 percent to $4.32 billion from $4.06 billion a year earlier.

“PNC’s second-quarter results were strong,” Chairman and CEO Bill Demchak said in a statement Friday. “We are continuing to invest in our businesses, including our middle market expansion and digital offerings, and remain focused on opportunities for growth and efficiency.”

PNC — the nation’s sixth-biggest bank, with assets of $380.7 billion — is on track to launch its national digital bank in the second half of this year, Mr. Demchak told analysts in a Friday morning conference call.

“At launch, it will be basically available on a national basis in all markets where we currently don’t have a core branch presence,” he said.

The digital bank will offer interest rates on deposits competitive with the generally higher rates paid by online-only banks, he said.

PNC will focus marketing for the digital bank in select markets, where it plans to build a few branches — a strategy that it hopes will give it an edge over other online banks.

“The handful of branches that we might have in a market is kind of a tipping stone to give somebody comfort that they are not dealing with the person behind the curtain,” Mr. Demchak said.

Plus that will give online customers the option to “go in a building and scream at someone if we get something wrong,” he said.

PNC hasn’t announced which markets it intends to target first, but one analyst on the call guessed they would include Dallas, Houston, Denver, Nashville, Minneapolis and Kansas City. Those are the cites where PNC recently started offering middle market business banking services.

“If you were throwing darts, that’s where I’d aim,” Mr. Demchak responded.

Mr. Demchak also said PNC would bring its business banking services to Boston and Phoenix in 2019.

PNC expects continued steady growth in the nation’s gross domestic product this year, chief financial officer Rob Reilly told analysts.

The bank also is expecting one more quarter-point hike in shortterm interest rates by the Federal Reserve this year, to come in September, rather than December as previously forecast.

The Fed last raised the benchmark federal funds rate in June, to a range of 1.75 percent to 2 percent. It was the second increase of the year and the seventh since December 2015.

PNC’s shares added 33 cents, or .24 percent Friday, to close at $138.32.