PNC chief’s prediction: No recession, one more Fed rate hike
PNC Financial Services Group chairman and CEO Bill Demchak said Wednesday that consumer spending should keep the economy from falling into a recession this year despite some headwinds, including the recent volatility in the stock market and trade tensions with China.
“We don’t think we’re headed toward a recession. Consumer confidence remains high,” Mr. Demchak said. “Our corporate clients … remain largely bullish.”
The chief of Pittsburgh’s dominant bank made the remarks during a conference call with analysts discussing fourth-quarter earnings, which skidded 37 percent from a year earlier when results had been boosted by a onetime gain due to a change in U.S. tax laws.
Bank of New York Mellon, which also has a large presence in the Pittsburgh region, also saw fourth-quarter profits fall in comparison with the positive effects of the tax law changes the previous year.
Mr. Demchak said a recession could emerge if, for instance, the partial U.S. government shutdown persists or if the impact of U.S. and Chinese
tariffs now being felt by large multinational companies “starts to trickle down to the broader economy.”
“We don’t think that’s going to be the case,” he said. “Instead, we see an economy growing at over 2.5 percent.” The nation’s gross domestic product rose at an annual rate of 3.4 percent in the third quarter of 2018.
After a series of hikes in short-term interest rates by the Federal Reserve in recent years — including four in 2018 — PNC is forecasting a single quarter-point increase this year, in September.
Mr. Demchak said that the quality of PNC’s loan portfolio remains strong and that the launch of the company’s national digital bank in October was exceeding expectations.
“We like what we’re seeing, but it’s early,” PNC’s chief financial officer, Robert Reilly, told analysts.
PNC reported fourthquarter profits of $1.28 billion, or $2.75 per share, down from $2.02 billion, or $4.18 per share, in the same quarter a year earlier. Special items, including the tax law benefit, added $900 million to year-earlier results, PNC said.
Revenue rose 2 percent to $4.34 billion from $4.26 billion.
New York-based BNY Mellon said earnings fell 26 percent to $832 million, or 84 cents per share, in the fourth quarter. That was down from $1.13 billion, or $1.08 per share, in the fourth quarter of 2017.
Revenue rose 7 percent to $4.01 billion, up from $3.73 billion.