PNC Financial Services Group saw increases in delinquencies, gross nonperforming loans (NPLs) and net charge-offs in the fourth quarter.
A notable contributor to the increase was its commercial real estate (CRE) portfolio, PNC Executive Vice President and Chief Financial Officer Robert Q. Reilly said during the bank's quarterly earnings conference call on Tuesday (Jan. 16).
Of the $79 million increase in net loan charge-offs that PNC reported, $56 million came from CRE clients, Reilly said.
Overall, net charge-offs increased 65% in the fourth quarter compared with the third quarter, PNC said in its earnings release Tuesday.
“The CRE office portfolio continues to be the most stressed, with net charge-offs of $56 million in the fourth quarter,” Riley said. “We expect to continue to experience losses in this portfolio.”
Delinquencies increased 8% and non-performing loans increased 3% in the fourth quarter compared to the third quarter, according to the release.
Delinquencies and net charge-offs increased for both consumer and commercial loans, while non-performing loans increased for commercial loans but decreased for consumer loans, according to the release.
“Credit quality across the portfolio remains strong, although there has been a slight increase in non-performing loans and delinquencies,” Reilly said on the conference call.
PNC Chairman, President and CEO William S. Demchak said on a conference call that as the bank gains more customers, fees are also growing, and deposits and loans are also growing for that reason.
Regarding corporate deposits, Demchak said capital has been shifting to larger banks in the wake of the banking sector turmoil in March 2023, and in the longer term since previous financial crises.
Demchak said PNC “barely” benefited from this trend after the “mini-crisis” in March, while smaller banks struggled and larger banks found it easier to attract corporate deposits.
“This trend accelerated in the wake of the mini-crisis in March, where businesses don't necessarily trust the regulatory environment to ensure the safety of their bank deposits,” Demchak said. “So we've seen those deposits flow upward. And without key relationships with businesses that have deep roots in treasury management and other services, those corporate deposits end up being lost.”
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