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PNC Net Loan Charge-Offs Rise 65%, Driven by Commercial Real Estate

PNC Financial Services Group saw delinquencies, total non-performing loans (NPLs) and net loan charge-offs increase during the fourth quarter.

One notable contributor to the increase was the commercial real estate (CRE) portfolio, Robert Q. Reilly, executive vice president and chief financial officer at PNC, said Tuesday (Jan. 16) during the bank’s quarterly earnings call.

Of the $79 million rise in total net loan charge-offs reported by PNC, $56 million was from CRE customers, Reilly said.

Overall, compared to the third quarter, net loan charge-offs leapt 65% in the fourth quarter, PNC said in a Tuesday earnings release.

“The CRE office portfolio is where we continue to see the most stress and fourth quarter’s net loan charge-offs were $56 million,” Reilly said. “We continue to expect future losses on this portfolio.”

Compared to the third quarter, delinquencies increased 8% and NPLs rose 3% in the fourth quarter, according to the release.

Delinquencies and net loan charge-offs were driven by both consumer and commercial loans, while NPLs were higher among commercial loans but lower on consumer loans, according to the release.

“While overall credit quality remained strong across our portfolio, we did see a slight uptick in NPLs and delinquencies,” Reilly said during the call.

PNC has also seen growth in fees as it acquires more customers, William S. Demchak, chairman, president and CEO of PNC, said during the call. Deposits and loans have grown for that reason as well.

Addressing corporate deposits, Demchak said that money is moving to the largest banks in the wake of the banking turmoil in March 2023 and, in the longer run, since the earlier financial crisis.

PNC has “just barely” benefited from this trend after the March “mini crisis,” while smaller banks have struggled and larger ones have had an easier time attracting corporate deposits, Demchak said.

“That trend line has accelerated as a function of the mini crisis in March, where corporates bluntly don’t necessarily trust the regulatory environment to ensure that their deposits at a bank are safe,” Demchak said. “So, we’ve seen those deposits flow uphill, and if you aren’t a primary relationship with that corporate deeply embedded with treasury management and other services, you net-net lose corporate deposits.”