PNC Financial Services reported profit of $3.7 billion for the second quarter of 2020, more than doubling the $1.4 billion net income it recorded last year as the bank’s recent BlackRock sale helped the firm quell losses related to the coronavirus pandemic. The Pittsburgh-based bank divested its 22.4% stake in the asset manager in May, with net proceeds from the sale totaling $14.2 billion, the bank said.
Like last quarter, PNC padded its loan loss reserves in response to the pandemic, bringing its total reserves to $2.5 billion, compared to $914 million in the previous quarter.
- "During this remarkable period in the midst of the pandemic and economic downturn, PNC has remained steadfast in our commitment to our customers, communities, employees and shareholders," Bill Demchak, PNC chairman, president and CEO, said in a statement accompanying the bank’s earnings release. "While our pre-provision results for the second quarter were good in the context of a lower rate environment and business headwinds, the uncertainty in the economy related to the pandemic resulted in a substantial loan loss reserve build."
Like larger banks such as JPMorgan Chase, Citi and Wells Fargo, which reported earnings Tuesday, PNC is building its reserves as it braces for potential loan defaults spurred by the recession.
The regional lender saw increases in both loans and deposits in the quarter ending June 30, compared to the same period in 2019.
Average loans increased 18%, and average deposits increased 40% — growth the bank attributed in part to higher liquidity maintained by customers due to the economic impact of the pandemic, as well as Paycheck Protection Program loan originations.
Since the announcement of its plans to sell its BlackRock stake, Demchak has hinted at the bank’s strategy to pursue bank acquisitions with its new capital.
Demchak said in a statement in May that the BlackRock sell-off positions PNC "to take advantage of potential investment opportunities that history has shown can arise in disrupted markets.”
The following month, Demchak said the bank is interested in a sale that would push its assets past $700 billion, but "will be patient."
During a call with analysts Wednesday, Demchak said the bank’s strategy has not changed, and PNC will continue taking a measured approach amid economic uncertainty.
"We're in pretty early innings here. The fiscal payments that the government's put out, plus what the Fed’s done, effectively masked some pretty severe underlying [economic] problems," Demchak said. "Depending on how fast that comes back, and if the government keeps providing stimulus, it will tell us how much of that capital we need in the first place. Secondly, what opportunities there will be to deploy it. We're going to be patient. The strategy of trying to pursue bank-like acquisitions to help us expand our national franchise remains the same."
Demchak said the bank is reconsidering its branch strategy in light of changing consumer behaviors.
"What’s clear is consumer behavior has changed, and in my belief, it has changed permanently with this adoption to digital," he said. "We'll have to adjust the way we serve our clients and it is likely that that will mean less physical space."
The bank has been in the "consolidation business" for some time, averaging 50 to 70 branch consolidations a year, PNC’s retail transformation manager, Dawn Fabian, said last year.
The regional bank has applied with regulators to close 29 branches in August. The bank closed 16 in May, part of an earlier filing with the Office of the Comptroller of the Currency (OCC).