PNC Financial Services reported a 29% drop in net income for the quarter ending March 31, as the Pittsburgh-based bank added $693 million to its loan loss reserves in response to the coronavirus pandemic.
The bank reported profit of $915 million Wednesday, compared to $1.3 billion in the same period in 2019, attributing the decrease to the higher provision it set aside for credit losses. The bank reserved a total of $914 million, spurred by the pandemic and a switch to the current expected credit loss (CECL) accounting standard.
"Our results for the first quarter were good, but the extraordinary changes in the economic backdrop occurring in March and the implications of the broad-based response to the COVID-19 outbreak had a material impact on our provision for credit losses," PNC CEO Bill Demchak said in a statement.
Demchak said the virus's impact on the economy has worsened since Q1 wrapped up, adding the bank will likely increase its reserve build in the second quarter as a result.
"Since we closed the books, we saw claims be higher than we had assumed," he said Wednesday on a call with analysts. "We changed from thinking that a V-shaped recovery was going to happen fast into more of a U-shaped recovery."
PNC reported revenue of $4.5 billion, a 5.4% increase from $4.3 billion in last year's comparable quarter.
The bank grew loans by $24.8 billion and deposits by $16.7 billion compared to the end of the fourth quarter, mainly driven by draws on commercial lines of credit, Demchak said.
"We have provided new loans to support key industries in our country since the COVID outbreak, including over $2 billion in new loans to hospitals and other health care entities and $1 billion in new loans to municipalities," he added.
The bank is processing thousands of forbearance and loan modification requests for consumers, Demchak said.
"I think our willingness to extend capital intelligently to clients is going to stand out, as it did in the crisis," Demchak told analysts. "We have an opportunity to grow good clients and support existing clients with our liquidity and capital, and we are going to do that."
Since launching its online Paycheck Protection Program (PPP) portal on April 3, Demchak said the bank received more than 75,000 applications for the Small Business Administration’s coronavirus relief program and has processed over $6 billion worth of the loans as of Wednesday morning.