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"We continue to add new customers and see strong business momentum across our franchise, particularly in the new and expansion markets," Demchak told analysts during the company's quarterly earnings call.
Checking and savings account growth, he added, "accelerated in our branches, and we continue to add new corporate and commercial banking clients above historical rates."
The bank, which had grappled with high deposit costs and waning loan demand last year and
Average deposits declined 1% from the previous quarter to $417 billion. PNC cited seasonal drops in corporate deposits. Companies often draw down deposits in the second quarter to pay taxes.
However, the pace of deposit cost increases slowed in the second quarter while yields on loans increased, resulting in the stronger interest income as well as a net interest margin of 2.60%, which was up three basis points.
"Net interest income has moved past its trough," Demchak said.
Chief Financial Officer Robert Reilly said PNC's average noninterest-bearing deposits had the smallest dollar decline in the second quarter since the Federal Reserve began raising rates in 2022. That result "gives us confidence that the noninterest-bearing portion of our deposits has largely stabilized," he said.
The bank's rate paid on interest-bearing deposits increased by one basis point during the second quarter to 2.61%, according to Reilly. "We believe our rate paid on deposits is approaching its peak level, but we do expect some potential drift higher as interest rates remain elevated," he said.
PNC reported second-quarter net income of $1.5 billion, or $3.39 of earnings per share, up from $1.3 billion, or $3.10, the previous quarter. Analysts had expected EPS of $2.99, according to a consensus forecast published by FactSet Research Systems.
PNC also reported a $754 million gain on a Visa share exchange, which more than offset other one-time items, resulting in a nine-cent benefit to its earnings per share.
Other major items during the second quarter included the sale of lower-yielding securities, which resulted in a loss of $497 million. The bank said it reinvested proceeds into higher-yielding securities to support its net interest margin in coming quarters.
The securities repositioning is expected to benefit PNC's net interest income by $80 million in 2024, with roughly $10 million of that benefit realized in the second quarter, Reilly said.
The finance chief also said PNC has revised upward its expectations for cost savings tied to its decision to cut its
At the beginning of the year, he said, PNC was targeting savings of $425 million for 2024. "Recently, we have identified … an additional $25 million, raising our full year target to $450 million," Reilly said.
He also noted that PNC's second-quarter noninterest expenses of $3.4 billion increased by 1% because of a donation to the bank's foundation. Excluding that contribution, he said, expenses declined slightly.
PNC's revenue rose 5% from the prior quarter to $5.4 billion. Noninterest income of $2.1 billion increased 12%, supported by seasonally higher card and cash management fees and increased capital markets and advisory activity.
Demchak noted that, during the second quarter, PNC launched its first new credit card in several years. The bank plans to launch several other new cards in the months and year ahead as it seeks to bolster its consumer business, he said.
Lending at PNC remained sluggish in the second quarter, as the bank said its average loans declined 1% from the prior quarter. It cited trends in residential real estate and home equity loans, where lending continues to be hindered by lingering high rates.
Nonetheless, PNC expects steady loan growth in the second half of the year. It anticipates two interest rate cuts this year that could spur increased loan demand.
PNC's guidance aligns with signs of increased big-bank loan growth early in the third quarter. Large banks posted loan growth of about 1% in the first week of July, according to Fed data.
"Loan growth is still weak but may be coming off its low base," supported by demand for commercial and industrial loans, said Piper Sandler analyst Scott Siefers.
Credit losses in the vulnerable office building sector remain an area of concern, PNC said. Its net loan charge-offs of $262 million were up $19 million from the prior quarter, primarily due to higher commercial real estate charge-offs.
"The credit environment continues to play out as we have expected, including an increase in charge-offs within the CRE office portfolio, where we remain adequately reserved," Demchak said. "Outside of CRE office, credit quality remains relatively stable."
