PNC's Demchak: Uncertainty deep-sixing M&A prospects

UPDATE: This story includes quotes from PNC's earnings call, context on the company's past comments about bank M&A and an analyst's commentary.

PNC Financial Services Group Chairman and CEO Bill Demchak still believes the banking industry is ripe for consolidation — but not now. 

The 62-year-old Demchak, said Tuesday that deals are likely off the table for most banks in the near term due to uncertainty surrounding the direction of tariff policy and interest rates.

"To try to do a deal with the volatility going on in rates right now and the potential marks on credit makes it impossible," Demchak said Tuesday while discussing PNC's first-quarter results on a conference call with analysts.

Robert Reilly, PNC's chief financial officer, stopped short of predicting a recession. But he also didn't rule one out.

"The proposed tariffs on April 2 were more severe than anticipated," Reilly said on the conference call. "If these tariffs are implemented as proposed and remain in effect for an extended period, it's quite possible the probability of a recession will go up."

"Everyone is trying to figure out what the steady state will be with tariffs and how they need to, if at all, change their business model to succeed in a world with tariffs," Demchak said. "It has, without question, slowed down activity in the near term."

PNC executives have spoken frequently about the M&A outlook, especially in the wake of President Trump's electoral victory In November, making clear that they see their own bank as a potential acquirer.

In December, Demchak said that PNC would look to acquire a bank with the "right core retail deposits in the right markets." In February, Reilly indicated that PNC was open to an acquisition but said that valuations were high, and there was a dearth of sellers. PNC's last major acquisition was its 2021 purchase of BBVA USA.

 On Tuesday, Demchak made it clear he expects the M&A calculus to shift after volatile market conditions settle. Dealmaking will return with a vengeance, and PNC could play a role.

"In the long run, I think there's going to be big consolidation," Demchak said. "In the course of that consolidation, if we outperform in our organic growth, we will have the right to be an acquirer."

In the first three months of 2025, Pittsburgh-based PNC reported earnings per share of $3.51, up from $3.10 in the same period last year and above analysts' forecast of $3.38, as determined by S&P.

Revenue totaled $5.45 billion, up 6% from the first quarter of 2024 and roughly in line with estimates. 

The $555 billion-asset bank raised its provisions for credit losses in the first quarter, taking a cautious approach amid economic uncertainty, even as its earnings exceeded analysts' expectations.

The company's credit metrics remained solid, with net chargeoffs falling 15% year over year to $205 million, or 0.26% of average loans. Office loan chargeoffs fell sharply to $8 million for the three months ending March 31, down from $50 million during the same period in 2024.

Reilly, however, forecast that second-quarter chargeoffs would reach $300 million, adding that the culprit would be office commercial real estate loans. Chargeoffs within PNC's $6.3 billion office portfolio will likely "return to the levels we were experiencing in the third and fourth quarters" of 2024, Reilly said. PNC reported office chargeoffs totaling $95 million for the quarter ending Sept. 30, followed by  chargeoffs of $62 million for the three months ending Dec. 31.

Reilly's prediction about chargeoffs fits in with comments by Janney Montgomery Scott Research Director Chris Marinac, who wrote Monday in a research note that he expected more problem loans in the second and third quarters "as customer financial statements and new risks of tariffs, trade wars, and uncertain business demand lead to higher watch-list and substandard credits."

PNC also reported a jump in delinquent loans, which totaled $1.43 billion on March 31, up 12% from a year ago. Reilly attributed the increase in part to $55 million in forbearance activities linked to the wildfires that struck Southern California in January.

PNC's loan portfolio totaled $319 billion on March 31, roughly even with the result a year ago. Commercial and industrial loans increased 2% to $180.5 billion, while commercial real estate loans declined 9% to $32.3 billion.

Period-ended deposits totaled $423 billion, down 1% from a year ago. 

Tuesday's result followed a solid 2024, when PNC reported record revenue of $21.6 billion and full-year earnings of $6 billion, up 5% from 2023. 

The earnings report came a week after PNC named former Black Rock executive Mark Wiedman as its president, tasking him with preparing the $554.7 billion-asset bank for a "significant opportunity to scale."

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Wiedman succeeds Michael Lyons, who left the bank in January to become Fiserv's CEO.  While Demchak said PNC maintains a "super-strong" management bench, he called Wiedman an exceptional choice. "When you see a talent like that, you add it," Demchak said.

In response to an analyst's question about his own plans, Demchak said he intends to continue leading PNC for the foreseeable future. "I'm only 62, I'm going to be around for a while," he said.