PNC Financial Services Group (PNC) Q3 2026 earnings review
PNC raises its outlook, but interest income trails its plan
PNC's lending grew faster than it planned, while the interest it earns on that lending grew more slowly. Average loans rose 2.5% from last quarter, more than the bank had set out. Net interest income rose 2.4% against a plan of at least 3%. Chief executive Bill Demchak said the strategy "continues to drive growth across our businesses", and every full-year target rose again.
| Average loans | $372.2B +2.5% from last quarter; the plan was 1–2% |
|---|---|
| Net interest income | $4.21B +2.4% from last quarter; the plan was 3–3.5% |
| Profit per share, excluding one-offs | $5.09 +17% from a year ago |
| Full-year revenue outlook, excluding one-offs | Raised to ~13.7% growth from ~13% three months ago |
⚖️ Verdict: 🟢 Bullish
The story got better because PNC raised its full-year targets for the third time this year. Its return on tangible equity also reached the 18% it had promised for year-end, a quarter early. The bad news: interest income came in below plan, so a 3% margin in the fourth quarter needs a jump bigger than any this year.
The question now is whether the net interest margin gets there. Either old bonds and swaps reprice faster than deposit costs rise and the target holds, or deposit costs win and it slips a fourth time. The fourth-quarter margin settles it in January.
🐂 Bull Case
Loans Grew Faster Than PNC Planned
PNC earns most of its money by lending, so the loan book sets the ceiling on interest income. Three months ago the bank said average loans would rise 1% to 2% this quarter. They rose 2.5%, on "strong new production and increased utilization": new borrowers plus existing ones drawing more credit.
The growth came from companies, not households. Business loans rose 4% from last quarter while consumer loans fell 1%, partly because the student loans moved out.
- Average loans: $372.2 billion, up 14% from a year ago
- Growth this year without FirstBank: $31.8 billion
- Full-year loan outlook: raised to about 13.5% from 12.5%
Chief executive Bill Demchak says the strategy "continues to drive growth across our businesses", and the plan has risen at every call in 2026. But the fourth-quarter outlook asks for another 2.5%, so any cooling in corporate borrowing would show quickly.
What to watch: fourth-quarter average loans against the $381 billion the outlook implies by our math. A figure at or above it keeps the raised interest income target in reach; a lower one means borrowing is slowing as funding costs rise.
Return Target Reached a Quarter Early
Return on tangible common equity measures the profit a bank makes on the capital shareholders have put in. PNC had told investors it would reach an 18% annualised rate by the end of 2026. It reached 18.3% this quarter, up from 16.8% a year ago, because costs fell.
The company cut expenses excluding one-offs by 3% from last quarter, citing "lower compensation expense and continued expense discipline". Staff costs, the largest line, fell to 31.0% of revenue from 33.3% a year ago. So profit before credit costs rose 15% on revenue up 11%.
What to watch: fourth-quarter expenses, which the outlook has rising about 5%. If the return holds above 18% through that seasonal step-up, the target is a floor. If it falls back below, this quarter was the peak.
Deal Fees Fell, but the Fee Outlook Rose
Capital markets and advisory is the fee PNC earns for arranging mergers, loans and bond deals. A quarter ago the company warned of a drop after "elevated second quarter capital markets and advisory revenue". It came: $433 million, down 25% and level with a year ago.
The other fee lines kept growing. Asset management rose 11% from a year ago and lending and deposit fees 7%. So the bank raised its full-year target for non-interest income to about 10.5% growth from 9%. It also expects fee income to rise about 3.5% in the fourth quarter.
What to watch: capital markets and advisory revenue in the fourth quarter. A rebound would show the second-quarter record was timing. Another quarter at this level would put the raised fee target under pressure.
Deposits Covered More of the Loan Growth
Last quarter PNC funded its loan growth largely with borrowed money, because deposits did not keep up. This quarter deposits at period end rose $16.6 billion, or 4%. The company attributed the rise to commercial balances "reflecting seasonality as well as new and expanded client relationships".
Commercial interest-bearing deposits rose 7% from June. The lender also cut its Federal Home Loan Bank borrowings by $3.9 billion at quarter end, so loans fell to 81% of deposits from 82%. But average borrowed funds still rose 9%, because the deposits arrived late in the period.
What to watch: average deposits and borrowed funds in the fourth quarter. If average deposits rise in line with loans, the seasonal explanation holds and funding costs stop climbing. If borrowings rise again, the inflow was timing.
🐻 Bear Case
Interest Income Fell Short of PNC's Own Plan
Net interest income is the gap between what PNC earns on loans and securities and what it pays for deposits and borrowings. The bank's slides lead with "Increased net interest income", and it rose 2.4% from last quarter. But the company had said 3% to 3.5%, the first quarter below plan in a year.
The company said growth was "partially offset by increased funding costs". The rate PNC pays on interest-bearing deposits rose 7 basis points to 1.98%, so the net interest margin slipped to 2.94% from 2.96%.
This matters because the target for that margin keeps moving. It was 3% by the end of 2025 at first, then the second half of 2026. Now the outlook "Supports our expectation for a 3.0% or higher NIM" in the fourth quarter. By our math that needs a 6 basis point gain in one quarter, more than any of the last three.
What to watch: the fourth-quarter net interest margin against 3.0%. Reaching it would show fixed-rate securities and swaps are repricing fast enough to beat rising deposit costs. Falling short would make this the fourth slip of the same target.
Problem Commercial Loans Rose 14% in a Quarter
Nonperforming loans are loans on which PNC has stopped counting interest because repayment is in doubt. Commercial nonperforming loans rose to $1.31 billion from $1.15 billion, and the balance at service companies doubled. Reserves fell to 1.42% of loans from 1.48%.
- New nonperforming assets: $692 million, against $335 million last quarter
- Commercial net charge-offs: $128 million, from $72 million a year ago
The totals still look calm: consumer delinquencies fell 9% and underlying charge-offs matched the plan. But lending to financial firms, now $49.1 billion and a fifth of business loans, is growing fastest, and the reserve ratio fell as it grew.
What to watch: commercial nonperforming loans next quarter. A second rise would mean the fast-grown book is starting to season; a fall would mark this as a few names.
Higher Rates Cut Tangible Book Value 3%
Banks hold bonds whose value falls when rates rise. The paper loss sits in a line called accumulated other comprehensive income, which went to negative $6.5 billion from negative $4.1 billion. The company blamed "the impact of higher interest rates on securities and swaps"; tangible book value per share fell 3%.
The regulatory capital ratio ignores these losses, and a third of the securities and swaps run off by the end of 2028. But PNC's own baseline now has the Federal Reserve raising rates twice, which would deepen the hole first.
What to watch: the duration of the bond book, which lengthened to 4.1 years from 3.6. A shorter figure would mean the portfolio is rolling into higher yields; a longer one would mean PNC is adding rate risk.
Risks this quarter didn't answer
Three standing concerns got no reading from the release, the slides or the financial supplement, so they carry over to next quarter unchanged.
- Capital: the common equity ratio is 9.8%, below the roughly 10% management calls its working level, while the bank returned $1.4 billion; a ratio back at 10% would settle it.
- Growth without FirstBank: the slides show organic loan growth but not organic interest income; a split would show how much of the 15% interest income growth the acquisition supplied.
- Deposit substitutes: interest-bearing stablecoins went unmentioned in the printed materials; the question is readable only from the call.
👓 Other Themes
Student Loans Moved to Held for Sale
PNC moved its $1.4 billion education loan book to held for sale and took a $35 million charge-off on the transfer. Loans held for sale rose to $2.75 billion from $1.52 billion. The move trimmed consumer loans by 1% and explains most of the reported rise in charge-offs; the company gave no sale date.
💲 Other KPIs
Rising faster each quarter: up 14 basis points from last quarter after 9 the quarter before, and flat a year ago. Old low-yield bonds are rolling into new ones, and the receive-fixed rate on the swap book rose to 3.92% from 3.75%. The company projects a third of securities and swaps to run off through 2028.
Up 13% from a year ago but down 1% from June, as $7 billion of custody assets left while managed assets rose $3 billion. Assets under administration are client money the bank manages or holds for a fee, so they drive asset management revenue, which rose 11% from a year ago.
Down from 403 million last quarter and 405 million in the first quarter, as $0.6 billion of buybacks work off the 13.9 million shares issued for FirstBank in January. The count is still 1% above a year ago, and the quarterly dividend is now $2.00 a share, 18% higher than a year ago.
🔮 Guidance
Raised. The plan now has average loans at about $367 billion for the year. By our math, that leaves about $382 billion for the fourth quarter, up 2.5% from this quarter and 16% from a year ago. Fourth raise in a row, each smaller than the last: +$9.7B, +$4.8B, +$3.3B. The quarterly loan outlook has been beaten four quarters running.
Raised to the top of the old range. The plan calls for about $16.64 billion for the year, so by our math the fourth quarter must deliver about $4.37 billion, up 4% from this quarter after a 2.4% rise. Third raise this year, and the smallest: +$72M, +$108M, +$36M. The whole raise rests on one quarter.
Raised. The plan has non-interest income near $9.6 billion before Visa and securities items. By our math it leaves about $2.46 billion for the fourth quarter, which matches the separate fourth-quarter lines of fee income up 3.5% plus about $250 million of other income. Second raise this year, after ~6% to ~9%.
Raised. The plan is now about $26.3 billion, so by our math the fourth quarter needs about $6.84 billion, 4% above this quarter's $6.60 billion excluding one-offs and 13% above a year ago. Third raise this year; the moves were $0, +$462M and +$162M.
Raised, for the third time. Expenses before integration costs and the foundation gift are now planned at about $15.15 billion, which by our math leaves about $3.92 billion for the fourth quarter, up 5% from this quarter. Revenue was raised slightly less in dollars, so the gap between the two narrows in the fourth quarter.
Unchanged since January. This quarter's rate was 20.0% and the nine-month rate 19.9%, so the full-year figure implies a slightly lower fourth quarter.
New. The outlook calls for about $381 billion of average loans, the same pace as this quarter. That fits the raised full-year figure, and the company ties it to its expectation of a 3.0% or higher net interest margin. If the pattern of beating by about 1% holds, the quarter lands near $385 billion.
New. About $4.37 billion, the largest quarterly step since the FirstBank quarter, after this quarter's 2.4% fell short of the 3% to 3.5% planned. The company says loan growth and repricing of fixed-rate assets support a margin of 3.0% or higher. Over the last five quarters the outlook has been missed twice and beaten three times, by small amounts each way.
New. About $2.22 billion, a rebound after this quarter's 6% fall, which the company had flagged as a capital markets step-down. A year ago fourth-quarter fee income rose 2.6% from the third, so the plan asks for a stronger seasonal lift than last year.
New, and higher than the $150 to $200 million range the company has given every quarter for a year. The figure excludes securities gains and Visa items; this quarter's comparable figure was about $249 million by our math, lifted by private equity revenue.
New. About $3.91 billion before integration costs, a seasonal rise that matches the full-year plan. Expenses fell 3% this quarter, so the fourth-quarter step returns them to roughly the second-quarter level; revenue in the plan rises about 4% over the same period.
New. Slightly below this quarter's reported figure, but above the $222 million booked once the student loan transfer is removed, and above the roughly $225 million planned for each of the last two quarters. By our math that is about 0.26% of average loans, a level between this quarter's 0.28% and last quarter's 0.25%.
New. The company plans the same $0.6 billion pace as the last two quarters, with about 27% of its 100 million share authorisation left. It kept the pace while the capital ratio slipped to 9.8%.
❓ Key Questions
How much interest income growth came without FirstBank?
Net interest income is up 15% from a year ago, but the comparison includes a full quarter of FirstBank. The slides split organic loan growth; the same split for interest income and revenue would show the underlying pace before the acquisition is lapped in January.
What gets the margin to 3% in one quarter?
The margin fell 2 basis points this quarter and needs 6 in the next while PNC itself expects two rate rises. The call should spell out the contribution from securities runoff, swaps and deposit pricing.
Why did problem loans at service companies double?
Nonperforming loans in that industry rose to $269 million from $131 million, and new nonperforming assets doubled. Whether this is one or two borrowers or a wider pattern decides how to read the lower reserve ratio.
How fast is lending to financial firms growing?
Loans to financial services companies reached $49.1 billion, up 45% in a year and a fifth of business loans. The spread on that production, and how much of it is to private credit funds, would show what the loan growth is worth.
How much will the Fed hikes add to deposit costs?
The rate paid on interest-bearing deposits rose 7 basis points this quarter with the Fed on hold. The deposit beta PNC assumes for two rate rises decides whether the 4% fourth-quarter interest income step is achievable.