PNC closes books on solid year; projects ‘shallow’ recession in 2023

PNC Financial Services Group on Wednesday reported higher revenue and profits for the fourth quarter compared with the same period a year earlier, as Pittsburgh’s and the state’s biggest bank benefited from rising interest rates.

Profits were lower than analysts had expected however, sending PNC’s stock tumbling $8.31, or 5%, to $153.54 per share in early afternoon trading.

PNC earned $1.5 billion, or $3.47 per share, in the final quarter of 2022, up from $1.3 billion, or $2.86, for the fourth quarter of 2021.

Adjusted earnings — those exclude special items — were $3.49 per share, which was below the average estimate on Wall Street of $3.95 per share.

Profits were hurt by a bump up in expenses and an increase in the money PNC set aside to cover bad loans as the bank prepares for a “shallow recession” this year. The provision for loan losses rose to $408 million in the fourth quarter, up from $241 million in the third quarter.

In the fourth quarter of 2021, instead of increasing reserves, PNC reduced them by $327 million, which aided profits for that period.

PNC’s chairman and CEO, Bill Demchak, said 2022 was a good year.

“Our strong performance during the year reflects the power of our main street bank model and our coast-to-coast franchise,” he told analysts during a Wednesday conference call.

PNC — the nation’s sixth biggest bank — is projecting a mild recession this year, resulting in a 1% decline in real gross domestic product.

The bank also expects the Federal Reserve to boost the federal funds rate a quarter point in both February and March as it battles inflation, then reverse course and implement a quarter-point cut in December. The federal funds rate currently sits at a range of 4.25% to 4.50%.

PNC posted fourth-quarter revenue of $5.76 billion, up 12% from $5.13 billion a year earlier. The key driver was an increase in net interest income — essentially profits on loans — reflecting the benefit of rising interest rates.

For the full year, revenue was $21.1 billion, up from $19.2 billion in 2021. Profits rose to $6.1 billion, or $13.85 per share, vs. $5.7 billion, or $12.70.

“We’ve put ourselves in a position of strength as we move into 2023,” Demchak said.