PNC's shares experience slow credit growth

Average loans were $ 223.3 billion, up 1.9% from the same quarter last year. Compared to the second quarter, average loans increased by 0.3%. The company said it expects a slight increase in loans in the fourth quarter.

PNC CEO Bill Demchak said Friday at the company's earnings call that business loans "were below our own expectations".

"The higher gains and gains seem to be due to competition from non-bank lenders, a surplus of corporate cash and attractive opportunities for our bond market clients," said Demchak.

Shares of the PNC fell 5.9% Friday noon, bringing the decline in the title in 2018 to 14%. Shares of other regional banks also fell, with the KBW Nasdaq Regional Banking index down 3.1%.

Growth in bank lending is expected to be slow in the third quarter. In a note to analysts released last month, Scott Siefers, director of Sandler O'Neill, said he thought the PNC "was stronger than many other big regions," but that any updates to the PNC loans would be "just as important as the 3Q Mr. Siefers was expecting the average loan to increase by 1% over the second quarter, according to his rating.

BMO Capital Markets analyst Lana Chan said in a note on Friday that the company's forecast for fourth-quarter loan growth was "slightly weaker" than analysts expected. Chan added that repayment of loans could also be an unfavorable factor for other regional banks.

PNC, based in Pittsburgh, is the first major regional bank to publish its results.

Despite weak loan growth, Demchak told analysts that the company's "real output and new customers are pretty good."

"When we talk to companies, they are really optimistic and they invest," Demchak said, adding that capital spending is increasing. "You would think that this would result in loan growth."

The company reported a profit of $ 1.39 billion, up 25% from the same quarter of the previous year. Earnings per share were $ 2.82, up from $ 2.16 a year ago. Profits have increased in all segments of the business.

Revenues rose 5.6% to $ 4.36 billion, as net interest and other interest income did not increase. The company's net interest margin – an essential measure of loan profitability – also reached 2.99%.

PNC set aside $ 88 million for its provision for credit losses, down 32% from the same quarter last year. The company said the provision was mainly related to auto loans and credit card loans.

The company also indicated that it expects net interest income, fees and non-interest expenses to increase 4% in the fourth quarter. He expects his loan loss provision to be in the range of $ 100 million to $ 150 million.

Write to Allison Prang at [email protected]