PNC Financial Services Group Inc (PNC) — Q1 2025 Transcript

Well, good morning, and welcome to today's conference call for The PNC Financial Services Group, Inc. I am Bryan Gill, the Director of Investor Relations for PNC. Participating on this call are PNC's Chairman and CEO, Bill Demchak, and Rob Reilly, Executive Vice President and CFO. Today's presentation contains forward-looking information from which cautionary statements are provided in today's earnings release materials, SEC filings, and other investor materials available on our corporate website, pnc.com, under Investor Relations. These statements speak only as of April 15, 2025, and PNC undertakes no obligation to update them. I'd like to turn the call over to Bill.

Thank you, Bryan, and good morning, everyone. As you've seen, PNC had a strong first quarter of 2025. But before we go into the results, I want to spend a moment just on the current environment. Obviously, there's been an increased level of volatility due to uncertainty regarding tariffs that have dominated the headlines over the past two weeks, roiling the markets and raising concerns of a potential recession. As you would expect, we continue to monitor and evaluate this situation, communicating with our clients to gauge their understanding of the potential impact on their businesses and daily lives. However, it's still very early, and the fluidity of the news coming out of Washington makes it difficult to narrow the range of potential outcomes for the broader economy at this point. Irrespective of that outcome, we have demonstrated time and again that we will perform well in periods of uncertainty. The foundation of our success has been built upon the strength of our balance sheet, client selection, our interest rate risk positioning, our diversified business mix, leading technology, and our people. And that has not changed. As always, we will continue to focus on the things we can control, with an emphasis on providing superior products and services to meet the needs of our customers while executing on the organic growth opportunities in front of us. We saw that play out this quarter as we grew customers and deepened relationships across our coast-to-coast franchise. We delivered another quarter of strong results, generating net income of $1.5 billion, or $3.51 per share. While loan growth remained challenging for the industry, we were pleased to see 3% growth on our spot C&I loans, as well as strong new commitments during the quarter. As expected, total revenue this quarter was primarily impacted by lower day counts and seasonality, but expenses were well controlled and our net interest margin expanded. Importantly, we remain on track to deliver positive operating leverage and achieve record NII for the year. Credit quality is strong, and we remain well reserved. Rob is going to cover that in some more detail in a few minutes. Finally, we continue to build our capital levels during the quarter while also providing significant shareholder returns through dividends and share repurchases. In summary, we delivered strong results in the quarter, and we remain well positioned to deliver on our strategic priorities. Before I turn it over to Rob for more detail on our financial results, I'd like to welcome Mark Wiedman, who we appointed to the role of president last week. I'm thrilled Mark has joined us in this role. Mark brings deep experience in financial services that will complement the strength of our existing team. I've known Mark for 20 years, and we are fortunate that the timing was right for him to join our team. I'd also like to thank our employees for everything they do for our company and our customers. And with that, I'll turn it over to Rob to take you through the quarter.

Thanks, Bill, and good morning, everyone. Our balance sheet is on slide three and is presented on an average basis. For the linked quarter, loans of $317 billion declined $2 billion, or 1%. Notably, on a spot basis, loans increased $2 billion, or 1%, compared to December 31. Investment securities of $142 billion decreased by $2 billion, and our cash balance at the Federal Reserve was $34 billion, a decrease of $3 billion, or 9%. Deposit balances declined $5 billion, or 1%, and averaged $421 billion. Borrowings of $65 billion were lower, primarily due to a reduction in advances. At quarter-end, AOCI was negative $5.2 billion, an improvement of $1.3 billion, or 20% compared with December 31. Our tangible book value increased to $100.40 per common share, representing a 5% increase linked quarter and a 17% increase compared to the same period a year ago. We remain well capitalized with an estimated CET1 ratio of 10.6% as of March 31. We estimate our CET1 ratio, inclusive of AOCI, to be 9.4% at quarter-end. During the first quarter, we returned approximately $800 million of capital to shareholders through both common dividends and share repurchases. Slide four shows our loans in more detail. Average loan balances of $317 billion declined $2 billion, or 1%, driven by lower commercial real estate and consumer loans. Importantly, on a period-end basis, total loans grew more than $2 billion, or 1%. Strong growth in C&I loans was partially offset by continued runoff in the CRE office portfolio and lower consumer balances. C&I loans were $181 billion on March 31, an increase of $5 billion, or 3%, reflecting broad growth across loan categories. This represented the largest increase in C&I balances since the fourth quarter of 2022, driven by higher utilization rates and new loan production. Regarding utilization, we saw positive trends in the first quarter with increases in each consecutive month, ending the quarter at 50.3%, or 80 basis points higher than year-end. Slide five details our investment securities and swap portfolios. Average investment securities decreased $2 billion to $142 billion as prepayments and maturities outpaced purchases. During the first quarter, our securities yield was stable at 3.17%, and as of March 31, approximately 20% of the portfolio was floating rate, and our duration was estimated to be 3.4 years. Our active received fixed rate swaps totaled $39 billion on March 31, and the weighted average received rate increased 27 basis points linked quarter to 3.49%, up from 2.2% this time last year. Our forward starting swaps now total $20 billion, including $9 billion that were added during the first quarter, which will roll on through 2026. With the addition of these swaps, we've reduced our interest rate sensitivity and further locked in a portion of our fixed rate asset repricing. Slide six covers our deposit balances in more detail. Average deposits decreased $5 billion, or 1%, to $421 billion. Consumer and commercial deposits followed seasonal trends. Consumer deposits of $210 billion increased $4 billion, or 2%, and commercial deposits of $206 billion declined $5 billion, or 2%. Lastly, we have a small amount of brokered CDs totaling $5 billion, which declined $3 billion as part of our funding plan. Our rate paid on interest-bearing deposits declined 20 basis points during the first quarter to 2.23%, and our cumulative deposit beta through March was 51%. Turning to slide seven, we highlight our income statement trends this quarter. First quarter net income was $1.5 billion, or $3.51 per share. Compared to the same period a year ago, we demonstrated strong momentum across our franchise. Total revenue increased $307 million, or 6%, driven by higher net interest income and fee growth. Non-interest expense increased $53 million, or 2%, reflecting increased business activity, technology investments, and higher marketing spend. Net income grew $155 million, resulting in EPS growth of 13% year-over-year. Comparing the first quarter to the fourth quarter, total revenue of $5.5 billion decreased $115 million, or 2%, largely due to seasonality. Non-interest expense of $3.4 billion declined $119 million, or 3%. Provision was $219 million, reflecting changes in macroeconomic factors and portfolio activity. Our effective tax rate was 18.8%. Turning to slide eight, we detail our revenue trends. First quarter revenue of $5.5 billion declined $115 million, or 2% linked quarter. Net interest income of $3.5 billion decreased $47 million, or 1%. The decline was driven by two fewer days in the quarter, partially offset by the benefit of lower funding costs and fixed rate asset repricing. Our net interest margin was 2.78%, an increase of three basis points. Fee income of $1.8 billion decreased $30 million, or 2% linked quarter. Looking at the details, asset management and brokerage income increased $17 million, or 5%, driven by higher brokerage client activity and positive net flows. Capital markets and advisory fees decreased $42 million, or 12%, reflecting lower M&A advisory and trading revenue. Card and cash management was stable as higher treasury management revenue was offset by seasonally lower consumer spending. Lending and deposit services revenue decreased $14 million, or 4%, in part due to seasonality. Mortgage revenue increased $12 million, or 10%, reflecting higher MSR hedging activity. Our other non-interest income of $137 million decreased $38 million and included $40 million of negative diesel derivative adjustments, primarily related to litigation escrow funding. As a reminder, PNC owns 1.8 million Visa Class B shares, with an unrecognized gain of approximately $950 million as of March 31. Turning to slide nine, we detail our non-interest expense trends. On a linked quarter basis, non-interest expense declined $119 million, or 3% as a result of fourth quarter asset impairments as well as seasonality. We remain focused on expense management, and as we've previously stated, we have a goal to reduce costs by $350 million in 2025 through our continuous improvement program. As you know, this program funds a significant portion of our ongoing business and technology investments, and we're confident we will achieve our full-year target. Our credit metrics are presented on slide ten. Non-performing loans of $2.3 billion were stable quarter-over-quarter, with a small decrease in consumer. Total delinquencies of $1.4 billion were up $49 million, or 4% compared with December 31, which included approximately $55 million of California wildfire forbearance activity. Net loan charge-offs were $205 million, down $45 million, representing a net charge-off ratio of 26 basis points. The decline was largely driven by lower CRE office charge-offs related to the timing of resolution on certain office properties. We expect the level to vary quarter to quarter as we work through these loans. Importantly, our overall credit quality remains strong across our portfolio. Our allowance for credit losses totaled $5.2 billion, or 1.64% of total loans at the end of the first quarter. This level of reserves includes an increase in the downside weightings of our CECL economic scenarios, along with some considerations for tariffs. As you know, the proposed tariffs on April 2 were more severe than anticipated. 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. We're actively assessing our portfolios and analyzing a wide range of factors, both positive and negative, that could impact our commercial and consumer exposures. However, we view the current environment as too fluid to reasonably change our estimates at this time. In summary, PNC reported a solid first quarter, and we're well positioned for the remainder of 2025. Our full-year guidance is unchanged. However, given the uncertainty of the proposed tariffs and the potential for disruption in client activity, our non-interest income could be pressured throughout the balance of the year. We'll obviously closely monitor this as these factors continue to develop. For the full year 2025 compared to the full year 2024, we expect average loans to be stable, which equates to spot loan growth of 2% to 3%. We expect full-year net interest income to be up 6% to 7%. We expect non-interest income to be up approximately 5%. Taking the component pieces of revenue together, we expect total revenue to be up approximately 6%. We expect non-interest expenses to be up approximately 1%, and we expect our effective tax rate to be approximately 19%. For the second quarter of 2025, compared to the first quarter of 2025, we expect average loans to be up approximately 1%. Net interest income to be up 1% to 2%, fee income to be up 1% to 3%, and other non-interest income to be in the range of $150 million and $200 million. Taking the component pieces of revenue together, we expect total revenue to be up 1% to 3%. We expect non-interest expense to be stable. We expect second quarter net charge-offs to be approximately $300 million. And with that, Bill and I are ready to take your questions.

Morning. On the loan growth front, solid end of period loan growth in C&I as you cited. And I know you cited higher line utilization and improved loan production. Can you just give us a little more color around the drivers and what specific areas in C&I are you seeing that? And is any of that transient in terms of potential line draws just to fund some inventory buildup ahead of tariffs and therefore more of a pull forward or anything like that? And is any of it maybe precautionary line draws given the recessionary backdrop? Thanks.

You want me to I'm sorry. My Bill is gonna answer that. Hey, John. Good morning. It's Rob. Yeah. So we were encouraged by the increase in the outstandings through the quarter, and when you look in our financial supplement, you'll see it was pretty broad-based across most of our loan categories. You know, we have been calling for this for some time in terms of increased utilization, which we saw in the quarter. So that tracks to what we thought at the beginning of the year. As far as, you know, some of this defensive or these tariff-driven, it's hard to say. It's not all of it for sure. Maybe there's a little bit of it in there. But, you know, generally speaking, we didn't see massive growth or a massive shift. So eighty basis points or I'm sorry, eighty on the utilization is a huge, but it was in line with know, gradual normalization.

Yeah. It's interesting that you know, in all the dialogue that I've had with clients, nobody's saying they're purposely building inventory in advance of the tariffs, having said that, you know, most of our lines finance working capital. So almost definitionally, there's some inventory building going on. Got it.

Okay. No. That's helpful. And then separately on the capital markets front, understandably trends there are pressured given the backdrop and you saw that pressure this quarter. Can you talk maybe perhaps about pipelines you expect? Are you seeing any erosion in any of the pipelines out there on the M&A side or capital market side just given the uncertainty, any deals getting pulled? Or the pipelines remaining robust and it's just a matter of getting the pig through the Python.

Yeah. Sure. Sure. The capital markets was a little lighter than what we expected although, you know, still pretty good. You know, for us, forty percent of our capital markets categories, Harris Williams are M&A advisory, and they had a very good quarter in line with expectations, whereas a little softer was in some of our foreign exchange and just some of our client activity. So when we look forward, you know, Harris Williams in particular, their pipeline right now is close to twenty percent higher than it was this time last year. The pipelines look good, John. They had a good year last year. And they had a very good year last year. So, you know, we're encouraged by that.

Okay. Great. Thank you.

Thank you. Good morning Bill and Rob. Appreciate your commentary around the uncertain environment leading you to keep your reserve rate relatively flat. If we were to go down the mild recession path and unemployment rose, say, slightly above five percent, can you speak to how you're thinking about the level of expense leverage that you have and what are the areas where you would look to achieve efficiencies should you need to?

Can answer that. I mean, in terms of our expenses, we feel really great about the way that we've lined up the year. You know, we've got positive leverage. Expenses up one percent off the, of the twenty four print. You know, naturally, if we get into a scenario where there's lower activity, some of that self-correcting in terms of expenses associated with revenue that you wouldn't have. But, you know, we're disciplined. We won't back off the investments Bill, that we've lined up. But, you know, there could be some opportunities if we get there, which we're not expecting to.

Yeah. The other offset under some presumption that we actually went into a mild recession. And, you know, the forward curve is correct, and there's, you know, four cuts this year. We actually have it with more cuts mild up, you know, an amount of upside in our NII just at the margin. So I don't know that a mild recession dramatically changes our outcome here.

That's helpful. Thank you. And it's interesting in light of all the commentary around how companies are putting investments on hold, giving the uncertain environment see your spot utilization has been increasing since the beginning of the year. Could you speak to perhaps the potential for increased opportunities in loan growth if credit spreads were to continue to widen as you know, capital markets become a less attractive option for some of your clients?

I gotta go back. I've been saying this for a year. It's not clear to me what caused the utilization to go down. It's not entirely clear to me as to why it's going up. You know, if there is sort of some offset, you know, capital markets new issuance slows down, then the pricing in the loan book. But I you know, one of the reasons we leave it largely out of our forecast in terms of being a main driver is it's been a bit confusing for the last year.

Thank you for taking my questions, Bill and Rob.

Good morning. Bill, I did want to just ask a few questions regarding the president role. And I wanted to understand a little bit more about what you are expecting, Mark, to be doing for PNC. And I know there's many of us on the call who know Mark well with what he's been doing over BlackRock for many years. But there might be others who are a little bit less familiar with him. So maybe you could help us understand why Mark is the right person for this role and how you anticipate he will be growing the business as president. Thank you.

No. Thank you for the question, Betsy. You know, I've known Mark for a lot of years going back to being on the board of BlackRock, and we actually had he and his financial advisory team come in here at one point during or shortly after the crisis just to double check everything we were doing on the balance sheet. Mark's gonna come in and be the president. He's gonna run our businesses. He comes in with a broad-based skill set. He's managed through crises. He's advised on balance sheets. He's a student of the markets. He's tech forward. He's been with a fast-growing company. I mean, he's a great talent. And it was somewhat serendipitous that he was available. We have a super strong team here, but when you see talent like that available, you add it. I don't know if it's any more complicated than that.

I'm also wondering about the opportunities for doing more with private credit. I don't know if that's part of the equation here as well. Given what you're doing already with private credit side and what Mark brings to the table there.

No. Mark is a well-rounded student of finance, markets, management, and leadership. In a way, it was interesting. We were talking to the press about this. We got questions on whether this means we're gonna go big into asset management, private credit, or private equity or something else. The answer to that is no. We're gonna do exactly what we're doing, and he's adding skill sets to what we're doing. Today, there's no change in our strategy. There's no change in what we want to be or how we're gonna execute. He's just gonna help us with our game plan.

Alright. Thanks very much.

Rob, I think in the past, you've talked about a three percent margin by the end of the year. Kind of feels to me like based on the first quarter result, maybe you got out of the gates a bit quicker than you would have thought, which is helpful. But, you know, just sort of given all the moving parts these days, maybe if you could sort of refresh your thoughts on, you know, that number and anticipated path to get there.

Yeah. Sure, Scott. We talked about this on every earnings call that we don't give official NIM guidance, but then I give NIM guidance. So means is, you know, if he's wrong. Yeah. That's right. That's right. Yeah. That's right. Thanks, Bill. So, yeah. We got out of the gate pretty good there at the two seventy-eight that you saw in the first quarter. You know, we said at the beginning of the year, we still feel that we can approach three percent. So I think, you know, the two ninety range has in the fourth quarter.

Okay. Perfect. Thank you. And then maybe just a little bit of a ticky tack one. The slightly higher net charge-off expectation into the second quarter. I mean, it's not huge by any means, but, you know, it's a little higher than what you've run recently. Any anything particular driving that, or is that just standard normalization?

No. There is something particular to that, Scott. So thanks for that question. It's really the lumpiness of the CRE office charge-offs. So when you look at our information, they were down pretty good in the first quarter, but that's a situation where it's a handful of deals that can either sort of fall timing-wise into one quarter or another quarter. So we'd expect those charge-offs to go back to the levels that we were experiencing in the third and fourth quarter, and that's part of the three hundred guidance.

Okay. It would probably slow state stuff is you know, to be Reserve.

Perfect. Alright. Thank you very much.

Good morning. I guess maybe you talked about loan growth and sort of client sentiment there. Just talk to us around the fragility across the customer base, be it consumer or commercial. Given concerns that we are in a recession or could fall into a recession. I'm just wondering how you look at the balance sheets for your customers and how bad do things need to go where the credit outlook deteriorates in a meaningful way?

The easiest way to think about this maybe is, you know, between today and three weeks ago, nothing's changed. What's happened though is everyone's trying to figure out what the steady state will be with tariffs and how they need to, if at all, change the business model to succeed inside of a world with tariffs. It is without question slowed down activity in the near term as people try to figure this out. But it hasn't yet turned into any sort of credit deterioration, nor, given the quality of our book, do I think it's a dramatic outcome for clients unless those very tariffs drive us into a steep recession. And then we're gonna have a standard credit cycle.

Got it. And I guess maybe, Rob, for you, if you mentioned the way the NIM may exit, I guess, 2025, just think talk to us about how you're thinking about balance sheet management from an ALCO perspective. You took some actions, I guess, middle or late last year to lock in the NII. I'm just wondering how you are thinking about, like, from a cash or the bond book. Are there things that you're doing as you think about just the forward outlook beyond 2025?

Yeah. Sure. So as we said, you know, 2025 is pretty locked in, and that's why we're confident in terms of our guidance. I will remind everybody that our NII guidance for the full year doesn't have a lot of loan growth. So if that happens, that'll be on top of that. So you're right. Where our eyes are now is sort of the outer years into 2026 and beyond. We have taken some actions to lock in that, which is the continuation of the fixed rate asset repricing that we're on. So that's where our heads are, and that's where the focus is.

Got it. Thank you.

Hi. I had a follow-up on the question about the new President Mark Wiedman. You described. Bill, I think you said exactly what you are doing currently at PNC is, but you'll still be doing. So my question to you is, how did you get him? I mean, there are so many people leaving the banking industry for private equity and non-banks and fintech and sometimes anywhere they can get to. And so why is he coming to such a heavily regulated industry with so much oversight, much skepticism, much cynicism, and so much questioning. It's a slog. Being in the banking industry and he's choosing to come. So what in the world was your sales pitch to him to get him to come to keep PNC doing exactly what it's doing?

I mean, you'll get to ask him that question at some point, Mike. But I think it's as simple as saying that what's going on in banking today is fascinating. Right? It is not my dad's bank. It's driven by technology. Scale matters. We have new entrants coming in on all sides of what we do, which could be exciting or dangerous depending on how you look at it. You know, you think through crypto and private credit and payment engines and all the other things that are happening. It's a very dynamic place. Notwithstanding all the oversight we get. I'm sure Mark is listening to this call, wondering what he got himself into.

You mentioned scale matters, and you noted this the first time you said that. What's your current appetite for greater scale? You said scale matters more than ever before, I think, in the history of banking. We have not seen that much consolidation, I imagine. So where do you stand?

I don't think you're gonna see it in the near future either. Know, a couple of things. Scale matters. We can get that through organic growth, and we're actually. And, you know, I talk too much about the long-term future, and people want to seem to think about next quarter. In the long run, I think there's gonna be big consolidation in the banking industry. The speed of growth of the very giant banks means that I think scale matters. In the course of that consolidation, if we outperform in our organic growth, we will have the right to be acquired. In today's world, you know, for a variety of different reasons, not the least of which is we wouldn't issue our shares at this price. At these relative prices, nobody's a seller, and trying to do a deal with the volatility going on in rates right now and the potential mark on credit makes it impossible. So I need to just shut up about doing deals because I kind of talk about what happens over the next ten years, and everybody thinks it's next quarter. Yeah. And it isn't. In the meantime, we're growing just fine. We have lots of capital, you know, and the ability to support our clients, and we're likely going into an environment where being a bank is a pretty important thing for the US economy, and we'll take advantage of that.

Last year, follow-up. You said you would not issue shares at this price, so does that mean you would be accelerating share buybacks?

That's a pretty good assumption.

Hey, good morning. I was just wondering, obviously, you talked about in the first quarter, we saw a little bit softer capital markets, M&A and trading. And there's an expectation in the guide that things get better from here albeit with the uncertainty. So can you just talk us through how that advisory outlook feels? And, I guess, maybe if you flush out the fees a little bit more, just what expectations to drive that second half improvement that's in the full year guide?

Hey. Sure, Ken. It's Rob. In regard to the full year fee guide, just in terms of our categories, the way that we report them, they're largely similar to what we thought at the beginning of the year. You know, albeit in the first quarter, asset management did a little better than we thought, and capital markets a little bit less. But, you know, when we look at the full year, it still sort of holds: asset management mid-single digits, capital markets mid-single digits, maybe a little bit better if the pipelines all pull through, card and cash management, which is our steady Eddie, is solidly mid-single to higher single digits. Lending and deposit services, low single digits, and mortgage, as we said, we expect to be down maybe as much as ten percent or more. So when you put all that together, you get the mid-single digits that we were expecting at the beginning of the year.

Okay. Great. Thank you. And then just one question on the deposit side. You're getting to this point of stability in DDAs and such. But when you think about the new rate environment, what do you see as your ability to continue to ratchet down deposit pricing, and what do you think the mix of deposits looks like as well? Thank you.

Well, I'd say I'd start with the second part of that question first. As far as the mix goes, we're at twenty-two percent non-interest bearing, and we've been pretty stable there for a while and expect that to continue. You know, all else being equal, we do expect that, you know, our rate paid will be going down over the course of the year. Not dramatically, but gradually and steadily that we've been on for some time. So that's still our thinking.

Okay. Thanks, Rob.

Hi. Good morning. Just a few follow-up questions. So, Bill, you know, nobody really asked this question much until we saw the Mike Lyon's announcement. But, you know, to follow-up with all the questions about Mark, you know, how much time are you going to give PNC in your current role? Do you think as we think about the succession planning?

I mean, how long am I gonna be here? Yeah. I guess, like, I mean, that's a that's a very direct question clearly, but, you know, Jamie Dimon often talks about being around for a few more years. You know, I often have to look up your age because you always look so much younger than your actual age. Always think you're like, fifty-two. I'm totally sixty-two. I can be around for a while.

Okay. That's great. That's the answer I think your investors wanted to hear. Because, given the announcement of Mark coming in, I think that that question ramped back up. So that was the first question. Okay. You'll be around for a while. Fair. Yeah. Second question is a quick follow-up. Rob, I'm sorry if I missed this during prepared remarks, but what is the unemployment rate that your reserve is implying in terms of what it's built on?

Yeah. Right now, Eric, in terms of our economic scenarios, we're just at five percent. But recall, you know, we've got reserves that are beyond that for things such as tariffs, on top of those modeled outputs.

Okay. Thanks, guys.

Thank you. Hi Bill. Hi Rob. Rob, can you share with us that you guys have done a good job in tackling your commercial real estate challenges and working through that portfolio. And at the same time, you've been able to keep your non-interest expense growth in check. Can you carve out of that? What is it costing you to work through these commercial real estate problems? So none of us expect them to end anytime real soon, but are there some expense savings coming once you get through that process?

Oh, maybe a little on the margins, Gerard, but that's not a big driver. We've got some pretty talented bankers that when we work through that, we'll have other things for them to do.

Got it. Okay. And then Bill, on your comment about share repurchases. Thoughts and opinions about what's going on in the regulatory environment. We have a number of nominees for the different regulatory agencies. The treasury secretary has been quite outspoken about having the regulations ease up a bit. What are your thoughts on that? And could that influence either even more buybacks once you know what your CET1 ratio could be after Basel III end game comes out?

My guess at the margin is our capital need will be less in the future than it is today, all else equal. I think, you know, the immediate changes were likely to see in regulation. A lot of talk on the SLR, which you call the treasury markets down a little bit. You know, some refocus from all the regulators on the core risk in a bank. So that's a supervision thing that doesn't change capital but rather changes behavior. And at the margin, that's a good thing for us. Maybe save a little bit of money on some of the things we're doing that frankly don't need to be done. But I don't know that there's a massive change that's ahead for us.

Okay. Can you just remind us, your CET1 ratio is similar to your regional peers in terms of the minimum? And what kind of comfort or what kind of buffer do you guys like to keep above that required level?

Hey. Hey, Gerard. It's Rob. So, you know, a couple things on that. Just to finish up on that answer that Bill gave. You know, obviously, once things settle down in terms of where all the rules come, we can then take an assessment in terms of where our actual targets are. So, you know, we've got a lot of capital flexibility. We continue to build capital. We need to see those things settle down, and then we can zero in on a target.

Very good. Thank you, Rob.

Just before we jump to another question, the comment kind of where our peers are. I would just remind everybody that our drawdown in CCAR, you know, has been through time less than basically anybody in the peer group. So, you know, we're starting from a point with the SCB that in effect penalizes us when we build to our capital ratio versus others. And that's unlikely to change the way we run our bank.

And, Gerard, that goes back to, you know, back to a few years ago when we were all focused on this. The correct peer comparison in our view is the post-stress capital levels.

Yeah. Very good. Thank you.

Hey, guys. A couple of quick clarifications. Just sorry, one more on the buyback. So the idea is buybacks accelerating, Rob, but within the context of your capital ratio still growing a bit near term until you get more clarity?

Yeah. That's right. In regard to that, as a share buyback, so we bought more in the first quarter than we had in the previous quarters. It's our expectation in the second quarter that we'll do more to Bill's point. Because we really like the share price. But we're not talking about a step change. You know, some more, but nothing that breaks the current path.

Okay. Got it. And then on the fee income outlook for the year, you mentioned in the beginning comments, were you just pointing out the obvious risk that you've got some market-sensitive fees in there and it kind of depends on the macro?

Yeah. That's right.

Okay. And then maybe just a quick update, strategy-wise, just how things are going on the national expansion and some of the consumer initiatives, the new card product?

Look. We're having a sidebar. I'm gonna ask you to reask that question. So Bill would like to buy more shares, which we're going. He definitely do. The answer to my to your question was it doesn't break the build in our capital levels. You'll see a level change in what we have been buying, but we'll still probably have a track on growing capital.

Got it. That's helpful. Rob, and you're going just make a comment on the card book and how that's going with the new product and credit card?

Oh, okay. Yeah. It's going great. Yeah. Going great. We continue to grow customer account there. So, you know, excited about the trajectory there.

Good morning. Just to follow-up on the rate, if rates are a little bit higher or lower than what you expected. But just conceptually, how is the balance sheet positioned here for movements on both the short and long end? As we think about more medium term? And then kind of what's the goal or talked about locking in some of the fixed rate asset we price in the next couple of years, but which way are you trying to lean?

There's a lot embedded in that question. We are at the margin better off if there are more cuts in the front end than we currently have in our forecast, which I think is a two week. We're gonna probably increase that. So at the margin, better off this year as a function of more cuts. Ultimately, you know, where the trajectory of NII continues to grow know, twenty-five, twenty-six, even twenty-seven is a function of term rates staying high. At the moment, they're higher than we had assumed in our forecast. What we've been doing, you know, the forward starting swaps this quarter is locking in some of that known outcome in twenty-six. That's kind of the way we're like, if everything stayed just where it was, you know, with the forecaster, we'd be great. So let's realize that because that's a big improvement over the course of the next several years, and that's how we're running the balance sheet today.

Obviously, taking a low yield.

Yeah. That's helpful. And then just on the short end, like I assume more cuts are helpful to a certain point. Not that the market's producing this now, but what's that point where you're like, hey, if we get below three or whatever it is, you know, then we kind of run out of room for a price deposit, for example. Like, what's that tipping point? I'm not sure there is one as long as the back, you know, it's as long as five to tens, depends if you know if the curve gets steeper as they cut, doing this in my head, but I think we're fine.

Okay. Thank you.

Well, thank you all for joining our call and for your interest in PNC. Please feel free to reach out to the IR team if you have any additional questions.

Thanks everybody. Thank you.