$PNC, -3.44% makes no sense. I'm not in this name, but let me just say it since management can't... Bunch of day-trading haters!

One of the better macro Bank calls so far btw.

1. Overview
2. Depostis & NIM
3. Rate Expectations
4. Loan Mix & Growth
5. Q&A.

Overview
Rev + 4%, EPS + 104%, ROE 12.3% (up 50bps on the Q).

With the EPS, I want to show this for those who have not understood my past posts about the FDIC charge's impact as a 1x charge from the comparable Q4 of 2023.

EPS is up 104%, but Fiscal Year Earnings is up 7%. Truly this is good, b/c it was not an easy year with rates moving very little in 2023. You have deposits up 1%. And this is a classic regional bank, meaning they had CRE charges they continued to take throughout 2023. 

Deposits AND NIM
They stated they would have a 40% beta to changes in rates (meaning they are going to continue to hedge during the year rather than make money based on curve steepening to the tune of 40%). This is what the "stale" banking analysts typically say, i.e. banks ONLY make money by borrowing short (deposits) and lending long (Mortgages and other loans. 

That is a 2022 understanding of banks. All the surviving banks now better understand concept of "strategy differentiation" a whole lot better. 

Rate Expectations
They are thinking only 2 cuts in 2025. If they get more, fine. They are still hedged at a 40% participation rate.

Loan Mix & Growth
The mix in Q3 was Auto and Personal off-set by weakness in both resi and commercial real estate. Kinda knew that given what $LEN reported early in Dec. As a result, they are going conservative and not anticipating a mtg growth in Q1. That will be upside if you get it (but tbh, given shape of curve shifts, not likely in Q1).
Also, a bit crazy, they are saying No loan growth is baked in to their expectation.

I'd also reiterate that in all banks, auto was a call out and very strong. As much as I hate $UPST, prob good for them. Also not bad for $GM $F $TSLA as auto is typically both loans and leases.

Q&A
1) NII in 2025. Wow. Direct Q on NII in 2025.They think it expands. For context, for a regional bank, 2.5% is base-level solid situation. So this is quite nice. 

2) M&A Commentary. They are only expecting a mid-teens advisory. Again, if you get M&A pick-up in their regions, you could see higher. I personally care on this b/c M&A is how you get earnings to amplify as it's got the juiciest margins.

3) What's up with Loan Growth? Q on what is going on with loan growth and why so conservative. A: Utilization is lower and there is uncertainty. This means Middle Markets isn't using capital at this point. 

Recall, this is different than $GS and $MS who both think that you can't stop this forever. You've had 2 solid years of underinvestment, low M&A and loads of uncertainty. They are thinking that changes in 2025 and that they are already seeing it. 

4) Gov. vs. the Banks. They are also of the opinion the Gov has overcorrected in trying to get the banks (through fee cancelation, etc). They also think the regulators are focused on the wrong things. Minor stuff that does not protect investors, depositors, and improve Bank soundness. They think there is a lot that should be done to improve it (protections for depositors, Basel 3, etc).

5) The Yld Curve. Thank you for saying it: "The shape of the curve is largely irrelevant." Yes! Plz. tell a friend.

6) Originations vs. Utilizations. The analyst tried to trap management on this. Answer: NO! Originations are high. Utilizations are low. This means folks are taking the line of credit but not necessarily using it. This is like having a credit card with a $100k but only using $10k a month. The implication? Companies are very healthy (you are totally cool to extend credit). BUT, they aren't using the full balance.

7) Upside to Conservative Guide? Yeah, you're right. If we really get zero loan growth, we could deploy capital to something higher yielding. In other words, they aren't really believing zero loan growth b/c they are keeping the capital on balance sheet very liquid so they can lend it out on a turn!!!

8) Disintermediation of banks to direct to AM. This one was weird, tbh, but it sums up the question. Their response was, hey... you know ABS is huge and it's to easy to do it without a huge deployment of folks that audit the asset on the ground right? I totally agree, FYI. Yes, there are pockets of lending where you can do that, but mostly you still need a network of folks to look at the asset (property, equipment, vehicle, etc). This might be younger fintech folks who don't understand why it might take a decade to build from front end to bank that are trying to suggest otherwise. 

Call still going on. I have some errands. I'll post if I hear more on the final 15 min while on the go.

@PNCBank