PNC Financial Services "CEO, mgmt meetings: On the rise" (Buy) Najarian

Research evidence excerpt

PNC Financial Services "CEO, mgmt meetings: On the rise" (Buy) Najarian

An underrated de-regulatory beneficiary. PNC noted that upon further

review, the enhanced risk based approach (eRBA) may be more beneficial than the

revised standardized (RSA) under Basel 3 endgame -- which is much better than

our own eRBA math. As a reminder, PNC sees ~80bp benefit from RSA from 10%

RWA decline, in-line with our math. To note, management indicated that they

"like our stock" at current levels, implying that solid buyback activity could

continue near-term despite loan growth. Further, with liquidity (LCR) reform likely

on the come, PNC noted that it has $30-40bn of securities at "SOFR plus a nickel"

funded by average borrowing costs of 4.76% to "bulk up" the balance sheet to

comply with LCR restrictions -- implying a negative carry of >100bp and potential

incremental tailwind to NII shall LCR reform play out.

We see tuck-in deals as more likely than transformational deals. PNC is

always asked about deal appetite, and a late '25 Wall Street Journal article naming

it the "next trillionaire bank" didn't exactly dampen investor concern over a

potential mega-deal. That said, Mr. Demchak pointed out that the integration for

such mega deals -- unlike the "lift and shift" concept at FirstBank and BBVA/

Compass -- is so encompassing that it detracts a bank from its technological

advancement journey. And in this era of fast, transformational developments, it

could certainly put a bank endeavoring on such a deal on its back foot. Thus, we

think tuck-in deals that support PNC's branch densification strategy are more

likely, though Mr. Demchak noted that there are virtually no sellers at the moment,

given this moment of "peak bank" (our words, not his).

Bonus (sixth) takeaway: AI.