The PNC Financial Services Group, inc (PNC) Q4 2025 Earnings Call Transcript

The PNC Financial Services Group, inc (NYSE: PNC) Q4 2025 Earnings Call dated Jan. 16, 2026

Corporate Participants:

Bryan Gill — Executive Vice President and Director of Investor Relations

William S. Demchak — Chairman & Chief Executive Officer

Robert Q. Reilly — Chief Financial Officer

Analysts:

John Pancari — Analyst

R. Scott Siefers — Analyst

Betsy Graseck — Analyst

Gerard Cassidy — Analyst

Erika Najarian — Analyst

Steven Chubak — Analyst

Ken Usdin — Analyst

Mike Mayo — Analyst

Saul Martinez — Analyst

Christopher McGratty — Analyst

Matthew O’Connor — Analyst

Ebrahim Poonawala — Analyst

Presentation:

Operator

Greetings, and welcome to The PNC Financial Services Group Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It’s now my pleasure to introduce your host, Bryan Gill. Thank you, Bryan. You may begin.

Bryan Gill — Executive Vice President and Director of Investor Relations

Well, good morning, and welcome to today’s conference call for The PNC Financial Services Group. I’m Bryan Gill, the Director of Investor Relations for PNC, and 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. Cautionary statements about this information as well as reconciliations of non-GAAP measures, are included in today’s earnings release materials, as well as our SEC filings and other investor materials. These are all available on our corporate website, pnc.com, under Investor Relations. These statements speak only as of January 16, 2026, and PNC undertakes no obligation to update them.

Now, I’d like to turn the call over to Bill.

William S. Demchak — Chairman & Chief Executive Officer

Thank you, Bryan, and good morning, everyone. As you’ve seen, by virtually all measures, 2025 was a successful year for PNC. We earned $7 billion in net income or $16.59 per share. Strong performance across all our lines of business resulted in record revenue, 5% operating leverage and 21% EPS growth for the year. As you’ve likely seen on January 5, we closed the acquisition of FirstBank, and we’re all excited about the opportunity in front of us, and I’d like to welcome the FirstBank employees to PNC.

We ended 2025 with substantial momentum, marked by meaningful client growth across all of our businesses and our ongoing branch expansion, and we’re poised [Phonetics] to accelerate that growth in 2026. As Rob will highlight in a second, we’re positioned to generate meaningful positive operating leverage again this year. Importantly, we expect to do so on a PNC standalone basis and also with the addition of FirstBank. Further, we will exit 2026 with FirstBank’s fully integrated results, which we expect will add approximately $1 per share to the 2027 results.

Finally, we expect to achieve all of this while also executing one of the largest investment agendas we’ve ever pursued, including all of our technology initiatives, payments capabilities, and consumer rewards platforms, and of course, our branch expansions. Now, before I wrap up, I want to thank all of our employees for everything they do for our company and our customers, including our new teammates from FirstBank. I’m incredibly excited about what we’re going to be able to accomplish together.

And with that, I’ll turn it over to Rob to take you through the numbers. Rob?

Robert Q. Reilly — Chief Financial Officer

Thanks, Bill, and good morning, everyone. Our balance sheet is on Slide 3 and is presented on an average basis. For the linked quarter, loans of $328 billion grew by $2 billion or 1%. Investment securities of $142 billion decreased $2 billion or 2%. Deposit balances were up $8 billion or 2% and averaged $440 billion, and borrowings decreased $6 billion to $60 billion. AOCI as of December 31st was negative $3.4 billion, an improvement of $669 million or 16% compared with the prior quarter.

Our tangible book value of $112.51 per common share increased 4% linked quarter and 18% compared to the same period a year ago. We remain well capitalized at quarter end with an estimated CET1 ratio of 10.6% or 9.8% when including AOCI. We continue to be well-positioned with capital flexibility. During the quarter, we returned $1.1 billion of capital to shareholders. Common dividends were $676 million. Share repurchases were approximately $400 million, and were at the high end of our estimated range. Going forward, we expect to further increase our quarterly share repurchases to a range of $600 million to $700 million.

Slide 4 shows our loans in more detail. Loan balances averaged $328 billion in the fourth quarter, an increase of $2 billion or 1% linked quarter. The growth was driven by higher commercial balances. On a spot basis, loans grew $5 billion or 2%, reflecting broad-based new production across our C&I franchise. Total loan yield of 5.6% decreased 16 basis points linked quarter, driven by lower interest rates. Compared to the same period a year ago, average loans increased $9 billion or 3%.

Commercial loans grew $10 billion or 5% as strong growth in C&I was partially offset by a decline in CRE loans. Notably, we believe that our CRE balances have largely stabilized, and we anticipate moderate growth in 2026. Consumer loans declined $1 billion or 1% as growth in auto balances was more than offset by a decline in residential real estate loans.

Slide 5 covers our deposit balances in more detail. Deposits averaged $440 billion, an increase of $8 billion or 2%, and included seasonal growth in commercial deposits. Non-interest-bearing balances of $95 billion increased $2 billion or 2% and represent 22% of total average deposits. Our total rate paid on interest-bearing deposits decreased 18 basis points to 2.14% in the fourth quarter, reflecting lower rates.

Turning to Slide 6. We highlight our income statement trends. For the full year of 2025 compared to 2024, we’ve demonstrated strong momentum across our franchise. Total revenue increased $1.5 billion or 7%, driven by both record net interest income and non-interest income. Non-interest expense was well controlled and increased by 2%, which resulted in 5% positive operating leverage and 15% PPNR growth.

Net income of $7 billion was up $1 billion, and full year diluted EPS grew 21% to $16.59 per share. Comparing the fourth quarter to the third quarter, total revenue was a record $6.1 billion and grew $156 million or 3%. Non-interest expense of $3.6 billion increased $142 million or 4%, and as a result, we delivered record PPNR of $2.5 billion. Provision was $139 million. Our effective tax rate was 12.7%, reflecting favorable resolution of several tax matters, and our fourth quarter net income was $2 billion or $4.88 per diluted share.

Turning to Slide 7. We detail our revenue trends. Fourth quarter revenue increased $156 million or 3% compared to the prior quarter. Net interest income of $3.7 billion increased $83 million or 2%. The growth was driven by lower funding costs, loan growth, and the continued benefit of fixed-rate asset repricing. And our net interest margin was 2.84%, an increase of 5 basis points. Non-interest income of $2.3 billion increased $73 million or 3%. Inside of that, fee income increased $54 million or 3% linked quarter.

Looking at the details. Asset management and brokerage increased $7 million or 2%, driven by both higher equity markets and positive client net flows. Capital markets and advisory revenue increased $57 million or 13%, driven by M&A advisory revenue. Card and cash management declined $4 million or 1% as higher treasury management revenue was more than offset by other seasonally lower activity. Lending and deposit services increased $7 million or 2% and included higher loan commitment fees.

Mortgage revenue decreased $13 million or 8%, reflecting lower MSR hedging activity down from elevated third quarter levels. And other non-interest income of $217 million increased $19 million, primarily due to higher private equity revenue. The Visa derivative adjustment in the fourth quarter was negative $41 million, primarily related to Visa’s December announcement of a litigation escrow funding. Notably, we continue to see strong momentum across our lines of business and throughout our markets, and for the full year 2025, non-interest income of $8.7 billion grew $633 million or 8% compared to 2024.

Turning to Slide 8. Our fourth quarter expenses were up $142 million or 4% linked quarter. The growth was driven by increased business activity and seasonality, partially offset by a reduction to the FDIC special assessment accrual. Full year non-interest expense increased $310 million or 2%, reflecting business growth and continued investments in our franchise. As you know, we had a goal of $350 million in cost savings through our 2025 continuous improvement program, and we successfully completed actions to exceed that goal.

Looking forward to 2026, our annual CIP target is once again $350 million, which is independent of the FirstBank acquisition, and this program will continue to fund a significant portion of our ongoing business and technology investments. Our credit metrics are presented on Slide 9. Overall, credit quality remains strong. Non-performing loans increased $81 million or 4% linked quarter.

At year end, NPLs represented 0.67% of total loans, down from 0.73% last year. Total delinquencies of $1.4 billion on December 31st represented 0.44% of total loans, up slightly quarter-over-quarter, but importantly unchanged from the same period a year ago. Net loan charge-offs were $162 million, down $17 million, and represent a net charge-off ratio of 20 basis points. And provision was $139 million, reflecting a slight release of loan reserves. At the end of the fourth quarter, our allowance for credit losses totaled $5.2 billion or 1.58% of total loans.

Turning to Slide 10. As you know, we successfully completed the FirstBank acquisition earlier this month, greatly expanding our presence in high-growth communities across Colorado and Arizona. Importantly, PNC and FirstBank employees have made great progress in preparing for a successful conversion and integration, which is scheduled for June of 2026.

I also want to provide an update to some of the deal metrics, all of which are the same or better than we had originally estimated. As you know, the purchase price was 30% cash and 70% stock and was approximately $4.2 billion at closing, and we issued 13.9 million shares of common stock as part of the consideration. At closing, tangible book value is estimated to be $109 per share, exceeding our expectations at deal announcement. The reduction to our CET1 ratio is estimated to be approximately 40 basis points, which is in line with our original expectations, and we continue to project an internal rate of return of approximately 25%.

Our expectation for non-recurring merger and integration costs is approximately $325 million, the majority of which will be recognized in the first half of 2026. Importantly, we anticipate achieving substantial operational efficiencies across the FirstBank franchise, and as a result, we expect FirstBank to generate an annualized earnings run rate of approximately $1 per share by the end of the year.

To summarize, PNC reported a strong fourth quarter, which contributed to a very successful 2025. We’re well-positioned to continue this momentum into 2026, and with the addition of FirstBank, we’re poised to enhance our growth trajectory. Regarding our view of the overall economy, we’re expecting continued economic growth over the course of 2026, resulting in approximately 2% real GDP growth and unemployment to remain near 4.5% throughout the year. We expect the Fed to cut rates 2x in 2026, with a 25 basis point decrease in July and another in September.

Looking ahead, FirstBank’s results will be reflected in our financial statements, and accordingly, our guidance is based on the projected financial results of the combined company. Our outlook for the full year 2026 compared to 2025 results is as follows. We expect full year average loan growth to be approximately 8%. We expect total revenue to be up approximately 11%. Inside of that, our expectation is for net interest income to be up approximately 14%, and non-interest income to grow 6%.

Non-interest expense to be up approximately 7%, excluding an estimated $325 million of integration expense. And we expect our effective tax rate to be approximately 19.5%. Based on this guidance, we expect to generate approximately 400 basis points of positive operating leverage, nearly all of which is driven by PNC on a standalone basis.

Looking ahead to the first quarter on Slide 12. Our guidance, as I just mentioned, includes the impact of the FirstBank acquisition. Our outlook for the first quarter of 2026 compared to the fourth quarter of 2025 is as follows. We expect average loans to be up approximately 5%. Net interest income to be up approximately 6%. Fee income to be down 1% to 2%. Other non-interest income to be in the range of $150 million to $200 million.

Taking the component pieces of revenue together, we expect total revenue to be up 2% to 3%. We expect non-interest expense, excluding integration expenses to be up approximately 4%. We expect first quarter net charge-offs to be approximately $200 million, and we expect diluted common shares to average approximately $406 million in the first quarter, which includes the impact of shares issued as part of the FirstBank acquisition.

With that, Bill and I are ready to take your questions.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from John Pancari from Evercore ISI. Your line is now live.

John Pancari

Good morning.

William S. Demchak

Hey, good morning, John.

John Pancari

Just a question, actually straight to capital. On the buyback front, I know you bought back $400 million in the fourth quarter. You guided to the $600 million to $700 million in the deck. And then, Rob, in your comments there, it sounds like you were pointing to that $600 million to $700 million quarterly pace as something that could continue. If you could just clarify on that. Is that a fair assumption as we look through ’26?

Robert Q. Reilly

Yeah. Hey, good morning, John. No, you’re spot on there, that $600 million to $700 million is a quarterly pace that we expect to continue through ’26.

John Pancari

Got it. Okay. All right. Thanks. And then also related to capital, I know your CET1 came in at 10.6%, and you guided to the 10.4% with FirstBank deal. Could you just remind us of your — how we should think about a targeted CET1 as you look through 2026, considering the deal and considering growth and buybacks. And then, how should we think maybe about a good medium term ROTCE target for you guys? I know you came in around 16.5% full year for ’25, ROTCE in the fourth quarter was around 18%. How can we think about a good medium term target for PNC?

Robert Q. Reilly

Okay. Well, that’s a lot there, John, but let’s take it as you asked it. In terms of our CET1 ratio, to be clear, we finished the year at 10.6%. With the acquisition of FirstBank, we’ll take that down 40 basis points to somewhere around 10.2%, 10.3% in terms of where we are now. With the share repurchases that we expect in the first quarter, we would expect to end the first quarter somewhere around that range.

We’ve said that we’ve got a target right now, and that target is obviously short term because there’s a lot of capital rules that are still in flux [Phonetics], but we’ve said 10%. So in the first quarter, we’ll be in that 10.2%, 10.3%, working our way down from 10.6% [Technical Issues] somewhat elevated because of the tax reserve release, but I’d say we’re at 17% right now as our exit rate into ’26. When we get through ’26 with the FirstBank acquisition, and we deliver on the guidance that we expect to deliver by this time next year, and again, this is just math, so we don’t have targets, but this time next year, we’ll be at 18%, heading higher.

John Pancari

Got it. Okay. Thanks, Rob. Appreciate it.

Robert Q. Reilly

Sure.

Operator

Thank you. Your next question is coming from Scott Siefers from Piper Sandler. Your line is now live.

R. Scott Siefers

Good morning, guys. Thanks for taking the question. Hey, Rob, I was hoping you could maybe sort of delve into your thoughts on NII momentum for the year. It can be a little noisy given that you had some standalone thoughts previously. I think you all had been saying up — like $1 billion or more of growth, if I recall correctly. Now, we’ve got FirstBank into the guidance, maybe if you can just sort of help bridge the gap and go through any places where you’re feeling incrementally better or worse, or any change on how you see NII projecting through the year?

Robert Q. Reilly

Sure. So our guidance with FirstBank for the year, as you’ve seen, is up 14% in NII. Inside of that, to your question, PNC standalone, we’re somewhere between 7.5% and 8%, which is comfortably above the $1 billion that we said in the earnings call in the third quarter. So we feel good about it. I mean, obviously, those are pretty good numbers, and that’s helping us generate the positive operating leverage that looks very comparable to last year, and that’s very good.

R. Scott Siefers

Perfect. Okay. Good. And then, I was glad to see you guys were able to sort of clean up last quarter’s noise related to the deposits with lower cost this quarter as we’d hoped. Maybe if you could spend just a quick second on how you see deposit costs playing out for, say, the next 50 basis points or so of Fed funds rate cuts that we’ve got kind of baked into the guide?

Robert Q. Reilly

Yeah, and just to clarify for those who weren’t on the third quarter call, that was a mix shift in terms of the commercial deposits that we added that were outsized at the time, just to level set that. As we go into ’26, we continue to see rate paid coming down. We’ll see that in the first quarter, even if we don’t get a rate cut, which we don’t expect just simply because the December rate cut will play through. And we’re calling for two rate cuts, one in July and one in September, and when those — if and when those occur, rate paid will continue to go down.

William S. Demchak

But I guess — I mean, it’s worth mentioning, independent of whether we’re right or wrong on the timing of those two rate cuts, it doesn’t impact our outcome on NII materially one way or the other.

Robert Q. Reilly

Exactly. That’s right.

R. Scott Siefers

Perfect. Good. Bill and Rob, thank you for taking the questions.

William S. Demchak

Yeah, sure, Scott.

Operator

Thank you. Your next question today is coming from Betsy Graseck from Morgan Stanley. Your line is now live.

Betsy Graseck

Hi, good morning.

William S. Demchak

Hi, Betsy.

Betsy Graseck

Bill, could I ask you to unpack a little bit. In your prepared remarks, you commented very quickly on the investments that you’ve been making, we all know in the branches and in technology, et cetera. Could you give us a sense as to how far along in this investment trajectory you are? I mean, I know technology is ongoing, right? But like — it was pretty quick, and I was hoping we could unpack a little bit where you are relative to where you want to be and how FirstBank integrates into all that? Thank you.

William S. Demchak

Yeah. I guess in its simplest form, our new initiative capex expense, all embedded in our guidance, is higher this year than it’s ever been. I think depending on how you want to look at tech spend, we maybe spend $3.5 billion and it’s going to go up 10% plus or minus for the year, and inside of that, AI is 20% of that increase, beyond what we spend already. Most of it is just the number of things we have to drive momentum, right? So we’re — with the ongoing branch build, and that will continue, so it’s putting us in front of more clients.

Rebuild of our payments capabilities, think of it as along the same lines of the rebuild of our online banking, where we’re breaking it down to micro services, so it’s more resilient and faster to be able to change. Modernization of our data centers, so we’re always on. All of our applications will be cloud native and will run in a synchronous transmission between backup data centers. Continued investments in people in the new markets, including investments in people inside of the Colorado, Arizona markets to take advantage of the FirstBank footprint.

All of that’s inside of the guide we gave, and all of that, the ability to do that and still control expenses kind of comes on the back of this continuous improvement program, which we’re going to execute again in ’26 and a lot of the savings in ’26 coming out of our automation efforts, some of which are related to AI, but some of which are just straight up automation to allow us to continue the investment profile we’ve had for years.

Betsy Graseck

And is that savings in the form of system savings, headcount savings, I’m assuming it’s a mix, but how much is headcount driving that?

William S. Demchak

[Indecipherable] savings is a piece of it. The most obvious example there is simply using Agentic AI for coding, but a lot of it is contract savings in tech as we shut down old systems and roll in new systems. So we’re shutting down redundant things and running on a single one, trying to think inside of what’s in that completely.

Robert Q. Reilly

Well, I would say, Betsy, just to jump in. I mean, the continuous improvement program is something that we’ve had for a number of years, that’s in our DNA. And when we do our budgeting, every part of the company is expected to contribute some CIP savings, which is just efficiency off of our increasingly larger spend. So it is as broad-based as it could be.

Betsy Graseck

Yeah, no, CIP is decades long, right?

Robert Q. Reilly

That’s right.

William S. Demchak

But to give you an idea of the scope, maybe this will help, between ’22 and ’25, we were able to get 40 points of operating leverage through automation in our retail operations and care center operations. Sorry, we were able to get — it’s probably closer to 30. When we look at AI between ’25 and ’30, we see another 40 points of operating leverage. We have 171 different opportunities outlined and $1.4 billion of total addressable spend that we’re able to go after through. I mean, we’ll use the term AI, but I just think of it as the same march that we’ve been along with automation that has given us all those efficiencies between ’22 and ’25.

Robert Q. Reilly

And all of that is in our guidance.

Betsy Graseck

Okay. Super. Thanks so much.

Operator

Thank you. Next question is coming from Gerard Cassidy from RBC Capital Markets. Your line is now live.

Gerard Cassidy

Thank you. Good morning, Bill. Good morning, Rob. To follow up on your comment about the ROTCE coming out at the end of this year, many companies now give out these ROTCE targets. Obviously, you don’t. But I’d like to get your insights on just how you guys approach looking at ROTCE and how you manage it?

Robert Q. Reilly

Sure. No. Thanks, Gerard. And it relates to John’s question there. We don’t have an explicit target because we’ve always viewed it as an outcome rather than something that we manage to. That said, when you take a look at our levels, comparable to peers, they’re pretty good. And we’re pretty optimistic in terms of what we’re going to be able to do in ’26 and beyond. So we see the level that we’re at now, which is pretty good, 17%, going to 18% this time next year, and then higher from there. So we watch it. Everything that we do contributes to it, but we just don’t start out with a target.

William S. Demchak

Yeah. And part of the issue with the target, it’s so dependent on operating environment in terms of shape of the yield curve and credit costs, and it’s also dependent on capital management. And I hate the idea of setting a target on return on capital and then energy [Phonetics] in the capital itself to hit that return. They ought to, in some ways, be disconnected. We can always just — we could always just drive our capital…

Robert Q. Reilly

Well, that’s for the variables — that’s where the variables are. So we saw that — as an industry, we saw that in the last couple of years when negative AOCI showed up. Nobody thought that was a good thing, but it helped our ROTCE.

William S. Demchak

Yeah. Exactly.

Gerard Cassidy

No, very helpful. And then, Bill and Rob, with the chance of being called the curmudgeon again, as I was at one of your peer calls earlier in the week about this question. I’ll try to rephrase it. The setup for you folks and your peers for 2026 looked really, really good. And for guys like all of us on the call that have been around a while, you always get nervous because we’re bank guys. Can you look at any risks on the — other than the obvious geopolitical risk, we get that, but what are you guys kind of looking at just to make sure that you don’t get blindsided? I don’t mean just for you guys, but just the industry gets kind of hit over the head with something that we don’t expect.

William S. Demchak

It has to be some exogenous variable because the base economy, I just don’t see big cracks that are going to be realized in ’26. So you get up every morning and you read a headline on credit card rates or on this or on that, right? It could be anything, right? By the way, it could be good things, too. But the basic business of running the bank against the economy with customer demand and the health of the consumer, we have a lot of tailwinds this year, and it should be a great year for banks.

Gerard Cassidy

I agree. I appreciate it, Bill. Thank you.

William S. Demchak

Yeah.

Operator

Thank you. Your next question today is coming from Erika Najarian from UBS. Your line is now live.

Erika Najarian

Hi, good morning. Maybe one for you, Bill. As we take a step back into the year, I think a lot of investors are contemplating the push-pull on investing in money centers versus regional banks. And maybe from your purview, as you think about the opportunities for regional banks, particularly in direct lending, which is just C&I lending or commercial lending. How much do you think potential Fed cuts, the leverage lending limits going away, and sort of the certainty or better certainty in the macro, is that going to spur more direct lending opportunities for regional banks, or are you agnostic to it relative to the cap market opportunity?

And also just remind us, your peers talked about significant advisory opportunities for 2026, and then just remind us how much of a SKU in advisory you may have in cap markets?

William S. Demchak

Let me start by saying we’re a national bank, not a regional bank. So I don’t know what regional banks are going to do with the leverage lending guidance. What it does for us is allow us to make smart loans, not necessarily riskier loans, but basically — the guidance is written would actually capture a lot of things as leveraged and high risk when they weren’t. And by clearing that up, the ability to do some of our specialized businesses that are secured or that are first out increases pretty dramatically, and we’re pretty excited by that. But it’s not like an open — we’re not treating it like an open invitation to run out and take more risk. That’s not what the game is.

On the advisory side, capital markets broadly did really well this year. As we go into next year, we — it’s not as large a percentage of our total company, perhaps as it is at the money centers, but the mixes aren’t wildly different. Inside of that mix, we are more heavily weighted to advisory probably than the giant banks. And in that sense, Harris Williams backlog, their activity level through the fourth quarter is as high as it’s ever been. So we’re pretty optimistic about the opportunity set there.

Erika Najarian

And just a follow-up question on the ROTCE. Obviously, I heard you loud and clear, 18% and going higher is better than your peers. And as I just take a step back, this is sort of a compound question, Bill. The way you answered the earlier question, it sounds like you don’t want to necessarily just put targets out there because you want the flexibility for the capital allocation when there are growth opportunities, which makes sense.

But also, as we think about longer-term returns, is 18% plus sort of above through the cycle, or is that sort of closer to like a through-the-cycle range for a PNC all in? And just asking it this way because you are the JPMorgan of smaller national banks, and they have a through-the-cycle target.

William S. Demchak

Why don’t we just kind of reason that out for a second, and it’s not going to become a target. But if you assume for a second that we’re running, I don’t know where we are this quarter, 2.88% NIM or something and [Indecipherable] — and we run where, 2.50% to 3%.

Robert Q. Reilly

Yeah, that’s right.

William S. Demchak

And so let’s say that accepts out interest rate volatility and then let’s assume for a second that our credit costs are running on the low side for through-the-cycle number. We probably have even upside, downside on the NIM from here. We have downside on the credit cost, so through-the-cycle may be slightly lower. However, as we plan out with the scale efficiencies we get through some of our cost initiatives and just client growth, it kind of offsets that.

So the outcome, the mechanical outcome that Rob talks about when you cross through 18%, keep going, I mean, I could show you on a piece of paper where it crosses 20% in the not-too-distant future. During that period of time, if credit normalizes and our charge-offs go up, double, we’re not going to hit that. That’s why we don’t want to put that target out there. We’re operating in a great space. It’s elevated from our history. We ought to be able to keep it somewhere around here, but there’s a lot of variables swinging around it. I don’t want to make uneconomic choices to hit a target that was artificially created.

Erika Najarian

That was very helpful. Thank you, guys.

Operator

Thank you. Next question is coming from Steven Chubak from Wolfe Research. Your line is now live.

Steven Chubak

Hi. Good morning, Bill and Rob, and thanks for taking my questions. So I wanted to start with a discussion on the capital markets outlook. Bill, at a conference in December, you indicated you’re starting to see increased capital markets activity, particularly in the middle market space. I was hoping you could just contextualize what you’re seeing in terms of pipelines, how they compare to year ago levels, and just how you’re thinking about growth in capital markets fees in the coming year, given the strong exit rate we saw in ’25, as well as some of the factors driving more robust activity that you cited.

William S. Demchak

Maybe Rob can give you detail on growth numbers. But before we go there, what I was referring to at that conference and has, in fact, come to fruition is that the logjam in middle market investments, the willingness to do M&A, the willingness to take down credit to get a deal done has opened up where it was kind of on hold for a long period of time because of tariffs and people trying to figure out how they operate and they’re afraid to buy into something when there was so much volatility and potential outcomes.

We saw that kind of pipeline crack in the fourth quarter. You see it in Harris Williams’ results. By the way, you would see it in our spot C&I loan numbers at the end of the year as we’ve just seen more activity on financings into acquisitions. The inside of our forecast, Rob — and as an aside, all that activity drives the rest of our capital markets activity. So when people are doing loans and deals, there’s derivatives, there’s bond issuance, there’s loan syndication and so on and so forth.

Robert Q. Reilly

Yeah. Just to finish that, so in terms of our outlook for ’26 capital markets, we’re expecting it to be up high single digits.

Steven Chubak

Okay. Great. And then just a question on NIM. I know in the past, you’ve noted you could achieve north of 300 bps at some point in the coming year, acknowledging that, that’s an output, do you feel like normalized NIM because you were alluding to this in your prior response, Bill, whether that could still settle in the low 300 range as you optimize wholesale funding, restrike the securities book, prosecute on some of the initiatives to grow operational deposits, including some mix shift from FirstBank. It feels like you can run sustainably above that for a bit, but just was hoping you could provide some context.

William S. Demchak

Look, I think that’s right, assuming we stay in an upward sloping yield curve in a similar environment. If we get into a world where we have 200 points of inversion, we’re not going to be running at 3%.

Robert Q. Reilly

But our plans in ’26 are to reach that 3% level in the second half of ’26, somewhere during the third quarter, maybe the end of the third quarter.

Steven Chubak

That’s great. Thanks so much for taking my questions.

Operator

Thank you. Next question today is coming from Ken Usdin from Autonomous Research. Your line is now live.

Ken Usdin

Hey, good morning. Thanks, guys. Just a follow-up on the last question, thanks for giving the outlook on the capital markets side. Rob, just with the moving parts of the FirstBank adds, I’m just wondering if you could kind of help us through just where you expect to have lead the fee growth, which obviously ended the year in almost all categories on a high note. Thanks.

Robert Q. Reilly

Yeah, sure, Ken. So for the full year, we’re saying non-interest income up 6%. In terms of the subcategories of that just in the order that we report them, we’ve got asset management up mid-single digits. As I just said, capital markets up high single digits. Card and cash management up mid-to-high single digits, and then lending deposit services and mortgages each up low single digits. And then, to add to that, for the full year, is $100 million of what are basically FirstBank’s fees. When we get past integration, we’ll be able to put that $100 million into each of those categories, but at the moment, it’s just simply an add-on. So you put all that together, that’s the up 6%.

Ken Usdin

Okay. And I guess, same question, I don’t know if you’re able to do it or willing, but is there any way to help us kind of understand where the FirstBank NII contribution is inside the total NII?

Robert Q. Reilly

Yeah, sure. So, actually, it came up in a question earlier. So we’re saying up 14%, inside of that PNC is 7% to 8% of that.

William S. Demchak

7%.

Ken Usdin

Okay. And that will include, obviously, all the purchase accounting benefits that…

Robert Q. Reilly

[Speech Overlap] That’s right. Yes, that’s right. You got it, Ken.

Ken Usdin

Okay. Got it. Thanks.

Operator

Thank you. Next question is coming from Mike Mayo from Wells Fargo. Your line is now live.

Mike Mayo

I’m going to start with a very simple question, and then I’ll have a more complex question. But what’s the difference between a national bank and a regional bank? Because when you answered the prior question, you said we’re a national — I know you’re a National Main Street bank, and you had that position for several years now. But it seems like there’s an important distinction in your mind, whether it’s for growth or efficiency or returns or brand. So if you could elaborate on that.

William S. Demchak

I think maybe the distinction is as much aspiration as it is where we are from the starting point. I mean, we are national in terms of our presence, both with C&I and retail, we’re across the country. But more importantly, perhaps, is the strategic direction and belief that ultimately to succeed, particularly with the retail platform, you have to have a national and ubiquitous presence and share in each market that allows you a fair fight. I think the distinction between that and a regional bank that’s trying to protect its moat in a shrinking market as the large banks and PNC come into their market, is a tough place to be. And that’s why I draw that distinction.

Mike Mayo

All right. I guess you’re saying you still target like the 30 largest MSAs, so you can shift resources and people and attention as you see opportunities. You don’t have to just defend [Phonetics] on a few of them. I guess, is that what you’re saying?

William S. Demchak

Yeah. I don’t think anybody has an ability to defend home turf here, right? We — the branch builds that are going on with the giant banks and ourselves, and at least one other of the smaller banks in the country, we’re coming into your market. If you’re not coming into our market to come fight us, we’re coming to your market to come fight you, and we’re going to get some percentage of your market as is JP and BofA, and ultimately, if you’re not growing, you’re shrinking. So perhaps it’s just a nuance in strategy or the realization that long-term survivability, at least in our view is dependent on the ability to take the fight to all the markets in the US and win.

Mike Mayo

A national platform.

William S. Demchak

Yeah.

Mike Mayo

And then, as a follow-up to that then, so if I heard you correctly, you have your ongoing continuous improvement program. And as part of that, you have record investment spend in 2026, record tech spend, record AI spend, and even with that, you have 400 basis points of positive operating leverage in your guide. So I guess even with you doing all that, are you spending enough given the higher level of competition from the bigger banks?

William S. Demchak

Yeah. I think we are. I mean, part of what you spend is what you can achieve. So you push too hard, you start wasting money. For the places where we compete, Mike, so you think about what we do in wealth or retail or our C&I middle market, smaller large corporate, and related product capabilities, I think our tech spend is at least on par, and I think our product set is more than competitive. And I think our core infrastructure as it relates to running in everything being cloud native and built off of micro services and the ability to build products, is as good as anybody.

Where we lose, right, on tech spend is some of our larger friends who’ve reported so far, they could choose to go build another Visa or Mastercard or Stripe or Shopify, right? They could choose to build a whole another business inside of their existing operating platform, where what we’re doing with our tech spend is optimizing the businesses we’re in today, and I think that’s the big difference.

Mike Mayo

All right. Thank you.

Operator

Thank you. [Operator Instructions] Our next question is coming from Saul Martinez from HSBC. Your line is now live.

Saul Martinez

Hey, good morning, guys. Thanks for taking my question. I wanted to ask about loan growth and the 8% guidance for growth in average loans, it seems to imply still a pretty fairly modest growth on an organic basis. After stripping out FirstBank, I get to something in the neighborhood of about 3%. And correct me if that math is wrong, you obviously expressed some optimism about C&I picking up, CRE stabilizing here. So that headwind is mitigated. I think you still probably have some headwinds in resi, but you just walk me through some of the assumptions that are embedded in the loan growth and whether there’s an element of conservatism built into that?

Robert Q. Reilly

Yeah, that’s a good question. So we’re calling for our full year forecast, 8% average loan growth, which does include FirstBank. PNC on a standalone, we’re at approximately 4% loan growth. So you have that number there. And all the categories you mentioned, that’s what we see, too. So we still see some momentum coming in here in terms of C&I. Ideally, real estate will inflect at some point here in the first half of ’26. On the consumer side, we don’t have a whole lot of growth built in. We do it in auto card, but as you mentioned, resi mortgage, as part of our deliberate management, is going down a bit.

Saul Martinez

Okay. That’s helpful. And then the only other question I have is just more of a clarification on the fee guidance. The numbers you gave, Rob, for asset management and cap markets in the different categories, that’s on a standalone basis, and then you would overlay about $100 million from FirstBank and that will — that $100 million would get — would fall in those categories in some distribution, is that correct?

Robert Q. Reilly

Yeah. That’s exactly right. And FirstBank didn’t have a whole lot of fees there. So that $100 million getting added to a $9 billion-plus number or so.

Saul Martinez

Yeah, yeah, fair point. Okay. Awesome. Thanks so much.

Operator

Thank you. Next question is coming from Chris McGratty from KBW. Your line is now live.

Christopher McGratty

Great. Good morning. Rob, on the dollar of contribution from FirstBank in 2027, I guess, where could you be positively surprised? I know it’s early.

Robert Q. Reilly

I would say the synergies on the revenue side. I do — I think there’s a lot of excitement. There’s a lot of enthusiasm. FirstBank has excellent relationships across those communities, and some of those relationships are likely, I would think, to utilize PNC products and services that FirstBank didn’t have. So we don’t have a whole ton of that built into it. But obviously, we find it appealing.

Christopher McGratty

Okay. Great. And then, related to the high single-digit capital markets expectations, you talked in your prepared remarks about the logjam just being opened. Is this high single-digit the full potential that you think the team on the field can achieve, or is there still an element of you’re holding back for a little bit of uncertainty?

Robert Q. Reilly

That’s what we think we can achieve, as with all our guidance.

Christopher McGratty

Got it. Thank you.

Operator

Thank you. Next question is coming from Matt O’Connor from Deutsche Bank. Your line is now live.

Matthew O’Connor

Good morning. I was hoping you could update us on your interest rate positioning, and I guess, post the closing of FirstBank, I don’t think that would have impacted that much, but just kind of give us a full picture of how you’re positioned from here for changes in absolute rates.

Robert Q. Reilly

Sure, Matt. And that came up a little bit earlier. Yeah, FirstBank doesn’t change a whole lot. Where we’ve been for some time, which is largely neutral. So our NII guide isn’t reliant on rate cuts. So if they happen or they don’t happen, that’s pretty much on the margin.

Matthew O’Connor

Okay. And then, I guess there’s a lot of moving pieces as we think about the rate curve. I mean, there’s obviously focus to lower, I guess, both the low end and the short end, and the longer term. And it’s been a few years since we’ve had some volatility. So I’m just wondering how you’re thinking about protecting yourself from maybe unusual movements in rates, and how does that impact your thinking of securities book?

William S. Demchak

So you should think about our book at least in the near term, as we are kind of indifferent to the front end of the curve, so we’re just balanced out on wherever Fed funds would sit between gains and losses on loan yield and deposit gains losses, and so forth. We are exposed on the reinvestment rate of fixed rate, assuming we don’t change the duration of the balance sheet, right?

We have assumptions built in there on the forward curve on where we can reinvest rolling off money. We have for — just as an ongoing program, and we did this in ’25, and we’ve done a lot of it in ’26, we lock those forward maturities at opportunistic times with forward starting swaps, right? So we kind of say, look, we’re pretty good and independent on what rates does, that’s because we’ve taken advantage and locked a lot of that forward [Technical Issues]

Robert Q. Reilly

And Matt, you know that’s — we started that at the beginning of last year, so that’s unchanged.

Matthew O’Connor

Okay. Thank you.

Operator

Thank you. Next question is coming from Ebrahim Poonawala from Bank of America. Your line is now live.

Ebrahim Poonawala

Hey, good morning. I guess, Bill, just going back to the long term competitiveness of the franchise. As you think about where some of the financing activity, revenue pools are shifting, just talk to us, when you think about investment spend, like should PNC be adding a lot more in terms of capital markets capabilities and on the wealth management front, just how do you think about those two businesses, in particular, either for ’26 and over the medium term?

William S. Demchak

Good question. So, a couple of things we’re focused on, a couple of things we’re not focused on. Focused on is the size of the wallet of private capital entities, which we do a tremendous amount of business with today, either through lending and asset-based lending or the business with Harris Williams or Solebury or cap-com [Phonetics] lines or on and on and on, getting better organized in covering them as a client versus having product-centric coverage, I think, opens up a big opportunity going forward.

Inside the capital markets space, in particular, investments in places we have grown through the years are — we’ve had derivatives and syndicate — loan syndications and FX forever, and that grows with our client base. We have built from scratch a fairly good and growing fixed income business, largely high grade, moving at the margin to higher yield. We have invested and don’t intend to invest into the equities business. I think that is a business that is going to be completely driven by giant-scale players and automation, and not a place where there’s going to be big margins for somebody like us.

And so I think we’ll continue to grow that business and invest in people, but I don’t think we need to buy anything to do it. I think it’s investing in research at the margin, salespeople at the margin, and making sure that our bankers, when they’re covering our clients, are aware of our capabilities on the debt syndication side. But no giant shifts to do anything there other than continue the trajectory we’ve been on. I should know this number, and I don’t. Rob, what’s the total annual number that we make out of our collective capital? What do we make in ’25 in our total…

Robert Q. Reilly

In total capital, a couple of billion.

William S. Demchak

Yeah. I mean, it’s a big business for us. People tend to say, that’s Harris Williams. Harris Williams is a piece of it. We do an awful lot of capital markets business for their clients.

Ebrahim Poonawala

That was helpful, Bill. And just one other question. There’s been obviously a lot of discussion around stablecoin, interest payments, including this week, and what we’re seeing is just the influence that the crypto industry has in D.C. You’ve dabbled a little bit in terms of partnerships with Coinbase. Just give us your sense around how you’re following this legislation, whether or not you think there is a risk to industry deposits, and how shareholders of banks should think about it?

William S. Demchak

That’s a good question. So the fight right now in D.C. is over, some terminology in the GENIUS Act that they’re trying to fix with the CLARITY Act with respect to whether rewards count is interest paid on stablecoins, which was forbidden in the GENIUS Act. As a practical matter, stablecoin was created and is marketed and touted as a payment mechanism that makes payments more efficient. That remains to be seen, but it isn’t marketed nor is it regulated as an investment vehicle.

And I think if they actually want to pay interest on it, then they ought to go through the same process, then it looks to me an awful lot like a government money market fund. So I think banks are sitting here saying, if you want to be a money market fund, go ahead and be a money market fund. If you want to be a payment mechanism, be a payment mechanism, but money market funds shouldn’t be payment mechanisms, and you shouldn’t pay interest. The crypto industry has a lot of lobbying power to say, no, we want it all, but we’ll see how this plays out.

Ebrahim Poonawala

Helpful. Thank you.

Operator

Thank you. We have reached the end of our question-and-answer session. I’d like to turn the floor back over to Bryan for any further closing comments.

Bryan Gill

Well, thank you all for joining our call today and your interest in PNC. And please feel free to reach out to the IR team if you have any follow-up questions. Thanks.

William S. Demchak

Thanks, everybody.

Robert Q. Reilly

Thank you.

Operator

[Operator Closing Remarks].