PNC Q3 Deep Dive: Commercial Deposit Surge, Branch Expansion, and Margin Headwinds

October 16, 2025 at 01:31 AM EDT

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Financial services giant PNC (NYSE: PNC) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 8.9% year on year to $5.92 billion. Its GAAP profit of $4.35 per share was 7.6% above analysts’ consensus estimates.

Is now the time to buy PNC? Find out in our full research report (it’s free for active Edge members).

PNC Financial Services Group (PNC) Q3 CY2025 Highlights:

Revenue: $5.92 billion vs analyst estimates of $5.81 billion (8.9% year-on-year growth, 1.8% beat)
EPS (GAAP): $4.35 vs analyst estimates of $4.04 (7.6% beat)
Adjusted Operating Income: $2.33 billion vs analyst estimates of $2.37 billion (39.4% margin, 1.7% miss)
Market Capitalization: $71.55 billion

StockStory’s Take

PNC’s third quarter results for 2025 were met with a negative market reaction, despite revenue and GAAP earnings per share surpassing Wall Street expectations. Management attributed the quarter’s financial performance to robust growth in commercial interest-bearing deposits, strong loan production in corporate and business credit, and record levels of debit and credit card transactions. However, CFO Rob Reilly explained that the outsized growth in higher-cost commercial deposits compressed net interest margin (NIM) more than anticipated, impacting investor sentiment. CEO Bill Demchak pointed out persistent strength in consumer spending and resilient credit quality, but noted that the mix shift in deposits influenced margin dynamics this quarter.

Looking ahead, PNC’s guidance is underpinned by expectations for continued net interest income growth and stable to modestly higher loan balances, supported by fixed-rate asset repricing and ongoing expansion in key markets. Management cautioned that further Federal Reserve rate cuts could temporarily dampen deposit yields and fee income, but affirmed their outlook for NIM expansion into 2026. Demchak emphasized, “There is absolutely nothing that has changed on our trajectory of forward NII growth,” while Reilly reiterated that PNC’s balance sheet positioning leaves them well-placed for rising rates and future lending opportunities.

Key Insights from Management’s Remarks

Management highlighted that the quarter’s results were driven by a combination of strong deposit growth, disciplined expense control, and ongoing investments in branch expansion and technology.

Commercial deposits drove margin mix: The bank saw an unprecedented increase in commercial interest-bearing deposits, which, while accretive to net interest income, shifted the overall deposit mix and resulted in a lower net interest margin. Reilly clarified that this was a one-off event and not indicative of a trend, stating, “NIM is an outcome, something we manage to.”
Loan growth led by C&I: Corporate and Industrial (C&I) loans grew as a result of strong new production, especially in corporate banking and business credit. The runoff in commercial real estate loans continued, but management expects this trend to inflect and turn positive by early next year.
Fee income momentum: PNC reported record fee income, with notable increases in asset management, capital markets advisory, and mortgage-related activities. The Wealth Management business, recently rebranded, achieved record investment asset levels and positive net flows, particularly in expansion markets.
Strategic branch investments: The bank continued to invest in its retail banking footprint, opening more than 25 new branches this year and maintaining a goal to build over 200 branches by 2029. This expansion is focused on enhancing market share in both legacy and high-growth geographies.
FirstBank acquisition to boost presence: The pending acquisition of FirstBank is expected to more than triple PNC’s Colorado branch footprint and establish a leading retail deposit position in Denver, while also adding presence in Arizona. Demchak described the deal as a strategic effort to accelerate retail growth without signaling a broader M&A spree.

Drivers of Future Performance

PNC’s outlook for the coming quarters is shaped by the interplay between deposit mix, loan growth, and the timing of interest rate changes.

NIM recovery expected: Management projects net interest margin will recover and surpass 3% in 2026, driven by continued asset repricing and a more stable deposit mix, assuming no repeat of the outsized commercial deposit surge seen this quarter. The balance sheet remains positioned for rising rates and incremental NII growth.
Loan growth and CRE inflection: Average loans are expected to be stable to up slightly next year. Management anticipates that the decline in commercial real estate balances will bottom out, with positive growth expected as early as next year, supplementing ongoing strength in C&I lending and unfunded commitments.
Expense discipline amid growth: While non-interest expenses are guided to rise 1-2% due to continued investments in technology and branch expansion, PNC is on track to achieve $350 million in cost reductions in 2025. The company’s continuous improvement program aims to offset inflationary pressures and fund growth initiatives.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be watching (1) the pace and sustainability of commercial deposit and loan growth, (2) signs of net interest margin recovery as deposit mix normalizes, and (3) the successful integration and market share gains from the FirstBank acquisition. Additional focus will be placed on branch expansion progress and cost control measures to support PNC’s long-term growth and profitability.

PNC Financial Services Group currently trades at $182, down from $189.82 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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