PNC Financial reports sluggish loan growth, shares fall

(Reuters) – PNC Financial Services Group Inc (PNC.N) beat analysts’ estimates for quarterly profit on Friday but loan growth at the U.S. regional bank was sluggish, sending its shares down 3.5 percent in morning trading.

U.S. lenders, particularly regional banks, were expected to benefit from a rise in borrowing by businesses as companies take advantage of lower taxes to boost investments.

However, PNC posted a meager 2 percent rise in total loans in the third quarter, compared with a 4 percent increase in the second quarter. The bank’s loan growth was also well below JPMorgan Chase & Co’s (JPM.N) 6 percent and Citigroup’s (C.N) 4 percent.

“Investors want to see the benefits of tax reform and a strong economy materialize into loan growth at the banks. In that regard, we didn’t see that happen for PNC this quarter,” analyst Kyle Sanders Edward Jones said.

PNC’s total non-interest expenses rose 6.2 percent to $2.61 billion in the quarter, as the bank spent more to boost its online banking operations and offer reward schemes. The bank also said its employee wage bill rose during the quarter.

A number of brokerages had said they expected roughly no change in non-interest expenses.

Net interest income rose 2 percent to $2.4 billion, helped partly by higher interest rates, which allow banks to charge more on loans.

The Federal Reserve has raised rates four times since the third quarter last year, bringing the short-term overnight funds rate to 2.25 percent.

The bank’s net interest margin, a key measure of lending profitability, also rose.

PNC’s net income rose 26 percent to $1.32 billion in the quarter ended Sept. 30. Earnings per share came in at $2.82, compared with the average analyst estimate of $2.72 per share, according to I/B/E/S data from Refinitiv.

The regional bank’s shares are down 9 percent this year.

Reporting by Diptendu Lahiri and Bharath Manjesh in Bengaluru, Writing by Anil D’Silva, Editing by Saumyadeb Chakrabarty

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