PNC — Q2 2026 Financial Report Analysis

PNC's first quarter with FirstBank fully absorbed: revenue up 21%, but the growth is bought as much as earned

The PNC Financial Services Group earned $2,055 million in the second quarter of 2026, or $4.81 per diluted share, up 25% and 25% respectively from the $1,643 million and $3.85 of a year earlier. Total revenue of $6,875 million rose 21.4%.

Those growth rates are real but they are not organic. PNC closed its acquisition of FirstBank Holding Company — a Colorado- and Arizona-based bank — on January 5, 2026, so the second quarter of 2026 contains FirstBank and the second quarter of 2025 does not. The quarter also carried an unusually dense set of one-off items on both the revenue and expense lines. Unpacking those two things is most of the work in reading this filing.

The headline numbers

Net interest income is what a bank earns on loans and securities minus what it pays on deposits and borrowings. Net interest margin expresses that as a percentage of the assets earning it — the spread the bank runs on. The efficiency ratio is operating costs as a share of revenue: lower is better, and 60% means PNC spent 60 cents to produce each dollar of revenue. CET1 is the regulator's core measure of loss-absorbing equity against risk-weighted assets.

For the first six months, net income was $3,827 million ($8.94 per diluted share) against $3,142 million ($7.37) a year earlier, on revenue of $13,040 million versus $11,113 million.

The one-offs roughly cancel out — which is the point

The quarter contained four items management itself flags as significant, and they push in opposite directions:

• +$448 million gain from PNC's participation in the Visa share exchange program
• −$139 million securities loss "related to the repositioning of the available-for-sale investment securities portfolio" — i.e. PNC sold lower-yielding bonds at a loss to redeploy the money
• −$85 million of Visa derivative adjustments, which the filing attributes to "the extension of anticipated litigation resolution timing"
• −$140 million pre-tax contribution to the PNC Foundation, sitting in expenses

On top of that, $127 million of FirstBank integration costs hit the quarter ($121 million in expense, $6 million netted against revenue), part of the roughly $325 million total management expects, of which $218 million of expense had been recognized by June 30.

Netted together, the significant items and integration costs worked out to roughly $43 million against pre-tax income — about $0.08 a share after tax at the quarter's 20.5% effective rate (our arithmetic from the filing's disclosed amounts, not a company-stated figure). So the $4.81 was not flattered by the Visa gain; the gain funded the securities repositioning and the Foundation contribution. What changed is the composition of the quarter, not its size.

Net interest income: the acquisition and the repricing tailwind, in that order

Net interest income of $4,107 million was up 15.5% on the year and up 4% on the first quarter of 2026 — the sequential comparison being the cleaner one, since both quarters contain FirstBank. Management attributes the sequential gain to "the benefit of commercial loan growth and higher noninterest-bearing deposit balances," and the six-month year-over-year gain of $1.0 billion (+15%) to "the benefit of FirstBank, loan growth and lower funding costs."

The margin math underneath is genuinely favourable and only partly acquisition-driven. Interest expense actually fell — $2,587 million in the quarter versus $2,715 million a year earlier, with deposit interest expense down to $1,682 million from $1,845 million, as the average rate paid on interest-bearing deposits dropped to 1.91% from 1.96% in the first quarter alone. Meanwhile asset yields held: total interest income rose to $6,694 million from $6,270 million. Management cites "the continued benefit of fixed rate asset repricing" — older low-rate loans and bonds rolling off and being replaced at today's higher rates — as the driver of the 17 basis point six-month margin improvement. That effect keeps working regardless of the deal.

The 1 basis point sequential margin move to 2.96%, though, says the easy part of that repricing is already in the numbers.

Fees: capital markets did the heavy lifting

Noninterest income of $2,768 million rose 31% year over year, and 26% sequentially. Strip the Visa gain and securities loss and the fee lines still grew:

Capital markets and advisory nearly doubled, which the filing puts down to "growth across capital markets businesses, including strong merger and acquisition advisory activity." That is the most cyclical line PNC has, and the one most likely to reverse — management's own third-quarter guidance calls for fee income to be down 5% to 5.5% sequentially, which implicitly concedes the point.

Asset management was helped by discretionary client assets under management reaching $247 billion at June 30, up from $230 billion in March and $217 billion a year earlier, on "higher spot equity markets and positive net flows." Roughly the same caveat applies: a chunk of that is the equity market, not new business.

Fee income reached 40% of total revenue in the quarter, versus 36% in the first quarter and 37% a year earlier — but the Visa gain accounts for most of that shift.

FirstBank: $4.3 billion spent, $2.4 billion of it goodwill

The deal is now fully integrated operationally. In June 2026 PNC "converted approximately 780,000 customers, more than 1,620 employees and 95 branches across Colorado and Arizona, merging FirstBank into PNC Bank."

Goodwill — the premium paid above the fair value of what was bought — is $2.4 billion, 55% of the purchase price, and is not deductible for tax. PNC assigned it to Retail Banking. That is the part of the deal that has to be earned back through the deposit franchise rather than showing up on the balance sheet as anything tangible. The $23.1 billion of deposits assumed against $15.2 billion of loans is the real prize: PNC bought funding, not assets.

Segment results for the first half show where it landed. Retail Banking revenue rose to $4,517 million from $3,794 million and earnings rose $562 million, with management attributing the net interest income increase "due to the benefit of FirstBank." Corporate & Institutional Banking revenue rose to $3,263 million from $2,813 million, earnings up $417 million — that one is organic, driven by capital markets and treasury management. Asset Management Group revenue rose modestly to $462 million from $428 million.

Credit: better than the headline reserve ratio suggests

Credit quality improved on almost every measure, and one apparent deterioration is an accounting artifact worth flagging.

• Nonperforming assets — loans where full repayment is no longer likely, plus repossessed property — fell to $2,150 million from $2,361 million at year-end, down 9%, "driven by lower commercial nonperforming loans." Nonperforming loans are now 0.55% of total loans versus 0.67% at December 31.
• Net charge-offs (loans written off as uncollectible, less recoveries) were $226 million in the quarter, 0.25% of average loans, down $27 million sequentially. For the six months, $479 million versus $403 million a year earlier — but the charge-off rate was 0.25% in both periods, and $45 million of the increase was FirstBank purchase-accounting charge-offs rather than new credit deterioration.
• Consumer credit actually improved: six-month consumer net charge-offs ran at 0.38% of average loans versus 0.44% a year earlier, with the credit card rate dropping to 3.24% from 4.35%. Commercial went the other way, 0.19% versus 0.17%, on higher commercial and industrial charge-offs.

The one number that looks like weakening is the allowance for credit losses at 1.48% of loans, down from 1.58% at year-end. It is not. PNC adopted a new accounting standard on January 1, 2026 under which "more acquired loans using the gross-up approach, primarily through our acquisition of FirstBank" have their reserve established by writing up the loan's carrying value rather than by running a charge through the provision line. The acquired book therefore arrived with reserves already embedded and diluted the ratio without any reserve release. The same mechanism is part of why the provision fell to $191 million from $254 million despite loans growing 11% since year-end.

The funding side is where the strain shows

Total loans reached $368.0 billion, up $36.5 billion (11%) since December 31, with commercial loans up 14% to $263.9 billion on "new production and higher utilization of loan commitments as well as the addition of FirstBank loans." Deposits grew far less — up $8.9 billion, or 2%, to $449.8 billion, and that includes the $23.1 billion of FirstBank deposits assumed.

The gap was filled with wholesale borrowing. Borrowed funds rose 50%, to $85.7 billion from $57.1 billion, "primarily due to higher FHLB advances" — money borrowed from the Federal Home Loan Bank system, which is reliable but more expensive and less sticky than customer deposits. The loans-to-deposits ratio moved to 82% from 75% at year-end. PNC's average rate on borrowed funds was 4.57% in the quarter against 1.91% on interest-bearing deposits; growing the loan book this way is materially more expensive at the margin than growing it on deposits.

Capital tells a related story. CET1 fell to 9.9% from 10.6% at year-end and 10.5% a year earlier, absorbing the acquisition's goodwill and the loan growth while PNC still returned $1.3 billion to shareholders in the quarter ($0.7 billion dividends, $0.6 billion buybacks). The board nonetheless raised the quarterly dividend on July 6 to $2.00 per share from $1.70, an 18% increase. Book value per common share is $145.52, up from $131.61 a year ago.

Takeaway: The 21% revenue growth is mostly purchased — FirstBank is in this quarter and not the comparison — and the Visa gain that inflates the fee line was consumed by a securities loss and a foundation contribution in the same period. What is genuinely PNC's own is narrower and more interesting: deposit costs falling while asset yields hold, a capital markets business that nearly doubled, and consumer credit improving. The cost is on the balance sheet, where an 11% loan book expansion was funded by a 50% jump in Federal Home Loan Bank borrowing and a CET1 ratio down 60 basis points — PNC is spending its capital and funding flexibility to buy growth, and management's own guidance says the fee tailwind reverses next quarter.

What management expects next

Guidance reaffirmed from July 15, 2026, for Q3 2026 versus Q2 2026:

For full-year 2026 versus 2025: average loans up approximately 12.5%, net interest income up 15% to 15.5%, noninterest income up approximately 11% (9% excluding integration costs and significant items), total revenue up approximately 14% (13% excluding), noninterest expense up approximately 11.5% (8.5% excluding), and an effective tax rate of approximately 19.5%.

PNC's own economic assumptions underpinning that: real GDP growth of 2.1% in 2026, unemployment ending the year around 4.3%, CPI inflation staying above 3%, and the Federal Reserve holding rates in a 3.50%–3.75% range through 2026 and into 2027 — with risks "skewed toward tighter monetary policy."

Our read. The Q3 guide is the honest version of this quarter: net interest income still building (+3% to 3.5%), fees giving back the capital markets spike (−5% to −5.5%), expenses falling as integration spending winds down to roughly $50 million. Strip the one-offs and PNC is running at roughly a 60% efficiency ratio with a margin that has stopped expanding sequentially — a bank that has extracted most of the rate-repricing benefit and now needs either deposit growth or loan spread to do the work. Two things to watch: whether deposits start growing fast enough to let PNC pay down FHLB advances, and whether CET1 stabilises at 9.9% or keeps drifting down while buybacks continue. The commercial and industrial charge-off uptick is small but it is the only credit line moving the wrong way, and it is the one that matters most in a book that is now 72% commercial.