The PNC Financial Services Group, Inc. (PNC) Earnings Call Transcript & Summary

I'm Gerard Cassidy, the President of the BancAnalysts Association of Boston. Thank you all for attending. Thank you very much. I appreciate that. With us today, we have PNC Financial, which we all obviously know, it's about $569 billion in total assets. Market cap is over $70 billion. And presently, they have over 2,200 branches throughout the United States. Last quarter, they had a return on tangible common equity of about 17%. Businesses are broken into three areas primarily, Retail Banking, Corporate & Investment Banking and Asset Management. To my immediate right is Rob Reilly, who many of you already know, Executive Vice President and CFO. I was chatting with Rob beforehand. He's been CFO since 2013. And some of you might remember before that, he headed up their Asset Management area for a number of years. To his right is Alex Overstrom. And for a few of us in this room, myself, Charlie and Brent, who have been doing this for a number of years, we like some of the famous baseball players, the Griffeys, the Boones, and the Bonds. Alex's father presented here as part of Shawmut National back in mid- to early 1990s. So, we have -- his is the first father-and-son combo with the Beavers Head. So...

I don't know if that bodes well or not, but we'll go for it.

So, thank you, Alex. He is Executive Vice President, Charge of Retail Banking at PNC. Prior to that, he was the Head of Small Business and Deputy Head of Retail Banking, and he joined PNC from Goldman Sachs in 2014. And I'm going to turn the mic over to Rob, who then will hand it over to Alex, and then we'll open it up for a fireside chat. Rob?

Thanks, Gerard. You've handled it all. Thank you for having us. This is now my 13th year. So, I was a little stun when you said way back in the '90s, which some of us were there. But a pleasure to be here with you this morning. Alex is going to walk you through some new initiatives on the Retail Bank, that you might have read about in a press release this morning. We're hopeful that you'll get a sense in terms of our enthusiasm for our organic growth efforts, which we initiated at least verbally last year at BAB and laid it out and Alex is going to bring you up to speed.

Great. Perfect. Thanks, Rob. And great to be here, Gerard. Thank you for the introduction. It is great to be back in Boston, close to my hometown of Hartford. As Rob mentioned, I'm going to spend a little bit of time today highlighting the Retail business, talking a little bit about the drivers of our recent performance, our strategic priorities and the opportunities we see ahead to continue to accelerate our growth. Before I do that, I'll reference the statement on forward-looking information and non-GAAP information, and we'll leave that there. Maybe just to start with a little bit of context on the business. We operate one of the largest Retail Banking franchise in the United States, $243 billion of low cost deposits, $97 billion in loans. We've got a team of 27,000 that serves the holistic needs of more than 15 million consumers and small businesses around the country. And that organization, this collective organization has generated $15 billion of net revenue over the last 12 months. If you look at our reach, it is both extensive and expanding. We serve 26 of the 30 largest U.S. markets, including 9 of the 10 fastest growing. And our coast-to-coast branch network puts us within easy reach of more than 40% of the U.S. population. So, you think about the scale, it's driving a very attractive financial performance. Over the last 3 years, we've grown our net revenue at a 14% compound annual growth rate driven by both net interest income and fee income. And during the same period, we've also lowered our direct expenses by nearly $300 million, resulting in a flat expense base and a significant improvement in our efficiency ratio. And the outcome of that has been the very strong growth you see in PPNR on the slide. Our success is anchored in a straightforward, client-focused strategy, start by being our customers' primary bank, deliver consistently outstanding service, what we talk about being client obsessed inside of the PNC organization. And ultimately earn the opportunity to support these clients holistically as their needs and their financial goals evolve with time. And while it's simple, this strategy is at the heart of our Retail Business and guides really all of our investments that we make inside of the franchise, whether that's scaling our presence nationally across physical and digital channels investing in experiences that make it easier for customers to choose PNC as their primary bank or building capabilities that allow us to better serve clients' needs throughout their life cycles. Everything that we do is oriented around the customer. Let me start with a little bit of color on how we scaled our presence nationally to position the business for growth. You can see we've evolved our branch network significantly over the last several years with more than 40% of our branches now in our fast-growing expansion markets, and that's up from less than 20% in 2018. This strategic shift is helping drive improved productivity across distribution channels. In our branches, we continue to achieve record levels of DDA sales as investments in our team members, in marketing, and the client experience continue to pay dividends. In digital, our work to optimize the sales journey to reduce friction has allowed us to grow consumer DDA sales 30% year-on-year, with digital now representing a meaningful portion of our overall sales. This combination has propelled overall customer growth with consumer DDAs growing 2% year-on-year, including 6% in our fast-growing Southwest markets. Given this strong performance, we see a compelling opportunity to continue to invest. And to the point Rob referenced earlier this morning, we announced plans to expand our branch builds to 300 by 2030, up from the 200 we announced a year ago at this conference. And this announcement really reflects the strong momentum we have in our business and the significant organic growth opportunity we see in front of us. If you look at these builds, they'll bring markets like Nashville, Chicago, Sarasota, Fort Myers fully to scale, increasing their density and accelerating ultimately our growth. Now importantly, these branches come on top of our planned acquisition of FirstBank, which, if approved, will make us the #1 Retail Bank in Denver and a leading player in Phoenix. Our overarching objective in these investments is to drive scale and relevance, really to position ourselves as the leading bank in our key markets. And to that end, by the end of this decade, we expect to be at scale in 18 of the top 30 U.S. markets, up from just 6 today. And you can see on the right-hand side of the slide, this type of scale drives performance, not only in the branches themselves, but across channels with digital sales per capita nearly 6x higher in markets where we have a presence. Long term, we see a $20 billion-plus deposit growth opportunities from these organic builds with returns well in excess of our cost of capital even under conservative assumptions. Now, stepping back more broadly across our channels, we're investing to create seamless integrated customer experiences. Today, 77% of our clients are digitally active. We're seeing very strong growth in our mobile users and we actually recently completed the migration of all of our clients to our new online banking platform. And now we're leveraging a genetic development to build our new mobile app, which we expect to roll out in the first half of 2026. We're mostly making it easier for clients to choose PNC as their primary bank, adding digital direct deposit, switching, refreshing our debit card suite and enabling instant debit card issuance through our mobile app. Now crucially, we're still investing in, in fact, increasing our investment in our in-person experiences so that every client entering one of our branches is treated with genuine hospitality and care. And these investments are reflected in our rising Net Promoter Scores, which are up 10 points over the last 3 years across our branch network, driving solid improvements in client retention and helping to fuel the growth we talked about. Finally, while we built a strong foundation, we have a significant opportunity in front of us to expand how we serve our clients throughout their life cycles. Take investing, as an example, we built a phenomenal platform with a newly rebranded PNC Wealth Management, manages close to $90 billion of investment assets, generates close to $1 billion of revenue. And yet we're only beginning to unlock the full potential of our affluent client base. And we've got several initiatives underway to further accelerate our progress. These include adding dedicated advisers and bankers focused on this affluent segment. introducing a securities-based lending solution to help clients manage their liquidity and providing customers with rewards for doing more with PNC. Likewise, you think about credit card, when we've made strides introducing new products growing client spend, our market share among our own clients is still well below what we see as our potential. We've added a number of highly seasoned card experts to lead our team over the last 12 months. And we're executing on a set of plans to address the opportunity that we see in front of us. That said, we recognize it will be a multiyear journey to realize our ambitions of becoming the #1 card provider for our core PNC customers. So in closing, we'd say our strategy is working. We're accelerating our underlying client growth, delivering strong financial results and doubling down on the organic investments to sustain and build on that momentum that we see. We believe the opportunities ahead of us are significant. We're excited about what we're doing and what's to come. And with that, Rob and I are happy to take your questions.

Alex, thank you for the presentation, and maybe we'll start with some questions for you first, and then we'll go to Rob and we'll open it up to the audience. Can you share with us, when you talk about that 7% branch share, does the expansion plan get you into that number that you need to get to the expansion range?

Yes. That's exactly right. Everything we're sort of trying to do, what we announced today, we talked about in the slide is all about sort of driving that local scale in these key markets, which are now 20 or so that we're investing in. We think that sort of 7% range is sort of where you begin to create that sense of ubiquity, that sense of convenience that really accelerates your growth. And we see it already in our own markets, in terms of the checking acquisition, checking share. And then ultimately, that leads, we think, to positive and accelerating deposit share. So, all of the markets that we're investing in and we're targeting that 7%. And then obviously, you get down into the sort of very localized micro market strategies, but that's sort of the macro objective.

Yes. One of the numbers that jumps out at us all on that screen, on the slides was the flat expense growth that you guys have shared. How do you balance the need for the branch expansion with keeping those expenses flat? What are the puts and takes that you get?

Yes. I appreciate you asking that in front of our CFO. It's been -- we didn't spend as much time talking about it in the presentation, but it's been a very big focus since I got in the seat 3 years ago, I would say a couple of levers that we've been pulling and we'll continue to pull. One was frankly optimizing that work. We've talked a lot today about how we grow it. But there's been a nice opportunity to optimize that we exited a bunch of branches where we frankly were overly dense, supermarket branches, prune the ATM network and frankly, address opportunities in our staffing across the broader network. The other thing where we've seen just a tremendous amount of cost takeout has been sort of our operational and middle office areas, I think we've taken out probably more than 2,000 people over the last couple of years in those areas just as we've begun to automate more processes and just drive more efficiency through that. So, our objective is, we want to invest, we want to invest to grow. And we think it's really important to sort of do our part to self-fund as much of that investment as we can through automation, through technology and just sort of rigorously running the business every day.

And Gerard, you're familiar. So that's -- for those of you that know us well, that's part of our continuous improvement program, where we take our efficiency dollars and use those to offset investments.

Rob, coming to you. Maybe you could share with us how the guidance for the quarter is going?

Yes, sure. So we posted our Q 4 days ago, where we reaffirmed our guidance. So, no change, in the last 4 days.

That's good.

Sorry to not be dramatic more on that. But yes, feeling good about the quarter.

Okay. Can we talk about NII for 2026. On the call, you referenced the $1 billion number.

$1 billion growth. Right.

Yes. Yes. And can you share with us the dynamics of the falling front end of the curve and what that might do?

Yes. It's -- like we experienced in '25, we're well into repricing our fixed rate assets that were put on much lower yields years ago. So, between now and the end of '26, we will have $65 billion, approximately $65 billion more of assets to reprice. So that's the preponderance of it when we talk about '26. That will be the big driver. When we get out into January, and we've got full year guidance for you, we'll have some more specifics. All in, we would expect incremental loan growth simply because we think the CRE runoff that has been a headwind for loan growth in the last couple of years will inflect probably in the first quarter of '26, maybe late in the first quarter. But that alone, net-net, everything else being equal, will be better for loan growth.

Yes. Can I just follow-up on the CRE coming about inflection. Is there any property types or any color on what's driving that?

Yes, I think it's just following the office fallout that we've worked through the slowdown in some construction that we had actually a little bit of a gap as that funded up. So loans that we have made earlier in this year will start to fund in '26. So that's what that's about.

Got it. Okay. Maybe we can talk a little bit about deposit pricing in the quarter. Through the rate cutting cycle, do you still expect the cumulative deposit beta in the mid-40% range?

Yes. Yes, for sure. I mean, deposit paid rates are coming down. Our cumulative beta right now is down 37% or something like that, but that's because it's choppy on the front end as rate cuts come late in the quarter and time in the quarter. So, rate paid is definitely -- it has come down. It will continue to come down. Our expectation is another rate cut in December, as we've said. So, we'll get to that mid-40 down beta pretty quickly, and that's in line with our expectations.

Got it. And maybe also to talk about what happened in the third quarter, the increase in interest-bearing commercial deposits. Can you share with us what are you looking for in this quarter?

Sure. Yes. So, as you know, we had a big increase in our commercial interest-bearing deposits in the third quarter, and that was a onetime event really which related to customers -- commercial customers of ours who had deposits off our balance sheet and money market funds. And because of the way rates were moving, when they did the math on the fee, they were paying for the fund and the yield, it actually made sense to come over to our balance sheet even though we didn't increase our rate paid. So, we like when our commercial clients like to have deposits with us. It is NII accretive. So we feel good about that, but there's not more of that to do. So, when we get into the fourth quarter, we'll see some growth in commercial interest-bearing not to the same degree, but there are some seasonal increases that we see. So, it will be in line with that.

Got it. Obviously, you've got a very strong capital, 10% CET1 ratio. Is that the right number? Or how are you...

Yes, I think so. So, we finished the quarter at 10.7% in CET1. As you know, you all know, the capital rules are still in flux, but generally are working in our favor. We'll have to see the dust settle down on that before we get precise, super precise. But I'd say 10% is a good number. So we're at 10.7% -- 10% for right now is a good number.

Got it. And maybe then with the excess capital, any thoughts about buybacks?

Yes. Yes. So we stated for the fourth quarter we expect share repurchases of between $300 million and $400 million. We really like our share price right now. I'll say that again. We really like our share price right now. So, we'll be at the higher end of that range. And then, all else being equal, going into '26, I'd expect share repurchases to increase from there.

Got it. Maybe, Alex, coming back to you. Are there any markets that you're not in today that over time, you might look to expand into?

It's interesting. So, you sort of look at our footprint, we're in 26 of the 30 largest markets. So we like the opportunity in the markets we're in. What you saw in the announcement today is really us bringing a lot of those markets plus some other ones to the degree of scale we think is opportunistic to accelerate our growth. So, in the near term, our focus is really operating in the markets we've got and growing those. Over the long arc of time, would we want to get into more? Sure. But the near-term focus is really scaling up in the markets, several of which we announced today.

Sure. And to add to that, we're in all the right markets where there's a lot of growth. So the idea is to build on what we've already got going in those markets.

We all know that density and market share is really important, particularly with deposits. And everybody is aspiring to do that. Can you share with us, what you might be doing differently than your peers that gives you the success that you've been -- that you put on those lines?

In sort of our view, we sort of think about winning and losing the retail banking or in around sort of two things. One, delivering really good customer service as much as that may sound like a happy idea. It really matters in this business and getting that right is key. And then, really good products and experiences for digitally and in the product set. So for us, it's all about doing those things and then doing them at scale in the markets that we're in. And so, the investments you see today are all about bringing those things to more of our customers in more neighborhoods and surrounding them, whether it's renovating all of our branches over the next several years. The digital investments we talked about, make it easier for clients to choose PNC as their primary bank. It's -- in some ways, it is a relatively simple approach, but we think getting the basics right, executing them well and doing that at scale is what's driven the success and will continue to drive the success going forward.

At this conference, many of the banks talked about the resiliency of the consumer, as you may have heard Bank of America had an Investor Day on Wednesday. They also talked about the resiliency of the consumer. Can you share with us what you're seeing on consumer spending in your concern?

It is -- I mean, that is the word I would have used. It is actually remarkable. We were just looking at the sort of deep dive on the October numbers. The consumer is hanging in there. Spending is robust. And it's -- whilst a little bit stronger at the upper end, it's still actually hanging in there among lower-end customers. So, that's been, frankly, given all of the turbulence perhaps a little bit surprising, even with the government shutdown, what we've seen is customers that have been impacted by that or drawing down some savings in other places in order to allow themselves to continue to spend to some degree. So, it looks pretty solid right now. The employment numbers that we see through our customer data appears okay. So it's still a pretty good picture. Obviously very dependent as we go forward on sort of the employment situation but...

And we keep a close eye.

Yes. Sure. Right now, it's okay.

Maybe we could dig down a little deeper on the consumer loan growth. What are you doing? What are you seeing to drive that growth as you go forward?

Yes. I would just say we're not sort of chasing consumer loan growth. What we're trying to do is make sure we serve our customers and serve them well. And I would sort of break our business into a couple of buckets. You sort of think about what we've got in the home lending side, home equity mortgage, auto, we've got a very, very strong platforms there. Autos, we've had a very nice year and continue to grow that business. Home equity is doing well. Mortgage obviously been a little bit more subdued. But we've got the right solutions. We've got the right products. We do a very good job bringing those to our customers. Where I think the biggest opportunity is, frankly, what we talked about today. We're undersized in card by a lot. We haven't grown that business over the last couple of years. I think that's beginning to inflect if you start looking at the balances, but it's a lot of work that we've got ahead of us in order to get that to where we think ultimately we can make it a more meaningful part of the business. So, that's the investments that we've got. And then in the affluent space, we do a decent job on some of those sort of more traditional products. We talked about introducing a securities-based line of credit. We think that's an attractive opportunity for us is sort of an incremental driver of growth, but those are sort of the two biggest areas of focus at this point. I don't know, Rob, if you have anything.

Yes. No, that's well said.

Yes. Coming back to card, on credit card, how will you guys measure the success of what you're achieving in the card space?

That's a great question. So first, we got to get a team that really understands the space, knows how to execute, knows what great is. I feel like we've got that group in place. They're now beginning the journey of that investment to really build a best-in-class platform for our customers. And I would really want to make sure people understand that we're not trying to play a national card game and prospect in the card space. What we're trying to do is really serve and deliver for our core customers. So, that's the overriding objective that we've gotten. So, when we look at that beginning to inflect on the balance is getting that to sort of sustainable year-over-year-over-year growth that will be an early sign, continuing to grow our spend. We've actually done a very good job in terms of growing customer spend. We made a record quarter in the third quarter, and we feel good on the trajectory as we go into the fourth quarter. And then ultimately, the longer tail on that is going to be actually driving up that attach rate among our core customers. Obviously, every day that goes by, we add more customers into the denominator. So, we're fighting against ourselves in some ways, but that also creates the opportunity. But those, I would say, are sort of the things that we look at, I think the earliest thing you'll begin to see is the spend and the balances and then over time, the attach rate.

Yes. And the key, Gerard, as you know, is the core customer offer. So we're not looking to go where no bank has ever gone before. We're looking for our fair share. And as Alex said, we're putting a lot of work into it. And generally speaking, our core customers are very receptive to the offer.

Yes. They want to do business with us. We need to put out that value proposition that makes sense for them. And again, all of this still in the prime, super prime space, no change in credit appetite or anything else like that.

Rob, obviously, you guys talked about scale today, the announcement. M&A activity is picking up in our industry. Of course, everybody knows your FirstBank deal that you did about a month ago. There's a lot of speculation and chatter about what's next for the bigger deals. Your name is, PNC is often included in there as an acquirer, which may be weighing on the valuation. Can you give us some your thoughts and color how you guys think about M&A going forward?

Yes. Well, so a couple of things on that. One, on the FirstBank acquisition we announced a month ago, as Alex referenced, our expectation is to close it at the first of the year, pending regulatory approval, which we're optimistic about. And just to touch on that, we're really excited about it. So we're excited about it at the time that we did it. We were drawn to what we saw as a pretty unique consumer interest-bearing and non-interest-bearing deposit franchise, that was independent from their commercial activities. Really attractive. We structured in a way, the IRRs are very good. And getting to know the people and getting towards -- working towards close, we're more excited. Our new colleagues are cultural fit and we're seeing big opportunities. So really, really feel good about that acquisition. In regard to acquisitions and how that's weighing on our stock price, it is. And in my estimation, our estimation, I think investors are overweighting our willingness to do a transaction at any cost. And we see that in our valuation. We're trading at a discount now on a PE basis to our multiples for the first time since I've been at BAB, which I think is like 11 or 12 years, I mean. So, and it's not because of our operating performance or our track record. If you look at our operating performance year-to-date in '25, we're at or near the top of the pack in our peer group in NII. We're at or near the top of the peer group in revenue, because our fees have been very good. Importantly, in terms of core profitability, PPNR, the peer group is up 7%. They're having a good year. We're having a better year. We're at 12%. So, we're doing all the things that we want to do, a lot of that coming from our organic growth efforts that are now contributing. So they're not all on the comp. But with that valuation in that move, clearly, there is some portion of our shareholders that don't want us to do a deal. And we hear that. Bill and I were talking about it yesterday. Bill Demchak, our CEO. And he and I, as you've noted, we are the longest tenured combo of CEO and CFO in our peer group. And we quickly realized we're large shareholders too. So, we're very much aligned personally with our shareholders as it should be. And here's maybe your headline, Gerard, we're not masochists. So like most people, we're not going to hurt ourselves. So, if a deal can't happen and organic growth is passed, so be it. But we won't lose our discipline. We won't lose our focus on what's best for our shareholders. And I think at the moment, the valuation is putting some of that in. And if you feel that way, it's untrue and you're misinformed.

Yes. in the past, there's been some quotes about maybe growing to a $1 trillion size. And if that is fair, what's that path? I mean, is that still a big jump for you?

Yes. I mean, $1 trillion number is just an arbitrary number. And really what that's about is, we want more scale. But so does everybody. So the largest bank in the country, we all know who that is, they want more scale. The smallest bank in the country, I don't know if anybody knows who that is, but I assure you they want more scale, right? . So in our case, we're less reliant on anything immediate in terms of scale, because we have more than most. So it's just a target and how you get there is a combination of organic growth, which we feel great about, and acquisitions if they happen to make sense. But I can assure you, if we get to $1 trillion, at that point, we'll want more scale, too. So there's nothing magical about that number, other than just making the point, scale matters.

Right. Got it. Why don't we open it up to some questions from the audience? Are there any questions? Yes. Pierce?

He wants to follow-up on the masochists thing.

Pierce Crosby from [indiscernible] I wanted to ask you about the -- how to think about the financial impact about the expansion branches that are sort of still in, I don't know if you want to call it infancies or at least just maturing. Would you say that they are a drag on absolute profitability today in returns on equity? Or I'm looking at them in the basket, not obviously the newest ones, but all of them together. Or is it more a case where since they haven't necessarily grown enough to generate too much in loans yet. So it's not necessarily attracting capital and the expenses that you are spending. They are at least covered by the revenue. They're not where you want them to be. But, how should we think about what's sort of in the run rate and then as they mature, what are sort of those impacts on sort of margins, returns and so forth? And also a sense of the order of magnitude of it of whether this is sort of nitpicking or sort of an adjustment that we should be thinking about.

I get it. Alex, what do you...

Let's start with the localized level. Maybe just to sort of think about even at just an individual branch, so you can sort of give you a sense. You make a capital investment to open the branch thinking more on a cash flow basis just because I think that's an easier way, economic way to think about it. And so that money is invested. And then, there's basically a J curve where you begin to earn back to a breakeven point. We've conservatively modeled a little bit less than 4 years to break even. And then after that, you're sort of in the positive and fairly quickly thereafter get to payback and then it's pretty attractive. So, you can sort of think about you have a series of J curves that sort of come online as you build the branches. But as each one of those season, it gets more and more and more profitable as you begin with a hole and then it basically inflects and becomes quite attractive.

Yes. And that's pretty much what we've been doing even on the corporate side in terms of these de novo markets, these waterfalls in terms of vintages that the vintages that we did 5 years ago are now paying for the new vintage that's coming. So it is neutral. I mean, I suppose if we stopped, which we don't want to do, we could improve some short-term returns, but that's all part of the plan and fairly obvious.

Betsy Graseck, Morgan Stanley. Thanks so much for coming here today. So, I totally get your point that you're going to be applying a very high bar to any potential opportunities. And you might not be looking, but there might be some who are looking to partner with you, right, in the sense that you want more scale, the smallest -- everyone wants more scale, and we're seeing this across industries, and we have this unique time frame right now where regulators seem to be supportive of corporate actions at this moment. So, when you were speaking with Bill, the other day. How did that factor into the conversation around how you're thinking? Is there -- because I'm sure you speak with lots of folks in the industry. So, should we be surprised if there's an opportunity that emerges in this environment?

Yes. So it's a good question. I sort of go to the place that we've been in the business. And I'm talking like the old guy. But we've been in the business for a long time, and we've got a track record in terms of making acquisitions that made sense for our shareholders. We're very proud of that, and there's things that we betted that we didn't do, that we're glad we didn't do. So, the notion that this time is somehow different, simply because the regulatory environment is generally viewed as more conducive to approving mergers. It doesn't mean that we're going to lose our discipline or lose our experience or lose our focus on the shareholders. So could more opportunities net-net come up? Potentially. But nothing really changes in terms of the way that we assess it. And I think it's important. It's important because it's back to this valuation aspect. We're not distinct in that regard. So, if we get back into a position where we have a premium again, because at the moment right now, our shareholders are saying, don't do it. We do what we always do. If an opportunity were to come up, we'd look at it. But here's the thing, so with a lot of other banks, to your point, right? So we're not that distinct.

Julian?

Can I ask a general question about competitive position between regional banks and the money center banks. I mean you're in a very luxurious position, you're large, you're high quality. I'm curious how the competitive position is changing at the margin in general between those two groups because you have competition from private debt, you have lower capital requirements for the money center banks and really -- not really seeing that for the regional banks. And then also, some people think that maybe the biggest banks, the money sector banks may benefit more from cost cutting via AI. So, how do you think the competitive position changing between the two groups?

Yes, sure. Well, I think it's best -- especially in this period, it's probably best to talk about that in terms of our client segments, because the competition is different. So Alex, maybe you can just speak about that on the Retail side, and then I'll talk about Commercial and our Wealth and then the overall bank.

Yes. I would say, we feel pretty good on -- first and foremost, I would say, when we think about the world is 9,000 banks and credit unions out there. There's a couple that are bigger than us, but we're bigger than 8,994 of them. By the way, it takes like 4,000 of them combined to equal our retail franchise. So, we feel pretty good to Rob's earlier point on our relative scale. So, we're going after a lot of that share, and we feel like we're doing that successfully in winning and we're doing it as we continue to expand in the markets. And what we try to do is bring the capabilities of one of the larger banks in the country, which we have a totally comprehensive product set, the ability to support our customers in all sort of periods and try to do it in a way that's very local, very high touch, very relationship based. This concept of client obsession, sort of, hospitality like we mean that, and we think we can treat our clients and treat our teams in a slightly different way than perhaps the biggest player, and we like that positioning. We think that's relatively unique in our model in the Retail space, and that's been what's allowing us to take share.

Yes. And it's similar on the Commercial side in the sense that, that competition is nothing new to us. We compete against all the large banks across the country, across all asset sizes. We don't win them all, but we win our fair share. And again, I point back to the PPNR growth. The large banks are in our peer group. Averages have been about 7%. They've had a good year. We've got a better year.

Actually, Rob, maybe I can follow up with a question aside from deposit market share. At this conference, the other topic that's been talked about a lot is the loans to the non-depository financial institutions and private credit. Obviously, you guys are present there. Can you give us some color on how you chose that business? And you've done a very good job obviously with minimal losses over the years.

Yes. No, thanks, Gerard, because that's a topic of the moment. The short answer is, we feel really good about the loans that we have, and they do represent the lowest risk loans in our commercial loan book, our total loan book for that matter. But let me break it down for you a little bit so you know what's inside the bucket, because -- as you know, the FDIC expanded the definition. So what otherwise looks like growth in that category for us was loan reclassification. And the buckets that we have stick with me here, we have four buckets that comprise about 20% of our loans, $60 billion. The largest bucket inside of that, which is about 40% of the $60 billion or $25 billion or so are asset securitization. So I think trade receivables securitization, CLOs, both of which use the same structure, which is a bankruptcy remote special purpose entity that diversified assets go into and then we lend on conservative advance rates to that entity. The short answer is, we've been doing that since 1995, the trade receivables and we've had zero loss -- zero losses. Naturally, with all the attention around it, we recently did just a check on all the collateral and the compliance, which we oversee. We use some third parties, but we're the eyes on and we liked what we saw. So, that's the biggest component of the bucket. The next, where we are a little outsized. And you'll recall, when I tell you, capital commitment lines to private equity funds. We purchased a few years ago Signature Bank's capital commitment line business, when they were working Signature Bank out. And we're now 30% of that bucket is capital commitment lines. And those are short-term secured by the capital commitments of pension funds, institutions, high net worth individuals. Again, short term, just the commitment, not the use of the funds that go into levered transactions. So, again, zero losses. The third -- so there's two more buckets left, 15% each. The third is real estate. So real estate investment trusts, real estate funds, subscription facilities, similar, we've been in that business a long time, virtually no losses there. And I say virtually, we were talking about this. We had one like 5 years ago, small loss, and we're still talking about it. We're still upset about that. But that book is in very good shape. And then lastly, it's just all other, which are loans to insurance true financial institutions. Mortgage warehouse lines, some equipment leasing, no subprime consumer or anything along those lines. So put all that together, it's 90-plus percent investment grade or investment-grade equivalent. Zero losses, zero criticized, zero watchlist, zero NPLs, zero charge-offs. So no, it's different than what you read. And really, just as an observer, defending NDFI, these aren't NDFI, these are marginal borrowers that use too much leverage or asset class. And we've seen that over the years at BAB. Haven't we, Gerard?

Yes.

So client selection is huge.

Yes. Well, with that, we're down to the last few seconds. I want to thank both of you for coming again to BAB. Please join me in a round of applause thanking PNC.

Thank you. Good job, Gerard.