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

So we have PNC Financial. From PNC, we have Rob Reilly, CFO. So Rob, thank you so much for joining us.

Of course, great to be with you.

And maybe just to kick things off, we were talking about this earlier. Broadly, I think the operating outlook coming into this year seems very constructive, particularly for the banking sector in terms of just the domestic economy, all of that. Give us a state of -- a mark-to-market on just the state of the world, where -- what your expectations were coming in, in terms of underpinning the guidance, et cetera?

Yes, sure. Sure. And that's all part of it. We share sort of the consensus view that's coming out of this conference. We are constructive. We were going into '26. We remain constructive for all the reasons that we've talked about in terms of continued growth, the momentum that we saw coming off of '25 going into '26. Labor looks like it's stabilized. We'd have to keep an eye on that. But we've got a generally stimulus-oriented set of circumstances that you're aware of that you talked about in terms of tax legislation, et cetera. We keep an eye on tariffs. The tariffs don't seem to be the headwinds that everybody thought that they would be. And of course, we've got a lot of emerging items going on geopolitically, but net-net, we're constructive.

Got it. And even though it's been like a little over a month this year, we've seen a fair amount of like geopolitical macro uncertainty. I'm just wondering, when you look at that like -- has any of this kind of derailed activity when you sit with loan committees, et cetera?

No. No, not really. Not really, Ebrahim. Everything that we expected in terms of coming out of the gate is holding. And again, we entered the year with a lot of momentum and strong pipelines, and that's all pulling through.

Got it. So maybe let's just drill into your outlook and the guidance for 2026. And I think maybe taking the macro positivity around loan growth and I think your loan growth, give or take, was about 3% year-over-year. And better or worse, on like the rule of thumb for banks over time is nominal GDP.

Yes, that's right.

So is that conservative? Are there aspects to the balance sheet that's kind of dragging down a little bit.

Nothing particularly unique. So our guidance for the full year is up 8%, but that includes the FirstBank acquisition. So the stand-alone is, to your point, it's like roughly half of that. Nothing particularly different than the rest of the industry. We were talking about that. When you get into loan guidance in January, it's a function of 3 things. One is the momentum that you have going into the year, the pipeline that you have going into the year. We know those things. But the third part is the tricky part, which is what's going to happen in the year. So in our view, just like everybody else is, there's an educated guess to it. If somebody guides to 6% and we're at 4%, that means they just guessed higher, typically particularly on the commercial side, we're at H.8, maybe even a little better than that through normal circumstances just because of the growth markets that we have. So if loan growth picks up more than what most people expect, we'll be right there, but that's just our thinking at the moment.

And I guess, it's funny like we've talked about loan growth picking up for so many years...

Yes. We have.

Like are they proof points even in like the last 6 to 8 weeks, where it feels like this is actually...

Yes, I think so. We finished pretty strong in the fourth quarter. In fact, our fourth quarter loan generation was the strongest quarterly loan generation that we've had in some time particularly on the commercial side. So that's been there. We've had a headwind of CRE, as you know, for the last couple of years. We see that inflecting sometime late in the first quarter. So that will be helpful. And as I mentioned, the pipelines are pretty strong. So I would definitely say year-over-year, definitely heightened. And our customers tell us that, too, when you've talked about this in the conference, capital expenditures outside of AI data centers have been non-existent for 3 years. They have to show up at some point, that's a big part of our loan usage, use of proceeds. So that all is adding up to being fairly constructive.

Got it. And on the C&I side, I think the one thing that gets tossed around is the tax incentives and the tax -- the bonus depreciation. Is that materializing yet or...

Yes, correct. Yes, right. Yes, I think that's just part -- it's just one variable that's contributing to the overall constructive view. One of the things, in addition to the loan growth that we achieved in the fourth quarter -- similarly in the fourth quarter, but really for the better part of 2025, we've been adding loan commitments, but with direct hard exposure that were unfunded at record levels. So that's a pretty good early indicator that there's an intent to borrow because customers pay for that. There's a payment that you need to make for those committed facilities that they've yet to draw down. So those going up measurably is a solid indicator of intended loan usage.

And you don't think we need -- two years ago, it was like the borrowers are waiting for rates to be cut like none of that.

I don't think so. I think that's sort of a leftover when you go from 0 to 5%. Now we're in increments back to sort of 25 basis points or something like that. I don't think those get in the way of our commercial borrowers strategic decisions.

Got it. And then I think, Rob, you mentioned at the end of -- you expect CRE to sort of bottom out by the end of 1Q. Just talk to us, the dynamic between pay-downs and payoffs that you are getting as opposed to new origination activity, which I understand has been mostly stalled over the last year?

Yes. Yes. So there's a couple of components to that. Most of the industry and the banks rightfully so were focused on the CRE office portfolio that for the better part of the last couple of years, we've been working down. That's coming or slowing down to the point where that won't be the headwind that it's been for loan growth. Beyond that, into multifamily and construction loans, multifamily is still healthy. There's a couple of areas of the country where it's an overbuilt, but the underlying fundamentals, particularly around the housing shortage in the United States bode well for that. Well, the other thing that it wasn't as focused on as much was just the construction loans or the lack of construction loans in the last couple of years that fund up that are now beginning. So we sort of have that air pocket working through. If you go back to COVID, everybody thought retail was dead and that you wouldn't be building another retail shopping center ever again and that's starting to come back online. So I think CRE is going to enter a period here of sort of BAU for lack of a better word, going into the second half of '26.

Got it. And I think C&I, you said running better than H.8 right now.

Yes, it is.

Are there aspects to -- is it PNC and is it the growth market? Or are you also seeing some of this reshoring or manufacturing type like investment going on...

A little bit of that, but mostly it's the growth markets for us. Yes, the growth markets are definitely growing at a faster rate than we would expect. So in terms of our outperformance, that's where it's coming from. But those growth markets are places where on-shoring manufacturing facilities are happening. So it could be a combination.

Maybe let's just talk about that. I think when you did the BBVA Compass acquisition, it provided the growth markets. When we think about When we think about -- like I have this conversation with investors, like what's the growth runway? Is it a 3-year runway, 5-year that you sort of outsized and gain.

It's multiple, it's multiple year. Yes. I pushed that out even past the 5 in terms of what's available to us. Everything -- so that was all of -- back to 2021 when we closed that deal. Everything that we expected to do back then, we've done or exceeded. And the growth path is a multiyear, which opportunity for us at double -- close to double-digit growth off a small base. And that's what's got us so excited about our organic growth opportunity and frankly, why we think we have one of the better ones, if not the best in our peer group.

And are there certain markets within that, that particularly sort of...

Yes, yes. What you would expect, Texas, for sure, California because of the size of the economy. And then for our wealth business, in addition to Texas and California, Florida, which we view as a growth market and an expansion market, largely through our acquisition of RBC USA in 2013. Yes.

So I guess, when you think about those markets and just the investment spend, where are you in that cycle in terms of hiring bankers, adding branches like you talked about adding...

Yes. Yes. So we've done a lot of that in terms of the staffing up. We feel pretty good about our staff levels in all of the markets, but we're growing. So of course, we're increasing our staff level. So the question is sort of where we're investing. Our priorities are largely around technology, as you know, and we can talk a little bit more about that in this year, we'll refresh our data centers, which will be national in scale and scope and support running synchronous operations, which is part of evolving to a national footprint. Our payments capabilities are something that PNC is a leader in, particularly on the commercial side, we continue to invest strongly there. And then on our consumer platform, we'll be introducing a rewards platform in '26, which is an exciting new mobile app. And then, of course, the branch expansion of 300 new branches. And of those 300 new branches, what's important to know about that over the next 5 years is we're investing in markets that we're already growing -- we already have a position there, in some cases, low single market deposit share. Our whole goal is to increase that penetration up to mid-single digit, maybe 7% is our magic number. And that's what that's all about. And that's differentiated from just going someplace new and getting started.

And just within that, and I think you've talked about -- I think Bill's has talked about the 7% as branch density number before things sort of brand recognition-wise kick in. But just talk to us about the broader deposit growth environment, how competitive it is? And just from a household acquisition standpoint, what's PNC's strategy in terms of it?

Yes. I mean for us, it's around the density that we're talking about. So clearly, in terms of consumer deposits, it's about client service, products and services, which we have. But the density is the real opportunity there, and we see it. So where we have that density, our branches are 20% more productive in sales and services. Even on the digital front, we're like 6x more productive where we have density, which sort of is a little bit counterintuitive. So it's about the density aspect. And we've grown deposits pretty good. I mean, in '25, we were up 3% -- we have one of the lowest rate paid. So we're doing it the hard way. And we want to continue that, and that's what those investments are about.

And do you think like how would you assess the competitive -- I mean it's always competitive to be...

Yes. It's always competitive, but I wouldn't say it's at food fight level.

It's not like if loan growth picks up, like does that kind of feel...

Potentially, in terms of those fundings. But we've heard some of that, but particularly on the commercial side, we grew our deposits pretty good in '25 without taking the rate paid up. In fact, we brought it down. So that's -- like I said, it's always competitive, but it doesn't feel like it's heightened competitive pressure.

Got it. And you mentioned the 300 branches. Just give us a mark-to-market on how many do you expect -- like where did things stand at the end of the year? How many...

Yes, good question. So we added 26 in 2025 of the 300. And then in '26, we'll do more than double that, so mid-50s and then importantly, in terms of the sitings and the locations for just about almost all the 300, we're there. So we're on track. Everything, like I said, on track or maybe a little bit better. You had asked about sort of the breakeven points, and we've sort of pointed to 3 years roughly, but it's a little bit better than that in these growth markets. But we fully expect over the course of those years that we could generate $20 billion of incremental consumer deposits with this investment.

On the branch point, just talk about not all banks are opening the branches or have a strategy around branch expansion. I think like Bill -- just talk about the science behind a branch opening around finding location.

Yes, it's a lot, it's a lot. And it takes scale and like anything, when you do in life, when you do a lot of it, you get better at it. So we know what we're doing. But it's fully within the capabilities of our Realty Services group, which reports to me. But it's a lot of work, a lot of people and a lot of resources.

You mentioned about nationalizing data centers.

Yes.

I guess, pardon my ignorance. What does that mean? Like just what does that do...

Yes, it was simply -- yes, just simply in terms of the infrastructure. So the ability to: one, be current in terms of everything that we're supporting. I think the big deal is and we can talk a little bit about this with a national footprint now, having data centers that can run simultaneously that if in 1 area, it goes down, the other area can pick it up so you don't lose anything in terms of customer interface or running the bank. That's a big deal and something that a national footprint requires.

So let's talk about the national footprint, right.

Yes, sure.

And I think -- just talk to us, I mean, you've been with PNC for a long time as you think about...

38 years.

Yes. So the evolution from a regional bank into a national bank in terms of the footprint, the lending businesses, et cetera. Like how does that change management strategy in terms of the priorities, how you'll think about go-to-market, et cetera. Like is it just -- because sometimes the pushback will be, is it national in namesake only? Or is there more sort of substance...

No, no, there's more substance to that. I mean -- and we bristle a little bit with that name. So the regional bank, we've bristle out a little bit because we do differentiate ourselves as national for a number of reasons. One is just the scale. So when you're in 30 of the top 30 MSAs in the country, you're in 10 of the top fastest-growing MSAs in the country. You're something more than a REIT and you're not confined to a region. So what are you? We call that national, we want to have density -- increase our density in those markets, but we're in those markets in a material way. The technology that's required to support that, like data center and also the delivery of products and services on a national basis is a higher level of challenge than if you're just confined to a region for the obvious points. And then our products and services scale well. So you take a look at our capital markets business, which is a big business. You take a look at our treasury management, our asset management business. Those are complete products that go up against anybody in the world, whether they're GSIBs, non-GSIBs or nonbanks. And that's a national bank.

Fair enough. I guess maybe just switching gears for a minute to revenue and NII outlook and I think the guidance is about 14% growth this year.

That's pretty good.

Pretty good. But then as we look through one, as far as this year is concerned, just talk to us about what are the puts and takes around what could make it better or worse as we think about it?

Yes. So I would say, so we've guided to 14%, which obviously includes the addition of FirstBank to a full run rate because we closed on January 5. So well before -- essentially a full year of FirstBank. PNC stand-alone inside of that is about 8%. And what we're going to see in '26, similar to what we saw in '25 is the continuation of our fixed rate asset repricing, which is largely mechanical. So we have $50 billion of fixed rate assets on our balance sheet that will reprice this year and thereon in terms of loans and investment securities on our books for 2% or 3%. You reprice them at today's rates. So that part is good, and that's a big part of it. Obviously, the loan growth will contribute to it. What could change that and where we're exposed is obviously the yield curve. So when we go to reprice those assets, if the yield curves are a little steeper, we'll do a little better, if it's a little flatter, we'll do a little bit worse, still up.

Are you thinking about like the 5-year part of the curve.

Yes, that's about right. Yes, that's about right. And the -- and then loan growth if it exceeds our expectations, that would be part of it. But it looks very good for NII growth in '26, similar to what we did in '25.

And is -- so when we look at the $50 billion of back book repricing, are we nearing an end to that tailwind like ...

No, that keeps going -- yes, yes, into '27 and beyond. So we're at the right point of the rate cycle in that regard. And PNC is on the front end of that because our duration was shorter than most going into this point of the rate cycle.

Understood. And -- so when you think about just the rate backdrop and just the repricing that should continue next year, what actions are you taking from a balance sheet standpoint? Are you -- it feels like you could have a debate whether a year from now, the Fed could be...

Yes. No, we're looking at that. Yes. So '26 is pretty locked. Similar to what we did last year was we took a little bit off the table for the bottom part of '26 and into '27, and we're doing that now, too, because the world can change your point, not super aggressively, but locking in some of these rates into '27 and '28 with forward-starting swaps, that sort of thing, which is what we've done. Nothing terribly high in terms of percentage, but just sensible because it looks good.

Got it. And when you think about the net interest margin, I know it's sort of an output to everything that's going on with the balance sheet. But is slightly over 3% the best case outcome here? Or like just how do you think...

I think so, you know this, Ebrahim. We don't give -- I never have given formally NIM guidance, but on every earnings release call within 1 minute, I'm giving NIM guidance. So I'll do it again here. So our net interest margin will continue to expand. We've said that we will go above and are likely to go above 3% in the back half of '26. Beyond that, without getting into guidance in the '27 and '28, we'll drift higher than that. Our strategic plan when we look out over a multiyear period. But of course, there's a lot of variables out there that aren't locked in. We sort of live in that just about 3%, 3.15% kind of range.

That's like when you think about the business mix?

When we think about the business mix. And that's getting out there pretty far, but that's the way we think about it.

I think maybe switching to -- on the fee income side, I think part of the conversation over the last day has been maybe some broadening out into middle market?

Yes.

And I'm just wondering, are you seeing that within -- on the investment banking cycle of PNC?

Yes. So we're seeing that with all of our fees. Actually, all of our fee business is asset management, capital markets treasury management within the capital markets, '25 was pretty interesting for us because we ended up achieving what we had guided at the beginning of the year, which was 18% up in capital markets fees in '25. It was looking like it was out of reach after Liberation Day in April and in the second quarter, the world stopped. But we more than made up for it in the back half of the year and the pipelines going into '26 are strong, which is why we're guiding to high single digits for Capital Markets in '26. Within -- importantly, within capital markets for PNC because it's different from bank to bank, about 1/3 of our capital markets. So call it, about $1.5 billion, $1.6 billion in fees. There's some NII with that, but set that aside, if -- you call it $1.6 billion, about 1/3 of that is our Harris Williams M&A advisory firm, which had a record quarter in the fourth quarter. And their pipelines are still very strong. But 2/3 of it relates to loan activity, loan syndications, asset-backed financings, derivatives tradings for our customers, all of which had an exceptionally strong second half of '25, and we expect that to continue. So the capital markets unit for PNC is very strong.

And when you think about that business and I think Bill gave a very detailed response on the earnings call around the strategic sort of view of the bank. But are there sort of gaps to fill there like do you think...

No, our products are there. We don't operate within the equity space or anything along those lines because we just don't see the margins there or the traction from that -- from a financial perspective. So as we covered on the call, I love our products and services and just we want to do more of them and increasingly, we get the opportunity to do more.

You mentioned Asset Management. I recall a year ago, we were talking about like a huge priority for PNC trying to convert like C&I business owners as they get into liquidity and bringing that in-house. Just give us a sense of is that -- how well is that working...

Yes, it's going well -- yes, going well. I mean, hey, we grew almost 10% last year. The new markets, the growth markets tend to be more affluent, so it's more target rich. The other thing about the new markets too, again, when we bought BBVA, they didn't have an asset management, so we had to grow this home. Same with RBC. We staffed up the -- it's the highest return business in the bank. And we've got the right coverage. What's appealing about the new markets is as opposed to the legacy markets, they're not dragged down by trust distributions. So if you think about our legacy business, a lot of the private bank were just private trust banks over 100 years. So in the trust business, you got to fight the outflows that are -- what you were hired to do to distribute the money to be able to get net asset growth. In our new markets, there aren't any old trust. So it's pure growth.

Got it. Yes. And FirstBank, I know it's a relatively small transaction, but any sort of fee revenue opportunities there to cross-sell and...

Yes. Yes. So on FirstBank in general, one is we're thrilled. We're thrilled with the combination. We were excited about it when we announced it in September, last September. When we closed in January, we're even more excited if that's possible. The cultures have come together really nicely. Kevin Classen, who is the CEO of FirstBank, as you know, is staying on to be our Regional President of the Mountain areas. So the opportunity for us, once we get together, obviously, the priority is a flawless conversion, which is our goal and our expectation. Beyond that, just the relationships that Kevin and his team have are conducive to being open to the expanded products and services that we bring naturally. So they didn't do a whole lot of corporate banking. They didn't do a whole lot of asset management. The didn't do a whole lot of capital markets, but they have relationships with companies that do and need those services. So that's exciting. You had -- when we had talked before this, you had said, have we learned anything from them. They're very good in terms of client service. We're going to retain all the client-facing employees. The one area that they've had success in that large banks have largely abandoned over the years is the smaller end commercial real estate customer, which large banks had sort of vacated, including PNC and operated with Tier 1 developers. They have a long history of very -- of a very good business there with very small losses. So that's something that we're going to examine -- we're going to keep in place, which is good for the continuity of their relationships. But as we understand that, that might be something actually we may expand into our business and something that they bring to the table, but that remains to be seen.

Understood. Maybe pivoting a little bit to the expense side. think your guidance implied about 400 basis points of positive uplift.

Not bad.

So no, it's a pretty strong guidance. So I just think when you think about it, and you always had this culture of like constant savings and efficiencies every year.

Yes, that's right. Continuous improvement.

Yes, continuous improvement. Just talk to us about that as we look forward, 400 basis points is great, but how do you -- what do you think is like a sustainable rate of change?

Yes. So positive operating leverage is really important to us. And I mentioned we have a running 5-year strategic plan that we renew annually. And whenever we start, we start with positive operating leverage is not negotiable. And that's resulted in a great track record. So if you take a look at the last 10 years at PNC, we delivered positive operating leverage in each of those 10 years with the exception of 2021 when we folded BBVA USA in midyear. So their expenses naturally percentage-wise went up more than the revenue. So we've delivered positive operating leverage. I would think best-in-class maybe -- at least tied for best-in-class, if not best-in-class. And that's not just a fluke that's delivered. So you're right. In terms of where we are now in the rate cycle, we're running higher than what we would typically at 400. But I would say sort of normal through the cycle, we'd look for a couple of hundred basis points. I think mid-single-digit revenue growth, maybe a little higher, low single-digit expense growth, which by definition is that positive operating leverage. So not necessarily 400 is sustainable, but a healthy margin there on a deliberate basis.

But just going back to the record over the last 10 years, it's very impressive. I don't know how many banks.

I don't know either. They can't have more than 10.

So is there an aspect to like a toggle where kind of on a constant basis, you're able to -- so there's enough flex at the bank to -- if the revenue environment is not so great, you're able to pull back on expenses.

On the margin, but we didn't do that. If you go back 10 years ago, when the rate cycle wasn't working for us, we were increasing our technology spend measurably. And we took a lot of heat for that. We took a lot of heat. We were still able to generate positive operating leverage, but a lot of your folks in your business were saying why are you doing this at the wrong time, and we're glad we did in hindsight. And we think that has resulted in the differentiation that we have today in technology in a lot of respects. So we won't do anything that's unintelligent to deliver it. With our continuous improvement program that we've talked about that we've had in place, we do have this internal muscle across the organization, across the budgeting where every area of the bank comes in with whether they're going to save that next 12 months from our current run rate that then can be applied and used for our investments and by definition, keep expense growth low single digit. If you didn't have that, your expenses would be mid-single digit expense growth.

I guess maybe just around the operating backdrop, everything seems very constructive. When you think about credit quality. I mean the markets are surprised by the sell-off in the software stocks last week. Business services, et cetera, around AI disruptions.

Yes, that's right.

Either AI disruption or outside of that, like are there areas of the sort of portfolio where you're seeing weakness, you're closely monitoring?

The short answer is we're not seeing weakness in any thematic way on the commercial side or even the consumer side. Clearly, there's some stress on the lower end consumer, but we don't really operate in that space. I'm glad you asked about the software news last week. So I would just sort of frame it out for you. We do have credit exposure there. It's relatively small, $5 billion in loans, which is less than 1.5% of our total loans. And house within our business credit, our secured finance area, which is where we do most of the monitoring. We don't think -- for what it's worth, we don't think the AI disruption is necessarily existential problem in terms of where we extend credit because in many of these cases, these software publishers are embedded in our systems with proprietary data, all the things that we [ shared ] about, so we'll probably see more of sort of a flattening of their growth curve than going out of business and we have a very small portfolio. We lend conservatively into that. And again, most of it is proprietary. We're users of a lot of it. So we can't flip a switch and say, hey, AI is taking part of it, and feel good about that.

Yes. I mean a lot of these are cash-rich businesses.

It's a cash-rich business.

So their growth outlook is being recalibrated, but I don't think they're going away anymore.

Yes. Well said.

Fair enough. I guess we just hosted a panel on the regulatory outlook.

Yes, I got the tail-end of that.

Yes. As we think about just from a regulation standpoint, all the policy debates that are going on, what's the most -- 2 or 3 most impactful things that for PNC and sort of your peer group that you're thinking about and focused on?

Yes. I would say the biggest one that we're focused on is the Basel III Endgame as that comes through because as proposed, the new definitions of RWA calculations as it relates to being able to use our internal ratings for middle market companies is a significant reduction of our RWA. So that's the big one there, up to maybe $40 billion of our $400-plus billion of -- so 10% of our RWA, which is our denominator. So that's a big one. The leverage finance, the change in leverage finance will help us on the margin, not so much that we're going to rush into doing a whole bunch of leveraged finance deals. But as you know, the rules as defining a leveraged finance transaction often captured non-levered or things that were mitigated by structure or by definition. So we'll be able to participate a little bit more in there. But I'd say the biggest change for us is just how we operate. So -- and Bill talked about this a couple of earnings calls ago, the resources, the calories spent on MRAs and compliance with a 0 tolerance for in our view, in many cases, nonmaterial types of items. The resources that, that took were enormous. So the ability to free those resources up and deploy them someplace else is a big deal.

Got it. Yes. I think what we heard from the panel was that maybe Basel Endgame is restricted to the G-SIBs with an opt-in for the large regional bank. I'm not sure if you heard so...

Yes. No, that's right. I mean I think AOCI has already been...

Discounted, right?

Included, yes.

It sounds like you would opt in if that was the option just given what it does for the RWA?

Yes. Yes.

I guess I think the big bang news for me, outside of your guidance, was the 18% ROTC entering 2027 at last check, I'm not sure if consensus had fully picked this up. So just unpack that a little bit around -- I'm assuming you expect to hit that towards the end of the year. And then how the sustainability, are there like one-off things that are supporting that also?

Yes. Yes. So just the whole concept of ROTCE, let's just talk about that. So to dial in, we finished 2025 fourth quarter exit rate at 18%. As I mentioned on the call, that was elevated because we had a large tax reserve release in the fourth quarter that elevated that. So call it 17%. And then I said, as we get into '26, we need to obviously complete the FirstBank integration. We need to deliver on the guidance that we provided. And by this time next year, we'll be at 18% again drifting higher. That's what I said. You would sort of imply, well, maybe some of the numbers were pointing to 17%, but I would point that out to timing and close enough for those purposes. But ROTCE, what's important to understand about PNC is why are we always at the high end. And the answer to that is just the construct of our businesses. So we talked about the fee businesses, 40% of our revenues come from noninterest income, largely recurring and not necessarily risky through the cycle, maybe capital markets a little bit and asset management to an extent. But that's in contrast to other peers that don't have that full set of products in whole. They might have parts, they might want to grow it, et cetera. So just generally speaking, we -- our portfolio of business is our higher return business. So naturally, you're going to have a higher return on whatever your denominator is. At 18%, that's pretty good. That's at the top of the peer group. We don't have a target. We're the one bank that doesn't have a target even though we're at the high end of the range. And the reason for that is simply because the largest variable in determining that, as you know, is interest rates, which are outside of our control. So to say we've got a target and the biggest variables outside of your control never seem to make sense to us. And the other thing that I'd point out is it's a useful measure. And I understand why you focus on it, but ROTCE in isolation, it could go up for bad reasons. So how about a whole bunch of negative AOCI in your denominator and your ROTCE is going up, and it could go down for good reasons in terms of the opposite of that. So it's good to keep track of. The takeaway is PNC is at the high end of the pack above where a lot of our peers' targets are and aspirations are fundamentally in terms of what our businesses are all about.

And you've been at the bank for a long time, when you just look at the return profile, would you say PNC and maybe to a less and broader extent the industry, is it getting a lot more efficient in terms of every dollar spent on things.

Yes, I think so. I think so. The other thing just to that construct is you got to risk-adjust your ROTCE. So what's your R? Is your R not -- recurring fees through the cycles, is you R a lot of high-risk loans -- so you got to look at that, too, the composition of the ROTCE is what's important.

And I guess while on that, AI, there's a lot of fascination over AI could or could not do. Just your view on AI spend today at the bank and what do you expect it will deliver for PNC?

Yes. So our technology spend. We go through this all the time. We say our technology spend's like $3 billion out of our $14 billion, $15 billion. But when we wanted to pull that together, it's easy to pull together with the technology group spends, but then you get into like what's not technology anymore, right? So I don't know, maybe it's all of our spend did along those lines. But what we -- where we are, which is further than we've been is we've targeted about $1.5 billion of addressable spend that we think AI can diminish, if not take it out, over a long period of time. And those 5 areas are software, the use of software, maybe using it less or along the lines of what we're talking about, our retail operations, which has all kinds of opportunity for automation. The third -- the third is the one that always jumped out first for us when AI first came up, which is AML compliance. It's just a natural large data sets that you feed in looking for the anomalies that could be able to identify. So we're making progress there. We've got it in the client care center, which is the industry is doing. And then for us, because we do a lot of commercial loan processing, particularly through our Midland mortgage servicing, Israel application there. So all of that, it's about $1.5 billion of addressable spend that we're on. And that's -- we call it the big 5 at the bank, and we're on that.

And how do you go about this. Is there are a bunch of new LLM models and AI models. Is it just do you work with [indiscernible] firm or you...

Everybody, everybody, a lot in-house. We're inclined to use our own cooking for the most part. But one of the nice things about having the national scale is if we can't find them, they find us.

And how long do you think to realize that $1.5 billion? Is it a 2-year process? 5-year process?

Well, we'll see. We'll see. I mean it's definitely what we plan to do in the next 12 months is built into our guidance and our continuous improvement. The acceleration beyond that, who knows?

You have pretty good visibility...

Yes. I don't think so. I mean, so think about where we were a year ago, we didn't have that dial. I couldn't give you that number. We kind of knew the general areas. But in each of these cases, I mean, it's happening. So in our -- I give you an example, our mobile app that we're introducing, our new mobile app that we're introducing, 100% of that was agentic coding. And the last time we did that, it wasn't.

Got it. I guess one last question. In terms of capital return, I think, again, another big bank could update $600 million or $700 million per quarter in buybacks. Talk to us around that relative to the stock valuation. Just how do you think about the return on that buyback.

Yes. Yes. I'm glad you asked that. So typically speaking, and the history has told us that once it reaches 2x price to tangible book, you sort of dial it back. And here we are above 2x, and we're dialing it up, for 2 reasons. One is we're coming off of pretty low levels anyway. But secondly, and more importantly, is our capital generation is very strong right now. So you take a look in terms of our outlook, you take a look in terms of where we are even with the share repurchases, we maintain a lot of capital flexibility. So at this point, it makes sense to continue. It's obviously something that you keep in mind when you look at the price to tangible book value in terms of dialing that back, but we're not there yet.

I guess last question tied to capital, I would be remiss not to ask you about bank M&A. So I appreciate you're not going to do something stupid. You know the math. Just talk to us in terms of other...

Appreciate that. Appreciate that, Ebrahim.

Are there a lot of like FirstBanks out there? Like how should shareholders think about what...

I think '25 was a pretty good example. So at the beginning of '25 when we were talking to you, you said, what do you expect to happen in the bank M&A space. And our expectation was there'd be a lot of activity between that $10 billion and $100 billion size bank that in many respects, sort of hit the scale wall and that there'd be very little in terms of $100 billion-plus selling because they don't view themselves at that scale wall and they've got pretty robust outlooks themselves. And that played out. What's interesting is looking at it in hindsight, in that $10 billion to $100 billion space, we think we got the best of the bunch. We were aware of FirstBank for a while. But when you take a look at it in terms of what they represent as a $30 billion bank, really compelling, particularly around the consumer franchise and the consumer deposit franchise that is independent of their commercial lending operations, which is pretty unique. So we set a pretty high bar in terms of what's attractive for us. So I appreciate you saying we never -- we wouldn't do anything stupid. I would expect more activity in that $10 billion to $100 billion, whether PNC plays in that, I'd say probably not because we like what we got. And then the $100 billion and above, don't expect much activity.

On that note, thank you very much.

Yes. Thank you.