Operator: Greetings and welcome to the PNC Financial Services Group Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bryan K. Gill, Thank you, Bryan. You may now begin.

Bryan K. Gill: Well, good morning, and welcome to today's conference call for the PNC Financial Services Group. I am Bryan K. Gill, the director of investor relations for PNC, And participating on this call are PNC's chairman and CEO, Bill Demchak, and Robert Q. Reilly, executive vice president and CFO. To's presentation contains forward looking information. Cautionary statements about this information, as well as reconciliations of non GAAP measures are included in today's earnings release materials as well as our SEC filings and other investor materials. These are all available on our corporate website, pandc.com under Investor Relations. These statements speak only as of 07/15/2026, PNC undertakes no obligation to update them. Now I would like to turn the call over to Bill.

William S. Demchak: Thank you, Bryan, and good morning, everyone. As you saw, PNC delivered an impressive second quarter. We generated $2.1 billion of net income or $4.81 per diluted share. Our results included First Bank integration costs and other significant items, Collectively, these items reduced earnings per share by $0.04 resulting in an adjusted diluted EPS of $4.85 Now Rob is going to take you through all those details on our financial results in a couple of minutes, but let me just hit a few highlights. Business momentum remains really strong. We continue to win new clients and deepen existing relationships. DDA growth continues at a healthy pace, while client acquisition across our corporate and private banking businesses continues to grow meaningfully. Net interest income grew on the back of continued commercial loan growth as well as favorable deposit mix and pricing. And fee income performance was a particular highlight increasing 10% linked quarter and 20% year over year. Growth has been broad based across every fee category underscoring the value of our diversified business model. Also generated positive operating leverage and improved our efficiency ratio. Credit performance remained strong, reflecting the strength of our economy as well as the quality of our portfolio. The consistency of our financial strength was evident in the Fed's latest stress test results. For the fourth year in a row, PNC's start to trough capital depletion was the lowest in our peer group. Further demonstrating our best in class resiliency. With this in mind, our board approved an increase to our quarterly common stock dividend of $0.30, or 18%, to $2 per share. Beyond these financial results, we continue to make meaningful progress on the things that will drive our future success. Successfully completed the conversion of FirstBank, opened new branches in high growth markets, introduced a new mobile banking platform, all the while continuing to advance client and infrastructure technology. None of these efforts are about the next quarter. They are about making PNC a better bank for our customers and positioning the company for sustained growth over the long term. In summary, we had a great quarter, and importantly, we are well positioned to drive further growth across our company. Before I turn it over to Robert, as always, I just want to thank our employees for everything they do for our company and our customers. And with that, Robert will take you through the quarter. Robert?

Robert Q. Reilly: Thanks, Bill. And good morning, everyone. Our balance sheet is on Slide 4 and is presented on an average basis. For the linked quarter, loans of $363 billion grew $12 billion or 4%. Securities balances increased 2% to $147 billion during the quarter and the portfolio yield improved 9 basis points to 3.45%. Average deposit balances of $457 billion were stable consistent with seasonal patterns. And borrowings were $79 billion, an increase of $16 billion reflecting high FHLB advances. Our tangible book value was $111 per common share, up 2% linked quarter. up 7% compared with the same period a year ago. And our return on tangible common equity was 17.9% in the second quarter. We continue to be well positioned with capital flexibility. During the quarter, we returned $1.3 billion of capital to shareholders. Which included $690 million of common dividends, $610 million of share repurchases. Going forward, we expect third quarter repurchases to approximate the same level. As Bill just mentioned, our Board recently approved a $0.30 increase to our quarterly cash dividend on common stock, raising the dividend 18% to $2 per share. And we remain well capitalized with an estimated CET1 ratio of 9.9%. Slide 5 shows our loans in more detail. Loan balances averaged $363 billion in the second quarter. Increase of $12 billion or 4% linked quarter. And the total average loan yield decreased 3 basis points linked quarter to 5.47%. Virtually all of the loan growth was in C and I, reflecting strong new production and higher utilization across almost every loan category. CRE balances increased $690 million during the quarter driven primarily by growth in retail and industrial exposures. And consumer loans declined by $730 million as growth in credit card balances partially offset expected declines in residential real estate and auto loans. Slide 6 covers our deposit balances in more detail. Average deposits were stable with the prior quarter. As higher consumer balances were offset by a seasonal decline in commercial deposits. Our total rate paid on interest bearing deposits decreased 5 basis points to 1.91% in the second quarter, reflecting lower rates paid across all deposit categories. Notably, average non interest bearing balances grew 4% linked quarter and represented 23% of total deposits. Turning to the income statement, As Bill mentioned, I want to provide a bit more detail regarding the integration costs and significant items in the quarter. When combined, these items had a minimal impact on our net income and earnings per share. First, we incurred $127 million of integration costs related to the FirstBank acquisition. Beyond these integration costs, we had several significant items. We participated in the Visa Exchange Program and monetized half of our Visa Class B2 shares resulting in a $448 million pre-tax gain. We also recorded a negative $85 million Visa derivative fair value adjustment associated with our remaining Visa Class B shares primarily related to the extension of anticipated litigation resolution. In addition, we repositioned a portion of our securities portfolio through the sale of approximately $4 billion of available for sale securities resulting in a $139 million loss. We reinvested the proceeds into securities with yields approximately 120-basis-points higher than the securities sold. Finally, we contributed $140 million to the PNC Foundation, which supports our communities and early childhood education initiatives. So all in, the First Bank integration costs and significant items when combined resulted in a nominal reduction to our second quarter EPS of $0.04. Turning to Slide 8, we highlight our income statement trends. Comparing the second quarter to the first quarter of 26. Total revenue was $6.9 billion and grew $710 million or 12%. And included both integration costs and significant items totaling $218 million Non interest expense of $4.1 billion increased $330 million or 9% included $140 million PNC Foundation contribution. As well as $121 million of integration expense. We generated 3% positive operating leverage and PPNR grew 16%. Provision was $191 million. Our effective tax rate was 21% As a result, our second quarter net income was $2.1 billion or $4.81 per common share. And $4.85 as adjusted. Comparing the second quarter of 26 to the same time last year, net income grew by $412 million, resulting in EPS growth of 25%. Turning to Slide 9, we detail our revenue trends. The quarter included integration costs and significant items within the other non interest income, our revenue growth was driven primarily by the underlying strength of our franchise. We generated 4% growth in net interest income and 10% growth in fee revenue. Net interest income of $4.1 billion increased $146 million and included the benefit of commercial loan growth, and higher non interest bearing deposit balances. Our net interest margin was 2.96%, an increase of 1 basis point. Fee income was $2.3 billion and increased $200 million or 10%. Looking at the details, Asset Management and Brokerage increased $20 million or 5%, driven by increased client activity and higher average equity markets. Capital Markets and Advisory revenue increased $114 million or 25% reflecting record M&A advisory fees, and strong activity across our other capital markets businesses. Card and Cash Management increased $34 million or 5% driven by seasonally higher consumer transaction levels, and growth in treasury management product revenue. Lending and deposit services increased by $6 million or 2% primarily due to increased customer activity. Mortgage revenue increased $26 million or 22%, largely attributable to negative residential mortgage servicing rights valuations recognized in the first quarter. And other non interest income of $489 million increased $364 million which included the $218 million of integration costs and significant items, as well as positive private equity valuation adjustments. Compared with the second quarter of 25, and excluding integration costs and significant items, total non interest income increased $444 million or 21%. Importantly, this performance was driven by strong organic growth, with broad based increases across our businesses. Turning to Slide 10, Second quarter expenses increased $330 million or 9% linked quarter. Expenses in the second quarter included integration expense and significant items totaling $261 million, while the first quarter of 2026 included $97 million of integration expense. Excluding the impact of integration costs and significant items, noninterest expense increased $166 million or 5% linked quarter. The growth reflected increased business activity, higher marketing spend as well as continued investments. We remain focused on expense management and we are on track to reach our goal to reduce costs by $350 million in 2026. Through our continuous improvement program. Which as a reminder is independent of the FirstBank acquisition. And this program will continue to fund a significant portion of our ongoing business and technology investments. Credit metrics are presented on Slide 11. Overall credit quality remains strong with improvements in NPL delinquencies and net loan charge offs. Non performing loans of $2 billion decreased $216 million or 10% and represented 0.55% of total loans down from 0.62% last quarter. To delinquencies declined $122 million to $1.4 billion now represent 0.39% of total loans. To net loan charge offs were $226 million and our NCO ratio was 25 basis points. At the end of the second quarter, our allowance for credit losses totaled $5.5 billion or 1.48% of total loans. To summarize, PNC reported a strong second quarter of 26, and we are well positioned for the second half of the year. Regarding our view of the overall economy, our base case assumes GDP growth to be approximately 2.1% in 2026. The unemployment rate holding steady and ending the year at approximately 4.3%. We expect the Federal Reserve to keep rates stable throughout 2026. For ease of comparability with our prior guidance, our full year outlook excludes the impact of First Bank integration charges and significant items. Considering our reported first half operating results, third quarter expectations and current economic forecast, our outlook for the full year 2026 compared to 2025 results, is as follows: We expect full year average loan growth of approximately 12.5%, expect full year net interest income to be up 15% to 15.5%. We expect non interest income to be up approximately 9%. Taking the component pieces of revenue together, we expect total revenue to be up approximately 13%. Non interest expense to be up approximately 8.5% and we expect our effective tax rate to be approximately 19.5%. Our outlook for the third quarter of 26 compared to the second quarter of 26 is as follows. We expect average loans to be up 1% to 2%. Net interest income to be up between 3% to 3.5%, fee income to be down 5% to 5.5%. Other non interest income to be in the range of a $150 million-$200 million. We expect adjusted non interest expense to decline 2% to 3%. And in the third quarter, we anticipate approximately $50 million of integration expenses. And we expect third quarter net charge offs to be approximately $225 million. And with that, Bill and I are ready to take your questions.

Operator: Thank you. We will now be conducting a question and answer session. Our first question today is coming from John McDonald of Truist Securities. Please go ahead.

John McDonald: Thanks. Good morning. Robert, wanted to ask, you had some very strong loan growth through the quarter. Could you speak a little bit to the cadence of the loan and deposit growth as the quarter progressed? There seems a little bit different dynamic between the period end and average. And maybe just broadly do you plan on funding the strong loan growth throughout the year?

Robert Q. Reilly: Yes, sure. So good morning, John. Loan growth in the first half and in the second quarter continued to be pretty strong. Which is a good thing. When we take a look at the second half, we still see loan growth but not at the same rates. We are pointing to effectively sort of GDP growth in our guidance going through the balance of the year. So overall loan growth, but not to the same extent.

Analyst: And in terms of funding, as we look forward, we do expect deposits to grow through the second half of the year. So that will be a key component to the funding as it replaces some wholesale debt that we picked up in the second quarter.

John McDonald: Okay. Got it. And was that just about some the funding that you picked up on the FHLB side this quarter, was that just some temporary dynamics and you expect that you also had good NIM growth this quarter. Maybe just comment on that and the outlook there.

Robert Q. Reilly: Yes. So non-interest-bearing, your second-- first, non-interest-bearing interest bearing deposits were higher than we expected All of that virtually all of that was on the commercial side. Related to our treasury management business and some escrow monies that come through. So that is a good thing.

William S. Demchak: Yeah. Yeah. The-- I would expect that to continue not at the same rate. So we are 23% of our total deposits and we have that pretty steady through the balance of the year. I think the funding, John, you should just assume we sort of optimize against every lever, whether it is wholesale funding, or what we are doing on deposits. You know, the drops this quarter in corporate deposits are pretty easy to turn back on. there is a bit of a seasonal effect, but there is also a rate effect You saw we grew deposits in retail, which is the most important thing. In the FHLB advances, you know, this quarter were, you know, think of it as the cheapest alternative to fund loans. You know, relative to other things, and that changes all the time. I would not read too much into that. No. it is just it is just flexing to the optimal cost.

Robert Q. Reilly: Yeah. Got it.

John McDonald: Got it. Okay. Great. Thanks, guys.

Robert Q. Reilly: Sure.

Operator: Thank you. Our next question is coming from John Pancari of Evercore ISI. Please go ahead.

John Pancari: Good morning. On the loan growth side, appreciate the trends that you have seen some pretty good strengthening. Can you maybe just talk about the areas of strengthening? What do you see in terms of demand and pipelines and utilization? And then separately on the loan spread, front, any shift in spreads that is observable here? Amid the competitive backdrop? Thanks.

William S. Demchak: You want me? Yeah.

Robert Q. Reilly: So inside that, I would say, the loan growth has been strong. Again, expect loan growth to continue not at the same rate and that is just a function of maybe some pull forward in terms of borrowings or some pent up borrowing demand. And then we will see As far as the mix, we do not see a lot of spread compression from a competitive standpoint, but we do have some spread compression in continuation of what we saw in the first quarter, which is most of the lending that we are doing is to the high credit quality, lower spread entities.

William S. Demchak: Those are who are borrowing now. it is good business. it is sufficient return, particularly given that those loans often come with treasury management and or capital markets. So there is a little bit of dilution to the portfolio spreads but that is more mixed than competitive pressures. The other thing, you know, we continue to have the new markets outpace the legacy markets just in terms of growth as we grow share there. And for the first time, I am sure this is not true, but for the first time I can remember we had strong growth across kind of every category inside of the C and I franchise. And utilization increases. So Right. So yeah, it is broad based. We are gaining share. You know, kind of all on the back of you know, what feels like a pretty strong economy. Okay. Thank you. that is helpful.

John Pancari: And then I know you do not really guide on more specifically around the margin, but just trying to get an idea, just given some of the pricing dynamics that you are seeing and in the backdrop and the environment, just wanted to get an idea of how you are thinking about this margin could project through the back half of the year that is kind of baked into your into your guidance here? I know you saw a modest expansion in the quarter by about a bit. Just how are you thinking about how that could play out as you look through the back half?

Robert Q. Reilly: Yes. So let me address that, John, because there is a lot of focus on NIM. So we had said that we expect to go above 3% by the end of the year and we still are standing next to that. So that is that. The second piece is if you jump down the NIM components and it sort of gets to your earlier question, the components of our second quarter NIM. What helped our second quarter NIM, which went up a net 1 basis point, was obviously the decline in the rate paid on the interest bearing as well as the increased noninterest bearing deposits. So that helped NIM. What constrained NIM was the point that I was making earlier is these commercial loans that are coming in at a pretty good rate and the majority of those being the higher credit quality lower spread. That constrains NIM. So when you think about it and you look at it, those loans carry the fees along with them. So from an EPS perspective, those loans are hugely accretive. On a stand alone basis, they are dilutive to NIM. So, you know, if we did not have those loans, just for illustration purposes, if we did not have that loan growth in the second quarter, our NIM would have easily popped above 3%.

William S. Demchak: So, you know, we are given a choice between lower NIM, higher EPS or higher NIM and lower EPS. We will take EPS every time. But having said that, we are still on the we are on record for 3% in the back half of the year.

Robert Q. Reilly: And much of that driven through the continued repricing of fixed rate assets. Well, that is the longer term issue. So the longer term issue is the steepness of the yield curve We still have a lot of fixed rate assets to reprice, so that will determine that. But I just mentioned that for illustration purposes because I think a lot of the focus on NIM is on the funding side. The issues there. But there is also the loan dynamic.

William S. Demchak: Right.

John Pancari: Got it. Thanks for that detail. I appreciate it.

Operator: Thank you. Our next question is coming from Ebrahim Poonawala of Bank of America. Please go ahead.

Ebrahim Poonawala: Hey, good morning. Guess, maybe, Bill, Robert, sticking with loan growth. So you mentioned the high credit quality, low spread lending, which is good to hear from a credit quality standpoint. Is this different from history in terms of this kind of loan growth or this is kind of what you would expect in a good C and I environment? Where market spreads are tight? So 1, like, is there something different about the quality or the type of borrower or the type of borrowing that is happening? Then I have a follow-up to that, but maybe if you could start there. Thanks.

Robert Q. Reilly: Yeah. I would say I would not say anything is, you know, like, way different. But I would say that the preponderance of the loan growth is in that higher credit quality, spread loans, which is probably mix wise a little bit higher than average run rate. But it is not, you know, off the charts.

Ebrahim Poonawala: Got it. And I guess as a follow-up to that, you had all the big banks report like there is a significant energy around the economy, around AI CapEx spend. We are seeing that in the financing markets. When you sort of bring it back to you are the second bank today that talked about broad based C and I growth. I am just wondering, 1, are you picking up some of that business tied to data center lending, etcetera? And second, when you think about the broad based growth, are there other engines of the economy at work here, be it reshoring, manufacturing, etcetera? Or are you able to sort of connect dots between second derivatives of AI CapEx driving that loan demand for P and C?

William S. Demchak: it is too broad based to lay it all on AI. At the margin, it is impacting what we are doing. But it is as I said before, it is coming from kind of all sectors. You know, which is you know I have heard the different explanations as to why it is showing up. People are otherwise used to the chaos and the environment, and they figured out that they need to operate through it and grow. The M and A environment is more robust. You know, look, the economy is strong and people are spending money. But it is not while I appreciate the impact AI is having on GDP that cannot be the only driver of the loan growth that we are seeing given the industry dispersion and the geographic dispersion.

Ebrahim Poonawala: Got it. Thank you.

Operator: Thank you. Our next question is coming from Erika Najarian of UBS. Please go ahead.

Erika Najarian: Hi, good morning. Robert, if I could just start with you to your point, there is a lot of focus on net interest margin trajectory because of the funding dynamic. The street currently has an exit rate of 3.08% for fourth quarter 26. As we think about where the loan growth is coming from, does that is that too fast of a ramp relative to the other opportunities in terms of fixed asset repricing and obviously maybe optimizing some of the wholesale funding that you put on this quarter to core funding?

William S. Demchak: Yes. So again, do not give NIM guidance nor do we manage to it. That said, I always give NIM guidance. So it is you know, we are above 3, Erika. I you know, the precise level at the exit run rate. Why do you why do you care? it is-- you know, at the end of the day, we will stick to our guide, and we will get there. But if we grow EPS and NII, you know, at 2% higher and have a lower NIM-- or would you to Robert's earlier point, why do you focus on it? So I personally do not care.

Robert Q. Reilly: I think that the NII dollars are more important, and I could not quote you what JPMorgan's NIM was for this quarter. So I think you are right.

Erika Najarian: I think just like I am just thinking about why the stock is down despite the beat and raise. So that is why I am trying to clarify that question.

William S. Demchak: More sellers than buyers. You know, look, the maybe the simplest thing to say across the space is we have healthy asset growth through loan growth which is coming from client acquisition and economic activity. And we have a great ability to fund it. We are growing our retail franchise, retail deposits are increasing. Corporate deposits did not pay up for and they went down in the quarter, but we can make those whatever we want. Got it. Okay. Deposits. When we are already liquid today, And so, you know, it is it is not a huge focus inside the company even though the mechanical outcome, as we have said, since the beginning of the year will push us over 3% by the end of the year.

Erika Najarian: To that end, you know, just to take a step back, you know, clearly, company is doing well. You have talked about organic NII dollar growth. Of about $1.2 billion this year. And so, I guess, as we think about sort of what is you know, your plan over the next few years, you know, is that NII dollar growth replicable? For a sustainable period of time And additionally, you printed a pretty nice ROTCE this quarter. I guess I am wondering about the path to the 20% that you have mentioned previously.

Robert Q. Reilly: Well, maybe I could jump in there a little bit. So we are not going to get into 2027 guidance, but we are on record saying that we have got a lot of fixed rate asset repricing that goes well into 2027 and beyond. So that is constructive for NII in 2027 and as we get closer to the end of the year, we will sharpen that up for you. As far as the ROTCE goes, we are on record saying that we would hit 18% annualized exit rate fourth quarter 26. We are sticking to that as well. And we are tracking to that. We point out this quarter, we are at 17.9%. So arguably, we are in the vicinity.

Erika Najarian: Okay. Thank you.

Robert Q. Reilly: Sure.

Operator: Thank you. Our next question is coming from Mike Mayo of Wells Fargo. Please go ahead.

Mike Mayo: Hi. Just a little bit more color on loan growth. Certainly, it is growing faster than you had thought. Can you talk about line utilization and potential for loans to grow even faster and how much you are assuming line utilization will increase as part of your higher guide?

Robert Q. Reilly: Yes. Hey, Mike, it is Robert. So as we pointed out in the second quarter, utilization has increased for us and it is been pretty broad based. When we look into the second half, we have continued loan growth. We have an expectation that the utilization would at least hold, maybe go up a little bit But that is all part of our thinking in terms of sort of moderating the loan growth to roughly GDP.

Mike Mayo: Okay. And you ever like, look, I if you know, your stock prices outperformed this year when you look at it and caught a bid. But do you ever wonder about this party that is taken place elsewhere as it relates to AI and this CapEx AI super cycle and all the mega IPOs and mega financings, and mega mergers that you are not part of. And it is like, wow, we are not part of that, but we have our own area. what is what is the counterargument to that whole super cycle? Or is there enough to go around and a trickle down effect? Bill, if you have thoughts on that because you have been on both sides of that kind of, you know, Wall Street you know, mega cycle.

William S. Demchak: So many ways to answer that. I guess I would offer the following. The first is you just look at who we are and our growth rate, our EPS is what a 25% year on year. We are growing single, double digits on every line item on revenue and growing customers in a space that does not focus heavily on capital markets Yet our capital markets revenue was up 80% year on year. So, if-- are we in the middle of a deal that pays $100 million in fees, you know, no, we are not. But are we actually growing the core franchise at a pace, importantly, at a pace that is less cyclical. Than the boom you are seeing in the super cycle right now. We are. So it is an alternative to something that I think is more volatile, yet it is you know, we are we are dropping real dollars to the bottom line in a healthy economy. And gaining share as we do it.

Mike Mayo: Okay. Appreciate the answer.

Operator: Thank you. Our next question is coming from Manav Ghisalya of Morgan Stanley. Please go ahead.

Manav Ghisalya: Hey, good morning. Robert, I wanted to check-in on the trends on deposit costs So the 5 basis points improvement this quarter, it is pretty good given the environment. Have you noticed anything in terms of the trajectory as you went through the quarter? Just given the increased on deposit competition? I am wondering if you are seeing anything-- any underlying trend in the either the overall portfolio or in specific geographies on deposit costs?

Robert Q. Reilly: Yeah. So, you know, we track that obviously pretty close. We declined in terms of rate paid in the first quarter. Our outlook, we do have rate paid drifting back up to first quarter levels. that is all part of our guidance. Mostly in terms of back book repricing and some of the things that we want to do with our deposits. So you know, that is that is the track that we are on.

Manav Ghisalya: So I guess in terms of the competitive environment, I guess what do you think is driving that? Is that just the rate outlook and the fact that rate cuts have come out of the forward curve and maybe we have a rate hike or 2? Coming up. Is that the only thing that is driving it? Is there just more competition overall Can you talk a little bit more about that dynamic?

William S. Demchak: I think a couple of things. But what is happening, let's separate what is going on in wealth and corporate and assume correctly that those are competitive yields and you can kind of dial them up and down with rate. On the retail side, to the extent you are in effect a commercial bank without a retail franchise, things are really tight, right? that is where you are seeing CD rates posted brokered CDs, you know, at really high rates. If you are growing in own a good retail franchise, it is less severe. And if you look inside of what we have done in retail, you know, the growth in DDA households, the increase in balance, and the actual drop in rate quarter on quarter, but basis point. Right? Yeah. Yeah. You know, what kind of leads you to a-- you know, to a conclusion that if you are if your company's balanced here between retail and just commercial lending, you actually are in a pretty good spot, and I think we are. I do not think everybody is. And, you know, we have talked about it forever, but retail shares moving aggressively to the larger players. And it is making it more difficult to fund if you are if you are smaller and do not focus.

Robert Q. Reilly: Yeah. that is right. And I think that is why even though we do expect some increase in our rate paid, it is not dramatic.

Manav Ghisalya: Great. Thank you.

Operator: Thank you. Our next question is coming from Matt O'Connor of Deutsche Bank. Please go ahead.

Matt O'Connor: Good morning. I was hoping to circle back on the capital market revenues and I guess the fact that a lot of the revenues in the industry are being driven by some of these biggest bigger headline deals and yet your revenues were so strong. Maybe you could just remind us a little bit about what the mix is maybe kind of generally from a product point of view, size of customer, And then just also any comments on like how well it is integrated with the rest of the firm as a feeder system? Thank you.

Robert Q. Reilly: Yes. Sure, Matt. So our capital markets was up overall, but each category was up Harris Williams, which is about 40% of our capital markets business had a record quarter. But beyond that, loan syndication, Solvency, trading all up. Bryan based.

William S. Demchak: You know? And inside of their you have derivatives and FX and our share of investment grade underwriting has gone way up.

Robert Q. Reilly: it is a healthy market. We participate in it.

Matt O'Connor: And then just in terms of the interconnectivity with the other businesses, like, when we see C and I loan growth, like is that driving some of the hedging here? I mean, obviously, that would make sense, but sometimes it is different targeted customer bases.

William S. Demchak: it is all correlated and you are exactly right. Loan growth gives rise to derivative activities. Oftentimes, if it is a even in a middle market instance where there is going to be some loan and there is gonna be, which is syndicated, and there might be some bonds associated with it where inside of that also. So it is all correlated, and it is on the back of the size of the financings that are going on inside of the U.S. economy.

Matt O'Connor: Okay. Thank you.

Operator: Thank you. Our next question is coming from Gerard Cassidy of RBC Capital Markets. Please go ahead.

Gerard Cassidy: Hey, Bill. Hey, Robert.

Robert Q. Reilly: Robert.

William S. Demchak: Hey, Gerard.

Gerard Cassidy: You guys have been good over the last 2, 3 years in getting out in front of the commercial real estate story. Obviously, there was a lot of fear following the pandemic about office space and the issues around it. Your credit continues to improve in commercial real estate and now you are growing commercial real estate mortgages. Can you share with us some color, what are you guys seeing there What are the opportunities to grow that portfolio further?

Robert Q. Reilly: Yes, Gerard. So you are spot on we have worked through the commercial real estate office, portfolio, still some work to do there, but we did release some reserves. As we work through that book. As far as loan growth, inflected in the first for the first time after I do not know how many quarters of declines. And we see that continuing. In fact, the pipelines are forming in commercial real estate in a very constructive way, across all the categories. So multifamily, industrial, and retail, pipelines are all up.

Analyst: So we would expect commercial real estate to be a bigger component of our loan growth going forward.

Gerard Cassidy: Very good. Is there any data center construction loans? Just out of the area, I assume not or not many.

Robert Q. Reilly: Nothing major. Although, you may know, it is sort of any data centers.

William S. Demchak: So nothing involved in the space. You know, we have been involved in it project construction loans forever inside of the real estate space.

Robert Q. Reilly: So tangentially, but not with big risk and not big size. Yeah.

Gerard Cassidy: Okay, good. And then as a follow-up, can you share with us, obviously, FirstBank is closed, it is integrated. What were some of the positive surprises you guys discovered in that process? And then what were some of the issues that may be required extra effort that you may not have anticipated So, I do not know if there are surprises or not, but perhaps the biggest thing that we proved to ourselves was that we could do an acquisition of that size without slowing down at all the rest of the company in terms technology deployment or product rollout.

William S. Demchak: So you will notice in the middle of this whole thing, put out a new mobile banking platform. Right? So normally, you do a deal, you get a free stuff. We did not have to free stuff. Second thing was the data factory that we built patented you know, in its first form with BBVA, was even better. Inside of this integration.

Robert Q. Reilly: Third thing, I think we are the first bank correct me where I go wrong here, Robert. But ever to do the early access Yeah. Where basically people could log in and credential before you did the actual account switch.

William S. Demchak: So all of that was great. What we underestimated on this 1 was the I am just going to call it lack of digital awareness on a relative basis to our existing client base that maybe FirstBank customer had. So we had a lot of branch traffic that was there to activate a debit card or to download a mobile app and things that we otherwise might have expected would happen outside of the branch caused traffic in the branch that we underestimated and caused some confusion, and we are going to have to improve on that going forward.

Robert Q. Reilly: But all in all, it, you know, mechanically and then and the conversion is so much more than the conversion-- Yeah. Than that. Mechanics.

William S. Demchak: But mechanically, it went really well. Super proud of the team of people that you know, got this done both on the PNC side and importantly on the FirstBank side. Super proud and thankful for the employees inside the First Bank branches that went through a couple of days of real heavy volume. Heavy lifting.

Robert Q. Reilly: 1 thing to add to that Gerard too, just in terms of the financials everything that we expected in terms of you know, the price we paid, the return that we would have, the accretion. it is all there and then some. So from a financial perspective, we are in a really good place.

Gerard Cassidy: Very good. Thank you, guys.

Robert Q. Reilly: Yeah.

Operator: Thank you. The next question is coming from Ken Usdin of Autonomous Research. Please go ahead.

Ken Usdin: Hey, guys. Robert, I know you touched on the capital market strength before. And just and we see, obviously, the fee guide that you gave that would assume that is probably coming off a little bit. Bill, you mentioned the super cycle of this, and I am just wondering, you know, Robert, if you could kind of walk us through just your expectations for the fee areas that you usually give us, which is a good run through. And then just how strong do you think this capital market flow through could be? And did you see any pull forward into this really strong second quarter result from a closings perspective? Thanks.

Operator: You want me to go first with the Yes, go ahead.

Robert Q. Reilly: Well, then that sort of tells the story too.

Ken Usdin: So for the third quarter, Ken, in terms of the fee sort of component breakdowns, we did we do feel like pulled some of capital markets forward into the second quarter So the second quarter was elevated. So when you look at the third quarter guide for the fee breakdown, it is largely around the capital markets that we think probably be down about 20% quarter over quarter. The rest of the fee categories are sort of flattish to up depending on sort of what happens with market conditions, but that is the big driver to get it to down the 5.5% that we talked about.

William S. Demchak: And just an aside, I mean, it is a net like, you come off a record quarter and everybody looks at the activity and says, we cannot do that again. Right. So-- so we knocked down our estimates going into the third quarter.

Robert Q. Reilly: You know, it is it is a handful of big deals. That show up that Yeah. Cause a difference that is right. You know, inside of the size of deals that are getting done in this. You know, in this market. that is our best guess for now, and, well, for the third quarter, but then for the full year. So if you just sort of dial it back for the full year, asset management is having a great year with the equity markets up. So they are up high. Single digits. Capital markets for the full year You know, we will be up close to 25% to 30% year over year that is in our guidance. Card and cash management, mid to high single digits Lending and deposit services, mid single digits. And then mortgage, just to round it out, probably flattish to down depending on sort of hedge gains and sort of how that works out.

William S. Demchak: So The guide the guide on capital markets, I mean, just to be clear, it is volatile.

Robert Q. Reilly: that is right. Yeah.

William S. Demchak: You know? And so Especially in a 90-day period. Yeah. Yeah.

Ken Usdin: But we are Scott? Sorry? Let's just say we are in the right places. We are in the right deals. Right? We are winning business. So it is kind of a function of what is actually happening in the broader market. Yeah. Exactly. that is why I am I am pointing to that point, which is that it just seems like the, you know, potential for this type of, you know, result to continue seems pretty good. So thanks for that color. Thanks, guys.

William S. Demchak: Sure.

Operator: Thank you. The next question is coming from David Schieterini of Jefferies. Please go ahead.

David Schieterini: Hi, thanks for taking the questions. Can you give us an update on sensitivity to rates on NII, if we get a hike or 2, what would that impact be?

William S. Demchak: Very small in 26. And we said it for a while, we are sort of in a neutral position to rates, 25 basis points up or down. Very little impact to 26. As you go forward, it becomes function of how the rest of the curve reacts where they would raise rates. But within the range that we would otherwise contemplate there is still a healthy pickup next year just because of the continued repricing.

David Schieterini: Got it. Thanks for that. And over to capital CET1 at 9.9%. You mentioned the buyback in the third quarter should be similar to the second quarter level. Is this 9.9% kind of the new, or comfort range, that you guys would point to?

William S. Demchak: Yes, I think so. We have said 10%. We were actually very close to ramping the 10%, but we rounded down to 9.9%. But our operating target is around 10% and that is where we expect to be.

David Schieterini: Thanks very much.

Operator: Thank you. The next question is coming from Saul Martinez of HSBC. Please go ahead.

Saul Martinez: Hi, good morning. Thanks for taking my question. Back on loan growth, is there I mean, do you guys feel like there is an element of conservatism being built into the second half guidance of, you know, roughly in line with nominal GDP growth. I get the comments about pull forward, but everything else you are talking about seems pretty constructive. The utilization rates kind of ticking higher, economy doing well. CRE returning to growth, M and A financing. Is there, you know, is the bias you know, if you are gonna be wrong more to the upside? Just curious how you know, if that is you think that is a logical conclusion?

Robert Q. Reilly: Got it.

William S. Demchak: I would say-- Hey, Bill, you want me to re-guide the guide? Robert? Yeah. I am just saying our guide is our guide and that is what we have we have guided to lower numbers, then they come in higher. We have guided to higher numbers that come into lower. So the guide is the guide. I think that the only thing I am comfortable in saying is if there is loan growth across the economy, we will get more than our fair share simply because of the newer markets we are operating in the share growth. But it is become so hard to predict what is happening with loan growth. We kind of you know, pick a real simple base case and hopefully outperform.

Saul Martinez: Got it. Okay. Fair enough. And then, I mean, nobody asked about credit anymore. You know, for good reason. We have obviously been, you know, really strong. I mean, are there are there areas that you are monitoring your you know, that where you see there are vulnerabilities and even if it is not a big part of your portfolio, where do you think there either from a sector standpoint, product your income categories. where do you feel like there is a more fragility?

Robert Q. Reilly: You know, I would tell you, I mean, overall, credit quality is very good on both the consumer side and the commercial side. And we do not see any big pockets forming. We follow sort of the pressures in the healthcare industry. there is pressures in the distillery sector. there is some pressures in transportation around fuel costs, those sorts of things. All the things that you read about and are well aware But I would not say there is any big pocket or anything that particularly worrisome beyond that.

Saul Martinez: Okay. Got it. Thank you.

Operator: Thank you. Our next question is from Chris McGratty of KBW. Please go ahead.

Chris McGratty: Great. Thanks. Hope I did not miss it, but any comment on credit spreads over the past 3 months with improving loan growth? Thank you.

Robert Q. Reilly: Sorry. I did not catch that. Did you Credit spread.

William S. Demchak: Oh, sorry, Chris.

Chris McGratty: Credit-- just a comment on credit spreads.

William S. Demchak: Now we are not seeing a lot of competitive pressure on the spreads. We are seeing some spread change relative to the mix change. Of higher credit quality, lower spread loans into our portfolio. But, you know, apples to apples spreads are, you know, pretty similar quarter over quarter.

Operator: Thank you. Our next question is a follow-up coming from Erika Najarian of UBS. Please go ahead.

Erika Najarian: I promise this is not about NIM or loan growth. Quick follow-up. Some stuff now. So, well, it is good. it is good. There was a news article last week about banks including PNC potentially being interested in a debit card network. And I am just wondering, of course, you are not gonna comment on any live deals, but what a debit card network or how a debit card network could be beneficial to PNC And, you know, do you have any sort of notion on how difficult it is to convert a PIN network to signature.

William S. Demchak: We are not going to comment. Yeah. Particularly, Joe.

Robert Q. Reilly: I think it is a safe assumption hypothetically that the work effort associated with a conversion like that would be pretty material. Leave it at that.

Erika Najarian: Got it. Thank you.

Operator: Thank you. At this time, I would like to turn the floor back over to Mr. Bill for closing comments.

Bryan K. Gill: Okay. Well, thank you all for joining our call this morning, and please feel free to reach out to the IR team if you have any further questions.

William S. Demchak: Thanks.

Robert Q. Reilly: Everybody.

Analyst: Thank you. Thank you.

Operator: Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines or lock off the webcast at this time. You for your participation