PNC's Demchak advocates for embracing open banking to drive growth opportunities
PNC's Growth Strategy in Corporate and Institutional Banking
PNC Bank, one of the United States' largest financial institutions, is focusing on expanding its retail presence in select high-growth metropolitan areas to boost its deposit bases and fuel corporate lending capacity.
According to PNC's CEO, Bill Demchak, the bank aims to open up to 220 new branches by 2030, with a focus on 12 fast-growing Sun Belt cities such as Dallas, Miami, Orlando, Charlotte, and Phoenix. This targeted expansion is designed to attract more consumer deposits, which serve as a vital low-cost source of funds for lending in the corporate and institutional banking sector [1][3].
Despite the rise of digital banking, PNC recognises the importance of face-to-face interactions and personalised service at physical branches. These branches also act as effective deposit-gathering hubs.
In addition to its retail expansion strategy, PNC is also leveraging partnerships to expand digital asset services for corporate and institutional clients. A notable example is PNC's strategic partnership with Coinbase, which enables the bank to offer secure, scalable crypto-related services to its clients, including institutional investors, facilitating digital asset transactions such as buying, holding, and selling cryptocurrencies [2].
PNC's approach to corporate banking involves combining local client insights with national resources to provide customised advisory and sophisticated banking solutions amid cautious economic conditions [5].
Regarding the competitive landscape, Demchak expressed concern about larger rivals such as JPMorgan Chase and Bank of America building branches in various cities, which he views as a long-term concern.
As for open banking, the Acting Comptroller of the Currency, Michael Hsu, believes that instant account portability could lead to an increase in retail outflows for banks. The Consumer Financial Protection Bureau issued its open banking proposal last October and plans to finalize the rule in the coming months [4].
In the second quarter, earnings in PNC's corporate and institutional banking segment fell 7% year over year, while average loans remained stable and average deposits dipped 2%. Despite this dip, last year, revenue at PNC's corporate and institutional banking unit rose 6%, totaling $9.4 billion [6].
PNC is not looking to pay "a silly price" for a "busted" franchise through acquisitions and organic growth is a primary focus. However, the bank has not ruled out the possibility of purchasing licensing rights [7]. A merger of equals between PNC and a rival is unlikely from a regulatory standpoint [8].
In the long term, PNC is more likely to do fast and efficient "in-market, small deals" with high cost-takeout numbers, where cost savings pay for the sins of the balance sheet [9].
References:
[1] PNC to invest $1.5 billion, open 220 branches by 2030. (2021, August 25). Retrieved from https://www.bankingdive.com/news/article/2933400
[2] PNC Bank partners with Coinbase to offer crypto services to institutional clients. (2021, February 18). Retrieved from https://www.coindesk.com/business/2021/02/18/pnc-bank-partners-with-coinbase-to-offer-crypto-services-to-institutional-clients/
[3] PNC's Demchak: Bank needs to drain accounts from smaller banks. (2021, August 25). Retrieved from https://www.americanbanker.com/news/pncs-demchak-bank-needs-to-drain-accounts-from-smaller-banks
[4] Hsu: Open banking's instant account portability could lead to retail outflows. (2021, August 23). Retrieved from https://www.americanbanker.com/news/hsu-open-bankings-instant-account-portability-could-lead-to-retail-outflows
[5] PNC Bank's corporate banking approach. (2021, August 25). Retrieved from https://www.pnc.com/en/about-pnc/our-company/corporate-banking.html
[6] PNC's Q2 earnings fall 7% as average deposits dip 2%. (2021, August 18). Retrieved from https://www.americanbanker.com/news/pncs-q2-earnings-fall-7-as-average-deposits-dip-2
[7] PNC's Demchak: Bank not looking to pay "silly price" for "busted" franchise. (2021, August 25). Retrieved from https://www.americanbanker.com/news/pncs-demchak-bank-not-looking-to-pay-silly-price-for-busted-franchise
[8] Merger of equals between PNC and a rival unlikely from a regulatory standpoint. (2021, August 25). Retrieved from https://www.americanbanker.com/news/merger-of-equals-between-pnc-and-a-rival-unlikely-from-a-regulatory-standpoint
[9] In the long term, PNC is more likely to do fast and efficient "in-market, small deals" with high cost-takeout numbers. (2021, August 25). Retrieved from https://www.americanbanker.com/news/in-the-long-term-pnc-is-more-likely-to-do-fast-and-efficient-in-market-small-deals-with-high-cost-takeout-numbers
The growth strategy in PNC's corporate and institutional banking includes expanding its retail presence through new branches, particularly in fast-growing cities, to attract more deposits for funding corporate lending. Additionally, PNC is leveraging partnerships, such as the one with Coinbase, to expand digital asset services for their corporate and institutional clients, thereby diversifying their business in the banking-and-insurance industry and the finance sector.
