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PNC Financial Services is ratcheting up its allowance for credit losses amid the industrywide trend of dwindling delinquency rates in the first half of 2020, the company announced in its earnings call today. PNC bumped up its ACL on auto accounts by 60 basis points (bps) in the second quarter to 2.79% of total outstandings, which increased year over year to $16.2 billion from $15.6 billion. The ACL increase was a result of “updated economic forecasts, which incorporated a significant COVID-19 impact on the economy,” said Robert Reilly, chief financial officer at PNC, noting the full extent of credit losses in the next year remains unknown.
“While our pre-provision results for the second quarter were good in the context of a lower rate environment and business headwinds, the uncertainty in the economy related to the pandemic resulted in a substantial loan loss reserve build,” said Bill Demchak, president and chief executive of PNC. PNC delinquencies 30-69 days past due decreased 38 basis points (bps) to 0.65% of loans outstanding from last quarter. Loans with delinquencies of 60-89 days similarly dipped 7 bps to 0.21% of outstandings. Accounts that were 90 or more days delinquent, in contrast, inched up 1 basis point to 0.12% of loans outstanding. Approximately 10% of PNC’s auto lender portfolios are still in stages of deferral, a total of $2.1 billion in principal balances, according to the earnings statement. PNC offered various deferral programs to assist with pandemic-related consumer financial hardship, but those programs expired at the end of June. Dips in delinquent account rates have been common in second-quarter earnings reports; Wells Fargo reported similar drops in line with a spike in financial assistance initiatives. Payment assistance programs are still provided on a case-by-case basis, Reilly said. “With our consumer customers, we’re granting loan modification through extensions, deferrals and forbearance.” However, weekly requests for payment extensions have declined by an average of 97% since the initial peak in mid-April, he added. PNC does not disclose details on auto loan originations, a company spokeswoman confirmed with Auto Finance News. Total consumer loans in PNC’s portfolio, however, decreased $1.9 billion, or 2%, primarily in auto, credit card and home equity loans. Shares of PNC [NYSE: PNC] were trading up 2.68% to $104.07 at market close. The Pittsburg, Pa.-based bank has a market capitalization of 44.15 billion. Originally published on Auto Finance News
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