Welcome to today's conference call for The PNC Financial Services Group. Participating on this call are PNC's Chairman, President, and CEO, Bill Demchak, and Rob Reilly, Executive Vice President and CFO. Today'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 materials are all available on our corporate website, pnc.com, under Investor Relations. These statements speak only as of July 14th, 2021, and PNC undertakes no obligation to update them. Now, I'd like to turn the call over to Bill.
Thanks, Bryan, good morning, everybody. As you've seen, we accomplished a lot in the second quarter. Most important was the closing of the acquisition of BBVA USA on June 1st. Obviously, this created a fair amount of noise in our reported results, adding one month of BBVA USA operating results and the impact of purchase accounting adjustments, as well as merger-related impacts.
Rob's going to take you through all that in a couple of minutes. Putting those things aside, we had a pretty good quarter driven by solid net interest income, strong fee growth, continued improvements in credit quality, and announcement of higher capital returns.
While loans increased primarily due to the acquisition, we did have spot loan growth in both consumer and C&I in the legacy PNC balance sheet. We've seen loan utilization rates stabilize within our corporate institutional banking business.
However, they remain near historic lows. While new loan approvals have rebounded actually to the highest level in a couple of years, that's been offset by continued pay-downs. Within the PNC legacy consumer book, we saw loans grow in the quarter, which was encouraging, and we're confident that strong economic growth is ultimately going to drive strong loan growth.
It remains an open debate as to the timing of that loan growth relative to the second half of 2021 and into 2022. During the quarter, we continued to deploy excess liquidity through $10 billion of net security purchases. Going forward, and considering the significant recent rally in treasuries, we'll be disciplined as we look to reduce our elevated cash position. You saw that our recent CCAR results underscore the strength of our balance sheet and our commitment to returning capital to our shareholders.
Following the results, we announced a 9% increase in our quarterly common stock dividend and a $2.9 billion share repurchase program. Importantly, we're well-positioned with substantial capital and liquidity to continue to support our customers and invest in our businesses. Regarding BBVA, I couldn't be more pleased with where we are.
PNC and BBVA employees have hit the ground running and are making great progress in preparing for a successful conversion and integration. The deal significantly expands our footprint, gives us access to 29 of the top 30 MSAs across the country with a coast-to-coast franchise, and it provides us with an opportunity for growth for years to come.
All of our original deal metrics are the same or better than we estimated. Rob's going to take you through those. Finally, the underlying growth opportunities in the new markets are outstanding.
Across this footprint, employees are making joint calls, and we are seeing deal pipelines build, especially as we present our enhanced capabilities and scale to the new markets. We continue to believe the revenue synergy opportunity is significant as we look to drive BBVA USA's non-interest income contribution to total revenue closer to legacy PNC's mid-40% level.
On the integration front, we're leveraging our past investments in technology and automation to expedite the process, drive synergies, and reduce complexity. We're moving the data for more than 600 BBVA USA applications to PNC applications, taking a lift and shift approach that allows us to simplify the customer conversion. I also want to mention that our continued rollout of Low Cash Mode, which was available to 2.5 million Virtual Wallet customers as of the end of June.
We're planning to roll it out to the remaining 1.1 million Virtual Wallet customers by the end of this month and look forward to making it available to BBVA customers upon conversion later this year. Since announcing the product in April, we've delivered over 10 million Low Cash Mode alerts and have seen strong engagement with the experience as it helps to address a major frustration for many of our customers across the industry.
Over time, we expect it to drive significant growth in new and existing customer relationships as we execute our national expansion strategy. Finally, I'd like to close by thanking our legacy PNC and the new BBVA USA employees for all their hard work that allowed us to close this deal early and prepare for conversion and long-term success. With that, I'll turn it over to Rob for a closer look at our results, and then we'll take your questions.
Thanks, Bill, and good morning, everyone. Bill just mentioned, and notable during the second quarter, we successfully completed our acquisition of BBVA USA, significantly expanding our footprint, which now includes growth markets throughout the Sun Belt region. Our balance sheet is on slide four and is presented on a spot basis.
While we typically cover our average balance sheets, we'll focus this quarter on spot balances due to the timing of the June 1 closing of the acquisition. Overall linked quarter balance sheet growth was driven by the acquisition, of course, which contributed $60 billion in loans, $18 billion of investment securities, and $82 billion of deposits at quarter end.
Excluding those additions during the quarter, legacy PNC loan balances declined $3 billion, investment securities increased $10 billion, and deposits declined by $4 billion. I'll cover the drivers in more detail over the next few slides.
We ended the quarter with a tangible book value of $93.83 per share. An estimated CET1 ratio of 10%, substantially above the levels we anticipated at the time of the deal announcement. As a result, we're well positioned with significant capital flexibility. As Bill just mentioned, we recently announced a $0.10 increase to our quarterly cash dividend on common stock, raising the dividend to $1.25 per share.
Additionally, we reinstated our share repurchase programs of up to $2.9 billion for the four-quarter period beginning in the third quarter of 2021. Slide five shows our period-end loans and deposits accounting for the acquisition and highlighting the relative contributions. Total loans were $295 billion at quarter end. With the acquisition, our loan mix remains consistent at approximately 2/3 commercial and 1/3 consumer. Total deposits were $453 billion at June 30.
Our rate paid on interest-bearing deposits is now 5 basis points, a 1 basis point decline linked quarter. Taking a closer look at loans, commercial loan balances of $200 billion increased $35 billion. BBVA contributed $39 billion, and spot PNC legacy growth of approximately $1 billion was offset by a $4.5 billion decline in PPP loans.
Consumer loans were up $23 billion, represented by $22 billion of acquired loans, as well as growth in legacy PNC consumer loans, primarily in the residential real estate portfolio. The yield on loan balances was stable at 3.38% compared to the first quarter, and reflected the combined loan portfolio. Slide six details the change in our spot securities and Federal Reserve balances over the past year.
Securities balances were $127 billion at the end of the second quarter, a $28 billion increase linked quarter due to the addition of $18 billion of securities from the acquisition and $10 billion in net purchases. Our Fed cash balances decreased $14 billion linked quarter, reflecting continued deployment into securities, and the payment of $11.5 billion for the acquisition.
Despite the linked quarter decline, our liquidity position remains in excess of our LCR requirements. As you can see on slide seven, our second quarter income statement includes the impact of the acquisition. Our reported EPS was $2.43, which included an initial provision for BBVA USA of $1 billion and integration costs of $111 million.
Adjusted for these items, EPS was $4.50 in the second quarter. Second quarter revenue was $4.7 billion, up $447 million compared with the first quarter, reflecting the acquisition as well as strong organic fee growth.
Expenses increased $476 million or 18% linked-quarter, including $181 million of significant items related to integration expenses and litigation reserves, as well as one month of BBVA operating expenses and higher legacy PNC business activity. The provision of $302 million included a provision recapture of $704 million related to improved credit quality and macroeconomic factors, as well as balance reductions, which was more than offset by $1 billion initial provision in connection with the acquisition.
As a result, total net income was $1.1 billion in the second quarter. Let's discuss the key drivers of this performance in more detail. Turning to slide eight, these charts illustrate our diversified business mix, with non-interest income representing 45% of total revenue in the second quarter.
Net interest income of $2.6 billion was up $233 million or 10%, and net interest margin of 2.29% was up 2 basis points, both of which reflect the impact of the acquisition. Second quarter fee income of $1.6 billion increased $229 million or 16% linked quarter.
Within that, legacy PNC fees grew by $167 million, and BBVA USA's one month of operations contributed $62 million. Taking a more detailed look at the performance in each of our fee categories, asset management revenue increased $13 million or 6% as a result of higher average equity markets.
Consumer services fees grew $73 million or 19%, primarily due to increased transaction volume and higher merchant services revenue. Corporate services increased $133 million or 24%, driven by higher M&A advisory activity and treasury management product revenue. Service charges on deposits grew $12 million or 10% due to the addition of BBVA USA.
Other non-interest income of $468 million declined $15 million linked quarter, and included a negative Visa derivative adjustment, lower securities gains, as well as higher private equity revenue. In total, non-interest income of $2.1 billion increased $214 million or 11% compared to the first quarter, driven primarily by legacy PNC fee growth as well as $80 million of non-interest income from the acquisition.
Turning to slide nine, our second quarter expenses were up by $476 million or 18% linked quarter, and included $181 million of significant items related to integration expenses and the addition to legal reserves.
The remainder of the increase was driven by BBVA's one-month operating expenses of $179 million, as well as increased business activity and marketing for legacy PNC. Obviously, with the acquisition, our operating expenses are going to be higher going forward. Nevertheless, we remain disciplined around our expense management.
As we previously stated, we have a goal to reduce PNC standalone expenses by $300 million in 2021 through our continuous improvement program, and we're on track to achieve our full year target. Additionally, we're confident we'll realize the full $900 million in net expense savings of BBVA USA's expense base in 2022.
Our credit metrics are presented on slide 10 and reflect the impact of the acquisition. Apart from the addition of the acquired loans, credit performance improved considerably within the legacy PNC portfolio. Non-performing loans were $2.8 billion at June 30th, and $871 million were related to the acquired loans.
PNC's legacy non-performing loans declined $230 million due to decreases in both commercial and consumer. Total delinquencies were $1.3 billion at June 30th, of which the acquisition impact was $291 million. Legacy PNC delinquencies declined $147 million.
Net charge-offs for Legacy PNC were $58 million, the lowest level since 2007, with an annualized charge-off to total loans ratio of 10 basis points. Acquired loan net charge-offs were $248 million, which was largely a result of required purchase accounting treatment for the acquisition. Slide 11 shows the change in our allowance for credit losses during the second quarter.
Within our legacy portfolio, we released reserves by approximately $700 million related to both improved credit quality and macroeconomic factors. Upon closing the acquisition, we established a $2.2 billion ACL for the acquired loans, or 3.5%, through fair value loan marks of $1.2 billion related to purchase credit-deteriorated loans and an initial provision of $1 billion related to non-PCD loans.
The initial BBVA USA ACL to total loans of 3.5% was subsequently reduced to 3.1% at the end of the quarter as a result of portfolio changes. In total, as a result, our total quarter year-end reserves for the combined entity were $6.4 billion, representing 2.16% of consolidated loans outstanding.
Turning to slide 12, now that we've closed the BBVA USA acquisition, I wanted to provide an update to some of the deal metrics, all of which are the same or have improved since our deal announcement. As you know, the purchase price was an all-cash fixed price and was approximately $11.5 billion at closing.
As I've already mentioned, tangible book value per share and the CET1 ratio are favorable relative to our original expectations. We continue to project an internal rate of return in excess of 19%, earnings per share accretion of more than 20%, and an annualized expense reduction of $900 million in 2022.
Additionally, our expectations for non-recurring merger and integration costs is approximately $980 million, the majority of which we expect to be recognized in 2021, consistent with our initial expectations. Taking a look at the credit metrics, these have all improved since we've announced the deal, and as a result, the ACL to total loans for BBVA USA is better than our original expectations.
In addition, and as anticipated, our net purchase accounting adjustment is nominal, with a net fair value premium of $322 million, the majority of which will be amortized over the next several years. For the second quarter, due to the maturity of some short-dated acquired assets, we realized a $30 million benefit to net interest income, which will not recur. In summary, PNC reported a strong second quarter, highlighted by the successful acquisition of BBVA USA.
We expect this transaction to add significant value to our shareholders as we begin to realize the potential of the combined franchise. In regard to our view of the overall economy, our current expectations are for GDP to surpass pre-recession levels sometime during the third quarter, and for the Fed funds rate to remain near zero throughout 2021.
Looking at the third quarter of 2021, which will now include a full quarter impact of BBVA USA's operations compared to the second quarter of 2021, we expect total spot loan balances to be up modestly, which includes a $3.5 billion decline in PPP loans.
On a percentage basis, we expect NII to be up in the mid-teens. We expect fee income to be up in the mid-single digits. We expect total non-interest expense, excluding integration expenses, to be up in the high single digits.
We expect other non-interest income to be between $325 million and $375 million, excluding net securities gains and Visa activity. We expect third quarter net charge-offs to be between $150 million and $200 million.
For annual guidance, taking into account our first half operating results and the addition of six more months of BBVA USA forecasted operating results, plus our expectation for modest loan growth in the second half of the year, we expect revenues to be up between 12%-14% and expenses, excluding integration costs, to be up between 13% and 15% for the full year 2021 compared with PNC standalone 2020.
We acknowledge some upside exists in spot loan growth during the second half of the year, but that remains to be seen, and as a result, is not included in our guidance. With that, Bill and I are ready to take your questions.
Thank you. At this time if you would like to ask a question please press the number one followed by the number four on your telephone keypad. Please hold while we compile the Q&A roster. Your first question comes from the line of Betsy Graseck with Morgan Stanley. Please go ahead.
Hi, good morning.
Hey, good morning, Betsy.
It's great to see the loan growth start to pick up here. The first question I have is just on how we should think about the loan growth in your book now that BBVA has come in. Is there going to be a churn period here where you've got some loans in that book that you're likely to be exiting and then growing through that churn? Would you suggest that that's not really big enough to matter when we're thinking about the loan growth?
At the margin it's going to matter, but it's extended over a bunch of years. We're not going to sell portfolios .
Rapid exit.
Rapid exit. Through time we will mature things and those balances will likely run off from certain industries as we grow balances from other target industries. That stretches over two, three, four years.
Okay, great. All right. Separately, your Harris Williams business obviously is already national, but does the BBVA footprint that you've added now do anything for them and their business with middle market?
At the margin, right? It just adds a larger network of potential clients and conversations. Yes. Now they obviously are in all of these markets to some extent already, but now we have more clients and we'll therefore have more dialogue. I would expect it will help.
Yeah. That's for sure. We'll be able to introduce our new commercial clients through BBVA USA to Harris Williams if they haven't already been introduced.
Yeah.
Great. Yeah, no, that was a really strong result from them this quarter. Just lastly, the dividend hike that you recently announced. How do you think about that from the perspective of payout ratio? I'm just wondering, should we expect that your full run rate of the BBVA USA expenses coming out is already in your earnings outlook when you were thinking about setting that dividend up?
I'm trying to think of a simple way to answer this. Long story short, there's room on the dividend on our forward income. We were in a bit of a fire drill because we managed to close the deal a month sooner than we thought, which meant that we kind of had CCAR results and the deal closed, which then threw us into the fire drill to figure out what we could do. I'm not going to say in a hurry, but on short notice, which is what we did.
An acceleration.
Acceleration of kind of what we'd thought. There's room on that certainly as we go forward, and we just thought it was important to get something done and not miss this cycle, which is what we acted on.
Okay.
I'm sorry. We've said for years that we expect with this model and this business mix that a 40%-50% payout ratio on the dividend is our target range.
Okay, great. All right. Yeah, no, that was my gut feel that there was room there. Appreciate that commentary. Thanks so much.
Sure.
Thank you for your question. Up next, we have a question from the line of Bill Carcache with Wolfe Research. Please proceed with your question.
Thank you. Good morning, Bill and Rob.
Hey. Good morning.
You guys have made impressive progress in your national expansion strategy. As you look ahead, how integral is the acquisition of additional branches to your furthering your national expansion on paper? It's easy to do a traditional analysis where you look at PNC's revenues per branch and BBVA's revenues per branch to isolate the opportunity to improve productivity and what that would mean in terms of incremental revenues per branch.
When you try to sell the idea of acquiring additional branches to generalists, there's a natural pushback on why those branch acquisitions are necessary in the first place given what we're seeing with the digitization of the business.
RBC is a great example where we saw your branch count rise sharply in 2012 before falling significantly for the better part of the next decade. How important was it to acquire those branches to begin with? I know there's a lot there, but was hoping you could speak to that point in general.
I wouldn't focus so much on branches as I would on clients. In the future, could you see us do smaller deals in market to gain greater share? Possibly. Now the values today just seem way too high to me, but possibly.
The purpose of that wouldn't be to get branches per se. Instead it would be to get clients and then we would optimize the branch network as we did with RBC after the fact.
Some natural conversion to solution centers from traditional branches which we, as to your point, Bill, we've been doing.
Right. Understood. Separately, with the curve having flattened a bit since your comments last quarter, has there been any change to your thought process around deploying a larger percentage of your liquidity into securities?
Within that, how worried are you about giving up some of your future asset sensitivity in exchange for the near term NII benefit? We're hearing different philosophies from different banks, but would just love to get your thoughts.
I guess first off, as you saw, we went at it pretty aggressively before we saw the big rally here. We still have a lot of liquidity. We barely put a dent in our liquidity even after writing the check for BBVA, so we're still very asset sensitive. Having said that, the recent rally's going to cause us to slow down and be more tactical than we had been during the last quarter, and we'll watch how this plays out.
I personally believe that the current rally is way overdone and I don't fully understand it. We're likely to, or not likely, we will slow down relative to what we saw in the last quarter.
Our expectations of that are built into our guidance.
Yeah.
Got it. If I could squeeze in one last one. I wanted to ask if you could look ahead a bit longer term at the opportunity to drive efficiency improvements. If the forward curve is right and we get one hike around the end of 2022 and another in the middle of 2023 and assume no further steepening. There are a lot of moving parts there, but could you just speak to your confidence level in being able to drive your efficiency ratio into that sort of high 50% range?
The math takes you there. The question is simply a function of when we look out to 2022, a function of a tailing integration cost as to whether you see it, what period of time you'll actually see it. The math takes you there once we get the cost out of the BBVA franchise and what we would expect that revenue environment to look like.
Great. Thank you for taking my questions.
Thank you. And up next, we have a question from the line of Mike Mayo with Wells Fargo Securities. Please go ahead, sir.
Hi.
Good morning, Mike.
I guess I have a short-term question and a long-term question. The long-term question is, what inning are you in your tech transformation? You spent seven years at getting your common infrastructure together, and that prepares you well for the BBVA integration.
That's kind of the good news and what inning are you in. I think the bad news is you're guiding this year for slightly negative operating leverage, the last slide. I know you don't like having that and why is that worse than expected when you should be having some synergies from BBVA? Thanks.
You want me to do the short-term one? I'm glad you asked that question, Mike, because at first read you might conclude that, but that's not what we're saying. What we're saying in the guidance for full year with revenue's percentage is going up less than expense percentage, that's simply the overlay of the BBVA USA acquisition six months into our results.
They have a higher efficiency ratio. If you think about it, that's largely the opportunity there. PNC standalone, we said at the beginning of the year it was going to be stable. We were going to fight for positive operating leverage halfway through. Revenue's up low single digits. Expenses are up low single digits. We're still fighting. As I mentioned in my comments prior to the Q&A, we're going to keep fighting. I don't know if you want to do long term.
Do you follow that, Mike? I mean, it's simple. We layered on a less efficient organization on top of us, and it's causing the math to be what it is.
Okay.
The legacy PNC business is kind of on target for what we said. The opportunity set is to drive the new organization.
PNC level.
Our level of efficiency. Yeah. Or better.
Okay. Then the long-term question.
Yeah. The issue on technology, I mean, think about, look, we're 80% of the way along where we would like to be in terms of what I would just call a modern platform across everything from data centers to the way we develop to the way we do automated testing and deploy and so on and so forth. We're pretty far along.
I think what happens down the road with technology is much more about client-facing technology and the ability to compete effectively in the new ecosystem of fintechs and where payments are going and all of that stuff. We're prepared for that. We're going to invest hard into that. We have the core technology behind us to allow us to play in that space, but that's where the fight's going to be. I think that game's just getting started.
And-
Well, sorry to extend the metaphor, the game's going into extra innings. Technology's going to be around for a while.
Yeah. Where do you think, I mean, I appreciate a number like 80% on building a modern platform, but again, after seven or eight years of doing that, where do you think the average bank is in that transformation? Because you've been talking about this more than others.
Look, I don't have an informed view. It's hard to figure out what other people are actually doing. If I just think about our ideal state compared to where we are, PNC's ideal state might be different than what somebody else aspires to. I still see us with certain applications that need to be re-engineered to kind of be plug and play through API.
Other people may or may not care about that. We're playing our own game. Our goal obviously is to be able to use technology as an advantage, not just in terms of cost, but also in terms of speed of market and creativity as to what we can offer to clients.
We're well on our way.
Yeah.
Okay. Thanks a lot.
Yeah.
Thank you for your question. Now we have a question from the line of John Pancari with Evercore ISI. Please go ahead, sir.
Morning.
Hey, John.
Hey, John.
I want to see if you can give a little more color on loan demand, particularly on the commercial side. Are you starting to see any signs of CapEx activity beginning to influence line drawdowns? If you are, where and what areas are you seeing some strength and in what borrower segments? Thanks.
Yeah. Hey, John, it's Rob. I can give you a little bit of color there. Generally speaking, utilization rates were up a little bit quarter-over-quarter, though not much. Where we are seeing continued growth that we started to see as green shoots in the first quarter is in our business credit asset-based book.
Real growth there that is encouraging because that tends to be a leading indicator of loan demand. That's largely where we've seen the growth. On the margin, we would expect to see in terms of getting to where, s trong loan growth with becoming more utilization across the general middle market book which is yet to show up.
The good news inside all that is we're actually winning a lot of clients, and we're extending facilities at a pace beyond where we've been for a bunch of years. The problem is they're just not drawing under it.
Credit facilities, right.
Yeah. We're in a good place for when loan demand comes back, and we continue to grow client share. You see that, by the way, in the fee growth that we're getting through TM and other stuff.
Activities picked up.
Yeah.
Okay. Great. No, thanks. That's helpful.
We've definitely advanced in the first quarter. Yeah.
Right. Got it. Then on the M&A front, I know you're still digesting the BBVA deal and everything. As you look at other markets, are there any other markets geographically that you think a deal would make sense to give you a more critical mass, just like you looked at the Southeast that way?
I just wondered if you could talk a little bit about your footprint and how you think about that. Then separately, Bill, I'm curious what your take is on President Biden's executive order particularly implying more scrutiny around bank mergers. Does that change how you think about deals? Thanks.
Yes to the second. The first issue, you should just assume that we look at all the same stuff that you do. I'm not going to give you an area of the country. We look, and you've seen us through time make decisions based on value creation for shareholders. That may or may not mean additional geographies. It may or may not mean filling in an existing geography.
It will very likely mean we'll continue to do small add-on acquisitions that give us product capability for clients. The executive order on looking at competition amongst banks, as a practical matter what would actually have to change for the bank approval process to change would be more about the Fed's rules on approving mergers than I think it would be coming out of President Biden's order.
I'm not expert on it, but I think it is safe to say that a larger deal in today's environment would get much more political scrutiny and noise than we did with the BBVA deal. That weighs on us.
Got it. All right, thanks. That helps.
Thank you for your question. We now have a question from the line of Scott Siefers with Piper Sandler. Please go ahead, sir.
Morning, guys. Thanks for taking the question.
Hey, Scott.
Maybe Rob can sort of back into things based on the guidance, but just would be curious to hear your thoughts on how the net interest margin rate moves from here. Just lots of moving parts between shifting some of the cash and securities, layering a full quarter BBVA, and then we've got the fair value premium amortization as well. Any thoughts there would be appreciated.
Yeah. No, that's a lot there, Scott. Back in the first quarter, we said we called a trough in NIM. We're still holding that. I do think NIM will drift higher not necessarily by a lot, but I think we've seen the bottom.
Okay, perfect. Just on the reserves. I think sort of pre-adjustments that were made for COVID, but post-CECL adoption, I think you guys were around a 145-ish reserve. Is that a good number to assume you'll gear down toward even with BBVA now in the mix?
Well, our day one was 154, not 145. That was PNC, Scott.
Okay. Sorry. Yep.
Yeah. Then if you do some of the math, you blend in BBVA day one, we're going to be a little bit higher on that on average. As we've said, the answer to that question all along has been if you consider those times normal, back to normal would be somewhere in that neighborhood.
Yeah. Okay, perfect. All right.
Sure.
Good. Well, I appreciate the thoughts.
Thank you. As a reminder, if you wish to register for a question, please press the number one followed by the number four. We now have a question from the line of Gerard Cassidy with RBC. Please go ahead, sir.
Thank you. Good morning, Bill. Good morning, Rob.
Hey, Gerard.
Bill, can you share with us when you think back to the National City deal and the RBC deals that you guys did over 10 years ago, and I grant that they're different than the BBVA deal. Obviously that experience has given you confidence on this deal.
Can you share with us when do you think the BBVA gets fully integrated based upon the experiences that you guys have with those prior two deals? Is it three years out, four years out? How long does it really become seamless where you can't tell, everything's running very smoothly?
There's a lot embedded in that question. The basic service structure. What happens in a branch, the applications, the product delivery, all of that stuff basically will be done by the end of this year, right? The real question then becomes how do we get the client penetration and growth rates in the newer markets, the fee penetration to grow to legacy PNC markets? What we found in RBC is in some of those newer markets that took somewhere around three years, I guess, Rob. We expect it'll be faster
Today, first because BBVA actually had a reasonable book of business that we could cross-sell into immediately. Secondly, we just have a better playbook. We've been at it for a while. We have the teams built today. They're calling today. I generally would expect
Yeah. I think it'd be a little faster, and I think the receptivity to the PNC brand is probably a little more than it was a few years ago, so that helps too.
Very good. I apologize if you addressed this already in your comments, but Bill and Robert, do you guys have any timing on the share repurchase program? I think you said it's going to be over four quarters, but I know there's no restrictions now like the old CCAR test.
Right
You guys had limits on how much you could buy. Have you given any thought on how you want to calibrate the repurchases?
Well, we're going to do it opportunistically, Gerard. We will do it. Ideally, we'll put together like we always have some autopilot program, and then on top of that, some discretionary piece, and the discretionary piece will be the variable, obviously. That's what we've done in the past. That's what we'll continue to do. There's some more flexibility there, obviously, and we'll take advantage of that.
Very good. Thank you.
Sure.
Thank you. Our next question comes from the line of Terry McEvoy from Stephens. Please proceed with your question.
Hi. Thanks. Good morning. Just two questions here. I wonder if you could discuss the strength in consumer services fees. Last quarter was up $442 million just on a standalone basis. I know in the release it said increased business activity. Was wondering if you could provide any more color there.
Yeah. Hey, Terry. This is Rob. Yeah. We did. We saw a lot of activity there, and most of that is just more consumer activity as you'd expect as the economy comes back on track. Inside of that, where we saw particular strength was debit card spend. Debit card spend is a big component of it.
The acceleration there was really strong. Just maybe more color than you want, but what showed up this quarter, as I said in debit card spends, what our team was telling us was a lot of micro purchases that had gone away. Cups of coffee and morning purchases on the way to work are now part of the volume again.
Perfect. As a follow-up, just the corporate service fees. Maybe you could talk about the pipelines there, and is the quarterly run rate now, is that a $600+ million in revenue quarterly run rate today?
I would say just in terms of the color, you've got to take a look at it now, obviously in combined form and put in a full three months of BBVA. Corporate fees also, as we said earlier, are showing increased activity. We were a little elevated in the second quarter because of Harris Williams, which did twice the volume of the first quarter. You've got to take that into account. You're mapping the right run rate place.
Great. Thank you, Rob.
Sure.
Thank you. We now have a follow-up question from the line of Bill Carcache with Wolfe Research. Please proceed.
Thanks for the follow-up. I just had a quick one on the money transfer business and the opportunity that you see there. Some investors have expressed concerns over disintermediation risk in that business as the cost of transferring money continues to fall and competitors in the space leverage technology to help consumers transfer money more cheaply.
Is disintermediation risk in legacy BBVA's money transfer business a concern for you guys? If you could discuss how you're thinking about the growth outlook for that business and the opportunities that you guys may have to maybe leverage technology and just speak to that opportunity in general, that would be helpful.
Well, I think the whole product, including the business transfer service, is a disintermediated product. What we have is the same thing that other people are building and frankly doing in more scale. The key to success on it is to make sure that you have distribution receiving end networks, which we do have through Latin America and Europe, and that you have compliance to be able to build it.
It's a competitive space. I'm glad we have the product. I think the actual product is going to be table stakes for banks. Our ability to grow it and scale it. We're going through different use cases that bring on potential corporate disbursements and other things that we hadn't thought of before. I think it becomes a table stakes product that started through disintermediation, kind of to your original question, right?
This was built outside of the banking system. BBVA just happened to have built one that we're now integrating into our core platform. We're pretty excited by it. I think time will tell how that product evolves and who uses it.
And in terms of-
Very helpful. Thank you.
The financial impact isn't large, so it's more the upside than anything.
Understood. Thank you.
Thank you. There are no further questions.
All right. Well, very good.
Thanks everybody. We'll see you at the end of the third quarter.
Thank you.
Yeah.
Thank you. This concludes today's conference call. You may now disconnect.