Soon we're going to get going. Next up, very pleased at PNC Financial Services. From the company making his debut performance on stage at this conference, Mark Wiedman, their President. As you know, who's been here umpteenth consecutive years or so, Rob Reilly.
Yeah.
Chief financial officer. Thank you both for joining.
Umpteenth. Yeah, at least umpteenth. Yeah.
Kind of.
Yeah.
I don't want to call you out. I guess, Mark, maybe we'll start with you.
Right.
I think given this is your first time here as part of PNC.
Yep.
Just maybe share a little bit about your background and how you wound up with the company.
Sure. Well, I spent 21 years in a former subsidiary of PNC called BlackRock, and there I did two things that connected me to PNC over time. One is, I spent a large part of my career there advising banks, including actually PNC along the way, on balance sheet questions. So healthy banks like a PNC, and then some not so healthy where I led the work in restructuring AIG's credit book, credit derivative book, Bear Stearns, Morgan Stanley's recapitalization, and the like during the crisis.
I actually started a company called PennyMac as part of that, and we saw the opening that frankly banks were going to create was for the non-banks, the creation of Pennymac back in 2008. Separately, I spent time at BlackRock, I would say, scaling and growing businesses in the capital market space generally. Like for example, iShares. All that came together back in 2023 when PNC and BlackRock jointly looked to acquire a bank we did not acquire quite famously in 2023 in the crisis. When Bill called and said, "Would you consider working with an organization I'd known for years and years?" It felt very natural.
Got it. Maybe as the follow-up, can you give us some insight into what you've learned about PNC since you've joined the company, and just what you see as the biggest opportunities where you can make an impact? Maybe what are your top priorities for the next 12 - 18 months?
Sure. I think where we see the opportunities is really about doing what we do really well better. Two things I think we're really good at that will lead to further growth are, one, we're very good at putting the client at the center of the business, and then the second is being local. Because we think that what our clients are looking for is an organization, a bank that will work with them, that has national capabilities, but keeps it local. That's the challenge that we face, the opportunity. In terms of getting closer to the client, there are areas where we're super strong, where we understand the client intimately and put the client first as we organize, and we're really good, for example, in real estate or in treasury management, and I'd put those capabilities up against anybody.
Then there's places where we can be a lot larger, and it's really about understanding who our clients are and deepening. Cards, an area where we've underperformed. Fundamentally, this is about developing a deeper relationship with our customers, retail customers. If you look at us compared to pure banks, we should be at least able to double our penetration with clients. It's just we haven't followed them as a client. On the corporate side, thinking about sponsors as clients is an opportunity for us. More and more, they own a lot of the portfolio companies we lend to. You've got to talk to them at the peak and bring it all together, treat them as a client. Many of our treasury management clients have one complaint with us.
They think we're really, really good, but there's one thing we can't do, which is follow them internationally in payments and lending. We're going to be building out those capabilities, helping those U.S. clients serve their needs in other places, whether it be lending into a global revolver or simply making payments for them in other spots in the world, particularly in Europe. That's where the opportunity is for us, is just literally is following the client to their needs, and that's where the growth comes from.
Got it. Maybe just talk big picture. The 10-year broke 5% this morning.
Yep.
Fed meets on Wednesday. A lot of debate in terms of what the rate backdrop looks like. Maybe just talk about kind of what you're thinking, how you're positioned.
Sure. So a couple things on that. We're now basically with where the world is. I didn't see what are the probabilities now of a rate hike, 90%+ or so. So we're in that camp. For us, beyond that, probably another 25 basis point increase in December and then another in March is sort of our current thinking. For us, for 2026, though, it's pretty neutral. As you know, we're in a neutral spot, so not a big impact in terms of anything that we see in 2026. Maybe marginally a little bit better, but significant in the outer years as the yield curve steepens, as you mentioned.
I guess, you spend a moment just on the more macro environment which just feel much different today than when we spoke here a year ago.
Yeah.
Just how are you thinking about the outlook of the U.S. economy in that backdrop?
Do you want to take a shot at that, Mark? Then I can fill in.
I think the big surprise for this year is how strong the economy's been. I'm sure we're going to talk about AI and AI CapEx, but I'd emphasize broad-based earnings growth, where earnings year-on-year are up 36% in the S&P 500. We're seeing it in our non-public customers. The consumer. The consumer is surprising us. She's resisting gas prices, she's resisting worries about tariffs, and she's spending. So what we're seeing in every income cohort, including low-income cohorts, they're up 4% year-on-year. They have the much rumored post-COVID wall that the consumer was going to hit didn't happen. So what we're seeing is their spending and their balance sheets are improving.
If you look at their balance sheets versus 2019, what they have with us in current accounts, they are up 20% post-inflation since 2019. It is a story basically of a very strong, resilient consumer who is willing to pay more, which is what is leading to that earnings growth on the company side. Overall, that is leading to a very broad lending demand across almost all the sectors that we are working with. Feeling pretty strong about the underlying real economy.
Yeah, I think we are a little surprised, like the world is, how strong the economy is.
Yeah.
And actually improved incrementally here in the third quarter with the labor numbers. To Mark's point about the consumer, like other peers, we have seen consumer delinquencies decline. It is strong.
I guess you both mentioned a strong consumer. I guess double-clicking within that, any notable changes in behavior worth pointing out recently?
Well, gambling. Fastest-growing area that we're seeing in spending is gambling. Upscaling, upend, increasing their spending on travel and entertainment at a higher end. Not so much money on home improvement. Those are examples, but that reflects broader trends that we're seeing.
Yeah, like I said, you've seen all the data. The consumer surprising that the consumer spend rate is up even ex gasoline. On the commercial side, we were talking about it earlier, credit's in very good shape. There's a risk-on environment across our commercial base that we're seeing, and that's reflected in our results.
You mentioned broad-based lending demand, resilient consumer, increased spending.
Yeah.
You know the next question, Rob.
Yeah. Guidance. Our full-year guidance and third-quarter guidance stays the same. We expected a good third quarter, and we are tracking to it.
You do not want to give us just within the ranges?
No, I think the ranges are pretty good. You take a look at the numbers, like I said, we are on track to have a very good year. We have had a good year. We are on track to continue to have a very good year, and we are sticking to it.
All right. Well, we are going to have to double-click one by one now.
Okay.
Sure. Let's start with loan growth.
Yeah.
The first half was strong, as you noted.
Yeah.
We talked about strong levels of new production, high utilization rates. Third quarter guidance actually implies a slowdown.
Yeah.
Just maybe spend a moment on what you're seeing in terms of borrower demand, client activity across the commercial book.
Yeah, sure. To your point, the first half of 2026 was really strong for us in terms of loan growth, even independent of the FirstBank acquisition, which we announced at your conference here last year, which successfully closed in January. Even that aside, saw a really strong commercial growth, predominantly commercial growth in our higher credit quality names that we've talked about, and that continues. We expect further growth but at a rate a little bit less than what we saw in the first half. More in line with historical growth in strong economies, which we sort of target to GDP range. Still good growth. The pipelines support that growth. It's broad based. One thing that we point out is commercial real estate as a loan category has inflected to growth after how many years, Jason, of the other way? Long stretch of declines.
It's constructive and again, congruent with the growth in the economy. That's on the commercial side. On our consumer side, we see some growth. We've got some offsets there. Credit card, as Mark pointed out, is our emphasis. A little bit less in terms of balance sheeting mortgages. We're still originating them, but we don't balance sheet them as aggressively. Auto's an area that isn't a real emphasis for us at the moment.
I guess when you think about the consumer side, is that intentional due to the environment?
Well, yeah, I'd say so. The credit card is intentional relative to the opportunity that we have. We've made a lot of great strides there. Everything else is intentional. Auto loans, as I mentioned, if you take a look at PNC over the years, our box doesn't really change. It's one of our lower return assets. When a lot of people are doing auto loans, we're not doing them, and when they're not doing them, we are doing them. That's just where we are right now.
Got it. Mark talked about AI-related CapEx spending earlier. Maybe just one of the themes that you've been debating and just how that's spilling over into the broader economy.
Yeah.
Now that some of your markets, whether it's Texas, Pennsylvania, Virginia, or the Mid-Atlantic,
Yeah
should benefit from this data center infrastructure development.
Right.
Are you seeing any meaningful opportunities emerge and how that impacts?
Yeah. A lot of dimensions to that, obviously. In terms of the credit book and the loan book, I would say we're participating in that, but my words gradually rather than transformationally. Very selective in terms of the credit quality, the high-end credit quality consistent with our book. There is the ecosystem aspects, like you said, in terms of power, transportation, construction. That's all part of our borrowing base. So we're participating in that. But not to an extent that that's driving our overall growth.
Maybe shifting gears to deposits. Just kind of received heightened attention of late. Just maybe an update what you're seeing in terms of mix and balances and pricing.
Yeah, sure.
And competitive landscape.
Yeah. Our deposits are good. Our deposit story for the third quarter is that our deposits on a spot basis are growing faster than our loans. That is coming from the commercial side, which is in part seasonal because consumer tends to sort of flatten out during the third quarter for us. Our rate paid will go up, consistent with what we talked about on our second quarter call, consistent with first quarter levels, all of which is due to mix.
Commercial pays higher. We will be up that 5 basis points or so that we talked about. Very much in line with everything that we talked about. The strength of PNC, obviously, is the granularity of our consumer interest-bearing book which holds the rate paid down. I would expect with some rate hikes that we will see some more action on the CD front. We are starting to see some of that in longer terms, and that portends in our future, but that is a good thing.
I guess if the Fed hikes on Wednesday, how do you think about deposit betas over the-
I think the deposit betas will be about what they have been historically, about 50%. Typically, they lag, as you know, so we can move a little bit in front of that. But I think it will be very consistent. The big thing for us with the higher rates over and above the deposit dynamics will be the repricing of our fixed rate asset securities. Outside of the deposits, we still have a lot of that to do, and obviously in a higher rate environment, that will be conducive.
Correct. Right.
Yeah.
I guess maybe thinking about net interest income, I know in the second quarter earnings call you and Bill were both pretty direct that you do not manage the NIM.
Yeah. That is right.
Can you maybe discuss why your strategy historically emphasized generating net interest income rather than maximizing NIM?
Yeah, sure. NIM is important. We are sticking to that. We will go above 3% by the end of the year, so you can relax in terms of that. The conversation really was, though, just about our fundamental business approach. As I had mentioned in terms of our loan growth, it has been disproportionately at the high credit quality, lower spread side, which has a tendency to compress your NIM. That is just looking at the transaction in isolation. The vast majority of the time when we book those loans, we also book capital market fees or treasury management or something along those lines that when you look at it together in terms of that transaction, it is accretive to revenue, it is accretive to NII, it is accretive to EPS, it is accretive to ROA, et cetera, but compresses NIM a little bit.
It is too narrow of a view for what we do. That is what we do. If you take a look, I think, Jason, if you go back, other than right after the crises, there is no time in our history where the credit alone provides sufficient enough return for the capital applied. You need those alternative revenue sources. That is PNC's business model. So we will do our business model all day long. If that is a couple of basis points of NIM compression, so be it.
Got it. But you are still going to, I guess, exit the year with a NIM 3%+ .
Yeah.
You talked about a better fixed rate asset repricing opportunity given the backup of rates. You are going to do over 15% NII growth this year with-
Yeah.
FirstBank benefiting.
Right.
I guess as you start to think about kind of the 2027 outlook for NII and NIM, as you're putting together your budget, just how are you circling all that up?
Yeah. Not to get into guidance, we'll get into that in terms of 2027 and 2028, but we're constructive. In a higher rate environment, all else being equal, and assuming that the economy holds in there with a steeper yield curve, we're going to do better.
Okay. Maybe shifting gears to the fee income side of the balance sheet. Just maybe where do you
The income side of the balance sheet?
The fee income side.
Oh, okay. Fee income. Okay. Yeah. Okay. Got you.
The income side of the income statement.
Okay.
This is my sixth in a row.
I got you.
As you think about-
We're watching you.
It's PNC.
We're watching you. Yeah, we're watching.
As you think about the next few years, just where do you see the greatest incremental fee income opportunities developing?
Do you want to take that?
Sure. It is all about deepening our relationships with our existing customers and expanding into our expansion markets. In that take on the corporate side, it is about capital markets activities, debt and derivatives associated almost always with some kind of lending situation. 2nd, our M&A advisory business with Harris Williams, and treasury management. Put all that together, that is 40% of our corporate bank. It is up dramatically on last year, and we are seeing clients wanting to do more and more with us going forward. That is a huge driver for us. On the consumer side, it is about cards, debit cards, expand our credit card business. All these are fee generating together. Feels pretty good. It is all about an integrated relationship with the customer as opposed to just looking at the lending relationship.
I would say if you take a look at the way that we report it, our fee businesses are having a good year, and we expect that to continue. Asset management, obviously, because of the equity markets is benefiting, although we do not rely completely on the equity markets. That is helpful. This is just the order that we report them. Capital markets is having a record year. We are aware of that. Where we are a little bit different, and Mark mentioned this, is a big percentage of our capital markets business is M&A advisory through Harris Williams, which is having yet again another record year.
The card and cash management is a steady eddy, and we see growth there. The only fee category that is flat, and that is within our expectations, is mortgages, where there is not a whole lot of that. But we are not big in mortgages and particularly reliant on that. Fee businesses are healthy. I think, you did not ask this, but they are big businesses in and of themselves. Where we are making investments and in these growth markets-
Yeah
the application, particularly in FirstBank most recently, and the receptivity of the client base to those fees is really strong.
I guess we've heard about investments in card, needed investments in international payments, investing in these new markets. We've got to spend on technology. You have to spend on AI.
Yeah.
Just how should we think about balancing between kind of maintaining positive operating leverage-
Right
and investing in the franchise the next several years?
Well, positive operating leverage is table stakes for us. I think if not the longest record in delivering positive operating leverage year-to-year, we're pretty close to the best. So that remains an objective, and we've got a continuous improvement program in place that you know that has been successful in terms of being able to offset what we invest in. And we're investing at a pretty good clip. There's no question about that. So I think we'll be able to maintain that. This isn't 2027 guidance or 2028 guidance, but positive operating leverage is really important. And we'll sustain it.
Just talk about your kind of approach to AI, just how you plan to leverage it over time, where do you expect it to ultimately drive efficiencies across the company?
Why don't you start, Mark, and then I can add in.
A few key levers that we see as being big opportunities for us, and potentially for banks generally. One is continual automation. About 15 years ago, we had the same number of employees we have today. We doubled the bank. Productivity growth has been automation. And we know there's a lot more to be unlocked with AI. We've got a Big Five program, which is the areas that we're targeting for improvements, including retail operations, commercial loan servicing, fraud, et cetera. And what we're seeing is the deeper and deeper we go, we find more and more applicable capabilities across the bank. I think that's a pretty generic story across all banks of some scale that are thinking about where they can automate and where there's opportunity for them to actually get more efficient and actually fund a number of the things you described.
The area where I think we are turning, a couple of areas we're turning. On the positive side, and then I'll give a little bit of what we're concerned about is around technology spend and software development, where in the last year we implemented agent assistance to developers, and we're able to put out our mobile app and our Total Rewards, which is basically treating our retail customers as an integrated client as opposed to individual products. Pulling all that together, we're able to do that about 40% more efficient than we've been able to do software development in the past. What we're seeing now as we think about using agents as the center of how we develop software, as opposed to just assisting, is 5 - 10x productivity improvements. So things that would've taken 10 weeks get done in a week or less.
That changes the scale dynamics we think in the industry. It's going to over time benefit, we think, banks that actually have the ability to build that software in-house, that can actually alter the relationship with vendors, for example. Early days. That's a big frontier for us. So that's a big priority. We are taking control of our destiny also in how we spend money on compute, both by owning our own data centers and actually owning our own GPUs and actually bringing in our own proprietary LLMs. Actually SLMs, small language models. Because it turns out you don't need the whole kit and caboodle for most of the problems we have to solve. Put all that together, that's a lot of opportunity. Where's the worry? The worry is risk. Risk management. Cyber, obviously.
I'd also say, as we've seen very notably in public discourse in the last few days, making sure our agents are doing what they're supposed to do and not doing something else is a top priority for us. So we've got to walk cautiously because that's going to be a challenge, I think, for every large organization using AI, is the agents going be a little bit too aggressive in what they're trying to get done. So we're trying to make sure we keep that under control. Broadly, it's a big opportunity over time. That creates margin. Does it get competed away? Reasonable question. That is a huge priority for us for the bank.
I think what I'd add to that is just from a PNC perspective. So last year, and we talked about it last year, out of the box we just said, "Hey, there's a big cost save opportunity. But let's focus on the biggest impact areas." As Mark mentioned, that was the Big Five that we talked around, which was coding, operations, AML, et cetera. I think the update this year and what we've been working on that I think you'll find interesting, and Bill talked a little bit about this on the second quarter earnings call, was this decision to do more in-house and driving it ourselves as opposed to relying on vendors is where we're going. As Mark said, we're doing our own compute. We're using the frontier models with the hyperscalers.
We've got open weight models in our data centers with no data sharing than the Chinese models. Where we're doing developing, when you talk about agentic development of harnessing capabilities, we're doing that in-house too and not relying on vendors. There's two reasons for that. One is it appeals to our general high control nature of our own data. Mark alluded to it. There's a big difference in terms of the efficiencies, in terms of being able to focus on the task which might not require the highest cost approach, which often vendors either deliberately or non-deliberately or can't do. That's a big thing for us in terms of just our approach and our thinking.
Interesting. Yeah. Maybe shift gears. Credit environment somewhat unique. You have strong loan growth, credit quality very benign. Just any industries where you're intentionally being more selective or underwriting standards remain particularly important?
I'd say generally, and you've heard it over and over again, credit is really good, both commercial and consumer. On the commercial side, no big pockets, nothing that is thematic or bubbles building. Obviously, there's some pressure with healthcare, with changes in the Affordable Care Act. We were talking about we have some distilleries around a secular change in people drinking less. Maybe some on the margin transportation-oriented, obviously, in terms of the price of fuel, but nothing that you point at and say, "Hey, something's really going on here." Which is good. We were talking earlier about the economy improving in the quarter. Our criticized assets have come down, our non-performance, all the leading indicators are improving. So things are good.
I'll just add an addition. There's one sector, and Rob, you touched on this earlier-
Yeah
where we've been very selective relative to the broader credit activity. Not so much in banking, but broadly in the financial system, which is around AI infrastructure and data centers, where we've been very selective around extremely well-structured credits that have the protection of a hyperscaler behind them and a high credit quality hyperscaler and a contract that we see as bulletproof. What that's meant is we've been selective. We've invested in a number of projects, but we are doing so very carefully because one worry we have is a lot of contracts may end up not actually being so bulletproof. We don't want to be involved in that kind of lending. We'll leave that to others. But we've been very selective there. Broadly, however, in most of our sectors, almost all, credit keeps improving from a pretty healthy base even at the beginning of the year.
That's right.
Sounds good. I guess shifting to capital, the regulatory environment more constructive than it's been in several years.
Yeah.
Just how are you thinking about long-term capital retargets? Regulatory reform ultimately reduces required capital across the industry.
Yeah.
Is it realistic to expect a reduction?
Yeah. Well, I'd say a couple of things there. One is where we are right now, roughly 10% in our CET1 ratios. It feels like the right place to be right now. The Basel when they get completed, and if they get completed along the lines of what everybody thinks, we are likely to add a point of capital. At some point, we have to select whether it's the expanded risk-based approach or the standardized approach. Right now, the expanded approach looks a little better, which makes sense because of the discount on the private middle-market credits that is sort of our wheelhouse. That sort of fits logically. That will add a point. We obviously work that down.
Ideally, the way that we do that is through loan growth. But beyond that capital return, which has been part of our story for a while, will continue. Ultimately, to ask your question in terms of, hey, where does it ultimately, can you come down from those levels? We will see. The stress tests certainly suggest that we can as an industry. If that's the case, because we stress better than most, if not the best. Stand reason, whatever it will be, we will be the lowest. Right?
I guess against that, you have talked about exiting this year with an 18% ROTCE.
Yeah
based on your guidance update.
Yeah.
Sounds good.
Yeah.
But as you kind of book beyond year-end, do you see opportunities for further improvement, or is kind of maintaining that level a more appropriate way to think about the business over time?
Yeah. When I came up at the end of last year, we said, hey, we would expect to exit 2026 at 18% ROTCE, even though we don't provide targets. Right? But we needed to work through our FirstBank. We don't provide NIM either, but I always provide that, too because they're outcomes. In all seriousness, what we really wanted to point to was based on our business composition, we have higher return businesses.
And that's why whatever the industry is and wherever the industry is, we're at the high end of that range in terms of those ROTCEs. So we said, okay, throw out 18%. We think we're comfortable with 18%. I'll point out we reached 17.9% in the second quarter. So I'd argue that we're in that neighborhood. And all else being equal, it's going to ebb and flow depending on where you are, but we would see that increasing. But the key point is we have on average, we're better than average. We're high return businesses.
Got it. Maybe just update us on your branch expansion efforts. In the past, we've talked about 7% branch share in those markets. Why is that the right number?
Yeah. I can start, Mark, and then maybe you fill in a little bit. We have an aggressive plan in terms of building out our branches. We've committed to building another 300 on top of the 2,300 that we have in all the places that you would expect in these high-growth markets that we've entered in the last handful of years, either organically or through acquisition. The key is, though, we're furthering our investments in those markets as opposed to entering those markets.
That's a big distinction because going in cold is a lot different than going in on a base of success. In a lot of those markets, we've established a 3% market share, branch market share. We think if we can get to 7%, and we know this through the markets where we have 7%, you get an exponential lift in terms of that critical mass in terms of business. That's the next step of a multi-year plan that we've had in place as we've gone into those markets. Now investing into the success of those markets to reach exponential gains. It's happening.
Just to add, branch build is one of the legs of our broader national expansion. The other legs are marketing. If you've been seeing our ads, which we think are pretty funny, hope you think so too.
I hate them.
Actually having a really good digital offering, which we didn't have before. All those pieces are working together, and what we're discovering is, one, last year we did about 25 branches. This year we're doing about 55. We're learning we can do it. We've picked the right sites. The revenue we're picking up in those branches is tracking above or at the targets we had. So we kind of know what we're doing. We see that leading through the end of the decade. So we'll get to about our big challenge is we're in lots of states, but we're not thick enough in those states. Just to give you an example, when we reach above that 7%, really an S-curve, you start to see increasing returns to deepening your branch presence.
Below it, you have to kind of get up there to get up to maybe 20% increase in productivity simply by hitting that 7%. That's the upside we get. It also leads when we have branches, and this is a little counterintuitive, our marketing to purely digital customers is six times more effective if there's a branch nearby, even if the customer never walks in the branch because Americans like to see the branch. You put that together with the marketing and a good digital experience, and we see growth in the Southeast and the Southwest, and obviously in our Keystone or our home markets as well.
Got it. I guess on FirstBank, you maybe touched on it, but you converted in June. Maybe just give us an update, how things are going so far, any notable kind of early wins, and just what's been the reception of the PNC products and services to that customer base in Colorado.
Yeah. We announced it here last year. We closed in January, and we converted in June. I would say every financial measure that we expected last September, we've either hit or exceeded, which feels good. The cultures of the two companies, which we suspected were very compatible when we met proved to be very true. Mark was pointing this out earlier when we were talking about it. Many of the FirstBank executives and folks are now part of PNC's executive team, taking on greater responsibilities across the organization. That's really good. The surprise to the upside has been we knew that FirstBank had a high profile in Denver and the surrounding communities.
The whole idea was that our products and services that FirstBank didn't provide, we'd be able to leverage the high-profile nature. That's happened much faster than what we would've thought. A lot more looks in our commercial book and prospects, a lot more looks in our asset management products and services, which is actually the fastest-growing market right now in our footprint for asset management. Those types of things we expected to happen, but not as quickly as they have.
The private bank. FirstBank had all these relationships but didn't have wealth management-
The products and services.
-private banking capabilities.
Right.
What we've found is by literally, much faster than, for example, we've found with BBVA and RBC, is that actually introducing them to PNC capabilities has led to Colorado now being our fastest-growing market, which was not what we expected. We did not expect to see such fast growth. That reflects really on the quality of the team that we brought into PNC. We aim to retain 100% of the client-facing staff. That's what you get when you make that kind of commitment.
All right. I would say PNC's obviously consistently highlighted significant organic growth runway.
Yeah. Right.
But as you look out over the next several years, is that organic opportunity sufficient enough to achieve your long-term objectives? Or is there a point where M&A becomes an attractive way to accelerate growth? What would transactions need to look like to clear that hurdle? Mark, I saw you quoted in an Ohio paper a couple weeks ago talking about national banking.
Quoted out of context. Keep going.
Yep. Just let you address that. Let me just talk to just M&A in general.
Yeah. I'd say our response to that is very consistent with what we've been saying. So no big updates there. We do have a very aggressive organic growth strategy in place that we feel will be very successful in a reasonable amount of time. That's what we do every day when we go into the office every day. That's what we do. So I do think it's sufficient. On the acquisition front, when a bank deal comes up, would we look at it? Of course, we would look at it, and so would everybody else, even if they tell you that they wouldn't. The key is that we would be very disciplined about that. All I can say is take a look at our track record in terms of our discipline.
Part of the issue improving the risk is seeing the deals we do, but you don't get to see the deals that we don't do. If you did, I think you'd be very assured that we have the shareholders' interests in mind. If we do anything, it absolutely has to be the best move for the shareholders, or we don't do it. We're not reliant on it. If an opportunity presents itself, of course, like I said, we'd establish it. I would say right now in terms of current valuations of these potentially what you would logically sort of determine as an acquisition target or an acquisition candidate, I think the valuations are very high right now, and I think the bar to get over is really high. I think it's unlikely.
I'll just add on organic growth. It's kind of an abstract word. It's pretty simple. It's about clients asking us to do more with them. In the corporate bank, what we're finding is, particularly in the Southwest, in the West, in the Southeast, which are our expansion markets, companies are saying, "Could you do more for us? In reality, I only have two large national competitors that I deal with. Can you be that third? Can you work with us?" That's why it's led to today, more than half of our geographically tied loans are actually in our expansion markets. That's continuing to grow. In the expansion markets, we're growing double the speed of our keystone or legacy markets. It's that client pull forward is the reason that we emphasize the organic growth.
I want to be clear on this, Jason, because we get asked this a lot. The question is our organic growth sufficient enough for our purposes? Yes. Are we reliant on acquisitions to meet our objectives? No. Are we capable of buying somebody? Yes. Is that price right now in terms of those dynamics conducive to that? No. Then I'd add to that, which probably would slow us down, is if anything in terms of the acquisitions were to impede
Yep.
our AI priorities, we would pass on the acquisition because we wouldn't want to miss out in terms of everything that AI has potentially to deliver by being distracted by some big acquisition. I just want to be very clear about that.
That's helpful.
Yeah.
I guess maybe as we kind of begin to wrap up, good environment for banks, PNC in particular. To me, what do you think is still underappreciated aspect of PNC's earnings story today, and why should investors be excited about the next several years?
Well, to me, it's about the compounding effects of our expansion markets. We have done it in the Southeast. More to go. We're doing it in the Southwest and the West, and it's not really about where our retail footprint is, and obviously, that'll expand. Where our corporate bank is a national bank, and in the retail footprint where we're expanding, all these are places where we have lots and lots of client-driven growth ahead of us. That I would say is, whether it's underappreciated or appreciated, that's the center of what we're focused on every day. That and the AI transformation. Those are the two things we're talking about in every management meeting.
Yeah. I would add to that, obviously these growth markets we're really excited about and we're investing in them. I think the FirstBank acquisition has only increased our enthusiasm in terms of what we can do. It's a great banking environment. Banks are doing well. But inside of that, at PNC, a lot of energy and a lot of enthusiasm that just continues to compound. That's the right word. That has us really excited.
I guess, Mark, in the final minute, your biggest positive surprise joining PNC, and maybe one thing that, I do not want to say disappointing, but biggest opportunity.
Sure. Biggest positive surprise, the culture of the bank runs deep. I was a little surprised to find that. Most financial institutions, culture is a pretty thin thing that is on the wall. What surprised me is whether I am sitting in an office in San Diego or Raleigh, people talk about the same reasons they are at the bank. They care about the bank, which I met the top management and the board when I interviewed, but I did not know that would be there. That is really great because I go to sleep thinking people care about the institution, no one is going to mess with it in the dark. That is really important. I would say the biggest opportunity is we are a very client-oriented bank that have not been 100% consistent in that application and how we have gone to market.
There are products where we have led with the product, not the client relationship. That is in the retail bank. It is about simply bringing the entire customer relationship together. That is an obvious opportunity with the launch of our Total Rewards, which has gotten take-up from customers much faster than we expected because customers want more from us, but we got to treat them as a customer. Same thing would be true with sponsors or with TM clients who want us to actually, for example, do euro and sterling. As long as we meet those needs, which are right in front of us, I actually think that organic growth path we talked about is ours to lose.
Perfect. On that note.
Thank you.
Please join me in thanking Mark and Rob for their time today.
Thank you.
Next up, Bank of America in the lunchroom where we had breakfast.