As PNC Financial Services moves forward with layoffs throughout the financial firm, the company is eying more reductions in costs.
On Tuesday, PNC said it would cut an undisclosed number of workers. In a statement, the Downtown Pittsburgh banking firm said it is reviewing its organizational structure, which “includes a shift away from work not fully aligned to our strategic priorities and will result in a reduction in staffing levels in certain areas.”
In PNC’s second-quarter earnings call, the company said it is continuing an ongoing plan to cut expenses, raising its target for overall reductions by $50 million.
“At the beginning of the year, we set a continuous improvement program goal of $400 million. Recently, we’ve identified initiatives that support increasing our (program) by an additional $50 million, raising our full-year target to $450 million,” Robert Reilly, executive vice president and chief financial officer, told analysts in July.
CEO Bill Demchaknoted costs were “basically down in every category other than personnel.”
“We’re going to have to take a hard look at where we can generate savings in this company without cutting the potential for growth and the opportunity we continue to see in our growth markets and just business activity,” Demchak said on the quarterly call.
However, in addition to that regular plan, PNC is looking other cost-cutting initiatives.
In a talk at Barclays Global Financial Services Conference in September, Demchak said, “You should expect to see us probably in the third quarter call give you some details on a more structural program that will have a direct impact to ’24 expenses.”
“It’s an environment where we want to be able to invest into our newer markets and continue to grow them,” Demchak said in September. “And to do that, we’re going to have to save elsewhere and save to the bottom line just given the revenue pressures.”
PNC did not respond to questions Wednesday.
The company employed about 61,500 as of December, which included about 59,900 full-time and 1,600 part-time employees. About 12,000 people work in the Pittsburgh region.
PNC is the sixth largest bank in the U.S., with assets of $554.1 billion.
In July, the board approved a 5-cent increase to its quarterly cash dividend on common stock, raising the dividend to $1.55 per share.
In the second quarter, net income was $1.5 billion, an 11% drop compared to the first quarter.
Total revenue was $5.3 billion, a 6% drop compared to the first quarter of 2023.
In August, Moody’s Investors Services downgraded PNC’s outlook from stable to negative, citing several sources of strain on the U.S. banking sector, such as “funding pressures, regulatory capital weaknesses and rising risks associated with commercial real estate exposures.”
The ratings agency noted higher interest rates have hit the overall banking sector.
Still, “PNC’s balance sheet has been negatively impacted by higher interest rates, however, less than many regional bank peers,” Moody’s noted.
PNC said it expects a “mild recession” starting in early 2024 with a contraction in real GDP of less than 1%.
It says that while the economy continued to expand in the first half of 2023, growth is slowing due to the Federal Reserve’s plan to raise interest rates to slow inflation.
“With much higher mortgage rates, the housing market is already in contraction, with steep drops in existing home sales and single-family housing starts, and a modest decline in house prices,” PNC said in its quarterly earnings. “Other sectors where interest rates play an outsized role, such as business investment and consumer spending on durable goods, will contract over 2023.”
The financial firm expects the unemployment rate to end the year above 4%, and then peak slightly above 5% in early 2025.
“Inflation will slow with weaker demand, moving back to the Federal Reserve’s 2% objective by this time next year,” PNC stated.
Stephanie Ritenbaugh is a Tribune-Review staff writer. You can contact Stephanie at [email protected].