The PNC Financial Services Group, Inc. (NYSE:PNC) Q4 2014 Earnings Conference Call - Final Transcript
Jan 16, 2015 • 10:00 am ET
(Operator Instructions) Paul
Miller, FBR Capital Markets.
It's Jessica Ribner in for Paul. How are you? One question on your mortgage bank. I know you guys have been focusing there, and given where rates are now in the 30-year, down to 3.66%, what are you seeing in the first quarter? Can you give us some color? And then, how do you think the purchase market is shaping up, actually? Because we know refis -- right? -- are going to be a little bit stronger.
Yes, hi, Jessica. Good morning; it's Rob. To answer your question, in the first couple weeks here of the year, given the rate movement that you reference, we've seen a significant jump in applications, particularly on the refi side, which are up almost 170% versus this time last year. Purchases is about the same; but the real driver is on the refi because of the rates that you mentioned.
Then in terms of expenses, you're targeting that $400 million of cost saves, but you expect to reinvest that. I just want to be clear.
Yes, absolutely clear. That's what we've done for the last couple of years, and that program has worked for us, and we're committed to continuing that program in 2015.
So based on that, can you give us an idea of where you think your efficiency ratio could settle out?
Yes, we don't have a specific efficiency ratio target, because the biggest driver of that is really outside of our control; and that's interest rates. What we do is manage our expenses, as I've mentioned, in this challenging revenue environment with a high degree of discipline. And we are committed to keeping those stable as we make continued investments in mostly our technology and retail bank transformation.
John McDonald, Sanford Bernstein.
Was wondering if you could talk about the fee income drivers that you are looking for in 2015. Feels like it's going to be a tough year on NII; and as Bill mentioned, provision gets a little tougher.So fee income seems to be an important driver to help revenues this year. What are some of the drivers you're looking for this year?
Well, you're absolutely right, and a lot of our strategies are around driving the fee income. We've had a lot of success with that in 2014 in terms of the growth that you've seen. If you just take a look at the broad categories -- Asset Management, we continue to experience high single-digit growth and have those types of expectations. Consumer services, we are seeing mid to high single-digit growth in the products that I mentioned. The year-over-year comparison had some unfortunate year-over-year comparisons, because of the diluted effect of some of the contra-revenue
items, but we continue to see growth there. Corporate services, we say mid-single growth. I caveat that, though, just with the biggest driver in 2014 was Harris Williams, our M&A advisory piece, which had a record year, easily twice the level of what they had had the