PNC CEO looks to grow bank saying 'scale matters'
PNC Financial Services' (PNC) CEO Bill Demchak is looking to expand PNC's size amid the influx of deposits into larger banks following the failures of regional banks in 2023, saying "scale matters." Currently the sixth largest bank in the country, PNC is still considered a regional bank.
JPMorgan Chase (JPM), the largest bank in the country, is undergoing management changes as it combines two of it's divisions. The move may provide insight into potential succession plans for CEO Jamie Dimon.
Yahoo Finance's David Hollerith breaks down the details.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Angel Smith
Video Transcript
JOSH LIPTON: The boss of PNC Financial is making it clear that his Pittsburgh bank needs to get bigger in the wake of a 2023 industry crisis, telling investors that scale matters. And he no longer wants the bank to be considered regional. Stoking debate about the future of regional banks and the potential for consolidation in this space, senior reporter David Hollerith has more. David.
DAVID HOLLERITH: Hey, Josh. In earnings last week, PNC CEO William Demchak said, in light of how deposits flooded into bigger banks last year during those bank failures in the spring, it's now critical that PNC get bigger itself. PNC is the sixth largest bank in the country. It's still considered what we call a super regional bank. And I spoke with about four analysts on this, who cover regional banks to sort of get their thoughts on what Demchak said and what it means for the industry as a whole.
Since last year's bank failures, there has been this ongoing debate about what's going to happen to the industry once things settle. Now they've said essentially three things. And one is they all agree consolidation in US banking is going to happen in the medium term. However, before anything like that, like a number of banks consolidating can occur, banks need to see interest rates regulation and commercial real estate credit concerns sort of ease to allow the correct environment for that.
It's also not quite so black and white. Even though PNC has been very vocal about their view that size matters, not all regional banks agree. And it's they're probably not all going to take the same tack. And then finally, I would just bring up that regardless of whether or not size does become more important, Demchak's message kind of serves as a pretty clear advertisement that they are looking to buy more banks in the future. And so we wanted to highlight this, because it seems increasingly clear that PNC is going to become a key player in whatever happens to the industry going forward.
JULIE HYMAN: Really interesting stuff, especially given where we were in spring of last year. But we also have to talk about a little bit of news from the nation's largest bank. That is JP Morgan. It made a bunch of management changes here. And most of these folks-- in fact, none of these folks in this release are named Jamie Dimon, but so what we're trying to contextualize and figure out what's the significance of this, what's the importance of some of these changes being announced.
DAVID HOLLERITH: Yeah. Julie, this came out this afternoon. But it's a really good read of it, which is that this looks like plans for succession. Obviously, Jamie Dimon has been the CEO of the bank for more than two decades now. And succession is a hot topic. He's sort of been the LeBron James of banking for some time now just based on his track record.
So what JPM has done in the past is they've moved a lot of key executives around the bank sort of as a way to broaden their experience to see how they would do as potential successors if they can handle multiple places. The key thing here is that the bank is sort of combining two divisions, its investment bank and its commercial bank. And it will have two new co-heads. One, in particular, Jennifer Piepszak, who was co-CEO of the bank's sprawling Consumer and Community Bank, will take over that side. Marianne Lake, who along with Piepszak, are sort of the front runners as far as we know for possible successors to Jamie Dimon, she will take on the role as sole CEO of the Consumer and Community Bank.
There are a bunch of other executive changes. And some of those names have been in the running in terms of what we've heard. But I think this all brings to the question of know why now, why is this happening. Potentially, it's because it's a new year and the bank has made a huge acquisition with First Republic. But we're going to want to pay more attention to this because Jamie Dimon is essentially-- he's a key figure to the largest bank's success. And anything that happens while inevitable will certainly impact what investors think.
JULIE HYMAN: For sure. He can't be CEO forever. I guess, he can try. David, thank you so much. Appreciate it.
