uploads/// Non Interest Income

Non-interest income of PNC Bank shows secular growth


Feb. 25 2015, Updated 1:05 p.m. ET

Non-interest income helps in leveraging income

Net interest income only reveals half the story about a bank’s revenues. A bank also earns a lot of non-interest income (or NII), the income that a bank earns largely in terms of fees and commissions for providing services. An example of non-interest income can be a fee charged by providing asset management services.

NII acts as a force multiplier for banks having a large franchisee base. A bank can cross-sell various products to its client base to increase revenues at minimal cost of new client acquisition. Similarly, the bank can harness the benefits of reach of a large branch network.

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Non-interest income growth has been secular

The NII of PNC Bank (PNC) has shown secular growth in the last few years. There have been a few quarters where non-interest income fell. However, the long-term direction is up. PNC Bank earned nearly $5.5 billion in non-interest income in 2014, with the asset management and corporate services segments accounting for the most of the non-interest income.

Focus on growth in non-interest income

PNC Bank has increased its focus on growing its NII, which was largely driven by falling yields in loans and trading segments. The bank has also seen a fall in its NII due to some acquisitions made in 2009 and 2012. This led to a fall in non-interest income from the peak of 50% in 2007 to its low of 38% in 2012. The bank aims to recapture the revenue mix of 2007 in the years ahead.

NII is also a focus area of its peers Wells Fargo (WFC), US Bank (USB), and Capital One (COF). All these banks are a part of the Financial Select Sector SPDR ETF (XLF).


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