Despite the digital banking trend, achieving a 7% share of physical branches in a specific market allows a bank to disproportionately capture deposits and economic activity. This highlights the enduring power of a physical presence for customer acquisition and trust.
PNC's CEO explains their stock was "crushed" because the market priced in the risk of an expensive acquisition, a penalty for being a likely consolidator in a favorable M&A environment. This occurred despite the company reporting record financial performance.
To ensure a smooth cultural and operational merger, PNC sends experienced branch managers from across the country to sit with employees of an acquired bank for weeks. This hands-on "branch buddy" approach helps transfer tacit knowledge, train on new systems, and build essential relationships.
Fair lending laws require banks to give specific reasons for a credit denial, which is difficult with complex AI models. To navigate this, banks first use traditional models for a decision. If it's a "no," they then use AI to find a way to approve the applicant, avoiding the regulatory disclosure hurdle.
Instead of focusing on product-specific revenue, PNC's corporate bank is organized around client relationships. This organizational design incentivizes bankers to patiently build relationships and win share over time, even if it means calling on a target client for 10 years.
When a corporate client is acquired by private equity and requires higher leverage, the bank risks losing the entire relationship. By partnering with a private credit fund to handle the loan, the bank can keep the client and all associated high-margin fee-based services like treasury management.
For banks to borrow against their loan portfolio from the Fed, they must physically transfer original loan documents to a secure, audited vault. This archaic process is so slow and cumbersome—sometimes involving phone calls that go unanswered—that it undermines the window's purpose as an emergency liquidity source.
PNC's CEO explains that even at an average rate of 18%, the net margin on credit cards is only around 4% after accounting for rewards, losses, and funding costs. Capping rates at 10% would turn this margin negative, forcing issuers to exit the business and cutting off consumer credit access.