Regional Banks Put AI Into Core Operations as Business Lending Grows

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Highlights

PNC CEO Bill Demchak used the bank’s third-quarter earnings call to describe preparations for an “agentic workforce,” including work on data architecture, digitized policies and procedures, access controls and systems that can recognize AI agents as well as employees. PNC has also installed GPUs in its own data centers. Demchak said technology development and maintenance are among the first areas where PNC expects to redesign work around AI.

U.S. Bancorp CEO Gunjan Kedia said AI use cases are expanding as a productivity tool. The bank has developed the ability to move workloads among models as it manages model costs, while taking a more measured approach to customer-facing applications because of privacy and customer-confidence considerations.

KeyCorp identified four areas for its AI work: commercial onboarding and servicing, commercial originations, consumer servicing and software engineering. CEO Chris Gorman said those are the initial domains the bank is targeting, per commentary during the earnings call.

Chief Financial Officer Clark Khayat said Key is using AI to automate high-volume consumer-servicing tasks and streamline credit and collateral processes in commercial originations. Commercial onboarding work is intended to reduce the time required to bring customers onto the bank’s systems.

Fifth Third also identified artificial intelligence as an internal investment priority. CEO Tim Spence said the bank intends to sustain long-term investment in growth and AI following the Comerica conversion.

Commercial Lending Expands Across Several Banks

PNC reported average commercial loans increased $10.4 billion from the second quarter and $42.4 billion from a year earlier. The bank attributed the increases to strong new production and higher utilization, with the year-over-year comparison also reflecting FirstBank loans acquired in March, according to its third quarter financial highlights.

U.S. Bancorp reported average total loans increased 8% year over year and 1% from the second quarter. Average commercial loans were $155.4 billion, up 12.3% from a year earlier, although they were essentially unchanged sequentially, as detailed in U.S. Bancorp’s third quarter results.

Regions reported average business loans of $67.3 billion, up 5.3% year over year and 0.9% from the second quarter. Average C&I loans increased 4.7% from a year earlier, while investor real estate loans increased 9.3%. Regions said quarterly growth came from C&I categories including government and public sector, wholesale and financial services, where those sectors were identified in Regions third-quarter earnings materials.

KeyCorp’s average commercial loans reached $83.1 billion, up from $75.4 billion a year earlier. C&I line utilization rose about 200 basis points during the quarter to 33.1%.

Gorman said Key was seeing borrowing across industries and markets, including customers spending on capital expenditures and smaller acquisitions.

Consumer Credit Holds Up as Loan Growth Stays Selective

Consumer lending showed relatively less consistent trends, but management commentary did not point to broad deterioration in household credit.

At Regions, average consumer loans declined 2.6% year over year, while credit card balances increased by more than 5%. Management said consumer spending was generally consistent with recent trends and employment conditions remained supportive. The bank indicated that “consumer credit fundamentals remain healthy,” while acknowledging continued economic uncertainty. Net charge-offs fell to an annualized 0.29% of average loans from 0.42% in the second quarter, and nonperforming loans declined to 0.59% of total loans.

U.S. Bancorp’s Kedia also pointed to credit performance. The bank’s net charge-off ratio improved to 0.51%, while consumer deposits reached another quarterly record. Small business was one area where borrowing increased: average small-business loans rose 11% year over year to $18 billion as the bank expanded its small-business offerings and added the Amazon card relationship.

PNC’s average consumer loans declined from the second quarter, partly because $1.4 billion of student loans were moved to held-for-sale. Separate PNC card data indicate that combined debit and credit card spending excluding gasoline increased 5.1% year over year in September (excluding gas) and averaged 4.5% growth over the prior three months. PNC said consumer balance sheets remained healthy, with checking and savings balances growing faster than inflation.

Deposits provide another measure of household and business liquidity. U.S. Bancorp reported average deposits up 2.9% year over year, while KeyCorp’s client deposits increased 1.6%.