US Banks Report Strong Earnings as Businesses Keep Borrowing

Several US regional banks announced strong earnings this week, showing that businesses are still borrowing money even as interest rates remain high. Banks like PNC Financial, U.S. Bancorp, M&T Bank, and Citizens Financial all reported growth in loans during the third quarter of the year. This good news came shortly after the country's biggest banks — including JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup — also reported more loans on their books. Together, these results suggest that the US economy is staying strong in the face of challenges.

PNC Financial led the group of regional banks with loan growth of 14.2% compared to the same time last year. U.S. Bancorp came in second at 8%, followed by M&T Bank at 5.5% and Citizens Financial at 5.29%. These numbers were higher than many experts had expected, especially since borrowing money has become more expensive lately. When loans cost more, businesses sometimes decide to wait before taking on new debt.

Many people expected that high inflation and a recent interest rate increase by the Federal Reserve would slow down borrowing. The Federal Reserve is the central bank of the United States, and it raises interest rates to try to cool down rising prices. Even so, business leaders at these banks said they had not seen any slowdown in demand for loans. Citizens Financial even said that loan demand started to pick up as the bank moved into the fourth quarter.

PNC's chief executive officer, William Demchak, said that people have gotten used to living with uncertainty around the world. 'The clouds are as dark as they ever were, but the economy's still strong. People are investing into it,' Demchak said. He meant that even though there are worries — like conflicts overseas and rising prices — businesses are still moving forward with their plans. This kind of confidence from business leaders is an important sign for the health of the economy.

Bank executives were also asked whether the huge wave of spending on artificial intelligence, or AI, was driving some of the loan growth. AI is technology that allows computers to think and learn in ways that are similar to humans. Companies building AI systems need powerful computers, large data centers, and lots of energy, and many of them are borrowing money to pay for all of this. Citizens Financial CEO Bruce Van Saun described the AI spending boom as 'full-on,' saying it was creating a ripple effect across many other industries.

Van Saun explained that even with higher interest rates, companies building AI systems are not slowing down. 'Even with higher rates, the kind of desire to get the compute power in place, the players aren't really batting an eyelash,' he said. This means that businesses investing in AI do not seem to be bothered by the cost of borrowing money. The demand for AI technology is simply too strong for higher rates to stop them.

PNC does not lend directly to companies building data centers, but Demchak said AI spending is still having an effect on many other sectors. Industries like heavy equipment, transportation, and energy are all seeing more business because of the AI boom. Demchak admitted that if AI-related spending slows down broadly, it could eventually slow loan growth at his bank too, even without direct lending to tech companies. This shows just how connected the AI industry is to the rest of the economy.

Not every bank credited AI for its loan growth. U.S. Bancorp's chief financial officer, John Stern, said his bank's loans were growing strongly even in areas that have nothing to do with AI. He pointed to industries like retail, food and beverage, and insurance as examples of strong borrowing. This suggests that the economy's strength is spread across many different types of businesses, not just the technology sector.