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PNC projects 20% increase in reserves from CECL

PNC Financial Services Group Inc. is expecting a 20% increase to its current aggregate reserve levels following implementation of the current expected credit loss standard on Jan. 1, 2020.

There is less than one quarter until CECL will require large banks to estimate the potential losses over their loans' lifetimes and record those losses at origination. During PNC's third-quarter earnings call, CFO Robert Reilly gave clearer insight into CECL's potential impact on the bank's loan loss reserves.

Reilly said the bank has been conducting a parallel run since the beginning of the year and its updated estimate is based on the current economic conditions forecast and its portfolio balance. The 20% reserve build is a more specific estimate than the bank's estimate last quarter of 15% to 25%.

The increase will be driven mostly by its consumer loan portfolio because longer-duration assets will require more reserves, Reilly said on the call.

As the CECL implementation date approaches, banks have been giving more estimates on CECL's effects. Reilly said PNC will "further refine" its allowance estimates through the end of the fourth quarter.