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In severely adverse scenario, PNC would see 15.4% loss rate in credit card book

Nine quarters of a hypothetical, severely adverse scenario would cause PNC Financial Services Group Inc. to record a pretax $2.7 billion net loss, the company said in its mid-cycle stress test results.

The Dodd-Frank-mandated test covered nine quarters from July 1, 2017, through Sept. 30, 2019, and assumed, among other factors, a 5.9% drop in GDP and an increase in the unemployment rate to 10.1%.

Pittsburgh-based PNC forecast cumulative pre-provision net revenue of $7.2 billion and a $9.9 billion provision for losses. Total loan losses are pegged at $7.5 billion, of which commercial-and-industrial loans will comprise $2.3 billion. That represents a 3.2% loss rate in the commercial and industrial portfolio. Domestic commercial real estate, including those secured by farmland, will see about $1.7 billion in losses, or a 5.4% loss rate. The credit card book will suffer approximately $700 million in losses, or a 15.4% loss rate.

The company's test sees it riding out the nine quarters with a minimum common equity Tier 1 capital ratio of 8.5%, a minimum Tier 1 risk-based capital ratio of 9.8%, a minimum total risk-based capital ratio of 12.3%, a Tier 1 leverage ratio of 8.4% and a minimum supplementary leverage ratio of 7.1%.