(Bloomberg) -- PNC Financial Services Group dropped the most since August after the company said this quarter’s net interest income will be lower than previously expected. 

“We’ll probably have a little bit less NII because of lower loan volume,” Chief Financial Officer Rob Reilly said at a Bank of America Corp. conference Wednesday. 

The metric, a key source of revenue for the bank, will probably be down 3% to 5%, compared with the company’s previous forecast for a drop of 2% to 3%. Full-year guidance for NII still holds, Reilly said.  

Net interest income — the difference between what the bank pays depositors and what it earns on loans — has come under pressure as higher interest rates force lenders to boost what they shell out to hold on to depositors. The Federal Reserve’s efforts to tame inflation through interest-rate hikes last year also crimped loan demand.

PNC, which had said average loan growth would be stable, now expects it to be down about 1% due to the lagging effect of rate hikes in the first quarter. 

Shares of the Pittsburgh-based company were down 2.7% to $142.80 at 10:08 a.m., after falling as much as 4.8% earlier Wednesday. The drop was the steepest on the 72-company S&P 500 Financials Index.

In the wide-ranging discussion, Reilly also said PNC doesn’t have any merger deals in the works, “but we do see through time the need for more scale.” 

Talking to regulators, “they would be supportive of what they would call a good merger,” Reilly said. “And a good merger means a competent acquirer.” 

--With assistance from Bre Bradham.

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