PNC Financial Services Group Inc. CEO William Demchak said he expects more political scrutiny of large deals in the current political environment following President Biden's executive order that included a call for a reconsideration of how regulators approve bank mergers.

During the bank's July 14 second-quarter earnings call, Demchak said the bank would likely continue to pursue small add-on acquisitions that improve the company's product offerings. In June, the bank closed on its $11.6 billion purchase of BBVA USA, but Demchak said pulling off a similarly sized deal might be tricky.

"A larger deal in today's environment would get much more political scrutiny and noise than we did with the BBVA deal. And that weighs on us," Demchak said on the call.

In response to an analyst question about whether the bank would consider another large deal to expand geographically and move toward its goal of a national footprint, Demchak said the company has looked but would not offer specifics on geography, only saying that the company's decisions would focus on value creation for shareholders. That said, Demchak said the bank could look at smaller, in-market deals.

"In the future, could you see us do smaller deals in-market to gain greater share? Possibly," he said. "Now, the values today just seem way too high to me, but possibly."

Demchak also called the recent increase in bond valuations perplexing. Even after the BBVA deal, the bank has plenty of liquidity to put to work. But Demchak said the bank plans to slow its securities purchases due to the recent flattening of the yield curve.

"I personally believe that the current rally is way overdone, and I don't fully understand it," Demchak said.

Management also commented on the bank's dividend and payout ratio. While the bank increased its dividend by 9% in June, executives said there was room to push it even higher. Demchak said the bank had short notice to submit its capital plan to the Federal Reserve due to the timing of the BBVA deal. And CFO Robert Reilly said the bank continues to maintain its long-term target of a 40% to 50% payout ratio on its dividend.