PNC Reports Strong Second Quarter Net Income of $912 Million and $1.67 Diluted EPS
Net Income For First Six Months Up 18 Percent Over First Half 2010
Growth in Customer Relationships Accelerates
PITTSBURGH, July 20, 2011 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported net income of $912 million, or $1.67 per diluted common share, for the second quarter of 2011 compared with net income of $832 million, or $1.57 per diluted common share, for the first quarter of 2011 and net income of $803 million, or $1.47 per diluted common share, for the second quarter of 2010. The company earned net income of $1.7 billion, or $3.24 per diluted common share, for the first six months of 2011 compared with $1.5 billion, or $2.15 per diluted common share, for the first six months of 2010.
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“PNC continued to deliver strong results in the second quarter, reflecting our accelerating sales momentum and the value of our franchise,” said James E. Rohr, chairman and chief executive officer. “Our earnings in a soft economy benefited from improving credit quality and exceptional customer revenue growth. We are confident in our ability to execute our business model and growth strategies which are designed to drive shareholder value.”
Income Statement Highlights
-- Strong earnings for the second quarter reflected client sales and
revenue momentum and improved credit quality.
-- Net interest income of $2.2 billion and net interest margin of 3.93
percent for the second quarter remained essentially stable with the
first quarter.
-- Noninterest income of $1.5 billion for the second quarter remained
essentially stable with the first quarter and included excellent results
in most client fee income categories.
-- The provision for credit losses of $280 million for the second quarter
declined from $421 million in the first quarter as overall credit
quality continued to improve.
-- Noninterest expense of $2.2 billion increased $106 million compared with
the first quarter primarily due to accruals related to legal
contingencies, a first quarter reversal of an accrued liability for
certain Visa litigation and higher marketing costs.
-- A decline in the effective tax rate to 20.4 percent for the second
quarter compared with 27.0 percent for the first quarter was primarily
attributable to the reversal of deferred tax liabilities.
Credit Quality Highlights
-- Credit quality further improved in the second quarter of 2011.
Nonperforming assets declined $459 million, or 9 percent, to $4.5
billion at June 30, 2011 compared with the first quarter. Accruing loans
past due decreased 8 percent to $4.1 billion from $4.5 billion at March
31, 2011, and included $2.7 billion of government insured or guaranteed
loans at June 30, 2011. Net charge-offs declined 22 percent to $414
million from $533 million in the first quarter. The allowance for loan
and lease losses was 120 percent of nonperforming loans as of June 30,
2011 compared with 110 percent at March 31, 2011.
Balance Sheet Highlights
-- PNC continued its momentum in acquiring new clients and deepening
customer relationships during the second quarter with its innovative
products and services, distribution network and cross-sell expertise.
Retail banking checking relationships grew organically by 74,000 during
the second quarter of 2011 compared with 10,000 during second quarter
2010. Net growth in small business checking relationships during the
second quarter was triple that of second quarter 2010. Corporate banking
is on track to exceed its goal of adding 1,000 new primary clients in
2011. Asset management sales referrals from PNC’s retail, corporate
and commercial bankers for the first half of 2011 were double those in
first half 2010.
-- Total loans of $150 billion at June 30, 2011 increased $.9 billion
compared with March 31, 2011 as a result of growth of $2.0 billion in
commercial loans largely from new client acquisition partially offset by
declines in commercial real estate and consumer loans. Loans and
commitments originated and renewed totaled approximately $38 billion in
the second quarter, including $1 billion of small business loans.
-- Total deposits were $182 billion at June 30, 2011, relatively unchanged
from March 31, 2011. Transaction deposits of $137 billion grew $2.6
billion compared with the first quarter end and $11.4 billion from June
30, 2010. Higher cost retail certificates of deposit continued to
decline with a net reduction of 4 percent in the second quarter.
-- PNC’s high quality balance sheet remained core funded with a loans to
deposits ratio of 83 percent at June 30, 2011 and a strong liquidity
position to support growth.
-- PNC had strong capital levels at June 30, 2011 with a Tier 1 common
capital ratio of an estimated 10.5 percent at June 30, 2011, an increase
from 10.3 percent at March 31, 2011.
-- PNC successfully completed the acquisition and conversion of 19 branches
and $324 million of deposits from BankAtlantic Bancorp, Inc. in the
Tampa, Florida area, on June 6, 2011.
-- PNC announced on June 20, 2011 that it had signed a definitive agreement
to acquire RBC Bank (USA), the U.S. retail banking subsidiary of Royal
Bank of Canada. RBC Bank (USA) has approximately $25 billion of assets
and 424 branches in North Carolina, Florida, Alabama, Georgia, Virginia
and South Carolina. The transaction is expected to add approximately $19
billion of deposits and $16 billion of loans and to close in March 2012,
subject to customary closing conditions, including regulatory approvals.
The Consolidated Financial Highlights accompanying this news release include reconciliations of reported to non-GAAP financial measures including a reconciliation of business segment income to income from continuing operations before noncontrolling interests.
CONSOLIDATED REVENUE REVIEW
Total revenue was $3.6 billion for both the second and first quarters of 2011 and $3.9 billion for the second quarter of 2010. Excellent results in most client fee income categories were offset by declines in other noninterest revenue sources in the comparison with the first quarter. The decrease in revenue compared with second quarter 2010 was primarily due to lower net interest income.
Net interest income of $2.2 billion for the second quarter of 2011 remained stable with the first quarter and declined from $2.4 billion in the second quarter of 2010. The net interest margin also remained stable at 3.93 percent for the second quarter compared with 3.94 percent for the first quarter and decreased from 4.35 percent in the second quarter of 2010. In the linked quarter comparison, a decline in the yield on interest-earning assets in the low interest rate environment was partially offset by the benefit of higher noninterest-bearing deposits. The decrease in net interest income and the net interest margin compared with the second quarter of 2010 was primarily attributable to a lower yield on earning assets resulting from lower purchase accounting accretion.
Noninterest income was $1.5 billion for both the second and first quarters of 2011 and for the second quarter of 2010. Client fee income grew in the linked quarter comparison. Asset management fees increased $25 million, or 10 percent, over the first quarter reflecting higher earnings recognized on the BlackRock investment, higher asset values and new clients. Consumer service fees grew $22 million, or 7 percent, compared with the first quarter due to higher volumes of customer-initiated transactions including debit and credit cards and merchant services. Corporate service fees increased $11 million to $228 million compared with the linked quarter reflecting strong capital markets activity partially offset by higher commercial mortgage servicing rights amortization costs due to changes in interest rates and prepayments. Service charges on deposits increased $8 million, or 7 percent, compared with the first quarter largely from higher transaction volumes. Residential mortgage revenue declined $32 million to $163 million compared with the linked quarter primarily as a result of lower loan sales revenue and lower net hedging gains on mortgage servicing rights. Other noninterest income of $266 million for the second quarter decreased $77 million compared with the first quarter largely due to first quarter recoveries on insurance claims and lower results from private equity and alternative investments. Net gains on sales of securities were $82 million in the second quarter of 2011 compared with $37 million in the first quarter. The increase was primarily due to opportunities in the low interest rate environment to sell residential mortgage-backed securities, mainly agency-backed.
Noninterest income in the second quarter of 2011 decreased $25 million compared with the second quarter of 2010 primarily as a result of lower service charges on deposits from the impact of Regulation E rules pertaining to overdraft fees partially offset by higher asset management fees.
CONSOLIDATED EXPENSE REVIEW
Noninterest expense for the second quarter was $2.2 billion compared with $2.1 billion for the first quarter of 2011 and $2.0 billion in the second quarter of 2010. The linked quarter increase of $106 million primarily resulted from a charge of approximately $40 million related to accruals for legal contingencies primarily associated with pending lawsuits offset in part by anticipated insurance recoveries, the impact of a first quarter reversal of a portion of an indemnification liability for certain Visa litigation of $38 million, and higher marketing costs associated with new product launches. Noninterest expense increased $174 million compared with the year ago quarter primarily due to the impact of second quarter 2010 benefits from the reversal of certain accrued liabilities, with $73 million associated with a franchise tax settlement and $47 million associated with certain Visa litigation. PNC remains focused on disciplined expense management while continuing to invest in its businesses.
The effective tax rate was 20.4 percent for the second quarter of 2011 compared with 27.0 percent for the first quarter. The decline was primarily attributable to a $54 million benefit, or $.10 per diluted common share, related to the reversal of deferred tax liabilities associated with adjustments to the tax basis of an asset.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were $263 billion at June 30, 2011 compared with $259 billion at March 31, 2011 and $262 billion at June 30, 2010. The increase compared with the first quarter end was primarily attributable to higher interest-earning deposits with banks and loan growth partially offset by lower investment securities. The increase from June 30, 2010 resulted from higher investment securities somewhat offset by lower loans.
Loans were $150 billion at June 30, 2011 compared with $149 billion at March 31, 2011 and $154 billion at June 30, 2010. Commercial loans grew by $2.0 billion during the second quarter from new client acquisition and higher utilization rates. Commercial real estate loans further decreased by $.8 billion during the quarter. Consumer loans declined by $.3 billion linked quarter primarily from the continued run-off of residential mortgage loans and home equity loans mainly in the distressed assets portfolio and lower education loans partially offset by higher indirect auto loans. Average loans of $150 billion for the second quarter declined $.2 billion compared with the first quarter. Growth in average commercial loans of $1.6 billion, or 3 percent, was more than offset by a decline in average commercial real estate loans of $.8 billion and a decline in average consumer loans, including a $.5 billion decrease in average residential real estate loans. In the comparison with the second quarter of 2010, average loans decreased $5.0 billion, or 3 percent, due to loan repayments, dispositions and net charge-offs and the impact of soft consumer loan demand. Total loan originations and new commitments and renewals were approximately $38 billion for the second quarter of 2011 compared with $28 billion for the first quarter of 2011 and $38 billion for the second quarter of 2010.
Investment securities at June 30, 2011 were $59.4 billion compared with $61.0 billion at March 31, 2011 and $53.7 billion at June 30, 2010. The decline from first quarter end was due to net portfolio sales activity in the second quarter’s low interest rate environment related to residential mortgage-backed securities, primarily agency-backed, and due to principal payments. Average investment securities were $58.5 billion for the second quarter of 2011, a decline of $3.6 billion compared with the first quarter and an increase of $3.1 billion compared with the second quarter of 2010. The linked quarter decrease resulted from net sales activity and principal payments. The increase compared with second quarter 2010 reflected net investments of excess liquidity in high quality securities, primarily agency residential mortgage-backed securities, somewhat offset by principal payments. At June 30, 2011, the available for sale investment securities balance included a net unrealized pretax loss of $.2 billion representing the difference between fair value and amortized cost compared with a net unrealized pretax loss of $.6 billion at March 31, 2011 and $.7 billion at June 30, 2010. The improvement in the net unrealized pretax loss was due to lower market interest rates and, in the comparison with a year ago, improved liquidity in non-agency residential and commercial mortgage-backed securities markets.
Interest-earning deposits with banks increased by $3.1 billion to $4.5 billion as of June 30, 2011 compared with March 31, 2011 primarily due to increased funds on deposit with the Federal Reserve.
Deposits were $181.9 billion at June 30, 2011 compared with $182.0 billion at March 31, 2011 and $178.8 billion at June 30, 2010. Average deposits of $180.8 billion for the second quarter of 2011 were even with the first quarter and declined $1.5 billion compared with the second quarter of 2010. In the linked quarter comparison, growth in average transaction deposits of $2.6 billion, or 2 percent, and average savings deposits was offset by a decline in average retail certificates of deposit of $1.4 billion, or 4 percent, and a $1.6 billion decrease in time deposits in foreign offices. In the comparison with the second quarter of 2010, average transaction deposits grew $7.3 billion, or 6 percent, and average retail certificates of deposit decreased $8.6 billion, or 20 percent. The ongoing planned reduction of higher-cost and primarily nonrelationship certificates of deposit is part of PNC’s overall deposit strategy that is focused on growing demand and other transaction deposits as the cornerstone products of customer relationships and a lower-cost, stable funding source.
Borrowed funds were $35.2 billion at June 30, 2011 compared with $35.0 billion at March 31, 2011 and $40.4 billion at June 30, 2010. Average borrowed funds were $35.0 billion for the second quarter of 2011, $38.4 billion for the first quarter and $41.2 billion for the second quarter of 2010. The decrease in average borrowed funds compared with the first quarter resulted from lower short-term funding instruments including federal funds purchased and repurchase agreements and maturities of bank notes and senior debt and subordinated debt. Lower borrowed funds compared with the second quarter of 2010 were primarily related to maturities of Federal Home Loan Bank borrowings, bank notes and senior debt, and subordinated debt.
PNC had strong capital levels and ratios at June 30, 2011. Common shareholders’ equity increased to $31.6 billion at June 30, 2011 compared with $30.5 billion at March 31, 2011 and $27.7 billion at June 30, 2010. The Tier 1 common capital ratio increased to an estimated 10.5 percent at June 30, 2011 from 10.3 percent at March 31, 2011 and 8.3 percent at June 30, 2010. The Tier 1 risk-based capital ratio increased to an estimated 12.8 percent at June 30, 2011 from 12.6 percent at March 31, 2011 and 10.7 percent at June 30, 2010. The increases in common shareholders’ equity and both ratios were primarily attributable to retention of earnings.
The PNC board of directors recently declared a quarterly common stock cash dividend of 35 cents per share payable on August 5, 2011. During the second quarter, the quarterly cash dividend on common stock payable on May 5, 2011 was increased from first quarter by 25 cents to 35 cents per share. PNC did not actively engage in share repurchase activity in the first six months of 2011 and 24.7 million shares remained available as of June 30, 2011 under its share repurchase program.
CREDIT QUALITY REVIEW
Credit quality continued to improve in the second quarter of 2011. Nonperforming assets declined by $459 million, or 9 percent, to $4.5 billion at June 30, 2011 compared with March 31, 2011 and decreased $1.3 billion, or 22 percent, from $5.7 billion at June 30, 2010. The decrease from first quarter was primarily due to lower commercial and commercial real estate nonperforming loans. The decline from a year ago reflected lower commercial, commercial real estate and residential real estate nonperforming loans. Nonperforming loans declined to $3.9 billion as of June 30, 2011 from $4.3 billion as of March 31, 2011 and $5.1 billion at June 30, 2010. Nonperforming assets to total assets were 1.70 percent at June 30, 2011 compared with 1.90 percent at March 31, 2011 and 2.19 percent at June 30, 2010.
Delinquencies improved in the second quarter of 2011 by $369 million, or 8 percent, compared with the first quarter. Accruing loans past due 90 days or more remained stable at $2.6 billion as of both June 30, 2011 and March 31, 2011, and included government insured or guaranteed loans, primarily residential mortgages, totaling $2.2 billion at both June 30, 2011 and March 31, 2011. Accruing loans past due 60 to 89 days of $553 million at June 30, 2011 declined $23 million from March 31, 2011. Accruing loans past due 30 to 59 days were $945 million at June 30, 2011 compared with $1.3 billion at March 31, 2011, a decrease of 27 percent, related to improving commercial real estate, equipment lease financing and commercial loans. Net charge-offs for the second quarter of 2011 declined to $414 million, or 1.11 percent of average loans on an annualized basis, compared with $533 million, or 1.44 percent, for the first quarter of 2011 and $840 million, or 2.18 percent, for the second quarter of 2010. Net charge-offs decreased in the linked quarter comparison primarily due to a decline in commercial real estate loan net charge-offs and lower home equity loan net charge-offs. The provision for credit losses was $280 million for the second quarter of 2011, $421 million for the first quarter of 2011 and $823 million for the second quarter of 2010. The decreases were driven by overall credit quality improvement and continuation of actions to reduce exposure levels.
The allowance for loan and lease losses was $4.6 billion at June 30, 2011, $4.8 billion at March 31, 2011 and $5.3 billion at June 30, 2010. The allowance for loan and lease losses to total loans was 3.08 percent at June 30, 2011, 3.19 percent at March 31, 2011 and 3.46 percent at June 30, 2010. The decrease in the allowance compared with a year ago primarily resulted from improving credit quality trends in the past year. The allowance to nonperforming loans was 120 percent at June 30, 2011 compared with 110 percent at March 31, 2011 and 104 percent at June 30, 2010.
BUSINESS SEGMENT RESULTS
Retail Banking
Retail Banking earned $44 million for the second quarter of 2011 compared with a loss of $18 million for the first quarter of 2011 and earnings of $80 million for second quarter 2010. Higher earnings in the linked quarter comparison were driven by a lower provision for credit losses and an increase in customer fees partially offset by an increase in noninterest expense. The decrease from the prior year second quarter was a result of lower revenue from the impact of Regulation E rules related to overdraft fees, lower net interest income and higher noninterest expense somewhat offset by a lower provision for credit losses and higher consumer service fees.
-- Checking relationships grew by 74,000 during the second quarter of 2011
exclusive of the BankAtlantic acquisition which added an additional
32,000 checking relationships. Net growth in small business checking
relationships during the second quarter was triple that of second
quarter 2010. Active online banking and active online bill payment
customers each grew by 20 percent, excluding the impact of BankAtlantic,
over second quarter 2010.
-- Success in implementing Retail Banking’s deposit strategy resulted in
growth in average deposits of $.9 billion during the second quarter
compared with the first quarter. Average transaction deposits grew $1.7
billion, or 2 percent, compared with the first quarter and $3.6 billion,
or 5 percent, compared with the prior year second quarter. This growth
was partially offset by planned run-off of higher rate certificate of
deposit balances, net of retention of customer relationships. Average
certificates of deposit declined $8.3 billion, or 20 percent, compared
with the second quarter of 2010. Continued decline in certificates of
deposit is expected throughout 2011. Retail Banking added approximately
$280 million in deposits in the June 2011 acquisition from BankAtlantic.
-- Average loans declined $.5 billion, or 1 percent, from the first quarter
of 2011 and $.9 billion, or 2 percent, compared with second quarter
2010. In both comparisons, decreases in commercial, home equity and
residential mortgage loans were partially offset by growth in indirect
auto loans and, in the comparison with second quarter 2010, higher
education loans. Loan originations have increased, but not to levels
that outpace loan paydowns and net charge-offs.
-- Net interest income for the second quarter of 2011 decreased $8 million,
or 1 percent, compared with the first quarter and $69 million, or 8
percent, compared with the second quarter of 2010. The declines were
primarily driven by lower average loan balances and lower interest
credits assigned to deposits in the continued low interest rate
environment.
-- Noninterest income increased $32 million, or 7 percent, compared with
the first quarter and decreased $49 million, or 10 percent, from the
second quarter of 2010. The linked quarter increase reflected higher
volumes of customer-initiated transactions, including debit and credit
cards and merchant services. In the year-over-year quarter comparison,
noninterest income declined due to lower overdraft fees resulting from
the impact of Regulation E rules partially offset by a higher volume of
transaction-related fees.
-- Noninterest expense for the second quarter increased $20 million, or 2
percent, from the first quarter and $27 million, or 3 percent, over the
second quarter of 2010. In both comparisons, the increase resulted from
higher new product marketing expense and investments in the business
partially offset by lower FDIC expense.
-- Net charge-offs were $223 million for the second quarter compared with
$257 million in the first quarter and $298 million in second quarter
2010. Provision for credit losses was $180 million for the second
quarter of 2011 compared with $276 million in the first quarter and $280
million in the second quarter of 2010. The decrease in the provision
compared with the first quarter was primarily due to signs of improved
credit quality within several loan portfolios.
-- PNC’s expansive branch footprint covers nearly one-third of the U.S.
population in 15 states and Washington, D.C. with a network of 2,459
branches and 6,707 ATMs at June 30, 2011. In the second quarter of 2011,
PNC acquired 19 branches from BankAtlantic, opened 5 traditional and 3
in-store branches and consolidated 14 branches. The planned acquisition
of RBC Bank (USA) in March 2012 is expected to add 424 banking locations
and expand PNC’s footprint to 19 states and over 2,800 branches.
-- For 2011, Retail Banking revenue will decline compared with 2010 from
the impact of the rules set forth in Regulation E related to overdraft
fees and the limits related to interchange rates on debit card
transactions. The incremental negative impact of these two aspects of
regulatory reform on fees is estimated to be approximately $300 million
in 2011 compared with 2010. These estimates do not include any
additional financial impact of other or additional regulatory
requirements.
Corporate & Institutional Banking
Corporate & Institutional Banking earned $448 million in the second quarter of 2011 compared with $432 million in the first quarter of 2011 and $448 million in the second quarter of 2010. Higher earnings in the linked quarter comparison reflected an increase in net interest income and noninterest income partially offset by a higher provision for credit losses. While earnings were flat in the comparison with second quarter 2010, lower net interest income and higher noninterest expense were offset by a lower provision for credit losses and higher noninterest income.
-- Overall results benefited from successful sales efforts to new clients
and product penetration of the existing customer base. New client
acquisitions in corporate banking were on pace to exceed the 1,000 new
primary client goal for the year and increased 19 percent over the first
quarter of 2011 and 26 percent over the second quarter of 2010. Sales of
treasury management and capital markets products to customers in PNC’s
western markets continued to be successful and were ahead of both target
and first half 2010 levels.
-- Net interest income for the second quarter of 2011 of $848 million
increased $49 million compared with the first quarter of 2011 and
declined $86 million compared with the second quarter of 2010. The
increase from the linked quarter was primarily due to higher average
loans and related loan fees. The decline in the comparison with the
prior year quarter was mainly a result of lower purchase accounting
accretion and lower interest credits assigned to deposits which more
than offset increases in average loans and deposits and improved loan
spreads.
-- Corporate service fees of $197 million for the second quarter of 2011
increased $10 million compared with the first quarter and declined $40
million compared with the second quarter of 2010. An increase in capital
markets activity drove the linked quarter increase. Both comparisons
were impacted by a decline in commercial mortgage banking income due to
changes in interest rates and prepayments as reflected in higher
amortization and impairment costs.
-- Other noninterest income of $135 million in the second quarter of 2011
increased $23 million compared with the first quarter and $76 million
compared with the second quarter of 2010. Both comparisons benefited
from higher capital markets activity. The increase from the prior year
quarter was also attributable to improved valuations on the commercial
mortgage held-for-sale portfolio and client-related trading positions.
-- Noninterest expense of $443 million in the second quarter of 2011
decreased $2 million compared with the first quarter and increased $21
million from second quarter 2010. The increase from the prior year
quarter was due to higher compensation-related costs.
-- Net charge-offs for the second quarter of 2011 decreased to $85 million
compared with $153 million in first quarter 2011 and $243 million in the
second quarter of 2010. Net charge-offs declined across all portfolios
in the linked quarter comparison, particularly in the equipment lease
financing and commercial real estate portfolios, which also drove the
decline from second quarter 2010. Nonperforming assets declined for the
fifth consecutive quarter.
-- Provision for credit losses was $31 million for the second quarter of
2011 compared with a benefit of $30 million in the first quarter and a
provision of $97 million in the second quarter of 2010. The increase
from the first quarter was due to higher loan and commitment levels. The
year-over-year second quarter decline reflected overall improvement in
portfolio credit quality partially offset by higher loans and
commitments.
-- Average loans were $65 billion for the second quarter of 2011 compared
with $64 billion in both the first quarter of 2011 and second quarter of
2010. Loan growth in the linked quarter was primarily in commercial
loans and asset-based lending due to new client activity and higher
utilization.
-- Average deposits of $47 billion in the second quarter of 2011 increased
$1.3 billion, or 3 percent, from the first quarter and $4.3 billion, or
10 percent, from the prior year second quarter. Deposit inflows
continued as customers moved balances into noninterest-bearing demand
deposits to maintain liquidity. Deposits related to commercial mortgage
servicing activities also contributed to the linked quarter increase.
-- The commercial mortgage servicing portfolio was $268 billion as of June
30, 2011, $266 billion at March 31, 2011 and $265 billion at June 30,
2010. The increase was largely the result of purchased servicing net of
portfolio run-off.
Asset Management Group
Asset Management Group earned $48 million in the second quarter of 2011 compared with $43 million in the first quarter of 2011 and $27 million in the second quarter of 2010. Assets under administration were $219 billion as of June 30, 2011. Higher earnings for the quarter were driven by a benefit from the provision for credit losses and growth in noninterest income partially offset by an increase in noninterest expense in both comparisons. Overall second quarter results benefited from strong sales and significant referrals from other PNC lines of business.
-- Assets under administration were $219 billion at June 30, 2011,
consistent with March 31, 2011 and $20 billion, or 10 percent, higher
than June 30, 2010. Discretionary assets under management were $109
billion at June 30, 2011 compared with $110 billion at March 31, 2011
and $99 billion at June 30, 2010. The year-over-year quarter growth was
driven by higher equity markets, strong sales performance and client
retention.
-- Noninterest income of $167 million for the second quarter increased $5
million, or 3 percent, compared with the linked quarter and $12 million,
or 8 percent, in the prior year quarter comparison. The increases were
attributable to higher asset values from stronger equity markets in the
comparison with second quarter 2010 and new client acquisition.
-- Net interest income was $59 million for the second quarter of 2011
compared with $60 million in the first quarter and $62 million in the
second quarter of 2010. The decreases were due to lower loan yields and
lower interest credits assigned to deposits reflective of the current
low rate environment.
-- Noninterest expense of $168 million in the second quarter of 2011
increased $8 million, or 5 percent, compared with both first quarter
2011 and second quarter 2010. The increases resulted from investments in
the business and higher compensation-related costs.
-- Credit quality indicators continued to improve and net charge-offs for
second quarter 2011 were minimal. Provision for credit losses was a
benefit of $18 million in the second quarter compared with a benefit of
$6 million in the first quarter and a provision of $14 million in the
second quarter of 2010.
-- Average deposits for the quarter of $7.6 billion decreased $145 million,
or 2 percent, compared with the first quarter due to run-off of higher
rate certificates of deposit and other deposits. Deposits increased $549
million, or 8 percent, in the comparison with second quarter 2010 as
growth in transaction deposits exceeded the strategic run-off of higher
rate certificates of deposit. Average loan balances of $6.1 billion
decreased $203 million, or 3 percent, compared with the linked quarter
and $271 million, or 4 percent, from the prior year second quarter
primarily due to planned exits and soft loan demand in the current
economy.
Residential Mortgage Banking
Residential Mortgage Banking earned $55 million in the second quarter of 2011 compared with $71 million in the first quarter of 2011 and $91 million in the second quarter of 2010. Earnings decreased from the first quarter mainly due to lower loan sales revenue. The decline in earnings from the prior year second quarter primarily resulted from higher noninterest expense and lower net interest income.
-- Total loan originations were $2.6 billion for the second quarter of 2011
compared with $3.2 billion in the first quarter of 2011 and $2.3 billion
in the second quarter of 2010. The linked quarter decrease was driven by
a reduction in refinance volume partially offset by an increase in
purchase loan originations. The increase from the prior year quarter
resulted from higher refinance volume in second quarter 2011. Loan
applications were up 23 percent linked quarter as higher purchase loan
applications more than offset the reduction in refinance applications.
Loans continue to be originated primarily through direct channels under
FNMA, FHLMC and FHA/VA agency guidelines.
-- Residential mortgage loans serviced for others totaled $125 billion at
June 30, 2011 compared with $127 billion at March 31, 2011 and $137
billion at June 30, 2010. Payoffs continued to outpace new loan
production.
-- Noninterest income was $172 million in the second quarter of 2011
compared with $202 million in the first quarter of 2011 and $182 million
in the second quarter of 2010. The linked quarter decrease reflected
lower loan sales revenue and lower net hedging gains on mortgage
servicing rights partially offset by higher servicing fees. The
year-over-year second quarter decrease resulted from lower net hedging
gains on mortgage servicing rights and lower servicing fees somewhat
offset by higher loan sales revenue driven by higher loan origination
volume.
-- Net interest income was $47 million in the second quarter of 2011
compared with $56 million in the first quarter of 2011 and $70 million
in the second quarter of 2010. The decrease compared with the first
quarter largely resulted from a lower balance of loans held for sale.
The year-over-year quarter decrease was primarily due to lower interest
earned on escrow deposits.
-- The provision for credit losses was a benefit of $8 million in the
second quarter compared with an $8 million provision in the first
quarter of 2011 and a benefit of $8 million in the second quarter of
2010.
-- Noninterest expense was $140 million in the second quarter of 2011
compared with $137 million in the first quarter and $109 million in the
second quarter of 2010. The linked quarter increase included higher
foreclosure-related expenses. The increase from second quarter 2010 was
driven by an increase in foreclosure-related expenses and higher
production expenses on a higher loan origination volume.
-- The fair value of mortgage servicing rights was $1.0 billion at June 30,
2011 compared with $1.1 billion at March 31, 2011 and $1.0 billion at
June 30, 2010. The decline in fair value from the first quarter was
primarily due to lower mortgage rates.
Distressed Assets Portfolio
Distressed Assets Portfolio segment had earnings of $84 million for the second quarter of 2011 compared with $25 million in the first quarter of 2011 and a loss of $79 million for the second quarter of 2010. The increase in earnings compared with the linked quarter was due to a lower provision for credit losses and higher net interest income. The increase in the year-over-year second quarter comparison resulted from a lower provision for loan losses and lower noninterest expense partially offset by a decline in net interest income.
-- Average loans were $14 billion for the second quarter of 2011, a decline
of $.6 billion from the first quarter of 2011 and $4.1 billion from the
second quarter of 2010. The decreases were due to portfolio management
activities including paydowns, loan sales and net charge-offs.
-- Net interest income was $257 million for the second quarter compared
with $236 million for the first quarter of 2011 and $348 million for the
second quarter of 2010. The increase over the linked quarter was due to
higher purchase accounting accretion on recoveries of commercial loans.
The decrease from the prior year quarter reflected lower loan balances,
both impaired and unimpaired.
-- Noninterest income was $13 million in the second quarter of 2011
compared with $9 million in the first quarter and $10 million in the
second quarter of 2010. The increase in both comparisons was due to
insurance receipts on nonprime loan defaults.
-- Noninterest expense for the second quarter was $56 million compared with
$53 million in the first quarter of 2011 and $75 million in the second
quarter of 2010. The year-over-year second quarter decline was driven by
lower other real estate owned costs.
-- Net charge-offs were $96 million for the second quarter compared with
$123 million for the first quarter of 2011 and $276 million for the
second quarter of 2010. The decrease in the linked quarter comparison
was primarily due to lower net charge-offs on the construction loan
portfolio. The prior year second quarter decline was a result of net
charge-offs taken in second quarter 2010 related to sales of residential
mortgage and brokered home equity loans and a decrease in net
charge-offs on the construction and mortgage portfolios.
-- The provision for credit losses was $81 million in the second quarter of
2011 compared with $152 million in the first quarter and $404 million in
second quarter of 2010. Credit quality improvements across all
portfolios benefited both comparisons. Delinquencies in the consumer
portfolio improved from the first quarter of 2011.
-- Loans in this segment require special servicing and management oversight
given current loan performance and market conditions. Accordingly, the
business activities of this segment are focused on maximizing value
within a defined risk profile. This includes selling assets when the
terms and conditions are appropriate to reduce future credit and
servicing costs.
Other, Including BlackRock
The “Other, including BlackRock” category, for the purposes of this release, includes earnings and gains or losses related to PNC’s equity interest in BlackRock, asset and liability management activities, including net securities gains or losses, other-than-temporary impairment of debt securities and certain trading activities, equity management activities, integration costs, exited businesses, differences between business segment performance reporting and financial statement reporting under generally accepted accounting principles, most corporate overhead and intercompany eliminations. Results of operations for PNC Global Investment Servicing are presented as income from discontinued operations, net of taxes, through June 30, 2010. The sale of PNC Global Investment Servicing was completed on July 1, 2010 and the after-tax gain on the sale is reflected in discontinued operations for third quarter 2010. Business segment results are presented on the basis of continuing operations before noncontrolling interests.
PNC recorded earnings of $233 million in “Other, including BlackRock” for the second quarter of 2011 compared with $279 million for the first quarter of 2011 and $214 million for the second quarter of 2010. Second quarter 2011 earnings declined from the first quarter primarily due to accruals related to legal contingencies, the impact of a first quarter reversal of a portion of an indemnification liability for certain Visa litigation, first quarter recoveries on insurance claims, and lower second quarter results from private equity and alternative investments partially offset by the benefit of a lower second quarter effective tax rate, higher net gains on sales of securities net of other-than-temporary impairments and higher earnings reported by BlackRock. The increase in earnings from the second quarter of 2010 primarily reflected the impact of integration costs incurred in 2010 and the benefit of the lower effective tax rate somewhat offset by second quarter 2010 benefits from the reversal of certain accrued liabilities associated with a franchise tax settlement and certain Visa litigation.
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC Chairman and Chief Executive Officer James E. Rohr and Executive Vice President and Chief Financial Officer Richard J. Johnson will hold a conference call for investors today at 8:00 a.m. Eastern Time regarding the topics addressed in this news release and the related financial supplement. Dial-in numbers for the conference call are (888) 942-8515 or (210) 234-0067 (international), conference ID PNC, and Internet access to the live audio listen-only webcast of the call is available at www.pnc.com/investorevents. PNC’s second quarter 2011 earnings release, the related financial supplement, and presentation slides to accompany the conference call remarks will be available at www.pnc.com/investorevents prior to the beginning of the call. A telephone replay of the call will be available for one week at (866) 373-1984 or (203) 369-0260 (international), conference ID 5723, and a replay of the audio webcast will be available on PNC’s website for 30 days.
The PNC Financial Services Group, Inc. (www.pnc.com) is one of the nation’s largest diversified financial services organizations providing retail and business banking; residential mortgage banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management.
[TABULAR MATERIAL FOLLOWS]
The PNC Financial Services Group, Inc.
Consolidated Financial Highlights(Unaudited)
Page 14
FINANCIAL RESULTS Three months ended Six months ended
Dollars in millions, except per
share data June 30 March 31 June 30 June 30 June 30
2011 2011 2010 2011 2010
Revenue
Net interest income $2,150 $2,176 $2,435 $4,326 $4,814
Noninterest income 1,452 1,455 1,477 2,907 2,861
Total revenue 3,602 3,631 3,912 7,233 7,675
Noninterest expense 2,176 2,070 2,002 4,246 4,115
Pretax, pre-provision
earnings from continuing
operations (a) 1,426 1,561 1,910 2,987 3,560
Provision for credit losses 280 421 823 701 1,574
Income from continuing operations
before income taxes and
noncontrolling interests (pretax
earnings) $1,146 $1,140 $1,087 $2,286 $1,986
Income from continuing operations
before noncontrolling interests
(b) $912 $832 $781 $1,744 $1,429
Income from discontinued
operations, net of income taxes
(c) 22 45
Net income $912 $832 $803 $1,744 $1,474
Less:
Net income (loss)
attributable to
noncontrolling interests (1) (5) (9) (6) (14)
Preferred stock dividends,
including TARP (d) 24 4 25 28 118
Preferred stock discount
accretion and redemptions,
including redemption of
TARP preferred stock
discount accretion (d) 1 1 1 251
Net income attributable to common
shareholders (d) $888 $833 $786 $1,721 $1,119
Diluted earnings per common share
Continuing operations $1.67 $1.57 $1.43 $3.24 $2.06
Discontinued operations (c) .04 .09
Net income $1.67 $1.57 $1.47 $3.24 $2.15
Cash dividends declared per
common share $.35 $.10 $.10 $.45 $.20
Certain prior period amounts included in these Consolidated Financial
Highlights have been reclassified to conform with the current period
presentation, which we believe is more meaningful to readers of our
consolidated financial statements.
(a) We believe that pretax, pre-provision earnings from continuing operations,
a non-GAAP measure, is useful as a tool to help evaluate our ability to provide
for credit costs through operations.
(b) See page 15 for a reconciliation of business segment income to income from
continuing operations before noncontrolling interests.
(c) Includes results of operations for PNC Global Investment Servicing Inc.
(GIS). We sold GIS effective July 1, 2010.
(d) We redeemed the Series N (TARP) Preferred Stock on February 10, 2010. In
connection with the redemption, we accelerated the accretion of the remaining
issuance discount on the Series N Preferred Stock and recorded a corresponding
reduction in retained earnings of $250 million in the first quarter of 2010.
This resulted in a one-time, noncash reduction in net income attributable to
common shareholders and related basic and diluted earnings per share. The
impact on diluted earnings per share was $.49 for the six months ended June 30,
2010. Total dividends declared during the first six months of 2010 included $89
million on the Series N Preferred Stock.
The PNC Financial Services Group, Inc.
Consolidated Financial Highlights(Unaudited)
Page 15
Three months ended Six months ended
June 30 March 31 June 30 June 30 June 30
2011 2011 2010 2011 2010
PERFORMANCE RATIOS
Net interest margin (a) 3.93 % 3.94 % 4.35 3.93 % 4.29 %
Provision-adjusted net
interest margin (b) 3.42 3.18 2.88 3.29 2.88
Noninterest income to total
revenue (c) 40 40 38 40 37
Efficiency (d) 60 57 51 59 54
Return on:
Average common
shareholders' equity 11.44 11.12 11.52 11.29 8.63
Average assets 1.40 1.29 1.22 1.34 1.12
BUSINESS SEGMENT INCOME
(LOSS)(e) (f)
In millions
Retail Banking $44 $(18) $80 $26 $104
Corporate & Institutional
Banking (g) 448 432 448 880 816
Asset Management Group 48 43 27 91 66
Residential Mortgage Banking 55 71 91 126 169
Distressed Assets Portfolio 84 25 (79) 109 (6)
Other, including BlackRock
(f) (h) 233 279 214 512 280
Income from continuing
operations before
noncontrolling interests $912 $832 $781 $1,744 $1,429
(a) Calculated as annualized taxable-equivalent net interest income divided by
average earning assets. The interest income earned on certain earning assets is
completely or partially exempt from federal income tax. As such, these
tax-exempt instruments typically yield lower returns than taxable investments.
To provide more meaningful comparisons of net interest margins for all earning
assets, we use net interest income on a taxable-equivalent basis in calculating
net interest margin by increasing the interest income earned on tax-exempt
assets to make it fully equivalent to interest income earned on taxable
investments. This adjustment is not permitted under generally accepted
accounting principles (GAAP) in the Consolidated Income Statement. The
taxable-equivalent adjustments to net interest income for the three months
ended June 30, 2011, March 31, 2011, and June 30, 2010 were $25 million, $24
million, and $19 million, respectively. The taxable-equivalent adjustments to
net interest income for the six months ended June 30, 2011 and June 30, 2010
were $49 million and $37 million, respectively.
(b) A reconciliation of net interest margin to provision-adjusted net interest
margin follows. We believe that provision-adjusted net interest margin, a
non-GAAP measure, is useful as a tool to help evaluate the amount of credit
related risk associated with interest-earning assets.
Three months ended Six months ended
June 30 March 31 June 30 June 30 June 30
2011 2011 2010 2011 2010
Net interest margin, as
reported 3.93 % 3.94 % 4.35 % 3.93 % 4.29 %
Less: provision adjustment .51 .76 1.47 .64 1.41
Provision-adjusted net
interest margin 3.42 % 3.18 % 2.88 % 3.29 % 2.88 %
The adjustment represents annualized provision for credit losses divided by
average interest-earning assets.
(c) Calculated as noninterest income divided by total revenue.
(d) Calculated as noninterest expense divided by total revenue.
(e) Our business information is presented based on our management accounting
practices and our management structure. We refine our methodologies from time
to time as our management accounting practices are enhanced and our business
and management structure change. Certain prior period amounts have been
reclassified to reflect current methodologies and our current business and
management structure. We have revised certain capital allocations among our
business segments, including amounts for prior periods. PNC's total capital did
not change as a result of these adjustments for any periods presented. Amounts
are presented on a continuing operations before noncontrolling interests basis
and therefore exclude the earnings attributable to GIS, which we sold effective
July 1, 2010.
(f) We consider BlackRock to be a separate reportable business segment but have
combined its results with Other for this presentation. Our second quarter 2011
Form 10-Q will include additional information regarding BlackRock.
(g) We consider a corporate banking primary client to be a corporate banking
client relationship with annual revenue generation of $50,000 or more or,
within corporate banking, a commercial banking client relationship with annual
revenue generation of $10,000 or more.
(h) Includes earnings and gains or losses related to PNC's equity interest in
BlackRock and residual activities that do not meet the criteria for disclosure
as a separate reportable business, such as gains or losses related to BlackRock
transactions, integration costs, asset and liability management activities
including net securities gains or losses, other-than-temporary impairment of
debt securities and certain trading activities, exited businesses, equity
management activities, alternative investments, intercompany eliminations, most
corporate overhead, and differences between business segment performance
reporting and financial statement reporting (GAAP).
The PNC Financial Services Group, Inc.
Consolidated Financial Highlights(Unaudited)
Page 16
June 30 March 31 June 30
2011 2011 2010
BALANCE SHEET DATA
Dollars in millions, except per share data
Assets $263,117 $259,378 $261,695
Loans (a) (b) 150,319 149,387 154,342
Allowance for loan and lease losses (a) 4,627 4,759 5,336
Interest-earning deposits with banks (a) 4,508 1,359 5,028
Investment securities (a) 59,414 60,992 53,717
Loans held for sale (b) 2,679 2,980 2,756
Goodwill and other intangible assets 10,594 10,764 12,138
Equity investments (a) 9,776 9,595 10,159
Noninterest-bearing deposits 52,683 48,707 44,312
Interest-bearing deposits 129,208 133,283 134,487
Total deposits 181,891 181,990 178,799
Transaction deposits 137,109 134,516 125,712
Borrowed funds (a) 35,176 34,996 40,427
Shareholders’ equity 32,235 31,132 28,377
Common shareholders’ equity 31,588 30,485 27,725
Accumulated other comprehensive income (loss) 69 (309) (442)
Book value per common share 60.02 58.01 52.77
Common shares outstanding (millions) 526 526 525
Loans to deposits 83 % 82 % 86 %
ASSETS UNDER ADMINISTRATION(billions)
Discretionary assets under management $109 $110 $99
Nondiscretionary assets under administration 110 109 100
Total assets under administration 219 219 199
CAPITAL RATIOS
Tier 1 common (c) 10.5 % 10.3 % 8.3 %
Tier 1 risk-based (c) 12.8 12.6 10.7
Total risk-based (c) 16.2 16.2 14.3
Leverage (c) 10.9 10.6 9.1
Common shareholders' equity to assets 12.0 11.8 10.6
ASSET QUALITY RATIOS
Nonperforming loans to total loans 2.57 % 2.88 % 3.31 %
Nonperforming assets to total loans, OREO and
foreclosed assets 2.97 3.29 3.70
Nonperforming assets to total assets 1.70 1.90 2.19
Net charge-offs to average loans (for the
three months ended) (annualized) 1.11 1.44 2.18
Allowance for loan and lease losses to total
loans 3.08 3.19 3.46
Allowance for loan and lease losses to
nonperforming loans (d) 120 110 104
(a) Amounts include consolidated variable interest entities. Our first quarter
2011 Form 10-Q included, and our second quarter 2011 Form 10-Q will include,
additional information regarding these Consolidated Balance Sheet line items.
Also includes our equity interest in BlackRock under Equity investments.
(b) Amounts include assets for which we have elected the fair value option. Our
first quarter 2011 Form 10-Q included, and our second quarter 2011 Form 10-Q
will include, additional information regarding these Consolidated Balance Sheet
line items.
(c) The ratios as of June 30, 2011 are estimated.
(d) The allowance for loan and lease losses includes impairment reserves
attributable to purchased impaired loans. Nonperforming loans do not include
purchased impaired loans or loans held for sale and effective in 2011, do not
include nonperforming residential loans accounted for under the fair value
option.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
We make statements in this news release and related conference call, and may from time to time make other statements, regarding our outlook for earnings, revenues, expenses, capital levels, liquidity levels, asset quality and other matters regarding or affecting PNC and its future business and operations that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words such as “believe,” “plan,” “expect,” “anticipate,” “see,” “intend,” “outlook,” “project,” “forecast,” “estimate,” “goal,” “will,” “should” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time.
Forward-looking statements speak only as of the date made. We do not assume any duty and do not undertake to update forward-looking statements. Actual results or future events could differ, possibly materially, from those anticipated in forward-looking statements, as well as from historical performance.
Our forward-looking statements are subject to the following principal risks and uncertainties.
-- Our businesses, financial results and balance sheet values are affected
by business and economic conditions, including the following:
o Changes in interest rates and valuations in debt, equity and other
financial markets.
o Disruptions in the liquidity and other functioning of U.S. and global
financial markets.
o Actions by Federal Reserve, U.S. Treasury and other government
agencies, including those that impact money supply and market interest
rates.
o Changes in customers’, suppliers’ and other counterparties’
performance and creditworthiness.
o Slowing or failure of the current moderate economic recovery.
o Continued effects of aftermath of recessionary conditions and uneven
spread of positive impacts of recovery on the economy and our
counterparties, including adverse impacts on levels of unemployment,
loan utilization rates, delinquencies, defaults and counterparty
ability to meet credit obligations.
o Changes in customer preferences and behavior, whether due to changing
business and economic conditions, legislative and regulatory
initiatives, or other factors.
-- Our forward-looking financial statements are subject to the risk that
economic and financial market conditions will be substantially different
than we are currently expecting. These statements are based on our
current view that the moderate economic recovery is transitioning into a
self-sustaining economic expansion in 2011, with faster economic growth
in the second half pushing the unemployment rate lower amidst continued
low interest rates.
-- Legal and regulatory developments could have an impact on ability to
operate our businesses, financial condition, results of operations,
competitive position, reputation, or pursuit of attractive acquisition
opportunities. Reputational impacts could affect matters such as
business generation and retention, liquidity, funding, and ability to
attract and retain management. These developments could include:
o Changes resulting from legislative and regulatory reforms, including
broad-based restructuring of financial industry regulation and changes
to laws and regulations involving tax, pension, bankruptcy, consumer
protection, and other industry aspects, and changes in accounting
policies and principles. We will be impacted by extensive reforms
provided for in the Dodd-Frank Wall Street Reform and Consumer
Protection Act (“Dodd-Frank”) and otherwise growing out of the
recent financial crisis, the precise nature, extent and timing of
which, and their impact on us, remains uncertain.
o Changes to regulations governing bank capital, including due to
Dodd-Frank and to Basel III initiatives.
o Unfavorable resolution of legal proceedings or other claims and
regulatory and other governmental investigations or other inquiries.
In addition to matters relating to PNC’s business and activities,
such matters may include proceedings, claims, investigations, or
inquiries relating to pre-acquisition business and activities of
acquired companies, such as National City. These matters may result in
monetary judgments or settlements or other remedies, including fines,
penalties, restitution or alterations in our business practices and in
additional expenses and collateral costs, and may cause reputational
harm to PNC following the acquisition and integration of acquired
businesses into ours.
o Results of regulatory examination and supervision process, including
our failure to satisfy requirements of agreements with governmental
agencies.
o Impact on business and operating results of any costs associated with
obtaining rights in intellectual property claimed by others and of
adequacy of our intellectual property protection in general.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION (CONTINUED)
-- Business and operating results are affected by our ability to identify
and effectively manage risks inherent in our businesses, including,
where appropriate, through effective use of third-party insurance,
derivatives, and capital management techniques, and to meet evolving
regulatory capital standards. In particular, our results currently
depend on our ability to manage elevated levels of impaired assets.
-- Business and operating results also include impacts relating to our
equity interest in BlackRock, Inc. and rely to a significant extent on
information provided to us by BlackRock. Risks and uncertainties that
could affect BlackRock are discussed in more detail by BlackRock in SEC
filings.
-- Our planned acquisition of RBC Bank (USA) presents us with risks and
uncertainties related both to the acquisition transaction itself and its
integration into PNC after closing, including:
o Closing is dependent on, among other things, receipt of regulatory and
other applicable approvals, the timing of which cannot be predicted
with precision at this point and which may not be received at all. The
impact of closing on PNC’s financial statements will be affected by
the timing of the transaction.
o The transaction (including integration of RBC Bank (USA)’s
businesses) may be substantially more expensive to complete than
anticipated. Anticipated benefits, including cost savings and
strategic gains, may be significantly harder or take longer to achieve
than expected or may not be achieved in their entirety as a result of
unexpected factors or events.
o Our ability to achieve anticipated results from this transaction is
dependent also on the following factors, in part related to the state
of economic and financial markets: the extent of credit losses in the
acquired loan portfolios and the extent of deposit attrition. Also,
litigation and governmental investigations that may be filed or
commenced, as a result of this transaction or otherwise, could impact
the timing or realization of anticipated benefits to PNC.
o Integration of RBC Bank (USA)’s business and operations into PNC,
which will include conversion of RBC Bank (USA)’s different systems
and procedures, may take longer than anticipated or be more costly
than anticipated or have unanticipated adverse results relating to RBC
Bank (USA)’s or PNC’s existing businesses. PNC’s ability to
integrate RBC Bank (USA) successfully may be adversely affected by the
fact that this transaction will result in PNC entering several markets
where PNC does not currently have any meaningful retail presence.
-- In addition to the planned RBC Bank (USA) transaction, we grow our
business in part by acquiring from time to time other financial services
companies, financial services assets and related deposits. These other
acquisitions often present risks and uncertainties analogous to those
presented by the RBC Bank (USA) transaction as well, in some cases, with
risks related to entering into new lines of business.
-- Competition can have an impact on customer acquisition, growth and
retention and on credit spreads and product pricing, which can affect
market share, deposits and revenues. Industry restructuring in the
current environment could also impact our business and financial
performance through changes in counterparty creditworthiness and
performance and in competitive and regulatory landscape. Our ability to
anticipate and respond to technological changes can also impact our
ability to respond to customer needs and meet competitive demands.
-- Business and operating results can also be affected by widespread
disasters, dislocations, terrorist activities or international
hostilities through impacts on the economy and financial markets
generally or on us or our counterparties specifically.
We provide greater detail regarding some of these factors in our 2010 Form 10-K and 2011 Form 10-Qs, including Risk Factors and Risk Management sections of those reports, and our subsequent SEC filings. Our forward-looking statements may also be subject to other risks and uncertainties, including those we may discuss elsewhere in this news release or in SEC filings, accessible on the SEC’s website at www.sec.gov and on our corporate website at www.pnc.com/secfilings. We have included these web addresses as inactive textual references only. Information on these websites is not part of this document.
CONTACTS:
MEDIA:
Fred Solomon
(412) 762-4550
corporate.communications@pnc.com
INVESTORS:
William H. Callihan
(412) 762-8257
investor.relations@pnc.com
SOURCE The PNC Financial Services Group, Inc.
Released July 20, 2011