PNC Reports First Quarter Net Income of $671 Million
Strong Performance Driven by Improved Credit Costs and Exceptional Expense Management
Common Capital Increased by 20% Since Year End
PITTSBURGH, April 22 /PRNewswire-FirstCall/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported net income of $671 million, or $.66 per diluted common share, for the first quarter of 2010. Net income would have been $744 million, or $1.31 per diluted common share, for the quarter excluding $.50 per diluted common share related to the redemption of TARP preferred shares and $73 million, or $.15 per diluted common share, for after-tax integration costs.
“PNC began 2010 by delivering strong financial results fueled by well-diversified revenue, exceptional expense management and improved credit costs,” said James E. Rohr, chairman and chief executive officer. “We began to see signs that the pace of credit deterioration had eased at the end of 2009, which is reflected in our lower first quarter provision for credit losses. During the quarter we redeemed our TARP preferred shares and improved the quality of our capital structure by issuing common equity. While there is still uncertainty about the economic environment and potential regulatory changes, we believe PNC is well positioned for another good year.”
Reported net income for the first quarter of 2009 was $530 million, or $1.03 per diluted common share, and $1.1 billion, or $2.17 per diluted common share, for the fourth quarter of 2009. Net income would have been $563 million, or $1.11 per diluted common share, for the first quarter of 2009 excluding after-tax integration costs of $33 million, or $.08 per diluted common share. Fourth quarter 2009 net income would have been $521 million, or $.90 per diluted common share, excluding a $687 million after-tax gain, or $1.49 per diluted common share, related to the BlackRock acquisition of Barclays Global Investors and $101 million, or $.22 per diluted common share, of after-tax integration costs.
HIGHLIGHTS
-- PNC remains committed to responsible lending to support economic growth.
Loans and commitments originated and renewed totaled approximately $32
billion in the first quarter. Since its inception, PNC has funded
approximately 3,200 refinances totaling $.6 billion through the Home
Affordable Refinance Program and has sent approximately 80,700
solicitations to eligible borrowers under the Home Affordable
Modification Program through March 31, 2010. Trial Modification Plan
offers under the Home Affordable Modification Program have been extended
to approximately 21,700 eligible borrowers.
-- Loans totaled $157 billion at March 31, 2010 and decreased a nominal $.3
billion since year end. An increase in loans of $3.5 billion from
consolidating Market Street Funding LLC, a variable interest entity, and
the securitized credit card portfolio was offset by soft customer loan
demand combined with loan repayments and payoffs in the distressed
assets portfolio.
-- Deposits declined by $4.4 billion or 2 percent since year end as PNC
continued to reduce nonrelationship certificates of deposit and other
time deposits and effectively managed deposit pricing, reducing the rate
paid on deposits to .81 percent in the first quarter of 2010 from .93
percent in the fourth quarter of 2009.
-- The company remained core funded with a loan to deposit ratio of 86
percent at March 31, 2010, providing a strong bank liquidity position to
support growth and stability.
-- Pretax pre-provision earnings of $1.7 billion were more than double the
provision for credit losses of $.8 billion in the first quarter of 2010
driven by well-diversified revenue performance, exceptional expense
management and reduced credit costs.
-- Total revenue was $3.8 billion for the quarter and reflected strong net
interest income of $2.4 billion due to the benefit of deposit repricing.
The net interest margin increased 19 basis points to 4.24 percent
compared with the fourth quarter of 2009 due to the impact of deposit
repricing and a reduction in low-rate interest-earning deposits with
banks.
-- Expenses of $2.1 billion in the first quarter declined 4 percent
compared with the linked quarter reflecting further progress in
integrating the National City Corporation acquisition.
-- The overall annualized cost savings goal related to the National City
acquisition of $1.5 billion is expected to be achieved in the fourth
quarter of 2010, earlier than 2011 as previously anticipated. As of
mid-April 2010, PNC had successfully completed the conversion of more
than 4 million customers at over 1,000 National City branches to the PNC
platform. Remaining branch conversions are scheduled to be completed in
June 2010.
-- The pace of credit quality deterioration during the first quarter
continued to ease. Nonperforming assets increased $.2 billion from year
end 2009 to $6.5 billion as of March 31, 2010, a lower increase compared
with $.7 billion in the fourth quarter. Loan loss reserves increased by
5 percent primarily due to the consolidation of the securitized credit
card portfolio. The allowance for loan and lease losses was increased to
$5.3 billion, or 3.38 percent of total loans, as of March 31, 2010.
-- The company announced a definitive agreement to sell PNC Global
Investment Servicing Inc. for $2.3 billion in cash and anticipates
closing the transaction in the third quarter of 2010 subject to
regulatory approvals and certain other closing conditions. Upon
completion of the sale, PNC expects to report an after-tax gain of
approximately $455 million and to further improve its capital structure.
Results of operations for PNC Global Investment Servicing are presented
as income from discontinued operations, net of income taxes, and the
business is no longer a reportable business segment.
-- Common capital was strengthened during the first quarter with a $3.45
billion common equity offering. The estimated Tier 1 common equity ratio
increased by 160 basis points to 7.6 percent at March 31, 2010 from 6.0
percent at December 31, 2009. On a pro forma basis at March 31, 2010,
PNC’s Tier 1 common capital ratio would have been an estimated 8.3
percent based on completion of the sale of PNC Global Investment
Servicing.
-- PNC redeemed all of the $7.6 billion of preferred shares held by the
U.S. Treasury under the Troubled Asset Relief Program (TARP) Capital
Purchase Program in February 2010 using net proceeds from the common
equity offering and a $2 billion senior note offering and other
available funds.
CONSOLIDATED REVENUE REVIEW
Revenue of $3.8 billion for the first quarter of 2010 was well diversified, led by net interest income of $2.4 billion compared with $2.3 billion for the first and fourth quarters of 2009. The net interest margin increased to 4.24 percent for the first quarter of 2010 compared with 3.81 percent for the first quarter of 2009 and 4.05 percent for the fourth quarter of 2009. The increases in net interest income and the margin for both periods of comparison reflected the company’s successful deposit pricing strategy as well as the benefit to the margin of a reduction in low-rate interest-earning deposits with banks. The interest rate paid on deposits declined to .81 percent for the first quarter of 2010 compared with 1.44 percent for first quarter 2009 and .93 percent for the fourth quarter of 2009. PNC’s deposit strategy included the retention and repricing at lower rates of relationship-based certificates of deposit and the planned run off of maturing non-relationship certificates of deposit.
Noninterest income totaled $1.4 billion for the first quarters of 2010 and 2009 and $2.5 billion for the fourth quarter of 2009. Asset management fees grew $40 million, or 18 percent, compared with the linked quarter due to improved markets and client growth. Residential mortgage fees increased $40 million, or 37 percent, over fourth quarter 2009 due to higher loan servicing and loan sales revenue. Service charges on deposits declined 15 percent compared with fourth quarter 2009 primarily due to seasonal declines in overdraft charges. Consumer service fees decreased 6 percent on a linked quarter basis due to lower brokerage fees, seasonal declines in transaction related fees and the impact of the consolidation of the securitized credit card portfolio. Other noninterest income of $240 million in the first quarter of 2010 included market-driven revenue and valuations associated with equity management, customer-related trading and other assets, and gains on sales of loans and other real estate owned. Fourth quarter 2009 included a $1.1 billion gain recognized on PNC’s portion of the increase in BlackRock’s equity resulting from the value of BlackRock shares issued in connection with BlackRock’s acquisition of Barclays Global Investors. The net effect to first quarter 2010 noninterest income of net securities gains and other-than-temporary impairment losses on securities was a decrease of $26 million compared with the fourth quarter of 2009.
Noninterest income was essentially flat compared with the prior year first quarter as higher asset management and corporate service fees and an increase in the net effect of net securities gains and other-than-temporary impairment losses on securities were substantially offset by declines in revenue related to residential mortgage servicing activities, consumer service fees and service charges on deposits.
CONSOLIDATED EXPENSE REVIEW
Noninterest expense for the first quarter of 2010 was $2.1 billion, a reduction of 2 percent compared with the first quarter of 2009 and a reduction of 4 percent compared with the fourth quarter of 2009. The decline in noninterest expense was primarily due to the impact of higher cost savings related to the National City acquisition in both comparisons and lower integration costs compared with the linked quarter. The overall multi-year annualized acquisition cost savings goal is $1.5 billion, which the company expects to achieve in the fourth quarter of 2010, earlier than the original 2011 timeframe. Integration costs in noninterest expense were $102 million for the first quarter of 2010, $52 million for the first quarter of 2009 and $155 million for the fourth quarter 2009.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were $265 billion at March 31, 2010 compared with $286 billion at March 31, 2009 and $270 billion at December 31, 2009. The decrease compared with March 31, 2009 was primarily due to declines in loans and interest-earning deposits with banks as PNC invested a portion of its available liquidity in low risk investment securities. The decrease compared with the linked quarter end was primarily attributable to lower interest-earning deposits with banks.
Average loans of $159 billion for the quarter decreased $15 billion, or 9 percent, compared with the year-earlier first quarter and increased $.6 billion compared with the fourth quarter of 2009. The decrease in average loans compared with first quarter 2009 was primarily due to reduced loan demand, paydowns, lower utilization levels and net charge-offs leading to declines of 18 percent in commercial loans and 12 percent in both commercial real estate loans and residential mortgage loans. Average loans in the first quarter of 2010 were increased by the impact of the consolidation of Market Street and the securitized credit card portfolio, including $3.5 billion of loans, pursuant to new accounting guidance effective January 1, 2010. PNC is committed to providing credit and liquidity to qualified borrowers. Total loan originations and new commitments and renewals were approximately $32 billion in the first quarter of 2010 compared with $26 billion in the first quarter of 2009 and $27 billion in the fourth quarter of 2009. Included in these amounts were originations for first mortgages of $2.0 billion in the first quarter of 2010, $6.9 billion in the first quarter of 2009 and $2.3 billion in the fourth quarter of 2009.
Loans held for sale averaged $2.5 billion in the first quarter of 2010 compared with $4.5 billion for the first quarter of 2009 and $2.9 billion in the fourth quarter of 2009. The decrease from first quarter 2009 was primarily due to lower residential mortgage loan originations during subsequent quarters.
Average investment securities for the first quarter of 2010 were $57 billion, an increase of $7.0 billion, or 14 percent, compared with the first quarter of 2009 and an increase of $1.1 billion, or 2 percent, compared with the fourth quarter of 2009. The increase in securities over first quarter 2009 reflected net investments of a portion of available liquidity in lower risk assets, primarily U.S. Treasury and government agency securities. The linked quarter increase in securities was largely related to the Market Street consolidation. The March 31, 2010 investment securities balance included a net unrealized pretax loss of $1.6 billion representing the difference between fair value and amortized cost compared with net unrealized pretax losses of $4.4 billion at March 31, 2009 and $2.3 billion at December 31, 2009. The improvement in the net unrealized pretax loss compared with March 31, 2009 was due to improved liquidity in non-agency residential and commercial mortgage-backed securities markets.
Average deposits of $183 billion declined $9.1 billion, or 5 percent, compared with the first quarter of 2009 and $3.2 billion, or 2 percent, compared with the linked quarter. The decline from the prior year first quarter occurred as PNC decreased high-cost nonrelationship certificates of deposit and other time deposits and grew transaction deposits reflecting customer preferences for liquidity. In the linked quarter comparison, average deposits decreased due to the withdrawal of corporate client balances in noninterest-bearing demand deposits, the continued reduction of nonrelationship certificates of deposit and lower time deposits in foreign offices, partially offset by increased balances of interest-bearing transaction accounts.
Average borrowed funds for the first quarter of 2010 were $42 billion, a decrease of $5.6 billion, or 12 percent, compared with the first quarter of 2009 and an increase of $2.7 billion, or 7 percent, compared with the fourth quarter of 2009. The decrease from the prior year first quarter was primarily due to maturities of Federal Home Loan Bank borrowings. In February 2010, PNC issued $2.0 billion of senior notes which proceeds were used toward redemption of the $7.6 billion of TARP preferred shares. Other borrowed funds increased in the linked quarter comparison due to the impact of the Market Street and securitized credit card portfolio consolidations.
PNC enhanced the quality of its capital during the first quarter of 2010. Common shareholders’ equity grew to $26 billion at March 31, 2010 compared with $19 billion at March 31, 2009 and $22 billion at December 31, 2009. During the first quarter of 2010 PNC raised $3.45 billion in new common equity through the issuance of 63.9 million common shares at an offering price of $54 per share. On February 10, 2010, net proceeds from the common equity and senior notes offerings combined with other available funds were used to redeem all of the $7.6 billion of preferred shares issued to the U.S. Treasury under the TARP Capital Purchase Program. In connection with the redemption of the TARP preferred shares, accretion of the remaining issuance discount was accelerated and resulted in a $250 million reduction of net income attributable to common shareholders or a $.50 reduction in earnings per diluted common share. PNC paid $89 million in dividends to the U.S. Treasury on the TARP preferred shares in the first quarter of 2010, or $.18 per diluted common share, and $421 million since the shares were issued in December 2008.
PNC increased the Tier 1 common equity ratio to an estimated 7.6 percent at March 31, 2010 from 6.0 percent at December 31, 2009 and 4.9 percent at March 31, 2009 largely as a result of the common equity issuance and retained earnings. The Tier 1 risk-based capital ratio decreased to an estimated 9.9 percent at March 31, 2010 from 11.4 percent at December 31, 2009 and 10.0 percent at March 31, 2009 primarily due to redemption of the TARP preferred shares partially offset by the common equity issuance and retained earnings. On a pro forma basis assuming completion of the sale of PNC Global Investment Servicing, PNC’s Tier 1 common capital ratio would have been an estimated 8.3 percent and the Tier 1 risk-based capital ratio would have been an estimated 10.6 percent at March 31, 2010. The PNC board of directors recently declared a quarterly common stock cash dividend of 10 cents per share payable on April 24, 2010.
ASSET QUALITY REVIEW
The pace of credit quality deterioration continued to slow in the first quarter of 2010. Nonperforming assets were $6.5 billion at March 31, 2010 reflecting a nominal increase compared with $6.3 billion at December 31, 2009 and $3.5 billion at March 31, 2009. The increase of $224 million from year end was lower than the increase in nonperforming assets in the past three consecutive quarters of $672 million, $988 million and $1.1 billion, respectively. Nonperforming assets to total assets were 2.46 percent at March 31, 2010 compared with 2.34 percent at December 31, 2009 and 1.23 percent at March 31, 2009.
Accruing loans past due 90 days or more were $.8 billion at March 31, 2010 and declined 5 percent from December 31, 2009. Accruing loans past due 30 to 89 days were $2.5 billion at March 31, 2010, a 3 percent increase compared with year end reflecting higher commercial real estate loan delinquencies somewhat offset by lower commercial loan delinquencies.
The provision for credit losses was $751 million for the first quarter of 2010 compared with $1.049 billion for the fourth quarter of 2009 and $880 million in the first quarter of 2009. The $298 million decrease in the provision compared with the linked quarter primarily resulted from lower additional reserves required for commercial loans. Net charge-offs for the first quarter of 2010 were $691 million, or 1.77 percent of average loans on an annualized basis, compared with $835 million, or 2.09 percent, for the fourth quarter of 2009 and $431 million, or 1.01 percent, for the first quarter of 2009. The decrease in net charge-offs of $144 million compared with the fourth quarter was primarily due to lower commercial loan and commercial real estate loan net charge-offs.
The company increased the allowance for loan and lease losses during the first quarter to $5.3 billion at March 31, 2010 from $5.1 billion at December 31, 2009 and $4.3 billion at March 31, 2009. The linked quarter increase was primarily due to consolidation of the securitized credit card portfolio. The allowance for loan and lease losses to total loans increased to 3.38 percent at March 31, 2010 compared with 3.22 percent at December 31, 2009 and 2.51 percent at March 31, 2009. The allowance to nonperforming loans was 92 percent at March 31, 2010, 89 percent at December 31, 2009 and 145 percent at March 31, 2009.
BUSINESS SEGMENT RESULTS
Retail Banking
Retail Banking earned $24 million for the quarter compared with earnings of $50 million for the year-ago quarter and a loss of $25 million for the fourth quarter of 2009. Earnings declined from the prior year first quarter as a result of increased credit costs, lower interest credits assigned to deposits, and a decline in fees which was partially offset by well-managed expenses. The increase in earnings over the prior quarter was primarily the result of lower credit costs. Retail Banking continued to maintain its focus on growing customers and deposits, customer and employee satisfaction, investing in the business for future growth, as well as disciplined expense management during this period of market and economic uncertainty. The deposit strategy of Retail Banking is to remain disciplined on pricing while targeting specific products and markets for growth.
Retail Banking overview:
-- Success in implementing Retail Banking’s deposit strategy resulted in
growth in average transaction deposits of $3.1 billion, or 4 percent,
compared with the prior year first quarter and $1.4 billion, or 2
percent, compared with the linked quarter. Excluding approximately $1.9
billion of average transaction deposits from first quarter 2009 balances
related to branch divestitures, average transaction deposits increased
$5.0 billion, or 7 percent, over the prior year first quarter. The
growth in transaction deposits was more than offset by planned run off
of higher rate certificates of deposit net of successful retention of
customer relationships. Required branch divestitures also impacted the
year-over-year quarter comparison. A continued decline in certificates
of deposit is expected in 2010.
-- Retail Banking continued to focus on expanding and deepening customer
relationships. Checking relationships declined by 5,000 during the first
quarter of 2010, a better than expected result and primarily due to the
impact of branch conversion activities in many markets. Customer
retention was stronger than anticipated and helped to offset lower
acquisition of new relationships in branch conversion markets. Markets
not impacted by conversion activities had strong first quarter checking
relationship results. Active online bill payment and online banking
customers grew by 6 percent and 1 percent, respectively, during the
first quarter.
-- Average loans increased $2.2 billion, or 4 percent, over the year-ago
quarter and increased $2.5 billion, or 4 percent, compared with the
fourth quarter of 2009. The increases in both comparisons were driven by
the consolidation of the securitized credit card portfolio and increased
education loans partially offset by lower commercial, home equity and
residential mortgage loans.
-- Net interest income for the first quarter of 2010 declined by $50
million compared with the first quarter of 2009 and increased by $38
million compared with the linked quarter. In both comparisons net
interest income benefited from the consolidation of the securitized
credit card portfolio, higher demand deposits and increased education
loans, and was negatively impacted by lower interest credits assigned to
deposits, reflective of the rate environment.
-- Noninterest income declined $31 million over the first quarter of 2009
and $57 million compared with the linked quarter. In both comparisons
fees declined due to the consolidation of the securitized credit card
portfolio, decreases in service charges on deposits related to lower
overdraft charges, and lower brokerage fees. The linked quarter
comparison was negatively impacted by seasonal declines in transaction
related fees. The prior year first quarter comparison was further
reduced by the impact of branch divestitures but benefited from growth
in transaction volume-related fees.
-- Noninterest expense for the first quarter declined $78 million from the
prior year first quarter and $36 million from the linked quarter.
Expenses were well managed as continued investments in distribution
channels were more than offset by reductions in expenses from
acquisitions and the required branch divestitures.
-- Provision for credit losses was $340 million for the first quarter of
2010 compared with $304 million in the first quarter of 2009 and $409
million in the prior quarter. The fourth quarter of 2009 included
increased reserves required for small commercial loans and the credit
card portfolio.
-- Retail Banking had 2,461 branches and an ATM network of 6,467 machines
at March 31, 2010. During the first quarter of 2010, PNC opened 3
traditional branches, consolidated 55 branches and had a net reduction
of 6 ATMs. The reduction in branches and ATMs mainly resulted from
branch consolidations following the second National City customer
conversion in February 2010.
Corporate & Institutional Banking
Corporate & Institutional Banking earned $360 million in the first quarter of 2010 compared with $359 million in the first quarter of 2009 and $415 million in the fourth quarter of 2009. Earnings in both comparisons were adversely impacted by a decrease in net interest income but benefited from a lower provision for credit losses and higher noninterest income.
Corporate & Institutional Banking overview:
-- Net interest income for the first quarter of 2010 was $877 million, a
decrease of $146 million compared with the first quarter of 2009 and a
decrease of $132 million compared with the fourth quarter of 2009. Both
comparisons were impacted by a decline in average loans and lower
interest credits assigned to deposits. The decrease in the linked
quarter comparison was also due to lower average deposits.
-- Corporate service fees were $242 million in the first quarter of 2010
compared with $218 million in the first quarter of 2009 and $235 million
in the fourth quarter of 2009. Both increases reflected first quarter
2010 fees associated with commercial mortgage special servicing. Merger
and acquisition advisory fees increased in the year-over-year comparison
and decreased compared with the fourth quarter of 2009.
-- Other noninterest income was $129 million in the first quarter of 2010
compared to $49 million in the first quarter of 2009 and $133 million in
the fourth quarter of 2009. The increase from a year ago was due to a
reduction in reserves for the DUS lending program, a benefit from the
impact of lower credit spreads on the valuations of customer derivative
activity and higher underwriting revenue partially offset by a decline
in valuation gains on commercial mortgage and multi-family held for sale
loan portfolios.
-- Noninterest expense was $445 million in the first quarter of 2010
compared with $430 million in the first quarter of 2009 and $444 million
in the fourth quarter of 2009. The increase over first quarter 2009 was
primarily due to higher compensation expense related to increased sales
activity, FDIC costs for higher deposit balances and credit-related
expenses.
-- Provision for credit losses was $236 million in the first quarter of
2010 compared with $287 million in the first quarter of 2009 and $283
million in the fourth quarter of 2009. The 2010 provision was driven by
continued deterioration in commercial real estate loans. The decline
compared with the year-ago first quarter was primarily from lower loan
balances and the linked quarter decrease was largely due to improved
performance in the middle market portfolio. Net charge-offs for the
first quarter of 2010 were $271 million compared with $167 million in
the first quarter of 2009 and $341 million in fourth quarter of 2009.
Net charge-offs showed signs of slowing in the middle market and
asset-based lending portfolios.
-- Average loans were $66 billion for the first quarter of 2010 compared
with $78 billion in the first quarter of 2009 and $67 billion in the
fourth quarter of 2009. The first quarter of 2010 included an increase
in loans from the consolidation of Market Street. Excluding Market
Street, average loans decreased $13 billion, or 17 percent, compared
with the prior year first quarter and $2 billion, or 3 percent, compared
with the linked quarter. Declines in utilization levels among middle
market and large corporate clients continued to result in lower loan
balances although the trend has slowed. Commercial real estate loans
decreased compared with the linked quarter driven by payoffs and
paydowns and exiting select customer relationships.
-- Average deposits were $42 billion in the first quarter of 2010, an
increase of $9.7 billion, or 30 percent, compared with the first quarter
of 2009 as customers continued to move balances from off-balance sheet
sweep products to noninterest-bearing demand deposits and from the
impact of the return of deposits from National City customers who had
previously moved funds to other institutions.
-- The commercial mortgage servicing portfolio was $282 billion at March
31, 2010 compared with $269 billion at March 31, 2009 and $287 billion
at December 31, 2009. The increase compared with a year ago reflected
the continued growth in the agency and conventional servicing portfolios
which was somewhat offset by a decline in the commercial mortgage-backed
securities servicing portfolio. The servicing portfolio declined from
year end primarily due to prepayment activity, scheduled maturities and
other servicing transfers.
Asset Management Group
Asset Management Group earned $39 million for the first quarters of 2010 and 2009 and $23 million for the fourth quarter of 2009. Assets under administration were $209 billion as of March 31, 2010. Strong revenue for the first quarter of $228 million reflected increased assets under management driven by increases in asset values and continued new business generation. Earnings grew 70 percent over the linked quarter as a result of a lower provision for credit losses and strong asset management fees. Flat earnings relative to the first quarter of 2009 reflected higher asset management fees and lower expenses and provision for credit losses offset by reduced net interest income from lower yields on loans. During the quarter, the business successfully executed the first and largest of its National City trust system conversions.
Asset Management Group overview:
-- Assets under administration increased to $209 billion at March 31, 2010
compared with $205 billion at December 31, 2009 and declined from $216
billion at March 31, 2009. Discretionary assets under management
increased to $105 billion at March 31, 2010 compared with $103 billion
at December 31, 2009 and $96 billion at March 31, 2009. The year over
year growth in discretionary assets was more than offset by a decrease
in nondiscretionary assets as a result of an exit of a noncore product
offering and other National City integration impacts.
-- Noninterest income of $164 million for the quarter increased $10
million, or 6 percent, compared with the first quarter of 2009, and $13
million, or 9 percent, compared with the linked quarter. The growth from
the previous quarters was primarily due to continued client expansion
and the improved equity markets.
-- Net interest income for the first quarter decreased $32 million, or 33
percent, compared with the first quarter of 2009, and $3 million, or 4
percent, compared with the linked quarter. The decreases were primarily
due to a reduction in higher yield loans.
-- Noninterest expense of $157 million in the first quarter of 2010
decreased by $13 million, or 8 percent, from the year-ago quarter and
increased 1 percent compared with the linked quarter. The year-over-year
decline is attributable to disciplined expense management as well as
integration-related initiatives.
-- Provision for credit losses was $9 million for the first quarter of 2010
compared with $17 million for the first quarter of 2009 and $25 million
for the fourth quarter of 2009. The decrease in the provision compared
with the fourth quarter was attributable to improved credit quality.
Credit quality indicators remained stable and reserves as a percent of
total loans were consistent with the linked quarter.
-- Average deposits for the quarter decreased $461 million, or 6 percent,
from the prior year first quarter and increased $110 million, or 2
percent, from the linked quarter. The decrease from first quarter 2009
was due to a strategic exit of higher rate certificates of deposit.
Average loan balances decreased $304 million, or 4 percent, from the
prior year first quarter and $103 million, or 2 percent, compared with
the linked quarter. Home equity loans grew in the first quarter 2009
comparison while commercial loans and residential mortgages declined in
both comparisons.
Residential Mortgage Banking
Residential Mortgage Banking earned $82 million in the first quarter of 2010 compared with $227 million in the first quarter of 2009 and $25 million in the fourth quarter of 2009. Earnings decreased from first quarter 2009 due to lower net hedging gains on mortgage servicing rights and loan sales revenue. The linked quarter increase in earnings was driven by higher noninterest income from loan servicing and loan sales revenues and lower noninterest expense.
Residential Mortgage Banking overview:
-- Total loan originations were $2.0 billion for the first quarter of 2010
compared with $6.9 billion in the first quarter of 2009 and $2.3 billion
in the fourth quarter of 2009. Lower mortgage rates in the first quarter
of 2009 resulted in high loan application and origination volumes. Loans
continued to be primarily originated through direct channels under FNMA,
FHLMC and FHA/VA agency guidelines.
-- Residential mortgage loans serviced for others totaled $141 billion at
March 31, 2010 compared with $168 billion at March 31, 2009 and $145
billion at December 31, 2009. Payoffs continued to outpace new direct
loan origination volume during the quarter. The decline from a year
earlier also reflected the sale of $7.9 billion of servicing in the
fourth quarter of 2009.
-- Noninterest income was $157 million in the first quarter of 2010
compared with $437 million in the first quarter of 2009 and $105 million
in the fourth quarter of 2009. The year over year quarter decline was
due to lower net hedging gains on mortgage servicing rights and reduced
loan sales revenue related to strong loan origination refinance volume
in the first quarter of 2009. The linked quarter increase in noninterest
income reflected higher loan servicing revenue primarily driven by
higher fourth quarter costs associated with repurchasing
government-insured loans as well as lower payoff volume.
-- Net interest income was $80 million in the first quarter of 2010
compared with $91 million in the first quarter of 2009 and $71 million
in the fourth quarter of 2009. The decrease compared with the first
quarter of 2009 resulted from lower residential mortgage loans held for
sale. The linked quarter increase was primarily due to interest earned
on repurchased government-insured loans.
-- Noninterest expense declined to $124 million in the first quarter of
2010 compared with $173 million in the first quarter of 2009 and $142
million in the fourth quarter of 2009 as lower loan origination volume
drove a reduction in expenses.
-- The fair value of mortgage servicing rights was $1.3 billion at March
31, 2010 compared with $1.0 billion at March 31, 2009 and $1.3 billion
at December 31, 2009.
Distressed Assets Portfolio
Distressed Assets Portfolio segment had earnings of $72 million for the first quarter of 2010 compared with earnings of $3 million for the first quarter of 2009 and a loss of $88 million in the fourth quarter of 2009. Earnings improved primarily due to lower provision for credit losses and higher net interest income on impaired loans.
Distressed Assets Portfolio overview:
-- Average loans declined to $18 billion in the first quarter of 2010
compared with $23 billion in the first quarter of 2009 and $19 billion
for the fourth quarter of 2009. The decrease in the linked quarter
comparison was primarily driven by paydowns. The comparison to first
quarter 2009 was also impacted by portfolio management activities
including loan sales and efforts to encourage customers to refinance or
pay off consumer loan balances.
-- Net interest income was $338 million for the first quarter of 2010
compared with $331 million for the first quarter of 2009 and $218
million for the fourth quarter of 2009. The increases in both
comparisons were driven by higher accretion on impaired loans due to
improved cash collection results which more than offset the decline in
average loans.
-- Noninterest income reflected a loss of $1 million for the first quarter
of 2010 compared with revenue of $13 million in first quarter 2009 and
$3 million in the linked quarter. The decline in both comparisons was
due to an increase in recourse reserves for brokered home equity loans
sold.
-- Noninterest expense for first quarter 2010 of $58 million declined $22
million compared with first quarter 2009 primarily due to lower other
real estate owned related expenses and losses. Noninterest expense
increased $9 million compared with fourth quarter 2009 as the linked
quarter included $12 million of net gains on other real estate owned
sales.
-- The provision for credit losses was $165 million in the first quarter of
2010 compared with $259 million in first quarter 2009 and $314 million
in the fourth quarter of 2009. The declines were largely driven by the
consumer loan portfolio in both comparisons.
-- Loans in this segment require special servicing and management oversight
given current loan performance and market conditions. Consequently, the
business activities of this segment are focused on maximizing value
within a defined risk profile, including selling assets when the terms
and conditions are appropriate.
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, corporate overhead and intercompany eliminations. As a result of its pending sale, Global Investment Servicing is no longer a reportable business segment, and business segment results are presented on the basis of continuing operations before noncontrolling interests.
PNC recorded earnings of $71 million in “Other, including BlackRock” for the first quarter of 2010 compared with a loss of $158 million for the first quarter of 2009 and earnings of $753 million for the fourth quarter of 2009. First quarter 2010 earnings included BlackRock equity earnings reflecting BlackRock’s acquisition of Barclays Global Investors and higher results from equity management and alternative investments compared with both 2009 quarters and higher trading results compared with first quarter 2009. The first quarter 2009 loss reflected the after-tax impact of other-than-temporary impairment charges and alternative investment writedowns and equity management losses. Fourth quarter 2009 earnings included a $687 million after-tax gain related to the BlackRock acquisition of Barclays Global Investors. After-tax integration costs were higher in the first quarter of 2010 compared with the year-ago first quarter, and lower than the linked quarter.
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 8:30 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 (800) 990-2718 or (706) 643-0187 (international), conference ID 66991424. The related financial supplement and presentation slides to accompany the conference call remarks may be found at www.pnc.com/investorevents. A taped replay of the call will be available for one week at (800) 642-1687 or (706) 645-9291 (international), conference ID 66991424.
In addition, Internet access to the call (listen only) and to PNC’s first quarter 2010 earnings release, supplemental financial information and presentation slides will be available at www.pnc.com/investorevents. A replay of the 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; asset management and global fund services.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
We make statements in this news release and in the conference call regarding this news release, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality and/or other matters regarding or affecting PNC 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,” “intend,” “outlook,” “estimate,” “forecast,” “will,” “project” 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 they are made. We do not assume any duty and do not undertake to update our forward-looking statements. Actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements, and future results could differ materially from our historical performance.
Our forward-looking statements are subject to the following principal risks and uncertainties. We provide greater detail regarding some of these factors in our 2009 Form 10-K, including in the Risk Factors and Risk Management sections of that report, and in our subsequent SEC filings. Our forward-looking statements may also be subject to other risks and uncertainties, including those that we may discuss elsewhere in this news release or in our filings with the SEC, accessible on the SEC’s website at www.sec.gov and on or through 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.
-- Our businesses and financial results are affected by business and
economic conditions, both generally and specifically in the principal
markets in which we operate. In particular, our businesses and financial
results may be impacted by:
o Changes in interest rates and valuations in the debt, equity and other
financial markets.
o Disruptions in the liquidity and other functioning of financial
markets, including such disruptions in the markets for real estate and
other assets commonly securing financial products.
o Actions by the Federal Reserve and other government agencies,
including those that impact money supply and market interest rates.
o Changes in our customers’, suppliers’ and other counterparties’
performance in general and their creditworthiness in particular.
o Changes in levels of unemployment.
o Changes in customer preferences and behavior, whether as a result of
changing business and economic conditions, climate-related physical
changes or legislative and regulatory initiatives, or other factors.
-- A continuation of turbulence in significant portions of the US and
global financial markets, particularly if it worsens, could impact our
performance, both directly by affecting our revenues and the value of
our assets and liabilities and indirectly by affecting our
counterparties and the economy generally.
-- Our business and financial performance could be impacted as the
financial industry restructures in the current environment, both by
changes in the creditworthiness and performance of our counterparties
and by changes in the competitive and regulatory landscape.
-- Given current economic and financial market conditions, our
forward-looking financial statements are subject to the risk that these
conditions will be substantially different than we are currently
expecting. These statements are based on our current expectations that
interest rates will remain low in the first half of 2010 but will move
upward in the second half of the year and our view that the moderate
economic recovery that began last year will extend through 2010.
-- Legal and regulatory developments could have an impact on our ability to
operate our businesses or our financial condition or results of
operations or our competitive position or reputation. Reputational
impacts, in turn, could affect matters such as business generation and
retention, our ability to attract and retain management, liquidity, and
funding. These legal and regulatory developments could include:
o Changes resulting from legislative and regulatory responses to the
current economic and financial industry environment.
o Other legislative and regulatory reforms, including broad-based
restructuring of financial industry regulation as well as changes to
laws and regulations involving tax, pension, bankruptcy, consumer
protection, and other aspects of the financial institution industry.
o Increased litigation risk from recent regulatory and other
governmental developments.
o Unfavorable resolution of legal proceedings or other claims and
regulatory and other governmental inquiries.
o The results of the regulatory examination and supervision process,
including our failure to satisfy the requirements of agreements with
governmental agencies.
o Changes in accounting policies and principles.
o Changes resulting from legislative and regulatory initiatives relating
to climate change that have or may have a negative impact on our
customers’ demand for or use of our products and services in general
and their creditworthiness in particular.
o Changes to regulations governing bank capital, including as a result
of the so-called “Basel 3” initiatives.
-- Our business and operating results are affected by our ability to
identify and effectively manage risks inherent in our businesses,
including, where appropriate, through the effective use of third-party
insurance, derivatives, and capital management techniques, and by our
ability to meet evolving regulatory capital standards.
-- The adequacy of our intellectual property protection, and the extent of
any costs associated with obtaining rights in intellectual property
claimed by others, can impact our business and operating results.
-- Our ability to anticipate and respond to technological changes can have
an impact on our ability to respond to customer needs and to meet
competitive demands.
-- Our ability to implement our business initiatives and strategies could
affect our financial performance over the next several years.
-- Competition can have an impact on customer acquisition, growth and
retention, as well as on our credit spreads and product pricing, which
can affect market share, deposits and revenues.
-- Our business and operating results can also be affected by widespread
natural disasters, terrorist activities or international hostilities,
either as a result of the impact on the economy and capital and other
financial markets generally or on us or on our customers, suppliers or
other counterparties specifically.
-- Also, risks and uncertainties that could affect the results anticipated
in forward-looking statements or from historical performance relating to
our equity interest in BlackRock, Inc. are discussed in more detail in
BlackRock’s filings with the SEC, including in the Risk Factors
sections of BlackRock’s reports. BlackRock’s SEC filings are
accessible on the SEC’s website and on or through BlackRock’s
website at www.blackrock.com. This material is referenced for
informational purposes only and should not be deemed to constitute a
part of this document.
In addition, our acquisition of National City Corporation (“National City”) on December 31, 2008 presents us with a number of risks and uncertainties related both to the acquisition itself and to the integration of the acquired businesses into PNC. These risks and uncertainties include the following:
-- The anticipated benefits of the transaction, including anticipated 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.
-- Our ability to achieve anticipated results from this transaction is
dependent on the state going forward of the economic and financial
markets, which have been under significant stress. Specifically, we may
incur more credit losses from National City’s loan portfolio than
expected. Other issues related to achieving anticipated financial
results include the possibility that deposit attrition or attrition in
key client, partner and other relationships may be greater than
expected.
-- Legal proceedings or other claims made and governmental investigations
currently pending against National City, as well as others that may be
filed, made or commenced relating to National City’s business and
activities before the acquisition, could adversely impact our financial
results.
-- Our ability to achieve anticipated results is also dependent on our
ability to bring National City’s systems, operating models, and
controls into conformity with ours and to do so on our planned time
schedule. The integration of National City’s business and operations
into PNC, which includes conversion of National City’s different
systems and procedures, may take longer than anticipated or be more
costly than anticipated or have unanticipated adverse results relating
to National City’s or PNC’s existing businesses. PNC’s ability to
integrate National City successfully may be adversely affected by the
fact that this transaction has resulted in PNC entering several markets
where PNC did not previously have any meaningful retail presence.
In addition to the National City transaction, we grow our business from time to time by acquiring other financial services companies. Acquisitions in general present us with risks, in addition to those presented by the nature of the business acquired, similar to some or all of those described above relating to the National City acquisition.
CONTACTS: MEDIA: Brian E. Goerke (412) 762-4550 corporate.communications@pnc.com INVESTORS: William H. Callihan (412) 762-8257 investor.relations@pnc.com [TABULAR MATERIAL FOLLOWS]
The PNC Financial Services Group,
Inc. Consolidated Financial Highlights(Unaudited)
FINANCIAL RESULTS Three months ended
Dollars in millions, except per
share data March 31 December 31 March 31
2010 2009 2009
Revenue
Net interest income $2,379 $2,346 $2,320
Noninterest income 1,384 2,540 (a) 1,366
Total revenue 3,763 4,886 3,686
Noninterest expense 2,113 2,209 2,158
Pretax, pre-provision earnings (b) $1,650 $2,677 $1,528
Provision for credit losses $751 $1,049 $880
Income from continuing operations
before noncontrolling interests
(c) $648 $1,103 $520
Income from discontinued
operations, net of income taxes
(d) $23 $4 $10
Net income $671 $1,107 $530
Net income attributable to common
shareholders $333 $1,011 $460
Diluted earnings per common share
Continuing operations $.61 $2.16 $1.01
Discontinued operations (d) .05 .01 (e) .02
Net income $.66 $2.17 $1.03
As adjusted (f) $1.31 $.90 $1.11
Cash dividends declared per common
share $.10 $.10 $.66
Total preferred dividends declared $93 $119 $51
TARP Capital Purchase Program
preferred dividends (g) $89 $95 $47
Impact of TARP Capital Purchase
Program preferred dividends per
diluted common share $.18 $.21 $.11
Certain prior period amounts included in these Consolidated Financial
Highlights have been reclassified to conform with the current period
presentation.
(a) Includes a $1.076 billion gain related to BlackRock's acquisition of
Barclays Global Investors (BGI) on December 1, 2009.
(b) PNC believes that pretax, pre-provision earnings is useful as a tool to
help evaluate its ability to provide for credit costs through operations.
(c) See page 18 for a reconciliation of business segment earnings to income
from continuing operations before noncontrolling interests.
(d) Includes results of operations for PNC Global Investment Servicing Inc.
(GIS) for all periods presented. On February 2, 2010, we entered into a
definitive agreement to sell GIS. Subject to regulatory approvals and certain
other closing conditions, the transaction is expected to close in the third
quarter of 2010.
(e) Includes the impact of $18 million of deferred income taxes provided on the
difference in the stock investment and tax basis of GIS, a US subsidiary.
(f) See reconciliation to "as reported" diluted earnings per share on page 16.
(g) PNC redeemed the TARP preferred stock on February 10, 2010.
Consolidated Financial Highlights
The PNC Financial Services Group, Inc. (Unaudited)
RECONCILIATIONS OF "AS REPORTED" (GAAP) NET INCOME, NET INCOME
ATTRIBUTABLE TO COMMON SHAREHOLDERS AND DILUTED EPS TO
"AS ADJUSTED" AMOUNTS
In millions, except per share data
THREE MONTHS ENDED March 31, 2010
Net Income
Income Attributable to
Taxes Net Common Diluted
Pretax (Benefit) (a) Income Shareholders EPS
Net income, as
reported $671 $333 $.66
Adjustments:
Integration costs $113 $(40) 73 73 .15
TARP preferred stock
accelerated discount
accretion 250 .50
Net income, as
adjusted $744 $656 $1.31
December 31, 2009
Net Income
Income Attributable to
Taxes Net Common Diluted
Pretax (Benefit) (a) Income Shareholders EPS
Net income, as
reported $1,107 $1,011 $2.17
Adjustments:
Integration costs $155 $(54) 101 101 .22
Gain on BlackRock/BGI
transaction (1,076) 389 (687) (687) (1.49)
Net income, as
adjusted $521 $425 $.90
March 31, 2009
Net Income
Income Attributable to
Taxes Net Common Diluted
Pretax (Benefit) (a) Income Shareholders EPS
Net income, as
reported $530 $460 $1.03
Adjustments:
Integration costs $52 $(19) 33 33 .08
Net income, as
adjusted $563 $493 $1.11
These tables represent reconciliations of certain “As Reported” (GAAP)
amounts to “As Adjusted” amounts for the TARP preferred stock accelerated
discount accretion, integration costs and the gain on the BlackRock/BGI
transaction. We have provided these adjusted amounts and reconciliations so
that investors, analysts, regulators and others will be better able to evaluate
the impact of these respective items on the results for and as of the periods
presented. We believe that information as adjusted for the impact of the
specified items may be useful due to the extent to which the items are not
indicative of ongoing operations. Adjusted information supplements our results
as reported in accordance with GAAP and should not be viewed in isolation from,
or as a substitute for, GAAP results.
(a) Calculated using a marginal federal income tax rate of 35%. The after-tax
gain on the BlackRock/BGI transaction also reflects the impact of state income
taxes.
The PNC Financial Services Group,
Inc. Consolidated Financial Highlights(Unaudited)
March 31 December 31 March 31
2010 2009 2009
PERFORMANCE RATIOS
From continuing operations
Noninterest income to total
revenue (a) 37 % 52 % 37 %
Efficiency (b) 56 45 59
From net income
Net interest margin (c) 4.24 % 4.05 % 3.81 %
Return on:
Average common shareholders'
equity 5.37 17.79 10.23
Average assets 1.02 1.62 .77
CAPITAL RATIOS
Tier 1 risk-based - as reported
(d) 9.9 % 11.4 % 10.0 %
Tier 1 risk-based - pro forma (e) 10.6
Tier 1 common - as reported (d) 7.6 6.0 4.9
Tier 1 common - pro forma (e) 8.3
Total risk-based (d) 13.4 15.0 13.6
Leverage (d) 8.9 10.1 8.9
Common shareholders' equity to
assets 10.0 8.2 6.5
ASSET QUALITY RATIOS
Nonperforming loans to total loans 3.66 % 3.60 % 1.73 %
Nonperforming assets to total
loans and foreclosed and other
assets 4.14 3.99 2.05
Nonperforming assets to total
assets 2.46 2.34 1.23
Net charge-offs to average loans
(for the three months ended)
(annualized) 1.77 2.09 1.01
Allowance for loan and lease
losses to total loans 3.38 3.22 2.51
Allowance for loan and lease
losses to nonperforming loans 92 89 145
(a) Calculated as noninterest income divided by the sum of net interest income
and noninterest income.
(b) Calculated as noninterest expense divided by the sum of net
interest income and noninterest income.
(c) 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 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 GAAP in the Consolidated Income
Statement. The taxable-equivalent adjustments to net interest income for the
three months ended March 31, 2010, December 31, 2009, and March 31, 2009 were
$18 million, $18 million, and $15 million, respectively.
(d) The ratios as of March 31, 2010 are estimated.
(e) The following represents a reconciliation of certain risk-based capital and
ratios at March 31, 2010:
Dollars in billions Tier 1 risk-based (d) Tier 1 common (d) Ratios – as reported 9.9 % 7.6 % Capital – as reported $22.9 $17.6 Adjustment: Net impact of pending 2010 sale of GIS (f) 1.6 1.6 Capital – pro forma $24.5 $19.2 Ratios – pro forma 10.6 % 8.3 % (f) The estimated net impact of this pending sale is as follows:
In billions Sales price $2.3 Less: Book equity / intercompany debt (1.5) Pretax gain .8 Income taxes (.3) After-tax gain .5 Elimination of net intangible assets: Goodwill and other intangible assets 1.3 Eligible deferred income taxes on goodwill and other intangible assets (.2) Net intangible assets 1.1 Estimated net impact of pending sale of GIS $1.6 We believe that the disclosure of these ratios reflecting the estimated impact of the pending sale of GIS provides additional meaningful information regarding the risk-based capital ratios at that date and the impact of this event on these ratios.
The PNC Financial Services Group,
Inc. Consolidated Financial Highlights(Unaudited)
At or for the three months ended
March 31 December 31 March 31
2010 2009 2009
BALANCE SHEET DATA
Dollars in millions, except per
share data
Assets $265,396 $269,863 $286,422
Loans (a) (b) 157,266 157,543 171,373
Allowance for loan and lease
losses (a) 5,319 5,072 4,299
Interest-earning deposits with
banks (a) 607 4,488 14,783
Investment securities (a) 57,606 56,027 46,253
Loans held for sale (b) 2,691 2,539 4,045
Goodwill and other intangible
assets 12,714 12,909 12,178
Equity investments (a) 10,256 10,254 8,215
Noninterest-bearing deposits 43,122 44,384 40,610
Interest-bearing deposits 139,401 142,538 154,025
Total deposits 182,523 186,922 194,635
Transaction deposits 126,420 126,244 118,869
Borrowed funds (a) 42,461 39,261 48,459
Shareholders’ equity 26,818 29,942 26,477
Common shareholders’ equity 26,466 22,011 18,546
Accumulated other comprehensive
loss 1,288 1,962 3,289
Book value per common share 50.32 47.68 41.67
Common shares outstanding
(millions) 526 462 445
Loans to deposits 86 % 84 % 88 %
ASSETS UNDER ADMINISTRATION
(billions)
Discretionary assets under
management $105 $103 $96
Nondiscretionary assets under
administration 104 102 120
Total assets under administration $209 $205 $216
BUSINESS SEGMENT EARNINGS (LOSS)
(millions) (c) (d)
Retail Banking $24 $(25) $50
Corporate & Institutional Banking 360 415 359
Asset Management Group 39 23 39
Residential Mortgage Banking 82 25 227
Distressed Assets Portfolio 72 (88) 3
Other, including BlackRock (d) (e)
(f) 71 753 (158)
Earnings from continuing
operations before noncontrolling
interests $648 $1,103 $520
(a) Amounts include consolidated variable interest entities. Some March 31,
2010 amounts include consolidated variable interest entities that we
consolidated effective January 1, 2010 based on guidance in ASU 2009-17,
Consolidations. Our first quarter 2010 Form 10-Q will include additional
information regarding these Consolidated Balance Sheet line items.
(b) Amounts include items for which PNC has elected the fair value option. Our
first quarter 2010 Form 10-Q will include additional information regarding
these Consolidated Balance Sheet line items.
(c) 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 businesses
and management structure change. Certain prior period amounts have been
reclassified to reflect current methodologies and our current business and
management structure. As a result of its pending sale, GIS is no longer a
reportable business segment. Amounts are presented on a continuing operations
before noncontrolling interests basis and exclude the earnings attributable to
GIS.
(d) We consider BlackRock to be a separate reportable business segment but have
combined its results with Other for this presentation. Our first quarter 2010
Form 10-Q will include additional information regarding BlackRock.
(e) Includes earnings and gains or losses related to PNC's equity interest in
BlackRock, integration costs, 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,
exited businesses, differences between business segment performance reporting
and financial statement reporting under generally accepted accounting
principles (GAAP), corporate overhead and intercompany eliminations.
(f) The $1.076 billion gain ($687 million after-tax) related to BlackRock's
acquisition of BGI was included in this business segment for the fourth quarter
2009.
SOURCE The PNC Financial Services Group, Inc.
Released April 22, 2010