MEDIA: | INVESTORS: | |||
Diane Zappas | Bryan Gill | |||
(412) 762-4550 | (412) 768-4143 | |||
media.relations@pnc.com | investor.relations@pnc.com | |||
For the quarter | ||||||||
1Q18 | 4Q17 | 1Q17 | ||||||
Net income $ millions | $1,239 | $2,091 | $1,074 | |||||
Diluted earnings per common share | $2.43 | $4.18 | $1.96 | |||||
“PNC delivered another quarter of strong earnings. Our expanded net interest margin, well-managed expenses and stable credit quality contributed to our results as we maintained strong capital returns. We see loan demand strengthening and look forward to launching our national retail digital strategy as the year goes on, and we continue to invest in our strategic priorities to expand PNC's franchise, deepen customer relationships and leverage technology to create long-term shareholder value.” Bill Demchak, PNC Chairman, President and Chief Executive Officer | ||
▪ | Net income was $1.2 billion for the first quarter compared with $2.1 billion for the fourth quarter, which included a net benefit of $.9 billion from federal tax legislation and significant items. |
▪ | Total revenue for the first quarter was $4.1 billion, a decrease of $149 million, or 3 percent. |
– | Net interest income increased $16 million, or 1 percent, to $2.4 billion primarily due to higher loan yields offset by higher deposit and borrowing costs and the impact of two fewer days in the first quarter. |
– | Net interest margin increased 3 basis points to 2.91 percent. |
– | Noninterest income decreased $165 million, or 9 percent, to $1.8 billion reflecting seasonally lower income and the impact of a fourth quarter benefit from significant items. |
▪ | Noninterest expense decreased $534 million, or 17 percent, to $2.5 billion. Fourth quarter 2017 included a total of $502 million for a PNC Foundation contribution, charges for real estate dispositions and exits, and employee cash payments and pension account credits. Excluding the impact of these items, noninterest expense decreased $32 million, or 1 percent. |
▪ | Provision for credit losses was $92 million, a decrease of $33 million, reflecting stable credit quality. |
▪ | Loans increased $1.2 billion to $221.6 billion at March 31, 2018 compared with December 31, 2017 driven by growth in commercial lending. Average loans in the first quarter were stable with the fourth quarter. |
– | Average commercial lending balances decreased $.3 billion as growth in PNC's corporate banking, equipment finance and business credit businesses was more than offset by a decline in multifamily agency warehouse lending within the real estate business. |
– | Average consumer lending balances increased $.3 billion reflecting growth in residential mortgage, auto and credit card loans partially offset by lower home equity and education loans. |
▪ | Overall credit quality remained stable. |
– | Nonperforming assets of $2.0 billion at March 31, 2018 decreased $31 million, or 2 percent, compared with December 31, 2017. |
– | Net charge-offs declined to $113 million for the first quarter compared with $123 million for the fourth quarter. |
▪ | Average deposits decreased $.8 billion to $260.7 billion in the first quarter compared with the fourth quarter due to seasonal declines in commercial deposits partially offset by growth in consumer deposits. |
▪ | Average investment securities increased $.4 billion to $74.6 billion in the first quarter compared with the fourth quarter. |
▪ | PNC returned $1.1 billion of capital to shareholders in the first quarter through repurchases of 4.8 million common shares for $.7 billion and dividends on common shares of $.4 billion. |
▪ | PNC maintained strong capital and liquidity positions. |
– | The Basel III common equity Tier 1 capital ratio, which became effective for PNC as of January 1, 2018, was an estimated 9.6 percent at March 31, 2018 compared with 9.8 percent at December 31, 2017, calculated on the same basis. |
– | The Liquidity Coverage Ratio at March 31, 2018 for both PNC and PNC Bank, N.A. continued to exceed the regulatory minimum requirement of 100 percent. |
Earnings Summary | ||||||||||||
In millions, except per share data | 1Q18 | 4Q17 | 1Q17 | |||||||||
Net income | $ | 1,239 | $ | 2,091 | $ | 1,074 | ||||||
Net income attributable to diluted common shares | $ | 1,158 | $ | 2,007 | $ | 963 | ||||||
Diluted earnings per common share | $ | 2.43 | $ | 4.18 | $ | 1.96 | ||||||
Average diluted common shares outstanding | 476 | 480 | 492 | |||||||||
Return on average assets | 1.34 | % | 2.20 | % | 1.19 | % | ||||||
Return on average common equity | 11.04 | % | 18.90 | % | 9.50 | % | ||||||
Book value per common share | Quarter end | $ | 91.39 | $ | 91.94 | $ | 86.14 | |||||
Tangible book value per common share (non-GAAP) | Quarter end | $ | 71.58 | $ | 72.28 | $ | 67.47 | |||||
Cash dividends declared per common share | $ | .75 | $ | .75 | $ | .55 | ||||||
CONSOLIDATED REVENUE REVIEW | |||||||||||||||
Revenue | Change | Change | |||||||||||||
1Q18 vs | 1Q18 vs | ||||||||||||||
In millions | 1Q18 | 4Q17 | 1Q17 | 4Q17 | 1Q17 | ||||||||||
Net interest income | $ | 2,361 | $ | 2,345 | $ | 2,160 | 1 | % | 9 | % | |||||
Noninterest income | 1,750 | 1,915 | 1,724 | (9 | )% | 2 | % | ||||||||
Total revenue | $ | 4,111 | $ | 4,260 | $ | 3,884 | (3 | )% | 6 | % | |||||
Noninterest Income | Change | Change | |||||||||||||
1Q18 vs | 1Q18 vs | ||||||||||||||
In millions | 1Q18 | 4Q17 | 1Q17 | 4Q17 | 1Q17 | ||||||||||
Asset management | $ | 455 | $ | 720 | $ | 403 | (37 | )% | 13 | % | |||||
Consumer services | 357 | 366 | 332 | (2 | )% | 8 | % | ||||||||
Corporate services | 429 | 458 | 414 | (6 | )% | 4 | % | ||||||||
Residential mortgage | 97 | 29 | 113 | 234 | % | (14 | )% | ||||||||
Service charges on deposits | 167 | 183 | 161 | (9 | )% | 4 | % | ||||||||
Other | 245 | 159 | 301 | 54 | % | (19 | )% | ||||||||
$ | 1,750 | $ | 1,915 | $ | 1,724 | (9 | )% | 2 | % | ||||||
CONSOLIDATED EXPENSE REVIEW | |||||||||||||||
Noninterest Expense | Change | Change | |||||||||||||
1Q18 vs | 1Q18 vs | ||||||||||||||
In millions | 1Q18 | 4Q17 | 1Q17 | 4Q17 | 1Q17 | ||||||||||
Personnel | $ | 1,354 | $ | 1,449 | $ | 1,257 | (7 | )% | 8 | % | |||||
Occupancy | 218 | 240 | 222 | (9 | )% | (2 | )% | ||||||||
Equipment | 273 | 274 | 251 | — | 9 | % | |||||||||
Marketing | 55 | 60 | 55 | (8 | )% | — | |||||||||
Other | 627 | 1,038 | 617 | (40 | )% | 2 | % | ||||||||
$ | 2,527 | $ | 3,061 | $ | 2,402 | (17 | )% | 5 | % | ||||||
Loans | Change | Change | |||||||||||||
1Q18 vs | 1Q18 vs | ||||||||||||||
In billions | 1Q18 | 4Q17 | 1Q17 | 4Q17 | 1Q17 | ||||||||||
Average | |||||||||||||||
Commercial lending | $ | 148.2 | $ | 148.5 | $ | 139.8 | — | 6 | % | ||||||
Consumer lending | 72.9 | 72.6 | 72.5 | — | 1 | % | |||||||||
Average loans | $ | 221.1 | $ | 221.1 | $ | 212.3 | — | 4 | % | ||||||
Quarter end | |||||||||||||||
Commercial lending | $ | 148.9 | $ | 147.4 | $ | 140.6 | 1 | % | 6 | % | |||||
Consumer lending | 72.7 | 73.0 | 72.2 | — | 1 | % | |||||||||
Total loans | $ | 221.6 | $ | 220.4 | $ | 212.8 | 1 | % | 4 | % | |||||
Investment Securities | Change | Change | |||||||||||||
1Q18 vs | 1Q18 vs | ||||||||||||||
In billions | 1Q18 | 4Q17 | 1Q17 | 4Q17 | 1Q17 | ||||||||||
Average | $ | 74.6 | $ | 74.2 | $ | 76.2 | 1 | % | (2 | )% | |||||
Quarter end | $ | 74.6 | $ | 76.2 | $ | 76.5 | (2 | )% | (2 | )% | |||||
Deposits | Change | Change | |||||||||||||
1Q18 vs | 1Q18 vs | ||||||||||||||
In billions | 1Q18 | 4Q17 | 1Q17 | 4Q17 | 1Q17 | ||||||||||
Average | |||||||||||||||
Noninterest-bearing | $ | 77.2 | $ | 80.2 | $ | 78.1 | (4 | )% | (1 | )% | |||||
Interest-bearing | 183.5 | 181.3 | 176.9 | 1 | % | 4 | % | ||||||||
Average deposits | $ | 260.7 | $ | 261.5 | $ | 255.0 | — | 2 | % | ||||||
Quarter end | |||||||||||||||
Noninterest-bearing | $ | 78.3 | $ | 79.8 | $ | 79.2 | (2 | )% | (1 | )% | |||||
Interest-bearing | 186.4 | 185.2 | 181.5 | 1 | % | 3 | % | ||||||||
Total deposits | $ | 264.7 | $ | 265.0 | $ | 260.7 | — | 2 | % | ||||||
Borrowed Funds | Change | Change | |||||||||||||
1Q18 vs | 1Q18 vs | ||||||||||||||
In billions | 1Q18 | 4Q17 | 1Q17 | 4Q17 | 1Q17 | ||||||||||
Average | $ | 59.6 | $ | 58.0 | $ | 54.9 | 3 | % | 9 | % | |||||
Quarter end | $ | 58.0 | $ | 59.0 | $ | 55.0 | (2 | )% | 5 | % | |||||
Capital | ||||||||||||
3/31/2018 | * | 12/31/2017 | 3/31/2017 | |||||||||
Common shareholders' equity In billions | $ | 43.0 | $ | 43.5 | $ | 41.8 | ||||||
Basel III common equity Tier 1 capital ratio | 9.6 | % | N/A | N/A | ||||||||
Fully phased-in Basel III common equity Tier 1 capital | ||||||||||||
ratio (Non-GAAP) | N/A | 9.8 | % | 10.0 | % | |||||||
Transitional Basel III common equity Tier 1 capital ratio | N/A | 10.4 | % | 10.5 | % | |||||||
* Ratios estimated; N/A - Not applicable | ||||||||||||
CREDIT QUALITY REVIEW | |||||||||||||||
Credit Quality | Change | Change | |||||||||||||
At or for the quarter ended | 3/31/18 vs | 3/31/18 vs | |||||||||||||
In millions | 3/31/2018 | 12/31/2017 | 3/31/2017 | 12/31/17 | 3/31/17 | ||||||||||
Nonperforming loans | $ | 1,842 | $ | 1,865 | $ | 1,998 | (1 | )% | (8 | )% | |||||
Nonperforming assets | $ | 2,004 | $ | 2,035 | $ | 2,212 | (2 | )% | (9 | )% | |||||
Accruing loans past due 90 days or more | $ | 628 | $ | 737 | $ | 699 | (15 | )% | (10 | )% | |||||
Net charge-offs | $ | 113 | $ | 123 | $ | 118 | (8 | )% | (4 | )% | |||||
Provision for credit losses | $ | 92 | $ | 125 | $ | 88 | (26 | )% | 5 | % | |||||
Allowance for loan and lease losses | $ | 2,604 | $ | 2,611 | $ | 2,561 | — | 2 | % | ||||||
BUSINESS SEGMENT RESULTS | |||||||||||
Business Segment Income | |||||||||||
In millions | 1Q18 | 4Q17 | 1Q17 | ||||||||
Retail Banking | $ | 296 | $ | (145 | ) | $ | 213 | ||||
Corporate & Institutional Banking | 584 | 937 | 484 | ||||||||
Asset Management Group | 68 | 56 | 47 | ||||||||
Other, including BlackRock | 291 | 1,243 | 330 | ||||||||
Net income | $ | 1,239 | $ | 2,091 | $ | 1,074 | |||||
See accompanying notes in Consolidated Financial Highlights | |||||||||||
Retail Banking | Change | Change | |||||||||||||||||
1Q18 vs | 1Q18 vs | ||||||||||||||||||
In millions | 1Q18 | 4Q17 | 1Q17 | 4Q17 | 1Q17 | ||||||||||||||
Net interest income | $ | 1,218 | $ | 1,190 | $ | 1,121 | $ | 28 | $ | 97 | |||||||||
Noninterest income | $ | 635 | $ | 345 | $ | 603 | $ | 290 | $ | 32 | |||||||||
Provision for credit losses | $ | 69 | $ | 149 | $ | 71 | $ | (80 | ) | $ | (2 | ) | |||||||
Noninterest expense | $ | 1,395 | $ | 1,391 | $ | 1,315 | $ | 4 | $ | 80 | |||||||||
Earnings (loss) | $ | 296 | $ | (145 | ) | $ | 213 | $ | 441 | $ | 83 | ||||||||
In billions | |||||||||||||||||||
Average loans | $ | 73.5 | $ | 73.0 | $ | 72.5 | $ | .5 | $ | 1.0 | |||||||||
Average deposits | $ | 160.0 | $ | 159.3 | $ | 158.0 | $ | .7 | $ | 2.0 | |||||||||
▪ | Average loans increased 1 percent in both comparisons due to growth in residential mortgage, auto and credit card loans partially offset by lower home equity and education loans. |
▪ | Average deposits grew in the first quarter of 2018 compared with the fourth quarter reflecting higher interest-bearing deposits of $1.2 billion partially offset by a decline in noninterest-bearing demand deposits of $.5 billion. Both interest-bearing and noninterest-bearing deposits grew in first quarter 2018 compared with first quarter 2017. |
▪ | Net charge-offs were $100 million for the first quarters of 2018 and 2017 and $99 million in the fourth quarter of 2017. |
▪ | Residential mortgage loan origination volume was $1.7 billion for the first quarter of 2018 compared with $2.4 billion for the fourth quarter and $1.9 billion for the first quarter of 2017. Approximately 56 percent of first quarter 2018 volume was for home purchase transactions compared with 50 percent for the fourth quarter and 43 percent for the first quarter of 2017 |
▪ | The residential mortgage servicing portfolio was $125 billion at March 31, 2018 compared with $127 billion at December 31, 2017 and $130 billion at March 31, 2017. Residential mortgage loan servicing acquisitions were $1 billion for both the first quarter of 2018 and fourth quarter of 2017 and $8 billion for the first quarter of 2017. |
▪ | Approximately 64 percent of consumer customers used non-teller channels for the majority of their transactions during the first quarter of 2018 compared with 63 percent in the fourth quarter and 61 percent in the first quarter of 2017. |
▪ | Deposit transactions via ATM and mobile channels were 54 percent of total deposit transactions in both the first quarter of 2018 and fourth quarter of 2017 compared with 52 percent in the first quarter of 2017. |
Corporate & Institutional Banking | Change | Change | |||||||||||||||||
1Q18 vs | 1Q18 vs | ||||||||||||||||||
In millions | 1Q18 | 4Q17 | 1Q17 | 4Q17 | 1Q17 | ||||||||||||||
Net interest income | $ | 882 | $ | 898 | $ | 839 | $ | (16 | ) | $ | 43 | ||||||||
Noninterest income | $ | 547 | $ | 604 | $ | 524 | $ | (57 | ) | $ | 23 | ||||||||
Provision for credit losses (benefit) | $ | 41 | $ | (14 | ) | $ | 25 | $ | 55 | $ | 16 | ||||||||
Noninterest expense | $ | 626 | $ | 643 | $ | 584 | $ | (17 | ) | $ | 42 | ||||||||
Earnings | $ | 584 | $ | 937 | $ | 484 | $ | (353 | ) | $ | 100 | ||||||||
In billions | |||||||||||||||||||
Average loans | $ | 135.5 | $ | 135.8 | $ | 127.0 | $ | (.3 | ) | $ | 8.5 | ||||||||
Average deposits | $ | 87.9 | $ | 89.4 | $ | 83.9 | $ | (1.5 | ) | $ | 4.0 | ||||||||
▪ | Average loans decreased slightly compared with the fourth quarter as growth in PNC's corporate banking, equipment finance and business credit businesses was more than offset by a decline in multifamily agency warehouse lending within the real estate business. Average loans increased 7 percent over the first quarter of 2017 reflecting broad-based loan growth. |
▪ | Average deposits decreased 2 percent from the fourth quarter as a result of seasonal declines, and increased 5 percent compared with first quarter 2017 due to growth in interest-bearing deposits partially offset by decreases in noninterest-bearing demand deposits. |
▪ | Net charge-offs were $9 million in the first quarter of 2018 compared with $29 million in the fourth quarter and $21 million in the first quarter of 2017. |
Asset Management Group | Change | Change | |||||||||||||||||
1Q18 vs | 1Q18 vs | ||||||||||||||||||
In millions | 1Q18 | 4Q17 | 1Q17 | 4Q17 | 1Q17 | ||||||||||||||
Net interest income | $ | 74 | $ | 71 | $ | 71 | $ | 3 | $ | 3 | |||||||||
Noninterest income | $ | 226 | $ | 226 | $ | 218 | — | $ | 8 | ||||||||||
Provision for credit losses (benefit) | $ | (7 | ) | $ | 7 | $ | (2 | ) | $ | (14 | ) | $ | (5 | ) | |||||
Noninterest expense | $ | 218 | $ | 217 | $ | 217 | $ | 1 | $ | 1 | |||||||||
Earnings | $ | 68 | $ | 56 | $ | 47 | $ | 12 | $ | 21 | |||||||||
In billions | |||||||||||||||||||
Client assets under administration at quarter end | $ | 277 | $ | 282 | $ | 264 | $ | (5 | ) | $ | 13 | ||||||||
Average loans | $ | 7.0 | $ | 7.1 | $ | 7.0 | $ | (.1 | ) | — | |||||||||
Average deposits | $ | 12.5 | $ | 12.6 | $ | 12.8 | $ | (.1 | ) | $ | (.3 | ) | |||||||
▪ | Client assets under administration at March 31, 2018 included discretionary client assets under management of $148 billion and nondiscretionary client assets under administration of $129 billion. |
– | Discretionary client assets under management decreased $3 billion compared with December 31, 2017 due to equity market declines and net business activities, and increased $7 billion compared with March 31, 2017 primarily attributable to equity market increases. |
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 | |||||||||
2018 | 2017 | 2017 | ||||||||||
Revenue | ||||||||||||
Net interest income | $ | 2,361 | $ | 2,345 | $ | 2,160 | ||||||
Noninterest income | 1,750 | 1,915 | 1,724 | |||||||||
Total revenue | 4,111 | 4,260 | 3,884 | |||||||||
Provision for credit losses | 92 | 125 | 88 | |||||||||
Noninterest expense | 2,527 | 3,061 | 2,402 | |||||||||
Income before income taxes (benefit) and noncontrolling interests | $ | 1,492 | $ | 1,074 | $ | 1,394 | ||||||
Net income | $ | 1,239 | $ | 2,091 | $ | 1,074 | ||||||
Less: | ||||||||||||
Net income attributable to noncontrolling interests | 10 | 11 | 17 | |||||||||
Preferred stock dividends (a) | 63 | 55 | 63 | |||||||||
Preferred stock discount accretion and redemptions | 1 | 2 | 21 | |||||||||
Net income attributable to common shareholders | $ | 1,165 | $ | 2,023 | $ | 973 | ||||||
Less: | ||||||||||||
Dividends and undistributed earnings allocated to nonvested restricted shares | 5 | 8 | 6 | |||||||||
Impact of BlackRock earnings per share dilution | 2 | 8 | 4 | |||||||||
Net income attributable to diluted common shares | $ | 1,158 | $ | 2,007 | $ | 963 | ||||||
Diluted earnings per common share | $ | 2.43 | $ | 4.18 | $ | 1.96 | ||||||
Cash dividends declared per common share | $ | .75 | $ | .75 | $ | .55 | ||||||
Effective tax rate (b) | 17.0 | % | (94.7 | )% | 23.0 | % | ||||||
(a) | Dividends are payable quarterly other than the Series O, Series R and Series S preferred stock, which are payable semiannually, with the Series O payable in different quarters than the Series R and Series S preferred stock. |
(b) | The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax. The first quarter 2018 results reflected the change in the statutory federal income tax rate from 35% to 21%, effective as of January 1, 2018, as a result of the new federal tax legislation. The fourth quarter 2017 results benefited from an income tax benefit from the new federal tax legislation primarily attributable to revaluation of deferred tax liabilities at the lower statutory tax rate. Where certain income tax effects could be reasonably estimated, these were included as provisional amounts as of December 31, 2017. As a result, these provisional amounts could be adjusted during the measurement period, which will end in December 2018. No changes were made to these provisional amounts during the first quarter of 2018. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | |||||||||||
Three months ended | ||||||||||||
March 31 | December 31 | March 31 | ||||||||||
2018 | 2017 | 2017 | ||||||||||
PERFORMANCE RATIOS | ||||||||||||
Net interest margin (a) | 2.91 | % | 2.88 | % | 2.77 | % | ||||||
Noninterest income to total revenue | 43 | % | 45 | % | 44 | % | ||||||
Efficiency (b) | 61 | % | 72 | % | 62 | % | ||||||
Return on: | ||||||||||||
Average common shareholders' equity (c) | 11.04 | % | 18.90 | % | 9.50 | % | ||||||
Average assets (c) | 1.34 | % | 2.20 | % | 1.19 | % | ||||||
BUSINESS SEGMENT NET INCOME (LOSS) (c) (d) | ||||||||||||
In millions | ||||||||||||
Retail Banking | $ | 296 | $ | (145 | ) | $ | 213 | |||||
Corporate & Institutional Banking | 584 | 937 | 484 | |||||||||
Asset Management Group | 68 | 56 | 47 | |||||||||
Other, including BlackRock (e) | 291 | 1,243 | 330 | |||||||||
Total net income | $ | 1,239 | $ | 2,091 | $ | 1,074 | ||||||
(a) | Calculated as annualized taxable-equivalent net interest income divided by average earning assets. To provide more meaningful comparisons of net interest margins, 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 March 31, 2018, December 31, 2017 and March 31, 2017 were $29 million, $54 million and $52 million, respectively. Taxable equivalent amounts for the 2018 period were calculated using a statutory federal income tax rate of 21%, reflecting the enactment of the new federal tax legislation effective January 1, 2018. Amounts for the 2017 periods were calculated using the previously applicable statutory federal income tax rate of 35%. |
(b) | Calculated as noninterest expense divided by total revenue. |
(c) | The first quarter 2018 results reflected the change in the statutory federal income tax rate from 35% to 21%, effective as of January 1, 2018, as a result of the new federal tax legislation. The fourth quarter 2017 results benefited from an income tax benefit from the new federal tax legislation primarily attributable to revaluation of deferred tax liabilities at the lower statutory tax rate. Our business segment results for the fourth quarter of 2017 reflect the allocation of the impact of the new tax legislation to our business segments, primarily the revaluation of the net deferred tax positions allocated to the segments. Where certain income tax effects could be reasonably estimated, these were included as provisional amounts as of December 31, 2017. As a result, these provisional amounts could be adjusted during the measurement period, which will end in December 2018. No changes were made to these provisional amounts during the first quarter of 2018. |
(d) | Our business information is presented based on our internal management reporting practices. Net interest income in business segment results reflects PNC’s internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors. |
(e) | 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. We provide additional information on these activities in our Form 10-K and Form 10-Q filings with the SEC. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | ||||||||||
March 31 | December 31 | March 31 | |||||||||
2018 | 2017 | 2017 | |||||||||
BALANCE SHEET DATA | |||||||||||
Dollars in millions, except per share data | |||||||||||
Assets | $ | 379,161 | $ | 380,768 | $ | 370,944 | |||||
Loans (a) | $ | 221,614 | $ | 220,458 | $ | 212,826 | |||||
Allowance for loan and lease losses | $ | 2,604 | $ | 2,611 | $ | 2,561 | |||||
Interest-earning deposits with banks | $ | 28,821 | $ | 28,595 | $ | 27,877 | |||||
Investment securities | $ | 74,562 | $ | 76,131 | $ | 76,432 | |||||
Loans held for sale (a) | $ | 965 | $ | 2,655 | $ | 1,414 | |||||
Equity investments (b) | $ | 12,008 | $ | 11,392 | $ | 10,900 | |||||
Mortgage servicing rights | $ | 1,979 | $ | 1,832 | $ | 1,867 | |||||
Goodwill | $ | 9,218 | $ | 9,173 | $ | 9,103 | |||||
Other assets (a) | $ | 27,949 | $ | 27,894 | $ | 28,083 | |||||
Noninterest-bearing deposits | $ | 78,303 | $ | 79,864 | $ | 79,246 | |||||
Interest-bearing deposits | $ | 186,401 | $ | 185,189 | $ | 181,464 | |||||
Total deposits | $ | 264,704 | $ | 265,053 | $ | 260,710 | |||||
Borrowed funds (a) | $ | 58,039 | $ | 59,088 | $ | 55,062 | |||||
Shareholders’ equity | $ | 46,969 | $ | 47,513 | $ | 45,754 | |||||
Common shareholders’ equity | $ | 42,983 | $ | 43,530 | $ | 41,774 | |||||
Accumulated other comprehensive income (loss) | $ | (699 | ) | $ | (148 | ) | $ | (279 | ) | ||
Book value per common share | $ | 91.39 | $ | 91.94 | $ | 86.14 | |||||
Tangible book value per common share (Non-GAAP) (c) | $ | 71.58 | $ | 72.28 | $ | 67.47 | |||||
Period end common shares outstanding (millions) | 470 | 473 | 485 | ||||||||
Loans to deposits | 84 | % | 83 | % | 82 | % | |||||
CLIENT ASSETS (billions) | |||||||||||
Discretionary client assets under management | $ | 148 | $ | 151 | $ | 141 | |||||
Nondiscretionary client assets under administration | 129 | 131 | 123 | ||||||||
Total client assets under administration | 277 | 282 | 264 | ||||||||
Brokerage account client assets | 49 | 49 | 46 | ||||||||
Total client assets | $ | 326 | $ | 331 | $ | 310 | |||||
CAPITAL RATIOS | |||||||||||
Basel III (d) (e) (f) | |||||||||||
Common equity Tier 1 | 9.6 | % | N/A | N/A | |||||||
Tier 1 risk-based | 10.8 | % | N/A | N/A | |||||||
Total capital risk-based | 12.8 | % | N/A | N/A | |||||||
Leverage | 9.4 | % | N/A | N/A | |||||||
Supplementary leverage | 7.9 | % | N/A | N/A | |||||||
Fully Phased-In Basel III (Non-GAAP) | |||||||||||
Common equity Tier 1 | N/A | 9.8 | % | 10.0 | % | ||||||
2017 Transitional Basel III (e) | |||||||||||
Common equity Tier 1 | N/A | 10.4 | % | 10.5 | % | ||||||
Tier 1 risk-based | N/A | 11.6 | % | 11.8 | % | ||||||
Total capital risk-based | N/A | 13.7 | % | 14.1 | % | ||||||
Leverage | N/A | 9.9 | % | 9.9 | % | ||||||
Common shareholders' equity to total assets | 11.3 | % | 11.4 | % | 11.3 | % | |||||
ASSET QUALITY | |||||||||||
Nonperforming loans to total loans | .83 | % | .85 | % | .94 | % | |||||
Nonperforming assets to total loans, OREO, foreclosed and other assets | .90 | % | .92 | % | 1.04 | % | |||||
Nonperforming assets to total assets | .53 | % | .53 | % | .60 | % | |||||
Net charge-offs to average loans (for the three months ended) (annualized) | .21 | % | .22 | % | .23 | % | |||||
Allowance for loan and lease losses to total loans | 1.18 | % | 1.18 | % | 1.20 | % | |||||
Allowance for loan and lease losses to nonperforming loans | 141 | % | 140 | % | 128 | % | |||||
Accruing loans past due 90 days or more (in millions) | $ | 628 | $ | 737 | $ | 699 | |||||
(a) | Amounts include assets and liabilities for which we have elected the fair value option. Our 2017 Form 10-K included, and our first quarter 2018 Form 10-Q will include, additional information regarding these Consolidated Balance Sheet line items. |
(b) | Amounts include our equity interest in BlackRock. The amount at March 31, 2018 includes $603 million of trading and available for sale securities that were reclassified to Equity investments on January 1, 2018 in accordance with the adoption of Accounting Standard Update 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. |
(c) | See the Tangible Book Value per Common Share table on page 18 for additional information. |
(d) | The ratios as of March 31, 2018 are estimated. |
(e) | All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented and calculated based on the standardized approach. See Capital Ratios on page 17 for additional information. |
(f) | The Basel III ratios for common equity Tier 1 capital, Tier 1 risk-based capital, Leverage and Supplementary leverage reflect the full phase-in of all Basel III adjustments to these metrics applicable to PNC. The Basel III total risk-based capital ratio includes $80 million of nonqualifying trust preferred capital securities that are subject to a phase-out period that runs through 2022. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | |
Basel III Common Equity Tier 1 Capital Ratios | ||||||||||||||||||||||
Basel III (a) | Fully Phased-In Basel III (Non-GAAP) (b) | 2017 Transitional Basel III | ||||||||||||||||||||
March 31 | December 31 | March 31 | December 31 | March 31 | ||||||||||||||||||
Dollars in millions | 2018 (estimated) | 2017 | 2017 | 2017 | 2017 | |||||||||||||||||
Common stock, related surplus and retained earnings, net of treasury stock | $ | 43,683 | $ | 43,676 | $ | 42,053 | $ | 43,676 | $ | 42,053 | ||||||||||||
Less regulatory capital adjustments: | ||||||||||||||||||||||
Goodwill and disallowed intangibles, net of deferred tax liabilities | (9,343 | ) | (9,307 | ) | (9,052 | ) | (9,243 | ) | (9,007 | ) | ||||||||||||
Basel III total threshold deductions | (3,284 | ) | (2,928 | ) | (1,585 | ) | (1,983 | ) | (1,064 | ) | ||||||||||||
Accumulated other comprehensive income (c) | (645 | ) | (207 | ) | (369 | ) | (166 | ) | (295 | ) | ||||||||||||
All other adjustments | (120 | ) | (141 | ) | (180 | ) | (138 | ) | (183 | ) | ||||||||||||
Basel III Common equity Tier 1 capital | $ | 30,291 | $ | 31,093 | $ | 30,867 | $ | 32,146 | $ | 31,504 | ||||||||||||
Basel III standardized approach risk-weighted assets (d) | $ | 315,711 | $ | 316,120 | $ | 308,392 | $ | 309,460 | $ | 300,233 | ||||||||||||
Basel III advanced approaches risk-weighted assets (e) | 281,322 | $ | 285,226 | $ | 278,938 | N/A | N/A | |||||||||||||||
Basel III Common equity Tier 1 capital ratio | 9.6 | % | 9.8 | % | 10.0 | % | 10.4 | % | 10.5 | % | ||||||||||||
Risk weight and associated rules utilized | Standardized | Standardized | Standardized (with 2017 transition adjustments) | |||||||||||||||||||
(a) | All current period results are calculated using the regulatory capital methodology applicable to us during 2018. Basel III common equity Tier I capital ratio as of March 31, 2018 reflects full phase-in of all Basel III adjustments to this metric applicable to PNC. |
(b) | 2017 Fully Phased-In Basel III results are presented as Pro forma estimates. |
(c) | Represents net adjustments related to accumulated other comprehensive income for securities currently and previously held as available for sale, as well as pension and other postretirement plans. |
(d) | Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets. |
(e) | Basel III advanced approaches risk-weighted assets are based on the Basel III advanced approaches rules, and include credit, market and operational risk-weighted assets. During the parallel run qualification phase, PNC has refined the data, models and internal processes used as part of the advanced approaches for determining risk-weighted assets. We anticipate additional refinements through the parallel run qualification phase. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | |
Tangible Book Value per Common Share (Non-GAAP) | |||||||||||
March 31 | December 31 | March 31 | |||||||||
Dollars in millions, except per share data | 2018 | 2017 | 2017 | ||||||||
Book value per common share | $ | 91.39 | $ | 91.94 | $ | 86.14 | |||||
Tangible book value per common share | |||||||||||
Common shareholders' equity | $ | 42,983 | $ | 43,530 | $ | 41,774 | |||||
Goodwill and Other Intangible Assets | (9,533 | ) | (9,498 | ) | (9,356 | ) | |||||
Deferred tax liabilities on Goodwill and Other Intangible Assets | 192 | 191 | 303 | ||||||||
Tangible common shareholders' equity | $ | 33,642 | $ | 34,223 | $ | 32,721 | |||||
Period-end common shares outstanding (in millions) | 470 | 473 | 485 | ||||||||
Tangible book value per common share (Non-GAAP) | $ | 71.58 | $ | 72.28 | $ | 67.47 | |||||
▪ | Our businesses, financial results and balance sheet values are affected by business and economic conditions, including the following: |
– | Changes in interest rates and valuations in debt, equity and other financial markets. |
– | Disruptions in the U.S. and global financial markets. |
– | Actions by the Federal Reserve Board, U.S. Treasury and other government agencies, including those that impact money supply and market interest rates. |
– | Changes in customer behavior due to newly enacted tax legislation, changing business and economic conditions or legislative or regulatory initiatives. |
– | Changes in customers’, suppliers’ and other counterparties’ performance and creditworthiness. |
– | Slowing or reversal of the current U.S. economic expansion. |
– | Commodity price volatility. |
▪ | Our forward-looking financial statements are subject to the risk that economic and financial market conditions will be substantially different than those we are currently expecting and do not take into account potential legal and regulatory contingencies. These statements are based on our current view that U.S. economic growth will accelerate somewhat in 2018, in light of stimulus from corporate and personal income tax cuts passed in late 2017 that are expected to support business investment and consumer spending, respectively. We expect an increase in federal government spending will also support economic growth in 2018. Further gradual improvement in the labor market this year, including job gains and rising wages, is another positive for consumer spending. Other sources of growth for the U.S. economy in 2018 will be the global economic expansion and the housing market, although trade restrictions are a downside risk to the forecast. Although inflation slowed in 2017, it should pick up as the labor market continues to tighten. Short-term interest rates and bond yields are expected to rise throughout 2018; after the Federal Open Market Committee raised the federal funds rate in March, our baseline forecast is for two additional rate hikes in 2018, pushing the fed funds rate to a range of 2.00 to 2.25 percent by the end of the year. Longer-term rates are also expected to increase as the Federal Reserve slowly reduces the size of its balance sheet and the federal government borrows more. Long-term rates will rise more slowly than short-term rates, so we anticipate that the yield curve will flatten but not invert. |
▪ | PNC’s ability to take certain capital actions, including returning capital to shareholders, is subject to review by the Federal Reserve Board as part of PNC’s comprehensive capital plan for the applicable period in connection with the Federal Reserve Board’s Comprehensive Capital Analysis and Review (CCAR) process and to the acceptance of such capital plan and non-objection to such capital actions by the Federal Reserve Board. |
▪ | PNC’s regulatory capital ratios in the future will depend on, among other things, the company’s financial performance, the scope and terms of final capital regulations then in effect (particularly those implementing the international regulatory capital framework developed by the Basel Committee on Banking Supervision (Basel Committee), and management actions affecting the composition of PNC’s balance sheet. In addition, PNC’s ability to determine, evaluate and forecast regulatory capital ratios, and to take actions (such as capital distributions) based on actual or forecasted capital ratios, will be dependent at least in part on the development, validation and regulatory approval of related models. |
▪ | Legal and regulatory developments could have an impact on our 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: |
– | Changes resulting from legislative and regulatory reforms, including changes affecting oversight of the financial services industry, consumer protection, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles. |
– | Changes to regulations governing bank capital and liquidity standards, including due to the Dodd-Frank Act and initiatives of the Basel Committee. |
– | Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries. 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. |
– | Results of the regulatory examination and supervision process, including our failure to satisfy requirements of agreements with governmental agencies. |
– | 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. |
▪ | 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 systems and controls, third-party insurance, derivatives, and capital management techniques, and to meet evolving regulatory capital and liquidity standards. |
▪ | 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 its SEC filings. |
▪ | We grow our business in part through acquisitions. Acquisition risks and uncertainties include those presented by the nature of the business acquired, including in some cases those associated with our entry into new businesses or new geographic or other markets and risks resulting from our inexperience in those new areas, as well as risks and uncertainties related to the acquisition transactions themselves, regulatory issues, and the integration of the acquired businesses into PNC after closing. |
▪ | 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. 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 natural and other disasters, pandemics, dislocations, terrorist activities, system failures, security breaches, cyberattacks or international hostilities through impacts on the economy and financial markets generally or on us or our counterparties specifically. |