MEDIA: | INVESTORS: | |||
Diane Zappas | Bryan Gill | |||
(412) 762-4550 | (412) 768-4143 | |||
corporate.communications@pnc.com | investor.relations@pnc.com | |||
For the quarter | |||||||||
3Q17 | 2Q17 | 3Q16 | |||||||
Net income $ millions | $1,126 | $1,097 | $1,006 | ||||||
Diluted earnings per common share | $2.16 | $2.10 | $1.84 | ||||||
"PNC continued to win new clients and grow both loans and deposits in the third quarter on the strength of our relationship-based business model and the quality of our product offering," said William S. Demchak, chairman, president and chief executive officer. "Net interest income increased and our margin expanded as we benefited from higher short-term rates and our well-positioned balance sheet. We continue to focus on disciplined expense management even as we invest in our businesses, and we believe we have additional opportunities to drive further growth and efficiency over the long term." | ||
▪ | Total revenue increased $65 million, or 2 percent, to $4.1 billion. PNC continues to generate positive operating leverage. |
– | Net interest income grew $87 million, or 4 percent, to $2.3 billion primarily due to higher loan yields and balances. |
– | Net interest margin increased 7 basis points to 2.91 percent. |
– | Noninterest income of $1.8 billion decreased $22 million, or 1 percent, driven by a decline in corporate service fees from elevated second quarter levels. |
▪ | Noninterest expense of $2.5 billion decreased $23 million, or 1 percent, as expenses were well managed. |
▪ | Provision for credit losses increased $32 million to $130 million and included $10 million related to Hurricanes Harvey and Irma. Loan growth and seasonal consumer loan credit trends contributed to the increase. |
▪ | Loans grew $3.1 billion, or 1 percent, to $221.1 billion at September 30, 2017 compared with June 30, 2017. |
– | Commercial lending balances increased $2.8 billion reflecting growth in PNC’s real estate, corporate banking, business credit and equipment finance businesses. |
– | Consumer lending balances increased $.3 billion as growth in residential mortgage, auto and credit card loans was largely offset by lower home equity and education loans. |
▪ | Overall credit quality remained stable. |
– | Nonperforming assets of $2.1 billion at September 30, 2017 decreased $86 million, or 4 percent, compared with June 30, 2017. |
– | Net charge-offs declined to $106 million for the third quarter compared with $110 million for the second quarter. |
▪ | Deposits increased $1.6 billion, or 1 percent, to $260.7 billion at September 30, 2017 compared with June 30, 2017 due to seasonal growth in commercial deposits. |
▪ | Investment securities decreased $1.4 billion, or 2 percent, to $75.0 billion at September 30, 2017 compared with June 30, 2017 as a result of lower reinvestments in part due to relatively less attractive market opportunities during the third quarter. |
▪ | PNC returned $.9 billion of capital to shareholders, or 86 percent of third quarter net income attributable to diluted common shares, through repurchases of 4.2 million common shares for $.5 billion and dividends on common shares of $.4 billion. |
▪ | The August quarterly cash dividend on common stock reflected a 36 percent increase, or 20 cents, to 75 cents per share. |
▪ | PNC maintained strong capital and liquidity positions. |
– | Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.3 percent at both September 30, 2017 and June 30, 2017, calculated using the regulatory capital methodologies applicable to PNC during 2017. |
– | Pro forma fully phased-in Basel III common equity Tier 1 capital ratio, a non-GAAP financial measure, was an estimated 9.8 percent at both September 30, 2017 and June 30, 2017, based on the standardized approach rules. |
– | The Liquidity Coverage Ratio at September 30, 2017 for both PNC and PNC Bank, N.A. continued to exceed the fully phased-in requirement of 100 percent. |
Earnings Summary | ||||||||||||
In millions, except per share data | 3Q17 | 2Q17 | 3Q16 | |||||||||
Net income | $ | 1,126 | $ | 1,097 | $ | 1,006 | ||||||
Net income attributable to diluted common shares | $ | 1,042 | $ | 1,025 | $ | 913 | ||||||
Diluted earnings per common share | $ | 2.16 | $ | 2.10 | $ | 1.84 | ||||||
Average diluted common shares outstanding | 483 | 488 | 496 | |||||||||
Return on average assets | 1.20 | % | 1.19 | % | 1.10 | % | ||||||
Return on average common equity | 9.89 | % | 9.88 | % | 8.74 | % | ||||||
Book value per common share | Quarter end | $ | 89.05 | $ | 87.78 | $ | 86.57 | |||||
Tangible book value per common share (non-GAAP) | Quarter end | $ | 69.72 | $ | 68.55 | $ | 67.93 | |||||
Cash dividends declared per common share | $ | .75 | $ | .55 | $ | .55 | ||||||
CONSOLIDATED REVENUE REVIEW | |||||||||||||||
Revenue | Change | Change | |||||||||||||
3Q17 vs | 3Q17 vs | ||||||||||||||
In millions | 3Q17 | 2Q17 | 3Q16 | 2Q17 | 3Q16 | ||||||||||
Net interest income | $ | 2,345 | $ | 2,258 | $ | 2,095 | 4 | % | 12 | % | |||||
Noninterest income | 1,780 | 1,802 | 1,734 | (1 | )% | 3 | % | ||||||||
Total revenue | $ | 4,125 | $ | 4,060 | $ | 3,829 | 2 | % | 8 | % | |||||
Noninterest Income | Change | Change | |||||||||||||
3Q17 vs | 3Q17 vs | ||||||||||||||
In millions | 3Q17 | 2Q17 | 3Q16 | 2Q17 | 3Q16 | ||||||||||
Asset management | $ | 421 | $ | 398 | $ | 404 | 6 | % | 4 | % | |||||
Consumer services | 357 | 360 | 348 | (1 | )% | 3 | % | ||||||||
Corporate services | 371 | 434 | 389 | (15 | )% | (5 | )% | ||||||||
Residential mortgage | 104 | 104 | 160 | — | (35 | )% | |||||||||
Service charges on deposits | 181 | 170 | 174 | 6 | % | 4 | % | ||||||||
Other | 346 | 336 | 259 | 3 | % | 34 | % | ||||||||
$ | 1,780 | $ | 1,802 | $ | 1,734 | (1 | )% | 3 | % | ||||||
CONSOLIDATED EXPENSE REVIEW | |||||||||||||||
Noninterest Expense | Change | Change | |||||||||||||
3Q17 vs | 3Q17 vs | ||||||||||||||
In millions | 3Q17 | 2Q17 | 3Q16 | 2Q17 | 3Q16 | ||||||||||
Personnel | $ | 1,274 | $ | 1,263 | $ | 1,239 | 1 | % | 3 | % | |||||
Occupancy | 204 | 202 | 215 | 1 | % | (5 | )% | ||||||||
Equipment | 259 | 281 | 246 | (8 | )% | 5 | % | ||||||||
Marketing | 62 | 67 | 72 | (7 | )% | (14 | )% | ||||||||
Other | 657 | 666 | 622 | (1 | )% | 6 | % | ||||||||
$ | 2,456 | $ | 2,479 | $ | 2,394 | (1 | )% | 3 | % | ||||||
Loans | Change | Change | |||||||||||||
9/30/17 vs | 9/30/17 vs | ||||||||||||||
In billions | 9/30/2017 | 6/30/2017 | 9/30/2016 | 6/30/17 | 9/30/16 | ||||||||||
Commercial lending | $ | 148.5 | $ | 145.7 | $ | 138.2 | 2 | % | 7 | % | |||||
Consumer lending | 72.6 | 72.3 | 72.2 | — | 1 | % | |||||||||
Total loans | $ | 221.1 | $ | 218.0 | $ | 210.4 | 1 | % | 5 | % | |||||
For the quarter ended: | |||||||||||||||
Average loans | $ | 219.2 | $ | 216.3 | $ | 208.8 | 1 | % | 5 | % | |||||
Investment Securities | Change | Change | |||||||||||||
9/30/17 vs | 9/30/17 vs | ||||||||||||||
In billions | 9/30/2017 | 6/30/2017 | 9/30/2016 | 6/30/17 | 9/30/16 | ||||||||||
At quarter end | $ | 75.0 | $ | 76.4 | $ | 78.5 | (2 | )% | (4 | )% | |||||
Average for the quarter ended | $ | 74.4 | $ | 75.3 | $ | 71.6 | (1 | )% | 4 | % | |||||
Deposits | Change | Change | |||||||||||||
9/30/17 vs | 9/30/17 vs | ||||||||||||||
In billions | 9/30/2017 | 6/30/2017 | 9/30/2016 | 6/30/17 | 9/30/16 | ||||||||||
At quarter end | $ | 260.7 | $ | 259.1 | $ | 259.9 | 1 | % | — | ||||||
Average for the quarter ended | $ | 259.4 | $ | 256.3 | $ | 252.5 | 1 | % | 3 | % | |||||
Borrowed Funds | Change | Change | |||||||||||||
9/30/17 vs | 9/30/17 vs | ||||||||||||||
In billions | 9/30/2017 | 6/30/2017 | 9/30/2016 | 6/30/17 | 9/30/16 | ||||||||||
At quarter end | $ | 57.6 | $ | 56.4 | $ | 51.6 | 2 | % | 12 | % | |||||
Average for the quarter ended | $ | 57.0 | $ | 57.5 | $ | 53.0 | (1 | )% | 8 | % | |||||
Capital | ||||||||||||
9/30/2017 | * | 6/30/2017 | 9/30/2016 | |||||||||
Common shareholders' equity In billions | $ | 42.4 | $ | 42.1 | $ | 42.3 | ||||||
Transitional Basel III common equity Tier 1 capital ratio | 10.3 | % | 10.3 | % | 10.6 | % | ||||||
Pro forma fully phased-in Basel III common equity | ||||||||||||
Tier 1 capital ratio (non-GAAP) | 9.8 | % | 9.8 | % | 10.2 | % | ||||||
* Ratios estimated | ||||||||||||
CREDIT QUALITY REVIEW | |||||||||||||||
Credit Quality | Change | Change | |||||||||||||
At or for the quarter ended | 9/30/17 vs | 9/30/17 vs | |||||||||||||
In millions | 9/30/2017 | 6/30/2017 | 9/30/2016 | 6/30/17 | 9/30/16 | ||||||||||
Nonperforming loans | $ | 1,873 | $ | 1,957 | $ | 2,146 | (4 | )% | (13 | )% | |||||
Nonperforming assets | $ | 2,067 | $ | 2,153 | $ | 2,375 | (4 | )% | (13 | )% | |||||
Accruing loans past due 90 days or more | $ | 678 | $ | 674 | $ | 766 | 1 | % | (11 | )% | |||||
Net charge-offs | $ | 106 | $ | 110 | $ | 154 | (4 | )% | (31 | )% | |||||
Provision for credit losses | $ | 130 | $ | 98 | $ | 87 | 33 | % | 49 | % | |||||
Allowance for loan and lease losses | $ | 2,605 | $ | 2,561 | $ | 2,619 | 2 | % | (1 | )% | |||||
BUSINESS SEGMENT RESULTS | |||||||||||
Business Segment Income | |||||||||||
In millions | 3Q17 | 2Q17 | 3Q16 | ||||||||
Retail Banking | $ | 232 | $ | 230 | $ | 224 | |||||
Corporate & Institutional Banking | 525 | 518 | 509 | ||||||||
Asset Management Group | 47 | 52 | 58 | ||||||||
Other, including BlackRock | 322 | 297 | 215 | ||||||||
Net income | $ | 1,126 | $ | 1,097 | $ | 1,006 | |||||
See accompanying notes in Consolidated Financial Highlights | |||||||||||
Retail Banking | Change | Change | |||||||||||||||||
3Q17 vs | 3Q17 vs | ||||||||||||||||||
In millions | 3Q17 | 2Q17 | 3Q16 | 2Q17 | 3Q16 | ||||||||||||||
Net interest income | $ | 1,176 | $ | 1,139 | $ | 1,136 | $ | 37 | $ | 40 | |||||||||
Noninterest income | $ | 643 | $ | 645 | $ | 680 | $ | (2 | ) | $ | (37 | ) | |||||||
Provision for credit losses | $ | 77 | $ | 50 | $ | 102 | $ | 27 | $ | (25 | ) | ||||||||
Noninterest expense | $ | 1,375 | $ | 1,370 | $ | 1,359 | $ | 5 | $ | 16 | |||||||||
Earnings | $ | 232 | $ | 230 | $ | 224 | $ | 2 | $ | 8 | |||||||||
In billions | |||||||||||||||||||
Average loans | $ | 72.5 | $ | 72.3 | $ | 71.5 | $ | .2 | $ | 1.0 | |||||||||
Average deposits | $ | 159.5 | $ | 160.2 | $ | 154.4 | $ | (.7 | ) | $ | 5.1 | ||||||||
Residential mortgage servicing portfolio Quarter end | $ | 129 | $ | 131 | $ | 126 | $ | (2 | ) | $ | 3 | ||||||||
Loan origination volume | $ | 2.5 | $ | 2.2 | $ | 3.1 | $ | .3 | $ | (.6 | ) | ||||||||
▪ | Average loans increased 1 percent compared with the third quarter of 2016 as growth in residential mortgage, auto and credit card loans was partially offset by lower commercial, home equity and education loans. |
▪ | Average deposits grew 3 percent over the third quarter of 2016 due to higher demand deposits as well as an increase in savings deposits which was partially offset by lower money market deposits reflecting a shift to relationship-based savings products. |
▪ | Approximately 57 percent of third quarter 2017 residential mortgage loan origination volume was for home purchase transactions compared with 61 percent for the second quarter and 41 percent in the third quarter of 2016. |
▪ | Residential mortgage loan servicing acquisitions were $2 billion for the third quarter of 2017 compared with $8 billion for the second quarter and $5 billion in the third quarter of 2016. |
▪ | Net charge-offs were $85 million for the third quarter of 2017 compared with $87 million in the second quarter and $89 million for the third quarter of 2016. |
▪ | Retail Banking continued to focus on the strategic priority of transforming the customer experience through transaction migration, branch network and home lending transformations and multi-channel engagement and service strategies. |
– | Approximately 62 percent of consumer customers used non-teller channels for the majority of their transactions during the third and second quarters of 2017 compared with 59 percent for the third quarter of 2016. |
– | Deposit transactions via ATM and mobile channels were 54 percent of total deposit transactions in the third quarter of 2017 compared with 52 percent in the second quarter and 50 percent in the third quarter of 2016. |
– | PNC had a network of 2,474 branches and 8,987 ATMs at September 30, 2017. Approximately 21 percent of the branch network operates under the universal model. |
Corporate & Institutional Banking | Change | Change | |||||||||||||||||
3Q17 vs | 3Q17 vs | ||||||||||||||||||
In millions | 3Q17 | 2Q17 | 3Q16 | 2Q17 | 3Q16 | ||||||||||||||
Net interest income | $ | 924 | $ | 890 | $ | 826 | $ | 34 | $ | 98 | |||||||||
Noninterest income | $ | 555 | $ | 588 | $ | 526 | $ | (33 | ) | $ | 29 | ||||||||
Provision for credit losses | $ | 62 | $ | 87 | $ | 8 | $ | (25 | ) | $ | 54 | ||||||||
Noninterest expense | $ | 599 | $ | 602 | $ | 565 | $ | (3 | ) | $ | 34 | ||||||||
Earnings | $ | 525 | $ | 518 | $ | 509 | $ | 7 | $ | 16 | |||||||||
In billions | |||||||||||||||||||
Average loans | $ | 134.3 | $ | 131.5 | $ | 124.0 | $ | 2.8 | $ | 10.3 | |||||||||
Average deposits | $ | 87.5 | $ | 83.7 | $ | 86.0 | $ | 3.8 | $ | 1.5 | |||||||||
Commercial loan servicing portfolio Quarter end | $ | 513 | $ | 502 | $ | 461 | $ | 11 | $ | 52 | |||||||||
▪ | Average loans increased 2 percent over the second quarter and 8 percent over the third quarter of 2016 driven by growth in PNC’s corporate banking and business credit businesses as well as the equipment finance business, including the acquired loans. |
▪ | Average deposits increased 5 percent over the second quarter reflecting seasonal growth. Compared with the third quarter of 2016, deposits increased 2 percent driven by an increase in interest-bearing demand deposits. |
▪ | Net charge-offs were $22 million in the third quarter of 2017, $21 million in the second quarter and $65 million in the third quarter of 2016, which reflected energy-related loans. |
Asset Management Group | Change | Change | |||||||||||||||||
3Q17 vs | 3Q17 vs | ||||||||||||||||||
In millions | 3Q17 | 2Q17 | 3Q16 | 2Q17 | 3Q16 | ||||||||||||||
Net interest income | $ | 72 | $ | 73 | $ | 74 | $ | (1 | ) | $ | (2 | ) | |||||||
Noninterest income | $ | 220 | $ | 217 | $ | 220 | $ | 3 | — | ||||||||||
Provision for credit losses (benefit) | $ | 3 | $ | (7 | ) | $ | (3 | ) | $ | 10 | $ | 6 | |||||||
Noninterest expense | $ | 214 | $ | 215 | $ | 206 | $ | (1 | ) | $ | 8 | ||||||||
Earnings | $ | 47 | $ | 52 | $ | 58 | $ | (5 | ) | $ | (11 | ) | |||||||
In billions | |||||||||||||||||||
Client assets under administration Quarter end | $ | 275 | $ | 266 | $ | 257 | $ | 9 | $ | 18 | |||||||||
Average loans | $ | 7.0 | $ | 7.0 | $ | 7.1 | — | $ | (.1 | ) | |||||||||
Average deposits | $ | 12.2 | $ | 12.4 | $ | 11.9 | $ | (.2 | ) | $ | .3 | ||||||||
▪ | Asset Management Group’s strategy is focused on growing investable assets by continually evolving the client experience and products and services. The business offers an open architecture platform with a full array of investment products and banking solutions. |
▪ | Client assets under administration at September 30, 2017 included discretionary client assets under management of $146 billion and nondiscretionary client assets under administration of $129 billion. |
– | Discretionary client assets under management increased $5 billion compared with June 30, 2017 and increased $8 billion compared with September 30, 2016 primarily attributable to equity market increases. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | ||||||||||||||||||
FINANCIAL RESULTS | Three months ended | Nine months ended | |||||||||||||||||
Dollars in millions, except per share data | September 30 | June 30 | September 30 | September 30 | September 30 | ||||||||||||||
2017 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
Revenue | |||||||||||||||||||
Net interest income | $ | 2,345 | $ | 2,258 | $ | 2,095 | $ | 6,763 | $ | 6,261 | |||||||||
Noninterest income | 1,780 | 1,802 | 1,734 | 5,306 | 5,027 | ||||||||||||||
Total revenue | 4,125 | 4,060 | 3,829 | 12,069 | 11,288 | ||||||||||||||
Provision for credit losses | 130 | 98 | 87 | 316 | 366 | ||||||||||||||
Noninterest expense | 2,456 | 2,479 | 2,394 | 7,337 | 7,035 | ||||||||||||||
Income before income taxes and noncontrolling interests | $ | 1,539 | $ | 1,483 | $ | 1,348 | $ | 4,416 | $ | 3,887 | |||||||||
Net income | $ | 1,126 | $ | 1,097 | $ | 1,006 | $ | 3,297 | $ | 2,938 | |||||||||
Less: | |||||||||||||||||||
Net income attributable to noncontrolling interests | 12 | 10 | 18 | 39 | 60 | ||||||||||||||
Preferred stock dividends (a) | 63 | 55 | 63 | 181 | 168 | ||||||||||||||
Preferred stock discount accretion and redemptions | 1 | 2 | 1 | 24 | 4 | ||||||||||||||
Net income attributable to common shareholders | $ | 1,050 | $ | 1,030 | $ | 924 | $ | 3,053 | $ | 2,706 | |||||||||
Less: | |||||||||||||||||||
Dividends and undistributed earnings allocated to nonvested restricted shares | 5 | 4 | 7 | 15 | 19 | ||||||||||||||
Impact of BlackRock earnings per share dilution | 3 | 1 | 4 | 8 | 10 | ||||||||||||||
Net income attributable to diluted common shares | $ | 1,042 | $ | 1,025 | $ | 913 | $ | 3,030 | $ | 2,677 | |||||||||
Diluted earnings per common share | $ | 2.16 | $ | 2.10 | $ | 1.84 | $ | 6.21 | $ | 5.33 | |||||||||
Cash dividends declared per common share | $ | .75 | $ | .55 | $ | .55 | $ | 1.85 | $ | 1.57 | |||||||||
Effective tax rate (b) | 26.8 | % | 26.0 | % | 25.4 | % | 25.3 | % | 24.4 | % | |||||||||
(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 PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | ||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||
September 30 | June 30 | September 30 | September 30 | September 30 | |||||||||||||||
2017 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
PERFORMANCE RATIOS | |||||||||||||||||||
Net interest margin (a) | 2.91 | % | 2.84 | % | 2.68 | % | 2.84 | % | 2.71 | % | |||||||||
Noninterest income to total revenue | 43 | % | 44 | % | 45 | % | 44 | % | 45 | % | |||||||||
Efficiency (b) | 60 | % | 61 | % | 63 | % | 61 | % | 62 | % | |||||||||
Return on: | |||||||||||||||||||
Average common shareholders' equity | 9.89 | % | 9.88 | % | 8.74 | % | 9.76 | % | 8.69 | % | |||||||||
Average assets | 1.20 | % | 1.19 | % | 1.10 | % | 1.19 | % | 1.09 | % | |||||||||
BUSINESS SEGMENT NET INCOME (LOSS) (c) (d) | |||||||||||||||||||
In millions | |||||||||||||||||||
Retail Banking | $ | 232 | $ | 230 | $ | 224 | $ | 675 | $ | 795 | |||||||||
Corporate & Institutional Banking | 525 | 518 | 509 | 1,527 | 1,364 | ||||||||||||||
Asset Management Group | 47 | 52 | 58 | 146 | 155 | ||||||||||||||
Other, including BlackRock (e) | 322 | 297 | 215 | 949 | 624 | ||||||||||||||
Total net income | $ | 1,126 | $ | 1,097 | $ | 1,006 | $ | 3,297 | $ | 2,938 | |||||||||
(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 September 30, 2017, June 30, 2017 and September 30, 2016 were $55 million, $54 million and $49 million, respectively. The taxable equivalent adjustments to net interest income for the first nine months of 2017 and 2016 were $161 million and $145 million, respectively. |
(b) | Calculated as noninterest expense divided by total revenue. |
(c) | Effective for the first quarter of 2017, as a result of changes to how we manage our businesses, we realigned our segments and, accordingly, have changed the basis of presentation of our segments, resulting in four reportable business segments: Retail Banking, Corporate & Institutional Banking, Asset Management Group and BlackRock. For purposes of this presentation, we have combined BlackRock with Other. All 2016 prior periods presented were revised to conform to the new segment alignment. |
(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. We periodically refine our internal methodologies as management reporting practices are enhanced. In the first quarter of 2017, we made certain adjustments to our internal funds transfer pricing methodology primarily relating to weighted average lives of certain non-maturity deposits. These changes in methodology affected business segment results, primarily adversely impacting net interest income for Corporate & Institutional Banking and Retail Banking, offset by increased net interest income in Other. All 2016 prior periods presented were revised to reflect our change in internal funds transfer pricing methodology. |
(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) | ||||||||||
September 30 | June 30 | September 30 | |||||||||
2017 | 2017 | 2016 | |||||||||
BALANCE SHEET DATA | |||||||||||
Dollars in millions, except per share data | |||||||||||
Assets | $ | 375,191 | $ | 372,190 | $ | 369,348 | |||||
Loans (a) | $ | 221,109 | $ | 218,034 | $ | 210,446 | |||||
Allowance for loan and lease losses | $ | 2,605 | $ | 2,561 | $ | 2,619 | |||||
Interest-earning deposits with banks | $ | 24,713 | $ | 22,482 | $ | 27,058 | |||||
Investment securities | $ | 74,994 | $ | 76,431 | $ | 78,514 | |||||
Loans held for sale (a) | $ | 1,764 | $ | 2,030 | $ | 2,053 | |||||
Equity investments (b) | $ | 11,009 | $ | 10,819 | $ | 10,605 | |||||
Mortgage servicing rights | $ | 1,854 | $ | 1,867 | $ | 1,293 | |||||
Goodwill | $ | 9,163 | $ | 9,163 | $ | 9,103 | |||||
Other assets (a) | $ | 28,454 | $ | 28,886 | $ | 28,364 | |||||
Noninterest-bearing deposits | $ | 79,967 | $ | 79,550 | $ | 82,159 | |||||
Interest-bearing deposits | $ | 180,768 | $ | 179,626 | $ | 177,736 | |||||
Total deposits | $ | 260,735 | $ | 259,176 | $ | 259,895 | |||||
Borrowed funds (a) | $ | 57,564 | $ | 56,406 | $ | 51,541 | |||||
Shareholders’ equity | $ | 46,388 | $ | 46,084 | $ | 45,707 | |||||
Common shareholders’ equity | $ | 42,406 | $ | 42,103 | $ | 42,251 | |||||
Accumulated other comprehensive income | $ | (22 | ) | $ | (98 | ) | $ | 646 | |||
Book value per common share | $ | 89.05 | $ | 87.78 | $ | 86.57 | |||||
Tangible book value per common share (Non-GAAP) (c) | $ | 69.72 | $ | 68.55 | $ | 67.93 | |||||
Period end common shares outstanding (millions) | 476 | 480 | 488 | ||||||||
Loans to deposits | 85 | % | 84 | % | 81 | % | |||||
CLIENT ASSETS (billions) | |||||||||||
Discretionary client assets under management | $ | 146 | $ | 141 | $ | 138 | |||||
Nondiscretionary client assets under administration | 129 | 125 | 119 | ||||||||
Total client assets under administration | 275 | 266 | 257 | ||||||||
Brokerage account client assets | 48 | 46 | 44 | ||||||||
Total client assets | $ | 323 | $ | 312 | $ | 301 | |||||
CAPITAL RATIOS | |||||||||||
Transitional Basel III (d) (e) | |||||||||||
Common equity Tier 1 | 10.3 | % | 10.3 | % | 10.6 | % | |||||
Tier 1 risk-based | 11.6 | % | 11.6 | % | 11.9 | % | |||||
Total capital risk-based | 13.7 | % | 13.7 | % | 14.2 | % | |||||
Leverage | 9.9 | % | 9.9 | % | 10.1 | % | |||||
Pro forma Fully Phased-In Basel III (Non-GAAP) (d) | |||||||||||
Common equity Tier 1 | 9.8 | % | 9.8 | % | 10.2 | % | |||||
Common shareholders' equity to assets | 11.3 | % | 11.3 | % | 11.4 | % | |||||
ASSET QUALITY | |||||||||||
Nonperforming loans to total loans | .85 | % | .90 | % | 1.02 | % | |||||
Nonperforming assets to total loans, OREO and foreclosed assets | .93 | % | .99 | % | 1.13 | % | |||||
Nonperforming assets to total assets | .55 | % | .58 | % | .64 | % | |||||
Net charge-offs to average loans (for the three months ended) (annualized) | .19 | % | .20 | % | .29 | % | |||||
Allowance for loan and lease losses to total loans | 1.18 | % | 1.17 | % | 1.24 | % | |||||
Allowance for loan and lease losses to nonperforming loans | 139 | % | 131 | % | 122 | % | |||||
Accruing loans past due 90 days or more (in millions) | $ | 678 | $ | 674 | $ | 766 | |||||
(a) | Amounts include assets and liabilities for which we have elected the fair value option. Our second quarter 2017 Form 10-Q included, and our third quarter 2017 Form 10-Q will include, additional information regarding these Consolidated Balance Sheet line items. |
(b) | Amounts include our equity interest in BlackRock. |
(c) | See the Tangible Book Value per Common Share table on page 16 for additional information. |
(d) | The ratios as of September 30, 2017 are estimated and calculated based on the standardized approach. See Capital Ratios on page 15 for additional information. |
(e) | Calculated using the regulatory capital methodology applicable to PNC during each period presented. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | |
Transitional Basel III and Pro forma Fully Phased-In Basel III Common Equity Tier 1 Capital Ratios (Non-GAAP) | |||||||||||||||||||||||||
2017 Transitional Basel III | 2016 Transitional Basel III | Pro forma Fully Phased-In Basel III (Non-GAAP) (estimated) | |||||||||||||||||||||||
September 30 | June 30 | September 30 | September 30 | June 30 | September 30 | ||||||||||||||||||||
Dollars in millions | 2017 (estimated) | 2017 | 2016 | 2017 | 2017 | 2016 | |||||||||||||||||||
Common stock, related surplus and retained earnings, net of treasury stock | $ | 42,426 | $ | 42,200 | $ | 41,604 | $ | 42,426 | $ | 42,200 | $ | 41,604 | |||||||||||||
Less regulatory capital adjustments: | |||||||||||||||||||||||||
Goodwill and disallowed intangibles, net of deferred tax liabilities | (9,137 | ) | (9,156 | ) | (8,993 | ) | (9,202 | ) | (9,225 | ) | (9,102 | ) | |||||||||||||
Basel III total threshold deductions | (1,178 | ) | (1,144 | ) | (731 | ) | (1,748 | ) | (1,702 | ) | (1,218 | ) | |||||||||||||
Accumulated other comprehensive income (a) | (94 | ) | (167 | ) | 181 | (117 | ) | (209 | ) | 302 | |||||||||||||||
All other adjustments | (162 | ) | (179 | ) | (177 | ) | (164 | ) | (181 | ) | (180 | ) | |||||||||||||
Basel III Common equity Tier 1 capital | $ | 31,855 | $ | 31,554 | $ | 31,884 | $ | 31,195 | $ | 30,883 | $ | 31,406 | |||||||||||||
Basel III standardized approach risk-weighted assets (b) | $ | 309,175 | $ | 306,379 | $ | 300,308 | $ | 317,271 | $ | 314,389 | $ | 308,665 | |||||||||||||
Basel III advanced approaches risk-weighted assets (c) | N/A | N/A | N/A | $ | 285,617 | $ | 282,472 | $ | 280,150 | ||||||||||||||||
Basel III Common equity Tier 1 capital ratio | 10.3 | % | 10.3 | % | 10.6 | % | 9.8 | % | 9.8 | % | 10.2 | % | |||||||||||||
Risk weight and associated rules utilized | Standardized (with 2017 transition adjustments) | Standardized (with 2016 transition adjustments) | Standardized | ||||||||||||||||||||||
(a) | 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. |
(b) | Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets. |
(c) | 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) | |||||||||||
September 30 | June 30 | September 30 | |||||||||
Dollars in millions, except per share data | 2017 | 2017 | 2016 | ||||||||
Book value per common share | $ | 89.05 | $ | 87.78 | $ | 86.57 | |||||
Tangible book value per common share | |||||||||||
Common shareholders' equity | $ | 42,406 | $ | 42,103 | $ | 42,251 | |||||
Goodwill and Other Intangible Assets | (9,503 | ) | (9,527 | ) | (9,408 | ) | |||||
Deferred tax liabilities on Goodwill and Other Intangible Assets | 301 | 302 | 306 | ||||||||
Tangible common shareholders' equity | $ | 33,204 | $ | 32,878 | $ | 33,149 | |||||
Period-end common shares outstanding (in millions) | 476 | 480 | 488 | ||||||||
Tangible book value per common share (Non-GAAP) | $ | 69.72 | $ | 68.55 | $ | 67.93 | |||||
▪ | 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 law and policy accompanying the new presidential administration and uncertainty or speculation pending the enactment of such changes. |
– | Changes in customers’, suppliers’ and other counterparties’ performance and creditworthiness. |
– | Slowing or reversal of the current U.S. economic expansion. |
– | Continued residual effects of recessionary conditions and uneven spread of positive impacts of recovery on the economy and our counterparties, including adverse impacts on levels of unemployment, loan utilization rates, delinquencies, defaults and counterparty ability to meet credit and other obligations. |
– | Commodity price volatility. |
– | Changes in customer preferences and behavior, whether due to changing business and economic conditions, legislative and regulatory initiatives, or other factors. |
▪ | Our forward-looking financial statements are subject to the risk that economic and financial market conditions will be substantially different than 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 the U.S. economy and the labor market will grow moderately through the rest of 2017 and in 2018, supported by gains in consumer spending thanks to solid job growth and rising wages, continued gradual improvement in the housing market, modest growth in business investment, an expanding global economy, and some fiscal stimulus from corporate and personal income tax cuts. Although inflation has 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 through the rest of this year and throughout 2018; PNC’s baseline forecast is for one 25 basis point increase in the federal funds rate in December of 2017, and three more increases in 2018. Longer-term rates will also increase as the Federal Reserve slowly reduces the size of its balance sheet, but at a slower pace than short-term rates. |
▪ | PNC’s ability to take certain capital actions, including paying dividends and any plans to increase common stock dividends, repurchase common stock under current or future programs, or issue or redeem preferred stock or other regulatory capital instruments, is subject to the review of such proposed actions 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), the international body responsible for developing global regulatory standards for banking organizations for consideration and adoption by national jurisdictions), 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, bank capital and liquidity standards, tax, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles. |
– | 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 by acquiring from time to time other financial services companies, financial services assets and related deposits and other liabilities. 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. |