For the quarter |
|||||||||||
1Q17 |
4Q16 |
1Q16 |
|||||||||
Net income $ millions |
|
|
|
||||||||
Diluted earnings per common share |
|
|
|
“PNC had a good start to the year,” said
Income Statement Highlights
First quarter 2017 compared with fourth quarter 2016
- Total revenue grew
$10 million to$3.9 billion . - Net interest income increased
$30 million , or 1 percent, to$2.2 billion primarily due to higher loan and securities yields that benefited from higher interest rates in the quarter partially offset by two fewer days in the first quarter. - Noninterest income decreased
$20 million , or 1 percent, to$1.7 billion reflecting seasonally lower fee income partially offset by positive valuation adjustments of$47 million associated with a five-year extension to conform certain equity investments subject to the Volcker Rule. - Noninterest expense decreased
$39 million , or 2 percent, to$2.4 billion and expenses continued to be well managed. - Provision for credit losses was
$88 million , an increase of$21 million . Overall credit quality remained stable. - Diluted earnings per common share were negatively impacted by
$.04 due to recognition of deferred issuance costs of$19 million upon the redemption of all REIT preferred securities onMarch 15, 2017 .
Balance Sheet Highlights
- Loans grew
$2.0 billion , or 1 percent, to$212.8 billion atMarch 31, 2017 compared withDecember 31, 2016 . - Commercial lending balances increased
$2.7 billion , or 2 percent, primarily in PNC’s real estate, business credit and corporate banking businesses. - Consumer lending balances decreased
$.7 billion reflecting lower home equity, education and credit card loans partially offset by higher residential mortgage loans. - Overall credit quality remained stable.
- Nonperforming assets of
$2.2 billion atMarch 31, 2017 decreased$.2 billion , or 7 percent, compared withDecember 31, 2016 . - Net charge-offs increased to
$118 million for the first quarter compared with$106 million for the fourth quarter. - Deposits increased
$3.5 billion , or 1 percent, to$260.7 billion atMarch 31, 2017 compared withDecember 31, 2016 reflecting growth in consumer deposits partially offset by seasonal declines in commercial deposits. - Investment securities increased
$.5 billion , or 1 percent, to$76.4 billion atMarch 31, 2017 compared withDecember 31, 2016 . - PNC maintained a strong liquidity position.
- The Liquidity Coverage Ratio at
March 31, 2017 for bothPNC and PNC Bank, N.A. continued to exceed the fully phased-in requirement of 100 percent, which became effective onJanuary 1, 2017 . - PNC returned
$.9 billion of capital to shareholders, or 92 percent of first quarter net income attributable to diluted common shares, through repurchases of 5.0 million common shares for$.6 billion and dividends on common shares of$.3 billion . - On
January 30, 2017 , PNC announced a$300 million increase to its common stock share repurchase programs, which now provide for repurchases of up to$2.3 billion for the four-quarter period endingJune 30, 2017 . - PNC maintained a strong capital position.
- Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.5 percent at
March 31, 2017 and 10.6 percent atDecember 31, 2016 , calculated using the regulatory capital methodologies applicable to PNC during 2017 and 2016, respectively. - Pro forma fully phased-in Basel III common equity Tier 1 capital ratio, a non-GAAP financial measure, was an estimated 10.0 percent at both
March 31, 2017 andDecember 31, 2016 , based on the standardized approach rules.
Earnings Summary |
||||||||||||||
In millions, except per share data |
1Q17 |
4Q16 |
1Q16 |
|||||||||||
Net income |
$ |
1,074 |
$ |
1,047 |
$ |
943 |
||||||||
Net income attributable to diluted common shares |
$ |
963 |
$ |
973 |
$ |
850 |
||||||||
Diluted earnings per common share |
$ |
1.96 |
$ |
1.97 |
$ |
1.68 |
||||||||
Average diluted common shares outstanding |
492 |
494 |
507 |
|||||||||||
Return on average assets |
1.19 |
% |
1.13 |
% |
1.07 |
% |
||||||||
Return on average common equity |
9.50 |
% |
9.31 |
% |
8.44 |
% |
||||||||
Book value per common share |
Quarter end |
$ |
86.14 |
$ |
85.94 |
$ |
83.47 |
|||||||
Tangible book value per common share (non-GAAP) |
Quarter end |
$ |
67.47 |
$ |
67.26 |
$ |
65.15 |
|||||||
Cash dividends declared per common share |
$ |
.55 |
$ |
.55 |
$ |
.51 |
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported amounts. Fee income, a non-GAAP financial measure, refers to noninterest income in the following categories: asset management, consumer services, corporate services, residential mortgage and service charges on deposits. Information in this news release including the financial tables is unaudited.
CONSOLIDATED REVENUE REVIEW |
|||||||||||||||||||||
Revenue |
Change |
Change |
|||||||||||||||||||
1Q17 vs |
1Q17 vs |
||||||||||||||||||||
In millions |
1Q17 |
4Q16 |
1Q16 |
4Q16 |
1Q16 |
||||||||||||||||
Net interest income |
$ |
2,160 |
$ |
2,130 |
$ |
2,098 |
1 |
% |
3 |
% |
|||||||||||
Noninterest income |
1,724 |
1,744 |
1,567 |
(1) |
% |
10 |
% |
||||||||||||||
Total revenue |
$ |
3,884 |
$ |
3,874 |
$ |
3,665 |
– |
6 |
% |
||||||||||||
Total revenue for the first quarter of 2017 grew
Net interest income for the first quarter of 2017 increased
The net interest margin increased to 2.77 percent for the first quarter of 2017 compared with 2.69 percent for the fourth quarter and 2.75 percent for the first quarter of 2016. The first quarter 2017 margin reflected benefits from higher interest rates in the quarter. Compared with first quarter 2016, higher loan yields were offset by lower securities yields and higher borrowing and deposit costs.
Noninterest Income |
Change |
Change |
|||||||||||||||||||||
1Q17 vs |
1Q17 vs |
||||||||||||||||||||||
In millions |
1Q17 |
4Q16 |
1Q16 |
4Q16 |
1Q16 |
||||||||||||||||||
Asset management |
$ |
403 |
$ |
399 |
$ |
341 |
1 |
% |
18 |
% |
|||||||||||||
Consumer services |
332 |
349 |
337 |
(5) |
% |
(1) |
% |
||||||||||||||||
Corporate services |
393 |
387 |
325 |
2 |
% |
21 |
% |
||||||||||||||||
Residential mortgage |
113 |
142 |
100 |
(20) |
% |
13 |
% |
||||||||||||||||
Service charges on deposits |
161 |
172 |
158 |
(6) |
% |
2 |
% |
||||||||||||||||
Other |
322 |
295 |
306 |
9 |
% |
5 |
% |
||||||||||||||||
$ |
1,724 |
$ |
1,744 |
$ |
1,567 |
(1) |
% |
10 |
% |
||||||||||||||
Noninterest income for the first quarter of 2017 decreased
Noninterest income for the first quarter of 2017 increased
CONSOLIDATED EXPENSE REVIEW |
||||||||||||||||||||||
Noninterest Expense |
Change |
Change |
||||||||||||||||||||
1Q17 vs |
1Q17 vs |
|||||||||||||||||||||
In millions |
1Q17 |
4Q16 |
1Q16 |
4Q16 |
1Q16 |
|||||||||||||||||
Personnel |
$ |
1,249 |
$ |
1,231 |
$ |
1,145 |
1 |
% |
9 |
% |
||||||||||||
Occupancy |
222 |
210 |
221 |
6 |
% |
– |
||||||||||||||||
Equipment |
251 |
254 |
234 |
(1) |
% |
7 |
% |
|||||||||||||||
Marketing |
55 |
60 |
54 |
(8) |
% |
2 |
% |
|||||||||||||||
Other |
625 |
686 |
627 |
(9) |
% |
– |
||||||||||||||||
$ |
2,402 |
$ |
2,441 |
$ |
2,281 |
(2) |
% |
5 |
% |
|||||||||||||
Noninterest expense for the first quarter of 2017 decreased
The effective tax rate was 23.0 percent for the first quarter of 2017, 23.4 percent for the fourth quarter of 2016 and 23.5 percent for the first quarter of 2016. Income taxes for first quarter 2017 included higher tax deductions for stock-based compensation related to vesting of restricted shares and options exercised and to a higher common stock price.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were
Loans |
Change |
Change |
||||||||||||||||||||
|
|
|||||||||||||||||||||
In billions |
|
|
|
|
|
|||||||||||||||||
Commercial lending |
$ |
140.6 |
$ |
137.9 |
$ |
135.1 |
2 |
% |
4 |
% |
||||||||||||
Consumer lending |
72.2 |
72.9 |
72.4 |
(1) |
% |
– |
||||||||||||||||
Total loans |
$ |
212.8 |
$ |
210.8 |
$ |
207.5 |
1 |
% |
3 |
% |
||||||||||||
For the quarter ended: |
||||||||||||||||||||||
Average loans |
$ |
212.3 |
$ |
210.9 |
$ |
207.2 |
1 |
% |
2 |
% |
||||||||||||
Total loans grew
First quarter 2017 period end and average loans increased
|
Change |
Change |
||||||||||||||||||||
3/31/17 vs |
3/31/17 vs |
|||||||||||||||||||||
In billions |
|
|
|
|
|
|||||||||||||||||
At quarter end |
$ |
76.4 |
$ |
75.9 |
$ |
72.5 |
1 |
% |
5 |
% |
||||||||||||
Average for the quarter ended |
$ |
76.3 |
$ |
76.1 |
$ |
70.3 |
– |
9 |
% |
|||||||||||||
Investment securities balances at
Interest-earning deposits with banks, primarily with the
Deposits |
Change |
Change |
||||||||||||||||||||
3/31/17 vs |
3/31/17 vs |
|||||||||||||||||||||
In billions |
|
|
|
|
|
|||||||||||||||||
At quarter end |
$ |
260.7 |
$ |
257.2 |
$ |
250.4 |
1 |
% |
4 |
% |
||||||||||||
Average for the quarter ended |
$ |
254.9 |
$ |
257.0 |
$ |
246.1 |
(1) |
% |
4 |
% |
||||||||||||
Total deposits at
Borrowed Funds |
Change |
Change |
||||||||||||||||||||
3/31/17 vs |
3/31/17 vs |
|||||||||||||||||||||
In billions |
|
|
|
|
|
|||||||||||||||||
At quarter end |
$ |
55.1 |
$ |
52.7 |
$ |
54.2 |
4 |
% |
2 |
% |
||||||||||||
Average for the quarter ended |
$ |
54.9 |
$ |
51.5 |
$ |
53.6 |
7 |
% |
2 |
% |
||||||||||||
Borrowed funds at
Capital |
|||||||||||||
3/31/2017* |
|
|
|||||||||||
Common shareholders’ equity In billions |
$ |
41.8 |
$ |
41.7 |
$ |
41.7 |
|||||||
Transitional Basel III common equity Tier 1 capital ratio |
10.5 |
% |
10.6 |
% |
10.6 |
% |
|||||||
Pro forma fully phased-in Basel III common equity |
|||||||||||||
Tier 1 capital ratio (non-GAAP) |
10.0 |
% |
10.0 |
% |
10.1 |
% |
|||||||
* Ratios estimated |
|||||||||||||
PNC maintained a strong capital position. Common shareholders’ equity at
PNC returned
On
CREDIT QUALITY REVIEW |
|||||||||||||||||||
Credit Quality |
Change |
Change |
|||||||||||||||||
At or for the quarter ended |
3/31/17 vs |
3/31/17 vs |
|||||||||||||||||
In millions |
|
|
|
|
|
||||||||||||||
Nonperforming loans |
$ |
1,998 |
$ |
2,144 |
$ |
2,281 |
(7) |
% |
(12) |
% |
|||||||||
Nonperforming assets |
$ |
2,212 |
$ |
2,374 |
$ |
2,552 |
(7) |
% |
(13) |
% |
|||||||||
Accruing loans past due 90 days or more |
$ |
699 |
$ |
782 |
$ |
782 |
(11) |
% |
(11) |
% |
|||||||||
Net charge-offs |
$ |
118 |
$ |
106 |
$ |
149 |
11 |
% |
(21) |
% |
|||||||||
Provision for credit losses |
$ |
88 |
$ |
67 |
$ |
152 |
31 |
% |
(42) |
% |
|||||||||
Allowance for loan and lease losses |
$ |
2,561 |
$ |
2,589 |
$ |
2,711 |
(1) |
% |
(6) |
% |
|||||||||
Overall credit quality for the first quarter of 2017 remained stable with the fourth quarter. Provision for credit losses for first quarter 2017 increased
Nonperforming assets at
Overall delinquencies as of
Net charge-offs for the first quarter of 2017 increased
The allowance for loan and lease losses at
BUSINESS SEGMENT RESULTS |
||||||||||||||
Business Segment Income |
||||||||||||||
In millions |
1Q17 |
4Q16 |
1Q16 |
|||||||||||
Retail Banking |
$ |
213 |
$ |
228 |
$ |
243 |
||||||||
Corporate & Institutional Banking |
484 |
545 |
398 |
|||||||||||
|
47 |
55 |
49 |
|||||||||||
Other, including BlackRock |
330 |
219 |
253 |
|||||||||||
Net income |
$ |
1,074 |
$ |
1,047 |
$ |
943 |
||||||||
See accompanying notes in Consolidated Financial Highlights |
||||||||||||||
Effective for the first quarter of 2017, as a result of changes to how PNC manages its businesses, it realigned its segments and, accordingly, has changed the basis of presentation of its segments, resulting in four reportable business segments: Retail Banking, Corporate & Institutional Banking,
Retail Banking |
Change |
Change |
||||||||||||||||||||
1Q17 vs |
1Q17 vs |
|||||||||||||||||||||
In millions |
1Q17 |
4Q16 |
1Q16 |
4Q16 |
1Q16 |
|||||||||||||||||
Net interest income |
$ |
1,121 |
$ |
1,120 |
$ |
1,122 |
$ |
1 |
$ |
(1) |
||||||||||||
Noninterest income |
$ |
603 |
$ |
655 |
$ |
633 |
$ |
(52) |
$ |
(30) |
||||||||||||
Provision for credit losses |
$ |
71 |
$ |
87 |
$ |
72 |
$ |
(16) |
$ |
(1) |
||||||||||||
Noninterest expense |
$ |
1,315 |
$ |
1,328 |
$ |
1,299 |
$ |
(13) |
$ |
16 |
||||||||||||
Earnings |
$ |
213 |
$ |
228 |
$ |
243 |
$ |
(15) |
$ |
(30) |
||||||||||||
In billions |
||||||||||||||||||||||
Average loans |
$ |
72.4 |
$ |
72.0 |
$ |
72.0 |
$ |
.4 |
$ |
.4 |
||||||||||||
Average deposits |
$ |
158.0 |
$ |
155.9 |
$ |
151.2 |
$ |
2.1 |
$ |
6.8 |
||||||||||||
Residential mortgage servicing portfolio Quarter end |
$ |
130.0 |
$ |
125.0 |
$ |
125.0 |
$ |
5.0 |
$ |
5.0 |
||||||||||||
Loan origination volume |
$ |
1.9 |
$ |
3.0 |
$ |
1.9 |
$ |
(1.1) |
– |
|||||||||||||
Retail Banking earnings for the first quarter of 2017 decreased in both comparisons. Noninterest income declined from the fourth quarter as a result of seasonally lower customer-initiated transactions, lower net hedging gains on residential mortgage servicing rights and lower mortgage loan sales revenue, partially offset by higher mortgage servicing fees. Noninterest income decreased compared with first quarter 2016 due to the impact of first quarter 2016 net gains on the sale of Visa Class B common shares partially offset by higher net hedging gains on residential mortgage servicing rights. Provision for credit losses declined in both comparisons reflecting overall credit portfolio performance. Noninterest expense decreased compared with the fourth quarter as a result of lower personnel and marketing expenses and increased compared with first quarter 2016 primarily due to investments in technology.
- 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 61 percent of consumer customers used non-teller channels for the majority of their transactions during the first quarter of 2017 compared with 60 percent and 56 percent for the fourth and first quarters of 2016, respectively.
- Deposit transactions via ATM and mobile channels increased to 52 percent of total deposit transactions in the first quarter of 2017 compared with 51 percent in the fourth quarter and 47 percent in the first quarter of 2016.
- PNC had a network of 2,508 branches and 8,976 ATMs at
March 31, 2017 . Approximately 21 percent of the branch network operates under the universal model. - Approximately 43 percent of first quarter 2017 residential mortgage loan origination volume was for home purchase transactions compared with 33 percent and 40 percent in the fourth and first quarters of 2016, respectively.
- Residential mortgage loan servicing acquisitions were
$8 billion in the first quarter of 2017 compared with$3 billion and$5 billion in the fourth and first quarters of 2016, respectively. - Average deposits grew 1 percent over the fourth quarter and 5 percent over the first quarter of 2016 due to higher demand deposits as well as an increase in savings deposits which were partially offset by lower money market deposits reflecting a shift to relationship-based savings products. Certificates of deposit declined from the net runoff of maturing accounts.
- Average loans increased 1 percent in both comparisons as growth in residential mortgage, auto and credit card loans was partially offset by lower home equity, education and commercial loans.
- Net charge-offs were
$100 million for the first quarter of 2017 compared with$90 million and$97 million for the fourth and first quarters of 2016, respectively.
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||
1Q17 vs |
1Q17 vs |
||||||||||||||||||
In millions |
1Q17 |
4Q16 |
1Q16 |
4Q16 |
1Q16 |
||||||||||||||
Net interest income |
$ |
839 |
$ |
864 |
$ |
817 |
$ |
(25) |
$ |
22 |
|||||||||
Noninterest income |
$ |
524 |
$ |
529 |
$ |
441 |
$ |
(5) |
$ |
83 |
|||||||||
Provision for credit losses (benefit) |
$ |
25 |
$ |
(3) |
$ |
102 |
$ |
28 |
$ |
(77) |
|||||||||
Noninterest expense |
$ |
584 |
$ |
567 |
$ |
533 |
$ |
17 |
$ |
51 |
|||||||||
Earnings |
$ |
484 |
$ |
545 |
$ |
398 |
$ |
(61) |
$ |
86 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
127.0 |
$ |
125.7 |
$ |
121.2 |
$ |
1.3 |
$ |
5.8 |
|||||||||
Average deposits |
$ |
83.9 |
$ |
88.5 |
$ |
82.4 |
$ |
(4.6) |
$ |
1.5 |
|||||||||
Commercial loan servicing portfolio Quarter end |
$ |
490 |
$ |
487 |
$ |
453 |
$ |
3 |
$ |
37 |
|||||||||
Corporate & Institutional Banking earnings for the first quarter of 2017 decreased compared with the fourth quarter and increased compared with the first quarter of 2016. Noninterest income declined from the fourth quarter due to lower revenue from commercial mortgage loans held for sale activities partially offset by higher merger and acquisition advisory fees. Noninterest income increased compared with the first quarter of 2016 as a result of higher merger and acquisition advisory fees, higher net hedging gains on commercial mortgage servicing rights and higher treasury management revenue. Provision for credit losses in the first quarter of 2017 increased compared with the fourth quarter driven by loan growth and decreased compared with first quarter 2016 reflecting a lower provision for energy related loans. Noninterest expense increased in both comparisons due to higher variable compensation.
- Average loans increased 1 percent over the fourth quarter and 5 percent over the first quarter of 2016 driven by growth in commercial loans in PNC’s corporate banking and equipment finance businesses. Growth in commercial real estate loans in PNC’s real estate business also contributed to the increase compared with the first quarter of 2016.
- Average deposits decreased 5 percent from the fourth quarter reflecting seasonal declines and increased 2 percent compared with the first quarter of 2016 due to an increase in interest-bearing demand deposits partially offset by decreases in noninterest-bearing demand and money market deposits.
- Net charge offs were
$21 million in the first quarter of 2017 compared with$17 million in the fourth quarter and$38 million in the first quarter of 2016.
|
Change |
Change |
||||||||||||||||||||
1Q17 vs |
1Q17 vs |
|||||||||||||||||||||
In millions |
1Q17 |
4Q16 |
1Q16 |
4Q16 |
1Q16 |
|||||||||||||||||
Net interest income |
$ |
71 |
$ |
73 |
$ |
77 |
$ |
(2) |
$ |
(6) |
||||||||||||
Noninterest income |
$ |
218 |
$ |
215 |
$ |
203 |
$ |
3 |
$ |
15 |
||||||||||||
Provision for credit losses (benefit) |
$ |
(2) |
$ |
(6) |
$ |
(3) |
$ |
4 |
$ |
1 |
||||||||||||
Noninterest expense |
$ |
217 |
$ |
207 |
$ |
206 |
$ |
10 |
$ |
11 |
||||||||||||
Earnings |
$ |
47 |
$ |
55 |
$ |
49 |
$ |
(8) |
$ |
(2) |
||||||||||||
In billions |
||||||||||||||||||||||
Client assets under administration Quarter end |
$ |
264 |
$ |
257 |
$ |
253 |
$ |
7 |
$ |
11 |
||||||||||||
Average loans |
$ |
7.0 |
$ |
7.1 |
$ |
7.4 |
$ |
(.1) |
$ |
(.4) |
||||||||||||
Average deposits |
$ |
12.8 |
$ |
12.4 |
$ |
12.3 |
$ |
.4 |
$ |
.5 |
||||||||||||
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
March 31, 2017 included discretionary client assets under management of$141 billion and nondiscretionary client assets under administration of$123 billion . - Discretionary client assets under management increased
$4 billion compared withDecember 31, 2016 and$6 billion compared withMarch 31, 2016 primarily attributable to equity market increases.
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, and residual activities that do not meet the criteria for disclosure as a separate reportable business, such as integration costs, asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities and certain trading activities, exited businesses, discontinued consumer loan portfolios, private equity investments, intercompany eliminations, most corporate overhead, tax adjustments that are not allocated to business segments, and differences between business segment performance reporting and financial statement reporting under generally accepted accounting principles.
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC Chairman, President and Chief Executive Officer
[TABULAR MATERIAL FOLLOWS]
|
Consolidated Financial Highlights (Unaudited) |
||||||||||
FINANCIAL RESULTS |
Three months ended |
||||||||||
Dollars in millions, except per share data |
|
|
|
||||||||
2017 |
2016 |
2016 |
|||||||||
Revenue |
|||||||||||
Net interest income |
$ |
2,160 |
$ |
2,130 |
$ |
2,098 |
|||||
Noninterest income |
1,724 |
1,744 |
1,567 |
||||||||
Total revenue |
3,884 |
3,874 |
3,665 |
||||||||
Provision for credit losses |
88 |
67 |
152 |
||||||||
Noninterest expense |
2,402 |
2,441 |
2,281 |
||||||||
Income before income taxes and noncontrolling interests |
$ |
1,394 |
$ |
1,366 |
$ |
1,232 |
|||||
Net income |
$ |
1,074 |
$ |
1,047 |
$ |
943 |
|||||
Less: |
|||||||||||
Net income (loss) attributable to noncontrolling interests |
17 |
22 |
19 |
||||||||
Preferred stock dividends (a) |
63 |
42 |
63 |
||||||||
Preferred stock discount accretion and redemptions |
21 |
1 |
2 |
||||||||
Net income attributable to common shareholders |
$ |
973 |
$ |
982 |
$ |
859 |
|||||
Less: |
|||||||||||
Dividends and undistributed earnings allocated to nonvested restricted shares |
6 |
7 |
6 |
||||||||
Impact of BlackRock earnings per share dilution |
4 |
2 |
3 |
||||||||
Net income attributable to diluted common shares |
$ |
963 |
$ |
973 |
$ |
850 |
|||||
Diluted earnings per common share |
$ |
1.96 |
$ |
1.97 |
$ |
1.68 |
|||||
Cash dividends declared per common share |
$ |
.55 |
$ |
.55 |
$ |
.51 |
|||||
Effective tax rate (b) |
23.0 |
% |
23.4 |
% |
23.5 |
% |
|||||
(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. |
|
Consolidated Financial Highlights (Unaudited) |
|||||||||||||
Three months ended |
||||||||||||||
|
|
|
||||||||||||
2017 |
2016 |
2016 |
||||||||||||
PERFORMANCE RATIOS |
||||||||||||||
Net interest margin (a) |
2.77 |
% |
2.69 |
% |
2.75 |
% |
||||||||
Noninterest income to total revenue |
44 |
% |
45 |
% |
43 |
% |
||||||||
Efficiency (b) |
62 |
% |
63 |
% |
62 |
% |
||||||||
Return on: |
||||||||||||||
Average common shareholders’ equity |
9.50 |
% |
9.31 |
% |
8.44 |
% |
||||||||
Average assets |
1.19 |
% |
1.13 |
% |
1.07 |
% |
||||||||
BUSINESS SEGMENT NET INCOME (LOSS) (c) (d) |
||||||||||||||
In millions |
||||||||||||||
Retail Banking |
$ |
213 |
$ |
228 |
$ |
243 |
||||||||
Corporate & Institutional Banking |
484 |
545 |
398 |
|||||||||||
|
47 |
55 |
49 |
|||||||||||
Other, including BlackRock (e) |
330 |
219 |
253 |
|||||||||||
Total net income |
$ |
1,074 |
$ |
1,047 |
$ |
943 |
(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 |
|||||||||||||
(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, |
|||||||||||||
(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 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 |
|
Consolidated Financial Highlights (Unaudited) |
|||||||||||||
|
|
|
||||||||||||
2017 |
2016 |
2016 |
||||||||||||
BALANCE SHEET DATA |
||||||||||||||
Dollars in millions, except per share data |
||||||||||||||
Assets |
$ |
370,944 |
$ |
366,380 |
$ |
360,985 |
||||||||
Loans (a) |
$ |
212,826 |
$ |
210,833 |
$ |
207,485 |
||||||||
Allowance for loan and lease losses |
$ |
2,561 |
$ |
2,589 |
$ |
2,711 |
||||||||
Interest-earning deposits with banks |
$ |
27,877 |
$ |
25,711 |
$ |
29,478 |
||||||||
Investment securities |
$ |
76,432 |
$ |
75,947 |
$ |
72,569 |
||||||||
Loans held for sale (a) |
$ |
1,414 |
$ |
2,504 |
$ |
1,541 |
||||||||
Equity investments (b) |
$ |
10,900 |
$ |
10,728 |
$ |
10,391 |
||||||||
Mortgage servicing rights |
$ |
1,867 |
$ |
1,758 |
$ |
1,323 |
||||||||
|
$ |
9,103 |
$ |
9,103 |
$ |
9,103 |
||||||||
Other assets (a) |
$ |
28,083 |
$ |
27,506 |
$ |
27,945 |
||||||||
Noninterest-bearing deposits |
$ |
79,246 |
$ |
80,230 |
$ |
78,151 |
||||||||
Interest-bearing deposits |
$ |
181,464 |
$ |
176,934 |
$ |
172,208 |
||||||||
Total deposits |
$ |
260,710 |
$ |
257,164 |
$ |
250,359 |
||||||||
Borrowed funds (a) |
$ |
55,062 |
$ |
52,706 |
$ |
54,178 |
||||||||
Shareholders’ equity |
$ |
45,754 |
$ |
45,699 |
$ |
45,130 |
||||||||
Common shareholders’ equity |
$ |
41,774 |
$ |
41,723 |
$ |
41,677 |
||||||||
Accumulated other comprehensive income |
$ |
(279) |
$ |
(265) |
$ |
532 |
||||||||
Book value per common share |
$ |
86.14 |
$ |
85.94 |
$ |
83.47 |
||||||||
Tangible book value per common share (Non-GAAP) (c) |
$ |
67.47 |
$ |
67.26 |
$ |
65.15 |
||||||||
Period end common shares outstanding (millions) |
485 |
485 |
499 |
|||||||||||
Loans to deposits |
82 |
% |
82 |
% |
83 |
% |
||||||||
CLIENT ASSETS (billions) |
||||||||||||||
Discretionary client assets under management |
$ |
141 |
$ |
137 |
$ |
135 |
||||||||
Nondiscretionary client assets under administration |
123 |
120 |
118 |
|||||||||||
Total client assets under administration (d) |
264 |
257 |
253 |
|||||||||||
Brokerage account client assets |
46 |
44 |
43 |
|||||||||||
Total client assets |
$ |
310 |
$ |
301 |
$ |
296 |
||||||||
CAPITAL RATIOS |
||||||||||||||
Transitional Basel III (e) (f) |
||||||||||||||
Common equity Tier 1 |
10.5 |
% |
10.6 |
% |
10.6 |
% |
||||||||
Tier 1 risk-based |
11.8 |
% |
12.0 |
% |
11.9 |
% |
||||||||
Total capital risk-based |
14.0 |
% |
14.3 |
% |
14.4 |
% |
||||||||
Leverage |
9.9 |
% |
10.1 |
% |
10.2 |
% |
||||||||
Pro forma Fully Phased-In Basel III (Non-GAAP) (e) |
||||||||||||||
Common equity Tier 1 |
10.0 |
% |
10.0 |
% |
10.1 |
% |
||||||||
Common shareholders’ equity to assets |
11.3 |
% |
11.4 |
% |
11.5 |
% |
||||||||
ASSET QUALITY |
||||||||||||||
Nonperforming loans to total loans |
.94 |
% |
1.02 |
% |
1.10 |
% |
||||||||
Nonperforming assets to total loans, OREO and foreclosed assets |
1.04 |
% |
1.12 |
% |
1.23 |
% |
||||||||
Nonperforming assets to total assets |
.60 |
% |
.65 |
% |
.71 |
% |
||||||||
Net charge-offs to average loans (for the three months ended) (annualized) |
.23 |
% |
.20 |
% |
.29 |
% |
||||||||
Allowance for loan and lease losses to total loans |
1.20 |
% |
1.23 |
% |
1.31 |
% |
||||||||
Allowance for loan and lease losses to nonperforming loans |
128 |
% |
121 |
% |
119 |
% |
||||||||
Accruing loans past due 90 days or more (in millions) |
$ |
699 |
$ |
782 |
$ |
782 |
(a) |
Amounts include assets and liabilities for which we have elected the fair value option. Our 2016 Form 10-K included, and our first 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 18 for additional information. |
|||||||||||||
(d) |
As a result of certain investment advisory services performed by one of our registered investment advisors, certain assets were previously reported as both discretionary client assets under management and nondiscretionary client assets under administration. Effective for the first quarter of 2017, these amounts are only reported as discretionary assets under management. Prior periods were adjusted to remove amounts previously included in nondiscretionary assets under administration of approximately |
|||||||||||||
(e) |
The ratios as of |
|||||||||||||
(f) |
Calculated using the regulatory capital methodology applicable to PNC during each period presented. |
|
CAPITAL RATIOS |
As a result of the phased-in periods included in the final |
We provide information below regarding PNC’s estimated |
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) |
|||||||||||||||||||
(estimated) |
|||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||
Dollars in millions |
2017 |
2016 |
2016 |
2017 |
2016 |
2016 |
|||||||||||||||
Common stock, related surplus and retained earnings, net of |
$ |
42,053 |
$ |
41,987 |
$ |
41,145 |
$ |
42,053 |
$ |
41,987 |
$ |
41,145 |
|||||||||
Less regulatory capital adjustments: |
|||||||||||||||||||||
|
(9,007) |
(8,974) |
(9,023) |
(9,052) |
(9,073) |
(9,148) |
|||||||||||||||
Basel III total threshold deductions |
(1,066) |
(762) |
(678) |
(1,588) |
(1,469) |
(1,139) |
|||||||||||||||
Accumulated other comprehensive income (a) |
(295) |
(238) |
60 |
(369) |
(396) |
101 |
|||||||||||||||
All other adjustments |
(185) |
(214) |
(139) |
(182) |
(221) |
(148) |
|||||||||||||||
Basel III Common equity Tier 1 capital |
$ |
31,500 |
$ |
31,799 |
$ |
31,365 |
$ |
30,862 |
$ |
30,828 |
$ |
30,811 |
|||||||||
Basel III standardized approach risk-weighted assets (b) |
$ |
300,683 |
$ |
300,533 |
$ |
295,555 |
$ |
309,066 |
$ |
308,517 |
$ |
303,805 |
|||||||||
Basel III advanced approaches risk-weighted assets (c) |
N/A |
N/A |
N/A |
$ |
279,690 |
$ |
277,896 |
$ |
283,297 |
||||||||||||
Basel III Common equity Tier 1 capital ratio |
10.5 |
% |
10.6 |
% |
10.6 |
% |
10.0 |
% |
10.0 |
% |
10.1 |
% |
|||||||||
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. |
||||||||||||||||||||
PNC utilizes the pro forma fully phased-in Basel III capital ratios to assess its capital position (without the benefit of phase-ins), as these ratios represent the regulatory capital standards that will ultimately be applicable to PNC under the final Basel III rules. Our Basel III capital ratios and estimates may be impacted by additional regulatory guidance or analysis, and, in the case of those ratios calculated using the advanced approaches, may be subject to variability based on the ongoing evolution, validation and regulatory approval of PNC’s models that are integral to the calculation of advanced approaches risk-weighted assets as PNC moves through the parallel run approval process. |
|
Tangible book value per common share is a non-GAAP measure and is calculated based on tangible common shareholders’ equity divided by period-end common shares outstanding. We believe this non-GAAP measure serves as a useful tool to help evaluate the strength and discipline of a company’s capital management strategies and as an additional, conservative measure of total company value. |
Tangible Book Value per Common Share (Non-GAAP) |
|||||||||||||||
|
|
|
|||||||||||||
Dollars in millions, except per share data |
2017 |
2016 |
2016 |
||||||||||||
Book value per common share |
$ |
86.14 |
$ |
85.94 |
$ |
83.47 |
|||||||||
Tangible book value per common share |
|||||||||||||||
Common shareholders’ equity |
$ |
41,774 |
$ |
41,723 |
$ |
41,677 |
|||||||||
|
(9,356) |
(9,376) |
(9,457) |
||||||||||||
Deferred tax liabilities on |
303 |
304 |
309 |
||||||||||||
Tangible common shareholders’ equity |
$ |
32,721 |
$ |
32,651 |
$ |
32,529 |
|||||||||
Period-end common shares outstanding (in millions) |
485 |
485 |
499 |
||||||||||||
Tangible book value per common share (Non-GAAP) |
$ |
67.47 |
$ |
67.26 |
$ |
65.15 |
|||||||||
Cautionary Statement Regarding Forward-Looking Information
We make statements in this news release and related conference call, and we may from time to time make other statements, regarding our outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting PNC and its future business and operations that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words such as “believe,” “plan,” “expect,” “anticipate,” “see,” “look,” “intend,” “outlook,” “project,” “forecast,” “estimate,” “goal,” “will,” “should” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time.
Forward-looking statements speak only as of the date made. We do not assume any duty and do not undertake to update forward-looking statements. Actual results or future events could differ, possibly materially, from those anticipated in forward-looking statements, as well as from historical performance.
Our forward-looking statements are subject to the following principal risks and uncertainties.
- Our businesses, financial results and balance sheet values are affected by business and economic conditions, including the following:
- 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. These statements are based on our current view that the
U.S. economy and the labor market will grow moderately in 2017, boosted by stable oil/energy prices, improving consumer spending and housing activity, and expanded federal fiscal policy stimulus as a result of the 2016 elections. Short-term interest rates and bond yields are expected to continue rising gradually in 2017, along with inflation. These forward-looking statements also do not, unless otherwise indicated, take into account the impact of potential legal and regulatory contingencies. - 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 theFederal 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 theFederal 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.
Cautionary Statement Regarding Forward-Looking Information (Continued)
- 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, tax, 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 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.
We provide greater detail regarding these as well as other factors in our 2016 Form 10-K, including in the Risk Factors and Risk Management sections and the Legal Proceedings and Commitments Notes of the Notes To Consolidated Financial Statements in that report, and in our subsequent
MEDIA:
corporate.communications@pnc.com
INVESTORS:
investor.relations@pnc.com
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