For the quarter |
||||||
3Q19 |
2Q19 |
3Q18 |
||||
Net income $ millions |
|
|
|
|||
Diluted earnings per common share |
|
|
|
"PNC delivered excellent results in the third quarter. Our loan growth was strong in both commercial and consumer average loans and we saw good deposit inflows and customer growth including from our national strategies. Net interest income and fee income increased and we managed expenses well even as we continued to make investments. We are pleased with our performance and expect that continued execution of our strategies will drive differentiated growth across our franchise and generate long-term value for our shareholders." |
Income Statement Highlights
Third quarter 2019 compared with second quarter 2019
- Net income was
$1.4 billion , an increase of$18 million , or 1 percent. - Total revenue of
$4.5 billion grew$54 million , or 1 percent. - Net interest income of
$2.5 billion increased slightly by$6 million due to the benefits of higher loan and securities balances, lower borrowing costs and an additional day partially offset by lower loan and securities yields. - Net interest margin decreased 7 basis points to 2.84 percent.
- Noninterest income of
$2.0 billion increased$48 million , or 2 percent. - Fee income of
$1.6 billion grew$73 million , or 5 percent, driven by an increase in residential mortgage revenue, higher asset management revenue and seasonally higher consumer activity partially offset by lower corporate service fees. - Other noninterest income of
$342 million decreased$25 million reflecting lower asset gains partially offset by higher revenue from private equity investments. - Noninterest expense of
$2.6 billion increased$12 million and the efficiency ratio improved to 58 percent for the third quarter from 59 percent in the second quarter. - Provision for credit losses of
$183 million increased$3 million , or 2 percent, as a higher provision for the consumer lending portfolio was substantially offset by a lower provision for the commercial lending portfolio. - The effective tax rate was 17.5 percent for the third quarter and 16.6 percent for the second quarter.
Balance Sheet Highlights
- Average loans increased
$2.8 billion , or 1 percent, to$237.7 billion in the third quarter compared with the second quarter. - Average commercial lending balances grew
$1.3 billion , or 1 percent, primarily in PNC's real estate business, including an increase in multifamily agency warehouse lending balances of$.7 billion , and in PNC's corporate banking business. - Average consumer lending balances increased
$1.5 billion , or 2 percent, due to growth in residential mortgage, auto, credit card and unsecured installment loans partially offset by lower home equity and education loans. - Overall credit quality remained strong.
- Nonperforming assets of
$1.8 billion atSeptember 30, 2019 decreased slightly by$3 million compared withJune 30, 2019 . - Net charge-offs were
$155 million for the third quarter compared with$142 million for the second quarter. - The allowance for loan and lease losses to total loans was 1.15 percent at both
September 30, 2019 andJune 30, 2019 . - Average deposits increased
$6.2 billion , or 2 percent, to$279.1 billion in the third quarter compared with the second quarter driven by seasonal growth in commercial deposits. - Average investment securities increased
$1.5 billion , or 2 percent, to$85.2 billion in the third quarter compared with the second quarter. - Average balances held with the
Federal Reserve of$15.3 billion increased$2.1 billion compared with the second quarter. - PNC returned
$1.5 billion of capital to shareholders in the third quarter through repurchases of 7.5 million common shares for$1.0 billion and dividends on common shares of$.5 billion . - The August quarterly cash dividend on common stock was raised to
$1.15 per share, an increase of20 cents per share, or 21 percent. - PNC maintained a strong capital position.
- The Basel III common equity Tier 1 capital ratio was an estimated 9.6 percent at
September 30, 2019 and 9.7 percent atJune 30, 2019 .
Earnings Summary |
||||||||||||
In millions, except per share data |
3Q19 |
2Q19 |
3Q18 |
|||||||||
Net income |
$ |
1,392 |
$ |
1,374 |
$ |
1,400 |
||||||
Net income attributable to diluted common shares |
$ |
1,307 |
$ |
1,300 |
$ |
1,317 |
||||||
Diluted earnings per common share |
$ |
2.94 |
$ |
2.88 |
$ |
2.82 |
||||||
Average diluted common shares outstanding |
445 |
452 |
467 |
|||||||||
Return on average assets |
1.36 |
% |
1.39 |
% |
1.47 |
% |
||||||
Return on average common equity |
11.56 |
% |
11.75 |
% |
12.32 |
% |
||||||
Book value per common share |
Quarter end |
$ |
103.37 |
$ |
101.53 |
$ |
93.22 |
|||||
Tangible book value per common share (non-GAAP) |
Quarter end |
$ |
82.37 |
$ |
80.76 |
$ |
73.11 |
|||||
Cash dividends declared per common share |
$ |
1.15 |
$ |
.95 |
$ |
.95 |
||||||
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 |
|||||||||||||
3Q19 vs |
3Q19 vs |
||||||||||||||
In millions |
3Q19 |
2Q19 |
3Q18 |
2Q19 |
3Q18 |
||||||||||
Net interest income |
$ |
2,504 |
$ |
2,498 |
$ |
2,466 |
— |
2 |
% |
||||||
Noninterest income |
1,989 |
1,941 |
1,891 |
2 |
% |
5 |
% |
||||||||
Total revenue |
$ |
4,493 |
$ |
4,439 |
$ |
4,357 |
1 |
% |
3 |
% |
|||||
Total revenue for the third quarter of 2019 increased
Net interest income for the third quarter of 2019 increased slightly by
Noninterest Income |
Change |
Change |
|||||||||||||
3Q19 vs |
3Q19 vs |
||||||||||||||
In millions |
3Q19 |
2Q19 |
3Q18 |
2Q19 |
3Q18 |
||||||||||
Asset management |
$ |
464 |
$ |
445 |
$ |
486 |
4 |
% |
(5) |
% |
|||||
Consumer services |
402 |
392 |
377 |
3 |
% |
7 |
% |
||||||||
Corporate services |
469 |
484 |
465 |
(3) |
% |
1 |
% |
||||||||
Residential mortgage |
134 |
82 |
76 |
63 |
% |
76 |
% |
||||||||
Service charges on deposits |
178 |
171 |
186 |
4 |
% |
(4) |
% |
||||||||
Other |
342 |
367 |
301 |
(7) |
% |
14 |
% |
||||||||
$ |
1,989 |
$ |
1,941 |
$ |
1,891 |
2 |
% |
5 |
% |
||||||
Noninterest income for the third quarter of 2019 increased
Noninterest income for the third quarter of 2019 increased
CONSOLIDATED EXPENSE REVIEW |
|||||||||||||||
Noninterest Expense |
Change |
Change |
|||||||||||||
3Q19 vs |
3Q19 vs |
||||||||||||||
In millions |
3Q19 |
2Q19 |
3Q18 |
2Q19 |
3Q18 |
||||||||||
Personnel |
$ |
1,400 |
$ |
1,365 |
$ |
1,413 |
3 |
% |
(1) |
% |
|||||
Occupancy |
206 |
212 |
195 |
(3) |
% |
6 |
% |
||||||||
Equipment |
291 |
298 |
264 |
(2) |
% |
10 |
% |
||||||||
Marketing |
76 |
83 |
71 |
(8) |
% |
7 |
% |
||||||||
Other |
650 |
653 |
665 |
— |
(2) |
% |
|||||||||
$ |
2,623 |
$ |
2,611 |
$ |
2,608 |
— |
1 |
% |
|||||||
Noninterest expense for the third quarter of 2019 increased
Noninterest expense for the third quarter of 2019 increased
The effective tax rate was 17.5 percent for the third quarter of 2019, 16.6 percent for the second quarter of 2019 and 15.7 percent for the third quarter of 2018.
CONSOLIDATED BALANCE SHEET REVIEW
Average total assets of
Loans |
Change |
Change |
|||||||||||||
3Q19 vs |
3Q19 vs |
||||||||||||||
In billions |
3Q19 |
2Q19 |
3Q18 |
2Q19 |
3Q18 |
||||||||||
Average |
|||||||||||||||
Commercial lending |
$ |
161.5 |
$ |
160.2 |
$ |
149.9 |
1 |
% |
8 |
% |
|||||
Consumer lending |
76.2 |
74.7 |
73.4 |
2 |
% |
4 |
% |
||||||||
Average loans |
$ |
237.7 |
$ |
234.9 |
$ |
223.3 |
1 |
% |
6 |
% |
|||||
Quarter end |
|||||||||||||||
Commercial lending |
$ |
160.2 |
$ |
161.6 |
$ |
149.5 |
(1) |
% |
7 |
% |
|||||
Consumer lending |
77.2 |
75.6 |
73.5 |
2 |
% |
5 |
% |
||||||||
Total loans |
$ |
237.4 |
$ |
237.2 |
$ |
223.0 |
— |
6 |
% |
||||||
Average loans for the third quarter of 2019 grew
Third quarter 2019 average and period end loans increased
|
Change |
Change |
|||||||||||||
3Q19 vs |
3Q19 vs |
||||||||||||||
In billions |
3Q19 |
2Q19 |
3Q18 |
2Q19 |
3Q18 |
||||||||||
Average |
$ |
85.2 |
$ |
83.7 |
$ |
80.8 |
2 |
% |
5 |
% |
|||||
Quarter end |
$ |
87.9 |
$ |
88.3 |
$ |
80.8 |
— |
9 |
% |
||||||
Average investment securities for the third quarter of 2019 increased
Average balances held with the
Deposits |
Change |
Change |
|||||||||||||
3Q19 vs |
3Q19 vs |
||||||||||||||
In billions |
3Q19 |
2Q19 |
3Q18 |
2Q19 |
3Q18 |
||||||||||
Average |
|||||||||||||||
Noninterest-bearing |
$ |
72.1 |
$ |
71.7 |
$ |
76.2 |
1 |
% |
(5) |
% |
|||||
Interest-bearing |
207.0 |
201.2 |
186.3 |
3 |
% |
11 |
% |
||||||||
Average deposits |
$ |
279.1 |
$ |
272.9 |
$ |
262.5 |
2 |
% |
6 |
% |
|||||
Quarter end |
|||||||||||||||
Noninterest-bearing |
$ |
74.1 |
$ |
69.9 |
$ |
74.8 |
6 |
% |
(1) |
% |
|||||
Interest-bearing |
211.5 |
203.4 |
190.1 |
4 |
% |
11 |
% |
||||||||
Total deposits |
$ |
285.6 |
$ |
273.3 |
$ |
264.9 |
5 |
% |
8 |
% |
|||||
Average deposits for the third quarter of 2019 increased
Borrowed Funds |
Change |
Change |
|||||||||||||
3Q19 vs |
3Q19 vs |
||||||||||||||
In billions |
3Q19 |
2Q19 |
3Q18 |
2Q19 |
3Q18 |
||||||||||
Average |
$ |
63.9 |
$ |
62.3 |
$ |
59.8 |
3 |
% |
7 |
% |
|||||
Quarter end |
$ |
61.4 |
$ |
69.0 |
$ |
58.0 |
(11) |
% |
6 |
% |
|||||
Average borrowed funds for the third quarter of 2019 increased
Capital |
|||||||||||
|
* |
|
|
||||||||
Common shareholders' equity In billions |
$ |
45.4 |
$ |
45.3 |
$ |
43.1 |
|||||
Basel III common equity Tier 1 capital ratio |
9.6 |
% |
9.7 |
% |
9.3 |
% |
|||||
* Ratio estimated |
|||||||||||
PNC maintained a strong capital position. Common shareholders' equity at
PNC returned
On
The Basel III common equity Tier 1 capital ratio was calculated based on the standardized approach for the risk-weighting of assets. See Capital Ratios in the Consolidated Financial Highlights.
CREDIT QUALITY REVIEW |
|||||||||||||||
Credit Quality |
Change |
Change |
|||||||||||||
At or for the quarter ended |
|
|
|||||||||||||
In millions |
|
|
|
|
|
||||||||||
Nonperforming loans |
$ |
1,728 |
$ |
1,724 |
$ |
1,694 |
— |
2 |
% |
||||||
Nonperforming assets |
$ |
1,847 |
$ |
1,850 |
$ |
1,825 |
— |
1 |
% |
||||||
Accruing loans past due 90 days or more |
$ |
532 |
$ |
524 |
$ |
619 |
2 |
% |
(14) |
% |
|||||
Net charge-offs |
$ |
155 |
$ |
142 |
$ |
91 |
9 |
% |
70 |
% |
|||||
Provision for credit losses |
$ |
183 |
$ |
180 |
$ |
88 |
2 |
% |
108 |
% |
|||||
Allowance for loan and lease losses |
$ |
2,738 |
$ |
2,721 |
$ |
2,584 |
1 |
% |
6 |
% |
|||||
Overall credit quality for the third quarter of 2019 remained strong. Provision for credit losses for the third quarter increased
Nonperforming assets at
Overall delinquencies at
Net charge-offs for the third quarter of 2019 increased
The allowance for loan and lease losses to total loans was 1.15 percent at both
BUSINESS SEGMENT RESULTS |
|||||||||||
Business Segment Income |
|||||||||||
In millions |
3Q19 |
2Q19 |
3Q18 |
||||||||
Retail Banking |
$ |
347 |
$ |
325 |
$ |
228 |
|||||
Corporate & Institutional Banking |
645 |
602 |
642 |
||||||||
|
46 |
80 |
55 |
||||||||
Other, including BlackRock |
354 |
367 |
475 |
||||||||
Net income |
$ |
1,392 |
$ |
1,374 |
$ |
1,400 |
|||||
See accompanying notes in Consolidated Financial Highlights |
|||||||||||
Retail Banking |
Change |
Change |
|||||||||||||||||
3Q19 vs |
3Q19 vs |
||||||||||||||||||
In millions |
3Q19 |
2Q19 |
3Q18 |
2Q19 |
3Q18 |
||||||||||||||
Net interest income |
$ |
1,393 |
$ |
1,376 |
$ |
1,305 |
$ |
17 |
$ |
88 |
|||||||||
Noninterest income |
$ |
744 |
$ |
657 |
$ |
622 |
$ |
87 |
$ |
122 |
|||||||||
Provision for credit losses |
$ |
147 |
$ |
81 |
$ |
113 |
$ |
66 |
$ |
34 |
|||||||||
Noninterest expense |
$ |
1,536 |
$ |
1,527 |
$ |
1,514 |
$ |
9 |
$ |
22 |
|||||||||
Earnings |
$ |
347 |
$ |
325 |
$ |
228 |
$ |
22 |
$ |
119 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
77.7 |
$ |
76.3 |
$ |
74.1 |
$ |
1.4 |
$ |
3.6 |
|||||||||
Average deposits |
$ |
168.8 |
$ |
168.8 |
$ |
161.8 |
— |
$ |
7.0 |
||||||||||
Retail Banking earnings for the third quarter of 2019 increased in both comparisons. Noninterest income increased in both comparisons due to higher residential mortgage revenue attributable to a higher benefit from residential mortgage servicing rights valuation, net of economic hedge, and increased loan sales revenue, growth in consumer services, including brokerage and debit and credit card fees, and a benefit from improvement in negative derivative fair value adjustments related to Visa Class B common shares. Growth in service charges on deposits also contributed to the increase compared with the second quarter. Provision for credit losses increased in both comparisons as a result of higher auto loan and credit card portfolio reserves attributable in part to loan growth. Noninterest expense increased in both comparisons primarily due to higher personnel and equipment expense and, compared with third quarter 2018, increased ATM expense resulting from enhanced checking product benefits and higher marketing, including expenses related to retail national expansion.
- Average loans increased 2 percent compared with second quarter 2019 and 5 percent compared with third quarter 2018 due to growth in residential mortgage, auto, credit card and unsecured installment loans partially offset by lower home equity and education loans.
- Average deposits were stable with the second quarter and increased 4 percent compared with third quarter 2018 due to increases in savings, noninterest-bearing demand and certificates of deposit partially offset by lower money market deposits reflecting a shift to relationship-based savings products.
- Net charge-offs were
$128 million for the third quarter of 2019 compared with$120 million in the second quarter and$96 million in the third quarter of 2018. - Residential mortgage loan origination volume increased to
$3.4 billion for the third quarter of 2019 compared with$2.9 billion for the second quarter and$2.1 billion for the third quarter of 2018. Approximately 44 percent of third quarter 2019 volume was for home purchase transactions compared with 54 percent and 72 percent for the second quarter of 2019 and third quarter of 2018, respectively. - The third party residential mortgage servicing portfolio was
$123 billion atSeptember 30, 2019 compared with$124 billion atJune 30, 2019 and$127 billion atSeptember 30, 2018 . Residential mortgage loan servicing acquisitions were$3 billion for third quarter 2019 compared with$5 billion for the second quarter and$6 billion for the third quarter of 2018. - Approximately 70 percent of consumer customers used non-teller channels for the majority of their transactions during the third quarter of 2019 compared with 69 percent in the second quarter and 66 percent in the third quarter of 2018.
- Deposit transactions via ATM and mobile channels were 58 percent of total deposit transactions in the third quarter of 2019 compared with 56 percent in the second quarter and 55 percent in the third quarter of 2018.
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||||||||||||
3Q19 vs |
3Q19 vs |
||||||||||||||||||||||||||||
In millions |
3Q19 |
2Q19 |
3Q18 |
2Q19 |
3Q18 |
||||||||||||||||||||||||
Net interest income |
$ |
930 |
$ |
917 |
$ |
925 |
$ |
13 |
$ |
5 |
|||||||||||||||||||
Noninterest income |
$ |
654 |
$ |
661 |
$ |
592 |
$ |
(7) |
$ |
62 |
|||||||||||||||||||
Provision for credit losses (benefit) |
$ |
48 |
$ |
100 |
$ |
(13) |
$ |
(52) |
$ |
61 |
|||||||||||||||||||
Noninterest expense |
$ |
703 |
$ |
698 |
$ |
698 |
$ |
5 |
$ |
5 |
|||||||||||||||||||
Earnings |
$ |
645 |
$ |
602 |
$ |
642 |
$ |
43 |
$ |
3 |
|||||||||||||||||||
In billions |
|||||||||||||||||||||||||||||
Average loans |
$ |
148.6 |
$ |
147.2 |
$ |
137.4 |
$ |
1.4 |
$ |
11.2 |
|||||||||||||||||||
Average deposits |
$ |
95.8 |
$ |
90.5 |
$ |
88.1 |
$ |
5.3 |
$ |
7.7 |
|||||||||||||||||||
Corporate & Institutional Banking earnings for the third quarter of 2019 increased in both comparisons. Noninterest income decreased compared with the second quarter primarily due to lower capital markets-related revenue partially offset by higher gains on asset sales and higher revenue from commercial mortgage banking activities. Noninterest income increased compared with the third quarter of 2018 driven by broad-based growth in revenue from commercial mortgage banking activities, capital-markets related revenue and treasury management product revenue. Provision for credit losses in the third quarter of 2019 decreased compared with the second quarter reflecting the sale of franchise finance loans and comparatively lower loan growth. Noninterest expense increased in both comparisons largely due to investments in strategic initiatives.
- Average loans increased 1 percent compared with the second quarter and 8 percent compared with the third quarter of 2018 primarily driven by loan growth in PNC's corporate banking and real estate businesses, including an increase in multifamily agency warehouse lending. The comparison with the third quarter of 2018 also benefited from growth in PNC's business credit business.
- Average deposits increased 6 percent over the second quarter reflecting seasonal growth and increased 9 percent compared with the third quarter of 2018. Growth was in interest-bearing deposits, including a shift from noninterest-bearing demand deposits in the comparison with the third quarter of 2018.
- Net charge-offs were
$30 million in the third quarter of 2019 compared with$23 million in the second quarter and$1 million in the third quarter of 2018.
|
Change |
Change |
|||||||||||||||||
3Q19 vs |
3Q19 vs |
||||||||||||||||||
In millions |
3Q19 |
2Q19 |
3Q18 |
2Q19 |
3Q18 |
||||||||||||||
Net interest income |
$ |
70 |
$ |
68 |
$ |
71 |
$ |
2 |
$ |
(1) |
|||||||||
Noninterest income |
$ |
216 |
$ |
286 |
$ |
228 |
$ |
(70) |
$ |
(12) |
|||||||||
Provision for credit losses (benefit) |
$ |
(1) |
— |
$ |
2 |
$ |
(1) |
$ |
(3) |
||||||||||
Noninterest expense |
$ |
228 |
$ |
249 |
$ |
225 |
$ |
(21) |
$ |
3 |
|||||||||
Earnings |
$ |
46 |
$ |
80 |
$ |
55 |
$ |
(34) |
$ |
(9) |
|||||||||
In billions |
|||||||||||||||||||
Client assets under administration at |
$ |
298 |
$ |
294 |
$ |
293 |
$ |
4 |
$ |
5 |
|||||||||
Average loans |
$ |
6.9 |
$ |
6.7 |
$ |
7.0 |
$ |
.2 |
$ |
(.1) |
|||||||||
Average deposits |
$ |
13.6 |
$ |
12.7 |
$ |
12.3 |
$ |
.9 |
$ |
1.3 |
|||||||||
Client assets under administration at
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 investment in BlackRock, and residual activities that do not meet the criteria for disclosure as a separate reportable business, such as asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities, certain trading activities, certain non-strategic runoff consumer loan portfolios, private equity investments, intercompany eliminations, certain corporate overhead, tax adjustments that are not allocated to business segments, exited businesses, 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 |
Nine months ended |
|||||||||||||||||||
Dollars in millions, except per share data |
|
|
|
|
|
||||||||||||||||
2019 |
2019 |
2018 |
2019 |
2018 |
|||||||||||||||||
Revenue |
|||||||||||||||||||||
Net interest income |
$ |
2,504 |
$ |
2,498 |
$ |
2,466 |
$ |
7,477 |
$ |
7,240 |
|||||||||||
Noninterest income |
1,989 |
1,941 |
1,891 |
5,741 |
5,552 |
||||||||||||||||
Total revenue |
4,493 |
4,439 |
4,357 |
13,218 |
12,792 |
||||||||||||||||
Provision for credit losses |
183 |
180 |
88 |
552 |
260 |
||||||||||||||||
Noninterest expense |
2,623 |
2,611 |
2,608 |
7,812 |
7,719 |
||||||||||||||||
Income before income taxes and noncontrolling interests |
$ |
1,687 |
$ |
1,648 |
$ |
1,661 |
$ |
4,854 |
$ |
4,813 |
|||||||||||
Net income |
$ |
1,392 |
$ |
1,374 |
$ |
1,400 |
$ |
4,037 |
$ |
3,995 |
|||||||||||
Less: |
|||||||||||||||||||||
Net income attributable to noncontrolling interests |
13 |
12 |
11 |
35 |
31 |
||||||||||||||||
Preferred stock dividends (a) |
63 |
55 |
63 |
181 |
181 |
||||||||||||||||
Preferred stock discount accretion and redemptions |
1 |
1 |
1 |
3 |
3 |
||||||||||||||||
Net income attributable to common shareholders |
$ |
1,315 |
$ |
1,306 |
$ |
1,325 |
$ |
3,818 |
$ |
3,780 |
|||||||||||
Less: |
|||||||||||||||||||||
Dividends and undistributed earnings allocated to |
6 |
4 |
6 |
15 |
16 |
||||||||||||||||
Impact of BlackRock earnings per share dilution |
2 |
2 |
2 |
7 |
7 |
||||||||||||||||
Net income attributable to diluted common shares |
$ |
1,307 |
$ |
1,300 |
$ |
1,317 |
$ |
3,796 |
$ |
3,757 |
|||||||||||
Diluted earnings per common share |
$ |
2.94 |
$ |
2.88 |
$ |
2.82 |
$ |
8.42 |
$ |
7.96 |
|||||||||||
Cash dividends declared per common share |
$ |
1.15 |
$ |
.95 |
$ |
.95 |
$ |
3.05 |
$ |
2.45 |
|||||||||||
Effective tax rate (b) |
17.5 |
% |
16.6 |
% |
15.7 |
% |
16.8 |
% |
17.0 |
% |
(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. |
|
Consolidated Financial Highlights (Unaudited) |
||||||||||||||||||||
Three months ended |
Nine months ended |
||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||
2019 |
2019 |
2018 |
2019 |
2018 |
|||||||||||||||||
PERFORMANCE RATIOS |
|||||||||||||||||||||
Net interest margin (a) |
2.84 |
% |
2.91 |
% |
2.99 |
% |
2.91 |
% |
2.95 |
% |
|||||||||||
Noninterest income to total revenue |
44 |
% |
44 |
% |
43 |
% |
43 |
% |
43 |
% |
|||||||||||
Efficiency (b) |
58 |
% |
59 |
% |
60 |
% |
59 |
% |
60 |
% |
|||||||||||
Return on: |
|||||||||||||||||||||
Average common shareholders' equity |
11.56 |
% |
11.75 |
% |
12.32 |
% |
11.48 |
% |
11.83 |
% |
|||||||||||
Average assets |
1.36 |
% |
1.39 |
% |
1.47 |
% |
1.36 |
% |
1.42 |
% |
|||||||||||
BUSINESS SEGMENT NET INCOME (c) |
|||||||||||||||||||||
In millions |
|||||||||||||||||||||
Retail Banking |
$ |
347 |
$ |
325 |
$ |
228 |
$ |
936 |
$ |
751 |
|||||||||||
Corporate & Institutional Banking |
645 |
602 |
642 |
1,799 |
1,857 |
||||||||||||||||
|
46 |
80 |
55 |
171 |
160 |
||||||||||||||||
Other, including BlackRock (d) |
354 |
367 |
475 |
1,131 |
1,227 |
||||||||||||||||
Total net income |
$ |
1,392 |
$ |
1,374 |
$ |
1,400 |
$ |
4,037 |
$ |
3,995 |
(a) |
Net interest margin is the total yield on interest-earning assets minus the total rate on interest-bearing liabilities and includes the benefit from use of noninterest-bearing sources. To provide more meaningful comparisons of net interest margins, we use interest income on a taxable-equivalent basis in calculating net interest yields used in the calculation of 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) |
Our business information is presented based on our internal management reporting practices. Net interest income in business segment results reflect 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. |
(d) |
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) |
||||||||||
|
|
|
|||||||||
2019 |
2019 |
2018 |
|||||||||
BALANCE SHEET DATA |
|||||||||||
Dollars in millions, except per share data |
|||||||||||
Assets |
$ |
408,916 |
$ |
405,761 |
$ |
380,080 |
|||||
Loans (a) |
$ |
237,377 |
$ |
237,215 |
$ |
223,053 |
|||||
Allowance for loan and lease losses |
$ |
2,738 |
$ |
2,721 |
$ |
2,584 |
|||||
Interest-earning deposits with banks |
$ |
19,036 |
$ |
18,362 |
$ |
19,800 |
|||||
Investment securities |
$ |
87,883 |
$ |
88,303 |
$ |
80,804 |
|||||
Loans held for sale (a) |
$ |
1,872 |
$ |
1,144 |
$ |
1,108 |
|||||
Equity investments (b) |
$ |
13,325 |
$ |
13,001 |
$ |
12,446 |
|||||
Mortgage servicing rights |
$ |
1,483 |
$ |
1,627 |
$ |
2,136 |
|||||
|
$ |
9,233 |
$ |
9,221 |
$ |
9,218 |
|||||
Other assets (a) |
$ |
35,774 |
$ |
34,193 |
$ |
28,851 |
|||||
Noninterest-bearing deposits |
$ |
74,077 |
$ |
69,867 |
$ |
74,736 |
|||||
Interest-bearing deposits |
$ |
211,506 |
$ |
203,393 |
$ |
190,148 |
|||||
Total deposits |
$ |
285,583 |
$ |
273,260 |
$ |
264,884 |
|||||
Borrowed funds (a) |
$ |
61,354 |
$ |
69,025 |
$ |
57,955 |
|||||
Total shareholders' equity |
$ |
49,420 |
$ |
49,340 |
$ |
47,058 |
|||||
Common shareholders' equity |
$ |
45,428 |
$ |
45,349 |
$ |
43,076 |
|||||
Accumulated other comprehensive income (loss) |
$ |
837 |
$ |
631 |
$ |
(1,260) |
|||||
Book value per common share |
$ |
103.37 |
$ |
101.53 |
$ |
93.22 |
|||||
Tangible book value per common share (Non-GAAP) (c) |
$ |
82.37 |
$ |
80.76 |
$ |
73.11 |
|||||
Period end common shares outstanding (millions) |
439 |
447 |
462 |
||||||||
Loans to deposits |
83 |
% |
87 |
% |
84 |
% |
|||||
Common shareholders' equity to total assets |
11.1 |
% |
11.2 |
% |
11.3 |
% |
|||||
CLIENT ASSETS (billions) |
|||||||||||
Discretionary client assets under management |
$ |
163 |
$ |
162 |
$ |
159 |
|||||
Nondiscretionary client assets under administration |
135 |
132 |
134 |
||||||||
Total client assets under administration |
298 |
294 |
293 |
||||||||
Brokerage account client assets |
52 |
52 |
51 |
||||||||
Total client assets |
$ |
350 |
$ |
346 |
$ |
344 |
|||||
CAPITAL RATIOS |
|||||||||||
Basel III (d) |
|||||||||||
Common equity Tier 1 |
9.6 |
% |
9.7 |
% |
9.3 |
% |
|||||
Tier 1 risk-based |
10.7 |
% |
10.9 |
% |
10.5 |
% |
|||||
Total capital risk-based (e) |
12.7 |
% |
12.8 |
% |
12.7 |
% |
|||||
Leverage |
9.3 |
% |
9.6 |
% |
9.2 |
% |
|||||
Supplementary leverage |
7.8 |
% |
8.0 |
% |
7.7 |
% |
|||||
ASSET QUALITY |
|||||||||||
Nonperforming loans to total loans |
.73 |
% |
.73 |
% |
.76 |
% |
|||||
Nonperforming assets to total loans, OREO and foreclosed assets |
.78 |
% |
.78 |
% |
.82 |
% |
|||||
Nonperforming assets to total assets |
.45 |
% |
.46 |
% |
.48 |
% |
|||||
Net charge-offs to average loans (for the three months ended) (annualized) |
.26 |
% |
.24 |
% |
.16 |
% |
|||||
Allowance for loan and lease losses to total loans |
1.15 |
% |
1.15 |
% |
1.16 |
% |
|||||
Allowance for loan and lease losses to nonperforming loans |
158 |
% |
158 |
% |
153 |
% |
|||||
Accruing loans past due 90 days or more (in millions) |
$ |
532 |
$ |
524 |
$ |
619 |
(a) |
Amounts include assets and liabilities for which we have elected the fair value option. Our second quarter 2019 Form 10-Q included, and our third quarter 2019 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 17 for additional information. |
(d) |
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 16 for additional information. The ratios as of |
(e) |
The 2019 and 2018 Basel III Total risk-based capital ratios include nonqualifying trust preferred capital securities of |
|
Consolidated Financial Highlights (Unaudited) |
||||||||||
CAPITAL RATIOS |
|||||||||||
Because PNC remains in the parallel run qualification phase for the advanced approaches, PNC's regulatory risk-based capital ratios in 2019 and 2018 are calculated using the standardized approach for determining risk-weighted assets. Under the standardized approach for determining credit risk-weighted assets, exposures are generally assigned a pre-defined risk weight. Exposures to high volatility commercial real estate, past due exposures and equity exposures are generally subject to higher risk weights than other types of exposures. |
|||||||||||
We provide information below regarding PNC's Basel III Common equity Tier 1 capital ratios. Under the Basel III rules applicable to PNC, significant common stock investments in unconsolidated financial institutions (for PNC, primarily BlackRock), mortgage servicing rights and deferred tax assets must be deducted from capital (net of associated deferred tax liabilities) to the extent they individually exceed 10%, or in the aggregate exceed 15%, of the institution's adjusted common equity Tier 1 capital. Also, PNC's Basel III regulatory capital includes accumulated other comprehensive income (loss) related to securities currently, and those transferred from, available for sale, as well as pension and other postretirement plans. |
|||||||||||
|
|||||||||||
|
|
|
|||||||||
Dollars in millions |
2019 |
2019 |
2018 |
||||||||
Common stock, related surplus and retained earnings, net of treasury stock |
$ |
44,592 |
$ |
44,718 |
$ |
44,336 |
|||||
Less regulatory capital adjustments: |
|||||||||||
|
(9,268) |
(9,252) |
(9,297) |
||||||||
Basel III total threshold deductions |
(2,952) |
(2,909) |
(3,932) |
||||||||
Accumulated other comprehensive income (loss) |
637 |
471 |
(1,007) |
||||||||
All other adjustments |
(209) |
(185) |
(322) |
||||||||
Basel III Common equity Tier 1 capital |
$ |
32,800 |
$ |
32,843 |
$ |
29,778 |
|||||
Basel III standardized approach risk-weighted assets (b) |
$ |
341,117 |
$ |
337,612 |
$ |
318,889 |
|||||
Basel III advanced approaches risk-weighted assets (c) |
$ |
319,963 |
$ |
309,646 |
$ |
274,742 |
|||||
Basel III Common equity Tier 1 capital ratio |
9.6 |
% |
9.7 |
% |
9.3 |
% |
(a) |
All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented. |
(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. |
Our Basel III capital ratios may be impacted by changes to the regulatory capital rules, 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.
|
Consolidated Financial Highlights (Unaudited) |
||||||||||
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 |
2019 |
2019 |
2018 |
||||||||
Book value per common share |
$ |
103.37 |
$ |
101.53 |
$ |
93.22 |
|||||
Tangible book value per common share |
|||||||||||
Common shareholders' equity |
$ |
45,428 |
$ |
45,349 |
$ |
43,076 |
|||||
|
(9,459) |
(9,442) |
(9,489) |
||||||||
Deferred tax liabilities on |
191 |
191 |
192 |
||||||||
Tangible common shareholders' equity |
$ |
36,160 |
$ |
36,098 |
$ |
33,779 |
|||||
Period-end common shares outstanding (millions) |
439 |
447 |
462 |
||||||||
Tangible book value per common share (Non-GAAP) |
$ |
82.37 |
$ |
80.76 |
$ |
73.11 |
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, tax rates, 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. Future events or circumstances may change our outlook and may also affect the nature of the assumptions, risks and uncertainties to which our forward-looking statements are subject. 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. As a result, we caution against placing undue reliance on any forward-looking statements.
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 customer behavior due to recently enacted tax legislation, changing business and economic conditions or legislative or regulatory initiatives.
- Changes in customers', suppliers' and other counterparties' performance and creditworthiness.
- Impacts of tariffs and other trade policies of the
U.S. and its global trading partners. - 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 views that:
U.S. economic growth, after accelerating a few years ago, has slowed since mid-2018 and is expected to slow further through the rest of this year and into 2020.- We expect that further gradual improvement in the labor market this year and into 2020, including job gains and rising wages, will be a positive for consumer spending.
- Slower global economic growth, trade restrictions and geopolitical concerns are downside risks to the forecast, which have increased in 2019, and risks are weighted to the downside.
- Inflation has slowed in 2019, to below the
FOMC's 2 percent objective, but is expected to gradually increase over the next two years. - Our baseline forecast is for one more 0.25 percentage point cut to the federal funds rate in
October 2019 , taking the rate to a range of 1.50 to 1.75 percent by the end of 2019. - 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 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 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 review 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 to laws and regulations, including changes affecting oversight of the financial services industry, consumer protection, bank capital and liquidity standards, 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 through acquisitions and new strategic initiatives. Risks and uncertainties include those presented by the nature of the business acquired and strategic initiative, 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 2018 Form 10-K and subsequent Form 10-Qs, including in the Risk Factors and Risk Management sections and the Legal Proceedings and Commitments Notes of the Notes To Consolidated Financial Statements in those reports, and in our other subsequent
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