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PNC Earns Record Net Income of $4.2 Billion for Full Year 2013 and Reports $7.39 Diluted EPS
"PNC reported record net income for 2013," said
Income Statement Highlights
- Fourth quarter results reflected loan and deposit growth, strong fee income, overall credit quality improvement and continued disciplined expense management.
- Net interest income of
$2.3 billion for the fourth quarter increased$32 million , or 1 percent, compared with the third quarter primarily due to loan growth and higher investment securities balances. - Noninterest income of
$1.8 billion increased$121 million compared with the third quarter.- Strong fee income growth included higher asset management and consumer service fees.
- Residential mortgage revenue increased due to a benefit from release of reserves for residential mortgage repurchase obligations of
$124 million partially offset by a decrease in net hedging gains on servicing rights. - The ratio of noninterest income to total revenue increased to 44 percent in the fourth quarter from 43 percent in the third quarter and 40 percent in the fourth quarter of 2012.
- Noninterest expense of
$2.5 billion for the fourth quarter increased$123 million compared with the third quarter reflecting higher incentive compensation costs associated with increased business activity. In addition, the fourth quarter included a contribution to thePNC Foundation and higher legal accruals. - Provision for credit losses declined to
$113 million for the fourth quarter compared with$137 million for the third quarter as overall credit quality continued to improve.
Balance Sheet Highlights
- Loans grew
$2.8 billion , or 1 percent, to$196 billion atDecember 31, 2013 compared withSeptember 30 , 2013.- Total commercial lending grew
$2.7 billion , or 2 percent, primarily in real estate and other specialty lending businesses including public finance. - Total consumer lending increased
$.1 billion as growth in automobile and credit card loans was partially offset by lower residential mortgage, home equity and education loans.
- Total commercial lending grew
- Overall credit quality continued to improve during the fourth quarter of 2013 compared with the third quarter.
- Nonperforming assets of
$3.5 billion atDecember 31, 2013 declined$165 million , or 5 percent. - Net charge-offs of
$189 million decreased$35 million , or 16 percent.
- Nonperforming assets of
- Deposits grew
$4.9 billion , or 2 percent, to$221 billion atDecember 31, 2013 compared withSeptember 30, 2013 driven by higher transaction deposits. - PNC enhanced its liquidity position in light of anticipated regulatory requirements as reflected in higher balances of interest-earning deposits with banks, investment securities and borrowed funds.
- PNC's well-positioned balance sheet remained core funded with a loans to deposits ratio of 89 percent at
December 31, 2013 . - PNC continued to build its strong capital position.
- The Basel I Tier 1 common capital ratio increased to an estimated 10.5 percent at
December 31, 2013 compared with 10.3 percent atSeptember 30, 2013 . - The pro forma fully phased-in Basel III Tier 1 common capital ratio increased to an estimated 9.4 percent at
December 31, 2013 from 8.7 percent atSeptember 30, 2013 .
- The Basel I Tier 1 common capital ratio increased to an estimated 10.5 percent at
Earnings Summary |
|||||||||||||
In millions, except per share data |
4Q13 |
3Q13 |
4Q12 |
||||||||||
Net income |
$ |
1,061 |
$ |
1,039 |
$ |
719 |
|||||||
Diluted earnings per common share |
$ |
1.85 |
$ |
1.79 |
$ |
1.24 |
|||||||
Average diluted common shares outstanding |
535 |
534 |
528 |
||||||||||
Return on average assets |
1.34 |
% |
1.36 |
% |
.95 |
% |
|||||||
Return on average common equity |
10.55 |
% |
10.50 |
% |
7.48 |
% |
|||||||
Book value per common share Period end |
$ |
72.21 |
$ |
69.92 |
$ |
67.05 |
|||||||
Tangible book value per common share (non-GAAP) Period end |
$ |
54.68 |
$ |
52.33 |
$ |
49.18 |
|||||||
Cash dividends declared per common share |
$ |
.44 |
$ |
.44 |
$ |
.40 |
|||||||
The Consolidated Financial Highlights accompanying this news release include additional information regarding selected income statement items and reconciliations to reported amounts of non-GAAP financial measures, including a reconciliation of tangible book value per common share to book value per common share and a reconciliation of business segment income to net income. Reference to core net interest income is to total net interest income less purchase accounting accretion, which consists of scheduled accretion and excess cash recoveries, as detailed in the Consolidated Financial Highlights. Information in this news release including the financial tables is unaudited. See the notes and other information in the Consolidated Financial Highlights.
CONSOLIDATED REVENUE REVIEW |
|||||||||||||||||||||
Revenue |
Change |
Change |
|||||||||||||||||||
4Q13 vs |
4Q13 vs |
||||||||||||||||||||
In millions |
4Q13 |
3Q13 |
4Q12 |
3Q13 |
4Q12 |
||||||||||||||||
Net interest income |
$ |
2,266 |
$ |
2,234 |
$ |
2,424 |
1 |
% |
(7) |
% |
|||||||||||
Noninterest income |
1,807 |
1,686 |
1,645 |
7 |
% |
10 |
% |
||||||||||||||
Total revenue |
$ |
4,073 |
$ |
3,920 |
$ |
4,069 |
4 |
% |
– |
||||||||||||
Total revenue for the fourth quarter of 2013 increased
Net interest income for the fourth quarter of 2013 increased
Noninterest Income |
Change |
Change |
|||||||||||||||||||||
4Q13 vs |
4Q13 vs |
||||||||||||||||||||||
In millions |
4Q13 |
3Q13 |
4Q12 |
3Q13 |
4Q12 |
||||||||||||||||||
Asset management |
$ |
364 |
$ |
330 |
$ |
302 |
10 |
% |
21 |
% |
|||||||||||||
Consumer services |
327 |
316 |
294 |
3 |
% |
11 |
% |
||||||||||||||||
Corporate services |
301 |
306 |
349 |
(2) |
% |
(14) |
% |
||||||||||||||||
Residential mortgage |
|||||||||||||||||||||||
Residential mortgage banking |
147 |
193 |
254 |
(24) |
% |
(42) |
% |
||||||||||||||||
Benefit (provision) for residential |
|||||||||||||||||||||||
mortgage repurchase obligations |
124 |
6 |
(254) |
NM |
NM |
||||||||||||||||||
Service charges on deposits |
158 |
156 |
150 |
1 |
% |
5 |
% |
||||||||||||||||
Net gains on sales of securities |
3 |
21 |
45 |
(86) |
% |
(93) |
% |
||||||||||||||||
Net other-than-temporary impairments |
- |
(2) |
(15) |
100 |
% |
100 |
% |
||||||||||||||||
Other |
383 |
360 |
520 |
6 |
% |
(26) |
% |
||||||||||||||||
$ |
1,807 |
$ |
1,686 |
$ |
1,645 |
7 |
% |
10 |
% |
||||||||||||||
Noninterest income for the fourth quarter of 2013 increased
Asset management revenue increased
Noninterest income for the fourth quarter of 2013 increased
CONSOLIDATED EXPENSE REVIEW |
||||||||||||||||||||||
Noninterest Expense |
Change |
Change |
||||||||||||||||||||
4Q13 vs |
4Q13 vs |
|||||||||||||||||||||
In millions |
4Q13 |
3Q13 |
4Q12 |
3Q13 |
4Q12 |
|||||||||||||||||
Personnel |
$ |
1,207 |
$ |
1,181 |
$ |
1,216 |
2 |
% |
(1) |
% |
||||||||||||
Occupancy |
211 |
205 |
226 |
3 |
% |
(7) |
% |
|||||||||||||||
Equipment |
197 |
194 |
194 |
2 |
% |
2 |
% |
|||||||||||||||
Marketing |
66 |
68 |
70 |
(3) |
% |
(6) |
% |
|||||||||||||||
Other |
866 |
776 |
1,123 |
12 |
% |
(23) |
% |
|||||||||||||||
$ |
2,547 |
$ |
2,424 |
$ |
2,829 |
5 |
% |
(10) |
% |
|||||||||||||
Noninterest expense for the fourth quarter of 2013 increased
Noninterest expense for the fourth quarter of 2013 declined
The effective tax rate was 24.9 percent for the fourth quarter of 2013 compared with 23.5 percent for the third quarter of 2013 and 22.0 percent for the fourth quarter of 2012.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were a record
Loans |
Change |
Change |
||||||||||||||||||||
12/31/13 vs |
12/31/13 vs |
|||||||||||||||||||||
In billions |
12/31/2013 |
9/30/2013 |
12/31/2012 |
9/30/13 |
12/31/12 |
|||||||||||||||||
Commercial lending |
$ |
117.1 |
$ |
114.4 |
$ |
108.9 |
2 |
% |
8 |
% |
||||||||||||
Consumer lending |
78.5 |
78.4 |
77.0 |
– |
2 |
% |
||||||||||||||||
Total loans |
$ |
195.6 |
$ |
192.8 |
$ |
185.9 |
1 |
% |
5 |
% |
||||||||||||
For the quarter ended: |
||||||||||||||||||||||
Average loans |
$ |
194.6 |
$ |
190.5 |
$ |
183.2 |
2 |
% |
6 |
% |
||||||||||||
Total loans grew
Investment Securities |
Change |
Change |
||||||||||||||||||||
12/31/13 vs |
12/31/13 vs |
|||||||||||||||||||||
In billions |
12/31/2013 |
9/30/2013 |
12/31/2012 |
9/30/13 |
12/31/12 |
|||||||||||||||||
At quarter end |
$ |
60.3 |
$ |
57.3 |
$ |
61.4 |
5 |
% |
(2) |
% |
||||||||||||
Average for the quarter ended |
$ |
57.4 |
$ |
56.6 |
$ |
59.4 |
1 |
% |
(3) |
% |
||||||||||||
Investment securities balances at
The available for sale investment securities balance included a net unrealized pretax gain of
Interest-earning deposits with banks were
Deposits |
Change |
Change |
||||||||||||||||||||
12/31/13 vs |
12/31/13 vs |
|||||||||||||||||||||
In billions |
12/31/2013 |
9/30/2013 |
12/31/2012 |
9/30/13 |
12/31/12 |
|||||||||||||||||
Transaction deposits |
$ |
186.4 |
$ |
181.8 |
$ |
176.7 |
3 |
% |
5 |
% |
||||||||||||
Other deposits |
34.5 |
34.3 |
36.4 |
1 |
% |
(5) |
% |
|||||||||||||||
Total deposits |
$ |
220.9 |
$ |
216.1 |
$ |
213.1 |
2 |
% |
4 |
% |
||||||||||||
For the quarter ended: |
||||||||||||||||||||||
Average deposits |
$ |
217.0 |
$ |
211.9 |
$ |
207.5 |
2 |
% |
5 |
% |
||||||||||||
Total deposits at
Borrowed Funds |
Change |
Change |
||||||||||||||||||||
12/31/13 vs |
12/31/13 vs |
|||||||||||||||||||||
In billions |
12/31/2013 |
9/30/2013 |
12/31/2012 |
9/30/13 |
12/31/12 |
|||||||||||||||||
At quarter end |
$ |
46.1 |
$ |
40.3 |
$ |
40.9 |
14 |
% |
13 |
% |
||||||||||||
Average for the quarter ended |
$ |
43.1 |
$ |
38.7 |
$ |
40.3 |
11 |
% |
7 |
% |
||||||||||||
Borrowed funds at
Capital |
|||||||||||||
12/31/2013* |
9/30/2013 |
12/31/2012 |
|||||||||||
Common shareholders' equity In billions |
$ |
38.5 |
$ |
37.2 |
$ |
35.4 |
|||||||
Basel I Tier 1 common capital ratio |
10.5 |
% |
10.3 |
% |
9.6 |
% |
|||||||
Basel I Tier 1 risk-based capital ratio |
12.4 |
% |
12.3 |
% |
11.6 |
% |
|||||||
Pro forma Basel III Tier 1 common capital ratio |
9.4 |
% |
8.7 |
% |
7.5 |
% |
|||||||
* Ratios estimated |
|||||||||||||
PNC continued to increase its strong capital levels and ratios. The Tier 1 capital ratios increased in all comparisons primarily due to growth in retained earnings. The increase in the pro forma fully phased-in Basel III Tier 1 common capital ratio, which was calculated using PNC's estimated risk-weighted assets under the Basel III advanced approaches, also included lower quantitative limits deductions and a benefit from higher accumulated other comprehensive income primarily related to annual changes in the funded status of pension plans partially offset by an increase in estimated advanced approaches risk-weighted assets. The Basel III Tier 1 common capital information is subject to additional regulatory guidance and the ongoing evolution, validation and regulatory approval of capital-related models. See Capital Ratios in the Consolidated Financial Highlights. Common shareholders' equity increased principally due to growth in retained earnings and, in the comparison with third quarter end, higher accumulated other comprehensive income.
On
CREDIT QUALITY REVIEW |
|||||||||||||||||||
Credit Quality |
Change |
Change |
|||||||||||||||||
At or for the quarter ended |
12/31/13 vs |
12/31/13 vs |
|||||||||||||||||
In millions |
12/31/2013 |
9/30/2013 |
12/31/2012 |
9/30/13 |
12/31/12 |
||||||||||||||
Nonperforming loans |
$ |
3,088 |
$ |
3,206 |
$ |
3,254 |
(4) |
% |
(5) |
% |
|||||||||
Nonperforming assets |
$ |
3,457 |
$ |
3,622 |
$ |
3,794 |
(5) |
% |
(9) |
% |
|||||||||
Accruing loans past due 90 days or more |
$ |
1,491 |
$ |
1,633 |
$ |
2,351 |
(9) |
% |
(37) |
% |
|||||||||
Net charge-offs |
$ |
189 |
$ |
224 |
$ |
310 |
(16) |
% |
(39) |
% |
|||||||||
Provision for credit losses |
$ |
113 |
$ |
137 |
$ |
318 |
(18) |
% |
(64) |
% |
|||||||||
Allowance for loan and lease losses |
$ |
3,609 |
$ |
3,691 |
$ |
4,036 |
(2) |
% |
(11) |
% |
|||||||||
Overall credit quality continued to improve during the fourth quarter of 2013. Nonperforming assets at
Overall delinquencies decreased
Net charge-offs for the fourth quarter of 2013 decreased
Provision for credit losses for fourth quarter 2013 decreased
The allowance for loan and lease losses declined in both comparisons reflecting overall improvement in credit quality. The allowance to total loans was 1.84 percent at
BUSINESS SEGMENT RESULTS |
||||||||||||||
Business Segment Income (Loss) |
||||||||||||||
In millions |
4Q13 |
3Q13 |
4Q12 |
|||||||||||
Retail Banking |
$ |
107 |
$ |
165 |
$ |
121 |
||||||||
Corporate & Institutional Banking |
569 |
542 |
649 |
|||||||||||
Asset Management Group |
36 |
47 |
34 |
|||||||||||
Residential Mortgage Banking |
55 |
28 |
(192) |
|||||||||||
Non-Strategic Assets Portfolio |
118 |
121 |
59 |
|||||||||||
Other, including BlackRock |
176 |
136 |
48 |
|||||||||||
Net income |
$ |
1,061 |
$ |
1,039 |
$ |
719 |
||||||||
See accompanying notes in Consolidated Financial Highlights |
||||||||||||||
Retail Banking |
Change |
Change |
||||||||||||||||||||
4Q13 vs |
4Q13 vs |
|||||||||||||||||||||
In millions |
4Q13 |
3Q13 |
4Q12 |
3Q13 |
4Q12 |
|||||||||||||||||
Net interest income |
$ |
1,012 |
$ |
1,006 |
$ |
1,081 |
$ |
6 |
$ |
(69) |
||||||||||||
Noninterest income |
$ |
488 |
$ |
557 |
$ |
596 |
$ |
(69) |
$ |
(108) |
||||||||||||
Provision for credit losses |
$ |
195 |
$ |
152 |
$ |
280 |
$ |
43 |
$ |
(85) |
||||||||||||
Noninterest expense |
$ |
1,138 |
$ |
1,151 |
$ |
1,206 |
$ |
(13) |
$ |
(68) |
||||||||||||
Earnings |
$ |
107 |
$ |
165 |
$ |
121 |
$ |
(58) |
$ |
(14) |
||||||||||||
In billions |
||||||||||||||||||||||
Average loans |
$ |
67.2 |
$ |
66.4 |
$ |
65.4 |
$ |
.8 |
$ |
1.8 |
||||||||||||
Average deposits |
$ |
134.6 |
$ |
134.0 |
$ |
131.9 |
$ |
.6 |
$ |
2.7 |
||||||||||||
Retail Banking earnings for the fourth quarter of 2013 decreased compared with the third quarter of 2013 and the fourth quarter of 2012. Noninterest income declined in both comparisons reflecting the impact of gains on sales of Visa Class B common shares in the third quarter of 2013 and the fourth quarter of 2012. This decrease in both comparisons was partially offset by fee income growth from higher customer-initiated transactions. Net interest income declined compared with fourth quarter 2012 due to spread compression, primarily on deposits. The linked quarter increase in provision for credit losses was primarily attributable to updates of home equity loan loss assumptions. Provision for credit losses for fourth quarter 2013 decreased from fourth quarter 2012 due to overall credit quality improvement. Lower noninterest expense reflected a focus on disciplined expense management and, in the prior year quarter comparison, the impact of fourth quarter 2012 adjustments to accruals primarily for deferred loan origination costs.
- Retail Banking continued to focus on providing service channel choices while lowering delivery costs as customer preferences continue to evolve.
- Approximately 39 percent of consumer customers used non-branch channels for the majority of their transactions during the fourth quarter of 2013 compared to 36 percent for the fourth quarter of 2012.
- Non-branch deposit transactions via ATM and mobile increased to 30 percent of total deposit transactions in the fourth quarter of 2013 compared with 18 percent for the fourth quarter of 2012.
- PNC closed or consolidated 16 branches in the fourth quarter for a total of 186 branches closed or consolidated for the full year 2013. PNC had a branch network of 2,714 branches and 7,445 ATMs at
December 31, 2013 . - Checking relationships increased 173,000, or 3 percent, to 6,648,000 at
December 31, 2013 from year end 2012.
- Average transaction deposits continued to grow in the fourth quarter of 2013, increasing
$1.2 billion over the third quarter. Average certificates of deposit declined$625 million in the same comparison due to net runoff of maturing accounts. In the comparison with fourth quarter 2012, average transaction deposits increased$5.0 billion , or 5 percent, while average certificates of deposit decreased$3.1 billion , or 13 percent. - Average loans increased in the fourth quarter of 2013 by 1 percent over the third quarter and 3 percent over fourth quarter 2012 as a result of growth in automobile, home equity, auto dealer floor plan and credit card loans partially offset by paydowns of education loans.
- Net charge-offs were
$168 million for fourth quarter 2013 compared with$143 million in the third quarter and$217 million in the fourth quarter of 2012. The linked quarter increase in net charge-offs was due in part to ongoing collateral value refinements on certain home equity loans. Nonperforming assets of$1.3 billion atDecember 31, 2013 were stable withSeptember 30, 2013 .
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||
4Q13 vs |
4Q13 vs |
||||||||||||||||||
In millions |
4Q13 |
3Q13 |
4Q12 |
3Q13 |
4Q12 |
||||||||||||||
Net interest income |
$ |
960 |
$ |
945 |
$ |
1,057 |
$ |
15 |
$ |
(97) |
|||||||||
Corporate service fees |
$ |
277 |
$ |
277 |
$ |
324 |
– |
$ |
(47) |
||||||||||
Other noninterest income |
$ |
152 |
$ |
134 |
$ |
195 |
$ |
18 |
$ |
(43) |
|||||||||
Provision for credit losses (benefit) |
$ |
(29) |
$ |
30 |
$ |
9 |
$ |
(59) |
$ |
(38) |
|||||||||
Noninterest expense |
$ |
525 |
$ |
495 |
$ |
549 |
$ |
30 |
$ |
(24) |
|||||||||
Earnings |
$ |
569 |
$ |
542 |
$ |
649 |
$ |
27 |
$ |
(80) |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
100.9 |
$ |
98.0 |
$ |
91.3 |
$ |
2.9 |
$ |
9.6 |
|||||||||
Average deposits |
$ |
71.7 |
$ |
67.1 |
$ |
63.9 |
$ |
4.6 |
$ |
7.8 |
|||||||||
Commercial mortgage servicing portfolio Quarter end |
$ |
308 |
$ |
298 |
$ |
282 |
$ |
10 |
$ |
26 |
|||||||||
Corporate & Institutional Banking earnings increased in the fourth quarter of 2013 compared with the third quarter of 2013 and decreased compared with the fourth quarter of 2012. Net interest income declined compared with fourth quarter 2012 as a result of spread compression on loans and deposits and lower purchase accounting accretion partially offset by higher average loans and deposits. Corporate service fees were stable with the third quarter largely attributable to lower net commercial mortgage servicing rights valuations substantially offset by higher merger and acquisition advisory fees. The decrease in corporate service fees in the prior year fourth quarter comparison was primarily due to lower net commercial mortgage servicing rights valuations and lower merger and acquisition advisory fees. Other noninterest income increased compared with third quarter reflecting higher credit valuations related to customer-initiated hedging activities and decreased compared with fourth quarter 2012 primarily as a result of lower revenue associated with asset sales and commercial mortgage loans held for sale. Provision for credit losses, which was a benefit in fourth quarter 2013, reflected overall credit quality improvement. Noninterest expense increased in the linked quarter comparison principally from higher incentive compensation costs associated with increased business activity. The decline in noninterest expense compared with fourth quarter 2012 was attributable to continued disciplined expense management.
- Average loans increased in both comparisons primarily due to growth in real estate and other specialty lending businesses including business credit and public finance.
- Average deposits increased in both comparisons as a result of business growth and inflows into noninterest-bearing and money market deposits. Additionally, linked quarter growth reflected seasonal increases.
- Net charge-offs were
$10 million in the fourth quarter of 2013 compared with$56 million in the third quarter of 2013 and$34 million in the fourth quarter of 2012.
Asset Management Group |
Change |
Change |
||||||||||||||||||||
4Q13 vs |
4Q13 vs |
|||||||||||||||||||||
In millions |
4Q13 |
3Q13 |
4Q12 |
3Q13 |
4Q12 |
|||||||||||||||||
Net interest income |
$ |
71 |
$ |
74 |
$ |
74 |
$ |
(3) |
$ |
(3) |
||||||||||||
Noninterest income |
$ |
198 |
$ |
188 |
$ |
173 |
$ |
10 |
$ |
25 |
||||||||||||
Provision for credit losses (benefit) |
$ |
8 |
$ |
(4) |
$ |
(2) |
$ |
12 |
$ |
10 |
||||||||||||
Noninterest expense |
$ |
204 |
$ |
192 |
$ |
195 |
$ |
12 |
$ |
9 |
||||||||||||
Earnings |
$ |
36 |
$ |
47 |
$ |
34 |
$ |
(11) |
$ |
2 |
||||||||||||
In billions |
||||||||||||||||||||||
Assets under administration Quarter end |
$ |
247 |
$ |
237 |
$ |
224 |
$ |
10 |
$ |
23 |
||||||||||||
Average loans |
$ |
7.1 |
$ |
6.9 |
$ |
6.4 |
$ |
.2 |
$ |
.7 |
||||||||||||
Average deposits |
$ |
9.2 |
$ |
8.7 |
$ |
8.6 |
$ |
.5 |
$ |
.6 |
||||||||||||
Asset Management Group core growth strategies include investing in higher growth geographies, increasing sales sourced from other PNC lines of business and adding new front line sales staff with the goal of creating meaningful growth over time in assets under management and noninterest income.- New business activities were strong with a 22 percent increase in primary client acquisitions and a 44 percent increase in sales sourced from other PNC lines of business in 2013 compared with 2012.
- Assets under administration at
December 31, 2013 included discretionary assets under management of$127 billion and nondiscretionary assets under administration of$120 billion . Discretionary assets under management increased$5 billion compared withSeptember 30, 2013 and$15 billion compared withDecember 31, 2012 driven by stronger equity markets and net positive flows net of cyclical client activities. - Average loans increased 2 percent compared with the third quarter and 11 percent compared with the fourth quarter of 2012 as new client originations, primarily home equity loans, benefited from an attractive interest rate environment and loan referrals from other lines of business.
- Average deposits increased 6 percent compared with the third quarter of 2013, reflecting seasonal growth, and 7 percent compared with the fourth quarter of 2012.
Residential Mortgage Banking |
Change |
Change |
||||||||||||||||||
4Q13 vs |
4Q13 vs |
|||||||||||||||||||
In millions |
4Q13 |
3Q13 |
4Q12 |
3Q13 |
4Q12 |
|||||||||||||||
Net interest income |
$ |
49 |
$ |
46 |
$ |
53 |
$ |
3 |
$ |
(4) |
||||||||||
Noninterest income |
||||||||||||||||||||
Benefit (provision) for residential mortgage |
||||||||||||||||||||
repurchase obligations |
$ |
124 |
$ |
6 |
$ |
(254) |
$ |
118 |
$ |
378 |
||||||||||
Other noninterest income |
$ |
154 |
$ |
202 |
$ |
259 |
$ |
(48) |
$ |
(105) |
||||||||||
Provision for credit losses |
$ |
(3) |
$ |
- |
$ |
2 |
$ |
(3) |
$ |
(5) |
||||||||||
Noninterest expense |
$ |
243 |
$ |
210 |
$ |
333 |
$ |
33 |
$ |
(90) |
||||||||||
Earnings (loss) |
$ |
55 |
$ |
28 |
$ |
(192) |
$ |
27 |
$ |
247 |
||||||||||
In billions |
||||||||||||||||||||
Residential mortgage servicing portfolio Quarter end |
$ |
114 |
$ |
115 |
$ |
119 |
$ |
(1) |
$ |
(5) |
||||||||||
Loan origination volume |
$ |
2.5 |
$ |
3.7 |
$ |
4.4 |
$ |
(1.2) |
$ |
(1.9) |
||||||||||
Residential Mortgage Banking earnings for the fourth quarter of 2013 increased compared with both the third quarter of 2013 and the fourth quarter of 2012. Fourth quarter 2013 earnings benefited from release of reserves for residential mortgage repurchase obligations largely attributable to the impact of previously disclosed agreements with FNMA and FHLMC. Other noninterest income declined compared with the third quarter due to lower net hedging gains on residential mortgage servicing rights. In the comparison with fourth quarter 2012, reduced loan sales revenue from lower origination volume drove the decrease in other noninterest income.
Noninterest expense increased compared with the third quarter primarily due to higher legal accruals, including a previously disclosed residential mortgage fair lending settlement with the
Loan origination volume in the fourth quarter of 2013 was down 33 percent from the third quarter and down 44 percent from the fourth quarter of 2012. Approximately 41 percent of fourth quarter 2013 origination volume was for home purchase transactions, an increase over both quarters of comparison. Originations under the revised Home Affordable Refinance Program remained a significant portion of fourth quarter volume at approximately 28 percent.
Non-Strategic Assets Portfolio |
Change |
Change |
|||||||||||||||||
4Q13 vs |
4Q13 vs |
||||||||||||||||||
In millions |
4Q13 |
3Q13 |
4Q12 |
3Q13 |
4Q12 |
||||||||||||||
Net interest income |
$ |
161 |
$ |
161 |
$ |
197 |
– |
$ |
(36) |
||||||||||
Noninterest income |
$ |
6 |
$ |
20 |
$ |
21 |
$ |
(14) |
$ |
(15) |
|||||||||
Provision for credit losses (benefit) |
$ |
(59) |
$ |
(43) |
$ |
52 |
$ |
(16) |
$ |
(111) |
|||||||||
Noninterest expense |
$ |
39 |
$ |
33 |
$ |
73 |
$ |
6 |
$ |
(34) |
|||||||||
Earnings |
$ |
118 |
$ |
121 |
$ |
59 |
$ |
(3) |
$ |
59 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
10.0 |
$ |
10.4 |
$ |
11.9 |
$ |
(.4) |
$ |
(1.9) |
|||||||||
Non-Strategic Assets Portfolio segment earnings decreased slightly in the fourth quarter of 2013 compared with the third quarter of 2013 and increased compared with the fourth quarter of 2012. Net interest income decreased compared with fourth quarter 2012 as a result of portfolio runoff including higher yielding commercial loans. Noninterest income declined in both comparisons and included the impact of an increased provision for home equity repurchase obligations. Provision for credit losses, which was a benefit in the fourth and third quarters of 2013, reflected overall improvement in credit quality. Noninterest expense decreased compared with fourth quarter 2012 from lower other real estate owned expense and lower loan servicing costs.
- The Non-Strategic Assets Portfolio primarily consists of non-strategic assets obtained through acquisitions of other companies. The business activity of this segment is to manage the wind-down of the portfolio while maximizing value and mitigating risk.
- Average loans decreased in both comparisons reflecting customer payment activity and portfolio management activities to reduce underperforming assets.
- Net charge-offs were
$9 million for the fourth quarter of 2013 compared with$23 million for the third quarter and$60 million for the fourth quarter of 2012. The decreases reflected continued improvement in credit quality.
Other, including
The "Other, including
PNC recorded earnings of
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC President and Chief Executive Officer
The
[TABULAR MATERIAL FOLLOWS]
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
|||||||||||||
FINANCIAL RESULTS |
Three months ended |
Year ended |
||||||||||||
Dollars in millions, except per share data |
December 31 |
September 30 |
December 31 |
December 31 |
December 31 |
|||||||||
2013 |
2013 |
2012 |
2013 |
2012 |
||||||||||
Revenue |
||||||||||||||
Net interest income |
$ |
2,266 |
$ |
2,234 |
$ |
2,424 |
$ |
9,147 |
$ |
9,640 |
||||
Noninterest income |
1,807 |
1,686 |
1,645 |
6,865 |
5,872 |
|||||||||
Total revenue |
4,073 |
3,920 |
4,069 |
16,012 |
15,512 |
|||||||||
Noninterest expense |
2,547 |
2,424 |
2,829 |
9,801 |
10,582 |
|||||||||
Pretax, pre-provision earnings (a) |
1,526 |
1,496 |
1,240 |
6,211 |
4,930 |
|||||||||
Provision for credit losses |
113 |
137 |
318 |
643 |
987 |
|||||||||
Income before income taxes and noncontrolling interests |
$ |
1,413 |
$ |
1,359 |
$ |
922 |
$ |
5,568 |
$ |
3,943 |
||||
Net income (b) |
$ |
1,061 |
$ |
1,039 |
$ |
719 |
$ |
4,227 |
$ |
3,001 |
||||
Less: |
||||||||||||||
Net income (loss) attributable to noncontrolling interests |
13 |
2 |
1 |
7 |
(12) |
|||||||||
Preferred stock dividends and discount accretion |
||||||||||||||
and redemptions |
50 |
71 |
54 |
249 |
181 |
|||||||||
Net income attributable to common shareholders |
$ |
998 |
$ |
966 |
$ |
664 |
$ |
3,971 |
$ |
2,832 |
||||
Diluted earnings per common share |
$ |
1.85 |
$ |
1.79 |
$ |
1.24 |
$ |
7.39 |
$ |
5.30 |
||||
Cash dividends declared per common share |
$ |
.44 |
$ |
.44 |
$ |
.40 |
$ |
1.72 |
$ |
1.55 |
||||
Certain prior period amounts included in these Consolidated Financial Highlights have been reclassified to conform with the current period presentation, which we believe is more meaningful to readers of our consolidated financial statements. |
(a) |
We believe that pretax, pre-provision earnings, a non-GAAP measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. |
||||||||||||||
(b) |
See page 17 for a reconciliation of business segment income to net income. |
Selected Noninterest Income Information - Increase (Decrease) to Noninterest Income and Impact on Diluted EPS |
|||||||||||||||||
Three months ended |
Year ended |
||||||||||||||||
December 31 |
September 30 |
December 31 |
December 31 |
December 31 |
|||||||||||||
In millions, except per share data |
2013 |
2013 |
2012 |
2013 |
2012 |
||||||||||||
Commercial mortgage servicing rights (impairment) / recovery, |
|||||||||||||||||
net of economic hedge |
|||||||||||||||||
Pretax |
$ |
(5) |
$ |
18 |
$ |
16 |
$ |
68 |
$ |
31 |
|||||||
After-tax |
$ |
(3) |
$ |
11 |
$ |
10 |
$ |
44 |
$ |
20 |
|||||||
Impact on diluted earnings per share (a) |
$ |
(.01) |
$ |
.02 |
$ |
.02 |
$ |
.08 |
$ |
.04 |
|||||||
Benefit / (provision) for residential mortgage repurchase obligations |
|||||||||||||||||
Pretax |
$ |
124 |
$ |
6 |
$ |
(254) |
$ |
53 |
$ |
(761) |
|||||||
After-tax |
$ |
81 |
$ |
4 |
$ |
(165) |
$ |
35 |
$ |
(495) |
|||||||
Impact on diluted earnings per share (a) |
$ |
.15 |
$ |
.01 |
$ |
(.31) |
$ |
.06 |
$ |
(.93) |
|||||||
Net gains on sales of securities |
|||||||||||||||||
Pretax |
$ |
3 |
$ |
21 |
$ |
45 |
$ |
99 |
$ |
204 |
|||||||
After-tax |
$ |
2 |
$ |
13 |
$ |
30 |
$ |
64 |
$ |
133 |
|||||||
Impact on diluted earnings per share (a) |
$ |
.00 |
$ |
.02 |
$ |
.06 |
$ |
.12 |
$ |
.25 |
|||||||
Gains on sales of Visa Class B common shares |
|||||||||||||||||
Pretax |
$ |
85 |
$ |
130 |
$ |
168 |
$ |
267 |
|||||||||
After-tax |
$ |
55 |
$ |
85 |
$ |
109 |
$ |
174 |
|||||||||
Impact on diluted earnings per share (a) |
$ |
.10 |
$ |
.16 |
$ |
.21 |
$ |
.33 |
|||||||||
Credit valuations related to customer-initiated hedging activities |
|||||||||||||||||
Pretax |
$ |
16 |
$ |
(1) |
$ |
17 |
$ |
56 |
$ |
7 |
|||||||
After-tax |
$ |
11 |
$ |
12 |
$ |
37 |
$ |
5 |
|||||||||
Impact on diluted earnings per share (a) |
$ |
.02 |
$ |
(.00) |
$ |
.02 |
$ |
.07 |
$ |
.01 |
|||||||
(a) |
In calculating impact on diluted earnings per share in the table above, after-tax amounts for the income statement items were calculated using a statutory federal income tax rate of 35%. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
|||||||||||||||||||
Three months ended |
Year ended |
|||||||||||||||||||
December 31 |
September 30 |
December 31 |
December 31 |
December 31 |
||||||||||||||||
2013 |
2013 |
2012 |
2013 |
2012 |
||||||||||||||||
PERFORMANCE RATIOS |
||||||||||||||||||||
Net interest margin (a) |
3.38 |
% |
3.47 |
% |
3.85 |
% |
3.57 |
% |
3.94 |
% |
||||||||||
Noninterest income to total revenue |