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PNC Reports First Quarter 2020 Net Income of $915 Million, $1.95 Diluted EPS
For the quarter |
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1Q20 |
4Q19 |
1Q19 |
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Net income $ millions |
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Diluted earnings per common share |
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"In these unprecedented times that we are collectively experiencing, PNC remains |
Economic Environment
The COVID-19 outbreak and public health response to contain it have resulted in recessionary economic and financial market conditions as of the end of the first quarter that did not exist at the beginning of the quarter. During
Income Statement Highlights
First quarter 2020 compared with fourth quarter 2019
- Net income was
$915 million , a decrease of$466 million driven by a higher provision for credit losses. - Total revenue of
$4.5 billion declined$92 million , or 2 percent. - Net interest income of
$2.5 billion increased$23 million , or 1 percent, primarily due to lower rates on deposits and borrowings and higher loan and securities balances partially offset by lower loan and other earning asset yields and one less day in the first quarter. - Net interest margin increased 6 basis points to 2.84 percent.
- Noninterest income of
$2.0 billion decreased$115 million , or 5 percent. - Fee income of
$1.7 billion was stable as higher residential mortgage revenue and corporate service fees were offset by lower asset management revenue, service charges on deposits and consumer service fees. - Other noninterest income of
$343 million declined$113 million primarily due to negative valuation adjustments of private equity investments and a fourth quarter gain on the sale of proprietary mutual funds partially offset by higher net securities gains in the first quarter. - Noninterest expense of
$2.5 billion decreased$219 million , or 8 percent, primarily due to lower incentive compensation and benefits expense, the impact of fourth quarter equipment write-offs and lower marketing expense. - The efficiency ratio improved to 56 percent for the first quarter from 60 percent in the fourth quarter.
- Provision for credit losses of $914 million, which was calculated under the Current Expected Credit Loss (CECL) accounting standard effective January 1, 2020, increased
$693 million primarily due to the significant economic impact of COVID-19 and loan growth. - Provision was
$506 million for the commercial portfolio and$399 million for the consumer portfolio. - The effective tax rate declined to 13.7 percent for the first quarter compared with 15.1 percent for the fourth quarter primarily due to the benefit from resolution of certain tax matters and the impact of lower pretax earnings.
Balance Sheet Highlights
- Loans at
March 31, 2020 increased$24.8 billion , or 10 percent, to$264.6 billion compared withDecember 31, 2019 . Commercial lending balances increased$24.1 billion , or 15 percent, reflecting higher utilization of loan commitments near quarter end driven by the economic impact of COVID-19. Consumer lending balances increased$.7 billion . - Unfunded commercial lending commitments declined to
$116.0 billion atMarch 31, 2020 from$131.8 billion atDecember 31, 2019 . - Average loans increased
$4.7 billion , or 2 percent, to$243.6 billion in the first quarter compared with the fourth quarter. - Average commercial lending balances of
$164.1 billion increased$3.3 billion , or 2 percent, in PNC's corporate banking, real estate and business credit businesses. - Average consumer lending balances of
$79.5 billion increased$1.4 billion , or 2 percent, due to growth in auto, residential mortgage, credit card and unsecured installment loans. - Credit quality performance:
- Overall delinquencies of
$1.5 billion atMarch 31, 2020 decreased$21 million , or 1 percent, compared withDecember 31, 2019 . - Nonperforming assets of
$1.8 billion atMarch 31, 2020 were stable withDecember 31, 2019 . - Net loan charge-offs were
$212 million for the first quarter compared with$209 million for the fourth quarter. - The allowance for credit losses for loans and leases and off-balance sheet credit exposures of
$4.4 billion to total loans was 1.66 percent atMarch 31, 2020 , and reflects theJanuary 1, 2020 transition adjustment of$.6 billion for adoption of the CECL accounting standard. - Deposits at
March 31, 2020 increased$16.7 billion , or 6 percent, to$305.2 billion compared withDecember 31, 2019 as higher commercial deposits near quarter end reflected liquidity maintained by customers due to the economic impact of COVID-19. - Average deposits increased
$2.0 billion , or 1 percent, to$289.7 billion in the first quarter compared with the fourth quarter due to growth in consumer deposits partially offset by seasonal declines in commercial deposits. - Investment securities at
March 31, 2020 increased$3.7 billion , or 4 percent, to$90.5 billion compared withDecember 31, 2019 . - Average investment securities increased
$.9 billion , or 1 percent, to$84.4 billion in the first quarter compared with the fourth quarter. - Balances held with the
Federal Reserve of$19.6 billion atMarch 31, 2020 decreased$3.6 billion compared withDecember 31, 2019 , and first quarter average balances of$17.3 billion decreased$5.7 billion compared with the fourth quarter. - PNC returned
$1.9 billion of capital to shareholders in the first quarter through repurchases of 10.1 million common shares for$1.4 billion and dividends on common shares of$.5 billion . - PNC announced on
March 16, 2020 a temporary suspension of its common stock repurchase program throughJune 30, 2020 in conjunction with theFederal Reserve's effort to support theU.S. economy during the COVID-19 outbreak. - On
April 2, 2020 , the PNC board of directors declared a quarterly cash dividend on common stock of$1.15 per share effective with theMay 5, 2020 dividend payment date. - PNC maintained strong capital and liquidity positions.
- The Basel III common equity Tier 1 capital ratio was an estimated 9.4 percent at
March 31, 2020 and 9.5 percent atDecember 31, 2019 . - The
March 31, 2020 ratio reflects PNC's election of a five-year transition provision to delay for two years the full impact of CECL on regulatory capital, followed by a three-year transition period. - The Liquidity Coverage Ratio at
March 31, 2020 for bothPNC and PNC Bank, N.A. exceeded the regulatory minimum requirement. March 31, 2020 ratios incorporate Tailoring Rule changes that reduced net cash outflows by 15 percent in the ratio calculations effectiveJanuary 1, 2020 .
Earnings Summary |
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In millions, except per share data |
1Q20 |
4Q19 |
1Q19 |
|||||||||
Net income |
$ |
915 |
$ |
1,381 |
$ |
1,271 |
||||||
Net income attributable to diluted common shares |
$ |
839 |
$ |
1,302 |
$ |
1,189 |
||||||
Diluted earnings per common share |
$ |
1.95 |
$ |
2.97 |
$ |
2.61 |
||||||
Average diluted common shares outstanding |
430 |
438 |
456 |
|||||||||
Return on average assets |
.89 |
% |
1.33 |
% |
1.34 |
% |
||||||
Return on average common equity |
7.51 |
% |
11.54 |
% |
11.13 |
% |
||||||
Book value per common share |
Quarter end |
$ |
106.70 |
$ |
104.59 |
$ |
98.47 |
|||||
Tangible book value per common share (non-GAAP) |
Quarter end |
$ |
84.93 |
$ |
83.30 |
$ |
78.07 |
|||||
Cash dividends declared per common share |
$ |
1.15 |
$ |
1.15 |
$ |
.95 |
||||||
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported (GAAP) amounts. This information supplements results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, GAAP results. 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 |
|||||||||||||
1Q20 vs |
1Q20 vs |
||||||||||||||
In millions |
1Q20 |
4Q19 |
1Q19 |
4Q19 |
1Q19 |
||||||||||
Net interest income |
$ |
2,511 |
$ |
2,488 |
$ |
2,475 |
1 |
% |
1 |
% |
|||||
Noninterest income |
2,006 |
2,121 |
1,811 |
(5) |
% |
11 |
% |
||||||||
Total revenue |
$ |
4,517 |
$ |
4,609 |
$ |
4,286 |
(2) |
% |
5 |
% |
|||||
Total revenue for the first quarter of 2020 decreased
Net interest income for the first quarter of 2020 increased
Noninterest Income |
Change |
Change |
|||||||||||||
1Q20 vs |
1Q20 vs |
||||||||||||||
In millions |
1Q20 |
4Q19 |
1Q19 |
4Q19 |
1Q19 |
||||||||||
Asset management |
$ |
382 |
$ |
504 |
$ |
437 |
(24) |
% |
(13) |
% |
|||||
Consumer services |
377 |
390 |
371 |
(3) |
% |
2 |
% |
||||||||
Corporate services |
526 |
499 |
462 |
5 |
% |
14 |
% |
||||||||
Residential mortgage |
210 |
87 |
65 |
141 |
% |
223 |
% |
||||||||
Service charges on deposits |
168 |
185 |
168 |
(9) |
% |
— |
|||||||||
Other |
343 |
456 |
308 |
(25) |
% |
11 |
% |
||||||||
$ |
2,006 |
$ |
2,121 |
$ |
1,811 |
(5) |
% |
11 |
% |
||||||
Noninterest income for the first quarter of 2020 decreased
Noninterest income for the first quarter of 2020 increased
CONSOLIDATED EXPENSE REVIEW |
|||||||||||||||
Noninterest Expense |
Change |
Change |
|||||||||||||
1Q20 vs |
1Q20 vs |
||||||||||||||
In millions |
1Q20 |
4Q19 |
1Q19 |
4Q19 |
1Q19 |
||||||||||
Personnel |
$ |
1,369 |
$ |
1,468 |
$ |
1,414 |
(7) |
% |
(3) |
% |
|||||
Occupancy |
207 |
201 |
215 |
3 |
% |
(4) |
% |
||||||||
Equipment |
287 |
348 |
273 |
(18) |
% |
5 |
% |
||||||||
Marketing |
58 |
77 |
65 |
(25) |
% |
(11) |
% |
||||||||
Other |
622 |
668 |
611 |
(7) |
% |
2 |
% |
||||||||
$ |
2,543 |
$ |
2,762 |
$ |
2,578 |
(8) |
% |
(1) |
% |
||||||
Noninterest expense for the first quarter of 2020 decreased
Noninterest expense for the first quarter of 2020 decreased
The effective tax rate was 13.7 percent for the first quarter of 2020, 15.1 percent for the fourth quarter of 2019 and 16.3 percent for the first quarter of 2019. The decline in the effective tax rate in the first quarter of 2020 was primarily due to the benefit from resolution of certain tax matters and the impact of lower pretax earnings.
CONSOLIDATED BALANCE SHEET REVIEW
Average total assets were
Loans |
Change |
Change |
|||||||||||||
1Q20 vs |
1Q20 vs |
||||||||||||||
In billions |
1Q20 |
4Q19 |
1Q19 |
4Q19 |
1Q19 |
||||||||||
Average |
|||||||||||||||
Commercial lending |
$ |
164.1 |
$ |
160.8 |
$ |
154.8 |
2 |
% |
6 |
% |
|||||
Consumer lending |
79.5 |
78.1 |
73.8 |
2 |
% |
8 |
% |
||||||||
Average loans |
$ |
243.6 |
$ |
238.9 |
$ |
228.6 |
2 |
% |
7 |
% |
|||||
Quarter end |
|||||||||||||||
Commercial lending |
$ |
184.7 |
$ |
160.6 |
$ |
158.4 |
15 |
% |
17 |
% |
|||||
Consumer lending |
79.9 |
79.2 |
73.9 |
1 |
% |
8 |
% |
||||||||
Total loans |
$ |
264.6 |
$ |
239.8 |
$ |
232.3 |
10 |
% |
14 |
% |
|||||
Total loans at
Average loans for the first quarter of 2020 grew
First quarter 2020 period end and average loans increased
|
Change |
Change |
|||||||||||||
1Q20 vs |
1Q20 vs |
||||||||||||||
In billions |
1Q20 |
4Q19 |
1Q19 |
4Q19 |
1Q19 |
||||||||||
Average |
$ |
84.4 |
$ |
83.5 |
$ |
82.3 |
1 |
% |
3 |
% |
|||||
Quarter end |
$ |
90.5 |
$ |
86.8 |
$ |
83.8 |
4 |
% |
8 |
% |
|||||
Average investment securities for the first quarter of 2020 increased
Average balances held with the
Deposits |
Change |
Change |
|||||||||||||
1Q20 vs |
1Q20 vs |
||||||||||||||
In billions |
1Q20 |
4Q19 |
1Q19 |
4Q19 |
1Q19 |
||||||||||
Average |
|||||||||||||||
Noninterest-bearing |
$ |
74.4 |
$ |
73.6 |
$ |
71.4 |
1 |
% |
4 |
% |
|||||
Interest-bearing |
215.3 |
214.1 |
195.8 |
1 |
% |
10 |
% |
||||||||
Average deposits |
$ |
289.7 |
$ |
287.7 |
$ |
267.2 |
1 |
% |
8 |
% |
|||||
Quarter end |
|||||||||||||||
Noninterest-bearing |
$ |
81.6 |
$ |
72.8 |
$ |
71.6 |
12 |
% |
14 |
% |
|||||
Interest-bearing |
223.6 |
215.7 |
199.6 |
4 |
% |
12 |
% |
||||||||
Total deposits |
$ |
305.2 |
$ |
288.5 |
$ |
271.2 |
6 |
% |
13 |
% |
|||||
Average deposits for the first quarter of 2020 increased
Borrowed Funds |
Change |
Change |
|||||||||||||
1Q20 vs |
1Q20 vs |
||||||||||||||
In billions |
1Q20 |
4Q19 |
1Q19 |
4Q19 |
1Q19 |
||||||||||
Average |
$ |
57.2 |
$ |
60.0 |
$ |
59.8 |
(5) |
% |
(4) |
% |
|||||
Quarter end |
$ |
73.4 |
$ |
60.3 |
$ |
59.9 |
22 |
% |
23 |
% |
|||||
Average borrowed funds for the first quarter of 2020 decreased
Capital |
|||||||||||
|
|
|
|||||||||
Common shareholders' equity In billions |
$ |
45.3 |
$ |
45.3 |
$ |
44.5 |
|||||
Basel III common equity Tier 1 capital ratio |
9.4 |
% |
9.5 |
% |
9.8 |
% |
|||||
Basel III common equity Tier 1 fully implemented capital |
9.2 |
% |
N/A |
N/A |
|||||||
* Ratios estimated |
|||||||||||
PNC maintained a strong capital position. Common shareholders' equity at
PNC returned
PNC announced on
On
For information regarding PNC's Basel III capital ratios, see Capital Ratios in the Consolidated Financial Highlights. The 2019 Tailoring Rules became effective for PNC as of
CREDIT QUALITY REVIEW |
|||||||||||||||
Credit Quality |
Change |
Change |
|||||||||||||
At or for the quarter ended |
|
|
|||||||||||||
In millions |
|
|
|
|
|
||||||||||
Provision for credit losses |
$ |
914 |
$ |
221 |
$ |
189 |
314 |
% |
384 |
% |
|||||
Net loan charge-offs |
$ |
212 |
$ |
209 |
$ |
136 |
1 |
% |
56 |
% |
|||||
Nonperforming loans |
$ |
1,644 |
$ |
1,635 |
$ |
1,653 |
1 |
% |
(1) |
% |
|||||
Nonperforming assets |
$ |
1,755 |
$ |
1,752 |
$ |
1,785 |
— |
(2) |
% |
||||||
Accruing loans past due 90 days or |
$ |
534 |
$ |
585 |
$ |
590 |
(9) |
% |
(9) |
% |
|||||
Allowance for credit losses - loans and leases* |
$ |
3,944 |
$ |
2,742 |
$ |
2,692 |
44 |
% |
47 |
% |
|||||
Allowance for credit losses - off-balance sheet credit exposures** |
$ |
450 |
$ |
318 |
$ |
279 |
42 |
% |
61 |
% |
|||||
Allowance for credit losses for loans, |
1.66 |
% |
|||||||||||||
* Allowance for loan and lease losses at |
|||||||||||||||
** Allowance for unfunded commitments and letters of credit at |
Provision for credit losses was
Net loan charge-offs for the first quarter of 2020 increased slightly by
Nonperforming assets at
Overall delinquencies at
The allowance for credit losses for loans and leases and off-balance sheet credit exposures was
BUSINESS SEGMENT RESULTS |
|||||||||||||||||||
Business Segment Income |
|||||||||||||||||||
In millions |
1Q20 |
4Q19 |
1Q19 |
||||||||||||||||
Retail Banking |
$ |
201 |
$ |
277 |
$ |
264 |
|||||||||||||
Corporate & Institutional Banking |
370 |
649 |
552 |
||||||||||||||||
|
54 |
91 |
45 |
||||||||||||||||
Other, including BlackRock |
290 |
364 |
410 |
||||||||||||||||
Net income |
$ |
915 |
$ |
1,381 |
$ |
1,271 |
|||||||||||||
See accompanying notes in Consolidated Financial Highlights |
|||||||||||||||||||
Retail Banking |
Change |
Change |
|||||||||||||||||
1Q20 vs |
1Q20 vs |
||||||||||||||||||
In millions |
1Q20 |
4Q19 |
1Q19 |
4Q19 |
1Q19 |
||||||||||||||
Net interest income |
$ |
1,456 |
$ |
1,402 |
$ |
1,349 |
$ |
54 |
$ |
107 |
|||||||||
Noninterest income |
$ |
788 |
$ |
652 |
$ |
595 |
$ |
136 |
$ |
193 |
|||||||||
Provision for credit losses |
$ |
445 |
$ |
161 |
$ |
128 |
$ |
284 |
$ |
317 |
|||||||||
Noninterest expense |
$ |
1,536 |
$ |
1,530 |
$ |
1,468 |
$ |
6 |
$ |
68 |
|||||||||
Earnings |
$ |
201 |
$ |
277 |
$ |
264 |
$ |
(76) |
$ |
(63) |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
81.4 |
$ |
79.5 |
$ |
75.2 |
$ |
1.9 |
$ |
6.2 |
|||||||||
Average deposits |
$ |
173.0 |
$ |
170.8 |
$ |
165.1 |
$ |
2.2 |
$ |
7.9 |
|||||||||
Retail Banking earnings for the first quarter of 2020 decreased compared to the fourth and first quarters of 2019. 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. Additionally, noninterest income increased due to the impact of negative derivative fair value adjustments related to Visa Class B common shares in the fourth and first quarters of 2019. Compared with the fourth quarter, these increases were partially offset by seasonal declines in service charges on deposits and consumer services, including merchant services and debit card fees, and fees waived related to the economic impact of COVID-19. In the comparison with first quarter 2019, growth in consumer services primarily attributable to debit card and brokerage fees contributed to the increase in noninterest income. Provision for credit losses for the first quarter of 2020, which was calculated under the CECL accounting standard, increased in both comparisons primarily due to the significant economic impact of COVID-19 and loan growth. Noninterest expense increased in both comparisons reflecting higher customer-related transaction costs and personnel expense and, compared with first quarter 2019, higher equipment costs and ATM expense resulting from enhanced checking product benefits.
- Average loans increased 2 percent compared with the fourth quarter and 8 percent compared with the first quarter of 2019 due to growth in residential mortgage, auto and credit card loans partially offset by lower education loans driven by continued runoff in the government guaranteed education loan portfolio.
- Average deposits increased 1 percent compared with the fourth quarter and 5 percent compared with first quarter 2019 due to increases in savings and demand deposits partially offset by lower money market deposits reflecting a shift to relationship-based savings products.
- Net loan charge-offs were
$166 million for the first quarter of 2020 compared with$154 million in the fourth quarter of 2019 and$132 million in the first quarter of 2019. - Residential mortgage loan origination volume was
$3.2 billion for the first quarter of 2020 compared with$3.5 billion for the fourth quarter of 2019 and$1.7 billion for the first quarter of 2019. Approximately 36 percent of first quarter 2020 volume was for home purchase transactions compared with 40 percent and 56 percent for the fourth and first quarters of 2019, respectively. - The third party residential mortgage servicing portfolio was
$118 billion atMarch 31, 2020 compared with$120 billion atDecember 31, 2019 and$123 billion atMarch 31, 2019 . Residential mortgage loan servicing acquisitions were$2 billion for first quarter 2020 compared with$3 billion for the fourth quarter of 2019 and$1 billion for the first quarter of 2019. - Approximately 71 percent of consumer customers used non-teller channels for the majority of their transactions during the first quarter of 2020 and the fourth quarter of 2019 compared with 68 percent in the first quarter of 2019.
- Deposit transactions via ATM and mobile channels were 59 percent of total deposit transactions in the first quarter of 2020 compared with 58 percent in the fourth quarter of 2019 and 57 percent in the first quarter of 2019.
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||
1Q20 vs |
1Q20 vs |
||||||||||||||||||
In millions |
1Q20 |
4Q19 |
1Q19 |
4Q19 |
1Q19 |
||||||||||||||
Net interest income |
$ |
966 |
$ |
969 |
$ |
898 |
$ |
(3) |
$ |
68 |
|||||||||
Noninterest income |
$ |
694 |
$ |
646 |
$ |
576 |
$ |
48 |
$ |
118 |
|||||||||
Provision for credit losses |
$ |
458 |
$ |
65 |
$ |
71 |
$ |
393 |
$ |
387 |
|||||||||
Noninterest expense |
$ |
722 |
$ |
726 |
$ |
686 |
$ |
(4) |
$ |
36 |
|||||||||
Earnings |
$ |
370 |
$ |
649 |
$ |
552 |
$ |
(279) |
$ |
(182) |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
151.0 |
$ |
147.9 |
$ |
141.9 |
$ |
3.1 |
$ |
9.1 |
|||||||||
Average deposits |
$ |
98.1 |
$ |
98.5 |
$ |
88.6 |
$ |
(0.4) |
$ |
9.5 |
|||||||||
Corporate & Institutional Banking earnings for the first quarter of 2020 decreased compared to both the fourth and first quarters of 2019. Noninterest income increased in both comparisons primarily due to higher capital markets-related revenue and higher revenue from commercial mortgage banking activities. Higher treasury management product revenue also contributed to the increase compared with the first quarter of 2019. Provision for credit losses in the first quarter of 2020, which was calculated under the CECL accounting standard, increased in both comparisons primarily due to the significant economic impact of COVID-19 and portfolio growth, including new loans and higher utilization. Noninterest expense increased compared with the first quarter of 2019 largely due to investments in strategic initiatives and variable costs associated with increased business activity.
- Average loans increased 2 percent compared with the fourth quarter of 2019 and 6 percent compared with the first quarter of 2019 due to broad growth across PNC's corporate banking, business credit and real estate businesses, including higher utilization of loan commitments primarily driven by the economic impact of COVID-19.
- Average deposits were largely unchanged from the fourth quarter reflecting lower than usual seasonal declines offset by liquidity maintained by customers due to the economic impact of COVID-19. Average deposits increased 11 percent over the first quarter of 2019.
- Net loan charge-offs were
$50 million in the first quarter of 2020 compared with$47 million in the fourth quarter of 2019 and$5 million in the first quarter of 2019.
|
Change |
Change |
|||||||||||||||||
1Q20 vs |
1Q20 vs |
||||||||||||||||||
In millions |
1Q20 |
4Q19 |
1Q19 |
4Q19 |
1Q19 |
||||||||||||||
Net interest income |
$ |
88 |
$ |
80 |
$ |
70 |
$ |
8 |
$ |
18 |
|||||||||
Noninterest income |
$ |
204 |
$ |
272 |
$ |
217 |
$ |
(68) |
$ |
(13) |
|||||||||
Provision for credit losses (benefit) |
$ |
3 |
$ |
1 |
(1) |
$ |
2 |
$ |
4 |
||||||||||
Noninterest expense |
$ |
219 |
$ |
232 |
$ |
230 |
$ |
(13) |
$ |
(11) |
|||||||||
Earnings |
$ |
54 |
$ |
91 |
$ |
45 |
$ |
(37) |
$ |
9 |
|||||||||
In billions |
|||||||||||||||||||
Client assets under administration at |
$ |
264 |
$ |
297 |
$ |
288 |
$ |
(33) |
$ |
(24) |
|||||||||
Average loans |
$ |
7.3 |
$ |
7.1 |
$ |
6.8 |
$ |
.2 |
$ |
.5 |
|||||||||
Average deposits |
$ |
18.1 |
$ |
17.9 |
$ |
12.9 |
$ |
.2 |
$ |
5.2 |
|||||||||
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 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 |
||||||||||||
Dollars in millions, except per share data |
|
|
|
||||||||||
2020 |
2019 |
2019 |
|||||||||||
Revenue |
|||||||||||||
Net interest income |
$ |
2,511 |
$ |
2,488 |
$ |
2,475 |
|||||||
Noninterest income |
2,006 |
2,121 |
1,811 |
||||||||||
Total revenue |
4,517 |
4,609 |
4,286 |
||||||||||
Provision for credit losses |
914 |
221 |
189 |
||||||||||
Noninterest expense |
2,543 |
2,762 |
2,578 |
||||||||||
Income before income taxes and noncontrolling interests |
$ |
1,060 |
$ |
1,626 |
$ |
1,519 |
|||||||
Net income |
$ |
915 |
$ |
1,381 |
$ |
1,271 |
|||||||
Less: |
|||||||||||||
Net income attributable to noncontrolling interests |
7 |
14 |
10 |
||||||||||
Preferred stock dividends (a) |
63 |
55 |
63 |
||||||||||
Preferred stock discount accretion and redemptions |
1 |
1 |
1 |
||||||||||
Net income attributable to common shareholders |
$ |
844 |
$ |
1,311 |
$ |
1,197 |
|||||||
Less: |
|||||||||||||
Dividends and undistributed earnings allocated to nonvested restricted shares |
4 |
6 |
5 |
||||||||||
Impact of BlackRock earnings per share dilution |
1 |
3 |
3 |
||||||||||
Net income attributable to diluted common shares |
$ |
839 |
$ |
1,302 |
$ |
1,189 |
|||||||
Diluted earnings per common share |
$ |
1.95 |
$ |
2.97 |
$ |
2.61 |
|||||||
Cash dividends declared per common share |
$ |
1.15 |
$ |
1.15 |
$ |
.95 |
|||||||
Effective tax rate (b) |
13.7 |
% |
15.1 |
% |
16.3 |
% |
(a) |
Dividends are payable quarterly other than the Series O, Series R and Series S preferred stock, which are payable |
(b) |
The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to |
|
Consolidated Financial Highlights (Unaudited) |
||||||||||||
Three months ended |
|||||||||||||
|
|
|
|||||||||||
2020 |
2019 |
2019 |
|||||||||||
PERFORMANCE RATIOS |
|||||||||||||
Net interest margin (a) |
2.84 |
% |
2.78 |
% |
2.98 |
% |
|||||||
Noninterest income to total revenue |
44 |
% |
46 |
% |
42 |
% |
|||||||
Efficiency (b) |
56 |
% |
60 |
% |
60 |
% |
|||||||
Return on: |
|||||||||||||
Average common shareholders' equity |
7.51 |
% |
11.54 |
% |
11.13 |
% |
|||||||
Average assets |
.89 |
% |
1.33 |
% |
1.34 |
% |
|||||||
BUSINESS SEGMENT NET INCOME (c) |
|||||||||||||
In millions |
|||||||||||||
Retail Banking |
$ |
201 |
$ |
277 |
$ |
264 |
|||||||
Corporate & Institutional Banking |
370 |
649 |
552 |
||||||||||
|
54 |
91 |
45 |
||||||||||
Other, including BlackRock (d) |
290 |
364 |
410 |
||||||||||
Total net income |
$ |
915 |
$ |
1,381 |
$ |
1,271 |
(a) |
Net interest margin is the total yield on interest-earning assets minus the total rate on interest-bearing liabilities |
(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 |
(d) |
Includes earnings and gains or losses related to PNC's equity investment in BlackRock and residual activities that |
|
Consolidated Financial Highlights (Unaudited) |
||||||||||
|
|
|
|||||||||
2020 |
2019 |
2019 |
|||||||||
BALANCE SHEET DATA |
|||||||||||
Dollars in millions, except per share data |
|||||||||||
Assets |
$ |
445,493 |
$ |
410,295 |
$ |
392,837 |
|||||
Loans (a) |
$ |
264,643 |
$ |
239,843 |
$ |
232,293 |
|||||
Allowance for credit losses - loan and leases (b) |
$ |
3,944 |
|||||||||
Allowance for loan and lease losses |
$ |
2,742 |
$ |
2,692 |
|||||||
Interest-earning deposits with banks |
$ |
19,986 |
$ |
23,413 |
$ |
15,261 |
|||||
Investment securities (c) |
$ |
90,546 |
$ |
86,824 |
$ |
83,869 |
|||||
Loans held for sale (a) |
$ |
1,693 |
$ |
1,083 |
$ |
686 |
|||||
Equity investments (d) |
$ |
13,205 |
$ |
13,734 |
$ |
12,567 |
|||||
Mortgage servicing rights |
$ |
1,082 |
$ |
1,644 |
$ |
1,812 |
|||||
|
$ |
9,233 |
$ |
9,233 |
$ |
9,218 |
|||||
Other assets (a) (c) |
$ |
41,556 |
$ |
32,202 |
$ |
34,761 |
|||||
Noninterest-bearing deposits |
$ |
81,614 |
$ |
72,779 |
$ |
71,606 |
|||||
Interest-bearing deposits |
$ |
223,590 |
$ |
215,761 |
$ |
199,615 |
|||||
Total deposits |
$ |
305,204 |
$ |
288,540 |
$ |
271,221 |
|||||
Borrowed funds (a) |
$ |
73,399 |
$ |
60,263 |
$ |
59,860 |
|||||
Total shareholders' equity |
$ |
49,263 |
$ |
49,314 |
$ |
48,536 |
|||||
Common shareholders' equity |
$ |
45,269 |
$ |
45,321 |
$ |
44,546 |
|||||
Accumulated other comprehensive income (loss) |
$ |
2,518 |
$ |
799 |
$ |
(5) |
|||||
Book value per common share |
$ |
106.70 |
$ |
104.59 |
$ |
98.47 |
|||||
Tangible book value per common share (Non-GAAP) (e) |
$ |
84.93 |
$ |
83.30 |
$ |
78.07 |
|||||
Period end common shares outstanding (millions) |
424 |
433 |
452 |
||||||||
Loans to deposits |
87 |
% |
83 |
% |
86 |
% |
|||||
Common shareholders' equity to total assets |
10.2 |
% |
11.0 |
% |
11.3 |
% |
|||||
CLIENT ASSETS (billions) |
|||||||||||
Discretionary client assets under management |
$ |
136 |
$ |
154 |
$ |
158 |
|||||
Nondiscretionary client assets under administration |
128 |
143 |
130 |
||||||||
Total client assets under administration |
264 |
297 |
288 |
||||||||
Brokerage account client assets |
49 |
54 |
51 |
||||||||
Total client assets |
$ |
313 |
$ |
351 |
$ |
339 |
|||||
CAPITAL RATIOS |
|||||||||||
Basel III (f) (g) |
|||||||||||
Common equity Tier 1 |
9.4 |
% |
9.5 |
% |
9.8 |
% |
|||||
Common equity Tier 1 fully implemented (h) |
9.2 |
% |
N/A |
N/A |
|||||||
Tier 1 risk-based |
10.5 |
% |
10.7 |
% |
10.9 |
% |
|||||
Total capital risk-based (i) |
12.6 |
% |
12.8 |
% |
13.0 |
% |
|||||
Leverage |
9.5 |
% |
9.1 |
% |
9.6 |
% |
|||||
Supplementary leverage |
8.5 |
% |
7.6 |
% |
8.1 |
% |
|||||
Pro forma Basel III (Non-GAAP) |
|||||||||||
2019 Pro forma Basel III (j) |
N/A |
10.1 |
% |
N/A |
|||||||
ASSET QUALITY |
|||||||||||
Nonperforming loans to total loans |
.62 |
% |
.68 |
% |
.71 |
% |
|||||
Nonperforming assets to total loans, OREO and foreclosed assets |
.66 |
% |
.73 |
% |
.77 |
% |
|||||
Nonperforming assets to total assets |
.39 |
% |
.43 |
% |
.45 |
% |
|||||
Net charge-offs to average loans (for the three months ended) (annualized) |
.35 |
% |
.35 |
% |
.24 |
% |
|||||
Allowance for loans and leases to total loans (k) |
1.49 |
% |
1.14 |
% |
1.16 |
% |
|||||
Allowance for loans and leases to nonperforming loans (k) |
240 |
% |
168 |
% |
163 |
% |
|||||
Accruing loans past due 90 days or more (in millions) |
$ |
534 |
$ |
585 |
$ |
590 |
(a) |
Amounts include assets and liabilities for which we have elected the fair value option. Our 2019 Form 10-K included, and our first quarter 2020 Form |
(b) |
Reflects the impact of adopting Accounting Standards Update 2016-13, Financial Instruments - Credit Losses and our transition from an incurred loss |
(c) |
Amount as of |
(d) |
Amounts include our equity investment in BlackRock. |
(e) |
See the Tangible Book Value per Common Share table on page 19 for additional information. |
(f) |
All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented and calculated based on the |
(g) |
The |
(h) |
The |
(i) |
The 2020 and 2019 Basel III Total risk-based capital ratios include nonqualifying trust preferred capital securities of |
(j) |
The 2019 Pro forma Basel III ratio is calculated as if the 2019 Tailoring Rules, and PNC's election to opt-out of the inclusion of certain elements of |
(k) |
Ratio at |
|
Consolidated Financial Highlights (Unaudited) |
CAPITAL RATIOS
As of
Under the Basel III rules applicable to PNC during 2019, significant common stock investments in unconsolidated financial institutions (for PNC, primarily BlackRock), mortgage servicing rights and deferred tax assets were deducted from common equity Tier 1 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 during 2019 included AOCI related to securities currently, and those transferred from, available for sale, as well as pension and other postretirement plans.
PNC's regulatory risk-based capital ratios in 2020 and 2019 are both 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.
Effective for
We also provide additional information below regarding PNC's 2019 Basel III Common equity Tier 1 capital ratios.
Our Basel III capital ratios may be impacted by changes to the regulatory capital rules and additional regulatory guidance or analysis.
|
||||||||||||||||||
Basel III |
2019 Pro forma (Non-GAAP) (d) |
|||||||||||||||||
2020 (estimated) (b) |
2019 |
2019 |
|
2019 (estimated) |
||||||||||||||
Dollars in millions |
||||||||||||||||||
Common stock, related surplus and retained earnings, |
$ |
43,596 |
$ |
44,522 |
$ |
44,552 |
$ |
42,751 |
$ |
44,522 |
||||||||
Less regulatory capital adjustments: |
||||||||||||||||||
|
(9,236) |
(9,254) |
(9,260) |
(9,236) |
(9,254) |
|||||||||||||
Basel III total threshold deductions (e) |
(3,276) |
(3,074) |
||||||||||||||||
Accumulated other comprehensive income (loss) (f) |
659 |
1 |
||||||||||||||||
All other adjustments |
(221) |
(173) |
(163) |
(225) |
(168) |
|||||||||||||
Basel III Common equity Tier 1 capital |
$ |
34,139 |
$ |
32,478 |
$ |
32,056 |
$ |
33,290 |
$ |
35,100 |
||||||||
Basel III standardized approach risk-weighted assets (g) |
$ |
363,178 |
$ |
340,799 |
$ |
328,128 |
$ |
363,198 |
$ |
347,805 |
||||||||
Basel III advanced approaches risk-weighted assets (h) |
$ |
318,722 |
$ |
298,889 |
||||||||||||||
Basel III Common equity Tier 1 capital ratio |
9.4 |
% |
9.5 |
% |
9.8 |
% |
9.2 |
% |
10.1 |
% |
(a) |
All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented. |
(b) |
The |
(c) |
The |
(d) |
The 2019 Pro forma Basel III ratio is calculated as if the 2019 Tailoring Rules, and PNC's election to opt-out of the inclusion of certain elements of accumulated other |
(e) |
Based on the Tailoring Rules, effective |
(f) |
Based on the Tailoring Rules effective |
(g) |
Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets. |
(h) |
Basel III advanced approaches risk-weighted assets in 2019 were based on the Basel III advanced approaches rules, and include credit, market and operational |
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 |
2020 |
2019 |
2019 |
||||||||
Book value per common share |
$ |
106.70 |
$ |
104.59 |