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PNC Reports First Quarter 2021 Net Income Of $1.8 Billion, $4.10 Diluted EPS

Generated linked quarter positive operating leverage; significant provision recapture; record capital and liquidity

PITTSBURGH, April 16, 2021 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported:




For the quarter









In millions, except per share data and as noted

1Q21

4Q20

1Q20



First Quarter Highlights

















Financial Results









 

▪  5% linked quarter positive operating leverage, driven by modest revenue growth and lower expenses
 

▪  Significant provision recapture reflecting improved macroeconomic expectations
 

▪  NIM contracted 5 basis points linked quarter, reflecting the impact of higher balances held at the Federal Reserve
 

▪  Average loans declined 3% linked quarter primarily due to lower utilization and originations


▪  Average deposits grew 2% on a linked quarter basis

– Loan to deposit ratio of 63%
 

▪  Record capital and liquidity
 

▪  Improving credit performance; net charge-offs to average loans of 0.25%
 

▪  BBVA USA acquisition planning on track. Continue to expect a mid-2021 close

Revenue

$

4,220



$

4,208



$

4,336





Noninterest expense

2,574



2,708



2,543





Pretax, pre-provision earnings (non-GAAP)

1,646



1,500



1,793





Provision for (recapture of) credit losses

(551)



(254)



914





Net income from continuing operations

1,826



1,456



759



























Per Common Share









Diluted EPS from continuing operations

$

4.10



$

3.26



$

1.59





Book value

118.47



119.11



106.70





Tangible book value (non-GAAP)

96.57



97.43



84.93



























Balance Sheet & Credit Quality








Average loans (in billions)

$

238.1



$

245.8



$

243.6





Average deposits (in billions)

365.4



359.4



289.7





Net loan charge-offs

146



229



212





Allowance for credit losses to total loans

2.20

%


2.46

%


1.66

%


























Selected Ratios









Return on average common equity

14.31

%


11.16

%


7.51

%




Return on average assets

1.58



1.24



0.89





Net interest margin (non-GAAP)

2.27



2.32



2.84





Noninterest income to total revenue

44



42



42





Efficiency

61



64



59





Common Equity Tier 1 capital ratio

12.6



12.2



9.4





See non-GAAP financial measures included in the consolidated financial highlights accompanying this news release.



 

From Bill Demchak, PNC Chairman, President and Chief Executive Officer:




"PNC had a solid start to 2021. We grew revenue, managed expenses and achieved positive operating leverage. We recorded a substantial provision recapture, saw improvement in our credit metrics and capital and liquidity are at record levels. Considerable progress was made in planning for our pending BBVA USA acquisition, and we launched Low Cash Mode℠, an innovative digital offering that helps Virtual Wallet® customers avoid overdraft fees and over time is expected to drive significant growth in new and existing customer relationships through the continued execution of our national expansion strategy. Looking ahead we see significant growth opportunities as the economy recovers and rates improve." 





Pending Acquisition of BBVA USA Bancshares, Inc.

  • On November 16, 2020 PNC announced a definitive agreement to acquire BBVA USA Bancshares, Inc., including its U.S. banking subsidiary BBVA USA, from the Spanish financial group BBVA S.A. for a fixed purchase price of $11.6 billion in cash. BBVA USA operates over 600 branches in Texas, Alabama, Arizona, California, Florida, Colorado and New Mexico. The transaction is expected to close in mid-2021 and will increase PNC's total assets by an estimated $102 billion, creating the fifth largest bank by assets and a PNC presence in 29 of the 30 largest markets in the U.S.

Income Statement Highlights

First quarter 2021 compared with fourth quarter 2020

  • Net income of $1.8 billion increased $370 million, or 25%, reflecting the impact of a substantial provision recapture.
  • Total revenue of $4.2 billion increased $12 million.
  • Net interest income of $2.3 billion decreased $76 million, or 3%, resulting from a decrease in loans outstanding, two fewer days in the first quarter and lower securities yields.
    • Net interest margin of 2.27% decreased 5 basis points reflecting the impact of higher balances held with the Federal Reserve Bank.
  • Noninterest income of $1.9 billion increased $88 million, or 5%.
    • Fee income of $1.4 billion decreased $102 million, or 7%, primarily driven by lower corporate service fees resulting from elevated merger and acquisition advisory fees in the fourth quarter.
    • Other noninterest income of $483 million increased $190 million, or 65%, and included higher private equity revenue as well as elevated underwriting related revenue.
  • Noninterest expense of $2.6 billion decreased $134 million, or 5%, due to disciplined expense management, seasonality and the impact of asset impairments recognized in the fourth quarter.
  • Provision recapture was $551 million in the first quarter driven by improvements in macroeconomic factors and lower loans outstanding. The provision recapture for the fourth quarter was $254 million.
  • The effective tax rate was 16.9% for the first quarter and 17.0% for the fourth quarter.

Balance Sheet Highlights

First quarter 2021 compared with fourth quarter 2020, or March 31, 2021 compared with December 31, 2020 

  • Average loans decreased $7.7 billion, or 3%, to $238.1 billion.
    • Average commercial loans of $164.9 billion declined $5.4 billion, or 3%, primarily due to lower average balances in PNC's real estate business, including seasonal declines in multifamily agency warehouse lending of $1.9 billion, and PNC's corporate banking business reflecting both lower utilization of loan commitments and a decline in originations.
    • Average consumer loans of $73.2 billion decreased $2.3 billion, or 3%, reflecting lower home equity, auto, credit card and residential mortgage.
  • Loans at March 31, 2021 declined $4.9 billion, or 2%, to $237.0 billion. Commercial loans decreased $2.7 billion, or 2%, and consumer loans decreased $2.2 billion, or 3%.
  • Credit quality performance:
    • Overall delinquencies decreased $217 million, or 16%, to $1.1 billion at March 31, 2021.
    • Nonperforming assets decreased $158 million, or 7%, to $2.2 billion at March 31, 2021.
    • Net loan charge-offs decreased $83 million to $146 million, primarily due to lower commercial loan net charge-offs.
    • The allowance for credit losses to total loans was 2.20% at March 31, 2021 compared with 2.46% at December 31, 2020.
  • Average deposits increased $6.0 billion, or 2%, to $365.4 billion due to growth in consumer deposits driven by government stimulus payments, partially offset by seasonally lower commercial deposits.
    • Deposits at March 31, 2021 increased $9.8 billion, or 3%, to $375.1 billion.
  • Average investment securities increased $0.7 billion, or 1%, to $86.4 billion.
    • Investment securities at March 31, 2021 increased $9.5 billion, or 11%, to $98.3 billion resulting from accelerated purchase activity near the end of the first quarter as the interest rate environment improved.
  • Average balances held with the Federal Reserve Bank of $85.2 billion increased $9.1 billion due to liquidity from deposit growth and lower loan balances.
    • Federal Reserve Bank balances at March 31, 2021 increased $0.9 billion to $85.8 billion.
  • PNC maintained strong capital and liquidity positions.
    • On April 1, 2021, the PNC board of directors declared a quarterly cash dividend on common stock of $1.15 per share payable on May 5, 2021.
    • The Basel III common equity Tier 1 capital ratio was an estimated 12.6% at March 31, 2021 and 12.2% at December 31, 2020.
    • The Liquidity Coverage Ratio at March 31, 2021 for both PNC and PNC Bank, N.A. exceeded the regulatory minimum requirement.

Earnings Summary







In millions, except per share data


1Q21


4Q20


1Q20

Net income


$

1,826



$

1,456



$

915


Net income attributable to diluted common shares


$

1,750



$

1,387



$

839


Diluted earnings per common share


$

4.10



$

3.26



$

1.95


Average diluted common shares outstanding


426



426



430


Cash dividends declared per common share


$

1.15



$

1.15



$

1.15









In the second quarter of 2020 PNC divested its entire 22.4% equity investment in BlackRock, Inc. Net proceeds from the sale were $14.2 billion. For the first quarter of 2020, BlackRock's historical results are reported as discontinued operations.

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







1Q21 vs

1Q21 vs

In millions

1Q21


4Q20


1Q20

4Q20

1Q20

Net interest income

$

2,348



$

2,424



$

2,511


(3)

%

(6)

%

Noninterest income

1,872



1,784



1,825


5

%

3

%

Total revenue

$

4,220



$

4,208



$

4,336



(3)

%









Total revenue for the first quarter of 2021 increased $12 million compared with the fourth quarter of 2020 as higher noninterest income more than offset a decrease in net interest income. In comparison with the first quarter of 2020, total revenue decreased $116 million due to lower net interest income. 

Net interest income of $2.3 billion for the first quarter of 2021 decreased $76 million compared to the fourth quarter resulting from a decrease in loans outstanding, two fewer days in the first quarter and lower securities yields; partially offset by higher loan yields, a decline in deposit rates and lower borrowings balances. In comparison with the first quarter of 2020, net interest income decreased $163 million due to lower yields on earning assets partially offset by lower rates on deposits, higher average earning assets and a decline in borrowing costs and balances.

The net interest margin declined to 2.27% for the first quarter of 2021 from 2.32% in the fourth quarter and 2.84% in the first quarter of 2020. In both comparisons the decrease reflected higher balances held with the Federal Reserve Bank. Compared with the first quarter of 2020, the decrease also resulted from lower yields on securities and loans, partially offset by lower rates on deposits.

Noninterest Income






Change

Change







1Q21 vs

1Q21 vs

In millions

1Q21


4Q20


1Q20

4Q20

1Q20

Asset management

$

226



$

221



$

201


2

%

12

%

Consumer services

384



387



377


(1)

%

2

%

Corporate services

555



650



526


(15)

%

6

%

Residential mortgage

105



99



210


6

%

(50)

%

Service charges on deposits

119



134



168


(11)

%

(29)

%

Other

483



293



343


65

%

41

%


$

1,872



$

1,784



$

1,825


5

%

3

%









Noninterest income for the first quarter of 2021 increased $88 million compared with the fourth quarter. Asset management revenue increased $5 million as a result of higher average equity markets. Consumer services decreased $3 million, as higher brokerage fees were more than offset by seasonally lower activity. Corporate services decreased $95 million primarily due to elevated fourth quarter merger and acquisition advisory fees. Residential mortgage revenue increased $6 million driven by higher results from residential mortgage servicing rights valuation, net of economic hedge. Service charges on deposits decreased $15 million due to lower transaction volumes, reflecting seasonality and higher average customer account balances as a result of government stimulus payments. Other noninterest income increased $190 million and included higher private equity revenue, primarily related to the reversal of negative valuation adjustments recognized during 2020, as well as elevated underwriting related revenue. In addition, the fourth quarter included a negative Visa Class B derivative fair value adjustment of $173 million compared to a positive adjustment of $17 million in the first quarter.

Noninterest income for the first quarter of 2021 increased $47 million compared with the first quarter of 2020. Asset management revenue increased $25 million as a result of higher average equity markets. Consumer services increased $7 million reflecting higher brokerage fees. Corporate services increased $29 million primarily due to higher revenue from commercial mortgage servicing activities, loan commitment fees and treasury management product revenue. Residential mortgage revenue decreased $105 million primarily driven by an elevated first quarter 2020 benefit from residential mortgage servicing rights valuation, net of economic hedge. Service charges on deposits decreased $49 million and included lower transaction volumes. Other noninterest income increased $140 million primarily due to higher private equity revenue and capital markets-related revenue, partially offset by lower net securities gains.

CONSOLIDATED EXPENSE REVIEW













Noninterest Expense






Change

Change







1Q21 vs

1Q21 vs

In millions

1Q21


4Q20


1Q20

4Q20

1Q20

Personnel

$

1,477



$

1,521



$

1,369


(3)

%

8

%

Occupancy

215



215



207



4

%

Equipment

293



296



287


(1)

%

2

%

Marketing

45



64



58


(30)

%

(22)

%

Other

544



612



622


(11)

%

(13)

%


$

2,574



$

2,708



$

2,543


(5)

%

1

%









Noninterest expense for the first quarter of 2021 decreased $134 million compared with the fourth quarter. Personnel expense decreased $44 million due to two fewer days in the quarter and seasonally lower medical benefits expense. Marketing decreased $19 million reflecting a seasonal decline in activity. Other expense decreased $68 million due to PNC's continued focus on expense management, seasonality and the impact of asset impairments recognized in the fourth quarter.

Noninterest expense for the first quarter of 2021 increased $31 million compared with the first quarter of 2020 due to higher deferred compensation, partially offset by lower costs associated with business travel and marketing activity. 

The effective tax rate was 16.9% for the first quarter of 2021, 17.0% for the fourth quarter of 2020 and 13.7% for the first quarter of 2020.

CONSOLIDATED BALANCE SHEET REVIEW

Average total assets were $468.2 billion in the first quarter of 2021 compared with $465.0 billion in the fourth quarter of 2020 and $412.4 billion in the first quarter of 2020. Total assets were $474.4 billion at March 31, 2021, $466.7 billion at December 31, 2020 and $445.5 billion at March 31, 2020. Balance sheet growth in the first quarter of 2021 resulted from higher balances maintained with the Federal Reserve Bank and investment securities, driven by increased deposits in all comparisons. 

Loans






Change

Change







1Q21 vs

1Q21 vs

In billions

1Q21


4Q20


1Q20

4Q20

1Q20

Average








Commercial

$

164.9



$

170.3



$

164.1


(3)

%

1

%

Consumer

73.2



75.5



79.5


(3)

%

(8)

%

Average loans

$

238.1



$

245.8



$

243.6


(3)

%

(2)

%









Quarter end








Commercial

$

164.5



$

167.2



$

184.7


(2)

%

(11)

%

Consumer

72.5



74.7



79.9


(3)

%

(9)

%

Total loans

$

237.0



$

241.9



$

264.6


(2)

%

(10)

%









Average loans for the first quarter of 2021 decreased $7.7 billion compared with the fourth quarter. Average commercial loans declined $5.4 billion due to lower average balances in PNC's real estate business, including seasonal declines in multifamily agency warehouse lending of $1.9 billion. The decline in average commercial loans was also impacted by lower utilization of loan commitments and lower originations in PNC's corporate banking business. Average consumer loans decreased $2.3 billion reflecting lower home equity, auto, credit card and residential mortgage loans. 

Total loans at March 31, 2021 decreased $4.9 billion compared with December 31, 2020 reflecting a decline in commercial loans of $2.7 billion and lower consumer loans of $2.2 billion. At March 31, 2021 PNC had $14.0 billion of PPP loans outstanding, $10.1 billion from the first round and $3.9 billion from the second round. PPP loans outstanding at December 31, 2020 were $12.0 billion.

Average and period-end loans for the first quarter of 2021 decreased $5.5 billion and $27.6 billion compared with the first quarter of 2020, respectively. The decrease in average loans was due to lower consumer lending, partially offset by higher commercial loans. The decrease in period-end loans was driven by lower commercial and consumer lending, primarily reflecting higher utilization of loan commitments by commercial customers at the end of the first quarter of 2020.

Investment Securities






Change

Change







1Q21 vs

1Q21 vs

In billions

1Q21


4Q20


1Q20

4Q20

1Q20

Average

$

86.4



$

85.7



$

84.4


1

%

2

%

Quarter end

$

98.3



$

88.8



$

90.5


11

%

9

%









Average investment securities for the first quarter of 2021 increased $0.7 billion and period-end balances increased $9.5 billion compared with the fourth quarter, resulting from accelerated purchase activity near the end of the first quarter as the interest rate environment improved. Purchase activity was primarily focused on U.S. Treasury and government agency securities as well as agency residential mortgage-backed securities.

First quarter 2021 average and period-end investment securities increased $2.0 billion and $7.8 billion, respectively, compared with the first quarter of 2020. Net unrealized gains on available for sale securities were $2.0 billion at March 31, 2021, $3.2 billion at December 31, 2020 and $2.9 billion at March 31, 2020.

Average balances held with the Federal Reserve Bank of $85.2 billion in the first quarter of 2021 increased from $76.1 billion in the fourth quarter reflecting deposit growth and lower loan  balances. Federal Reserve Bank balances at March 31, 2021 of $85.8 billion increased from $84.9 billion at December 31, 2020. Average balances held with the Federal Reserve Bank increased $67.9 billion from $17.3 billion in the first quarter of 2020 primarily due to higher deposits. Federal Reserve Bank balances were $19.6 billion at March 31, 2020.

Deposits






Change

Change







1Q21 vs

1Q21 vs

In billions

1Q21


4Q20


1Q20

4Q20

1Q20

Average








Noninterest-bearing

$

113.3



$

109.9



$

74.4


3

%

52

%

Interest-bearing

252.1



249.5



215.3


1

%

17

%

Average deposits

$

365.4



$

359.4



$

289.7


2

%

26

%









Quarter end








Noninterest-bearing 

$

120.7



$

112.6



$

81.6


7

%

48

%

Interest-bearing

254.4



252.7



223.6


1

%

14

%

Total deposits

$

375.1



$

365.3



$

305.2


3

%

23

%









Average deposits for the first quarter of 2021 increased $6.0 billion compared with the fourth quarter and deposits at March 31, 2021 increased $9.8 billion compared with December 31, 2020. In both comparisons the increase was due to growth in consumer deposits primarily driven by government stimulus payments. Compared with the fourth quarter of 2020 the increase in average deposits was partially offset by seasonal declines in commercial deposits. First quarter 2021 average and period-end deposits increased $75.7 billion and $69.9 billion, respectively, compared with first quarter 2020 as a result of overall growth in commercial and consumer liquidity.

Borrowed Funds






Change

Change







1Q21 vs

1Q21 vs

In billions

1Q21


4Q20


1Q20

4Q20

1Q20

Average

$

35.2



$

38.2



$

57.2


(8)

%

(38)

%

Quarter end

$

33.0



$

37.2



$

73.4


(11)

%

(55)

%









Average and period-end borrowed funds for the first quarter of 2021 decreased $3.0 billion  and $4.2 billion, respectively, compared with the fourth quarter due to lower Federal Home Loan Bank borrowings as well as lower bank notes and senior debt. Average borrowed funds for the first quarter of 2021 declined $22.0 billion compared with the first quarter of 2020 and period-end borrowed funds decreased $40.4 billion compared with March 31, 2020.

Capital








3/31/2021

*


12/31/2020


3/31/2020

Common shareholders' equity    In billions

$

50.3




$

50.5



$

45.3


Basel III common equity Tier 1 capital ratio

12.6

%



12.2

%


9.4

%

Basel III common equity Tier 1 fully implemented
capital ratio

12.3

%



11.8

%


9.2

%

* Ratios estimated














PNC maintained a strong capital position. Common shareholders' equity at March 31, 2021 decreased $0.2 billion over December 31, 2020 as higher first quarter net income was more than offset by a decrease in accumulated other comprehensive income, reflecting the impact of higher rates on net unrealized securities gains, and dividends paid during the first quarter. 

In the first quarter of 2021, PNC returned capital to shareholders through dividends on common shares of $0.5 billion. During the first quarter, PNC refrained from repurchasing shares and will continue to do so for the remainder of the period leading up to the close of our pending BBVA USA transaction. Following the close, PNC expects to resume repurchases in the second half of 2021.

On April 1, 2021, the PNC board of directors declared a quarterly cash dividend on common stock payable on May 5, 2021 of $1.15 per share.

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 January 1, 2020. PNC elected a five-year transition provision effective March 31, 2020 to delay for two years the full impact of the Current Expected Credit Losses (CECL) standard on regulatory capital, followed by a three-year transition period. The fully implemented ratios reflect the full impact of CECL and exclude the benefits of this transition provision.

CREDIT QUALITY REVIEW
















Credit Quality






Change

Change


At or for the quarter ended

1Q21 vs

1Q21 vs

In millions

3/31/2021


12/31/2020


3/31/2020

4Q20

1Q20

Provision for (recapture of) credit
losses

$

(551)



$

(254)



$

914


$

(297)


$

(1,465)


Net loan charge-offs

$

146



$

229



$

212


(36)

%

(31)

%

Nonperforming loans

$

2,138



$

2,286



$

1,644


(6)

%

30

%

Nonperforming assets

$

2,179



$

2,337



$

1,755


(7)

%

24

%

Accruing loans past due 90 days or
more

$

479



$

509



$

534


(6)

%

(10)

%

Allowance for loan and lease losses

$

4,714



$

5,361



$

3,944


(12)

%

20

%

Allowance for unfunded lending
related commitments

$

507



$

584



$

450


(13)

%

13

%

Allowance for credit losses to total
loans

2.20

%


2.46

%


1.66

%



Nonperforming assets to total assets

0.46

%


0.50

%


0.39

%



Net charge-offs to average loans
(annualized)

0.25

%


0.37

%


0.35

%











Provision recapture was $551 million in the first quarter of 2021. The commercial loan provision recapture was $286 million and the consumer loan provision recapture was $293 million. For both commercial and consumer loans, the provision recapture primarily reflected improvements in macroeconomic factors and lower loans outstanding. Provision for credit losses for securities and other assets was $28 million for the first quarter of 2021.

Net loan charge-offs for the first quarter of 2021 decreased $83 million compared with the fourth quarter due to lower commercial and consumer loan net charge-offs. Commercial loan net charge-offs decreased $58 million from the fourth quarter driven by lower gross charge-offs of commercial and industrial loans. Consumer loan net charge-offs decreased $25 million from the fourth quarter and included lower net charge-offs related to auto and credit card loans. Compared to the first quarter of 2020, net loan charge-offs decreased $66 million due to lower commercial loan net charge-offs of $8 million and lower consumer loan net charges-offs of $58 million.

The allowance for credit losses was $5.2 billion at March 31, 2021, $5.9 billion at December 31, 2020 and $4.4 billion at March 31, 2020. The allowance for credit losses as a percentage of total loans was 2.20% at March 31, 2021, 2.46% at December 31, 2020 and 1.66% at March 31, 2020.

Nonperforming assets at March 31, 2021 decreased $158 million compared with December 31, 2020 primarily due to lower commercial nonperforming loans, partially offset by higher consumer nonperforming loans. Commercial nonperforming loans decreased $174 million from the fourth quarter driven by portfolio activity and improved credit performance. Nonperforming consumer loans increased $26 million from the fourth quarter reflecting higher nonperforming residential real estate and home equity loans.

Nonperforming assets increased $424 million compared with March 31, 2020. Commercial nonperforming loans increased $183 million compared with the first quarter of 2020, primarily due to the economic impacts of the pandemic on the commercial real estate portfolio. Consumer nonperforming loans increased $311 million from March 31, 2020 driven by residential real estate borrowers exiting forbearance and deferring payments to the end of the loan term. Other real estate owned and foreclosed assets decreased $70 million compared with the first quarter of 2020.

Overall delinquencies at March 31, 2021 of $1.1 billion decreased $217 million compared with December 31, 2020. Consumer delinquencies decreased $203 million primarily reflecting lower delinquencies in auto and residential real estate loans. Commercial loan delinquencies decreased $14 million. Loans past due 30 to 59 days decreased $135 million, loans past due 60 to 89 days decreased $52 million and loans past due 90 days or more decreased $30 million. Under the CARES Act credit reporting rules and guidance from regulatory agencies, certain loans modified due to pandemic-related hardships were considered current and not reported as past due at March 31, 2021 and December 31, 2020.

BUSINESS SEGMENT RESULTS












Business Segment Income






In millions

1Q21


4Q20


1Q20

Retail Banking

$

607



$

336



$

201


Corporate & Institutional Banking

1,058



992



370


Asset Management Group

99



82



54


Other

52



32



127


Net income from continuing operations excluding noncontrolling
interest

$

1,816



$

1,442



$

752


See accompanying notes in Consolidated Financial Highlights












 

Retail Banking







Change


Change








1Q21 vs


1Q21 vs

In millions

1Q21


4Q20


1Q20


4Q20


1Q20

Net interest income

$

1,362



$

1,380



$

1,456



$

(18)



$

(94)


Noninterest income

$

654



$

473



$

788



$

181



$

(134)


Provision for (recapture of) credit losses

$

(257)



$

(81)



$

445



$

(176)



$

(702)


Noninterest expense

$

1,476



$

1,482



$

1,528



$

(6)



$

(52)


Earnings

$

607



$

336



$

201



$

271



$

406












In billions










Average loans

$

77.6



$

79.7



$

81.4



$

(2.1)



$

(3.8)


Average deposits

$

208.2



$

200.8



$

173.0



$

7.4



$

35.2












Retail Banking earnings for the first quarter of 2021 increased compared with the fourth and first quarters of 2020. Noninterest income increased compared to the fourth quarter driven by the favorable impact of derivative fair value adjustments related to Visa Class B common shares, partially offset by lower service charges on deposits. In comparison to the first quarter of 2020, noninterest income decreased driven by residential mortgage, primarily due to lower mortgage servicing rights valuation, net of economic hedge, as well as lower service charges on deposits.

Provision recapture for the first quarter of 2021 reflected improvements in macroeconomic factors and lower loans outstanding. Noninterest expense was effectively flat compared to the fourth quarter of 2020 and decreased compared to the first quarter of 2020 primarily as a result of lower customer related transaction costs, personnel, and marketing expenses, partially offset by increased technology investments.

  • Average loans decreased 3% compared with the fourth quarter of 2020 and 5% compared with the first quarter of 2020. The decreases were driven by lower auto, residential mortgage, home equity and credit card loans where paydowns have outpaced consumer demand, partially offset by growth in commercial as a result of PPP loans.
  • Average deposits increased 4% compared with the fourth quarter and 20% compared with the first quarter 2020 due to increases in demand deposits and savings reflecting government stimulus payments and lower consumer spending, partially offset by lower certificates of deposit.
  • Net loan charge-offs were $108 million for the first quarter of 2021 compared with $136 million in the fourth quarter of 2020 and $166 million for the first quarter of 2020.
  • Residential mortgage loan origination volume was $4.3 billion in the first quarter of 2021 compared with $3.7 billion for the fourth quarter of 2020 and $3.2 billion for the first quarter of 2020. Approximately 34% of first quarter 2021 volume was for home purchase transactions compared with 45% for the fourth quarter of 2020 and 36% for the first quarter of 2020.
  • The third party residential mortgage servicing portfolio was $117 billion at March 31, 2021 compared with $121 billion at December 31, 2020 and $118 billion at March 31, 2020. Residential mortgage loan servicing acquisitions were $7 billion for the first quarter of 2021 compared with $12 billion for the fourth quarter of 2020 and $2 billion for the first quarter of 2020.
  • Approximately 79% of consumer customers used non-teller channels for the majority of their transactions during the first quarter of 2021 compared with 77% in the fourth quarter of 2020 and 71% in the first quarter of 2020.
  • Deposit transactions via ATM and mobile channels were 66% of total deposit transactions in both the first quarter of 2021 and the fourth quarter of 2020, compared with 59% in the first quarter of 2020.

Corporate & Institutional Banking






Change


Change








1Q21 vs


1Q21 vs

In millions

1Q21


4Q20


1Q20


4Q20


1Q20

Net interest income

$

1,001



$

994



$

966



$

7



$

35


Noninterest income

$

807



$

919



$

694



$

(112)



$

113


Provision for (recapture of) credit losses

$

(282)



$

(166)



$

458



$

(116)



$

(740)


Noninterest expense

$

711



$

801



$

722



$

(90)



$

(11)


Earnings

$

1,058



$

992



$

370



$

66



$

688












In billions










Average loans

$

148.5



$

154.2



$

151.0



$

(5.7)



$

(2.5)


Average deposits

$

136.3



$

138.8



$

98.1



$

(2.5)



$

38.2












Corporate & Institutional Banking earnings for the first quarter of 2021 increased compared to both the fourth quarter of 2020 and first quarter of 2020.  Noninterest income decreased compared to the fourth quarter of 2020 primarily due to lower capital markets-related revenue, led by a decrease in merger and acquisition advisory fees.  Noninterest income increased compared to first quarter of 2020 driven by broad-based growth in capital markets-related revenue, treasury management product revenue and revenue from commercial mortgage banking activities. Provision recapture in the first quarter of 2021 reflected improvements in macroeconomic factors and lower loans outstanding. Noninterest expense decreased compared to the fourth quarter of 2020 reflecting lower variable costs as a result of elevated business activity in the fourth quarter. Noninterest expense decreased compared with the first quarter of 2020 and included lower costs associated with business travel.

  • Average loans decreased 4% compared to the fourth quarter of 2020 due to lower average balances in PNC's real estate business, including seasonal declines in multifamily agency warehouse lending of $1.9 billion. The decline was also impacted by lower utilization of loan commitments and lower originations in PNC's corporate banking business. Average loans decreased 2% over the first quarter of 2020 due to a decline in PNC's corporate banking and business credit businesses, reflecting lower average utilization of loan commitments, partially offset by PPP loan originations and an increase in multifamily agency warehouse lending.
  • Average deposits decreased 2% from the fourth quarter of 2020 and increased 39% from the first quarter of 2020 reflecting changes in liquidity maintained by customers due to the economic impact of the pandemic.
  • Net charge-offs were $44 million in the first quarter of 2021 compared with $99 million in the fourth quarter of 2020 and $50 million in the first quarter of 2020.

Asset Management Group







Change


Change








1Q21 vs


1Q21 vs

In millions

1Q21


4Q20


1Q20


4Q20


1Q20

Net interest income

$

93



$

91



$

88



$

2



$

5


Noninterest income

$

229



$

225



$

204



$

4



$

25


Provision for (recapture of) credit losses

$

(9)



$

(2)



$

3



$

(7)



$

(12)


Noninterest expense

$

202



$

211



$

219



$

(9)



$

(17)


Earnings

$

99



$

82



$

54



$

17



$

45












In billions










Client assets under administration at 
quarter end

$

334



$

324



$

264



$

10



$

70


Average loans

$

8.4



$

8.2



$

7.3



$

0.2



$

1.1


Average deposits

$

20.6



$

19.6



$

18.1



$

1.0



$

2.5












Asset Management Group earnings for the first quarter of 2021 increased in both comparisons. Noninterest income increased in both comparisons due to the impact of higher average equity markets. Provision recapture in the first quarter of 2021 reflected improvements in macroeconomic factors. Noninterest expense declined in both comparisons due to intangible asset amortization run-off. Compared with the first quarter of 2020, the decrease was also driven by lower costs associated with business travel.

Client assets under administration at March 31, 2021 included discretionary client assets under management of $173 billion and nondiscretionary client assets under administration of $161 billion. Discretionary client assets under management increased $3 billion compared with December 31, 2020 and $37 billion compared with March 31, 2020 primarily driven by higher spot equity markets.

Other

The "Other" category, for the purposes of this release, includes 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 William S. Demchak and Executive Vice President and Chief Financial Officer Robert Q. Reilly will hold a conference call for investors today at 9:00 a.m. Eastern Time regarding the topics addressed in this news release and the related financial supplement. Dial-in numbers for the conference call are (877) 272-3568 and (303) 223-2682 (international) and Internet access to the live audio listen-only webcast of the call is available at www.pnc.com/investorevents. PNC's first quarter 2021 earnings release, related financial supplement, and presentation slides to accompany the conference call remarks will be available at www.pnc.com/investorevents prior to the beginning of the call. A telephone replay of the call will be available for one week at (800) 633-8284 and (402) 977-9140 (international), conference ID 21990438 and a replay of the audio webcast will be available on PNC's website for 30 days.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

 [TABULAR MATERIAL FOLLOWS]

The PNC Financial Services Group, Inc.

 

Consolidated Financial Highlights
(Unaudited)








FINANCIAL RESULTS


Three months ended

Dollars in millions, except per share data


March 31


December 31


March 31



2021


2020


2020

Revenue







Net interest income


$

2,348



$

2,424



$

2,511


Noninterest income


1,872



1,784



1,825


Total revenue


4,220



4,208



4,336


Provision for (recapture of) credit losses


(551)



(254)



914


Noninterest expense


2,574



2,708



2,543


Income from continuing operations before income taxes and noncontrolling interests


$

2,197



$

1,754



$

879


Income taxes from continuing operations


371



298



120


    Net income from continuing operations


$

1,826



$

1,456



$

759


Income from discontinued operations before taxes






$

181


Income taxes from discontinued operations






25


    Net income from discontinued operations







$

156


Net income


$

1,826



$

1,456



$

915


Less:







Net income attributable to noncontrolling interests


10



14



7


Preferred stock dividends (a)


57



48



63


Preferred stock discount accretion and redemptions


1



1



1


Net income attributable to common shareholders


$

1,758



$

1,393



$

844


Per Common Share







Basic earnings from continuing operations


$

4.11



$

3.26



$

1.59


Basic earnings from discontinued operations






0.37


Total basic earnings


$

4.11



$

3.26



$

1.96


Diluted earnings from continuing operations


$

4.10



$

3.26



$

1.59


Diluted earnings from discontinued operations






0.36


Total diluted earnings


$

4.10



$

3.26



$

1.95


Cash dividends declared per common share


$

1.15



$

1.15



$

1.15


Effective tax rate from continuing operations (b)


16.9

%


17.0

%


13.7

%











(a)

Dividends are payable quarterly other than Series O, Series R and Series S preferred stock, which are payable semiannually, with the Series O payable in different quarters than the Series R and Series S preferred stock.

(b)

The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax.

 

The PNC Financial Services Group, Inc.

Consolidated Financial Highlights
(Unaudited)



Three months ended



March 31


December 31


March 31



2021


2020


2020

PERFORMANCE RATIOS







Net interest margin (a)


2.27

%


2.32

%


2.84

%

Noninterest income to total revenue


44

%


42

%


42

%

Efficiency (b)


61

%


64

%


59

%

Return on:







Average common shareholders' equity


14.31

%


11.16

%


7.51

%

Average assets


1.58

%


1.24

%


0.89

%

BUSINESS SEGMENT NET INCOME (c)







In millions







Retail Banking


$

607



$

336



$

201


Corporate & Institutional Banking


1,058



992



370


Asset Management Group


99



82



54


Other (d)


52



32



127


Net income from continuing operations excluding noncontrolling interest


$

1,816



$

1,442



$

752















(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 net interest income on a taxable-equivalent basis in calculating average 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 March 31, 2021, December 31, 2020 and March 31, 2020 were $15 million, $17 million and $22 million, respectively.

(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 residual activities that do not meet the criteria for disclosure as a separate reportable business. We provide additional information on these activities in our Form 10-K and Form 10-Q filings with the SEC.

 

The PNC Financial Services Group, Inc.

Consolidated Financial Highlights 
(Unaudited)


March 31


December 31


March 31


2021


2020


2020

BALANCE SHEET DATA






Dollars in millions, except per share data






Assets

$

474,414



$

466,679



$

445,493


Loans (a)

$

237,013



$

241,928



$

264,643


Allowance for loan and lease losses

$

4,714



$

5,361



$

3,944


Interest-earning deposits with banks

$

86,161



$

85,173



$

19,986


Investment securities

$

98,255



$

88,799



$

90,546


Loans held for sale (a)

$

1,967



$

1,597



$

1,693


Equity investments

$

6,386



$

6,052



$

4,694


Asset held for sale (b)





$

8,511


Mortgage servicing rights

$

1,680



$

1,242



$

1,082


Goodwill

$

9,317



$

9,233



$

9,233


Other assets (a)

$

30,894



$

30,999



$

41,556


Noninterest-bearing deposits

$

120,641



$

112,637



$

81,614


Interest-bearing deposits

$

254,426



$

252,708



$

223,590


Total deposits

$

375,067



$

365,345



$

305,204


Borrowed funds (a)

$

33,030



$

37,195



$

73,399


Allowance for unfunded lending related commitments

$

507



$

584



$

450


Total shareholders' equity

$

53,849



$

54,010



$

49,263


Common shareholders' equity

$

50,331



$

50,493



$

45,269


Accumulated other comprehensive income (loss)

$

1,290



$

2,770



$

2,518


Book value per common share

$

118.47



$

119.11



$

106.70


Tangible book value per common share (Non-GAAP) (c)

$

96.57



$

97.43



$

84.93


Period end common shares outstanding (millions)

425



424



424


Loans to deposits

63

%


66

%


87

%

Common shareholders' equity to total assets

10.6

%


10.8

%


10.2

%

CLIENT ASSETS (billions)






Discretionary client assets under management

$

173



$

170



$

136


Nondiscretionary client assets under administration

161



154



128


Total client assets under administration

334



324



264


Brokerage account client assets

61



59



49


Total client assets

$

395



$

383



$

313


CAPITAL RATIOS






Basel III (d) (e)






Common equity Tier 1

12.6

%


12.2

%


9.4

%

Common equity Tier 1 fully implemented (f)

12.3

%


11.8

%


9.2

%

Tier 1 risk-based

13.7

%


13.2

%


10.5

%

Total capital risk-based (g)

16.0

%


15.6

%


12.6

%

Leverage

9.7

%


9.5

%


9.5

%

   Supplementary leverage

10.1

%


9.9

%


7.9

%

ASSET QUALITY






Nonperforming loans to total loans

0.90

%


0.94

%


0.62

%

Nonperforming assets to total loans, OREO and foreclosed assets

0.92

%


0.97

%


0.66

%

Nonperforming assets to total assets

0.46

%


0.50

%


0.39

%

Net charge-offs to average loans (for the three months ended) (annualized)

0.25

%


0.37

%


0.35

%

Allowance for loan and lease losses to total loans

1.99

%


2.22

%


1.49

%

Allowance for credit losses to total loans (h)

2.20

%


2.46

%


1.66