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PNC Reports Full Year 2015 Net Income of $4.1 Billion and $7.39 Diluted EPS
"PNC delivered consistent, quality results and advanced our strategic priorities in 2015," said
Income Statement Highlights
- Fourth quarter results reflected revenue growth over the third quarter in both net interest income and fee income, a continued focus on disciplined expense management, and higher loans and deposits.
- Net interest income of
$2.1 billion for the fourth quarter grew$30 million , or 1 percent, compared with the third quarter driven by higher core net interest income. - Noninterest income of
$1.8 billion for the fourth quarter increased$48 million , or 3 percent, compared with the third quarter primarily due to strong fee income growth. - Noninterest expense of
$2.4 billion increased$44 million , or 2 percent, compared with the third quarter reflecting higher variable compensation costs associated with business activity. - Provision for credit losses was
$74 million for the fourth quarter compared with$81 million for the third quarter as overall credit quality remained relatively stable.
Balance Sheet Highlights
- Loans grew
$1.7 billion to $206.7 billion atDecember 31, 2015 compared withSeptember 30 , 2015.- Total commercial lending grew
$2.4 billion , or 2 percent, primarily in PNC's real estate business, including an increase in multifamily agency warehouse lending. - Total consumer lending decreased
$.7 billion reflecting declines in the non-strategic consumer loan portfolio.
- Total commercial lending grew
- Overall credit quality in the fourth quarter remained relatively stable with the third quarter.
- Nonperforming assets of
$2.4 billion atDecember 31, 2015 decreased$.1 billion , or 3 percent, compared withSeptember 30, 2015 . - Net charge-offs increased to
$120 million for the fourth quarter compared with$96 million for the third quarter. - PNC implemented its planned change in the derecognition policy for purchased impaired pooled loans effective
December 31, 2015 , resulting in a reduction of the recorded investment balance included in total loans and the associated allowance for loan losses balance each by$468 million .
- Nonperforming assets of
- Deposits grew
$4.0 billion , or 2 percent, to$249.0 billion atDecember 31, 2015 compared withSeptember 30, 2015 . - Investment securities increased
$2.5 billion , or 4 percent, in the fourth quarter to$70.5 billion atDecember 31 , 2015. - PNC's well-positioned balance sheet remained core funded with a loans to deposits ratio of
83 percent atDecember 31, 2015 . - PNC returned capital to shareholders through repurchases of 5.8 million common shares for
$.5 billion during the fourth quarter.- Repurchases for full year 2015 totaled 22.3 million common shares for
$2.1 billion .
- Repurchases for full year 2015 totaled 22.3 million common shares for
- PNC maintained a strong capital position.
- Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.7 percent at
December 31, 2015 and 10.6 percent atSeptember 30, 2015 , calculated using the regulatory capital methodology applicable to PNC during 2015. - Pro forma fully phased-in Basel III common equity Tier 1 capital ratio was an estimated 10.0 percent at
December 31, 2015 and 10.1 percent atSeptember 30, 2015 based on the standardized approach rules.
- Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.7 percent at
Earnings Summary |
|||||||||||||
In millions, except per share data |
4Q15 |
3Q15 |
4Q14 |
||||||||||
Net income |
$ |
1,022 |
$ |
1,073 |
$ |
1,057 |
|||||||
Net income attributable to diluted common shares |
$ |
965 |
$ |
991 |
$ |
988 |
|||||||
Diluted earnings per common share |
$ |
1.87 |
$ |
1.90 |
$ |
1.84 |
|||||||
Average diluted common shares outstanding |
513 |
520 |
532 |
||||||||||
Return on average assets |
1.12 |
% |
1.19 |
% |
1.23 |
% |
|||||||
Return on average common equity |
9.30 |
% |
9.61 |
% |
9.67 |
% |
|||||||
Book value per common share Period end |
$ |
81.84 |
$ |
81.42 |
$ |
77.61 |
|||||||
Tangible book value per common share (non-GAAP) Period end |
$ |
63.65 |
$ |
63.37 |
$ |
59.88 |
|||||||
Cash dividends declared per common share |
$ |
.51 |
$ |
.51 |
$ |
.48 |
|||||||
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported amounts, including reconciliations of tangible book value to book value per common share and 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. Fee income 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. See the notes and other information in the Consolidated Financial Highlights.
CONSOLIDATED REVENUE REVIEW |
|||||||||||||||||||||
Revenue |
Change |
Change |
|||||||||||||||||||
4Q15 vs |
4Q15 vs |
||||||||||||||||||||
In millions |
4Q15 |
3Q15 |
4Q14 |
3Q15 |
4Q14 |
||||||||||||||||
Net interest income |
$ |
2,092 |
$ |
2,062 |
$ |
2,097 |
1 |
% |
– |
||||||||||||
Noninterest income |
1,761 |
1,713 |
1,850 |
3 |
% |
(5) |
% |
||||||||||||||
Total revenue |
$ |
3,853 |
$ |
3,775 |
$ |
3,947 |
2 |
% |
(2) |
% |
|||||||||||
Total revenue for the fourth quarter of 2015 increased
Net interest income for the fourth quarter of 2015 increased
The net interest margin of 2.70 percent for the fourth quarter of 2015 increased over the third quarter margin of 2.67 percent driven by the impact of a reduction in low-yielding balances on deposit with the
Noninterest Income |
Change |
Change |
|||||||||||||||||||||
4Q15 vs |
4Q15 vs |
||||||||||||||||||||||
In millions |
4Q15 |
3Q15 |
4Q14 |
3Q15 |
4Q14 |
||||||||||||||||||
Asset management |
$ |
399 |
$ |
376 |
$ |
376 |
6 |
% |
6 |
% |
|||||||||||||
Consumer services |
349 |
341 |
321 |
2 |
% |
9 |
% |
||||||||||||||||
Corporate services |
394 |
384 |
397 |
3 |
% |
(1) |
% |
||||||||||||||||
Residential mortgage |
113 |
125 |
135 |
(10) |
% |
(16) |
% |
||||||||||||||||
Service charges on deposits |
170 |
172 |
180 |
(1) |
% |
(6) |
% |
||||||||||||||||
Other, including net securities gains |
336 |
315 |
441 |
7 |
% |
(24) |
% |
||||||||||||||||
$ |
1,761 |
$ |
1,713 |
$ |
1,850 |
3 |
% |
(5) |
% |
||||||||||||||
Noninterest income for the fourth quarter of 2015 increased
Noninterest income for the fourth quarter of 2015 decreased
CONSOLIDATED EXPENSE REVIEW |
||||||||||||||||||||||
Noninterest Expense |
Change |
Change |
||||||||||||||||||||
4Q15 vs |
4Q15 vs |
|||||||||||||||||||||
In millions |
4Q15 |
3Q15 |
4Q14 |
3Q15 |
4Q14 |
|||||||||||||||||
Personnel |
$ |
1,252 |
$ |
1,222 |
$ |
1,170 |
2 |
% |
7 |
% |
||||||||||||
Occupancy |
208 |
209 |
216 |
– |
(4) |
% |
||||||||||||||||
Equipment |
245 |
227 |
234 |
8 |
% |
5 |
% |
|||||||||||||||
Marketing |
56 |
64 |
67 |
(13) |
% |
(16) |
% |
|||||||||||||||
Other |
635 |
630 |
852 |
1 |
% |
(25) |
% |
|||||||||||||||
$ |
2,396 |
$ |
2,352 |
$ |
2,539 |
2 |
% |
(6) |
% |
|||||||||||||
Noninterest expense for the fourth quarter of 2015 increased
Noninterest expense for the fourth quarter of 2015 decreased
The effective tax rate was 26.1 percent for the fourth quarter of 2015, 20.0 percent for the third quarter of 2015 and 22.1 percent for the fourth quarter of 2014. Lower income tax expense for third quarter 2015 reflected tax benefits attributable to effectively settling acquired entity tax contingencies, and for fourth quarter 2014 reflected the tax favorability of the
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were
Loans |
Change |
Change |
||||||||||||||||||||
12/31/15 |
vs |
12/31/15 |
vs |
|||||||||||||||||||
In billions |
12/31/2015 |
9/30/2015 |
12/31/2014 |
9/30/15 |
12/31/14 |
|||||||||||||||||
Commercial lending |
$ |
133.5 |
$ |
131.1 |
$ |
128.4 |
2 |
% |
4 |
% |
||||||||||||
Consumer lending |
73.2 |
73.9 |
76.4 |
(1) |
% |
(4) |
% |
|||||||||||||||
Total loans |
$ |
206.7 |
$ |
205.0 |
$ |
204.8 |
1 |
% |
1 |
% |
||||||||||||
For the quarter ended: |
||||||||||||||||||||||
Average loans |
$ |
206.0 |
$ |
204.8 |
$ |
202.9 |
1 |
% |
2 |
% |
||||||||||||
Total loans grew
Investment Securities |
Change |
Change |
||||||||||||||||||||
12/31/15 |
vs |
12/31/15 |
vs |
|||||||||||||||||||
In billions |
12/31/2015 |
9/30/2015 |
12/31/2014 |
9/30/15 |
12/31/14 |
|||||||||||||||||
At quarter end |
$ |
70.5 |
$ |
68.0 |
$ |
55.8 |
4 |
% |
26 |
% |
||||||||||||
Average for the quarter ended |
$ |
67.9 |
$ |
62.1 |
$ |
54.3 |
9 |
% |
25 |
% |
||||||||||||
Investment securities balances at
Interest-earning deposits with banks, primarily with the
Other assets of
Deposits |
Change |
Change |
||||||||||||||||||||
12/31/15 |
vs |
12/31/15 |
vs |
|||||||||||||||||||
In billions |
12/31/2015 |
9/30/2015 |
12/31/2014 |
9/30/15 |
12/31/14 |
|||||||||||||||||
At quarter end |
$ |
249.0 |
$ |
245.0 |
$ |
232.2 |
2 |
% |
7 |
% |
||||||||||||
Average for the quarter ended |
$ |
246.9 |
$ |
243.4 |
$ |
229.4 |
1 |
% |
8 |
% |
||||||||||||
Total deposits at
Borrowed Funds |
Change |
Change |
||||||||||||||||||||
12/31/15 |
vs |
12/31/15 |
vs |
|||||||||||||||||||
In billions |
12/31/2015 |
9/30/2015 |
12/31/2014 |
9/30/15 |
12/31/14 |
|||||||||||||||||
At quarter end |
$ |
54.5 |
$ |
56.6 |
$ |
56.7 |
(4) |
% |
(4) |
% |
||||||||||||
Average for the quarter ended |
$ |
55.0 |
$ |
57.5 |
$ |
52.4 |
(4) |
% |
5 |
% |
||||||||||||
Borrowed funds at
Capital |
|||||||||||||
12/31/2015* |
9/30/2015 |
12/31/2014 |
|||||||||||
Common shareholders' equity In billions |
$ |
41.3 |
$ |
41.5 |
$ |
40.6 |
|||||||
Transitional Basel III common equity Tier 1 capital ratio |
10.7 |
% |
10.6 |
% |
10.9 |
% |
|||||||
Pro forma fully phased-in Basel III common equity |
|||||||||||||
Tier 1 capital ratio |
10.0 |
% |
10.1 |
% |
10.0 |
% |
|||||||
* Ratios estimated |
|||||||||||||
PNC maintained a strong capital position. Common shareholders' equity decreased compared with
PNC returned capital to shareholders through repurchases totaling 22.3 million common shares for
On
PNC continued to maintain a strong liquidity position. The estimated Liquidity Coverage Ratio at
CREDIT QUALITY REVIEW |
|||||||||||||||||||
Credit Quality |
Change |
Change |
|||||||||||||||||
At or for the quarter ended |
12/31/15 |
vs |
12/31/15 |
vs |
|||||||||||||||
In millions |
12/31/2015 |
9/30/2015 |
12/31/2014 |
9/30/15 |
12/31/14 |
||||||||||||||
Nonperforming loans |
$ |
2,126 |
$ |
2,177 |
$ |
2,510 |
(2) |
% |
(15) |
% |
|||||||||
Nonperforming assets |
$ |
2,425 |
$ |
2,490 |
$ |
2,880 |
(3) |
% |
(16) |
% |
|||||||||
Accruing loans past due 90 days or more |
$ |
881 |
$ |
890 |
$ |
1,105 |
(1) |
% |
(20) |
% |
|||||||||
Net charge-offs |
$ |
120 |
$ |
96 |
$ |
118 |
25 |
% |
2 |
% |
|||||||||
Provision for credit losses |
$ |
74 |
$ |
81 |
$ |
52 |
(9) |
% |
42 |
% |
|||||||||
Allowance for loan and lease losses |
$ |
2,727 |
$ |
3,237 |
$ |
3,331 |
(16) |
% |
(18) |
% |
|||||||||
Overall credit quality for the fourth quarter of 2015 remained relatively stable with the third quarter. Nonperforming assets at
Overall delinquencies decreased
Net charge-offs for the fourth quarter of 2015 increased
Provision for credit losses for fourth quarter 2015 decreased
The allowance for loan and lease losses at
BUSINESS SEGMENT RESULTS |
||||||||||||||
Business Segment Income (Loss) |
||||||||||||||
In millions |
4Q15 |
3Q15 |
4Q14 |
|||||||||||
Retail Banking |
$ |
213 |
$ |
251 |
$ |
172 |
||||||||
Corporate & Institutional Banking |
539 |
502 |
564 |
|||||||||||
Asset Management Group |
51 |
44 |
45 |
|||||||||||
Residential Mortgage Banking |
(17) |
(4) |
(9) |
|||||||||||
Non-Strategic Assets Portfolio |
96 |
68 |
76 |
|||||||||||
Other, including BlackRock |
140 |
212 |
209 |
|||||||||||
Net income |
$ |
1,022 |
$ |
1,073 |
$ |
1,057 |
||||||||
See accompanying notes in Consolidated Financial Highlights |
||||||||||||||
Net interest income in business segment results reflects PNC's internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors. Enhancements were made to PNC's funds transfer pricing methodology in the first quarter of 2015 primarily for costs related to new regulatory short-term liquidity standards. The enhancements incorporate an additional charge assigned to assets, including for unfunded loan commitments. Conversely, a higher transfer pricing credit has been assigned to those deposits that are accorded higher value under the regulatory liquidity rules. These adjustments apply to business segment results prospectively beginning with the first quarter of 2015, primarily impacting two business segments with a benefit to Retail Banking earnings and a decrease in Corporate & Institutional Banking earnings.
Retail Banking |
Change |
Change |
||||||||||||||||||||
4Q15 vs |
4Q15 vs |
|||||||||||||||||||||
In millions |
4Q15 |
3Q15 |
4Q14 |
3Q15 |
4Q14 |
|||||||||||||||||
Net interest income |
$ |
1,074 |
$ |
1,069 |
$ |
986 |
$ |
5 |
$ |
88 |
||||||||||||
Noninterest income |
$ |
571 |
$ |
574 |
$ |
534 |
$ |
(3) |
$ |
37 |
||||||||||||
Provision for credit losses |
$ |
108 |
$ |
57 |
$ |
54 |
$ |
51 |
$ |
54 |
||||||||||||
Noninterest expense |
$ |
1,203 |
$ |
1,190 |
$ |
1,195 |
$ |
13 |
$ |
8 |
||||||||||||
Earnings |
$ |
213 |
$ |
251 |
$ |
172 |
$ |
(38) |
$ |
41 |
||||||||||||
In billions |
||||||||||||||||||||||
Average loans |
$ |
63.6 |
$ |
63.8 |
$ |
65.4 |
$ |
(.2) |
$ |
(1.8) |
||||||||||||
Average deposits |
$ |
149.9 |
$ |
146.2 |
$ |
138.6 |
$ |
3.7 |
$ |
11.3 |
||||||||||||
Retail Banking earnings for the fourth quarter of 2015 decreased compared with the third quarter and increased compared with the fourth quarter of 2014. Net interest income increased in the comparison with fourth quarter 2014 as a result of the benefit from enhancements to PNC's funds transfer pricing methodology in first quarter 2015. Noninterest income included gains on sales of Visa Class B common shares of
- Retail Banking continued to focus on the strategic priority of transforming the customer experience through transaction migration, branch network transformation and multi-channel sales strategies.
- Approximately 55 percent of consumer customers used non-teller channels for the majority of their transactions during the fourth quarter of 2015 compared with 53 percent for the third quarter and 49 percent for the fourth quarter of 2014.
- Deposit transactions via ATM and mobile channels increased to 46 percent of total deposit transactions in the fourth quarter of 2015 compared with 45 percent for the third quarter and 38 percent for the fourth quarter of 2014.
- Integral to PNC's retail branch transformation strategy, more than 375 branches operate under the universal model designed to drive higher ATM and mobile deposits and enhance sales opportunities for branch personnel. PNC had a network of 2,616 branches and 8,956 ATMs at
December 31, 2015 .
- Average deposits grew 2 percent over the third quarter due to higher demand deposits as well as an increase in savings deposits partially offset by lower money market deposits reflecting a shift to new relationship-based savings products. In the comparison with fourth quarter 2014, average deposits grew 8 percent from overall strong growth in demand, savings and money market deposits.
- Average loans decreased 3 percent compared with the fourth quarter of 2014 as growth in automobile and credit card loans was more than offset by lower home equity and education loans.
- Net charge-offs for the fourth quarter of 2015 were
$93 million compared with$66 million in the third quarter and$104 million in the fourth quarter of 2014. The increase from third quarter was primarily in commercial and home equity loans.
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||
4Q15 vs |
4Q15 vs |
||||||||||||||||||
In millions |
4Q15 |
3Q15 |
4Q14 |
3Q15 |
4Q14 |
||||||||||||||
Net interest income |
$ |
881 |
$ |
887 |
$ |
956 |
$ |
(6) |
$ |
(75) |
|||||||||
Corporate service fees |
$ |
376 |
$ |
356 |
$ |
369 |
$ |
20 |
$ |
7 |
|||||||||
Other noninterest income |
$ |
162 |
$ |
120 |
$ |
119 |
$ |
42 |
$ |
43 |
|||||||||
Provision for credit losses |
$ |
23 |
$ |
46 |
$ |
21 |
$ |
(23) |
$ |
2 |
|||||||||
Noninterest expense |
$ |
554 |
$ |
533 |
$ |
544 |
$ |
21 |
$ |
10 |
|||||||||
Earnings |
$ |
539 |
$ |
502 |
$ |
564 |
$ |
37 |
$ |
(25) |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
117.7 |
$ |
116.2 |
$ |
112.2 |
$ |
1.5 |
$ |
5.5 |
|||||||||
Average deposits |
$ |
82.0 |
$ |
83.1 |
$ |
78.4 |
$ |
(1.1) |
$ |
3.6 |
|||||||||
Commercial loan servicing portfolio Quarter end |
$ |
447 |
$ |
441 |
$ |
377 |
$ |
6 |
$ |
70 |
|||||||||
Corporate & Institutional Banking earnings for the fourth quarter of 2015 increased compared with the third quarter and decreased compared with the fourth quarter of 2014. Net interest income declined compared with the fourth quarter of 2014 reflecting enhancements to PNC's funds transfer pricing methodology in the first quarter of 2015. Corporate service fees increased compared with the third quarter primarily due to higher merger and acquisition advisory fees and loan syndication fees. Other noninterest income increased in both comparisons reflecting higher revenue associated with multifamily loans originated for sale to agencies, higher gains on asset sales and increased securities underwriting activity. Provision for credit losses decreased compared with the third quarter due to reductions in reserve requirements partially offset by provision attributed to industry-specific weaknesses and loan growth. Noninterest expense increased in both comparisons as a result of higher variable compensation and other costs associated with business activity and, in the comparison with the third quarter, higher asset writedowns.
- Average loans increased 1 percent over the third quarter and 5 percent over the fourth quarter of 2014 primarily due to growth in PNC's real estate and business credit businesses as well as increased lending to large corporate customers partially offset by the impact of capital and liquidity management activities.
- Average deposits increased 5 percent over the fourth quarter of 2014 driven by business growth and increases in demand and certificates of deposit products.
- Net charge-offs in the fourth quarter were
$24 million compared with net charge-offs of$26 million in the third quarter and a net recovery position of$2 million in the fourth quarter of 2014.
Asset Management Group |
Change |
Change |
||||||||||||||||||||
4Q15 vs |
4Q15 vs |
|||||||||||||||||||||
In millions |
4Q15 |
3Q15 |
4Q14 |
3Q15 |
4Q14 |
|||||||||||||||||
Net interest income |
$ |
77 |
$ |
71 |
$ |
74 |
$ |
6 |
$ |
3 |
||||||||||||
Noninterest income |
$ |
211 |
$ |
207 |
$ |
207 |
$ |
4 |
$ |
4 |
||||||||||||
Provision for credit losses (benefit) |
$ |
(2) |
$ |
(2) |
$ |
(3) |
– |
$ |
1 |
|||||||||||||
Noninterest expense |
$ |
210 |
$ |
211 |
$ |
211 |
$ |
(1) |
$ |
(1) |
||||||||||||
Earnings |
$ |
51 |
$ |
44 |
$ |
45 |
$ |
7 |
$ |
6 |
||||||||||||
In billions |
||||||||||||||||||||||
Client assets under administration Quarter end |
$ |
259 |
$ |
256 |
$ |
263 |
$ |
3 |
$ |
(4) |
||||||||||||
Average loans |
$ |
7.4 |
$ |
7.4 |
$ |
7.4 |
– |
– |
||||||||||||||
Average deposits |
$ |
12.2 |
$ |
11.3 |
$ |
10.1 |
$ |
.9 |
$ |
2.1 |
||||||||||||
Asset Management Group continued to focus on driving growth through sales sourced from other PNC lines of business, maximizing front line productivity and optimizing market presence in high opportunity markets. Its business strategies primarily focus on growing client assets under management, building retirement capabilities and expanding product solutions for all customers.- Client assets under administration at
December 31, 2015 included discretionary client assets under management of$134 billion and nondiscretionary client assets under administration of$125 billion .- Discretionary client assets under management increased
$2 billion compared withSeptember 30, 2015 primarily attributable to stronger equity markets and decreased$1 billion compared withDecember 31, 2014 .
- Discretionary client assets under management increased
Residential Mortgage Banking |
Change |
Change |
||||||||||||||||||
4Q15 vs |
4Q15 vs |
|||||||||||||||||||
In millions |
4Q15 |
3Q15 |
4Q14 |
3Q15 |
4Q14 |
|||||||||||||||
Net interest income |
$ |
30 |
$ |
31 |
$ |
34 |
$ |
(1) |
$ |
(4) |
||||||||||
Noninterest income |
$ |
125 |
$ |
135 |
$ |
148 |
$ |
(10) |
$ |
(23) |
||||||||||
Provision for credit losses (benefit) |
$ |
- |
$ |
2 |
$ |
(1) |
$ |
(2) |
$ |
1 |
||||||||||
Noninterest expense |
$ |
181 |
$ |
171 |
$ |
196 |
$ |
10 |
$ |
(15) |
||||||||||
Earnings (loss) |
$ |
(17) |
$ |
(4) |
$ |
(9) |
$ |
(13) |
$ |
(8) |
||||||||||
In billions |
||||||||||||||||||||
Residential mortgage servicing portfolio Quarter end |
$ |
123 |
$ |
122 |
$ |
108 |
$ |
1 |
$ |
15 |
||||||||||
Loan origination volume |
$ |
2.3 |
$ |
2.7 |
$ |
2.4 |
$ |
(.4) |
$ |
(.1) |
||||||||||
Residential Mortgage Banking loss for the fourth quarter of 2015 was higher compared with third quarter 2015 and fourth quarter 2014 losses. Noninterest income decreased in both comparisons due to lower loan sales revenue and, in the comparison with the third quarter, lower net hedging gains on mortgage servicing rights partially offset by higher servicing revenue. Noninterest expense increased compared with the third quarter reflecting higher legal accruals and decreased from fourth quarter 2014 primarily as a result of lower residential mortgage compliance costs.
- The strategic focus of Residential Mortgage Banking is the acquisition of new customers through a retail loan officer sales force with an emphasis on home purchase transactions, competing on the basis of superior service, and leveraging cross-sell opportunities, especially in the bank footprint markets.
- Loan origination volume in the fourth quarter of 2015 decreased 17 percent compared with the third quarter and 8 percent compared with the fourth quarter of 2014 in part reflecting the impact of longer loan closing periods driven by implementation of new regulations. Approximately 45 percent of fourth quarter 2015 origination volume was for home purchase transactions compared with 55 percent in the third quarter and 42 percent in the fourth quarter of 2014.
- Loan servicing acquisitions were
$5 billion in the fourth quarter of 2015 and$10 billion in the third quarter. There were no servicing acquisitions in the fourth quarter of 2014.
Non-Strategic Assets Portfolio |
Change |
Change |
|||||||||||||||||
4Q15 vs |
4Q15 vs |
||||||||||||||||||
In millions |
4Q15 |
3Q15 |
4Q14 |
3Q15 |
4Q14 |
||||||||||||||
Net interest income |
$ |
90 |
$ |
90 |
$ |
122 |
– |
$ |
(32) |
||||||||||
Noninterest income |
$ |
19 |
$ |
16 |
$ |
18 |
$ |
3 |
$ |
1 |
|||||||||
Provision for credit losses (benefit) |
$ |
(53) |
$ |
(25) |
$ |
(20) |
$ |
(28) |
$ |
(33) |
|||||||||
Noninterest expense |
$ |
10 |
$ |
23 |
$ |
39 |
$ |
(13) |
$ |
(29) |
|||||||||
Earnings |
$ |
96 |
$ |
68 |
$ |
76 |
$ |
28 |
$ |
20 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
6.8 |
$ |
7.2 |
$ |
8.3 |
$ |
(.4) |
$ |
(1.5) |
|||||||||
The Non-Strategic Assets Portfolio consists of non-strategic assets primarily obtained through acquisitions of other companies and includes a consumer portfolio of mainly residential mortgage and brokered home equity loans and lines of credit, and a small commercial/commercial real estate loan and lease portfolio. The business activity of this segment is to manage the liquidation of the portfolios while maximizing the value and mitigating risk.
- Net interest income decreased compared with the fourth quarter of 2014 reflecting declining loan balances and lower purchased impaired loan accretion.
- Provision for credit losses for the fourth quarter of 2015 was a higher benefit in both comparisons driven by improved actual and projected cash flows on consumer impaired loans.
- Noninterest expense for the fourth quarter of 2015 decreased in both comparisons primarily due to lower legal costs, as well as lower volume-related expenses compared with fourth quarter 2014.
- Net charge-offs were
$4 million for the fourth quarter of 2015 compared with a net recovery position of$1 million for the third quarter and net charge-offs of$12 million for the fourth quarter of 2014. - Effective
December 31, 2015 , PNC implemented its planned change in the derecognition policy for purchased impaired pooled consumer and residential real estate loans, resulting in a reduction of the recorded investment balance included in total loans and the associated allowance for loan losses balance each by$468 million , most of which was recorded in the Non-Strategic Assets Portfolio. Accordingly, loans that were paid off, sold, foreclosed upon, or that had nominal collateral value/expected cash flows were removed from these loan pools.
Other, including
The "Other, including
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC Chairman, 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 |
|||||||||||
2015 |
2015 |
2014 |
2015 |
2014 |
||||||||||||
Revenue |
||||||||||||||||
Net interest income |
$ |
2,092 |
$ |
2,062 |
$ |
2,097 |
$ |
8,278 |
$ |
8,525 |
||||||
Noninterest income |
1,761 |
1,713 |
1,850 |
6,947 |
6,850 |
|||||||||||
Total revenue |
3,853 |
3,775 |
3,947 |
15,225 |
15,375 |
|||||||||||
Noninterest expense |
2,396 |
2,352 |
2,539 |
9,463 |
9,488 |
|||||||||||
Pretax, pre-provision earnings (a) |
1,457 |
1,423 |
1,408 |
5,762 |
5,887 |
|||||||||||
Provision for credit losses |
74 |
81 |
52 |
255 |
273 |
|||||||||||
Income before income taxes and noncontrolling interests |
$ |
1,383 |
$ |
1,342 |
$ |
1,356 |
$ |
5,507 |
$ |
5,614 |
||||||
Net income (b) |
$ |
1,022 |
$ |
1,073 |
$ |
1,057 |
$ |
4,143 |
$ |
4,207 |
||||||
Less: |
||||||||||||||||
Net income (loss) attributable to noncontrolling interests |
14 |
18 |
21 |
37 |
23 |
|||||||||||
Preferred stock dividends and discount accretion |
||||||||||||||||
and redemptions (c) |
43 |
64 |
48 |
225 |
237 |
|||||||||||
Net income attributable to common shareholders |
$ |
965 |
$ |
991 |
$ |
988 |
$ |
3,881 |
$ |
3,947 |
||||||
Less: |
||||||||||||||||
Dividends and undistributed earnings allocated to |
||||||||||||||||
nonvested restricted shares |
4 |
2 |
17 |
11 |
||||||||||||
Impact of BlackRock earnings per share dilution |
4 |
4 |
5 |
18 |
18 |
|||||||||||
Net income attributable to diluted common shares |
$ |
957 |
$ |
987 |
$ |
981 |
$ |
3,846 |
$ |
3,918 |
||||||
Diluted earnings per common share |
$ |
1.87 |
$ |
1.90 |
$ |
1.84 |
$ |
7.39 |
$ |
7.30 |
||||||
Cash dividends declared per common share |
$ |
.51 |
$ |
.51 |
$ |
.48 |
$ |
2.01 |
$ |
1.88 |
||||||
Effective tax rate (d) |
26.1 |
% |
20.0 |
% |
22.1 |
% |
24.8 |
% |
25.1 |
% |
||||||
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. |
|||||||||||||||
(c) |
Dividends are payable quarterly other than Series O and Series R preferred stock, which are payable semiannually in different quarters. |
|||||||||||||||
(d) |
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. |
TOTAL AND CORE NET INTEREST INCOME AND NET INTEREST MARGIN |
|||||||||||||||
Three months ended |
Year ended |
||||||||||||||
December 31 |
September 30 |
December 31 |
December 31 |
December 31 |
|||||||||||
Dollars in millions |
2015 |
2015 |
2014 |
2015 |
2014 |
||||||||||
Net Interest Income |
|||||||||||||||
Core net interest income (a) |
$ |
2,002 |
$ |
1,972 |
$ |
1,971 |
$ |
7,859 |
$ |
7,942 |
|||||
Total purchase accounting accretion |
|||||||||||||||
Scheduled accretion net of contractual interest |
64 |
71 |
94 |
313 |
456 |
||||||||||
Excess cash recoveries |
26 |
19 |
32 |
106 |
127 |
||||||||||
Total purchase accounting accretion |
90 |
90 |
126 |
419 |
583 |
||||||||||
Total net interest income |
$ |
2,092 |
$ |
2,062 |
$ |
2,097 |
$ |
8,278 |
$ |
8,525 |
|||||
Net Interest Margin |
|||||||||||||||
Core net interest margin (b) |
2.60 |
% |
2.57 |