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PNC Reports Full Year 2018 Net Income of $5.3 Billion, $10.71 Diluted EPS
For the year |
For the quarter |
||||||||||
2018 |
2017 |
4Q18 |
3Q18 |
4Q17 |
|||||||
Net income $ millions |
$5,346 |
$5,388 |
$1,351 |
$1,400 |
$2,091 |
||||||
Diluted earnings per common share |
$10.71 |
$10.36 |
$2.75 |
$2.82 |
$4.18 |
"2018 was a successful year for PNC. Earnings per share increased, and our returns on average assets and common equity were strong. Record revenue was driven by higher net interest income and noninterest income, and we generated positive operating leverage for the year. We grew loans and deposits, and expanded to new markets with our middle market corporate banking franchise and the successful launch of our national retail digital strategy. Supported by our strong capital and liquidity positions, we are entering 2019 well positioned to create long-term value for our shareholders." Bill Demchak, PNC Chairman, President and Chief Executive Officer |
Income Statement Highlights
- Fourth quarter and full year 2017 net income included a net benefit of
$.9 billion from federal tax legislation and significant items.
Fourth quarter 2018 compared with third quarter 2018
- Net income of
$1.4 billion for the fourth quarter decreased$49 million , or 4 percent, compared with the third quarter. - Total revenue for the fourth quarter of
$4.3 billion declined$17 million . - Net interest income of
$2.5 billion increased$15 million , or 1 percent, due to higher loan and securities yields and balances partially offset by increased funding costs. - Net interest margin decreased 3 basis points to 2.96 percent due to automation of operational processes that refined the calculation of certain average other interest-earning assets and impacted the related average yield.
- Noninterest income of
$1.9 billion decreased$32 million , or 2 percent. - Fee income declined
$56 million , or 4 percent, to$1.5 billion due to lower asset management revenue driven by a$47 million decrease in earnings from PNC's equity investment inBlackRock , including a$10 million flow-through impact ofBlackRock's recently announced restructuring charge. Additionally, lower residential mortgage revenue was partially offset by seasonally higher consumer activity. - Other noninterest income increased
$24 million , or 8 percent, to$325 million and included positive Visa Class B derivative fair value adjustments of$42 million in the fourth quarter compared with negative adjustments of$32 million in the third quarter. - Noninterest expense decreased
$31 million , or 1 percent, to$2.6 billion reflecting the fourth quarter elimination of a$36 million quarterlyFDIC deposit insurance surcharge assessment. - Provision for credit losses was
$148 million , an increase of$60 million resulting from a higher commercial loan provision reflecting portfolio growth and a benefit from lower specific reserves in the third quarter. - The effective tax rate was 16.3 percent for the fourth quarter compared with 15.7 percent for the third quarter, and 16.8 percent for full year 2018.
Balance Sheet Highlights
- Average loans increased
$2.6 billion , or 1 percent, to$225.9 billion in the fourth quarter compared with the third quarter. - Average commercial lending balances grew
$2.3 billion reflecting seasonal growth in PNC's multifamily agency warehouse lending within the real estate business and loan growth across the corporate banking, business credit and equipment finance businesses. - Average consumer lending balances increased
$.3 billion due to growth in residential mortgage, credit card, auto and unsecured installment loans partially offset by lower home equity and education loans. - Overall credit quality remained strong.
- Nonperforming assets of
$1.8 billion atDecember 31, 2018 decreased$17 million , or 1 percent, compared withSeptember 30, 2018 . - Net charge-offs were
$107 million for the fourth quarter compared with$91 million for the third quarter. - Average deposits increased
$4.0 billion , or 2 percent, to$266.5 billion in the fourth quarter compared with the third quarter reflecting seasonal growth in commercial deposits. - Average investment securities increased
$1.4 billion , or 2 percent, to$82.1 billion in the fourth quarter compared with the third quarter. - Average balances held with the Federal Reserve decreased
$2.4 billion to $16.4 billion compared with the third quarter, andDecember 31, 2018 balances decreased$9.1 billion to $10.5 billion compared withSeptember 30, 2018 reflecting short-term investments in resale agreements over year end. - PNC returned
$1.2 billion of capital to shareholders in the fourth quarter through repurchases of 6.1 million common shares for$.8 billion and dividends on common shares of$.4 billion . - For the full year 2018, PNC returned
$4.4 billion of capital to shareholders through repurchases of 19.9 million common shares for$2.8 billion and dividends on common shares of$1.6 billion . - In
November 2018 , PNC announced an increase to authorized repurchases of up to an additional$900 million in common shares, an addition to previously announced share repurchase programs of up to$2.0 billion through the end of the second quarter of 2019. - PNC maintained strong capital and liquidity positions.
- The Basel III common equity Tier 1 capital ratio was an estimated 9.6 percent at
December 31, 2018 and 9.3 percent atSeptember 30, 2018 . - The Liquidity Coverage Ratio at
December 31, 2018 for bothPNC and PNC Bank, N.A. continued to exceed the regulatory minimum requirement of 100 percent.
Earnings Summary |
||||||||||||
In millions, except per share data |
4Q18 |
3Q18 |
4Q17 |
|||||||||
Net income |
$ |
1,351 |
$ |
1,400 |
$ |
2,091 |
||||||
Net income attributable to diluted common shares |
$ |
1,274 |
$ |
1,317 |
$ |
2,007 |
||||||
Diluted earnings per common share |
$ |
2.75 |
$ |
2.82 |
$ |
4.18 |
||||||
Average diluted common shares outstanding |
463 |
467 |
480 |
|||||||||
Return on average assets |
1.40 |
% |
1.47 |
% |
2.20 |
% |
||||||
Return on average common equity |
11.83 |
% |
12.32 |
% |
18.90 |
% |
||||||
Book value per common share |
Quarter end |
$ |
95.72 |
$ |
93.22 |
$ |
91.94 |
|||||
Tangible book value per common share (non-GAAP) |
Quarter end |
$ |
75.42 |
$ |
73.11 |
$ |
72.28 |
|||||
Cash dividends declared per common share |
$ |
.95 |
$ |
.95 |
$ |
.75 |
||||||
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported amounts. Fee income, a non-GAAP financial measure, refers to noninterest income in the following categories: asset management, consumer services, corporate services, residential mortgage and service charges on deposits. Information in this news release, including the financial tables, is unaudited.
CONSOLIDATED REVENUE REVIEW |
|||||||||||||||
Revenue |
Change |
Change |
|||||||||||||
4Q18 vs |
4Q18 vs |
||||||||||||||
In millions |
4Q18 |
3Q18 |
4Q17 |
3Q18 |
4Q17 |
||||||||||
Net interest income |
$ |
2,481 |
$ |
2,466 |
$ |
2,345 |
1 |
% |
6 |
% |
|||||
Noninterest income |
1,859 |
1,891 |
1,915 |
(2) |
% |
(3) |
% |
||||||||
Total revenue |
$ |
4,340 |
$ |
4,357 |
$ |
4,260 |
— |
2 |
% |
||||||
Total revenue for the fourth quarter of 2018 decreased
Net interest income for the fourth quarter of 2018 increased
Noninterest Income |
Change |
Change |
|||||||||||||
4Q18 vs |
4Q18 vs |
||||||||||||||
In millions |
4Q18 |
3Q18 |
4Q17 |
3Q18 |
4Q17 |
||||||||||
Asset management |
$ |
428 |
$ |
486 |
$ |
720 |
(12) |
% |
(41) |
% |
|||||
Consumer services |
387 |
377 |
366 |
3 |
% |
6 |
% |
||||||||
Corporate services |
468 |
465 |
458 |
1 |
% |
2 |
% |
||||||||
Residential mortgage |
59 |
76 |
29 |
(22) |
% |
103 |
% |
||||||||
Service charges on deposits |
192 |
186 |
183 |
3 |
% |
5 |
% |
||||||||
Other |
325 |
301 |
159 |
8 |
% |
104 |
% |
||||||||
$ |
1,859 |
$ |
1,891 |
$ |
1,915 |
(2) |
% |
(3) |
% |
||||||
Noninterest income for the fourth quarter of 2018 declined
Other noninterest income for the fourth quarter of 2018 increased
Noninterest income for the fourth quarter of 2018 decreased
CONSOLIDATED EXPENSE REVIEW |
|||||||||||||||
Noninterest Expense |
Change |
Change |
|||||||||||||
4Q18 vs |
4Q18 vs |
||||||||||||||
In millions |
4Q18 |
3Q18 |
4Q17 |
3Q18 |
4Q17 |
||||||||||
Personnel |
$ |
1,348 |
$ |
1,413 |
$ |
1,449 |
(5) |
% |
(7) |
% |
|||||
Occupancy |
202 |
195 |
240 |
4 |
% |
(16) |
% |
||||||||
Equipment |
285 |
264 |
274 |
8 |
% |
4 |
% |
||||||||
Marketing |
84 |
71 |
60 |
18 |
% |
40 |
% |
||||||||
Other |
658 |
665 |
1,038 |
(1) |
% |
(37) |
% |
||||||||
$ |
2,577 |
$ |
2,608 |
$ |
3,061 |
(1) |
% |
(16) |
% |
||||||
Noninterest expense for the fourth quarter of 2018 decreased
Noninterest expense for the fourth quarter of 2018 decreased
The effective tax rate was 16.3 percent for the fourth quarter of 2018 compared with 15.7 percent for the third quarter, and 16.8 percent for full year 2018. The federal statutory tax rate was lowered to 21.0 percent effective
CONSOLIDATED BALANCE SHEET REVIEW
Average total assets were
Loans |
Change |
Change |
|||||||||||||
4Q18 vs |
4Q18 vs |
||||||||||||||
In billions |
4Q18 |
3Q18 |
4Q17 |
3Q18 |
4Q17 |
||||||||||
Average |
|||||||||||||||
Commercial lending |
$ |
152.2 |
$ |
149.9 |
$ |
148.5 |
2 |
% |
2 |
% |
|||||
Consumer lending |
73.7 |
73.4 |
72.6 |
— |
2 |
% |
|||||||||
Average loans |
$ |
225.9 |
$ |
223.3 |
$ |
221.1 |
1 |
% |
2 |
% |
|||||
Quarter end |
|||||||||||||||
Commercial lending |
$ |
152.3 |
$ |
149.5 |
$ |
147.4 |
2 |
% |
3 |
% |
|||||
Consumer lending |
73.9 |
73.5 |
73.0 |
1 |
% |
1 |
% |
||||||||
Total loans |
$ |
226.2 |
$ |
223.0 |
$ |
220.4 |
1 |
% |
3 |
% |
|||||
Average loans for the fourth quarter of 2018 increased
Fourth quarter 2018 average and period end loans increased
Investment Securities |
Change |
Change |
|||||||||||||
4Q18 vs |
4Q18 vs |
||||||||||||||
In billions |
4Q18 |
3Q18 |
4Q17 |
3Q18 |
4Q17 |
||||||||||
Average |
$ |
82.1 |
$ |
80.7 |
$ |
74.2 |
2 |
% |
11 |
% |
|||||
Quarter end |
$ |
82.7 |
$ |
80.8 |
$ |
76.1 |
2 |
% |
9 |
% |
|||||
Average investment securities for the fourth quarter of 2018 increased
Average balances held with the
Deposits |
Change |
Change |
|||||||||||||
4Q18 vs |
4Q18 vs |
||||||||||||||
In billions |
4Q18 |
3Q18 |
4Q17 |
3Q18 |
4Q17 |
||||||||||
Average |
|||||||||||||||
Noninterest-bearing |
$ |
75.3 |
$ |
76.2 |
$ |
80.2 |
(1) |
% |
(6) |
% |
|||||
Interest-bearing |
191.2 |
186.3 |
181.3 |
3 |
% |
5 |
% |
||||||||
Average deposits |
$ |
266.5 |
$ |
262.5 |
$ |
261.5 |
2 |
% |
2 |
% |
|||||
Quarter end |
|||||||||||||||
Noninterest-bearing |
$ |
74.0 |
$ |
74.8 |
$ |
79.9 |
(1) |
% |
(7) |
% |
|||||
Interest-bearing |
193.9 |
190.1 |
185.2 |
2 |
% |
5 |
% |
||||||||
Total deposits |
$ |
267.9 |
$ |
264.9 |
$ |
265.1 |
1 |
% |
1 |
% |
|||||
Average deposits for the fourth quarter of 2018 increased
Borrowed Funds |
Change |
Change |
|||||||||||||
4Q18 vs |
4Q18 vs |
||||||||||||||
In billions |
4Q18 |
3Q18 |
4Q17 |
3Q18 |
4Q17 |
||||||||||
Average |
$ |
58.7 |
$ |
59.8 |
$ |
58.0 |
(2) |
% |
1 |
% |
|||||
Quarter end |
$ |
57.4 |
$ |
57.9 |
$ |
59.1 |
(1) |
% |
(3) |
% |
|||||
Average borrowed funds for the fourth quarter of 2018 decreased
Capital |
||||||||||||
12/31/2018 |
* |
9/30/2018 |
12/31/2017 |
|||||||||
Common shareholders' equity In billions |
$ |
43.7 |
$ |
43.1 |
$ |
43.5 |
||||||
Basel III common equity Tier 1 capital ratio |
9.6 |
% |
9.3 |
% |
9.8 |
% |
||||||
* Ratio estimated |
||||||||||||
PNC maintained a strong capital position. Common shareholders' equity at
PNC returned
On
The Basel III common equity Tier 1 capital ratio, which includes the full phase-in of all Basel III adjustments, became effective for PNC as of
CREDIT QUALITY REVIEW |
|||||||||||||||
Credit Quality |
Change |
Change |
|||||||||||||
At or for the quarter ended |
12/31/18 vs |
12/31/18 vs |
|||||||||||||
In millions |
12/31/2018 |
9/30/2018 |
12/31/2017 |
9/30/18 |
12/31/17 |
||||||||||
Nonperforming loans |
$ |
1,694 |
$ |
1,694 |
$ |
1,865 |
— |
(9) |
% |
||||||
Nonperforming assets |
$ |
1,808 |
$ |
1,825 |
$ |
2,035 |
(1) |
% |
(11) |
% |
|||||
Accruing loans past due 90 days or more |
$ |
629 |
$ |
619 |
$ |
737 |
2 |
% |
(15) |
% |
|||||
Net charge-offs |
$ |
107 |
$ |
91 |
$ |
123 |
18 |
% |
(13) |
% |
|||||
Provision for credit losses |
$ |
148 |
$ |
88 |
$ |
125 |
68 |
% |
18 |
% |
|||||
Allowance for loan and lease losses |
$ |
2,629 |
$ |
2,584 |
$ |
2,611 |
2 |
% |
1 |
% |
|||||
Overall credit quality for the fourth quarter of 2018 remained strong. Provision for credit losses for the fourth quarter increased
Nonperforming assets at
Overall delinquencies at
Net charge-offs for the fourth quarter of 2018 increased
The allowance for loan and lease losses to total loans was 1.16 percent at both
BUSINESS SEGMENT RESULTS |
|||||||||||
Business Segment Income |
|||||||||||
In millions |
4Q18 |
3Q18 |
4Q17 |
||||||||
Retail Banking |
$ |
313 |
$ |
228 |
$ |
(105) |
|||||
Corporate & Institutional Banking |
651 |
642 |
960 |
||||||||
Asset Management Group |
42 |
55 |
58 |
||||||||
Other, including BlackRock |
345 |
475 |
1,178 |
||||||||
Net income |
$ |
1,351 |
$ |
1,400 |
$ |
2,091 |
|||||
See accompanying notes in Consolidated Financial Highlights |
|||||||||||
In the fourth quarter of 2018, as a result of updating internal management reporting processes relating to segment reporting disclosures, certain noninterest expenses and fourth quarter 2017 net income tax benefits that were previously recorded within "Other, including
Retail Banking |
Change |
Change |
|||||||||||||||||
4Q18 vs |
4Q18 vs |
||||||||||||||||||
In millions |
4Q18 |
3Q18 |
4Q17 |
3Q18 |
4Q17 |
||||||||||||||
Net interest income |
$ |
1,319 |
$ |
1,305 |
$ |
1,190 |
$ |
14 |
$ |
129 |
|||||||||
Noninterest income |
$ |
696 |
$ |
622 |
$ |
345 |
$ |
74 |
$ |
351 |
|||||||||
Provision for credit losses |
$ |
119 |
$ |
113 |
$ |
149 |
$ |
6 |
$ |
(30) |
|||||||||
Noninterest expense |
$ |
1,487 |
$ |
1,514 |
$ |
1,494 |
$ |
(27) |
$ |
(7) |
|||||||||
Earnings (loss) |
$ |
313 |
$ |
228 |
$ |
(105) |
$ |
85 |
$ |
418 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
74.8 |
$ |
74.1 |
$ |
73.0 |
$ |
.7 |
$ |
1.8 |
|||||||||
Average deposits |
$ |
161.8 |
$ |
161.8 |
$ |
159.3 |
— |
$ |
2.5 |
||||||||||
Retail Banking earnings for the fourth quarter of 2018 increased in both comparisons. Noninterest income increased compared with the third quarter as a result of derivative fair value adjustments related to Visa Class B common shares, higher consumer service fees, including seasonally higher credit card and merchant services fees and brokerage revenue, and higher service charges on deposits. These increases were partially offset by a negative adjustment for residential mortgage servicing rights valuation, net of economic hedge, driven by a decline in long-term interest rates at quarter end. Noninterest income increased compared with fourth quarter 2017 due to
- Average loans increased 1 percent compared with the third quarter and 2 percent compared with fourth quarter 2017 due to growth in residential mortgage, auto, credit card and unsecured installment loans partially offset by lower home equity and education loans.
- Average deposits grew 2 percent compared with fourth quarter 2017 as higher savings and demand deposits were partially offset by lower money market and certificate of deposits.
- Net charge-offs were
$112 million for the fourth quarter of 2018 compared with$96 million in the third quarter and$99 million in the fourth quarter of 2017. - Residential mortgage loan origination volume was
$1.6 billion for the fourth quarter of 2018 compared with$2.1 billion for the third quarter and$2.4 billion for the fourth quarter of 2017. Approximately 67 percent of fourth quarter 2018 volume was for home purchase transactions compared with 72 percent for the third quarter and 50 percent for the fourth quarter of 2017. - The third party residential mortgage servicing portfolio was
$125 billion atDecember 31, 2018 compared with$127 billion at bothSeptember 30, 2018 andDecember 31, 2017 . Residential mortgage loan servicing acquisitions were$2 billion for fourth quarter 2018 compared with$6 billion for the third quarter and$1 billion for the fourth quarter of 2017. - Approximately 67 percent of consumer customers used non-teller channels for the majority of their transactions during the fourth quarter of 2018 compared with 66 percent in the third quarter and 63 percent in the fourth quarter of 2017.
- Deposit transactions via ATM and mobile channels were 55 percent of total deposit transactions in the fourth and third quarters of 2018 compared with 54 percent in the fourth quarter of 2017.
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||
4Q18 vs |
4Q18 vs |
||||||||||||||||||
In millions |
4Q18 |
3Q18 |
4Q17 |
3Q18 |
4Q17 |
||||||||||||||
Net interest income |
$ |
930 |
$ |
925 |
$ |
898 |
$ |
5 |
$ |
32 |
|||||||||
Noninterest income |
$ |
632 |
$ |
592 |
$ |
604 |
$ |
40 |
$ |
28 |
|||||||||
Provision for credit losses (benefit) |
$ |
42 |
$ |
(13) |
$ |
(14) |
$ |
55 |
$ |
56 |
|||||||||
Noninterest expense |
$ |
687 |
$ |
698 |
$ |
686 |
$ |
(11) |
$ |
1 |
|||||||||
Earnings |
$ |
651 |
$ |
642 |
$ |
960 |
$ |
9 |
$ |
(309) |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
139.5 |
$ |
137.4 |
$ |
135.8 |
$ |
2.1 |
$ |
3.7 |
|||||||||
Average deposits |
$ |
91.8 |
$ |
88.1 |
$ |
89.4 |
$ |
3.7 |
$ |
2.4 |
|||||||||
Corporate & Institutional Banking earnings for the fourth quarter of 2018 increased compared with the third quarter of 2018 and decreased compared with the fourth quarter of 2017. Fourth quarter 2017 earnings included an income tax benefit of
- Average loans increased 2 percent compared with the third quarter of 2018 and 3 percent over the fourth quarter of 2017 due to growth across PNC's corporate banking, business credit and equipment finance businesses. The comparison with the third quarter also benefited from seasonal growth in multifamily agency warehouse lending within the real estate business.
- Average deposits increased 4 percent compared with the third quarter reflecting seasonal growth, and increased 3 percent compared with the fourth quarter of 2017. In both comparisons, higher interest-bearing deposits were partially offset by lower noninterest-bearing demand deposits.
- Net charge-offs were
$2 million in the fourth quarter of 2018 compared with$1 million in the third quarter and$29 million in the fourth quarter of 2017, which included charge-offs of certain commercial purchased impaired loans.
Asset Management Group |
Change |
Change |
|||||||||||||||||
4Q18 vs |
4Q18 vs |
||||||||||||||||||
In millions |
4Q18 |
3Q18 |
4Q17 |
3Q18 |
4Q17 |
||||||||||||||
Net interest income |
$ |
70 |
$ |
71 |
$ |
71 |
$ |
(1) |
$ |
(1) |
|||||||||
Noninterest income |
$ |
216 |
$ |
228 |
$ |
226 |
$ |
(12) |
$ |
(10) |
|||||||||
Provision for credit losses |
— |
$ |
2 |
$ |
7 |
$ |
(2) |
$ |
(7) |
||||||||||
Noninterest expense |
$ |
232 |
$ |
225 |
$ |
233 |
$ |
7 |
$ |
(1) |
|||||||||
Earnings |
$ |
42 |
$ |
55 |
$ |
58 |
$ |
(13) |
$ |
(16) |
|||||||||
In billions |
|||||||||||||||||||
Client assets under administration at |
$ |
272 |
$ |
293 |
$ |
282 |
$ |
(21) |
$ |
(10) |
|||||||||
Average loans |
$ |
6.9 |
$ |
7.0 |
$ |
7.1 |
$ |
(.1) |
$ |
(.2) |
|||||||||
Average deposits |
$ |
12.5 |
$ |
12.3 |
$ |
12.6 |
$ |
.2 |
$ |
(.1) |
|||||||||
- Client assets under administration at
December 31, 2018 include discretionary client assets under management of$148 billion and nondiscretionary client assets under administration of$124 billion . - Discretionary client assets under management decreased
$11 billion compared withSeptember 30, 2018 and$3 billion compared withDecember 31, 2017 primarily attributable to equity market decreases.
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 |
||||||||||||||||
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||||
Revenue |
|||||||||||||||||||||
Net interest income |
$ |
2,481 |
$ |
2,466 |
$ |
2,345 |
$ |
9,721 |
$ |
9,108 |
|||||||||||
Noninterest income |
1,859 |
1,891 |
1,915 |
7,411 |
7,221 |
||||||||||||||||
Total revenue |
4,340 |
4,357 |
4,260 |
17,132 |
16,329 |
||||||||||||||||
Provision for credit losses |
148 |
88 |
125 |
408 |
441 |
||||||||||||||||
Noninterest expense |
2,577 |
2,608 |
3,061 |
10,296 |
10,398 |
||||||||||||||||
Income before income taxes (benefit) and noncontrolling interests |
$ |
1,615 |
$ |
1,661 |
$ |
1,074 |
$ |
6,428 |
$ |
5,490 |
|||||||||||
Net income |
$ |
1,351 |
$ |
1,400 |
$ |
2,091 |
$ |
5,346 |
$ |
5,388 |
|||||||||||
Less: |
|||||||||||||||||||||
Net income attributable to noncontrolling interests |
14 |
11 |
11 |
45 |
50 |
||||||||||||||||
Preferred stock dividends (a) |
55 |
63 |
55 |
236 |
236 |
||||||||||||||||
Preferred stock discount accretion and redemptions |
1 |
1 |
2 |
4 |
26 |
||||||||||||||||
Net income attributable to common shareholders |
$ |
1,281 |
$ |
1,325 |
$ |
2,023 |
$ |
5,061 |
$ |
5,076 |
|||||||||||
Less: |
|||||||||||||||||||||
Dividends and undistributed earnings allocated to nonvested restricted shares |
5 |
6 |
8 |
21 |
23 |
||||||||||||||||
Impact of BlackRock earnings per share dilution |
2 |
2 |
8 |
9 |
16 |
||||||||||||||||
Net income attributable to diluted common shares |
$ |
1,274 |
$ |
1,317 |
$ |
2,007 |
$ |
5,031 |
$ |
5,037 |
|||||||||||
Diluted earnings per common share |
$ |
2.75 |
$ |
2.82 |
$ |
4.18 |
$ |
10.71 |
$ |
10.36 |
|||||||||||
Cash dividends declared per common share |
$ |
.95 |
$ |
.95 |
$ |
.75 |
$ |
3.40 |
$ |
2.60 |
|||||||||||
Effective tax rate (b) |
16.3 |
% |
15.7 |
% |
(94.7) |
% |
16.8 |
% |
1.9 |
% |
(a) |
Dividends are payable quarterly other than the Series O, Series R and Series S preferred stock, which are payable semiannually, with the Series O payable in different quarters than the Series R and Series S preferred stock. |
(b) |
The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax. The 2018 results reflected the change in the statutory federal income tax rate from 35% to 21%, effective as of January 1, 2018, as a result of the new federal tax legislation. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||||||||||||
Three months ended |
Year ended |
||||||||||||||||||||
December 31 |
September 30 |
December 31 |
December 31 |
December 31 |
|||||||||||||||||
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||||
PERFORMANCE RATIOS |
|||||||||||||||||||||
Net interest margin (a) |
2.96 |
% |
2.99 |
% |
2.88 |
% |
2.97 |
% |
2.87 |
% |
|||||||||||
Noninterest income to total revenue |
43 |
% |
43 |
% |
45 |
% |
43 |
% |
44 |
% |
|||||||||||
Efficiency (b) |
59 |
% |
60 |
% |
72 |
% |
60 |
% |
64 |
% |
|||||||||||
Return on: |
|||||||||||||||||||||
Average common shareholders' equity (c) |
11.83 |
% |
12.32 |
% |
18.90 |
% |
11.83 |
% |
12.09 |
% |
|||||||||||
Average assets (c) |
1.40 |
% |
1.47 |
% |
2.20 |
% |
1.41 |
% |
1.45 |
% |
|||||||||||
BUSINESS SEGMENT NET INCOME (LOSS) (c) (d) (e) |
|||||||||||||||||||||
In millions |
|||||||||||||||||||||
Retail Banking |
$ |
313 |
$ |
228 |
$ |
(105) |
$ |
1,064 |
$ |
447 |
|||||||||||
Corporate & Institutional Banking |
651 |
642 |
960 |
2,508 |
2,433 |
||||||||||||||||
Asset Management Group |
42 |
55 |
58 |
202 |
187 |
||||||||||||||||
Other, including BlackRock (f) |
345 |
475 |
1,178 |
1,572 |
2,321 |
||||||||||||||||
Total net income |
$ |
1,351 |
$ |
1,400 |
$ |
2,091 |
$ |
5,346 |
$ |
5,388 |
(a) |
Net interest margin is the total yield on interest-earning assets minus the total rate on interest-bearing liabilities and includes the benefit from use of noninterest-bearing sources. To provide more meaningful comparisons of net interest margins, we use interest income on a taxable-equivalent basis in calculating net interest yields used in the calculation of net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under generally accepted accounting principles (GAAP) in the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017 were $28 million, $29 million and $54 million, respectively. The taxable equivalent adjustments to net interest income for the years ended December 31, 2018 and December 31, 2017 were $115 million and $215 million, respectively. Taxable equivalent amounts for the 2018 periods were calculated using a statutory federal income tax rate of 21%, reflecting the enactment of the new federal tax legislation effective January 1, 2018. Amounts for the 2017 periods were calculated using the previously applicable statutory federal income tax rate of 35%. |
(b) |
Calculated as noninterest expense divided by total revenue. |
(c) |
The 2018 results reflected the change in the statutory federal income tax rate from 35% to 21%, effective as of January 1, 2018, as a result of the new federal tax legislation. |
(d) |
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. |
(e) |
In the fourth quarter of 2018, we updated our internal management reporting processes relating to our segment reporting disclosures. Certain noninterest expenses and fourth quarter 2017 net income tax benefits that were previously recorded within "Other, including BlackRock", were reclassified to our reportable segments. These expenses largely relate to items that were previously considered corporate expenses, but are either closely aligned to processes and revenue functions within our lines of business or are an allocation of expenses that the line of business would incur if it operated on a standalone basis. Fourth quarter 2017 net income tax benefits were reclassified within that period, while the expense reclassifications were retrospectively applied to all prior periods presented. |
(f) |
Includes earnings and gains or losses related to PNC's equity interest in BlackRock and residual activities that do not meet the criteria for disclosure as a separate reportable business. We provide additional information on these activities in our Form 10-K and Form 10-Q filings with the SEC. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||
December 31 |
September 30 |
December 31 |
|||||||||
2018 |
2018 |
2017 |
|||||||||
BALANCE SHEET DATA |
|||||||||||
Dollars in millions, except per share data |
|||||||||||
Assets |
$ |
382,315 |
$ |
380,080 |
$ |
380,768 |
|||||
Loans (a) |
$ |
226,245 |
$ |
223,053 |
$ |
220,458 |
|||||
Allowance for loan and lease losses |
$ |
2,629 |
$ |
2,584 |
$ |
2,611 |
|||||
Interest-earning deposits with banks |
$ |
10,893 |
$ |
19,800 |
$ |
28,595 |
|||||
Investment securities |
$ |
82,701 |
$ |
80,804 |
$ |
76,131 |
|||||
Loans held for sale (a) |
$ |
994 |
$ |
1,108 |
$ |
2,655 |
|||||
Equity investments (b) |
$ |
12,894 |
$ |
12,446 |
$ |
11,392 |
|||||
Mortgage servicing rights |
$ |
1,983 |
$ |
2,136 |
$ |
1,832 |
|||||
Goodwill |
$ |
9,218 |
$ |
9,218 |
$ |
9,173 |
|||||
Other assets (a) |
$ |
34,408 |
$ |
28,851 |
$ |
27,894 |
|||||
Noninterest-bearing deposits |
$ |
73,960 |
$ |
74,736 |
$ |
79,864 |
|||||
Interest-bearing deposits |
$ |
193,879 |
$ |
190,148 |
$ |
185,189 |
|||||
Total deposits |
$ |
267,839 |
$ |
264,884 |
$ |
265,053 |
|||||
Borrowed funds (a) |
$ |
57,419 |
$ |
57,955 |
$ |
59,088 |
|||||
Shareholders' equity |
$ |
47,728 |
$ |
47,058 |
$ |
47,513 |
|||||
Common shareholders' equity |
$ |
43,742 |
$ |
43,076 |
$ |
43,530 |
|||||
Accumulated other comprehensive income (loss) |
$ |
(725) |
$ |
(1,260) |
$ |
(148) |
|||||
Book value per common share |
$ |
95.72 |
$ |
93.22 |
$ |
91.94 |
|||||
Tangible book value per common share (Non-GAAP) (c) |
$ |
75.42 |
$ |
73.11 |
$ |
72.28 |
|||||
Period end common shares outstanding (millions) |
457 |
462 |
473 |
||||||||
Loans to deposits |
84 |
% |
84 |
% |
83 |
% |
|||||
CLIENT ASSETS (billions) |
|||||||||||
Discretionary client assets under management |
$ |
148 |
$ |
159 |
$ |
151 |
|||||
Nondiscretionary client assets under administration |
124 |
134 |
131 |
||||||||
Total client assets under administration |
272 |
293 |
282 |
||||||||
Brokerage account client assets |
47 |
51 |
49 |
||||||||
Total client assets |
$ |
319 |
$ |
344 |
$ |
331 |
|||||
CAPITAL RATIOS |
|||||||||||
Basel III (d) (e) (f) |
|||||||||||
Common equity Tier 1 |
9.6 |
% |
9.3 |
% |
N/A |
||||||
Tier 1 risk-based |
10.8 |
% |
10.5 |
% |
N/A |
||||||
Total capital risk-based |
12.9 |
% |
12.7 |
% |
N/A |
||||||
Leverage |
9.3 |
% |
9.2 |
% |
N/A |
||||||
Supplementary leverage |
7.8 |
% |
7.7 |
% |
N/A |
||||||
Fully Phased-In Basel III (Non-GAAP) |
|||||||||||
Common equity Tier 1 |
N/A |
N/A |
9.8 |
% |
|||||||
Transitional Basel III (e) |
|||||||||||
Common equity Tier 1 |
N/A |
N/A |
10.4 |
% |
|||||||
Tier 1 risk-based |
N/A |
N/A |
11.6 |
% |
|||||||
Total capital risk-based |
N/A |
N/A |
13.7 |
% |
|||||||
Leverage |
N/A |
N/A |
9.9 |
% |
|||||||
Common shareholders' equity to total assets |
11.4 |
% |
11.3 |
% |
11.4 |
% |
|||||
ASSET QUALITY |
|||||||||||
Nonperforming loans to total loans |
.75 |
% |
.76 |
% |
.85 |
% |
|||||
Nonperforming assets to total loans, OREO and foreclosed assets |
.80 |
% |
.82 |
% |
.92 |
% |
|||||
Nonperforming assets to total assets |
.47 |
% |
.48 |
% |
.53 |
% |
|||||
Net charge-offs to average loans (for the three months ended) (annualized) |
.19 |
% |
.16 |
% |
.22 |
% |
|||||
Allowance for loan and lease losses to total loans |
1.16 |
% |
1.16 |
% |
1.18 |
% |
|||||
Allowance for loan and lease losses to nonperforming loans |
155 |
% |
153 |
% |
140 |
% |
|||||
Accruing loans past due 90 days or more (in millions) |
$ |
629 |
$ |
619 |
$ |
737 |
(a) |
Amounts include assets and liabilities for which we have elected the fair value option. Our third quarter 2018 Form 10-Q included, and our 2018 Form 10-K will include, additional information regarding these Consolidated Balance Sheet line items. |
(b) |
Amounts include our equity interest in BlackRock. Amounts for the 2018 periods reflected $.6 billion of trading and available for sale securities, primarily money market funds, that were reclassified to Equity investments on January 1, 2018 in accordance with the adoption of Accounting Standards Update 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. |
(c) |
See the Tangible Book Value per Common Share table on page 18 for additional information. |
(d) |
The ratios as of December 31, 2018 are estimated. |
(e) |
All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented and calculated based on the standardized approach. See Capital Ratios on page 17 for additional information. |
(f) |
The 2018 Basel III ratios for Common equity Tier 1 capital, Tier 1 risk-based capital, Leverage and Supplementary leverage reflect the full phase-in of all Basel III adjustments to these metrics applicable to PNC. The 2018 Basel III Total risk-based capital ratios include $80 million of nonqualifying trust preferred capital securities that are subject to a phase-out period that runs through 2021. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
CAPITAL RATIOS |
|
Because PNC remains in the parallel run qualification phase for the advanced approaches, PNC's regulatory risk-based capital ratios in 2018 and 2017 are calculated using the standardized approach for determining risk-weighted assets. Under the standardized approach for determining credit risk-weighted assets, exposures are generally assigned a pre-defined risk weight. Exposures to high volatility commercial real estate, past due exposures and equity exposures are generally subject to higher risk weights than other types of exposures. With the exception of certain nonqualifying trust preferred capital securities included in PNC's Total risk-based capital, the transitions and multi-year phase-in of the definition of capital under the Basel III rules were completed as of January 1, 2018. Accordingly, we refer to the capital ratios calculated using the definition of capital in effect as of January 1, 2018 and, for the risk-based ratios, standardized risk-weighted assets, as the Basel III ratios. We refer to the capital ratios calculated using the phased-in Basel III provisions in effect for 2017 and, for the risk-based ratios, standardized approach risk-weighted assets, as the 2017 Transitional Basel III ratios. |
|
We provide information below regarding PNC's estimated Basel III December 31, 2018, actual Basel III September 30, 2018, Fully Phased-In Basel III December 31, 2017 and actual December 31, 2017 Transitional Basel III Common equity Tier 1 ratios. Under the Basel III rules applicable to PNC, significant common stock investments in unconsolidated financial institutions (for PNC, primarily BlackRock), mortgage servicing rights and deferred tax assets must be deducted from capital (subject to a phase-in schedule that ended December 31, 2017 and 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, Basel III regulatory capital includes (subject to a phase-in schedule that ended December 31, 2017) accumulated other comprehensive income (loss) related to securities currently and those transferred from, available for sale, as well as pension and other postretirement plans. |
Basel III Common Equity Tier 1 Capital Ratios |
||||||||||||||||||
Basel III (a) |
Fully Phased-In Basel III (Non-GAAP) (b) |
2017 Transitional Basel III |
||||||||||||||||
December 31 |
September 30 |
December 31 |
December 31 |
|||||||||||||||
Dollars in millions |
2018 |
2018 |
2017 |
2017 |
||||||||||||||
Common stock, related surplus and retained earnings, net of treasury stock |
$ |
44,467 |
$ |
44,336 |
$ |
43,676 |
$ |
43,676 |
||||||||||
Less regulatory capital adjustments: |
||||||||||||||||||
Goodwill and disallowed intangibles, net of deferred tax liabilities |
(9,277) |
(9,297) |
(9,307) |
(9,243) |