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PNC Reports Second Quarter 2016 Net Income Of $989 Million, $1.82 Diluted EPS
"We had a good second quarter against a backdrop of global uncertainty," said
Income Statement Highlights
- Second quarter results reflected higher fee income, increased noninterest expense driven by business activity, lower provision for credit losses, and growth in average loans and deposits compared with the first quarter of 2016.
- Net interest income of
$2.1 billion for the second quarter decreased$30 million , or 1 percent, compared with the first quarter mainly from a decline in purchase accounting accretion. - Noninterest income of
$1.7 billion for the second quarter increased$159 million , or 10 percent, compared with the first quarter primarily due to strong growth in fee income from higher client activity and seasonality. - Noninterest expense increased
$79 million , or 3 percent, to$2.4 billion for the second quarter compared with the first quarter as a result of higher business activity as PNC remained focused on disciplined expense management.- Provision for credit losses declined to
$127 million for the second quarter from$152 million in the first quarter as overall credit quality remained stable.
- Provision for credit losses declined to
Balance Sheet Highlights
- Loans grew
$1.6 billion , or 1 percent, to$209.1 billion atJune 30, 2016 compared withMarch 31, 2016 .- Total commercial lending increased
$1.9 billion , or 1 percent, primarily to large corporate customers in PNC's corporate banking business and from growth in real estate loans. - Total consumer lending decreased
$.3 billion due to lower home equity and education loans partially offset by growth in auto and credit card loans.
- Total commercial lending increased
- Overall credit quality in the second quarter remained stable with the first quarter.
- Nonperforming assets of
$2.5 billion atJune 30, 2016 decreased 1 percent compared withMarch 31, 2016 . - Net charge-offs were
$134 million for the second quarter and$149 million for the first quarter. - The energy related loan portfolio weakened slightly, but at a slower pace compared with the first quarter.
- Nonperforming assets of
- Deposits were
$249.8 billion atJune 30, 2016 , a decrease of$.6 billion fromMarch 31, 2016 .- Average deposits increased
$1.5 billion , or 1 percent, in the second quarter compared with the first quarter reflecting growth in consumer deposits.
- Average deposits increased
- Investment securities decreased
$.8 billion , or 1 percent, in the second quarter to$71.8 billion atJune 30, 2016 compared withMarch 31, 2016 . - PNC maintained a strong liquidity position.
- The Liquidity Coverage Ratio at
June 30, 2016 exceeded 100 percent for bothPNC and PNC Bank, N.A. , above the minimum phased-in requirement of 90 percent in 2016.
- The Liquidity Coverage Ratio at
- PNC completed common stock repurchase programs for the five quarter period that ended in the second quarter of 2016.
- PNC returned a total of
$4.0 billion of capital to shareholders through repurchases of 29.9 million common shares for$2.7 billion and dividends on common shares of$1.3 billion over the five quarter period. - Second quarter 2016 repurchases were 6.1 million common shares for
$.5 billion and dividends on common shares were$.3 billion . - In
June 2016 PNC announced share repurchase programs of up to$2.0 billion for the four-quarter period beginning in the third quarter of 2016, including repurchases of up to$.2 billion related to employee benefit plans. - PNC's board of directors raised the quarterly dividend on common stock to
55 cents per share, an increase of4 cents per share, or 8 percent, effective with the August dividend.
- PNC returned a total of
- PNC maintained a strong capital position.
- Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.6 percent at both
June 30, 2016 andMarch 31, 2016 , calculated using the regulatory capital methodologies applicable to PNC during 2016. - Pro forma fully phased-in Basel III common equity Tier 1 capital ratio was an estimated
10.2 percent atJune 30, 2016 and 10.1 percent atMarch 31, 2016 based on the standardized approach rules.
- Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.6 percent at both
Earnings Summary |
|||||||||||||
In millions, except per share data |
2Q16 |
1Q16 |
2Q15 |
||||||||||
Net income |
$ |
989 |
$ |
943 |
$ |
1,044 |
|||||||
Net income attributable to diluted common shares |
$ |
914 |
$ |
850 |
$ |
987 |
|||||||
Diluted earnings per common share |
$ |
1.82 |
$ |
1.68 |
$ |
1.88 |
|||||||
Average diluted common shares outstanding |
503 |
507 |
525 |
||||||||||
Return on average assets |
1.11 |
% |
1.07 |
% |
1.19 |
% |
|||||||
Return on average common equity |
8.87 |
% |
8.44 |
% |
9.75 |
% |
|||||||
Book value per common share Period end |
$ |
85.33 |
$ |
83.47 |
$ |
79.64 |
|||||||
Tangible book value per common share (non-GAAP) Period end |
$ |
66.89 |
$ |
65.15 |
$ |
61.75 |
|||||||
Cash dividends declared per common share |
$ |
.51 |
$ |
.51 |
$ |
.51 |
|||||||
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported amounts. Reference to core net interest income, a non-GAAP financial measure, 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, 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 |
|||||||||||||||||||
2Q16 vs |
2Q16 vs |
||||||||||||||||||||
In millions |
2Q16 |
1Q16 |
2Q15 |
1Q16 |
2Q15 |
||||||||||||||||
Net interest income |
$ |
2,068 |
$ |
2,098 |
$ |
2,052 |
(1) |
% |
1 |
% |
|||||||||||
Noninterest income |
1,726 |
1,567 |
1,814 |
10 |
% |
(5) |
% |
||||||||||||||
Total revenue |
$ |
3,794 |
$ |
3,665 |
$ |
3,866 |
4 |
% |
(2) |
% |
|||||||||||
Total revenue for the second quarter of 2016 increased
Net interest income for the second quarter of 2016 decreased
The net interest margin was 2.70 percent for the second quarter of 2016 compared with 2.75 percent for the first quarter and 2.73 percent for the second quarter of 2015. The decrease in the margin in both comparisons was driven by a lower benefit from purchase accounting accretion, partially offset in the second quarter 2015 comparison by the impact of lower balances on deposit with the
Noninterest Income |
Change |
Change |
|||||||||||||||||||||
2Q16 vs |
2Q16 vs |
||||||||||||||||||||||
In millions |
2Q16 |
1Q16 |
2Q15 |
1Q16 |
2Q15 |
||||||||||||||||||
Asset management |
$ |
377 |
$ |
341 |
$ |
416 |
11 |
% |
(9) |
% |
|||||||||||||
Consumer services |
354 |
337 |
334 |
5 |
% |
6 |
% |
||||||||||||||||
Corporate services |
403 |
325 |
369 |
24 |
% |
9 |
% |
||||||||||||||||
Residential mortgage |
165 |
100 |
164 |
65 |
% |
1 |
% |
||||||||||||||||
Service charges on deposits |
163 |
158 |
156 |
3 |
% |
4 |
% |
||||||||||||||||
Other, including net securities gains |
264 |
306 |
375 |
(14) |
% |
(30) |
% |
||||||||||||||||
$ |
1,726 |
$ |
1,567 |
$ |
1,814 |
10 |
% |
(5) |
% |
||||||||||||||
Noninterest income for the second quarter of 2016 increased
Noninterest income for the second quarter of 2016 decreased
CONSOLIDATED EXPENSE REVIEW |
||||||||||||||||||||||
Noninterest Expense |
Change |
Change |
||||||||||||||||||||
2Q16 vs |
2Q16 vs |
|||||||||||||||||||||
In millions |
2Q16 |
1Q16 |
2Q15 |
1Q16 |
2Q15 |
|||||||||||||||||
Personnel |
$ |
1,226 |
$ |
1,145 |
$ |
1,200 |
7 |
% |
2 |
% |
||||||||||||
Occupancy |
215 |
221 |
209 |
(3) |
% |
3 |
% |
|||||||||||||||
Equipment |
240 |
234 |
231 |
3 |
% |
4 |
% |
|||||||||||||||
Marketing |
61 |
54 |
67 |
13 |
% |
(9) |
% |
|||||||||||||||
Other |
618 |
627 |
659 |
(1) |
% |
(6) |
% |
|||||||||||||||
$ |
2,360 |
$ |
2,281 |
$ |
2,366 |
3 |
% |
– |
||||||||||||||
Noninterest expense for the second quarter of 2016 increased
Noninterest expense for the second quarter of 2016 decreased
The effective tax rate was 24.3 percent for the second quarter of 2016, 23.5 percent for the first quarter of 2016 and 28.2 percent for the second quarter of 2015. The lower effective tax rate in second quarter 2016 compared with second quarter 2015 was primarily attributable to increased tax credit investments.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were
Loans |
Change |
Change |
||||||||||||||||||||
6/30/16 vs |
6/30/16 vs |
|||||||||||||||||||||
In billions |
6/30/2016 |
3/31/2016 |
6/30/2015 |
3/31/16 |
6/30/15 |
|||||||||||||||||
Commercial lending |
$ |
137.0 |
$ |
135.1 |
$ |
130.8 |
1 |
% |
5 |
% |
||||||||||||
Consumer lending |
72.1 |
72.4 |
74.4 |
– |
(3) |
% |
||||||||||||||||
Total loans |
$ |
209.1 |
$ |
207.5 |
$ |
205.2 |
1 |
% |
2 |
% |
||||||||||||
For the quarter ended: |
||||||||||||||||||||||
Average loans |
$ |
208.3 |
$ |
207.2 |
$ |
205.4 |
1 |
% |
1 |
% |
||||||||||||
Total loans grew
Average loans increased
Second quarter 2016 period end and average loans increased
Investment Securities |
Change |
Change |
||||||||||||||||||||
6/30/16 vs |
6/30/16 vs |
|||||||||||||||||||||
In billions |
6/30/2016 |
3/31/2016 |
6/30/2015 |
3/31/16 |
6/30/15 |
|||||||||||||||||
At quarter end |
$ |
71.8 |
$ |
72.6 |
$ |
61.4 |
(1) |
% |
17 |
% |
||||||||||||
Average for the quarter ended |
$ |
70.2 |
$ |
70.3 |
$ |
59.4 |
– |
18 |
% |
|||||||||||||
Investment securities balances at
Interest-earning deposits with banks, primarily with the
Deposits |
Change |
Change |
||||||||||||||||||||
6/30/16 vs |
6/30/16 vs |
|||||||||||||||||||||
In billions |
6/30/2016 |
3/31/2016 |
6/30/2015 |
3/31/16 |
6/30/15 |
|||||||||||||||||
At quarter end |
$ |
249.8 |
$ |
250.4 |
$ |
239.7 |
– |
4 |
% |
|||||||||||||
Average for the quarter ended |
$ |
247.6 |
$ |
246.1 |
$ |
237.8 |
1 |
% |
4 |
% |
||||||||||||
Total deposits at
Borrowed Funds |
Change |
Change |
||||||||||||||||||||
6/30/16 vs |
6/30/16 vs |
|||||||||||||||||||||
In billions |
6/30/2016 |
3/31/2016 |
6/30/2015 |
3/31/16 |
6/30/15 |
|||||||||||||||||
At quarter end |
$ |
54.6 |
$ |
54.2 |
$ |
58.3 |
1 |
% |
(6) |
% |
||||||||||||
Average for the quarter ended |
$ |
53.6 |
$ |
53.6 |
$ |
57.1 |
– |
(6) |
% |
|||||||||||||
Borrowed funds at
Capital |
|||||||||||||
6/30/2016* |
3/31/2016 |
6/30/2015 |
|||||||||||
Common shareholders' equity In billions |
$ |
42.1 |
$ |
41.7 |
$ |
41.1 |
|||||||
Transitional Basel III common equity Tier 1 capital ratio |
10.6 |
% |
10.6 |
% |
10.6 |
% |
|||||||
Pro forma fully phased-in Basel III common equity |
|||||||||||||
Tier 1 capital ratio |
10.2 |
% |
10.1 |
% |
10.0 |
% |
|||||||
* Ratios estimated |
|||||||||||||
PNC maintained a strong capital position. Common shareholders' equity increased compared with
PNC completed common stock repurchase programs for the five quarter period that ended in the second quarter of 2016. PNC returned a total of
In
CREDIT QUALITY REVIEW |
|||||||||||||||||||
Credit Quality |
Change |
Change |
|||||||||||||||||
At or for the quarter ended |
6/30/16 vs |
6/30/16 vs |
|||||||||||||||||
In millions |
6/30/2016 |
3/31/2016 |
6/30/2015 |
3/31/16 |
6/30/15 |
||||||||||||||
Nonperforming loans |
$ |
2,264 |
$ |
2,281 |
$ |
2,252 |
(1) |
% |
1 |
% |
|||||||||
Nonperforming assets |
$ |
2,515 |
$ |
2,552 |
$ |
2,578 |
(1) |
% |
(2) |
% |
|||||||||
Accruing loans past due 90 days or more |
$ |
754 |
$ |
782 |
$ |
914 |
(4) |
% |
(18) |
% |
|||||||||
Net charge-offs |
$ |
134 |
$ |
149 |
$ |
67 |
(10) |
% |
100 |
% |
|||||||||
Provision for credit losses |
$ |
127 |
$ |
152 |
$ |
46 |
(16) |
% |
176 |
% |
|||||||||
Allowance for loan and lease losses |
$ |
2,685 |
$ |
2,711 |
$ |
3,272 |
(1) |
% |
(18) |
% |
|||||||||
Overall credit quality for the second quarter of 2016 remained stable with the first quarter. Provision for credit losses for second quarter 2016 was
Nonperforming assets at
Overall delinquencies improved as of
Net charge-offs for the second quarter of 2016 decreased
The allowance for loan and lease losses at
BUSINESS SEGMENT RESULTS |
||||||||||||||
Business Segment Income (Loss) |
||||||||||||||
In millions |
2Q16 |
1Q16 |
2Q15 |
|||||||||||
Retail Banking |
$ |
307 |
$ |
268 |
$ |
241 |
||||||||
Corporate & Institutional Banking |
490 |
431 |
508 |
|||||||||||
Asset Management Group |
48 |
49 |
62 |
|||||||||||
Residential Mortgage Banking |
46 |
(13) |
19 |
|||||||||||
Non-Strategic Assets Portfolio |
29 |
52 |
56 |
|||||||||||
Other, including BlackRock |
69 |
156 |
158 |
|||||||||||
Net income |
$ |
989 |
$ |
943 |
$ |
1,044 |
||||||||
See accompanying notes in Consolidated Financial Highlights |
||||||||||||||
Retail Banking |
Change |
Change |
||||||||||||||||||||
2Q16 vs |
2Q16 vs |
|||||||||||||||||||||
In millions |
2Q16 |
1Q16 |
2Q15 |
1Q16 |
2Q15 |
|||||||||||||||||
Net interest income |
$ |
1,118 |
$ |
1,113 |
$ |
1,045 |
$ |
5 |
$ |
73 |
||||||||||||
Noninterest income |
$ |
564 |
$ |
537 |
$ |
590 |
$ |
27 |
$ |
(26) |
||||||||||||
Provision for credit losses |
$ |
29 |
$ |
77 |
$ |
45 |
$ |
(48) |
$ |
(16) |
||||||||||||
Noninterest expense |
$ |
1,168 |
$ |
1,150 |
$ |
1,210 |
$ |
18 |
$ |
(42) |
||||||||||||
Earnings |
$ |
307 |
$ |
268 |
$ |
241 |
$ |
39 |
$ |
66 |
||||||||||||
In billions |
||||||||||||||||||||||
Average loans |
$ |
62.4 |
$ |
63.1 |
$ |
64.3 |
$ |
(.7) |
$ |
(1.9) |
||||||||||||
Average deposits |
$ |
154.1 |
$ |
151.6 |
$ |
145.3 |
$ |
2.5 |
$ |
8.8 |
||||||||||||
Retail Banking earnings for the second quarter of 2016 increased in both comparisons. Noninterest income included net 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 and service strategies.
- Approximately 57 percent of consumer customers used non-teller channels for the majority of their transactions during the second quarter of 2016 compared with 56 percent and 52 percent for the first quarter of 2016 and second quarter of 2015, respectively.
- Deposit transactions via ATM and mobile channels were 48 percent of total deposit transactions in the second quarter of 2016 compared with 47 percent in the first quarter and 42 percent in the second quarter of 2015.
- Integral to PNC's retail branch transformation strategy, approximately 18 percent of the branch network operates under the universal model, including over 100 branches converted in the second quarter of 2016. Universal branches are designed to enhance sales opportunities for branch personnel, in part by driving higher ATM and mobile deposits. PNC had a network of 2,601 branches and 8,993 ATMs at
June 30, 2016 .
- Average deposits grew 2 percent over the first quarter and 6 percent over the second quarter of 2015 due to higher demand deposits as well as an increase in savings deposits partially offset by lower money market deposits reflecting a shift to relationship-based savings products. Certificates of deposit declined in both comparisons from the net runoff of maturing accounts.
- Average loans decreased 3 percent compared with the second quarter of 2015 as growth in automobile and credit card loans was more than offset by lower home equity, education and commercial loans.
- Net charge-offs for the second quarter of 2016 were
$75 million compared with$96 million in the first quarter and$86 million in the second quarter of 2015.
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||
2Q16 vs |
2Q16 vs |
||||||||||||||||||
In millions |
2Q16 |
1Q16 |
2Q15 |
1Q16 |
2Q15 |
||||||||||||||
Net interest income |
$ |
854 |
$ |
870 |
$ |
871 |
$ |
(16) |
$ |
(17) |
|||||||||
Noninterest income |
$ |
533 |
$ |
434 |
$ |
492 |
$ |
99 |
$ |
41 |
|||||||||
Provision for credit losses |
$ |
69 |
$ |
107 |
$ |
20 |
$ |
(38) |
$ |
49 |
|||||||||
Noninterest expense |
$ |
549 |
$ |
521 |
$ |
547 |
$ |
28 |
$ |
2 |
|||||||||
Earnings |
$ |
490 |
$ |
431 |
$ |
508 |
$ |
59 |
$ |
(18) |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
121.6 |
$ |
119.7 |
$ |
116.1 |
$ |
1.9 |
$ |
5.5 |
|||||||||
Average deposits |
$ |
78.3 |
$ |
79.5 |
$ |
79.0 |
$ |
(1.2) |
$ |
(.7) |
|||||||||
Commercial loan servicing portfolio Quarter end |
$ |
459 |
$ |
453 |
$ |
436 |
$ |
6 |
$ |
23 |
|||||||||
Corporate & Institutional Banking earnings for the second quarter of 2016 increased compared with the first quarter and decreased compared to the second quarter of 2015. Noninterest income increased in both comparisons primarily due to higher merger and acquisition advisory fees, corporate securities underwriting activity and loan syndication fees. Provision for credit losses decreased compared with the first quarter reflecting a lower provision for energy related loans. The provision increased compared with the second quarter of 2015 reflecting relative weakness in energy related loans and continued loan growth. Noninterest expense increased over the first quarter primarily due to higher variable compensation and other costs associated with increased business activity.
- Average loans increased 2 percent over the first quarter primarily driven by increased lending to large corporate customers in PNC's corporate banking business. Average loans increased 5 percent compared with the second quarter of 2015 due to growth in PNC's real estate business, including both commercial real estate and commercial loans.
- Average deposits decreased 2 percent from the first quarter reflecting seasonally lower balances, and declined 1 percent compared with the second quarter of 2015 due to decreases in noninterest-bearing and money market deposits, substantially offset by interest-bearing demand deposit growth.
- Net charge-offs in the second quarter of 2016 were
$59 million compared with net charge-offs of$41 million in the first quarter and net recoveries of$19 million in the second quarter of 2015. Higher net charge-offs in second quarter 2016 primarily were on energy related loans.
Asset Management Group |
Change |
Change |
||||||||||||||||||||
2Q16 vs |
2Q16 vs |
|||||||||||||||||||||
In millions |
2Q16 |
1Q16 |
2Q15 |
1Q16 |
2Q15 |
|||||||||||||||||
Net interest income |
$ |
76 |
$ |
77 |
$ |
71 |
$ |
(1) |
$ |
5 |
||||||||||||
Noninterest income |
$ |
213 |
$ |
203 |
$ |
243 |
$ |
10 |
$ |
(30) |
||||||||||||
Provision for credit losses (benefit) |
$ |
6 |
$ |
(3) |
$ |
1 |
$ |
9 |
$ |
5 |
||||||||||||
Noninterest expense |
$ |
206 |
$ |
206 |
$ |
215 |
– |
$ |
(9) |
|||||||||||||
Earnings |
$ |
48 |
$ |
49 |
$ |
62 |
$ |
(1) |
$ |
(14) |
||||||||||||
In billions |
||||||||||||||||||||||
Client assets under administration Quarter end |
$ |
261 |
$ |
260 |
$ |
262 |
$ |
1 |
$ |
(1) |
||||||||||||
Average loans |
$ |
7.3 |
$ |
7.4 |
$ |
7.5 |
$ |
(.1) |
$ |
(.2) |
||||||||||||
Average deposits |
$ |
12.0 |
$ |
12.3 |
$ |
10.9 |
$ |
(.3) |
$ |
1.1 |
||||||||||||
Asset Management Group growth strategies include increasing sales sourced from other PNC lines of business, maximizing front line productivity and optimizing market presence in high opportunity markets. The business is primarily focused on growing client assets under management, building retirement capabilities and expanding product solutions for all customers.- Client assets under administration at
June 30, 2016 included discretionary client assets under management of$135 billion and nondiscretionary client assets under administration of$126 billion .- Discretionary client assets under management were consistent with
March 31, 2016 and increased$1 billion compared withJune 30, 2015 primarily attributable to equity market increases.
- Discretionary client assets under management were consistent with
Residential Mortgage Banking |
Change |
Change |
||||||||||||||||||
2Q16 vs |
2Q16 vs |
|||||||||||||||||||
In millions |
2Q16 |
1Q16 |
2Q15 |
1Q16 |
2Q15 |
|||||||||||||||
Net interest income |
$ |
28 |
$ |
25 |
$ |
30 |
$ |
3 |
$ |
(2) |
||||||||||
Noninterest income |
$ |
182 |
$ |
105 |
$ |
176 |
$ |
77 |
$ |
6 |
||||||||||
Provision for credit losses (benefit) |
$ |
1 |
$ |
(1) |
$ |
(2) |
$ |
2 |
$ |
3 |
||||||||||
Noninterest expense |
$ |
136 |
$ |
152 |
$ |
178 |
$ |
(16) |
$ |
(42) |
||||||||||
Earnings (loss) |
$ |
46 |
$ |
(13) |
$ |
19 |
$ |
59 |
$ |
27 |
||||||||||
In billions |
||||||||||||||||||||
Residential mortgage servicing portfolio Quarter end |
$ |
126 |
$ |
125 |
$ |
115 |
$ |
1 |
$ |
11 |
||||||||||
Loan origination volume |
$ |
2.6 |
$ |
1.9 |
$ |
2.9 |
$ |
.7 |
$ |
(.3) |
||||||||||
Residential Mortgage Banking earnings for the second quarter of 2016 increased compared with both the first quarter of 2016 and second quarter of 2015. Noninterest income increased over the linked quarter due to net hedging gains on residential mortgage servicing rights compared with net hedging losses in the first quarter, as well as higher loan sales revenue. In the comparison with second quarter 2015, higher servicing revenue was partially offset by lower loan sales revenue. Noninterest expense decreased in both comparisons as a result of release of residential mortgage foreclosure-related reserves of
- 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 PNC's footprint markets.
- Loan origination volume in the second quarter of 2016 increased 35 percent compared with the first quarter and declined 10 percent compared with the second quarter of 2015. Approximately 48 percent of second quarter 2016 origination volume was for home purchase transactions compared with 40 percent in the first quarter and 50 percent in the second quarter of 2015.
- Loan servicing acquisitions were
$6 billion in the second quarter of 2016,$5 billion in the first quarter and$6 billion in the second quarter of 2015.
Non-Strategic Assets Portfolio |
Change |
Change |
|||||||||||||||||
2Q16 vs |
2Q16 vs |
||||||||||||||||||
In millions |
2Q16 |
1Q16 |
2Q15 |
1Q16 |
2Q15 |
||||||||||||||
Net interest income |
$ |
73 |
$ |
75 |
$ |
100 |
$ |
(2) |
$ |
(27) |
|||||||||
Noninterest income |
$ |
5 |
$ |
22 |
$ |
9 |
$ |
(17) |
$ |
(4) |
|||||||||
Provision for credit losses (benefit) |
$ |
13 |
$ |
(7) |
$ |
(5) |
$ |
20 |
$ |
18 |
|||||||||
Noninterest expense |
$ |
20 |
$ |
21 |
$ |
26 |
$ |
(1) |
$ |
(6) |
|||||||||
Earnings |
$ |
29 |
$ |
52 |
$ |
56 |
$ |
(23) |
$ |
(27) |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
5.9 |
$ |
6.1 |
$ |
7.6 |
$ |
(.2) |
$ |
(1.7) |
|||||||||
The Non-Strategic Assets Portfolio consists of 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 lending portfolio. The business activity of this segment is to manage the liquidation of the portfolios while maximizing the value and mitigating risk.
- Noninterest income decreased from the first quarter primarily due to a settlement and release of reserves in the first quarter related to home equity repurchase obligations.
- Provision for credit losses increased in both comparisons driven by reduced cash flow expectations on certain purchased impaired loans.
- Net charge-offs were in a net recovery position of
$2 million for the second quarter of 2016 compared with net charge-offs of$8 million for the first quarter and net recoveries of$7 million for the second quarter of 2015.
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 |
Six months ended |
|||||||||||||
Dollars in millions, except per share data |
June 30 |
March 31 |
June 30 |
June 30 |
June 30 |
||||||||||
2016 |
2016 |
2015 |
2016 |
2015 |
|||||||||||
Revenue |
|||||||||||||||
Net interest income |
$ |
2,068 |
$ |
2,098 |
$ |
2,052 |
$ |
4,166 |
$ |
4,124 |
|||||
Noninterest income |
1,726 |
1,567 |
1,814 |
3,293 |
3,473 |
||||||||||
Total revenue |
3,794 |
3,665 |
3,866 |
7,459 |
7,597 |
||||||||||
Noninterest expense |
2,360 |
2,281 |
2,366 |
4,641 |
4,715 |
||||||||||
Pretax, pre-provision earnings (Non-GAAP) (a) |
1,434 |
1,384 |
1,500 |
2,818 |
2,882 |
||||||||||
Provision for credit losses |
127 |
152 |
46 |
279 |
100 |
||||||||||
Income before income taxes and noncontrolling interests |
$ |
1,307 |
$ |
1,232 |
$ |
1,454 |
$ |
2,539 |
$ |
2,782 |
|||||
Net income |
$ |
989 |
$ |
943 |
$ |
1,044 |
$ |
1,932 |
$ |
2,048 |
|||||
Less: |
|||||||||||||||
Net income (loss) attributable to noncontrolling interests |
23 |
19 |
4 |
42 |
5 |
||||||||||
Preferred stock dividends and discount accretion and redemptions (b) |
43 |
65 |
48 |
108 |
118 |
||||||||||
Net income attributable to common shareholders |
$ |
923 |
$ |
859 |
$ |
992 |
$ |
1,782 |
$ |
1,925 |
|||||
Less: |
|||||||||||||||
Dividends and undistributed earnings allocated to nonvested restricted shares |
6 |
6 |
12 |
2 |
|||||||||||
Impact of BlackRock earnings per share dilution |
3 |
3 |
5 |
6 |
10 |
||||||||||
Net income attributable to diluted common shares |
$ |
914 |
$ |
850 |
$ |
987 |
$ |
1,764 |
$ |
1,913 |
|||||
Diluted earnings per common share |
$ |
1.82 |
$ |
1.68 |
$ |
1.88 |
$ |
3.49 |
$ |
3.63 |
|||||
Cash dividends declared per common share |
$ |
.51 |
$ |
.51 |
$ |
.51 |
$ |
1.02 |
$ |
.99 |
|||||
Effective tax rate (c) |
24.3 |
% |
23.5 |
% |
28.2 |
% |
23.9 |
% |
26.4 |
% |
(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) |
Dividends are payable quarterly other than Series O and Series R preferred stock, which are payable semiannually in different quarters. |
||||||||||||||
(c) |
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 |
Six months ended |
||||||||||||||
June 30 |
March 31 |
June 30 |
June 30 |
June 30 |
|||||||||||
Dollars in millions |
2016 |
2016 |
2015 |
2016 |
2015 |
||||||||||
Net Interest Income |
|||||||||||||||
Core net interest income (a) |
$ |
2,004 |
$ |
2,012 |
$ |
1,941 |
$ |
4,016 |
$ |
3,885 |
|||||
Total purchase accounting accretion |
|||||||||||||||
Scheduled accretion net of contractual interest |
45 |
52 |
83 |
97 |
178 |
||||||||||
Excess cash recoveries |
19 |
34 |
28 |
53 |
61 |
||||||||||
Total purchase accounting accretion |
64 |
86 |
111 |
150 |
239 |
||||||||||
Total net interest income |
$ |
2,068 |
$ |
2,098 |
$ |
2,052 |
$ |
4,166 |
$ |
4,124 |
|||||
Net Interest Margin |
|||||||||||||||
Core net interest margin (b) |
2.63 |
% |
2.65 |
% |
2.59 |
% |
2.64 |
% |
2.63 |
% |
|||||
Purchase accounting accretion impact on net interest margin |
.07 |
.10 |
.14 |
.09 |
.15 |
||||||||||
Net interest margin (c) |
2.70 |
% |
2.75 |
% |
2.73 |
% |
2.73 |
% |
2.78 |
% |
(a) |
We believe that core net interest income, a non-GAAP financial measure, is useful in evaluating the performance of our interest-based activities. |
||||||||||||||
(b) |
We believe that core net interest margin, a non-GAAP financial measure, is useful as a tool to help evaluate the impact of purchase accounting accretion on net interest margin. To calculate core net interest margin, net interest margin has been adjusted by annualized purchase accounting accretion divided by average interest-earning assets. |
||||||||||||||
(c) |
Calculated as annualized taxable-equivalent net interest income divided by average earning assets. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest margins for all earning assets, we use net interest income on a taxable-equivalent basis in calculating 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 June 30, 2016, March 31, 2016 and June 30, 2015 were $48 million, $48 million and $49 million, respectively. The taxable equivalent adjustments to net interest income for the first six months of 2016 and 2015 were $96 million and $98 million, respectively. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||||||||||||
Three months ended |
Six months ended |
||||||||||||||||||||
June 30 |
March 31 |
June 30 |
June 30 |
June 30 |
|||||||||||||||||
2016 |
2016 |
2015 |
2016 |
2015 |
|||||||||||||||||
PERFORMANCE RATIOS |
|||||||||||||||||||||
Net interest margin (a) |
2.70 |
% |
2.75 |
% |
2.73 |
% |
2.73 |
% |
2.78 |
% |
|||||||||||
Noninterest income to total revenue |
45 |
% |
43 |
% |
47 |
% |
44 |
% |
46 |
% |
|||||||||||
Efficiency (b) |
62 |
% |
62 |
% |
61 |
% |
62 |
% |
62 |
% |
|||||||||||
Return on: |
|||||||||||||||||||||
Average common shareholders' equity |
8.87 |
% |
8.44 |
% |
9.75 |
% |
8.66 |
% |
9.54 |
% |
|||||||||||
Average assets |
1.11 |
% |
1.07 |
% |
1.19 |
% |
1.09 |
% |
1.18 |
% |
|||||||||||
BUSINESS SEGMENT NET INCOME (LOSS) (c) (d) |
|||||||||||||||||||||
In millions |
|||||||||||||||||||||
Retail Banking |
$ |
307 |
$ |
268 |
$ |
241 |
$ |
575 |
$ |
443 |
|||||||||||
Corporate & Institutional Banking |
490 |
431 |
508 |
921 |
990 |
||||||||||||||||
Asset Management Group |
48 |
49 |
62 |
97 |
99 |
||||||||||||||||
Residential Mortgage Banking |
46 |
(13) |
19 |
33 |
47 |
||||||||||||||||
Non-Strategic Assets Portfolio |
29 |
52 |
56 |
81 |