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PNC Reports Second Quarter 2018 Net Income Of $1.4 Billion, $2.72 Diluted EPS
For the quarter |
||||||
2Q18 |
1Q18 |
2Q17 |
||||
Net income $ millions |
$1,356 |
$1,239 |
$1,097 |
|||
Diluted earnings per common share |
$2.72 |
$2.43 |
$2.10 |
"PNC's second quarter results were strong. We grew fee income and net interest income, expanded our margin, managed expenses well and maintained stable credit quality. Our board recently increased the common stock dividend 27 percent to an all-time high. We are continuing to invest in our businesses, including our middle market expansion and digital offerings, and remain focused on opportunities for growth and efficiency that will create long-term value for our shareholders."
Income Statement Highlights
Second quarter 2018 compared with first quarter 2018
- Net income of
$1.4 billion for the second quarter increased 9 percent compared with$1.2 billion for the first quarter, and PNC generated positive operating leverage. - Total revenue for the second quarter increased
$213 million , or 5 percent, to$4.3 billion . - Net interest income increased
$52 million , or 2 percent, to$2.4 billion due to higher loan and securities yields and an additional day in the second quarter partially offset by increased funding costs. - Net interest margin increased 5 basis points to 2.96 percent.
- Noninterest income increased
$161 million , or 9 percent, to$1.9 billion . - Growth in fee income of
$72 million , or 5 percent, reflected seasonality and higher business activity. - Other noninterest income increased
$89 million to $334 million due to higher revenue from private equity investments, and benefits from Visa Class B derivative fair value adjustments and commercial mortgage loans held for sale. - Noninterest expense increased
$57 million , or 2 percent, to$2.6 billion . - Provision for credit losses was
$80 million , a decrease of$12 million reflecting a lower provision for commercial loans.
Balance Sheet Highlights
- Average loans increased
$1.6 billion , or 1 percent, in the second quarter to$222.7 billion compared with the first quarter. - Average commercial lending balances grew
$1.5 billion primarily in PNC's corporate banking and business credit businesses. - Average consumer lending balances increased
$.1 billion reflecting growth in auto, residential mortgage and credit card loans substantially offset by lower home equity and education loans. - Overall credit quality remained strong.
- Nonperforming assets of
$1.9 billion atJune 30, 2018 decreased$150 million , or 7 percent, compared withMarch 31, 2018 . - Net charge-offs were
$109 million for the second quarter compared with$113 million for the first quarter. - Average deposits increased
$.3 billion to $261.0 billion in the second quarter compared with the first quarter as growth in consumer deposits was partially offset by seasonally lower commercial deposits. - Average investment securities increased
$2.8 billion , or 4 percent, to$77.5 billion in the second quarter compared with the first quarter. - Average balances held with the
Federal Reserve Bank declined$4.7 billion to $20.7 billion in the second quarter compared with the first quarter. - PNC completed common stock repurchase programs of
$2.4 billion , and repurchased shares for$.2 billion related to employee benefit plans, for the four quarters ending with the second quarter of 2018. A total of$4.1 billion of capital was returned to shareholders over this period through repurchases of 18.4 million common shares for$2.6 billion and dividends on common shares of$1.5 billion . - Capital returned to shareholders in the second quarter of 2018 totaled
$1.2 billion through repurchases of 5.7 million common shares for$.8 billion and dividends on common shares of$.4 billion . - PNC's board of directors raised the quarterly cash dividend on common stock to
95 cents per share, an increase of20 cents per share, or 27 percent, effective with the August dividend. - In
June 2018 PNC announced share repurchase programs of up to$2.0 billion for the four-quarter period beginning in the third quarter of 2018, including repurchases of up to$.3 billion related to stock issuances under employee benefit plans. - PNC maintained strong capital and liquidity positions.
- The Basel III common equity Tier 1 capital ratio was an estimated 9.5 percent at
June 30, 2018 compared with 9.6 percent atMarch 31, 2018 . - The Liquidity Coverage Ratio at
June 30, 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 |
2Q18 |
1Q18 |
2Q17 |
|||||||||
Net income |
$ |
1,356 |
$ |
1,239 |
$ |
1,097 |
||||||
Net income attributable to diluted common shares |
$ |
1,282 |
$ |
1,158 |
$ |
1,025 |
||||||
Diluted earnings per common share |
$ |
2.72 |
$ |
2.43 |
$ |
2.10 |
||||||
Average diluted common shares outstanding |
472 |
476 |
488 |
|||||||||
Return on average assets |
1.45 |
% |
1.34 |
% |
1.19 |
% |
||||||
Return on average common equity |
12.13 |
% |
11.04 |
% |
9.88 |
% |
||||||
Book value per common share |
Quarter end |
$ |
92.26 |
$ |
91.39 |
$ |
87.78 |
|||||
Tangible book value per common share (non-GAAP) |
Quarter end |
$ |
72.25 |
$ |
71.58 |
$ |
68.55 |
|||||
Cash dividends declared per common share |
$ |
.75 |
$ |
.75 |
$ |
.55 |
||||||
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 |
|||||||||||||
2Q18 vs |
2Q18 vs |
||||||||||||||
In millions |
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 |
||||||||||
Net interest income |
$ |
2,413 |
$ |
2,361 |
$ |
2,258 |
2 |
% |
7 |
% |
|||||
Noninterest income |
1,911 |
1,750 |
1,802 |
9 |
% |
6 |
% |
||||||||
Total revenue |
$ |
4,324 |
$ |
4,111 |
$ |
4,060 |
5 |
% |
7 |
% |
|||||
Total revenue for the second quarter of 2018 increased
Net interest income for the second quarter of 2018 increased
The net interest margin increased to 2.96 percent for the second quarter of 2018 compared with 2.91 percent for the first quarter and 2.84 percent for the second quarter of 2017. Higher loan and securities yields in the second quarter of 2018 were partially offset by higher borrowing and deposit costs in both comparisons reflecting the impact of interest rate increases.
Noninterest Income |
Change |
Change |
|||||||||||||
2Q18 vs |
2Q18 vs |
||||||||||||||
In millions |
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 |
||||||||||
Asset management |
$ |
456 |
$ |
455 |
$ |
398 |
— |
15 |
% |
||||||
Consumer services |
381 |
357 |
360 |
7 |
% |
6 |
% |
||||||||
Corporate services |
487 |
429 |
466 |
14 |
% |
5 |
% |
||||||||
Residential mortgage |
84 |
97 |
104 |
(13) |
% |
(19) |
% |
||||||||
Service charges on deposits |
169 |
167 |
170 |
1 |
% |
(1) |
% |
||||||||
Other |
334 |
245 |
304 |
36 |
% |
10 |
% |
||||||||
$ |
1,911 |
$ |
1,750 |
$ |
1,802 |
9 |
% |
6 |
% |
||||||
Noninterest income for the second quarter of 2018 increased
Other noninterest income for the second quarter of 2018 increased
Noninterest income for the second quarter of 2018 increased
CONSOLIDATED EXPENSE REVIEW |
|||||||||||||||
Noninterest Expense |
Change |
Change |
|||||||||||||
2Q18 vs |
2Q18 vs |
||||||||||||||
In millions |
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 |
||||||||||
Personnel |
$ |
1,356 |
$ |
1,354 |
$ |
1,276 |
— |
6 |
% |
||||||
Occupancy |
203 |
218 |
202 |
(7) |
% |
— |
|||||||||
Equipment |
281 |
273 |
281 |
3 |
% |
— |
|||||||||
Marketing |
75 |
55 |
67 |
36 |
% |
12 |
% |
||||||||
Other |
669 |
627 |
653 |
7 |
% |
2 |
% |
||||||||
$ |
2,584 |
$ |
2,527 |
$ |
2,479 |
2 |
% |
4 |
% |
||||||
Noninterest expense for the second quarter of 2018 increased
Noninterest expense for the second quarter of 2018 increased
The effective tax rate was 18.3 percent for the second quarter of 2018 and 17.0 percent for the first quarter reflecting the new federal statutory tax rate of 21.0 percent. The increase in the effective tax rate over the first quarter primarily resulted from higher second quarter pretax earnings and the impact of higher first quarter tax deductions related to stock-based compensation. The effective tax rate was 26.0 percent for the second quarter of 2017.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were
Loans |
Change |
Change |
|||||||||||||
2Q18 vs |
2Q18 vs |
||||||||||||||
In billions |
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 |
||||||||||
Average |
|||||||||||||||
Commercial lending |
$ |
149.7 |
$ |
148.2 |
$ |
144.2 |
1 |
% |
4 |
% |
|||||
Consumer lending |
73.0 |
72.9 |
72.2 |
— |
1 |
% |
|||||||||
Average loans |
$ |
222.7 |
$ |
221.1 |
$ |
216.4 |
1 |
% |
3 |
% |
|||||
Quarter end |
|||||||||||||||
Commercial lending |
$ |
149.6 |
$ |
148.9 |
$ |
145.7 |
— |
3 |
% |
||||||
Consumer lending |
73.2 |
72.7 |
72.3 |
1 |
% |
1 |
% |
||||||||
Total loans |
$ |
222.8 |
$ |
221.6 |
$ |
218.0 |
1 |
% |
2 |
% |
|||||
Average loans for the second quarter of 2018 increased
Second quarter 2018 average and period end loans increased
Investment Securities |
Change |
Change |
|||||||||||||
2Q18 vs |
2Q18 vs |
||||||||||||||
In billions |
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 |
||||||||||
Average |
$ |
77.5 |
$ |
74.7 |
$ |
75.4 |
4 |
% |
3 |
% |
|||||
Quarter end |
$ |
80.1 |
$ |
74.5 |
$ |
76.4 |
8 |
% |
5 |
% |
|||||
Investment securities average balances for the second quarter of 2018 increased
Average balances held with the
Deposits |
Change |
Change |
|||||||||||||
2Q18 vs |
2Q18 vs |
||||||||||||||
In billions |
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 |
||||||||||
Average |
|||||||||||||||
Noninterest-bearing |
$ |
76.6 |
$ |
77.2 |
$ |
77.3 |
(1) |
% |
(1) |
% |
|||||
Interest-bearing |
184.4 |
183.5 |
179.1 |
— |
3 |
% |
|||||||||
Average deposits |
$ |
261.0 |
$ |
260.7 |
$ |
256.4 |
— |
2 |
% |
||||||
Quarter end |
|||||||||||||||
Noninterest-bearing |
$ |
79.1 |
$ |
78.3 |
$ |
79.6 |
1 |
% |
(1) |
% |
|||||
Interest-bearing |
185.8 |
186.4 |
179.6 |
— |
3 |
% |
|||||||||
Total deposits |
$ |
264.9 |
$ |
264.7 |
$ |
259.2 |
— |
2 |
% |
||||||
Average deposits for the second quarter of 2018 increased
Borrowed Funds |
Change |
Change |
|||||||||||||
2Q18 vs |
2Q18 vs |
||||||||||||||
In billions |
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 |
||||||||||
Average |
$ |
59.0 |
$ |
59.7 |
$ |
57.6 |
(1) |
% |
2 |
% |
|||||
Quarter end |
$ |
59.2 |
$ |
58.0 |
$ |
56.4 |
2 |
% |
5 |
% |
|||||
Average borrowed funds for the second quarter of 2018 declined
Capital |
||||||||||||
6/30/2018 |
* |
3/31/2018 |
6/30/2017 |
|||||||||
Common shareholders' equity In billions |
$ |
42.9 |
$ |
43.0 |
$ |
42.1 |
||||||
Basel III common equity Tier 1 capital ratio |
9.5 |
% |
9.6 |
% |
9.8 |
% |
||||||
* Ratio estimated |
||||||||||||
PNC maintained a strong capital position. Common shareholders' equity at
PNC completed common stock repurchase programs of
In
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 |
6/30/18 vs |
6/30/18 vs |
|||||||||||||
In millions |
6/30/2018 |
3/31/2018 |
6/30/2017 |
3/31/18 |
6/30/17 |
||||||||||
Nonperforming loans |
$ |
1,719 |
$ |
1,842 |
$ |
1,957 |
(7) |
% |
(12) |
% |
|||||
Nonperforming assets |
$ |
1,854 |
$ |
2,004 |
$ |
2,153 |
(7) |
% |
(14) |
% |
|||||
Accruing loans past due 90 days or more |
$ |
586 |
$ |
628 |
$ |
674 |
(7) |
% |
(13) |
% |
|||||
Net charge-offs |
$ |
109 |
$ |
113 |
$ |
110 |
(4) |
% |
(1) |
% |
|||||
Provision for credit losses |
$ |
80 |
$ |
92 |
$ |
98 |
(13) |
% |
(18) |
% |
|||||
Allowance for loan and lease losses |
$ |
2,581 |
$ |
2,604 |
$ |
2,561 |
(1) |
% |
1 |
% |
|||||
Overall credit quality for the second quarter of 2018 remained strong. Provision for credit losses for the second quarter decreased
Nonperforming assets at
Overall delinquencies at
Net charge-offs for the second quarter of 2018 decreased
The allowance for loan and lease losses to total loans was 1.16 percent at
BUSINESS SEGMENT RESULTS |
|||||||||||
Business Segment Income |
|||||||||||
In millions |
2Q18 |
1Q18 |
2Q17 |
||||||||
Retail Banking |
$ |
330 |
$ |
296 |
$ |
230 |
|||||
Corporate & Institutional Banking |
675 |
584 |
518 |
||||||||
Asset Management Group |
49 |
68 |
52 |
||||||||
Other, including BlackRock |
302 |
291 |
297 |
||||||||
Net income |
$ |
1,356 |
$ |
1,239 |
$ |
1,097 |
|||||
See accompanying notes in Consolidated Financial Highlights |
|||||||||||
Retail Banking |
Change |
Change |
|||||||||||||||||
2Q18 vs |
2Q18 vs |
||||||||||||||||||
In millions |
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 |
||||||||||||||
Net interest income |
$ |
1,277 |
$ |
1,218 |
$ |
1,139 |
$ |
59 |
$ |
138 |
|||||||||
Noninterest income |
$ |
678 |
$ |
635 |
$ |
645 |
$ |
43 |
$ |
33 |
|||||||||
Provision for credit losses |
$ |
72 |
$ |
69 |
$ |
50 |
$ |
3 |
$ |
22 |
|||||||||
Noninterest expense |
$ |
1,450 |
$ |
1,395 |
$ |
1,370 |
$ |
55 |
$ |
80 |
|||||||||
Earnings |
$ |
330 |
$ |
296 |
$ |
230 |
$ |
34 |
$ |
100 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
73.7 |
$ |
73.5 |
$ |
72.3 |
$ |
.2 |
$ |
1.4 |
|||||||||
Average deposits |
$ |
162.6 |
$ |
160.0 |
$ |
160.2 |
$ |
2.6 |
$ |
2.4 |
|||||||||
Retail Banking earnings for the second quarter of 2018 increased in both comparisons. Noninterest income for the second quarter of 2018 included positive derivative fair value adjustments of
- Average loans increased 2 percent compared with second quarter 2017 due to growth in residential mortgage, auto and credit card loans partially offset by lower home equity and education loans.
- Average deposits grew in both comparisons due to higher demand and savings deposits which were partially offset by lower money market deposits, reflecting a shift to relationship-based savings products. Certificates of deposit declined due to the continued net runoff of maturing accounts.
- Net charge-offs were
$112 million for the second quarter of 2018 compared with$100 million in the first quarter and$87 million in the second quarter of 2017. - Residential mortgage loan origination volume was
$2.0 billion for the second quarter of 2018 compared with$1.7 billion for the first quarter and$2.2 billion for the second quarter of 2017. Approximately 71 percent of second quarter 2018 volume was for home purchase transactions compared with 56 percent for the first quarter and 61 percent for the second quarter of 2017. - The residential mortgage servicing portfolio was
$124 billion atJune 30, 2018 compared with$125 billion atMarch 31, 2018 and$131 billion atJune 30, 2017 . Residential mortgage loan servicing acquisitions were$3 billion for second quarter 2018 compared with$1 billion for the first quarter and$8 billion for the second quarter of 2017. - Approximately 65 percent of consumer customers used non-teller channels for the majority of their transactions during the second quarter of 2018 compared with 64 percent in the first quarter and 62 percent in the second quarter of 2017.
- Deposit transactions via ATM and mobile channels were 54 percent of total deposit transactions in the second and first quarters of 2018 compared with 52 percent in the second quarter of 2017.
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||
2Q18 vs |
2Q18 vs |
||||||||||||||||||
In millions |
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 |
||||||||||||||
Net interest income |
$ |
900 |
$ |
882 |
$ |
890 |
$ |
18 |
$ |
10 |
|||||||||
Noninterest income |
$ |
635 |
$ |
547 |
$ |
588 |
$ |
88 |
$ |
47 |
|||||||||
Provision for credit losses |
$ |
15 |
$ |
41 |
$ |
87 |
$ |
(26) |
$ |
(72) |
|||||||||
Noninterest expense |
$ |
639 |
$ |
626 |
$ |
602 |
$ |
13 |
$ |
37 |
|||||||||
Earnings |
$ |
675 |
$ |
584 |
$ |
518 |
$ |
91 |
$ |
157 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
137.0 |
$ |
135.5 |
$ |
131.5 |
$ |
1.5 |
$ |
5.5 |
|||||||||
Average deposits |
$ |
85.8 |
$ |
87.9 |
$ |
83.7 |
$ |
(2.1) |
$ |
2.1 |
|||||||||
Corporate & Institutional Banking earnings for the second quarter of 2018 increased compared with the first quarter of 2018 and the second quarter of 2017. Noninterest income increased in both comparisons primarily due to higher capital markets-related revenue, including merger and acquisition advisory fees, and growth in treasury management product revenue. Higher revenue from commercial mortgage banking activities also contributed to the increase over the first quarter. Provision for credit losses decreased in both comparisons as a result of lower specific loan reserves. Additionally, second quarter 2017 included an initial provision for the loan and lease portfolio obtained in the acquisition of a commercial and vendor finance business. Noninterest expense increased in both comparisons largely due to investments in strategic initiatives and variable costs associated with increased business activity.
- Average loans increased 1 percent compared with the first quarter and 4 percent compared with the second quarter of 2017 primarily driven by commercial loan growth in PNC's corporate banking, business credit and equipment finance businesses.
- Average deposits decreased 2 percent from the first quarter as a result of seasonal declines, and increased 3 percent compared with the second quarter of 2017 due to growth in interest-bearing deposits partially offset by a decrease in noninterest-bearing demand deposits.
- Net charge-offs were in a net recovery position of
$2 million in the second quarter of 2018 compared with net charge-offs of$9 million in the first quarter and$21 million in the second quarter of 2017. - PNC has formalized plans to expand its middle market business into the
Boston andPhoenix markets in 2019, following expansion into theDenver ,Houston andNashville markets in 2018.
Asset Management Group |
Change |
Change |
|||||||||||||||||
2Q18 vs |
2Q18 vs |
||||||||||||||||||
In millions |
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 |
||||||||||||||
Net interest income |
$ |
72 |
$ |
74 |
$ |
73 |
$ |
(2) |
$ |
(1) |
|||||||||
Noninterest income |
$ |
222 |
$ |
226 |
$ |
217 |
$ |
(4) |
$ |
5 |
|||||||||
Provision for credit losses (benefit) |
$ |
7 |
$ |
(7) |
$ |
(7) |
$ |
14 |
$ |
14 |
|||||||||
Noninterest expense |
$ |
223 |
$ |
218 |
$ |
215 |
$ |
5 |
$ |
8 |
|||||||||
Earnings |
$ |
49 |
$ |
68 |
$ |
52 |
$ |
(19) |
$ |
(3) |
|||||||||
In billions |
|||||||||||||||||||
Client assets under administration at |
$ |
279 |
$ |
277 |
$ |
266 |
$ |
2 |
$ |
13 |
|||||||||
Average loans |
$ |
7.0 |
$ |
7.0 |
$ |
7.0 |
— |
— |
|||||||||||
Average deposits |
$ |
12.3 |
$ |
12.5 |
$ |
12.4 |
$ |
(.2) |
$ |
(.1) |
|||||||||
- Client assets under administration at
June 30, 2018 included discretionary client assets under management of$149 billion and nondiscretionary client assets under administration of$130 billion . - Discretionary client assets under management increased
$1 billion compared withMarch 31, 2018 primarily due to higher equity markets atJune 30, 2018 and net business activities, and increased$8 billion compared withJune 30, 2017 primarily attributable to equity market increases.
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 |
|||||||||||||||
2018 |
2018 |
2017 |
2018 |
2017 |
||||||||||||||||
Revenue |
||||||||||||||||||||
Net interest income |
$ |
2,413 |
$ |
2,361 |
$ |
2,258 |
$ |
4,774 |
$ |
4,418 |
||||||||||
Noninterest income |
1,911 |
1,750 |
1,802 |
3,661 |
3,526 |
|||||||||||||||
Total revenue |
4,324 |
4,111 |
4,060 |
8,435 |
7,944 |
|||||||||||||||
Provision for credit losses |
80 |
92 |
98 |
172 |
186 |
|||||||||||||||
Noninterest expense |
2,584 |
2,527 |
2,479 |
5,111 |
4,881 |
|||||||||||||||
Income before income taxes (benefit) and noncontrolling |
$ |
1,660 |
$ |
1,492 |
$ |
1,483 |
$ |
3,152 |
$ |
2,877 |
||||||||||
Net income |
$ |
1,356 |
$ |
1,239 |
$ |
1,097 |
$ |
2,595 |
$ |
2,171 |
||||||||||
Less: |
||||||||||||||||||||
Net income attributable to noncontrolling interests |
10 |
10 |
10 |
20 |
27 |
|||||||||||||||
Preferred stock dividends (a) |
55 |
63 |
55 |
118 |
118 |
|||||||||||||||
Preferred stock discount accretion and redemptions |
1 |
1 |
2 |
2 |
23 |
|||||||||||||||
Net income attributable to common shareholders |
$ |
1,290 |
$ |
1,165 |
$ |
1,030 |
$ |
2,455 |
$ |
2,003 |
||||||||||
Less: |
||||||||||||||||||||
Dividends and undistributed earnings allocated to |
5 |
5 |
4 |
10 |
10 |
|||||||||||||||
Impact of BlackRock earnings per share dilution |
3 |
2 |
1 |
5 |
5 |
|||||||||||||||
Net income attributable to diluted common shares |
$ |
1,282 |
$ |
1,158 |
$ |
1,025 |
$ |
2,440 |
$ |
1,988 |
||||||||||
Diluted earnings per common share |
$ |
2.72 |
$ |
2.43 |
$ |
2.10 |
$ |
5.15 |
$ |
4.05 |
||||||||||
Cash dividends declared per common share |
$ |
.75 |
$ |
.75 |
$ |
.55 |
$ |
1.50 |
$ |
1.10 |
||||||||||
Effective tax rate (b) |
18.3 |
% |
17.0 |
% |
26.0 |
% |
17.7 |
% |
24.5 |
% |
(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 first and second quarter 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 |
Six months ended |
|||||||||||||||||||
June 30 |
March 31 |
June 30 |
June 30 |
June 30 |
||||||||||||||||
2018 |
2018 |
2017 |
2018 |
2017 |
||||||||||||||||
PERFORMANCE RATIOS |
||||||||||||||||||||
Net interest margin (a) |
2.96 |
% |
2.91 |
% |
2.84 |
% |
2.94 |
% |
2.81 |
% |
||||||||||
Noninterest income to total revenue |
44 |
% |
43 |
% |
44 |
% |
43 |
% |
44 |
% |
||||||||||
Efficiency (b) |
60 |
% |
61 |
% |
61 |
% |
61 |
% |
61 |
% |
||||||||||
Return on: |
||||||||||||||||||||
Average common shareholders' equity (c) |
12.13 |
% |
11.04 |
% |
9.88 |
% |
11.59 |
% |
9.69 |
% |
||||||||||
Average assets (c) |
1.45 |
% |
1.34 |
% |
1.19 |
% |
1.39 |
% |
1.19 |
% |
||||||||||
BUSINESS SEGMENT NET INCOME (LOSS) (c) (d) |
||||||||||||||||||||
In millions |
||||||||||||||||||||
Retail Banking |
$ |
330 |
$ |
296 |
$ |
230 |
$ |
626 |
$ |
443 |
||||||||||
Corporate & Institutional Banking |
675 |
584 |
518 |
1,259 |
1,002 |
|||||||||||||||
Asset Management Group |
49 |
68 |
52 |
117 |
99 |
|||||||||||||||
Other, including BlackRock (e) |
302 |
291 |
297 |
593 |
627 |
|||||||||||||||
Total net income |
$ |
1,356 |
$ |
1,239 |
$ |
1,097 |
$ |
2,595 |
$ |
2,171 |
(a) |
Calculated as annualized taxable-equivalent net interest income divided by average earning assets. To provide more meaningful comparisons of net interest margins, 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, 2018, March 31, 2018 and June 30, 2017 were $29 million, $29 million and $54 million, respectively. The taxable equivalent adjustments to net interest income for the six months ended June 30, 2018 and June 30, 2017 were $58 million and $106 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 first and second quarter 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) |
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) |
||||||||||
June 30 |
March 31 |
June 30 |
|||||||||
2018 |
2018 |
2017 |
|||||||||
BALANCE SHEET DATA |
|||||||||||
Dollars in millions, except per share data |
|||||||||||
Assets |
$ |
380,711 |
$ |
379,161 |
$ |
372,190 |
|||||
Loans (a) |
$ |
222,855 |
$ |
221,614 |
$ |
218,034 |
|||||
Allowance for loan and lease losses |
$ |
2,581 |
$ |
2,604 |
$ |
2,561 |
|||||
Interest-earning deposits with banks |
$ |
21,972 |
$ |
28,821 |
$ |
22,482 |
|||||
Investment securities |
$ |
80,125 |
$ |
74,562 |
$ |
76,431 |
|||||
Loans held for sale (a) |
$ |
1,325 |
$ |
965 |
$ |
2,030 |
|||||
Equity investments (b) |
$ |
12,430 |
$ |
12,008 |
$ |
10,819 |
|||||
Mortgage servicing rights |
$ |
2,045 |
$ |
1,979 |
$ |
1,867 |
|||||
Goodwill |
$ |
9,218 |
$ |
9,218 |
$ |
9,163 |
|||||
Other assets (a) |
$ |
27,897 |
$ |
27,949 |
$ |
28,886 |
|||||
Noninterest-bearing deposits |
$ |
79,047 |
$ |
78,303 |
$ |
79,550 |
|||||
Interest-bearing deposits |
$ |
185,838 |
$ |
186,401 |
$ |
179,626 |
|||||
Total deposits |
$ |
264,885 |
$ |
264,704 |
$ |
259,176 |
|||||
Borrowed funds (a) |
$ |
59,222 |
$ |
58,039 |
$ |
56,406 |
|||||
Shareholders' equity |
$ |
46,904 |
$ |
46,969 |
$ |
46,084 |
|||||
Common shareholders' equity |
$ |
42,917 |
$ |
42,983 |
$ |
42,103 |
|||||
Accumulated other comprehensive income (loss) |
$ |
(940) |
$ |
(699) |
$ |
(98) |
|||||
Book value per common share |
$ |
92.26 |
$ |
91.39 |
$ |
87.78 |
|||||
Tangible book value per common share (Non-GAAP) (c) |
$ |
72.25 |
$ |
71.58 |
$ |
68.55 |
|||||
Period end common shares outstanding (millions) |
465 |
470 |
480 |
||||||||
Loans to deposits |
84 |
% |
84 |
% |
84 |
% |
|||||
CLIENT ASSETS (billions) |
|||||||||||
Discretionary client assets under management |
$ |
149 |
$ |
148 |
$ |
141 |
|||||
Nondiscretionary client assets under administration |
130 |
129 |
125 |
||||||||
Total client assets under administration |
279 |
277 |
266 |
||||||||
Brokerage account client assets |
49 |
49 |
46 |
||||||||
Total client assets |
$ |
328 |
$ |
326 |
$ |
312 |
|||||
CAPITAL RATIOS |
|||||||||||
Basel III (d) (e) (f) |
|||||||||||
Common equity Tier 1 |
9.5 |
% |
9.6 |
% |
N/A |
||||||
Tier 1 risk-based |
10.7 |
% |
10.8 |
% |
N/A |
||||||
Total capital risk-based |
12.6 |
% |
12.8 |
% |
N/A |
||||||
Leverage |
9.4 |
% |
9.4 |
% |
N/A |
||||||
Supplementary leverage |
7.8 |
% |
7.9 |
% |
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 |
10.3 |
% |
|||||||
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 |
11.3 |
% |
11.3 |
% |
11.3 |
% |
|||||
ASSET QUALITY |
|||||||||||
Nonperforming loans to total loans |
.77 |
% |
.83 |
% |
.90 |
% |
|||||
Nonperforming assets to total loans, OREO, foreclosed and other assets |
.83 |
% |
.90 |
% |
.99 |
% |
|||||
Nonperforming assets to total assets |
.49 |
% |
.53 |
% |
.58 |
% |
|||||
Net charge-offs to average loans (for the three months ended) (annualized) |
.20 |
% |
.21 |
% |
.20 |
% |
|||||
Allowance for loan and lease losses to total loans |
1.16 |
% |
1.18 |
% |
1.17 |
% |
|||||
Allowance for loan and lease losses to nonperforming loans |
150 |
% |
141 |
% |
131 |
% |
|||||
Accruing loans past due 90 days or more (in millions) |
$ |
586 |
$ |
628 |
$ |
674 |
(a) |
Amounts include assets and liabilities for which we have elected the fair value option. Our first quarter 2018 Form 10-Q included, and our second quarter 2018 Form 10-Q will include, additional information regarding these Consolidated Balance Sheet line items. |
(b) |
Amounts include our equity interest in BlackRock. The amount at March 31, 2018 included $.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 17 for additional information. |
(d) |
The ratios as of June 30, 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 16 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 June 30, 2018, actual Basel III March 31, 2018, pro forma Fully Phased-In Basel III June 30, 2017 and actual June 30, 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 (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 |
2017 Transitional |
||||||||||||||||
June 30 |
March 31 |
June 30 |
June 30 |
|||||||||||||||
Dollars in millions |
2018 |
2018 |
2017 |
2017 |
||||||||||||||
Common stock, related surplus and retained earnings, net of |
$ |
43,857 |
$ |
43,681 |
$ |
42,200 |
$ |
42,200 |
||||||||||
Less regulatory capital adjustments: |
||||||||||||||||||
Goodwill and disallowed intangibles, net of deferred tax |
(9,319) |
(9,343) |
(9,225) |
(9,156) |
||||||||||||||
Basel III total threshold deductions |
(3,430) |
(3,272) |
(1,702) |
(1,144) |
||||||||||||||
Accumulated other comprehensive income (loss) (c) |
(757) |
(645) |
(209) |
(167) |
||||||||||||||
All other adjustments |
(167) |
(121) |
(181) |
(179) |
||||||||||||||
Basel III Common equity Tier 1 capital |
$ |
30,184 |
$ |
30,300 |
$ |
30,883 |
$ |
31,554 |
||||||||||
Basel III standardized approach risk-weighted assets (d) |
$ |
319,143 |
$ |
314,922 |
$ |
314,389 |
$ |
306,379 |
||||||||||
Basel III advanced approaches risk-weighted assets (e) |
280,993 |
$ |
280,385 |
$ |
282,472 |
N/A |
||||||||||||
Basel III Common equity Tier 1 capital ratio |
9.5 |
% |
9.6 |
% |
9.8 |
% |
10.3 |
% |
||||||||||
Risk weight and associated rules utilized |
Standardized |
Standardized |
Standardized |
(a) |
All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented and calculated based on the standardized approach. |
(b) |
2017 Fully Phased-In Basel III results are presented as Pro forma estimates. |
(c) |
Represents net adjustments related to accumulated other comprehensive income (loss) for securities currently and those transferred from available for sale, as well as pension and other postretirement plans. |
(d) |
Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets. |
(e) |
Basel III advanced approaches risk-weighted assets are based on the Basel III advanced approaches rules, and include credit, market and operational risk-weighted assets. During the parallel run qualification phase, PNC has refined the data, models and internal processes used as part of the advanced approaches for determining risk-weighted assets. We anticipate additional refinements through the parallel run qualification phase. |
Our Basel III capital ratios may be impacted by additional regulatory guidance or analysis, and, in the case of those ratios calculated using the advanced approaches, may be subject to variability based on the ongoing evolution, validation and regulatory approval of PNC's models that are integral to the calculation of advanced approaches risk-weighted assets as PNC moves through the parallel run approval process.
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||
Tangible book value per common share is a non-GAAP measure and is calculated based on tangible common shareholders' equity divided by period-end common shares outstanding. We believe this non-GAAP measure serves as a useful tool to help evaluate the strength and discipline of a company's capital management strategies and as an additional, conservative measure of total company value. |
|||||||||||
Tangible Book Value per Common Share (Non-GAAP) |
|||||||||||
June 30 |
March 31 |
June 30 |
|||||||||
Dollars in millions, except per share data |
2018 |
2018 |
2017 |
||||||||
Book value per common share |
$ |
92.26 |
$ |
91.39 |
$ |
87.78 |
|||||
Tangible book value per common share |
|||||||||||
Common shareholders' equity |
$ |
42,917 |
$ |
42,983 |
$ |
42,103 |
|||||
Goodwill and Other Intangible Assets |
(9,511) |
(9,533) |
(9,527) |
||||||||
Deferred tax liabilities on Goodwill and Other Intangible Assets |
192 |
192 |
302 |
||||||||
Tangible common shareholders' equity |
$ |