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PNC REPORTS SECOND QUARTER 2022 NET INCOME OF $1.5 BILLION, $3.39 DILUTED EPS OR $3.42 AS ADJUSTED
5% loan growth; 22 basis point NIM expansion; 7% positive operating leverage
For the quarter |
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In millions, except per share data and as noted |
2Q22 |
1Q22 |
2Q21 |
Second Quarter Highlights |
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Comparisons reflect 2Q22 vs. 1Q22 |
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Financial Results |
||||||||||
Revenue |
$ 5,116 |
$ 4,692 |
$ 4,667 |
▪ Operating leverage of 7%, reflecting revenue growth of 9% and expense growth of 2%
▪ Net interest and noninterest income each grew 9%
▪ NIM increased 22 basis points
▪ PPNR increased 23%
▪ Average loans grew 5%, driven by commercial loan growth
▪ Average deposits decreased 2%
▪ Provision for credit losses of
▪ Net loan charge-offs were
▪ Tangible book value decreased 7%, due to the change in AOCI – Held to maturity securities were 60% of investment securities at
▪ PNC returned |
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Noninterest expense |
3,244 |
3,172 |
3,050 |
|||||||
Pretax, pre-provision earnings (PPNR) (non-GAAP) |
1,872 |
1,520 |
1,617 |
|||||||
Integration costs |
14 |
31 |
111 |
|||||||
PPNR excluding integration costs (non-GAAP) |
1,886 |
1,551 |
1,728 |
|||||||
Provision for (recapture of) credit losses |
36 |
(208) |
302 |
|||||||
Net income |
1,496 |
1,429 |
1,103 |
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Per Common Share |
||||||||||
Diluted earnings - as reported |
$ 3.39 |
$ 3.23 |
$ 2.43 |
|||||||
Impact from integration costs (non-GAAP) |
0.03 |
0.06 |
0.21 |
|||||||
Diluted earnings - as adjusted (non-GAAP) |
3.42 |
3.29 |
2.64 |
|||||||
Average diluted common shares outstanding |
414 |
420 |
427 |
|||||||
Book value |
101.39 |
106.47 |
120.25 |
|||||||
Tangible book value (non-GAAP) |
74.39 |
79.68 |
93.83 |
|||||||
Balance Sheet & Credit Quality |
||||||||||
Average loans In billions |
$ 304.8 |
$ 290.7 |
$ 255.6 |
|||||||
Average deposits In billions |
446.5 |
453.3 |
401.7 |
|||||||
Accumulated other comprehensive income (loss) (AOCI) In billions |
(8.4) |
(5.7) |
1.5 |
|||||||
Net loan charge-offs |
83 |
137 |
306 |
|||||||
Allowance for credit losses to total loans |
1.65 % |
1.76 % |
2.16 % |
|||||||
Selected Ratios |
||||||||||
Return on average common shareholders' equity |
13.52 % |
11.64 % |
8.32 % |
|||||||
Return on average assets |
1.10 |
1.05 |
0.88 |
|||||||
Net interest margin (NIM) (non-GAAP) |
2.50 |
2.28 |
2.29 |
|||||||
Noninterest income to total revenue |
40 |
40 |
45 |
|||||||
Efficiency |
63 |
68 |
65 |
|||||||
Common equity Tier 1 capital ratio |
9.6 |
9.9 |
10.1 |
|||||||
Diluted earnings as adjusted is a non-GAAP measure calculated by excluding post-tax integration costs for |
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From
"PNC had a very strong second quarter. Loan growth exceeded our expectations, both net interest income and net interest margin increased meaningfully, fees rebounded and expenses remained well controlled. We're gaining traction across our expanded footprint and are confident that our capital levels and strong credit quality position us for continued success."
Income Statement Highlights
Second quarter 2022 compared with first quarter 2022
- Net income of
$1.5 billion increased$67 million , or 5%, driven by growth in pretax, pre-provision earnings of 23%. - Total revenue of
$5.1 billion increased$424 million , or 9%, due to higher net interest income and noninterest income. - Net interest income of
$3.1 billion increased$247 million , or 9%, driven by higher yields on interest earning assets and increased loan balances, partially offset by higher funding costs. - Net interest margin of 2.50% increased 22 basis points due to higher yields on interest earning assets.
- Noninterest income of
$2.1 billion increased$177 million , or 9%. - Fee income of
$1.9 billion increased$211 million , or 13%, reflecting higher capital markets related revenue, increased card and cash management fees and higher lending and deposit services revenue. - Other noninterest income of
$177 million decreased$34 million , or 16%, and included negative Visa Class B fair value adjustments of$16 million related to litigation escrow funding and derivative valuation changes. - Noninterest expense of
$3.2 billion increased$72 million , or 2%, driven by increased business activity, annual employee merit increases and higher marketing spend. - Provision for credit losses was
$36 million in the second quarter. The first quarter of 2022 included a provision recapture of$208 million . - The effective tax rate was 18.5% for the second quarter and 17.3% for the first quarter.
Balance Sheet Highlights
Second quarter 2022 compared with first quarter 2022 or
- Average loans of
$304.8 billion increased$14.1 billion , or 5%. - Average commercial loans of
$207.6 billion grew$12.0 billion driven primarily by growth in PNC's corporate banking and business credit businesses of$11.1 billion and$1.7 billion , respectively, partially offset by PPP loan forgiveness. - Average consumer loans of
$97.2 billion increased$2.1 billion reflecting higher residential mortgage and home equity loans, partially offset by lower auto loans. - Credit quality performance:
- Delinquencies of
$1.5 billion decreased$188 million , or 11%, due to both lower consumer and commercial delinquencies, which included the resolution ofBBVA USA conversion-related administrative and operational delays. - Total nonperforming loans of
$2.0 billion decreased$252 million , or 11%. - Net loan charge-offs of
$83 million decreased$54 million . - The allowance for credit losses to total loans was 1.65% at
June 30, 2022 compared with 1.76% atMarch 31, 2022 . - Average deposits of
$446.5 billion decreased$6.8 billion , driven by lower commercial deposits. - Deposits at
June 30, 2022 of$440.8 billion decreased$9.4 billion as a result of lower consumer and commercial deposits. - Average investment securities of
$134.7 billion grew$0.8 billion , or 1%. - Average
Federal Reserve Bank balances of$39.3 billion decreased$23.0 billion , driven by higher loans outstanding and lower deposits. - PNC maintained strong capital and liquidity positions.
- On
July 1, 2022 , the PNC board of directors declared a quarterly cash dividend on common stock of$1.50 per share payable onAugust 5, 2022 . - PNC returned
$1.4 billion of capital to shareholders through$737 million of common share repurchases, representing 4.3 million shares, and$627 million of dividends on common shares. - The Basel III common equity Tier 1 capital ratio was an estimated 9.6% at
June 30, 2022 and 9.9% atMarch 31, 2022 . - The Liquidity Coverage Ratio at
June 30, 2022 for PNC exceeded the regulatory minimum requirement.
Earnings Summary |
||||||
In millions, except per share data |
2Q22 |
1Q22 |
2Q21 |
|||
Net income |
$ 1,496 |
$ 1,429 |
$ 1,103 |
|||
Net income attributable to diluted common shares - as reported |
$ 1,402 |
$ 1,355 |
$ 1,037 |
|||
Net income attributable to diluted common shares - as adjusted (non-GAAP) |
$ 1,413 |
$ 1,379 |
$ 1,125 |
|||
Diluted earnings per common share - as reported |
$ 3.39 |
$ 3.23 |
$ 2.43 |
|||
Diluted earnings per common share - as adjusted (non-GAAP) |
$ 3.42 |
$ 3.29 |
$ 2.64 |
|||
Average diluted common shares outstanding |
414 |
420 |
427 |
|||
Cash dividends declared per common share |
$ 1.50 |
$ 1.25 |
$ 1.15 |
|||
See non-GAAP financial measures included in the Consolidated Financial Highlights accompanying this news release |
Second quarter 2022 net income of
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported (GAAP) amounts. This information supplements results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, GAAP results. Effective for the first quarter of 2022, the presentation of noninterest income has been recategorized. Fee income, a non-GAAP financial measure, refers to noninterest income in the following categories: asset management and brokerage, capital markets related, card and cash management, lending and deposit services and residential and commercial mortgage. See a description of each updated noninterest income revenue category in PNC's first quarter 2022 Form 10-
CONSOLIDATED REVENUE REVIEW |
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Revenue |
Change |
Change |
|||||
2Q22 vs |
2Q22 vs |
||||||
In millions |
2Q22 |
1Q22 |
2Q21 |
1Q22 |
2Q21 |
||
Net interest income |
$ 3,051 |
$ 2,804 |
$ 2,581 |
9 % |
18 % |
||
Noninterest income |
2,065 |
1,888 |
2,086 |
9 % |
(1) % |
||
Total revenue |
$ 5,116 |
$ 4,692 |
$ 4,667 |
9 % |
10 % |
||
Total revenue for the second quarter of 2022 increased
Net interest income of
The net interest margin was 2.50% in the second quarter of 2022, increasing 22 basis points and 21 basis points compared with the first quarter of 2022 and the second quarter of 2021, respectively. In both comparisons the increase was primarily due to higher yields on interest earning assets.
Noninterest Income |
Change |
Change |
|||||
2Q22 vs |
2Q22 vs |
||||||
In millions |
2Q22 |
1Q22 |
2Q21 |
1Q22 |
2Q21 |
||
Asset management and brokerage |
$ 365 |
$ 377 |
$ 350 |
(3) % |
4 % |
||
Capital markets related |
409 |
252 |
324 |
62 % |
26 % |
||
Card and cash management |
671 |
620 |
597 |
8 % |
12 % |
||
Lending and deposit services |
282 |
269 |
270 |
5 % |
4 % |
||
Residential and commercial mortgage |
161 |
159 |
206 |
1 % |
(22) % |
||
Other |
177 |
211 |
339 |
(16) % |
(48) % |
||
$ 2,065 |
$ 1,888 |
$ 2,086 |
9 % |
(1) % |
|||
Noninterest income for the second quarter of 2022 increased
Noninterest income for the second quarter of 2022 decreased
CONSOLIDATED EXPENSE REVIEW |
|||||||
Noninterest Expense |
Change |
Change |
|||||
2Q22 vs |
2Q22 vs |
||||||
In millions |
2Q22 |
1Q22 |
2Q21 |
1Q22 |
2Q21 |
||
Personnel |
$ 1,779 |
$ 1,717 |
$ 1,640 |
4 % |
8 % |
||
Occupancy |
246 |
258 |
217 |
(5) % |
13 % |
||
Equipment |
351 |
331 |
326 |
6 % |
8 % |
||
Marketing |
95 |
61 |
74 |
56 % |
28 % |
||
Other |
773 |
805 |
793 |
(4) % |
(3) % |
||
$ 3,244 |
$ 3,172 |
$ 3,050 |
2 % |
6 % |
|||
Noninterest expense for the second quarter of 2022 increased
Noninterest expense increased
The effective tax rate was 18.5% for the second quarter of 2022, 17.3% for the first quarter of 2022 and 16.1% for the second quarter of 2021.
CONSOLIDATED BALANCE SHEET REVIEW
Average total assets were
Loans |
Change |
Change |
|||||
|
|
|
|
|
|||
In billions |
|
|
|||||
Average |
|||||||
Commercial |
$ 207.6 |
$ 195.6 |
$ 175.8 |
6 % |
18 % |
||
Consumer |
97.2 |
95.1 |
79.8 |
2 % |
22 % |
||
Average loans |
$ 304.8 |
$ 290.7 |
$ 255.6 |
5 % |
19 % |
||
Quarter end |
|||||||
Commercial |
$ 212.5 |
$ 198.3 |
$ 199.6 |
7 % |
6 % |
||
Consumer |
98.3 |
96.2 |
95.1 |
2 % |
3 % |
||
Total loans |
$ 310.8 |
$ 294.5 |
$ 294.7 |
6 % |
5 % |
||
Average loans for the second quarter of 2022 were
Average loans for the second quarter of 2022 increased
Second quarter 2022 average and period-end PPP loans outstanding were
|
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|
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|
||||
In billions |
Balance |
Portfolio Mix |
Balance |
Portfolio Mix |
Balance |
Portfolio Mix |
Average |
||||||
Available for sale |
$ 66.6 |
$ 132.3 |
$ 107.0 |
|||
Held to maturity |
68.1 |
1.6 |
1.5 |
|||
Average investment securities |
$ 134.7 |
$ 133.9 |
$ 108.5 |
|||
Quarter end |
||||||
Available for sale |
$ 53.0 |
40 % |
$ 112.3 |
85 % |
$ 125.0 |
99 % |
Held to maturity |
79.7 |
60 % |
20.1 |
15 % |
1.5 |
1 % |
Total investment securities |
$ 132.7 |
$ 132.4 |
$ 126.5 |
|||
Average investment securities for the second quarter of 2022 were
Investment securities at
Average
Deposits |
Change |
Change |
|||||
|
|
|
|
|
|||
In billions |
|
|
|||||
Average |
|||||||
Noninterest-bearing |
$ 149.4 |
$ 153.7 |
$ 132.3 |
(3) % |
13 % |
||
Interest-bearing |
297.1 |
299.6 |
269.4 |
(1) % |
10 % |
||
Average deposits |
$ 446.5 |
$ 453.3 |
$ 401.7 |
(2) % |
11 % |
||
Quarter end |
|||||||
Noninterest-bearing |
$ 146.4 |
$ 150.8 |
$ 154.2 |
(3) % |
(5) % |
||
Interest-bearing |
294.4 |
299.4 |
298.7 |
(2) % |
(1) % |
||
Total deposits |
$ 440.8 |
$ 450.2 |
$ 452.9 |
(2) % |
(3) % |
||
Average deposits for the second quarter of 2022 were
Deposits at
Borrowed Funds |
Change |
Change |
|||||
|
|
|
|
|
|||
In billions |
|
|
|||||
Average |
$ 35.7 |
$ 30.3 |
$ 34.1 |
18 % |
5 % |
||
Quarter end |
$ 36.0 |
$ 26.6 |
$ 34.8 |
35 % |
3 % |
||
Average borrowed funds of
Capital |
|
|
|
|||
* |
||||||
Common shareholders' equity In billions |
$ 41.6 |
$ 44.2 |
$ 51.1 |
|||
Accumulated other comprehensive income (loss) In billions |
$ (8.4) |
$ (5.7) |
$ 1.5 |
|||
Basel III common equity Tier 1 capital ratio |
9.6 % |
9.9 % |
10.1 % |
|||
Basel III common equity Tier 1 fully implemented capital ratio |
9.4 % |
9.7 % |
9.9 % |
|||
* Ratios estimated |
||||||
PNC maintained a strong capital position. Common shareholders' equity at
Accumulated other comprehensive income at
In the second quarter of 2022, PNC returned
On
For information regarding PNC's Basel III capital ratios, see Capital Ratios in the Consolidated Financial Highlights. PNC elected a five-year transition provision effective
CREDIT QUALITY REVIEW |
|||||
Credit Quality |
Change |
Change |
|||
|
|
|
|
|
|
In millions |
|
|
|||
Provision for (recapture of) credit losses |
$ 36 |
$ (208) |
$ 302 |
$ 244 |
$ (266) |
Net loan charge-offs |
$ 83 |
$ 137 |
$ 306 |
(39) % |
(73) % |
Allowance for credit losses |
$ 5,143 |
|
|
(1) % |
(19) % |
Total delinquencies |
$ 1,511 |
|
|
(11) % |
10 % |
Nonperforming loans |
$ 2,046 |
|
|
(11) % |
(26) % |
Net charge-offs to average loans (annualized) |
0.11 % |
0.19 % |
0.48 % |
||
Allowance for credit losses to total loans |
1.65 % |
1.76 % |
2.16 % |
||
Nonperforming loans to total loans |
0.66 % |
0.78 % |
0.94 % |
||
Total delinquencies represent accruing loans more than 30 days past due |
The second quarter of 2022 included a provision for credit losses of
Net loan charge-offs were
The allowance for credit losses was
Nonperforming loans were
Delinquencies at
BUSINESS SEGMENT RESULTS |
|||||
Business Segment Income (Loss) |
|||||
In millions |
2Q22 |
1Q22 |
2Q21 |
||
Retail Banking |
$ 322 |
$ 340 |
$ 232 |
||
Corporate & Institutional Banking |
1,003 |
956 |
809 |
||
|
86 |
102 |
87 |
||
Other |
70 |
10 |
(37) |
||
Net income excluding noncontrolling interests |
$ 1,481 |
$ 1,408 |
$ 1,091 |
||
Retail Banking |
Change |
Change |
|||||||
2Q22 vs |
2Q22 vs |
||||||||
In millions |
2Q22 |
1Q22 |
2Q21 |
1Q22 |
2Q21 |
||||
Net interest income |
$ 1,662 |
$ 1,531 |
$ 1,497 |
$ 131 |
$ 165 |
||||
Noninterest income |
$ 748 |
$ 745 |
$ 706 |
$ 3 |
$ 42 |
||||
Provision for (recapture of) credit losses |
$ 55 |
$ (81) |
$ 214 |
$ 136 |
$ (159) |
||||
Noninterest expense |
$ 1,913 |
$ 1,892 |
$ 1,677 |
$ 21 |
$ 236 |
||||
Earnings |
$ 322 |
$ 340 |
$ 232 |
$ (18) |
$ 90 |
||||
In billions |
|||||||||
Average loans |
$ 93.8 |
$ 93.2 |
$ 84.3 |
$ 0.6 |
$ 9.5 |
||||
Average deposits |
$ 268.4 |
$ 265.1 |
$ 233.2 |
$ 3.3 |
$ 35.2 |
||||
Net charge-offs In millions |
$ 88 |
$ 141 |
$ 79 |
$ (53) |
$ 9 |
||||
Retail Banking Highlights
Second quarter 2022 compared with first quarter 2022
- Earnings decreased 5%, as higher net interest income and noninterest income were more than offset by a provision for credit losses and higher noninterest expense.
- Noninterest income increased modestly as higher card and cash management fees were largely offset by lower residential mortgage loan sales revenue and negative Visa Class B fair value adjustments of
$16 million . The first quarter of 2022 included a positive Visa Class B derivative fair value adjustment of$4 million . - Provision for credit losses was
$55 million for the second quarter of 2022, and included the impact of changes in portfolio composition, updates to the economic outlook and improvements in credit quality. - Noninterest expense increased 1% and included higher marketing spend.
- Average loans increased 1%, driven by growth in residential mortgage and home equity loans, partially offset by lower auto loans and PPP loan forgiveness.
- Average deposits increased 1%, driven by growth in demand and savings deposits.
Second quarter 2022 compared with second quarter 2021
- Earnings increased 39%, due to higher net interest income, a lower provision for credit losses and an increase in noninterest income, partially offset by higher noninterest expense.
- Noninterest income increased 6%, primarily driven by the addition of
BBVA USA customers and increased business activity. - Noninterest expense increased 14%, primarily reflecting operating expenses from
BBVA USA and increased marketing spend. - Average loans increased 11%, reflecting the addition of
BBVA USA and higher residential mortgage loans, partially offset by PPP loan forgiveness. - Average deposits increased 15%, and included the addition of
BBVA USA .
Corporate & Institutional Banking |
Change |
Change |
|||||||
2Q22 vs |
2Q22 vs |
||||||||
In millions |
2Q22 |
1Q22 |
2Q21 |
1Q22 |
2Q21 |
||||
Net interest income |
$ 1,253 |
$ 1,160 |
$ 1,092 |
$ 93 |
$ 161 |
||||
Noninterest income |
$ 968 |
$ 804 |
$ 867 |
$ 164 |
$ 101 |
||||
Provision for (recapture of) credit losses |
$ (17) |
$ (118) |
$ 104 |
$ 101 |
$ (121) |
||||
Noninterest expense |
$ 934 |
$ 837 |
$ 813 |
$ 97 |
$ 121 |
||||
Earnings |
$ 1,003 |
$ 956 |
$ 809 |
$ 47 |
$ 194 |
||||
In billions |
|||||||||
Average loans |
$ 193.0 |
$ 180.2 |
$ 157.7 |
$ 12.8 |
$ 35.3 |
||||
Average deposits |
$ 146.2 |
$ 154.6 |
$ 145.0 |
$ (8.4) |
$ 1.2 |
||||
Net charge-offs (recoveries) In millions |
$ 11 |
$ (1) |
$ 233 |
$ 12 |
$ (222) |
||||
Corporate & Institutional Banking Highlights
Second quarter 2022 compared with first quarter 2022
- Earnings increased 5%, due to higher noninterest income and net interest income, partially offset by a lower provision recapture and higher noninterest expense.
- Noninterest income increased 20%, driven by an increase in capital markets related revenue, including higher merger and acquisition advisory fees.
- Provision recapture of
$17 million for the second quarter of 2022 included improvements in credit quality, partially offset by loan growth. - Noninterest expense increased 12%, primarily due to higher variable costs as a result of increased business activity.
- Average loans increased 7%, driven primarily by growth in PNC's corporate banking and business credit businesses of
$11.1 billion and$1.7 billion , respectively, partially offset by PPP loan forgiveness. - Average deposits decreased 5%, reflecting outflows and seasonal declines in commercial deposits.
Second quarter 2022 compared with second quarter 2021
- Earnings increased 24%, due to higher net interest income, a lower provision for credit losses and increased noninterest income, partially offset by higher noninterest expense.
- Noninterest income increased 12%, and included higher capital markets related revenue, the benefit of
BBVA USA , growth in treasury management product revenue and lower commercial mortgage banking activities. - Noninterest expense increased 15%, due to operating expenses from
BBVA USA , higher variable costs as a result of increased business activity and continued investment in strategic initiatives. - Average loans increased 22%, driven by the addition of
BBVA USA and broad-based organic growth across PNC's lending segments, partially offset by PPP loan forgiveness. - Average deposits increased 1%, and included the addition of
BBVA USA .
|
Change |
Change |
|||||||
2Q22 vs |
2Q22 vs |
||||||||
In millions |
2Q22 |
1Q22 |
2Q21 |
1Q22 |
2Q21 |
||||
Net interest income |
$ 153 |
$ 138 |
$ 112 |
$ 15 |
$ 41 |
||||
Noninterest income |
$ 234 |
$ 248 |
$ 244 |
$ (14) |
$ (10) |
||||
Provision for (recapture of) credit losses |
$ 5 |
$ 2 |
$ 23 |
$ 3 |
$ (18) |
||||
Noninterest expense |
$ 270 |
$ 251 |
$ 219 |
$ 19 |
$ 51 |
||||
Earnings |
$ 86 |
$ 102 |
$ 87 |
$ (16) |
$ (1) |
||||
In billions |
|||||||||
Discretionary client assets under management |
$ 167 |
$ 182 |
$ 183 |
$ (15) |
$ (16) |
||||
Nondiscretionary client assets under administration |
$ 153 |
$ 165 |
$ 172 |
$ (12) |
$ (19) |
||||
Client assets under administration at quarter end |
$ 320 |
$ 347 |
$ 355 |
$ (27) |
$ (35) |
||||
Brokerage client account assets |
$ 4 |
$ 5 |
$ 5 |
$ (1) |
$ (1) |
||||
In billions |
|||||||||
Average loans |
$ 14.0 |
$ 13.4 |
$ 10.0 |
$ 0.6 |
$ 4.0 |
||||
Average deposits |
$ 31.7 |
$ 33.3 |
$ 23.4 |
$ (1.6) |
$ 8.3 |
||||
Net charge-offs (recoveries) In millions |
$ (1) |
$ 2 |
$ 2 |
$ (3) |
$ (3) |
||||
Asset Management Group Highlights
Second quarter 2022 compared with first quarter 2022
- Earnings decreased 16%, as higher net interest income was more than offset by higher noninterest expense and lower noninterest income.
- Noninterest income decreased 6%, reflecting the impact of lower average equity markets.
- Noninterest expense increased 8%, and included higher personnel expense.
- Discretionary client assets under management decreased 8%, primarily driven by lower spot equity markets.
- Average loans increased 4%, driven by higher residential mortgage loans.
- Average deposits decreased 5%, primarily due to seasonal outflows.
Second quarter 2022 compared with second quarter 2021
- Earnings were relatively stable.
- Noninterest income decreased 4%, and included the impact of lower average equity markets.
- Noninterest expense increased 23%, largely due to the addition of operating expenses from
BBVA USA and higher personnel expense. - Discretionary client assets under management decreased 9%, primarily driven by lower spot equity markets.
- Average loans increased 40%, reflecting the addition of
BBVA USA and growth in residential mortgage. - Average deposits increased 35%, reflecting the addition of
BBVA USA and growth in demand and savings deposits.
Other
The "Other" category, for the purposes of this release, includes residual activities that do not meet the criteria for disclosure as a separate reportable business, such as asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities, certain trading activities, certain runoff consumer loan portfolios, private equity investments, intercompany eliminations, certain corporate overhead, tax adjustments that are not allocated to business segments, exited businesses, and differences between business segment performance reporting and financial statement reporting under generally accepted accounting principles.
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC Chairman, President and Chief Executive Officer
[TABULAR MATERIAL FOLLOWS]
|
Consolidated Financial Highlights (Unaudited) |
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FINANCIAL RESULTS |
Three months ended |
Six months ended |
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Dollars in millions, except per share data |
|
|
|
|
|
|||||||
2022 |
2022 |
2021 |
2022 |
2021 |
||||||||
Revenue |
||||||||||||
Net interest income |
$ 3,051 |
$ 2,804 |
$ 2,581 |
$ 5,855 |
$ 4,929 |
|||||||
Noninterest income |
2,065 |
1,888 |
2,086 |
3,953 |
3,958 |
|||||||
Total revenue |
5,116 |
4,692 |
4,667 |
9,808 |
8,887 |
|||||||
Provision for (recapture of) credit losses |
36 |
(208) |
302 |
(172) |
(249) |
|||||||
Noninterest expense |
3,244 |
3,172 |
3,050 |
6,416 |
5,624 |
|||||||
Income before income taxes and noncontrolling interests |
$ 1,836 |
$ 1,728 |
$ 1,315 |
$ 3,564 |
$ 3,512 |
|||||||
Income taxes |
340 |
299 |
212 |
639 |
583 |
|||||||
Net income |
$ 1,496 |
$ 1,429 |
$ 1,103 |
$ 2,925 |
$ 2,929 |
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Less: |
||||||||||||
Net income attributable to noncontrolling interests |
15 |
21 |
12 |
36 |
22 |
|||||||
Preferred stock dividends (a) |
71 |
45 |
48 |
116 |
105 |
|||||||
Preferred stock discount accretion and redemptions |
1 |
2 |
1 |
3 |
2 |
|||||||
Net income attributable to common shareholders |
$ 1,409 |
$ 1,361 |
$ 1,042 |
$ 2,770 |
$ 2,800 |
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Per Common Share |
||||||||||||
Basic |
$ 3.39 |
$ 3.23 |
$ 2.43 |
$ 6.62 |
$ 6.54 |
|||||||
Diluted |
$ 3.39 |
$ 3.23 |
$ 2.43 |
$ 6.61 |
$ 6.53 |
|||||||
Cash dividends declared per common share |
$ 1.50 |
$ 1.25 |
$ 1.15 |
$ 2.75 |
$ 2.30 |
|||||||
Effective tax rate (b) |
18.5 % |
17.3 % |
16.1 % |
17.9 % |
16.6 % |
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PERFORMANCE RATIOS |
||||||||||||
Net interest margin (c) |
2.50 % |
2.28 % |
2.29 % |
2.39 % |
2.28 % |
|||||||
Noninterest income to total revenue |
40 % |
40 % |
45 % |
40 % |
45 % |
|||||||
Efficiency (d) |
63 % |
68 % |
65 % |
65 % |
63 % |
|||||||
Return on: |
||||||||||||
Average common shareholders' equity |
13.52 % |
11.64 % |
8.32 % |
12.53 % |
11.29 % |
|||||||
Average assets |
1.10 % |
1.05 % |
0.88 % |
1.08 % |
1.21 % |
(a) |
Dividends are payable quarterly other than Series R and Series S preferred stock, which are payable semiannually. |
(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. |
(c) |
Net interest margin is the total yield on interest-earning assets minus the total rate on interest-bearing liabilities and includes the benefit from use of noninterest-bearing sources. To provide more meaningful comparisons of net interest margins, we use net interest income on a taxable-equivalent basis in calculating average yields used in the calculation of net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under generally accepted accounting principles (GAAP) in the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the three months ended |
(d) |
Calculated as noninterest expense divided by total revenue. |
|
Consolidated Financial Highlights (Unaudited) |
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|
|
|
|||
2022 |
2022 |
2021 |
|||
BALANCE SHEET DATA |
|||||
Dollars in millions, except per share data |
|||||
Assets |
$ 540,786 |
$ 541,246 |
$ 554,212 |
||
Loans (a) |
$ 310,800 |
$ 294,457 |
$ 294,704 |
||
Allowance for loan and lease losses |
$ 4,462 |
$ 4,558 |
$ 5,730 |
||
Interest-earning deposits with banks |
$ 28,404 |
$ 48,776 |
$ 72,447 |
||
Investment securities |
$ 132,732 |
$ 132,411 |
$ 126,543 |
||
Total deposits |
$ 440,811 |
$ 450,197 |
$ 452,883 |
||
Borrowed funds (a) |
$ 35,984 |
$ 26,571 |
$ 34,813 |
||
Allowance for unfunded lending related commitments |
$ 681 |
$ 639 |
$ 645 |
||
Total shareholders' equity |
$ 47,652 |
$ 49,181 |
$ 54,627 |
||
Common shareholders' equity |
$ 41,648 |
$ 44,170 |
$ 51,107 |
||
Accumulated other comprehensive income (loss) |
$ (8,358) |
$ (5,731) |
$ 1,463 |
||
Book value per common share |
$ 101.39 |
$ 106.47 |
$ 120.25 |
||
Tangible book value per common share (non-GAAP) (b) |
$ 74.39 |
$ 79.68 |
$ 93.83 |
||
Period end common shares outstanding (In millions) |
411 |
415 |
425 |
||
Loans to deposits |
71 % |
65 % |
65 % |
||
Common shareholders' equity to total assets |
7.7 % |
8.2 % |
9.2 % |
||
CLIENT ASSETS (In billions) |
|||||
Discretionary client assets under management |
$ 167 |
$ 182 |
$ 183 |
||
Nondiscretionary client assets under administration |
153 |
165 |
172 |
||
Total client assets under administration |
320 |
347 |
355 |
||
Brokerage account client assets |
72 |
79 |
88 |
||
Total client assets |
$ 392 |
$ 426 |
$ 443 |
||
CAPITAL RATIOS |
|||||
Basel III (c) (d) |
|||||
Common equity Tier 1 |
9.6 % |
9.9 % |
10.1 % |
||
Common equity Tier 1 fully implemented (e) |
9.4 % |
9.7 % |
9.9 % |
||
Tier 1 risk-based |
11.0 % |
11.2 % |
11.1 % |
||
Total capital risk-based (f) |
12.9 % |
13.0 % |
13.2 % |
||
Leverage |
8.4 % |
8.2 % |
8.7 % |
||
Supplementary leverage |
7.2 % |
7.0 % |
7.3 % |
||
ASSET QUALITY |
|||||
Nonperforming loans to total loans |
0.66 % |
0.78 % |
0.94 % |
||
Nonperforming assets to total loans, OREO and foreclosed assets |
0.67 % |
0.79 % |
0.96 % |
||
Nonperforming assets to total assets |
0.38 % |
0.43 % |
0.51 % |
||
Net charge-offs to average loans (for the three months ended) (annualized) |
0.11 % |
0.19 % |
0.48 % |
||
Allowance for loan and lease losses to total loans |
1.44 % |
1.55 % |
1.94 % |
||
Allowance for credit losses to total loans (g) |
1.65 % |
1.76 % |
2.16 % |
||
Allowance for loan and lease losses to nonperforming loans |
218 % |
198 % |
206 % |
||
Total delinquencies (In millions) (h) |
$ 1,511 |
$ 1,699 |
$ 1,375 |
(a) |
Amounts include assets and liabilities for which we have elected the fair value option. Our first quarter 2022 Form 10-Q included, and our second quarter 2022 Form 10-Q will include, additional information regarding these Consolidated Balance Sheet line items. |
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(b) |
See the Tangible Book Value per Common Share table on page 18 for additional information. |
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(c) |
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. The ratios as of |
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(d) |
The ratios are calculated to reflect PNC's election to adopt the CECL optional five-year transition provision. |
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(e) |
The fully implemented ratios are calculated to reflect the full impact of CECL and excludes the benefits of the five-year transition provision. |
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(f) |
The 2021 Basel III Total risk-based capital ratio includes nonqualifying trust preferred capital securities of |
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(g) |
Excludes allowances for investment securities and other financial assets. |
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(h) |
Total delinquencies represent accruing loans more than 30 days past due. |
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|
Consolidated Financial Highlights (Unaudited) |
CAPITAL RATIOS
PNC's regulatory risk-based capital ratios in 2022 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.
PNC elected a five-year transition provision effective
Our Basel III capital ratios may be impacted by changes to the regulatory capital rules and additional regulatory guidance or analysis.
|
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Basel III (a) |
|||||||
2022 (estimated) (b) |
2022 (b) |
2021 (b) |
(estimated) (c) |
(estimated) (c) |
|||
Dollars in millions |
|||||||
Common stock, related surplus and retained earnings, net of treasury stock |
$ 50,730 |
$ 50,624 |
$ 50,775 |
$ 50,006 |
$ 49,900 |
||
Less regulatory capital adjustments: |
|||||||
|
(11,094) |
(11,114) |
(11,231) |
(11,094) |
(11,114) |
||
All other adjustments |
(99) |
(63) |
(27) |
(106) |
(68) |
||
Basel III Common equity Tier 1 capital |
$ 39,537 |
$ 39,447 |
$ 39,517 |
$ 38,806 |
$ 38,718 |
||
Basel III standardized approach risk-weighted assets (d) |
$ 413,147 |
$ 397,455 |
$ 389,429 |
$ 413,273 |
$ 397,737 |
||
Basel III Common equity Tier 1 capital ratio |
9.6 % |
9.9 % |
10.1 % |
9.4 % |
9.7 % |
(a) |
All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented. |
(b) |
The ratio is calculated to reflect PNC's election to adopt the CECL optional five-year transition provision. |
(c) |
The |
(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. |
|
Consolidated Financial Highlights (Unaudited) |
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NON-GAAP MEASURES |
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Pretax Pre-Provision Earnings (non-GAAP) Pretax Pre-Provision Earnings Excluding Integration Costs (non-GAAP) |
Three months ended |
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|
|
|
|||
Dollars in millions |
2022 |
2022 |
2021 |
||
Income before income taxes and noncontrolling interests |
$ 1,836 |
$ 1,728 |
$ 1,315 |
||
Provision for (recapture of) credit losses |
36 |
(208) |
302 |
||
Pretax pre-provision earnings (non-GAAP) |
$ 1,872 |
$ 1,520 |
$ 1,617 |
||
Integration costs |
14 |
31 |
111 |
||
Pretax pre-provision earnings excluding integration costs (non-GAAP) |
$ 1,886 |
$ 1,551 |
$ 1,728 |
Pretax pre-provision earnings is a non-GAAP measure and is based on adjusting income before income taxes and noncontrolling interests to exclude provision for (recapture of) credit losses. We believe that pretax, pre-provision earnings is a useful tool to help evaluate the ability to provide for credit costs through operations and provides an additional basis to compare results between periods by isolating the impact of provision for (recapture of) credit losses, which can vary significantly between periods.
Pretax pre-provision earnings excluding integration costs is a non-GAAP measure and is based on adjusting pretax pre-provision earnings to exclude integration costs during the period. We believe that pretax, pre-provision earnings excluding integration costs is a useful tool in understanding PNC's results by providing greater comparability between periods, as well as demonstrating the effect of significant items.
Adjusted Diluted Earnings per Common Share Excluding Integration Costs (non-GAAP) |
Three months ended |
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|
Per Common |
|
Per Common |
|
Per Common |
||||||
Dollars in millions, except per share data |
2022 |
Share |
2022 |
Share |
2021 |
Share |
|||||
Net income attributable to common shareholders |
$ 1,409 |
$ 1,361 |
$ 1,042 |
||||||||
Dividends and undistributed earnings allocated to nonvested restricted shares |
(7) |
(6) |
(5) |
||||||||
Net income attributable to diluted common shareholders |
$ 1,402 |
$ 3.39 |
$ 1,355 |
$ 3.23 |
$ 1,037 |
$ 2.43 |
|||||
Integration costs after tax (a) |
11 |
0.03 |
24 |
0.06 |
88 |
0.21 |
|||||
Adjusted net income attributable to diluted common shareholders excluding integration costs (non-GAAP) |
$ 1,413 |
$ 3.42 |
$ 1,379 |
$ 3.29 |
$ 1,125 |
$ 2.64 |
|||||
Average diluted common shares outstanding (In millions) |
414 |
420 |
427 |
(a) |
Statutory tax rate of 21% used to calculate impacts. |
The adjusted diluted earnings per common share excluding integration costs is a non-GAAP measure and excludes the integration costs related to the
|
Consolidated Financial Highlights (Unaudited) |
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