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PNC Reports Second Quarter Net Income Of $1.0 Billion And $1.88 Diluted EPS
"PNC had a successful second quarter," said
Income Statement Highlights
- Second quarter earnings reflected revenue growth, well-controlled expenses, improved credit quality and higher loans, securities and deposits.
- Net interest income of
$2.1 billion for the second quarter decreased$20 million , or 1 percent, compared with the first quarter due to lower purchase accounting accretion, while core net interest income was relatively stable. - Noninterest income of
$1.8 billion for the second quarter increased$155 million , or 9 percent, compared with the first quarter primarily driven by strong fee income growth from higher client activity and seasonality, as well as higher gains on asset sales. - Noninterest expense of
$2.4 billion for the second quarter increased slightly by 1 percent over the first quarter primarily reflecting higher variable compensation costs associated with higher business activity, as PNC continued to focus on disciplined expense management.- Second quarter 2015 included a reduction in noninterest expense associated with a change in application of historic tax credits and a related increase in the effective tax rate.
- Provision for credit losses declined to
$46 million for the second quarter from$54 million in the first quarter as overall credit quality improved.
Balance Sheet Highlights
- Loans grew
$.4 billion to $205.1 billion atJune 30, 2015 compared withMarch 31, 2015 .- Total commercial lending increased
$1.0 billion primarily in PNC's real estate, business credit and corporate banking businesses. - Total consumer lending declined
$.6 billion , including runoff in the non-strategic portfolio.
- Total commercial lending increased
- Overall credit quality improved in the second quarter compared with the first quarter.
- Nonperforming assets of
$2.6 billion atJune 30, 2015 declined$.2 billion , or 6 percent, compared withMarch 31, 2015 . - Net charge-offs decreased to
$67 million for the second quarter from$103 million in the first quarter.
- Nonperforming assets of
- Investment securities increased by
$.6 billion , or 1 percent, in the second quarter to$61.4 billion atJune 30, 2015 , largely funded by deposit growth. - Deposits grew
$3.2 billion , or 1 percent, compared with the first quarter due to higher money market and demand deposits. - PNC's well-positioned balance sheet remained core funded with a loans to deposits ratio of
86 percent atJune 30, 2015 . - PNC maintained a strong liquidity position.
- The estimated Liquidity Coverage Ratio at
June 30, 2015 exceeded 100 percent for bothPNC and PNC Bank, N.A. , above the minimum phased-in requirement of 80 percent in 2015, calculated as of month end.
- The estimated Liquidity Coverage Ratio at
- PNC returned capital to shareholders through repurchases of 5.9 million common shares for
$.6 billion during the second quarter of 2015.- Purchases were made under share repurchase programs of up to
$2.875 billion for the five quarter period beginning in the second quarter of 2015.
- Purchases were made under share repurchase programs of up to
- PNC maintained a strong capital position.
- Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.6 percent at
June 30, 2015 and 10.5 percent atMarch 31, 2015 , calculated using the regulatory capital methodology applicable to PNC during 2015. - Pro forma fully phased-in Basel III common equity Tier 1 capital ratio was an estimated
10.0 percent atJune 30, 2015 andMarch 31, 2015 based on the standardized approach rules.
- Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.6 percent at
Earnings Summary |
|||||||||||||
In millions, except per share data |
2Q15 |
1Q15 |
2Q14 |
||||||||||
Net income |
$ |
1,044 |
$ |
1,004 |
$ |
1,052 |
|||||||
Net income attributable to diluted common shares |
$ |
987 |
$ |
926 |
$ |
995 |
|||||||
Diluted earnings per common share |
$ |
1.88 |
$ |
1.75 |
$ |
1.85 |
|||||||
Average diluted common shares outstanding |
525 |
529 |
539 |
||||||||||
Return on average assets |
1.19 |
% |
1.17 |
% |
1.31 |
% |
|||||||
Return on average common equity |
9.75 |
% |
9.32 |
% |
10.12 |
% |
|||||||
Book value per common share Period end |
$ |
79.64 |
$ |
78.99 |
$ |
75.62 |
|||||||
Tangible book value per common share (non-GAAP) Period end |
$ |
61.75 |
$ |
61.21 |
$ |
58.22 |
|||||||
Cash dividends declared per common share |
$ |
.51 |
$ |
.48 |
$ |
.48 |
|||||||
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported amounts, including reconciliations of tangible book value to book value per common share and business segment income to net income. Reference to core net interest income is to total net interest income less purchase accounting accretion, which consists of scheduled accretion and excess cash recoveries, as detailed in the Consolidated Financial Highlights. Information in this news release including the financial tables is unaudited. See the notes and other information in the Consolidated Financial Highlights.
CONSOLIDATED REVENUE REVIEW |
|||||||||||||||||||||
Revenue |
Change |
Change |
|||||||||||||||||||
2Q15 vs |
2Q15 vs |
||||||||||||||||||||
In millions |
2Q15 |
1Q15 |
2Q14 |
1Q15 |
2Q14 |
||||||||||||||||
Net interest income |
$ |
2,052 |
$ |
2,072 |
$ |
2,129 |
(1) |
% |
(4) |
% |
|||||||||||
Noninterest income |
1,814 |
1,659 |
1,681 |
9 |
% |
8 |
% |
||||||||||||||
Total revenue |
$ |
3,866 |
$ |
3,731 |
$ |
3,810 |
4 |
% |
1 |
% |
|||||||||||
Total revenue for the second quarter of 2015 increased
Net interest income for the second quarter of 2015 decreased
The net interest margin was 2.73 percent for the second quarter of 2015 compared with 2.82 percent for the first quarter of 2015 and 3.12 percent for the second quarter of 2014. The decrease in the margin compared with the first quarter was mainly due to lower benefit from purchase accounting accretion and the impact of increasing the company's liquidity position. In the second quarter 2014 comparison, the margin declined primarily as a result of the impact of increasing the company's liquidity position, lower loan yields and lower benefit from purchase accounting accretion.
Noninterest Income |
Change |
Change |
|||||||||||||||||||||
2Q15 vs |
2Q15 vs |
||||||||||||||||||||||
In millions |
2Q15 |
1Q15 |
2Q14 |
1Q15 |
2Q14 |
||||||||||||||||||
Asset management |
$ |
416 |
$ |
376 |
$ |
362 |
11 |
% |
15 |
% |
|||||||||||||
Consumer services |
334 |
311 |
323 |
7 |
% |
3 |
% |
||||||||||||||||
Corporate services |
369 |
344 |
343 |
7 |
% |
8 |
% |
||||||||||||||||
Residential mortgage |
164 |
164 |
182 |
– |
(10) |
% |
|||||||||||||||||
Service charges on deposits |
156 |
153 |
156 |
2 |
% |
– |
|||||||||||||||||
Other, including net securities gains |
375 |
311 |
315 |
21 |
% |
19 |
% |
||||||||||||||||
$ |
1,814 |
$ |
1,659 |
$ |
1,681 |
9 |
% |
8 |
% |
||||||||||||||
Noninterest income for the second quarter of 2015 increased
Noninterest income for the second quarter of 2015 increased
CONSOLIDATED EXPENSE REVIEW |
||||||||||||||||||||||
Noninterest Expense |
Change |
Change |
||||||||||||||||||||
2Q15 vs |
2Q15 vs |
|||||||||||||||||||||
In millions |
2Q15 |
1Q15 |
2Q14 |
1Q15 |
2Q14 |
|||||||||||||||||
Personnel |
$ |
1,200 |
$ |
1,157 |
$ |
1,172 |
4 |
% |
2 |
% |
||||||||||||
Occupancy |
209 |
216 |
199 |
(3) |
% |
5 |
% |
|||||||||||||||
Equipment |
231 |
222 |
204 |
4 |
% |
13 |
% |
|||||||||||||||
Marketing |
67 |
62 |
68 |
8 |
% |
(1) |
% |
|||||||||||||||
Other |
659 |
692 |
685 |
(5) |
% |
(4) |
% |
|||||||||||||||
$ |
2,366 |
$ |
2,349 |
$ |
2,328 |
1 |
% |
2 |
% |
|||||||||||||
Noninterest expense for the second quarter of 2015 increased
Noninterest expense for the second quarter of 2015 increased
The effective tax rate was 28.2 percent for the second quarter of 2015, 24.4 percent for the first quarter of 2015 and 25.4 percent for the second quarter of 2014. The higher effective tax rate for second quarter 2015 was primarily related to historic tax credits recorded as reductions to the associated investment asset balances, while in prior periods these credits were recorded as a reduction of income tax expense.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were
Loans |
Change |
Change |
||||||||||||||||||||
6/30/15 vs |
6/30/15 vs |
|||||||||||||||||||||
In billions |
6/30/2015 |
3/31/2015 |
6/30/2014 |
3/31/15 |
6/30/14 |
|||||||||||||||||
Commercial lending |
$ |
130.7 |
$ |
129.7 |
$ |
124.1 |
1 |
% |
5 |
% |
||||||||||||
Consumer lending |
74.4 |
75.0 |
76.9 |
(1) |
% |
(3) |
% |
|||||||||||||||
Total loans |
$ |
205.1 |
$ |
204.7 |
$ |
201.0 |
– |
2 |
% |
|||||||||||||
For the quarter ended: |
||||||||||||||||||||||
Average loans |
$ |
205.4 |
$ |
205.2 |
$ |
199.2 |
– |
3 |
% |
|||||||||||||
Total loans grew
Investment Securities |
Change |
Change |
||||||||||||||||||||
6/30/15 vs |
6/30/15 vs |
|||||||||||||||||||||
In billions |
6/30/2015 |
3/31/2015 |
6/30/2014 |
3/31/15 |
6/30/14 |
|||||||||||||||||
At quarter end |
$ |
61.4 |
$ |
60.8 |
$ |
56.6 |
1 |
% |
8 |
% |
||||||||||||
Average for the quarter ended |
$ |
59.4 |
$ |
57.1 |
$ |
56.3 |
4 |
% |
6 |
% |
||||||||||||
Investment securities balances at
Interest-earning deposits with banks of
Deposits |
Change |
Change |
||||||||||||||||||||
6/30/15 vs |
6/30/15 vs |
|||||||||||||||||||||
In billions |
6/30/2015 |
3/31/2015 |
6/30/2014 |
3/31/15 |
6/30/14 |
|||||||||||||||||
Transaction deposits |
$ |
205.3 |
$ |
202.3 |
$ |
188.5 |
1 |
% |
9 |
% |
||||||||||||
Other deposits |
34.4 |
34.2 |
34.1 |
1 |
% |
1 |
% |
|||||||||||||||
Total deposits |
$ |
239.7 |
$ |
236.5 |
$ |
222.6 |
1 |
% |
8 |
% |
||||||||||||
For the quarter ended: |
||||||||||||||||||||||
Average deposits |
$ |
237.8 |
$ |
233.1 |
$ |
220.0 |
2 |
% |
8 |
% |
||||||||||||
Total deposits at
Borrowed Funds |
Change |
Change |
||||||||||||||||||||
6/30/15 vs |
6/30/15 vs |
|||||||||||||||||||||
In billions |
6/30/2015 |
3/31/2015 |
6/30/2014 |
3/31/15 |
6/30/14 |
|||||||||||||||||
At quarter end |
$ |
58.3 |
$ |
56.8 |
$ |
49.1 |
3 |
% |
19 |
% |
||||||||||||
Average for the quarter ended |
$ |
57.2 |
$ |
56.4 |
$ |
47.1 |
1 |
% |
21 |
% |
||||||||||||
Borrowed funds at
Capital |
|||||||||||||
6/30/2015* |
3/31/2015 |
6/30/2014 |
|||||||||||
Common shareholders' equity In billions |
$ |
41.1 |
$ |
41.1 |
$ |
40.3 |
|||||||
Transitional Basel III common equity Tier 1 capital ratio |
10.6 |
% |
10.5 |
% |
11.0 |
% |
|||||||
Pro forma fully phased-in Basel III common equity |
|||||||||||||
Tier 1 capital ratio |
10.0 |
% |
10.0 |
% |
10.0 |
% |
|||||||
* Ratios estimated |
|||||||||||||
PNC maintained a strong capital position. Common shareholders' equity was stable with first quarter end as an increase in retained earnings was offset by share repurchases. The transitional Basel III common equity Tier 1 capital ratios were calculated using the regulatory capital methodologies, including related phase-ins, applicable to PNC during 2015 and 2014. The Basel III standardized approach took effect on
PNC repurchased 5.9 million common shares for
On
On
CREDIT QUALITY REVIEW |
|||||||||||||||||||
Credit Quality |
Change |
Change |
|||||||||||||||||
At or for the quarter ended |
6/30/15 vs |
6/30/15 vs |
|||||||||||||||||
In millions |
6/30/2015 |
3/31/2015 |
6/30/2014 |
3/31/15 |
6/30/14 |
||||||||||||||
Nonperforming loans |
$ |
2,252 |
$ |
2,405 |
$ |
2,801 |
(6) |
% |
(20) |
% |
|||||||||
Nonperforming assets |
$ |
2,578 |
$ |
2,754 |
$ |
3,168 |
(6) |
% |
(19) |
% |
|||||||||
Accruing loans past due 90 days or more |
$ |
914 |
$ |
988 |
$ |
1,252 |
(7) |
% |
(27) |
% |
|||||||||
Net charge-offs |
$ |
67 |
$ |
103 |
$ |
145 |
(35) |
% |
(54) |
% |
|||||||||
Provision for credit losses |
$ |
46 |
$ |
54 |
$ |
72 |
(15) |
% |
(36) |
% |
|||||||||
Allowance for loan and lease losses |
$ |
3,272 |
$ |
3,306 |
$ |
3,453 |
(1) |
% |
(5) |
% |
|||||||||
Overall credit quality for the second quarter of 2015 improved compared with the first quarter. Nonperforming assets at
Overall delinquencies decreased
Net charge-offs for the second quarter of 2015 declined
Provision for credit losses for second quarter 2015 declined
The allowance for loan and lease losses at
BUSINESS SEGMENT RESULTS |
||||||||||||||
Business Segment Income |
||||||||||||||
In millions |
2Q15 |
1Q15 |
2Q14 |
|||||||||||
Retail Banking |
$ |
241 |
$ |
202 |
$ |
225 |
||||||||
Corporate & Institutional Banking |
508 |
482 |
470 |
|||||||||||
Asset Management Group |
62 |
37 |
53 |
|||||||||||
Residential Mortgage Banking |
19 |
28 |
36 |
|||||||||||
Non-Strategic Assets Portfolio |
56 |
81 |
99 |
|||||||||||
Other, including BlackRock |
158 |
174 |
169 |
|||||||||||
Net income |
$ |
1,044 |
$ |
1,004 |
$ |
1,052 |
||||||||
See accompanying notes in Consolidated Financial Highlights |
||||||||||||||
Net interest income in business segment results reflects PNC's internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors. Enhancements were made to PNC's funds transfer pricing methodology in the first quarter of 2015 primarily for costs related to new regulatory short-term liquidity standards. The enhancements incorporate an additional charge assigned to assets, including for unfunded loan commitments. Conversely, a higher transfer pricing credit has been assigned to those deposits that are accorded higher value under the regulatory liquidity rules. These adjustments apply to business segment results prospectively beginning with the first quarter of 2015, primarily impacting two business segments with a benefit to Retail Banking earnings and a decrease in Corporate & Institutional Banking earnings.
Retail Banking |
Change |
Change |
||||||||||||||||||||
2Q15 vs |
2Q15 vs |
|||||||||||||||||||||
In millions |
2Q15 |
1Q15 |
2Q14 |
1Q15 |
2Q14 |
|||||||||||||||||
Net interest income |
$ |
1,045 |
$ |
1,038 |
$ |
973 |
$ |
7 |
$ |
72 |
||||||||||||
Noninterest income |
$ |
590 |
$ |
488 |
$ |
541 |
$ |
102 |
$ |
49 |
||||||||||||
Provision for credit losses |
$ |
45 |
$ |
49 |
$ |
4 |
$ |
(4) |
$ |
41 |
||||||||||||
Noninterest expense |
$ |
1,210 |
$ |
1,158 |
$ |
1,155 |
$ |
52 |
$ |
55 |
||||||||||||
Earnings |
$ |
241 |
$ |
202 |
$ |
225 |
$ |
39 |
$ |
16 |
||||||||||||
In billions |
||||||||||||||||||||||
Average loans |
$ |
64.3 |
$ |
65.1 |
$ |
66.4 |
$ |
(.8) |
$ |
(2.1) |
||||||||||||
Average deposits |
$ |
145.3 |
$ |
141.6 |
$ |
137.5 |
$ |
3.7 |
$ |
7.8 |
||||||||||||
Retail Banking earnings for the second quarter of 2015 increased in both comparisons. Net interest income increased compared with the second quarter of 2014 as a result of the benefit from enhancements to PNC's funds transfer pricing methodology in first quarter 2015. Noninterest income included gains on sales of Visa Class B common shares of
- Retail Banking continued to focus on the strategic priority of transforming the customer experience through transaction migration, branch network transformation and multi-channel sales strategies.
- Approximately 52 percent of consumer customers used non-teller channels for the majority of their transactions during the second quarter of 2015 compared with 50 percent for the first quarter and 45 percent for the second quarter of 2014.
- Deposit transactions via ATM and mobile channels increased to 42 percent of total deposit transactions in second quarter 2015 compared with 40 percent for the first quarter and 33 percent for the second quarter of 2014.
- Integral to PNC's retail branch transformation strategy, more than 300 branches operate under the universal model designed to drive higher ATM and mobile deposits and enhance sales opportunities for branch personnel. During the second quarter of 2015, the total branch network was reduced by 16 branches and the ATM network was increased by 126. PNC had a network of 2,644 branches and 8,880 ATMs at
June 30, 2015 . - As part of Retail Banking's transformation and multi-channel sales strategy, PNC's proactive customer appointment setting model was rolled out to all markets.
- Average transaction deposits grew
$3.6 billion , or 3 percent, over the first quarter and$8.6 billion , or 8 percent, over the second quarter of 2014 reflecting growth in consumer money market and demand deposits. Average savings deposits increased$.7 billion over the first quarter and$1.8 billion over second quarter 2014, while average certificates of deposit decreased$.6 billion and$2.6 billion , respectively, due to net runoff of maturing accounts. - Average loans decreased from the first quarter primarily driven by declines in home equity and education loans. Average loans decreased 3 percent compared with the second quarter of 2014 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 2015 were
$86 million compared with$99 million in the first quarter and$116 million in the second quarter of 2014. The decrease from first quarter reflected improved credit quality across consumer portfolios. In the comparison with second quarter 2014, credit quality improved primarily in the home equity and commercial loan portfolios.
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||
2Q15 vs |
2Q15 vs |
||||||||||||||||||
In millions |
2Q15 |
1Q15 |
2Q14 |
1Q15 |
2Q14 |
||||||||||||||
Net interest income |
$ |
871 |
$ |
855 |
$ |
921 |
$ |
16 |
$ |
(50) |
|||||||||
Corporate service fees |
$ |
341 |
$ |
310 |
$ |
312 |
$ |
31 |
$ |
29 |
|||||||||
Other noninterest income |
$ |
151 |
$ |
119 |
$ |
115 |
$ |
32 |
$ |
36 |
|||||||||
Provision for credit losses |
$ |
20 |
$ |
17 |
$ |
103 |
$ |
3 |
$ |
(83) |
|||||||||
Noninterest expense |
$ |
547 |
$ |
514 |
$ |
504 |
$ |
33 |
$ |
43 |
|||||||||
Earnings |
$ |
508 |
$ |
482 |
$ |
470 |
$ |
26 |
$ |
38 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
116.1 |
$ |
115.1 |
$ |
107.2 |
$ |
1.0 |
$ |
8.9 |
|||||||||
Average deposits |
$ |
79.0 |
$ |
78.6 |
$ |
70.4 |
$ |
.4 |
$ |
8.6 |
|||||||||
Commercial loan servicing portfolio Quarter end |
$ |
436 |
$ |
390 |
$ |
353 |
$ |
46 |
$ |
83 |
|||||||||
Corporate & Institutional Banking earnings for the second quarter of 2015 increased in both comparisons. Net interest income decreased compared with the second quarter of 2014 reflecting enhancements to PNC's funds transfer pricing methodology in the first quarter of 2015. Corporate service fees increased in both comparisons primarily attributable to higher treasury management and capital markets advisory fees. Other noninterest income increased in both comparisons principally as a result of higher revenue associated with multifamily loans originated for sale to agencies and higher revenue associated with credit valuations for customer-related derivatives activities. Provision for credit losses decreased from the second quarter of 2014 largely reflecting improved credit quality. Noninterest expense increased in both comparisons due to asset writedowns, investments in technology and infrastructure, and higher variable compensation costs associated with business activity.
- Average loans increased 1 percent over the first quarter and 8 percent over the second quarter of 2014 primarily due to growth in commercial lending in PNC's corporate banking, real estate and business credit businesses.
- Average deposits increased 12 percent over the second quarter of 2014 driven by business growth and inflows into demand and money market deposits.
- Charge-offs in the second quarter of 2015 were in a net recovery position of
$19 million , primarily related to large commercial credit recoveries, compared with a net recovery position of$1 million in the first quarter and net charge-offs of$15 million in the second quarter of 2014.
Asset Management Group |
Change |
Change |
||||||||||||||||||||
2Q15 vs |
2Q15 vs |
|||||||||||||||||||||
In millions |
2Q15 |
1Q15 |
2Q14 |
1Q15 |
2Q14 |
|||||||||||||||||
Net interest income |
$ |
71 |
$ |
73 |
$ |
72 |
$ |
(2) |
$ |
(1) |
||||||||||||
Noninterest income |
$ |
243 |
$ |
208 |
$ |
207 |
$ |
35 |
$ |
36 |
||||||||||||
Provision for credit losses (benefit) |
$ |
1 |
$ |
12 |
$ |
(6) |
$ |
(11) |
$ |
7 |
||||||||||||
Noninterest expense |
$ |
215 |
$ |
210 |
$ |
202 |
$ |
5 |
$ |
13 |
||||||||||||
Earnings |
$ |
62 |
$ |
37 |
$ |
53 |
$ |
25 |
$ |
9 |
||||||||||||
In billions |
||||||||||||||||||||||
Client assets under administration Quarter end |
$ |
262 |
$ |
265 |
$ |
257 |
$ |
(3) |
$ |
5 |
||||||||||||
Average loans |
$ |
7.5 |
$ |
7.4 |
$ |
7.2 |
$ |
.1 |
$ |
.3 |
||||||||||||
Average deposits |
$ |
10.9 |
$ |
10.7 |
$ |
9.5 |
$ |
.2 |
$ |
1.4 |
||||||||||||
Asset Management Group continued to focus on driving growth through sales sourced from other PNC lines of business, maximizing front line productivity and optimizing market presence including additions to staff in high opportunity markets. Its business strategies primarily focus on growing client assets under management, building retirement capabilities and expanding product solutions for all customers.- Client assets under administration at
June 30, 2015 included discretionary client assets under management of$134 billion and nondiscretionary client assets under administration of$128 billion .- Discretionary client assets under management decreased
$2 billion compared withMarch 31, 2015 primarily attributable to short-term seasonal outflows, and increased$3 billion compared withJune 30, 2014 driven by stronger equity markets and new sales production.
- Discretionary client assets under management decreased
Residential Mortgage Banking |
Change |
Change |
||||||||||||||||||
2Q15 vs |
2Q15 vs |
|||||||||||||||||||
In millions |
2Q15 |
1Q15 |
2Q14 |
1Q15 |
2Q14 |
|||||||||||||||
Net interest income |
$ |
30 |
$ |
30 |
$ |
37 |
– |
$ |
(7) |
|||||||||||
Noninterest income |
$ |
176 |
$ |
177 |
$ |
190 |
$ |
(1) |
$ |
(14) |
||||||||||
Provision for credit losses (benefit) |
$ |
(2) |
$ |
2 |
$ |
1 |
$ |
(4) |
$ |
(3) |
||||||||||
Noninterest expense |
$ |
178 |
$ |
161 |
$ |
169 |
$ |
17 |
$ |
9 |
||||||||||
Earnings |
$ |
19 |
$ |
28 |
$ |
36 |
$ |
(9) |
$ |
(17) |
||||||||||
In billions |
||||||||||||||||||||
Residential mortgage servicing portfolio Quarter end |
$ |
115 |
$ |
113 |
$ |
111 |
$ |
2 |
$ |
4 |
||||||||||
Loan origination volume |
$ |
2.9 |
$ |
2.6 |
$ |
2.6 |
$ |
.3 |
$ |
.3 |
||||||||||
Residential Mortgage Banking earnings for the second quarter of 2015 declined compared with the first quarter of 2015 and second quarter of 2014. Noninterest income in both comparisons reflected higher net hedging gains on residential mortgage servicing rights offset by lower loan sales revenue and lower servicing revenue. Noninterest expense increased in both comparisons driven by higher legal accruals and increased production expense on higher origination volume.
- The strategic focus of Residential Mortgage Banking is the acquisition of new customers through a retail loan officer sales force with an emphasis on home purchase transactions, competing on the basis of superior service, and leveraging cross-sell opportunities, especially in the bank footprint markets.
- Loan origination volume in the second quarter of 2015 was
$2.9 billion , an increase of 12 percent compared with the first quarter and 14 percent compared with the second quarter of 2014. Approximately 50 percent of second quarter 2015 origination volume was for home purchase transactions compared with 31 percent in the first quarter and 50 percent in the second quarter of 2014. - Loan servicing acquisitions were
$6.2 billion in the second quarter of 2015,$8.1 billion in the first quarter and none in the second quarter of 2014.
Non-Strategic Assets Portfolio |
Change |
Change |
|||||||||||||||||
2Q15 vs |
2Q15 vs |
||||||||||||||||||
In millions |
2Q15 |
1Q15 |
2Q14 |
1Q15 |
2Q14 |
||||||||||||||
Net interest income |
$ |
100 |
$ |
112 |
$ |
137 |
$ |
(12) |
$ |
(37) |
|||||||||
Noninterest income |
$ |
9 |
$ |
9 |
$ |
10 |
– |
$ |
(1) |
||||||||||
Provision for credit losses (benefit) |
$ |
(5) |
$ |
(31) |
$ |
(39) |
$ |
26 |
$ |
34 |
|||||||||
Noninterest expense |
$ |
26 |
$ |
24 |
$ |
30 |
$ |
2 |
$ |
(4) |
|||||||||
Earnings |
$ |
56 |
$ |
81 |
$ |
99 |
$ |
(25) |
$ |
(43) |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
7.6 |
$ |
8.0 |
$ |
9.3 |
$ |
(.4) |
$ |
(1.7) |
|||||||||
The Non-Strategic Assets Portfolio consists of non-strategic assets primarily obtained through acquisitions of other companies and includes a consumer portfolio of mainly residential mortgage and brokered home equity loans and lines of credit, and a small commercial/commercial real estate loan and lease portfolio. The business activity of this segment is to manage the liquidation of the portfolios while maximizing the value and mitigating risk.
- Provision for credit losses was a benefit in each of the three quarters reflecting improving credit metrics.
- Charge-offs for the second quarter of 2015 were in a net recovery position of
$7 million , primarily related to commercial real estate loan recoveries, compared with a small net recovery position for the first quarter and net charge-offs of$10 million for the second quarter of 2014.
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 |
||||||||||
2015 |
2015 |
2014 |
2015 |
2014 |
|||||||||||
Revenue |
|||||||||||||||
Net interest income |
$ |
2,052 |
$ |
2,072 |
$ |
2,129 |
$ |
4,124 |
$ |
4,324 |
|||||
Noninterest income |
1,814 |
1,659 |
1,681 |
3,473 |
3,263 |
||||||||||
Total revenue |
3,866 |
3,731 |
3,810 |
7,597 |
7,587 |
||||||||||
Noninterest expense |
2,366 |
2,349 |
2,328 |
4,715 |
4,592 |
||||||||||
Pretax, pre-provision earnings (a) |
1,500 |
1,382 |
1,482 |
2,882 |
2,995 |
||||||||||
Provision for credit losses |
46 |
54 |
72 |
100 |
166 |
||||||||||
Income before income taxes and noncontrolling interests |
$ |
1,454 |
$ |
1,328 |
$ |
1,410 |
$ |
2,782 |
$ |
2,829 |
|||||
Net income (b) |
$ |
1,044 |
$ |
1,004 |
$ |
1,052 |
$ |
2,048 |
$ |
2,112 |
|||||
Less: |
|||||||||||||||
Net income (loss) attributable to noncontrolling interests |
4 |
1 |
3 |
5 |
1 |
||||||||||
Preferred stock dividends and discount accretion |
|||||||||||||||
and redemptions (c) |
48 |
70 |
48 |
118 |
118 |
||||||||||
Net income attributable to common shareholders |
$ |
992 |
$ |
933 |
$ |
1,001 |
$ |
1,925 |
$ |
1,993 |
|||||
Less: |
|||||||||||||||
Dividends and undistributed earnings allocated to |
|||||||||||||||
nonvested restricted shares |
2 |
3 |
2 |
6 |
|||||||||||
Impact of BlackRock earnings per share dilution |
5 |
5 |
3 |
10 |
9 |
||||||||||
Net income attributable to diluted common shares |
$ |
987 |
$ |
926 |
$ |
995 |
$ |
1,913 |
$ |
1,978 |
|||||
Diluted earnings per common share |
$ |
1.88 |
$ |
1.75 |
$ |
1.85 |
$ |
3.63 |
$ |
3.67 |
|||||
Cash dividends declared per common share |
$ |
.51 |
$ |
.48 |
$ |
.48 |
$ |
.99 |
$ |
.92 |
|||||
Certain prior period amounts included in these Consolidated Financial Highlights have been reclassified to conform with the current period presentation, which we believe is more meaningful to readers of our consolidated financial statements. |
|||||||||||||||
(a) |
We believe that pretax, pre-provision earnings, a non-GAAP measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. |
||||||||||||||
(b) |
See page 16 for a reconciliation of business segment income to net income. |
||||||||||||||
(c) |
Dividends are payable quarterly other than Series O and Series R preferred stock, which are payable semiannually in different quarters. |
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 |
2015 |
2015 |
2014 |
2015 |
2014 |
||||||||||
Net Interest Income |
|||||||||||||||
Core net interest income (a) |
$ |
1,941 |
$ |
1,944 |
$ |
1,982 |
$ |
3,885 |
$ |
4,014 |
|||||
Total purchase accounting accretion |
|||||||||||||||
Scheduled accretion net of contractual interest |
83 |
95 |
112 |
178 |
246 |
||||||||||
Excess cash recoveries |
28 |
33 |
35 |
61 |
64 |
||||||||||
Total purchase accounting accretion |
111 |
128 |
147 |
239 |
310 |
||||||||||
Total net interest income |
$ |
2,052 |
$ |
2,072 |
$ |
2,129 |
$ |
4,124 |
$ |
4,324 |
|||||
Net Interest Margin |
|||||||||||||||
Core net interest margin (b) |
2.59 |
% |
2.65 |
% |
2.92 |
% |
2.63 |
% |
2.97 |
% |
|||||
Purchase accounting accretion impact on net interest margin |
.14 |
.17 |
.20 |
.15 |
.22 |