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PNC Reports Third Quarter 2016 Net Income of $1.0 Billion, $1.84 Diluted EPS
"PNC delivered another good quarter," said
Income Statement Highlights
Third quarter 2016 compared with second quarter 2016
- Total revenue grew
$35 million , or 1 percent, to$3.8 billion .- Net interest income of
$2.1 billion increased$27 million , or 1 percent, due to an additional day in the quarter and higher earning assets partially offset by lower yields. - Noninterest income of
$1.7 billion increased$8 million driven by fee income growth.
- Net interest income of
- Noninterest expense increased
$34 million , or 1 percent, to$2.4 billion reflecting business activity and included a newFDIC deposit insurance surcharge as overall expenses remained well managed. - Provision for credit losses was
$87 million , a decrease of$40 million primarily attributable to stabilization of the energy related portfolio.
Balance Sheet Highlights
- Loans grew
$1.4 billion , or 1 percent, to$210.4 billion atSeptember 30, 2016 compared withJune 30 , 2016.- Total commercial lending increased
$1.1 billion , or 1 percent, primarily in PNC's corporate banking and real estate businesses. - Total consumer lending increased
$.3 billion due to growth in auto, residential mortgage and credit card loans partially offset by lower home equity and education loans reflecting runoff portfolios.
- Total commercial lending increased
- Overall credit quality remained stable with the second quarter.
- Nonperforming assets of
$2.4 billion atSeptember 30, 2016 decreased 6 percent compared withJune 30, 2016 . - Net charge-offs increased to
$154 million for the third quarter compared with$134 million for the second quarter.
- Nonperforming assets of
- Deposits grew
$10.1 billion , or 4 percent, to$259.9 billion atSeptember 30, 2016 compared withJune 30, 2016 due to growth in commercial deposits primarily attributable to seasonality. - Investment securities of
$78.5 billion atSeptember 30, 2016 increased$6.7 billion , or 9 percent, compared withJune 30, 2016 commensurate with deposit growth. - PNC maintained a strong liquidity position.
- The Liquidity Coverage Ratio at
September 30, 2016 exceeded 100 percent for bothPNC and PNC Bank, N.A. , above the 2017 fully phased-in requirement of 100 percent.
- The Liquidity Coverage Ratio at
- PNC returned
$.8 billion of capital to shareholders, or 85 percent of third quarter net income attributable to diluted common shares, through repurchases of 5.9 million common shares for$.5 billion and dividends on common shares of$.3 billion .- The August quarterly dividend on common stock reflected an 8 percent increase, or
4 cents per share, to55 cents per share.
- The August quarterly dividend on common stock reflected an 8 percent increase, or
- PNC maintained a strong capital position.
- Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.6 percent at both
September 30, 2016 andJune 30, 2016 , calculated using the regulatory capital methodologies applicable to PNC during 2016. - Pro forma fully phased-in Basel III common equity Tier 1 capital ratio, a non-GAAP financial measure, was an estimated 10.2 percent at both
September 30, 2016 andJune 30, 2016 based on the standardized approach rules.
- Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.6 percent at both
Earnings Summary |
|||||||||||||
In millions, except per share data |
3Q16 |
2Q16 |
3Q15 |
||||||||||
Net income |
$ |
1,006 |
$ |
989 |
$ |
1,073 |
|||||||
Net income attributable to diluted common shares |
$ |
913 |
$ |
914 |
$ |
987 |
|||||||
Diluted earnings per common share |
$ |
1.84 |
$ |
1.82 |
$ |
1.90 |
|||||||
Average diluted common shares outstanding |
496 |
503 |
520 |
||||||||||
Return on average assets |
1.10 |
% |
1.11 |
% |
1.19 |
% |
|||||||
Return on average common equity |
8.74 |
% |
8.87 |
% |
9.61 |
% |
|||||||
Book value per common share Period end |
$ |
86.57 |
$ |
85.33 |
$ |
81.42 |
|||||||
Tangible book value per common share (non-GAAP) Period end |
$ |
67.93 |
$ |
66.89 |
$ |
63.37 |
|||||||
Cash dividends declared per common share |
$ |
.55 |
$ |
.51 |
$ |
.51 |
|||||||
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported amounts. Reference to core net interest income, a non-GAAP financial measure, is to total net interest income less purchase accounting accretion, which consists of scheduled accretion and excess cash recoveries, as detailed in the Consolidated Financial Highlights. Fee income, a non-GAAP financial measure, refers to noninterest income in the following categories: asset management, consumer services, corporate services, residential mortgage, and service charges on deposits. Information in this news release including the financial tables is unaudited.
CONSOLIDATED REVENUE REVIEW |
|||||||||||||||||||||
Revenue |
Change |
Change |
|||||||||||||||||||
3Q16 vs |
3Q16 vs |
||||||||||||||||||||
In millions |
3Q16 |
2Q16 |
3Q15 |
2Q16 |
3Q15 |
||||||||||||||||
Net interest income |
$ |
2,095 |
$ |
2,068 |
$ |
2,062 |
1 |
% |
2 |
% |
|||||||||||
Noninterest income |
1,734 |
1,726 |
1,713 |
– |
1 |
% |
|||||||||||||||
Total revenue |
$ |
3,829 |
$ |
3,794 |
$ |
3,775 |
1 |
% |
1 |
% |
|||||||||||
Total revenue for the third quarter of 2016 increased
Net interest income for the third quarter of 2016 increased
The net interest margin was 2.68 percent for the third quarter of 2016 compared with 2.70 percent for the second quarter and 2.67 percent for the third quarter of 2015. The decrease in the margin from the second quarter was primarily due to lower average rates on net securities purchases and the impact of prepayments. The increase in the margin over third quarter 2015 largely reflected the impact of the
Noninterest Income |
Change |
Change |
|||||||||||||||||||||
3Q16 vs |
3Q16 vs |
||||||||||||||||||||||
In millions |
3Q16 |
2Q16 |
3Q15 |
2Q16 |
3Q15 |
||||||||||||||||||
Asset management |
$ |
404 |
$ |
377 |
$ |
376 |
7 |
% |
7 |
% |
|||||||||||||
Consumer services |
348 |
354 |
341 |
(2) |
% |
2 |
% |
||||||||||||||||
Corporate services |
389 |
403 |
384 |
(3) |
% |
1 |
% |
||||||||||||||||
Residential mortgage |
160 |
165 |
125 |
(3) |
% |
28 |
% |
||||||||||||||||
Service charges on deposits |
174 |
163 |
172 |
7 |
% |
1 |
% |
||||||||||||||||
Other, including net securities gains |
259 |
264 |
315 |
(2) |
% |
(18) |
% |
||||||||||||||||
$ |
1,734 |
$ |
1,726 |
$ |
1,713 |
– |
1 |
% |
|||||||||||||||
Noninterest income for the third quarter of 2016 increased
Noninterest income for the third quarter of 2016 increased
CONSOLIDATED EXPENSE REVIEW |
||||||||||||||||||||||
Noninterest Expense |
Change |
Change |
||||||||||||||||||||
3Q16 vs |
3Q16 vs |
|||||||||||||||||||||
In millions |
3Q16 |
2Q16 |
3Q15 |
2Q16 |
3Q15 |
|||||||||||||||||
Personnel |
$ |
1,239 |
$ |
1,226 |
$ |
1,222 |
1 |
% |
1 |
% |
||||||||||||
Occupancy |
215 |
215 |
209 |
– |
3 |
% |
||||||||||||||||
Equipment |
246 |
240 |
227 |
3 |
% |
8 |
% |
|||||||||||||||
Marketing |
72 |
61 |
64 |
18 |
% |
13 |
% |
|||||||||||||||
Other |
622 |
618 |
630 |
1 |
% |
(1) |
% |
|||||||||||||||
$ |
2,394 |
$ |
2,360 |
$ |
2,352 |
1 |
% |
2 |
% |
|||||||||||||
Noninterest expense for the third quarter of 2016 increased
Noninterest expense for the third quarter of 2016 increased
The effective tax rate was 25.4 percent for the third quarter of 2016, 24.3 percent for the second quarter of 2016 and 20.0 percent for the third quarter of 2015. Lower income tax expense for third quarter 2015 reflected tax benefits attributable to effectively settling acquired entity tax contingencies.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets increased to
Loans |
Change |
Change |
||||||||||||||||||||
9/30/16 |
vs |
9/30/16 |
vs |
|||||||||||||||||||
In billions |
9/30/2016 |
6/30/2016 |
9/30/2015 |
6/30/16 |
9/30/15 |
|||||||||||||||||
Commercial lending |
$ |
138.2 |
$ |
137.1 |
$ |
131.2 |
1 |
% |
5 |
% |
||||||||||||
Consumer lending |
72.2 |
71.9 |
73.7 |
– |
(2) |
% |
||||||||||||||||
Total loans |
$ |
210.4 |
$ |
209.0 |
$ |
204.9 |
1 |
% |
3 |
% |
||||||||||||
For the quarter ended: |
||||||||||||||||||||||
Average loans |
$ |
208.9 |
$ |
208.4 |
$ |
204.9 |
– |
2 |
% |
|||||||||||||
Total loans grew
Third quarter 2016 period end and average loans increased
Investment Securities |
Change |
Change |
||||||||||||||||||||
9/30/16 |
vs |
9/30/16 |
vs |
|||||||||||||||||||
In billions |
9/30/2016 |
6/30/2016 |
9/30/2015 |
6/30/16 |
9/30/15 |
|||||||||||||||||
At quarter end |
$ |
78.5 |
$ |
71.8 |
$ |
68.1 |
9 |
% |
15 |
% |
||||||||||||
Average for the quarter ended |
$ |
71.6 |
$ |
70.1 |
$ |
62.0 |
2 |
% |
15 |
% |
||||||||||||
Investment securities balances at
Interest-earning deposits with banks, primarily with the
Deposits |
Change |
Change |
||||||||||||||||||||
9/30/16 |
vs |
9/30/16 |
vs |
|||||||||||||||||||
In billions |
9/30/2016 |
6/30/2016 |
9/30/2015 |
6/30/16 |
9/30/15 |
|||||||||||||||||
At quarter end |
$ |
259.9 |
$ |
249.8 |
$ |
245.0 |
4 |
% |
6 |
% |
||||||||||||
Average for the quarter ended |
$ |
252.5 |
$ |
247.6 |
$ |
243.4 |
2 |
% |
4 |
% |
||||||||||||
Total deposits at
Borrowed Funds |
Change |
Change |
||||||||||||||||||||
9/30/16 |
vs |
9/30/16 |
vs |
|||||||||||||||||||
In billions |
9/30/2016 |
6/30/2016 |
9/30/2015 |
6/30/16 |
9/30/15 |
|||||||||||||||||
At quarter end |
$ |
51.6 |
$ |
54.6 |
$ |
56.7 |
(5) |
% |
(9) |
% |
||||||||||||
Average for the quarter ended |
$ |
53.0 |
$ |
53.6 |
$ |
57.5 |
(1) |
% |
(8) |
% |
||||||||||||
Borrowed funds at
Capital |
|||||||||||||
9/30/2016* |
6/30/2016 |
9/30/2015 |
|||||||||||
Common shareholders' equity In billions |
$ |
42.3 |
$ |
42.1 |
$ |
41.5 |
|||||||
Transitional Basel III common equity Tier 1 capital ratio |
10.6 |
% |
10.6 |
% |
10.6 |
% |
|||||||
Pro forma fully phased-in Basel III common equity |
|||||||||||||
Tier 1 capital ratio (non-GAAP) |
10.2 |
% |
10.2 |
% |
10.1 |
% |
|||||||
* Ratios estimated |
|||||||||||||
PNC maintained a strong capital position. Common shareholders' equity increased compared with
PNC returned
On
CREDIT QUALITY REVIEW |
|||||||||||||||||||
Credit Quality |
Change |
Change |
|||||||||||||||||
At or for the quarter ended |
9/30/16 |
vs |
9/30/16 |
vs |
|||||||||||||||
In millions |
9/30/2016 |
6/30/2016 |
9/30/2015 |
6/30/16 |
9/30/15 |
||||||||||||||
Nonperforming loans |
$ |
2,146 |
$ |
2,264 |
$ |
2,177 |
(5) |
% |
(1) |
% |
|||||||||
Nonperforming assets |
$ |
2,375 |
$ |
2,515 |
$ |
2,490 |
(6) |
% |
(5) |
% |
|||||||||
Accruing loans past due 90 days or more |
$ |
766 |
$ |
754 |
$ |
890 |
2 |
% |
(14) |
% |
|||||||||
Net charge-offs |
$ |
154 |
$ |
134 |
$ |
96 |
15 |
% |
60 |
% |
|||||||||
Provision for credit losses |
$ |
87 |
$ |
127 |
$ |
81 |
(31) |
% |
7 |
% |
|||||||||
Allowance for loan and lease losses |
$ |
2,619 |
$ |
2,685 |
$ |
3,237 |
(2) |
% |
(19) |
% |
|||||||||
Overall credit quality for the third quarter of 2016 remained stable with the second quarter. Provision for credit losses for third quarter 2016 was
Nonperforming assets at
Overall delinquencies as of
Net charge-offs for the third quarter of 2016 increased
The allowance for loan and lease losses at
BUSINESS SEGMENT RESULTS |
||||||||||||||
Business Segment Income (Loss) |
||||||||||||||
In millions |
3Q16 |
2Q16 |
3Q15 |
|||||||||||
Retail Banking |
$ |
223 |
$ |
307 |
$ |
251 |
||||||||
Corporate & Institutional Banking |
537 |
490 |
502 |
|||||||||||
Asset Management Group |
58 |
48 |
44 |
|||||||||||
Residential Mortgage Banking |
13 |
46 |
(4) |
|||||||||||
Non-Strategic Assets Portfolio |
54 |
29 |
68 |
|||||||||||
Other, including BlackRock |
121 |
69 |
212 |
|||||||||||
Net income |
$ |
1,006 |
$ |
989 |
$ |
1,073 |
||||||||
See accompanying notes in Consolidated Financial Highlights |
||||||||||||||
Retail Banking |
Change |
Change |
||||||||||||||||||||
3Q16 vs |
3Q16 vs |
|||||||||||||||||||||
In millions |
3Q16 |
2Q16 |
3Q15 |
2Q16 |
3Q15 |
|||||||||||||||||
Net interest income |
$ |
1,120 |
$ |
1,118 |
$ |
1,069 |
$ |
2 |
$ |
51 |
||||||||||||
Noninterest income |
$ |
527 |
$ |
564 |
$ |
574 |
$ |
(37) |
$ |
(47) |
||||||||||||
Provision for credit losses |
$ |
104 |
$ |
29 |
$ |
57 |
$ |
75 |
$ |
47 |
||||||||||||
Noninterest expense |
$ |
1,191 |
$ |
1,168 |
$ |
1,190 |
$ |
23 |
$ |
1 |
||||||||||||
Earnings |
$ |
223 |
$ |
307 |
$ |
251 |
$ |
(84) |
$ |
(28) |
||||||||||||
In billions |
||||||||||||||||||||||
Average loans |
$ |
62.0 |
$ |
62.4 |
$ |
63.8 |
$ |
(.4) |
$ |
(1.8) |
||||||||||||
Average deposits |
$ |
154.2 |
$ |
154.1 |
$ |
146.2 |
$ |
.1 |
$ |
8.0 |
||||||||||||
Retail Banking earnings for the third quarter of 2016 decreased in both comparisons. Noninterest income declined reflecting the impact of net gains on sales of Visa Class B common shares in both the second quarter of 2016 and the third quarter of 2015. There were no sales of Visa shares in the third quarter of 2016. Noninterest income included seasonally higher service charges on deposits compared with the second quarter, and growth in both consumer service fees and service charges on deposits compared with third quarter 2015. Provision for credit losses increased compared with the second quarter due to seasonal credit trends affecting the education loan portfolio and continued growth in auto and credit card portfolios. Noninterest expense increased over the second quarter primarily as a result of investments in technology and higher marketing expenses, and included a new
- Retail Banking continued to focus on the strategic priority of transforming the customer experience through transaction migration, branch network transformation and multi-channel sales and service strategies.
- Approximately 59 percent of consumer customers used non-teller channels for the majority of their transactions during the third quarter of 2016 compared with 57 percent and 53 percent for the second quarter of 2016 and third quarter of 2015, respectively.
- Deposit transactions via ATM and mobile channels were 50 percent of total deposit transactions in the third quarter of 2016 compared with 48 percent in the second quarter and 45 percent in the third quarter of 2015.
- PNC had a network of 2,600 branches and 9,045 ATMs at
September 30, 2016 . Approximately 18 percent of the branch network operates under the universal model as part of PNC's retail branch transformation strategy.
- Average deposits grew 5 percent over the third quarter of 2015 due to higher demand deposits, and an increase in savings deposits which were partially offset by lower money market deposits reflecting a shift to relationship-based savings products. Certificates of deposit declined from the net runoff of maturing accounts.
- Average loans decreased 3 percent compared with the third quarter of 2015 as growth in automobile and credit card loans was more than offset by lower home equity, education and commercial loans.
- Net charge-offs for the third quarter of 2016 were
$89 million compared with$75 million in the second quarter of 2016 and$66 million in the third quarter of 2015.
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||
3Q16 vs |
3Q16 vs |
||||||||||||||||||
In millions |
3Q16 |
2Q16 |
3Q15 |
2Q16 |
3Q15 |
||||||||||||||
Net interest income |
$ |
873 |
$ |
854 |
$ |
887 |
$ |
19 |
$ |
(14) |
|||||||||
Noninterest income |
$ |
517 |
$ |
533 |
$ |
476 |
$ |
(16) |
$ |
41 |
|||||||||
Provision for credit losses |
$ |
12 |
$ |
69 |
$ |
46 |
$ |
(57) |
$ |
(34) |
|||||||||
Noninterest expense |
$ |
555 |
$ |
549 |
$ |
533 |
$ |
6 |
$ |
22 |
|||||||||
Earnings |
$ |
537 |
$ |
490 |
$ |
502 |
$ |
47 |
$ |
35 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
122.6 |
$ |
121.6 |
$ |
116.2 |
$ |
1.0 |
$ |
6.4 |
|||||||||
Average deposits |
$ |
83.0 |
$ |
78.3 |
$ |
83.1 |
$ |
4.7 |
$ |
(.1) |
|||||||||
Commercial loan servicing portfolio Quarter end |
$ |
461 |
$ |
459 |
$ |
441 |
$ |
2 |
$ |
20 |
|||||||||
Corporate & Institutional Banking earnings for the third quarter of 2016 increased in both comparisons. Noninterest income declined from the second quarter primarily due to lower capital markets-related revenue and a lower benefit from commercial mortgage servicing rights valuation partially offset by higher gains on asset sales and higher treasury management fees. Noninterest income increased compared with the third quarter of 2015 principally from higher gains on asset sales, higher treasury management fees and higher corporate securities underwriting activity. Provision for credit losses in the third quarter of 2016 decreased in both comparisons reflecting stabilization of the energy related portfolio and changes in expected commercial default rates. Noninterest expense increased compared with third quarter 2015 as a result of higher variable compensation and other costs associated with increased business activity and investments in technology and infrastructure.
- Average loans increased 1 percent over the second quarter and 6 percent over the third quarter of 2015 driven by growth in PNC's real estate business, including both commercial real estate and commercial loans, and increased lending to large corporate customers in PNC's corporate banking business.
- Average deposits increased 6 percent over the second quarter reflecting seasonal growth. Compared with third quarter 2015, decreases in average noninterest-bearing demand and money market deposits were mostly offset by interest-bearing demand deposit growth.
- Net charge-offs of
$69 million in the third quarter of 2016 increased compared with$59 million in the second quarter and$26 million in the third quarter of 2015 due in part to charge-offs of previously reserved energy related loans.
Asset Management Group |
Change |
Change |
||||||||||||||||||||
3Q16 vs |
3Q16 vs |
|||||||||||||||||||||
In millions |
3Q16 |
2Q16 |
3Q15 |
2Q16 |
3Q15 |
|||||||||||||||||
Net interest income |
$ |
74 |
$ |
76 |
$ |
71 |
$ |
(2) |
$ |
3 |
||||||||||||
Noninterest income |
$ |
220 |
$ |
213 |
$ |
207 |
$ |
7 |
$ |
13 |
||||||||||||
Provision for credit losses (benefit) |
$ |
(3) |
$ |
6 |
$ |
(2) |
$ |
(9) |
$ |
(1) |
||||||||||||
Noninterest expense |
$ |
206 |
$ |
206 |
$ |
211 |
– |
$ |
(5) |
|||||||||||||
Earnings |
$ |
58 |
$ |
48 |
$ |
44 |
$ |
10 |
$ |
14 |
||||||||||||
In billions |
||||||||||||||||||||||
Client assets under administration Quarter end |
$ |
266 |
$ |
261 |
$ |
256 |
$ |
5 |
$ |
10 |
||||||||||||
Average loans |
$ |
7.1 |
$ |
7.3 |
$ |
7.4 |
$ |
(.2) |
$ |
(.3) |
||||||||||||
Average deposits |
$ |
11.9 |
$ |
12.0 |
$ |
11.3 |
$ |
(.1) |
$ |
.6 |
||||||||||||
Asset Management Group's growth strategy is focused on capturing more investable assets by delivering an enhanced client experience, and involves new client acquisition and expanding share of wallet while leveraging its open architecture platform with a full array of investment products and banking solutions for all clients. Key considerations are maximizing front line productivity, a relationship-based focus with other line of business partners, and optimizing market presence in high opportunity markets.- Client assets under administration at
September 30, 2016 included discretionary client assets under management of$138 billion and nondiscretionary client assets under administration of$128 billion .- Discretionary client assets under management increased
$3 billion compared withJune 30, 2016 and$6 billion compared withSeptember 30, 2015 primarily attributable to equity market increases.
- Discretionary client assets under management increased
Residential Mortgage Banking |
Change |
Change |
||||||||||||||||||
3Q16 vs |
3Q16 vs |
|||||||||||||||||||
In millions |
3Q16 |
2Q16 |
3Q15 |
2Q16 |
3Q15 |
|||||||||||||||
Net interest income |
$ |
28 |
$ |
28 |
$ |
31 |
– |
$ |
(3) |
|||||||||||
Noninterest income |
$ |
163 |
$ |
182 |
$ |
135 |
$ |
(19) |
$ |
28 |
||||||||||
Provision for credit losses |
$ |
- |
$ |
1 |
$ |
2 |
$ |
(1) |
$ |
(2) |
||||||||||
Noninterest expense |
$ |
170 |
$ |
136 |
$ |
171 |
$ |
34 |
$ |
(1) |
||||||||||
Earnings (loss) |
$ |
13 |
$ |
46 |
$ |
(4) |
$ |
(33) |
$ |
17 |
||||||||||
In billions |
||||||||||||||||||||
Residential mortgage servicing portfolio Quarter end |
$ |
126 |
$ |
126 |
$ |
122 |
– |
$ |
4 |
|||||||||||
Loan origination volume |
$ |
3.1 |
$ |
2.6 |
$ |
2.7 |
$ |
.5 |
$ |
.4 |
||||||||||
Residential Mortgage Banking earnings for the third quarter of 2016 decreased compared with second quarter 2016 and increased compared with third quarter 2015. Noninterest income declined from the second quarter due to lower net hedging gains on residential mortgage servicing rights partially offset by higher loan sales revenue. Noninterest income increased over the third quarter of 2015 primarily as a result of higher loan sales revenue. Noninterest expense increased compared with the linked quarter due to the impact of second quarter release of residential mortgage foreclosure-related reserves and from higher origination costs.
- 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 the bank footprint markets.
- Loan origination volume in the third quarter of 2016 increased 17 percent compared with the second quarter and 12 percent compared with the third quarter of 2015. Approximately 41 percent of third quarter 2016 origination volume was for home purchase transactions compared with 48 percent in the second quarter and 55 percent in the third quarter of 2015.
- Loan servicing acquisitions were
$5 billion in the third quarter of 2016,$6 billion in the second quarter and$10 billion in the third quarter of 2015.
Non-Strategic Assets Portfolio |
Change |
Change |
|||||||||||||||||
3Q16 vs |
3Q16 vs |
||||||||||||||||||
In millions |
3Q16 |
2Q16 |
3Q15 |
2Q16 |
3Q15 |
||||||||||||||
Net interest income |
$ |
72 |
$ |
73 |
$ |
90 |
$ |
(1) |
$ |
(18) |
|||||||||
Noninterest income |
$ |
8 |
$ |
5 |
$ |
16 |
$ |
3 |
$ |
(8) |
|||||||||
Provision for credit losses (benefit) |
$ |
(22) |
$ |
13 |
$ |
(25) |
$ |
(35) |
$ |
3 |
|||||||||
Noninterest expense |
$ |
16 |
$ |
20 |
$ |
23 |
$ |
(4) |
$ |
(7) |
|||||||||
Earnings |
$ |
54 |
$ |
29 |
$ |
68 |
$ |
25 |
$ |
(14) |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
5.6 |
$ |
5.9 |
$ |
7.2 |
$ |
(.3) |
$ |
(1.6) |
|||||||||
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 the third quarter of 2016 primarily related to consumer loans compared with a provision in the second quarter which reflected reduced cash flow expectations on certain purchased impaired residential mortgage loans.
- Charge-offs were in net recovery positions of
$6 million for the third quarter of 2016 compared with$2 million for the second quarter and$1 million for the third quarter of 2015.
Other, including
The "Other, including
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC Chairman, President and Chief Executive Officer
The
[TABULAR MATERIAL FOLLOWS]
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||||||
FINANCIAL RESULTS |
Three months ended |
Nine months ended |
|||||||||||||
Dollars in millions, except per share data |
September 30 |
June 30 |
September 30 |
September 30 |
September 30 |
||||||||||
2016 |
2016 |
2015 |
2016 |
2015 |
|||||||||||
Revenue |
|||||||||||||||
Net interest income |
$ |
2,095 |
$ |
2,068 |
$ |
2,062 |
$ |
6,261 |
$ |
6,186 |
|||||
Noninterest income |
1,734 |
1,726 |
1,713 |
5,027 |
5,186 |
||||||||||
Total revenue |
3,829 |
3,794 |
3,775 |
11,288 |
11,372 |
||||||||||
Provision for credit losses |
87 |
127 |
81 |
366 |
181 |
||||||||||
Noninterest expense |
2,394 |
2,360 |
2,352 |
7,035 |
7,067 |
||||||||||
Income before income taxes and noncontrolling interests |
$ |
1,348 |
$ |
1,307 |
$ |
1,342 |
$ |
3,887 |
$ |
4,124 |
|||||
Net income |
$ |
1,006 |
$ |
989 |
$ |
1,073 |
$ |
2,938 |
$ |
3,121 |
|||||
Less: |
|||||||||||||||
Net income (loss) attributable to noncontrolling interests |
18 |
23 |
18 |
60 |
23 |
||||||||||
Preferred stock dividends and discount accretion and redemptions (a) |
64 |
43 |
64 |
172 |
182 |
||||||||||
Net income attributable to common shareholders |
$ |
924 |
$ |
923 |
$ |
991 |
$ |
2,706 |
$ |
2,916 |
|||||
Less: |
|||||||||||||||
Dividends and undistributed earnings allocated to nonvested restricted shares |
7 |
6 |
19 |
2 |
|||||||||||
Impact of BlackRock earnings per share dilution |
4 |
3 |
4 |
10 |
14 |
||||||||||
Net income attributable to diluted common shares |
$ |
913 |
$ |
914 |
$ |
987 |
$ |
2,677 |
$ |
2,900 |
|||||
Diluted earnings per common share |
$ |
1.84 |
$ |
1.82 |
$ |
1.90 |
$ |
5.33 |
$ |
5.52 |
|||||
Cash dividends declared per common share |
$ |
.55 |
$ |
.51 |
$ |
.51 |
$ |
1.57 |
$ |
1.50 |
|||||
Effective tax rate (b) |
25.4 |
% |
24.3 |
% |
20.0 |
% |
24.4 |
% |
24.3 |
% |
(a) |
Dividends are payable quarterly other than Series O and Series R preferred stock, which are payable semiannually in different quarters. |
||||||||||||||
(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. |
TOTAL AND CORE NET INTEREST INCOME AND NET INTEREST MARGIN |
|||||||||||||||
Three months ended |
Nine months ended |
||||||||||||||
September 30 |
June 30 |
September 30 |
September 30 |
September 30 |
|||||||||||
Dollars in millions |
2016 |
2016 |
2015 |
2016 |
2015 |
||||||||||
Net Interest Income |
|||||||||||||||
Core net interest income (Non-GAAP) (a) |
$ |
2,033 |
$ |
2,004 |
$ |
1,972 |
$ |
6,049 |
$ |
5,857 |
|||||
Total purchase accounting accretion |
|||||||||||||||
Scheduled accretion net of contractual interest |
39 |
45 |
71 |
136 |
249 |
||||||||||
Excess cash recoveries |
23 |
19 |
19 |
76 |
80 |
||||||||||
Total purchase accounting accretion |
62 |
64 |
90 |
212 |
329 |
||||||||||
Total net interest income |
$ |
2,095 |
$ |
2,068 |
$ |
2,062 |
$ |
6,261 |
$ |
6,186 |
|||||
Net Interest Margin |
|||||||||||||||
Core net interest margin (Non-GAAP) (b) |
2.61 |
% |
2.63 |
% |
2.57 |
% |
2.63 |
% |
2.60 |
% |
|||||
Purchase accounting accretion impact on net interest margin |
.07 |
.07 |
.10 |
.08 |
.14 |
||||||||||
Net interest margin (c) |
2.68 |
% |
2.70 |
% |
2.67 |
% |
2.71 |
% |
2.74 |
% |
(a) |
We believe that core net interest income, a non-GAAP financial measure, is useful in evaluating the performance of our interest-based activities. |
||||||||||||||
(b) |
We believe that core net interest margin, a non-GAAP financial measure, is useful as a tool to help evaluate the impact of purchase accounting accretion on net interest margin. To calculate core net interest margin, net interest margin has been adjusted by annualized purchase accounting accretion divided by average interest-earning assets. |
||||||||||||||
(c) |
Calculated as annualized taxable-equivalent net interest income divided by average earning assets. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest margins, 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 September 30, 2016, June 30, 2016 and September 30, 2015 were $49 million, $48 million and $50 million, respectively. The taxable equivalent adjustments to net interest income for the first nine months of 2016 and 2015 were $145 million and $148 million, respectively. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||||||||||||
Three months ended |
Nine months ended |
||||||||||||||||||||
September 30 |
June 30 |
September 30 |
September 30 |
September 30 |
|||||||||||||||||
2016 |
2016 |
2015 |
2016 |
2015 |
|||||||||||||||||
PERFORMANCE RATIOS |
|||||||||||||||||||||
Net interest margin (a) |
2.68 |
% |
2.70 |
% |
2.67 |
% |
2.71 |
% |
2.74 |
% |
|||||||||||
Noninterest income to total revenue |
45 |
% |
45 |
% |
45 |
% |
45 |
% |
46 |
% |
|||||||||||
Efficiency (b) |
63 |
% |
62 |
% |
62 |
% |
62 |
% |
62 |
% |
|||||||||||
Return on: |
|||||||||||||||||||||
Average common shareholders' equity |
8.74 |
% |
8.87 |
% |
9.61 |
% |
8.69 |
% |
9.56 |
% |
|||||||||||
Average assets |
1.10 |
% |
1.11 |
% |
1.19 |
% |
1.09 |
% |
1.18 |
% |
|||||||||||
BUSINESS SEGMENT NET INCOME (LOSS) (c) (d) |
|||||||||||||||||||||
In millions |
|||||||||||||||||||||
Retail Banking |
$ |
223 |
$ |
307 |
$ |
251 |
$ |
798 |
$ |
694 |
|||||||||||
Corporate & Institutional Banking |
537 |
490 |
502 |
1,458 |
1,492 |
||||||||||||||||
Asset Management Group |
58 |
48 |
44 |
155 |
143 |
||||||||||||||||
Residential Mortgage Banking |
13 |
46 |
(4) |
46 |
43 |
||||||||||||||||
Non-Strategic Assets Portfolio |
54 |
29 |
68 |
135 |
205 |
||||||||||||||||
Other, including BlackRock (d) (e) |
121 |
69 |
212 |
346 |