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PNC Reports Third Quarter 2017 Net Income of $1.1 Billion, $2.16 Diluted EPS
For the quarter |
||||||
3Q17 |
2Q17 |
3Q16 |
||||
Net income $ millions |
$1,126 |
$1,097 |
$1,006 |
|||
Diluted earnings per common share |
$2.16 |
$2.10 |
$1.84 |
"PNC continued to win new clients and grow both loans and deposits in the third quarter on the strength of our relationship-based business model and the quality of our product offering," said
Income Statement Highlights
Third quarter 2017 compared with second quarter 2017
- Total revenue increased
$65 million , or 2 percent, to$4.1 billion . PNC continues to generate positive operating leverage. - Net interest income grew
$87 million , or 4 percent, to$2.3 billion primarily due to higher loan yields and balances. - Net interest margin increased 7 basis points to 2.91 percent.
- Noninterest income of
$1.8 billion decreased$22 million , or 1 percent, driven by a decline in corporate service fees from elevated second quarter levels. - Noninterest expense of
$2.5 billion decreased$23 million , or 1 percent, as expenses were well managed. - Provision for credit losses increased
$32 million to $130 million and included$10 million related to Hurricanes Harvey and Irma. Loan growth and seasonal consumer loan credit trends contributed to the increase.
Balance Sheet Highlights
- Loans grew
$3.1 billion , or 1 percent, to$221.1 billion atSeptember 30, 2017 compared withJune 30 , 2017. - Commercial lending balances increased
$2.8 billion reflecting growth in PNC's real estate, corporate banking, business credit and equipment finance businesses. - Consumer lending balances increased
$.3 billion as growth in residential mortgage, auto and credit card loans was largely offset by lower home equity and education loans. - Overall credit quality remained stable.
- Nonperforming assets of
$2.1 billion atSeptember 30, 2017 decreased$86 million , or 4 percent, compared withJune 30, 2017 . - Net charge-offs declined to
$106 million for the third quarter compared with$110 million for the second quarter. - Deposits increased
$1.6 billion , or 1 percent, to$260.7 billion atSeptember 30, 2017 compared withJune 30, 2017 due to seasonal growth in commercial deposits. - Investment securities decreased
$1.4 billion , or 2 percent, to$75.0 billion atSeptember 30, 2017 compared withJune 30, 2017 as a result of lower reinvestments in part due to relatively less attractive market opportunities during the third quarter. - PNC returned
$.9 billion of capital to shareholders, or 86 percent of third quarter net income attributable to diluted common shares, through repurchases of 4.2 million common shares for$.5 billion and dividends on common shares of$.4 billion . - The August quarterly cash dividend on common stock reflected a 36 percent increase, or
20 cents , to75 cents per share. - PNC maintained strong capital and liquidity positions.
- Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.3 percent at both
September 30, 2017 andJune 30, 2017 , calculated using the regulatory capital methodologies applicable to PNC during 2017. - Pro forma fully phased-in Basel III common equity Tier 1 capital ratio, a non-GAAP financial measure, was an estimated 9.8 percent at both
September 30, 2017 andJune 30, 2017 , based on the standardized approach rules. - The Liquidity Coverage Ratio at
September 30, 2017 for bothPNC and PNC Bank, N.A. continued to exceed the fully phased-in requirement of 100 percent.
Earnings Summary |
||||||||||||
In millions, except per share data |
3Q17 |
2Q17 |
3Q16 |
|||||||||
Net income |
$ |
1,126 |
$ |
1,097 |
$ |
1,006 |
||||||
Net income attributable to diluted common shares |
$ |
1,042 |
$ |
1,025 |
$ |
913 |
||||||
Diluted earnings per common share |
$ |
2.16 |
$ |
2.10 |
$ |
1.84 |
||||||
Average diluted common shares outstanding |
483 |
488 |
496 |
|||||||||
Return on average assets |
1.20 |
% |
1.19 |
% |
1.10 |
% |
||||||
Return on average common equity |
9.89 |
% |
9.88 |
% |
8.74 |
% |
||||||
Book value per common share |
Quarter end |
$ |
89.05 |
$ |
87.78 |
$ |
86.57 |
|||||
Tangible book value per common share (non-GAAP) |
Quarter end |
$ |
69.72 |
$ |
68.55 |
$ |
67.93 |
|||||
Cash dividends declared per common share |
$ |
.75 |
$ |
.55 |
$ |
.55 |
||||||
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported amounts. Fee income, a non-GAAP financial measure, refers to noninterest income in the following categories: asset management, consumer services, corporate services, residential mortgage and service charges on deposits. Information in this news release including the financial tables is unaudited.
CONSOLIDATED REVENUE REVIEW |
|||||||||||||||
Revenue |
Change |
Change |
|||||||||||||
3Q17 vs |
3Q17 vs |
||||||||||||||
In millions |
3Q17 |
2Q17 |
3Q16 |
2Q17 |
3Q16 |
||||||||||
Net interest income |
$ |
2,345 |
$ |
2,258 |
$ |
2,095 |
4 |
% |
12 |
% |
|||||
Noninterest income |
1,780 |
1,802 |
1,734 |
(1) |
% |
3 |
% |
||||||||
Total revenue |
$ |
4,125 |
$ |
4,060 |
$ |
3,829 |
2 |
% |
8 |
% |
|||||
Total revenue for the third quarter of 2017 grew
Net interest income for the third quarter of 2017 increased
The net interest margin increased to 2.91 percent for the third quarter of 2017 compared with 2.84 percent for the second quarter and 2.68 percent for the third quarter of 2016. The third quarter 2017 margin reflected the benefit from higher short-term interest rates.
Noninterest Income |
Change |
Change |
|||||||||||||
3Q17 vs |
3Q17 vs |
||||||||||||||
In millions |
3Q17 |
2Q17 |
3Q16 |
2Q17 |
3Q16 |
||||||||||
Asset management |
$ |
421 |
$ |
398 |
$ |
404 |
6 |
% |
4 |
% |
|||||
Consumer services |
357 |
360 |
348 |
(1) |
% |
3 |
% |
||||||||
Corporate services |
371 |
434 |
389 |
(15) |
% |
(5) |
% |
||||||||
Residential mortgage |
104 |
104 |
160 |
— |
(35) |
% |
|||||||||
Service charges on deposits |
181 |
170 |
174 |
6 |
% |
4 |
% |
||||||||
Other |
346 |
336 |
259 |
3 |
% |
34 |
% |
||||||||
$ |
1,780 |
$ |
1,802 |
$ |
1,734 |
(1) |
% |
3 |
% |
||||||
Noninterest income for the third quarter of 2017 decreased
Noninterest income for the third quarter of 2017 increased
CONSOLIDATED EXPENSE REVIEW |
|||||||||||||||
Noninterest Expense |
Change |
Change |
|||||||||||||
3Q17 vs |
3Q17 vs |
||||||||||||||
In millions |
3Q17 |
2Q17 |
3Q16 |
2Q17 |
3Q16 |
||||||||||
Personnel |
$ |
1,274 |
$ |
1,263 |
$ |
1,239 |
1 |
% |
3 |
% |
|||||
Occupancy |
204 |
202 |
215 |
1 |
% |
(5) |
% |
||||||||
Equipment |
259 |
281 |
246 |
(8) |
% |
5 |
% |
||||||||
Marketing |
62 |
67 |
72 |
(7) |
% |
(14) |
% |
||||||||
Other |
657 |
666 |
622 |
(1) |
% |
6 |
% |
||||||||
$ |
2,456 |
$ |
2,479 |
$ |
2,394 |
(1) |
% |
3 |
% |
||||||
Noninterest expense for the third quarter of 2017 decreased
Noninterest expense for the third quarter of 2017 increased
The effective tax rate was 26.8 percent for the third quarter of 2017, 26.0 percent for the second quarter of 2017 and 25.4 percent for the third quarter of 2016. The increase in the effective tax rate in the third quarter of 2017 was primarily due to higher pretax income and the impact of state tax legislative changes.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were
Loans |
Change |
Change |
|||||||||||||
9/30/17 vs |
9/30/17 vs |
||||||||||||||
In billions |
9/30/2017 |
6/30/2017 |
9/30/2016 |
6/30/17 |
9/30/16 |
||||||||||
Commercial lending |
$ |
148.5 |
$ |
145.7 |
$ |
138.2 |
2 |
% |
7 |
% |
|||||
Consumer lending |
72.6 |
72.3 |
72.2 |
— |
1 |
% |
|||||||||
Total loans |
$ |
221.1 |
$ |
218.0 |
$ |
210.4 |
1 |
% |
5 |
% |
|||||
For the quarter ended: |
|||||||||||||||
Average loans |
$ |
219.2 |
$ |
216.3 |
$ |
208.8 |
1 |
% |
5 |
% |
|||||
Total loans grew
Third quarter 2017 period end and average loans increased
Investment Securities |
Change |
Change |
|||||||||||||
9/30/17 vs |
9/30/17 vs |
||||||||||||||
In billions |
9/30/2017 |
6/30/2017 |
9/30/2016 |
6/30/17 |
9/30/16 |
||||||||||
At quarter end |
$ |
75.0 |
$ |
76.4 |
$ |
78.5 |
(2) |
% |
(4) |
% |
|||||
Average for the quarter ended |
$ |
74.4 |
$ |
75.3 |
$ |
71.6 |
(1) |
% |
4 |
% |
|||||
Investment securities balances at
Balances held with the
Deposits |
Change |
Change |
|||||||||||||
9/30/17 vs |
9/30/17 vs |
||||||||||||||
In billions |
9/30/2017 |
6/30/2017 |
9/30/2016 |
6/30/17 |
9/30/16 |
||||||||||
At quarter end |
$ |
260.7 |
$ |
259.1 |
$ |
259.9 |
1 |
% |
— |
||||||
Average for the quarter ended |
$ |
259.4 |
$ |
256.3 |
$ |
252.5 |
1 |
% |
3 |
% |
|||||
Total deposits at
Borrowed Funds |
Change |
Change |
|||||||||||||
9/30/17 vs |
9/30/17 vs |
||||||||||||||
In billions |
9/30/2017 |
6/30/2017 |
9/30/2016 |
6/30/17 |
9/30/16 |
||||||||||
At quarter end |
$ |
57.6 |
$ |
56.4 |
$ |
51.6 |
2 |
% |
12 |
% |
|||||
Average for the quarter ended |
$ |
57.0 |
$ |
57.5 |
$ |
53.0 |
(1) |
% |
8 |
% |
|||||
Borrowed funds at
Capital |
||||||||||||
9/30/2017* |
6/30/2017 |
9/30/2016 |
||||||||||
Common shareholders' equity In billions |
$ |
42.4 |
$ |
42.1 |
$ |
42.3 |
||||||
Transitional Basel III common equity Tier 1 capital ratio |
10.3 |
% |
10.3 |
% |
10.6 |
% |
||||||
Pro forma fully phased-in Basel III common equity |
||||||||||||
Tier 1 capital ratio (non-GAAP) |
9.8 |
% |
9.8 |
% |
10.2 |
% |
||||||
* Ratios estimated |
||||||||||||
PNC maintained a strong capital position. Common shareholders' equity at
PNC returned
On
CREDIT QUALITY REVIEW |
|||||||||||||||
Credit Quality |
Change |
Change |
|||||||||||||
At or for the quarter ended |
9/30/17 vs |
9/30/17 vs |
|||||||||||||
In millions |
9/30/2017 |
6/30/2017 |
9/30/2016 |
6/30/17 |
9/30/16 |
||||||||||
Nonperforming loans |
$ |
1,873 |
$ |
1,957 |
$ |
2,146 |
(4) |
% |
(13) |
% |
|||||
Nonperforming assets |
$ |
2,067 |
$ |
2,153 |
$ |
2,375 |
(4) |
% |
(13) |
% |
|||||
Accruing loans past due 90 days or more |
$ |
678 |
$ |
674 |
$ |
766 |
1 |
% |
(11) |
% |
|||||
Net charge-offs |
$ |
106 |
$ |
110 |
$ |
154 |
(4) |
% |
(31) |
% |
|||||
Provision for credit losses |
$ |
130 |
$ |
98 |
$ |
87 |
33 |
% |
49 |
% |
|||||
Allowance for loan and lease losses |
$ |
2,605 |
$ |
2,561 |
$ |
2,619 |
2 |
% |
(1) |
% |
|||||
Overall credit quality for the third quarter of 2017 remained stable with the second quarter. Provision for credit losses for third quarter 2017 increased
Nonperforming assets at
Overall delinquencies as of
Net charge-offs for the third quarter of 2017 decreased
The allowance for loan and lease losses to total loans was 1.18 percent at
BUSINESS SEGMENT RESULTS |
|||||||||||
Business Segment Income |
|||||||||||
In millions |
3Q17 |
2Q17 |
3Q16 |
||||||||
Retail Banking |
$ |
232 |
$ |
230 |
$ |
224 |
|||||
Corporate & Institutional Banking |
525 |
518 |
509 |
||||||||
Asset Management Group |
47 |
52 |
58 |
||||||||
Other, including BlackRock |
322 |
297 |
215 |
||||||||
Net income |
$ |
1,126 |
$ |
1,097 |
$ |
1,006 |
|||||
See accompanying notes in Consolidated Financial Highlights |
|||||||||||
Effective for the first quarter of 2017, as a result of changes to how PNC manages its businesses, it realigned its segments and, accordingly, has changed the basis of presentation of its segments, resulting in four reportable business segments: Retail Banking, Corporate & Institutional Banking,
Retail Banking |
Change |
Change |
|||||||||||||||||
3Q17 vs |
3Q17 vs |
||||||||||||||||||
In millions |
3Q17 |
2Q17 |
3Q16 |
2Q17 |
3Q16 |
||||||||||||||
Net interest income |
$ |
1,176 |
$ |
1,139 |
$ |
1,136 |
$ |
37 |
$ |
40 |
|||||||||
Noninterest income |
$ |
643 |
$ |
645 |
$ |
680 |
$ |
(2) |
$ |
(37) |
|||||||||
Provision for credit losses |
$ |
77 |
$ |
50 |
$ |
102 |
$ |
27 |
$ |
(25) |
|||||||||
Noninterest expense |
$ |
1,375 |
$ |
1,370 |
$ |
1,359 |
$ |
5 |
$ |
16 |
|||||||||
Earnings |
$ |
232 |
$ |
230 |
$ |
224 |
$ |
2 |
$ |
8 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
72.5 |
$ |
72.3 |
$ |
71.5 |
$ |
.2 |
$ |
1.0 |
|||||||||
Average deposits |
$ |
159.5 |
$ |
160.2 |
$ |
154.4 |
$ |
(.7) |
$ |
5.1 |
|||||||||
Residential mortgage servicing portfolio Quarter end |
$ |
129 |
$ |
131 |
$ |
126 |
$ |
(2) |
$ |
3 |
|||||||||
Loan origination volume |
$ |
2.5 |
$ |
2.2 |
$ |
3.1 |
$ |
.3 |
$ |
(.6) |
|||||||||
Retail Banking earnings for the third quarter of 2017 increased in both comparisons. Noninterest income declined compared with the second quarter as a result of higher service charges on deposits more than offset by the change in the negative derivative fair value adjustment related to Visa Class B common shares and lower consumer service fees. Noninterest income decreased compared with the third quarter of 2016 due to lower residential mortgage loan sales revenue and lower net hedging gains on residential mortgage servicing rights partially offset by higher service charges on deposits and consumer service fees, including debit card, credit card and brokerage fees. Provision for credit losses increased compared with the second quarter reflecting growth in auto and credit card portfolios, seasonal credit trends including in the education loan portfolio, and the impact of Hurricanes Harvey and Irma. Noninterest expense increased compared with the third quarter of 2016 and included higher compliance expense and customer transaction-related costs.
- Average loans increased 1 percent compared with the third quarter of 2016 as growth in residential mortgage, auto and credit card loans was partially offset by lower commercial, home equity and education loans.
- Average deposits grew 3 percent over the third quarter of 2016 due to higher demand deposits as well as an increase in savings deposits which was partially offset by lower money market deposits reflecting a shift to relationship-based savings products.
- Approximately 57 percent of third quarter 2017 residential mortgage loan origination volume was for home purchase transactions compared with 61 percent for the second quarter and 41 percent in the third quarter of 2016.
- Residential mortgage loan servicing acquisitions were
$2 billion for the third quarter of 2017 compared with$8 billion for the second quarter and$5 billion in the third quarter of 2016. - Net charge-offs were
$85 million for the third quarter of 2017 compared with$87 million in the second quarter and$89 million for the third quarter of 2016. - Retail Banking continued to focus on the strategic priority of transforming the customer experience through transaction migration, branch network and home lending transformations and multi-channel engagement and service strategies.
- Approximately 62 percent of consumer customers used non-teller channels for the majority of their transactions during the third and second quarters of 2017 compared with 59 percent for the third quarter of 2016.
- Deposit transactions via ATM and mobile channels were 54 percent of total deposit transactions in the third quarter of 2017 compared with 52 percent in the second quarter and 50 percent in the third quarter of 2016.
- PNC had a network of 2,474 branches and 8,987 ATMs at
September 30, 2017 . Approximately 21 percent of the branch network operates under the universal model.
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||
3Q17 vs |
3Q17 vs |
||||||||||||||||||
In millions |
3Q17 |
2Q17 |
3Q16 |
2Q17 |
3Q16 |
||||||||||||||
Net interest income |
$ |
924 |
$ |
890 |
$ |
826 |
$ |
34 |
$ |
98 |
|||||||||
Noninterest income |
$ |
555 |
$ |
588 |
$ |
526 |
$ |
(33) |
$ |
29 |
|||||||||
Provision for credit losses |
$ |
62 |
$ |
87 |
$ |
8 |
$ |
(25) |
$ |
54 |
|||||||||
Noninterest expense |
$ |
599 |
$ |
602 |
$ |
565 |
$ |
(3) |
$ |
34 |
|||||||||
Earnings |
$ |
525 |
$ |
518 |
$ |
509 |
$ |
7 |
$ |
16 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
134.3 |
$ |
131.5 |
$ |
124.0 |
$ |
2.8 |
$ |
10.3 |
|||||||||
Average deposits |
$ |
87.5 |
$ |
83.7 |
$ |
86.0 |
$ |
3.8 |
$ |
1.5 |
|||||||||
Commercial loan servicing portfolio Quarter end |
$ |
513 |
$ |
502 |
$ |
461 |
$ |
11 |
$ |
52 |
|||||||||
Corporate & Institutional Banking earnings for the third quarter of 2017 increased compared with both the second quarter of 2017 and the third quarter of 2016. Noninterest income declined from the second quarter due to a decrease in corporate service fees including lower loan syndication fees, lower net hedging gains on commercial mortgage servicing rights and lower merger and acquisition advisory fees. Additionally, lower net gains on commercial mortgage loans held for sale were offset by higher gains on asset sales. Noninterest income increased compared with the third quarter of 2016 reflecting higher underwriting fees, increased operating lease income related to a business acquired in the second quarter of 2017 and growth in treasury management product revenue partially offset by lower merger and acquisition advisory fees. Provision for credit losses declined from the second quarter driven by a second quarter initial provision for the loan and lease portfolio obtained through a business acquisition. Compared to third quarter 2016, provision for credit losses increased primarily as a result of loan growth. Noninterest expense increased compared with the third quarter of 2016 due to operating expenses associated with the acquired business and investments in technology and infrastructure.
- Average loans increased 2 percent over the second quarter and 8 percent over the third quarter of 2016 driven by growth in PNC's corporate banking and business credit businesses as well as the equipment finance business, including the acquired loans.
- Average deposits increased 5 percent over the second quarter reflecting seasonal growth. Compared with the third quarter of 2016, deposits increased 2 percent driven by an increase in interest-bearing demand deposits.
- Net charge-offs were
$22 million in the third quarter of 2017,$21 million in the second quarter and$65 million in the third quarter of 2016, which reflected energy-related loans.
Asset Management Group |
Change |
Change |
|||||||||||||||||
3Q17 vs |
3Q17 vs |
||||||||||||||||||
In millions |
3Q17 |
2Q17 |
3Q16 |
2Q17 |
3Q16 |
||||||||||||||
Net interest income |
$ |
72 |
$ |
73 |
$ |
74 |
$ |
(1) |
$ |
(2) |
|||||||||
Noninterest income |
$ |
220 |
$ |
217 |
$ |
220 |
$ |
3 |
— |
||||||||||
Provision for credit losses (benefit) |
$ |
3 |
$ |
(7) |
$ |
(3) |
$ |
10 |
$ |
6 |
|||||||||
Noninterest expense |
$ |
214 |
$ |
215 |
$ |
206 |
$ |
(1) |
$ |
8 |
|||||||||
Earnings |
$ |
47 |
$ |
52 |
$ |
58 |
$ |
(5) |
$ |
(11) |
|||||||||
In billions |
|||||||||||||||||||
Client assets under administration Quarter end |
$ |
275 |
$ |
266 |
$ |
257 |
$ |
9 |
$ |
18 |
|||||||||
Average loans |
$ |
7.0 |
$ |
7.0 |
$ |
7.1 |
— |
$ |
(.1) |
||||||||||
Average deposits |
$ |
12.2 |
$ |
12.4 |
$ |
11.9 |
$ |
(.2) |
$ |
.3 |
|||||||||
Asset Management Group's strategy is focused on growing investable assets by continually evolving the client experience and products and services. The business offers an open architecture platform with a full array of investment products and banking solutions.- Client assets under administration at
September 30, 2017 included discretionary client assets under management of$146 billion and nondiscretionary client assets under administration of$129 billion . - Discretionary client assets under management increased
$5 billion compared withJune 30, 2017 and increased$8 billion compared withSeptember 30, 2016 primarily attributable to equity market increases.
Other, including
The "Other, including
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC Chairman, President and Chief Executive Officer
The
[TABULAR MATERIAL FOLLOWS]
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||||||||||
FINANCIAL RESULTS |
Three months ended |
Nine months ended |
|||||||||||||||||
Dollars in millions, except per share data |
September 30 |
June 30 |
September 30 |
September 30 |
September 30 |
||||||||||||||
2017 |
2017 |
2016 |
2017 |
2016 |
|||||||||||||||
Revenue |
|||||||||||||||||||
Net interest income |
$ |
2,345 |
$ |
2,258 |
$ |
2,095 |
$ |
6,763 |
$ |
6,261 |
|||||||||
Noninterest income |
1,780 |
1,802 |
1,734 |
5,306 |
5,027 |
||||||||||||||
Total revenue |
4,125 |
4,060 |
3,829 |
12,069 |
11,288 |
||||||||||||||
Provision for credit losses |
130 |
98 |
87 |
316 |
366 |
||||||||||||||
Noninterest expense |
2,456 |
2,479 |
2,394 |
7,337 |
7,035 |
||||||||||||||
Income before income taxes and noncontrolling interests |
$ |
1,539 |
$ |
1,483 |
$ |
1,348 |
$ |
4,416 |
$ |
3,887 |
|||||||||
Net income |
$ |
1,126 |
$ |
1,097 |
$ |
1,006 |
$ |
3,297 |
$ |
2,938 |
|||||||||
Less: |
|||||||||||||||||||
Net income attributable to noncontrolling interests |
12 |
10 |
18 |
39 |
60 |
||||||||||||||
Preferred stock dividends (a) |
63 |
55 |
63 |
181 |
168 |
||||||||||||||
Preferred stock discount accretion and redemptions |
1 |
2 |
1 |
24 |
4 |
||||||||||||||
Net income attributable to common shareholders |
$ |
1,050 |
$ |
1,030 |
$ |
924 |
$ |
3,053 |
$ |
2,706 |
|||||||||
Less: |
|||||||||||||||||||
Dividends and undistributed earnings allocated to nonvested restricted shares |
5 |
4 |
7 |
15 |
19 |
||||||||||||||
Impact of BlackRock earnings per share dilution |
3 |
1 |
4 |
8 |
10 |
||||||||||||||
Net income attributable to diluted common shares |
$ |
1,042 |
$ |
1,025 |
$ |
913 |
$ |
3,030 |
$ |
2,677 |
|||||||||
Diluted earnings per common share |
$ |
2.16 |
$ |
2.10 |
$ |
1.84 |
$ |
6.21 |
$ |
5.33 |
|||||||||
Cash dividends declared per common share |
$ |
.75 |
$ |
.55 |
$ |
.55 |
$ |
1.85 |
$ |
1.57 |
|||||||||
Effective tax rate (b) |
26.8 |
% |
26.0 |
% |
25.4 |
% |
25.3 |
% |
24.4 |
% |
(a) |
Dividends are payable quarterly other than the Series O, Series R and Series S preferred stock, which are payable semiannually, with the Series O payable in different quarters than the Series R and Series S preferred stock. |
(b) |
The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax. |
The 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 |
|||||||||||||||
2017 |
2017 |
2016 |
2017 |
2016 |
|||||||||||||||
PERFORMANCE RATIOS |
|||||||||||||||||||
Net interest margin (a) |
2.91 |
% |
2.84 |
% |
2.68 |
% |
2.84 |
% |
2.71 |
% |
|||||||||
Noninterest income to total revenue |
43 |
% |
44 |
% |
45 |
% |
44 |
% |
45 |
% |
|||||||||
Efficiency (b) |
60 |
% |
61 |
% |
63 |
% |
61 |
% |
62 |
% |
|||||||||
Return on: |
|||||||||||||||||||
Average common shareholders' equity |
9.89 |
% |
9.88 |
% |
8.74 |
% |
9.76 |
% |
8.69 |
% |
|||||||||
Average assets |
1.20 |
% |
1.19 |
% |
1.10 |
% |
1.19 |
% |
1.09 |
% |
|||||||||
BUSINESS SEGMENT NET INCOME (LOSS) (c) (d) |
|||||||||||||||||||
In millions |
|||||||||||||||||||
Retail Banking |
$ |
232 |
$ |
230 |
$ |
224 |
$ |
675 |
$ |
795 |
|||||||||
Corporate & Institutional Banking |
525 |
518 |
509 |
1,527 |
1,364 |
||||||||||||||
Asset Management Group |
47 |
52 |
58 |
146 |
155 |
||||||||||||||
Other, including BlackRock (e) |
322 |
297 |
215 |
949 |
624 |
||||||||||||||
Total net income |
$ |
1,126 |
$ |
1,097 |
$ |
1,006 |
$ |
3,297 |
$ |
2,938 |
|||||||||
(a) |
Calculated as annualized taxable-equivalent net interest income divided by average earning assets. To provide more meaningful comparisons of net interest margins, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under generally accepted accounting principles (GAAP) in the Consolidated Income Statement. The taxable equivalent adjustments to net interest income for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016 were $55 million, $54 million and $49 million, respectively. The taxable equivalent adjustments to net interest income for the first nine months of 2017 and 2016 were $161 million and $145 million, respectively. |
(b) |
Calculated as noninterest expense divided by total revenue. |
(c) |
Effective for the first quarter of 2017, as a result of changes to how we manage our businesses, we realigned our segments and, accordingly, have changed the basis of presentation of our segments, resulting in four reportable business segments: Retail Banking, Corporate & Institutional Banking, Asset Management Group and BlackRock. For purposes of this presentation, we have combined BlackRock with Other. All 2016 prior periods presented were revised to conform to the new segment alignment. |
(d) |
Our business information is presented based on our internal management reporting practices. 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. We periodically refine our internal methodologies as management reporting practices are enhanced. In the first quarter of 2017, we made certain adjustments to our internal funds transfer pricing methodology primarily relating to weighted average lives of certain non-maturity deposits. These changes in methodology affected business segment results, primarily adversely impacting net interest income for Corporate & Institutional Banking and Retail Banking, offset by increased net interest income in Other. All 2016 prior periods presented were revised to reflect our change in internal funds transfer pricing methodology. |
(e) |
Includes earnings and gains or losses related to PNC's equity interest in BlackRock and residual activities that do not meet the criteria for disclosure as a separate reportable business. We provide additional information on these activities in our Form 10-K and Form 10-Q filings with the SEC. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||
September 30 |
June 30 |
September 30 |
|||||||||
2017 |
2017 |
2016 |
|||||||||
BALANCE SHEET DATA |
|||||||||||
Dollars in millions, except per share data |
|||||||||||
Assets |
$ |
375,191 |
$ |
372,190 |
$ |
369,348 |
|||||
Loans (a) |
$ |
221,109 |
$ |
218,034 |
$ |
210,446 |
|||||
Allowance for loan and lease losses |
$ |
2,605 |
$ |
2,561 |
$ |
2,619 |
|||||
Interest-earning deposits with banks |
$ |
24,713 |
$ |
22,482 |
$ |
27,058 |
|||||
Investment securities |
$ |
74,994 |
$ |
76,431 |
$ |
78,514 |
|||||
Loans held for sale (a) |
$ |
1,764 |
$ |
2,030 |
$ |
2,053 |
|||||
Equity investments (b) |
$ |
11,009 |
$ |
10,819 |
$ |
10,605 |
|||||
Mortgage servicing rights |
$ |
1,854 |
$ |
1,867 |
$ |
1,293 |
|||||
Goodwill |
$ |
9,163 |
$ |
9,163 |
$ |
9,103 |
|||||
Other assets (a) |
$ |
28,454 |
$ |
28,886 |
$ |
28,364 |
|||||
Noninterest-bearing deposits |
$ |
79,967 |
$ |
79,550 |
$ |
82,159 |
|||||
Interest-bearing deposits |
$ |
180,768 |
$ |
179,626 |
$ |
177,736 |
|||||
Total deposits |
$ |
260,735 |
$ |
259,176 |
$ |
259,895 |
|||||
Borrowed funds (a) |
$ |
57,564 |
$ |
56,406 |
$ |
51,541 |
|||||
Shareholders' equity |
$ |
46,388 |
$ |
46,084 |
$ |
45,707 |
|||||
Common shareholders' equity |
$ |
42,406 |
$ |
42,103 |
$ |
42,251 |
|||||
Accumulated other comprehensive income |
$ |
(22) |
$ |
(98) |
$ |
646 |
|||||
Book value per common share |
$ |
89.05 |
$ |
87.78 |
$ |
86.57 |
|||||
Tangible book value per common share (Non-GAAP) (c) |
$ |
69.72 |
$ |
68.55 |
$ |
67.93 |
|||||
Period end common shares outstanding (millions) |
476 |
480 |
488 |
||||||||
Loans to deposits |
85 |
% |
84 |
% |
81 |
% |
|||||
CLIENT ASSETS (billions) |
|||||||||||
Discretionary client assets under management |
$ |
146 |
$ |
141 |
$ |
138 |
|||||
Nondiscretionary client assets under administration |
129 |
125 |
119 |
||||||||
Total client assets under administration |
275 |
266 |
257 |
||||||||
Brokerage account client assets |
48 |
46 |
44 |
||||||||
Total client assets |
$ |
323 |
$ |
312 |
$ |
301 |
|||||
CAPITAL RATIOS |
|||||||||||
Transitional Basel III (d) (e) |
|||||||||||
Common equity Tier 1 |
10.3 |
% |
10.3 |
% |
10.6 |
% |
|||||
Tier 1 risk-based |
11.6 |
% |
11.6 |
% |
11.9 |
% |
|||||
Total capital risk-based |
13.7 |
% |
13.7 |
% |
14.2 |
% |
|||||
Leverage |
9.9 |
% |
9.9 |
% |
10.1 |
% |
|||||
Pro forma Fully Phased-In Basel III (Non-GAAP) (d) |
|||||||||||
Common equity Tier 1 |
9.8 |
% |
9.8 |
% |
10.2 |
% |
|||||
Common shareholders' equity to assets |
11.3 |
% |
11.3 |
% |
11.4 |
% |
|||||
ASSET QUALITY |
|||||||||||
Nonperforming loans to total loans |
.85 |
% |
.90 |
% |
1.02 |
% |
|||||
Nonperforming assets to total loans, OREO and foreclosed assets |
.93 |
% |
.99 |
% |
1.13 |
% |
|||||
Nonperforming assets to total assets |
.55 |
% |
.58 |
% |
.64 |
% |
|||||
Net charge-offs to average loans (for the three months ended) (annualized) |
.19 |
% |
.20 |
% |
.29 |
% |
|||||
Allowance for loan and lease losses to total loans |
1.18 |
% |
1.17 |
% |
1.24 |
% |
|||||
Allowance for loan and lease losses to nonperforming loans |
139 |
% |
131 |
% |
122 |
% |
|||||
Accruing loans past due 90 days or more (in millions) |
$ |
678 |
$ |
674 |
$ |
766 |
(a) |
Amounts include assets and liabilities for which we have elected the fair value option. Our second quarter 2017 Form 10-Q included, and our third quarter 2017 Form 10-Q will include, additional information regarding these Consolidated Balance Sheet line items. |
(b) |
Amounts include our equity interest in BlackRock. |
(c) |
See the Tangible Book Value per Common Share table on page 16 for additional information. |
(d) |
The ratios as of September 30, 2017 are estimated and calculated based on the standardized approach. See Capital Ratios on page 15 for additional information. |
(e) |
Calculated using the regulatory capital methodology applicable to PNC during each period presented. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||||||||||||||||
CAPITAL RATIOS |
|||||||||||||||||||||||||
As a result of the phased-in periods included in the final U.S. Basel III regulatory capital rules (Basel III rules), as well as the fact that PNC remains in the parallel run qualification phase for the advanced approaches, PNC's regulatory risk-based capital ratios in 2017 and 2016 are calculated using the standardized approach for determining risk-weighted assets, and the definitions of, and deductions from, regulatory capital under the Basel III rules (as such definitions and deductions are phased-in for 2017 and 2016, respectively). We refer to the capital ratios calculated using the phased-in Basel III provisions in effect for each year and, for the risk-based ratios, standardized approach risk-weighted assets, as Transitional Basel III ratios. 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, equity exposures and securitization exposures are generally subject to higher risk weights than other types of exposures. |
|||||||||||||||||||||||||
We provide information below regarding PNC's estimated September 30, 2017 and actual June 30, 2017 and September 30, 2016 Transitional Basel III common equity Tier 1 ratios and PNC's estimated pro forma fully phased-in Basel III common equity Tier 1 ratio. Under the Basel III rules adopted by the U.S. banking agencies, significant common stock investments in unconsolidated financial institutions, mortgage servicing rights and deferred tax assets must be deducted from capital (subject to a phase-in schedule and net of associated deferred tax liabilities) to the extent they individually exceed 10%, or in the aggregate exceed 15%, of the institution's adjusted common equity Tier 1 capital. Also, Basel III regulatory capital includes (subject to a phase-in schedule) accumulated other comprehensive income related to securities currently and previously held as available for sale, as well as pension and other postretirement plans. |
|||||||||||||||||||||||||
Transitional Basel III and Pro forma Fully Phased-In Basel III Common Equity Tier 1 Capital Ratios (Non-GAAP) |
|||||||||||||||||||||||||
2017 Transitional Basel III |
2016 Transitional Basel III |
Pro forma Fully Phased-In Basel III (Non-GAAP) (estimated) |
|||||||||||||||||||||||
September 30 |
June 30 |
September 30 |
September 30 |
June 30 |
September 30 |
||||||||||||||||||||
Dollars in millions |
2017 (estimated) |
2017 |
2016 |
2017 |
2017 |
2016 |
|||||||||||||||||||
Common stock, related surplus and retained earnings, net of treasury stock |
$ |
42,426 |
$ |
42,200 |
$ |
41,604 |
$ |
42,426 |
$ |
42,200 |
$ |
41,604 |
|||||||||||||
Less regulatory capital adjustments: |
|||||||||||||||||||||||||
Goodwill and disallowed intangibles, net of deferred tax liabilities |
(9,137) |
(9,156) |
(8,993) |
(9,202) |
(9,225) |
(9,102) |
|||||||||||||||||||
Basel III total threshold deductions |
(1,178) |
(1,144) |
(731) |
(1,748) |
(1,702) |
(1,218) |
|||||||||||||||||||
Accumulated other comprehensive income (a) |
(94) |
(167) |
181 |
(117) |
(209) |
302 |
|||||||||||||||||||
All other adjustments |
(162) |
(179) |
(177) |
(164) |
(181) |
(180) |
|||||||||||||||||||
Basel III Common equity Tier 1 capital |
$ |
31,855 |
$ |
31,554 |
$ |
31,884 |
$ |
31,195 |
$ |
30,883 |
$ |
31,406 |
|||||||||||||
Basel III standardized approach risk-weighted assets (b) |
$ |
309,175 |
$ |
306,379 |
$ |
300,308 |
$ |
317,271 |
$ |
314,389 |
$ |
308,665 |
|||||||||||||
Basel III advanced approaches risk-weighted assets (c) |
N/A |
N/A |
N/A |
$ |
285,617 |
$ |
282,472 |
$ |
280,150 |
||||||||||||||||
Basel III Common equity Tier 1 capital ratio |
10.3 |
% |
10.3 |
% |
10.6 |
% |
9.8 |
% |
9.8 |
% |
10.2 |
% |
|||||||||||||
Risk weight and associated rules utilized |
Standardized (with 2017 |
Standardized (with 2016 transition adjustments) |
Standardized |
(a) |
Represents net adjustments related to accumulated other comprehensive income for securities currently and previously held as available for sale, as well as pension and other postretirement plans. |
(b) |
Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets. |
(c) |
Basel III advanced approaches risk-weighted assets are based on the Basel III advanced approaches rules, and include credit, market and operational risk-weighted assets. During the parallel run qualification phase, PNC has refined the data, models and internal processes used as part of the advanced approaches for determining risk-weighted assets. We anticipate additional refinements through the parallel run qualification phase. |
PNC utilizes the pro forma fully phased-in Basel III capital ratios to assess its capital position (without the benefit of phase-ins), as these ratios represent the regulatory capital standards that will ultimately be applicable to PNC under the final Basel III rules. Our Basel III capital ratios and estimates may be impacted by additional regulatory guidance or analysis, and, in the case of those ratios calculated using the advanced approaches, may be subject to variability based on the ongoing evolution, validation and regulatory approval of PNC's models that are integral to the calculation of advanced approaches risk-weighted assets as PNC moves through the parallel run approval process. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||
Tangible book value per common share is a non-GAAP measure and is calculated based on tangible common shareholders' equity divided by period-end common shares outstanding. We believe this non-GAAP measure serves as a useful tool to help evaluate the strength and discipline of a company's capital management strategies and as an additional, conservative measure of total company value. |
|||||||||||
Tangible Book Value per Common Share (Non-GAAP) |
|||||||||||
September 30 |
June 30 |
September 30 |
|||||||||
Dollars in millions, except per share data |
2017 |
2017 |
2016 |
||||||||
Book value per common share |
$ |
89.05 |
$ |
87.78 |
$ |
86.57 |
|||||
Tangible book value per common share |
|||||||||||
Common shareholders' equity |
$ |
42,406 |
$ |
42,103 |
$ |
42,251 |
|||||
Goodwill and Other Intangible Assets |
(9,503) |
(9,527) |
(9,408) |
||||||||
Deferred tax liabilities on Goodwill and Other Intangible Assets |
301 |
302 |
306 |
||||||||
Tangible common shareholders' equity |
$ |
33,204 |
$ |
32,878 |
$ |
33,149 |
|||||
Period-end common shares outstanding (in millions) |
476 |