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PNC Reports Third Quarter 2018 Net Income Of $1.4 Billion, $2.82 Diluted EPS
For the quarter |
||||||
3Q18 |
2Q18 |
3Q17 |
||||
Net income $ millions |
$1,400 |
$1,356 |
$1,126 |
|||
Diluted earnings per common share |
$2.82 |
$2.72 |
$2.16 |
"PNC delivered another good, consistent quarter. We grew average loans and deposits and continued to add new clients. Net interest income and our margin and fee income increased. We're experiencing success with our national initiative to expand our middle market capabilities in faster growing markets, and we launched our national retail digital strategy with a high yield savings offer to be supported by an ultra-thin retail network. Looking ahead, we're positioned to drive growth and efficiency over the long term."
Bill Demchak, PNC Chairman, President and Chief Executive Officer
Income Statement Highlights
Third quarter 2018 compared with second quarter 2018
- Net income of
$1.4 billion for the third quarter increased$44 million , or 3 percent, compared with the second quarter. - Total revenue for the third quarter increased
$33 million , or 1 percent, to$4.4 billion . - Net interest income increased
$53 million , or 2 percent, to$2.5 billion due to higher loan yields and securities balances and the benefit of an additional day in the third quarter partially offset by increased funding costs. - Net interest margin increased 3 basis points to 2.99 percent.
- Noninterest income was
$1.9 billion , a decrease of$20 million . - Fee income grew
$13 million , or 1 percent, to$1.6 billion led by higher asset management revenue and consumer activity. - Other noninterest income decreased
$33 million to $301 million primarily due to negative Visa Class B derivative fair value adjustments of$32 million in the third quarter compared with a benefit of$27 million in the second quarter partially offset by higher revenue from private equity investments. - Noninterest expense increased
$24 million , or 1 percent, to$2.6 billion driven by higher business activity. - Provision for credit losses was
$88 million , an increase of$8 million reflecting a higher provision for consumer loans. - The effective tax rate was 15.7 percent for the third quarter compared with 18.3 percent for the second quarter due to the timing of deductions related to tax planning activities.
Balance Sheet Highlights
- Average loans increased
$.7 billion in the third quarter to$223.3 billion compared with the second quarter. - Average commercial lending balances grew
$.2 billion primarily in PNC's equipment finance and business credit businesses. Loan growth was moderated by substantial payoff volumes. - Average consumer lending balances increased
$.5 billion due to growth in auto, residential mortgage, credit card and unsecured installment loans partially offset by lower home equity and education loans. - Overall credit quality remained strong.
- Nonperforming assets of
$1.8 billion atSeptember 30, 2018 decreased$29 million , or 2 percent, compared withJune 30, 2018 . - Net charge-offs were
$91 million for the third quarter compared with$109 million for the second quarter. - Average deposits increased
$1.5 billion , or 1 percent, to$262.5 billion in the third quarter compared with the second quarter primarily due to seasonal growth in commercial deposits. - Average investment securities increased
$3.3 billion , or 4 percent, to$80.8 billion in the third quarter compared with the second quarter. - PNC returned
$.9 billion of capital to shareholders in the third quarter through repurchases of 3.3 million common shares for$.5 billion and dividends on common shares of$.4 billion . - The August quarterly cash dividend on common stock was raised to
95 cents per share, an increase of20 cents per share, or 27 percent. - PNC maintained strong capital and liquidity positions.
- The Basel III common equity Tier 1 capital ratio was an estimated 9.3 percent at
September 30, 2018 and 9.5 percent atJune 30, 2018 . - The Liquidity Coverage Ratio at
September 30, 2018 for bothPNC and PNC Bank, N.A. continued to exceed the regulatory minimum requirement of 100 percent.
Earnings Summary |
||||||||||||
In millions, except per share data |
3Q18 |
2Q18 |
3Q17 |
|||||||||
Net income |
$ |
1,400 |
$ |
1,356 |
$ |
1,126 |
||||||
Net income attributable to diluted common shares |
$ |
1,317 |
$ |
1,282 |
$ |
1,042 |
||||||
Diluted earnings per common share |
$ |
2.82 |
$ |
2.72 |
$ |
2.16 |
||||||
Average diluted common shares outstanding |
467 |
472 |
483 |
|||||||||
Return on average assets |
1.47 |
% |
1.45 |
% |
1.20 |
% |
||||||
Return on average common equity |
12.32 |
% |
12.13 |
% |
9.89 |
% |
||||||
Book value per common share |
Quarter end |
$ |
93.22 |
$ |
92.26 |
$ |
89.05 |
|||||
Tangible book value per common share (non-GAAP) |
Quarter end |
$ |
73.11 |
$ |
72.25 |
$ |
69.72 |
|||||
Cash dividends declared per common share |
$ |
.95 |
$ |
.75 |
$ |
.75 |
||||||
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 |
|||||||||||||
3Q18 vs |
3Q18 vs |
||||||||||||||
In millions |
3Q18 |
2Q18 |
3Q17 |
2Q18 |
3Q17 |
||||||||||
Net interest income |
$ |
2,466 |
$ |
2,413 |
$ |
2,345 |
2 |
% |
5 |
% |
|||||
Noninterest income |
1,891 |
1,911 |
1,780 |
(1) |
% |
6 |
% |
||||||||
Total revenue |
$ |
4,357 |
$ |
4,324 |
$ |
4,125 |
1 |
% |
6 |
% |
|||||
Total revenue for the third quarter of 2018 increased
Net interest income for the third quarter of 2018 increased
Noninterest Income |
Change |
Change |
|||||||||||||
3Q18 vs |
3Q18 vs |
||||||||||||||
In millions |
3Q18 |
2Q18 |
3Q17 |
2Q18 |
3Q17 |
||||||||||
Asset management |
$ |
486 |
$ |
456 |
$ |
421 |
7 |
% |
15 |
% |
|||||
Consumer services |
377 |
381 |
357 |
(1) |
% |
6 |
% |
||||||||
Corporate services |
465 |
487 |
404 |
(5) |
% |
15 |
% |
||||||||
Residential mortgage |
76 |
84 |
104 |
(10) |
% |
(27) |
% |
||||||||
Service charges on deposits |
186 |
169 |
181 |
10 |
% |
3 |
% |
||||||||
Other |
301 |
334 |
313 |
(10) |
% |
(4) |
% |
||||||||
$ |
1,891 |
$ |
1,911 |
$ |
1,780 |
(1) |
% |
6 |
% |
||||||
Noninterest income for the third quarter of 2018 declined
Other noninterest income for the third quarter of 2018 decreased
Noninterest income for the third quarter of 2018 increased
CONSOLIDATED EXPENSE REVIEW |
|||||||||||||||
Noninterest Expense |
Change |
Change |
|||||||||||||
3Q18 vs |
3Q18 vs |
||||||||||||||
In millions |
3Q18 |
2Q18 |
3Q17 |
2Q18 |
3Q17 |
||||||||||
Personnel |
$ |
1,413 |
$ |
1,356 |
$ |
1,286 |
4 |
% |
10 |
% |
|||||
Occupancy |
195 |
203 |
204 |
(4) |
% |
(4) |
% |
||||||||
Equipment |
264 |
281 |
259 |
(6) |
% |
2 |
% |
||||||||
Marketing |
71 |
75 |
62 |
(5) |
% |
15 |
% |
||||||||
Other |
665 |
669 |
645 |
(1) |
% |
3 |
% |
||||||||
$ |
2,608 |
$ |
2,584 |
$ |
2,456 |
1 |
% |
6 |
% |
||||||
Noninterest expense for the third quarter of 2018 increased
Noninterest expense for the third quarter of 2018 increased
The effective tax rate was 15.7 percent for the third quarter of 2018 compared with 18.3 percent for the second quarter due to the timing of deductions related to tax planning activities. The federal statutory tax rate was lowered to 21.0 percent effective
CONSOLIDATED BALANCE SHEET REVIEW
Average total assets were
Loans |
Change |
Change |
|||||||||||||
3Q18 vs |
3Q18 vs |
||||||||||||||
In billions |
3Q18 |
2Q18 |
3Q17 |
2Q18 |
3Q17 |
||||||||||
Average |
|||||||||||||||
Commercial lending |
$ |
149.9 |
$ |
149.7 |
$ |
146.9 |
— |
2 |
% |
||||||
Consumer lending |
73.4 |
72.9 |
72.3 |
1 |
% |
2 |
% |
||||||||
Average loans |
$ |
223.3 |
$ |
222.6 |
$ |
219.2 |
— |
2 |
% |
||||||
Quarter end |
|||||||||||||||
Commercial lending |
$ |
149.4 |
$ |
149.6 |
$ |
148.5 |
— |
1 |
% |
||||||
Consumer lending |
73.7 |
73.3 |
72.6 |
1 |
% |
2 |
% |
||||||||
Total loans |
$ |
223.1 |
$ |
222.9 |
$ |
221.1 |
— |
1 |
% |
||||||
Average loans for the third quarter of 2018 increased
Third quarter 2018 average and period end loans increased
Investment Securities |
Change |
Change |
|||||||||||||
3Q18 vs |
3Q18 vs |
||||||||||||||
In billions |
3Q18 |
2Q18 |
3Q17 |
2Q18 |
3Q17 |
||||||||||
Average |
$ |
80.8 |
$ |
77.5 |
$ |
74.4 |
4 |
% |
9 |
% |
|||||
Quarter end |
$ |
80.8 |
$ |
80.1 |
$ |
75.0 |
1 |
% |
8 |
% |
|||||
Investment securities average balances for the third quarter of 2018 increased
Average balances held with the
Deposits |
Change |
Change |
|||||||||||||
3Q18 vs |
3Q18 vs |
||||||||||||||
In billions |
3Q18 |
2Q18 |
3Q17 |
2Q18 |
3Q17 |
||||||||||
Average |
|||||||||||||||
Noninterest-bearing |
$ |
76.2 |
$ |
76.7 |
$ |
79.0 |
(1) |
% |
(4) |
% |
|||||
Interest-bearing |
186.3 |
184.3 |
180.5 |
1 |
% |
3 |
% |
||||||||
Average deposits |
$ |
262.5 |
$ |
261.0 |
$ |
259.5 |
1 |
% |
1 |
% |
|||||
Quarter end |
|||||||||||||||
Noninterest-bearing |
$ |
74.8 |
$ |
79.1 |
$ |
80.0 |
(5) |
% |
(7) |
% |
|||||
Interest-bearing |
190.1 |
185.8 |
180.7 |
2 |
% |
5 |
% |
||||||||
Total deposits |
$ |
264.9 |
$ |
264.9 |
$ |
260.7 |
— |
2 |
% |
||||||
Average deposits for the third quarter of 2018 increased
Borrowed Funds |
Change |
Change |
|||||||||||||
3Q18 vs |
3Q18 vs |
||||||||||||||
In billions |
3Q18 |
2Q18 |
3Q17 |
2Q18 |
3Q17 |
||||||||||
Average |
$ |
59.8 |
$ |
58.9 |
$ |
57.0 |
2 |
% |
5 |
% |
|||||
Quarter end |
$ |
58.0 |
$ |
59.3 |
$ |
57.6 |
(2) |
% |
1 |
% |
|||||
Average borrowed funds for the third quarter of 2018 increased
Capital |
||||||||||||
9/30/2018 |
* |
6/30/2018 |
9/30/2017 |
|||||||||
Common shareholders' equity In billions |
$ |
43.1 |
$ |
42.9 |
$ |
42.4 |
||||||
Basel III common equity Tier 1 capital ratio |
9.3 |
% |
9.5 |
% |
9.8 |
% |
||||||
* Ratio estimated |
||||||||||||
PNC maintained a strong capital position. Common shareholders' equity at
PNC returned
On
The Basel III common equity Tier 1 capital ratio, which includes the full phase-in of all Basel III adjustments, became effective for PNC as of
CREDIT QUALITY REVIEW |
|||||||||||||||
Credit Quality |
Change |
Change |
|||||||||||||
At or for the quarter ended |
9/30/18 vs |
9/30/18 vs |
|||||||||||||
In millions |
9/30/2018 |
6/30/2018 |
9/30/2017 |
6/30/18 |
9/30/17 |
||||||||||
Nonperforming loans |
$ |
1,694 |
$ |
1,719 |
$ |
1,873 |
(1) |
% |
(10) |
% |
|||||
Nonperforming assets |
$ |
1,825 |
$ |
1,854 |
$ |
2,067 |
(2) |
% |
(12) |
% |
|||||
Accruing loans past due 90 days |
$ |
619 |
$ |
586 |
$ |
678 |
6 |
% |
(9) |
% |
|||||
Net charge-offs |
$ |
91 |
$ |
109 |
$ |
106 |
(17) |
% |
(14) |
% |
|||||
Provision for credit losses |
$ |
88 |
$ |
80 |
$ |
130 |
10 |
% |
(32) |
% |
|||||
Allowance for loan and lease losses |
$ |
2,584 |
$ |
2,581 |
$ |
2,605 |
— |
(1) |
% |
||||||
Overall credit quality for the third quarter of 2018 remained strong. Provision for credit losses for the third quarter increased
Nonperforming assets at
Overall delinquencies at
Net charge-offs for the third quarter of 2018 decreased
The allowance for loan and lease losses to total loans was 1.16 percent at both
BUSINESS SEGMENT RESULTS |
|||||||||||
Business Segment Income |
|||||||||||
In millions |
3Q18 |
2Q18 |
3Q17 |
||||||||
Retail Banking |
$ |
283 |
$ |
330 |
$ |
232 |
|||||
Corporate & Institutional Banking |
665 |
675 |
525 |
||||||||
Asset Management Group |
61 |
49 |
47 |
||||||||
Other, including BlackRock |
391 |
302 |
322 |
||||||||
Net income |
$ |
1,400 |
$ |
1,356 |
$ |
1,126 |
|||||
See accompanying notes in Consolidated Financial Highlights |
|||||||||||
Retail Banking |
Change |
Change |
|||||||||||||||||
3Q18 vs |
3Q18 vs |
||||||||||||||||||
In millions |
3Q18 |
2Q18 |
3Q17 |
2Q18 |
3Q17 |
||||||||||||||
Net interest income |
$ |
1,305 |
$ |
1,277 |
$ |
1,176 |
$ |
28 |
$ |
129 |
|||||||||
Noninterest income |
$ |
622 |
$ |
678 |
$ |
643 |
$ |
(56) |
$ |
(21) |
|||||||||
Provision for credit losses |
$ |
113 |
$ |
72 |
$ |
77 |
$ |
41 |
$ |
36 |
|||||||||
Noninterest expense |
$ |
1,442 |
$ |
1,450 |
$ |
1,375 |
$ |
(8) |
$ |
67 |
|||||||||
Earnings |
$ |
283 |
$ |
330 |
$ |
232 |
$ |
(47) |
$ |
51 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
74.1 |
$ |
73.7 |
$ |
72.5 |
$ |
.4 |
$ |
1.6 |
|||||||||
Average deposits |
$ |
161.8 |
$ |
162.6 |
$ |
159.5 |
$ |
(.8) |
$ |
2.3 |
|||||||||
Retail Banking earnings for the third quarter of 2018 decreased compared with the second quarter and increased compared with the third quarter of 2017. Earnings benefited from the lower federal statutory income tax rate compared with third quarter 2017. Noninterest income decreased in both comparisons as a result of negative derivative fair value adjustments related to Visa Class B common shares and a lower benefit from residential mortgage servicing rights valuation, net of economic hedge partially offset by higher service charges on deposits. Additionally, consumer service fees grew in the comparison to third quarter 2017, including debit card, brokerage and credit card fees. Provision for credit losses increased in both comparisons due to credit card loan portfolio growth and, in the second quarter comparison, auto loan portfolio growth. Noninterest expense decreased compared with the second quarter reflecting lower occupancy costs and increased in the comparison to third quarter 2017 as a result of higher personnel costs, marketing activity and continued investments in technology.
- Average loans increased 1 percent compared with the second quarter and 2 percent compared with third quarter 2017 due to growth in auto, residential mortgage, credit card and unsecured installment loans partially offset by lower home equity, commercial and education loans.
- Average deposits declined compared with the second quarter primarily due to lower demand deposits attributable in part to seasonal consumer spending. Certificates of deposit increased in the comparison. Average deposits grew 1 percent compared with third quarter 2017 as higher demand and savings deposits were partially offset by lower money market deposits reflecting a shift to relationship-based savings products and by a decline in certificates of deposit.
- Net charge-offs were
$96 million for the third quarter of 2018 compared with$112 million in the second quarter and$85 million in the third quarter of 2017. - Residential mortgage loan origination volume was
$2.1 billion for the third quarter of 2018 compared with$2.0 billion for the second quarter and$2.5 billion for the third quarter of 2017. Approximately 72 percent of third quarter 2018 volume was for home purchase transactions compared with 71 percent for the second quarter and 57 percent for the third quarter of 2017. - The residential mortgage servicing portfolio was
$127 billion atSeptember 30, 2018 compared with$124 billion atJune 30, 2018 and$129 billion atSeptember 30, 2017 . Residential mortgage loan servicing acquisitions were$6 billion in the third quarter of 2018 compared with$3 billion in the second quarter and$2 billion in the third quarter of 2017. - Approximately 66 percent of consumer customers used non-teller channels for the majority of their transactions during the third quarter of 2018 compared with 65 percent in the second quarter and 62 percent in the third quarter of 2017.
- Deposit transactions via ATM and mobile channels were 55 percent of total deposit transactions in the third quarter of 2018 compared with 54 percent in both the second quarter of 2018 and third quarter of 2017.
Corporate & Institutional Banking |
Change |
Change |
|||||||||||||||||
3Q18 vs |
3Q18 vs |
||||||||||||||||||
In millions |
3Q18 |
2Q18 |
3Q17 |
2Q18 |
3Q17 |
||||||||||||||
Net interest income |
$ |
925 |
$ |
900 |
$ |
924 |
$ |
25 |
$ |
1 |
|||||||||
Noninterest income |
$ |
592 |
$ |
635 |
$ |
555 |
$ |
(43) |
$ |
37 |
|||||||||
Provision for credit losses (benefit) |
$ |
(13) |
$ |
15 |
$ |
62 |
$ |
(28) |
$ |
(75) |
|||||||||
Noninterest expense |
$ |
669 |
$ |
639 |
$ |
599 |
$ |
30 |
$ |
70 |
|||||||||
Earnings |
$ |
665 |
$ |
675 |
$ |
525 |
$ |
(10) |
$ |
140 |
|||||||||
In billions |
|||||||||||||||||||
Average loans |
$ |
137.4 |
$ |
137.0 |
$ |
134.3 |
$ |
.4 |
$ |
3.1 |
|||||||||
Average deposits |
$ |
88.1 |
$ |
85.8 |
$ |
87.5 |
$ |
2.3 |
$ |
.6 |
|||||||||
Corporate & Institutional Banking earnings for the third quarter of 2018 decreased compared with the second quarter of 2018 and increased compared with the third quarter of 2017. Earnings benefited from the lower federal statutory income tax rate compared with third quarter 2017. Noninterest income declined from the second quarter primarily due to lower revenue from commercial mortgage banking activities, including a lower benefit from commercial mortgage servicing rights valuation, net of economic hedge, and lower net gains on commercial mortgage loans held for sale. Capital markets-related revenue also declined from the second quarter driven by lower customer-related derivative sales and lower loan syndication fees partially offset by higher merger and acquisition advisory fees. Noninterest income increased compared with the third quarter of 2017 primarily due to higher merger and acquisition advisory fees and growth in treasury management product revenue partially offset by lower gains on asset sales. Provision for credit losses was a benefit in the third quarter of 2018 reflecting lower specific loan reserves combined with overall strong portfolio credit quality. Noninterest expense increased in both comparisons due to continued investments in strategic initiatives and variable costs associated with increased business activity.
- Average loans increased modestly compared with the second quarter primarily in PNC's equipment finance and business credit businesses. Loan growth was moderated by substantial payoff volumes. Average loans increased 2 percent compared with the third quarter of 2017 driven by growth in PNC's corporate banking, business credit and equipment finance businesses.
- Average deposits increased 3 percent over the second quarter reflecting seasonal growth, and increased 1 percent compared with the third quarter of 2017 due to growth in interest-bearing deposits partially offset by a decrease in noninterest-bearing demand deposits.
- Net charge-offs were
$1 million in the third quarter of 2018 compared with a net recovery position of$2 million in the second quarter of 2018 and net charge-offs of$22 million in the third quarter of 2017.
Asset Management Group |
Change |
Change |
|||||||||||||||||
3Q18 vs |
3Q18 vs |
||||||||||||||||||
In millions |
3Q18 |
2Q18 |
3Q17 |
2Q18 |
3Q17 |
||||||||||||||
Net interest income |
$ |
71 |
$ |
72 |
$ |
72 |
$ |
(1) |
$ |
(1) |
|||||||||
Noninterest income |
$ |
228 |
$ |
222 |
$ |
220 |
$ |
6 |
$ |
8 |
|||||||||
Provision for credit losses |
$ |
2 |
$ |
7 |
$ |
3 |
$ |
(5) |
$ |
(1) |
|||||||||
Noninterest expense |
$ |
217 |
$ |
223 |
$ |
214 |
$ |
(6) |
$ |
3 |
|||||||||
Earnings |
$ |
61 |
$ |
49 |
$ |
47 |
$ |
12 |
$ |
14 |
|||||||||
In billions |
|||||||||||||||||||
Client assets under administration at |
$ |
293 |
$ |
279 |
$ |
275 |
$ |
14 |
$ |
18 |
|||||||||
Average loans |
$ |
7.0 |
$ |
7.0 |
$ |
7.0 |
— |
— |
|||||||||||
Average deposits |
$ |
12.3 |
$ |
12.3 |
$ |
12.2 |
— |
$ |
.1 |
||||||||||
- Client assets under administration at
September 30, 2018 include discretionary client assets under management of$159 billion and nondiscretionary client assets under administration of$134 billion . - Discretionary client assets under management increased
$10 billion compared withJune 30, 2018 primarily due to equity market increases and net business activities, and increased$13 billion compared withSeptember 30, 2017 primarily attributable to equity market increases.
Other, including
The "Other, including
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC Chairman, President and Chief Executive Officer
The
[TABULAR MATERIAL FOLLOWS]
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
|||||||||||||||||||
FINANCIAL RESULTS |
Three months ended |
Nine months ended |
||||||||||||||||||
Dollars in millions, except per share data |
September 30 |
June 30 |
September 30 |
September 30 |
September 30 |
|||||||||||||||
2018 |
2018 |
2017 |
2018 |
2017 |
||||||||||||||||
Revenue |
||||||||||||||||||||
Net interest income |
$ |
2,466 |
$ |
2,413 |
$ |
2,345 |
$ |
7,240 |
$ |
6,763 |
||||||||||
Noninterest income |
1,891 |
1,911 |
1,780 |
5,552 |
5,306 |
|||||||||||||||
Total revenue |
4,357 |
4,324 |
4,125 |
12,792 |
12,069 |
|||||||||||||||
Provision for credit losses |
88 |
80 |
130 |
260 |
316 |
|||||||||||||||
Noninterest expense |
2,608 |
2,584 |
2,456 |
7,719 |
7,337 |
|||||||||||||||
Income before income taxes (benefit) and noncontrolling |
$ |
1,661 |
$ |
1,660 |
$ |
1,539 |
$ |
4,813 |
$ |
4,416 |
||||||||||
Net income |
$ |
1,400 |
$ |
1,356 |
$ |
1,126 |
$ |
3,995 |
$ |
3,297 |
||||||||||
Less: |
||||||||||||||||||||
Net income attributable to noncontrolling interests |
11 |
10 |
12 |
31 |
39 |
|||||||||||||||
Preferred stock dividends (a) |
63 |
55 |
63 |
181 |
181 |
|||||||||||||||
Preferred stock discount accretion and redemptions |
1 |
1 |
1 |
3 |
24 |
|||||||||||||||
Net income attributable to common shareholders |
$ |
1,325 |
$ |
1,290 |
$ |
1,050 |
$ |
3,780 |
$ |
3,053 |
||||||||||
Less: |
||||||||||||||||||||
Dividends and undistributed earnings allocated to |
6 |
5 |
5 |
16 |
15 |
|||||||||||||||
Impact of BlackRock earnings per share dilution |
2 |
3 |
3 |
7 |
8 |
|||||||||||||||
Net income attributable to diluted common shares |
$ |
1,317 |
$ |
1,282 |
$ |
1,042 |
$ |
3,757 |
$ |
3,030 |
||||||||||
Diluted earnings per common share |
$ |
2.82 |
$ |
2.72 |
$ |
2.16 |
$ |
7.96 |
$ |
6.21 |
||||||||||
Cash dividends declared per common share |
$ |
.95 |
$ |
.75 |
$ |
.75 |
$ |
2.45 |
$ |
1.85 |
||||||||||
Effective tax rate (b) |
15.7 |
% |
18.3 |
% |
26.8 |
% |
17.0 |
% |
25.3 |
% |
(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 2018 results reflected the change in the statutory federal income tax rate from 35% to 21%, effective as of January 1, 2018, as a result of the new federal tax legislation. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
|||||||||||||||||||
Three months ended |
Nine months ended |
|||||||||||||||||||
September 30 |
June 30 |
September 30 |
September 30 |
September 30 |
||||||||||||||||
2018 |
2018 |
2017 |
2018 |
2017 |
||||||||||||||||
PERFORMANCE RATIOS |
||||||||||||||||||||
Net interest margin (a) |
2.99 |
% |
2.96 |
% |
2.91 |
% |
2.95 |
% |
2.84 |
% |
||||||||||
Noninterest income to total revenue |
43 |
% |
44 |
% |
43 |
% |
43 |
% |
44 |
% |
||||||||||
Efficiency (b) |
60 |
% |
60 |
% |
60 |
% |
60 |
% |
61 |
% |
||||||||||
Return on: |
||||||||||||||||||||
Average common shareholders' equity (c) |
12.32 |
% |
12.13 |
% |
9.89 |
% |
11.83 |
% |
9.76 |
% |
||||||||||
Average assets (c) |
1.47 |
% |
1.45 |
% |
1.20 |
% |
1.42 |
% |
1.19 |
% |
||||||||||
BUSINESS SEGMENT NET INCOME (LOSS) (c) (d) |
||||||||||||||||||||
In millions |
||||||||||||||||||||
Retail Banking |
$ |
283 |
$ |
330 |
$ |
232 |
$ |
909 |
$ |
675 |
||||||||||
Corporate & Institutional Banking |
665 |
675 |
525 |
1,924 |
1,527 |
|||||||||||||||
Asset Management Group |
61 |
49 |
47 |
178 |
146 |
|||||||||||||||
Other, including BlackRock (e) |
391 |
302 |
322 |
984 |
949 |
|||||||||||||||
Total net income |
$ |
1,400 |
$ |
1,356 |
$ |
1,126 |
$ |
3,995 |
$ |
3,297 |
(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, 2018, June 30, 2018 and September 30, 2017 were $29 million, $29 million and $55 million, respectively. The taxable equivalent adjustments to net interest income for the nine months ended September 30, 2018 and September 30, 2017 were $87 million and $161 million, respectively. Taxable equivalent amounts for the 2018 periods were calculated using a statutory federal income tax rate of 21%, reflecting the enactment of the new federal tax legislation effective January 1, 2018. Amounts for the 2017 periods were calculated using the previously applicable statutory federal income tax rate of 35%. |
(b) |
Calculated as noninterest expense divided by total revenue. |
(c) |
The 2018 results reflected the change in the statutory federal income tax rate from 35% to 21%, effective as of January 1, 2018, as a result of the new federal tax legislation. |
(d) |
Our business information is presented based on our internal management reporting practices. Net interest income in business segment results reflect PNC's internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors. |
(e) |
Includes earnings and gains or losses related to PNC's equity interest in BlackRock and residual activities that do not meet the criteria for disclosure as a separate reportable business. We provide additional information on these activities in our Form 10-K and Form 10-Q filings with the SEC. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||
September 30 |
June 30 |
September 30 |
|||||||||
2018 |
2018 |
2017 |
|||||||||
BALANCE SHEET DATA |
|||||||||||
Dollars in millions, except per share data |
|||||||||||
Assets |
$ |
380,080 |
$ |
380,711 |
$ |
375,191 |
|||||
Loans (a) |
$ |
223,053 |
$ |
222,855 |
$ |
221,109 |
|||||
Allowance for loan and lease losses |
$ |
2,584 |
$ |
2,581 |
$ |
2,605 |
|||||
Interest-earning deposits with banks |
$ |
19,800 |
$ |
21,972 |
$ |
24,713 |
|||||
Investment securities |
$ |
80,804 |
$ |
80,125 |
$ |
74,994 |
|||||
Loans held for sale (a) |
$ |
1,108 |
$ |
1,325 |
$ |
1,764 |
|||||
Equity investments (b) |
$ |
12,446 |
$ |
12,430 |
$ |
11,009 |
|||||
Mortgage servicing rights |
$ |
2,136 |
$ |
2,045 |
$ |
1,854 |
|||||
Goodwill |
$ |
9,218 |
$ |
9,218 |
$ |
9,163 |
|||||
Other assets (a) |
$ |
28,851 |
$ |
27,897 |
$ |
28,454 |
|||||
Noninterest-bearing deposits |
$ |
74,736 |
$ |
79,047 |
$ |
79,967 |
|||||
Interest-bearing deposits |
$ |
190,148 |
$ |
185,838 |
$ |
180,768 |
|||||
Total deposits |
$ |
264,884 |
$ |
264,885 |
$ |
260,735 |
|||||
Borrowed funds (a) |
$ |
57,955 |
$ |
59,222 |
$ |
57,564 |
|||||
Shareholders' equity |
$ |
47,058 |
$ |
46,904 |
$ |
46,388 |
|||||
Common shareholders' equity |
$ |
43,076 |
$ |
42,917 |
$ |
42,406 |
|||||
Accumulated other comprehensive income (loss) |
$ |
(1,260) |
$ |
(940) |
$ |
(22) |
|||||
Book value per common share |
$ |
93.22 |
$ |
92.26 |
$ |
89.05 |
|||||
Tangible book value per common share (Non-GAAP) (c) |
$ |
73.11 |
$ |
72.25 |
$ |
69.72 |
|||||
Period end common shares outstanding (millions) |
462 |
465 |
476 |
||||||||
Loans to deposits |
84 |
% |
84 |
% |
85 |
% |
|||||
CLIENT ASSETS (billions) |
|||||||||||
Discretionary client assets under management |
$ |
159 |
$ |
149 |
$ |
146 |
|||||
Nondiscretionary client assets under administration |
134 |
130 |
129 |
||||||||
Total client assets under administration |
293 |
279 |
275 |
||||||||
Brokerage account client assets |
51 |
49 |
48 |
||||||||
Total client assets |
$ |
344 |
$ |
328 |
$ |
323 |
|||||
CAPITAL RATIOS |
|||||||||||
Basel III (d) (e) (f) |
|||||||||||
Common equity Tier 1 |
9.3 |
% |
9.5 |
% |
N/A |
||||||
Tier 1 risk-based |
10.5 |
% |
10.7 |
% |
N/A |
||||||
Total capital risk-based |
12.7 |
% |
12.6 |
% |
N/A |
||||||
Leverage |
9.2 |
% |
9.4 |
% |
N/A |
||||||
Supplementary leverage |
7.6 |
% |
7.8 |
% |
N/A |
||||||
Fully Phased-In Basel III (Non-GAAP) |
|||||||||||
Common equity Tier 1 |
N/A |
N/A |
9.8 |
% |
|||||||
Transitional Basel III (e) |
|||||||||||
Common equity Tier 1 |
N/A |
N/A |
10.3 |
% |
|||||||
Tier 1 risk-based |
N/A |
N/A |
11.6 |
% |
|||||||
Total capital risk-based |
N/A |
N/A |
13.7 |
% |
|||||||
Leverage |
N/A |
N/A |
9.9 |
% |
|||||||
Common shareholders' equity to total assets |
11.3 |
% |
11.3 |
% |
11.3 |
% |
|||||
ASSET QUALITY |
|||||||||||
Nonperforming loans to total loans |
.76 |
% |
.77 |
% |
.85 |
% |
|||||
Nonperforming assets to total loans, OREO, foreclosed and other assets |
.82 |
% |
.83 |
% |
.93 |
% |
|||||
Nonperforming assets to total assets |
.48 |
% |
.49 |
% |
.55 |
% |
|||||
Net charge-offs to average loans (for the three months ended) (annualized) |
.16 |
% |
.20 |
% |
.19 |
% |
|||||
Allowance for loan and lease losses to total loans |
1.16 |
% |
1.16 |
% |
1.18 |
% |
|||||
Allowance for loan and lease losses to nonperforming loans |
153 |
% |
150 |
% |
139 |
% |
|||||
Accruing loans past due 90 days or more (in millions) |
$ |
619 |
$ |
586 |
$ |
678 |
(a) |
Amounts include assets and liabilities for which we have elected the fair value option. Our second quarter 2018 Form 10-Q included, and our third quarter 2018 Form 10-Q will include, additional information regarding these Consolidated Balance Sheet line items. |
(b) |
Amounts include our equity interest in BlackRock. Amounts for the 2018 periods reflected $.6 billion of trading and available for sale securities, primarily money market funds, that were reclassified to Equity investments on January 1, 2018 in accordance with the adoption of Accounting Standards Update 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. |
(c) |
See the Tangible Book Value per Common Share table on page 17 for additional information. |
(d) |
The ratios as of September 30, 2018 are estimated. |
(e) |
All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented and calculated based on the standardized approach. See Capital Ratios on page 16 for additional information. |
(f) |
The 2018 Basel III ratios for Common equity Tier 1 capital, Tier 1 risk-based capital, Leverage and Supplementary leverage reflect the full phase-in of all Basel III adjustments to these metrics applicable to PNC. The 2018 Basel III Total risk-based capital ratios include $80 million of nonqualifying trust preferred capital securities that are subject to a phase-out period that runs through 2021. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
|||||||||||||||||
CAPITAL RATIOS |
||||||||||||||||||
Because PNC remains in the parallel run qualification phase for the advanced approaches, PNC's regulatory risk-based capital ratios in |
||||||||||||||||||
We provide information below regarding PNC's estimated Basel III September 30, 2018, actual Basel III June 30, 2018, pro forma Fully |
||||||||||||||||||
Basel III Common Equity Tier 1 Capital Ratios |
||||||||||||||||||
Basel III (a) |
Fully Phased-In |
2017 Transitional |
||||||||||||||||
September 30 |
June 30 |
September 30 |
September 30 |
|||||||||||||||
Dollars in millions |
2018 (estimated) |
2018 |
2017 |
2017 |
||||||||||||||
Common stock, related surplus and retained earnings, net of |
$ |
44,336 |
$ |
43,857 |
$ |
42,426 |
$ |
42,426 |
||||||||||
Less regulatory capital adjustments: |
||||||||||||||||||
Goodwill and disallowed intangibles, net of deferred tax |
(9,299) |
(9,319) |
(9,202) |
(9,137) |
||||||||||||||
Basel III total threshold deductions |
(4,034) |
(3,408) |
(1,731) |
(1,166) |
||||||||||||||
Accumulated other comprehensive income (loss) |
(1,007) |
(757) |
(117) |
(94) |
||||||||||||||
All other adjustments |
(322) |
(167) |
(163) |
(161) |
||||||||||||||
Basel III Common equity Tier 1 capital |
$ |
29,674 |
$ |
30,206 |
$ |
31,213 |
$ |
31,868 |
||||||||||
Basel III standardized approach risk-weighted assets (c) |
$ |
318,321 |
$ |
319,112 |
$ |
317,393 |
$ |
309,292 |
||||||||||
Basel III advanced approaches risk-weighted assets (d) |
$ |
274,072 |
$ |
280,883 |
$ |
285,517 |
N/A |
|||||||||||
Basel III Common equity Tier 1 capital ratio |
9.3 |
% |
9.5 |
% |
9.8 |
% |
10.3 |
% |
||||||||||
Risk weight and associated rules utilized |
Standardized |
Standardized |
Standardized |
(a) |
2018 results are calculated using the regulatory capital methodology applicable to us during 2018 and reflects the full phase-in of all Basel III adjustments to this metric applicable to PNC. |
(b) |
2017 Fully Phased-In Basel III results are presented as pro forma estimates. |
(c) |
Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets. |
(d) |
Basel III advanced approaches risk-weighted assets are based on the Basel III advanced approaches rules, and include credit, market and operational risk-weighted assets. During the parallel run qualification phase, PNC has refined the data, models and internal processes used as part of the advanced approaches for determining risk-weighted assets. We anticipate additional refinements through the parallel run qualification phase. |
Our Basel III capital ratios may be impacted by additional regulatory guidance or analysis, and, in the case of those ratios calculated using the advanced approaches, may be subject to variability based on the ongoing evolution, validation and regulatory approval of PNC's models that are integral to the calculation of advanced approaches risk-weighted assets as PNC moves through the parallel run approval process.
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||||||||