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PNC Reports Third Quarter 2021 Net Income Of $1.5 Billion, $3.30 Diluted EPS Or $3.75 As Adjusted

Converted BBVA USA; delivered record revenue; continued strong credit quality performance

PITTSBURGH, Oct. 15, 2021 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported:




For the quarter








In millions, except per share data and as noted

3Q21

2Q21

3Q20


Third Quarter Highlights











▪  Converted BBVA USA customers, employees, systems and branches as of October 12, 2021

– Third quarter results reflect full quarter benefit from BBVA USA

– Second quarter results include one month impact of BBVA USA which closed on June 1, 2021

▪  Diluted EPS as adjusted was $3.75, excluding $243 million of pre-tax integration costs related to BBVA USA

▪  Revenue increased 11% linked quarter driven by the full quarter benefit of BBVA USA and strong fee income growth

▪  Expenses increased 18% linked quarter. PNC legacy expenses increased 3% linked quarter, reflecting increased business activity

▪  Provision recapture of $203 million, reflecting improved credit quality and changes in portfolio composition

▪  Average loans and deposits increased 14% and 13%, respectively, linked quarter due to the full quarter benefit of BBVA USA

▪  Strong credit performance; net loan charge-offs of $81 million, decreased $225 million linked quarter

Financial Results








Revenue

$

5,197



$

4,667



$

4,281



Noninterest expense

3,587




3,050



2,531



Pretax, pre-provision earnings (non-GAAP)

1,610




1,617



1,750



Integration costs

243




111





Pretax, pre-provision earnings excluding integration costs (non-GAAP)

1,853




1,728





Provision for (recapture of) credit losses

(203)




302



52



Net income

1,490




1,103



1,532























Per Common Share








Diluted earnings - as reported

$

3.30



$

2.43



$

3.39



Impact from integration costs (non-GAAP)

(0.45)




(0.21)





Diluted earnings - as adjusted (non-GAAP)

3.75




2.64





Book value

121.16




120.25



117.44



Tangible book value (non-GAAP)

94.82




93.83



95.71























Balance Sheet & Credit Quality







Average loans (in billions)

$

291.3



$

255.6



$

253.1



Average deposits (in billions)

454.4




401.7



350.5



Net loan charge-offs

81



306



155



Allowance for credit losses to total loans

2.07

%


2.16

%


2.58

%






















Selected Ratios








Return on average common equity

10.95

%


8.32

%


11.76

%


Return on average assets

1.06



0.88



1.32



Net interest margin (non-GAAP)

2.27



2.29



2.39



Noninterest income to total revenue

45



45



42



Efficiency

69



65



59



Efficiency excluding integration costs (non-GAAP)

64




63





Common Equity Tier 1 capital ratio

10.2



10.1



11.7













Diluted earnings as adjusted is a non-GAAP measure calculated by excluding post-tax integration costs for BBVA USA. See this and other non-GAAP financial measures in the consolidated financial highlights accompanying this release.


 

From Bill Demchak, PNC Chairman, President and Chief Executive Officer:


















  "In the third quarter PNC delivered solid financial results reflecting revenue growth and strong credit quality performance. While average loans increased due to the full quarter benefit of BBVA USA, period-end loans decreased modestly due to Paycheck Protection Program loan forgiveness activity. Importantly, we have completed the conversion of BBVA USA, providing all existing and new PNC customers with access to our coast-to-coast franchise. With the significant expansion of our footprint and the continued execution of our strategic priorities, we see substantial opportunities to leverage our best-in-class products and services, and deliver enhanced shareholder value for years to come."



















BBVA USA 

  • As of October 12, 2021, PNC has converted approximately 2.6 million customers, 9,000 employees and nearly 600 branches across seven states, merging BBVA USA into PNC Bank. PNC acquired BBVA USA on June 1, 2021.
  • Third quarter financial results reflect the full quarter benefit of BBVA USA. Second quarter financial results include the impact of BBVA USA operations for the month of June 2021.
    • Net interest income attributable to BBVA USA was $532 million in the third quarter of 2021 and included a significant increase in premium amortization expense related to certain BBVA USA investment securities. In the second quarter of 2021, net interest income attributable to BBVA USA was $236 million and included a $30 million benefit from purchase accounting accretion.
    • Noninterest income attributable to BBVA USA was $213 million in the third quarter of 2021, increasing $133 million compared with the second quarter of 2021.
    • Noninterest expense attributable to BBVA USA was $506 million in the third quarter of 2021, increasing $327 million compared with the second quarter of 2021.
    • Merger and integration costs in the third quarter of 2021 were $243 million, increasing $132 million compared with the second quarter of 2021. Since the announcement of the acquisition, PNC has incurred approximately half of the $980 million of expected merger and integration costs.
    • PNC remains on track to realize $900 million in cost saves.

Income Statement Highlights

Third quarter 2021 compared with second quarter 2021

  • Net income of $1.5 billion increased $387 million, or 35%.
  • Total revenue of $5.2 billion increased $530 million, or 11%, reflecting the full quarter benefit of BBVA USA and higher noninterest income.
  • Net interest income of $2.9 billion increased $275 million, or 11%, driven by higher interest earning asset balances reflecting the full quarter benefit of BBVA USA, partially offset by lower yields.
    • Net interest margin of 2.27% decreased 2 basis points.
  • Noninterest income of $2.3 billion increased $255 million, or 12%.
    • Fee income of $1.9 billion increased $274 million, or 17%, driven by the full quarter benefit of BBVA USA, record merger and acquisition advisory fees and higher residential mortgage revenue.
    • Other noninterest income of $449 million declined $19 million, or 4%, and included higher private equity revenue as well as a negative Visa Class B derivative fair value adjustment of $169 million primarily related to the extension of anticipated litigation resolution timing.
  • Noninterest expense of $3.6 billion increased $537 million, or 18%, and included a full quarter of BBVA USA operating expenses, increased integration expenses, higher incentive compensation related to increased business activity and increased marketing.
  • The third quarter of 2021 included a provision recapture of $203 million, reflecting continued improvements in credit quality and changes in portfolio composition. The second quarter included a provision for credit losses of $302 million, primarily driven by the establishment of an initial provision for credit losses related to the BBVA USA acquisition.
  • The effective tax rate was 17.8% for the third quarter and 16.1% for the second quarter.

Balance Sheet Highlights

Third quarter 2021 compared with second quarter 2021 or September 30, 2021 compared with June 30, 2021 

  • Average loans of $291.3 billion increased $35.7 billion, or 14%, reflecting the full quarter benefit of BBVA USA.
  • Loans of $290.2 billion at September 30, 2021 decreased $4.5 billion, or 2%.
    • Commercial loans of $195.2 billion decreased $4.4 billion, or 2%, driven by $4.8 billion of Paycheck Protection Program (PPP) loan forgiveness and a decrease in BBVA USA legacy loan portfolios, partially offset by growth in PNC legacy corporate banking, business credit and multifamily agency warehouse lending.
    • Consumer loans of $95.0 billion remained relatively stable, as growth in residential mortgage loans was offset primarily by declines in home equity and auto loans.
  • Credit quality performance:
    • Delinquencies of $1.4 billion increased $106 million, or 8%, largely due to commercial loans past due 30 to 59 days primarily reflecting operational delays.
    • Total nonperforming loans of $2.5 billion decreased $251 million, or 9%.
    • Net loan charge-offs of $81 million decreased $225 million. The second quarter included net loan charge-offs of $248 million related to the purchase accounting treatment for certain loans that were previously charged-off by BBVA USA.
    • The allowance for credit losses to total loans was 2.07% at September 30, 2021 compared with 2.16% at June 30, 2021.
  • Average deposits of $454.4 billion increased $52.7 billion, or 13%, primarily due to the full quarter benefit of BBVA USA.
    • Deposits of $448.9 billion at September 30, 2021 decreased $4.0 billion, or 1%, due to BBVA USA legacy commercial deposit outflows reflecting the impact of strategic repricing decisions, partially offset by growth in PNC legacy deposits.
  • Average investment securities of $120.6 billion, increased $12.1 billion, or 11%, driven by the full quarter benefit of BBVA USA.
    • Investment securities of $125.6 billion at September 30, 2021 decreased $0.9 billion, or 1%.
  • Average Federal Reserve Bank balances were $80.1 billion, increasing $1.8 billion.
    • Federal Reserve Bank balances at September 30, 2021 were $75.1 billion, an increase of $3.2 billion reflecting increased liquidity.
  • PNC maintained strong capital and liquidity positions.
    • On October 1, 2021, the PNC board of directors declared a quarterly cash dividend on common stock of $1.25 per share payable on November 5, 2021.
    • The Basel III common equity Tier 1 capital ratio was an estimated 10.2% at September 30, 2021 and 10.1% at June 30, 2021.
    • The Liquidity Coverage Ratio at September 30, 2021 for PNC exceeded the regulatory minimum requirement.

 

Earnings Summary







In millions, except per share data


3Q21


2Q21


3Q20

Net income


$

1,490



$

1,103



$

1,532


Net income attributable to

diluted common shares - as reported


$

1,408



$

1,037



$

1,447


Net income attributable to

diluted common shares - as adjusted (non-GAAP)


$

1,600



$

1,125



Diluted earnings per common share - as reported


$

3.30



$

2.43



$

3.39


Diluted earnings per common share - as adjusted (non-GAAP)


$

3.75



$

2.64



Average diluted common shares outstanding


426



427



426


Cash dividends declared per common share


$

1.25



$

1.25



$

1.15















See non-GAAP financial measures included in the consolidated financial highlights accompanying this news release

Third quarter 2021 net income of $1.5 billion, or $3.30 per diluted common share, included integration costs of $243 million pretax resulting from the acquisition of BBVA USA. Excluding the impact of integration costs, adjusted diluted earnings per common share was $3.75.

The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported (GAAP) amounts. This information supplements results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, GAAP results. 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







3Q21 vs

3Q21 vs

In millions

3Q21


2Q21


3Q20

2Q21

3Q20

Net interest income

$

2,856



$

2,581



$

2,484


11

%

15

%

Noninterest income

2,341



2,086



1,797


12

%

30

%

Total revenue

$

5,197



$

4,667



$

4,281


11

%

21

%









Total revenue for the third quarter of 2021 increased $530 million compared with the second quarter of 2021 and $916 million compared with the third quarter of 2020. In both comparisons, the increase was largely due to the acquisition of BBVA USA and growth in noninterest income as a result of increased business activity. For the third quarter of 2021, net interest income attributable to BBVA USA was $532 million and included a significant increase in premium amortization related to certain BBVA USA investment securities. In the second quarter of 2021, net interest income attributable to BBVA USA was $236 million and included a $30 million benefit from purchase accounting accretion. Total noninterest income attributable to BBVA USA was $213 million in the third quarter of 2021, increasing $133 million from the second quarter of 2021.

Net interest income of $2.9 billion for the third quarter of 2021 increased $275 million compared to the second quarter driven by higher interest earning assets reflecting the full quarter benefit of BBVA USA, partially offset by lower yields. In comparison with the third quarter of 2020, net interest income increased $372 million as a result of interest earning assets acquired in the BBVA USA acquisition and higher securities balances, partially offset by lower securities yields.

The net interest margin was 2.27% in the third quarter of 2021, 2.29% in the second quarter of 2021 and 2.39% in the third quarter of 2020. In both comparisons the decrease was largely due to lower securities yields.

Noninterest Income






Change

Change







3Q21 vs

3Q21 vs

In millions

3Q21


2Q21


3Q20

2Q21

3Q20

Asset management

$

248



$

239



$

215


4

%

15

%

Consumer services

496



457



390


9

%

27

%

Corporate services

842



688



479


22

%

76

%

Residential mortgage

147



103



137


43

%

7

%

Service charges on deposits

159



131



119


21

%

34

%

Other

449



468



457


(4)

%

(2)

%


$

2,341



$

2,086



$

1,797


12

%

30

%









Noninterest income for the third quarter of 2021 increased $255 million compared with the second quarter of 2021. Asset management revenue grew $9 million primarily as a result of the full quarter benefit of BBVA USA and higher average equity markets. Consumer services increased $39 million driven by growth in transaction volumes, primarily due to the addition of BBVA USA customers. Corporate services was $154 million higher and included record merger and acquisition advisory fees and the full quarter benefit of BBVA USA. Residential mortgage revenue increased $44 million reflecting higher loan sales revenue and servicing fees. Service charges on deposits increased $28 million and included the full quarter benefit of BBVA USA and the effect of Low Cash ModeSM. Other noninterest income decreased $19 million and included higher private equity revenue as well as a negative Visa Class B derivative fair value adjustment of $169 million primarily related to the extension of anticipated litigation resolution timing. The second quarter included a negative Visa Class B derivative fair value adjustment of $13 million.

Noninterest income for the third quarter of 2021 increased $544 million compared with the third quarter of 2020. Asset management revenue grew $33 million as a result of higher average equity markets and the benefit of BBVA USA. Consumer services was $106 million higher driven by growth in transaction volumes and the addition of BBVA USA customers. Corporate services increased $363 million driven by record merger and acquisition advisory fees and higher treasury management product revenue. Service charges on deposits increased $40 million primarily driven by the addition of BBVA USA customers. Other noninterest income decreased $8 million and included a negative fair value adjustment related to the Visa Class B derivative, higher private equity revenue and the benefit of BBVA USA.

CONSOLIDATED EXPENSE REVIEW













Noninterest Expense






Change

Change







3Q21 vs

3Q21 vs

In millions

3Q21


2Q21


3Q20

2Q21

3Q20

Personnel

$

1,986



$

1,640



$

1,410


21

%

41

%

Occupancy

248



217



205


14

%

21

%

Equipment

355



326



292


9

%

22

%

Marketing

103



74



67


39

%

54

%

Other

895



793



557


13

%

61

%


$

3,587



$

3,050



$

2,531


18

%

42

%









Noninterest expense for the third quarter of 2021 increased $537 million compared with the second quarter of 2021. The third quarter of 2021 included a full quarter of operating expenses related to BBVA USA of $506 million and integration expenses of $235 million. The second quarter of 2021 included $179 million of BBVA USA operating expenses and integration expenses of $101 million. PNC legacy noninterest expense was $2,846 million and $2,770 million, respectively, for the third and second quarter of 2021, increasing primarily due to higher incentive compensation, as a result of increased business activity, and increased marketing.

Noninterest expense increased $1,056 million in comparison with the third quarter of 2020 primarily driven by operating and integration expenses related to the BBVA USA acquisition, and increased business and marketing activity.

The effective tax rate was 17.8% for the third quarter of 2021, 16.1% for the second quarter of 2021 and 9.8% for the third quarter of 2020. The third quarter of 2020 included tax credit benefits and the favorable resolution of certain tax matters.

CONSOLIDATED BALANCE SHEET REVIEW

Average total assets were $559.2 billion in the third quarter of 2021 compared with $504.4 billion in the second quarter of 2021 and $462.1 billion in the third quarter of 2020. In both comparisons the increase was primarily driven by the BBVA USA acquisition.

Total assets were $553.5 billion at September 30, 2021, $554.2 billion at June 30, 2021 and $461.8 billion at September 30, 2020. Compared to the third quarter of 2020, balance sheet growth was primarily driven by the BBVA USA acquisition.

Loans






Change

Change


September 30,
2021


June 30,
2021


September 30,
2020

09/30/21 vs

09/30/21 vs

In billions



06/30/21

09/30/20

Average








Commercial

$

196.3



$

175.8



$

175.6


12

%

12

%

Consumer

95.0



79.8



77.5


19

%

23

%

Average loans

$

291.3



$

255.6



$

253.1


14

%

15

%









Quarter end








Commercial

$

195.2



$

199.6



$

172.7


(2)

%

13

%

Consumer

95.0



95.1



76.6



24

%

Total loans

$

290.2



$

294.7



$

249.3


(2)

%

16

%









Average loans for the third quarter of 2021 were $291.3 billion, increasing $35.7 billion and $38.2 billion, respectively, compared to the second quarter of 2021 and third quarter of 2020, reflecting the acquisition of BBVA USA.

Loans were $290.2 billion at September 30, 2021, decreasing $4.5 billion compared with June 30, 2021. Commercial loans decreased $4.4 billion compared with the second quarter of 2021 driven by $4.8 billion of PPP loan forgiveness and a decrease in BBVA USA legacy loan portfolios, partially offset by growth in PNC legacy corporate banking, business credit and multifamily agency warehouse lending. Consumer loans remained relatively stable from the second quarter of 2021, as growth in residential mortgage loans was offset primarily by declines in home equity and auto loans.  

Loans at September 30, 2021 increased $40.9 billion compared with September 30, 2020, reflecting the impact of the BBVA USA acquisition, partially offset by lower utilization of loan commitments by commercial customers and PPP loan forgiveness. 

PPP loans outstanding were $6.8 billion at September 30, 2021, $11.6 billion at June 30, 2021 and $12.9 billion at September 30, 2020

Investment Securities






Change

Change


September 30,
2021


June 30,
2021


September 30,
2020

09/30/21 vs

09/30/21 vs

In billions



06/30/21

09/30/20

Average

$

120.6



$

108.5



$

90.5


11

%

33

%

Quarter end

$

125.6



$

126.5



$

91.2


(1)

%

38

%









Average investment securities for the third quarter of 2021 were $120.6 billion, increasing $12.1 billion and $30.1 billion, respectively, from the second quarter of 2021 and third quarter of 2020 driven by BBVA USA. Compared to the third quarter of 2020, the increase was also attributable to increased purchase activity.

Investment securities at September 30, 2021 decreased $0.9 billion from June 30, 2021 due to sales and prepayments exceeding purchases during the quarter. Compared to September 30, 2020, investment securities increased $34.4 billion reflecting increased purchase activity and investment securities from BBVA USA. Net unrealized gains on available for sale securities were $1.7 billion at September 30, 2021, $2.0 billion at June 30, 2021 and $3.4 billion at September 30, 2020.

Average Federal Reserve Bank balances for the third quarter of 2021 were $80.1 billion, increasing $1.8 billion and $20.1 billion, respectively, from the second quarter of 2021 and the third quarter of 2020. The increase compared to the third quarter of 2020 was primarily due to deposit growth.

Federal Reserve Bank balances at September 30, 2021 of $75.1 billion increased $3.2 billion from $71.9 billion at June 30, 2021 primarily due to increased liquidity. Federal Reserve Bank balances increased $4.5 billion from $70.6 billion at September 30, 2020.

Deposits






Change

Change


September 30,
2021


June 30,
2021


September 30,
2020

09/30/21 vs

09/30/21 vs

In billions



06/30/21

09/30/20

Average








Noninterest-bearing

$

155.9



$

132.3



$

101.9


18

%

53

%

Interest-bearing

298.5



269.4



248.6


11

%

20

%

Average deposits

$

454.4



$

401.7



$

350.5


13

%

30

%









Quarter end








Noninterest-bearing 

$

156.3



$

154.2



$

107.3


1

%

46

%

Interest-bearing

292.6



298.7



247.8


(2)

%

18

%

Total deposits

$

448.9



$

452.9



$

355.1


(1)

%

26

%









Average deposits for the third quarter of 2021 were $454.4 billion, increasing $52.7 billion and $103.9 billion, respectively, compared with the second quarter of 2021 and third quarter of 2020 reflecting the acquisition of BBVA USA.

Deposits at September 30, 2021 decreased $4.0 billion compared with June 30, 2021 due to BBVA USA legacy commercial deposit outflows reflecting the impact of strategic repricing decisions, partially offset by growth in PNC legacy deposits. Compared to September 30, 2020, deposits increased $93.8 billion, reflecting deposits from BBVA USA and overall growth in commercial and consumer liquidity.

Borrowed Funds






Change

Change


September 30,
2021


June 30,
2021


September 30,
2020

09/30/21 vs

09/30/21 vs

In billions



06/30/21

09/30/20

Average

$

34.4



$

34.1



$

43.3


1

%

(21)

%

Quarter end

$

33.5



$

34.8



$

42.1


(4)

%

(20)

%









Average borrowed funds for the third quarter of 2021 were $34.4 billion, increasing $0.3 billion compared with the second quarter of 2021. Compared with the third quarter of 2020, average borrowed funds decreased $8.9 billion reflecting the use of excess liquidity.

Borrowed funds at September 30, 2021 decreased $1.3 billion and $8.6 billion compared with June 30, 2021 and September 30, 2020, respectively. In both comparisons the reduction reflected the use of excess liquidity.

Capital

September 30,
2021



June 30,
2021


September 30,
2020


*



Common shareholders' equity    In billions

$

51.3




$

51.1



$

49.8


Basel III common equity Tier 1 capital ratio

10.2

%



10.1

%


11.7

%

Basel III common equity Tier 1 fully implemented capital ratio

10.0

%



9.9

%


11.3

%

* Ratios estimated














PNC maintained a strong capital position. Common shareholders' equity at September 30, 2021 increased $0.2 billion from June 30, 2021 as third quarter net income was substantially offset by  dividends, share repurchases and lower accumulated other comprehensive income reflecting the impact of higher rates on net unrealized securities gains. 

In the third quarter of 2021, PNC returned $0.9 billion of capital to shareholders through $0.5 billion of dividends on common shares and $0.4 billion of common share repurchases representing 2.1 million shares. Repurchases were made under the share repurchase programs of up to $2.9 billion for the four-quarter period beginning in the third quarter of 2021.

 On October 1, 2021, the PNC board of directors declared a quarterly cash dividend on common stock of $1.25 per share payable on November 5, 2021.

For information regarding PNC's Basel III capital ratios, see Capital Ratios in the Consolidated Financial Highlights. PNC elected a five-year transition provision effective March 31, 2020 to delay for two years the full impact of the Current Expected Credit Losses (CECL) standard on regulatory capital, followed by a three-year transition period. The fully implemented ratios reflect the full impact of CECL and exclude the benefits of this transition provision.

CREDIT QUALITY REVIEW
















Credit Quality






Change

3Q21 vs

2Q21

Change

3Q21 vs

3Q20

In millions

September 30,
2021


June 30,
2021


September 30,
2020

Provision for (recapture of) credit losses

$

(203)



$

302



$

52


$

(505)


$

(255)


Net loan charge-offs

$

81



$

306



$

155


(74)

%

(48)

%

Allowance for credit losses

$

6,001



$

6,375



$

6,440


(6)

%

(7)

%

Accruing loans past due 90 days or more

$

492



$

527



$

448


(7)

%

10

%

Nonperforming loans

$

2,528



$

2,779



$

2,085


(9)

%

21

%

















Net charge-offs to average loans (annualized)

0.11

%


0.48

%


0.24

%



Allowance for credit losses to total loans

2.07

%


2.16

%


2.58

%



Nonperforming loans to total loans

0.87

%


0.94

%


0.84

%











The third quarter of 2021 included a provision recapture of $203 million, reflecting continued improvements in credit quality and changes in portfolio composition. The second quarter included a provision for credit losses of $302 million, primarily driven by the establishment of an initial provision for credit losses related to the BBVA USA acquisition.

Net loan charge-offs were $81 million in the third quarter of 2021, decreasing $225 million and $74 million from the second quarter of 2021 and third quarter of 2020, respectively. The second quarter of 2021 included net loan charge-offs of $248 million primarily related to the purchase accounting treatment for certain loans that were previously charged-off by BBVA USA. For the third quarter of 2021, commercial and consumer net loan charge-offs were $21 million and $60 million, respectively.

The allowance for credit losses was $6.0 billion at September 30, 2021 and $6.4 billion at both June 30, 2021 and September 30, 2020. The allowance for credit losses as a percentage of total loans was 2.07% at September 30, 2021, 2.16% at June 30, 2021 and 2.58% at September 30, 2020.

Nonperforming loans at September 30, 2021 of $2.5 billion decreased $251 million compared to June 30, 2021, primarily due to lower nonperforming loans in the commercial real estate and commercial and industrial portfolios. Nonperforming loans increased $443 million compared to September 30, 2020, primarily due to nonperforming loans acquired in the BBVA USA acquisition.

Overall delinquencies at September 30, 2021 of $1.4 billion, increased $106 million compared to June 30, 2021 and $158 million compared to September 30, 2020. In both comparisons, the increase was largely due to commercial loans past due 30 to 59 days primarily reflecting operational delays. Under the CARES Act credit reporting rules and guidance from regulatory agencies, certain loans modified due to pandemic-related hardships were considered current during their modification period and not reported as past due.

BUSINESS SEGMENT RESULTS












Business Segment Income






In millions

3Q21


2Q21


3Q20

Retail Banking

$

447



$

232



$

530


Corporate & Institutional Banking

1,123



809



670


Asset Management Group

114



87



91


Other

(210)



(37)



228


Net income excluding noncontrolling interest

$

1,474



$

1,091



$

1,519


See accompanying notes in Consolidated Financial Highlights












 

Retail Banking







Change


Change








3Q21 vs


3Q21 vs

In millions

3Q21


2Q21


3Q20


2Q21


3Q20

Net interest income

$

1,713



$

1,497



$

1,383



$

216



$

330


Noninterest income

$

662



$

706



$

673



$

(44)



$

(11)


Provision for (recapture of) credit losses

$

(113)



$

214



$

(157)



$

(327)



$

44


Noninterest expense

$

1,889



$

1,677



$

1,512



$

212



$

377


Earnings

$

447



$

232



$

530



$

215



$

(83)












In billions










Average










Loans

$

99.1



$

84.3



$

81.8



$

14.8



$

17.3


Deposits

$

262.0



$

233.2



$

197.9



$

28.8



$

64.1


Quarter end










Loans

$

97.3



$

100.7



$

80.7



$

(3.4)



$

16.6


Deposits

$

261.7



$

260.8



$

198.7



$

0.9



$

63.0












Net charge offs    In millions

$

82



$

79



$

125



$

3



$

(43)












Retail Banking Highlights

Third quarter 2021 compared with second quarter 2021

  • Earnings increased 93%, due to the full quarter benefit of BBVA USA and a provision recapture, partially offset by lower noninterest income.
    • Noninterest income decreased 6%, primarily due to a negative fair value adjustment of $169 million related to the Visa Class B derivative, partially offset by the full quarter benefit of BBVA USA and higher residential mortgage revenue. The second quarter of 2021 included a negative Visa Class B derivative fair value adjustment of $13 million.
    • Provision recapture of $113 million at September 30, 2021 reflected changes in portfolio composition and continued improvements in credit quality. The second quarter included a provision for credit losses of $214 million, primarily related to the acquisition of BBVA USA.
    • Noninterest expense increased 13%, driven by the full quarter impact of BBVA USA related operating expenses and increased marketing activity.
  • Average loans and deposits increased 18% and 12%, respectively, reflecting the full quarter benefit of BBVA USA.
    • Period-end loans decreased 3%, driven by PPP loan forgiveness as well as lower home equity and auto loans, partially offset by higher residential mortgage loans.
    • Period-end deposits increased modestly driven by growth in demand and savings deposits.

Third quarter 2021 compared with third quarter 2020

  • Earnings decreased 16% and included the benefit of BBVA USA.
    • Noninterest income declined 2%, primarily due to a negative Visa Class B derivative fair value adjustment, partially offset by higher consumer services fees and service charges on deposits, reflecting the addition of BBVA USA customers.
    • Noninterest expense increased 25%, driven by operating expenses related to BBVA USA and increased marketing activity.
  • Average and period-end loans both increased 21%. Average and period-end deposits both increased 32%. In all comparisons, the increase reflected the impact of the BBVA USA acquisition.

 

Corporate & Institutional Banking






Change


Change








3Q21 vs


3Q21 vs

In millions

3Q21


2Q21


3Q20


2Q21


3Q20

Net interest income

$

1,250



$

1,092



$

1,025



$

158



$

225


Noninterest income

$

1,056



$

867



$

723



$

189



$

333


Provision for (recapture of) credit losses

$

(99)



$

104



$

211



$

(203)



$

(310)


Noninterest expense

$

980



$

813



$

663



$

167



$

317


Earnings

$

1,123



$

809



$

670



$

314



$

453












In billions










Average










Loans

$

175.8



$

157.7



$

159.5



$

18.1



$

16.3


Deposits

$

163.1



$

145.0



$

133.1



$

18.1



$

30.0


Quarter end










Loans

$

176.4



$

177.5



$

156.6



$

(1.1)



$

19.8


Deposits

$

157.8



$

164.1



$

137.3



$

(6.3)



$

20.5












Net charge-offs    In millions

$

13



$

233



$

32



$

(220)



$

(19)












Corporate & Institutional Banking Highlights

Third quarter 2021 compared with second quarter 2021

  • Earnings increased 39%, including the full quarter benefit of BBVA USA, record merger and acquisition advisory fees and a provision recapture.
    • Noninterest income increased 22%, primarily due to record merger and acquisition advisory fees and increased treasury management product revenue.
    • Provision recapture of $99 million at September 30, 2021 reflected continued improvements in credit quality. The second quarter included a provision for credit losses of $104 million, primarily related to the acquisition of BBVA USA.
    • Noninterest expense increased 21%, due to the full quarter impact of BBVA USA operating expenses and higher variable costs as a result of elevated business activity.
  • Average loans and deposits increased 11% and 12%, respectively, reflecting the full quarter benefit of BBVA USA.
    • Period-end loans decreased 1%, driven by a decline in BBVA USA legacy loan portfolios and PPP loan forgiveness, partially offset by growth in PNC legacy corporate banking, business credit and multifamily agency warehouse lending.
    • Period-end deposits decreased 4%, due to BBVA USA legacy deposit outflows reflecting the impact of strategic repricing decisions, partially offset by growth in PNC legacy deposits.

Third quarter 2021 compared with third quarter 2020

  • Earnings increased 68%, and included record merger and acquisition advisory fees, the benefit of BBVA USA and a provision recapture.
    • Noninterest income increased 46%, driven by record merger and acquisition advisory fees and increased treasury management product revenue.
    • Noninterest expense increased 48%, reflecting operating expenses related to BBVA USA and higher variable costs as a result of elevated business activity.
  • Average loans increased 10%, and included the acquisition of BBVA USA.
    • Period-end loans increased 13%, reflecting the acquisition of BBVA USA and growth in PNC's business credit business, partially offset by PPP loan forgiveness and declines in PNC's real estate and corporate banking businesses.
  • Average and period-end deposits increased 23% and 15%, respectively, primarily due to the acquisition of BBVA USA.

 

Asset Management Group







Change


Change








3Q21 vs


3Q21 vs

In millions

3Q21


2Q21


3Q20


2Q21


3Q20

Net interest income

$

141



$

112



$

89



$

29



$

52


Noninterest income

$

256



$

244



$

221



$

12



$

35


Provision for (recapture of) credit losses

$

(6)



$

23



$

(19)



$

(29)



$

13


Noninterest expense

$

255



$

219



$

211



$

36



$

44


Earnings

$

114



$

87



$

91



$

27



$

23












In billions










Discretionary client assets under management

$

183



$

183



$

158





$

25


Nondiscretionary client assets under administration

$

170



$

172



$

142



$

(2)



$

28


Client assets under administration at quarter end

$

353



$

355



$

300



$

(2)



$

53


Brokerage client account assets

$

5



$

5





$



$

5












In billions










Average










Loans

$

13.0



$

10.0



$

7.9



$

3.0



$

5.1


Deposits

$

29.3



$

23.4



$

19.1



$

5.9



$

10.2


Quarter end










Loans

$

13.1



$

12.9



$

8.1



$

0.2



$

5.0


Deposits

$

29.3



$

28.7



$

18.8



$

0.6



$

10.5












Net charge-offs (recoveries)    In millions

$

(1)



$

2



$

1



$

(3)



$

(2)












Asset Management Group Highlights

Third quarter 2021 compared with second quarter 2021

  • Earnings increased 31%, and included the full quarter benefit of BBVA USA.
    • Noninterest income increased 5%, due to the full quarter benefit of BBVA USA and higher average equity markets.
    • Noninterest expense increased 16%, due to the full quarter impact of BBVA USA related operating expenses and higher operational loss reserves.
  • Discretionary client assets under management remained consistent with the prior quarter.
  • Average loans and deposits increased 30% and 25%, respectively, reflecting the full quarter benefit of BBVA USA.

Third quarter 2021 compared with third quarter 2020

  • Earnings increased 25%, primarily due to the impact of BBVA USA and higher average equity markets.
    • Noninterest income increased 16%, driven by higher average equity markets and the benefit of BBVA USA.
    • Noninterest expense increased 21%, due to the impact of operating expenses related to BBVA USA and higher operational loss reserves.
  • Discretionary client assets under management increased 16%, primarily driven by higher spot equity markets.
  • Average loans and deposits increased 65% and 53%, respectively, reflecting the acquisition of BBVA USA.

Other

The "Other" category, for the purposes of this release, includes residual activities that do not meet the criteria for disclosure as a separate reportable business, such as asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities, certain trading activities, certain runoff consumer loan portfolios, private equity investments, intercompany eliminations, certain corporate overhead, tax adjustments that are not allocated to business segments, exited businesses, and differences between business segment performance reporting and financial statement reporting under generally accepted accounting principles.

CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION

PNC Chairman, President and Chief Executive Officer William S. Demchak and Executive Vice President and Chief Financial Officer Robert Q. Reilly will hold a conference call for investors today at 9:00 a.m. Eastern Time regarding the topics addressed in this news release and the related financial supplement. Dial-in numbers for the conference call are (877) 272-3568 and (312) 429-1278 (international) and Internet access to the live audio listen-only webcast of the call is available at www.pnc.com/investorevents. PNC's third quarter 2021 earnings release, related financial supplement, and presentation slides to accompany the conference call remarks will be available at www.pnc.com/investorevents prior to the beginning of the call. A telephone replay of the call will be available for one week at (800) 633-8284 and (402) 977-9140 (international), conference ID 21997580 and a replay of the audio webcast will be available on PNC's website for 30 days.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

 [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



2021


2021


2020




2021


2020

Revenue













Net interest income


$

2,856



$

2,581



$

2,484





$

7,785



$

7,522


Noninterest income


2,341



2,086



1,797





6,299



5,171


Total revenue


5,197



4,667



4,281





14,084



12,693


Provision for (recapture of) credit losses


(203)



302



52





(452)



3,429


Noninterest expense


3,587



3,050



2,531





9,211



7,589


Income from continuing operations before income taxes and noncontrolling interests


$

1,813



$

1,315



$

1,698





$

5,325



$

1,675


Income taxes from continuing operations


323



212



166





906



128


    Net income from continuing operations


$

1,490



$

1,103



$

1,532





$

4,419



$

1,547


Income from discontinued operations before taxes












$

5,777


Income taxes from discontinued operations












1,222


    Net income from discontinued operations
















$

4,555


Net income


$

1,490



$

1,103



$

1,532





$

4,419



$

6,102


Less:













Net income attributable to noncontrolling interests


16



12



13





38



27


Preferred stock dividends (a)


57



48



63





162



181


Preferred stock discount accretion and redemptions


1



1



1





3



3


Net income attributable to common shareholders


$

1,416



$

1,042



$

1,455





$

4,216



$

5,891


Per Common Share













Basic earnings from continuing operations


$

3.31



$

2.43



$

3.40





$

9.84



$

3.11


Basic earnings from discontinued operations












10.61


Total basic earnings


$

3.31



$

2.43



$

3.40





$

9.84



$

13.73


Diluted earnings from continuing operations


$

3.30



$

2.43



$

3.39





$

9.83



$

3.11


Diluted earnings from discontinued operations












10.59


Total diluted earnings


$

3.30



$

2.43



$

3.39





$

9.83



$

13.70


Cash dividends declared per common share


$

1.25



$

1.25



$

1.15





$

3.65



$

3.45


Effective tax rate from continuing operations (b)


17.8

%


16.1

%


9.8

%




17.0

%


7.6

%

 



(a)

Dividends are payable quarterly other than Series R and Series S preferred stock, which are payable semiannually. On September 13, 2021, PNC issued 1,500,000 depositary shares of Series T preferred stock with a $1 par value. Beginning on December 15, dividends will be paid on the Series T on a quarterly basis (March 15, June 15, September 15 and December 15 of each year).

(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



2021


2021


2020




2021


2020

PERFORMANCE RATIOS













Net interest margin (a)


2.27

%


2.29

%


2.39

%




2.28

%


2.57

%

Noninterest income to total revenue


45

%


45

%


42

%




45

%


41

%

Efficiency (b)


69

%


65

%


59

%




65

%


60

%

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