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PNC REPORTS THIRD QUARTER 2022 NET INCOME OF $1.6 BILLION, $3.78 DILUTED EPS

3% avg. loan growth; 32 basis point NIM expansion; 7% positive operating leverage

PITTSBURGH, Oct. 14, 2022 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported:




For the quarter



In millions, except per share data and as noted

3Q22

2Q22

3Q21

Third Quarter Highlights










Financial Results




Comparisons reflect 3Q22 vs. 2Q22 


Revenue

$    5,549

$    5,116

$    5,197

▪  Operating leverage of 7%,
reflecting revenue growth of 8%
and expense growth of 1%

▪  Net interest income grew 14%

–  NIM increased 32 basis points

▪  Noninterest income increased
modestly

▪  Efficiency ratio improved to 59%

▪  PPNR increased 21%

▪  Average loans grew 3%, driven by
commercial and consumer loan
growth

▪  Average deposits decreased 2%

–   Spot deposits declined 0.6%

▪  Provision for credit losses of $241
million; allowance for credit losses
to total loans of 1.67%

▪  Net loan charge-offs were $119
million or 0.15% annualized to
average loans

▪  Tangible book value decreased
6%, due to the change in AOCI

▪  PNC returned $1.7 billion of
capital to shareholders


Noninterest expense

3,280

3,244

3,587

Pretax, pre-provision earnings (PPNR) (non-GAAP)

2,269

1,872

1,610

Integration costs

1

14

243

PPNR excluding integration costs (non-GAAP)

2,270

1,886

1,853

Provision for (recapture of) credit losses

241

36

(203)

Net income

1,640

1,496

1,490













Per Common Share




Diluted earnings - as reported

$      3.78

$      3.39

$      3.30

Impact from integration costs (non-GAAP)

0.03

0.45

Diluted earnings - as adjusted (non-GAAP)

3.78

3.42

3.75

Average diluted common shares outstanding

410

414

426

Book value

97.59

101.39

121.16

Tangible book value (non-GAAP)

69.98

74.39

94.82













Balance Sheet & Credit Quality



Average loans     In billions

$    313.0

$    304.8

$    291.3

Average deposits    In billions

439.2

446.5

454.4

Accumulated other comprehensive income (loss)
(AOCI)    In billions

(10.5)

(8.4)

1.1

Net loan charge-offs

119

83

81

Allowance for credit losses to total loans

1.67 %

1.65 %

2.07 %













Selected Ratios




Return on average common shareholders' equity

14.97 %

13.52 %

10.95 %

Return on average assets

1.19

1.10

1.06

Net interest margin (NIM) (non-GAAP)

2.82

2.50

2.27

Noninterest income to total revenue

37

40

45

Efficiency

59

63

69

Common equity Tier 1 capital ratio

9.3

9.6

10.3







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:

"Our third quarter results reflected continued strong momentum across the expanded PNC footprint. We grew loans and revenue, our net interest margin increased and expenses remained well controlled, resulting in substantial positive operating leverage. Our credit quality metrics and capital levels remain solid and we continue to be well positioned for ongoing success."

Income Statement Highlights

Third quarter 2022 compared with second quarter 2022

  • Net income of $1.6 billion increased $144 million, or 10%.
  • Total revenue of $5.5 billion increased $433 million, or 8%, primarily due to higher net interest income.
  • Net interest income of $3.5 billion increased $424 million, or 14%, driven by higher yields on interest-earning assets and loan growth, partially offset by higher funding costs.
    • Net interest margin of 2.82% increased 32 basis points primarily due to higher yields on interest-earning assets.
  • Noninterest income of $2.1 billion increased modestly.
    • Fee income of $1.8 billion decreased $131 million, or 7%, driven by lower capital markets related revenue as a result of elevated merger and acquisition advisory activity in the second quarter.
    • Other noninterest income of $317 million increased $140 million, and included higher private equity revenue and positive Visa Class B derivative fair value adjustments of $13 million.
  • Noninterest expense of $3.3 billion increased $36 million, or 1%, reflecting increased personnel expense to support business growth as well as one additional day in the quarter.
  • Provision for credit losses was $241 million in the third quarter, reflecting slightly weaker economic expectations which impacted our macroeconomic scenarios and weightings. The second quarter of 2022 included a provision for credit losses of $36 million.
  • The effective tax rate was 19.1% for the third quarter and 18.5% for the second quarter.

Balance Sheet Highlights

Third quarter 2022 compared with second quarter 2022 or September 30, 2022 compared with June 30, 2022

  • Average loans of $313.0 billion increased $8.2 billion, or 3%.
    • Average commercial loans of $214.1 billion grew $6.5 billion driven by growth in PNC's corporate banking, real estate and business credit businesses.
    • Average consumer loans of $98.9 billion increased $1.7 billion due to higher residential mortgage, home equity and credit card loans, partially offset by lower auto loans.
  • Credit quality performance:
    • Delinquencies of $1.6 billion increased $115 million, or 8%, as a result of higher commercial delinquencies primarily due to administrative delays, partially offset by lower consumer delinquencies.
    • Total nonperforming loans of $2.1 billion increased $22 million, or 1%, as lower consumer nonperforming loans were more than offset by higher commercial nonperforming loans.
    • Net loan charge-offs of $119 million increased $36 million, primarily driven by higher commercial net loan charge-offs.
    • The allowance for credit losses to total loans was 1.67% at September 30, 2022 compared with 1.65% at June 30, 2022.
  • Average deposits of $439.2 billion decreased $7.3 billion, or 2%, driven by lower consumer deposits, reflecting inflationary pressures and seasonally higher consumer spending.
    • Deposits at September 30, 2022 of $438.2 billion decreased $2.6 billion, or 0.6%, as higher commercial deposits were more than offset by lower consumer deposits.
  • Average investment securities of $137.0 billion grew $2.3 billion, or 2%.
  • Average Federal Reserve Bank balances of $31.5 billion decreased $7.8 billion, driven by increased loans outstanding and lower deposits, partially offset by higher borrowed funds.
    • Federal Reserve Bank balances at September 30, 2022 were $39.8 billion.
  • PNC maintained strong capital and liquidity positions.
    • On October 3, 2022, the PNC board of directors declared a quarterly cash dividend on common stock of $1.50 per share payable on November 5, 2022.
    • PNC returned $1.7 billion of capital to shareholders, an increase of $0.3 billion due to higher share repurchases. Capital return during the third quarter was comprised of $1.1 billion of common share repurchases, representing 6.7 million shares, and $0.6 billion of dividends on common shares.
    • The Basel III common equity Tier 1 capital ratio was an estimated 9.3% at September 30, 2022 and 9.6% at June 30, 2022.
    • The Liquidity Coverage Ratio at September 30, 2022 for PNC exceeded the regulatory minimum requirement.

 

Earnings Summary







In millions, except per share data


3Q22


2Q22


3Q21

Net income


$  1,640


$  1,496


$  1,490

Net income attributable to

diluted common shares - as reported


$  1,550


$  1,402


$  1,408

Net income attributable to

diluted common shares - as adjusted (non-GAAP)


$  1,551


$  1,413


$  1,600

Diluted earnings per common share - as reported


$    3.78


$    3.39


$    3.30

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


$    3.78


$    3.42


$    3.75

Average diluted common shares outstanding


410


414


426

Cash dividends declared per common share


$    1.50


$    1.50


$    1.25

See non-GAAP financial measures included in the Consolidated Financial Highlights accompanying this news release

 

We continue to evaluate the impact to our business from Hurricane Ian. Based on our assessment to date, we do not expect Hurricane Ian to have a material impact on our operating results, including credit losses.

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. Effective for the first quarter of 2022, the presentation of noninterest income has been recategorized. Fee income, a non-GAAP financial measure, refers to noninterest income in the following categories: asset management and brokerage, capital markets related, card and cash management, lending and deposit services and residential and commercial mortgage. See a description of each updated noninterest income revenue category in PNC's second quarter 2022 Form 10-Q. All periods presented herein reflect this change. Information in this news release, including the financial tables, is unaudited.

CONSOLIDATED REVENUE REVIEW











Revenue






Change

Change







3Q22 vs

3Q22 vs

In millions

3Q22


2Q22


3Q21

2Q22

3Q21

Net interest income

$     3,475


$     3,051


$     2,856

14 %

22 %

Noninterest income

2,074


2,065


2,341

(11) %

Total revenue

$     5,549


$     5,116


$     5,197

8 %

7 %









 

Total revenue for the third quarter of 2022 increased $433 million and $352 million compared with the second quarter of 2022 and the third quarter of 2021, respectively, driven by higher net interest income.

Net interest income of $3.5 billion for the third quarter of 2022 increased $424 million and $619 million compared to the second quarter of 2022 and third quarter of 2021, respectively. In both comparisons the increase was driven by higher yields on interest-earning assets and loan growth, partially offset by higher funding costs.

The net interest margin was 2.82% in the third quarter of 2022, increasing 32 basis points and 55 basis points compared with the second quarter of 2022 and the third quarter of 2021, respectively. In both comparisons the increase was primarily due to higher yields on interest-earning assets.

Noninterest Income






Change

Change







3Q22 vs

3Q22 vs

In millions

3Q22


2Q22


3Q21

2Q22

3Q21

Asset management and brokerage

$      357


$      365


$      375

(2) %

(5) %

Capital markets related

299


409


482

(27) %

(38) %

Card and cash management

671


671


663

1 %

Lending and deposit services

287


282


305

2 %

(6) %

Residential and commercial mortgage

143


161


248

(11) %

(42) %

Other

317


177


268

79 %

18 %


$   2,074


$   2,065


$   2,341

(11) %









 

Noninterest income for the third quarter of 2022 increased $9 million compared with the second quarter of 2022. Asset management and brokerage fees decreased $8 million and included the impact of lower average equity markets. Capital markets related revenue decreased $110 million driven by lower merger and acquisition advisory fees reflecting the impact of elevated second quarter activity. Lending and deposit services increased $5 million driven by higher loan commitment fees. Residential and commercial mortgage revenue decreased $18 million primarily due to lower residential mortgage banking activities. Other noninterest income increased $140 million and included higher private equity revenue and positive Visa Class B derivative fair value adjustments of $13 million. The second quarter of 2022 included negative Visa Class B derivative fair value adjustments of $16 million.

Noninterest income for the third quarter of 2022 decreased $267 million compared with the third quarter of 2021, driven by lower merger and acquisition advisory fees, a decline in residential and commercial mortgage banking activities and lower private equity revenue, partially offset by positive Visa Class B derivative fair value adjustments. The third quarter of 2021 included negative Visa Class B derivative fair value adjustments of $169 million and integration costs of $8 million.

CONSOLIDATED EXPENSE REVIEW













Noninterest Expense






Change

Change







3Q22 vs

3Q22 vs

In millions

3Q22


2Q22


3Q21

2Q22

3Q21

Personnel

$        1,805


$        1,779


$        1,986

1 %

(9) %

Occupancy

241


246


248

(2) %

(3) %

Equipment

344


351


355

(2) %

(3) %

Marketing

93


95


103

(2) %

(10) %

Other

797


773


895

3 %

(11) %


$        3,280


$        3,244


$        3,587

1 %

(9) %









 

Noninterest expense for the third quarter of 2022 increased $36 million compared with the second quarter of 2022, reflecting increased personnel expense to support business growth as well as one additional day in the quarter.

Noninterest expense decreased $307 million in comparison with the third quarter of 2021, primarily due to lower integration expenses and a decline in variable compensation related to lower merger and acquisition advisory activity. Integration expenses were $235 million in the third quarter of 2021.

The effective tax rate was 19.1% for the third quarter of 2022, 18.5% for the second quarter of 2022 and 17.8% for the third quarter of 2021.

CONSOLIDATED BALANCE SHEET REVIEW

Average total assets were $547.1 billion in the third quarter of 2022 compared with $546.9 billion in the second quarter of 2022 and $559.2 billion in the third quarter of 2021. Compared to the third quarter of 2021, the decrease was primarily attributable to lower Federal Reserve Bank balances reflecting a decline in deposits, partially offset by higher loan and securities balances.

Loans






Change

Change


September 30,
2022


June 30,
2022


September 30,
2021

09/30/22 vs

09/30/22 vs

In billions



06/30/22

09/30/21

Average








Commercial

$           214.1


$          207.6


$           196.3

3 %

9 %

Consumer

98.9


97.2


95.0

2 %

4 %

Average loans

$           313.0


$          304.8


$           291.3

3 %

7 %









Quarter end








Commercial

$           215.6


$          212.5


$           195.2

1 %

10 %

Consumer

99.8


98.3


95.0

2 %

5 %

Total loans

$           315.4


$          310.8


$           290.2

1 %

9 %









 

Average loans for the third quarter of 2022 were $313.0 billion, increasing $8.2 billion compared to the second quarter of 2022. Average commercial loans increased $6.5 billion driven by growth in PNC's corporate banking, real estate and business credit businesses. Average consumer loans of $98.9 billion increased $1.7 billion due to higher residential mortgage, home equity and credit card loans, partially offset by lower auto loans.

Average loans for the third quarter of 2022 increased $21.7 billion compared to the third quarter of 2021. Average commercial loans increased $17.8 billion primarily driven by growth in PNC's corporate banking and business credit businesses, partially offset by Paycheck Protection Program (PPP) loan forgiveness. Average consumer loans increased $3.9 billion largely due to growth in residential mortgage loans. 

Investment Securities







September 30, 2022

June 30, 2022

September 30, 2021

In billions

Balance

Portfolio Mix

Balance

Portfolio Mix

Balance

Portfolio Mix

Average







Available for sale

$        52.1


$        66.6


$      119.1


Held to maturity

84.9


68.1


1.5


Average investment securities

$      137.0


$      134.7


$      120.6









Quarter end







Available for sale

$        45.8

34 %

$        53.0

40 %

$      124.1

99 %

Held to maturity

90.7

66 %

79.7

60 %

1.5

1 %

Total investment securities

$      136.5


$      132.7


$      125.6









 

Average investment securities for the third quarter of 2022 were $137.0 billion, increasing $2.3 billion from the second quarter of 2022 reflecting net purchases, primarily of agency residential mortgage-backed securities within the held to maturity portfolio. Average investment securities increased $16.4 billion from the third quarter of 2021 due to net purchase activity. Net unrealized losses on available for sale securities were $4.8 billion at September 30, 2022, compared with net unrealized losses of $3.0 billion at June 30, 2022 and net unrealized gains of $1.7 billion at September 30, 2021.

Average Federal Reserve Bank balances for the third quarter of 2022 were $31.5 billion, decreasing $7.8 billion from the second quarter of 2022, driven by higher loans outstanding and lower deposits, partially offset by higher borrowed funds. Average Federal Reserve Bank balances decreased $48.6 billion from the third quarter of 2021, primarily due to higher loans outstanding, increased securities balances and lower deposits. Federal Reserve Bank balances at September 30, 2022 were $39.8 billion.

Deposits




Change

Change


September 30,
2022

June 30,
2022

September 30,
2021

09/30/22 vs

09/30/22 vs

In billions

06/30/22

09/30/21

Average






Commercial

$             215.8

$        216.9

$           233.0

(1) %

(7) %

Consumer

$             223.4

$        229.6

$           221.4

(3) %

1 %

Average deposits

$             439.2

$        446.5

$           454.4

(2) %

(3) %







Quarter end






Commercial

$             216.0

$        214.3

$           227.7

1 %

(5) %

Consumer

$             222.2

$        226.5

$           221.2

(2) %

Total deposits

$             438.2

$        440.8

$           448.9

(1) %

(2) %







 

Average deposits for the third quarter of 2022 were $439.2 billion, decreasing $7.3 billion compared with the second quarter of 2022, driven by lower consumer deposits, reflecting inflationary pressures and seasonally higher consumer spending. Compared with the third quarter of 2021, average deposits decreased $15.2 billion and included the repositioning of certain BBVA USA portfolios. In both comparisons, noninterest-bearing balances decreased due to deposit outflows and the shift of commercial deposits to interest-bearing as deposit rates have risen.

Deposits at September 30, 2022 of $438.2 billion, decreased $2.6 billion from June 30, 2022 as higher commercial deposits were more than offset by lower consumer deposits.

Borrowed Funds






Change

Change


September 30,
2022


June 30,
2022


September 30,
2021

09/30/22 vs

09/30/22 vs

In billions



06/30/22

09/30/21

Average

$              44.3


$            35.7


$              34.4

24 %

29 %

Quarter end

$              54.6


$            36.0


$              33.5

52 %

63 %









 

Average borrowed funds of $44.3 billion in the third quarter of 2022 increased $8.6 billion and $9.9 billion compared with the second quarter of 2022 and third quarter of 2021, respectively, driven by increased Federal Home Loan Bank borrowings. In comparison to the third quarter of 2021, the increase was partially offset by lower bank notes and senior debt.

Capital

September 30,
2022

*


June 30,
2022


September 30,
2021




Common shareholders' equity    In billions

$          39.4



$         41.6


$          51.3

Accumulated other comprehensive income (loss) 

In billions

$         (10.5)



$          (8.4)


$            1.1















Basel III common equity Tier 1 capital ratio

9.3 %



9.6 %


10.3 %

Basel III common equity Tier 1 fully implemented capital ratio

9.1 %



9.4 %


10.0 %

* Ratios estimated














 

PNC maintained a strong capital position. Common shareholders' equity at September 30, 2022 decreased $2.2 billion from June 30, 2022 as the benefit of third quarter net income was more than offset by the decline in accumulated other comprehensive income, as well as share repurchases and dividends paid in the third quarter.

As a Category III institution, PNC has elected to exclude accumulated other comprehensive income when calculating Basel III capital ratios. Accumulated other comprehensive income at September 30, 2022 decreased $2.1 billion and $11.6 billion from June 30, 2022 and September 30, 2021, respectively. In both comparisons the decrease reflected the negative impact of higher interest rates on net unrealized losses on securities and swaps.

In the third quarter of 2022, PNC returned $1.7 billion of capital to shareholders, an increase of $0.3 billion from the second quarter of 2022, due to higher share repurchases. Capital return in the third quarter of 2022 was comprised of $1.1 billion of common share repurchases, representing 6.7 million shares, and $0.6 billion of dividends on common shares. Consistent with the Stress Capital Buffer (SCB) framework, which allows for capital return in amounts in excess of the SCB minimum levels, our board of directors has authorized a repurchase framework under the previously approved repurchase program of up to 100 million common shares, of which approximately 53% were still available for repurchase at September 30, 2022. Under this framework, PNC expects its quarterly repurchases to approximate $700 million to $750 million with the ability to adjust those levels as conditions warrant. PNC's SCB for the four-quarter period beginning October 1, 2022 is 2.9%.

On October 3, 2022, the PNC board of directors declared a quarterly cash dividend on common stock of $1.50 per share payable on November 5, 2022.

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 until December 31, 2021 the full impact of the Current Expected Credit Losses (CECL) standard on regulatory capital, followed by a three-year transition period. Effective for the first quarter of 2022, PNC is now in the three-year transition period, and the full impact of the CECL standard is being phased-in to regulatory capital through December 31, 2024. The fully implemented ratios reflect the full impact of CECL and exclude the benefits of this transition provision.

CREDIT QUALITY REVIEW












Credit Quality




Change

Change


September
30, 2022

June 30,
2022

September
30, 2021

09/30/22 vs

09/30/22 vs

In millions

06/30/22

09/30/21

Provision for (recapture of) credit losses

$           241

$         36

$          (203)

$       205

$       444

Net loan charge-offs

$           119

$         83

$             81

43 %

47 %

Allowance for credit losses (a)

$        5,263

$    5,143

$        6,001

2 %

(12) %

Total delinquencies (b)

$        1,626

$    1,511

$        1,469

8 %

11 %

Nonperforming loans

$        2,068

$    2,046

$        2,528

1 %

(18) %













Net charge-offs to average loans (annualized)

0.15 %

0.11 %

0.11 %



Allowance for credit losses to total loans

1.67 %

1.65 %

2.07 %



Nonperforming loans to total loans

0.66 %

0.66 %

0.87 %



(a) Excludes allowances for investment securities and other financial assets

(b) Total delinquencies represent accruing loans more than 30 days past due

 

Provision for credit losses was $241 million in the third quarter of 2022, reflecting slightly weaker economic expectations which impacted our macroeconomic scenarios and weightings. The second quarter of 2022 included a provision for credit losses of $36 million.

Net loan charge-offs were $119 million in the third quarter of 2022, increasing $36 million and $38 million from the second quarter of 2022 and third quarter of 2021, respectively, primarily driven by higher commercial loan net charge-offs.

The allowance for credit losses was $5.3 billion at September 30, 2022, $5.1 billion at June 30, 2022 and $6.0 billion at September 30, 2021. The allowance for credit losses as a percentage of total loans was 1.67% at September 30, 2022, 1.65% at June 30, 2022 and 2.07% at September 30, 2021.

Nonperforming loans were $2.1 billion at September 30, 2022, increasing $22 million compared to June 30, 2022, as lower consumer nonperforming loans were more than offset by higher commercial nonperforming loans. Nonperforming loans decreased $460 million compared to September 30, 2021, due to lower commercial and consumer nonperforming loans.

Delinquencies at September 30, 2022 of $1.6 billion increased $115 million and $157 million compared to June 30, 2022 and September 30, 2021, respectively. In both comparisons the increase was the result of higher commercial loan delinquencies primarily due to administrative delays, partially offset by lower consumer loan delinquencies.

BUSINESS SEGMENT RESULTS












Business Segment Income (Loss)






In millions

3Q22


2Q22


3Q21

Retail Banking

$     560


$     322


$     447

Corporate & Institutional Banking

929


1,003


1,123

Asset Management Group

90


86


114

Other

45


70


(210)

Net income excluding noncontrolling interests

$  1,624


$  1,481


$  1,474







 

Retail Banking







Change


Change








3Q22 vs


3Q22 vs

In millions

3Q22


2Q22


3Q21


2Q22


3Q21

Net interest income

$  2,017


$  1,662


$  1,713


$       355


$       304

Noninterest income

$     725


$     748


$     662


$       (23)


$         63

Provision for (recapture of) credit losses

$       92


$       55


$    (113)


$         37


$       205

Noninterest expense

$  1,901


$  1,913


$  1,889


$       (12)


$         12

Earnings

$     560


$     322


$     447


$       238


$       113











In billions










Average loans

$    94.9


$    93.8


$    99.1


$        1.1


$      (4.2)

Average deposits

$  264.4


$  268.4


$  262.0


$      (4.0)


$        2.4











Net charge-offs    In millions

$       98


$       88


$       82


$        10


$         16











 

Retail Banking Highlights

Third quarter 2022 compared with second quarter 2022

  • Earnings increased 74%, primarily due to higher net interest income.
    • Noninterest income decreased 3%, primarily due to a decline in residential mortgage banking activities.
    • Provision for credit losses was $92 million for the third quarter of 2022, reflecting slightly weaker economic expectations which impacted our macroeconomic scenarios and weightings.
    • Noninterest expense decreased modestly, or 1%.
  • Average loans increased 1%, due to higher residential mortgage, home equity and credit card loans, partially offset by lower auto loans.
  • Average deposits decreased 2%, reflecting inflationary pressures and seasonally higher consumer spending.

Third quarter 2022 compared with third quarter 2021

  • Earnings increased 25%, due to higher net interest income and higher noninterest income, partially offset by a higher provision for credit losses and higher noninterest expense.
    • Noninterest income increased 10%, and included positive Visa Class B derivative fair value adjustments of $13 million, partially offset by lower residential mortgage revenue. The third quarter of 2021 included negative Visa Class B derivative fair value adjustments of $169 million.
    • Noninterest expense increased modestly, or 1%, primarily reflecting increased technology investments.
  • Average loans decreased 4%, as growth in residential mortgage, home equity and credit card loans was more than offset by PPP loan forgiveness and lower auto loans.
  • Average deposits increased 1%, due to higher savings and demand deposits, partially offset by lower money market deposits.

 

Corporate & Institutional Banking






Change


Change








3Q22 vs


3Q22 vs

In millions

3Q22


2Q22


3Q21


2Q22


3Q21

Net interest income

$  1,368


$  1,253


$  1,250


$       115


$       118

Noninterest income

$     887


$     968


$  1,056


$       (81)


$     (169)

Provision for (recapture of) credit losses

$     150


$     (17)


$     (99)


$       167


$       249

Noninterest expense

$     890


$     934


$     980


$       (44)


$       (90)

Earnings

$     929


$  1,003


$  1,123


$       (74)


$     (194)











In billions










Average loans

$  199.9


$  193.0


$  175.8


$        6.9


$      24.1

Average deposits

$  145.4


$  146.2


$  163.1


$      (0.8)


$    (17.7)











Net charge-offs    In millions

$       33


$       11


$       13


$        22


$         20











 

Corporate & Institutional Banking Highlights

Third quarter 2022 compared with second quarter 2022

  • Earnings decreased 7%, due to a higher provision for credit losses and lower noninterest income, partially offset by higher net interest income and lower noninterest expense.
    • Noninterest income decreased 8%, primarily due to a decline in capital markets related revenue driven by lower merger and acquisition advisory fees reflecting the impact of elevated second quarter activity.
    • Provision for credit losses was $150 million for the third quarter of 2022, reflecting slightly weaker economic expectations which impacted our macroeconomic scenarios and weightings.
    • Noninterest expense decreased 5%, largely due to a decline in variable compensation associated with lower fee business activity.
  • Average loans increased 4%, driven primarily by growth in PNC's corporate banking, real estate and business credit businesses.
  • Average deposits were largely stable.

Third quarter 2022 compared with third quarter 2021

  • Earnings decreased 17%, due to a higher provision for credit losses and lower noninterest income, partially offset by higher net interest income and lower noninterest expense.
    • Noninterest income decreased 16%, primarily due to lower capital markets related revenue largely driven by lower merger and acquisition advisory activity.
    • Noninterest expense decreased 9%, as a result of lower variable compensation associated with lower fee business activity.
  • Average loans increased 14%, primarily driven by growth PNC's corporate banking and business credit businesses, partially offset by PPP loan forgiveness.
  • Average deposits decreased 11%, and included the repositioning of certain BBVA USA portfolios.

 

Asset Management Group







Change


Change








3Q22 vs


3Q22 vs

In millions

3Q22


2Q22


3Q21


2Q22


3Q21

Net interest income

$    165


$    153


$    141


$        12


$        24

Noninterest income

$    231


$    234


$    256


$        (3)


$      (25)

Provision for (recapture of) credit losses

$        4


$        5


$      (6)


$        (1)


$        10

Noninterest expense

$    274


$    270


$    255


$          4


$        19

Earnings

$      90


$      86


$    114


$          4


$      (24)











In billions          










Discretionary client assets under management

$    166


$    167


$    183


$        (1)


$      (17)

Nondiscretionary client assets under administration

$    148


$    153


$    170


$        (5)


$      (22)

Client assets under administration at quarter end

$    314


$    320


$    353


$        (6)


$      (39)

Brokerage client account assets

$        4


$        4


$        5



$        (1)











In billions










Average loans

$   14.4


$   14.0


$   13.0


$       0.4


$       1.4

Average deposits

$   29.3


$   31.7


$   29.3


$     (2.4)












Net charge-offs (recoveries)    In millions

$      (2)


$      (1)


$      (1)


$        (1)


$        (1)











 

Asset Management Group Highlights

Third quarter 2022 compared with second quarter 2022

  • Earnings increased 5%, primarily due to higher net interest income.
    • Noninterest income was relatively stable.
    • Noninterest expense increased 1%, largely driven by higher personnel expense reflecting the impact of additional headcount to support business growth.
  • Discretionary client assets under management decreased 1%, as net inflows were more than offset by lower spot equity markets.
  • Average loans increased 3%, driven by higher residential mortgage loans.
  • Average deposits decreased 8%, and included the impact of client activity and inflationary pressures.

Third quarter 2022 compared with third quarter 2021

  • Earnings decreased 21%, as higher net interest income was more than offset by lower noninterest income, higher noninterest expense and an increase in the provision for credit losses.
    • Noninterest income decreased 10%, primarily due to the impact of lower average equity markets.
    • Noninterest expense increased 7%, and included higher personnel expense.
  • Discretionary client assets under management decreased 9%, driven by lower spot equity markets.
  • Average loans increased 11%, due to growth in residential mortgage loans.
  • Average deposits were stable.

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 11:00 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) 402-9101 and (303) 223-4368 (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 2022, 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 22020242 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





2022


2022


2021




2022


2021



Revenue















Net interest income


$     3,475


$     3,051


$     2,856




$     9,330


$     7,785



Noninterest income


2,074


2,065


2,341




6,027


6,299



Total revenue


5,549


5,116


5,197




15,357


14,084



Provision for (recapture of) credit losses


241


36


(203)




69


(452)



Noninterest expense


3,280


3,244


3,587




9,696


9,211



Income before income taxes and noncontrolling interests


$     2,028


$     1,836


$     1,813




$     5,592


$     5,325



Income taxes


388


340


323




1,027


906



Net income


$     1,640


$     1,496


$     1,490




$     4,565


$     4,419



Less:















Net income attributable to noncontrolling interests


16


15


16




52


38



Preferred stock dividends (a)


65


71


57




181


162



Preferred stock discount accretion and redemptions


1


1


1




4


3



Net income attributable to common shareholders


$     1,558


$     1,409


$     1,416




$     4,328


$     4,216



Per Common Share















Basic


$       3.78


$       3.39


$       3.31




$     10.39


$       9.84



Diluted


$       3.78


$       3.39


$       3.30




$     10.39


$       9.83



Cash dividends declared per common share


$       1.50


$       1.50


$       1.25




$       4.25


$       3.55



Effective tax rate (b)


19.1 %


18.5 %


17.8 %




18.4 %


17.0 %



PERFORMANCE RATIOS















Net interest margin (c)


2.82 %


2.50 %


2.27 %




2.54 %


2.28 %



Noninterest income to total revenue


37 %


40 %


45 %




39 %


45 %



Efficiency (d)


59 %


63 %


69 %




63 %


65 %



Return on:















Average common shareholders' equity


14.97 %


13.52 %


10.95 %




13.31 %


11.17 %



Average assets


1.19 %


1.10 %


1.06 %




1.11 %


1.16 %





(a)

Dividends are payable quarterly other than Series R and Series S preferred stock, which are payable semiannually.

(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.

(c)

Net interest margin is the total yield on interest-earning assets minus the total rate on interest-bearing liabilities and includes the benefit from use of noninterest-bearing sources. To provide more meaningful comparisons of net interest margins, we use net interest income on a taxable-equivalent basis in calculating average yields used in the calculation of 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, 2022, June 30, 2022 and September 30, 2021 were $29 million, $25 million and $22 million, respectively. The taxable-equivalent adjustments to net interest income for the nine months ended September 30, 2022 and September 30, 2021 were $76 million and $52 million, respectively.

(d)

Calculated as noninterest expense divided by total revenue.

 

The PNC Financial Services Group, Inc.

Consolidated Financial Highlights (Unaudited)








September 30


June 30


September 30


2022


2022


2021

BALANCE SHEET DATA






Dollars in millions, except per share data






Assets

$           559,477


$           540,786


$           553,515

Loans (a)

$           315,400


$           310,800


$           290,230

Allowance for loan and lease losses

$               4,581


$               4,462


$               5,355

Interest-earning deposits with banks

$             40,278


$             28,404


$             75,478

Investment securities

$           136,451


$           132,732


$           125,606

Total deposits

$           438,194


$           440,811


$           448,902

Borrowed funds (a)

$             54,633


$             35,984


$             33,471

Allowance for unfunded lending related commitments

$                  682


$                  681


$                  646

Total shareholders' equity

$             46,688


$             47,652


$             56,259

Common shareholders' equity

$             39,444


$             41,648


$             51,250

Accumulated other comprehensive income (loss)

$            (10,486)


$              (8,358)


$               1,079

Book value per common share

$               97.59


$             101.39


$             121.16

Tangible book value per common share (non-GAAP) (b)

$               69.98


$               74.39


$               94.82

Period end common shares outstanding (In millions)

404


411


423

Loans to deposits

72 %


71 %


65 %

Common shareholders' equity to total assets

7.1 %


7.7 %


9.3 %

CLIENT ASSETS (In billions)






Discretionary client assets under management

$                  166


$                  167


$                  183

Nondiscretionary client assets under administration

148


153


170

Total client assets under administration

314


320


353

Brokerage account client assets

71


72


81

Total client assets

$                  385


$                  392


$                  434

CAPITAL RATIOS






Basel III (c) (d)






Common equity Tier 1

9.3 %


9.6 %


10.3 %

Common equity Tier 1 fully implemented (e)

9.1 %


9.4 %


10.0 %

Tier 1 risk-based

11.0 %


11.0 %


11.6 %

Total capital risk-based (f)

12.9 %


12.9 %


13.6 %

Leverage

8.6 %


8.4 %


8.2 %

  Supplementary leverage

7.3 %


7.1 %


7.0 %

ASSET QUALITY






Nonperforming loans to total loans

0.66 %


0.66 %


0.87 %

Nonperforming assets to total loans, OREO and foreclosed assets

0.67 %


0.67 %


0.88 %

Nonperforming assets to total assets

0.38 %


0.38 %


0.46 %

Net charge-offs to average loans (for the three months ended) (annualized)

0.15 %


0.11 %


0.11 %

Allowance for loan and lease losses to total loans

1.45 %


1.44 %


1.85 %

Allowance for credit losses to total loans (g)

1.67 %


1.65 %


2.07 %

Allowance for loan and lease losses to nonperforming loans

222 %


218 %


212 %

Total delinquencies (In millions) (h)

$               1,626


$               1,511


$               1,469



(a)

Amounts include assets and liabilities for which we have elected the fair value option. Our second quarter 2022 Form 10-Q included, and our third quarter 2022 Form 10-Q will include, additional information regarding these Consolidated Balance Sheet line items.

(b)

See the Tangible Book Value per Common Share table on page 18 for additional information. 

(c)

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. The ratios as of September 30, 2022 are estimated.

(d)

The ratios are calculated to reflect PNC's election to adopt the CECL optional five-year transition provision.

(e)

The fully implemented ratios are calculated to reflect the full impact of CECL and excludes the benefits of the five-year transition provision.

(f)

The 2021 Basel III Total risk-based capital ratio includes nonqualifying trust preferred capital securities of $20 million that were subject to a phase-out period that ran through 2021.

(g)

Excludes allowances for investment securities and other financial assets.

(h)

Total delinquencies represent accruing loans more than 30 days past due.

 

The PNC Financial Services Group, Inc.


Consolidated Financial Highlights (Unaudited)

CAPITAL RATIOS

PNC's regulatory risk-based capital ratios in 2022 are calculated using the standardized approach for determining risk-weighted assets. 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 and equity exposures are generally subject to higher risk weights than other types of exposures.

PNC elected a five-year transition provision effective March 31, 2020 to delay until December 31, 2021 the full impact of the CECL standard on regulatory capital, followed by a three-year transition period. Effective for the first quarter 2022, PNC is now in the three-year transition period, and the full impact of the CECL standard is being phased-in to regulatory capital through December 31, 2024. See the table below for the June 30, 2022, September 30, 2021 and estimated September 30, 2022 ratios. For the full impact of PNC's adoption of CECL, which excludes the benefits of the five-year transition provision, see the September 30, 2022 and June 30, 2022 (Fully Implemented) estimates presented in the table below.

Our Basel III capital ratios may be impacted by changes to the regulatory capital rules and additional regulatory guidance or analysis.

Basel lll Common Equity Tier 1 Capital Ratios








Basel III (a)





September 30

2022

(estimated) (b)

June 30

2022 (b)


September 30 

 2021 (b)


September 30, 2022 
(Fully
Implemented)

(estimated) (c)

June 30, 2022
(Fully
Implemented)

(estimated) (c)




Dollars in millions


Common stock, related surplus and retained earnings,
net of treasury stock

$    50,653

$    50,730


$    51,228


$         49,930

$        50,007

Less regulatory capital adjustments:








Goodwill and disallowed intangibles, net of deferred
tax liabilities

(11,159)

(11,094)


(11,142)


(11,159)

(11,094)

All other adjustments

(123)

(99)


(48)


(127)

(107)

Basel III Common equity Tier 1 capital

$    39,371

$    39,537


$    40,038


$         38,644

$        38,806

Basel III standardized approach risk-weighted assets (d)

$  423,347

$  413,432


$  389,911


$       423,494

$      413,706

Basel III Common equity Tier 1 capital ratio

9.3 %

9.6 %


10.3 %


9.1 %

9.4 %



(a)

All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented.

(b)

The ratio is calculated to reflect PNC's election to adopt the CECL optional five-year transition provision.

(c)

The September 30, 2022 and June 30, 2022 ratio is calculated to reflect the full impact of CECL and excludes the benefits of the five-year transition provision.

(d)

Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets.

 

The PNC Financial Services Group, Inc.


Consolidated Financial Highlights (Unaudited)

NON-GAAP MEASURES

Pretax Pre-Provision Earnings (non-GAAP)

Pretax Pre-Provision Earnings Excluding Integration Costs (non-GAAP)

Three months ended


September 30


June 30


September 30

Dollars in millions

2022


2022


2021

Income before income taxes and noncontrolling interests

$             2,028


$             1,836


$             1,813

Provision for (recapture of) credit losses

241


36


(203)

Pretax pre-provision earnings (non-GAAP)

$             2,269


$             1,872


$             1,610

Integration costs

1


14


243

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

$             2,270


$             1,886


$             1,853

 

Pretax pre-provision earnings is a non-GAAP measure and is based on adjusting income before income taxes and noncontrolling interests to exclude provision for (recapture of) credit losses. We believe that pretax, pre-provision earnings is a useful tool to help evaluate the ability to provide for credit costs through operations and provides an additional basis to compare results between periods by isolating the impact of provision for (recapture of) credit losses, which can vary significantly between periods.

Pretax pre-provision earnings excluding integration costs is a non-GAAP measure and is based on adjusting pretax pre-provision earnings to exclude integration costs during the period. We believe that pretax, pre-provision earnings excluding integration costs is a useful tool in understanding PNC's results by providing greater comparability between periods, as well as demonstrating the effect of significant items.

Adjusted Diluted Earnings per Common Share
Excluding Integration Costs (non-GAAP)

Three months ended


September 30


Per Common


June 30


Per Common


September 30


Per Common

Dollars in millions, except per share data

2022


Share


2022


Share


2021


Share

Net income attributable to common shareholders

$        1,558




$        1,409




$        1,416



Dividends and undistributed earnings allocated to
nonvested restricted shares

(8)




(7)




(8)



Net income attributable to diluted common
shareholders

$        1,550


$          3.78


$        1,402


$          3.39


$        1,408


$          3.30

Integration costs after tax (a)

1



11


0.03


192


0.45

Adjusted net income attributable to diluted
common shareholders excluding integration costs
(non-GAAP)

$        1,551


$          3.78


$        1,413


$          3.42


$        1,600


$          3.75

Average diluted common shares outstanding

(In millions)

410




414




426



(a)   Statutory tax rate of 21% used to calculate impacts.

 

The adjusted diluted earnings per common share excluding integration costs is a non-GAAP measure and excludes the integration costs related to the BBVA USA acquisition. It is calculated based on adjusting net income attributable to diluted common shareholders by removing post-tax integration costs in the period. We believe this non-GAAP measure serves as a useful tool in understanding PNC's results by providing greater comparability between periods, as well as demonstrating the effect of significant items.

The PNC Financial Services Group, Inc.


Consolidated Financial Highlights (Unaudited)

 

Tangible Book Value per Common Share (non-GAAP)







September 30


June 30