PNC Announces Plans Regarding The Supervisory Capital Assessment Program
May 07 2009 - 5:10PM
PR Newswire (US)
PNC to increase common equity by $600 million PITTSBURGH, May 7
/PRNewswire-FirstCall/ -- The PNC Financial Services Group, Inc.
(NYSE:PNC) today announced that it plans to satisfy the requirement
to increase common shareholders' equity by $600 million under the
Supervisory Capital Assessment Program (SCAP) by November 9, 2009,
through a combination of growth in retained earnings and other
capital market alternatives. This requirement equals 0.25 percent
of the company's risk-weighted assets as of March 31, 2009. PNC has
no plans to convert preferred shares issued under the U.S. Treasury
Department's Capital Purchase Program. The SCAP was conducted by
various federal banking supervisory agencies with oversight by the
Board of Governors of the Federal Reserve System. "PNC plans to
grow retained earnings through our demonstrated ability to deliver
net income and to access the capital markets. This will enable us
to achieve the capital buffer required by regulators in the event
of further economic weakening," said James E. Rohr, chairman and
chief executive officer. "Our business model produced a strong
start to 2009 with first quarter net income of $530 million while
further strengthening our capital and liquidity positions. I am
pleased with our outlook for delivering long-term shareholder value
as we continue to make credit available to qualified borrowers and
support the efforts of the Federal government to restore confidence
in the U.S. banking system." KEY POINTS -- PNC's successful
business model is based on growing high-quality and diverse revenue
streams, controlling expenses and returning to an overall moderate
risk profile. Pretax, pre-provision earnings of $1.5 billion in the
first quarter exceeded credit costs by more than $650 million. The
benefits of the National City acquisition continue to exceed the
company's expectations. -- PNC is well capitalized under the
regulatory definition and effective capital management is an
integral part of the company's business model. That process
includes stress testing and forecasting to determine optimal
capital levels and structure. PNC's Tier 1 and Tier 1 common
risk-based capital ratios were 10.0 percent and 4.9 percent as of
March 31, 2009, respectively, in excess of regulatory minimums. --
PNC plans to redeem the Treasury Department's $7.6 billion
investment in preferred shares as soon as appropriate, subject to
approval by PNC's primary banking regulators. -- PNC's
risk-weighted assets were $245 billion as of March 31, 2009.
Increasing the capital buffer by $600 million represents 0.25
percent of the company's risk-weighted assets or three percent of
the market capitalization as of today's market close. -- Given the
economic assumptions, loss rates and estimated revenues disclosed
by the Federal Reserve, the related capital requirement was
conservative. However, with current market uncertainty, PNC
supports the continued strengthening of its common capital
position. -- PNC remains committed to responsible lending,
essential to economic recovery. Loans and commitments of
approximately $26 billion were originated and renewed during the
first quarter as the company continued to make credit available to
qualified borrowers. The PNC Financial Services Group, Inc.
(http://www.pnc.com/) is one of the nation's largest diversified
financial services organizations providing retail and business
banking; residential mortgage banking; specialized services for
corporations and government entities, including corporate banking,
real estate finance and asset-based lending; wealth management;
asset management and global fund services. Cautionary Statement
Regarding Forward-Looking Information We make statements in this
news release, and we may from time to time make other statements,
regarding our outlook or expectations for earnings, revenues,
expenses, capital levels, liquidity levels, asset quality and/or
other matters regarding or affecting PNC that are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act. Forward-looking statements are typically identified by
words such as "believe," "plan," "expect," "anticipate," "intend,"
"outlook," "estimate," "forecast," "will," "project" and other
similar words and expressions. Forward-looking statements are
subject to numerous assumptions, risks and uncertainties, which
change over time. Forward-looking statements speak only as of the
date they are made. We do not assume any duty and do not undertake
to update our forward-looking statements. Actual results or future
events could differ, possibly materially, from those that we
anticipated in our forward-looking statements, and future results
could differ materially from our historical performance. Our
forward-looking statements are subject to the following principal
risks and uncertainties. We provide greater detail regarding some
of these factors in our 2008 Form 10K, including in the Risk
Factors and Risk Management sections of that report, and in our
other SEC filings. Our forward-looking statements may also be
subject to other risks and uncertainties, including those that we
may discuss elsewhere in this news release or in our filings with
the SEC, accessible on the SEC's website at http://www.sec.gov/ and
on or through our corporate website at
http://www.pnc.com/secfilings. We have included these web addresses
as inactive textual references only. Information on these websites
is not part of this document. -- Our businesses and financial
results are affected by business and economic conditions, both
generally and specifically in the principal markets in which we
operate. In particular, our businesses and financial results may be
impacted by: -- Changes in interest rates and valuations in the
debt, equity and other financial markets. -- Disruptions in the
liquidity and other functioning of financial markets, including
such disruptions in the markets for real estate and other assets
commonly securing financial products. -- Actions by the Federal
Reserve and other government agencies, including those that impact
money supply and market interest rates. -- Changes in our
customers', suppliers' and other counterparties' performance in
general and their creditworthiness in particular. -- Changes in
customer preferences and behavior, whether as a result of changing
business and economic conditions or other factors. -- A
continuation of recent turbulence in significant portions of the
U.S. and global financial markets, particularly if it worsens,
could impact our performance, both directly by affecting our
revenues and the value of our assets and liabilities and indirectly
by affecting our counterparties and the economy generally. -- Our
business and financial performance could be impacted as the
financial industry restructures in the current environment, both by
changes in the creditworthiness and performance of our
counterparties and by changes in the competitive landscape. --
Given current economic and financial market conditions, our
forward-looking financial statements are subject to the risk that
these conditions will be substantially different than we are
currently expecting. These statements are based on our current
expectations that interest rates will remain low through 2009 with
continued wide market credit spreads, and our view that national
economic trends currently point to a continuation of severe
recessionary conditions in 2009 followed by a subdued recovery. --
Legal and regulatory developments could have an impact on our
ability to operate our businesses or our financial condition or
results of operations or our competitive position or reputation.
Reputational impacts, in turn, could affect matters such as
business generation and retention, our ability to attract and
retain management, liquidity and funding. These legal and
regulatory developments could include: -- Changes resulting from
the Emergency Economic Stabilization Act of 2008, the American
Recovery and Reinvestment Act of 2009, and other developments in
response to the current economic and financial industry
environment, including current and future conditions or
restrictions imposed as a result of our participation in the TARP
Capital Purchase Program. -- Legislative and regulatory reforms
generally, including changes to laws and regulations involving tax,
pension, bankruptcy, consumer protection, and other aspects of the
financial institution industry. -- Increased litigation risk from
recent regulatory and other governmental developments. --
Unfavorable resolution of legal proceedings or regulatory and other
governmental inquiries. -- The results of the regulatory
examination and supervision process, including our failure to
satisfy the requirements of agreements with governmental agencies.
-- Changes in accounting policies and principles. -- Our issuance
of securities to the U.S. Department of the Treasury may limit our
ability to return capital to our shareholders and is dilutive to
our common shares. If we are unable previously to redeem the
shares, the dividend rate increases substantially after five years.
-- We intend to meet the requirement under the Supervisory Capital
Assessment Program that we increase the common shareholders equity
component of Tier I capital by $600 million through a combination
of growth in retained earnings and other capital raising
alternatives. Our ability to increase common shareholders equity
through capital raising transactions will be dependent on market
conditions at the time of the transactions. Market conditions will
also affect the extent to which such transactions are dilutive to
our existing common shareholders. If we fail to meet this
requirement in advance of the November 9, 2009 deadline in the
manner we plan to do so, we would likely be required to meet the
requirement through conversion of a portion of the preferred stock
issued to the US Treasury under the TARP Capital Purchase Program
into mandatorily convertible preferred stock or by otherwise
issuing common equity securities to the US Treasury. Such a
transaction could be more dilutive to our common shareholders than
other means of meeting this requirement and could result in the
imposition of additional limitations on the conduct of our business
by the US Treasury. -- Our business and operating results are
affected by our ability to identify and effectively manage risks
inherent in our businesses, including, where appropriate, through
the effective use of third-party insurance, derivatives and capital
management techniques. -- The adequacy of our intellectual property
protection, and the extent of any costs associated with obtaining
rights in intellectual property claimed by others, can impact our
business and operating results. -- Our ability to anticipate and
respond to technological changes can have an impact on our ability
to respond to customer needs and to meet competitive demands. --
Our ability to implement our business initiatives and strategies
could affect our financial performance over the next several years.
-- Competition can have an impact on customer acquisition, growth
and retention, as well as on our credit spreads and product
pricing, which can affect market share, deposits and revenues. --
Our business and operating results can also be affected by
widespread natural disasters, terrorist activities or international
hostilities, either as a result of the impact on the economy and
capital and other financial markets generally or on us or on our
customers, suppliers or other counterparties specifically. -- Also,
risks and uncertainties that could affect the results anticipated
in forward-looking statements or from historical performance
relating to our equity interest in BlackRock, Inc. are discussed in
more detail in BlackRock's filings with the SEC, including in the
Risk Factors sections of BlackRock's reports. BlackRock's SEC
filings are accessible on the SEC's website and on or through
BlackRock's website at http://www.blackrock.com/. This material is
referenced for informational purposes only and should not be deemed
to constitute a part of this document. In addition, our recent
acquisition of National City Corporation ("National City") presents
us with a number of risks and uncertainties related both to the
acquisition transaction itself and to the integration of the
acquired businesses into PNC. These risks and uncertainties include
the following: -- The anticipated benefits of the transaction,
including anticipated cost savings and strategic gains, may be
significantly harder or take longer to achieve than expected or may
not be achieved in their entirety as a result of unexpected factors
or events. -- Our ability to achieve anticipated results from this
transaction is dependent on the state going forward of the economic
and financial markets, which have been under significant stress
recently. Specifically, we may incur more credit losses from
National City's loan portfolio than expected. Other issues related
to achieving anticipated financial results include the possibility
that deposit attrition or attrition in key client, partner and
other relationships may be greater than expected. -- Litigation and
governmental investigations currently pending against National
City, as well as others that may be filed or commenced relating to
National City's business and activities before the acquisition,
could adversely impact our financial results. -- Our ability to
achieve anticipated results is also dependent on our ability to
bring National City's systems, operating models, and controls into
conformity with ours and to do so on our planned time schedule. The
integration of National City's business and operations into PNC,
which will include conversion of National City's different systems
and procedures, may take longer than anticipated or be more costly
than anticipated or have unanticipated adverse results relating to
National City's or PNC's existing businesses. PNC's ability to
integrate National City successfully may be adversely affected by
the fact that this transaction will result in PNC entering several
markets where PNC did not previously have any meaningful retail
presence. In addition to the National City transaction, we grow our
business from time to time by acquiring other financial services
companies. Acquisitions in general present us with risks, in
addition to those presented by the nature of the business acquired,
similar to some or all of those described above relating to the
National City acquisition. CONTACTS: MEDIA: Frederick Solomon (412)
762-4550 INVESTORS: William H. Callihan (412) 762-8257 DATASOURCE:
The PNC Financial Services Group, Inc. CONTACT: Media, Frederick
Solomon, +1-412-762-4550, ; Investors, William H. Callihan,
+1-412-762-8257, Web Site: http://www.pnc.com/
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