PITTSBURGH,
Jan. 18, 2012 /PRNewswire/
-- The PNC Financial Services Group, Inc. (NYSE: PNC) today
reported 2011 net income of $3.1
billion, or $5.64 per diluted
common share, compared with 2010 net income of $3.4 billion, or $5.74 per diluted common share. Fourth quarter
2011 net income was $493 million, or
$.85 per diluted common share,
compared with third quarter 2011 net income of $834 million, or $1.55 per diluted common share, and fourth
quarter 2010 net income of $820
million, or $1.50 per diluted
common share.
"PNC had a solid year of accomplishments in a challenging
regulatory and economic environment. We increased market share
across our businesses by continuing to grow the number of customers
we serve," said James E. Rohr,
chairman and chief executive officer. "We are leveraging our
capital strength to expand into the southeast with a strategic
acquisition and we remain focused on strong risk and expense
management. In 2012, we are committed to building on our
achievements so that we can deliver greater value to our
shareholders, customers, communities and employees."
Income Statement Highlights
- PNC's 2011 results were driven by good performance in a
challenging environment of low interest rates, slow economic growth
and new regulations. Fourth quarter earnings reflected strong
revenue and improved credit costs offset by higher expenses.
- Net interest income of $2.2
billion for the fourth quarter increased $24 million compared with the third quarter due
to strong growth in core net interest income.
- Noninterest income of $1.4
billion for the fourth quarter decreased $19 million from the third quarter and included
the regulatory impact of lower interchange fees of $75 million on debit card transactions offset by
higher corporate service revenue.
- Provision for credit losses declined to $190 million for the fourth quarter compared with
$261 million in the third quarter as
overall credit quality continued to improve.
- Noninterest expense of $2.7
billion for the fourth quarter increased $579 million compared with the third quarter and
included $240 million of residential
mortgage foreclosure-related expenses primarily as a result of
ongoing governmental matters, a noncash charge of $198 million related to redemption of trust
preferred securities, and an increase in personnel expense of
$103 million primarily driven by
higher stock market prices and higher business production.
Noninterest expense for the first quarter of 2012 is expected to
return to third quarter 2011 levels excluding legal and
regulatory-related contingencies and integration costs that may be
incurred in first quarter 2012.
Credit Quality Highlights
- Overall credit quality improved during 2011 and in the fourth
quarter.
- Nonperforming assets of $4.2
billion at December 31, 2011
declined $1.0 billion, or 19 percent,
compared with year end 2010 and $142
million, or 3 percent, compared with the third quarter.
- Accruing loans past due were $4.5
billion at December 31, 2011
and $4.3 billion at September 30, 2011. The increase was primarily
due to purchased government insured loans.
- Net charge-offs declined to $327
million in the fourth quarter compared with $365 million in the third quarter.
- The allowance for loan and lease losses was 122 percent of
nonperforming loans at both December 31,
2011 and September 30,
2011.
Balance Sheet Highlights
- PNC successfully grew customers and deepened relationships
throughout 2011.
- Retail banking checking relationships increased 296,000 in
2011, including 41,000 from acquisitions, or almost 4 times the
growth in 2010.
- New primary client acquisitions in corporate banking of 1,165
exceeded the goal of 1,000 for 2011 and represented a 15 percent
increase over 2010 new primary clients.
- Asset management group increased primary client acquisition by
26 percent in 2011 compared with 2010, surpassing the 2011 primary
client acquisition goal.
- Loans grew $8.4 billion, or 6
percent, during 2011, to $159 billion
at December 31, 2011.
- Fourth quarter loan growth of $4.5
billion, or 3 percent, was strong with $3.5 billion in commercial lending and
$1.0 billion in consumer
lending.
- PNC successfully repositioned and grew deposits during 2011 to
$188 billion at December 31, 2011 and September 30, 2011 compared with $183 billion at December
31, 2010.
- Transaction deposits grew to $148
billion at December 31, 2011,
an increase of $13.0 billion compared
with December 31, 2010 and
$4.6 billion compared with third
quarter end.
- Higher cost retail certificates of deposit continued to decline
with a net reduction of $7.8 billion,
or 21 percent, in 2011 and $2.9
billion, or 9 percent, in the fourth quarter.
- PNC's balance sheet reflected a moderate risk profile, remained
core funded with a loans to deposits ratio of 85 percent at
December 31, 2011, and had a strong
liquidity position.
- PNC maintained high capital levels with a Tier 1 common capital
ratio of an estimated 10.3 percent at December 31, 2011, 10.5 percent at September 30, 2011 and 9.8 percent at
December 31, 2010.
Acquisition Activity
- In December 2011 PNC received
regulatory approvals for its acquisition of RBC Bank (USA), the U.S. retail banking subsidiary of
Royal Bank of Canada, with more
than 400 branches in North
Carolina, Florida,
Alabama, Georgia, Virginia and South
Carolina. PNC does not intend to issue any shares of common
stock as part of the purchase price. The acquisition is expected to
be accretive to 2012 earnings, excluding integration costs. Closing
is anticipated for March 2012,
subject to remaining customary closing conditions.
- In December 2011 PNC acquired 27
branches in metropolitan Atlanta,
Georgia from Flagstar Bank, FSB, a subsidiary of Flagstar
Bancorp, Inc., and converted them to its systems, including
approximately $210 million of
deposits.
Fourth quarter 2011 net income of $493
million, or $.85 per diluted
common share, included $156 million
after tax, or $.30 per diluted common
share, of residential mortgage foreclosure-related expenses
primarily as a result of ongoing governmental matters and a noncash
after-tax charge of $129 million, or
$.24 per diluted common share,
related to redemption of trust preferred securities. Fourth quarter
2010 earnings of $820 million, or
$1.50 per diluted common share,
included an after-tax gain of $102
million, or $.19 per diluted
common share, related to the sale of a portion of PNC's BlackRock
shares and $46 million after tax, or
$.09 per diluted common share, for
residential mortgage foreclosure-related expenses. Full year 2011
net income per diluted common share of $5.64 included $.40
per diluted common share of residential mortgage
foreclosure-related expenses primarily as a result of ongoing
governmental matters, $.24 per
diluted common share related to redemption of trust preferred
securities and $.05 per diluted
common share for integration costs. Full year 2010 net income per
diluted common share of $5.74
included $.72 per diluted common
share for discontinued operations, including the gain on sale of
PNC Global Investment Servicing, a reduction of $.48 per diluted common share related to the
redemption of TARP preferred shares and $.48 per diluted common share for integration
costs.
The Consolidated Financial Highlights accompanying this news
release include additional information regarding residential
mortgage foreclosure-related expenses, preferred redemptions,
discontinued operations and PNC's BlackRock shares transaction and
include reconciliations of reported to non-GAAP financial measures,
including a reconciliation of business segment income to income
from continuing operations before noncontrolling interests.
Reference to core net interest income is to total net interest
income less purchase accounting accretion.
CONSOLIDATED REVENUE REVIEW
Total revenue was $3.5 billion for
both the fourth and third quarters of 2011 and $3.9 billion for the fourth quarter of 2010. The
decline compared with the year ago quarter was primarily due to the
fourth quarter 2010 gain of $160
million related to the sale of a portion of PNC's BlackRock
shares, lower corporate service fees primarily related to a fourth
quarter 2010 recovery in the value of commercial mortgage servicing
rights, and the fourth quarter 2011 regulatory impact of lower
interchange fees of $75 million on
debit card transactions.
Net interest income was $2.2
billion, an increase of $24
million compared with the third quarter and consistent with
the fourth quarter of 2010. Strong growth in core net interest
income driven by loan growth and lower funding costs was partially
offset by a decline in purchase accounting accretion including
lower cash recoveries on impaired loans. The net interest margin
was 3.86 percent for the fourth quarter compared with 3.89 percent
for the third quarter and 3.93 percent in the fourth quarter of
2010.
Noninterest income was $1.4
billion for both the fourth and third quarters of 2011 and
$1.7 billion for the fourth quarter
of 2010. Asset management fees declined $37
million compared with the linked quarter partially due to a
third quarter noncash tax benefit at BlackRock. Consumer service
fees decreased $61 million compared
with the third quarter primarily due to regulatory changes which
resulted in lower interchange fees of $75
million on debit card transactions partially offset by
higher transaction volumes. Corporate service fees increased
$79 million in the linked quarter
comparison primarily due to the impact of a third quarter reduction
in the value of commercial mortgage servicing rights. Residential
mortgage revenue decreased $41
million compared with the third quarter mainly from lower
net hedging gains on mortgage servicing rights. Other noninterest
income of $250 million for the fourth
quarter increased $56 million
compared with the third quarter primarily due to an increase in
value of hedges on deferred compensation obligations related to
higher stock market prices and higher results from client trading
activity. Net gains on sales of securities were $62 million in the fourth quarter of 2011
compared with $68 million in the
third quarter. Fourth quarter net gains were derived primarily from
sales of agency residential mortgage-backed securities. The credit
portion of net other-than-temporary impairments on securities was a
loss of $44 million in the fourth
quarter compared with a loss of $35
million in the third quarter.
Noninterest income for the fourth quarter of 2011 declined
$352 million compared with the fourth
quarter of 2010 due in part to a gain in 2010 of $160 million related to the sale of a portion of
PNC's BlackRock shares sold by PNC as part of BlackRock's secondary
common stock offering. Corporate service fees decreased
$104 million in the comparison
primarily due to a recovery in the value of commercial mortgage
servicing rights in the fourth quarter of 2010. Consumer service
fees declined $53 million due to the
lower interchange fees on debit card transactions partially offset
by higher transaction volumes. Asset management fees decreased
$53 million primarily from the impact
of fourth quarter 2010 performance fee revenue at BlackRock.
CONSOLIDATED EXPENSE REVIEW
Noninterest expense was $2.7
billion for the fourth quarter of 2011, $2.1 billion for the third quarter and
$2.3 billion for the fourth quarter
of 2010. Fourth quarter 2011 noninterest expense included
$240 million of residential mortgage
foreclosure-related expenses primarily as a result of ongoing
governmental matters and a noncash charge of $198 million for the unamortized discount related
to redemption of trust preferred securities which will reduce
future funding costs. Personnel expense increased $103 million over the third quarter primarily
driven by higher stock market prices and higher business
production. Noninterest expense increased $379 million in the comparison with fourth
quarter 2010 primarily driven by residential mortgage
foreclosure-related expenses primarily as a result of ongoing
governmental matters and the noncash charge related to redemption
of trust preferred securities.
The effective tax rate was 23.0 percent for the fourth quarter
of 2011 compared with 27.0 percent for the third quarter and 26.9
percent for the fourth quarter of 2010. The decrease in the fourth
quarter 2011 rate was primarily attributable to the impact of
higher tax-exempt income and tax credits on lower pretax
income.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were $271 billion at
December 31, 2011 compared with
$269 billion at September 30, 2011 and $264 billion at December
31, 2010. The increase compared with the third quarter
resulted from higher loans partially offset by lower
interest-earning deposits with banks and lower investment
securities. The increase from a year ago was primarily due to
higher loan balances.
Loans grew to $159.0 billion at
December 31, 2011 from $154.5 billion at September 30, 2011 and $150.6 billion at December
31, 2010. Commercial lending grew $3.5 billion during the fourth quarter from new
and existing client activity across diverse industries including
financial services and manufacturing. Consumer loans increased
$1.0 billion linked quarter mainly
due to higher indirect auto and education loans. Total loan
originations and new commitments and renewals were $41 billion for the fourth quarter and
$147 billion for full year 2011,
including $4.1 billion of small
business loans, compared with $141
billion for 2010. Average loans of $156.2 billion in the fourth quarter grew
$4.4 billion, or 3 percent, compared
with the third quarter. Average commercial loans grew $3.5 billion, or 6 percent, and average consumer
loans increased $.9 billion, or 2
percent. In the comparison with fourth quarter 2010, average loans
grew $6.3 billion, or 4 percent.
Growth in average commercial loans of $9.4
billion, or 17 percent, and average consumer loans of
$.8 billion, or 1 percent, in fourth
quarter 2011 was partially offset by declines in average commercial
real estate loans of $2.1 billion, or
12 percent, and average residential real estate loans of
$1.7 billion, or 10 percent.
Investment securities were $60.6
billion at December 31, 2011
compared with $62.1 billion at
September 30, 2011 and $64.3 billion at December
31, 2010. Average investment securities were $60.4 billion for the fourth quarter of 2011, an
increase of $2.7 billion compared
with the third quarter and a decrease of $1.9 billion compared with the fourth quarter of
2010. Within the investment portfolio, average securities available
for sale increased $1.8 billion and
average securities held to maturity increased $1.0 billion compared with the linked quarter. At
December 31, 2011, the available for
sale investment securities balance included a net unrealized pretax
loss of $40 million representing the
difference between fair value and amortized cost compared with a
net unrealized pretax gain of $.1
billion at September 30, 2011
and a net unrealized pretax loss of $.9 billion at
December 31, 2010. The decline
compared with third quarter end was attributable to slightly higher
interest rates. The improvement in the comparison with a year ago
was primarily due to lower market interest rates and improved
liquidity in non-agency commercial mortgage-backed securities
markets.
Interest-earning deposits with banks of $1.2 billion as of December 31, 2011 decreased $1.6 billion compared with September 30, 2011 largely attributable to lower
funds on deposit with the Federal Reserve which funded loan growth.
Interest-earning deposits with banks declined $.4 billion compared with December 31, 2010.
Deposits grew to $188.0 billion at
December 31, 2011 compared with
$187.7 billion at September 30, 2011 and $183.4 billion at December
31, 2010. Growth in transaction deposits of $4.6 billion and savings deposits of $.3 billion was partially offset by declines in
retail certificates of deposit of $2.9
billion and time deposits in foreign offices of $1.8 billion compared with the third quarter.
Average deposits were $186.5 billion
for the fourth quarter, an increase of $2.4
billion from the third quarter of 2011 and $4.8 billion from the fourth quarter of 2010. In
the linked quarter comparison, average transaction deposits grew
$4.2 billion, or 3 percent, while
average retail certificates of deposit declined $2.7 billion, or 8 percent. Growth in transaction
deposits included higher noninterest-bearing demand deposits from
commercial customers continuing to maintain balances for liquidity.
In the comparison with fourth quarter 2010, average transaction
deposits grew $12.4 billion, or 9
percent, and average retail certificates of deposit declined
$8.3 billion, or 21 percent. The
continued reduction of higher-cost and primarily nonrelationship
certificates of deposit is part of PNC's overall deposit strategy
that is focused on growing demand and other transaction deposits as
the cornerstone products of customer relationships and a stable
funding source. Deposits of approximately $210 million were acquired in the Flagstar
branches acquisition in December
2011.
Borrowed funds were $36.7 billion
at December 31, 2011, $35.1 billion at September
30, 2011 and $39.5 billion at
December 31, 2010. The increase in
borrowed funds from third quarter end was primarily due to a
$2.0 billion increase in Federal Home
Loan Bank borrowings and an increase in commercial paper. These
increases were partially offset by maturities and a reduction of
subordinated debt which reflected PNC's redemption on November 15, 2011 of $750
million of trust preferred securities issued by National
City Capital Trust II with a then current interest rate of 6.625
percent and an original scheduled maturity date of November 15, 2036. This redemption, which
resulted in a noncash charge of $198
million for the unamortized discount, will reduce future
funding costs by approximately $30
million annually. The decrease in borrowed funds compared
with year end 2010 reflected the trust preferred securities
redemption and net maturities partially offset by higher Federal
Home Loan Bank borrowings.
Average borrowed funds were $35.7
billion for the fourth quarter of 2011, $33.9 billion for the third quarter and
$38.2 billion for fourth quarter
2010. The increase from the third quarter was primarily due to
higher Federal Home Loan Bank borrowings and the issuance of
$1.25 billion of senior debt in
September 2011. The decrease in
average borrowed funds compared with the fourth quarter of 2010
primarily resulted from maturities of bank notes and senior debt
and subordinated debt.
PNC continued to maintain strong capital levels and ratios.
Common shareholders' equity was $32.4
billion at December 31, 2011,
$32.6 billion at September 30, 2011 and $29.6 billion at December
31, 2010. The Tier 1 common capital ratio was an estimated
10.3 percent at December 31, 2011
compared with 10.5 percent at September 30,
2011 and 9.8 percent at December 31,
2010. The Tier 1 risk-based capital ratio was an estimated
12.6 percent at December 31, 2011,
13.1 percent at September 30, 2011
and 12.1 percent at December 31,
2010. The declines in the Tier 1 common and Tier 1
risk-based capital ratios compared with September 30, 2011 were due to higher
risk-weighted assets. The increase in common shareholders' equity
from year end 2010 was attributable to the retention of earnings.
The Tier 1 common capital ratio increased in the comparison with
year end 2010 due to the retention of earnings partially offset by
higher risk-weighted assets primarily from loan growth. The
increase in the Tier 1 risk-based capital ratio compared with
December 31, 2010 resulted from the
issuance of preferred stock in July
2011 and retention of earnings somewhat offset by the
redemption of trust preferred securities in November 2011 and higher risk-weighted
assets.
In December 2011 PNC received
regulatory approvals for its acquisition of RBC Bank (USA) and announced that it does not intend to
issue any shares of common stock as part of the purchase price. PNC
has a common stock repurchase program that permits the purchase of
up to 25 million shares of PNC common stock on the open market or
in privately negotiated transactions. No shares were purchased
during 2011 under this program. The PNC board of directors declared
a quarterly common stock cash dividend of 35
cents per share with a payment date of February 5, 2012.
CREDIT QUALITY REVIEW
Overall credit quality continued to improve during 2011 and in
the fourth quarter of 2011. Nonperforming assets declined by
$142 million, or 3 percent, to
$4.2 billion at December 31, 2011 compared with September 30, 2011 and decreased $967 million, or 19 percent, from December 31, 2010. The decrease from third
quarter was due to lower commercial and commercial real estate
nonperforming loans partially offset by an increase in home equity
nonperforming loans. The decline from year end 2010 reflected lower
commercial real estate, commercial and residential mortgage
nonperforming loans partially offset by higher home equity
nonperforming loans. Nonperforming assets to total assets were 1.53
percent at December 31, 2011 compared
with 1.59 percent at September 30,
2011 and 1.94 percent at December 31,
2010.
Delinquencies increased by $219
million, or 5 percent, in the fourth quarter of 2011
compared with the third quarter due to a net increase of
$210 million in accruing past due
government insured loans. Accruing loans past due 90 days or more
were $3.0 billion at December 31, 2011 and $2.8
billion at September 30, 2011.
Accruing loans past due 30 to 59 days were $1.0 billion at both December 30, 2011 and September 30, 2011. Accruing loans past due 60 to
89 days were stable at $547 million
as of December 31, 2011 and
$544 million at September 30, 2011. Net charge-offs for the
fourth quarter of 2011 declined to $327
million, or .83 percent of average loans on an annualized
basis, compared with $365 million, or
.95 percent, for the third quarter of 2011 and $791 million, or 2.09 percent, for the fourth
quarter of 2010. Net charge-offs decreased in the linked quarter
comparison primarily due to declines in commercial loan net
charge-offs and commercial real estate loan net charge-offs
partially offset by an increase in residential real estate and
other consumer loan net charge-offs. The provision for credit
losses was $190 million for the
fourth quarter of 2011, $261 million
for the third quarter and $442
million for the fourth quarter of 2010. The decreases were
driven by overall credit quality improvement and continued actions
to reduce exposure levels.
The allowance for loan and lease losses was $4.3 billion at December
31, 2011, $4.5 billion at
September 30, 2011 and $4.9 billion at December
31, 2010. The allowance for loan and lease losses to total
loans was 2.73 percent at December 31,
2011, 2.92 percent at September 30,
2011 and 3.25 percent at December 31,
2010. The decrease in the allowance compared with year end
2010 resulted from improving credit quality trends. The allowance
to nonperforming loans was 122 percent at both December 31, 2011 and September 30, 2011 compared with 109 percent at
December 31, 2010.
BUSINESS SEGMENT RESULTS
Retail Banking
Retail Banking earned $31 million
for the full year 2011 compared with $144
million in 2010. Lower earnings were primarily driven by a
decline in revenue from the impact of Regulation E rules related to
overdraft fees, lower net interest income and the regulatory impact
of lower interchange fees on debit card transactions partially
offset by a lower provision for credit losses. Retail Banking
incurred a loss of $28 million for
the fourth quarter of 2011 compared with earnings of $33 million for the third quarter of 2011 and
earnings of $44 million for fourth
quarter 2010. The decrease in earnings in the linked quarter
comparison was due to the regulatory impact of lower interchange
fees on debit card transactions, seasonally higher expenses and an
increase in the provision for credit losses partially offset by
higher net interest income. The decline in earnings from the prior
year fourth quarter was due to a higher provision for credit losses
and the regulatory impact of lower interchange fees on debit card
transactions.
- Checking relationships grew by 39,000 during the fourth quarter
of 2011, including 9,000 from the Flagstar Bank, FSB branch
acquisition. In 2011, checking relationships grew by 296,000,
including 41,000 from acquisitions, or almost 4 times the growth in
2010. Active online banking and active online bill payment
customers grew 15 percent and 13 percent, respectively, in
2011.
- Continued success in implementing Retail Banking's deposit
strategy resulted in transaction deposit growth and a reduction in
higher rate certificates of deposit. In the fourth quarter of 2011
total average deposits declined $.8
billion from the third quarter with a $2.7 billion decline in certificates of deposit
partially offset by an increase of $1.7
billion in transaction deposits. Compared with the prior
year fourth quarter, average transaction deposits increased
$5.1 billion, or 7 percent, and
average certificates of deposit declined $8.0 billion, or 21 percent. A continued decline
in certificates of deposit is expected in 2012. Retail Banking
added approximately $210 million in
deposits in the December 2011 branch
acquisition from Flagstar.
- Average loans grew $.8 billion,
or 1 percent, over third quarter 2011 and $.6 billion, or 1 percent, compared with the
fourth quarter of 2010. In the linked quarter comparison, higher
indirect auto, education, floor plan and credit card loans were
partially offset by a decline in commercial loans. The increase
from the prior year fourth quarter resulted from higher indirect
auto and education loans offset by lower commercial and home equity
loans.
- Net interest income for the fourth quarter of 2011
increased $12 million, or 1 percent,
compared with the third quarter and $6
million, or 1 percent, compared with the fourth quarter of
2010.
- Noninterest income for the fourth quarter decreased
$54 million, or 12 percent, compared
with the third quarter and $43
million, or 10 percent, from the fourth quarter of 2010. The
decline in both comparisons was primarily due to the regulatory
impact of lower interchange fees on debit card transactions
partially offset by higher transaction volumes.
- Noninterest expense for the fourth quarter increased
$31 million, or 3 percent, over the
third quarter and $8 million, or 1
percent, compared with fourth quarter 2010. The linked quarter
increase was primarily attributable to seasonally higher expenses
and investments in key areas of the business partially offset by
continued disciplined expense management.
- Net charge-offs increased to $195
million for fourth quarter 2011 compared with $182 million in the third quarter and declined
from $225 million in the fourth
quarter of 2010. In the linked quarter comparison, small business
and education loan net charge-offs increased. Nonperforming assets
were $849 million at December 31, 2011, an increase of $65 million compared with third quarter end. The
provision for credit losses was $229
million for the fourth quarter of 2011 compared with
$206 million in the third quarter and
$157 million in the fourth quarter of
2010.
- PNC's expansive branch footprint covers nearly one-third
of the U.S. population in 14 states and Washington, D.C. with a network of 2,511
branches and 6,806 ATMs at December 31,
2011. The Flagstar branch acquisition added 27 branches and
29 ATMs.
- For 2011 Retail Banking revenue was negatively impacted by
approximately $275 million compared
with 2010 due to the impact of the rules set forth in Regulation E
related to overdraft fees and the Dodd−Frank limits related to
interchange rates on debit card transactions.
- Regulation E, which became effective in the third quarter of
2010, had an incremental negative impact to 2011 revenues of
approximately $200 million compared
with 2010.
- The Dodd−Frank limits related to interchange rates on debit
cards were effective October 1, 2011
and had a negative impact of approximately $75 million in the fourth quarter of 2011 and are
expected to have an additional incremental reduction in future
periods' annual revenue of approximately $175 million based on 2011 transaction volumes
and will impact year-over-year quarterly comparisons through the
third quarter of 2012.
Corporate & Institutional Banking
Corporate & Institutional Banking earned $1.9 billion for the full year 2011 compared with
$1.8 billion in 2010. The increase in
earnings was primarily due to an improvement in the provision for
credit losses, which was a benefit in 2011, partially offset by
lower net interest income and a reduction in the value of
commercial mortgage servicing rights. Earnings were $576 million in the fourth quarter of 2011
compared with $419 million in the
third quarter and $543 million in the
fourth quarter of 2010. Higher earnings in the linked quarter
comparison reflected an improvement in the provision for credit
losses, which was a benefit in the fourth quarter, and the impact
of a third quarter reduction in the value of commercial mortgage
servicing rights. The increase in earnings compared with fourth
quarter 2010 was primarily due to the benefit from the provision
for credit losses partially offset by the impact of a fourth
quarter 2010 recovery in the value of commercial mortgage servicing
rights.
- Overall results benefited from successful sales efforts to new
clients and product penetration of the existing customer base. New
primary client acquisitions in corporate banking of 1,165 exceeded
the goal of 1,000 for 2011 and represented a 15 percent increase
over 2010 new primary clients.
- Average loans were $71 billion
for the fourth quarter of 2011 compared with $68 billion in the third quarter of 2011 and
$63 billion in the fourth quarter of
2010. Loan growth in both comparisons was primarily in commercial
loans, commercial real estate and asset-based lending due to new
client activity and higher utilization in the corporate banking
business.
- Average deposits of $55 billion
in the fourth quarter of 2011 increased $3
billion, or 5 percent, from the third quarter and
$9 billion, or 19 percent, from
fourth quarter 2010. Deposit inflows into noninterest-bearing
demand deposits continued as FDIC insurance has been an attraction
for customers maintaining liquidity during this prolonged period of
low interest rates.
- Net interest income for the fourth quarter of 2011 of
$904 million increased $38 million compared with the third quarter and
decreased $13 million compared with
the fourth quarter of 2010. The increase compared with third
quarter was primarily due to higher average loans and deposits. The
decrease from fourth quarter 2010 was mainly due to lower purchase
accounting accretion and lower interest credits assigned to
deposits partially offset by increases in average deposits and
loans.
- Corporate service fees of $230
million for the fourth quarter of 2011 increased
$77 million compared with the third
quarter and decreased $104 million
compared with fourth quarter 2010. The linked quarter increase was
impacted by a reduction in the value of commercial mortgage
servicing rights in the third quarter of 2011. The decrease
compared with fourth quarter 2010 was due to a fourth quarter 2010
recovery in the value of commercial mortgage servicing rights and
lower merger and acquisition advisory fees.
- Other noninterest income of $137
million in the fourth quarter increased $36 million compared with the third quarter and
$12 million compared with the fourth
quarter of 2010. Both comparisons benefited from improved
valuations on commercial mortgage loans held for sale. The increase
over third quarter was also due to higher revenue from customer
driven capital markets activity and an increase in revenue from
multi-family agency loan production.
- Noninterest expense of $494
million in the fourth quarter of 2011 increased $46 million compared with the third quarter and
decreased $12 million from fourth
quarter 2010. The increase from the linked quarter was primarily
due to higher personnel costs largely driven by higher stock market
prices and higher business production.
- Net charge-offs for the fourth quarter of 2011 were
$43 million compared with
$94 million in third quarter 2011 and
$349 million in the fourth quarter of
2010. Net charge-offs decreased in middle-market and specialty
lending portfolios in the comparison with third quarter. The
decrease from fourth quarter 2010 reflected declines across all
loan portfolios. Nonperforming assets declined for the seventh
consecutive quarter.
- Provision for credit losses was a benefit of $136 million for the fourth quarter of 2011
compared with provisions of $11
million in the third quarter and $18
million in the fourth quarter of 2010. The decrease in both
comparisons reflected improved credit quality which more than
offset the impact of higher loan and commitment levels.
- The commercial mortgage servicing portfolio was $267 billion at both December 31, 2011 and September 30, 2011 compared with $266 billion at December
31, 2010.
Asset Management Group
Asset Management Group earned $141
million for the full year 2011 compared with $137 million for 2010. The increase in earnings
was due to an improvement in the provision for credit losses, which
was a benefit for 2011, from improving credit quality, and higher
noninterest income from higher equity markets during 2011 and
business growth. These increases were partially offset by lower net
interest income from lower loan yields and higher noninterest
expense from significant strategic business investments. The
business delivered consistent performance in 2011 compared with
2010, remaining focused on client acquisition, asset growth, and
expense discipline. Assets under administration as of December 31, 2011 were $210 billion, including $107 billion of discretionary assets under
management. Fourth quarter 2011 earnings were $17 million compared with $33 million in the third quarter and $28 million in the fourth quarter of 2010. The
decline in the linked quarter comparison was attributable to the
provision for credit losses which was a benefit in the third
quarter. Earnings decreased in the comparison with fourth quarter
2010 primarily due to higher noninterest expense from strategic
business investments.
- Assets under administration were $210
billion at December 31, 2011
compared with $202 billion at
September 30, 2011 and $212 billion at December
31, 2010. Discretionary assets under management were
$107 billion at December 31, 2011 compared with $103 billion at September
30, 2011 and $108 billion at
December 31, 2010. The increase in
discretionary assets under management compared with the third
quarter was attributable to improved equity markets and strong
sales performance and client retention.
- Noninterest income of $161
million for the fourth quarter increased $2 million, or 1 percent, compared with both the
third quarter and the fourth quarter of 2010. The increases were
attributable to new client acquisition, increased sales and
improved equity markets.
- Net interest income was $61
million for the fourth quarter compared with $58 million in the third quarter and $65 million in fourth quarter 2010. The increase
in the linked quarter comparison was attributable to growth in
average transaction deposits. The decrease in the prior year
quarter comparison was due to lower loan yields, reduced average
loan balances and lower interest credits assigned to deposits
reflective of the current low rate environment.
- Noninterest expense of $184
million in the fourth quarter of 2011 increased $9 million, or 5 percent, compared with the third
quarter and $13 million, or 8
percent, compared with the fourth quarter of 2010. The increases
resulted from investments in the business to drive growth and
higher compensation-related costs.
- Provision for credit losses was $10
million in the fourth quarter 2011 compared with a benefit
of $10 million in the third quarter
and a provision of $9 million in the
fourth quarter of 2010. Net charge-offs were $6 million in the fourth quarter compared with
$5 million in the third quarter and
$21 million in the fourth quarter of
2010.
- Average deposits for the quarter of $8.0
billion increased $213
million, or 3 percent, compared with the third quarter and
$494 million, or 7 percent, compared
with fourth quarter 2010. Transaction deposits increased 3 percent
in the third quarter comparison and 9 percent in the prior year
quarter comparison. Certificates of deposit continued to decrease
due to the strategic run-off of higher rate balances.
- Average loan balances of $6.1
billion were consistent with the third quarter and declined
$170 million, or 3 percent, compared
with fourth quarter 2010 from soft loan demand in 2011 and credit
risk management activities within the portfolio. An increase in
consumer loans in the fourth quarter compared with the third
quarter was offset by a decrease in commercial loans.
Residential Mortgage Banking
Residential Mortgage Banking earned $87
million for the full year 2011 compared with $269 million for 2010. The decline in earnings
was driven by an increase in noninterest expense and lower net
interest income. Residential Mortgage Banking had a loss of
$61 million in the fourth quarter of
2011 compared with earnings of $22
million in the third quarter and earnings of $3 million in the fourth quarter of 2010. The
fourth quarter 2011 loss compared with both periods was primarily
due to higher residential mortgage foreclosure-related expenses
primarily as a result of ongoing governmental matters.
- Total loan originations were $3.0
billion for the fourth quarter of 2011, $2.6 billion in the third quarter and
$3.5 billion in the fourth quarter of
2010. Loans continued to be originated primarily through direct
channels under FNMA, FHLMC and FHA/VA agency guidelines.
- Residential mortgage loans serviced for others totaled
$118 billion at December 31, 2011 compared with $121 billion at September
30, 2011 and $125 billion at
December 31, 2010. Payoffs continued
to outpace new loan production.
- Noninterest income was $167
million in the fourth quarter of 2011 compared with
$206 million in the third quarter and
$168 million in the fourth quarter of
2010. The linked quarter decrease reflected a decline of
$34 million of net hedging gains on
mortgage servicing rights and lower servicing fee revenue. In the
comparison with fourth quarter 2010, lower net hedging gains on
mortgage servicing rights were offset by higher loan sales revenue
and higher servicing fee revenue.
- Net interest income was $52
million in the fourth quarter of 2011 compared with
$46 million in the third quarter and
$60 million in the fourth quarter of
2010. The increase compared with the third quarter primarily
resulted from higher earnings on securities used to hedge mortgage
servicing rights. The decline compared with fourth quarter 2010 was
attributable to a lower balance of loans held for sale.
- The provision for credit losses was a $10 million benefit in the fourth quarter
compared with provisions of $15
million in the third quarter and $8
million in fourth quarter 2010.
- Noninterest expense was $317
million in the fourth quarter of 2011 compared with
$203 million in the third quarter and
$215 million in the fourth quarter of
2010. The increase in both comparisons was primarily due to higher
residential mortgage foreclosure-related expenses primarily as a
result of ongoing governmental matters.
- The fair value of mortgage servicing rights was $.7 billion at both December 31, 2011 and September 30, 2011 compared with $1.0 billion at December
31, 2010. The decline in fair value was primarily due to
lower mortgage rates.
Non-Strategic Assets Portfolio
Non-Strategic Assets Portfolio segment (formerly Distressed
Assets Portfolio) had earnings of $200
million for the full year 2011 compared with a loss of
$57 million for 2010. The increase
was primarily attributable to a lower provision for credit losses
partially offset by lower net interest income. A loss of
$2 million was incurred for the
fourth quarter of 2011 compared with earnings of $93 million in the third quarter of 2011 and a
loss of $71 million for the fourth
quarter of 2010. The decrease compared with the linked quarter was
due to an increase in noninterest expense, a higher provision for
credit losses and lower net interest income. The increase in the
fourth quarter 2010 comparison primarily resulted from a lower
provision for credit losses and higher noninterest income partially
offset by lower net interest income.
- Average loans were $13 billion
for the fourth quarter of 2011, a decline of $.4 billion from the third quarter and
$2.7 billion from the fourth quarter
of 2010. The decreases were due to portfolio management activities
including paydowns, loan sales and charge-offs.
- Net interest income was $192
million for the fourth quarter compared with $228 million for the third quarter and
$256 million for the fourth quarter
of 2010. The decrease in both comparisons was due to lower average
loans and lower purchase accounting accretion.
- Noninterest income was $15
million in the fourth quarter of 2011 compared with
$10 million in the third quarter and
a loss of $56 million in the fourth
quarter of 2010. The increase from the linked quarter was due to
higher gains on asset sales. The fourth quarter of 2010 included
higher recourse reserves for potential repurchases of brokered home
equity loans.
- Noninterest expense for the fourth quarter was $119 million compared with $47 million in the third quarter and $81 million in the fourth quarter of 2010. The
increase in both comparisons was driven by higher residential
mortgage foreclosure-related expenses primarily as a result of
ongoing governmental matters.
- Net charge-offs were $77 million
for the fourth quarter of 2011 compared with $74 million for the third quarter and
$183 million for the fourth quarter
of 2010. The increase in the third quarter comparison was primarily
due to higher net charge-offs in the consumer portfolios. The
decline from the prior year fourth quarter was largely attributable
to a decrease in the non-prime mortgage portfolio.
- The provision for credit losses was $88
million in the fourth quarter of 2011 compared with
$45 million in the third quarter and
$231 million in the fourth quarter of
2010. The increase in the third quarter comparison was due to an
increase in troubled debt restructuring volumes and additional
reserves in the brokered home equity portfolio. The decrease from
fourth quarter 2010 was due to overall improvement in credit
quality across the portfolios.
- The majority of loans in the Non-Strategic Assets Portfolio
(formerly Distressed Assets Portfolio) were obtained through
acquisitions of other companies and fall outside of PNC's core
business strategy. More than 83 percent of the consumer loans in
this portfolio were performing as of December 31, 2011. Certain loans in this segment
continue to require special servicing and management
oversight.
Other, Including BlackRock
The "Other, including BlackRock" category, for the purposes of
this release, includes earnings and gains or losses related to
PNC's equity interest in BlackRock, and residual activities that do
not meet the criteria for disclosure as a separate reportable
business, such as gains or losses related to BlackRock
transactions, integration costs, asset and liability management
activities including net securities gains or losses,
other-than-temporary impairment of investment securities and
certain trading activities, exited businesses, equity management
activities, alternative investments, intercompany eliminations,
most corporate overhead, tax adjustments that are not allocated to
business segments, and differences between business segment
performance reporting and financial statement reporting under
generally accepted accounting principles. Results of operations for
PNC Global Investment Servicing are presented as income from
discontinued operations, net of income taxes, through June 30, 2010, and therefore are not included in
business segment results. The sale of PNC Global Investment
Servicing was completed on July 1,
2010 and the after-tax gain on that sale is reflected in
discontinued operations for 2010.
PNC recorded earnings of $737
million in "Other, including BlackRock" for both 2011 and
2010. Earnings for 2011 compared with 2010 reflected lower
integration costs offset by the noncash charge related to
redemption of trust preferred securities and a 2010 gain related to
the sale of a portion of PNC's BlackRock shares. For the fourth
quarter of 2011, PNC recorded a loss of $9
million in "Other, including BlackRock" compared with
earnings of $234 million for the
third quarter of 2011 and $273
million for the fourth quarter of 2010. The decline in the
linked quarter comparison reflected the noncash charge related to
redemption of trust preferred securities, the impact on earnings
from the BlackRock investment of a third quarter noncash tax
benefit at BlackRock, and higher integration costs. In the
comparison with fourth quarter 2010, earnings decreased primarily
due to the noncash charge related to redemption of trust preferred
securities, the gain related to the sale of a portion of PNC's
BlackRock shares in fourth quarter 2010, and the impact of fourth
quarter 2010 performance fee revenue at BlackRock on earnings from
the BlackRock investment, partially offset by lower integration
costs.
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL
INFORMATION
PNC Chairman and Chief Executive Officer James E. Rohr and Executive Vice President and
Chief Financial Officer Richard J.
Johnson will hold a conference call for investors today at
8:00 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 or (303) 223-4399 (international) and Internet access to
the live audio listen-only webcast of the call is available at
www.pnc.com/investorevents. PNC's fourth quarter and full year 2011
earnings release, the 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 or (402) 977-9140
(international), conference ID 21563016 and a replay of the audio
webcast will be available on PNC's website for 30 days.
The PNC Financial Services Group, Inc. (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 and asset management.
[TABULAR MATERIAL FOLLOWS]
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The PNC
Financial Services Group, Inc.
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|
Consolidated Financial Highlights
(Unaudited)
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|
|
|
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|
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FINANCIAL RESULTS
|
Three
months ended
|
|
Year
ended
|
|
Dollars
in millions, except per share data
|
December
31
|
|
September
30
|
|
December
31
|
|
December
31
|
|
December
31
|
|
|
2011
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
$2,199
|
|
$2,175
|
|
$2,201
|
|
$8,700
|
|
$9,230
|
|
Noninterest income (a)
|
1,350
|
|
1,369
|
|
1,702
|
|
5,626
|
|
5,946
|
|
Total revenue
|
3,549
|
|
3,544
|
|
3,903
|
|
14,326
|
|
15,176
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|
Noninterest expense (b) (c) (d)
|
2,719
|
|
2,140
|
|
2,340
|
|
9,105
|
|
8,613
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|
Pretax,
pre-provision earnings from continuing operations (e)
|
830
|
|
1,404
|
|
1,563
|
|
5,221
|
|
6,563
|
|
Provision
for credit losses
|
190
|
|
261
|
|
442
|
|
1,152
|
|
2,502
|
|
Income
from continuing operations before income taxes and
noncontrolling interests (pretax earnings)
|
$640
|
|
$1,143
|
|
$1,121
|
|
$4,069
|
|
$4,061
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations before noncontrolling interests
(f)
|
$493
|
|
$834
|
|
$820
|
|
$3,071
|
|
$3,024
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|
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|
|
|
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|
|
|
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|
|
Income
from discontinued operations, net of income taxes (g)
|
|
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|
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|
|
|
|
373
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|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$493
|
|
$834
|
|
$820
|
|
$3,071
|
|
$3,397
|
|
|
|
|
|
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Less:
|
|
|
|
|
|
|
|
|
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Net income
(loss) attributable to noncontrolling interests
|
17
|
|
4
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(3)
|
|
15
|
|
(15)
|
|
|
Preferred
stock dividends, including TARP (h)
|
24
|
|
4
|
|
24
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|
56
|
|
146
|
|
|
Preferred
stock discount accretion and redemptions, including redemption
of TARP preferred stock discount accretion (h)
|
1
|
|
|
|
1
|
|
2
|
|
255
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to common shareholders (h)
|
$451
|
|
$826
|
|
$798
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|
$2,998
|
|
$3,011
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|
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Diluted
earnings per common share
|
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Continuing operations
|
$.85
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|
$1.55
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|
$1.50
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|
$5.64
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|
$5.02
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Discontinued operations (g)
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|
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|
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|
.72
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Net
income
|
$.85
|
|
$1.55
|
|
$1.50
|
|
$5.64
|
|
$5.74
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Cash
dividends declared per common share
|
$.35
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|
$.35
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|
$.10
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|
$1.15
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$.40
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Certain
prior period amounts included in these Consolidated Financial
Highlights have been reclassified to conform with the current
period presentation, which we believe is more meaningful to readers
of our consolidated financial statements.
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The
after-tax amounts below were calculated using a marginal federal
income tax rate of 35% and include applicable income tax
adjustments. The portion of our BlackRock shares and the
after-tax gain on the sale of GIS also reflect the impact of state
income taxes.
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(a)
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Noninterest income for the three months and year
ended December 31, 2010 included a $160 million gain ($102 million
after taxes) related to our gain on sale of a portion of our shares
of BlackRock stock as part of BlackRock's November 2010 secondary
common stock offering. The impact on diluted earnings per share was
$.19 for the three months and year ended December 31,
2010.
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(b)
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Noninterest expense for the three months and year
ended December 31, 2011 included a $198 million noncash charge
($129 million after taxes) for the unamortized discount related to
redemption of $750 million of trust preferred securities during the
fourth quarter of 2011. The impact on diluted earnings per share
was $.24 for the three months and year ended December 31,
2011.
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(c)
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Includes
expenses of $240 million and $324 million ($156 million and $210
million after taxes, respectively) for the three months and year
ended December 31, 2011 for residential mortgage
foreclosure-related expenses, primarily as a result of ongoing
governmental matters. The impact on diluted earnings per share was
$.30 and $.40 for the three months and year ended December 31,
2011. The related impact for both the three months and year
ended December 31, 2010 was $71 million ($46 million after taxes),
with an impact on diluted earnings per share of $.09 for both
periods.
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(d)
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Includes
expenses of $28 million and $42 million ($18 million and $27
million after taxes, respectively) for the three months and year
ended December 31, 2011 for integration costs. The impact on
diluted earnings per share was $.04 and $.05 for the three months
and year ended December 31, 2011. The related impact for the three
months and year ended December 31, 2010 was $78 million and $387
million ($51 million and $251 million after taxes, respectively),
with an impact on diluted earnings per share of $.10 and $.48,
respectively.
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(e)
|
We believe
that pretax, pre-provision earnings from continuing operations, a
non-GAAP measure, is useful as a tool to help evaluate our ability
to provide for credit costs through operations.
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(f)
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See page
16 for a reconciliation of business segment income to income from
continuing operations before noncontrolling interests.
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(g)
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Includes
results of operations for PNC Global Investment Servicing Inc.
(GIS) through June 30, 2010 and the related after-tax gain on sale.
We sold GIS effective July 1, 2010, resulting in a gain of $639
million, or $328 million after taxes, recognized during the third
quarter of 2010.
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(h)
|
We
redeemed the Series N (TARP) Preferred Stock on February 10, 2010.
In connection with the redemption, we accelerated the accretion of
the remaining issuance discount on the Series N Preferred Stock and
recorded a corresponding reduction in retained earnings of $250
million in the first quarter of 2010. This resulted in a noncash
reduction in net income attributable to common shareholders and
related basic and diluted earnings per share. The impact on diluted
earnings per share was $.48 for the year ended December 31, 2010.
Total dividends declared during 2010 included $89 million on the
Series N Preferred Stock.
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The PNC
Financial Services Group, Inc.
|
|
|
|
Consolidated Financial Highlights
(Unaudited)
|
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|
Three
months ended
|
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|
Year
ended
|
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|
December
31
|
|
September
30
|
|
December
31
|
|
|
December
31
|
|
December
31
|
|
|
2011
|
|
2011
|
|
2010
|
|
|
2011
|
|
2010
|
|
PERFORMANCE RATIOS
|
|
|
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|
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|
Net
interest margin (a)
|
3.86
|
%
|
3.89
|
%
|
3.93
|
%
|
|
3.92
|
%
|
4.14
|
%
|
Provision-adjusted net interest margin (b)
|
3.53
|
|
3.43
|
|
3.15
|
|
|
3.41
|
|
3.03
|
|
Noninterest income to total revenue (c)
|
38
|
|
39
|
|
44
|
|
|
39
|
|
39
|
|
Efficiency
(d)
|
77
|
|
60
|
|
60
|
|
|
64
|
|
57
|
|
Return
on:
|
|
|
|
|
|
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|
|
|
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Average
common shareholders' equity
|
5.70
|
|
10.25
|
|
10.61
|
|
|
9.56
|
|
10.88
|
|
|
Average
assets
|
.72
|
|
1.24
|
|
1.23
|
|
|
1.16
|
|
1.28
|
|
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|
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|
|
|
|
|
|
|
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|
BUSINESS SEGMENT INCOME (LOSS) (e)
(f)
|
|
|
|
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In
millions
|
|
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Retail
Banking
|
$(28)
|
|
$33
|
|
$44
|
|
|
$31
|
|
$144
|
|
Corporate
& Institutional Banking (g)
|
576
|
|
419
|
|
543
|
|
|
1,875
|
|
1,794
|
|
Asset
Management Group (g)
|
17
|
|
33
|
|
28
|
|
|
141
|
|
137
|
|
Residential Mortgage Banking
|
(61)
|
|
22
|
|
3
|
|
|
87
|
|
269
|
|
Non-Strategic Assets Portfolio (h)
|
(2)
|
|
93
|
|
(71)
|
|
|
200
|
|
(57)
|
|
Other,
including BlackRock (f) (i) (j) (k) (l) (m)
|
(9)
|
|
234
|
|
273
|
|
|
737
|
|
737
|
|
|
Income
from continuing operations before
|
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling interests
|
$493
|
|
$834
|
|
$820
|
|
|
$3,071
|
|
$3,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Calculated
as annualized taxable-equivalent net interest income divided by
average earning assets. The interest income earned on certain
earning assets is completely or partially exempt from federal
income tax. As such, these tax-exempt instruments typically yield
lower returns than taxable investments. To provide more meaningful
comparisons of net interest margins for all earning assets, we use
net interest income on a taxable-equivalent basis in calculating
net interest margin by increasing the interest income earned on
tax-exempt assets to make it fully equivalent to interest income
earned on taxable investments. This adjustment is not permitted
under generally accepted accounting principles (GAAP) in the
Consolidated Income Statement. The taxable-equivalent adjustments
to net interest income for the three months ended December 31,
2011, September 30, 2011, and December 31, 2010 were $28 million,
$27 million, and $22 million, respectively. The taxable-equivalent
adjustments to net interest income for the years ended December 31,
2011 and December 31, 2010 were $104 million and $81 million,
respectively.
|
|
|
(b)
|
A
reconciliation of net interest margin to provision-adjusted net
interest margin follows. We believe that provision-adjusted net
interest margin, a non-GAAP measure, is useful as a tool to help
evaluate the amount of credit related risk associated with
interest-earning assets.
|
|
|
|
|
Three
months ended
|
|
Year
ended
|
|
|
|
December
31
|
|
September
30
|
|
December
31
|
|
|
December
31
|
|
December
31
|
|
|
|
2011
|
|
2011
|
|
2010
|
|
|
2011
|
|
2010
|
|
|
Net
interest margin, as reported
|
3.86
|
%
|
3.89
|
%
|
3.93
|
%
|
|
3.92
|
%
|
4.14
|
%
|
|
Less:
provision adjustment
|
.33
|
|
.46
|
|
.78
|
|
|
.51
|
|
1.11
|
|
|
Provision-adjusted net interest margin
|
3.53
|
%
|
3.43
|
%
|
3.15
|
%
|
|
3.41
|
%
|
3.03
|
%
|
|
|
|
The
adjustment represents annualized provision for credit losses
divided by average interest-earning assets.
|
|
|
(c)
|
Calculated
as noninterest income divided by total revenue.
|
|
|
(d)
|
Calculated
as noninterest expense divided by total revenue.
|
|
|
(e)
|
Our
business information is presented based on our management
accounting practices and our management structure. We refine our
methodologies from time to time as our management accounting
practices are enhanced and our business and management structure
change. Certain prior period amounts have been reclassified to
reflect current methodologies and our current business and
management structure. We have revised certain capital allocations
among our business segments, including amounts for prior periods.
PNC's total capital did not change as a result of these adjustments
for any periods presented. Amounts are presented on a continuing
operations before noncontrolling interests basis and therefore
exclude the earnings attributable to GIS and the related after-tax
gain on sale of GIS, which closed July 1, 2010.
|
|
|
(f)
|
We
consider BlackRock to be a separate reportable business segment but
have combined its results with Other for this presentation. Our
2011 Form 10-K
will
include additional information regarding BlackRock.
|
|
|
(g)
|
We
consider a primary client relationship to be a corporate banking
client relationship with annual revenue generation of $50,000 or
more, or, within corporate banking, a commercial banking client
relationship with annual revenue generation of $10,000 or more, and
for Asset Management Group, a client relationship with annual
revenue generation of $10,000 or more.
|
|
|
(h)
|
Formerly,
the Distressed Assets Portfolio.
|
|
|
(i)
|
Includes
earnings and gains or losses related to PNC's equity interest in
BlackRock and residual activities that do not meet the criteria for
disclosure as a separate reportable business, such as gains or
losses related to BlackRock transactions, integration costs, asset
and liability management activities including net securities gains
or losses, other-than-temporary impairment of investment securities
and certain trading activities, exited businesses, equity
management activities, alternative investments, intercompany
eliminations, most corporate overhead, tax adjustments that are not
allocated to business segments, and differences between business
segment performance reporting and financial statement reporting
(GAAP), including the presentation of net income attributable to
noncontrolling interests as the segments' results exclude their
portion of net income attributable to noncontrolling
interests.
|
|
|
(j)
|
Amounts
for the three months and year ended December 31, 2010 include the
$160 million gain ($102 million after taxes) related to our gain on
the sale of a portion of our shares of BlackRock stock as a part of
BlackRock's November 2010 secondary common stock
offering.
|
|
|
(k)
|
Amounts
for the three months and year ended December 31, 2011 include a
$198 million noncash charge ($129 million after taxes) for the
unamortized discount related to redemption of $750 million of trust
preferred securities during the fourth quarter of 2011.
|
|
|
(l)
|
Amounts
for the three months and year ended December 31, 2011 include
expenses of $240 million and $324 million ($156 million and $210
million after taxes, respectively) for residential mortgage
foreclosure-related expenses, primarily as a result of ongoing
governmental matters. The related impact for both the three
months and year ended December 31, 2010 was $71 million ($46
million after taxes).
|
|
|
(m)
|
Includes
expenses of $28 million and $42 million ($18 million and $27
million after taxes, respectively) for the three months and year
ended December 31, 2011 for integration costs. The related impact
for the three months and year ended December 31, 2010 was $78
million and $387 million ($51 million and $251 million after taxes,
respectively).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The PNC
Financial Services Group, Inc.
|
|
|
Consolidated Financial Highlights
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31
|
|
September
30
|
|
December
31
|
|
|
2011
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
BALANCE
SHEET DATA
|
|
|
|
|
|
|
Dollars
in millions, except per share data
|
|
|
|
|
|
|
Assets
|
$271,205
|
|
$269,470
|
|
$264,284
|
|
Loans (a)
(b)
|
159,014
|
|
154,543
|
|
150,595
|
|
Allowance
for loan and lease losses (a)
|
4,347
|
|
4,507
|
|
4,887
|
|
Interest-earning deposits with banks (a)
|
1,169
|
|
2,773
|
|
1,610
|
|
Investment
securities (a)
|
60,634
|
|
62,105
|
|
64,262
|
|
Loans held
for sale (b)
|
2,936
|
|
2,491
|
|
3,492
|
|
Goodwill
and other intangible assets
|
10,144
|
|
10,156
|
|
10,753
|
|
Equity
investments (a) (c)
|
10,134
|
|
9,915
|
|
9,220
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
59,048
|
|
55,180
|
|
50,019
|
|
Interest-bearing deposits
|
128,918
|
|
132,552
|
|
133,371
|
|
Total
deposits
|
187,966
|
|
187,732
|
|
183,390
|
|
Transaction deposits
|
147,637
|
|
143,015
|
|
134,654
|
|
Borrowed
funds (a)
|
36,704
|
|
35,102
|
|
39,488
|
|
Shareholders' equity
|
34,053
|
|
34,219
|
|
30,242
|
|
Common
shareholders' equity
|
32,417
|
|
32,583
|
|
29,596
|
|
Accumulated other comprehensive income
(loss)
|
(105)
|
|
397
|
|
(431)
|
|
|
|
|
|
|
|
|
Book value
per common share
|
61.52
|
|
61.92
|
|
56.29
|
|
Common
shares outstanding (millions)
|
527
|
|
526
|
|
526
|
|
Loans to
deposits
|
85
|
%
|
82
|
%
|
82
|
%
|
|
|
|
|
|
|
|
CLIENT
ASSETS (billions)
|
|
|
|
|
|
|
Discretionary assets under management
|
$107
|
|
$103
|
|
$108
|
|
Nondiscretionary assets under
administration
|
103
|
|
99
|
|
104
|
|
Total
assets under administration
|
210
|
|
202
|
|
212
|
|
Brokerage
account assets
|
34
|
|
33
|
|
34
|
|
Total
client assets
|
$244
|
|
$235
|
|
$246
|
|
|
|
|
|
|
|
|
CAPITAL
RATIOS
|
|
|
|
|
|
|
Tier 1
common (d)
|
10.3
|
%
|
10.5
|
%
|
9.8
|
%
|
Tier 1
risk-based (d)
|
12.6
|
|
13.1
|
|
12.1
|
|
Total
risk-based (d)
|
15.8
|
|
16.5
|
|
15.6
|
|
Leverage
(d)
|
11.1
|
|
11.4
|
|
10.2
|
|
Common
shareholders' equity to assets
|
12.0
|
|
12.1
|
|
11.2
|
|
|
|
|
|
|
|
|
ASSET
QUALITY RATIOS
|
|
|
|
|
|
|
Nonperforming loans to total loans
|
2.24
|
%
|
2.39
|
%
|
2.97
|
%
|
Nonperforming assets to total loans, OREO and
foreclosed assets
|
2.60
|
|
2.77
|
|
3.39
|
|
Nonperforming assets to total assets
|
1.53
|
|
1.59
|
|
1.94
|
|
Net
charge-offs to average loans (for the three months ended)
(annualized)
|
.83
|
|
.95
|
|
2.09
|
|
Allowance
for loan and lease losses to total loans
|
2.73
|
|
2.92
|
|
3.25
|
|
Allowance
for loan and lease losses to nonperforming loans (e)
|
122
|
|
122
|
|
109
|
|
|
(a)
|
Amounts
include consolidated variable interest entities. Our third quarter
2011 Form 10-Q included, and our 2011 Form 10-K will include,
additional information regarding these Consolidated Balance Sheet
line items.
|
|
(b)
|
Amounts
include assets for which we have elected the fair value option. Our
third quarter 2011 Form 10-Q included, and our 2011 Form 10-K will
include, additional information regarding these Consolidated
Balance Sheet line items.
|
|
(c)
|
Amounts
include our equity interest in BlackRock.
|
|
(d)
|
The ratios
as of December 31, 2011 are estimated.
|
|
(e)
|
The
allowance for loan and lease losses includes impairment reserves
attributable to purchased impaired loans. Nonperforming loans do
not include government insured or guaranteed loans, loans held for
sale, loans accounted for under the fair value option and purchased
impaired loans.
|
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
We make statements in this news release and related conference
call, and may from time to time make other statements, regarding
our outlook for earnings, revenues, expenses, capital levels,
liquidity levels, asset levels, asset quality and other matters
regarding or affecting PNC and its future business and operations
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," "see," "look," "intend," "outlook,"
"project," "forecast," "estimate," "goal," "will," "should" 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 made. We do
not assume any duty and do not undertake to update forward-looking
statements. Actual results or future events could differ, possibly
materially, from those anticipated in forward-looking statements,
as well as from historical performance.
Our forward-looking statements are subject to the following
principal risks and uncertainties.
- Our businesses, financial results and balance sheet values are
affected by business and economic conditions, including the
following:
- Changes in interest rates and valuations in debt, equity and
other financial markets.
- Disruptions in the liquidity and other functioning of U.S. and
global financial markets.
- The impact on financial markets and the economy of the
downgrade by Standard & Poor's of U.S. Treasury obligations and
other U.S. government-backed debt, as well as issues surrounding
the level of U.S. and European government debt and concerns
regarding the creditworthiness of certain sovereign governments in
Europe.
- Actions by Federal Reserve, U.S. Treasury and other government
agencies, including those that impact money supply and market
interest rates.
- Changes in customers', suppliers' and other counterparties'
performance and creditworthiness.
- Slowing or failure of the current moderate economic
recovery.
- Continued effects of aftermath of recessionary conditions and
uneven spread of positive impacts of recovery on the economy and
our counterparties, including adverse impacts on levels of
unemployment, loan utilization rates, delinquencies, defaults and
counterparty ability to meet credit and other obligations.
- Changes in customer preferences and behavior, whether due to
changing business and economic conditions, legislative and
regulatory initiatives, or other factors.
- Our forward-looking financial statements are subject to the
risk that economic and financial market conditions will be
substantially different than we are currently expecting. These
statements are based on our current view that the modest economic
expansion will persist in 2012 and interest rates will remain very
low.
- Legal and regulatory developments could have an impact on our
ability to operate our businesses, financial condition, results of
operations, competitive position, reputation, or pursuit of
attractive acquisition opportunities. Reputational impacts could
affect matters such as business generation and retention,
liquidity, funding, and ability to attract and retain management.
These developments could include:
- Changes resulting from legislative and regulatory reforms,
including broad-based restructuring of financial industry
regulation and changes to laws and regulations involving tax,
pension, bankruptcy, consumer protection, and other industry
aspects, and changes in accounting policies and principles. We will
be impacted by extensive reforms provided for in the Dodd-Frank
Wall Street Reform and Consumer Protection Act and otherwise
growing out of the recent financial crisis, the precise nature,
extent and timing of which, and their impact on us, remains
uncertain.
- Changes to regulations governing bank capital and liquidity
standards, including due to the Dodd-Frank Act and to Basel III
initiatives.
- Unfavorable resolution of legal proceedings or other claims and
regulatory and other governmental investigations or other
inquiries. In addition to matters relating to PNC's business and
activities, such matters may include proceedings, claims,
investigations, or inquiries relating to pre-acquisition business
and activities of acquired companies, such as National City. These
matters may result in monetary judgments or settlements or other
remedies, including fines, penalties, restitution or alterations in
our business practices, and in additional expenses and collateral
costs, and may cause reputational harm to PNC.
- Results of regulatory examination and supervision process,
including our failure to satisfy requirements of agreements with
governmental agencies.
- Impact on business and operating results of any costs
associated with obtaining rights in intellectual property claimed
by others and of adequacy of our intellectual property protection
in general.
- Business and operating results are affected by our ability to
identify and effectively manage risks inherent in our businesses,
including, where appropriate, through effective use of third-party
insurance, derivatives, and capital management techniques, and to
meet evolving regulatory capital standards. In particular, our
results currently depend on our ability to manage elevated levels
of impaired assets.
- Business and operating results also include impacts relating to
our equity interest in BlackRock, Inc. and rely to a significant
extent on information provided to us by BlackRock. Risks and
uncertainties that could affect BlackRock are discussed in more
detail by BlackRock in its SEC filings.
- Our planned acquisition of RBC Bank (USA) presents us with risks and uncertainties
related both to the acquisition transaction itself and its
integration into PNC after closing, including:
- The transaction (including integration of RBC Bank
(USA)'s businesses) may be
substantially more expensive to complete than anticipated.
Anticipated benefits, including 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 also on the extent of credit losses in the
acquired loan portfolios and the extent of deposit attrition, in
part related to the state of economic and financial markets. Also,
litigation and governmental investigations that may be filed or
commenced, as a result of this transaction or otherwise, could
impact the timing or realization of anticipated benefits to
PNC.
- Integration of RBC Bank (USA)'s business and operations into PNC, which
will include conversion of RBC Bank (USA)'s different systems and procedures, may
take longer than anticipated or be more costly than anticipated or
have unanticipated adverse results relating to RBC Bank
(USA)'s or PNC's existing
businesses. PNC's ability to integrate RBC Bank (USA) successfully may be adversely affected by
the facts that this transaction will result in PNC entering several
markets where PNC does not currently have any meaningful retail
presence and that the conversion is taking place simultaneously
with the acquisition.
- In addition to the planned RBC Bank (USA) transaction, we grow our business in part
by acquiring from time to time other financial services companies,
financial services assets and related deposits. These other
acquisitions often present risks and uncertainties analogous to
those presented by the RBC Bank (USA) transaction. Acquisition risks include
those presented by the nature of the business acquired, as well as
risks and uncertainties related to the acquisition transactions
themselves, regulatory issues, and the integration of the acquired
businesses into PNC after closing.
- Competition can have an impact on customer acquisition, growth
and retention and on credit spreads and product pricing, which can
affect market share, deposits and revenues. Industry restructuring
in the current environment could also impact our business and
financial performance through changes in counterparty
creditworthiness and performance and in the competitive and
regulatory landscape. Our ability to anticipate and respond to
technological changes can also impact our ability to respond to
customer needs and meet competitive demands.
- Business and operating results can also be affected by
widespread disasters, dislocations, terrorist activities or
international hostilities through impacts on the economy and
financial markets generally or on us or our counterparties
specifically.
We provide greater detail regarding some of these factors in our
2010 Form 10-K and 2011 Form 10-Qs, including Risk Factors and Risk
Management sections of those reports, and our subsequent SEC
filings. Our forward-looking statements may also be subject to
other risks and uncertainties, including those we may discuss
elsewhere in this news release or in SEC filings, accessible on the
SEC's website at www.sec.gov and on our corporate website at
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.
CONTACTS:
MEDIA:
Fred Solomon
(412) 762-4550
corporate.communications@pnc.com
INVESTORS:
William H. Callihan
(412) 762-8257
investor.relations@pnc.com
SOURCE The PNC Financial Services Group, Inc.