PITTSBURGH, April 15, 2020 /PRNewswire/ -- The PNC
Financial Services Group, Inc. (NYSE: PNC) today reported:
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For the
quarter
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1Q20
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4Q19
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1Q19
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Net
income $ millions
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$915
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$1,381
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$1,271
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Diluted earnings per
common share
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$1.95
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$2.97
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$2.61
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"In these unprecedented
times that we are collectively experiencing, PNC remains
squarely focused on meeting the needs of our customers and
addressing the specific
challenges of those facing hardship due to the coronavirus
pandemic. We are
continuing our legacy of supporting the communities we serve,
committing $30 million
to relief programs, while implementing broad measures to keep our
employees safe,
with minimal disruption to our customers. PNC also is supporting
the broader financial
system at a critical time and fulfilling an important role, along
with other banks, by
serving as facilitator of government stimulus programs. Our results
for the first quarter
were good, but the extraordinary changes in the economic backdrop
occurring in
March and the implications of the broad-based response to the
COVID-19 outbreak
had a material impact on our provision for credit losses. With our
strong capital and
liquidity and leading technology, we will continue to serve our
stakeholders while
navigating the current challenges." Bill
Demchak, PNC Chairman, President and Chief Executive
Officer
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Economic Environment
The COVID-19 outbreak and public health response to contain it
have resulted in recessionary economic and financial market
conditions as of the end of the first quarter that did not exist at
the beginning of the quarter. During March
2020 in response, the Federal Reserve reduced the federal
funds rate 1.5 percentage points to .00 to .25 percent. The
recession that has started in the U.S. as a result of
government-mandated closures and stay at home orders is
significantly impacting the U.S. labor market, consumer spending
and business investment. As a result, the U.S. government enacted
the CARES Act, the largest economic stimulus package in the
nation's history in an effort to lessen the impact of COVID-19 on
consumers and businesses.
Income Statement Highlights
First quarter 2020 compared with fourth quarter 2019
- Net income was $915 million, a
decrease of $466 million driven by a
higher provision for credit losses.
- Total revenue of $4.5 billion
declined $92 million, or 2
percent.
- Net interest income of $2.5
billion increased $23 million,
or 1 percent, primarily due to lower rates on deposits and
borrowings and higher loan and securities balances partially offset
by lower loan and other earning asset yields and one less day in
the first quarter.
-
- Net interest margin increased 6 basis points to 2.84
percent.
- Noninterest income of $2.0
billion decreased $115
million, or 5 percent.
-
- Fee income of $1.7 billion was
stable as higher residential mortgage revenue and corporate service
fees were offset by lower asset management revenue, service charges
on deposits and consumer service fees.
- Other noninterest income of $343
million declined $113 million
primarily due to negative valuation adjustments of private equity
investments and a fourth quarter gain on the sale of proprietary
mutual funds partially offset by higher net securities gains in the
first quarter.
- Noninterest expense of $2.5
billion decreased $219
million, or 8 percent, primarily due to lower incentive
compensation and benefits expense, the impact of fourth quarter
equipment write-offs and lower marketing expense.
-
- The efficiency ratio improved to 56 percent for the first
quarter from 60 percent in the fourth quarter.
- Provision for credit losses of $914
million, which was calculated
under the Current Expected Credit Loss (CECL) accounting
standard effective January 1,
2020, increased $693 million primarily due to the
significant economic impact of COVID-19 and loan growth.
-
- Provision was $506 million for
the commercial portfolio and $399
million for the consumer portfolio.
- The effective tax rate declined to 13.7 percent for the first
quarter compared with 15.1 percent for the fourth quarter primarily
due to the benefit from resolution of certain tax matters and the
impact of lower pretax earnings.
Balance Sheet Highlights
- Loans at March 31, 2020 increased
$24.8 billion, or 10 percent, to
$264.6 billion compared with
December 31, 2019. Commercial lending
balances increased $24.1 billion, or
15 percent, reflecting higher utilization of loan commitments near
quarter end driven by the economic impact of COVID-19. Consumer
lending balances increased $.7
billion.
-
- Unfunded commercial lending commitments declined to
$116.0 billion at March 31, 2020 from $131.8
billion at December 31,
2019.
- Average loans increased $4.7
billion, or 2 percent, to $243.6
billion in the first quarter compared with the fourth
quarter.
-
- Average commercial lending balances of $164.1 billion increased $3.3 billion, or 2 percent, in PNC's corporate
banking, real estate and business credit businesses.
- Average consumer lending balances of $79.5 billion increased $1.4 billion, or 2 percent, due to growth in
auto, residential mortgage, credit card and unsecured installment
loans.
- Credit quality performance:
-
- Overall delinquencies of $1.5
billion at March 31, 2020
decreased $21 million, or 1 percent,
compared with December 31, 2019.
- Nonperforming assets of $1.8
billion at March 31, 2020 were
stable with December 31, 2019.
- Net loan charge-offs were $212
million for the first quarter compared with $209 million for the fourth quarter.
- The allowance for credit losses for loans and leases and
off-balance sheet credit exposures of $4.4
billion to total loans was 1.66 percent at March 31, 2020, and reflects the January 1, 2020 transition adjustment of
$.6 billion for adoption of the CECL
accounting standard.
- Deposits at March 31, 2020
increased $16.7 billion, or 6
percent, to $305.2 billion compared
with December 31, 2019 as higher
commercial deposits near quarter end reflected liquidity maintained
by customers due to the economic impact of COVID-19.
-
- Average deposits increased $2.0
billion, or 1 percent, to $289.7
billion in the first quarter compared with the fourth
quarter due to growth in consumer deposits partially offset by
seasonal declines in commercial deposits.
- Investment securities at March 31,
2020 increased $3.7 billion,
or 4 percent, to $90.5 billion
compared with December 31, 2019.
-
- Average investment securities increased $.9 billion, or 1 percent, to $84.4 billion in the first quarter compared with
the fourth quarter.
- Balances held with the Federal Reserve of $19.6 billion at March 31,
2020 decreased $3.6 billion
compared with December 31, 2019, and
first quarter average balances of $17.3
billion decreased $5.7 billion
compared with the fourth quarter.
- PNC returned $1.9 billion of
capital to shareholders in the first quarter through repurchases of
10.1 million common shares for $1.4
billion and dividends on common shares of $.5 billion.
-
- PNC announced on March 16, 2020 a
temporary suspension of its common stock repurchase program through
June 30, 2020 in conjunction with the
Federal Reserve's effort to support the U.S. economy during the
COVID-19 outbreak.
- On April 2, 2020, the PNC board
of directors declared a quarterly cash dividend on common stock of
$1.15 per share effective with the
May 5, 2020 dividend payment
date.
- PNC maintained strong capital and liquidity positions.
-
- The Basel III common equity Tier 1 capital ratio was an
estimated 9.4 percent at March 31,
2020 and 9.5 percent at December 31,
2019.
- The March 31, 2020 ratio reflects
PNC's election of a five-year transition provision to delay for two
years the full impact of CECL
on regulatory capital, followed by a three-year transition
period.
- The Liquidity Coverage Ratio at March
31, 2020 for both PNC and PNC Bank, N.A. exceeded the
regulatory minimum requirement.
- March 31, 2020 ratios incorporate
Tailoring Rule changes that reduced net cash outflows by 15 percent
in the ratio calculations effective January
1, 2020.
Earnings
Summary
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In millions,
except per share data
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|
1Q20
|
|
|
4Q19
|
|
|
1Q19
|
|
Net income
|
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$
|
915
|
|
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$
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1,381
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$
|
1,271
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Net income
attributable to diluted common shares
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$
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839
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$
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1,302
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$
|
1,189
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Diluted earnings per
common share
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$
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1.95
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$
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2.97
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$
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2.61
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Average diluted
common shares outstanding
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430
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|
438
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|
456
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Return on average
assets
|
|
.89
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%
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|
1.33
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%
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|
1.34
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%
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Return on average
common equity
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|
7.51
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%
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|
11.54
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%
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|
11.13
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%
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Book value per common
share
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Quarter
end
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$
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106.70
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$
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104.59
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$
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98.47
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Tangible book value
per common share (non-GAAP)
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Quarter
end
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$
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84.93
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$
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83.30
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$
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78.07
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Cash dividends
declared per common share
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$
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1.15
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$
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1.15
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$
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.95
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The Consolidated Financial Highlights accompanying this news
release include additional information regarding reconciliations of
non-GAAP financial measures to reported (GAAP) amounts. This
information supplements results as reported in accordance with GAAP
and should not be viewed in isolation from, or as a substitute for,
GAAP results. Fee income, a non-GAAP financial measure, refers to
noninterest income in the following categories: asset management,
consumer services, corporate services, residential mortgage and
service charges on deposits. Information in this news release,
including the financial tables, is unaudited.
CONSOLIDATED
REVENUE REVIEW
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Revenue
|
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Change
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Change
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|
|
|
|
|
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1Q20 vs
|
1Q20 vs
|
In
millions
|
1Q20
|
|
|
4Q19
|
|
|
1Q19
|
|
4Q19
|
1Q19
|
Net interest
income
|
$
|
2,511
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|
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$
|
2,488
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|
|
$
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2,475
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|
1
|
%
|
1
|
%
|
Noninterest
income
|
2,006
|
|
|
2,121
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|
|
1,811
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(5)
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%
|
11
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%
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Total
revenue
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$
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4,517
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$
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4,609
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$
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4,286
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(2)
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%
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5
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%
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Total revenue for the first quarter of 2020 decreased
$92 million compared with the fourth
quarter as lower noninterest income was partially offset by higher
net interest income. In the comparison with first quarter 2019,
total revenue increased $231 million
due to higher noninterest income and net interest income.
Net interest income for the first quarter of 2020 increased
$23 million compared with the fourth
quarter primarily due to lower rates on deposits and borrowings and
higher loan and securities balances partially offset by lower loan
and other earning asset yields and one less day in the first
quarter. Net interest income increased $36
million compared with the first quarter of 2019 as lower
rates on borrowings and deposits, higher loan and securities
balances and one additional day in first quarter 2020 were
substantially offset by lower yields on loans, securities and other
earning assets. The net interest margin increased to 2.84 percent
for the first quarter of 2020 from 2.78 percent for the fourth
quarter due to lower rates on deposits and borrowings and higher
securities yields partially offset by lower loan yields. The margin
decreased from 2.98 percent in the first quarter of 2019 as a
result of lower yields on earning assets partially offset by lower
funding costs.
Noninterest
Income
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
1Q20 vs
|
1Q20 vs
|
In
millions
|
1Q20
|
|
|
4Q19
|
|
|
1Q19
|
|
4Q19
|
1Q19
|
Asset
management
|
$
|
382
|
|
|
$
|
504
|
|
|
$
|
437
|
|
(24)
|
%
|
(13)
|
%
|
Consumer
services
|
377
|
|
|
390
|
|
|
371
|
|
(3)
|
%
|
2
|
%
|
Corporate
services
|
526
|
|
|
499
|
|
|
462
|
|
5
|
%
|
14
|
%
|
Residential
mortgage
|
210
|
|
|
87
|
|
|
65
|
|
141
|
%
|
223
|
%
|
Service charges on
deposits
|
168
|
|
|
185
|
|
|
168
|
|
(9)
|
%
|
—
|
|
Other
|
343
|
|
|
456
|
|
|
308
|
|
(25)
|
%
|
11
|
%
|
|
$
|
2,006
|
|
|
$
|
2,121
|
|
|
$
|
1,811
|
|
(5)
|
%
|
11
|
%
|
|
|
|
|
|
|
|
|
Noninterest income for the first quarter of 2020 decreased
$115 million compared with the fourth
quarter. Asset management revenue, including PNC's equity
investment in BlackRock, decreased $122
million reflecting the impact of BlackRock's previously
announced charitable contribution and lower average equity markets.
Consumer services decreased $13
million and service charges on deposits declined
$17 million due to seasonally lower
transaction volumes and activity as well as fees waived related to
the economic impact of COVID-19. Corporate services grew
$27 million as a result of higher
merger and acquisition advisory fees and a higher benefit from
commercial mortgage servicing rights valuation, net of economic
hedge. Residential mortgage revenue increased $123 million due to a higher benefit from
residential mortgage servicing rights valuation, net of economic
hedge, as well as higher loan sales revenue and servicing fees.
Other noninterest income decreased $113
million primarily due to negative valuation adjustments of
private equity investments in the first quarter compared with
positive valuations in the fourth quarter and the impact of a
fourth quarter gain on the sale of proprietary mutual funds
partially offset by higher net securities gains, which were
$182 million in the first
quarter.
Noninterest income for the first quarter of 2020 increased
$195 million compared with the first
quarter of 2019. Asset management revenue decreased $55 million reflecting BlackRock's charitable
contribution and the impact of 2019 sales of PNC's retirement
recordkeeping business and proprietary mutual funds. Consumer
services increased $6 million and
included higher brokerage revenue. Corporate services grew
$64 million primarily due to higher
treasury management product revenue, a higher benefit from
commercial mortgage servicing rights valuation, net of economic
hedge, and higher merger and acquisition advisory fees. Residential
mortgage revenue increased $145
million due to higher results from residential mortgage
servicing rights valuation, net of economic hedge, and higher loan
sales revenue. Service charges on deposits were stable as higher
transaction volumes were offset by a reduction of customer fees
charged. Other noninterest income increased $35 million reflecting higher net securities
gains partially offset by negative valuation adjustments of private
equity investments in the first quarter of 2020.
CONSOLIDATED
EXPENSE REVIEW
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|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
Expense
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
1Q20 vs
|
1Q20 vs
|
In
millions
|
1Q20
|
|
|
4Q19
|
|
|
1Q19
|
|
4Q19
|
1Q19
|
Personnel
|
$
|
1,369
|
|
|
$
|
1,468
|
|
|
$
|
1,414
|
|
(7)
|
%
|
(3)
|
%
|
Occupancy
|
207
|
|
|
201
|
|
|
215
|
|
3
|
%
|
(4)
|
%
|
Equipment
|
287
|
|
|
348
|
|
|
273
|
|
(18)
|
%
|
5
|
%
|
Marketing
|
58
|
|
|
77
|
|
|
65
|
|
(25)
|
%
|
(11)
|
%
|
Other
|
622
|
|
|
668
|
|
|
611
|
|
(7)
|
%
|
2
|
%
|
|
$
|
2,543
|
|
|
$
|
2,762
|
|
|
$
|
2,578
|
|
(8)
|
%
|
(1)
|
%
|
|
|
|
|
|
|
|
|
Noninterest expense for the first quarter of 2020 decreased
$219 million compared with the fourth
quarter. Personnel expense decreased $99
million due to lower incentive compensation and benefits
expense, including the impact of a fourth quarter award of a
contribution to health savings accounts. Equipment expense declined
$61 million attributable to fourth
quarter technology-related write-offs and marketing expense was
seasonally lower.
Noninterest expense for the first quarter of 2020 decreased
$35 million compared with the first
quarter of 2019 primarily due to lower personnel expense reflecting
lower incentive compensation partially offset by business
growth.
The effective tax rate was 13.7 percent for the first quarter of
2020, 15.1 percent for the fourth quarter of 2019 and 16.3 percent
for the first quarter of 2019. The decline in the effective tax
rate in the first quarter of 2020 was primarily due to the benefit
from resolution of certain tax matters and the impact of lower
pretax earnings.
CONSOLIDATED BALANCE SHEET REVIEW
Average total assets were $412.4
billion in the first quarter of 2020 compared with
$411.4 billion in the fourth quarter
of 2019 and $385.9 billion in the
first quarter of 2019. Total assets were $445.5 billion at March
31, 2020, $410.3 billion at
December 31, 2019 and $392.8
billion at March 31, 2019.
Assets at March 31, 2020 reflected
increases in commercial lending balances near quarter end driven by
the economic impact of COVID-19.
Loans
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
1Q20 vs
|
1Q20 vs
|
In
billions
|
1Q20
|
|
4Q19
|
|
1Q19
|
4Q19
|
1Q19
|
Average
|
|
|
|
|
|
|
|
Commercial
lending
|
$
|
164.1
|
|
|
$
|
160.8
|
|
|
$
|
154.8
|
|
2
|
%
|
6
|
%
|
Consumer
lending
|
79.5
|
|
|
78.1
|
|
|
73.8
|
|
2
|
%
|
8
|
%
|
Average
loans
|
$
|
243.6
|
|
|
$
|
238.9
|
|
|
$
|
228.6
|
|
2
|
%
|
7
|
%
|
|
|
|
|
|
|
|
|
Quarter
end
|
|
|
|
|
|
|
|
Commercial
lending
|
$
|
184.7
|
|
|
$
|
160.6
|
|
|
$
|
158.4
|
|
15
|
%
|
17
|
%
|
Consumer
lending
|
79.9
|
|
|
79.2
|
|
|
73.9
|
|
1
|
%
|
8
|
%
|
Total
loans
|
$
|
264.6
|
|
|
$
|
239.8
|
|
|
$
|
232.3
|
|
10
|
%
|
14
|
%
|
|
|
|
|
|
|
|
|
Total loans at March 31, 2020
increased $24.8 billion compared with
December 31, 2019. Commercial lending
balances increased $24.1 billion
reflecting higher utilization of loan commitments near quarter end
driven by the economic impact of COVID-19 on customer liquidity
needs. Unfunded commercial lending commitments declined to
$116.0 billion at March 31, 2020 from $131.8
billion at December 31, 2019.
Consumer lending balances increased $.7
billion.
Average loans for the first quarter of 2020 grew $4.7 billion compared with the fourth quarter.
Average commercial lending balances increased $3.3 billion primarily in PNC's corporate
banking, real estate and business credit businesses. Average
consumer lending balances increased $1.4
billion due to growth in auto, residential mortgage, credit
card and unsecured installment loans.
First quarter 2020 period end and average loans increased
$32.3 billion and $15.0 billion, respectively, compared with first
quarter 2019 driven by overall growth in both commercial and
consumer lending, and higher utilization by commercial customers at
the end of first quarter 2020.
Investment
Securities
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
1Q20 vs
|
1Q20 vs
|
In
billions
|
1Q20
|
|
4Q19
|
|
1Q19
|
4Q19
|
1Q19
|
Average
|
$
|
84.4
|
|
|
$
|
83.5
|
|
|
$
|
82.3
|
|
1
|
%
|
3
|
%
|
Quarter
end
|
$
|
90.5
|
|
|
$
|
86.8
|
|
|
$
|
83.8
|
|
4
|
%
|
8
|
%
|
|
|
|
|
|
|
|
|
Average investment securities for the first quarter of 2020
increased $.9 billion and period end
balances increased $3.7 billion
compared with the fourth quarter primarily due to net purchases of
agency residential mortgage-backed securities, corporate debt
securities and commercial mortgage-backed securities. Effective
January 1, 2020 upon adoption of
Accounting Standards Update 2019-04, $16.2
billion of debt securities were transferred from held to
maturity to available for sale. First quarter 2020 average and
period-end investment securities increased $2.1 billion and $6.7
billion, respectively, compared with the first quarter of
2019 primarily due to net increases in agency residential
mortgage-backed securities. Net unrealized gains on available for
sale securities were $2.9 billion at
March 31, 2020, $1.4 billion at December
31, 2019 and $.5 billion at
March 31, 2019.
Average balances held with the Federal Reserve Bank were
$17.3 billion in the first quarter of
2020, $23.0 billion in the fourth
quarter of 2019 and $14.7 billion in
the first quarter of 2019. Balances held with the Federal Reserve
were $19.6 billion at March 31, 2020, $23.2
billion at December 31, 2019
and $15.0 billion at March 31, 2019.
Deposits
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
1Q20 vs
|
1Q20 vs
|
In
billions
|
1Q20
|
|
4Q19
|
|
1Q19
|
4Q19
|
1Q19
|
Average
|
|
|
|
|
|
|
|
Noninterest-bearing
|
$
|
74.4
|
|
|
$
|
73.6
|
|
|
$
|
71.4
|
|
1
|
%
|
4
|
%
|
Interest-bearing
|
215.3
|
|
|
214.1
|
|
|
195.8
|
|
1
|
%
|
10
|
%
|
Average
deposits
|
$
|
289.7
|
|
|
$
|
287.7
|
|
|
$
|
267.2
|
|
1
|
%
|
8
|
%
|
|
|
|
|
|
|
|
|
Quarter
end
|
|
|
|
|
|
|
|
Noninterest-bearing
|
$
|
81.6
|
|
|
$
|
72.8
|
|
|
$
|
71.6
|
|
12
|
%
|
14
|
%
|
Interest-bearing
|
223.6
|
|
|
215.7
|
|
|
199.6
|
|
4
|
%
|
12
|
%
|
Total
deposits
|
$
|
305.2
|
|
|
$
|
288.5
|
|
|
$
|
271.2
|
|
6
|
%
|
13
|
%
|
|
|
|
|
|
|
|
|
Average deposits for the first quarter of 2020 increased
$2.0 billion compared with the fourth
quarter due to growth in consumer deposits partially offset by
seasonal declines in commercial deposits. Deposits at March 31, 2020 increased $16.7 billion compared with December 31, 2019 as higher commercial deposits
near quarter end reflected liquidity maintained by customers due to
the economic impact of COVID-19. First quarter 2020 average and
period-end deposits increased $22.5
billion and $34.0 billion,
respectively, compared with first quarter 2019 driven by overall
deposit and customer growth as well as liquidity maintained by
customers at the end of first quarter 2020.
Borrowed
Funds
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
1Q20 vs
|
1Q20 vs
|
In
billions
|
1Q20
|
|
4Q19
|
|
1Q19
|
4Q19
|
1Q19
|
Average
|
$
|
57.2
|
|
|
$
|
60.0
|
|
|
$
|
59.8
|
|
(5)
|
%
|
(4)
|
%
|
Quarter
end
|
$
|
73.4
|
|
|
$
|
60.3
|
|
|
$
|
59.9
|
|
22
|
%
|
23
|
%
|
|
|
|
|
|
|
|
|
Average borrowed funds for the first quarter of 2020 decreased
$2.8 billion compared with the fourth
quarter due to lower Federal Home Loan Bank borrowings partially
offset by higher bank notes and senior debt. Borrowed funds at
March 31, 2020 increased $13.1 billion compared with December 31, 2019 reflecting higher Federal Home
Loan Bank borrowings, bank notes and senior debt, and repurchase
agreements in part related to enhanced liquidity to meet customer
needs caused by the economic impact of COVID-19. Average borrowed
funds for the first quarter of 2020 decreased $2.6 billion compared with the first quarter of
2019, and period-end borrowed funds increased $13.5 billion.
Capital
|
|
|
|
|
|
|
3/31/2020
*
|
|
12/31/2019
|
|
3/31/2019
|
Common shareholders'
equity In billions
|
$
|
45.3
|
|
|
$
|
45.3
|
|
|
$
|
44.5
|
|
Basel III common
equity Tier 1 capital ratio
|
9.4
|
%
|
|
9.5
|
%
|
|
9.8
|
%
|
Basel III common
equity Tier 1 fully implemented capital
ratio
|
9.2
|
%
|
|
N/A
|
|
|
N/A
|
|
* Ratios
estimated
|
|
|
|
|
|
|
|
|
|
|
|
PNC maintained a strong capital position. Common shareholders'
equity at March 31, 2020 was stable
with December 31, 2019. An increase
in accumulated other comprehensive income of $1.7 billion and first quarter net income were
offset by share repurchases and dividends and the day-one effect of
adoption of the CECL accounting standard of $.7 billion.
PNC returned $1.9 billion of
capital to shareholders in the first quarter through repurchases of
10.1 million common shares for $1.4
billion and dividends on common shares of $.5 billion. PNC has purchased a total of 24.0
million shares for $3.4 billion under
current share repurchase programs of up to $5.3 billion for the four-quarter period ending
with the second quarter of 2020. These programs include an
additional $1.0 billion in common
shares for which PNC received approval in January 2020.
PNC announced on March 16, 2020 a
temporary suspension of its common stock repurchase program through
June 30, 2020 in conjunction with the
Federal Reserve's effort to support the U.S. economy during the
COVID-19 outbreak.
On April 2, 2020, the PNC board of
directors declared a quarterly cash dividend on common stock of
$1.15 per share effective with the
May 5, 2020 dividend payment
date.
For information regarding PNC's Basel III capital ratios, see
Capital Ratios in the Consolidated Financial Highlights. The 2019
Tailoring Rules became effective for PNC as of January 1, 2020. PNC elected a five-year
transition provision effective March 31,
2020 to delay for two years the full impact of CECL on regulatory
capital, followed by a three-year transition period. The
March 31, 2020 fully implemented
ratio reflects the full impact of CECL and excludes the benefits of
phase-ins.
CREDIT QUALITY
REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Quality
|
|
|
|
|
|
Change
|
Change
|
|
At or for the quarter
ended
|
3/31/20 vs
|
3/31/20 vs
|
In
millions
|
3/31/2020
|
|
12/31/2019
|
|
3/31/2019
|
12/31/19
|
3/31/19
|
Provision for credit
losses
|
$
|
914
|
|
|
$
|
221
|
|
|
$
|
189
|
|
314
|
%
|
384
|
%
|
Net loan
charge-offs
|
$
|
212
|
|
|
$
|
209
|
|
|
$
|
136
|
|
1
|
%
|
56
|
%
|
Nonperforming
loans
|
$
|
1,644
|
|
|
$
|
1,635
|
|
|
$
|
1,653
|
|
1
|
%
|
(1)
|
%
|
Nonperforming
assets
|
$
|
1,755
|
|
|
$
|
1,752
|
|
|
$
|
1,785
|
|
—
|
|
(2)
|
%
|
Accruing loans past
due 90 days or
more
|
$
|
534
|
|
|
$
|
585
|
|
|
$
|
590
|
|
(9)
|
%
|
(9)
|
%
|
Allowance for credit
losses -
loans and
leases*
|
$
|
3,944
|
|
|
$
|
2,742
|
|
|
$
|
2,692
|
|
44
|
%
|
47
|
%
|
Allowance for credit
losses -
off-balance sheet
credit exposures**
|
$
|
450
|
|
|
$
|
318
|
|
|
$
|
279
|
|
42
|
%
|
61
|
%
|
Allowance for credit
losses for loans,
leases and off-balance sheet credit
exposures to total loans
|
1.66
|
%
|
|
|
|
|
|
|
|
* Allowance for loan
and lease losses at 12/31/19 and 3/31/19
|
** Allowance for
unfunded commitments and letters of credit at 12/31/19 and
3/31/19
|
Provision for credit losses was $914
million in the first quarter of 2020, an increase of
$693 million compared with the fourth
quarter of 2019. PNC adopted the CECL accounting standard effective
January 1, 2020 and the reasonable
and supportable forecasts of future macroeconomic scenarios used in
the estimation of expected credit losses were materially affected
by the adverse economic impact of COVID-19, resulting in a
significant increase in the provision. Loan portfolio growth also
contributed to higher reserve levels. Provision for credit losses
was $506 million for the commercial
portfolio, $399 million for the
consumer portfolio and $9 million for
other assets and securities.
Net loan charge-offs for the first quarter of 2020 increased
slightly by $3 million compared with
the fourth quarter as increases in commercial loan, credit card and
auto loan charge-offs were partially offset by higher recoveries.
Compared with first quarter 2019, net loan charge-offs increased
$76 million due to higher commercial
net charge-offs of $47 million and
higher consumer net charge-offs of $29
million. Net charge-offs were .35 percent of average loans
on an annualized basis for both the first quarter of 2020 and
fourth quarter of 2019 and .24 percent for the first quarter of
2019.
Nonperforming assets at March 31,
2020 were essentially stable with December 31, 2019. Higher nonperforming loans in
the commercial and auto portfolios were partially offset by lower
nonperforming home equity and residential mortgage loans.
Nonperforming assets decreased $30
million compared with March 31,
2019 due to lower nonperforming home equity and residential
mortgage loans and lower other real estate owned and foreclosed
assets partially offset by higher nonperforming commercial and auto
loans. Nonperforming assets to total assets were .39 percent at
March 31, 2020, .43 percent at
December 31, 2019 and .45 percent at
March 31, 2019.
Overall delinquencies at March 31,
2020 decreased $21 million, or
1 percent, compared with December 31,
2019. Loans past due 30 to 59 days increased $27 million driven by residential mortgage loans.
Loans past due 60 to 89 days increased $3
million and loans past due 90 days or more decreased
$51 million. Overall delinquencies at
March 31, 2020 increased $47 million, or 3 percent, compared with
March 31, 2019 reflecting higher auto
and credit card past due loans. Loans past due 30 to 59 days
increased $54 million, loans past due
60 to 89 days increased $49 million
and loans past due 90 days or more decreased $56 million.
The allowance for credit losses for loans and leases and
off-balance sheet credit exposures was $4.4
billion at March 31, 2020.
This reflects the January 1, 2020
transition adjustment of $.6 billion
for adoption of the CECL accounting standard that was added to the
December 31, 2019 allowance for loan
and lease losses and off-balance sheet credit exposures of
$3.1 billion. At March 31, 2020, the allowance for credit losses
for loans and leases and off-balance sheet credit exposures to
total loans was 1.66 percent.
BUSINESS SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
Business Segment
Income
|
|
|
|
|
|
In
millions
|
1Q20
|
|
4Q19
|
|
1Q19
|
Retail
Banking
|
$
|
201
|
|
|
$
|
277
|
|
|
$
|
264
|
|
Corporate &
Institutional Banking
|
370
|
|
|
649
|
|
|
552
|
|
Asset Management
Group
|
54
|
|
|
91
|
|
|
45
|
|
Other, including
BlackRock
|
290
|
|
|
364
|
|
|
410
|
|
Net income
|
$
|
915
|
|
|
$
|
1,381
|
|
|
$
|
1,271
|
|
See accompanying
notes in Consolidated Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Banking
|
|
|
|
|
|
|
Change
|
|
|
Change
|
|
|
|
|
|
|
|
|
1Q20 vs
|
|
|
1Q20 vs
|
|
In
millions
|
1Q20
|
|
4Q19
|
|
1Q19
|
|
4Q19
|
|
|
1Q19
|
|
Net interest
income
|
$
|
1,456
|
|
|
$
|
1,402
|
|
|
$
|
1,349
|
|
|
$
|
54
|
|
|
$
|
107
|
|
Noninterest
income
|
$
|
788
|
|
|
$
|
652
|
|
|
$
|
595
|
|
|
$
|
136
|
|
|
$
|
193
|
|
Provision for credit
losses
|
$
|
445
|
|
|
$
|
161
|
|
|
$
|
128
|
|
|
$
|
284
|
|
|
$
|
317
|
|
Noninterest
expense
|
$
|
1,536
|
|
|
$
|
1,530
|
|
|
$
|
1,468
|
|
|
$
|
6
|
|
|
$
|
68
|
|
Earnings
|
$
|
201
|
|
|
$
|
277
|
|
|
$
|
264
|
|
|
$
|
(76)
|
|
|
$
|
(63)
|
|
|
|
|
|
|
|
|
|
|
|
In
billions
|
|
|
|
|
|
|
|
|
|
Average
loans
|
$
|
81.4
|
|
|
$
|
79.5
|
|
|
$
|
75.2
|
|
|
$
|
1.9
|
|
|
$
|
6.2
|
|
Average
deposits
|
$
|
173.0
|
|
|
$
|
170.8
|
|
|
$
|
165.1
|
|
|
$
|
2.2
|
|
|
$
|
7.9
|
|
|
|
|
|
|
|
|
|
|
|
Retail Banking earnings for the first quarter of 2020 decreased
compared to the fourth and first quarters of 2019. Noninterest
income increased in both comparisons due to higher residential
mortgage revenue attributable to a higher benefit from residential
mortgage servicing rights valuation, net of economic hedge, and
increased loan sales revenue. Additionally, noninterest income
increased due to the impact of negative derivative fair value
adjustments related to Visa Class B common shares in the fourth and
first quarters of 2019. Compared with the fourth quarter, these
increases were partially offset by seasonal declines in service
charges on deposits and consumer services, including merchant
services and debit card fees, and fees waived related to the
economic impact of COVID-19. In the comparison with first quarter
2019, growth in consumer services primarily attributable to debit
card and brokerage fees contributed to the increase in noninterest
income. Provision for credit losses for the first quarter of 2020, which was calculated
under the CECL accounting standard, increased in both comparisons
primarily due to the significant economic impact of
COVID-19 and loan growth.
Noninterest expense increased in both comparisons reflecting higher
customer-related transaction costs and personnel expense and,
compared with first quarter 2019, higher equipment costs and ATM
expense resulting from enhanced checking product benefits.
- Average loans increased 2 percent compared with the fourth
quarter and 8 percent compared with the first quarter of 2019 due
to growth in residential mortgage, auto and credit card loans
partially offset by lower education loans driven by continued
runoff in the government guaranteed education loan portfolio.
- Average deposits increased 1 percent compared with the fourth
quarter and 5 percent compared with first quarter 2019 due to
increases in savings and demand deposits partially offset by lower
money market deposits reflecting a shift to relationship-based
savings products.
- Net loan charge-offs were $166
million for the first quarter of 2020 compared with
$154 million in the fourth quarter of
2019 and $132 million in the first
quarter of 2019.
- Residential mortgage loan origination volume was $3.2 billion for the first quarter of 2020
compared with $3.5 billion for the
fourth quarter of 2019 and $1.7
billion for the first quarter of 2019. Approximately 36
percent of first quarter 2020 volume was for home purchase
transactions compared with 40 percent and 56 percent for the fourth
and first quarters of 2019, respectively.
- The third party residential mortgage servicing portfolio was
$118 billion at March 31, 2020 compared with $120 billion at December
31, 2019 and $123 billion at
March 31, 2019. Residential mortgage
loan servicing acquisitions were $2
billion for first quarter 2020 compared with $3 billion for the fourth quarter of 2019 and
$1 billion for the first quarter of
2019.
- Approximately 71 percent of consumer customers used non-teller
channels for the majority of their transactions during the first
quarter of 2020 and the fourth quarter of 2019 compared with 68
percent in the first quarter of 2019.
- Deposit transactions via ATM and mobile channels were 59
percent of total deposit transactions in the first quarter of 2020
compared with 58 percent in the fourth quarter of 2019 and 57
percent in the first quarter of 2019.
Corporate &
Institutional Banking
|
|
|
|
|
|
|
|
|
Change
|
|
|
Change
|
|
|
|
|
|
|
|
|
1Q20 vs
|
|
|
1Q20 vs
|
|
In
millions
|
1Q20
|
|
4Q19
|
|
1Q19
|
|
4Q19
|
|
|
1Q19
|
|
Net interest
income
|
$
|
966
|
|
|
$
|
969
|
|
|
$
|
898
|
|
|
$
|
(3)
|
|
|
$
|
68
|
|
Noninterest
income
|
$
|
694
|
|
|
$
|
646
|
|
|
$
|
576
|
|
|
$
|
48
|
|
|
$
|
118
|
|
Provision for credit
losses
|
$
|
458
|
|
|
$
|
65
|
|
|
$
|
71
|
|
|
$
|
393
|
|
|
$
|
387
|
|
Noninterest
expense
|
$
|
722
|
|
|
$
|
726
|
|
|
$
|
686
|
|
|
$
|
(4)
|
|
|
$
|
36
|
|
Earnings
|
$
|
370
|
|
|
$
|
649
|
|
|
$
|
552
|
|
|
$
|
(279)
|
|
|
$
|
(182)
|
|
|
|
|
|
|
|
|
|
|
|
In
billions
|
|
|
|
|
|
|
|
|
|
Average
loans
|
$
|
151.0
|
|
|
$
|
147.9
|
|
|
$
|
141.9
|
|
|
$
|
3.1
|
|
|
$
|
9.1
|
|
Average
deposits
|
$
|
98.1
|
|
|
$
|
98.5
|
|
|
$
|
88.6
|
|
|
$
|
(0.4)
|
|
|
$
|
9.5
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & Institutional Banking earnings for the first
quarter of 2020 decreased compared to both the fourth and first
quarters of 2019. Noninterest income increased in both comparisons
primarily due to higher capital markets-related revenue and higher
revenue from commercial mortgage banking activities. Higher
treasury management product revenue also contributed to the
increase compared with the first quarter of 2019. Provision for
credit losses in the first quarter of 2020, which was calculated under the CECL
accounting standard, increased in both comparisons primarily due
to the significant economic impact of COVID-19 and portfolio growth, including new
loans and higher utilization.
Noninterest expense increased compared with the first quarter of
2019 largely due to investments in strategic initiatives and
variable costs associated with increased business activity.
- Average loans increased 2 percent compared with the fourth
quarter of 2019 and 6 percent compared with the first quarter of
2019 due to broad growth across PNC's corporate banking, business
credit and real estate businesses, including higher utilization of
loan commitments primarily driven by the economic impact of
COVID-19.
- Average deposits were largely unchanged from the fourth quarter
reflecting lower than usual seasonal declines offset by liquidity
maintained by customers due to the economic impact of COVID-19.
Average deposits increased 11 percent over the first quarter of
2019.
- Net loan charge-offs were $50
million in the first quarter of 2020 compared with
$47 million in the fourth quarter of
2019 and $5 million in the first
quarter of 2019.
Asset Management
Group
|
|
|
|
|
|
|
Change
|
|
|
Change
|
|
|
|
|
|
|
|
|
1Q20 vs
|
|
|
1Q20 vs
|
|
In
millions
|
1Q20
|
|
4Q19
|
|
1Q19
|
|
4Q19
|
|
|
1Q19
|
|
Net interest
income
|
$
|
88
|
|
|
$
|
80
|
|
|
$
|
70
|
|
|
$
|
8
|
|
|
$
|
18
|
|
Noninterest
income
|
$
|
204
|
|
|
$
|
272
|
|
|
$
|
217
|
|
|
$
|
(68)
|
|
|
$
|
(13)
|
|
Provision for credit
losses (benefit)
|
$
|
3
|
|
|
$
|
1
|
|
|
(1)
|
|
|
$
|
2
|
|
|
$
|
4
|
|
Noninterest
expense
|
$
|
219
|
|
|
$
|
232
|
|
|
$
|
230
|
|
|
$
|
(13)
|
|
|
$
|
(11)
|
|
Earnings
|
$
|
54
|
|
|
$
|
91
|
|
|
$
|
45
|
|
|
$
|
(37)
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
In
billions
|
|
|
|
|
|
|
|
|
|
Client assets under
administration at
quarter end
|
$
|
264
|
|
|
$
|
297
|
|
|
$
|
288
|
|
|
$
|
(33)
|
|
|
$
|
(24)
|
|
Average
loans
|
$
|
7.3
|
|
|
$
|
7.1
|
|
|
$
|
6.8
|
|
|
$
|
.2
|
|
|
$
|
.5
|
|
Average
deposits
|
$
|
18.1
|
|
|
$
|
17.9
|
|
|
$
|
12.9
|
|
|
$
|
.2
|
|
|
$
|
5.2
|
|
|
|
|
|
|
|
|
|
|
|
Asset Management Group earnings for the first quarter of 2020
decreased compared with the fourth quarter of 2019 and increased
compared with the first quarter of 2019. Noninterest income
decreased compared with the fourth quarter as a result of a gain on
the sale of proprietary mutual funds in the fourth quarter and the
impact of lower average equity markets. Noninterest income
decreased compared with first quarter 2019 due to lower revenue
related to the 2019 sales of the retirement recordkeeping business
and proprietary mutual funds. Noninterest expense decreased in both
comparisons due to the impact of the 2019 divestitures.
Client assets under administration at March 31, 2020 included discretionary client
assets under management of $136
billion and nondiscretionary client assets under
administration of $128 billion.
Discretionary client assets under management decreased $18 billion compared with December 31, 2019 and $22
billion compared with March 31,
2019 primarily driven by declines in the equity markets, and the fourth quarter
sale of proprietary mutual funds in the March 31, 2019 comparison.
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 investment in BlackRock, and 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 Chief Financial Officer
Robert Q. Reilly will hold a
conference call for investors today at 9:30
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 (800) 616-4707 and (303) 223-4366
(international) and Internet access to the live audio listen-only
webcast of the call is available at www.pnc.com/investorevents.
PNC's first quarter 2020 earnings release, related financial
supplement, and presentation slides to accompany the conference
call remarks will be available at www.pnc.com/investorevents prior
to the beginning of the call. A telephone replay of the call will
be available for one week at (800) 633-8284 and (402) 977-9140
(international), conference ID 21952111 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
|
|
Dollars in
millions, except per share data
|
|
March 31
|
|
December
31
|
|
March 31
|
|
|
|
2020
|
|
2019
|
|
2019
|
|
Revenue
|
|
|
|
|
|
|
|
Net interest
income
|
|
$
|
2,511
|
|
|
$
|
2,488
|
|
|
$
|
2,475
|
|
|
Noninterest
income
|
|
2,006
|
|
|
2,121
|
|
|
1,811
|
|
|
Total
revenue
|
|
4,517
|
|
|
4,609
|
|
|
4,286
|
|
|
Provision for credit
losses
|
|
914
|
|
|
221
|
|
|
189
|
|
|
Noninterest
expense
|
|
2,543
|
|
|
2,762
|
|
|
2,578
|
|
|
Income before income
taxes and noncontrolling interests
|
|
$
|
1,060
|
|
|
$
|
1,626
|
|
|
$
|
1,519
|
|
|
Net income
|
|
$
|
915
|
|
|
$
|
1,381
|
|
|
$
|
1,271
|
|
|
Less:
|
|
|
|
|
|
|
|
Net income
attributable to noncontrolling interests
|
|
7
|
|
|
14
|
|
|
10
|
|
|
Preferred stock
dividends (a)
|
|
63
|
|
|
55
|
|
|
63
|
|
|
Preferred stock
discount accretion and redemptions
|
|
1
|
|
|
1
|
|
|
1
|
|
|
Net income
attributable to common shareholders
|
|
$
|
844
|
|
|
$
|
1,311
|
|
|
$
|
1,197
|
|
|
Less:
|
|
|
|
|
|
|
|
Dividends and
undistributed earnings allocated to
nonvested restricted shares
|
|
4
|
|
|
6
|
|
|
5
|
|
|
Impact of BlackRock
earnings per share dilution
|
|
1
|
|
|
3
|
|
|
3
|
|
|
Net income
attributable to diluted common shares
|
|
$
|
839
|
|
|
$
|
1,302
|
|
|
$
|
1,189
|
|
|
Diluted earnings per
common share
|
|
$
|
1.95
|
|
|
$
|
2.97
|
|
|
$
|
2.61
|
|
|
Cash dividends
declared per common share
|
|
$
|
1.15
|
|
|
$
|
1.15
|
|
|
$
|
.95
|
|
|
Effective tax rate
(b)
|
|
13.7
|
%
|
|
15.1
|
%
|
|
16.3
|
%
|
|
|
|
(a)
|
Dividends are payable
quarterly other than the Series O, Series R and Series S preferred
stock, which are payable
semiannually, with the Series O payable in different quarters than
the Series R and Series S preferred stock.
|
(b)
|
The effective income
tax rates are generally lower than the statutory rate due to the
relationship of pretax income to
tax credits and earnings that are not subject to tax.
|
The PNC Financial
Services Group, Inc.
|
Consolidated
Financial Highlights (Unaudited)
|
|
|
Three months
ended
|
|
|
|
March 31
|
|
December
31
|
|
March 31
|
|
|
|
2020
|
|
2019
|
|
2019
|
|
PERFORMANCE
RATIOS
|
|
|
|
|
|
|
|
Net interest margin
(a)
|
|
2.84
|
%
|
|
2.78
|
%
|
|
2.98
|
%
|
|
Noninterest income to
total revenue
|
|
44
|
%
|
|
46
|
%
|
|
42
|
%
|
|
Efficiency
(b)
|
|
56
|
%
|
|
60
|
%
|
|
60
|
%
|
|
Return on:
|
|
|
|
|
|
|
|
Average common
shareholders' equity
|
|
7.51
|
%
|
|
11.54
|
%
|
|
11.13
|
%
|
|
Average
assets
|
|
.89
|
%
|
|
1.33
|
%
|
|
1.34
|
%
|
|
BUSINESS SEGMENT
NET INCOME (c)
|
|
|
|
|
|
|
|
In
millions
|
|
|
|
|
|
|
|
Retail
Banking
|
|
$
|
201
|
|
|
$
|
277
|
|
|
$
|
264
|
|
|
Corporate &
Institutional Banking
|
|
370
|
|
|
649
|
|
|
552
|
|
|
Asset Management
Group
|
|
54
|
|
|
91
|
|
|
45
|
|
|
Other, including
BlackRock (d)
|
|
290
|
|
|
364
|
|
|
410
|
|
|
Total net
income
|
|
$
|
915
|
|
|
$
|
1,381
|
|
|
$
|
1,271
|
|
|
|
|
(a)
|
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
March 31, 2020, December 31, 2019 and March
31, 2019 were $22 million, $23 million and $27 million,
respectively.
|
(b)
|
Calculated as
noninterest expense divided by total revenue.
|
(c)
|
Our business
information is presented based on our internal management reporting
practices. Net interest income
in business segment results reflect PNC's internal funds transfer
pricing methodology. Assets receive a funding
charge and liabilities and capital receive a funding credit based
on a transfer pricing methodology that incorporates
product repricing characteristics, tenor and other
factors.
|
(d)
|
Includes earnings and
gains or losses related to PNC's equity investment in BlackRock and
residual activities that
do not meet the criteria for disclosure as a separate reportable
business. We provide additional information on these
activities in our Form 10-K and Form 10-Q filings with the
SEC.
|
The PNC Financial
Services Group, Inc.
|
Consolidated
Financial Highlights (Unaudited)
|
|
March 31
|
|
December
31
|
|
March 31
|
|
2020
|
|
2019
|
|
2019
|
BALANCE SHEET
DATA
|
|
|
|
|
|
Dollars in
millions, except per share data
|
|
|
|
|
|
Assets
|
$
|
445,493
|
|
|
$
|
410,295
|
|
|
$
|
392,837
|
|
Loans (a)
|
$
|
264,643
|
|
|
$
|
239,843
|
|
|
$
|
232,293
|
|
Allowance for credit
losses - loan and leases (b)
|
$
|
3,944
|
|
|
|
|
|
Allowance for loan
and lease losses
|
|
|
$
|
2,742
|
|
|
$
|
2,692
|
|
Interest-earning
deposits with banks
|
$
|
19,986
|
|
|
$
|
23,413
|
|
|
$
|
15,261
|
|
Investment securities
(c)
|
$
|
90,546
|
|
|
$
|
86,824
|
|
|
$
|
83,869
|
|
Loans held for sale
(a)
|
$
|
1,693
|
|
|
$
|
1,083
|
|
|
$
|
686
|
|
Equity investments
(d)
|
$
|
13,205
|
|
|
$
|
13,734
|
|
|
$
|
12,567
|
|
Mortgage servicing
rights
|
$
|
1,082
|
|
|
$
|
1,644
|
|
|
$
|
1,812
|
|
Goodwill
|
$
|
9,233
|
|
|
$
|
9,233
|
|
|
$
|
9,218
|
|
Other assets (a)
(c)
|
$
|
41,556
|
|
|
$
|
32,202
|
|
|
$
|
34,761
|
|
Noninterest-bearing
deposits
|
$
|
81,614
|
|
|
$
|
72,779
|
|
|
$
|
71,606
|
|
Interest-bearing
deposits
|
$
|
223,590
|
|
|
$
|
215,761
|
|
|
$
|
199,615
|
|
Total
deposits
|
$
|
305,204
|
|
|
$
|
288,540
|
|
|
$
|
271,221
|
|
Borrowed funds
(a)
|
$
|
73,399
|
|
|
$
|
60,263
|
|
|
$
|
59,860
|
|
Total shareholders'
equity
|
$
|
49,263
|
|
|
$
|
49,314
|
|
|
$
|
48,536
|
|
Common shareholders'
equity
|
$
|
45,269
|
|
|
$
|
45,321
|
|
|
$
|
44,546
|
|
Accumulated other
comprehensive income (loss)
|
$
|
2,518
|
|
|
$
|
799
|
|
|
$
|
(5)
|
|
Book value per common
share
|
$
|
106.70
|
|
|
$
|
104.59
|
|
|
$
|
98.47
|
|
Tangible book value
per common share (Non-GAAP) (e)
|
$
|
84.93
|
|
|
$
|
83.30
|
|
|
$
|
78.07
|
|
Period end common
shares outstanding (millions)
|
424
|
|
|
433
|
|
|
452
|
|
Loans to
deposits
|
87
|
%
|
|
83
|
%
|
|
86
|
%
|
Common shareholders'
equity to total assets
|
10.2
|
%
|
|
11.0
|
%
|
|
11.3
|
%
|
CLIENT ASSETS
(billions)
|
|
|
|
|
|
Discretionary client
assets under management
|
$
|
136
|
|
|
$
|
154
|
|
|
$
|
158
|
|
Nondiscretionary
client assets under administration
|
128
|
|
|
143
|
|
|
130
|
|
Total client assets
under administration
|
264
|
|
|
297
|
|
|
288
|
|
Brokerage account
client assets
|
49
|
|
|
54
|
|
|
51
|
|
Total client
assets
|
$
|
313
|
|
|
$
|
351
|
|
|
$
|
339
|
|
CAPITAL
RATIOS
|
|
|
|
|
|
Basel III (f)
(g)
|
|
|
|
|
|
Common equity Tier
1
|
9.4
|
%
|
|
9.5
|
%
|
|
9.8
|
%
|
Common equity Tier 1
fully implemented (h)
|
9.2
|
%
|
|
N/A
|
|
|
N/A
|
|
Tier 1
risk-based
|
10.5
|
%
|
|
10.7
|
%
|
|
10.9
|
%
|
Total capital
risk-based (i)
|
12.6
|
%
|
|
12.8
|
%
|
|
13.0
|
%
|
Leverage
|
9.5
|
%
|
|
9.1
|
%
|
|
9.6
|
%
|
Supplementary leverage
|
8.5
|
%
|
|
7.6
|
%
|
|
8.1
|
%
|
Pro forma Basel
III (Non-GAAP)
|
|
|
|
|
|
2019 Pro forma Basel III
(j)
|
N/A
|
|
|
10.1
|
%
|
|
N/A
|
|
ASSET
QUALITY
|
|
|
|
|
|
Nonperforming loans
to total loans
|
.62
|
%
|
|
.68
|
%
|
|
.71
|
%
|
Nonperforming assets
to total loans, OREO and foreclosed assets
|
.66
|
%
|
|
.73
|
%
|
|
.77
|
%
|
Nonperforming assets
to total assets
|
.39
|
%
|
|
.43
|
%
|
|
.45
|
%
|
Net charge-offs to
average loans (for the three months ended) (annualized)
|
.35
|
%
|
|
.35
|
%
|
|
.24
|
%
|
Allowance for loans
and leases to total loans (k)
|
1.49
|
%
|
|
1.14
|
%
|
|
1.16
|
%
|
Allowance for loans
and leases to nonperforming loans (k)
|
240
|
%
|
|
168
|
%
|
|
163
|
%
|
Accruing loans past
due 90 days or more (in millions)
|
$
|
534
|
|
|
$
|
585
|
|
|
$
|
590
|
|
|
|
(a)
|
Amounts include
assets and liabilities for which we have elected the fair value
option. Our 2019 Form 10-K included, and our first quarter 2020
Form
10-Q will include, additional information regarding these
Consolidated Balance Sheet line items.
|
(b)
|
Reflects the impact
of adopting Accounting Standards Update 2016-13, Financial
Instruments - Credit Losses and our transition from an
incurred loss
model for these reserves to an expected credit loss methodology.
Our 2019 Form 10-K included, and our first quarter 2020 Form 10-Q
will include
additional information related to our adoption of this standard,
which is commonly referred to as the Current Expected Credit Losses
(CECL) standard.
|
(c)
|
Amount as of March
31, 2020 is net of the related Allowances for Credit Losses
recorded in accordance with the adoption of CECL. Our 2019 Form
10-K included, and our first quarter 2020 Form 10-Q will include
additional information related to our adoption of this
standard.
|
(d)
|
Amounts include our
equity investment in BlackRock.
|
(e)
|
See the Tangible Book
Value per Common Share table on page 19 for additional
information.
|
(f)
|
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 18 for additional
information. The ratios as of March 31, 2020 are
estimated.
|
(g)
|
The March 31, 2020
ratios are calculated to reflect PNC's election to adopt the CECL
optional transition provision.
|
(h)
|
The March 31, 2020
ratio is calculated to reflect the full impact of CECL and excludes
the benefits of phase-ins.
|
(i)
|
The 2020 and 2019
Basel III Total risk-based capital ratios include nonqualifying
trust preferred capital securities of $40 million and $60
million,
respectively, that are subject to a phase-out period that runs
through 2021.
|
(j)
|
The 2019 Pro forma
Basel III ratio is calculated as if the 2019 Tailoring Rules, and
PNC's election to opt-out of the inclusion of certain elements
of
accumulated other comprehensive income in regulatory capital, had
been in effect at December 31, 2019. We believe that the pro forma
Basel III
ratio is a useful tool to assess the impact to our capital position
after adoption of the 2019 Tailoring Rules.
|
(k)
|
Ratio at March 31,
2020 reflects the transition impact on our allowance for loans and
leases from the adoption of the CECL standard along with the
increases in reserves during the first quarter of 2020 due to the
significant economic impact of COVID-19 and loan growth. Our 2019
Form 10-K
included and our first quarter 2020 Form 10-Q will include
additional information related to our adoption of this
standard.
|
The PNC Financial
Services Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Financial Highlights (Unaudited)
|
CAPITAL RATIOS
As of January 1, 2020, the 2019
Tailoring Rules became effective for PNC. The most significant
changes involve the election to exclude specific accumulated other
comprehensive income (AOCI) items from common equity Tier 1 capital
and higher thresholds used to calculate common equity Tier 1
capital deductions. Effective January 1,
2020, PNC must deduct from common equity Tier 1 capital (net
of associated deferred tax liabilities) investments in
unconsolidated financial institutions (for PNC, primarily
BlackRock), mortgage servicing rights and deferred tax assets to
the extent such items individually exceed 25% of the institution's
adjusted common equity Tier 1 capital.
Under the Basel III rules applicable to PNC during 2019,
significant common stock investments in unconsolidated financial
institutions (for PNC, primarily BlackRock), mortgage servicing
rights and deferred tax assets were deducted from common equity
Tier 1 capital (net of associated deferred tax liabilities) to the
extent they individually exceed 10%, or in the aggregate exceed
15%, of the institution's adjusted common equity Tier 1 capital.
Also, PNC's Basel III regulatory capital during 2019 included AOCI
related to securities currently, and those transferred from,
available for sale, as well as pension and other postretirement
plans.
PNC's regulatory risk-based capital ratios in 2020 and 2019 are
both 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.
Effective for March 31, 2020,
regulators issued an interim final rule revising the optional
transition provisions that would allow banks that have adopted the
Current Expected Credit Loss (CECL) standard to delay for two years
CECL's full impact on regulatory
capital, relative to the incurred loss methodology's impact on
regulatory capital, followed by a three year transition
period. PNC elected to adopt this optional transition
provision effective for March 31,
2020. For an estimate of results reflecting the optional
transition provisions see the March 31,
2020 ratio. For the full impact of PNC's adoption of CECL,
which excludes the benefits of phase-ins, see the March 31, 2020 (Fully Implemented) estimate
presented in the table below.
We also provide additional information below regarding PNC's
2019 Basel III Common equity Tier 1 capital ratios.
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 (Non-GAAP)
(a)
|
|
|
|
|
|
|
|
|
Basel III
|
|
|
2019 Pro forma
Basel III
(Non-GAAP)
(d)
|
|
|
March 31
2020
(estimated)
(b)
|
December
31
2019
|
|
March 31
2019
|
|
March 31, 2020
(Fully
Implemented)
(estimated) (c)
|
December
31
2019
(estimated)
|
|
|
|
|
|
Dollars in
millions
|
|
|
Common stock, related
surplus and retained earnings,
net of treasury stock
|
$
|
43,596
|
|
$
|
44,522
|
|
|
$
|
44,552
|
|
|
$
|
42,751
|
|
$
|
44,522
|
|
|
Less regulatory
capital adjustments:
|
|
|
|
|
|
|
|
|
Goodwill and
disallowed intangibles, net of deferred
tax liabilities
|
(9,236)
|
|
(9,254)
|
|
|
(9,260)
|
|
|
(9,236)
|
|
(9,254)
|
|
|
Basel III total
threshold deductions (e)
|
|
(3,276)
|
|
|
(3,074)
|
|
|
|
|
|
Accumulated other
comprehensive income (loss) (f)
|
|
659
|
|
|
1
|
|
|
|
|
|
All other
adjustments
|
(221)
|
|
(173)
|
|
|
(163)
|
|
|
(225)
|
|
(168)
|
|
|
Basel III Common
equity Tier 1 capital
|
$
|
34,139
|
|
$
|
32,478
|
|
|
$
|
32,056
|
|
|
$
|
33,290
|
|
$
|
35,100
|
|
|
Basel III
standardized approach risk-weighted assets (g)
|
$
|
363,178
|
|
$
|
340,799
|
|
|
$
|
328,128
|
|
|
$
|
363,198
|
|
$
|
347,805
|
|
|
Basel III advanced
approaches risk-weighted assets (h)
|
|
$
|
318,722
|
|
|
$
|
298,889
|
|
|
|
|
|
Basel III Common
equity Tier 1 capital ratio
|
9.4
|
%
|
9.5
|
%
|
|
9.8
|
%
|
|
9.2
|
%
|
10.1
|
%
|
|
|
|
(a)
|
All ratios are
calculated using the regulatory capital methodology applicable to
PNC during each period presented.
|
(b)
|
The March 31, 2020
ratio is calculated to reflect PNC's election to adopt the CECL
optional transition provision.
|
(c)
|
The March 31, 2020
ratio is calculated to reflect the full impact of CECL and excludes
the benefits of phase-ins.
|
(d)
|
The 2019 Pro forma
Basel III ratio is calculated as if the 2019 Tailoring Rules, and
PNC's election to opt-out of the inclusion of certain elements of
accumulated other
comprehensive income in regulatory capital, had been in effect at
December 31, 2019. We believe that this ratio is a useful tool to
assess the impact to our capital
position after adoption of the 2019 Tailoring Rules.
|
(e)
|
Based on the
Tailoring Rules, effective January 1, 2020 for PNC, the limit for
threshold deductions increased, resulting in no deduction as of
March 31, 2020.
|
(f)
|
Based on the
Tailoring Rules effective January 1, 2020, PNC elected to opt-out
of the inclusion of accumulated other comprehensive income in
regulatory capital.
|
(g)
|
Basel III
standardized approach risk-weighted assets are based on the Basel
III standardized approach rules and include credit and market
risk-weighted assets.
|
(h)
|
Basel III advanced approaches
risk-weighted assets in 2019 were based on the Basel III
advanced approaches rules, and include credit, market and
operational
risk-weighted assets. Based on the Tailoring Rules effective
January 1, 2020, PNC is no longer required to report advanced
approaches risk-weighted assets.
|
Tangible book value per common share is a non-GAAP measure and
is calculated based on tangible common shareholders' equity divided
by period-end common shares outstanding. We believe this non-GAAP
measure serves as a useful tool to help evaluate the strength and
discipline of a company's capital management strategies and as an
additional, conservative measure of total company value.
Tangible Book
Value per Common Share (Non-GAAP)
|
|
|
|
|
|
|
March 31
|
|
December
31
|
|
March 31
|
Dollars in
millions, except per share data
|
2020
|
|
2019
|
|
2019
|
Book value per common
share
|
$
|
106.70
|
|
|
$
|
104.59
|
|
|
$
|
98.47
|
|
Tangible book value
per common share
|
|
|
|
|
|
Common shareholders'
equity
|
$
|
45,269
|
|
|
$
|
45,321
|
|
|
$
|
44,546
|
|
Goodwill and other
intangible assets
|
(9,425)
|
|
|
(9,441)
|
|
|
(9,450)
|
|
Deferred tax
liabilities on Goodwill and other intangible assets
|
189
|
|
|
187
|
|
|
190
|
|
Tangible common
shareholders' equity
|
$
|
36,033
|
|
|
$
|
36,067
|
|
|
$
|
35,286
|
|
Period-end common
shares outstanding (millions)
|
424
|
|
|
433
|
|
|
452
|
|
Tangible book value
per common share (Non-GAAP)
|
$
|
84.93
|
|
|
$
|
83.30
|
|
|
$
|
78.07
|
|
Cautionary Statement Regarding Forward-Looking
Information
We make statements in this news release and related conference
call, and we may from time to time make other statements, regarding
our outlook for earnings, revenues, expenses, tax rates, capital
and liquidity levels and ratios, asset levels, asset quality,
financial position, 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 necessarily subject to numerous
assumptions, risks and uncertainties, which change over time.
Future events or circumstances may change our outlook and may also
affect the nature of the assumptions, risks and uncertainties to
which our forward-looking statements are subject.
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. As a result, we caution against placing undue
reliance on any forward-looking statements.
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 U.S. and global financial markets.
- Actions by the Federal Reserve Board, U.S. Treasury and other
government agencies, including those that impact money supply and
market interest rates.
- Changes in customer behavior due to changing business and
economic conditions or legislative or regulatory initiatives.
- Changes in customers', suppliers' and other counterparties'
performance and creditworthiness.
- Impacts of tariffs and other trade policies of the U.S. and its
global trading partners.
- The length and extent of economic contraction as a result of
the COVID-19 pandemic.
- Commodity price volatility.
- Our forward-looking financial statements are subject to the
risk that economic and financial market conditions will be
substantially different than those we are currently expecting and
do not take into account potential legal and regulatory
contingencies. These statements are based on our views that:
-
- PNC's baseline economic forecast is for a severe but short
recession in the first half of 2020. Restrictions on movement
because of the COVID-19 pandemic have led to a huge drop in
consumer spending and a steep drop in output as many workers are
unable to get to their jobs. PNC expects a significant contraction
in U.S. real GDP and steep job losses over the next few months and
a large increase in the unemployment rate in 2020.
- In the baseline forecast, economic growth resumes in the third
quarter as consumers start to spend again. Fiscal stimulus and
extremely low interest rates support the recovery. Real GDP
surpasses its pre-recession peak in mid-2021, and growth is well
above its long-term trend through mid-2022.
- The baseline forecast assumes that the Federal Open Market
Committee keeps the federal funds rate in its current range of 0.00
to 0.25 percent throughout 2020 and into 2021.
- Given the many unknowns and risks being heavily weighted to the
downside, our forward-looking statements are subject to the risk
that conditions will be substantially different than we are
currently expecting. If efforts to contain COVID-19 are
unsuccessful and restrictions on movement last into the third
quarter or beyond, the recession would be much longer and much more
severe. Ineffective fiscal stimulus, or an extended delay in
implementing it, are also major downside risks. The deeper the
recession is, and the longer it lasts, the more it will damage
consumer fundamentals and sentiment. This could both prolong the
recession, and/or make any recovery weaker. Similarly, the
recession could damage business fundamentals. And an extended
global recession due to COVID-19 would weaken the U.S. recovery. As
a result, the outbreak and its consequences, including responsive
measures to manage it, have had and are likely to continue to have
an adverse effect, possibly materially, on our business and
financial performance by adversely affecting, possibly materially,
the demand and profitability of our products and services, the
valuation of assets and our ability to meet the needs of our
customers.
- PNC's ability to take certain capital actions, including
returning capital to shareholders, is subject to PNC meeting or
exceeding a stress capital buffer established by the Federal
Reserve Board as part of PNC's comprehensive capital plan for the
applicable period in connection with the Federal Reserve Board's
Comprehensive Capital Analysis and Review (CCAR) process.
Cautionary Statement Regarding Forward-Looking
Information (Continued)
- PNC's regulatory capital ratios in the future will depend on,
among other things, the company's financial performance, the scope
and terms of final capital regulations then in effect and
management actions affecting the composition of PNC's balance
sheet. In addition, PNC's ability to determine, evaluate and
forecast regulatory capital ratios, and to take actions (such as
capital distributions) based on actual or forecasted capital
ratios, will be dependent at least in part on the development,
validation and regulatory review of related models.
- 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 to laws and regulations, including changes affecting
oversight of the financial services industry, consumer protection,
bank capital and liquidity standards, pension, bankruptcy and other
industry aspects, and changes in accounting policies and
principles.
- Unfavorable resolution of legal proceedings or other claims and
regulatory and other governmental investigations or other
inquiries. 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 the 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 systems and
controls, third-party insurance, derivatives, and capital
management techniques, and to meet evolving regulatory capital and
liquidity standards.
- 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.
- We grow our business in part through acquisitions and new
strategic initiatives. Risks and uncertainties include those
presented by the nature of the business acquired and strategic
initiative, including in some cases those associated with our entry
into new businesses or new geographic or other markets and risks
resulting from our inexperience in those new areas, 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. 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 natural and other disasters, pandemics, dislocations,
terrorist activities, system failures, security breaches,
cyberattacks or international hostilities through impacts on the
economy and financial markets generally or on us or our
counterparties specifically.
We provide greater detail regarding these as well as other
factors in our 2019 Form 10-K, including in the Risk Factors and
Risk Management sections and the Legal Proceedings and Commitments
Notes of the Notes To Consolidated Financial Statements in that
report, and in our subsequent SEC filings. In particular, our
forward-looking statements are subject to risks and uncertainties
related to the COVID-19 pandemic and the resulting governmental and
societal responses. 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 our 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.
MEDIA:
Marcey
Zwiebel
(412) 762-4550
media.relations@pnc.com
INVESTORS:
Bryan
Gill
(412) 768-4143
investor.relations@pnc.com
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SOURCE The PNC Financial Services Group, Inc.