PITTSBURGH, Jan. 12, 2018 /PRNewswire/ -- The PNC
Financial Services Group, Inc. (NYSE: PNC) today reported:
|
For the
year
|
|
For the
quarter
|
|
2017
|
|
2016
|
|
4Q17
|
|
3Q17
|
|
4Q16
|
Net income $
millions
|
$5,388
|
|
$3,985
|
|
$2,091
|
|
$1,126
|
|
$1,047
|
Diluted earnings per
common share
|
$10.36
|
|
$7.30
|
|
$4.18
|
|
$2.16
|
|
$1.97
|
|
"By just about any measure, 2017 was a successful year for PNC,"
said PNC Chairman, President and Chief Executive Officer
William S. Demchak. "We grew loans
and deposits and added customers across our businesses, continued
to focus on expense management, and generated record fee income for
the year, as well as in the fourth quarter. The year ended with a
benefit from the new tax legislation, giving us increased
flexibility as we continue to invest in our businesses, communities
and our employees, which helps drive our Main Street banking model.
We executed on our strategic priorities throughout the year,
including our technology initiatives and the expansion of our
middle market franchise into new markets. As we enter the new year,
we believe we are firmly positioned to create long-term value for
our shareholders."
PNC's fourth quarter and full year 2017 reported net income and
earnings per share benefited from the new federal tax legislation
net of significant items, as summarized in the following table.
Summary Impact of
Tax Legislation and Significant Items
|
In millions,
except per share data
|
|
|
Diluted Earnings Per
Common Share
|
|
Impact on
Net Income
|
|
EPS Impact
of
Tax Legislation
&
Significant
Items
|
|
Reported
EPS (GAAP)
|
|
EPS Excluding
Impact
of Tax Legislation
&
Significant
Items
(non-GAAP)
|
Tax
legislation
|
$
|
1,129
|
|
$
|
2.35
|
|
|
|
|
Significant items,
net
|
(218)
|
|
$
|
(0.46)
|
|
|
|
|
4Q17
impact
|
$
|
911
|
|
$
|
1.89
|
|
$
|
4.18
|
|
$
|
2.29
|
2017 full year
impact
|
$
|
911
|
|
$
|
1.86
|
|
$
|
10.36
|
|
$
|
8.50
|
|
|
|
|
|
|
|
|
The benefit from tax legislation on fourth quarter 2017 net
income was primarily attributable to revaluation of deferred tax
liabilities at the lower statutory tax rate. The net charge for
significant items included the previously announced contribution to
the PNC Foundation and employee cash payments and pension account
credits, Visa Class B derivative fair value adjustments primarily
related to extension of anticipated timing of litigation
resolution, and charges for real estate dispositions and exits
including datacenters. These items were partially offset by the
flow through benefit of tax legislation from PNC's equity
investment in BlackRock. Details of the impact of tax legislation
and significant items by income statement line item are provided in
the following table.
Income Statement
Impact of Tax Legislation and Significant Items
|
|
In
millions
|
4Q17
|
Net Interest
Income
|
|
Tax legislation -
impact on leveraged leases
|
$
|
(26)
|
|
|
Noninterest
Income
|
|
Significant
items
|
|
Flow through impact
of tax legislation from equity investment in BlackRock
|
254
|
Visa Class B
derivative fair value adjustments
|
(248)
|
Appreciation of
BlackRock stock contributed to PNC Foundation
|
119
|
Residential mortgage
servicing rights fair value assumption updates
|
(71)
|
Noninterest income
increase
|
54
|
|
|
Noninterest
Expense
|
|
Significant
items
|
|
Contribution to PNC
Foundation
|
200
|
Real estate
disposition and exit charges
|
197
|
Employee cash
payments and pension credits
|
105
|
Noninterest expense
increase
|
502
|
|
|
Income
Taxes
|
|
Tax legislation -
primarily revaluation of deferred tax liabilities (a)
|
1,155
|
Tax effect of
significant items
|
230
|
Income tax
benefit
|
1,385
|
|
|
Impact on 4Q17 and
full year 2017 net income
|
$
|
911
|
|
|
|
(a) Certain tax
legislation amounts are considered reasonable estimates as of
December 31, 2017. As a result, the amounts could be adjusted
during the measurement period, which will end in December
2018.
|
Income Statement Highlights
Fourth quarter 2017 compared with third quarter 2017
- Total revenue for the fourth quarter was $4.3 billion, an increase of $135 million, or 3 percent.
-
- Net interest income of $2.3
billion was stable with the third quarter. Excluding the
impact of tax legislation, net interest income increased
$26 million, or 1 percent, due to
higher loan balances and higher loan and securities yields
partially offset by higher deposit and borrowing costs.
- Net interest margin was 2.88 percent compared with 2.91 percent
in the third quarter. The impact of tax legislation related to
leveraged leases reduced the margin by 3 basis points.
- Noninterest income of $1.9
billion increased $135
million, or 8 percent, driven by strong fee income and a net
benefit from significant items.
- Noninterest expense of $3.1
billion increased $605
million, or 25 percent. Excluding the impact of significant
items, noninterest expense increased $103
million, or 4 percent, reflecting higher compensation and
benefits costs including variable compensation associated with
increased business activity.
- Provision for credit losses was $125
million, a decline of $5
million, as a higher provision for the consumer loan
portfolio was more than offset by a lower provision for the
commercial lending portfolio.
Balance Sheet Highlights
- Average loans grew $1.9 billion,
or 1 percent, to $221.1 billion in
the fourth quarter compared with the third quarter.
-
- Average commercial lending balances increased $1.6 billion reflecting growth across PNC's
business credit, real estate, corporate banking and equipment
finance businesses.
- Average consumer lending balances increased $.3 billion as growth in residential mortgage,
auto and credit card loans was partially offset by lower home
equity and education loans.
- Overall credit quality remained stable.
-
- Nonperforming assets of $2.0
billion at December 31, 2017
decreased $32 million, or 2 percent,
compared with September 30, 2017.
- Net charge-offs increased to $123
million for the fourth quarter compared with $106 million for the third quarter.
- Average deposits increased $2.1
billion, or 1 percent, to $261.5
billion in the fourth quarter compared with the third
quarter due to seasonal growth in commercial deposits.
- Average investment securities decreased $.2 billion to $74.2
billion in the fourth quarter compared with the third
quarter. Investment securities increased $1.1 billion to $76.1
billion at December 31, 2017
compared with September 30, 2017.
- PNC returned $.9 billion of
capital to shareholders in the fourth quarter through repurchases
of 3.7 million common shares for $.5
billion and dividends on common shares of $.4 billion.
-
- For the full year 2017, PNC returned $3.6 billion of capital to shareholders through
repurchases of 18.6 million common shares for $2.3 billion and dividends on common shares of
$1.3 billion.
- PNC maintained strong capital and liquidity positions.
-
- Transitional Basel III common equity Tier 1 capital ratio was
an estimated 10.4 percent at December 31,
2017 and 10.3 percent at September
30, 2017, calculated using the regulatory capital
methodologies applicable to PNC during 2017.
- Pro forma fully phased-in Basel III common equity Tier 1
capital ratio, a non-GAAP financial measure, was an estimated 9.8
percent at both December 31, 2017 and
September 30, 2017, based on the
standardized approach rules.
- The Liquidity Coverage Ratio at December
31, 2017 for both PNC and PNC Bank, N.A. continued to exceed
the fully phased-in requirement of 100 percent.
Earnings
Summary
|
|
|
|
|
|
|
In millions,
except per share data
|
|
4Q17
|
|
|
3Q17
|
|
|
4Q16
|
|
Net income
|
|
$
|
2,091
|
|
|
$
|
1,126
|
|
|
$
|
1,047
|
|
Net income
attributable to diluted common shares
|
|
$
|
2,007
|
|
|
$
|
1,042
|
|
|
$
|
973
|
|
Diluted earnings per
common share
|
|
$
|
4.18
|
|
|
$
|
2.16
|
|
|
$
|
1.97
|
|
Average diluted
common shares outstanding
|
|
480
|
|
|
483
|
|
|
494
|
|
Return on average
assets
|
|
2.20
|
%
|
|
1.20
|
%
|
|
1.13
|
%
|
Return on average
common equity
|
|
18.90
|
%
|
|
9.89
|
%
|
|
9.31
|
%
|
Book value per common
share
|
Quarter
end
|
$
|
91.94
|
|
|
$
|
89.05
|
|
|
$
|
85.94
|
|
Tangible book value
per common share (non-GAAP)
|
Quarter
end
|
$
|
72.28
|
|
|
$
|
69.72
|
|
|
$
|
67.26
|
|
Cash dividends
declared per common share
|
|
$
|
.75
|
|
|
$
|
.75
|
|
|
$
|
.55
|
|
|
|
|
|
|
|
|
This news release includes financial metrics that have been
adjusted for the impact of new tax legislation and significant
items. Such adjusted metrics are considered non-GAAP financial
information. These metrics may be useful to management, investors
and analysts because the company believes they better reflect the
ongoing financial results and trends of its businesses and increase
comparability of period-to-period results. Fee income, a non-GAAP
financial measure, refers to noninterest income in the following
categories: asset management, consumer services, corporate
services, residential mortgage and service charges on deposits.
Information in this news release including the financial tables is
unaudited.
CONSOLIDATED
REVENUE REVIEW
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
4Q17 vs
|
4Q17 vs
|
In
millions
|
4Q17
|
|
3Q17
|
|
4Q16
|
|
3Q17
|
4Q16
|
Net interest
income
|
$
|
2,345
|
|
$
|
2,345
|
|
$
|
2,130
|
|
—
|
|
10
|
%
|
Noninterest
income
|
1,915
|
|
1,780
|
|
1,744
|
|
8
|
%
|
10
|
%
|
Total
revenue
|
$
|
4,260
|
|
$
|
4,125
|
|
$
|
3,874
|
|
3
|
%
|
10
|
%
|
|
|
|
|
|
|
|
|
Total revenue for the fourth quarter of 2017 increased
$135 million compared with the third
quarter driven by higher noninterest income, and increased
$386 million compared with the fourth
quarter of 2016 due to increases in both net interest income and
noninterest income.
Net interest income was stable with the third quarter. Excluding
the impact of tax legislation related to leveraged leases, net
interest income increased $26
million, or 1 percent, as a result of higher loan balances
and higher loan and securities yields partially offset by higher
deposit and borrowing costs. In the comparison with fourth quarter
2016, the increase in net interest income was due to higher loan
and securities yields and higher loan balances offset in part by
higher borrowing and deposit costs.
The net interest margin declined to 2.88 percent for the fourth
quarter of 2017 compared with 2.91 percent for the third quarter.
The impact of tax legislation related to leveraged leases reduced
the fourth quarter net interest margin by 3 basis points and
lowered the average yield on loans by 5 basis points. The third
quarter comparison also reflected higher deposit and borrowing
costs partially offset by higher securities yields in the fourth
quarter of 2017. The margin increased compared with 2.69 percent
for the fourth quarter of 2016 due to higher loan and securities
yields partially offset by higher deposit and borrowing costs.
Noninterest
Income
|
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
|
4Q17 vs
|
4Q17 vs
|
In
millions
|
4Q17
|
|
3Q17
|
|
4Q16
|
|
3Q17
|
4Q16
|
Asset
management
|
$
|
720
|
|
$
|
421
|
|
$
|
399
|
|
71
|
%
|
80
|
%
|
Consumer
services
|
366
|
|
357
|
|
349
|
|
3
|
%
|
5
|
%
|
Corporate
services
|
423
|
|
371
|
|
387
|
|
14
|
%
|
9
|
%
|
Residential
mortgage
|
29
|
|
104
|
|
142
|
|
(72)
|
%
|
(80)
|
%
|
Service charges on
deposits
|
183
|
|
181
|
|
172
|
|
1
|
%
|
6
|
%
|
Other
|
194
|
|
346
|
|
295
|
|
(44)
|
%
|
(34)
|
%
|
|
$
|
1,915
|
|
$
|
1,780
|
|
$
|
1,744
|
|
8
|
%
|
10
|
%
|
|
|
|
|
|
|
|
|
|
Noninterest income for the fourth quarter of 2017 increased
$135 million compared with the third
quarter and $171 million compared
with the fourth quarter of 2016.
Asset management revenue increased $299
million over the third quarter and $321 million compared with fourth quarter 2016
reflecting a $254 million fourth
quarter flow through impact of tax legislation from PNC's equity
investment in BlackRock as well as higher equity markets.
Consumer service fees and service charges on deposits grew in
both comparisons as a result of increased customer activity,
including debit card, credit card and brokerage fees.
Strong growth in corporate service fees of $52 million compared with the third quarter and
$36 million compared with fourth
quarter 2016 was primarily attributable to higher merger and
acquisition advisory fees and loan syndication fees and growth in
treasury management product revenue.
Residential mortgage revenue declined $75
million compared with the third quarter and $113 million compared with fourth quarter 2016
due to a $71 million negative
adjustment for residential mortgage servicing rights fair value
assumption updates as well as lower loan sales revenue.
Other noninterest income decreased $152
million compared with the third quarter and $101 million compared with fourth quarter 2016.
Fourth quarter 2017 other noninterest income included $248 million of negative derivative fair value
adjustments related to swap agreements with purchasers of Visa
Class B common shares. These fair value adjustments were primarily
related to extension of anticipated timing of litigation
resolution. Other noninterest income for the fourth quarter also
included a benefit of $119 million
for appreciation in value of BlackRock stock contributed to the PNC
Foundation.
CONSOLIDATED
EXPENSE REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
Expense
|
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
|
4Q17 vs
|
4Q17 vs
|
In
millions
|
4Q17
|
|
3Q17
|
|
4Q16
|
|
3Q17
|
4Q16
|
Personnel
|
$
|
1,438
|
|
$
|
1,274
|
|
$
|
1,231
|
|
13
|
%
|
17
|
%
|
Occupancy
|
240
|
|
204
|
|
210
|
|
18
|
%
|
14
|
%
|
Equipment
|
274
|
|
259
|
|
254
|
|
6
|
%
|
8
|
%
|
Marketing
|
60
|
|
62
|
|
60
|
|
(3)
|
%
|
—
|
|
Other
|
1,049
|
|
657
|
|
686
|
|
60
|
%
|
53
|
%
|
|
$
|
3,061
|
|
$
|
2,456
|
|
$
|
2,441
|
|
25
|
%
|
25
|
%
|
|
|
|
|
|
|
|
|
|
Noninterest expense for the fourth quarter of 2017 increased
$605 million compared with the third
quarter. Noninterest expense increased $103
million, or 4 percent, excluding the impact of significant
items totaling $502 million, which
consisted of a $200 million
contribution to the PNC Foundation, $197
million of charges for real estate dispositions and exits
including datacenters, and $105
million of personnel expense for employee cash payments and
pension account credits.
The increase in personnel expense compared with the third
quarter was also attributable to higher compensation and benefits
costs including variable compensation associated with increased
business activity. Occupancy expense increased $36 million compared with the third quarter
primarily due to $29 million of the
real estate disposition and exit charges. Other noninterest expense
increased $392 million over the third
quarter reflecting the contribution to the PNC Foundation and
$168 million of the real estate
disposition and exit charges.
Noninterest expense for the fourth quarter of 2017 increased
$620 million compared with the fourth
quarter of 2016 due to the impact of fourth quarter 2017
significant items as well as ongoing business and technology
investments.
An income tax benefit was recognized in the fourth quarter of
2017 as a result of the new tax legislation and was primarily
attributable to revaluation of deferred tax liabilities at the
lower statutory tax rate of 21 percent. The effective tax rate was
26.8 percent for the third quarter of 2017 and 23.4 percent for the
fourth quarter of 2016.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were
$380.8 billion at December 31, 2017 compared with $375.2 billion at September 30, 2017 and $366.4 billion at December
31, 2016. Assets grew 1 percent compared with September 30, 2017 primarily due to higher
deposits held with the Federal Reserve Bank and higher investment
securities. Assets grew 4 percent over December 31, 2016 driven by growth in loans and
higher Federal Reserve Bank deposits.
Loans
|
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
|
12/31/17
vs
|
12/31/17
vs
|
In
billions
|
12/31/2017
|
|
9/30/2017
|
|
12/31/2016
|
|
9/30/17
|
12/31/16
|
Commercial
lending
|
$
|
147.4
|
|
$
|
148.5
|
|
$
|
137.9
|
|
(1)
|
%
|
7
|
%
|
Consumer
lending
|
73.1
|
|
72.6
|
|
72.9
|
|
1
|
%
|
—
|
|
Total
loans
|
$
|
220.5
|
|
$
|
221.1
|
|
$
|
210.8
|
|
—
|
|
5
|
%
|
For the quarter
ended:
|
|
|
|
|
|
|
|
|
Average
loans
|
$
|
221.1
|
|
$
|
219.2
|
|
$
|
210.9
|
|
1
|
%
|
5
|
%
|
|
|
|
|
|
|
|
|
|
Average loans for the fourth quarter of 2017 increased
$1.9 billion over the third quarter
due to growth in commercial lending balances of $1.6 billion and consumer lending balances of
$.3 billion. Total loans at
December 31, 2017 declined
$.6 billion compared with
September 30, 2017 reflecting lower
commercial lending balances of $1.1
billion and higher consumer lending balances of $.5 billion. Growth in average commercial lending
balances was across PNC's business credit, real estate, corporate
banking and equipment finance businesses, while the decline in
balances at December 31, 2017 was
related to multifamily agency warehouse lending. Consumer lending
growth in residential mortgage, auto and credit card loans was
partially offset by lower home equity and education loans in both
comparisons.
Fourth quarter 2017 average and period end loans increased
$10.2 billion and $9.7 billion, respectively, compared with fourth
quarter 2016 driven by higher commercial lending balances as well
as an increase in consumer lending balances, primarily residential
real estate loans.
Investment
Securities
|
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
|
12/31/17
vs
|
12/31/17
vs
|
In
billions
|
12/31/2017
|
|
9/30/2017
|
|
12/31/2016
|
|
9/30/17
|
12/31/16
|
At quarter
end
|
$
|
76.1
|
|
$
|
75.0
|
|
$
|
75.9
|
|
1
|
%
|
—
|
|
Average for the
quarter ended
|
$
|
74.2
|
|
$
|
74.4
|
|
$
|
76.0
|
|
—
|
|
(2)
|
%
|
|
|
|
|
|
|
|
|
|
Investment securities balances at December 31, 2017 increased $1.1 billion compared with September 30, 2017 as net purchases exceeded
portfolio runoff. Average balances for the fourth quarter declined
$.2 billion compared with the third
quarter due to portfolio runoff and timing of reinvestments. Fourth
quarter 2017 period end investment securities increased
$.2 billion compared with
December 31, 2016, while average
investment securities decreased $1.8
billion compared with fourth quarter 2016 reflecting
portfolio runoff and lower reinvestments. Net unrealized gains on
available for sale securities were $.4
billion at December 31, 2017,
$.7 billion at September 30, 2017 and $.2
billion at December 31,
2016.
Balances held with the Federal Reserve Bank increased to
$28.3 billion at December 31, 2017 compared with $24.3 billion at September
30, 2017 and $25.1 billion at
December 31, 2016 driven by increased
liquidity from higher deposits and borrowings.
Deposits
|
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
|
12/31/17
vs
|
12/31/17
vs
|
In
billions
|
12/31/2017
|
|
9/30/2017
|
|
12/31/2016
|
|
9/30/17
|
12/31/16
|
At quarter
end
|
$
|
265.1
|
|
$
|
260.8
|
|
$
|
257.2
|
|
2
|
%
|
3
|
%
|
Average for the
quarter ended
|
$
|
261.5
|
|
$
|
259.4
|
|
$
|
257.1
|
|
1
|
%
|
2
|
%
|
|
|
|
|
|
|
|
|
|
Average deposits for the fourth quarter of 2017 increased
$2.1 billion compared with the third
quarter due to seasonal growth in commercial deposits. Total
deposits at December 31, 2017
increased $4.3 billion compared with
September 30, 2017 reflecting higher
commercial and consumer deposit balances. Fourth quarter 2017
average and period end deposits increased $4.4 billion and $7.9
billion, respectively, compared with fourth quarter 2016
driven by overall deposit and customer growth.
Borrowed
Funds
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
12/31/17
vs
|
12/31/17
vs
|
In
billions
|
12/31/2017
|
|
9/30/2017
|
|
12/31/2016
|
9/30/17
|
12/31/16
|
At quarter
end
|
$
|
59.1
|
|
$
|
57.6
|
|
$
|
52.7
|
3
|
%
|
12
|
%
|
Average for the
quarter ended
|
$
|
58.0
|
|
$
|
57.0
|
|
$
|
51.5
|
2
|
%
|
13
|
%
|
|
|
|
|
|
|
|
|
Average borrowed funds for the fourth quarter increased
$1.0 billion compared with the third
quarter and borrowed funds at December 31,
2017 increased $1.5 billion
compared with September 30, 2017
primarily due to higher bank notes and senior debt. Fourth quarter
2017 average and period end borrowed funds increased $6.5 billion and $6.4
billion, respectively, compared with the fourth quarter of
2016 as a result of increases in bank notes and senior debt and
Federal Home Loan Bank borrowings partially offset by lower
subordinated debt.
Capital
|
|
|
|
|
|
|
|
12/31/2017
|
*
|
|
9/30/2017
|
|
12/31/2016
|
Common shareholders'
equity In billions
|
$
|
43.5
|
|
|
|
$
|
42.4
|
|
|
$
|
41.7
|
|
Transitional Basel
III common equity Tier 1 capital ratio
|
10.4
|
%
|
|
|
10.3
|
%
|
|
10.6
|
%
|
Pro forma fully
phased-in Basel III common equity
|
|
|
|
|
|
|
Tier 1 capital ratio
(non-GAAP)
|
9.8
|
%
|
|
|
9.8
|
%
|
|
10.0
|
%
|
* Ratios
estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNC maintained a strong capital position. Common shareholders'
equity at December 31, 2017 increased
$1.1 billion compared with
September 30, 2017 due to higher
fourth quarter net income partially offset by dividends and share
repurchases. The transitional Basel III common equity Tier 1
capital ratios were calculated using the regulatory capital
methodologies, including related phase-ins, applicable to PNC
during 2017 and 2016 using the standardized approach. The pro forma
ratios were also calculated based on the standardized approach. See
Capital Ratios in the Consolidated Financial Highlights.
PNC returned $.9 billion of
capital to shareholders in the fourth quarter of 2017 through
repurchases of 3.7 million common shares for $.5 billion and dividends on common shares of
$.4 billion. For the full year 2017,
PNC returned $3.6 billion of capital
to shareholders. Repurchases totaled 18.6 million common shares for
$2.3 billion and dividends on common
shares were $1.3 billion. Of the full
year repurchases, 7.9 million common shares for $1.1 billion took place under current share
repurchase programs of up to $2.7
billion for the four-quarter period beginning in the third
quarter of 2017. These programs include repurchases of up to
$.3 billion related to stock
issuances under employee benefit plans.
On January 4, 2018, the PNC board
of directors declared a quarterly cash dividend on common stock of
75 cents per share effective with the
February 5, 2018 dividend payment
date.
CREDIT QUALITY
REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Quality
|
|
|
|
|
|
Change
|
Change
|
|
At or for the quarter
ended
|
12/31/17
vs
|
12/31/17
vs
|
In
millions
|
12/31/2017
|
|
9/30/2017
|
|
12/31/2016
|
9/30/17
|
12/31/16
|
Nonperforming
loans
|
$
|
1,865
|
|
$
|
1,873
|
|
$
|
2,144
|
—
|
|
(13)
|
%
|
Nonperforming
assets
|
$
|
2,035
|
|
$
|
2,067
|
|
$
|
2,374
|
(2)
|
%
|
(14)
|
%
|
Accruing loans past
due 90 days or
more
|
$
|
737
|
|
$
|
678
|
|
$
|
782
|
9
|
%
|
(6)
|
%
|
Net
charge-offs
|
$
|
123
|
|
$
|
106
|
|
$
|
106
|
16
|
%
|
16
|
%
|
Provision for credit
losses
|
$
|
125
|
|
$
|
130
|
|
$
|
67
|
(4)
|
%
|
87
|
%
|
Allowance for loan
and lease losses
|
$
|
2,611
|
|
$
|
2,605
|
|
$
|
2,589
|
—
|
|
1
|
%
|
|
|
|
|
|
|
|
|
Overall credit quality for the fourth quarter of 2017 remained
stable with the third quarter. Provision for credit losses for
fourth quarter 2017 decreased $5
million compared with the third quarter. The provision for
the consumer lending portfolio increased due to loan
growth, higher delinquencies in auto and credit card in part
due to seasonality and the residual impact of hurricanes, and the
impact of a home equity loan reserve release in the third
quarter. This increase was more than offset by a lower
provision for the commercial lending portfolio reflecting stable
credit quality and reversal of hurricane reserves.
Nonperforming assets at December 31,
2017 decreased $32 million
compared with September 30, 2017 due
to lower other real estate owned and foreclosed and other assets as
well as lower nonperforming residential real estate loans. These
declines were partially offset by higher nonperforming commercial
loans primarily in the retail/wholesale trade category largely
attributable to a single borrower. In the comparison with
December 31, 2016, nonperforming
assets decreased $339 million as both
consumer and commercial nonperforming loans declined. Nonperforming
assets to total assets were .53 percent at December 31, 2017 compared with .55 percent at
September 30, 2017 and .65 percent at
December 31, 2016.
Overall delinquencies as of December 31,
2017 increased $101 million,
or 7 percent, compared with September 30,
2017 reflecting increases in residential mortgage, auto and
credit card, in part due to seasonality and the residual impact of
hurricanes. Accruing loans past due 90 days or more increased
$59 million driven by government
insured residential mortgage, accruing loans 30 to 59 days
increased $59 million and accruing
loans past due 60 to 89 days decreased $17
million.
Net charge-offs for the fourth quarter of 2017 increased
$17 million in both comparisons due
to charge-offs of certain commercial purchased impaired loans that
were previously fully reserved. Net charge-offs for the fourth
quarter of 2017 were .22 percent of average loans on an annualized
basis compared with .19 percent for the third quarter and .20
percent for the fourth quarter of 2016.
The allowance for loan and lease losses to total loans was 1.18
percent at both December 31, 2017 and
September 30, 2017 and 1.23 percent
at December 31, 2016. The allowance
to nonperforming loans was 140 percent at December 31, 2017, 139 percent at September 30, 2017 and 121 percent at
December 31, 2016.
BUSINESS SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
Business Segment
Income
|
|
|
|
|
|
In
millions
|
4Q17
|
|
3Q17
|
|
4Q16
|
Retail
Banking
|
$
|
(145)
|
|
$
|
232
|
|
$
|
228
|
Corporate &
Institutional Banking
|
937
|
|
525
|
|
545
|
Asset Management
Group
|
56
|
|
47
|
|
55
|
Other, including
BlackRock
|
1,243
|
|
322
|
|
219
|
Net income
|
$
|
2,091
|
|
$
|
1,126
|
|
$
|
1,047
|
See accompanying
notes in Consolidated Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
Effective for the first quarter of 2017, as a result of changes
to how PNC manages its businesses, it realigned its segments and,
accordingly, has changed the basis of presentation of its segments,
resulting in four reportable business segments: Retail Banking,
Corporate & Institutional Banking, Asset Management Group and
BlackRock. For purposes of this news release, BlackRock has been
combined with Other. In addition, PNC made certain adjustments to
its internal funds transfer pricing methodology primarily relating
to weighted average lives of certain non-maturity deposits. These
changes in methodology affected business segment results, primarily
adversely impacting net interest income for Corporate &
Institutional Banking and Retail Banking, offset by increased net
interest income in Other. All 2016 periods presented were revised
to conform to the new segment alignment and to reflect the change
in internal funds transfer pricing methodology.
Retail
Banking
|
|
|
|
|
|
|
Change
|
|
Change
|
|
|
|
|
|
|
|
4Q17 vs
|
|
4Q17 vs
|
In
millions
|
4Q17
|
|
3Q17
|
|
4Q16
|
|
3Q17
|
|
4Q16
|
Net interest
income
|
$
|
1,190
|
|
$
|
1,176
|
|
$
|
1,120
|
|
$
|
14
|
|
$
|
70
|
Noninterest
income
|
$
|
345
|
|
$
|
643
|
|
$
|
655
|
|
$
|
(298)
|
|
$
|
(310)
|
Provision for credit
losses
|
$
|
149
|
|
$
|
77
|
|
$
|
87
|
|
$
|
72
|
|
$
|
62
|
Noninterest
expense
|
$
|
1,391
|
|
$
|
1,375
|
|
$
|
1,328
|
|
$
|
16
|
|
$
|
63
|
Earnings
(loss)
|
$
|
(145)
|
|
$
|
232
|
|
$
|
228
|
|
$
|
(377)
|
|
$
|
(373)
|
|
|
|
|
|
|
|
|
|
|
In
billions
|
|
|
|
|
|
|
|
|
|
Average
loans
|
$
|
73.0
|
|
$
|
72.5
|
|
$
|
72.0
|
|
$
|
.5
|
|
$
|
1.0
|
Average
deposits
|
$
|
159.3
|
|
$
|
159.5
|
|
$
|
155.9
|
|
$
|
(.2)
|
|
$
|
3.4
|
Residential mortgage
servicing portfolio
Quarter end
|
$
|
127
|
|
$
|
129
|
|
$
|
125
|
|
$
|
(2)
|
|
$
|
2
|
Loan origination
volume
|
$
|
2.4
|
|
$
|
2.5
|
|
$
|
3.0
|
|
$
|
(.1)
|
|
$
|
(.6)
|
|
|
|
|
|
|
|
|
|
|
Retail Banking earnings for the fourth quarter of 2017 decreased
in both comparisons. The fourth quarter 2017 loss included income
tax expense of $139 million as a
result of the new tax legislation. Fourth quarter 2017 noninterest
income included $248 million of
negative derivative fair value adjustments related to Visa Class B
common shares and $71 million
negative impact from residential mortgage servicing rights fair
value assumption updates. Additionally, in both comparisons
noninterest income reflected lower residential mortgage loan sales
revenue partially offset by higher consumer service fees, including
debit card, credit card and brokerage fees, and higher service
charges on deposits. Provision for credit losses increased over
both prior periods reflecting loan growth, higher delinquencies in
auto and credit card in part due to seasonality and the residual
impact of hurricanes, and the impact of a home equity loan reserve
release in the third quarter. Noninterest expense increased in
both comparisons as a result of higher personnel and compliance
expense, real estate disposition and exit charges, and investments
in technology, partially offset by release of legal reserves.
- Average loans increased 1 percent in both comparisons as growth
in residential mortgage, auto and credit card loans was partially
offset by lower home equity, commercial, and education loans.
- Average deposits grew 2 percent over the fourth quarter of 2016
due to higher demand deposits as well as an increase in savings
deposits which was partially offset by lower money market deposits
reflecting a shift to relationship-based savings products.
- Approximately 50 percent of fourth quarter 2017 residential
mortgage loan origination volume was for home purchase transactions
compared with 57 percent for the third quarter and 33 percent in
the fourth quarter of 2016.
- Residential mortgage loan servicing acquisitions were
$1 billion for the fourth quarter of
2017 compared with $2 billion for the
third quarter and $3 billion in the
fourth quarter of 2016.
- Net charge-offs were $99 million
for the fourth quarter of 2017 compared with $85 million in the third quarter and $90 million for the fourth quarter of 2016.
- Retail Banking continued to focus on the strategic priority of
transforming the customer experience through transaction migration,
branch network and home lending transformations and multi-channel
engagement and service strategies.
-
- Approximately 63 percent of consumer customers used non-teller
channels for the majority of their transactions during the fourth
quarter compared with 62 percent in the third quarter and 60
percent for the fourth quarter of 2016.
- Deposit transactions via ATM and mobile channels were 54
percent of total deposit transactions in the fourth and third
quarters of 2017 compared with 51 percent in the fourth quarter of
2016.
- PNC had a network of 2,459 branches and 9,051 ATMs at
December 31, 2017.
Corporate &
Institutional Banking
|
|
|
|
|
|
Change
|
|
Change
|
|
|
|
|
|
|
|
4Q17 vs
|
|
4Q17 vs
|
In
millions
|
4Q17
|
|
3Q17
|
|
4Q16
|
|
3Q17
|
|
4Q16
|
Net interest
income
|
$
|
898
|
|
$
|
924
|
|
$
|
864
|
|
$
|
(26)
|
|
$
|
34
|
Noninterest
income
|
$
|
604
|
|
$
|
555
|
|
$
|
529
|
|
$
|
49
|
|
$
|
75
|
Provision for credit
losses
|
$
|
(14)
|
|
$
|
62
|
|
$
|
(3)
|
|
$
|
(76)
|
|
$
|
(11)
|
Noninterest
expense
|
$
|
643
|
|
$
|
599
|
|
$
|
567
|
|
$
|
44
|
|
$
|
76
|
Earnings
|
$
|
937
|
|
$
|
525
|
|
$
|
545
|
|
$
|
412
|
|
$
|
392
|
|
|
|
|
|
|
|
|
|
|
In
billions
|
|
|
|
|
|
|
|
|
|
Average
loans
|
$
|
135.8
|
|
$
|
134.3
|
|
$
|
125.7
|
|
$
|
1.5
|
|
$
|
10.1
|
Average
deposits
|
$
|
89.4
|
|
$
|
87.5
|
|
$
|
88.5
|
|
$
|
1.9
|
|
$
|
.9
|
|
|
|
|
|
|
|
|
|
|
Corporate & Institutional Banking earnings for the fourth
quarter of 2017 increased compared with both the third quarter of
2017 and the fourth quarter of 2016. Fourth quarter 2017 earnings
included a benefit of $373 million in
income taxes and a negative impact of $26
million related to leveraged leases in net interest income
as a result of the new tax legislation. Noninterest income
increased compared with the third quarter primarily due to higher
capital markets fees, including merger and acquisition advisory
fees, and higher net gains on commercial mortgage loans held for
sale partially offset by lower gains on asset sales. In the fourth
quarter 2016 comparison, noninterest income increased largely due
to higher capital markets fees, including merger and acquisition
advisory fees, higher operating lease income related to a business
acquired in the second quarter of 2017 and growth in treasury
management product revenue. Provision for credit losses was a
benefit in the fourth quarter of 2017 reflecting stable credit
quality and reversal of hurricane reserves. Noninterest expense
increased in both comparisons primarily due to variable costs
associated with increased business activity and investments in
technology and infrastructure, as well as expenses associated with
the acquired business in the comparison with fourth quarter
2016.
- Average loans increased 1 percent over the third quarter and 8
percent over the fourth quarter of 2016 driven by broad-based
growth across lending segments. The prior year comparison was also
impacted by acquired loans in the second quarter of 2017.
- Average deposits increased 2 percent over the third quarter
reflecting seasonal growth. Compared with the fourth quarter of
2016, deposits increased 1 percent primarily driven by growth in
interest-bearing demand deposits partially offset by a decline in
noninterest-bearing demand deposits.
- Net charge-offs were $29 million
in the fourth quarter of 2017 compared with $22 million in the third quarter and $17 million in the fourth quarter of 2016. Fourth
quarter 2017 net charge-offs included charge-offs of $17 million for certain commercial purchased
impaired loans that were fully reserved.
Asset Management
Group
|
|
|
|
|
|
|
Change
|
|
Change
|
|
|
|
|
|
|
|
4Q17 vs
|
|
4Q17 vs
|
In
millions
|
4Q17
|
|
3Q17
|
|
4Q16
|
|
3Q17
|
|
4Q16
|
Net interest
income
|
$
|
71
|
|
$
|
72
|
|
$
|
73
|
|
$
|
(1)
|
|
$
|
(2)
|
Noninterest
income
|
$
|
226
|
|
$
|
220
|
|
$
|
215
|
|
$
|
6
|
|
$
|
11
|
Provision for credit
losses (benefit)
|
$
|
7
|
|
$
|
3
|
|
$
|
(6)
|
|
$
|
4
|
|
$
|
13
|
Noninterest
expense
|
$
|
217
|
|
$
|
214
|
|
$
|
207
|
|
$
|
3
|
|
$
|
10
|
Earnings
|
$
|
56
|
|
$
|
47
|
|
$
|
55
|
|
$
|
9
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
In
billions
|
|
|
|
|
|
|
|
|
|
Client assets under
administration
Quarter end
|
$
|
282
|
|
$
|
275
|
|
$
|
257
|
|
$
|
7
|
|
$
|
25
|
Average
loans
|
$
|
7.1
|
|
$
|
7.0
|
|
$
|
7.1
|
|
$
|
.1
|
|
—
|
Average
deposits
|
$
|
12.6
|
|
$
|
12.2
|
|
$
|
12.4
|
|
$
|
.4
|
|
$
|
.2
|
|
|
|
|
|
|
|
|
|
|
Asset Management Group earnings for the fourth quarter of 2017
increased in both comparisons. Fourth quarter 2017 earnings
included an income tax benefit of $9
million as a result of the new tax legislation. Noninterest
income increased compared with the third quarter and fourth quarter
of 2016 primarily due to increases in the average equity markets.
Provision for credit losses increased in both comparisons due to
higher reserves on home equity loans. Noninterest expense increased
over both prior periods and included increases in personnel and
vendor-related expenses as well as continued investments in
technology.
- Asset Management Group's strategy is focused on growing
investable assets by continually evolving the client experience and
products and services. The business offers an open architecture
platform with a full array of investment products and banking
solutions.
- Client assets under administration at December 31, 2017 included discretionary client
assets under management of $151
billion and nondiscretionary client assets under
administration of $131 billion.
-
- Discretionary client assets under management increased
$5 billion compared with September 30, 2017 and $14
billion compared with December 31,
2016 primarily attributable to equity market increases.
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
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, discontinued consumer loan portfolios, private
equity 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.
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 (877)
402-9102 and (303) 223-4371 (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 2017
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 and (402) 977-9140
(international), conference ID 21862750 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
|
|
Year ended
|
Dollars in
millions, except per share data
|
December
31
|
|
September
30
|
|
December
31
|
|
December
31
|
|
December
31
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenue
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
$
|
2,345
|
|
|
$
|
2,345
|
|
|
$
|
2,130
|
|
|
$
|
9,108
|
|
|
$
|
8,391
|
|
Noninterest
income
|
1,915
|
|
|
1,780
|
|
|
1,744
|
|
|
7,221
|
|
|
6,771
|
|
Total
revenue
|
4,260
|
|
|
4,125
|
|
|
3,874
|
|
|
16,329
|
|
|
15,162
|
|
Provision for credit
losses
|
125
|
|
|
130
|
|
|
67
|
|
|
441
|
|
|
433
|
|
Noninterest
expense
|
3,061
|
|
|
2,456
|
|
|
2,441
|
|
|
10,398
|
|
|
9,476
|
|
Income before income
taxes (benefit) and
noncontrolling interests
|
$
|
1,074
|
|
|
$
|
1,539
|
|
|
$
|
1,366
|
|
|
$
|
5,490
|
|
|
$
|
5,253
|
|
Net income
|
$
|
2,091
|
|
|
$
|
1,126
|
|
|
$
|
1,047
|
|
|
$
|
5,388
|
|
|
$
|
3,985
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Net income
attributable to noncontrolling interests
|
11
|
|
|
12
|
|
|
22
|
|
|
50
|
|
|
82
|
|
Preferred
stock dividends (a)
|
55
|
|
|
63
|
|
|
42
|
|
|
236
|
|
|
209
|
|
Preferred
stock discount accretion and redemptions
|
2
|
|
|
1
|
|
|
1
|
|
|
26
|
|
|
6
|
|
Net income
attributable to common shareholders
|
$
|
2,023
|
|
|
$
|
1,050
|
|
|
$
|
982
|
|
|
$
|
5,076
|
|
|
$
|
3,688
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Dividends and
undistributed earnings allocated to
nonvested restricted
shares
|
8
|
|
|
5
|
|
|
7
|
|
|
23
|
|
|
26
|
|
Impact of
BlackRock earnings per share dilution
|
8
|
|
|
3
|
|
|
2
|
|
|
16
|
|
|
12
|
|
Net income
attributable to diluted common shares
|
$
|
2,007
|
|
|
$
|
1,042
|
|
|
$
|
973
|
|
|
$
|
5,037
|
|
|
$
|
3,650
|
|
Diluted earnings per
common share
|
$
|
4.18
|
|
|
$
|
2.16
|
|
|
$
|
1.97
|
|
|
$
|
10.36
|
|
|
$
|
7.30
|
|
Cash dividends
declared per common share
|
$
|
.75
|
|
|
$
|
.75
|
|
|
$
|
.55
|
|
|
$
|
2.60
|
|
|
$
|
2.12
|
|
Effective tax rate
(b)
|
(94.7)
|
%
|
|
26.8
|
%
|
|
23.4
|
%
|
|
1.9
|
%
|
|
24.1
|
%
|
|
|
(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 fourth quarter and full year 2017 results
benefited from the new federal tax legislation. Certain tax
legislation amounts are considered reasonable estimates as of
December 31, 2017. As a result, the amounts could be adjusted
during the measurement period, which will end in December
2018.
|
The PNC Financial
Services Group, Inc.
|
Consolidated
Financial Highlights (Unaudited)
|
|
Three months
ended
|
|
Year ended
|
|
December
31
|
|
September
30
|
|
December
31
|
|
December
31
|
|
December
31
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
PERFORMANCE
RATIOS
|
|
|
|
|
|
|
|
|
|
Net interest margin
(a)
|
2.88
|
%
|
|
2.91
|
%
|
|
2.69
|
%
|
|
2.87
|
%
|
|
2.73
|
%
|
Noninterest income to
total revenue
|
45
|
%
|
|
43
|
%
|
|
45
|
%
|
|
44
|
%
|
|
45
|
%
|
Efficiency
(b)
|
72
|
%
|
|
60
|
%
|
|
63
|
%
|
|
64
|
%
|
|
62
|
%
|
Return on:
|
|
|
|
|
|
|
|
|
|
Average common
shareholders' equity (c)
|
18.90
|
%
|
|
9.89
|
%
|
|
9.31
|
%
|
|
12.09
|
%
|
|
8.85
|
%
|
Average assets
(c)
|
2.20
|
%
|
|
1.20
|
%
|
|
1.13
|
%
|
|
1.45
|
%
|
|
1.10
|
%
|
BUSINESS SEGMENT
NET INCOME (LOSS) (c) (d) (e)
|
|
|
|
|
|
|
|
|
|
In
millions
|
|
|
|
|
|
|
|
|
|
Retail
Banking
|
$
|
(145)
|
|
|
$
|
232
|
|
|
$
|
228
|
|
|
$
|
530
|
|
|
$
|
1,023
|
|
Corporate &
Institutional Banking
|
937
|
|
|
525
|
|
|
545
|
|
|
2,464
|
|
|
1,909
|
|
Asset Management
Group
|
56
|
|
|
47
|
|
|
55
|
|
|
202
|
|
|
210
|
|
Other, including
BlackRock (f)
|
1,243
|
|
|
322
|
|
|
219
|
|
|
2,192
|
|
|
843
|
|
Total net
income
|
$
|
2,091
|
|
|
$
|
1,126
|
|
|
$
|
1,047
|
|
|
$
|
5,388
|
|
|
$
|
3,985
|
|
|
|
(a)
|
Calculated as
annualized taxable-equivalent net interest income divided by
average earning assets. To provide more meaningful comparisons of
net interest margins, 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, 2017,
September 30, 2017 and December 31, 2016 were $54
million, $55 million and $50 million, respectively. The
taxable-equivalent adjustments to net interest income for the year
ended December 31, 2017 and December 31, 2016 were $215
million and $195 million, respectively.
|
(b)
|
Calculated as
noninterest expense divided by total revenue.
|
(c)
|
The fourth quarter
and full year 2017 results benefited from the new federal tax
legislation. Our business segment results for these periods reflect
the allocation of the impact of the new tax legislation to our
business segments, including the revaluation of our deferred taxes.
Certain tax legislation amounts are considered reasonable estimates
as of December 31, 2017. As a result, the amounts could be adjusted
during the measurement period, which will end in December
2018.
|
(d)
|
Effective for the
first quarter of 2017, as a result of changes to how we manage our
businesses, we realigned our segments and, accordingly, have
changed the basis of presentation of our segments, resulting in
four reportable business segments: Retail Banking, Corporate &
Institutional Banking, Asset Management Group and BlackRock.
For purposes of this presentation, we have combined BlackRock with
Other. All 2016 prior periods presented were revised to conform to
the new segment alignment.
|
(e)
|
Our business
information is presented based on our internal management reporting
practices. Net interest income in business segment results reflects
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. We periodically
refine our internal methodologies as management reporting practices
are enhanced. In the first quarter of 2017, we made certain
adjustments to our internal funds transfer pricing methodology
primarily relating to weighted average lives of certain
non-maturity deposits. These changes in methodology affected
business segment results, primarily adversely impacting net
interest income for Corporate & Institutional Banking and
Retail Banking, offset by increased net interest income in Other.
All 2016 prior periods presented were revised to reflect our change
in internal funds transfer pricing methodology.
|
(f)
|
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. 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)
|
|
December
31
|
|
September
30
|
|
December
31
|
|
2017
|
|
2017
|
|
2016
|
BALANCE SHEET
DATA
|
|
|
|
|
|
Dollars in
millions, except per share data
|
|
|
|
|
|
Assets
|
$
|
380,768
|
|
|
$
|
375,191
|
|
|
$
|
366,380
|
|
Loans (a)
|
$
|
220,458
|
|
|
$
|
221,109
|
|
|
$
|
210,833
|
|
Allowance for loan
and lease losses
|
$
|
2,611
|
|
|
$
|
2,605
|
|
|
$
|
2,589
|
|
Interest-earning
deposits with banks
|
$
|
28,595
|
|
|
$
|
24,713
|
|
|
$
|
25,711
|
|
Investment
securities
|
$
|
76,131
|
|
|
$
|
74,994
|
|
|
$
|
75,947
|
|
Loans held for sale
(a)
|
$
|
2,655
|
|
|
$
|
1,764
|
|
|
$
|
2,504
|
|
Equity investments
(b)
|
$
|
11,392
|
|
|
$
|
11,009
|
|
|
$
|
10,728
|
|
Mortgage servicing
rights
|
$
|
1,832
|
|
|
$
|
1,854
|
|
|
$
|
1,758
|
|
Goodwill
|
$
|
9,173
|
|
|
$
|
9,163
|
|
|
$
|
9,103
|
|
Other assets
(a)
|
$
|
27,894
|
|
|
$
|
28,454
|
|
|
$
|
27,506
|
|
Noninterest-bearing
deposits
|
$
|
79,864
|
|
|
$
|
79,967
|
|
|
$
|
80,230
|
|
Interest-bearing
deposits
|
$
|
185,189
|
|
|
$
|
180,768
|
|
|
$
|
176,934
|
|
Total
deposits
|
$
|
265,053
|
|
|
$
|
260,735
|
|
|
$
|
257,164
|
|
Borrowed funds
(a)
|
$
|
59,088
|
|
|
$
|
57,564
|
|
|
$
|
52,706
|
|
Shareholders'
equity
|
$
|
47,513
|
|
|
$
|
46,388
|
|
|
$
|
45,699
|
|
Common shareholders'
equity
|
$
|
43,530
|
|
|
$
|
42,406
|
|
|
$
|
41,723
|
|
Accumulated other
comprehensive income
|
$
|
(148)
|
|
|
$
|
(22)
|
|
|
$
|
(265)
|
|
Book value per common
share
|
$
|
91.94
|
|
|
$
|
89.05
|
|
|
$
|
85.94
|
|
Tangible book value
per common share (Non-GAAP) (c)
|
$
|
72.28
|
|
|
$
|
69.72
|
|
|
$
|
67.26
|
|
Period end common
shares outstanding (millions)
|
473
|
|
|
476
|
|
|
485
|
|
Loans to
deposits
|
83
|
%
|
|
85
|
%
|
|
82
|
%
|
CLIENT
ASSETS
|
|
|
|
|
|
Discretionary client
assets under management
|
$
|
151
|
|
|
$
|
146
|
|
|
$
|
137
|
|
Nondiscretionary
client assets under administration
|
131
|
|
|
129
|
|
|
120
|
|
Total client assets
under administration
|
282
|
|
|
275
|
|
|
257
|
|
Brokerage account
client assets
|
49
|
|
|
48
|
|
|
44
|
|
Total client
assets
|
$
|
331
|
|
|
$
|
323
|
|
|
$
|
301
|
|
CAPITAL
RATIOS
|
|
|
|
|
|
Transitional Basel
III (d) (e)
|
|
|
|
|
|
Common equity
Tier 1
|
10.4
|
%
|
|
10.3
|
%
|
|
10.6
|
%
|
Tier 1
risk-based
|
11.6
|
%
|
|
11.6
|
%
|
|
12.0
|
%
|
Total capital
risk-based
|
13.7
|
%
|
|
13.7
|
%
|
|
14.3
|
%
|
Leverage
|
9.9
|
%
|
|
9.9
|
%
|
|
10.1
|
%
|
Pro forma Fully
Phased-In Basel III (Non-GAAP) (d)
|
|
|
|
|
|
Common equity
Tier 1
|
9.8
|
%
|
|
9.8
|
%
|
|
10.0
|
%
|
Common shareholders'
equity to assets
|
11.4
|
%
|
|
11.3
|
%
|
|
11.4
|
%
|
ASSET
QUALITY
|
|
|
|
|
|
Nonperforming loans
to total loans
|
.85
|
%
|
|
.85
|
%
|
|
1.02
|
%
|
Nonperforming assets
to total loans, OREO, foreclosed and other assets
|
.92
|
%
|
|
.93
|
%
|
|
1.12
|
%
|
Nonperforming assets
to total assets
|
.53
|
%
|
|
.55
|
%
|
|
.65
|
%
|
Net charge-offs to
average loans (for the three months ended) (annualized)
|
.22
|
%
|
|
.19
|
%
|
|
.20
|
%
|
Allowance for loan
and lease losses to total loans
|
1.18
|
%
|
|
1.18
|
%
|
|
1.23
|
%
|
Allowance for loan
and lease losses to nonperforming loans
|
140
|
%
|
|
139
|
%
|
|
121
|
%
|
Accruing loans past
due 90 days or more (in millions)
|
$
|
737
|
|
|
$
|
678
|
|
|
$
|
782
|
|
|
|
(a)
|
Amounts include
assets and liabilities for which we have elected the fair value
option. Our third quarter 2017 Form 10-Q included, and our 2017
Form 10-K will include, additional information regarding these
Consolidated Balance Sheet line items.
|
(b)
|
Amounts include our
equity interest in BlackRock.
|
(c)
|
See the Tangible Book
Value per Common Share table on page 19 for additional
information.
|
(d)
|
The ratios as of
December 31, 2017 are estimated and calculated based on the
standardized approach. See Capital Ratios on page 18 for additional
information.
|
(e)
|
Calculated using the
regulatory capital methodology applicable to PNC during each period
presented.
|
The PNC Financial
Services Group, Inc.
|
|
|
|
|
|
Consolidated
Financial Highlights (Unaudited)
|
CAPITAL RATIOS
As a result of the phased-in periods included in the final U.S.
Basel III regulatory capital rules (Basel III rules), as well as
the fact that PNC remains in the parallel run qualification phase
for the advanced approaches, PNC's regulatory risk-based capital
ratios in 2017 and 2016 are calculated using the standardized
approach for determining risk-weighted assets, and the definitions
of, and deductions from, regulatory capital under the Basel III
rules (as such definitions and deductions are phased-in for 2017
and 2016, respectively). We refer to the capital ratios calculated
using the phased-in Basel III provisions in effect for each year
and, for the risk-based ratios, standardized approach risk-weighted
assets, as Transitional Basel III ratios. 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, equity
exposures and securitization exposures are generally subject to
higher risk weights than other types of exposures.
We provide information below regarding PNC's estimated
December 31, 2017 and actual September 30, 2017 and
December 31, 2016 Transitional Basel III common equity Tier 1
ratios and PNC's estimated pro forma fully phased-in Basel III
common equity Tier 1 ratio. Under the Basel III rules applicable to
PNC, significant common stock investments in unconsolidated
financial institutions, mortgage servicing rights and deferred tax
assets must be deducted from capital (subject to a phase-in
schedule and 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, Basel III regulatory capital includes (subject to a phase-in
schedule) accumulated other comprehensive income related to
securities currently and previously held as available for sale, as
well as pension and other postretirement plans.
Transitional
Basel III and Pro forma Fully Phased-In Basel III Common Equity
Tier 1 Capital Ratios (Non-GAAP)
|
|
|
2017 Transitional
Basel III
|
|
|
2016
Transitional
Basel III
|
|
|
Pro forma Fully
Phased-In Basel III (Non-GAAP)
(estimated)
|
|
December
31
|
|
September
30
|
|
|
December
31
|
|
|
December
31
|
|
September
30
|
|
December
31
|
Dollars in
millions
|
2017
(estimated)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
2017
|
|
2016
|
Common stock, related
surplus and retained earnings,
net of treasury stock
|
$
|
43,676
|
|
|
$
|
42,426
|
|
|
|
$
|
41,987
|
|
|
|
$
|
43,676
|
|
|
$
|
42,426
|
|
|
$
|
41,987
|
|
Less regulatory
capital adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and
disallowed intangibles, net of deferred
tax liabilities
|
(9,244)
|
|
|
(9,137)
|
|
|
|
(8,974)
|
|
|
|
(9,307)
|
|
|
(9,202)
|
|
|
(9,073)
|
|
Basel III total
threshold deductions
|
(1,985)
|
|
|
(1,166)
|
|
|
|
(762)
|
|
|
|
(2,932)
|
|
|
(1,731)
|
|
|
(1,469)
|
|
Accumulated other
comprehensive income (a)
|
(165)
|
|
|
(94)
|
|
|
|
(238)
|
|
|
|
(206)
|
|
|
(117)
|
|
|
(396)
|
|
All other
adjustments
|
(140)
|
|
|
(161)
|
|
|
|
(214)
|
|
|
|
(144)
|
|
|
(163)
|
|
|
(221)
|
|
Basel III Common
equity Tier 1 capital
|
$
|
32,142
|
|
|
$
|
31,868
|
|
|
|
$
|
31,799
|
|
|
|
$
|
31,087
|
|
|
$
|
31,213
|
|
|
$
|
30,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basel III
standardized approach risk-weighted assets (b)
|
$
|
309,301
|
|
|
$
|
309,292
|
|
|
|
$
|
300,533
|
|
|
|
$
|
315,954
|
|
|
$
|
317,393
|
|
|
$
|
308,517
|
|
Basel III advanced
approaches risk-weighted assets (c)
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$
|
284,890
|
|
|
$
|
285,517
|
|
|
$
|
277,896
|
|
Basel III Common
equity Tier 1 capital ratio
|
10.4
|
%
|
|
10.3
|
%
|
|
|
10.6
|
%
|
|
|
9.8
|
%
|
|
9.8
|
%
|
|
10.0
|
%
|
Risk weight and
associated rules utilized
|
Standardized (with
2017
transition adjustments)
|
|
Standardized
(with 2016
transition
adjustments)
|
|
Standardized
|
|
|
(a)
|
Represents net
adjustments related to accumulated other comprehensive income for
securities currently and previously held as available for sale, as
well as pension and other postretirement plans.
|
(b)
|
Basel III
standardized approach risk-weighted assets are based on the Basel
III standardized approach rules and include credit and market
risk-weighted assets.
|
(c)
|
Basel III advanced
approaches risk-weighted assets are based on the Basel III advanced
approaches rules, and include credit, market and operational
risk-weighted assets. During the parallel run qualification phase,
PNC has refined the data, models and internal processes used as
part of the advanced approaches for determining risk-weighted
assets. We anticipate additional refinements through the parallel
run qualification phase.
|
PNC utilizes the pro forma fully phased-in Basel III capital
ratios to assess its capital position (without the benefit of
phase-ins), as these ratios represent the regulatory capital
standards that may ultimately be applicable to PNC under the final
Basel III rules. Our Basel III capital ratios and estimates may be
impacted by additional regulatory guidance or analysis, and, in the
case of those ratios calculated using the advanced approaches, may
be subject to variability based on the ongoing evolution,
validation and regulatory approval of PNC's models that are
integral to the calculation of advanced approaches risk-weighted
assets as PNC moves through the parallel run approval process.
The PNC Financial
Services Group, Inc.
|
|
|
|
|
|
Consolidated
Financial Highlights (Unaudited)
|
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)
|
|
|
|
|
|
|
December
31
|
|
September
30
|
|
December
31
|
Dollars in
millions, except per share data
|
2017
|
|
2017
|
|
2016
|
Book value per common
share
|
$
|
91.94
|
|
$
|
89.05
|
|
$
|
85.94
|
Tangible book value
per common share
|
|
|
|
|
|
Common shareholders'
equity
|
$
|
43,530
|
|
$
|
42,406
|
|
$
|
41,723
|
Goodwill and Other
Intangible Assets
|
(9,498)
|
|
(9,503)
|
|
(9,376)
|
Deferred tax
liabilities on Goodwill and Other Intangible Assets
|
191
|
|
301
|
|
304
|
Tangible
common shareholders' equity
|
$
|
34,223
|
|
$
|
33,204
|
|
$
|
32,651
|
Period-end common
shares outstanding (in millions)
|
473
|
|
476
|
|
485
|
Tangible book value
per common share (Non-GAAP)
|
$
|
72.28
|
|
$
|
69.72
|
|
$
|
67.26
|
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 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 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 newly enacted tax
legislation, changing business and economic conditions or
legislative or regulatory initiatives.
- Changes in customers', suppliers' and other counterparties'
performance and creditworthiness.
- Slowing or reversal of the current U.S. economic
expansion.
- 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 current view that
U.S. economic growth will accelerate somewhat in 2018, thanks to
stimulus from recently passed corporate and personal income tax
cuts that will support business investment and consumer spending,
respectively. Further gradual improvement in the labor market this
year, including job gains and rising wages, is another positive for
consumer spending. Other sources of growth for the U.S. economy in
2018 will be the global economic expansion and the housing market.
Although inflation slowed in 2017, it should pick up as the labor
market continues to tighten. Short-term interest rates and bond
yields are expected to rise throughout 2018; PNC's baseline
forecast is for three increases in the federal funds rate in 2018,
pushing the rate to a range of 2.00 to 2.25 percent by the end of
the year. Longer-term rates are also expected to increase as the
Federal Reserve slowly reduces the size of its balance sheet and
the federal government borrows more, but at a slower pace than
short-term rates, so we anticipate the yield curve will flatten but
not invert.
- PNC's ability to take certain capital actions, including
returning capital to shareholders, is subject to review 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
and to the acceptance of such capital plan and non-objection to
such capital actions by the Federal Reserve Board.
- 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 (particularly
those implementing the international regulatory capital framework
developed by the Basel Committee on Banking Supervision (Basel
Committee)), 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 approval of related
models.
Cautionary Statement Regarding Forward-Looking
Information (Continued)
- 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 changes affecting oversight of the financial services
industry, consumer protection, pension, bankruptcy and other
industry aspects, and changes in accounting policies and
principles.
- Changes to regulations governing bank capital and liquidity
standards, including due to the Dodd-Frank Act and initiatives of
the Basel Committee.
- 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. Acquisition
risks and uncertainties include those presented by the nature of
the business acquired, 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 2016 Form 10-K and our 2017 Form 10-Qs, including in
the Risk Factors and Risk Management sections and the Legal
Proceedings and Commitments Notes of the Notes To Consolidated
Financial Statements in those reports, and in 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 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:
|
INVESTORS:
|
Diane
Zappas
|
Bryan
Gill
|
(412)
762-4550
|
(412)
768-4143
|
media.relations@pnc.com
|
investor.relations@pnc.com
|
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SOURCE PNC Financial Services Group, Inc.