PITTSBURGH, Jan. 16, 2019 /PRNewswire/ -- The PNC Financial
Services Group, Inc. (NYSE: PNC) today reported:
|
For the
year
|
|
For the
quarter
|
|
2018
|
|
2017
|
|
|
4Q18
|
|
3Q18
|
|
4Q17
|
|
Net
income $ millions
|
$5,346
|
|
$5,388
|
|
|
$1,351
|
|
$1,400
|
|
$2,091
|
|
Diluted earnings per
common share
|
$10.71
|
|
$10.36
|
|
|
$2.75
|
|
$2.82
|
|
$4.18
|
|
|
|
"2018 was a successful
year for PNC. Earnings per share increased, and our returns on
average assets and common equity were strong. Record revenue was
driven by higher net interest income and noninterest income, and we
generated positive operating leverage for the year. We grew loans
and deposits, and expanded to new markets with our middle market
corporate banking franchise and the successful launch of our
national retail digital strategy. Supported by our strong capital
and liquidity positions, we are entering 2019 well positioned to
create long-term value for our shareholders."
Bill Demchak, PNC Chairman, President and Chief Executive
Officer
|
Income Statement Highlights
- Fourth quarter and full year 2017 net income included a net
benefit of $.9 billion from federal
tax legislation and significant items.
Fourth quarter 2018 compared with third quarter 2018
- Net income of $1.4 billion for
the fourth quarter decreased $49
million, or 4 percent, compared with the third quarter.
- Total revenue for the fourth quarter of $4.3 billion declined $17
million.
- Net interest income of $2.5
billion increased $15 million,
or 1 percent, due to higher loan and securities yields and balances
partially offset by increased funding costs.
-
- Net interest margin decreased 3 basis points to 2.96 percent
due to automation of operational processes that refined the
calculation of certain average other interest-earning assets
and impacted the related average yield.
- Noninterest income of $1.9
billion decreased $32 million,
or 2 percent.
-
- Fee income declined $56 million,
or 4 percent, to $1.5 billion due to
lower asset management revenue driven by a $47 million decrease in earnings from PNC's
equity investment in BlackRock, including a $10 million flow-through impact of BlackRock's
recently announced restructuring charge. Additionally, lower
residential mortgage revenue was partially offset by seasonally
higher consumer activity.
- Other noninterest income increased $24
million, or 8 percent, to $325
million and included positive Visa Class B derivative fair
value adjustments of $42 million in
the fourth quarter compared with negative adjustments of
$32 million in the third
quarter.
- Noninterest expense decreased $31
million, or 1 percent, to $2.6
billion reflecting the fourth quarter elimination of a
$36 million quarterly FDIC deposit
insurance surcharge assessment.
- Provision for credit losses was $148
million, an increase of $60
million resulting from a higher commercial loan provision
reflecting portfolio growth and a benefit from lower specific
reserves in the third quarter.
- The effective tax rate was 16.3 percent for the fourth quarter
compared with 15.7 percent for the third quarter, and 16.8 percent
for full year 2018.
Balance Sheet Highlights
- Average loans increased $2.6
billion, or 1 percent, to $225.9
billion in the fourth quarter compared with the third
quarter.
-
- Average commercial lending balances grew $2.3 billion reflecting seasonal growth in PNC's
multifamily agency warehouse lending within the real estate
business and loan growth across the corporate banking, business
credit and equipment finance businesses.
- Average consumer lending balances increased $.3 billion due to growth in residential
mortgage, credit card, auto and unsecured installment loans
partially offset by lower home equity and education loans.
- Overall credit quality remained strong.
-
- Nonperforming assets of $1.8
billion at December 31, 2018
decreased $17 million, or 1 percent,
compared with September 30,
2018.
- Net charge-offs were $107 million
for the fourth quarter compared with $91
million for the third quarter.
- Average deposits increased $4.0
billion, or 2 percent, to $266.5
billion in the fourth quarter compared with the third
quarter reflecting seasonal growth in commercial
deposits.
- Average investment securities increased $1.4 billion, or 2 percent, to $82.1 billion in the fourth quarter compared with
the third quarter.
- Average balances held with the Federal Reserve decreased
$2.4 billion to $16.4 billion compared with the third quarter,
and December 31, 2018 balances
decreased $9.1 billion to
$10.5 billion compared with
September 30, 2018 reflecting
short-term investments in resale agreements over year end.
- PNC returned $1.2 billion of
capital to shareholders in the fourth quarter through repurchases
of 6.1 million common shares for $.8
billion and dividends on common shares of $.4 billion.
-
- For the full year 2018, PNC returned $4.4 billion of capital to shareholders through
repurchases of 19.9 million common shares for $2.8 billion and dividends on common shares of
$1.6 billion.
- In November 2018, PNC announced
an increase to authorized repurchases of up to an additional
$900 million in common shares, an
addition to previously announced share repurchase programs of up to
$2.0 billion through the end of the
second quarter of 2019.
- PNC maintained strong capital and liquidity positions.
-
- The Basel III common equity Tier 1 capital ratio was an
estimated 9.6 percent at December 31,
2018 and 9.3 percent at September 30,
2018.
- The Liquidity Coverage Ratio at December
31, 2018 for both PNC and PNC Bank, N.A. continued to exceed
the regulatory minimum requirement of 100 percent.
Earnings
Summary
|
|
|
|
|
|
|
In millions,
except per share data
|
|
4Q18
|
|
3Q18
|
|
4Q17
|
Net income
|
|
$
|
1,351
|
|
|
$
|
1,400
|
|
|
$
|
2,091
|
|
Net income
attributable to diluted common shares
|
|
$
|
1,274
|
|
|
$
|
1,317
|
|
|
$
|
2,007
|
|
Diluted earnings per
common share
|
|
$
|
2.75
|
|
|
$
|
2.82
|
|
|
$
|
4.18
|
|
Average diluted
common shares outstanding
|
|
463
|
|
|
467
|
|
|
480
|
|
Return on average
assets
|
|
1.40
|
%
|
|
1.47
|
%
|
|
2.20
|
%
|
Return on average
common equity
|
|
11.83
|
%
|
|
12.32
|
%
|
|
18.90
|
%
|
Book value per common
share
|
Quarter
end
|
$
|
95.72
|
|
|
$
|
93.22
|
|
|
$
|
91.94
|
|
Tangible book value
per common share (non-GAAP)
|
Quarter
end
|
$
|
75.42
|
|
|
$
|
73.11
|
|
|
$
|
72.28
|
|
Cash dividends
declared per common share
|
|
$
|
.95
|
|
|
$
|
.95
|
|
|
$
|
.75
|
|
|
|
|
|
|
|
|
The Consolidated Financial Highlights accompanying this news
release include additional information regarding reconciliations of
non-GAAP financial measures to reported amounts. 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
|
|
|
|
|
|
|
4Q18 vs
|
4Q18 vs
|
In
millions
|
4Q18
|
|
3Q18
|
|
4Q17
|
3Q18
|
4Q17
|
Net interest
income
|
$
|
2,481
|
|
|
$
|
2,466
|
|
|
$
|
2,345
|
|
1
|
%
|
6
|
%
|
Noninterest
income
|
1,859
|
|
|
1,891
|
|
|
1,915
|
|
(2)
|
%
|
(3)
|
%
|
Total
revenue
|
$
|
4,340
|
|
|
$
|
4,357
|
|
|
$
|
4,260
|
|
—
|
|
2
|
%
|
|
|
|
|
|
|
|
|
Total revenue for the fourth quarter of 2018 decreased
$17 million compared with the third
quarter and increased $80 million
compared with the fourth quarter of 2017. Net interest income grew
while noninterest income declined in both comparisons.
Net interest income for the fourth quarter of 2018 increased
$15 million compared with the third
quarter and $136 million compared
with the fourth quarter of 2017. Higher loan and securities yields
and balances were partially offset by higher deposit and borrowing
costs in both comparisons reflecting the impact of interest rate
increases. The net interest margin was 2.96 percent for the fourth
quarter of 2018 compared with 2.99 percent for the third quarter
and 2.88 percent for the fourth quarter of 2017. The decline in the
margin from the third quarter was due to automation of operational
processes that refined the calculation of certain average other
interest-earning assets and impacted the related average
yield.
Noninterest
Income
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
4Q18 vs
|
4Q18 vs
|
In
millions
|
4Q18
|
|
3Q18
|
|
4Q17
|
3Q18
|
4Q17
|
Asset
management
|
$
|
428
|
|
|
$
|
486
|
|
|
$
|
720
|
|
(12)
|
%
|
(41)
|
%
|
Consumer
services
|
387
|
|
|
377
|
|
|
366
|
|
3
|
%
|
6
|
%
|
Corporate
services
|
468
|
|
|
465
|
|
|
458
|
|
1
|
%
|
2
|
%
|
Residential
mortgage
|
59
|
|
|
76
|
|
|
29
|
|
(22)
|
%
|
103
|
%
|
Service charges on
deposits
|
192
|
|
|
186
|
|
|
183
|
|
3
|
%
|
5
|
%
|
Other
|
325
|
|
|
301
|
|
|
159
|
|
8
|
%
|
104
|
%
|
|
$
|
1,859
|
|
|
$
|
1,891
|
|
|
$
|
1,915
|
|
(2)
|
%
|
(3)
|
%
|
|
|
|
|
|
|
|
|
Noninterest income for the fourth quarter of 2018 declined
$32 million compared with the third
quarter as lower fee income was somewhat offset by higher other
noninterest income. Asset management revenue decreased $58 million reflecting lower earnings of
$47 million from PNC's equity
investment in BlackRock, including a $10
million flow-through impact of BlackRock's recently
announced restructuring charge, and lower average equity markets.
Consumer service fees grew $10
million due to seasonally higher credit card and merchant
services activity and higher brokerage revenue. Corporate service
fees increased $3 million primarily
due to higher loan syndication and other fees substantially offset
by lower merger and acquisition advisory fees. Residential mortgage
revenue decreased $17 million
reflecting a $19 million negative
adjustment for residential mortgage servicing rights valuation, net
of economic hedge, driven by a decline in long-term interest rates
at quarter end. Service charges on deposits grew $6 million as a result of a seasonal increase in
consumer spending.
Other noninterest income for the fourth quarter of 2018
increased $24 million primarily due
to positive derivative fair value adjustments of $42 million related to Visa Class B common shares
in the fourth quarter compared with negative adjustments of
$32 million in the third quarter and
higher gains on asset sales partially offset by lower revenue from
private equity investments.
Noninterest income for the fourth quarter of 2018 decreased
$56 million compared with the fourth
quarter of 2017. Asset management revenue declined $292 million reflecting a $254 million fourth quarter 2017 flow-through
impact of tax legislation on PNC's equity investment in BlackRock.
Lower earnings from the equity investment in BlackRock in the
fourth quarter of 2018 also contributed to the decline. Consumer
service fees grew $21 million driven
by higher debit card, brokerage and credit card activity. Corporate
service fees increased $10 million
reflecting higher treasury management revenue. Residential mortgage
revenue increased $30 million as a
result of a $71 million fourth
quarter 2017 negative adjustment for residential mortgage servicing
rights fair value assumption updates compared with a negative
valuation adjustment of $19 million
in the fourth quarter of 2018 partially offset by lower loan sales
revenue. Service charges on deposits increased $9 million due to higher consumer transaction
volumes. Other noninterest income increased $166 million due to $248
million of fourth quarter 2017 negative derivative fair
value adjustments related to Visa Class B common shares compared
with positive adjustments of $42
million in the fourth quarter of 2018 partially offset by a
fourth quarter 2017 benefit of $119
million for appreciation in value of BlackRock stock
contributed to the PNC Foundation.
CONSOLIDATED
EXPENSE REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
Expense
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
4Q18 vs
|
4Q18 vs
|
In
millions
|
4Q18
|
|
3Q18
|
|
4Q17
|
3Q18
|
4Q17
|
Personnel
|
$
|
1,348
|
|
|
$
|
1,413
|
|
|
$
|
1,449
|
|
(5)
|
%
|
(7)
|
%
|
Occupancy
|
202
|
|
|
195
|
|
|
240
|
|
4
|
%
|
(16)
|
%
|
Equipment
|
285
|
|
|
264
|
|
|
274
|
|
8
|
%
|
4
|
%
|
Marketing
|
84
|
|
|
71
|
|
|
60
|
|
18
|
%
|
40
|
%
|
Other
|
658
|
|
|
665
|
|
|
1,038
|
|
(1)
|
%
|
(37)
|
%
|
|
$
|
2,577
|
|
|
$
|
2,608
|
|
|
$
|
3,061
|
|
(1)
|
%
|
(16)
|
%
|
|
|
|
|
|
|
|
|
Noninterest expense for the fourth quarter of 2018 decreased
$31 million compared with the third
quarter. Personnel expense declined $65
million as lower variable compensation was partially offset
by an increase in benefits, including medical expense. Equipment
expense increased $21 million in part
due to technology-related depreciation. Marketing expense increased
$13 million driven by the national
retail digital strategy. Other noninterest expense declined
$7 million reflecting the fourth
quarter elimination of a $36 million
quarterly FDIC deposit insurance surcharge assessment partially
offset by higher expense for business activities.
Noninterest expense for the fourth quarter of 2018 decreased
$484 million compared with the fourth
quarter of 2017. Fourth quarter 2017 included significant items of
$502 million consisting of a
$200 million contribution to the PNC
Foundation, $197 million of charges
for real estate dispositions and exits, and $105 million of personnel expense for employee
cash payments and pension account credits. Excluding the impact of
these items, noninterest expense increased $18 million, or 1 percent, in support of business
growth.
The effective tax rate was 16.3 percent for the fourth quarter
of 2018 compared with 15.7 percent for the third quarter, and 16.8
percent for full year 2018. The federal statutory tax rate was
lowered to 21.0 percent effective January 1,
2018. Fourth quarter 2017 included an income tax benefit
recognized as a result of federal tax legislation and was primarily
attributable to revaluation of net deferred tax liabilities at the
lower statutory tax rate.
CONSOLIDATED BALANCE SHEET REVIEW
Average total assets were $383.1
billion in the fourth quarter of 2018, an increase of 1
percent compared with $377.9 billion
in the third quarter and 2 percent compared with $376.8 billion in the fourth quarter of 2017.
Higher average loans, investment securities and short-term
investments were partially offset by lower interest-earning
deposits with banks in both comparisons. Total assets were
$382.3 billion at December 31, 2018, $380.1
billion at September 30, 2018
and $380.8 billion at December 31, 2017.
Loans
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
4Q18 vs
|
4Q18 vs
|
In
billions
|
4Q18
|
|
3Q18
|
|
4Q17
|
3Q18
|
4Q17
|
Average
|
|
|
|
|
|
|
|
Commercial
lending
|
$
|
152.2
|
|
|
$
|
149.9
|
|
|
$
|
148.5
|
|
2
|
%
|
2
|
%
|
Consumer
lending
|
73.7
|
|
|
73.4
|
|
|
72.6
|
|
—
|
|
2
|
%
|
Average
loans
|
$
|
225.9
|
|
|
$
|
223.3
|
|
|
$
|
221.1
|
|
1
|
%
|
2
|
%
|
|
|
|
|
|
|
|
|
Quarter
end
|
|
|
|
|
|
|
|
Commercial
lending
|
$
|
152.3
|
|
|
$
|
149.5
|
|
|
$
|
147.4
|
|
2
|
%
|
3
|
%
|
Consumer
lending
|
73.9
|
|
|
73.5
|
|
|
73.0
|
|
1
|
%
|
1
|
%
|
Total
loans
|
$
|
226.2
|
|
|
$
|
223.0
|
|
|
$
|
220.4
|
|
1
|
%
|
3
|
%
|
|
|
|
|
|
|
|
|
Average loans for the fourth quarter of 2018 increased
$2.6 billion compared with the third
quarter. Average commercial lending balances grew $2.3 billion reflecting seasonal growth in PNC's
multifamily agency warehouse lending within the real estate
business and loan growth across the corporate banking, business
credit and equipment finance businesses. Average consumer lending
balances increased $.3 billion due to
growth in residential mortgage, credit card, auto and unsecured
installment loans partially offset by lower home equity and
education loans. Total loans at December 31,
2018 grew $3.2 billion
compared with September 30, 2018.
Commercial lending balances increased $2.8
billion and consumer lending balances increased $.4 billion.
Fourth quarter 2018 average and period end loans increased
$4.8 billion and $5.8 billion, respectively, compared with fourth
quarter 2017 driven by growth in both commercial and consumer
lending balances.
Investment
Securities
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
4Q18 vs
|
4Q18 vs
|
In
billions
|
4Q18
|
|
3Q18
|
|
4Q17
|
3Q18
|
4Q17
|
Average
|
$
|
82.1
|
|
|
$
|
80.7
|
|
|
$
|
74.2
|
|
2
|
%
|
11
|
%
|
Quarter
end
|
$
|
82.7
|
|
|
$
|
80.8
|
|
|
$
|
76.1
|
|
2
|
%
|
9
|
%
|
|
|
|
|
|
|
|
|
Average investment securities for the fourth quarter of 2018
increased $1.4 billion and period end
balances increased $1.9 billion
compared with the third quarter due to net purchase activity,
primarily in US Treasury securities. Fourth quarter 2018 average
and period end investment securities increased $7.9 billion and $6.6
billion, respectively, compared with the fourth quarter of
2017. Net unrealized losses on available for sale securities were
$.1 billion at December 31, 2018 compared with net unrealized
losses of $.7 billion at September 30, 2018 and net unrealized gains of
$.4 billion at December 31, 2017.
Average balances held with the Federal Reserve Bank decreased to
$16.4 billion for the fourth quarter
of 2018 from $18.8 billion in the
third quarter and $25.3 billion in
the fourth quarter of 2017 as investment of liquidity continued.
Balances held with the Federal Reserve at December 31, 2018 were $10.5 billion at December
31, 2018, $19.6 billion at
September 30, 2018 and $28.3 billion at December
31, 2017. The lower balance at year end 2018 reflected
short-term investments in resale agreements of $6.9 billion at December
31, 2018, included in other assets on the balance sheet.
Deposits
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
4Q18 vs
|
4Q18 vs
|
In
billions
|
4Q18
|
|
3Q18
|
|
4Q17
|
3Q18
|
4Q17
|
Average
|
|
|
|
|
|
|
|
Noninterest-bearing
|
$
|
75.3
|
|
|
$
|
76.2
|
|
|
$
|
80.2
|
|
(1)
|
%
|
(6)
|
%
|
Interest-bearing
|
191.2
|
|
|
186.3
|
|
|
181.3
|
|
3
|
%
|
5
|
%
|
Average
deposits
|
$
|
266.5
|
|
|
$
|
262.5
|
|
|
$
|
261.5
|
|
2
|
%
|
2
|
%
|
|
|
|
|
|
|
|
|
Quarter
end
|
|
|
|
|
|
|
|
Noninterest-bearing
|
$
|
74.0
|
|
|
$
|
74.8
|
|
|
$
|
79.9
|
|
(1)
|
%
|
(7)
|
%
|
Interest-bearing
|
193.9
|
|
|
190.1
|
|
|
185.2
|
|
2
|
%
|
5
|
%
|
Total
deposits
|
$
|
267.9
|
|
|
$
|
264.9
|
|
|
$
|
265.1
|
|
1
|
%
|
1
|
%
|
|
|
|
|
|
|
|
|
Average deposits for the fourth quarter of 2018 increased
$4.0 billion compared with the third
quarter reflecting seasonal growth in commercial deposits.
Noninterest-bearing balances decreased primarily due to the shift
of commercial deposits to interest-bearing as deposit rates have
risen. Deposits increased $3.0
billion at December 31, 2018
compared with September 30, 2018 as
higher consumer interest-bearing deposits reflected a seasonal
increase in balances at year end. Fourth quarter 2018 average and
period end deposits increased $5.0
billion and $2.8 billion,
respectively, compared with fourth quarter 2017 driven by overall
deposit and customer growth.
Borrowed
Funds
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
4Q18 vs
|
4Q18 vs
|
In
billions
|
4Q18
|
|
3Q18
|
|
4Q17
|
3Q18
|
4Q17
|
Average
|
$
|
58.7
|
|
|
$
|
59.8
|
|
|
$
|
58.0
|
|
(2)
|
%
|
1
|
%
|
Quarter
end
|
$
|
57.4
|
|
|
$
|
57.9
|
|
|
$
|
59.1
|
|
(1)
|
%
|
(3)
|
%
|
|
|
|
|
|
|
|
|
Average borrowed funds for the fourth quarter of 2018 decreased
$1.1 billion compared with the third
quarter due to lower bank notes and senior debt and Federal Home
Loan Bank borrowings partially offset by higher subordinated debt.
Borrowed funds at December 31, 2018
declined $.5 billion compared with
September 30, 2018 as lower bank
notes and senior debt were partially offset by higher Federal Home
Loan Bank borrowings reflecting short-term issuances late in the
fourth quarter. Fourth quarter 2018 average borrowed funds
increased $.7 billion compared with
fourth quarter 2017 due to higher Federal Home Loan Bank borrowings
and repurchase agreements partially offset by lower bank notes and
senior debt. Borrowed funds at December 31,
2018 declined $1.7 billion
compared with December 31, 2017
primarily due to lower bank notes and senior debt.
Capital
|
|
|
|
|
|
|
|
12/31/2018
|
*
|
|
9/30/2018
|
|
12/31/2017
|
Common shareholders'
equity In billions
|
$
|
43.7
|
|
|
|
$
|
43.1
|
|
|
$
|
43.5
|
|
Basel III common
equity Tier 1 capital ratio
|
9.6
|
%
|
|
|
9.3
|
%
|
|
9.8
|
%
|
* Ratio
estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNC maintained a strong capital position. Common shareholders'
equity at December 31, 2018 increased
$.6 billion compared with
September 30, 2018 due to fourth
quarter net income partially offset by share repurchases and
dividends, and to an improvement in accumulated other comprehensive
loss related to lower net unrealized securities losses.
PNC returned $1.2 billion of
capital to shareholders in the fourth quarter of 2018 through
repurchases of 6.1 million common shares for $.8 billion and dividends on common shares of
$.4 billion. In November 2018, PNC announced an increase to
authorized repurchases of up to $900
million in common shares through the end of the second
quarter of 2019. This was in addition to the share repurchase
programs of up to $2.0 billion
previously announced for this period. These programs include
repurchases of up to $.3 billion
related to stock issuances under employee benefit plans. For the
full year 2018, PNC returned $4.4
billion of capital to shareholders through repurchases of
19.9 million common shares for $2.8
billion and dividends on common shares of $1.6 billion.
On January 3, 2019, the PNC board
of directors declared a quarterly cash dividend on common stock of
95 cents per share effective with the
February 5, 2019 dividend payment
date.
The Basel III common equity Tier 1 capital ratio, which includes
the full phase-in of all Basel III adjustments, became effective
for PNC as of January 1, 2018. The
ratio for December 31, 2017 was
calculated on the same basis. These ratios were calculated based on
the standardized approach for the risk-weighting of assets. See
Capital Ratios in the Consolidated Financial Highlights.
CREDIT QUALITY
REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Quality
|
|
|
|
|
|
Change
|
Change
|
|
At or for the quarter
ended
|
12/31/18
vs
|
12/31/18
vs
|
In
millions
|
12/31/2018
|
|
|
9/30/2018
|
|
|
12/31/2017
|
|
9/30/18
|
12/31/17
|
Nonperforming
loans
|
$
|
1,694
|
|
|
$
|
1,694
|
|
|
$
|
1,865
|
|
—
|
|
(9)
|
%
|
Nonperforming
assets
|
$
|
1,808
|
|
|
$
|
1,825
|
|
|
$
|
2,035
|
|
(1)
|
%
|
(11)
|
%
|
Accruing loans past
due 90 days or more
|
$
|
629
|
|
|
$
|
619
|
|
|
$
|
737
|
|
2
|
%
|
(15)
|
%
|
Net
charge-offs
|
$
|
107
|
|
|
$
|
91
|
|
|
$
|
123
|
|
18
|
%
|
(13)
|
%
|
Provision for credit
losses
|
$
|
148
|
|
|
$
|
88
|
|
|
$
|
125
|
|
68
|
%
|
18
|
%
|
Allowance for loan
and lease losses
|
$
|
2,629
|
|
|
$
|
2,584
|
|
|
$
|
2,611
|
|
2
|
%
|
1
|
%
|
|
|
|
|
|
|
|
|
Overall credit quality for the fourth quarter of 2018 remained
strong. Provision for credit losses for the fourth quarter
increased $60 million compared with
the third quarter. The provision for commercial loans increased
reflecting portfolio growth and a benefit from lower specific
reserves in the third quarter. The provision for consumer loans
increased modestly compared with the third quarter as a higher
provision for auto loans was partially offset by lower home equity
and credit card loan provisions.
Nonperforming assets at December 31,
2018 decreased $17 million
compared with September 30, 2018 due
to lower other real estate owned and foreclosed assets.
Nonperforming loans were stable reflecting lower nonperforming home
equity and residential mortgage loans offset by higher
nonperforming commercial loans. Nonperforming assets decreased
$227 million compared with
December 31, 2017 as a result of
lower nonperforming commercial and commercial real estate loans,
lower other real estate owned and foreclosed assets, and lower
nonperforming consumer loans. Nonperforming assets to total assets
were .47 percent at December 31,
2018, .48 percent at September 30,
2018 and .53 percent at December 31,
2017.
Overall delinquencies at December 31,
2018 increased $57 million, or
4 percent, compared with September 30,
2018. Accruing loans 30 to 59 days past due increased
$34 million due to higher equipment
lease financing and commercial loan delinquencies partially offset
by lower government insured education and home equity loan
delinquencies. Accruing loans past due 60 to 89 days increased
$13 million and accruing loans past
due 90 days or more increased $10
million.
Net charge-offs for the fourth quarter of 2018 increased
$16 million compared with the
third quarter primarily attributable to higher auto loan net
charge-offs related in part to Hurricane Florence. Net
charge-offs for the fourth quarter of 2018 decreased $16 million compared with the fourth quarter of
2017 due to lower commercial lending net charge-offs reflecting
fourth quarter 2017 charge-offs of certain commercial purchased
impaired loans partially offset by higher consumer loan net
charge-offs. Net charge-offs for the fourth quarter of 2018 were
.19 percent of average loans on an annualized basis compared with
.16 percent for the third quarter and .22 percent for the fourth
quarter of 2017.
The allowance for loan and lease losses to total loans was 1.16
percent at both December 31, 2018 and
September 30, 2018 and 1.18 percent
at December 31, 2017. The allowance
to nonperforming loans was 155 percent at December 31, 2018, 153 percent at September 30, 2018 and 140 percent at
December 31, 2017.
BUSINESS SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
Business Segment
Income
|
|
|
|
|
|
In
millions
|
4Q18
|
|
3Q18
|
|
4Q17
|
Retail
Banking
|
$
|
313
|
|
|
$
|
228
|
|
|
$
|
(105)
|
|
Corporate &
Institutional Banking
|
651
|
|
|
642
|
|
|
960
|
|
Asset Management
Group
|
42
|
|
|
55
|
|
|
58
|
|
Other, including
BlackRock
|
345
|
|
|
475
|
|
|
1,178
|
|
Net income
|
$
|
1,351
|
|
|
$
|
1,400
|
|
|
$
|
2,091
|
|
See accompanying
notes in Consolidated Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
In the fourth quarter of 2018, as a result of updating internal
management reporting processes relating to segment reporting
disclosures, certain noninterest expenses and fourth quarter 2017
net income tax benefits that were previously recorded within
"Other, including BlackRock" were reclassified to reportable
segments. Fourth quarter 2017 net income tax benefits were
reclassified within that period. Noninterest expense
reclassifications were retrospectively applied to prior periods
presented.
Retail
Banking
|
|
|
|
|
|
|
Change
|
|
|
Change
|
|
|
|
|
|
|
|
|
4Q18 vs
|
|
|
4Q18 vs
|
|
In
millions
|
4Q18
|
|
3Q18
|
|
4Q17
|
|
3Q18
|
|
|
4Q17
|
|
Net interest
income
|
$
|
1,319
|
|
|
$
|
1,305
|
|
|
$
|
1,190
|
|
|
$
|
14
|
|
|
$
|
129
|
|
Noninterest
income
|
$
|
696
|
|
|
$
|
622
|
|
|
$
|
345
|
|
|
$
|
74
|
|
|
$
|
351
|
|
Provision for credit
losses
|
$
|
119
|
|
|
$
|
113
|
|
|
$
|
149
|
|
|
$
|
6
|
|
|
$
|
(30)
|
|
Noninterest
expense
|
$
|
1,487
|
|
|
$
|
1,514
|
|
|
$
|
1,494
|
|
|
$
|
(27)
|
|
|
$
|
(7)
|
|
Earnings
(loss)
|
$
|
313
|
|
|
$
|
228
|
|
|
$
|
(105)
|
|
|
$
|
85
|
|
|
$
|
418
|
|
|
|
|
|
|
|
|
|
|
|
In
billions
|
|
|
|
|
|
|
|
|
|
Average
loans
|
$
|
74.8
|
|
|
$
|
74.1
|
|
|
$
|
73.0
|
|
|
$
|
.7
|
|
|
$
|
1.8
|
|
Average
deposits
|
$
|
161.8
|
|
|
$
|
161.8
|
|
|
$
|
159.3
|
|
|
—
|
|
|
$
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
Retail Banking earnings for the fourth quarter of 2018 increased
in both comparisons. Noninterest income increased compared with the
third quarter as a result of derivative fair value adjustments
related to Visa Class B common shares, higher consumer service
fees, including seasonally higher credit card and merchant services
fees and brokerage revenue, and higher service charges on deposits.
These increases were partially offset by a negative adjustment for
residential mortgage servicing rights valuation, net of economic
hedge, driven by a decline in long-term interest rates at quarter
end. Noninterest income increased compared with fourth quarter 2017
due to $248 million of fourth quarter
2017 negative derivative fair value adjustments related to Visa
Class B common shares compared with positive adjustments of
$42 million in the fourth quarter of
2018, as well as a $71 million fourth
quarter 2017 negative adjustment for residential mortgage servicing
rights fair value assumption updates compared with a $19 million negative valuation adjustment in the
fourth quarter of 2018. Additionally, the comparison to fourth
quarter 2017 reflected growth in consumer service fees and service
charges on deposits. Provision for credit losses decreased compared
with fourth quarter 2017 primarily due to lower home equity and
credit card loan provisions. Noninterest expense decreased in the
comparison with the third quarter reflecting timing of technology
costs and the fourth quarter elimination of the quarterly FDIC
deposit insurance surcharge assessment partially offset by
increased marketing related to the national retail digital
strategy. Noninterest expense declined compared with fourth quarter
2017 due to lower personnel and branch occupancy costs, lower legal
expense and the reduced FDIC assessment partially offset by higher
noncredit losses, equipment expense and marketing.
- Average loans increased 1 percent compared with the third
quarter and 2 percent compared with fourth quarter 2017 due to
growth in residential mortgage, auto, credit card and unsecured
installment loans partially offset by lower home equity and
education loans.
- Average deposits grew 2 percent compared with fourth quarter
2017 as higher savings and demand deposits were partially offset by
lower money market and certificate of deposits.
- Net charge-offs were $112 million
for the fourth quarter of 2018 compared with $96 million in the third quarter and $99 million in the fourth quarter of 2017.
- Residential mortgage loan origination volume was $1.6 billion for the fourth quarter of 2018
compared with $2.1 billion for the
third quarter and $2.4 billion for
the fourth quarter of 2017. Approximately 67 percent of fourth
quarter 2018 volume was for home purchase transactions compared
with 72 percent for the third quarter and 50 percent for the fourth
quarter of 2017.
- The third party residential mortgage servicing portfolio was
$125 billion at December 31, 2018 compared with $127 billion at both September 30, 2018 and December 31, 2017. Residential mortgage loan
servicing acquisitions were $2
billion for fourth quarter 2018 compared with $6 billion for the third quarter and $1 billion for the fourth quarter of 2017.
- Approximately 67 percent of consumer customers used non-teller
channels for the majority of their transactions during the fourth
quarter of 2018 compared with 66 percent in the third quarter and
63 percent in the fourth quarter of 2017.
- Deposit transactions via ATM and mobile channels were 55
percent of total deposit transactions in the fourth and third
quarters of 2018 compared with 54 percent in the fourth quarter of
2017.
Corporate &
Institutional Banking
|
|
|
|
|
|
Change
|
|
|
Change
|
|
|
|
|
|
|
|
|
4Q18 vs
|
|
|
4Q18 vs
|
|
In
millions
|
4Q18
|
|
3Q18
|
|
4Q17
|
|
3Q18
|
|
|
4Q17
|
|
Net interest
income
|
$
|
930
|
|
|
$
|
925
|
|
|
$
|
898
|
|
|
$
|
5
|
|
|
$
|
32
|
|
Noninterest
income
|
$
|
632
|
|
|
$
|
592
|
|
|
$
|
604
|
|
|
$
|
40
|
|
|
$
|
28
|
|
Provision for credit
losses (benefit)
|
$
|
42
|
|
|
$
|
(13)
|
|
|
$
|
(14)
|
|
|
$
|
55
|
|
|
$
|
56
|
|
Noninterest
expense
|
$
|
687
|
|
|
$
|
698
|
|
|
$
|
686
|
|
|
$
|
(11)
|
|
|
$
|
1
|
|
Earnings
|
$
|
651
|
|
|
$
|
642
|
|
|
$
|
960
|
|
|
$
|
9
|
|
|
$
|
(309)
|
|
|
|
|
|
|
|
|
|
|
|
In
billions
|
|
|
|
|
|
|
|
|
|
Average
loans
|
$
|
139.5
|
|
|
$
|
137.4
|
|
|
$
|
135.8
|
|
|
$
|
2.1
|
|
|
$
|
3.7
|
|
Average
deposits
|
$
|
91.8
|
|
|
$
|
88.1
|
|
|
$
|
89.4
|
|
|
$
|
3.7
|
|
|
$
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & Institutional Banking earnings for the fourth
quarter of 2018 increased compared with the third quarter of 2018
and decreased compared with the fourth quarter of 2017. Fourth
quarter 2017 earnings included an income tax benefit of
$.4 billion as a result of federal
tax legislation. Noninterest income increased over the third
quarter primarily due to higher gains on asset sales and higher
loan syndication and other fees partially offset by lower merger
and acquisition advisory fees. Noninterest income increased
compared with the fourth quarter of 2017 primarily due to higher
gains on asset sales and growth in treasury management product
revenue partially offset by lower revenue from commercial mortgage
banking activities. Provision for credit losses in the fourth
quarter of 2018 reflected portfolio growth and was a benefit in
both the third quarter of 2018 and fourth quarter of 2017.
Noninterest expense decreased compared with the third quarter
primarily due to lower variable compensation.
- Average loans increased 2 percent compared with the third
quarter of 2018 and 3 percent over the fourth quarter of 2017 due
to growth across PNC's corporate banking, business credit and
equipment finance businesses. The comparison with the third quarter
also benefited from seasonal growth in multifamily agency warehouse
lending within the real estate business.
- Average deposits increased 4 percent compared with the third
quarter reflecting seasonal growth, and increased 3 percent
compared with the fourth quarter of 2017. In both comparisons,
higher interest-bearing deposits were partially offset by lower
noninterest-bearing demand deposits.
- Net charge-offs were $2 million
in the fourth quarter of 2018 compared with $1 million in the third quarter and $29 million in the fourth quarter of 2017, which
included charge-offs of certain commercial purchased impaired
loans.
Asset Management
Group
|
|
|
|
|
|
|
Change
|
|
|
Change
|
|
|
|
|
|
|
|
|
4Q18 vs
|
|
|
4Q18 vs
|
|
In
millions
|
4Q18
|
|
3Q18
|
|
4Q17
|
|
3Q18
|
|
|
4Q17
|
|
Net interest
income
|
$
|
70
|
|
|
$
|
71
|
|
|
$
|
71
|
|
|
$
|
(1)
|
|
|
$
|
(1)
|
|
Noninterest
income
|
$
|
216
|
|
|
$
|
228
|
|
|
$
|
226
|
|
|
$
|
(12)
|
|
|
$
|
(10)
|
|
Provision for credit
losses
|
—
|
|
|
$
|
2
|
|
|
$
|
7
|
|
|
$
|
(2)
|
|
|
$
|
(7)
|
|
Noninterest
expense
|
$
|
232
|
|
|
$
|
225
|
|
|
$
|
233
|
|
|
$
|
7
|
|
|
$
|
(1)
|
|
Earnings
|
$
|
42
|
|
|
$
|
55
|
|
|
$
|
58
|
|
|
$
|
(13)
|
|
|
$
|
(16)
|
|
|
|
|
|
|
|
|
|
|
|
In
billions
|
|
|
|
|
|
|
|
|
|
Client assets under
administration at
quarter end
|
$
|
272
|
|
|
$
|
293
|
|
|
$
|
282
|
|
|
$
|
(21)
|
|
|
$
|
(10)
|
|
Average
loans
|
$
|
6.9
|
|
|
$
|
7.0
|
|
|
$
|
7.1
|
|
|
$
|
(.1)
|
|
|
$
|
(.2)
|
|
Average
deposits
|
$
|
12.5
|
|
|
$
|
12.3
|
|
|
$
|
12.6
|
|
|
$
|
.2
|
|
|
$
|
(.1)
|
|
|
|
|
|
|
|
|
|
|
|
Asset Management Group earnings for the fourth quarter of 2018
decreased compared with both the third quarter of 2018 and the
fourth quarter of 2017. Noninterest income declined compared with
the third quarter primarily due to decreases in the average equity
markets. Noninterest income decreased compared with the fourth
quarter of 2017 as a result of changes in asset mix and valuation
losses on certain equity investments partially offset by higher
average equity markets. Noninterest expense increased compared with
the third quarter of 2018 and decreased compared with the fourth
quarter of 2017.
- Client assets under administration at December 31, 2018 include discretionary client
assets under management of $148
billion and nondiscretionary client assets under
administration of $124 billion.
-
- Discretionary client assets under management decreased
$11 billion compared with
September 30, 2018 and $3 billion compared with December 31, 2017 primarily attributable to
equity market decreases.
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 and certain trading activities,
discontinued consumer loan portfolios, private equity investments,
intercompany eliminations, most corporate overhead, tax adjustments
that are not allocated to business segments, exited businesses,
integration costs, 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 10:00
a.m. Eastern Time regarding the topics addressed in this
news release and the related financial supplement. Dial-in numbers
for the conference call are (877) 237-6365 and (303) 223-0113
(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 2018 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
21899468 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
|
|
|
2018
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
|
$
|
2,481
|
|
|
$
|
2,466
|
|
|
$
|
2,345
|
|
|
|
$
|
9,721
|
|
|
$
|
9,108
|
|
Noninterest
income
|
|
1,859
|
|
|
1,891
|
|
|
1,915
|
|
|
|
7,411
|
|
|
7,221
|
|
Total
revenue
|
|
4,340
|
|
|
4,357
|
|
|
4,260
|
|
|
|
17,132
|
|
|
16,329
|
|
Provision for credit
losses
|
|
148
|
|
|
88
|
|
|
125
|
|
|
|
408
|
|
|
441
|
|
Noninterest
expense
|
|
2,577
|
|
|
2,608
|
|
|
3,061
|
|
|
|
10,296
|
|
|
10,398
|
|
Income before income
taxes (benefit) and noncontrolling interests
|
|
$
|
1,615
|
|
|
$
|
1,661
|
|
|
$
|
1,074
|
|
|
|
$
|
6,428
|
|
|
$
|
5,490
|
|
Net income
|
|
$
|
1,351
|
|
|
$
|
1,400
|
|
|
$
|
2,091
|
|
|
|
$
|
5,346
|
|
|
$
|
5,388
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to noncontrolling interests
|
|
14
|
|
|
11
|
|
|
11
|
|
|
|
45
|
|
|
50
|
|
Preferred stock
dividends (a)
|
|
55
|
|
|
63
|
|
|
55
|
|
|
|
236
|
|
|
236
|
|
Preferred stock
discount accretion and redemptions
|
|
1
|
|
|
1
|
|
|
2
|
|
|
|
4
|
|
|
26
|
|
Net income
attributable to common shareholders
|
|
$
|
1,281
|
|
|
$
|
1,325
|
|
|
$
|
2,023
|
|
|
|
$
|
5,061
|
|
|
$
|
5,076
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and
undistributed earnings allocated to nonvested restricted
shares
|
5
|
|
|
6
|
|
|
8
|
|
|
|
21
|
|
|
23
|
|
Impact of BlackRock
earnings per share dilution
|
|
2
|
|
|
2
|
|
|
8
|
|
|
|
9
|
|
|
16
|
|
Net income
attributable to diluted common shares
|
|
$
|
1,274
|
|
|
$
|
1,317
|
|
|
$
|
2,007
|
|
|
|
$
|
5,031
|
|
|
$
|
5,037
|
|
Diluted earnings per
common share
|
|
$
|
2.75
|
|
|
$
|
2.82
|
|
|
$
|
4.18
|
|
|
|
$
|
10.71
|
|
|
$
|
10.36
|
|
Cash dividends
declared per common share
|
|
$
|
.95
|
|
|
$
|
.95
|
|
|
$
|
.75
|
|
|
|
$
|
3.40
|
|
|
$
|
2.60
|
|
Effective tax rate
(b)
|
|
16.3
|
%
|
|
15.7
|
%
|
|
(94.7)
|
%
|
|
|
16.8
|
%
|
|
1.9
|
%
|
(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 2018 results reflected the change in the
statutory federal income tax rate from 35% to 21%, effective as of
January 1, 2018, as a result of the new federal tax
legislation.
|
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
|
|
|
2018
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
PERFORMANCE
RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
(a)
|
|
2.96
|
%
|
|
2.99
|
%
|
|
2.88
|
%
|
|
|
2.97
|
%
|
|
2.87
|
%
|
Noninterest income to
total revenue
|
|
43
|
%
|
|
43
|
%
|
|
45
|
%
|
|
|
43
|
%
|
|
44
|
%
|
Efficiency
(b)
|
|
59
|
%
|
|
60
|
%
|
|
72
|
%
|
|
|
60
|
%
|
|
64
|
%
|
Return on:
|
|
|
|
|
|
|
|
|
|
|
|
Average common
shareholders' equity (c)
|
|
11.83
|
%
|
|
12.32
|
%
|
|
18.90
|
%
|
|
|
11.83
|
%
|
|
12.09
|
%
|
Average assets
(c)
|
|
1.40
|
%
|
|
1.47
|
%
|
|
2.20
|
%
|
|
|
1.41
|
%
|
|
1.45
|
%
|
BUSINESS SEGMENT
NET INCOME (LOSS) (c) (d) (e)
|
|
|
|
|
|
|
|
|
|
|
|
In
millions
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Banking
|
|
$
|
313
|
|
|
$
|
228
|
|
|
$
|
(105)
|
|
|
|
$
|
1,064
|
|
|
$
|
447
|
|
Corporate &
Institutional Banking
|
|
651
|
|
|
642
|
|
|
960
|
|
|
|
2,508
|
|
|
2,433
|
|
Asset Management
Group
|
|
42
|
|
|
55
|
|
|
58
|
|
|
|
202
|
|
|
187
|
|
Other, including
BlackRock (f)
|
|
345
|
|
|
475
|
|
|
1,178
|
|
|
|
1,572
|
|
|
2,321
|
|
Total net
income
|
|
$
|
1,351
|
|
|
$
|
1,400
|
|
|
$
|
2,091
|
|
|
|
$
|
5,346
|
|
|
$
|
5,388
|
|
(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 interest income on a
taxable-equivalent basis in calculating net interest 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 December 31, 2018, September 30, 2018 and
December 31, 2017 were $28 million, $29 million and $54
million, respectively. The taxable equivalent adjustments to net
interest income for the years ended December 31, 2018 and December
31, 2017 were $115 million and $215 million, respectively. Taxable
equivalent amounts for the 2018 periods were calculated using a
statutory federal income tax rate of 21%, reflecting the enactment
of the new federal tax legislation effective January 1, 2018.
Amounts for the 2017 periods were calculated using the previously
applicable statutory federal income tax rate of 35%.
|
(b)
|
Calculated as
noninterest expense divided by total revenue.
|
(c)
|
The 2018 results
reflected the change in the statutory federal income tax rate from
35% to 21%, effective as of January 1, 2018, as a result of the new
federal tax legislation.
|
(d)
|
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.
|
(e)
|
In the fourth quarter
of 2018, we updated our internal management reporting processes
relating to our segment reporting disclosures. Certain noninterest
expenses and fourth quarter 2017 net income tax benefits that were
previously recorded within "Other, including BlackRock", were
reclassified to our reportable segments. These expenses largely
relate to items that were previously considered corporate expenses,
but are either closely aligned to processes and revenue functions
within our lines of business or are an allocation of expenses that
the line of business would incur if it operated on a standalone
basis. Fourth quarter 2017 net income tax benefits were
reclassified within that period, while the expense
reclassifications were retrospectively applied to all prior periods
presented.
|
(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
|
|
2018
|
|
2018
|
|
2017
|
BALANCE SHEET
DATA
|
|
|
|
|
|
Dollars in
millions, except per share data
|
|
|
|
|
|
Assets
|
$
|
382,315
|
|
|
$
|
380,080
|
|
|
$
|
380,768
|
|
Loans (a)
|
$
|
226,245
|
|
|
$
|
223,053
|
|
|
$
|
220,458
|
|
Allowance for loan
and lease losses
|
$
|
2,629
|
|
|
$
|
2,584
|
|
|
$
|
2,611
|
|
Interest-earning
deposits with banks
|
$
|
10,893
|
|
|
$
|
19,800
|
|
|
$
|
28,595
|
|
Investment
securities
|
$
|
82,701
|
|
|
$
|
80,804
|
|
|
$
|
76,131
|
|
Loans held for sale
(a)
|
$
|
994
|
|
|
$
|
1,108
|
|
|
$
|
2,655
|
|
Equity investments
(b)
|
$
|
12,894
|
|
|
$
|
12,446
|
|
|
$
|
11,392
|
|
Mortgage servicing
rights
|
$
|
1,983
|
|
|
$
|
2,136
|
|
|
$
|
1,832
|
|
Goodwill
|
$
|
9,218
|
|
|
$
|
9,218
|
|
|
$
|
9,173
|
|
Other assets
(a)
|
$
|
34,408
|
|
|
$
|
28,851
|
|
|
$
|
27,894
|
|
Noninterest-bearing
deposits
|
$
|
73,960
|
|
|
$
|
74,736
|
|
|
$
|
79,864
|
|
Interest-bearing
deposits
|
$
|
193,879
|
|
|
$
|
190,148
|
|
|
$
|
185,189
|
|
Total
deposits
|
$
|
267,839
|
|
|
$
|
264,884
|
|
|
$
|
265,053
|
|
Borrowed funds
(a)
|
$
|
57,419
|
|
|
$
|
57,955
|
|
|
$
|
59,088
|
|
Shareholders'
equity
|
$
|
47,728
|
|
|
$
|
47,058
|
|
|
$
|
47,513
|
|
Common shareholders'
equity
|
$
|
43,742
|
|
|
$
|
43,076
|
|
|
$
|
43,530
|
|
Accumulated other
comprehensive income (loss)
|
$
|
(725)
|
|
|
$
|
(1,260)
|
|
|
$
|
(148)
|
|
Book value per common
share
|
$
|
95.72
|
|
|
$
|
93.22
|
|
|
$
|
91.94
|
|
Tangible book value
per common share (Non-GAAP) (c)
|
$
|
75.42
|
|
|
$
|
73.11
|
|
|
$
|
72.28
|
|
Period end common
shares outstanding (millions)
|
457
|
|
|
462
|
|
|
473
|
|
Loans to
deposits
|
84
|
%
|
|
84
|
%
|
|
83
|
%
|
CLIENT ASSETS
(billions)
|
|
|
|
|
|
Discretionary client
assets under management
|
$
|
148
|
|
|
$
|
159
|
|
|
$
|
151
|
|
Nondiscretionary
client assets under administration
|
124
|
|
|
134
|
|
|
131
|
|
Total client assets
under administration
|
272
|
|
|
293
|
|
|
282
|
|
Brokerage account
client assets
|
47
|
|
|
51
|
|
|
49
|
|
Total client
assets
|
$
|
319
|
|
|
$
|
344
|
|
|
$
|
331
|
|
CAPITAL
RATIOS
|
|
|
|
|
|
Basel III (d) (e)
(f)
|
|
|
|
|
|
Common equity Tier
1
|
9.6
|
%
|
|
9.3
|
%
|
|
N/A
|
|
Tier 1
risk-based
|
10.8
|
%
|
|
10.5
|
%
|
|
N/A
|
|
Total capital
risk-based
|
12.9
|
%
|
|
12.7
|
%
|
|
N/A
|
|
Leverage
|
9.3
|
%
|
|
9.2
|
%
|
|
N/A
|
|
Supplementary leverage
|
7.8
|
%
|
|
7.7
|
%
|
|
N/A
|
|
Fully Phased-In
Basel III (Non-GAAP)
|
|
|
|
|
|
Common equity Tier
1
|
N/A
|
|
|
N/A
|
|
|
9.8
|
%
|
Transitional Basel
III (e)
|
|
|
|
|
|
Common equity Tier
1
|
N/A
|
|
|
N/A
|
|
|
10.4
|
%
|
Tier 1
risk-based
|
N/A
|
|
|
N/A
|
|
|
11.6
|
%
|
Total capital
risk-based
|
N/A
|
|
|
N/A
|
|
|
13.7
|
%
|
Leverage
|
N/A
|
|
|
N/A
|
|
|
9.9
|
%
|
Common shareholders'
equity to total assets
|
11.4
|
%
|
|
11.3
|
%
|
|
11.4
|
%
|
ASSET
QUALITY
|
|
|
|
|
|
Nonperforming loans
to total loans
|
.75
|
%
|
|
.76
|
%
|
|
.85
|
%
|
Nonperforming assets
to total loans, OREO and foreclosed assets
|
.80
|
%
|
|
.82
|
%
|
|
.92
|
%
|
Nonperforming assets
to total assets
|
.47
|
%
|
|
.48
|
%
|
|
.53
|
%
|
Net charge-offs to
average loans (for the three months ended) (annualized)
|
.19
|
%
|
|
.16
|
%
|
|
.22
|
%
|
Allowance for loan
and lease losses to total loans
|
1.16
|
%
|
|
1.16
|
%
|
|
1.18
|
%
|
Allowance for loan
and lease losses to nonperforming loans
|
155
|
%
|
|
153
|
%
|
|
140
|
%
|
Accruing loans past
due 90 days or more (in millions)
|
$
|
629
|
|
|
$
|
619
|
|
|
$
|
737
|
|
(a)
|
Amounts include
assets and liabilities for which we have elected the fair value
option. Our third quarter 2018 Form 10-Q included, and our 2018
Form 10-K will include, additional information regarding these
Consolidated Balance Sheet line items.
|
(b)
|
Amounts include our
equity interest in BlackRock. Amounts for the 2018 periods
reflected $.6 billion of trading and available for sale securities,
primarily money market funds, that were reclassified to Equity
investments on January 1, 2018 in accordance with the adoption of
Accounting Standards Update 2016-01, Financial Instruments -
Overall: Recognition and Measurement of Financial Assets and
Financial Liabilities.
|
(c)
|
See the Tangible Book
Value per Common Share table on page 18 for additional
information.
|
(d)
|
The ratios as of
December 31, 2018 are estimated.
|
(e)
|
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 17 for additional
information.
|
(f)
|
The 2018 Basel III
ratios for Common equity Tier 1 capital, Tier 1 risk-based capital,
Leverage and Supplementary leverage reflect the full phase-in of
all Basel III adjustments to these metrics applicable to PNC. The
2018 Basel III Total risk-based capital ratios include $80 million
of nonqualifying trust preferred capital securities that are
subject to a phase-out period that runs through 2021.
|
The PNC Financial
Services Group,
Inc.
|
Consolidated
Financial Highlights (Unaudited)
|
|
CAPITAL
RATIOS
|
|
Because PNC remains
in the parallel run qualification phase for the advanced
approaches, PNC's regulatory risk-based capital ratios in 2018 and
2017 are calculated using the standardized approach for determining
risk-weighted assets. Under the standardized approach for
determining credit risk-weighted assets, exposures are generally
assigned a pre-defined risk weight. Exposures to high volatility
commercial real estate, past due exposures and equity exposures are
generally subject to higher risk weights than other types of
exposures. With the exception of certain nonqualifying trust
preferred capital securities included in PNC's Total risk-based
capital, the transitions and multi-year phase-in of the definition
of capital under the Basel III rules were completed as of January
1, 2018. Accordingly, we refer to the capital ratios calculated
using the definition of capital in effect as of January 1, 2018
and, for the risk-based ratios, standardized risk-weighted assets,
as the Basel III ratios. We refer to the capital ratios calculated
using the phased-in Basel III provisions in effect for 2017 and,
for the risk-based ratios, standardized approach risk-weighted
assets, as the 2017 Transitional Basel III ratios.
|
|
|
We provide
information below regarding PNC's estimated Basel III
December 31, 2018, actual Basel III September 30, 2018, Fully
Phased-In Basel III December 31, 2017 and actual
December 31, 2017 Transitional Basel III Common equity Tier 1
ratios. Under the Basel III rules applicable to PNC, significant
common stock investments in unconsolidated financial institutions
(for PNC, primarily BlackRock), mortgage servicing rights and
deferred tax assets must be deducted from capital (subject to a
phase-in schedule that ended December 31, 2017 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
that ended December 31, 2017) accumulated other comprehensive
income (loss) related to securities currently and those transferred
from, available for sale, as well as pension and other
postretirement plans.
|
Basel III
Common Equity Tier 1 Capital Ratios
|
|
Basel III
(a)
|
|
|
Fully Phased-In Basel
III (Non-GAAP) (b)
|
|
|
2017 Transitional
Basel III
|
|
|
|
|
|
|
December
31
|
|
September
30
|
|
|
December
31
|
|
|
December
31
|
|
Dollars in
millions
|
2018
(estimated)
|
|
2018
|
|
|
2017
|
|
|
2017
|
|
Common stock, related
surplus and retained earnings, net of treasury stock
|
$
|
44,467
|
|
|
$
|
44,336
|
|
|
|
$
|
43,676
|
|
|
|
$
|
43,676
|
|
|
Less regulatory
capital adjustments:
|
|
|
|
|
|
|
|
|
|
|
Goodwill and
disallowed intangibles, net of deferred tax liabilities
|
(9,277)
|
|
|
(9,297)
|
|
|
|
(9,307)
|
|
|
|
(9,243)
|
|
|
Basel III total
threshold deductions
|
(3,637)
|
|
|
(3,932)
|
|
|
|
(2,928)
|
|
|
|
(1,983)
|
|
|
Accumulated other
comprehensive income (loss)
|
(610)
|
|
|
(1,007)
|
|
|
|
(207)
|
|
|
|
(166)
|
|
|
All other
adjustments
|
(265)
|
|
|
(322)
|
|
|
|
(141)
|
|
|
|
(138)
|
|
|
Basel III Common
equity Tier 1 capital
|
$
|
30,678
|
|
|
$
|
29,778
|
|
|
|
$
|
31,093
|
|
|
|
$
|
32,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basel III
standardized approach risk-weighted assets (c)
|
$
|
320,370
|
|
|
$
|
318,889
|
|
|
|
$
|
316,120
|
|
|
|
$
|
309,460
|
|
|
Basel III advanced
approaches risk-weighted assets (d)
|
$
|
282,597
|
|
|
$
|
274,742
|
|
|
|
$
|
285,226
|
|
|
|
N/A
|
|
|
Basel III Common
equity Tier 1 capital ratio
|
9.6
|
%
|
|
9.3
|
%
|
|
|
9.8
|
%
|
|
|
10.4
|
%
|
|
Risk weight and
associated rules utilized
|
Standardized
|
|
|
Standardized
|
|
|
Standardized
(with 2017 transition
adjustments)
|
|
(a)
|
2018 results are
calculated using the regulatory capital methodology applicable to
us during 2018 and reflects the full phase-in of all Basel III
adjustments to this metric applicable to PNC.
|
(b)
|
2017 Fully Phased-In
Basel III results are presented as pro forma estimates.
|
(c)
|
Basel III
standardized approach risk-weighted assets are based on the Basel
III standardized approach rules and include credit and market
risk-weighted assets.
|
(d)
|
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.
|
Our Basel III capital ratios may be impacted by changes to the
regulatory capital rules, 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
|
2018
|
|
2018
|
|
2017
|
Book value per common
share
|
$
|
95.72
|
|
|
$
|
93.22
|
|
|
$
|
91.94
|
|
Tangible book value
per common share
|
|
|
|
|
|
Common shareholders'
equity
|
$
|
43,742
|
|
|
$
|
43,076
|
|
|
$
|
43,530
|
|
Goodwill and other
intangible assets
|
(9,467)
|
|
|
(9,489)
|
|
|
(9,498)
|
|
Deferred tax
liabilities on Goodwill and other intangible assets
|
190
|
|
|
192
|
|
|
191
|
|
Tangible common
shareholders' equity
|
$
|
34,465
|
|
|
$
|
33,779
|
|
|
$
|
34,223
|
|
Period-end common
shares outstanding (millions)
|
457
|
|
|
462
|
|
|
473
|
|
Tangible book value
per common share (Non-GAAP)
|
$
|
75.42
|
|
|
$
|
73.11
|
|
|
$
|
72.28
|
|
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 recently enacted tax
legislation, 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.
- 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 view that U.S.
economic growth has accelerated over the past two years to above
its long-run trend, due to stimulus from corporate and personal
income tax cuts passed in late 2017 and an increase in federal
government spending. We expect further gradual improvement in the
labor market this year, including job gains and rising wages, will
be another positive for consumer spending. However, growth is
expected to slow over the course of 2019 as fiscal stimulus fades.
Trade restrictions and geopolitical concerns are downside risks to
the forecast. Inflation is expected to slow in the first half of
2019, to below the Federal Open Market Committee's 2 percent
objective, because of lower energy prices. Short-term interest
rates and bond yields are expected to rise very slowly in 2019. Our
baseline forecast is for one more increase in the federal funds
rate, in September 2019, pushing the
rate to a range of 2.50 to 2.75 percent in the second half of this
year.
- 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 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.
- 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 2017 Form 10-K and our 2018 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:
Marcey Zwiebel
(412) 762-4550
media.relations@pnc.com
INVESTORS:
Bryan Gill
(412) 768-4143
investor.relations@pnc.com
View original content to download
multimedia:http://www.prnewswire.com/news-releases/pnc-reports-full-year-2018-net-income-of-5-3-billion--10-71-diluted-eps-300779284.html
SOURCE PNC Financial Services Group, Inc.