PITTSBURGH, July 14, 2021 /PRNewswire/ -- The PNC
Financial Services Group, Inc. (NYSE: PNC) today reported:
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For the
quarter
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In millions, except
per share data and as noted
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2Q21
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1Q21
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2Q20
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Second Quarter
Highlights
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▪ Closed the
acquisition of BBVA USA on June 1, 2021
▪ Second quarter
results include one month impact of BBVA USA
▪ Adjusted EPS
was $4.50, excluding the initial provision for credit losses and
integration costs related to BBVA USA
▪ Revenue
increased 11% linked quarter driven by the BBVA USA acquisition and
strong PNC legacy noninterest income growth
▪ Expenses
increased 18% linked quarter including integration expenses,
increased business activity and litigation reserves
▪ Provision for
credit losses was $302 million, as a provision recapture of $704
million was more than offset by a $1.0 billion initial provision
for BBVA USA
▪ Total loans and
deposits increased 24% and 21%, respectively, linked quarter due to
the BBVA USA acquisition
▪ Solid credit
performance; acquired net loan charge-offs of $248 million
were primarily due to purchase accounting
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Financial
Results
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Revenue
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$
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4,667
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$
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4,220
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$
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4,076
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Noninterest
expense
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3,050
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2,574
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2,515
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Pretax, pre-provision
earnings (non-GAAP)
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1,617
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1,646
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1,561
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Provision for
(recapture of) credit losses
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302
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(551)
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2,463
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Net income (loss)
from continuing operations
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1,103
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1,826
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(744)
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Per Common
Share
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Diluted earnings
(loss) from continuing operations - as reported
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$
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2.43
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$
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4.10
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$
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(1.90)
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Diluted earnings
(loss) from continuing operations - as adjusted
(non-GAAP)
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4.50
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NA
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NA
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Book value
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120.25
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118.47
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115.26
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Tangible book value
(non-GAAP)
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93.83
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96.57
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93.54
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Balance Sheet
& Credit Quality
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Total loans (in
billions)
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$
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294.7
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$
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237.0
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$
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258.2
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Total deposits (in
billions)
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452.9
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375.1
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346.0
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PNC legacy net loan
charge-offs
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58
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146
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236
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Acquired net loan
charge-offs
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248
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NA
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NA
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Allowance for credit
losses to total loans
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2.16
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%
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2.20
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%
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2.55
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%
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Selected
Ratios
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Return on average
common equity
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8.32
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%
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14.31
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%
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30.11
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%
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Return on average
assets
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0.88
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1.58
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3.21
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Net interest margin
(non-GAAP)
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2.29
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2.27
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2.52
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Noninterest income to
total revenue
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45
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44
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38
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Efficiency
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65
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61
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62
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Common Equity Tier 1
capital ratio
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10.0
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12.6
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11.3
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Adjusted EPS is a
non-GAAP measure calculated by excluding the initial provision for
credit losses for BBVA USA recorded on June 1, 2021 and integration
costs. See this and other non-GAAP financial measures in the
consolidated financial highlights accompanying this news
release.
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From Bill Demchak,
PNC Chairman, President and Chief Executive Officer:
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"PNC had a successful second quarter. We closed on our
acquisition of BBVA USA earlier than anticipated, organically grew
fee income, deployed excess liquidity through securities purchases
and maintained solid credit quality metrics. Underscoring our
strong financial position and commitment to capital return, our
board recently approved a 10 cent per share, or 9%, increase to our
common stock dividend and announced $2.9 billion in share
repurchase programs. Looking ahead, we are working towards a
successful conversion of BBVA USA and are excited about the
substantial opportunities for growth and efficiency improvements as
we move forward as a combined company.
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Closed acquisition of BBVA USA Bancshares, Inc.
- On June 1, 2021, PNC completed
the acquisition of BBVA USA
Bancshares, Inc., including its U.S. banking subsidiary BBVA
USA, from the Spanish financial
group BBVA S.A. PNC second quarter financial results include the
impact of BBVA USA operations for
the month of June 2021.
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- Purchase price of $11.5 billion
in cash.
- Net fair value premium of $322
million will be amortized through net interest income over
time.
- On track to realize $900 million
in cost saves in 2022.
- Expect to incur a total of $980
million in merger and integration related costs; the
majority of which will be incurred in 2021.
- Conversion of customers, branches and systems is expected to
occur in October 2021.
Income Statement
Summary
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2Q21
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In millions,
except per share data
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PNC legacy
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BBVA USA
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Initial provision for
credit losses & integration costs
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PNC
consolidated
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Net interest
income (a)
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$
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2,345
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$
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236
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$
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2,581
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Noninterest
income
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2,016
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80
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$
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(10)
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2,086
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Total
revenue
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4,361
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316
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(10)
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4,667
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Noninterest
expense
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2,770
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179
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101
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3,050
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Provision for
(recapture of) credit losses
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(648)
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(56)
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1,006
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302
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Diluted EPS - as
reported
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2.43
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Negative impact from initial provision for
credit losses & integration costs (non-GAAP)
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2.07
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Diluted EPS - as
adjusted (non-GAAP)
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4.50
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(a) BBVA USA net
interest income includes a $30 million benefit from purchase
accounting accretion
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See non-GAAP
financial measures included in the consolidated financial
highlights accompanying this news release
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Income Statement Highlights
Second quarter 2021 compared with first quarter 2021
- Net income of $1.1 billion
decreased $723 million, or 40%,
primarily due to the initial provision for credit losses related to
the acquisition of BBVA USA.
- Total revenue of $4.7 billion
increased $447 million, or 11%,
reflecting the BBVA USA
acquisition and an increase in PNC legacy noninterest income.
- Net interest income of $2.6
billion increased $233
million, or 10%, driven by the acquired interest earning
assets of BBVA USA and higher
securities balances, partially offset by lower yields on PNC legacy
interest earning assets.
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- Net interest margin of 2.29% increased 2 basis points and
included the interest earning assets acquired from BBVA
USA.
- Noninterest income of $2.1
billion increased $214
million, or 11%, including $80
million from BBVA USA.
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- Fee income of $1.6 billion,
including $62 million from BBVA
USA, increased $229 million, or 16%, driven by growth in PNC
legacy corporate and consumer services, primarily resulting from
increased business activity.
- Other noninterest income of $468
million, including $18 million
from BBVA USA, declined
$15 million, or 3%, and included a
negative Visa Class B derivative fair value adjustment, lower net
securities gains, and higher private equity revenue.
- Noninterest expense of $3.1
billion, including $179
million of operating expenses from BBVA USA, increased $476
million, or 18%, and included integration expenses of
$101 million and additions to second
quarter legal reserves of $80 million
related to various matters. Noninterest expense also increased due
to growth in business and marketing activity during the second
quarter.
- Provision for credit losses was $302
million, as a provision recapture of $704 million, primarily driven by improvements in
credit quality and macroeconomic factors as well as balance
reductions, was more than offset by an initial provision for credit
losses related to the BBVA USA
acquisition of $1.0 billion. The
first quarter included a provision recapture of $551 million.
- The effective tax rate was 16.1% for the second quarter and
16.9% for the first quarter.
Balance Sheet and
Credit Quality Summary
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June 30,
2021
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In billions,
except as noted
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PNC legacy
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BBVA USA
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PNC
consolidated
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Loans
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$
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234.2
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$
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60.5
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$
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294.7
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Investment
securities
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108.9
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17.6
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126.5
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Deposits
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370.7
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82.2
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452.9
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PNC legacy net loan
charge-offs (in millions)
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58
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58
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Acquired net loan
charge-offs (in millions)
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248
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248
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Net loan charge-offs
(in millions)
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58
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248
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306
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Nonperforming assets
(in millions)
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1,938
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880
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2,818
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Allowance for credit
losses to total loans
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1.93
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%
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3.07
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%
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2.16
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%
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Balance Sheet Highlights
June 30, 2021 compared with
March 31, 2021
- Loans of $294.7 billion at
June 30, 2021, including $60.5 billion related to BBVA USA, increased $57.7
billion.
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- Commercial loans of $199.6
billion, including $38.5
billion from BBVA USA,
increased $35.1 billion reflecting
acquired loans and growth in PNC's legacy corporate banking and
business credit businesses, partially offset by $4.5 billion of legacy PNC Paycheck Protection
Program (PPP) loan forgiveness.
- Consumer loans of $95.1 billion,
including $22.0 billion from BBVA
USA, increased $22.6 billion driven by acquired loans and growth
in PNC legacy residential mortgage loans.
- Credit quality performance included the June 1, 2021 acquisition of BBVA USA and the associated purchase accounting
impacts. PNC legacy credit quality improved across all
metrics.
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- Delinquencies of $1.3 billion at
June 30, 2021, including $291 million acquired from BBVA USA, increased $144
million entirely driven by the acquisition which more than
offset lower PNC legacy delinquencies.
- Total nonperforming assets of $2.8
billion at June 30, 2021,
including $880 million acquired from
BBVA USA, increased $639 million as lower PNC legacy nonperforming
assets were more than offset by acquired nonperforming assets.
- Net loan charge-offs of $306
million, included BBVA USA
net loan charge-offs of $248 million,
primarily reflecting the purchase accounting treatment for certain
loans that were previously charged-off by BBVA USA, and PNC legacy net loan charge-offs of
$58 million. Total net loan
charge-offs increased $160
million.
- The allowance for credit losses to total loans was 2.16% at
June 30, 2021 compared with 2.20% at
March 31, 2021 and included an
allowance for credit losses to total BBVA USA loans of 3.07%.
- Deposits of $452.9 billion at
June 30, 2021, including $82.2 billion in deposits acquired from BBVA
USA, increased $77.8 billion due to growth in commercial and
consumer deposits driven by the acquisition.
- Investment securities of $126.5
billion at June 30, 2021,
including $17.6 billion related to
BBVA USA, increased $28.2 billion resulting from the acquisition and
increased purchase activity.
- Federal Reserve Bank balances at June
30, 2021 were $71.9 billion,
decreasing $13.9 billion due to the
payment of $11.5 billion for the
purchase of BBVA USA and increased
securities purchases, partially offset by balances acquired in the
transaction.
- PNC maintained strong capital and liquidity positions.
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- On July 1, 2021, the PNC board of
directors raised the quarterly cash dividend on common stock to
$1.25 cents per share, an increase of
10 cents per share, or 9%, effective
with the August 5, 2021 dividend
payment.
- In June 2021, PNC announced the
reinstatement of share repurchase programs with repurchases of
up to $2.9 billion for the
four-quarter period beginning in the third quarter of 2021.
- The Basel III common equity Tier 1 capital ratio was an
estimated 10.0% at June 30, 2021 and
12.6% at March 31, 2021. The decrease
was driven by the purchase of BBVA USA.
- The Liquidity Coverage Ratio at June 30,
2021 for PNC exceeded the regulatory minimum
requirement.
Earnings
Summary
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In millions,
except per share data
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2Q21
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1Q21
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2Q20
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Net income
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$
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1,103
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$
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1,826
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$
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3,655
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Net income
attributable to
diluted common shares
- as reported
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$
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1,037
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$
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1,750
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$
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3,569
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Net income
attributable to
diluted common shares
- as adjusted (non-GAAP)
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$
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1,919
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NA
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NA
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Diluted earnings per
common share - as reported
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$
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2.43
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$
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4.10
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$
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8.40
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Diluted earnings per
common share - as adjusted (non-GAAP)
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$
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4.50
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NA
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NA
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Average diluted
common shares outstanding
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427
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426
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426
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Cash dividends
declared per common share
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$
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1.25
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$
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1.15
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$
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1.15
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See non-GAAP
financial measures included in the consolidated financial
highlights accompanying this news release
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Second quarter 2021 net income of $1.1
billion, or $2.43 per diluted
common share, included integration costs of $111 million pretax and a provision for credit
losses of $1.0 billion pretax,
resulting from the acquisition of BBVA USA. Excluding the impact of these items,
adjusted diluted earnings per common share was $4.50.
In the second quarter of 2020, PNC divested its entire 22.4%
equity investment in BlackRock, Inc. Net proceeds from the sale
were $14.2 billion. For the second
quarter of 2020, the after-tax gain on sale of $4.3 billion and BlackRock's historical results
are reported as discontinued operations.
The Consolidated Financial Highlights accompanying this news
release include additional information regarding reconciliations of
non-GAAP financial measures to reported (GAAP) amounts. This
information supplements results as reported in accordance with GAAP
and should not be viewed in isolation from, or as a substitute for,
GAAP results. Fee income, a non-GAAP financial measure, refers to
noninterest income in the following categories: asset management,
consumer services, corporate services, residential mortgage and
service charges on deposits. Information in this news release,
including the financial tables, is unaudited.
CONSOLIDATED
REVENUE REVIEW
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Revenue
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Change
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Change
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2Q21 vs
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2Q21 vs
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In
millions
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2Q21
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1Q21
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2Q20
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1Q21
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2Q20
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Net interest
income
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$
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2,581
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$
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2,348
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$
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2,527
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10
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%
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2
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%
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Noninterest
income
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2,086
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1,872
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1,549
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11
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%
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35
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%
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Total
revenue
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$
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4,667
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$
|
4,220
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$
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4,076
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11
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%
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14
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%
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Total revenue for the second quarter of 2021 increased
$447 million compared with the first
quarter of 2021 and $591 million
compared with the second quarter of 2020. In both comparisons the
increase was largely due to the June 1,
2021 acquisition of BBVA USA, which contributed $316 million to total revenue, including
$236 million of net interest income,
$62 million of fee income and
$18 million of other noninterest
income. Both comparisons also benefited from higher PNC legacy
noninterest income as a result of increased business
activity.
Net interest income of $2.6
billion for the second quarter of 2021 increased
$233 million compared to the first
quarter driven by the acquired interest earning assets of BBVA
USA and higher securities
balances, partially offset by lower yields on PNC legacy interest
earning assets. In comparison with the second quarter of 2020, net
interest income increased $54 million
as a result of acquired interest earning assets and lower rates on
deposits, partially offset by lower PNC legacy loans outstanding
and securities yields.
The net interest margin was 2.29% in the second quarter of 2021,
2.27% in the first quarter and 2.52% in the second quarter of 2020.
The increase compared to the first quarter of 2021 was largely due
to the addition of BBVA USA's
interest earning assets, partially offset by lower yields on
securities. Compared with the second quarter of 2020, the decrease
primarily reflected higher average balances held with the Federal
Reserve Bank.
Noninterest
Income
|
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Change
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Change
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2Q21 vs
|
2Q21 vs
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In
millions
|
2Q21
|
|
|
1Q21
|
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|
2Q20
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1Q21
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2Q20
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Asset
management
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$
|
239
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$
|
226
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$
|
199
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6
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%
|
20
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%
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Consumer
services
|
457
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|
384
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|
330
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|
19
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%
|
38
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%
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Corporate
services
|
688
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|
555
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|
|
512
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|
24
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%
|
34
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%
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Residential
mortgage
|
103
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|
|
105
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|
|
158
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(2)
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%
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(35)
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%
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Service charges on
deposits
|
131
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|
|
119
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|
|
79
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10
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%
|
66
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%
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Other
|
468
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|
|
483
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|
|
271
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(3)
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%
|
73
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%
|
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$
|
2,086
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|
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$
|
1,872
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|
|
$
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1,549
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|
11
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%
|
35
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%
|
|
|
|
|
|
|
|
|
Noninterest income for the second quarter of 2021 increased
$214 million compared with the first
quarter. Asset management revenue grew $13
million primarily as a result of higher average equity
markets. Consumer services increased $73
million driven by growth in transaction volumes. Corporate
services was $133 million higher
primarily due to increased merger and acquisition advisory fees,
treasury management product revenue, and loan syndication fees.
Service charges on deposits increased $12
million primarily due to the addition of BBVA USA, partially offset by fewer overdrafts
reflecting the impact of Low Cash Mode℠. Other noninterest income
decreased $15 million and included a
negative Visa Class B derivative fair value adjustment, lower net
securities gains and higher private equity revenue.
Noninterest income for the second quarter of 2021 increased
$537 million compared with the second
quarter of 2020. Asset management revenue grew $40 million as a result of higher average equity
markets. Consumer services was $127
million higher driven by growth in transaction volumes.
Corporate services increased $176
million driven by higher merger and acquisition advisory
fees and treasury management product revenue. Residential mortgage
revenue declined $55 million
primarily due to lower loan servicing fees. Service charges on
deposits increased $52 million
primarily driven by higher transaction volumes and lower
pandemic-related fee waivers. Other noninterest income increased
$197 million primarily due to higher
private equity revenue.
CONSOLIDATED
EXPENSE REVIEW
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Noninterest
Expense
|
|
|
|
|
|
Change
|
Change
|
|
|
|
|
|
|
2Q21 vs
|
2Q21 vs
|
In
millions
|
2Q21
|
|
1Q21
|
|
2Q20
|
1Q21
|
2Q20
|
Personnel
|
$
|
1,640
|
|
|
$
|
1,477
|
|
|
$
|
1,373
|
|
11
|
%
|
19
|
%
|
Occupancy
|
217
|
|
|
215
|
|
|
199
|
|
1
|
%
|
9
|
%
|
Equipment
|
326
|
|
|
293
|
|
|
301
|
|
11
|
%
|
8
|
%
|
Marketing
|
74
|
|
|
45
|
|
|
47
|
|
64
|
%
|
57
|
%
|
Other
|
793
|
|
|
544
|
|
|
595
|
|
46
|
%
|
33
|
%
|
|
$
|
3,050
|
|
|
$
|
2,574
|
|
|
$
|
2,515
|
|
18
|
%
|
21
|
%
|
|
|
|
|
|
|
|
|
Noninterest expense for the second quarter of 2021 increased
$476 million and $535 million compared with the first quarter of
2021 and second quarter of 2020, respectively. The second quarter
of 2021 included integration expenses of $101 million, BBVA USA related operating expenses of $179 million and additions to second quarter
legal reserves of $80 million related
to various matters. In both comparisons the increase was also
driven by growth in business and marketing activity during the
second quarter of 2021.
The effective tax rate from continuing operations was 16.1% for
the second quarter of 2021, 16.9% for the first quarter of 2021 and
17.5% for the second quarter of 2020.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were $554.2 billion
at June 30, 2021, $474.4 billion at March
31, 2021 and $459.0 billion at
June 30, 2020. Second quarter 2021
balance sheet growth in both comparisons reflected the addition of
assets from the BBVA USA
acquisition. In comparison with the second quarter of 2020, the
increase is also attributable to higher balances maintained with
the Federal Reserve Bank reflecting deposit growth.
Loans
|
|
|
|
|
|
Change
|
Change
|
|
June 30,
2021
|
|
March 31,
2021
|
|
June 30,
2020
|
06/30/21
vs
|
06/30/21
vs
|
In
billions
|
|
|
03/31/21
|
06/30/20
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
199.6
|
|
|
$
|
164.5
|
|
|
$
|
180.2
|
|
21
|
%
|
11
|
%
|
Consumer
|
95.1
|
|
|
72.5
|
|
|
78.0
|
|
31
|
%
|
22
|
%
|
Total
loans
|
$
|
294.7
|
|
|
$
|
237.0
|
|
|
$
|
258.2
|
|
24
|
%
|
14
|
%
|
|
|
|
|
|
|
|
|
Loans were $294.7 billion at
June 30, 2021, reflecting
$60.5 billion related to BBVA
USA, including $38.5 billion of commercial loans and
$22.0 billion of consumer loans.
Loans increased $57.7 billion
compared with March 31, 2021 driven
by the acquisition of BBVA USA.
Commercial loans increased $35.1
billion compared with the first quarter of 2021 and included
loans acquired through the BBVA USA acquisition and growth in PNC's legacy
corporate banking and business credit businesses, partially offset
by $4.5 billion of PNC legacy PPP
loan forgiveness. Consumer loans increased $22.6 billion compared with the first quarter of
2021 reflecting loans acquired through the BBVA USA acquisition and growth in PNC legacy
residential mortgage loans.
Loans increased $36.5 billion
compared with June 30, 2020,
reflecting the impact of the BBVA USA acquisition, partially offset by lower
utilization of loan commitments by commercial customers.
PPP loans outstanding at June 30,
2021 were $11.6 billion and
included $2.1 billion acquired from
BBVA USA. PPP loans outstanding
were $14.0 billion at March 31, 2021 and $12.8
billion at June 30, 2020.
Investment
Securities
|
|
|
|
|
|
Change
|
Change
|
|
June 30,
2021
|
|
March 31,
2021
|
|
June 30,
2020
|
06/30/21
vs
|
06/30/21
vs
|
In
billions
|
|
|
03/31/21
|
06/30/20
|
Quarter
end
|
$
|
126.5
|
|
|
$
|
98.3
|
|
|
$
|
98.5
|
|
29
|
%
|
28
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities were $126.5
billion at June 30, 2021,
including $17.6 billion related to
BBVA USA. Investment securities
increased $28.2 billion and
$28.0 billion compared with
March 31, 2021 and June 30, 2020, respectively, reflecting
investment securities acquired from BBVA USA and increased purchase activity. Purchase
activity during the second quarter 2021 was primarily of agency
residential mortgage backed and U.S. Treasury and government agency
securities. Net unrealized gains on available for sale securities
were $2.0 billion at both
June 30, 2021 and March 31, 2021 and $3.4
billion at June 30, 2020.
Federal Reserve Bank balances at June 30,
2021 of $71.9 billion
decreased $13.9 billion from
$85.8 billion at March 31, 2021 due to the payment of $11.5 billion for the purchase of BBVA
USA and increased securities
purchases, partially offset by balances acquired in the
transaction. Federal Reserve Bank balances increased $21.9 billion from $50.0
billion at June 30, 2020
primarily due to deposit growth.
Deposits
|
|
|
|
|
|
Change
|
Change
|
|
June 30,
2021
|
|
March 31,
2021
|
|
June 30,
2020
|
06/30/21
vs
|
06/30/21
vs
|
In
billions
|
|
|
03/31/21
|
06/30/20
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
$
|
154.2
|
|
|
$
|
120.7
|
|
|
$
|
99.5
|
|
28
|
%
|
55
|
%
|
Interest-bearing
|
298.7
|
|
|
254.4
|
|
|
246.5
|
|
17
|
%
|
21
|
%
|
Total
deposits
|
$
|
452.9
|
|
|
$
|
375.1
|
|
|
$
|
346.0
|
|
21
|
%
|
31
|
%
|
|
|
|
|
|
|
|
|
Deposits at June 30, 2021 were
$452.9 billion, including
$82.2 billion related to BBVA
USA. Deposits increased $77.8
billion compared with March 31,
2021 and $106.9 billion
compared with June 30, 2020. In both
comparisons the increase reflected deposits acquired from BBVA
USA. Compared to June 30, 2020 the increase is also attributable
to overall growth in commercial and consumer liquidity.
Borrowed
Funds
|
|
|
|
|
|
Change
|
Change
|
|
June 30,
2021
|
|
March 31,
2021
|
|
June 30,
2020
|
06/30/21
vs
|
06/30/21
vs
|
In
billions
|
|
|
03/31/21
|
06/30/20
|
Quarter
end
|
$
|
34.8
|
|
|
$
|
33.0
|
|
|
$
|
47.0
|
|
5
|
%
|
(26)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowed funds at June 30, 2021
were $34.8 billion, increasing
$1.8 billion compared with the first
quarter of 2021 due to debt acquired through the acquisition of
BBVA USA. Compared to June 30, 2020 total borrowed funds decreased
$12.2 billion primarily due to lower
Federal Home Loan Bank borrowings.
Capital
|
June 30,
2021
|
|
|
March 31,
2021
|
|
June 30,
2020
|
|
*
|
|
|
Common shareholders'
equity In billions
|
$
|
51.1
|
|
|
|
$
|
50.3
|
|
|
$
|
48.9
|
|
Basel III common
equity Tier 1 capital ratio
|
10.0
|
%
|
|
|
12.6
|
%
|
|
11.3
|
%
|
Basel III common
equity Tier 1 fully implemented capital ratio
|
9.7
|
%
|
|
|
12.3
|
%
|
|
10.9
|
%
|
* Ratios
estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNC maintained a strong capital position. Common shareholders'
equity at June 30, 2021 increased
$0.8 billion from March 31, 2021 as second quarter net income and
an increase in accumulated other comprehensive income more than
offset dividends paid during the second quarter.
In the second quarter of 2021, PNC returned capital to
shareholders through dividends on common shares of $0.5 billion and refrained from repurchasing
shares due to the BBVA USA
transaction.
In June 2021, PNC announced the
reinstatement of share repurchase programs with repurchases of up
to $2.9 billion for the four-quarter
period beginning in the third quarter of 2021.
On July 1, 2021, the PNC board of
directors raised the quarterly cash dividend on common stock to
$1.25 cents per share, an increase of
10 cents per share, or 9%, effective
with the August 5, 2021 dividend
payment.
For information regarding PNC's Basel III capital ratios, see
Capital Ratios in the Consolidated Financial Highlights. The 2019
Tailoring Rules became effective for PNC as of January 1, 2020. PNC elected a five-year
transition provision effective March 31,
2020 to delay for two years the full impact of the Current
Expected Credit Losses (CECL) standard on regulatory capital,
followed by a three-year transition period. The fully implemented
ratios reflect the full impact of CECL and exclude the benefits of
this transition provision.
CREDIT QUALITY
REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Quality
|
|
|
|
|
|
Change
|
Change
|
|
At or for the quarter
ended
|
2Q21 vs
|
2Q21 vs
|
In
millions
|
6/30/2021
|
|
3/31/2021
|
|
6/30/2020
|
1Q21
|
2Q20
|
Provision for
(recapture of) credit
losses
|
$
|
302
|
|
|
$
|
(551)
|
|
|
$
|
2,463
|
|
$
|
853
|
|
$
|
(2,161)
|
|
PNC legacy net loan
charge-offs
|
$
|
58
|
|
|
$
|
146
|
|
|
$
|
236
|
|
(60)
|
%
|
(75)
|
%
|
Acquired net loan
charge-offs
|
$
|
248
|
|
|
|
|
|
|
|
Net loan
charge-offs
|
$
|
306
|
|
|
$
|
146
|
|
|
$
|
236
|
|
110
|
%
|
30
|
%
|
Nonperforming
assets
|
$
|
2,818
|
|
|
$
|
2,179
|
|
|
$
|
1,955
|
|
29
|
%
|
44
|
%
|
Accruing loans past
due 90 days or more
|
$
|
527
|
|
|
$
|
479
|
|
|
$
|
456
|
|
10
|
%
|
16
|
%
|
Allowance for loan
and lease losses
|
$
|
5,730
|
|
|
$
|
4,714
|
|
|
$
|
5,928
|
|
22
|
%
|
(3)
|
%
|
Allowance for
unfunded lending related commitments
|
$
|
645
|
|
|
$
|
507
|
|
|
$
|
662
|
|
27
|
%
|
(3)
|
%
|
Allowance for credit
losses to total loans
|
2.16
|
%
|
|
2.20
|
%
|
|
2.55
|
%
|
|
|
Nonperforming assets
to total assets
|
0.51
|
%
|
|
0.46
|
%
|
|
0.43
|
%
|
|
|
Net charge-offs to
average loans (annualized)
|
0.48
|
%
|
|
0.25
|
%
|
|
0.35
|
%
|
|
|
|
|
|
|
|
|
|
|
The second quarter of 2021 credit quality performance included
the June 1, 2021 acquisition of BBVA
USA and the associated purchase
accounting impacts. PNC legacy credit quality improved across all
metrics.
Provision for credit losses was $302
million in the second quarter of 2021, as a provision
recapture of $704 million, primarily
driven by improvements in credit quality and macroeconomic factors
as well as balance reductions, was more than offset by an initial
provision for credit losses of $1.0
billion related to the BBVA USA acquisition. The first quarter included a
provision recapture of $551
million.
Net loan charge-offs were $306
million and included BBVA USA net loan charge-offs of $248 million, primarily representing the purchase
accounting treatment for certain loans that were previously
charged-off by BBVA USA, and PNC
legacy net loan charge-offs of $58
million. Total net loan charge-offs increased $160 million and $70
million compared with March 31,
2021 and June 30, 2020,
respectively. In both comparisons the increase was driven by the
impact of the BBVA USA
acquisition, partially offset by lower PNC legacy commercial and
consumer net loan charge-offs.
PNC legacy commercial net loan charge-offs were $8 million for the second quarter of 2021,
decreasing $43 million from the first
quarter of 2021 primarily due to lower commercial and industrial
net loan charge-offs. PNC legacy consumer loan net charge-offs were
$50 million in the second quarter of
2021, declining $45 million from the
first quarter of 2021 largely due to lower gross charge-offs
related to auto and credit card loans.
The allowance for credit losses was $6.4
billion at June 30, 2021,
$5.2 billion at March 31, 2021 and $6.6
billion at June 30, 2020. The
allowance for credit losses at June 30,
2021 included the impact of BBVA USA's initial provision for credit losses of
$1.0 billion and fair value purchase
accounting credit marks of $1.2
billion, partially offset by a provision recapture of
$704 million and net loan charge-offs
of $306 million. The allowance for
credit losses as a percentage of total loans was 2.16% at
June 30, 2021 and included the
allowance for credit losses to total BBVA USA loans of 3.07%. The allowance for credit
losses as a percentage of total loans was 2.20% at March 31, 2021 and 2.55% at June 30, 2020.
Nonperforming assets at June 30,
2021 of $2.8 billion included
$880 million of nonperforming assets
acquired from BBVA USA, increasing
$639 million and $863 million compared with March 31, 2021 and June
30, 2020, respectively. In both comparisons the increase
was primarily due to nonperforming assets acquired from BBVA
USA. Compared with March 31, 2021, PNC legacy nonperforming assets
decreased $241 million reflecting
improved credit performance.
Overall delinquencies at June 30,
2021 of $1.3 billion included
$291 million acquired from BBVA
USA, increasing $144 million compared to March 31, 2021 driven by delinquencies acquired
from BBVA USA, partially offset by
lower PNC legacy commercial and consumer delinquencies. Compared to
June 30, 2020 delinquencies decreased
$20 million. Under the CARES Act
credit reporting rules and guidance from regulatory agencies,
certain loans modified due to pandemic-related hardships were
considered current during their modification period and not
reported as past due.
BUSINESS SEGMENT RESULTS
PNC has three reportable business segments: Retail Banking,
Corporate & Institutional Banking, and Asset Management Group.
Business segment results and a description of each business will be
included in PNC's second quarter 2021 Form 10-Q.
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL
INFORMATION
PNC Chairman, President and Chief Executive Officer William S. Demchak and Executive Vice President
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)
402-9103 and (312) 429-1278 (international) and Internet access to
the live audio listen-only webcast of the call is available at
www.pnc.com/investorevents. PNC's second quarter 2021 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
21994450 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
|
|
|
|
Six months
ended
|
Dollars in
millions, except per share data
|
|
June 30
|
|
March 31
|
|
June 30
|
|
|
|
June 30
|
|
June 30
|
|
|
2021
|
|
2021
|
|
2020
|
|
|
|
2021
|
|
2020
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
|
$
|
2,581
|
|
|
$
|
2,348
|
|
|
$
|
2,527
|
|
|
|
|
$
|
4,929
|
|
|
$
|
5,038
|
|
Noninterest
income
|
|
2,086
|
|
|
1,872
|
|
|
1,549
|
|
|
|
|
3,958
|
|
|
3,374
|
|
Total
revenue
|
|
4,667
|
|
|
4,220
|
|
|
4,076
|
|
|
|
|
8,887
|
|
|
8,412
|
|
Provision for
(recapture of) credit losses
|
|
302
|
|
|
(551)
|
|
|
2,463
|
|
|
|
|
(249)
|
|
|
3,377
|
|
Noninterest
expense
|
|
3,050
|
|
|
2,574
|
|
|
2,515
|
|
|
|
|
5,624
|
|
|
5,058
|
|
Income (loss) from
continuing operations before income taxes
and noncontrolling
interests
|
|
$
|
1,315
|
|
|
$
|
2,197
|
|
|
$
|
(902)
|
|
|
|
|
$
|
3,512
|
|
|
$
|
(23)
|
|
Income taxes
(benefit) from continuing operations
|
|
212
|
|
|
371
|
|
|
(158)
|
|
|
|
|
583
|
|
|
(38)
|
|
Net income (loss) from continuing operations
|
|
$
|
1,103
|
|
|
$
|
1,826
|
|
|
$
|
(744)
|
|
|
|
|
$
|
2,929
|
|
|
$
|
15
|
|
Income from
discontinued operations before taxes
|
|
|
|
|
|
$
|
5,596
|
|
|
|
|
|
|
$
|
5,777
|
|
Income taxes from
discontinued operations
|
|
|
|
|
|
1,197
|
|
|
|
|
|
|
1,222
|
|
Net income from discontinued operations
|
|
|
|
|
|
|
|
$
|
4,399
|
|
|
|
|
|
|
|
$
|
4,555
|
|
Net income
|
|
$
|
1,103
|
|
|
$
|
1,826
|
|
|
$
|
3,655
|
|
|
|
|
$
|
2,929
|
|
|
$
|
4,570
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to noncontrolling interests
|
|
12
|
|
|
10
|
|
|
7
|
|
|
|
|
22
|
|
|
14
|
|
Preferred stock
dividends (a)
|
|
48
|
|
|
57
|
|
|
55
|
|
|
|
|
105
|
|
|
118
|
|
Preferred stock
discount accretion and redemptions
|
|
1
|
|
|
1
|
|
|
1
|
|
|
|
|
2
|
|
|
2
|
|
Net income
attributable to common shareholders
|
|
$
|
1,042
|
|
|
$
|
1,758
|
|
|
$
|
3,592
|
|
|
|
|
$
|
2,800
|
|
|
$
|
4,436
|
|
Per Common
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
from continuing operations
|
|
$
|
2.43
|
|
|
$
|
4.11
|
|
|
$
|
(1.90)
|
|
|
|
|
$
|
6.54
|
|
|
$
|
(0.29)
|
|
Basic earnings from
discontinued operations
|
|
|
|
|
|
10.28
|
|
|
|
|
|
|
10.60
|
|
Total basic
earnings
|
|
$
|
2.43
|
|
|
$
|
4.11
|
|
|
$
|
8.40
|
|
|
|
|
$
|
6.54
|
|
|
$
|
10.33
|
|
Diluted earnings
(loss) from continuing operations
|
|
$
|
2.43
|
|
|
$
|
4.10
|
|
|
$
|
(1.90)
|
|
|
|
|
$
|
6.53
|
|
|
$
|
(0.29)
|
|
Diluted earnings from
discontinued operations
|
|
|
|
|
|
10.28
|
|
|
|
|
|
|
10.59
|
|
Total diluted
earnings
|
|
$
|
2.43
|
|
|
$
|
4.10
|
|
|
$
|
8.40
|
|
|
|
|
$
|
6.53
|
|
|
$
|
10.32
|
|
Cash dividends
declared per common share
|
|
$
|
1.25
|
|
|
$
|
1.15
|
|
|
$
|
1.15
|
|
|
|
|
$
|
2.40
|
|
|
$
|
2.30
|
|
Effective tax rate
from continuing operations (b)
|
|
16.1
|
%
|
|
16.9
|
%
|
|
17.5
|
%
|
|
|
|
16.6
|
%
|
|
165.2
|
%
|
(a)
|
Dividends are payable
quarterly other than Series O, Series R and Series S preferred
stock, which are payable semiannually, with the Series O payable in
different quarters than the Series R and Series S preferred
stock.
|
(b)
|
The effective income
tax rates are generally lower than the statutory rate due to the
relationship of pretax income to tax credits and earnings that are
not subject to tax.
|
The PNC Financial
Services Group, Inc.
|
Consolidated
Financial Highlights (Unaudited)
|
|
|
Three months
ended
|
|
|
|
Six months
ended
|
|
|
June 30
|
|
March 31
|
|
June 30
|
|
|
|
June 30
|
|
June 30
|
|
|
2021
|
|
2021
|
|
2020
|
|
|
|
2021
|
|
2020
|
PERFORMANCE
RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
(a)
|
|
2.29
|
%
|
|
2.27
|
%
|
|
2.52
|
%
|
|
|
|
2.28
|
%
|
|
2.67
|
%
|
Noninterest income to
total revenue
|
|
45
|
%
|
|
44
|
%
|
|
38
|
%
|
|
|
|
45
|
%
|
|
40
|
%
|
Efficiency
(b)
|
|
65
|
%
|
|
61
|
%
|
|
62
|
%
|
|
|
|
63
|
%
|
|
60
|
%
|
Return on:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common
shareholders' equity
|
|
8.32
|
%
|
|
14.31
|
%
|
|
30.11
|
%
|
|
|
|
11.29
|
%
|
|
19.15
|
%
|
Average
assets
|
|
0.88
|
%
|
|
1.58
|
%
|
|
3.21
|
%
|
|
|
|
1.21
|
%
|
|
2.11
|
%
|
(a)
|
Net interest margin
is the total yield on interest-earning assets minus the total rate
on interest-bearing liabilities and includes the benefit from use
of noninterest-bearing sources. To provide more meaningful
comparisons of net interest margins, we use net interest income on
a taxable-equivalent basis in calculating average yields used in
the calculation of net interest margin by increasing the interest
income earned on tax-exempt assets to make it fully equivalent to
interest income earned on taxable investments. This adjustment is
not permitted under generally accepted accounting principles (GAAP)
in the Consolidated Income Statement. The taxable-equivalent
adjustments to net interest income for the three months ended
June 30, 2021, March 31, 2021 and June 30, 2020 were
$15 million, $15 million and $19 million, respectively. The taxable
equivalent adjustments to net interest income for the six months
ended June 30, 2021 and June 30, 2020 were $30 million
and $41 million, respectively.
|
(b)
|
Calculated as
noninterest expense divided by total revenue.
|
The PNC Financial
Services Group, Inc.
|
Consolidated
Financial Highlights (Unaudited)
|
|
June 30
|
|
March 31
|
|
June 30
|
|
2021
|
|
2021
|
|
2020
|
BALANCE SHEET
DATA
|
|
|
|
|
|
Dollars in
millions, except per share data
|
|
|
|
|
|
Assets
|
$
|
554,212
|
|
|
$
|
474,414
|
|
|
$
|
458,978
|
|
Loans (a)
|
$
|
294,704
|
|
|
$
|
237,013
|
|
|
$
|
258,236
|
|
Allowance for loan
and lease losses
|
$
|
5,730
|
|
|
$
|
4,714
|
|
|
$
|
5,928
|
|
Interest-earning
deposits with banks
|
$
|
72,447
|
|
|
$
|
86,161
|
|
|
$
|
50,233
|
|
Investment
securities
|
$
|
126,543
|
|
|
$
|
98,255
|
|
|
$
|
98,493
|
|
Loans held for sale
(a)
|
$
|
2,227
|
|
|
$
|
1,967
|
|
|
$
|
1,443
|
|
Equity
investments
|
$
|
7,521
|
|
|
$
|
6,386
|
|
|
$
|
4,943
|
|
Mortgage servicing
rights
|
$
|
1,793
|
|
|
$
|
1,680
|
|
|
$
|
1,067
|
|
Goodwill
|
$
|
10,958
|
|
|
$
|
9,317
|
|
|
$
|
9,233
|
|
Other assets
(a)
|
$
|
35,025
|
|
|
$
|
30,894
|
|
|
$
|
34,920
|
|
Noninterest-bearing
deposits
|
$
|
154,190
|
|
|
$
|
120,641
|
|
|
$
|
99,458
|
|
Interest-bearing
deposits
|
$
|
298,693
|
|
|
$
|
254,426
|
|
|
$
|
246,539
|
|
Total
deposits
|
$
|
452,883
|
|
|
$
|
375,067
|
|
|
$
|
345,997
|
|
Borrowed funds
(a)
|
$
|
34,813
|
|
|
$
|
33,030
|
|
|
$
|
47,026
|
|
Allowance for
unfunded lending related commitments
|
$
|
645
|
|
|
$
|
507
|
|
|
$
|
662
|
|
Total shareholders'
equity
|
$
|
54,627
|
|
|
$
|
53,849
|
|
|
$
|
52,923
|
|
Common shareholders'
equity
|
$
|
51,107
|
|
|
$
|
50,331
|
|
|
$
|
48,928
|
|
Accumulated other
comprehensive income
|
$
|
1,463
|
|
|
$
|
1,290
|
|
|
$
|
3,069
|
|
Book value per common
share
|
$
|
120.25
|
|
|
$
|
118.47
|
|
|
$
|
115.26
|
|
Tangible book value
per common share (non-GAAP) (b)
|
$
|
93.83
|
|
|
$
|
96.57
|
|
|
$
|
93.54
|
|
Period end common
shares outstanding (millions)
|
425
|
|
|
425
|
|
|
425
|
|
Loans to
deposits
|
65
|
%
|
|
63
|
%
|
|
75
|
%
|
Common shareholders'
equity to total assets
|
9.2
|
%
|
|
10.6
|
%
|
|
10.7
|
%
|
CLIENT ASSETS
(billions)
|
|
|
|
|
|
Discretionary client
assets under management
|
$
|
183
|
|
|
$
|
173
|
|
|
$
|
151
|
|
Nondiscretionary
client assets under administration
|
172
|
|
|
161
|
|
|
138
|
|
Total client assets
under administration
|
355
|
|
|
334
|
|
|
289
|
|
Brokerage account
client assets
|
88
|
|
|
61
|
|
|
53
|
|
Total client
assets
|
$
|
443
|
|
|
$
|
395
|
|
|
$
|
342
|
|
CAPITAL
RATIOS
|
|
|
|
|
|
Basel III (c)
(d)
|
|
|
|
|
|
Common equity Tier
1
|
10.0
|
%
|
|
12.6
|
%
|
|
11.3
|
%
|
Common equity Tier 1
fully implemented (e)
|
9.7
|
%
|
|
12.3
|
%
|
|
10.9
|
%
|
Tier 1
risk-based
|
10.9
|
%
|
|
13.7
|
%
|
|
12.4
|
%
|
Total capital
risk-based (f)
|
13.1
|
%
|
|
16.0
|
%
|
|
14.9
|
%
|
Leverage
|
8.7
|
%
|
|
9.7
|
%
|
|
9.4
|
%
|
Supplementary leverage
|
7.3
|
%
|
|
10.1
|
%
|
|
9.3
|
%
|
ASSET
QUALITY
|
|
|
|
|
|
Nonperforming loans
to total loans
|
0.94
|
%
|
|
0.90
|
%
|
|
0.73
|
%
|
Nonperforming assets
to total loans, OREO and foreclosed assets
|
0.96
|
%
|
|
0.92
|
%
|
|
0.76
|
%
|
Nonperforming assets
to total assets
|
0.51
|
%
|
|
0.46
|
%
|
|
0.43
|
%
|
Net charge-offs to
average loans (for the three months ended) (annualized)
|
0.48
|
%
|
|
0.25
|
%
|
|
0.35
|
%
|
Allowance for loan
and lease losses to total loans
|
1.94
|
%
|
|
1.99
|
%
|
|
2.30
|
%
|
Allowance for credit
losses to total loans (g)
|
2.16
|
%
|
|
2.20
|
%
|
|
2.55
|
%
|
Allowance for loan
and lease losses to nonperforming loans
|
206
|
%
|
|
220
|
%
|
|
316
|
%
|
Accruing loans past
due 90 days or more (in millions)
|
$
|
527
|
|
|
$
|
479
|
|
|
$
|
456
|
|
(a)
|
Amounts include
assets and liabilities for which we have elected the fair value
option. Our first quarter 2021 Form 10-Q included, and our second
quarter 2021 Form 10-Q will include, additional information
regarding these Consolidated Balance Sheet line items.
|
(b)
|
See the Tangible Book
Value per Common Share table on page 16 for additional
information.
|
(c)
|
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 15 for additional
information. The ratios as of June 30, 2021 are
estimated.
|
(d)
|
The ratios are
calculated to reflect PNC's election to adopt the CECL optional
five-year transition provision.
|
(e)
|
The fully implemented
ratios are calculated to reflect the full impact of CECL and
excludes the benefits of the five-year transition
provision.
|
(f)
|
The 2021 and 2020
Basel III Total risk-based capital ratios include nonqualifying
trust preferred capital securities of $20 million and $40 million,
respectively, that are subject to a phase-out period that runs
through 2021.
|
(g)
|
Excludes allowances
for investment securities and other financial assets.
|
The PNC Financial
Services Group, Inc.
|
|
Consolidated
Financial Highlights (Unaudited)
|
CAPITAL RATIOS
As of January 1, 2020, the 2019
Tailoring Rules became effective for PNC. The most significant
changes involve PNC's election to exclude specific accumulated
other comprehensive income items from common equity Tier 1 capital
and higher thresholds used to calculate common equity Tier 1
capital deductions. Effective January 1,
2020, PNC must deduct from common equity Tier 1 capital
investments in unconsolidated financial institutions, mortgage
servicing rights and deferred tax assets (in each case, net of
associated deferred tax liabilities) to the extent such items
individually exceed 25% of the institution's adjusted common equity
Tier 1 capital.
PNC's regulatory risk-based capital ratios in 2021 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.
During 2020, regulators adopted a final rule permitting banks
that have adopted the CECL standard to delay for two years CECL's
full impact on regulatory capital, relative to the incurred loss
methodology's impact on regulatory capital, followed by a three
year transition period. PNC elected to adopt this optional
five-year transition provision effective as of March 31, 2020. See the table below for the
March 31, 2021 ratio and estimated June 30, 2021 ratio.
For the full impact of PNC's adoption of CECL, which excludes the
benefits of the five-year transition provision, see the
June 30, 2021 and March 31, 2021 (Fully Implemented)
estimates presented in the table below.
Our Basel III capital ratios may be impacted by changes to the
regulatory capital rules and additional regulatory guidance or
analysis.
Basel lll
Common Equity Tier 1 Capital Ratios
|
|
|
|
|
|
|
|
Basel III
(a)
|
|
|
|
|
June 30
2021
(estimated)
(b)
|
March 31
2021 (b)
|
|
June 30
2020
(b)
|
|
June 30, 2021 (Fully
Implemented)
(estimated)
(c)
|
March 31, 2021 (Fully
Implemented)
(estimated)
(c)
|
|
|
|
Dollars in
millions
|
|
Common stock, related
surplus and retained earnings, net of treasury stock
|
$
|
50,776
|
|
$
|
50,095
|
|
|
$
|
47,254
|
|
|
$
|
49,645
|
|
$
|
49,040
|
|
Less regulatory
capital adjustments:
|
|
|
|
|
|
|
|
Goodwill and
disallowed intangibles, net of deferred tax liabilities
|
(11,232)
|
|
(9,300)
|
|
|
(9,222)
|
|
|
(11,232)
|
|
(9,300)
|
|
All other
adjustments
|
(199)
|
|
(36)
|
|
|
(75)
|
|
|
(223)
|
|
(42)
|
|
Basel III Common
equity Tier 1 capital
|
$
|
39,345
|
|
$
|
40,759
|
|
|
$
|
37,957
|
|
|
$
|
38,190
|
|
$
|
39,698
|
|
Basel III
standardized approach risk-weighted assets (d)
|
$
|
392,128
|
|
$
|
323,630
|
|
|
$
|
336,990
|
|
|
$
|
391,792
|
|
$
|
322,649
|
|
Basel III Common
equity Tier 1 capital ratio
|
10.0
|
%
|
12.6
|
%
|
|
11.3
|
%
|
|
9.7
|
%
|
12.3
|
%
|
(a)
|
All ratios are
calculated using the regulatory capital methodology applicable to
PNC during each period presented.
|
(b)
|
The ratio is
calculated to reflect PNC's election to adopt the CECL optional
five-year transition provision.
|
(c)
|
The June 30,
2021 and March 31, 2021 ratio is calculated to reflect the
full impact of CECL and excludes the benefits of the five-year
transition provision.
|
(d)
|
Basel III
standardized approach risk-weighted assets are based on the Basel
III standardized approach rules and include credit and market
risk-weighted assets.
|
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)
|
|
|
|
|
|
|
June 30
|
|
March 31
|
|
June 30
|
Dollars in
millions, except per share data
|
2021
|
|
2021
|
|
2020
|
Book value per common
share
|
$
|
120.25
|
|
|
$
|
118.47
|
|
|
$
|
115.26
|
|
Tangible book value
per common share
|
|
|
|
|
|
Common shareholders'
equity
|
$
|
51,107
|
|
|
$
|
50,331
|
|
|
$
|
48,928
|
|
Goodwill and other
intangible assets
|
(11,515)
|
|
|
(9,489)
|
|
|
(9,410)
|
|
Deferred tax
liabilities on Goodwill and other intangible assets
|
284
|
|
|
189
|
|
|
188
|
|
Tangible common
shareholders' equity
|
$
|
39,876
|
|
|
$
|
41,031
|
|
|
$
|
39,706
|
|
Period-end common
shares outstanding (millions)
|
425
|
|
|
425
|
|
|
425
|
|
Tangible book value
per common share (non-GAAP)
|
$
|
93.83
|
|
|
$
|
96.57
|
|
|
$
|
93.54
|
|
Pretax pre-provision earnings is a non-GAAP measure and is based
on adjusting income from continuing operations before income taxes
and noncontrolling interests to add back provision for (recapture
of) credit losses. We believe that pretax, pre-provision earnings
is a useful tool to help evaluate the ability to provide for credit
costs through operations and provides an additional basis to
compare results between periods by isolating the impact of
provision for (recapture of) credit losses, which can vary
significantly between periods.
Pretax
Pre-Provision Earnings (non-GAAP)
|
|
|
|
|
|
|
June 30
|
|
March 31
|
|
June 30
|
Dollars in
millions
|
2021
|
|
2021
|
|
2020
|
Income (loss) from
continuing operations before income taxes and noncontrolling
interests
|
$
|
1,315
|
|
|
$
|
2,197
|
|
|
$
|
(902)
|
|
Provision for
(recapture of) credit losses
|
302
|
|
|
(551)
|
|
|
2,463
|
|
Pretax pre-provision
earnings (non-GAAP)
|
$
|
1,617
|
|
|
$
|
1,646
|
|
|
$
|
1,561
|
|
The interest income earned on certain earning assets is
completely or partially exempt from federal income tax. As such,
these tax-exempt instruments typically yield lower returns than
taxable investments. To provide more meaningful comparisons of net
interest income, we use interest income on a taxable-equivalent
basis 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 GAAP. Taxable
equivalent net interest income is only used for calculating net
interest margin and net interest income shown elsewhere in this
presentation is GAAP net interest income.
Taxable-Equivalent Net Interest Income
(non-GAAP)
|
|
|
|
|
|
|
June 30
|
|
March 31
|
|
June 30
|
Dollars in
millions
|
2021
|
|
2021
|
|
2020
|
Net interest
income
|
$
|
2,581
|
|
|
$
|
2,348
|
|
|
$
|
2,527
|
|
Taxable-equivalent
adjustments
|
15
|
|
|
15
|
|
|
19
|
|
Net interest income
(Fully Taxable-Equivalent - FTE)
|
$
|
2,596
|
|
|
$
|
2,363
|
|
|
$
|
2,546
|
|
The PNC Financial
Services Group, Inc.
|
|
Consolidated
Financial Highlights (Unaudited)
|
|
|
|
The adjusted diluted earnings per common share is a non-GAAP
measure and includes the impact of the BBVA USA acquisition. It is calculated based on
adjusting net income attributable to diluted common shareholders by
adding back the initial provision for credit losses recorded on
June 1, 2021 and integration costs in
the second quarter of 2021. We believe this non-GAAP measure serves
as a useful tool in understanding PNC's results by providing
greater comparability with prior periods, as well as demonstrating
the effect of significant items.
Acquisition
Adjusted Diluted Earnings per Common Share
(non-GAAP)
|
|
|
|
|
June 30
|
|
Per Common
Share
|
Dollars in
millions, except per share data
|
2021
|
|
Net income
attributable to diluted common shareholders
|
$
|
1,037
|
|
|
$
|
2.43
|
|
Initial provision for
credit losses and integration costs after tax (a)
|
882
|
|
|
2.07
|
|
Acquisition adjusted
net income attributable to diluted common shareholders
(non-GAAP)
|
$
|
1,919
|
|
|
$
|
4.50
|
|
Average diluted
common shares outstanding (millions)
|
427
|
|
|
|
(a) Statutory tax rate of 21%
used to calculate impacts.
|
|
|
|
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 us and
our future business and operations that are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act. Forward-looking statements are typically identified by
words such as "believe," "plan," "expect," "anticipate," "see,"
"look," "intend," "outlook," "project," "forecast," "estimate,"
"goal," "will," "should" and other similar words and
expressions.
Forward-looking statements are necessarily subject to numerous
assumptions, risks and uncertainties, which change over time.
Future events or circumstances may change our outlook and may also
affect the nature of the assumptions, risks and uncertainties to
which our forward-looking statements are subject.
Forward-looking statements speak only as of the date made. We
do not assume any duty and do not undertake to update
forward-looking statements. Actual results or future events
could differ, possibly materially, from those anticipated in
forward-looking statements, as well as from historical
performance. As a result, we caution against placing undue
reliance on any forward-looking statements.
Our forward-looking statements are subject to the following
principal risks and uncertainties.
- Our businesses, financial results and balance sheet values are
affected by business and economic conditions, including:
-
- 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,
market interest rates and inflation,
- Changes in customer behavior due to changing business and
economic conditions or legislative or regulatory initiatives,
- Changes in customers', suppliers' and other counterparties'
performance and creditworthiness,
- Impacts of tariffs and other trade policies of the U.S. and its
global trading partners,
- The length and extent of the economic impacts of the COVID-19
pandemic,
- The impact of the results of the recent U.S. elections on the
regulatory landscape, capital markets, and the response to and
management of the COVID-19 pandemic, including the effectiveness of
already-enacted fiscal stimulus from the federal government, a
potential infrastructure bill and changes in tax laws, and
- 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:
-
- The U.S. economy is in an economic recovery, following a very
severe but very short economic contraction in the first half of
2020 due to the COVID-19 pandemic and public health measures to
contain it.
- With passage of the American Rescue Plan Act of 2021 and
continued vaccine distribution, economic growth has picked up in
2021 and will remain very strong through the rest of this year and
into 2022. Real GDP is expected to return to its pre-pandemic level
in the second quarter of 2021. Employment in June 2021 was still down by 6.8 million from
before the pandemic; PNC expects employment to return to its
pre-pandemic level in the spring of 2022.
- Inflation has accelerated in mid-2021 on a year-ago basis due
to comparisons with spring 2020 (when prices were falling), strong
demand in specific segments, and supply chain disruptions.
Inflation will slow in the second half of 2021.
- PNC expects the Federal Open Market Committee to keep the fed
funds rate in its current range of 0.00 to 0.25 percent until
mid-2023.
- PNC's ability to take certain capital actions, including
returning capital to shareholders, is subject to PNC meeting or
exceeding a stress capital buffer established by the Federal
Reserve Board in connection with the Federal Reserve Board's
Comprehensive Capital Analysis and Review (CCAR) process.
- PNC's regulatory capital ratios in the future will depend on,
among other things, the company's financial performance, the scope
and terms of final capital regulations then in effect and
management actions affecting the composition of PNC's balance
sheet. In addition, PNC's ability to determine, evaluate and
forecast regulatory capital ratios, and to take actions (such as
capital distributions) based on actual or forecasted capital
ratios, will be dependent at least in part on the development,
validation and regulatory review of related models.
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 to laws and regulations, including changes affecting
oversight of the financial services industry, consumer protection,
bank capital and liquidity standards, pension, bankruptcy and other
industry aspects, and changes in accounting policies and
principles.
- Unfavorable resolution of legal proceedings or other claims and
regulatory and other governmental investigations or other
inquiries. These matters may result in monetary judgments or
settlements or other remedies, including fines, penalties,
restitution or alterations in our business practices, and in
additional expenses and collateral costs, and may cause
reputational harm to PNC.
- Results of the regulatory examination and supervision process,
including our failure to satisfy requirements of agreements with
governmental agencies.
- Impact on business and operating results of any costs
associated with obtaining rights in intellectual property claimed
by others and of adequacy of our intellectual property protection
in general.
- Business and operating results are affected by our ability to
identify and effectively manage risks inherent in our businesses,
including, where appropriate, through effective use of systems and
controls, third-party insurance, derivatives, and capital
management techniques, and to meet evolving regulatory capital and
liquidity standards.
- Our acquisition of BBVA USA
Bancshares, Inc. presents us with risks and uncertainties related
to the integration of the acquired business into PNC
including:
-
- The business of BBVA USA
Bancshares, Inc., including its U.S. banking subsidiary, BBVA
USA, going forward may not perform
as we currently project or in a manner consistent with historical
performance. As a result, the anticipated benefits, including
estimated cost savings, of the transaction may be significantly
harder or take longer to achieve than expected or may not be
achieved in their entirety as a result of unexpected factors or
events, including those that are outside of our control.
- The integration of BBVA USA
Bancshares, Inc., including its U.S. banking subsidiary, BBVA
USA, with that of PNC and PNC Bank
may be more difficult to achieve than anticipated or have
unanticipated adverse results relating to BBVA USA Bancshares, Inc., including its U.S.
banking subsidiary, BBVA USA, or
our existing businesses. Our ability to integrate BBVA USA Bancshares, Inc., including its U.S.
banking subsidiary, BBVA USA,
successfully may be adversely affected by the fact that this
transaction results in us entering several geographic markets where
we did not previously have any meaningful presence.
- In addition to the BBVA USA
Bancshares, Inc. transaction, 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 2020 Form 10-K and in our first quarter 2021 Form
10-Q, 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
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SOURCE The PNC Financial Services Group, Inc.