Le Lézard
Classified in: Business
Subjects: ERN, CCA

PNC Reports Full Year 2019 Net Income Of $5.4 Billion, $11.39 Diluted EPS


PITTSBURGH, Jan. 15, 2020 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported:



For the year


For the quarter


2019

2018


4Q19

3Q19

4Q18

Net income   $ millions

$5,418


$5,346



$1,381


$1,392


$1,351


Diluted earnings per common share

$11.39


$10.71



$2.97


$2.94


$2.75






"PNC delivered excellent results in 2019 against the backdrop of continued change across our industry. Earnings per share increased and we generated record revenue and positive operating leverage for the year. Expenses were well controlled and our efficiency ratio improved. We increased loans and deposits and leveraged our strong product set to grow clients in existing and new markets. At the same time, we made important investments in the development of our employees and their careers and to support employees' health and wellness and long-term financial wellbeing. With the announced increase to our authorized share buybacks, we are well positioned with capital flexibility for the opportunities and challenges ahead as we remain focused on creating long-term shareholder value by doing what is best for our customers."

         Bill Demchak, PNC Chairman, President and Chief Executive Officer

Increase to Authorized Share Repurchases

Income Statement Highlights

Fourth quarter 2019 compared with third quarter 2019

Balance Sheet Highlights


Earnings Summary







In millions, except per share data


4Q19



3Q19



4Q18


Net income


$

1,381



$

1,392



$

1,351


Net income attributable to diluted common shares


$

1,302



$

1,307



$

1,274


Diluted earnings per common share


$

2.97



$

2.94



$

2.75


Average diluted common shares outstanding


438



445



463


Return on average assets


1.33

%


1.36

%


1.40

%

Return on average common equity


11.54

%


11.56

%


11.83

%

Book value per common share

Quarter end

$

104.59



$

103.37



$

95.72


Tangible book value per common share (non-GAAP)

Quarter end

$

83.30



$

82.37



$

75.42


Cash dividends declared per common share


$

1.15



$

1.15



$

.95










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











Revenue






Change

Change







4Q19 vs

4Q19 vs

In millions

4Q19



3Q19



4Q18


3Q19

4Q18

Net interest income

$

2,488



$

2,504



$

2,481


(1)

%

?


Noninterest income

2,121



1,989



1,859


7

%

14

%

Total revenue

$

4,609



$

4,493



$

4,340


3

%

6

%









Total revenue for the fourth quarter of 2019 increased $116 million compared with the third quarter and $269 million compared with the fourth quarter of 2018 driven by higher noninterest income.

Net interest income for the fourth quarter of 2019 decreased $16 million compared with the third quarter due to lower loan and securities yields substantially offset by lower rates on deposits and borrowings. Net interest income increased $7 million compared with the fourth quarter of 2018 as higher loan and securities balances and lower borrowing costs were substantially offset by lower loan and securities yields and higher deposit and borrowing balances. The net interest margin declined to 2.78 percent for the fourth quarter of 2019 from 2.84 percent for the third quarter due to lower earning asset yields and lower benefit from noninterest-bearing sources of funds substantially offset by lower rates on deposits and borrowings. The margin decreased from 2.96 percent in the fourth quarter of 2018 as a result of lower yields on earning assets partially offset by lower borrowing costs.

Noninterest Income






Change

Change







4Q19 vs

4Q19 vs

In millions

4Q19



3Q19



4Q18


3Q19

4Q18

Asset management

$

504



$

464



$

428


9

%

18

%

Consumer services

390



402



387


(3)

%

1

%

Corporate services

499



469



468


6

%

7

%

Residential mortgage

87



134



59


(35)

%

47

%

Service charges on deposits

185



178



192


4

%

(4)

%

Other

456



342



325


33

%

40

%


$

2,121



$

1,989



$

1,859


7

%

14

%









Noninterest income for the fourth quarter of 2019 increased $132 million compared with the third quarter driven by higher other noninterest income. Asset management revenue increased $40 million reflecting higher earnings from PNC's equity investment in BlackRock. Consumer services decreased $12 million due to seasonally higher credit card activity that was more than offset by a true up of credit card rewards costs. Corporate services grew $30 million reflecting broad-based increases including treasury management product revenue. Residential mortgage revenue decreased $47 million as a result of a lower benefit from residential mortgage servicing rights valuation, net of economic hedge, lower loan sales revenue and lower servicing fees. Service charges on deposits increased $7 million reflecting seasonally higher consumer spending. Other noninterest income increased $114 million due to higher revenue from private equity investments and a gain on the sale of proprietary mutual funds of $57 million partially offset by negative derivative fair value adjustments related to Visa Class B common shares of $45 million in the fourth quarter compared with $8 million in the third quarter and lower net gains on commercial mortgage loans held for sale.

Noninterest income for the fourth quarter of 2019 increased $262 million compared with the fourth quarter of 2018. Asset management revenue increased $76 million reflecting higher earnings from PNC's equity investment in BlackRock. Consumer services increased $3 million and included higher debit card revenue. Corporate services grew $31 million across businesses led by higher treasury management product revenue. Residential mortgage revenue increased $28 million due to higher results from residential mortgage servicing rights valuation, net of economic hedge, and higher loan sales revenue partially offset by lower servicing fees. Service charges on deposits decreased $7 million reflecting a reduction of customer fees charged partially offset by higher transaction volumes. Other noninterest income increased $131 million as a result of higher revenue from private equity investments, the gain on the sale of proprietary mutual funds and higher capital markets-related revenue partially offset by negative Visa derivative fair value adjustments in the fourth quarter of 2019 compared with positive adjustments of $42 million in the fourth quarter of 2018.


CONSOLIDATED EXPENSE REVIEW













Noninterest Expense






Change

Change







4Q19 vs

4Q19 vs

In millions

4Q19



3Q19



4Q18


3Q19

4Q18

Personnel

$

1,468



$

1,400



$

1,348


5

%

9

%

Occupancy

201



206



202


(2)

%

?


Equipment

348



291



285


20

%

22

%

Marketing

77



76



84


1

%

(8)

%

Other

668



650



658


3

%

2

%


$

2,762



$

2,623



$

2,577


5

%

7

%









Noninterest expense for the fourth quarter of 2019 increased $139 million compared with the third quarter. Personnel expense increased $68 million due to higher benefits, including a $25 million year-end employee award of an additional contribution to health savings accounts, and higher incentive compensation associated with business activity. Equipment expense increased $57 largely million attributable to technology-related write-offs of $50 million primarily for decommissioned regulatory software.

Noninterest expense for the fourth quarter of 2019 increased $185 million compared with the fourth quarter of 2018. Personnel expense increased $120 million driven by business growth, and equipment expense increased reflecting the fourth quarter 2019 write-offs.

The effective tax rate was 15.1 percent for the fourth quarter of 2019, 17.5 percent for the third quarter of 2019 and 16.3 percent for the fourth quarter of 2018. The lower effective tax rate in the fourth quarter of 2019 compared with the third quarter was related to lower state income taxes and tax credit benefits. For the full year 2019, the effective tax rate was 16.4 percent.

CONSOLIDATED BALANCE SHEET REVIEW

Average total assets of $411.4 billion in the fourth quarter of 2019 increased 1 percent compared with $406.7 billion in the third quarter of 2019 primarily due to higher balances held with the Federal Reserve Bank. Average total assets increased 7 percent compared with $383.1 billion in the fourth quarter of 2018 reflecting loan growth and higher Federal Reserve Bank balances. Total assets were $410.3 billion at December 31, 2019, $408.9 billion at September 30, 2019 and $382.3 billion at December 31, 2018.


Loans






Change

Change







4Q19 vs

4Q19 vs

In billions

4Q19



3Q19



4Q18


3Q19

4Q18

Average








Commercial lending

$

160.8



$

161.5



$

152.2


?


6

%

Consumer lending

78.1



76.2



73.7


3

%

6

%

Average loans

$

238.9



$

237.7



$

225.9


?


6

%









Quarter end








Commercial lending

$

160.6



$

160.2



$

152.3


?


5

%

Consumer lending

79.2



77.1



73.9


3

%

7

%

Total loans

$

239.8



$

237.3



$

226.2


1

%

6

%









Average loans for the fourth quarter of 2019 grew $1.2 billion compared with the third quarter. Average commercial lending balances declined $.7 billion primarily in PNC's real estate business, including a decrease in multifamily agency warehouse lending balances, partially offset by growth in PNC's corporate banking business. Average consumer lending balances increased $1.9 billion due to growth in residential mortgage, auto, credit card and unsecured installment loans partially offset by lower education loans. Total loans at December 31, 2019 grew $2.5 billion compared with September 30, 2019. Consumer lending balances increased $2.1 billion and commercial lending balances increased $.4 billion.

Fourth quarter 2019 average and period end loans increased $13.0 billion and $13.6 billion, respectively, compared with fourth quarter 2018 driven by overall growth in both commercial and consumer lending.


Investment Securities






Change

Change







4Q19 vs

4Q19 vs

In billions

4Q19



3Q19



4Q18


3Q19

4Q18

Average

$

83.5



$

85.2



$

82.1


(2)

%

2

%

Quarter end

$

86.8



$

87.9



$

82.7


(1)

%

5

%









Average investment securities for the fourth quarter of 2019 decreased $1.7 billion and period end balances decreased $1.1 billion compared with the third quarter primarily due to net sales of U.S. Treasury securities. Fourth quarter 2019 average and period-end investment securities increased $1.4 billion and $4.1 billion, respectively, compared with the fourth quarter of 2018 reflecting net increases in agency residential mortgage-backed securities partially offset by lower U.S. Treasury securities in the average comparison. Net unrealized gains on available for sale securities were $1.4 billion at both December 31, 2019 and September 30, 2019 compared with net unrealized losses of $.1 billion at December 31, 2018.

Average balances held with the Federal Reserve Bank increased to $23.0 billion in the fourth quarter of 2019 from $15.3 billion in the third quarter and $16.4 billion in the fourth quarter of 2018. Balances held with the Federal Reserve were $23.2 billion at December 31, 2019, $18.8 billion at September 30, 2019 and $10.5 billion at December 31, 2018. 


Deposits






Change

Change







4Q19 vs

4Q19 vs

In billions

4Q19



3Q19



4Q18


3Q19

4Q18

Average








Noninterest-bearing

$

73.6



$

72.1



$

75.3


2

%

(2)

%

Interest-bearing

214.2



207.0



191.2


3

%

12

%

Average deposits

$

287.8



$

279.1



$

266.5


3

%

8

%









Quarter end








Noninterest-bearing

$

72.8



$

74.1



$

74.0


(2)

%

(2)

%

Interest-bearing

215.7



211.5



193.9


2

%

11

%

Total deposits

$

288.5



$

285.6



$

267.9


1

%

8

%










Average deposits for the fourth quarter of 2019 increased $8.7 billion compared with the third quarter due to higher commercial deposits reflecting seasonal growth and the full quarter impact of a new sweep deposit product offering for current asset management clients. Deposits at December 31, 2019 increased $2.9 billion over September 30, 2019 as an increase in consumer interest-bearing deposits at year end was partially offset by a decline in commercial noninterest-bearing deposits. Fourth quarter 2019 average and period-end deposits increased $21.3 billion and $20.6 billion, respectively, compared with fourth quarter 2018 driven by overall deposit and customer growth.


Borrowed Funds






Change

Change







4Q19 vs

4Q19 vs

In billions

4Q19



3Q19



4Q18


3Q19

4Q18

Average

$

60.0



$

63.9



$

58.8


(6)

%

2

%

Quarter end

$

60.3



$

61.4



$

57.4


(2)

%

5

%









Average borrowed funds for the fourth quarter of 2019 decreased $3.9 billion and period end balances decreased $1.1 billion compared with the third quarter due to lower Federal Home Loan Bank borrowings partially offset by higher federal funds purchased, and higher bank notes and senior debt in the period end comparison. Average and period-end borrowed funds for the fourth quarter of 2019 increased $1.2 billion and $2.9 billion, respectively, compared with the fourth quarter of 2018 due to higher federal funds purchased and bank notes and senior debt partially offset by a decrease in Federal Home Loan Bank borrowings.


Capital








12/31/2019

*


9/30/2019


12/31/2018

Common shareholders' equity    In billions

$

45.3




$

45.4



$

43.7


Basel III common equity Tier 1 capital ratio

9.5

%



9.6

%


9.6

%

* Ratio estimated















PNC maintained a strong capital position. Common shareholders' equity at December 31, 2019 decreased $.1 billion compared with September 30, 2019 as fourth quarter net income was more than offset by share repurchases and dividends.

PNC received approval in January 2020 from the Federal Reserve to repurchase up to an additional $1.0 billion in common shares through the end of the second quarter of 2020. Share repurchases will be made subject to market conditions. This is in addition to the share repurchase programs of up to $4.3 billion for the four-quarter period beginning in the third quarter of 2019, which were announced in June 2019.

PNC returned $1.5 billion of capital to shareholders in the fourth quarter of 2019 through repurchases of 6.5 million common shares for $1.0 billion and dividends on common shares of $.5 billion. For the full year 2019, PNC returned $5.4 billion of capital to shareholders through repurchases of 25.9 million common shares for $3.5 billion and dividends on common shares of $1.9 billion.

On January 2, 2020, the PNC board of directors declared a quarterly cash dividend on common stock of $1.15 per share effective with the February 5, 2020 dividend payment date.

The Basel III common equity Tier 1 capital ratio was 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

12/31/19 vs

12/31/19 vs

In millions

12/31/2019


9/30/2019


12/31/2018

9/30/19

12/31/18

Nonperforming loans

$

1,635



$

1,728



$

1,694


(5)

%

(3)

%

Nonperforming assets

$

1,752



$

1,847



$

1,808


(5)

%

(3)

%

Accruing loans past due 90 days  or more

$

585



$

532



$

629


10

%

(7)

%

Net charge-offs

$

209



$

155



$

107


35

%

95

%

Provision for credit losses

$

221



$

183



$

148


21

%

49

%

Allowance for loan and lease losses

$

2,742



$

2,738



$

2,629


?


4

%










Overall credit quality for the fourth quarter of 2019 remained historically strong. Provision for credit losses for the fourth quarter increased $38 million compared with the third quarter. Provision for consumer lending increased due to the credit card, auto and residential mortgage loan portfolios partially offset by a lower provision for home equity loans. Provision for commercial loans increased reflecting reserves attributable to certain commercial credits.

Nonperforming assets at December 31, 2019 decreased $95 million compared with September 30, 2019. Lower nonperforming commercial, commercial real estate, home equity and residential mortgage loans were partially offset by higher nonperforming equipment lease financing, auto and credit card loans. Nonperforming assets decreased $56 million compared with December 31, 2018 due to lower nonperforming home equity, residential mortgage and commercial real estate loans partially offset by higher nonperforming commercial, auto, equipment lease financing and credit card loans. Nonperforming assets to total assets were .43 percent at December 31, 2019, .45 percent at September 30, 2019 and .47 percent at December 31, 2018.

Overall delinquencies at December 31, 2019 increased $156 million, or 12 percent, compared with September 30, 2019. Loans past due 30 to 59 days increased $114 million driven by higher equipment lease financing, auto and commercial loan delinquencies. Loans past due 90 days or more increased $53 million primarily due to higher commercial, government insured residential mortgage, credit card and auto loan delinquencies. Overall delinquencies at December 31, 2019 increased $19 million, or 1 percent, compared with December 30, 2018 driven by higher past due auto, credit card and commercial loans partially offset by lower government insured education and residential mortgage loans.

Net charge-offs for the fourth quarter of 2019 increased $54 million compared with the third quarter. Consumer lending net charge-offs increased $30 million driven by credit card, auto and home equity loans, and commercial lending net charge-offs increased $24 million. Compared with fourth quarter 2018, net charge-offs increased $102 million as commercial net charge-offs increased $52 million and consumer net charge-offs increased $50 million. Net charge-offs were .35 percent of average loans on an annualized basis for the fourth quarter of 2019 compared with .26 percent for the third quarter of 2019 and .19 percent for the fourth quarter of 2018.

The allowance for loan and lease losses to total loans remained relatively stable at 1.14 percent at December 31, 2019 compared with 1.15 percent at September 30, 2019 and 1.16 percent at December 31, 2018. The allowance to nonperforming loans was 168 percent at December 31, 2019 compared with 158 percent at September 30, 2019 and 155 percent at December 31, 2018.


BUSINESS SEGMENT RESULTS












Business Segment Income






In millions

4Q19



3Q19



4Q18


Retail Banking

$

277



$

347



$

313


Corporate & Institutional Banking

649



645



651


Asset Management Group

91



46



42


Other, including BlackRock

364



354



345


Net income

$

1,381



$

1,392



$

1,351


See accompanying notes in Consolidated Financial Highlights














Retail Banking







Change


Change








4Q19 vs


4Q19 vs

In millions

4Q19



3Q19



4Q18



3Q19


4Q18

Net interest income

$

1,402



$

1,393



$

1,319



$

9



$

83


Noninterest income

$

652



$

744



$

696



$

(92)



$

(44)


Provision for credit losses

$

161



$

147



$

119



$

14



$

42


Noninterest expense

$

1,530



$

1,536



$

1,487



$

(6)



$

43


Earnings

$

277



$

347



$

313



$

(70)



$

(36)












In billions










Average loans

$

79.5



$

77.7



$

74.8



$

1.8



$

4.7


Average deposits

$

170.8



$

168.8



$

161.8



$

2.0



$

9.0













Retail Banking earnings for the fourth quarter of 2019 decreased in both comparisons. Noninterest income declined compared with the third quarter due to negative derivative fair value adjustments related to Visa Class B common shares and lower residential mortgage revenue attributable to a lower benefit from residential mortgage servicing rights valuation, net of economic hedge, and decreased loan sales and servicing revenue. Noninterest income decreased compared with the fourth quarter of 2018 due to negative Visa derivative fair value adjustments in the fourth quarter of 2019 compared with positive adjustments in the fourth quarter of 2018 partially offset by higher results from residential mortgage servicing rights valuation, net of economic hedge, increased loan sales revenue, and growth in consumer service fees. Provision for credit losses increased in both comparisons primarily due to higher credit card and auto loan portfolio reserves attributable to loan growth partially offset by a lower provision for home equity loans. Noninterest expense increased compared with the fourth quarter of 2018 reflecting higher customer-related transaction costs, noncredit losses and ATM expense resulting from enhanced checking product benefits.


Corporate & Institutional Banking






Change


Change








4Q19 vs


4Q19 vs

In millions

4Q19



3Q19



4Q18



3Q19


4Q18

Net interest income

$

969



$

930



$

930



$

39



$

39


Noninterest income

$

646



$

654



$

632



$

(8)



$

14


Provision for credit losses

$

65



$

48



$

42



$

17



$

23


Noninterest expense

$

726



$

703



$

687



$

23



$

39


Earnings

$

649



$

645



$

651



$

4



$

(2)












In billions










Average loans

$

147.9



$

148.6



$

139.5



$

(.7)



$

8.4


Average deposits

$

98.5



$

95.8



$

91.8



$

2.7



$

6.7












Corporate & Institutional Banking earnings for the fourth quarter of 2019 were relatively consistent in the comparisons. Noninterest income decreased compared with the third quarter primarily due to lower revenue from commercial mortgage banking activities, partially offset by higher treasury management product revenue. Noninterest income increased compared with the fourth quarter of 2018 driven by higher treasury management product revenue and higher capital markets-related revenue partially offset by lower gains on asset sales. Provision for credit losses in the fourth quarter of 2019 increased compared with the third quarter due to reserves attributable to certain commercial credits. Noninterest expense increased in both comparisons largely due to investments in strategic initiatives and variable costs associated with increased business activity.


Asset Management Group







Change


Change








4Q19 vs


4Q19 vs

In millions

4Q19



3Q19



4Q18



3Q19


4Q18

Net interest income

$

80



$

70



$

70



$

10



$

10


Noninterest income

$

272



$

216



$

216



$

56



$

56


Provision for credit losses (benefit)

$

1



$

(1)




?



$

2



$

1


Noninterest expense

$

232



$

228



$

232



$

4




?


Earnings

$

91



$

46



$

42



$

45



$

49












In billions










Client assets under administration at
quarter end

$

297



$

298



$

272



$

(1)



$

25


Average loans

$

7.1



$

6.9



$

6.9



$

.2



$

.2


Average deposits

$

17.9



$

13.6



$

12.5



$

4.3



$

5.4












Asset Management Group earnings for the fourth quarter of 2019 increased in both comparisons. Noninterest income increased as a result of a gain of $57 million on the sale of components of the PNC Capital Advisors investment management business, including its PNC family of proprietary mutual funds of approximately $14 billion. Noninterest expense increased over the third quarter due to costs associated with the sale transaction.

Client assets under administration at December 31, 2019 included discretionary client assets under management of $154 billion and nondiscretionary client assets under administration of $143 billion. Discretionary client assets under management decreased $9 billion compared with September 30, 2019. The sale transaction resulted in a decline of $11 billion in discretionary assets under management, with the Asset Management Group remaining the wealth manager of approximately $3 billion of funds sold. This decline was partially offset by increases in equity markets. Discretionary client assets under management increased $6 billion compared with December 31, 2018 as the impact of the sale transaction was more than offset by increases in equity markets.

Other, including BlackRock

The "Other, including BlackRock" category, for the purposes of this release, includes earnings and gains or losses related to PNC's equity investment in BlackRock, and residual activities that do not meet the criteria for disclosure as a separate reportable business, such as asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities, certain trading activities, certain runoff consumer loan portfolios, private equity investments, intercompany eliminations, certain corporate overhead, tax adjustments that are not allocated to business segments, exited businesses, and differences between business segment performance reporting and financial statement reporting under generally accepted accounting principles.

CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION

PNC Chairman, President and Chief Executive Officer William S. Demchak and Chief Financial Officer Robert Q. Reilly will hold a conference call for investors today at 9:30 a.m. Eastern Time regarding the topics addressed in this news release and the related financial supplement. Dial-in numbers for the conference call are (800) 616-4018 and (303) 223-4381 (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 2019 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 21934065 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



2019


2019


2018



2019


2018

Revenue












Net interest income


$

2,488



$

2,504



$

2,481




$

9,965



$

9,721


Noninterest income


2,121



1,989



1,859




7,862



7,411


Total revenue


4,609



4,493



4,340




17,827



17,132


Provision for credit losses


221



183



148




773



408


Noninterest expense


2,762



2,623



2,577




10,574



10,296


Income before income taxes and noncontrolling interests


$

1,626



$

1,687



$

1,615




$

6,480



$

6,428


Net income


$

1,381



$

1,392



$

1,351




$

5,418



$

5,346


Less:












Net income attributable to noncontrolling interests


14



13



14




49



45


Preferred stock dividends (a)


55



63



55




236



236


Preferred stock discount accretion and redemptions


1



1



1




4



4


Net income attributable to common shareholders


$

1,311



$

1,315



$

1,281




$

5,129



$

5,061


Less:












Dividends and undistributed earnings allocated to
    nonvested restricted shares


6



6



5




21



21


Impact of BlackRock earnings per share dilution


3



2



2




10



9


Net income attributable to diluted common shares


$

1,302



$

1,307



$

1,274




$

5,098



$

5,031


Diluted earnings per common share


$

2.97



$

2.94



$

2.75




$

11.39



$

10.71


Cash dividends declared per common share


$

1.15



$

1.15



$

.95




$

4.20



$

3.40


Effective tax rate (b)


15.1

%


17.5

%


16.3

%



16.4

%


16.8

%



(a) 

Dividends are payable quarterly other than the Series O, Series R and Series S preferred stock, which are payable semiannually, with the Series O payable in different quarters than the Series R and Series S preferred stock.

(b) 

The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax.

 

 


The PNC Financial Services Group, Inc.

Consolidated Financial Highlights (Unaudited)



Three months ended



Year ended



December 31


September 30


December 31



December 31


December 31



2019


2019


2018



2019


2018

PERFORMANCE RATIOS












Net interest margin (a)


2.78

%


2.84

%


2.96

%



2.89

%


2.97

%

Noninterest income to total revenue


46

%


44

%


43

%



44

%


43

%

Efficiency (b)


60

%


58

%


59

%



59

%


60

%

Return on:












Average common shareholders' equity


11.54

%


11.56

%


11.83

%



11.50

%


11.83

%

Average assets


1.33

%


1.36

%


1.40

%



1.35

%


1.41

%

BUSINESS SEGMENT NET INCOME (c)












In millions












Retail Banking


$

277



$

347



$

313




$

1,213



$

1,064


Corporate & Institutional Banking


649



645



651




2,448



2,508


Asset Management Group


91



46



42




262



202


Other, including BlackRock (d)


364



354



345




1,495



1,572


Total net income


$

1,381



$

1,392



$

1,351




$

5,418



$

5,346




(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 December 31, 2019, September 30, 2019 and December 31, 2018 were $23 million, $25 million and $28 million, respectively. The taxable equivalent adjustments to net interest income for the twelve months ended December 31, 2019 and December 31, 2018 were $103 million and $115 million, respectively.

(b) 

Calculated as noninterest expense divided by total revenue. 

(c) 

Our business information is presented based on our internal management reporting practices. Net interest income in business segment results reflect PNC's internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors. 

(d) 

Includes earnings and gains or losses related to PNC's equity investment in BlackRock and residual activities that do not meet the criteria for disclosure as a separate reportable business. We provide additional information on these activities in our Form 10-K and Form 10-Q filings with the SEC.

 

 


The PNC Financial Services Group, Inc.

Consolidated Financial Highlights (Unaudited)


December 31


September 30


December 31


2019


2019


2018

BALANCE SHEET DATA






Dollars in millions, except per share data






Assets

$

410,295



$

408,916



$

382,315


Loans (a)

$

239,843



$

237,377



$

226,245


Allowance for loan and lease losses

$

2,742



$

2,738



$

2,629


Interest-earning deposits with banks

$

23,413



$

19,036



$

10,893


Investment securities

$

86,824



$

87,883



$

82,701


Loans held for sale (a)

$

1,083



$

1,872



$

994


Equity investments (b)

$

13,734



$

13,325



$

12,894


Mortgage servicing rights

$

1,644



$

1,483



$

1,983


Goodwill

$

9,233



$

9,233



$

9,218


Other assets (a)

$

32,202



$

35,774



$

34,408


Noninterest-bearing deposits

$

72,779



$

74,077



$

73,960


Interest-bearing deposits

$

215,761



$

211,506



$

193,879


Total deposits

$

288,540



$

285,583



$

267,839


Borrowed funds (a)

$

60,263



$

61,354



$

57,419


Total shareholders' equity

$

49,314



$

49,420



$

47,728


Common shareholders' equity

$

45,321



$

45,428



$

43,742


Accumulated other comprehensive income (loss)

$

799



$

837



$

(725)


Book value per common share

$

104.59



$

103.37



$

95.72


Tangible book value per common share (Non-GAAP) (c)

$

83.30



$

82.37



$

75.42


Period end common shares outstanding (millions)

433



439



457


Loans to deposits

83

%


83

%


84

%

Common shareholders' equity to total assets

11.0

%


11.1

%


11.4

%

CLIENT ASSETS (billions)






Discretionary client assets under management

$

154



$

163



$

148


Nondiscretionary client assets under administration

143



135



124


Total client assets under administration

297



298



272


Brokerage account client assets

54



52



47


Total client assets

$

351



$

350



$

319


CAPITAL RATIOS






Basel III (d)






Common equity Tier 1

9.5

%


9.6

%


9.6

%

Tier 1 risk-based

10.7

%


10.7

%


10.8

%

Total capital risk-based (e)

12.8

%


12.7

%


13.0

%

Leverage

9.1

%


9.3

%


9.4

%

 Supplementary leverage

7.6

%


7.8

%


7.8

%

ASSET QUALITY






Nonperforming loans to total loans

.68

%


.73

%


.75

%

Nonperforming assets to total loans, OREO and foreclosed assets

.73

%


.78

%


.80

%

Nonperforming assets to total assets

.43

%


.45

%


.47

%

Net charge-offs to average loans (for the three months ended) (annualized)

.35

%


.26

%


.19

%

Allowance for loan and lease losses to total loans

1.14

%


1.15

%


1.16

%

Allowance for loan and lease losses to nonperforming loans

168

%


158

%


155

%

Accruing loans past due 90 days or more (in millions)

$

585



$

532



$

629




(a)

Amounts include assets and liabilities for which we have elected the fair value option. Our third quarter 2019 Form 10-Q included, and our 2019 Form 10-K will include, additional information regarding these Consolidated Balance Sheet line items.

(b) 

Amounts include our equity investment in BlackRock.

(c) 

See the Tangible Book Value per Common Share table on page 18 for additional information.

(d) 

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.  The ratios as of December 31, 2019 are estimated.

(e) 

The 2019 and 2018 Basel III Total risk-based capital ratios include nonqualifying trust preferred capital securities of $60 million and $80 million, respectively, 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 was in the parallel run qualification phase for the advanced approaches at December 31, 2019, PNC's regulatory risk-based capital ratios in 2019 and 2018 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.


We provide information below regarding PNC's Basel III Common equity Tier 1 capital ratios. Under the Basel III rules applicable to PNC during 2018 and 2019, significant common stock investments in unconsolidated financial institutions (for PNC, primarily BlackRock), mortgage servicing rights and deferred tax assets must be deducted from capital (net of associated deferred tax liabilities) to the extent they individually exceed 10%, or in the aggregate exceed 15%, of the institution's adjusted common equity Tier 1 capital. Also, PNC's Basel III regulatory capital during 2018 and 2019 includes 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 lll Common Equity Tier 1 Capital Ratios (a)







December 31


September 30


December 31

Dollars in millions

2019 
(estimated)


2019


2018

Common stock, related surplus and retained earnings, net of treasury stock

$

44,522



$

44,592



$

44,467


Less regulatory capital adjustments:






Goodwill and disallowed intangibles, net of deferred tax liabilities

(9,251)



(9,268)



(9,277)


Basel III total threshold deductions

(3,279)



(2,952)



(3,464)


Accumulated other comprehensive income (loss)

659



638



(610)


All other adjustments

(175)



(209)



(211)


Basel III Common equity Tier 1 capital

$

32,476



$

32,801



$

30,905


Basel III standardized approach risk-weighted assets (b)

$

340,506



$

340,912



$

320,595


Basel III advanced approaches risk-weighted assets (c)

$

317,778



$

319,960



$

282,902


Basel III Common equity Tier 1 capital ratio

9.5

%


9.6

%


9.6

%



(a)

All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented.

(b)

Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets.

(c)

Basel III advanced approaches risk-weighted assets are based on the Basel III advanced approaches rules, and include credit, market and operational risk-weighted assets. During the parallel run qualification phase, PNC has refined the data, models and internal processes used as part of the advanced approaches for determining risk-weighted assets.

Our Basel III capital ratios may be impacted by changes to the regulatory capital rules and additional regulatory guidance or analysis.

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

2019


2019


2018

Book value per common share

$

104.59



$

103.37



$

95.72


Tangible book value per common share






Common shareholders' equity

$

45,321



$

45,428



$

43,742


Goodwill and other intangible assets

(9,441)



(9,459)



(9,467)


Deferred tax liabilities on Goodwill and other intangible assets

187



191



190


Tangible common shareholders' equity

$

36,067



$

36,160



$

34,465


Period-end common shares outstanding (millions)

433



439



457


Tangible book value per common share (Non-GAAP)

$

83.30



$

82.37



$

75.42


Cautionary Statement Regarding Forward-Looking Information

We make statements in this news release and related conference call, and we may from time to time make other statements, regarding our outlook for earnings, revenues, expenses, tax rates, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting PNC and its future business and operations that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act.  Forward-looking statements are typically identified by words such as "believe," "plan," "expect," "anticipate," "see," "look," "intend," "outlook," "project," "forecast," "estimate," "goal," "will," "should" and other similar words and expressions.

Forward-looking statements are necessarily subject to numerous assumptions, risks and uncertainties, which change over time.  Future events or circumstances may change our outlook and may also affect the nature of the assumptions, risks and uncertainties to which our forward-looking statements are subject.  Forward-looking statements speak only as of the date made.  We do not assume any duty and do not undertake to update forward-looking statements.  Actual results or future events could differ, possibly materially, from those anticipated in forward-looking statements, as well as from historical performance.  As a result, we caution against placing undue reliance on any forward-looking statements.

Our forward-looking statements are subject to the following principal risks and uncertainties.

We provide greater detail regarding these as well as other factors in our 2018 Form 10-K and subsequent 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 other 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
[email protected]

INVESTORS:
Bryan Gill
(412) 768-4143
[email protected]

PNC Logo

 

SOURCE PNC Financial Services Group


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