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| 8-K - FORM 8-K - PNC FINANCIAL SERVICES GROUP, INC. | d8k.htm |
 The PNC
Financial Services Group, Inc. Barclays London Conference
May 23, 2011
Exhibit 99.1 |
 2
Cautionary Statement Regarding Forward-Looking
Information and Adjusted Information |
 3
Today’s Discussion
PNC’s powerful franchise and proven business
model are designed to deliver strong results
Delivered strong financial performance and
positioned for even greater shareholder value
Client momentum is building across our businesses
PNC Continues to Build a Great Company.
PNC Continues to Build a Great Company. |
 4
PNC’s Powerful Franchise
(1) Rankings source: SNL DataSource; Banks headquartered in U.S. Assets rank excludes
Morgan Stanley and Goldman Sachs. |
 5
PNC’s Successful Business Model
Staying core funded and disciplined in our deposit pricing
Returning to a moderate risk profile
Leveraging customer relationships and our strong brand to
grow high quality, diverse revenue streams
Focus
on
creating
positive
operating
leverage
1
while
investing
in innovation
Remaining disciplined with our capital
Executing on our strategies
(1) A period to period dollar or percentage change when revenue growth exceeds expense
growth. |
 6
A Higher Quality, Differentiated Balance Sheet
Change from:
Category (billions)
Mar. 31,
2011
Dec. 31,
2010
Dec. 31,
2008
Investment securities
$61
($3)
$18
Core commercial loans¹
62
1
(12)
Core commercial real estate¹
16
(1)
(6)
Core consumer loans¹
58
(1)
5
Distressed portfolio loans²
14
(1)
(13)
Total loans
149
(1)
(26)
Other assets
49
(1)
(24)
Total assets
$259
($5)
($32)
Transaction deposits
$135
$--
$24
Retail CDs, time, savings
47
(1)
(35)
Total deposits
182
($1)
($11)
Borrowed funds, other
46
(5)
(27)
Preferred equity
1
--
(7)
Common equity
30
1
13
Total liabilities and equity
$259
($5)
($32)
Core commercial loan growth over
year end 2010 offset by continued
distressed runoff and soft
consumer loan demand
Continued reduction and repricing
of high cost brokered and retail
CDs
Core funded –
loans to deposits
ratio of 82%
Significant reduction in borrowed
funds
Strengthened common equity
Highlights
Designed to
Deliver
Strong
Results
(1) Excludes loans assigned to the Distressed Assets Portfolio business segment. (2)
Represents loans assigned to the Distressed Assets Portfolio business segment.
|
 7
Relative Balance Sheet Strength
1Q11 loans/deposits
68%
80%
82%
84%
90%
91%
93%
94%
94%
94%
96%
99%
103%
JPM
KEY
PNC
RF
WFC
BAC
STI
CMA
USB
FITB
BBT
COF
MTB
1Q11 Tier 1 common ratio
1Q11 reserves/loans
4.34%
4.29%
4.16%
4.08%
3.84%
3.56%
3.19%
2.80%
2.80%
2.64%
2.52%
2.44%
2.17%
1.73%
JPM
PNC
BAC
COF
RF
FITB
PNC
KEY
WFC
USB
BBT
STI
CMA
MTB
10.7%
10.4%
10.3%
10.0%
9.3%
9.1%
9.0%
8.9%
8.6%
8.4%
8.2%
7.9%
6.4%
KEY
CMA
PNC
JPM
BBT
STI
FITB
WFC
BAC
COF
USB
RF
MTB
Includes purchased
impaired loan marks¹
Designed to
Deliver
Strong
Results
Peer Source: SNL DataSource and company reports. Ratios as of quarter end. (1) 1Q11
reserves/loans would be 4.29% if adjusted to include the remaining marks on purchased
impaired loans. Further information is provided in the Appendix. Others have made acquisitions and have
marks on purchased impaired loans. No adjustments have been made for those peers.
|
 8
Credit Trends Continue to Improve
$751
$486
$442
$421
$840
$614
$791
$823
$691
$533
1Q10
2Q10
3Q10
4Q10
1Q11
Accruing
loans
past
due
1,2
Provision and net charge-offs
Criticized commercial loans
30-89 Days
90 Days +
Nonperforming
loans
1,3
$2.5
$1.9
$1.4
$1.4
$1.4
$.8
$.6
$.6
$.5
$.5
1Q10
2Q10
3Q10
4Q10
1Q11
1Q10
2Q10
3Q10
4Q10
1Q11
Total nonperforming loans
$5.8
$5.1
$4.8
$4.5
$4.4
Designed to
Deliver
Strong
Results
$16.4
$18.8
$15.0
$13.7
$12.7
1Q10
2Q10
3Q10
4Q10
1Q11
Criticized Commercial loans
4
Provision
Net charge-offs
As of quarter end except net charge-offs, which are for the quarter. (1) Loans acquired
from National City that were impaired are not included as they were recorded at
estimated fair value when acquired and are currently considered performing loans due to the accretion of interest in
purchase accounting. (2) Excludes loans that are government insured/guaranteed, primarily
residential mortgages. (3) Does not include loans held for sale or foreclosed and other
assets. (4) Criticized loans are ones that we consider “special mention,” “substandard’” or “doubtful”. |
 9
(6)
(5)
(4)
(3)
(2)
(1)
0
1
2
3
4
0%
1%
2%
3%
4%
5%
6%
PNC’s Balance Sheet Is Positioned for Higher
Interest Rates
PNC Duration of Equity
(At Quarter End)
5-Yr LIBOR Swaps
(At Quarter End)
2007
2008
2009
PNC 1Q11 NII Sensitivity
Effect on NII in 1st
year from
gradual interest rate change
over following 12 months
100 bps increase
+1.1%
100 bps decrease
(0.9%)¹
Effect on NII in 2nd
year from
gradual interest rate change
over preceding 12 months
100 bps increase
+3.4%
100 bps decrease
(3.4%)¹
Q1
Q2
Q3
Q4
2010
(1) Given the inherent limitations in certain of these measurement tools and techniques,
results become less meaningful as interest rates approach zero.
Q1
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q2
Q1
2011
Designed to
Deliver
Strong
Results |
 10
Financial Performance
Strong
Earnings
1Q11
4Q10
1Q10
Net income ($
millions) $832
$820
$671
Earnings per diluted share
$1.57
$1.50
$0.66
Valuation
Drivers
1Q11
4Q10
1Q10
Tier 1 common capital ratio
10.3%
9.8%
7.9%
Book value per common share¹
$58.01
$56.29
$50.32
Operating
Leverage
1Q11
4Q10
1Q10
Revenue ($
millions) $3,631
$3,903
$3,763
Provision ($
millions) $421
$442
$751
Noninterest expense
($ millions)
$2,070
$2,340
$2,113
Performance
Measures
1Q11
4Q10
1Q10
Return on average assets
1.29%
1.23%
1.02%
Return on Tier 1 common capital¹
15.4%
15.4%
15.5%
(1)
Return
on
Tier
1
common
capital
calculated
as
annualized
net
income
divided
by
Tier
1
common
capital.
Further
information
is
provided
in
the
Appendix.
Delivered
Strong
Financial
Performance |
 11
Core
1
and Provision-Adjusted
2
Net Interest
Income Trends
(millions)
1Q10
2Q10
3Q10
4Q10
1Q11
Core NII¹
$1,939
$1,895
$1,890
$1,857
$1,895
Scheduled purchase accounting
accretion
365
376
214
211
200
Cash recoveries²
75
164
111
133
81
Total NII
$2,379
$2,435
$2,215
$2,201
$2,176
Provision
751
823
486
442
421
Provision-adjusted NII³
$1,628
$1,612
$1,729
$1,759
$1,755
Delivered
Strong
Financial
Performance
(1) Core net interest income is total net interest income, as reported, less related purchase
accounting accretion (scheduled and cash recoveries). (2) Reflects cash received in
excess of recorded investment from sales or payoffs of impaired commercial loans. (3) Provision-
adjusted net interest income is total net interest income, as reported, less provision. (4)
Net interest margin less (annualized purchase accounting accretion/average
interest-earning assets). (5) Net interest margin less (annualized provision/average interest-earnings assets).
Further information on (4) and (5) is provided in the Appendix.
|
 12
Diversified Sources of Fee Income
1Q
YoY change in
noninterest income
18%
5%
4%
3%
2%
1%
1%
-6%
-6%
-7%
-9%
-16%
-27%
COF
JPM
WFC
FITB
BBT
BAC
STI
PNC
CMA
KEY
MTB
RF
USB
Noninterest income
Mar. 31, 2011
Client expansion and
deepening relationships
Introduction of innovative
new products
Expanded distribution
Enhancing sales and
service model
Work to manage impact
of ongoing regulatory
reforms
$1.5B
Asset
management
Consumer
services
Corporate
services
Deposit
service
charges
18%
21%
13%
15%
8%
Other
1
16%
Residential
Mortgage
Peer source: SNL DataSource. Noninterest income is from continuing operations. (1) Other in
this chart includes net gains on sales of securities, net OTTI and remaining
other. Growth strategies
Equity
Mgmt/
Trading
9%
Delivered
Strong
Financial
Performance |
 13
Focus on Well-Managed Expenses
Expense management strategies
Expense management is subject to legal and regulatory contingencies. See Note 16 Legal
included in Part I, Item 1 of PNC’s 1Q11 Form 10-Q. Also refer to the economic
assumptions in the Cautionary Statement in the Appendix. YoY change in noninterest
expense -11%
-5%
-4%
-2%
-1%
1%
3%
4%
5%
8%
9%
13%
17%
KEY
FITB
RF
PNC
JPM
MTB
CMA
BBT
WFC
USB
STI
BAC
COF
Focusing on continuous improvement
–
dedicated resources
Balancing need for growth with pace
of investment
Investing in talent and innovative
products for future growth
Delivered
Strong
Financial
Performance |
 14
Delivering Strong Returns
1Q11 return on average assets
1Q11 return on Tier 1 common
capital¹
1.34%
1.29%
1.23%
1.21%
1.19%
1.06%
0.96%
0.77%
0.60%
0.43%
0.35%
2.05%
0.21%
COF
USB
PNC
WFC
MTB
KEY
JPM
FITB
CMA
BBT
STI
BAC
RF
Peer
Source:
SNL
DataSource
and
company
reports.
(1)
Return
on
Tier
1
common
capital
calculated
as
annualized
net
income
divided
by
Tier
1
common
capital.
Further
information
is
provided
in
the
Appendix.
(2)
As
of
May
9,
2011;
Annualized
dividend
yield
calculated
as
annualized
dividend
divided
by
market
price.
34.5%
21.0%
18.8%
17.7%
15.4%
12.0%
9.1%
9.1%
8.7%
6.8%
6.7%
6.2%
3.8%
COF
USB
JPM
WFC
PNC
FITB
MTB
KEY
BBT
CMA
BAC
STI
RF
2.4%
2.3%
2.2%
2.0%
1.9%
1.7%
1.1%
0.6%
0.5%
0.4%
0.3%
3.2%
0.1%
MTB
BBT
PNC
JPM
USB
FITB
WFC
CMA
RF
KEY
COF
BAC
STI
Delivered
Strong
Financial
Performance
Annualized dividend yield² |
 15
Outlook
1
–
Full Year 2011 vs. 2010
Balance Sheet
Income Statement
Commercial loan growth is expected
Continue to shift deposit mix towards transaction accounts
Core NII expected to increase by $100 million or more
Purchase accounting accretion expected to decline by as much as $700 million,
resulting in lower NII
Provision expected to decline by at least $800 million
Provision-adjusted NII and margin expected to increase
Noninterest income expected to increase in the low-to-mid single digits,
excluding the expected incremental negative impact of approximately $400
million due to overdraft and interchange regulatory limits
Noninterest expenses expected to decline, subject to legal and regulatory
contingencies²
(1) Refer to the Cautionary Statement in the Appendix. (2) See Note 22 Legal Proceedings
included in Item 8 and Risk Factors Item 1A of PNC’s 2010 Form 10-K and Note
16 Legal Proceedings in PNC’s 1Q11 Form 10-Q. Positioned
for Greater
Shareholder
Value |
 16
A Demonstrated Ability to Achieve
Greater Shareholder Value
Achieving greater shareholder value
As of quarter end. (1) Tangible book value per share calculated as book value per share less
total intangible assets per share. PNC believes that tangible book value, a
non-GAAP measure, is useful as a tool to help evaluate the amount, on a per share basis, of intangible assets
included in book value per common share. Further information is provided in the
Appendix. 4Q08
1Q11
4Q08
1Q11
Book value per share
Tangible book value per share¹ $39.44
$58.01
$13.10
$37.49
4Q08
1Q11
Stock price
$49.00
$62.99
Positioned
for Greater
Shareholder
Value |
 17
Strong Momentum –
Retail Banking
Growth in
Checking relationships
Growth in Online bill
payment active customers
Retail Banking
Mix of checking relationships
12/31/10
Goal
Free checking
Relationship checking
Recent
results
(one month
post launch)
100%
0%
Growth strategies
Expand market share and
share of wallet by
providing customers with
more choices and rewards
Focus on winning in the
payments space
Launch of integrated
deposit products
Enhance credit card
offerings
Expand branch distribution
network and channels
2Q10
3Q10
4Q10
1Q11
+10
+49
+27
+56
2Q10
3Q10
4Q10
1Q11
+44
+72
+35
+52
Building
Momentum |
  18
Strong Momentum –
Asset Management Group
Referral sales¹
+126%
$105B
1Q10 1Q11
1Q11 vs. 1Q10
Assets under management
$110B
Equity
Fixed income
Liquidity/other
+$6B
+$1B
($2B)
Growth strategies
Expanding distribution and talent in
newly acquired and high growth
markets
Leveraging cross-sell opportunities
from Retail and Corporate bank referral
network
Investing in innovation and technology
–
piloting Wealth Insight tool
Asset Management Group
Building
Momentum
(1) Referral sales are new sales to clients who were referred to AMG by Retail Banking or
Corporate and Institutional Banking. |
 19
Strong Momentum –
Corporate & Institutional Banking
Growth strategies
Continue to add new clients across the
footprint
-
Goal of 1,000 for 2011
Leverage PNC’s loan syndication
capabilities as a leader in the middle-
market
Deepening relationships by delivering
all of PNC to our clients
Focus on total relationship return
65%
59%
53%
54%
Strong Momentum –
Corporate & Institutional Banking
Building
Momentum
(1) Corporate Banking Utilization rates reflect the consolidation of Market Street Funding
Corporation beginning January 2010. |
 20
PNC’s Growth Opportunities
Building
Momentum |
 21
Summary
PNC Continues to Build a Great Company.
PNC Continues to Build a Great Company.
PNC’s powerful franchise and proven business
model are designed to deliver strong results
Delivered strong financial performance and
positioned for even greater shareholder value
Client momentum is building across our businesses |
 22
Cautionary Statement Regarding Forward-Looking
Information
Appendix |
 23
Cautionary Statement Regarding Forward-Looking
Information (continued)
Appendix |
 24
Cautionary Statement Regarding Forward-Looking
Information (continued)
Appendix |
 25
Non-GAAP to GAAP Reconcilement
Appendix |
 26
Non-GAAP to GAAP Reconcilement
Appendix |
 27
Non-GAAP to GAAP Reconcilement
Appendix |
 28
Non-GAAP to GAAP Reconcilement
Appendix |
 29
Peer Group of Banks
Appendix
The PNC Financial Services Group, Inc.
PNC
BB&T Corporation
BBT
Bank of America Corporation
BAC
Capital One Financial, Inc.
COF
Comerica Inc.
CMA
Fifth Third Bancorp
FITB
JPMorgan Chase
JPM
KeyCorp
KEY
M&T Bank
MTB
Regions Financial Corporation
RF
SunTrust Banks, Inc.
STI
U.S. Bancorp
USB
Wells Fargo & Co.
WFC
Ticker |