Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - PNC FINANCIAL SERVICES GROUP, INC. | d837706d8k.htm |
| EX-99.1 - EX-99.1 - PNC FINANCIAL SERVICES GROUP, INC. | d837706dex991.htm |
 The PNC
Financial Services Group, Inc. Fourth Quarter and Full Year 2014
Earnings Conference Call
January 16, 2015
Exhibit 99.2 |
 2
Cautionary Statement Regarding Forward-Looking
Information and Adjusted Information
Our
earnings
conference
call
presentation
includes
“snapshot”
information
about
PNC
used
by
way
of
illustration.
It
is
not
intended
as
a
full
business
or
financial
review
and
should
be
viewed
in
the
context
of
all
of
the
information
made
available
by
PNC
in
its
SEC
filings.
The
presentation
also
contains
forward-looking
statements
regarding
our
outlook
for
earnings,
revenues,
expenses,
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.
Forward-looking
statements
are
necessarily
subject
to
numerous
assumptions,
risks
and
uncertainties,
which
change
over
time.
The
forward-looking
statements
in
this
presentation
are
qualified
by
the
factors
affecting
forward-looking
statements
identified
in
the
more
detailed
Cautionary
Statement
included
in
the
Appendix,
which
is
included
in
the
version
of
the
presentation
materials
posted
on
our
corporate
website
at
www.pnc.com/investorevents,
and
in
our
SEC
filings.
We
provide
greater
detail
regarding
these
as
well
as
other
factors
in
our
2013
Form
10-K
and
our
2014
Form
10-Qs,
including
in
the
Risk
Factors
and
Risk
Management
sections
and
in
the
Legal
Proceedings
and
Commitments
and
Guarantees
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
in
this
presentation
or
in
our
SEC
filings,
accessible
on
the
SEC’s
website
at
www.sec.gov
and
on
PNC’s
corporate
website
at
www.pnc.com/secfilings.
We
have
included
web
addresses
in
this
presentation
as
inactive
textual
references
only.
Information
on
those
websites
is
not
part
of
this
presentation.
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
in
this
presentation
speak
only
as
of
the
date
of
this
presentation.
We
do
not
assume
any
duty
and
do
not
undertake
to
update
those
statements.
Actual
results
or
future
events
could
differ,
possibly
materially,
from
those
anticipated
in
forward-looking
statements,
as
well
as
from
historical
performance.
In
this
presentation,
we
may
sometimes
refer
to
adjusted
results
to
help
illustrate
the
impact
of
certain
types
of
items.
This
information
supplements
our
results
as
reported
in
accordance
with
GAAP
and
should
not
be
viewed
in
isolation
from,
or
as
a
substitute
for,
our
GAAP
results.
We
believe
that
this
additional
information
and
the
reconciliations
we
provide
may
be
useful
to
investors,
analysts,
regulators
and
others
to
help
evaluate
the
impact
of
these
respective
items
on
our
operations.
We
may
also
provide
information
on
the
components
of
total
net
interest
income
(purchase
accounting
accretion
and
the
remainder,
which
we
refer
to
as
core
net
interest
income),
on
the
impact
of
purchase
accounting
accretion
on
net
interest
margin
(core
net
interest
margin
being
net
interest
margin
less
(annualized
purchase
accounting
accretion
divided
by
average
interest-earning
assets)),
on
pretax
pre-provision
earnings
(total
revenue
less
noninterest
expense),
and
on
tangible
book
value
per
common
share
(calculated
based
on
tangible
common
shareholders’
equity
(common
shareholders’
equity
less
goodwill
and
other
intangible
assets,
other
than
servicing
rights,
net
of
deferred
tax
liabilities
on
such
intangible
assets)
divided
by
period-end
common
shares
outstanding).
Where
applicable,
we
provide
GAAP
reconciliations
for
such
additional
information,
including
in
the
slides,
the
Appendix
and/or
other
slides
and
materials
on
our
corporate
website
at
www.pnc.com/investorevents
and
in
our
SEC
filings.
In
certain
discussions,
we
may
also
provide
information
on
yields
and
margins
for
all
interest-earning
assets
calculated
using
net
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.
We
believe
this
adjustment
may
be
useful
when
comparing
yields
and
margins
for
all
earning
assets.
We
may
also
use
annualized,
pro
forma,
estimated
or
third
party
numbers
for
illustrative
or
comparative
purposes
only.
These
may
not
reflect
actual
results.
This
presentation
may
also
include
discussion
of
other
non-GAAP
financial
measures,
which,
to
the
extent
not
so
qualified
therein
or
in
the
Appendix,
is
qualified
by
GAAP
reconciliation
information
available
on
our
corporate
website
at
www.pnc.com
under
“About
Us–Investor
Relations,”
which
may
include
materials
from
investor
presentations
or
in
our
annual,
quarterly
or
current
reports. |
 3
Successful 2014 Achievements
Grew loans, deposits, fee income and capital
Continued progress on strategic priorities
–
Fee income grew 4% vs FY13
(1)
Controlled expenses: noninterest expense decreased 2% vs FY13
Effectively managed overall credit quality
Strong Basel III capital position
–
Pro forma fully phased-in Basel III common equity Tier 1 capital ratio of 10.0%
(2)
–
Capital actions
FY14 financial
summary
Net income
Diluted EPS from
net income
Return on average
assets
$4.2 billion
$7.30
1.28%
(1)
See
Reconcilement
section
of
the
Appendix.
(2)
Estimated
as
of
December
31,
2014.
For
4Q14,
the
resulting
fully
phased-in
Basel
III
common
equity
Tier
1
capital
ratio
was
calculated
based
on
standardized
approach
RWAs
and
rules.
See
Estimated
Transitional
Basel
III
and
Pro
forma
Fully
Phased-In
Basel
III
Common
Equity
Tier
1
Capital
Ratios
and
related
information
in
the
Appendix
for
further
details.
(3)
Repurchased
under
our
2014
capital
plan
authorization
of
up
to
$1.5
billion
of
common
stock
for
four
quarter
period
2Q14
through
1Q15.
Ability
to
purchase
full
amount
is
subject
to
factors
such
as
market
and
general
economic
conditions,
economic
capital
and
regulatory
capital
conditions,
alternative
uses
of
capital,
regulatory
and
contractual
limitations,
issuances
related
to
employee
benefit
plans
and
the
potential
impact
on
credit
ratings.
Repurchased
12.9
million
common
shares
for
$1.1
billion
(3)
Increased
common
stock
dividend
by
9%
to
$1.88 |
 4
Higher Commercial Loans, Deposits and Liquidity
Average loans increased $3.1
billion
–
Total Commercial grew $3.3
billion
–
Total Consumer declined $.2
billion
Average deposits grew $5.6 billion
Spot loan balances grew 2%
Spot deposits at Federal Reserve
Bank increased $5.5 billion
Highlights
% change from:
Category (billions)
4Q14
3Q14
4Q13
Investment securities
$54.2
0%
(5%)
Total commercial lending
$126.4
3%
9%
Total consumer lending
76.5
0%
(2%)
Total loans
$202.9
2%
4%
Interest-earning deposits with
banks
$27.7
25%
165%
Total assets
$339.6
3%
8%
Total deposits
$229.4
2%
6%
Total equity
$46.0
0%
7%
Average Balances
Linked quarter:
Prior Year Quarter:
Average loans grew 4%
Increased average interest-
earning deposits with banks by
165%
Average deposits increased 6% |
 5
Period-end common shares
outstanding down 5 million
Repurchased 6.1 million common
shares for approximately $500
million during the quarter
(8)
Capital remained strong
Basel III standardized approach
risk-weighted assets increased
$3.7 billion
Strong Capital Position
(1),
(2)
See
Notes
A
and
B
respectively,
in
the
Appendix
for
additional
details.
(3)
December
31,
2014
ratios
estimated.
(4)
See
Estimated
Transitional
Basel
III
and
Pro
forma
Fully
Phased-In
Basel
III
Common
Equity
Tier
1
Capital
Ratios
and
related
information
in
the
Appendix
for
further
details.
(5)
Calculated
using
the
regulatory
capital
methodology
applicable
to
PNC
during
2014.
See
Note
C
in
the
Appendix
for
further
details.
(6)
Calculated
on
a
pro
forma
basis
without
the
benefit
of
the
Basel
III
phase-in
provisions.
For
4Q14,
3Q14
and
4Q13,
the
resulting
pro
forma
fully
phased-in
Basel
III
common
equity
Tier
1
ratios
were
calculated
based
on
standardized
approach
RWAs
and
rules.
(7)
See
Appendix
for
additional
information
related
to
TBV.
(8)
See
Note
3
on
Slide
3.
Highlights
Risk-weighted assets:
Dec. 31,
2014
Sept. 30,
2014
Dec. 31,
2013
Estimated Basel I risk-weighted assets
calculated in accordance with transition
rules for 2014
(1)
$281,379
$277,348
N/A
Estimated
Basel
III
standardized
approach
risk-weighted assets
(2)
$299,360
$295,665
$291,977
Transitional
Basel
III
common
equity
Tier
1
(5)
11.0%
11.1%
N/A
Pro forma fully phased-In Basel III
common
equity
Tier
1
(6)
10.0%
10.1%
9.4%
Linked quarter:
Prior Year Quarter:
Pro forma fully phased-in Basel
III common equity Tier I capital
ratio increased 60 bps
TBV grew 10%
(7)
Tangible book value (TBV):
Dec. 31,
2014
Sept. 30,
2014
Dec. 31,
2013
Tangible
book
value
per
common
share
(7)
$59.88
$59.24
$54.57
Book value per common share
$77.61
$76.71
$72.07
Capital ratios:
(3,4)
(millions) |
 6
Revenue grew 3% primarily driven
by noninterest income growth
Higher expenses included $128
million
of
specific
elevated
items
(6)
Stable credit costs
Net income grew 2%
Delivered Consistent Profitability and Solid Returns
Highlights
(1)
Amounts
for
the
2013
period
have
been
updated
to
reflect
the
first
quarter
2014
adoption
of
Accounting
Standards
Update
(ASU)
2014-01
related
to
investments
in
low
income
housing
tax
credits.
(2),(3),(4)
See
Notes
D,
E
and
F,
respectively,
in
the
Appendix
for
additional
details.
(5)
See
Reconcilement
section
of
the
Appendix.
(6)
See
Slide
9.
Linked quarter:
$Change from
$Change from
(millions)
4Q14
3Q14
FY14
FY13
Net interest income
$2,097
($7)
$8,525
($622)
Noninterest income
1,850
113
6,850
(15)
Total revenue
$3,947
$106
$15,375
($637)
Noninterest
expense
(1)
$2,539
$182
$9,488
($193)
Pretax pre-provision
earnings
(2,5)
$1,408
($76)
$5,887
($444)
Provision
52
(3)
273
(370)
Pretax
earnings
(3)
$1,356
($73)
$5,614
($74)
Net income
$1,057
$19
$4,207
($5)
Net income attributable
to diluted common shares
$981
22
$3,918
$2
4Q14
3Q14
FY14
FY13
Returns
ROAA
(4)
1.23%
1.25%
1.28%
1.38%
ROACE
(4)
9.67%
9.52%
9.91%
10.85%
Full Year 2014:
Revenue decreased 4% as a result
of lower NII
Noninterest expense declined 2%
Net income relatively stable |
 7
Average interest-earning assets
increased 9%
NII decreased 7% due to decreases
in Core NII and PAA
PAA lower as scheduled accretion
declined
NIM down due to lower loan yields
and liquidity-related actions
Average interest-earning assets
grew 3%
Core NII
(3)
increased 1% as a result
of average commercial loan growth
and higher prepayments which
impacted securities yields
NII declined modestly
–
Lower PAA
Commercial Loan Growth Drove Higher Linked Quarter
Core NII
(1)
Core
net
interest
income
(Core
NII)
is
total
net
interest
income
(NII),
as
reported,
less
related
purchase
accounting
accretion
(scheduled
and
excess
cash
recoveries)
(PAA).
See
also
Note
G
in
the
Appendix.
(2)
Core
NIM
is
net
interest
margin
(NIM)
less
(annualized
PAA/average
interest-earning
assets).
See
Reconcilement
section
of
the
Appendix.
(3)
See
Reconcilement
section
of
the
Appendix.
Core NII
(1)
$1,971
$14
$7,942
($362)
Plus purchase
accounting accretion
(PAA)
126
(21)
583
(260)
Total NII
$2,097
($7)
$8,525
($622)
4Q14
3Q14
FY14
FY13
Margins
Net interest margin
(NIM)
2.89%
2.98%
3.08%
3.57%
Core NIM
(2)
2.72%
2.78%
2.88%
3.25%
Highlights
Linked quarter:
$Change
from
$Change
from
(billions)
4Q14
3Q14
FY14
FY13
Average interest-earning
assets
$293.9
$9.0
$283.3
$22.7
(millions)
Full Year 2014: |
 8
Noninterest income growth of
7% included higher gains on
asset dispositions including a $94
million gain on the sale of PNC’s
Washington, D.C. building
Asset management revenue
declined entirely due to lower
earnings from PNC’s equity
investment in BlackRock
Noninterest income reflected
higher quality revenues due to
fee income growth
Fee
income
increased
4%
(2)
driven by growth in most of our
fee businesses
–
Corporate services grew 17%
–
Asset management up 13%
–
Service charges on deposits
increased 11%
Fee income excluding residential
mortgage grew 10%
(2)
Diverse Businesses Drove Stable Linked Quarter Fee
Income
Highlights
(1)
Asset
management
includes
the
Asset
Management
Group
(AMG)
and
BlackRock.
(2)
See
Reconcilement
section
of
the
Appendix.
(3)
Total
other
noninterest
income
includes
the
categories
other
income
(including
gains
on
asset
dispositions),
net
gains
(losses)
on
sales
of
securities
and
net-other-than-temporary
impairments.
Linked quarter:
$Change
from
$Change
from
(millions)
4Q14
3Q14
FY14
FY13
Asset
management
(1)
$376
($35)
$1,513
$171
Consumer services
321
1
1,254
1
Corporate services
397
23
1,415
205
Residential mortgage
135
(5)
618
(253)
Service charges on
deposits
180
1
662
65
Fee
income
(2)
$1,409
($15)
$5,462
$189
Total other noninterest
income
(3)
$441
$128
$1,388
($204)
Total noninterest income
$1,850
$113
$6,850
($15)
4Q14
3Q14
FY14
FY13
Noninterest income to total
revenue
47%
45%
45%
43%
Full Year 2014: |
 9
Disciplined Expense Management While Investing for
Growth
Noninterest expense grew 8%
Elevated fourth quarter expenses
included $128 million of:
–
PNC Foundation contribution
–
Higher legal and residential
mortgage compliance costs
–
Increased fixed asset write-offs
Highlights
Linked quarter:
(1)
See
Note
H
in
the
Appendix.
(2)
CIP
refers
to
PNC’s
Continuous
Improvement
Program.
(3)
As
required
on
adoption
of
Accounting
Standards
Update
2014-01,
2013
periods
have
been
updated
for
adoption
of
ASU
2014-01.
This
includes
a
reduction
in
noninterest
expense
for
2013
periods.
The
efficiency
ratio
for
the
2013
period
listed
above
has
been
updated
to
reflect
the
adoption
of
this
ASU.
$
Change
from
$
Change
from
(millions)
4Q14
3Q14
FY14
FY13
Personnel
$1,170
($19)
$4,611
($132)
Occupancy
216
16
833
-
Equipment
234
14
859
96
Marketing
67
1
253
7
Other
852
170
2,932
(164)
Total noninterest expense
$2,539
$182
$9,488
($193)
4Q14
3Q14
FY14
FY13
Efficiency
ratio
(1,3)
64%
61%
62%
60%
Full Year 2014:
Noninterest expense decline of 2%
reflected disciplined expense
management and achievement of
CIP
(2)
savings initiatives |
 10
Overall credit quality
improved
4Q14
3Q14
4Q13
3Q14
4Q13
Nonperforming
loans
(1,2)
$2,510
$2,612
$3,088
(4%)
(19%)
Total
Past
Due
(1,3)
$1,946
$2,006
$2,490
(3%)
(22%)
Net charge-offs
$118
$82
$189
44%
(38%)
Provision
$52
$55
$113
(5%)
(54%)
4Q14
3Q14
4Q13
Loan loss
reserves to total
loans
(4)
1.63%
1.70%
1.84%
Relatively Stable Credit Quality
Highlights
(millions)
Overall credit quality
remained relatively stable
–
Overall delinquencies
declined
–
Net charge-offs
increased and were
.23% of average
loans
(5)
primarily due to
higher recoveries in
3Q14
–
Provision for credit
losses stable
Maintained appropriate
reserves
% change from:
As
of
quarter
end
except
net
charge-offs
and
provision,
which
are
for
the
quarter.
(1)
Does
not
include
purchased
impaired
loans
or
loans
held
for
sale.
(2)
Does
not
include
foreclosed
and
other
assets.
Excludes
certain
government
insured
or
guaranteed
loans
and
loans
accounted
for
under
the
fair
value
option.
(3)
Includes
loans
that
are
government
guaranteed/insured,
primarily
residential
mortgages.
Past
due
loans
in
this
category
totaled
$1.4
billion
in
4Q14.
(4)
See
Note
I
in
the
Appendix
for
additional
details.
(5)
Net
charge-offs
to
average
loans
for
4Q14
(annualized).
Linked quarter:
Full Year 2014: |
 11
Outlook
(1)
–
1Q15 vs. 4Q14
(1)
Refer
to
Cautionary
Statement
in
the
Appendix,
including
economic
and
other
assumptions.
Does
not
take
into
account
impact
of
potential
legal
and
regulatory
contingencies.
(2)
Fee
income
refers
to
noninterest
income
in
the
following
categories:
asset
management,
consumer
services,
corporate
services,
residential
mortgage,
and
service
charges
on
deposits. |
 12
Cautionary Statement Regarding Forward-Looking
Information
This
presentation
includes
“snapshot”
information
about
PNC
used
by
way
of
illustration
and
is
not
intended
as
a
full
business
or
financial
review.
It
should
not
be
viewed
in
isolation
but
rather
in
the
context
of
all
of
the
information
made
available
by
PNC
in
its
SEC
filings.
We
also
make
statements
in
this
presentation,
and
we
may
from
time
to
time
make
other
statements,
regarding
our
outlook
for
earnings,
revenues,
expenses,
capital
and
liquidity
levels
and
ratios,
asset
levels,
asset
quality,
financial
position,
and
other
matters
regarding
or
affecting
PNC
and
its
future
business
and
operations
that
are
forward-looking
statements
within
the
meaning
of
the
Private
Securities
Litigation
Reform
Act.
Forward-looking
statements
are
typically
identified
by
words
such
as
“believe,”
“plan,”
“expect,”
“anticipate,”
“see,”
“look,”
“intend,”
“outlook,”
“project,”
“forecast,”
“estimate,”
“goal,”
“will,”
“should”
and
other
similar
words
and
expressions.
Forward-looking
statements
are
subject
to
numerous
assumptions,
risks
and
uncertainties,
which
change
over
time.
Forward-looking
statements
speak
only
as
of
the
date
made.
We
do
not
assume
any
duty
and
do
not
undertake
to
update
forward-looking
statements.
Actual
results
or
future
events
could
differ,
possibly
materially,
from
those
anticipated
in
forward-looking
statements,
as
well
as
from
historical
performance.
Our
forward-looking
statements
are
subject
to
the
following
principal
risks
and
uncertainties.
Our
businesses,
financial
results
and
balance
sheet
values
are
affected
by
business
and
economic
conditions,
including
the
following:
–
Changes
in
interest
rates
and
valuations
in
debt,
equity
and
other
financial
markets.
–
Disruptions
in
the
liquidity
and
other
functioning
of
U.S.
and
global
financial
markets.
–
The
impact
on
financial
markets
and
the
economy
of
any
changes
in
the
credit
ratings
of
U.S.
Treasury
obligations
and
other
U.S.
government-backed
debt,
as
well
as
issues
surrounding
the
levels
of
U.S.
and
European
government
debt
and
concerns
regarding
the
creditworthiness
of
certain
sovereign
governments,
supranationals
and
financial
institutions
in
Europe.
–
Actions
by
the
Federal
Reserve,
U.S.
Treasury
and
other
government
agencies,
including
those
that
impact
money
supply
and
market
interest
rates.
–
Changes
in
customers’,
suppliers’
and
other
counterparties’
performance
and
creditworthiness.
–
Slowing
or
reversal
of
the
current
U.S.
economic
expansion.
–
Continued
residual
effects
of
recessionary
conditions
and
uneven
spread
of
positive
impacts
of
recovery
on
the
economy
and
our
counterparties,
including
adverse
impacts
on
levels
of
unemployment,
loan
utilization
rates,
delinquencies,
defaults
and
counterparty
ability
to
meet
credit
and
other
obligations.
–
Changes
in
customer
preferences
and
behavior,
whether
due
to
changing
business
and
economic
conditions,
legislative
and
regulatory
initiatives,
or
other
factors.
•
Our
forward-looking
financial
statements
are
subject
to
the
risk
that
economic
and
financial
market
conditions
will
be
substantially
different
than
we
are
currently
expecting.
These
statements
are
based
on
our
current
view
that
the
U.S.
economic
expansion
will
speed
up
to
an
above
trend
growth
rate
near
3.3
percent
in
2015,
boosted
by
lower
oil/energy
prices,
and
that
short-term
interest
rates
and
bond
yields
will
rise
only
slowly
in
the
latter
half
of
2015.
These
forward-looking
statements
also
do
not,
unless
otherwise
indicated,
take
into
account
the
impact
of
potential
legal
and
regulatory
contingencies. |
 13
Cautionary Statement Regarding Forward-Looking
Information (continued)
PNC’s
ability
to
take
certain
capital
actions,
including
paying
dividends
and
any
plans
to
increase
common
stock
dividends,
repurchase
common
stock
under
current
or
future
programs,
or
issue
or
redeem
preferred
stock
or
other
regulatory
capital
instruments,
is
subject
to
the
review
of
such
proposed
actions
by
the
Federal
Reserve
as
part
of
PNC’s
comprehensive
capital
plan
for
the
applicable
period
in
connection
with
the
regulators’
Comprehensive
Capital
Analysis
and
Review
(CCAR)
process
and
to
the
acceptance
of
such
capital
plan
and
non-objection
to
such
capital
actions
by
the
Federal
Reserve.
PNC’s
regulatory
capital
ratios
in
the
future
will
depend
on,
among
other
things,
the
company’s
financial
performance,
the
scope
and
terms
of
final
capital
regulations
then
in
effect
(particularly
those
implementing
the
Basel
Capital
Accords),
and
management
actions
affecting
the
composition
of
PNC’s
balance
sheet.
In
addition,
PNC’s
ability
to
determine,
evaluate
and
forecast
regulatory
capital
ratios,
and
to
take
actions
(such
as
capital
distributions)
based
on
actual
or
forecasted
capital
ratios,
will
be
dependent
at
least
in
part
on
the
development,
validation
and
regulatory
approval
of
related
models.
Legal
and
regulatory
developments
could
have
an
impact
on
our
ability
to
operate
our
businesses,
financial
condition,
results
of
operations,
competitive
position,
reputation,
or
pursuit
of
attractive
acquisition
opportunities.
Reputational
impacts
could
affect
matters
such
as
business
generation
and
retention,
liquidity,
funding,
and
ability
to
attract
and
retain
management.
These
developments
could
include:
–
Changes
resulting
from
legislative
and
regulatory
reforms,
including
major
reform
of
the
regulatory
oversight
structure
of
the
financial
services
industry
and
changes
to
laws
and
regulations
involving
tax,
pension,
bankruptcy,
consumer
protection,
and
other
industry
aspects,
and
changes
in
accounting
policies
and
principles.
We
will
be
impacted
by
extensive
reforms
provided
for
in
the
Dodd-Frank
Wall
Street
Reform
and
Consumer
Protection
Act
(the
“Dodd-Frank
Act”)
and
otherwise
growing
out
of
the
most
recent
financial
crisis,
the
precise
nature,
extent
and
timing
of
which,
and
their
impact
on
us,
remains
uncertain.
–
Changes
to
regulations
governing
bank
capital
and
liquidity
standards,
including
due
to
the
Dodd-Frank
Act
and
to
Basel-related
initiatives.
–
Unfavorable
resolution
of
legal
proceedings
or
other
claims
and
regulatory
and
other
governmental
investigations
or
other
inquiries.
In
addition
to
matters
relating
to
PNC’s
current
and
historical
business
and
activities,
such
matters
may
include
proceedings,
claims,
investigations,
or
inquiries
relating
to
pre-acquisition
business
and
activities
of
acquired
companies,
such
as
National
City.
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. |
 14
Cautionary Statement Regarding Forward-Looking
Information (continued)
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
third-party
insurance,
derivatives,
and
capital
management
techniques,
and
to
meet
evolving
regulatory
capital
and
liquidity
standards.
In
particular,
our
results
currently
depend
on
our
ability
to
manage
elevated
levels
of
impaired
assets.
Business
and
operating
results
also
include
impacts
relating
to
our
equity
interest
in
BlackRock,
Inc.
and
rely
to
a
significant
extent
on
information
provided
to
us
by
BlackRock.
Risks
and
uncertainties
that
could
affect
BlackRock
are
discussed
in
more
detail
by
BlackRock
in
its
SEC
filings.
We
grow
our
business
in
part
by
acquiring
from
time
to
time
other
financial
services
companies,
financial
services
assets
and
related
deposits
and
other
liabilities.
Acquisition
risks
and
uncertainties
include
those
presented
by
the
nature
of
the
business
acquired,
including
in
some
cases
those
associated
with
our
entry
into
new
businesses
or
new
geographic
or
other
markets
and
risks
resulting
from
our
inexperience
in
those
new
areas,
as
well
as
risks
and
uncertainties
related
to
the
acquisition
transactions
themselves,
regulatory
issues,
and
the
integration
of
the
acquired
businesses
into
PNC
after
closing.
Competition
can
have
an
impact
on
customer
acquisition,
growth
and
retention
and
on
credit
spreads
and
product
pricing,
which
can
affect
market
share,
deposits
and
revenues.
Industry
restructuring
in
the
current
environment
could
also
impact
our
business
and
financial
performance
through
changes
in
counterparty
creditworthiness
and
performance
and
in
the
competitive
and
regulatory
landscape.
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,
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
2013
Form
10-K
and
our
2014
Form
10-Qs,
including
in
the
Risk
Factors
and
Risk
Management
sections
and
the
Legal
Proceedings
and
Commitments
and
Guarantees
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
presentation
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.
Any
annualized,
pro
forma,
estimated,
third
party
or
consensus
numbers
in
this
presentation
are
used
for
illustrative
or
comparative
purposes
only
and
may
not
reflect
actual
results.
Any
consensus
earnings
estimates
are
calculated
based
on
the
earnings
projections
made
by
analysts
who
cover
that
company.
The
analysts’
opinions,
estimates
or
forecasts
(and
therefore
the
consensus
earnings
estimates)
are
theirs
alone,
are
not
those
of
PNC
or
its
management,
and
may
not
reflect
PNC’s
or
other
company’s
actual
or
anticipated
results. |
 15
Notes
Explanatory Notes
(A) Includes credit and market risk-weighted assets.
(B) Basel III standardized approach risk-weighted assets were estimated based on the Basel
III standardized approach rules and include credit and market risk-weighted
assets. (I) The allowance for loan and lease losses includes impairment reserves
attributable to purchased impaired loans. (G) PNC believes that core net interest
income, a non-GAAP financial measure, is useful in evaluating the performance of our
interest-based activities.
(C) Transitional Basel III common equity Tier 1 capital ratio is common equity Tier 1 capital
(using the definitions of, and deductions from, capital under Basel III, as such
definitions and deductions are phased-in for 2014) divided by period-end Basel I risk-
weighted assets with 2014 transition adjustments as defined by the Basel III rules.
(E) Pretax earnings is income before income taxes and noncontrolling interests.
(H) Efficiency ratio calculated as noninterest expense divided by total revenue.
(D) Pretax pre-provision earnings is defined as total revenue less noninterest expense. We
believe that pretax pre-provision earnings, a non-GAAP financial measure, is
useful as a tool to help evaluate the ability to provide for credit costs through
operations.
(F) ROAA is Return on Average Assets and ROACE is Return on Average Common Shareholders'
Equity. |
 16
Estimated
Transitional
Basel
III
and
Pro
forma
Fully
Phased-
In
Basel
III
Common
Equity
Tier
1
Capital
Ratios
As a result of the staggered effective dates of the final U.S. capital rules issued in July
2013, as well as the fact that PNC remains in the parallel run qualification phase for
the advanced approaches, PNC’s regulatory risk-based capital ratios in 2014
are based on the definitions of, and deductions from, capital under Basel III (as such
definitions and deductions are phased-in for 2014) and Basel I risk-weighted assets (but
subject to certain adjustments as defined by the Basel III rules). We refer to the capital
ratios calculated using these Basel III phased-in provisions and Basel I
risk-weighted assets as the Transitional Basel III ratios. These capital ratios
became effective for PNC on January 1, 2014. We provide information on the next slide
regarding PNC’s estimated Transitional Basel III common equity Tier 1 ratio and
PNC’s estimated pro forma fully phased-in Basel III common equity Tier 1
ratio. We previously referred to the Basel III common equity Tier 1 ratio as the Basel
III Tier 1 common ratio. In addition, on the next slide we provide information regarding
PNC’s Basel I Tier 1 common capital ratio during 2013, which was applicable to PNC
through 2013 under the U.S. regulatory capital rules.
Common equity Tier 1 capital as defined under the Basel III rules adopted by the U.S. banking
agencies differs materially from Basel I Tier 1 common capital. For example, under
Basel III, significant common stock investments in unconsolidated financial
institutions, mortgage servicing rights and deferred tax assets must be deducted from
capital to the extent they individually exceed 10%, or in the aggregate exceed 15%, of
the institution’s adjusted common equity Tier 1 capital. Also, Basel I regulatory
capital excludes accumulated other comprehensive income related to securities
currently and previously held as available for sale, as well as pension and other
postretirement plans, whereas under Basel III these items are a component of PNC's
capital. |
 17
Estimated
Transitional
Basel
III
and
Pro
forma
Fully
Phased-
In
Basel
III
Common
Equity
Tier
1
Capital
Ratios
Transitional Basel III
Pro forma Fully Phased-In Basel III
Dollars in millions
December 31, 2014
September 30, 2014
December 31, 2014
September 30, 2014
December 31, 2013(a)
Common stock, related surplus, and retained earnings, net of treasury stock
$40,102
$39,808
$40,102
$39,808
$38,031
Less regulatory capital adjustments:
Goodwill and disallowed intangibles, net of deferred tax liabilities
(8,939)
(8,914)
(9,276)
(9,234)
(9,321)
Basel III total threshold deductions
(217)
(214)
(1,085)
(1,067)
(1,386)
Accumulated other comprehensive income (b)
(9)
100
153
501
196
All other adjustments (c)
(15)
(28)
(77)
(93)
(64)
Estimated Basel III Common equity Tier 1 capital
30,922
$
30,752
$
29,817
$
29,915
$
27,456
$
Estimated Basel I risk-weighted assets calculated in accordance with transition rules
for 2014 (d)
281,379
$
277,348
$
N/A
N/A
N/A
Estimated Basel III standardized approach risk-weighted assets (e)
N/A
N/A
299,360
$
295,665
$
291,977
$
Estimated Basel III advanced approaches risk-weighted assets (f)
N/A
N/A
286,450
$
289,405
$
290,080
$
Estimated Basel III Common equity Tier 1 capital ratio
11.0%
11.1%
10.0%
10.1%
9.4%
Risk-weight and associated rules utilized
Basel I (with 2014
transition
adjustments)
Basel I (with 2014
transition
adjustments)
Standardized
Standardized
Standardized
(a) Amounts have not been updated to reflect the first quarter 2014 adoption of ASU 2014-01
related to investments in low income housing tax credits. (b) Represents net adjustments
related to accumulated other comprehensive income for securities currently and previously held as available for sale, as well as
pension and other postretirement plans.
(c) Includes adjustments as required based on whether the standardized approach or advanced
approaches is utilized. (d) Includes credit and market risk-weighted assets.
(e) Basel III standardized approach risk-weighted assets were estimated based on the Basel
III standardized approach rules and include credit and market risk-weighted assets.
(f) Basel III advanced approaches risk-weighted assets were estimated based on the Basel
III advanced approaches rules, and include credit, market and operational risk-weighted assets.
2013 Basel I Tier 1 Common Capital Ratios (a) (b)
Dollars in millions
Dec. 31, 2013
Basel I Tier 1 common capital
$28,484
Basel I risk-weighted assets
272,169
Basel I Tier 1 common capital ratio
10.5%
(a) Effective January 1, 2014, the Basel I Tier 1 common capital ratio no longer applies to PNC
(except for stress testing purposes). Our 2013 Form 10-K included additional
information regarding our Basel I capital ratios. PNC utilizes the pro forma fully
phased-in Basel III capital ratios to assess its capital position (without the benefit of phase-ins), including comparison to similar estimates made by other financial
institutions. Our Basel III capital ratios and estimates may be impacted by additional
regulatory guidance or analysis, and in the case of those ratios calculated using the advanced approaches, the
ongoing evolution, validation and regulatory approval of PNC’s models integral to the
calculation of advanced approaches risk-weighted assets. (b) Amounts have not been
updated to reflect the first quarter 2014 adoption of ASU 2014-01 related to investments in low income housing tax credits. |
 18
Tangible Book Value per Common Share
%Change
Tangible Book Value per Common Share Ratio
12/31/14 vs.
9/30/14
12/31/14 vs.
12/31/13
Dollars in millions, except per share data
Dec. 31, 2014
Sept. 30, 2014
Dec. 31, 2013
Book value per common share (a)
77.61
$
76.71
$
72.07
$
1%
8%
Tangible book value per common share
Common shareholders' equity (a)
40,605
$
40,536
$
38,392
$
Goodwill and Other Intangible Assets (b)
(9,595)
(9,559)
(9,654)
Deferred tax liabilities on Goodwill and Other Intangible Assets (b)
320
325
333
Tangible common shareholders' equity
31,330
$
31,302
$
29,071
$
Period-end common shares outstanding (in millions)
523
528
533
Tangible book value per common share (Non-GAAP)
59.88
$
59.24
$
54.57
$
1%
10%
Tangible book value per common share is a non-GAAP financial measure and is calculated
based on tangible common shareholders’ equity divided by period-end common
shares outstanding. We believe this non-GAAP financial 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.
(a) Amounts for the 2013 period have been updated to reflect the first quarter 2014 adoption
of Accounting Standards Update (ASU) 2014-01 related to investments in low income
housing tax credits. (b) Excludes the impact from mortgage servicing rights of $1.4
billion at December 31, 2014, $1.5 billion at September 30, 2014 and $1.6 billion at December 31, 2013. |
 19
Non-GAAP to GAAP Reconcilement
$ in millions
Dec. 31, 2014
Sept. 30, 2014
Dec. 31, 2014
Dec. 31, 2013
Net interest margin, as reported
2.89%
2.98%
3.08%
3.57%
Purchase accounting accretion (1)
$126
$147
$583
$843
Purchase accounting accretion, if annualized
$500
$583
$583
$843
Avg. interest earning assets
$293,905
$284,951
$283,305
$260,645
Annualized purchase accounting accretion/Avg. interest-earning assets
0.17%
0.20%
0.20%
0.32%
Core net interest margin (2)
2.72%
2.78%
2.88%
3.25%
For the three months ended
For the year ended
(1) Purchase accounting accretion is scheduled purchase accounting accretion plus excess cash
recoveries. (2) PNC believes that core net interest margin, a non-GAAP financial
measure, is useful as a tool to help evaluate the impact of purchase accounting
accretion on net interest margin. The adjustment represents annualized purchase accounting accretion divided by average interest-
earning assets.
$ in millions
Dec. 31, 2014
Sept. 30, 2014
% Change
Dec. 31, 2014
Dec. 31, 2013
% Change
Net Interest Income
Core net interest income (a)
$1,971
$1,957
1%
$7,942
$8,304
-4%
Total purchase accounting accretion
Scheduled accretion net of contractual interest
94
116
-19%
456
728
-37%
Excess cash recoveries
32
31
3%
127
115
10%
Total purchase accounting accretion
126
147
-14%
583
843
-31%
Total net interest income
$2,097
$2,104
0%
$8,525
$9,147
-7%
For the three months ended
(a) We believe that core net interest income, a non-GAAP financial measure, is useful in
evaluating the performance of our interest-based activities. For the year
ended |
 20
Non-GAAP to GAAP Reconcilement
For the three months ended
$ in millions
Dec. 31, 2014
Sept. 30, 2014
% change
Dec. 31, 2014
Dec. 31, 2013
% Change
Net interest income
$2,097
$2,104
0%
$8,525
$9,147
-7%
Noninterest income
$1,850
$1,737
7%
$6,850
$6,865
0%
Total revenue
$3,947
$3,841
3%
$15,375
$16,012
-4%
Noninterest expense (1)
($2,539)
($2,357)
8%
($9,488)
($9,681)
-2%
Pretax pre-provision earnings (2)
$1,408
$1,484
-5%
$5,887
$6,331
-7%
Net income (1)
$1,057
$1,038
2%
$4,207
$4,212
0%
(1) Amounts for 2013 period have been updated to reflect the first quarter 2014 adoption of
Accounting Standards Update (ASU) 2014-1 related to investments in low income
housing tax credits. (2) PNC believes that pretax, pre-provision earnings, a
non-GAAP financial measure, is useful as a tool to help evaluate the ability to
provide for credit costs through operations. For
the year ended
For the three months ended
$ in millions
Dec. 31, 2014
Sept. 30, 2014
% change
Dec. 31, 2014
Dec. 31, 2013
% change
Asset management
$376
$411
$1,513
$1,342
Consumer services
$321
$320
$1,254
$1,253
Corporate services
$397
$374
$1,415
$1,210
Residential mortgage
$135
$140
$618
$871
Service charges on deposits
$180
$179
$662
$597
Total fee income
$1,409
$1,424
-1%
$5,462
$5,273
4%
Residential mortgage
$135
$140
$618
$871
$1,274
$1,284
-1%
$4,844
$4,402
10%
Net gains on sales of securities
$0
$0
$4
$99
Net other-than-temporary impairments
($7)
($1)
($11)
($16)
Other
$448
$314
$1,395
$1,509
Total noninterest income, as reported
$1,850
$1,737
7%
$6,850
$6,865
0%
For the year ended
Fee income, adjusted for residential mortgage |