Attached files
| file | filename |
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| 8-K - FORM 8-K - PNC FINANCIAL SERVICES GROUP, INC. | d903223d8k.htm |
| EX-99.1 - EX-99.1 - PNC FINANCIAL SERVICES GROUP, INC. | d903223dex991.htm |
 The PNC
Financial Services Group, Inc. First Quarter 2015
Earnings Conference Call
April 15, 2015
Exhibit 99.2 |
 2
Cautionary Statement Regarding Forward-Looking
Information and Adjusted Information
Our earnings conference call presentation 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 and on its corporate website. The
presentation
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, and in our SEC filings. We provide greater detail regarding these as well as other
factors in our 2014 Form 10-K 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.
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 include non-GAAP financial information.
Non-GAAP financial information includes metrics such as pre-tax provision
earnings, tangible book value, and taxable equivalent net interest income, as well as adjusted results and certain
information used to review components of reported information. When we do so, we provide GAAP
reconciliations for such information. Such reconciliations may be found in our
presentation, in these slides, including the Appendix, in other materials on our corporate website, and in
our SEC filings. 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 information and the related reconciliations may be useful to investors, analysts,
regulators
and
others
to
help
understand
and
evaluate
our
financial
results.
We
may
also
use
annualized,
pro
forma,
estimated
or
third
party
numbers for illustrative or comparative purposes only. These may
not reflect actual results.
References
to
our
corporate
website
are
to
www.pnc.com
under
“About
Us–Investor
Relations.”
Our
SEC
filings
are
available
both
on
our
corporate website and on the SEC’s website at www.sec.gov. We include web addresses here
as inactive textual references only. Information on these websites is not part of this
presentation. |
 3
1Q15 Highlights
1Q15 financial
summary
Net income
Diluted EPS from
net income
Return on average
assets
$1.0 billion
$1.75
1.17%
(1)
See
Reconcilement
section
of
the
Appendix.
(2)
Estimated
as
of
March
31,
2015.
For
1Q15,
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
slides
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.
(4)
Through
2Q16,
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.
Solid first quarter
–
Grew average loans, deposits and securities
–
Revenue impacted by seasonal trends
–
Well-managed expenses: declined 7% linked quarter
–
Credit quality improved modestly
Progress on strategic priorities
–
Fee income grew 7% vs 1Q14
(1)
Strong capital position
–
Pro forma fully phased-in Basel III common equity Tier 1 capital ratio of 9.9%
(2)
–
Capital actions
Increased quarterly common stock dividend by 6% to $0.51 for 2Q15
Repurchased 4.4 million common shares for $0.4 billion
in 1Q15
(3)
Plan to repurchase up to $2.875 billion of common stock over the
five
quarter period starting in 2Q15
(4) |
 4
Higher Commercial Loans, Deposits and Liquidity
Investment securities increased
$3.0 billion due to higher
reinvestment activity
Total loans increased $2.3 billion
–
Total Commercial grew $2.9
billion
–
Total Consumer declined $0.6
billion
Interest–earning deposits with
banks increased $2.7 billion
Total deposits grew $3.7 billion
Highlights (Avg. Balances)
Category (billions)
1Q15
4Q14
1Q14
Investment securities
$57.2
5%
(2%)
Total commercial lending
$129.3
2%
9%
Total consumer lending
$75.9
(1%)
(3%)
Total loans
$205.2
1%
4%
Interest-earning deposits with
banks
$30.4
10%
150%
Total assets
$348.1
2%
9%
Total deposits
$233.1
2%
7%
Total equity
$46.0
0%
4%
Average Balances
Linked Quarter:
Prior Year Quarter:
Total loans grew $8.6 billion
Non-strategic loans declined
$1.7 billion impacting both
Commercial and Consumer
lending
Interest-earning deposits with
banks grew $18.2 billion
Total deposits increased $14.7
billion
% change from: |
 5
Common shares outstanding down
3 million
Repurchased 4.4 million common
shares for approximately $400
million during the quarter
Fully phased-in Basel III
standardized RWAs increased $5.7
billion
Strong Capital Position
(1)
See
Note
A
in
the
Appendix
for
additional
details.
(2)
March
31,
2015
ratio
estimated.
(3)
See
Estimated
Transitional
Basel
III
and
Pro
forma
Fully
Phased-In
Basel
III
Common
Equity
Tier
1
Capital
Ratios
slides
and
related
information
in
the
Appendix
for
further
details.
(4)
Calculated
on
a
pro
forma
basis
without
the
benefit
of
the
Basel
III
phase-in
provisions.
For
1Q15,
4Q14
and
1Q14,
the
pro
forma
fully
phased-in
Basel
III
common
equity
Tier
1
ratios
were
calculated
based
on
standardized
approach
RWAs
and
rules.
(5)
See
Appendix
for
additional
information
related
to
tangible
book
value
per
common
share.
Highlights
Risk-weighted assets (RWAs):
Mar. 31,
2015
Dec. 31,
2014
Mar. 31,
2014
Estimated fully phased-in Basel III
standardized approach RWAs
(1)
$304,464
$298,786
$293,310
Pro forma fully phased-In Basel III
common equity Tier 1
(4)
9.9%
10.0%
9.7%
Linked Quarter:
Prior Year Quarter:
Pro forma fully phased-in Basel
III common equity Tier I capital
ratio increased 20 bps
Tangible book value per
common share grew 9%
(5)
Mar. 31,
2015
Dec. 31,
2014
Mar. 31,
2014
Book value per common share
$78.99
$77.61
$73.73
Tangible book value per common share
(5)
$61.21
$59.88
$56.33
Common shares outstanding (millions)
520
523
534
Capital ratio:
(2,3)
(millions) |
 6
Revenue declined primarily due to
higher gains on asset dispositions in
4Q14 and seasonality
Noninterest expense decrease was
driven by specific elevated expenses
in 4Q14 and continued expense
management
Provision for credit losses stable
Results As Expected
Highlights
(1) (2),(3) See Notes B, C and D, respectively, in the Appendix for additional details. (4)
See Reconcilement section of the Appendix. Linked Quarter:
(millions)
1Q15
4Q14
1Q14
Net interest income
$2,072
(1%)
(6%)
Noninterest income
1,659
(10%)
5%
Total revenue
3,731
(5%)
(1%)
Noninterest expense
2,349
(7%)
4%
Pretax pre-provision
earnings
(1,4)
1,382
(2%)
(9%)
Provision
54
4%
(43%)
Pretax earnings
(2)
$1,328
(2%)
(6%)
Net income
$1,004
(5%)
(5%)
Net income attributable to
diluted common shares
$926
(6%)
(6%)
Prior Year Quarter:
Revenue decreased as a result of
lower NII partially offset by strong
noninterest income growth
Noninterest expense increase
reflects investments in technology
and business infrastructure and
higher benefits costs
% change from:
1Q15
4Q14
1Q14
Returns
ROAA
(3)
1.17%
1.23%
1.35%
ROACE
(3)
9.32%
9.67%
10.36% |
 7
Average interest-earning assets
increased 9%
NII decreased 6% as Core NII was
primarily impacted by lower loan
yields and liquidity-related actions
PAA lower as scheduled accretion
declined
NIM down mostly due to:
Average interest-earning assets
grew 3%
Core NII
(3)
and NII were relatively
stable and impacted approximately
$30 million by two fewer days in the
quarter
Stable 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 E in the Appendix. (2) Core NIM is net interest margin (NIM) less (annualized PAA/average
interest-earning assets). (3) See Reconcilement section of the Appendix.
Core NII
(1)
$1,944
($27)
($88)
Plus purchase accounting
accretion (PAA)
128
2
(35)
Total NII
$2,072
(25)
(123)
1Q15
4Q14
1Q14
Margins
Net interest margin (NIM)
2.82%
2.89%
3.26%
Core NIM
(2,3)
2.65%
2.72%
3.02%
Highlights
Linked Quarter:
1Q15
4Q14
1Q14
Average interest-earning
assets (billions)
$301.7
$7.8
$25.9
(millions)
Prior Year Quarter:
$ change from:
–
Balance sheet management
activities; increased liquidity
–
Lower loan yields
–
Lower PAA |
 8
Fee income declined 4%
(2)
due to
seasonality
Residential mortgage grew 21%
and benefited from higher net
hedging gains on RMSR
Asset management stable
Other income declined largely
due to higher gains on asset
dispositions in 4Q14
Noninterest income grew 5%
Fee income increased 7%
(2)
Strong growth across all fee
income categories
Revenue Reflects Seasonal Factors
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
net
gains
(losses)
on
sales
of
securities,
net-other-than-temporary
impairments
and
other
income
(including
gains
on
asset
dispositions).
Linked Quarter:
(millions)
1Q15
4Q14
1Q14
Asset management
(1)
$376
$-
$12
Consumer services
311
(10)
21
Corporate services
344
(53)
43
Residential mortgage
164
29
3
Service charges on deposits
153
(27)
6
Fee income
(2)
1,348
(61)
85
Total other noninterest
income
(3)
311
(130)
(8)
Total noninterest income
$1,659
($191)
$77
1Q15
4Q14
1Q14
Noninterest income to total
revenue
44%
47%
42%
Prior Year Quarter:
$ change from: |
 9
Solid progress towards 2015 CIP
(2)
target of $400 million
Disciplined Expense Management While Investing for
Growth
Noninterest expense decline of 7%
reflects specific elevated expenses
which occurred in 4Q14 as well as
continued disciplined expense
management
Personnel expense declined due to
lower incentive compensation and
was partially offset by higher
benefits costs
Highlights
Linked Quarter:
(1) See Note F in the Appendix. (2) CIP refers to PNC’s Continuous Improvement Program.
(millions)
1Q15
4Q14
1Q14
Personnel
$1,157
($13)
$77
Occupancy
216
-
(2)
Equipment
222
(12)
21
Marketing
62
(5)
10
Other
692
(160)
(21)
Total noninterest expense
$2,349
($190)
$85
1Q15
4Q14
1Q14
Efficiency ratio
(1)
63%
64%
60%
Prior Year Quarter:
Noninterest expense increased 4%
mostly due to investments in
technology and business
infrastructure and higher benefits
costs
$ change from: |
 10
Overall credit quality
improved
1Q15
4Q14
1Q14
4Q14
1Q14
Nonperforming
loans
(1,2)
$2,405
$2,510
$2,947
(4%)
(18%)
Total Past Due
(1,3)
$1,750
$1,946
$2,226
(10%)
(21%)
Commercial Lending
$1
($1)
$31
NM
(97%)
Consumer Lending
102
119
155
(14%)
(34%)
Total Net Charge-offs
$103
$118
$186
(13%)
(45%)
Provision
$54
$52
$94
4%
(43%)
1Q15
4Q14
1Q14
Loan loss reserves to
total loans
(4)
1.61%
1.63%
1.78%
Credit Quality Improved Modestly
Highlights
(millions)
Overall credit quality
improved modestly
–
Overall delinquencies
declined
–
Net charge-offs
decreased and were
.20% of average
loans
(5)
–
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
$1.2
billion
in
1Q15.
(4)
See
Note
G
in
the
Appendix
for
additional
details.
(5)
Net
charge-offs
to
average
loans
for
1Q15
(annualized).
Linked Quarter:
Prior Year Quarter: |
 11
Outlook
(1)
–
2Q15 vs. 1Q15
(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
3.2
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 2014 Form 10-K,
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
that
report,
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. |
 15
Notes
Explanatory Notes
(A) 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. (G) The allowance for loan and lease losses includes impairment reserves
attributable to purchased impaired loans. (E) PNC believes that core net interest
income, a non-GAAP financial measure, is useful in evaluating the performance of our
interest-based activities.
(C) Pretax earnings is income before income taxes and noncontrolling interests.
(F) Efficiency ratio calculated as noninterest expense divided by total revenue.
(B) 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.
(D) 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. Basel III regulatory capital
rules (Basel III rules), 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 2015 will be calculated using the standardized approach for
determining risk-weighted assets, and the definitions of, and deductions from, regulatory
capital under the Basel III rules (as such definitions and deductions are
phased-in for 2015). We refer to the capital ratios calculated using the
phased-in Basel III provisions in effect for 2015 and the standardized approach risk-
weighted assets as the 2015 Transitional Basel III ratios. Under the standardized approach
for determining credit risk-weighted assets, exposures are generally assigned a
predefined risk weight. Exposures to high volatility commercial real estate, past due
exposures, equity exposures and securitization exposures are generally subject to
higher risk weights than other types of exposures. We provide information on the next
slide regarding PNC’s estimated 2015 and 2014 Transitional Basel III common equity
Tier 1 ratios and PNC’s estimated pro forma fully phased-in Basel III common
equity Tier 1 ratio. Under the Basel III rules adopted by the U.S. banking agencies,
significant common stock investments in unconsolidated financial institutions,
mortgage servicing rights and deferred tax assets must be deducted from capital
(subject to a phase-in schedule) to the extent they individually exceed 10%, or in
the aggregate exceed 15%, of the institution's adjusted common equity Tier 1 capital.
Also, Basel III regulatory capital includes (subject to a phase-in schedule)
accumulated other comprehensive income related to securities currently and previously held as
available for sale, as well as pension and other postretirement plans.
PNC's regulatory risk-based capital ratios in 2014 were based on the definitions of, and
deductions from, regulatory capital under the Basel III rules (as such definitions and
deductions were 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
2014 capital ratios calculated using these phased-in Basel III provisions and
Basel I risk-weighted assets as the 2014 Transitional Basel III ratios. |
 17
Estimated Transitional Basel III and Pro forma Fully Phased-
In Basel III Common Equity Tier 1 Capital Ratios
2015 Transitional Basel III
2014 Transitional Basel III
Pro forma Fully Phased-In Basel III
Dollars in millions
Mar. 31, 2015
Dec. 31, 2014
Mar. 31, 2014
Mar. 31, 2015
Dec. 31, 2014
Mar. 31, 2014
Common stock, related surplus, and retained earnings, net of treasury stock
$40,374
$40,103
$38,722
$40,374
$40,103
$38,722
Less regulatory capital adjustments:
Goodwill and disallowed intangibles, net of deferred tax liabilities
(9,013)
(8,939)
(8,932)
(9,251)
(9,276)
(9,291)
Basel III total threshold deductions
(418)
(212)
(214)
(1,046)
(1,081)
(1,186)
Accumulated other comprehensive income (a)
115
40
82
288
201
410
All other adjustments
(107)
(63)
(16)
(150)
(121)
(106)
Estimated Basel III Common equity Tier 1 capital
30,951
$
30,929
$
29,642
$
30,215
$
29,826
$
28,549
$
Estimated Basel I risk-weighted assets calculated in accordance with
transition rules (b)
N/A
284,018
$
273,826
$
N/A
N/A
N/A
Estimated Basel III standardized approach risk-weighted assets (c)
296,764
$
N/A
N/A
304,464
$
298,786
$
293,310
$
Estimated Basel III advanced approaches risk-weighted assets (d)
N/A
N/A
N/A
286,954
$
285,870
$
289,441
$
Estimated Basel III Common equity Tier 1 capital ratio
10.4%
10.9%
10.8%
9.9%
10.0%
9.7%
Risk-weight and associated rules utilized
Standardized (with 2015
transition adjustments)
Basel I (with 2014
transition
adjustments)
Basel I (with
2014 transition
adjustments)
Standardized
Standardized
Standardized
(a) 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. (b) Includes credit and market risk-weighted assets.
(c) 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.
(d) 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.
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. |
 18
Tangible Book Value per Common Share
% Change
Tangible Book Value per Common Share Ratio
3/31/15 vs.
12/31/14
3/31/15 vs.
3/31/14
Dollars in millions, except per share data
Mar. 31, 2015
Dec. 31, 2014
Mar. 31, 2014
Book value per common share
78.99
$
77.61
$
73.73
$
2%
7%
Tangible book value per common share
Common shareholders' equity
41,077
$
40,605
$
39,378
$
Goodwill and Other Intangible Assets (a)
(9,566)
(9,595)
(9,621)
Deferred tax liabilities on Goodwill and Other Intangible Assets
317
320
331
Tangible common shareholders' equity
31,828
$
31,330
$
30,088
$
Period-end common shares outstanding (in millions)
520
523
534
Tangible book value per common share (Non-GAAP)
61.21
$
59.88
$
56.33
$
2%
9%
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.
(a) Excludes the impact from mortgage servicing rights of $1.3 billion at March 31, 2015, $1.4
billion at December 31, 2014, and $1.6 billion at March
31, 2014. |
 19
Non-GAAP to GAAP Reconcilement
For the three months ended
$ in millions
Mar. 31, 2015
Dec. 31, 2014
% Change
Mar. 31, 2014
% Change
Asset management
$376
$376
0%
$364
3%
Consumer services
$311
$321
-3%
$290
7%
Corporate services
$344
$397
-13%
$301
14%
Residential mortgage
$164
$135
21%
$161
2%
Service charges on deposits
$153
$180
-15%
$147
4%
Total fee income
$1,348
$1,409
-4%
$1,263
7%
Net gains (losses) on sales of securities
$42
$0
$10
Net other-than-temporary impairments
($1)
($7)
($2)
Other
$270
$448
$311
Total noninterest income, as reported
$1,659
$1,850
-10%
$1,582
5%
For the three months ended
$ in millions
Mar. 31, 2015
Dec. 31, 2014
% Change
Mar. 31, 2014
% Change
Net interest income
$2,072
$2,097
-1%
$2,195
-6%
Noninterest income
$1,659
$1,850
-10%
$1,582
5%
Total revenue
$3,731
$3,947
-5%
$3,777
-1%
Noninterest expense
($2,349)
($2,539)
-7%
($2,264)
4%
Pretax pre-provision earnings (1)
$1,382
$1,408
-2%
$1,513
-9%
Net income
$1,004
$1,057
-5%
$1,060
-5%
(1) 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. |
 20
Non-GAAP to GAAP Reconcilement
For the three months ended
$ in millions
Mar. 31, 2015
Mar. 31, 2014
% change
Asset management
$376
$364
Consumer services
$311
$290
Corporate services
$344
$301
Residential mortgage
$164
$161
Service charges on deposits
$153
$147
Total fee income
$1,348
$1,263
Net gains (losses) on sales of securities
$42
$10
Net other-than-temporary impairments
($1)
($2)
Other
$270
$311
Total noninterest income, as reported
$1,659
$1,582
5%
Corporate services
$344
$301
14%
Less commercial facility fees in corporate services
($32)
$0
as a result of reclassification (1)
$312
$301
4%
facility fees reclassification
Corporate services, adjusted for commercial
(1) Beginning in 2Q14, certain commercial facility fees were classified from net interest
income to noninterest income. |
 21
Non-GAAP to GAAP Reconcilement
$ in millions
Mar. 31,
2015
Dec. 31,
2014
Sept. 30,
2014
Jun. 30,
2014
Mar. 31,
2014
Net interest margin, as reported
2.82%
2.89%
2.98%
3.12%
3.26%
Purchase accounting accretion (1)
$128
$126
$147
$147
$163
Purchase accounting accretion, if annualized
$519
$500
$583
$590
$661
Avg. interest earning assets
$301,673
$293,905
$284,951
$278,369
$275,778
Annualized purchase accounting accretion/Avg. interest-earning assets
0.17%
0.17%
0.20%
0.20%
0.24%
Core net interest margin (2)
2.65%
2.72%
2.78%
2.92%
3.02%
For the three months 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.
For the three months ended
$ in millions
Mar. 31, 2015
Dec. 31, 2014
% Change
Mar. 31, 2014
% Change
Net Interest Income
Core net interest income (a)
$1,944
$1,971
-1%
$2,032
-4%
Total purchase accounting accretion
Scheduled accretion net of contractual interest
95
94
1%
134
-29%
Excess cash recoveries
33
32
3%
29
14%
Total purchase accounting accretion
128
126
2%
163
-21%
Total net interest income
$2,072
$2,097
-1%
$2,195
-6%
(a) We believe that core net interest income, a non-GAAP financial measure, is useful in
evaluating the performance of our interest- based activities.
|