Attached files
 The PNC
Financial Services Group, Inc. Fourth Quarter and Full Year 2009 Earnings January 21, 2010 Exhibit 99.2 |
 2 Cautionary Statement Regarding Forward-Looking Information and Adjusted Information This 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 or expectations relating to PNC’s future
business, operations, financial condition, financial performance, capital and liquidity
levels, and asset quality. 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. We provide greater detail regarding some of
these factors in our 2008 Form 10-K and 2009 Form 10-Qs, including in the Risk
Factors and Risk Management sections of those reports, and in our other SEC filings (accessible on the SEC’s website at www.sec.gov and on or through our corporate website at
www.pnc.com/secfilings). We have included web addresses here and elsewhere in
this presentation as inactive textual references only. Information on these websites is not part of this document. Future events or circumstances may change our outlook or expectations and may also affect the
nature of the assumptions, risks and uncertainties to which our forward-looking
statements are subject. The 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. In this presentation, we will sometimes refer to adjusted results to help illustrate the impact of
certain types of items, including our fourth quarter 2009 gain related to
BlackRock’s acquisition of Barclays Global Investors (“BGI”), our fourth quarter 2008 conforming provision for credit losses for National City, and other integration costs in the 2009 and 2008 periods.
This information supplements our results as reported in accordance with GAAP and should
not be viewed in isolation from, or 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 as they evaluate the impact of these respective items on our
results for the periods presented due to the extent to which the items are not indicative of our ongoing operations. 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. 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 PNC–Investor Relations.” |
 3 2009 Strategic Highlights Grew our businesses and delivered strong results Significant progress in rebalancing risk profile Acquisition benefits exceeding expectations Regulatory changes to date have been manageable Extraordinary challenges Severe recessionary economic conditions Significant franchise expansion Uncertain regulatory environment Exceptional performance PNC’s Business Model Is Designed to Deliver Strong Results. |
 4 2009 Financial Highlights Execution of the PNC business model delivered exceptional results Balance sheet is well-positioned with an improved risk profile, more liquidity and more capital Strong revenue performance of $17 billion from diversified sources Disciplined expense management - increased integration cost savings goal to $1.5 billion annualized Pretax pre-provision earnings 1 exceeded credit costs by $3.3 billion Substantial loan loss reserves and marks on impaired loans $4.36 $2,403 $16,988 YTD09 $3,871 $3,987 $4,048 $5,082 Revenue $2.17 $1,107 4Q09 $1.03 $530 1Q09 $1.00 $559 3Q09 $207 Net income $.14 2Q09 Earnings per diluted common share In millions, except per share (1) Total revenue less noninterest expense. Revenue includes a $1.1 billion gain related to
BlackRock’s acquisition of BGI on December 1, 2009. Further
information is provided in the Appendix. |
 5 PNC’s Framework for Success Execute on and deliver the PNC business model Capitalize on integration opportunities Emphasize continuous improvement culture Leverage credit that meets our risk/return criteria Focus on cross selling PNC’s deep product offerings Focus “front door” on risk-adjusted returns Leverage “back door” credit liquidation capabilities Maximize credit portfolio value Reposition deposit gathering strategies Action Plans 0.62% 1 >$1.2 billion 43% 1 2.4% 84% December 31, 2009 1.30%+ $1.5 billion >50% 0.3%-0.5% 80%-90% Target Return on average assets (year ended) Key Metrics Loan to deposit ratio (as of) Provision to average loans (year ended) Noninterest income/total revenue (year ended) Integration cost savings (4Q09, annualized) Executing our strategies PNC Business Model Staying core funded Returning to a moderate risk profile Growing high quality, diverse revenue streams Creating positive operating leverage (1) Excludes the impact of the $1.08 billion pretax, $687 million after-tax, gain related to
the BLK/BGI transaction. Including the gain, noninterest income to total revenue
percentage for the year was 47% and the return on average assets for the year was .87%. Further information is provided in the Appendix. |
 6 A Higher Quality, Differentiated Balance Sheet $271 29 16 $42 $184 11 51 $122 $271 56 161 $54 Sept. 30, 2009 $291 25 21 $52 $193 24 58 $111 $291 73 175 $43 Dec. 31, 2008 ($21) $270 Total liabilities and equity ($13) $39 Borrowed funds (12) 12 Other time/savings ($6) $187 Total deposits (7) 14 Other (9) 49 Retail CDs $15 $126 Transaction deposits 5 30 Shareholders’ equity (16) 57 Other assets (18) 157 Total loans ($21) $270 Total assets $56 Dec. 31, 2009 $13 YoY change Investment securities Category (billions) PNC Made Substantial Progress in Transitioning the Balance PNC Made Substantial Progress in Transitioning the Balance Sheet to Reflect Our Business Model. Sheet to Reflect Our Business Model. Loans/Assets 58% Investment securities/Assets 21% Loans/Deposits 84% Dec. 31, 2009 Key Ratios |
 7 Pretax Pre-Provision Earnings Substantially Exceed Credit Costs PNC Is Recognized for the Ability to Create Positive Operating PNC Is Recognized for the Ability to Create Positive Operating Leverage to Help Offset Credit Costs. Leverage to Help Offset Credit Costs. $17.0 $9.7 $7.3 $3.9 Full year 2009 Revenue Expense Pretax pre-provision earnings Provision 4Q09 vs. 3Q09 highlights Strong 4Q09 revenue performance of $5.1 billion - 6% increase in net interest income, net interest margin up 29 basis points - $1.1 billion gain related to BLK/BGI - Lower residential mortgage revenue - Other client-based fee income relatively stable Continued disciplined expense management - Expenses flat from 3Q09 despite $66 million increase in integration costs - Increased quarterly acquisition cost savings by $100 million to $300 million Provision of $1.05 billion increased loan loss reserve coverage (1) Total revenue less noninterest expense. Revenue includes a $1.1 billion gain related to
BlackRock’s acquisition of BGI on December 1, 2009. Further
information is provided in the Appendix. 1 |
 8 Credit Quality Trends 78% 40% 23% 11% Change from prior quarter 6.2% $10.0 4.9 $5.1 2.09% $835 $5,671 1,595 $4,076 $884 $2,388 4Q09 $4.3 $4.6 $4.8 Allowance for loan and lease losses Allowance and marks on impaired loans (billions, except %) 8.3 7.5 6.6 Marks on impaired loans $12.6 $12.1 $11.4 Total allowance and marks on impaired loans 7.0% 7.0% 6.8% Total allowance and marks on impaired loans/ outstanding loan balances Net charge-offs (millions, except %) Nonperforming loans (millions, except %) Accruing loans past due 1 (millions) $2,136 $2,195 $2,380 30 – 89 days $501 $1,043 $875 90 days or more 1.01% 1.89% 1.59% NCOs/average loans 2 $431 $795 $650 Total net charge-offs $2,960 $4,156 $5,126 Total nonperforming loans 930 $3,226 2Q09 413 1,260 Consumer lending $2,547 $3,866 Commercial lending 1Q09 3Q09 (1) Excludes the impact of the $1.08 billion pretax, $687 million after-tax, gain related to
the BLK/BGI transaction. Including the gain, noninterest income to total revenue
percentage for the year was 47% and the return on average assets for the year was .87%. Further information is provided in the Appendix. |
 9 Strengthening Capital Ratios Throughout 2009 10.0% 1Q09 2Q09 4.9% 5.3% 1Q09 2Q09 Tier 1 common ratio Tier 1 risk-based ratio 5.5% 10.5% 10.9% 3Q09 3Q09 Ratios and common equity as of quarter end. (1) Estimated. (2) Marks on impaired loans refer to
fair value marks related to loans acquired from National City that were impaired per
FASB ASC 310-30 (AICPA SOP 03-3). Marks as of December 31, 2009 were approximately $4.9 billion. PNC capital ratios already reflect impact of marks on impaired loans – as of December 31, 2008, marks were approximately $9.2 billion Increased common equity by $4.5 billion from 4Q08 to 4Q09 Highlights PNC Is Focused on Disciplined Uses of Capital During Uncertain PNC Is Focused on Disciplined Uses of Capital During Uncertain Times. Times. 4.8% 9.7% 4Q08 4Q08 6.0% 1 4Q09 11.5% 1 4Q09 2 |
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Summary and Expectations Growth in relationship-based deposits offset by additional higher cost time deposit run-off Continued weak loan demand and low utilization rates driven by economic conditions Net interest income and net interest margin consistent with 3Q09 annualized Relatively stable noninterest income apart from the BLK/BGI gain and MSR hedging gains Reduced expenses driven by integration cost saves Credit cost improvement as the economy recovers 2009 performance PNC’s execution of its business model delivered strong results in 2009 PNC’s achievements during 2009 leave us well positioned to take advantage of the economic recovery 2010 expectations PNC Continues to Build a Great Company. PNC Continues to Build a Great Company. |
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Cautionary Statement Regarding Forward-Looking Information Appendix 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 or expectations for earnings, revenues, expenses, capital levels,
liquidity levels, asset quality and/or other matters regarding or affecting PNC 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,” “intend,” “outlook,” “estimate,” “forecast,” “will,” “project” 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 they are made. We do not assume any duty
and do not undertake to update our forward- looking statements. Actual results
or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements, and future results could differ materially from our historical performance. Our forward-looking statements are subject to the following principal risks and
uncertainties. We provide greater detail regarding some of these factors in our
2008 Form 10-K and 2009 Form 10-Qs, including in the Risk Factors and Risk Management sections of those reports, and in our other SEC filings. Our forward-looking statements may also be subject to other risks and
uncertainties, including those that we may discuss elsewhere in this presentation or in
our filings with the SEC, accessible on the SEC’s website at www.sec.gov and on or through 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.
•Our businesses and financial results are affected by business and economic conditions, both
generally and specifically in the principal markets in which we operate. In particular,
our businesses and financial results may be impacted by: o
Changes in interest rates and valuations in the debt, equity and other financial
markets. o Disruptions in the liquidity and other functioning of financial markets, including such disruptions
in the markets for real estate and other assets commonly securing financial products.
o Actions by the Federal Reserve and other government agencies, including those that impact money
supply and market interest rates. o Changes in our customers’, suppliers’ and other counterparties’ performance in
general and their creditworthiness in particular. o
Changes in levels of unemployment. o Changes in customer preferences and behavior, whether as a result of changing business and economic
conditions or other factors. •A continuation of recent turbulence in significant
portions of the US and global financial markets, particularly if it worsens, could impact our performance, both directly by affecting our revenues and the value of our assets and liabilities
and indirectly by affecting our counterparties and the economy generally. •Our business and financial performance could be impacted as the financial industry
restructures in the current environment, both by changes in the creditworthiness and
performance of our counterparties and by changes in the competitive and regulatory landscape. •Given current economic and financial market conditions, our forward-looking financial
statements are subject to the risk that these conditions will be substantially
different than we are currently expecting. These statements are based on our current expectations that interest rates will remain low in the first half of 2010 but will move upward in the second half of the year and our view that
the modest economic recovery that began last year will extend through 2010.
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Cautionary Statement Regarding Forward-Looking Information (continued) Appendix •Legal and regulatory developments could have an impact on our ability to operate our
businesses or our financial condition or results of operations or our competitive
position or reputation. Reputational impacts, in turn, could affect matters such as business generation and retention, our ability to attract and retain management, liquidity, and funding. These legal and
regulatory developments could include: o Changes resulting from legislative and regulatory responses to the current economic and financial
industry environment, including current and future conditions or restrictions imposed
as a result of our participation in the TARP Capital Purchase Program. o Other legislative and regulatory reforms, including
broad-based restructuring of financial industry regulation as well as changes to laws and regulations involving tax, pension, bankruptcy, consumer protection, and other aspects of the
financial institution industry. o Increased litigation risk from recent regulatory and other governmental developments. o Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental
inquiries. o The results of the regulatory examination and supervision process, including our failure to satisfy
the requirements of agreements with governmental agencies. o Changes in accounting policies and principles. •Our issuance of securities to the US Department of the Treasury may limit our ability to
return capital to our shareholders and is dilutive to our common shares. If we
are unable previously to redeem the shares, the dividend rate increases substantially after five years. •Our business and operating results are affected by our ability to identify and effectively
manage risks inherent in our businesses, including, where appropriate, through the
effective use of third-party insurance, derivatives, and capital management techniques, and by our ability to meet evolving regulatory capital standards. •The adequacy of our intellectual property protection, and the extent of any costs associated
with obtaining rights in intellectual property claimed by others, can impact our
business and operating results. •Our ability to anticipate and respond to
technological changes can have an impact on our ability to respond to customer needs and to meet competitive demands. •Our ability to implement our business initiatives and strategies could affect our financial
performance over the next several years. •Competition can have an impact on
customer acquisition, growth and retention, as well as on our credit spreads and product pricing, which can affect market share, deposits and revenues. •Our business and operating results can also be affected by widespread natural disasters,
terrorist activities or international hostilities, either as a result of the impact on
the economy and capital and other financial markets generally or on us or on our customers, suppliers or other counterparties specifically. •Also, risks and uncertainties that could affect the results anticipated in
forward-looking statements or from historical performance relating to our equity
interest in BlackRock, Inc. are discussed in more detail in BlackRock’s filings with the SEC, including in the Risk Factors sections of BlackRock’s reports. BlackRock’s SEC filings are accessible on the SEC’s website and
on or through BlackRock’s website at www.blackrock.com. This material is
referenced for informational purposes only and should not be deemed to constitute a part of this document. In addition, our recent acquisition of National City Corporation (“National City”)
presents us with a number of risks and uncertainties related both to the acquisition
itself and to the integration of the acquired businesses into PNC. These risks and uncertainties include the following: •The anticipated benefits of the transaction, including anticipated cost savings and strategic
gains, may be significantly harder or take longer to achieve than expected or may not
be achieved in their entirety as a result of unexpected factors or events. |
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Cautionary Statement Regarding Forward-Looking Information (continued) Appendix Our ability to achieve anticipated results from this transaction is dependent on the state
going forward of the economic and financial markets, which have been under significant
stress recently. Specifically, we may incur more credit losses from National City’s loan portfolio than expected. Other issues related to achieving anticipated financial results include the possibility that
deposit attrition or attrition in key client, partner and other relationships may be
greater than expected. Legal proceedings or other claims made and governmental
investigations currently pending against National City, as well as others that may be filed, made or commenced relating to National City’s business and activities before the
acquisition, could adversely impact our financial results. Our ability to
achieve anticipated results is also dependent on our ability to bring National City’s systems, operating models, and controls into conformity with ours and to do so on our planned time schedule. The integration of National
City’s business and operations into PNC, which includes conversion of National
City’s different systems and procedures, may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to National City’s or PNC’s existing
businesses. PNC’s ability to integrate National City successfully may be
adversely affected by the fact that this transaction has resulted in PNC entering several markets where PNC did not previously have any meaningful retail presence. In addition to the National City transaction, we grow our business from time to time by acquiring
other financial services companies. Acquisitions in general present us with
risks, in addition to those presented by the nature of the business acquired, similar to some or all of those described above relating to the National City acquisition. Any annualized, proforma, 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. • • • |
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Non-GAAP to GAAP Reconcilement Appendix For the three months ended, in millions Pretax Income taxes (benefit) (a) Net income Reported net income (loss) ($246) National City conforming provision for credit losses $504 ($176) 328 Net income excluding National City conforming provision for credit losses $82 Year ended, in millions Pretax Income taxes (benefit) (a) Net income Diluted EPS Reported net income $2,403 $4.36 Gain on BlackRock/BGI transation ($1,076) $389 (687) (1.51) Net income excluding gain on BlackRock/BGI transaction $1,716 $2.85 Year ended, in millions Net income Average assets Return on average assets Reported $2,403 $276,876 0.87% Excluding gain on BlackRock/BGI transaction $1,716 $276,876 0.62% December 31, 2009 PNC believes that information adjusted for the impact of certain items may be useful due to the extent to which the items are not indicative of our ongoing operations. December 31, 2009 December 31, 2008 PNC believes that information adjusted for the impact of certain items may be useful due to the extent to which the items are not indicative of our ongoing operations. (a) Calculated using a marginal federal income tax rate of 35%. The after-tax gain on the BlackRock/BGI transaction also reflects the impact of state income taxes. |
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Non-GAAP to GAAP Reconcilement Appendix Year ended March 31, 2009 June 30, 2009 Sept. 30, 2009 Dec. 31, 2009 Dec. 31, 2009 in millions Total revenue $3,871 $3,987 $4,048 $5,082 $16,988 Noninterest expense 2,328 2,658 2,379 2,369 9,734 Pretax pre-provision earnings 1,543 1,329 1,669 2,713 7,254 Provision for credit losses 880 1,087 914 1,049 3,930 Excess of pretax pre-provision earnings over credit losses $663 $242 $755 $1,664 $3,324 Total revenue $3,871 $3,987 $4,048 $5,082 $16,988 Gain on BlackRock/BGI transaction 1,076 1,076 Total revenue excluding BlackRock/BGI gain 3,871 3,987 4,048 4,006 15,912 Noninterest expense 2,328 2,658 2,379 2,369 9,734 Pretax pre-provision earnings excluding BlackRock/BGI gain 1,543 1,329 1,669 1,637 6,178 Provision for credit losses 880 1,087 914 1,049 3,930 Excess of pretax pre-provision earnings excluding BlackRock/BGI gain over credit losses $663 $242 $755 $588 $2,248 in millions Reported Gain on BlackRock/BGI transaction Reported excluding BlackRock/BGI gain Reported Gain on BlackRock/BGI transaction Reported excluding BlackRock/BGI gain Net interest income $9,054 $9,054 $2,345 $2,345 Noninterest income 7,934 $1,076 6,858 2,737 $1,076 1,661 Total revenue $16,988 $1,076 $15,912 $5,082 $1,076 $4,006 Noninterest income/total revenue 47% 43% 54% 41% Three months ended Year ended Dec. 31, 2009 Three months ended Dec. 31, 2009 PNC believes that pretax pre-provision earnings is useful as a tool to help evaluate ability to
provide for credit costs through operations. PNC believes that information adjusted for the impact of certain items may be useful due to the extent to which the items are not indicative of
our ongoing operations. PNC believes that information adjusted for the impact of
certain items may be useful due to the extent to which the items are not indicative of our ongoing operations. |
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Non-GAAP to GAAP Reconcilement Appendix Adjustments, Income taxes Net Diluted Adjustments, Income taxes Net Diluted For the three months ended, in millions except per share data Pretax (benefit) (a) Income EPS Pretax (benefit) (a) Income EPS Net income, as reported $1,107 $2.17 $559 $1.00 Adjustments: Gain on BlackRock/BGI transaction ($1,076) $389 (687) (1.49) Integration costs 155 (54) 101 .22 $89 ($31) 58 .12 Net income, as adjusted $521 $.90 $617 $1.12 Adjustments, Income taxes Net Diluted For the three months ended, in millions except per share data Pretax (benefit) (a) Income EPS Net income (loss), as reported ($246) $(.77) Adjustments: Conforming provision for credit losses - National City $504 ($176) 328 .94 Other integration costs 81 (29) 52 .15 Net income, as adjusted $134 $.32 Adjustments, Income taxes Net Diluted Adjustments, Income taxes Net Diluted Year ended, in millions except per share data Pretax (benefit) (a) Income EPS Pretax (benefit) (a) Income EPS Net income, as reported $2,403 $4.36 $914 $2.44 Adjustments: Gain on BlackRock/BGI transaction $(1,076) $389 (687) (1.51) Conforming provision for credit losses - National City $504 ($176) 328 .95 Other integration costs 421 (147) 274 .60 145 (51) 94 .27 Net income, as adjusted $1,990 $3.45 $1,336 $3.66 December 31, 2009 September 30, 2009 (a) Calculated using a marginal federal income tax rate of 35%. The after-tax gain on the
BlackRock/BGI transaction also reflects the impact of state income taxes. December 31,
2008 December 31, 2009 December 31, 2008 PNC believes that information adjusted for the impact of certain items may be useful due to the
extent to which the items are not indicative of our ongoing operations. |
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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 & Company WFC Ticker |