Attached files
| file | filename |
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| 8-K - FORM 8-K - PNC FINANCIAL SERVICES GROUP, INC. | d656510d8k.htm |
| EX-99.1 - EX-99.1 - PNC FINANCIAL SERVICES GROUP, INC. | d656510dex991.htm |
 The PNC
Financial Services Group, Inc. Fourth Quarter and Full Year 2013
Earnings Conference Call
January 16, 2014
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 2012 Form 10-K and
our 2013 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 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, such as benefits/provisions for
residential mortgage repurchase obligations, gains on sales of a portion of our VISA shares,
commercial mortgage servicing rights valuations/recoveries, net of economic hedge,
credit valuations related to customer-initiated hedging activities, non-cash charges related to redemptions of trust preferred securities,
expenses for residential mortgage foreclosure-related matters, and integration costs. 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 net interest income (purchase accounting accretion and the core remainder), on the impact of purchase accounting
accretion on net interest margin (core net interest margin (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 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, proforma,
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 PNC–Investor Relations.” |
 3
2013 Achievements
PNC Is Well-Positioned to Continue to Create Shareholder Value.
2013 financial
summary
Net income
Diluted EPS from
net income
Return on average
assets
$4.2 billion
$7.39
1.38%
FY13 record net income
Grew loans, deposits, revenue and capital
Diversified businesses delivered fee income growth
Expense declined by 7% in FY13 vs. FY12
Effectively managed credit risk appetite
Continued progress on strategic priorities |
 4
Continued Loan Growth and Capital Improvement
Investment securities grew by
$3.0 billion from end of 3Q13
Loans
increased $2.8 billion
within commercial and
consumer lending
Total deposits grew $4.9 billion
due to higher transaction
deposits
During the quarter, PNC
enhanced its liquidity position
in anticipation of regulatory
requirements
Tier 1 common capital levels
and ratios continued to increase
(1)
Estimated
as
of
December
31,
2013.
(2)
See
Note
A
in
the
Appendix
for
further
details.
(3)
PNC’s
pro
forma
Basel
III
Tier
1
common
capital
ratio was estimated without benefit of phase-ins and based on estimated Basel III advanced
approaches risk-weighted assets. See Estimated Pro forma Basel III Tier
1 Common Capital and related information in the Appendix for further details. Linked
quarter highlights % change from:
Category (billions)
Dec. 31,
2013
Sep. 30,
2013
Dec. 31,
2012
Investment securities
$60.3
5.3%
(1.8%)
Total commercial lending
$117.1
2.4%
7.5%
Total consumer lending
78.5
0.1%
2.0%
Total loans
$195.6
1.4%
5.2%
Total assets
$320.3
3.8%
5.0%
Transaction deposits
186.4
2.5%
5.5%
Total deposits
$220.9
2.2%
3.7%
Total shareholders’
equity
$42.4
3.1%
8.7%
Capital ratios
(1)
:
Basel I Tier 1 common capital
ratio
(2)
10.5%
10.3%
9.6%
Pro forma Basel III Tier 1
common capital ratio
(3)
9.4%
8.7%
7.5%
Balances at period-end
–
Commercial lending increased
$2.7 billion primarily in real
estate and other specialty
lending businesses
–
Consumer lending growth of
$.1 billion was driven by
automobile and credit card
loans partially offset by
declines in other categories |
 5
Revenue Growth and Improved Credit Quality Drove
Profitability and Returns
Highlights
Revenue grew 4% driven by:
Pretax pre-provision earnings
(1)
grew 2% as a result of strong
noninterest income growth
partially offset by increased
expenses
Credit costs declined as overall
credit trends continued to
improve
(1),(2),(3) See Notes B, C and D respectively in the Appendix for additional details. (4) See
Reconcilement section of the Appendix. Full Year
2013:
Pretax
pre-provision
earnings
(1)(4)
increased 26% primarily due to
noninterest income growth of 17%
and expense decline of 7%
Increased returns
Linked quarter:
$
Change
from
$
Change
from
(millions)
4Q13
3Q13
FY13
FY12
Net interest income
$2,266
$32
$9,147
($493)
Noninterest income
1,807
121
6,865
993
Total revenue
$4,073
$153
$16,012
$500
Noninterest expense
$2,547
$123
$9,801
($781)
Pretax pre-provision
earnings
(1)
$1,526
$30
$6,211
$1,281
Provision
113
(24)
643
(344)
Pretax earnings
(2)
1,413
54
5,568
1,625
Net income
$1,061
$22
$4,227
$1,226
Returns
ROAA
(3)
1.34%
1.36%
1.38%
1.02%
ROACE
(3)
10.55%
10.50%
10.88%
8.31%
–
Growth in both noninterest
income and NII |
 6
Core NII Increase Driven by Loan Growth
(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).
(2)
See
Note
E
in
Appendix
for
further
details.
(3)
Net
interest
margin
less
(annualized
PAA/average
interest-earning
assets).
See
Reconcilement
in
Appendix.
(4)
See
Appendix
for
additional
information.
Core NII
(1)
$2,075
$40
($76)
Scheduled accretion
163
(10)
(65)
Excess cash recoveries
(2)
28
2
(17)
Total purchase accounting
accretion (PAA)
191
(8)
(82)
Total NII
$2,266
$32
($158)
Highlights
Linked quarter:
Full year 2013:
Average interest-earning assets
increased 4.2% due to average
loan growth of 2.1% and average
investment securities growth of
1%
Loan and securities growth
supported higher NII of 1.4%
NIM declined 9 bps primarily due
to higher deposits held at banks
Average interest-earning assets
growth of 4.9% driven by
average loan growth of 7.6%
Core NII
(1,4)
decreased primarily
due to decline in asset yields
$ change from:
(billions)
4Q13
3Q13
4Q12
Average interest-earning assets
$270.5
$10.9
$16.8
Net interest
Margin(NIM)
Core NIM
(3)
(millions)
–
Core NII increased 2.0%
–
PAA declined primarily as a
result of lower accretion on
impaired loans |
 7
Diversified Businesses Delivered Fee Income Growth
Highlights
(1) Asset management includes the Asset Management Group and BlackRock. (2) See Reconcilement
section of the Appendix. Noninterest income growth of 7%
largely reflects:
Linked quarter:
$
Change
from
$
Change
from
(millions)
4Q13
3Q13
FY13
FY12
Asset management
(1)
$364
$34
$1,342
$173
Consumer services
327
11
1,253
117
Corporate services
301
(5)
1,210
44
Residential mortgage
271
72
871
587
Deposit service charges
158
2
597
24
Fee income
$1,421
$114
$5,273
$945
Net gains on sales of
securities less net OTTI
3
(16)
83
(10)
Gain on VISA sales
0
(85)
168
(99)
Other
383
108
1,341
157
Total noninterest income
$1,807
$121
$6,865
$993
Full Year 2013:
Noninterest income grew 17%
Fee income grew 22%
(2)
Noninterest income to total
revenue of 43% compared to
38% in 2012
–
Pre-tax benefit of $124 million
from the release of reserves for
residential mortgage repurchase
obligations primarily related to
previously disclosed FNMA and
FHLMC agreements
–
Strong fee income growth of 9%
primarily driven by Asset
Management and Consumer
Services
(2)
–
Other income increased
primarily due to higher revenue
from private equity investments |
 8
Disciplined Expense Management While Investing for
Growth
Noninterest expense increase of
5% reflected:
Exceeded $700 million CIP
(2)
target
Highlights
Linked
quarter:
(1)
See
Note
F
in
the
Appendix.
(2)CIP
refers
to
PNC’s
Continuous
Improvement
Program.
(3)
Trust
preferred
securities
redemption-related
charges
were
$57
million
in
FY13
and
$295
million
in
FY12.
There
were
no
integrations
costs
in
FY13
and
$267
million
in
FY12.
Full Year 2013:
Noninterest expense decline of
7% largely reflects lower trust
preferred securities redemption
charges, lower integration
costs and continued focus on
expense management
(3)
$ Change from
$ Change from
(millions)
4Q13
3Q13
FY13
FY12
Personnel
$1,207
$26
$4,743
$126
Occupancy
211
6
833
6
Equipment
197
3
763
28
Marketing
66
(2)
246
(33)
Other
866
90
3,216
(908)
Total noninterest expense
$2,547
$123
$9,801
($781)
Efficiency ratio
(1)
63%
62%
61%
68%
–
Higher incentive compensation
costs related to increased
business activity
–
PNC Foundation contribution
of $50 million
–
Higher legal accruals |
 9
Overall Credit Quality Continued to Improve
Nonperforming loans
(2,4)
Provision and net charge-offs
Criticized commercial loans
30-89 Days
90 Days +
Accruing loans past due
(2,3)
As
of
quarter
end
except
net
charge-offs
and
provision,
which
are
for
the
quarter.
(1)
Criticized
loans
are
ones
that
we
consider
“special
mention,”
“substandard’”
or
“doubtful”.
(2)
Loans
acquired
from
National
City
or
RBC
Bank
(USA)
that
were
impaired
are
not
included
as
they
were
recorded
at
estimated
fair
value
when
acquired
and
are
currently
considered
performing
loans
due
to
the
accretion
of
interest
in
purchase
accounting.
(3)
Includes
loans
that
are
government
guaranteed/insured,
primarily
residential
mortgages.
These
past
due
loans
totaled
$1.8
billion
in
4Q13.
(4)
Does
not
include
loans
held
for
sale
or
foreclosed
and
other
assets.
Excludes
certain
government
insured
or
guaranteed
loans
and
loans
accounted
for
under
the
fair
value
option.
Criticized
Commercial
loans
(1)
Total nonperforming loans
Provision
Net charge-offs |
 10
Outlook
(1)
–
1Q14 vs. 4Q13
(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
or
the
potential
impacts
of
the
Congress
failing
to
timely
address
the
authorized
level
of
the
Federal
borrowing
debt
ceiling.
(2)
Fee
income
refers
to
Noninterest
income
in
the
following
categories:
asset
management,
consumer
services,
corporate
services,
residential
mortgage,
and
service
charges
on
deposits. |
 11
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 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 a trend growth rate near 2.5
percent in 2014 as drags from Federal fiscal restraint subside, and that short-term
interest rates will remain very low and bond yields will rise only slowly in
2014. These forward-looking statements also do not, unless otherwise indicated, take into account the impact of potential legal and regulatory
contingencies or the potential impacts of the Congress failing to timely address the
authorized level of the Federal borrowing debt ceiling. |
 12
Cautionary Statement Regarding Forward-Looking
Information (continued)
Appendix
•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
on
the
ongoing
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
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. |
 13
Cautionary Statement Regarding Forward-Looking
Information (continued)
Appendix
•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,
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
2012
Form
10-K
and
our
2013
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
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,
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. |
 14
Notes
Appendix
Explanatory Notes
(A) Basel I Tier 1 common capital ratio is period-end Basel I Tier 1 common capital
divided by period-end Basel I risk-weighted assets.
(E) Excess cash recoveries represent cash payments from customers that exceeded the recorded
investment of the designated impaired loans.
(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 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. |
 15
Estimated Pro forma Basel III Tier I Common Capital
Appendix
Basel I Tier 1 Common Capital Ratio
Dollars in millions
Dec. 31, 2013 (a)
Sept. 30, 2013
Dec. 31, 2012
Basel I Tier 1 common capital
$28,488
$27,540
$24,951
Basel I risk-weighted assets
271,192
266,698
260,847
Basel I Tier 1 common capital ratio
10.5%
10.3%
9.6%
(a) Estimated as of December 31, 2013.
Estimated Pro forma Basel III Tier 1 Common Capital Ratio
Dollars in millions
Dec. 31, 2013
Sept. 30, 2013
Dec. 31, 2012
Basel I Tier 1 common capital
$28,488
$27,540
$24,951
Less regulatory capital adjustments:
Basel III quantitative limits
(1,398)
(2,011)
(2,330)
Accumulated other comprehensive income (a)
196
(231)
276
All other adjustments
144
(49)
(396)
Estimated Basel III Tier 1 common capital
$27,430
$25,249
$22,501
Estimated Basel III advanced approaches risk-weighted assets
290,906
289,063
301,006
Pro forma Basel III Tier 1 common capital ratio
9.4%
8.7%
7.5%
(a) Represents net adjustments related to accumulated other comprehensive income for available
for sale securities and pension and other postretirement benefit plans. We provide
information below regarding PNC’s pro forma fully phased-in Basel III Tier 1 common capital ratio and how it differs from the Basel I
Tier 1 common capital ratio. This Basel III ratio is calculated using PNC's estimated
risk-weighted assets under the Basel III advanced approaches.
Tier 1 common capital as defined under the Basel III rules differs materially from Basel I.
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 Tier 1 common capital. Also, Basel I regulatory capital excludes certain other
comprehensive income related to both available for sale securities and pension and other
postretirement plans, whereas under Basel III these items are a component of PNC's capital.
Basel III risk-weighted assets were estimated under the advanced approaches
included in the Basel III rules and application of Basel II.5, and reflect credit, market and operational risk.
PNC utilizes this capital ratio estimate to assess its Basel III capital position (without the
benefit of phase-ins), including comparison to similar estimates made by other
financial institutions. This Basel III capital estimate is likely to be impacted by any additional regulatory guidance and
the ongoing evolution, validation and regulatory approval of PNC's models integral to the
calculation of advanced approaches risk-weighted assets.
|
 16
Tangible Book Value per Common Share
Appendix
Tangible Book Value per Common Share Ratio
Dollars in millions, except per share data
Dec. 31, 2013
Sept. 30, 2013
Dec. 31, 2012
Book value per common share
72.21
$
69.92
$
67.05
$
Tangible book value per common share
Common shareholders' equity
38,467
$
37,190
$
35,413
$
Goodwill and Other Intangible Assets (a)
(9,654)
(9,690)
(9,798)
Deferred tax liabilities on Goodwill and Other Intangible
Assets (a) 333
340
354
Tangible common shareholders'
equity 29,146
$
27,840
$
25,969
$
Period-end common shares outstanding (in millions)
533
532
528
Tangible book value per common
share 54.68
$
52.33
$
49.18
$
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) Excludes the impact from mortgage servicing rights of $1.6 billion at both December 31,
2013 and September 30, 2013 and $1.1 billion at December 31, 2012.
|
 17
Non-GAAP to GAAP Reconcilement
Appendix
$ in millions
Dec. 31, 2013
Sept. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Net interest margin, as reported
3.38%
3.47%
3.58%
3.81%
3.85%
Purchase accounting accretion (1)
$191
$199
$204
$249
$273
Purchase accounting accretion, if annualized
$758
$790
$818
$1,010
$1,086
Avg. interest earning assets
$270,485
$259,606
$256,102
$256,180
$253,643
Annualized purchase accounting accretion/Avg. interest-earning assets
0.28%
0.30%
0.32%
0.38%
0.42%
Core net interest margin (2)
3.10%
3.17%
3.26%
3.43%
3.43%
For the three months ended
(1) Purchase accounting accretion is scheduled purchase accounting accretion plus cash
recoveries. (2)
PNC
believes
that
core
net
interest
margin,
a
non-GAAP
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, 2013
Sept. 30, 2013
% Change
Dec. 31, 2013
Dec. 31, 2012
% Change
Net interest income
$2,266
$2,234
1%
$9,147
$9,640
-5%
Noninterest income
$1,807
$1,686
7%
$6,865
$5,872
17%
Total revenue
$4,073
$3,920
4%
$16,012
$15,512
3%
Noninterest expense
($2,547)
($2,424)
5%
($9,801)
($10,582)
-7%
Pretax pre-provision earnings (1)
$1,526
$1,496
2%
$6,211
$4,930
26%
Net income
$1,061
$1,039
2%
$4,227
$3,001
41%
(1) PNC believes that pretax, pre-provision earnings, a non-GAAP measure, is useful as
a tool to help evaluate the ability to provide for credit
costs through operations. For
the quarter ended
For
the year ended |
 18
Non-GAAP to GAAP Reconcilement
Appendix
$ in millions
Dec. 31, 2013
Dec. 31, 2012
% change
Core net interest income (a)
$8,304
$8,516
-2%
Total purchase accounting accretion (a)
Scheduled accretion net of contractual interest
$728
$967
Excess cash recoveries
$115
$157
Total purchase accounting accretion
$843
$1,124
Total net interest income
$9,147
$9,640
-5%
For the year ended
(a) We believe that core net interest income and purchase accounting accretion are useful in
evaluating components of net interest income. |
 19
Non-GAAP to GAAP Reconcilement
Appendix
$ in millions
Dec. 31, 2013
Sept. 30, 2013
% change
Dec. 31, 2013
Dec. 31, 2012
% change
Asset management
$364
$330
$1,342
$1,169
Consumer services
$327
$316
$1,253
$1,136
Corporate services
$301
$306
$1,210
$1,166
Residential mortgage
$271
$199
$871
$284
Deposit service charges
$158
$156
$597
$573
Total fee income, as reported
$1,421
$1,307
9%
$5,273
$4,328
22%
Benefit/(Provision) for residential mortgage repurchase obligations
$124
$6
$53
($761)
$1,297
$1,301
0%
$5,220
$5,089
3%
Fee income, adjusted for benefit/(provision) for residential mortgage
repurchase obligations
For
the quarter ended
For
the year ended
$ in millions
Dec. 31, 2013
Dec. 31, 2012
% change
Asset management
$1,342
$1,169
Consumer services
$1,253
$1,136
Corporate services
$1,210
$1,166
Residential mortgage
$871
$284
Deposit service charges
$597
$573
Total fee income, as reported
$5,273
$4,328
22%
Residential mortgage
($871)
($284)
$4,402
$4,044
9%
Fee income, adjusted for Residential mortgage
For
the year ended |