PNC Releases Results Of Annual Dodd-Frank Company-Run Stress Test

Rhea-AI Summary

The PNC Financial Services Group, Inc. (NYSE: PNC) announced the results of its biennial company-run stress test, required under the Dodd-Frank Act. This test assesses banks' capital sufficiency during severe economic conditions over a nine-quarter period ending March 31, 2022. PNC's estimated capital ratios under adverse scenarios include a Common Equity Tier 1 ratio of 8.2% at Q1 2022 and a minimum of 8.0%. The results do not account for the benefits from the recent sale of PNC's investment in BlackRock, which strengthened its capital position. PNC remains confident in its financial resilience.

Positive

• Common Equity Tier 1 ratio projected at 8.2% for Q1 2022.
• Minimum regulatory capital ratios show resilience under stress scenarios.
• Recent sale of BlackRock investment bolstered capital position.

Negative

• Stress test results do not reflect potential benefits from the sale of BlackRock.
• Capital ratios may not forecast actual future conditions.

PITTSBURGH, June 25, 2020 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) announced today the results of its biennial company-run stress test conducted in accordance with regulations of the Board of Governors of the Federal Reserve System (Federal Reserve) and the Office of the Comptroller of the Currency (OCC) under the Dodd-Frank Wall Street Reform and Consumer Protection Act. These company-run stress tests are designed to help assess whether banking organizations have sufficient capital to absorb losses and support operations during hypothetical severely adverse economic conditions over a nine-quarter projection period. The projection period for the 2020 test covers January 1, 2020 to March 31, 2022.

"The results of the stress test confirm PNC's ability to withstand the challenges of a severe economic environment, while upholding our commitment to our customers, communities and employees," said PNC Chairman, President and Chief Executive Officer William S. Demchak. "Additionally, the benefit from the recent sale of our equity investment in BlackRock, which bolstered our capital position to record levels, is not reflected in our estimated stress test results. We are confident in our ability to navigate headwinds from a position of financial strength with our strong balance sheet, liquidity and capital flexibility."

Under the hypothetical severely adverse scenario provided by the agencies, PNC estimates that its ending and minimum regulatory capital ratios would be as follows:

Basel III Regulatory Capital Ratios: Common Equity Tier 1  Tier 1 Risk-Based Capital Total Risk-Based Capital Tier 1 Leverage Supplementary Leverage

Ending Q1 2022 8.2% 9.4% 11.8% 8.4% 6.9%

Minimum 8.0% 9.2% 11.5% 8.2% 6.7%

These results are the product of a forward-looking regulatory exercise using hypothetical macroeconomic assumptions and, as such, these results do not represent a forecast of PNC's future capital levels or anticipated economic conditions.  In addition, these results do not reflect the benefits of PNC's recent sale of its equity investment in BlackRock, Inc. and the five-year transition period, which PNC has elected to apply for incorporating the effects of the Current Expected Credit Loss (CECL) standard into regulatory capital.  Together these items provide a material benefit to PNC's regulatory capital ratios that is not included in the projections as presented.

The supervisory severely adverse scenario for the 2020 company-run stress test was released by the Federal Reserve and OCC in February 2020, before the onset of the economic and financial stress caused by the novel coronavirus pandemic.  Nevertheless, the scenario includes a severe global recession that is accompanied by both a period of heightened stress in commercial real estate and corporate debt markets, as well as a sharp drop in asset prices.

As required by applicable regulations, capital ratios are calculated (a) for the first quarter of 2020 using the actual capital actions expected to be undertaken in that quarter and (b) for the remaining eight quarters of the stress period, assuming that (i) there are no repurchases or redemptions of regulatory capital instruments; (ii) there are no issuances of common stock or preferred stock (other than equity issuances pursuant to expensed employee compensation programs); (iii) the dollar amount of quarterly common stock dividends is equal to the quarterly average dollar amount of common stock dividends paid during the second, third, and fourth quarters of 2019 and first quarter of 2020 (for PNC, the quarterly average amount of common dividends during this period was $490 million); and (iv) payments on other regulatory capital instruments are made equal to the stated dividend, interest, or principal due.

The Basel III risk-based ratios were determined using the standardized approach for risk weights included in the Basel III rules.

Results of PNC's company-run stress test, including PNC's estimates of pre-provision net revenue, other revenue, loan and other losses, net income before taxes, and regulatory capital ratios for PNC, as well as additional information on the methodologies used in conducting the stress test, may be found at www.pnc.com/regulatorydisclosures.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

CONTACTS

MEDIA:
PNC Media Relations
(412) 762-4550
media.relations@pnc.com  

INVESTORS:
Bryan Gill 
(412) 768-4143 
investor.relations@pnc.com

 

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SOURCE PNC Financial Services Group

FAQ

What were the 2020 stress test results for PNC (NYSE: PNC)?

PNC's stress test results showed a Common Equity Tier 1 ratio of 8.2% at Q1 2022 and a minimum of 8.0% under adverse conditions.

When was PNC's stress test conducted?

PNC conducted its company-run stress test based on a projection period ending March 31, 2022.

What regulatory requirements did PNC follow for the stress test?

The stress test was conducted under regulations of the Federal Reserve and the OCC as mandated by the Dodd-Frank Act.

How does the sale of BlackRock investment impact PNC's financial strength?

The sale of PNC's investment in BlackRock significantly strengthened its capital position, although it is not reflected in the stress test results.

What economic conditions were considered in PNC's stress test?

The stress test included a hypothetical severe global recession and heightened stress in commercial real estate and corporate debt markets.