PNC Reports Third Quarter 2021 Net Income Of $1.5 Billion, $3.30 Diluted EPS Or $3.75 As Adjusted
PNC Financial Services Group reported a strong Q3 2021, with net income of $1.49 billion, or $3.30 per diluted share, reflecting a 35% increase from Q2. Revenue rose 11% to $5.20 billion, driven by the full-quarter impact of BBVA USA acquisition. Diluted EPS adjusted for integration costs was $3.75. Average loans and deposits increased 14% and 13%, respectively. However, expenses surged 18% linked quarter due to ongoing integration efforts. PNC also recaptured $203 million in credit losses, highlighting improved credit quality.
- Net income increased 35% from Q2 to $1.49 billion.
- Total revenue rose 11% to $5.20 billion, driven by BBVA USA acquisition.
- Average loans and deposits grew by 14% and 13%, respectively.
- Diluted EPS as adjusted was $3.75, excluding integration costs.
- Provision recapture of $203 million indicates improved credit quality.
- Total expenses increased 18% linked quarter to $3.59 billion.
- Integration costs amounted to $243 million, impacting net income.
- Period-end loans decreased modestly due to PPP loan forgiveness.
PITTSBURGH, Oct. 15, 2021 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported:
For the quarter | ||||||||||||||||||||
In millions, except per share data and as noted | 3Q21 | 2Q21 | 3Q20 | Third Quarter Highlights | ||||||||||||||||
▪ Converted BBVA USA customers, employees, systems and branches as of October 12, 2021 – Third quarter results reflect full quarter benefit from BBVA USA – Second quarter results include one month impact of BBVA USA which closed on June 1, 2021 ▪ Diluted EPS as adjusted was ▪ Revenue increased ▪ Expenses increased ▪ Provision recapture of ▪ Average loans and deposits increased ▪ Strong credit performance; net loan charge-offs of | ||||||||||||||||||||
Financial Results | ||||||||||||||||||||
Revenue | $ | 5,197 | $ | 4,667 | $ | 4,281 | ||||||||||||||
Noninterest expense | 3,587 | 3,050 | 2,531 | |||||||||||||||||
Pretax, pre-provision earnings (non-GAAP) | 1,610 | 1,617 | 1,750 | |||||||||||||||||
Integration costs | 243 | 111 | — | |||||||||||||||||
Pretax, pre-provision earnings excluding integration costs (non-GAAP) | 1,853 | 1,728 | — | |||||||||||||||||
Provision for (recapture of) credit losses | (203) | 302 | 52 | |||||||||||||||||
Net income | 1,490 | 1,103 | 1,532 | |||||||||||||||||
Per Common Share | ||||||||||||||||||||
Diluted earnings - as reported | $ | 3.30 | $ | 2.43 | $ | 3.39 | ||||||||||||||
Impact from integration costs (non-GAAP) | (0.45) | (0.21) | — | |||||||||||||||||
Diluted earnings - as adjusted (non-GAAP) | 3.75 | 2.64 | — | |||||||||||||||||
Book value | 121.16 | 120.25 | 117.44 | |||||||||||||||||
Tangible book value (non-GAAP) | 94.82 | 93.83 | 95.71 | |||||||||||||||||
Balance Sheet & Credit Quality | ||||||||||||||||||||
Average loans (in billions) | $ | 291.3 | $ | 255.6 | $ | 253.1 | ||||||||||||||
Average deposits (in billions) | 454.4 | 401.7 | 350.5 | |||||||||||||||||
Net loan charge-offs | 81 | 306 | 155 | |||||||||||||||||
Allowance for credit losses to total loans | 2.07 | % | 2.16 | % | 2.58 | % | ||||||||||||||
Selected Ratios | ||||||||||||||||||||
Return on average common equity | 10.95 | % | 8.32 | % | 11.76 | % | ||||||||||||||
Return on average assets | 1.06 | 0.88 | 1.32 | |||||||||||||||||
Net interest margin (non-GAAP) | 2.27 | 2.29 | 2.39 | |||||||||||||||||
Noninterest income to total revenue | 45 | 45 | 42 | |||||||||||||||||
Efficiency | 69 | 65 | 59 | |||||||||||||||||
Efficiency excluding integration costs (non-GAAP) | 64 | 63 | — | |||||||||||||||||
Common Equity Tier 1 capital ratio | 10.2 | 10.1 | 11.7 | |||||||||||||||||
Diluted earnings as adjusted is a non-GAAP measure calculated by excluding post-tax integration costs for BBVA USA. See this and other non-GAAP financial measures in the consolidated financial highlights accompanying this release. | ||||||||||||||||||||
From Bill Demchak, PNC Chairman, President and Chief Executive Officer: | |||||||||||||
"In the third quarter PNC delivered solid financial results reflecting revenue growth and strong credit quality performance. While average loans increased due to the full quarter benefit of BBVA USA, period-end loans decreased modestly due to Paycheck Protection Program loan forgiveness activity. Importantly, we have completed the conversion of BBVA USA, providing all existing and new PNC customers with access to our coast-to-coast franchise. With the significant expansion of our footprint and the continued execution of our strategic priorities, we see substantial opportunities to leverage our best-in-class products and services, and deliver enhanced shareholder value for years to come." | |||||||||||||
BBVA USA
- As of October 12, 2021, PNC has converted approximately 2.6 million customers, 9,000 employees and nearly 600 branches across seven states, merging BBVA USA into PNC Bank. PNC acquired BBVA USA on June 1, 2021.
- Third quarter financial results reflect the full quarter benefit of BBVA USA. Second quarter financial results include the impact of BBVA USA operations for the month of June 2021.
- Net interest income attributable to BBVA USA was
$532 million in the third quarter of 2021 and included a significant increase in premium amortization expense related to certain BBVA USA investment securities. In the second quarter of 2021, net interest income attributable to BBVA USA was$236 million and included a$30 million benefit from purchase accounting accretion. - Noninterest income attributable to BBVA USA was
$213 million in the third quarter of 2021, increasing$133 million compared with the second quarter of 2021. - Noninterest expense attributable to BBVA USA was
$506 million in the third quarter of 2021, increasing$327 million compared with the second quarter of 2021. - Merger and integration costs in the third quarter of 2021 were
$243 million , increasing$132 million compared with the second quarter of 2021. Since the announcement of the acquisition, PNC has incurred approximately half of the$980 million of expected merger and integration costs. - PNC remains on track to realize
$900 million in cost saves.
Income Statement Highlights
Third quarter 2021 compared with second quarter 2021
- Net income of
$1.5 billion increased$387 million , or35% . - Total revenue of
$5.2 billion increased$530 million , or11% , reflecting the full quarter benefit of BBVA USA and higher noninterest income. - Net interest income of
$2.9 billion increased$275 million , or11% , driven by higher interest earning asset balances reflecting the full quarter benefit of BBVA USA, partially offset by lower yields. - Net interest margin of
2.27% decreased 2 basis points. - Noninterest income of
$2.3 billion increased$255 million , or12% . - Fee income of
$1.9 billion increased$274 million , or17% , driven by the full quarter benefit of BBVA USA, record merger and acquisition advisory fees and higher residential mortgage revenue. - Other noninterest income of
$449 million declined$19 million , or4% , and included higher private equity revenue as well as a negative Visa Class B derivative fair value adjustment of$169 million primarily related to the extension of anticipated litigation resolution timing. - Noninterest expense of
$3.6 billion increased$537 million , or18% , and included a full quarter of BBVA USA operating expenses, increased integration expenses, higher incentive compensation related to increased business activity and increased marketing. - The third quarter of 2021 included a provision recapture of
$203 million , reflecting continued improvements in credit quality and changes in portfolio composition. The second quarter included a provision for credit losses of$302 million , primarily driven by the establishment of an initial provision for credit losses related to the BBVA USA acquisition. - The effective tax rate was
17.8% for the third quarter and16.1% for the second quarter.
Balance Sheet Highlights
Third quarter 2021 compared with second quarter 2021 or September 30, 2021 compared with June 30, 2021
- Average loans of
$291.3 billion increased$35.7 billion , or14% , reflecting the full quarter benefit of BBVA USA. - Loans of
$290.2 billion at September 30, 2021 decreased$4.5 billion , or2% . - Commercial loans of
$195.2 billion decreased$4.4 billion , or2% , driven by$4.8 billion of Paycheck Protection Program (PPP) loan forgiveness and a decrease in BBVA USA legacy loan portfolios, partially offset by growth in PNC legacy corporate banking, business credit and multifamily agency warehouse lending. - Consumer loans of
$95.0 billion remained relatively stable, as growth in residential mortgage loans was offset primarily by declines in home equity and auto loans. - Credit quality performance:
- Delinquencies of
$1.4 billion increased$106 million , or8% , largely due to commercial loans past due 30 to 59 days primarily reflecting operational delays. - Total nonperforming loans of
$2.5 billion decreased$251 million , or9% . - Net loan charge-offs of
$81 million decreased$225 million . The second quarter included net loan charge-offs of$248 million related to the purchase accounting treatment for certain loans that were previously charged-off by BBVA USA. - The allowance for credit losses to total loans was
2.07% at September 30, 2021 compared with2.16% at June 30, 2021. - Average deposits of
$454.4 billion increased$52.7 billion , or13% , primarily due to the full quarter benefit of BBVA USA. - Deposits of
$448.9 billion at September 30, 2021 decreased$4.0 billion , or1% , due to BBVA USA legacy commercial deposit outflows reflecting the impact of strategic repricing decisions, partially offset by growth in PNC legacy deposits. - Average investment securities of
$120.6 billion , increased$12.1 billion , or11% , driven by the full quarter benefit of BBVA USA. - Investment securities of
$125.6 billion at September 30, 2021 decreased$0.9 billion , or1% . - Average Federal Reserve Bank balances were
$80.1 billion , increasing$1.8 billion . - Federal Reserve Bank balances at September 30, 2021 were
$75.1 billion , an increase of$3.2 billion reflecting increased liquidity. - PNC maintained strong capital and liquidity positions.
- On October 1, 2021, the PNC board of directors declared a quarterly cash dividend on common stock of
$1.25 per share payable on November 5, 2021. - The Basel III common equity Tier 1 capital ratio was an estimated
10.2% at September 30, 2021 and10.1% at June 30, 2021. - The Liquidity Coverage Ratio at September 30, 2021 for PNC exceeded the regulatory minimum requirement.
Earnings Summary | ||||||||||||
In millions, except per share data | 3Q21 | 2Q21 | 3Q20 | |||||||||
Net income | $ | 1,490 | $ | 1,103 | $ | 1,532 | ||||||
Net income attributable to diluted common shares - as reported | $ | 1,408 | $ | 1,037 | $ | 1,447 | ||||||
Net income attributable to diluted common shares - as adjusted (non-GAAP) | $ | 1,600 | $ | 1,125 | — | |||||||
Diluted earnings per common share - as reported | $ | 3.30 | $ | 2.43 | $ | 3.39 | ||||||
Diluted earnings per common share - as adjusted (non-GAAP) | $ | 3.75 | $ | 2.64 | — | |||||||
Average diluted common shares outstanding | 426 | 427 | 426 | |||||||||
Cash dividends declared per common share | $ | 1.25 | $ | 1.25 | $ | 1.15 | ||||||
See non-GAAP financial measures included in the consolidated financial highlights accompanying this news release | ||||||||||||
Third quarter 2021 net income of
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported (GAAP) amounts. This information supplements results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, GAAP results. Fee income, a non-GAAP financial measure, refers to noninterest income in the following categories: asset management, consumer services, corporate services, residential mortgage and service charges on deposits. Information in this news release, including the financial tables, is unaudited.
CONSOLIDATED REVENUE REVIEW | |||||||||||||||
Revenue | Change | Change | |||||||||||||
3Q21 vs | 3Q21 vs | ||||||||||||||
In millions | 3Q21 | 2Q21 | 3Q20 | 2Q21 | 3Q20 | ||||||||||
Net interest income | $ | 2,856 | $ | 2,581 | $ | 2,484 | 11 | % | 15 | % | |||||
Noninterest income | 2,341 | 2,086 | 1,797 | 12 | % | 30 | % | ||||||||
Total revenue | $ | 5,197 | $ | 4,667 | $ | 4,281 | 11 | % | 21 | % | |||||
Total revenue for the third quarter of 2021 increased
Net interest income of
The net interest margin was
Noninterest Income | Change | Change | |||||||||||||
3Q21 vs | 3Q21 vs | ||||||||||||||
In millions | 3Q21 | 2Q21 | 3Q20 | 2Q21 | 3Q20 | ||||||||||
Asset management | $ | 248 | $ | 239 | $ | 215 | 4 | % | 15 | % | |||||
Consumer services | 496 | 457 | 390 | 9 | % | 27 | % | ||||||||
Corporate services | 842 | 688 | 479 | 22 | % | 76 | % | ||||||||
Residential mortgage | 147 | 103 | 137 | 43 | % | 7 | % | ||||||||
Service charges on deposits | 159 | 131 | 119 | 21 | % | 34 | % | ||||||||
Other | 449 | 468 | 457 | (4) | % | (2) | % | ||||||||
$ | 2,341 | $ | 2,086 | $ | 1,797 | 12 | % | 30 | % | ||||||
Noninterest income for the third quarter of 2021 increased
Noninterest income for the third quarter of 2021 increased
CONSOLIDATED EXPENSE REVIEW | |||||||||||||||
Noninterest Expense | Change | Change | |||||||||||||
3Q21 vs | 3Q21 vs | ||||||||||||||
In millions | 3Q21 | 2Q21 | 3Q20 | 2Q21 | 3Q20 | ||||||||||
Personnel | $ | 1,986 | $ | 1,640 | $ | 1,410 | 21 | % | 41 | % | |||||
Occupancy | 248 | 217 | 205 | 14 | % | 21 | % | ||||||||
Equipment | 355 | 326 | 292 | 9 | % | 22 | % | ||||||||
Marketing | 103 | 74 | 67 | 39 | % | 54 | % | ||||||||
Other | 895 | 793 | 557 | 13 | % | 61 | % | ||||||||
$ | 3,587 | $ | 3,050 | $ | 2,531 | 18 | % | 42 | % | ||||||
Noninterest expense for the third quarter of 2021 increased
Noninterest expense increased
The effective tax rate was
CONSOLIDATED BALANCE SHEET REVIEW
Average total assets were
Total assets were
Loans | Change | Change | |||||||||||||
September 30, | June 30, | September 30, | 09/30/21 vs | 09/30/21 vs | |||||||||||
In billions | 06/30/21 | 09/30/20 | |||||||||||||
Average | |||||||||||||||
Commercial | $ | 196.3 | $ | 175.8 | $ | 175.6 | 12 | % | 12 | % | |||||
Consumer | 95.0 | 79.8 | 77.5 | 19 | % | 23 | % | ||||||||
Average loans | $ | 291.3 | $ | 255.6 | $ | 253.1 | 14 | % | 15 | % | |||||
Quarter end | |||||||||||||||
Commercial | $ | 195.2 | $ | 199.6 | $ | 172.7 | (2) | % | 13 | % | |||||
Consumer | 95.0 | 95.1 | 76.6 | — | 24 | % | |||||||||
Total loans | $ | 290.2 | $ | 294.7 | $ | 249.3 | (2) | % | 16 | % | |||||
Average loans for the third quarter of 2021 were
Loans were
Loans at September 30, 2021 increased
PPP loans outstanding were
Investment Securities | Change | Change | |||||||||||||
September 30, | June 30, | September 30, | 09/30/21 vs | 09/30/21 vs | |||||||||||
In billions | 06/30/21 | 09/30/20 | |||||||||||||
Average | $ | 120.6 | $ | 108.5 | $ | 90.5 | 11 | % | 33 | % | |||||
Quarter end | $ | 125.6 | $ | 126.5 | $ | 91.2 | (1) | % | 38 | % | |||||
Average investment securities for the third quarter of 2021 were
Investment securities at September 30, 2021 decreased
Average Federal Reserve Bank balances for the third quarter of 2021 were
Federal Reserve Bank balances at September 30, 2021 of
Deposits | Change | Change | |||||||||||||
September 30, | June 30, | September 30, | 09/30/21 vs | 09/30/21 vs | |||||||||||
In billions | 06/30/21 | 09/30/20 | |||||||||||||
Average | |||||||||||||||
Noninterest-bearing | $ | 155.9 | $ | 132.3 | $ | 101.9 | 18 | % | 53 | % | |||||
Interest-bearing | 298.5 | 269.4 | 248.6 | 11 | % | 20 | % | ||||||||
Average deposits | $ | 454.4 | $ | 401.7 | $ | 350.5 | 13 | % | 30 | % | |||||
Quarter end | |||||||||||||||
Noninterest-bearing | $ | 156.3 | $ | 154.2 | $ | 107.3 | 1 | % | 46 | % | |||||
Interest-bearing | 292.6 | 298.7 | 247.8 | (2) | % | 18 | % | ||||||||
Total deposits | $ | 448.9 | $ | 452.9 | $ | 355.1 | (1) | % | 26 | % | |||||
Average deposits for the third quarter of 2021 were
Deposits at September 30, 2021 decreased
Borrowed Funds | Change | Change | |||||||||||||
September 30, | June 30, | September 30, | 09/30/21 vs | 09/30/21 vs | |||||||||||
In billions | 06/30/21 | 09/30/20 | |||||||||||||
Average | $ | 34.4 | $ | 34.1 | $ | 43.3 | 1 | % | (21) | % | |||||
Quarter end | $ | 33.5 | $ | 34.8 | $ | 42.1 | (4) | % | (20) | % | |||||
Average borrowed funds for the third quarter of 2021 were
Borrowed funds at September 30, 2021 decreased
Capital | September 30, | June 30, | September 30, | |||||||||
* | ||||||||||||
Common shareholders' equity In billions | $ | 51.3 | $ | 51.1 | $ | 49.8 | ||||||
Basel III common equity Tier 1 capital ratio | 10.2 | % | 10.1 | % | 11.7 | % | ||||||
Basel III common equity Tier 1 fully implemented capital ratio | 10.0 | % | 9.9 | % | 11.3 | % | ||||||
* Ratios estimated | ||||||||||||
PNC maintained a strong capital position. Common shareholders' equity at September 30, 2021 increased
In the third quarter of 2021, PNC returned
On October 1, 2021, the PNC board of directors declared a quarterly cash dividend on common stock of
For information regarding PNC's Basel III capital ratios, see Capital Ratios in the Consolidated Financial Highlights. PNC elected a five-year transition provision effective March 31, 2020 to delay for two years the full impact of the Current Expected Credit Losses (CECL) standard on regulatory capital, followed by a three-year transition period. The fully implemented ratios reflect the full impact of CECL and exclude the benefits of this transition provision.
CREDIT QUALITY REVIEW | |||||||||||||||||
Credit Quality | Change 3Q21 vs 2Q21 | Change 3Q21 vs 3Q20 | |||||||||||||||
In millions | September 30, | June 30, | September 30, | ||||||||||||||
Provision for (recapture of) credit losses | $ | (203) | $ | 302 | $ | 52 | $ | (505) | $ | (255) | |||||||
Net loan charge-offs | $ | 81 | $ | 306 | $ | 155 | (74) | % | (48) | % | |||||||
Allowance for credit losses | $ | 6,001 | $ | 6,375 | $ | 6,440 | (6) | % | (7) | % | |||||||
Accruing loans past due 90 days or more | $ | 492 | $ | 527 | $ | 448 | (7) | % | 10 | % | |||||||
Nonperforming loans | $ | 2,528 | $ | 2,779 | $ | 2,085 | (9) | % | 21 | % | |||||||
Net charge-offs to average loans (annualized) | 0.11 | % | 0.48 | % | 0.24 | % | |||||||||||
Allowance for credit losses to total loans | 2.07 | % | 2.16 | % | 2.58 | % | |||||||||||
Nonperforming loans to total loans | 0.87 | % | 0.94 | % | 0.84 | % | |||||||||||
The third quarter of 2021 included a provision recapture of
Net loan charge-offs were
The allowance for credit losses was
Nonperforming loans at September 30, 2021 of
Overall delinquencies at September 30, 2021 of
BUSINESS SEGMENT RESULTS | |||||||||||
Business Segment Income | |||||||||||
In millions | 3Q21 | 2Q21 | 3Q20 | ||||||||
Retail Banking | $ | 447 | $ | 232 | $ | 530 | |||||
Corporate & Institutional Banking | 1,123 | 809 | 670 | ||||||||
Asset Management Group | 114 | 87 | 91 | ||||||||
Other | (210) | (37) | 228 | ||||||||
Net income excluding noncontrolling interest | $ | 1,474 | $ | 1,091 | $ | 1,519 | |||||
See accompanying notes in Consolidated Financial Highlights | |||||||||||
Retail Banking | Change | Change | |||||||||||||||||
3Q21 vs | 3Q21 vs | ||||||||||||||||||
In millions | 3Q21 | 2Q21 | 3Q20 | 2Q21 | 3Q20 | ||||||||||||||
Net interest income | $ | 1,713 | $ | 1,497 | $ | 1,383 | $ | 216 | $ | 330 | |||||||||
Noninterest income | $ | 662 | $ | 706 | $ | 673 | $ | (44) | $ | (11) | |||||||||
Provision for (recapture of) credit losses | $ | (113) | $ | 214 | $ | (157) | $ | (327) | $ | 44 | |||||||||
Noninterest expense | $ | 1,889 | $ | 1,677 | $ | 1,512 | $ | 212 | $ | 377 | |||||||||
Earnings | $ | 447 | $ | 232 | $ | 530 | $ | 215 | $ | (83) | |||||||||
In billions | |||||||||||||||||||
Average | |||||||||||||||||||
Loans | $ | 99.1 | $ | 84.3 | $ | 81.8 | $ | 14.8 | $ | 17.3 | |||||||||
Deposits | $ | 262.0 | $ | 233.2 | $ | 197.9 | $ | 28.8 | $ | 64.1 | |||||||||
Quarter end | |||||||||||||||||||
Loans | $ | 97.3 | $ | 100.7 | $ | 80.7 | $ | (3.4) | $ | 16.6 | |||||||||
Deposits | $ | 261.7 | $ | 260.8 | $ | 198.7 | $ | 0.9 | $ | 63.0 | |||||||||
Net charge offs In millions | $ | 82 | $ | 79 | $ | 125 | $ | 3 | $ | (43) | |||||||||
Retail Banking Highlights
Third quarter 2021 compared with second quarter 2021
- Earnings increased
93% , due to the full quarter benefit of BBVA USA and a provision recapture, partially offset by lower noninterest income. - Noninterest income decreased
6% , primarily due to a negative fair value adjustment of$169 million related to the Visa Class B derivative, partially offset by the full quarter benefit of BBVA USA and higher residential mortgage revenue. The second quarter of 2021 included a negative Visa Class B derivative fair value adjustment of$13 million . - Provision recapture of
$113 million at September 30, 2021 reflected changes in portfolio composition and continued improvements in credit quality. The second quarter included a provision for credit losses of$214 million , primarily related to the acquisition of BBVA USA. - Noninterest expense increased
13% , driven by the full quarter impact of BBVA USA related operating expenses and increased marketing activity. - Average loans and deposits increased
18% and12% , respectively, reflecting the full quarter benefit of BBVA USA. - Period-end loans decreased
3% , driven by PPP loan forgiveness as well as lower home equity and auto loans, partially offset by higher residential mortgage loans. - Period-end deposits increased modestly driven by growth in demand and savings deposits.
Third quarter 2021 compared with third quarter 2020
- Earnings decreased
16% and included the benefit of BBVA USA. - Noninterest income declined
2% , primarily due to a negative Visa Class B derivative fair value adjustment, partially offset by higher consumer services fees and service charges on deposits, reflecting the addition of BBVA USA customers. - Noninterest expense increased
25% , driven by operating expenses related to BBVA USA and increased marketing activity. - Average and period-end loans both increased
21% . Average and period-end deposits both increased32% . In all comparisons, the increase reflected the impact of the BBVA USA acquisition.
Corporate & Institutional Banking | Change | Change | |||||||||||||||||
3Q21 vs | 3Q21 vs | ||||||||||||||||||
In millions | 3Q21 | 2Q21 | 3Q20 | 2Q21 | 3Q20 | ||||||||||||||
Net interest income | $ | 1,250 | $ | 1,092 | $ | 1,025 | $ | 158 | $ | 225 | |||||||||
Noninterest income | $ | 1,056 | $ | 867 | $ | 723 | $ | 189 | $ | 333 | |||||||||
Provision for (recapture of) credit losses | $ | (99) | $ | 104 | $ | 211 | $ | (203) | $ | (310) | |||||||||
Noninterest expense | $ | 980 | $ | 813 | $ | 663 | $ | 167 | $ | 317 | |||||||||
Earnings | $ | 1,123 | $ | 809 | $ | 670 | $ | 314 | $ | 453 | |||||||||
In billions | |||||||||||||||||||
Average | |||||||||||||||||||
Loans | $ | 175.8 | $ | 157.7 | $ | 159.5 | $ | 18.1 | $ | 16.3 | |||||||||
Deposits | $ | 163.1 | $ | 145.0 | $ | 133.1 | $ | 18.1 | $ | 30.0 | |||||||||
Quarter end | |||||||||||||||||||
Loans | $ | 176.4 | $ | 177.5 | $ | 156.6 | $ | (1.1) | $ | 19.8 | |||||||||
Deposits | $ | 157.8 | $ | 164.1 | $ | 137.3 | $ | (6.3) | $ | 20.5 | |||||||||
Net charge-offs In millions | $ | 13 | $ | 233 | $ | 32 | $ | (220) | $ | (19) | |||||||||
Corporate & Institutional Banking Highlights
Third quarter 2021 compared with second quarter 2021
- Earnings increased
39% , including the full quarter benefit of BBVA USA, record merger and acquisition advisory fees and a provision recapture. - Noninterest income increased
22% , primarily due to record merger and acquisition advisory fees and increased treasury management product revenue. - Provision recapture of
$99 million at September 30, 2021 reflected continued improvements in credit quality. The second quarter included a provision for credit losses of$104 million , primarily related to the acquisition of BBVA USA. - Noninterest expense increased
21% , due to the full quarter impact of BBVA USA operating expenses and higher variable costs as a result of elevated business activity. - Average loans and deposits increased
11% and12% , respectively, reflecting the full quarter benefit of BBVA USA. - Period-end loans decreased
1% , driven by a decline in BBVA USA legacy loan portfolios and PPP loan forgiveness, partially offset by growth in PNC legacy corporate banking, business credit and multifamily agency warehouse lending. - Period-end deposits decreased
4% , due to BBVA USA legacy deposit outflows reflecting the impact of strategic repricing decisions, partially offset by growth in PNC legacy deposits.
Third quarter 2021 compared with third quarter 2020
- Earnings increased
68% , and included record merger and acquisition advisory fees, the benefit of BBVA USA and a provision recapture. - Noninterest income increased
46% , driven by record merger and acquisition advisory fees and increased treasury management product revenue. - Noninterest expense increased
48% , reflecting operating expenses related to BBVA USA and higher variable costs as a result of elevated business activity. - Average loans increased
10% , and included the acquisition of BBVA USA. - Period-end loans increased
13% , reflecting the acquisition of BBVA USA and growth in PNC's business credit business, partially offset by PPP loan forgiveness and declines in PNC's real estate and corporate banking businesses. - Average and period-end deposits increased
23% and15% , respectively, primarily due to the acquisition of BBVA USA.
Asset Management Group | Change | Change | |||||||||||||||||
3Q21 vs | 3Q21 vs | ||||||||||||||||||
In millions | 3Q21 | 2Q21 | 3Q20 | 2Q21 | 3Q20 | ||||||||||||||
Net interest income | $ | 141 | $ | 112 | $ | 89 | $ | 29 | $ | 52 | |||||||||
Noninterest income | $ | 256 | $ | 244 | $ | 221 | $ | 12 | $ | 35 | |||||||||
Provision for (recapture of) credit losses | $ | (6) | $ | 23 | $ | (19) | $ | (29) | $ | 13 | |||||||||
Noninterest expense | $ | 255 | $ | 219 | $ | 211 | $ | 36 | $ | 44 | |||||||||
Earnings | $ | 114 | $ | 87 | $ | 91 | $ | 27 | $ | 23 | |||||||||
In billions | |||||||||||||||||||
Discretionary client assets under management | $ | 183 | $ | 183 | $ | 158 | — | $ | 25 | ||||||||||
Nondiscretionary client assets under administration | $ | 170 | $ | 172 | $ | 142 | $ | (2) | $ | 28 | |||||||||
Client assets under administration at quarter end | $ | 353 | $ | 355 | $ | 300 | $ | (2) | $ | 53 | |||||||||
Brokerage client account assets | $ | 5 | $ | 5 | — | $ | — | $ | 5 | ||||||||||
In billions | |||||||||||||||||||
Average | |||||||||||||||||||
Loans | $ | 13.0 | $ | 10.0 | $ | 7.9 | $ | 3.0 | $ | 5.1 | |||||||||
Deposits | $ | 29.3 | $ | 23.4 | $ | 19.1 | $ | 5.9 | $ | 10.2 | |||||||||
Quarter end | |||||||||||||||||||
Loans | $ | 13.1 | $ | 12.9 | $ | 8.1 | $ | 0.2 | $ | 5.0 | |||||||||
Deposits | $ | 29.3 | $ | 28.7 | $ | 18.8 | $ | 0.6 | $ | 10.5 | |||||||||
Net charge-offs (recoveries) In millions | $ | (1) | $ | 2 | $ | 1 | $ | (3) | $ | (2) | |||||||||
Asset Management Group Highlights
Third quarter 2021 compared with second quarter 2021
- Earnings increased
31% , and included the full quarter benefit of BBVA USA. - Noninterest income increased
5% , due to the full quarter benefit of BBVA USA and higher average equity markets. - Noninterest expense increased
16% , due to the full quarter impact of BBVA USA related operating expenses and higher operational loss reserves. - Discretionary client assets under management remained consistent with the prior quarter.
- Average loans and deposits increased
30% and25% , respectively, reflecting the full quarter benefit of BBVA USA.
Third quarter 2021 compared with third quarter 2020
- Earnings increased
25% , primarily due to the impact of BBVA USA and higher average equity markets. - Noninterest income increased
16% , driven by higher average equity markets and the benefit of BBVA USA. - Noninterest expense increased
21% , due to the impact of operating expenses related to BBVA USA and higher operational loss reserves. - Discretionary client assets under management increased
16% , primarily driven by higher spot equity markets. - Average loans and deposits increased
65% and53% , respectively, reflecting the acquisition of BBVA USA.
Other
The "Other" category, for the purposes of this release, includes residual activities that do not meet the criteria for disclosure as a separate reportable business, such as asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities, certain trading activities, certain runoff consumer loan portfolios, private equity investments, intercompany eliminations, certain corporate overhead, tax adjustments that are not allocated to business segments, exited businesses, and differences between business segment performance reporting and financial statement reporting under generally accepted accounting principles.
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC Chairman, President and Chief Executive Officer William S. Demchak and Executive Vice President and Chief Financial Officer Robert Q. Reilly will hold a conference call for investors today at 9:00 a.m. Eastern Time regarding the topics addressed in this news release and the related financial supplement. Dial-in numbers for the conference call are (877) 272-3568 and (312) 429-1278 (international) and Internet access to the live audio listen-only webcast of the call is available at www.pnc.com/investorevents. PNC's third quarter 2021 earnings release, related financial supplement, and presentation slides to accompany the conference call remarks will be available at www.pnc.com/investorevents prior to the beginning of the call. A telephone replay of the call will be available for one week at (800) 633-8284 and (402) 977-9140 (international), conference ID 21997580 and a replay of the audio webcast will be available on PNC's website for 30 days.
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.
[TABULAR MATERIAL FOLLOWS]
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | |||||||||||||||||||||
FINANCIAL RESULTS | Three months ended | Nine months ended | ||||||||||||||||||||
Dollars in millions, except per share data | September 30 | June 30 | September 30 | September 30 | September 30 | |||||||||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||
Revenue | ||||||||||||||||||||||
Net interest income | $ | 2,856 | $ | 2,581 | $ | 2,484 | $ | 7,785 | $ | 7,522 | ||||||||||||
Noninterest income | 2,341 | 2,086 | 1,797 | 6,299 | 5,171 | |||||||||||||||||
Total revenue | 5,197 | 4,667 | 4,281 | 14,084 | 12,693 | |||||||||||||||||
Provision for (recapture of) credit losses | (203) | 302 | 52 | (452) | 3,429 | |||||||||||||||||
Noninterest expense | 3,587 | 3,050 | 2,531 | 9,211 | 7,589 | |||||||||||||||||
Income from continuing operations before income taxes and noncontrolling interests | $ | 1,813 | $ | 1,315 | $ | 1,698 | $ | 5,325 | $ | 1,675 | ||||||||||||
Income taxes from continuing operations | 323 | 212 | 166 | 906 | 128 | |||||||||||||||||
Net income from continuing operations | $ | 1,490 | $ | 1,103 | $ | 1,532 | $ | 4,419 | $ | 1,547 | ||||||||||||
Income from discontinued operations before taxes | $ | 5,777 | ||||||||||||||||||||
Income taxes from discontinued operations | 1,222 | |||||||||||||||||||||
Net income from discontinued operations | $ | 4,555 | ||||||||||||||||||||
Net income | $ | 1,490 | $ | 1,103 | $ | 1,532 | $ | 4,419 | $ | 6,102 | ||||||||||||
Less: | ||||||||||||||||||||||
Net income attributable to noncontrolling interests | 16 | 12 | 13 | 38 | 27 | |||||||||||||||||
Preferred stock dividends (a) | 57 | 48 | 63 | 162 | 181 | |||||||||||||||||
Preferred stock discount accretion and redemptions | 1 | 1 | 1 | 3 | 3 | |||||||||||||||||
Net income attributable to common shareholders | $ | 1,416 | $ | 1,042 | $ | 1,455 | $ | 4,216 | $ | 5,891 | ||||||||||||
Per Common Share | ||||||||||||||||||||||
Basic earnings from continuing operations | $ | 3.31 | $ | 2.43 | $ | 3.40 | $ | 9.84 | $ | 3.11 | ||||||||||||
Basic earnings from discontinued operations | 10.61 | |||||||||||||||||||||
Total basic earnings | $ | 3.31 | $ | 2.43 | $ | 3.40 | $ | 9.84 | $ | 13.73 | ||||||||||||
Diluted earnings from continuing operations | $ | 3.30 | $ | 2.43 | $ | 3.39 | $ | 9.83 | $ | 3.11 | ||||||||||||
Diluted earnings from discontinued operations | 10.59 | |||||||||||||||||||||
Total diluted earnings | $ | 3.30 | $ | 2.43 | $ | 3.39 | $ | 9.83 | $ | 13.70 | ||||||||||||
Cash dividends declared per common share | $ | 1.25 | $ | 1.25 | $ | 1.15 | $ | 3.65 | $ | 3.45 | ||||||||||||
Effective tax rate from continuing operations (b) | 17.8 | % | 16.1 | % | 9.8 | % | 17.0 | % | 7.6 | % | ||||||||||||
(a) | Dividends are payable quarterly other than Series R and Series S preferred stock, which are payable semiannually. On September 13, 2021, PNC issued 1,500,000 depositary shares of Series T preferred stock with a |
(b) | The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | |||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||
September 30 | June 30 | September 30 | September 30 | September 30 | ||||||||||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||
PERFORMANCE RATIOS | ||||||||||||||||||||||
Net interest margin (a) | 2.27 | % | 2.29 | % | 2.39 | % | 2.28 | % | 2.57 | % | ||||||||||||
Noninterest income to total revenue | 45 | % | 45 | % | 42 | % | 45 | % | 41 | % | ||||||||||||
Efficiency (b) | 69 | % | 65 | % | 59 | % | 65 | % | 60 | % | ||||||||||||
Return on: | ||||||||||||||||||||||
Average common shareholders' equity | 10.95 | % | 8.32 | % | 11.76 | % | 11.17 | % | 16.57 | % | ||||||||||||
Average assets | 1.06 | % | 0.88 | % | 1.32 | % | 1.16 | % | 1.83 | % | ||||||||||||
BUSINESS SEGMENT NET INCOME (LOSS) (c) | ||||||||||||||||||||||
In millions | ||||||||||||||||||||||
Retail Banking | $ | 447 | $ | 232 | $ | 530 | $ | 1,286 | $ | 508 | ||||||||||||
Corporate & Institutional Banking | 1,123 | 809 | 670 | 2,990 | 682 | |||||||||||||||||
Asset Management Group | 114 | 87 | 91 | 300 | 173 | |||||||||||||||||
Other (d) | (210) | (37) | 228 | (195) | 157 | |||||||||||||||||
Net income from continuing operations excluding noncontrolling interests | $ | 1,474 | $ | 1,091 | $ | 1,519 | $ | 4,381 | $ | 1,520 | ||||||||||||
(a) | Net interest margin is the total yield on interest-earning assets minus the total rate on interest-bearing liabilities and includes the benefit from use of noninterest-bearing sources. To provide more meaningful comparisons of net interest margins, we use net interest income on a taxable-equivalent basis in calculating average yields used in the calculation of net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under generally accepted accounting principles (GAAP) in the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020 were |
(b) | Calculated as noninterest expense divided by total revenue. |
(c) | Our business information is presented based on our internal management reporting practices. Net interest income in business segment results reflect PNC's internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors. |
(d) | Includes earnings and gains or losses related to residual activities that do not meet the criteria for disclosure as a separate reportable business. We provide additional information on these activities in our Form 10-K and Form 10-Q filings with the SEC. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | ||||||||||
September 30 | June 30 | September 30 | |||||||||
2021 | 2021 | 2020 | |||||||||
BALANCE SHEET DATA | |||||||||||
Dollars in millions, except per share data | |||||||||||
Assets | $ | 553,515 | $ | 554,212 | $ | 461,817 | |||||
Loans (a) | $ | 290,230 | $ | 294,704 | $ | 249,279 | |||||
Allowance for loan and lease losses | $ | 5,355 | $ | 5,730 | $ | 5,751 | |||||
Interest-earning deposits with banks | $ | 75,478 | $ | 72,447 | $ | 70,959 | |||||
Investment securities | $ | 125,606 | $ | 126,543 | $ | 91,185 | |||||
Loans held for sale (a) | $ | 2,121 | $ | 2,227 | $ | 1,787 | |||||
Equity investments | $ | 7,737 | $ | 7,521 | $ | 4,938 | |||||
Mortgage servicing rights | $ | 1,833 | $ | 1,793 | $ | 1,113 | |||||
Goodwill | $ | 10,885 | $ | 10,958 | $ | 9,233 | |||||
Other assets (a) | $ | 36,137 | $ | 35,025 | $ | 32,445 | |||||
Noninterest-bearing deposits | $ | 156,305 | $ | 154,190 | $ | 107,281 | |||||
Interest-bearing deposits | $ | 292,597 | $ | 298,693 | $ | 247,798 | |||||
Total deposits | $ | 448,902 | $ | 452,883 | $ | 355,079 | |||||
Borrowed funds (a) | $ | 33,471 | $ | 34,813 | $ | 42,110 | |||||
Allowance for unfunded lending related commitments | $ | 646 | $ | 645 | $ | 689 | |||||
Total shareholders' equity | $ | 56,259 | $ | 54,627 | $ | 53,276 | |||||
Common shareholders' equity | $ | 51,250 | $ | 51,107 | $ | 49,760 | |||||
Accumulated other comprehensive income | $ | 1,079 | $ | 1,463 | $ | 2,997 | |||||
Book value per common share | $ | 121.16 | $ | 120.25 | $ | 117.44 | |||||
Tangible book value per common share (non-GAAP) (b) | $ | 94.82 | $ | 93.83 | $ | 95.71 | |||||
Period end common shares outstanding (in millions) | 423 | 425 | 424 | ||||||||
Loans to deposits | 65 | % | 65 | % | 70 | % | |||||
Common shareholders' equity to total assets | 9.3 | % | 9.2 | % | 10.8 | % | |||||
CLIENT ASSETS (billions) | |||||||||||
Discretionary client assets under management | $ | 183 | $ | 183 | $ | 158 | |||||
Nondiscretionary client assets under administration | 170 | 172 | 142 | ||||||||
Total client assets under administration | 353 | 355 | 300 | ||||||||
Brokerage account client assets | 81 | 88 | 55 | ||||||||
Total client assets | $ | 434 | $ | 443 | $ | 355 | |||||
CAPITAL RATIOS | |||||||||||
Basel III (c) (d) | |||||||||||
Common equity Tier 1 | 10.2 | % | 10.1 | % | 11.7 | % | |||||
Common equity Tier 1 fully implemented (e) | 10.0 | % | 9.9 | % | 11.3 | % | |||||
Tier 1 risk-based | 11.5 | % | 11.1 | % | 12.8 | % | |||||
Total capital risk-based (f) | 13.6 | % | 13.2 | % | 15.2 | % | |||||
Leverage | 8.2 | % | 8.7 | % | 9.4 | % | |||||
Supplementary leverage | 6.9 | % | 7.3 | % | 9.5 | % | |||||
ASSET QUALITY | |||||||||||
Nonperforming loans to total loans | 0.87 | % | 0.94 | % | 0.84 | % | |||||
Nonperforming assets to total loans, OREO and foreclosed assets | 0.88 | % | 0.96 | % | 0.86 | % | |||||
Nonperforming assets to total assets | 0.46 | % | 0.51 | % | 0.47 | % | |||||
Net charge-offs to average loans (for the three months ended) (annualized) | 0.11 | % | 0.48 | % | 0.24 | % | |||||
Allowance for loan and lease losses to total loans | 1.85 | % | 1.94 | % | 2.31 | % | |||||
Allowance for credit losses to total loans (g) | 2.07 | % | 2.16 | % | 2.58 | % | |||||
Allowance for loan and lease losses to nonperforming loans | 212 | % | 206 | % | 276 | % | |||||
Accruing loans past due 90 days or more (in millions) | $ | 492 | $ | 527 | $ | 448 | |||||
(a) | Amounts include assets and liabilities for which we have elected the fair value option. Our second quarter 2021 Form 10-Q included, and our third quarter 2021 Form 10-Q will include, additional information regarding these Consolidated Balance Sheet line items. |
(b) | See the Tangible Book Value per Common Share table on page 20 for additional information. |
(c) | All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented and calculated based on the standardized approach. See Capital Ratios on page 18 for additional information. The ratios as of September 30, 2021 are estimated. |
(d) | The ratios are calculated to reflect PNC's election to adopt the CECL optional five-year transition provision. |
(e) | The fully implemented ratios are calculated to reflect the full impact of CECL and excludes the benefits of the five-year transition provision. |
(f) | The 2021 and 2020 Basel III Total risk-based capital ratios include nonqualifying trust preferred capital securities of |
(g) | Excludes allowances for investment securities and other financial assets. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) |
CAPITAL RATIOS
As of January 1, 2020, the 2019 Tailoring Rules became effective for PNC. The most significant changes involve PNC's election to exclude specific accumulated other comprehensive income items from common equity Tier 1 capital and higher thresholds used to calculate common equity Tier 1 capital deductions. Effective January 1, 2020, PNC must deduct from common equity Tier 1 capital investments in unconsolidated financial institutions, mortgage servicing rights and deferred tax assets (in each case, net of associated deferred tax liabilities) to the extent such items individually exceed
PNC's regulatory risk-based capital ratios in 2021 are calculated using the standardized approach for determining risk-weighted assets. Under the standardized approach for determining credit risk-weighted assets, exposures are generally assigned a pre-defined risk weight. Exposures to high volatility commercial real estate, past due exposures and equity exposures are generally subject to higher risk weights than other types of exposures.
During 2020, regulators adopted a final rule permitting banks that have adopted the CECL standard to delay for two years CECL's full impact on regulatory capital, relative to the incurred loss methodology's impact on regulatory capital, followed by a three year transition period. PNC elected to adopt this optional five-year transition provision effective as of March 31, 2020. See the table below for the June 30, 2021, September 30, 2020 and estimated September 30, 2021 ratios. For the full impact of PNC's adoption of CECL, which excludes the benefits of the five-year transition provision, see the September 30, 2021 and June 30, 2021 (Fully Implemented) estimates presented in the table below.
Our Basel III capital ratios may be impacted by changes to the regulatory capital rules and additional regulatory guidance or analysis.
Basel lll Common Equity Tier 1 Capital Ratios | |||||||||||||||||
Basel III (a) | |||||||||||||||||
September 30 2021 (estimated) (b) | June 30 2021 (b) | September 30 2020 (b) | September 30, 2021 (estimated) (c) | June 30, 2021 (estimated) (c) | |||||||||||||
Dollars in millions | |||||||||||||||||
Common stock, related surplus and retained earnings, net of treasury stock | $ | 51,228 | $ | 50,775 | $ | 48,122 | $ | 50,171 | $ | 49,645 | |||||||
Less regulatory capital adjustments: | |||||||||||||||||
Goodwill and disallowed intangibles, net of deferred tax liabilities | (11,142) | (11,231) | (9,208) | (11,142) | (11,231) | ||||||||||||
All other adjustments | (48) | (27) | (63) | (53) | (33) | ||||||||||||
Basel III Common equity Tier 1 capital | $ | 40,038 | $ | 39,517 | $ | 38,851 | $ | 38,976 | $ | 38,381 | |||||||
Basel III standardized approach risk-weighted assets (d) | $ | 390,682 | $ | 389,429 | $ | 331,748 | $ | 390,667 | $ | 388,957 | |||||||
Basel III Common equity Tier 1 capital ratio | 10.2 | % | 10.1 | % | 11.7 | % | 10.0 | % | 9.9 | % | |||||||
(a) | All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented. |
(b) | The ratio is calculated to reflect PNC's election to adopt the CECL optional five-year transition provision. |
(c) | The September 30, 2021 and June 30, 2021 ratio is calculated to reflect the full impact of CECL and excludes the benefits of the five-year transition provision. |
(d) | Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | |
NON-GAAP MEASURES |
Pretax Pre-Provision Earnings (non-GAAP) Pretax Pre-Provision Earnings Excluding Integration Costs (non-GAAP) | |||||||||||
September 30 | June 30 | September 30 | |||||||||
Dollars in millions | 2021 | 2021 | 2020 | ||||||||
Income from continuing operations before income taxes and noncontrolling interests | $ | 1,813 | $ | 1,315 | $ | 1,698 | |||||
Provision for (recapture of) credit losses (a) | (203) | 302 | 52 | ||||||||
Pretax pre-provision earnings (non-GAAP) | $ | 1,610 | $ | 1,617 | $ | 1,750 | |||||
Integration costs | 243 | 111 | NA | ||||||||
Pretax pre-provision earnings excluding integration costs (non-GAAP) | $ | 1,853 | $ | 1,728 | NA | ||||||
(a) | Provision for (recapture of) credit losses for the three months ended June 30, 2021 includes a |
Pretax pre-provision earnings is a non-GAAP measure and is based on adjusting income from continuing operations before income taxes and noncontrolling interests to exclude provision for (recapture of) credit losses. We believe that pretax, pre-provision earnings is a useful tool to help evaluate the ability to provide for credit costs through operations and provides an additional basis to compare results between periods by isolating the impact of provision for (recapture of) credit losses, which can vary significantly between periods.
Pretax pre-provision earnings excluding integration costs is a non-GAAP measure and is based on adjusting pretax pre-provision earnings to exclude integration costs during the period. We believe that pretax, pre-provision earnings excluding integration costs is a useful tool in understanding PNC's results by providing greater comparability between periods, as well as demonstrating the effect of significant items.
Adjusted Diluted Earnings per Common Share Excluding Integration Costs (non-GAAP) | |||||||||||||||
September 30 | Per Common | June 30 | Per Common | ||||||||||||
Dollars in millions, except per share data | 2021 | 2021 | |||||||||||||
Net income attributable to diluted common shareholders | $ | 1,408 | $ | 3.30 | $ | 1,037 | $ | 2.43 | |||||||
Integration costs after tax (a) | 192 | 0.45 | 88 | 0.21 | |||||||||||
Adjusted net income attributable to diluted common shareholders | $ | 1,600 | $ | 3.75 | $ | 1,125 | $ | 2.64 | |||||||
Average diluted common shares outstanding (in millions) | 426 | 427 | |||||||||||||
(a) | Statutory tax rate of |
The adjusted diluted earnings per common share excluding integration costs is a non-GAAP measure and excludes the integration costs related to the BBVA USA acquisition. It is calculated based on adjusting net income attributable to diluted common shareholders by removing post-tax integration costs in the period. This non-GAAP measure was updated from the Q2 2021 earnings release to only adjust for integration costs to provide for a better quarter-over-quarter comparison as Q2 2021 included a significant initial provision for credit losses for BBVA USA that will not be taken in future quarters. We believe this non-GAAP measure serves as a useful tool in understanding PNC's results by providing greater comparability between periods, as well as demonstrating the effect of significant items.
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) |
Tangible Book Value per Common Share (non-GAAP) | |||||||||||
September 30 | June 30 | September 30 | |||||||||
Dollars in millions, except per share data | 2021 | 2021 | 2020 | ||||||||
Book value per common share | $ | 121.16 | $ | 120.25 | $ | 117.44 | |||||
Tangible book value per common share | |||||||||||
Common shareholders' equity | $ | 51,250 | $ | 51,107 | $ | 49,760 | |||||
Goodwill and other intangible assets | (11,419) | (11,515) | (9,396) | ||||||||
Deferred tax liabilities on goodwill and other intangible assets | 277 | 284 | 187 | ||||||||
Tangible common shareholders' equity | $ | 40,108 | $ | 39,876 | $ | 40,551 | |||||
Period-end common shares outstanding (in millions) | 423 | 425 | 424 | ||||||||
Tangible book value per common share (non-GAAP) | $ | 94.82 | $ | 93.83 | $ | 95.71 | |||||
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.
Taxable-Equivalent Net Interest Income (non-GAAP) | |||||||||||
September 30 | June 30 | September 30 | |||||||||
Dollars in millions | 2021 | 2021 | 2020 | ||||||||
Net interest income | $ | 2,856 | $ | 2,581 | $ | 2,484 | |||||
Taxable-equivalent adjustments | 22 | 15 | 17 | ||||||||
Net interest income (Fully Taxable-Equivalent - FTE) | $ | 2,878 | $ | 2,596 | $ | 2,501 | |||||
The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest income, we use 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. This adjustment is not permitted under GAAP. Taxable equivalent net interest income is only used for calculating net interest margin and net interest income shown elsewhere in this presentation is GAAP net interest income.
Efficiency Ratio Excluding Integration Costs (non-GAAP) | |||||||
September 30 | June 30 | ||||||
Dollars in millions | 2021 | 2021 | |||||
Noninterest expense | $ | 3,587 | $ | 3,050 | |||
Integration expense | (235) | (101) | |||||
Noninterest expense excluding integration expense (non-GAAP) | $ | 3,352 | $ | 2,949 | |||
Total revenue | $ | 5,197 | $ | 4,667 | |||
Integration costs - contra revenue | (8) | (10) | |||||
Total revenue excluding integration costs - contra revenue (non-GAAP) | $ | 5,205 | $ | 4,677 | |||
Efficiency ratio (a) | 69 | % | 65 | % | |||
Efficiency ratio excluding integration costs (non-GAAP) (b) | 64 | % | 63 | % | |||
(a) | Calculated as noninterest expense divided by total revenue. |
(b) | Calculated as noninterest expense excluding integration expense divided by total revenue excluding integration costs - contra revenue. |
The efficiency ratio excluding integration costs is a non-GAAP measure and excludes the integration costs related to the BBVA USA acquisition. It is calculated based on adjusting the efficiency ratio calculation by excluding integration costs during the period from noninterest expense and total revenue. We believe that this non-GAAP measure is a useful tool for the purpose of evaluating PNC's results. The exclusion of integration costs increases comparability across periods, demonstrates the impact of significant items and provides a useful measure for determining PNC's revenue and expenses that are core to our business operations and expected to recur over time.
Cautionary Statement Regarding Forward-Looking Information
We make statements in this news release and related conference call, and we may from time to time make other statements, regarding our outlook for financial performance, such as earnings, revenues, expenses, tax rates, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting us and our 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 necessarily subject to numerous assumptions, risks and uncertainties, which change over time. 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 speak only as of the date made. We do not assume any duty and do not undertake any obligation 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. As a result, we caution against placing undue reliance on any forward-looking statements.
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:
- Changes in interest rates and valuations in debt, equity and other financial markets,
- Disruptions in the U.S. and global financial markets,
- Actions by the Federal Reserve Board, U.S. Treasury and other government agencies, including those that impact money supply, market interest rates and inflation,
- Changes in customer behavior due to changing business and economic conditions or legislative or regulatory initiatives,
- Changes in customers', suppliers' and other counterparties' performance and creditworthiness,
- Impacts of tariffs and other trade policies of the U.S. and its global trading partners,
- The length and extent of the economic impacts of the COVID-19 pandemic,
- The impact of the results of the 2020 U.S. elections, including on the regulatory landscape, capital markets, tax policy, infrastructure spending and social programs, and
- Commodity price volatility.
- Our forward-looking financial statements are subject to the risk that economic and financial market conditions will be substantially different than those we are currently expecting and do not take into account potential legal and regulatory contingencies. These statements are based on our view that:
- The U.S. economy is in an economic recovery, following a very severe but very short economic contraction in the first half of 2020 due to the COVID-19 pandemic and public health measures to contain it.
- With the passage of the American Rescue Plan Act of 2021 and continued vaccine distribution, economic growth picked up in the first half of 2021, and real GDP returned to its pre-pandemic level in the second quarter of 2021. The Delta variant and supply chain difficulties have been drags on growth in the second half of 2021, although the economy continues to expand. Growth will pick up at the end of 2021 as the impact of the Delta variant fades and supply chains normalize and will remain solid into 2022. Employment in September 2021 was still down by almost 5 million from before the pandemic; PNC expects employment to return to its pre-pandemic level in mid-2022.
- Compared to the spring of 2020 (when prices were falling), inflation accelerated in mid-2021 due to strong demand in specific segments and supply chain disruptions. Inflation has started to slow on a month-over-month basis but will remain elevated in the near term.
- PNC expects the Federal Open Market Committee to keep the fed funds rate in its current range of 0.00 to 0.25 percent until mid-2023.
- PNC's ability to take certain capital actions, including returning capital to shareholders, is subject to PNC meeting or exceeding a stress capital buffer established by the Federal Reserve Board in connection with the Federal Reserve Board's Comprehensive Capital Analysis and Review (CCAR) process.
- 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 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 review of related models.
Cautionary Statement Regarding Forward-Looking Information (Continued)
- 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 to laws and regulations, including changes affecting oversight of the financial services industry, consumer protection, bank capital and liquidity standards, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles.
- Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries. 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.
- 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 systems and controls, third-party insurance, derivatives, and capital management techniques, and to meet evolving regulatory capital and liquidity standards.
- Our acquisition of BBVA USA Bancshares, Inc. presents us with risks and uncertainties related to the integration of the acquired business into PNC including:
- The business of BBVA USA Bancshares, Inc., including its U.S. banking subsidiary, BBVA USA, going forward may not perform as we currently project or in a manner consistent with historical performance. As a result, the anticipated benefits, including estimated cost savings, of the transaction may be significantly more difficult or take longer to achieve than expected or may not be achieved in their entirety as a result of unexpected factors or events, including those that are outside of our control.
- The integration of BBVA USA Bancshares, Inc., including its U.S. banking subsidiary, BBVA USA, with that of PNC and PNC Bank may be more difficult to achieve than anticipated or have unanticipated adverse results relating to BBVA USA Bancshares, Inc., including its U.S. banking subsidiary, BBVA USA, or our existing businesses. Our ability to integrate BBVA USA Bancshares, Inc., including its U.S. banking subsidiary, BBVA USA, successfully may be adversely affected by the fact that this transaction results in us entering several geographic markets where we did not previously have any meaningful presence.
- In addition to the BBVA USA Bancshares, Inc. transaction, we grow our business in part through acquisitions and new strategic initiatives. Risks and uncertainties include those presented by the nature of the business acquired and strategic initiative, 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. 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, system failures, security breaches, 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 2020 Form 10-K and in our subsequent Form 10-Qs, including in the Risk Factors and Risk Management sections and the Legal Proceedings and Commitments Notes of the Notes To Consolidated Financial Statements in those reports, and in our other subsequent SEC filings. Our forward-looking statements may also be subject to other risks and uncertainties, including those we may discuss elsewhere in this news release 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.
MEDIA:
Marcey Zwiebel
(412) 762-4550
media.relations@pnc.com
INVESTORS:
Bryan Gill
(412) 768-4143
investor.relations@pnc.com
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SOURCE The PNC Financial Services Group, Inc.
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