PNC FINANCIAL SERVICES GROUP, INC. PITTSBURGH, Jan. 13, 2017 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported:
For the year
------------
2016 2015 4Q16 3Q16 4Q15
---- ---- ---- ---- ----
Net income $ millions $3,985 $4,143 $1,047 $1,006 $1,022
----------------------- ------ ------ ------ ------ ------
Diluted earnings per common share $7.30 $7.39 $1.97 $1.84 $1.87
--------------------------------- ----- ----- ----- ----- -----
"PNC delivered a solid year in 2016. Although the financial results finished slightly below 2015, this was due in part to our disciplined risk management efforts throughout the year to position PNC well in the current credit and interest rate cycle," said William S. Demchak, chairman, president and chief executive officer. "At the same time in 2016, we grew net interest and fee income, and kept expenses essentially flat. We also returned capital to shareholders, grew our customer franchise and continued to invest in our strategic priorities, particularly core technology infrastructure that will be critical to our future success. As we look ahead, I'm confident the actions we took position us for further growth and long-term value."
Income Statement Highlights
Fourth quarter 2016 compared with third quarter 2016
-- Total revenue grew $45 million to $3.9 billion.
-- Net interest income increased $35 million, or 2 percent, to $2.1
billion driven by higher securities and loan balances and higher
loan yields.
-- Noninterest income of $1.7 billion increased $10 million, or 1
percent, as lower fee income was offset by higher other income.
-- Noninterest expense increased $47 million, or 2 percent, to $2.4 billion
and included a $55 million contribution to the PNC Foundation.
-- Provision for credit losses was $67 million, a decrease of $20 million
as overall credit quality remained stable.
Balance Sheet Highlights
-- Loans grew $.4 billion to $210.8 billion at December 31, 2016 compared
with September 30, 2016, and average loans grew $2.0 billion, or 1
percent, in the fourth quarter over the third quarter.
-- Average commercial lending balances increased $1.7 billion, or 1
percent, primarily in PNC's corporate banking and real estate
businesses.
-- Average consumer lending balances increased $.3 billion due to
growth in auto, residential mortgage and credit card loans partially
offset by lower home equity and education loans reflecting runoff
portfolios.
-- Overall credit quality remained stable.
-- Nonperforming assets were $2.4 billion at both December 31, 2016 and
September 30, 2016.
-- Net charge-offs declined to $106 million for the fourth quarter
compared with $154 million for the third quarter.
-- Deposits were $257.2 billion at December 31, 2016, a decrease of $2.7
billion from September 30, 2016.
-- Average deposits increased $4.5 billion, or 2 percent, in the fourth
quarter compared with the third quarter reflecting higher commercial
deposits and growth in savings products.
-- Investment securities of $75.9 billion at December 31, 2016 decreased
$2.6 billion, or 3 percent, compared with September 30, 2016, and
average investment securities increased $4.4 billion, or 6 percent, in
the fourth quarter compared with the third quarter.
-- PNC maintained a strong liquidity position.
-- The Liquidity Coverage Ratio at December 31, 2016 for both PNC and
PNC Bank, N.A. continued to exceed the fully phased-in requirement
of 100 percent, which became effective on January 1, 2017.
-- PNC returned $.8 billion of capital to shareholders, or 79 percent of
fourth quarter net income attributable to diluted common shares, through
repurchases of 4.9 million common shares for $.5 billion and dividends
on common shares of $.3 billion.
-- PNC maintained a strong capital position.
-- Transitional Basel III common equity Tier 1 capital ratio was an
estimated 10.6 percent at both December 31, 2016 and September 30,
2016, calculated using the regulatory capital methodologies
applicable to PNC during 2016.
-- Pro forma fully phased-in Basel III common equity Tier 1 capital
ratio, a non-GAAP financial measure, was an estimated 10.0 percent
at December 31, 2016 and 10.2 percent at September 30, 2016, based
on the standardized approach rules.
Earnings Summary
In millions, except per share data 4Q16 3Q16 4Q15
---- ---- ----
Net income $1,047 $1,006 $1,022
Net income attributable to diluted common shares $973 $913 $957
Diluted earnings per common share $1.97 $1.84 $1.87
Average diluted common shares outstanding 494 496 513
Return on average assets 1.13% 1.10% 1.12%
Return on average common equity 9.31% 8.74% 9.30%
Book value per common share Period end $86.10 $86.57 $81.84
Tangible book value per common share (non-GAAP) Period end $67.41 $67.93 $63.65
Cash dividends declared per common share $.55 $.55 $.51
---------------------------------------- ---- ---- ----
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported amounts. Reference to core net interest income, a non-GAAP financial measure, is to total net interest income less purchase accounting accretion as detailed in the Consolidated Financial Highlights. 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
4Q16 vs 4Q16 vs
In millions 4Q16 3Q16 4Q15 3Q16 4Q15
Net interest income $2,130 $2,095 $2,092 2% 2%
Noninterest income 1,744 1,734 1,761 1% (1)%
Total revenue $3,874 $3,829 $3,853 1% 1%
Total revenue for the fourth quarter of 2016 grew $45 million compared with the third quarter and $21 million compared with the fourth quarter of 2015. Net interest income increased in both comparisons and noninterest income increased over the third quarter.
Net interest income for the fourth quarter of 2016 increased $35 million compared with the third quarter and $38 million compared with the fourth quarter of 2015 primarily due to higher core net interest income. Higher securities and loan balances and higher loan yields were partially offset by an increase in borrowing costs. Additionally, in the fourth quarter 2015 comparison, purchase accounting accretion declined.
The net interest margin was 2.69 percent for the fourth quarter of 2016 compared with 2.68 percent for the third quarter and 2.70 percent for the fourth quarter of 2015. The fourth quarter 2016 margin reflected higher loan yields, lower securities yields and higher borrowing costs.
Noninterest Income Change Change
4Q16 vs 4Q16 vs
In millions 4Q16 3Q16 4Q15 3Q16 4Q15
Asset management $399 $404 $399 (1)% -
Consumer services 349 348 349 - -
Corporate services 387 389 394 (1)% (2)%
Residential mortgage 142 160 113 (11)% 26%
Service charges on deposits 172 174 170 (1)% 1%
Other, including net securities
gains 295 259 336 14% (12)%
$1,744 $1,734 $1,761 1% (1)%
Noninterest income for the fourth quarter of 2016 increased $10 million compared with the third quarter. Asset management revenue, which includes earnings from PNC's equity investment in BlackRock, declined as the impact of higher equity markets was more than offset by lower fixed income markets and lower net new business activity. Corporate service fees reflected lower merger and acquisition advisory fees and a higher benefit from commercial mortgage servicing rights valuation. Residential mortgage banking noninterest income decreased $18 million primarily due to lower loan sales revenue from lower application and origination volumes. Other noninterest income increased $36 million largely attributable to higher revenue from private equity and other investments and higher gains on asset dispositions.
Noninterest income for the fourth quarter of 2016 declined $17 million compared with the fourth quarter of 2015 as growth in fee income was more than offset by lower other income. Residential mortgage banking noninterest income increased $29 million driven by higher net hedging gains on mortgage servicing rights and increased loan sales revenue from higher origination volumes. Other noninterest income decreased $41 million reflecting the impact of fourth quarter 2015 sales of Visa Class B common shares.
CONSOLIDATED EXPENSE REVIEW
Noninterest Expense Change Change
4Q16 vs 4Q16 vs
In millions 4Q16 3Q16 4Q15 3Q16 4Q15
Personnel $1,231 $1,239 $1,252 (1)% (2)%
Occupancy 210 215 208 (2)% 1%
Equipment 254 246 245 3% 4%
Marketing 60 72 56 (17)% 7%
Other 686 622 635 10% 8%
$2,441 $2,394 $2,396 2% 2%
Noninterest expense for the fourth quarter of 2016 increased $47 million compared with the third quarter and $45 million compared with the fourth quarter of 2015. Fourth quarter 2016 included a contribution of $55 million to the PNC Foundation. PNC continued to invest in technology and business infrastructure while remaining focused on disciplined expense management.
The effective tax rate was 23.4 percent for the fourth quarter of 2016, 25.4 percent for the third quarter of 2016 and 26.1 percent for the fourth quarter of 2015. The decline in both comparisons was largely related to the tax favorability of the PNC Foundation contribution.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were $366.4 billion at December 31, 2016 compared with $369.3 billion at September 30, 2016 and $358.5 billion at December 31, 2015. Assets declined 1 percent compared with third quarter end primarily due to lower investment securities balances. Assets grew 2 percent over year end 2015 as a result of higher investment securities and loans partially offset by lower deposits maintained with the Federal Reserve Bank.
Loans Change Change
12/31/16 vs 12/31/16 vs
In billions 12/31/2016 9/30/2016 12/31/2015 9/30/16 12/31/15
Commercial lending $138.0 $138.2 $133.6 - 3%
Consumer lending 72.8 72.2 73.1 1% -
Total loans $210.8 $210.4 $206.7 - 2%
For the quarter
ended:
Average loans $210.9 $208.9 $206.0 1% 2%
Total loans grew $.4 billion as of December 31, 2016 compared with September 30, 2016, and average loans grew $2.0 billion in the fourth quarter over the third quarter. Average commercial lending balances increased $1.7 billion primarily in PNC's corporate banking and real estate businesses. Average consumer lending balances increased $.3 billion due to growth in auto, residential mortgage and credit card loans partially offset by lower home equity and education loans driven by runoff portfolios.
Fourth quarter 2016 period end and average loans increased $4.1 billion and $4.9 billion, respectively, compared with fourth quarter 2015 driven by commercial and commercial real estate loan growth partially offset by a decrease in consumer loans, including runoff portfolios of non-strategic residential mortgage, brokered home equity and discontinued government guaranteed education loans.
Investment Securities Change Change
12/31/16 vs 12/31/16 vs
In billions 12/31/2016 9/30/2016 12/31/2015 9/30/16 12/31/15
At quarter end $75.9 $78.5 $70.5 (3)% 8%
Average for the quarter
ended $76.0 $71.6 $67.8 6% 12%
Investment securities balances at December 31, 2016 decreased $2.6 billion compared with September 30, 2016, while average balances for the fourth quarter increased $4.4 billion compared with the third quarter reflecting the full quarter impact of securities purchases at the end of the third quarter. The decrease in the year-end balance was due to repayments and a valuation decline in the available for sale investment securities portfolio primarily as a result of higher market interest rates. The net unrealized pretax gain declined to $.2 billion at December 31, 2016 compared with $1.3 billion at September 30, 2016. Fourth quarter 2016 period end and average investment securities increased $5.4 billion and $8.2 billion, respectively, compared with fourth quarter 2015.
Interest-earning deposits with banks, primarily with the Federal Reserve Bank, declined to $25.7 billion at December 31, 2016 compared with $27.1 billion at September 30, 2016 and $30.5 billion at December 31, 2015. The decrease from September 30, 2016 was due to a decline in deposits and growth in other asset categories partially offset by lower investment securities and increased borrowings. The decrease from year end 2015 largely resulted from investment securities purchases and loan growth partially offset by deposit growth.
Deposits Change Change
12/31/16 vs 12/31/16 vs
In billions 12/31/2016 9/30/2016 12/31/2015 9/30/16 12/31/15
At quarter end $257.2 $259.9 $249.0 (1)% 3%
Average for the quarter
ended $257.1 $252.6 $247.0 2% 4%
Total deposits at December 31, 2016 decreased $2.7 billion compared with September 30, 2016 primarily as a result of timing and seasonality of commercial deposit activity. Average deposits increased $4.5 billion in the fourth quarter compared with the third quarter reflecting higher commercial deposits and growth in savings products. Period end and average fourth quarter 2016 deposits increased $8.2 billion and $10.1 billion, respectively, compared with fourth quarter 2015 due to overall strong growth in demand deposits as well as savings deposits, which reflected in part a shift from money market deposits to relationship-based savings products.
Borrowed Funds Change Change
12/31/16 vs 12/31/16 vs
In billions 12/31/2016 9/30/2016 12/31/2015 9/30/16 12/31/15
At quarter end $52.7 $51.5 $54.5 2% (3)%
Average for the quarter
ended $51.5 $52.9 $55.0 (3)% (6)%
Borrowed funds at December 31, 2016 increased $1.2 billion compared with September 30, 2016 as increases in both short- and long-term debt were partially offset by a decrease in subordinated debt. Average borrowed funds for the fourth quarter of 2016 declined $1.4 billion from the third quarter as a result of timing of redemptions and issuances and was reflected primarily in lower bank notes and senior debt. Fourth quarter 2016 period end borrowed funds decreased $1.8 billion and average borrowed funds declined $3.5 billion compared with fourth quarter 2015 mainly due to lower Federal Home Loan Bank borrowings partially offset by higher bank notes and senior debt.
Capital
12/31/2016* 9/30/2016 12/31/2015
----------- --------- ----------
Common shareholders' equity In billions $41.8 $42.3 $41.3
Transitional Basel III common equity Tier 1 capital ratio 10.6% 10.6% 10.6%
Pro forma fully phased-in Basel III common equity
Tier 1 capital ratio (non-GAAP) 10.0% 10.2% 10.0%
* Ratios estimated
PNC maintained a strong capital position. Common shareholders' equity at December 31, 2016 decreased $.5 billion compared with September 30, 2016 due to growth in retained earnings more than offset by lower accumulated other comprehensive income primarily related to net unrealized securities gains and by share repurchases. The transitional Basel III common equity Tier 1 capital ratios were calculated using the regulatory capital methodologies, including related phase-ins, applicable to PNC during 2016 and 2015 using the standardized approach. The pro forma ratios were also calculated based on the standardized approach. See Capital Ratios in the Consolidated Financial Highlights.
On November 1, 2016, PNC issued $.5 billion fixed-to-floating rate non-cumulative perpetual preferred stock, Series S, in an underwritten public offering.
PNC returned $.8 billion of capital to shareholders in the fourth quarter of 2016 through repurchases of 4.9 million common shares for $.5 billion and dividends on common shares of $.3 billion. For the full year 2016, PNC returned $3.1 billion of capital to shareholders. Repurchases totaled 22.8 million common shares for $2.0 billion and dividends on common shares were $1.1 billion. Of the full year repurchases, 10.8 million common shares for $1.0 billion took place under current share repurchase programs of up to $2.0 billion for the four-quarter period beginning in the third quarter of 2016. These programs include repurchases of up to $.2 billion related to stock issuances under employee benefit plans.
On January 5, 2017, the PNC board of directors declared a quarterly cash dividend on common stock of 55 cents per share with a payment date of February 5, 2017.
CREDIT QUALITY REVIEW
Credit Quality Change Change
At or for the quarter ended 12/31/16 vs 12/31/16 vs
---------------------------
In millions 12/31/2016 9/30/2016 12/31/2015 9/30/16 12/31/15
Nonperforming loans $2,144 $2,146 $2,126 - 1%
Nonperforming assets $2,374 $2,375 $2,425 - (2)%
Accruing loans past due 90 days or
more $782 $766 $881 2% (11)%
Net charge-offs $106 $154 $120 (31)% (12)%
Provision for credit losses $67 $87 $74 (23)% (9)%
Allowance for loan and lease losses $2,589 $2,619 $2,727 (1)% (5)%
Overall credit quality for the fourth quarter of 2016 remained stable with the third quarter. Provision for credit losses for fourth quarter 2016 decreased $20 million compared with the third quarter reflecting the performance of home equity lines of credit reaching draw period end dates.
Nonperforming assets at December 31, 2016 were stable with September 30, 2016 as lower commercial lending nonperforming loans were offset by higher nonperforming consumer loans. Nonperforming assets declined $51 million from December 31, 2015 due to improvements in the consumer lending and commercial real estate portfolios and lower other real estate owned partially offset by higher commercial nonperforming loans. Nonperforming assets to total assets were .65 percent at December 31, 2016 compared with .64 percent at September 30, 2016 and .68 percent at December 31, 2015.
Overall delinquencies as of December 31, 2016 increased $120 million, or 8 percent, compared with September 30, 2016 as a result of increases in accruing loans past due 30 to 59 days of $108 million and in the 90 days or more category of $16 million.
Net charge-offs for the fourth quarter of 2016 decreased $48 million compared with the third quarter driven by lower commercial loan net charge-offs, and declined $14 million compared with fourth quarter 2015. Both comparisons benefited from lower energy related portfolio net charge-offs. Net charge-offs for the fourth quarter of 2016 were .20 percent of average loans on an annualized basis compared with .29 percent for the third quarter and .23 percent for the fourth quarter of 2015.
The allowance for loan and lease losses at December 31, 2016 decreased $30 million compared with September 30, 2016 and $138 million compared with December 31, 2015. The allowance to total loans was 1.23 percent at December 31, 2016, 1.24 percent at September 30, 2016 and 1.32 percent at December 31, 2015. The allowance to nonperforming loans was 121 percent at December 31, 2016, 122 percent at September 30, 2016 and 128 percent at December 31, 2015.
BUSINESS SEGMENT RESULTS
Business Segment Income (Loss)
In millions 4Q16 3Q16 4Q15
Retail Banking $229 $223 $213
Corporate & Institutional
Banking 577 537 539
Asset Management Group 55 58 51
Residential Mortgage Banking 39 13 (17)
Non-Strategic Assets
Portfolio 58 54 96
Other, including BlackRock 89 121 140
Net income $1,047 $1,006 $1,022
See accompanying notes in Consolidated Financial Highlights
Retail Banking Change Change
4Q16 vs 4Q16 vs
In millions 4Q16 3Q16 4Q15 3Q16 4Q15
Net interest income $1,105 $1,120 $1,074 $(15) $31
Noninterest income $514 $527 $571 $(13) $(57)
Provision for credit
losses $74 $104 $108 $(30) $(34)
Noninterest expense $1,184 $1,191 $1,203 $(7) $(19)
Earnings $229 $223 $213 $6 $16
In billions
Average loans $62.0 $62.0 $63.6 - $(1.6)
Average deposits $155.7 $154.2 $149.9 $1.5 $5.8
Retail Banking earnings for the fourth quarter of 2016 increased in both comparisons. Noninterest income decreased compared with the third quarter as a result of negative derivative fair value adjustments on swap agreements with purchasers of Visa Class B common shares and lower service charges on deposits. Noninterest income declined compared with fourth quarter 2015 primarily due to the impact of fourth quarter 2015 sales of Visa shares. Provision for credit losses decreased in both comparisons reflecting the performance of home equity lines of credit reaching draw period end dates. Noninterest expense declined in both comparisons as a result of lower customer transaction-related costs as well as branch network efficiencies.
-- Retail Banking continued to focus on the strategic priority of
transforming the customer experience through transaction migration,
branch network transformation and multi-channel service strategies.
-- Approximately 60 percent of consumer customers used non-teller
channels for the majority of their transactions during the fourth
quarter of 2016 compared with 59 percent and 55 percent for the
third quarter of 2016 and fourth quarter of 2015, respectively.
-- Deposit transactions via ATM and mobile channels increased to 51
percent of total deposit transactions in the fourth quarter of 2016
compared with 50 percent in the third quarter and 46 percent in the
fourth quarter of 2015.
-- PNC had a network of 2,520 branches and 9,024 ATMs at December 31,
2016. Approximately 21 percent of the branch network operates under
the universal model.
-- Average deposits grew 4 percent over the fourth quarter of 2015 due to
higher demand deposits as well as an increase in savings deposits which
were partially offset by lower money market deposits reflecting a shift
to relationship-based savings products. Certificates of deposit declined
from the net runoff of maturing accounts.
-- Average loans decreased 2 percent compared with the fourth quarter of
2015 as growth in automobile and credit card loans was more than offset
by lower home equity, commercial and education loans.
-- Net charge-offs were $89 million for the fourth and third quarters of
2016 and $93 million in the fourth quarter of 2015.
Corporate & Institutional Banking Change Change
4Q16 vs 4Q16 vs
In millions 4Q16 3Q16 4Q15 3Q16 4Q15
Net interest income $906 $873 $881 $33 $25
Noninterest income $522 $517 $538 $5 $(16)
Provision for credit losses (benefit) $(1) $12 $23 $(13) $(24)
Noninterest expense $550 $555 $554 $(5) $(4)
Earnings $577 $537 $539 $40 $38
In billions
Average loans $124.3 $122.6 $117.7 $1.7 $6.6
Average deposits $85.6 $83.0 $82.0 $2.6 $3.6
Commercial loan servicing portfolio
Quarter end $487 $461 $447 $26 $40
Corporate & Institutional Banking earnings for the fourth quarter of 2016 increased in both comparisons. Noninterest income increased from the third quarter due to higher revenue from commercial mortgage loans held for sale activities, a higher benefit from commercial mortgage servicing rights valuation and higher revenue from credit valuations for customer-related derivative activities partially offset by lower merger and acquisition advisory fees and lower gains on asset sales. Noninterest income decreased compared with the fourth quarter of 2015 as a result of lower merger and acquisition advisory fees partially offset by a higher benefit from commercial mortgage servicing rights valuation. Provision for credit losses in the fourth quarter of 2016 decreased in both comparisons largely reflecting stable credit quality. Noninterest expense reflected continued expense management.
-- Average loans increased 1 percent over the third quarter driven by
growth in commercial loans in PNC's corporate banking, real estate and
equipment finance businesses. Average loans increased 6 percent over the
fourth quarter of 2015 due to growth in both commercial real estate and
commercial loans in PNC's real estate business and increased lending to
large corporate customers in PNC's corporate banking business.
-- Average deposits increased 3 percent over the third quarter reflecting
seasonal growth, and increased 4 percent compared with the fourth
quarter of 2015 due to an increase in interest-bearing demand deposits
partially offset by decreases in noninterest-bearing demand deposits and
certificates of deposit.
-- Net charge offs were $18 million in the fourth quarter of 2016 compared
with $69 million in the third quarter and $24 million in the fourth
quarter of 2015. Both comparisons benefited from lower energy related
portfolio net charge-offs.
Asset Management Group Change Change
4Q16 vs 4Q16 vs
In millions 4Q16 3Q16 4Q15 3Q16 4Q15
Net interest income $73 $74 $77 $(1) $(4)
Noninterest income $215 $220 $211 $(5) $4
Provision for credit losses (benefit) $(6) $(3) $(2) $(3) $(4)
Noninterest expense $207 $206 $210 $1 $(3)
Earnings $55 $58 $51 $(3) $4
In billions
Client assets under administration
Quarter end $266 $266 $259 - $7
Average loans $7.1 $7.1 $7.4 - $(.3)
Average deposits $12.4 $11.9 $12.2 $.5 $.2
Asset Management Group earnings for the fourth quarter of 2016 decreased compared with the third quarter of 2016 and increased compared with the fourth quarter of 2015. Noninterest income decreased in the comparison with third quarter 2016 primarily due to declines in net new business activities partially offset by increases in the average equity markets, which drove the increase in noninterest income over the fourth quarter of 2015. Noninterest expense was consistent with third quarter 2016 and declined compared with fourth quarter 2015.
-- Asset Management Group's growth strategy is focused on capturing more
investable assets by delivering an enhanced client experience, and
involves new client acquisition and expanding products and services
based on clients' needs and investment objectives while leveraging its
open architecture platform with a full array of investment products and
banking solutions for all clients. Key considerations are maximizing
front line productivity, a relationship-based focus with other line of
business partners, and optimizing market presence in high opportunity
markets.
-- Client assets under administration at December 31, 2016 included
discretionary client assets under management of $137 billion and
nondiscretionary client assets under administration of $129 billion.
-- Discretionary client assets under management decreased $1 billion
compared with September 30, 2016 and increased $3 billion compared
with December 31, 2015 primarily attributable to equity market
increases.
Residential Mortgage Banking Change Change
4Q16 vs 4Q16 vs
In millions 4Q16 3Q16 4Q15 3Q16 4Q15
Net interest income $26 $28 $30 $(2) $(4)
Noninterest income $183 $163 $125 $20 $58
Provision for credit losses $ - $ - $ - - -
Noninterest expense $148 $170 $181 $(22) $(33)
Earnings (loss) $39 $13 $(17) $26 $56
In billions
Residential mortgage servicing portfolio
Quarter end $125 $126 $123 $(1) $2
Loan origination volume $3.0 $3.1 $2.3 $(.1) $.7
Residential Mortgage Banking earnings for the fourth quarter of 2016 increased in both comparisons. Noninterest income for the fourth quarter of 2016 benefited from higher net hedging gains on residential mortgage servicing rights partially offset by lower servicing revenue in both comparisons. Additionally, loan sales revenue declined compared with the third quarter due to lower loan application and origination volumes, and increased over fourth quarter 2015 due to higher origination volumes. Noninterest expense decreased in both comparisons driven by release of legal reserves partially offset by increased servicing costs.
-- The strategic focus of Residential Mortgage Banking is the acquisition
of new customers through a retail loan officer sales force with an
emphasis on home purchase transactions, competing on the basis of
superior service, and leveraging the bank footprint markets.
-- Loan origination volume in the fourth quarter of 2016 decreased 3
percent compared with the third quarter and increased 32 percent
compared with the fourth quarter of 2015. Approximately 33 percent of
fourth quarter 2016 origination volume was for home purchase
transactions compared with 41 percent in the third quarter and 45
percent in the fourth quarter of 2015.
-- Loan servicing acquisitions were $3 billion in the fourth quarter of
2016 and $5 billion in both the third quarter of 2016 and fourth quarter
of 2015.
Non-Strategic Assets Portfolio Change Change
4Q16 vs 4Q16 vs
In millions 4Q16 3Q16 4Q15 3Q16 4Q15
Net interest income $78 $72 $90 $6 $(12)
Noninterest income $8 $8 $19 - $(11)
Provision for credit losses
(benefit) $(14) $(22) $(53) $8 $39
Noninterest expense $9 $16 $10 $(7) $(1)
Earnings $58 $54 $96 $4 $(38)
In billions
Average loans $5.3 $5.6 $6.8 $(.3) $(1.5)
The Non-Strategic Assets Portfolio consists of non-strategic assets primarily obtained through acquisitions of other companies and includes a consumer portfolio of mainly residential mortgage and brokered home equity loans and lines of credit, and a small commercial/commercial real estate loan and lease portfolio. The business activity of this segment is to manage the liquidation of the portfolios while maximizing the value and mitigating risk. Provision for credit losses was a benefit in all three quarters reflecting improved credit quality.
Other, including BlackRock
The "Other, including BlackRock" category, for the purposes of this release, includes earnings and gains or losses related to PNC's equity interest in BlackRock, and residual activities that do not meet the criteria for disclosure as a separate reportable business, such as integration costs, asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities and certain trading activities, exited businesses, private equity investments, intercompany eliminations, most corporate overhead, tax adjustments that are not allocated to business segments, 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 Chief Financial Officer Robert Q. Reilly will hold a conference call for investors today at 11:00 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) 402-9243 and (312) 281-1202 (international) and Internet access to the live audio listen-only webcast of the call is available at www.pnc.com/investorevents. PNC's fourth quarter and full year 2016 earnings release, the 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 21817931 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; residential mortgage banking; 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 Year ended
------------------ ----------
Dollars in millions, except per share data December 31 September 30 December 31 December 31 December 31
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Revenue
Net interest income $2,130 $2,095 $2,092 $8,391 $8,278
Noninterest income 1,744 1,734 1,761 6,771 6,947
----- ----- ----- ----- -----
Total revenue 3,874 3,829 3,853 15,162 15,225
Provision for credit losses 67 87 74 433 255
Noninterest expense 2,441 2,394 2,396 9,476 9,463
----- ----- ----- ----- -----
Income before income taxes and noncontrolling interests $1,366 $1,348 $1,383 $5,253 $5,507
Net income $1,047 $1,006 $1,022 $3,985 $4,143
Less:
Net income (loss) attributable to noncontrolling interests 22 18 14 82 37
Preferred stock dividends and discount accretion and redemptions (a) 43 64 43 215 225
--- --- --- --- ---
Net income attributable to common shareholders $982 $924 $965 $3,688 $3,881
Less:
Dividends and undistributed earnings allocated to nonvested restricted shares 7 7 4 26 17
Impact of BlackRock earnings per share dilution 2 4 4 12 18
--- --- --- --- ---
Net income attributable to diluted common shares $973 $913 $957 $3,650 $3,846
Diluted earnings per common share $1.97 $1.84 $1.87 $7.30 $7.39
Cash dividends declared per common share $.55 $.55 $.51 $2.12 $2.01
Effective tax rate (b) 23.4% 25.4% 26.1% 24.1% 24.8%
--------------------- ---- ---- ---- ---- ----
(a) Dividends are
payable
quarterly
other than
the Series
O, Series R
and Series S
preferred
stock, which
are payable
semiannually,
with the
Series O
payable in
different
quarters
than the
Series R and
Series S
preferred
stock.
(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.
TOTAL AND CORE NET INTEREST INCOME AND NET INTEREST MARGIN
Three months ended Year ended
----------
December 31 September 30 December 31 December 31 December 31
Dollars in millions 2016 2016 2015 2016 2015
------------------- ---- ---- ---- ---- ----
Net Interest Income
Core net interest income (Non-GAAP) (a) $2,064 $2,033 $2,002 $8,113 $7,859
Purchase accounting accretion 66 62 90 278 419
----------------------------- --- --- --- --- ---
Total net interest income $2,130 $2,095 $2,092 $8,391 $8,278
------------------------- ------ ------ ------ ------ ------
Net Interest Margin
Core net interest margin (Non-GAAP) (b) 2.62% 2.61% 2.60% 2.65% 2.61%
Purchase accounting accretion impact on net interest margin .07 .07 .10 .08 .13
----------------------------------------------------------- --- --- --- --- ---
Net interest margin (c) 2.69% 2.68% 2.70% 2.73% 2.74%
---------------------- ---- ---- ---- ---- ----
(a) We believe
that core net
interest
income, a
non-GAAP
financial
measure, is
useful in
evaluating
the
performance
of our
interest-
based
activities.
(b) We believe
that core net
interest
margin, a
non-GAAP
financial
measure, is
useful as a
tool to help
evaluate the
impact of
purchase
accounting
accretion on
net interest
margin. To
calculate
core net
interest
margin, net
interest
margin has
been adjusted
by annualized
purchase
accounting
accretion
divided by
average
interest-
earning
assets.
(c) Calculated as
annualized
taxable-
equivalent
net interest
income
divided by
average
earning
assets. 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
margins, we
use net
interest
income on a
taxable-
equivalent
basis in
calculating
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
December 31,
2016,
September 30,
2016 and
December 31,
2015 were $50
million, $49
million and
$48 million,
respectively.
The taxable
equivalent
adjustments
to net
interest
income for
the year
ended
December 31,
2016 and
December 31,
2015 were
$195 million
and $196
million,
respectively.
The PNC Financial Services Group, Inc. Consolidated Financial Highlights (Unaudited)
Three months ended Year ended
------------------ ----------
December 31 September 30 December 31 December 31 December 31
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
PERFORMANCE RATIOS
Net interest margin (a) 2.69% 2.68% 2.70% 2.73% 2.74%
Noninterest income to total revenue 45% 45% 46% 45% 46%
Efficiency (b) 63% 63% 62% 62% 62%
Return on:
Average common shareholders'
equity 9.31% 8.74% 9.30% 8.85% 9.50%
Average assets 1.13% 1.10% 1.12% 1.10% 1.17%
BUSINESS SEGMENT NET INCOME (LOSS) (c) (d)
In millions
Retail Banking $229 $223 $213 $1,027 $907
Corporate & Institutional Banking 577 537 539 2,035 2,031
Asset Management Group 55 58 51 210 194
Residential Mortgage Banking 39 13 (17) 85 26
Non-Strategic Assets Portfolio 58 54 96 193 301
Other, including BlackRock (d) (e) 89 121 140 435 684
--- --- --- --- ---
Total net income $1,047 $1,006 $1,022 $3,985 $4,143
---------------- ------ ------ ------ ------ ------
(a) See note (c) on
page 14 for
additional
information.
(b) Calculated as
noninterest
expense
divided by
total revenue.
(c) Our business
information is
presented
based on our
internal
management
reporting
practices. We
periodically
refine our
internal
methodologies
as management
reporting
practices are
enhanced. Net
interest
income in
business
segment
results
reflects 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) We consider
BlackRock to
be a separate
reportable
business
segment but
have combined
its results
with Other for
this
presentation.
Our 2016 Form
10-K will
include
additional
information
regarding
BlackRock.
(e) Includes
earnings and
gains or
losses related
to PNC's
equity
interest in
BlackRock and
residual
activities
that do not
meet the
criteria for
disclosure as
a separate
reportable
business, such
as gains or
losses related
to BlackRock
transactions,
integration
costs, asset
and liability
management
activities
including net
securities
gains or
losses, other-
than-
temporary
impairment of
investment
securities and
certain
trading
activities,
exited
businesses,
private equity
investments,
intercompany
eliminations,
most corporate
overhead, tax
adjustments
that are not
allocated to
business
segments, and
differences
between
business
segment
performance
reporting and
financial
statement
reporting
(GAAP),
including the
presentation
of net income
attributable
to
noncontrolling
interests as
the segments'
results
exclude their
portion of net
income
attributable
to
noncontrolling
interests.
The PNC Financial Services Group, Inc. Consolidated Financial Highlights (Unaudited)
December 31 September 30 December 31
2016 2016 2015
---- ---- ----
BALANCE SHEET DATA
Dollars in millions, except per share data
Assets $366,380 $369,348 $358,493
Loans (a) 210,833 210,446 206,696
Allowance for loan and lease losses 2,589 2,619 2,727
Interest-earning deposits with banks 25,711 27,058 30,546
Investment securities 75,947 78,514 70,528
Loans held for sale (a) 2,504 2,053 1,540
Equity investments (b) 10,728 10,605 10,587
Mortgage servicing rights 1,758 1,293 1,589
Goodwill 9,103 9,103 9,103
Other assets (a) 27,506 28,364 26,566
Noninterest-bearing deposits 80,230 82,159 79,435
Interest-bearing deposits 176,934 177,736 169,567
Total deposits 257,164 259,895 249,002
Borrowed funds (a) 52,706 51,541 54,532
Shareholders' equity 45,773 45,707 44,710
Common shareholders' equity 41,797 42,251 41,258
Accumulated other comprehensive income (191) 646 130
Book value per common share $86.10 $86.57 $81.84
Tangible book value per common share (Non-GAAP) (c) $67.41 $67.93 $63.65
Period end common shares outstanding (millions) 485 488 504
Loans to deposits 82% 81% 83%
CLIENT ASSETS (billions)
Discretionary client assets under management $137 $138 $134
Nondiscretionary client assets under administration 129 128 125
--- --- ---
Total client assets under administration (d) 266 266 259
Brokerage account client assets 44 44 43
--- --- ---
Total client assets $310 $310 $302
CAPITAL RATIOS
Transitional Basel III (e) (f)
Common equity Tier 1 10.6% 10.6% 10.6%
Tier 1 risk-based 12.0% 11.9% 12.0%
Total capital risk-based 14.3% 14.2% 14.6%
Leverage 10.2% 10.1% 10.1%
Pro forma Fully Phased-In Basel III (Non-GAAP) (e)
Common equity Tier 1 10.0% 10.2% 10.0%
Common shareholders' equity to assets 11.4% 11.4% 11.5%
ASSET QUALITY
Nonperforming loans to total loans 1.02% 1.02% 1.03%
Nonperforming assets to total loans, OREO and foreclosed assets 1.12% 1.13% 1.17%
Nonperforming assets to total assets .65% .64% .68%
Net charge-offs to average loans (for the three months ended) (annualized) .20% .29% .23%
Allowance for loan and lease losses to total loans (g) 1.23% 1.24% 1.32%
Allowance for loan and lease losses to nonperforming loans (g) (h) 121% 122% 128%
Accruing loans past due 90 days or more (in millions) $782 $766 $881
---------------------------------------------------- ---- ---- ----
(a) Amounts include
assets and
liabilities for
which we have
elected the
fair value
option. Our
third quarter
2016 Form 10-Q
included, and
our 2016 Form
10-K will
include,
additional
information
regarding these
Consolidated
Balance Sheet
line items.
(b) Amounts include
our equity
interest in
BlackRock.
(c) See the Tangible
Book Value per
Common Share
Ratio table on
page 18 for
additional
information.
(d) As a result of
certain
investment
advisory
services
performed by
one of our
registered
investment
advisors,
certain assets
are reported as
both
discretionary
client assets
under
management and
nondiscretionary
client assets
under
administration.
The amount of
such assets was
approximately
$9 billion, $9
billion and $6
billion as of
December 31,
2016, September
30, 2016 and
December 31,
2015,
respectively.
(e) The ratios as of
December 31,
2016 are
estimated and
calculated
based on the
standardized
approach. See
Capital Ratios
on page 17 for
additional
information.
(f) Calculated using
the regulatory
capital
methodology
applicable to
PNC during each
period
presented.
(g) See our 2015
Form 10-K for
information on
our change in
derecognition
policy
effective
December 31,
2015 for
certain
purchased
impaired loans.
(h) The allowance
for loan and
lease losses
includes
impairment
reserves
attributable to
purchased
impaired loans.
Nonperforming
loans exclude
certain
government
insured or
guaranteed
loans, loans
held for sale,
loans accounted
for under the
fair value
option and
purchased
impaired loans.
The PNC Financial Services Group, Inc. Consolidated Financial Highlights (Unaudited)
CAPITAL RATIOS
As a result of the staggered effective dates of the final U.S. Basel III regulatory capital rules (Basel III rules), as well as the fact that PNC remains in the parallel run qualification phase for the advanced approaches, PNC's regulatory risk-based capital ratios in 2016 and 2015 are calculated using the standardized approach for determining risk-weighted assets, and the definitions
of, and deductions from, regulatory capital under the Basel III rules (as such definitions and deductions are phased-in for 2016 and 2015, respectively). We refer to the capital ratios calculated using the phased-in Basel III provisions in effect for each year and, for the risk-based ratios, standardized approach risk-weighted assets, as Transitional Basel III ratios. 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, equity exposures and securitization exposures are generally subject to higher risk weights than other types of exposures.
We provide information below regarding PNC's estimated December 31, 2016 and actual September 30, 2016 and December 31, 2015 Transitional Basel III common equity Tier 1 ratios and PNC's estimated pro forma fully phased-in Basel III common equity Tier 1 ratio. Under the Basel III rules adopted by the U.S. banking agencies, significant common stock investments in unconsolidated financial
institutions, mortgage servicing rights and deferred tax assets must be deducted from capital (subject to a phase-in schedule and net of associated deferred tax liabilities) to the extent they individually exceed 10%, or in the aggregate exceed 15%, of the institution's adjusted common equity Tier 1 capital. Also, Basel III regulatory capital includes (subject to a phase-in schedule)
accumulated other comprehensive income related to securities currently and previously held as available for sale, as well as pension and other postretirement plans.
Transitional Basel III and Pro forma Fully Phased-In Basel III Common Equity Tier 1 Capital Ratios (Non-GAAP)
2016 Transitional Basel III 2015 Transitional Basel III Pro forma Fully Phased-In Basel III (Non-GAAP)
(estimated)
----------
(estimated)
----------
December 31 September 30 December 31 December 31 September 30 December 31
Dollars in millions 2016 2016 2015 2016 2016 2015
------------------- ---- ---- ---- ---- ---- ----
Common stock, related surplus and retained earnings, net of treasury stock $41,987 $41,604 $41,128 $41,987 $41,604 $41,128
Less regulatory capital adjustments:
Goodwill and disallowed intangibles, net of deferred tax liabilities (8,976) (8,993) (8,972) (9,074) (9,102) (9,172)
Basel III total threshold deductions (776) (731) (470) (1,452) (1,218) (1,294)
Accumulated other comprehensive income (a) (238) 181 (81) (396) 302 (201)
All other adjustments (142) (177) (112) (150) (180) (182)
Basel III Common equity Tier 1 capital $31,855 $31,884 $31,493 $30,915 $31,406 $30,279
Basel III standardized approach risk-weighted assets (b) $300,573 $300,308 $295,905 $308,770 $308,665 $303,707
Basel III advanced approaches risk-weighted assets (c) N/A N/A N/A $278,632 $280,150 $264,931
Basel III Common equity Tier 1 capital ratio 10.6% 10.6% 10.6% 10.0% 10.2% 10.0%
Risk weight and associated rules utilized Standardized (with 2016 Standardized (with 2015
transition adjustments) Standardized
transition adjustments)
(a) Represents net
adjustments
related to
accumulated
other
comprehensive
income for
securities
currently and
previously
held as
available for
sale, as well
as pension and
other
postretirement
plans.
(b) Basel III
standardized
approach risk-
weighted
assets are
based on the
Basel III
standardized
approach rules
and include
credit and
market risk-
weighted
assets.
(c) Basel III
advanced
approaches
risk-weighted
assets are
based on the
Basel III
advanced
approaches
rules, and
include
credit, market
and
operational
risk-weighted
assets. During
the parallel
run
qualification
phase PNC has
refined the
data, models
and internal
processes used
as part of the
advanced
approaches for
determining
risk-weighted
assets. We
anticipate
additional
refinements
through the
parallel run
qualification
phase.
PNC utilizes the pro forma fully phased-in Basel III
capital ratios to assess its capital position (without
the benefit of phase-ins), as these ratios represent
the regulatory capital standards that will be ultimately
applicable to PNC under the final Basel III rules. Our
Basel III capital ratios and estimates may be impacted
by additional regulatory guidance or analysis, and, in
the case of those ratios calculated using the advanced
approaches, may be subject to variability based on the
ongoing evolution, validation and regulatory approval of
PNC's models that are integral to the calculation of
The PNC Financial Services Group, Inc. Consolidated Financial Highlights (Unaudited)
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.
Tangible Book Value per Common Share Ratio (Non-GAAP)
December 31 September 30 December 31
Dollars in millions, except per share data 2016 2016 2015
------------------------------------------ ---- ---- ----
Book value per common share $86.10 $86.57 $81.84
Tangible book value per common share
Common shareholders' equity $41,797 $42,251 $41,258
Goodwill and Other Intangible Assets (9,376) (9,408) (9,482)
Deferred tax liabilities on Goodwill and Other
Intangible Assets 304 306 310
---------------------------------------------- --- --- ---
Tangible common shareholders' equity $32,725 $33,149 $32,086
Period-end common shares outstanding (in millions) 485 488 504
Tangible book value per common share (Non-GAAP) $67.41 $67.93 $63.65
---------------------------------------------- ------ ------ ------
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 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 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 Board, 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.
-- Commodity price volatility.
-- 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 those we are currently expecting. These statements are based on
our current view that the U.S. economy and the labor market will grow
moderately in 2017, boosted by stable oil/energy prices, improving
consumer spending and housing activity, and expanded federal fiscal
policy stimulus as a result of the 2016 elections. Short-term interest
rates and bond yields are expected to continue rising in 2017, along
with inflation. These forward-looking statements also do not, unless
otherwise indicated, take into account the impact of potential legal and
regulatory contingencies.
-- 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 Board as part
of PNC's comprehensive capital plan for the applicable period in
connection with the Federal Reserve Board's 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
Board.
-- 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 international regulatory capital framework developed by
the Basel Committee on Banking Supervision (Basel Committee), the
international body responsible for developing global regulatory
standards for banking organizations for consideration and adoption by
national jurisdictions), and management actions affecting the
composition of PNC's balance sheet. In addition, PNC's ability to
determine, evaluate and forecast regulatory capital ratios, and to take
actions (such as capital distributions) based on actual or forecasted
capital ratios, will be dependent at least in part on the development,
validation and regulatory approval of related models.
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 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 initiatives of
the Basel Committee.
-- Unfavorable resolution of legal proceedings or other claims and
regulatory and other governmental investigations or other inquiries.
In addition to matters relating to PNC's current and historical
business and activities, such matters may include proceedings,
claims, investigations, or inquiries relating to pre-acquisition
business and activities of acquired companies, such as National
City. These matters may result in monetary judgments or settlements
or other remedies, including fines, penalties, restitution or
alterations in our business practices, and in additional expenses
and collateral costs, and may cause reputational harm to PNC.
-- Results of the regulatory examination and supervision process,
including our failure to satisfy requirements of agreements with
governmental agencies.
-- Impact on business and operating results of any costs associated
with obtaining rights in intellectual property claimed by others and
of adequacy of our intellectual property protection in general.
-- Business and operating results are affected by our ability to identify
and effectively manage risks inherent in our businesses, including,
where appropriate, through effective use of third-party insurance,
derivatives, and capital management techniques, and to meet evolving
regulatory capital and liquidity standards. In particular, our results
currently depend on our ability to manage elevated levels of impaired
assets.
-- Business and operating results also include impacts relating to our
equity interest in BlackRock, Inc. and rely to a significant extent on
information provided to us by BlackRock. Risks and uncertainties that
could affect BlackRock are discussed in more detail by BlackRock in its
SEC filings.
-- We grow our business in part by acquiring from time to time other
financial services companies, financial services assets and related
deposits and other liabilities. Acquisition risks and uncertainties
include those presented by the nature of the business acquired,
including in some cases those associated with our entry into new
businesses or new geographic or other markets and risks resulting from
our inexperience in those new areas, as well as risks and uncertainties
related to the acquisition transactions themselves, regulatory issues,
and the integration of the acquired businesses into PNC after closing.
-- Competition can have an impact on customer acquisition, growth and
retention and on credit spreads and product pricing, which can affect
market share, deposits and revenues. Industry restructuring in the
current environment could also impact our business and financial
performance through changes in counterparty creditworthiness and
performance and in the competitive and regulatory landscape. Our
ability to anticipate and respond to technological changes can also
impact our ability to respond to customer needs and meet competitive
demands.
-- Business and operating results can also be affected by widespread
natural and other disasters, pandemics, dislocations, terrorist
activities, cyberattacks or international hostilities through impacts on
the economy and financial markets generally or on us or our
counterparties specifically.
We provide greater detail regarding these as well as other factors in our 2015 Form 10-K and our 2016 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 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) 762-1693
corporate.communications@pnc.com
INVESTORS:
Bryan K. Gill
(412) 768-4143
investor.relations@pnc.com
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/pnc-reports-full-year-2016-net-income-of-40-billion-730-diluted-eps-300390743.html
SOURCE PNC Financial Services Group, Inc.
