PR Newswire
PITTSBURGH, Jan. 18, 2022
PITTSBURGH, Jan. 18, 2022 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported:
For the quarter | For the year | |||||||||||||
In millions, except per share data and as noted | 4Q21 | 3Q21 | 2021 | 2020 | Fourth Quarter Highlights | |||||||||
▪ Diluted EPS as adjusted was ▪ Approximately 95% of ▪ Revenue decreased 1% linked ▪ Expenses increased 6% linked ▪ Provision recapture of $327 ▪ Average loans decreased 1% ▪ Average deposits declined ▪ Net loan charge-offs of $124 | ||||||||||||||
Financial Results | ||||||||||||||
Revenue | $ 5,127 | $ 5,197 | $ 19,211 | $ 16,901 | ||||||||||
Noninterest expense | 3,791 | 3,587 | 13,002 | 10,297 | ||||||||||
Pretax, pre-provision earnings (non-GAAP) | 1,336 | 1,610 | 6,209 | 6,604 | ||||||||||
Integration costs | 438 | 243 | 798 | 7 | ||||||||||
Pretax, pre-provision earnings excluding | 1,774 | 1,853 | 7,007 | 6,611 | ||||||||||
Provision for (recapture of) credit losses | (327) | (203) | (779) | 3,175 | ||||||||||
Net income from continuing operations | 1,306 | 1,490 | 5,725 | 3,003 | ||||||||||
Per Common Share | ||||||||||||||
Diluted earnings from continuing operations - | $ 2.86 | $ 3.30 | $ 12.70 | $ 6.36 | ||||||||||
Impact from integration costs (non-GAAP) | 0.82 | 0.45 | 1.48 | 0.01 | ||||||||||
Diluted earnings from continuing operations - | 3.68 | 3.75 | 14.18 | 6.37 | ||||||||||
Book value | 120.61 | 121.16 | 120.61 | 119.11 | ||||||||||
Tangible book value (non-GAAP) | 94.11 | 94.82 | 94.11 | 97.43 | ||||||||||
Balance Sheet & Credit Quality | ||||||||||||||
Average loans (in billions) | $ 288.9 | $ 291.3 | $ 268.7 | $ 252.6 | ||||||||||
Average deposits (in billions) | 452.8 | 454.4 | 418.9 | 333.8 | ||||||||||
Net loan charge-offs | 124 | 81 | 657 | 832 | ||||||||||
Allowance for credit losses to total loans | 1.92% | 2.07% | 1.92% | 2.46% | ||||||||||
Selected Ratios | ||||||||||||||
Return on average common equity | 9.61% | 10.95% | 10.78% | 15.21% | ||||||||||
Return on average assets | 0.92 | 1.06 | 1.09 | 1.68 | ||||||||||
Net interest margin (non-GAAP) | 2.27 | 2.27 | 2.29 | 2.53 | ||||||||||
Noninterest income to total revenue | 44 | 45 | 45 | 41 | ||||||||||
Efficiency | 74 | 69 | 68 | 61 | ||||||||||
Efficiency excluding integration costs (non- | 66 | 64 | 64 | 61 | ||||||||||
Common Equity Tier 1 capital ratio | 10.2 | 10.3 | 10.2 | 12.2 | ||||||||||
Diluted earnings as adjusted is a non-GAAP measure calculated by excluding post-tax integration costs for BBVA In May 2020, PNC divested its entire 22.4% equity investment in BlackRock Inc. The after-tax gain on sale of $4.3 |
From Bill Demchak, PNC Chairman, President and Chief Executive Officer: | |||||||||||||
"2021 was a pivotal year for PNC. We delivered solid financial results, closed and converted BBVA USA in less | |||||||||||||
BBVA USA
Income Statement Highlights
Fourth quarter 2021 compared with third quarter 2021
Balance Sheet Highlights
Fourth quarter 2021 compared with third quarter 2021 or December 31, 2021 compared with September 30, 2021
Earnings Summary | ||||||
In millions, except per share data | 4Q21 | 3Q21 | 4Q20 | |||
Net income | $ 1,306 | $ 1,490 | $ 1,456 | |||
Net income attributable to diluted common shares - as reported | $ 1,214 | $ 1,408 | $ 1,387 | |||
Net income attributable to diluted common shares - as adjusted (non-GAAP) | $ 1,560 | $ 1,600 | $ 1,393 | |||
Diluted earnings per common share - as reported | $ 2.86 | $ 3.30 | $ 3.26 | |||
Diluted earnings per common share - as adjusted (non-GAAP) | $ 3.68 | $ 3.75 | $ 3.27 | |||
Average diluted common shares outstanding | 424 | 426 | 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 |
Fourth quarter 2021 net income of $1.3 billion, or $2.86 per diluted common share, included integration costs of $438 million pretax resulting from the acquisition of BBVA USA. Excluding the impact of integration costs, adjusted diluted earnings per common share was $3.68.
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 | |||||
4Q21 vs | 4Q21 vs | ||||||
In millions | 4Q21 | 3Q21 | 4Q20 | 3Q21 | 4Q20 | ||
Net interest income | $ 2,862 | $ 2,856 | $ 2,424 | — | 18% | ||
Noninterest income | 2,265 | 2,341 | 1,784 | (3)% | 27% | ||
Total revenue | $ 5,127 | $ 5,197 | $ 4,208 | (1)% | 22% | ||
Total revenue for the fourth quarter of 2021 decreased $70 million compared with the third quarter of 2021 due to lower noninterest income. Compared with the fourth quarter of 2020 total revenue increased $919 million primarily due to the acquisition of BBVA USA and growth in noninterest income.
Net interest income of $2.9 billion for the fourth quarter of 2021 increased $6 million compared to the third quarter of 2021 primarily driven by higher securities balances. In comparison with the fourth quarter of 2020, net interest income increased $438 million as a result of higher interest earning assets, partially offset by lower securities yields.
The net interest margin was 2.27% for both the fourth and third quarter of 2021 and 2.32% in the fourth quarter of 2020. Compared to the fourth quarter of 2020, the decrease was driven by lower securities yields.
Noninterest Income | Change | Change | |||||
4Q21 vs | 4Q21 vs | ||||||
In millions | 4Q21 | 3Q21 | 4Q20 | 3Q21 | 4Q20 | ||
Asset management | $ 251 | $ 248 | $ 221 | 1% | 14% | ||
Consumer services | 508 | 496 | 387 | 2% | 31% | ||
Corporate services | 839 | 842 | 650 | — | 29% | ||
Residential mortgage | 101 | 147 | 99 | (31)% | 2% | ||
Service charges on deposits | 126 | 159 | 134 | (21)% | (6)% | ||
Other | 440 | 449 | 293 | (2)% | 50% | ||
$ 2,265 | $ 2,341 | $ 1,784 | (3)% | 27% | |||
Noninterest income for the fourth quarter of 2021 decreased $76 million compared with the third quarter of 2021. Asset management revenue grew $3 million primarily as a result of higher average equity markets. Consumer services increased $12 million due to higher brokerage fees and increased credit card activity. Corporate services decreased $3 million and included continued strong merger and acquisition advisory fees and $17 million of integration costs related to treasury management fee waivers for BBVA USA customers during conversion. Residential mortgage revenue decreased $46 million due to lower results from residential mortgage servicing rights valuation, net of economic hedge, and lower loan sales revenue. Service charges on deposits decreased $33 million primarily due to the impact of converting BBVA USA customers to PNC products and overdraft pricing structure as well as conversion-related fee waivers of $11 million. Other noninterest income decreased $9 million, reflecting lower private equity revenue and integration costs of $19 million related to BBVA USA lease exits. In addition, the fourth quarter included a positive Visa Class B derivative fair value adjustment of $1 million compared to a negative Visa Class B derivative fair value adjustment of $169 million in the third quarter.
Noninterest income for the fourth quarter of 2021 increased $481 million compared with the fourth quarter of 2020. Asset management revenue grew $30 million as a result of higher average equity markets and the benefit of BBVA USA. Consumer services increased $121 million driven by the addition of BBVA USA customers, growth in transaction volumes and higher brokerage fees. Corporate services increased $189 million driven by higher merger and acquisition advisory fees, increased treasury management product revenue and the benefit of BBVA USA. Service charges on deposits decreased $8 million as the addition of BBVA USA was more than offset by the impact of Low Cash ModeSM and conversion-related fee waivers. Other noninterest income increased $147 million and included higher private equity revenue.
CONSOLIDATED EXPENSE REVIEW | |||||||
Noninterest Expense | Change | Change | |||||
4Q21 vs | 4Q21 vs | ||||||
In millions | 4Q21 | 3Q21 | 4Q20 | 3Q21 | 4Q20 | ||
Personnel | $ 2,038 | $ 1,986 | $ 1,521 | 3% | 34% | ||
Occupancy | 260 | 248 | 215 | 5% | 21% | ||
Equipment | 437 | 355 | 296 | 23% | 48% | ||
Marketing | 97 | 103 | 64 | (6)% | 52% | ||
Other | 959 | 895 | 612 | 7% | 57% | ||
$ 3,791 | $ 3,587 | $ 2,708 | 6% | 40% | |||
Noninterest expense for the fourth quarter of 2021 increased $204 million compared with the third quarter of 2021. Integration expenses were $391 million in the fourth quarter of 2021 and $235 million in the third quarter of 2021. Excluding the impact of integration expenses, noninterest expense was $3,400 million and $3,352 million, respectively, for the fourth and third quarter of 2021, increasing primarily due to personnel costs, reflecting higher employee benefits expense and an increase to PNC's minimum wage. In addition, personnel costs related to incentive compensation remained elevated during the fourth quarter of 2021 due to continued high levels of business activity.
Noninterest expense increased $1,083 million in comparison with the fourth quarter of 2020 primarily driven by operating and integration expenses related to the BBVA USA acquisition, and increased business activity.
The effective tax rate was 21.5% for the fourth quarter of 2021, 17.8% for the third quarter of 2021 and 17.0% for the fourth quarter of 2020. The full year 2021 effective tax rate was 18.1%.
CONSOLIDATED BALANCE SHEET REVIEW
Average total assets were $560.3 billion in the fourth quarter of 2021 compared with $559.2 billion in the third quarter of 2021 and $465.0 billion in the fourth quarter of 2020. Compared to the fourth quarter of 2020, the increase was primarily driven by the BBVA USA acquisition.
Loans | Change | Change | |||||
December 31, | September 30, | December 31, | 12/31/21 vs | 12/31/21 vs | |||
In billions | 09/30/21 | 12/31/20 | |||||
Average | |||||||
Commercial | $ 193.8 | $ 196.3 | $ 170.3 | (1)% | 14% | ||
Consumer | 95.1 | 95.0 | 75.5 | — | 26% | ||
Average loans | $ 288.9 | $ 291.3 | $ 245.8 | (1)% | 18% | ||
Quarter end | |||||||
Commercial | $ 193.1 | $ 195.2 | $ 167.2 | (1)% | 15% | ||
Consumer | 95.3 | 95.0 | 74.7 | — | 28% | ||
Total loans | $ 288.4 | $ 290.2 | $ 241.9 | (1)% | 19% | ||
Average loans for the fourth quarter of 2021 were $288.9 billion, decreasing $2.4 billion compared to the third quarter of 2021. Average commercial loans decreased $2.5 billion driven by PPP loan forgiveness of $4.7 billion, partially offset by growth in PNC corporate banking and business credit businesses. Average consumer loans of $95.1 billion increased modestly driven by growth in residential mortgage loans largely offset by declines in home equity and auto loans.
Average loans for the fourth quarter of 2021 increased $43.1 billion compared to the fourth quarter of 2020, reflecting the acquisition of BBVA USA.
Fourth quarter 2021 average and period-end PPP loans outstanding were $4.6 billion and $3.4 billion, respectively.
Investment Securities | Change | Change | |||||
December 31, | September 30, | December 31, | 12/31/21 vs | 12/31/21 vs | |||
In billions | 09/30/21 | 12/31/20 | |||||
Average | $ 127.8 | $ 120.6 | $ 85.7 | 6% | 49% | ||
Quarter end | $ 133.0 | $ 125.6 | $ 88.8 | 6% | 50% | ||
Average investment securities for the fourth quarter of 2021 were $127.8 billion, increasing $7.2 billion and $42.1 billion from the third quarter of 2021 and fourth quarter of 2020, respectively, reflecting increased purchase activity, primarily of U.S. Treasury and government agency securities. Compared to the fourth quarter of 2020, the increase was also attributable to BBVA USA.
Net unrealized gains on available for sale securities were $0.7 billion at December 31, 2021, $1.7 billion at September 30, 2021 and $3.2 billion at December 31, 2020.
Average Federal Reserve Bank balances for the fourth quarter of 2021 were $75.1 billion, decreasing $5.0 billion from the third quarter of 2021, primarily reflecting increased securities purchases. Compared to the fourth quarter of 2020, average Federal Reserve Bank balances decreased $1.0 billion.
Deposits | Change | Change | |||||
December 31, | September 30, | December 31, | 12/31/21 vs | 12/31/21 vs | |||
In billions | 09/30/21 | 12/31/20 | |||||
Average | |||||||
Noninterest-bearing | $ 156.6 | $ 155.9 | $ 109.9 | — | 42% | ||
Interest-bearing | 296.2 | 298.5 | 249.5 | (1)% | 19% | ||
Average deposits | $ 452.8 | $ 454.4 | $ 359.4 | — | 26% | ||
Quarter end | |||||||
Noninterest-bearing | $ 155.2 | $ 156.3 | $ 112.6 | (1)% | 38% | ||
Interest-bearing | 302.1 | 292.6 | 252.7 | 3% | 20% | ||
Total deposits | $ 457.3 | $ 448.9 | $ 365.3 | 2% | 25% | ||
Average deposits for the fourth quarter of 2021 were $452.8 billion, decreasing $1.6 billion compared with the third quarter of 2021, as growth in commercial and consumer deposits was more than offset by legacy BBVA USA commercial deposit outflows reflecting the impact of strategic repricing decisions in the third quarter. Compared with the fourth quarter of 2020, average deposits increased $93.4 billion primarily reflecting the acquisition of BBVA USA.
Deposits at December 31, 2021 of $457.3 billion, increased $8.4 billion from September 30, 2021 as a result of growth in consumer deposits.
Borrowed Funds | Change | Change | |||||
December 31, | September 30, | December 31, | 12/31/21 vs | 12/31/21 vs | |||
In billions | 09/30/21 | 12/31/20 | |||||
Average | $ 34.4 | $ 34.4 | $ 38.2 | — | (10)% | ||
Quarter end | $ 30.8 | $ 33.5 | $ 37.2 | (8)% | (17)% | ||
Average borrowed funds of $34.4 billion in the fourth quarter of 2021 were stable compared with the third quarter of 2021. Compared with the fourth quarter of 2020, average borrowed funds decreased $3.8 billion reflecting the use of excess liquidity.
Borrowed funds at December 31, 2021 of $30.8 billion, decreased $2.7 billion primarily due to lower bank notes and senior debt.
Capital | December 31, 2021 | September 30, 2021 | December 31, 2020 | |||
* | ||||||
Common shareholders' equity In billions | $ 50.7 | $ 51.3 | $ 50.5 | |||
Basel III common equity Tier 1 capital ratio | 10.2% | 10.3% | 12.2% | |||
Basel III common equity Tier 1 fully | 10.0% | 10.0% | 11.8% | |||
* Ratios estimated | ||||||
PNC maintained a strong capital position. Common shareholders' equity at December 31, 2021 decreased $0.6 billion from September 30, 2021 as fourth quarter net income was more than offset by a decrease in accumulated other comprehensive income, reflecting the impact of higher rates on net unrealized securities gains, as well as share repurchases and dividends paid in the fourth quarter.
In the fourth quarter of 2021, PNC returned $1.1 billion of capital to shareholders through $0.6 billion of common share repurchases, representing 2.9 million shares, and $0.5 billion of dividends on common shares. Repurchases were made under the share repurchase programs of up to $2.9 billion for the four-quarter period beginning in the third quarter of 2021.
On January 5, 2022, the PNC board of directors declared a quarterly cash dividend on common stock of $1.25 per share payable on February 5, 2022.
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 4Q21 vs 3Q21 | Change 4Q21 vs 4Q20 | |||
In millions | December 31, | September 30, | December 31, | ||
Provision for (recapture of) credit losses | $ (327) | $ (203) | $ (254) | $ (124) | $ (73) |
Net loan charge-offs | $ 124 | $ 81 | $ 229 | 53% | (46)% |
Allowance for credit losses | $ 5,530 | $ 6,001 | $ 5,945 | (8)% | (7)% |
Total delinquencies | $ 1,985 | $ 1,469 | $ 1,363 | 35% | 46% |
Nonperforming loans | $ 2,480 | $ 2,528 | $ 2,286 | (2)% | 8% |
Net charge-offs to average loans (annualized) | 0.17% | 0.11% | 0.37% | ||
Allowance for credit losses to total loans | 1.92% | 2.07% | 2.46% | ||
Nonperforming loans to total loans | 0.86% | 0.87% | 0.94% | ||
Total delinquencies represent accruing loans more than 30 days past due Total delinquencies as of September 30, 2021 have been revised to align the delinquency methodology of residential real |
The fourth quarter of 2021 included a provision recapture of $327 million, reflecting continued improvements in the economic environment. The third quarter included a provision recapture of $203 million.
Net loan charge-offs were $124 million in the fourth quarter of 2021, increasing $43 million from the third quarter of 2021 driven by higher consumer loan net charge-offs, reflecting BBVA USA conversion-related impacts and seasonality. Compared to the fourth quarter of 2020, net loan charge-offs decreased $105 million driven by lower commercial and industrial net loan charge-offs.
The allowance for credit losses was $5.5 billion at December 31, 2021, $6.0 billion September 30, 2021 and $5.9 billion at December 31, 2020. The allowance for credit losses as a percentage of total loans was 1.92% at December 31, 2021, 2.07% at September 30, 2021 and 2.46% at December 31, 2020.
Nonperforming loans were $2.5 billion at both December 31, 2021 and September 30, 2021. Nonperforming loans increased $194 million compared to December 31, 2020, primarily due to nonperforming loans from the BBVA USA acquisition, partially offset by lower consumer nonperforming loans.
Delinquencies at December 31, 2021 of $2.0 billion increased $516 million compared to September 30, 2021, reflecting higher commercial loan delinquencies of $244 million and consumer loan delinquencies of $272 million. The increase in total delinquencies was primarily driven by BBVA USA conversion-related administrative and operational delays which should largely be resolved within the first half of 2022. Compared to the fourth quarter of 2020, total delinquencies increased $622 million also primarily related to conversion-related administrative and operational delays. Under the CARES Act credit reporting rules and guidance from regulatory agencies, certain loans modified due to pandemic-related hardships were considered current during their modification period and not reported as past due.
BUSINESS SEGMENT RESULTS | |||||
Business Segment Income | |||||
In millions | 4Q21 | 3Q21 | 4Q20 | ||
Retail Banking | $ 362 | $ 447 | $ 336 | ||
Corporate & Institutional Banking | 1,334 | 1,123 | 992 | ||
Asset Management Group | 106 | 114 | 82 | ||
Other | (509) | (210) | 32 | ||
Net income excluding noncontrolling interests | $ 1,293 | $ 1,474 | $ 1,442 | ||
Retail Banking | Change | Change | |||||||
4Q21 vs | 4Q21 vs | ||||||||
In millions | 4Q21 | 3Q21 | 4Q20 | 3Q21 | 4Q20 | ||||
Net interest income | $ 1,634 | $ 1,713 | $ 1,380 | $ (79) | $ 254 | ||||
Noninterest income | $ 774 | $ 662 | $ 473 | $ 112 | $ 301 | ||||
Provision for (recapture of) credit losses | $ 55 | $ (113) | $ (81) | $ 168 | $ 136 | ||||
Noninterest expense | $ 1,874 | $ 1,889 | $ 1,482 | $ (15) | $ 392 | ||||
Earnings | $ 362 | $ 447 | $ 336 | $ (85) | $ 26 | ||||
In billions | |||||||||
Average Loans | $ 95.0 | $ 99.1 | $ 79.7 | $ (4.1) | $ 15.3 | ||||
Average Deposits | $ 262.8 | $ 262.0 | $ 200.8 | $ 0.8 | $ 62.0 | ||||
Net charge offs In millions | $ 124 | $ 82 | $ 136 | $ 42 | $ (12) | ||||
Retail Banking Highlights
Fourth quarter 2021 compared with third quarter 2021
Fourth quarter 2021 compared with fourth quarter 2020
Corporate & Institutional Banking | Change | Change | |||||||
4Q21 vs | 4Q21 vs | ||||||||
In millions | 4Q21 | 3Q21 | 4Q20 | 3Q21 | 4Q20 | ||||
Net interest income | $ 1,228 | $ 1,250 | $ 994 | $ (22) | $ 234 | ||||
Noninterest income | $ 1,053 | $ 1,056 | $ 919 | $ (3) | $ 134 | ||||
Provision for (recapture of) credit losses | $ (369) | $ (99) | $ (166) | $ (270) | $ (203) | ||||
Noninterest expense | $ 975 | $ 980 | $ 801 | $ (5) | $ 174 | ||||
Earnings | $ 1,334 | $ 1,123 | $ 992 | $ 211 | $ 342 | ||||
In billions | |||||||||
Average Loans | $ 176.8 | $ 175.8 | $ 154.2 | $ 1.0 | $ 22.6 | ||||
Average Deposits | $ 160.4 | $ 163.1 | $ 138.8 | $ (2.7) | $ 21.6 | ||||
Net charge-offs In millions | $ (1) | $ 13 | $ 99 | $ (14) | $ (100) | ||||
Corporate & Institutional Banking Highlights
Fourth quarter 2021 compared with third quarter 2021
Fourth quarter 2021 compared with fourth quarter 2020
Asset Management Group | Change | Change | |||||||
4Q21 vs | 4Q21 vs | ||||||||
In millions | 4Q21 | 3Q21 | 4Q20 | 3Q21 | 4Q20 | ||||
Net interest income | $ 130 | $ 141 | $ 91 | $ (11) | $ 39 | ||||
Noninterest income | $ 258 | $ 256 | $ 225 | $ 2 | $ 33 | ||||
Provision for (recapture of) credit losses | $ (15) | $ (6) | $ (2) | $ (9) | $ (13) | ||||
Noninterest expense | $ 265 | $ 255 | $ 211 | $ 10 | $ 54 | ||||
Earnings | $ 106 | $ 114 | $ 82 | $ (8) | $ 24 | ||||
In billions | |||||||||
Discretionary client assets under management | $ 192 | $ 183 | $ 170 | $ 9 | $ 22 | ||||
Nondiscretionary client assets under administration | $ 175 | $ 170 | $ 154 | $ 5 | $ 21 | ||||
Client assets under administration at quarter end | $ 367 | $ 353 | $ 324 | $ 14 | $ 43 | ||||
Brokerage client account assets | $ 5 | $ 5 | — | — | $ 5 | ||||
In billions | |||||||||
Average Loans | $ 12.9 | $ 13.0 | $ 8.2 | $ (0.1) | $ 4.7 | ||||
Average Deposits | $ 29.3 | $ 29.3 | $ 19.6 | — | $ 9.7 | ||||
Net charge-offs (recoveries) In millions | $ 1 | $ (1) | $ 1 | $ 2 | — | ||||
Asset Management Group Highlights
Fourth quarter 2021 compared with third quarter 2021
Fourth quarter 2021 compared with fourth quarter 2020
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 9:30 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) 885-9643 and (773) 790-4245 (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 2021 and full year 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 21999390 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 | Year ended | ||||||||||
Dollars in millions, except per share data | December 31 | September 30 | December 31 | December 31 | December 31 | |||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||||
Revenue | ||||||||||||
Net interest income | $ 2,862 | $ 2,856 | $ 2,424 | $ 10,647 | $ 9,946 | |||||||
Noninterest income | 2,265 | 2,341 | 1,784 | 8,564 | 6,955 | |||||||
Total revenue | 5,127 | 5,197 | 4,208 | 19,211 | 16,901 | |||||||
Provision for (recapture of) credit losses | (327) | (203) | (254) | (779) | 3,175 | |||||||
Noninterest expense | 3,791 | 3,587 | 2,708 | 13,002 | 10,297 | |||||||
Income from continuing operations before income taxes and | $ 1,663 | $ 1,813 | $ 1,754 | $ 6,988 | $ 3,429 | |||||||
Income taxes from continuing operations | 357 | 323 | 298 | 1,263 | 426 | |||||||
Net income from continuing operations | $ 1,306 | $ 1,490 | $ 1,456 | $ 5,725 | $ 3,003 | |||||||
Income from discontinued operations before taxes | $ 5,777 | |||||||||||
Income taxes from discontinued operations | 1,222 | |||||||||||
Net income from discontinued operations | $ 4,555 | |||||||||||
Net income | $ 1,306 | $ 1,490 | $ 1,456 | $ 5,725 | $ 7,558 | |||||||
Less: | ||||||||||||
Net income attributable to noncontrolling interests | 13 | 16 | 14 | 51 | 41 | |||||||
Preferred stock dividends (a) | 71 | 57 | 48 | 233 | 229 | |||||||
Preferred stock discount accretion and redemptions | 2 | 1 | 1 | 5 | 4 | |||||||
Net income attributable to common shareholders | $ 1,220 | $ 1,416 | $ 1,393 | $ 5,436 | $ 7,284 | |||||||
Per Common Share | ||||||||||||
Basic earnings from continuing operations | $ 2.87 | $ 3.31 | $ 3.26 | $ 12.71 | $ 6.37 | |||||||
Basic earnings from discontinued operations | 10.62 | |||||||||||
Total basic earnings | $ 2.87 | $ 3.31 | $ 3.26 | $ 12.71 | $ 16.99 | |||||||
Diluted earnings from continuing operations | $ 2.86 | $ 3.30 | $ 3.26 | $ 12.70 | $ 6.36 | |||||||
Diluted earnings from discontinued operations | 10.60 | |||||||||||
Total diluted earnings | $ 2.86 | $ 3.30 | $ 3.26 | $ 12.70 | $ 16.96 | |||||||
Cash dividends declared per common share | $ 1.25 | $ 1.25 | $ 1.15 | $ 4.90 | $ 4.60 | |||||||
Effective tax rate from continuing operations (b) | 21.5% | 17.8% | 17.0% | 18.1% | 12.4% | |||||||
PERFORMANCE RATIOS | ||||||||||||
Net interest margin (c) | 2.27% | 2.27% | 2.32% | 2.29% | 2.53% | |||||||
Noninterest income to total revenue | 44% | 45% | 42% | 45% | 41% | |||||||
Efficiency (d) | 74% | 69% | 64% | 68% | 61% | |||||||
Return on: | ||||||||||||
Average common shareholders' equity | 9.61% | 10.95% | 11.16% | 10.78% | 15.21% | |||||||
Average assets | 0.92% | 1.06% | 1.24% | 1.09% | 1.68% |
(a) | Dividends are payable quarterly other than Series R and Series S preferred stock, which are payable semiannually. |
(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. |
(c) | 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 December 31, 2021, September 30, 2021 and December 31, 2020 were $22 million, $22 million and $17 million, respectively. The taxable equivalent adjustments to net interest income for the twelve months ended December 31, 2021 and December 31, 2020 were $74 million and $75 million, respectively. |
(d) | Calculated as noninterest expense divided by total revenue. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | ||||
December 31 | September 30 | December 31 | |||
2021 | 2021 | 2020 | |||
BALANCE SHEET DATA | |||||
Dollars in millions, except per share data | |||||
Assets | $ 558,448 | $ 553,515 | $ 466,679 | ||
Loans (a) | $ 288,372 | $ 290,230 | $ 241,928 | ||
Allowance for loan and lease losses | $ 4,868 | $ 5,355 | $ 5,361 | ||
Investment securities | $ 132,962 | $ 125,606 | $ 88,799 | ||
Total deposits | $ 457,278 | $ 448,902 | $ 365,345 | ||
Borrowed funds (a) | $ 30,784 | $ 33,471 | $ 37,195 | ||
Total shareholders' equity | $ 55,695 | $ 56,259 | $ 54,010 | ||
Common shareholders' equity | $ 50,685 | $ 51,250 | $ 50,493 | ||
Accumulated other comprehensive income | $ 409 | $ 1,079 | $ 2,770 | ||
Book value per common share | $ 120.61 | $ 121.16 | $ 119.11 | ||
Tangible book value per common share (non-GAAP) (b) | $ 94.11 | $ 94.82 | $ 97.43 | ||
Period end common shares outstanding (in millions) | 420 | 423 | 424 | ||
Loans to deposits | 63% | 65% | 66% | ||
Common shareholders' equity to total assets | 9.1% | 9.3% | 10.8% | ||
CLIENT ASSETS (billions) | |||||
Discretionary client assets under management | $ 192 | $ 183 | $ 170 | ||
Nondiscretionary client assets under administration | 175 | 170 | 154 | ||
Total client assets under administration | 367 | 353 | 324 | ||
Brokerage account client assets | 83 | 81 | 59 | ||
Total client assets | $ 450 | $ 434 | $ 383 | ||
CAPITAL RATIOS | |||||
Basel III (c) (d) | |||||
Common equity Tier 1 | 10.2% | 10.3% | 12.2% | ||
Common equity Tier 1 fully implemented (e) | 10.0% | 10.0% | 11.8% | ||
Tier 1 risk-based | 11.5% | 11.6% | 13.2% | ||
Total capital risk-based (f) | 13.4% | 13.6% | 15.6% | ||
Leverage | 8.2% | 8.2% | 9.5% | ||
Supplementary leverage | 6.9% | 7.0% | 9.9% | ||
ASSET QUALITY | |||||
Nonperforming loans to total loans | 0.86% | 0.87% | 0.94% | ||
Nonperforming assets to total loans, OREO and foreclosed assets | 0.87% | 0.88% | 0.97% | ||
Nonperforming assets to total assets | 0.45% | 0.46% | 0.50% | ||
Net charge-offs to average loans (for the three months ended) (annualized) | 0.17% | 0.11% | 0.37% | ||
Allowance for loan and lease losses to total loans | 1.69% | 1.85% | 2.22% | ||
Allowance for credit losses to total loans (g) | 1.92% | 2.07% | 2.46% | ||
Allowance for loan and lease losses to nonperforming loans | 196% | 212% | 235% | ||
Total delinquencies (in millions) (h) | $ 1,985 | $ 1,469 | $ 1,363 |
(a) | Amounts include assets and liabilities for which we have elected the fair value option. Our 2021 Form 10-Qs included, and our 2021 Form 10-K will include, additional information regarding these Consolidated Balance Sheet line items. |
(b) | See the Tangible Book Value per Common Share table on page 17 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 15 for additional information. The ratios as of December 31, 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 $20 million and $40 million, respectively, that are subject to a phase-out period that runs through 2021. |
(g) | Excludes allowances for investment securities and other financial assets. |
(h) | Total delinquencies represent accruing loans more than 30 days past due. Amounts as of September 30, 2021 have been revised to align the methodology of acquired residential real estate loans attributable to BBVA to PNC's methodology, which resulted in an increase of $73 million as of September 30, 2021. This change was made as a result of the conversion of bank systems completed in October 2021. |
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 25% of the institution's adjusted common equity Tier 1 capital.
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 September 30, 2021, December 31, 2020 and estimated December 31, 2021 ratios. For the full impact of PNC's adoption of CECL, which excludes the benefits of the five-year transition provision, see the December 31, 2021 and September 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) | |||||||
December 31 2021 (estimated) (b) | September 30 2021 (b) | December 31 2020 (b) | December 31, 2021 (estimated) (c) | September 30, 2021 (estimated) (c) | |||
Dollars in millions | |||||||
Common stock, related surplus and retained earnings, | $ 51,243 | $ 51,228 | $ 48,958 | $ 50,277 | $ 50,171 | ||
Less regulatory capital adjustments: | |||||||
Goodwill and disallowed intangibles, net of deferred | (11,136) | (11,142) | (9,193) | (11,136) | (11,142) | ||
All other adjustments | (43) | (48) | (30) | (48) | (53) | ||
Basel III Common equity Tier 1 capital | $ 40,064 | $ 40,038 | $ 39,735 | $ 39,093 | $ 38,976 | ||
Basel III standardized approach risk-weighted assets (d) | $ 391,099 | $ 389,911 | $ 326,772 | $ 391,194 | $ 389,887 | ||
Basel III Common equity Tier 1 capital ratio | 10.2% | 10.3% | 12.2% | 10.0% | 10.0% |
(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 December 31, 2021 and September 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 | Three months ended | Year ended | |||||
December 31 | September 30 | December 31 | December 31 | ||||
Dollars in millions | 2021 | 2021 | 2021 | 2020 | |||
Income from continuing operations before income taxes and | $ 1,663 | $ 1,813 | $ 6,988 | $ 3,429 | |||
Provision for (recapture of) credit losses | (327) | (203) | (779) | 3,175 | |||
Pretax pre-provision earnings (non-GAAP) | $ 1,336 | $ 1,610 | $ 6,209 | $ 6,604 | |||
Integration costs | 438 | 243 | 798 | 7 | |||
Pretax pre-provision earnings excluding integration costs (non- | $ 1,774 | $ 1,853 | $ 7,007 | $ 6,611 |
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.
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | |
Adjusted Diluted Earnings per Common Share | Three months ended | ||||||||||
December 31 | Per Common | September 30 | Per Common | December 31 | Per Common | ||||||
Dollars in millions, except per share data | 2021 | Share | 2021 | Share | 2020 | Share | |||||
Net income from continuing operations | $ 1,220 | $ 1,416 | $ 1,393 | ||||||||
Dividends and undistributed earnings allocated to | (6) | (8) | (6) | ||||||||
Net income from continuing operations | $ 1,214 | $ 2.86 | $ 1,408 | $ 3.30 | $ 1,387 | $ 3.26 | |||||
Integration costs after tax (a) | 346 | 0.82 | 192 | 0.45 | 6 | 0.01 | |||||
Adjusted net income from continuing operations | $ 1,560 | $ 3.68 | $ 1,600 | $ 3.75 | $ 1,393 | $ 3.27 | |||||
Average diluted common shares outstanding (in millions) | 424 | 426 | 426 |
Year ended | |||||||
December 31 | Per Common | December 31 | Per Common | ||||
Dollars in millions, except per share data | 2021 | Share | 2020 | Share | |||
Net income from continuing operations | $ 5,436 | $ 2,729 | |||||
Dividends and undistributed earnings allocated to | (27) | (13) | |||||
Net income from continuing operations | $ 5,409 | $ 12.70 | $ 2,716 | $ 6.36 | |||
Integration costs after tax (a) | 630 | 1.48 | 6 | 0.01 | |||
Adjusted net income from continuing operations | $ 6,039 | $ 14.18 | $ 2,722 | $ 6.37 | |||
Average diluted common shares outstanding (in millions) | 426 | 427 |
(a) | Statutory tax rate of 21% used to calculate impacts. |
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 from continuing operations attributable to diluted common shareholders by removing post-tax integration costs in the period. 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.
Tangible Book Value per Common Share (non-GAAP) | |||||
December 31 | September 30 | December 31 | |||
Dollars in millions, except per share data | 2021 | 2021 | 2020 | ||
Book value per common share | $ 120.61 | $ 121.16 | $ 119.11 | ||
Tangible book value per common share | |||||
Common shareholders' equity | $ 50,685 | $ 51,250 | $ 50,493 | ||
Goodwill and other intangible assets | (11,406) | (11,419) | (9,381) | ||
Deferred tax liabilities on goodwill and other intangible assets | 270 | 277 | 188 | ||
Tangible common shareholders' equity | $ 39,549 | $ 40,108 | $ 41,300 | ||
Period-end common shares outstanding (in millions) | 420 | 423 | 424 | ||
Tangible book value per common share (non-GAAP) | $ 94.11 | $ 94.82 | $ 97.43 |
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.
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights (Unaudited) | |
Taxable-Equivalent Net Interest Income (non-GAAP) | Three months ended | Year ended | |||||
December 31 | September 30 | December 31 | December 31 | ||||
Dollars in millions | 2021 | 2021 | 2021 | 2020 | |||
Net interest income | $ 2,862 | $ 2,856 | $ 10,647 | $ 9,946 | |||
Taxable-equivalent adjustments | 22 | 22 | 74 | 75 | |||
Net interest income (Fully Taxable-Equivalent - FTE) | $ 2,884 | $ 2,878 | $ 10,721 | $ 10,021 |
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) | Three months ended | Year ended | |||||
December 31 | September 30 | December 31 | December 31 | ||||
Dollars in millions | 2021 | 2021 | 2021 | 2020 | |||
Noninterest expense | $ 3,791 | $ 3,587 | $ 13,002 | $ 10,297 | |||
Integration expense | (391) | (235) | (733) | (7) | |||
Noninterest expense excluding integration expense (non-GAAP) | $ 3,400 | $ 3,352 | $ 12,269 | $ 10,290 | |||
Total revenue | $ 5,127 | $ 5,197 | $ 19,211 | $ 16,901 | |||
Integration costs - contra revenue | (47) | (8) | (65) | ||||
Total revenue excluding integration costs - contra revenue (non- | $ 5,174 | $ 5,205 | $ 19,276 | $ 16,901 | |||
Efficiency ratio (a) | 74% | 69% | 68% | 61% | |||
Efficiency ratio excluding integration costs (non-GAAP) (b) | 66% | 64% | 64% | 61% |
(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.
Cautionary Statement Regarding Forward-Looking Information (Continued)
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
[email protected]
INVESTORS:
Bryan Gill
(412) 768-4143
[email protected]
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SOURCE The PNC Financial Services Group, Inc.
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