Generated positive operating leverage; grew NII; substantially increased fee income and TBV
PITTSBURGH, Oct. 15, 2024 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported:
For the quarter |
|||||||||||
In millions, except per share data and as noted |
3Q24 |
2Q24 |
3Q23 |
Third Quarter Highlights |
|||||||
Financial Results |
Comparisons reflect 3Q24 vs. 2Q24 |
||||||||||
Net interest income (NII) |
$ 3,410 |
$ 3,302 |
$ 3,418 |
Income Statement ▪ Generated 1% positive operating ▪ Revenue stable; noninterest expense • NII grew 3%; NIM increased 4 bps • Fee income increased 10%, and • Other noninterest income of $69 Balance Sheet ▪ Average loans were stable ▪ Average deposits and securities ▪ Net loan charge-offs were $286 ▪ ACL to total loans stable at 1.7% ▪ AOCI improved $2.4 billion or 32% ▪ TBV per share increased 9% ▪ Maintained strong capital position – CET1 capital ratio of 10.3% – Repurchased more than $0.1
|
|||||||
Fee income (non-GAAP) |
1,953 |
1,777 |
1,721 |
||||||||
Other noninterest income |
69 |
332 |
94 |
||||||||
Noninterest income |
2,022 |
2,109 |
1,815 |
||||||||
Revenue |
5,432 |
5,411 |
5,233 |
||||||||
Noninterest expense |
3,327 |
3,357 |
3,245 |
||||||||
Pretax, pre-provision earnings (PPNR) (non-GAAP) |
2,105 |
2,054 |
1,988 |
||||||||
Provision for credit losses |
243 |
235 |
129 |
||||||||
Net income |
1,505 |
1,477 |
1,570 |
||||||||
Per Common Share |
|||||||||||
Diluted earnings per share (EPS) |
$ 3.49 |
$ 3.39 |
$ 3.60 |
||||||||
Average diluted common shares outstanding |
400 |
400 |
400 |
||||||||
Book value |
124.56 |
116.70 |
105.98 |
||||||||
Tangible book value (TBV) (non-GAAP) |
96.98 |
89.12 |
78.16 |
||||||||
Balance Sheet & Credit Quality |
|||||||||||
Average loans In billions |
$ 319.6 |
$ 319.9 |
$ 319.5 |
||||||||
Average securities In billions |
142.3 |
141.3 |
139.7 |
||||||||
Average deposits In billions |
422.1 |
417.2 |
422.5 |
||||||||
Accumulated other comprehensive income (loss) (AOCI) In billions |
(5.1) |
(7.4) |
(10.3) |
||||||||
Net loan charge-offs |
286 |
262 |
121 |
||||||||
Allowance for credit losses (ACL) to total loans |
1.65 % |
1.67 % |
1.70 % |
||||||||
Selected Ratios |
|||||||||||
Return on average common shareholders' equity |
11.72 % |
12.16 % |
13.65 % |
||||||||
Return on average assets |
1.05 |
1.05 |
1.12 |
||||||||
Net interest margin (NIM) (non-GAAP) |
2.64 |
2.60 |
2.71 |
||||||||
Noninterest income to total revenue |
37 |
39 |
35 |
||||||||
Efficiency |
61 |
62 |
62 |
||||||||
Common equity Tier 1 (CET1) capital ratio |
10.3 |
10.2 |
9.8 |
||||||||
See non-GAAP financial measures in the Consolidated Financial Highlights accompanying this release.
|
From Bill Demchak, PNC Chairman and Chief Executive Officer: |
||||||||||||
"Our results for the third quarter demonstrate PNC's continued strong momentum across the franchise. NII and NIM both increased, fee revenue grew substantially and expenses remained well controlled, resulting in positive operating leverage. Importantly, we increased TBV, grew customers and continued to strengthen our capital levels. We remain well positioned to capitalize on opportunities and achieve record NII in 2025." |
Income Statement Highlights
Third quarter 2024 compared with second quarter 2024
Balance Sheet Highlights
Third quarter 2024 compared with second quarter 2024 or September 30, 2024 compared with June 30, 2024
Earnings Summary |
||||||
In millions, except per share data |
3Q24 |
2Q24 |
3Q23 |
|||
Net income |
$ 1,505 |
$ 1,477 |
$ 1,570 |
|||
Net income attributable to diluted common shareholders |
$ 1,396 |
$ 1,355 |
$ 1,440 |
|||
Diluted earnings per common share |
$ 3.49 |
$ 3.39 |
$ 3.60 |
|||
Average diluted common shares outstanding |
400 |
400 |
400 |
|||
Cash dividends declared per common share |
$ 1.60 |
$ 1.55 |
$ 1.55 |
|||
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. Information in this news release, including the financial tables, is unaudited.
Second Quarter 2024 Significant Items
In the second quarter of 2024, PNC participated in the Visa exchange program, allowing PNC to monetize 50% of its Visa Class B-1 shares and converting its remaining holdings into 1.8 million of Visa Class B-2 shares. The exchange resulted in a gain of $754 million. The second quarter of 2024 also included Visa Class B-2 derivative fair value adjustments of negative $116 million and a $120 million expense related to a PNC Foundation contribution. During the second quarter, PNC also repositioned the investment securities portfolio, selling low-yielding investment securities for net proceeds of $3.8 billion, resulting in a loss of $497 million. PNC redeployed the full proceeds from the sale into higher-yielding investment securities. The combined impact to pre-tax noninterest income and pre-tax noninterest expense was $141 million and $120 million, respectively. The net income impact of these significant items on the second quarter of 2024 was $35 million, or $0.09 per common share.
CONSOLIDATED REVENUE REVIEW
Revenue |
Change |
Change |
|||||
3Q24 vs |
3Q24 vs |
||||||
In millions |
3Q24 |
2Q24 |
3Q23 |
2Q24 |
3Q23 |
||
Net interest income |
$ 3,410 |
$ 3,302 |
$ 3,418 |
3 % |
— |
||
Noninterest income |
2,022 |
2,109 |
1,815 |
(4) % |
11 % |
||
Total revenue |
$ 5,432 |
$ 5,411 |
$ 5,233 |
— |
4 % |
||
Total revenue for the third quarter of 2024 increased $21 million from the second quarter of 2024 due to strong fee income growth and higher net interest income, partially offset by negative Visa derivative fair value adjustments of $128 million. Compared with the third quarter of 2023, total revenue increased $199 million driven by higher noninterest income.
Net interest income of $3.4 billion increased $108 million from the second quarter of 2024, driven by higher yields on interest-earning assets. Net interest margin was 2.64% in the third quarter of 2024, increasing 4 basis points from the second quarter of 2024. Compared to the third quarter of 2023, net interest income was stable.
Noninterest Income |
Change |
Change |
|||||
3Q24 vs |
3Q24 vs |
||||||
In millions |
3Q24 |
2Q24 |
3Q23 |
2Q24 |
3Q23 |
||
Asset management and brokerage |
$ 383 |
$ 364 |
$ 348 |
5 % |
10 % |
||
Capital markets and advisory |
371 |
272 |
168 |
36 % |
121 % |
||
Card and cash management |
698 |
706 |
689 |
(1) % |
1 % |
||
Lending and deposit services |
320 |
304 |
315 |
5 % |
2 % |
||
Residential and commercial mortgage |
181 |
131 |
201 |
38 % |
(10) % |
||
Fee income (non-GAAP) |
1,953 |
1,777 |
1,721 |
10 % |
13 % |
||
Other |
69 |
332 |
94 |
(79) % |
(27) % |
||
Total noninterest income |
$ 2,022 |
$ 2,109 |
$ 1,815 |
(4) % |
11 % |
||
Noninterest income for the third quarter of 2024 decreased $87 million compared with the second quarter of 2024. Asset management and brokerage increased $19 million, reflecting higher average equity markets. Capital markets and advisory revenue grew $99 million and included higher merger and acquisition advisory activity, increased asset backed financing revenue and higher underwriting fees. Card and cash management fees decreased $8 million reflecting the impact of credit card origination incentives, partially offset by higher treasury management product revenue. Lending and deposit services grew $16 million primarily due to increased customer activity. Residential and commercial mortgage revenue increased $50 million driven by higher residential mortgage servicing rights valuation, net of economic hedge. Other noninterest income decreased $263 million, reflecting negative Visa derivative fair value adjustments of $128 million primarily related to litigation escrow funding, while the prior quarter included the benefit of $141 million of significant items.
Noninterest income for the third quarter of 2024 increased $207 million from the third quarter of 2023. Fee income increased $232 million driven by growth in capital markets and advisory revenue. Other noninterest income decreased $25 million primarily reflecting negative Visa derivative fair value adjustments of $128 million in the third quarter of 2024 compared to negative $51 million in the third quarter of 2023.
CONSOLIDATED EXPENSE REVIEW
Noninterest Expense |
Change |
Change |
|||||
3Q24 vs |
3Q24 vs |
||||||
In millions |
3Q24 |
2Q24 |
3Q23 |
2Q24 |
3Q23 |
||
Personnel |
$ 1,869 |
$ 1,782 |
$ 1,773 |
5 % |
5 % |
||
Occupancy |
234 |
236 |
244 |
(1) % |
(4) % |
||
Equipment |
357 |
356 |
347 |
— |
3 % |
||
Marketing |
93 |
93 |
93 |
— |
— |
||
Other |
774 |
890 |
788 |
(13) % |
(2) % |
||
Total noninterest expense |
$ 3,327 |
$ 3,357 |
$ 3,245 |
(1) % |
3 % |
||
Noninterest expense for the third quarter of 2024 decreased $30 million compared to the second quarter of 2024 as increased personnel costs, reflecting higher variable compensation related to increased business activity, were more than offset by lower other expense. Other expense for the second quarter of 2024 included a $120 million PNC Foundation contribution expense.
Noninterest expense for the third quarter of 2024 increased $82 million compared with the third quarter of 2023, primarily due to higher personnel costs, reflecting higher variable compensation related to increased business activity.
The effective tax rate was 19.2% for the third quarter of 2024, 18.8% for the second quarter of 2024 and 15.5% for the third quarter of 2023.
CONSOLIDATED BALANCE SHEET REVIEW
Average total assets of $569.5 billion increased $6.5 billion compared to the second quarter of 2024 and $14.6 billion compared to the third quarter of 2023. In both comparisons, the increase was primarily attributable to higher Federal Reserve Bank balances and increased investment securities.
Average Loans |
Change |
Change |
|||||
3Q24 vs |
3Q24 vs |
||||||
In billions |
3Q24 |
2Q24 |
3Q23 |
2Q24 |
3Q23 |
||
Commercial |
$ 219.0 |
$ 219.1 |
$ 217.7 |
— |
1 % |
||
Consumer |
100.6 |
100.8 |
101.8 |
— |
(1) % |
||
Total |
$ 319.6 |
$ 319.9 |
$ 319.5 |
— |
— |
||
Average loans for the third quarter of 2024 were stable compared to the second quarter of 2024 and third quarter of 2023. In comparison to the third quarter of 2023, average commercial loans increased $1.3 billion driven by higher corporate banking balances, partially offset by a decline in commercial real estate lending. Average consumer loans decreased $1.2 billion and included lower education, credit card and home equity balances.
Average Investment Securities |
Change |
Change |
|||||
3Q24 vs |
3Q24 vs |
||||||
In billions |
3Q24 |
2Q24 |
3Q23 |
2Q24 |
3Q23 |
||
Available for sale |
$ 56.2 |
$ 53.4 |
$ 46.5 |
5 % |
21 % |
||
Held to maturity |
86.1 |
87.9 |
93.2 |
(2) % |
(8) % |
||
Total |
$ 142.3 |
$ 141.3 |
$ 139.7 |
1 % |
2 % |
||
Average investment securities of $142.3 billion in the third quarter of 2024 increased $1.0 billion and $2.6 billion from the second quarter of 2024 and the third quarter of 2023, respectively. In both comparisons, the increase reflected net purchase activity, primarily of U.S. Treasury securities. The duration of the investment securities portfolio was estimated at 3.3 years as of September 30, 2024, 3.6 years as of June 30, 2024 and 4.3 years as of September 30, 2023.
Net unrealized losses on available-for-sale securities were $2.3 billion at September 30, 2024, decreasing from $3.7 billion at June 30, 2024 and $5.4 billion at September 30, 2023. In both comparisons, the decrease reflected the benefit from lower interest rates as well as paydowns and maturities.
Average Federal Reserve Bank balances for the third quarter of 2024 were $44.9 billion, increasing $4.2 billion from the second quarter of 2024 and $7.0 billion from the third quarter of 2023. In comparison to the second quarter of 2024, the increase primarily reflected deposit balance growth. Compared to the third quarter of 2023, the increase was driven by higher borrowed funds outstanding.
Average Deposits |
Change |
Change |
|||||
3Q24 vs |
3Q24 vs |
||||||
In billions |
3Q24 |
2Q24 |
3Q23 |
2Q24 |
3Q23 |
||
Commercial |
$ 206.1 |
$ 199.7 |
$ 204.7 |
3 % |
1 % |
||
Consumer |
216.0 |
217.5 |
217.8 |
(1) % |
(1) % |
||
Total |
$ 422.1 |
$ 417.2 |
$ 422.5 |
1 % |
— |
||
IB % of total avg. deposits |
77 % |
77 % |
74 % |
||||
NIB % of total avg. deposits |
23 % |
23 % |
26 % |
||||
IB - Interest-bearing NIB - Noninterest-bearing |
|||||||
Average deposits for the third quarter of 2024 of $422.1 billion increased $4.9 billion compared to the second quarter of 2024. Average commercial deposits grew $6.4 billion reflecting higher interest-bearing deposit balances. Average consumer deposits declined $1.5 billion as growth in time deposits was more than offset by declines across the remaining portfolio. Compared to the third quarter of 2023, average deposits were stable.
Noninterest-bearing deposits as a percentage of total average deposits were 23% for the third quarter of 2024, stable from the second quarter of 2024 and down 3% from the third quarter of 2023.
Average Borrowed Funds |
Change |
Change |
|||||
3Q24 vs |
3Q24 vs |
||||||
In billions |
3Q24 |
2Q24 |
3Q23 |
2Q24 |
3Q23 |
||
Total |
$ 76.1 |
$ 77.5 |
$ 67.5 |
(2) % |
13 % |
||
Avg. borrowed funds to avg. liabilities |
15 % |
15 % |
13 % |
||||
Average borrowed funds of $76.1 billion in the third quarter of 2024 decreased $1.4 billion compared to the second quarter of 2024 reflecting lower Federal Home Loan Bank borrowings, partially offset by parent company senior debt issuances. Compared to the third quarter of 2023, borrowed funds increased $8.6 billion primarily driven by parent company senior debt issuances, partially offset by lower Federal Home Loan Bank borrowings.
Capital |
September 30, |
June 30, 2024 |
September 30, |
||
Common shareholders' equity In billions |
$ 49.4 |
$ 46.4 |
$ 42.2 |
||
Accumulated other comprehensive income (loss) In billions |
$ (5.1) |
$ (7.4) |
$ (10.3) |
||
Basel III common equity Tier 1 capital ratio * |
10.3 % |
10.2 % |
9.8 % |
||
Basel III common equity Tier 1 fully implemented capital ratio (estimated) |
10.3 % |
10.1 % |
9.7 % |
||
*September 30, 2024 ratio is estimated |
PNC maintained a strong capital position. Common shareholders' equity at September 30, 2024 increased $3.0 billion from June 30, 2024, driven by net income and an improvement in accumulated other comprehensive income, partially offset by dividends paid and share repurchases.
As a Category III institution, PNC has elected to exclude accumulated other comprehensive income related to both available-for-sale securities and pension and other post-retirement plans from CET1 capital. Accumulated other comprehensive income of negative $5.1 billion at September 30, 2024 improved from negative $7.4 billion at June 30, 2024 and negative $10.3 billion at September 30, 2023, primarily reflecting the benefit from lower interest rates as well as paydowns and maturities of securities and swaps.
In the third quarter of 2024, PNC returned $0.8 billion of capital to shareholders, including more than $0.6 billion of dividends on common shares and more than $0.1 billion of common share repurchases. Consistent with the Stress Capital Buffer (SCB) framework, which allows for capital return in amounts in excess of the SCB minimum levels, our board of directors has authorized a repurchase framework under the previously approved repurchase program of up to 100 million common shares, of which approximately 43% were still available for repurchase at September 30, 2024.
Fourth quarter 2024 share repurchase activity is expected to approximate recent quarterly average share repurchase levels. PNC may adjust share repurchase activity depending on market and economic conditions, as well as other factors.
PNC's SCB for the four-quarter period beginning October 1, 2024 is the regulatory minimum of 2.5%.
On October 3, 2024, the PNC board of directors declared a quarterly cash dividend on common stock of $1.60 per share to be paid on November 5, 2024 to shareholders of record at the close of business October 16, 2024.
At September 30, 2024, PNC was considered "well capitalized" based on applicable U.S. regulatory capital ratio requirements. For additional 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 until December 31, 2021 the full impact of the Current Expected Credit Losses (CECL) standard on regulatory capital, followed by a three-year transition period. Effective for the first quarter of 2022, PNC is now in the three-year transition period, and the full impact of the CECL standard is being phased-in to regulatory capital through December 31, 2024. The fully implemented ratios reflect the full impact of CECL and exclude the benefits of this transition provision.
CREDIT QUALITY REVIEW
Credit Quality |
Change |
Change |
|||
September 30, |
June 30, 2024 |
September 30, |
09/30/24 vs |
09/30/24 vs |
|
In millions |
06/30/24 |
09/30/23 |
|||
Provision for credit losses (a) |
$ 243 |
$ 235 |
$ 129 |
$ 8 |
$ 114 |
Net loan charge-offs (a) |
$ 286 |
$ 262 |
$ 121 |
9 % |
136 % |
Allowance for credit losses (b) |
$ 5,314 |
$ 5,353 |
$ 5,407 |
(1) % |
(2) % |
Total delinquencies (c) |
$ 1,275 |
$ 1,272 |
$ 1,287 |
— |
(1) % |
Nonperforming loans |
$ 2,578 |
$ 2,503 |
$ 2,123 |
3 % |
21 % |
Net charge-offs to average loans (annualized) |
0.36 % |
0.33 % |
0.15 % |
||
Allowance for credit losses to total loans |
1.65 % |
1.67 % |
1.70 % |
||
Nonperforming loans to total loans |
0.80 % |
0.78 % |
0.67 % |
||
(a) Represents amounts for the three months ended for each respective period (b) Excludes allowances for investment securities and other financial assets (c) Total delinquencies represent accruing loans more than 30 days past due |
Provision for credit losses was $243 million in the third quarter of 2024. The second quarter of 2024 included a provision for credit losses of $235 million.
Net loan charge-offs were $286 million in the third quarter of 2024, increasing $24 million compared to the second quarter of 2024, primarily due to lower commercial recoveries. Compared to the third quarter of 2023, net loan charge-offs increased $165 million primarily due to higher commercial net loan charge-offs.
The allowance for credit losses was $5.3 billion at September 30, 2024, and $5.4 billion at both June 30, 2024 and September 30, 2023. The allowance for credit losses as a percentage of total loans was 1.65% at September 30, 2024, 1.67% at June 30, 2024 and 1.70% at September 30, 2023.
Delinquencies at September 30, 2024 were $1.3 billion, stable from June 30, 2024 and September 30, 2023. In both comparisons, higher commercial delinquencies were offset by lower consumer delinquencies.
Nonperforming loans at September 30, 2024 were $2.6 billion, increasing $75 million from June 30, 2024, and included higher commercial real estate nonperforming loans. Compared to September 30, 2023, nonperforming loans increased $455 million, reflecting higher commercial nonperforming loans, partially offset by lower consumer nonperforming loans.
BUSINESS SEGMENT RESULTS
Business Segment Income (Loss) |
|||||
In millions |
3Q24 |
2Q24 |
3Q23 |
||
Retail Banking |
$ 1,164 |
$ 1,715 |
$ 1,094 |
||
Corporate & Institutional Banking |
1,197 |
1,046 |
960 |
||
Asset Management Group |
104 |
103 |
73 |
||
Other |
(975) |
(1,405) |
(573) |
||
Net income excluding noncontrolling interests |
$ 1,490 |
$ 1,459 |
$ 1,554 |
||
Retail Banking |
Change |
Change |
|||||||
3Q24 vs |
3Q24 vs |
||||||||
In millions |
3Q24 |
2Q24 |
3Q23 |
2Q24 |
3Q23 |
||||
Net interest income |
$ 2,783 |
$ 2,709 |
$ 2,576 |
$ 74 |
$ 207 |
||||
Noninterest income |
$ 701 |
$ 1,409 |
$ 784 |
$ (708) |
$ (83) |
||||
Noninterest expense |
$ 1,842 |
$ 1,841 |
$ 1,876 |
$ 1 |
$ (34) |
||||
Provision for credit losses |
$ 111 |
$ 27 |
$ 42 |
$ 84 |
$ 69 |
||||
Earnings |
$ 1,164 |
$ 1,715 |
$ 1,094 |
$ (551) |
$ 70 |
||||
In billions |
|||||||||
Average loans |
$ 96.3 |
$ 96.5 |
$ 97.4 |
$ (0.2) |
$ (1.1) |
||||
Average deposits |
$ 249.2 |
$ 249.7 |
$ 253.7 |
$ (0.5) |
$ (4.5) |
||||
Net loan charge-offs In millions |
$ 141 |
$ 138 |
$ 114 |
$ 3 |
$ 27 |
||||
Retail Banking Highlights
Third quarter 2024 compared with second quarter 2024
Third quarter 2024 compared with third quarter 2023
Corporate & Institutional Banking |
Change |
Change |
|||||||
3Q24 vs |
3Q24 vs |
||||||||
In millions |
3Q24 |
2Q24 |
3Q23 |
2Q24 |
3Q23 |
||||
Net interest income |
$ 1,615 |
$ 1,560 |
$ 1,419 |
$ 55 |
$ 196 |
||||
Noninterest income |
$ 1,030 |
$ 942 |
$ 835 |
$ 88 |
$ 195 |
||||
Noninterest expense |
$ 950 |
$ 911 |
$ 895 |
$ 39 |
$ 55 |
||||
Provision for credit losses |
$ 134 |
$ 228 |
$ 102 |
$ (94) |
$ 32 |
||||
Earnings |
$ 1,197 |
$ 1,046 |
$ 960 |
$ 151 |
$ 237 |
||||
In billions |
|||||||||
Average loans |
$ 204.0 |
$ 204.0 |
$ 202.8 |
— |
$ 1.2 |
||||
Average deposits |
$ 146.0 |
$ 139.9 |
$ 141.7 |
$ 6.1 |
$ 4.3 |
||||
Net loan charge-offs In millions |
$ 147 |
$ 129 |
$ 12 |
$ 18 |
$ 135 |
||||
Corporate & Institutional Banking Highlights
Third quarter 2024 compared with second quarter 2024
Third quarter 2024 compared with third quarter 2023
Asset Management Group |
Change |
Change |
|||||||
3Q24 vs |
3Q24 vs |
||||||||
In millions |
3Q24 |
2Q24 |
3Q23 |
2Q24 |
3Q23 |
||||
Net interest income |
$ 161 |
$ 163 |
$ 139 |
$ (2) |
$ 22 |
||||
Noninterest income |
$ 242 |
$ 235 |
$ 223 |
$ 7 |
$ 19 |
||||
Noninterest expense |
$ 270 |
$ 261 |
$ 271 |
$ 9 |
$ (1) |
||||
Provision for (recapture of) credit losses |
$ (2) |
$ 2 |
$ (4) |
$ (4) |
$ 2 |
||||
Earnings |
$ 104 |
$ 103 |
$ 73 |
$ 1 |
$ 31 |
||||
In billions |
|||||||||
Discretionary client assets under management |
$ 214 |
$ 196 |
$ 176 |
$ 18 |
$ 38 |
||||
Nondiscretionary client assets under administration |
$ 216 |
$ 208 |
$ 170 |
$ 8 |
$ 46 |
||||
Client assets under administration at quarter end |
$ 430 |
$ 404 |
$ 346 |
$ 26 |
$ 84 |
||||
In billions |
|||||||||
Average loans |
$ 16.5 |
$ 16.6 |
$ 15.7 |
$ (0.1) |
$ 0.8 |
||||
Average deposits |
$ 27.2 |
$ 27.9 |
$ 27.2 |
$ (0.7) |
— |
||||
Net loan charge-offs (recoveries) In millions |
— |
— |
— |
— |
— |
||||
Asset Management Group Highlights
Third quarter 2024 compared with second quarter 2024
Third quarter 2024 compared with third quarter 2023
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, ACL for investment securities, certain trading activities, certain runoff consumer loan portfolios, private equity investments, intercompany eliminations, corporate overhead net of allocations, tax adjustments that are not allocated to business segments, exited businesses and the residual impact from funds transfer pricing operations.
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC Chairman 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 10:00 a.m. Eastern Time regarding the topics addressed in this news release and the related earnings materials. Dial-in numbers for the conference call are (866) 604-1697 and (215) 268-9875 (international) and Internet access to the live audio listen-only webcast of the call is available at www.pnc.com/investorevents. PNC's third quarter 2024 earnings materials 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 (877) 660-6853 and (201) 612-7415 (international), Access ID 13748386 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.
CONTACTS |
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MEDIA: |
INVESTORS: |
|
Kristen Pillitteri |
Bryan Gill |
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(412) 762-4550 |
(412) 768-4143 |
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[TABULAR MATERIAL FOLLOWS]
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
|||||||||||
FINANCIAL RESULTS |
Three months ended |
Nine months ended |
||||||||||
Dollars in millions, except per share data |
September 30 |
June 30 |
September 30 |
September 30 |
September 30 |
|||||||
2024 |
2024 |
2023 |
2024 |
2023 |
||||||||
Revenue |
||||||||||||
Net interest income |
$ 3,410 |
$ 3,302 |
$ 3,418 |
$ 9,976 |
$ 10,513 |
|||||||
Noninterest income |
2,022 |
2,109 |
1,815 |
6,012 |
5,616 |
|||||||
Total revenue |
5,432 |
5,411 |
5,233 |
15,988 |
16,129 |
|||||||
Provision for credit losses |
243 |
235 |
129 |
633 |
510 |
|||||||
Noninterest expense |
3,327 |
3,357 |
3,245 |
10,018 |
9,938 |
|||||||
Income before income taxes and noncontrolling interests |
$ 1,862 |
$ 1,819 |
$ 1,859 |
$ 5,337 |
$ 5,681 |
|||||||
Income taxes |
357 |
342 |
289 |
1,011 |
917 |
|||||||
Net income |
$ 1,505 |
$ 1,477 |
$ 1,570 |
$ 4,326 |
$ 4,764 |
|||||||
Less: |
||||||||||||
Net income attributable to noncontrolling interests |
15 |
18 |
16 |
47 |
50 |
|||||||
Preferred stock dividends (a) |
82 |
95 |
104 |
258 |
299 |
|||||||
Preferred stock discount accretion and redemptions |
2 |
2 |
2 |
6 |
6 |
|||||||
Net income attributable to common shareholders |
$ 1,406 |
$ 1,362 |
$ 1,448 |
$ 4,015 |
$ 4,409 |
|||||||
Less: Dividends and undistributed earnings allocated to |
10 |
7 |
8 |
24 |
23 |
|||||||
Net income attributable to diluted common shareholders |
$ 1,396 |
$ 1,355 |
$ 1,440 |
$ 3,991 |
$ 4,386 |
|||||||
Per Common Share |
||||||||||||
Basic |
$ 3.50 |
$ 3.39 |
$ 3.60 |
$ 9.99 |
$ 10.95 |
|||||||
Diluted |
$ 3.49 |
$ 3.39 |
$ 3.60 |
$ 9.98 |
$ 10.94 |
|||||||
Cash dividends declared per common share |
$ 1.60 |
$ 1.55 |
$ 1.55 |
$ 4.70 |
$ 4.55 |
|||||||
Effective tax rate (b) |
19.2 % |
18.8 % |
15.5 % |
18.9 % |
16.1 % |
|||||||
PERFORMANCE RATIOS |
||||||||||||
Net interest margin (c) |
2.64 % |
2.60 % |
2.71 % |
2.60 % |
2.78 % |
|||||||
Noninterest income to total revenue |
37 % |
39 % |
35 % |
38 % |
35 % |
|||||||
Efficiency (d) |
61 % |
62 % |
62 % |
63 % |
62 % |
|||||||
Return on: |
||||||||||||
Average common shareholders' equity |
11.72 % |
12.16 % |
13.65 % |
11.76 % |
14.23 % |
|||||||
Average assets |
1.05 % |
1.05 % |
1.12 % |
1.02 % |
1.14 % |
(a) |
Dividends are payable quarterly, other than Series S preferred stock, which is 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 September 30, 2024, June 30, 2024 and September 30, 2023 were $33 million, $34 million and $36 million, respectively. The taxable-equivalent adjustments to net interest income for the nine months ended September 30, 2024 and September 30, 2023 were $101 million and $111 million, respectively. |
(d) |
Calculated as noninterest expense divided by total revenue. |
The PNC Financial Services Group, Inc. |
Consolidated Financial Highlights (Unaudited) |
||||
September 30 |
June 30 |
September 30 |
|||
2024 |
2024 |
2023 |
|||
BALANCE SHEET DATA |
|||||
Dollars in millions, except per share data and as noted |
|||||
Assets |
$ 564,881 |
$ 556,519 |
$ 557,334 |
||
Loans (a) |
$ 321,381 |
$ 321,429 |
$ 318,416 |
||
Allowance for loan and lease losses |
$ 4,589 |
$ 4,636 |
$ 4,767 |
||
Interest-earning deposits with banks |
$ 35,024 |
$ 33,039 |
$ 41,484 |
||
Investment securities |
$ 144,183 |
$ 138,645 |
$ 132,387 |
||
Total deposits |
$ 423,966 |
$ 416,391 |
$ 423,609 |
||
Borrowed funds (a) |
$ 68,069 |
$ 71,391 |
$ 66,167 |
||
Allowance for unfunded lending related commitments |
$ 725 |
$ 717 |
$ 640 |
||
Total shareholders' equity |
$ 55,689 |
$ 52,642 |
$ 49,454 |
||
Common shareholders' equity |
$ 49,442 |
$ 46,397 |
$ 42,215 |
||
Accumulated other comprehensive income (loss) |
$ (5,090) |
$ (7,446) |
$ (10,261) |
||
Book value per common share |
$ 124.56 |
$ 116.70 |
$ 105.98 |
||
Tangible book value per common share (non-GAAP) (b) |
$ 96.98 |
$ 89.12 |
$ 78.16 |
||
Period end common shares outstanding (In millions) |
397 |
398 |
398 |
||
Loans to deposits |
76 % |
77 % |
75 % |
||
Common shareholders' equity to total assets |
8.8 % |
8.3 % |
7.6 % |
||
CLIENT ASSETS (In billions) |
|||||
Discretionary client assets under management |
$ 214 |
$ 196 |
$ 176 |
||
Nondiscretionary client assets under administration |
216 |
208 |
170 |
||
Total client assets under administration |
430 |
404 |
346 |
||
Brokerage account client assets |
86 |
83 |
78 |
||
Total client assets |
$ 516 |
$ 487 |
$ 424 |
||
CAPITAL RATIOS |
|||||
Basel III (c) (d) |
|||||
Common equity Tier 1 |
10.3 % |
10.2 % |
9.8 % |
||
Common equity Tier 1 fully implemented (e) |
10.3 % |
10.1 % |
9.7 % |
||
Tier 1 risk-based |
11.8 % |
11.6 % |
11.5 % |
||
Total capital risk-based |
13.6 % |
13.5 % |
13.4 % |
||
Leverage |
8.9 % |
8.8 % |
8.9 % |
||
Supplementary leverage |
7.4 % |
7.4 % |
7.6 % |
||
ASSET QUALITY |
|||||
Nonperforming loans to total loans |
0.80 % |
0.78 % |
0.67 % |
||
Nonperforming assets to total loans, OREO and foreclosed assets |
0.81 % |
0.79 % |
0.68 % |
||
Nonperforming assets to total assets |
0.46 % |
0.46 % |
0.39 % |
||
Net charge-offs to average loans (for the three months ended) (annualized) |
0.36 % |
0.33 % |
0.15 % |
||
Allowance for loan and lease losses to total loans |
1.43 % |
1.44 % |
1.50 % |
||
Allowance for credit losses to total loans (f) |
1.65 % |
1.67 % |
1.70 % |
||
Allowance for loan and lease losses to nonperforming loans |
178 % |
185 % |
225 % |
||
Total delinquencies (In millions) (g) |
$ 1,275 |
$ 1,272 |
$ 1,287 |
(a) |
Amounts include assets and liabilities for which we have elected the fair value option. Our second quarter 2024 Form 10-Q included, and our third quarter 2024 Form 10-Q will include, additional information regarding these Consolidated Balance Sheet line items. |
(b) |
See the Tangible Book Value per Common Share table on page 16 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 September 30, 2024 are estimated. |
(d) |
The ratios are calculated to reflect PNC's election to adopt the CECL optional five-year transition provision. |
(e) |
The estimated fully implemented ratios are calculated to reflect the full impact of CECL and exclude the benefits of the five-year transition provision. |
(f) |
Excludes allowances for investment securities and other financial assets. |
(g) |
Total delinquencies represent accruing loans more than 30 days past due. |
The PNC Financial Services Group, Inc. Consolidated Financial Highlights (Unaudited) |
CAPITAL RATIOS
PNC's regulatory risk-based capital ratios in 2024 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.
PNC elected a five-year transition provision effective March 31, 2020 to delay until December 31, 2021 the full impact of the CECL standard on regulatory capital, followed by a three-year transition period. Effective for the first quarter 2022, PNC is now in the three-year transition period, and the full impact of the CECL standard is being phased-in to regulatory capital through December 31, 2024. See the table below for the June 30, 2024, September 30, 2023 and estimated September 30, 2024 ratios. For the full impact of PNC's adoption of CECL, which excludes the benefits of the five-year transition provision, see the September 30, 2024 and June 30, 2024 (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 (a) |
|||||||
Basel III |
|||||||
September 30 2024 (estimated) (b) |
June 30 2024 (b) |
September 30 2023 (b) |
September 30, 2024 (estimated) (c) |
June 30, 2024 (estimated) (c) |
|||
Dollars in millions |
|||||||
Common stock, related surplus and retained earnings, |
$ 54,774 |
$ 54,084 |
$ 52,958 |
$ 54,532 |
$ 53,843 |
||
Less regulatory capital adjustments: |
|||||||
Goodwill and disallowed intangibles, net of deferred |
(10,949) |
(10,965) |
(11,083) |
(10,949) |
(10,965) |
||
All other adjustments |
(84) |
(102) |
(99) |
(85) |
(104) |
||
Basel III Common equity Tier 1 capital |
$ 43,741 |
$ 43,017 |
$ 41,776 |
$ 43,498 |
$ 42,774 |
||
Basel III standardized approach risk-weighted assets (d) |
$ 422,844 |
$ 423,503 |
$ 425,131 |
$ 422,935 |
$ 423,593 |
||
Basel III Common equity Tier 1 capital ratio |
10.3 % |
10.2 % |
9.8 % |
10.3 % |
10.1 % |
(a) |
All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented. |
(b) |
The ratios are calculated to reflect PNC's election to adopt the CECL optional five-year transition provisions. |
(c) |
The September 30, 2024 and June 30, 2024 ratios are calculated to reflect the full impact of CECL and exclude the benefits of the five-year transition provisions. |
(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
Fee Income (non-GAAP) |
Three months ended |
||||
September 30 |
June 30 |
September 30 |
|||
Dollars in millions |
2024 |
2024 |
2023 |
||
Noninterest income |
|||||
Asset management and brokerage |
$ 383 |
$ 364 |
$ 348 |
||
Capital markets and advisory |
371 |
272 |
168 |
||
Card and cash management |
698 |
706 |
689 |
||
Lending and deposit services |
320 |
304 |
315 |
||
Residential and commercial mortgage |
181 |
131 |
201 |
||
Fee income (non-GAAP) |
$ 1,953 |
$ 1,777 |
$ 1,721 |
||
Other income |
69 |
332 |
94 |
||
Total noninterest income |
$ 2,022 |
$ 2,109 |
$ 1,815 |
Fee income is a non-GAAP measure and is comprised of noninterest income in the following categories: asset management and brokerage, capital markets and advisory, card and cash management, lending and deposit services, and residential and commercial mortgage. We believe this non-GAAP measure serves as a useful tool for comparison of noninterest income related to fees.
Pretax Pre-Provision Earnings (non-GAAP) |
Three months ended |
||||
September 30 |
June 30 |
September 30 |
|||
Dollars in millions |
2024 |
2024 |
2023 |
||
Income before income taxes and noncontrolling interests |
$ 1,862 |
$ 1,819 |
$ 1,859 |
||
Provision for credit losses |
243 |
235 |
129 |
||
Pretax pre-provision earnings (non-GAAP) |
$ 2,105 |
$ 2,054 |
$ 1,988 |
Pretax pre-provision earnings is a non-GAAP measure and is based on adjusting income before income taxes and noncontrolling interests to exclude provision for 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 credit losses, which can vary significantly between periods.
Tangible Book Value per Common Share (non-GAAP) |
|||||
September 30 |
June 30 |
September 30 |
|||
Dollars in millions, except per share data |
2024 |
2024 |
2023 |
||
Book value per common share |
$ 124.56 |
$ 116.70 |
$ 105.98 |
||
Tangible book value per common share |
|||||
Common shareholders' equity |
$ 49,442 |
$ 46,397 |
$ 42,215 |
||
Goodwill and other intangible assets |
(11,188) |
(11,206) |
(11,337) |
||
Deferred tax liabilities on goodwill and other intangible assets |
240 |
241 |
254 |
||
Tangible common shareholders' equity |
$ 38,494 |
$ 35,432 |
$ 31,132 |
||
Period-end common shares outstanding (In millions) |
397 |
398 |
398 |
||
Tangible book value per common share (non-GAAP) |
$ 96.98 |
$ 89.12 |
$ 78.16 |
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 |
||||
September 30 |
June 30 |
September 30 |
|||
Dollars in millions |
2024 |
2024 |
2023 |
||
Net interest income |
$ 3,410 |
$ 3,302 |
$ 3,418 |
||
Taxable-equivalent adjustments |
33 |
34 |
36 |
||
Net interest income (Fully Taxable-Equivalent - FTE) (non-GAAP) |
$ 3,443 |
$ 3,336 |
$ 3,454 |
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. Net interest income shown elsewhere in this presentation is GAAP net interest income.
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, including our sustainability strategy, 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 2023 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.
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SOURCE The PNC Financial Services Group, Inc.