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Grew deposits; increased capital; generated positive operating leverage
PITTSBURGH, April 14, 2023 /PRNewswire/ -- The PNC Financial Services Group, Inc. (PNC" href="/company/PNC" onmouseover="handlePagePreview('company','PNC')" style="color:#4007a2 !important; text-decoration:underline !important; font-weight:bold;">NYSE: PNCPNC-pp">) today reported:
For the quarter | |||||||||
In millions, except per share data and as noted | 1Q23 | 4Q22 | 1Q22 | First Quarter Highlights | |||||
Comparisons reflect 1Q23 vs. 4Q22 | |||||||||
Financial Results | Strong Balance Sheet Positioning | ||||||||
Revenue | $ 5,603 | $ 5,763 | $ 4,692 | ▪ Average deposits increased 0.3%; spot deposits grew $0.5 billion ▪ Average loans increased 1%; spot loans increased $0.5 billion ▪ ACL to total loans stable at 1.7%; net loan charge-offs declined ▪ AOCI improved $1.1 billion, or 10% ▪ Tangible book value increased 7% ▪ CET1 capital ratio increased to 9.2% Solid Income Statement Results ▪ PPNR was relatively stable ▪ Efficiency ratio of 59% ▪ Revenue decreased 3% ▪ Expenses decreased 4% ▪ Positive operating leverage of 2% | |||||
Noninterest expense | 3,321 | 3,474 | 3,172 | ||||||
Pretax, pre-provision earnings (PPNR) (non-GAAP) | 2,282 | 2,289 | 1,520 | ||||||
Provision for (recapture of) credit losses | 235 | 408 | (208) | ||||||
Net income | 1,694 | 1,548 | 1,429 | ||||||
Per Common Share | |||||||||
Diluted earnings | $ 3.98 | $ 3.47 | $ 3.23 | ||||||
Average diluted common shares outstanding | 402 | 404 | 420 | ||||||
Book value | 104.76 | 99.93 | 106.47 | ||||||
Tangible book value (non-GAAP) | 76.90 | 72.12 | 79.68 | ||||||
Balance Sheet & Credit Quality | |||||||||
Average loans In billions | $ 325.5 | $ 321.9 | $ 290.7 | ||||||
Average deposits In billions | 436.2 | 434.9 | 453.3 | ||||||
Accumulated other comprehensive income (loss) (AOCI) In billions | (9.1) | (10.2) | (5.7) | ||||||
Net loan charge-offs | 195 | 224 | 137 | ||||||
Allowance for credit losses (ACL) to total loans | 1.66 % | 1.67 % | 1.76 % | ||||||
Selected Ratios | |||||||||
Return on average common shareholders' equity | 16.11 % | 14.19 % | 11.64 % | ||||||
Return on average assets | 1.22 | 1.10 | 1.05 | ||||||
Net interest margin (NIM) (non-GAAP) | 2.84 | 2.92 | 2.28 | ||||||
Noninterest income to total revenue | 36 | 36 | 40 | ||||||
Efficiency | 59 | 60 | 68 | ||||||
Common equity Tier 1 (CET1) capital ratio | 9.2 | 9.1 | 9.9 | ||||||
Average PNC Bank liquidity coverage ratio (LCR) | 130 | 126 | 158 | ||||||
See non-GAAP financial measures in the Consolidated Financial Highlights accompanying this release. |
From Bill Demchak, PNC Chairman, President and Chief Executive Officer:
"PNC's first quarter results reflected the strength of our balance sheet and the power of our national franchise. During a quarter characterized by heightened market volatility, we grew deposits, increased our capital position and drove strong financial results. At the same time, we controlled expenses well, achieved positive operating leverage and our credit quality metrics remained solid. Looking ahead, PNC remains well positioned to deliver for all stakeholders through the current environment and beyond."
Income Statement Highlights
First quarter 2023 compared with fourth quarter 2022
Balance Sheet Highlights
First quarter 2023 compared with fourth quarter 2022 or March 31, 2023 compared with December 31, 2022
Earnings Summary | ||||||
In millions, except per share data | 1Q23 | 4Q22 | 1Q22 | |||
Net income | $ 1,694 | $ 1,548 | $ 1,429 | |||
Net income attributable to diluted common shares | $ 1,599 | $ 1,400 | $ 1,355 | |||
Diluted earnings per common share | $ 3.98 | $ 3.47 | $ 3.23 | |||
Average diluted common shares outstanding | 402 | 404 | 420 | |||
Cash dividends declared per common share | $ 1.50 | $ 1.50 | $ 1.25 | |||
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.
CONSOLIDATED REVENUE REVIEW | |||||||
Revenue | Change | Change | |||||
1Q23 vs | 1Q23 vs | ||||||
In millions | 1Q23 | 4Q22 | 1Q22 | 4Q22 | 1Q22 | ||
Net interest income | $ 3,585 | $ 3,684 | $ 2,804 | (3) % | 28 % | ||
Noninterest income | 2,018 | 2,079 | 1,888 | (3) % | 7 % | ||
Total revenue | $ 5,603 | $ 5,763 | $ 4,692 | (3) % | 19 % | ||
Total revenue for the first quarter of 2023 decreased $160 million from the fourth quarter of 2022 as a result of lower net interest income and noninterest income. Compared with the first quarter of 2022, total revenue increased $911 million primarily due to higher net interest income.
Net interest income of $3.6 billion for the first quarter of 2023 decreased $99 million from the fourth quarter of 2022 driven by two fewer days in the quarter and higher funding costs, partially offset by higher yields on interest-earning assets. Compared to the first quarter of 2022, net interest income increased $781 million as a result of higher interest-earning asset yields and balances, partially offset by higher funding costs.
The net interest margin was 2.84% in the first quarter of 2023, decreasing 8 basis points in comparison with the fourth quarter of 2022 as higher yields on interest-earning assets were more than offset by increased funding costs. Compared to the first quarter of 2022, net interest margin increased 56 basis points reflecting the benefit of higher yields on interest-earning assets.
Noninterest Income | Change | Change | |||||
1Q23 vs | 1Q23 vs | ||||||
In millions | 1Q23 | 4Q22 | 1Q22 | 4Q22 | 1Q22 | ||
Asset management and brokerage | $ 356 | $ 345 | $ 377 | 3 % | (6) % | ||
Capital markets and advisory | 262 | 336 | 252 | (22) % | 4 % | ||
Card and cash management | 659 | 671 | 620 | (2) % | 6 % | ||
Lending and deposit services | 306 | 296 | 269 | 3 % | 14 % | ||
Residential and commercial mortgage | 177 | 184 | 159 | (4) % | 11 % | ||
Other | 258 | 247 | 211 | 4 % | 22 % | ||
Total noninterest income | $ 2,018 | $ 2,079 | $ 1,888 | (3) % | 7 % | ||
Noninterest income for the first quarter of 2023 decreased $61 million compared with the fourth quarter of 2022. Asset management and brokerage fees increased $11 million, reflecting the impact of higher average equity markets and increased annuity sales. Capital markets and advisory revenue decreased $74 million driven by lower merger and acquisition advisory fees. Card and cash management fees decreased $12 million reflecting seasonally lower consumer transaction volumes. Lending and deposit services increased $10 million and included increased client activity. Residential and commercial mortgage revenue decreased $7 million largely due to lower results from residential mortgage servicing rights valuation, net of economic hedge. Other noninterest income increased $11 million.
Noninterest income for the first quarter of 2023 increased $130 million from the first quarter of 2022, as a result of business growth across the franchise as well as higher private equity revenue, partially offset by the impact of lower average equity markets.
CONSOLIDATED EXPENSE REVIEW | |||||||
Noninterest Expense | Change | Change | |||||
1Q23 vs | 1Q23 vs | ||||||
In millions | 1Q23 | 4Q22 | 1Q22 | 4Q22 | 1Q22 | ||
Personnel | $ 1,826 | $ 1,943 | $ 1,717 | (6) % | 6 % | ||
Occupancy | 251 | 247 | 258 | 2 % | (3) % | ||
Equipment | 350 | 369 | 331 | (5) % | 6 % | ||
Marketing | 74 | 106 | 61 | (30) % | 21 % | ||
Other | 820 | 809 | 805 | 1 % | 2 % | ||
Total noninterest expense | $ 3,321 | $ 3,474 | $ 3,172 | (4) % | 5 % | ||
Noninterest expense for the first quarter of 2023 declined $153 million in comparison to the fourth quarter of 2022 reflecting strong expense control. Personnel costs decreased $117 million, reflecting lower variable compensation related to decreased business activity as well as seasonally lower benefits expense. Equipment expense declined $19 million, primarily due to lower technology expense. Marketing expense decreased $32 million, reflecting seasonality and the optimization of spend. Other noninterest expense increased $11 million and included $25 million from a higher FDIC assessment rate, which was partially offset by continued cost savings initiatives.
Noninterest expense increased $149 million from the first quarter of 2022, due to higher personnel costs, an increased FDIC assessment rate and continued investments in technology and marketing to support business growth.
The effective tax rate was 17.2% for the first quarter of 2023, 17.7% for the fourth quarter of 2022 and 17.3% for the first quarter of 2022.
CONSOLIDATED BALANCE SHEET REVIEW
Average total assets were $562.3 billion in the first quarter of 2023 compared with $557.2 billion in the fourth quarter of 2022 and $550.1 billion in the first quarter of 2022. The increase from the fourth quarter of 2022 was driven by increased loans outstanding and higher Federal Reserve Bank balances. In comparison to the first quarter of 2022, the increase was primarily attributable to higher loan and securities balances, partially offset by lower Federal Reserve Bank balances.
Loans | Change | Change | |||||
March 31, 2023 | December 31, 2022 | March 31, 2022 | 03/31/23 vs | 03/31/23 vs | |||
In billions | 12/31/22 | 03/31/22 | |||||
Average | |||||||
Commercial | $ 224.6 | $ 221.6 | $ 195.6 | 1 % | 15 % | ||
Consumer | 100.9 | 100.3 | 95.1 | 1 % | 6 % | ||
Average loans | $ 325.5 | $ 321.9 | $ 290.7 | 1 % | 12 % | ||
Quarter end | |||||||
Commercial | $ 225.4 | $ 225.0 | $ 198.3 | — | 14 % | ||
Consumer | 101.1 | 101.0 | 96.2 | — | 5 % | ||
Total loans | $ 326.5 | $ 326.0 | $ 294.5 | — | 11 % | ||
Average loans for the first quarter of 2023 were $325.5 billion, increasing $3.6 billion compared to the fourth quarter of 2022. Average commercial loans increased $3.0 billion driven by growth in PNC's corporate banking business during the fourth quarter of 2022. Average consumer loans grew $0.6 billion and included higher residential mortgage and home equity loans. Loans at March 31, 2023 increased $0.5 billion.
Average loans for the first quarter of 2023 increased $34.8 billion in comparison to the first quarter of 2022. Average commercial loans increased $29.0 billion as a result of growth in PNC's corporate banking, real estate and business credit businesses. Average consumer loans increased $5.8 billion due to growth in residential mortgage, home equity and credit card loans.
Investment Securities | ||||||
March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||
In billions | Balance | Portfolio Mix | Balance | Portfolio Mix | Balance | Portfolio Mix |
Average | ||||||
Available for sale | $ 48.2 | $ 49.7 | $ 132.3 | |||
Held to maturity | 95.2 | 93.2 | 1.6 | |||
Average investment securities | $ 143.4 | $ 142.9 | $ 133.9 | |||
Quarter end | ||||||
Available for sale | $ 43.2 | 31 % | $ 44.1 | 32 % | $ 112.3 | 85 % |
Held to maturity | 95.0 | 69 % | 95.2 | 68 % | 20.1 | 15 % |
Total investment securities | $ 138.2 | $ 139.3 | $ 132.4 | |||
Average investment securities for the first quarter of 2023 of $143.4 billion were relatively stable from the fourth quarter of 2022. Average investment securities increased $9.5 billion from the first quarter of 2022 reflecting net purchases, primarily of agency residential mortgage-backed securities. Net unrealized losses on available for sale securities were $3.8 billion at March 31, 2023, $4.4 billion at December 31, 2022 and $4.3 billion at March 31, 2022.
Average Federal Reserve Bank balances for the first quarter of 2023 were $33.5 billion, increasing $3.5 billion from the fourth quarter of 2022 driven by higher borrowed funds and deposits. Average Federal Reserve Bank balances decreased $28.8 billion from the first quarter of 2022, primarily due to higher loans outstanding.
Federal Reserve Bank balances at March 31, 2023 were $32.5 billion, increasing $5.6 billion from December 31, 2022.
Deposits | |||||||||
March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||||
In billions | Balance | IB | NIB | Balance | IB | NIB | Balance | IB | NIB |
Average | |||||||||
Commercial | $ 210.0 | $ 215.8 | $ 225.2 | ||||||
Consumer | 226.2 | 219.1 | 228.1 | ||||||
Average deposits | $ 436.2 | 72 % | 28 % | $ 434.9 | 69 % | 31 % | $ 453.3 | 66 % | 34 % |
Quarter end | |||||||||
Commercial | $ 207.0 | $ 207.7 | $ 217.4 | ||||||
Consumer | 229.8 | 228.6 | 232.8 | ||||||
Total deposits | $ 436.8 | 73 % | 27 % | $ 436.3 | 71 % | 29 % | $ 450.2 | 67 % | 33 % |
IB - Interest-bearing NIB - Noninterest-bearing | |||||||||
Average deposits for the first quarter of 2023 were $436.2 billion, increasing $1.3 billion from the fourth quarter of 2022 due to higher consumer time deposits, partially offset by seasonally lower commercial deposits. Compared with the first quarter of 2022, average deposits decreased $17.1 billion primarily due to lower commercial deposits reflecting the impact of competitive pricing dynamics. In both comparisons, noninterest-bearing balances decreased, due to the continued shift into interest-bearing deposit products as interest rates have risen. Deposits at March 31, 2023 of $436.8 billion, increased $0.5 billion from December 31, 2022.
Borrowed Funds | Change | Change | |||||
March 31, | December 31, | March 31, | 03/31/23 vs | 03/31/23 vs | |||
In billions | 12/31/22 | 03/31/22 | |||||
Average | $ 63.0 | $ 59.2 | $ 30.3 | 6 % | 108 % | ||
Quarter end | $ 60.8 | $ 58.7 | $ 26.6 | 4 % | 129 % | ||
Average borrowed funds of $63.0 billion in the first quarter of 2023 increased $3.8 billion from the fourth quarter of 2022, driven by parent company senior debt issuances in January 2023. In comparison to the first quarter of 2022, average borrowed funds increased $32.7 billion, reflecting increased Federal Home Loan Bank borrowings and senior debt issuances.
Capital & Liquidity | March 31, | December 31, | March 31, | ||
Common shareholders' equity In billions | $ 41.8 | $ 40.0 | $ 44.2 | ||
Accumulated other comprehensive income (loss) In billions | $ (9.1) | $ (10.2) | $ (5.7) | ||
Basel III common equity Tier 1 capital ratio * | 9.2 % | 9.1 % | 9.9 % | ||
Basel III common equity Tier 1 fully implemented capital ratio * | 9.1 % | 8.9 % | 9.7 % | ||
Average PNC liquidity coverage ratio | 108 % | 107 % | 109 % | ||
Average PNC Bank liquidity coverage ratio | 130 % | 126 % | 158 % | ||
* March 31, 2023 ratios are estimated | |||||
PNC maintained a strong capital position. Common shareholders' equity at March 31, 2023 increased $1.8 billion from December 31, 2022, driven by the benefit of first quarter net income and an increase in accumulated other comprehensive income, partially offset by dividends paid and share repurchases during the first quarter.
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 at March 31, 2023 improved $1.1 billion compared to December 31, 2022, reflecting the accretion of unrealized losses and the favorable impact of interest rate changes on securities and swaps valuations. Accumulated other comprehensive income decreased $3.4 billion from March 31, 2022, as a result of the negative impact of higher interest rates on securities and swaps valuations.
In the first quarter of 2023, PNC returned $1.0 billion of capital to shareholders, reflecting $0.6 billion of dividends on common shares and $0.4 billion of common share repurchases, representing 2.4 million shares. 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 47% were still available for repurchase at March 31, 2023. PNC's SCB for the four-quarter period beginning October 1, 2022 is 2.9%.
Due to recent market volatility and increased economic uncertainty, share repurchase activity is expected to be reduced in the second quarter of 2023 compared to recent prior quarters. PNC continues to evaluate and may adjust share repurchase activity, as actual amounts and timing are dependent on market and economic conditions as well as other factors.
On April 3, 2023, the PNC board of directors declared a quarterly cash dividend on common stock of $1.50 per share payable on May 5, 2023.
At March 31, 2023, 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 | |||
March 31, | December 31, | March 31, | 03/31/23 vs | 03/31/23 vs | |
In millions | 12/31/22 | 03/31/22 | |||
Provision for (recapture of) credit losses | $ 235 | $ 408 | $ (208) | $ (173) | $ 443 |
Net loan charge-offs | $ 195 | $ 224 | $ 137 | (13) % | 42 % |
Allowance for credit losses (a) | $ 5,413 | $ 5,435 | $ 5,197 | — | 4 % |
Total delinquencies (b) | $ 1,326 | $ 1,490 | $ 1,699 | (11) % | (22) % |
Nonperforming loans | $ 2,010 | $ 1,985 | $ 2,298 | 1 % | (13) % |
Net charge-offs to average loans (annualized) | 0.24 % | 0.28 % | 0.19 % | ||
Allowance for credit losses to total loans | 1.66 % | 1.67 % | 1.76 % | ||
Nonperforming loans to total loans | 0.62 % | 0.61 % | 0.78 % | ||
(a) Excludes allowances for investment securities and other financial assets (b) Total delinquencies represent accruing loans more than 30 days past due |
Provision for credit losses of $235 million in the first quarter of 2023 included the impact of updated economic assumptions as well as changes in portfolio composition and quality. The fourth quarter of 2022 included a provision for credit losses of $408 million.
Net loan charge-offs were $195 million in the first quarter of 2023, decreasing $29 million from the fourth quarter of 2022, due to lower consumer and commercial net charge-offs. Compared to the first quarter of 2022, net charge-offs increased $58 million, driven by higher commercial net charge-offs, partially offset by a decline in consumer net charge-offs.
The allowance for credit losses was $5.4 billion at both March 31, 2023 and December 31, 2022 and $5.2 billion at March 31, 2022. The allowance for credit losses as a percentage of total loans was 1.66% at March 31, 2023, 1.67% at December 31, 2022 and 1.76% at March 31, 2022.
Nonperforming loans were $2.0 billion at March 31, 2023 and December 31, 2022. Compared to March 31, 2022, nonperforming loans decreased $288 million, due to lower consumer and commercial nonperforming loans.
Delinquencies at March 31, 2023 of $1.3 billion decreased $164 million and $373 million compared to December 31, 2022 and March 31, 2022, respectively. In both comparisons, the decrease was a result of lower consumer and commercial loan delinquencies.
BUSINESS SEGMENT RESULTS | |||||
Business Segment Income (Loss) | |||||
In millions | 1Q23 | 4Q22 | 1Q22 | ||
Retail Banking | $ 647 | $ 752 | $ 340 | ||
Corporate & Institutional Banking | 1,059 | 982 | 956 | ||
Asset Management Group | 52 | 52 | 102 | ||
Other | (81) | (258) | 10 | ||
Net income excluding noncontrolling interests | $ 1,677 | $ 1,528 | $ 1,408 | ||
Retail Banking | Change | Change | |||||||
1Q23 vs | 1Q23 vs | ||||||||
In millions | 1Q23 | 4Q22 | 1Q22 | 4Q22 | 1Q22 | ||||
Net interest income | $ 2,281 | $ 2,330 | $ 1,531 | $ (49) | $ 750 | ||||
Noninterest income | $ 743 | $ 749 | $ 745 | $ (6) | $ (2) | ||||
Noninterest expense | $ 1,927 | $ 1,892 | $ 1,892 | $ 35 | $ 35 | ||||
Provision for (recapture of) credit losses | $ 238 | $ 193 | $ (81) | $ 45 | $ 319 | ||||
Earnings | $ 647 | $ 752 | $ 340 | $ (105) | $ 307 | ||||
In billions | |||||||||
Average loans | $ 97.4 | $ 96.6 | $ 93.2 | $ 0.8 | $ 4.2 | ||||
Average deposits | $ 262.5 | $ 259.8 | $ 265.1 | $ 2.7 | $ (2.6) | ||||
Net charge-offs In millions | $ 112 | $ 108 | $ 141 | $ 4 | $ (29) | ||||
Retail Banking Highlights
First quarter 2023 compared with fourth quarter 2022
First quarter 2023 compared with first quarter 2022
Corporate & Institutional Banking | Change | Change | |||||||
1Q23 vs | 1Q23 vs | ||||||||
In millions | 1Q23 | 4Q22 | 1Q22 | 4Q22 | 1Q22 | ||||
Net interest income | $ 1,414 | $ 1,489 | $ 1,160 | $ (75) | $ 254 | ||||
Noninterest income | $ 886 | $ 962 | $ 804 | $ (76) | $ 82 | ||||
Noninterest expense | $ 939 | $ 990 | $ 837 | $ (51) | $ 102 | ||||
Provision for (recapture of) credit losses | $ (28) | $ 183 | $ (118) | $ (211) | $ 90 | ||||
Earnings | $ 1,059 | $ 982 | $ 956 | $ 77 | $ 103 | ||||
In billions | |||||||||
Average loans | $ 209.9 | $ 207.1 | $ 180.2 | $ 2.8 | $ 29.7 | ||||
Average deposits | $ 145.4 | $ 147.3 | $ 154.6 | $ (1.9) | $ (9.2) | ||||
Net charge-offs (recoveries) In millions | $ 85 | $ 100 | $ (1) | $ (15) | $ 86 | ||||
Corporate & Institutional Banking Highlights
First quarter 2023 compared with fourth quarter 2022
First quarter 2023 compared with first quarter 2022
Asset Management Group | Change | Change | |||||||
1Q23 vs | 1Q23 vs | ||||||||
In millions | 1Q23 | 4Q22 | 1Q22 | 4Q22 | 1Q22 | ||||
Net interest income | $ 127 | $ 152 | $ 138 | $ (25) | $ (11) | ||||
Noninterest income | $ 230 | $ 223 | $ 248 | $ 7 | $ (18) | ||||
Noninterest expense | $ 280 | $ 291 | $ 251 | $ (11) | $ 29 | ||||
Provision for credit losses | $ 9 | $ 17 | $ 2 | $ (8) | $ 7 | ||||
Earnings | $ 52 | $ 52 | $ 102 | — | $ (50) | ||||
In billions | |||||||||
Discretionary client assets under management | $ 177 | $ 173 | $ 182 | $ 4 | $ (5) | ||||
Nondiscretionary client assets under administration | $ 156 | $ 152 | $ 165 | $ 4 | $ (9) | ||||
Client assets under administration at quarter end | $ 333 | $ 325 | $ 347 | $ 8 | $ (14) | ||||
Brokerage client account assets | $ 4 | $ 4 | $ 5 | — | $ (1) | ||||
In billions | |||||||||
Average loans | $ 14.6 | $ 14.5 | $ 13.4 | $ 0.1 | $ 1.2 | ||||
Average deposits | $ 28.2 | $ 27.8 | $ 33.3 | $ 0.4 | $ (5.1) | ||||
Net charge-offs (recoveries) In millions | — | $ 18 | $ 2 | $ (18) | $ (2) | ||||
Asset Management Group Highlights
First quarter 2023 compared with fourth quarter 2022
First quarter 2023 compared with first quarter 2022
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, 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 11:00 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 (877) 402-9134 and (303) 223-4377 (international) and Internet access to the live audio listen-only webcast of the call is available at www.pnc.com/investorevents. PNC's first quarter 2023 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 (800) 633-8284 and (402) 977-9140 (international), conference ID 22026071 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 | |||||
FINANCIAL RESULTS | Three months ended | |||||
Dollars in millions, except per share data | March 31 | December 31 | March 31 | |||
2023 | 2022 | 2022 | ||||
Revenue | ||||||
Net interest income | $ 3,585 | $ 3,684 | $ 2,804 | |||
Noninterest income | 2,018 | 2,079 | 1,888 | |||
Total revenue | 5,603 | 5,763 | 4,692 | |||
Provision for (recapture of) credit losses | 235 | 408 | (208) | |||
Noninterest expense | 3,321 | 3,474 | 3,172 | |||
Income before income taxes and noncontrolling interests | $ 2,047 | $ 1,881 | $ 1,728 | |||
Income taxes | 353 | 333 | 299 | |||
Net income | $ 1,694 | $ 1,548 | $ 1,429 | |||
Less: | ||||||
Net income attributable to noncontrolling interests | 17 | 20 | 21 | |||
Preferred stock dividends (a) | 68 | 120 | 45 | |||
Preferred stock discount accretion and redemptions | 2 | 1 | 2 | |||
Net income attributable to common shareholders | $ 1,607 | $ 1,407 | $ 1,361 | |||
Per Common Share | ||||||
Basic | $ 3.98 | $ 3.47 | $ 3.23 | |||
Diluted | $ 3.98 | $ 3.47 | $ 3.23 | |||
Cash dividends declared per common share | $ 1.50 | $ 1.50 | $ 1.25 | |||
Effective tax rate (b) | 17.2 % | 17.7 % | 17.3 % | |||
PERFORMANCE RATIOS | ||||||
Net interest margin (c) | 2.84 % | 2.92 % | 2.28 % | |||
Noninterest income to total revenue | 36 % | 36 % | 40 % | |||
Efficiency (d) | 59 % | 60 % | 68 % | |||
Return on: | ||||||
Average common shareholders' equity | 16.11 % | 14.19 % | 11.64 % | |||
Average assets | 1.22 % | 1.10 % | 1.05 % |
(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 March 31, 2023, December 31, 2022 and March 31, 2022 were $38 million, $36 million and $22 million, respectively. |
(d) | Calculated as noninterest expense divided by total revenue. |
The PNC Financial Services Group, Inc. | Consolidated Financial Highlights | ||||
March 31 | December 31 | March 31 | |||
2023 | 2022 | 2022 | |||
BALANCE SHEET DATA | |||||
Dollars in millions, except per share data | |||||
Assets | $ 561,777 | $ 557,263 | $ 541,246 | ||
Loans (a) | $ 326,475 | $ 326,025 | $ 294,457 | ||
Allowance for loan and lease losses | $ 4,741 | $ 4,741 | $ 4,558 | ||
Interest-earning deposits with banks | $ 33,865 | $ 27,320 | $ 48,776 | ||
Investment securities | $ 138,239 | $ 139,334 | $ 132,411 | ||
Total deposits | $ 436,833 | $ 436,282 | $ 450,197 | ||
Borrowed funds (a) | $ 60,822 | $ 58,713 | $ 26,571 | ||
Allowance for unfunded lending related commitments | $ 672 | $ 694 | $ 639 | ||
Total shareholders' equity | $ 49,044 | $ 45,774 | $ 49,181 | ||
Common shareholders' equity | $ 41,809 | $ 40,028 | $ 44,170 | ||
Accumulated other comprehensive income (loss) | $ (9,108) | $ (10,172) | $ (5,731) | ||
Book value per common share | $ 104.76 | $ 99.93 | $ 106.47 | ||
Tangible book value per common share (non-GAAP) (b) | $ 76.90 | $ 72.12 | $ 79.68 | ||
Period end common shares outstanding (In millions) | 399 | 401 | 415 | ||
Loans to deposits | 75 % | 75 % | 65 % | ||
Common shareholders' equity to total assets | 7.4 % | 7.2 % | 8.2 % | ||
CLIENT ASSETS (In billions) | |||||
Discretionary client assets under management | $ 177 | $ 173 | $ 182 | ||
Nondiscretionary client assets under administration | 156 | 152 | 165 | ||
Total client assets under administration | 333 | 325 | 347 | ||
Brokerage account client assets | 77 | 74 | 79 | ||
Total client assets | $ 410 | $ 399 | $ 426 | ||
CAPITAL RATIOS | |||||
Basel III (c) (d) | |||||
Common equity Tier 1 | 9.2 % | 9.1 % | 9.9 % | ||
Common equity Tier 1 fully implemented (e) | 9.1 % | 8.9 % | 9.7 % | ||
Tier 1 risk-based | 10.9 % | 10.4 % | 11.2 % | ||
Total capital risk-based | 12.8 % | 12.3 % | 13.0 % | ||
Leverage | 8.5 % | 8.2 % | 8.2 % | ||
Supplementary leverage | 7.2 % | 6.9 % | 7.0 % | ||
ASSET QUALITY | |||||
Nonperforming loans to total loans | 0.62 % | 0.61 % | 0.78 % | ||
Nonperforming assets to total loans, OREO and foreclosed assets | 0.63 % | 0.62 % | 0.79 % | ||
Nonperforming assets to total assets | 0.36 % | 0.36 % | 0.43 % | ||
Net charge-offs to average loans (for the three months ended) (annualized) | 0.24 % | 0.28 % | 0.19 % | ||
Allowance for loan and lease losses to total loans | 1.45 % | 1.45 % | 1.55 % | ||
Allowance for credit losses to total loans (f) | 1.66 % | 1.67 % | 1.76 % | ||
Allowance for loan and lease losses to nonperforming loans | 236 % | 239 % | 198 % | ||
Total delinquencies (In millions) (g) | $ 1,326 | $ 1,490 | $ 1,699 |
(a) | Amounts include assets and liabilities for which we have elected the fair value option. Our 2022 Form 10-K included, and our first quarter 2023 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 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 16 for additional information. The ratios as of March 31, 2023 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) | 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 2023 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 December 31, 2022, March 31, 2022 and estimated March 31, 2023 ratios. For the full impact of PNC's adoption of CECL, which excludes the benefits of the five-year transition provision, see the March 31, 2023 and December 31, 2022 (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) | |||||||
March 31 2023 (estimated) (b) | December 31 2022 (b) | March 31 2022 (b) | March 31, 2023 (estimated) (c) | December 31, 2022 (estimated) (c) | |||
Dollars in millions | |||||||
Common stock, related surplus and retained earnings, net of treasury stock | $ 51,400 | $ 50,924 | $ 50,624 | $ 50,918 | $ 50,200 | ||
Less regulatory capital adjustments: | |||||||
Goodwill and disallowed intangibles, net of deferred tax liabilities | (11,119) | (11,138) | (11,114) | (11,119) | (11,138) | ||
All other adjustments | (92) | (101) | (63) | (94) | (101) | ||
Basel III Common equity Tier 1 capital | $ 40,189 | $ 39,685 | $ 39,447 | $ 39,705 | $ 38,961 | ||
Basel III standardized approach risk-weighted assets (d) | $ 435,873 | $ 435,537 | $ 397,455 | $ 436,067 | $ 435,581 | ||
Basel III Common equity Tier 1 capital ratio | 9.2 % | 9.1 % | 9.9 % | 9.1 % | 8.9 % |
(a) | All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented. |
(b) | The ratio is calculated to reflect PNC's election to adopt the CECL optional five-year transition provision. |
(c) | The March 31, 2023 and December 31, 2022 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) | Three months ended | ||||
March 31 | December 31 | March 31 | |||
Dollars in millions | 2023 | 2022 | 2022 | ||
Income before income taxes and noncontrolling interests | $ 2,047 | $ 1,881 | $ 1,728 | ||
Provision for (recapture of) credit losses | 235 | 408 | (208) | ||
Pretax pre-provision earnings (non-GAAP) | $ 2,282 | $ 2,289 | $ 1,520 |
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 (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.
Tangible Book Value per Common Share (non-GAAP) | |||||
March 31 | December 31 | March 31 | |||
Dollars in millions, except per share data | 2023 | 2022 | 2022 | ||
Book value per common share | $ 104.76 | $ 99.93 | $ 106.47 | ||
Tangible book value per common share | |||||
Common shareholders' equity | $ 41,809 | $ 40,028 | $ 44,170 | ||
Goodwill and other intangible assets | (11,378) | (11,400) | (11,383) | ||
Deferred tax liabilities on goodwill and other intangible assets | 260 | 261 | 269 | ||
Tangible common shareholders' equity | $ 30,691 | $ 28,889 | $ 33,056 | ||
Period-end common shares outstanding (In millions) | 399 | 401 | 415 | ||
Tangible book value per common share (non-GAAP) | $ 76.90 | $ 72.12 | $ 79.68 |
Tangible book value per common share is a non-GAAP measure and is calculated based on tangible common shareholders' equity divided by period-end common shares outstanding. We believe this non-GAAP measure serves as a useful tool to help evaluate the strength and discipline of a company's capital management strategies and as an additional, conservative measure of total company value.
Taxable-Equivalent Net Interest Income (non-GAAP) | Three months ended | ||||
March 31 | December 31 | March 31 | |||
Dollars in millions | 2023 | 2022 | 2022 | ||
Net interest income | $ 3,585 | $ 3,684 | $ 2,804 | ||
Taxable-equivalent adjustments | 38 | 36 | 22 | ||
Net interest income (Fully Taxable-Equivalent - FTE) | $ 3,623 | $ 3,720 | $ 2,826 |
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.
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 2022 Form 10-K, including in the Risk Factors and Risk Management sections and the Legal Proceedings and Commitments Notes of the Notes To Consolidated Financial Statements in that report, 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 sec.gov and on our corporate website at 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:
Tim Miller
(412) 762-4550
media.relations@pnc.com
INVESTORS:
Bryan Gill
(412) 768-4143
investor.relations@pnc.com
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SOURCE The PNC Financial Services Group, Inc.