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Segment Reporting
12 Months Ended
Dec. 31, 2012
Segment Reporting [Abstract]  
Segment Reporting

Note 26 Segment Reporting

We have six reportable business segments:

  • Retail Banking
  • Corporate & Institutional Banking
  • Asset Management Group
  • Residential Mortgage Banking
  • BlackRock
  • Non-Strategic Assets Portfolio

 

Results of individual businesses are presented based on our internal management reporting practices. There is no comprehensive, authoritative body of guidance for management accounting equivalent to GAAP; therefore, the financial results of our individual businesses are not necessarily comparable with similar information for any other company. We periodically refine our internal methodologies as management reporting practices are enhanced. To the extent practicable, retrospective application of new methodologies is made to prior period reportable business segment results and disclosures to create comparability to the current period presentation to reflect any such refinements.

 

Financial results are presented, to the extent practicable, as if each business operated on a stand-alone basis. Additionally, we have aggregated the results for corporate support functions within “Other” for financial reporting purposes.

 

Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product maturities, duration and other factors. During the second quarter of 2012, enhancements were made to the funds transfer pricing methodology. Retrospective application of our new funds transfer pricing methodology has been made to the prior period reportable business segment results and disclosures to create comparability to the current period presentation, which we believe is more meaningful to readers of our financial statements.

 

A portion of capital is intended to cover unexpected losses and is assigned to our business segments using our risk-based economic capital model, including consideration of the goodwill and other intangible assets at those business segments, as well as the diversification of risk among the business segments.

 

We have allocated the allowances for loan and lease losses and for unfunded loan commitments and letters of credit based on our assessment of risk in each business segment's loan portfolio. Our allocation of the costs incurred by operations and other shared support areas not directly aligned with the businesses is primarily based on the use of services. Key reserve assumptions and estimation processes react to and are influenced by observed changes in loan portfolio performance experience, the financial strength of the borrower, and economic conditions. Key reserve assumptions are periodically updated. During the third quarter of 2012, PNC increased the amount of internally observed data used in estimating the key commercial lending assumptions of PDs and LGDs. Prior periods are not presented on a comparable basis as it is not practicable to do so.

 

Total business segment financial results differ from consolidated income from continuing operations before noncontrolling interests, which itself excludes the earnings and revenue attributable to GIS through June 30, 2010 and the related third quarter 2010 after-tax gain on the sale of GIS that are reflected in discontinued operations. The impact of these differences is reflected in the “Other” category in the business segment tables. “Other” includes residual activities that do not meet the criteria for disclosure as a separate reportable business, such as gains or losses related to BlackRock transactions, integration costs, asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities and certain trading activities, exited businesses, alternative investments including private equity, intercompany eliminations, most corporate overhead, tax adjustments that are not allocated to business segments and differences between business segment performance reporting and financial statement reporting (GAAP), including the presentation of net income attributable to noncontrolling interests as the segments' results exclude their portion of net income attributable to noncontrolling interests. Assets, revenue and earnings attributable to foreign activities were not material in the periods presented for comparative purposes.

 

Business Segment Products and Services

 

Retail Banking provides deposit, lending, brokerage, investment management, and cash management services to consumer and small business customers within our primary geographic markets. Our customers are serviced through our branch network, call centers, online banking and mobile channels. The branch network is located primarily in Pennsylvania, Ohio, New Jersey, Michigan, Illinois, Maryland, Indiana, North Carolina, Florida, Kentucky, Washington, D.C., Delaware, Alabama, Virginia, Georgia, Missouri, Wisconsin and South Carolina.

 

Corporate & Institutional Banking provides lending, treasury management and capital markets-related products and services to mid-sized corporations, government and not-for-profit entities and selectively to large corporations. Lending products include secured and unsecured loans, letters of credit and equipment leases. Treasury management services include cash and investment management, receivables management, disbursement services, funds transfer services, information reporting and global trade services. Capital markets-related products and services include foreign exchange, derivatives, loan syndications, mergers and acquisitions advisory and related services to middle-market companies, our multi-seller conduit, securities underwriting and securities sales and trading. Corporate & Institutional Banking also provides commercial loan servicing, and real estate advisory and technology solutions for the commercial real estate finance industry. Corporate & Institutional Banking provides products and services generally within our primary geographic markets, with certain products and services offered nationally and internationally.

 

Asset Management Group includes personal wealth management for high net worth and ultra high net worth clients and institutional asset management. Wealth management products and services include investment and retirement planning, customized investment management, private banking, tailored credit solutions and trust management and administration for individuals and their families. Institutional asset management provides investment management, custody and retirement administration services. Institutional clients include corporations, unions, municipalities, non-profits, foundations and endowments, primarily located in our geographic footprint.

 

Residential Mortgage Banking directly originates primarily first lien residential mortgage loans on a nationwide basis with a significant presence within the retail banking footprint, and also originates loans through majority owned affiliates. Mortgage loans represent loans collateralized by one-to-four-family residential real estate. These loans are typically underwritten to government agency and/or third-party standards, and sold, servicing retained, to secondary mortgage conduits of FNMA, FHLMC, Federal Home Loan Banks and third-party investors, or are securitized and issued under the GNMA program. The mortgage servicing operation performs all functions related to servicing mortgage loans, primarily those in first lien position, for various investors and for loans owned by PNC. Certain loan applications are brokered by majority owned affiliates to others.

 

BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. BlackRock provides diversified investment management services to institutional clients, intermediary and individual investors through various investment vehicles. Investment management services primarily consist of the management of equity, fixed income, multi-asset class, alternative investment and cash management products. BlackRock offers its investment products in a variety of vehicles, including open-end and closed-end mutual funds, iShares® exchange-traded funds (ETFs), collective investment trusts and separate accounts. In addition, BlackRock provides market risk management, financial markets advisory and enterprise investment system services to a broad base of clients. Financial markets advisory services include valuation services relating to illiquid securities, dispositions and workout assignments (including long-term portfolio liquidation assignments), risk management and strategic planning and execution.

We hold an equity investment in BlackRock, which is a key component of our diversified revenue strategy. BlackRock is a publicly traded company, and additional information regarding its business is available in its filings with the Securities and Exchange Commission (SEC). At December 31, 2012, our economic interest in BlackRock was 22%.

PNC received cash dividends from BlackRock of $225 million during 2012, $212 million during 2011, and $178 million during 2010.

 

Non-Strategic Assets Portfolio (formerly, Distressed Assets Portfolio) includes a consumer portfolio of mainly residential mortgage and brokered home equity loans and a small commercial loan and lease portfolio. We obtained a significant portion of these non-strategic assets through acquisitions of other companies.

Table 162: Results Of Businesses 
      Corporate & Asset Residential    Non-Strategic       
Year ended December 31Retail Institutional Management Mortgage    Assets       
In millionsBanking Banking Group Banking BlackRock Portfolio Other Consolidated 
2012                        
Income Statement                        
Net interest income$4,314 $3,991 $297 $209    $830 $(1) $9,640 
Noninterest income 2,012  1,598  676  317 $512  13  744  5,872 
 Total revenue 6,326  5,589  973  526  512  843  743  15,512 
Provision for credit losses (benefit) 800     11  (5)     181     987 
Depreciation and amortization 194  141  41  11        320  707 
Other noninterest expense 4,392  1,887  691  981     287  1,637  9,875 
Income (loss) from continuing operations before income taxes                        
 and noncontrolling interests 940  3,561  230  (461)  512  375  (1,214)  3,943 
Income taxes (benefit) 344  1,233  85  (153)  117  138  (822)  942 
Income (loss) from continuing operations before noncontrolling                        
 interests$596 $2,328 $145 $(308) $395 $237 $(392) $3,001 
Inter-segment revenue$ 1 $ 33 $ 12 $ 7 $ 15 $ (10) $ (58)    
Average Assets (a)$72,573 $102,962 $6,735 $11,529 $5,857 $12,050 $83,319 $295,025 
2011                        
Income Statement                        
Net interest income$3,804 $3,465 $280 $201    $913 $37 $8,700 
Noninterest income 1,773  1,237  649  751 $464  47  705  5,626 
 Total revenue 5,577  4,702  929  952  464  960  742  14,326 
Provision for credit losses (benefit) 891  (124)  (24)  5     366  38  1,152 
Depreciation and amortization 186  144  41  10        278  659 
Other noninterest expense 3,917  1,688  646  787     275  1,133  8,446 
Income (loss) from continuing operations before income taxes                        
 and noncontrolling interests 583  2,994  266  150  464  319  (707)  4,069 
Income taxes (benefit) 212  1,054  98  61  103  119  (649)  998 
Income (loss) from continuing operations before noncontrolling                        
 interests$371 $1,940 $168 $89 $361 $200 $(58) $3,071 
Inter-segment revenue$ 1 $ 20 $ 13 $ 7 $ 16 $ (10) $ (47)    
Average Assets (a)$66,448 $81,043 $6,719 $11,270 $5,516 $13,119 $81,220 $265,335 
2010                   
Income Statement                        
Net interest income$3,849 $3,604 $288 $262    $1,229 $(2) $9,230 
Noninterest income 1,958  1,351  628  741 $462  (93)  899  5,946 
 Total revenue 5,807  4,955  916  1,003  462  1,136  897  15,176 
Provision for credit losses 1,103  303  20  5     976  95  2,502 
Depreciation and amortization 218  148  41  3        287  697 
Other noninterest expense 3,838  1,675  606  560     250  987  7,916 
Income (loss) from continuing operations before income taxes                        
 and noncontrolling interests 648  2,829  249  435  462  (90)  (472)  4,061 
Income taxes (benefit) 237  1,000  91  159  111  (33)  (528)  1,037 
Income (loss) from continuing operations before noncontrolling                        
 interests$411 $1,829 $158 $276 $351 $(57) $56 $3,024 
Inter-segment revenue$1 $21 $13 $12 $22 $(12) $(57)    
Average Assets (a)$67,428 $77,540 $6,954 $9,247 $5,428 $17,517 $80,788 $264,902 
(a) Period-end balances for BlackRock.