 The PNC
Financial Services Group, Inc. Investor Meetings
Second Quarter 2014
Exhibit 99.1 |
 2
Cautionary Statement Regarding Forward-Looking
Information and Adjusted Information
Our presentation includes “snapshot”
information about PNC used by way of illustration. It is not intended as a full business or
financial review and should be viewed in the context of all of the information made
available by PNC in its SEC filings. The presentation also contains forward- looking
statements regarding our outlook for earnings, revenues, expenses, capital and
liquidity levels and ratios, asset levels, asset quality, financial
position,
and
other
matters
regarding
or
affecting
PNC
and
its
future
business
and
operations.
Forward-looking
statements
are
necessarily subject to numerous assumptions, risks and uncertainties, which change over time.
The forward-looking statements in this presentation are qualified by the factors
affecting forward-looking statements identified in the more detailed Cautionary Statement included in
the
Appendix
that
follows
and
in
our
SEC
filings.
We
provide
greater
detail
regarding
these
as
well
as
other
factors
in
our
2013
Form
10-K
and
our first quarter 2014 Form 10-Q, including in the Risk Factors and Risk Management
sections and in the Legal Proceedings and Commitments and Guarantees Notes of the Notes
To Consolidated Financial Statements in those reports, and in our subsequent SEC filings. Our forward-
looking statements may also be subject to other risks and uncertainties, including those we
may discuss in this presentation or in SEC filings, accessible on the SEC’s
website at www.sec.gov and on PNC’s corporate website at www.pnc.com/secfilings. We have included web addresses in
this presentation as inactive textual references only. Information on those websites is not
part of this presentation. 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 in this presentation speak only as of
the date of this presentation. We do not assume any duty and do not undertake to update
those statements. Actual results or future events could differ, possibly materially, from those anticipated in
forward-looking statements, as well as from historical performance.
In
this
presentation,
we
may
sometimes
refer
to
adjusted
results
to
help
illustrate
the
impact
of
certain
types
of
items.
This
information
supplements our results as reported in accordance with GAAP and should not be viewed in
isolation from, or as a substitute for, our GAAP results. We believe that this
additional information and the reconciliations we provide may be useful to investors, analysts, regulators and others
to help evaluate the impact of these respective items on our operations. We may also provide
information on tangible book value per common share (calculated based on tangible
common shareholders’ equity (common shareholders’
equity less goodwill and other intangible assets, other
than servicing rights, net of deferred tax liabilities on such intangible assets) divided by
common shares outstanding). Where applicable, we provide
GAAP
reconciliations
for
such
additional
information,
including
in
the
Appendix
and/or
other
slides
and
materials
on
our
corporate
website
at
www.pnc.com/investorevents
and
in
our
SEC
filings.
In
certain
discussions,
we
may
also
provide
information
on
yields
and
margins
for all interest-earning assets calculated using net 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. We believe this adjustment may be useful when
comparing
yields
and
margins
for
all
earning
assets.
We
may
also
use
annualized,
pro
forma,
estimated
or
third
party
numbers
for
illustrative
or comparative purposes only. These may not reflect actual results.
This presentation may also include discussion of other non-GAAP financial measures, which,
to the extent not so qualified therein or in the Appendix,
is
qualified
by
GAAP
reconciliation
information
available
on
our
corporate
website
at
www.pnc.com
under
“About
PNC
–
Investor
Relations.”Appendix,
is qualified by GAAP reconciliation information available on our corporate website at www.pnc.com under “About PNC–Investor Relations.” |
 3
Agenda
Performance overview
Executing our strategic priorities
Continued focus on expense management
and capital strength |
 4
Corporate & Institutional
A leader in serving middle-market,
large corporate, government and
non-profit entities
A top 10 U.S. bank-held wealth
manager
Asset Management
Residential Mortgage
A primary consumer product
National distribution capabilities
(1) Rankings source: SNL DataSource; Holding companies (for assets) or Banks (for deposits,
branches and ATMs) headquartered in U.S. Assets rank excludes Morgan Stanley and
Goldman Sachs. Both Residential Mortgage Banking and Corporate & Institutional
Banking offices located in these states.
CO
TX
KS
BlackRock
A leader in investment management, risk
management and advisory services
worldwide
March 31, 2014
U.S. Rank
(1)
Deposits
$222B
7
th
Assets
$323B
7
th
Branches
2,703
4
th
ATMs
8,001
3
rd
Footprint covering nearly half of the U.S.
population
Retail Banking
PNC’s Leading Franchise |
 5
Significant Tangible Book Value Growth
12/31/2009
PNC
data
has
been
updated
to
reflect
the
first
quarter
2014
adoption
of
Accounting
Standards
Update
(ASU)
2014-01
related
to
investments
in
low
income
housing
tax
credits.
See
Note
A
and
PNC
reconciliation
in
Appendix
for
further
details.
PNC’s
book
value
per
common
share
was
$47.64
at
12/31/2009
and
$73.73
at
3/31/2014.
(1)
Peer
source:
SNL
Datasource.
% change 12/31/2009 to 3/31/2014
(1)
Tangible Book Value Per Common Share
$26.15
$56.33
PNC
3/31/14
12/31/09 |
 6
Strong Financials
Financial Drivers
FY13 vs. FY12 Growth
Revenue
3%
Noninterest
Income
(3)
17%
Noninterest
Expense
(3)
(8%)
Pretax Pre-Provision
Earnings
(4)
26%
(
1)
Net
income
from
continuing
operations.
For
FY10,
this
excludes
income
from
discontinued
operations
of
$373
million.
For
the
other
periods
in
the
chart,
net
income
equals
income
from
continuing
operations
as
PNC
did
not
have
discontinued
operations
for
those
periods.
(2)
ROAA
is
return
on
average
assets.
ROAA
is
calculated
as
net
income
from
continuing
operations
divided
by
average
total
assets.
(3)
Prior
period
amounts
have
been
updated
to
reflect
the
first
quarter
2014
adoption
of
Accounting
Standards
Update
(ASU)
2014-01
related
to
investments
in
low
income
housing
tax
credits.
(4)
See
Note
B
and
PNC
reconciliation
in
the
Appendix
for
additional
details.
Up 40%
Y/Y
(1)
(2) |
 7
1Q14 Highlights
1Q14 financial
summary
Net income
Diluted EPS from
net income
Return on average
assets
$1.1 billion
$1.82
1.35%
Successful first quarter
–
Continued loan and deposit growth
–
Reduced expenses
–
Improved credit quality
–
Seasonal trends impact
Stronger capital position
–
Pro
forma
fully
phased-in
Basel
III
common
equity
Tier
1
capital
ratio
of
9.7%
(1)
–
Capital actions
Increased quarterly common stock dividend by 9% to $0.48 for 2Q14
Executing on strategic priorities
(1)
As
of
March
31,
2014
and
calculated
based
on
the
Basel
III
standardized
approach.
We
previously
referred
to
the
Basel
III
common
equity
Tier
1
capital
ratio
as
the
Basel
III
Tier
1
common
capital
ratio.
Calculated
on
a
pro
forma
basis
without
the
benefit
of
the
Basel
III
phase-in
provisions.
See
Transitional
Basel
III
and
Pro
forma
Fully
Phased-
In
Basel
III
Common
Equity
Tier
1
Capital
Ratios
and
related
information
in
the
Appendix
for
further
details.
(2)
Through
1Q15,
subject
to
factors
such
as
market
and
general
economic
conditions,
economic
and
regulatory
capital
conditions,
alternative
uses
of
capital,
regulatory
and
contractual
limitations,
issuances
related
to
employee
benefit
plans
and
the
potential
impact
on
credit
ratings.
Plan
to
repurchase
up
to
$1.5
billion
of
common
stock
over
the
four
quarter
period
starting
in
2Q14
(2) |
 8
JPM
PNC
BAC
RF
WFC
CMA
FITB
KEY
COF
BBT
STI
1Q13-1Q14
Expense growth
(2)
1Q13-1Q14
Loan growth
(1)
Strong First Quarter Business Drivers and Results
1Q13-1Q14
Noninterest income growth
Peer
Source:
SNL
Datasource.
(1)
Loan
balances
as
of
3/31/2013
and
3/31/2014.
(2)
PNC
prior
period
amounts
have
been
updated
to
reflect
the
first
quarter
2014
adoption
of
Accounting
Standards
Update
(ASU)
2014-01
related
to
investments
in
low
income
housing
tax
credits.
(3)
PNC’s
adjusted
noninterest
income
growth
excludes
Residential
Mortgage.
See
Appendix
for
PNC
reconciliation.
BAC
WFC
COF
MTB
1Q14
Return on avg. assets
BAC
KEY
CMA
USB
MTB
BAC
BBT
STI
RF
FITB
WFC
JPM
Adjusted
noninterest
income
growth was
7%
(3) |
 9
Redefine the Retail
Banking business
Drive growth in
acquired &
underpenetrated
markets
Capture more
investable assets
Build a stronger
Residential
Mortgage business
Bolster
infrastructure &
Streamline
processes
Revenue Growth and Efficiency Improvement
Opportunities
Targeted Outcomes
(1)
Increase
fee income
Expand
market share
Deepen
relationships
Improve
operating
efficiencies
Strategic Priorities
(1) Refer to Cautionary Statement in the Appendix, including economic and other assumptions.
Does not take into account impact of potential legal and regulatory contingencies.
|
 10
Deeper Penetration in Underpenetrated and Acquired
Markets
Total Corporate Banking and AMG sales
Total Corporate Banking and AMG cross-sales
AMG refers to Asset Management Group. 2014 sales and cross-sales through March 31, 2014
annualized. (1) Southeast markets defined as Alabama, Georgia, North Carolina, South
Carolina and Florida. Includes the impact of RBC Bank (USA), which we acquired on March 2, 2012.
(2)
Southeast
2012
sales
and
cross
sales
reflect
10
months
annualized.
(3)
See
Note
D
in
Appendix
for
additional
details.
Deepening client relationships
Northeast
Midwest
Northeast
Midwest
New client
Year 1
New client
Year 2
Existing
clients
(3)
Southeast
(1)
Southeast
(1)
Product Growth
Corporate Banking Primary Clients
Actual
Actual
Annualized
Annualized
Actual
Actual
Annualized
Annualized
Annualized
Annualized
(2)
(2) |
 11
Strong Performance in Demographically Attractive
Southeast Markets
(1)
(1)
Southeast
markets
defined
as
Alabama,
Georgia,
North
Carolina,
South
Carolina
and
Florida.
Includes
the
impact
of
RBC
Bank (USA), which we acquired on March 2, 2012. (2) Total DDA households refers to consumer
and small business relationships. (3) A mortgage with a borrower as part of a
residential real estate purchase transaction. Asset Management Group
Residential Mortgage Banking
Retail Banking
Corporate & Institutional Banking
Purchase
(3)
Total DDA Households
(2)
Assets Under
Management
Refinance
Average Total Loans
Average Total Loans
Referral Sales
$5.8
$6.3
$369
$231
Loan Origination Volume
19% |
 12
Capturing More Investable Assets
1Q14 Highlights
Retail Banking -
Brokerage Managed Account Assets
Asset Management Group
Continued momentum in asset
growth
AUA increased 3% linked quarter
Discretionary AUM core net flows
(3)
strength continues:
Noninterest income increased 9% for
1Q14 compared to 1Q13
8%
CAGR
AMG -
Assets Under Administration (AUA)
40%
CAGR
AMG
refers
to
Asset
Management
Group.
AUM
refers
to
assets
under
management.
(1)
Represents
the
potential
households’
investable
assets
across
PNC’s
Retail
Bank
footprint
held
by
PNC’s
existing
customers.
Personal
investable
assets
excludes
principal
residence
and
relates
only
to
PNC’s
personal
investments
business
and
is
not
incremental.
(2)
Represents
the
value
of
investments
by
individuals
in
the
states
represented
by
the
RBC
Banks
(USA)
acquisition
even
where
it
overlaps
with
prior
PNC
states
such
as
Florida.
Source:
Data
Analytics
Research
using
IXI
household
data.
(3)
After
adjustment to total net flows for cyclical client activities.
Retail Banking Brokerage
Total investable assets opportunity of
$1.9 trillion across our existing Retail
Banking clients
(1)
Southeast market represents
$800B
(2)
potential high net worth
investable assets
–
$1.6 billion in 1Q14
–
$4.7 billion in FY13
–
Managed Account sales increased
15% in 1Q14
–
Total quarter-end Brokerage assets
of $41 billion, up 6% compared to
end of 1Q13 |
 13
Old Model
Outcomes
New Model
Responses
Transforming our Retail Banking Model
Transitioning model based on innovation and premium value
Expectations of “free”
Changing customer preferences
Reduced revenue sources
Expensive distribution
New checking continuum
Enhance customer experience
and brand
Value-based revenue model
Redefine the branch network |
 14
Retail Banking –
Redefining the Branch Network
Digital Consumer Customers
(1)
Retail Banking Headcount (HC)
12 month change
Investment Professionals
Call Center Sales Reps.
Tellers
Total HC
(Dec. 2012 vs. Dec. 2013)
(1)
Digital
Consumer
Customers
represents
consumer
checking
relationships
that
process
the
majority
of
their
transactions
through
non-branch channels.
Successfully migrating customers to self-service –
ATM/Mobile usage increasing
1Q13
1Q14
Total deposit transactions |
 15
Retail Banking –
Redefining the Branch
Current technology initiatives
Investing in technology
New branch formats
–
Flexible spaces
–
New sales and
services focus
Future technology initiatives
Research –
PNC Center for Financial
Services Innovation joint effort with
Carnegie Mellon University
–
Video advisor
–
Video wall
–
Assisted ATM
–
Instant card
issuance
–
Employee tablet
–
DepositEasy
SM
ATMs
–
Video teller
–
Mobile tablet
account opening |
 16
Building a Stronger Residential Mortgage Banking
Business
2014 industry volume
(1)
expected to be lowest since 1997
PNC outpacing industry
(4)
Closing purchase applications faster than industry
Continued upward trend in customer loyalty
(1)
Source:
Mortgage
Bankers
Association
(MBA),
April
2014
publication
(2)
A
mortgage
with
a
borrower
as
part
of
a
residential
real
estate
purchase
transaction.
(3)
Source:
Form
10-Q
filings
for
period
ended
March
31,
2014.
(4)
Chase
Retail.
(5)
Source:
Icon-
Lendershare
report,
May
2014.
(6)
See
Note
C
in
Appendix
for
details
on
PNC’s
mortgage
origination
customer
loyalty.
1Q13 vs. 1Q14 Change in Total Fundings
(3)
(5)
(6)
(2) |
 17
Building Best In Class Technology & Operations
Focused Priorities
Establishing a foundation to support our scale and effectively
respond to rapidly changing environments
Providing ability to grow with existing investments
Creating a competitive advantage –
improved operational efficiency
and business agility
Retail transformation
Cyber security
Modernize applications
Infrastructure enhancements |
 18
Noninterest Expense Trends
(1)
Continued Focus on Expense Management
2014 Expense Management
Opportunities
(1)
Prior
period
amounts
have
been
updated
to
reflect
the
first
quarter
2014
adoption
of
Accounting
Standards
Update
(ASU)
2014-01
related
to
investments
in
low
income
housing
tax
credits.
(2)
Percentage
decline
is
calculated
based
on
numbers
rounded
to
three
decimals.
(3)
See
Note
E
in
the
Appendix
for
further
details.
(4)
CIP
refers
to
PNC’s
Continuous
Improvement
Program.
Lowering service delivery costs
Branch reconfiguration and
consolidations
Re-engineering mortgage
servicing business
Enhancing online investment
platform and centralized
services
CIP
(4)
goal of $500 million
Down 4%
(2)
Down 8%
Highlights
Decreased expense reflected
our disciplined expense
management
Efficiency ratio
(3)
of 60% in
1Q14 |
 19
Capital Strength Reflected in Stress Test
Source:
The
Board
of
Governors
of
the
Federal
Reserve
Dodd-Frank
Act
Stress
Test,
March
2014:
Supervisory
Stress
Test
Methodology
and
Results,
March
2014
(as
corrected).
(1)
The
variance
reflects
the
difference
under
the
Federal
Reserve’s
supervisory
stress
test
between
the
Basel
I
Tier
1
common
capital
ratios
reported
as
of
September
30,
2013
and
the
minimum
Basel
I
Tier
1
common
capital
ratio
reached
under
the
supervisory
severely
adverse
scenario
between
the
periods
4Q13
and
4Q15.
Ratios
were
calculated
using
the
capital
action
assumptions
contained
in
the
Federal
Reserve’s
Dodd-Frank stress testing rules.
Company Reported
Basel I Tier 1 Common Ratio (9/30/13)
Basel I Tier 1
Common Ratio Variance
(1)
BBT
USB
STI
PNC
FITB
KEY
CMA
RF
WFC
MTB
JPM
COF
BAC |
 20
Strong Capital Build
Strong Capital Position Provides Capital Flexibility
Highlights
Capital priorities:
Increased quarterly common
stock dividend by 9% to
$0.48 for 2Q14
Plan to repurchase up to $1.5
billion of common stock
through 1Q15
(3)
(1)
We
previously
referred
to
the
Basel
III
common
equity
Tier
1
capital
ratio
as
the
Basel
III
Tier
1
common
capital
ratio.
(2)
Calculated
on
a
pro
forma
basis
without
the
benefit
of
the
Basel
III
phase-in
provisions.
For
both
1Q14
and
4Q13,
the
resulting
pro
forma
fully
phased-in
Basel
III
common
equity
Tier
1
ratios
were
calculated
based
on
the
Basel
III
standardized
approach.
Advanced
approaches
RWAs
and
related
rules
were
utilized
for
1Q13.
See
Transitional
Basel
III
and
Pro
forma
Fully
Phased-In
Basel
III
Common
Equity
Tier
1
Capital
Ratios
and
related
information
in
the
Appendix
for
further
details.
(3)
See
Note
2
on slide 7 above.
–
Build capital to support
client growth and
business investment
–
Maintain appropriate
capital in light of
economic uncertainty
–
Return excess capital to
shareholders, subject to
the CCAR process |
 21
Relative Returns and Valuation
21
ROACE
(2)
3/31/14
USB
14.4%
WFC
14.2
COF
10.8
PNC
10.4
BBT
10.3
JPM
9.7
KEY
9.4
FITB
8.9
STI
8.1
RF
8.0
MTB
8.0
CMA
7.6
BAC
-0.9
Current
Price/TBV
(3)
USB
2.76x
MTB
2.23
WFC
2.01
BBT
1.98
COF
1.58
FITB
1.51
PNC
1.48
STI
1.39
RF
1.31
KEY
1.29
JPM
1.29
CMA
1.27
BAC
1.07
ROAA
(1)
3/31/14
WFC
1.59%
COF
1.57
USB
1.55
PNC
1.35
BBT
1.27
RF
1.08
KEY
1.07
MTB
1.06
FITB
0.99
STI
0.93
JPM
0.88
CMA
0.86
BAC
-0.05
Peer Average
1.07%
Peer Average
1.63x
Peer Average
9.0%
Based on closing price as of 5/7/2014. Tangible book value (TBV)
as of 3/31/2014.
Peer
Source:
SNL
Datasource.
Peer
Average
is
average
of
peers
listed
in
table.
(1)
See
Note
2
on
slide
6
above.
(2)
ROACE
is
return
on
average
common
shareholders’
equity.
(3)
Price
to
tangible
book
value
(P/TBV)
based
on
closing
price
as
of
5/19/2014
and
TBV
as
of
3/31/2014.
PNC’s
tangible
book
value
(TBV)
as
of
3/31/2014
was
$56.33
and
its
book
value
was
$73.73.
See
Note
A
and
PNC
reconciliation
in
Appendix
for
further
details. |
 22
Key Takeaways
Strong financial results
Strategic priorities provide opportunities for
continued profitability driven by revenue growth and
improved efficiencies
Capital flexibility positions us well for returning
capital to shareholders |
 *
*
*
*
* |
 24
Cautionary Statement Regarding Forward-Looking
Information
Appendix
This
presentation
includes
“snapshot”
information
about
PNC
used
by
way
of
illustration
and
is
not
intended
as
a
full
business
or
financial
review.
It
should not be viewed in isolation but rather in the context of all of the information made
available by PNC in its SEC filings. We also make statements in this presentation, and
we may from time to time make other statements, regarding our outlook for earnings, revenues,
expenses,
capital
and
liquidity
levels
and
ratios,
asset
levels,
asset
quality,
financial
position,
and
other
matters
regarding
or
affecting
PNC
and
its
future
business and operations that are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act. Forward-looking statements
are
typically
identified
by
words
such
as
“believe,”
“plan,”
“expect,”
“anticipate,”
“see,”
“look,”
“intend,”
“outlook,”
“project,”
“forecast,”
“estimate,”
“goal,”
“will,”
“should”
and other similar words and expressions. Forward-looking statements are subject to
numerous assumptions, risks and uncertainties, which change over time.
Forward-looking statements speak only as of the date made. We do not assume any duty
and do not undertake to update forward-looking statements. Actual results or
future events could differ, possibly materially, from those anticipated in forward-looking statements, as well as from historical
performance.
Our forward-looking statements are subject to the following principal risks and
uncertainties. –
Changes in interest rates and valuations in debt, equity and other financial markets.
–
Disruptions in the liquidity and other functioning of U.S. and global financial
markets. –
The impact on financial markets and the economy of any changes in the credit ratings of U.S.
Treasury obligations and other U.S. government-backed debt, as well as issues
surrounding the levels of U.S. and European government debt and concerns regarding the
creditworthiness of certain sovereign governments, supranationals and financial institutions
in Europe. –
Actions by the Federal Reserve, U.S. Treasury and other government agencies, including those
that impact money supply and market interest rates.
–
Changes
in
customers’,
suppliers’
and
other
counterparties’
performance
and
creditworthiness.
–
Slowing or reversal of the current U.S. economic expansion.
–
Continued
residual
effects
of
recessionary
conditions
and
uneven
spread
of
positive
impacts
of
recovery
on
the
economy
and
our
counterparties, including adverse impacts on levels of unemployment, loan utilization rates,
delinquencies, defaults and counterparty ability to meet credit and other
obligations. –
Changes in customer preferences and behavior, whether due to changing business and economic
conditions, legislative and regulatory initiatives, or other factors.
•Our forward-looking financial statements are subject to the risk that economic and
financial market conditions will be substantially different than we are currently
expecting. These statements are based on our current view that the U.S. economic expansion will speed up to an above trend growth
rate near 2.8 percent in 2014 as drags from Federal fiscal restraint subside and that
short-term interest rates will remain very low and bond yields will
rise
only
slowly
in
2014.
These
forward
looking
statements
also
do
not,
unless
otherwise
indicated,
take
into
account
the
impact
of
potential
legal
and
regulatory contingencies.
•Our businesses, financial results and balance sheet values are affected by business and
economic conditions, including the following: |
 25
Cautionary Statement Regarding Forward-Looking
Information (continued)
Appendix
PNC’s ability to take certain capital actions, including paying dividends and any plans
to increase common stock dividends, repurchase common stock under current or future
programs, or issue or redeem preferred stock or other regulatory capital instruments,
is subject to the review of such proposed actions by the Federal Reserve as part of PNC’s comprehensive capital plan
for
the
applicable
period
in
connection
with
the
regulators’
Comprehensive
Capital
Analysis
and
Review
(CCAR)
process
and
to
the
acceptance of such capital plan and non-objection to such capital actions by the Federal
Reserve. PNC’s regulatory capital ratios in the future will depend on, among other
things, the company’s financial performance, the scope and terms of final capital
regulations then in effect (particularly those implementing the Basel Capital Accords), and management
actions affecting the composition of PNC’s balance sheet. In addition, PNC’s
ability to determine, evaluate and forecast regulatory capital ratios, and to take
actions (such as capital distributions) based on actual or forecasted capital ratios, will be dependent on
the ongoing development, validation and regulatory approval of related models.
Legal and regulatory developments could have an impact on our ability to operate our
businesses, financial condition, results of operations, competitive position,
reputation, or pursuit of attractive acquisition opportunities. Reputational impacts could affect
matters such as business generation and retention, liquidity, funding, and ability to attract
and retain management. These developments could include:
–
Changes resulting from legislative and regulatory reforms, including major reform of the
regulatory oversight structure of the financial services industry and changes to laws
and regulations involving tax, pension, bankruptcy, consumer protection, and other
industry aspects, and changes in accounting policies and principles. We will be impacted by extensive reforms
provided for in the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”) and otherwise growing out of the most recent financial
crisis, the precise nature, extent and timing of which, and their impact on us,
remains uncertain.
–
Changes to regulations governing bank capital and liquidity standards, including due to the
Dodd-Frank Act and to Basel- related initiatives.
–
Unfavorable resolution of legal proceedings or other claims and regulatory and other
governmental investigations or other inquiries.
In
addition
to
matters
relating
to
PNC’s
business
and
activities,
such
matters
may
include
proceedings,
claims,
investigations, or inquiries relating to pre-acquisition business and activities of
acquired companies, such as National City. These
matters
may
result
in
monetary
judgments
or
settlements
or
other
remedies,
including
fines,
penalties,
restitution
or
alterations in our business practices, and in additional expenses and collateral costs, and
may cause reputational harm to PNC.
–
Results of the regulatory examination and supervision process, including our failure to
satisfy requirements of agreements with governmental agencies.
–
Impact
on
business
and
operating
results
of
any
costs
associated
with
obtaining
rights
in
intellectual
property
claimed
by
others and of adequacy of our intellectual property protection in general.
|
 26
Cautionary Statement Regarding Forward-Looking
Information (continued)
Appendix
Business and operating results are affected by our ability to identify and effectively manage
risks inherent in our businesses, including, where appropriate,
through
effective
use
of
third-party
insurance,
derivatives,
and
capital
management
techniques,
and
to
meet
evolving
regulatory
capital and liquidity standards. In particular, our results currently depend on our ability to
manage elevated levels of impaired assets. Business
and
operating
results
also
include
impacts
relating
to
our
equity
interest
in
BlackRock,
Inc.
and
rely
to
a
significant
extent
on
information provided to us by BlackRock. Risks and uncertainties that could affect
BlackRock are discussed in more detail by BlackRock in its SEC filings.
We grow our business in part by acquiring from time to time other financial services
companies, financial services assets and related deposits and other liabilities.
Acquisition risks and uncertainties include those presented by the nature of the business acquired, including in some
cases
those
associated
with
our
entry
into
new
businesses
or
new
geographic
or
other
markets
and
risks
resulting
from
our
inexperience
in
those new areas, as well as risks and uncertainties related to the acquisition transactions
themselves, regulatory issues, and the integration of the acquired businesses into PNC
after closing. Competition can have an impact on customer acquisition, growth and
retention and on credit spreads and product pricing, which can affect market share,
deposits and revenues. Industry restructuring in the current environment could also impact our business and financial
performance
through
changes
in
counterparty
creditworthiness
and
performance
and
in
the
competitive
and
regulatory
landscape.
Our
ability
to
anticipate
and
respond
to
technological
changes
can
also
impact
our
ability
to
respond
to
customer
needs
and
meet
competitive
demands.
Business and operating results can also be affected by widespread natural and other disasters,
dislocations, terrorist activities, cyberattacks or international hostilities through
impacts on the economy and financial markets generally or on us or our counterparties specifically.
We provide greater detail regarding these as well as other factors in our 2013 Form 10-K
and our first quarter 2014 Form 10-Q, including in the Risk Factors and Risk
Management sections and the Legal Proceedings and Commitments and Guarantees Notes of the Notes To
Consolidated Financial Statements in those reports, and in our subsequent SEC filings.
Our forward-looking statements may also be subject to other risks and
uncertainties, including those we may discuss elsewhere in this presentation or in 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. Any annualized, pro forma, estimated, third party
or consensus numbers in this presentation are used for illustrative or comparative purposes
only
and
may
not
reflect
actual
results.
Any
consensus
earnings
estimates
are
calculated
based
on
the
earnings
projections
made
by
analysts
who cover that company. The analysts’
opinions, estimates or forecasts (and therefore the consensus earnings estimates) are theirs
alone, are not those of PNC or its management, and may not reflect PNC’s or other
company’s actual or anticipated results. |
 27
Notes
Appendix
Explanatory Notes
(A) Tangible book value per common share calculated based on tangible common shareholders'
equity (common shareholders' equity less goodwill and other intangible assets, other
than servicing rights, net of deferred tax liabilities on such intangible assets)
divided by period-end common shares outstanding. PNC's book value per share was $47.64 and $73.73 at 12/31/09
and 3/31/14, respectively. See Appendix, Slide 30 for PNC reconciliation.
(C) Originations customer loyalty three month rolling average. Measure of customer loyalty
based on survey responses of customers who have recently closed a loan with PNC, and
their responses to three questions: Overall satisfaction, likelihood to recommend,
likelihood to use again. Responses are given a rating of 1-5 (5 being the best) and all 5s are considered to
be a “loyal customer”.
(B) Pretax pre-provision earnings is defined as total revenue less noninterest expense. We
believe that pretax pre-provision earnings, a non-GAAP measure, is useful as a
tool to help evaluate the ability to provide for credit costs through operations. (E)
Efficiency ratio calculated as noninterest expense divided by total revenue. (D)
Represents PNC's Corporate Banking clients excluding new clients of less than three years as of 12/31/13. A Corporate
Banking primary client is defined as a corporate banking relationship with annual revenue
generation of $50,000 or more or, within corporate banking, a commercial banking client
relationship with annual revenue generation of $10,0000 or more. |
 28
Transitional Basel III and Pro forma Fully Phased-In Basel III
Common Equity Tier 1 Capital Ratios
Appendix
As a result of the staggered effective dates of the final U.S. capital rules issued in July
2013, as well as the fact that PNC remains in the parallel run qualification phase for
the advanced approaches, PNC’s regulatory risk-based capital ratios in 2014
are based on the definitions of, and deductions from, capital under Basel III (as such
definitions and deductions are phased-in for 2014) and Basel I risk-weighted assets (but subject to
certain
adjustments
as
defined
by
the
Basel
III
rules).
We
refer
to
the
capital
ratios
calculated
using
these
Basel III phased-in provisions and Basel I risk-weighted assets as the Transitional
Basel III ratios. These capital ratios became effective for PNC on January 1, 2014.
We provide information on the next slide regarding PNC’s Transitional Basel III
common equity Tier 1 ratio and PNC’s pro forma fully phased-in Basel III
common equity Tier 1 ratio. We previously referred to the Basel III common equity Tier
1 ratio as the Basel III Tier 1 common ratio. In addition, on the next slide we
provide information regarding PNC’s Basel I Tier 1 common capital ratio, which
was applicable to PNC through 2013 under the U.S. regulatory capital rules.
Common equity Tier 1 capital as defined under the Basel III rules adopted by the U.S. banking
agencies differs materially from Basel I. For example, under Basel III, significant
common stock investments in unconsolidated financial institutions, mortgage servicing
rights and deferred tax assets must be deducted from capital to the extent they
individually exceed 10%, or in the aggregate exceed 15%, of the institution’s
adjusted common equity Tier 1 capital. Also, Basel I regulatory capital excludes
accumulated other comprehensive income related to securities currently and previously
held as available for sale, as well as pension and other postretirement plans, whereas
under Basel III these items are a component of PNC's capital. |
 29
Transitional Basel III and Pro forma Fully Phased-In Basel III
Common Equity Tier 1 Capital Ratios
Appendix
Transitional Basel
III
Dollars in millions
Mar. 31, 2014
Mar. 31, 2014
Dec. 31, 2013(a)
Mar. 31, 2013(a)
Common stock, related surplus, and retained earnings, net of treasury
stock
$38,722
$38,722
$38,031
$35,305
Less regulatory capital adjustments:
Goodwill and disallowed intangibles, net of deferred tax liabilities
(8,932)
(9,291)
(9,321)
(9,412)
Basel III total threshold deductions
(214)
(1,186)
(1,386)
(2,076)
Accumulated other comprehensive income (b)
82
410
196
289
All other adjustments (c)
(16)
(106)
(64)
(580)
Estimated Common equity Tier 1 capital
29,642
28,549
27,456
23,526
Estimated Basel I risk-weighted assets calculated in accordance with
transition rules for 2014 (d)
273,826
N /A
N /A
N /A
Estimated Basel III standardized approach risk-weighted assets (e)
N /A
293,310
291,977
N /A
Estimated Basel III advanced approaches risk-weighted assets (f)
N /A
289,441
290,080
293,810
Estimated Basel III Common equity Tier 1 capital ratio
10.8%
9.7%
9.4%
8.0%
Risk-weight and associated rules utilized
Basel I (with 2014
transition adjustments)
Standardized
Standardized
Advanced
(b) Represents
net
adjustments
related
to
accumulated
other
comprehensive
income
for
securities
currently
and
previously
held
as
available
for
sale,
as
well
as
pension and other postretirement plans.
(c) Includes adjustments as required based on whether the standardized approach or advanced
approaches is utilized. (d) Includes credit and market risk-weighted assets.
(e)
Estimated
based
on
Basel
III
standardized
approach
rules
and
includes
credit
and
market
risk-weighted
assets.
(f) Estimated based on Basel III advanced approaches rules and includes credit, market and
operational risk-weighted assets. 2013 Basel I Tier 1 Common Capital Ratios (a)
(b) Dollars in millions
Dec. 31, 2013
Mar. 31, 2013
Basel I Tier 1 common capital
$28,484
$25,680
Basel I risk-weighted assets
272,169
261,491
Basel I Tier 1 common capital ratio
10.5%
9.8%
(a)
Effective
January
1,
2014,
the
Basel
I
Tier
1
common
capital
ratio
no
longer
applies
to
PNC
(except
for
stress
testing purposes). Our 2013 Form 10-K included additional information regarding our Basel I
capital ratios. Pro forma Fully Phased-In Basel III
PNC utilizes the pro forma fully phased-in Basel III capital ratios to assess its capital
position (without the benefit of phase-ins), including comparison to similar
estimates made by other financial institutions. Our Basel III capital ratios and estimates may be impacted by additional regulatory guidance or
analysis and, in the case of those ratios calculated using the advanced approaches, the ongoing
evolution, validation and regulatory approval of PNC’s models integral to the
calculation of advanced approaches risk-weighted assets. (b) Amounts have not been
updated to reflect the first quarter 2014 adoption of ASU 2014-01 related to investments
in low income housing tax credits.
(a) Amounts have not been updated to reflect the first quarter 2014 adoption of Accounting
Standards Update (ASU) 2014-01 related to investments in low income housing tax
credits. |
 30
Tangible Book Value per Common Share
Appendix
Tangible Book Value per Common Share Ratio
3/31/14 vs.
12/31/09
Dollars in millions, except per share data
Mar. 31, 2014
Dec. 31, 2009
(b)
Book value per common share
73.73
$
47.64
$
55%
Tangible book value per common share
Common shareholders' equity
39,378
$
21,995
$
Goodwill and Other Intangible Assets (a)
(9,621)
(10,650)
Deferred tax liabilities on Goodwill and Other Intangible Assets (a)
331
738
Tangible common shareholders' equity
30,088
$
12,083
$
Period-end common shares outstanding (in millions)
534
462
Tangible book value per common share (Non-GAAP)
56.33
$
26.15
$
115%
(a) Excludes the impact from mortgage servicing rights of $1.6 billion at March 31, 2014 and
$2.3 billion at December 31, 2009. Tangible book value per common share is a
non-GAAP financial measure and is calculated based on tangible common
shareholders’ equity divided by period-end common shares outstanding. We believe this
non-GAAP financial 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.
(b) Prior period amounts have been updated to reflect the first quarter 2014 adoption of
Accounting Standards Update (ASU) 2014-01 related to investments in low income
housing tax credits. % Change |
 31
Non-GAAP to GAAP Reconcilement
Appendix
$ in millions
Dec. 31, 2013
Dec. 31, 2012
% Change
Net interest income
$9,147
$9,640
-5%
Noninterest income
$6,865
$5,872
17%
Total revenue
$16,012
$15,512
3%
Noninterest expense (1)
($9,681)
($10,486)
-8%
Pretax pre-provision earnings (2)
$6,331
$5,026
26%
Net income (1)
$4,212
$2,994
41%
(1) Prior period amounts have been updated to reflect the first quarter 2014 adoption of
Accounting Standards Update (ASU) 2014-01 related to investments in low income
housing tax credits.
(2) PNC believes that pretax, pre-provision earnings, a non-GAAP measure, is useful as
a tool to help evaluate the ability to provide for credit costs through
operations. For
the year ended |
 32
Non-GAAP to GAAP Reconcilement
Appendix
$ in millions
Mar. 31, 2014
Mar. 31, 2013
% change
Asset management
$364
$308
Consumer services
$290
$296
Corporate services
$301
$277
Residential mortgage
$161
$234
Deposit service charges
$147
$136
Net securities gains
$10
$14
Net other-than-temporary impairments
($2)
($10)
Other
$311
$311
Total noninterest income, as reported
$1,582
$1,566
1%
Less Residential mortgage
$161
$234
$1,421
$1,332
7%
Noninterest income, adjusted for Residential mortgage
For
the three months ended |
 33
Peer Group of Banks
Appendix
The PNC Financial Services Group, Inc.
PNC
BB&T Corporation
BBT
Bank of America Corporation
BAC
Capital One Financial, Inc.
COF
Comerica Inc.
CMA
Fifth Third Bancorp
FITB
JPMorgan Chase
JPM
KeyCorp
KEY
M&T Bank
MTB
Regions Financial Corporation
RF
SunTrust Banks, Inc.
STI
U.S. Bancorp
USB
Wells Fargo & Co.
WFC |