01—Abstract
Summary
Summary of the 10-K filed March 11, 2010. Cited figures are marked; the original filing is the authoritative source.
PNC Financial Services Group, Inc. (PNC) filed its 2009 10-K report on March 10, 2010, detailing a year marked by significant integration efforts following the substantial acquisition of National City Corporation on December 31, 2008.
Despite a challenging economic environment, PNC reported a net income of $2.4 billiona for 2009, a notable increase from $914 million in 2008. This performance was aided by a significant gain from BlackRock's acquisition of Barclays Global Investors and successful cost-saving initiatives related to the National City integration, which exceeded initial expectations. The company also made progress in strengthening its capital position, including the redemption of preferred stock issued to the U.S. Treasury under TARP.
Looking ahead, PNC announced plans to sell its Global Investment Servicing (GIS) business for $2.3 billionb, expecting an after-tax gain of approximately $455 million. The report highlights the company's ongoing commitment to returning to a "moderate risk profile" through disciplined credit management and maintaining strong capital and liquidity levels. Key strategic goals include revenue growth exceeding expense growth, customer acquisition and retention, and continued integration of the expanded franchise to drive shareholder value.
02—Key points
Key Highlights
- PNC completed the integration of National City Corporation, realizing over $800 million in cost savings in 2009 and increasing its multi-year annualized cost savings goal to $1.5 billion.
- Net income for 2009 was $2.4 billion, a significant increase from $914 million in 2008, benefiting from a $1.076 billion pre-tax gain on the BlackRock/BGI transaction.
- The company redeemed its $7.6 billion TARP preferred stock issued to the U.S. Treasury on February 10, 2010, using proceeds from recent common stock and senior notes offerings.
- PNC announced the pending sale of PNC Global Investment Servicing (GIS) for $2.3 billion, expecting an after-tax gain of approximately $455 million, with a target closing in Q3 2010.
- Tier 1 common capital ratio improved to 6.0% at year-end 2009, and Tier 1 risk-based capital ratio stood at 11.4%, demonstrating strengthened capital positions.
- The provision for credit losses increased significantly to $3.9 billion in 2009 from $1.5 billion in 2008, reflecting ongoing economic deterioration and the impact of acquired portfolios.
- Retail Banking and Corporate & Institutional Banking segments saw substantial revenue increases, primarily due to the inclusion of National City's operations, though earnings were impacted by higher credit costs in Retail Banking.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed March 11, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $16.23B$6.30B | +157.8% |
| Operating Income | $2.36B$796.00M | +196.2% |
| Interest Expense | $3.00B$2.45B | +22.7% |
| Net Income | $2.40B$856.00M | +180.7% |
| EPS (Basic) | $4.40$2.49 | +76.7% |
| EPS (Diluted) | $4.36$2.44 | +78.7% |
| Shares Outstanding (Basic) | 454.00M344.00M | +32.0% |
| Shares Outstanding (Diluted) | 455.00M346.00M | +31.5% |
05—Questions
Frequently Asked Questions
What was the primary driver of PNC's financial performance in 2009?
The primary driver of PNC's financial performance in 2009 was the integration of National City Corporation, acquired on December 31, 2008. This integration led to significant cost savings and an expansion of the company's geographic and operational footprint. Additionally, a substantial gain from BlackRock's acquisition of Barclays Global Investors significantly boosted non-interest income.
How did PNC manage its capital position in 2009, especially in light of the TARP investment?
PNC strengthened its capital position in 2009. It raised $624 million in new common equity in May 2009 to augment its Tier 1 common capital following the Federal Reserve's stress test results. Importantly, on February 10, 2010, PNC redeemed all $7.6 billion of its TARP preferred stock held by the U.S. Treasury, utilizing proceeds from subsequent offerings and other funds.
What is the significance of the pending sale of PNC Global Investment Servicing (GIS)?
The pending sale of GIS for $2.3 billion, expected to close in Q3 2010, is significant as it will generate an estimated after-tax gain of $455 million and further strengthen PNC's capital and liquidity position. The company is also obligated to raise $700 million in additional Tier 1 common capital if the sale is not completed by November 1, 2010.
How did the National City acquisition impact PNC's risk profile and credit quality?
The National City acquisition significantly increased PNC's size and complexity, and its loan portfolio contained a higher proportion of riskier assets, particularly from National City's acquired portfolios. This led to a substantial increase in the provision for credit losses and nonperforming assets. PNC reported a significant increase in its allowance for loan and lease losses and has been actively working to manage and reduce its exposure to riskier assets to return to its desired moderate risk profile.
06—Continue