10-KPeriod: FY2009

PNC FINANCIAL SERVICES GROUP, INC. Annual Report, Year Ended Dec 31, 2009

Filed March 11, 2010For Securities:PNC

Summary

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 billion 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 billion, 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.

Financial Highlights

33 data points
Beta

Revenue

$16.23B

Net Income

$2.40B

14.8% Net Margin

EPS (Diluted)

$4.36

Total Assets

$269.86B

Free Cash Flow

$5.75B

Financial Statements
Beta
Revenue$16.23B
Operating Income$2.36B
Interest Expense$3.00B
Net Income$2.40B
EPS (Basic)$4.40
EPS (Diluted)$4.36
Shares Outstanding (Basic)454.00M
Shares Outstanding (Diluted)455.00M

Key Highlights

  • 1PNC 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.
  • 2Net 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.
  • 3The 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.
  • 4PNC 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.
  • 5Tier 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.
  • 6The 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.
  • 7Retail 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.

Frequently Asked Questions

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.

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.

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.

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.