What is the main strategic direction PNC is pursuing?

PNC is actively transitioning into a diversified national financial services organization. This involves increasing contributions from fee-based businesses such as asset management, processing, and private banking, while reducing reliance on traditional, balance-sheet-heavy lending activities. The company is also divesting non-core assets, exemplified by the pending sale of its residential mortgage banking business.

How did the sale of the residential mortgage banking business impact the financials?

The sale of the residential mortgage banking business is treated as a discontinued operation. While it contributed $45 million in earnings for the nine months ended September 30, 2000, the primary financial impact for investors will be the expected $250 million after-tax gain upon closing, which is anticipated in the first quarter of 2001. The capital generated from this sale is earmarked for redeployment into higher-growth businesses, share repurchases, and balance sheet deleveraging.

What is the outlook for net interest income and margin?

Net interest income decreased by $154 million for the nine months ended September 30, 2000, and the net interest margin narrowed to 3.63% from 3.86% in the prior year. These decreases were attributed to funding costs from the ISG acquisition, downsizing of credit-related businesses, and a higher interest rate environment. PNC expects continued pressure on net interest income and margin throughout the remainder of 2000.

How is PNC managing its risk exposures?

PNC actively manages credit risk through diversification and collateral requirements. Interest rate risk is managed centrally by Asset and Liability Management, utilizing income simulation and economic value of equity models, and employing strategies like securities transactions, funding adjustments, and financial derivatives. Liquidity risk is managed to ensure sufficient funding for obligations, and trading activities are primarily customer-driven, with risk managed through a value-at-risk approach.

PNC 10-Q Quarterly Report Q3 FY2000 — Revenue, Net Income, EPS

Summary

PNC Financial Services Group, Inc. reported solid results for the nine months ended September 30, 2000, demonstrating a strategic shift towards fee-based businesses and a more national, less balance-sheet-dependent model. Net income increased by 9% to $945 million, or $3.18 per diluted share, driven by strong growth in asset management, fund processing, and private banking, which offset a decrease in net interest income. The company is actively reshaping its portfolio, highlighted by the pending sale of its residential mortgage banking business for $605 million, anticipated to generate a significant after-tax gain. This strategic divestiture is expected to free up capital for redeployment into higher-growth areas and share repurchases. Asset quality remained stable, with nonperforming assets at 0.68% of total loans. The company's diverse business lines, particularly BlackRock and PFPC, continue to perform well, contributing to the overall positive financial performance.

Key Highlights

1Total revenue from continuing operations increased by 11.6% to $3.80 billion for the nine months ended September 30, 2000, compared to the prior-year period.
2Net income from continuing operations grew by 9% to $900 million ($3.03 per diluted share) for the nine months ended September 30, 2000, compared to core earnings of $850 million ($2.77 per diluted share) in the prior year.
3Noninterest income saw a substantial increase of 34% to $2.156 billion for the nine months ended September 30, 2000, largely driven by growth in fee-based businesses like asset management and fund processing.
4The company announced the definitive agreement to sell its residential mortgage banking business for $605 million, expected to yield an after-tax gain of approximately $250 million.
5Return on average common shareholders' equity from continuing operations was 20.67% for the nine months ended September 30, 2000, up from 20.16% in the prior year.
6Asset quality remained stable, with nonperforming assets to total loans at 0.68% as of September 30, 2000, compared to 0.61% as of December 31, 1999.
7Shareholders' equity grew to $6.071 billion at September 30, 2000, with a book value per common share of $21.01.

PNC FINANCIAL SERVICES GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2000

Summary

Key Highlights

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