What is the impact of the current economic turmoil on PNC's performance?

PNC's performance in the third quarter of 2008 was negatively impacted by "unprecedented turmoil, volatility and illiquidity in worldwide financial markets." This led to valuation losses on certain assets, an increase in the provision for credit losses, and a decrease in net income compared to the prior year. The company also noted that market credit spreads widened, contributing to valuation losses on commercial mortgage loans.

What are the key details of the planned acquisition of National City?

PNC announced its definitive agreement to acquire National City Corporation for approximately $5.9 billion, consisting of $5.5 billion in PNC common stock and $384 million in cash for warrant holders. The acquisition is expected to close by December 31, 2008, subject to regulatory and shareholder approvals. National City is a large commercial banking organization with approximately $145 billion in assets at September 30, 2008. PNC anticipates incurring approximately $2.3 billion in merger and integration costs.

What is PNC's participation in the TARP Capital Purchase Program and what are the implications?

PNC announced its intention to participate in the U.S. Treasury's TARP Capital Purchase Program, planning to issue $7.7 billion of preferred stock and warrants to the Treasury. These funds will count as Tier 1 capital. However, this participation will impose restrictions on PNC's ability to pay dividends on common stock and repurchase shares without Treasury approval for a period of three years or until the preferred stock is no longer held by the Treasury.

How has PNC's net interest income and margin performed?

Net interest income increased by 31% in the third quarter of 2008 compared to the same period in 2007, driven by a 14% increase in average interest-earning assets and lower funding costs. This resulted in a wider net interest margin of 3.46% for the quarter, up from 3.00% in the prior year's quarter.

PNC 10-Q Quarterly Report Q3 FY2008 — Revenue, Net Income, EPS

Summary

PNC Financial Services Group, Inc. reported net income of $248 million for the third quarter of 2008, a decrease from $407 million in the prior year's third quarter. This decline was driven by a higher provision for credit losses and valuation losses on certain illiquid assets, including commercial mortgage loans. Despite these challenges, the company maintained a strong liquidity position and saw an 8% increase in average deposits year-over-year, supporting nearly 80% of loan growth. The company also announced a significant strategic move: the planned acquisition of National City Corporation for approximately $5.9 billion, which is expected to close by December 31, 2008, pending regulatory and shareholder approvals. PNC also announced its participation in the U.S. Treasury's Troubled Asset Relief Program (TARP) Capital Purchase Program, planning to issue $7.7 billion in preferred stock to the Treasury, which will bolster its capital position but introduce restrictions on dividends and share repurchases.

Financial Highlights

17 data points

Beta

Revenue

$1.65B

Net Income

$259.00M

0.2% Net Margin

EPS (Diluted)

$0.70

Free Cash Flow

$3.30B

Financial Statements

Beta

Revenue	$1.65B
Interest Expense	$574.00M
Net Income	$259.00M
EPS (Basic)	$0.72
EPS (Diluted)	$0.70
Shares Outstanding (Basic)	345.00M
Shares Outstanding (Diluted)	347.00M

Key Highlights

1Net income decreased to $248 million in Q3 2008 from $407 million in Q3 2007.
2The company plans to acquire National City Corporation for approximately $5.9 billion in a deal expected to close by year-end 2008.
3PNC will participate in the TARP Capital Purchase Program, issuing $7.7 billion in preferred stock to the U.S. Treasury.
4Average deposits increased by 8% year-over-year, supporting loan growth.
5Net interest income increased by 31% in Q3 2008 compared to Q3 2007, driven by higher earning assets and lower funding costs, leading to a wider net interest margin of 3.46%.
6Noninterest income was negatively impacted by valuation losses of $82 million on commercial mortgage loans held for sale and other impairments, totaling $74 million on preferred stock in FHLMC and FNMA.
7The provision for credit losses increased significantly to $190 million in Q3 2008 from $65 million in Q3 2007, reflecting a challenging economic environment.

PNC FINANCIAL SERVICES GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2008

Summary

Financial Highlights

Key Highlights

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