10-QPeriod: Q2 FY2013

PNC FINANCIAL SERVICES GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 8, 2013For Securities:PNC

Summary

PNC Financial Services Group, Inc. reported a strong second quarter of 2013, with net income attributable to common shareholders reaching $1,069 million, or $1.99 per diluted share, a significant increase from $526 million, or $0.98 per diluted share, in the second quarter of 2012. This growth was driven by a 12% increase in total revenue, an 8% decrease in noninterest expense, and a lower provision for credit losses. Total revenue was boosted by stronger customer fee income and higher gains on asset sales and valuations, partly offset by lower net interest income. The company maintained a strong capital position, with its Basel I Tier 1 common capital ratio improving to 10.1% from 9.6% at the end of 2012. The pro forma Basel III Tier 1 common capital ratio also saw an increase to an estimated 8.2% from 7.5%. PNC also returned capital to shareholders by increasing its quarterly cash dividend on common stock by 10% to $0.44 per share. The company highlighted improved overall credit quality, with net charge-offs decreasing compared to the prior year quarter, although the provision for credit losses increased slightly due to anticipated easing of commercial credit improvements and higher net credit exposure.

Financial Highlights

32 data points
Beta

Revenue

$4.06B

Net Income

$1.11B

27.4% Net Margin

EPS (Diluted)

$1.98

Total Assets

$304.42B

Free Cash Flow

$784.00M

Financial Statements
Beta
Revenue$4.06B
Interest Expense$211.00M
Net Income$1.11B
EPS (Basic)$2.00
EPS (Diluted)$1.98
Shares Outstanding (Basic)528.00M
Shares Outstanding (Diluted)531.00M

Key Highlights

  • 1Net income attributable to common shareholders increased to $1,069 million ($1.99/share) from $526 million ($0.98/share) year-over-year.
  • 2Total revenue grew by 12% to $4,064 million, driven by noninterest income which rose significantly due to lower provisions for mortgage repurchase obligations and strong customer fee income.
  • 3Noninterest expense decreased by 8% to $2,435 million, primarily due to lower non-cash charges and integration costs.
  • 4The provision for credit losses decreased to $157 million from $256 million, reflecting improved overall credit quality.
  • 5Basel I Tier 1 common capital ratio improved to 10.1%, and the pro forma Basel III Tier 1 common capital ratio was an estimated 8.2%.
  • 6The quarterly common stock dividend was increased by 10% to $0.44 per share.
  • 7Total loans increased by $3.9 billion to $190 billion, with commercial lending showing growth.

Frequently Asked Questions

The significant increase in net income was primarily driven by a 12% increase in total revenue, an 8% decrease in noninterest expense, and a reduction in the provision for credit losses. The revenue growth was notably boosted by a lower provision for residential mortgage repurchase obligations, strong customer fee income, and higher gains on asset sales and valuations.

PNC's capital position remained strong. The Basel I Tier 1 common capital ratio increased to 10.1% from 9.6% at the end of 2012. Additionally, the pro forma Basel III Tier 1 common capital ratio was an estimated 8.2% at June 30, 2013, up from 7.5% at the end of 2012. This strong capital position allowed the company to increase its quarterly common stock dividend.

Net interest income decreased by 11% in the second quarter compared to the prior year, reflecting lower purchase accounting accretion and lower yields on loans and securities, partially offset by lower borrowing costs. The net interest margin also declined to 3.58% from 4.08%. Management expects net interest income to be modestly lower in the third quarter and to decrease for the full year 2013 compared to 2012, mainly due to an expected decline in purchase accounting accretion.

Overall credit quality improved during the second quarter of 2013. Nonperforming assets remained relatively flat compared to the end of 2012, but this was due to the alignment with interagency guidance which increased consumer nonperforming loans, offset by reductions in commercial nonperforming loans. Net charge-offs decreased compared to the second quarter of 2012. The provision for credit losses also decreased due to an improvement in commercial credit quality.