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PNC FINANCIAL SERVICES GROUP, INC. 8-K Report, Regulation FD Disclosure (Apr 16, 2024)

Reports
Regulation FD·Exhibits & Filings
Filing Date
Filed April 16, 2024
Period End
April 16, 2024
Security
PNC
In the record · 2016–202610-K1110-Q328-K210

PNC filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 210 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Apr ’17Apr ’17
  2. Deal closed8-K · May ’20May ’20
  3. Leadership change8-K · Jun ’22Jun ’22
  4. Leadership change8-K · Apr ’26Apr ’26

01—Abstract

Summary

Summary of the 8-K filed April 16, 2024. Cited figures are marked; the original filing is the authoritative source.

PNC Financial Services Group's April 16, 2024 8-K furnishes the slides used on its first quarter 2024 earnings call.

The filing itself contains no new financial statements; the substance is in Exhibit 99.1. PNC reported net income of $1.3 billiona ($1,344 million) and diluted EPS of $3.10. Adjusted diluted EPS, which excludes a $130 million pre-tax FDIC special assessment tied to the SVB and Signature Bank closures, was $3.36.

Net income fell 21% year over year but rose 52% from the prior quarter, which included $515 millionb of FDIC charges and $150 million of workforce reduction charges in 4Q23. The quarter showed balance sheet strength and cost discipline alongside soft top-line trends. Total revenue of $5.1 billion declined 8% year over year and 4% sequentially, driven by lower net interest income and a net interest margin that compressed to 2.57% from 2.84% a year earlier.

Average loans fell 2% year over year, and deposits declined 4%. Core noninterest expense dropped 6% sequentially to $3.2 billionc. Credit quality was broadly stable, with the allowance for credit losses at 1.68% of total loans, although nonperforming loans rose to 0.74% of total loans and office CRE is a watch item, with 9.7% reserved and 10.5% non-performing.

Capital and liquidity improved. The Basel III CET1 ratio rose to an estimated 10.1% from 9.9% in the prior quarter, and tangible book value per share reached $85.70d. Management's 2Q24 guidance calls for stable total revenue, net interest income down about 1%, and core noninterest expense up 2% to 4%.

For full-year 2024 it expects net interest income to decline 4% to 5% and total revenue to be stable to down 2%. The company also expects two Fed rate cuts in 2024, starting around mid-year, and it flagged that Basel III Endgame could reduce its CET1 ratio to roughly 8.3% on a fully phased-in basis.

02—Key points

Key Highlights

  1. Adjusted diluted EPS of $3.36 (ex-$130M pre-tax FDIC special assessment) vs. GAAP diluted EPS of $3.10; net income of $1.3B, up 52% sequentially but down 21% year over year.
  2. Total revenue of $5.145B, down 4% QoQ and 8% YoY, as net interest income fell to $3.264B and net interest margin compressed to 2.57% (from 2.84% in 1Q23).
  3. Core noninterest expense fell 6% QoQ to $3.204B, with the company citing well-controlled personnel and other expenses.
  4. Basel III CET1 ratio improved to an estimated 10.1% (from 9.9% in 4Q23); tangible book value per share rose to $85.70 (up 1% QoQ, 11% YoY).
  5. Average loans declined 1% QoQ and 2% YoY to $320.6B, and deposits fell 4% YoY, reflecting soft demand; the company also noted rising interest-bearing deposit costs (cumulative beta 45%).
  6. Credit quality is stable overall but watch items remain: NPLs rose to 0.74% of loans, and office CRE has 9.7% reserves with 10.5% NPL concentration.
  7. 2Q24 guidance: stable total revenue, net interest income down ~1%, core noninterest expense up 2–4%; full-year 2024 net interest income seen down 4–5% and revenue stable to down 2%.

03—Questions

Frequently Asked Questions

  1. Why is GAAP EPS ($3.10) lower than adjusted EPS ($3.36) for the first quarter of 2024?

    The difference is a $130 million pre-tax FDIC special assessment related to the closures of Silicon Valley Bank and Signature Bank. PNC excludes it from adjusted EPS as a non-core expense. After tax at 21%, the adjustment is about $103 million, or $0.26 per share.

  2. Why did net interest income and net interest margin decline?

    Net interest income fell 9% year over year to $3.264B, and net interest margin dropped from 2.84% to 2.57%. The presentation points to higher deposit costs (the interest-bearing deposit rate rose to 2.60% from 1.66%) and soft loan demand, with average loans down 2% year over year. Management expects further NII declines in 2024.

  3. Is PNC's capital position strengthening?

    Yes, on the reported basis. The CET1 ratio rose to an estimated 10.1% from 9.9% in 4Q23 and 9.2% a year earlier, and tangible book value per share grew to $85.70. However, including AOCI the ratio is 8.5%, and on a fully phased-in Basel III Endgame basis it is about 8.3%, which investors should weigh against the headline figure.

  4. What is driving the outlook for 2024?

    Management expects full-year 2024 net interest income to fall 4–5% and total revenue to be stable to down 2%, with core noninterest expense flat. Its baseline assumes slower GDP growth below 2%, a modest rise in unemployment to above 4%, and two Fed rate cuts starting around mid-2024. Noninterest income is guided up 4–6%.

  5. Are there any credit quality concerns?

    Overall credit is described as stable, with net charge-offs of $243 million in 1Q24 (0.30% of average loans) and an allowance at 1.68% of loans. The main concern is office CRE, which is about $7.8B of loans with 10.5% nonperforming and 26.4% criticized, and total NPLs rose to 0.74% of loans from 0.68% in 4Q23.

04—Continue

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