By The PNC Financial Services Group, Inc.
Generated positive operating leverage; grew NII and NIM; maintained 2.5% SCB requirement
Increased quarterly common stock dividend 5 cents to $1.60 per share on July 2, 2024
PITTSBURGH, July 16, 2024 /PRNewswire/ — The PNC Financial Services Group, Inc. (NYSE: PNC) today reported:
For the quarter
In millions, except per share data and as noted
2Q24
1Q24
2Q23
Second Quarter Highlights
Financial Results
Comparisons reflect 2Q24 vs. 1Q24
Net interest income (NII)
$ 3,302
$ 3,264
$ 3,510
Income Statement
Noninterest income
2,109
1,881
1,783
▪ Generated positive operating
leverage; PPNR increased 13%
Revenue
5,411
5,145
5,293
Noninterest expense
3,357
3,334
3,372
▪ Revenue increased 5%
Pretax, pre-provision earnings (PPNR) (non-GAAP)
2,054
1,811
1,921
– NII and NIM increased
Provision for credit losses
235
155
146
▪ Noninterest expense increased 1%
Net income
1,477
1,344
1,500
▪ Gain on Visa share exchange of
$754 million substantially offset by
other significant items, resulting in a
9 cent benefit to EPS
Per Common Share
Diluted earnings per share (EPS)
$ 3.39
$ 3.10
$ 3.36
Balance Sheet
Average diluted common shares outstanding
400
400
401
▪ Average loans and deposits were
relatively stable
Book value
116.70
113.30
105.67
Tangible book value (TBV) (non-GAAP)
89.12
85.70
77.80
▪ Average securities increased 4%
▪ Net loan charge-offs were $262
million, or 0.33% annualized to
average loans
Balance Sheet & Credit Quality
Average loans In billions
$ 319.9
$ 320.6
$ 324.5
▪ ACL to total loans stable at 1.7%
Average securities In billions
141.3
135.4
141.0
▪ AOCI improved $0.6 billion, including
securities repositioning impact
Average deposits In billions
417.2
420.2
425.7
Accumulated other comprehensive income (loss) (AOCI)
In billions
(7.4)
(8.0)
(9.5)
▪ TBV per share increased 4%
Net loan charge-offs
262
243
194
▪ Maintained strong capital position
Allowance for credit losses (ACL) to total loans
1.67 %
1.68 %
1.68 %
– CET1 capital ratio of 10.2%
– Maintained regulatory minimum
Stress Capital Buffer (SCB) of
2.5%
Selected Ratios
Return on average common shareholders’ equity
12.16 %
11.39 %
13.01 %
– Increased quarterly common stock
dividend 5 cents to $1.60 per
share on July 2, 2024
Return on average assets
1.05
0.97
1.08
Net interest margin (NIM) (non-GAAP)
2.60
2.57
2.79
Noninterest income to total revenue
39
37
34
Efficiency
62
65
64
Common equity Tier 1 (CET1) capital ratio
10.2
10.1
9.5
See non-GAAP financial measures in the Consolidated Financial Highlights accompanying this release.
From Bill Demchak, PNC Chairman and Chief Executive Officer:
“PNC delivered strong results in the second quarter; generating positive operating leverage through revenue growth and well controlled expenses while adding customers, and strengthening our capital levels. Importantly, net interest income and net interest margin increased, marking the beginning of our growth trajectory towards expected record NII in 2025. In June, the Federal Reserve announced the results of the annual stress test and PNC’s start-to-trough CET1 ratio depletion was 1.6%, the best in our peer group. And earlier this month, our board approved a 5 cent increase to our quarterly common stock dividend.”
Significant Items
In the second quarter of 2024, PNC participated in the Visa exchange program, allowing PNC to monetize 50% of its Visa Class B-1 shares and converting its remaining holdings into 1.8 million of Visa Class B-2 shares. The exchange resulted in a gain of $754 million. The second quarter of 2024 also included Visa Class B-2 derivative fair value adjustments of negative $116 million, primarily related to the extension of anticipated litigation resolution timing, and a $120 million expense related to a PNC Foundation contribution. During the quarter, PNC also repositioned the investment securities portfolio, selling available-for-sale securities with a market value of $3.8 billion and a weighted average yield of approximately 1.5%. The sale of securities resulted in a loss of $497 million. PNC redeployed the sale proceeds into available-for-sale securities with a market value of $3.8 billion and a weighted average yield of approximately 5.5%. The combined net income impact of these significant items was $35 million, or $0.09 per common share.
Income Statement Impact of Significant Items
In millions
2Q24
Noninterest Income
Significant items impacting Other Noninterest Income
Gain on exchange of Visa Class B-1 shares
$ 754
Visa Class B-2 derivative fair value adjustments
(116)
Loss on sale of securities
(497)
Noninterest income increase from significant items
$ 141
Noninterest Expense
Significant items impacting Other Noninterest Expense
Contribution to PNC Foundation
$ 120
Noninterest expense increase from significant items
$ 120
Net Income and EPS
Pretax, pre-provision impact of significant items
$ 21
Tax impact of significant items
14
Net Income increase from significant items
$ 35
EPS impact of significant items
$ 0.09
Tax impact of significant items includes the benefit of shares donated to the PNC Foundation, partially offset by the tax impact of pretax, pre-provision significant items at a statutory tax rate of 21%.
Income Statement Highlights
Second quarter 2024 compared with first quarter 2024
Total revenue of $5.4 billion increased $266 million, or 5%, due to higher noninterest and net interest income.
Net interest income of $3.3 billion increased $38 million, or 1%, reflecting higher yields on interest-earning assets.
Net interest margin of 2.60% increased 3 basis points.
Noninterest income of $2.1 billion increased $228 million, or 12%.
Fee income of $1.8 billion increased $31 million, or 2%, primarily due to seasonally higher card and cash management fees and increased capital markets and advisory activity, partially offset by lower residential mortgage revenue.
Other noninterest income of $332 million increased $197 million reflecting the impact of $141 million of significant items in the second quarter of 2024.
Noninterest expense of $3.4 billion increased $23 million, or 1%, and included a $120 million PNC Foundation contribution expense in the second quarter of 2024, while the first quarter included a $130 million FDIC special assessment expense.
Provision for credit losses was $235 million in the second quarter, primarily reflecting the impact of portfolio activity. The first quarter of 2024 included a provision for credit losses of $155 million.
The effective tax rate was 18.8% for both the second and first quarter.
Balance Sheet Highlights
Second quarter 2024 compared with first quarter 2024 or June 30, 2024 compared with March 31, 2024
Average loans of $319.9 billion were stable, reflecting average commercial loans of $219.1 billion and average consumer loans of $100.8 billion.
Credit quality performance:
Delinquencies of $1.3 billion were stable.
Total nonperforming loans of $2.5 billion increased $123 million, or 5%, primarily due to higher commercial nonperforming loans.
Net loan charge-offs of $262 million increased $19 million, primarily due to higher commercial real estate net loan charge-offs.
The allowance for credit losses of $5.4 billion was relatively stable. The allowance for credit losses to total loans was 1.67% at June 30, 2024 and 1.68% at March 31, 2024.
Average investment securities of $141.3 billion increased $5.9 billion, or 4%, reflecting net purchase activity, primarily of U.S. Treasury securities.
Average Federal Reserve Bank balances of $40.7 billion decreased $7.1 billion, primarily reflecting net securities purchases.
Average deposits of $417.2 billion were relatively stable and included seasonal declines in corporate deposits.
Average borrowed funds of $77.5 billion increased $1.9 billion, or 2%, reflecting parent company senior debt issuances.
PNC maintained a strong capital and liquidity position.
Based on the results of the Federal Reserve’s 2024 annual stress test, PNC’s SCB for the four-quarter period beginning October 1, 2024 will remain at the regulatory minimum of 2.5%.
On July 2, 2024, the PNC board of directors raised the quarterly cash dividend on common stock to $1.60 per share, an increase of 5 cents per share. The dividend is payable on August 5, 2024 to shareholders of record at the close of business July 15, 2024.
PNC returned $0.7 billion of capital to shareholders, reflecting $0.6 billion of dividends on common shares and $0.1 billion of common share repurchases, representing 0.7 million shares.
The Basel III common equity Tier 1 capital ratio was an estimated 10.2% at June 30, 2024 and was 10.1% at March 31, 2024.
PNC’s average LCR for the three months ended June 30, 2024 was 108%, exceeding the regulatory minimum requirement throughout the quarter.
Earnings Summary
In millions, except per share data
2Q24
1Q24
2Q23
Net income
$ 1,477
$ 1,344
$ 1,500
Net income attributable to diluted common shares
$ 1,355
$ 1,240
$ 1,347
Diluted earnings per common share
$ 3.39
$ 3.10
$ 3.36
Average diluted common shares outstanding
400
400
401
Cash dividends declared per common share
$ 1.55
$ 1.55
$ 1.50
The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported (GAAP) amounts. This information supplements results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, GAAP results. Fee income, a non-GAAP financial measure, refers to noninterest income in the following categories: asset management and brokerage, capital markets and advisory, card and cash management, lending and deposit services, and residential and commercial mortgage. Information in this news release, including the financial tables, is unaudited.
CONSOLIDATED REVENUE REVIEW
Revenue
Change
Change
2Q24 vs
2Q24 vs
In millions
2Q24
1Q24
2Q23
1Q24
2Q23
Net interest income
$ 3,302
$ 3,264
$ 3,510
1 %
(6) %
Noninterest income
2,109
1,881
1,783
12 %
18 %
Total revenue
$ 5,411
$ 5,145
$ 5,293
5 %
2 %
Total revenue for the second quarter of 2024 increased $266 million from the first quarter of 2024 and $118 million compared with the second quarter of 2023. In both comparisons, the increase was driven by higher noninterest income. The linked quarter increase also reflected the benefit of higher net interest income.
Net interest income of $3.3 billion increased $38 million from the first quarter of 2024, reflecting higher yields on interest-earning assets. Net interest margin was 2.60% in the second quarter of 2024, increasing 3 basis points from the first quarter of 2024.
Compared to the second quarter of 2023, net interest income decreased $208 million and net interest margin declined 19 basis points, as the benefit of higher interest-earning asset yields was more than offset by increased funding costs and lower loan balances.
Noninterest Income
Change
Change
2Q24 vs
2Q24 vs
In millions
2Q24
1Q24
2Q23
1Q24
2Q23
Asset management and brokerage
$ 364
$ 364
$ 348
—
5 %
Capital markets and advisory
272
259
213
5 %
28 %
Card and cash management
706
671
697
5 %
1 %
Lending and deposit services
304
305
298
—
2 %
Residential and commercial mortgage
131
147
98
(11) %
34 %
Fee income
1,777
1,746
1,654
2 %
7 %
Other
332
135
129
146 %
157 %
Total noninterest income
$ 2,109
$ 1,881
$ 1,783
12 %
18 %
Noninterest income for the second quarter of 2024 increased $228 million compared with the first quarter of 2024. Capital markets and advisory revenue increased $13 million, driven by higher merger and acquisition advisory activity and increased loan syndication revenue, partially offset by lower underwriting fees. Card and cash management fees grew $35 million reflecting seasonally higher consumer transaction volumes and higher treasury management product revenue. Residential and commercial mortgage revenue decreased $16 million primarily due to lower residential mortgage activity. Other noninterest income increased $197 million primarily reflecting the impact of $141 million of significant items in the second quarter of 2024.
Noninterest income for the second quarter of 2024, increased $326 million from the second quarter of 2023. Fee income increased $123 million driven by growth across all categories. Other noninterest income increased $203 million primarily reflecting the impact of $141 million of significant items in the second quarter of 2024. The second quarter of 2023 also included negative Visa derivative fair value adjustments of $83 million.
CONSOLIDATED EXPENSE REVIEW
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