PNC Reports Second Quarter 2017 Net Income of $1.1 Billion, $2.10 Diluted EPS - 14.07.17 - News

PITTSBURGH, July 14, 2017

For the quarter

2Q17

1Q17

2Q16

Net income $ millions

$1,097

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PNC Financial Services Group

147,00 €

+0,34%

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$1,074

$989

Diluted earnings per common share

$2.10

$1.96

$1.82

"In the second quarter, PNC grew loans and revenue, and we controlled expenses well," said William S. Demchak, chairman, president and chief executive officer. "We've maintained a strong capital position and recently increased our common stock dividend by 36 percent to an all-time high. Our ongoing execution on our strategic priorities across the enterprise has positioned us for continued success in the current credit and interest rate environment, as well as for the long term."

Income Statement Highlights

Second quarter 2017 compared with first quarter 2017

Total revenue grew $176 million, or 5 percent, to $4.1 billion, and PNC continued to generate positive operating leverage.

Net interest income increased $98 million, or 5 percent, to $2.3 billion due to higher loan yields and balances and an additional day in the second quarter partially offset by increased funding costs. The net interest margin increased 7 basis points to 2.84 percent.
Noninterest income increased $78 million, or 5 percent, to $1.8 billion driven by fee income growth related to higher business activity and seasonality.

Noninterest expense increased $77 million, or 3 percent, to $2.5 billion reflecting the impact of seasonal activity.
Provision for credit losses increased $10 million to $98 million and included an initial provision for a loan and lease portfolio obtained through a business acquisition offset by a benefit from the performance of certain residential real estate loans and home equity lines of credit reaching draw period end dates.

Balance Sheet Highlights

Loans grew $5.2 billion, or 2 percent, to $218.0 billion at June 30, 2017 compared with March 31, 2017.

Commercial lending balances increased $5.1 billion in PNC's corporate banking, real estate and business credit businesses as well as the equipment finance business, which included the acquisition on April 3, 2017 of a commercial and vendor finance business with $1.0 billion of loans and leases.
Consumer lending balances increased $.1 billion as growth in residential mortgage, auto and credit card loans was substantially offset by lower home equity and education loans.

Overall credit quality remained stable.

Nonperforming assets of $2.2 billion at June 30, 2017 decreased $59 million, or 3 percent, compared with March 31, 2017.
Net charge-offs decreased to $110 million for the second quarter compared with $118 million for the first quarter.

Deposits were $259.2 billion at June 30, 2017, a decrease of $1.5 billion, or 1 percent, compared with March 31, 2017 reflecting a seasonal decline in consumer deposits.

Average deposits increased $1.5 billion, or 1 percent, in the second quarter compared with the first quarter.

Investment securities were $76.4 billion at both June 30, 2017 and March 31, 2017.
PNC completed common stock repurchase programs for the four quarter period ending in the second quarter of 2017 and returned a total of $3.4 billion of capital to shareholders over this period through repurchases of 21.5 million common shares for $2.3 billion and dividends on common shares of $1.1 billion.

Capital returned to shareholders in the second quarter of 2017 totaled $1.0 billion, or 93 percent of second quarter net income attributable to diluted common shares, through repurchases of 5.7 million common shares for $.7 billion and dividends on common shares of $.3 billion.

PNC's board of directors raised the quarterly cash dividend on common stock to 75 cents per share, an increase of 20 cents per share, or 36 percent, effective with the August dividend.
In June 2017 PNC announced share repurchase programs of up to $2.7 billion for the four-quarter period beginning in the third quarter of 2017, including repurchases of up to $.3 billion related to employee benefit plans.
PNC maintained strong capital and liquidity positions.

Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.3 percent at June 30, 2017 and 10.5 percent at March 31, 2017, calculated using the regulatory capital methodologies applicable to PNC during 2017.
Pro forma fully phased-in Basel III common equity Tier 1 capital ratio, a non-GAAP financial measure, was an estimated 9.8 percent at June 30, 2017 and 10.0 percent at March 31, 2017, based on the standardized approach rules.
The Liquidity Coverage Ratio at June 30, 2017 for both PNC and PNC Bank, N.A. continued to exceed the fully phased-in requirement of 100 percent.

Earnings Summary
	In millions, except per share data			2Q17			1Q17			2Q16
	Net income		$	1,097		$	1,074		$	989
	Net income attributable to diluted common shares		$	1,025		$	963		$	914
	Diluted earnings per common share		$	2.10		$	1.96		$	1.82
	Average diluted common shares outstanding			488			492			503
	Return on average assets			1.19	%		1.19	%		1.11	%
	Return on average common equity			9.88	%		9.50	%		8.87	%
	Book value per common share	Quarter end	$	87.78		$	86.14		$	85.33
	Tangible book value per common share (non-GAAP)	Quarter end	$	68.55		$	67.47		$	66.89
	Cash dividends declared per common share		$	.55		$	.55		$	.51

The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported amounts. Fee income, a non-GAAP financial measure, refers to noninterest income in the following categories: asset management, consumer services, corporate services, residential mortgage and service charges on deposits. Information in this news release including the financial tables is unaudited.

CONSOLIDATED REVENUE REVIEW

Revenue

Change

2Q17 vs

In millions

2Q17

1Q17

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