The PNC Financial Services Group, Inc. Citigroup Financial Services Conference March 9, 2011 Exhibit 99.1 |
2 Cautionary Statement Regarding Forward-Looking Information and Adjusted Information This presentation includes “snapshot” information about PNC used by way of illustration. It is not intended as a full business or financial review and should be viewed in the context of all of the information made available by PNC in its SEC filings. The presentation also contains forward-looking statements regarding our outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality and/or other matters regarding or affecting PNC and its future business and operations. Forward-looking statements are necessarily subject to numerous assumptions, risks and uncertainties, which change over time. The forward-looking statements in this presentation are qualified by the factors affecting forward-looking statements identified in the more detailed Cautionary Statement included in the Appendix, which is included in the version of the presentation materials posted on our corporate website at www.pnc.com/investorevents. We provide greater detail regarding some of these factors in our 2010 Form 10-K, including in the Risk Factors and Risk Management sections of that report, and in our subsequent SEC filings (accessible on the SEC’s website at www.sec.gov and on or through our corporate website at www.pnc.com/secfilings). We have included web addresses here and elsewhere in this presentation as inactive textual references only. Information on these websites is not part of this presentation. Future events or circumstances may change our outlook or expectations and may also affect the nature of the assumptions, risks and uncertainties to which our forward-looking statements are subject. The forward-looking statements in this presentation speak only as of the date of this presentation. We do not assume any duty and do not undertake to update those statements. In this presentation, we will sometimes refer to adjusted results to help illustrate the impact of certain types of items, such as our third quarter 2010 gain related to the sale of PNC Global Investment Servicing Inc. (“GIS”), the acceleration of accretion of the remaining issuance discount on our TARP preferred stock in connection with the first quarter 2010 redemption of such stock, our fourth quarter 2009 gain related to BlackRock’s acquisition of Barclays Global Investors (the “BLK/BGI gain”), our fourth quarter 2008 conforming provision for credit losses for National City, and integration costs in the 2010 and 2009 periods. This information supplements our results as reported in accordance with GAAP and should not be viewed in isolation from, or a substitute for, our GAAP results. We believe that this additional information and the reconciliations we provide may be useful to investors, analysts, regulators and others as they evaluate the impact of these respective items on our results for the periods presented due to the extent to which the items are not indicative of our ongoing operations. We may also provide information on pretax pre-provision earnings (total revenue less noninterest expense), as we believe that pretax pre-provision earnings, a non-GAAP measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. Where applicable, we provide GAAP reconciliations for such additional information. In certain discussions, we may also provide information on yields and margins for all interest-earning assets calculated using net interest income on a taxable-equivalent basis by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. We believe this adjustment may be useful when comparing yields and margins for all earning assets. We may also use annualized, proforma, estimated or third party numbers for illustrative or comparative purposes only. These may not reflect actual results. This presentation may also include discussion of other non-GAAP financial measures, which, to the extent not so qualified therein or in the Appendix, is qualified by GAAP reconciliation information available on our corporate website at www.pnc.com under “About PNC–Investor Relations.” |
3 Today’s Discussion PNC’s powerful franchise and ability to execute delivered record results in 2010 PNC’s business model is designed to deliver strong results and long-term value PNC has momentum and is positioned to achieve even greater shareholder value PNC Continues to Build a Great Company. PNC Continues to Build a Great Company. |
4 Footprint covering nearly 1/3 of the U.S. population Retail Corporate & Institutional A leader in serving middle-market customers and government entities One of the largest bank-held asset managers in the U.S. Asset Management Residential Mortgage National distribution capabilities PNC’s Powerful Franchise Dec. 31, 2010 U.S. Rank1 Deposits $183B 6 Assets $264B 6 Branches 2,470 5 ATMs 6,673 5 Record 2010 net income of $3.4B (1) Rankings source: SNL DataSource; Banks headquartered in U.S. Assets rank excludes Morgan Stanley and Goldman Sachs. CO TX KS OK BlackRock A leader in investment management, risk management and advisory services worldwide A Powerful Franchise and Record Results th th th th |
5 PNC’s Successful Business Model Designed to Deliver Strong Results Staying core funded and disciplined in our deposit pricing Returning to a moderate risk profile Leveraging customer relationships and our strong brand to grow high quality, diverse revenue streams Creating positive operating leverage 1 while investing in innovation Remaining disciplined with our capital Executing on our strategies (1) A period to period dollar or percentage change when revenue growth exceeds expense growth. |
6 PNC’s Higher Quality, Differentiated Balance Sheet Category (billions) Dec. 31, 2010 Change from Dec. 31, 2008 Investment securities $64 $21 48% Core loans 1 136 (13) (9%) Distressed loans 2 15 (12) (43%) Other assets 49 (23) (31%) Total assets $264 ($27) (9%) Transaction deposits $134 $23 21% Retail CDs, time, savings 49 (33) (40%) Total deposits $183 ($10) (5%) Borrowed funds, other $50 ($22) (30%) Preferred equity 1 (7) (92%) Common equity 30 12 69% Total liabilities and equity $264 ($27) (9%) Improving environment for corporate loan demand Slower pace of CRE decline Relatively stable consumer portfolio, opportunities for credit card growth Continued run-off of distressed loans 2 when appropriate Further low cost deposit gathering Additional run-off of higher cost deposits Possible shift from capital accumulation to optimization 4 2011 expectations 3 (1) Excludes loans assigned to the Distressed Assets Portfolio business segment. (2) Represents loans assigned to the Distressed Assets Portfolio business segment. (3) Refer to the economic assumptions in the Cautionary Statement in the Appendix. (4) Subject to regulatory approvals. Designed to Deliver Strong Results |
7 Returning to a Moderate Risk Profile Nonperforming loans³ to total loans Nonperforming assets² to total assets Net charge- offs to average loans Allowance for loan and lease losses 4 to loans 2010 reserves / NCOs 2.6 1.7 1.6 1.4 1.3 1.3 1.3 1.2 1.1 1.1 1.0 1.0 0.8 MTB PNC CMA JPM WFC FITB USB BAC RF BBT STI KEY COF X 2010 key metrics 1 2.01% 2.55% 2.97% 3.68% 1.91% 2.65% 3.25% 3.27% (1) As of or for the year ended December 31, 2010. Peers represents average of banks identified in the Appendix. Sources: SNL DataSource. (2) Does not include purchased impaired loans due to purchase accounting. Also does not include loans held for sale. (3) Nonperforming loans do not include foreclosed and other assets. (4) Includes impairment reserves attributable to purchased impaired loans. Loans PNC acquired from National City that were impaired are purchased impaired loans. Designed to Deliver Strong Results |
8 Strong Pretax Pre-Provision Earnings 1 and Well-Controlled Expenses Drive Strong ROAA Peer Source: SNL DataSource. (1) Total revenue less noninterest expense. PNC believes that pre-tax, pre-provision earnings, a non-GAAP measure, is useful as a tool to help evaluate our ability to provide for credit costs through operations. Total revenue and noninterest expense are both from continuing operations on our consolidated income statement. $15.2 $8.6 $6.6 Total revenue Noninterest expense Pretax pre- provision earnings¹ Provision Year ended December 31, 2010 Net income $2.5 $3.4 2010 return on average assets 1.37% 1.28% 1.14% 1.08% 1.03% 0.85% 0.67% 0.62% 0.53% 0.50% 0.12% -0.09% -0.40% COF PNC USB MTB WFC JPM FITB KEY BBT CMA STI BAC RF Designed to Deliver Strong Results |
9 3.96% 4.35% 3.93% 4.24% 3.32% 3.38% 3.39% 3.45% 2.88% 3.15% 3.10% 2.90% 1Q10 2Q10 3Q10 4Q10 Net interest margin Provision- adjusted NIM 4 Expect Core 1 and Provision-Adjusted 2 Net Interest Income to Improve in 2011 (1) Core net interest income is total net interest income, as reported, less related purchase accounting accretion. (2) Provision-adjusted net interest income is total net interest income, as reported, less provision. (3) Net interest margin less (annualized purchase accounting accretion/average interest-earning assets). (4) Net interest margin less (annualized provision/average interest-earnings assets). (5) Refer to the economic assumptions in the Cautionary Statement in the Appendix. Further information on (3) and (4) is provided in the Appendix. Positioned to Achieve Greater Shareholder Value Although lower NII and NIM is expected, core net interest income 1 and core NIM 3 are expected to increase - Balance sheet is positioned for rising interest rates - Further opportunity to lower deposit costs Purchase accounting accretion expected to decrease up to $700 million, resulting in lower net interest income and NIM Provision expected to decrease by over $800 million, resulting in higher provision-adjusted net interest income 2 Full year provision-adjusted NIM 4 expected to improve 2011 expectations 5 (billions) 1Q10 2Q10 3Q10 4Q10 FY10 Core NII 1 $1.9 $1.9 $1.9 $1.9 $7.6 Purchase accounting accretion $.4 $.5 $.3 $.3 $1.6 Total NII $2.4 $2.4 $2.2 $2.2 $9.2 Provision .8 .8 .5 .4 2.5 Provision-adjusted NII 2 $1.6 $1.6 $1.7 $1.8 $6.7 Core NIM 3 |
10 Provision-Adjusted Net Interest Margin 1 Trend 3.43% 3.32% 3.14% 2.97% 2.76% 2.68% 3.03% 2.17% 2.49%3 3.26% 3.27% 3.40% 3.38% 3.33% 2.90% 1.45% 2.27% 0.94% 0.50% 1.50% 2.50% 3.50% 4.50% 2002 2003 2004 2005 2006 2007 2008 2009 2010 PNC provision-adjusted margin 1 vs. Peers 2 PNC Peers 2 (1) Net interest margin less (provision/average interest-earning assets). (2) Peers represents average of banks identified in the Appendix. Peer source: SNL DataSource. (3) Excludes the 4Q08 conforming provision for credit losses of $504 million related to the National City acquisition as average interest-earning assets do not reflect the National City acquisition because the acquisition closed on December 31, 2008. Other acquisitions did not similarly impact the ratio. Including the National City conforming provision, the provision-adjusted net interest margin was 2.04%. Further information on (1) and (3) is provided in the Appendix. PNC 2.89% Average Peers² 2.69% Positioned to Achieve Greater Shareholder Value |
11 Diversified Sources of Fee Income YoY change in noninterest income 1% 0% -2% -2% -3% -3% -4% -5% -9% -10% -12% -15% -29% PNC¹ STI JPM KEY CMA WFC BBT FITB 2 BAC RF COF MTB USB Noninterest income Year ended December 31, 2010 Diversified fee sources Sales and service model Customer growth momentum Regulatory headwinds $5.9B Asset management Consumer services Corporate services Deposit service charges 18% 21% 12% 18% 12% Other³ 19% Residential Mortgage Peer source: SNL DataSource. Noninterest income is from continuing operations. (1) Excludes the 2009 $1,076 million BLK/BGI gain recorded in noninterest income. The year over year change including the gain was -17%. Further information is provided in the Appendix. (2) Excludes the impact of the 2009 gain related to the sale of a business. (3) Other in this chart includes net gains on sales of securities, net OTTI, gains on BlackRock transactions, and other. 2011 drivers Positioned to Achieve Greater Shareholder Value |
12 Disciplined Expense Management 2010 noninterest expense highlights Expenses of $8.6 billion decreased 5% YoY Integration costs totaled $387 million in 2010 Achieved acquisition cost savings of $1.8 billion annualized in 4Q10 Expenses expected to be down in 2011, but magnitude depends on investments 1 Aggressively adding talent in key markets across businesses - Asset Management Group - Corporate & Institutional Banking - Residential Mortgage Banking Investing in products and services - Consumer payments model - Healthcare Building out infrastructure Positioned to Achieve Greater Shareholder Value 2011 outlook (1) Subject to legal and regulatory contingencies. See Note 22 Legal Proceedings included in Item 8 of PNC’s Form 10-K. Also refer to the economic assumptions in the Cautionary Statement in the Appendix. |
13 Strong Momentum – Retail Banking Retail Banking 4Q09 4Q10 Checking relationships Online bill payment active customers 5,390 5,465 4Q09 4Q10 780 977 Most of 2010 client growth occurred in 2H10 following conversions 4Q10 checking relationships up 27,000 in a typically flat seasonal quarter Customer engagement scores higher in 2H10 than 1H10 Workplace and University Banking channel client acquisition up 20% in 2H10 vs. 2H09 Reached definitive agreement to acquire 19 branches in Tampa, FL in January 2011 Positioned to Achieve Greater Shareholder Value |
14 Regulatory changes are impacting revenue streams Some competitors have chosen to increase fees and/or reduce customer choices Products Designed to Accelerate Retail Market Share Expansion Positioned to Achieve Greater Shareholder Value Industry challenge PNC strategy Expand market share and share of wallet by providing customers with more choices and rewards Announced new accounts to help customers save, manage money and avoid fees - Connects checking, credit, debit, and rewards - Expands Virtual Wallet features to reach a broader group of customers - An integrated view of your money that you cannot get anywhere else - The more business the customer does with PNC, the more they get in return - Free checking remains available with no balance requirement and free access to PNC’s 6,673 ATM’s |
15 Strong Momentum – Corporate & Institutional Banking 2009 2010 $1,137 $1,225 Treasury management revenue 1 (1) Consolidated PNC amounts. Capital markets revenue 1 Corporate & Institutional Banking 2009 2010 85% of Corporate Banking relationship managers sold to a new name in 2010, with many bringing in five or more All relationship managers cross-sold in 2010 Strong TM pipeline including healthcare providers, gov’t agencies and middle market companies In terms of capital markets deals -#2 middle market deal bookrunner -#4 U.S. real estate bookrunner -#4 U.S. asset-based credit lead arranger Harris Williams revenue increased $80 million in 2010 vs. 2009 $533 $618 Positioned to Achieve Greater Shareholder Value |
16 Strong Momentum – Asset Management Group Channel sales 1 +60% $103B 2009 2010 Asset Management Group Record sales year in 2010, including 60% YoY increase in channel sales, a strategic focus for PNC Total assets under administration of $212 billion, discretionary assets under management of $108 billion Net asset flows up $3 billion in 2H10 versus 1H10 Significantly increased frontline talent with 500 new hires in 2010, approximately double prior year 2010 vs. 2009 Assets under management $108B Equity Fixed income Liquidity/other +$6B +$2B ($3B) Positioned to Achieve Greater Shareholder Value (1) Channel sales are new sales to clients who were referred to AMG by Retail Banking or Corporate and Institutional Banking. |
17 Remaining Disciplined With Our Capital 4Q10 Tier 1 common ratio 2010 return on Tier 1 common capital 1 10.1% 9.8% 9.8% 9.3% 9.1% 8.8% 8.6% 8.3% 8.1% 7.9% 7.8% 7.5% 6.6% CMA PNC JPM KEY BBT COF BAC WFC STI RF USB FITB MTB 24.6% 17.8% 16.9% 16.0% 15.6% 15.1% 10.0% 8.0% 8.0% 4.6% 1.9% -1.8% -7.2% COF MTB USB PNC WFC JPM FITB KEY BBT CMA STI BAC RF Peer Source: SNL DataSource and company reports. MTB is estimated. Ratios as of year end. (1) Return on tier 1 common capital calculated as net income divided by tier 1 common capital. Further information is provided in the Appendix. Positioned to Achieve Greater Shareholder Value |
18 Possible Impact of Basel III Tier 1 common ratio 9.8% Under current rules 10.0% (1) Proforma assumptions may change. Proforma assumes current common stock dividend of $.10 per share per quarter and no common stock repurchases. Assumed 2011 net income of $3.0 billion and 2012 net income of $3.4 billion from First Call mean estimate as of February 24, 2011. The First Call mean estimate is used for illustrative purposes only and does not necessarily reflect management’s expectations and may not reflect actual results. Proforma estimates are subject to change depending on final Basel III rules and final regulatory implementation. Basel III proforma assumptions are based on rules in current form and also include lower deferred tax assets and subinvestment grade securities at the end of 2012 and the impact of mortgage servicing rights and the after-tax treatment of our BlackRock investment. PNC’s capital management priorities 12.6% 4Q10 Assumes full Basel III implementation and without benefit of multi- year phase-in Proforma 4Q12 1 Positioned to Achieve Greater Shareholder Value Increase the return of capital to shareholders via dividends and share repurchases; subject to regulatory approval Maintain ample capacity to meet the needs of our clients and support organic business growth Continue to invest in innovative products and services Deploy capital for acquisitions that meet our strategic criteria Ensure capital adequacy in times of uncertainty and regulatory compliance |
19 A Demonstrated Ability to Achieve Greater Shareholder Value Achieving greater shareholder value As of quarter end. (1) Tangible book value per share calculated as book value per share less total intangible assets per share. PNC believes that tangible book value, a non-GAAP measure, is useful as a tool to help evaluate the amount, on a per share basis, of intangible assets included in book value per common share. Further information is provided in the Appendix. 4Q08 4Q10 4Q08 4Q10 Book value per share Tangible book value per share 1 $39.44 $56.29 $13.10 $35.82 Positioned to Achieve Greater Shareholder Value 4Q08 4Q10 Stock price $49.00 $60.72 |
20 Summary PNC Continues to Build a Great Company. PNC Continues to Build a Great Company. PNC’s powerful franchise and ability to execute delivered record results in 2010 PNC’s business model is designed to deliver strong results and long-term value PNC has momentum and is positioned to achieve even greater shareholder value |
21 Cautionary Statement Regarding Forward-Looking Information Appendix This presentation includes “snapshot” information about PNC used by way of illustration and is not intended as a full business or financial review. It should not be viewed in isolation but rather in the context of all of the information made available by PNC in its SEC filings. We also make statements in this presentation, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality and/or other matters regarding or affecting PNC and its future business and operations that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words such as “believe,” “plan,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “will,” “should,” “project,” “goal” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. We do not assume any duty and do not undertake to update our forward- looking statements. Actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements, and future results could differ materially from our historical performance. Our forward-looking statements are subject to the following principal risks and uncertainties. We provide greater detail regarding some of these factors in our 2010 Form 10-K, including in the Risk Factors and Risk Management sections of that report, and in our subsequent SEC filings. Our forward-looking statements may also be subject to other risks and uncertainties, including those that we may discuss elsewhere in this presentation or in our filings with the SEC, accessible on the SEC’s website at www.sec.gov and on or through our corporate website at www.pnc.com/secfilings. We have included these web addresses as inactive textual references only. Information on these websites is not part of this document. •Our businesses and financial results are affected by business and economic conditions, both generally and specifically in the principal markets in which we operate. In particular, our businesses and financial results may be impacted by: o Changes in interest rates and valuations in the debt, equity and other financial markets. o Disruptions in the liquidity and other functioning of financial markets, including such disruptions in the markets for real estate and other assets commonly securing financial products. o Actions by the Federal Reserve and other government agencies, including those that impact money supply and market interest rates. o Changes in our customers’, suppliers’ and other counterparties’ performance in general and their creditworthiness in particular. o A slowing or failure of the moderate economic recovery that began in mid-2009 and continued throughout 2010. o Continued effects of the aftermath of recessionary conditions and the uneven spread of the positive impacts of the recovery on the economy in general and our customers in particular, including adverse impact on loan utilization rates as well as delinquencies, defaults and customer ability to meet credit obligations. o Changes in levels of unemployment. o Changes in customer preferences and behavior, whether as a result of changing business and economic conditions, climate-related physical changes or legislative and regulatory initiatives, or other factors. •Turbulence in significant portions of the US and global financial markets could impact our performance, both directly by affecting our revenues and the value of our assets and liabilities and indirectly by affecting our counterparties and the economy generally. |
22 Cautionary Statement Regarding Forward-Looking Information (continued) Appendix •We will be impacted by the extensive reforms provided for in the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and ongoing reforms impacting the financial institutions industry generally. Further, as much of the Dodd-Frank Act will require the adoption of implementing regulations by a number of different regulatory bodies, the precise nature, extent and timing of many of these reforms and the impact on us is still uncertain. •Financial industry restructuring in the current environment could also impact our business and financial performance as a result of changes in the creditworthiness and performance of our counterparties and by changes in the competitive and regulatory landscape. •Our results depend on our ability to manage current elevated levels of impaired assets. •Given current economic and financial market conditions, our forward-looking financial statements are subject to the risk that these conditions will be substantially different than we are currently expecting. These statements are based on our current view that the moderate economic recovery that began in mid-2009 and continued throughout 2010 will slowly gather enough momentum in 2011 to lower the unemployment rate amidst continued low interest rates. •Legal and regulatory developments could have an impact on our ability to operate our businesses or our financial condition or results of operations or our competitive position or reputation. Reputational impacts, in turn, could affect matters such as business generation and retention, our ability to attract and retain management, liquidity, and funding. These legal and regulatory developments could include: o Changes resulting from legislative and regulatory responses to the current economic and financial industry environment. o Other legislative and regulatory reforms, including broad-based restructuring of financial industry regulation (such as those under the Dodd- Frank Act) as well as changes to laws and regulations involving tax, pension, bankruptcy, consumer protection, and other aspects of the financial institution industry. o Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries. In addition to matters relating to PNC’s business and activities, such matters may also include proceedings, claims, investigations, or inquiries relating to pre-acquisition business and activities of acquired companies, such as National City. o The results of the regulatory examination and supervision process, including our failure to satisfy the requirements of agreements with governmental agencies. o Changes in accounting policies and principles. o Changes resulting from legislative and regulatory initiatives relating to climate change that have or may have a negative impact on our customers’ demand for or use of our products and services in general and their creditworthiness in particular. o Changes to regulations governing bank capital, including as a result of the Dodd-Frank Act and of the so-called “Basel III” initiatives. •Our business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through the effective use of third-party insurance, derivatives, and capital management techniques, and by our ability to meet evolving regulatory capital standards. •The adequacy of our intellectual property protection, and the extent of any costs associated with obtaining rights in intellectual property claimed by others, can impact our business and operating results. •Our ability to anticipate and respond to technological changes can have an impact on our ability to respond to customer needs and to meet competitive demands. •Our ability to implement our business initiatives and strategies could affect our financial performance over the next several years. •Competition can have an impact on customer acquisition, growth and retention, as well as on our credit spreads and product pricing, which can affect market share, deposits and revenues. |
23 Cautionary Statement Regarding Forward-Looking Information (continued) Appendix •Our business and operating results can also be affected by widespread disasters, terrorist activities or international hostilities, either as a result of the impact on the economy and capital and other financial markets generally or on us or on our customers, suppliers or other counterparties specifically. •Also, risks and uncertainties that could affect the results anticipated in forward-looking statements or from historical performance relating to our equity interest in BlackRock, Inc. are discussed in more detail in BlackRock’s filings with the SEC, including in the Risk Factors sections of BlackRock’s reports. BlackRock’s SEC filings are accessible on the SEC’s website and on or through BlackRock’s website at www.blackrock.com. This material is referenced for informational purposes only and should not be deemed to constitute a part of this document. We grow our business in part by acquiring from time to time other financial services companies, financial services assets and related deposits. Acquisitions present us with risks in addition to those presented by the nature of the business acquired. These include risks and uncertainties related both to the acquisition transactions themselves and to the integration of the acquired businesses into PNC after closing. Acquisitions may be substantially more expensive to complete (including unanticipated costs incurred in connection with the integration of the acquired company) and the anticipated benefits (including anticipated cost savings and strategic gains) may be significantly harder or take longer to achieve than expected. Acquisitions may involve our entry into new businesses or new geographic or other markets, and these situations also present risks resulting from our inexperience in those new areas. As a regulated financial institution, our pursuit of attractive acquisition opportunities could be negatively impacted due to regulatory delays or other regulatory issues. In addition, regulatory and/or legal issues relating to the pre-acquisition operations of an acquired business may cause reputational harm to PNC following the acquisition and integration of the acquired business into ours and may result in additional future costs or regulatory limitations arising as a result of those issues. Any annualized, proforma, estimated, third party or consensus numbers in this presentation are used for illustrative or comparative purposes only and may not reflect actual results. Any consensus earnings estimates are calculated based on the earnings projections made by analysts who cover that company. The analysts’ opinions, estimates or forecasts (and therefore the consensus earnings estimates) are theirs alone, are not those of PNC or its management, and may not reflect PNC’s or other company’s actual or anticipated results. |
24 Non-GAAP to GAAP Reconcilement Appendix For the three months ended $ in millions Dec. 31, 2010 Sept. 30, 2010 June 30, 2010 Mar. 31, 2010 Net interest margin, as reported 3.93% 3.96% 4.35% 4.24% Provision for credit losses $442 $486 $823 $751 Avg. interest earning assets $223,795 $223,677 $224,580 $226,992 Annualized provision/Avg. interest earning assets 0.78% 0.86% 1.47% 1.34% Provision-adjusted net interest margin (1) 3.15% 3.10% 2.88% 2.90% $ in millions 2002 2003 2004 2005 2006 2007 2008 2009 2010 Net interest margin, as reported 3.99% 3.64% 3.22% 3.00% 2.92% 3.00% 3.37% 3.82% 4.14% Provision for credit losses $309 $177 $52 $21 $124 $315 $1,517 $3,930 $2,502 Avg. interest-earning assets $55,345 $55,172 $61,821 $73,001 $77,692 $98,010 $114,484 $238,487 $224,749 Provision/Avg. interest-earning assets 0.56% 0.32% 0.08% 0.03% 0.16% 0.32% 1.33% 1.65% 1.11% Provision-adjusted net interest margin (1) 3.43% 3.32% 3.14% 2.97% 2.76% 2.68% 2.04% 2.17% 3.03% $504 Adjusted provision for credit losses $1,013 Avg. interest-earning assets $114,484 Adjusted provision/Avg. interest-earning assets 0.88% Adjusted provision-adjusted net interest margin (2) 2.49% (2) The adjustment represents provision for credit losses adjusted for the 4Q08 conforming provision related to the National City acquisition (as average interest- earnings assets for 2008 do not reflect the National City acquisition because it closed on December 31, 2008), divided by average interest-earning assets. Other acquisitions did not similarly impact the ratio. (1) The adjustment represents annual or annualized, as applicable, provision for credit losses divided by average interest-earning assets. For the year ended Conforming provision - National City PNC believes that provision-adjusted net interest margin, a non-GAAP measure, is useful as a tool to help evaluate the amount of credit related risk associated with interest-earning assets. |
25 Non-GAAP to GAAP Reconcilement Appendix In millions except per share data As of Dec. 31, 2008 As of Dec. 31, 2010 Common shareholders' equity $17,490 $29,596 Common shares outstanding 443 526 Book value per common share $39.44 $56.29 Intangible assets $11,688 $10,753 Common shareholders' equity less intangible assets $5,802 $18,843 Common shares outstanding 443 526 Tangible book value per common share $13.10 $35.82 PNC believes that tangible book value per common share, a non-GAAP measure, is useful as a tool to help evaluate the amount, on a per share basis, of intangible assets included in book value per common share. $ in millions Dec. 31, 2010 Sept. 30, 2010 June 30, 2010 Mar. 31, 2010 Net interest margin, as reported 3.93% 3.96% 4.35% 4.24% Purchase accounting accretion $344 $325 $540 $440 Purchase accounting accretion, if annualized $1,365 $1,289 $2,166 $1,784 Avg. interest earning assets $223,795 $223,677 $224,580 $226,992 Annualized purchase accounting accretion/Avg. interest earning assets 0.61% 0.58% 0.96% 0.79% Core net interest margin (1) 3.32% 3.38% 3.39% 3.45% (1) PNC believes that core net interest margin, a non-GAAP measure, is useful as a tool to help evaluate the impact of purchase accounting accretion on net interest margin. The adjustment represents annualized purchase accounting accretion divided by average interest-earning assets. For the three months ended In millions Dec. 31, 2009 Dec. 31, 2010 Noninterest income, as reported $7,145 $5,946 -17% Adjustment: Gain on BlackRock/BGI transaction 1,076 - - Noninterest income, as adjusted $6,069 $5,946 -2% For the year ended Year over Year Change |
26 Non-GAAP to GAAP Reconcilement Appendix As of or for the three months ended In millions Dec. 31, 2010 Sept. 30, 2010 June 30, 2010 Mar. 31, 2010 Tier 1 common capital $21,188 $20,437 $18,173 $17,562 Reported net income 820 1,103 803 671 Reported net income, if annualized 3,253 4,376 3,221 �� 2,721 Adjustments: After-tax gain on sale of GIS - (328) After-tax impact of integration costs 51 62 65 73 Adjusted net income $871 $837 $868 $744 Adjusted net income, if annualized 3,454 3,321 3,482 3,017 Return on tier 1 common capital 15.4% 21.4% 17.7% 15.5% Adjusted return on tier 1 common capital 16.3% 16.2% 19.2% 17.2% As of or for the year ended In millions Dec. 31, 2010 Dec. 31, 2009 Tier 1 common capital $21,188 $13,941 Reported net income 3,397 2,403 Adjustments: After-tax gain on BlackRock/BGI transaction - (687) After-tax gain on sale of GIS (328) - After-tax impact of integration costs 251 274 Adjusted net income $3,320 $1,990 Return on tier 1 common capital 16.0% 17.2% Adjusted return on tier 1 common capital 15.7% 14.3% PNC believes that return on tier 1 common capital is useful as a tool to help measure and assess a company's use of common equity, and that such information adjusted for the impact of the BLK/BGI and GIS gains and integration costs may be useful due to the extent to which those items are not indicative of our ongoing operations. After-tax adjustments are calculated using a marginal federal income tax rate of 35% and include applicable income tax adjustments. The after-tax gain on the sale of GIS and the after-tax BLK/BGI gain also reflect the impact of state income taxes. Pretax amounts and tax benefit for adjustments are as follows: (1) gain on sale of GIS for 3Q and full year 2010 is $639 million pretax with tax benefit of $311 million; (2) gain on BlackRock/BGI transaction for full year 2009 is $1,076 million pretax with tax benefit of $389 million; (3) integration costs for 1Q, 2Q, 3Q and 4Q 2010, respectively, are $113 million, $100 million, $96 million, and $78 million pretax with tax benefit of $40 million, $35 million, $34 million, and $27 million, respectively; and (4) integration costs for full years 2010 and 2009, respectively, are $387 million and $421 million pretax with tax benefit of $136 million and $147 million, respectively. |
27 Peer Group of Banks Appendix The PNC Financial Services Group, Inc. PNC BB&T Corporation BBT Bank of America Corporation BAC Capital One Financial, Inc. COF Comerica Inc. CMA Fifth Third Bancorp FITB JPMorgan Chase JPM KeyCorp KEY M&T Bank MTB Regions Financial Corporation RF SunTrust Banks, Inc. STI U.S. Bancorp USB Wells Fargo & Co. WFC Ticker |