October 13, 2017 / 8:11 PM / 7 days ago

Fitch: PNC Continues to Report Solid Earnings

(The following statement was released by the rating agency) CHICAGO, October 13 (Fitch) PNC Financial Services Group, Inc. (PNC) reported $1.1 billion of net income in the third quarter of 2017 (3Q17), up 2.6% on a linked-quarter basis and a considerable 12% from the year-ago period. Return on average assets (ROA) and return on average common equity (ROE) were stable from the linked quarter at 1.2% and 9.9%, respectively. PNC's higher net income was driven by growth in net interest income (NIM) and controlled expenses, partially offset by an increase in provision expenses and lower noninterest income as compared to last quarter. Fitch affirmed PNC's ratings on October 3 reflecting the company's strong earnings profile, stable and diverse business model, consistent performance through time, and solid liquidity profile. PNC's earnings, as measured by ROA, are higher than those of other large banks reporting to date. NIM grew nearly 4% sequentially and a considerable 12% from a year ago driven by higher loan yields and loan growth, partially offset by higher funding costs. PNC saw its NIM expand by 7bps sequentially and 23bps from the year-ago quarter. This was driven by higher asset yields due to short-term interest rate increases. PNC indicated deposit betas on its $12 billion of wealth deposits were just a "little bit more" than retail deposit betas. PNC's noninterest income fell by 1% sequentially, driven by a decline primarily in corporate service fees, particularly lower loan syndication fees, lower net hedging gains on commercial MSRs, and lower M&A advisory fees. This was partially offset by improved asset management, which includes PNC's equity investment in BlackRock, deposit service charges, and higher gains on asset sales. Expenses declined 1% on a linked-quarter basis reflecting lower equipment expense following last quarter's asset impairments. This was partially offset by higher personnel expenses due to increased headcount and an additional day during the quarter. PNC indicated it remains on track to achieve its 2017 Continuous Improvement Program expense savings target of $350 million. PNC achieved 1% sequential and 5% year-over-year loan growth during the quarter, primarily from commercial lending with modest retail loan growth. Commercial loan growth of $2.8 billion was broad-based across asset classes. Consumer loans were up slightly as higher mortgage, auto, and credit card balances were partially offset by lower home equity and student loan balances. PNC noted continued success in its direct auto product, Check Ready, and the quality of the overall auto book (which does not include leasing) remains good with an average FICO of 730 and average term of 70 months. Following the yield curve flattening during the quarter, PNC opted to pull back on securities purchases. PNC's credit quality remained solid with just 19bps of net charge-offs (NCOs) during the quarter, a 1bp improvement sequentially. Non-performing loans decreased by 4% from the prior quarter. PNC's provision expense was greater than its NCOs resulting in a $24 million reserve build compared to a $12 million reserve release in 2Q17. PNC disclosed that the provision expense for the quarter includes $10 million related to the recent hurricanes. Early-stage delinquencies increased 12%, primarily due to higher delinquencies in auto, home equity, and credit cards in hurricane-affected states. Auto delinquencies in particular were impacted, increasing 61% on a linked-quarter basis. PNC reported that its estimated Common Equity Tier 1 Ratio under the fully phased-in Basel III standardized approach was 9.8%, unchanged from the prior quarter. This change was driven by retained earnings offset by higher risk-weighted assets from loan growth. In terms of guidance for next quarter, PNC indicated loans will be up modestly, with NIM, fee income, and noninterest expenses all "up low-single digits." The provision expense is expected to be between $100 million and $150 million. PNC also expected a 25bps increase in short-term rates in December. Contact: Julie Solar Senior Director +1-312-368-5472 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 Justin Fuller Senior Director +1-212-908-2057 . Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below