PNC raises quarterly profit as troubled commercial loans increase
PNC reported third-quarter net income of 2.097 billion dollars, up from 1.822 billion dollars a year earlier. Average lending and deposits expanded, with commercial loans accounting for the lending increase. Nonperforming loans also rose, concentrated in commercial lending. The bank’s earnings improvement came alongside higher charge-offs, a slightly lower capital ratio and liquidity coverage above the regulatory minimum.
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PNC’s quarterly earnings rise from a year earlier
PNC Financial Services Group, a US banking group, released its third-quarter financial results on October 15. The announcement covers the quarter ended September 30 and includes earnings, lending, deposit and credit-quality figures. The company’s reported accounting earnings and its adjusted earnings measure provide two versions of the quarterly profit calculation, with the adjusted figure presented separately from the accounting result.[1], [2]
Net income increased to 2.097 billion dollars from 1.822 billion dollars a year earlier. Diluted earnings per share rose from 4.35 dollars to 4.97 dollars; adjusted earnings were 5.09 dollars per share. Revenue increased annually from 5.915 billion dollars to 6.562 billion dollars, although it remained below the previous quarter’s 6.875 billion dollars. Annual and sequential revenue comparisons therefore moved in opposite directions.[1]
Commercial lending drives average loan growth
Average loans rose approximately 9 billion dollars from the previous quarter to 372.2 billion dollars. Commercial lending increased 10.4 billion dollars, while consumer loans fell 1.4 billion dollars. PNC also moved 1.4 billion dollars of student loans into the held-for-sale category. Net interest income rose sequentially from 4.107 billion dollars to 4.206 billion dollars during the quarter.[1]
Average deposits increased 4.2 billion dollars to 461.2 billion dollars. At quarter-end, deposits were 466.4 billion dollars, up 16.6 billion dollars. PNC attributed the period-end gain to seasonal commercial-account movements and new or expanded customer relationships. Its net interest margin slipped from 2.96 per cent to 2.94 per cent, while remaining above the 2.79 per cent recorded a year earlier.[1]
Troubled loans and charge-offs increase
Nonperforming loans increased 167 million dollars, or 8 per cent, to 2.2 billion dollars, concentrated in commercial lending. Net charge-offs rose from 226 million dollars in the second quarter to 257 million dollars, including 35 million dollars linked to the student-loan transfer. The allowance for credit losses was 5.4 billion dollars, equivalent to 1.42 per cent of loans on the balance sheet.[1]
The common equity Tier one ratio, a core measure of bank capital, declined from 9.9 per cent to 9.8 per cent. Liquidity coverage stood at 106 per cent, above the regulatory minimum. Accumulated other comprehensive losses widened from 4.1 billion dollars to 6.5 billion dollars. During the quarter, PNC returned 1.4 billion dollars to shareholders through dividends and share repurchases.[1]
