Grew liquidity and capital; reduced expenses; credit quality stable PITTSBURGH, April 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 1Q24 4Q23 1Q23 First Quarter Highlights Financial Results Comparisons reflect 1Q24 vs. 4Q23 Revenue $    5,145 $    5,361 $    5,603   Income Statement   ▪  Revenue decreased 4% ▪  Core noninterest expenses declined 6% ▪  Generated positive operating leverage; efficiency improved ▪  Provision for credit losses of $155 million Balance Sheet ▪  Average loans decreased 1% ▪  Average deposits decreased 1% –  Spot deposits increased 1% ▪  ACL to total loans stable at 1.7% ▪  Net loan charge-offs were $243 million, or 0.30% annualized to average loans ▪  AOCI was negative $8.0 billion, compared to negative $7.7 billion, reflecting higher interest rates ▪  TBV per share increased to $85.70 ▪  Federal Reserve Bank balances averaged $47.8 billion, an increase of $5.6 billion ▪  Maintained strong capital position –  CET1 capital ratio of 10.1% –  Repurchased $0.1 billion of common shares Noninterest expense (NIE) 3,334 4,074 3,321 Non-core NIE adjustments 130 665 — Core NIE (non-GAAP) 3,204 3,409 3,321 Pretax, pre-provision earnings - as adjusted (non-GAAP) 1,941 1,952 2,282 Provision for credit losses 155 232 235 Net income 1,344 883 1,694 Per Common Share Diluted earnings $      3.10 $      1.85 $      3.98 Impact from non-core NIE adjustments 0.26 1.31 — Diluted earnings - as adjusted (non-GAAP) 3.36 3.16 3.98 Average diluted common shares outstanding 400 401 402 Book value 113.30 112.72 104.76 Tangible book value (TBV) (non-GAAP) 85.70 85.08 76.90 Balance Sheet & Credit Quality Average loans    In billions $    320.6 $    324.6 $    325.5 Average deposits    In billions 420.2 423.9 436.2 Accumulated other comprehensive income (loss) (AOCI)    In billions (8.0) (7.7) (9.1) Net loan charge-offs 243 200 195 Allowance for credit losses (ACL) to total loans 1.68 % 1.70 % 1.66 % Selected Ratios Return on average common shareholders' equity 11.39 % 6.93 % 16.11 % Return on average assets 0.97 0.62 1.22 Net interest margin (NIM) (non-GAAP) 2.57 2.66 2.84 Noninterest income to total revenue 37 37 36 Efficiency 65 76 59 Efficiency - as adjusted (non-GAAP) 62 64 59 Common equity Tier 1 (CET1) capital ratio 10.1 9.9 9.2 Core NIE is a non-GAAP measure calculated by excluding non-core NIE adjustments from noninterest expense. Non-core NIE adjustments include the pre-tax impact from the FDIC special assessment for the recovery of Silicon Valley Bank and Signature Bank ($130 million in 1Q24 and $515 million in 4Q23); 4Q23 also excludes charges related to the workforce reduction ($150 million). See this and other non-GAAP financial measures in the Consolidated Financial Highlights accompanying this release. From Bill Demchak, PNC Chairman and Chief Executive Officer: "PNC delivered solid first quarter results generating net income of $1.3 billion which included an additional $130 million pre-tax FDIC special assessment. During the quarter, we grew customers, reduced expenses, increased spot deposits, maintained stable credit quality and continued to build upon our strong liquidity and capital positions. The strength of our balance sheet, diverse business mix, and the quality of our people, position us well for continued growth across our franchise as the year progresses." Income Statement Highlights First quarter 2024 compared with fourth quarter 2023 Total revenue of $5.1 billion decreased $216 million, or 4%, due to lower net interest income and noninterest income. Net interest income of $3.3 billion decreased $139 million, or 4%, reflecting increased funding costs, lower loan balances and one fewer day in the quarter. Net interest margin of 2.57% decreased 9 basis points. Noninterest income of $1.9 billion decreased $77 million, or 4%. Fee income of $1.7 billion decreased $74 million, or 4%, primarily due to lower capital markets and advisory activity and a seasonal decline in card and cash management fees. Other noninterest income of $135 million decreased $3 million. Noninterest expense of $3.3 billion decreased $740 million, or 18%, and included non-core noninterest expenses of $130 million in the first quarter and $665 million in the fourth quarter. Core noninterest expense of $3.2 billion decreased $205 million, or 6%, driven by lower or stable expenses across all categories, reflecting a continued focus on expense management. Provision for credit losses was $155 million in the first quarter, reflecting portfolio activity and improved macroeconomic factors. The fourth quarter of 2023 included a provision for credit losses of $232 million. The effective tax rate was 18.8% for the first quarter and 16.3% for the fourth quarter. Balance Sheet Highlights First quarter 2024 compared with fourth quarter 2023 or March 31, 2024 compared with December 31, 2023 Average loans of $320.6 billion decreased $4.0 billion, or 1%. Average commercial loans of $219.2 billion decreased $3.4 billion, or 2%, driven by lower utilization of loan commitments and paydowns outpacing new production. Average consumer loans of $101.4 billion declined less than 1%. Credit quality performance: Delinquencies of $1.3 billion decreased $109 million, or 8%, driven by lower consumer and commercial loan delinquencies. Total nonperforming loans of $2.4 billion increased $200 million, or 9%, primarily due to higher commercial real estate nonperforming loans. Net loan charge-offs of $243 million increased $43 million, primarily due to higher commercial net loan charge-offs. The allowance for credit losses of $5.4 billion was relatively unchanged. The allowance for credit losses to total loans was 1.68% at March 31, 2024, and 1.70% at December 31, 2023. Average deposits of $420.2 billion decreased $3.8 billion, or 1%, reflecting seasonally lower commercial deposits. Deposits at March 31, 2024, of $425.6 billion increased $4.2 billion, or 1%, reflecting higher commercial and consumer deposits balances. Average investment securities of $135.4 billion decreased $2.0 billion, or 1%. Average Federal Reserve Bank balances of $47.8 billion increased $5.6 billion. Federal Reserve Bank balances at March 31, 2024, of $53.2 billion increased $9.9 billion, or 23%, reflecting higher period end deposits. Average borrowed funds of $75.6 billion increased $2.7 billion, or 4%, primarily due to parent company senior debt issuances early in the quarter. PNC maintained a strong capital and liquidity position. On April 3, 2024, the PNC board of directors declared a quarterly cash dividend on common stock of $1.55 per share to be paid on May 6, 2024 to shareholders of record at the close of business April 15, 2024. PNC returned $0.8 billion of capital to shareholders, reflecting more than $0.6 billion of dividends on common shares and more than $0.1 billion of common share repurchases, representing 0.9 million shares. The Basel III common equity Tier 1 capital ratio was an estimated 10.1% at March 31, 2024 and 9.9% at December 31, 2023. PNC's average LCR for the three months ended March 31, 2024, was 107%, exceeding the regulatory minimum requirement throughout the quarter. Earnings Summary In millions, except per share data 1Q24 4Q23 1Q23 Net income $       1,344 $          883 $       1,694 Net income attributable to diluted common shares - as reported $       1,240 $          740 $       1,599 Net income attributable to diluted common shares - as adjusted (non-GAAP) $       1,343 $       1,265 $       1,599 Diluted earnings per common share - as reported $         3.10 $         1.85 $         3.98 Diluted earnings per common share - as adjusted (non-GAAP) $         3.36 $         3.16 $         3.98 Average diluted common shares outstanding 400 401 402 Cash dividends declared per common share $         1.55 $         1.55 $         1.50 See non-GAAP financial measures included in the Consolidated Financial Highlights accompanying this news release First quarter 2024 net income of $1.3 billion, or $3.10 per diluted common share, included $103 million of post-tax expenses pertaining to the increased FDIC special assessment. Excluding the impact of this item, adjusted diluted earnings per common share was $3.36. 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 1Q24 vs 1Q24 vs In millions 1Q24 4Q23 1Q23 4Q23 1Q23 Net interest income $         3,264 $         3,403 $         3,585 (4) % (9) % Noninterest income 1,881 1,958 2,018 (4) % (7) % Total revenue $         5,145 $         5,361 $         5,603 (4) % (8) % Total revenue for the first quarter of 2024 decreased $216 million from the fourth quarter of 2023 and $458 million compared with the first quarter of 2023. In both comparisons, the decline was due to lower net interest income and noninterest income. Net interest income of $3.3 billion decreased $139 million compared to the fourth quarter of 2023, reflecting increased funding costs, lower loan balances and one fewer day in the quarter. Net interest margin was 2.57% in the first quarter of 2024, decreasing 9 basis points in comparison with the fourth quarter of 2023, primarily as a result of higher funding costs. Compared to the first quarter of 2023, net interest income decreased $321 million and net interest margin declined 27 basis points, as the benefit of higher interest-earning asset yields was more than offset by increased funding costs. Noninterest Income Change Change 1Q24 vs 1Q24 vs In millions 1Q24 4Q23 1Q23 4Q23 1Q23 Asset management and brokerage $          364 $          360 $          356 1 % 2 % Capital markets and advisory 259 309 262 (16) % (1) % Card and cash management 671 688 659 (2) % 2 % Lending and deposit services 305 314 306 (3) % — Residential and commercial mortgage 147 149 177 (1) % (17) % Fee income 1,746 1,820 1,760 (4) % (1) % Other 135 138 258 (2) % (48) % Total noninterest income $      1,881 $      1,958 $      2,018 (4) % (7) % Noninterest income for the first quarter of 2024 decreased $77 million compared with the fourth quarter of 2023. Asset management and brokerage revenue increased $4 million and included the impact of favorable equity markets. Capital markets and advisory revenue declined $50 million, driven by lower merger and acquisition advisory activity, partially offset by higher underwriting fees. Card and cash management fees decreased $17 million as seasonally lower consumer transaction volumes were partially offset by higher treasury management fees. Lending and deposit services declined $9 million reflecting the reduction of certain checking product fees. Residential and commercial mortgage revenue decreased $2 million reflecting lower residential mortgage activity. Other noninterest income decreased $3 million, and included lower gains on sales. The first quarter also included negative Visa Class B derivative fair value adjustments of $7 million. Visa Class B derivative fair value adjustments were negative $100 million in the fourth quarter. Noninterest income for the first quarter of 2024, decreased $137 million from the first quarter of 2023. Fee income declined $14 million, as growth in card and cash management and asset management and brokerage fees were more than offset by lower residential and commercial mortgage revenue. Other noninterest income decreased $123 million primarily driven by a decline in private equity revenue. The first quarter of 2023 also included negative Visa Class B derivative fair value adjustments of $45 million.    CONSOLIDATED EXPENSE REVIEW Noninterest Expense Change Change 1Q24 vs 1Q24 vs In millions 1Q24 4Q23 1Q23 4Q23 1Q23 Personnel $       1,794 $       1,983 $       1,826 (10) % (2) % Occupancy 244 243 251 — (3) % Equipment 341 365 350 (7) % (3) % Marketing 64 74 74 (14) % (14) % Other 891 1,409 820 (37) % 9 % Total noninterest expense $       3,334 $       4,074 $       3,321 (18) % — Non-core noninterest expense adjustments 130 665 — Core noninterest expense (non-GAAP) $       3,204 $       3,409 $       3,321 (6) % (4) % See non-GAAP financial measures included in the Consolidated Financial Highlights accompanying this news release Noninterest expense for the first quarter of 2024 decreased $740 million in comparison to the fourth quarter of 2023. The first quarter of 2024 included non-core noninterest expenses of $130 million related to the increased FDIC special assessment and the fourth quarter of 2023 included $515 million pertaining to the FDIC special assessment as well as $150 million of workforce reduction charges. Excluding the impact of these items, core noninterest expense was $3.2 billion for the first quarter of 2024, decreasing $205 million, or 6%, from the fourth quarter of 2023 driven by lower or stable expenses across all categories, reflecting a continued focus on expense management.  Noninterest expense of $3.3 billion for the first quarter of 2024, which included a $130 million FDIC special assessment, was stable compared with the first quarter of 2023. Excluding the impact of this item, core noninterest expense was $3.2 billion for the first quarter of 2024, decreasing $117 million, or 4%, from the first quarter of 2023. The effective tax rate was 18.8% for the first quarter of 2024, 16.3% for the fourth quarter of 2023 and 17.2% for the first quarter of 2023. CONSOLIDATED BALANCE SHEET REVIEW Average total assets were $562.8 billion in the first quarter of 2024, relatively stable in comparison to both the fourth quarter of 2023 and the first quarter of 2023. Average Loans Change Change 1Q24 vs 1Q24 vs In billions 1Q24 4Q23 1Q23 4Q23 1Q23 Commercial $                  219.2 $                  222.6 $                  224.6 (2) % (2) % Consumer 101.4 102.0 100.9 (1) % — Total $                  320.6 $                  324.6 $                  325.5 (1) % (2) % Average loans for the first quarter of 2024 decreased $4.0 billion compared to the fourth quarter of 2023. Average commercial loans decreased $3.4 billion driven by lower utilization of loan commitments and paydowns outpacing new production. Average consumer loans declined $0.6 billion compared to the fourth quarter of 2023, primarily driven by lower credit card and home equity balances. Average loans for the first quarter of 2024 decreased $4.9 billion in comparison to the first quarter of 2023. Average commercial loans decreased $5.3 billion compared to the first quarter of 2023, driven by lower utilization of loan commitments. Average consumer loans were relatively stable. Average Investment Securities Change Change 1Q24 vs 1Q24 vs In billions 1Q24 4Q23 1Q23 4Q23 1Q23 Available for sale $                    46.0 $                       46.1 $                    48.2 — (5) % Held to maturity 89.4 91.3 95.2 (2) % (6) % Total $                  135.4 $                     137.4 $                  143.4 (1) % (6) % Average investment securities of $135.4 billion in the first quarter of 2024 declined $2.0 billion and $8.0 billion from the fourth quarter of 2023 and the first quarter of 2023, respectively. In both comparisons, limited purchase activity was more than offset by portfolio paydowns and maturities. The duration of the investment securities portfolio was 4.0 years at March 31, 2024, 4.1 years at December 31, 2023 and 4.4 years at March 31, 2023. Net unrealized losses on available for sale securities were $4.0 billion at March 31, 2024 increasing from $3.6 billion at December 31, 2023 and $3.8 billion at March 31, 2023. In both comparisons, the increase primarily reflected the impact of higher interest rates.   Average Federal Reserve Bank balances for the first quarter of 2024 were $47.8 billion, increasing $5.6 billion from the fourth quarter of 2023 and $14.3 billion from the first quarter of 2023. In both comparisons, the increase reflected lower loans and securities balances as well as higher average borrowed funds.  Federal Reserve Bank balances at March 31, 2024 were $53.2 billion, increasing $9.9 billion from December 31, 2023. Average Deposits Change Change 1Q24 vs 1Q24 vs In billions 1Q24 4Q23 1Q23 4Q23 1Q23 Commercial $                  202.5 $                  207.0 $                  210.0 (2) % (4) % Consumer 217.6 216.9 226.2 —