(The following statement was released by the rating agency)
CHICAGO, July 16 (Fitch) PNC Financial Services Group, Inc.
(PNC) reported a
solid 1.31% return on asset (ROA) during the second quarter of
supported by strong fee income growth and lower credit costs,
offset by higher
expenses and a continued decline in spread income. Reflecting a
economic recovery and a competitive lending environment, PNC
grew loans only
1.4% on a linked-quarter basis, with commercial loan growth
offset by continued
deleveraging in certain consumer asset classes. Fitch still
views the quarter's
results as consistent with PNC's credit profile, with ratings
that remain among
some of the highest in the world.
Reflecting an ongoing trend, spread income declined during the
reflecting lower loan yields and securities balances, and a
certain commercial facility fees as noninterest incomes.
reclassification of these fees, spread income was down 1.6% in
2Q'14. PNC also
reported a sizeable 14 basis points (bps) decline in the net
(NIM) due to lower asset yields and actions taken to improve
liquidity, with 5
bps attributed to the reclassification of these fees.
Excluding the impact of purchase accounting accretion on the
NIM, PNC's core NIM
declined 10 bps a linked-quarter basis to 2.92%, below the
average for the large
regional banks. Although PNC's margin continues to compress and
levels, PNC has good revenue diversity, with noninterest income
of revenues, insulating the company somewhat from a very
Noninterest income increased 6% on a linked-quarter basis mainly
income growth, in part due to the commercial facility fees
change. PNC reported additional gains on the sale of VISA shares
in 2Q'14, with
$54 million in securities gains this quarter, down slightly from
last quarter. Excluding these items, core noninterest income was
up 5% in 2Q'14
on a sequential basis.
PNC reported a 3% increase in noninterest expenses due to
personnel expenses and incentive compensation costs, as well as
marketing costs. PNC expects that expenses may be up low single
digits in 3Q'14
relative to 2Q'14.
Credit quality continues to improve for PNC, and the company
reported very low
net charge-offs (NCOs) of just 29 bps during 2Q'14. Reflecting
improvement in credit quality, provision expense declined 23%
quarter. Quarterly earnings once again benefitted from a loan
release with NCOs exceeding provision expenses, though at only
5% of pre-tax
income, it is not considered to be a driver of quarterly
PNC continued to enhance its liquidity position in anticipation
regulatory requirements, namely the October 2013 Liquidity
Coverage Ratio (LCR)
proposal. PNC continued to maintain higher deposit balances with
Reserve, and higher borrowed funds balances. Borrowed funds have
from a year-ago, with most of the issuance completed at the
bank-level. PNC has
not publicly disclosed its estimate of the LCR.
PNC also reported a further increase in its estimated fully
phased-in Tier 1
common ratio (CET1) under Basel III standardized approach rules,
up 30 bps to an
estimated 10% CET1 ratio at June 30, 2014. The increase was due
to growth in
retained earnings and higher unrealized securities gains,
partially offset by
higher risk-weighted assets and share repurchases.
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Additional information is available at 'www.fitchratings.com'.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS
here. IN ADDITION,
ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE
FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
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
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH