Fourth quarter 2012 net income was $719 million, or $1.24 per diluted common share, compared with $925 million, or $1.64 per diluted common share, for the third quarter of 2012 and $493 million, or $.85 per diluted common share, for the fourth quarter of 2011. Fourth quarter 2012 earnings were reduced by $.47 per diluted common share for the net impact of previously disclosed actions taken in the fourth quarter associated with residential mortgage banking activities and other items. Comparable items which reduced earnings in the third quarter of 2012 and the fourth quarter of 2011 are provided in the Selected Income Statement Information section of this news release.
"PNC expanded its businesses significantly in 2012," said James E. Rohr, chairman and chief executive officer. "Our balance sheet strength along with our committed employees allowed us to grow customers, loans and deposits across our franchise and expand into Southeastern markets. While we are pleased with the progress we have made, our financial results do not yet reflect the full potential from our investments. Our commitment to revenue growth, expense reduction and efficient capital management in 2013 should position PNC to deliver even greater shareholder value."
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Income Statement Highlights
PNC’s businesses and markets drove growth in loans, deposits and customers and resulted in strong revenue in the fourth quarter.
PNC was successful in 2012 in growing and deepening customer relationships across its businesses and geographies through new client acquisition and cross sales.
Retail Banking net checking relationships grew 714,000 during 2012, including 460,000 from the RBC Bank (USA) acquisition.
Corporate & Institutional Banking continued to focus on building client relationships and adding new clients with attractive risk-return profiles. For the full year, 1,061 new corporate banking primary clients were added.
Asset management new primary client acquisitions were 37 percent higher in 2012 compared with 2011, fueled by an increase in referrals from other PNC businesses.
Residential Mortgage Banking loan origination volume in 2012 increased to $15.2 billion reflecting growth of 33 percent over 2011.
Net interest income of $2.4 billion for the fourth quarter of 2012 increased modestly compared with the third quarter.
Noninterest income was $1.6 billion for the fourth quarter of 2012 and $1.7 billion for the third quarter. Fourth quarter noninterest income was reduced by a $254 million provision for residential mortgage repurchase obligations. Both quarters included similar gains on sales of Visa shares. Excluding the impact of these items in both quarters, noninterest income increased 11 percent over the third quarter.
Provision for credit losses was $318 million for the fourth quarter of 2012 compared with $228 million for the third quarter. The increase primarily reflected a larger loan portfolio and reduced reserve release in commercial lending.
Noninterest expense was $2.8 billion for the fourth quarter and $2.7 billion for the third quarter. Fourth quarter noninterest expense included a noncash charge of $45 million for residential mortgage banking goodwill impairment and higher expenses for residential mortgage foreclosure-related matters.
Balance Sheet Highlights
Loans grew $4.0 billion, or 2 percent, during the fourth quarter to $186 billion at December 31, 2012 compared with September 30, 2012.
Total commercial lending increased $3.7 billion, or 4 percent, over the third quarter primarily in asset-based lending, healthcare, public finance and real estate.
Total consumer lending increased $.3 billion primarily in automobile loans.
Overall credit quality improved during the fourth quarter of 2012 compared with the third quarter.
Nonperforming assets of $3.8 billion at December 31, 2012 declined $.2 billion, or 6 percent.
Net charge-offs of $310 million decreased $21 million, or 6 percent.
Accruing loans past due decreased 4 percent.
Total deposits increased to $213 billion at December 31, 2012 compared with $206 billion at September 30, 2012.
Transaction deposits grew $8.3 billion, or 5 percent, during the fourth quarter to $177 billion, or 83 percent of deposits, at December 31, 2012. Seasonal growth drove the increase.
Retail certificates of deposit declined $1.2 billion due to runoff of maturing accounts.
PNC’s balance sheet remained core funded with a loans to deposits ratio of 87 percent at December 31, 2012 and retained a strong bank holding company liquidity position.
PNC redeemed $.5 billion of 12 percent hybrid capital securities during the fourth quarter of 2012, effectively lowering funding costs.
PNC had a strong capital position at December 31, 2012.
The Tier 1 common capital ratio increased to an estimated 9.6 percent at year end from 9.5 percent at September 30, 2012.
The estimated proforma Basel III Tier 1 common capital ratio was 7.3 percent at December 31, 2012 without benefit of phase-ins.
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