PNC Financial Services Group, Inc. (the) · NYSE:PNC
PNC Financial Services Group, Inc. (the) — Lehman Brothers Tenth Annual Financial Services Conference (May 2007)
39 slides from PNC Financial Services Group, Inc. (the)'s conference presentation, May 16, 2007
Slide 1: The PNC Financial Services Group, Lehman Brothers Tenth Annual Financial Services Conference
The PNC Financial Services Group, Inc. Lehman Brothers Tenth Annual Financial Services Conference May 16, 2007 Exhibit 99.1
Slide 2: Cautionary Statement Regarding Forward-Looking Information and Adjusted Information
Cautionary Statement Regarding Forward-Looking Information and Adjusted Information This presentation contains forward-looking statements regarding our outlook or expectations relating to PNC’s future business, operations, financial condition, financial performance and asset quality. Forward-looking
Slide 3: PNC – A Diversified Financial Services Company Delivering Solid Growth
PNC – A Diversified Financial Services Company Delivering Solid Growth Revenue * (taxable - equivalent) Year End Assets Earnings $0 $1 $2 $3 $4 $5 $6 $7 2004 2005 2006 $0 $20 $40 $60 $80 $100 $120 2004 2005 2006 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 $1.6 2004 2005 2006 $ billions $ billions $ bill
Slide 4: 1Q07 Financial Highlights
1Q07 Financial Highlights Strong Execution Drives Outstanding First Quarter Results Assets $123 billion Total revenue $1.6 billion Net income $459 million Noninterest income to total revenue 61% Net interest margin 2.95% Nonperforming loans to total loans .28% Tangible Common Equity 5.8% Reported ea
Slide 5: Business Segments At A Glance
Business Segments At A Glance A Diversified Business Mix Winning in the Payments Space A Premier Middle-market Franchise World Class Asset Manager A Leading Global Servicing Platform Retail Banking Corporate & Institutional Banking BlackRock PFPC PNC Bank Branches PNC Employees / Offices Outside of
Slide 6: A More Valuable Revenue Mix
A More Valuable Revenue Mix Noninterest Income 61% Deposit Net Interest Income* 25% Loan Net Interest Income* 14% Contribution to Total Revenue – For the Three Months Ended March 31, 2007 *Deposit net interest income and loan net interest income are reconciled to reported net interest income in the
Slide 7: Strategies to Create Quality Growth
Strategies to Create Quality Growth Expanding fee based businesses Gathering low-cost deposits Using credit selectively Creating positive operating leverage Maintaining moderate risk profile
Slide 8: Fee-Based Businesses Differentiate PNC
Fee-Based Businesses Differentiate PNC PFPC & BLK Noninterest Income to Total Revenue 0% 10% 20% 30% 40% 50% 60% 70% PNC USB KEY WFC FITB WB STI BBT RF NCC CMA Source: SNL DataSource, PNC as reported For the three months ended March 31, 2007
Slide 9: Diverse Revenue Streams
Diverse Revenue Streams Deposit Net Interest Income* Loan Net Interest Income* 10% 25% 14% Asset Management 10% Consumer Services, Brokerage and Deposit Charges 13% Fund Servicing 14% Corporate Services 14% Equity Management, Trading and Other Contribution to Total Revenue – For the Three Months End
Slide 10: Retail Banking – Leveraging the Payments Business to Drive Fee Revenue Growth
Retail Banking Revenue Contribution* Retail Banking – Leveraging the Payments Business to Drive Fee Revenue Growth Leveraging the Payments Business Noninterest Income 46% Loan Net Interest Income 16% Deposit Net Interest Income 38% For the three months ended March 31, 2007 Growth is for 1Q07 vs. 1Q0
Slide 11: One of the Largest U.S. Wealth Management Firms
We are One of the Largest U.S. Wealth Management Firms Serving the Full Spectrum of Wealth Clients Mass Affluent Wealthy Low High Ultra- Affluent Mass Market PNC is one of the top ten largest U.S. bank wealth management firms with approximately $76 billion of assets under management Based on data fr
Slide 12: Expanding Franchise into Fast Growing, Wealthy Markets
Expanding Franchise into Fast Growing, Wealthy Markets PNC reflects 103 county footprint including the Mercantile 38 county footprint and the Washington, DC MSA. Source: SNL DataSource Median Household Median Household Income Income $60,694 $69,363 $51,546 PNC MRBK U.S. Washington, DC $78,402 Projec
Slide 13: C&I Banking – Relationship Strategy Driving Fee Income Growth
C&I Banking – Relationship Strategy Driving Fee Income Growth A Leader in Cross-sell Penetration of Middle Market Customers in Footprint C&I Banking Revenue Contribution* Noninterest Income 24% Loan Net Interest Income 51% Deposit Net Interest Income 25% PNC has highest percentage of lead bank relat
Slide 14: PFPC – Benefiting from Investments in High Growth Products
Emerging Product Growth Focus Driving Fee Revenue Growth PFPC – Benefiting from Investments in High Growth Products 22% 29% 78% 71% Core Product Fee Revenue Emerging Product Fee Revenue 1Q04 1Q07 Managed Accounts Alternative Investments Offshore Subaccounting 32% 13% 8% 5% Combined 3-Year CAGR 13% *
Slide 15: Strategies to Create Quality Growth
Strategies to Create Quality Growth Expanding fee based businesses Gathering low-cost deposits Using credit selectively Creating positive operating leverage Maintaining moderate risk profile
Slide 16: Executing on Our Strategy to Gather Low Cost Deposits
Executing on Our Strategy to Gather Low Cost Deposits PNC Has Been Focused on Growing Noninterest-Bearing Deposits… Providing a Funding Advantage Interest-bearing deposits 15% 15% Noninterest-bearing deposits 13% 4% Total deposits 14% 12% CMA 23 % WFC PNC KEY RF FITB USB NCC STI BBT WB Average Nonin
Slide 17: Multiple Sources Driving Noninterest-Bearing Deposit Growth
Multiple Sources Driving Noninterest-Bearing Deposit Growth 29% 27% 25% 19% Consumer Corporate Banking, Treasury Management and Other Midland $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 1Q06 1Q07 PNC Excluding Mercantile Mercantile impact Average Noninterest-Bearing Deposits Contribution to Average Nonintere
Slide 18: PNC's Deposit Strategy Results in a Lower Cost Deposit Base
PNC’s Deposit Strategy Results in a Lower Cost Deposit Base Interest Cost of Total Average Deposits 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% USB WFC PNC CMA RF KEY FITB WB STI NCC BBT Source: SNL DataSource, PNC as reported March 31, 2007
Slide 19: Strategies to Create Quality Growth
Strategies to Create Quality Growth Expanding fee based businesses Gathering low-cost deposits Using credit selectively Creating positive operating leverage Maintaining moderate risk profile
Slide 20: Selectively Growing More Valuable Risk-Adjusted Loans
$13.8 $13.9 $4.6 $5.2 Selected Average Loans Outstanding Excluding Mercantile Selectively Growing More Valuable Risk-Adjusted Loans Total loans increased 1%* $8.4 $8.9 $4.3 $4.5 1Q06 1Q07 $ billions Home Equity Loans Small Business Loans 1Q06 1Q07 Asset Based Lending Loans Corporate Loans Retail Ban
Slide 21: Growing Higher Quality Revenue Streams
8% 13% Growing Higher Quality Revenue Streams Noninterest Income $831 Million 60% 1Q06 Revenue Contribution As Adjusted * Deposit NII $326 Million 23% Loan NII $234 Million 17% Noninterest Income $941 Million 60% Deposit NII $392 Million 25% Loan NII $237 Million 15% Growth 1Q07 vs 1Q06 As Adjusted
Slide 22: Strategies to Create Quality Growth
Strategies to Create Quality Growth Expanding fee based businesses Gathering low-cost deposits Using credit selectively Creating positive operating leverage Maintaining moderate risk profile
Slide 23: Creating Positive Operating Leverage
Creating Positive Operating Leverage Growing Revenues Faster Than Expenses Trend Continues 1Q07 vs 1Q06* $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 2004 2005 2006 Revenue 9% $ billions Compound Annual Growth Rate (2004 – 2006) Adjusted Revenue (Taxable-equivalent) - $5.6 billion, $6.4 billion, $8.6 bil
Slide 24: Strategies to Create Quality Growth
Strategies to Create Quality Growth Expanding fee based businesses Gathering low-cost deposits Using credit selectively Creating positive operating leverage Maintaining moderate risk profile
Slide 25: Disciplined Approach Leads to Strong Credit Risk Profile
Disciplined Approach Leads to Strong Credit Risk Profile Strong Asset Quality Nonperforming loans to loans 0.28% 0.44% Nonperforming assets to total assets 0.17% 0.39% Net Charge-offs to average loans for the 1Q07 period 0.27% 0.36% Allowance for loan and lease losses to loans 1.10% 1.11% Allowance
Slide 26: Well Positioned Based on Lehman Research
Well Positioned Based on Lehman Research Loans to deposits Fee income to revenue Demand deposits as % of total deposits One-year Gap rank Linked quarter change in deposits to average earning assets MBS & mortgage loans as % of average earning assets EPS impact of gradual +100bps parallel shift Sourc
Slide 27: Creating Capital Flexibility
Creating Capital Flexibility A Disciplined and Comprehensive Approach to Capital Management Capital Flexibility Investing in and growing our business Making disciplined acquisitions Returning capital to shareholders Growing earnings Exiting under- performing assets Maintaining a moderate risk profil
Slide 28: Summary: Well Positioned to Create Value
Summary Well Positioned to Create Value A diversified financial services company Delivering consistent, solid growth Building a demonstrated ability to execute
Slide 29: Cautionary Statement Regarding Forward-Looking Information
Cautionary Statement Regarding Forward-Looking Information We make statements in this presentation, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses and/or other matters regarding or affecting PNC that are forward-looking stat
Slide 30: Cautionary Statement Regarding Forward-Looking Information (continued)
Cautionary Statement Regarding Forward-Looking Information (continued) • Legal and regulatory developments could have an impact on our ability to operate our businesses or our financial condition or results of operations or our competitive position or reputation. Reputational impacts, in turn, could
Slide 31: Non-GAAP to GAAP Reconcilement – Income Statement Summary, First Quarter 2007
Non-GAAP to GAAP Reconcilement Appendix Income Statement Summary – First Quarter 2007 PNC As Reported Taxable Taxable As Adjusted, TE Three months ended March 31, 2007 GAAP Equivalent Equivalent Adjusted, Basis, Excluding ($ millions) Basis Adjustment Basis Adjustments TE Basis Mercantile Mercantile
Slide 32: Non-GAAP to GAAP Reconcilement – Income Statement Summary, First Quarter 2006
Non-GAAP to GAAP Reconcilement Appendix Income Statement Summary – First Quarter 2006 PNC As Reported Taxable Taxable PNC As Adjusted, TE Three months ended March 31, 2006 GAAP Equivalent Equivalent Adjusted, Basis, Excluding ($ millions) Basis Adjustment Basis Adjustments TE Basis Mercantile Mercan
Slide 33: Non-GAAP to GAAP Reconcilement – First Quarter '06 vs First Quarter '07
Non-GAAP to GAAP Reconcilement Appendix Income Statement Summary – First Quarter ’06 vs First Quarter ‘07 ($ millions) 1Q06 As Adjusted, TE Basis 1Q07 As Adjusted, TE Basis Growth Q106 vs Q107 1Q07 As Adjusted, TE Basis Excluding Mercantile Growth Q106 vs Q107 1Q06 Unadjusted 1Q07 Unadjusted Growth
Slide 34: Non-GAAP to GAAP Reconcilement – Income Statement Summary, 2004 to 2006
Non-GAAP to GAAP Reconcilement Appendix Income Statement Summary – 2004 to 2006 BlackRock For the year ended December 31, 2006 PNC Deconsolidation and BlackRock PNC In millions As Reported Adjustments (a) Other Adjustments Equity Method As Adjusted Net interest income $2,245 $(10) $2,235 Provision f
Slide 35: Non-GAAP to GAAP Reconcilement – 2004 to 2006 (continued)
Non-GAAP to GAAP Reconcilement Appendix Income Statement Summary – 2004 to 2006 (continued) For the year ended December 31, 2004 PFPC Distribution/ BlackRock PNC Out-Of-Pocket Deconsolidation and BlackRock PNC In millions As Reported Revenue and Expense Other Adjustments Equity Method As Adjusted Ne
Slide 36: Non-GAAP to GAAP Reconcilement – Business Segment Earnings Reconciliation
Non-GAAP to GAAP Reconcilement Appendix Business Segment Earnings Reconciliation Quarter Ending Earnings (Loss) $ millions 2007 2006 % of Segments Retail Banking $201 $190 48% Corporate and Institutional Banking 32% BlackRock (a) (b) 13% PFPC (c) 7% Total business segment earnings Other (a) (14) Tot
Slide 37: Non-GAAP to GAAP Reconcilement – Business Segment Revenue Reconciliation
Non-GAAP to GAAP Reconcilement Appendix Business Segment Revenue Reconciliation Quarter Ending March 31, 2007 Earnings (Loss) $ millions Retail Banking Corporate & Institutional Banking BlackRock (a) (b) PFPC (c) Other Intercompany Eliminations Consolidated Net interest income $451 $180 $0 ($5) ($3)
Slide 38: Non-GAAP to GAAP Reconcilement – Balance Sheet Summary Reconciliation
Non-GAAP to GAAP Reconcilement Appendix Balance Sheet Summary Reconciliation Average Balance Sheet for the three months ended: March 31, 2007 March 31, 2006 $ millions PNC Excluding Mercantile Mercantile (a) PNC As Reported PNC % Change Excluding Mercantile % Change Including Mercantile Average loan
Slide 39: Peer Group of Super-Regional Banks
Peer Group of Super-Regional Banks Appendix The PNC Financial Services Group, Inc. PNC BB&T Corporation BBT Comerica CMA Fifth Third Bancorp FITB KeyCorp KEY National City Corporation NCC Regions Financial RF SunTrust Banks, Inc. STI U.S. Bancorp USB Wachovia Corporation WB Wells Fargo & Company WFC