PNC Financial Services Group, Inc. (the) · NYSE:PNC
PNC Financial Services Group, Inc. (the) — Merrill Lynch Banking & Financial Services Investor Conference 2006
35 slides from PNC Financial Services Group, Inc. (the)'s conference presentation, Nov 16, 2006
Slide 1: The PNC Financial Services Group, Inc. Merrill Lynch Banking & Financial Services Investor Conference
EXHIBIT 99.1 The PNC Financial Services Group, Inc. Merrill Lynch Banking & Financial Services Investor Conference November 16, 2006
Slide 2: Cautionary Statement Regarding Forward-Looking Information
Cautionary Statement Regarding Forward-Looking 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 statements are necessari
Slide 3: Our Journey to Build a Great Company
Our Journey to Build a Great Company Propelled PNC to Win and Grow Improved employee Deepened Launched Announced and customer customer continuous plans to acquire satisfaction relationships improvement Mercantile Built Developed Disciplined Introduced Diversified strong capital Banking business mix
Slide 4: PNC’s High Return Business Mix
PNC’s High Return Business Mix Business Results Nine – Months Ended September 30, 2006 $ millions Return on Average Business Earnings Capital(1) Retail Banking $581 26% Corporate & Total business Institutional Banking $334 23% segment earnings grew 10.5% compared to the nine months BlackRock(2) $209
Slide 5: Fee-Based Businesses Differentiate PNC
Fee-Based Businesses Differentiate PNC Noninterest Income to Total Revenue Quarter ended 9/30/06 90% As Reported 80% 70% Adjusted * 60% 50% 40% 30% 20% 10% 0% PNC USB WB FITB NCC WFC STI KEY BBT RF Source: SNL DataSource, PNC as reported * Adjusted ratio excludes pretax gain on BlackRock transaction
Slide 6: Disciplined Approach Leads to Strong Credit Risk Profile
Disciplined Approach Leads to Strong Credit Risk Profile Lending Profile (As of September 30, 2006) Strong Asset Quality Commercial Loans September 30, 2006 PNC Peer Diverse Consolidated Group - No large industry concentration Nonperforming loans to loans 0.34% 0.40% Limited large non-investment Net
Slide 7: Our Approach to Interest Rate Risk: Preserve and Optimize Long-Term Value
Our Approach to Interest Rate Risk: Preserve and Optimize Long-Term Value Well Positioned in This Environment Duration 3 Month LIBOR of Equity 10 Year T Note Years At Quarter End 3 6.0% 2 5.0% 1 4.0% 0 3.0% (1) 2.0% (2) 1.0% (3) 0.0% 2004 2005 2006
Slide 8: One PNC Creating Positive Operating Leverage
One PNC Creating Positive Operating Leverage One PNC Accomplishments Change in RevenueExpense vs 2,700 of 3,000 positions 12% eliminated 9% 6% All of the 2,400 ideas 3% implemented or in process 0% Expect to realize $400 million of -3% total annual pretax earnings -6% benefit by mid-2007 -9% -12% 20
Slide 9: We’ve Been Delivering Results
We’ve Been Delivering Results Consolidated Net Income $ millions $1,400 $1,200 $1,200 $1,000 $1,000 $800 $800 $600 $600 $400 $400 $200 $200 $0 $0 2003 2004 2005 2004 2005 2006 Adjusted * Nine Months Ended September 30 * 2006 YTD GAAP net income was $2.2 billion. Adjusted net income excludes the afte
Slide 10: Business Initiatives to Drive Growth
Business Initiatives to Drive Growth Retail Banking – Winning in the payments space C&I Banking – Building a premier middle market franchise Mercantile expansion PFPC – Investing in a global servicing platform BlackRock – Building a world-class asset manager
Slide 11: Creating a Differentiated Brand
Creating a Differentiated Brand Deliver Exceptional Service Demonstrate Ease Build Confidence Ask for the Business
Slide 12: PNC Ranked Highest in Inaugural J.D. Power Small Business Banking Satisfaction Study
PNC Ranked Highest in Inaugural J.D. Power and Associates Small Business Banking Satisfaction Study “Highest in Customer Satisfaction with Small Business Banking” PNC Bank received the highest numerical score in the proprietary J.D. Power and Associates 2006 Small Business Banking Satisfaction Study
Slide 13: Increasing and Deepening Checking Relationships
Increasing and Deepening Checking Relationships Retail Banking …Provides Opportunities to Checking Customer Base Leverage Increased Ownership in Payments Business millions YTD 2.0 9/30/06 Growth(1) Small Business Small Business debit 1.5 card revenue ($ millions) $9.0 +26% Small Business online (2)
Slide 14: Investing in Our Brand to Drive Growth
Investing in Our Brand to Drive Growth Ease. Confidence. Achievement Redesigned and simplified checking product Introduced free ATM’s worldwide Marketing campaign to expand checking product reach beyond branch footprint Launched regional credit card product Investing to enhance the customer experien
Slide 15: Growing Deposits Faster Than Our Peers
Growing Deposits Faster Than Our Peers Deposit Increase Compared to Peers Average Balances 3Q06 vs. 3Q05 PNC Peers Total interest-bearing deposits 9% 9% Total noninterest-bearing deposits 6% (2)% Total deposits 8% 6% Source: SNL DataSource Peers reflects average of super-regional banks identified in
Slide 16: Noninterest-Bearing Deposits Are More Valuable
Noninterest-Bearing Deposits Are More Valuable PNC’s High Percentage of Rising Interest Rates Increase Value of Noninterest-Bearing Funding PNC’s Noninterest-Bearing Deposits Average Noninterest-Bearing Deposits Impact of Noninterest-Bearing Sources to Average Earning Assets – 3Q06 on PNC’s Net Inte
Slide 17: Focused on Winning in the Affluent Segment
Focused on Winning in the Affluent Segment Mass Affluent Customer Defined: High Investable assets from $100,000 to $1,000,000 Ultra- Affluent 674,000 existing PNC households (31%) 66% of Retail Banking Wealth deposit base Management Opportunity Mass Affluent Mass Market Low
Slide 18: Corporate & Institutional Banking: Building a Premier Middle Market Franchise
Corporate & Institutional Banking: Building a Premier Middle Market Franchise What’s Our Competitive Advantage? Focused on middle market Extensive product offering Established national origination and servicing capabilities Corporate & Institutional Banking Location Lock Box Location
Slide 19: Successfully Deepening C&I Banking Relationships
Successfully Deepening C&I Banking Relationships A Leader in Cross-sell Penetration Driving of Strong C&I Banking Middle Market Customers in Footprint Fee Revenue Growth $ billions Noninterest Income PNC has highest percentage of Net Interest Income* lead bank relationships in our footprint – 63%* $
Slide 20: Combination Will Create Mid-Atlantic Powerhouse
Combination Will Create Mid-Atlantic Powerhouse 69% of PNC Proforma Branches Located in the Mid-Atlantic Region New York Combined Proforma Proforma Market Share (1) Pennsylvania Maryland Branches 198 Deposit market share 2nd New Jersey Virginia Branches 57 West Virginia Deposit market share 6th Mary
Slide 21: Mercantile Opportunity
Mercantile Opportunity Increase Mercantile’s online banking penetration and provide enhanced retail consumer offerings to drive additional growth such as home equity and credit card lending Significant opportunity to leverage PNC’s small business capabilities across Mercantile’s banking footprint De
Slide 22: PFPC – Benefiting from Investments in High Growth Products
PFPC – Benefiting from Investments in High Growth Products Servicing Statistics September 30 % Change 2006 vs. 2005 Fund assets serviced ($ billions) Accounting / administration $774 -2% Domestic $695 -4% Offshore $79 +18% Shareholder accounts (in millions) Total 66 +12% Transfer agency 18 -5% Subac
Slide 23: BlackRock and MLIM Create One of the Largest Asset Managers in the World
BlackRock and MLIM Create One of the Largest Asset Managers in the World “New”BlackRock Assets Under Management Diversified product set $ billions $1,200 BlackRock Solutions provides $1,075 differentiation $1,000 Substantially greater global $800 presence $600 Enhanced talent $453 $400 $342 $309 $27
Slide 24: Summary
Summary Diversified business mix delivering high fee revenue contribution Balance sheet characterized by strong asset quality and significant flexibility in current environment Executing on our strategies to create a differentiated brand
Slide 25: 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 26: 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 27: Cautionary Statement Regarding Forward-Looking Information (continued)
Cautionary Statement Regarding Forward-Looking Information (continued) • The integration of Mercantile’s business and operations into PNC, which will include conversion of Mercantile’s different systems and procedures, may take longer than anticipated or be more costly than anticipated or have unant
Slide 28: Additional Information About The PNC/Mercantile Transaction
Additional Information About The PNC/Mercantile Transaction The PNC Financial Services Group, Inc. and Mercantile Bankshares Corporation will be filing a proxy statement/prospectus and other relevant documents concerning the PNC/Mercantile merger transaction with the United States Securities and Exc
Slide 29: Appendix
Appendix
Slide 30: Non-GAAP to GAAP Reconcilement
Non-GAAP to GAAP Reconcilement Appendix (a) Net Income and Selected Ratios
Slide 31: Non-GAAP to GAAP Reconcilement
Non-GAAP to GAAP Reconcilement Appendix Business Earnings and Return on Capital Nine Months Ended September 30 Return on $ millions Earnings Avg Capital * Business segments 2006 2005 Growth 2006 Retail Banking $581 $487 19% 26% Corporate & Institutional Banking 334 372 (10)% 23% BlackRock (a)(b) 209
Slide 32: Non-GAAP to GAAP Reconcilement
Non-GAAP to GAAP Reconcilement Appendix Net Interest Income Nine Months Ended September 30 GAAP Taxable- GAAP Taxable- $ millions Net Interest Equivalent Net Interest Net Interest Equivalent Net Interest Income Adjustment Income TE Income Adjustment Income TE 2005 2005 2005 2006 2006 2006 Business s
Slide 33: Non-GAAP to GAAP Reconcilement
Non-GAAP to GAAP Reconcilement Appendix Consolidated Net Income Nine Months Ended September 30 $ millions CAGR 2006 2005 2004 2006 vs 2004 Net income, GAAP basis $2,219 $970 $890 58% Adjustments: Gain on BlackRock transaction* (1,293) Securities portfolio rebalancing loss* 127 BlackRock/MLIM transac
Slide 34: Non-GAAP to GAAP Reconcilement
Non-GAAP to GAAP Reconcilement Appendix Operating Leverage For the Nine Months Ended September 30 Change Change As 2006 vs 2006 Reported Adjusted Reported 2005 Adjusted* $ millions 2006 Adjustments* 2006 * 2005 Reported vs 2005 GAAP Net interest income $1,679 $1,679 $1,599 Noninterest income 5,358 (
Slide 35: Peer Group of Super-Regional Banks
Peer Group of Super-Regional Banks Appendix Ticker BB&T Corporation BBT Fifth Third Bancorp FITB KeyCorp KEY National City Corporation NCC The PNC Financial Services Group, Inc. PNC Regions Financial RF SunTrust Banks, Inc. STI U.S. Bancorp USB Wachovia Corporation WB Wells Fargo & Company WFC