PNC Full Report

$75

$80

$85

$90

$95

$100

$105

17-Mar 17-Jun 17-Sep 17-Dec 17-Mar

One Year Price History (w/ 50-day Moving Average)

PNC S&P 500 50d EMA

Year 2015 2016E 2017E

P/E 13.35 11.64 10.84

PEG 1.89 1.55 1.44

P/Sales 3.01 2.78 2.67

P/FCF 8.91 8.09 7.53

P/Book 1.60 1.00 0.94

March 21, 2016

PNC FINANCIAL SERVICES GROUP — (PNC)

PNC: More Gains than GNC

OUSEMG EQUITYRESEARCH 1

Stock Rating: Buy

Price Target

Current Price

$96.52 (12.0%)

$86.16

Analysts Travis Blair

Head Analyst

Jacob Moore Executive Board

Abby Roberg Analyst

Mozika Maloba Analyst

Robert Meeks Analyst

Company Information

Sector Financial

Industry Regional Banks

Market Cap $43.3B

Sales $15.0B

Beta 1.04

Price-Based Multiples

Investment Thesis

The Pittsburgh National Corporation Financial Services Group operates in three

major reported segments; Retail Banking, Corporate & Institutional Banking, and

Asset Management Group throughout the Mid-Atlantic, Southeast, and Midwest

regions of the United States.

Thesis Highlights

Overstated Downward Trend in Banking Industry

Since the start of 2016, banks have been the worst performing industry group vs. the

S&P 500. The recent performance of the industry has been driven by uncertain global

conditions, oil prices, and dovish Federal Funds Rate guidance. Certain institutions

may suffer significant losses as a result of these drivers; however, the credit risk to

regional banks (specifically PNC) has been overstated by the market.

Stability in Loan Book and Diversified Revenue Stream

PNC is driving fee income growth in a variety of its business segments. Asset

management, consumer services, and corporate services fee revenue have all been

experiencing significant growth. This has pushed the company to have one of the

highest proportions of non-interest revenue in its peer group. PNC has the second

highest annual deposit growth among its competitors, at 7.8 percent. Through its

Continuous Improvement Program (CIP), the company is reducing expense growth,

and saw an expense reduction in 2015.

Organic Growth Driven by Southeast Region

PNC’s acquisition of The Royal Bank of Canada, which had 424 branches in North

Carolina, Florida, Alabama, Georgia, Virginia and South Carolina, allowed it to create

a presence in the Southeast (SE) region of the US. Since then, PNC has seen growth

within this region and describes the SE region as its “single best opportunity for

organic growth overtime.” PNC is building on client relationships and create initiatives

such as the cross-selling of loans. PNC plans to see above average growth in the SE

for 2016 fueled by rapid population growth and increases in demand within the

region.

Thesis Risk

▪ “Lower for Longer” Still a Threat

PNC Management believes it can leverage ~$10bn of its $35bn in liquidity into higher

quality and higher yielding securities to improve NIM without compromising LCR

(currently >100%). While this strategy is noteworthy, the psychology behind regional

banks is the impact interest rates can have. Relevant Information

NIM 2.70%

Efficiency Ratio 61.42

LCR >100%

Tier 1 Capital Ratio 10.6%

Short Interest 1.13%

Dividend Yield 2.36%

Debt Rating A3

Next Earnings Date 4/14/2016


MARCH 21, 2016 | PITTSBURGH NATIONAL CORPORATION FINANCIAL SERVICES GROUP (PNC)

Overstated Downward Trend in Banking Industry

Fair Value Problematic

Legislative measures such as the Dodd-Frank Act have led to historically high

capitalization levels in the banking industry. Higher capitalization levels limit even

healthy financial institutions from generating ROE. This along with artificially low

interest rates have made the process of determining fair valuation within the banking

industry much more difficult. As a result, shares of banking institutions have been

more volatile and are more susceptible to overreact in the face of macroeconomic

events.

Since the beginning of 2016, banks have been the worst performing industry

measured against the S&P 500. The recent performance has been driven mainly by

uncertain global conditions, oil prices, and dovish Federal Funds rate guidance.

Certain institutions are suffering heavy losses as a result of these drivers; however,

the increased credit risk to regional banks (specifically PNC) has been overstated by

the market.

Energy Credit Risk

Despite trading in line with industry indices,

PNC’s loan exposure to the energy sector is

much lower than its peers. Within PNC’s loan

exposure to energy companies $200mn or 17

percent of total energy exposure was not asset

backed or investment grade. In late December

2015 PNC increased its Allowance for Loan Lease

Losses by $300mn, largely to account for further

expected deterioration of oil prices. Although oil

has fluctuated greatly since the start of 2016,

WTI Crude is once again trading around the

same level it did in late 2015. Oil at $40 per

barrel poses far less credit risk to banks than at

its recent trough of $26.21 seen on February 11,

2016.

Thesis Point 1:

▪ RBC Acquisition Highlights

▪ Energy Credit Risk

▪ Attractive Valuation

PNC 1.0%

BB&T 1.0%

Fifth Third Bancorp 2.0%

KeyCorp 2.0%

Capital One 4.0%

Bank of America 4.0%

Regions Financial 4.0%

SunTrust Banks 4.0%

JP Morgan Chase 5.0%

Average 3.0%

Energy Exposure as a % of

Total Loans



P/TBVPS

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16

PNC P/TBVPS

PNC 3-Year Average 5-Year Average 10-Year Average 15-Year Average

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

PNC P/TBVPS

PNC 3-Year Average 5-Year Average

On every historical basis—3, 5, 10, and 15-year average P/TBVPS, PNC trades at a discount. However, the operating

environment has changed drastically as a result of significant regulation. With this in mind, we believe the 3 year-

average is a better representation of PNC’s value. The chart in the upper right corner displays PNC’s P/TBVPS over the

past 9 months. Relative to the 3-year average, PNC currently trades at a 9 percent discount and 20 percent lower than

its P/TBVPS to start the year.

-9.0%

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00


PNC vs. Industry P/TBVPS

PNC Industry 3-Year Average 5-Year Average 10-Year Average 15-Year Average

0

10

20

30

40

50

60

70


TBVPS

PNC FITB BBT MTB HBAN KEY

0

10

20

30

40

50

60

70


PNC TBVPS vs. Industry TBVPS

PNC Industry

-5.2%

Fundamentals have not changed recently. For PNC, TBVPS has significantly improved overtime vs. its peers.

1.25

1.36

1.47

1.58

1.69

1.80

PNC vs. Industry P/TBVPS

PNC Industry 3-Year Industry Average 5-Year Industry Average 3-Year Average 5-Year Average

-19.8%

Current 3-Year 5-Year 10-Year 15-Year

1.85x 2.11x 2.04x 2.41x 2.74x

Current Premium/Discount to Historical P/TBVPS -12.4% -9.1% -23.2% -32.4%

Industry Average 1.39x 1.64x 1.56x 1.94x 2.44x

Premium/Discount to Industry 33.1% 28.6% 30.4% 24.1% 12.2%

BBT


1.21x 1.55x 1.46x 1.70x 2.64x



Premium/Discount to Industry -20.3% -11.6% -13.2% -18.2% 7.2%

FITB


1.44x 1.57x 1.43x 1.51x 1.75x

Current Premium/Discount to Historical P/TBVPS -8.3% 0.4% -4.4% -17.9%


Premium/Discount to Industry 3.6% -3.9% -6.6% -23.4% -29.1%

HBAN


1.06x 1.29x 1.13x 1.26x 1.55x



Premium/Discount to Industry -31.5% -28.5% -35.2% -41.9% -42.2%

KEY


1.80x 2.22x 2.27x 2.74x 3.29x



Premium/Discount to Industry 28.6% 36.9% 49.6% 46.0% 41.1%

MTB


1.44x 1.58x 1.52x 2.50x 2.97x



Premium/Discount to Industry -2.2% -9.6% -8.7% 29.7% 24.3%

PNC

Considering the lack of correlation

between macroeconomic factors and

deterioration of fundamentals, we feel

PNC’s current discount relative to its

historical 3-year average is unwarranted

especially considering the consistency

displayed in the above two charts.



Stability in Loan Book and Diversified Revenue Stream

Loan Book & Balance Sheet Strength

PNC has a conservatively positioned balance sheet and a strong book of loans. Its

investment portfolio is well-diversified. Over the past few years, PNC has made

significant changes to the composition of its portfolio, significantly increasing the

amount of US Treasury and Agency securities, and ensuring it is well positioned to

meet new, tougher regulatory requirements. PNC has experienced solid returns,

despite defensively positioning for rising rates. Cash represents about 10 percent of

assets, giving PNC one of the highest cash balances amongst its peers. Management

has expressed a continued plan to move excess cash into higher yielding securities.

PNC has been working to drive commercial lending growth. Commercial and

commercial real estate loans now account for about 60 percent of the loan book. The

bank has significant capital and liquidity to promote further loan growth. PNC has a

strong track-record of only entering beneficial loan agreements. It has some of the

lowest net-charge offs to average loans and non-performing loan rates within its

peers.

Thesis Point 2:

▪ Conservative Balance

Sheet

▪ Book of Loans

▪ PNC vs. Peers

▪ Market Share

2011 2012 2013 2014 2015

BAC 10.6% 10.8% 10.9% 9.2% 9.3%

WFC 11.0 10.3 9.4 8.7 8.1

JPM 6.5 6.6 6.4 5.8 5.9

PNC 3.5 3.7 3.6 3.6 3.3

USB 3.2 3.2 3.3 3.4 3.4

Commerical & Industrial Loans Market Share

2011 2012 2013 2014 2015

BAC 14.3% 13.6% 13.3% 12.9% 11.9%

WFC 12.8 12.7 12.3 11.8 11.2

JPM 11.1 10.9 10.4 9.7 9.0

C 5.2 4.9 4.7 4.4 3.9

PNC 3.3 3.7 3.6 3.5 3.4

Home Equity Loans Market Share

14%

49%

4%

6%

8%

9%

6%4%

Securities Breakdown

UST and Agency

Agency RMBS

Agency CMBS

Non-Agency RMBS

Non-Agency CMBS

Asset-Backed

State and Muni

Other

2010 2011 2012 2013 2014 2015 5-Year

Commercial Lending 36.6% 41.3% 44.7% 45.2% 47.6% 47.7% 43.1%

Commercial Real Estate 11.9% 10.2% 10.0% 10.8% 11.4% 13.3% 10.9%

Equipment Lease Financing 4.2% 4.0% 3.9% 3.9% 3.8% 3.6% 4.0%

Total Commercial Lending 52.8% 55.5% 58.6% 59.9% 62.7% 64.6% 57.9%

% Change 2.8% 3.1% 1.3% 2.8% 1.9% --

Home Equity 22.7% 20.8% 19.3% 18.6% 16.9% 15.5% 19.7%

Residential Real Estate 10.6% 9.1% 8.2% 7.7% 7.0% 7.0% 8.5%

Total Home Equity & Real Estate 33.3% 29.9% 27.5% 26.3% 24.0% 22.5% 28.2%

% Change -3.4% -2.4% -1.2% -2.4% -1.4% --

Other Consumer

(auto, education, other)13.9% 14.6% 13.9% 13.8% 13.4% 12.9% 13.9%

Total Consumer Lending (other, credit cards, res. Real estate, & home equity)

47.2% 44.5% 41.4% 40.1% 37.3% 35.4% 42.1%

% Change -2.7% -3.1% -1.3% -2.8% -1.9% --

Total Book of Loans 150.6 159.0 185.9 195.6 204.8 206.7 179.18

% Change 5.6% 16.9% 5.2% 4.7% 0.9% --

PNC Book of Loans



Stability in Loan Book and Diversified Revenue Stream (Contd.)

Well Positioned Against Peers, Still Room for Improvement

Though PNC still has a below average NIM, the company has been dedicated to

increasing NIM as much as possible. In 2015, NIM was up 3 bps. The low NIM is

offset by PNC’s continued dedication to cost cutting through its Continuous

Improvement Program (CIP). The main areas CIP has focused on are branch

reconfigurations, lower cost transaction channels, and efficiencies in the mortgage

business. Management expects CIP to keep expenses stable in FY16, while freeing up

capital for investments into technology and retail transformation. In addition, the

company has placed a continuous emphasis to increase its fee growth, specifically in

asset management, corporate services, and consumer services.

Management’s focus has been aimed towards expense reduction, fee growth across

its segments, and maintaining PNC’s theme of conservative lending ultimately leading

to less net charge offs and nonperforming loans. With this in mind, management is

now turning their focus to improving NIM which is currently lowest of the peer group.

BB&T M&T Bank Fifth Third Bank Huntington Bank KeyCorp Average PNC Ranking

Liquidity Coverage Ratio 130% 116% 116% 100% 100% 112% >100% 3rd

Efficiency Ratio 58.80% 58.88% 57.60% 63.70% 66.40% 61.08% 74.00% 1st

Tier 1 Captial Ratio 10.50% 9.10% 10.49% 10.90% 11.14% 10.43% 10.60% 3rd

Avg. Deposit Growth 7.30% 7.40% 4.90% 4.00% 4.10% 5.54% 7.80% 1st

Total Loan Growth 20.70% 30.50% 3.00% 5.00% 2.00% 12.24% 4.00% 3rd

Interest Earning Assets

Growth- 20.00% 7.00% 8.00% 12.10% 11.78% 9.00% 3rd

Net Interest Margin 3.12% 3.16% 2.88% 3.49% 2.87% 3.10% 2.74% 6th

Expense Growth 6.40% 2.10% 1.40% 4.83% 4.40% 3.83% -0.30% 1st

Net Charge Offs 0.38% 0.19% 0.34% 0.46% 0.25% 0.32% 0.23% 2nd

Fee Income Growth -0.70% -2.40% 17.00% - 5.00% 4.73% 7.81% 2nd

Nonperforming Loans % 0.52% 0.91% 0.70% 0.79% 0.65% 0.71% 0.68% 3rd

Thesis Point 2:

▪ Conservative Balance

Sheet

▪ Market Share

▪ Book of Loans

▪ PNC vs. Peers



Organic Growth Driven by Southeast Region

Organic Growth Opportunity

In 2011, PNC agreed to acquire RBC and their 424 branches 900,000 customers in

Alabama, Florida, Georgia, North Carolina and South Carolina. By 2014, all of PNC’s

start up costs were complete allowing for it to invest directly into the consolidation

and advancement of its Southeast (SE) branches. As a result, PNC now sees the SE

region of the United States as its “single best opportunity for organic growth

overtime.”

With recent gains in market share and exposure, the SE market now represents 11

percent of PNC’s total market revenue and 7 percent of its total overall revenue. In

states such as Florida, Georgia, North Carolina and South Carolina, PNC has seen

YoY increases in market share of of 0.10 percent, 0.18 percent, 0.10 and 0.07

percent respectively. Also, in North Carolina and Alabama, PNC’s market share ranks

in the top ten. This allows PNC to benefit from the 2.3 percent employment increase

and 1.4 percent population growth the SE region is forecasted to achieve in

comparison to the Midwest and Mid-Atlantic’s forecasted 1.6 and 1.7 percent

employment increases and 0.2 and 0.7 percent population increases respectively. In

the midst of these positive trends, PNC is consolidating its branches and implementing

a new service model within their company.

PNC CARES (About Gaining Clients)

With the integration phase over for PNC in the Southeast (SE), their main focus

moving forward is to gain clients. Last year, PNC launched a new service model called

PNC CARES. This model includes many additions and changes to its current business

model in the hope to improve and create their client relationships. Some of these

additions are a new innovation lab that enables PNC to test new products and services

and a new program for gauging customer satisfaction and loyalty to the brand called

the Net Promoter Score (NPS). The NPS tells PNC not only whether customers are

satisfied with the quality of their relationship, but also how likely they are to

recommend PNC to their family and friends. Along with this, PNC created a Voice of

the Customer database to help it turn customer feedback into experience

enhancements and implemented over 100 improvements throughout the company

driven by customer and employee input.

Along with implementing new business models, PNC was also able to consolidate its

branches over the past few years. As of 2015, PNC has roughly 598 offices in the SE

region compared to the 652 offices it operated in 2012. With PNC’s elimination of

some of the reach it had in the SE, PNC still saw a 7 percent growth in revenue in its

SE region in comparison to an overall 1 percent decline in revenue. With the ongoing

consolidation of its SE branches and its implementation of PNC CARES, PNC is in a

great place to grab more market share from its competitors in the SE and be the main

driver of organic growth for the company in the next couple of years.

Thesis Point 3:

▪ RBC Acquisition Highlights

▪ Favorable

Macroenvironment in SE



“Lower for Longer” Still a Threat

Weak NIM Relative to Peers

Net Interest Margin (NIM) ranks lowest amongst our peer group at 2.77 percent for

FY2015 vs. the industry of 3.01 percent. Just as well, over the past five years PNC’s

NIM has declined 111bps against the group average of just 54bps. The lower interest

rate environment has clearly taken its toll on NIM as PNC was the leader in 2012.

PNC is currently in the process of moving $10bn worth of $35bn in liquidity into

“higher quality and higher yielding” assets. Despite management’s efforts to gather

some improvement in NIM, their effort in 11th hour is somewhat overdue and

reflected in steady and significant NIM deterioration over the years relative to peers

(twice the decline as peers).

Furthermore, over the past five years the industry has shifted the mix towards net

interest income by an average of 140bps. On the other hand, PNC has shifted away

from this trend and is split evenly between net interest income and noninterest

income.

In addition to this, management notes the spread from rising interest rates moves

significantly slower and the recent December rate hike will have little effect on NIM.

From the Q4 earnings call management accounted for three rate hikes, one in March,

June, and December at 25bps each. The March rate hike will not occur; therefore,

leaving just two rate hikes in management’s assumptions.

Thesis Risk 1:

▪ Weak NIM & Spreads

Lack

▪ Shift Towards Net

Interest Income

2011 2012 2013 2014 2015

PNC 3.88% 4.02% 3.49% 3.03% 2.77%BBT 3.99% 3.88% 3.64% 3.43% 3.31%FITB 3.59% 3.47% 3.25% 3.05% 2.87%HBAN 3.34% 3.45% 3.28% 3.23% 3.13%KEY 3.10% 3.11% 3.05% 2.87% 2.86%MTB 3.77% 3.70% 3.64% 3.34% 2.90%

Avg. 3.56% 3.52% 3.37% 3.18% 3.01%

Net Interest Margin

NII Non-II NII Non-II NII Non-II NII Non-II NII Non-II

PNC 55.0% 45.0% 58.0% 42.0% 54.0% 46.0% 55.0% 45.0% 50.0% 50.0%

BBT 55.0% 45.0% 55.0% 45.0% 54.5% 45.5% 54.0% 46.0% 54.0% 46.0%

FITB 53.0% 47.0% 50.5% 49.5% 49.5% 50.5% 55.0% 45.0% 50.0% 50.0%

HBAN 55.0% 45.0% 56.5% 43.5% 59.0% 41.0% 62.0% 38.0% 62.0% 38.0%

KEY 56.0% 44.0% 54.0% 46.0% 60.0% 40.0% 59.0% 41.0% 58.0% 42.0%

MTB 55.0% 45.0% 56.0% 44.0% 55.5% 44.5% 56.5% 43.5% 57.0% 43.0%

Avg. 54.80% 45.20% 54.40% 45.60% 55.70% 44.30% 57.30% 42.70% 56.20% 43.80%

Net Interest Income & Noninterest Income (as a % of revenue)

2011 2012 2013 2014 2015



Appendix A: Interest Rates

Appendix B: PNC Locations

FED Effective Rate 0.37

Meeting Prob. of Hike Prob. Of Cut 0.25-0.5 0.5-0.75 0.75-1 1-1.25 1.25-1.5 1.5-1.75 1.75-2

4/27/2016 6.0% 0.0% 94.0% 6.0% 0.0% 0.0% 0.0% 0.0% 0.0%

6/15/2016 41.7% 0.0% 58.3% 39.4% 2.3% 0.0% 0.0% 0.0% 0.0%

7/27/2016 49.9% 0.0% 50.1% 42.1% 7.5% 0.3% 0.0% 0.0% 0.0%

9/21/2016 59.9% 0.0% 40.1% 43.7% 14.4% 1.8% 0.1% 0.0% 0.0%

11/2/2016 62.4% 0.0% 37.6% 43.5% 16.2% 2.5% 0.2% 0.0% 0.0%

12/14/2016 71.3% 0.0% 28.7% 42.1% 22.7% 5.8% 0.7% 0.0% 0.0%

2/1/2017 73.6% 0.0% 26.4% 41.0% 24.3% 7.1% 1.1% 0.1% 0.0%

Source: Bloomberg

FOMC Target Range

FOMC Rate Hike Probability

OUSEMG

EQ

UIT

YR

ES

EA

RC

H

9

PIT

TS

BU

RG

H N

AT

ION

AL C

OR

PO

RA

TIO

N F

INA

NC

IAL S

ER

VIC

ES G

RO

UP

(P

NC

)

Inco

me S

tate

men

t (v

alues

in m

illions

of

USD

, exp

ect

per

shar

e f

igure

s)

Ne

t R

ev

en

ue

3,8

06

.03

,73

2.0

3,7

57

.03

,73

1.0

15

,02

6.0

15

,38

9.0

15

,95

6.0

15

,23

8.0

14

,32

6.0

+ N

et

Inte

rest

Inco

me

2,0

92

.00.5

52

,06

2.0

0.5

52

,05

2.0

0.5

2,0

72

.00.5

68

,27

8.0

0.5

58

,52

5.0

0.5

59

,14

7.0

0.5

79

,64

0.0

0.6

38

,70

0.0

0.6

1

+ T

ota

l In

tere

st Inco

me

2,3

58.0

0.6

22,3

41.0

0.6

32,3

05.0

0.6

12,3

19.0

0.6

29,3

23.0

0.6

29,4

31.0

0.6

110,0

07.0

0.6

310,7

34.0

0.7

010,1

94.0

0.7

1

+ Inte

rest

Inco

me

1,9

15.0

0.5

01,9

18.0

0.5

11,8

98.0

0.5

11,9

13.0

0.5

17,6

44.0

0.5

17,8

07.0

0.5

18,2

58.0

0.5

28,6

99.0

0.5

78,0

33.0

0.5

6

+ Inve

stm

ent In

com

e443.0

0.1

2423.0

0.1

1407.0

0.1

1406.0

0.1

11,6

79.0

0.1

11,6

24.0

0.1

11,7

49.0

0.1

12,0

35.0

0.1

32,1

61.0

0.1

5

-

Tota

l In

tere

st E

xpense

266.0

0.0

7279.0

0.0

7253.0

0.0

7247.0

0.0

71,0

45.0

0.0

7906.0

0.0

6860.0

0.0

51,0

94.0

0.0

71,4

94.0

0.1

0

+ T

ota

l N

on

-In

tere

st

Inco

me

1,7

14

.00.4

51

,67

0.0

0.4

51

,70

5.0

0.4

51

,65

9.0

0.4

46

,74

8.0

0.4

56

,86

4.0

0.4

56

,80

9.0

0.4

35

,59

8.0

0.3

75

,62

6.0

0.3

9

+ T

radin

g A

ccount Pro

fits

/Loss

es

----

----

----

----

0.0

0.0

014.0

0.0

0-5

6.0

0.0

0-7

.00.0

00.0

0.0

0

+ Inve

stm

ent &

Loan Inc

(Loss

)2

0.0

0-9

0.0

08

0.0

041

0.0

143.0

0.0

0-7

.00.0

083.0

0.0

193.0

0.0

197.0

0.0

1

+ G

ain

/Loss

fro

m Inve

stm

ents

2.0

0.0

0-9

.00.0

08.0

0.0

041.0

0.0

143.0

0.0

0-7

.00.0

083.0

0.0

193.0

0.0

197.0

0.0

1

+ C

om

mis

sions

& F

ees

Earn

ed

1,4

25.0

0.3

71,3

98.0

0.3

71,4

39.0

0.3

81,3

48.0

0.3

65,6

10.0

0.3

75,4

62.0

0.3

55,2

73.0

0.3

34,3

28.0

0.2

84,4

76.0

0.3

1

+ O

ther

op inco

me (

loss

)287.0

0.0

8281.0

0.0

8258.0

0.0

7270.0

0.0

71,0

95.0

0.0

71,3

95.0

0.0

91,5

09.0

0.0

91,1

84.0

0.0

81,0

53.0

0.0

7

- P

rov

isio

n f

or

Lo

an

Lo

sse

s7

4.0

0.0

28

1.0

0.0

24

6.0

0.0

15

4.0

0.0

12

55

.00.0

22

73

.00.0

26

43

.00.0

49

87

.00.0

61

,15

2.0

0.0

8

Ne

t R

ev

en

ue

aft

er

Pro

vis

ion

s3

,73

2.0

0.9

83

,65

1.0

0.9

83

,71

1.0

0.9

93

,67

7.0

0.9

91

4,7

71

.00.9

81

5,1

16

.00.9

81

5,3

13

.00.9

61

4,2

51

.00.9

41

3,1

74

.00.9

2

- To

tal N

on

-In

tere

st

Exp

en

se

2,3

96

.00.6

32

,35

2.0

0.6

32

,36

6.0

0.6

32

,34

9.0

0.6

39

,46

3.0

0.6

39

,79

1.0

0.6

49

,84

9.0

0.6

21

0,2

70

.00.6

79

,06

3.0

0.6

3

+ O

ther

Opera

ting E

xpense

s2,3

96.0

0.6

32,3

52.0

0.6

32,3

66.0

0.6

32,3

49.0

0.6

39,4

63.0

0.6

39,7

91.0

0.6

49,8

49.0

0.6

210,2

70.0

0.6

79,0

63.0

0.6

3

Op

era

tin

g I

nco

me

(Lo

ss)

1,3

36

.00.3

51

,29

9.0

0.3

51

,34

5.0

0.3

61

,32

8.0

0.3

65

,30

8.0

0.3

55

,32

5.0

0.3

55

,46

4.0

0.3

43

,98

1.0

0.2

64

,11

1.0

0.2

9

Pre

tax I

nco

me

(Lo

ss),

Ad

juste

d1

,33

6.0

0.3

51

,29

9.0

0.3

51

,34

5.0

0.3

61

,32

8.0

0.3

65

,30

8.0

0.3

55

,32

5.0

0.3

55

,46

4.0

0.3

43

,98

1.0

0.2

64

,11

1.0

0.2

9

- A

bn

orm

al Lo

sse

s (

Ga

ins)

-47

.0-0

.01

-43

.0-0

.01

-10

9.0

-0.0

30

.00.0

0-1

99

.0-0

.01

-28

9.0

-0.0

2-2

24

.0-0

.01

38

.00.0

04

2.0

0.0

0

+ C

redit V

alu

ation A

dju

stm

ent

----

----

----

----

----

14.0

0.0

0-5

6.0

0.0

0-7

.00.0

0--

--

+ M

erg

er/

Acq

uis

itio

n E

xpense

----

----

-30.0

-0.0

1--

----

----

----

--267.0

0.0

242.0

--

+ D

isposa

l of Ass

ets

----

----

----

----

----

-94.0

----

----

----

--

+ Im

pairm

ent O

f Goodw

ill--

----

----

----

----

----

----

--45.0

----

--

+ L

egal Settle

ment

----

----

-30.0

-0.0

1--

---3

0.0

0.0

0--

----

----

----

--

+ O

ther

Abnorm

al Item

s-4

7.0

-0.0

1-4

3.0

-0.0

1-7

9.0

-0.0

2--

---1

69.0

-0.0

1-2

09.0

-0.0

1-1

68.0

-0.0

1-2

67.0

-0.0

2--

--

Pre

tax I

nco

me

(Lo

ss),

GA

AP

1,3

83

.00.3

61

,34

2.0

0.3

61

,45

4.0

0.3

91

,32

8.0

0.3

65

,50

7.0

0.3

75

,61

4.0

0.3

65

,68

8.0

0.3

63

,94

3.0

0.2

64

,06

9.0

0.2

8

- In

co

me

Ta

x E

xp

en

se

(B

en

efi

t)3

61

.00.0

92

69

.00.0

74

10

.00.1

13

24

.00.0

91

,36

4.0

0.0

91

,40

7.0

0.0

91

,47

6.0

0.0

99

42

.00.0

69

98

.00.0

7

+ C

urr

ent In

com

e T

ax

----

----

----

----

960.0

0.0

61,1

52.0

0.0

7280.0

0.0

2372.0

0.0

2158.0

0.0

1

+ D

efe

rred Inco

me T

ax

----

----

----

----

404.0

0.0

3255.0

0.0

21,1

96.0

0.0

7570.0

0.0

4840.0

0.0

6

Inco

me

(Lo

ss)

fro

m C

on

t O

ps

1,0

22

.00.2

71

,07

3.0

0.2

91

,04

4.0

0.2

81

,00

4.0

0.2

74

,14

3.0

0.2

84

,20

7.0

0.2

74

,21

2.0

0.2

63

,00

1.0

0.2

03

,07

1.0

0.2

1

Inco

me

(Lo

ss)

Incl. M

I1

,02

2.0

0.2

71

,07

3.0

0.2

91

,04

4.0

0.2

81

,00

4.0

0.2

74

,14

3.0

0.2

84

,20

7.0

0.2

74

,21

2.0

0.2

63

,00

1.0

0.2

03

,07

1.0

0.2

1

-

Min

ority

Inte

rest

14.0

0.0

018.0

0.0

04.0

0.0

01.0

0.0

037.0

0.0

023.0

0.0

011.0

0.0

0-1

2.0

0.0

015.0

0.0

0

Ne

t In

co

me

, G

AA

P1

,00

8.0

0.2

61

,05

5.0

0.2

81

,04

0.0

0.2

81

,00

3.0

0.2

74

,10

6.0

0.2

74

,18

4.0

0.2

74

,20

1.0

0.2

63

,01

3.0

0.2

03

,05

6.0

0.2

1

-

Pre

ferr

ed D

ivid

ends

43.0

0.0

164.0

0.0

248.0

0.0

170.0

0.0

2225.0

0.0

1237.0

0.0

2249.0

0.0

2177.0

0.0

156.0

0.0

0

-

Oth

er

Adju

stm

ents

961.0

0.2

5991.0

0.2

7992.0

0.2

6930.0

0.2

517.0

0.0

011.0

0.0

018.0

0.0

04.0

0.0

02.0

0.0

0

Ne

t In

co

me

Av

ail

to C

om

mo

n,

GA

AP

96

1.0

0.2

59

91

.00.2

79

92

.00.2

69

30

.00.2

53

,86

4.0

0.2

63

,93

6.0

0.2

63

,93

4.0

0.2

52

,83

2.0

0.1

92

,99

8.0

0.2

1

Ne

t In

co

me

Av

ail

to C

om

mo

n,

Ad

j9

30

.50.2

49

63

.10.2

69

21

.20.2

59

30

.00.2

53

,73

4.7

0.2

53

,74

7.9

0.2

43

,78

8.0

0.2

42

,87

2.5

0.1

92

,97

1.0

0.2

1

Net Abnorm

al Lo

sses

(Gain

s)-3

0.6

-0.0

1-2

8.0

-0.0

1-7

0.9

-0.0

20.0

0.0

0-1

29.4

-0.0

1-1

88.1

-0.0

1-1

46.0

-0.0

140.5

0.0

0-2

7.0

0.0

0

Net Ext

raord

inary

Loss

es

(Gain

s)0.0

0.0

00.0

0.0

00.0

0.0

00.0

0.0

00.0

0.0

00.0

0.0

00.0

0.0

00.0

0.0

00.0

0.0

0

Q1

20

15

Co

mm

on

Siz

ed

FY2

01

2C

om

mo

n

Siz

ed

FY2

01

1C

om

mo

n

Siz

ed

Q4

20

15

Co

mm

on

Siz

ed

Q3

20

14

Co

mm

on

Siz

ed

Q2

20

15

Co

mm

on

Siz

ed

FY2

01

5C

om

mo

n

Siz

ed

FY2

01

4C

om

mo

n

Siz

ed

FY2

01

3C

om

mo

n

Siz

ed

Inco

me

Sta

tem

en

t (v

alu

es

in m

illio

ns

of U

SD

, exc

ept

per

share

fig

ure

s)

OUSEMG

EQ

UIT

YR

ES

EA

RC

H

PIT

TS

BU

RG

H N

AT

ION

AL C

OR

PO

RA

TIO

N F

INA

NC

IAL S

ER

VIC

ES G

RO

UP

(P

NC

)

Bala

nce S

heet

(val

ues

in m

illions

of

USD

, exp

ect

per

shar

e f

igure

s)

To

tal A

sse

ts

+ C

ash

& C

ash

Equiv

ale

nts

4,0

65.0

0.0

13,8

35.0

0.0

14,4

12.0

0.0

14,1

51.0

0.0

14,0

65.0

0.0

14,3

60.0

0.0

14,0

43.0

0.0

15,2

20.0

0.0

24,1

05.0

0.0

2

+ Inte

rbank

ass

ets

31,9

15.0

0.0

935,7

58.0

0.1

035,9

40.0

0.1

033,0

91.0

0.0

931,9

15.0

0.0

933,6

31.0

0.1

014,1

21.0

0.0

45,4

47.0

0.0

23,3

74.0

0.0

1

+ F

ed F

unds

Sold

& R

epos

1,3

69.0

0.0

01,5

34.0

0.0

01,9

71.0

0.0

11,8

93.0

0.0

11,3

69.0

0.0

01,8

52.0

0.0

11,9

86.0

0.0

11,4

63.0

0.0

02,2

05.0

0.0

1

+ O

ther

Inte

rbank

Ass

ets

30,5

46.0

0.0

934,2

24.0

0.0

933,9

69.0

0.1

031,1

98.0

0.0

930,5

46.0

0.0

931,7

79.0

0.0

912,1

35.0

0.0

43,9

84.0

0.0

11,1

69.0

0.0

0

+ S

T A

nd L

T Inve

stm

ents

72,2

54.0

0.2

069,9

67.0

0.1

963,6

96.0

0.1

862,9

19.0

0.1

872,2

54.0

0.2

058,1

76.0

0.1

763,3

67.0

0.2

063,5

02.0

0.2

163,1

47.0

0.2

3

+ T

radin

g S

ecu

rities

1,7

26.0

0.0

01,9

01.0

0.0

12,3

34.0

0.0

12,1

51.0

0.0

11,7

26.0

0.0

02,3

53.0

0.0

13,0

73.0

0.0

12,0

96.0

0.0

12,5

13.0

0.0

1

+ Inve

stm

ent Sec

Ava

il fo

r Sale

55,7

60.0

0.1

653,6

63.0

0.1

547,6

79.0

0.1

347,5

79.0

0.1

455,7

60.0

0.1

644,2

35.0

0.1

348,6

07.0

0.1

551,0

52.0

0.1

748,5

68.0

0.1

8

+ Inve

stm

ent Sec

Held

to M

at

14,7

68.0

0.0

414,4

03.0

0.0

413,6

83.0

0.0

413,1

89.0

0.0

414,7

68.0

0.0

411,5

88.0

0.0

311,6

87.0

0.0

410,3

54.0

0.0

312,0

66.0

0.0

4

+ T

ota

l Com

merc

ial Lo

ans

133,5

44.0

0.3

7131,1

64.0

0.3

6130,7

22.0

0.3

7129,6

75.0

0.3

7133,5

44.0

0.3

7128,3

68.0

0.3

7117,1

45.0

0.3

7108,9

42.0

0.3

688,3

14.0

0.3

3

+ C

om

merc

ial RE L

oans

34,9

36.0

0.1

033,7

37.0

0.0

932,5

89.0

0.0

932,0

25.0

0.0

934,9

36.0

0.1

030,9

48.0

0.0

928,7

67.0

0.0

925,9

02.0

0.0

822,6

20.0

0.0

8

+ O

ther

Com

merc

ial Lo

ans

98,6

08.0

0.2

897,4

27.0

0.2

798,1

33.0

0.2

897,6

50.0

0.2

898,6

08.0

0.2

897,4

20.0

0.2

888,3

78.0

0.2

883,0

40.0

0.2

765,6

94.0

0.2

4

+ T

ota

l Consu

mer

Loans

73,1

52.0

0.2

073,8

19.0

0.2

074,4

31.0

0.2

175,0

47.0

0.2

173,1

52.0

0.2

076,4

49.0

0.2

278,4

68.0

0.2

576,9

14.0

0.2

570,7

00.0

0.2

6

+ C

redit C

ard

Loans

4,8

62.0

0.0

14,6

00.0

0.0

14,5

20.0

0.0

14,4

34.0

0.0

14,8

62.0

0.0

14,6

12.0

0.0

14,4

25.0

0.0

14,3

03.0

0.0

13,9

76.0

0.0

1

+ H

om

e E

quity

Loans

32,1

33.0

0.0

933,0

06.0

0.0

933,5

35.0

0.0

934,0

65.0

0.1

032,1

33.0

0.0

934,6

77.0

0.1

036,4

47.0

0.1

135,9

20.0

0.1

233,0

89.0

0.1

2

+ 1

-4 F

am

ily R

esi

dential Lo

ans

14,4

11.0

0.0

414,4

92.0

0.0

414,5

32.0

0.0

414,4

89.0

0.0

414,4

11.0

0.0

414,4

07.0

0.0

415,0

65.0

0.0

515,2

40.0

0.0

514,4

69.0

0.0

5

+ A

uto

Loans

11,1

57.0

0.0

311,0

39.0

0.0

311,0

57.0

0.0

311,1

20.0

0.0

311,1

57.0

0.0

311,6

16.0

0.0

310,8

27.0

0.0

38,7

08.0

0.0

35,1

81.0

0.0

2

+ S

tudent Lo

ans

5,8

81.0

0.0

26,0

70.0

0.0

26,2

12.0

0.0

26,4

48.0

0.0

25,8

81.0

0.0

26,6

26.0

0.0

27,5

34.0

0.0

28,2

38.0

0.0

39,5

82.0

0.0

4

+ O

ther

Consu

mer

Loans

4,7

08.0

0.0

14,6

12.0

0.0

14,5

75.0

0.0

14,4

91.0

0.0

14,7

08.0

0.0

14,5

11.0

0.0

14,1

70.0

0.0

14,5

05.0

0.0

14,4

03.0

0.0

2

+ O

ther

Loans

1,5

40.0

0.0

02,0

60.0

0.0

12,3

57.0

0.0

12,4

23.0

0.0

11,5

40.0

0.0

02,2

62.0

0.0

12,2

55.0

0.0

13,6

93.0

0.0

12,9

36.0

0.0

1

+ T

ota

l Lo

ans

208,2

36.0

0.5

8207,0

43.0

0.5

7207,5

10.0

0.5

9207,1

45.0

0.5

9208,2

36.0

0.5

8207,0

79.0

0.6

0197,8

68.0

0.6

2189,5

49.0

0.6

2161,9

50.0

0.6

0

-

Rese

rve for

Loan L

oss

es

2,7

27.0

0.0

13,2

37.0

0.0

13,2

72.0

0.0

13,3

06.0

0.0

12,7

27.0

0.0

13,3

31.0

0.0

13,6

09.0

0.0

14,0

36.0

0.0

14,3

47.0

0.0

2

+ N

et Lo

ans

205,5

09.0

0.5

7203,8

06.0

0.5

6204,2

38.0

0.5

8203,8

39.0

0.5

8205,5

09.0

0.5

7203,7

48.0

0.5

9194,2

59.0

0.6

1185,5

13.0

0.6

1157,6

03.0

0.5

8

+ N

et Fix

ed A

ssets

5,9

08.0

0.0

2--

----

----

--5,9

08.0

0.0

25,6

43.0

0.0

25,6

18.0

0.0

25,4

28.0

0.0

2--

--

+ P

ropert

y, P

lant &

Equip

5,9

08.0

0.0

2--

----

----

--5,9

08.0

0.0

25,6

43.0

0.0

25,6

18.0

0.0

25,4

28.0

0.0

2--

--

+ T

ota

l In

tangib

le A

ssets

9,4

82.0

0.0

39,5

10.0

0.0

39,5

38.0

0.0

39,5

66.0

0.0

39,4

82.0

0.0

310,9

47.0

0.0

311,2

90.0

0.0

410,8

69.0

0.0

410,1

44.0

0.0

4

+ G

oodw

ill9,1

03.0

0.0

39,1

03.0

0.0

39,1

03.0

0.0

39,1

03.0

0.0

39,1

03.0

0.0

39,1

03.0

0.0

39,0

74.0

0.0

39,0

72.0

0.0

38,2

85.0

0.0

3

+ O

ther

Inta

ngib

le A

ssets

379.0

0.0

0407.0

0.0

0435.0

0.0

0463.0

0.0

0379.0

0.0

01,8

44.0

0.0

12,2

16.0

0.0

11,7

97.0

0.0

11,8

59.0

0.0

1

+ Inve

stm

ents

in A

ssoci

ate

s10,5

87.0

0.0

310,4

97.0

0.0

310,5

31.0

0.0

310,5

23.0

0.0

310,5

87.0

0.0

310,7

28.0

0.0

310,5

60.0

0.0

310,8

77.0

0.0

410,1

34.0

0.0

4

+ T

ota

l Defe

rred T

ax

Ass

ets

3,2

84.0

0.0

1--

----

----

--3,2

84.0

0.0

13,6

70.0

0.0

13,8

15.0

0.0

14,9

52.0

0.0

23,8

64.0

0.0

1

+ T

ota

l Deriva

tive

Ass

ets

1,8

36.0

0.0

13,6

19.0

0.0

12,5

57.0

0.0

13,3

59.0

0.0

11,8

36.0

0.0

12,5

87.0

0.0

11,6

95.0

0.0

12,4

30.0

0.0

12,3

60.0

0.0

1

+ O

ther

Ass

ets

13,6

53.0

0.0

425,1

33.0

0.0

723,0

33.0

0.0

723,5

12.0

0.0

713,6

53.0

0.0

411,5

82.0

0.0

311,4

24.0

0.0

410,8

69.0

0.0

416,4

74.0

0.0

6

To

tal A

sse

ts3

58

,49

3.0

1.0

03

62

,12

5.0

1.0

03

53

,94

5.0

1.0

03

50

,96

0.0

1.0

03

58

,49

3.0

1.0

03

45

,07

2.0

1.0

03

20

,19

2.0

1.0

03

05

,10

7.0

1.0

02

71

,20

5.0

1.0

0

Lia

bili

tie

s &

Sh

are

ho

lde

rs'

Eq

uit

y

+ D

em

and D

eposi

ts90,0

38.0

0.2

983,6

32.0

0.2

682,6

53.0

0.2

783,5

27.0

0.2

790,0

38.0

0.2

982,8

29.0

0.2

877,7

56.0

0.2

873,9

95.0

0.2

857,7

17.0

0.2

5

+ Inte

rest

Bearing D

eposi

ts158,9

64.0

0.5

1161,3

47.0

0.5

1157,0

51.0

0.5

1152,9

76.0

0.5

0158,9

64.0

0.5

1149,4

05.0

0.5

0143,1

75.0

0.5

2139,1

47.0

0.5

3130,2

49.0

0.5

6

+ S

avi

ng D

eposi

ts138,4

54.0

0.4

4140,4

65.0

0.4

4136,4

61.0

0.4

4132,4

38.0

0.4

3138,4

54.0

0.4

4128,0

09.0

0.4

3119,7

09.0

0.4

3113,0

56.0

0.4

398,6

17.0

0.4

2

+ T

ime D

eposi

ts20,5

10.0

0.0

720,8

82.0

0.0

720,5

90.0

0.0

720,5

38.0

0.0

720,5

10.0

0.0

721,3

96.0

0.0

723,4

66.0

0.0

826,0

91.0

0.1

031,6

32.0

0.1

4

+ T

ota

l Deposi

ts249,0

02.0

0.8

0244,9

79.0

0.7

8239,7

04.0

0.7

8236,5

03.0

0.7

8249,0

02.0

0.8

0232,2

34.0

0.7

8220,9

31.0

0.8

0213,1

42.0

0.8

1187,9

66.0

0.8

0

+ S

T B

orr

ow

ings

& R

epos

4,5

70.0

0.0

16,0

08.0

0.0

28,4

33.0

0.0

310,1

72.0

0.0

34,5

70.0

0.0

111,8

62.0

0.0

412,3

46.0

0.0

413,7

42.0

0.0

59,6

23.0

0.0

4

+ S

T B

orr

ow

ings

4,5

70.0

0.0

16,0

08.0

0.0

28,4

33.0

0.0

310,1

72.0

0.0

34,5

70.0

0.0

111,8

62.0

0.0

412,3

46.0

0.0

413,7

42.0

0.0

59,6

23.0

0.0

4

+ L

T D

ebt

49,9

62.0

0.1

650,6

55.0

0.1

649,8

43.0

0.1

646,6

57.0

0.1

549,9

62.0

0.1

644,9

06.0

0.1

533,7

59.0

0.1

227,1

65.0

0.1

027,0

81.0

0.1

2

+ L

T B

orr

ow

ings

49,9

62.0

0.1

650,6

55.0

0.1

649,8

43.0

0.1

646,6

57.0

0.1

549,9

62.0

0.1

644,9

06.0

0.1

533,7

59.0

0.1

227,1

65.0

0.1

027,0

81.0

0.1

2

+ P

ensi

on L

iabili

ties

547.0

0.0

0--

----

----

--547.0

0.0

0843.0

0.0

0667.0

0.0

01,2

59.0

0.0

01,0

77.0

0.0

0

+ P

ensi

ons

379.0

0.0

0--

----

----

--379.0

0.0

0464.0

0.0

0292.0

0.0

0865.0

0.0

0680.0

0.0

0

+ O

ther

Post

-Ret Benefits

168.0

0.0

0--

----

----

--168.0

0.0

0379.0

0.0

0375.0

0.0

0394.0

0.0

0397.0

0.0

0

+ T

ota

l Defe

rred T

ax

Liabili

ties

5,4

46.0

0.0

2--

----

----

--5,4

46.0

0.0

25,6

07.0

0.0

25,4

37.0

0.0

25,5

13.0

0.0

25,0

02.0

0.0

2

+ T

ota

l Deriva

tive

Lia

bili

ties

640.0

0.0

01,8

70.0

0.0

11,3

91.0

0.0

01,8

70.0

0.0

1640.0

0.0

01,3

83.0

0.0

0904.0

0.0

0589.0

0.0

0711.0

0.0

0

+ O

ther

Liabili

ties

2,3

46.0

0.0

112,3

35.0

0.0

48,6

62.0

0.0

39,3

20.0

0.0

32,3

46.0

0.0

12,1

63.0

0.0

12,1

11.0

0.0

11,9

32.0

0.0

12,4

99.0

0.0

1

To

tal Lia

bili

tie

s3

12

,51

3.0

1.0

03

15

,84

7.0

1.0

03

08

,03

3.0

1.0

03

04

,52

2.0

1.0

03

12

,51

3.0

1.0

02

98

,99

8.0

1.0

02

76

,15

5.0

1.0

02

63

,34

2.0

1.0

02

33

,95

9.0

1.0

0

+ P

refe

rred E

quity

14,7

61.4

0.3

22,2

98.0

0.0

53,4

49.0

0.0

83,9

48.0

0.0

914,7

61.4

0.3

235.3

0.0

03,9

41.0

0.0

93,5

90.0

0.0

91,6

37.0

0.0

4

+ S

hare

Capital &

APIC

4,1

43.6

0.0

916,5

35.0

0.3

615,3

40.0

0.3

315,2

67.0

0.3

34,1

43.6

0.0

919,2

42.7

0.4

215,1

14.0

0.3

414,8

83.0

0.3

614,7

55.0

0.4

0

+ C

om

mon S

tock

2,7

08.0

0.0

62,7

08.0

0.0

62,7

08.0

0.0

62,7

06.0

0.0

62,7

08.0

0.0

62,7

05.0

0.0

62,6

98.0

0.0

62,6

90.0

0.0

62,6

83.0

0.0

7

+ A

dditio

nal Paid

in C

apital

1,4

35.6

0.0

313,8

27.0

0.3

012,6

32.0

0.2

812,5

61.0

0.2

71,4

35.6

0.0

316,5

37.7

0.3

612,4

16.0

0.2

812,1

93.0

0.2

912,0

72.0

0.3

2

-

Tre

asu

ry S

tock

3,3

68.0

0.0

72,8

37.0

0.0

62,2

62.0

0.0

51,7

75.0

0.0

43,3

68.0

0.0

71,4

30.0

0.0

3408.0

0.0

1569.0

0.0

1487.0

0.0

1

+ R

eta

ined E

arn

ings

29,0

43.0

0.6

328,3

37.0

0.6

127,6

09.0

0.6

026,8

82.0

0.5

829,0

43.0

0.6

326,2

00.0

0.5

723,2

51.0

0.5

320,2

65.0

0.4

918,2

53.0

0.4

9

+ O

ther

Equity

130.0

0.0

0615.0

0.0

1379.0

0.0

1703.0

0.0

2130.0

0.0

0503.0

0.0

1436.0

0.0

1834.0

0.0

2-1

05.0

0.0

0

Eq

uit

y b

efo

re M

ino

rity

In

tere

st

44

,71

0.0

0.9

74

4,9

48

.00.9

74

4,5

15

.00.9

74

5,0

25

.00.9

74

4,7

10

.00.9

74

4,5

51

.00.9

74

2,3

34

.00.9

63

9,0

03

.00.9

33

4,0

53

.00.9

1

+ M

inority

Inte

rest

1,2

70.0

0.0

31,3

30.0

0.0

31,3

97.0

0.0

31,4

13.0

0.0

31,2

70.0

0.0

31,5

23.0

0.0

31,7

03.0

0.0

42,7

62.0

0.0

73,1

93.0

0.0

9

To

tal Eq

uit

y4

5,9

80

.01.0

04

6,2

78

.01.0

04

5,9

12

.01.0

04

6,4

38

.01.0

04

5,9

80

.01.0

04

6,0

74

.01.0

04

4,0

37

.01.0

04

1,7

65

.01.0

03

7,2

46

.01.0

0

To

tal Lia

bili

tie

s &

Eq

uit

y3

58

,49

3.0

1.0

03

62

,12

5.0

1.0

03

53

,94

5.0

1.0

03

50

,96

0.0

1.0

03

58

,49

3.0

1.0

03

45

,07

2.0

1.0

03

20

,19

2.0

1.0

03

05

,10

7.0

1.0

02

71

,20

5.0

1.0

0

FY2

01

3C

om

mo

n

Siz

ed

FY2

01

2C

om

mo

n

Siz

ed

FY2

01

1C

om

mo

n

Siz

ed

Q1

20

15

Co

mm

on

Siz

ed

FY2

01

5C

om

mo

n

Siz

ed

FY2

01

4C

om

mo

n

Siz

ed

Q4

20

15

Co

mm

on

Siz

ed

Q3

20

15

Co

mm

on

Siz

ed

Q2

20

15

Co

mm

on

Siz

ed

Ba

lan

ce

Sh

ee

t (v

alu

es

in m

illio

ns

of U

SD

, exc

ept

per

share

fig

ure

s)

10



Balance Sheet(values in millions of USD, expect per share figures)

Cash from Operating Activities

+ Net Income 1,008.0 1,055.0 1,040.0 1,003.0 4,106.0 4,184.0 4,201.0 3,013.0 3,056.0

+ Depreciation & Amortization 286.0 272.0 278.0 252.0 1,088.0 988.0 1,146.0 1,159.0 1,140.0

+ Provision for Loan Losses 74.0 81.0 46.0 54.0 255.0 273.0 643.0 987.0 1,152.0

+ Non-Cash Items 130.0 132.0 -224.0 29.0 67.0 121.0 356.0 502.0 1,420.0

+ Gain on Sale of Secs & Loans 120.0 -113.0 -9.0 -41.0 -43.0 7.0 -83.0 -93.0 -249.0

+ Deferred Income Taxes 276.0 19.0 69.0 40.0 404.0 255.0 1,196.0 570.0 840.0

+ Stock-Based Compensation 4.0 -33.0 — — -29.0 -28.0 -23.0 -18.0 —

+ Other Non-Cash Adjustments -270.0 259.0 -284.0 30.0 -265.0 -113.0 -734.0 43.0 829.0

+ Net Ch in Operating Capital 421.0 408.0 247.0 -1,096.0 -20.0 -9.0 -791.0 1,148.0 -733.0

+ Trading Assets & Liab 38.0 187.0 207.0 -229.0 203.0 757.0 -455.0 1,350.0 330.0

+ Net Ch in Operating Loans 479.0 305.0 -123.0 -268.0 393.0 -405.0 -94.0 -1,125.0 77.0

+ Other Op Assets/Liab -96.0 -84.0 163.0 -599.0 -616.0 -361.0 -242.0 923.0 -1,140.0

Cash from Operating Activities 1,896.0 1,971.0 1,387.0 242.0 5,496.0 5,557.0 5,555.0 6,809.0 6,035.0

Cash from Investing Activities

+ Net Change in Investments -4,202.0 -5,020.0 -1,231.0 -4,135.0 -14,588.0 4,845.0 -177.0 3,084.0 2,308.0

+ Decrease in Investments 5,780.0 3,506.0 3,354.0 4,035.0 16,675.0 13,334.0 20,125.0 21,727.0 29,466.0

+ Dec in HTM Investments 491.0 487.0 568.0 486.0 2,032.0 1,987.0 2,483.0 3,174.0 2,859.0

+ Dec in AFS Investments 5,289.0 3,019.0 2,786.0 3,549.0 14,643.0 11,347.0 17,642.0 18,553.0 26,607.0

+ Increase in Investments -9,982.0 -8,526.0 -4,585.0 -8,170.0 -31,263.0 -8,489.0 -20,302.0 -18,643.0 -27,158.0

+ Inc in HTM Investments -1,161.0 -686.0 -1,049.0 -2,000.0 -4,896.0 -500.0 -1,883.0 -1,479.0 -1,607.0

+ Inc in AFS Investments -8,821.0 -7,840.0 -3,536.0 -6,170.0 -26,367.0 -7,989.0 -18,419.0 -17,164.0 -25,551.0

+ Net Ch in Loans & Interbank 1,615.0 142.0 -3,237.0 514.0 -966.0 -29,539.0 -18,887.0 -16,312.0 -8,927.0

+ Net Ch in Customer Loans -2,470.0 -485.0 -844.0 -173.0 -3,972.0 -12,147.0 -10,790.0 -14,333.0 -10,224.0

+ Net Ch in Interbank Assets 3,842.0 181.0 -2,849.0 540.0 1,714.0 -19,512.0 -8,681.0 -1,794.0 1,928.0

+ Net Ch in Loans 243.0 446.0 456.0 147.0 1,292.0 2,120.0 584.0 -185.0 -631.0

+ Net Cash from Acq & Div 0.0 -62.0 0.0 -4,130.0 430.0

+ Cash for Acq of Subs 0.0 -62.0 0.0 -4,130.0 430.0

+ Other Investing Activities -139.0 -173.0 -129.0 -265.0 -706.0 -137.0 129.0 97.0 -360.0

Cash from Investing Activities -2,726.0 -5,051.0 -4,597.0 -3,886.0 -16,260.0 -24,893.0 -18,935.0 -17,261.0 -6,549.0

Cash from Financing Activities

+ Dividends Paid -300 -326 -312 -319 -1,257 -1,232 -1,148 -997 -660

+ Cash From (Repayment) Debt -1,854 -1,945 1,585 -153 -2,367 10,469 5,333 2,604 -3,051

+ Cash From (Repay) ST Debt -1,240.0 -2,267.0 -1,835.0 508.0 -4,834.0 219.0 -3,235.0 2,903.0 438.0

+ Net Ch in Interbank Trans -300.0 -113.0 -12.0 -1,308.0 -1,733.0 -778.0 965.0 -2.0 -1,151.0

+ Cash From LT Debt 1,302.0 1,484.0 4,251.0 3,556.0 10,593.0 23,176.0 22,323.0 17,099.0 12,269.0

+ Repayments of LT Debt -1,616.0 -1,049.0 -819.0 -2,909.0 -6,393.0 -12,148.0 -14,720.0 -17,396.0 -14,607.0

+ Cash (Repurchase) of Equity -1,106.0 6.0 -999.0 -385.0 -2,484.0 -896.0 589.0 2,409.0 987.0

+ Increase in Capital Stock 0.0 84.0 58.0 78.0 168.0 280.0 763.0 2,625.0 1,060.0

+ Decrease in Capital Stock -1,106.0 -78.0 -1,057.0 -463.0 -2,652.0 -1,176.0 -174.0 -216.0 -73.0

+ Net Change In Deposits 3,820.0 5,268.0 3,197.0 4,292.0 16,577.0 11,312.0 7,804.0 8,051.0 4,046.0

+ Other Financing Activities 500.0 -500.0 0.0 0.0 0.0 0.0 -375.0 -500.0 0.0

Cash from Financing Activities 1,060.0 2,503.0 3,471.0 3,435.0 10,469.0 19,653.0 12,203.0 11,567.0 1,322.0

Net Changes in Cash 230.0 -577.0 261.0 -209.0 -295.0 317.0 -1,177.0 1,115.0 808.0

Cash Paid for Taxes 676.0 337.0 163.0 29.0 1,205.0 1,114.0 237.0 23.0 801.0

Cash Paid for Interest 676.0 261.0 252.0 251.0 1,005.0 863.0 891.0 1,208.0 1,517.0

FY2013 FY2012 FY2011Q1 2015 FY2015 FY2014Q4 2015 Q3 2015 Q2 2015

Cash Flow Statement (values in millions of USD, except per share figures)

OUSEMG

EQ

UIT

YR

ES

EA

RC

H

12

PIT

TS

BU

RG

H N

AT

ION

AL C

OR

PO

RA

TIO

N F

INA

NC

IAL S

ER

VIC

ES G

RO

UP

(P

NC

)

CO

MP

AR

AB

LE A

NA

LY

SIS

PN

C F

inan

cia

l S

erv

ices

- P

ub

lic C

om

para

ble

Co

mp

an

ies

Pri

ce

as o

fM

ark

et

Fre

e C

ash

Flo

w

Co

mp

an

y3

/1

9/2

01

6V

alu

e5

-Ye

ar

TT

M2

01

6E

5-Y

ea

rT

TM

20

16

E5

-Ye

ar

TT

M2

01

6E

PN

C F

ina

ncia

l S

erv

ice

s

$8

6.1

6$

43

,17

54

.1%

7.5

%1

.42

.4x

2.7

x2

.8x

11

.7x

12

.0x

11

.6x

6.9

x8

.0x

8.1

x

Re

gio

na

l B

an

ks

BB&

T C

orp

ora

tion

$34.6

7$27,0

58.9

15.8

%8.6

%1.2

2.3

x2.6

x2.5

x12.9

x12.6

x11.8

x6.6

x9.2

x7.5

x

Fifth

Third B

anco

rp17.3

613,6

07

4.5

%4.2

%2.3

2.2

x1.9

x2.2

x10.3

x9.6

x11.1

x6.8

x6.4

x7.8

x

Huntingto

n B

ancs

hare

s In

corp

ora

ted

9.6

77,7

14

18.0

%5.9

%1.7

2.4

x2.4

x2.3

x11.6

x11.3

x11.2

x7.6

x8.2

x7.8

x

KeyCorp

11.3

99,5

18

22.2

%6.6

%1.3

2.3

x2.1

x2.0

x11.4

x10.4

x10.1

x8.0

x8.8

x6.7

x

M&

T B

ank C

orp

ora

tion

112.6

117,9

17

5.4

%3.8

%3.2

2.9

x3.6

x3.4

x14.6

x14.8

x13.4

x16.1

x9.3

x7.9

x

Me

an

2.0

2.4

x2

.5x

2.5

x1

2.2

x1

1.7

x1

1.5

x9

.0x

8.4

x7

.5x

Me

dia

n1

.72

.3x

2.4

x2

.3x

11

.6x

11

.3x

11

.2x

7.6

x8

.8x

7.8

x

Pre

miu

m/D

isco

un

t

S&

P 5

00

--

1.6

x1

.6x

1.8

x1

6.4

x1

8.5

x1

8.5

x--

----

Pre

miu

m/D

isco

un

t--

Ea

rnin

gs

5-Y

ea

r

Gro

wth

Ra

te

'16

E -

'1

7E

Re

ve

nu

e

Gro

wth

20

16

PE

G

Pri

ce

as a

Mu

ltip

le o

f:

Sa

les

(35

.7%

)0

.1%

4.3

%1

0.1

%(4

.0%

)2

.6%

1.1

%(3

0.7

%)

(4.4

%)

6.6

%

35

.2%

40

.6%

34

.1%

(40

.0%

)(5

4.0

%)

(59

.6%

)--

----

Th

e P

NC

Fin

an

cia

l S

erv

ices G

rou

p,

Inc.

- P

ub

lic C

om

para

ble

Co

mp

an

ies

Co

mp

an

y5

-Ye

ar

TT

M2

01

6E

5-Y

ea

rT

TM

20

16

E5

-Ye

ar

TT

M5

-Ye

ar

TT

M2

01

6E

5-Y

ea

rT

TM

20

16

E

PN

C F

ina

ncia

l S

erv

ice

s

30

.3%

33

.8%

--2

2.7

%2

7.0

%2

4.2

%5

.0%

4.3

%1

.2%

1.2

%1

.1%

9.7

%1

0.4

%8

.8%

Re

gio

na

l B

an

ks

BB&

T C

orp

ora

tion

26.3

%28.2

%21.9

%17.8

%21.7

%22.1

%5.4

%4.6

%1.0

%1.1

%1.1

%8.8

%8.4

%9.0

%

Fifth

Third B

anco

rp31.9

%33.6

%--

22.9

%26.2

%20.0

%6.5

%6.3

%1.2

%1.2

%0.9

%10.9

%10.3

%8.1

%

Huntingto

n B

ancs

hare

s In

corp

ora

ted

27.9

%29.0

%--

21.1

%23.2

%22.1

%6.8

%5.9

%1.1

%1.0

%0.9

%10.9

%10.9

%10.1

%

KeyCorp

26.9

%27.1

%--

20.0

%21.7

%21.1

%5.0

%5.4

%1.0

%1.0

%1.0

%8.7

%8.6

%8.4

%

M&

T B

ank C

orp

ora

tion

32.9

%33.5

%--

22.0

%23.1

%25.1

%6.8

%5.0

%1.2

%1.0

%1.1

%9.6

%7.6

%8.7

%

Me

an

29

.2%

30

.3%

21

.9%

20

.7%

23

.2%

22

.1%

6.1

%5

.5%

1.1

%1

.0%

1.0

%9

.8%

9.1

%8

.9%

Me

dia

n2

7.9

%2

9.0

%2

1.9

%2

1.1

%2

3.1

%2

2.1

%6

.5%

5.4

%1

.1%

1.0

%1

.0%

9.6

%8

.6%

8.7

%

Pre

miu

m/D

isco

un

t

S&

P 5

00

1

2.8

%1

2.1

%1

5.1

%8

.8%

8.0

%8

.0%

----

3.0

%2

.6%

2.6

%1

4.1

%1

2.0

%1

2.0

%

Pre

miu

m/D

isco

un

t--

--

Re

turn

On

:

Ne

t M

arg

inIn

ve

ste

d C

ap

ita

lA

sse

tsE

qu

ity

EB

IT M

arg

in

Op

era

tin

g M

etr

ics

--1.1

%3

.6%

--1

.9%

3.8

%2

.1%

(1.1

%)

(1.2

%)

(4.4

%)

(1.6

%)

(3.3

%)

(1.5

%)

17

.5%

21

.7%

--1

3.8

%1

8.9

%1

6.1

%(1

.8%

)(1

.4%

)

(0.1

%)

0.1

%0

.1%

0.0

%(0

.1%

)1

.3%

OUSEMG

EQ

UIT

YR

ES

EA

RC

H

13

PIT

TS

BU

RG

H N

AT

ION

AL C

OR

PO

RA

TIO

N F

INA

NC

IAL S

ER

VIC

ES G

RO

UP

(P

NC

)

Cu

rre

nt

NTM

TB

VP

S3

-Ye

ar

Av

era

ge

1.4

4x

1.4

4x

1.5

7x

TB

VP

S59.8

868.8

959.8

8

Imp

lied

Pri

ce

$86.1

6$99.1

3$93.9

1

We

igh

tin

g50.0

0%

50.0

0%

We

igh

ted

PT

$49.5

7+

$46.9

6

Po

ten

tia

l U

psid

e$96.5

212.0

3%

1.3

0

1.3

5

1.4

0

1.4

5

1.5

0

1.5

5

1.6

0

1.6

5

1.7

0

1.7

5 Mar-

15

Apr-

15

May-1

5Ju

n-1

5Ju

l-15

Aug-1

5Sep-1

5O

ct-1

5N

ov-1

5D

ec-

15

Jan-1

6Feb-1

6M

ar-

16

PN

C P

/TBVPS

PN

C3-Y

ear

Avera

ge

Takin

g into

acc

ount

the s

trong f

undam

enta

ls o

f PN

C,

rece

nt

dow

nw

ard

tradin

g o

f th

e s

tock

as

a re

sult o

f unre

late

d m

acr

oeco

nom

ic fa

ctors

,

and o

pport

unity f

or

gro

wth

in t

he S

outh

east

regio

n w

e f

eel sh

are

s are

underv

alu

ed a

nd t

here

is

room

for

multip

le e

xpansi

on o

n a

P/T

BPVS

level.

Our

price

targ

et

for

PN

C is

weig

hte

d 5

0/5

0 b

etw

een N

TM

TBVPS a

t th

e

curr

ent

multip

le

and

the

3-y

ear

avera

ge

P/T

BVPS

multip

le

at

the

curr

ent

TBVPS.

We pre

fer

the 3-y

ear

avera

ge m

ultip

le as

PN

C opera

tes

in a sp

ace

whic

h h

as

changed d

rast

ically

over

the p

ast

10 y

ears

ultim

ate

ly leadin

g

to

dis

tort

ed

his

torica

l m

ultip

les.

Lik

ew

ise,

post

-rece

ssio

n

and

more

import

antly post

-regula

tion,

the m

ark

et

has

a bett

er

sense

fo

r valu

e

whic

h h

as

been r

eflect

ed b

ut

not

as

of la

tely

.

62

63

64

65

66

67

68

69

70 M

ar-

15

Apr-

15

May-1

5Ju

n-1

5Ju

l-15

Aug-1

5Sep-1

5O

ct-1

5N

ov-1

5D

ec-

15

Jan-1

6Feb-1

6M

ar-

16

NTM

TBVPS

OUSEMG

EQ

UIT

YR

ES

EA

RC

H

14

PIT

TS

BU

RG

H N

AT

ION

AL C

OR

PO

RA

TIO

N F

INA

NC

IAL S

ER

VIC

ES G

RO

UP

(P

NC

)

AN

NO

TA

TE

D S

TO

CK C

HA

RT

74

.669

99

8

79

.669

99

8

84

.669

99

8

89

.669

99

8

94

.669

99

8

99

.669

99

8

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.1

0.1 1

6-M

ar2

8-A

pr

10

-Ju

n2

3-J

ul

3-S

ep

16

-Oct

30

-No

v1

3-J

an2

6-F

eb7

5

80

85

90

95

10

0 16

-Mar

16

-Ap

r1

6-M

ay1

6-J

un

16

-Ju

l1

6-A

ug

16

-Sep

16

-Oct

16

-No

v1

6-D

ec1

6-J

an1

6-F

eb1

6-M

ar

Ea

rnin

gs

EPS:

1.7

19

Est

imate

: 1.7

84

Ea

rnin

gs

EPS:

1.7

45

Est

imate

: 1.7

56

Ea

rnin

gs

EPS:

1.8

06

Est

imate

: 1.7

94

FD

IC in

crease

s re

serv

e ratio

from

1.1

5%

to

1.3

5%

Ea

rnin

gs

EPS:

1.7

50

Est

imate

: 1.7

20

PNC Full Report

Documents

Transcript of PNC Full Report