The PNC Financial Services Group, Inc. (NYSE:PNC) Q4 2019 Earnings Conference Call - Final Transcript

Jan 15, 2020 • 09:30 am ET


The PNC Financial Services Group, Inc. (NYSE:PNC) Q4 2019 Earnings Conference Call - Final Transcript


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William S. Demchak

customers positions us well to continue to deliver for all of our constituencies.

And with that, I'll turn it over to Rob, and then we'll be happy to take your questions.

Robert Q. Reilly

Great. Thanks, Bill and good morning, everyone. As Bill just mentioned, we reported full year net income of $5.4 billion or $11.39 per diluted common share. And fourth quarter net income was $1.4 billion or $2.97 per diluted common share. Our balance sheet is on slide 4 and is presented on an average basis.

Total loans grew $1.2 billion to $239 billion linked quarter. Compared to the fourth quarter of 2018, growth was $13 billion or 6%. Investment securities of $83.5 billion decreased $1.7 billion or 2% linked quarter, due to portfolio run-off primarily in treasuries. Year-over-year, total security balances increased $1.4 billion or 2%. Our cash balances at the Federal Reserve averaged $23 billion for the fourth quarter, up $7.7 billion linked quarter, and $6.6 billion year-over-year, primarily as a result of strong deposit growth. Deposits grew $8.7 billion or 3% linked quarter and $21.3 billion or 8% year-over-year.

As of December 31st, 2019, our Basel III common equity Tier 1 ratio was estimated to be 9.5% compared to 9.6% at September 30th. For the full year 2019, we returned $5.4 billion of capital to shareholders. This represented a 22% increase over 2018 and was comprised of $1.9 billion in common dividends and $3.5 billion in share repurchases. Of note, the tailoring rules became effective January 1st, 2020, and as a result will provide us increased flexibility in managing both our capital and liquidity levels going forward.

As we announced earlier this morning, we've received approval from the Federal Reserve to repurchase up to $1 billion in common shares through the end of the second quarter of 2020, which is in addition to the share repurchase programs of up to $4.3 billion approved by the Fed as part of PNC's 2019 capital plan. This will provide us the ability to repurchase additional shares over the next two quarters, the level of which will depend on market conditions.

Our return on average assets for the fourth quarter was 1.3%, our return on average common equity was 11.5% and our return on tangible common equity was 14.5%. Our tangible book value was $83.30 per common share as of December 31st, an increase of 10% compared to a year ago. Slide 5 shows our average loans and deposits in more detail. Average loan balances of $239 billion in the fourth quarter were up $1.2 billion compared to the third quarter. The growth was driven by consumer lending, which increased $1.9 billion or 3% reflecting higher residential mortgage, auto and credit card loan balances.

Commercial lending decreased $738 million linked quarter as growth in our corporate banking business was more than offset by declines in our real estate business, primarily due to a $1.1 billion decrease in our multi-family warehouse balances. Compared to the same period a year ago, average loans grew