PNC Financial Services (NYSE: PNC) reported Q2 EPS of $1.88, $0.12 better than the analyst estimate of $1.76. Revenue for the quarter came in at $3.87 billion versus the consensus estimate of $3.78 billion.

Income Statement Highlights

• Second quarter earnings reflected revenue growth, well-controlled expenses, improved credit quality and higher loans, securities and deposits.
• Net interest income of $2.1 billion for the second quarter decreased $20 million, or 1 percent, compared with the first quarter due to lower purchase accounting accretion, while core net interest income was relatively stable.
• Noninterest income of $1.8 billion for the second quarter increased $155 million, or 9 percent, compared with the first quarter primarily driven by strong fee income growth from higher client activity and seasonality, as well as higher gains on asset sales.
• Noninterest expense of $2.4 billion for the second quarter increased slightly by 1 percent over the first quarter primarily reflecting higher variable compensation costs associated with higher business activity, as PNC continued to focus on disciplined expense management.
  • Second quarter 2015 included a reduction in noninterest expense associated with a change in application of historic tax credits and a related increase in the effective tax rate.
• Provision for credit losses declined to $46 million for the second quarter from $54 million in the first quarter as overall credit quality improved.

Balance Sheet Highlights

• Loans grew $.4 billion to $205.1 billion at June 30, 2015 compared with March 31, 2015.
  • Total commercial lending increased $1.0 billion primarily in PNC's real estate, business credit and corporate banking businesses.
  • Total consumer lending declined $.6 billion, including runoff in the non-strategic portfolio.
• Overall credit quality improved in the second quarter compared with the first quarter.
  • Nonperforming assets of $2.6 billion at June 30, 2015 declined $.2 billion, or 6 percent, compared with March 31, 2015.
  • Net charge-offs decreased to $67 million for the second quarter from $103 million in the first quarter.
• Investment securities increased by $.6 billion, or 1 percent, in the second quarter to $61.4 billion at June 30, 2015, largely funded by deposit growth.
• Deposits grew $3.2 billion, or 1 percent, compared with the first quarter due to higher money market and demand deposits.
• PNC's well-positioned balance sheet remained core funded with a loans to deposits ratio of 86 percent at June 30, 2015.
• PNC maintained a strong liquidity position.
  • The estimated Liquidity Coverage Ratio at June 30, 2015 exceeded 100 percent for both PNC and PNC Bank, N.A., above the minimum phased-in requirement of 80 percent in 2015, calculated as of month end.
• PNC returned capital to shareholders through repurchases of 5.9 million common shares for $.6 billion during the second quarter of 2015.
  • Purchases were made under share repurchase programs of up to $2.875 billion for the five quarter period beginning in the second quarter of 2015.
• PNC maintained a strong capital position.
  • Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.6 percent at June 30, 2015 and 10.5 percent at March 31, 2015, calculated using the regulatory capital methodology applicable to PNC during 2015.
  • Pro forma fully phased-in Basel III common equity Tier 1 capital ratio was an estimated 10.0 percent at June 30, 2015 and March 31, 2015 based on the standardized approach rules.

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