PNC Financial Services (NYSE: PNC) reported Q2 EPS of $1.82, $0.07 better than the analyst estimate of $1.75. Revenue for the quarter came in at $3.79 billion versus the consensus estimate of $3.81 billion.

Income Statement Highlights

• Second quarter results reflected higher fee income, increased noninterest expense driven by business activity, lower provision for credit losses, and growth in average loans and deposits compared with the first quarter of 2016.
• Net interest income of $2.1 billion for the second quarter decreased $30 million, or 1 percent, compared with the first quarter mainly from a decline in purchase accounting accretion.
• Noninterest income of $1.7 billion for the second quarter increased $159 million, or 10 percent, compared with the first quarter primarily due to strong growth in fee income from higher client activity and seasonality.
• Noninterest expense increased $79 million, or 3 percent, to $2.4 billion for the second quarter compared with the first quarter as a result of higher business activity as PNC remained focused on disciplined expense management.
  • Provision for credit losses declined to $127 million for the second quarter from $152 million in the first quarter as overall credit quality remained stable.

Balance Sheet Highlights

• Loans grew $1.6 billion, or 1 percent, to $209.1 billion at June 30, 2016 compared with March 31, 2016.
  • Total commercial lending increased $1.9 billion, or 1 percent, primarily to large corporate customers in PNC's corporate banking business and from growth in real estate loans.
  • Total consumer lending decreased $.3 billion due to lower home equity and education loans partially offset by growth in auto and credit card loans.
• Overall credit quality in the second quarter remained stable with the first quarter.
  • Nonperforming assets of $2.5 billion at June 30, 2016 decreased 1 percent compared with March 31, 2016.
  • Net charge-offs were $134 million for the second quarter and $149 million for the first quarter.
  • The energy related loan portfolio weakened slightly, but at a slower pace compared with the first quarter.
• Deposits were $249.8 billion at June 30, 2016, a decrease of $.6 billion from March 31, 2016.
  • Average deposits increased $1.5 billion, or 1 percent, in the second quarter compared with the first quarter reflecting growth in consumer deposits.
• Investment securities decreased $.8 billion, or 1 percent, in the second quarter to $71.8 billion at June 30, 2016 compared with March 31, 2016.
• PNC maintained a strong liquidity position.
  • The Liquidity Coverage Ratio at June 30, 2016 exceeded 100 percent for both PNC and PNC Bank, N.A., above the minimum phased-in requirement of 90 percent in 2016.
• PNC completed common stock repurchase programs for the five quarter period that ended in the second quarter of 2016.
  • PNC returned a total of $4.0 billion of capital to shareholders through repurchases of 29.9 million common shares for $2.7 billion and dividends on common shares of $1.3 billion over the five quarter period.
  • Second quarter 2016 repurchases were 6.1 million common shares for $.5 billion and dividends on common shares were $.3 billion.
  • In June 2016 PNC announced share repurchase programs of up to $2.0 billion for the four-quarter period beginning in the third quarter of 2016, including repurchases of up to $.2 billion related to employee benefit plans.
  • PNC's board of directors raised the quarterly dividend on common stock to 55 cents per share, an increase of 4 cents per share, or 8 percent, effective with the August dividend.
• PNC maintained a strong capital position.
  • Transitional Basel III common equity Tier 1 capital ratio was an estimated 10.6 percent at both June 30, 2016 and March 31, 2016, calculated using the regulatory capital methodologies applicable to PNC during 2016.
  • Pro forma fully phased-in Basel III common equity Tier 1 capital ratio was an estimated 10.2 percent at June 30, 2016 and 10.1 percent at March 31, 2016 based on the standardized approach rules.

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