Pnc Financial Services Group, Inc. (the) · NYSE:PNC
Pnc Financial Services Group, Inc. (the) — Lehman Brothers 2006 Financial Services Conference
37 slides from Pnc Financial Services Group, Inc. (the)'s conference presentation, May 17, 2006
Slide 1: Lehman Brothers 2006 Financial Services Conference
The PNC Financial Services Group, Inc. Lehman Brothers 2006 Financial Services Conference May 17, 2006 EXHIBIT 99.1
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: Key Messages
Key Messages A diversified financial services company Maintaining a moderate risk profile that is key to improving consistency Executing strategies focused on continued growth and positive operating leverage PNC is…
Slide 4: PNC – A Diversified Financial Services Company
Regional, National and International Businesses PNC – A Diversified Financial Services Company Business Leadership International fund processing: PFPC – with offices in U.S., Ireland & Luxembourg International investment management: BlackRock – with offices in U.S., Scotland, Hong Kong, Tokyo & Aust
Slide 5: PNC's High Return Business Mix
PNCs High Return Business Mix Business Earnings Contribution – Three Months Ended March 31, 2006 Retail Banking Earnings $190 Return on capital 26% Corporate & Institutional Banking Earnings $105 Return on capital 22% BlackRock Earnings $71 Return on average equity 30% PFPC Earnings $27 Return on av
Slide 6: We've Been Delivering Results
We’ve Been Delivering Results Consolidated Net Income Year to Date Highlights $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 2003 2004 2005 $0 $50 $100 $150 $200 $250 $300 $350 $400 1Q05 1Q06 2003 net income excludes expenses related to the DOJ agreement of $87 million after tax and is reconciled to GA
Slide 7: BlackRock/Merrill Lynch Investment Managers Combination
BlackRock/Merrill Lynch Investment Managers Combination Creates Leading Investment Management Firm Transaction is a Win–Win for PNC and BlackRock Will create a top ten investment manager worldwide - $1 trillion in assets under management - Largest publicly traded asset manager in the U.S. - Largest
Slide 8: Key Messages
Key Messages A diversified financial services company Maintaining a moderate risk profile that is key to improving consistency Executing strategies focused on continued growth and positive operating leverage PNC is…
Slide 9: Strong Risk Culture is Essential to Minimizing Surprises
Strong Risk Culture is Essential to Minimizing Surprises Strategic Actions We’ve Taken to Enhance our Risk Culture Strengthened personnel and systems Improved diversification Increased loan granularity Enhanced disclosure Remained disciplined
Slide 10: Disciplined Approach Leads to Strong Asset Quality
Disciplined Approach Leads to Strong Asset Quality Asset Quality Compared to Peers 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Net Charge-offs to Average Loans PNC Peer Group Source
Slide 11: High Quality Consumer Loan Portfolio
High Quality Consumer Loan Portfolio Composition of Consumer Loan Portfolio Home Equity Loans Auto Loans Other Consumer Loans Average Consumer Loans For the Three Months Ended 3/31/06 Home Equity Portfolio Credit Statistics First lien positions 45% Weighted average: Loan to value 68% FICO scores 90
Slide 12: Our Approach to Interest Rate Risk
Our Approach to Interest Rate Risk: Preserve and Optimize Long-Term Value Neutral Duration of Equity Positions Us Well in This Environment (3) (2) (1) 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Duration of Equity Years 3 Month LIBOR 10 Year T Note At Quarter End 2004 2005 3/31/06
Slide 13: Key Messages
Key Messages A diversified financial services company Maintaining a moderate risk profile that is key to improving consistency Executing strategies focused on continued growth and positive operating leverage PNC is…
Slide 14: Fee-Based Businesses Differentiate PNC
Fee-Based Businesses Differentiate PNC Noninterest Income to Total Revenue Information for the quarter ended 3/31/06 PNC amounts calculated in the Appendix Source: SNL DataSource 0% 10% 20% 30% 40% 50% 60% 70% 80% BK PNC WB USB FITB WFC STI BBT KEY RF NCC Banking & Other BlackRock PFPC
Slide 15: Fee Based Businesses Delivering Strong Noninterest Income Growth
Fee Based Businesses Delivering Strong Noninterest Income Growth Consolidated Noninterest Income $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 2003 2004 2005 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 1Q05 1Q06 $ millions 13% CAGR 13% CAGR
Slide 16: Increasing and Deepening Checking Relationships
Increasing and Deepening Checking Relationships 0.0 0.5 1.0 1.5 2.0 2003 2004 2005 3/31/06 …Provides Opportunities for Deepening Relationships Average home equity loans ($ billions) $13.8 +8% Consumer on-line banking users 50% +18% Consumer online bill-pay users 14% +92% Growth* * Growth is for 1Q06
Slide 17: Growing a Valuable Core Deposit Base
Growing a Valuable Core Deposit Base Relationship Strategy Generating Deposit Growth $5 $7 $9 $11 $13 $15 $17 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q $5 $7 $9 $11 $13 $15 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% $ billions Retail Banking Average Certificates of Depos
Slide 18: Growing Deposits Faster Than Our Peers
Growing Deposits Faster Than Our Peers Deposit Increase Compared to Peers Total interest-bearing deposits 15% 9% Total noninterest-bearing deposits 12% 3% Total deposits 14% 7% Average Balances 1Q06 vs. 1Q05 PNC Peers Source: SNL DataSource Peers reflects median of super-regional banks as identified
Slide 19: Noninterest-Bearing Deposits Becoming More Valuable
Noninterest-Bearing Deposits Becoming More Valuable PNC’s High Percentage of Noninterest-Bearing Funding Rising Interest Rates Increase Value of PNC’s Noninterest-Bearing Deposits WFC % PNC BK RF KEY USB STI WB FITB NCC BBT 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Average
Slide 20: Average Loans Outstanding
Average Loans Outstanding Improving Execution Driving Loan Growth Drivers of Growth Retail Banking Focus on home equity loan product Offering enhanced Business Banking product set to small business customers Corporate & Institutional Banking Leveraging national distribution in Commercial Real Estate
Slide 21: An Opportunity to Increase Securities Yields
An Opportunity to Increase Securities Yields Retained Portfolio Flexibility Increasing Yields on Securities Portfolio BK 4.61 % 3.77 % +84bp RF 4.92 4.32 +60bp PNC 4.66 4.10 +56bp USB 5.00 4.48 +52bp WFC 6.06 5.60 +46bp STI 4.69 4.25 +44bp BT 4.39 4.08 +31bp WB 5.24 5.01 +23bp NCC 5.27 5.07 +20bp KE
Slide 22: Net Interest Income Improving
Net Interest Income Improving Consolidated Net Interest Income (Taxable - Equivalent Basis) $1,000 $1,250 $1,500 $1,750 $2,000 $2,250 2003 2004 2005 Net interest income on a taxable-equivalent basis is reconciled to GAAP net interest income in the Appendix $ millions $350 $400 $450 $500 $550 $600 1Q
Slide 23: One PNC – Driving Improved Operating Leverage
One PNC – Driving Improved Operating Leverage Building a Culture of Continuous Improvement Eliminate 3,000 positions Implement 2,400 ideas Achieve $400 million of total value 2,100 positions eliminated 91% of ideas are complete or in process Delivered $60 million in first quarter of 2006. On track t
Slide 24: Impact of Expense Management Becoming More Visible
Impact of Expense Management Becoming More Visible Bank Efficiency Ratio Improving 50% 55% 60% 65% 70% 6/30/05 9/30/05 12/31/05 3/31/06 Bank efficiency ratio represents the consolidated (GAAP basis) efficiency ratio excluding the effect of BlackRock and PFPC and is reconciled to GAAP in the Appendix
Slide 25: Improving Capital Flexibility
Improving Capital Flexibility Tangible Common Equity Ratio Capital Management Priorities PNC (Pro forma) 7.3% FITB 6.9% KEY 6.7% NCC 6.6% WFC 6.2% BBT 6.1% USB 5.7% BK 5.6% STI 5.6% PNC 5.0% WB 4.9% As of December 31, 2005 Pro forma after giving effect to BlackRock/Merrill Lynch transaction and is r
Slide 26: Summary
Summary Built a differentiated company Comprehensive risk management culture to increase predictability Proven and executable growth strategies PNC has:
Slide 27: © PNC
© PNC
Slide 28: 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 29: 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 30: Appendix
Appendix
Slide 31: Non-GAAP to GAAP Reconcilement: Business Earnings and Return on Capital
Non-GAAP to GAAP Reconcilement Appendix Business Earnings and Return on Capital Business segments Retail Banking $190 26% Corporate & Institutional Banking 22% BlackRock 30% PFPC 28% Total business segments Minority interest in income of BlackRock (22) Other (17) Total consolidated $354 17% $ millio
Slide 32: Non-GAAP to GAAP Reconcilement: Consolidated Net Income
Non-GAAP to GAAP Reconcilement Appendix Consolidated Net Income Net income, GAAP basis $1,325 $1,197 $1,001 15% Expenses related to DOJ agreement (1) One-time tax benefit (2) (45) Net income, adjusted $1,280 $1,197 $1,088 8% Net income, GAAP basis $354 $354 0% One-time tax benefit (2) (45) Net incom
Slide 33: Non-GAAP to GAAP Reconcilement: Noninterest Income to Total Revenue
Non-GAAP to GAAP Reconcilement Appendix Noninterest Income to Total Revenue* BlackRock (1) $396 23% PFPC (1) 13% Banking businesses 29% Other 3% Total consolidated $1,185 $1,741 68% Noninterest Income $ millions Consolidated Total Revenue Noninterest Income to Consolidated Total Revenue* Quarter End
Slide 34: Non-GAAP to GAAP Reconcilement: Net Interest Income
Non-GAAP to GAAP Reconcilement Appendix Net Interest Income Net interest income, GAAP basis $2,154 $1,969 $1,996 4% Taxable-equivalent adjustment 82% Net interest income, taxable-equivalent basis $2,187 $1,989 $2,006 4% Net interest income, GAAP basis $556 $506 10% Taxable-equivalent adjustment 17%
Slide 35: Non-GAAP to GAAP Reconcilement: Efficiency Ratios
Non-GAAP to GAAP Reconcilement Appendix Efficiency Ratios Source: Page 10 of The PNC Financial Services Group, Inc. first quarter 2006 Earnings Release Financial Supplement
Slide 36: Non-GAAP to GAAP Reconcilement: Tangible Common Equity Ratio
Non-GAAP to GAAP Reconcilement Appendix Tangible Common Equity Ratio Common shareholders equity $8.5 $1.6(a) $10.1 Goodwill & other intangible assets 4.1 ($0.5) 3.6 Tangible common equity $4.4 $6.5 Total assets $92.0 ($1.2) $2.5(b) $93.3 Goodwill & other intangible assets 4.1 (0.5) 3.6 Tangible asse
Slide 37: Peer Group of Super-Regional Banks
Peer Group of Super-Regional Banks Appendix BB&T Corporation BBT The Bank of New York Company, Inc. BK 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
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