Pnc Financial Services Group, Inc. (the) · NYSE:PNC
Pnc Financial Services Group, Inc. (the) — BancAnalysts Association of Boston 26th Annual Conference (November 2007)
28 slides from Pnc Financial Services Group, Inc. (the)'s conference presentation, Nov 8, 2007
Slide 1: The PNC Financial Services Group, BancAnalysts Association of Boston 26th Annual Conference
The PNC Financial Services Group, Inc. BancAnalysts Association of Boston 26 th Annual Conference November 8, 2007 Exhibit 99.1
Slide 2: Cautionary Statement Regarding Forward-Looking Information and Adjusted Information
Cautionary Statement Regarding Forward-Looking Information and Adjusted 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
Slide 3: Key Take-aways
Key Take-aways State of the markets PNC is well-positioned for this environment Leveraging our position to capture opportunities
Slide 4: Media Outlets Paint a Gloomy Picture
Media Outlets Paint a Gloomy Picture “Another Subprime Lender Files for Bankruptcy” February 2007, MoneyNews “Cash Sources Dry Up for Subprime Mortgage Lenders” March 2007 , USAToday “Those Who Profited from Subprimes Now Suffer Too” August 2007, MotherJones “Bond Funds Could Get Hit by Mortgage Mes
Slide 5: Assessing One's Current Position
Assessing One’s Current Position Strategy and Business Mix Dictate Ability to Respond Flexible Core funded Positive operating leverage Total return focus High fee mix Credit Factors Liquidity Factors Liquidity Profile Subprime/Alt-A Commercial real estate Leveraged lending Warehouse/ syndications St
Slide 6: Subprime Mortgage Resets – Still Early in the Cycle
Subprime Mortgage Resets – Still Early in the Cycle Estimated Subprime Loans with Higher Rate Resets… and a Sense of Foreboding $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 J F M A M J J A S O N D J F M A M J J A S O N D J F Average Default Rate of Adjustable-Rate Subprime RMBS Originated 2000-2006 (%
Slide 7: Default Rates are Still at a Low Point
Default Rates are Still at a Low Point U.S. Speculative-Grade Bond Default Rate 1983 1985 1989 1991 1993 1999 1995 1997 2001 2003 1987 2005 2007 Long-term average 4.54% Source: Standard & Poor’s Global Fixed Income Research Recession U.S. Speculative-grade default rate (%)
Slide 8: Pricing – No Bargains Yet
Pricing – No Bargains Yet Spread Between Corporate Debt and 10-Year Treasury, bps 1,000 1,200 1,400 1,600 1,800 2,000 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 10 Year BBB 10 Year B 10 Year CCC Source: RiskMetrics Group 2003 2004 2005 2006 2007
Slide 9: Ongoing Liquidity Pressures
Ongoing Liquidity Pressures Diverging Yields Liquidity Needs 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% Fed Funds 1 Month LIBOR Source: SNL DataSource $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Weekly average primary credit borrowings from the Fed millions Source: Federal Reserve June 4 July August S
Slide 10: Key Take-aways
Key Take-aways PNC State of the markets PNC is well-positioned for this environment Leveraging our position to capture opportunities
Slide 11: Moderate Risk Profile Reflected in Absolute Yields
Moderate Risk Profile Reflected in Absolute Yields Focus on Total Risk-adjusted Returns PNC Focus on Risk-adjusted Lending WFC 7.92 % NCC 7.33 BBT 7.11 RF 6.95 KEY 6.92 CMA 6.91 USB 6.90 WB 6.88 FITB 6.74 STI 6.62 PNC 6.37 For the three months ended September 30, 2007. Source: SNL DataSource, PNC as
Slide 12: Maintaining a Moderate Credit Risk Profile – A Closer Look
Maintaining a Moderate Credit Risk Profile – A Closer Look PNC Composition of Loans for Third Quarter 2007 53% 28% 14% 45% 28% 22% Source: Company reports, peer average reflects average of super-regional banks as defined in Appendix excluding PNC, except as noted below. (1) RF and FITB excluded due
Slide 13: High Quality Consumer Loan Portfolio
High Quality Consumer Loan Portfolio Auto 5% Composition of Consumer Loan and Residential Mortgage Portfolio Other 8% Residential Mortgage 35% As of September 30, 2007 Home Equity Portfolio Credit Statistics First lien positions 39% In-footprint exposure 93% Weighted average: Loan to value 72% FICO
Slide 14: Credit Discipline Reflected in Reserves and Losses
Credit Discipline Reflected in Reserves and Losses Proactively Assessing Credits PNC Managing the Risk WB 0.19 % RF 0.27 PNC 0.30 CMA 0.32 STI 0.35 KEY 0.35 BBT 0.41 USB 0.54 NCC 0.54 FITB 0.60 WFC 1.02 USB 318 % PNC RF CMA BBT KEY WFC WB FITB NCC STI For the three months ended September 30, 2007. S
Slide 15: Creating Positive Operating Leverage
Creating Positive Operating Leverage Generating Capital by Growing Revenues Faster Than Expenses Trend Continues ¹ PNC $0 $1 $2 $3 $4 $5 $6 $7 2004 2005 2006 Revenue 9% billions Compound Annual Growth Rate (2004 – 2006) Adjusted Revenue (as reported $5.5 billion, $6.3 billion, $8.6 billion for 2004,
Slide 16: Building a Diversified Business Mix
Building a Diversified Business Mix PNC High Fee Income Contribution Low Cost Funding Mix RF 3.90 % PNC 3.99 USB 4.01 FITB 4.04 STI 4.08 WFC 4.14 BBT 4.20 CMA 4.29 WB 4.34 KEY 4.40 NCC 4.46 Cost of Interest Bearing Liabilities ² 3Q07 PNC 58 % USB FITB WFC WB STI BBT KEY RF NCC CMA YTD07 (1) For the
Slide 17: Proactively Managing the Balance Sheet
Proactively Managing the Balance Sheet Aligning the Balance Sheet with Expectations PNC (3) (2) (1) 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% PNC Duration of Equity (At Quarter End) Fed Fund Effective Rate (At Quarter End) 2004 2005 2006 2007 Source: SNL DataSource, PNC as reported
Slide 18: Key Take-aways
Key Take-aways State of the markets PNC is well-positioned for this environment Leveraging our position to capture opportunities
Slide 19: Opportunities to Capture Value
Opportunities to Capture Value Remaining focused on client-related business Affinity toward asset-based lending Leveraging Midland Loan Services Exercising patience and finding pockets of value
Slide 20: Summary
Summary PNC We’ve executed on our strategies We’re well-positioned for the current environment Liquidity Profile High Low PNC
Slide 21: Cautionary Statement Regarding Forward-Looking Information
Cautionary Statement Regarding Forward-Looking Information Appendix 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-loo
Slide 22: Cautionary Statement Regarding Forward-Looking Information (continued)
Cautionary Statement Regarding Forward-Looking Information (continued) Appendix •Our ability to implement our business initiatives and strategies could affect our financial performance over the next several years. •Legal and regulatory developments could have an impact on our ability to operate our
Slide 23: Additional Information About The PNC/Sterling Financial Corporation Transaction
Additional Information About The PNC/Sterling Financial Corporation Transaction Appendix The PNC Financial Services Group, Inc. and Sterling Financial Corporation will be filing a proxy statement/prospectus and other relevant documents concerning the merger with the United States Securities and Exch
Slide 24: Non-GAAP to GAAP Reconcilement Income Statement Summary – Nine Months Ended September 30
Non-GAAP to GAAP Reconcilement Income Statement Summary – For the Nine Months Ended September 30 Appendix NINE MONTHS ENDED In millions As Reported Adjustments As Adjusted (a) As Reported Adjustments As Adjusted (b) Net interest income $2,122 $2,122 $1,679 ($10) $1,669 Net interest income: % Change
Slide 25: Non-GAAP to GAAP Reconcilement Income Statement Summary – 04 to 2006
Non-GAAP to GAAP Reconcilement Income Statement Summary – 2004 to 2006 Appendix BlackRock For the year ended December 31, 2006 PNC Deconsolidation and BlackRock PNC In millions As Reported Adjustments (a) Other Adjustments Equity Method As Adjusted Net interest income $2,245 $(10) $2,235 Provision f
Slide 26: Non-GAAP to GAAP Reconcilement Income Statement Summary – 04 to 2006 (continued)
Non-GAAP to GAAP Reconcilement Income Statement Summary – 2004 to 2006 (continued) Appendix For the year ended December 31, 2004 BlackRock PNC Deconsolidation and BlackRock PNC In millions As Reported Other Adjustments Equity Method As Adjusted Net interest income $1,969 $(14) $1,955 Provision for c
Slide 27: Non-GAAP to GAAP Reconcilement Noninterest Income/Total Revenue
Non-GAAP to GAAP Reconcilement Noninterest Income/Total Revenue Appendix Nine Months Ending September 30, 2007 Dollars in millions Retail Banking Corporate & Institutional Banking Other Banking and Other BlackRock PFPC Total Net interest income (expense) $1,517 $571 $48 $2,136 ($14) $2,122 Nonintere
Slide 28: Peer Group of Super-Regional Banks
Peer Group of Super-Regional Banks Appendix The PNC Financial Services Group, Inc. PNC BB&T Corporation BBT Comerica CMA Fifth Third Bancorp FITB KeyCorp KEY National City Corporation NCC Regions Financial RF SunTrust Banks, Inc. STI U.S. Bancorp USB Wachovia Corporation WB Wells Fargo & Company WFC