PNC Bank 2002 Annual Report Download - page 40

Download and view the complete annual report

Please find page 40 of the 2002 PNC Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 117

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117

38
CONSOLIDATED STATEMENT OF
INCOME REVIEW
NET INTEREST INCOME
Changes in net interest income and margin result from the
interaction among the volume and composition of earning
assets, related yields and associated funding costs. Accordingly,
portfolio size, composition and yields earned and funding
costs can have a significant impact on net interest income and
margin. See the Average Consolidated Balance Sheet and Net
Interest Analysis for additional information.
Taxable equivalent net interest income was $2.210 billion
for 2002, down $68 million, or 3%, from $2.278 billion for
2001. The decline in net interest income for 2002 compared
with the prior year reflected the effects of a lower rate
environment and growth in average transaction deposits in
2002 that was more than offset by the impact of the continued
downsizing of the loan portfolio. The net interest margin
widened 15 basis points to 3.99% for 2002 compared with
3.84% for 2001. The widening of the net interest margin for
2002 resulted from the impact of changes in balance sheet
composition and a lower interest rate environment, combined
with a steep yield curve. See Interest Rate Risk in the Risk
Management section of this Financial Review for additional
information.
PROVISION FOR CREDIT LOSSES
The provision for credit losses was $309 million for 2002
compared with $903 million for 2001. Provision expense for
2001 reflected $714 million for net charge-offs associated with
institutional lending repositioning initiatives. Excluding this
amount, the provision for credit losses increased $120 million
in 2002. The provision for 2002 reflected additions to
reserves for PNC Business Credit and Corporate Banking and
losses in Corporate Banking primarily related to Market Street
Funding Corporation (“Market Street”) liquidity facilities. See
Credit Risk in the Risk Management section and Critical
Accounting Policies And Judgments in the Risk Factors
section of this Financial Review for additional information
regarding credit risk.
Net charge-offs were $223 million, or .60%, of average
loans for 2002 compared with $948 million or 2.12%,
respectively, for 2001. Net charge-offs for 2001 included $804
million related to institutional lending repositioning initiatives.
Excluding this amount, net charge-offs increased $79 million
in 2002 primarily due to two charge-offs totaling $90 million
related to Market Street liquidity facilities. See Market Street
Funding Corporation in this Financial Review for additional
information.
NONINTEREST INCOME
Noninterest income was $3.197 billion for 2002 compared
with $2.652 billion for 2001.
Asset management fees totaled $853 million for 2002, up
$5 million compared with 2001. The increase primarily
reflected an increase in separate account base fee revenue
arising from growth in assets under management at
BlackRock, partially offset by lower asset management fees at
PNC Advisors primarily due to weak equity markets in 2002
and the recognition of $15 million of revenue accrual
adjustments that benefited 2001. Consolidated assets under
management were $313 billion at December 31, 2002, an
increase of $29 billion compared with December 31, 2001, due
to growth at BlackRock.
Fund servicing fees decreased $17 million, to $816 million,
for 2002 compared with 2001. Excluding a one-time benefit
of approximately $13 million related to the renegotiation of a
client contract recognized during 2002 at PFPC, fund servicing
fees decreased $30 million in 2002. Depressed financial market
conditions, pricing and other competitive factors including
customer attrition contributed to the decline in 2002.
Service charges on deposits were $227 million for 2002
compared with $218 million for 2001. The increase in 2002
reflected the benefit of an increase in average transaction
deposits that offset the impact of price reductions from
comparable services.
Brokerage fees declined $11 million, to $195 million, for
2002 compared with the prior year as lower sales commissions
resulted from the impact of depressed financial market
conditions and lower trading volumes.
Consumer services revenue increased $10 million, to $239
million, for 2002 compared with 2001, reflecting additional
fees from ATM and debit card transactions arising from
increased transaction volumes.
Corporate services revenue totaled $526 million for 2002
compared with $60 million for 2001. Net gains in excess of
valuation adjustments related to the liquidation of institutional
loans held for sale totaled $147 million in 2002, while revenue
in 2001 was adversely impacted by valuation adjustments on
loans held for sale of $259 million. Excluding these items,
corporate services revenue increased $60 million in 2002
primarily due to growth in treasury management fees and
higher gains from commercial mortgage loan sales.