PNC Bank 2002 Annual Report Download - page 66

Download and view the complete annual report

Please find page 66 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

64
2001 VERSUS 2000
CONSOLIDATED INCOME STATEMENT REVIEW
Summary Results
Consolidated net income for 2001 was $377 million or $1.26
per diluted share. Excluding the effect of adopting the new
accounting standard for financial derivatives, net income was
$382 million or $1.28 per diluted share compared with $1.279
billion or $4.31 per diluted share for 2000. Income from
continuing operations in 2001 was $377 million or $1.26 per
diluted share compared with $1.214 billion or $4.09 per diluted
share in 2000. Income from discontinued operations was $5
million or $.02 per diluted share in 2001 compared with $65
million or $.22 per diluted share in 2000. Results for 2001
reflect the actions taken during the year to accelerate the
repositioning of PNC’s lending business and other strategic
initiatives. These charges, totaling $1.2 billion pretax, reduced
2001 net income by $768 million or $2.65 per diluted share.
Return on average common shareholders’ equity was
5.65% and return on average assets was .53% for 2001
compared with 20.52% and 1.76%, respectively, for 2000.
Net Interest Income
Taxable-equivalent net interest income of $2.278 billion for
2001 increased 4% compared with 2000 net interest income of
$2.182 billion. The increase was primarily due to the impact of
transaction deposit growth and a lower rate environment that
was partially offset by the impact of continued downsizing of
the loan portfolio. The net interest margin widened 20 basis
points to 3.84% for 2001 compared with 3.64% for 2000. The
increase was primarily due to the impact of the lower rate
environment, the benefit of growth in transaction deposits and
the downsizing of higher-cost, less valuable retail certificates
and wholesale deposits.
Provision For Credit Losses
The provision for credit losses was $903 million for 2001
which included $714 million associated with institutional
lending repositioning initiatives in 2001. The provision was
$136 million in 2000.
Noninterest Income
Noninterest income was $2.652 billion for 2001 compared
with $2.950 billion in 2000. Noninterest income in 2001
included charges of $259 million for valuation adjustments on
loans held for sale related to the institutional lending
repositioning and $17 million of charges for asset impairments
associated with other strategic initiatives. A $111 million
increase in net securities gains and growth in asset
management, fund servicing, consumer services and other
revenue was more than offset by net losses of $179 million
resulting from lower valuations of equity management
investments as well as reduced brokerage and corporate
services revenue as a result of lower capital markets activity.
Asset management fees of $848 million for 2001 increased
$39 million or 5% primarily driven by new institutional
business and strong fixed-income performance at BlackRock
which more than offset decreases at PNC Advisors primarily
due to the impact of declining equity markets. Consolidated
assets under management were $284 billion at December 31,
2001, a 12% increase compared with December 31, 2000.
Fund servicing fees were $833 million for 2001, a $120 million
increase compared with 2000 primarily driven by new client
growth.
Service charges on deposits increased 6% to $218 million
for 2001 mainly due to an increase in transaction deposit
accounts. Brokerage fees were $206 million for 2001
compared with $249 million for 2000 as increased fees from
sales of insurance products were more than offset by declines
in other brokerage revenue due to weak equity markets.
Consumer services revenue of $229 million for 2001
increased $20 million or 10% compared with 2000 mainly due
to the expansion of PNC’s ATM network and the increase in
transaction deposit accounts.
Corporate services revenue was $60 million for 2001
compared with $342 million for 2000. Revenue in 2001 was
adversely impacted by valuation adjustments on loans held for
sale of $259 million. In addition, increases in treasury
management and commercial mortgage-backed securities
servicing revenue were more than offset by the comparative
impact of losses resulting from lower valuations of equity
investments and lower capital markets fees in 2001.
Equity management (private equity activities) reflected net
losses of $179 million for 2001 compared with net gains of
$133 million in 2000. The decrease primarily resulted from a
decline in the estimated fair value of both limited partnership
and direct investments.
Net securities gains were $131 million for 2001 compared
with $20 million in 2000.
Other noninterest income was $306 million for 2001
compared with $269 million for 2000. Excluding $12 million
of asset write-downs in the fourth quarter of 2001, other
noninterest income increased 18% primarily due to higher
revenue from trading activities and gains on the sale of
residential mortgage loans. Net trading income included in
other noninterest income was $142 million in 2001 compared
with $84 million in 2000.