PNC Bank 2012 Annual Report Download - page 54

K EY F ACTORS A FFECTING F INANCIAL P ERFORMANCE
Our financial performance is substantially affected by a
number of external factors outside of our control, including
the following:
• General economic conditions, including the
continuity, speed and stamina of the moderate
economic recovery in general and on our customers
in particular,
• The level of, and direction, timing and magnitude of
movement in, interest rates and the shape of the
interest rate yield curve,
• The functioning and other performance of, and
availability of liquidity in, the capital and other
financial markets,
• Loan demand, utilization of credit commitments and
standby letters of credit, and asset quality,
• Customer demand for non-loan products and
services,
• Changes in the competitive and regulatory landscape
and in counterparty creditworthiness and
performance as the financial services industry
restructures in the current environment,
• The impact of the extensive reforms enacted in the
Dodd-Frank legislation and other legislative,
regulatory and administrative initiatives, including
those outlined elsewhere in this Report, and
• The impact of market credit spreads on asset
valuations.
In addition, our success will depend upon, among other things:
• Further success in growing profitability through the
acquisition and retention of customers,
• Continued development of the geographic markets
related to our recent acquisitions, including full
deployment of our product offerings into our
Southeast markets,
• Revenue growth and our ability to provide innovative
and valued products to our customers,
• Our ability to utilize technology to develop and
deliver products and services to our customers,
• Our ability to manage and implement strategic
business objectives within the changing regulatory
environment,
• A sustained focus on expense management,
• Managing the non-strategic assets portfolio and
impaired assets,
• Improving our overall asset quality,
• Continuing to maintain and grow our deposit base as
a low-cost funding source,
• Prudent risk and capital management related to our
efforts to manage risk in keeping with a moderate
risk philosophy, and to meet evolving regulatory
capital standards,
• Actions we take within the capital and other financial
markets,
• The impact of legal and regulatory-related
contingencies, and
• The appropriateness of reserves needed for critical
estimates and related contingencies.
For additional information, please see Risk Factors in Item 1A
of this Report and the Cautionary Statement Regarding
Forward-Looking Information section in this Item 7.
Table 1: Summary Financial Results
Year ended December 31 2012 2011
Net income (millions) $3,001 $3,071
Diluted earnings per common share
from net income $ 5.30 $ 5.64
Return from net income on:
Average common shareholders’
equity 8.31% 9.56%
Average assets 1.02% 1.16%
I
NCOME S TATEMENT H IGHLIGHTS
Our performance in 2012 included the following:
• Net income for 2012 of $3.0 billion decreased 2
percent compared to 2011. Revenue growth of 8
percent and a decline in the provision for credit
losses were more than offset by a 16 percent increase
in noninterest expense in 2012 compared with 2011.
Further detail is included below and in the
Consolidated Income Statement Review section of
this Item 7.
• Net interest income of $9.6 billion for 2012 increased
11 percent compared with 2011 driven by the impact
of the RBC Bank (USA) acquisition, organic loan
growth and lower funding costs.
• Noninterest income of $5.9 billion for 2012 increased
$.2 billion compared to 2011. The increase was
primarily driven by higher residential mortgage loans
sales revenue related to an increase in loan
origination volume, gains on sales of Visa Class B
common shares and higher corporate service fees,
largely offset by higher provision for residential
mortgage repurchase obligations.
• The provision for credit losses decreased to $1.0
billion for 2012 compared to $1.2 billion for 2011.
The decline in the comparison was driven by overall
credit quality improvement.
• Noninterest expense of $10.6 billion for 2012
increased $1.5 billion compared with 2011 primarily
driven by operating expense for the RBC Bank
(USA) acquisition, higher integration costs, increased
noncash charges related to redemption of trust
preferred securities and a charge for residential
mortgage banking goodwill impairment, partially
offset by the impact from higher residential mortgage
foreclosure-related expenses in 2011.
The PNC Financial Services Group, Inc. – Form 10-K 35