PNC Bank 2012 Annual Report Download - page 60

P ROVISION F OR C REDIT L OSSES
The provision for credit losses totaled $1.0 billion for 2012, a
decrease of $.2 billion, or 14 percent, compared with $1.2
billion for 2011. The decline in the comparison was driven by
overall credit quality improvement.
We currently expect our provision for credit losses in the first
quarter of 2013 to be between $200 and $300 million, as we
expect the benefit of commercial loan reserve releases to be
lower in 2013 compared to 2012.
The Credit Risk Management portion of the Risk Management
section of this Item 7 includes additional information
regarding factors impacting the provision for credit losses. See
also Item 1A Risk Factors and the Cautionary Statement
Regarding Forward-Looking Information section of Item 7 of
this Report.
N ONINTEREST E XPENSE
Noninterest expense was $10.6 billion for 2012 and $9.1
billion for 2011. Noninterest expense for 2012 included
noncash charges of $295 million related to redemption of trust
preferred securities, integration costs of $267 million, $225
million of residential mortgage foreclosure-related expenses,
and a noncash charge of $45 million for residential mortgage
banking goodwill impairment. Noninterest expense for 2011
included $324 million of residential mortgage foreclosure-
related expenses, $198 million of noncash charges related to
redemption of trust preferred securities and $42 million of
integration costs. The increase in noninterest expense in 2012
compared with 2011 also reflected operating expense for the
RBC Bank (USA) acquisition, higher personnel expense,
higher settlements for other litigation and increased expenses
for other real estate owned.
In the first quarter of 2013, we expect noninterest expense to
decrease by at least $300 million compared to noninterest
expense in fourth quarter 2012 of $2.8 billion. This expected
decline is primarily due to our expectations for a significant
reduction in residential mortgage foreclosure-related
compliance expenses, which were $91 million in the fourth
quarter and included the impact of a charge of approximately
$70 million for the early 2013 amendment to our foreclosure
consent orders, and for no anticipated noncash charges related
to redemption of trust preferred securities and goodwill
impairment, and integration costs, which were $70 million,
$45 million and $35 million in the fourth quarter of 2012,
respectively.
For full year 2013, we have increased our continuous
improvement expense savings goal to $700 million, which
represents approximately 7 percent of our noninterest expense
in 2012 and reflects an expected decline in residential
mortgage foreclosure-related compliance expenses. We expect
that amount to be offset by investments in our businesses and
infrastructure, including the full year impact of investing in
the Southeast. However, we are not expecting to incur
integration costs in 2013 and anticipate the charges for any
noncash charges related to redemption of trust preferred
securities to be approximately $60 million or less in 2013.
As a result, we currently expect total noninterest expense for
2013 to decline by mid-single digits on a percentage basis
compared with 2012.
E FFECTIVE I NCOME T AX R ATE
The effective income tax rate was 23.9% in 2012 compared
with 24.5% in 2011. The effective tax rate is generally lower
than the statutory rate primarily due to tax credits PNC
receives from our investments in low income housing
partnerships and other tax exempt investments.
We expect our 2013 full year effective tax rate to be between
25 to 26 percent, reflecting expected higher pre-tax income.
The PNC Financial Services Group, Inc. – Form 10-K 41