PNC Bank 2014 Annual Report Download - page 113

The following table summarizes the notional or contractual amounts and net fair value of financial derivatives at December 31,
2014 and December 31, 2013.
Table 55: Financial Derivatives Summary
December 31, 2014 December 31, 2013
In millions
Notional/
Contractual
Amount
Net Fair
Value (a)
Notional/
Contractual
Amount
Net Fair
Value (a)
Derivatives designated as hedging instruments under GAAP
Total derivatives designated as hedging instruments $ 49,061 $1,075 $ 36,197 $ 825
Derivatives not designated as hedging instruments under GAAP
Total derivatives used for residential mortgage banking activities $ 76,102 $ 409 $119,679 $ 330
Total derivatives used for commercial mortgage banking activities 26,290 26 53,149 (12)
Total derivatives used for customer-related activities 183,474 122 169,534 138
Total derivatives used for other risk management activities 5,390 (425) 2,697 (422)
Total derivatives not designated as hedging instruments $291,256 $ 132 $345,059 $ 34
Total Derivatives $340,317 $1,207 $381,256 $ 859
(a) Represents the net fair value of assets and liabilities.
2013 V
ERSUS 2012
Consolidated Income Statement Review
Summary Results
Net income for 2013 was $4.2 billion, or $7.36 per diluted
common share, compared with $3.0 billion, or $5.28 per
diluted common share, for 2012. The increase was driven by
an 8% decline in noninterest expense, a 3% increase in
revenue and lower provision for credit losses. The decline in
noninterest expense reflected our continued focus on
disciplined expense management. Higher revenue in the
comparison was driven by improvement in the provision for
residential mortgage repurchase obligations, strong client fee
income and higher gains on asset valuations, partially offset
by lower net interest income and lower gains on asset sales.
Net Interest Income
Net interest income decreased by $493 million, or 5%, in 2013
compared with 2012, reflecting a decline in purchase
accounting accretion in the comparison, the impact of lower
yields on loans and securities, and the impact of lower
securities balances. These decreases were partially offset by
higher loan balances, reflecting commercial and consumer
loan growth over the period, and lower rates paid on borrowed
funds and deposits. Total purchase accounting accretion was
$.8 billion for 2013 compared to $1.1 billion in 2012.
Net interest margin declined 37 basis points in 2013 compared
with 2012 due to lower purchase accounting accretion and lower
yields on interest-earning assets, which decreased 48 basis
points, partially offset by a decrease in the weighted-average rate
paid on total interest-bearing liabilities of 14 basis points.
The decrease in the yield on interest-earning assets was
primarily due to lower rates on new loans and purchased
securities in the ongoing low interest rate environment, as well
as the impact of higher levels of interest-earning deposits with
banks maintained in light of anticipated regulatory
requirements. The decrease in the rate paid on interest-bearing
liabilities was primarily due to redemptions of higher-rate
bank notes and senior debt and subordinated debt, including
the redemption of trust preferred and hybrid capital securities.
Noninterest Income
Noninterest income increased to $6.9 billion in 2013
compared to $5.9 billion in 2012, due to higher residential
mortgage revenue, which was driven by improvement in the
provision for residential mortgage repurchase obligations,
strong client fee income and higher gains on asset valuations,
partially offset by lower gains on asset sales. Noninterest
income as a percentage of total revenue was 43% for 2013, up
from 38% for 2012.
Asset management revenue increased to $1.3 billion in 2013
compared to $1.2 billion in 2012, driven by higher earnings
from our BlackRock investment, stronger average equity
markets and strong sales resulting in positive net flows, after
adjustments for cyclical client activities. Discretionary client
assets under management increased to $127 billion at
December 31, 2013 compared with $112 billion at
December 31, 2012.
The increase in consumer service fees to $1.3 billion in 2013
compared to $1.1 billion in 2012 was due to growth in
brokerage fees and the impact of higher customer-initiated fee
based transactions.
Corporate services revenue increased $44 million, or 4%, to
$1.2 billion in 2013 compared with 2012. This increase
included the impact of higher valuation gains from rising
interest rates on net commercial mortgage servicing rights
valuations, which were gains of $68 million in 2013 compared
The PNC Financial Services Group, Inc. – Form 10-K 95