Please ensure Javascript is enabled for purposes of website accessibility

PNC Financial Services Sees Q1 Profits Decline 28%

By Bram Berkowitz – Updated Apr 17, 2020 at 10:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The bank took a credit provision nearly five times higher than in the first quarter of 2019 to prepare for expected losses.

PNC Financial Services (PNC 4.45%), the holding company of the $412 billion asset PNC Bank, reported a 28% drop in first-quarter profits as the bank sets aside more cash for future loan losses during the coronavirus pandemic.

Net income in the first quarter of 2020 was $915 million, or $1.95 per share.

The bank recorded a $914 million credit provision, which is the cash banks set aside to cover potential loan losses. That was nearly five times the $189 million credit provision the bank took in the first quarter of 2019.

PNC Bank

Image Source: Getty

"Our results for the first quarter were good, but the extraordinary changes in the economic backdrop occurring in March and the implications of the broad-based response to the COVID-19 outbreak
had a material impact on our provision for credit losses," Bill Demchak, chairman, president, and CEO of PNC, said in a statement. "With our strong capital and liquidity and leading technology, we will continue to serve our stakeholders while navigating the current challenges."

The bank continued to pay its normal dividend of $1.15 per common share, even as its common equity tier 1 ratio (CET1) continued to decline. The CET1 is a closely watched capital buffer that measures a bank's core equity by its total risk-weighted assets. PNC's CET1 ratio at the end of Q1 was 9.4%, down 10 basis points from the fourth quarter of 2019 and down from 9.8% in last year's first quarter. That is definitely toward the lower end when you look at some of the other big banks.

However, PNC CFO Robert Reilly said on the company's earnings call that the bank believes it could continue to support its current dividend if the the CET1 ratio got all the way down to 8.5% under a severely adverse scenario.

 

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The PNC Financial Services Group, Inc. Stock Quote
The PNC Financial Services Group, Inc.
PNC
$160.64 (4.45%) $6.84

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
331%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.