The PNC Financial Services Group Reports First Quarter 2001 Earnings

Apr 19, 2001, 01:00 ET from PNC Financial Services Group

    PITTSBURGH, April 19 /PRNewswire/ -- The PNC Financial Services Group,
 Inc. (NYSE:   PNC) today reported first quarter 2001 earnings of $305 million or
 $1.03 per diluted share, excluding the cumulative effect of an accounting
 change, compared with $308 million or $1.03 per diluted share for the first
 quarter of 2000.  Reported net income for the first quarter of 2001, which
 includes the effect of adopting the new accounting standard for derivatives,
 was $300 million or $1.01 per diluted share.  Return on average common
 shareholders' equity was 18.82 percent and return on average assets was
 1.62 percent for the first quarter of 2001 compared with 21.71 percent and
 1.66 percent, respectively, for the first quarter of 2000.  These results
 include the negative impact of a $27 million net loss from venture capital
 activities.  Excluding this loss and the effect of the accounting change,
 first quarter 2001 results were $332 million or $1.12 per diluted share.
     "PNC's diverse group of businesses is performing well in the face of a
 turbulent market and a slowing economy.  I am pleased that our investments in
 asset management, processing and other growth businesses continue to fuel
 strong overall results for PNC," said James E. Rohr, president and chief
 executive officer of The PNC Financial Services Group.  "We are also
 continuing to reposition our traditional lending businesses and strengthen our
 balance sheet even further.  The actions taken during the first quarter are
 another important step in positioning PNC for an environment that we expect to
 remain quite challenging in the months ahead."
     On January 31, 2001, PNC sold its residential mortgage banking business,
 which is reflected in its financial statements as discontinued operations.
 The recorded gain on sale and earnings from operations totaled $40 million
 after tax in the first quarter of 2001.  These earnings were mostly offset by
 a $32 million after-tax charge related to the write-down of loans in the
 communications and energy, metals and mining portfolios that PNC has
 designated for exit and severance costs.  The gain on sale of the residential
 mortgage banking business is subject to adjustment after final settlement is
 completed.
 
     HIGHLIGHTS
 
     *  Asset management and processing businesses grew earnings 30 percent
        compared with the first quarter of 2000 and increased to 28 percent of
        total business earnings for the first quarter of 2001 compared with
        23 percent in the first quarter of 2000.
 
     *  Excluding gains and losses from venture capital activities, noninterest
        income grew 15 percent in the first quarter of 2001 compared with the
        prior-year quarter and noninterest income to total revenue increased to
        57 percent for the first quarter of 2001 compared with 53 percent a
        year ago.
 
     *  Loans declined $5.0 billion from December 31, 2000 to $45.6 billion at
        March 31, 2001 as a result of ongoing efforts to reduce balance sheet
        leverage and lending revenue was 22 percent of total revenue in the
        first quarter of 2001, one of the lowest in PNC's peer group.
 
     *  The loan to deposit ratio was 97 percent at March 31, 2001, down from
        110 percent at March 31, 2000, and 121 percent at September 30, 1998
        prior to the implementation of balance sheet downsizing initiatives.
 
     FIRST QUARTER 2001 INCOME STATEMENT REVIEW
 
     Taxable-equivalent net interest income of $559 million for the first
 quarter of 2001 remained relatively unchanged compared with the first quarter
 of 2000 as the impact of a higher level of earning assets was offset by a
 narrower net interest margin.  The net interest margin was 3.62 percent for
 the first quarter of 2001 compared with 3.68 percent for the first quarter of
 2000.  The narrowing of the net interest margin was primarily due to a higher
 proportion of securities available for sale in the mix of earning assets.
     The provision for credit losses was $80 million for the first quarter of
 2001 compared with $31 million for the first quarter of 2000.  The increase
 was primarily due to $41 million of additional provision for credit losses
 related to the write-down of loans in the communications and energy, metals
 and mining portfolios that PNC has designated for exit.
     Noninterest income was $701 million for the first quarter of 2001 and
 included $39 million of equity management losses.  Excluding equity management
 gains and losses in both years, noninterest income increased 15 percent
 compared with the first quarter of 2000 primarily due to growth in asset
 management and processing revenue.
     Asset management fees of $223 million for the first quarter of
 2001 increased $37 million or 20 percent compared with the first quarter of
 2000 primarily driven by new business.  Assets under management were
 $248 billion at March 31, 2001, a 13 percent increase compared with March 31,
 2000.  Fund servicing fees of $181 million for the first quarter of 2001
 increased $26 million or 17 percent compared with the first quarter of
 2000 primarily due to existing and new client growth.  At March 31, 2001, PFPC
 provided accounting/administration services for $472 billion of pooled
 investment assets and provided custody services for $435 billion of customer
 assets.  The comparable amounts were $448 billion and $425 billion,
 respectively, at March 31, 2000.  PFPC serviced in excess of 44 million
 shareholder accounts at March 31, 2001 compared with 39 million a year ago.
     Brokerage fees were $54 million for the first quarter of 2001 compared
 with $71 million for the first quarter of 2000.  The decrease was primarily
 due to a decline in equity markets activity.  Consumer services revenue of
 $55 million for the first quarter of 2000 increased $8 million or 17 percent
 compared with the prior-year quarter primarily due to an increase in retail
 transaction volume.
     Corporate services revenue was $76 million for the first quarter of
 2001 compared with $82 million for the first quarter of 2000 primarily due to
 lower capital markets revenue and other asset write-downs.
     Equity management, which is comprised of venture capital activities,
 reflected losses of $39 million for the first quarter of 2001 compared with
 $87 million of income for the first quarter of 2000.  The decrease primarily
 resulted from a decline in the estimated fair value of partnership and direct
 investments.
     Net securities gains were $29 million for the first quarter of 2001 and
 were mostly offset by write-downs of other assets and e-commerce investments
 totaling $22 million that are reflected in corporate services and other
 income.  Other noninterest income was $72 million for the first quarter of
 2001 compared with $53 million for the first quarter of 2000.  The increase
 was primarily due to residential mortgage loan securitizations and student
 loan sales.
     Noninterest expense was $775 million and the efficiency ratio was
 58 percent in the first quarter of 2001 compared with $792 million and
 58 percent, respectively, during the first quarter of 2000.
     Results from continuing operations were $265 million or $0.89 per diluted
 share for the first quarter of 2001.  Excluding the loss from venture capital
 activities and costs related to downsizing initiatives, results from
 continuing operations were $324 million or $1.09 per diluted share.  Earnings
 from continuing operations were $302 million or $1.01 per diluted share a year
 ago.
 
     FIRST QUARTER 2001 BALANCE SHEET REVIEW
 
     The Corporation has been pursuing a number of initiatives designed to
 improve the risk and return characteristics of its lending businesses.  These
 include the sale of the residential mortgage banking and credit card
 businesses, exiting certain non-strategic institutional lending businesses and
 the continued downsizing of the indirect automobile lending portfolio.  These
 actions have resulted in a reduction in the loan to deposit ratio to
 97 percent at March 31, 2001, down from 121 percent at September 30, 1998
 prior to the implementation of balance sheet downsizing initiatives.
     Total assets were $71.0 billion at March 31, 2001 compared with
 $74.3 billion at March 31, 2000 prior to the sale of PNC's residential
 mortgage banking business.  On the same basis, average interest-earning assets
 were $61.5 billion for the first quarter of 2001 compared with $65.0 billion
 for the first quarter of 2000.  The decrease was primarily due to a
 $4.1 billion reduction in loans and loans held for sale that resulted from the
 sale of mortgage banking and other balance sheet downsizing initiatives.
     Average deposits were $46.3 billion for the first quarter of 2001 compared
 with $44.3 billion in the first quarter of 2000 and represented 64 percent of
 total sources of funds in both periods.  The increase in deposits primarily
 resulted from a number of strategic marketing initiatives to grow more
 valuable transaction accounts.
     Average borrowed funds declined to $14.4 billion for the first quarter of
 2001 compared with $20.1 billion for the first quarter of 2000 prior to the
 sale of PNC's residential mortgage banking business.
     Shareholders' equity totaled $6.8 billion at March 31, 2001.  The
 regulatory capital ratios are estimated to be 7.8 percent for leverage,
 8.6 percent for tier I and 12.5 percent for total risk-based capital.  During
 the first quarter of 2001, PNC repurchased 2.3 million shares of common stock.
 Common shares outstanding at March 31, 2001 were 288.9 million.
 
     ASSET QUALITY REVIEW
 
     The ratio of nonperforming assets to total loans, loans held for sale and
 foreclosed assets was .81 percent at March 31, 2001 compared with .71 percent
 at December 31, 2000 and .65 percent at March 31, 2000.  The increase
 primarily resulted from a decrease in loans.  Nonperforming assets were
 $386 million at March 31, 2001 compared with $372 million and $344 million at
 December 31, 2000 and March 31, 2000, respectively.
     The allowance for credit losses was $675 million and represented
 1.48 percent of period-end loans and 201 percent of nonperforming loans at
 March 31, 2001.  The comparable ratios were 1.33 percent and 209 percent,
 respectively, at December 31, 2000 and 1.34 percent and 225 percent,
 respectively, at March 31, 2000.  Net charge-offs were $80 million or
 .65 percent of average loans in the first quarter of 2001.  The comparable
 amounts were $40 million or .32 percent, respectively, in the fourth quarter
 of 2000 and $31 million or .25 percent, respectively, in the first quarter of
 2000.  The increase was primarily due to a $41 million write-down of loans in
 the communications and energy, metals and mining portfolios that PNC has
 designated for exit.  Excluding this amount, net charge-offs were $39 million
 or .32 percent of average loans for the first quarter of 2001.
 
      BUSINESS RESULTS
      Quarter ended March 31 - dollars in millions
 
                                             Revenue            Return on
                         Earnings       (taxable-            Assigned Capital
                                         equivalent basis)
                         2001    2000    2001      2000     2001     2000
 
     PNC Bank
      Community Banking   $162    $129    $542      $477       24%      20%
      Corporate Banking     24      64     192       214        8       22
       Total PNC Bank      186     193     734       691       19       21
 
     Secured Finance
      PNC Real Estate
       Finance              20      13      53        46       21       14
      PNC Business Credit   16      13      38        28       41       38
       Total Secured
        Finance             36      26      91        74       26       20
        Total Banking      222     219     825       765       20       21
     Asset Management
      and Processing
       PNC Advisors         44      41     199       204       32       30
       BlackRock            25      19     134       108       26       26
       PFPC                 17       6     189       165       33       12
        Total Asset
         Management and
         Processing         86      66     522       477       30       25
          Total business
           results         308     285   1,347     1,242       22       22
     Other                 (43)     17     (87)       46
       Results from
        continuing
        operations         265     302   1,260     1,288       17       21
     Discontinued
      operations            40       6
     Results before
      cumulative effect of
      accounting change    305     308   1,260     1,288       19       22
     Cumulative effect of
      accounting change     (5)
      Total Consolidated  $300    $308  $1,260    $1,288       19       22
 
     Overall, businesses performed well during the first quarter of
 2001 compared with the same period last year with the exception of Corporate
 Banking, which was negatively impacted by higher credit costs.  Excluding
 Corporate Banking, total business earnings increased 29 percent compared with
 a year ago due to strong growth in Asset Management and Processing businesses,
 improved performance in Secured Finance and net securities gains in Community
 Banking.
     PNC Bank -- Community Banking earned $162 million for the first quarter of
 2001, an increase of 26 percent compared with the same quarter in
 2000, primarily due to net securities gains and strong business growth.
 Excluding net securities gains in 2001 and net losses from last year, earnings
 increased 11 percent primarily driven by growth in deposits as well as higher
 noninterest income.  Corporate Banking's earnings declined to $24 million for
 the first quarter of 2001 compared with $64 million for the first quarter of
 2000 primarily due to $41 million of additional provision for credit losses
 related to the write-down of loans in the communications and energy, metals
 and mining portfolios that PNC has designated for exit.
     Secured Finance -- PNC Real Estate Finance earned $20 million for the
 first quarter of 2001, a 54 percent increase compared with the prior-year
 quarter primarily due to higher commercial mortgage servicing revenue and
 growth in the affordable housing business.  PNC Business Credit earned
 $16 million for the first quarter of 2001, a 23 percent increase compared with
 the first quarter of 2000 primarily due to an increase in noninterest income.
     Asset Management and Processing -- PNC Advisors earned $44 million for the
 first quarter of 2001, a 7 percent increase compared with the first quarter of
 2000 primarily driven by improved efficiency.  Revenue growth attributable to
 new asset management business was more than offset by lower brokerage revenue.
 BlackRock earned $25 million for the first quarter of 2001, a 33 percent
 increase compared with the same period in 2000 primarily resulting from new
 business and strong fixed-income performance.  PFPC's earnings were
 $17 million for the first quarter of 2001 compared with $6 million during the
 same period in 2000.  The increase was primarily due to new and existing
 client growth.  Cash earnings for PFPC, which exclude goodwill amortization,
 increased $11 million to $27 million.
     Total business financial results differ from results from continuing
 operations primarily due to differences between management accounting
 practices and generally accepted accounting principles, divested and exited
 businesses in the prior year, equity management activities, minority
 interests, residual asset and liability management activities, eliminations
 and unassigned items, the impact of which is reflected in the "Other"
 category.
 
     RECORDED COMMENTS ON FIRST QUARTER 2001 RESULTS
 
     Recorded comments providing further information regarding the topics
 addressed in this earnings release will be available for one week, beginning
 at approximately 10:00 a.m. on April 19, by calling 1-800-753-8878.  The
 recorded comments may include forward-looking information and are subject to
 the cautionary statements set forth below and elsewhere in this press release.
 
     FORWARD-LOOKING STATEMENTS
 
     This release and other statements that the Corporation may make may
 include forward-looking statements within the meaning of the Private
 Securities Litigation Reform Act with respect to outlook for the second
 quarter 2001 and other future financial or business performance, conditions,
 strategies, expectations and goals.  Forward-looking statements are typically
 identified by words or phrases such as "believe," "expect," "anticipate,"
 "intend," "estimate," "position," "target," "assume," "achievable,"
 "potential," "strategy," "goal," "objective," "plan," "aspiration," "outlook,"
 "outcome," "continue," "remain," "maintain," "strive," "trend," and variations
 of such words and similar expressions, or future or conditional verbs such as
 "will," "would," "should," "could," "may," or similar expressions.  The
 Corporation cautions that forward-looking statements are subject to numerous
 assumptions, risks and uncertainties, which change over time.  These
 forward-looking statements speak only as of the date of this press release,
 and the Corporation assumes no duty to update forward-looking statements.
 Actual results could differ materially from those anticipated in these
 forward-looking statements and future results could differ materially from
 historical performance.
     The factors discussed elsewhere in this press release and the following
 factors, among others, could cause actual results to differ materially from
 forward-looking statements or historical performance:  adjustments to recorded
 results of sale of residential mortgage banking business after final
 settlement is completed; decisions PNC makes with respect to the redeployment
 of available capital; changes in asset quality and credit risk; economic
 conditions; changes in financial and capital markets; the inability to sustain
 revenue and earnings growth; changes in interest rates; inflation; changes in
 values of assets under management and assets serviced; relative investment
 performance of assets under management; customer acceptance of PNC products
 and services; customer borrowing, repayment, investment, and deposit
 practices; customer disintermediation; valuation of debt and equity
 investments; the introduction, withdrawal, success and timing of business
 initiatives and strategies; the extent and cost of any share repurchases;
 decisions PNC makes with respect to further reduction of balance sheet
 leverage and potential investments in PNC businesses; competitive conditions;
 the inability to realize cost savings or revenue enhancements, implement
 integration plans and other consequences associated with mergers,
 acquisitions, restructurings and divestitures; and the impact, extent and
 timing of technological changes, capital management activities, and actions of
 the Federal Reserve Board and legislative and regulatory actions and reform.
 Further, an increase in the number of customer or counterparty delinquencies,
 bankruptcies, or defaults could result, among other things, in a higher loan
 loss provision and reduced profitability.
     The Corporation's SEC reports, accessible on the SEC's website at
 www.sec.gov on PNC's website at www.pnc.com , identify additional factors that
 can affect forward-looking statements.
 
     The PNC Financial Services Group, Inc., headquartered in Pittsburgh, is
 one of the nation's largest diversified financial services organizations,
 providing community banking, corporate banking, real estate finance,
 asset-based lending, wealth management, asset management and global fund
 services.
 
     [TABULAR MATERIAL FOLLOWS]
 
     Consolidated Financial Highlights
 
     The PNC Financial Services Group, Inc.
 
     For the three months ended - dollars  March 31     Dec. 31    March 31
      in millions, except per share data       2001        2000        2000
 
     FINANCIAL PERFORMANCE
     Revenue
        Net interest income (taxable-
         equivalent basis)                     $559        $538        $560
        Noninterest income                      701         735         728
        Total revenue                         1,260       1,273       1,288
     Income from continuing operations          265         314         302
     Discontinued operations                     40          20           6
     Income before cumulative effect of
      accounting change                         305         334         308
     Cumulative effect of accounting
      change                                     (5)
         Net income                            $300        $334        $308
 
     Cash earnings from continuing
      operations (a)                           $294        $344        $331
     Cash earnings from discontinued
      operations (a)                             40          20           6
     Cash earnings before cumulative
      effect of accounting change (a)           334         364         337
     Cash earnings from cumulative effect
      of accounting change (a)                   (5)
         Cash earnings from net income (a)     $329        $364        $337
 
     Per common share
       Diluted earnings
         Continuing operations                $0.89       $1.06       $1.01
         Discontinued operations                .14         .07         .02
         Diluted earnings before cumulative
          effect of accounting change          1.03        1.13        1.03
         Cumulative effect of accounting
          change                               (.02)
         Net income                           $1.01       $1.13       $1.03
       Diluted cash earnings (a)
         Continuing operations                $1.00       $1.16       $1.11
         Discontinued operations                .14         .06         .02
         Diluted cash earnings before
          cumulative effect of accounting
          change (a)                           1.14        1.22        1.13
         Cumulative effect of accounting
          change                               (.02)
         Net income                           $1.12       $1.22       $1.13
 
     Cash dividends declared                  $0.48       $0.48       $0.45
 
     SELECTED RATIOS
     From continuing operations
     Return on
        Average common shareholders'
         equity                               16.59 %     20.10 %     21.29 %
        Average assets                         1.49        1.81        1.77
     Net interest margin                       3.62        3.60        3.68
     Noninterest income to total revenue      55.63       57.74       56.52
     Efficiency (b)                           57.91       55.44       57.85
     From net income
     Return on
        Average common shareholders'
         equity                               18.82       21.41       21.71
        Average assets                         1.62        1.72        1.66
     Net interest margin                       3.53        3.24        3.46
     Noninterest income to total revenue      57.13       60.64       58.27
     Efficiency (c)                           56.18       53.09       57.36
 
      (a) Excludes amortization of goodwill.
      (b) Excludes amortization and distributions on capital securities.
      (c) Excludes amortization, distributions on capital securities and
          residential mortgage banking risk management activities.
 
 
     Consolidated Financial Highlights
 
     The PNC Financial Services Group, Inc.
 
     For the three months
      ended - dollars in     March 31   Dec. 31  Sept. 30   June 30  March 31
      millions                   2001      2000      2000      2000      2000
 
     BALANCE SHEET DATA
     Assets                   $70,966   $69,844   $69,884   $68,885   $68,474
     Earning assets            60,548    59,373    60,142    59,334    59,986
     Loans, net of unearned
      income                   45,626    50,601    49,791    50,281    50,259
     Securities available for
      sale                     11,976     5,902     6,490     5,315     5,906
     Loans held for sale        1,765     1,655     2,127     2,305     2,799
     Deposits                  47,189    47,664    47,494    46,381    45,767
     Borrowed funds            12,279    11,718    12,299    13,028    13,362
     Shareholders' equity       6,781     6,656     6,383     6,157     6,039
     Common shareholders'
      equity                    6,470     6,344     6,071     5,844     5,726
     Book value per common
      share                     22.39     21.88     21.01     20.22     19.68
     Loans to deposits            .97      1.06      1.05      1.08      1.10
 
     CAPITAL RATIOS
     Leverage                    7.80 %    8.03 %    6.87 %    6.72 %    6.67 %
     Common shareholders'
      equity to total assets     9.12      9.08      8.69      8.48      8.36
 
     ASSET QUALITY RATIOS
     Nonperforming assets to
      total loans, loans held
      for sale and foreclosed
      assets                      .81       .71       .68       .67       .65
     Allowance for credit
      losses to total loans      1.48      1.33      1.36      1.34      1.34
     Allowance for credit
      losses to nonperforming
      loans                    200.89    208.98    219.16    217.04    224.67
     Net charge-offs to
      average loans               .65       .32       .24       .27       .25
 
 
     ANALYSIS OF FIRST QUARTER RESULTS
 
                                                                  Per Diluted
     In millions, except per share data               Net Income        Share
 
     Net income                                             $300       $1.01
     Cumulative effect of accounting change                    5         .02
     Results before cumulative effect of accounting change   305        1.03
     Venture capital activities                               27         .09
                                                             332        1.12
     Discontinued operations                                 (40)       (.14)
     Loans designated for exit                                27         .09
     Severance costs                                           5         .02
     Adjusted results                                       $324       $1.09
 
 
     Consolidated Statement of Income
 
     The PNC Financial Services Group, Inc.
 
     For the three months ended - dollars   March 31     Dec. 31   March 31
      in millions, except per share data        2001        2000       2000
     Interest Income
     Loans and fees on loans                    $981      $1,027       $984
     Securities available for sale               122          96         94
     Loans held for sale                          37          41         64
     Other                                        32          26         19
        Total interest income                  1,172       1,190      1,161
     Interest Expense
     Deposits                                    397         453        369
     Borrowed funds                              221         204        237
        Total interest expense                   618         657        606
        Net interest income                      554         533        555
     Provision for credit losses                  80          40         31
        Net interest income less provision
         for credit losses                       474         493        524
     Noninterest Income
     Asset management                            223         219        186
     Fund servicing                              181         167        155
     Service charges on deposits                  50          56         50
     Brokerage                                    54          57         71
     Consumer services                            55          56         47
     Corporate services                           76          94         82
     Equity management                           (39)          1         87
     Net securities gains (losses)                29          16         (3)
     Other                                        72          69         53
        Total noninterest income                 701         735        728
     Noninterest Expense
     Staff expense                               421         410        411
     Net occupancy                                53          52         53
     Equipment                                    57          59         56
     Amortization                                 26          27         28
     Marketing                                     9          22         13
     Distributions on capital securities          17          17         16
     Other                                       192         165        215
        Total noninterest expense                775         752        792
     Income from continuing operations
      before income taxes                        400         476        460
     Income taxes                                135         162        158
        Income from continuing operations        265         314        302
     Income from discontinued operations
      (less applicable income taxes of $0,
      $14, and $5)                                40          20          6
     Net income before cumulative effect
      of accounting change                       305         334        308
     Cumulative effect of accounting
      change (less applicable income taxes
      of $2)                                      (5)
        Net income                              $300        $334       $308
     Income from continuing operations
      applicable to diluted earnings             261         310        297
     Net income applicable to diluted
      earnings                                   296         330        303
     Earnings Per Common Share
     Continuing operations
     Basic                                     $0.90       $1.07      $1.02
     Diluted                                    0.89        1.06       1.01
     Net income
     Basic                                     $1.02       $1.14      $1.04
     Diluted                                    1.01        1.13       1.03
     Cash Dividends Declared Per Common
      Share                                      .48         .48        .45
     Average Common Shares Outstanding
     Basic                                     289.2       289.2      291.9
     Diluted                                   292.8       292.9      294.1
 
 
     Details of Net Interest Income and Net Interest Margin
 
     The PNC Financial Services Group, Inc.
 
     Net Interest Income by Quarter
     Taxable-equivalent basis
     Three months ended           March 31  Dec. 31  Sept. 30  June 30 March 31
      - in millions                   2001     2000      2000     2000     2000
     Interest income
        Loans and fees on loans       $985   $1,031    $1,028   $1,013     $988
        Securities available for sale  122       97        99       98       95
        Loans held for sale             37       41        47       52       64
        Other                           33       26        30       22       19
           Total interest income     1,177    1,195     1,204    1,185    1,166
     Interest expense
        Deposits                       397      453       434      397      369
        Borrowed funds                 221      204       236      238      237
           Total interest expense      618      657       670      635      606
           Net interest income        $559     $538      $534     $550     $560
 
 
     Net Interest Margin by Quarter
     Taxable-equivalent basis   March 31  Dec. 31 Sept. 30  June 30  March 31
     Three months ended             2001     2000     2000     2000      2000
     Average yields/rates
        Yield on earning assets
           Loans and fees on loans  7.96 %   8.16 %   8.13 %   8.03 %    7.88 %
           Securities available for
            sale                    6.08     6.53     6.41     6.50      6.22
           Loans held for sale      7.31     8.32     8.77     8.11      7.64
           Other                    7.20     7.80     8.05     7.01      6.92
              Total yield on
               earning assets       7.67     7.99     7.98     7.86      7.68
        Rate on interest-bearing
         liabilities
           Deposits                 4.22     4.66     4.58     4.30      4.05
           Borrowed funds           6.15     6.83     6.85     6.54      6.14
              Total rate on
               interest-bearing
               liabilities          4.75     5.16     5.18     4.92      4.67
              Interest rate spread  2.92     2.83     2.80     2.94      3.01
        Impact of noninterest-
         bearing sources             .70      .77      .74      .69       .67
              Net interest margin   3.62 %   3.60 %   3.54 %   3.63 %    3.68 %
 
 
     Noninterest Income and Expense by Quarter
 
     The PNC Financial Services Group, Inc.
 
     Noninterest Income by Quarter
     Three months ended        March 31  Dec. 31  Sept. 30  June 30  March 31
      - in millions                2001     2000      2000     2000      2000
     Asset management              $223     $219      $208     $196      $186
     Fund servicing                 181      167       168      164       155
     Service charges on deposits     50       56        50       50        50
     Brokerage                       54       57        61       60        71
     Consumer services               55       56        55       51        47
     Corporate services              76       94        86       80        82
     Equity management              (39)       1        (3)      48        87
     Net securities gains (losses)   29       16         7                 (3)
     Other                           72       69        68       79        53
        Total noninterest income   $701     $735      $700     $728      $728
 
     Noninterest income to total
      revenue                     55.63 %  57.74 %   56.73 %  56.96 %   56.52 %
 
 
     Noninterest Expense by Quarter
     Three months ended        March 31  Dec. 31  Sept. 30  June 30  March 31
      - in millions                2001     2000      2000     2000      2000
     Staff expense                 $421     $410      $399     $396      $411
     Net occupancy                   53       52        50       48        53
     Equipment                       57       59        54       55        56
     Amortization                    26       27        27       28        28
     Marketing                        9       22        16       19        13
     Distributions on capital
      securities                     17       17        17       17        16
     Other                          192      165       184      217       215
        Total noninterest expense  $775     $752      $747     $780      $792
 
     Efficiency (a)               57.91 %  55.44 %   56.79 %  57.29 %   57.85 %
 
     (a) Excludes amortization and distributions on capital securities.
 
 
     Consolidated Balance Sheet
 
     The PNC Financial Services Group, Inc.
 
                                             March 31     Dec. 31    March 31
     In millions, except par value               2001        2000        2000
     Assets
     Cash and due from banks                   $2,998      $3,662      $2,172
     Short-term investments                       853       1,151         967
     Loans held for sale                        1,765       1,655       2,799
     Securities available for sale             11,976       5,902       5,906
     Loans, net of unearned income of
      $1,062, $999 and $724                    45,626      50,601      50,259
        Allowance for credit losses              (675)       (675)       (674)
        Net loans                              44,951      49,926      49,585
     Goodwill and other amortizable assets      2,437       2,468       2,482
     Investment in discontinued operations                    356         274
     Other                                      5,986       4,724       4,289
        Total assets                          $70,966     $69,844     $68,474
 
     Liabilities
     Deposits
        Noninterest-bearing                    $8,431      $8,490      $8,019
        Interest-bearing                       38,758      39,174      37,748
           Total deposits                      47,189      47,664      45,767
     Borrowed funds
        Federal funds purchased                   785       1,445         909
        Repurchase agreements                     830         607         136
        Bank notes and senior debt              5,362       6,110       7,001
        Federal Home Loan Bank borrowings       2,623         500       2,058
        Subordinated debt                       2,379       2,407       2,425
        Other borrowed funds                      300         649         833
           Total borrowed funds                12,279      11,718      13,362
     Other                                      3,869       2,958       2,458
        Total liabilities                      63,337      62,340      61,587
 
     Mandatorily redeemable capital
      securities of subsidiary trusts             848         848         848
 
     Shareholders' Equity
     Preferred stock                                7           7           7
     Common stock - $5 par value
        Authorized 450 shares
        Issued 353 shares                       1,764       1,764       1,764
     Capital surplus                            1,323       1,303       1,285
     Retained earnings                          6,857       6,736       6,178
     Deferred benefit expense                     (26)        (25)        (18)
     Accumulated other comprehensive
      income (loss) from continuing
      operations                                    7         (43)       (140)
     Accumulated other comprehensive loss
      from discontinued operations                            (45)       (124)
     Common stock held in treasury at
      cost: 64, 63 and 62 shares               (3,151)     (3,041)     (2,913)
        Total shareholders' equity              6,781       6,656       6,039
        Total liabilities, capital
         securities and shareholders'
         equity                               $70,966     $69,844     $68,474
 
 
     Consolidated Average Balance Sheet Data by Quarter
 
     The PNC Financial Services Group, Inc.
 
     Three months ended - in     March 31  Dec. 31  Sept. 30  June 30  March 31
      millions                       2001     2000      2000     2000      2000
     Assets
     Interest-earning assets
        Loans held for sale        $2,005   $1,991    $2,151   $2,577    $3,319
        Securities available for
         sale                       8,061    5,928     6,179    6,009     6,128
        Loans, net of unearned
         income
           Consumer                 9,085    9,081     9,174    9,209     9,247
           Residential mortgage    12,673   12,838    12,405   12,571    12,584
           Commercial              20,882   21,109    21,800   22,042    21,791
           Commercial real estate   2,580    2,670     2,688    2,682     2,698
           Lease financing          3,897    3,639     3,238    3,049     2,958
           Other                      520      591       646      676       688
           Total loans, net of
            unearned income        49,637   49,928    49,951   50,229    49,966
        Other                       1,831    1,322     1,445    1,276     1,113
           Total interest-earning
            assets                 61,534   59,169    59,726   60,091    60,526
     Noninterest-earning assets    10,251    9,214     8,857    8,566     7,818
     Investment in discontinued
      operations                      207      570       515      448       412
           Total assets           $71,992  $68,953   $69,098  $69,105   $68,756
 
     Liabilities
     Interest-bearing liabilities
        Deposits
           Demand and money
            market                $20,468  $19,762   $18,914  $18,549   $17,700
           Savings                  1,919    1,937     2,020    2,107     2,138
           Retail certificates of
            deposit                13,724   14,795    14,776   14,403    14,591
           Other time                 565      587       619      641       637
           Deposits in foreign
            offices                 1,402    1,579     1,342    1,483     1,489
           Total interest-bearing
            deposits               38,078   38,660    37,671   37,183    36,555
        Borrowed funds             14,375   11,738    13,518   14,422    15,333
           Total interest-bearing
            liabilities            52,453   50,398    51,189   51,605    51,888
     Noninterest-bearing deposits   8,190    8,304     8,239    8,357     7,700
     Other                          3,830    2,978     2,637    2,290     2,393
           Total liabilities       64,473   61,680    62,065   62,252    61,981
 
     Mandatorily redeemable
      capital securities of
      subsidiary trusts               848      848       848      848       848
 
     Shareholders' Equity           6,671    6,425     6,185    6,005     5,927
           Total liabilities,
            capital securities
            and shareholders'
            equity                $71,992  $68,953   $69,098  $69,105   $68,756
     Common Shareholders' Equity   $6,360   $6,113    $5,873   $5,692    $5,614
 
 
     Loan Portfolio and Nonperforming Assets by Quarter
 
     The PNC Financial Services Group, Inc.
 
     Loan Portfolio by Quarter
                                March 31  Dec. 31  Sept. 30  June 30  March 31
     Period ended - in millions     2001     2000      2000     2000      2000
     Consumer                     $9,049   $9,133    $9,174   $9,213    $9,173
     Residential mortgage          8,806   13,264    12,563   12,470    12,711
     Commercial                   20,676   21,207    21,198   22,140    22,033
     Commercial real estate        2,590    2,583     2,676    2,687     2,665
     Lease financing               5,080    4,845     4,498    3,834     3,701
     Other                           487      568       646      669       700
        Total loans               46,688   51,600    50,755   51,013    50,983
        Unearned income           (1,062)    (999)     (964)    (732)     (724)
        Total loans, net of
         unearned income         $45,626  $50,601   $49,791  $50,281   $50,259
 
 
     Nonperforming Assets by Type
                                March 31  Dec. 31  Sept. 30  June 30  March 31
     Period ended - in millions     2001     2000      2000     2000      2000
     Nonaccrual loans
        Commercial                  $296     $312      $261     $259      $240
        Commercial real estate        21        3        16       12        13
        Residential mortgage           4        4        26       34        42
        Consumer                       3        2         3        3         3
        Lease financing                6        2         2        3         2
           Total nonaccrual loans    330      323       308      311       300
           Troubled debt restructured
            loans                      6
        Total nonperforming loans    336      323       308      311       300
 
     Foreclosed and other assets
        Commercial real estate         2        3         4        4         5
        Residential mortgage           7        8         8        9         8
        Other                         41       38        34       29        31
           Total foreclosed and other
            assets                    50       49        46       42        44
              Total nonperforming
               assets               $386     $372      $354     $353      $344
 
 
     Nonperforming Assets by Business
                                March 31  Dec. 31  Sept. 30  June 30  March 31
     Period ended - in millions     2001     2000      2000     2000      2000
     PNC Bank
          Community Banking          $61      $47       $82      $96      $104
          Corporate Banking          210      219       156      153       160
     Secured Finance
          PNC Real Estate Finance     25        9        22       19        22
          PNC Business Credit         33       36        32       22         2
     PNC Advisors                      4        2         6        8         8
     Other                            53       59        56       55        48
              Total nonperforming
               assets               $386     $372      $354     $353      $344
 
 
     The PNC Financial Services Group, Inc.
 
     Asset Quality Data
 
     Allowance For Credit Losses
     Three months ended         March 31  Dec. 31  Sept. 30  June 30  March 31
      - in millions                 2001     2000      2000     2000      2000
     Beginning balance              $675     $675      $675     $674      $674
     Charge-offs
        Consumer                     (10)     (12)      (11)     (11)      (12)
        Residential mortgage                   (4)       (1)      (1)       (2)
        Commercial                   (78)     (35)      (27)     (30)      (29)
        Commercial real estate                 (1)       (2)
        Lease financing               (3)      (3)       (2)      (1)       (2)
           Total charge-offs         (91)     (55)      (43)     (43)      (45)
 
     Recoveries
        Consumer                       5        6         5        5         6
        Residential mortgage                    1                  1
        Commercial                     6        7         4        3         7
        Commercial real estate                            4
        Lease financing                         1                            1
           Total recoveries           11       15        13        9        14
 
     Net charge-offs
        Consumer                      (5)      (6)       (6)      (6)       (6)
        Residential mortgage                   (3)       (1)                (2)
        Commercial                   (72)     (28)      (23)     (27)      (22)
        Commercial real estate                 (1)        2
        Lease financing               (3)      (2)       (2)      (1)       (1)
           Total net charge-offs     (80)     (40)      (30)     (34)      (31)
 
     Provision for credit losses      80       40        30       35        31
 
        Ending balance              $675     $675      $675     $675      $674
 
 

SOURCE PNC Financial Services Group
    PITTSBURGH, April 19 /PRNewswire/ -- The PNC Financial Services Group,
 Inc. (NYSE:   PNC) today reported first quarter 2001 earnings of $305 million or
 $1.03 per diluted share, excluding the cumulative effect of an accounting
 change, compared with $308 million or $1.03 per diluted share for the first
 quarter of 2000.  Reported net income for the first quarter of 2001, which
 includes the effect of adopting the new accounting standard for derivatives,
 was $300 million or $1.01 per diluted share.  Return on average common
 shareholders' equity was 18.82 percent and return on average assets was
 1.62 percent for the first quarter of 2001 compared with 21.71 percent and
 1.66 percent, respectively, for the first quarter of 2000.  These results
 include the negative impact of a $27 million net loss from venture capital
 activities.  Excluding this loss and the effect of the accounting change,
 first quarter 2001 results were $332 million or $1.12 per diluted share.
     "PNC's diverse group of businesses is performing well in the face of a
 turbulent market and a slowing economy.  I am pleased that our investments in
 asset management, processing and other growth businesses continue to fuel
 strong overall results for PNC," said James E. Rohr, president and chief
 executive officer of The PNC Financial Services Group.  "We are also
 continuing to reposition our traditional lending businesses and strengthen our
 balance sheet even further.  The actions taken during the first quarter are
 another important step in positioning PNC for an environment that we expect to
 remain quite challenging in the months ahead."
     On January 31, 2001, PNC sold its residential mortgage banking business,
 which is reflected in its financial statements as discontinued operations.
 The recorded gain on sale and earnings from operations totaled $40 million
 after tax in the first quarter of 2001.  These earnings were mostly offset by
 a $32 million after-tax charge related to the write-down of loans in the
 communications and energy, metals and mining portfolios that PNC has
 designated for exit and severance costs.  The gain on sale of the residential
 mortgage banking business is subject to adjustment after final settlement is
 completed.
 
     HIGHLIGHTS
 
     *  Asset management and processing businesses grew earnings 30 percent
        compared with the first quarter of 2000 and increased to 28 percent of
        total business earnings for the first quarter of 2001 compared with
        23 percent in the first quarter of 2000.
 
     *  Excluding gains and losses from venture capital activities, noninterest
        income grew 15 percent in the first quarter of 2001 compared with the
        prior-year quarter and noninterest income to total revenue increased to
        57 percent for the first quarter of 2001 compared with 53 percent a
        year ago.
 
     *  Loans declined $5.0 billion from December 31, 2000 to $45.6 billion at
        March 31, 2001 as a result of ongoing efforts to reduce balance sheet
        leverage and lending revenue was 22 percent of total revenue in the
        first quarter of 2001, one of the lowest in PNC's peer group.
 
     *  The loan to deposit ratio was 97 percent at March 31, 2001, down from
        110 percent at March 31, 2000, and 121 percent at September 30, 1998
        prior to the implementation of balance sheet downsizing initiatives.
 
     FIRST QUARTER 2001 INCOME STATEMENT REVIEW
 
     Taxable-equivalent net interest income of $559 million for the first
 quarter of 2001 remained relatively unchanged compared with the first quarter
 of 2000 as the impact of a higher level of earning assets was offset by a
 narrower net interest margin.  The net interest margin was 3.62 percent for
 the first quarter of 2001 compared with 3.68 percent for the first quarter of
 2000.  The narrowing of the net interest margin was primarily due to a higher
 proportion of securities available for sale in the mix of earning assets.
     The provision for credit losses was $80 million for the first quarter of
 2001 compared with $31 million for the first quarter of 2000.  The increase
 was primarily due to $41 million of additional provision for credit losses
 related to the write-down of loans in the communications and energy, metals
 and mining portfolios that PNC has designated for exit.
     Noninterest income was $701 million for the first quarter of 2001 and
 included $39 million of equity management losses.  Excluding equity management
 gains and losses in both years, noninterest income increased 15 percent
 compared with the first quarter of 2000 primarily due to growth in asset
 management and processing revenue.
     Asset management fees of $223 million for the first quarter of
 2001 increased $37 million or 20 percent compared with the first quarter of
 2000 primarily driven by new business.  Assets under management were
 $248 billion at March 31, 2001, a 13 percent increase compared with March 31,
 2000.  Fund servicing fees of $181 million for the first quarter of 2001
 increased $26 million or 17 percent compared with the first quarter of
 2000 primarily due to existing and new client growth.  At March 31, 2001, PFPC
 provided accounting/administration services for $472 billion of pooled
 investment assets and provided custody services for $435 billion of customer
 assets.  The comparable amounts were $448 billion and $425 billion,
 respectively, at March 31, 2000.  PFPC serviced in excess of 44 million
 shareholder accounts at March 31, 2001 compared with 39 million a year ago.
     Brokerage fees were $54 million for the first quarter of 2001 compared
 with $71 million for the first quarter of 2000.  The decrease was primarily
 due to a decline in equity markets activity.  Consumer services revenue of
 $55 million for the first quarter of 2000 increased $8 million or 17 percent
 compared with the prior-year quarter primarily due to an increase in retail
 transaction volume.
     Corporate services revenue was $76 million for the first quarter of
 2001 compared with $82 million for the first quarter of 2000 primarily due to
 lower capital markets revenue and other asset write-downs.
     Equity management, which is comprised of venture capital activities,
 reflected losses of $39 million for the first quarter of 2001 compared with
 $87 million of income for the first quarter of 2000.  The decrease primarily
 resulted from a decline in the estimated fair value of partnership and direct
 investments.
     Net securities gains were $29 million for the first quarter of 2001 and
 were mostly offset by write-downs of other assets and e-commerce investments
 totaling $22 million that are reflected in corporate services and other
 income.  Other noninterest income was $72 million for the first quarter of
 2001 compared with $53 million for the first quarter of 2000.  The increase
 was primarily due to residential mortgage loan securitizations and student
 loan sales.
     Noninterest expense was $775 million and the efficiency ratio was
 58 percent in the first quarter of 2001 compared with $792 million and
 58 percent, respectively, during the first quarter of 2000.
     Results from continuing operations were $265 million or $0.89 per diluted
 share for the first quarter of 2001.  Excluding the loss from venture capital
 activities and costs related to downsizing initiatives, results from
 continuing operations were $324 million or $1.09 per diluted share.  Earnings
 from continuing operations were $302 million or $1.01 per diluted share a year
 ago.
 
     FIRST QUARTER 2001 BALANCE SHEET REVIEW
 
     The Corporation has been pursuing a number of initiatives designed to
 improve the risk and return characteristics of its lending businesses.  These
 include the sale of the residential mortgage banking and credit card
 businesses, exiting certain non-strategic institutional lending businesses and
 the continued downsizing of the indirect automobile lending portfolio.  These
 actions have resulted in a reduction in the loan to deposit ratio to
 97 percent at March 31, 2001, down from 121 percent at September 30, 1998
 prior to the implementation of balance sheet downsizing initiatives.
     Total assets were $71.0 billion at March 31, 2001 compared with
 $74.3 billion at March 31, 2000 prior to the sale of PNC's residential
 mortgage banking business.  On the same basis, average interest-earning assets
 were $61.5 billion for the first quarter of 2001 compared with $65.0 billion
 for the first quarter of 2000.  The decrease was primarily due to a
 $4.1 billion reduction in loans and loans held for sale that resulted from the
 sale of mortgage banking and other balance sheet downsizing initiatives.
     Average deposits were $46.3 billion for the first quarter of 2001 compared
 with $44.3 billion in the first quarter of 2000 and represented 64 percent of
 total sources of funds in both periods.  The increase in deposits primarily
 resulted from a number of strategic marketing initiatives to grow more
 valuable transaction accounts.
     Average borrowed funds declined to $14.4 billion for the first quarter of
 2001 compared with $20.1 billion for the first quarter of 2000 prior to the
 sale of PNC's residential mortgage banking business.
     Shareholders' equity totaled $6.8 billion at March 31, 2001.  The
 regulatory capital ratios are estimated to be 7.8 percent for leverage,
 8.6 percent for tier I and 12.5 percent for total risk-based capital.  During
 the first quarter of 2001, PNC repurchased 2.3 million shares of common stock.
 Common shares outstanding at March 31, 2001 were 288.9 million.
 
     ASSET QUALITY REVIEW
 
     The ratio of nonperforming assets to total loans, loans held for sale and
 foreclosed assets was .81 percent at March 31, 2001 compared with .71 percent
 at December 31, 2000 and .65 percent at March 31, 2000.  The increase
 primarily resulted from a decrease in loans.  Nonperforming assets were
 $386 million at March 31, 2001 compared with $372 million and $344 million at
 December 31, 2000 and March 31, 2000, respectively.
     The allowance for credit losses was $675 million and represented
 1.48 percent of period-end loans and 201 percent of nonperforming loans at
 March 31, 2001.  The comparable ratios were 1.33 percent and 209 percent,
 respectively, at December 31, 2000 and 1.34 percent and 225 percent,
 respectively, at March 31, 2000.  Net charge-offs were $80 million or
 .65 percent of average loans in the first quarter of 2001.  The comparable
 amounts were $40 million or .32 percent, respectively, in the fourth quarter
 of 2000 and $31 million or .25 percent, respectively, in the first quarter of
 2000.  The increase was primarily due to a $41 million write-down of loans in
 the communications and energy, metals and mining portfolios that PNC has
 designated for exit.  Excluding this amount, net charge-offs were $39 million
 or .32 percent of average loans for the first quarter of 2001.
 
      BUSINESS RESULTS
      Quarter ended March 31 - dollars in millions
 
                                             Revenue            Return on
                         Earnings       (taxable-            Assigned Capital
                                         equivalent basis)
                         2001    2000    2001      2000     2001     2000
 
     PNC Bank
      Community Banking   $162    $129    $542      $477       24%      20%
      Corporate Banking     24      64     192       214        8       22
       Total PNC Bank      186     193     734       691       19       21
 
     Secured Finance
      PNC Real Estate
       Finance              20      13      53        46       21       14
      PNC Business Credit   16      13      38        28       41       38
       Total Secured
        Finance             36      26      91        74       26       20
        Total Banking      222     219     825       765       20       21
     Asset Management
      and Processing
       PNC Advisors         44      41     199       204       32       30
       BlackRock            25      19     134       108       26       26
       PFPC                 17       6     189       165       33       12
        Total Asset
         Management and
         Processing         86      66     522       477       30       25
          Total business
           results         308     285   1,347     1,242       22       22
     Other                 (43)     17     (87)       46
       Results from
        continuing
        operations         265     302   1,260     1,288       17       21
     Discontinued
      operations            40       6
     Results before
      cumulative effect of
      accounting change    305     308   1,260     1,288       19       22
     Cumulative effect of
      accounting change     (5)
      Total Consolidated  $300    $308  $1,260    $1,288       19       22
 
     Overall, businesses performed well during the first quarter of
 2001 compared with the same period last year with the exception of Corporate
 Banking, which was negatively impacted by higher credit costs.  Excluding
 Corporate Banking, total business earnings increased 29 percent compared with
 a year ago due to strong growth in Asset Management and Processing businesses,
 improved performance in Secured Finance and net securities gains in Community
 Banking.
     PNC Bank -- Community Banking earned $162 million for the first quarter of
 2001, an increase of 26 percent compared with the same quarter in
 2000, primarily due to net securities gains and strong business growth.
 Excluding net securities gains in 2001 and net losses from last year, earnings
 increased 11 percent primarily driven by growth in deposits as well as higher
 noninterest income.  Corporate Banking's earnings declined to $24 million for
 the first quarter of 2001 compared with $64 million for the first quarter of
 2000 primarily due to $41 million of additional provision for credit losses
 related to the write-down of loans in the communications and energy, metals
 and mining portfolios that PNC has designated for exit.
     Secured Finance -- PNC Real Estate Finance earned $20 million for the
 first quarter of 2001, a 54 percent increase compared with the prior-year
 quarter primarily due to higher commercial mortgage servicing revenue and
 growth in the affordable housing business.  PNC Business Credit earned
 $16 million for the first quarter of 2001, a 23 percent increase compared with
 the first quarter of 2000 primarily due to an increase in noninterest income.
     Asset Management and Processing -- PNC Advisors earned $44 million for the
 first quarter of 2001, a 7 percent increase compared with the first quarter of
 2000 primarily driven by improved efficiency.  Revenue growth attributable to
 new asset management business was more than offset by lower brokerage revenue.
 BlackRock earned $25 million for the first quarter of 2001, a 33 percent
 increase compared with the same period in 2000 primarily resulting from new
 business and strong fixed-income performance.  PFPC's earnings were
 $17 million for the first quarter of 2001 compared with $6 million during the
 same period in 2000.  The increase was primarily due to new and existing
 client growth.  Cash earnings for PFPC, which exclude goodwill amortization,
 increased $11 million to $27 million.
     Total business financial results differ from results from continuing
 operations primarily due to differences between management accounting
 practices and generally accepted accounting principles, divested and exited
 businesses in the prior year, equity management activities, minority
 interests, residual asset and liability management activities, eliminations
 and unassigned items, the impact of which is reflected in the "Other"
 category.
 
     RECORDED COMMENTS ON FIRST QUARTER 2001 RESULTS
 
     Recorded comments providing further information regarding the topics
 addressed in this earnings release will be available for one week, beginning
 at approximately 10:00 a.m. on April 19, by calling 1-800-753-8878.  The
 recorded comments may include forward-looking information and are subject to
 the cautionary statements set forth below and elsewhere in this press release.
 
     FORWARD-LOOKING STATEMENTS
 
     This release and other statements that the Corporation may make may
 include forward-looking statements within the meaning of the Private
 Securities Litigation Reform Act with respect to outlook for the second
 quarter 2001 and other future financial or business performance, conditions,
 strategies, expectations and goals.  Forward-looking statements are typically
 identified by words or phrases such as "believe," "expect," "anticipate,"
 "intend," "estimate," "position," "target," "assume," "achievable,"
 "potential," "strategy," "goal," "objective," "plan," "aspiration," "outlook,"
 "outcome," "continue," "remain," "maintain," "strive," "trend," and variations
 of such words and similar expressions, or future or conditional verbs such as
 "will," "would," "should," "could," "may," or similar expressions.  The
 Corporation cautions that forward-looking statements are subject to numerous
 assumptions, risks and uncertainties, which change over time.  These
 forward-looking statements speak only as of the date of this press release,
 and the Corporation assumes no duty to update forward-looking statements.
 Actual results could differ materially from those anticipated in these
 forward-looking statements and future results could differ materially from
 historical performance.
     The factors discussed elsewhere in this press release and the following
 factors, among others, could cause actual results to differ materially from
 forward-looking statements or historical performance:  adjustments to recorded
 results of sale of residential mortgage banking business after final
 settlement is completed; decisions PNC makes with respect to the redeployment
 of available capital; changes in asset quality and credit risk; economic
 conditions; changes in financial and capital markets; the inability to sustain
 revenue and earnings growth; changes in interest rates; inflation; changes in
 values of assets under management and assets serviced; relative investment
 performance of assets under management; customer acceptance of PNC products
 and services; customer borrowing, repayment, investment, and deposit
 practices; customer disintermediation; valuation of debt and equity
 investments; the introduction, withdrawal, success and timing of business
 initiatives and strategies; the extent and cost of any share repurchases;
 decisions PNC makes with respect to further reduction of balance sheet
 leverage and potential investments in PNC businesses; competitive conditions;
 the inability to realize cost savings or revenue enhancements, implement
 integration plans and other consequences associated with mergers,
 acquisitions, restructurings and divestitures; and the impact, extent and
 timing of technological changes, capital management activities, and actions of
 the Federal Reserve Board and legislative and regulatory actions and reform.
 Further, an increase in the number of customer or counterparty delinquencies,
 bankruptcies, or defaults could result, among other things, in a higher loan
 loss provision and reduced profitability.
     The Corporation's SEC reports, accessible on the SEC's website at
 www.sec.gov on PNC's website at www.pnc.com , identify additional factors that
 can affect forward-looking statements.
 
     The PNC Financial Services Group, Inc., headquartered in Pittsburgh, is
 one of the nation's largest diversified financial services organizations,
 providing community banking, corporate banking, real estate finance,
 asset-based lending, wealth management, asset management and global fund
 services.
 
     [TABULAR MATERIAL FOLLOWS]
 
     Consolidated Financial Highlights
 
     The PNC Financial Services Group, Inc.
 
     For the three months ended - dollars  March 31     Dec. 31    March 31
      in millions, except per share data       2001        2000        2000
 
     FINANCIAL PERFORMANCE
     Revenue
        Net interest income (taxable-
         equivalent basis)                     $559        $538        $560
        Noninterest income                      701         735         728
        Total revenue                         1,260       1,273       1,288
     Income from continuing operations          265         314         302
     Discontinued operations                     40          20           6
     Income before cumulative effect of
      accounting change                         305         334         308
     Cumulative effect of accounting
      change                                     (5)
         Net income                            $300        $334        $308
 
     Cash earnings from continuing
      operations (a)                           $294        $344        $331
     Cash earnings from discontinued
      operations (a)                             40          20           6
     Cash earnings before cumulative
      effect of accounting change (a)           334         364         337
     Cash earnings from cumulative effect
      of accounting change (a)                   (5)
         Cash earnings from net income (a)     $329        $364        $337
 
     Per common share
       Diluted earnings
         Continuing operations                $0.89       $1.06       $1.01
         Discontinued operations                .14         .07         .02
         Diluted earnings before cumulative
          effect of accounting change          1.03        1.13        1.03
         Cumulative effect of accounting
          change                               (.02)
         Net income                           $1.01       $1.13       $1.03
       Diluted cash earnings (a)
         Continuing operations                $1.00       $1.16       $1.11
         Discontinued operations                .14         .06         .02
         Diluted cash earnings before
          cumulative effect of accounting
          change (a)                           1.14        1.22        1.13
         Cumulative effect of accounting
          change                               (.02)
         Net income                           $1.12       $1.22       $1.13
 
     Cash dividends declared                  $0.48       $0.48       $0.45
 
     SELECTED RATIOS
     From continuing operations
     Return on
        Average common shareholders'
         equity                               16.59 %     20.10 %     21.29 %
        Average assets                         1.49        1.81        1.77
     Net interest margin                       3.62        3.60        3.68
     Noninterest income to total revenue      55.63       57.74       56.52
     Efficiency (b)                           57.91       55.44       57.85
     From net income
     Return on
        Average common shareholders'
         equity                               18.82       21.41       21.71
        Average assets                         1.62        1.72        1.66
     Net interest margin                       3.53        3.24        3.46
     Noninterest income to total revenue      57.13       60.64       58.27
     Efficiency (c)                           56.18       53.09       57.36
 
      (a) Excludes amortization of goodwill.
      (b) Excludes amortization and distributions on capital securities.
      (c) Excludes amortization, distributions on capital securities and
          residential mortgage banking risk management activities.
 
 
     Consolidated Financial Highlights
 
     The PNC Financial Services Group, Inc.
 
     For the three months
      ended - dollars in     March 31   Dec. 31  Sept. 30   June 30  March 31
      millions                   2001      2000      2000      2000      2000
 
     BALANCE SHEET DATA
     Assets                   $70,966   $69,844   $69,884   $68,885   $68,474
     Earning assets            60,548    59,373    60,142    59,334    59,986
     Loans, net of unearned
      income                   45,626    50,601    49,791    50,281    50,259
     Securities available for
      sale                     11,976     5,902     6,490     5,315     5,906
     Loans held for sale        1,765     1,655     2,127     2,305     2,799
     Deposits                  47,189    47,664    47,494    46,381    45,767
     Borrowed funds            12,279    11,718    12,299    13,028    13,362
     Shareholders' equity       6,781     6,656     6,383     6,157     6,039
     Common shareholders'
      equity                    6,470     6,344     6,071     5,844     5,726
     Book value per common
      share                     22.39     21.88     21.01     20.22     19.68
     Loans to deposits            .97      1.06      1.05      1.08      1.10
 
     CAPITAL RATIOS
     Leverage                    7.80 %    8.03 %    6.87 %    6.72 %    6.67 %
     Common shareholders'
      equity to total assets     9.12      9.08      8.69      8.48      8.36
 
     ASSET QUALITY RATIOS
     Nonperforming assets to
      total loans, loans held
      for sale and foreclosed
      assets                      .81       .71       .68       .67       .65
     Allowance for credit
      losses to total loans      1.48      1.33      1.36      1.34      1.34
     Allowance for credit
      losses to nonperforming
      loans                    200.89    208.98    219.16    217.04    224.67
     Net charge-offs to
      average loans               .65       .32       .24       .27       .25
 
 
     ANALYSIS OF FIRST QUARTER RESULTS
 
                                                                  Per Diluted
     In millions, except per share data               Net Income        Share
 
     Net income                                             $300       $1.01
     Cumulative effect of accounting change                    5         .02
     Results before cumulative effect of accounting change   305        1.03
     Venture capital activities                               27         .09
                                                             332        1.12
     Discontinued operations                                 (40)       (.14)
     Loans designated for exit                                27         .09
     Severance costs                                           5         .02
     Adjusted results                                       $324       $1.09
 
 
     Consolidated Statement of Income
 
     The PNC Financial Services Group, Inc.
 
     For the three months ended - dollars   March 31     Dec. 31   March 31
      in millions, except per share data        2001        2000       2000
     Interest Income
     Loans and fees on loans                    $981      $1,027       $984
     Securities available for sale               122          96         94
     Loans held for sale                          37          41         64
     Other                                        32          26         19
        Total interest income                  1,172       1,190      1,161
     Interest Expense
     Deposits                                    397         453        369
     Borrowed funds                              221         204        237
        Total interest expense                   618         657        606
        Net interest income                      554         533        555
     Provision for credit losses                  80          40         31
        Net interest income less provision
         for credit losses                       474         493        524
     Noninterest Income
     Asset management                            223         219        186
     Fund servicing                              181         167        155
     Service charges on deposits                  50          56         50
     Brokerage                                    54          57         71
     Consumer services                            55          56         47
     Corporate services                           76          94         82
     Equity management                           (39)          1         87
     Net securities gains (losses)                29          16         (3)
     Other                                        72          69         53
        Total noninterest income                 701         735        728
     Noninterest Expense
     Staff expense                               421         410        411
     Net occupancy                                53          52         53
     Equipment                                    57          59         56
     Amortization                                 26          27         28
     Marketing                                     9          22         13
     Distributions on capital securities          17          17         16
     Other                                       192         165        215
        Total noninterest expense                775         752        792
     Income from continuing operations
      before income taxes                        400         476        460
     Income taxes                                135         162        158
        Income from continuing operations        265         314        302
     Income from discontinued operations
      (less applicable income taxes of $0,
      $14, and $5)                                40          20          6
     Net income before cumulative effect
      of accounting change                       305         334        308
     Cumulative effect of accounting
      change (less applicable income taxes
      of $2)                                      (5)
        Net income                              $300        $334       $308
     Income from continuing operations
      applicable to diluted earnings             261         310        297
     Net income applicable to diluted
      earnings                                   296         330        303
     Earnings Per Common Share
     Continuing operations
     Basic                                     $0.90       $1.07      $1.02
     Diluted                                    0.89        1.06       1.01
     Net income
     Basic                                     $1.02       $1.14      $1.04
     Diluted                                    1.01        1.13       1.03
     Cash Dividends Declared Per Common
      Share                                      .48         .48        .45
     Average Common Shares Outstanding
     Basic                                     289.2       289.2      291.9
     Diluted                                   292.8       292.9      294.1
 
 
     Details of Net Interest Income and Net Interest Margin
 
     The PNC Financial Services Group, Inc.
 
     Net Interest Income by Quarter
     Taxable-equivalent basis
     Three months ended           March 31  Dec. 31  Sept. 30  June 30 March 31
      - in millions                   2001     2000      2000     2000     2000
     Interest income
        Loans and fees on loans       $985   $1,031    $1,028   $1,013     $988
        Securities available for sale  122       97        99       98       95
        Loans held for sale             37       41        47       52       64
        Other                           33       26        30       22       19
           Total interest income     1,177    1,195     1,204    1,185    1,166
     Interest expense
        Deposits                       397      453       434      397      369
        Borrowed funds                 221      204       236      238      237
           Total interest expense      618      657       670      635      606
           Net interest income        $559     $538      $534     $550     $560
 
 
     Net Interest Margin by Quarter
     Taxable-equivalent basis   March 31  Dec. 31 Sept. 30  June 30  March 31
     Three months ended             2001     2000     2000     2000      2000
     Average yields/rates
        Yield on earning assets
           Loans and fees on loans  7.96 %   8.16 %   8.13 %   8.03 %    7.88 %
           Securities available for
            sale                    6.08     6.53     6.41     6.50      6.22
           Loans held for sale      7.31     8.32     8.77     8.11      7.64
           Other                    7.20     7.80     8.05     7.01      6.92
              Total yield on
               earning assets       7.67     7.99     7.98     7.86      7.68
        Rate on interest-bearing
         liabilities
           Deposits                 4.22     4.66     4.58     4.30      4.05
           Borrowed funds           6.15     6.83     6.85     6.54      6.14
              Total rate on
               interest-bearing
               liabilities          4.75     5.16     5.18     4.92      4.67
              Interest rate spread  2.92     2.83     2.80     2.94      3.01
        Impact of noninterest-
         bearing sources             .70      .77      .74      .69       .67
              Net interest margin   3.62 %   3.60 %   3.54 %   3.63 %    3.68 %
 
 
     Noninterest Income and Expense by Quarter
 
     The PNC Financial Services Group, Inc.
 
     Noninterest Income by Quarter
     Three months ended        March 31  Dec. 31  Sept. 30  June 30  March 31
      - in millions                2001     2000      2000     2000      2000
     Asset management              $223     $219      $208     $196      $186
     Fund servicing                 181      167       168      164       155
     Service charges on deposits     50       56        50       50        50
     Brokerage                       54       57        61       60        71
     Consumer services               55       56        55       51        47
     Corporate services              76       94        86       80        82
     Equity management              (39)       1        (3)      48        87
     Net securities gains (losses)   29       16         7                 (3)
     Other                           72       69        68       79        53
        Total noninterest income   $701     $735      $700     $728      $728
 
     Noninterest income to total
      revenue                     55.63 %  57.74 %   56.73 %  56.96 %   56.52 %
 
 
     Noninterest Expense by Quarter
     Three months ended        March 31  Dec. 31  Sept. 30  June 30  March 31
      - in millions                2001     2000      2000     2000      2000
     Staff expense                 $421     $410      $399     $396      $411
     Net occupancy                   53       52        50       48        53
     Equipment                       57       59        54       55        56
     Amortization                    26       27        27       28        28
     Marketing                        9       22        16       19        13
     Distributions on capital
      securities                     17       17        17       17        16
     Other                          192      165       184      217       215
        Total noninterest expense  $775     $752      $747     $780      $792
 
     Efficiency (a)               57.91 %  55.44 %   56.79 %  57.29 %   57.85 %
 
     (a) Excludes amortization and distributions on capital securities.
 
 
     Consolidated Balance Sheet
 
     The PNC Financial Services Group, Inc.
 
                                             March 31     Dec. 31    March 31
     In millions, except par value               2001        2000        2000
     Assets
     Cash and due from banks                   $2,998      $3,662      $2,172
     Short-term investments                       853       1,151         967
     Loans held for sale                        1,765       1,655       2,799
     Securities available for sale             11,976       5,902       5,906
     Loans, net of unearned income of
      $1,062, $999 and $724                    45,626      50,601      50,259
        Allowance for credit losses              (675)       (675)       (674)
        Net loans                              44,951      49,926      49,585
     Goodwill and other amortizable assets      2,437       2,468       2,482
     Investment in discontinued operations                    356         274
     Other                                      5,986       4,724       4,289
        Total assets                          $70,966     $69,844     $68,474
 
     Liabilities
     Deposits
        Noninterest-bearing                    $8,431      $8,490      $8,019
        Interest-bearing                       38,758      39,174      37,748
           Total deposits                      47,189      47,664      45,767
     Borrowed funds
        Federal funds purchased                   785       1,445         909
        Repurchase agreements                     830         607         136
        Bank notes and senior debt              5,362       6,110       7,001
        Federal Home Loan Bank borrowings       2,623         500       2,058
        Subordinated debt                       2,379       2,407       2,425
        Other borrowed funds                      300         649         833
           Total borrowed funds                12,279      11,718      13,362
     Other                                      3,869       2,958       2,458
        Total liabilities                      63,337      62,340      61,587
 
     Mandatorily redeemable capital
      securities of subsidiary trusts             848         848         848
 
     Shareholders' Equity
     Preferred stock                                7           7           7
     Common stock - $5 par value
        Authorized 450 shares
        Issued 353 shares                       1,764       1,764       1,764
     Capital surplus                            1,323       1,303       1,285
     Retained earnings                          6,857       6,736       6,178
     Deferred benefit expense                     (26)        (25)        (18)
     Accumulated other comprehensive
      income (loss) from continuing
      operations                                    7         (43)       (140)
     Accumulated other comprehensive loss
      from discontinued operations                            (45)       (124)
     Common stock held in treasury at
      cost: 64, 63 and 62 shares               (3,151)     (3,041)     (2,913)
        Total shareholders' equity              6,781       6,656       6,039
        Total liabilities, capital
         securities and shareholders'
         equity                               $70,966     $69,844     $68,474
 
 
     Consolidated Average Balance Sheet Data by Quarter
 
     The PNC Financial Services Group, Inc.
 
     Three months ended - in     March 31  Dec. 31  Sept. 30  June 30  March 31
      millions                       2001     2000      2000     2000      2000
     Assets
     Interest-earning assets
        Loans held for sale        $2,005   $1,991    $2,151   $2,577    $3,319
        Securities available for
         sale                       8,061    5,928     6,179    6,009     6,128
        Loans, net of unearned
         income
           Consumer                 9,085    9,081     9,174    9,209     9,247
           Residential mortgage    12,673   12,838    12,405   12,571    12,584
           Commercial              20,882   21,109    21,800   22,042    21,791
           Commercial real estate   2,580    2,670     2,688    2,682     2,698
           Lease financing          3,897    3,639     3,238    3,049     2,958
           Other                      520      591       646      676       688
           Total loans, net of
            unearned income        49,637   49,928    49,951   50,229    49,966
        Other                       1,831    1,322     1,445    1,276     1,113
           Total interest-earning
            assets                 61,534   59,169    59,726   60,091    60,526
     Noninterest-earning assets    10,251    9,214     8,857    8,566     7,818
     Investment in discontinued
      operations                      207      570       515      448       412
           Total assets           $71,992  $68,953   $69,098  $69,105   $68,756
 
     Liabilities
     Interest-bearing liabilities
        Deposits
           Demand and money
            market                $20,468  $19,762   $18,914  $18,549   $17,700
           Savings                  1,919    1,937     2,020    2,107     2,138
           Retail certificates of
            deposit                13,724   14,795    14,776   14,403    14,591
           Other time                 565      587       619      641       637
           Deposits in foreign
            offices                 1,402    1,579     1,342    1,483     1,489
           Total interest-bearing
            deposits               38,078   38,660    37,671   37,183    36,555
        Borrowed funds             14,375   11,738    13,518   14,422    15,333
           Total interest-bearing
            liabilities            52,453   50,398    51,189   51,605    51,888
     Noninterest-bearing deposits   8,190    8,304     8,239    8,357     7,700
     Other                          3,830    2,978     2,637    2,290     2,393
           Total liabilities       64,473   61,680    62,065   62,252    61,981
 
     Mandatorily redeemable
      capital securities of
      subsidiary trusts               848      848       848      848       848
 
     Shareholders' Equity           6,671    6,425     6,185    6,005     5,927
           Total liabilities,
            capital securities
            and shareholders'
            equity                $71,992  $68,953   $69,098  $69,105   $68,756
     Common Shareholders' Equity   $6,360   $6,113    $5,873   $5,692    $5,614
 
 
     Loan Portfolio and Nonperforming Assets by Quarter
 
     The PNC Financial Services Group, Inc.
 
     Loan Portfolio by Quarter
                                March 31  Dec. 31  Sept. 30  June 30  March 31
     Period ended - in millions     2001     2000      2000     2000      2000
     Consumer                     $9,049   $9,133    $9,174   $9,213    $9,173
     Residential mortgage          8,806   13,264    12,563   12,470    12,711
     Commercial                   20,676   21,207    21,198   22,140    22,033
     Commercial real estate        2,590    2,583     2,676    2,687     2,665
     Lease financing               5,080    4,845     4,498    3,834     3,701
     Other                           487      568       646      669       700
        Total loans               46,688   51,600    50,755   51,013    50,983
        Unearned income           (1,062)    (999)     (964)    (732)     (724)
        Total loans, net of
         unearned income         $45,626  $50,601   $49,791  $50,281   $50,259
 
 
     Nonperforming Assets by Type
                                March 31  Dec. 31  Sept. 30  June 30  March 31
     Period ended - in millions     2001     2000      2000     2000      2000
     Nonaccrual loans
        Commercial                  $296     $312      $261     $259      $240
        Commercial real estate        21        3        16       12        13
        Residential mortgage           4        4        26       34        42
        Consumer                       3        2         3        3         3
        Lease financing                6        2         2        3         2
           Total nonaccrual loans    330      323       308      311       300
           Troubled debt restructured
            loans                      6
        Total nonperforming loans    336      323       308      311       300
 
     Foreclosed and other assets
        Commercial real estate         2        3         4        4         5
        Residential mortgage           7        8         8        9         8
        Other                         41       38        34       29        31
           Total foreclosed and other
            assets                    50       49        46       42        44
              Total nonperforming
               assets               $386     $372      $354     $353      $344
 
 
     Nonperforming Assets by Business
                                March 31  Dec. 31  Sept. 30  June 30  March 31
     Period ended - in millions     2001     2000      2000     2000      2000
     PNC Bank
          Community Banking          $61      $47       $82      $96      $104
          Corporate Banking          210      219       156      153       160
     Secured Finance
          PNC Real Estate Finance     25        9        22       19        22
          PNC Business Credit         33       36        32       22         2
     PNC Advisors                      4        2         6        8         8
     Other                            53       59        56       55        48
              Total nonperforming
               assets               $386     $372      $354     $353      $344
 
 
     The PNC Financial Services Group, Inc.
 
     Asset Quality Data
 
     Allowance For Credit Losses
     Three months ended         March 31  Dec. 31  Sept. 30  June 30  March 31
      - in millions                 2001     2000      2000     2000      2000
     Beginning balance              $675     $675      $675     $674      $674
     Charge-offs
        Consumer                     (10)     (12)      (11)     (11)      (12)
        Residential mortgage                   (4)       (1)      (1)       (2)
        Commercial                   (78)     (35)      (27)     (30)      (29)
        Commercial real estate                 (1)       (2)
        Lease financing               (3)      (3)       (2)      (1)       (2)
           Total charge-offs         (91)     (55)      (43)     (43)      (45)
 
     Recoveries
        Consumer                       5        6         5        5         6
        Residential mortgage                    1                  1
        Commercial                     6        7         4        3         7
        Commercial real estate                            4
        Lease financing                         1                            1
           Total recoveries           11       15        13        9        14
 
     Net charge-offs
        Consumer                      (5)      (6)       (6)      (6)       (6)
        Residential mortgage                   (3)       (1)                (2)
        Commercial                   (72)     (28)      (23)     (27)      (22)
        Commercial real estate                 (1)        2
        Lease financing               (3)      (2)       (2)      (1)       (1)
           Total net charge-offs     (80)     (40)      (30)     (34)      (31)
 
     Provision for credit losses      80       40        30       35        31
 
        Ending balance              $675     $675      $675     $675      $674
 
 SOURCE  PNC Financial Services Group

RELATED LINKS

http://www.pncbank.com