finacial analyiss

1. 1
PNC Bank financial analysis
Institutional affiliations
Student’s name
Professor’s name

2. 2
PNC Bank Financial analysis
PNC Financial Service Group, Inc. (PNC) Is a multinational bank that is listed on the London
Stock Exchange and particularly the FTSE 100. The bank offers financial services such as
lending and taking deposits from its customers. Moreover, the bank provides other financial
services such as wealth management, real estate planning, assets management, and information
processing. In order to manage all these financial services and non-financial services, there is a
need to perform financial analysis to determine the financial situation of this company therefore,
a financial analysis is essential. This paper will give insightful information regarding the
financial performance of this business through an in-depth analysis of the key performance
indicators, the financial ratios, the analysis of financial performance, and comparison of
performance with a comparator company that operates in the same industry.
Financial ratio analysis
Return on Equity
The return on equity ratio is an efficiency measure ratio that indicates the amount of
money that the business yield to the investors after investing their money with the business’
operations. According to Bunea et al. (2019), a significant amount of the return on equity is
preferable since it signals to the users of the financial statement that the business has the
capability to invest money of the investors and yield a significant amount of returns to them.
Therefore, the investors would be lured to invest in a venture that has a high return on equity as
opposed to the ones that have low returns. The rationale for the decision is because low returns in
Equity indicate that the business future operations might be curtailed because of the failure of its
investments. PNC bank maintained an ROE of 10.98% and 11.19% in 2020 and 2019 years

3. 3
respectively (see appendix one). The ratio implies that the company has relatively low returns as
compared to other banks operating in the same segments. USB financial is another competitor
that has been closely competing with the bank, which has returns of 13.40% and 13.96%. This
implies that the investors would opt to invest in other banks such as USB corps.
Return on assets
The Return on Assets ratio is another indicator that measures the way the business
utilizes its total assets invested in the business. The ROA ratio measures the amount of revenue
that is generated by the assets invested (Suardana et al., 2018). Therefore, a higher ROA
indicates that the business is efficient in utilizing its total assets to generate income. The trend for
the PNC bank shows that it had a ROA ratio of 1.32%, 1.40%, and 1.40% in the year 2020, 2019,
and 2018 respectively. The trend indicates that the business has been inefficient in the
management of its assets in a bid to generate sales. Therefore, there is a need to manage the
assets in order to guarantee high returns.
Tax ratio
The tax ratio is an efficiency measurement metric that used to show the level to which a
company and other institutions manage their taxes in relation to the income that they earn
According to Myšková and Hájek (2017), a low tax ratio is preferred because they signify that
ventures are efficient in tax avoidance and therefore, it helps businesses to have high net
incomes. PNC has a Tax ratio of 19.60 % and 20.64% and 23.73A% in 2020, 2018, and 2019
respectively. The PNC’s tax ratio has been declining over the years which is an indication that
the bank was efficient in tax management. Significantly low tax ratios are preferred as compared
to significantly high tax ratios.

4. 4
Expense ratio
The expense ratio measures the efficiency of the business in regard to managing its
expenses in relation to the sales volume for goods and services. According to Hossain (2020),
low expense ratios are preferred by companies and other institutions because they reveal that
businesses and other ventures are efficient in managing their expenses. High expense ratios are
undesired because they show that companies are inefficient in managing their operating costs.
PNC registered Expense ratio of 59.31% and 60.10%, 97.97% in 2020, 2019, and 2018
respectively (see appendix one). Therefore, PNC had some excellent cost managers that
managed the expenditure thus, people with vested interest would invest with the business
because it had an outstanding cost manager.
Assets utilization ratio
Assets utilization ratios are an efficiency measuring metric that is used to assess the
efficiency of the business to utilize the assets in a bid to generate revenue based on the assets
invested. The ratios measure the efficiency of the business management in the utilization of the
assets of the company intending to make a profit (Nwaorgu et al., 2019). An increasing asset
utilization ratio shows that companies and other institutions are being efficient with each dollar
of assets they have invested (Nwaorgu et al., 2019). In 2020, PNC had an asset utilization ratio
of 4.34% while in 2020, 3.531% in 2019 the ratio was 4.48% in 2018. Despite the ratio declining
as compared to the hitherto period, it is evident the bank was managing its assets outstandingly.
Equity multiplier
The equity multiplier measures the number of times a company has for Equity in
comparison to its assets. According to Weidman et al. (2019), and Equity multiplier assess the

5. 5
number of assets that have been financed by equity. It is a leverage ratio that shows the investors'
input towards the acquisition of assets of the company. Studies assert that low levels of equity
multipliers are preferred as compared to high ratio as they signify that the assets are significantly
financed by shareholders (Weidman et al., 2019). Bancorp company has a higher ratio as
compared to PNC. In 2020, 2019,2018, PNC had an equity multiplier of 9.44, 8.32, and 8.01
respectively. Thus, investors and other people who have vested interest in the business would
have chosen to invest in it. Low levered firms are preferred because their going concern, in the
long run, is not in doubt and there is a low likelihood of the curtailment of operations in the
future and therefore, there is a guarantee that the business will run in the future and it would be
profitable.
Statement of financial position overview
Loans increased in the year 2019, as compared to 2017 and 2018 thus signaling the
increase of corporate banking and business credit facilities. Since PNC deals with giving loans
and taking deposits, the increase in loans implies that the business ‘revenue would increase
because of the interest rate that is attached to the loan deposits. According to (PNC, 2020), the
growth of commercial loans was driven by the asset-backed finances and lending activities to
medium-sized corporations. Business credit department loan issuance was boosted by the overall
utilization of commercial loans. The commercial real estate loans were increased by the
geographical locations and the type of property the borrower took (PNC, 2020). The various loan
growth reflects higher and indirect loans from franchise dealers who had expanded their
operations to various locations. However, in 2020, the loans reduced because of the stringent
laws that were put into place as a result of the Covid19 Pandemic which was a result of financial
turmoil. Due to the economic downturn, the bank reduced lending activities and there was a fall

6. 6
of loan issuance by 5% (PNC, 2020). The bank might have opted to avoid giving loans because
there might be a high degree of default because of the economic downturn that was caused by the
pandemic. The business wanted to avoid bad debts that would be written off as a result of a
failure of the borrower to return the debts they borrowed from the bank. ‘’
Risk management is an essential undertaking that is carried out by the Bank which
enhances risk management techniques. The company tries to mitigate risks in light of optimizing
the long term value of the shareholders. According to the annual report, the business uses the
Enterprise Risk Management framework that is aligned with the minimum requirement for risk
management framework (PNC, 2020). The ERM framework designed incorporates risk
mitigation strategy, risk culture environment, risk identification, risk assessment, risk
governance, risk controls, and monitoring. The risk management of PNC provides an analysis of
key areas which include credit management, liquidity, and operational segments. The risk
management model also addresses financial derivatives that are used as part of overall liabilities
and assets management (PNC, 2020). The company is actively involved in the management and
the adoption of the applicable regulatory pronouncements which is the constraint to the ERM
framework. Therefore, the ERM framework has been designed by the bank to mitigate risks
ranging from liquidity risks to liability risks.
The key performance indicator for the business includes the net profit margins, sales
revenue, and other non-monetary performance indicators. The PNC shareholder return is used to
compare the returns to the investors who invest their equity in a bid to improve the business
performance. The returns for five years encompass the period from 2016 to 2020 and the peer
group used for comparison is FTSE 100. The peer group for PNC consists of Bank of America
corporations, capital one corporation's fifth ban Bancorp; JPMorgan & Chase Co, and Regional

7. 7
corporations. The Board of Directors has approved the peer group and therefore, it is an
approved platform that can be used to compare financial performance across the company’s
operations.
The company’s non-financial performance metrics include; company’s reputation, brand
preference, take rate, customer retention, and employee attitude and performance. According to
the 2020 annual report, the customers that were employed by the bank in all its operations totaled
to 51,918 as of December 2020 where 50017 were full-time employees and the rest 1901 were
part-time employees. Out of the 1759-part time, employees were employed in retail banking and
helped the business to scale its operations as a result and this helped the business to realize a
high-profit margin. The brand preference positions the company in a competitive edge because it
is popularly known across all the operational segments.
Conclusion
In essence, PNC is a renowned bank that is listed in the London stock exchange in the
FTSE 100. The business has favorable financial ratios that make it to be desired by the investors,
lenders, and other people who have vested interest in the business. Moreover, it has key strength
that emanates from its management and other employees who are employed. It has a significant
number of employees which helps the business to carry out its financial undertakings. The
business has adopted the ERM Framework that helps it to mitigate risks and this acts as a risk
mitigation strategy for the business. Therefore, there is perceived confidence in the bank and thus

8. 8
has led to improved reputation because of its position in the market. Despite the bank’s
operations being competitive, it has maintained a higher standard as compared to its peers in
terms of return to its investors and profit margins. Despite the company having desirable ratios, it
has some shortcomings in its operations. The loan amount that was borrowed in 2020, reduced
hence reducing the interest revenue that the bank was supposed to have. Covid19 impacted the
economic well- being of the society and led to the decline of lending rate.

9. 9
References
Bunea, O. I., Corbos, R. A., & Popescu, R. I. (2019). Influence of some financial indicators on
return on equity ratio in the Romanian energy sector-A competitive approach using a
DuPont-based analysis. Energy, 189, 116251.
https://doi.org/10.1016/j.energy.2019.116251
Hossain, M. S. (2020). True Expense Ratio and True Alpha of Imperfect Diversification:
Evidence from Stock Market in Bangladesh. International Journal of Economics and
Finance, 12(11), 1-21. https://ideas.repec.org/a/ibn/ijefaa/v12y2020i11p21.html
Myšková, R., & Hájek, P. (2017). Comprehensive assessment of firm financial performance
using financial ratios and linguistic analysis of annual reports. Journal of International
Studies, volume 10, issue: 4. https://www.ceeol.com/search/article-detail?id=607109
Nwaorgu, I. A., O Odesa, J., & N Nzoegbu, J. (2019). Effect of Director’s Tunneling on Assets
Utilization: Evidence from Corporate Organizations in Nigeria. Journal of Economics,
Management and Trade, 1-9. https://doi.org/10.9734/jemt/2019/v24i230159
Suardana, I. B. R., Astawa, I. N. D., & Martini, L. K. B. (2018). Influential factors towards
return on assets and profit change. International journal of social sciences and
humanities, 2(1), 105-116. https://doi.org/10.29332/ijssh.v2n1.100

10. 10
Weidman, S. M., McFarland, D. J., Meric, G., & Meric, I. (2019). Determinants of return-on-
equity in USA, German and Japanese manufacturing firms. Managerial Finance.
https://doi.org/10.1108/MF-07-2018-0305
PNC. (2020). Form 10-K. Retrieved from https://thepncfinancialservicesgroupinc.gcs-web.com/static-
files/2ce8642a-1688-4adf-8f15-6facd57a0a66
Appendix one
PNC BANK
Financial
ratios
2020 2019 2018
Details
Return on
equity
13.40% 10.98% 11.19%
Return on
assets
1.40% 1.32% 1.40%
Tax ratio 23.73% 19.60% 20.24%
Expense
ratio
97.95% 59.31% 60.10%
Asset
utilization ratio
3.531% 4.34% 4.48%
9.439742393
Equity
multiplier
(total assets/total
stockholders’ equity
8.320051101 8.010287462
Appendix 2

11. 11
Appendix three