Hello, welcome to The PNC Financial Services Group's 2023 Annual Meeting of Shareholders. Please note that this webcast is being recorded. It is now my pleasure to turn the meeting over to Bill Demchak, Chairman, President, and Chief Executive Officer of The PNC Financial Services Group.
Thank you, good morning, everybody. On behalf of our board of directors and management team, we are pleased that you have joined us this morning for our 2023 Annual Meeting of Shareholders. As Chairman of The PNC Financial Services Group, I will preside as the chair of this meeting. To begin, let me provide an overview of how our meeting will proceed. After calling the meeting to order, I will introduce our director nominees, executive committee members, and representatives of our independent registered public accounting firm who will be available to address questions. Next, our Corporate Secretary will provide a report on procedural matters. I will then introduce the formal business of the meeting, including the four items on the agenda. We will then pause for questions regarding those four items and open the polls for voting.
After the polls are closed, our corporate secretary will report on the preliminary voting results. Following that, I'll adjourn the meeting and provide remarks on our 2022 performance, recent events in the banking industry, and our continued focus on serving all of our stakeholders. Immediately following that brief presentation, I will use the remaining time to take general questions submitted by shareholders through our virtual meeting portal. I now call this meeting to order. I would like to introduce our director nominees who joined the meeting today. Joseph Alvarado, Debra Cafaro, Marjorie Rodgers Cheshire, Andrew Feldstein, Richard Harshman, Daniel Hesse, Renu Khator, Linda Medler, Robert Niblock, Martin Pfinsgraff, Bryan Salesky, and Toni Townes-Whitley . Also on the line are all the members of our executive committee.
Carole Brown, Richard Bynum, Kieran Fallon, Debbie Guild, Vicki Henn, Greg Jordan, Stacy Juchno, Ganesh Krishnan, Mike Lyons, Alex Overstrom, Bill Parsley, and Rob Riley. Also on the line is Tom Kelly of PricewaterhouseCoopers, our independent registered public accounting firm. They will be available to answer questions during the general question-and-answer session. Joining me today on the panel are Greg Jordan, our General Counsel and Chief Administrative Officer, Laura Gleason, our Corporate Secretary, and Bryan Gill, Director of Investor Relations. This meeting will be conducted in accordance with the regulations for conduct, which are available on the virtual meeting portal. By attending this meeting, you agree to abide by the regulations for conduct. Because this is a meeting of our shareholders, only those who entered the meeting as a shareholder using a control number will be permitted to vote and submit questions. Shareholder questions are welcome.
To vote or submit questions, please follow the instructions available on the virtual meeting portal. We will only answer questions submitted in writing via the portal and consistent with our regulations for conduct. You could submit questions at any time during the meeting, even now. We'll now turn to the formalities that are necessary for our record keeping. Laura, will you please present the secretary's report?
Thank you. Bill. I have in my possession an affidavit from Broadridge Financial Solutions, PNC's distribution and tabulation agent. The affidavit provides that the proxy materials were mailed to shareholders commencing on March 15th, 2023, the day we began providing access to our proxy materials. Certain other shareholders were mailed paper copies or received electronic delivery of these proxy materials, including the Notice of Annual Meeting beginning on March 15th, 2023. The materials were distributed to shareholders of record as of February 3rd, 2023. Janice W. Castillo LLC has been appointed as the judge of election for this meeting. The judge of election keeps a listing of all shareholders of record. On behalf of Janice W. Castillo LLC, Janice Castillo is supervising the voting, and she has delivered her oath of office to me.
The affidavit, notice, and oath will be filed with the records of this meeting. The judge of election has certified that at the beginning of this meeting, there were present in person via virtual format or by proxy 362 million votes or 90.44% of the total voting power. Therefore, a quorum is present. Copies of the minutes from the 2022 Annual Meeting of Shareholders are available from me upon request. I would like to remind those attending the meeting that today's presentation contains forward-looking information. Cautionary statements about this information are included in today's presentation, which is also available on our corporate website, pnc.com, under Investor Relations. I urge you to read the cautionary statements regarding such information. This concludes my report.
Thank you, Laura. Based on your report, I can confirm that this meeting has been properly convened. The purpose of this meeting is to consider and act upon four management proposals. First, the election of 13 nominated directors. Second, the ratification of the audit committee selection of PricewaterhouseCoopers as our independent registered public accounting firm for 2023. Third, the advisory approval of the compensation of our named executive officers. Fourth, the advisory approval of the frequency of future votes on named executive officer compensation. I will now ask for a single motion to introduce these proposals. May I have such a motion?
Mr. Chairman, my name is Bryan Gill. I am a shareholder, and I so move.
May I have a second to this motion?
Mr. Chairman, my name is Greg Jordan. I am a shareholder, and I second the motion.
Thank you. I declare that these proposals have been properly introduced and moved. We will now pause to allow for questions related to these four proposals. Questions unrelated to these four proposals will be addressed as appropriate during the general question and answer session that will follow the adjournment of this meeting. If multiple questions are submitted on the same topic, we'll do our best to summarize them and respond collectively to allow us to address as many questions as possible. We'll make every effort to address questions and comments that are consistent with the regulations of conduct.
At this time, we have no questions related to the proposals.
Thank you, Bryan. All proposals are now formally before the meeting. I declare the polls to be open. Shareholders who have sent in proxies or voted by phone or internet do not need to take any further action. Shareholders who have not voted or wish to change their vote may do so now in the virtual meeting portal. We will pause briefly to allow voting to occur. Let's give it a few more seconds here. All right. I declare the polls to be closed. I'd like to call upon the corporate secretary to report the preliminary voting results.
Thank you, Bill. The Judge of Election has provided a preliminary report to me which certifies that a majority of the votes cast were for the election of all 13 director nominees, for the ratification of the selection of PricewaterhouseCoopers, for the advisory approval of the compensation of PNC's named executive officers, and for a frequency of one year for future advisory votes on named executive officer compensation. I will file the preliminary report with the records of this meeting. The final vote tally will be disclosed on a Form 8-K that PNC will file with the SEC.
Thank you, Laura. Subject to certification of the final voting results by the Judge of Election, I declare that all four management proposals have been approved. This concludes the formal business of the meeting. I declare the annual meeting to be adjourned. Before we begin the general question and answer session, I'd like to take a moment to reflect on our success in 2022 and provide some context on the current environment. Just to start, I'd like to thank our more than 61,000 employees for their incredible efforts and the work that they do every day to support our customers. I'd also like to thank our Lead Independent Director, Andrew Feldstein, and our entire board for their continued guidance and support over the past year. I'd like to acknowledge Dr.
Renu Khator, who joined our board in May 2022 and serves as the chancellor of the University of Houston System and President of University of Houston. Of course, I'd like to thank you and all of our shareholders for your trust in our company. In short, 2022 was a year of growth for our company. We performed well with $6.1 billion in net income on more than $21 billion in revenue, both increases from the prior year. Just as important as how we did it, we delivered our Main Street bank model to more customers and communities across our coast-to-coast footprint, including within new and expanded markets. We built and nurtured long-term relationships by delivering products that address their fundamental banking needs. We grew loans in a disciplined manner, and our credit quality remained strong.
We controlled expenses well, resulting in substantial positive operating leverage, and we maintained strong levels of capital and liquidity. We did not do this because we expected things in the banking system to play out exactly as they have. We did this because this is the way we consistently manage the company, and the way we manage the company positions us well to be a source of strength and stability through the cycle. Let's fast-forward to March of 2023. It's important to point out that the events that kicked off fears about the banking sector, including recent failures, have taken place within just a few banks, and those banks have business models that are substantially different than PNC and the overwhelming majority of other banks. Inside our company, we really haven't seen any meaningful impacts from these events.
Our balance sheet remains strong and stable. We are operating the company in the same way we were at the beginning of March. As you saw in our first quarter results, our credit quality remains solid and has trended better than our own expectations. Now in the short term, the dynamics in the industry may contribute to some headwinds, including pressure on our net interest income. Notwithstanding that, we were the only bank in our peer group that grew deposits on a spot and average basis in the first quarter of 2023. Over time, we actually expect that PNC will be a beneficiary from this process. Meanwhile, our focus every day is the same, providing products and services and deploying capital to help our customers move forward financially. Career opportunities for employees and helps us attract and retain top talent.
Investing to help the communities in which we work and live prosper. Through all of this, creating value for you, our shareholders. We are patient, persistent, and consistent in the way we run the company, and we're optimistic about the opportunities for PNC in 2023 and beyond. I will now pause to allow for questions from our shareholders in the remaining time allocated for this meeting. I will respond personally or designate another person to respond to questions we receive that are appropriate for discussion. A reminder, if multiple questions are submitted on the same topic, we will summarize them and respond collectively. We'll make every effort to address questions and comments that are consistent with the regulations for conduct. We will not respond to questions that were already addressed in today's presentation.
If you have a question about a matter of concern to you individually and not of general concern to our shareholders, please contact our investor relations team through our website, pnc.com. We've allocated one hour for the meeting, including all questions, so we will address as many questions as possible. We've received several questions submitted through our virtual meeting portal prior to today's meeting, and we'll address those first.
Okay. Our first question. Given the failures of Silicon Valley Bank and Signature Bank, what do you believe are the ramifications for the financial services industry and for PNC in particular?
Timely question. I think there's 2 ways to go at this. One is, what are the regulatory ramifications? I think it's pretty clear that the regulators are going to push some regulation downhill to smaller banks. I think even in our own case, given how large we are, that we will be subject to potentially higher liquidity and even higher capital standards. Whatever comes our way will be phased in through time, and it's part of our planning process, and I don't expect that it will affect the operation of the company. I do think that the failures of Silicon Valley and Signature highlight the risk associated with monoline and smaller subscale institutions.
I think PNC's diversified business, and just the scale and the markets that we operate in, stand out in an environment like this and serve us well.
Okay. Thank you, Bill. Second question? Has the acquisition of BBVA USA replaced the earnings that were divested through the sale of your equity ownership in BlackRock?
Yes, by multiple times is the short answer. Our PNC's pre-provision net revenue has actually increased $1.8 billion compared to 2019 if we take BlackRock out of that. During the same period of time, the increased contribution we would have gotten from BlackRock, given our ownership stake, would have been $160 million. We're literally more than tenfold higher in earnings.
Okay. Thank you. Our third question. Can you talk about the success you've had with the BBVA USA acquisition?
Sure. I mean, I would just remind everybody that, you know, the strategy behind the purchase of BBVA was to introduce the PNC brand and capability into newer markets, and that, you know, in growth markets, which it did. We, you know, our plan was to both offer our larger suite of products to BBVA existing clients and importantly to grow, outright share in the markets that we entered. A couple of sound bites just on progress. The revenue year-on-year, so first quarter '23 compared to first quarter '22, for our C&IB business is up more than 45% from those same markets. Then in our retail distribution network, sales are also up north of 40% year-on-year. Substantial progress in our original objectives.
Importantly, that opportunity set, you know, gives us runway for the next multiple years. You know, we've talked about 10-year opportunity to grow that out to get to parity with some of our legacy markets.
All right. Thank you. Our next question is basically asking, could you please explain PNC's rationale behind its participation in the multi bank liquidity support of First Republic Bank? Does PNC believe it will get this deposit back, and have you taken reserves related to this deposit?
The rationale is, was actually pretty simple. We were pleased to be, you know, part of the solution, you know, helping stabilize the banking system in a moment of crisis. You know, as banks fail, it hurts the entire system as we've seen that for a variety of different reasons. We do expect to get our money back. Nonetheless, we treat it like a deposit at any other institution, and we take a reserve through our CECL process, and we've done that.
Okay. Your next question. PNC stock price was approximately $226 in January of 2021 and is currently in the $120 range. Can you explain what has driven the decline?
Yes. It isn't a decline in earnings. I think on the comparisons in the question, our earnings are probably up. It's a decline in multiple, the multiple that the market ascribes to our earnings, which has occurred throughout the industry. When we were, you know, at a price higher than $200, we had a forward earnings multiple of something on the order of 16, and that's fallen to, you know, eight or nine or 10 today. nine today, I think, Bryan. And the rest of the industry has fallen as well.
That's a function of the perception of forward earnings power of the industry, and the worries that are out there right now about a shallow recession, about credit costs increasing, and importantly, about funding costs increasing, you know, on the back of some of the stress the banking system has seen.
Okay. Thank you. Our next question regards branches and your views on that, and can you explain your rationale for branch consolidations?
Sure. It, it's, you know, ultimately, we want to serve our customers, where we are, you know, where they are, through multiple channels. We do that through digital, we do that through physical and branches, and we increasingly do it through mobile branches to get to markets, that have very thin or non-existent branch networks. We open branches and we close branches, you know, based on population shift and activity. Notwithstanding all of that, there is clearly an underlying trend across all banks across the country for branch traffic to decline. You know, it's declined steadily over the last 10 years. We expect that will continue, and we'll adjust our physical footprint, and increase our digital footprint if that's what clients demand, as that continues to happen.
Okay, thank you. Next question that was sent in. PNC lends over $2.82 billion to companies involved in the nuclear weapons industry. How does PNC ensure that its financing activities are aligned with its commitments to sustainability and ethics?
I think we've gotten this question every year for a bunch of years. Just to lead off, we don't finance north of $2 billion. We actually, at our estimation, we finance about $195 million. Importantly, you know, in March of 2022, we published our environmental and social policy guidance for responsible lending, and it provides a description of a framework that we employ evaluating industries that some of our stakeholders may consider sensitive, as well as our escalation paths for the decisioning around that. You know, PNC's activities with weapons producers are in conflict-affected and high-risk areas are governed by applicable laws as well as enterprise and line of business methodology, policies, and procedures.
Our exposure, not by design, but by outcome as we go through this process is actually quite small, and in fact, it declined, year-over-year.
Okay. Next question that came in. What have become PNC's strongest markets across the U.S.?
That's a great question. You know, our historical, you know, strength in the franchise came out of Pittsburgh and Philadelphia and New Jersey and our legacy markets. Increasingly, as we just look at, you know, sales and revenue growth, you see Washington, D.C., show up. You know, Texas, Houston is fantastic, and growth opportunities all through the Southeast and Florida. It's changing over time. Importantly, we still continue to grow our legacy markets, but the opportunity set in these newer markets and the, just growth capacity, the percentages increase, you know, year-on-year are massive relative to legacy markets.
Okay. We have no further questions at this time.
All right. Thank you, Bryan. Thank you all for your questions. Again, if you have additional questions or your question was not answered, you can reach out to our investor relations group through our corporate website. Thank you all for attending. Thank you for your interest in PNC.
The conference has ended. You may disconnect your line.