Bill Demchuck, the Chairman, Chief Executive Officer and President of P&C Financial Group, I will be presiding as the Chairman of the 2019 Annual Meeting of Shareholders, and I now call the meeting to order. On behalf of our Board of Directors and management team, I welcome all of you in the room and also all of those listening via the webcast or teleconference. This meeting will be conducted in accordance with the regulations for conduct, which were included in proxy statement. As indicated in our proxy statement, by attending this meeting, you agree to abide by the regulations for conduct. As a reminder, no cameras, mobile phones,
laptops, tablets or recording equipment are permitted in
the meeting room. Microphone will be brought to you. A microphone will be brought to you. I ask that you respect others who are speaking. Please don't speak out of turn or interfere when another speaker has the floor.
And after you have spoken, I will respond personally or designate another person to respond. You should have received a copy of the agenda and the regulations for conduct today. If you did not receive an agenda, please raise your hand and an attendant will give one to you. Seeing none. We have 3 management proposals on the agenda for this meeting.
You'll have time to ask questions or make comments about the proposals after they are introduced. During the formal business of the meeting, your questions or comments must pertain to an agenda item. After we adjourn the meeting, we will hold a general session and answer or general question and answer session to discuss matters not on the agenda, but appropriate for discussion. I would like at this time to introduce our director nominees who are present as well as our management executive committee members. Would you please stand?
Thank you. I'd also like to introduce the representatives present from PricewaterhouseCoopers, LLP, our independent registered public accounting firm. Would you please stand? Thanks, guys. You will have the opportunity to ask questions of the PwC representatives during the general question and answer session.
With me on the platform today is Greg Jordan, our General Counsel and Alicia Powell, our Corporate Secretary. Alicia will serve Company, N. A, PNC's transfer agent. The affidavit
states that the company has been Company, NA, PNC's transfer agent. The affidavit states that the notice of Internet availability of proxy materials was mailed
to certain shareholders on March 12,
2019, the day they were given access to electronic delivery of these proxy materials, including the notice of annual meeting beginning on March 12, 2019. The materials were distributed to shareholders of record as of February 1, 2019. The Board of Directors appointed Computershare as the Judge of Election for this meeting. The Judge of Election keeps a certified listing of all shareholders of record. On behalf of Computershare, Shirley Nasralla is here to supervise the voting, and she has delivered her oath of office to me.
Ms. Nasralla, will you please stand? Thank you. The affidavit, notice and oath will be filed with the records of this meeting. The judge of election is certified that at the beginning of this meeting, they were present in person or by 412,701,545 votes or 90.95 percent of the total voting power.
Therefore, a quorum is present. Copies of the minutes from the 2018 Annual Meeting of Shareholders are available from me upon request. I'd also like to remind those attending the meeting that as reflected on this slide, our materials and information in the Investor Relations section of our website, pnc.com, include cautionary statements regarding forward looking and non GAAP financial information, and I urge you to read those cautionary statements. Mr. Chairman, this concludes my report.
Thank you, Alicia. Based on your report, I find that proper notice has been given and a quorum is present. Therefore, this meeting has been properly convened. The purpose of this meeting is to consider and act upon 3 management proposals, and they are the election of 13 nominated directors, the ratification of the audit committee selection of PricewaterhouseCoopers LLP as PNC's independent registered public accounting firm for 2019 and the advisory approval of the compensation of PNC's named executive officers. I will now ask for a single motion to introduce these proposals.
May I have such a motion?
Mr. Chairman, my name is Bing Han. I'm a shareholder. I so move.
May I have a second to this motion? Mr. Chairman, my name is Nathan Herring. I'm a shareholder, and I second the motion. Thank you.
I declare that these proposals have been properly introduced and moved, and I now open the floor to any discussion or questions related to these proposals. If you have a question unrelated to these proposals, you will have an
Any
Any questions on these proposals? Thank you. All proposals are now formally before the meeting and I declare the polls to be open. If anybody needs a ballot, please raise your hand. And if you've already voted and do not intend to change your vote today, you do not need a ballot.
Does anybody need a ballot? And please make sure that you've signed and fully completed your ballot before handing it in. And once you've completed the ballot, raise your hand so that one of our representatives can collect it. And then once our representative collects the ballots and gets into the blood judge of election, the polls will close. And did we get all the ballots from the auditorium?
We did. Thank you. Okay. I declare that the polls to be closed. While the votes are being tabulated, I'd like to provide a few comments about our company.
In December, we marked 10 years since P&C's acquisition of National City Corporation. As you can see from the slide here, we accomplished a lot in those 10 years. We expanded the reach of our franchise, we added customers, and we grew our business. But our industry is changing. Trust has become the most important criteria when consumers choose a financial partner.
Trust not only in the fair value exchange, it should be at the heart of any business relationship, but also that their bank is doing everything that it should to protect their information and their assets. The quality of our people in the branch and our care centers and wherever our customers engage with us continues to be a differentiator, but we're also working hard and fast to deliver high quality digital experience as customers increasingly demand that virtually everything they can do at a branch and more be possible online and in the palms of their hands. We've been investing heavily over the years to build a technological infrastructure capable of supporting not only the company we've become, but also our growth for the foreseeable future. Now we're leveraging our improved capabilities as our tech spend shifts from infrastructure to more customer facing innovation. Looking at the company's performance, 2018 was a successful year for P&C with net income of $5,300,000,000 or $10.71 per diluted common share.
We achieved record total revenue of $17,100,000,000 Net interest income of $9,700,000,000 was also a record, increasing 7% year over year. Net interest margin continued to expand and we grew our fee businesses across the franchise contributing to higher non interest income. We also grew both loans and deposits. In 2018, we returned $4,400,000,000 in capital to our shareholders with 19,900,000 shares repurchased for $2,800,000,000 and $1,600,000,000 paid in common stock dividends. We raised the quarterly dividend on our common stock from $0.75 per share to 0.95 dollars per share in the Q3.
Since 2014, we've returned more than $16,000,000,000 in capital via dividends and share repurchases. And as you can see here, at 11%, our 5 year total return to shareholders significantly outpaced both the S and P 500 in our peer banks. Short term, it would be pretty easy to keep doing what we have been doing. PNC currently has a best in class corporate and institutional banking business serving corporate clients with revenue over $50,000,000 We have an excellent retail banking business that serves the needs of more than 8,000,000 customers. And our wealth management business is highly profitable with substantial growth opportunities based on referrals through our other lines of business.
But the world is changing around us and as the expectations of our customers evolve, our opportunities are expanding. Our Corporate and Institutional Banking business is growing nationally as we build corporate relationships across the country and continue to expand our middle market corporate banking franchise to new markets. Our retail banking business on the other hand is primarily focused in critical questions about how are we how we are going to provide stable funding for the sustainable growth of our business. In simple form, we are growing our loans on a national basis today in CNIB and our current platform in retail is basically trying to fund them with a regional platform. We're focusing our efforts now and our investment dollars are winning in the digital age where technology itself brings additional scale and where PNC's focus on ease, simplicity, trust and fairness is widely embraced.
We're building on these principles, culture and strategy that have made us Late last year, we began using digital channels to market a high yield savings account to new customers outside of our existing retail branch network. And though early, our results are exceeding our expectations and we are pleased that a number of our new customers are quickly expanding their relationships with us to include a full virtual wallet relationship. Importantly, these new deposit accounts that this effort is generating are overwhelmingly with customers who are completely new to P&C and in diverse geographies as the map on this slide shows. We're supporting this national effort with a limited retail presence in select markets, recognizing that even primarily digital customers want access to a location they can visit on occasion. But our physical retail presence in the new markets nationally is going to look very different from traditional bank expansions as we leverage the lessons we've learned over the last 10 years about evolving customer preferences and our ability to serve customers in markets with a limited branch presence.
Over time, we believe this strategy offers us an opportunity to expand retail banking to the half of the country we don't currently serve with a more efficient and less costly model than traditional expansion through either acquisition or significant branch openings. Now before we move on with the business of the meeting, I wanted to offer some comments on the Q1 of this year and then I'd like to share just a few thoughts on the year ahead and why I hope you're all as proud as I am of your investment in P&C. As you know, earlier this month, we announced Q1 2019 results. And for the quarter, reported net income of $1,300,000,000 or $2.61 per diluted common share. Year over year, we grew net income and compared with the Q4 of 2018, net interest income was stable, despite 2 fewer days in the quarter.
And our net interest margin actually expanded while we kept expenses flat. We saw solid loan growth and overall credit quality remained strong. Additionally, we grew capital providing us with flexibility into the future. As 2019 unfolds, we remain confident about the strength of the economy the opportunities to drive growth, efficiency and value over the long term. I'm excited about the opportunities in front of us and the growth that is possible if we continue to execute and focus on doing what is best for our customers, our shareholders, our employees and our communities.
And on that note, as I think about our various constituencies, let me just share a few final thoughts on why we do what we do. Our Main Street bank philosophy is built on the idea that what we do best that we do best when our communities, employees, customers and shareholders all prosper. We're committed to delivering the best possible banking experience, but we also believe that our company should serve a greater purpose. And I'm very happy to share that the news that very happy to share the news that PNC recently received an outstanding Community Reinvestment Act rating from the OCC. It's the highest possible rating and one that we're proud to have earned for every exam period since the inception of CRA back in 1977.
In 2018 alone, PNC provided more than $3,200,000,000 in financing that benefited low and moderate income families and communities, including more than $2,300,000,000 in community development loans. The PNC Foundation and PNC Bank provided more than $77,000,000 in charitable giving and sponsorships. And we delivered on the promise we made in 2017 to accelerate the implementation of a $15 minimum wage for our employees and continued our work to create a more inclusive environment. We're actually ranked the highest rated bank on Barron's 100 Most Sustainable Companies list for 2019. And finally, just a few weeks ago, we celebrated the 15th anniversary of PNC Grow Up Great, our signature philanthropic program focused on early childhood education.
As part of that celebration, we extended our commitment to Grow Up Great, which is now a 5 $100,000,000 initiative. Since its inception, Grow Up Great has improved the quality of early childhood education and access to early education programs for more than 5,000,000 children across the markets where we operate. And it's helping to provide these children the best chance at success in school and life. Thank you all for your investment in P&C and for your support of all we're doing to serve our communities, of our voting.
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 and for the advisory approval of the compensation of P&C's named executive officers. I will file the preliminary report with the records of this meeting. The final vote tally will be disclosed on a Form 8 ks that PNC will file with the SEC.
Thank you, Alicia. Subject to certification of the final voting results by the judge of election, I declare that the shareholders have approved the 3 proposals introduced by management. This concludes the formal business of the meeting. I declared the annual meeting to be adjourned. But I would now like to open the floor to questions from our shareholders.
Someone has microphones here.
Good morning. Good morning. Good morning, Mr. Chairman. My name is Tim Chesley, and I'm a representative of the Carpenters Union Pension Fund that holds shares in PNC Financial Services.
The Carpenters Pension Funds collectively have assets of $60,000,000,000 and they are long term holders of 512,000 shares of PNC Financial Services common stock. We commend the board and the management team for a solid long term financial and stock price performance record achieved in an ethical manner that considers the contributions of important corporate constituents. So thank you. Mr. Chairman, a topic that has received growing interest in the business press and at leading business schools is the growth and the size of the ownership interests held by mutual funds, particularly passive index funds.
Some have been even expressed with anti competitive concerns related to the growing concentration of stock holdings by a limited number of investors. BlackRock, Vanguard and along with others each own in excess of 5% of the company's outstanding shares. The proxy statement disclosure clearly outlines the ownership interests and transactions with and between P&C and BlackRock. Could you speak to the issue of this growing concentration of institutional investor ownership generally and its impact or potential impact on corporate governance. Specifically, might the increasing concentration promote a longer term strategic environment for boards?
Thank you.
Thank you for your question. I guess I will start by acknowledging our ownership stake in BlackRock and my involvement as a member of the BlackRock Board. I can speak to their practices and then I can answer your question as an individual not necessarily representing a stance of the company. As it relates to BlackRock and the topic of governance around index funds and what I see sitting on their board is they take their responsibilities very seriously in the way that they vote their shares, whether they are held in an index fund or in a otherwise benchmarked fund. They have an entirely separate governance organization inside of their company.
They engage actively with management. They engage with us as management of this company. And I actually don't see any difference in their behavior nor do I see difference in Vanguard's behavior as an aside and their responsibilities as shareholders in voting their shares and helping to steer the governance and strategic direction of the shares they hold in their portfolios. Having said all of that, so that's sort of practical experience and what I see. The popular debate is somehow that concentrations of these shares inside of massive index funds will cause less differentiation around amongst companies and will put less pressure on boards in terms of their oversight of companies, if that's where you were going with the last part of your question.
I don't know how that plays out across the other large companies in this country, but I would tell you at our at P&C, our Board is actively engaged in doing the right thing for our 4 constituencies independent and long before we would see pressure from shareholders. We're actively engaged in our shareholders. We take their views into account everything that we do. So it's kind of it's almost a foreign notion to me our Board wouldn't be aggressively pushing the management of this company to do the right thing, independent of who owns our stock. It's a fair question.
It will be part of the public debate for the next long bit of time I suspect and my suspicion through time is we will see institutional investors stand up to their responsibilities of corporate governance whether the shares are holding index funds or independently. But thank you for your question.
Okay. Good morning, everyone, and Mr. Domczyk in particular. I'd like to say this remarkable building is a sign of as a green building, a sign of the commitment that PNC has to sustainability. So I'm hoping you'll take under consideration the issue of PNC's investment of $600,000,000 in the production of nuclear weapons.
On April 11, the Wall Street Journal published an op ed entitled The Threat of Nuclear War is Still With Us, written by 3 former officials: George Shultz, the Secretary of State William J. Perry, the Defense Secretary and Sam Nunn, Chair of the Senate Armed Services Committee. These men have intimate knowledge of war and weapons, and they said, the U. S. And its allies and Russia are caught in a dangerous policy paralysis that could lead most likely by mistake or miscalculation to a military confrontation and potentially the use of nuclear weapons for the first time in 74 years.
And then weeks ago, the 1st generation of new bombs, the most dangerous ever built, rolled off the assembly line in Texas. They're less destructive, but for that reason, they're much more of a threat since they're designed to deter not to deter, but to be used. Last year, the Bulletin of Atomic Scientists moved their doomsday clock up to 2 minutes before midnight. Yet, the U. S.
Plans to spend through 2028, dollars 494,000,000,000 on nuclear weapons according to the Congressional Budget Office. And then cleanup of radioactive waste, which is one of the most hazardous substances in the world, according to the Government Accountability Office will cost $541,000,000,000 And, so given these needs our nation has for health care, education, infrastructure, I must ask why does a bank that serves the public make such risky investments in companies whose products endanger the planet and the people? I hope you'll continue your commitment to sustainability by considering a move of your money to productive and forward looking investments? Thank you.
Thank you for your question and I appreciate your concern. I mean a couple of things. The first is we are most definitely going to continue our commitment to sustainability. It's a very important part of the culture inside of our company. As it relates to our financing of companies who have some involvement in nuclear production, whether it's the technology, whether it's for power or for weapons, our total exposure in that area is actually less than 300,000,000 dollars We went through this last year and I recognize you see a report that has a larger number, but I assure you it's smaller than that.
Notwithstanding that whether it's 300,000,000 or $600,000,000 it's still a small portion of what we do and those loans are 2 companies that have broad based activities, many of those activities beneficial to a sustainable economy. We are faced as a company with choices, not always clear choices in representing the interests of our employees, our shareholders, our clients and our communities. We take that responsibility seriously. And as we said last year to this very question, in the instance of these companies and our small financing with financings with them, we are comfortable where we stand today. Separate from that, we do across our entire portfolio continually screen for outsized risks with respect to climate change, with respect to carbon, with respect to reputational risks and many other things, this would fall in side of it.
But given how small an exposure it is to companies that are reputable and involved in very in a wide variety of things, we're comfortable with where we are today and it won't change. But thank you for your question. We have another question.
Thank you. And in view of your remarks and my friends' remarks, I'm going to revise what I say and not be repetitive. I want to thank you for your investment and growing up great in the amount of $500,000,000 a remarkable initiative. But in contrast, as we've just heard, you're spending somewhere between $300,000,000 $600,000,000 with the makers of nuclear weapons. And my understanding is that you have made available a much larger amount to companies who deal in deadly weapons through underwriting and financial managers.
Investing in both children and nuclear weapons that rain down death brings to mind that motto of the 1960s, War is not healthy for children or other living creatures. And we know war is the business of those companies. Weapons need to be used, replenished, updated. We have 7,000 nuclear weapons. Surely, there is no need for more.
As my friend mentioned about the bulletin of atomic scientists and the doomsday clock, they also said they believe that we in immediate danger of destroying ourselves from 2 sources, nuclear annihilation and climate change. We, each one of us, those who make up the bank, we're the ones that can change things. We are the change that we've been waiting for. Thank you.
Your comment. Are there other questions?
So, thank you for these comments and thank you for recognizing me Chairman Demchak. I would just like to add to this conversation that perhaps if P and C values their investments in these companies, specifically Jacobs Engineering, General Dynamics, BWX Technologies, AECOM, these companies do amazing things, I'm sure. That's why P&C has invested in them. Perhaps they could send a message to those companies saying perhaps they should get out of nuclear weapons technology. These companies do things like nuclear laboratory production as well as the production of missiles.
They can do other things. And I think PNC is a great company, but they can recognize their power in the market to influence what their investments do. So I would consider that as well as a solution. Thank you.
Thank you for your comment. One thing I'm not sure if you're aware of or not, but we're actually I think 94th or 5th on the list of financial institutions that provide capital to these companies. So your comment on ability to influence outcomes, I'm not sure that we have that ability. With respect to this broad topic, as we said last year, advice if you're trying to make progress on this, it's going to have to come through our government. It isn't going to come through financial institutions.
And it isn't going to come through a financial institution that's 95th on the list of people providing capital to these companies. So are there other questions not pertaining to financing of these particular companies?
Thank you, Mr. Demchak. Shareholder, maybe something this is a little bit closer to your own checkbooks. P and C is one of the institutions that I use here in the city. Something I noticed in the last 6 to maybe 18 months, when I used to swipe my debit card, I'd immediately get a text.
It was a feeling of security. If I was to ever lose it, I could tell you that it was still here or still there. I've been having real trouble being able to
actually get that feature back. I don't know if it was
cut, but I know with self for myself at least, it is a sense of security.
Big feature. And it's still out there. So the only thing I could think is that maybe in a refresh of reloading your app or something on your online banking, you just need to go in and actually check the box that says you want text alerts with your mobile I don't know, it could have been an update or something, but it's definitely still out there. I get it all the time. I actually get it all the time.
My son swipes his card, which means it's going all the time. Yes. So I would turn it back on. It absolutely works and it is a great feature. But thank you for your comment.
There's one question over here.
Are you aware of the following situation, which applies to all of those companies and maybe more, at least in principle? There is a mechanism on many of these weapons called dial a yield, which means that you can dial up or down a particular range of yield for the weapon that may be more or less appropriate or at least perceived more or less appropriate for a given situation, if you will, addressing a city versus a small hard target. And what happens when you dial the yield down is that you still have the same fissile material involved or further on, but there is a fissile material needed to get the weapon going. And you have to have that around to get a critical explosion going, whether it be, for example, highly enriched uranium or plutonium. And when you cut that yield down, that means that less of that material participates in the actual energetic event, but it still gets dispersed and can be transformed into something radioactive.
So that that means that it can impact people even well after the event if it is used. For an example, and this goes way back, for example, to Hiroshima, only 1 point 3% of the material actually participated in the explosion. And we know that there were many fatalities for years after. Some of them were pretty famous. For example, Yoshio Nishina, who was the head of the Japanese program, died several years later.
And this still continues in the sense that there's really no way to get more than about 20% of the material to participate in a given explosion. So
If I could could just interrupt. First of all, I was not aware of that. And secondly, I don't at all want to seem like I'm indifferent to the horrors of nuclear weapons because I'm not certainly as an individual and I would suggest that the majority of our employees would probably feel the same way. What I am suggesting is that as a financial institution that has to look at broad based decisions for companies that do multiple things and look out. My job is to look out for the interests of our 4 constituencies, our communities, our company, shareholders and our employees.
What I am suggesting is we are not going to change our financing approach for those companies. It is something that we have talked about. It is something that we look at in terms of the way that we review our portfolio, but we are not going to change it. And with that, are there any other questions unrelated to nuclear financing? Seeing none, thank you.
That concludes the annual meeting for today. Thank you all for attending.