FINANCIAL INSTITUTIONSISSUER COMMENT 3 March 2016RATINGSPNC FINANCIAL SERVICES GROUP, INC. (PNC) Moodys SR Unsecured Rating A3Moodys Outlook STABond-Implied Rating1 A3CDS-Implied Rating Baa2EDF-Implied Rating Baa1As of March 1, 20161. The A3 bond-implied rating is for PNC Funding Corp., a wholly owned subsidiary of PNC that is mainly responsible for issuing corporate debt.ContactsAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Market Signals ReviewPNC Financial: Two Market-Implied Ratings Slip Immediately before PNCs release of its 2015 10K the CDS- and EDF'-implied ratings both fell. On February 26, the CDS-implied rating dropped from Baa1 to Baa2 while the EDF-implied rating weakened from A3 to Baa1 (Figure 1). The bond- implied rating was unchanged over the last week at A3.FIGURE 1. PNC FINANCIAL SERVICES GROUP: MOODYS AND MARKET-IMPLIED RATINGS - LAST 30 DAYSIn the 10K released on February 26, PNC management revised its outlook downwards for net interest income growth, from modest growth to stable. In addition, the company estimated its provision for loan losses at $75 million to $125 million; reaching the top end of that range could be caused by its energy exposures. At year-end 2015, PNC had $2.6 billion in oil and gas exposure, representing 1% of loans. Of this total $0.2 billion is non-investment grade. The CDS- and EDF-implied ratings remain where they dropped following the release of the 10K.The CDS-implied rating of Baa2 has not been so low since May of 2015. The EDF-implied rating has varied from Baa1 to A3 on multiple occasions over the last 36 months. TheMOODY'S ANALYTICS FINANCIAL INSTITUTIONS2 3 March 2016 Market Signals Review: PNC Financial: Two Market-Implied Ratings Slipbond-implied rating has varied from a high of A...
