PNC Bank 2001 Annual Report Download - page 40

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38
PFPC
Year ended December 31
Dollars in millions 2001 2000
INCOME STATEMENT
Fund servicing revenue $738 $674
Operating expense 536 501
Amortization 25 31
Operating income 177 142
Nonoperating income (a) 14 31
Debt financing 94 95
Facilities consolidation
and other charges 36
Pretax earnings 61 78
Income taxes 25 31
Earnings $36 $47
AVERAGE BALANCE
S
HEET
Intangible assets $1,065 $1,107
Other assets 706 471
Total assets $1,771 $1,578
Assigned funds and other liabilities $1,563 $1,369
Assigned capital 208 209
Total funds $1,771 $1,578
P
ERFORMANCE
R
ATIO
S
Return on assigned capital 17% 22%
Operating margin 19 21
(a) Net of nonoperating expense
PFPC is the largest full-service mutual fund transfer agent
and second largest provider of mutual fund accounting and
administration services in the United States, providing a
wide range of fund services to the investment management
industry. PFPC also provides processing solutions to the
international marketplace through its Ireland and
Luxembourg operations.
To meet the growing needs of the European
marketplace, PFPC continues its pursuit of offshore
expansion. PFPC is also focusing technological resources
on targeted Web-based initiatives and exploring strategic
alliances.
In the fourth quarter of 2001, PFPC incurred $36
million of pretax charges largely related to a plan to
consolidate certain facilities as a follow-up to the
integration of the Investor Services Group (“ISG”)
acquisition. The charges primarily reflect termination costs
related to exiting certain lease agreements and the
abandonment of related leasehold improvements.
PFPC earned $36 million in 2001 compared with $47
million in 2000. Excluding facilities consolidation and
other charges in 2001, earnings increased $12 million or
26% in the year-to-year comparison and the return on
assigned capital and operating margin improved to 28%
and 24%, respectively. The increase was primarily due to
growth in transfer agency and subaccounting revenue that
resulted from an increase in shareholder accounts serviced,
and $9 million of nonrecurring fee adjustments.
Revenue of $738 million for 2001 increased $64 million
compared with 2000. An increase in shareholder accounts
serviced drove strong performance in transfer agency and
subaccounting revenues. The benefit of growth in
accounting/administration assets and shareholder accounts
more than offset the impact on revenue of lower custody
assets serviced. Revenue growth rates in this business may
be pressured by lower equity valuations, pricing and other
competitive factors. See Business and Economic
Conditions and Fund Servicing in the Risk Factors section
of this Financial Review for additional information
regarding matters that could impact fund servicing revenue.
Operating expense increased 7% in the year-to-year
comparison as the impact of business expansion was
partially mitigated by expense management initiatives and
the comparative impact of ISG integration costs that were
incurred in the prior year.
Servicing Statistics
December 31 2001 2000
Accounting/administration assets ($ in billions)
Domestic $514 $454
Foreign 21 9
Total $535 $463
Custody assets ($ in billions) 357 437
Shareholder accounts (in millions) 49 43