PNC Bank 2001 Annual Report Download - page 5

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DEAR SHAREHOLDER:
The past year was defined by
significant challenges and notable
achievements for our company. As
we enter 2002, our long-term objective
remains clear and unchanged: to
build a diversified financial services
company that generates superior
financial performance and achieves a
premium valuation.
In 2001, we made significant
progress toward achieving that goal.
• We continued to grow our Regional
Community Bank by deepening
our sales culture and leveraging
technology to anticipate and meet
customer needs.
• We expanded the distribution capa-
bilities and product breadth across
our group of leading asset manage-
ment and processing businesses.
• We strengthened the risk, return
and valuation dynamics of our bank-
ing business by taking dramatic steps
to downsize our institutional loan
portfolio and discontinue our vehicle
leasing business.
Among several actions taken
to reposition our banking business,
the largest was the 2001 reduction
of our loan portfolio by approximately
$13 billion. A portion of that reduc-
tion included institutional credits
that we sold to subsidiaries of
American International Group, Inc.
and removed from our balance
sheet. You can read more about
this transaction, and a similar one
involving venture capital assets, in
the financial review section.
After year end, we learned
that our independent auditors and
federal banking regulators had
differing views on the appropriate
accounting treatment for these
transactions. After considering all the
circumstances, and to avoid investor
confusion, we made the decision to
revise our 2001 earnings and conform
financial reporting with regulatory
reporting requirements.
The total cost associated with
the overall repositioning of our
banking business and other actions —
including $155 million related to the
revision — amounted to approximate-
ly $768 million after tax. As a result,
2001 earnings from continuing opera-
tions were $377 million or $1.26 per
diluted share compared with $1.214
billion or $4.09 per diluted share from
continuing operations in 2000.
Clearly, our 2001 results did not
meet our expectations. However, given
the challenging economic environment
we faced, I’m pleased with how we’ve
positioned ourselves for the future. We
have an improved risk profile and a
business mix more capable of generat-
ing value for our shareholders.
In 2002, our priorities — and
our challenges — are clear. We will
focus on the strategic growth of our
businesses, value-added customer
relationships, executing our loan
downsizing initiative and asset quality.
FOCUSED ON GROWTH
Our Regional Community Bank
has grown higher-return, lower-risk
transaction deposits by 11% on average
over the past year. This is the result
3