PNC Bank 2001 Annual Report Download - page 7

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In recent years, we have exited or
downsized capital-intensive businesses
such as credit cards, residential mort-
gage banking and indirect auto, ware-
house and institutional lending.
In 2001, we accelerated this
effort by reducing total loans by
approximately $13 billion. That
includes $3.4 billion in institutional
loan outstandings that we transferred
to held for sale. In 2002, we will
diligently pursue opportunities to
liquidate loans held for sale.
Our 2001 loan reduction initiative
included institutional credits that no
longer meet our risk/return criteria and
our $1.9 billion vehicle leasing business.
We decided to discontinue vehicle leas-
ing due to the rapidly changing environ-
ment and what we now believe to be
unacceptable risk dynamics.
We are also repositioning our
venture capital activities to focus more
on managing client investments.
Through this approach, we attracted
more than $100 million of external
funding commitments in 2001.
In connection with the sale of
our residential mortgage banking busi-
ness in January 2001, a bookkeeping
error occurred. While completing our
year-end review, we discovered and cor-
rected the error. As a result, net income
from discontinued operations for 2001
was adjusted to $5 million, $35 million
less than originally reported.
This event was unrelated to the
restatement referred to earlier, and I can
assure you we took immediate actions to
resolve this situation and implement
measures designed to prevent it from
happening again.
LOOKING AHEAD
The repositioning of PNC has
been aligned with our long-term goal
of creating a more valuable company.
We enter 2002 with a higher-
quality revenue mix, driven by business-
es with stronger growth potential. Asset
management and processing businesses
contributed 38% of business revenue in
2001. Our reliance on lending revenue
was among the lowest of our peers, as
was our loans to deposits ratio, another
indicator of our efforts to reduce bal-
ance sheet leverage.
Through our efforts, we have
built a well-capitalized company that is
capable of significant capital generation,
and we are focused on managing it
effectively. Your board of directors has
authorized a repurchase of up to 35 mil-
lion common shares through February
2004. We will act on this authorization
as we downsize the exit and held for sale
loan portfolios and as other conditions
permit. We will also consider other
means by which capital can be used to
improve returns.
For example, we will continue
to pursue acquisitions that enhance
our competitive advantage and build
more valuable businesses. Our recent
acquisition of a portion of the U.S.
asset-based lending business of the
National Bank of Canada is a good
example. It will further enhance a
business we have built into one of the
top-5asset-based lenders in the nation.
In 2002, we will seek additional
opportunities that help us meet the
risk/return criteria of our businesses and
support our goal of delivering more
consistent earnings growth over time.
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