PNC Bank 2005 Annual Report Download - page 10

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management service companies, insurance companies, and
issuers of commercial paper and other securities, including
mutual funds.
Our various non-bank subsidiaries engaged in investment
banking and private equity activities compete with commercial
banks, investment banking firms, merchant banks, insurance
companies, private equity firms, and other investment
vehicles.
In providing asset management services, our subsidiaries
compete with investment management firms, large banks and
other financial institutions, brokerage firms , mutual fund
complexes, and insurance companies.
The fund servicing business is also highly competitive, with a
relatively small number of providers. Merger, acquisition and
consolidation activity in the financial services industry has
also impacted the number of existing or potential fund
servicing clients and has intensified competition.
In all of these areas, the principal bases for competition are
pricing (including the interest rates charged on loans or paid
on interest-bearing deposits), the range of products and
services offered, and the quality of customer service
(including convenience and responsiveness to customer needs
and concerns). The ability to access and use technology is an
increasingly important competitive factor in the financial
services industry. Technology is important not only with
respect to delivery of financial services but also in processing
information. Each of our businesses consistently must make
significant technological investments to remain competitive.
Our failure to execute successfully our One PNC initiative
would negatively impact our financial performance over
the next several years.
Our future results are likely to be affected significantly by the
results of the implementation of our One PNC initiative, as
discussed in Item 7 of this Report. Our ability to improve
profitability is, in particular, dependent to a meaningful extent
on the success of this initiative. Generally, the amounts of our
anticipated cost savings and revenue enhancements are based
to some extent on estimates and assumptions regarding future
business performance and expenses, and, although we believe
them to be reasonable at the present time, these estimates and
assumptions may prove to be inaccurate in some respects, due
to changing conditions or otherwise. For example:
• Some of the ideas may take longer to implement than
anticipated or may cost more to implement than
anticipated;
• The implementation of cost savings ideas may have
unintended impacts on our ability to attract and retain
business and customers;
• Revenue enhancement ideas may not be successful in
the marketplace or may result in unintended costs;
• Assumed attrition required to achieve workforce
reductions may not come in the right places or at the
right times to meet planned goals; and
• Changing market conditions may force us to alter the
implementation or continuation of cost savings or
revenue enhancement ideas.
As a result, we may not be able to achieve or sustain the cost
savings and revenue enhancements that we are anticipating
from the One PNC initiative.
We grow our business in part by acquiring from time to
time other financial services companies, and these
acquisitions present us with a number of risks and
uncertainties related both to the acquisition transactions
themselves and to the integration of the acquired
businesses into PNC after closing.
Acquisitions of other financial services companies also present
risks to PNC other than those presented by the nature of the
business acquired. In particular, acquisitions may be
substantially more expensive to complete (including as a result
of costs incurred in connection with the integration of the
acquired company) and the anticipated benefits (including
anticipated cost savings and strategic gains) may be significantly
harder or take longer to achieve than expected. In some cases,
acquisitions involve our entry into new businesses or new
geographic or other markets, and these situations also present
risks resulting from our inexperience in these new areas. As a
regulated financial institution, our pursuit of attractive
acquisition opportunities could be negatively impacted due to
regulatory delays or other regulatory issues. Regulatory and/or
legal issues relating to the pre-acquisition operations of an
acquired business may cause reputational harm to PNC
following the acquisition and integration of the acquired business
into ours and may result in additional future costs and expenses
arising as a result of those issues. Recent acquisitions,
including our acquisition of Riggs, continue to present the
post-closing risks and uncertainties described above.
The performance of our asset management businesses may
be adversely affected by the relative performance of our
products compared with alternative investments.
Asset management revenue is primarily based on a percentage
of the value of assets under management and, in some cases,
performance fees, in most cases expressed as a percentage of
the returns realized on assets under management, and thus is
impacted by general changes in capital markets valuations and
customer preferences. In addition, investment performance is
an important factor influencing the level of assets under
management. Poor investment performance could impair
revenue and growth as existing clients might withdraw funds
in favor of better performing products. Also, performance
fees could be lower or nonexistent. Additionally, the ability to
attract funds from existing and new clients might diminish.