PNC Bank 2007 Annual Report Download - page 3

middle-market loan syndications in the Northeast. And in the U.S., we ranked second in both
transaction and dollar volume. PNC’s Harris Williams subsidiary, one of the nation’s largest
M&A advisory firms for middle market companies, was selected Middle Market Investment
Bank of the Year by Investment Dealers’ Digest, a leading trade publication. And Harris
Williams had a record year.
Our national asset-based lending group also had a record year, with year-end loan outstandings
of approximately $5 billion. And ARCS Commercial Mortgage, acquired in the second quarter
of 2007, allows Corporate & Institutional Banking to offer a full spectrum of financing servicing
options to multifamily owners and investors on a national basis.
In fund servicing, PFPC retains its leadership positions in the processing business – remaining
the No.1 subaccounting provider and the No. 2 full-service mutual fund transfer agent in the
United States – even as it expands internationally.
In 2007 we opened a new sales office in London and obtained a license that will allow PFPC to
provide depository services in the $1 trillion Luxembourg market, the second largest worldwide
market for funds after the United States. Total funds serviced by PFPC grew to $2.5 trillion in
2007, up from $2.2 trillion the previous year, a 14 percent increase.
Our asset manager, BlackRock, with its expanded product line and truly global reach, has $1.4
trillion in assets under management as of year-end 2007. The strategic decisions being made to
grow the distribution network, expand the product range, and their overall focus on investment
performance and client service should continue to benefit PNC.
We continued to manage risk. We are well-positioned from a credit risk perspective due to our
strategic decision making and operating discipline. We believe our industry will continue to face
challenges from credit deterioration. While not immune, we believe our approach to credit risk
management makes the migration we are seeing manageable.
Coming off historically low credit losses, PNC along with many other financial services
companies has been affected by credit deterioration, in our case primarily related to residential
real estate development portfolio. However, our outstandings in this sector represent only about
2 percent of our total assets, the majority of which are in our footprint. Relative to our peers, our
exposures are small.
Overall, our asset quality remains strong, with nonperforming asset, nonperforming loan, and
net charge-offs asset quality ratios better than our peers. We remain diligent in our underwriting
practices and our ongoing credit assessments, and we believe our adherence to a moderate risk
profile continued to serve us well.
Our effectively managed balance sheet is a key strength for us. Our ample liquidity position
allowed us to respond quickly to the rate volatility that occurred throughout 2007, and we are
well positioned for a falling interest rate environment.
We improved our operating leverage. Even as we invested in our businesses, we continued to
grow revenues faster than expenses on an adjusted basis, creating positive operating leverage.
This sounds deceptively easy, but it is not, given our commitment to invest in our business for
long-term growth.
This started with our successful One PNC initiative, which benefited greatly from the
solicitation of employee ideas, and now continuous improvement is part of our culture. In 2007