PNC Bank 2012 Annual Report Download - page 39

The issues described above may affect the value of our
ownership interests, direct or indirect, in property subject to
foreclosure. In addition, possible delays in the schedule for
processing foreclosures may result in an increase in
nonperforming loans, additional servicing costs and possible
demands for contractual fees or penalties under servicing
agreements.
There is also a continuing risk of incurring costs related to
further remedial and related efforts required by the consent
orders and related to repurchase requests arising out of either
the foreclosure process or origination issues. Reputational
damage arising out of this industry-wide inquiry could also
have an adverse effect upon our existing mortgage and home
equity loan business and could reduce future business
opportunities.
One or more of the foregoing could adversely affect PNC’s
business, financial condition, results of operations or cash
flows.
We grow our business in part by acquiring other financial
services companies from time to time, and these
acquisitions present 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, financial
services assets and related deposits and other liabilities present
risks and uncertainties to PNC in addition to those presented
by the nature of the business acquired.
In general, acquisitions may be substantially more expensive
to complete than anticipated (including unanticipated costs
incurred in connection with the integration of the acquired
company). Anticipated benefits (including anticipated cost
savings and strategic gains) may be significantly harder or
take longer to achieve than expected or may not be achieved
in their entirety as a result of unexpected factors or events.
Our ability to achieve anticipated results from acquisitions is
often dependent also on the extent of credit losses in the
acquired loan portfolios and the extent of deposit attrition,
which are, in part, related to the state of economic and
financial markets. Also, litigation and governmental
investigations that may be filed or commenced, as a result of
an acquisition or otherwise, could impact the timing or
realization of anticipated benefits to PNC.
Integration of an acquired company’s business and operations
into PNC, including conversion of the acquired company’s
different systems and procedures, may take longer than
anticipated or be more costly than anticipated or have
unanticipated adverse results relating to the acquired
company’s or PNC’s existing businesses. In some cases,
acquisitions involve our entry into new businesses or new
geographic or other markets, and these situations also present
risks and uncertainties in instances where we may be
inexperienced in these new areas.
Our ability to analyze the risks presented by prospective
acquisitions, as well as our ability to prepare in advance of
closing for integration, depends, in part, on the information we
can gather with respect to the target, which is more limited
than the information we have regarding companies we already
own.
As a regulated financial institution, our ability to pursue or
complete attractive acquisition opportunities could be
negatively impacted by regulatory delays or other regulatory
issues. In addition, legal and regulatory or other governmental
proceedings, claims, investigations or inquiries relating to pre-
acquisition business and activities of acquired companies may
result in future monetary judgments or settlements or other
remedies, including damages, fines, penalties, restitution or
alterations in our business practices, and in additional
expenses and collateral costs, and may cause reputational
harm to PNC. The processes of integrating acquired
businesses, as well as the deconsolidation of divested
businesses, also pose many additional possible risks which
could result in increased costs, liability or other adverse
consequences to PNC. Note 23 Legal Proceedings in the Notes
To Consolidated Financial Statements in Item 8 of this Report
describes several legal proceedings related to pre-acquisition
activities of companies we have acquired, including National
City. Other such legal proceedings may be commenced in the
future.
The soundness of other financial institutions could
adversely affect us.
Financial services institutions are interrelated as a result of
trading, clearing, counterparty, and other relationships. We
have exposure to many different industries and counterparties,
and we routinely execute transactions with counterparties in
the financial services industry, including brokers and dealers,
commercial banks, investment banks, mutual and hedge funds,
and other institutional clients. Many of these transactions
expose us to credit risk in the event of default of our
counterparty or client. In addition, our credit risk may be
exacerbated when the collateral held by us cannot be realized
upon or is liquidated at prices that are not sufficient to recover
the full amount of the loan or derivative exposure due us.
20 The PNC Financial Services Group, Inc. – Form 10-K