PNC Bank 2012 Annual Report Download - page 50

ITEM 7–M ANAGEMENT ’ S D ISCUSSION AND
A NALYSIS OF F INANCIAL C ONDITION AND
R ESULTS OF O PERATIONS
E XECUTIVE S UMMARY
K EY S TRATEGIC G OALS
At PNC we manage our company for the long term. We are
focused on revenue growth, with an emphasis on deepening
customer relationships and increasing fee income, while
reducing expenses. Our goal for 2013 is to deliver positive
operating leverage and create momentum going into 2014,
while investing for the future, and managing risk and capital.
We continue to invest in our products, markets and brand, and
embrace our corporate responsibility to the communities
where we do business.
The primary drivers of revenue are the acquisition, expansion
and retention of customer relationships. We strive to expand
and deepen customer relationships by offering convenient
banking options and innovative technology solutions,
providing a broad range of fee-based and credit products and
services, focusing on customer service, and enhancing our
brand. This strategy is designed to give our customers choices
based on their needs. Our approach is focused on effectively
growing targeted market share and “share of wallet” rather
than short term fee revenue optimization. We may also grow
revenue through appropriate and targeted acquisitions and, in
certain businesses, by expanding into new geographical
markets.
PNC faces a variety of risks that may impact various aspects
of our risk profile from time to time. The extent of such
impacts may vary depending on factors such as the current
economic, political and regulatory environment, merger and
acquisition activity, and operational challenges. Many of these
risks and our risk management strategies are described in
more detail elsewhere in this Report.
Our priorities for 2013 are to build capital to support client
growth and business investment, maintain appropriate capital
in light of economic uncertainty and the Basel III framework
and return excess capital to shareholders, subject to regulatory
approval. We continue to work to improve the quality of our
capital and expect to build capital through retained earnings.
PNC continues to maintain a strong bank holding company
liquidity position. See the Capital and Liquidity Actions
section of this Executive Summary, the Funding and Capital
Sources section of the Consolidated Balance Sheet Review
section and the Liquidity Risk Management section of this
Financial Review and the Supervision and Regulation section
in Item 1 of this Report.
RBC B ANK (USA) A CQUISITION
On March 2, 2012, we acquired 100% of the issued and
outstanding common stock of RBC Bank (USA), the U.S.
retail banking subsidiary of Royal Bank of Canada. As part of
the acquisition, PNC also purchased a credit card portfolio
from RBC Bank (Georgia), National Association. PNC paid
$3.6 billion in cash as the consideration for the acquisition of
both RBC Bank (USA) and the credit card portfolio. The
transaction added approximately $18.1 billion in deposits,
$14.5 billion of loans and $1.1 billion of goodwill and
intangible assets to PNC’s Consolidated Balance Sheet. Our
Consolidated Income Statement includes the impact of
business activity associated with the RBC Bank (USA)
acquisition subsequent to March 2, 2012.
RBC Bank (USA), based in Raleigh, North Carolina, operated
more than 400 branches in North Carolina, Florida, Alabama,
Georgia, Virginia and South Carolina. The primary reasons for
the acquisition of RBC Bank (USA) were to enhance
shareholder value, to improve PNC’s competitive position in
the financial services industry, and to further expand PNC’s
existing branch network in the states where it currently
operates as well as expanding into new markets. When
combined with PNC’s existing network, PNC now has 2,881
branches across 17 states and the District of Columbia,
ranking it fifth among U.S. banks in branches. See Note 2
Acquisition and Divestiture Activity in the Notes To
Consolidated Financial Statements in Item 8 of this Report for
additional information regarding this acquisition and the
Smartstreet divestiture and 2011 branch acquisitions described
below.
S ALE OF S MARTSTREET
Effective October 26, 2012, PNC divested certain deposits and
assets of the Smartstreet business unit, which was acquired by
PNC as part of the RBC Bank (USA) acquisition, to Union
Bank, N.A. Smartstreet is a nationwide business focused on
homeowner or community association managers and had
approximately $1 billion of assets and deposits as of
September 30, 2012. The gain on sale was immaterial and
resulted in a reduction of goodwill and core deposit
intangibles of $46 million and $13 million, respectively.
B RANCH A CQUISITIONS
Effective December 9, 2011, PNC acquired 27 branches in the
northern metropolitan Atlanta, Georgia area from Flagstar
Bank, FSB, a subsidiary of Flagstar Bancorp, Inc. Effective
June 6, 2011, PNC acquired 19 branches in the greater Tampa,
Florida area from BankAtlantic, a subsidiary of BankAtlantic
Bancorp, Inc. Our Consolidated Income Statement includes
the impact of the branch activity subsequent to each date of
the respective acquisitions.
The PNC Financial Services Group, Inc. – Form 10-K 31