PNC Bank 2013 Annual Report Download - page 48

ITEM 7–M ANAGEMENT ’ S D ISCUSSION AND
A NALYSIS OF F INANCIAL C ONDITION AND
R ESULTS OF O PERATIONS (MD&A)
E
XECUTIVE S UMMARY
K EY S TRATEGIC G OALS
At PNC we manage our company for the long term. We are
focused on the fundamentals of growing customers, loans,
deposits and fee revenue and improving profitability, while
investing for the future and managing risk, expenses and
capital. We continue to invest in our products, markets and
brand, and embrace our corporate responsibility to the
communities where we do business.
We strive to expand and deepen customer relationships by
offering a broad range of fee-based and credit products and
services. We are focused on delivering those products and
services where, when and how our customers want to receive
them with the goal of offering insight that reflects their
specific needs. Our approach is concentrated on organically
growing and deepening client relationships that meet our risk/
return measures. Our strategies for growing fee income across
our lines of business are focused on achieving deeper market
penetration and cross selling our diverse product mix.
Our strategic priorities are designed to enhance value over the
long term. A key priority is to drive growth in acquired and
underpenetrated markets, including in the Southeast. We are
seeking to attract more of the investable assets of new and
existing clients. PNC is focused on redefining our retail banking
business to a more customer-centric and sustainable model
while lowering delivery costs as customer banking preferences
evolve. We are working to build a stronger residential mortgage
banking business with the goal of becoming the provider of
choice for our customers. Additionally, we continue to focus on
expense management while bolstering critical infrastructure and
streamlining our processes.
Our capital priorities are 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, in accordance with our capital plan
included in our 2014 Comprehensive Capital Analysis and
Review (CCAR) submission to the Board of Governors of the
Federal Reserve System (Federal Reserve). We continue to
improve our capital levels and ratios through retention of
quarterly earnings and expect to build capital through
retention of future earnings. PNC continues to maintain
adequate liquidity positions at both PNC and PNC Bank,
National Association (PNC Bank, N.A.). For more detail, see
the Capital and Liquidity Actions portion of this Executive
Summary, the Funding and Capital Sources portion of the
Consolidated Balance Sheet Review section and the Liquidity
Risk Management section of this Item 7 and the Supervision
and Regulation section in Item 1 Business of this Report.
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.
R ECENT M ARKET AND I NDUSTRY D EVELOPMENTS
There have been numerous legislative and regulatory
developments and dramatic changes in the competitive
landscape of our industry over the last several years. The
United States and other governments have undertaken major
reform of the regulation of the financial services industry,
including engaging in new efforts to impose requirements
designed to strengthen the stability of the financial system and
protect consumers and investors. We expect to face further
increased regulation of our industry as a result of current and
future initiatives intended to enhance the regulation of
financial services companies, the stability of the financial
system, the protection of consumers and investors, and the
liquidity and solvency of financial institutions and markets.
We also expect in many cases more intense scrutiny from our
supervisors in the examination process and more aggressive
enforcement of regulations on both the federal and state
levels. Compliance with new regulations will increase our
costs and reduce our revenue. Some new regulations may limit
our ability to pursue certain desirable business opportunities.
The Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank), enacted in July 2010, mandates
the most wide-ranging overhaul of financial industry
regulation in decades. Many parts of the law are now in effect,
and others are now in the implementation stage, which is
likely to continue for several years. Dodd-Frank (through
provisions commonly known as the “Volcker Rule”) prohibits
banks and their affiliates from engaging in some types of
proprietary trading and restricts the ability of banks and their
affiliates to sponsor, invest in or have other financial
relationships with private equity, hedge and similar funds. In
December 2013, the five agencies with authority for
rulemaking issued final rules to implement the Volcker Rule.
At the same time, the Federal Reserve also issued an order
that extended, until July 21, 2015, the date by which banking
entities (including PNC) must conform their activities and
investments to the limitations and requirements of the final
rule. For additional information on the final regulations
implementing the Volcker Rule, as well as the potential
impact of them on PNC, see the Supervision and Regulation
section of Item 1 Business and Item 1A Risk Factors of this
Report.
In January 2014, the Office of the Comptroller of the
Currency (OCC) requested comment on a proposal that would
establish enforceable minimum guidelines governing the
design and implementation of an effective risk governance
framework at large national banks, including PNC Bank, N.A.
The proposal, which builds upon heightened supervisory
30 The PNC Financial Services Group, Inc. – Form 10-K