PNC Bank 2014 Annual Report Download - page 50

ITEM 7 – MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS (MD&A)
E
XECUTIVE S UMMARY
Key Strategic Goals
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 deposit, fee-based and credit
products and services. We are focused on delivering those
products and services where, when and how our customers
choose with the goal of offering insight that addresses 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 geographic markets, including in the
Southeast. In addition, we are seeking to attract more of the
investable assets of new and existing clients. PNC is focused
on transforming our retail banking business to a more
customer-centric and sustainable model while lowering
delivery costs as customer banking preferences evolve. We are
also 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 investing in technology and business
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 the capital plan
included in our 2015 Comprehensive Capital Analysis and
Review (CCAR) submission to the Board of Governors of the
Federal Reserve System (Federal Reserve). We continue to
maintain a strong capital position and expect to build capital
through retention of future earnings net of dividend payments
and share repurchases. PNC has increased its liquidity
positions at both PNC and PNC Bank, National Association
(PNC Bank). For more detail, see the Capital and Liquidity
Actions portion of this Executive Summary, the Capital
portion of the Consolidated Balance Sheet Review section and
the Liquidity Risk Management portion of the 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.
Recent Market and Industry Developments
There have been numerous legislative and regulatory
developments and significant 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. 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. We expect
to face further increased regulation of our industry as a result
of Dodd-Frank as well as other 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 laws
and 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.
On January 20, 2015, the U.S. Supreme Court denied a writ of
certiorari in NACS v. Board of Governors of the Federal
Reserve System, with the effect that the decision of the U.S.
Court of Appeals for the D.C. Circuit in this case will stand. In
March 2014, the court of appeals had upheld the Federal
Reserve’s network processing rule and its interchange fee rule
except as to the issue of transaction monitoring costs, which it
remanded to the Federal Reserve for further explanation. The
court of appeals decision reversed the grant of summary
judgment in July 2013 by the U.S. District Court for the
District of Columbia in favor of the plaintiffs in this case
vacating these rules.
For additional information concerning recent legislative and
regulatory developments, as well as certain governmental,
legislative and regulatory inquiries and investigations that may
affect PNC, please see the Supervision and Regulation section
of Item 1 Business, Item 1A Risk Factors, and Note 21 Legal
32 The PNC Financial Services Group, Inc. – Form 10-K