This excerpt taken from the PNC 8-K filed Mar 23, 2007.
Succeeding in Our Strategies to Win
We mapped our route to that goal over the past four years. Along the way, we focused on five strategies that we believe will propel us to long-term success. Each strategy provided its own contribution to our winning results in 2006:
We continue to grow our customer base. To increase satisfaction and attract higher value checking relationships to our Retail Banking segment, we were one of the first major banks to offer access to free ATMs worldwide. We simplified our checking products and reached beyond our traditional banking territory through online banking. We launched a new PNC-branded credit card and enhanced our merchant services offerings.
During 2006, we drove an initiative to target the mass affluent within our existing customer base. Our superior information technology enabled us to identify more than 680,000 current PNC households with investable assets of between $100,000 and $1 million, and we strengthened our Private Client Group specifically to provide these customers with a differentiated level of service.
We have upgraded the signage and other features of many of our branches, which are our main distribution channel and the face of PNC in our communities. New stand-alone branches are being constructed in locations convenient to growing populations with expanding incomes. Branch staff is receiving enhanced training on new products, new services and better ways to meet client needs. In 2006, an independent analyst visiting bank branches in the Washington, D.C. area found PNC employees to be the most knowledgeable he encountered.
We have supported all of this brand-building activity with strong advertising and marketing. We began with television commercials for our free-ATM offer last September. In February of this year, we introduced Leading the Way, the most comprehensive brand advertising campaign in PNCs history.
It is still early, but our efforts are beginning to show success. Initial balances in new checking accounts are higher by 20 percent. Our PNC-branded credit card, which launched in September, quickly surpassed our initial expectations. More than 70,000 consumers now carry the card, and receivables total more than $140 million. The initial results of the mass affluent initiative, too, are promising. Loans, deposits and investments among customers in the initiatives pilot have grown faster than those of similarly situated, unassigned customers.
We leveraged our market leadership. The effort to deepen relationships extends to our Corporate & Institutional Banking segment, where the focus is on middle market customers with between $30 million and $1 billion in annual revenues.
We have national reach, with commercial real estate lending and servicing, asset-based lending, treasury management, capital markets, and the mergers and acquisitions advisory services of Harris Williams.
Our competitive advantage lies in our emphasis and expertise in the middle market space, which was recognized in 2006 when PNC won Principal of the Year and Deal of the Year (Debt) at the Middle Market Financing Awards sponsored by The M&A Advisor magazine. Unlike larger organizations that focus on big corporate customers and serve the middle market as a sideline, we have a stable and experienced sales force dedicated to serving the needs and developing relationships with these clients.
For the fourth consecutive year, our expertise has helped us retain our ranking as the No. 1 lead arranger of loan syndications for mid-size companies in the Northeast. That is important, because lead bank relationships have helped make PNC a leader in cross-sell penetration. We are selling more treasury management services, more business checking accounts and more capital markets services.
Meanwhile, at BlackRock, an expanded product line and truly global reach should help our asset management segment contribute significantly more to PNC in the years ahead.
And, scale continues to be important in the processing business, so it is significant that PFPC is the No. 1 sub-accounting provider and the No. 2 full-service mutual fund transfer agent in the United States. Fee income from these businesses permits PFPC to invest in higher growth areas, such as Europe, where investments in mutual and hedge funds have exploded.
Our offshore assets serviced grew in double digits last year, which led PFPC to add a new Irish office and an expanded Dublin headquarters in 2006. Our four European offices helped make PFPC the No. 1 servicer of Irish-domiciled hedge funds in 2006. And PFPC continues to expand its international franchise by further developing a global custody business that now has responsibility for assets totaling $427 billion worldwide.
We have improved our operating leverage. As we enter 2007, we are in the final stages of One PNC, the innovative initiative designed to increase operating leverage by enhancing revenues and lowering expenses. By mid-year, we expect to achieve our quarterly run-rate goal of $100 million, or $400 million in annual benefit.