PNC FINANCIAL SERVICES GROUP, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A) (form 10-K) – Marketscreener.com

EXECUTIVE SUMMARY

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 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 commitments to our customers, shareholders, employees and the communities
where we do business.

We strive to serve our customers and expand and deepen relationships by offering
a broad range of deposit, credit and fee-based products and services. We are
focused on delivering those products and services to our customers with the goal
of addressing their financial objectives and needs. Our business model is built
on customer loyalty and engagement, understanding our customers’ financial goals
and offering our diverse products and services to help them achieve financial
well-being. Our approach is concentrated on organically growing and deepening
client relationships across our businesses that meet our risk/return measures.

 We are focused on our strategic priorities, which are designed to enhance value
over the long term, and consist of:
•Expanding our leading banking franchise to new markets and digital platforms,
•Deepening customer relationships by delivering a superior banking experience
and financial solutions, and
•Leveraging technology to create efficiencies that help us better serve
customers. 

Our capital and liquidity priorities are to support customers, fund business
investments and return excess capital to shareholders, while maintaining
appropriate capital in light of economic conditions, the Basel III framework and
other regulatory expectations. For more detail, see the Supervision and
Regulation section in Item 1 Business, the Capital Highlights portion of this
Executive Summary and the Liquidity and Capital Management portion of the Risk
Management section in this Item 7.

Key Factors Affecting Financial Performance
We face 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 business and economic conditions, political and regulatory
environment and operational challenges. Many of these risks and our risk
management strategies are described in more detail elsewhere in this Report.

 Our success will depend upon, among other things, the following factors that we
manage or control:
•Effectively managing capital and liquidity including:
•Continuing to maintain and, over time, grow our deposit base as a low-cost
stable funding source,
•Prudent liquidity and capital management to meet evolving regulatory capital,
capital planning, stress testing and liquidity standards, and
•Actions we take within the capital and other financial markets.
•Execution of our strategic priorities,
•Management of credit risk in our portfolio,
•Our ability to manage and implement strategic business objectives within the
changing regulatory environment,
•The impact of legal and regulatory-related contingencies,
•The appropriateness of critical accounting estimates and related contingencies,
and
•Our ability to manage operational risks related to new products and services,
changes in processes and procedures or the implementation of new technology. Our financial performance is also substantially affected by a number of external
factors outside of our control, including the following:
•Global and domestic economic conditions, including the length and extent of the
economic impacts of the COVID-19 pandemic, and the actions taken to mitigate and
manage it,
•The effect of climate change on our business and performance, including
indirectly through impacts on our customers,
•The actions by the Federal Reserve, U.S. Treasury and other government
agencies, including those that impact money supply and market interest rates and
inflation,
•The level of, and direction, timing and magnitude of movement in, interest
rates and the shape of the interest rate yield curve,
•The functioning and other performance of, and availability of liquidity in,
U.S. and global financial markets, including capital markets,
•The impact of tariffs and other trade policies of the U.S. and its global
trading partners,
36 The PNC Financial Services Group, Inc. - 2022 Form 10-K
-------------------------------------------------------------------------------- •Changes in the competitive landscape,
•Impacts of changes in federal, state and local governmental policy, including
on the regulatory landscape, capital markets, taxes, infrastructure spending and
social programs,
•The impact of market credit spreads on asset valuations,
•The ability of customers, counterparties and issuers to perform in accordance
with contractual terms, and the resulting impact on our asset quality,
•Loan demand, utilization of credit commitments and standby letters of credit,
and
•The impact on customers and changes in customer behavior due to changing
business and economic conditions or regulatory or legislative initiatives. 

For additional information on the risks we face, see Item 1A Risk Factors and
the Cautionary Statement Regarding Forward-Looking Information section in this
Item 7.

Presentation of Noninterest Income

Effective for the first quarter of 2022, PNC updated the presentation of its
noninterest income categorization to be based on product and service type, and
accordingly, has changed the basis of presentation of its noninterest income
revenue streams to: (i) Asset management and brokerage, (ii) Capital markets
related, (iii) Card and cash management, (iv) Lending and deposit services, (v)
Residential and commercial mortgage and (vi) Other noninterest income. For a
description of each updated noninterest income revenue stream, see Note 1
Accounting Policies. Additionally, in the fourth quarter of 2022, PNC updated
the name of the noninterest income line item “Capital markets related” to “Capital markets and advisory.” This update did not impact the components of the
category. All periods presented herein reflect these changes.

Acquisition of BBVA USA Bancshares, Inc.

On June 1, 2021, PNC acquired BBVA, a U.S. financial holding company conducting
its business operations primarily through its U.S. banking subsidiary, BBVA USA.
PNC paid $11.5 billion in cash as consideration for the acquisition.

On October 8, 2021, BBVA USA merged into PNC Bank. On October 12, 2021, PNC
converted approximately 2.6 million customers, 9,000 employees and over 600
branches across seven states. Our results of operations and balance sheets for
all periods presented in this Report reflect the benefit of BBVA’s acquired
businesses for the period since the acquisition closed on June 1, 2021.

For additional information on the acquisition of BBVA, see Note 2 Acquisition
and Divestiture Activity.

Discontinued Operations

In the second quarter of 2020, PNC divested its entire 22.4% equity investment
in BlackRock. Net proceeds from the sale were $14.2 billion with an after-tax
gain on sale of $4.3 billion. BlackRock’s historical results are reported as
discontinued operations. For additional details on the divestiture of our equity
investment in BlackRock, see Note 2 Acquisition and Divestiture Activity.

 The PNC Financial Services Group, Inc. - 2022 Form 10-K 37

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