Good morning. My name is Pama and I will be your conference operator today. At this time, I would like to welcome everyone to the PNC Financial Services Group Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to the Director of Investor Relations, Mr. Brian Gill. Sir, please go ahead.

Thank you operator and good morning. Welcome to today's conference call for the PNC Financial Services Group. Participating on this call are PNC's Chairman, President and Chief Executive Officer, Bill Demchak, and Rob Reilly, Executive Vice President and Chief Financial Officer. Today's presentation contains forward-looking information. Our forward-looking statements regarding PNC performance assume a continuation of the current economic trends and do not take into account the impact of potential legal and regulatory contingencies. Actual results and future events could differ, possibly materially from those anticipated in our statements and from historical performance due to a variety of risks and other factors. Information about such factors, as well as GAAP reconciliation and other information on non-GAAP financial measures we discuss is included in today's conference call, earnings release and related presentation materials, and in our 10-K, 10-Q, and various other SEC filings and investor materials. These are all available on our corporate Web site, pnc.com, under Investor Relations. These statements speak only as of January 15, 2016 and PNC undertakes no obligation to update them. And now I'd like to turn the call over to Bill Demchak.

Thanks Brian and good morning everybody. I know it's been a busy day for all of you and it was a pretty straight forward quarter end year first actually, so I am just going to have few brief observation to share and then I’ll turn it over to Rob. As you are seeing today we reported full year 2015 results with net income of $4.1 billion or $7.39 per diluted common share and the return on an average assets for the full year was 1.17%. In a pretty difficult revenue environment PNC performed well by executing on our strategic priorities and as we’ve said before controlling the things that are in our power to control. I’d tell you I’d even argue that the degree of difficulty in '15 was probably tougher than the year before, but again we delivered the solid consistent results that you guys have come to expect. In 2015, we grew loans, we had average deposits update percent, we had fee income up 3% and non-interest income represented a higher percentage of our totaled revenue mix in '15 than in '14, which is an important priority for us. You have seen, we also maintain strong capital and liquidity positions even as we return more capital to shareholders through repurchases and higher dividend. And at the same time and importantly we continue to control expense as well. 2015 was the third year in a row that we brought down expenses despite major ongoing investments in our businesses and infrastructure. In retail, we know have more than 375 branches using our universal banking model and we plan to convert another 100 or even more in 2016. In technology, we are in the late innings on our work to strengthen our core systems, fortify our cyber security and modernize applications.…

Thanks Bill and good morning everyone. Overall our full year and fourth quarter results played out largely consistent with our expectations. For the full year we grew loan, deposits and fee income and reduced expenses even as we continue to invest in technology and our businesses. In addition we returned more capital to our shareholders while maintaining strong capital levels. As a result our 2015 net income was $4.1 billion or $7.39 per diluted common share. Fourth quarter net income was $1 billion or $1.87 per diluted common share. Our balance sheet information is on Slide 4 and it's presented on an average bases. As you can see total assets increased by $1.8 billion or 1% linked quarter compared to the fourth quarter a year ago, total assets grew by $21 billion or 6%, primarily reflecting increases in investment securities, loans and interest-earning assets which includes balances held at the federal reserves for liquidity purposes. Total loans grew by $1.2 billion or 1% linked quarter, primarily due to growth in commercial real-estate. A worth noting that on the spot basis, total commercial lending grew $2.4 billion or 2% primarily in PNC’s real-estate business, which includes an increase in multi-family agency warehouse lending. For the year-over-year quarter, total loans increased by $3.1 billion or 2% again driven by growth in commercial loans. Specifically real-estate and business credit as well as increased lending to our large corporate clients. Consumer lending decreased $396 million linked quarter as the decline in the non-strategic consumer loan portfolio was somewhat offset by growth in credit card and auto lending. Compared to the same quarter a year ago, consumer lending was down $2.8 billion or 4%, primarily due to the continued decline a non-strategic home lending and lower educational loan balances again partially offset by growth in…

Thank you. [Operator Instructions] Your first question comes from the line of Erika Najarian from Bank of America.

Thank you so much for giving us details in terms of what's embedded in your plan from an interest rate outlook perspective. I was anticipating that investors will be curious about what you mean by adjust accordingly. As you can imagine investors are a little bit more cautious about the pace of this set and as you think about the trade-offs between delivering positive operating leverage if the set doesn't raise three times versus delaying some of the investments that you've mentioned, I guess is it adjusting accordingly on the expense side or just take us through essentials?

It’s adjusting accordingly in terms of the guidance we give you in its simplest form. So, our plan takes those assumptions today and by the way some investors and even the Feds dot [ph] taught themselves I guess having going four times, obviously the market doesn't believe that today. We're three weeks into the year, so we're not going to bin a whole planning process until we see how it plays out, and as it plays out we would give you, as we do always quarterly guidance on what you might expect. I don't think as we've said before that near term pressures on rates and/or localized pressures on the economy are going to dramatically shift our investment profile, largely because we continue to be able to fund that profile through continuous improvement and hold costs constant. So, you're broader question, can we get to positive operating leverages, so many embedded assumptions on that in terms of what credit cost doing rates doing and everything else we'll have to see.

And in terms of your capital management for the year and in terms of us trying to back into what you could distribute post 2016 CCAR, your CEP1 [ph] ratio was kept flat at 10% which seems high relative to the risk profile and the size of the bank and I'm wondering if to you Bill that seems like an appropriate level to think about for '16 as well.

I would remind you and we've talked about this before that there is not a magic boundary on this kind of 100% payout ratio in terms of what we could request, I'd also remind you that we talk about focusing on the post stress ratio as opposed to the starting ratio which is the one that's obviously your binding constraint. As we run our base case, and the other thing that we've talked about in the past is that our base case typically for a variety of reasons ends up being lower than what we in fact produce in income. All of those things suggest that we'll have an opportunity to go back and be aggressive in terms of capital returns ask, until we see what actually comes out of the Fed in terms of instructions, that the definition of aggressive will have to be rather vague at this point, because as I've said despite that we're at 10 today it's really dependent on where we’re going to end up post there stress scenario.

And just to add to that Erika, as you know we are well positioned to return capital to shareholders we just have to see what their scenarios are.

Got you. Thank you very much.

Next question please.

Thank you. Our next question comes from a line of John Pancari with Evercore. Please proceed.

Just similar to the line of questioning, in terms of how we should think about spread revenue growth and the margin outlook. Can you just give us some way to think about the sensitivity if we don’t see any Fed moves, what we could think -- what we can expected by way of the margin progression as well as the spread rev? Thanks.

Yes sure, as you know we don’t give specific guidance around NIM, that’s an outcome. Our plans do call for growth in NIM, but they are largely reliant on increases and rates. Now naturally there is other variables involved in terms of pricing on loans and securities that would factor into that, but I think generally speaking if your question just sort of is where does this outcome play out if you don’t get Fed rate increases, its probably stable plus or minus the small amount.

Okay alright that’s helpful thanks. And then separately in terms of how we should think about loan growth beyond the first quarter, I know you indicated relatively stable for the first quarter '16 but what's a -- how are you thinking about full year particularly given some of the uncertainty on the micro back drop? Thanks.

Our plans call for really a continuation of what we have seen for a while which is continued growth on the commercial book for PNC largely in our specialty businesses. And then on the consumer side relatively flat, overall home equity, obviously some of the non-strategic working down off set by what we would expect to be a continued growth in credit card and possibly although it's smaller level auto [ph].

I think you know one of the offsets if in fact we get into a surprises here as it relates to the discuss in the economy and increasing credit cost, our specialty businesses actually tend to pick up growth in stressful situation. So our plan kindly called along with our GDP assumption for moderate growth, but in a down turn scenario same way you saw back through the crisis we actually have the ability through the specialty leading to do correct -- quite well.

Okay and Bill, if I could give you one more here on the capital to deployment side, could you just remind us of your thoughts around M&A, I know you have been more tempered to terms of that outlook, but just wanted to get your updated thoughts at this point.

Tempered is one word. As it relates to tradition of bank M&A we are not interested, we are not involved there is a variety of reasons you’ve heard me talk about before. Sometime through time could that somehow change sure because forever is a long time, but today it's not on our radar. I would tell you that we have taken some small investments and syntax [ph] stuff you would had seen an announcement with EWS and Clear Exchange in partnership with six other large banks to put a P-to-P product out on a ubiquitous way to all bank clients. We are interested in distributive ledger block chain technology, we are interested in some of the corporate payments dispersement technology, none of these are big numbers. But in terms of our focus and where we think about growth opportunities in how to deploy capital it would be much more focused in that area than it would be a traditional bank deal.

Got you thank you.

Next question please.

Thank you. Our next question comes from a line of Matt O'Connor with Deutsche Bank. Please proceed.

Hi this is Rob from Matt’s team. I was just curious if you can updates on your thinking for the reinvestment of the 30 billion or so liquated on the balance sheet, where you may look to deploy that and the timing?

Sure Rob, so consistent with what we said on prior earnings calls we do have a large balance there that was largely driven by meeting the liquidity coverage ratios and given the growth in deposits and the way to year played out, those balances actually went into excess of that. We have started to put some of that to work at this past quarter, you could see in some investment securities. And probably the best way to answer your question is we could shift 10 billion of that into other high quality securities without jeopardizing the liquidity coverage.

The other thing you’d see if you dig through the numbers is, we’ve paid down some wholesale debt, short term funding that didn’t come for LCR and some of the -- I think there was even a sub-debt deal that deal that went [multiple speakers], which drops our funding cost helps in the, as well. So you could see that decline both as we change our funding mix but also as we deploy cash into higher yielding assets.

Okay thank you.

Next question please.

Thank you. And our next question comes from the line of Gerard Cassidy from RBC. Please proceed.

Rob can you share with us in terms of what you are seeing on the underwriting standards and commercial real-estate and construction loans or what your loan guys are telling you? And second has there been any change in those underwriting standards in the marketplace since the regulators came out in December expressing concerns that those standards that too aggressive?

Well, to your first part of your question Gerard in terms of our commercial real-estate. We continue to see growth there, not quite at the same levels that we’ve seen in the past years. But the big difference there and it didn’t really sit up in the fourth quarter, but it’s been happening for a while, is the shift in the emphasis in terms of what we’re lending into much, much more around the permanent lending. You can see that in our supplement and less so on the construction sides in terms of a mix. So our commercial mortgage loan balance as you can see it continued to increase quarterly and we would expect that to continue.

Part was what’s happening is the combination of a lot of the European Banks pulling back post-crisis. And then the lack of volume that’s getting through the CMVS market is continuing the opportunity for what historically has been called Life Insurance product. But basically balance sheeting term loans with good debt service coverage and loan to value ratios kind of as we hit this big CMVS maturity double plus their projects get funded and come online. So that’s kind of where we see the opportunity. The bankers will tell you and as we look at markets, we’re obviously concerned about energy heavy cities, we’re a little bit concerned about some of the technology heavy cities across all property types and that you would see that in our underwriting criteria in the step that we target to the extend we’re still doing new projects.

Thank you and then in your press release and the Corporate and Institutional Banking section, you guys give us some color, you talked about the loans growing about 1% over the third quarter, it was due to some real estate business credit that you generated, as well as large corporate. But then you put in there partially offset by the impact of capital and liquidity management activities, can you give us some color what that it was?

Yes. So combination of LCR requirements and the cost associated with LCR and simply capital regulatory capital requirements again certain types of lending only relationships caused the return to be below the standard we’d otherwise like the hold. And so we’ve shifted the mix and inside of our growth you’d actually see a lot of run-off in lower returning relationship. A lot of that shows up in what is broadly defined as the financial services space, you’ll see a lot of that in the public finance space. Where those balances have decline and frankly have somewhat masked the real growth that is underlined inside of C&IB as we’ve run those balances down.

And Gerard, you’ll recall that was a bigger issue in the third quarter where we have more of those balances run-off. So it’s the same issue just a smaller amount in the fourth quarter.

And not to put words in your mouth. So if it’s not meeting your internal return targets your willing to give this business up, is that correct?

Sure.

Definitely.

Good, no that’s good. And then finally Rob, I apologize if you addressed this in your prepared remarks and I didn’t hear it. But going into the first quarter, I know you showed us that the net interest income will be up slightly, so the increase in your margin in this quarter. With the Fed funds rate increased that we saw in December, should that have a positive impact on the net interest margin in the first quarter?

Yes, a bit. Definitely it will have an impact on the net interest income. But the margin moves a lot slower.

Great. I appreciated. Thank you, guys.

Next question please.

Thank you. Our next question comes from the line of Scott Siefers from Sandler O’Neill & Partners. Please proceed.

Bill couple of questions ago you talked about the potential benefited dislocation in your specialty business, I guess pricing [multiple speakers] the risk reward improves et cetera. I wonder if you could sort of apply those comments to the broader portfolio. Are you seeing anything thus far just given that dislocation which I guess for now has been largely limited to the capital markets? But have you seen anything in the broader portfolio that would lead you to feel better?

Yes. It’s interesting, we haven’t really seen the spike in lending spreads that potentially could occur. In fact did occur in 9 -- particularly in ’09, particularly with the leverage product. Where we probably have seen some benefit as the cash flow leverage loans done to do buyouts in M&A, think middle market private equity and so forth. As the market for that has become tougher and you’ve read about the Hung’s [ph] indications, opportunities increased for our asset based lending business as a substitute for that. We’ve already seen it, it’s part of the growth embedded in there and I expect it will continue.

Okay. Alright, that sounds good. Thank you very much.

Next question please.

Thank you. Our next question comes from the line of Ken Usdin from Jefferies. Please proceed.

If I can ask a question on just your fee income outlook, it had some really good seasonal strength as you usually do and we understand the first quarter seasonality. Can you talk about, what you expect to be the drivers within fee income this year given what looks like there will be some challenges whether it’s borne by the markets or residential mortgage comparisons or what not. But what do you think is going to drive fee income growth?

Well I think, if you take a look at it, we agree we think we had a strong fee story in 2015 and I think much of what drove that we would expect to continue into '16 because this is central to our strategy, is to grow these fee businesses across the broader franchise. So if you just walk down in a bit asset management, we would expect to be able to continue to grow, I guess we have to put some parenthesis around where these markets sort of play out and it’s my earlier comments in terms of this, they continue to persist over a prolonged period that could in the short term affect that, but long term we see big growth continuing there. Consumer services, a lot of momentum we've been growing at mid-single digits and we would expect to be able to do that through time. Same with corporate services. Residential mortgage is struggling in terms of where we are in the rate cycle and everything that's going on there, but of course that's a smaller number. So I think it's pretty.

I think the one caveat, if we ran into a lumpy capital markets, inside our corporate services the biggest driver there is our treasury management business and we continue to grow that at a healthy clip both through introduction of new products, but also through cross sell you know down into the southeast. But this year we did have a great year inside of our capital markets activity with corporate security fees loan syndications and Harris Williams while down a bit from last year, you know this is the second best year ever. So we could see some pressure conceivably in what we would call our capital markets line. But in terms of raw size that is so dwarfed by what we do in treasury management you know we'd like to think we could outgrow it.

Understood, and one just follow up, that other income line ex the Visa and Securities gains, can you just remind us what a kind of typical range is for that line and do you see any major changes one way or the other there.

Not a whole lot, we guide ex-Visa, we guide 250-275 a quarter and I think that's a good number.

Okay, thanks a lot guys.

Thank you.

Thank you sir, our next question comes from the line of Paul Miller from FBR, please proceed.

I know in your past guidance that you've been somewhat bullish and I think you were calling for like 200 basis points of rate hikes. Has the volatility over the last -- have you answered this question already, I apologize, I've been jumping all over the place, but is the volatility in the markets over the last two weeks changed those assessments?

Sorry, let me. First off our guidance had three rate hikes, 25 each through the course of '16 and the volatility in the last three weeks you know has caused concern but hasn't caused us to be in a plan after three weeks of disruption, we'll let this play out and see where we end up. You have to -- the thing you always have to hold in the back of your mind is we're coming off of a base of zero, so we're still wildly accommodative and notwithstanding some localized stress in the economy, as you know doesn’t necessarily stop you from raising rates. You know the offset to that is that we're seeing even in some numbers today, we know the Fed is watching inflation and the inflationary numbers continue to be really benign, notwithstanding some at the margin inflation and wages where we’re seeing it from imports and other places. So we'll let that play out, but we had three increases in our plan, they happen or they don’t, it will affect their results or not, you know we'll update you as we go.

And I know a lot of peoples have been asking about credit out there, but do you see any regions because you do go across pretty much most of the Mid-East coast. Do you see any regions besides some of those energy sector areas in Pennsylvania that are struggling?

It's, I mean energy sectors broadly, but you know I wouldn't isolate that to Pennsylvania. We’re actually -- you know the localized economy here notwithstanding some reliance on coal and natural gas is actually quite strong. We see some pressure down not surprisingly into Texas and other areas on our energy book and it's starting to spread as you would expect it would into at the margin real estate and other service providers from everybody from accountants to lawyers than anybody who was in the game as the oil boom started. But you know that's kind of at the margin and beyond that I don't know that we see a particular region in the country that is standing out although I’d tell you, Mike Lyons who runs our CNIB [ph] business just finished a grand tour around the country, seen a lot of clients and kind of came back with the notion that more so than he saw in the last time he was through, he said people are feeling more margin pressure and at the margin a little lower activity than they otherwise thought they'd see at this point in the year. [Multiple speakers].

Thank you guys, thank you very much.

Thank you, [Operator Instructions], gentlemen there are no further questions, thank you.

Thank you all for participating in the conference call this morning and we look forward to working with you during the quarter. Thanks everybody.