The PNC Financial Services Group, Inc. (PNC) Earnings Call Transcript & Summary

Hello, and welcome to The PNC Financial Services Group's 2021 Annual Meeting of Shareholders. Please note that this webcast is being recorded. It is now my pleasure to turn today's meeting over to Bill Demchak, Chairman of The PNC Financial Services Group.

Good morning, everybody. On behalf of our Board of Directors and management team, we're pleased that you've joined us for this morning in our 2021 Annual Meeting of Shareholders. As Chairman of The PNC Financial Services Group, I will preside as the Chair of this meeting. Obviously, in light of the continuing public health concerns regarding the COVID-19 pandemic, we are conducting our meeting solely by remote communication. To begin, let me just provide a quick overview of how the meeting is going to proceed. First, I'll call the meeting to order. Then I'll introduce our directors, the Executive Committee and representatives of our independent public accounting firm, who will be available to address questions during the general Q&A portion of the meeting. Next, our Corporate Secretary will provide a report on procedural matters. I'll then introduce the formal business of the meeting, including the 4 items on our agenda. We'll then pause for questions regarding those 4 items and open the polls for voting. After the polls are closed, the Corporate Secretary will report on the preliminary voting results. And then following that, I'll adjourn the meeting and provide marks -- remarks on our 2020 and first quarter performance, the progress that we're making towards our strategic priorities as well as our commitment to our communities, customers, employees and shareholders. Immediately following that brief presentation, I will use the remaining time to take general questions submitted by shareholders through our virtual meeting portal. I will now call this meeting to order. I'd like to introduce our director nominees, who have joined the meeting today remotely: Joseph Alvarado, Charles Bunch, Debra Cafaro, Marjorie Rodgers Cheshire, David Cohen, Andrew Feldstein, Richard Harshman, Dan Hesse, Linda Medler, Martin Pfinsgraff, Toni Townes-Whitley and Michael Ward. Also on the line are the members of our Executive Committee: Carole Brown, Richard Bynum, Kieran Fallon, Debbie Guild, Vicki Henn, Greg Jordan, Stacy Juchno, Ganesh Krishnan, Karen Larrimer, Mike Lyons, Bill Parsley and Rob Reilly. And finally, Tom Kelly and Sam Kennedy of PricewaterhouseCoopers LLP, our independent registered public accounting firm, are on the phone. And they'll be able to answer questions during the general question-and-answer session. Joining me today on the call and in the room here actually is Greg Jordan, our General Counsel and Chief Administrative Officer; as well as Alicia Powell, our Corporate Secretary; and Brian Gill, the Director of Investor Relations. This meeting is going to be conducted in accordance with the regulations for conduct and the order set forth on the agenda. The regulations and agenda are available in the virtual meeting portal. By attending this meeting, you agree to abide by the regulations for conduct. Because this is a meeting of our shareholders, only those who entered the meeting as a shareholder using a control number will be permitted to vote and submit questions. Shareholder questions are welcome. To vote or submit questions, please follow the instructions available on our virtual meeting portal. We will only be answering questions submitted in writing via the portal. And consistent with our regulations for conduct, you could submit questions at any time during the meeting, even now. We'll now turn to the formalities that are necessary for our recordkeeping. Alicia, will you please present the Secretary's report?

Thank you, Bill. I have in my possession an affidavit from Broadridge Financial Solutions, Inc., PNC's distribution and tabulation agent. The affidavit provides that the proxy materials were mailed to shareholders commencing on March 16, 2021, the day we began providing access to our proxy materials. Certain other shareholders were mailed paper copies or received electronic delivery of these proxy materials, including the notice of annual meeting beginning on March 16, 2021. The materials were distributed to shareholders of record as of January 29, 2021. American Election Services has been appointed as the judge of election for this meeting. The judge of election keeps a certified listing of all shareholders of record. On behalf of American Election Services, James Raitt is supervising the voting, and he has delivered his oath of office to me. The affidavit, notice and oath will be filed with the records of this meeting. The judge of election has certified that at the beginning of this meeting, there were present in person via virtual format or by proxy, 374 million votes or 88.35% of the total voting power. Therefore, a quorum is present. Copies of the minutes from the 2020 Annual Meeting of Shareholders are available from me upon request. I would also like to remind those attending the meeting that today's presentation contains forward-looking information. Cautionary statements about this information are included in today's presentation, which is available on our corporate website, pnc.com, under Investor Relations. And I urge you to read the cautionary statements regarding this information. Mr. Chairman, this concludes my report.

Thank you, Alicia. Based on your report, I find that proper notice has been given, and a quorum is present. Therefore, this meeting has been properly convened. The purpose of this meeting is to consider and act upon 4 proposals. The 3 management proposals are: first, the election of 13 -- of the 13 nominated directors; second, the ratification of the Audit Committee's selection of PricewaterhouseCoopers LLP as PNC's independent registered public accounting firm for 2021; and third, the advisory approval of the compensation of PNC's named executive officers. I will now ask for a single motion to introduce these proposals. May I have such a motion?

Mr. Chairman, my name is Bryan Gill. I am a shareholder, and I so move.

May I have a second to this motion?

Mr. Chairman, my name is Greg Jordan. I'm a shareholder, and I second the motion.

I declare that these proposals have been properly introduced and moved. The fourth proposal for shareholder consideration is a shareholder proposal regarding a report on risk management in the nuclear weapons industry submitted by the Sisters of St. Joseph of Brentwood, together with cosponsors or cosponsor, the Sisters of Humility of Mary. If the proponent's representative, Joyce Rothermel, is available, I would ask that the operator unmute her line so that the proposal can be presented. The proposal is set forth in detail on Page 86 of our proxy. Joyce, if you would, you have 3 or 4 minutes to present the proposal.

Good morning, members of the Board and shareholders and Mr. Demchak. My name is Joyce Rothermel, and I'm a representative of the Stop Banking the Bomb campaign. I'm here to move proposal 4 on behalf of the Sisters of St. Joseph of Brentwood and the Sisters of the Humility of Mary, Villa Maria, Pennsylvania. As Catholic religious congregations and a society struggling with excessive violence, the sisters assert that there is a clear moral responsibility for PNC and us investors to acknowledge the direct role that financing of nuclear weapons plays in perpetuating human rights harms in war and conflict and that all actors must contribute to appropriate remedies. The most severe human rights impacts of the nuclear weapons companies financed by PNC are irremediable and result in the loss of life. This proposal is offered supported by strong legal and financial risks assessments to PNC and us shareholders as an invitation to deeply examine the business model in the context of its human rights responsibilities, so that leadership and vision be advanced to end the company's financing that contributes to death and destruction and instead, advance the purpose to contribute to a more positive vision of society, which PNC does in so many ways already. Using the words of Irish folk singer and peacemaker Tommy Sands in refuting the words of an earlier antiwar song sings, "the answer's not blowing in the wind, my friends. The answer stares you in the eyes." Since 1945, the terror of nuclear weapons has been with us. And the answer is not to build them, not to have them. As a resident of Pittsburgh, I'm concerned that our local bank, my local bank, is complicit in financing nuclear weapons. PNC lends over $1.6 billion to companies that manufacture or produce nuclear weapons. And since January 22 of this year, nuclear weapons are illegal under international law. We believe the support for this proposal is warranted for 3 reasons. First, PNC's risk management screens and due diligence processes lag behind its peers and do not explicitly address the risks associated with financing nuclear weapons. Second, the Board's conclusion that financing nuclear weapons does not present significant enough risks to stop fails to account for the entry into force of the treaty on the prohibition of nuclear weapons, which will likely result in increasing reputational and legal risk. The treaty establishes a new normative framework on nuclear weapons and has inspired other financial institutions to exit financial relationships with nuclear weapons producers. Lastly, many of the companies categorized as nuclear companies that PNC finances do not have adequate systems in place to fulfill their own human rights responsibilities and present reputational and legal risks. Last week, 30% of Lockheed Martin shareholders voted for improved human rights disclosure. In conclusion, we agree with Pope Francis that not just the use, but even the possession of nuclear weapons is immoral. We say to PNC and all financial institutions and governments who do to stop banking the bomb and encourage all shareholders to support proposal #4, which reads shareholders request that the Board of Directors issue a report at reasonable cost and omitting proprietary information, assessing the effectiveness of PNC's environmental and social risk management systems at managing risks associating with lending, investing and financing activities within the nuclear weapons industry. Thank you very much.

Thank you, Joyce. And by the way, thank you for recognizing the good that we do in our communities in support of our communities. As an aside, our Pittsburgh team remembers you fondly from the community food bank as a CEO. And I think we continue to support them in a big way at a time when it's desperately needed here in Pittsburgh. We're going to take a pause right now to allow for questions related to these 4 proposals. And I'll just remind you, questions unrelated to these proposals will be addressed as appropriate during the general question-and-answer session that will follow the adjournment of the official meeting. If multiple questions are submitted on the same topic, we'll do our best to summarize them and respond collectively to allow us to address as many questions as possible. And we'll make every effort to address questions and comments that are consistent with the regulations for conduct. We've received several questions submitted through the virtual meeting portal prior to today's meeting, and we'll address those first.

Bill, we received a few questions about the size of PNC's Board of Directors and the compensation of our directors. Can you discuss why PNC's Board has 13 members? And why you think this is the appropriate number of directors to have? And then also, can you discuss the director's compensation levels and why you think they're deserving of the amounts they receive?

Sure, Bryan. So the Board's Nominating and Governance Committee reviews the size and composition of the Board annually. And at this time, it has set its size at 13 directors. When we compare the size of our Board to other financial institutions with 13 directors, we're actually below the peer median. And given the amount and complexity of the work facing the Boards of financial institutions these days, we actually think that we may need to make our Board a bit bigger in the near future. With respect to compensation paid to our directors, our Board is working -- I'll just tell you, the Board is working harder than ever. Last year, we had more than 65 Board and committee meetings. We established a new special committee on equity and inclusion, engaged regularly on our pandemic response, oversaw the sale of BlackRock and our agreement to acquire BBVA and maintained a regular constructive dialogue with our regulators. And of course, those are just the meetings. All the work that goes into preparing for the meeting ends up to a pretty big job to sit on the Board of a financial institution. The Nominating and Governance Committee reviews the director compensation program annually, and it's found PNC's director pay to be reasonable and appropriate. The committee's review is performed by a benchmarking study completed by an independent third party. Thank you.

Okay. Your next question asked about the qualifications of the director nominees and whether PNC has ever considered implementing a restriction on how long Board members can serve.

Thank you. So we recognize the value of a Board that is diverse in perspective and experience. And we understand that diverse Boards lead to better decisions and outcomes for our employees, our customers and our communities and our shareholders. In developing the slate of director nominees, the Board's Nominating and Governance Committee evaluates potential directors for demographic, cognitive, gender and ethnic diversity as well as breadth of background, skills and experience. Committee considers the company's strategy and industry trends when anticipating the skills the Board will need in the future. As the financial services industry has evolved, so has our Board. Our slate of director nominees include senior leaders with substantial expertise in a range of fields, including technology, risk, strategic planning and finance. Of our 13 director nominees, all 13 have valuable senior leadership experience. 12 are independent, 4 women and 3 bring racial diversity to the Board. Our Board does have a mandatory retirement age of 72. The average tenure of our directors is currently about 5 years. And the Board's commitment to refreshment is evidenced by the addition of 10 new directors and 10 director retirements since 2000 -- since the 2015 Annual Meeting of Shareholders.

Okay. Your next question relates to proposal #2. Can you discuss the selection of the independent registered public accounting firm and why that same firm has been chosen consistently for years?

Sure. So that's under the Audit Committee's charter. It's responsible for selecting, appointing, compensating, retaining and overseeing our independent auditors. The committee evaluates, monitors and reports to the Board regarding the independent's qualifications and performance of the independent auditors and approves all audit engagement fees and associated terms. The committee selected PwC as our independent auditors for 2021. The committee values PwC's extensive experience, auditing large financial institutions over the years. And it has found PNC to be objective, challenging, candid and thoughtful. It's also important to note that PwC's audit of PNC is subject to annual PCAOB inspection.

Okay. Your next question relates to proposal #4, the shareholder proposal regarding the report on risk management and the nuclear weapons industry. The shareholder asks why their proposal was addressed after the management proposals in the proxy statement and why the Board recommends a vote against this proposal.

Sure. First off, it's just standard practice to list shareholder proposals after management proposals. I actually have no idea why that is, but all of our peers follow a similar formatting. And the position or order in the proposals has absolutely nothing to do with their level of importance. As you've seen, the Board of Directors recommends a vote against the shareholder proposal because our lending to companies connected to the nuclear defense industry is actually quite limited. In fact, an independent third party found that there's 88 other financial organizations who outrank us in exposure to these companies with an aggregate over 700x more exposure than PNC. In short, we're just not critical to the financing operations of these companies. Further, the company's -- the shareholder proponents have characterized as nuclear weapons companies are, in fact, large and diversified companies that provide a myriad of products and services that benefit society, enhance the -- and enhance the quality of human life. These companies make components of cancer detection tools and treatments, navigation systems and radar systems and safe drinking water management systems, just to give you a few examples. The vast, vast majority of these companies' operations and revenue bear no relationship whatsoever to nuclear weapons. Our loans to companies connected to the nuclear defense industry are subject to our environmental and social risk management framework, which includes an environmental and human rights risk assessment. And we've consistently found no ESG risks that would inherently exclude these loans or these loan recipients from the application of our fair and consistent lending guidelines. Finally, the Board recently reviewed our lending relationships with these companies and concluded that these relationships do not pose a material credit, legal or reputational risk to PNC and are consistent with our ESRM framework. Further detail on the Board's recommended vote against this proposal can be found in our proxy statement.

Okay. Your next question asks if the Board of Directors has ever recommended a yes vote on a shareholder proposal? And if so, did it require multiple submissions by the shareholder?

This was a great question that actually had us all thinking for a second because what actually happens is when our Board agrees with a shareholder proposal's recommendation, we simply implement the recommendation. And in such cases, the proposal is withdrawn by the shareholder, and it does not get voted upon by the shareholders. And this actually happens quite often. We get great suggestions coming through from shareholders, and we react to them, which is our job. To put another way, the only shareholder proposals that actually get included in the proxy statement over the years are those that the Board has already chosen not to implement. So the course the Board has recommended -- so of course, the Board has recommended voting against these particular proposals.

Okay. We have no further questions related to the proposals at this time.

Thank you, Bryan. All proposals are now formally before the meeting, and I declare the polls to be open. [Operator Instructions] We will pause briefly to allow voting to occur, and please continue to hold just for a little bit while the final votes are cast. [Voting]

All right. I declare the polls to be closed, and I'd like to call upon the Corporate Secretary to report the preliminary voting results.

Thank you, Bill. The judge of election has provided a preliminary report to me, which certifies that a majority of the votes cast were for the election of all 13 director nominees, for the ratification of the selection of PricewaterhouseCoopers, for the advisory approval of the compensation of PNC's named executive officers and against the shareholder proposal regarding a report on risk management in the nuclear weapons industry. I will file the preliminary report with the records of this meeting, and the final vote tally will be disclosed on a Form 8-K that we will file with the SEC.

Thanks, Alicia. Subject to certification of the final voting results by the judge of election, I declare that the slate of 13 directors has been elected, the appointment of PricewaterhouseCoopers as PNC's independent auditor for 2021 has been ratified, the advisory resolution on executive compensation has been approved, and the shareholder proposal regarding a report on risk management and the nuclear weapons industry has not been approved. This concludes the formal business of the meeting. I declare the annual meeting to be adjourned. Now with the close of the business portion of today's meeting, I thought I'd offer just a few remarks on our 2020 year and first year '21 results and then address a few of the key initiatives that we're currently executing on to position our company for the future while supporting all of our constituents. When we think about last year and what we've accomplished as a company, it's actually pretty remarkable. We've experienced a pandemic, an economic crisis, widespread unrest and a contentious U.S. election. And notwithstanding these challenges, we continue to look out for the best interest of our constituents. We actually transferred more than 30,000 of our employees to a remote work environment. We've modified our branch operations so that we can continue to serve our customers, and we extended approximately $13 billion in small business loans through the first round of the Paycheck Protection Program. We also deployed $30 million directly into communities in support of coronavirus relief efforts. In addition, we remain focused on our strategic priorities, including accelerating our national expansion with our agreement to acquire BBVA USA in a transformational step that will reflect a strategic redeployment of proceeds from the sale of our BlackRock investment. All of this is fundamental to who we are as a company. As a Main Street bank, we have an opportunity and the responsibility to help make a difference for those we serve. And this became even more important last year. It wasn't always easy, and we actually learned a lot through the process. But I'm a strong believer that when we do what's right for all of our stakeholders, we win. In the face of unprecedented challenges, we did what we said we were going to do by focusing on the things that were within our control and positioning our company for long-term growth, all while supporting our employees, customers and communities. Because of this, we ended 2020 in a better place as a company than where we started. Shifting for a moment to our financials. We had a solid 2020 amidst a pretty challenging operating environment and reported full year net income from continued operations of $3 billion or $6.36 per diluted common share. Over the course of the year, we grew loans and deposits, delivered positive operating leverage and executed well on all of our strategic priorities. Our balance sheet finished the year in a very strong position, I think the strongest ever, with record levels of capital and liquidity and significant credit reserves. Moving into our first quarter results. We had a solid start to the year as we grew revenue and controlled our expenses, again, generating positive operating leverage. Our first quarter results also benefited from a significant provision recapture driven largely by an improving economic outlook. In addition, we maintained record high capital and liquidity levels. Consistent with the industry, the quarter was impacted by continued weak loan demand. But based on the strength of the U.S. economy, we expect to see this improve over time. We continue to execute well on our strategic priorities: expanding our leading banking franchise, deepening customer relationships and leveraging technology to innovate. One of the best examples of this is our pending acquisition of BBVA USA. Subject to regulatory approval, this acquisition will significantly accelerate our national expansion and position us in 29 of the 30 largest markets in the country. When complete, this transaction will reflect a strategic redeployment of proceeds from the sale of our BlackRock investment and elevate us to the fifth-largest U.S. bank in terms of assets. We're making significant progress in our integration planning and are on track to close midyear, pending regulatory approval. We're collaborating with our BBVA counterparts to convert technology, map business segments and develop integration strategies. And we haven't found any surprises regarding the type or quality of BBVA's business. Another example of our progress in executing on our priorities is the recent launch of Low Cash Mode. This groundbreaking digital tool fundamentally changes the banking experience for our virtual wallet customers by allowing them to avoid overdraft fees through unprecedented account transparency and control. Low Cash Mode allows our virtual wallet customers to see and control what's happening in their checking accounts in real time. If a customer's balance is negative, we give them at least 24 hours to decide whether to process certain debits that otherwise might result in overdrafts. And if the customer chooses to return a payment, we do not assess a fee. This payment control is a significant differentiator that we believe will help our customers avoid overdrafts -- overdraft fees of approximately $125 million to $150 million annually. Low Cash Mode represents a shift away from the industry's widely used overdraft approach, which drives customer dissatisfaction and which we believe is unsustainable. We firmly believe this differentiated approach will drive significant growth in new and existing customer relationships over time as we execute our national expansion strategy. This is the right move for our customers and the bank. And as I said earlier, when we do right by our customers, we win. We also win by doing what's right for our communities. And you may have seen that earlier today, we announced a 4-year, $88 billion community benefits plan to expand economic opportunities for minorities, low- and moderate-income individuals and communities and other underserved populations. This plan was developed in connection with our pending acquisition of BBVA USA, and it covers PNC's expanded footprint, pending regulatory approval of the acquisition. It also includes and builds on PNC's and BBVA's previous pledges to help meet community needs, advance economic empowerment and address systemic racism. Through this plan, we have a significant opportunity to make a difference in several key areas, including supporting homeownership among minority and low- and moderate-income borrowers, increasing access to credit for small businesses in low- and moderate-income communities and bringing unbanked and underbanked individuals who have suffered disproportionately through the pandemic into the mainstream financial system. Through targeted loans, grants and investments as well as products that serve individuals outside the mainstream financial system, we expect to have a significant impact across all 3 of these areas, among others. This plan reflects our Main Street bank approach and our strong belief that when our communities thrive, we thrive. We have seen time and time again that an investment in our community is an investment in our company. We are confident that by deploying traditional bank products in a better and more equitable way, we will increase long-term shareholder value. Not only is this the right thing to do, but it's good business, and it will make our company more competitive. As I mentioned earlier, our community benefits plan includes and builds on our previous corporate responsibility commitments, including the $1 billion to help fight systemic racism and support economic empowerment among low- and moderate-income communities. Last summer, we appointed Richard Bynum as the company's first Corporate Responsibility Officer to lead our work in this space. In addition, in June of last year, our Board formed a special committee on equity and inclusion to oversee these important matters. This oversight work will include our work executing on the community benefits plan. Internally, we're taking steps to better recruit, retain and develop diverse talent. I'm proud to share that we have the most diverse Board and Executive Committee in PNC's history. 33% of our independent Board members are gender diverse, while 25% are racially diverse. In addition, a majority of our Executive Committee members are gender and racially diverse. And as our efforts -- and as part of our efforts to be even more transparent around our workforce demographic data, we will begin publishing our equal employment opportunity data later this year. Finally, I want to take a moment to address our management of environmental issues, which has become increasingly critical to our ability to compete. While our stakeholders' expectation for transparency, dialogue and action may be greater than we've ever seen, we've made significant progress. We're engaging with our stakeholders, investing in our sustainable finance capabilities and enhancing our reporting. Over the next few months, we'll be publishing our first task force on climate-related financial disclosures report. This report will accompany our annual corporate responsibility report, which aligns with the GRI and SASB frameworks and focuses on our risk management strategy related to climate change. Notwithstanding massive challenges over the past year, our company has continued to move forward, making the next right decision and fulfilling our obligations to our colleagues, our customers, our communities and all of you. I want to thank our employees who have made all of this possible during one of the most challenging times in our history and whose dedication and hard work that positioned us to deliver for all of our stakeholders this year and beyond. I also want to thank all of you for your support and trust, which has never been more important. All right. I'm now going to pause and allow for questions from our shareholders in the remaining time. I will respond personally or I will designate another person to respond to questions we receive that are appropriate for discussion. As a reminder, if multiple questions are submitted on the same topic, we'll summarize them and respond collectively. And we'll make every effort to address questions and comments that are consistent with the regulations for conduct, and we will not respond to questions that were already addressed in today's presentation. If you do have a question about a manner of concern to you individually and not of general concern to our shareholders, please contact our Investor Relations team through our website at pnc.com. We've allocated 1 hour for the meeting, including all questions and comments. So please keep your questions and comments brief in order to give us the opportunity to address as many questions as possible. And again, we received several questions submitted to our virtual meeting portal prior to today's meeting, so we're going to kind of hit on those first.

Okay. Bill, we received a question asking if we are considering a stock split, why or why not? And if yes, what timing or conditions would you like to see before taking that action?

Thanks, Bryan. No, we're not considering a stock split. There's not really a compelling case to be made for a stock split. At one time, the conventional thinking was that when a company's share price got to a certain level, the company would split the stock as a way of foreshadowing expectations of growth and in order to make it more affordable for retail shareholders. Practically speaking, though, all the stock split really does is increase costs because it doubles the cost of the mechanics that go into servicing every share. The split might result in some positive short-term public relations that brings about maybe a short-term bump. But long term, it would appear that the cost is more than it's worth.

Okay. Your next question asks you to discuss PNC's ongoing efforts to promote diversity and inclusive representation and within the organization, specifically within the executive leadership team.

Sure. First of all, we've been at this for a long period of time. We recognize the importance of a diverse team to PNC's long-term success. It starts with our Board. And we're pleased, as I said before, that the independent directors elected today by our shareholders are 1/3 women, and 1/4 of them bring racial diversity to the Board. We've also assembled our most diverse executive team in our history, with 5 women and 3 people of color on my team of 12 direct reports. And most importantly, perhaps across the company, we hold our managers accountable for developing diverse teams. And we provide them tools to be able to do that. For many years now, I actually don't know how many years this goes back, but call it 5 or 10, at least 50% of our hires in our early career development program have been made up of diverse candidates, ensuring that we have a strong and diverse talent pipeline for years to come. We have a program in place where basically we recruit diverse teams into the company. We have managers who are accountable to develop our team members. We have a process for tracking it. It's incredibly important to us as ultimately, our talent is our most precious resource.

Moving to the next question. Could you discuss PNC strategies for competing with online consumer banks and the general migration to a more digital-based consumer banking experience?

So the influx of new entrants into the digital banking space has made it clear that ease and simplicity are paramount to customers when using banking products and services. We are embracing and championing ease and simplicity throughout our product offerings with Low Cash Mode being the most recent example while always maintaining our focus on security and preserving customer trust. However, we also know that having a physical presence still really matters to our customers, and that's why we continue to build brick-and-mortar solution centers as we continue our national retail expansion.

And next, could you provide an update on the progress of PNC's acquisition of BBVA USA?

Sure. So the process has actually been going really well. And we've achieved a good deal of progress today, including filing all the major regulatory applications. We formed an enterprise integration working group, comprised of businesses and functional leads across both PNC and BBVA. We've held almost continuous meetings with BBVA team members and conducted numerous listening sessions with community organizations across our combined footprint. We've confirmed system and application mapping with the vast majority is inside migrating to PNC technology, which reduces complexity substantially. At this time, we're still expecting to close the deal sometime in mid '21. And we'll continue to work -- and we will continue working diligently on the various work streams under our control ahead of closing in a preparation for integration.

Okay. Your next question asked, could you please discuss the rationale for the Tempus acquisition and how it fits into PNC strategy? And then secondly, did it affect the pay ratio calculations?

Sure. For those of you who are unfamiliar with it, Tempus is an industry-leading player in the payment sector, and it's been around for 30-plus years. In particular, Tempus has an industry-leading gateway solution, allowing for significant optionality and deciding method of payments for both the company's receivables and their payables. PNC historically has had a strong partnership with Tempus. We've actually gone to market with them for years and collaborated with them on products in the past. Our acquisition of Tempus is just kind of the next step in that partnership, and it's going to result in some powerful solutions that will help our clients meet their cash-handling needs. Tempus Technology closed in 2021, and it would have no bearing on the 2020 compensation, and as a practical matter, no bearing going forward. It's a fairly small organization.

We have a question from [ Tim Chesley ] of the EAS Carpenters Union. I'll read it verbatim. As long-term investors, we believe the executive compensation plan should be designed to drive the successful execution of the company's long-term strategic business plan. We support the company's executive compensation plan as it includes a variety of financial and stock performance metrics, includes peer-related performance targets and uses a variety of equity instruments. Could you or the Compensation Committee Chair speak to the performance metrics considered in determining the level of performance share units and restricted share units awarded named executive officers in the first quarter?

Sure. Thanks for the question, Tim. In your question, you referenced we have 2 different share accounts, one -- or types that we give out. One, our restricted units that are 40% of the total and they vest in annual installments over 3 years. There's also 60% of the total that has a 3-year performance period driven off of a relative EPS rank and a performance against a return on equity target that, in its simplest form, kind of comes from our strategic plan assumptions. The payout range on the restricted share units are 0% to 100%, near 0% to 150% on the performance shares. The amount that we give out in a given year is determined as a portion of total compensation for each named executive officer. And you might have seen that this year, we purposely chose to pay a higher percentage in equity than we traditionally do. across our higher-paid executives, including myself.

We have another question. Mr. Chairman, the topic of stakeholder capitalism as an alternative to shareholder capitalism has received considerable attention recently. As long-term pension fund investors, the Carpenters Funds appreciate the sentiments of bodied and stakeholder capitalism perspective, but feel that execution could be complicated. Could you discuss the Board's perspective on the concept of stakeholder capitalism, and what principles the Board could use to balance the interest of varied stakeholders as it develops and implements the long-term business strategy?

Yes, that's a great question. And it's a question that my guess is Boards of every type of company are struggling with today. And I would tell you, it's actually a pretty easy question to answer at PNC. As a practical matter, if you think about the constituencies that would make up stakeholder capitalism, it's our employees, our communities, our shareholders and our clients. We're a service organization that is driven by the talent we have in our company, the degree to which they like their job, and they're proud of their job, the opportunities we have to allow them to learn and take on new assignments. You heard me talk earlier about we thrive when our communities thrive. We're part of the community. We're part of the network. Being part of that network actually gets us business. And it doesn't work when the network doesn't work. It doesn't work when part of the network's left out. So support of our communities as part of our brand has been something that we've just done forever. And it's good for business. And then just always do it right by the client. We're in a business where there's 5,000 banks in the country. We compete with everybody. Client service, the best client service with the best products, it's table stakes for us to provide long-term return to our shareholders. So I don't think there's -- maybe it's just a case with a bank because we're kind of based in communities, and we're service-oriented. But frankly, stakeholder activism or shareholder activism capitalism are kind of the same thing. We'll maximize long-term shareholder value by basically being part of the fabric of our communities and serving clients and taking care of our employees. It's a great question.

Our next question is short and to the point. Any plan to increase the quarterly dividend?

So we have -- as part of our application to purchase BBVA, we basically put capital actions on hold. You'll know last year, we had restrictions, not just us, but the whole industry from the Fed on the amount of capital you could return either in dividend or share buybacks. We basically publicly said that we're going to stay where we are until we close the BBVA acquisition and then take a look. It would be our intention to -- or you should expect that you would see capital return from us, both in terms of dividend and share repurchases, that those will come back as we get through the close and integration of BBVA. So no specific time on that. That obviously takes regulatory approval, but it's in our game plan that we'll get back to sort of normal course as soon as we close and integrate.

Okay. Looks like we have no further questions.

All right. Well, thanks, Bryan, for reading those out. And thank you, everybody, for your questions. Again, if you have additional questions or your question wasn't answered, you can reach out to our Investor Relations group through our corporate website. Thank you all for attending. Thank you for your interest in PNC.

The conference has now ended. You may now disconnect your lines.