Good morning. My name is Syclan 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 call is being recorded. I will now turn the call over to the Director of Investor Relations, Mr. Bill Callihan. Sir, please go ahead.

Thank you and good morning everyone. Welcome to today's conference call for the PNC Financial Services Group. Participating on this call is 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's 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 reconciliations 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 the corporate website, pnc.com, under Investor Relations. These statements speak only as of October 15, 2014, and PNC undertakes no obligation to update them. And now, I’d like to turn the call over to Bill Demchak.

Thanks Bill and good morning everybody. As you have seen this morning we reported net income of $1 billion, $1.79 per diluted common share for the quarter with a return on average assets of 1.25%. These results are very much in keeping with our expectations and our guidance. And you saw that we grew revenue in the quarter on the back of 4% increase in fee income which overcame a slight decline in net interest income. Loans were up slightly on an average basis but they are actually down quarter-to-quarter on a spot basis. We continue to win new customers across our lines of business in the quarter and increasingly we are focusing on deepening relationships with existing customers through cross sell. Additionally we continue to manage expenses well and completed the actions to achieve our 2014 continuous improvement target ahead of schedule. Credit quality continues to improve and we improved our capital position. So as I said a couple of months ago, I am pleased with how we are executing against our strategic priorities and controlling the things that we can control and what is proving to be a challenging revenue environment. Our third quarter results, another quarter with a billion dollars or more of net income speak to the consistency of our approach. Now having said that, I spent quite a bit of time with a lot of you over the last couple of months and I know that many of you are turning your attention to 2015. And while we’re in the early days of our budgeting process and I am not going to give you specific guidance here, but just looking at the economic and industry trends, there are a few comments I’ll make about our outlook for the remainder of this year and for 2015…

Thanks Bill and good morning everyone. Overall our third quarter results were largely in line with our expectations and demonstrate our ability to execute on our strategic growth priorities. As you know, the sustained low interest rate environment continues to affect our net interest income as it has for some time and for the reasons that Bill just mentioned. However we saw solid fee income growth this quarter that exceeded our expectations and more than offset the decline in net interest income resulting in revenue growth on a linked quarter basis. Expenses remain well controlled and credit quality was favorable. Our B3 common capital ratios improved even after $670 million in share buybacks and dividends in the third quarter. Turning to our average balance sheet on slide 4, total assets increased by $7 billion or 2% on a linked quarter basis. This increase was driven by higher deposits held with the Federal Reserve and to a lesser extent higher average loan balances. Average commercial loans during the third quarter were up $913 million or 1% from the second quarter. And average consumer lending was down by $318 million linked quarter as lower home equity, residential mortgage, and education loans more than offset increases on automobile lending. Our third quarter spot loan balances were essentially flat reflecting a higher level of loan activity late in the second quarter. As well as overall slowing loan condition -- slowing loan growth conditions in the third quarter. Compared to the same quarter a year ago, average loans increased by $9 billion or 5%. Importantly we achieve this growth despite $1.5 billion in run off of loans from our non-strategic assets portfolio during the same period. Average investment securities decreased $1.9 billion or 3% in the third quarter as net payments and maturities exceeded our…

Operator if you could give our participants the instructions please.

Certainly, thank you. (Operator Instructions). Please hold while we compile the Q&A roster. Your first question comes from the line of Erika Najarian with the Bank of America. Please go ahead.

Hi, Erika.

Good morning.

Good morning. Hello.

Your line is open.

Yes, hi, can you hear me.

Yes. Erika Najarian - Bank of America Hello, great. You know Bill, you said at the top of the call that you are in the middle of budgeting for 2015 and clearly the results this year have shown that you are executing on the things that you can control specifically on the year-over-year progress and expenses. As we look forward to 2015, let's just say that the market was at this point right this morning and let's take the prospect of rising short rates out of the way, could we expect the efficiency ratio to improve from the 61% that you have been posting next year?

I don’t see how. I think we are going to be able to -- we will control expenses but at the end of the day and you have heard me say this before, real improvement in the efficiency ratio got to come from the revenue side and we are driving that on fee income, but it's got to come out of NII and we are so underleveraged as a firm right now that the opportunity for us if and when rates rise is what is going to drive a material change in that ratio. So we are going to focus on expenses and doing good job on it but moving wherever you want even if we manage to drop them a couple of hundred million and I am not saying we are going to, it doesn’t really move the needle here.

Okay, got it. And just as my follow-up question, Rob given your comments on the LCR, it sounds like most of the LCR driven liquidity action should be fully in the run rate at this point, so there shouldn’t be further incremental hits from LCR related balance sheet optimization at this point?

Yeah, good morning. I would say the bulk of the work is behind us. There may be some incremental work on the margin but the vast majority is behind us.

The other thing, I will just add to that, I mean when you look at the drop in the NIM in the quarter just because it sort of spike in largely corporate deposits, you know, it is neutral to income, it is not necessarily LCR related, it just kind of flows that are coming in the form of deposit and largely being held at the Fed at this point. So it is affecting them but it is not costing us anything.

Got it. Thank you so much.

Next question please.

Our next question comes from the line of Betsy Graseck with Morgan Stanley. Please go ahead.

Hi, how are you?

Good morning, good.

Hey, couple of questions. One was just on the LCR because you did get that final rule set recently and I wanted to understand how it impacts you because I know it was a wide range going into that final rule?

Sure, this is Rob. But generally speaking the final rules were announced, PNC was viewed and is categorized as being under the full approach. There was an open issue whether that was going to happen or not but we are in the full approach. Largely in terms of the final rules compared to a conservative rate of the proposed rules it was a net better move for us in terms of how far we had to go. But you can tell by the Fed balances that we have built through the year, we have moved considerably in terms of our liquidity position and very comfortable that we can meet the levels as they are phased in.

Right, it was better because more operational deposits then what you could have potentially had?

It was a whole bunch of little singles from the way you would look through to you know securitization. Of course for receivables it was operating deposits, it was some impact on municipals and VRDN (ph). So bunch of little stuff at the margin where in our previous planning we’d kind of assume when we just you know as is our nature we assume the worse.

Got it, okay and then two questions; one, on you said possibly let's take the other side of the question that Erika had let’s say the global growth is not as bad as people think and rates start to go back up. You know the Fed put out this comment back in September saying that the RP would be capped at 300 billion, so do you end up raising rates through increasing IOER or does your interest rate sensitivity stay the same because the question is does IOER going up impact your asset yields since most of that’s based off of Fed fund part of the curve?

Sorry IOER meaning the excess reserve balances.

Right.

If they raise short rates through whatever mechanism either you know rates on excess balances or the reverse speed ball facility for money funds on the four side of the equation, we make money. We make money if short rates go up and that will be their impact. Now if they do that, we’ll see what the impact is on longer rates. Our base assumption, you heard me talk about it in planning isn’t really heroic. We are kind of saying that they move in Julyish and they go -- they get funds or short rates to 1 % by the end of the year. If they go more than that, we obviously have more leverage you know and greater upside than what we are currently planning as we think about the future. I don’t, you know, just as in a side, the economy right now we go and talk to our clients but actually feels a lot better than the sentiment. So I am personally a bit confused after we get the news out of Europe which is clearly struggling. The U.S. economy feels very strong and resilient. And personally I think this is a bit of an overreaction, particularly on the rate side. We’ve had an equity correction here that’s down and I don’t know what it is right now 7% or 8% from the highs. But we rallied rates down to basically zero again and I am taking the Fed off the table for all of 15, at least as the market saying. That doesn’t feel right to me.

Okay and the technical part of the question I was asking was that if you are not able to lift Vibor (ph) or prime because Fed fund isn’t moving, then I get the point that you totally get a better -- you’re asset sensitive with excess reserves and so your earnings go up but if your loan balances are not able to react if Fed Funds stays where it is then do you pass anything on to the depositors or does it make you less asset sensitive then usually?

I haven’t focused on that. I see where you are going. If the Fed is unable to make that connection in short rates. Look at the end of the day if somehow they manage to increase excess reserve rates and Vibor doesn’t move which I don’t think is a likely outcome. Then the other rates we are going to be paying on deposits would suffer.

Okay and then just on loan growth because I know it was little bit lighter Q-on-Q but second quarter was very strong, I just want to understand what you are thinking will be driving that, you know C&I over the next couple of quarters?

I think the third quarter was perhaps a bit anomalous. You know we ended up kind of flat a little bit up in C&I, some gives and takes in different books. The general theme continues to be growth on our specialty businesses, asset based real estate, lease finance. We’ve seen growth in large corporate as we seen the M&A activity continue to set records and a lot of borrowing to do, dividends and share repurchase. So I don’t know that that’s necessarily going to change. I think in Robs comments he kind of suggested.

Yes I said, we did see a spike up there at the end of the second quarter, which was higher jumping off point and there was growth conditions in the third quarter albeit slowing growth. So that combination put us in a…

We are saying low single digit growth.

But our guidance for the fourth quarter calls for continuation of modest loan growth, principally on commercial side.

Great and driven by more planned equipment investing?

No haven’t -- it really hasn’t taken off. We are seeing loans, I wish there was a way to pass through it, but my best guess is the bulk of the balance growth we see beyond real estate, in a project based real estate in the C&I space is largely due to kind of M&A and leverage, share buyback, excess dividend, and so forth. You still see the planned equipment investment, it is still well below where it ought to be running given where the economy is so that's kind of an upside if and when it happens.

Okay. Alright, hey thanks a lot.

Yeah sure.

Next question please.

Our next question comes from the line of Matt O’Connor with Deutsche Bank. Please go ahead. Matt O’Connor - Deutsche Bank: Hey guys.

Good morning Matt. Matt O’Connor - Deutsche Bank: Seeing some good momentum in the capital markets advisory areas and I think you announced an acquisition there recently, so maybe if you can talk a little bit about both the current trends that you are seeing and then just kind of longer-term strategy and how meaningful this could be to PNC overall?

Yes, so Harris Williams is on pace in fact they might have already had their record year after three quarters. You know they had their gaining share in what is a very hot M&A market. We have owned them now for 10 years plus or minus and beyond what they contribute to the bottom line for us they basically help our dialogue with our corporate customers. It is kind of another arrow on the quiver when we go out and want to have a meaningful relationship with the middle market company having the leading advisory firm helps. Solebury, who we announced in the quarter we purchased as an advisory firm that basically helps people through the IPO process. They don’t take a principal position and they don’t take a management position in effect in the IPO but rather they advice people on who to choose and how to go about it. And they help people with investor relations. We did that as a sort of a complimentary product to the Harris Williams product in the sense that when Harris Williams goes and pitches for a sale out of a private equity shop more often than not they are not only pitching against another advisory they are pitching against an IPO. And we want it as a firm to have a full service solution set to those clients and that's what Solebury does. Bottom line, both of them add to our bottom line but as much as anything else they add to our broader relationship with middle market companies which is the key point we are trying to drive. Matt O’Connor - Deutsche Bank: Okay, so don’t just focus on the fee revenues it kicks off but is kind of broader relationship that has been…?

In its simplest form if you think of a private middle market company and you say would you like to take a meeting with the leading firm who has done a bunch of deals in your industry, both on the advisory and the IPO side, you get a meeting with the CEO, they want to hear about it. They all want to hear what their company is worth and what their competitors are doing and what the future holds for them. Yes, it is a great calling card. Matt O’Connor - Deutsche Bank: Okay, and then just separately within the credit, obviously very strongest quarter, I noticed you had higher recoveries both in commercial and residential and I am just wondering if we get into the point of residential where it might be kind of higher or longer on the recovery side?

Well you know we have been saying that for some time Matt that these levels we do believe are unsustainably lower over a long period of time. But each quarter, the things seem to stay pretty good. Matt O’Connor - Deutsche Bank: Actually sorry, I meant on the recovery side against the charge offs, you had a pickup in both commercial and residential real estate and I didn’t know if there was just kind of a reevaluation or something?

Nothing specially, it is just we are working off of a relatively low level there so it is nothing particularly departing from the current themes. Matt O’Connor - Deutsche Bank: Okay, and actually then lastly if I can sneak in on the interest rates here, I think you and some other banks talked about not reinvesting sort of the proceeds as much in the third quarter and I think that's one of the reasons why rates are coming down so much that lot of folks were trying to stay shorter on the duration and now you are having to squeeze, I guess it was just like what do you do now, why you kind of waited out to kind of the securities folks shrink a little bit more?

Couple of things, we are actually notwithstanding the drop in securities balances spot and average, second or third quarter. We are actually through TBAs and forward starting slots and some other banks probably held that position largely flat. So, we didn’t get shorter on a duration basis per say through the third quarter. Given where rates have gone here, so you are going to now have a period of time where you are going to see prepayments on anything that can prepay and we think if we didn’t like them before we really don’t like them now so if anything else we might look at opportunity to monetize here. But we are certainly not going to invest into it more heavily at this level. The opportunity cost is just sitting on the sidelines is low enough that you stay on the sidelines. Matt O’Connor - Deutsche Bank: Okay yes, I would agree. Thank you.

Next question please.

Our next question comes from the line of Paul Miller with FBR Capital, please go ahead.

Thank you very much. My question goes back to and I think you made a comment and I am not sure if I heard it correctly, it goes back to the core NII and the total NII. You talk about higher liquidity positions is driving that lower and lower asset yields but did you mention some of the reinvestment opportunities, in other words are you making a decision to pull back a little bit until you get, so you can redeploy with better yields maybe down the road since you do think the Fed at some point is going to raise rates?

No, looking at simplest form you are connecting a lot of dots here but in the simplest form we are under invested fixed rates and have been for a long period of time to take advantage when rates go up. You can see that visibly in the balance sheet somewhat by the securities balances declining but also just through the balances that are growing at the Federal Reserve which are obviously floating rate balances. Right, in its simplest form if we wanted to you could take the Fed balances and the LCR neutral by investing them in treasuries. If you look the yield on the two year treasury right now, that in 29 basis points which is 4 basis points more than I get leaving a floating at the Feds. So I’ll leave them there. But we do have a lot of dry powder, we’ve been that way for a while. We’ve been wrong for a while right, I wish I had a perfect crystal ball and we could have invested and then sell everything today but we didn’t. And we are not in the business of kind of making those dramatic bets with our balance sheet.

And on the same token with growing your loan book, I know lot of people saying there is still a lot of price competition, is that the same thing keep me a powder dry for an opportunity to wind commercial yields to go up, you can take advantage of it?

Look we are -- if you go tracked your time notwithstanding the third quarter in C&I which I said was kind of anomalous, I think we are growing C&I to pace faster than all of our peers largely through winning new clients. A big part of that coming from the Southeast where we are new entrants beginning share. Spreads have declined in C&I lending and in real estate lending but they’re still appreciably higher than they were in the tight periods in 2006-2007 and all that means is to get an adequate return for shareholders. We need to make sure that we are getting our fare share of cross sell with the clients that we are lending money to. And by the way we are doing that, you see it in corporate service fee line and other fee category lines where focus on growing customers across the full relationship not just lending.

Which is now our strategy as you know for some time.

Okay, hey guys, thank you very much.

Thank you, next question please.

Our next question comes from the line of Bill Carcache with Nomura Securities, please go ahead.

Thanks, good morning. Bill you’ve talked about deposit beaters likely being higher in the next rate cycle but given uncertainty around the timing of when those rate hikes will come, I was hoping you could separate new Fed rate moves from the impact of QE coming to an end? So X when your Fed rates moves do you think the end of QE will translate into a slowdown in overall industry deposit growth not necessarily deposits growth will turn negative but just a slowing of the growth, in kind of a post QE environment?

Yes, I think so. I think part of the issue and I am a little stale on this, I saw there is an article published or research piece published a couple of days ago and I didn’t get through it. But I guess the notion of doing less of the (inaudible) facility would in fact cause the rundown of the Fed balance sheet to take a longer period of time than it otherwise might so the impact on deposit outflow in effect as QE goes away is slower than it might be. But that’s all true right, then the need to chase deposits and have higher betas is somewhat muted. Now I don’t know if that’s true. My fear and our worry is the Fed liquidity leaves the system and people compete for those deposits to comply with LCR, particularly the retail deposits that in other ways see higher deposit betas than you might have in past cycles. So we will see how that plays out. But you are right to assume that the roll off of QE and how the Fed balance sheet shrinks will have a different effect on deposit flows than just if and when the Fed rates is raised.

And as a follow up to that, overall industry growth has been pretty decent and particularly in the commercial side, can you talk about how you guys are positioned for an environment where that deposit growth does slow and maybe the industry as a whole kind of the implications for that slowing of deposit growth but the continuation of the loan growth that we are seeing?

Yes, that is why we have been, I mean we planned different scenarios that you could have an environment where you have the utilization line increase on C&I loan. This is planned equipment expenditures finally come to life. So, very robust loan growth exactly at the time when the excess liquidity largely from large corporate kind of drains out of the system. You know and we plan I guess, that is one of the reasons we have on our own forecast and we did this at the last conference presentation we went through, we talk about the fact that for base planning our betas are a lot higher cause there is a possibility and you have this weird anomaly and this cycle where because of LCR certain deposits are worth more than others which is new. So, I don’t know how that plays out. I just know we are supposed to focus on and run different scenarios against it which we do.

Great, that is really helpful. Thank you and if I can squeeze just one last one in, can you update us on what you are seeing in terms of any pockets within the commercial lending space where you find yourself just walking away because of the unattractive economics and then maybe the same question to the extent that anything stands out on the consumer side?

You know in the C&I space rather than industry what has been in the headlines and it is true as leverage lending continues to be at a place where we would view it as tough to make money is in a sight we don’t plan the space. So it doesn’t really matter to us so much. But that is kind of where the headlines are in C&I. We have also talked about this before, in small business, particularly small business that has a difficult ability to offer you fee streams. You know the increased tenor and tightened spreads in small business generically define if made somewhat less attractive than it once was. Most of the other stuff, you know, we have kept our credit box the same for since I have been at the company and we will compete with price inside of that credit box particularly for clients where we have a broad based relationship. We have large fee streams where to keep that client we will drop the spread on the loan to where we need to go. But those are still good loans. Bad loans, it doesn’t matter what the price is, they are still bad loans.

Understood, thank you.

Next question please.

Our next question comes from the line Ken Usdin with Jefferies Group. Please go ahead.

Thanks, good morning.

Good morning Ken.

Rob, I was wondering if I could just ask a couple of questions on expenses. First of all just this quarter your sequential growth was 1% in line I guess with the low single digit increase but I am just wondering did all those things you guys have talked about a quarter ago with regards to the CCAR spending and then the incremental spend come through this quarter and then when you think about fourth quarter, do you expect the same kind of growth rate, what kind of got flushed out in this quarter or didn’t I guess is my first question?

Yes, I understand Ken. Essentially in terms of the third quarter most of what we said and we expected did play out with one exception, that you recall I have mentioned the employee benefits. We had implemented a new high deductible plan in the beginning of the year that in effect back end of the corporate expense piece of that. We were expecting that through our projections arrive in the third quarter and that didn’t. Not a big piece but that didn’t but it does play into fourth quarter guidance where we do expect to see some increase in that category. But generally everything else occurred as we thought. Maybe a little lower than our guidance as I mentioned in my comments because you know with the acceleration of the continuous improvement program gains.

Got it and then when you think ahead can you help us understand how that -- those investment spending and the incremental depreciation and amortization that is starting to get thrown off of it, how does that play against your ability to find incremental continuous improvement on top of what you’ve already secured not just for this year, but as you also start to think about the years ahead?

Yes sure, so again we won’t get into 2015 guidance we’ll do that as we usually do in our call in January. But generally speaking and you’re familiar with it. So the continuous improvement program that we had in place for a number of years it works for us. It is a disciplined exercise where we identify expenses that we go after every year with the idea that in total they can fund our investments. So we would expect to be able to continue that in 2015, the program works well for us. It’s not great for the outside world because it’s hard to as you know take those numbers right through the income statement but it is a very useful tool that allows us to keep expense discipline in place particularly during time of revenue challenges.

Okay and then just last piece on that then just the DNA piece, can you just help us understand how that does or does not cascade?

Yes sure. Overtime depreciation will increase in our equipment line but as you know a lot of that is going to generate, a lot of those solutions overtime are going to generate efficiencies that we should be able to pick up in other areas.

Right, okay, got it. Thanks a lot.

Okay, next question please?

Our next question comes from the line of John McDonald with Sanford Bernstein. Please go ahead.

Hi, good morning. Hi guys, Rob just wondering the fee income was very strong this quarter so the ability to stay flat sequentially seems like a nice positive. Could you give us some color on some of the foots and takes that you mentioned for the next quarter, you mentioned some seasonal items and how you stay you are thinking you might stay flattish.

Yes, what I am really saying there is the elevated gains that we had from the M&A, the Harris William record performance, we don’t necessarily expected those same levels. So the underlying growth in asset management, consumer services, and the corporate services I see in terms of the higher business activity that we’re expecting to basically offset that. And that’s where I get to stable.

Okay, in the last two quarters you had 50 million or so other Visa gains, you expect to kind of keep harvesting those on a regular basis?

Well we don’t give specific guidance in terms of anything that we are going to do in the short term. We have been on the record saying that it is our intent to monetize the Visa. After the sale here in the third quarter we now have 7.4 million shares of the Class B, valued at 650 million on our books for 90 million. So unrealized gains of 560 million.

Okay and can you give us any color on what you are assuming in the provision outlook. Your reserves still look high relative to peers at the 1.7 you mentioned, are you assuming some reserve release continues but at a fading amount going forward and in charge of kind of stabilize?

Assuming everything stays constant in terms of the environment that we are in, I would expect that we would have further releases although not necessarily at the levels that you know we’ve had this year.

Okay and then the final thing from me, just some buybacks, what factors will drive your utilization or the remaining authorization you have for the two quarters left in the CCAR period?

Yes, so we are half way through the program and we are about 40% in terms of our repurchases under the program rules. That amount that you didn’t utilize in that particular given quarter can be carried into the future quarter. So we are committed to our buyback program, we’ll continue with the program that we have and we would expect to repurchase more shares over the remaining two quarters of the program.

Okay, just to be clear, are you saying you’ll definitely use the whole thing for this year or is it kind of market and price dependent and other factors as well?

We are value buyers. Look at the 40% of the total promotion we did in the first half of the year. We have 60% left to go, our share price is 10 bucks lower, figure it out.

Alright, thanks guys.

That was Bill by the way.

I get that. Thank you.

Next question please?

Our next question comes from the line of Mike Mayo with CLSA, please go ahead.

Hi, how much more in savings do you have from the continuous improvement project?

I am not sure I heard all that Mike, in terms of the continuous improvement program we had a target for 500 million through the year. We achieved that through the three quarters. So in that particular program we are in excess. We still have ideas that we will continue manage and continue to pursue and those that we can complete in the fourth quarter we will do and those that we can't will be part of our 2015 program.

So will the 2015 program have a new name or is this just going to be business as usual or what?

We are done with names. Basically we do it every year. You compile a list of opportunities that we track and hope people too and the savings from those Mike are basically what has allowed us to make these investments into our technology agenda and retail transformation. And actually at the same time is cutting expenses outright. So, it is just part of our annual budgeting and operating process.

Okay, and then as it relates to your financial targets, in the past you had targets for efficiency and ROE, do you have any targets currently or what kind of numbers do you want to achieve?

We don’t have visible targets out there. I would tell you, you know the question on efficiency, you heard me say it is going to be driven by revenue increases, largely rate dependent. And many on the call have heard me say before we run cases here without efficiency ratio gets to impossibly low levels in the 40s in the right rate environment. In the side I don’t think we can necessarily get there. I don’t believe that financial projections but that's where the leverage is and that's -- therefore I don’t want to set a target out when it is largely driven by a variable I don’t control which is rates. We do know that we have the opportunity to be more efficient with the dollars we are spending and as you have seen we are intently focused on getting the most efficiency we can out of those. Generally focused on growing fee income which is within our control, which we are doing and we will play the environment out here.

Did I hear you right, so you think you can get to the efficiency in the 40s in the right rate environment?

No, so I am just saying we have run the cases right, so take it for what it is worth. It is a gigantic financial projection that basically says in this rate environment with the following deposit betas there is enough revenue leverage inside of our NII while remaining disciplined on expenses that you drive that ratio very low. And yes I have seen cases in the 40s. I have also for the public record I have told you that I do not believe those cases. But it is just materially better than where it is today, driven off of revenue and in particular off of NII.

Or in other words a major step down in efficiency ratio, we are going to need to rely on a different rate environment.

Yes.

Okay, just one more follow up, do you think that we collectively should be expecting financial targets from companies such as yours. For example without an increase in interest rates, where the metrics should fall out, I mean PNC has performed better than the industry and Bill you have a good track record. So I think there is a certain degree of added trust. But having said that what should we as investors hold PNC accountable to in terms of financial results in the next one year or three years?

Look it is a fair question Mike, and it is something that I trouble myself with. The challenge we have, if you ought to hold us accountable to the things that we can control. Right, so it is market share, it is fees, it is transformation. It is getting the technology side right, it is controlling credit, it is being disciplined on expenses. I shouldn’t be rewarded or at the extreme penalized on where rates go. We are inherently a cyclical business, right. And I could tell you which is why in my comments in a slide when I said for our planning cycle next year we assumed a rate rise in July and Fed funds at the end of the year at 1%. That's how we are going to measure ourselves. So, if that doesn’t play out there is nothing I did or didn’t do or the team did or didn’t do, you know, against that success factor. So I get the need and the desire to want to have outright metrics. But people tend to forget and for the life of me I can't understand why that banking is a cyclical industry.

Alright, thanks a lot.

Yes, next question please.

Our next question comes from the line Terry McEvoy with Stern Agee. Please go ahead.

Thanks, good morning. Bill do you remain as upbeat about the organic growth prospects in the Southeast for PNC and then as I look at the service charge line last quarter we had more customer transactions, you made some changes in the product offering, was that specific to the Southeast and what you are doing there or was that more broad based around your footprint?

Good questions. We continue to be really pleased with what we are seeing in the Southeast continued growth across all products and client types well in access of our legacy markets. That’s a real and long-term organic growth opportunity for us, it is one of our core strategic priorities. Just in terms of the service charges, you may or may not remember that we were one of the last of the large banks to eliminate free check in and so a lot of that in the product line up is simply change in the product continuum and how people choose to pay for our retail banking product. So it’s not an overdraft phase. I think even sequentially year-on-year fees are down and its coming in other forms. But by the way that’s across the whole footprint. We have minor variations in some markets but generically it is across the whole footprint.

And then just as a follow-up, if I look at your commercial portfolio loans to manufacturing borrowers they are up the strongest year-over-year but flat quarter-over-quarter and was that just some quarter end volatility or was there a noticeable change that happened last year?

That’s my guess. And my guess is that it is anomalous. We had some pay downs in our asset base lending group. You know things can be lumpy so we don’t see a real change in where demand is coming from and the type of business we are winning. You know we picked at certain period of time and market-to-market at the end of the third quarter and it was flat rather than up a little bit.

Thank you very much.

Okay, next question please.

Our next question comes from the line of Matt Burnell with Wells Fargo. Please go ahead.

Good morning, thanks for taking my question. Two questions, first of all on loan growth, we had a lot of questions on commercial loan growth. I guess I am curious given some of the regulatory data that’s come out over the quarter that seem to show a broadening of loan growth across consumer as well as more and more banks becoming a bit more willing to lend to the consumer that for your loan balances that look like it was a similar story this quarter versus the prior quarters of automobile continuing to grow but not much growth, in fact negative trends in most of the other consumer lines. Can you give us a sense as to sort of where you are seeing demand or in fact if PNC doesn’t really die into most of the industry data in terms of consumer lending?

That’s right, I can answer some of that. Just if you break down the components of our consumer loans, the home equity product both align the credit and then term loans have been somewhat flattish for a while and we expect reasonably stay in that area. We have seen some growth in credit card. Bill mentioned that in terms of the year-over-year activity. We are relatively small player but expanded client base and expanded product aspects have that growing and we would expect that to continue to grow. You mentioned automobile, actually in automobile that growth in true consumer loan has been slowing. It is still growth, slowing and that’s an example of maybe where we are backing off a little bit because of credit quality. It jumped in the quarter and that’s largely a categorical anomaly. Its most of the jumps relates actually to a commercial customer with the underlying collateral is our consumer assets, a captive credit arm of a large domestic manufacturer. So, if you take that out the auto growth has been in the 1% range for the third quarter in direct and we would expect to sort of remain in that area.

The one thing I would add to that is, you got to remember we have some built runoff in our nonstrategic book which is what a billion and half bucks year-on-year. And we also have probably a comparatively larger student loan book that is in runoff mode given the change in educational lending. So we are kind of running inside the retail space, running to stay even. The other comment I’d make is, a lot of that growth my suspicion has come on the back of balance sheeting residential mortgages which we do some of but again my best suspicion is materially less in some of our peers.

Okay, that’s helpful and then I’m going to ask you a question in terms of expenses and I guess specifically you’ve made a number of references to investing in the retail business, and I guess with some of the headlines related to cyber crime which haven’t really -- haven’t just focused on the biggest banks but have also referenced some of the regional banks, can you give us some metrics or some color as to how you are thinking about investment on that side of the equation specifically?

Yeah, sure. It is -- by the way we have been accessed for a while and it is part of our technology agenda which we have been pretty public about. Given some of the dialogue over the last week or so from some of the conferences, we actually kind of dug in to say how much inside of our technology agenda could be pointed to cyber and it is somewhat of a scary number. Just in terms of the size of the group we are focused on the investments we have and applications that helped both screen for bad traffic, knock out that traffic, and other things. And then added to that, a big part of our technology agenda is in the data center strategy where we just -- you know we are building more core resiliency which is another form of protection against cyber. The good news for you is that this is -- we had planned for this, we have been self funding it, it is a lot of money but it is nothing new for us. We kind of had assumed we needed to get better at this and throw a lot of resources at it at the better part of the year ago or more and had been on track to do so.

Okay, that is helpful. Thank you very much.

Next question please.

Our next question comes from the line of Gerard Cassidy with RBC Capital Markets. Please go ahead.

Hi everyone, this is actually Steve diving in for Gerard. Thanks for taking our call. Just two questions, first question is just on your capital planning, you are north of 10% common rate now, and last CCAR cycle you guys asked for 65% pay and received it, do you think you can get that to close to like 80% or 90% this time around?

We don’t know. You know a couple of things, one is our -- the base case CCAR that we put into the process typically has a lower net income number than what we end up producing, whether it is because provisions are lower or we reduced the sales or any number of things. So, the payout ratio that we ask for inside of our base case is higher than the 60% and we end up making more money. So, our actual ends up lower. We clearly are in a situation where absent building our payout you know upwards towards a 100% we are generating capital at a pace that is beyond our ability to intelligently deploy it with our customers which weren’t the case but it is. We got to figure out a way to return more to shareholders. So that will be a topic of discussion inside of this company and many others I suspect as we go into CCAR this year but without guidance from Fed as yet, nothing we can say about it formally.

Fair enough, thank you. And last question, your mobile banking channel, do you have the percentage of customers that are using your mobile to banking channel and where do you expect that number to go hopefully by the end of 2015?

So we are making disclosure on all the digital, all the non-predominantly. 47% of our customers are predominantly non-branched clients so we have 1 percentage -- 36% of our deposits are now non-teller, so either the ATM or the mobile phone. And that number has grown leaps and bounds but I would tell you it is below what some of our peers do today. So, I would expect that we could get upwards of 50%. We were little bit slower than some of the very large banks in the roll out of image ATMs. So we are playing a little bit of catch up against some of the leaders in that space even while we are far ahead of some of our smaller competitors.

Great.

Okay continue please.

You are 36%, you are 36% right now for non-teller and you said that some of your competitors do you know or you have got a sense of how high they are at for the non-teller, is it 50%?

Yes, I remember seeing a 50. I will do my own research on that before you trust my number, but I remember seeing a 50% of somebody.

Great, thanks very much for taking our call.

Yeah, sure.

With that, that wrap up the Q&A. Bill do you have any closing comments before we sign off.

No again, appreciate everybody's time this morning. We feel pretty good about the quarter executing on kind of what we set out to do, notwithstanding the revenue environment. I look forward to a quarter when we can actually announce on a day when the market doesn’t open up down 300 points. But so be it and we look forward to talking to you guys at the end of the year. Thank you.

With that operator we are going to conclude the call.