A Guide to PNC and Shareholder Letters

By John MaxfieldMarketsFool.com

Over the past two decades, PNC Financial Services Group (NYSE: PNC) hasevolved into one of the best-managed companies in the financial services sector.

Listen in to this episode of Industry Focus: Financials, asThe Motley Fool's Gaby Lapera and John Maxfielddissectwhat's behind its success.

Continue Reading Below

A full transcript follows the video.

10 stocks we like better than PNC Financial ServicesWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

More From Fool.com

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and PNC Financial Services wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of April 3, 2017

This video was recorded on April 3, 2017.

Gaby Lapera: Hello, everyone! Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. You're listening to the Financials edition, tapedtoday on Monday,April 3, 2017. My name is Gaby Lapera, andjoining me on Skype is John Maxfield, banking specialist. How's it going, John?

John Maxfield: It's going great, Gaby. How are you doing?

Lapera: Pretty good!I'm pumped to have you on the show two times in the last two weeks.

Maxfield: Lucky you, huh? Luckylisteners. I'm being facetious, though.

Lapera: I'm sure they're so excited to hear more about banks,because that's what we're going to talk about today, banks.I know it's a surprise,because the title of the episode isn't Industry Focus: Financials or anything. We thought we'dswitch it up again with more banks.[laughs]

Maxfield: The old banking bait and switch.

Lapera: At least we crack ourselves up, John.[laughs]

Maxfield: [laughs] Only us. Maybe our moms.

Lapera: My mom says hi, by the way. My mom loves Maxfield, listeners, in case you're curious. Although she did say you talked a little too quicklyon the last episode,and she wants you to slow down so she can hear every word.

Maxfield: I love your mom, she's our mostcommitted listener, andI agree with her that I sometimes talk way too fast.

Lapera: [laughs] In that case,now that we're done with this small talk, let's talk aboutPNC Bankandshareholder letters. We're going to interweave the two topics. Let's start with what's going on with PNC Bank in general right now. Thereason we picked PNC Bank to begin with is becauseafter doing that [U.S. Bancorp] (NYSE: USB) episode last week, which,if you want to link to that, I'm happy to send it. Maxfield finally published that article onthe Richard Davis interview. If you emailed me about that,I'm going to email you back as soon as the show is over and send that to you. Ifanyone else wants that article,I'm more than happy to email it to you. Our email is industryfocus@fool.com. Winding back,the reason we're talking about PNC Bank isbecause we talked about how great U.S. Bancorp'sefficiency ratio is, and PNC Bank has aneven better one.

Maxfield: Yeah. If you think about it, when you'reanalyzing banks as an investor,there's a couple of statistics that are really central that you'regoing to want to check first. Efficiency ratio is one of those. We talked about it last week, theefficiency ratio tells you thepercentage of net revenue that is beingconsumed by operatingexpenses. Most banks want to get around 60%,that's what most are targeting right now. But PNC'sefficiency ratio is 52.5%. So, what does that mean? The average bank in its peer group has a 62%efficiency ratio. What that means is that 10% more of PNC's revenue is available to pay taxes,cover loan-loss provisions, and to drop to the bottom line. So it has an enormous advantageright out of the chute.

Lapera: Definitely. Andthe things that make up the efficiency ratio are expenses and assets.

Maxfield: Expenses and revenue, rather.

Lapera: Expenses and revenue, sorry. Not assets. Thank you. What I was going to say is, PNC has the highest revenue as a percent of asset.PNC does have the highest revenue as a percent of assets in its class,and it's over 1%, which is great. That's generally what you want to see in banks, anything over 1% isgravy. Most banks are not there yet.

Maxfield: I think we mixed up some numbers. Theirrevenue as a percent of assets is4.92%, which is the highest in its peer group, and itspeer group are the really large, too-big-to-fail banks,JPMorgan Chase(NYSE: JPM), Citigroup(NYSE: C), Bank of America(NYSE: BAC), Wells Fargo(NYSE: WFC), plusother large regional banks. So that's the largestwith one exception, and that isCapital One(NYSE: COF). The reason that Capital One'srevenue is so high as a percentage of assets is because a very largeportion of its loan portfolioconsists of credit card loans, and those yield,as everybody knows, a lot more than, say, a homemortgage does. So its revenue as a percent of assets isthe top in its peer group. But then,if you translate that over intoprofitability,that's where that 1.1% return on assets is. When you'retalking about profitability for banks, there'stwo measures that you want to look at: yourreturn on assets andyour return on equity. Return on assets is basically yourunlevered profitability. Your return on equity is your leveredprofitability. Here's the interesting thing about PNC, andthis is one of the reasons that it doesn't pop up a lot wheninvestors are looking for the top-performing banks -- it's because theirreturn on common equity last year was8.58%. When you'relooking for a 10% return on equity, you think, that'sactually meaningfully below that standard industry benchmark that you want to see. But the reason that it's below,as we see with its good return on assets,is just because it's not very levered,which means it's a very safe bank that'sstill earning a lot of money if you look at it on a levered basis.

Lapera: Yes. Andin my defense, 4.92% is above 1%.[laughs]

Maxfield: [laughs] Absolutely. And,just for the listeners,sometimes I throw a whole bunch of numbers at Gabyas we're preparing for the show, andanybody who listens to the show knows how fast Isometimes talk, so Gaby, I'm sure you're sometimes overwhelmed by them.

Lapera: So the maintakeaways from that little section that we just talked about is, revenue as a percent of assets, you want it to be at 1% or higher for a bank that you're looking at in general, and return on common equity, yougenerally wanted to be above 10%. But not as big a deal for PNC that it's at 8.6%because of how unlevered it is. That actually gives us a great segue into, PNC Bankis like Thomas Jefferson, because literally all of its acquisitions are like theLouisiana Purchase. For our listeners who are not as familiar with history,I don't know how many of those there are, theLouisiana Purchase bought us ahuge segment of the country that was originally owned by France,and we got it for super cheap. PNC does that all the time.

Maxfield: Yeah,I love that comparison. You know what it shows? It's the United Statesreally knows how to work with cycles. If youlook at the Louisiana Purchase, they picked it up for pennies on the dollar because France was a distressed seller at the timebecause they were in the middle of a war with Great Britain. There's the same situationwith Alaska. We picked it up for pennies on the dollar in adistressed sale from Russia, whoneeded to get money at the time. That's the exact same way,not only to grow a country --although I think some people would questionwhether or not the people who are buying and selling thingslike the Louisiana Purchase actually hadtitle to buy and sell the Louisiana Purchase,but that's neither here nor there --the point being, in the bankindustry, if you want to grow,the way to do it is beresponsible, be prudentwith your lending, then wait until troubled times,and thenpick up the lenders who are not able to be responsible or prudent whenthe bubble is inflating. So you can get them for literally pennies on the dollar. Andthat's exactly what PNC has done. About a decade ago, it boughtRiggs Bankafter it ran into some problems,it boughtNational Cityduring the financial crisis and itmore than doubled in size. Just recently,over the past few years, it picked up about 400 branches in another acquisition.

Lapera: Andthese are also great purchases because,much like Alaska had oil, or theLouisiana Purchase had, really,a variety of resources andinteresting things in it, the banks that PNC has beenpicking up have not been in terribly bad positions. It's not likeBank of America andCountrywide. They are much better,in general, in terms of credit quality, after.

Maxfield: Yeah,that's a great point. The big one to think about is thatNational City acquisition that happenedduring the financial crisis. That was actually forced on National Cityby the regulators. Not only that, but then PNC went and gotbillions of dollars worth of money from the TARP program thatNational City was denied and used that money toactually acquire National City. So it's an interesting subplot to all of that.

Lapera: Definitely. So,now that you have a little bit of background on PNC and us gushing over it,let's talk about the shareholder letter. For those of you unfamiliar, theshareholder letter generally appears at the beginning of a company's 10-K every year. The 10-Kis the SEC filing that thecompanies put in at the end of the year that's basically like, "This ishow are company did for the whole year,"and it has all the numbers for the whole year and year over year metrics andexplanations of where they think the company is going, stuff like that. So,pretty important SEC filing in general. This is just the very front half of it. Normally, shareholder letters are what you wouldexpect them to be,because they are, in theory, written by the CEO, but they'reprobably written by a media team inconjunction with the CEO,which is full of corporate speak and not verytransparent to people reading them. But this was a very interesting shareholder letter, because it had less ...what's a safe for work word for BS?[laughs]

Maxfield: Corporate jargon.

Lapera: Corporatejargon, it had less corporate jargon than the average letter. I know that John and I have talked about this quite a bit. We love writing; there was that great writing episode we did over a year ago now. One of the most important things about writing is that, when you write, you need to be well organized. This wasprobably one of the best organized shareholder letters thatI've ever seen. What about you, Maxfield?

Maxfield: I agree. I was struck, I have never read, theirCEO is a guy named William Demchak, who used to be at JPMorgan Chase for a while, and did stuff in their investment bank. I've read a lot of letters, but I hadn't read one of his before, so when I opened this up last week, or a couple weeks ago, I was really surprised by the quality of it. The first thing that struck me, to your point, Gaby,was the organization of it. I'm a writer; I'm an editor. You're a writer, you're an editor. So we appreciate these nuances. And what I found is, that very first paragraph -- andthis is a tip for people who are interested inimproving their writing -- that very firstparagraph in Demchak's letter lays out his case, ittotally provides a summary conclusion of his case,right out of the gate. What that allows you to do is test hisperspective, his conclusion, relative to the facts that he lays out in the letter. And what that shows is, he isconfident enough in PNC'sperformance that he's willing to lay it out and have people testwhat he has to say about that. So I think it's a great letter. But the other reason that issuch a good shareholder letter, in my opinion, is that it does a really good job teasing out the natural tension that bank CEOs andexecutive have between growingaggressively and growing responsibly. Youhave to grow as a business. And as a bank, it's really easy to growbecause all you have to do is jack up your loanvolume by reducing your credit standards. But the problem with that is, you then take on these riskier loans, which then, in a crisis, cansubject you to an existential issue. But you still have to grow. You have to balance these competing objectives. And I think Demchakdoes an excellent job in his letterteasing out that tension.

Lapera: Yeah. Something else, forpeople who are looking for writing tips,one of the other really impressive things about this letter is that he really keeps in mind who his audience is. He lays out his thesis, and thenright away, he hits all of the really important numbers, and then he lays out his framework,his road map for where he sees the company going, along with the letter, which is a really great way to lay anything out. But as with all things, we encourage you tothink critically about this,before we sound just like an ad for William Demchak and PNC bank. One of the mostimportant things to do when you read anythingwritten by a company islook at it with a critical eye,because you have to understand that there's more going on than what they're saying here. And I thinkone of the best examples, there's a few, but a reallyinteresting example is share repurchases. I'm on Page 2 of the shareholder letter, and it says, "In 2016, we returned more than $3 billion in capital to shareholders. Repurchases for the full year totaled 22.8 million common shares for $2.3 billion, and we paid $1.1 billion in common stock dividends." Maxfield,what is PNC currently valued at? It's like 2.1 times book or something, right?

Maxfield: Right,2.1 times book.

Lapera: So the question is,most people would look at that and be like, "Wasthat actually a really good move, for them to repurchase shares at 2.1 times book?" If they even think to think that, and they're like, "Oh, that's nice, theyreturned value to the shareholders by buying stock purchases." But the savvy investor would think, "Hey,does that actually make sense, to buy your stock when it's so expensive?"

Maxfield: Right. Ideally, when a company buys back its stock,it wants to buy it back cheap,because that's the way that a buyback is accretive to the book value of remainingshareholders. So in the banking world, you want to buy back, and this is ideal, but,in an ideal situation, you want to be buying back your stock at 1 times or less than 1 times book value,because that means you're basically buying dollars for$0.90 or $0.80,depending on what the valuation is. Then, once you get up to that 2 times book value and above, your repurchases actually start to destroy value for the remaining shareholders. Buthere's the problem that banks run intowhen it comes to allocating their capital. Generally, theFederal Reserve doesn't want a bank todistribute their dividends more than a third or 40% of their earnings. That leaves two-thirds to 60% of their earnings that a bank either has to retain on its balance sheet, or in some other way, get it off its balance sheet. Andthe only other way to get that capital off its balance sheet is through share repurchasing. So the question is, is it still a good idea when there's a high valuation, to be repurchasing shares as a bank? And the answer is, they really don't have a choice. If theyretain all of that capital on their balance sheet, it will drive down the return on equity, and therebypotentially incentivize theexecutive to reduce their credit standards and jack up their loan volume, jack up their revenue, to offset the downward pull on their return on equity by all this additional capital that's on the balance sheet. So, a bank,in terms of buying back their shares at a high valuation, is it ideal? No. But do banks have any other choice? Not really.

Lapera: Yeah. So,this is a great example of thempresenting you with something, and they're like, "This is positive," andif you think about it a little bit more, you're like, "I'mnot sure if it's positive," but thenwhen you think about it even more,it turns out it's probably net-neutral. My next example of this is actually, you should read corporate shareholders' letters with a grain of salt,because one of the things that a lot of banks like to talk about is theircorporate responsibility, theircommitment to volunteeringand helping the communities that they're in. If you'rewith me on the shareholder letter, if you'vedownloaded it from the PNC website, if you flip to Page 7, Delivering For Our Communities, there's a whole section on how much volunteers in PNC did for thecommunities that they're in. And I think it's natural for most peopleto be suspicious of most corporations saying, "Look at all the good things we did!" And that's a fair thing,because there are complicated factors at play here that you don't really see. Andone of the things he actually brings up is that PNC knows that when their communities thrive, our business thrives. So, they're basically saying, "We'reinvesting into the community because we know we're going to get a lot back from the community."

Maxfield: Yeah. And when a bank orany company is investing in the community,first of all, that's good, and that's an important thing,and we should applaud that. But to your point, it's not like a bank or a company doesn't get anything from that. Andthis is what I think about, whenever I hearcorporate executives talking aboutgiving back to the community, there's a memory from my childhood that it brings up. I grew up in asmall town in Wyoming, anagricultural community, and bankers arereally important there, because that's what allows you to buy farms, fortypical person, because most people in small townsdon't have enough money to go out and buy a farm. So, you get to know your bankerspretty well. And what you find in these communities is, the very best bankers, the ones that are able to act as a magnet for the best borrowers in their areas, these bankers are the ones that are the most involved in their community. Theysit on the boards of the local hospitals, they are involved in the local schools,they chair the local Boy Scouts League. They do all of these different things, and they do it, basically, in effect, to market to the local community. And the other part of that is,under federal legislation,specifically it's called the Community Reinvestment Act, banks are obligated by federal law to reinvest in their community, and make sure the deposits that they're collecting aren'tbeing translated into loans inlarger metropolitan areas. To your point, Gaby, there's two things here. First,it's good for businessto invest in the community. So,it's not just totally gratuitous. The second part is that,to a certain extent, they don't have a choice investing in the community.

Lapera: Yeah. So,when you see corporationsgiving themselves a huge pat on the back, like, yes,it is really good that they didthese wonderful things, but they're also, A,to some extent, required to do it, and B, they'reprobably going to get something out of it, too. Andthere's some examples in here, andif you want to email me about them,I'm more than happy to chat.

Maxfield: Onelast thing I want to hit before we move on to another topic is, when you're reading through this -- and Demchak is talking about cycles --here's what he says aboutwhere we're at right now. He talks about, in 2016, theirshareholder return, even though theirshareholder return over a three-year period ranks itfirst and its peer group, its stock in 2016underperformed its peer group. So the question is, why? And this is what Demchak says. "Tosome extent, this is the resultof the long-term strategic decisions we madenot to pursue short-term revenueopportunities that are inconsistent with our riskappetite, and to continue to invest in our franchise." So,what he is saying there is that right now,where the banking industry is at,they arealmost getting into that zonewhere any additional loan growth right now will almostout of necessity come from reducing your loan standards. And that is not a good thing. You don't want to see other banks doing that. But you get the impression from what Demchak saysin his letter that other banks are doing that. But he's claiming that PNC isn't. Now,you don't know for sure until, as Buffett would say,the water goes out. But it's reassuring that he points this thing out in his letter.

Lapera: Yeah,definitely. That actually does fitinto this general theme that we're discussing ofdecoding corporate speak. He's not trying to hide anything here,but because of the way these letters are written,sometimes they say something and the meaning is a little obscured. I don't know if you guys can see this,I guess you can only see this if you're watching the video, I go through and write down whateach section actually means. So the whole eight page letterends up being something like three paragraphs worth of sentences of what theyactually mean when they say something. Sometimes, it's not a negative thing; it's just them having to use corporate speak, that John just decodedright there. There is one other thing thatI found really interesting that they presented as apositive thing,one of the things that they're driving at, which is that they're interested in growing their consumer loans, but they'reinterested in growing it in surprising categories. For me, as someone who isfamiliar with the industry and the economic layout that we have right now, what is that they're interested in growing credit cards,student credit cards, and auto lending, which is aninteresting set of things to be interested in growing for your consumer lending. Especially auto lending, which ispretty widely considered to be about to be a bubble right now. So,it's interesting, that they're like, "We want to grow this." What do you think about that?

Maxfield: What'sinteresting about that is that it'sopposed against all these other conversationabout responsible growth. When he talks aboutone of the elements of their growth strategygoing forward, and talking about getting adeeper concentration in consumer loans,specifically credit cards and auto finance,it does certainlypresent itself as aninteresting juxtaposition. What I would say is, his argument is that they need to balance out their consumer portfoliorelative to their commercial portfolio better. So the question is,you just have to assume they'regoing to move into those areas in a responsible way. Andif you don't feel comfortable with the management moving into those areas, then you certainly should avoid their stock.

Lapera: Definitely. So it's one of those things that, you should read this as a potential investor and think, "Isthis a path forward that I should agree with? DoI think this is conservativeand in line with what they CEO is saying is conservative? Oram I just not interested at all?" Especially withstudent credit cards, those can get kind of dicey,although he does mention thathe wants to use appropriate disclosures and otherprotections. But, those tend to have some more problems than regular credit cards,because it's a group of people that aren't as experienced, and don't have as highfinancial literacy,potentially, as other consumers.

So let's talk a little bit of aboutother information that was in the shareholder letter that's interesting. We mentionedpreviously, they are looking to grow theirconsumer loan portfolio through credit cards and auto lending, but they're also looking atgrowing in other ways. One of the most interesting ways is investing in tech and innovation.

Maxfield: Yeah. If youthink about where the banking industry is at right now,there are literally thousands of these so-called fintech firms, these aresmaller technology firms that are trying to creep into the financials space. In order for banks to be able to fend them off andprotect their competitive position in the years and decades ahead, theyhave to be innovating and investing in the digital experience of their customers, in order to continue to fend off these fintech companies. This is something that William Demchak talked a lot about in his letter. Andthere's one thing in particular that he mentions in there that I found really interesting,it's this conversation about open APIs. What an API is is, basically ... [laughs] I don't know what it stands for, but, what it is, is, it allowsdevelopers on the outside of a bank toautomatically tap into the data streams in these banks. If you think about a mint.com or something like that, or the Mint app, whereit can aggregate information from your bank account, your credit card account, your mortgage, other things like that. It'saccessing a lot of that information through an API. One of the things about APIs is that, while it allows those banking services to run through third-party apps, what it's doing is it's masking that bank brand behind that third party app. So,it's a really interesting thing. Again,it's kind of like buybacks. Banks have to invest, they have to go down these routes,even if they could be disruptive to theirtraditional businesses, because in order to survive and in order to survive theinstitutional imperativethat's going on in the industry right now, in order to survive another day and continue banking in 10, 20, 100 years, they have to make these investments.

Lapera:Listeners,and Maxfield, API stands forapplication program interface.

Maxfield: [laughs] Thank you.

Lapera: You're welcome. But,more to your point, one of the factsbrought up in the shareholder letter is that 60% of PNC'sretail customers use non-teller channelsfor the majority of their transactions. That's basically mobile apps. So it's really important that they're expanding into this space. I think that's up from 40% just three years ago. That's anincredible growth.

Maxfield: Yeah,think about that. 60%of their customers are using non-branch channels for a majority of theirtransactions, and that's up from 40%. A fewyears from now, it could be 80%,and after that, it could be 90% and then 100%. Itjust goes to show how revolutionary thechanges that are going on in the banking industry are right now.

Lapera: Definitely. Andone of the things they have to look at is,what are they going to do with the physical branches? It sounds like PNC has astrategy. They are shifting away fromfull service branches to smaller -- to literally smaller footprint buildings withfewer people in thembecause they don't really need as many human beings doing work. Which isinteresting. Actually, this segues perfectly into ournext growth opportunity,which is, they are interested in growing the middle market,without opening any branches. I was joking before the show that whenever you say middle market,it sounds weird and opaque,it sounds like some kind of business that has something to do withsome kind of financial vehicle thathas an acronym that's equally opaque, but it's not, it's just businesses that are somewhere between $5 million and $1 billion,because that's a small, manageable range,[laughs] you know?

Maxfield: It's not likethe black market, that's for sure.

Lapera: No,it's not the black market. They're not sitting arounddoing credit-default swapsor whatever it is. It's literallyjust lending to middle-sized businesses.I just think that's funny.

Maxfield: His point on that was great. He's saying, "Look,before, what we found was,in order to attract these corporate customers, these middle market corporate customers,what we found is thatyou had to have an establishedretail branch networkin that area." Whathe's saying in this letter is, they are finding that in order topursue those marketsin specific geographical locations, theyactually don't need physicalretail branches there anymore. So they're going to move intoDallas, Kansas City, andMinneapolis,where they don't have physical branch networks,but they're going to start lending there much more aggressively. When you think about this, and you look at their footprint, PNC Financial could grow still significantly from where they are today in the future, which is different than those really big banks in the United States,because there's a limit to how much the grow,because they're already insome of these different markets.

Lapera: Definitely. This also speaks to theefficiency ratio that we were talking about earlier. They're keeping expenses down bynot opening new brancheswhen they don't need to open new branches, and they're doing that by testing and learning, which is one of the most important things that companies need to do in order to survive. Becauseif they just cruise alongdoing exactly what they've been doing for 100 years,it's not going to work out great,especially with how quickly things are changing for companies now.

Maxfield: Yeah. And to that point,he says in here, they'rein their fourth year of a five-year, $1.2 billion plan tomodernize the company's infrastructure and to build out keytechnological and operational capabilities. One of the things he says in that conversation is that, in 2017, the current year, they finally expect those investments to begingenerating netexpense savings. He goes on to say that willhelp to fund initiatives to enhanceinnovation and capabilities further. So, all these investments that they're making, they are now finally coming to fruition, and starting to impact the bottom line.

Lapera: Yeah. So there'sa lot of really good informationin the shareholder letter,a lot of really interesting things to think about. Ihighly encourage everyone to go ahead and do their ownliterature review, which is what today essentially was, of the shareholder letter, andlet me know what you actually think of it. Speaking of,Maxfield, PNC, would you buy it?

Maxfield: I, asmaybe I have hinted in the past, I am not buying any stocks right now. Andthe reason I'm not buying any stocks right nowis because it's my opinion that the market is really high. Andpeople are going to say, "John,you're market timing; that's not what you stand for." As a general rule, at The Motley Fool,that is not what we stand for. However, I think we have this inflation induced bump up in bank stocks in general, so I'm generallystaying away from them right now,looking for better opportunities in the future. However, if you're looking for a good bank stock to put on your watch list to watch in the future, if there is a correction in the market, I think PNC Financial is a great selection because, No. 1, I think it has a very good CEO, William Demchak, and No. 2, he's young, he'sonly 55,which means he could still be around for another decade running the bank, and No. 3,because it's a regional bank, and because itsgrowth opportunities are sopromising, this is a stock that could really do well over a very long period of time.

Lapera: Yeah,I agree with you. And also, listeners,I have to do my usual legal disclosure which is,we are not recommending this personally for you. This is just ourpersonal opinion. It really is up to you. You need to do your own research and think about how thistype of investment would fit into your portfolio, andwhether or not it actually makes sense to you. ButI would agree that PNC isdefinitely an interesting bank to look at. I think William Demchak is a straight shooter, which isnot something that I think is frequently said about bank CEOs. I actually love,there was a section in here where Demchak threw someserious shade on Wells Fargo. Wells Fargo remained unnamed, basically saying, they have a highcommitment to making sure that the people at PNC know what the deal is, and it's not to create fraudulent accounts. Also, I realized today that not everyone knows what throwing shade means. It meanscasting aspersions on,insulting. So now you can use that. It's cool street slang with your kids. I would love that. Send me a story if you actually say "throwing some shade on you, kid,"because I think that would be hilarious. But yeah,I agree. I think PNC is definitely aninteresting stock to research. I'm also not buying stocks right now,so I'm not going to buy anything, because mostly, I tapped out my account with that Industry Focus-helps-Gaby-pick-stocks week we had a few weeks ago, soI have no money to buy stocks. But yeah. One point that I wanted to finish up with, unless, Maxfield, did you have anything else you wanted to say about PNC or shareholder letters in general?

Maxfield: No, just toreiterate thethe point thatI don't recommend people to buy it right now,but I recommend people keep their eye on it, and if a better opportunity comes up, think about it at that point.

Lapera: Good. My final point is, the other reallygood thing to look at is conference calls. If you can keep your grubby little hands on a conference call, that is great,because it's a question and answer format where analysts in the industrywho are very familiar with it are asking pointedquestions to the executives. It's a good way of knowingwhether or not executives know what they're talking about, whether they're bluffing, what's going on. It's an exacttranscript of everything that everyone has said. Conference calls arealso a really good place to learn new things,because you have these analystsasking these really technical questionswith all sorts of new words that you might not know, orconcepts that you might not be aware of. And every time you see a new one, you just look it up and add it to your mental toolkit for being able to analyze banks in the future. Last point, this isfinancial literacy month, apparently. I just got an email today about it. So get ready for a financial-literacy episode soon. In the meantime,go out and increase your own financial literacy.

As usual, people on the program may haveinterests in the stocks they talk about,and The Motley Fool may have recommendations for or against,so don't buy or sell stocks basedsolely on what you hear. Contact us at industryfocus@fool.com, or by tweeting us, @MFIndustryFocus, andlet us know what you would like to hear next. Thank you to Heather Horton, today's rad producer, and thank you to you all for joining us. Everyone,have a great week!

Gaby Lapera owns shares of JPMorgan Chase. John Maxfield owns shares of Bank of America, US Bancorp, and Wells Fargo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.