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Software // Enterprise Applications
01:28 PM

Building A Flagship Operation

PNC CIO's drive for excellence serves the company well as it trims $40 million and adds custom services

In the past two years, PNC Financial Services Group Inc.'s chairman and CEO, James Rohr, has placed a large chunk of the company's destiny in the hands of CIO Timothy Shack. He tapped Shack to head much of PNC's back-office processing businesses, including treasury-management operations and subsidiaries that service mutual funds and commercial real-estate loans. These businesses are a cornerstone of PNC's operations, contributing more than a fifth of its $5.1 billion in revenue last year.

Not bad for the son of a Pittsburgh steelworker. Tom Whitford, who's worked with Shack for 15 years and is PNC's chief risk officer, says one of Shack's strengths is his feel for the interplay between technology and business. Shack also has a drive for excellence, as surveys of internal and external customers show. "Tim holds himself accountable for the businesses he serves almost as much as the business heads themselves," Whitford says.

Timothy Shack -- Photo by Jim Judkis

It's key to ensure that IT and business strategies are aligned, says PNC CIO Shack.

Photo of Timothy Shack by Jim Judkis
That's probably a big part of why Rohr put Shack at the helm of the processing units and challenged him to reduce expenses of the mutual-funds servicing business by $40 million and keep processing revenue flowing. Shack, who joined PNC in 1976 and became its CIO six years ago, appears well on his way to achieving those objectives.

As head of PFPC Worldwide Inc., the mutual-funds servicing unit, he cut operating expenses by 7% in the second quarter this year, enabling PFPC to post earnings of $15 million, up from $12 million the first quarter. Among the cost-saving moves are the consolidation of three data-processing centers in Philadelphia and the sale of PFPC's underperforming retirement-services business to Wachovia Corp.

Many of the nation's largest mutual funds buy recordkeeping and accounting services spanning some 14 of PFPC's product lines. PFPC administers 48 million shareholder accounts and $1.5 trillion in assets, making it the largest provider of recordkeeping services and second-largest provider of accounting services.

The treasury-management operations that Shack oversees include a polyglot of back-office services such as cash management and accounts-receivable processing, sold primarily to midsize regional companies in PNC's five-state footprint of Delaware, Kentucky, New Jersey, Ohio, and Pennsylvania. Revenue from them for the first half of this year was $175 million, compared with $170 million the first half of last year. Under Shack's watch PNC's A/R Advantage accounts-receivable tool has been enhanced to let companies view remittance documents over the Internet. He's also tightly bound treasury management with PNC's other corporate banking activities.

Midland Loan Services, PNC's commercial real-estate loan servicing subsidiary, also has flourished. By the end of June, its portfolio had grown to $79 billion from $71 billion a year earlier, supported by initiatives like a new backup data center and Web-based loan-management and document-imaging systems.

All this has happened as PNC was hit last year with regulatory actions over questionable accounting practices. Earlier this year, PNC agreed to pay a $115 million settlement with the Department of Justice. Meanwhile, revenue has declined because of weak equity markets, reduced capital investments, and poor quality of credit.

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