Never mind the recent mayhem in financial markets: times are good for Charlotte McLaughlin, president and CEO of PNC Capital Markets. McLaughlin is riding a contrarian business boom over the last year in running a division which sells risk management tools, balance sheet analytics and hedging instruments, in addition to the usual menu of fixed-income products.
"The bad environment actually provided a boost," says McLaughlin, whose clients include everyone from wealthy investors to regional banks. "A volatile market environment like this stress-tests every company's balance sheet. Our success has been to help clients manage their risks and increase the value of their business."
The proof is in the numbers. PNC Capital Markets posted $80.7 million of revenue in the first half of 2008, a 52-percent jump from the same period a year ago. Sales have been driven by two categories in particular as clients sought to hedge their interest rate and currency exposure: derivatives, which soared 134 percent in the first half of 2008 compared to the same period in 2007, and foreign exchange, which jumped 24 percent. In the group that caters to financial institutions alone - which McLaughlin started from scratch two years ago-revenue ballooned 92 percent in the first half of 2008, to $9.2 million.
The strong performance is a nice bump to the parent company's bottom line: record revenue from Capital Markets helped boost PNC's non-interest income 24 percent over the previous year during the second quarter. The way McLaughlin tells it, her group had no choice but to post such strong results. Amid the turmoil, clients who in the past needed little outside assistance came to PNC for help with analyzing their balance sheets, restructuring their portfolios and reducing interest-rate risk. When the credit crunch began to get serious last year, McLaughlin launched an interest-rate hedging program that helps clients offer longer duration fixed-rate loans, generate fee income, and manage asset and liability exposure.
McLaughlin says her job was made easier in part by the relative strength of PNC, which has $143 billion in assets. As a traditionally conservative bank, PNC had little subprime exposure when the crisis hit.
"We've lost some of our competitors," says McLaughlin. "We were conservative on the credit front, we have a large amount of fee income, so we're not as driven by the cycle, and we were well positioned from an interest-rate standpoint."
McLaughlin has taken advantage of PNC's stability to expand geographically, breaking into 10 new states, including New York and New Jersey. She also capitalized on Wall Street's layoffs to pick up key personnel to fuel her group's expansion.
This kind of growth, however, didn't come from nowhere. Since taking the reins at PNC Capital Markets in 2001, McLaughlin has been rebuilding many of its businesses that had been dormant for years, including municipal bond issuance, derivatives sales and trading, and the financial institution's business.
This sounds like a heavy load, but McLaughlin has a knack for making difficult things seem easy. She's an avid runner who logs four miles, four days per week, and lifts weights or does pilates exercises on the days that she's not running. She can also memorize a piece of music after playing it on the piano a couple of times. To her, the frequent traveling, crisis management and rapid-fire growth rate are nothing to get too frazzled about. "It's fun," says McLaughlin. "It's so active, and it's a challenge figuring out the market and helping clients. I like that."
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