James E. Rohr, chairman and chief executive officer of PNC, at one of the company's Baltimore branches.
James E. Rohr, chairman and chief executive officer of PNC, at one of the company's Baltimore branches. (Baltimore Sun photo by Barbara Haddock Taylor)

Just five years ago, PNC Bank had virtually no presence in Baltimore. Today, it is Maryland's third-largest financial institution by deposits, after Bank of America and M&T Bank.

PNC Chairman and Chief Executive Officer James E. Rohr has led the growth of the Pittsburgh-based bank in the Baltimore region, starting with the acquisition of local institutional giant Mercantile Bankshares Corp., which owned the venerable Mercantile-Safe Deposit & Trust Co., in 2006.

Since then, PNC has also opened new branches and has made smaller acquisitions, including taking over the banking services from then-Chevy Chase Bank at Giant Food stores in Maryland, Virginia, Delaware and Washington.

Now the bank has 176 branches and employs 2,500 workers in the greater Maryland market, which includes Baltimore City and its surrounding counties as well as the Eastern Shore and parts of Southern Maryland.

Rohr, 62, was in town last week, cultivating client relationships and meeting with senior executives and employees here.

"I always look forward to coming to Baltimore," Rohr said. "It's a great city."

PNC plans to remain in the city as officials look for a new headquarters when the bank's lease at Hopkins Plaza expires in 2014. That office employs about 410 people.

Rohr sat down with The Baltimore Sun to discuss the bank's Maryland presence, opportunities to expand and new financial regulations affecting banks and customers.

What expansion or growth opportunities do you see in the greater Baltimore market?

We're growing at almost 20 percent a year in Maryland. And it's happened in the last three years. We're adding customers at a record pace. We're cross-selling new products. …

The whole market here, in every business line, is ahead of plan, which is kind of cool. Every business line, whether it's wealth, corporate banking or retail banking, business banking, everyone is ahead of plan.

PNC has been active with acquisitions during the past several years, which includes purchases of Baltimore's Mercantile Bankshares and Washington-based Riggs National Corp. Do you see other opportunities here or elsewhere?

In general, you'll see a lot of continued consolidation in the industry. As a country, we have 7,800 banks. Canada has five. And so, there's a big consolidation effort here.

The most important thing is customer preference. Check writing has gone from 57 percent of the payment business to about 15 percent by the end of this year. So it has declined dramatically, while debit cards is about 35 percent of the business, growing rapidly. You have a big change in the product set and a lot more technology.

Online banking is growing at about 20 to 25 percent, and mobile banking for us at about 45 percent, which is on a smaller basis.

I think you'll see a lot of customer preference change, and the banks that have the competitive products like we do, with Virtual Wallet and other mobile products, are going to able to capture the lion's share of the customers.

Now that you have a few years to reflect on the Mercantile acquisition, do you consider it a success?

It was a tremendous success. It is an absolutely tremendous success.

When we look at [Greater Maryland regional president Louis Cestello] and Lou's team and how they're been able to grow and grow market share here and grow customers, they've done a far better job than we would have expected.

It has worked out extraordinarily well. The combination of Mercantile and Riggs in Washington, D.C., this is a big win for us. You couldn't be any happier in how it has grown.

Given PNC's lease on its downtown Baltimore building expires in 2014, how important is it for the bank to remain in the city?

We're not going anywhere. It's very important. We manage the company with 32 different regional presidents. That local management is critically important. We want the city and people in the region to identify with us in the city.

Keeping management here and decision-making here is key to our execution. If we thought about moving to a different building, it would be a different building here.

How does greater Maryland compare to PNC's other markets?

It's one of the larger ones. We have a lot of different markets. None are the same. Philadelphia and D.C. are bigger. This one is growing faster than some. This is one of our best-performing markets, I would say.

Given new banking regulations under the Dodd-Frank financial reform act are expected to increase costs for banks and possibly cut into their earnings, what does this mean for consumers?

Well, it's going to be more costs.

The Dodd-Frank bill has in excess of 300 rulings and over 100 studies. Each one of which will have additional responsibilities. I think it will cost more money.

From a customer point of view, I think it's going to raise our costs.

The important thing is, one, we needed a systemic regulator. I think that's very positive.

Two, they needed to bring a lot of nonbanks in under the regulatory umbrella. I think that's really a good idea.

Three, we need more capital. And so the banks have raised more capital and reduced the risk. That's a good thing.

So to be clear: You're saying consumers will see their costs go up?

One example is the Durbin amendment required the Federal Reserve, or in other words the government, to set the price on debit interchange, which means swiping of the card.

The banks have been charging somewhere in the neighborhood of 44 cents a swipe, for which they give a lot of service. They take the fraud cost and security.

The way the amendment was written, the Fed could only use incremental costs … and [the] rule was 12 cents an item. That means the debit business, which is 35 percent of the payment process — the largest portion of the payment process — becomes unprofitable for the whole system. Not just large banks, but small banks as well.

So immediately the four largest banks, or shortly thereafter, did away with free checking. And we changed our products, but we still have a free checking product.

It changes the dynamic. When you move $14 billion worth of revenue from the banks and give it to the retailers, you know, that's a lot of money.

There's a bill in the Senate today being considered that would defer the implementation, which is supposed to start in July. [The bill would] study the impact of debit interchange before they go through.


An earlier version of this article had James Rohr's incorrect age. The Baltimore Sun regrets the error.