Transcript US Home Market - June 2002

ABN AMRO North America
U.S. Home Market
Analyst Presentation
June 20, 2002
Contents
N. Bobins
Background
Strategy
Retail Business
Mortgage Business
Commercial Business
Managing for Value and Financial Performance
Concluding Remarks
0
2
ABN AMRO Global Network
U.S.
C&CC
WCS
PCAM
Consumer and
Commercial Clients
Wholesale
Client Services
Private Clients and
Asset Management
ABN AMRO,
N.A.
Brazil
The Netherlands
Rest of the World
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3
One Bank/Two Brands
ABN AMRO, N.A. Local Brands
 Trusted, respected, admired
 Relationship focused
Local, hometown banks
 Involved in the community
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4
ABN AMRO Advantages
Relative to U.S. Banks of Comparable Size:
 Superior technology
 International capabilities
 Financial strength
Think Global, Act Local
0
5
Important Component of
ABN AMRO
ABN AMRO Earnings
ABN AMRO Assets
All Other
ABN AMRO
ABN AMRO,
N.A.
61%
82%
39%
18%
Source: ABN AMRO Annual Report, 2001
0
6
Overview of Business Segments
ABN AMRO, N.A.
Profit Contribution by Business Segment
2001
Mortgage 26%
Retail 19%
Commercial 55%
0
7
A History of Growth…
ABN AMRO, N.A. Assets
(Billions)
USD 97
Size
Organic
USD 51
Acquisition USD 46
USD 1
1979
2001
0
8
…and Profits
ABN AMRO, N.A.
U.S. Earnings (Millions)
Profits
USD 742
ABN AMRO,
N.A.
Mgmt.
estimates
at least
one-half
due to
organic
sources
USD 74
USD 8
Industry*
1979
2001
* Source: FDIC
0
9
Current Position in the
United States
The U.S. banking industry consists of 9,000 banks holding
nearly USD 8 trillion in assets
ABN AMRO, N.A.
 Largest U.S. chartered bank owned by a non-US financial institution
 11th largest by assets
 11th largest commercial loan portfolio
 11th largest deposit base
 5th largest mortgage originator
Sources: SNL Securities, Mortgage Bankers Association, FDIC
and American Banker
0
10
The ABN AMRO N.A. Culture
 Relationship driven
 Superior marketing
 Adhere to our regional footprint
 Long-term approach to the market
 Emphasize credit risk management
 Invest in and keep our talent
 Commitment to the communities we serve
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11
Focus on Credit Risk Management
I. Relationship-Driven Front Line
II. Centralized Risk Management
 Long-term relationship model
 Regional and client focus
 High degree of familiarity with our
clients and our markets
 Centralized credit command
– Reports up through Herman
Siegelaar EVP/CCO
 Sophisticated tracking and
monitoring
III. Diversification of Business
 Geographic and product diversity
– Mortgage banking
– Commercial banking
– Asset-based lending
– Leasing
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Long Track Record as a Team
Harry Tempest
Norm Bobins
Scott Heitmann Tom Heagy
Chairman
President and
CEO
Vice Chairman
Vice Chairman
21 year tenure
25 year tenure
22 year tenure
35 years in banking
29 years in banking
35 years in banking
Tom Goldstein Sam Halim
Hill Hammock
H. Siegelaar
CFO
COO
CCO
27 year tenure
32 year tenure
32 years in banking
32 years in banking
15 year tenure
37 years in
financial services
CIO
4 year tenure
29 year tenure
15 years financial
services, 19 finance 32 years in banking
0
13
Commitment to the Community
Charitable Leadership:
Community Development:
 Affordable housing programs
 Financial literacy programs
The LaSalle
Bank Chicago
Marathon:
Employee Volunteerism:
 Non-profit board representation
 Community outreach
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14
Contents
Background
Strategy
N. Bobins
Retail Business
Mortgage Business
Commercial Business
Managing for Value and Financial Performance
Concluding Remarks
0
15
Strategy Driven by Goals
 1979 – ABN acquires LaSalle Bank
Goal: To be the best bank in Chicago
 1990 Goal: To be the best bank in Illinois
 1995 Goal: To widen our scope of influence in the Midwest
 2002 Goal: To be the best middle market bank in the
Midwest
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16
Strategy
2002 Goal
 Leveraging our regional footprint with select acquisitions
and geographic expansion
 Expanding our penetration of additional products and
services across existing client base
 Increasing our market share in our home states and
regional offices
 Continuing to adapt operations to enhance efficiency
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17
A Changing Landscape
… plays right into our
strengths
Opening up of the competitive
landscape…
 Relationship focus
Major local competitors
digesting acquisitions
 Strong regional footprint
 Trusted, well-established brands
 Management changes
 Service through advanced
 Name changes
technology
 Strategy changes
 Long tenure of senior
 Decentralized decision making
management
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18
Regional Focus
A homogeneous market with
a stable base of service and
manufacturing industries
 Population: 57 million
 GDP USD: 1.9 trillion
– Strategically positioned
regional footprint
– Hub and spoke
philosophy
– Platform for significant
regional expansion
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Midwest Market Size
The U.S. Midwest in Perspective
U.S.
Midwest
Western
Europe
GDP (USD trillions)
United States …….…... 9.3
European Union ……... 8.0
Germany ……………… 1.9
U.S. Midwest ……….… 1.9
France …………….…... 1.4
1.3 million km2
1.4 million km2
0
U.K. …………...……...... 1.3
20
National Businesses
National Businesses
Market Size
 Mortgage
 USD 2,100 B asset origination
 Asset-Based Lending
 USD 100+ B assets
 Leasing
 USD 280 B assets
 Global Securitized Trust
 USD 260 M revenue
 CMBS
 USD 70 B asset origination
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Advanced Technology
The LaSalle Bank’s ABN
AMRO Plaza, in the
Chicago Loop
 1.3 million square feet, 41 stories
 Occupancy in 2003
 Key features:
– State-of-the-art facility
– Five locations into one
– Increased security
– Reduced cost
– Strengthens the culture
0
22
Contents
Background
Strategy
S. Heitmann
Retail Business
Mortgage Business
Commercial Business
Managing for Value and Financial Performance
Concluding Remarks
0
23
Retail Business Description
Retail Business Segment
Consumer
Credit
Products
Consumer
Banking
Products
Mass Market
and
Mass Affluent
Consumers
0
Investment
and Annuity
Products
24
A History of Growth
Deposit Growth
USD Billions
600
CAGR 17.8%
500
$48
400
$40
$36
$35
1997
1998
300
$22
200
100
$42
$11
$12
1992
1993
$17
$18
1994
1995
0
1996
0
1999
2000
2001
25
Current Market Position
Illinois
Michigan
– #2 deposit position
– #2 deposit position
– 10% share of deposits
– 18% share of deposits
Source: American Banker, FDIC
0
26
Growth Fueled by Acquisition
Lane Financial
Branch Expansion
Exchange National
390
Number of Branches
Talman
293
Cragin
300
299
287
Savings of America
Comerica-Illinois
114
CNBC
Standard Federal
Michigan National
104
1995 1996 1997 1998 1999 2000 2001
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Management Team
Retail Segment Leadership
Al Harker
Tom Zidar
Jeff Conner
Consumer Banking
Investments and
Insurance
Consumer Lending
and Mortgage
30 year tenure
5 year tenure
14 year tenure
30 years in banking
12 years in banking
32 years in banking
0
28
Retail Strategy
Building Value in the Retail Market
Regional dominance
through relationship
banking
Pursue the Mass
Affluent customer
segment
Building long-term
banking relationships...
…focusing on the most
profitable customers
High economic profit businesses
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29
Why Target Mass Affluent
Customers?
Average Mass Affluent customer is four times
as profitable as an average Mass Market
customer
Over 1.5 million Mass Affluent households in
Illinois and Michigan
This market segment represents a large
opportunity for ABN AMRO, N.A.
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Life Event Customer Offerings
Banking Products
Demand
Deposits
Consumer
Loans
Savings/Time
Deposits
Financial Planning
Education
College
Savings
Home
Ownership
Mutual Funds
Home
Improvement
Retirement
Accounts
Retirement
Annuities
Estate
Management
Insurance
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31
Pursuing the Mass Affluent
Customer
Identified seven distinct Mass Affluent customer segments
Leverage existing retail relationships by targeting retirees,
pre-retirees, established families and small business owners,
many who are already retail clients
Focus on those customer segments that can be influenced
using a consultative selling approach
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Knowledge Management and Data
Mining
Data
Warehouse
Customer
Profiles
Data Mining
Profitability
Matrix
Sets foundation for marketing decisions:
– Customer segmentation
– Targeting
– Positioning of product offering
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Focused Marketing
Product Design and Positioning
Data Mining
Results
Advertising
Channels
Direct
Marketing
Branches
VRU
Agent
Services
Tele-sales
Internet
ATMs
eCare
Mass Affluent Customer
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34
Growth Record
Revenue Growth
Investment
Products
81% growth
Annuities
41% growth
Home Equities
37% growth
0
35
Geographic Expansion
Future Growth Drivers
National Home Equity Lending
Acquisition
Increased Delivery Capacity
de Novo Branch Expansion
Affluent Customer Strategy
Product Development
Increased Market Share
0
36
Contents
Background
Strategy
Retail Business
S. Heitmann
Mortgage Business
Commercial Business
Managing for Value and Financial Performance
Concluding Remarks
0
37
Mortgage Business Description
The U.S. Mortgage Banking Industry
Origination
Servicing
USD 2.1 trillion in assets
USD 5.8 trillion in assets
14% Annual Growth
6% Annual Growth
(62% brokers)
USD 15 billion in industry profits
0
Source: Inside Mortgage Finance; Marakon Analysis
38
Key Structural Differences between
U.S. and European Markets
U.S. Market
European Market
Limited secondary market,
assets kept on books:
Government agencies create
liquid securitization market:
– Credit risk sold off
– Credit risk stays with bank
– Need not be self funded
– Funded via bond issuances
No prepayment penalty:
Prepayment penalty:
– Refinance leads to higher
origination market
– No refinance market and
lower origination volume
Capital requirements are high
Capital requirements are low
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Structural Differences
between U.S. and European Markets
…create significant advantages in the U.S….
– U.S. banks require much less self-funding than Europeans
– U.S. funding instruments are much less expensive
– U.S. credit risks can be sold to investors
– U.S. has a refinance market, boosting origination volumes
…but U.S. banks must manage prepayment option risk
0
40
U.S. Mortgage Market Trends
1
Increased scale economies and narrowing margins are
driving market consolidation
– Product is commoditized and customers more price sensitive
– Technology is lowering cost to serve
2
Staying closer to the customer through Servicing is
becoming a competitive advantage
– Origination market migrating to Internet channel
– Prepayment speeds increasing with each refinance wave
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U.S. Mortgage Market
Keys to Success
Profitability
Growth
– Scale
– Multiple distribution
channels
– Efficiency
– Manage retention
– Prepayment risk
management
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Mortgage Strategy
Building Value in the Mortgage Market
Origination:
Servicing:
Build relationships with
wholesale originators
focused on brokers
Retaining servicing to
create push refinance
and cross-sell market
Gaining competitive advantage …and retaining relationships to
in customer access…
ensure long-term profitability
High economic profit businesses
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43
ABN AMRO, N.A. Market Position
Strategy has allowed ABN AMRO, N.A. to build
substantial position in the market
Origination
Servicing
ANB AMRO, N.A. Rank: #5
Market Share:
ANB AMRO, N.A. Rank:
4.5%
Source: Inside Mortgage Finance. Numbers as of 1Q 02
Market Share:
0
#7
2.7%
44
A History of Growth
National Rank
Mortgage Origination
Growth
#9
#9
1.8%
Market
Share
1.8%
1996
1997
Source:
#8
#8
2.0%
2.2%
1998
1999
0
#6
#6
2.3%
3.9%
2000
2001
#5
4.5%
Today
45
A History of Growth
Mortgage Servicing Growth
National Rank
#10
#15
#18
#13
#8
2.5%
#7
2.7%
2.1%
1.6%
1.3%
1.0%
Market
Share
#31
0.6%
1996
1997
1998
1999
0
2000
2001
Today
46
Management Team
Mortgage Business Leadership
Jeff Conner
Stan Rhodes
Mortgage and
Consumer Lending
CEO,
Mortgage
14 year tenure
32 years in banking
29 year tenure
29 years in banking
Willie Newman
Rich Geary
COO,
Mortgage
Origination
COO,
Mortgage
Servicing
13 year tenure
16 years in banking
28 year tenure
28 years in banking
0
47
Mortgage Origination
Keys to success:
 Distribution channels
 High credit quality
 Scale and low cost base
 Flexible cost structure
 Sales and marketing effort
ABN AMRO, N.A. position:




National network of broker relationships
Advantaged broker support infrastructure with MOAI.com
Advantaged cost position
Branch network sales skills
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Mortgage Servicing
Keys to mortgage servicing:
 Cost structure
 Quality of service
 Customer retention at refinance
 Cross-sell fee products
ABN AMRO, N.A. position:
 Retention ensured by National Lending Center
 Customer profitability warehouse to drive marketing
 Cross-sell to improve customer loyalty
0
49
Mortgage Risk Management
Mortgage Origination Process
• Loan securitized, sold
Mortgage
application
Pipeline
hedged to
expected
fallout
Loan
funded
Hedge
adjusted
Loan
warehoused
Net interest
income
realized
• Credit risk transferred
• Hedge closed, offsets
realized as fee income
• Gain on sale recognized
• Servicing asset (MSR)
booked at market
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Mortgage Risk Management
Mortgage Servicing Process
MSR Value = PV of expected future servicing cash flows
MSR monthly
beginning
balance
+
New
originations
-
Principal
payments
PrePre-payments
payments
MSR month
ending
balance
=
– MSR value depleted by principal payments and prepayments
– Prepayments accelerate when interest rates fall
0
51
Mortgage Risk Management
Origination
Hedges
Servicing
Origination and Servicing are natural hedges against one another
Kept in balance through use of hedge instruments
Hedges adjusted when out of balance
0
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Risk Management in Practice
The U.S. mortgage industry has experienced volatility
over the past 13 quarters...
500
Refinance Origination Volume
(USD Billions)
400
300
200
100
0
Q1
1999
Q2
Q3
Q4
Q1
Q2
Q3
2000
Source:
Q4
Q1
2001
0
Q2
Q3
Q4
Q1
2002
53
Risk Management in Practice
…ABN AMRO, N.A. has successfully managed risk
through the cycle
Originations
MSR
Hedging
Servicing
Q1 Q2 Q3 Q4 Q1 Q2
1999
2000
Q3 Q4 Q1 Q2 Q3 Q4 Q1
2001
2002
0
54
U.S. Mortgage Market Outlook
Short-term:
– Refinance market will soften
– “Purchase originations will be stronger than last
year,” and home sales, which hit new highs in 2001
will do so once again in 2002.
– Fannie Mae chief economist David Berson
Long- term:
– Based on demographic trends, Freddie Mac projects total
U.S. mortgage debt outstanding to double by 2010
0
55
Contents
Background
Strategy
Retail Business
Mortgage Business
N. Bobins
Commercial Business
Managing for Value and Financial Performance
Concluding Remarks
0
56
Commercial Segment
Revenue Contribution
Financial
Institutions 3%
Trust 7%
ABL 14%
Wealth
Mgmt 8%
Leasing 4%
Small
Business 10%
Middle Market 37%
Commercial
Real Estate 17%
0
57
Management Team
Seasoned Commercial Segment Leadership
Larry Richman John Newman
Mike Sharkey
Illinois Middle
Market
Commercial Real
Estate
Asset-Based
Lending
21 year tenure
32 year tenure
18 year tenure
26 years in banking
32 years in banking
24 years in banking
Mark Hoppe
John Lynch
David Rudis
R. Hampton
Michigan Middle
Market and Small
Business
Metro Chicago
and Financial
Institutions
Leasing and
Wealth
Management
Corporate and
Securitized Trust
21 year tenure
28 year tenure
20 year tenure
5 year tenure
25 years in banking
32 years in banking
26 years in banking
31 years in banking
0
58
Key Client Segments
Middle Market
– Companies with sales between USD 50
million and USD 1 billion
Metro/Small
Business
– Companies with sales below USD 50
million
Commercial
Real Estate
– Developers, REITs, operators and
servicers, pension funds
Financial
Institutions
– Full product suite for regional peers
and downstream community banks
0
59
Why Target the Middle Market?
Most attractive corporate market:
– Clients do not have ready access to capital markets
– Limited number of providers
– Clients are relationship driven, not price driven
ABN AMRO, N.A. approach:
– Provide credit at profitable spreads
– Emphasize cross-sales opportunities
– Offer a combination of a broad product line and strong local
market presence
0
60
Middle Market Commercial Banking
Business
Definition
Business Model
Competitive
Advantage
– Commercial clients
with $50MM to $1B
in revenue
– Sell through a
– High-quality
powerful network of
relationship
relationships
managers
– Cross-sell a
comprehensive
suite of financial
services, including
cash management,
foreign exchange,
etc.
– Emphasize
– Ability to customize
consistent
the product
execution, customer
– Capitalize on
knowledge, and
transitional
building the local
challenges facing
brand
our competitors
0
61
Metro/Small Business
Business
Definition
Business Model
– Services emerging
middle market and
small business
clients
– Eight regional
commercial offices
located in the
Chicagoland area
Competitive
Advantage
– Long-standing
presence
– Well-established
brand
– Target clients with
– Serve small business
revenue of less than
market through 125
$50MM
branches
0
62
Commercial Real Estate
Business
Definition
Business Model
A full range of
services, including:
– Relationship
driven
– Interim construction
financing
– Disciplined lending
approach
– Commercial
mortgages
– For-sale housing
– Corporate services
providers
– REITS
– Securitization
– Experienced staff
– Geographic
expansion
Competitive
Advantage
– Unchallenged
leader in Chicago
market
– Prominent position
within the Midwest
– Substantial capital
markets
capabilities
– Interest rate
protection
0
63
Asset-Based Lending
Business
Definition
– Collateral-based
lending
Business Model
Competitive
Advantage
– More than 40 years
– Expands offerings
of experience
and type of clientele
– Extends life cycle
– Higher yielding
assets
– Collateral monitoring
and tight controls
– Achieved scale: #5
market share in the
U.S.
– Established
geographic network
– Diversified portfolio
0
64
Wealth Management
Business
Definition
– Investments
– Financial Planning
– Insurance
– Succession
Planning
– Business Valuation
Business Model
Competitive
Advantage
– Target family
business owners
– Leverages longstanding client
relationships
– Integrate
commercial and
personal wealth
issues
– Enhances client
retention
– Creates “one-stop
shop”
– Work in conjunction
with personal legal
and tax experts
0
65
Financial Institutions
Business
Definition
Business Model
Offers a full range of
correspondent
services, including:
– Call on > 1,000
banks within
regional footprint
– Bank stock loans
– Use technology to
expand service and
reduce costs
– Check clearing
services
– Fed funds purchased
– Trade finance
– Emphasize client
responsiveness
Competitive
Advantage
– 70 years of
experience
– Specialize in bank
stock lending
– Becoming the
Internet
Correspondent
Bank
– Foreign exchange
0
66
Corporate and Institutional Trust
Business
Definition
– Corporate Trust
Services
– Employee Benefit
Service
– Land Trust
– Deferred Exchange
Business Model
Competitive
Advantage
– Sold by Commercial – Superior service
capability
relationship
managers
– Installed client
base
– Initial contact is
heavily sales and
– Augments
marketing driven
economic profit
– Repeat business is
strongly service
driven
0
67
Global Securitized Trust
Business
Definition
Business Model
Comprehensive trust – National business
and collateral services
– Referral driven
– CMBS/RMBS
– Cash Managed
Loans
– CLOs/CBOs
– Document Services
– Repeat business is
strongly service
driven
Competitive
Advantage
– Brand name
– Superior service
capability
– Reputation
– High economic
profit business
- Fewer, larger clients
- Institutional
investors
- Asset managers
0
68
Commercial Performance
Regional Businesses:
Commercial Real Estate
Middle Market
Wealth Management
Small Business
Trust
Financial Institutions
48% growth
32% growth
39% growth
22% growth
16% growth
12% growth
44% Average
Pre-tax Margin
National Businesses:
Leasing
Asset-Based Lending
Global Securitized Trust
37% growth
20% growth
25% growth
0
69
Future Growth
Geographic Expansion
Add Regional Offices
Leverage National Business
Acquisition
Further Penetration of Local Markets
Cross-Selling
One Culture
Increased Market Share
0
70
Contents
Background
Strategy
Retail Business
Mortgage Business
Commercial Business
Managing for Value and Financial Performance T. Goldstein
Concluding Remarks
0
71
Future Growth Drivers
Historically embedded in ABN AMRO, N.A. culture
– Strategy
– Disciplined acquisitions
– Intelligent credit
– Interest rate risk management
– Disciplined pricing
– Performance
0
72
Disciplined Acquisitions
Three-Pronged Approach:
 Fortify position in Michigan and Illinois
 Expand Midwest presence to create dominant position in
a third market
 Broaden product/service offering to customers
0
73
Acquisition Track Record
Assets
Acquisition
Year
LaSalle National
1979
1.0
Lane Financial
1988
1.6
Exchange National
1990
3.2
Talman
1992
5.3
Cragin
1994
2.7
Savings of America
1994
1.6
– 10 acquisitions
(USD B)
Comerica-Illinois
1996
1.3
CNBC
1996
0.8
Standard Federal
1997
16.0
Michigan National
2001
12.0
0
– USD 45 billion in
assets
– Successful track
record of integration:
– Cultural migration
– High cost takeouts
– Short timelines
– Minimal customer
disruptions
– Economic profit
generating acquisitions
74
Managing for Value Mindset
Historically embedded in ABN AMRO, N.A. culture
– Strategy
– Disciplined acquisitions
– Intelligent credit
– Interest rate risk management
– Disciplined pricing
– Performance
0
75
Intelligent Credit
Nonaccrual Loans to Total Loans*
1.8%
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
1Q 01
2Q 01
Illinois
3Q 01
Michigan
4Q 01
Midwest Peer Group
Source: Uniform Bank Performance Report, OCC
*excludes Loans Held for Sale
0
1Q 02
76
Intelligent Credit
Net Charge-offs to Total Loans*
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
1Q 01
2Q 01
Illinois
3Q 01
Michigan
4Q 01
Midwest Peer Group
Source: Uniform Bank Performance Report, OCC
*excludes Loans Held for Sale
0
1Q 02
77
Managing for Value Mindset
Historically embedded in ABN AMRO, N.A. culture
– Strategy
– Disciplined acquisitions
– Intelligent credit
– Interest rate risk management
– Disciplined pricing
– Performance
0
78
Earnings Growth
(USD Millions)
Pro forma: Excludes EAB
742
606
508
432
1998
1999
2000
2001
Source: C&CC U.S. segment reporting (excl. EAB) for 2001, comparable internal
management reporting for prior years
0
79
Earnings Growth
Q1 2001 versus Q1 2002 (USD Millions)
Pro forma: Excludes EAB,
includes MNC prior to acquisition
247
220
MNC
36
184
Q1 2001
Q1 2002
Source: C&CC U.S. segment reporting (excl. EAB, incl. MNC in Q1 2001)
0
80
Return on Common Equity
Peer Normalized Return on Common Equity*
Pro forma: Excludes EAB
19%
14%
1998
15%
1999
16%
16%
2000
2001
Q1 2002
(annualized)
* Common Equity calculated as 7.6% of RWA with corresponding adjustment to Net Interest Income
Source: C&CC U.S. segment reporting (excl. EAB) for 2001 and 2002,
comparable internal management reporting for prior years
0
81
Asset Growth
Period-End Assets (USD Billions)
Pro forma: Excludes EAB
68
67
1998
1999
97
11
86
MNC
74
2000
2001
Source: C&CC U.S. segment reporting (excl. EAB) for 2001, comparable internal
management reporting for prior years
0
82
Fee Income Ratio
Non-interest Income as a Percentage of
Total Net Revenue
Pro forma: Excludes EAB
39%
32%
25%
1998
26%
1999
2000
2001
Source: C&CC U.S. segment reporting (excl. EAB) for 2001, comparable internal
reporting for prior years
0
83
Efficiency Ratio
Q1 2001 vs. Q1 2002
Pro forma: Excludes EAB, includes MNC
prior to acquisition
56%
53%
Q1 2001
Q1 2002
Source: C&CC U.S. segment reporting (excl. EAB, incl. MNC in Q1 2001)
0
84
Reconciliation of Segment vs.
Legal Entity Reporting
C&CC U.S. - Q1 2002
(USD Millions)
NIAC - C&CC Segment Reporting
247.0
FAS 133/MSR Specific
(49.0)
Head Office Accounting Adjs*
(0.4)
Structure Differences
Preferred Dividend
Other SBUs
Net Income - AANA Inc. Legal
(26.6)
13.0
14.2
198.2
* Head Office Accounting Adjustments include differential for Dutch provision,
amortization of security gain/losses and purchase accounting
Source: C&CC U.S. segment reporting; AANA Inc. FRY9-C
0
85
Performance Outlook
The mortgage pipeline began to slow
in March
Mortgage Pipeline
14
5.5%
USD Billions
12
5.3%
10
8
5.1%
6
4.9%
4
4.7%
2
0
4.5%
Jan
'01
Feb
Mar
Apr
May
Jun
Jul
Aug
Pipeline
Sep
Oct
Nov
Dec
Jan
'02
Feb
Mar
10 Yr Bond Rate
Source: C&CC U.S. internal management reporting, Federal Reserve
0
86
Performance Outlook
Starting in 2nd quarter 2001, loan volume plateaued
as a result of economic weakness
Deliberate
MNC portfolio
reduction
Commercial Loans
MNC
acquisition
USD Billions
40
30
20
10
Q1
'99
Q2
'99
Q3
'99
Q4
'99
Q1
'00
Q2
'00
Illinois
Q3
'00
Q4
'00
Q1
'01
Q2
'01
Q4
'01
Q1
'02
Michigan
Source: C&CC U.S. internal management reporting
0
Q3
'01
87
Contents
Background
Strategy
Retail Business
Mortgage Business
Commercial Business
Managing for Value and Financial Performance
Concluding Remarks
N. Bobins
0
88
Retrospect
Themes…
1
Strong and growing presence in the U.S. Midwest with
marketing scale
2
Three businesses with synergistic benefits and operational
scale
3
An experienced and accomplished management team
4
A strong marketing culture with a bottom-line orientation
5
Continued opportunities for growth
6
Strong support from ABN AMRO N.V.
0
89