Transcript First Quarter 2003 Review April 17, 2003 Speakers: Henry Meyer Jeff Weeden

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First Quarter 2003 Review
April 17, 2003
Speakers: Henry Meyer
Jeff Weeden
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
FORWARD-LOOKING STATEMENT DISCLOSURE
The conference call and discussion, including related questions and
answers, and presentation materials, contain forward-looking statements
about issues like anticipated second quarter and full-year 2003 earnings,
anticipated level of net loan charge-offs and nonperforming assets and
anticipated improvement in profitability and competitiveness. Forward-looking
statements by their nature are subject to assumptions, risks and
uncertainties. Actual results could differ materially from those contained in or
implied by such forward-looking statements for a variety of factors including:
changes in interest rates; continued weakness in the economy, which could
materially impact credit quality trends and the ability to generate loans; failure
of the capital markets to function consistent with customary levels; delay in or
inability to execute strategic initiatives designed to grow revenues and/or
manage expenses; consummation of significant business combinations or
divestitures; new legal obligations or restrictions or unfavorable resolution of
litigation; further disruption in the economy or the general business climate
as a result of terrorist activities or military actions; and changes in
accounting, tax or regulatory practices or requirements.
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Strategic Overview
 Economy impacts 1Q earnings
• Lower net interest margin
• Pressure on market-sensitive businesses
 Strong expense management
 Continued focus on asset quality
 Business alignment
3
4
Financial Summary - 1Q03
 EPS of $0.51
 Revenues under pressure
 Expense discipline strong
 Average core deposits up
 Net charge-offs and NPLs down
 Repurchased 2 million shares
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Net Interest Income
$ in millions
Investments
Consumer Loans
Commercial Loans
Net Interest Income (TE)
Net Interest Margin (TE)
Average Earning Assets
Net Interest Income (TE)
$75,000
3.93% 3.98% 3.99% 3.98% 3.86%
$71,981
$72,579
$72,083
$72,554
$73,424
1Q02
2Q02
3Q02
4Q02
1Q03
4.0%
$800
$722 $724
$702 $721
$703
$50,000
3.0%
$600
$25,000
$400
2.0%
$200
1.0%
1Q02
2Q02
3Q02
4Q02
1Q03
$0
6
Average Loans
$ in millions
Commercial
Consumer
Exit Portfolios
Auto
Commercial
$63,488
$63,928
$63,486
$62,677
1Q02
2Q02
3Q02
4Q02
$37,140
22,908
$37,088
23,967
$36,497
24,591
$36,367
24,308
2,499
941
2,041
832
1,705
693
1,371
631
$62,845
% Change
1Q03 vs. 1Q02
$36,463
(1.8)%
24,683
7.7
1Q03
1,135
564
(54.6)
(40.1)
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Average Core Deposit Growth
$ in billions
% Change 1Q03 vs.
1Q02
4Q02*
1Q02
4Q02
1Q03
Noninterest Bearing
$8.6
$9.9
$9.8
14%
(6)%
NOW & MMDA
13.4
15.2
16.8
25
43
1.9
2.0
2.0
5
13
13.4
12.2
11.8
(12)
(14)
$37.3
$39.3
$40.4
Savings Deposits
CDs Under 100k
Total Core Deposits
*Annualized
8%
12%
8
Noninterest Income 1Q03 vs. 4Q02
in millions
Noninterest Income 4Q02
Trust & Investment Services
Letter of Credit & Loan Fees
Investment Banking & Capital Markets
Service Charges on Deposit Accounts
All other-net
Total
Noninterest Income 1Q03
$446
(10)
(10)
( 8)
( 7)
(14)
(49)
$397
9
Noninterest Expense 1Q03 vs. 4Q02
in millions
Noninterest Expense 4Q02 $668
Personnel
Marketing
Professional Fees
All other- net
Total
Noninterest Expense 1Q03 $657
9
(8)
(4)
(8)
(11)
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Net Charge-offs by Loan Type
in millions
1Q02
2Q02
3Q02
4Q02
1Q03
$69
$76
$84
$84
$70
67
59
51
63
60
136
135
135
147
130
70
68
50
39
31
$206
$203
$185
$186
$161
Continuing Portfolio
Commercial
Consumer
Run-off Portfolio &
Loan Sales
Total Net C/O
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Asset Quality Indicators
$ in millions
1Q02
2Q02
3Q02
4Q02
1Q03
Nonperforming Loans
to EOP Loans
$973
1.52%
$957
1.50%
$987
1.57%
$943
1.51%
$904
1.44%
Nonperforming Assets
to EOP Loans + OREO
$1,012
1.58%
$995
1.56%
$1,017
1.61%
$993
1.59%
$968
1.54%
Net C/O
to Average Loans
$206
1.32%
$203
1.27%
$185
1.16%
$186
1.18%
$161
1.04%
Allowance
to Total Loans
to Nonperforming Loans
$1,607
2.51%
165%
$1,539
2.41%
161%
$1,489
2.37%
151%
$1,452
2.32%
154%
$1,421
2.27%
157%
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Run-Off Loan Portfolio &
Nonreplenished Allowance
in millions
1Q02
Commitments
2Q02
3Q02 4Q02
$1,532 $1,143 $1,005
1Q03
$940
$766
Outstandings
941
724
662
599
496
Allowance for
Loan Losses
205
137
87
48
17
NPLs
208
132
91
85
58
Nonperforming Loans- Flow
Analysis
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$ in millions
NPLs beginning of period
Loans placed on
nonaccrual status
Charge-offs
Loans sold
Payments
Transfers to OREO
Loans returned to
accrual status
Acquisition
NPLs end of period
1Q02
2Q02
3Q02
4Q02
1Q03
$910
$973
$957
$987
$943
294
(206)
-(22)
(3)
254
(203)
(18)
(49)
--
281
(185)
(25)
(41)
--
339
(186)
(36)
(149)
--
237
(161)
(21)
(75)
(19)
---
---
---
(13)
1
---
$973
$957
$987
$943
$904
Total Revenue (TE) by Line of
Business
$ in millions
1Q02
1Q03
Investment
Management
Services Corporate &
Investment
18%
Banking
35%
Consumer
Banking
47%
Investment
Management
Services Corporate &
Investment
17%
Banking
34%
Consumer
Banking
49%
Change
1Q02
Retail Banking
$ 311
Small Business
90
Consumer Finance
150
Corporate Banking
249
Real Estate Capital
90
Equipment Finance
66
Investment Mgmt Services 213
1Q03
$ 320
94
150
234
84
71
192
$
$ 9
4
(15)
( 6)
5
( 21)
%
3%
4
(6)
(7)
8
(10)
14
Net Income by Line of Business
$ in millions
1Q02
1Q03
Investment
Management
Services
11%
Corporate &
Investment
Consumer
Banking
Banking
52%
37%
Investment
Management
Services
9% Corporate &
Investment
Consumer
Banking
Banking
48%
43%
Change
1Q02
Retail Banking
$ 54
Small Business
21
Consumer Finance
6
Corporate Banking
59
Real Estate Capital
36
Equipment Finance
19
Investment Mgmt Services 23
1Q03
$ 62
22
12
51
30
25
20
$
$ 8
1
6
(8)
(6)
6
(3)
%
15%
5
100
(14)
(17)
32
(13)
15
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Tangible Equity to Tangible Assets
6.62%
6.57%
1Q02
6.69%
6.73%
2Q02
6.73%
6.71%
6.63%
3Q02
6.71%
6.54%
4Q02
KEY
Peer Average - S& P 500 Banks Index
1Q03
2003 Outlook
 Revenue – challenging environment
• Net interest margin pressure
• Pressure on market-sensitive businesses
 Expense – well controlled
 Asset Quality – stable to improving
 EPS: $2.15 - $2.30
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