Lines of Business Highlights: General Bank, Capital Management, Wealth Management, Corporate and Investment Banking
Earnings Highlights:
Prior periods not restated | Three Months Ended |
(In millions, except per share data) | | | Dec. 31
2001 | | Sept. 30
2001 | | Dec. 31
2000 |
| | | | | | | |
Earnings | | | | | | | |
Operating earnings(a) | $ | | 799 | | 298 | | 681 |
Diluted earnings
per common share
(Operating earnings) | | | 0.58 | | 0.27 | | 0.69 |
Net income (loss) applicable to common stockholders
(As reported) | | | 730 | | (334) | | 599 |
Diluted earnings per
common share
(As reported) | $ | | 0.54 | | 0.31 | | 0.60 |
Financial ratios (Operating earnings) | | | | | | | |
Return on average common stockholders'
equity | | | 10.77 | % | 5.77 | | 15.36 |
Overhead efficiency ratio | | | 64.74 | | 76.74 | | 63.85 |
Net interest margin | | | 3.81 | | 3.58 | | 3.46 |
Fee and other income as % of total revenue | |
| 45.33 | | 34.42 | | 47.38 |
Cash operating earnings | | | | | | | |
Net income | $ | | 980 | | 395 | | 753 |
Diluted earnings per common share | $ | | 0.71 | | 0.36 | | 0.76 |
Return on average tangible common stockholders' equity | | | 23.56 | % | 11.36 | | 21.55 |
Dividend payout ratio(b) | | | 33.80 | % | 66.67 | | 63.16 |
Overhead efficiency ratio | | | 59.22 | % | 72.86 | | 61.46 |
Asset quality | | | | | | | |
Allowance as % of nonaccrual and restructured loans | | | 195 | % | 202 | | 146 |
Allowance as % of loans, net | | | 1.83 | | 1.79 | | 1.39 |
Net charge-offs as % of average loans, net | | | 0.93 | | 0.73 | | 0.64 |
Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale | | | 1.13 | % | 1.08 | | 1.22 |
| | | | | | | |
(a) Operating earnings are reported net income excluding after-tax net merger-related, restructuring and other charges and gains.
(b) Based on common shares. |
The merger of First Union and the former Wachovia closed on Sept. 1, 2001; therefore fourth quarter 2001 earnings reflect the first full quarter of combined results. The third quarter of 2001 reflects only one month of financial results from the former Wachovia. Because this merger was accounted for as a purchase, previous periods have not been restated.
CHARLOTTE, N.C. – Wachovia Corp. (NYSE:WB) today reported fourth quarter 2001 cash operating earnings of $980 million, or 71 cents per share; operating earnings of $799 million, or 58 cents per share; and net income applicable to common stockholders of $730 million, or 54 cents per share. Cash operating earnings in the fourth quarter of 2001 exclude $63 million after tax in merger-related, restructuring and other charges described below as well as intangibles amortization.
"Strong revenue growth in the fourth quarter of 2001 enabled all four of Wachovia's core businesses to produce solid results for our shareholders. We're seeing the power of the incredible franchise that we have created through the merger of First Union and the former Wachovia as we focus our combined resources on serving our customers," said Ken Thompson, Wachovia president and CEO. "The actions that we took in previous quarters have served us well in a weak economy. We met our earnings goals even with an increase in net charge-offs related to a large credit in the energy services sector. Our merger integration is progressing very well and we believe we are in excellent position to continue to grow core earnings as we work diligently to smoothly combine our two companies."
In 2001, cash operating earnings were $2.8 billion, or $2.50 per share, before $737 million in net after-tax merger-related, restructuring and other charges. After these charges, 2001 earnings were $1.6 billion ($1.45 per share). This compares with $92 million (7 cents per share) in 2000, which included $2.8 billion in net after-tax merger-related, restructuring and other charges.
Lines of Business
General Bank Highlights
Prior periods not restated | Three Months Ended |
(In millions) | | | Dec. 31
2001 | | Sept. 30
2001 | | Dec. 31
2000 |
| | | | | | | |
Total Revenue
(tax-equivalent) | $ | | 2,269 | | 1,757 | | 1,484 |
Provision for loan losses | | | 129 | | 98 | | 74 |
Noninterest expense | | | 1,243 | | 1,025 | | 977 |
Operating Earnings | | | 570 | | 411 | | 286 |
Average loans, net | | | 97,212 | | 76,618 | | 61,735 |
Average core deposits | | | 135,426 | | 110,771 | | 98,184 |
Economic capital | $ | | 5,913 | | 4,468 | | 3,689 |
General Bank financial results continued their very strong momentum, with excellent total revenue growth aided by balance sheet and fee income growth (particularly in mortgage banking) and excellent expense control. Low-cost core deposit growth also was strong. Consumer real estate loan production set a record in the quarter, although commercial loan demand continued to be low in the weak economy. The focus in the General Bank is on providing excellent service to customers throughout the merger integration process, on growing low-cost core deposits, on improving loan spreads and on becoming more efficient.
Capital Management Highlights
Prior periods not restated | Three Months Ended |
(In millions) | | | Dec. 31
2001 | | Sept. 30
2001 | | Dec. 31
2000 |
| | | | | | | |
Total Revenue
(tax-equivalent) | $ | | 810 | | 675 | | 720 |
Provision for loan losses | | | - | | - | | - |
Noninterest expense | | | 669 | | 573 | | 574 |
Operating Earnings | | | 87 | | 66 | | 97 |
Average loans, net | | | 337 | | 269 | | 104 |
Average core deposits | | | 1,505 | | 1,535 | | 2,142 |
Economic capital, average | $ | | 947 | | 846 | | 836 |
The Capital Management Group (CMG) includes asset management and retail brokerage services. CMG's balanced business model of multiple distribution channels and a broad product array generated solid earnings recovery from a difficult third quarter of 2001. Record product sales and increased brokerage production drove the increase in revenues and expenses in the quarter. Annuity sales reached record levels for the third consecutive quarter, and gross fluctuating mutual fund sales also set a record. For the year, combined annuity and mutual fund sales reached $15 billion. Assets under management at Dec. 31, 2001, remained steady with the third quarter of 2001 at $226 billion. Included in assets under management are mutual fund assets, which increased 2 percent from the third quarter of 2001 to $104 billion.
Wealth Management Highlights
Prior periods not restated | Three Months Ended |
(In millions) | | | Dec. 31
2001 | | Sept. 30
2001 | | Dec. 31
2000 |
| | | | | | | |
Total Revenue
(tax-equivalent) | $ | | 228 | | 161 | | 131 |
Provision for loan losses | | | 4 | | 2 | | - |
Noninterest expense | | | 161 | | 114 | | 84 |
Operating Earnings | | | 42 | | 30 | | 31 |
Average loans, net | | | 8,148 | | 5,680 | | 4,319 |
Average core deposits | | | 9,431 | | 7,313 | | 5,737 |
Economic capital, average | $ | | 358 | % | 237 | | 164 |
Wealth Management, which includes private banking, personal trust, investment advisory services, charitable services, financial planning and insurance brokerage, generated strong revenue growth in the quarter with solid increases in loans and deposits combined with a modest margin improvement. The fee-based businesses also performed well. Expense control efforts continued, as did the planning and implementation of the affluent and ultra-high net worth business models. Wealth Management assets under management (included in the Capital Management Group total) were $78 billion at quarter end.
Corporate and Investment
Banking Highlights | Three Months Ended |
(In millions) | | | Dec. 31
2001 | | Sept. 30
2001 | | Dec. 31
2000 |
| | | | | | | |
Total Revenue
(tax-equivalent) | $ | | 975 | | 231 | | 695 |
Provision for loan losses | | | 254 | | 126 | | 124 |
Noninterest expense | | | 552 | | 480 | | 411 |
Operating Earnings | | | 156 | | (206) | | 187 |
Average loans, net | | | 46,265 | | 42,074 | | 41,770 |
Average core deposits | | | 12,710 | | 10,512 | | 9,232 |
Economic capital, average | $ | | 7,512 | | 6,267 | | 6,162 |
The Corporate and Investment Bank experienced strong revenue growth in equity capital markets, loan syndication and high yield debt, but growth was offset by weaker trading results and increased provision expense related to an energy-related credit. Principal investing write-downs amounted to $21 million in the fourth quarter of 2001 compared with $585 million in the previous quarter. In 2001, as part of previously disclosed portfolio management actions, less profitable loan outstandings were reduced by $3 billion. Lower commercial loan demand and transfers to loans held for sale also moderated growth.
Asset Quality
Net charge-offs were 0.93 percent of average net loans in the fourth quarter of 2001 compared with 0.73 percent in the third quarter of 2001, bringing full year net charge-offs to 0.70 percent. The increase in net charge-offs from the third quarter of 2001 was primarily the result of a $97 million charge-off related to an energy services company that filed for bankruptcy in the fourth quarter of 2001. The provision of $381 million exceeded net charge-offs of $378 million by $3 million related to write-downs recorded on loans transferred to loans held for sale. Total nonperforming assets including loans held for sale increased $36 million in the fourth quarter of 2001 to $1.9 billion. The increase included nonperforming assets of $200 million associated with the energy services company and Argentine exposure.
Merger-Related Items
After-tax merger-related, restructuring and other charges in the fourth quarter of 2001 were $63 million and for the full year 2001, $737 million. In addition, earnings in the fourth quarter of 2001 were affected by increased deposit base intangible amortization resulting from finalizing the valuation, as well as other intangibles amortization related to legacy Wachovia customer relationships. The deposit base amortization was $114 million after tax, or 8 cents per share in the fourth quarter of 2001, and $176 million after tax, or 16 cents per share, for full year 2001. Average diluted shares increased by 258 million in the fourth quarter of 2001, which included shares issued for the merger for the full quarter while the third quarter of 2001 included only one month of those shares.
***
Wachovia Corporation (NYSE:WB), created through the Sept. 1, 2001, merger of First Union and Wachovia, had assets of $330 billion at Dec. 31, 2001, and $28 billion in stockholders' equity. Wachovia is a leading provider of financial services throughout the East Coast and the nation. The company operates full-service banking offices under the First Union and Wachovia names in 11 East Coast states and Washington, D.C., and offers full-service brokerage with offices in 49 states and global services through more than 30 international offices. Online banking and brokerage products and services are available through wachovia.com and firstunion.com.
Earnings Conference Call and Supplemental Materials
Wachovia President and CEO Ken Thompson and CFO Bob Kelly will review Wachovia's fourth quarter results in a conference call and audio webcast beginning at 10 a.m. EST today. Supplemental materials relating to the fourth quarter results are available on the Internet at https://wachovia.firstunion.com, and investors are encouraged to access these materials in advance of the conference call.
Webcast Instructions: To gain access to the webcast, which will be "listen-only," go to https://wachovia.firstunion.com and click on the link Wachovia Fourth Quarter Earnings Audio webcast. In order to listen to the webcast, you will need to download Real Player Basic 8.
Teleconference Instructions: The telephone number for the conference call is 888-790-1803 for U.S. callers or 712-271-0076 for international callers. You will be asked to tell the answering coordinator your name and the name of your firm. Mention the conference Access Code: 33345.
Replay: Wednesday, Jan. 23, from noon until 5 p.m. EST on Friday, Feb. 15. The replay telephone number is 402-998-1693.
This news release may contain various forward-looking statements. A discussion of various factors that could cause Wachovia Corporation's actual results to differ materially from those expressed in such forward-looking statements is included in Wachovia's filings with the Securities and Exchange Commission, including its Current Report on Form 8-K dated Jan. 23, 2002.
