CHARLOTTE, N.C. – Wachovia Corp. (NYSE:WB) today reported fourth quarter 2002 net income available to common stockholders of $891 million, or $0.66 per share. These earnings included $92 million, or $0.06 per share, of after-tax net merger-related and restructuring expenses. Fourth quarter 2002 results also reflected a lower tax provision due primarily to the recognition of the remaining tax benefit related to the company’s loss on its investment in The Money Store. This tax benefit was fully offset by credit and legal actions initiated in the quarter as part of the company’s ongoing efforts to reduce risk.
Full year 2002 net income available to common stockholders was $3.6 billion, or $2.60 per share. Results in 2002 included $243 million, or $0.18 per share, of after-tax net merger-related and restructuring expenses.
“Our strong fourth quarter performance caps a year of superb execution on our goals. We delivered on all of our promises – we expanded distribution, reduced risk, controlled expenses and built capital, which enabled us to regain a double A (Aa3) Moody’s debt rating,” said Ken Thompson, president and CEO. “Our people have much to be proud of – their great teamwork and dedication helped us meet each merger integration milestone on time and on budget. In fact, we exceeded our merger expense efficiency goal by 23 percent. And through a year of new product rollouts, systems conversion and merger integration, our customer service rankings improved for the 15th consecutive quarter and we emerged as best-in-class among the major banks in our footprint.
“Each line of business focused on the fundamentals and showed excellent progress against strong economic headwinds,” he added. “Our balanced business model and broad distribution enabled us in 2002 to grow client assets in mutual funds 9 percent, annuities sales 22 percent, and low-cost core deposits 16 percent despite the very difficult economic environment.
“In addition, we are pleased that our improved performance enabled us to increase the dividend an annualized 8 percent. And we’re particularly proud of generating a total return to stockholders of 19.5 percent in 2002, best among the 50 largest U.S. banks.”
Average loans in the fourth quarter of 2002 were $153 billion, up modestly from the previous quarter and down from the fourth quarter of 2001, reflecting higher consumer loan balances dampened by continued lower corporate loan demand. Average loans declined $9.8 billion from the previous year due to loan sales and securitizations, transfers to loans held for sale, and weak commercial loan demand. Average core deposits increased 2 percent from the previous quarter and 6 percent from the previous year to $171 billion, while average low-cost core deposits increased 4 percent from the previous quarter and 16 percent from the previous year to $124 billion.
Fourth quarter 2002 net charge-offs declined 11 percent from the third quarter of 2002 and 47 percent from the fourth quarter of 2001 to $199 million, or 0.52 percent of average net loans. Total nonperforming assets including loans held for sale declined 7 percent from the third quarter of 2002 and 4 percent from the fourth quarter of 2001 to $1.9 billion in the fourth quarter of 2002. In the full year of 2002, net charge-offs were $1.1 billion, or 0.73 percent of average net loans.
Lines of Business
General Bank
The General Bank includes retail, small business and commercial customers. General Bank revenue increased 4 percent from the third quarter of 2002 and 5 percent from the fourth quarter a year ago. Key factors included solid growth in core deposits and residential mortgage-related revenues, investment sales through the branch system and continued strong debit card sales volume. Expenses rose largely due to higher variable compensation, technology and infrastructure upgrades, and nonrecurring personnel expenses. Average core deposits increased 2 percent from the third quarter of 2002 and 8 percent from the prior year. The increase in average low-cost core deposits was particularly strong at 4 percent from the prior quarter and 21 percent from the prior year. Average loans grew 5 percent from the third quarter of 2002 and 9 percent from the prior year, reflecting strength in consumer real estate-secured products. The General Bank added 87,000 net new checking accounts since December 31, 2001.
Capital Management
The Capital Management Group (CMG) includes asset management and retail brokerage services. CMG grew fourth quarter 2002 earnings 11 percent from third quarter 2002 and 5 percent from the fourth quarter of 2001 due to its broad product array, multi-distribution channels and tight expense controls despite the weak equities markets.
Annuity sales of $1.5 billion (including record bank annuity sales of $1.1 billion) and strong net mutual fund sales of $5.4 billion in the quarter drove revenue growth. Assets under management at December 31, 2002, were a record $232 billion, up 3 percent from December 31, 2001. Included in assets under management are mutual fund assets 0f a record $113 billion. The acquisitions of certain assets of E-Risk Services, LLC, a leading agency provider of management liability insurance, and of J.L. Kaplan Associates, LLC, a privately held investment management firm with $3 billion in assets under management, both closed in the fourth quarter of 2002.
Wealth Management
Wealth Management includes private banking, personal trust, investment advisory services, charitable services, financial planning and insurance brokerage. Revenue increased 7 percent from both the third quarter of 2002 and the fourth quarter of 2001, led by strength in net interest income and insurance commissions, which offset soft investment management fees. Average loans grew 2 percent from the third quarter of 2002 and 11 percent year over year, while average core deposits, led by higher money market and checking account balances, rose 3 percent from the third quarter of 2002 and 10 percent from the fourth quarter of 2001. Expenses increased due to higher variable compensation costs and higher overhead expenses related to increased infrastructure investment. Wealth Management assets under management (included in the CMG total) declined 14 percent from December 31, 2001, to $66 billion at December 31, 2002, primarily due to lower equity market valuations year over year.
Corporate and Investment Bank
While weak market conditions dampened year over year revenue growth in the Corporate and Investment Bank, revenue grew modestly in the fourth quarter of 2002 compared with the previous quarter due to improved investment banking performance that resulted in 7 percent growth in fee income. Higher net principal investing losses more than offset lower trading account losses in the quarter. The increase in expense from the previous quarter reflected severance expenses and higher incentive payments tied to higher revenue. The decline in expense from the fourth quarter of 2001 reflected reductions in personnel. Average loans declined due to weak overall loan demand.
Outlook
“While economic growth in 2003 may continue to be somewhat subdued, we expect some improvement over 2002,” said Thompson. “For our industry, we expect diminished credit problems and modestly better conditions in the financial markets. That bodes well for our customers, and we are well positioned to meet all of their needs. We feel very confident about our prospects in 2003.”
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Wachovia Corporation (NYSE:WB), created through the September 1, 2001, merger of First Union and Wachovia, had assets of $342 billion and stockholders' equity of $32 billion at December 31, 2002. Wachovia is a leading provider of financial services to retail, brokerage and corporate customers 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 of the 50 states. Global services are provided through more than 30 international offices. Online banking and brokerage products and services are available through wachovia.com.
Earnings Conference Call and Supplemental Materials
Wachovia President and CEO Ken Thompson and CFO Bob Kelly will review Wachovia's fourth quarter 2002 results in a conference call and audio webcast beginning at 11 a.m. Eastern Time today. Supplemental materials relating to fourth quarter results are available on the Internet at wachovia.com/investor, 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 wachovia.com/investor and click on the link "Wachovia Fourth Quarter Earnings Audio Webcast." In order to listen to the webcast, you will need to download either Real Player or Media Player.
Teleconference Instructions: The telephone number for the conference call is 1-888-889-1954 for U.S. callers or 212-287-1616 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: Kelly.
Replay: Thursday, January 16 at 2 p.m. through 5 p.m., Friday, February 14. Replay telephone number is 402-280-9967.
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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 January 16, 2003.
