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Wachovia Reports Cash Operating Earnings of $395 Million, or 36 Cents Per Share in Third Quarter 2001 34 cents per share in principal investing write-downs and proactive steps taken to strengthen balance sheet Third Quarter 2001 Highlights
The merger of First Union and the former Wachovia closed on Sept. 1, 2001; therefore third quarter 2001 earnings reflect the financial results for one month 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 third quarter 2001 cash operating earnings of $395 million, or 36 cents per share; operating earnings of $298 million, or 27 cents per share; and a net loss of $334 million, or 31 cents per share. Cash operating earnings for the third quarter of 2001 exclude $632 million after tax in merger-related, restructuring and other charges described below as well as intangibles amortization. "I am pleased with the underlying performance in our businesses and the strength of our core earnings, which give us great optimism for the future," said Ken Thompson, Wachovia president and CEO. "While we are not satisfied with the bottom line results, we believe we have taken exactly the right actions to increase reserves and prudently strengthen our balance sheet in a weakening economy. "Despite the weight we all feel from the terrible events of September 11 and the upheaval in the financial markets, our employees have been dedicated in taking care of their customers while at the same time making excellent progress with merger integration. Our commitment to putting our customers first as we proceed with merger integration is evident in the solid loan and deposit growth in our General Bank and our 10th consecutive quarter of improvement in customer service scores. Expense control is a keystone in the new Wachovia and we expect to see further evidence of that in 2002 as merger synergies gain traction," he said. Principal Investing Write-downs Principal investing write-downs in the third quarter of 2001 amounted to $380 million after tax or 34 cents per share. Since the company last reported results for its principal investing portfolio at the end of the second quarter of 2001, both direct and indirect investments in the portfolio have been impaired by the sharp declines in equity market valuations, in line with a 31 percent decline in the NASDAQ composite index and a 15 percent decline in the S&P 500 index in the third quarter of 2001. The third quarter 2001 write-downs related primarily to investments made in 1999 and 2000 largely in the technology and telecom sectors. Merger-Related, Restructuring and Other Charges
September 11-Related Impact Wachovia estimated that the third quarter impact of the September 11 tragedy amounted to $55 million after tax, or 5 cents per share, from lost brokerage and trading income during market closings and trading losses due to spread widening. Also, $20 million in pre-tax costs were included in the third quarter of 2001 related to Wachovia's World Trade Center trust operations. Lines of Business
General Bank financial results continued to show very good momentum, with growth in revenues and low cost core deposits and strong consumer credit production. 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.
Despite the unsettled markets and the continued slide in the broader equity markets, the Capital Management Group achieved record annuity sales and record gross and net fluctuating mutual fund sales. Excluding the impact of the former Wachovia, assets under management increased 4 percent from the third quarter of 2000. Assets under management were $226 billion at September 30, 2001, including $47 billion from the former Wachovia. Continued focus on expense control was evident in the modest decline from the third quarter of 2000, despite the higher expense base associated with the merger.
Wealth Management, which serves affluent and ultra high net worth individuals, is focused on gathering assets and serving clients well. While rate compression had an impact on the value of the loan and deposit portfolios in the Wealth Management segment, sales volumes and lending relationships increased year over year. Retention of both clients and sales professionals remained strong in the third quarter. The increase in expenses year over year reflects the higher expense base due to the Wachovia merger and to incremental investments to drive future performance.
Corporate and Investment Banking was negatively affected by the decline in the equity markets and reduced liquidity for non-public investments, with the $534 million decline in total revenue reflecting the $380 million after-tax write-down in private equity investments in the third quarter of 2001. Fixed income sales and trading and interest rate derivatives continued to perform well due to declining short-term rates. Excluding the impact of one month of expenses related to the former Wachovia, noninterest expense declined 8 percent, largely due to strong cost controls. *** Wachovia Corporation (NYSE:WB), created through the Sept. 1, 2001, merger of First Union and Wachovia with assets of $326 billion as of Sept. 30 and $29 billion in stockholders' equity, is a leading provider of financial services to 19 million retail 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 47 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. |
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