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Wachovia Reports Continued Momentum in 2nd Quarter 2002 Earnings Supplemental Quarterly Earnings Report (PDF)
* Periods prior to the September 1, 2001, merger of First Union and the former Wachovia, which was accounted for as a purchase, have not been restated. CHARLOTTE, N.C. – Wachovia Corp. (NYSE:WB) today reported second quarter 2002 net income available to common stockholders of $862 million, or 63 cents per share; operating earnings of $957 million, or 69 cents per share; and cash operating earnings of $1.1 billion, or 77 cents per share. Operating earnings exclude $89 million, or 6 cents per share, of after-tax net merger-related and restructuring charges. Cash operating earnings exclude deposit base intangible, goodwill and other intangible amortization as well as the net merger-related and restructuring charges. "This was another solid quarter for our company, which reflects the hard work and dedication of our people in serving customers in a difficult economic environment. We're particularly proud of the 13th consecutive quarter of improved customer satisfaction ratings, even as we successfully completed the conversions of brokerage, personal trust, mutual fund and other systems that directly touch our customers," said Ken Thompson, Wachovia president and CEO. "While many employees have been busy learning new policies, products and procedures, we've continued to see outstanding growth in core deposits and, at the same time, record sales of investment products. And we've made excellent progress in building capital and controlling expenses. This is a real tribute to our people and, we believe, to our momentum for the future." Total revenue increased 3 percent from the first quarter of 2002, to $4.6 billion, reflecting an improved margin in the continuing low interest rate environment, lower write-downs in principal investing and higher net securities gains used to offset the impact of credit actions. Lines of Business General Bank The General Bank includes retail, small business and commercial customers. General Bank financial results showed outstanding momentum, with a 4 percent increase in revenue from the first quarter of 2002, and strong growth in core deposits, consumer loan production and record investment sales through the branch system. Average core deposits increased 3 percent from the first quarter of 2002, and the increase in average low-cost core deposits was particularly strong at 6 percent from the prior quarter. Good average loan growth of 3 percent from the first quarter of 2002 reflected strength in consumer real estate-secured products and student lending. Investment production of $1.3 billion was led by $910 million in annuity sales. While strong cost control efforts continued, expenses grew modestly due to the consolidation of Wachovia's home equity and mortgage origination platforms, as well as increased variable incentive expense due to strong sales production. Capital Management The Capital Management Group (CMG) includes asset management and retail brokerage services. These businesses produced stable revenues quarter over quarter as good sales production through multiple distribution channels offset declining equity valuations in difficult markets. Tight expense control was evident. CMG generated 11 percent growth in annuity sales to $1.5 billion (including bank annuity sales of $910 million) and net mutual fund sales of $5.7 billion. Assets under management at June 30, 2002, were stable from March 31, 2002, at $230 billion, despite lower market valuations. Included in assets under management are mutual fund assets, which increased 3 percent from March 31, 2002, to $109 billion. Wealth Management Wealth Management, which includes private banking, personal trust, investment advisory services, charitable services, financial planning and insurance brokerage, generated revenue growth of 3 percent from the first quarter of 2002. Good loan volume, along with stable spreads, contributed to higher net interest income, while strong momentum in insurance brokerage drove an increase in fee income. Expenses declined 1 percent from the first quarter of 2002. Wealth Management assets under management (included in the Capital Management Group total) declined nearly $4 billion from March 31, 2002, to $72 billion at June 30, 2002, due to lower equity market valuations, although net flows were positive. Corporate and Investment Bank Corporate and Investment Bank revenue declined only 1 percent despite weak market conditions that dampened its advisory businesses and fixed income trading results, partially offset by improved performance in loan syndications and lower principal investing write-downs. The increased provision was driven by net charge-offs of $225 million related to Argentina and to the telecommunications sector. Average loans declined 4 percent due to continued portfolio management actions and weak loan demand. Asset Quality Second quarter 2002 net charge-offs of $374 million, or 0.97 percent of average net loans, included the $225 million related to continued deterioration in Argentine credits and the telecommunications sector. The provision of $397 million included $23 million related to write-downs recorded on sales directly out of the loan portfolio. Total nonperforming assets including loans held for sale were $2.1 billion in the second quarter of 2002, an increase of 1 percent from March 31, 2002. The Argentine-related and telecommunications sector loans represented 31 percent of new commercial nonaccrual loans before write-downs. Wachovia Corporation (NYSE:WB), created through the September 1, 2001, merger of First Union and Wachovia, had assets of $325 billion and stockholders' equity of $30 billion at June 30, 2002. Wachovia is a leading provider of financial services to 20 million 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 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 2nd quarter results in a conference call and audio webcast beginning at 10 a.m. EDT today. Supplemental materials relating to the second quarter results are available on the Internet at http://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 http://wachovia.firstunion.com and click on the link "Wachovia Second 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 1-888-566-5777 for U.S. callers or 415-228-5014 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, July 18, at 12 p.m. through 5 p.m. Monday, July 22. Replay telephone number is 402-280-9997. 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 July 18, 2002. |
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