EX-99.B 3 0003.txt THE PRESENTATION MATERIALS [LOGO OF FIRST UNION] Repositioning for the Future Presentation by Ken Thompson President and Chief Executive Officer June 26, 2000 Cautionary Statement [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- A number of statements we will be making in our presentation and in the accompanying slides will be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements of the Corporation's plans, goals, objectives, expectations, projections, targets, estimates and intentions. These forward-looking statements involve significant risks and uncertainties and are subject to change based on various factors (many of which are beyond the Corporation's control). Factors that could cause the Corporation's actual results to differ materially from such forward-looking statements are set forth in the Corporation's most recent Annual Report on Form 10-K, Current Reports on Form 8-K including its Current Report on Form 8-K, dated June 26, 2000, and Quarterly Reports on Form 10-Q. In addition to the foregoing, a significant portion of the financial information presented has not been prepared based on GAAP and is derived from internal management reporting sources. Overview [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- o 2Q 2000 earnings o Restructuring program o Vision and strategy o New approach toward managing for growth 2Q 2000 Earnings [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Factors Affecting 2Q 2000 Earnings ---------------------------------- External o Interest Rates o Capital Markets o Loan Losses Internal o The Money Store o Auto Finance 2Q 2000 Estimated EPS -------------------------------------------------------------------------------- $0.72 - $0.74 Total EPS o $0.63 - $0.65 o Core Businesses - Capital Management - General Bank - Capital Markets o $0.09 o Balance Sheet Strategies Core Businesses Targeted to Generate Attractive Growth [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Net Income "Normalized" 3-5 year growth rate targets from core businesses Capital Management 15%+ >>> Corporate >>> Target EPS General Bank 4 to 6% >>> growth rate of >>> 10-12% Capital Markets 12 to 15% Comprehensive Strategic Review [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Lines of business closely examined over six months o Restructuring program involves dispositions of various businesses and assets o One-time net restructuring and other charges of an estimated $2.8 billion after tax, of which an estimated $1.8 billion after tax is non-cash* o Divestitures estimated to "free-up" almost $1 billion in net capital deployed toward growth investments or share repurchases o Company will have a sharper focus and a stronger growth platform * Net of an estimated $1 billion in gains from sale of non-core businesses. Strict Evaluation Criteria Governed Decision-Making [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Evaluation Criteria 1. Core vs. non-core businesses 2. Scale vs. non-scale 3. Net income growth potential 4. Risk-adjusted return on capital 5. Impact on credit and market risk 6. Improvement of product economics and product choice Focus on Core Advantages Led to Resource Reallocation [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Business Restructured Strategy The Money Store o Discontinue retail subprime origination o Retain servicing of loans and securitized assets o Servicing operation becomes First Union's home equity loan service center Mortgage o Sell mortgage servicing portfolio and platform o Market third party product for servicing release premium Credit Card o Sell loans and operations o Market third party product for referral fee Non-Strategic Branches o Sell branches in areas where we lack critical mass and growth potential Other Non-Core Business o Streamline and downsize businesses Lines where we lack scale and growth potential (some processing businesses, public finance, etc.) Loan Portfolio o Sell nonperforming and poorly performing loans Securities o Sell various securities Estimated After Tax Restructuring and Other Charges [LOGO OF FIRST UNION] --------------------------------------------------------------------------------
$ Millions Non-cash Reserves Cash charges established charges Cash gains Total -------------------------------------------------------------------------------------------- The Money Store $(1,777) $(620) $ (189) $ $(2,586) First Union Mortgage (86) (86) Corporation Credit card (98) (98) Sale of securities (412) (412) Improve risk profile (362) (362) Sale of businesses 987 987 Other (198) (198) ------------------------------------------------------------- Total $(1,777) $(982) $ (983) $ 987 $(2,755)* =============================================================
* Includes net restructuring charges of $2,061 and other charges of $694. Management's current estimates. Improved Risk Profile [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- o Quality of net income Improved o Growth rate for net income Improved o Credit risk Improved o Liquidity risk Improved o Interest rate risk Improved o Operational risk Improved o Capital ratios - Holding company Well capitalized - Bank Well capitalized Improved Credit Quality [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- o Lowered risk in loan portfolio - Money Store production halted, increased reserves for existing portfolio - Health care NPAs and additional poorly performing loans divested - Credit cards sold - Reserves supplemented by additional provision of $260 million o Improved coverage ratios Estimated Ratios 1Q00 2Q00 --------------------------------------------------- Allowance/Loans 1.30% 1.33% Allowance/NPAs 139% 201% NPAs/Loans 0.93% 0.66% 2Q00 includes the impact of the restructuring program. Restructuring Frees Up Capital [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Additional shares available for repurchase >>>>> 30-35 million if all "freed up" capital >>>>> shares were used for share repurchase Looking Ahead: A New Focus [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Old First Union >>> Restructuring New First Union >>> and New Focus o Rapid growth through >>> o Expand share of customer wallet acquisition >>> o Grow market share across franchise o Product orientation >>> o Focus on customer relationships in distinct segments o Emphasis on self-manufactured >>> o Sell more third party products products o Reliance on balance sheet >>> o Focus on "core" businesses to strategies >>> generate higher earnings growth o Investments focused on >>> o Disciplined and focused achieving scale >>> investment in growth businesses >>> o Strict measures for deploying >>> capital Competitive Advantages Provide Platform for Growth [LOGO OF FIRST UNION] --------------------------------------------------------------------------------
Integrated Integrated Retail Wholesale Capital << Customer >> General Bank << Customer >> Capital Markets Management Strategy Strategy o 6th largest o No. 1 deposit o Middle-market, national share on East growth company broker-dealer Coast orientation with 7,000 registered o 15 million o Strong reps* customers in relationships with attractive 2,700 corporate o 20th largest markets clients mutual fund complex with o Integrated, o Strong and rapidly 42 four- and multi-channel growing principal five-star distribution investing group funds network ($3.3 billion committed) o 4th largest personal trust o Broad product line provider (No. 2 middle market M&A; No. 1 middle market derivatives; No. 5 leveraged loan syndications)
*Pending First Albany acquisition. Targeted Customer Segments Offer Huge Growth Opportunity [LOGO OF FIRST UNION] --------------------------------------------------------------------------------
Target Segments Strategic Thrusts Significant >>>>> High Net Worth o Served by Private Opportunity Income-producing Capital Management Group assets >$1MM o National trust/estate planning services Footprint o Additional trust/estate o 36-38% of all high net planning experts worth and affluent ---------------------------------------------------------- households >>>>> Affluent o Attractive credit and o 28% of small businesses Income-producing investment products assets >$250,000 o Market leading online Current banking/brokerage Penetration o Referrals to Capital o Relationships with Management Group 18-25% of target segments >>>>> ---------------------------------------------------------- o 6-8% share of footprint Emerging Affluent o Packaged financial deposits; 5-7% share of Income-producing solutions investable assets assets >$75,000 o Cross-selling at all customer touch points >>>>> ---------------------------------------------------------- Small Business o Aggregate personal and Small Business business banking and Owners investments o 400 Business Financing Centers o Additional Relationship Managers ----------------------------------------------------------
Capital Markets Will Focus Its Growth Efforts [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Reallocate >>>>> o Expenses will not grow as quickly Resources >>>>> o Expense reductions to fund growth areas o Reduce capital commitment Strategic >>>>> o Leverage off Principal Investing and Private Focus >>>>> Equity Group coverage o Focus on middle-market growth companies o Industry-aligned corporate and investment banking teams Discipined >>>>> o Expand Principal Investing Investments >>>>> o Further develop New Economy activities o Introduce selective new products Core Businesses Targeted to Generate Attractive Growth [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Net Income "Normalized" 3-5 year growth rate targets from core businesses Capital Management 15%+ >>>>> Corporate General Bank 4 to 6% >>>>> Target EPS growth rate of Capital Markets 12 to 15% >>>>> 10-12% Core Businesses Expected to Perform Well [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Return on Equity "Normalized" 3-5 year targets from core businesses Capital Management 40 to 45% >>>>> Corporate Target General Bank 18 to 20% >>>>> ROE of 19-21% Capital Markets 15 to 25% >>>>> Business Mix Will Shift Considerably [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Estimated share of net income from core businesses* (Two pie charts appear here with the following plot points.) Today "Normalized" over 3-5 Years Capital >>>>> Markets Capital 40% Markets 35-40% Capital >>>>> Management Capital 20% Management 30-35% General Bank Loans >>>>> and Deposits General Bank Loans 40% and Deposits 25-30% * Excludes earnings from balance sheet strategies. A New and Talented Leadership Team [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- Role Appointed ------------------------------------------------ Ken Thompson President and CEO 2000 Bob Atwood Chief Financial Officer 1991 (Retiring - search underway) Rob Nimmo Chief Risk Officer 2000 Mark Treanor General Counsel 1999 Tom Wurtz Treasurer 1999 Don McMullen Head, Capital Management Group 1995 Ben Jenkins Head, General Banking Group 1999 Barnes Hauptfuhrer Co-head, Capital Markets Group 2000 Steve Cummings Co-head, Capital Markets Group 2000 David Carroll Head, eCommerce 1999 Enhanced Financial Discipline [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- o RAROC and EVA metrics for investment decisions o More focused and disciplined approach to acquisitions o Explicit charge for use of balance sheet o Re-engineered internal reporting system o Key managers will be held accountable The New First Union [LOGO OF FIRST UNION] -------------------------------------------------------------------------------- o Strong franchise with a powerful distribution network and an attractive customer base o Scale achieved in critical growth areas, especially lucrative Capital Management business o Restructuring plan and strategy designed to create - Higher earnings growth - Better quality earnings - Better use of capital - Improved risk profile - Improved credit quality