425 1 form425_92940.txt FIRST UNION CORPORATION Filed by First Union Corporation Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Subject Company: Wachovia Corporation Commission File No. 1-9021 Date: May 1, 2001 This filing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, (i) statements about the benefits of the merger between First Union Corporation and Wachovia Corporation, including future financial and operating results, cost savings, enhanced revenues, and accretion to reported earnings that may be realized from the merger; (ii) statements with respect to First Union's and Wachovia's plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets", "projects" and similar expressions. These statements are based upon the current beliefs and expectations of First Union's and Wachovia's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the risk that the businesses of First Union and Wachovia will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; (3) revenues following the merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the merger on the proposed terms and schedule; (6) the failure of First Union's and Wachovia's stockholders to approve the merger; (7) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (8) the strength of the United States economy in general and the strength of the local economies in which the combined company will conduct operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on the combined company's loan portfolio and allowance for loan losses; (9) changes in the U.S. and foreign legal and regulatory framework; and (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on the combined company's capital markets and asset management activities. Additional factors that could cause First Union's and Wachovia's results to differ materially from those described in the forward-looking statements can be found in First Union's and Wachovia's reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to First Union or Wachovia or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. First Union and Wachovia do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made. The proposed transaction will be submitted to First Union's and Wachovia's stockholders for their consideration, and, on April 26, 2001, First Union filed a registration statement on Form S-4 with the SEC containing a preliminary joint proxy statement/prospectus of First Union and Wachovia and other relevant documents concerning the proposed transaction. Stockholders are urged to read the definitive joint proxy statement/prospectus when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You will be able to obtain a free copy of the registration statement and the joint proxy statement/prospectus, as well as other filings containing information about First Union and Wachovia, at the SEC's Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the SEC filings that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to First Union, Investor Relations, One First Union Center, Charlotte, North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations, 100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397). First Union and Wachovia, and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of First Union and Wachovia in connection with the merger. Information about the directors and executive officers of First Union and their ownership of First Union common stock is set forth in First Union's proxy statement on Schedule 14A, as filed with the SEC on March 13, 2001. Information about the directors and executive officers of Wachovia and their ownership of Wachovia common stock is set forth in Wachovia's proxy statement on Schedule 14A, as filed with the SEC on March 19, 2001. Additional information regarding the interests of those participants may be obtained by reading the definitive joint proxy statement/prospectus regarding the proposed transaction when it becomes available. THE FOLLOWING IS A TRANSCRIPT OF A PRESENTATION HELD ON APRIL 30, 2001. APRIL 30, 2001 PRESENTATION BY BOB KELLY WEBCAST HOST: MORGAN STANLEY >> GOOD MORNING. WELCOME TO THE FIRST UNION PRESENTATION. I'M DAVID HILDER. I'M MORGAN STANLEY'S ANALYST COVERING FIRST UNION. WITH ME IS DIANE MERDIAN WHO COVERS WACHOVIA. SHE'S HERE BECAUSE AS YOU MIGHT HAVE HEARD WACHOVIA AND FIRST UNION HAVE PROPOSED TO MERGE. WE HAVE HERE AND WE ARE DELIGHTED TO HAVE HIM, BOB KELLY, WHO IS THE CHIEF FINANCIAL OFFICER OF FIRST UNION, AND WHO WILL BE THE CHIEF FINANCIAL OFFICER OF THE COMBINED COMPANIES. THIS PRESENTATION IS ACTUALLY GOING TO BE IN THE FORMAT THAT DIANE DESCRIBED AS DIRECTED Q&A, WHICH MEANS THAT DIANE AND I WILL QUESTION BOB. BOB WILL ACTUALLY GIVE A BRIEF PRESENTATION OF, WE'RE TOLD, NO MORE THAN THREE SLIDES BEFORE THE Q&A BEGINS. THE FORMAT, AS I UNDERSTAND IT, IS A LITTLE BIT LIKE LARRY KING, BUT WITH TOUGHER QUESTIONS. UNFORTUNATELY, FIRST UNION'S LAWYERS HAVE TOLD BOB THAT UNLESS I READ THE FOLLOWING STATEMENT, HE CAN'T ANSWER ANY QUESTIONS. IN ORDER TO DO THAT AND BECAUSE WE COULDN'T FIND THE GUY WHO USED TO DO THE FEDERAL EXPRESS COMMERCIAL, I WILL TELL YOU THIS. I REMIND YOU THAT ANY FORWARD-LOOKING STATEMENTS MADE DURING THIS PRESENTATION ARE SUBJECT TO RISKS AND UNCERTAINTIES, AND FACTORS THAT COULD CAUSE THE RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS ARE SET FORTH IN ITS PUBLIC REPORTS FILED WITH THE SEC, AND FIRST UNION FILED A REGISTRATION STATEMENT ON FORM S-4 CONTAINING A JOINT PROXY PROSPECTUS REGARDING ITS PROPOSED MERGER WITH WACHOVIA. THAT DOCUMENT, AS WITH OTHER RELATED DOCUMENTS FILED WITH THE SEC, CONTAINS INFORMATION REGARDING THE INTERESTS OF CERTAIN PARTICIPANTS IN THE PROXY SOLICITATION. THESE DOCUMENTS CAN BE OBTAINED FOR FREE AT THE SEC'S WEBSITE AND FROM FIRST UNION AND WACHOVIA. WITH THAT, WE ARE DELIGHTED -- [ APPLAUSE ] -- TO BRING YOU BOB KELLY. >>Bob: GOOD MORNING, EVERYONE, AND THANK YOU, DIANE AND DAVID. THERE WILL BE A SHORT TEST TO THE CAUTIONARY STATEMENT AT THE END OF THE STATEMENT. WE ONLY HAVE A COUPLE OF SLIDES THIS MORNING BECAUSE I REALLY WANT TO GET INTO THE Q&A. YOU'RE ALL FAMILIAR, I THINK, WITH OUR FIRST QUARTER RESULTS AND FIRST UNION GENERALLY, AND I'M SURE YOU PROBABLY HAVE SEEN THE PRESENTATION GOING OVER THE PROPOSED MERGER BETWEEN WACHOVIA AND OURSELVES. SO JUST IN TERMS OF HIGHLIGHTS, A SHORT OVERVIEW OF THE FIRST QUARTER, JUST AS A REMINDER. WE MET THE MARKET'S EXPECTATIONS OF 62 CENTS ON AN OPERATING BASIS. CORE BUSINESSES SHOW GOOD TRENDS IN A TOUGH MARKET, PARTICULARLY THE RETAIL BANK, AND WE FEEL THAT CAPITAL MARKETS AND CAPITAL MANAGEMENT DID, FRANKLY, BETTER THAN THE MARKET. WE INCREASED OUR RESERVES FOR LOAN LOSSES BY $37 MILLION DURING THE FIRST QUARTER. A GAIN WE RECEIVED WITHIN THE FIRST QUARTER OFFSET THIS INCREASE IN RESERVES. CHARGE-OFFS WERE LOWER THAN THE GUIDANCE WE PROVIDED TO THE STREET. WE ARE AT -- IF YOU RECALL THE GUIDANCE WAS 60 TO 80 BASIS POINTS FOR THE YEAR. WE CAME IN AT 53 BASIS POINTS, WHICH IS ENCOURAGING AT THIS POINT IN THE YEAR. NPAs ROSE ABOUT 4%. WHICH IS PROBABLY BETTER THAN WHAT WE WERE THINKING LATE IN THE FALL, AND WE'RE WORKING HARD ON THAT, AND YOU WILL RECALL OUR STRATEGIC REPOSITIONING LAST JUNE. WE TOOK $7.5 BILLION WORTH OF LOANS AND SECURITIES, MOVED THEM INTO ASSETS HELD FOR SALE, SO THE HIGH POINT WAS $7.5 BILLION AT THE END OF THE FOURTH QUARTER, WE HAD IT DOWN TO $4.3 BILLION, AND THROUGH THE SECURITIZATION OF THE MONEY STORE LOANS, WE'RE DOWN TO ABOUT $700 MILLION AT THE END OF THE FIRST QUARTER SO WE'VE DONE AN AWFUL LOT TO CLEAR UP OUR STRATEGIC REPOSITIONING ASSETS, AS PROMISED, AND WE SHOULD BE ESSENTIALLY DOWN TO ZERO BY THE END OF THE SECOND QUARTER. EXPENSE GROWTH IN THE FOURTH QUARTER - YOU MAY RECALL THAT OUR EXPENSES WERE ACTUALLY DOWN FROM THE THIRD QUARTER ABOUT $180 MILLION - AND EXPENSES WERE UP A SUM TOTAL OF $6 MILLION DURING THE FIRST QUARTER OVER THE FOURTH. I THINK WHAT YOU ARE SEEING EVIDENCE OF IS GREAT EXPENSE MANAGEMENT AT THE COMPANY, BUT WE STILL HAVE AN AWFUL LOT TO DO. I WANT TO GO THE OTHER DIRECTION. THAT'S THE END OF MY PRESENTATION. [ LAUGHTER ] MAYBE I'LL GET SOME HELP. IT'S DEAD. HERE'S SOME HELP. IS THAT WHAT IT DOES? [ LAUGHTER ] THERE WILL BE A SHORT TEST ON THAT LATER, TOO. WE HAVE -- THIS IS A BIT OF A SUMMARY IN TERMS OF WHAT DOES THE NEW WACHOVIA DO FOR EACH OTHER, AND AS YOU KNOW, IT IS A MERGER OF EQUALS. IT'S NOT AN ACQUISITION. IF YOU LOOK TO OUR THREE MAJOR BUSINESS LINES, IT WILL GIVE YOU A SENSE OF HOW WE WOULD SUMMARIZE THE BENEFITS OF THE TRANSACTION. FIRSTLY, INCREASE THE NUMBER ONE RETAIL BANK ON THE EAST COAST OF THE U.S. THE ADVANTAGE THAT WACHOVIA BRINGS TO THE COMPANY BESIDES ITS CUSTOMER BASE IS OUTSTANDING CUSTOMER SERVICE AND A VERY STRONG BRAND NAME. WHAT WE BRING TO THE TABLE - FIRST UNION BRINGS TO THE TABLE - IS OUR DISTRIBUTION AND THE [INAUDIBLE] THAT WE HAVE IN THE SOUTHERN STATES, AS WELL AS IN THE NEW JERSEY AREA. QUITE FRANKLY, IT'S FOR BOTH SIDES. IT TAKES ONE MAJOR COMPETITOR OUT OF A LARGE AND GROWING MARKET, AND THE OTHER FACTOR WHICH IS IMPORTANT TO NOTE IS THAT WE'RE TAKING A VERY MEASURED, CONSERVATIVE APPROACH TO INTEGRATION, SO THREE YEARS TO MAKE SURE, FIRSTLY, THAT OUR CUSTOMERS AND EMPLOYEES GET USED TO THE IDEA THAT THIS IS GOING TO BE A VERY CUSTOMER FRIENDLY MERGER. WE'RE GOING TO TAKE OUR TIME TO DO THINGS RIGHT, UNLIKE CORESTATES IN THE PAST, AND WE CAN TALK ABOUT THAT, IF YOU WISH, AND WE'RE ALSO GOING TO MAKE SURE WE HAVE A BEST OF BOTH APPROACH. WE'RE NOT GOING TO SAY EVERYTHING WE ARE GOING TO DO IS THE FIRST UNION APPROACH, OR EVERYTHING WE'RE GOING TO DO IS THE WACHOVIA APPROACH. WE'RE GOING TO THE DO THE BEST OF BOTH, AND THREE YEARS IS ENOUGH TIME TO ENSURE THAT HAPPENS. IN TERMS OF BROKERAGE AND WEALTH MANAGEMENT, AS YOU'RE PROBABLY AWARE, WE HAVE CLOSE TO 8,400 BROKERS, $96 BILLION IN MUTUAL FUNDS AND TOTAL ASSETS UNDER MANAGEMENT ARE $222 BILLION. WHAT IT DOES FOR THE FIRST UNION SIDE IS IT ADDS 3.5 MILLION CUSTOMERS THAT WE CAN SELL THESE WEALTH MANAGEMENT PRODUCTS. ONE LITTLE STATISTIC I HAVE BEEN USING A LITTLE BIT OVER THE PAST WEEK OR SO IS THE RATIO OF REGISTERED REPS PER BRANCH. IN THE WACHOVIA SIDE, THEY ARE STILL BUILDING THIS CAPABILITY, AND THE FIRST UNION SIDE IS MUCH MORE WELL DEVELOPED. AT THE MOMENT ON THE FIRST UNION SIDE, WE HAVE 1 1/2 SERIES SIX AND SERIES SEVEN PEOPLE PER BRANCH, AND THE WACHOVIA PEOPLE ARE .3. WE SEE A HUGE AMOUNT OF OPPORTUNITY TO SELL MUTUAL FUNDS, BROKERAGE ACCOUNTS AND ANNUITIES TO THE FOLKS AT WACHOVIA, AND WE WILL BE ABLE TO MAINTAIN AND GROW OUR SHARE OF WACHOVIA CUSTOMERS. WE THINK THAT'S A BIG UPSIDE. FRANKLY, THAT'S WHAT FIRST UNION DID, AS WELL, HAVING THE BROKERAGE, WEALTH MANAGEMENT CAPABILITY BACK INTO THE BRANCH NETWORK. FINALLY, IN TERMS OF THE CORPORATE INVESTMENT BANK, WE WILL REMAIN FOCUSED ON THE MIDDLE MARKET. WE DO NOT WANT TO BE A [INAUDIBLE]. WE WANT TO FOCUS ON THE MIDDLE MARKET BEING MID-SIZED COMPANIES. NOT THE FORTUNE 500 COMPANIES. THAT STRATEGY IS UNCHANGED, AND WE WILL FOCUS ON RAROC. IN OTHER WORDS, DOING A BETTER JOB WITH OUR EXISTING CAPITAL VERSUS ONGOING GROWTH. WHAT WACHOVIA BRINGS TO THE TABLE ARE ARGUABLY BETTER CORPORATE, MID-MARKET NAMES THAN THE FIRST UNION SIDE HAS. THEY HAVE VERY STRONG RELATIONSHIPS, ARGUABLY STRONGER THAN OUR OWN, AND THEY BRING PROBABLY THE BEST CASH MANAGEMENT CAPABILITY IN THE COUNTRY TO THE FIRST UNION CUSTOMERS AND TO THE NEW COMPANY. FROM THE FIRST UNION SIDE, OF COURSE, FIRST UNION'S BEEN BUILDING AN INVESTMENT BANKING CAPABILITY AGGRESSIVELY OVER THE PAST FEW YEARS, AND THAT'S SOMETHING THAT THE WACHOVIA SIDE DOES NOT HAVE. MOST NOTABLY, DERIVATIVES, HIGH YIELD, M&As, SECURITIZATION, ET CETERA. WE'RE GOING TO RETURN TO AN ISSUE THAT A LOT OF PEOPLE HAVE BEEN ASKING ABOUT IN THE PAST TWO WEEKS. IT'S MY LAST SLIDE. THAT IS, WHY ISN'T THIS LIKE THE CORESTATES DEAL? LET'S KIND OF REVIEW THE CORESTATES DEAL FOR A SECOND. THAT WAS AN OUT-OF-MARKET DEAL. THAT WAS A 40% PREMIUM. THE FINANCIAL ASSUMPTION IN THE CORESTATES DEAL WAS THAT WE COULD GET OVER 40% EXPENSE SYNERGIES IN THE FIRST YEAR, AND WE'D GET 16% REVENUE SYNERGIES IN THE FIRST YEAR. AND THAT WAS DRIVEN BY THE AMOUNT OF THE PREMIUM, AND IT WAS, OF COURSE, FIVE TIMES, AND EVERYONE KNOWS THE OUTCOME OF THAT AND THAT IS, WE COULDN'T MEET THOSE CHARGES, AND WE LOST A LOT OF CUSTOMERS. THIS IS A COMPLETELY NEW PARADIGM IN DEALS AND IN MERGERS. FIRSTLY, OF COURSE, IT'S MARKET FOR MARKET, VERY LOW PREMIUM. SECOND IS THE LUXURY OF TAKING TIME AND NOT BEING AGGRESSIVE ON THE REVENUE AND EXPENSE SIDE. IT'S IMMEDIATELY ACCRETIVE TO SHAREHOLDERS. THE IRR FOR BOTH IS OVER 20%. WE FEEL EVERY ASSUMPTION IS CONSERVATIVE OR REASONABLE, WHETHER IT BE THE ONE-TIME CHARGE, WHICH IS IN AT ABOUT $1.4 BILLION, YOU'LL RECALL, WHICH IS PRETTY ON-LINE AND PRETTY MUCH ON-LINE WITH THE RATIO THAT YOU SEE IN OTHER DEALS IN TERMS OF ONE-TIME CHARGE AS A PERCENTAGE OF ANNUAL SAVINGS. WE TOOK NO REVENUE SYNERGIES, AND WE JUST SHOWED REVENUE AND SYNERGIES, AS WELL AS REVENUE RUNOFF ON A NET BASIS TO BE ZERO, AND OUR EXPENSE SYNERGIES ARE $890 MILLION, WHICH IS 37% OF WACHOVIA'S COST BASE, BUT IT'S ABOUT 8% OF THE COMBINED COST BASE. WE FEEL THAT'S ACHIEVABLE BECAUSE IT'S IN-MARKET, AND WE THINK THAT WE'LL OUTPERFORM IT. THE DEPOSIT DIVESTITURES ARE MUCH LOWER THAN MOST PEOPLE WOULD EXPECT. WE'RE ESTIMATING ABOUT ANYWHERE FROM 1.5 TO $2 BILLION. WE PROBABLY WILL COME IN AT THE LOW END OF THAT RANGE. THAT'S WHAT WE HOPE. OUR RESERVES WILL BE [INAUDIBLE] AS A RESULT OF THIS MERGER. YOU WILL SEE IN THE PRESENTATION, WE'RE ADDING $450 MILLION TO OUR RESERVES TO GIVE US RESERVES TO LOAN RATIO ABOUT 1.74, 1.75, WHICH IS BETTER THAN THE INDUSTRY AVERAGE, AND IT CERTAINLY GIVES US ABOVE AVERAGE CAPITAL RATIOS AT CLOSING, AS WELL, ON A COMBINED BASIS, BUT IT'S ABOVE THE MEDIAN FOR THE TOP 20 BANKS IN THE UNITED STATES. AND, FINALLY, OF COURSE, IT GIVES US A GREAT CAPABILITY OF GENERATING FREE CAPITAL. IN THE FIRST 12 MONTHS, WE'RE ESTIMATING THAT TO BE $2.5 BILLION, AND THAT WILL BE GROWING AT 15% PER ANNUM. WE THINK THIS IS A VERY, VERY COMPELLING TRANSACTION. THE ASSUMPTIONS ARE REALISTIC, AND WE FEEL THIS IS AN EXCELLENT DEAL FOR BOTH GROUPS OF SHAREHOLDERS. SO THAT IS MY OPENING COMMENTS, AND I'D BE OPEN TO ANSWERING ANY QUESTIONS YOU WOULD HAVE. >>DIANE: WE'RE GOING TO START ON OPERATING REVENUE, IF YOU WOULD, BOB. I'M THINKING MORE BEFORE THE WACHOVIA TRANSACTION, BUT CAN YOU TALK ABOUT HOW THE WACHOVIA TRANSACTION AFFECTS IT? YOU'VE DONE A REALLY GOOD JOB OF WORKING THE EXPENSE SIDE ON THE LAST YEAR, BUT IT'S BEEN A TOUGH REVENUE ENVIRONMENT. IN FACT, REVENUES HAVE COME DOWN A LITTLE FASTER THAN EXPENSES, SO YOU'RE GETTING A RISING EXPENSE REVENUE RATIO. CAN WE SEE POSITIVE OPERATING LEVERAGE IN A TOUGH MARKET? UNDER WHAT CIRCUMSTANCES DO YOU EXPECT TO SEE REAL LEVERAGE, AND DOES THE TRANSACTION PUT THIS OFF? >>Bob: NO. WE HAD GIVEN INDICATIONS IN THE FOURTH QUARTER, YOU WILL RECALL, THAT WE HAD A SMALL AMOUNT OF POSITIVE OPERATING LEVERAGE IN THE FOURTH QUARTER. WE SAID WE EXPECT TO HAVE POSITIVE OPERATING LEVERAGE. THIS YEAR, WE DID NOT HAVE POSITIVE OPERATING LEVERAGE IN THE FIRST QUARTER. MAINLY BECAUSE IF YOU LOOK THROUGH THE NUMBERS, YOU'LL SEE THAT WE HAVE SOME PRINCIPAL INVESTING LOSSES IN THE FIRST QUARTER. THAT DIDN'T HELP IN SPITE OF THE FACT THAT WE HAD GREAT EXPENSE CONTROL. IT IS STILL VERY MUCH A GOAL OF OURS TO HAVE POSITIVE OPERATING LEVERAGE. THE THINGS THAT ARE ENCOURAGING IS THAT THE GENERAL BANK'S EFFICIENCY RATIO ACTUALLY IMPROVES EVERY QUARTER IN THE LAST FIVE QUARTERS, IF YOU LOOK THROUGH THE NUMBERS. THE CHALLENGES, OF COURSE, ARE IN THE BROKERAGE/MUTUAL FUND BUSINESS AND THE CAPITAL MARKETS BUSINESS, AND IT'S VERY HIGHLY DEPENDENT UPON WHAT KIND OF CUSTOMER ACTIVITY WE EXPECT TO SEE FOR THE REST OF THIS YEAR AND NEXT YEAR. WE ARE BRINGING DOWN COSTS AGGRESSIVELY, BUT, FRANKLY, IT WILL DEPEND UPON HOW THE MARKET LOOKS THIS YEAR. AND IF YOU LOOK AT THE BROKERAGE BUSINESS AND THE ASSETS UNDER MANAGEMENT BUSINESS, THE REVENUE GROWTH HASN'T BEEN THERE, WASN'T THERE IN THE FIRST QUARTER, BUT IF YOU TAKE A LOOK AT HOW THAT BUSINESS DID, VIS-A-VIS OUR COMPETITORS, AND THE NUMBERS LOOK PRETTY GOOD. IN FACT, I JUST PULLED A COUPLE LAST WEEK WHICH I WAS LOOKING AT. LOOK AT THE BROKERAGE BUSINESS, FEE INCOME FROM OUR CAPITAL MANAGEMENT GROUP, THE INCREASE VERSUS THE FOURTH QUARTER WAS ZERO PERCENT. IF YOU COMPARE IT TO MERRILL LYNCH'S FEE INCOME, FOR EXAMPLE, THIS IS DOWN 6% AND COMPARED TO SCHWAB'S, SCHWAB'S IS DOWN 8%. IF YOU LOOK AT ASSET MANAGEMENT, T. ROWE PRICE IS DOWN 4%. JANUS WAS DOWN 3%. ASSETS UNDER MANAGEMENT AT FIRST UNION WAS ESSENTIALLY FLAT, T. ROWE PRICE AT 11%. FRANKLIN DOWN 5%. JANUS DOWN 20%. SO IS IT A GOOD MARKET RIGHT NOW IN THE ASSET MANAGEMENT BROKERAGE BUSINESS? NO. ARE WE DOING AS WELL AS OUR COMPETITORS OR PERHAPS A LITTLE BIT BETTER? WE WOULD LIKE TO THINK SO, AND THAT'S WHY WE'VE BEEN ENCOURAGED BY WHAT WE SAW IN THE FIRST QUARTER IN SPITE OF THE TOUGH MARKET. IN THE CAPITAL MARKETS AREA, i.e., THAT'S THE BANKING GROUP, WHAT WE'RE SEEING THERE IS -- WE TOLD PEOPLE UP FRONT IN THE FOURTH QUARTER THAT WE WEREN'T EXPECTING ANY PRINCIPAL INVESTMENT GAINS THIS YEAR, AND WE HAD A FEW HUNDRED MILLIONS WORTH LAST YEAR, AND WE TOLD PEOPLE REVENUES WOULD BE DOWN THIS YEAR. OF COURSE, THEY ARE. WE HAD A SMALL PRINCIPAL INVESTING LOSS IN THE FOURTH AND FIRST QUARTER. THAT IS OKAY BECAUSE WE'VE BEEN VERY SUCCESSFUL AT THIS BUSINESS OVER THE PAST 12 OR 13 YEARS. WE AVERAGE AN IRR OF 43% OVER THE PAST DOZEN YEARS, BUT IT DOES IMPACT THIS YEAR BECAUSE THE LAST TWO YEARS HAVE BEEN FANTASTIC FOR PRINCIPAL INVESTING. THE OTHER FACTOR IS WE HAD A NUMBER OF CROSS-BORDER LEASES THAT WERE VERY PROFITABLE OVER THE PAST COUPLE OF YEARS AND BECAUSE OF THE LEGISLATIVE TAX CHANGES, THE INCOME ON THAT WOULD BE LOWER. SO THE LONG AND THE SHORT OF IT IS, WE'RE GOING TO BE WORKING HARD TO IMPROVE OUR EFFICIENCY RATIO AND OPERATING LEVERAGE. YOU'RE GOING TO SEE IT EASILY IN THE GENERAL BANK GOING FORWARD, AND IT'S GOING TO BE AT LEAST PARTIALLY [INAUDIBLE] UPON THE END MARKETS IN OUR OTHER TWO CORE BUSINESSES. >>David: I WANTED TO ASK A QUESTION ABOUT THE COST SAVING ASSUMPTIONS. >>Bob: RIGHT. >>David: IN YOUR MERGER PRESENTATION, YOU INDICATED THAT YOU EXPECTED TO ACHIEVE ROUGHLY HALF OF THE ULTIMATE LEVEL OF COST SAVINGS IN THE YEAR 2002. >>Bob: RIGHT. >>David: AND YET YOU'RE ALSO TALKING ABOUT NOT CLOSING ANY BRANCHES DURING THE FIRST YEAR AND TELLING EMPLOYEES AND CUSTOMERS THAT YOU'RE GOING TO DO A VERY SLOW INTEGRATION. >>Bob: RIGHT. >>David: HOW IS IT POSSIBLE TO GET HALF OF YOUR ULTIMATE COST SAVINGS IN THE FIRST YEAR WITHOUT MOVING RAPIDLY? >>Bob: THAT'S A GOOD QUESTION. FIRSTLY, WE ARE, INDEED, NOT GOING TO CLOSE ANY BRANCHES THE FIRST YEAR, AND YOU SAW IN OUR FINANCIAL ASSUMPTIONS, WE'RE GOING TO CLOSE APPROXIMATELY 250 TO 300 BRANCHES, AND THE MAJORITY OF THOSE ARE WITHIN A HALF MILE OF EACH OTHER. AND AS LONG AS YOU DO IT SLOWLY, WE DON'T EXPECT TO LOSE CUSTOMERS, AND I CAN GO THROUGH THOSE REASONS LATER. WHERE THE SAVINGS ARE GOING TO OCCUR IS GOING TO BE IN TECHNOLOGY AND HEAD OFFICE AND IN PURCHASING. SO WHEN YOU SEE IN YOUR FINANCIAL ASSUMPTIONS THAT WE'RE GOING TO ACHIEVE 50% IN THE FIRST YEAR, IT'S ACTUALLY 50% IN THE FIRST 16 OR 17 MONTHS. OKAY? BECAUSE WE HAVE THE STUB PERIOD THIS YEAR AS WELL AS NEXT YEAR. SECOND THING YOU SHOULD REALIZE WHEN YOU THINK ABOUT COST SAVINGS IS THAT WHEN YOU THINK OF A TRADITIONAL MERGER OF EQUALS WHERE BOTH ARE ROUGHLY THE SAME SIZE, WACHOVIA IS 30% OF THE COMBINED COMPANY, SO IT'S SMALLER, AND IT HAS NOT BEEN ABLE TO DRIVE THE SORT OF PURCHASING EFFICIENCIES THAT A MUCH LARGER ORGANIZATION LIKE FIRST UNION HAS BEEN ABLE TO. SO WHEN YOU ACTUALLY GO THROUGH -- WHEN WE DID THE DUE DILIGENCE AND YOU GO THROUGH THE VARIOUS FORMS OF PURCHASING, MOST SIGNIFICANTLY LIKE TELEPHONE AND DATA LINE CHARGES, AND IF YOU LOOK AT OUR OPERATING EXPENSE, WE'RE PRETTY COMFORTABLE THAT JUST IN PURCHASING IN THE FIRST YEAR, WE CAN SAVE OVER $100 MILLION A YEAR IN THE FIRST YEAR, AND THE TELEPHONE AND DATA TRANSMISSION CHARGES, WE FEEL THAT WE CAN RENEGOTIATE THOSE OVER THE NEXT COUPLE OF MONTHS IN ANTICIPATION OF CLOSING IN THE THIRD QUARTER AND BRINGING THOSE COSTS DOWN VERY, VERY MATERIALLY. WE ALSO EXPECT WE WILL BE ABLE TO CLOSE A DATA CENTER FAIRLY QUICKLY. THAT'S VERY EXPENSIVE TO RUN, AND THAT WILL BE A BIG SAVINGS, AND PEOPLE ARE ON THIS ISSUE AGGRESSIVELY ALREADY. WE SHOULD BE ABLE TO DO ALL OF THOSE THINGS WITHOUT TOUCHING CUSTOMERS, WHICH IS THE KEY. >>Diane: WOULD YOU TALK A LITTLE BIT ABOUT THE CHANGE IN INFORMATION INTERNALLY AVAILABLE? IF I'M RUNNING ANALYSIS, WHAT SHOULD I KNOW THAT I DIDN'T KNOW ABOUT MY BUSINESS SIX MONTHS AGO? HOW HAVE YOU CHANGED THE ACCOUNTABILITY AND COMPENSATION? WILL THAT CARRY THROUGH TO WACHOVIA? >>Bob: OKAY. WE'VE BEEN PRETTY BUSY OVER THE PAST SIX MONTHS ON TWO ISSUES. ONE BEING MEASUREMENT, AND THE SECOND ONE BEING ACCOUNTABILITY. WE HAD FINANCIAL STATEMENTS, INTERNAL FINANCIAL STATEMENTS, THAT WERE DONE ON A MATRIX BASIS. WE WERE DOUBLE COUNTING REVENUES ALL OVER THE PLACE, AND IF YOU SAW THE BOTTOM LINES, THEY WERE THE TOTAL FOR THE COMPANY, SO ALL OF THE BUSINESSES COULD BE REALLY PROFITABLE, AND A SOLO COMPANY MAY NOT BE. WE DECIDED THAT MAY NOT BE A REAL SMART THING TO DO. SO WE CHANGED OUR METHODOLOGIES ON HOW WE LOOK AT REVENUES AND EXPENSES, SO WE GOT INTO PAYING FEES INTO EACH OF OUR BUSINESSES. WE STARTED DOING THAT IN AUGUST THROUGH TO DECEMBER OF LAST YEAR, SO YOU SEE, WHEN YOU LOOK AT YOUR NUMBERS THAT HAVE BEEN DISCLOSED IN THE FIRST QUARTER, WE HAVE DISCLOSED 11 SEGMENTS. IF YOU ADD THEM ALL UP, YOU'LL SEE THOSE SEGMENTS ACTUALLY COME TO THE BOTTOM LINE OF THE COMPANY, AND IF YOU LOOK AT EACH SEGMENT, WE'VE PRODUCED FOR YOU AN INCOME STATEMENT FOR EACH OF THE 11 SEGMENTS. WE'VE PRODUCED FIVE QUARTERS OF NUMBERS. SO THAT GOES UP. WE'VE PRODUCED RAROCS FOR EACH BUSINESS, PROFITS FOR EACH BUSINESS, AND WE HAVE SOME KEY OPERATING STATISTICS FOR EACH BUSINESS. NOW, FINALLY, WE HAVE THE SAME BASIS THAT WE CAN LOOK AT EACH AND EVERY ONE OF OUR BUSINESSES ON A CONSISTENT BASIS COMPANY-WIDE, WHICH IS SOMETHING WE COULDN'T DO IN THE PAST. NO MATRIX ACCOUNTING. ON TOP OF THAT, WE HAVE STARTED MEETING ALL OF OUR BUSINESSES ON A MONTHLY BASIS AT A HIGH LEVEL TO MAKE SURE THAT WHATEVER THEY PROMISE, THEY DELIVER, AND ON A MORE DETAILED BASIS, WE'RE MEETING EVERY MONDAY MORNING ON AN ONGOING BASIS WITH ONE OF OUR INTERNAL BUSINESSES. WE HAVE ABOUT 30 INTERNALLY, AND WE DISCLOSED 11 EXTERNALLY. TO GO THROUGH THE HISTORY OF THE BUSINESS, WHAT ITS STRATEGIES ARE, STRENGTHS AND WEAKNESSES, VULNERABILITIES, ET CETERA, ET CETERA, AND WE GET A MUCH BETTER UNDERSTANDING IF THOSE ARE THE BUSINESSES WE ACTUALLY WANT TO BE IN, AND WHETHER WE WANT TO MAINTAIN THE CAPITAL, ADD TO THE CAPITAL, REDUCE CAPITAL, OR EVEN SELL THE BUSINESS. AS WELL, IT'S ONE THING TO PRODUCE GREAT NUMBERS, BUT WE WANT PEOPLE TO FEEL THEY'RE ACCOUNTABLE FOR THEM, AND THAT'S SOMETHING THAT ALWAYS HASN'T BEEN THE CASE IN THE PAST. WE ALSO HAD A NUMBER OF COMPENSATION PLANS THAT WERE NOT SHAREHOLDER FRIENDLY. IN FEBRUARY, WE ELIMINATED RSAs AND WENT TO A PURELY OPTION-BASED PROGRAM. WE TOOK OUR BASE SALARIES, AND WE'RE RIGHT-SIZING THOSE TO BE AT AN INDUSTRY AVERAGE VERSUS ABOVE AVERAGE. VARIABLE COMPENSATION IN THE PAST WAS KIND OF A VAGUE CONCEPT IN TERMS OF HOW YOU ACTUALLY GOT YOUR BONUS. BONUSES NOW ARE DRIVEN BY TWO FACTORS AND TWO FACTORS ONLY, AND THAT IS, WHAT WAS OUR GROWTH IN EPS FOR THE YEAR, AND WHAT WAS OUR GROWTH IN PROFIT. BUSINESS UNITS RECOGNIZE THAT IF THEY DON'T IMPROVE THEIR GROWTH IN EARNINGS, THEY DON'T IMPROVE THEIR ECONOMIC PROFIT - IN OTHER WORDS, THEIR EVA CONTRIBUTED, THEY'RE NOT GOING TO GET A BONUS. WE SET UP FOR ALL THE EXECUTIVE TEAMS, MINIMUM SHAREHOLDINGS FOR ALL EXECUTIVES, WHICH IS SOMETHING WE HAVEN'T HAD IN THE PAST, AND THAT IS -- EVERYONE IS COMPLYING WITH THAT EXCEPT FOR A COUPLE OF PEOPLE AT THIS MOMENT, AND THEY WILL BE IN COMPLIANCE AT THE END OF THIS YEAR WHEN THEY'VE BOUGHT THE REQUIRED STOCKHOLDINGS. FOR OUR CEO, KEN THOMPSON, HE'S ALREADY WELL ABOVE HIS BASE. FOR VICE CHAIRMAN, IT'S FOUR TIMES BASE SALARY, AND FOR EVPs, IT'S THREE TIMES BASE. ALL OF THOSE THINGS ARE VERY SHAREHOLDER FRIENDLY, AND EVERYONE KNOWS NOW, IF YOU SUBMIT NUMBERS, YOU'VE GOT TO ACHIEVE THEM. IF YOU DON'T ACHIEVE THEM, THERE'S A COST TO IT. >>Diane: IF I CAN ASK, IF THE WACHOVIA INTEGRATION HAPPENS, WILL IT BE ON THE SAME PLAN IN TERMS OF HAVING BONUSES? >>Bob: THAT WOULD BE MY EXPECTATION. WE HAVEN'T HAD THAT DISCUSSION YET, BUT THAT WOULD BE WHAT I WOULD EXPECT. THEY DO ALREADY CALCULATE RAROCS, BUT THEY DON'T ACTUALLY DISCLOSE IT EXTERNALLY. WE DON'T SEE A LOT OF DIFFERENCES. THEY DO HAVE A BIT OF MATRIX ACCOUNTING, AND WE HOPE TO GET THAT IRONED OUT. WE HAD DETAILED MEETINGS ON FRIDAY IN WINSTON-SALEM ON EXACTLY THIS ISSUE. ALL OF THOSE ISSUES ARE IN THERE QUICKLY, AND IN AN IDEAL WORLD, WHAT I'M HOPING IS THAT WE WILL HAVE LIVE DATA FEEDS BETWEEN BOTH OF OUR COMPANIES, SO WE CAN SHARE INFORMATION AND SEE INFORMATION ON A CONSOLIDATED BASIS A MONTH BEFORE CLOSING. >>David: BOB, IN YOUR MERGER PRESENTATION, AGAIN, YOU TALKED ABOUT GENERATING $2.5 BILLION OF FREE CAPITAL. >>Bob: RIGHT. >>David: AS A RESULT OF THIS MERGER, COULD YOU TALK ABOUT HOW YOU'RE GOING TO DECIDE WHAT TO DO WITH THAT, AND REALLY, IF YOU CAN HANDICAP WHETHER MOST OF THAT WILL BE DIRECTED TOWARD SHARE REPURCHASE, TOWARD ACQUISITIONS OF SOME SORT, AND I HEARD THIS QUESTION A COUPLE OF TIMES LAST NIGHT, TOWARD INCREASING THE DIVIDEND, ESPECIALLY TO THE FORMER WACHOVIA SHAREHOLDERS. >>Bob: RIGHT. LET'S START WITH THE DIVIDEND ISSUE. I THINK EVERYONE IS AWARE THAT WE'RE PAYING A SPECIAL DIVIDEND TO WACHOVIA SHAREHOLDERS OF 48 CENTS. SO YOU KNOW WHAT THAT'S ABOUT, THAT IS ROUGHLY THE AMOUNT OF CASH THAT WOULD BE REQUIRED TO MAKE UP FOR THE DIFFERENCE BETWEEN WACHOVIA'S DIVIDEND AND FIRST UNION'S DIVIDEND FOR ONE YEAR. SO THAT'S ALL THAT WAS ABOUT. YOU PROBABLY SAW IN THE PRESENTATION THAT OUR TARGETED DIVIDEND PAYOUT RATIO IS GOING TO BE 35 TO 40%, AND FIRST UNION IS 36 OR 37% RIGHT NOW, AND WE'LL BE GOING FORWARD WITH THE FIRST UNION DIVIDEND AND DIVIDEND PAYOUT RATIO. OUR EXPECTATION IS AS WE START TO REALIZE SAVINGS AND BUILD EARNINGS, WE WILL INCREASE THE DIVIDEND, AND WE THINK THAT A MID-30s PAYOUT RATIO WOULD BE MORE APPROPRIATE THAN WHAT WACHOVIA HAS AT THE MOMENT, WHICH WOULD TAKE A GOOD DEAL LONGER TO BE ABLE TO START THE DIVIDEND GOING FORWARD. THE ONE YEAR WOULD REALLY HELP THE WACHOVIA SHAREHOLDERS. IN TERMS OF WHAT WE'RE GOING TO DO WITH THE $2.5 BILLION IN CAPITAL, WE HAVE STATED IN THE PAST - THE FIRST UNION PEOPLE HAVE - THAT IT'S GREAT TO BE NUMBER FOUR, FIVE OR SIX BANK IN TERMS OF ASSETS, BUT THAT SHOULD ALSO REQUIRE A VERY STRONG CAPITAL BASE, AND IF YOU GO THROUGH THE NUMBERS FOR THE FIRST UNION SIDE, MOST OF THE CAPITAL RATIOS WERE IN THE THIRD QUARTILE OF THE TOP 20 BANKS, ALTHOUGH THE ASSETS WERE IN THE SECOND QUARTILE. WE STATED A GOAL IN DECEMBER, JANUARY THAT WE WANTED OUR CAPITAL RATIOS TO BE UP IN THE SECOND QUARTILE SOMEWHERE OF THE TOP 20 BANKS. IT'S OUR EXPECTATION THAT THAT CLOSING DATE WILL BE SOMEWHERE AROUND 9th OR 10th, WHICH WILL PUT US UP IN THE SECOND QUARTILE, BUT PERSONALLY AT THIS POINT, I'D LIKE TO SEE THEM JUST A BIT STRONGER AND PUT IT SOMEWHERE IN THE MIDDLE OF THE SECOND QUARTILE, AND I CAN'T TELL YOU WHAT THAT RATIO WOULD BE OR WHAT PERCENTAGE THAT WOULD BE AT THIS POINT, BECAUSE IT WILL DEPEND ON WHAT THE OTHERS ARE DOING WITH THEIR CAPITAL RATIOS, BUT LET'S ASSUME THAT WE CLOSE IN AUGUST-SEPTEMBER SOMETIME, OUR CAPITAL RATIOS WILL BE QUITE STRONG AT THAT POINT, AND BEYOND THAT, I WOULD SAY THAT WE WOULD FAIRLY QUICKLY BE IN A POSITION WHERE WE COULD START BUYING BACK SHARES IF THAT WAS THE BEST USE OF OUR CAPITAL. OUR EXTERNAL AND INTERNAL HURDLE FOR INVESTMENTS FOR ANY ACQUISITION, YOU WANT TO MAKE AT LEAST AN 18% IRR AFTER TAX, AND FROM THE FIRST UNION PERSPECTIVE, THIS PARTICULAR TRANSACTION WITH WACHOVIA IS OVER 20% AND EVEN HIGHER FOR THE WACHOVIA SIDE OF THEIR MERGER WITH FIRST UNION. SECONDLY, ANY INTERNAL EXPANSION HAS TO MEET A HURDLE RATE OF AT LEAST 15%, AND I THINK IT'S FAIR TO SAY, THOUGH, THAT OF THE $2.5 BILLION, WE WON'T BE ABLE TO SPEND THAT MONEY THROUGH ACQUISITIONS OR THROUGH INTERNAL GROWTH, SO MY EXPECTATION IS THAT YOU WILL SEE A COMBINATION OF SHARE BUYBACK, AS WELL AS INTERNAL GROWTH AND ACQUISITIONS, AND WE SHOULD BE ABLE TO GET TO THAT REASONABLY QUICKLY. >>Diane: TWO QUESTIONS POSSIBLY RELATED, POSSIBLY NOT. WOULD YOU TALK ABOUT HOW COMFORTABLE YOU ARE WITH THE WACHOVIA CONSENSUS EARNINGS ESTIMATES THAT YOU USED IN THE PRESENTATION? TWO, IF YOU FIND YOURSELF IN 18 MONTHS SAYING, WE THOUGHT WE COULD GROW OUR EARNINGS AT THIS RATE, BUT INSTEAD, WE WILL TAKE A MORE CONSERVATIVE VIEW AND TARGET EARNINGS FROM 300 BASIS POINTS LOWER, WHAT WOULD IT BE? WOULD IT BE INTEGRATION? WOULD IT BE ENVIRONMENTAL? WOULD IT BE CAPITAL MARKETS? EVERYBODY IN THE INDUSTRY HAS DECIDED GROWTH RATES ARE TOO HIGH? WHAT WOULD DRIVE YOUR NUMBERS DOWN? >>Bob: FIRSTLY -- WHAT WAS THE FIRST PART OF THE QUESTION? >>Diane: CAN WACHOVIA DRIVE -- >>Bob: OKAY. WE BUILT SLIDES TO GIVE YOU AN INDICATION OF THE POTENTIAL EARNINGS POWER OF THE COMBINED COMPANIES, AND WHAT WE DID IS WE LOOKED AT THE FIRST TWO LINES OF OUR EARNINGS ESTIMATES, AND PROJECTIONS. WE TOOK FIRST CALL FOR US AND EXTENDED IT, AND WE TOOK FIRST CALL FOR WACHOVIA AND EXTENDED IT. HOWEVER, WE ADJUSTED THE NUMBERS. YOU'LL RECALL BACK IN THE WACHOVIA PRESENTATION, WHICH THEY DID FOR THEIR ANALYSTS A MONTH OR FIVE WEEKS AGO, THEY SAID GOING FORWARD, AND THERE WAS CONTROVERSY AROUND THIS, THEY EXPECTED EARNINGS GROWTH OF 14% PER ANNUM, AND OBVIOUSLY, THAT'S HIGH. IF YOU GO BACK AND LOOK AT THE NUMBERS, IT'S BECAUSE THEY WERE STARTING FROM A LOW BASE, SO IF YOU TAKE THE 14%, IT'S MORE LIKE 11% IF YOU JUST MOVE IT OUT. FOR THE PURPOSES OF OUR PRESENTATION THAT WE MADE TO THE MARKET SEVERAL WEEKS AGO, WHAT WE DID IS WE TOOK 11% AND TOOK IT DOWN TO 9 TO 10% AND PROJECTED OUTWARD. IN ADDITION, WHEN WE TOOK A LOOK AT THEIR FIRST CALL, THERE WERE A NUMBER OF ANALYSTS THAT HAVE NOT YET ADJUSTED THEIR EXPECTATIONS FOR WHAT THE EARNINGS POTENTIAL OF WACHOVIA WOULD BE IF YOU ACTUALLY TAKE OUT THEIR CREDIT CARD BUSINESS, SO THE FIRST CALL ESTIMATES FOR NEXT YEAR WAS 5.40, 5.45. WE TOOK OUT ALL THE ANALYSTS THAT WERE OBVIOUSLY TOO HIGH, AND THAT TOOK US DOWN TO 5.30, AND THEN WE WENT 5.30 TO 9 TO 10% RATE. WE FEEL PRETTY COMFORTABLE. WE ACTUALLY CHANGED OUR EARNINGS GROWTH OUTLOOK ON A MEDIUM TERM BASIS FOR SEVERAL OF OUR BUSINESSES. THE GENERAL BANK WAS AT 4 TO 6% LAST FALL, WHICH THE COMMENT WAS GEE, MAYBE IT'S APPROPRIATE, MAYBE IT'S NOT, BUT THE REALITY IS, WE ARE PERFORMING IN OUR GENERAL BANK MUCH BETTER THAN WE EVER WOULD HAVE EXPECTED. SERVICE LEVELS ARE ALMOST BEST IN THE INDUSTRY. GALLUP ORGANIZATION ACTUALLY TALKS TO 60,000 OF OUR CUSTOMERS EVERY QUARTER. BEST IN CLASS IN THE U.S. MARKET WAS THEIR SCORING SYSTEM. IT'S 6.4 OUT OF A POSSIBLE 7. WE'RE AT 6.3 NOW. WELL ABOVE THE AVERAGE. OUR TURNOVER RATE IN OUR BRANCHES IS ACTUALLY LOWER THAN INDUSTRY AVERAGE. I'M ALMOST OUT OF TIME. [ BELL RINGING ] >>Diane: YOU'RE OUT OF TIME. >>Bob: THE BOTTOM LINE IS, WE FEEL COMFORTABLE WITH THE RETAIL BANK GROWTH RATE, AND WE INCREASED THEM IN CAPITAL MANAGEMENT, WE STILL THINK IT'S A HIGH-GROWTH BUSINESS, AND CAPITAL MARKETS, OUR GOAL THERE IS NOT TO GROW EARNINGS STRICTLY. OUR GOAL IS TO BE FOCUSED ON INCREASING RAROC AND ECONOMIC PROFITS.