<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JULY 15, 1999
BANKBOSTON CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 1-6522 04-2471221
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 434-2200
================================================================================
<PAGE>
-2-
ITEM 5. OTHER EVENTS.
- ----------------------
On July 15, 1999, BankBoston Corporation (the Corporation) issued a press
release announcing its earnings for the quarter ended June 30, 1999. The
financial information that is included herewith as Exhibit 99(a) was included in
the Corporation's press release and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
- -------------------------------------------
(c) Exhibits.
99(a) Financial information included in the Corporation's Press Release dated
July 15, 1999.
<PAGE>
-3-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BANKBOSTON CORPORATION
Dated: July 16, 1999 /s/ Robert T. Jefferson
-------------------------
Robert T. Jefferson
Comptroller
<PAGE>
EXHIBIT 99 (A)
BANKBOSTON REPORTS SECOND QUARTER NET INCOME
OF $250 MILLION OR $.83 PER SHARE
11% GROWTH IN EARNINGS PER SHARE FROM FIRST QUARTER
BOSTON, July 15, 1999 -- BankBoston Corporation (NYSE: BKB) reported today
second quarter net income of $250 million, or $.83 per common share on a diluted
basis. This compares with $223 million, or $.75 per share, in the first quarter
of 1999 and $242 million, or $.80 per share, in the second quarter of 1998.
Net income for the first half of 1999 was $473 million, or $1.58 per share,
compared with net income for the first half of 1998 of $480 million, or $1.58
per share.
Highlights were as follows (current quarter amounts shown for total
revenues and operating income exclude business sale gains and valuation
writedowns related to the transfer of commercial loans into an accelerated
disposition portfolio):
. Revenues, on a fully taxable equivalent basis, were $1,371 million,
compared with $1,234 million in the prior quarter and $1,102 million
in the second quarter of 1998. The growth from prior periods
reflected increases from several businesses, including a record
quarter from Robertson Stephens;
. Operating income (pre-tax income before provision for credit losses),
on a fully taxable equivalent basis, was $472 million in the second
quarter, compared with $428 million in the prior quarter and $455
million in the second quarter of 1998;
. The Corporation's Brazilian and Argentine operations continued their
strong performance despite a difficult economic environment and
together they reported an increase of approximately 50% in net income
this year compared with the first half of 1998;
. Return on average common equity was 19.92% in the second quarter,
compared with 18.54% in the prior quarter and 20.70% in the second
quarter of 1998;
. Return on average assets was 1.25% in the second quarter, compared
with 1.19% in the prior quarter and 1.36% in the second quarter of
1998;
. Nonaccrual loans and OREO totaled $386 million at June 30, 1999,
compared with $382 million at March 31, 1999 and June 30, 1998;
. The provision for credit losses was $95 million in the second quarter,
compared with $70 million in the prior quarter and $60 million in the
second quarter of 1998. Net credit losses were $61 million in the
current quarter, which represented a $5 million decline from the first
quarter. This decline included: (a) higher recoveries of $45 million,
which mainly resulted from a partial insurance recovery related to
international private banking loans that had been charged off in the
first quarter of 1998, and (b) higher chargeoffs of $40 million, which
included the transfer of commercial loans into an accelerated
disposition portfolio. Net credit losses in the second quarter of
1998 were $51 million. The reserve for credit losses grew to 1.89% of
outstanding loans and leases at June 30, 1999, compared with 1.77% at
March 31, 1999 and 1.70% at June 30, 1998;
. The second quarter included a gain of $50 million from the sale of the
Corporation's minority interest in Partners First (a credit card
company) and valuation writedowns to noninterest income of $25 million
resulting from the aforementioned transfer of commercial loans into an
accelerated disposition portfolio.
1
<PAGE>
NONINTEREST INCOME
The components of noninterest income are as follows:
<TABLE>
<CAPTION>
First Second Quarter Six Months
Quarter ---------------- -----------------
1999 (in millions) 1999 1998 Change 1999 1998 Change
- --------- ------ ------ ------- ------- ------ -------
<C> <S> <C> <C> <C> <C> <C> <C>
$ 334 Financial service fees and commissions $ 456 $ 195 $261 $ 789 $ 360 $ 429
34 Net equity and mezzanine profits 26 84 (58) 59 136 (77)
33 Mutual fund fees 35 32 3 67 62 5
39 Personal trust fees 41 41 0 81 82 ( 1)
7 Other trust and agency fees 6 9 ( 3) 13 17 ( 4)
39 Trading profits and commissions 41 (4) 45 80 30 50
45 Net foreign exchange profits 37 32 5 82 61 21
(2) Securities gains/(losses), net (3) 11 (14) (5) 36 (41)
66 Other income 48 57 ( 9) 116 97 19
----- ----- ----- ---- ------ ------ -----
595 Subtotal 687 457 230 1,282 881 401
0 Gain on sale of businesses 50 0 50 50 165 (115)
0 Valuation writedowns: commercial loans transferred (25) 0 (25) (25) 0 (25)
into an accelerated disposition portfolio
----- ----- ----- ---- ------ ------ -----
$ 595 Total $ 712 $ 457 $255 $1,307 $1,046 $ 261
===== ===== ===== ==== ====== ====== =====
</TABLE>
. The significant growth in financial service fees and commissions is
detailed below.
. Equity and mezzanine profits declined in all comparisons mainly due to
a lower level of sales activity. At June 30, 1999, the Private Equity
portfolio had a carrying value of $1.5 billion compared with $1.2
billion at June 30, 1998.
. Mutual fund fees improved in all comparisons due to a higher level of
fees from Brazil, Argentina and international private banking. The
Corporation remains among the top mutual fund providers in Brazil and
Argentina at June 30, 1999, ranking fifth in Brazil with assets under
management of $4.6 billion and first in Argentina with assets under
management of $1.7 billion.
. The improvement in trading profits and commissions from all prior
periods was due, in part, to an increase in profits from Robertson
Stephens, which was acquired by the Corporation during the third
quarter of 1998. Also contributing to the improvement in the prior
year comparisons were profits earned during 1999 by the Boston-based
emerging markets trading unit compared with losses incurred during
1998.
. Foreign exchange profits were up in both prior year comparisons as the
Corporation's Boston-based business benefited from a greater volume of
customer transactions due, in part, to volatile market conditions in
1999. Higher profits from the foreign exchange businesses in Chile
and Mexico also contributed to the increases. Lower market volatility
during the second quarter of 1999 resulted in a decline in profits
from the high levels posted in the first quarter by the Boston-based
business and Argentina.
. Net securities losses were recorded in the current year periods while
net gains, which were due to stronger domestic and international
markets, were recorded in 1998.
. The change in other income in the first quarter and six month
comparisons was affected by gains that arose in the first quarter of
1999 from currency positions maintained in Brazil, as the Brazilian
government devalued its currency by allowing it to float freely
against the U.S. dollar. All comparisons of other income were
affected by higher levels of earnings from minority owned
subsidiaries; increased revenue from investments in bank owned life
insurance policies (largely offset by the funding cost for the
investment that was included in net interest revenue); and the
recognition of translation losses in the second quarter of 1999, which
had previously been included in the translation component of equity.
In addition, the prior year comparisons reflected the impact of a gain
from the second quarter of 1998 sale of the Corporation's minority
interest in a Mexican pension company.
<PAGE>
. During the second quarter of 1999, the Corporation recorded a $50
million gain in connection with the sale of its minority interest in
Partners First (a credit card company) and also recorded valuation
writedowns of $25 million from the transfer of commercial loans into
an accelerated disposition portfolio. During the first quarter of
1998, the Corporation recorded a gain of $165 million related to the
sale of its 26% ownership interest in HomeSide Inc., a mortgage
banking company.
The components of financial service fees and commissions are as follows:
<TABLE>
<CAPTION>
First
Quarter Second Quarter Six Months
- --------- -------------- --------------
1999 (in millions) 1999 1998 Change 1999 1998 Change
- --------- ----- ----- ------ ----- ----- ------
<C> <S> <C> <C> <C> <C> <C> <C>
$ 80 Deposit and electronic banking fees $ 94 $ 76 $ 18 $ 174 $ 146 $ 28
20 Letters of credit and acceptance fees 19 19 0 39 38 1
18 Other loan-related fees 19 17 2 37 31 6
21 Credit card fees 23 12 11 44 22 22
28 Syndication and agent fees 26 20 6 54 35 19
60 Underwriting fees 89 10 79 149 16 133
55 Brokerage fees and commissions 74 3 71 129 6 123
20 Advisory fees 72 11 61 91 16 75
32 Other 40 27 13 72 50 22
----- ----- ----- ---- ----- ----- ----
$ 334 Total $ 456 $ 195 $261 $ 789 $ 360 $429
===== ===== ===== ==== ===== ===== ====
</TABLE>
. Deposit and electronic banking fees improved in all comparisons due
mainly to an increase in domestic electronic banking fees, as well as
higher fees from Argentina and Brazil.
. The increase in credit card fees from the first quarter is mainly due
to higher fees from Argentina and Brazil. Compared with prior year
periods, the growth was mainly due to higher fees from Brazil and
Uruguay. The latter was affected by the acquisition of OCA (a credit
card and consumer finance company in Uruguay) during 1998.
. Syndication and agent fees increased in the prior year comparisons due
to a higher level of activity.
. The significant increase in underwriting, brokerage and advisory fees
in all comparisons relates to growth from Robertson Stephens, an
investment banking company acquired by the Corporation during the
third quarter of 1998. Business volumes have been very strong during
the first half of 1999, particularly in the second quarter.
. Other financial service fees improved in all comparisons due, in part,
to a higher level of fees from Argentina and Brazil.
<PAGE>
NET INTEREST REVENUE
Net interest revenue, on a fully taxable equivalent basis, was $684 million
for the second quarter of 1999, compared with $639 million in the prior quarter
and $645 million in the second quarter of 1998. Net interest margin was 4.03%
for the second and first quarters of 1999, compared with 4.17% in the second
quarter of last year. For the first half of 1999, net interest revenue on a
fully taxable equivalent basis was $1,324 million, compared with $1,252 million
in the first half of 1998. Net interest margin was 4.03% for the first half of
1999, compared with 4.12% for the first half of 1998.
The $45 million increase in net interest revenue from the prior quarter was
due to (a) an increase from the Private Equity business due to a higher level of
dividends, (b) an increase from Brazil due, in part, to wider spreads and the
absence of a first quarter charge related to fiscal reforms that were passed by
the Brazilian government, including certain tax measures and (c) wider spreads
from Argentina. All of these factors also had a positive impact on net interest
margin. In addition, one more day in the second quarter accrual period
contributed to the improvement in net interest revenue. Overall, net interest
margin was flat with the first quarter as the improvements discussed above were
offset by the impact of a $2.5 billion increase in the average balance of
liquid, lower-yielding assets in the Corporation's Section 20 subsidiary, needed
to support a much higher level of activity in Robertson Stephens.
Compared with prior year periods, net interest revenue improved while net
interest margin declined. The increase in net interest revenue was mainly
driven by Argentina, which benefited from wider spreads and an increase in
average earning assets of approximately $1 billion. The latter reflected
expansion activities, including the acquisition of Deutsche Bank Argentina and
the opening of new branches. In addition, the net interest revenue comparisons
also benefited from last year's acquisition of OCA and higher domestic loan
fees. Partially offsetting the improvement in the six month comparison and
contributing to the decline in net interest margin was the absence of net
interest revenue from the national credit card business, which was contributed
into a joint venture during the first quarter of 1998, and the impact of funding
costs associated with an investment in bank owned life insurance policies. The
major factor behind the decline in net interest margin in both comparisons was a
higher level of liquid, lower-yielding assets in the Corporation's Section 20
subsidiary to support the investment banking activities of Robertson Stephens,
which was acquired by the Corporation during the third quarter of 1998. Average
earning assets from the Section 20 subsidiary grew approximately $6.5 billion in
the quarterly comparison and $5.5 billion in the six month comparison. This
more than offset net interest margin improvements posted by Argentina and
Brazil, as well as increases attributable to the OCA acquisition and higher
domestic loan fees.
<PAGE>
NONINTEREST EXPENSE
The components of noninterest expense are as follows:
<TABLE>
<CAPTION>
First
Quarter Second Quarter Six Months
- --------- -------------- ----------------
1999 (in millions) 1999 1998 Change 1999 1998 Change
- --------- ----- ----- ------ ------ ------ ------
<C> <S> <C> <C> <C> <C> <C> <C>
$ 473 Employee costs $ 547 $ 368 $179 $1,021 $ 722 $299
109 Occupancy & equipment 113 96 17 221 190 31
27 Professional fees 25 22 3 52 46 6
25 Advertising and public relations 32 32 0 56 54 2
35 Communications 37 31 6 72 61 11
13 Goodwill amortization 13 8 5 25 16 9
124 Other 132 90 42 258 219 39
----- ----- ----- ---- ------ ------ ----
$ 806 Total $ 899 $ 647 $252 $1,705 $1,308 $397
===== ===== ===== ==== ====== ====== ====
</TABLE>
Below is an analysis of the changes in noninterest expense from the first
quarter (dollars in millions):
<TABLE>
- ------------------------------------------------------------------------------------------------------
<S> <C>
Noninterest expense: first quarter 1999 $806
- ------------------------------------------------------------------------------------------------------
. Increase in direct expenses from wholesale banking, mainly Robertson Stephens 88
- ------------------------------------------------------------------------------------------------------
. Other factors, net (mainly advertising) 5
----
- ------------------------------------------------------------------------------------------------------
Noninterest expense: second quarter 1999 $899
====
- ------------------------------------------------------------------------------------------------------
</TABLE>
Noninterest expense increased $93 million from the first quarter of 1999
due mainly to higher expenses in the Wholesale Bank. This reflects an increase
in incentive compensation which corresponds to a significantly higher level of
revenue, principally from investment banking activities in Robertson Stephens.
Below is an analysis of the changes in noninterest expense from prior year
periods (dollars in millions):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Q2 6 MOS.
--------- -----------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Noninterest expense: 1998 period $647 $1,308
- -------------------------------------------------------------------------------------------------------------------------
. Increase in direct expenses from wholesale banking, mainly Robertson Stephens 206 338
- -------------------------------------------------------------------------------------------------------------------------
. Increase in direct expenses from Brazil and Southern Cone (Argentina, Uruguay, Chile) 32 80
- -------------------------------------------------------------------------------------------------------------------------
. Absence of Q1'98 charges related to the Regional Bank, as well as the realignments of the
European and the private banking businesses 0 (48)
- -------------------------------------------------------------------------------------------------------------------------
. Other factors, net 14 27
---- ------
- -------------------------------------------------------------------------------------------------------------------------
Noninterest expense: 1999 period $899 $1,705
==== ======
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
As noted above, the vast majority of the increase in noninterest expense
from the 1998 periods mainly reflects expansion activities by the Corporation
including the acquisition of Robertson Stephens in the third quarter of 1998,
branch expansion in Argentina and Brazil, and the acquisition of OCA. In
addition, higher levels of incentive compensation associated with the growth in
revenue also contributed to the increase.
<PAGE>
CREDIT PROFILE
Loan and Lease Portfolio
The segments of the lending portfolio are as follows:
<TABLE>
<CAPTION>
(in millions) 6-30-99 3-31-99 12-31-98 9-30-98 6-30-98
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
United States Operations:
Commercial, industrial and financial $ 16,603 $ 17,028 $ 16,294 $ 18,218 $ 16,275
Commercial real estate:
Construction 353 228 215 209 219
Other commercial real estate 3,323 3,531 3,871 4,089 3,876
Consumer-related loans:
Residential mortgages 1,729 1,840 2,035 2,111 2,229
Home equity 2,051 2,325 2,294 2,672 2,871
Credit card 375 379 404 393 412
Other 2,357 2,433 2,532 2,693 2,753
Lease financing 1,810 1,768 1,801 1,607 1,609
Unearned income (282) (291) (275) (231) (232)
-------- -------- --------- -------- --------
28,319 29,241 29,171 31,761 30,012
-------- -------- --------- -------- --------
International Operations:
Commercial 10,170 10,308 10,356 10,636 10,218
Consumer-related loans:
Residential mortgages 1,281 1,249 1,251 1,383 1,318
Credit card 351 327 362 339 248
Other 1,166 1,162 1,192 1,164 1,087
Lease financing 677 705 725 652 519
Unearned income (175) (217) (251) (188) (148)
-------- -------- --------- -------- --------
13,470 13,534 13,635 13,986 13,242
-------- -------- --------- -------- --------
Total loans and lease financing $ 41,789 $ 42,775 $ 42,806 $ 45,747 $ 43,254
======== ======== ========= ======== ========
</TABLE>
Loans and leases were $41.8 billion at June 30, 1999 compared with $42.8
billion at March 31, 1999. The domestic portfolio declined approximately $900
million from March 31 mainly due to lower levels of commercial and home equity
loans due, in part, to syndication and securitization activity, respectively.
The international portfolio decreased slightly from March 31 as an increase in
trade-related Brazilian loans was offset by declines related to syndication
activities.
<PAGE>
Nonaccrual Loans and OREO
Nonaccrual loans and OREO amounted to $386 million at June 30, 1999,
compared with $382 million at March 31, 1999, and June 30, 1998. The growth in
the international commercial portfolio from March 31 reflects the recessionary
environment in Latin America and includes the placement of one large loan on
nonaccrual. Nonaccrual loans and OREO represented .9% of related assets at June
30, 1999, March 31, 1999 and June 30, 1998.
The components of consolidated nonaccrual loans and OREO are as follows:
<TABLE>
<CAPTION>
(in millions) 6-30-99 3-31-99 12-31-98 9-30-98 6-30-98
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Domestic nonaccrual loans:
Commercial, industrial and financial $ 54 $ 81 $ 86 $ 71 $ 63
Commercial real estate:
Construction 0 2 2 2 2
Other commercial real estate 9 17 19 30 33
Consumer-related loans:
Residential mortgages 29 30 36 36 42
Home equity 15 16 17 18 15
Credit card 5 6 6 6 6
Other 14 16 20 21 18
-------- -------- --------- -------- --------
126 168 186 184 179
-------- -------- --------- -------- --------
International nonaccrual loans:
Commercial 126 77 86 103 107
Consumer-related loans:
Residential mortgages 58 56 50 39 36
Credit card 6 8 6 7 6
Other 48 49 47 33 26
-------- -------- --------- -------- --------
238 190 189 182 175
-------- -------- --------- -------- --------
Total nonaccrual loans 364 358 375 366 354
OREO 22 24 27 29 28
-------- -------- --------- -------- --------
Total $ 386 $ 382 $ 402 $ 395 $ 382
======== ======== ========= ======== ========
</TABLE>
<PAGE>
Provision and Reserve for Credit Losses
The reserve for credit losses at June 30, 1999 was $792 million, or 1.89%
of outstanding loans and leases, compared with $758 million, or 1.77% at March
31, 1999 and $734 million, or 1.70% at June 30, 1998. The reserve for credit
losses was 218% of nonaccrual loans at June 30, 1999, compared with 212% at
March 31, 1999 and 207% at June 30, 1998.
The provision for credit losses was $95 million in the second quarter of
1999, compared with $70 million in the first quarter of 1999 and $60 million in
the second quarter of 1998.
Net credit losses were $61 million in the second quarter of 1999, compared
with $66 million in the first quarter of 1999 and $51 million in the second
quarter of 1998. The $5 million decline in net credit losses from the first
quarter was due to higher recoveries of $45 million, which mainly resulted from
a partial insurance recovery related to international private banking loans that
had been charged off in the first quarter of 1998, and higher chargeoffs of $40
million, which included the transfer of commercial loans into an accelerated
disposition portfolio. The carrying value of this portfolio was approximately
$100 million at June 30, 1999.
Net credit losses as a percent of average loans and leases on an annualized
basis were .57% in the second quarter of 1999, compared with .63% for the first
quarter of 1999 and .46% in the second quarter of 1998.
Net credit losses were as follows:
<TABLE>
<CAPTION>
First Second Quarter Six Months
Quarter ----------------- ----------------
1999 (in millions) 1999 1998 1999 1998
- ----------- ------ ------ ------ ------
<C> <S> <C> <C> <C> <C>
Domestic
$ 21 Commercial, industrial and financial $ 49 $ 5 $ 70 $ 18
(3) Commercial real estate 0 (1) (3) (2)
Consumer-related loans:
0 Residential mortgages 0 1 0 3
4 Credit card 4 6 8 26
1 Home equity 1 1 2 3
13 Other 9 11 22 30
----- ----- ----- ----- -----
36 63 23 99 78
International
8 Commercial (25) 13 (17) 89
Consumer-related loans:
4 Credit card 5 2 9 4
18 Other 18 13 36 21
----- ----- ----- ----- -----
30 (2) 28 28 114
----- ----- ----- ----- -----
$ 66 Total $ 61 $ 51 $ 127 $ 192
===== ===== ===== ===== =====
</TABLE>
<PAGE>
THE CORPORATION
BankBoston, with assets of $77.6 billion and some 25,000 employees, is the
nation's oldest commercial bank and New England's only global bank. BankBoston
is engaged in consumer, small business and corporate banking in New England;
delivering sophisticated financial solutions to corporations and governments
nationally and internationally; and full service banking in leading Latin
American markets. The Corporation's common stock is listed on the New York and
Boston stock exchanges.
On March 14, 1999, the Corporation entered into an agreement and plan of
merger with Fleet Financial Group, Inc. The merger, which will be accounted for
as a pooling of interests, is subject to shareholder and regulatory approvals,
and is expected to be completed late in the third quarter or early in the fourth
quarter of 1999. A special meeting of the Corporation's stockholders to
consider and vote on the planned merger with Fleet Financial Group, Inc. has
been scheduled for August 11, 1999.
************
This press release contains forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
estimates. These risks and uncertainties include, among other things, (1)
significant changes in world financial markets, particularly in Latin America
and Asia; (2) the ability of various countries in Asia and Latin America,
particularly in Brazil, to institute timely and effective economic policies; (3)
developments in general economic conditions, both domestic and international,
including interest rate and currency fluctuations, market fluctuations and
perceptions, and inflation; (4) legislative or regulatory developments,
including changes in laws concerning taxes, banking, securities, insurance and
other aspects of the financial services industry; (5) changes in the competitive
environment for financial services organizations and the Corporation's ability
to manage those changes; and (6) the Corporation's ability and resources, in
both its domestic and international operations, to effectively execute its
articulated business strategies and manage risks associated with the Year 2000
issue. In addition to these factors, the forward-looking statements in this
press release relating to the Corporation's pending merger with Fleet Financial
Group, Inc. are subject to a number of risks and uncertainties including, among
other things, (1) the ability of the combined entity to fully realize expected
cost savings from the merger or to realize those savings within the expected
timeframe; (2) the level of revenues following the merger; (3) the level of
costs related to the integration of the businesses of the Corporation and Fleet.
<PAGE>
CONSOLIDATED BALANCE SHEET
(dollars in millions)
<TABLE>
<CAPTION>
March 31 June 30
-------- -------------------
1999 1999 1998
-------- ------- -------
<C> <S> <C> <C>
Assets
Securities:
$13,516 Available for sale $13,427 $11,218
410 Held to maturity 397 528
42,775 Loans and lease financing 41,789 43,254
(758) Reserve for credit losses (792) (734)
------- ------- -------
42,017 Net loans and lease financing 40,997 42,520
6,939 Other earning assets 10,128 5,704
12,826 Cash and other assets 12,615 10,529
------- ------- -------
$75,708 Total Assets $77,564 $70,499
======= ======= =======
Liabilities and Stockholders' Equity
$48,468 Deposits $49,036 $45,196
13,878 Funds borrowed 14,989 13,654
4,616 Notes payable 4,599 3,682
2,788 Other liabilities 2,871 1,992
Guaranteed preferred beneficial interests in
995 Corporation's junior subordinated debentures 995 995
------- ------- -------
70,745 Total Liabilities 72,490 65,519
------- ------- -------
Stockholders' Equity
0 Preferred equity 0 278
4,963 Common equity 5,074 4,702
------- ------- -------
4,963 Total Stockholders' Equity 5,074 4,980
------- ------- -------
$75,708 Total Liabilities and Stockholders' Equity $77,564 $70,499
======= ======= =======
</TABLE>
SELECTED AVERAGE BALANCES
<TABLE>
<CAPTION>
Quarter Ended Quarters Ended Six Months Ended
------------- -------------- ----------------
March 31 June 30 June 30
-------- -------------- ----------------
1999 1999 1998 1999 1998
---- ------- -------------- ------- ----------------
<C> <S> <C> <C> <C> <C>
Assets
$42,536 Loans and lease financing $42,538 $44,196 $42,537 $43,952
13,247 Securities 13,898 11,188 13,574 10,898
64,280 Total earning assets 68,146 61,961 66,223 61,228
76,110 Total assets 80,544 71,236 78,338 70,476
Liabilities and Stockholders' Equity
40,378 Interest bearing deposits 40,676 37,195 40,528 37,176
7,038 Noninterest bearing deposits 7,424 8,209 7,232 8,411
------- ------- ------- ------- -------
47,416 Total deposits 48,100 45,404 47,760 45,587
5,526 Notes payable (1) 5,586 4,392 5,556 4,073
59,280 Total interest bearing liabilities 63,212 54,641 61,257 53,932
4,877 Common stockholders' equity 5,039 4,600 4,957 4,525
4,877 Total stockholders' equity 5,039 4,878 4,957 4,803
</TABLE>
(1) Amounts include guaranteed preferred beneficial interests in the
Corporation's junior subordinated debentures.
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Quarters Ended Six Months Ended
March 31 June 30 June 30
- ----------------- ---------------------- ---------------------
1999 1999 1998 1999 1998
- ----------------- --------- --------- --------- --------
<C> <S> <C> <C> <C> <C>
$1,371.7 Interest income $1,447.7 $1,390.2 $2,819.4 $2,727.6
736.9 Interest expense 769.5 750.7 1,506.4 1,484.8
-------- -------- -------- -------- --------
634.8 Net interest revenue 678.2 639.5 1,313.0 1,242.8
70.0 Provision for credit losses 95.0 60.0 165.0 200.0
-------- -------- -------- -------- --------
Net interest revenue after provision
564.8 for credit losses 583.2 579.5 1,148.0 1,042.8
-------- -------- -------- -------- --------
Noninterest income:
333.5 Financial service fees and commissions 455.7 194.6 789.2 359.7
79.1 Trust and investment management fees 81.6 82.1 160.8 161.4
39.0 Trading profits and commissions 40.9 (3.7) 79.9 30.4
(2.0) Securities gains/(losses), net (2.7) 11.4 (4.6) 36.2
145.1 Other income 136.2 173.0 281.2 458.8
-------- -------- -------- -------- --------
594.7 Total noninterest income 711.7 457.4 1,306.5 1,046.5
-------- -------- -------- -------- --------
Noninterest expense:
401.9 Salaries 482.5 305.1 884.5 597.8
71.5 Employee benefits 65.1 63.3 136.6 124.2
64.0 Occupancy expense 67.9 55.8 131.9 110.1
44.6 Equipment expense 44.8 39.6 89.4 79.8
223.5 Other expense 239.1 183.6 462.6 396.6
-------- -------- -------- -------- --------
805.5 Total noninterest expense 899.4 647.4 1,705.0 1,308.5
-------- -------- -------- -------- --------
354.0 Income before income taxes 395.5 389.5 749.5 780.8
131.0 Provision for income taxes 145.3 147.6 276.3 300.7
-------- -------- -------- -------- --------
$ 223.0 NET INCOME $ 250.2 $ 241.9 $ 473.2 $ 480.1
======== ======== ======== ======== ========
NET INCOME PER COMMON SHARE:
$ .75 Basic $ .84 $ .81 $ 1.60 $ 1.61
$ .75 Diluted $ .83 $ .80 $ 1.58 $ 1.58
$ .32 DIVIDENDS PAID PER COMMON SHARE $ .32 $ .29 $ .64 $ .58
Average number of common shares, in thousands:
295,935 Basic 296,832 293,769 296,386 293,159
298,477 Diluted 301,662 298,275 300,095 297,579
$ 0 Preferred dividends $ 0 $ 4.4 $ 0 $ 8.8
</TABLE>
NUMBER OF EMPLOYEES
<TABLE>
<CAPTION>
June 30 Mar. 31 June 30
1999 1999 1998
----------- --------- -----------
<S> <C> <C> <C>
Full time equivalent employees 24,800 24,700 22,900
</TABLE>
<PAGE>
OTHER DATA
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Quarters Ended Six Months Ended
- ----------------- --------------- -----------------
March 31 June 30 June 30
- ----------------- --------------- -----------------
1999 1999 1998 1999 1998
- ----------------- ------- --------------- --------- -----------------
<C> <S> <C> <C> <C> <C>
1.19% Return on average total assets (annualized) 1.25% 1.36% 1.22% 1.37%
18.54% Return on average common equity (annualized) 19.92% 20.70% 19.25% 21.01%
$639.0 Net interest revenue, fully taxable equivalent basis $684.6 $644.9 $1,323.7 $1,251.9
4.03% Consolidated net interest margin 4.03% 4.17% 4.03% 4.12%
3.55% Domestic net interest margin (estimated) 3.52% 4.12% 3.53% 4.13%
5.23% International net interest margin (estimated) 5.29% 4.29% 5.26% 4.11%
</TABLE>
<TABLE>
<CAPTION>
March 31 June 30
- ----------------- ----------------------
1999 1999 1998
- ----------------- --------- ---------
<C> <S> <C> <C>
COMMON STOCKHOLDERS' EQUITY:
$ 4,963 Common stockholders' equity $ 5,074 $ 4,702
296,626 Common shares outstanding, in thousands 297,041 294,126
Per common share:
$ 16.73 Book value $ 17.08 $ 15.99
43.31 Market value 51.13 55.63
CAPITAL RATIOS/REGULATORY CAPITAL:
5.57% Tangible Common Equity ratio 5.59% 6.09%
Risk-based capital ratios: Estimate
7.2% Tier 1 capital ratio (minimum required 4.00%) 7.5% 8.4%
11.5% Total capital ratio (minimum required 8.00%) 11.9% 13.0%
6.9% Leverage ratio 6.8% 7.8%
$ 5,186 Tier 1 capital $ 5,383 $ 5,491
8,335 Total capital 8,566 8,524
72,200 Total risk-adjusted assets 72,086 65,351
</TABLE>
RESERVE FOR CREDIT LOSSES
(dollars in millions)
<TABLE>
<CAPTION>
Quarter Ended Quarters Ended Six Months Ended
March 31 June 30 June 30
- ---------------- -------------------- ---------------------
1999 1999 1998 1999 1998
- ---------------- -------- ------- -------- --------
<C> <S> <C> <C> <C> <C>
$753.5 Beginning balance $ 757.4 $725.1 $ 753.5 $ 711.6
70.0 Provision for credit losses 95.0 60.0 165.0 200.0
0.0 Reserve of acquired companies 0.0 0.0 0.0 14.0
(83.6) Credit losses (122.7) (73.4) (206.2) (229.6)
17.5 Recoveries 62.1 22.2 79.5 37.9
------- ------- ------ ------- -------
(66.1) Net credit losses (60.6) (51.2) (126.7) (191.7)
------- ------- ------ ------- -------
$757.4 Ending balance $ 791.8 $733.9 $ 791.8 $ 733.9
======= ======= ====== ======= =======
1.77% Reserve as a % of loans and leases 1.89% 1.70% 1.89% 1.70%
======= ======= ====== ======= =======
212% Reserve as a % of nonaccrual loans 218% 207% 218% 207%
======= ======= ====== ======= =======
</TABLE>
