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) August 4, 1999
--------------------------------
First Union Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 1-10000 56-0898180
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One First Union Center
Charlotte, North Carolina 28288-0013
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (704)374-6565
-----------------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 5. Other Events.
On August 4, 1999, First Union Corporation (the "Corporation") held a
meeting with analysts and others where its management presented, among other
things, the materials attached hereto as Exhibit (99) to this report (the
"Presentation Materials"). The Presentation Materials are incorporated herein by
reference.
The Presentation Materials contain, among other things, certain
forward-looking statements with respect to the goals, plans, objectives,
intentions, expectations, financial condition, results of operations, future
performance and business of the Corporation, including, without limitation, (i)
statements relating to certain of the Corporation's and its business units'
goals and expectations with respect to (a) net income, (b) revenue growth, and
(c) strategic plans, and (ii) statements preceded by, followed by or that
include the words "may", "could", "would", "should", "believes", "expects",
"anticipates", "estimates", "intends", "plans" or similar expressions. These
forward-looking statements involve certain risks and uncertainties that are
subject to change based on various factors (many of which are beyond the
Corporation's control). The following factors, among others, could cause the
Corporation's financial performance to differ materially from the goals, plans,
objectives, intentions, and expectations expressed in such forward-looking
statements: (1) the strength of the United States economy in general and the
strength of the local economies in which the Corporation conducts operations;
(2) the effects of, and changes in, trade, monetary and fiscal policies and
laws, including interest rate policies of the Board of Governors of the Federal
Reserve System; (3) inflation, interest rate, market and monetary fluctuations;
(4) the timely development and acceptance of new products and services by the
Corporation and the acceptance of these products and services by new and
existing customers; (5) the willingness of customers to substitute competitors'
products and services for the Corporation's products and services and vice
versa; (6) the impact of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and insurance); (7)
technnological changes, including the impact of Year 2000 computer system
problems; (8) changes in consumer spending and saving habits; (9) the impact of
the EVEREN Capital Corporation and other possible acquisitions by the
Corporation, including the success of the Corporation in fully realizing or
realizing within the expected time frame expected cost savings and/or revenue
enhancements; (10) the growth and profitability of the Corporation's noninterest
or fee income being less than expected; (11) unanticipated regulatory or
judicial proceedings; (12) the impact of changes in accounting policies by the
Securities and Exchange Commission; and (13) the success of the Corporation at
managing the risks involved in the foregoing. Additional information with
respect to factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements is included in the reports filed
by the Corporation with the Securities and Exchange Commission.
The Corporation cautions that the foregoing list of factors is not
exclusive, and neither such list nor any such forward-looking statement takes
into account the impact that any future acquisitions may have on the Corporation
and any such forward-looking statement. In addition, the Corporation does not
intend to update any forward-looking statement, whether written or oral,
relating to the matters discussed in the Presentation Materials.
<PAGE>
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
(99) The Presentation Materials.
<PAGE>
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.
FIRST UNION CORPORATION
Date: August 4, 1999 By: /s/ Kent S. Hathaway
---------------------------
Name: Kent S. Hathaway
Title: Senior Vice President
<PAGE>
Exhibit Index
Exhibit No. Description
----------- -----------
(99) The Presentation Materials.
(FIRST UNION LOGO)
Leveraging
the Opportunity
August 4, 1999
<PAGE>
Cautionary Statement
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, 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 which could cause the
Corporation's actual results to differ materially from such forward-looking
statements are set forth in the Corporation's 1998 Annual Report on Form 10-K,
1999 First Quarter Report on Form 10-Q and 1999 Current Reports on Form 8-K.
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.
<PAGE>
(FIRST UNION LOGO)
Strategic Focus
Edward E. Crutchfield
<PAGE>
COVER SLIDE: FIRST UNION: STRATEGIC FOCUS
=========================================
Welcome; thank you for joining us today. Before we get started, my lawyers
have asked that I refer you to the cautionary statement at the front of your
handouts.
My role today is to set the stage for the rest of our speakers by briefly
describing some of the economic, societal, demographic and technological
trends behind the evolution of our new business model.
We are in the midst of an amazing societal transformation that is affecting
not just the financial services industry but all industries. This is not just
a transformation from the industrial age to the information age, but to a new
era in which knowledge is used for competitive advantage. We are entering a
"placeless society" that largely disregards the boundaries of distance, time,
borders and language.
For some time we have believed the traditional bank model is not competitive
in this changing environment. With earnings growth as our goal, we have built
a transformative business model centered on squarely meeting the needs of our
customers.
Today, both individual and corporate customers have two basic objectives in
selecting their financial services providers: First, they want broader and
more sophisticated products and services -- in addition to traditional bank
products. Second, they want a variety of new and different delivery channels
with an emphasis on convenience, speed and control.
SLIDE 1: STRATEGIC FOCUS/FTU TODAY
==================================
Fortunately, we saw the change coming and we have been building this new
business model piece by piece, over five years. Since 1994, we have focused
our efforts on building the knowledge-based businesses of capital markets and
capital management. Since 1996, we have been working to transform our
traditional bank branches with our Future Bank initiative, and prepare for an
era of e-commerce.
As a result, today First Union owns the nation's sixth largest securities
company (based on net income) and sixth largest banking company (based on
assets) -- and we are a leading competitor on the Internet. We currently have
775,000 online retail financial services customers and 20,000 online
corporate customers.
<PAGE>
SLIDE 2: STRONG, BALANCED EARNINGS /GOAL 50-50
==============================================
For several years we have stated our goal of creating a new kind of financial
services company -- one that's about 50 percent like a traditional bank and
50 percent like a securities business. We are nearly there -- we can see it
in the nationwide securities company we have created alongside our
traditional bank. (In October we will change the name of our capital markets
and capital management businesses to First Union Securities.)
We believe industry leaders require this kind of robust business model -- one
that leverages off the traditional bank -- and a thoughtful strategy for
e-commerce.
We expect substantial growth in our securities business consisting of capital
markets and capital management businesses over the next three years, as Ken
Thompson and Don McMullen will describe shortly. On the channel front, we
have developed a very competitive online presence in banking and brokerage
activities.
SLIDE 3: BUSINESS MODEL/SCOPE OF TRANSITION
===========================================
We have not lost sight of the fact that our traditional bank currently
provides 52 percent of our profitability. John Georgius will provide an
update on the progress of our Future Bank initiative for transforming our
traditional bank. Essentially, we see our future bank platform as the
catalyst for linking the traditional bank customer to the electronic world -
to a model less reliant on bricks and mortar.
As you might have surmised, we believe the Internet is a critical business
driver. For First Union, the Internet clearly represents a new channel as
well as a means to accelerate customer acquisition and asset accumulation.
(Jack Antonini and David Carroll will update you on our Internet strategy
shortly.)
SLIDE 4: FIRST UNION SECURITIES
===============================
This slide is a snapshot of our First Union Securities business. As you can
see, Capital Markets and Capital Management are high-performing businesses
that, combined, produced revenues of $4.4 billion in 1998 and $2.7 billion
year-to-date this year.
Year-to-date 1999 versus 1998, we had 22 percent revenue growth in First
Union Securities versus 13 percent for the median of publicly traded
securities firms. Breaking that apart a little, our Capital Markets revenue
growth was 28 percent versus 15 percent for our publicly traded capital
markets peers for the same period. Capital Management revenue growth was 15
percent versus 12 percent for publicly traded asset managers and regional
brokerages.
<PAGE>
SLIDE 5: OPERATING RESULTS
==========================
As my final slide shows, First Union has produced strong year-to-date
operating results compared with the top 20 banks --- for example,
o 21% fee income growth; and
o A 23% return on equity.
We believe our performance should command a higher multiple going forward.
I'll be back at the end to moderate our Q&A session. Before turning the
platform over to John Georgius, there is one other issue I want to address. I
know we have disappointed you this year with our downward earnings forecasts.
I can assure you we have disappointed ourselves even more. But now, what I am
asking you to do is to focus on the future rather than the past, and the rest
of my team will be talking about just that today.
<PAGE>
Strategic Focus
First Union Today
(A map appears here with the following legend.)
Access
Financial Centers 2368
First Union ATMs 3955
FUHEB 104
FUMC 94
Wheat First Union 152
The Money Store 188
EVEREN Securities* 169
International Locations 28
Call Centers 11
Firstunion.com unlimited
*Acquisition pending.
<PAGE>
Strong Balanced Earnings
Goal: 50% Traditional Bank
50% Securities Firm
Net Income
(Pie chart appears here with the following plot points.)
1998
First Union Securities 39% $1.1B
Traditional Bank 61% $1.7B
(Pie chart appears here with the following plot points.)
First Half
1998
First Union Securities 42% $578MM
Traditional Bank 58% $806MM
(Pie chart appears here with the following plot points.)
First Half
1999
First Union Securities 48% $740MM
Traditional Bank 52% $800MM
<PAGE>
Business Model
Scope of Transition
Transforming the "Traditional" Bank
Online Strategy
- --Banking
- --Brokerage
First Union Securities
- --Nationwide full service presence
<PAGE>
Our Securities Business
First Union Securities
(Capital Markets and Capital Management)
- ----------------------------------------------------------------------------
(Dollars in millions) First Half
----------------------------
1998 1998 1999 Change
- ----------------------------------------------------------------------------
Fee Income $2,933 $1,544 $1,865 21%
Net Interest Income 1,498 702 896 28%
------ ------ ------
Total Revenue $4,431 $2,246 $2,761 23%
Net Income $1,083 $ 578 $ 740 28%
ROE 22.2% 25.1% 26.8%
- ----------------------------------------------------------------------------
<PAGE>
Comparative Statistics
First Union Corporation
Operating Results
First Half 99
- -------------------------------------------------------------------
Average
FTU Top 20 Banks
- -------------------------------------------------------------------
Fee Income Growth* 21% 20%
Return on Equity 23% 20%
P/E Multiple 13.8 16.3
- -------------------------------------------------------------------
All results exclude gains on EPS Inc. 1999 P/E multiple based on consensus
estimates and price at 7/28/99.
*First Half 99 vs. First Half 98.
<PAGE>
Appendix
<PAGE>
Return on Average
Common Equity*
Rank 1Q99
1 U.S. Bancorp 24.6%
2 Bank of New York 24.5%
3 Citigroup 23.6%
4 PNC Bank 20.8%
5 Bank One 22.9%
6 J.P Morgan 22.3%
7 First Union 21.4%
8 National City 20.9%
9 Mellon 20.9%
10 Chase Manhattan 20.6%
Rank 1Q99
11 Washington Mutual 19.4%
12 Fleet Financial Group 19.3%
13 SunTrust 18.7%
14 BankBoston 18.5%
15 Wachovia 18.3%
16 Wells Fargo 17.3%
17 Republic New York 17.0%
18 Keycorp 16.9%
19 BankAmerica 16.8%
20 Bankers Trust 12.5%
Based on operating data.
Source: Company reports.
<PAGE>
Revenue Growth*
Rank 1Q99
% Increase
1 J.P. Morgan 24.8%
2 Fleet Financial 22.5%
3 BankBoston 19.7%
4 Keycorp 17.0%
5 U.S. Bancorp 16.9%
6 National City 11.6%
6 First Union 11.6%
8 Chase Manhattan 11.2%
9 Washington Mutual 10.9%
9 Bank of New York 10.9%
Rank 1Q99
% Increase
11 Citigroup 10.0%
12 Wachovia 9.7%
13 Mellon 8.9%
14 SunTrust 8.5%
15 PNC Bank 8.4%
16 Bank One 7.1%
16 Wells Fargo 7.1%
18 Republic New York 6.9%
19 BankAmerica -4.4%
20 Bankers Trust -7.6%
Based on operating data.
Source: Company reports.
<PAGE>
Fee Income Growth*
Rank 1Q99
% Increase
1 Keycorp 41.0%
2 U.S. Bancorp 40.4%
3 BankBoston 40.3%
4 Fleet Financial 38.0%
5 First Union 31.1%
6 Washington Mutual 29.3%
7 J.P. Morgan 26.6%
8 Republic New York 25.2%
9 Chase Manhattan 19.6%
10 National City 16.8%
Rank 1Q99
% Increase
11 Bank One 16.4%
11 Wachovia 16.4%
13 PNC Bank 15.2%
14 Mellon 13.0%
14 Bank of New York 13.0%
16 Wells Fargo 12.7%
17 SunTrust 11.5%
18 Citigroup 11.0%
19 Bankers Trust 1.5%
20 BankAmerica -9.5%
Based on operating data.
Source: Company reports.
<PAGE>
Growth in Fee Income as a
Percent of Total Revenue*
1Q99
Rank Change
1 U.S. Bancorp 7.4%
1 First Union 7.4%
3 Bankers Trust 7.3%
4 BankBoston 7.1%
5 Keycorp 6.8%
6 Republic New York 5.4%
6 Fleet Financial 5.4%
8 Chase Manhattan 4.0%
9 Bank One 3.9%
10 Washington Mutual 3.3%
1Q99
Rank Change
11 PNC Bank 2.8%
12 Mellon 2.5%
13 Wells Fargo 2.1%
14 Wachovia 2.0%
15 National City 1.9%
16 J.P. Morgan 1.2%
17 Bank of New York 1.1%
18 SunTrust 1.0%
19 Citigroup 0.6%
20 BankAmerica -2.4%
Based on operating data.
Source: Company reports.
<PAGE>
First Union Performance
through the Business Cycle
- --------------------------------------------------------------------------------
Recession
Years
1985-89 1990-91 1993-97 1998
- --------------------------------------------------------------------------------
Fee Income/Revenue 27% 32% 31% 46%
Average Revenue Growth* 9 9 9 14
Average Loan Growth* 18% (2)% 8% 9%
NPAs/Loans 1.09 3.43 1.09 0.62
NCO Ratio 0.40 0.93 0.51 0.48
ROE 16% 12% 18% 23%
Average EPS Growth** 3 (3) 9 14
Efficiency 62 62 60 57
- --------------------------------------------------------------------------------
Based on operating data
* Based on restated data. 1990-91 excludes the estimated impact of several large
purchase accounting acquisitions.
**Based on originally reported data.
<PAGE>
Net Charge-Offs 1988 - 1998
1 SunTrust 0.48%
2 Wachovia 0.51%
3 Republic New York 0.55%
4 First Union 0.59%
5 Keycorp 0.60%
6 National City 0.60%
7 State Street* 0.67%
8 J.P. Morgan 0.69%
9 BankAmerica 0.75%
10 PNC Bank 0.86%
11 U.S. Bancorp 0.96%
12 Bank One 1.01%
12 Fleet Financial 1.04%
14 Wells Fargo 1.05%
15 BankBoston 1.08%
16 Mellon Bank 1.14%
17 Bank of New York 1.29%
18 Chase Manhattan 1.38%
19 Citicorp 1.50%
20 Bankers Trust (est.) 1.75%
Originally reported data.
Source: Company reports.
<PAGE>
Originally Reported EPS
1988 - 1998
Compound Annual
Rank Growth Rate
1 Citigroup 16.0%
2 State Street 15.5%
3 SunTrust 11.1%
4 Wells Fargo 11.0%
5 First Union 10.6%
6 BankAmerica 9.9%
7 Bank One 9.6%
8 Wachovia 9.4%
9 Bank of New York 8.1%
10 Keycorp 7.9%
Compound Annual
Rank Growth Rate
11 National City 7.6%
12 Fleet Financial 5.4%
13 PNC Bank 3.5%
14 BankBoston 2.4%
15 Republic New York 2.2%
16 J.P. Morgan -0.3%
17 Chase Manhattan -2.8%
18 U.S. Bancorp n.m.*
19 Mellon n.m.*
20 Bankers Trust n.m.**
* Loss in first year.
**Loss in last year.
Based on originally reported operating earnings.
Source: Factset (1998 from company reports).
<PAGE>
Return on Average
Total Equity 1989 - 1998
10 Year
Rank Average
1 State Street 18.4%
2 Norwest 17.2%
3 National City 16.8%
4 Keycorp 16.5%
5 Bank One 16.0%
6 First Union 15.8%
6 Wachovia 15.8%
8 Mellon 15.7%
9 Citigroup 15.7%
10 SunTrust 15.4%
10 Year
Rank Average
11 U.S. Bancorp 14.8%
12 Bank of New York 14.6%
13 BankAmerica 14.3%
14 PNC Bank 14.2%
15 Fleet Financial 12.4%
16 J.P. Morgan 11.4%
17 Republic New York 10.9%
18 Chase Manhattan 10.5%
19 Bankers Trust 10.4%
20 BankBoston 8.0%
Based on originally reported earnings including non-recurring charges.
Source: Factset.
<PAGE>
First Union Dividend Growth
Current dividend annualized
(In dollars)
<TABLE>
<CAPTION>
78 80 82 84 86 88 90 92 94 96 98 Current
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.15 0.16 0.17 0.18 0.20 0.23 0.25 0.29 0.33 0.39 0.43 0.50 0.54 0.56 0.64 0.75 0.86 0.98 1.10 1.22 1.58 1.88
</TABLE>
<PAGE>
(FIRST UNION LOGO)
Future Bank:
The Vehicle for
Transformation
John Georgius
<PAGE>
Redefining Retail
The Scope
[ ] 2,300 branches converted
[ ] 10,000 employees trained
in expanded roles
[ ] 769,000 training hours
dedicated
[ ] Conversion completed
12/98
The Goals
[ ] Increase customer
choice
[ ] Expand sales
capacity
[ ] Enhance service
- --Future Bank
<PAGE>
Increasing Choice
[ ] Providing 24x7 banking through multiple,
integrated channels
[ ] Expanding functionality of First Union
Direct
[ ] Integrating sales and service across all
channels
[ ] Migrating customers to lower cost
channels at their own pace
[ ] Bolstering online financial services
<PAGE>
Customer Acceptance
By the numbers:
67% Customers who self-select an
automated service option
69% Caller resolution rate for automated
Voice Response Unit
20% Total product sales generated by
First Union Direct
91% Growth in online banking customers
since year-end 1998
<PAGE>
Expanding Sales Capacity
[ ] Centralizing 108 administrative
functions
[ ] Shifting 38 million inbound branch calls
[ ] Redefining compensation structure
[ ] Deploying a 100% commission-based
sales force
[ ] Building relationship-focused sales
skills
<PAGE>
Our Service Realities
Simultaneous conversions brought
service issues to forefront
FBI-Related
- -- Long customer lines in branches
- -- Overly aggressive migration to
telephone center
- -- Shortage of service specialists in
high volume branches
- -- Learning curves for new jobs
Conversion-Related
- -- Cash Management and lockbox
challenges
<PAGE>
Our Service Realities
Service complaints tend
to peak a few months AFTER a
conversion is completed
- -- 37% reduction in service
complaints since March '99 peak
<PAGE>
Our Service Solutions
[ ] Redefining, retaining and demanding
"quality service" for every job, every interaction
[ ] Surveying 60,000+ customers each quarter
[ ] Adding service specialists to highest volume
branches
[ ] Strengthening Customer Relationship
Manager role
[ ] Improving customer experience from branch
to phone
[ ] Coordinating efforts with corporate quality
program
<PAGE>
Surpassing Atlanta
Majority of markets converted
surpass Atlanta in sales ramp-up.
Growth in
Revenue Credits*
Market (180 Days)
Baltimore 193.0
VA East 176.8
Capital 80.6
Penn/Del 76.6
South NJ 50.4
Georgia South 36.8
NC East 32.7
North NJ 29.7
Tampa 26.7
Metrolina 26.0
NY/CT 22.5
Growth in
Revenue Credits*
Market (180 Days)
VA West 20.7
Gold Coast 14.8
Coastal 13.6
Gulf Coast 8.7
Tri State 5.3
Atlanta 4.8
North Florida 3.4
Dade/Monroe 0.4
Piedmont (5.5)
Tennessee (7.7)
* % change over baseline; baseline defined as the 6 month average prior to
conversion.
Revenue credits: Net Present Value revenue stream of every product sold.
<PAGE>
Performance Results
June YTD '99
Overall % Change Over
Production June YTD '98
Investment Fee 32%
Income
Loan Production* 52%
CAP Unit Sales 61%
Deposit Unit Sales 4%
*Includes Consumer Direct Loans Outstanding; Prime Equity Lines Committed; Small
Business Loans/Lines.
<PAGE>
Performance Results
June YTD '99
Productivity % Change Over
Per Sales FTE June YTD '98
Investment Fee 42%
Income
Loan Production* 63%
CAP Unit Sales 71%
Deposit Unit Sales 11%
*Includes Consumer Direct Loans Outstanding; Prime Equity Lines Committed; Small
Business Loans/Lines.
<PAGE>
Sales Production
Top Quartile
Revenue Credits/FS
($000)
(Bar chart appears here with the following plot points.)
April May June
1998 1999 1998 1999 1998 1999
18% 17% 24%
57 67 53 62 59 73
<PAGE>
Sales Production
2nd Quartile
Revenue Credits/FS
($000)
(Bar chart appears here with the following plot points.)
April May June
1998 1999 1998 1999 1998 1999
21% 24% 22%
33 40 33 41 37 45
<PAGE>
Sales Production
3rd Quartile
Revenue Credits/FS
($000)
(Bar chart appears here with the following plot points.)
April May June
1998 1999 1998 1999 1998 1999
17% 39% 28%
23 27 23 32 25 32
<PAGE>
Sales Production
Bottom Quartile
Revenue Credits/FS
($000)
(Bar chart appears here with the following plot points.)
April May June
1998 1999 1998 1999 1998 1999
9% 64% 45%
11 12 11 18 11 16
<PAGE>
Managing for Success
Financial Specialists Below
Minimum Sales Standards*
(Bar chart appears here with the following plot points.)
Jan 99 Feb 99 Mar 99 Apr 99 May 99 Jun 99
65% 48% 26% 24% 23% 16%
*Represents all Financial Specialists who have been licensed or
lending-certified for 6 months or longer.
<PAGE>
New Breed of Sales
Financial Consultants are a
100% commission-based sales force
[ ] Producing at 117% of sales goals
[ ] Generating 4% of total sales
[ ] Cultivating 85% new business
-- Small businesses
-- Affluent customers
[ ] Substantial compensation potential
-- Top 10 to earn $200,000 - $270,000
<PAGE>
Look to the Segments...
Capital Management
Future Bank
[ ] Mutual Funds
[ ] Personal Trust
[ ] CAP
[ ] Private Client
[ ] Insurance
[ ] Brokerage
Consumer Bank
[ ] Consumer Deposits
[ ] Consumer Loans
[ ] ATM
[ ] Mortgages
[ ] Credit Cards
Commercial Bank
[ ] Small Business Loans
[ ] Small Business Deposits
[ ] Small Business Cash Management
- --An Integrated Model Focused on
Meeting Customer Needs
<PAGE>
(FIRST UNION LOGO)
Integrated Solutions
for Individuals and
Businesses
Jack Antonini
<PAGE>
First Union
Online Objective
[ ] To be a comprehensive "Online Hub" providing smart, straight-forward
solutions in the customer's best interest, making firstunion.com our
customers' guide to the financial world.
[ ] For our retail and commercial customers we are: convenient (anytime,
anywhere), safe, secure, individual in our communication, anticipatory of
their needs, and we provide a total view of their relationships with First
Union.
[ ] For our stakeholders: improved customer profitability through deepened
relationships and lower attrition, higher customer trust and usage, and
greater customer acquisition opportunities in- and out-of-footprint.
<PAGE>
Life Cycle Strategy
Birth Start a family or company
Growth Feed and nurture
Maturity Manage and assess
Legacy Pass it on
<PAGE>
Our Research Confirms
What Customers Want
[ ] Transact from any place, day or night
[ ] Transact across different, fully synchronized channels
[ ] Competitive pricing
[ ] Value-added services that make life easier
[ ] A trusted advisor
[ ] To be recognized and known
[ ] Responsiveness to concerns and issues
[ ] Ability to access all financial accounts through primary financial
institution's website
<PAGE>
Anywhere, Anytime
[GRAPHIC APPEARS HERE]
2368 Financial Centers
321 Brokerage Offices*
414 Specialty Offices
3955 ATMs
7x24 Telephone
Online
*Including pending acquisition of EVEREN Securities.
<PAGE>
Channel Opportunity
Internet Opportunities
for Various Retail Categories
Fragmented Markets
Internet Business Opportunity
HIGH
INSURANCE/FINANCIAL SERVICES
Computer Software/Hardware
Travel
Books
Magazines
Music/Video
Flowers/Gifts
Automobiles
Office Products
Specialized Sporting Goods
Consumer Electronics/Appliances
Groceries/Food
Collectibles
General Sporting Goods
Apparel
Tools/Home Repair
Toys
Home Furnishings
Cigars
LOW
Source: Morgan Stanley Dean Witter Research January 1999.
<PAGE>
firstunion.com
Internet Financial Services
Today
Personal Banking Account inquiry, bill presentment and payment, funds
transfer, product information, account self-service, Online
Advisor, rate information and payment calculators
Asset Management CAP accounts, trading, research, annuities, investment
advice, portfolio tracking
Business Services Cash management services, bill presentment and payment,
international trade, secure sales, digital certificate
authority, small business payments, Online Advisor
<PAGE>
Online Customers
First Union Retail
Traditional Online With
Customer Customer Bill Pay
Average Number of Accounts 2.75 6.43 7.41
Average Product Growth Rate 12.5% 20.3% 20.4%
Average Balances
Deposits $ 7,765 $11,068 $18,482
Loans $10,255 $16,065 $25,273
Annuities/Mutual Funds $ 8,274 $16,343 $38,945
Relative Profitability Index 1.0 2.2 2.8
Average DDA Attrition 21% 11% 4%
<PAGE>
Online Banking
First Union
[ ] 775,000 retail customers
[ ] 28-44 average age group
[ ] $75,000+ annual household income
[ ] 6 or more First Union accounts
[ ] More active, multi-channel users
<PAGE>
Online Customers
First Union Wholesale
Small Business Corporate
Offline Online Offline Online
Number of Customers 574,082 9,155 21,226 10,845
Number of Accounts 1.54 3.32 3.56 6.30
Average DDA Balances $ 27,115 $ 70,596 $ 141,123 $ 657,780
Relative Profitability 1.0 4.3 1.0 2.8
<PAGE>
Cash Management
[ ] Electronic offerings
-- Automated Clearing House
-- Wire Transfer
-- Electronic Data Interchange
-- Information Reporting
-- WEB InVision - Funds Transfer/Information
-- WEB Achieve - Internet payments (ACH)
-- Image Services - Check and Lockbox
-- Trade Services - Web-based Letters of Credit
-- Web-based Loan and Investment Information
<PAGE>
Small Business
[ ] Online offering
-- Business Check/ATM Card
-- Business Fax
-- CAP for Business
-- Commercial Mortgage
-- Insurance
-- Revolving Line of Credit
-- Small Business Term Loan
-- VISA for Business
-- Online Business Banking
-- ADP Payroll Processing
<PAGE>
Our Approach
[ ] Flexible Scalable Systems
-- Responsive to market and customers
-- Continual improvement
-- Add to site quickly and easily
-- Develop partnerships and alliances
<PAGE>
Investment Leverage
Build Across Channels
[ ] Leverage single systems platform
across all channels
[ ] Telephone
[ ] Internet
[ ] Financial Center
<PAGE>
Integrated Systems
Leverage Customer
Information and Channels
Savings --- ---- Financial Centers
Deposits --- ---- Brokerage Offices
Mortgages --- Knowledge ---- Call Centers
Cards --- Based ---- Online Customers
CAPs --- Marketing ---- ATMs
Other Products --- ----
<PAGE>
Retail Functionality
PHASE I
Core Banking
Functionality
o Account Inquiry
o Fund Transfer
o Bill Payment
o Product Information
o Application (manual fulfillment)
End of 1998
PHASE II
Interactive
Web Site
o Brand Look and Feel
o Improved Navigation
o Limited Bill Presentment
o Online Trading
o Automated Enrollment
o Inbound/Outbound Email
o Single Sign-on
o Mortgage Prequalification
August 1999
PHASE III
Relationship
Orientation
o Credit Approval
o Personal Financial Planning
o Internal Bill Presentment
o Enhanced Inquiry
o Targeted Offerings
o Proactive Email Stock Alerts
o Account Self Service
o Enhanced Customer Service
o Insurance
o Mortgage Origination
o Begin Money Movement
End of 1999
PHASE IV
Personalized
Gateway
o Virtual Financial Advisor
o Full Money Movement Capability
o Cross Channel Synchronization
o Push Email-Proactive Event Notification
2000+
Increasing Value As Viewed by the Online Customer
<PAGE>
(FIRST UNION LOGO)
firstunion.com
David Carroll
<PAGE>
Our View
[ ] The Internet is a channel and a business
[ ] Our Strategy
-- Provide a fully developed, integrated Internet channel for our
existing customers
-- Offer fully developed, integrated access for new customers who want
content-rich, value-added multiple channel options
-- Explore Internet-specific new business opportunities
<PAGE>
Online Evolution
Online
Capability
1994-1997
[ ] Dial-up
--Telephone and PC Banking
[ ] Web presence
--Billboard and Brochures
Channel
Utility
1998-1999
[ ] Proprietary Financial Services
[ ] Cross Channel Access
[ ] Online Fulfillment
[ ] Online Advice
Total
Solutions
1999-2000
[ ] Personalization
[ ] Aggregation
[ ] Advisory Services
[ ] Financial and Non-financial Offerings
<PAGE>
What People Want
Website
Experience
[ ] Personal
[ ] Clear and simple
[ ] Interactive
[ ] Intuitive
[ ] Consistent
[ ] Fast, reliable performance
[ ] Engaging
[ ] Meaningful
Website
Functionality
[ ] Open and close all accounts
[ ] Credit application and approval
[ ] Invest and trade
[ ] Financial planning and budgeting
[ ] Customer service
[ ] Aggregate accounts
[ ] Status notification
[ ] Pay bills and taxes
[ ] Manage other peoples' money
<PAGE>
The Function Factory
Rapid, rolling enhancements every 30-60-90 days
[GRAPHIC APPEARS HERE]
New Products
New Services
New Content
<PAGE>
Website Redesign
[GRAPHIC OF FIRST UNION WEB PAGE APPEARS HERE]
<PAGE>
Ease of Navigation
67% of web shoppers don't complete purchases
[GRAPHIC APPEARS HERE]
Why?
[ ] Cumbersome, unfriendly sites
[ ] Fear
[ ] Uncertainty
[ ] Inability to speak to a live person
SOURCE: NET EFFECT SURVEY OF TOP 25 E-COMMERCE SITES, JANUARY 1 - MAY 15, 1999.
<PAGE>
Full Service
[GRAPHICS APPEAR HERE]
Deeper
Relationships,
Greater
Sales
First Union Online
[ ] Channel Parity
[ ] Self Service
First Union Direct
[ ] 5300 Call Center Bankers
[ ] 7x24 Full Service
<PAGE>
Personalization
[ ] Dynamic content
[ ] Privacy and security
--Various levels from passwords to digital
certificates
--Based on customer exposure and preference
[ ] Segment of one
--Customized information and offers
--Marketing by permission
<PAGE>
Make It Easy
Get Wired!
[GRAPHIC APPEARS HERE]
<PAGE>
Meaningful Information
[GRAPHIC OF WEB PAGE APPEARS HERE]
<PAGE>
Online Brokerage
[GRAPHIC OF WEB PAGE APPEARS HERE]
<PAGE>
Wholesale Services
Our Strategy
| | Implement enterprise-wide Internet technology and processes for moving
paper-based transactions to electronic channels
| | Make it easy for our customers to do business with us
--Provide direct online access to all services and information
| | Develop new Internet-only products and services
<PAGE>
Diverse Customer Base
733,000 Business Customers
Small Business Commercial Corporate
$0-$10 million $10-$100 million $100 million-$2 billion
7 million prospects 39,000 prospects 7,000 prospects
697,000 customers 30,000 customers 6,000 customers
9,155 6,778 4,067 online
<PAGE>
Electronic Evolution
2001 [] E-Community
[] "E-CFO" (by segments)
New [] Aggregation
Business [] Customer Centric Solutions
[] Strategic Alliances
2000
Current New
Current & [] Information [] Next Generation
New Products [] Images Platform of
& Services [] Payments Service
[] Financing [] International
[] Online Advisor Payments
[] Trade Finance [] Electronic Bill
Payment and
Presentment
1999
[] Customer Care
Foundation [] Security
[] Time to Market
[] Capacity, Flexibility, Reliability
1998
<PAGE>
Global Cash Management
[] Overall Industry Ranking--3rd
[] Overall Market Share--9%
Strategic Product Lines
1999 Revenue Goal Market Share
(in millions) Industry Rank
- ------------------------------------------------------------------------------
Collections $172.5 #1
Disbursements $136.7 #5
Electronic Services $141.3 #4
Rankings based on 1998 Ernst & Young survey.
Goals are for illustrative purposes only and should not be construed as a
forecast or budget.
See "Cautionary Statement."
<PAGE>
Global Cash Management
Impact of the Net
Revenues 1999 2002 %
(in millions) Goal Goal Change Margins
- -------------------------------------------------------------------------------
Collections $172.5 $125.0 -27.5% 14.7%
Disbursements $136.7 $160.5 17.4% 35.2%
Electronic Services $141.3 $210.0 48.6% 66.3%
- -------------------------------------------------------------------------------
Total $450.5 $495.5 10%
Goals are for illustrative purposes only and should not be construed as a
forecast or budget.
See "Cautionary Statement."
<PAGE>
EBPP Strategy
Develop Electronic Bill
Payment and Presentment
Initiative Key Actions
Shift our #1 market position [] Developing 3Q99 EBPP
as Remittance Processor to product offering
market leadership position --Consumer to Business
as Electronic Bill Payment --Business to Business
and Presentment Processor [] Equity owner of new
switch that provides access
for presenting bills to
homebanking customers
[] Leverage current leadership
as lockbox processor to
consolidate payments
[] Launched Small Business Bill
Pay Services
<PAGE>
Critical Mass
EBPP Switch Alliance
60,000,000 Customers 59,000 Billers
Chase Chase
First Union SWITCH First Union
Wells Fargo Wells Fargo
Other Financial
Institutions
<PAGE>
Biller Switch
EBPP Alliance
Marketing Approach Advantage
[] Maximize distribution of our [] 60 million consumers and small
customers' bills business
[] Leverage current relationships [] 59,000 corporations and institutions
[] Minimize cost to bank and [] The biller switch strategy, coupled
customers with our high processing volumes
[] Maximize payment consolidation and low unit costs, positions
[] Allow branding of bills for First Union to be price competitive
marketing and to build volume
[] Unlike non-bank financial
institutions, First Union has
the ability to process and
consolidate payments for billers
[] First Union's processing
capabilities allow our billers
the opportunity to provide
marketing and branding to their
invoices
[] Founding members issue nearly
300 million mortgage and credit
card bills
<PAGE>
Small Business Online
[] Our small business Internet strategy
is to provide comprehensive self-service
sales and service functionality
[] Our goal is to be the premier small
business Internet site
--Financial advice
--Banking services
--Connect buyers and sellers
--Aggregate services that help customers in
their day-to-day operations
<PAGE>
In Sum
What Matters
[] Balanced in approach
[] Cross channel
[] Continuous and rapid product
and service development
[] Execution
<PAGE>
{FIRST UNION LOGO]
First Union Securities
Capital Management:
Power for the 2000s
Don McMullen
<PAGE>
Our Securities Business
First Union Securities
(Capital Markets and Capital Management)
(Dollars in millions)
First Half
---------------------
1998 1998 1999 Change
------ ------ ------ ------
Fee Income $2,933 $1,544 $1,865 21%
Net Interest Income 1,498 702 896 28%
------ ------ ------ -----
Total Revenue $4,431 $2,246 $2,761 23%
Net Income $1,083 $578 $740 28%
ROE 22.2% 25.1% 26.8%
<PAGE>
The Promise
Pre-Tax Income*
1994--2000
(Dollars in millions)
{Bar Chart Goes Here with following plot points}
1994 1995 1996 1997 1998 1999 2000
Actual Actual Goal Goal Goal Goal Goal
$165 $220 $285 $430 $620 $900 $1,150
*Income before taxes and corporate allocations based on internal management
reports. Data for 1994, 1995 and 1996 exclude subsequent acquisitions.
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Keeping the Promise
Pre-tax Income*
1994--2000
(Dollars in millions)
{Bar Chart Goes Here with following plot points}
1994 1995 1996 1997 1998 1999 2000
Actual Actual Actual Actual Actual Goal Goal
- ------ ------- ----- ---- ---- ------ -------
$165 $220 $353 $477 $812 $1,070 $1,250
*Income before taxes and corporate allocations based on internal management
reports. Data for 1994, 1995 and 1996 exclude subsequent acquisitions.
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Creating Mass and Scale
Assets Under Management
(Dollars in billions)
{Bar Chart Goes Here with following plot points}
1994 1995 1996 1997 1998 6/99
- ---- ---- ---- ---- ---- ------
$28 $47 $67 $80 $153 $164
o Mutual Funds--$75 Billion
o First Investment Advisors (Personal Trust) $54 Billion*
First Capital Group (Institutional Trust) $60 Billion*
o AUC--$661 Billion
*First Investment Advisors and First Capital Group include some mutual funds.
<PAGE>
Distribution Edge
CMG
o National Full Service Brokerage
--Wheat First and EVEREN*
o Financial Centers
--2400 centers with 2800 Series 6 Reps, 553 Series 7 Reps
--Private Client and Personal Trust groups
--Future Bank
o Alternate Delivery--Extending "when, where, how" to our brokerage customers
--Discount
--Internet
o Third Party Distributors
* Acquisition pending.
<PAGE>
Window of Opportunity
[BAR CHART APPEARS HERE WITH FOLLOWING POINTS]
Share of
Business Credit
(Percent)
[CHART SHOWING BANK VERSUS NON-BANK SHARE OF BUSINESS CREDIT]
Share of
Household Assets
(Percent)
[CHART SHOWING BANK DEPOSITS VERSUS MUTUAL & MONEY MARKET FUNDS
AS A PERCENTAGE OF HOUSEHOLD ASSETS]
Financial
Holdings by Age
Baby Boomers Today
[CHART SHOWING PERCENTAGES OF DEPOSITS, LOANS AND INVESTMENTS BY AGE GROUPS]
<PAGE>
Distribution Edge
National Brokerage
{Map Goes Here}
o EVEREN Potential
o 6th Largest Brokerage
o 6,300 Registered Representatives
--2800 Series 6
--3500 Series 7
o 2,700 Retail Offices in 41 States
Includes pending EVEREN acquisition.
<PAGE>
Product and Service Edge
Retail
Retail Brokerage Evergreen CAP Accounts
Services Mutual Funds
IRA Insurance/ Personal Trust
Annuities
Private Client Financial Advisory First Investment
Group Services Advisors
Institutional
First Capital Benefit Plan 401(k) Plan
Group Services Services
Institutional Corporate Trust Institutional Debt
Custody Management
<PAGE>
Target Markets
CAP, Private Banking, Personal
Affluent Trust, First Investment Advisors,
Brokerage, Insurance
CAP, Evergreen, Insurance
Emerging Annuities, IRA, Financial
Affluent Planning, Brokerage
Base Mass Brokerage, CAP, Evergreen, Insurance,
Annuities
Corporate Trust, Institutional
Custody, Benefit Plan Services,
Commercial CAP, First Capital Group,
Insurance, Evergreen
<PAGE>
Exceptional Products... 5yr. CAGR
CAP Balances -- Up 50%
Evergreen Mutual Funds -- Up 63%
Annuity Sales -- Up 78%
Personal Trust AUM -- Up 38%
Benefit Services/401(k) Assets -- Up 56%
Note: Data reflects compound annual growth rate from 1994 to 1999 goals.
Goals are used for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Competitive Advantage
Product + Distribution =
National Rankings
#1 Bank Annuity Provider
#2 Bank IRA Provider
#3 Personal Trust Discretionary Assets
#5 Asset Management Account
#6 Broker Dealer
#7 Municipal Trustee
#8 Corporate Trustee
#18 Mutual Fund Provider
#18 Defined Contribution Services Provider
<PAGE>
Perspective
CMG
Higher Net Income in 1998 than--
Schwab
Paine Webber
Northern Trust
State Street Corp.
More Managed Assets than--
T. Rowe Price
More Revenue from Affluent Market than--
US Trust
<PAGE>
Positioned for the Future
o Full Service Brokerage
Distribution Strength o Financial Center
o Alternate Delivery
o Investments
Product Capability o Trust & Insurance
o Bank Products
o Technology Investments
Mass and Scale o Geographic Reach
o Attract Talent and Alliances
<PAGE>
CMG Game Plan
Move Forward
o Continue to focus on asset gathering
o Maximize product and distribution strength
o Leverage wholesale bank relationships
<PAGE>
Move Forward
Focus on Asset Gathering
o Brokerage
--Active promotion
--CAP Accounts in Wheat, EVEREN*
o Mutual Funds
--Attract more high-caliber talent
--New products, alliances
o Trust and Insurance
--Trust sales through brokerage
--Private equity and hedge funds
--401(k)
--Institutional Debt Management
--Comprehensive range of insurance products
* Acquisition pending
<PAGE>
Move Forward
Maximize Productivity of Distribution Channels
o Cross-sell, cross-sell, cross-sell
o Future Bank
--Intensify branch training and licensing
o Hire the right people
o Invest in technology
o Internet
<PAGE>
Move Forward
CMG Internet Strategy
Today
o On-line stock trading access and capability
o Individual CMG products being positioned for internet expansion
--CAP, Insurance, Trust, 401(k), etc.
Tomorrow
o Total on-line product and service relationship with customer
o Combine First Union bank products and Capital Management products for
competitive advantage on-line
<PAGE>
Move Forward
Wholesale Partnership
IPO-- Capital Management
--Transfer Agent (Corporate Trust)
--Distribution (FUBS/Wheat First)
--SERPs, BOLI, COLI
(Insurance Group)
Commercial Client CFOs, --Institutional Investment
Treasurers-- Opportunities (First Capital Group)
--Retirement Services
(Institutional Trust)
--Tax Planning (Financial Planning/
Trust)
--Personal Estates and Personal
Wealthy Master Trust (Trust)
Clients-- --Customized investment management
advice (FIA)
--Mutual Funds (Evergreen)
<PAGE>
Forward Momentum
Revenue Growth* 1998--2002
Fee and Net Interest Income
(Dollars in millions)
CAGR 15%
{Bar chart goes here with following plot points}
1998 1999 2000 2001 2002
Actual Goal Goal Goal Goal
$2,245 $2,450 $2,875 $3,310 $3,800
*1998 data based on segment reporting. 1999--2000 based on internal
management reporting. Excludes EVEREN.
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Forward Momentum
Pre-Tax Income* 1998--2002
(Dollars in millions)
CAGR 17%
{Bar chart goes here with following plot points}
1998 1999 2000 2001 2002
Actual Goal Goal Goal Goal
$815 $1,075 $1,250 $1,460 $1,710
*Income before taxes and corporate allocations based on internal management
reports. Excludes EVEREN.
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
We've Only Just Begun
Keep Moving Forward
o 15-20% growth
o Build recurring fee income stream
o Top 10 provider in each line of business
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Appendix
<PAGE>
CAP Accounts
(bar chart)
<TABLE>
<CAPTION>
Balances Accounts
(Dollars in billions) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
7 12 18 26 38 54 21 126 280 320 430 613
Goal Goal
</TABLE>
o #5 Asset Management Account
o CAPs for individuals, small business & first-time investors
o CAP households average 8 services vs. 3 for DDA customers
o Brokerage trading volume up 106% over 1998 YTD 6/99
o 57% of asset inflow to new accounts from external sources
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Mutual Funds
(bar chart)
Assets
(Dollars in billions)
1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ----
$7 $13 $27 $42 $69 $80
Goal
o Nation's 18th largest mutual fund provider
o 36 funds rated "4" or "5" by Morningstar
o 2.4 million shareholders
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Insurance Products
(bar chart)
Proprietary Annuity Sales
(Dollars in millions)
1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ----
$113 $144 $1,032 $1,342 $1,600 $2,000
Goal
o #1 bank annuity provider
o Full service insurance agency offering annuities, life, home, auto, health
and other insurance
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Personal Trust
(bar chart)
Assets Under Management
(Dollars in billions)
1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ----
$12 $15 $26 $31 $55 $60
Goal
o $55 billion in assets under management
o $78 billion in assets under care
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Pension & 401(k) Services
(bar chart)
401(k) Daily Assets
(Dollars in millions)
1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ----
$1,000 $2,200 $4,000 $5,200 $7,500 $9,300
Goal
o 18th largest provider of defined contribution services -- $19 billion
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
FIRST UNION
First Union Securities
Capital Markets:
Where Capital and Ideas Meet
Ken Thompson
<PAGE>
Our Securities Business
First Union Securities
(Capital Markets and Capital Management)
(Dollars in millions) First Half
---------------------------------
1998 1998 1999 Change
- -----------------------------------------------------------------------------
Fee Income $2,933 $1,544 $1,865 21%
Net Interest Income 1,498 702 896 28%
----- --- ---
Total Revenue $4,431 $2,246 $2,761 23%
Net Income $1,083 $578 $740 28%
ROE 22.2% 25.1% 26.8%
<PAGE>
Our Vision
(Graphic)
Capital First Union Capital Markets Ideas
The marriage between capital and ideas
<PAGE>
Strategic Evolution
Mid
1980s Specialized Industries
1988 Merchant Banking
1993 Derivatives
1994 Build Out Debt Products
Loan Syndications o Private Placements o
High Yield Debt o High Grade Debt o Asset Securitization
1997 Acquisition Phase
Wheat First o Bowles Hollowell o EVEREN Securities*
1999 Integration Phase
*Pending.
<PAGE>
Capital Markets Today
Specialized o 19 industry coverage groups
Industries o $10 billion loan portfolio
Leverage Finance o $8.5 billion loan portfolio
Investment o Loan Syndications o High Yield Debt o
Banking High Grade Debt o M&A Advisory o Equity
First Union o $600 + million Merchant Banking
Capital Partners investment portfolio
Risk Management o Fixed Income Derivatives o
Equity Derivatives o Foreign Exchange
Structured Products
& Real Estate Capital o Asset Securitization o Conduit Programs o
Markets CMBS o Affordable Housing
International o Trade Finance o Correspondent Banking
<PAGE>
Proven Performance
(Graphic)
Fee Income Growth* 1994-1999
(Dollars in millions)
1994 1998 1999
- ---- ---- ----
$120 $1,255 $1,815
Goal
(Bar Chart)
Loan Syndications
High Yield
Asset Securitization
Equity Underwriting
M&A
Other Investment Banking
Merchant Banking
Risk Management
International
Corporate Banking
*Data from internal management reports. 1999 data excludes tax benefits. Goals
are for illustrative purposes only and should not be construed as a forecast or
budget. See "Cautionary Statement."
<PAGE>
Proven Performance
(bar chart)
Pre-Tax Income* 1994-1999
(Dollars in millions)
1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ----
$192 $289 $417 $1,155 $1,410 $1,840
Goal
*Income before tax and corporate allocations. Data for 1994, 1995 and 1996
excludes subsequent acquisitions.
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Positioned for Success
Platform Strengths
o Middle market leader
o Substantial capital
o Growing retail distribution
Strong Core Competencies
o Risk management culture
o Industry expertise
o Product capabilities
<PAGE>
Strategic Direction
o Continued Increase in Corporate
Banking Income Stream
o Accelerating Growth
-> Investment banking "agenting" business
-> Proprietary investing business
o Feed Growing Businesses
<PAGE>
Shifting the Business Mix
Capital Markets
Revenue Mix*
(Pie Chart) (Pie Chart)
1998 2002 Goal
- ---- ---------
16% Agenting 38% Agenting
9% Investing 9% Investing
75% Lending 53% Lending
*Data from internal management reports. Excludes EVEREN and trading revenue.
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Achieving the Mix
o Integrating the Delivery Model
o Capitalizing on Leveraged Finance Strengths
o Enhancing the Equity Product
o Expanding Proprietary Investing
o Building on the Winners
<PAGE>
Integrating Delivery
o Cultivate and execute high value-added investment banking relationships
o Target and develop relationships with investment banking potential
o Manage existing commercial relationships
(Pyramid Chart)
Investment Bankers
Corporate Bankers
Product Specialists Proprietary Investors
19 Specialized Industry Groups
<PAGE>
Leveraged Finance
Capitalizing On Our Strengths
Products
Loan Syndications: #4 Agent Only Leveraged
High Yield: #10 Lead and Co-Managed
M&A: #1 in deals less than $250 million
Merchant Banking: $1.0 billion invested since 1988
Relationships
Private Equity Group History
Middle Market Franchise Position
<PAGE>
Enhancing Equity Product
(Graphic)
M&A
Merchant Banking
Equity o Wheat First provides platform
o EVEREN bolsters retail
o Continue to build expertise in all areas
o Requires continued investment 1999-2002
High Yield Debt
Private Placements
Syndicated Loans
Securitization
Derivatives
Mezzanine Finance
Corporate Banking
<PAGE>
Proprietary Investing
(Graphic)
First Union Investors
- ---------------------
Capital Partners
Middle Market Capital
Special Situations
Private Equity Fund Investing
Technology Investing
<PAGE>
Building On the Winners
Structured Products
o Real Estate Capital Markets
-> Institutionalization of real estate investing
-> Securitization of debt (CMBS) and equity (REITs)
o Securitization
-> Growth of asset-backed market
-> Debt capital for small and mid-cap finance companies and portfolio lenders
1997* 1998* YTD99*
- -----------------------------------------------------------------------
Third Party Securitization
# of Deals 14 23 22
Underwritten (billions) $5.6 $13.8 $12.8
CMBS
Origination Volume (billions) $2.1 $3.0 $1.1
Collateral Contributed (billions) $1.6 $1.3 $1.7
*Data from internal management reports. 1999 data reflects period ended June
30, 1999.
<PAGE>
Building On the Winners
Risk Management
o Expanding trading capabilities
o Strengthening internal partnerships
-> Capital Management
-> International
-> Cash Management
o Developing high growth equity derivatives
1997* 1998* YTD99*
- ----------------------------------------------------------------------
Derivatives
$Revenues (millions) $78 $127 $65
Foreign Exchange
$ Revenues (millions) $43 $50 $27
*Data from internal management reports. 1999 data reflects period ended June
30, 1999.
<PAGE>
Building On the Winners
International
o Maximizing opportunities with:
-> International trade finance
-> International correspondent banking
-> Footprint-linked corporate banking
o Balance of annuity revenue and short-term trade credit
o Presence in 28 countries, relationships in 130
o Steady earnings growth
<PAGE>
Goals 1999-2002
Revenue Growth* 1998-2002
(Dollars in millions)
(Graphic)
Net Interest Income
Fee Income
(GRAPHIC)
CAGR 15%
(bar chart)
1998 1999 2000 2001 2002
Actual Goal Goal Goal Goal
- ------ ---- ---- ---- ----
$2,480 $3,165 $3,580 $4,130 $4,750
*1998 data based on segment reporting. 1999-2002 data based on internal
management reports. Excludes EVEREN.
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Goals 1999-2002
Pre-Tax Income* 1998-2002
(Dollars in millions)
(Graphic)
CAGR 16%
(bar chart)
1998 1999 2000 2001 2002
Actual Goal Goal Goal Goal
- ------ ---- ---- ---- ----
$1,410 $1,840 $2,130 $2,475 $2,870
*1998 data based on segment reporting. 1999-2002 data based on internal
management reports. Excludes EVEREN.
Goals are for illustrative purposes only and should not be construed as a
forecast or budget. See "Cautionary Statement."
<PAGE>
Our Call to Action
Growing companies can't wait for ideas...
First Union is ready.
