2003 Annual Report: Chief Financial Officer's Letter (Page 2 of 3)

The company's strong performance was again led by Consumer and Commercial Banking (CCB), which accounted for about 70% of earnings. CCB earnings rose 15% to $7.52 billion, as revenue grew 11% driven by record mortgage originations, strong growth in credit and debit cards and a 10% increase in average deposits.

Global Corporate and Investment Banking earnings reached $2 billion for the first time, up 29% from 2002, as market-based and investment banking activity increased and provision expense declined 61%, reflecting significantly lower loan charge-offs.

Asset Management earnings rose 79% to $670 million, due to lower provision expense, one large equity gain and improved equity markets.

Equity Investments reported a net loss of $249 million, an improvement from a $331 million net loss the previous year. Impairments during 2003 continued to outpace cash gains and mark-to-market adjustments.

The company continues to leverage the advantages of scale, high profitability and significant cash flow for the advantage of shareholders.

During the year, the company returned approximately $10 billion to shareholders through dividends and net share repurchases. Total shareholders' equity finished the year at $48.0 billion. Year-end assets were $736 billion. The Tier 1 Capital ratio at year end was 7.85%, a decline of 37 basis points, reflecting higher risk-weighted assets and lower levels of equity. Senior management is comfortable with a lower Tier 1 ratio, given the improved economy.

These results compare quite favorably with those of our peers. Our goal remains to produce consistent, solid annual earnings increases while managing our capital wisely in order to produce an attractive total return for shareholders.

James H. Hance, Jr.
Vice Chairman and Chief Financial Officer