L. Phillip Humann Chairman, President and CEO

Transcription

1 L. Phillip Humann Chairman, President and CEO Merrill Lynch Banking and Financial Services Conference November 2004 This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such statements include, but are not limited to, statements about the benefits of the merger between SunTrust Banks, Inc. ( SunTrust ) and National Commerce Financial Corporation ( NCF ), including future financial and operating results, SunTrust s plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of SunTrust s and NCF 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 from those set forth in the forward-looking statements: the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer to realize than expected; disruption from the merger making it more difficult to maintain relationships with clients, employees or suppliers; increased competition and its effects on pricing, spending, third-party relationships and revenues; the risk of new and changing regulation in the U.S. and internationally. Additional factors that could cause SunTrust s and NCF s results to differ materially from those described in the forwardlooking statements can be found in the 2003 Annual Reports on Form 10-K of SunTrust and NCF, and in the Quarterly Reports on Form 10-Q and 10-Q/A of SunTrust and NCF filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission s internet site ( The forward-looking statements in this presentation speak only as of the date of the filing, and SunTrust does not assume any obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. This presentation could include some non-gaap measures to describe SunTrust s performance. The reconciliation of those measures to GAAP measures can be found in SunTrust s earnings press release, on SunTrust s website in the press release section of the Investor Relations pages and in the appendix of this presentation.

2 TRANSLATING POTENTIAL INTO PERFORMANCE POTENTIAL High growth geographic footprint Optimal business mix and operating model Fortress balance sheet Investments for the future PERFORMANCE Revenue momentum and bottom line results Net interest income and fee income growth Industry-leading credit quality Strong LOB & sales results 2 PERFORMANCE PERSPECTIVE Pre 2000 Double digit EPS growth Strong economy in the Southeast Solid equity markets Performance reflected recession and industry pressures Higher credit quality costs, margin compression Maintained investment in revenue generation capacity 2004 & beyond Economic rebound and rising rates spark improved performance NCF merger enhances geographic reach, retail capabilities 3

3 EPS GROWTH: BACK ON TRACK CAGR = 10.1% EPS (1) CAGR = 11.4% CAGR = 3.2% $ Q 03 4Q 03 1Q 04 2Q 04 3Q 04 GAAP EPS Reduction in EPS due to Merger-related charges Growth = 10.2% (1) EPS as originally reported and adjusted for stock splits. There are no adjustments for merger pooling. 4 CORE REVENUE GROWTH PER SHARE IMPROVING VERSUS PEERS (1) STI = 7% Growth (2) Peers = 9% Growth STI = 10% Growth (2) Peers = 3% Growth $ Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04 Source: SNL SunTrust Peers* (1) Core revenue per share is calculated by adding fee income per share to net interest income per share. It excludes securities gains and losses and is fully taxable equivalent (2) Total Revenue Growth for SunTrust was 7% 3Q 04 over 3Q 03 and 4% for 3Q 03 over 3Q 02 * Wells Fargo, AmSouth, National City, Wachovia, US Bancorp, Fifth Third, Bank of America, KeyCorp, PNC, Comerica, Northern Trust, BB&T and Mellon 5

4 FEE INCOME GROWTH PER SHARE IMPROVING VERSUS PEERS (1)(2) 2.50 STI = 10% Growth Peers = 17% Growth STI = 18% Growth Peers = 3% Growth $ Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04 Source: SNL SunTrust Peers* Highlights Trust and investment mgmt Total Wealth Management Service Charges 3Q2004: 3Q2003 3Q04:2Q04 (Annualized) 17% 27% * Wells Fargo, AmSouth, National City, Wachovia, US Bancorp, Fifth Third, Bank of America, KeyCorp, PNC, Comerica, Northern Trust, BB&T and Mellon (1) For more data on fee income, please refer to the appendix of this presentation (2) Fee Income excludes securities gains and losses 6 NET INTEREST INCOME PER SHARE REMAINS BETTER THAN PEERS (1) STI = 5% Growth Peers = 1% Growth STI = 5% Growth Peers = 4% Growth $ Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04 Source: SNL SunTrust Peers* (1) Net Interest Income is fully taxable equivalent * Wells Fargo, AmSouth, National City, Wachovia, US Bancorp, Fifth Third, Bank of America, KeyCorp, PNC, Comerica, Northern Trust, BB&T and Mellon 7

5 NET INTEREST MARGIN TRENDS 3.7% 3.6% 3.5% 3.56% 3.56% 3.51% 3.48% 3.4% 3.38% 3.3% 3.2% 3.1% 3.26% 3.21% 3.05% 3.13% 3.09% 3.13% 3.11% 3.0% 2.98% 2.9% 2.8% 2.7% 2.6% 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 8 LOAN AND DEPOSIT GROWTH (1)(2) ($ in millions) Deposits Loans $ 85,000 80,000 75,000 70,000 65,000 70,852 77,733 70,313 79,370 70,361 79,905 73,166 80,936 74,122 83,753 60,000 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04 3Q2004: 3Q04:2Q04 Highlights 3Q2003 (Annualized) Low cost deposits (2) 10% 5% Mortgage loans Real Estate Equity Total Loans 11* 14 * Adjusted for consolidation of Three Pillars (1) For more data on deposits and loans, please refer to the appendix of this presentation (2) Deposits = Consumer and Commercial Deposits, Low Cost Deposits = Demand Deposits + NOW + Savings 10

6 INDUSTRY LEADING CREDIT QUALITY (1) Peers* SunTrust NPAs/(Loans+OREO) Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q NCOs/Average Loans Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04 Source: SNL * Wells Fargo, AmSouth, National City, Wachovia, US Bancorp, Fifth Third, Bank of America, KeyCorp, PNC, Comerica, Northern Trust, BB&T and Mellon (1) For more data on credit quality, please refer to the appendix of this presentation 11 FOCUS ON EFFICIENCY Reflected Revenue Slowdown Nine Months Ended Year over Year Growth Trends 9/30/ YTD* Revenue Growth 4% Expense Growth 1% (3) Core Revenue Growth 7% flat * As of 9/30/04 12

7 LOB INITIATIVES - RETAIL Actions Introduce enhanced consumer and Business Banking product sets Focus on high growth Business Banking segment Initial Results Doubled net new checking account acquisition rate YTD over 2003 level Equity product volumes 20% higher than same period in 2003 Positive Business Banking trends (as of July 31, 2004) Checking balances up 12% over 2003 Loan production up 9% over 2003 Continue to grow branch network over next three years in high growth markets Denovo growth of 45 net new locations by year end 2004 NCF merger deepens branch share in high opportunity markets and adds over 250 branches in the Carolinas Long Term Growth Rate Target: 8 10% 13 LOB INITIATIVES - COMMERCIAL Actions Enhance Treasury Services technology platform to satisfy customer and competitive demands Leverage new pricing tools with the relationship profitability component Initial Results Introduced product additions and enhancements critical to client cash management needs Purchasing Card payment manager Web-based foreign exchange trading Payroll Card Online report delivery Secure data transmission Installed several upgrades to improve pricing position Enhanced model to maximize economic profit Converted all commercial relationships to common profitability management system Established pricing governance process Long Term Growth Rate Target: 8 10% 14

8 LOB INITIATIVES CORPORATE AND INVESTMENT BANKING Actions Initial Results Further develop equity and debt capital market Leveraging CIB product skills across LOBs products to sustain competitive market positions Equity Linked CDs (SILCs) sold to PCS client base CMBS partnership with Commercial Real Estate Risk management partnership on Credit Default Swaps and Secondary Loan Trading Focus on upper middle and large corporate Expanding Corporate Banking client markets with low risk profile penetration faster than any other bank Completed 90% of annual client plans in Q1, focusing on cross-sell goals and retention Long Term Growth Rate Target: 9 11% 15 LOB INITIATIVES PRIVATE CLIENT SERVICES Actions Initial Results Buy, build, or partner to offer a complete product Hired a net 30 new brokers in the first half of the set to satisfy market demands year; Retail Investment Income up 20% over last year Opened new AMA offices in Charlotte, Miami, Atlanta and Memphis; Increased AMA AUM to $8.465 billion, a 150% increase over last year at this time Completed acquisition of substantially all of the assets of Seix Investment Advisors ($17 Billion in new assets) Developed and implemented new Flexible Architecture process for institutional clients Develop comprehensive package of insurance products and services Implemented a comprehensive program targeted at wealthy and affluent clients Launched an entire array of insurance services including: Term, UL, VUL, Survivorship, Wealth Transfer products; Long-term care products; Disability products; and Annuities Insurance sales up 244% over last year Long Term Growth Rate Target: 12 14% 16

9 LOB INITIATIVES MORTGAGE Action Expand Retail, Broker, and Correspondent channels while enhancing Consumer Direct Initial Results 113 net new retail loan officers (155% of YTD goal) 425 net new broker and correspondent relationships (177% of YTD goal) $2.1B bank referred production (162% of YTD goal) Consumer Enhancements include: - Process and workflow improvements resulting in significant service level improvements - Installation of new voice response technology and CTI screen pop tools has led to more than 40% of customer service calls being handled by the automated solution - Strategies include the successful introduction of Bundled Settlement Services, comprehensive targeted marketing campaigns, a relocation service and expanded hours of operation. The result has been a 22% conversion ratio (from referrals to mortgage applications). Launch out of footprint sales of mortgage and home equity Significantly ramped up out of footprint sales force and are on track to meet goals of numbers of new customers. Have been successful with the home equity product in the markets it has been rolled out within the Retail channels; major roll-out is expected by year end. Long Term Growth Rate Target: 8 10% 17 LONG TERM GROWTH INITIATIVES RECAP Business Line Long Term Growth Rate Target Retail Commercial Corporate and Investment Banking 8-10% 8-10% 9-11% Private Client Services Mortgage 12-14% 8-10% SunTrust 8-10% 18

10 SALES FOCUS PAYING OFF Retail Branch Banking new deposit sales up 15% Private Client Services Trust new business for AMA up 42% Mortgage Mortgage purchase closing volume ($s) up 2% Corp and Investment Banking Total Treasury Management Deals (#s) up 5% Commercial New business deposits up 49% SunTrust Online New deposit accounts (#s) up 9% Increases are 3Q 04 over 2Q NCF MERGER Makes Best Footprint Better 8.7% Financial scale $25+bn market cap $148bn assets $97bn deposits Projected Weighted Average Population Growth 5.3% 1,723 full-service offices in 11 states plus D.C. SunTrust National Average #3 in market share in Southeast WV Top 5 rank in 20 of 25 largest high growth markets in Southeast TN VA NC Adds meaningful presence in some of the highest growth North Carolina and South Carolina markets Solidifies positions in Virginia and Tennessee MS AL SC GA FL SunTrust National Commerce 20

11 INTEGRATION TIMELINE 3Q04 4Q04 1Q05 2Q05 3Q05 Regulatory Approval (8/04-9/04) Change control process installed (9/04) Shareholder Approval (9/15/04) Customer and employee impacts cataloged Leadership positions identified Added 5 new banking regions (Memphis, South Carolina, Triad, Triangle, Mecklenburg) Rollout of NCF Consumer and Small Business checking product to SunTrust legacy footprint Legal Closing (10/1/04) Divestiture of deposits of $65 million and 3 branches (12/10/04) Migration to common pricing begins Mitigation plans developed for all customer and employee impacts Procurement rollout Network connectivity and infrastructure Sequence Conversions Begin Payroll General Ledger Brokerage Benefits Consumer Lending origination Core NBC, CCB and NBC, FSB Mortgage 61 Branch closures/ consolidations Data center consolidation Trust TRANSLATING POTENTIAL INTO PERFORMANCE Strong Earnings Momentum Positive Outlook 22

12 APPENDIX 23 EARNINGS MOMENTUM Earnings growth accelerating 3Q04 : 3Q03 3Q Q Q 2003 Change 3Q04 : 2Q04 Sequential Change Net Income $368.8 $386.6 $ % (2) (18)% Earnings per Share % (2) (18)% Return on Avg. Assets b.p. (7) b.p. Return on Avg. Assets less net realized and unrealized gains on securities portfolio (1) b.p. (6) b.p. Return on Avg. Equity b.p. (57) b.p. Return on Avg. Realized Equity (1) b.p. (136) b.p. (1) SunTrust presents a return on average realized shareholders equity, as well as a return on average assets less net unrealized securities gains. These two ratios reflect primarily adjustments to remove the effects of the Company s securities portfolio which includes the ownership by the Company of 48.3 million shares of The Coca-Cola Company. The Company uses this information internally to gauge its actual performance in the industry. SunTrust believes that the return on assets less the net unrealized securities gains is more indicative of the Company s return on assets because it fully reflects the return on assets that are related to the Company s core businesses, which are primarily customer relationship and customer transaction driven. The Company also believes that the return on average realized equity is more indicative of the Company s return on equity because the excluded equity relates primarily to a long term holding of a specific security. See the reconciliations slides in the appendix. (2) Annualized. 24

13 FEE INCOME GROWTH Fee income growth momentum continuing ($ in millions) 3Q Q Q Q2004: 3Q2003 3Q04:2Q04 (Annualized) Trust and Investment Mgmt. $150 $140 $128 17% 27% Retail Investment % (46)% Deposit Charges % 6% Corp & Invst. Banking (7)% (76)% Credit Card Fees % (32)% Other Charges & Fees % (10)% Other Non-Interest Income % 216% Total Fees (1) % 3% (1) Fees without Securities net gains. 25 LOAN GROWTH Driven by targeted sales initiatives ($ in millions) 3Q 2004: 3Q Q 2004: 2Q Q Q Q 2003 Change Sequential Annualized Change Commercial $27,630.5 $27,510.8 $29,501.8 (6)% (1) 2%/flat RE Commercial RE Construction Mortgages Credit Card Direct RE Equity Indirect Nonaccrual Total Loans 9, , , , , , , , , , , , , , , , , , , , , % 12% 30% 20% flat 30% 7% (39)% 8% 1% 15% 39% 19% 10% 33% (3)% (2)% (1) 14%/11% (1) Higher growth rate adjusted for consolidation of Three Pillars 26

14 CUSTOMER DEPOSIT GROWTH ($ in millions) 3Q Q 2004: 3Q Q Q 2003 Change 3Q 2004: 2Q 2004 Sequential Annualized Change DDA NOW MMA $20, , ,434.4 $20, , ,367.4 $18, , , % 10% flat (2)% 6% 1% Targeted Product and Sales Initiatives SAV 7, , , % 25% CDs 10, , ,343.5 (5)% 14% Total (1) 74, , , % 5% Total low cost deposits (2) 40, , , % 5% (1) Average quarterly Consumer and Commercial Deposits (excludes Broker & Foreign Deposits) (2) Total of DDA, NOW, Savings 27 STRONG CREDIT QUALITY ($ in thousands) 3Q2004 2Q2004 1Q2004 4Q2003 3Q2003 Net Charge-offs $51,043 $37,556 $58,787 $69,787 $79,265 Net Charge-offs to Avg. Loans NPAs NPAs to Loans/OREO/Other repo Allowance for loan losses Allowance to Nonperforming loans Allowance to Chargeoffs (Years Coverage) 0.24% $304, % $892, % % $324, % $902, % % $331, % $936, % % $378, % $941, % % $463, % $941, % 3.0 Improving Trends 28

15 RECONCILIATIONS APPENDIX (Dollars in millions) 3Q 04 Average loans reported $83,753 3Q 03 $77,733 Change 3Q 04 vs 3Q % Impact of Three Pillars - (1,975) Average loans excluding Three Pillars $ 83,753 $75, % Average commercial loans reported $27,631 $29,502 (6.3)% Impact of Three Pillars - (1,975) Average commercial loans excluding Three Pillars $27,631 $27, % 3Q 04 2Q 04 3Q 03 Return on average total assets 1.15% 1.22% 1.04% Impact of excluding net unrealized securities gains (0.05) Return on average total assets less net realized and unrealized gains on securities 1.21% 1.27% 0.99% Return on average equity 14.68% 15.25% 14.24% Impact of excluding net unrealized securities gains Return on average realized equity 17.45% 18.81% 16.02% 29 RECONCILIATIONS APPENDIX (Dollars and shares in thousands except per share amounts) 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04 Fee Income excluding securities gains and losses $503,070 $488,177 $505,620 $565,554 $543,380 $564,571 $590,159 $631,713 $645,885 Net Interest Income-FTE 815, , , , , , , , ,695 Core Revenue* 1,318,197 1,325,518 1,338,633 1,375,969 1,387,768 1,442,072 1,454,063 1,516,779 1,539,580 Common Shares Outstanding 285, , , , , , , , ,001 Core Revenue Per Share Fee Income 548, , , , , , , , ,692 Securities losses/(gains) (45,813) (39,547) (42,039) (31,238) (31,098) (19,501) (4,927) 9,048 18,193 Fee Income excluding securities gains and losses 503, , , , , , , , ,885 Net Interest Income 805, , , , , , , , ,874 FTE adjustment 10,013 10,240 10,543 10,902 11,588 11,981 12,256 12,637 16,821 Net Interest Income-FTE 815, , , , , , , , ,695 Total Revenue 1,364,010 1,365,065 1,380,672 1,407,207 1,418,866 1,461,573 1,458,990 1,507,731 1,521,387 Securities losses/(gains) (45,813) (39,547) (42,039) (31,238) (31,098) (19,501) (4,927) 9,048 18,193 Core Revenue* 1,318,197 1,325,518 1,338,633 1,375,969 1,387,768 1,442,072 1,454,063 1,516,779 1,539,580 * Also known as total revenue excluding securities gains and losses (1) Multiply by 4 to calculate sequential annualized growth or reductions 30

16 RECONCILIATIONS APPENDIX (Dollars in millions) Fee Income $1,653.9 $1,625.9 $1,773.6 $2,051.9 $2,268.8 $2,303.0 Securities losses/(gains) (8.2) (6.6) (153.1) (204.5) (123.9) Net Interest Income 2, , , , , ,320.3 FTE Adjustment Core Revenue* 4, , , , , ,544.4 Total Revenue 4, , , , , ,668.3 Securities losses/(gains) (8.2) (6.6) (153.1) (204.5) (123.9) Core Revenue* 4, , , , , ,544.4 * Also known as total revenue excluding securities gains and losses (1) Multiply by 4 to calculate sequential annualized growth or reductions 31 L. Phillip Humann Chairman, President and CEO Merrill Lynch Banking and Financial Services Conference November 2004