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Second Quarter Review

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5 mill donations, etc. This will change the culture. 24. Noninterest Expense Reductions ... Lower loan sale gains ($50mm), higher auto lease residual losses ($39mm) ... – PowerPoint PPT presentation

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Title: Second Quarter Review


1
Second Quarter Review Corporate Update New
York City July 19, 2000
2
Todays Outline
  • What has been done since April Dimon
  • Comprehensive financial repositioning Scharf
  • Earnings review Scharf
  • Long-term outlook Dimon
  • Future agenda Dimon

3
What has been done since April?
4
Since April
  • Evaluation of businesses
  • Execution
  • Develop systems / charter consolidations plan
  • Improved customer service
  • Waste reduction
  • First USA stabilization
  • Form management team
  • Implement clear management philosophies and
    process
  • Implement new financial philosophies
  • Balance sheet strength
  • Dividend and capital
  • Management and public reporting

5
Evaluation of Businesses
  • No significant business sales - pruning only
  • Franchises have high market shares
  • Franchises are positioned for growth
  • Businesses form a strong portfolio that benefit
    one another

6
Execution - Systems / Charter Consolidations
  • Plan to collapse 20 domestic bank charters to 3
  • Convert 7 DDA systems into one
  • 5 planned conversions beginning 2001
  • Easiest first, complex last - mitigates risk
  • None will be done until ready
  • This is a must
  • Should be core competency
  • Right for customer service
  • Significant expense savings

7
Execution - Improve Customer Service
  • Must get this right to build a great company
  • Incorporate service metrics into management
    reporting and compensation
  • Empower the front line to serve customer needs
  • Service
  • Local authority / responsibility
  • Suggestion box
  • New recognition system
  • Battlefield decisions
  • Serve one another
  • Rolling out banking center computers

8
Execution - Waste Reduction
  • Reduce noninterest expense 500 million pretax
  • Savings net of systems conversion costs
  • To be completed by end of first quarter of 2001
  • Represents less than 10 of 6 billion of
    non-headcount expense base
  • Most expense reductions will be non-headcount
    related
  • Expense cuts will not impact customer service,
    technology investments, or other investment
    spending
  • Additionally, we will drive headcount down

9
Execution - First USA
  • Management team reorganization - 75 of changes
    filled internally
  • Operating expenses excluding marketing decreasing
  • International card operations sold - 65 million
    after tax savings per year
  • Transitioned Wingspan and consumer lending to
    Retail - leverage efficiency
  • Established in-house payment processing -
    improvements in accuracy and timeliness
  • Improving Internet contract values
  • 4Q99 2Q00
  • Operating expense ratio (normalized) 4.35 4.13
  • Staffing (EOP) 13,500 10,800
  • Managed net credit losses 6.52 5.44

10
Execution - First USA
  • Customer Care
  • Sep 99 Jun 00
  • Customer satisfaction 64 76
  • New account card delivery - days 13 9
  • Inbound customer service calls 7 mill 5 mill
  • Telephone contact rate 26.0 21.2
  • Attrition is improving

11
Management Team
  • Business Heads Age Yrs _at_ ONE
  • Bill Boardman Credit card 59 16
  • David Bolger Corporate banking 42 20
  • David Kundert Investment mgmt. 57 29
  • Ken Stevens Retail 48 4
  • Geoff Stringer Corporate investments 56 26
  • Mike Welborn Middle market 48 4
  • Staff
  • Marv Adams CTO 42 3
  • Bill Campbell E-commerce 56 New
  • Mike Cavanagh Strategic planning 34 New
  • Christine Edwards CLO/Corp Secty. 47 New
  • Tim Moen Human resources 47 20
  • Robert ONeill General auditor 44 13
  • Charlie Scharf CFO 35 New
  • Richard Wade Corp. risk management 48 26
  • TBD Capital markets

Average share ownership Owned
80,152 Options 283,077
excluding Dimon and Istock owned unvested
restricted shares
12
Implement New Management Philosophies
  • Entrepreneurial
  • Owners and partners
  • Run lean and fast
  • Open door policy
  • Meritocracy
  • High standards
  • Teamwork
  • Personal character

13
Financial Philosophies
Financial Targets ROE 18-20 Dividend
payout 25-30 EPS growth 12-15 Target AA
Rating
  • Strong balance sheet
  • Recurring income
  • Be low-cost provider
  • Invest relentlessly
  • Credit ratings count
  • Disciplined reporting / MIS
  • Make money on operations
  • Build for good times and bad
  • Create stock buyback capacity

14
Financial Philosophies - Public Reporting Clarity
  • Retail (including Wingspan)
  • Commercial banking
  • First USA
  • Investment management group - new
  • Corporate investments - new
  • Corporate (treasury / unallocated)
  • - All allocations reality based
  • - Loan losses charged to units
  • - Better capital and profitability analysis
  • - Clear and transparent public reporting

15
Dividend Philosophy
  • Reset to proper level - earnings based
  • 50 reduction
  • Dividends are tax inefficient
  • Retain capital - active capital allocation
    decisions
  • Not abdicated, major strategic alternatives
    improved
  • Maintain maximum flexibility
  • Use capital to
  • Invest in businesses
  • Prepare for potential downturn
  • Buyback stock
  • Payout target 25-30 - increase with earnings
  • Best for long-term stock value - offensive, not
    defensive

16
Comprehensive Financial Repositioning Dividend Bal
ance Sheet Expenses
17
Comprehensive Financial Repositioning
  • Reduce annual dividend by 50 to 0.84
  • Significant item adjustments of 1.9 billion
    after tax
  • Strong capital base
  • Tangible common equity ratio of 5.4
  • Plan to raise additional regulatory capital
  • Reduce noninterest expense 500 million pretax

18
Dividend Analysis
  • Yield and payout ratio high relative to peers
  • 2001
  • 2000 Payout

  • Yield
    Ratio
  • Bank One - current 5.9 56
  • First Union - pro forma 7.0 68
  • Bank of America 4.4 38
  • US Bancorp 4.1 37
  • FleetBoston 3.4 39
  • Firstar 3.1 45
  • Bank One (pro forma ) 2.8 29
  • Chase Manhattan 2.7 33
  • Wells Fargo 2.2 36
  • Citigroup 1.0 19
  • AIG 0.2 5
  • Merrill Lynch 1.0 18
  • Morgan Stanley Dean Witter 1.0 23

19
Significant Item Adjustments of 1.9 Billion
  • Conservative and realistic assumptions on all
    assets and liabilities
  • - I/O - Auto residuals
  • - PCCRs - Facilities
  • - Partnership assets - Reserves
  • All new business decisions and accounting
    consistent with todays assumptions
  • Balance sheet is sacrosanct

20
Significant Item Adjustments
  • ( in millions)
  • 2Q00
  • Retail
  • Auto lease residual 307
  • Asset sale / restructuring 167
  • All other 44 (1)
  • Total 518
  • Commercial banking
  • Credit loss reserves 647
  • All other 26
  • Total 673
  • First USA
  • I/O strip 354
  • PCCRs 275
  • Partnership assets 121
  • All other 27 (2)
  • Total 777

2Q00 Investment management All
other 9 Total 9 Corporate / unallocated Investm
ent portfolio 415 Legal 190 Real
estate 141 Reconciliations 100 All
other 117 Total 963 Total Corporation 2,940
pretax 1,913 after tax
(1) Reduced by 22 million for gain on loan
sale (2) Reduced by 46 million for gain on sale
of Canadian and UK card operations
21
Strong Capital Position
  • TCE
    Tier 1 Total

  • Ratio Capital Capital
  • Firstar 6.2 8.0 10.7
  • US Bancorp 5.6 6.6 10.9
  • Bank One - 6/30/00 5.4 7.1 10.2
  • Wells Fargo 4.2 7.5 10.3
  • Bank of America 4.1 7.4 11.0
  • First Union - pro forma 3.8 6.6 10.6
  • FleetBoston 3.6 6.7 11.0
  • Chase Manhattan 3.4 8.6 12.3
  • If Bank One preferred was 15 of equity and sub.
    debt was 20 of Total Capital the ratios would
    be Tier 1 _at_ 7.6 and Tier 2 _at_10.8 at 6/30/00
  • _at_ 3/31/00 unless otherwise noted
    (Common equity - all intangibles) / (total assets
    securitized credit cards -

    intangible assets)

22
Credit Trends
( in millions) 4Q99 1Q00 2Q00 Nonperforming
assets - commercial 1,159 1,190 1,344 Nonperfor
ming assets - consumer 506 471 440 Total 1,665
1,661 1,784 Nonperforming assets / related
assets 1.02 0.99 1.03 Reserve /
loans 1.39 1.39 1.73 Reserve / reported net
charge-offs annualized 207
220 233 Reserve / NPLs 147 149 177 Mana
ged charge-off rate (annualized) 1.99
2.04 1.99 Downgrades increasing faster than
upgrades Adjusted for FFIEC-related charge-offs
23
Noninterest Expense Reductions
  • 500 million annualized by end of 2001 first
    quarter
  • Change in process will drive expenses down
  • Policy changes driving reductions
  • Old New
  • To Planning Group (PG) gt5 mill gt50 thousand
  • T E Self-approval No self-approval
  • Consultants, executive PG to 10 mill CEO/CFO
    search, contributions, Mgrs. lt5 mill
    donations, etc.
  • This will change the culture

24
Noninterest Expense Reductions
  • Total Annualized Expenses Reported
  • 1999 full year 10.9 bill
  • 1Q00 annualized 10.6
  • 2Q00 annualized 10.5
  • 2001 quarterly average target 10.0
  • Headcount (Full-time part-time with benefits)
  • 12/31/99 Adjusted for BOFS 86,600
  • 3/31/00 85,500
  • 6/30/00 82,500
  • 12/31/00 Budget 86,000
  • - We will not add staff from today
  • - Expect to drive headcount down
  • excluding merger-related charges

25
Noninterest Expense Reductions - Efficiency
Improvement
  • ( in millions) Efficiency Ratio
  • 2Q00 Mid Pt Cost Save
  • Annualized ONE Peer
    Potential
  • Retail 4,096 64 60 240 pretax
  • Commercial 2,252 54 50 150
  • Other 4,152 110
  • Total 10,500 500
  • Mid-point is not best in class
  • Excluding Wingspan

26
Comprehensive Financial Repositioning
  • Dividend set to appropriate level
  • Capital position strong and will be strengthened
  • Balance sheet integrity
  • Gain efficiencies quickly - expense discipline

27
Earnings Review
28
Net Income (Loss)
  • ( in millions)
    2Q99 1Q00
    2Q00

  • Net Net Net
  • Income EPS Income EPS
    Income EPS
  • Reported 992 0.83 689 0.60 (1,269) (1.11)
  • Adjustments
  • Significant items -- -- --
    -- 1,913 1.66
  • Merger-related 120 0.10 --
    -- -- --
  • Adjusted 1,112 0.93 689 0.60 644 0.55
  • Adjusted
  • ROA (reported assets) 1.76 1.03 0.95
  • ROE 21 14 13

29
LOB Performance Review Summary
( in millions)
Reported Normalized Net
Income 2Q99 1Q00 2Q00 Retail (incl.
Wingspan) 290 236 247 Commercial
banking 203 200 214 First USA 339 67 113 Investm
ent management 91 81 79 Corporate
investments 90 141 61 Corporate / unallocated
99 (36) (70) Sub-total 1,112 689
644 Less Merger-related items (120) --
-- Total Corporation 992 689 644 EPS 0.8
3 0.60 0.55 ROA (reported assets) 1.57 1.03 0
.95 ROE 19 14 13 Efficiency ratio 52 54 55
30
Retail (including Wingspan) Performance Drivers -
2Q00 vs 2Q99
  • Net income down 43mm or 15
  • Revenue growth of 45mm or 3 impacted by
  • Lower loan sale gains (50mm), higher auto lease
    residual losses (39mm)
  • Revenues up 9, excluding above
  • Higher provision (38mm)
  • Noninterest expense up 62mm
  • Wingspan launched 6/99
  • Excluding loan sale gains, auto lease residual
    losses and Wingspan, net income up 12

31
Commercial Banking Performance Drivers - 2Q00 vs
2Q99
  • Net income up 11mm or 5
  • Revenue growth up 93mm or 10
  • Loan growth of 12
  • Treasury Management fees up 12 (23mm)
  • Provision up 42mm or 39
  • Deteriorating credit quality
  • Noninterest expense up 26mm or 5
  • Treasury Management expenses higher to support
    volume growth

32
First USA Performance Drivers - 2Q00 vs 1Q00
  • Net income up 46mm or 69
  • Revenue down 31mm or 2
  • Declining yield, lower outstandings
  • Higher funding costs
  • Offset by higher interchange
  • Provision lower by 69mm or 7
  • Noninterest expense improved 38mm

33
First USA Performance Drivers - 2Q00 vs 2Q99
  • Net income down 226mm or 67
  • Margin down 330mm or 19
  • Lower outstandings, higher funding costs
  • Noninterest income down 148mm or 33
  • Securitization gains 80mm lower
  • Noninterest expense better 139mm or 17

34
First USA

Reported Normalized of
Avg. Managed Loans 2Q99 1Q00 2Q00
Peers Net Interest Margin 10.37 9.14 8.83 7.
85 Loan loss provision 5.23 5.78 5.44 4.22 No
ninterest income 2.65 1.58 1.87 3.05 Noninteres
t expense 4.76 4.29 4.13 4.34 Pretax
income 3.03 0.63 1.09 2.34 90 Day past due
( managed) 1.96 1.91 1.69

35
First USA
Change ( billions) 2Q99 1Q00 2Q00
2Q99 Managed loans - avg. 68.9 67.1 66.1
(4) Managed charge-offs -
5.25 5.78 5.44 Charge volume
35.6 34.0 36.8 3 New accounts opened
(000s) 2,287 950 826 (64) Cards issued
(000s) 65,620 56,378 54,648 (17)
Managed (6) excluding 1Q00 purge of 7
million inactive accounts
36
Investment Management Group Performance Drivers -
2Q00 vs 2Q99
  • Net income down 12mm or 13
  • 1999 Earnings inflated by
  • Reversal of litigation expenses
  • Accounting change
  • Roney Securities operated at a small loss
  • Sold May 1999
  • Excluding the above items
  • Revenues up 5
  • Expenses up 3
  • Net income up 7

37
Current Earnings Power
  • After tax
  • Earnings EPS ROE
  • Normalized 2Q00 644 0.55 13
  • 2Q00 Annualized 2,576 2.20
  • Expense savings 320 0.27
  • Investment portfolio / other 150 0.13
  • Total 3,046 2.60
  • 10 EPS growth 2.86 16
  • 15 EPS growth 2.99 17
  • ROE Target 18-20

38
Long-term Outlook
39
Retail
  • Competitive strength from
  • Broad geographic reach - 14 states
  • Top market share - 1 or 2 in 70 of our markets
  • Large customer base - over 8 million households
  • Strong deposit base
  • Focus on
  • Customer service, sales culture, costs
  • True national platform
  • Direct expenses reduced 125 million in 1999 and
    126 million in 2000
  • 700,000 online customers
  • Clear ability to cross sell
  • Sold more than 4 billion of mutual funds and
    annuities
  • Over 3,600 registered brokers
  • Quality portfolio
  • Auto business an exception
  • Very little subprime
  • Test new concepts / innovate

40
E-Business
  • Internet is critical to our business - must be
    fully integrated
  • New Skunkworks group
  • Bill Campbell senior management working group
  • Coordinate and develop company-wide strategies
  • Internet is not binary, but a continuum of
    services
  • Wingspan - 95,000 customers
  • Built great stuff - technology, customer-focused
  • Merge platforms (save 30 million)
  • Test various products, services, private brand
    can be...
  • Private labeled
  • Agnostic
  • Fully leverage all our assets, use physical
    presence
  • Major opportunities exist

41
Commercial Banking
  • Middle market franchise a company jewel
  • Relationships are wide and deep - single
    provider, many products
  • Relationships last and are profitable over the
    long-term
  • Closely tied to Retail
  • Large Corporate needs focus on capital
  • Improve risk analysis and control in total and by
    customer
  • Force the cross sell
  • Maximize ROE - not earnings
  • Products
  • Strong treasury management franchise
  • Great origination capability - higher velocity
    needed
  • Improve capital markets capabilities
  • No equity - dont compete with Wall Street
  • Double penetration
  • 40 of net revenues are noninterest-related

42
First USA
  • Stabilizing - have gotten results
  • Opportunity to increase ROO vs. industry
  • Several major partnership contracts renewed
  • 50 new partnerships launched this year
  • This is still a fundamentally good industry
  • Being the 2 player in a consolidating industry
    is enviable
  • Little subprime
  • Bank One ownership should be a competitive
    advantage

43
Investment Management
  • Large and growing mutual fund company
  • 67 billion of mutual funds under management
  • 129 billion of total assets under management
  • 62 of funds are Morningstar 4 or 5 rated
  • Wealth management
  • Over 650 private bankers
  • Great opportunities to grow

44
Corporate Investments
  • Recurring net income is approximately 200
    million per year
  • Tax-driven leasing, housing, energy 50
  • Equity investments / venture capital 25
  • Other 25
  • Target 25-30 returns on capital over time
  • Very specialized
  • Good talent - more opportunities

45
Financial Philosophies - Public Reporting Clarity
  • 8 million households
  • 1 or 2 in 70 of major markets
  • 6500 ATMs
  • 1800 banking centers
  • Significant on-line presence
  • Wingspan
  • Good small business / community banking presence
  • Excellent middle-market franchise
  • Good mid- / large corporate bank to
    corporations, governments, institutions
  • Capital markets capabilities
  • Excellent treasury management services
  • 3 commercial bank in US
  • 2 domestic Visa / Mastercard issuer
  • 54 million cardmembers
  • 66 billion in managed assets
  • Good Internet presence
  • Investment advisory, insurance, trust and related
    services to individuals and institutions
  • 129 billion AUM
  • 62 of mutual funds ranked 4 or 5 by Morningstar
  • Proprietary investment activities
  • Growth, tax-oriented and value investing
  • Leveraged and equipment leasing
  • Investment portfolio
  • Corporate treasury
  • Unallocated expenses
  • Corporate activities

46
Agendas
47
Business Philosophies
  • Strategies will be right for Bank One -
    constantly review
  • Franchises should be market leaders
  • Franchises should be durable
  • Always maintain financial discipline
  • Excellence in execution
  • Employee ownership a key
  • Management and shareholder interests must be
    aligned
  • Be field and client driven

48
Immediate Agenda
  • Capital allocation - customer, risk, product
  • Align incentives
  • Extreme budgeting for 2001
  • Analyst relationships
  • Open door policy
  • Constantly improve disclosure
  • Quarter-by-quarter updates
  • Transform tactical plan to strategic plan
  • Board governance - best practices

49
Future Agenda - Build a Great Company
  • Strong financial structure
  • Strong management
  • Building infrastructure and execution
    capabilities
  • Strong franchises
  • Several years of earnings growth opportunities
    through more disciplined management
  • Future opportunities
  • Creative strategies
  • Consolidations and acquisitions

50
Private Securities Litigation Reform Act of
1995 Forward-Looking Statement Disclosure
  • Certain statements made by management in this
    presentation and these materials are not
    statements of historical fact, but are
    forward-looking statements within the meaning
    of the Private Securities Litigation Reform Act
    of 1995.
  • These forward-looking statements involve risks
    and uncertainties which may cause actual results
    to differ materially from those in such
    statements.
  • Additional discussion of factors that could cause
    actual results to differ materially from
    projections, forecasts, estimates and
    expectations is contained in respective SEC
    filings, including the Annual Report on Form
    10-K for the year ending December 31, 1999.

51
(No Transcript)
52
Special Appendix
53
Net Income

  • Reported Normalized
  • ( in millions) 2Q99 1Q00 2Q00
  • Net interest income (1) 3,675 3,445 3,406
  • Provision for credit losses 1,075 1,272 1,174
  • Noninterest income 1,688 1,514 1,343
  • Noninterest expense 2,627 2,661 2,611
  • Net income 1,112 689 644
  • Managed basis.
  • 2Q00 represents reported results excluding
    significant item adjustments.
  • 2Q99 represents reported results excluding
    merger-related items.
  • (1) Fully taxable equivalent basis

54
Significant Item Adjustments - By Line of Business
( in millions)
2Q00 Net Income (loss)
Reported Adj. Normalized Retail
(including Wingspan) (81) 328 247 Commercial
banking (213) 427 214 First USA
(379) 492 113 Investment management
73 6 79 Corporate investments 61 -- 61 Corporate
/ unallocated (730) 660 (70) Total
Corporation (1,269) 1,913 644
55
Retail (including Wingspan)
( in millions)
Reported Normalized
2Q99 1Q00 2Q00 Net interest income
(1) 1,082 1,236 1,205 Provision for credit
losses 83 167 121 Noninterest income 408 306 330
Noninterest expense 962 1,002 1,024 Net income
(loss) 290 236 247 ROE (to be
reviewed) 25 18 17 Efficiency
Ratio 65 65 67 Loans - average ( in
billions) 64.9 73.1 73.6 (1) Fully taxable
equivalent basis

56
Commercial Banking
( in millions)
Reported Normalized
2Q99 1Q00 2Q00 Net interest income
(1) 628 664 694 Provision for credit
losses 108 132 150 Noninterest income 329 354 356
Noninterest expense 538 570 563 Net income
(loss) 203 200 214 ROE (to be
reviewed) 14 13 13 Efficiency
Ratio 56 56 54 Loans - average ( in
billions) Large corporate 31.9 37.2 38.1 Mid
dle market 28.6 31.0 31.9 Real
estate 11.0 11.9 12.0 (1) Fully taxable
equivalent basis

57
First USA
( in millions)
Reported Normalized
2Q99 1Q00 2Q00 Net interest income
(1) 1,781 1,525 1,451 Provision for credit
losses 898 969 900 Noninterest income 455 264 307
Noninterest expense 818 715 679 Net income
(loss) 339 67 113 ROO (pretax) 3.0 0.6 1.1
ROE (to be reviewed) 23 4 7 Efficiency
Ratio 37 40 39 Managed loans - avg. ( in
billions) 68.9 67.1 66.1 (1) Fully taxable
equivalent basis

58
Investment Management
( in millions)
Reported Normalized
2Q99 1Q00 2Q00 Net interest income
(1) 99 100 101 Provision for credit
losses -- 2 2 Noninterest income 295 287 288 Nonin
terest expense 255 257 263 Net income
(loss) 91 81 79 ROE (to be reviewed) 41 36 3
5 Efficiency ratio 65 66 68 ( in
billions) Assets under management - avg.
124.7 126.9 129.4 (1) Fully taxable
equivalent basis

59
Corporate Investments
( in millions)
Reported 2Q99 1Q00 2Q00 Net
interest income (1) 48 35 30 Provision for
credit losses -- 1 1 Noninterest
income 97 185 52 Noninterest expense 34 39 31 Net
income (loss) 90 141 61 ROE (to be
reviewed) 36 47 20 Efficiency
ratio 23 18 38 ( in billions) Assets - avg.
7.5 8.0 8.4 (1) Fully taxable equivalent
basis

60
Loss Reserve Policies
  • Consumer - (home equity, auto, other personal)
  • Nonaccrual 90 days
  • Charge-off 120 days
  • Reserves 1 year prospective charge-off
  • Credit card
  • Charge-off 180 days - interest fees accrue up
    to point of charge-off
  • Re-age 3 consecutive payments, once per year 2
    times in 5 years (eff. 3Q00)
  • Commercial
  • Nonaccrual Credit determination or 90 days
  • Charge-off Loan specific analysis repayment of
    principal becomes doubtful
  • Reserves Asset specific reserves for loans
    classified doubtful
  • Risk Class specific expected loss based on
    calculated reserves
  • Management judgment

61
Credit Card - Purchased Credit Card Relationships
(PCCRs)
  • Total receivables 7.1 billion
  • 3/31/00 balance of premium paid 533 million
  • Amortization period - approximately 7 years
  • Second quarter write-down - mainly 2
    portfolios 275 million
  • Attrition, yield compression, and fee income
    assumptions tightened - better forecasting
  • Poor retention rates - since stabilized
  • Portfolio acquisitions still attractive

62
Credit Card I/O Strip
  • ( in millions) 3/31/00 6/30/00
  • I/O value 630 245
  • Interest rate risk 44 pretax
  • Finance charge 193
  • Fees 56
  • Losses (38)
  • FFIEC impact 85
  • Life adjustment / other 14
  • Total 354
  • FFIEC impact on I/O strip valuation reflects
    one-time write-off resulting in increased
    charge-offs from fully adopting rules at First
    USA regarding re-aging and charge-offs from 210
    days to 180 days.

63
Auto Lease Residuals
  • Total residual at 6/30/00 6.8 bill
  • Size of reserve at 3/31/00 166 mill
  • Second quarter write-down
  • Change from previous Auto Lease Guide valuation
    137 mill
  • Change realization rate to 95.5 120
  • Mitigation costs / other 50
  • Total 307
  • Size of reserve at 6/30/00 473
  • Going forward
  • Focus on returns vs. volume - portfolio will seek
    its own level
  • New leases priced based on above assumptions
  • No 24-month leases
  • Tightened credit cut-offs

64
Retail Asset Sales / Restructuring
  • Charge
  • Severance and exit costs 54 mill
  • Committed sales
  • Indirect installment loans (8 billion) 113
  • Total 167
  • Run indirect installment loan business
    to maximize economic value
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