Wachovia Corporation Announces Slowing Growth Due to Interest Rate Environment

Wachovia Corporation, a financial holding company with significant assets and equity, has announced that it expects to see moderated revenue and net earnings growth for the second quarter and full year, a change from previous forecasts. This slowdown is attributed primarily to the dampening of activity in market-sensitive businesses, particularly in capital markets, mortgage, and investment businesses. The company's chief financial officer, Robert S. McCoy Jr., emphasized that despite the challenging interest rate environment, Wachovia still expects good growth in revenue and earnings, albeit at a slower pace than in 1999 or previously anticipated by management in 2000.

Key Takeaways:

• Wachovia Corporation expects reported revenue and net earnings growth for the second quarter and full year to moderate due to the interest rate environment.
• The slowing economy has increased pressure on customer performance, leading to a rise in non-performing loans.
• Wachovia plans to take a special provision expense of approximately $200 million in the second quarter to increase its allowance for loan losses and coverage of non-performing assets.
• The company's overall loan portfolio quality remains strong despite the increased non-performing loans.
• Wachovia's market-sensitive businesses, including capital markets, mortgage, and investment businesses, have seen growth tempered by the rising interest rates.
• The company's operating earnings in 1999, excluding merger-related charges, were $1.024 billion, up 10.1 percent over 1998.
• Wachovia reported revenues, excluding loan loss provision expense and securities gains, of $4.121 billion in 1999, up 13.6 percent from 1998.
• As of March 31, 2000, Wachovia had reported assets of $68.8 billion and shareholders' equity of $5.8 billion.

Statistics:

• Revenue growth expectation for the full year: moderate growth.
• Net earnings growth expectation for the full year: moderate growth.
• Special provision expense: approximately $200 million in the second quarter.
• Increase in non-performing loans: a rise attributed to the slowing economy.
• Operating earnings in 1999: $1.024 billion (up 10.1 percent from 1998).
• Revenues in 1999: $4.121 billion (up 13.6 percent from 1998).
• Assets as of March 31, 2000: $68.8 billion.
• Shareholders' equity as of March 31, 2000: $5.8 billion.

Sources:

• "Wachovia Corporation Announces Expectations for Slowing Growth Due to Interest Rate Environment" (PRNewswire, June 15, 2000).
• Wachovia Corporation 1999 Annual Report.