BANK ONE CORPORATION
INDEX TO FINANCIAL REVIEW

1   Five Quarter Summary of Selected Financial Information  
2   Forward-Looking Statements 
2   Application of Critical Accounting Policies 
2   Summary of Results 
7   Business Segment Results 
7   Business Segment Results and Other Data 
30   Balance Sheet Analysis 
30   Risk Management 
31       Liquidity Risk Management 
31       Market Risk Management 
34   Credit Portfolio Composition 
37   Asset Quality 
39   Allowance for Credit Losses 
42   Derivative Financial Instruments 
43   Loan Securitizations and Off-Balance Sheet Activities 
46   Capital Management 
50   Consolidated Financial Statements 
54   Notes to Consolidated Financial Statements 
64   Selected Statistical Information 
67   Report of Management 
68   Review Report of Independent Public Accountants 
69   Form 10-Q 

FIVE QUARTER SUMMARY OF SELECTED FINANCIAL INFORMATION
Bank One Corporation and Subsidiaries

Three Months Ended
(In millions, except per share data, ratios, and headcount)
 September 30
2003
 June 30
2003
 March 31
2003
 December 31
2002
 September 30
2002
INCOME STATEMENT DATA:                        
Total revenue, net of interest expense   $ 4,084   $ 4,072   $ 3,943   $ 4,197   $ 4,154  
Net interest income    2,086    1,970    1,984    2,144    2,188  
Net interest income-  
  fully taxable-equivalent basis ("FTE") (1)    2,127    2,009    2,021    2,180    2,226  
Noninterest income    1,998    2,102    1,959    2,053    1,966  
Provision for credit losses    416    461    496    628    587  
Noninterest expense    2,421    2,403    2,297    2,371    2,404  
                      
Income from continuing operations, net of taxes    874    847    811    832    813  
                      
Income from discontinued operations, net of taxes (2)    9    9    7    10    10  
                      
     Net income    883    856    818    842    823  
PER COMMON SHARE DATA:  
Basic earnings per share  
Income from continuing operations, net   $ 0.78   $ 0.75   $ 0.70   $ 0.72   $ 0.70  
Income from discontinued operations, net    0.01    0.01    0.01    0.01    0.01  
Net income   $ 0.79   $ 0.76   $ 0.71   $ 0.73   $ 0.71  
                      
Diluted earnings per share  
Income from continuing operations, net    0.78    0.74    0.70    0.71    0.69  
Income from discontinued operations, net    0.01    0.01    0.01    0.01    0.01  
Net income   $ 0.79   $ 0.75   $ 0.71   $ 0.72   $ 0.70  
                      
Cash dividends declared    0.25    0.21    0.21    0.21    0.21  
Book value    20.05    19.70    19.44    19.28    18.79  
BALANCE SHEET DATA - ENDING BALANCES:  
Loans   $ 141,710   $ 144,583   $ 144,747   $ 148,125   $ 150,389  
Total assets    290,006    299,463    287,864    277,383    274,187  
Deposits    163,411    172,015    167,075    170,008    164,036  
Long-term debt (3)    44,225    46,070    44,950    43,234    42,481  
Common stockholders' equity    22,411    22,257    22,316    22,440    21,925  
Total stockholders' equity    22,411    22,257    22,316    22,440    21,925  
CREDIT QUALITY RATIOS:  
Annualized net charge-offs to average loans    1.50 %  1.35 %  1.35 %  1.65 %  1.55 %
Allowance to period end loans    3.34    3.35    3.31    3.20    3.17  
Nonperforming assets to related assets (4)    2.06    2.28    2.38    2.38    2.48  
FINANCIAL PERFORMANCE:  
Return on average assets    1.24 %  1.24 %  1.22 %  1.24 %  1.24 %
Return on average common equity    15.8    15.3    14.7    15.0    14.8  
Net interest margin    3.45    3.37    3.45    3.65    3.83  
Efficiency ratio (5)    58.7    58.5    57.7    56.0    57.3  
CAPITAL RATIOS:  
Risk-based capital:  
     Tier 1    9.8 %  9.7 %  10.0 %  9.9 %  9.5 %
     Total    13.5    13.6    13.8    13.7    13.0  
Leverage    8.4    8.7    8.9    8.9    9.0  
COMMON STOCK DATA:  
Average shares outstanding:  
      Basic    1,115    1,132    1,148    1,157    1,162  
      Diluted    1,124    1,140    1,156    1,166    1,171  
Stock price, quarter-end   $ 38.65   $ 37.18   $ 34.62   $ 36.55   $ 37.40  
Headcount    71,240    72,323    74,077    73,685    73,535  
  (1) Net interest income-FTE includes tax equivalent adjustments of $41 million, $39 million, $37 million, $36 million and $38 million for the quarters ended September 30, 2003, June 30, 2003, March 31, 2003, December 31, 2002 and September 30, 2002, respectively.
  (2) As a result of the Corporation’s announced agreement to sell its corporate trust services business, the results of these operations are reported as discontinued.
  (3) Includes trust preferred securities.
  (4) Related assets consist of loans outstanding, including loans held for sale, and other real estate owned.
  (5) The efficiency ratio is based on income from continuing operations. Prior periods have been recalculated to conform with the current period presentation.

1

FORWARD-LOOKING STATEMENTS

Management’s Discussion and Analysis included herein contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, Bank One Corporation and its subsidiaries (the “Corporation”) may make or approve certain statements in future filings with the Securities and Exchange Commission (the “Commission”), in press releases, and in oral and written statements made by or with the Corporation’s approval that are not statements of historical fact and may constitute forward-looking statements. Forward-looking statements may relate to, without limitation, the Corporation’s financial condition, results of operations, plans, objectives, future performance or business.

        Words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “estimates,” “targeted” and similar expressions are intended to identify forward-looking statements but are not the only means to identify these statements.

        Forward-looking statements involve risks and uncertainties. Actual conditions, events or results may differ materially from those contemplated by a forward-looking statement. Factors that could cause this difference – many of which are beyond the Corporation’s control – include the following, without limitation:

        Forward-looking statements speak only as of the date they are made. The Corporation undertakes no obligation to update any forward-looking statement to reflect subsequent circumstances or events.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Generally accepted accounting principles are complex and require management to apply significant judgments to various accounting, reporting and disclosure matters. Management of the Corporation must use assumptions and estimates to apply these principles where actual measurement is not possible or practical. Changes in such estimates may have a significant impact on the financial statements. For a complete discussion of the Corporation’s significant accounting policies, see “Notes to the Consolidated Financial Statements” in the Corporation’s 2002 Annual Report on pages 84-108. Certain policies are considered critical because they are highly dependent upon subjective or complex judgments, assumptions and estimates. Management has reviewed the application of these policies with the Audit and Risk Management Committee of the Corporation’s Board of Directors. For a discussion of the assumptions used to value the August 2003 stock option grant see Note 12, “Stock-Based Compensation.” For a discussion of applying critical accounting policies, see “Application of Critical Accounting Policies” beginning on page 35 in the Corporation’s 2002 Annual Report.

SUMMARY OF RESULTS
(All comparisons are to the same period in the prior year unless otherwise specified.)

This quarter the Corporation purchased key business components of Zurich Life, a U.S. life and annuity operation of Zurich Financial Services Group. For a discussion of this purchase, see page 56. The results of operations for Zurich Life from September 1 to September 30, 2003 are included in the Corporation’s consolidated financial statements for the three and nine months ended September 30, 2003.

2

        Net income was $883 million, or $0.79 per diluted share. This compares to net income of $823 million, or $0.70 per diluted share. For the nine months ended September 30, 2003, net income totaled $2.6 billion, or $2.25 per diluted share. This compares to net income of $2.5 billion, or $2.08 per diluted share.

Net Interest Income

Net interest income represents the spread on interest earning assets over interest bearing liabilities, including loan fees, cash interest collections on nonaccrual loans, dividend income, interest reversals, and income or expense on derivatives used to manage interest rate risk. Net interest income was $2.1 billion, a decrease of $102 million, or 5%. Net interest margin decreased to 3.45% from 3.83%. For the first nine months of 2003, net interest income was $6.0 billion, a decrease of $371 million, or 6%. Net interest margin for the same period decreased to 3.42% from 3.80%. For both the third quarter and the first nine months of 2003, the decline in net interest income and margin generally resulted from actions taken in 2002 to position the balance sheet more defensively for rising interest rates. In 2002, the Corporation extended the duration of liabilities and repositioned the treasury investment portfolio, which reduced net interest income in 2003 due to the lower rate environment. See Note 8, “Interest Income and Interest Expense,” for further details of the components of net interest income.

Noninterest Income

Noninterest income of $2.0 billion increased $32 million, and as a percentage of total revenue increased to 48.9% from 47.3%. This increase was primarily due to net gains in the investment portfolio, higher capital markets revenue and higher deposit service charges, offset by losses on the credit derivatives hedge portfolio.

        For the first nine months of 2003, noninterest income of $6.1 billion was essentially flat. Losses on the credit derivatives hedge portfolio and lower income derived from securitized loans, were mostly offset by the net gains from investment securities. The components of noninterest income for the periods indicated were:

Three Months Ended September 30
 Nine Months Ended September 30
  Change
   Change
(Dollars in millions)
 2003
 2002
 Amount
 Percent
 2003
 2002
 Amount
 Percent
Banking fees and commissions     $ 441   $ 410   $ 31    8 % $ 1,339   $ 1,363   $ (24 )  (2 )%
Credit card revenue    974    976    (2 )  -    2,736    2,847    (111 )  (4 )
Service charges on deposits    433    409    24    6    1,229    1,178    51    4  
Fiduciary and investment management fees    164    159    5    3    485    488    (3 )  (1 )
Investment securities gains (losses)    68    (29 )  97    N/M    289    49    240    N/M  
Trading gains (losses)    23    143    (120 )  (84 )  (49 )  234    (283 )  N/M  
Other income (loss)    (105 )  (102 )  (3 )  (3 )  30    (32 )  62    N/M  
  Total noninterest income   $ 1,998   $ 1,966   $ 32    2   $ 6,059   $ 6,127   $ (68 )  (1 )
Noninterest income to total revenue    48.9 %  47.3 %  1.6 %    50.1 %  48.9 %   1.2 %    

Quarterly Results

Banking fees and commissions of $441 million increased $31 million, or 8%. Increased asset-backed, syndication and fixed income origination fees, premiums and commissions on insurance products related to the Zurich Life acquisition, and improved investment sales in the Retail line of business were the primary drivers of this increase. Partially offsetting these were lower fees resulting from the elimination of teller service fees.

        Service charges on deposits of $433 million increased $24 million, or 6%, resulting from higher Retail deposit service charges.

        Net securities gains from the investment portfolios were $68 million, compared to net securities losses of $29 million, an increase of $97 million. This increase primarily arose from the sale by One Equity Partners LLC of its controlling interest in Ability One Products Corp. and the overall performance of the principal investments portfolio, partially offset by security losses in the treasury investment portfolio.

3

        In the third quarter, trading produced gains of $23 million, a decrease of $120 million, or 84%, from trading gains of $143 million. This decrease resulted from the decline in the fair value of the credit derivatives portfolio, which is used to hedge the commercial loan portfolio and limit exposures to specific credits, partially offset by increased derivatives trading revenue.

Year-to-Date Results

Banking fees and commissions of $1.3 billion decreased $24 million, or 2%. This decrease was the result of lower fees from the intentional reduction of non-branded ATM machines and elimination of the teller service fee, partially offset by the increase in asset-backed origination fees.

        Credit card revenue of $2.7 billion decreased by $111 million, or 4%, driven by a lower margin on securitized loans, offset by higher interchange fees from increased card usage volume.

        Service charges on deposits of $1.2 billion increased by $51 million, or 4%. This increase stemmed from higher Retail deposit service charges.

        Net investment securities gains from treasury activities and the principal investment portfolios were $289 million, an increase of $240 million. This increase was primarily a result of a gain on the sale of an investment held in the principal investment portfolio. Valuation adjustments included in each period’s net securities gains were a result of changes in the value of principal investments, the interest rate environment and economic conditions.

        Trading losses of $49 million decreased $283 million from trading gains of $234 million. This decrease was primarily the result of losses on the credit derivatives portfolio used to hedge the commercial loan portfolio and limit exposures for specific credits, partially offset by greater interest rate derivatives and foreign exchange trading revenue.

        Other income of $30 million increased $62 million, primarily the result of gains associated with the sale of commercial loans and securities acquired in satisfaction of debt, and an increase in securitization activity.

4

Noninterest Expense

Total noninterest expense of $2.4 billion increased $17 million. The components of noninterest expense for the periods indicated were:

Three Months Ended September 30
 Nine Months Ended September 30
  Change
 Change
(Dollars in millions)
 2003
 2002
 Amount
 Percent
 2003
 2002
 Amount
 Percent
Salaries and employee benefits:                                    
  Salaries   $ 1,031   $962   $69    7 % $3,053   $2,806   $247    9 %
  Employee benefits    162    159    3    2    526    491    35    7  
    Total salaries and employee benefits    1,193    1,121    72    6    3,579    3,297    282    9  
Occupancy    175    158    17  11  505    485    20    4  
Equipment    119    107    12    11    347    308    39    13  
Outside service fees and processing    290    302    (12 )  (4 )  838    969    (131 )  (14 )
Marketing and development    253    292    (39 )  (13 )  694    828    (134 )  (16 )
Telecommunication    58    74    (16 )  (22 )  160    308    (148 )  (48 )
Intangible amortization    34    32    2    6    98    94    4    4  
Other expense    299    318    (19 )  (6 )  900    949    (49 )  (5 )
  Total noninterest expense before  
    restructuring-related reversals    2,421    2,404    17  1  7,121    7,238    (117 )  (2 )
Restructuring-related reversals    -    -  -    -    -    (63 )  63    N/M  
    Total noninterest expense   $ 2,421   $2,404   $17  1 $7,121   $7,175   $(54 )  (1 )
Headcount    71,240    73,535    (2,295 )  (3 )
Efficiency ratio    58.7 %  57.3 %  1.4 %    58.3 %  56.7 %  1.6 %

Quarterly Results

Salaries and employee benefits increased $72 million, or 6%. Higher volume-based commissions incurred by Retail and increased stock option expense for the Corporation contributed to increased compensation levels. Stock option expense includes a new grant for 2003 as well as the amortization expense of the 2002 grant. Overall employee benefits expense also increased. These increases were partially offset by a reduction in headcount.

        Occupancy expense increased $17 million, or 11%. A combination of increased rent and other occupancy expenses, as well as branch expansion costs incurred by Retail, were the main contributing factors.

        Equipment expense increased $12 million, or 11%, as additional depreciation expense was incurred on fixed assets acquired in the Corporation’s systems conversion efforts.

        Marketing and development expense decreased $39 million, or 13%. This decrease was primarily the result of lower advertising expenditures for Card Services, partially offset by an increase in Retail’s marketing spend.

        Telecommunications expense decreased $16 million, or 22%, as the Corporation realized cost savings related to terminated and renegotiated vendor contracts.

        Other expense decreased $19 million, or 6%. Lower operating and fraud costs were the main drivers of this decrease, partially offset by increased expenses related to the acquisition of Zurich Life. Other expense includes freight and postage expense of $62 million and $63 million for 2003 and 2002, respectively.

Year-to-Date Results

Salaries and employee benefits increased $282 million, or 9%. This increase resulted from higher base and incentive compensation and benefits expense, partially offset by a reduction in headcount. The expense related to the fair value method of accounting for stock option and stock purchase plans for the nine months ended 2003 and 2002 amounted to $50 million and $28 million, respectively. The Corporation adopted the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” in 2002.

        Occupancy expense increased $20 million, or 4%. A combination of increased rent and other occupancy expenses, as well as branch expansion costs incurred by Retail, were the main contributing factors.

5

        Equipment expense increased $39 million, or 13%, as additional depreciation expense was incurred on fixed assets acquired in the Corporation’s systems conversion efforts.

        Outside service fees and processing expense decreased $131 million, or 14%. The Corporation continued to experience operational efficiencies resulting from renegotiated vendor contracts and the Corporation’s systems conversion efforts.

        Marketing and development expense decreased $134 million, or 16%. This decrease was primarily the result of lower advertising expenditures for Card Services, partially offset by an increase in Retail’s marketing spend.

        Telecommunications expense decreased $148 million, or 48%, as the Corporation realized cost savings as a result of the terminated and renegotiated vendor contracts.

        Other expense decreased $49 million, or 5%, while reinvestment in the Corporation’s infrastructure continued. This decrease was a result of lower operating and fraud expenses, partially offset by increased expenses related to the acquisition of Zurich Life. Other expense includes freight and postage expense of $186 million and $193 million for 2003 and 2002, respectively.

        The year-ago period contained a benefit of $63 million for restructuring charge reversals.

Provision for Credit Losses

Provision for credit losses was $416 million for the third quarter and $1.4 billion for the first nine months of 2003, compared to $587 million and $1.9 billion for 2002, respectively. These decreases were mainly the result of improving credit quality. For the three- and nine-month periods ended September 30, 2003, Commercial Banking continued to experience a reduction in the size of its loan portfolio. This, along with continued improvement in credit quality, led to the decision to release $150 million and $245 million of corporate banking credit loss reserves through the provision for credit losses for the three and nine-month periods, respectively. These reserve releases were partially offset by an increased provision in the current quarter in Card Services resulting from slightly higher losses, and an increase in provision of $85 million in the second quarter of 2003 in the Corporate line of business related to the change in the overall risk profile of the non-core portfolios.

Applicable Income Taxes

The Corporation’s income before income taxes, as well as applicable income tax expense and effective tax rate for each of the periods indicated were:

Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions) 2003 2002 2003 2002
Income from continuing operations before income taxes     $ 1,247   $ 1,163   $ 3,605   $ 3,504  
Applicable income taxes    373    350    1,073    1,080  
Effective tax rate    30 %  30 %  30 %  31 %
Income from discontinued operations before income taxes   $ 14   $ 15   $ 39   $ 45  
Applicable income taxes    5    5    14    16  
Effective tax rate    36 %  33 %  36 %  36 %
Income before income taxes   $ 1,261   $ 1,178   $ 3,644   $ 3,549  
Applicable income taxes    378    355    1,087    1,096  
Effective tax rate    30 %  30 %  30 %  31 %

        Applicable income tax expense for all periods included the benefit from tax-exempt income, tax-advantaged investments and general business tax credits, partially offset by the effect of nondeductible expenses.

6

BUSINESS SEGMENT RESULTS

The Corporation is managed on a line of business basis. The business segments’ financial results presented reflect the current organization of the Corporation. For a detailed discussion of the various business activities of the Corporation’s business segments, see pages 38-51 of the Corporation’s 2002 Annual Report.

        As a result of the Corporation’s announced agreement to sell its corporate trust services business, the results of these operations have been transferred from the Investment Management line of business to the Corporate line of business and are reported as discontinued operations for the current and prior periods.

        The following table summarizes income (loss) from continuing operations by line of business for the periods indicated:

Three Months Ended September 30
 Nine Months Ended September 30
(In millions)
     2003
     2002
     2003
     2002
Retail   $           392   $           361   $           1,160   $           1,096  
Commercial Banking  361   179   827   469  
Card Services  285   298   812   845  
Investment Management (1)  91   79   240   264  
Corporate   (255 ) (104 ) (507 ) (250 )
  Income from continuing operations  $           874   $           813   $           2,532   $           2,424  
  (1) Prior period data has been adjusted for the transfer of corporate trust services from Investment Management to the Corporate line of business where it is now reported as discontinued operations (see page 27).

BUSINESS SEGMENT RESULTS AND OTHER DATA

The information provided in each of the line of business tables is based on management information systems, assumptions and methodologies that are under continual review by management. Information provided beginning with the caption entitled “Financial Performance” is included herein for analytical purposes only.

7

Retail
Retail provides a broad range of financial products and services, including deposits, investments, loans, insurance, and online banking to consumers and small business customers.

Three Months Ended September 30
 Nine Months Ended September 30
Change
 Change
(Dollars in millions)
 2003
 2002
 Amount
 Percent
 2003
 2002
 Amount
 Percent
INCOME STATEMENT DATA:                                    
Net interest income-FTE (1) (2)   $1,102 $1,067 $35  3 % $3,301   $3,208 $ 93    3 %
  Banking fees and commissions (3)    170    170    -    -    534    562    (28 )  (5 )
  Credit card revenue (4)    53    51    2    4    165    143    22    15  
  Service charges on deposits (5)    242    213    29    14    671    610    61    10  
  Other income    28    2    26    N/M    43    26    17    65  
    Total noninterest income    493    436    57    13    1,413    1,341    72    5  
      Total revenue, net of interest expense    1,595    1,503    92    6    4,714    4,549    165    4  
                                  
Provision for credit losses    139    114    25    22    363    360    3    1  
                                  
Salaries and employee benefits    390    377    13    3    1,183    1,140    43    4  
Other expense    449    439    10    2  1,341  1,330  11   1
Total noninterest expense before                                  
  restructuring-related reversals    839    816    23    3    2,524    2,470    54    2  
Restructuring-related reversals    -  -    -    -    -  (18 )  18    N/M  
  Total noninterest expense    839    816    23    3    2,524    2,452    72    3  
Income before income taxes    617    573    44  8  1,827  1,737  90   5
Applicable income taxes    225    212    13    6    667    641    26    4  
  Net income (6)   $ 392   $ 361   $ 31    9 % $ 1,160   $ 1,096   $ 64    6 %
FINANCIAL PERFORMANCE:  
Return on average common equity    33 %  30 %  3 %    32 %  31 %  1 %
Efficiency ratio    53    54    (1 )      54    54    -      
Headcount    30,867    32,753    (1,886 )  (6 )%
ENDING BALANCES:  
  Small business commercial   $10,122 $9,899 $223  2 %
  Home equity    25,252    18,696    6,556    35  
  Vehicle    13,841    15,001    (1,160 )  (8 )
  Other personal loans    6,199    7,118    (919 )  (13 )
      Total loans (7) (8)    55,414    50,714    4,700    9  
                                  
Assets    58,080    54,174    3,906    7                  
                                  
Demand deposits    29,642    26,607    3,035    11  
Savings    40,581    38,130    2,451    6  
  Core deposits    70,223    64,737    5,486    8  
Time    18,616    23,000    (4,384 )  (19 )
  Total deposits    88,839    87,737    1,102    1  
                                  
Equity    4,774    4,774    -    -                  
AVERAGE BALANCES:  
  Small business commercial   $10,126 $9,891 $235  2 % $10,031   $9,846 $ 185    2 %
  Home equity    24,499    17,872    6,627    37    22,847    16,836    6,011    36  
  Vehicle    13,962    14,574    (612 )  (4 )  14,125  14,404    (279 )  (2 )
  Other personal loans    6,147    6,773    (626 )  (9 )  6,415    7,184    (769 )  (11 )
      Total loans (7)    54,734    49,110    5,624    11    53,418    48,270    5,148    11  
                                  
Assets    57,467    52,688    4,779    9    56,263    51,948    4,315    8  
                                  
Demand deposits    29,632    26,085    3,547    14    28,686    25,726    2,960    12  
Savings    40,354    38,095    2,259    6    40,015    37,677    2,338    6  
  Core deposits    69,986    64,180    5,806    9    68,701    63,403    5,298    8  
Time    18,985    23,759    (4,774 )  (20 )  20,079  24,643    (4,564 )  (19 )
  Total deposits    88,971    87,939    1,032    1    88,780    88,046    734    1  
                                  
Equity    4,774    4,774    -    -    4,774    4,774    -    -  

8

Retail – continued

Three Months Ended September 30
 Nine Months Ended September 30
Change
 Change
(Dollars in millions)
 2003
 2002
 Amount
 Percent
 2003
 2002
    Amount
 Percent
CREDIT QUALITY:                                    
Net charge-offs:  
  Small business commercial   $ 14   $ 14   $ -    0 % $ 41   $ 46   $ (5 )  (11 )%
  Home equity    47    24    23    96    100    74    26    35  
  Vehicle    56    53    3    6    149    159    (10 )  (6 )
  Other personal loans    27    26    1    4    69    81    (12 )  (15 )
      Total net charge-offs    144    117    27    23    359    360    (1 )  -  
Annualized net charge-off ratios:  
  Small business commercial    0.55 %  0.57 %  (0.02 )%    0.54 %  0.62 %  (0.08 )%
  Home equity    0.77  0.54  0.23    0.58  0.59  (0.01 )
  Vehicle    1.60  1.45  0.15    1.41  1.47  (0.06 )
  Other personal loans    1.76  1.54  0.22      1.43  1.50  (0.07 )
      Total net charge-offs    1.05  0.95  0.10      0.90  0.99  (0.09 )
Nonperforming assets:  
  Commercial   $ 268   $ 273   $ (5 )  (2 )%
  Consumer (9)    305    304    1    -  
Total nonperforming loans (9) (10)    573    577    (4 )  (1 )
    Other, including other real estate owned ("OREO")    117    180    (63 )  (35 )
      Total nonperforming assets    690    757    (67 )  (9 )
                                  
Allowance for credit losses   $ 683   $ 681   $ 2    -  
Allowance to period end loans (8)    1.29 %  1.41 %  (0.12 )%
Allowance to nonperforming loans (9) (10)    120    119    1  
Nonperforming assets to related assets (11)    1.24  1.49  (0.25 )
DISTRIBUTION:  
Number of:  
  Banking centers    1,810    1,779    31    2 %
  ATMs    4,350    4,122    228    6  
  Relationship bankers    3,139    2,591    548    21  
  On-line customers (in thousands)    2,184    1,326    858    65  
  Personal demand accounts (in thousands)    4,684    4,339    345    8  
  Business demand accounts (in thousands)    508    491    17    3  
  Debit cards issued (in thousands)    5,104    4,609    495    11  
RETAIL BROKERAGE:  
Mutual fund sales   $ 671   $ 575   $ 96    17% $2,022 $1,792 $ 230    13%
Annuity sales    895    752    143    19    2,420    2,363    57    2  
  Total investment sales volume    1,566    1,327    239    18    4,442    4,155    287    7  
                                  
Market value customer assets - end of period (in billions)    $31.9 $26.7 $5.2  19 %              
                                  
Number of customers - end of period (in thousands)    707    676    31    5  
Number of dedicated investment sales representatives    902    828    74    9  
  N/M–Not meaningful.
  (1) Net interest income is presented rather than gross interest income and gross interest expense because the Corporation relies primarily on net interest income to assess the performance of the segment and make resource allocations.
  (2) Net interest income-FTE includes tax equivalent adjustments of $6 million for the three months ended September 30, 2003 and 2002, respectively. For the nine months ended September 30, 2003 and 2002, tax equivalent adjustments were $17 million and $16 million, respectively.
  (3) Banking fees and commissions include insurance premiums, documentary fees, commitment fees, annuity and mutual fund commissions, leasing fees, safe deposit fees, official check fees, ATM interchange and miscellaneous other fee revenue.
  (4) Credit card revenue includes credit card fees in both the Card Services and Commercial lines of business, debit card fees, merchant fees and interchange fees.
  (5) Service charges on deposits include deficient balance fees, non-sufficient funds/overdraft fees and other service-related fees.
  (6) Net income before restructuring-related reversals, net of $7 million tax, was $1,085 million for the nine months ended September 30, 2002.
  (7) Certain loans, previously classified as other personal loans, were reclassified into loan categories which are more reflective of management’s view of the underlying loan characteristics. Prior period balances have been adjusted to conform to the current period presentation.
  (8) Loans include loans held for sale of $2,480 million and $2,517 million at September 30, 2003 and 2002, respectively. These amounts are not included in allowance for credit losses coverage statistics.
  (9) Includes consumer balances that are placed on nonaccrual status when the collection of contractual principal or interest becomes 90 days past due.
  (10) Nonperforming loans includes loans held for sale of $2 million and $3 million at September 30, 2003 and 2002, respectively. These amounts are not included in allowance for credit losses coverage statistics.
  (11) Related assets consist of loans outstanding, including loans held for sale, and other real estate owned.

9

Retail – continued

Quarterly Results

Retail net income was $392 million, up $31 million, or 9%.

        Total revenue, net of interest expense increased $92 million, or 6%, to $1.6 billion. Net interest income was $1.1 billion, up $35 million, or 3%, primarily from growth in home equity loans and core deposits, partially offset by spread compression and lower time deposits. Noninterest income was $493 million, up $57 million, or 13%, driven by higher mortgage-related revenue, deposit service charges, and investment sales. Partially offsetting these increases were the impact of the VISA® card interchange rate settlement and the elimination of the teller service and online bill-pay fees.

        Noninterest expense was $839 million, up 3%, or $23 million, primarily due to increased marketing spend and volume-based commissions, as well as branch expansion costs, partially offset by improved efficiencies in operating expenses.

        The provision for credit losses was $139 million, up 22%, or $25 million, driven primarily by continued growth in the loan portfolios. As a percentage of average loans, net charge-offs were 1.05%, up from 0.95%, primarily due to the sale of a small non-relationship portfolio.

        The allowance for credit losses of $683 million represented 1.29% of period-end loans. Nonperforming assets were $690 million, down 9%, driven by a decrease in other real estate owned.

Year-To-Date Results

Retail year-to-date net income was $1.2 billion, up $75 million, or 7% (excluding the $11 million after-tax benefit from a restructuring charge reversal in the prior year).

        Total revenue, net of interest expense increased 4% to $4.7 billion. Net interest income was $3.3 billion, up 3%, primarily from growth in home equity loans and core deposits, partially offset by spread compression and lower time deposits. Noninterest income was $1.4 billion, up 5%, as a result of higher deposit service charges, debit card revenue, and mortgage-related activity. Partially offsetting these increases were the intentional reduction of non-branded ATM machines and the elimination of the teller service and online bill-pay fees as well as the impact of the VISA interchange settlement.

        Noninterest expense increased $54 million, or 2% (excluding the $18 million pre-tax benefit from the restructuring charge reversal in the prior year), primarily due to increased collection expenses, marketing spend, benefit costs, volume-based commissions and incentive compensation. This increase was partially offset by lower fraud and operating expenses as well as other expense improvements.

        The provision for credit losses was $363 million, up $3 million, or 1%, driven by continued growth in the loan portfolios, partially offset by credit quality improvements in the vehicle and small business commercial portfolios. As a percentage of average loans, net charge-offs were 0.90%, down from 0.99%.

10

Commercial Banking
Commercial Banking offers a broad array of products, including global cash management, treasury services, capital markets, commercial cards, lending and other noncredit products and services to corporate banking, middle market banking and governmental customers.

Three Months Ended September 30
 Nine Months Ended September 30
    Change
   Change
(Dollars in millions)
 2003
 2002
 Amount
 Percent
 2003
 2002
 Amount
 Percent
INCOME STATEMENT DATA:                                    
Net interest income-FTE (1) (12)   $ 576   $ 605   $ (29 )  (5 )% $ 1,719   $ 1,858   $ (139 )  (7 )%
  Banking fees and commissions (3)    198    175    23    13    623    574    49    9  
  Credit card revenue (4)    27    21    6    29    77    55    22    40  
  Service charges on deposits (5)    186    188    (2 )  (1 )  546    545    1    -  
  Fiduciary and investment  
   management fees (13)    -    -    -    -    -    (1 )  1    N/M  
  Investment securities gains (losses)     31     (12 )   43     N/M   29     (13 )   42     N/M  
  Trading gains (losses) (14)     30     143     (113 )   (79 )   (28 )   250   (278 )   N/M  
  Other income (loss)    (11 )  (78 )  67    86    7    (148 )  155    N/M  
    Total noninterest income    461    437    24    5    1,254    1,262    (8 )  (1 )
      Total revenue, net of interest expense    1,037    1,042    (5 )  -    2,973    3,120    (147 )  (5 )
Provision for credit losses    (51 )  237    (288 )  N/M    87    792    (705 )  (89 )
Salaries and employee benefits    296    269    27    10    868    789    79    10  
Other expense    286    315    (29 )  (9 )  881    947    (66 )  (7 )
Total noninterest expense before  
  restructuring-related reversals    582    584    (2 )  -    1,749    1,736    13    1  
Restructuring-related reversals    -    -    -    -    -    (4 )  4    N/M  
  Total noninterest expense    582    584    (2 )  -    1,749    1,732    17    1  
Income before income taxes    506    221    285    N/M    1,137    596    541    91  
Applicable income taxes    145    42    103    N/M    310    127    183    N/M  
  Net income (15)   $ 361   $ 179   $ 182    N/M   $ 827   $ 469   $ 358    76  
Memo-Revenue by activity:  
  Lending-related revenue   $ 454   $ 390   $ 64    16 % $ 1,318   $ 1,239   $ 79    6 %
  Credit derivative hedge portfolio    (51 )  101    (152 )  N/M    (248 )  101    (349 )  N/M  
  Global treasury services    405    426    (21 )  (5 )  1,190    1,254    (64 )  (5 )
  Capital markets (16)    234    154    80    52    688    518    170    33  
  Other    (5 )  (29 )  24    83    25    8    17    N/M  
FINANCIAL PERFORMANCE:  
Return on average common equity    19 %  10 %  9 %  15 %  8 %  7 %
Efficiency ratio    56    56    -    59    56    3  
Efficiency ratio excluding credit hedge portfolio    53    62    (9 )  54    57    (3 )
Headcount:  
  Corporate banking  
    (including capital markets)    2,624    2,306    318    14 %
  Middle market    2,551    2,942    (391 )  (13 )
  Global treasury services    3,234    3,403    (169 )  (5 )
  Operations, technology, and other administration    1,930    1,967    (37 )  (2 )
    Total headcount    10,339    10,618    (279 )  (3 )
ENDING BALANCES:  
Loans (17)   $54,493 $62,991 $(8,498 )  (13) %  
Assets    102,410    95,649    6,761    7  
Demand deposits    27,287    24,514    2,773    11  
Savings    11,269    7,981    3,288    41  
Time    1,024    9,678    (8,654 )  (89 )
Foreign offices    11,619    9,400    2,219    24  
  Total deposits    51,199    51,573    (374 )  (1 )
Equity    7,409    7,365    44    1  
AVERAGE BALANCES:  
Loans   $55,090 $63,684 $(8,594 )  (13 )% $57,681 $67,238 $(9,557 )  (14) %
Assets    100,545    92,709    7,836    8    97,340    95,423    1,917    2  
Demand deposits    25,929    21,728    4,201    19    24,315    22,281    2,034    9  
Savings    10,983    7,636    3,347    44    10,106    2,859    7,247    N/M  
Time    2,968    8,787    (5,819 )  (66 )  4,834    13,484    (8,650 )  (64 )
Foreign offices    10,413    8,932    1,481    17    9,960    8,467    1,493    18  
  Total deposits    50,293    47,083    3,210    7    49,215    47,091    2,124    5  
Equity    7,409    7,365    44    1    7,409    7,365    44    1  

11

Commercial Banking – continued

Three Months Ended September 30
 Nine Months Ended September 30
Change
 Change
(Dollars in millions)
 2003
 2002
 Amount
 Percent
 2003
 2002
 Amount
 Percent
CREDIT QUALITY:                                    
Net charge-offs   $ 99   $ 237   $ (138 )  (58 )% $ 332   $ 792   $ (460 )  (58 )%
Annualized net charge-off ratio    0.72 %  1.49 %  (0.77) %    0.77 %  1.57% (0.80) %  
Nonperforming assets:  
  Nonperforming loans (18)   $ 1,387   $ 2,040   $ (653 )  (32 )%
  Other, including OREO    40    27    13    48  
Total nonperforming assets    1,427    2,067    (640 )  (31 )
Allowance for credit losses    2,826    3,071    (245 )  (8 )
Allowance to period end loans (17)    5.23 %  4.89 %  0.34 %
Allowance to nonperforming loans (18)    204    157    47  
Nonperforming assets to related assets (11)    2.62  3.28  (0.66)
CORPORATE BANKING:  
Loans-ending balance   $ 27,375   $ 31,152   $ (3,777 )  (12 )%
          -average balance    27,544    31,600    (4,056 )  (13 ) $ 29,047   $ 33,484   $ (4,437 )  (13 )
Deposits-ending balance    24,414    28,803    (4,389 )  (15 )
              -average balance    25,221    25,871    (650 )  (3 )  25,415    25,406    9    -  
Credit quality:  
  Net charge-offs    56    160    (104 )  (65 )  200    491    (291 )  (59 )
  Annualized net charge-off ratio    0.81 %  2.03 %  (1.22) %    0.92 %  1.95 %  (1.03) %  
  Nonperforming loans   $ 526   $ 1,010   $ (484 )  (48 )
  Nonperforming loans to total loans    1.92 %  3.24 %  (1.32) %
SYNDICATIONS:  
Lead arranger deals:  
  Volume (in billions)   $ 15.3   $ 11.6   $ 3.7    32 % $ 46.0   $ 44.6   $ 1.4    3 %
  Number of transactions    76    69    7    10    217    184    33    18  
  League table standing-rank    4    4    -    -                      
  League table standing-market share    7 %  6 %  1 %       7 %  6 %  1 %
MIDDLE MARKET BANKING:  
Loans-ending balance   $ 27,118   $ 31,839   $ (4,721 )  (15 )%
          -average balance    27,546    32,084    (4,538 )  (14 ) $ 28,634   $ 33,754   $ (5,120 )  (15 )
Deposits-ending balance    26,785    22,770    4,015    18  
              -average balance    25,072    21,212    3,860    18    23,800    21,685    2,115    10  
Credit quality:  
  Net charge-offs    43    77    (34 )  (44 )%  132    301    (169 )  (56 )%
  Annualized net charge-off ratio    0.62 %  0.96 %  (0.34) %    0.61 %  1.19 %  (0.58) %
  Nonperforming loans   $ 861   $ 1,030   $ (169 )  (16 )%
  Nonperforming loans to total loans    3.18 %  3.24 %  (0.06 )%
  For additional footnote detail see page 9.
  (12) Net interest income-FTE includes tax equivalent adjustments of $28 million and $24 million for the three months ended September 30, 2003 and 2002, respectively. For the nine months ended September 30, 2003 and 2002, tax equivalent adjustments were $76 million and $68 million, respectively.
  (13) Fiduciary and investment management fees include asset management fees, personal trust fees, other trust fees and advisory fees.
  (14) Trading gains (losses) primarily includes realized and unrealized mark-to-market changes from trading assets, derivative financial instruments and foreign exchange products.
  (15) Net income before restructuring-related reversals, net of $1 million tax, was $466 million for the nine months ended September 30, 2002.
  (16) Capital markets includes trading income and underwriting, syndicated lending and advisory fees.
  (17) Loans include loans held for sale of $471 million and $230 million at September 30, 2003 and 2002, respectively. These amounts are not included in allowance for credit losses coverage statistics.
  (18) Nonperforming loans include loans held for sale of $3 million and $90 million at September 30, 2003 and 2002, respectively. These amounts are not included in allowance for credit losses coverage statistics.

Quarterly Results

Commercial Banking net income increased $182 million to $361 million. Excluding the $95 million after-tax reduction in the allowance for credit losses, net income was $266 million, up 49% from $179 million, driven by substantially improved credit quality and significant growth in capital markets. These improvements were partially offset by declining loan volumes and deposit margin compression.

12

Commercial Banking – continued

Net interest income decreased 5% to $576 million, reflecting a 13% reduction in average loan volume and compression in deposit spreads in the low interest rate environment. These decreases were partially offset by improvement in loan spreads, particularly in corporate banking. Loan balances continued to decline, reflecting decreased demand for financing. Despite declines in corporate banking loan balances, investment grade commitments increased in the current quarter. Middle market loan demand, however, lagged due to lower utilization and tightened credit standards.

        Noninterest income was $461 million, which included the $51 million negative impact of the credit derivatives hedge portfolio and the offsetting positive impact of $51 million from the sale of loans and securities primarily acquired in satisfaction of debt. Noninterest income of $437 million in the prior year included a $101 million positive impact from the credit derivatives hedge portfolio and a $23 million loss on the sale of loans and securities acquired in satisfaction of debt. Excluding these items, the dramatic improvement was $102 million, or 28%, driven by strong capital markets results, including greater derivatives trading revenue and higher asset-backed, syndication and fixed income origination fees.

        Continued expense management efforts held noninterest expense relatively flat at $582 million despite increased expenses related to stock options and employee benefits.

        Credit quality continued to improve, as indicated by a $138 million, or 58%, decline in net charge-offs.

        The reduced size of the loan portfolio and the continued improvement in credit quality led to a $245 million reduction in the allowance for credit losses. Nonperforming loans declined 32% to $1.4 billion, reflecting declines of 48% in corporate banking and 16% in middle market banking.

Year-To-Date Results

Commercial Banking reported net income of $827 million, up $358 million, or 76%. The current year included a $156 million after-tax reduction in the allowance for credit losses and a $158 million after-tax loss on the credit derivatives hedge portfolio. The prior year includes $64 million of after-tax income on the credit derivatives hedge portfolio. Excluding the impact of these items in both periods, net income was $829 million compared to $405 million, an increase of 105%. This improvement was primarily driven by improved credit quality and strength in capital markets, partially offset by the impact of declining loan volumes and deposit margin compression.

        Net interest income was $1.7 billion, down $139 million, or 7%, reflecting a 14% reduction in average loan volume and compressed deposit spreads due to falling interest rates, partially offset by improved loan spreads, particularly in corporate banking.

        Noninterest income (excluding the impact of the credit derivatives hedge portfolio) was $1.5 billion, an increase of $341 million, or 29%, from the first three quarters of 2002. This increase was primarily driven by higher revenue from a number of capital markets activities, gains on sales of loans and securities acquired in satisfaction of debt in the current year compared to losses in the prior year, gains in tax-oriented investments and increased revenue from global treasury services.

        Ongoing expense management efforts held noninterest expense fairly flat at $1.7 billion, despite higher compensation-related expenses.

        Credit quality improved significantly from 2002, as demonstrated by a $460 million, or 58%, reduction in net charge-offs. The provision for credit losses of $87 million also reflected a $245 million reduction in the allowance for credit losses.

13

Card Services
Card Services offers customers co-brand, affinity and other credit cards, including cards related to leading corporations, financial institutions, universities, sports franchises and affinity organizations. All of these cards carry the respective VISA or MasterCard® brand names.

        Card Services is the third-largest credit card provider in the United States and the largest VISA credit card issuer in the world. Card Services is also a leader in online card marketing and customer service, with more than 4.7 million registered users of its website.

Reported Basis

Three Months Ended September 30
 Nine Months Ended September 30
Change
 Change
(Dollars in millions)
 2003
 2002
 Amount
 Percent
 2003
 2002
    Amount
 Percent
INCOME STATEMENT DATA:                                    
Net interest income-FTE (1) (19) (20)   $414   $359   $55    15 % $1,055   $878   $177    20 %
  Banking fees and commissions (3)    5    13    (8 )  (62 )  25    55    (30 )  (55 )
  Credit card revenue (4) (20)    895    903    (8 )  (1 )  2,494    2,647    (153 )  (6 )
  Other income/(loss)    (12 )  (24 )  12    50    18    (14 )  32    N/M  
    Total noninterest income    888    892    (4 )  -  2,537    2,688    (151 )  (6 )
      Total revenue, net of interest expense    1,302    1,251    51  4    3,592    3,566    26  1
Provision for credit losses    246    148    98    66    589    363    226    62  
Salaries and employee benefits    157    151    6    4    466    439    27    6  
Other expense    436    464    (28 )  (6 )  1,218    1,401    (183 )  (13 )
Total noninterest expense before  
  restructuring-related reversals    593    615    (22 )  (4 )  1,684    1,840    (156 )  (8 )
Restructuring-related reversals    -    -  -    -    -    (19 )  19    N/M  
  Total noninterest expense    593    615    (22 )  (4 )  1,684    1,821    (137 )  (8 )
Income before income taxes    463    488    (25 )  (5 )  1,319    1,382    (63 )  (5 )
Applicable income taxes    178    190    (12 )  (6 )  507    537    (30 )  (6 )
  Net income (21)   $285   $298   $(13 )  (4 )% $812   $845   $(33 )  (4 )%
Memo-Net securitization gains  
   (amortization)   $(13 ) $(11 ) $(2 )  (18 )%  5   $(55 ) $60    N/M  
FINANCIAL PERFORMANCE:  
Return on average common equity    18 %  18 %  - %    17 %  18 %  (1 )%
Efficiency ratio    46    49    (3 )      47    51  (4 )
Headcount    10,366    10,508    (142 )  (1 )%
ENDING BALANCES:  
Owned loans:  
  Held in portfolio   $ 6,449   $ 6,751   $ (302 )  (4 )%
  Held for sale (22)    7,729    5,173    2,556    49  
     Total owned loans    14,178    11,924    2,254    19  
Seller's interest and accrued interest receivable    23,285    24,387    (1,102 )  (5 )
  Total receivables    37,463    36,311    1,152    3  
Assets    42,768    40,567    2,201    5  
Equity    6,361    6,361    -    -  
AVERAGE BALANCES:  
Owned loans:  
  Held in portfolio   $ 6,440   $5,883   $557    9 % $7,100   $5,421   $1,679    31 %
  Held for sale    10,001    4,640    5,361    N/M    7,213    3,323    3,890    N/M  
    Total owned loans    16,441    10,523    5,918    56    14,313    8,744    5,569    64  
Seller's interest and accrued interest receivable    21,829    24,236    (2,407 )  (10 )  23,839    22,897    942    4  
  Total receivables    38,270    34,759    3,511    10    38,152    31,641    6,511    21  
Assets    43,105    38,804    4,301    11    43,390    36,023    7,367    20  
Equity    6,361    6,361    -    -    6,361    6,361    -    -  

14

Card Services – continued

Three Months Ended September 30
 Nine Months Ended September 30
Change
 Change
(Dollars in millions)
 2003
 2002
 Amount
 Percent
 2003
 2002
    Amount
 Percent
CREDIT QUALITY:                                    
Net charge-offs   $211   $131   $80    61 % $554   $346   $208    60 %
Annualized net charge-off ratio    5.13 %  4.99 %  0.14 %    5.16 %  5.30 %  (0.14 )%
Delinquency ratio:  
  30+ days    3.82    2.74    1.08      
  90+ days    1.78    1.11    0.67  
Allowance for credit losses   $431 $396  35  9
Allowance to period end loans held in portfolio    6.68 %  5.87 %  0.81 %
OTHER DATA:  
Charge volume (in billions)   $42.8   $39.5   $3.3    8 % $121.6   $111.9   $9.7    9 %
New accounts opened (in thousands) (23)    895    2,005    (1,110 )  (55 )  3,693    3,929    (236 )  (6 )
Credit cards issued (in thousands)    51,500  48,952  2,548  5
Number of CardmemberServices.com  
  customers (in millions)    4.7    3.0    1.7    57  
Paymentech (in millions):            
  Bank card volume   $ 39,271   $ 30,711   $ 8,560    28 % $ 110,973   $ 88,748   $ 22,225    25 %
  Total transactions    1,417    1,063    354    33    3,977    3,019    958    32  
  For additional footnote detail see pages 9 and 12.
  (19) Net interest income-FTE did not have tax equivalent adjustments for the three and nine months ended September 30, 2003 and 2002, respectively.
  (20) On a reported basis, income earned on securitized loans is reported in credit card revenue and income earned on seller’s interest is reported in net interest income. On a managed basis, net interest income, noninterest income and provision for credit losses are reported in their respective income statement lines.
  (21) Net income before restructuring-related reversals, net of $7 million tax, was $833 million for the nine months ended September 30, 2002.
  (22) On a reported basis, loans held for sale are not included in allowance for credit losses coverage statistics.
  (23) Net accounts opened includes originations, purchases and sales.

Quarterly Results – Reported

Card Services net income was $285 million, down 4%, as continued margin compression and the higher provision for credit losses offset the benefit of higher loan volume.

        Total revenue increased 4% to $1.3 billion. Net interest income increased 15% to $414 million, reflecting higher owned loan balances, partially offset by modest margin compression. Average owned loan balances were $16.4 billion, an increase of $5.9 billion, or 56%, due to a lower percentage of seller’s interest and accrued interest receivable to managed loans in the current period. End-of-period owned loans increased $2.3 billion, or 19%. Noninterest income remained relatively flat at $888 million, primarily driven by higher securitized and owned loans offset by lower margin earned on securitized loans.

        Paymentech Inc., the Corporation’s merchant card processor, reported an increase in total revenue of 18% to $148 million, resulting from a 33% increase in total transactions and a 28% increase in bank card volume, driven primarily by the purchase of the Scotia Bank merchant acquirer business in the fourth quarter 2002.

        Noninterest expense was $593 million, a decline of 4%, due to reduced marketing expenses partially offset by higher Paymentech expenses.

        Provision for credit losses was $246 million, an increase of $98 million, or 66%, which included a $35 million increase in the allowance for credit losses. The net charge-off ratio was 5.13%, up from 4.99%. The 30-day delinquency ratio increased to 3.82% from 2.74%.

        The Corporation believes that it is more meaningful to discuss credit performance on a managed basis as the on-balance sheet portfolio has a greater percentage of new originations and, therefore, is less seasoned. See the Managed Basis section below for this information.

15

Card Services – continued

Year-to-Date Results – Reported

Card Services’ year-to-date net income was $812 million, down 3% (excluding the $12 million after-tax benefit from a restructuring charge reversal in the prior year) as continued margin compression and the higher provision for credit losses offset the benefit of higher loan volume and lower noninterest expense.

        Total revenue increased 1% to $3.6 billion. Net interest income increased 20% to $1.1 billion, reflecting higher owned loan balances, partially offset by margin compression. Average owned loan balances were $14.3 billion, an increase of $5.6 billion, or 64%, due to a lower percentage of average securitized loans to average managed loans. Noninterest income decreased 6% to $2.5 billion, primarily driven by lower margin earned on securitized loans partially offset by higher interchange fees from increased card usage volume and increased securitization activity. Noninterest income in both the current and prior year included modest gains from the sale of small portfolios.

        Paymentech Inc., the Corporation’s merchant card processor, reported an increase in total revenue of 17% to $431 million, resulting from a 32% increase in total transactions and a 25% increase in bank card volume, driven primarily by the purchase of the Scotia Bank merchant acquirer business in the fourth quarter 2002.

        Noninterest expense was $1.7 billion, a decline of 8% (excluding the $19 million pre-tax benefit from a restructuring charge reversal in the prior year) due to reduced marketing expenses and operational efficiencies partially offset by higher Paymentech expenses.

        Provision for credit losses was $589 million, an increase of $226 million, or 62%. The net charge-off ratio was 5.16%, down from 5.30%.

         The Corporation believes that it is more meaningful to discuss credit performance on a managed basis since the on-balance sheet portfolio has a greater percentage of new originations and, therefore, is less seasoned. See the Managed Basis section below for this information.

Managed Basis

Through securitization, the Corporation transforms a substantial portion of its credit card receivables into securities, which are sold to investors. Securitization impacts the Corporation’s consolidated balance sheet by removing those credit card receivables that have been sold and by reclassifying those credit card receivables whose ownership has been transformed into certificate form (referred to as “seller’s interest”) from loans to investments. Gain or loss on the sale of credit card receivables, net of amortization of transaction costs and amortization from securitization repayments, is reported in other income. Securitization also impacts the Corporation’s consolidated income statement by reclassifying interest income and fees, interchange income, credit losses and recoveries related to securitized receivables as securitization income included in credit card revenue. Credit card interest income and fees, credit losses and recoveries related to credit card receivables that have been converted to certificate form are reclassified as investment income in net interest income.

        The Corporation evaluates its Card Services line of business trends on a managed basis, which treats securitization as a secured financing transaction and assumes that receivables are still on the balance sheet. The Corporation manages its Card Services operations on a managed basis because the receivables that are securitized are subject to underwriting standards comparable to the owned portfolio and are serviced by operating personnel without regard to ownership. The Corporation believes that investors should be informed, and often request information, about the credit performance of the entire managed portfolio in order to understand the quality of the Card Services originations and the related credit risks inherent in the owned portfolio and retained interests in securitizations. In addition, the Corporation funds its Card Services operations, reviews operating results and makes decisions about allocating resources, such as employees and capital, on a managed basis. See “Loan Securitizations” on page 43 of this report and Note 9, “Credit Card Securitizations,” on pages 94-95 of the Corporation’s 2002 Annual Report for additional information related to the Corporation’s securitization activity.

16

Card Services – continued

The following table presents Card Services information on a managed basis.

Three Months Ended September 30
 Nine Months Ended September 30
Change
 Change
(Dollars in millions)
 2003
 2002
 Amount
 Percent
 2003
 2002
    Amount
 Percent
INCOME STATEMENT DATA:                                    
Net interest income-FTE (1) (19) (20)   $ 1,605   $ 1,524   $ 81  5 % $4,570   $4,605 $(35 ) (1 )%
                                     
  Banking fees and commissions (3)    5    13    (8 )  (62 )  25    55    (30 )  (55 )
  Credit card revenue (4) (20)    477    460    17  4  1,331    1,296    35    3  
  Other income/(loss)    (12 )  (24 )  12    50    18    (14 )  32    N/M  
    Total noninterest income    470    449    21  5  1,374    1,337    37    3  
      Total revenue, net of interest expense    2,075    1,973    102  5  5,944    5,942    2  -
                                     
Provision for credit losses (20)    1,019    870    149    17    2,941    2,739    202    7  
                                     
Salaries and employee benefits    157    151    6    4    466    439    27    6  
Other expense    436    464    (28 )  (6 )  1,218    1,401    (183 )  (13 )
Total noninterest expense before  
  restructuring-related reversals    593    615    (22 )  (4 )  1,684    1,840    (156 )  (8 )
Restructuring-related reversals    -    -  -    -    -    (19 )  19    N/M  
  Total noninterest expense    593    615    (22 )  (4 )  1,684    1,821    (137 )  (8 )
Income before income taxes    463    488    (25 )  (5 )  1,319    1,382    (63 )  (5 )
Applicable income taxes    178    190    (12 )  (6 )  507    537    (30 )  (6 )
  Net income (21)   $285   $298   $(13 )  (4 )% $812   $845   $(33 )  (4 )%
Memo-Net securitization gains                    
 (amortization)   $(13 ) $(11 ) $(2 )  (18 ) $5   $(55 ) $60    N/M  
FINANCIAL PERFORMANCE:  
Percentage of average outstandings:  
  Net interest income - FTE    8.57 %  8.87 %  (0.30 )%    8.30 %  9.21 %  (0.91 )%
  Provision for credit losses    5.44  5.06  .38    5.34  5.48  (0.14 )
  Noninterest income    2.51  2.61  (0.10 )    2.50  2.67  (0.17 )
  Risk adjusted margin    5.64  6.42  (0.78 )    5.46  6.40  (0.94 )
  Noninterest expense    3.17  3.58  (0.41 )    3.06  3.64  (0.58 )
  Pretax income - FTE    2.47  2.84  (0.37 )    2.40  2.77  (0.37 )
  Net income    1.52  1.73  (0.21 )    1.48  1.69  (0.21 )
                                     
Return on average common equity    18    18    -    17    18    (1 )
Efficiency ratio    29    31    (2 )      28    31    (3 )
Headcount    10,366    10,508    (142 )  (1 )%
ENDING BALANCES:  
  Held in portfolio   $ 6,449   $6,751   $(302 )  (4 )%
  Held for sale (22)    7,729    5,173    2,556    49  
  Securitized    36,763    32,858    3,905    12  
  Seller's interest and accrued interest receivable    23,285    24,387    (1,102 )  (5 )
    Total loans    74,226    69,169    5,057    7  
                                     
Assets    79,531    73,425    6,106    8  
Equity    6,361    6,361    -    -  
AVERAGE BALANCES:  
  Held in portfolio   $ 6,440   $ 5,883   $ 557    9 % $ 7,100   $ 5,421   $ 1,679    31 %
  Held for sale    10,001    4,640    5,361    N/M    7,213    3,323    3,890    N/M  
  Securitized    36,029    33,442    2,587    8    35,424    35,184    240  1
  Seller's interest and accrued interest receivable    21,829    24,236    (2,407 )  (10 )  23,839    22,897    942    4  
    Total loans    74,299    68,201    6,098    9    73,576    66,825    6,751    10  
                                     
Assets    79,134    72,246    6,888    10    78,814    71,207    7,607    11  
Equity    6,361    6,361    -    -    6,361    6,361    -    -  

17

Card Services – continued

Three Months Ended September 30
 Nine Months Ended September 30
Change
 Change
(Dollars in millions)
 2003
 2002
 Amount
 Percent
 2003
 2002
 Amount
 Percent
CREDIT QUALITY:                                    
Net charge-offs   $ 984   $ 853   $ 131    15 % $ 2,906   $ 2,722   $ 184    7 %
                                     
Annualized net charge-off ratio    5.30 %  5.00 % 0.30 % 5.27 % 5.43 %  (0.16 )%
12 month lagged (24)    5.77    5.12    0.65    5.80  5.58  .22
                                     
Delinquency ratio:  
  30+ days    3.98    4.05    (0.07 )    
  90+ days    1.85    1.68    0.17  
                                     
Allowance for credit losses   $431 $396 35  9
                                     
Allowance to period end loans held in portfolio    6.68 %  5.87 %  0.81 %
OTHER DATA:  
Charge volume (in billions)   $ 42.8   $ 39.5   $ 3.3    8 % $ 121.6   $ 111.9   $ 9.7    9 %
New accounts opened (in thousands) (23)    895    2,005    (1,110 )  (55 )  3,693    3,929    (236 )  (6 )
Credit cards issued (in thousands)    51,500  48,952  2,548  5
Number of CardmemberServices.com  
  customers (in millions)    4.7    3.0    1.7    57  
Paymentech (in millions):      
  Bank card volume   $39,271 $30,711 $8,560  28 % $110,973 $88,748 $22,225  25 %
  Total transactions    1,417    1,063    354    33    3,977    3,019    958    32  
  For additional footnote detail see pages 9, 12 and 15.
  (24) 2002 ratio includes Wachovia net charge-offs but excludes Wachovia loans.

Quarterly Results – Managed

Card Services net income was $285 million, down 4%, as margin compression and the higher provision for credit losses offset the benefits of higher loan volume.

        Total revenue increased 5% to $2.1 billion. Net interest income increased 5% to $1.6 billion, reflecting the effect of higher average loan balances, partially offset by modest margin compression. Average managed loans were $74.3 billion, an increase of $6.1 billion, or 9%. End-of-period loans increased $5.1 billion, or 7%. Noninterest income increased 5% to $470 million, primarily resulting from the benefit of increased charge volume. Charge volume increased 8% to $42.8 billion.

        Paymentech Inc., the Corporation’s merchant card processor, reported an increase in total revenue of 18% to $148 million, resulting from a 33% increase in total transactions and a 28% increase in bank card volume, driven primarily by the purchase of the Scotia Bank merchant acquirer business in the fourth quarter 2002.

        Noninterest expense was $593 million, a decline of 4%, due to reduced marketing expenses partially offset by higher Paymentech expenses.

        Provision for credit losses increased $149 million, or 17%, to $1.0 billion, primarily driven by higher managed loan balances, higher non-bankruptcy losses and a $35 million increase in the allowance for credit losses. Credit ratios remained strong despite the increase in the managed net charge-off rate to 5.30% from the lower rate of 5.00%. The 30-day delinquency ratio decreased to 3.98% from 4.05%.

Year-To-Date Results – Managed

Card Services’ year-to-date net income was $812 million, down 3% (excluding the $12 million after-tax benefit from a restructuring charge reversal in the prior year) as margin compression and the higher provision for credit losses offset the benefit of higher loan volume and lower noninterest expense.

Total revenue remained relatively flat at $5.9 billion. Net interest income decreased 1% to $4.6 billion, reflecting the impact of margin compression partially offset by higher average loan balances. Average managed loans were $73.6 billion, an increase of $6.8 billion, or 10%. Noninterest income increased 3% to $1.4 billion primarily resulting from the benefit of increased charge volume and increased securitization activity. Charge volume increased 9% to $121.6 billion. Noninterest income in both the current and prior year included modest gains from the sale of small portfolios.

18

Card Services – continued

        Paymentech Inc., the Corporation’s merchant card processor, reported an increase in total revenue of 17% to $431 million, resulting from a 32% increase in total transactions and a 25% increase in bank card volume, driven primarily by the purchase of the Scotia Bank merchant acquirer business in the fourth quarter 2002.

        Noninterest expense was $1.7 billion, a decline of 8% (excluding the $19 million pre-tax benefit from a restructuring charge reversal in the prior year) due to reduced marketing expenses and operational efficiencies partially offset by higher Paymentech expenses.

        Provision for credit losses increased $202 million, or 7%, to $2.9 billion primarily driven by higher managed loan balances and an increase in the allowance for credit losses. The net charge-off rate was 5.27%, down from 5.43%.

19

Card Services – continued

        The following table reconciles line items presented on a reported basis with those presented on a managed basis:

Three Months Ended September 30
 Nine Months Ended September 30
(in millions):
 2003
 2002
 2003
 2002
INCOME STATEMENT DATA:          
Net interest income - FTE (1) 
  Reported data for the period  $      414   $      359   $      1,055   $      878  
  Securitization adjustments  1,191   1,165   3,515   3,727  
    Managed net interest income  1,605   1,524   4,570   4,605  
           
Credit card revenue: 
  Reported data for the period  $      895   $      903   $   2,494   $   2.647  
  Securitization adjustments  (418 ) (443 ) (1,163 ) (1,351 )
    Managed credit card revenue  477   460   1,331   1,296  
           
Noninterest income: 
  Reported data for the period  $      888   $      892   $   2,537   $   2,688  
  Securitization adjustments  (418 ) (443 ) (1,163 ) (1,351 )
    Managed noninterest income  470   449   1,374   1,337  
           
Total revenue, net of interest expense: 
  Reported data for the period  $   1,302   $   1,251   $   3,592   $   3,566  
  Securitization adjustments  773   722   2,352   2,376  
    Managed total revenue, net of interest expense  2,075   1,973   5,944   5,942  
           
 Provision for credit losses: 
  Reported data for the period  $      246   $      148   $      589   $      363  
  Securitization adjustments  773   722   2,352   2,376  
    Managed provision for credit losses  1,019   870   2,941   2,739  
ENDING BALANCES: 
Owned loans: 
  Held in portfolio  $   6,449   $   6,751  
  Held for sale (22)  7,729   5,173  
    Total owned loans  14,178   11,924  
Seller's interest and accrued interest receivable  23,285   24,387  
    Total receivables  37,463   36,311  
Securitized loans  36,763   32,858  
    Total managed loans  74,226   69,169  
           
Assets: 
  Reported  $ 42,768   $ 40,567  
  Securitization adjustments  36,763   32,858  
    Managed assets  79,531   73,425  
AVERAGE BALANCES: 
Owned loans: 
  Held in portfolio  $   6,440   $   5,883   $   7,100   $   5,421  
  Held for sale  10,001   4,640   7,213   3,323  
    Total owned loans  16,441   10,523   14,313   8,744  
Seller's interest and accrued interest receivable  21,829   24,236   23,839   22,897  
    Total receivables  38,270   34,759   38,152   31,641  
Securitized loans  36,029   33,442   35,424   35,184  
    Total managed loans  74,299   68,201   73,576   66,825  
           
Total assets: 
  Reported  $ 43,105   $ 38,804   $ 43,390   $ 36,023  
  Securitization adjustments  36,029   33,442   35,424   35,184  
    Managed assets  79,134   72,246   78,814   71,207  
CREDIT QUALITY: 
Net charge-offs: 
  Reported  $      211   $      131   $      554   $      346  
  Securitization adjustments  773   722   2,352   2,376  
    Managed net charge-offs  984   853   2,906   2,722  

20

Investment Management
The Investment Management Group (IMG) provides investment, insurance, trust and private banking services to individuals. IMG also provides investment and investment-related services, including retirement and custody services, securities lending and corporate trust services to institutions. As discussed in Note 3, “Acquisitions,” the Corporation acquired Zurich Life, a U.S. life and annuity operation. On July 24, 2003, the Corporation announced an agreement to sell the corporate trust services business, part of the Investment Management line of business. The sale price is approximately $720 million, of which approximately 10% is contingent upon business retention. The sale includes corporate, municipal, structured finance and escrow businesses as well as the document custody and London corporate trust operations. The closing of the transaction is expected in the fourth quarter. As a result, corporate trust services was transferred to the Corporate line of business where it is reported as discontinued operations.

        On September 17, 2003, the Corporation announced an agreement to purchase Security Capital Research & Management Incorporated, a recognized expert in developing real estate investment products, with approximately $3.5 billion in assets under management. The transaction is expected to close in the fourth quarter.

Three Months Ended September 30
 Nine Months Ended September 30
Change
 Change
(Dollars in millions)
 2003
 2002 (25)
 Amount
 Percent
 2003
 2002 (25)
 Amount
 Percent
INCOME STATEMENT DATA:                                    
Net interest income-FTE (1) (26)   $ 115   $ 89   $ 26    29 % $ 294   $ 290   $ 4    1 %
           
  Banking fees and commissions (3)    88    63    25    40    224    195    29    15  
  Service charges on deposits (5)    5    5    —    —    15    14    1    7  
  Fiduciary and investment  
   management fees (13)    156    156    —    —    461    481    (20 )  (4 )
  Other income    8    —    8  N/M    10    9    1    11  
    Total noninterest income    257    224    33    15    710    699    11    2  
      Total revenue, net of interest expense    372    313    59    19    1,004    989    15    2  
           
Provision for credit losses    4    2    2    N/M    12    7    5    71  
           
Salaries and employee benefits    114    107    7    7    330    313    17    5  
Other expense    110    77    33    43    280    250    30    12  
Total noninterest expense before  
  restructuring-related reversals    224    184    40    22    610    563    47    8  
Restructuring-related reversals    —    —    —    —    —    (1 )  1    N/M  
  Total noninterest expense    224    184    40    22    610    562    48    9  
Income before income taxes    144    127    17    13    382    420    (38 )  (9 )
Applicable income taxes    53    48    5    10    142    156    (14 )  (9 )
  Net income (27)   $ 91   $ 79   $ 12    15 % $ 240   $ 264   $ (24 )  (9 )%
FINANCIAL PERFORMANCE:  
Return on average common equity    31 %  33 %  (2 )%       31 %  37 %  (6 )%
Efficiency ratio    60    59    1         61    57    4  
Headcount    4,949    4,300    649    15 %                    
ENDING BALANCES:  
Loans   $ 7,155   $ 7,087   $ 68    1 %
  Commercial    3,153    3,160    (7 )  —  
  Consumer    4,002    3,927    75    2  
           
Assets    15,656    8,494    7,162    84  
           
Demand deposits    971    1,744    (773 )  (44 )
Savings    8,327    6,068    2,259    37  
Time    621    783    (162 )  (21 )
Foreign offices    219    239    (20 )  (8 )
  Total deposits    10,138    8,834    1,304    15  
           
Equity    1,553    954    599    63  
AVERAGE BALANCES:  
Loans   $ 6,665   $ 6,941   $ (276 )  (4 )% $ 6,666   $ 6,963   $ (297 )  (4 )%
  Commercial    2,996    3,177    (181 )  (6 )  3,056    3,244    (188 )  (6 )
  Consumer    3,669    3,764    (95 )  (3 )  3,610    3,719    (109 )  (3 )
           
Assets    10,700    8,312    2,388    29    9,119    8,287    832    10  
           
Demand deposits    2,019    1,604    415    26    1,843    1,641    202    12  
Savings    8,032    5,913    2,119    36    7,664    5,859    1,805    31  
Time    633    818    (185 )  (23 )  689    893    (204 )  (23 )
Foreign offices    165    211    (46 )  (22 )  169    209    (40 )  (19 )
  Total deposits    10,849    8,546    2,303    27    10,365    8,602    1,763    20  
           
Equity    1,149    954    195    20    1,020    954    66    7  

21

Investment Management – continued

Three Months Ended September 30
 Nine Months Ended September 30
Change
 Change
(Dollars in millions)
 2003
 2002 (25)
 Amount
 Percent
 2003
 2002 (25)
 Amount
 Percent
CREDIT QUALITY:                                    
Net charge-offs:
  Commercial   $ 5   $ 1   $ 4    N/M   $ 10   $ 2   $ 8    N/M  
  Consumer    (1 )  1    (2 )  N/M    2    5    (3 )  (60 )
Total net charge-offs    4    2    2    N/M    12    7    5    71  
           
Annualized net charge-off ratios:  
  Commercial    0.67 %  0.13 %  0.54 %    0.44 %  0.08 %  0.36 %
  Consumer    (0.11 )  0.11  (0.22 )    0.07  0.18  (0.11 )
    Total net charge-off ratio    0.24  0.12  0.12    0.24  0.13  0.11
           
Nonperforming assets:  
  Commercial   $ 60   $ 39   $ 21    54
  Consumer    14    8    6    75
    Total nonperforming loans    74    47    27    57
  Other, including OREO    1    1    —