SunTrust 2003 Annual Report Download - page 13

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Annual Report 2003 SunTrust Banks, Inc. 11
Financial Results
The year’s financial results are reviewed in great detail in the “Management
Discussion & Analysis” that begins on page 15. In the spirit of openness in
financial reporting, I invite you to review it carefully. For purposes of this letter,
though, a quick overview of 2003 financial highlights is in order.
In general, our earnings improvement was based on solid, revenue-driven
gains in our major lines of business, with particularly strong growth in sales-
related revenues.
We saw year-over-year improvement in net interest income and, in par-
ticular, in fee income where there was noticeable pick-up in fees related to
improving equity markets. Because of investments we made in market-driven
businesses, such as wealth management and capital markets services, SunTrust
is particularly well positioned to benefit from a stronger stock market.
Improved Credit Quality
The credit quality picture got progressively better during the year. SunTrust
continued to be well-served by our traditionally conservative risk posture and
careful credit management. We are proud that during an economic cycle when
other large U.S. banks were hit by serious credit problems, SunTrust’s credit
quality remained “best in class” compared with both peer institutions and
industry averages.
On a less positive note, loan demand in one important market segment, the
large corporate market, was weak in 2003. This overshadowed quite healthy loan
growth in other areas such as consumer, mortgage and commercial lending.
With our balance sheet positioned for rising interest rates, historically low
rates had a dampening effect on our net interest margin, and thus on net inter-
est income and earnings overall, especially during the first half of 2003. The
good news is that this negative impact began to diminish – and in fact turned
around – in the second half of the year. Signs were pointing to continued
improvement as 2004 began.
Focus on Efficiency
Although we did a respectable job of keeping core operating expenses in check
in 2003, further improving efficiency remains a critical corporate priority. To