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## FIGURE 2. MAJOR BUSINESS GROUPS GLYPH<209> TAXABLE-EQUIVALENT REVENUE AND NET INCOME 

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Results for 2001 include a one-time cumulative charge of $39 million ($24 million after tax) resulting from a prescribed change, applicable to all companies, in the accounting for retained interests in securitized assets. 

b SigniGLYPH<222>cant items in Reconciling Items for the year ended December 31, 2001, include: 

¥A$40 million ($25 million after tax) charge taken to establish a reserve for losses incurred on the residual values of leased vehicles and a $15 million ($9 million after tax) increase in the reserve for customer derivative losses. Both of these items reduced revenue. 

¥ An additional $400 million ($252 million after tax) taken to increase the allowance for loan losses for KeyGLYPH<213>s continuing loan portfolio and an additional $490 million ($309 million after tax) recorded primarily in connection with KeyGLYPH<213>s decision to discontinue certain credit-only commercial relationships. 

¥Agoodwill write-down of $150 million associated with the downsizing of the automobile GLYPH<222>nance business and charges of $20 million ($13 million after tax) taken to establish additional litigation reserves. 

N/M = Not Meaningful 

## Consumer Banking 

As shown in Figure 3, net income for Consumer Banking was $425 million for 2003, up from $399 million for 2002 and $351 million for 2001. The increase in 2003 was attributable to growth in taxable- equivalent net interest income and a lower provision for loan losses. These positive results were offset in part by an increase in noninterest expense and a slight reduction in noninterest income. 

Taxable-equivalent net interest income increased by $74 million, or 4%, from 2002, due to a more favorable interest rate spread on average earning assets, an 11% increase in average home equity loans and a rise in average core deposits. A less favorable interest rate spread on deposits moderated these positive results. The increase in deposits was due primarily to higher levels of money market deposit accounts, negotiable order of withdrawal (“NOW”) accounts and noninterest-bearing deposits. 

These deposits grew because clients showed a preference for investments that provide high levels of liquidity in a low interest rate environment. Additionally, a more aggressive pricing structure implemented in mid-2002 supported the growth in money market deposits. Noninterest-bearing deposits also increased as a result of our intensified cross-selling efforts and the introduction of new products, such as free checking. 

Noninterest income decreased by $2 million due largely to a $36 million reduction in service charges on deposit accounts (primarily those generated by the Retail Banking line of business). In addition, higher than anticipated prepayments on home equity loans contributed to a $10 million reduction in the carrying amount of retained interests in securitized loans in the Consumer Finance line. The decrease in deposit service charges resulted from lower overdraft and maintenance fees. Maintenance fees were lower because Key introduced free checking products in the third quarter of 2002 and made them available to all of Key’s markets by the end of that year. These adverse changes were offset by a $17 million decrease in net losses incurred on the residual values of leased vehicles in the Indirect Lending unit and a $30 million increase in net gains from loan securitizations and sales. 

Noninterest expense rose by $49 million, or 4%, from 2002, due largely to a $22 million rise in personnel expense, higher costs associated with other real estate owned and an increase in professional fees. 

The provision for loan losses decreased by $20 million, or 7%, as a result of improved asset quality in the Indirect Lending unit and Retail Banking line of business. 

