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## FIGURE 11. INVESTMENT BANKING AND CAPITAL MARKETS INCOME 

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N/M = Not Meaningful 

and derivatives income from the prior year. The increase in 2002 resulted from the $15 million charge taken in 2001 to increase the reserve for customer derivative losses. 

Letter of credit and loan fees. The 2003 increase in letter of credit and non-yield-related loan fees was due primarily to higher agency origination, servicing and syndication fees generated by the KeyBank Real Estate Capital line of business. These improved results were due in part to the acquisition of Conning Asset Management in June 2002. Higher fees from letter of credit activities also contributed to the increase. 

Net gains from loan securitizations and sales. In 2003, almost half of the $34 million increase in net gains from loan securitizations and sales resulted from securitizations and sales of education loans. The remainder of the increase was attributable largely to the sales of home equity loans. 

## FIGURE 12. NONINTEREST EXPENSE 

Securities transactions. During 2003, Key realized net securities gains of $11 million, compared with net gains of $6 million in 2002 and $35 million in 2001. Since the 2001 sales involved primarily equity securities rather than debt securities, the sales did not have a significant adverse affect on Key’s net interest income in subsequent periods. 

## Noninterest expense 

Noninterest expense for 2003 was $2.7 billion, representing an $89 million, or 3%, increase from the prior year. In 2002, noninterest expense decreased by $288 million, or 10%. 

As shown in Figure 12, Key experienced an increase of $57 million in personnel expense and $27 million in professional fees in 2003. The aggregate increase in these expense components was partially offset by a $14 million reduction in computer processing expense. 

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The 2002 reduction in noninterest expense reflected a $234 million decrease in amortization expense related to intangibles, which resulted from two significant events. In the second quarter of 2001, Key recorded a $150 million write-down of goodwill associated with management’s decision to downsize the automobile finance business. In addition, a 2002 prescribed change in accounting for goodwill reduced amortization expense by approximately $79 million. For more information pertaining 

to the accounting change, see the section entitled “Amortization of intangibles” on page 24. Other factors that contributed to the 2002 improvement were a $60 million reduction in computer processing expense, a $16 million decrease in equipment expense and a $20 million charge (included in miscellaneous expense) taken in the second quarter of 2001 to increase litigation reserves. These positive results were moderated by a $58 million rise in personnel expense. 

