CITICORP - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.20549

FORM 10-Q

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ________ TO _______

COMMISSION FILE NUMBER 1-5738

CITICORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 06-1515595
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

399 PARK AVENUE, NEW YORK, NEW YORK 10043
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(800) 285-3000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

-----------------

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES /X/ NO / /

BECAUSE THE REGISTRANT IS AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF CITIGROUP INC.,
NONE OF ITS OUTSTANDING VOTING STOCK IS HELD BY NONAFFILIATES. AS OF THE DATE
HEREOF, 1,000 SHARES OF THE REGISTRANT'S COMMON STOCK, $0.01 PAR VALUE PER
SHARE, WERE ISSUED AND OUTSTANDING.

REDUCED DISCLOSURE FORMAT

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(A)
AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.

AVAILABLE ON THE WEB AT www.citigroup.com

CITICORP

TABLE OF CONTENTS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

ACQUISITION OF GOLDEN STATE BANCORP

On May 21, 2002, Citigroup Inc. (Citigroup) announced that it will acquire
Golden State Bancorp (Golden State) in a transaction in which Citigroup will
pay approximately $16.40 in cash and .5234 Citigroup shares for each share of
Golden State delivered at closing, subject to certain adjustments. Golden
State stockholders will be entitled to elect to receive the merger
consideration in shares of Citigroup common stock or cash, subject to certain
limitations. Based on the average prices for the four trading days ended May
23, 2002, the total transaction value is approximately $5.8 billion.

Golden State is the parent company of California Federal Bank, the second
largest thrift in the U.S. and, through its First Nationwide Mortgage business,
the eighth largest mortgage servicer. As of June 30, 2002, it had $24 billion in
deposits, $52 billion in assets and 355 branches in California and Nevada.

The transaction is expected to close in the third quarter of 2002. It is subject
to a number of regulatory approvals and the approval of Golden State
stockholders.

IMPACT FROM ARGENTINA'S ECONOMIC CHANGES

FIRST QUARTER 2002

During the first quarter of 2002, Argentina continued to experience significant
political and economic changes. The government of Argentina implemented
substantial economic changes, including abandoning the country's fixed U.S.
dollar-to-peso exchange rate, as well as the redenomination of substantially all
remaining loans and deposits and certain other assets and liabilities
denominated in U.S. dollars into pesos. As a result of the impact of these
government actions on operations, the Company changed its functional currency in
Argentina from the U.S. dollar to the Argentine peso. Additionally, the
government announced the terms of certain compensation instruments it has
committed to issue to financial institutions, to compensate them in part for
losses incurred as a result of the redenomination events. The government also
announced a 180 day moratorium against creditors filing foreclosures or
bankruptcy proceedings against borrowers. The government actions, combined with
the severe recessionary economic situation and the devaluation of the peso, have
adversely impacted Citicorp's consumer and commercial borrowers in Argentina.

To reflect the impact of economic events in Argentina, Citicorp recorded a total
of $858 million net in pretax charges in the 2002 first quarter, as follows: a
$475 million addition to the allowance for credit losses, $269 million in loan
and investment write-downs, a $72 million net charge for currency redenomination
and other foreign currency items, and a $42 million restructuring charge. The
$72 million net charge includes a benefit from the compensation instruments the
Argentine government has committed to issue. In addition, the impact of the
devaluation of the peso during the first quarter produced foreign currency
translation losses that reduced Citicorp's equity by $512 million, net of tax.

SECOND QUARTER 2002

During the second quarter of 2002, Argentina continued to experience severe
recessionary conditions, high inflation and political uncertainty. As a result
of these conditions, Citicorp recorded a total of $84 million net in pretax
charges in the 2002 second quarter, as follows: a $76 million loss relating to
Amparos (representing judicial orders requiring previously dollar denominated
deposits to be repaid at market exchange rates); a net loss of $5 million
relating to CER adjustments (representing inflation-indexed interest accruals to
be paid to depositors and received on certain loans); Proprietary Investment
Activities' impairment charges of $53 million; and reductions in the Company's
consumer loan loss reserve of $50 million resulting from the declining size of
the consumer loan portfolio due to the devaluation of the Argentine peso. In
addition, the impact of the devaluation of the peso since April 1, 2002 resulted
in foreign currency translation losses that reduced Citicorp's equity by $77
million, net of tax.

As the economic situation, financial regulations and implementation issues in
Argentina remain fluid, we continue to work with the government and our
customers and continue to monitor conditions closely. Additional losses may be
incurred. In particular, we continue to monitor the potential additional impact
that the continued economic crisis may have on our commercial borrowers, and we
will continue to assess government announcements and actions with respect to the
compensation instruments the government has committed to issue to the banks.
This paragraph contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act. See "Forward-Looking Statements" on
page 21.

1

ACCOUNTING CHANGES

ADOPTION OF EITF 99-20
During the second quarter of 2001, the Company adopted Emerging Issues Task
Force (EITF) Issue No. 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets"
(EITF 99-20). EITF 99-20 provides new guidance regarding income recognition and
identification and determination of impairment on certain asset-backed
securities. The initial adoption resulted in a cumulative adjustment of $111
million after-tax, recorded as a charge to earnings, and an increase of $88
million included in stockholder's equity from non-owner sources.

DERIVATIVES AND HEDGE ACCOUNTING
On January 1, 2001, Citicorp adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 changed the
accounting treatment of derivative contracts (including foreign exchange
contracts) that are employed to manage risk outside of Citicorp's trading
activities, as well as certain derivative instruments embedded in other
contracts. SFAS No. 133 requires that all derivatives be recorded on the balance
sheet at their fair value. The treatment of changes in the fair value of
derivatives depends on the character of the transaction, including whether it
has been designated and qualifies as part of a hedging relationship. The
majority of Citicorp's derivatives are entered into for trading purposes and
were not impacted by the adoption of SFAS No. 133. The cumulative effect of
adopting SFAS No. 133 at January 1, 2001 was an after-tax charge of $33 million
included in net income and an increase of $82 million included in other changes
in stockholder's equity from nonowner sources.

BUSINESS FOCUS

Citigroup's and Citicorp's internal management reporting was realigned to
follow its recently-announced organizational changes. Accordingly, Citicorp
has modified the Company's financial reporting format to be consistent with
this internal reporting. These modifications are intended to simplify
disclosure by emphasizing global products. All prior periods have been
reclassified to conform to the current period's presentation.

The following table shows the net income (loss) for Citicorp's businesses on a
Product View:

(1) Reclassified to conform to the current period's presentation.
(2) Includes the following cumulative effect of accounting changes: 2001 first
quarter adoption of SFAS No. 133 and the 2001 second quarter adoption of
EITF 99-20. See Note 2 to Unaudited Consolidated Financial Statements.

2

RESULTS OF OPERATIONS

FINANCIAL SUMMARY

(1) Revenues, Net of Interest Expense, and Benefits, Claims, and Credit Losses
in the table above are disclosed on an owned basis (under Generally Accepted
Accounting Principles). If this table were prepared on a managed basis,
which includes certain effects of securitization activities including
receivables held for securitization and receivables sold with servicing
retained, revenues and benefits, claims, and credit losses would have been
increased by $1.081 billion and $2.102 billion in the 2002 second quarter
and six months and increased $930 million and $1.696 billion in the
comparable 2001 periods. Although a managed basis presentation is not in
conformity with GAAP, it provides a representation of the volumes in the
credit card business. Net Income on a managed basis is equal to GAAP Net
Income.

INCOME

Citicorp reported net income of $3.038 billion in the 2002 second quarter, up
35% from $2.256 billion in the 2001 second quarter. Net income in the 2002
second quarter included an after-tax benefit of $25 million for
restructuring-related items. Net income in the 2001 second quarter included an
after-tax charge of $105 million for restructuring-related items and an
after-tax charge of $111 million, reflecting the cumulative effect of adopting
EITF 99-20 (as described in Notes 2 and 8 of Notes to Unaudited Consolidated
Financial Statements). Return on common equity was 18.4% compared to 18.7% a
year ago.

Net income for the 2002 six months of $5.504 billion was up 26% from $4.353
billion in the 2001 six months.

Net income in the 2001 six months included an after-tax charge of $144 million
for restructuring-related items and an after-tax charge of $144 million,
reflecting the cumulative effect of adopting SFAS No. 133 and EITF 99-20 (as
described in Notes 2 and 8 of Notes to Unaudited Consolidated Financial
Statements). Return on common equity was 16.9% and 18.1% in the six months of
2002 and 2001, respectively.

Global Consumer net income increased $468 million or 33% and $773 million or 28%
in the 2002 second quarter and six months compared to the 2001 periods. Global
Corporate and Investment Bank (GCIB) increased $265 million or 38% and $163
million or 11% from the 2001 second quarter and six months compared to the 2001
periods. Global Investment Management grew $119 million and $145 million from
the 2001 three- and six-month periods, while Proprietary Investment Activities
decreased $273 million and $183 million from the 2001 second quarter and
six-month periods. See individual segment and product discussions on pages 6 -
21 for additional discussion and analysis of the Company's results and
operations.

REVENUES, NET OF INTEREST EXPENSE

Total revenues, net of interest expense, of $12.8 billion and $25.2 billion in
the 2002 second quarter and six months were up $1.6 billion or 14% and $2.9
billion or 13%, respectively, from the 2001 periods. Global Consumer revenues
were up $1.3 billion or 18% in the 2002 second quarter to $8.4 billion, and were
up $2.6 billion or 18% in the 2002 six months to $16.7 billion. Increases in
RETAIL BANKING revenues of $614 million or 30% and $1.4 billion or 35% from the
2001 second quarter and six months, respectively, were due to the impact of
acquisitions, combined with growth primarily in Citibanking North America and
Consumer Assets. Compared to the 2001 periods, CARDS was up $486 million or 18%
in the 2002 second quarter and $748 million or 13% in the 2002 six months, while
CONSUMER FINANCE experienced growth of $234 million or 11% in the 2002 second
quarter and $394 million or 9% in the 2002 six months. Both businesses
experienced improved spreads and strong growth in receivables.

3

Compared to the 2001 periods, GCIB revenues were up $495 million or 17% in the
2002 second quarter and $447 million or 7% in the 2002 six months, driven by
CAPITAL MARKETS AND BANKING, up $447 million or 22% in the 2002 second quarter
and $466 million or 11% in the 2002 six-month period.

Global Investment Management revenues of $812 million in the 2002 second
quarter and $1.6 billion in the 2002 six months were up $234 million or 40%
and $349 million or 29% from the comparable 2001 periods, primarily due to
growth in asset-based fee revenues and the impact of acquisitions. Revenues
in Proprietary Investment Activities decreased $372 million and $227 million
from the 2001 second quarter and six months, respectively, primarily
reflecting lower venture capital results and higher impairment write-downs.

Citicorp securitizes credit card receivables as part of the management of its
funding and liquidity needs. After securitization of the receivables, the
Company continues to maintain credit card customer account relationships and
provides servicing for receivables transferred to the special purpose entity
trusts set up to facilitate securitization activities. See Note 10 of Notes to
Unaudited Consolidated Financial Statements. The Company manages the receivables
securitized as if the receivables had neither been held for securitization nor
sold (managed basis). On a managed basis, including securitized receivables,
both revenues and provisions for benefits, claims, and credit losses would have
increased by $1.081 billion and $2.102 billion in the 2002 second quarter and
six months and increased by $930 million and $1.696 billion in the comparable
2001 periods. Total managed revenues were $13.9 billion in the 2002 second
quarter and $27.3 billion in the 2002 six months, up $1.7 billion or 14% and
$3.3 billion or 14% from the comparable 2001 periods. Net income on a managed
basis is equal to GAAP net income.

SELECTED REVENUE ITEMS

Net interest revenue rose $1.2 billion or 19% from the 2001 second quarter to
$7.7 billion and increased $2.8 billion or 22% from the 2001 six months to $15.5
billion, reflecting increases in fixed income trading and investment positions,
acquisitions, the impact of a changing rate environment and business volume
growth. Total fees and commissions of $2.9 billion were up $271 million or 10%
from the 2001 second quarter, primarily as a result of volume-related growth in
customer activities.

Aggregate Trading and Foreign Exchange revenues of $1.2 billion and $2.2 billion
for the 2002 second quarter and six months were up $362 million or 42% from the
2001 second quarter and $254 million or 13% from the 2001 six-month period,
reflecting growth in Fixed Income. Investment Transactions revenues were down
$97 million from the 2001 second quarter and $184 million from the 2001 six
months, resulting primarily from higher impairment write-downs. Other revenue as
shown in the Consolidated Statements of Income of $1.0 billion in the 2002
second quarter decreased $192 million from the year-ago quarter, and was down
$211 million from the 2001 six months, primarily reflecting venture capital
activity and increased credit losses on securitized credit card receivables.

OPERATING EXPENSES

Operating expenses of $5.9 billion and $11.9 billion in the 2002 second quarter
and six months, respectively, were up $201 million or 4% in the 2002 second
quarter and $220 million or 2% in the 2002 six months, compared to year-ago
levels. The change in expenses reflects the impact of acquisitions which was
partially offset by expense control initiatives, lower incentive compensation,
and the absence of goodwill and indefinite-lived intangible asset amortization
in the 2002 second quarter due to the adoption of Statement of Financial
Accounting Standards (SFAS) No. 141, "Business Combinations" (SFAS No. 141) and
certain provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS
No. 142), which reduced operating expenses by $70 million in the 2002 second
quarter and $137 million in the six-month period.

Global Consumer expenses increased 7% in the 2002 second quarter and 6% in the
2002 six months. GCIB expenses were down 2% in the quarter and down 8% in the
six months while Global Investment Management expenses were up 5% and 8% from
year-ago levels.

Operating expenses included restructuring-related releases of $40 million ($25
million after-tax) in the 2002 second quarter and restructuring-related charges
of $6 million ($4 million after-tax) in the 2002 six months related principally
to a reduction in the reserve due to changes in estimates in the 2002 second
quarter and to severance and other costs associated with the reduction of staff
within the Latin American consumer and corporate businesses in the six-month
period. Restructuring-related items of $168 million ($105 million after-tax) in
the 2001 second quarter and $230 million ($144 million after-tax) in the 2001
six months related principally to severance and reduction of staff primarily in
the Global Consumer and GCIB businesses.

4

BENEFITS, CLAIMS, AND CREDIT LOSSES

Benefits, claims, and credit losses were $2.2 billion and $4.9 billion in the
2002 second quarter and six months, up $469 million and $1.5 billion from the
2001 second quarter and six months, respectively. Policyholder benefits and
claims in the 2002 second quarter decreased 40% from the 2001 second quarter to
$154 million, and 42% to $294 billion in the 2002 six months, primarily as a
result of the reorganization of a Citicorp insurance unit into a Citigroup unit.
The provision for credit losses increased 39% from the 2001 second quarter to
$2.1 billion in the 2002 second quarter and increased 57% from the 2001 six
months to $4.6 billion in the 2002 six months.

Global Consumer provisions for benefits, claims, and credit losses of $1.7
billion in the 2002 second quarter were up 32% from the 2001 second quarter,
primarily reflecting increases in CARDS and CONSUMER FINANCE. Total net credit
losses were $1.682 billion and the related loss ratio was 2.65% in the 2002
second quarter, as compared to $1.643 billion and 2.71% in the preceding quarter
and $1.224 billion and 2.19% in the year-ago quarter. The consumer loan
delinquency ratio (90 days or more past due) decreased to 2.62% at June 30, 2002
from 2.78% at March 31, 2002 and increased from 2.30% a year ago.

The GCIB provision for credit losses of $460 million and $1.1 billion in the
2002 second quarter and six months increased $172 million and $585 million from
year-ago levels, primarily due to an addition to the loan loss reserve for
Argentina in the 2002 first quarter and higher than expected write-offs in
CAPITAL MARKETS AND BANKING related to the telecommunications industry.

Corporate cash-basis loans at June 30, 2002 and 2001 were $4.521 billion and
$2.582 billion, respectively, while the corporate Other Real Estate Owned (OREO)
portfolio totaled $123 million and $194 million, respectively. The increase in
cash-basis loans from the 2001 second quarter was primarily related to the
Banamex acquisition and increases attributable to borrowers in the
telecommunications industry and in Argentina. Corporate cash-basis loans at June
30, 2002 increased $577 million from March 31, 2002 primarily due to exposures
in the telecommunications industry and Argentina. The improvements in OREO were
primarily related to the North America real estate portfolio.

CAPITAL

Total capital (Tier 1 and Tier 2) was $63.4 billion or 12.53% of net
risk-adjusted assets, and Tier 1 capital was $42.5 billion or 8.40% at June 30,
2002, compared to $63.2 billion or 12.82% and $42.2 billion or 8.55% of
risk-adjusted assets at March 31, 2002.

5

- -------------------------------------------------------------------------------
The Net Income line in the following business segments and operating unit
discussions excludes the cumulative effect of adopting EITF 99-20 and SFAS No.
133. The cumulative effect of accounting changes is included within the
Corporate/Other business segment. See Note 2 to Unaudited Consolidated Financial
Statements.
- -------------------------------------------------------------------------------

GLOBAL CONSUMER

(1) Reclassified to conform to the current period's presentation.

GLOBAL CONSUMER - which provides banking, lending, including credit and charge
cards, and investment and personal insurance products and services to customers
around the world -- reported net income of $1.893 billion and $3.566 billion in
the 2002 second quarter and six months, up $468 million or 33% and $773 million
or 28% from the comparable 2001 periods, reflecting double digit growth in
CARDS, RETAIL BANKING AND CONSUMER FINANCE. CARDS net income increased $204
million or 37% in the 2002 second quarter and $214 million or 19% in the 2002
six months from the prior-year periods, reflecting strong growth in CitiCards
and the acquisition of Banamex. RETAIL BANKING net income increased $183 million
or 42% in the 2002 second quarter and $336 million or 39% in the 2002 six months
from the prior-year periods, as the impact of the Banamex and European American
Bank (EAB) acquisitions, prior-year restructuring charges and growth in North
America and Western Europe were partially offset by losses in Argentina.
CONSUMER FINANCE net income increased $89 million or 19% in the 2002 second
quarter and $233 million or 27% in the 2002 six months from the prior-year
periods, mainly driven by revenue growth and continued expense savings in North
America.

Global Consumer net income in the 2002 second quarter included a net
restructuring reserve release of $21 million ($32 million pretax), resulting
from changes in estimates in CitiCards and Citibanking North America. Net income
in the 2002 six months also included $11 million ($18 million pretax) of
restructuring-related charges in the first quarter of 2002, including $8 million
related to severance and other costs associated with the reduction of staff in
Argentina. Net income in the 2001 second quarter included restructuring-related
charges of $58 million ($92 million pretax), mainly related to the downsizing of
various functions across all products and geographies. Net income in the 2001
six months also included restructuring-related charges of $12 million ($19
million pretax), consisting of accelerated depreciation in North America.

CARDS

(1) Reclassified to conform to the current period's presentation.

CARDS - which includes bankcards, private-label cards and charge cards in 47
countries around the world - reported net income of $756 million and $1.352
billion in the 2002 second quarter and six months, respectively, up $204 million
or 37% and $214 million or 19% from the 2001 periods, led by North America,
which benefited from the August 2001 acquisition of Banamex, as well as revenue
growth, expense management and a 2002 second quarter restructuring reserve
release of $12 million (after-tax) in CitiCards.

As shown in the following table, average managed loans grew 6% in the 2002
second quarter and six months, reflecting growth in North America of 5% in both
periods and growth in International Cards of 8% and 7%, respectively. CitiCards,
reflecting base

6

business momentum, and Mexico, which included the impact of the acquisition of
Banamex, drove growth in North America. Growth in International Cards reflected
broad-based increases in Asia and growth in Western Europe, led by the UK,
Greece and Spain, all of which benefited from strengthening currencies in the
2002 second quarter. Growth in International Cards was partially offset by a
decline in Latin America, which reflected the negative impact of foreign
currency translation and lower volumes in Argentina. Sales grew 8% in the 2002
second quarter, reflecting growth in CitiCards, which benefited from higher
balance consolidation activity, and Mexico, which included the impact of the
Banamex acquisition, and Western Europe and Asia, which benefited from increased
marketing efforts.

(1) Reclassified to conform to the current period's presentation.

Revenues, net of interest expense, of $3.259 billion and $6.396 billion in the
2002 second quarter and six months, were up $486 million or 18% and $748 million
or 13% from the 2001 periods. Revenue on securitized loans is recorded monthly
as realized over the term of each securitization transaction. Credit losses on
securitized loans are deducted in determining the net revenue from credit card
securitizations, which is included in Other Income. These losses were $989
million and $1.924 billion in the 2002 second quarter and six months,
respectively, up $177 million or 22% and $444 million or 30% from the 2001
periods, reflecting increased securitization levels and higher loss ratios.
Excluding securitization-related credit losses, revenues in the 2002 second
quarter and six months grew $665 million or 18% and $1.209 billion or 17% from
the comparable prior-year periods, reflecting growth in North America, Asia and
Western Europe, partially offset by a decline in Latin America. Revenue growth
in North America was primarily due to spread improvements resulting from lower
cost of funds and repricing actions in CitiCards, combined with the benefit of
receivable growth, which included the acquisition of Banamex. In addition,
CitiCards revenues included $94 million in the 2002 second quarter and $115
million in the 2002 six months from an increase in the amortization period for
certain direct loan origination costs while Diners Club N.A. revenues benefited
from a $40 million release of a reserve related to unused travelers checks. Led
by Korea, the Philippines and Malaysia, growth in Asia reflected increased
volumes across the region and the positive impact of foreign currency
translation. The increase in Western Europe was primarily due to growth in the
U.K., Greece, and Spain, along with the impact of foreign currency translation.
The decline in Latin America reflected continued weakness in Argentina due to
reduced business activity as well as the negative impact of foreign currency
translation.

Operating expenses of $1.372 billion in the 2002 second quarter increased $54
million or 4% from the 2001 second quarter, reflecting growth of 5% in North
America and 2% in International Cards. Operating expenses in the 2002 second
quarter included a net restructuring reserve release of $19 million, mainly in
CitiCards. Excluding restructuring-related items, growth in North America was
driven by Mexico, which included the effect of the Banamex acquisition, and
CitiCards, with increased advertising and marketing costs partially offset by
disciplined expense management. Operating expenses of $2.694 billion in the 2002
six months increased $21 million or 1% from the 2001 period, as increases in
Mexico, Western Europe and Asia were partially offset by lower advertising and
marketing costs in CitiCards and Diners Club N.A., the impact of foreign
currency translation in Latin America and Japan and the 2002 second quarter
restructuring reserve release.

The provision for credit losses in the 2002 second quarter and six months was
$737 million and $1.635 billion, respectively, compared to $580 million and
$1.171 billion in the 2001 periods, primarily reflecting increased credit losses
in CitiCards and Asia, primarily Hong Kong, and, in the six-month comparison, an
addition to the loan loss reserve resulting from deteriorating credit in
Argentina. Net credit losses in the 2002 second quarter were $761 million and
the related loss ratio was 6.51%, compared to $780 million and 7.11% in the 2002
first quarter and $601 million and 5.34% in the prior-year quarter. The decline
in the net credit loss ratio from the 2002 first quarter reflected improvements
in CitiCards, mainly due to a change in the mix of loans on the balance sheet,
and in Mexico which benefited from higher recoveries. CitiCards net credit
losses in the prior-year quarter included a recovery of $55 million from the
sale of certain bankrupt accounts which resulted in a 48 basis point reduction
of the net credit loss ratio. Loans delinquent 90 days or more were $944 million
or 1.91% of loans at June 30, 2002, compared to $1.018 billion or 2.25% at March
31, 2002 and $933 million or 2.09% at June 30, 2001. The decline compared to the
prior quarter was primarily due to improvement in CitiCards and Mexico. Net
credit losses and the related loss ratio may increase from the 2002 second
quarter as bankruptcy losses in the U.S. could be accelerated if proposed U.S.
bankruptcy legislation is enacted. This statement is a forward-looking statement
within the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" on page 21.

7

The securitization of credit card receivables is limited to the CitiCards
business within North America. At June 30, 2002, securitized credit card
receivables were $65.8 billion, compared with $61.4 billion as of June 30, 2001.
Credit card receivables held-for-sale were $6.5 billion compared to $9.0 billion
a year ago. Revenue on securitized receivables is recorded monthly as realized
over the term of each securitization transaction. The revolving nature of the
receivables sold and the monthly recognition of revenue result in a pattern of
recognition that is similar to the pattern that would be experienced if the
receivables had not been sold. However, because securitization changes
Citicorp's role from that of a lender to that of a loan servicer, it removes the
receivables from Citicorp's balance sheet and affects the manner in which
revenue and the provision for credit losses are classified in the income
statement. For securitized receivables and receivables held-for-sale, amounts
that would otherwise be reported as net interest revenue, as fee and commission
revenue, and as credit losses on loans are instead reported as fee and
commission revenue (for servicing fees) and as other revenue (for the remaining
cash flows, net of credit losses). Because credit losses are a component of
these cash flows, revenues over the terms of these transactions may vary
depending upon the credit performance of the securitized receivables. However,
Citicorp's exposure to credit losses on the securitized receivables is
contractually limited to these cash flows. Including securitized receivables and
receivables held-for-sale, net credit losses would have been $1.842 billion for
the 2002 second quarter with a related loss ratio of 6.23% compared to $1.793
billion and 6.17% for the 2002 first quarter and $1.503 billion and 5.37% for
the 2001 second quarter. Adjusting for securitization activity, loans delinquent
90 days or more would have been $2.248 billion or 1.85% at June 30, 2002,
compared to $2.488 billion or 2.11% at March 31, 2002 and $1.938 billion or
1.68% at June 30, 2001.

CONSUMER FINANCE

(1) Reclassified to conform to the current period's presentation.

CONSUMER FINANCE - which provides community-based lending services through
branch networks, regional sales offices and cross-selling initiatives with other
Citigroup businesses - reported net income of $565 million and $1.098 billion in
the 2002 second quarter and six months, respectively, up $89 million or 19% and
$233 million or 27% from the 2001 periods, principally reflecting revenue growth
in North America and efficiencies resulting from the integration of Associates
First Capital Corporation (Associates) into CitiFinancial. Net income growth in
the 2002 second quarter and six months also included after-tax benefits of $32
million and $64 million, respectively, due to the absence of goodwill and other
indefinite-lived intangible asset amortization.

As shown in the following table, average loans grew 9% compared to the 2001
second quarter resulting from the cross-selling of products through Primerica
Financial Services (Primerica), an increase in auto loans in the U.S. and the
acquisitions of Taihei and Marufuku in Japan. Average auto loans for the 2002
second quarter increased $1.7 billion or 39% from 2001, reflecting a shift in
strategy to fund business volumes internally rather than externally through the
securitization of receivables. In Japan, average loans of $12 billion in the
2002 second quarter grew $1.9 billion or 19% from the prior-year quarter,
reflecting, in part, the acquisitions of Taihei and Marufuku which added $1.0
billion to average loans, primarily personal loans, in the 2002 second quarter.

(1) Reclassified to conform to the current period's presentation.

8

As shown in the following table, the average net interest margin of 11.22% in
the 2002 second quarter increased 43 basis points from the 2001 second quarter,
mainly due to lower cost of funds. In North America, the average net interest
margin was 8.50% in the 2002 second quarter, increasing 32 basis points from the
prior-year quarter as the benefit of lower cost of funds was partially offset by
lower yields, both reflecting a lower interest rate environment. The average net
interest margin for International Consumer Finance was 21.92% in the 2002 second
quarter, down 18 basis points from the prior year reflecting lower yields,
including the impact of growth in lower-yielding real estate-secured loans,
partially offset by a decline in cost of funds.

Revenues, net of interest expense, of $2.406 billion and $4.704 billion in the
2002 second quarter and six months, respectively, increased $234 million or 11%
and $394 million or 9% from the 2001 periods, mainly reflecting growth in the
U.S. and Japan, partially offset by a decline in Latin America. Revenue growth
in the U.S. was primarily driven by growth in receivables and improved net
interest margins. Increases in Japan included the impact of acquisitions,
partially offset by the impact of foreign currency translation. The decline in
Latin America was due to continued weakness in Argentina.

Operating expenses of $764 million and $1.496 billion in the 2002 second quarter
and six months, respectively, decreased $74 million or 9% and $277 million or
16% from the prior-year periods, primarily reflecting efficiencies resulting
from the integration of Associates in the U.S., the absence of goodwill and
other indefinite-lived intangible asset amortization, the impact of foreign
currency translation and prior-year restructuring-related charges of $25 million
($15 million after-tax) and $38 million ($23 million after-tax) in the 2001
second quarter and six months, respectively. Restructuring charges in 2001
mainly reflected actions in CitiFinancial.

The provisions for benefits, claims, and credit losses were $763 million in the
2002 second quarter, up from $737 million in the 2002 first quarter and $588
million in the prior-year quarter. The net credit loss ratio of 3.71% in the
2002 second quarter was up from 3.63% in the 2002 first quarter and 2.91% in the
2001 second quarter. In North America, the net credit loss ratio of 3.10% in the
2002 second quarter was up from 3.00% in the 2002 first quarter and 2.49% in the
2001 second quarter. The net credit loss ratio for International Consumer
Finance was 6.12% in the 2002 second quarter, down from 6.41% in the 2002 first
quarter and up from 4.72% in the 2001 second quarter. The decline from the prior
quarter was mainly due to the acquisitions in Japan which did not include any
loans that were 90 days or more past due at the time of acquisition. The
increase compared to the prior year was due to increased bankruptcy filings and
deteriorating credit quality in Japan.

Loans delinquent 90 days or more were $2.131 billion or 2.72% of loans at June
30, 2002, compared to $2.213 billion or 2.97% at March 31, 2002 and $1.943
billion or 2.74% a year ago. The decrease in the delinquency ratio versus the
prior year and prior quarter was mainly due to the impact of acquisitions in
Japan and improvements in the U.S. In Japan, net credit losses and the related
loss ratio are expected to increase from the 2002 second quarter as a result of
economic conditions and credit performance of the portfolios, including
bankruptcy filings. This statement is a forward-looking statement within the
meaning of the Private Securities Litigation Reform Act. See "Forward-Looking
Statements" on page 21.

RETAIL BANKING

(1) Reclassified to conform to the current period's presentation.
NM Not meaningful

9

RETAIL BANKING - which delivers banking, lending, and investment and insurance
services to customers through retail branches, electronic delivery systems and
the network of Primerica Financial Services independent agents -- reported net
income of $617 million and $1.208 billion in the 2002 second quarter and six
months, respectively, up $183 million or 42% and $336 million or 39% from the
2001 periods. The increases in RETAIL BANKING primarily reflect growth in North
America Retail Banking of $201 million or 95% and $366 million or 87% in the
2002 second quarter and six months, partially offset by decreases in
International Retail Banking of $18 million or 8% and $30 million or 7%,
respectively. The growth in North America Retail Banking was primarily due to
the acquisitions of Banamex and EAB in the 2001 third quarter along with revenue
growth in Citibanking North America and Consumer Assets. The decline in
International Retail Banking primarily reflects losses in Argentina, partially
offset by growth in Western Europe and prior-year restructuring-related charges.

As shown in the following table, RETAIL BANKING grew average loans and customer
deposits compared to 2001. The growth in North America primarily reflects the
acquisitions of Banamex and EAB, which added $24.7 billion and $7.9 billion,
respectively, to average customer deposits and $7.7 billion and $3.8 billion,
respectively, to average loans. In addition, North America Retail Banking
experienced customer deposit growth in Citibanking North America and average
loan growth in Consumer Assets, primarily due to increased student loans. The
growth in International Retail Banking customer deposits reflects growth in
Japan and CEEMEA, partially offset by a decline in Argentina. The increase in
International Retail Banking average loans reflects growth in Western Europe,
primarily in Germany, partially offset by a decline in Argentina.

(1) Includes loans held-for-sale.

Revenues, net of interest expense, of $2.685 billion and $5.508 billion in the
2002 second quarter and six months, respectively, increased $614 million or 30%
and $1.437 billion or 35% from the 2001 periods. The increase in revenues
reflected growth in North America, partially offset by a decline in
International. Revenue growth in North America was driven by the acquisitions of
Banamex and EAB, the benefit of customer deposit growth in Citibanking North
America and increased net servicing revenue in Consumer Assets, where mortgage
originations in the 2002 six months increased 48% from 2001 to $21.1 billion.
International Retail Banking revenues declined 9% and 1% in the 2002 second
quarter and six months, respectively, as a decline in Latin America was
partially offset by growth in Western Europe and CEEMEA. The decline in Latin
America was due to events in Argentina which included losses and reserves on
Amparos, reduced business activity due to the economic situation, the negative
impact of foreign currency translation and losses resulting from
government-mandated inflation indexed interest accruals. Increased loan volumes
and improved spreads, mainly in Germany, combined with the impact of foreign
currency translation across the region, primarily drove revenue growth in
Western Europe. Revenue growth in CEEMEA was primarily due to growth in
investment product fees and increased business volumes.

Operating expenses for the 2002 second quarter and six months increased $294
million or 23% and $695 million or 28% from the comparable 2001 periods.
Operating expenses in 2002 included a second quarter net restructuring reserve
release of $9 million ($6 million after-tax), mainly in Citibanking North
America and Japan, and first quarter 2002 restructuring-related charges of $13
million ($7 million after-tax), primarily resulting from actions in Argentina.
Operating expenses in 2001 included second quarter restructuring-related charges
of $50 million ($32 million after-tax) with $42 million in International Retail
Banking and $8 million in North America. Excluding restructuring-related items,
the growth in expenses was primarily due to the acquisitions of Banamex and EAB
and increases in Western Europe and CEEMEA, and was partially offset by a
decline in Latin America. The growth in Western Europe and CEEMEA was mainly due
to volume-related increases, higher advertising and marketing costs in Western
Europe and the impact of foreign currency translation. The decline in Latin
America was primarily due to the impact of foreign currency translation and
expense reduction initiatives across the region.

The provisions for benefits, claims, and credit losses were $166 million and
$467 million in the 2002 second quarter and six months, up from $103 million
and $212 million in the 2001 periods. The increase in the provisions for
benefits, claims, and credit losses was mainly due to the impact of
acquisitions and, in the six-month comparison, an addition to the loan loss
reserve resulting from deteriorating credit in Argentina. Net credit losses
were $212 million and the related loss ratio was 0.80% in the 2002 second
quarter, compared to $203 million and 0.78% in the 2002 first quarter and
$120 million and 0.53% in the prior-year quarter. The increase in net credit
losses from the prior year was mainly due to the acquisition of Banamex.

10

Loans delinquent 90 days or more were $3.561 billion or 3.31% of loans at June
30, 2002, compared to $3.481 billion or 3.34% at March 31, 2002, and $2.475
billion or 2.71% a year ago. The increase in delinquent loans from the prior
year mainly reflects the acquisitions of EAB and Banamex, as well as increases
in Western Europe and Consumer Assets. The increase in delinquent loans from the
prior quarter mainly reflects increases in Consumer Assets and Western Europe,
partially offset by improvements in Mexico. The increase in Western Europe
compared to the prior year and prior quarter occurred mainly in Germany and
reflected the impact of statutory changes and foreign currency translation. The
increase in Consumer Assets compared to the prior year and prior quarter mainly
reflected increases in government guaranteed student loans and a higher level of
buy backs from GNMA pools where credit risk is maintained by government
agencies.

Average assets of $163 billion and $164 billion in the 2002 second quarter and
six months increased $51 billion and $52 billion from the comparable 2001
periods, primarily reflecting the acquisitions of Banamex and EAB.

OTHER CONSUMER

(1) Reclassified to conform to the current period's presentation.

OTHER CONSUMER - which includes e-Consumer, the business responsible for
developing and implementing Global Consumer Internet financial services products
and e-commerce solutions, and also includes certain treasury and other
unallocated staff functions, global marketing and other programs -- reported
losses of $45 million and $92 million for the 2002 second quarter and six months
compared to losses of $37 million and $82 million in the 2001 second quarter and
six months. The increase in losses from 2001 was primarily due to a pension
curtailment gain in the prior-year period related to the acquisition of
Associates combined with an increase in legal reserves in 2002. Revenues,
expenses and the provisions for benefits, claims, and credit losses reflect
offsets to certain line-item reclassifications reported in other Global Consumer
businesses.

CONSUMER PORTFOLIO REVIEW

In the consumer portfolio, credit loss experience is often expressed in terms of
annualized net credit losses as a percentage of average loans. Pricing and
credit policies reflect the loss experience of each particular product. Consumer
loans are generally written off no later than a predetermined number of days
past due on a contractual basis, or earlier in the event of bankruptcy. The
number of days is set according to loan product and country.

The following table summarizes delinquency and net credit loss experience in
both the managed and on-balance sheet loan portfolios in terms of loans 90 days
or more past due, net credit losses, and as a percentage of related loans. The
managed loan portfolio includes loans held-for-sale and certain securitized
loans. See Note 10 to Unaudited Consolidated Financial Statements.

11

CONSUMER LOAN DELINQUENCY AMOUNTS, NET CREDIT LOSSES, AND RATIOS

(1) The ratios of 90 days or more past due and net credit losses are calculated
based on end-of-period and average loans, respectively, both net of unearned
income.
(2) Reclassified to conform to the current period's presentation.

12

CONSUMER LOAN BALANCES, NET OF UNEARNED INCOME

Total delinquencies 90 days or more past due in the managed portfolio were
$8.133 billion or 2.41% of loans at June 30, 2002, compared to $8.326 billion or
2.56% at March 31, 2002 and $6.426 billion or 2.11% at June 30, 2001. Total
managed net credit losses in the 2002 second quarter were $2.763 billion and the
related loss ratio was 3.34%, compared to $2.664 billion and 3.32% in the 2002
first quarter and $2.155 billion and 2.86% in the 2001 second quarter. For a
discussion of trends by business, see business discussions on pages 6 - 11.

Citicorp's allowance for credit losses of $10.437 billion is available to absorb
probable credit losses inherent in the entire portfolio. For analytical purposes
only, the portion of Citicorp's allowance for credit losses attributed to the
consumer portfolio was $5.756 billion at June 30, 2002, $5.732 billion at March
31, 2002, and $4.914 billion at June 30, 2001. The increase in the allowance for
credit losses attributed to the consumer portfolio from a year ago includes the
impact of the acquisitions of Banamex and EAB along with increases in the first
quarter of 2002 related to Argentina. The allowance as a percentage of loans on
the balance sheet was 2.21% at June 30, 2002, up from 2.18% at June 30, 2001 and
down from 2.32% at March 31, 2002. The increase in the allowance as a percentage
of loans from a year ago was primarily due to the increase in the allowance
related to Argentina. The decline in the allowance as a percentage of loans from
March 31, 2002 primarily reflects the growth in consumer loans as well as
stricter lending standards in individual businesses. On balance sheet consumer
loans of $261 billion grew $14 billion or 6% from March 31, 2002 and $36 billion
or 16% from a year ago. The increase from March 31, 2002 was primarily driven by
growth in CitiCards, Western Europe Retail Banking, Consumer Assets, Japan
Consumer Finance and North America Consumer Finance. The increase in Western
Europe Retail Banking reflected growth in Germany and the impact of foreign
currency translation. Growth in Consumer Assets was primarily due to increases
in CitiMortgage. The increase in Japan Consumer Finance included approximately
$500 million from the acquisition of Marufuku combined with the impact of
foreign currency translation. Growth in North America Consumer Finance was
mainly due to an increase in real estate secured loans in the U.S. The increase
in loans from a year ago also includes the impact of the Banamex and EAB
acquisitions.

Net credit losses, delinquencies, and the related ratios may increase from the
2002 second quarter as a result of the credit performance of the portfolios,
including bankruptcies, global economic conditions, portfolio growth, and
seasonal factors. In Japan, net credit losses and the related loss ratio are
expected to increase from the 2002 second quarter reflecting current economic
conditions in Japan, including rising unemployment rates and bankruptcy filings.
Net credit losses and the related loss ratio in the U.S., particularly in
CitiCards, may increase from the 2002 second quarter as bankruptcy losses in the
U.S. could be accelerated if proposed U.S. bankruptcy legislation is enacted.
Net credit losses and delinquencies relating to Argentina may be impacted by the
local economic situation, including such factors as unemployment levels,
inflation and foreign exchange rates. This paragraph contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act.
See "Forward-Looking Statements" on page 21.

GLOBAL CORPORATE AND INVESTMENT BANK

(1) Reclassified to conform to the current period's presentation.
NM Not meaningful

THE GLOBAL CORPORATE AND INVESTMENT BANK (GCIB) serves corporations, financial
institutions, governments, investors and other participants in capital markets
throughout the world and consists of CAPITAL MARKETS AND BANKING and TRANSACTION
SERVICES.

13

GCIB net income of $961 million and $1.602 billion in the 2002 second quarter
and six months was up $265 million or 38% and $163 million or 11%, respectively.
The 2002 second quarter primarily reflects net income growth from the comparable
2001 quarter of $164 million or 28% in CAPITAL MARKETS AND BANKING and $101
million or 98% in TRANSACTION SERVICES. The 2002 six months primarily reflects
net income growth of $91 million or 47% in TRANSACTION SERVICES and $72 million
or 6% in CAPITAL MARKETS AND BANKING.

CAPITAL MARKETS AND BANKING increase in the 2002 second quarter primarily
reflects increases in Sales & Trading and Fixed Income combined with 2001
restructuring charges, partially offset by a higher provision for credit losses
and a 2001 second quarter building sale in Asia. The increase in the 2002 six
months primarily reflects increases in Sales & Trading and 2001 restructuring
charges, partially offset by a higher provision for credit losses and a 2001
second quarter building sale in Asia. TRANSACTION SERVICES net income growth in
the 2002 second quarter and six months primarily reflects an investment gain,
higher business volumes, higher spreads in Latin America, the benefit of the
Banamex acquisition, continued rationalization of expenses in North America and
Europe, and 2001 restructuring charges. The first quarter of 2002 included
write-offs on trade finance exposures in Argentina.

The businesses of the GCIB are significantly affected by the levels of activity
in the global capital markets which, in turn, are influenced by macro-economic
and political policies and developments, among other factors, in the over 100
countries in which the businesses operate. Global economic and market events can
have both positive and negative effects on the revenue performance of the
businesses and can affect credit performance. Losses on corporate lending
activities and the level of cash-basis loans can vary widely with respect to
timing and amount, particularly within any narrowly-defined business or loan
type. The businesses of the GCIB may be impacted by weak global economic
conditions, stress in the telecommunications industry, market turmoil in Brazil,
sovereign or regulatory actions, litigation expenses, settlements, continued
crisis in Argentina, and other related factors. This paragraph contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 21.

CAPITAL MARKETS AND BANKING

(1) Reclassified to conform to the current period's presentation.

CAPITAL MARKETS AND BANKING delivers a full range of global financial services
and products including foreign exchange, derivatives, loans, leasing, equipment
finance, structured products and treasury.

CAPITAL MARKETS AND BANKING net income of $757 million and $1.317 billion in the
2002 second quarter and six months increased $164 million or 28% and $72 million
or 6% from the comparable 2001 periods. The increase in the 2002 second quarter
primarily reflects increases in Sales & Trading and Fixed Income and 2001
restructuring charges of $32 million (after-tax), partially offset by a higher
provision for credit losses and a 2001 second quarter building sale in Asia. The
increase in the 2002 six months primarily reflects increases in Sales & Trading
and 2001 restructuring charges of $60 million (after-tax), partially offset by a
higher provision for credit losses and a 2001 second quarter building sale in
Asia.

Revenues, net of interest expense, of $2.490 billion and $4.779 billion in the
2002 second quarter and six months increased $447 million or 22% and $466
million or 11%, respectively. The increase in the 2002 second quarter and six
months was primarily due to increases in Sales & Trading and Fixed Income as
well as the acquisition of Banamex, partially offset by a 2001 second quarter
building sale in Asia, and 2002 first quarter redenomination losses in
Argentina. Sales & Trading and Fixed Income benefited from low interest rates
and also included strong foreign exchange trading results.

Operating expenses were $895 million in the 2002 second quarter, up $54 million
or 6% primarily due to increases in compensation and benefits as a result of
increases in production-related compensation and the acquisition of Banamex,
partially offset by 2001 restructuring charges of $54 million (pretax), expense
control initiatives, and a benefit from the absence of goodwill and other
indefinite-lived intangible asset amortization of $16 million (pretax).
Operating expenses were down $66 million or 4% to $1.749 billion for the 2002
six months primarily due to 2001 restructuring charges of $98 million (pretax),
expense control initiatives, and a benefit from the absence of goodwill and
other indefinite-lived intangible asset amortization of $30 million (pretax).

14

The provision for credit losses was $457 million in the 2002 second quarter, up
$172 million from 2001 primarily due to exposures in the telecommunications
industry. The provision for credit losses increased $523 million to $1.068
billion for the 2002 six months primarily due to exposures in the
telecommunications industry and provisions for Argentina in the first quarter of
2002.

Cash-basis loans were $4.090 billion at June 30, 2002, $3.608 billion at March
31, 2002, $3.068 billion at December 31, 2001, and $2.469 billion at June 30,
2001. Cash-basis loans were up $1.621 billion from June 30, 2001 primarily due
to borrowers in the telecommunications industry combined with increases in
Mexico and Argentina. The increase in Mexico primarily reflects the acquisition
of Banamex and includes exposures in steel, textile, food products and other
industries. Cash-basis loans increased $482 million from March 31, 2002
primarily due to borrowers in the telecommunications industry and Argentina.

TRANSACTION SERVICES

(1) Reclassified to conform to the current period's presentation.
NM Not meaningful

TRANSACTION SERVICES - which provides cash management, trade finance, custody,
clearing and depository services globally - reported net income of $204 million
in the 2002 second quarter, up $101 million or 98% from 2001, and net income of
$285 million for the 2002 six months, up $91 million or 47% from 2001, in each
case reflecting the impact of an investment gain, higher volumes including the
benefit of the Banamex acquisition, higher spreads in Latin America, continued
rationalization of expenses in North America and Europe and prior-year
restructuring-related charges of $13 million (after-tax). Net income in the 2002
six months included $44 million (after-tax) in trade finance write-offs in
Argentina.

As shown in the following table, average liability balances and assets under
custody experienced strong growth versus the prior year. Average liability
balances grew 12% led by Asia, Japan and Mexico. Assets under custody grew 20%
with the improvement primarily in North America and Europe.

Revenues, net of interest expense, of $939 million in the 2002 second quarter
increased $48 million or 5% from the comparable 2001 period, reflecting an
investment gain, higher volumes including the benefit of the Banamex acquisition
and higher spreads in Latin America, partially offset by lower spreads in all
other regions. Total revenues, net of interest expense, of $1.774 billion in the
six months ending June 30, 2002 decreased $19 million or 1% from the comparable
2001 period, primarily reflecting lower spreads in all regions except Latin
America, partially offset by an investment gain, higher volumes including the
benefit of the Banamex acquisition and higher spreads in Latin America.

Operating expenses of $626 million and $1.270 billion in the 2002 second quarter
and six months decreased $89 million or 12% and $194 million or 13% from the
comparable 2001 periods, reflecting continued expense reductions in operations
and technology as well as in the front office in North America and Europe,
foreign currency translation benefits in Latin America and 2001
restructuring-related charges of $17 million (pretax) in both the 2001 second
quarter and six months.

The provision for credit losses of $3 million in the 2002 second quarter was
unchanged from the comparable 2001 period. Provision for credit losses of $72
million for the six months ending June 30, 2002 was up $62 million from the
comparable 2001 period, reflecting first quarter 2002 trade finance write-offs
in Argentina.

Cash-basis loans, which in the TRANSACTION SERVICES business are primarily trade
finance receivables, were $380 million at June 30, 2002, $335 million at March
31, 2002, $444 million at December 31, 2001 and $100 million at June 30, 2001.
Cash-basis loans at June 30, 2002 were up $280 million from June 30, 2001
principally due to the Banamex acquisition.

15

CORPORATE PORTFOLIO REVIEW

Corporate loans are identified as impaired and placed on a nonaccrual basis when
it is determined that the payment of interest or principal is doubtful of
collection or when interest or principal is past due for 90 days or more, except
when the loan is well-secured and in the process of collection. Impaired
corporate loans are written down to the extent that principal is judged to be
uncollectible. Impaired collateral-dependent loans are carried at the lower of
cost or collateral value. The following table summarizes corporate cash-basis
loans at period-end and net credit losses for the corresponding three-month
period.

(1) Reclassified to conform to the current period's presentation.
(2) JENA includes Japan, Western Europe, and North America.
(3) Other International includes Asia (excluding Japan), Mexico, Latin America,
and CEEMEA.
(4) Includes Banamex cash-basis loans and net credit losses in the 2002 first
and second quarters and the 2001 fourth quarter.

Corporate cash-basis loans were $4.521 billion, $3.944 billion, $3.514 billion,
and $2.582 billion at June 30, 2002, March 31, 2002, December 31, 2001 and June
30, 2001, respectively. Cash-basis loans increased $1.939 billion from June 30,
2001 primarily due to increases in JENA, Other International, and CitiCapital.
JENA increased primarily due to exposures in the telecommunications industry.
Other International increased primarily due to increases in Mexico and
Argentina. The increase in Mexico primarily reflects the acquisition of Banamex
and includes exposures in steel, textile, food products and other industries.
CitiCapital increased primarily due to equipment finance loans. Cash-basis loans
increased $577 million from March 31, 2002 primarily due to increases in JENA
and Other International. JENA increased primarily due to borrowers in the
telecommunications industry, and Other International increased primarily due to
Argentina.

Total corporate net credit losses of $485 million in the 2002 second quarter
increased $198 million from the 2001 second quarter primarily due to an increase
of $197 million in CAPITAL MARKETS AND BANKING primarily reflecting higher net
credit losses in the tele-communications industry, in equipment finance and in
Argentina.

Brazil is experiencing market turmoil as a result of uncertainty about the
upcoming presidential elections and its ability to service its government and
external debt. Citicorp continues to monitor the situation closely. For further
details on Citicorp's cross-border exposure to Brazil, please see Management of
Cross-Border Risk on page 24.

Citicorp's allowance for credit losses of $10.437 billion is available to absorb
probable credit losses inherent in the entire portfolio. For analytical purposes
only, the portion of Citicorp's allowance for credit losses attributed to the
corporate portfolio was $4.681 billion at June 30, 2002 compared to $4.788
billion at March 31, 2002, and $4.003 billion at June 30, 2001. The allowance
attributed to the corporate portfolio as a percentage of loans was 3.32% at June
30, 2002, as compared to 3.41% at March 31, 2002 and 2.79% at June 30, 2001. The
$107 million or 9 basis point decrease in the allowance from the 2002 first
quarter primarily reflects Argentina write-offs, the reclassification of $60
million to "Other Liabilities" for reserves related to letters of credit, the
impact of declining foreign exchange rates in Mexico, and a decrease in reserves
in CitiCapital due to improvements in credit quality in the transportation
leasing portfolio, partially offset by additional reserves for the
telecommunications industry. The $678 million or 53 basis point increase from
the 2001 second quarter primarily reflects the acquisition of Banamex and
additional reserves for Argentina. Losses on corporate lending activities and
the level of cash-basis loans can vary widely with respect to timing and amount,
particularly within any narrowly-defined business or loan type. Corporate net
credit losses and cash-basis loans may increase from the 2002 second quarter
levels due to weak global economic conditions, stress in the telecommunications
industry, market turmoil in Brazil, sovereign or regulatory actions, the
continued economic crisis in Argentina, and other factors. This statement is a
forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements " on page 21.

16

GLOBAL INVESTMENT MANAGEMENT

(1) Reclassified to conform to the current period's presentation.
NM Not meaningful

GLOBAL INVESTMENT MANAGEMENT comprises LIFE INSURANCE AND ANNUITIES, PRIVATE
BANKING and ASSET MANAGEMENT. These businesses offer a broad range of life
insurance, annuity, asset management and personalized wealth management products
and services distributed to institutional, high net worth, and retail clients.

Global Investment Management net income of $208 million in the 2002 second
quarter and $346 million in the 2002 six months was up $119 million and $145
million from the comparable 2001 periods. LIFE INSURANCE AND ANNUITIES net
income was $56 million in the 2002 second quarter and $67 million in the 2002
six months, up $45 million and $46 million from the comparable 2001 periods. The
$45 million increase in net income at LIFE INSURANCE AND ANNUITIES from the 2001
second quarter primarily reflects the Banamex acquisition and the benefit from
the release of an Amparos reserve in Argentina. The $46 million increase in net
income at LIFE INSURANCE AND ANNUITIES from the 2001 six months primarily
reflects the Banamex acquisition and higher earnings in Latin America. PRIVATE
BANKING net income was $113 million in the 2002 second quarter and $223 million
in the 2002 six months, up $25 million or 28% and $40 million or 22% from the
comparable 2001 periods. The increase in net income at PRIVATE BANKING from the
2001 periods primarily reflects continued customer revenue momentum across a
range of products, including client trading activity and lending, and the impact
of lower interest rates, partially offset by increased expenses due to higher
employee-related and technology costs. Asset MANAGEMENT net income was $39
million in the 2002 second quarter and $56 million in the 2002 six months, an
increase of $49 million and $59 million from the comparable 2001 periods. The
increase in net income at ASSET MANAGEMENT primarily reflects the Banamex
acquisition, decreased expenses and strong net flows.

LIFE INSURANCE AND ANNUITIES

(1) Reclassified to conform to the current period's presentation.

17

LIFE INSURANCE AND ANNUITIES is comprised of International Insurance
Manufacturing and Citi Insurance Group (CIG). These businesses offer a broad
range of life insurance and annuity products. The International Insurance
Manufacturing business primarily has operations in Latin America, Mexico,
Western Europe, and Asia.

LIFE INSURANCE AND ANNUITIES net income was $56 million and $67 million in the
2002 second quarter and six months, respectively, up $45 million and $46
million, respectively, from the comparable periods of 2001. The $45 million
increase in net income from the 2001 second quarter primarily reflects a $23
million increase in Latin America, a $13 million increase in Mexico due to the
Banamex acquisition, a $7 million increase in Asia and a $2 million increase in
CIG. The $23 million increase in Latin America is due to a release of an Amparos
reserve and the benefit of lower benefits and claims expense due to changes in
Argentine regulations and the impact of the peso devaluation. The $46 million
increase from the 2001 six months primarily reflects an $18 million increase in
Mexico due to the Banamex acquisition, a $16 million increase in Latin America,
a $7 million increase in Asia and a $5 million increase in CIG. The increase in
Latin America primarily resulted from lower benefits and claims expense, and a
benefit in the 2002 six months from a redenomination gain.

Revenues, net of interest expense, of $207 million and $337 million in the
2002 second quarter and six months, respectively, increased $152 million and
$228 million from the 2001 second quarter and six months, respectively. The
$152 million increase from the 2001 second quarter primarily reflects the
Banamex acquisition, the impact of the Amparos reserve release and an
increase in Asia investment revenues. The $228 million increase from the 2001
six months primarily reflects the Banamex acquisition and higher Asia
investment revenues.

Operating expenses of $31 million and $60 million in the 2002 second quarter and
six months increased $22 million and $41 million from the 2001 second quarter
and six months, respectively, primarily due to the Banamex acquisition.

Provision for benefits and claims of $89 million and $171 million in the 2002
second quarter and six months increased $65 million and $120 million from the
2001 second quarter and six months, respectively, primarily due to the Banamex
acquisition, partially offset by lower benefits and claims in Latin America due
to changes in Argentine regulations and the impact of the peso devaluation.

PRIVATE BANKING

(1) Reclassified to conform to the current period's presentation.

PRIVATE BANKING provides personalized wealth management services for high net
worth clients around the world. PRIVATE BANKING net income was $113 million in
the 2002 second quarter and $223 million in the 2002 six months, up $25 million
or 28% and $40 million or 22% from the 2001 periods, primarily reflecting
continued customer revenue momentum across most products and the impact of lower
interest rates, partially offset by increased expenses.

Client business volumes under management, which include custody accounts, client
assets under fee-based management, deposits, and loans, were $163 billion at the
end of the 2002 second quarter, up $12 billion or 8% from $151 billion at the
end of the 2001 second quarter and reflects increases in most major product
lines, including an increase of $5 billion in banking and fiduciary deposits and
$4 billion in loans. Regionally, the increase primarily reflects continued
growth in North America, Asia and Japan.

Revenues, net of interest expense, were $427 million in the 2002 second quarter
and $850 million in the six months, up $51 million or 14% and $82 million or 11%
from the respective 2001 periods. Revenue growth was primarily driven by
continued customer revenue momentum across a range of products including client
trading activity, lending, and the benefit of lower interest rates. In the 2002
second quarter and six months, the increase in revenues reflects continued
favorable trends in North America (including Mexico), up $30 million or 19% and
$64 million and 21%, respectively, from the comparable 2001 periods.
International revenues increased $21 million or 9% from the 2001 second quarter
and $18 million or 4% from the 2001 six months, primarily due to growth in Japan
and Asia.

Operating expenses of $261 million and $518 million in the 2002 second quarter
and six months were up $24 million or 10% and $42 million or 9% from the
respective 2001 periods, primarily reflecting higher levels of employee-related
expenses (including European severance costs) partially due to increased
front-end sales and servicing capabilities and investment spending in
technology. Operating expenses include restructuring charges of $3 million
pretax ($2 million after-tax) in the 2002 first quarter and $7 million pretax
($4 million after-tax) in the 2001 second quarter, primarily relating to North
America and Latin America.

The provision for credit losses was $6 million in the 2002 six months, up $3
million from the year-ago period, primarily reflecting higher write-offs. Loans
90 days or more past due at the 2002 quarter-end were $193 million or 0.67% of
total loans outstanding, compared with $64 million or 0.26% at the end of the
2001 second quarter, and reflects increases in North America, Western Europe,
Japan and CEEMEA.

Average assets of $29 billion in the 2002 second quarter increased $3 billion or
12% from $26 billion in the 2001 second quarter, primarily due to higher
mortgage financing, and margin and tailored lending.

18

ASSET MANAGEMENT

(1) Reclassified to conform to the current period's presentation.
(2) Includes $27 billion and $26 billion in 2002 and 2001, respectively, for
PRIVATE BANKING clients.

ASSET MANAGEMENT offers institutional, high net worth, and retail clients a
broad range of investment alternatives from investment centers located around
the world and includes the businesses of Citibank Global Asset Management,
Banamex asset management and retirement services, retirement services
businesses in Latin America and an alternative investments business. Products
and services offered include mutual funds, closed-end funds, separately
managed accounts, and pension administration.

Net income of $39 million in the 2002 second quarter and $56 million in the 2002
six months improved $49 million and $59 million from the comparable 2001
periods, primarily due to the Banamex acquisition, partially offset by declines
in the retirement services businesses in Latin America due to the current
economic conditions in Argentina.

Assets under management for the 2002 second quarter rose 16% from the 2001
second quarter to $164 billion, primarily reflecting strong net flows and the
impact of the Banamex acquisition.

Revenues, net of interest expense, of $178 million and $364 million in the
2002 second quarter and six months increased $31 million or 21% from the 2001
second quarter and $39 million or 12% from the 2001 six months. The increase
in revenues from the 2001 second quarter and six-month periods was primarily
due to the Banamex acquisition, partially offset by reduced revenues in the
retirement services businesses in Latin America due to the economic
conditions in Argentina.

Operating expenses of $137 million and $308 million in the 2002 second quarter
and six months declined $25 million or 15% and $16 million or 5% from the
comparable 2001 periods, primarily reflecting reduced expenses in the retirement
services businesses in Latin America due to the current economic conditions in
Argentina, partially offset by the impact of the Banamex acquisition. Operating
expenses include restructuring charges of $12 million pretax ($8 million
after-tax) in the 2002 first quarter, relating to Latin America and $5 million
pretax ($3 million after-tax) in the 2001 second quarter, primarily relating to
Western Europe.

19

PROPRIETARY INVESTMENT ACTIVITIES

(1) Reclassified to conform to the current periods presentation.

PROPRIETARY INVESTMENT ACTIVITIES comprises Citicorp's venture capital
activities, results from certain proprietary investments, the results of certain
investments in countries that refinanced debt under the 1989 Brady Plan or plans
of a similar nature, and since August 2001, the Banamex investment portfolio.

Revenues, net of interest expense, of ($71) million for the 2002 second quarter
decreased $372 million from the 2001 second quarter, primarily reflecting lower
venture capital results and higher impairment write-downs, including $53 million
in pretax write-downs on certain investments in Argentina. For the 2002 six
months, revenues, net of interest expense, of $22 million decreased $227 million
from the 2001 six-month period, primarily reflecting lower venture capital
results and higher impairment write-downs, including $153 million for
investments in Argentina, partially offset by net mark to market gains on an
investment in India.

Operating expenses of $29 million and $62 million in the 2002 second quarter and
six months increased $11 million and $12 million, respectively, from the
comparable 2001 periods, primarily due to increased venture capital costs,
partially related to a majority-owned venture capital fund which was established
in late 2001.

Minority interest, net of tax, increased in both the 2002 second quarter and
six-month periods from the comparable 2001 periods, primarily due to the net
impact of majority-owned investment funds established in late 2001.

Proprietary Investment Activities results may fluctuate in the future as a
result of market and asset-specific factors. This statement is a forward-looking
statement within the meaning of the Private Securities Litigation Reform Act.
See "Forward-Looking Statements" on page 21.

CORPORATE/OTHER

(1) Reclassified to conform to the current period's presentation.

CORPORATE/OTHER includes net corporate treasury results, corporate expenses,
certain intersegment eliminations, the Internet-related development
activities, cumulative effect of accounting changes and taxes not allocated
to the individual businesses, and the results of Northland Insurance Company
(Northland). Effective October 2001, Northland was reorganized as a unit of
Citigroup's Property and Casualty segment.

Revenues, net of interest expense, of $193 million and $373 million in the
2002 second quarter and six months decreased $103 million and $183 million,
respectively, from the 2001 periods primarily as a result of the Northland
reorganization partially offset by lower net treasury costs and the impact of
higher intersegment eliminations. The lower net treasury costs primarily
relate to favorable interest rate positioning and lower funding costs,
including the impact of lower interest rates.

Operating expenses of $115 million in the 2002 second quarter decreased $47
million from the 2001 second quarter, primarily due to the Northland
reorganization and lower unallocated corporate costs, partially offset by the
impact of higher intersegment eliminations. Operating expenses of $305
million in the 2002 six months increased $3 million from the 2001 six-month
period, primarily due to the impact of higher intersegment eliminations,
partially offset by the impact of the Northland reorganization and lower
unallocated corporate costs.

The cumulative effect of accounting changes of $111 million in the 2001 second
quarter reflects the impact of adopting EITF 99-20. The 2001 six-month period
also reflects a $33 million charge related to the 2001 first quarter adoption of
SFAS No. 133. See Note 2 of Notes to Unaudited Consolidated Financial Statements
for further details of cumulative effects of accounting changes.

20

FORWARD-LOOKING STATEMENTS

Certain of the statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company's actual results may differ materially from
those included in the forward-looking statements. Forward-looking statements are
typically identified by words or phrases such as "believe," "expect,"
"anticipate," "intend," "estimate," "may increase," "may fluctuate," and similar
expressions or future or conditional verbs such as "will," "should," "would,"
and "could." These forward-looking statements involve risks and uncertainties
including, but not limited to, weak global economic conditions including the
economic crisis in Argentina and market turmoil in Brazil; government decrees
and judicial orders in Argentina; rising unemployment rates and an increase in
bankruptcy filings in Japan; sovereign or regulatory actions, and political
conditions and developments; credit performance of the portfolios, including
bankruptcies, portfolio growth, and seasonal factors; stress in the
telecommunications industry; the effect of banking and financial services
reforms and of rules regarding the regulatory capital treatment of recourse,
direct credit substitutes and residual interest in asset securitizations;
possible amendments to, and interpretations of, risk-based capital guidelines
and reporting instructions; the effect proposed U.S. bankruptcy legislation
would have if enacted; the resolution of legal proceedings and related matters;
and the Company's success in managing the costs associated with the expansion of
existing distribution channels and developing new ones, and in realizing
increased revenues from such distribution channels, including cross-selling
initiatives and electronic commerce-based efforts.

MANAGING GLOBAL RISK

The Citicorp Risk Management framework recognizes the wide range and diversity
of global business activities by balancing strong corporate oversight with
defined independent risk management functions at the business level. The
Citicorp Risk Management Framework is summarized in Citicorp's 2001 Form 10-K
and is described in detail in Citigroup's 2001 Annual Report and Form 10-K.

THE CREDIT RISK MANAGEMENT PROCESS

The credit risk management process at Citicorp relies on corporate-wide
standards to ensure consistency and integrity, with business-specific policies
and practices to ensure applicability and ownership. Citicorp's credit risk
management process is described in detail in Citicorp's 2001 Form 10-K.

THE MARKET RISK MANAGEMENT PROCESS

Market risk at Citicorp - like credit risk - is managed through corporate-wide
standards and business policies and procedures.

- - Market risks are measured in accordance with established standards to ensure
consistency across businesses and the ability to aggregate like risks at the
Citigroup-level.
- - Each business is required to establish, and have approved by independent
Market Risk Management, a market risk limit framework, including risk
measures, limits and controls, that clearly defines approved risk profiles
and is within the parameters of Citigroup's overall risk appetite.
- - Businesses, working in conjunction with independent Market Risk Management,
must ensure that market risks are independently measured, monitored and
reported, to ensure transparency in risk-taking activities and integrity in
risk reports.

In all cases, the businesses are ultimately responsible for the market risks
that they take, and for remaining within their defined limits.

Market risk encompasses liquidity risk and price risk, both of which arise in
the normal course of business of a global financial intermediary. Liquidity risk
is the risk that some entity, in some location and in some currency, may be
unable to meet a financial commitment to a customer, creditor, or investor when
due. Liquidity Risk is discussed in the Liquidity and Capital Resources section.

Price risk is the risk to earnings that arises from changes in interest rates,
foreign exchange rates, equity and commodity prices, and in their implied
volatilities. Price risk arises in Non-Trading Portfolios, as well as in Trading
Portfolios.

21

NON-TRADING PORTFOLIOS

Price risk in non-trading portfolios is measured predominantly through
Earnings-at-Risk and Factor Sensitivity techniques. These measurement techniques
are supplemented with additional tools, including stress testing and
cost-to-close analysis.

Business units manage the potential earnings effect of interest rate movements
by managing the asset and liability mix, either directly or through the use of
derivative financial products. These include interest rate swaps and other
derivative instruments that are designated and effective as hedges. The
utilization of derivatives is managed in response to changing market conditions
as well as to changes in the characteristics and mix of the related assets and
liabilities.

Earnings-at-Risk is the primary method for measuring price risk in Citicorp's
non-trading portfolios. Earnings-at-Risk measures the pretax earnings impact of
a specified upward and downward parallel shift in the yield curve for the
appropriate currency. The Earnings-at-Risk is calculated separately for each
currency and reflects the repricing gaps in the position as well as option
positions, both explicit and embedded. U.S. dollar exposures are calculated by
multiplying the gap between interest sensitive items, including assets,
liabilities, derivative instruments and other off-balance sheet instruments, by
100 basis points. Non-U.S. dollar exposures are calculated utilizing the
statistical equivalent of a 100 basis point change in interest rates and
assuming no correlation between exposures in different currencies.

Citicorp's primary non-trading price risk exposure is to movements in the U.S.
dollar and Mexican peso interest rates. Citicorp also has Earnings-at-Risk in
various other currencies, however, there are no significant risk concentrations
in any other individual non-U.S. dollar currency.

The following table illustrates the impact to Citicorp's pretax earnings from a
100 basis point increase or decrease in the U.S. dollar yield curve. As of June
30, 2002, the potential impact on pretax earnings over the next 12 months is a
decrease of $455 million from an interest rate increase and an increase of $480
million from an interest rate decrease. The potential impact on pretax earnings
for periods beyond the first 12 months is an increase of $981 million from an
increase in interest rates and a decrease of $1,469 million from an interest
rate decrease. The change in Earnings-at-Risk from the prior year and prior-year
end primarily reflects an increase in the proportion of floating rate funding
and the change in the mix of assets and liabilities to reflect Citicorp's view
of interest rates.

The statistical equivalent of a 100 basis point increase in Mexican peso
interest rates would have a potential positive impact on Citicorp's pretax
earnings of approximately $299 million over the next 12 months and a potential
positive impact of $187 million for the years thereafter. The statistical
equivalent of a 100 basis points decrease in Mexican peso interest rates would
have a potential negative impact on Citicorp's pretax earnings of approximately
$299 million for the next 12 months and potential negative impact of $187
million for the years thereafter. The change in Earnings-at-Risk from the prior
year primarily represents the inclusion of Banamex's Mexican peso exposure while
the change in Earnings-at-Risk from the prior year-end reflects the repricing
characteristics of the portfolio.

Excluding the impact of changes in Mexican peso interest rates, the statistical
equivalent of a 100 basis point increase in other non-U.S. dollar interest rates
would have a potential negative impact on Citicorp's pretax earnings of $205
million over the next twelve months and potential positive impact $113 million
for the years thereafter. The statistical equivalent of a 100 basis point
decrease in other non-U.S. dollar interest rates would have a potential positive
impact on Citicorp's pretax earnings of $208 million over the next twelve months
and a potential negative impact of $98 million for the years thereafter. The
change in Earnings-at-Risk from the prior year and the prior year-end primarily
represents changes in the asset and liability mix across a range of currencies
to reflect Citicorp's current view of interest rates.

CITICORP EARNINGS-AT-RISK (IMPACT ON PRETAX EARNINGS)(1)

(1) Prior year amounts have been restated to conform with the current period's
presentation.

22

TRADING PORTFOLIOS

Price risk in trading portfolios is measured through a complementary set of
tools, including Factor Sensitivities, Value-at-Risk, and Stress Testing. Each
trading portfolio has its own market risk limit framework, encompassing these
measures and other controls, including permitted product lists and a new,
complex product approval process established by the business, and approved by
independent market risk management.

Factor Sensitivities are defined as the change in the value of a position for a
defined change in a market risk factor (e.g., the change in the value of a
Treasury bill for a 1 basis point change in interest rates). It is the
responsibility of independent market risk management to ensure that factor
sensitivities are calculated, monitored, and, in some cases, limited for all
relevant risks taken in a trading portfolio. Value-at-Risk estimates the
potential decline in the value of a position or a portfolio, under normal market
conditions, over a one-day holding period, at a 99% confidence level. The
Value-at-Risk method incorporates the Factor Sensitivities of the trading
portfolio with the volatilities and correlations of those factors.

Stress Testing is performed on trading portfolios on a regular basis, to
estimate the impact of extreme market movements. Stress Testing is performed on
individual trading portfolios, as well as on aggregations of portfolios and
businesses, as appropriate. It is the responsibility of independent market risk
management, in conjunction with the businesses, to develop stress scenarios,
review the output of periodic stress testing exercises, and utilize the
information to make judgments as to the ongoing appropriateness of exposure
levels and limits.

New and/or complex products in trading portfolios are required to be reviewed
and approved by the Global Corporate Capital Markets Approval Committee (CMAC).
The CMAC is responsible for ensuring that all relevant risks are identified and
understood, and can be measured, managed, and reported in accordance with
applicable Global Corporate policies and practices. The CMAC is made up of
senior representatives from market and credit risk management, legal,
accounting, operations, and other support areas, as required.

The level of price risk exposure at any given point in time depends on the
market environment and expectations of future price and market movements, and
will vary from period to period.

For Citicorp's major trading centers, the aggregate pretax Value-at-Risk in the
trading portfolios was $31 million at June 30, 2002. Daily exposures averaged
$39 million during the 2002 second quarter and ranged from $23 million to $58
million.

The following table summarizes Value-at-Risk in the trading portfolios as of
June 30, 2002 and December 31, 2001, along with the averages.

The table below provides the range of Value-at-Risk in the trading portfolios
that was experienced during the second quarter of 2002 and all of 2001.

23

MANAGEMENT OF CROSS-BORDER RISK

Cross-border risk is the risk that Citicorp will be unable to obtain payment
from customers on their contractual obligations as a result of actions taken by
foreign governments such as exchange controls, debt moratoria, and restrictions
on the remittance of funds. Citicorp manages cross-border risk as part of the
Citigroup's Risk Management framework described in Citicorp's 2001 Form 10-K.

The following table presents total cross-border outstandings and commitments on
a regulatory basis in accordance with Federal Financial Institutions Examination
Council (FFIEC) guidelines. Total cross-border outstandings include cross-border
claims on third parties as well as investments in and funding of local
franchises, as described in Citicorp's 2001 Form 10-K. Countries with
outstandings greater than 0.75% of Citicorp assets at June 30, 2002 and December
31, 2001 include:

(1) Included in total cross-border claims on third parties.
(2) Commitments (not included in total cross-border outstandings) include
legally binding cross-border letters of credit and other commitments and
contingencies as defined by the FFIEC.

LIQUIDITY AND CAPITAL RESOURCES

Citicorp's primary source of capital resources is its net earnings. Other
sources include proceeds from the issuance of trust preferred securities, senior
debt, subordinated debt and commercial paper. Citicorp can also generate funds
by securitizing various financial assets including credit card receivables and
other receivables generally secured by collateral.

Citicorp and certain other subsidiaries issue commercial paper directly to
investors. Citicorp maintains combined liquidity reserves of cash, securities
and unused bank lines of credit to support its combined outstanding commercial
paper.

Associates First Capital Corporation, a subsidiary of Citicorp, has a
combination of unutilized credit facilities with unaffiliated banks of $6.4
billion as of June 30, 2002 which have maturities ranging from 2002 to 2005.
All of these facilities are guaranteed by Citicorp. In connection with the
facilities, Citicorp is required to maintain a certain level of consolidated
stockholder's equity (as defined in the agreements). At June 30, 2002, this
requirement was exceeded by approximately $52.5 billion. Citicorp has also
guaranteed various debt obligations of CitiFinancial Credit Company (CCC), an
indirect subsidiary of Citicorp.

Borrowings under bank lines of credit may be at interest rates based on LIBOR,
CD rates, the prime rate, or bids submitted by the banks. Each company pays its
banks facility fees for its lines of credit.

Citicorp and some of its nonbank subsidiaries have credit facilities with
Citicorp's subsidiary banks, including Citibank, N.A. Borrowings under these
facilities must be secured in accordance with Section 23A of the Federal Reserve
Act.

MANAGEMENT OF LIQUIDITY

Management of liquidity at Citicorp is the responsibility of the Corporate
Treasurer. A uniform liquidity risk management policy exists for Citigroup and
its major operating subsidiaries. Under this policy, there is a single set of
standards for the measurement of liquidity risk in order to ensure consistency
across businesses, stability in methodologies and transparency of risk.
Management of liquidity at each operating subsidiary and/or country is performed
on a daily basis and is monitored by Corporate Treasury. Each major operating
subsidiary and/or country must prepare an annual liquidity and funding plan for
the approval by the Corporate Treasurer. Under the annual liquidity and funding
plan, liquidity limits, targets and ratios are established. Contingency Funding
Plans are prepared on a periodic basis for Citigroup and each major operating
subsidiary and country. These plans include stress testing of assumptions about
significant changes in key funding sources, credit ratings, contingent uses of
funding, and political and economic conditions in certain countries.

24

Citicorp's funding sources are well-diversified across funding types and
geography, a benefit of the strength of the global franchise. Funding includes a
large geographically diverse retail and corporate deposit base, a significant
portion of which is considered core.

Other sources of funding include collateralized borrowings, securitizations
(primarily credit card and mortgages), long-term debt, and purchased/wholesale
funds. This funding is significantly enhanced by Citicorp's strong capital
position. As a subsidiary of Citigroup, Citicorp finances its operations on a
basis consistent with its capitalization, regulatory structure and the operating
environment in which it operates.

A diversity of funding sources, currencies, and maturities is used to gain a
broad access to the investor base. Citicorp's deposits, which represented 60% of
its total funding at June 30, 2002 and 59% of its total funding at December 31,
2001, are broadly diversified by both geography and customer segments.

Stockholder's equity, which grew $2.6 billion during the first six months of
2002 to $66.0 billion at June 30, 2002, continues to be an important component
of the overall funding structure. In addition, long-term debt is issued by
Citicorp and its subsidiaries. Total Citicorp long-term debt outstanding at the
end of the 2002 second quarter was $69.7 billion, down from $81.1 billion at
2001 year-end. Asset securitization programs remain an important source of
liquidity. Loans securitized during the first six months of 2002 included $5.7
billion of U.S. credit cards and $14.3 billion of U.S. consumer mortgages. As
credit card securitization transactions amortize, newly originated receivables
are recorded on Citicorp's balance sheet and become available for asset
securitization. During the second quarter of 2002, the scheduled amortization of
certain credit card securitization transactions made available $4.3 billion of
new receivables. In addition, at least $6.3 billion of credit card
securitization transactions are scheduled to amortize during the rest of 2002.

Citicorp is subject to risk-based capital guidelines issued by the Board of
Governors of the Federal Reserve System (FRB). These guidelines are used to
evaluate capital adequacy based primarily on the perceived credit risk
associated with balance sheet assets, as well as certain off-balance sheet
exposures such as unused loan commitments, letters of credit, and derivative and
foreign exchange contracts. The risk-based capital guidelines are supplemented
by a leverage ratio requirement.

OFF-BALANCE SHEET ARRANGEMENTS

Citicorp and its subsidiaries are involved with several types of off-balance
sheet arrangements, including special purpose entities (SPEs), lines and letters
of credit, and loan commitments. The principal uses of SPEs are to obtain
sources of liquidity by securitizing certain of Citicorp's financial assets, to
assist our clients in securitizing their financial assets, and to create other
investment products for our clients.

SPEs may be organized as trusts, partnerships, or corporations. In a
securitization, the company transferring assets to an SPE converts those assets
into cash before they would have been realized in the normal course of business.
The SPE obtains the cash needed to pay the transferor for the assets received by
issuing securities to investors in the form of debt instruments, certificates,
commercial paper, and other notes of indebtedness. Investors usually have
recourse to the assets in the SPE and often benefit from other credit
enhancements, such as a cash collateral account, overcollateralization in the
form of excess assets in the SPE, or a liquidity facility, such as a line of
credit or asset purchase agreement. Accordingly, the SPE can typically obtain a
more favorable credit rating from rating agencies, such as Standard and Poor's
and Moody's Investors Service, than the transferor could obtain for its own debt
issuances, resulting in less expensive financing costs. The transferor can use
the cash proceeds from the sale to extend credit to additional customers or for
other business purposes. The SPE may also enter into a derivative contract in
order to convert the yield or currency of the underlying assets to match the
needs of the SPE's investors or to limit the credit risk of the SPE. The Company
may be the counterparty to any such derivative. The securitization process
enhances the liquidity of the financial markets, may spread credit risk among
several market participants, and makes new funds available to extend credit to
consumers and commercial entities.

SECURITIZATION OF CITICORP'S ASSETS

Citicorp and its subsidiaries are involved with several types of off-balance
sheet arrangements, including special purpose entities (SPEs). In some of these
arrangements (credit card receivable and mortgage loan securitizations),
Citicorp is securitizing assets that were previously recorded in its statement
of financial position. In other arrangements, Citicorp acts as intermediary or
agent for its corporate clients, assisting them in obtaining sources of
liquidity by selling the clients' trade receivables or other financial assets to
an SPE. The Company also securitizes clients' debt obligations in transactions
involving SPEs that issue collateralized debt obligations. In yet other
arrangements, the Company packages and securitizes assets purchased in the
financial markets in order to create new security offerings for institutional
and private bank clients as well as retail customers. In connection with such
arrangements, Citigroup may purchase and temporarily hold assets designated for
subsequent securitization.

In the second quarter of 2002, Citicorp securitized $2.2 billion of credit
card receivables and $7.7 billion of mortgage and other receivables, thereby
reducing our assets and the related funding by $9.9 billion in the quarter.
At June 30, 2002, total assets in credit card trusts were $77 billion, $65
billion of which were accounted for as sales and removed from the balance
sheet. In addition, mortgages and other loans which have been securitized and
are outstanding totaled $86 billion. The impact to net income resulting from
these securitizations

25

was not significant. Under generally accepted accounting principles, the
assets and liabilities of these SPEs do not appear in Citicorp's consolidated
statement of financial position. See Note 10 to Unaudited Consolidated
Financial Statements.

CREDIT CARD RECEIVABLES

Credit card receivables are securitized through a trust, which is established to
purchase the receivables. Citicorp sells receivables into the trust on a
non-recourse basis.

After securitization of credit card receivables, the Company continues to
maintain credit card customer account relationships and provides servicing for
receivables transferred to the SPE trusts. As a result, the Company considers
both the securitized and unsecuritized credit card receivables to be part of the
business it manages. The documents establishing the trusts generally require the
Company to maintain an ownership interest in the trusts. The Company also
arranges for third parties to provide credit enhancement to the trusts,
including cash collateral accounts, subordinated securities, and letters of
credit. As specified in certain of the sale agreements, the net revenue with
respect to the investors' interest collected by the trusts each month is
accumulated up to a predetermined maximum amount, and is available over the
remaining term of that transaction to make payments of interest to trust
investors, fees, and transaction costs in the event that net cash flows from the
receivables are not sufficient. If the net cash flows are insufficient,
Citicorp's loss is limited to its retained interest. When the predetermined
amount is reached, net revenue with respect to the investors' interest is passed
directly to the Citicorp subsidiary that sold the receivables. Credit card
securitizations are revolving securitizations; that is, as customers pay their
credit card balances, the cash proceeds are used to replenish the receivables in
the trust. Salomon Smith Barney is one of several underwriters that distribute
securities issued by the trusts to investors. The Company relies on
securitizations to fund approximately 60% of its CitiCard business.

At June 30, 2002, total assets in the credit card trusts were $77 billion. Of
that amount, $65 billion has been sold to investors via trust-issued securities,
and the remaining seller's interest of $12 billion is recorded in Citicorp's
Consolidated Statement of Financial Position as Consumer Loans. Citicorp retains
credit risk on its seller's interests. Amounts receivable from the trusts were
$973 million and amounts due to the trusts were $833 million at June 30, 2002.
During the quarter ended June 30, 2002, finance charges and interchange fees of
$2.5 billion were collected by the trusts. Also for the quarter ended June 30,
2002, the trusts recorded $1.6 billion in coupon interest paid to third-party
investors, servicing fees, and other costs.

MORTGAGES, HOME EQUITY, AUTO AND OTHER LOANS

The Company provides a wide range of mortgage, home equity, auto and other loan
products to a diverse customer base. In addition to providing a source of
liquidity and less expensive funding, securitizing these assets also reduces the
Company's credit exposure to the borrowers. In connection with the
securitization of these loans, servicing rights entitle the Company to a future
stream of cash flows based on the outstanding principal balances of the loans
and the contractual servicing fee. Failure to service the loans in accordance
with contractual servicing obligations may lead to a termination of the
servicing rights and the loss of future servicing fees. In non-recourse
servicing, the principal credit risk to the servicer arises from temporary
advances of funds. In recourse servicing, the servicer agrees to share credit
risk with the owner of the mortgage loans, such as FNMA, FHLMC, GNMA, or with a
private investor, insurer or guarantor. Our mortgage loan securitizations are
primarily non-recourse, thereby effectively transferring the risk of future
credit losses to the purchasers of the securities issued by the trust. Home
equity loans may be revolving lines of credit under which borrowers have the
right to draw on the line of credit up to their maximum amount for a specified
number of years. In addition to servicing rights, the Company also retains a
residual interest in its home equity, manufactured housing and auto loan
securitizations, consisting of seller's interest and interest-only strips that
arise from the calculation of gain or loss at the time assets are sold to the
SPE. At June 30, 2002, mortgages and other loans securitized and outstanding
were $86 billion.

The following table summarizes certain cash flows received from and paid to
securitization trusts during the quarter ended June 30, 2002:

SECURITIZATIONS OF CLIENT ASSETS

The Company acts as intermediary or agent for its corporate clients, assisting
them in obtaining sources of liquidity, by selling the clients' trade
receivables or other financial assets to an SPE.

The Company administers several third-party owned, special purpose, multi-seller
finance companies that purchase pools of trade receivables, credit cards, and
other financial assets from third-party clients of the Company. As
administrator, the Company provides

26

accounting, funding, and operations services to these conduits. The Company has
no ownership interest in the conduits. The clients continue to service the
transferred assets. The conduits' asset purchases are funded by issuing
commercial paper and medium-term notes. Clients absorb the first losses of the
conduit by providing collateral in the form of excess assets. The Company along
with other financial institutions provides liquidity facilities, such as
commercial paper back-stop lines of credit to the conduits. The Company also
provides second loss enhancement in the form of letters of credit and other
guarantees. All fees are charged on a market basis. At June 30, 2002, total
assets in the conduits were $51 billion.

The Company also securitizes clients' debt obligations in transactions involving
SPEs that issue collateralized debt obligations (CDOs). A majority of the
transactions are on behalf of clients where the Company first purchases the
assets at the request of the clients and warehouses them until the
securitization transaction is executed. Other CDOs are structured where the
underlying debt obligations are purchased directly in the open market or from
issuers. Some CDOs have static unmanaged portfolios of assets, while others have
a more actively managed portfolio of financial assets. The Company receives fees
for structuring and distributing the CDO securities to investors.

CREATION OF OTHER INVESTMENT PRODUCTS

The Company packages and securitizes assets purchased in the financial markets
in order to create new security offerings, including hedge funds, mutual funds,
and other investment funds, for institutional and private bank clients as well
as retail customers, that match the clients' investment needs and preferences.
The SPEs may be credit-enhanced by excess assets in the investment pool or by
third party insurers assuming the risks of the underlying assets, thus reducing
the credit risk assumed by the investors and diversifying investors' risk to a
pool of assets as compared with investments in individual assets. The Company
typically manages the SPE for market-rate fees. In addition, the Company may be
one of several liquidity providers to the SPE and may place the securities with
investors. The Company has no ownership interest in these entities.

CREDIT COMMITMENTS AND LINES OF CREDIT

The table below summarizes Citicorp's credit commitments as of June 30, 2002 and
December 31, 2001.

(1) Credit card lines are unconditionally cancelable by the issuer.

(2) Includes $140 billion and $148 billion with original maturity less than one
year at June 30, 2002 and December 31, 2001, respectively.

CAPITAL

CITICORP

Citicorp is subject to risk-based capital guidelines issued by the Board of
Governors of the Federal Reserve System (FRB). These guidelines are used to
evaluate capital adequacy based primarily on the perceived credit risk
associated with balance sheet assets, as well as certain off-balance sheet
exposures such as unused loan commitments, letters of credit, and derivative and
foreign exchange contracts. The risk-based capital guidelines are supplemented
by a leverage ratio requirement.

CITICORP RATIOS

(1) Tier 1 capital divided by adjusted average assets.

Citicorp maintained a strong capital position during the 2002 second quarter.
Total capital (Tier 1 and Tier 2) amounted to $63.4 billion at June 30, 2002,
representing 12.53% of net risk adjusted assets. This compares with $63.2
billion and 12.82% at March 31,

27

2002, and $62.9 billion and 12.41% at December 31, 2001. Tier 1 capital of $42.5
billion at June 30, 2002 represented 8.40% of net risk adjusted assets, compared
with $42.2 billion and 8.55% at March 31, 2002, and $42.2 billion and 8.33% at
December 31, 2001. The Tier 1 capital ratio at June 30, 2002 was above
Citicorp's target range of 8.00% to 8.30%.

COMPONENTS OF CAPITAL UNDER REGULATORY GUIDELINES

(1) Tier 1 capital excludes unrealized gains and losses on debt securities
available for sale in accordance with regulatory risk-based capital
guidelines. The federal bank regulatory agencies permit institutions to
include in Tier 2 capital up to 45% of pretax net unrealized holding gains
on available-for-sale equity securities with readily determinable fair
values. Institutions are required to deduct from Tier 1 capital net
unrealized holding losses on available-for-sale equity securities with
readily determinable fair values, net of tax.

(2) Includes goodwill and certain other identifiable intangible assets.

(3) Represents investment in certain overseas insurance activities and
unconsolidated banking and finance subsidiaries.

(4) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is
deducted from risk-adjusted assets.

(5) Includes qualifying senior and subordinated debt in an amount not exceeding
50% of Tier 1 capital, and subordinated capital notes subject to certain
limitations.

(6) Includes risk-weighted credit equivalent amounts, net of applicable
bilateral netting agreements, of $25.1 billion for interest rate, commodity,
and equity derivative contracts and foreign exchange contracts as of June
30, 2002, compared to $20.7 billion as of March 31, 2002 and $21.8 billion
as of December 31, 2001. Net risk-adjusted assets also includes the effect
of other off-balance sheet exposures such as unused loan commitments and
letters of credit and reflects deductions for intangible assets and any
excess allowance for credit losses.

Common stockholder's equity increased $2.6 billion during the first six months
of 2002 to $66.0 billion at June 30, 2002, representing 9.93% of assets,
compared to 10.17% at March 31, 2002, and 9.81% at December 31, 2001. The net
increase in common stockholder's equity during the first six months principally
reflected net income of $5.5 billion, offset by cash dividends declared of $2.0
billion, and $0.9 billion related to the net change in foreign currency
translation adjustment, change in hedging activities and unrealized gains and
losses on investment securities.

The mandatorily redeemable securities of subsidiary trusts (trust securities)
outstanding at June 30, 2002 of $1,033 million qualify as Tier 1 capital and are
included in long-term debt on the balance sheet. For the six months ended June
30, 2002 and 2001, interest expense on the trust securities amounted to $38
million.

The final rules governing the regulatory capital treatment of nonfinancial
equity investments, which became effective April 1, 2002, were adopted for the
quarter ended June 30, 2002. The implementation had a minimal impact on
Citicorp's capital ratios. The capital ratio impact of the $330 million capital
charge was substantially offset by the $3.3 billion net reduction in
risk-adjusted assets for the nonfinancial equity investments.

Citicorp's subsidiary depository institutions are subject to the risk-based
capital guidelines issued by their respective primary federal bank regulatory
agencies, which are generally similar to the FRB's guidelines. At June 30, 2002,
all of Citicorp's subsidiary depository institutions were "well capitalized"
under the federal bank regulatory agencies' definitions.

Citicorp is a legal entity separate and distinct from Citibank, N.A. and its
other subsidiaries and affiliates. As discussed in the Citicorp 2001 Form 10-K,
there are various legal limitations on the extent to which Citicorp's
subsidiaries may extend credit, pay dividends, or otherwise supply funds to
Citicorp. As of June 30, 2002, under their applicable dividend limitations,
Citicorp's national and state-chartered bank subsidiaries could have declared
dividends to their respective parent companies without regulatory approval of
approximately $7.9 billion. In determining whether and to what extent to pay
dividends, each bank subsidiary must also consider the effect of dividend
payments on applicable risk-based capital and leverage ratio requirements, as
well as policy statements of the federal regulatory agencies that indicate that
banking organizations should generally pay dividends out of current operating
earnings.

28

Consistent with these considerations, Citicorp estimates that, as of
June 30 , 2002, its bank subsidiaries could have distributed dividends to
Citicorp, directly or through their parent holding company, of approximately
$7.6 billion of the available $7.9 billion.

CITIBANK, N.A. RATIOS

Citibank's net income for the second quarter of 2002 amounted to $2.0 billion.
During the quarter, Citibank paid a dividend of $9 million to Citicorp (parent
company). Citibank had $10.7 billion of subordinated notes outstanding at June
30, 2002, March 31, 2002, and December 31, 2001, that were issued to Citicorp
(parent company) and included in Citibank's Tier 2 capital.

In December 2001, the Basel Committee on Banking Supervision (Committee)
announced that a consultative package on the new Basel Capital Accord (new
Accord) would not be issued in early 2002, as previously indicated. Instead, the
Committee will first seek to complete a comprehensive impact assessment of the
draft proposal, after which a new consultative package will be issued. On July
10, 2002, the Committee announced that it will launch a Quantitative Impact
Study on October 1, 2002 which will allow banks to perform a concrete and
comprehensive assessment of how the Committee's proposals will affect their
organization. Banks will be asked to submit their findings by December 20, 2002.
The new Accord, which will apply to all "significant" banks, as well as to
holding companies that are parents of banking groups, is intended to be
finalized in the fourth quarter of 2003, with implementation of the framework by
year-end 2006. The Company is monitoring the status and progress of the proposed
rule.

On November 29, 2001, the FRB issued final rules regarding the regulatory
capital treatment of recourse, direct credit substitutes and residual interest
in asset securitizations. The rules require a deduction from Tier 1 capital for
the amount of credit-enhancing interest-only strips (a type of residual
interest) that exceeds 25% of Tier 1 capital, as well as requiring
dollar-for-dollar capital for residual interests not deducted for Tier 1
capital. On May 17, 2002, the FRB issued guidance that requires institutions to
treat accrued interest receivables related to credit card securitizations as
residual interest, which will also require dollar-for-dollar capital. These
rules, which require full implementation in the fourth quarter of 2002, are not
expected to have a significant impact on Citicorp.

Additionally, from time to time, the FRB and the FFIEC propose amendments to,
and issue interpretations of, risk-based capital guidelines and reporting
instructions. Such proposals or interpretations could, if implemented in the
future, affect reported capital ratios and net risk-adjusted assets. This
paragraph and the preceding paragraph contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" on page 21.

29

CITICORP AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

See Notes to Unaudited Consolidated Financial Statements.

30

CITICORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Notes to Unaudited Consolidated Financial Statements.

31

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED)

CITICORP AND SUBSIDIARIES

(1) Refers to the adoption of SFAS 133 in the first quarter of 2001 and the
adoption of EITF 99-20 in the second quarter of 2001, resulting in
increases to equity from nonowner sources of $82 million and $88 million,
respectively.

See Notes to Unaudited Consolidated Financial Statements.

32

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) CITICORP AND SUBSIDIARIES

See Notes to Unaudited Consolidated Financial Statements.

33

CONSOLIDATED BALANCE SHEETS CITIBANK, N.A. AND SUBSIDIARIES

(1) Amounts at June 30, 2002 and December 31, 2001 include the after-tax
amounts for net unrealized gains on investment securities of $49 million
and $17 million, respectively, for foreign currency translation of ($2.089)
billion and ($1.460) billion, respectively, and for cash flow hedges of
$484 million and $156 million, respectively.

See Notes to Unaudited Consolidated Financial Statements.

34

CITICORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying consolidated financial statements as of June 30, 2002 and for
the three- and six-month periods ended June 30, 2002 and 2001 are unaudited and
include the accounts of Citicorp and its subsidiaries (collectively, the
Company). In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation have been reflected.
The accompanying consolidated financial statements should be read in conjunction
with the consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001.

Certain financial information that is normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America, but is not required for interim reporting
purposes, has been condensed or omitted.

Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.

2. ACCOUNTING CHANGES

BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
Effective July 1, 2001, the Company adopted the provisions of SFAS No. 141 and
certain provisions of SFAS No. 142 as required for goodwill and intangible
assets resulting from business combinations consummated after June 30, 2001. The
new rules require that all business combinations consummated after June 30, 2001
be accounted for under the purchase method. The nonamortization provisions of
the new rules affecting goodwill and intangible assets deemed to have indefinite
lives are effective for all purchase business combinations completed after June
30, 2001.

On January 1, 2002, Citicorp adopted the remaining provisions of SFAS No. 142,
when the rules became effective for calendar year companies. Under the new
rules, effective January 1, 2002, goodwill and intangible assets deemed to have
indefinite lives are no longer amortized, but are subject to annual impairment
tests. Other intangible assets will continue to be amortized over their useful
lives.

The Company has performed the required impairment tests of goodwill and
indefinite-lived intangible assets and there was no impairment upon adoption of
SFAS No. 142.

Net income for the second quarter and first six months of 2002 and 2001 and the
full years 2001, 2000 and 1999 adjusted to exclude amortization expense (net of
taxes) related to goodwill and indefinite lived intangible assets which are no
longer amortized are as follows:

During the first six months of 2002, no goodwill was impaired or written off.
The Company recorded goodwill of $41 million during the 2002 second quarter and
$74 million during the 2002 first quarter in connection with the consumer
finance acquisitions of Marufuku Co., Ltd. and Taihei Co., Ltd., respectively,
in Japan. Additionally, in February 2002, Banamex completed the purchase of the
remaining 48% interest in Seguros Banamex, a life insurance business, and AFORE
Banamex, a pension fund management business, from AEGON for $1.24 billion which
resulted in additional goodwill of $1.07 billion in the Global Investment
Management segment.

35

The changes in goodwill during the second quarter of 2002 were as follows:

(1) Other changes in goodwill includes foreign exchange effects on non-dollar
denominated goodwill, purchase accounting adjustments and certain other
reclassifications.

At June 30, 2002, $440 million of the Company's acquired trade names were
considered to be indefinite-lived and not subject to amortization. All other
acquired intangible assets are subject to amortization.

The components of intangible assets were as follows:

(1) Primarily contract-related intangible assets.

The intangible assets recorded during the first six months of 2002 and their
respective amortization periods were as follows:

(1) Represents present value of future profits acquired during the first six
months of 2002 that will be amortized on an accelerated basis over 22
years.
(2) There was no significant residual value estimated for the intangible assets
recorded during the first six months of 2002.

Intangible assets amortization expense was $188 million and $179 million for the
three months ended June 30, 2002 and 2001, respectively, and $373 million and
$337 million for the six months ended June 30, 2002 and 2001, respectively.
Intangible assets amortization expense is estimated to be $410 million for the
remainder of 2002, $820 million in 2003, $780 million in 2004, $720 million in
2005, $660 million in 2006, and $610 million in 2007.

ADOPTION OF EITF 99-20
During the second quarter of 2001, the Company adopted Emerging Issues Task
Force (EITF) Issue No. 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Asset"
(EITF 99-20). EITF 99-20 provides new guidance regarding income recognition and
identification and determination of impairment on certain asset-backed
securities. The initial adoption resulted in a cumulative adjustment of $111
million after-tax, recorded as a charge to earnings, and an increase of $88
million included in other changes in stockholder's equity from nonowner sources.

DERIVATIVES AND HEDGE ACCOUNTING
On January 1, 2001, Citicorp adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 changed the
accounting treatment of derivative contracts (including foreign exchange
contracts) that are employed to manage risk outside of Citicorp's trading
activities, as well as certain derivative instruments embedded in other
contracts.

36

SFAS No. 133 requires that all derivatives be recorded on the balance sheet at
their fair value. The treatment of changes in the fair value of derivatives
depends on the character of the transaction, including whether it has been
designated and qualifies as part of a hedging relationship. The majority of
Citicorp's derivatives are entered into for trading purposes and were not
impacted by the adoption of SFAS No. 133. The cumulative effect of adopting SFAS
No. 133 at January 1, 2001 was an after-tax charge of $33 million included in
net income and an increase of $82 million included in other changes in
stockholder's equity from nonowner sources.

TRANSFERS AND SERVICING OF FINANCIAL ASSETS
In September 2000, the Financial Accounting Standards Board (FASB) issued SFAS
No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, a replacement of FASB Statement No. 125" (SFAS
No. 140). In July 2001, FASB issued Technical Bulletin No. 01-1, "Effective Date
for Certain Financial Institutions of Certain Provisions of Statement 140
Related to the Isolation of Transferred Assets."

Certain provisions of SFAS No. 140 require that the structure for transfers of
financial assets to certain securitization vehicles be modified to comply with
revised isolation guidance for institutions subject to receivership by the
Federal Deposit Insurance Corporation. These provisions were effective for
transfers taking place after December 31, 2001, with an additional transition
period ending no later than September 30, 2006 for transfers to certain master
trusts. It is not expected that these provisions will materially affect the
financial statements. SFAS No. 140 also provides revised guidance for an entity
to be considered a qualifying special purpose entity.

IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
On January 1, 2002, Citicorp adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144), when the rule
became effective for calendar year companies. SFAS No. 144 established
additional criteria for determining when a long-lived asset is held-for-sale. It
also broadens the definition of "discontinued operations," but does not allow
for the accrual of future operating losses, as was previously permitted. The
provisions of the new standard are generally to be applied prospectively.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES
In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" (SFAS No. 146). SFAS No. 146 requires that a
liability for costs associated with exit or disposal activities be recognized
when the liability is incurred. Existing generally accepted accounting
principles provide for the recognition of such costs at the date of management's
commitment to an exit plan. In addition, SFAS No. 146 requires that the
liability be measured at fair value and be adjusted for changes in estimated
cash flows.

The provisions of the new standard are effective for exit or disposal activities
initiated after December 31, 2002. It is not expected that SFAS No. 146 will
materially affect the financial statements.

3. BUSINESS DEVELOPMENTS

ACQUISITION OF GOLDEN STATE BANCORP

On May 21, 2002, Citigroup Inc. (Citigroup) announced that it will acquire
Golden State Bancorp (Golden State) in a transaction in which Citigroup will
pay approximately $16.40 in cash and .5234 Citigroup shares for each share of
Golden State delivered at closing, subject to certain adjustments. Golden
State stockholders will be entitled to elect to receive the merger
consideration in shares of Citigroup common stock or cash, subject to certain
limitations. Based on the average prices for the four trading days ended May
23, 2002, the total transaction value is approximately $5.8 billion.

Golden State is the parent company of California Federal Bank, the second
largest thrift in the U.S. and, through its First Nationwide Mortgage business,
the eighth largest mortgage servicer. As of June 30, 2002, it had $24 billion in
deposits, $52 billion in assets and 355 branches in California and Nevada.

The transaction is expected to close in the third quarter of 2002. It is subject
to a number of regulatory approvals and the approval of Golden State
stockholders.

37

4. BUSINESS SEGMENT INFORMATION

The following table presents certain information regarding the Company's
business segments:

(1) Results in the 2002 second quarter and six-month periods reflect after-tax
restructuring-related credits (charges) in Global Consumer of $21 million
and $10 million, in Global Corporate and Investment Bank of $4 million and
($4) million, respectively, and in Global Investment Management of ($10) in
the six-month period. The 2001 second quarter and six-month periods results
reflect after-tax restructuring-related credits (charges) in Global
Consumer of ($58) million and ($70) million, in Global Corporate and
Investment Bank of ($45) million and ($73) million, respectively, in Global
Investment Management of ($7) million in both periods, and in
Corporate/Other of $5 million and $6 million, respectively.
(2) Results in the 2002 second quarter and six-month periods include pretax
provisions (credits) for benefits, claims, and credit losses in Global
Consumer of $1.7 billion and $3.6 billion, in Global Corporate and
Investment Bank of $0.5 billion and $1.1 billion, in Global Investment
Management of $89 million and $177 million, and in Corporate/Other of ($4)
million and ($9) million respectively. The 2001 second quarter and
six-month period results reflect pretax provisions (credits) for benefits,
claims, and credit losses in Global Consumer of $1.3 billion and $2.5
billion, in Global Corporate and Investment Bank of $0.3 billion and $0.6
billion, in Global Investment Management of $25 million and $54 million and
in Corporate/Other of $0.2 billion and $0.3 billion, respectively.
(3) Reclassified to conform to the current period's presentation.

38

5. INVESTMENTS

(1) For the six months ended June 30, 2002, net gains on investments held by
venture capital subsidiaries totaled $231 million of which $281 million and
$222 million represented gross unrealized gains and losses, respectively.
For the six months ended June 30, 2001, net gains on investments held by
venture capital subsidiaries totaled $323 million, of which $722 million
and $493 million represented gross unrealized gains and losses,
respectively.

The amortized cost and fair value of investments in fixed maturities and equity
securities at June 30, 2002 and December 31, 2001 were as follows:

(1) At December 31, 2001, gross pretax unrealized gains and losses on fixed
maturities and equity securities totaled $1.146 billion and $679 million,
respectively.
(2) Recorded at amortized cost.
(3) Includes non-marketable equity securities carried at cost, which are
reported in both the amortized cost and fair value columns.

39

6. TRADING ACCOUNT ASSETS AND LIABILITIES

(1) Net of master netting agreements and securitization.

7. DERIVATIVES AND OTHER ACTIVITIES

The following table summarizes certain information related to the Company's
hedging activities for the three months and six months ended June 30, 2002 and
2001:

(1) Net losses on net investment hedges for the three months ended June 30,
2002 are primarily related to instruments hedging net investments which
have as their functional currency the Japanese yen, the British pound or
the Euro.

The accumulated other changes in equity from nonowner sources from cash flow
hedges for the six months ended June 30, 2002 and 2001 can be summarized as
follows (net of taxes):

(1) Balance at January 1, 2001 results from the cumulative effect of the
accounting change for cash-flow hedges.

8. RESTRUCTURING-RELATED ITEMS

(1) Represents additions to restructuring liabilities arising from
acquisitions.
(2) Utilization amounts include translation effects on the restructuring
reserve.

40

During the first quarter of 2002, Citicorp recorded restructuring charges of $42
million, primarily consisting of the downsizing of Global Consumer and Global
Corporate and Investment Bank operations in Argentina. Through June 30, 2002,
the 2002 reserve utilization included $4 million of severance and other costs
which were paid in cash. As of June 30, 2002, approximately 150 gross staff
positions have been eliminated under these programs.

During 2001, Citicorp recorded restructuring charges of $315 million. Of the
$315 million, $186 million related to the downsizing of certain functions in the
Global Corporate and Investment Bank and Global Consumer businesses in order to
align their cost structures with current market conditions and $129 million
related to the acquisition of Banamex and the integration of its operations. In
addition, a restructuring reserve of $112 million was recorded in connection
with the acquisition of Banamex and recognized as a liability in the purchase
price allocation of Banamex. The total Banamex reserves of $241 million include
costs related to downsizings, the reconfiguration of branch operations in
Mexico, and the integration of operations and operating platforms. These
restructuring initiatives are expected to be implemented this year. The reserves
included $299 million related to employee severance, $63 million related to
exiting leasehold and other contractual obligations, and $65 million of asset
impairment charges.

The $299 million related to employee severance reflects the cost of
eliminating approximately 10,160 positions, including 4,200 in Citicorp's
Global Consumer business and 3,600 in Banamex related to the acquisition, and
1,300 in the Global Consumer business and 1,060 in the Global Corporate and
Investment Bank business related to other restructuring initiatives.
Approximately 1,220 of these positions were in the United States.

Through June 30, 2002, the 2001 restructuring reserve utilization included $65
million of asset impairment charges as well as $218 million of severance and
other costs (of which $177 million of employee severance and $19 million of
leasehold and other exit costs have been paid in cash and $22 million is legally
obligated), together with translation effects. Utilization of the 2001
restructuring reserve in the 2002 second quarter and six months was $36 million
and $50 million, respectively. Through June 30, 2002, approximately 8,800 gross
staff positions have been eliminated under these programs, including
approximately 1,400 in the 2002 second quarter and 2,300 in the first six months
of 2002.

During 2000, Citicorp recorded restructuring charges of $576 million, primarily
consisting of exit costs related to the acquisition of Associates. The charges
included $238 million related to employee severance, $154 million related to
exiting leasehold and other contractual obligations, and $184 million of asset
impairment charges.

Of the $576 million charge, $474 million related to the acquisition of
Associates and included the reconfiguration of certain branch operations, the
exit from non-strategic businesses and from activities as mandated by federal
bank regulations, and the consolidation and integration of corporate, middle and
back office functions. In the Global Consumer business, $51 million includes the
reconfiguration of certain branch operations outside the U.S. and the downsizing
and consolidation of certain back office functions in the U.S. Approximately
$440 million of the $576 million charge related to operations in the United
States.

The $238 million portion of the charge related to employee severance reflects
the costs of eliminating approximately 5,600 positions, including approximately
4,600 in Associates and 700 in the Global Consumer business. Approximately 4,900
of these positions related to the United States. In 2000, a reserve of $23
million was recorded, $20 million of which related to the elimination of 1,600
non-U.S. positions of an acquired entity.

Through June 30, 2002, the 2000 restructuring reserve utilization included $184
million of asset impairment charges and $352 million of severance and other exit
costs (of which $173 million of employee severance and $120 million of leasehold
and other exit costs have been paid in cash and $59 million is legally
obligated), together with translation effects. Utilization of the 2000
restructuring reserve in the 2002 second quarter and six months was $18 million
and $53 million, respectively. Through June 30, 2002, approximately 6,200 staff
positions have been eliminated under these programs including approximately 550
in the 2002 second quarter and 950 in the first six months of 2002.

The implementation of these restructuring initiatives also caused certain
related premises and equipment assets to become redundant. The remaining
depreciable lives of these assets were shortened, and accelerated depreciation
charges (in addition to normal scheduled depreciation on those assets) of $3
million and $22 million were recognized in the second quarter of 2002 and 2001,
respectively, and $8 million and $44 million were recognized in the six-month
periods, respectively.

Changes in estimates are attributable to facts and circumstances arising
subsequent to an original restructuring charge. Changes in estimates
attributable to lower than anticipated costs of implementing certain projects
and a reduction in the scope of certain initiatives during the second quarter of
2002 resulted in a reduction of the reserve for 2001 restructuring initiatives
of $6 million, a reduction of the reserve for 2000 restructuring initiatives of
$24 million and a reduction of reserves for prior restructuring initiatives of
$13 million. Changes in estimates during 2001 resulted in a reduction of the
reserve for 2001 restructuring initiatives of $5 million during the second
quarter of 2001 and a reduction of $29 million for 2000 restructuring
initiatives during the fourth quarter of 2001.

Additional information about restructuring-related items, including the business
segments affected, may be found in Citicorp's 2001 Form 10-K.

41

9. CHANGES IN EQUITY FROM NONOWNER SOURCES

Changes in each component of "Accumulated Other Changes in Equity from Nonowner
Sources" for the six-month period ended June 30, 2002 are as follows:

(1) Primarily reflects the impact of a rising interest rate yield curve on
fixed-income securities.
(2) Includes the $512 million after-tax impact of translating Argentina's net
assets into the U.S. dollar equivalent. As a result of government actions
in Argentina, which began in the fourth quarter of 2001 and continues, the
functional currency of the Argentine branch and subsidiaries was changed in
the 2002 first quarter from the U.S. dollar to the Argentine peso.
(3) Primarily reflects the decline in the Mexican peso against the U.S. dollar,
and includes the $77 million after-tax impact of translating Argentina's
operations into the U.S. dollar equivalent.

10. SECURITIZATIONS

ACCOUNTING POLICIES

For each securitization entity with which Citicorp is involved, the Company
makes a determination of whether the entity should be considered a subsidiary of
the Company and be consolidated into the Company's financial statements or
whether the entity is sufficiently independent that it does not need to be
consolidated. If the securitization entity's activities are sufficiently
restricted to meet certain accounting requirements to be a qualifying special
purpose entity, the securitization entity is not consolidated by the Company as
seller of the transferred assets. For all other securitizations in which the
Company participates, an evaluation is made of whether the Company controls the
entity by considering several factors, including how much of the entity's
ownership is in the hands of third-party investors, who controls the
securitization entity, and who reaps the rewards and bears the risks of the
entity. Only securitization entities controlled by the Company are consolidated.

For a transfer of financial assets to be considered a sale: financial assets
transferred by the Company must have been isolated from the seller, even in
bankruptcy or other receivership; the purchaser must have the right to sell the
assets transferred, or the purchaser must be a qualifying special purpose entity
meeting certain significant restrictions on its activities, whose investors have
the right to sell their ownership interests in the entity; and the seller does
not continue to control the assets transferred through an agreement to
repurchase them or have a right to cause the assets to be returned (known as a
call option). A transfer of financial assets that meets the sale requirements is
removed from the Company's consolidated statement of financial position. If the
conditions for sale are not met, the transfer is considered to be a secured
borrowing, the asset remains on the Company's consolidated statement of
financial position and the proceeds are recognized as the Company's liability.

In determining whether financial assets transferred have, in fact, been isolated
from the Company, an opinion of legal counsel is obtained for complex
transactions or where the Company has continuing involvement with the assets
transferred or with the securitization entity. For sale treatment to be
appropriate, those opinions must state that the asset transfer would be
considered a sale and that the assets transferred would not be consolidated with
the Company's other assets in the event of the Company's insolvency.

In the case of asset transfers to certain master trust securitization entities,
the Company has until no later than June 30, 2006 to make the changes needed in
the master trusts' organizational structure and governing documents that are
necessary to meet these isolation requirements.

The Company values its securitized retained interests at fair value as
determined using generally accepted valuation techniques at the time of
securitization and subsequently. The Company retains a seller's interest in the
credit card receivables transferred to the trusts, which is not in securitized
form. Accordingly, the seller's interest is carried on a historical cost basis
and classified as consumer loans.

42

SECURITIZATION ACTIVITIES

Citicorp and its subsidiaries securitize primarily credit card receivables and
mortgages. Other types of loans securitized include home equity loans, auto
loans and student loans.

After securitizations of credit card receivables, the Company continues to
maintain credit card customer account relationships and provides servicing for
receivables transferred to the trusts. The Company also arranges for third
parties to provide credit enhancement to the trusts, including cash collateral
accounts, subordinated securities and letters of credit. As specified in certain
of the sale agreements, the net revenue collected each month is accumulated up
to a predetermined maximum amount, and is available over the remaining term of
that transaction to make payments of yield, fees, and transaction costs in the
event that net cash flows from the receivables are not sufficient. When the
predetermined amount is reached net revenue is passed directly to the Citigroup
subsidiary that sold the receivables.

The Company provides a wide range of mortgage and home equity products to a
diverse customer base. In connection with these loans, the servicing rights
entitle the Company to a future stream of cash flows based on the outstanding
principal balances of the loans and the contractual servicing fee. Failure to
service the loans in accordance with contractual requirements may lead to a
termination of the servicing rights and the loss of future servicing fees. In
non-recourse servicing, the principal credit risk to the servicer is the cost of
temporary advances of funds. In recourse servicing, the servicer agrees to share
credit risk with the owner of the mortgage loans such as FNMA or FHLMC or with a
private investor, insurer or guarantor. Losses on recourse servicing occur
primarily when foreclosure sale proceeds of the property underlying a defaulted
mortgage or home equity loan are less than the outstanding principal balance and
accrued interest of such mortgage loan and the cost of holding and disposing of
the underlying property.

The Company also originates and sells first mortgage loans in the ordinary
course of its mortgage banking activities. The Company sells certain of these
loans to the Government National Mortgage Association (GNMA) with the servicing
rights retained. GNMA has the primary recourse obligation on the individual
loans; however, GNMA's recourse obligation is capped at a fixed amount per loan.
Any losses above that fixed amount are borne by Citigroup as the
seller/servicer.

The following table summarizes certain cash flows received from and paid to
securitization trusts during the three and six-month periods ended June 30, 2002
and 2001:

(1) Other includes auto loans in all periods and student loans in the six
months ended June 30, 2002.

The Company recognized gains on securitizations of $59 million and $69 million
for the three months ended June 30, 2002 and 2001, respectively, and $94 million
and $93 million for the six months ended June 30, 2002 and 2001, respectively,
primarily related to mortgage loans.

Key assumptions used for mortgages during the six months ended June 30, 2002 in
measuring the fair value of retained interests at the date of sale or
securitization follow:

Discount rate 10.9% to 11.5%
Constant prepayment rate 6.8% to 7.4%
Anticipated net credit losses 0.03%
=============

43

As required by SFAS No. 140, the effect of two negative changes in each of the
key assumptions used to determine the fair value of retained interests must be
disclosed. The negative effect of each change in each assumption must be
calculated independently, holding all other assumptions consistent. Because the
key assumptions may not in fact be independent, the net effect of simultaneous
adverse changes in the key assumptions may be less than the sum of the
individual effects shown below.

At June 30, 2002, for mortgages, auto loans and manufactured housing loans, the
key assumptions, presented by product groups, and the sensitivity of the fair
value of retained interests to two adverse changes in each of the key
assumptions were as follows:

MANAGED LOANS

For the loan portfolios where the Company continues to manage loans after they
have been securitized, the following table presents the total loan amounts
managed, the portion of those portfolios securitized, and delinquencies (loans
which are 90 days or more past due) at June 30, 2002 and December 31, 2001, and
credit losses, net of recoveries, for the three and six-month periods ended June
30, 2002 and 2001.

(1) Includes home equity loans and auto loans.
(2) Includes loans held-for-sale.

44

SERVICING RIGHTS

The fair value of capitalized mortgage loan servicing rights was $1.381 billion,
$1.173 billion and $1.092 billion at June 30, 2002, December 31, 2001 and June
30, 2001, respectively. The following table summarizes the changes in
capitalized mortgage servicing rights (MSR):

The following table summarizes the changes in the valuation allowance for
capitalized mortgage servicing rights:

11. CONTINGENCIES

For a discussion of certain legal proceedings, see Part II, Item I of this Form
10-Q. In addition, in the ordinary course of business, Citicorp and its
subsidiaries are defendants or co-defendants in various litigation and
regulatory matters incidental to and typical of the businesses in which they are
engaged. In the opinion of the Company's management, the ultimate resolution of
these legal proceedings would not be likely to have a material adverse effect on
the results of the Company and its subsidiaries' operations, financial
condition, or liquidity.

12. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

CITIFINANCIAL CREDIT COMPANY (CCC)

On August 4, 1999, CCC, an indirect wholly-owned subsidiary of Citigroup, was
contributed to and became a subsidiary of Citicorp Banking Corporation (CBC), a
wholly-owned subsidiary of Citicorp. Citicorp issued a full and unconditional
guarantee of the outstanding long-term debt securities and commercial paper of
CCC.

ASSOCIATES FIRST CAPITAL CORPORATION (AFCC)

In connection with Citigroup's November 30, 2000 acquisition of AFCC in which
AFCC became a wholly-owned subsidiary of Citicorp, Citicorp issued a full and
unconditional guarantee of the outstanding long-term debt securities and
commercial paper of AFCC and Associates Corporation of North America (ACONA), a
subsidiary of AFCC.

Effective as of August 10, 2001, CBC, the parent company of CCC, transferred
100% of the stock of CCC to AFCC in exchange for convertible preferred stock of
AFCC, making CCC a wholly-owned subsidiary of AFCC. The condensed consolidating
financial statements account for the transaction in a manner similar to a
pooling of interest and therefore all prior periods have been restated.

On October 2, 2001, ACONA merged with and into AFCC at which time, AFCC assumed
ACONA's obligations under all debt instruments and agreements. Information
included in the following condensed financial statements under the AFCC column
represents AFCC Consolidated which includes ACONA's and CCC's results.

On July 1, 2002, Citicorp contributed its remaining interest in the stock of
AFCC to CBC, making AFCC a wholly-owned subsidiary of CBC. Citicorp remains the
guarantor of the outstanding long-term debt securities and commercial paper of
AFCC.

AFCC has a combination of unutilized credit facilities with unaffiliated banks
of $6.4 billion as of June 30, 2002 which have maturities ranging from 2002 to
2005. All of these facilities are guaranteed by Citicorp. In connection with the
facilities, Citicorp is required to maintain a certain level of consolidated
stockholder's equity (as defined in the agreements). At June 30, 2002, this
requirement was exceeded by approximately $52.5 billion. Citicorp also has
guaranteed various debt obligations of AFCC and CCC, an indirect subsidiary of
Citicorp.

45

CONDENSED CONSOLIDATING INCOME STATEMENTS (UNAUDITED)

(1) Includes all other subsidiaries of Citicorp and intercompany eliminations.

(2) Includes Citicorp Parent Company elimination of distributed and
undistributed income of subsidiaries and the elimination of CCC, included
in the AFCC column.

46

CONDENSED CONSOLIDATING INCOME STATEMENTS (UNAUDITED)

(1) Includes all other subsidiaries of Citicorp and intercompany eliminations.

(2) Includes Citicorp Parent Company elimination of distributed and
undistributed income of subsidiaries and the elimination of CCC, included
in the AFCC column.

47

CONDENSED CONSOLIDATING INCOME STATEMENTS (UNAUDITED)

(1) Includes all other subsidiaries of Citicorp and intercompany eliminations.

(2) Includes Citicorp Parent Company elimination of distributed and
undistributed income of subsidiaries and the elimination of CCC, included
in the AFCC column.

48

CONDENSED CONSOLIDATING INCOME STATEMENTS (UNAUDITED)

(1) Includes all other subsidiaries of Citicorp and intercompany eliminations.
(2) Includes Citicorp Parent Company elimination of distributed and
undistributed income of subsidiaries and the elimination of CCC, included
in the AFCC column.

49

CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)

(1) Includes all other subsidiaries of Citicorp and intercompany eliminations.
(2) Includes Citicorp Parent Company elimination of investments in subsidiaries
and the elimination of CCC, included in the AFCC column.

50

CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)

(1) Includes all other subsidiaries of Citicorp and intercompany eliminations.
(2) Includes Citicorp Parent Company elimination of investments in subsidiaries
and the elimination of CCC, included in the AFCC column.

51

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)

(1) Includes all other subsidiaries of Citicorp and intercompany eliminations.
(2) Includes the elimination of CCC, included in the AFCC column.

52

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)

(1) Includes all other subsidiaries of Citicorp and intercompany eliminations.
(2) Includes the elimination of CCC, included in the AFCC column.

53

FINANCIAL DATA SUPPLEMENT

CITICORP AND SUBSIDIARIES

AVERAGE BALANCES AND INTEREST RATES, TAXABLE EQUIVALENT BASIS -
QUARTERLY(1)(2)(3)

(1) The taxable equivalent adjustment is based on the U.S. federal statutory
tax rate of 35%.
(2) Interest rates and amounts include the effects of risk management
activities associated with the respective asset and liability categories.
See Note 7 to Unaudited Consolidated Financial Statements.
(3) Monthly or quarterly averages have been used by certain subsidiaries, where
daily averages are unavailable.
(4) Includes cash-basis loans.
(5) Average rates reflect prevailing local interest rates including
inflationary effects and monetary correction in certain countries.
(6) The fair value carrying amounts of derivative and foreign exchange
contracts are reported in non-interest-earning assets and other
non-interest-bearing liabilities.
(7) Savings deposits consist of Insured Money Market Rate accounts, NOW
accounts, and other savings deposits.
(8) Includes allocations for capital and funding costs based on the location of
the asset.

54

CITICORP AND SUBSIDIARIES

AVERAGE BALANCES AND INTEREST RATES, TAXABLE EQUIVALENT BASIS -
SIX MONTHS (1) (2) (3)

(1) Reclassified to conform to the current period's presentation.
(2) A cash-basis loan is defined as collateral dependent when repayment is
expected to be provided solely by the underlying collateral and there are no
other available and reliable sources of repayment, in which case the loans
are written down to the lower of cost or collateral value.
(3) Substantially all consumer loans, of which $1.257 billion, $1.106 billion,
and $973 million are government-guaranteed student loans and mortgages at
June 30, 2002, March 31, 2002, and June 30, 2001, respectively.

OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS

(1) Represents repossessed real estate, carried at lower of cost or fair value,
less costs to sell.
(2) Primarily commercial transportation equipment and manufactured housing,
carried at lower of cost or fair value, less costs to sell.

56

DETAILS OF CREDIT LOSS EXPERIENCE

(1) Includes amounts recognized under credit default swaps purchased from third
parties.
(2) Primarily includes foreign currency translation effects and the addition of
allowance for credit losses related to acquisitions.
- --------------------------------------------------------------------------------

57

Part II - Other Information

Item 1. Legal Proceedings.

In April 2002, Citigroup and various of its affiliates, including affiliates of
Citicorp, were named as defendants along with, among others, commercial and/or
investment banks, certain current and former Enron officers and directors,
lawyers and accountants in two putative consolidated class action complaints
that were filed in the United States District Court for the Southern District of
Texas seeking unspecified damages. One action, brought on behalf of individuals
who purchased Enron securities (NEWBY, ET AL. V. ENRON CORP., ET AL.), alleges
violations of Sections 11 and 15 of the Securities Act of 1933, as amended, and
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and
the other action, brought on behalf of current and former Enron employees
(TITTLE, ET AL. V. ENRON CORP., ET AL.), alleges violations of the Employment
Retirement Income Security Act of 1974, as amended (ERISA), and the Racketeer
Influenced and Corrupt Organizations Act (RICO), as well as negligence and civil
conspiracy. On May 8, 2002, Citigroup filed motions to dismiss the complaints,
which are pending.

In July 2002, Citigroup and various of its affiliates, including affiliates of
Citicorp, and certain of their officers and other employees were named as
defendants, along with, among others, commercial and/or investment banks,
certain current and former Enron officers and directors, lawyers and accountants
in a putative class action filed in the United States District Court for the
Southern District of New York on behalf of purchasers of the Yosemite Notes and
Enron Credit-Linked Notes, among other securities (HUDSON SOFT CO., LTD. V.
CREDIT SUISSE FIRST BOSTON CORPORATION, ET AL.). The complaint alleges
violations of RICO and seeks unspecified damages.

Additional actions have been filed against Citigroup and certain of its
affiliates, including affiliates of Citicorp, along with other parties,
including (i) an action brought in state court by state pension plans for
alleged violations of state securities law and common law fraud and unjust
enrichment; (ii) an action by banks that participated in two Enron revolving
credit facilities, alleging fraud, gross negligence, and breach of implied
duties in connection with defendants' administration of a credit facility with
Enron; (iii) an action brought by several funds in connection with secondary
market purchases of Enron Corp. debt securities alleging violations of the
federal securities law, including Section 11 of the Securities Act of 1933, as
amended, fraud and misrepresentation; and (iv) a series of putative class
actions by purchasers of NewPower Holdings common stock alleging violations of
the federal securities law, including Section 11 of the Securities Act of 1933,
as amended, and Section 10(b) of the Securities Exchange Act of 1934, as
amended.

Additionally, Citigroup and certain of its affiliates, including affiliates of
Citicorp, have received inquiries and requests for information from various
regulatory and governmental agencies and Congressional committees regarding
certain transactions and business relationships with Enron and its affiliates.
Citigroup and Citicorp are cooperating fully with all such requests.

Additional lawsuits containing similar claims to those described above may be
filed in the future.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

See Exhibit Index.

(b) Reports on Form 8-K

On April 17, 2002, the Company filed a Current Report on Form 8-K, dated April
15, 2002, reporting under Item 5 thereof the summarized results of operations of
Citicorp and its subsidiaries for the quarter ended March 31, 2002.

No other reports on Form 8-K were filed during the second quarter of 2002;
however, on July 19, 2002, the Company filed a Current Report on Form 8-K, dated
July 17, 2002, reporting under Item 5 thereof the summarized results of
operations of Citicorp and its subsidiaries for the quarter ended June 30, 2002.

58

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 14th day of August, 2002.

CITICORP
(Registrant)

By: /s/ Todd S. Thomson
--------------------
Name: Todd S. Thomson
Title: Chief Financial Officer
Principal Financial Officer

By: /s/ William P. Hannon
---------------------
Name: William P. Hannon
Title: Controller
Principal Accounting Officer

59

EXHIBIT INDEX

Exhibit
Number Description of Exhibit
- ------ ----------------------

3.01 Citicorp's Certificate of Incorporation (incorporated by
reference to Exhibit 3(i) to Citicorp's Post-Effective Amendment
No. 1 to Registration Statement on Form S-3, File No. 333-21143,
filed on October 8, 1998).

3.02 Citicorp's By-Laws (incorporated by reference to Exhibit 3.02 to
Citicorp's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2001, File No. 1-5738).

12.01+ Calculation of Ratio of Income to Fixed Charges.

12.02+ Calculation of Ratio of Income to Fixed Charges (including
preferred stock dividends).

99.01+ Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.02+ Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.03+ Residual Value Obligation Certificate.

- ----------

The total amount of securities authorized pursuant to any instrument defining
rights of holders of long-term debt of Citicorp does not exceed 10% of the total
assets of Citicorp and its consolidated subsidiaries. Citicorp will furnish
copies of any such instrument to the Securities and Exchange Commission upon
request.

- ----------

+ Filed herewith

60