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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

Commission file number 1-5738

Citicorp
(Exact name of registrant as specified in its charter)

        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 ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        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

Part I—Financial Information

2

THE COMPANY

Citicorp (Citicorp and, together with its subsidiaries, the Company) is a diversified global financial services holding company whose businesses provide a broad range of financial services to consumer and corporate customers in over 100 countries and territories. Citicorp was incorporated in 1967 under the laws of the State of Delaware. Citicorp is an indirect, wholly-owned subsidiary of Citigroup Inc. (Citigroup).

The Company's activities are conducted through the Global Consumer, Global Corporate and Investment Bank (GCIB), Global Investment Management (GIM) and Proprietary Investment Activities business segments.

The Company is a bank holding company within the meaning of the U.S. Bank Holding Company Act of 1956 (BHC Act) registered with, and subject to examination by, the Board of Governors of the Federal Reserve System (FRB). Certain of the Company's subsidiaries are subject to supervision and examination by their respective federal and state authorities. This quarterly report on Form 10-Q should be read in conjunction with Citicorp's 2002 Annual Report on Form 10-K.

The principal executive offices of the Company are located at 399 Park Avenue, New York, New York 10043, telephone number 212 559 1000. Additional information about Citicorp is available on Citigroup's website at http://www.citigroup.com.

Citicorp's annual report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K, and all amendments to these reports, are available free of charge through Citigroup's website by clicking on the "Investor Relations" page and selecting "SEC Filings." The Securities and Exchange Commission (SEC) website contains reports, information statements, and other information regarding the Company at http://www.sec.gov.

CITICORP AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND 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 (GAAP)). If this table were prepared on a managed basis, which includes certain effects of credit card securitization activities including receivables held for securitization and receivables sold with servicing retained, there would be no impact to net income, but Revenues, Net of Interest Expense, and Benefits, Claims, and Credit Losses would each have been increased by $1.208 billion and $1.081 billion in the 2003 and 2002 second quarters, respectively, and by $2.310 billion and $2.094 billion in the respective six-month periods. Although a managed basis presentation is not in conformity with GAAP, the Company believes it provides a representation of performance and key indicators of the credit card business that is consistent with the way management reviews operating performance and allocates resources. Furthermore, investors utilize information about the credit quality of the entire managed portfolio as the results of both the held and securitized portfolios impact the overall performance of the Cards business. See the discussion of the Cards business on page 11.

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Business Focus

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

Citicorp Net Income—Product View

(1)

Reclassified to conform to the current period's presentation.

4

Results of Operations

Income

Citicorp reported net income of $3.219 billion in the 2003 second quarter, up 6% from $3.038 billion in the 2002 second quarter. Return on average common equity was 16.9% compared to 18.4% a year ago.

Net income for the 2003 six months of $6.336 billion was up 15% from $5.504 billion in the 2002 six months. Return on average common equity was 16.9% and 16.9% in the six months of 2003 and 2002, respectively.

Global Consumer net income increased $339 million or 19% and $763 million or 22% in the 2003 second quarter and six months compared to the 2002 periods. Global Corporate and Investment Bank (GCIB) decreased $164 million or 16% and increased $129 million or 7% in the 2003 second quarter and six months compared to the 2002 periods. Global Investment Management decreased $3 million or 1% and increased $43 million or 13% from the respective 2002 periods, while Proprietary Investment Activities increased $81 million and increased $25 million from the 2002 second quarter and six-month periods.

See individual segment and product discussions on pages 11 - 25 for additional discussion and analysis of the Company's results of operations.

Revenues, Net of Interest Expense

Total revenues, net of interest expense, of $13.6 billion and $26.9 billion in the 2003 second quarter and six months were up $817 million or 6% and $1.7 billion or 7%, respectively, from the 2002 periods. Global Consumer revenues were up $851 million or 10% in the 2003 second quarter to $9.5 billion, and were up $1.7 billion or 10% in the 2003 six months to $18.9 billion. Increases in Retail Banking revenues of $824 million or 28% and $1.3 billion or 21% from the 2002 second quarter and six months, respectively, were driven by the results of Golden State Bancorp (GSB) as well as increases in most regions. Compared to the 2002 periods, Cards was up $102 million or 3% in the 2003 second quarter and $314 million or 5% in the 2003 six months, while Consumer Finance revenue declined $18 million or 1% in the 2003 second quarter primarily due to declines in Japan, and was up $182 million or 4% in the 2003 six months.

Compared to the 2002 periods, GCIB revenues were down $216 million or 7% to $2.9 billion in the 2003 second quarter and were down $199 million or 3% in the 2003 six months, driven by Capital Markets and Banking which was down $162 million or 7% and $201 million or 5% in the 2003 second quarter and six-month periods.

Global Investment Management revenues of $862 million in the 2003 second quarter and $1.6 billion in the 2003 six months were up $75 million or 10% and $136 million or 9% from the comparable 2002 periods, primarily due to higher client trading and lending activity and the impact of acquisitions. Revenues in Proprietary Investment Activities increased $169 million and $98 million from the 2002 second quarter and six months, respectively, primarily reflecting higher net recognized gains and lower impairment write-downs.

Selected Revenue Items

Net interest revenue rose $379 million or 5% from the 2002 second quarter to $8.1 billion and increased $880 million or 6% from the 2002 six months to $16.4 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 $2.8 billion in the 2003 second quarter were down $70 million or 2% from the 2002 second quarter and decreased $199 million or 3% from the 2003 six months, reflecting lower servicing fee revenues and asset-backed fee revenue.

Foreign exchange revenues of $930 million were up $182 million or 24% from the 2002 second quarter and up $544 million or 42% from the 2002 six months to $1.8 billion, reflecting continued strong foreign exchange trading in 2003. Trading account losses of $296 million for the 2003 second quarter and $313 million for the six months of 2003 decreased $768 million from the 2002 second quarter and $1.2 billion from the 2002 six months, primarily reflecting declines in interest rate products. Investment transactions were up $207 million from the 2002 second quarter and $309 million from the 2002 six months. Other revenue of $1.9 billion in the 2003 second quarter was up $887 million or 85% from the prior-year quarter and $1.4 billion or 73% from the 2002 six months, primarily reflecting higher venture capital activity and higher securitization gains and activity, partially offset by increased credit losses on securitized credit card receivables.

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Operating Expenses

Operating expenses of $6.7 billion and $13.2 billion in the 2003 second quarter and six months, respectively, were up $747 million or 13% in the 2003 second quarter and were up $1.3 billion or 11% in the 2003 six months, compared to year-ago levels. The increase primarily reflects the addition of GSB, severance costs, costs associated with the repositioning of the Latin America business, higher legal and pension costs and the additional cost of expensing stock options.

Global Consumer expenses in the 2003 second quarter and six months were up 12% and 11%, respectively. GCIB expenses were up 10% in the quarter and were up 9% in the six months while Global Investment Management expenses were up 19% and 9% from the year-ago periods.

Benefits, Claims, and Credit Losses

Benefits, claims, and credit losses were $2.3 billion and $4.5 billion in the 2003 second quarter and six months, up $121 million and down $378 million from the 2002 second quarter and six months, respectively. Policyholder benefits and claims in the 2003 second quarter decreased 4% from the 2002 second quarter to $148 million, and were up 1% to $296 million in the 2003 six months, as a result of increases in Life Insurance and Annuities. The provision for credit losses increased 6% from the 2002 second quarter to $2.2 billion in the 2003 second quarter and decreased 8% from the 2002 six months to $4.2 billion in the 2003 six months.

Global Consumer provisions for benefits, claims, and credit losses of $1.9 billion in the 2003 second quarter were up 4% from the 2002 second quarter, reflecting increases in Consumer Finance. Total net credit losses were $1.745 billion and the related loss ratio (excluding Commercial Markets) was 2.42% in the 2003 second quarter, as compared to $1.707 billion and 2.38% in the preceding quarter and $1.655 billion and 2.72% in the year-ago quarter. The consumer loan delinquency ratio (90 days or more past due) increased to 2.41% at June 30, 2003 from 2.40% at March 31, 2003 and decreased from 2.53% a year ago. See page 30 for a reconciliation of total consumer credit information.

The GCIB provision for credit losses of $298 million in the 2003 second quarter increased $33 million or 12% while the six-month provision decreased $419 million or 50% from year-ago levels. The decrease was primarily due to provisions for Argentina and exposures in the telecommunications industry recorded during the 2002 first quarter.

Corporate cash-basis loans at June 30, 2003 and 2002 were $4.182 billion and $3.826 billion, respectively, while the corporate Other Real Estate Owned (OREO) portfolio totaled $60 million and $123 million, respectively. The increase in cash-basis loans from the 2002 second quarter was primarily attributable to borrowers in the power and energy industry, as well as corporate borrowers in Brazil, Hong Kong, Australia, Singapore and Mexico. Corporate cash-basis loans at June 30, 2003 increased $123 million from March 31, 2003 primarily due to exposures in the power and energy industry, as well as corporate borrowers in Singapore, Australia and Brazil. The decrease in OREO from the 2002 second quarter was primarily due to continued improvements in the North America real estate portfolio.

Income Taxes

The Company's effective tax rate of 28.9% in the 2003 second quarter declined 490 basis points from 33.8% in the 2002 second quarter. The decline primarily represented benefits for not providing U.S. income taxes for the earnings of certain foreign subsidiaries and a $94 million release of a tax reserve related to a settlement with tax authorities which increased income in Japan.

Regulatory Capital

Total capital (Tier 1 and Tier 2) was $69.9 billion or 12.61% of net risk-adjusted assets, and Tier 1 capital was $46.6 billion or 8.40% at June 30, 2003, compared to $68.7 billion or 12.31% and $45.3 billion or 8.11%, respectively, at December 31, 2002.

6

EVENTS IN 2002 and 2003

Acquisition of Sears' Credit Card Business

On July 15, 2003, Citigroup announced that it will acquire Sears' $29 billion Credit Card business (the 8th largest portfolio in the U.S.) of private label and bankcard credit card receivables in a transaction in which Citigroup will pay a 10% premium or approximately $3 billion at closing. The acquisition will also include Sears' Financial Products business and credit card facilities with approximately 8,300 employees (5,800 full-time employees). In addition, the companies signed a multi-year marketing and servicing agreement across a range of each company's businesses, products and services. The transaction is expected to close by year-end, subject to applicable regulatory approvals. The operations of Sears' Credit Card business will be integrated into the businesses of Citicorp.

Settlement of Certain Legal and Regulatory Matters

On July 28, 2003, Citigroup entered into a final settlement agreement with the Securities and Exchange Commission (SEC) to resolve the SEC's outstanding investigations into Citigroup transactions with Enron and Dynegy. Pursuant to the settlement, Citigroup has, among other terms, (1) consented to the entry of an administrative cease and desist order, which bars Citigroup from committing or causing violations of provisions of the federal securities laws, and (2) agreed to pay $120 million ($101.25 million allocable to Enron and $18.75 million allocable to Dynegy). Citigroup entered into this settlement without admitting or denying any wrongdoing or liability, and the settlement does not establish wrongdoing or liability for purposes of any other proceeding. On July 28, 2003, Citibank, N.A. entered into an agreement with the Office of the Comptroller of the Currency (OCC) and Citigroup entered into an agreement with the Federal Reserve Bank of New York (FED) to resolve their inquiries into certain of Citigroup's transactions with Enron. Pursuant to the agreements, Citibank and Citigroup have agreed to submit plans to the OCC and FED, respectively, regarding the handling of complex structured finance transactions. Also on July 28, 2003, Citigroup entered into a settlement agreement with the Manhattan District Attorney's Office to resolve its investigation into certain of Citigroup's transactions with Enron; pursuant to the settlement, Citigroup has agreed to pay $25.5 million and to abide by its agreements with the SEC, OCC and FED. The Company and certain other Citigroup subsidiaries had previously established a reserve for the cost of these settlements.

Impact from Argentina's Economic Changes

Throughout 2002, Argentina experienced significant political and economic changes including severe recessionary conditions, high inflation and political uncertainty. The government of Argentina implemented substantial economic changes, including abandoning the country's fixed U.S. dollar-to-peso exchange rate, and asymmetrically redenominating substantially all of the banking industry's loans, deposits (which were also restricted) and other assets and liabilities previously denominated in U.S. dollars into pesos at different rates. As a result of the impact of these government actions, the Company changed its functional currency in Argentina from the U.S. dollar to the Argentine peso during the 2002 first quarter. Additionally, the government issued certain compensation instruments 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. Later in the year, the government modified the terms of certain of their Patriotic Bonds, making them less valuable. The government actions, combined with the severe recessionary economic situation and the devaluation of the peso, adversely impacted Citicorp's business in Argentina.

During the full year of 2002, Citicorp recorded a total of $1.704 billion in net pretax charges, as follows: $1.018 billion in net provisions for credit losses; $284 million in investment write-downs; $232 million in losses relating to Amparos (representing judicial orders requiring previously dollar-denominated deposits and insurance contracts that had been redenominated at government rates to be immediately repaid at market exchange rates); $98 million of write-downs of Patriotic Bonds; a $42 million restructuring charge; and a $30 million net charge for currency redenomination and other foreign currency items that includes a benefit from compensation instruments issued in 2002.

Of these charges, Citicorp recorded a total of $84 million in pretax charges in the 2002 second quarter and $942 million (pretax) in the 2002 six-month period.

In addition, the impact of the devaluation of the peso during 2002 produced foreign currency translation losses that reduced Citicorp's equity by $595 million, net of tax, during 2002, including $512 million, net of tax, during the 2002 first quarter and an additional $77 million, net of tax, in the 2002 second quarter.

The Argentina Supreme Court has determined that the 2002 redenomination of certain bank deposits of the Province of San Luis with Banco de la Nacion Argentina from dollars to pesos was unconstitutional. The parties to that litigation did not reach an agreement on the timing and manner of the repayment of the referred deposits within the timeframe set forth by the Supreme Court in its ruling, therefore, the Supreme Court is to decide the terms and conditions of such repayment. In the opinion of the Company's management, the ultimate resolution of the redenomination would not be likely to have a material adverse effect on the consolidated financial condition of the Company, but may be material to the Company's operating results for any particular period. Following this decision, on April 1, 2003, the government issued a regulation providing for a voluntary election on the part of depositors with reprogrammed/

7

restricted balances to receive their peso deposits, including indexation, from their respective banks, as well as a ten-year bond issued directly by the government (the April 2003 Plan). During the election period, which expired on May 23, 2003, 41% of Citicorp's eligible deposit liabilities in Argentina elected to redeem their deposits under the terms of the April 2003 Plan. The redemption of deposits was effected with no significant impact on the Company's net income or liquidity. Additional costs to the Company will depend on future actions or decisions by the Argentine government or judiciary. Further, any voluntary actions the Company might undertake, such as the settlement of reprogrammed deposits completed in January 2003, could mitigate such cost.

The Company believes it has a sound basis to bring a claim, as a result of various actions of the Argentine government. A recovery on such a claim could serve to reduce the economic loss of the Company in Argentina.

As the economic situation as well as legal and regulatory 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 corporate borrowers, as well as the impact on consumer deposits and insurance liabilities of potential government actions, including re-dollarization. Another item we continue to monitor is the realizability of the government obligations such as the compensation instruments, held by Corporate and Consumer businesses, and the guaranteed promissory notes held by the insurance subsidiary. The initial principal payment under certain compensation instruments issued to the Company is expected in August 2003. We are currently evaluating the impact of a government decree issued on August 7, 2003 which will likely affect the valuation of the guaranteed promissory notes. This is not likely to have a material effect on the financial condition or operating results of the Company.

On July 3, 2003, an insurance subsidiary of the Company that issues annuities obtained approval from the Argentine Ministry of Insurance to offer a restructuring plan for its voluntary annuity holders. The plan offers three alternatives, from which its customers will be able to elect during the third quarter of 2003. The alternatives are settlement with local currency, a Company-issued U.S. dollar obligation with a maturity of up to 10 years or a government bond. Once the annuitants have made an election, the Company will be able to evaluate the impact this restructuring plan will have on its financial results.

The above paragraphs contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26.

Acquisition of Golden State Bancorp

On November 6, 2002, Citigroup completed its acquisition of 100% of Golden State Bancorp (GSB) in a transaction in which Citigroup paid approximately $2.3 billion in cash and issued 79.5 million Citigroup common shares. The total transaction value of approximately $5.8 billion was based on the average prices of Citigroup shares, as adjusted for the effect of the TPC distribution, for the two trading days before and after May 21, 2002, the date the terms of the acquisition were agreed to and announced.

GSB was 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.

ACCOUNTING CHANGES IN 2003

Stock-Based Compensation

On January 1, 2003, the Company adopted the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), prospectively to all awards of Citigroup stock granted, modified, or settled after January 1, 2003. The prospective method is one of the adoption methods provided for under SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure," issued in December 2002. SFAS 123 requires that compensation cost for all stock awards be calculated and recognized over the service period (generally equal to the vesting period). This compensation cost is determined using option pricing models, intended to estimate the fair value of the awards at the grant date.

Had the Company applied SFAS 123 in accounting for the Company's stock option plans for all options granted, net income would have been the pro forma amounts indicated below:

8

Costs Associated with Exit or Disposal Activities

        On January 1, 2003, Citicorp adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (SFAS 146). SFAS 146 requires that a liability for costs associated with exit or disposal activities, other than in a business combination, be recognized when the liability is incurred. Previous generally accepted accounting principles provided for the recognition of such costs at the date of management's commitment to an exit plan. In addition, SFAS 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. The impact of adopting SFAS 146 was not material.

Consolidation of Variable Interest Entities

        In January 2003, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). This interpretation changes the method of determining whether certain entities, including securitization entities, should be included in the Company's Consolidated Financial Statements. An entity is subject to FIN 46 and is called a variable interest entity (VIE) if it has (1) equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) equity investors that cannot make significant decisions about the entity's operations, or that do not absorb the expected losses or receive the expected returns of the entity. All other entities are evaluated for consolidation in accordance with SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries" (SFAS 94). A VIE is consolidated by its primary beneficiary, which is the party involved with the VIE that has a majority of the expected losses or a majority of the expected residual returns or both.

        The provisions of the interpretation are to be applied immediately to VIEs created after January 31, 2003, and to VIEs in which an enterprise obtains an interest after that date. For VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 is applicable beginning July 1, 2003. For any VIEs that must be consolidated under FIN 46, the assets, liabilities and noncontrolling interest of the VIE would be initially measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying amounts is not practicable, fair value at the date FIN 46 first applies may be used to measure the assets, liabilities and noncontrolling interest of the VIE.

        The Company is evaluating the impact of applying FIN 46 to existing VIEs in which it has variable interests and has not yet completed this analysis. The Company previously reported that the implementation of FIN 46 could increase both assets and liabilities by $55 billion. However, the Company has since restructured certain VIEs that enables them to meet the criteria for non-consolidation. At this time, it is anticipated that the effect on the Company's Consolidated Statement of Financial Position could be an increase of approximately $3 billion to both assets and liabilities. As we continue to evaluate the impact of applying FIN 46, additional entities may be identified that would need to be consolidated by the Company. This paragraph contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26.

Guarantees and Indemnifications

        On January 1, 2003, the Company adopted the recognition and measurement provisions of FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45), which requires that, for guarantees within the scope of FIN 45 issued or amended after December 31, 2002, a liability for the fair value of the obligation undertaken in issuing the guarantee be recognized. The impact of adopting FIN 45 was not material.

Derivative Instruments and Hedging Activities

        In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" (SFAS 149). SFAS 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133. In particular, this Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative and when a derivative contains a financing component that warrants special reporting in the statement of cash flows. This Statement is generally effective for contracts entered into or modified after June 30, 2003 and is not expected to have a material impact on the Company's financial statements. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Act. See "Forward-Looking Statements" on page 26.

Liabilities and Equity

        In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" (SFAS 150). SFAS 150 establishes standards for how an issuer measures certain financial instruments with characteristics of both liabilities and equity and classifies them in its statement of financial position. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) when that financial instrument embodies an obligation of the issuer. This Statement is effective for financial instruments entered into or modified after May 31, 2003,

9

and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, and is not expected to have a material impact on the Company's financial statements. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26.

Accounting Changes in 2002

Business Combinations, Goodwill and Other Intangible Assets

        Effective July 1, 2001, the Company adopted the provisions of SFAS No. 141, "Business Combinations" (SFAS 141) and certain provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), as required for goodwill and indefinite-lived 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.

SIGNIFICANT ACCOUNTING POLICIES

        The Company's accounting policies are fundamental to understanding management's discussion and analysis of results of operations and financial condition. The Company has identified four policies as being significant because they require management to make subjective and/or complex judgments about matters that are inherently uncertain. These policies relate to Valuations of Financial Instruments, Allowance for Credit Losses, Securitizations and Argentina. These significant accounting policies are further described in the Company's 2002 Annual Report on Form 10-K.

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GLOBAL CONSUMER

        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 $2.154 billion and $4.196 billion in the 2003 second quarter and six months, up $339 million or 19% and $763 million or 22% from the comparable 2002 periods, driven by growth in Retail Banking and Cards that was partially offset by a decline in Consumer Finance. Retail Banking net income increased $395 million or 77% in the 2003 second quarter and $704 million or 67% in the 2003 six months from the prior-year periods, reflecting the impact of the Golden State Bancorp (GSB) acquisition, organic revenue growth and improved credit costs. Cards net income increased $46 million or 6% in the 2003 second quarter and $202 million or 16% in the 2003 six months from the 2002 periods primarily reflecting increases in North America. Consumer Finance net income of $508 million and $993 million in the 2003 second quarter and six months declined $60 million or 11% and $105 million or 10% from the 2002 periods, as the addition of the GSB auto finance business was more than offset by continued weakness in Japan.

Cards

        Cards—which includes bankcards, private-label cards and charge cards in 47 countries around the world—reported net income of $768 million and $1.503 billion in the 2003 second quarter and six months, respectively, up $46 million or 6% and $202 million or 16% from the 2002 periods, led by North America, which benefited from revenue growth that was driven by increases in average managed receivables. International Cards income declined $8 million or 7% compared to the prior-year quarter and increased $70 million or 50% compared to the 2002 six months, both reflecting changes in the allowance for credit losses related to Argentina in the 2002 periods.

        As shown in the following table, average managed loans grew 5% and 6% in the 2003 second quarter and six months, respectively, reflecting growth of 4% and 6% in North America and 12% and 13% in International Cards. Growth in North America was led by Citi Cards, reflecting a higher level of promotional rate balances and new product launches. Average loan growth in the 2003 second quarter was negatively impacted by a change in acquisition marketing strategies which resulted in a decline in promotional rate balances compared to the prior quarter. Growth in International Cards reflected increases in EMEA, driven by the U.K., and in Asia, led by Korea and Malaysia. The growth in International Cards also included the benefit of strengthening currencies and was partially offset by a decline in Latin America, which reflected lower loan volumes across the region. Sales in North America declined 4% in the 2003 second quarter, reflecting the change in acquisition marketing strategies partially offset by an increase in sales per active account. International Cards sales grew 10% from the prior-year quarter, reflecting strong growth in EMEA, which benefited from marketing and expansion efforts. In Asia, sales were up 2% as growth across the region was partially offset by the effect of Severe Acute Respiratory Syndrome (SARS), impacting mostly Hong Kong and Taiwan.

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(1)

Although a managed basis presentation is not in conformity with GAAP, the Company believes it provides a representation of performance and key indicators of the credit card business that is consistent with the way management reviews operating performance and allocates resources. Furthermore, investors utilize information about the credit quality of the entire managed portfolio as the results of both the held and securitized portfolios impact the overall performance of the Cards business.

        Revenues, net of interest expense, of $3.309 billion and $6.642 billion in the 2003 second quarter and six months rose $102 million or 3% and $314 million or 5% from the 2002 periods, primarily reflecting growth in North America, EMEA and Asia. Revenue growth in North America was primarily due to the benefit of receivable growth and increased cardholder services fees and was partially offset by lower spreads. Managed net interest revenue as a percent of average managed loans in North America of 10.27% declined 19 bps from the prior-year quarter, as lower cost of funds was more than offset by the impact of increased promotional rate balances. Citi Cards revenues in the 2003 second quarter included gains from the sale of $1.7 billion in non-strategic portfolios. In addition, Citi Cards revenues included net gains of $69 million and $215 million, in the 2003 second quarter and six months, respectively, as a result of changes in estimates in the timing of revenue recognition on securitizations while prior-year revenues included $94 million and $115 million, in the quarter and six months, respectively, resulting from an increase in the amortization period for certain direct loan origination costs. Increases in EMEA and Asia were driven by growth in receivables and sales combined with the benefit of foreign currency translation.

        Operating expenses of $1.463 billion and $2.909 billion in the 2003 second quarter and six months, respectively, increased $82 million or 6% and $201 million or 7% from the prior-year periods. In North America, expenses increased 8% in both the 2003 second quarter and six months, respectively, driven by increased advertising expenditures and on-going business initiatives, including costs associated with the anticipated third quarter addition of the Home Depot private label card portfolio as well as the absence of a $19 million restructuring reserve release in the prior year. In International Cards, expenses were unchanged in the quarter and up 5% in the six months as disciplined expense management was offset by the impact of foreign currency translation and, in the six-month comparison, investments to support business growth, including costs associated with the consolidation of certain back office operations in Europe.

        The provision for credit losses in the 2003 second quarter and six months was $678 million and $1.452 billion, respectively, compared to $729 million and $1.626 billion in the 2002 periods. In the prior year, the provision for credit losses included a $117 million addition to the allowance for credit losses in the 2002 first quarter resulting from deteriorating credit in Argentina that was partially offset by a $31 million release in the 2002 second quarter resulting from a decline in the Argentine loan portfolio. Excluding the prior-year amounts related to Argentina, the decline in the provision for credit losses reflected credit improvement in North America and in the international markets overall and an increase in the level of securitized receivables, partially offset by the impact of higher loss rates in the U.K. and Korea. Net credit losses in the 2003 second quarter were $679 million with a related loss ratio of 5.41%, compared to $730 million and 5.49% for the 2003 first quarter and $760 million and 6.51% in the prior-year quarter. Loans delinquent 90 days or more were $870 million or 1.80% of loans at June 30, 2003, compared to $932 million or 1.81% at March 31, 2003 and $925 million or 1.87% at June 30, 2002.

        The securitization of credit card receivables is limited to the Citi Cards business within North America. At June 30, 2003, securitized credit card receivables were $72.0 billion, compared to $65.8 billion at June 30, 2002. Credit card receivables held-for-sale were $3.0 billion at June 30, 2003, compared to $6.5 billion a year ago. 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 amount of revenue and 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, gains are recognized upon sale and amounts that would otherwise be reported as net interest revenue, fee and commission revenue, and credit losses on loans are instead reported as fee and commission revenue (for servicing fees) and other revenue (for the remaining revenue, net of credit losses and the amortization of previously recognized securitization gains). 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. For a further discussion of the securitization of credit card receivables, see page 37.

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        Including the effect of securitizations, managed net credit losses in the 2003 second quarter were $1.887 billion with a related loss ratio of 6.08%, compared to $1.832 billion and 5.86% in the 2003 first quarter and $1.841 billion and 6.23% in the 2002 second quarter. The increase in the rate from the first quarter of 2003 was primarily due to higher bankruptcy losses, including the impact of seasonality in North America, while the decline from the prior-year quarter reflected improvement in both North America and the international markets, despite higher loss rates in the United Kingdom and Korea. Loans delinquent 90 days or more on a managed basis were $2.313 billion or 1.88% at June 30, 2003, compared to $2.406 billion or 1.92% at March 31, 2003 and $2.260 billion or 1.86% at June 30, 2002.

Consumer Finance

        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 $508 million and $993 million in the 2003 second quarter and six months, respectively, down $60 million or 11% and $105 million or 10% from the 2002 periods, principally reflecting a decline in International Consumer Finance resulting from continued weakness in Japan that was partially offset by the acquisition of GSB in North America. International results in the 2003 second quarter also included a $94 million release of a tax reserve related to a settlement with tax authorities which increased income in Japan.

        As shown in the preceding table, average loans grew 11% compared to the 2002 second quarter resulting from acquisitions, growth in real-estate secured loans, the impact of funding auto loan volumes internally and strengthening currencies in the international markets. Growth in real estate-secured loans mainly reflected the continued cross-selling of products through Primerica Financial Services as well as portfolio acquisitions in North America and growth in the U.K. Average auto loans for the 2003 second quarter increased $3.2 billion or 41% from 2002, primarily resulting from the addition of $2.0 billion from the acquisition of GSB, as well as a shift in funding policy to fund business volumes internally. In Japan, average loans in the 2003 second quarter declined 3% from the prior-year quarter, as the benefit of foreign currency translation was offset by the impact of charge-offs, reduced loan demand and higher pay-downs.

        As shown in the following table, the average net interest margin of 9.99% in the 2003 second quarter declined 83 basis points from the 2002 second quarter, reflecting compression in both North America and the international markets, particularly in Japan. In North America, the average net interest margin was 8.36% in the 2003 second quarter, decreasing 9 basis points from the prior-year quarter as the benefit of lower cost of funds was more than offset by lower yields, reflecting the lower interest rate environment and the continued shift to higher-quality credits. The average net interest margin for International Consumer Finance was 15.40% in the 2003 second quarter, declining 277 basis points from the prior-year quarter, primarily driven by Japan. The compression of net interest margin in Japan reflected a decline in higher-yielding personal loans combined with a change in the treatment of adjustments and refunds of interest and continued high levels of non-performing loans. Beginning in the second quarter of 2003, adjustments and refunds of interest charged to customer accounts are accounted for as reduction of net interest margin whereas, in prior periods, such amounts were treated as credit costs. The net interest margin decline in Japan was offset, in part, by margin expansion in Europe which experienced increased yields as well as favorable funding.

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        Revenues, net of interest expense, of $2.431 billion and $4.963 billion in the 2003 second quarter and six months, respectively, declined $18 million or 1% from the prior-year quarter and increased $182 million or 4% from the prior-year six months. Revenue in North America increased 7% from both the second quarter and six months of 2002 and was primarily driven by growth in receivables that included the addition of the GSB auto portfolio, partially offset by declines in insurance revenue and net interest margin. Revenue in International Consumer finance declined $125 million or 13% and $34 million or 2% from the 2002 periods mainly due to lower volumes and spreads in Japan partially offset by growth in EMEA and Asia, the benefit of foreign currency translation and, in the six-month comparison, the impact of acquisitions in Japan.

        Operating expenses of $835 million and $1.700 billion in the 2003 second quarter and six months, respectively, increased $46 million or 6% and $156 million or 10% from the prior-year periods. Operating expenses in North America increased $52 million or 11% and $98 million or 10%, respectively, from the prior-year periods, primarily due to increased volumes, including the acquisition of GSB, and increased credit and collection costs. Operating expenses for International Consumer Finance declined 2% from the prior-year quarter and increased 10% from the prior-year six months. The decline from the prior-year quarter reflected expense savings from branch closings and headcount reductions in Japan, partially offset by the impact of foreign currency translation, additional costs in Japan attributable to actions taken to restructure the business in response to the continued challenging business environment and, in the six-month comparison, the addition of Taihei and Marufuku.

        The provisions for benefits, claims, and credit losses were $957 million in the 2003 second quarter, up from $930 million in the 2003 first quarter and $775 million in the prior-year second quarter primarily reflecting increases in the provision for credit losses in Japan, due to deteriorating credit conditions, and in North America, resulting from growth in the portfolio, including the impact of acquisitions. Net credit losses and the related loss ratio were $897 million and 4.01% in the 2003 second quarter, compared to $855 million and 3.91% in the 2003 first quarter and $724 million and 3.60% in the 2002 second quarter. In North America, the net credit loss ratio of 2.98% in the 2003 second quarter was down from 3.06% in the 2003 first quarter and 3.10% in the 2002 second quarter. The net credit loss ratio for International Consumer Finance was 7.43% in the 2003 second quarter, up from 6.69% in the 2003 first quarter and 5.16% in the 2002 second quarter, primarily due to conditions in Japan, including increased bankruptcy losses and deteriorating credit quality. The net credit loss ratio for International Consumer Finance in the 2003 second quarter was reduced by 62 basis points as a result of the change in treatment of adjustments and refunds as discussed above. Loans delinquent 90 days or more were $2.182 billion or 2.41% of loans at June 30, 2003, compared to $2.183 billion or 2.45% at March 31, 2003 and $2.166 billion or 2.62% a year ago. The decrease in the delinquency ratio versus the prior year and prior quarter was mainly due to improvements in North America.

        In Japan, net credit losses and the related loss ratio are expected to increase from the 2003 second quarter as a result of economic conditions and credit performance of the unsecured loan portfolio, including increased 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 26.

Retail Banking

        Retail Banking—which delivers banking, lending, including leasing and equipment financing, investment and insurance services to customers through retail branches and electronic delivery systems—reported net income of $909 million and $1.747 billion in the 2003 second quarter and six months, respectively, up $395 million or 77% and $704 million or 67% from the 2002 periods. The increase in Retail Banking was driven by growth in North America of $298 million or 91% and $531 million or 82% in the 2003 second quarter and six months, respectively, primarily due to the acquisition of GSB, organic revenue growth and improved credit

14

costs. Net income in International Retail Banking increased $97 million or 52% and $173 million or 43% in the 2003 second quarter and six months, respectively, reflecting growth in Asia, as well as an increase in Latin America due to charges taken in the prior-year periods related to Argentina.

        As shown in the following table, Retail Banking grew average loans and customer deposits compared to 2002. The growth in North America primarily reflected the acquisition of GSB, partially offset by the negative impact of foreign currency translation in Mexico and the run-off of non-core portfolios in CitiCapital. North America also experienced organic growth in customer deposits in Citibanking North America and in average loans in Consumer Assets, primarily due to increased mortgages and student loans. In the international markets, average customer deposits grew 7% from the prior-year quarter driven by the impact of foreign currency translation and growth in Japan. International Retail Banking average loans increased 2% from the prior-year quarter as the impact of foreign currency translation and growth in installment loans in Germany were partially offset by the 2002 third quarter sale of the mortgage portfolio in Japan. Growth in both loans and customer deposits was negatively impacted by volume declines in Latin America.

        Revenues, net of interest expense, of $3.720 billion and $7.158 billion in the 2003 second quarter and six months, respectively, increased $824 million or 28% and $1.258 billion or 21% from the 2002 periods. The growth in revenues reflected increases across all regions. Revenues in North America increased $524 million or 27% and $903 million or 24% in the 2003 second quarter and six months, respectively, driven by the acquisition of GSB and growth in Consumer Assets and Mexico. Excluding the acquisition of GSB, growth in North America, excluding Mexico, was driven by higher mortgage securitization income and the benefit of increased loan and deposit volumes, partially offset by lower net funding and positioning spreads in Citibanking North America and lower revenue in CitiCapital resulting from the run-off of non-core portfolios. In Mexico, revenues benefited from revised estimates of reserves related to certain investments and increased deposit volumes and spreads and were negatively impacted by foreign currency translation. International Retail Banking revenues increased $300 million or 32% and $355 million or 17% in the 2003 second quarter and six months, respectively, reflecting strengthening currencies, growth in Asia and EMEA, and improvement in Latin America. Excluding the impact of foreign currency translation, increased loan volumes, mainly in Germany, drove growth in EMEA, while Asia benefited from strong investment and insurance products sales. The improvement in Latin America was due to events in Argentina including lower losses and reserves related to Amparos and government-mandated inflation indexed interest accruals. These improvements were partially offset in the six-month comparison by a benefit in the prior year resulting from a change in the allocation of re-denomination losses among products based on the pesification decree issued by the Argentine government in February 2002.

        Operating expenses in the 2003 second quarter and six months increased $331 million or 19% and $494 million or 14%, respectively, from the comparable 2002 periods. In North America, growth of $243 million or 22% and $334 million or 15% from the 2002 second quarter and six months, respectively, was primarily due to the addition of GSB and volume-related increases in Consumer Assets, partially offset by the impact of foreign currency translation in Mexico. International Retail Banking operating expenses increased $88 million or 15% and $160 million or 13% from the 2003 second quarter and six months, respectively, mainly reflecting the impact of foreign currency translation, volume-related increases, costs (including severance) attributable to business repositioning in Latin America and, in the six-month comparison, costs associated with the consolidation of certain back office operations in Europe.

        The provisions for benefits, claims, and credit losses were $300 million and $583 million in the 2003 second quarter and six months, down from $356 million and $757 million in the prior-year periods, reflecting a lower provision for credit losses. The decline in the provision for credit loss from the prior-year second quarter was primarily due to lower credit costs in CitiCapital and Mexico, partially offset by the impact of foreign currency translation and an addition to the allowance for credit losses in Germany. The six-month comparison also reflected a $101 million addition to the allowance for credit losses in the first quarter of 2002 related to Argentina. Net credit losses (excluding Commercial Markets) were $165 million and the related loss ratio was 0.58% in the 2003 second quarter, compared to $120 million and 0.42% in the 2003 first quarter and $172 million and 0.79% in the prior-year second quarter. The increase in credit losses from the 2003 first quarter was mainly driven by higher bankruptcies in Germany. The decrease in the net credit loss ratio from the prior-year second quarter was primarily due to a reduction of losses in Argentina, higher recoveries in Mexico, and the addition of the GSB portfolio which is predominantly real estate secured loans. Commercial Markets net credit losses were $139 million and the related loss ratio was 1.30% in the 2003 second quarter, compared to $179 million and 1.65% in the 2003 first quarter and $250 million and 2.55% in the prior-year second quarter. The decline from the 2003 first quarter and 2002 second quarter reflected improvement in CitiCapital, Mexico and Citibanking North America.

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        Loans delinquent 90 days or more (excluding Commercial Markets) were $3.706 billion or 3.29% of loans at June 30, 2003, compared to $3.644 billion or 3.18% at March 31, 2003, and $3.037 billion or 3.46% a year ago. Compared to a year ago, the increase in delinquent loans was primarily due to increases in Consumer Assets and Germany, including the impact of foreign currency translation, and was partially offset by declines in Mexico and Asia, mainly in Taiwan. The increase in Consumer Assets reflected the addition of GSB and a higher level of buy backs from GNMA pools where credit risk is maintained by government agencies. The decline in Mexico reflected improvement in the mortgage portfolio as well as the impact of foreign currency translation.

        Cash-basis loans in Commercial Markets were $1.165 billion or 2.76% of loans at June 30, 2003, $1.250 billion or 2.88% at March 31, 2003, and $1.161 billion or 2.95% at June 30, 2002. Cash-basis loans were essentially unchanged from the prior year and improved slightly from the prior quarter as improved credit and the impact of foreign currency translation in Mexico were essentially offset by increases in CitiCapital where the business continues to work through the liquidation of non-core portfolios.

        Average assets of $222 billion and $221 billion in the 2003 second quarter and six months, respectively, increased $51 billion from both comparable 2002 periods. The increase in average assets primarily reflected the acquisition of GSB, growth in mortgages and student loans in Consumer Assets, and the impact of foreign currency translation in EMEA.

Other Consumer

        Other Consumer—which includes certain treasury and other unallocated staff functions, global marketing and other programs—reported losses of $31 million and $47 million for the 2003 second quarter and six months, respectively, compared to income of $11 million in the 2002 second quarter and a loss of $9 million in the 2002 six months. Income in the 2002 second quarter reflected a $40 million pre-tax release of a reserve related to unused travelers checks in a non-core business.

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GLOBAL CORPORATE AND INVESTMENT BANK

        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. The primary businesses in Capital Markets and Banking include Fixed Income, Sales & Trading (which mainly operates in Asia, Latin America, EMEA and Mexico) and Lending.

        GCIB net income of $878 million and $1.858 billion in the 2003 second quarter and six months was down $164 million or 16% from the 2002 second quarter and up $129 million or 7% from the 2002 six months, respectively. The 2003 second quarter reflects net income declines from the comparable 2002 quarter of $135 million or 16% in Capital Markets and Banking and $29 million or 13% in Transaction Services. The 2003 six months reflects net income growth of $79 million or 26% in Transaction Services and $50 million or 4% in Capital Markets and Banking.

        The decrease in Capital Markets and Banking net income in the 2003 second quarter primarily reflects losses in credit derivatives (which serve as an economic hedge for the loan portfolio) as credit spreads tightened, partially offset by increases in Fixed Income. The increase in the 2003 six months reflects increases in Fixed Income and a lower provision for credit losses, partially offset by losses in credit derivatives as credit spreads tightened. The decrease in Transaction Services net income in the 2003 second quarter reflects lower gains from the sale of equity investments, as well as the continued decline in market capitalizations and interest rates, and a lower level of issuance activity as compared to the prior year, partially offset by gains on early termination of intracompany deposits (which were offset in Capital Markets and Banking). The increase in the 2003 six months is primarily due to gains on early termination of intracompany deposits (which were offset in Capital Markets and Banking), a lower provision for credit losses and the impact of expense control initiatives.

        The businesses of 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 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. Credit costs are expected to improve compared to 2002 levels despite continued weak global economic conditions. This paragraph contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26.

Capital Markets and Banking

        Capital Markets and Banking delivers a full range of global financial services and products including foreign exchange, structured products, derivatives and loans.

        Capital Markets and Banking net income of $691 million in the 2003 second quarter decreased $135 million or 16% from 2002, primarily due to losses in credit derivatives, partially offset by increases in Fixed Income. Net income was $1.474 billion in the 2003 six months, up $50 million or 4% from 2002, primarily due to a lower provision for credit losses and increases in Fixed Income. The 2002 six months were negatively impacted by Latin America, primarily Argentina.

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        Revenues, net of interest expense, of $2.038 billion and $4.034 billion in the 2003 second quarter and six months decreased $162 million or 7% from the 2002 second quarter and $201 million or 5% from the 2002 six months, respectively. Revenue declines in the 2003 periods were driven by losses in credit derivatives (which serve as an economic hedge for the loan portfolio) as credit spreads tightened, partially offset by Fixed Income.

        Operating expenses of $842 million and $1.661 billion in the 2003 second quarter and six months increased $127 million or 18% from the 2002 second quarter and $265 million or 19% from the 2002 six months, respectively. The increase in operating expenses in 2003 reflects increased incentive compensation expense primarily related to Fixed Income performance, as well as costs associated with the repositioning of the Company's business in Latin America, primarily severance-related and higher legal fees.

        The provision for credit losses was $286 million in the 2003 second quarter, an increase of $24 million from the prior-year quarter, primarily reflecting deterioration in power and energy industry exposures. The provision for credit losses of $393 million in the 2003 six months decreased $368 million from the 2002 six months, primarily reflecting prior-year provisions for Argentina and the telecommunications industry.

        Cash-basis loans were $3.669 billion at June 30, 2003, $3.520 billion at March 31, 2003, $3.394 billion at December 31, 2002, and $3.187 billion at June 30, 2002. Cash-basis loans increased $482 million from June 30, 2002, primarily due to increases in the power and energy industry, as well as corporate borrowers in Brazil, Hong Kong, Australia, Mexico and Singapore. Cash-basis loans increased $149 million from March 31, 2003, primarily reflecting increases in the power and energy industry, as well as corporate borrowers in Singapore, Australia and Brazil.

Transaction Services

NM

Not meaningful

        Transaction Services—which provides cash management, trade finance, custody, clearing and depository services globally—reported net income of $187 million in the 2003 second quarter, down $29 million or 13% from the 2002 second quarter. The decrease in the 2003 second quarter reflects lower gains from the sale of equity investments, as well as lower fees on assets under custody, a decline in interest rates and a lower level of issuance activity as compared to the prior year, partially offset by gains on early termination of intracompany deposits (which were offset in Capital Markets and Banking). Net income in the 2003 six months increased $79 million or 26% from 2002, primarily due to gains on early termination of intracompany deposits (which were offset in Capital Markets and Banking), lower provision for credit losses and the impact of expense control initiatives.

        As shown in the following table, average liability balances of $96 billion grew 14% compared to the 2002 second quarter primarily due to increases in Europe and Asia. Assets under custody reached $5.6 trillion, a 4% increase compared to the prior year.