<PAGE> 1
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: January 20, 1999
----------------
HOUSEHOLD INTERNATIONAL, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8198 36-3121988
- --------------------------------------------------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation Number)
2700 Sanders Road, Prospect Heights, Illinois 60070
- ---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 847/564-5000
------------<PAGE>
<PAGE> 2
Item 5. Other Events
Press release pertaining to the financial results of
Household International, Inc., for the quarter and year
ended December 31, 1998. Said release is filed as an
exhibit hereto.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
No. Exhibit
--- -------
27 Financial Data Schedule.
99 Press release titled "Household
International Reports Q4 and Full Year
Results" dated January 20, 1999.
<PAGE>
<PAGE> 3
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
HOUSEHOLD INTERNATIONAL, INC.
----------------------------
(Registrant)
By: /s/ John W. Blenke
-------------------
John W. Blenke
Assistant Secretary
Dated: January 29, 1999
----------------
U:\LAW\EDGAR\I8K199.WP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FOLLOWING SUMMARY FINANCIAL INFORMATION OF THE COMPANY AND
ITS SUBSIDIARIES IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND FINANCIAL STATEMENTS PREVIOUSLY FILED WITH THE
SECURITIES & EXCHANGE COMMISSION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 457,400
<SECURITIES> 3,202,100
<RECEIVABLES> 44,205,900
<ALLOWANCES> 2,548,100
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1,227,300
<DEPRECIATION> 755,200
<TOTAL-ASSETS> 52,892,700
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 30,438,600
0
164,400
<COMMON> 544,100
<OTHER-SE> 6,052,300
<TOTAL-LIABILITY-AND-EQUITY> 52,892,700
<SALES> 0
<TOTAL-REVENUES> 8,897,000
<CGS> 0
<TOTAL-COSTS> 2,910,500
<OTHER-EXPENSES> 1,000,000<F2>
<LOSS-PROVISION> 1,516,800
<INTEREST-EXPENSE> 2,517,000
<INCOME-PRETAX> 952,700
<INCOME-TAX> 428,600
<INCOME-CONTINUING> 524,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 524,100
<EPS-PRIMARY> 1.04<F3>
<EPS-DILUTED> 1.03<F4>
<FN>
<F1>FINANCIAL STATEMENTS OF THE COMPANY WERE PREPARED IN ACCORDANCE
WITH FINANCIAL INSTITUTION INDUSTRY STANDARDS. ACCORDINGLY, THE
COMPANY'S BALANCE SHEETS WERE NON-CLASSIFIED.
<F2>REPRESENTS MERGER AND INTEGRATION RELATED COSTS ASSOCIATED WITH
HOUSEHOLD'S MERGER WITH BENEFICIAL, ACCOUNTED FOR AS A POOLING OF
INTERESTS.
<F3>REPRESENTS BASIC EPS COMPUTED IN ACCORDANCE WITH STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE."
AMOUNTS HAVE BEEN RESTATED AS A RESULT OF HOUSEHOLD'S MERGER WITH
BENEFICIAL, ACCOUNTED FOR AS A POOLING OF INTERESTS AND FOR
HOUSEHOLD'S 3-FOR-1 STOCK SPLIT EFFECTED IN THE FORM OF A STOCK
DIVIDEND AND PAID ON JUNE 1, 1998.
<F4>REPRESENTS DILUTED EPS COMPUTED IN ACCORDANCE WITH STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE."
AMOUNTS HAVE BEEN RESTATED AS A RESULT OF HOUSEHOLD'S MERGER WITH
BENEFICIAL, ACCOUNTED FOR AS A POOLING OF INTERESTS, AND FOR
HOUSEHOLD'S 3-FOR-1 STOCK SPLIT EFFECTED IN THE FORM OF A STOCK
DIVIDEND AND PAID ON JUNE 1, 1998.
</FN>
</TABLE>
<PAGE> 1
HOUSEHOLD INTERNATIONAL REPORTS Q4 AND
FULL YEAR RESULTS
- - Q4 Net Income Up 71 Percent To $349.9 Million Reflecting
Strong Performance By US And UK Consumer Finance
Businesses, Private Label And Auto Finance Units
- - Q4 EPS Increases 73 Percent To $.71 From $.41,
Inclusive Of Q497 Charge By Beneficial Corporation
- - Q4 Cash Basis Operating EPS Up 61 Percent To $.79
- - Q4 Return On Average Common Equity Reaches
22.8 Percent; Return On Average Managed Assets Is
1.90 Percent
- - Company Completes Comprehensive Review Of US Bankcard
Strategy; Affirms Commitment To GM Card And Union Privilege
Programs; Refocuses Household Bank Brand
Prospect Heights, IL, January 20, 1999 -- Household
International (NYSE:HI) today announced that it achieved
record net income and earnings per share for the fourth
quarter ended December 31, 1998. Net income of
$349.9 million was up 71 percent from $204.8 million
recorded in Q497, and reported EPS of $.71 was up 73 percent
from $.41 reported in Q497.
Cash basis operating EPS for Q498 was $.79, up 61 percent
from $.49 in the comparable 1997 quarter. Return on average
common equity for Q498 was 22.8 percent. Return on average
managed assets for Q498 was 1.90 percent.
William F. Aldinger, Household's chairman and chief
executive officer, said, "This year was highlighted by the
successful acquisition of Beneficial Corporation, as well as
strong performances by our US and UK consumer finance
businesses and by our private label credit card and auto
finance units. We also made significant progress in
refocusing our US Mastercard/Visa business including our
Household Bank branded portfolio. Fourth quarter results
will provide good momentum for a successful 1999."
<PAGE>
<PAGE> 2
Noting that Household has determined to focus on fewer,
stronger Mastercard/Visa programs -- a decision that led to
the sale of $500 million of credit card receivables in Q398
and an additional $1.4 billion of receivables in Q498 --
Aldinger continued, "We remain committed to our two major
credit card partnerships, the GM Card and the Union
Privilege program with the AFL/CIO labor federation.
Household looks forward to continuing to refine these
programs with its partners in 1999 to provide greater
customer value and profitable growth."
Household said that its previously announced review of its
US bankcard strategy had also led to the decision to refocus
its Household Bank branded portfolio to target Household's
areas of traditional strength -- customers and prospects of
Household's core consumer finance business, as well as
other, well-defined market segments offering higher
potential returns. To facilitate this effort, the company
has entered into an alliance with Renaissance Holdings, a
privately held issuer of secured and unsecured credit cards
to non-prime consumers.
Said Aldinger, "We are very excited about the potential of
the Renaissance Holdings alliance as we believe we can
leverage their proven capabilities with the extensive
distribution of Household's Mastercard/Visa, consumer
finance, private label and auto finance businesses."
Fourth Quarter Results
- ----------------------
Receivables of the company's core consumer finance
businesses, other than bankcard, grew 12 percent from a year
ago and three percent sequentially. In total, Household's
managed portfolio of core receivables rose four percent from
the level of a year ago, and was down slightly from the
third quarter due to the sale of $1.4 billion of
Mastercard/Visa receivables. This amount includes
$1.2 billion sold to Fleet Financial Group and $200 million
sold to others from former telephone co-branded card
programs. These sales resulted in premiums of approximately
$144 million. The company wrote off related securitization
and intangible assets against this gain. The net amount
resulted in a loss of one cent per share.
The company's managed net interest margin widened to
8.03 percent, up from 7.92 percent in the prior quarter and
7.80 percent a year ago. The sequential quarter and year-
over-year improvement resulted from higher yields on
unsecured products and lower funding costs, partially offset
by the effect of a shift in mix toward secured products.
<PAGE>
<PAGE> 3
Compared to the fourth quarter a year ago, operating
expenses were down 23 percent, reflecting in part, cost
savings achieved through the integration of Beneficial. On
a sequential quarter basis, total operating expenses dropped
5 percent, with all expense categories contributing to the
decline. The company's normalized managed efficiency ratio
for the fourth quarter was 34 percent, compared with the
year-ago level of 40 percent.
At December 31, the managed delinquency ratio (60+ days) was
4.90 percent, a decline from 4.96 percent at September 30
and up from 4.64 percent a year ago. The annualized managed
net chargeoff ratio for the fourth quarter was 4.39 percent,
compared with 4.33 percent in the prior quarter. The
managed net chargeoff ratio was 3.94 percent in the year-ago
quarter. Excluding the effect of lower Mastercard/Visa
receivables, the delinquency ratio at December 31 was
4.79 percent and the fourth quarter chargeoff ratio equaled
4.32 percent.
The ratio of reserves-to-managed receivables was
3.99 percent at December 31, compared with 4.16 percent at
the end of the third quarter and 3.99 percent a year ago.
The decline in the ratio reflects the sale of credit card
receivables and the growing percentage of secured loans in
the company's portfolio. Total reserves-to-total
nonperforming loans were 110 percent, compared with
116 percent a year ago.
Full-year operating earnings per share were $2.30, up
19 percent, and operating net income rose 23 percent to
$1.16 billion. For the year, the company's return on
managed assets improved to 1.60 percent from 1.38 percent in
1997.
The company's reported earnings per share for the full year,
including the impact of non-recurring items, was $1.03,
compared with $1.93 for 1997. Reported net income for the
full year 1998 was $524.1 million, versus $940.3 million in
1997. The 1998 amounts include an after-tax gain of
$118.5 million on the sale of Beneficial Corporation's
Canadian operations, recorded in the first quarter, and an
after-tax charge of $751 million, recorded in the second
quarter, related to the merger and integration of
Beneficial.
Household International, through its subsidiaries, is a
leading provider of consumer finance, credit card, non-prime
auto finance and credit insurance products in the United
States, Canada and the United Kingdom. In the United
States, Household operates under the two oldest and most
widely recognized names in consumer finance -- HFC and
Beneficial. Household is also one of the nation's largest
issuers of private-label and general purpose credit cards,
including the GM Card and the AFL-CIO's Union Privilege
card.
<PAGE>
<PAGE> 4
This press release contains certain estimates and
projections that may be forward-looking in nature, as
defined by the Private Securities Litigation Reform Act of
1995. A variety of factors may cause actual results to
differ materially from the results discussed in these
forward-looking statements. Factors that might cause such a
difference are discussed in Household International's
Report on Form 10-Q for the quarter ended September 30, 1998.
CONTACT:
Craig A. Streem, Vice President -- Investor Relations, 847-564-6053,
or Celeste M. Murphy, Director -- Investor Relations, 847-564-7568,
both of Household International
<PAGE>
<PAGE> 5
Quarterly Financial Supplement
<TABLE>
<CAPTION>
December 31, 1998 - Quarterly Highlights
- -------------------------------------------------------------------------------------------------------------------
Summary Managed Income Statement Three Months Ended % Change from Prior
------------------------------ -------------------
($ millions) 12/31/98 9/30/98 12/31/97 Qtr. Year
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Managed-basis net interest margin and other revenues <F1> $1,872.4 $1,808.3 $1,831.8 3.5% 2.2%
Managed-basis provision for credit losses <F1> 716.7 661.5 737.7 8.3 (2.8)
Operating expenses <F2> 631.2 662.2 824.2 (4.7) (23.4)
- -------------------------------------------------------------------------------------------------------------------
Income before income taxes 524.5 484.6 269.9 8.2 94.3
Income taxes 174.6 166.6 65.1 4.8 100+
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 349.9 $ 318.0 $ 204.8 10.0% 70.8%
===================================================================================================================
Common Stock Data <F3>
- -------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.72 $ 0.64 $ 0.41 12.5% 75.6%
Diluted earnings per common share 0.71 0.63 0.41 12.7 73.2
- -------------------------------------------------------------------------------------------------------------------
Average common shares (millions) 482.9 490.3 483.8 (1.5) (0.2)
Average common and equivalent shares (millions) 489.0 498.3 493.2 (1.9) (0.9)
- -------------------------------------------------------------------------------------------------------------------
Common stock price
High $ 40.50 $ 53.69 $ 43.20 - -
Low 23.00 35.25 36.13 - -
Period end 39.63 37.50 42.55 5.7 (6.9)
- -------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $ 0.15 $ 0.15 $ 0.14 - 7.1
Book value per common share 12.88 12.32 12.81 4.5 0.5
===================================================================================================================
Key Ratios
- -------------------------------------------------------------------------------------------------------------------
Return on average common shareholders' equity 22.8% 20.5% 13.1% 11.2% 74.0%
Return on average owned assets 2.64 2.53 1.73 4.3 52.6
Return on average managed assets 1.90 1.76 1.16 8.0 63.8
Managed efficiency ratio, normalized 33.9 36.9 40.4 (8.1) (16.1)
Managed net interest margin 8.03 7.92 7.80 1.4 2.9
Total shareholders' equity as a percent of managed assets 9.31 8.99 9.28 3.6 0.3
Tangible equity to tangible managed assets 7.11 6.59 6.92 7.9 2.7
===================================================================================================================
</TABLE>
<PAGE>
<PAGE> 6
Quarterly Financial Supplement (continued)
<TABLE>
<CAPTION>
Twelve Months Highlights
- -----------------------------------------------------------------------------------------------
Summary Managed Income Statement Twelve Months Ended
--------------------
($ millions) 12/31/98 12/31/97 % Change
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Managed-basis net interest margin and other revenues <F1> $7,151.6 $6,907.9 3.5%
Gain on sale of Beneficial Canada 189.4 - -
Managed-basis provision for credit losses <F1> 2,716.0 2,620.6 3.6
Operating expenses 2,672.3 2,884.8 (7.4)
Merger and integration related costs 1,000.0 - -
- -----------------------------------------------------------------------------------------------
Income before income taxes 952.7 1,402.5 -
Income taxes 428.6 462.2 -
- -----------------------------------------------------------------------------------------------
Net Income $ 524.1 $ 940.3 -
===============================================================================================
Income before merger charge and Beneficial Canada gain $1,156.6 $ 940.3 23.0%
===============================================================================================
Common Stock Data <F3>
- -----------------------------------------------------------------------------------------------
Basic earnings per common share $ 1.04 $ 1.97 -
Diluted earnings per common share 1.03 1.93 -
Diluted earnings per common share before merger
charge and Beneficial Canada gain 2.30 1.93 19.2%
- -----------------------------------------------------------------------------------------------
Average common shares (millions) 487.2 470.2 3.6
Average common and equivalent shares (millions) 496.4 479.1 3.6
- -----------------------------------------------------------------------------------------------
Common stock price
High $ 53.69 $ 43.33 -
Low 23.00 26.21 -
Dividends declared per common share 0.60 0.54 11.1
===============================================================================================
Key Ratios
- -----------------------------------------------------------------------------------------------
Return on average common shareholders' equity <F4> 18.2% 17.3% 5.2%
Return on average owned assets <F4> 2.29 2.03 12.8
Return on average managed assets <F4> 1.60 1.38 15.9
Managed efficiency ratio, normalized 37.6 41.0 (8.3)
Managed net interest margin, normalized 7.86 7.74 1.6
===============================================================================================
<FN>
<F1> To aid analysis, net interest margin and other revenues and provision for credit losses are
presented on a pro forma managed basis as if receivables securitized and sold with limited
recourse were held in the portfolio. Policyholders' benefits have been netted against other
revenues.
<F2> Operating expenses, excluding Beneficial's $90 million of nonrecurring expenses in the
fourth quarter of 1997, were 14 percent lower than a year ago.
<F3> All share information has been adjusted for the 3-for-1 common stock split effected in the
form of a stock dividend and paid on June 1, 1998.
<F4> Excludes merger and integration related costs incurred in the second quarter of 1998 and the
gain on sale of Beneficial Canada recorded in the first quarter of 1998.
</FN>
</TABLE>
<PAGE>
<PAGE> 7
Consolidated Statements of Income - Owned Basis
<TABLE>
<CAPTION>
Three Months
- -----------------------------------------------------------------------------------
% Change
Three Months Ended from Prior
---------------------------- --------------
($ millions) 12/31/98 9/30/98 12/31/97 Qtr. Year
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Finance income $1,492.2 $1,425.8 $1,304.7 4.7% 14.4%
Other interest income 15.5 15.2 10.3 2.0 50.5
Interest expense 659.9 628.1 598.9 5.1 10.2
- -----------------------------------------------------------------------------------
Net interest margin 847.8 812.9 716.1 4.3 18.4
Provision for credit losses
on owned receivables 377.5 358.4 387.0 5.3 (2.5)
- -----------------------------------------------------------------------------------
Net interest margin after
provision for credit losses 470.3 454.5 329.1 3.5 42.9
- -----------------------------------------------------------------------------------
Securitization income 365.3 370.1 401.1 (1.3) (8.9)
Insurance revenues 126.3 129.2 121.7 (2.2) 3.8
Investment income 40.3 42.5 44.1 (5.2) (8.6)
Fee income 155.6 151.8 197.6 2.5 (21.3)
Other income 60.1 55.8 59.6 7.7 0.8
- -----------------------------------------------------------------------------------
Total other revenues 747.6 749.4 824.1 (0.2) (9.3)
- -----------------------------------------------------------------------------------
Salaries and fringe benefits 268.0 280.1 290.4 (4.3) (7.7)
Occupancy and equipment expense 68.5 73.0 82.0 (6.2) (16.5)
Other marketing expenses 99.5 101.7 123.9 (2.2) (19.7)
Other servicing and
administrative expenses 156.9 162.3 285.8 (3.3) (45.1)
Amortization of acquired
intangibles and goodwill 38.3 45.1 42.1 (15.1) (9.0)
Policyholders' benefits 62.2 57.1 59.1 8.9 5.2
- -----------------------------------------------------------------------------------
Total costs and expenses 693.4 719.3 883.3 (3.6) (21.5)
- -----------------------------------------------------------------------------------
Income before income taxes 524.5 484.6 269.9 8.2 94.3
Income taxes 174.6 166.6 65.1 4.8 100+
- -----------------------------------------------------------------------------------
Net Income 349.9 318.0 204.8 10.0 70.8
- -----------------------------------------------------------------------------------
Preferred dividends (2.6) (4.1) (4.1) (36.6) (36.6)
- -----------------------------------------------------------------------------------
Earnings available to common
shareholders $ 347.3 $ 313.9 $ 200.7 10.6% 73.0%
===================================================================================
Effective tax rate 33.3% 34.4% 24.1% (3.2)% 38.2%
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE> 8
Consolidated Statements of Income - Owned Basis (continued)
<TABLE>
<CAPTION>
Twelve Months
- ------------------------------------------------------------------------
Twelve Months Ended
--------------------
($ millions) 12/31/98 12/31/97 % Change
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Finance income $5,604.2 $5,131.0 9.2%
Other interest income 57.1 49.8 14.7
Interest expense 2,517.0 2,358.4 6.7
- ------------------------------------------------------------------------
Net interest margin 3,144.3 2,822.4 11.4
Provision for credit losses
on owned receivables 1,516.8 1,493.0 1.6
- ------------------------------------------------------------------------
Net interest margin after
provision for credit losses 1,627.5 1,329.4 22.4
- ------------------------------------------------------------------------
Securitization income 1,548.9 1,638.4 (5.5)
Insurance revenues 492.8 454.2 8.5
Investment income 161.2 173.1 (6.9)
Fee income 599.7 592.4 1.2
Other income 243.7 355.7 (31.5)
- ------------------------------------------------------------------------
Total other revenues 3,046.3 3,213.8 (5.2)
- ------------------------------------------------------------------------
Gain on sale of Beneficial Canada 189.4 - -
- ------------------------------------------------------------------------
Salaries and fringe benefits 1,127.5 1,085.3 3.9
Occupancy and equipment expense 309.1 327.4 (5.6)
Other marketing expenses 403.2 449.6 (10.3)
Other servicing and
administrative expenses 661.9 864.1 (23.4)
Amortization of acquired
intangibles and goodwill 170.6 158.4 7.7
Policyholders' benefits 238.2 255.9 (6.9)
- ------------------------------------------------------------------------
Costs and expenses before merger charge 2,910.5 3,140.7 7.3
Merger and integration related costs 1,000.0 - -
- ------------------------------------------------------------------------
Total costs and expenses 3,910.5 3,140.7 -
- ------------------------------------------------------------------------
Income before income taxes 952.7 1,402.5 -
Income taxes 428.6 462.2 -
- ------------------------------------------------------------------------
Net Income 524.1 940.3 -
- ------------------------------------------------------------------------
Preferred dividends (15.0) (17.0) (11.8)
- ------------------------------------------------------------------------
Earnings available to common
shareholders $ 509.1 $ 923.3 -
========================================================================
Income before merger charge and
Beneficial Canada gain $1,156.6 $ 940.3 23.0%
========================================================================
Effective tax rate before merger
charge and Beneficial Canada gain 34.4% 33.0% 4.2%
========================================================================
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data
- ------------------------------------------------------------------------------------
($ millions) 12/31/98 9/30/98 12/31/97
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Owned assets $52,892.7 $51,452.2 $46,817.0
Managed assets 72,594.5 73,258.3 71,295.5
Managed receivables 63,907.7 64,086.9 63,160.5
Debt 42,461.5 40,450.0 36,746.5
Trust originated preferred securities 375.0 375.0 175.0
Preferred stock 164.4 264.5 264.5
Common shareholders' equity 6,221.4 5,945.5 6,174.0
====================================================================================
/TABLE
<PAGE>
<PAGE> 9
Consolidated Statements of Income - Managed Basis
Securitizations and sales of consumer receivables are a source
of liquidity and capital management for the company. The company continues
to service the securitized receivables after such receivables are sold, and
retains a limited recourse obligation. Securitizations impact the
classification of revenues and expenses in the statement of income. Net
interest margin, non-interest income such as interchange fee income and
provision for credit losses related to receivables sold are reported net in
securitization income.
<TABLE>
<CAPTION>
Three Months
- -----------------------------------------------------------------------------------------------------------------------
% Change
Three months ended from Prior
----------------------------------------------------------------- ------------
($ millions) 12/31/98 <F1> 9/30/98 <F1> 12/31/97 <F1> Qtr. Year
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Finance income and other
interest income $ 2,285.5 13.94% $ 2,254.9 13.91% $ 2,187.9 13.90% 1.4 % 4.5 %
Interest expense 968.1 5.91 971.4 5.99 959.4 6.10 (0.3) 0.9
- -----------------------------------------------------------------------------------------------------------------------
Net interest margin 1,317.4 8.03% 1,283.5 7.92% 1,228.5 7.80% 2.6 7.2
Provision for credit losses 716.7 661.5 737.7 8.3 (2.8)
- -----------------------------------------------------------------------------------------------------------------------
Net interest margin after
provision for credit losses 600.7 622.0 490.8 (3.4) 22.4
- -----------------------------------------------------------------------------------------------------------------------
Insurance revenues 126.3 129.2 121.7 (2.2) 3.8
Investment income 40.3 42.5 44.1 (5.2) (8.6)
Fee income 390.5 354.4 437.0 10.2 (10.6)
Other income 60.1 55.8 59.6 7.7 0.8
- -----------------------------------------------------------------------------------------------------------------------
Total other revenues 617.2 581.9 662.4 6.1 (6.8)
Operating expenses and policyholders'
benefits 693.4 719.3 883.3 (3.6) (21.5)
- -----------------------------------------------------------------------------------------------------------------------
Income before income taxes 524.5 484.6 269.9 8.2 94.3
Income taxes 174.6 166.6 65.1 4.8 100+
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 349.9 $ 318.0 $ 204.8 10.0 % 70.8 %
=======================================================================================================================
Average managed receivables:
Home equity $22,080.5 $21,203.3 $19,276.7 4.1 % 14.5 %
Auto finance 1,628.3 1,368.2 697.0 19.0 100+
MasterCard/Visa <F2> 17,787.5 18,918.6 18,442.7 (6.0) (3.6)
Private label 9,980.6 9,334.5 9,878.0 6.9 1.0
Other unsecured 11,895.1 11,778.8 11,199.5 1.0 6.2
- -----------------------------------------------------------------------------------------------------------------------
Core products 63,372.0 62,603.4 59,493.9 1.2 6.5
- -----------------------------------------------------------------------------------------------------------------------
First mortgage 176.0 294.8 440.5 (40.3) (60.0)
Commercial 746.8 755.2 919.2 (1.1) (18.8)
Discontinued products <F3> - - 1,679.9 - -
- -----------------------------------------------------------------------------------------------------------------------
Total 64,294.8 63,653.4 62,533.5 1.0 2.8
Average noninsurance investments 995.9 867.5 436.8 14.8 100+
Other interest-earning assets 313.4 309.7 - 1.2 -
- -----------------------------------------------------------------------------------------------------------------------
Average managed interest-
earning assets $65,604.1 $64,830.6 $62,970.3 1.2 % 4.2 %
=======================================================================================================================
</TABLE>
<PAGE>
<PAGE> 10
Consolidated Statement of Income - Managed Basis (continued)
<TABLE>
<CAPTION>
Twelve Months
- ---------------------------------------------------------------------------------------------
Twelve Months Ended
-----------------------------------------
($ millions) 12/31/98 <F1> 12/31/97 <F1> % Change
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Finance income and other
interest income $ 8,975.4 13.85% $ 8,412.5 13.77% 6.7 %
Interest expense 3,881.3 5.99 3,692.2 6.04 5.1
- ---------------------------------------------------------------------------------------------
Net interest margin 5,094.1 7.86% 4,720.3 7.74% 7.9
Provision for credit losses 2,716.0 2,620.6 3.6
- ---------------------------------------------------------------------------------------------
Net interest margin after
provision for credit losses 2,378.1 2,099.7 13.3
- ---------------------------------------------------------------------------------------------
Insurance revenues 492.8 454.2 8.5
Investment income 161.2 173.1 (6.9)
Fee income 1,398.0 1,460.5 (4.3)
Other income 243.7 355.7 (31.5)
- ---------------------------------------------------------------------------------------------
Total other revenues 2,295.7 2,443.5 (6.0)
Gain on sale of Beneficial Canada 189.4 - -
Operating expenses and policyholders'
benefits 2,910.5 3,140.7 (7.3)
Merger and integration related costs 1,000.0 - -
- ---------------------------------------------------------------------------------------------
Income before income taxes 952.7 1,402.5 -
Income taxes 428.6 462.2 -
- ---------------------------------------------------------------------------------------------
Net income $ 524.1 $ 940.3 -
=============================================================================================
Income before merger charge and
Beneficial Canada gain $ 1,156.6 $ 940.3 23.0 %
=============================================================================================
Average managed receivables:
Home equity $20,878.1 $17,678.4 18.1 %
Auto finance 1,260.2 282.6 100+
MasterCard/Visa <F2> 18,742.2 18,506.2 1.3
Private label 9,621.2 9,837.7 (2.2)
Other unsecured 11,847.8 10,785.7 9.8
- ---------------------------------------------------------------------------------------------
Core products 62,349.5 57,090.6 9.2
- ---------------------------------------------------------------------------------------------
First mortgage 296.7 565.8 (47.6)
Commercial 783.4 970.2 (19.3)
Discontinued products <F3> 247.5 1,820.6 (86.4)
- ---------------------------------------------------------------------------------------------
Total 63,677.1 60,447.2 5.3
Average noninsurance investments 803.7 661.4 21.5
Other interest-earning assets 302.6 - -
- ---------------------------------------------------------------------------------------------
Average managed interest-
earning assets $64,783.4 $61,108.6 6.0%
==============================================================================================
<FN>
<F1> % Columns: comparison to average managed interest-earning assets, annualized.
<F2> MasterCard and Visa are registered trademarks of MasterCard International, Incorporated
and VISA USA Inc., respectively.
<F3> Discontinued products include receivables relating to Beneficial's disposed Canadian
and German operations of $1,112.4, $247.5 and $1,089.0 million in the three months
ended December 1997 and twelve months ended December 1998 and December 1997, respectively,
and Household's portfolio of student loans of $567.5 and $731.6 million for the three and
twelve months ended December 1997, respectively.
</FN>
</TABLE>
<PAGE>
<PAGE> 11
Receivables Analysis
<TABLE>
<CAPTION>
Managed Portfolio
- -----------------------------------------------------------------------------------------------------------------------
% Change from Prior
-------------------
($ millions) 12/31/98 9/30/98 12/31/97 Qtr. Year
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Home equity $22,330.1 $21,812.2 $19,492.8 2.4 % 14.6 %
Auto finance 1,765.3 1,501.3 883.4 17.6 99.8
MasterCard/Visa 16,610.8 18,094.8 19,211.7 (8.2) (13.5)
Private label 10,377.5 9,841.7 9,997.2 5.4 3.8
Other unsecured 11,970.6 11,878.9 11,210.2 0.8 6.8
- -----------------------------------------------------------------------------------------------------------------------
Core products <F1> 63,054.3 63,128.9 60,795.3 (0.1) 3.7
- -----------------------------------------------------------------------------------------------------------------------
First mortgage 156.3 196.0 396.6 (20.3) (60.6)
Commercial 697.1 762.0 882.6 (8.5) (21.0)
Discontinued products <F2> - - 1,086.0 - -
- -----------------------------------------------------------------------------------------------------------------------
Managed portfolio $63,907.7 $64,086.9 $63,160.5 (0.3)% 1.2%
=======================================================================================================================
Receivables (% of Managed Portfolio)
- -----------------------------------------------------------------------------------------------------------------------
Home equity 34.9% 34.0% 30.9%
Auto finance 2.8 2.3 1.4
MasterCard/Visa 26.0 28.2 30.4
Private label 16.2 15.4 15.8
Other unsecured 18.8 18.6 17.8
- -----------------------------------------------------------------------------------------------------------------------
Core products 98.7 98.5 96.3
- -----------------------------------------------------------------------------------------------------------------------
First mortgage 0.2 0.3 0.6
Commercial 1.1 1.2 1.4
Discontinued products <F2> - - 1.7
- -----------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
=======================================================================================================================
Receivables ($ millions)
- -----------------------------------------------------------------------------------------------------------------------
First mortgage $ 156.3 $ 196.0 $ 396.6 (20.3)% (60.6)%
Home equity 18,692.7 17,697.6 13,786.2 5.6 35.6
Auto finance 805.0 601.0 487.5 33.9 65.1
MasterCard/Visa 7,180.2 6,620.7 6,874.7 8.5 4.4
Private label 9,566.0 8,972.1 9,356.9 6.6 2.2
Other unsecured 7,108.6 7,431.4 6,823.1 (4.3) 4.2
Commercial 697.1 762.0 957.0 (8.5) (27.2)
- -----------------------------------------------------------------------------------------------------------------------
Total owned receivables 44,205.9 42,280.8 38,682.0 4.6 14.3
- -----------------------------------------------------------------------------------------------------------------------
Accrued finance charges 642.5 572.9 536.7 12.1 19.7
Credit loss reserve for owned receivables (1,734.2) (1,786.2) (1,642.1) (2.9) 5.6
Unearned credit insurance premiums and claims reserves (505.1) (462.3) (452.3) 9.3 11.7
Amounts due and deferred from receivables sales 2,152.9 2,243.9 2,094.2 (4.1) 2.8
Reserve for receivables serviced with limited recourse (813.9) (876.7) (880.9) (7.2) (7.6)
- -----------------------------------------------------------------------------------------------------------------------
Total owned receivables, net 43,948.1 41,972.4 38,337.6 4.7 14.6
- -----------------------------------------------------------------------------------------------------------------------
Receivables serviced with limited recourse:
Home equity 3,637.4 4,114.6 6,038.6 (11.6) (39.8)
Auto finance 960.3 900.3 395.9 6.7 100+
MasterCard/Visa 9,430.6 11,474.1 12,337.0 (17.8) (23.6)
Private label 811.5 869.6 1,025.0 (6.7) (20.8)
Other unsecured 4,862.0 4,447.5 4,682.0 9.3 3.8
- -----------------------------------------------------------------------------------------------------------------------
Total receivables serviced with limited recourse 19,701.8 21,806.1 24,478.5 (9.7) (19.5)
- -----------------------------------------------------------------------------------------------------------------------
Total managed receivables, net $63,649.9 $63,778.5 $62,816.1 (0.2)% 1.3%
=======================================================================================================================
<FN>
<F1> Core products growth excluding MasterCard/Visa is 3.1 percent from the prior quarter and 11.7 percent from the
prior year.
<F2> Discontinued products at December 31, 1997 included receivables relating to Beneficial's disposed Canadian and
German operations.
</FN>
/TABLE
<PAGE>
<PAGE> 12
Credit Quality/Credit Loss Reserves
<TABLE>
<CAPTION>
Two-Months-and-Over Contractual Delinquency
- -----------------------------------------------------------------------------------------------------------------
As a percent of managed consumer receivables,
excludes commercial. 12/31/98 9/30/98 12/31/97
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First mortgage 14.90 % 11.80 % 10.35 %
Home equity 3.67 3.73 3.69
Auto finance 2.29 2.05 2.09
MasterCard/Visa 3.75 3.73 3.10
Private label 6.20 6.55 5.81
Other unsecured 7.94 8.03 7.81
- -----------------------------------------------------------------------------------------------------------------
Total 4.90 % 4.96 % 4.64 %
=================================================================================================================
Quarter-to-Date Chargeoffs, Net of Recoveries
- -----------------------------------------------------------------------------------------------------------------
As a percent of average managed consumer receivables, annualized, excludes commercial.
- -----------------------------------------------------------------------------------------------------------------
First mortgage 1.04 % (0.32)% 1.29 %
Home equity 0.68 0.72 0.62
Auto finance 5.63 4.89 5.31
MasterCard/Visa 6.61 5.96 5.56
Private label 5.47 5.33 5.19
Other unsecured 6.94 7.50 5.85
- -----------------------------------------------------------------------------------------------------------------
Total 4.39 % 4.33 % 3.94 %
=================================================================================================================
Nonperforming Assets
- -----------------------------------------------------------------------------------------------------------------
($ millions)
- -----------------------------------------------------------------------------------------------------------------
Nonaccrual managed receivables $1,439.2 $1,476.4 $1,364.9
Accruing managed receivables 90 or more days delinquent 874.6 832.0 807.8
Renegotiated commercial loans 12.3 12.3 12.4
- -----------------------------------------------------------------------------------------------------------------
Total nonperforming managed receivables 2,326.1 2,320.7 2,185.1
Real estate owned 253.9 232.2 212.8
- -----------------------------------------------------------------------------------------------------------------
Total nonperforming assets $2,580.0 $2,552.9 $2,397.9
=================================================================================================================
Managed credit loss reserves as a percent
of nonperforming managed receivables 109.5 % 114.7 % 115.5 %
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE> 13
Credit Quality/Credit Loss Reserves (continued)
<TABLE>
<CAPTION>
Credit Loss Reserves
- -----------------------------------------------------------------------------------------------------------------
($ millions) 12/31/98 9/30/98 12/31/97
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reserves for owned receivables at beginning of quarter $1,786.2 $1,757.2 $1,587.9
Provision for credit losses 377.5 358.4 387.0
Chargeoffs, net of recoveries (415.4) (388.4) (335.6)
Portfolio acquisitions, net (14.1) 59.0 2.8
- -----------------------------------------------------------------------------------------------------------------
Reserves for owned receivables at end of quarter 1,734.2 1,786.2 1,642.1
- -----------------------------------------------------------------------------------------------------------------
Credit loss reserves for receivables serviced
with limited recourse at beginning of quarter 876.7 862.9 766.9
Provision for credit losses 339.2 303.1 350.7
Chargeoffs, net of recoveries (282.7) (292.3) (278.9)
Other, net (119.3) 3.0 42.2
- -----------------------------------------------------------------------------------------------------------------
Credit loss reserves for receivables serviced
with limited recourse at end of quarter 813.9 876.7 880.9
- -----------------------------------------------------------------------------------------------------------------
Total credit loss reserves at end of quarter $2,548.1 $2,662.9 $2,523.0
=================================================================================================================
Credit loss reserves
Owned $1,734.2 3.92%<F1> $1,786.2 4.22%<F1> $1,642.1 4/25%<F1>
Serviced with limited recourse 813.9 4.13 876.7 4.02 880.9 3.60
- -----------------------------------------------------------------------------------------------------------------
Total managed credit loss reserves $2,548.1 3.99% $2,662.9 4.16% $2,523.0 3.99%
=================================================================================================================
<FN>
<F1> % Columns: comparisons to appropriate receivables.
</FN>
</TABLE>
