10-Q

UNITED STATES SECURITIES AND

EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2003

OR

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

For the transition period from                                to                               

Commission file number 1-8198

HOUSEHOLD INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	86-1052062
(State of Incorporation)	(I.R.S. Employer Identification No.)
2700 Sanders Road, Prospect Heights, Illinois	60070
(Address of principal executive offices)	(Zip Code)

(847) 564-5000

Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x  No  ¨

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

At July 31, 2003, there were 50 shares of the registrant’s common stock outstanding.

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 10-Q with the reduced disclosure format.

HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES

Table of Contents

PART I.	Financial Information	Page
Item 1.	Financial Statements
	Condensed Consolidated Statements of Income (Unaudited)	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Interim Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 4.	Controls and Procedures	33
PART II.	Other Information
Item 6.	Exhibits and Reports on Form 8-K	34
Signature		34

1

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	Three months ended June 30, 2003		Three months ended June 30, 2002		March 29 through June 30, 2003		January 1 through March 28, 2003		Six months ended June 30, 2002
	(Successor)		(Predecessor)		(Successor)		(Predecessor)		(Predecessor)
(In millions)	(Note 2)		(Note 2)		(Note 2)		(Note 2)		(Note 2)
Finance and other interest income	$	2,504.1	$	2,609.9	$	2,578.6	$	2,470.5	$	5,145.6
Interest expense		558.8		980.9		573.4		897.4		1,919.7
Net interest margin		1,945.3		1,629.0		2,005.2		1,573.1		3,225.9
Provision for credit losses on owned receivables		1,039.3		850.9		1,072.8		976.1		1,773.9
Net interest margin after provision for credit losses		906.0		778.1		932.4		597.0		1,452.0
Securitization revenue		282.6		523.4		291.1		432.6		1,041.7
Insurance revenue		183.3		177.5		189.0		171.6		347.6
Investment income		33.2		44.0		34.5		80.0		90.2
Fee income		259.7		190.3		268.5		288.3		406.8
Other income		131.5		95.3		136.6		238.7		283.3
Total other revenues		890.3		1,030.5		919.7		1,211.2		2,169.6
Salaries and fringe benefits		488.6		453.0		505.9		491.3		898.3
Sales incentives		83.2		67.6		84.6		37.7		121.7
Occupancy and equipment expense		100.0		93.3		103.5		97.7		185.5
Other marketing expenses		135.2		133.5		139.9		138.8		273.9
Other servicing and administrative expenses		263.7		204.1		272.9		313.7		435.8
Amortization of acquired intangibles		78.3		12.6		80.3		12.3		32.4
HSBC acquisition related costs incurred by Household		—		—		—		198.2		—
Policyholders’ benefits		98.4		87.4		101.4		91.0		171.4
Total costs and expenses		1,247.4		1,051.5		1,288.5		1,380.7		2,119.0
Income before income taxes		548.9		757.1		563.6		427.5		1,502.6
Income taxes		184.9		249.7		189.9		181.8		504.2
Net income	$	364.0	$	507.4	$	373.7	$	245.7	$	998.4

See notes to interim condensed consolidated financial statements.

2

HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)	June 30, 2003		December 31, 2002
	(Unaudited)
	(Successor)		(Predecessor)
ASSETS		(Note 2)		(Note 2)
Cash	$	307.9	$	797.7
Investment securities		6,624.2		7,584.0
Receivables, net		87,248.9		82,050.5
Acquired intangibles, net		3,000.3		386.4
Goodwill		6,542.1		1,122.1
Properties and equipment, net		487.9		535.1
Real estate owned		486.3		427.1
Derivative financial assets		3,601.3		1,863.5
Other assets		3,280.5		3,094.2
Total assets	$	111,579.4	$	97,860.6
LIABILITIES AND SHAREHOLDER’S(S’) EQUITY
Debt:
Deposits	$	60.7	$	821.2
Commercial paper, bank and other borrowings		8,857.0		6,128.3
Due to affiliates		3,296.5		—
Senior and senior subordinated debt (with original maturities over one year)		75,111.9		74,776.2
Company obligated mandatorily redeemable preferred securities of subsidiary trusts*		1,021.5		975.0
Total debt		88,347.6		82,700.7
Insurance policy and claim reserves		1,336.2		1,047.6
Derivative related liabilities		2,981.6		1,183.9
Other liabilities		2,694.8		2,512.3
Total liabilities		95,360.2		87,444.5
Preferred stock		1,100.0		1,193.2
Common shareholder’s(s’) equity:
Common stock, $0.01 and $1.00 par value, 100 and 750,000,000 shares authorized, 50 and 551,811,025 shares issued at June 30, 2003 and December 31, 2002, respectively		—		551.8
Additional paid-in capital		14,646.0		1,911.3
Retained earnings		355.1		9,885.6
Accumulated other comprehensive income (loss)		118.1		(694.9	)
Less common stock in treasury, 0 and 77,197,686 shares at June 30, 2003 and December 31, 2002, respectively, at cost		—		(2,430.9	)
Total common shareholder’s(s’) equity		15,119.2		9,222.9
Total liabilities and shareholder’s(s’) equity	$	111,579.4	$	97,860.6

* The sole assets of the trusts are Junior Subordinated Deferrable Interest Notes issued by Household International, Inc. in November 2001, January 2001, June 2000, March 1998 and June 1995, bearing interest at 7.50, 8.25, 10.00, 7.25 and 8.25 percent, respectively, and due November 2031, January 2031, June 2030, December 2037 and June 2025, respectively.

See notes to interim condensed consolidated financial statements.

3

HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions)	March 29 through June 30, 2003			January 1 through March 28, 2003			Six months through June 30, 2002
	(Successor)			(Predecessor)			(Predecessor)
	(Note 2)			(Note 2)			(Note 2)
CASH PROVIDED BY OPERATIONS
Net income	$	373.7		$	245.7		$	998.4
Adjustments to reconcile net income to cash provided by operations:
Provision for credit losses on owned receivables		1,072.8			976.1			1,773.9
Insurance policy and claim reserves		(94.3	)		47.2			86.8
Depreciation and amortization		121.5			53.5			116.5
Interest-only strip receivables, net change		197.8			36.4			(58.8	)
Other, net		723.7			106.0			759.1
Cash provided by operations		2,395.2			1,464.9			3,675.9
INVESTMENTS IN OPERATIONS
Investment securities:
Purchased		(1,268.7	)		(1,046.7	)		(2,817.3	)
Matured		660.5			584.2			621.8
Sold		234.6			768.4			232.0
Short-term investment securities, net change		1,555.5			(375.0	)		(2,585.3	)
Receivables:
Originations, net		(12,887.2	)		(8,261.6	)		(22,226.3	)
Purchases and related premiums		(1,831.5	)		(129.0	)		(406.5	)
Initial and fill-up securitizations		9,156.5			7,300.1			17,249.6
Whole loan sales		—			—			882.3
Properties and equipment purchased		(28.3	)		(21.6	)		(84.4	)
Properties and equipment sold		2.2			.1			3.0
Cash decrease from investments in operations		(4,406.4	)		(1,181.1	)		(9,131.1	)
FINANCING AND CAPITAL TRANSACTIONS
Short-term debt and demand deposits, net change		1,977.6			(513.5	)		(7,709.4	)
Time certificates, net change		194.3			150.3			(951.8	)
Due to affiliates, net change		3,296.5			—			—
Senior and senior subordinated debt issued		991.0			4,360.9			19,811.9
Senior and senior subordinated debt retired		(4,563.0	)		(4,029.8	)		(5,747.4	)
Policyholders’ benefits paid		(64.0	)		(35.6	)		(214.0	)
Cash received from policyholders		91.6			33.1			35.4
Shareholders’ dividends		(311.1	)		(141.4	)		(238.5	)
Purchase of treasury stock		—			(164.1	)		(160.0	)
Issuance of common stock		—			62.2			86.4
Redemption of preferred stock		—			(114.4	)		—
Issuance of preferred stock		—			—			387.4
Cash increase (decrease) from financing and capital transactions		1,612.9			(392.3	)		5,300.0
Effect of exchange rate changes on cash		32.2			(15.2	)		(41.8	)
Decrease in cash		(366.1	)		(123.7	)		(197.0	)
Cash at beginning of period		674.0			797.7			543.6
Cash at end of period	$	307.9		$	674.0		$	346.6
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid	$	1,104.2		$	897.2		$	1,891.8
Income taxes paid		253.2			39.6			469.0
SUPPLEMENTAL NON-CASH FINANCING AND CAPITAL ACTIVITIES
Push-down of purchase price by HSBC (Note 2)	$	(12.0	)	$	14,658.5			—
Exchange of preferred stock for preferred stock issued to HSBC		—			1,100.0			—

See notes to interim condensed consolidated financial statements.

4

HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Household International, Inc. (“Household”) and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Household and its subsidiaries may also be referred to in this Form 10-Q as “we,” “us” or “our.” These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2002.

2.  Merger with HSBC

On March 28, 2003, HSBC Holdings plc (“HSBC”) completed its acquisition of Household by way of merger with H2 Acquisition Corporation (“H2”), a wholly owned subsidiary of HSBC, acquiring 100 percent of the voting equity interest of Household in a purchase business combination. HSBC believes that the merger offers significant opportunities to extend Household’s business model into countries and territories currently served by HSBC and broadens the product range available to the enlarged customer base. Subsequent to the merger, H2 was renamed “Household International, Inc.” Under the terms of the merger agreement, each share of our approximately 476.0 million outstanding common shares at the time of merger was converted into the right to receive, at the holder’s election, either 2.675 ordinary shares of HSBC, of nominal value $0.50 each (“HSBC Ordinary Shares”), or 0.535 American depositary shares, each representing an interest in five HSBC Ordinary Shares. Additionally, each of Household’s depositary shares representing, respectively, one-fortieth of a share of 8 ¹/4% cumulative preferred stock, Series 1992-A, one-fortieth of a share of 7.50% cumulative preferred stock, Series 2001-A, one-fortieth of a share of 7.60% cumulative preferred stock, Series 2002-A and one-fortieth of a share of 7 ⁵/8% cumulative preferred stock, Series 2002-B was converted into the right to receive $25 in cash per depositary share, plus accrued and unpaid dividends up to but not including the effective date of the merger which was an aggregate amount of approximately $1.1 billion. In consideration of HSBC transferring sufficient funds to make the payments described above with respect to Household’s depositary shares, we issued a new series of 6.50% cumulative preferred stock in the amount of $1.1 billion to HSBC on March 28, 2003. The preferred stock is redeemable by Household at any time after March 31, 2008.

Also on March 28, 2003, we called for redemption all the issued and outstanding shares of our 5.00% cumulative preferred stock, $4.50 cumulative preferred stock and $4.30 cumulative preferred stock totaling $114.4 million. Pursuant to the terms of these issues of preferred stock, we paid a redemption price of $50.00 per share of 5.00% cumulative preferred stock, $103.00 per share of $4.50 cumulative preferred stock and $100.00 per share of $4.30 cumulative preferred stock, plus, in each case, all dividends accrued and unpaid, whether or not earned or declared, to the redemption date. Additionally, on March 28, 2003, we declared a dividend of $0.8694 per share on our common stock, which was paid on May 6, 2003 to our holders of record on March 28, 2003.

In conjunction with HSBC’s acquisition of Household, we incurred acquisition related costs of $198.2 million. Consistent with the guidelines for accounting for business combinations, these costs were expensed in our income statement on March 28, 2003. These costs were comprised of the following:

	(In millions)
Payments to executives under existing employment agreements	$	97.0
Investment banking, legal and other costs		101.2
Total	$	198.2

5

In accordance with the guidelines for accounting for business combinations, the purchase price paid by HSBC plus related purchase accounting adjustments have been “pushed-down” and recorded in our financial statements for the period subsequent to March 28, 2003. This has resulted in a new basis of accounting reflecting the fair market value of our assets and liabilities for the “successor” period beginning March 29, 2003. Information for all “predecessor” periods prior to the merger are presented using our historical basis of accounting. Results for the periods ended June 30, 2003 should not be considered indicative of the results for any future quarters or the year ending December 31, 2003.

The purchase price paid by HSBC plus related purchase accounting adjustments was valued at approximately $14.6 billion and is recorded as “Additional paid-in capital” in the accompanying condensed consolidated balance sheet. The $14.6 billion purchase price consisted of the following:

	(In millions)
Value of HSBC ordinary shares issued	$	14,365.7
Fair value of outstanding Household stock options, net of unearned compensation		111.9
Fair value of outstanding Household restricted stock rights, net of unearned compensation		1.9
Fair value of equity portion of adjustable conversion-rate equity security units		21.0
Acquisition costs incurred by HSBC		146.0
Total purchase price	$	14,646.5

As of the acquisition date, we recorded our assets and liabilities at their estimated fair values. During the second quarter, we made adjustments to our preliminary fair value estimates as additional information, including third party valuation data, was obtained. As of June 30, 2003, our fair value estimates have resulted in recording approximately $6.5 billion of goodwill and $3.0 billion of acquired intangibles. Additionally, as of June 30, 2003, fair value adjustments of approximately $0.1 billion have been made to increase assets and approximately $2.6 billion to increase liabilities to fair value.

These fair value adjustments represent current estimates and are subject to further adjustment as our valuation data is finalized. Goodwill has not yet been allocated to our operating units. None of the goodwill is expected to be deductible for tax purposes.

Approximately $3.0 billion of acquired intangibles were recorded as part of the allocation of the purchase price. Total acquired intangibles resulting from the merger were comprised of the following:

	(In millions)
Purchased credit card relationships and related programs	$	1,404.0
Retail Services merchant relationships		277.0
Other loan related relationships		326.1
Trade names		715.0
Technology, customer lists and other contracts		281.0
Total acquired intangibles	$	3,003.1

The trade names are not subject to amortization. The remaining acquired intangibles are being amortized over their estimated useful lives either on a straight-line basis or in proportion to the underlying revenues generated. These useful lives range from 5 years for Retail Services merchant relationships to approximately 10 years for certain loan related relationships.

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3.  Investment Securities

Investment securities consisted of the following available-for-sale investments:

	June 30, 2003				December 31, 2002
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Corporate debt securities	$	2,084.4	$	2,159.7	$	2,032.8	$	2,110.0
Money market funds		722.5		722.5		2,177.2		2,177.2
Certificates of deposit		127.3		125.9		167.7		173.0
U.S. government and federal agency debt securities		2,430.0		2,433.8		1,804.4		1,820.8
Marketable equity securities		19.5		21.9		28.6		19.8
Non-government mortgage backed securities		542.4		545.3		660.5		669.0
Other		527.0		529.8		523.8		536.3
Subtotal		6,453.1		6,538.9		7,395.0		7,506.1
Accrued investment income		85.3		85.3		77.9		77.9
Total available-for-sale investments	$	6,538.4	$	6,624.2	$	7,472.9	$	7,584.0

4.  Receivables

Receivables consisted of the following:

(In millions)	June 30, 2003			December 31, 2002
Real estate secured	$	49,756.2		$	45,818.5
Auto finance		2,576.3			2,023.8
MasterCard(1)/Visa(1)		9,368.6			8,946.5
Private label		12,060.1			11,339.6
Personal non-credit card		14,115.2			13,970.9
Commercial and other		430.6			463.0
Total owned receivables		88,307.0			82,562.3
Purchase accounting fair value adjustments		537.0			—
Accrued finance charges		1,538.6			1,537.6
Credit loss reserve for owned receivables		(3,658.6	)		(3,332.6	)
Unearned credit insurance premiums and claims reserves		(720.3	)		(799.0	)
Interest-only strip receivables		1,026.3			1,147.8
Amounts due and deferred from receivable sales		218.9			934.4
Total owned receivables, net		87,248.9			82,050.5
Receivables serviced with limited recourse		24,268.2			24,933.5
Total managed receivables, net	$	111,517.1		$	106,984.0

(1) MasterCard is a registered trademark of MasterCard International, Incorporated and Visa is a registered trademark of VISA USA, Inc.

Purchase accounting fair value adjustments represent adjustments which have been “pushed down” to record our receivables at fair value at the acquisition date.

Interest-only strip receivables are reported net of our estimate of probable losses under the recourse provisions for receivables serviced with limited recourse. Our estimate of the recourse obligation totaled $1,980.3 million at June 30, 2003 and $1,759.5 million at December 31, 2002. Interest-only strip receivables also included fair value mark-to-market adjustments which increased the balance by $115.9 million at June 30, 2003 and $389.2 million at December 31, 2002.

7

Receivables serviced with limited recourse consisted of the following:

(In millions)	June 30, 2003		December 31, 2002
Real estate secured	$	237.0	$	456.2
Auto finance		5,285.3		5,418.6
MasterCard/Visa		9,604.8		10,006.1
Private label		4,261.3		3,577.1
Personal non-credit card		4,879.8		5,475.5
Total	$	24,268.2	$	24,933.5

The combination of receivables owned and receivables serviced with limited recourse, which we consider our managed portfolio, is shown below:

(In millions)	June 30, 2003		December 31, 2002
Real estate secured	$	49,993.2	$	46,274.7
Auto finance		7,861.6		7,442.4
MasterCard/Visa		18,973.4		18,952.6
Private label		16,321.4		14,916.7
Personal non-credit card		18,995.0		19,446.4
Commercial and other		430.6		463.0
Total	$	112,575.2	$	107,495.8

5.  Credit Loss Reserves

An analysis of credit loss reserves for the three and six months ended June 30 was as follows:

	Three months ended June 30,						Six months ended June 30,
(In millions)	2003			2002			2003			2002
Owned receivables:
Credit loss reserves at beginning of period	$	3,483.1		$	2,876.6		$	3,332.6		$	2,663.1
Provision for credit losses		1,039.3			850.9			2,048.9			1,773.9
Charge-offs		(997.4	)		(830.6	)		(1,931.7	)		(1,609.2	)
Recoveries		66.2			65.0			126.6			124.9
Other, net		67.4			21.4			82.2			30.6
Credit loss reserves for owned receivables at June 30		3,658.6			2,983.3			3,658.6			2,983.3
Receivables serviced with limited recourse:
Credit loss reserves at beginning of period		1,776.2			1,269.9			1,759.5			1,148.3
Provision for credit losses		617.0			427.5			1,024.3			866.8
Charge-offs		(436.1	)		(353.1	)		(854.7	)		(689.0	)
Recoveries		23.8			26.0			43.9			49.1
Other, net		(.6	)		15.3			7.3			10.4
Credit loss reserves for receivables serviced with limited recourse at June 30		1,980.3			1,385.6			1,980.3			1,385.6
Total credit loss reserves for managed receivables at June 30	$	5,638.9		$	4,368.9		$	5,638.9		$	4,368.9

We maintain credit loss reserves to cover probable losses of principal, interest and fees, including late, overlimit and annual fees. Credit loss reserves are based on a range of estimates and are intended to be adequate but not excessive. We estimate probable losses for consumer receivables based on delinquency and restructure

8

status and past loss experience. Credit loss reserves take into account whether loans have been restructured, rewritten or are subject to forbearance, credit counseling accommodation, modification, extension or deferment. Our credit loss reserves also take into consideration the loss severity expected based on the underlying collateral, if any, for the loan. Approximately two-thirds of all restructured receivables are secured products which may have less loss severity exposure because of the underlying collateral. In addition, loss reserves on consumer receivables reflect our assessment of portfolio risk factors which may not be fully reflected in the statistical calculation which uses roll rates and migration analysis. Roll rates and migration analysis are techniques used to estimate the likelihood that a loan will progress through the various delinquency buckets and ultimately charge off. Risk factors considered in establishing loss reserves on consumer receivables include recent growth, product mix, bankruptcy trends, geographic concentrations, economic conditions and current levels of charge-offs and delinquencies.

HSBC intends, subject to receipt of regulatory and other approvals, to hold our domestic private label credit card receivables within HSBC’s U.S. banking subsidiary. As a result, HSBC anticipates regulatory accounting charge-off, loss provisioning and account management guidelines issued by the Federal Financial Institutions Examination Council, or FFIEC, will need to be applied to these receivables. Implementation of such guidelines will result in private label credit card receivables being charged off at 6 months contractually delinquent (end of the month 60 days after notification for receivables involving a bankruptcy) versus the current practice of generally being charged off the month following the month in which the account becomes 9 months contractually delinquent (end of the month 90 days after notification for receivables involving a bankruptcy). HSBC’s plans for ultimate collection on these receivables will therefore be demonstrably different from the current practice and may require different reserve requirements. As of June 30, 2003, we have not allocated any purchase price adjustment to owned loss reserves in contemplation of this change as the process for preparing regulatory approval requests for the movement of our private label card receivables to HSBC’s U.S. banking subsidiary has only recently been initiated. To the extent we proceed with this business plan, we currently estimate that such fair value adjustment to reflect the expected impact of the implementation of the regulatory guidelines would be an increase to owned loss reserves for such existing private label credit card receivables which were originated prior to March 29, 2003. We and HSBC are also evaluating whether select other products will also be held in the HSBC U.S. banking subsidiary.

6.  Acquired Intangibles

Acquired intangibles consisted of the following:

(In millions) June 30, 2003	Gross		Accumulated Amortization		Carrying Value
Purchased credit card relationships and related programs	$	1,488.4	$	47.3	$	1,441.1
Retail Services merchant relationships		270.1		14.3		255.8
Other loan related relationships		326.1		9.7		316.4
Trade names		715.0		—		715.0
Technology, customer lists and other contracts		281.0		9.0		272.0
Acquired intangibles	$	3,080.6	$	80.3	$	3,000.3

(In millions) December 31, 2002	Gross		Accumulated Amortization		Carrying Value
Purchased credit card relationships	$	1,038.6	$	670.8	$	367.8
Other intangibles		26.5		7.9		18.6
Acquired intangibles	$	1,065.1	$	678.7	$	386.4

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Estimated amortization expense associated with our acquired intangibles for each of the following years is as follows:

(In millions) Year ending December 31,
2003	$	258.4
2004		355.3
2005		334.5
2006		327.1
2007		309.5

7.  Income Taxes

For the second quarter, our effective tax rate was 33.7 percent in 2003 (successor) and 33.0 percent in 2002 (predecessor). Our effective tax rate was 33.7 percent for the period March 29 through June 30, 2003 (successor); 42.5 percent for the period January 1 through March 28, 2003 (predecessor); and 33.6 percent for the first six months of 2002 (predecessor). The effective tax rate for the period ended March 28, 2003 was adversely impacted by the non-deductibility of certain HSBC acquisition related costs. Excluding HSBC acquisition related costs of $198.2 million, which resulted in a $27.3 million tax benefit, our effective tax rate was 33.3 percent for the period January 1 through March 28, 2003. The effective tax rate differs from the statutory federal income tax rate primarily because of the effects of state and local income taxes and tax credits.

8.  Comprehensive Income

In 2003, comprehensive income was $528.1 million for the second quarter (successor), $491.8 million for the period March 29 through June 30 (successor) and $396.3 million for the period January 1 through March 28 (predecessor).

In 2002, comprehensive income was $297.7 million for the second quarter (predecessor) and $1,125.5 million for the six months ended June 30, 2002 (predecessor).

The components of accumulated other comprehensive income (loss) were as follows:

	June 30, 2003			December 31, 2002
(In millions)	(Successor)			(Predecessor)
Unrealized losses on cash flow hedging instruments	$	(85.1	)	$	(736.5	)
Unrealized gains on investments and interest-only strip receivables		126.5			319.3
Foreign currency translation and other adjustments		76.7			(277.7	)
Accumulated other comprehensive income (loss)	$	118.1		$	(694.9	)

The balances associated with the components of accumulated other comprehensive income (loss) on a “predecessor” basis were eliminated as a result of push-down accounting effective March 29, 2003 when the “successor” period began.

9.  Stock-Based Compensation

In 2002, we adopted the fair value method of accounting for our stock option and employee stock purchase plans. We elected to recognize stock compensation cost prospectively for all new awards granted under those plans beginning January 1, 2002 as provided under SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure (an amendment of FASB Statement No. 123)” (“SFAS No. 148”). Prior to 2002, we applied the recognition and measurement provisions of APB No. 25, “Accounting for Stock

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Issued to Employees” in accounting for those plans. No compensation expense for these plans is reflected in net income for the quarter or six months ended June 30, 2002 as all employee stock options granted prior to January 1, 2002 had an exercise price equal to the market value of the underlying common stock on the date of grant and the purchase price for the shares issued under the employee stock purchase plan was not less than 85 percent of the market price. Because option expense is recognized over the vesting period of the awards, generally four years, compensation expense included in the determination of net income for the predecessor and successor periods in 2003 is less than that which would have been recognized if the fair value method had been applied to all awards since the original effective date of FASB Statement No. 123.

In conjunction with the HSBC merger, outstanding stock options and restricted stock rights (“RSRs”) granted under our various equity plans were assumed by HSBC and converted into options to purchase or rights to receive ordinary shares of HSBC. Stock options and RSRs which were issued prior to November 2002 vested upon completion of the merger. The employee stock purchase plan was terminated on March 7, 2003 and Household stock was purchased on that date. These shares of Household common stock were converted into HSBC shares at the time of the merger. All rights to HSBC shares were adjusted based upon the agreed-upon merger exchange ratio as described in Note 2.

The following table illustrates the effect on net income if the fair value method had been applied to all outstanding and unvested awards in each period.

	Three months ended June 30, 2003			Three months ended June 30, 2002			March 29 through June 30, 2003			January 1 through March 28, 2003			Six months ended June 30, 2002
(In millions)	(Successor)			(Predecessor)			(Successor)			(Predecessor)			(Predecessor)
Net income, as reported	$	364.0		$	507.4		$	373.7		$	245.7		$	998.4
Add stock-based employee compensation expense included in reported net income, net of tax:
Stock option and employee stock purchase plans		1.3			—			1.3			6.6			—
Restricted stock rights		2.4			8.7			2.4			11.5			17.2
Deduct stock-based employee compensation expense determined under the fair value method, net of tax:
Stock option and employee stock purchase plans		(1.3	)		(7.3	)		(1.3	)		(52.6	)		(14.4	)
Restricted stock rights		(2.4	)		(8.7	)		(2.4	)		(11.5	)		(17.2	)
Pro forma net income	$	364.0		$	500.1		$	373.7		$	199.7		$	984.0

The pro forma compensation expense included in the table above may not be representative of the actual effects on net income for future years.

10.  Transactions with Affiliates

In the second quarter of 2003, we received $3.3 billion in funding from affiliates of HSBC. This funding was on terms comparable to those that would be made with unaffiliated parties. Interest expense on this funding totaled $4.6 million for both the quarter ended June 30, 2003 (successor) and the period March 29, 2003 through June 30, 2003 (successor).

In consideration of HSBC affiliates transferring sufficient funds to make the payments described in Note 2 with respect to Household’s depositary shares, we issued a new series of 6.50% cumulative preferred stock in the amount of $1.1 billion to HSBC on March 28, 2003. The preferred stock is redeemable by Household at any time after March 31, 2008.

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11.  New Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation Number 46, “Consolidation of Variable Interest Entities” (“Interpretation No. 46”). Interpretation No. 46 clarifies the application of Accounting Research Bulletin Number 51, “Consolidated Financial Statements” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Qualifying special purpose entities as defined by FASB Statement Number 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” are excluded from the scope of Interpretation No. 46. Interpretation No. 46 applies immediately to all variable interest entities created after January 31, 2003 and is effective for fiscal periods beginning after July 1, 2003 for existing variable interest entities. We adopted Interpretation No. 46 in the second quarter of 2003. This adoption did not have a material impact on our financial position or results of operations.

In April 2003, the FASB issued Statement Number 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS No. 149”). This statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The guidelines are to be applied prospectively. The provisions of SFAS 149 that relate to Statement 133 implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. We do not expect SFAS No. 149 will have a material impact to our financial position or results of operations.

In May 2003, the FASB issued Statement Number 150, “Accounting for Financial Instruments with Characteristics of Liabilities, Equity, or Both” (“SFAS No. 150”). This limited scope statement prescribes changes to the classification of preferred securities of subsidiary trusts and the accounting for forward purchase contracts issued by a company in its own stock. SFAS No. 150 requires all preferred securities of subsidiary trusts to be classified as debt on the consolidated balance sheet and the related dividends as interest expense. We adopted SFAS No. 150 in the second quarter of 2003 and, therefore, have reclassified company obligated mandatorily redeemable preferred securities of subsidiary trusts as debt. Dividends on these securities have historically and will continue to be reported as interest expense in our consolidated statements of income.

12.  Segment Reporting

We have three reportable segments: Consumer, Credit Card Services and International. Our Consumer segment consists of our consumer lending, mortgage services, retail services and auto finance businesses. Our Credit Card Services segment consists of our domestic MasterCard and Visa credit card business. Our International segment consists of our foreign operations in the United Kingdom and Canada. There has been no change in the basis of our segmentation or in the measurement of segment profit as compared with the presentation in our Annual Report on Form 10-K for the year ended December 31, 2002.

We allocate resources and provide information to management for decision making on a managed basis. Therefore, an adjustment is required to reconcile the managed financial information to our reported financial information in our consolidated financial statements. This adjustment reclassifies net interest margin, fee income and loss provision into securitization revenue. Income statement information included in the table for the six months ended June 30, 2003 combines January 1 through March 28, 2003 (the “predecessor period”) and March 29 to June 30, 2003 (the “successor period”) in order to present “combined” financial results for the six-month period. Fair value adjustments related to purchase accounting and related amortization have been allocated to Corporate, which is included in the “All Other” caption within our segment disclosure.

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Reportable Segments—Managed Basis

(In millions)	Consumer		Credit Card Services		Inter- national		All Other			Totals		Adjustments/ Reconciling Items			Managed Basis Consolidated Totals		Securitization Adjustments			Owned Basis Consolidated Totals
Three months ended June 30, 2003
Net interest margin	$	1,804.1	$	471.6	$	180.8	$	207.1		$	2,663.6		—		$	2,663.6	$	(718.3	)(4)	$	1,945.3
Fee income		110.1		294.6		20.4		1.9			427.0		—			427.0		(167.3	)(4)		259.7
Other revenues, excluding fee income		144.5		36.7		77.1		143.8			402.1	$	(40.1	)(1)		362.0		268.6	(4)		630.6
Intersegment revenues		30.3		6.9		3.1		(.2	)		40.1		(40.1	)(1)		—		—			—
Provision for credit losses		1,182.9		383.3		85.1		3.0			1,654.3		2.0	(2)		1,656.3		(617.0	)(4)		1,039.3
Net income		175.2		94.3		43.9		77.3			390.7		(26.7	)		364.0		—			364.0
Receivables		83,992.1		17,439.2		10,185.5		958.4			112,575.2		—			112,575.2		(24,268.2	)(5)		88,307.0
Assets		86,352.1		20,086.6		11,171.7		27,059.4			144,669.8		(8,822.2	)(3)		135,847.6		(24,268.2	)(5)		111,579.4
Three months ended June 30, 2002
Net interest margin	$	1,718.9	$	423.0	$	154.1	$	(15.4	)	$	2,280.6		—		$	2,280.6	$	(651.6	)(4)	$	1,629.0
Fee income		84.3		256.5		13.1		1.4			355.3		—			355.3		(165.0	)(4)		190.3
Other revenues, excluding fee income		140.3		41.4		107.8		214.7			504.2	$	(53.1	)(1)		451.1		389.1	(4)		840.2
Intersegment revenues		42.8		8.2		2.5		(.4	)		53.1		(53.1	)(1)		—		—			—
Provision for credit losses		841.5		346.8		88.8		.4			1,277.5		.9	(2)		1,278.4		(427.5	)(4)		850.9
Net income		363.5		65.9		56.1		56.3			541.8		(34.4	)		507.4		—			507.4
Receivables		80,134.5		16,566.9		7,648.8		1,110.4			105,460.6		—			105,460.6		(22,322.7	)(5)		83,137.9
Assets		82,320.2		17,612.6		8,915.6		19,643.9			128,492.3		(9,363.3	)(3)		119,129.0		(22,322.7	)(5)		96,806.3
Six months ended June 30, 2003
Net interest margin	$	3,542.3	$	950.2	$	359.9	$	169.8		$	5,022.2		—		$	5,022.2	$	(1,443.9	)(4)	$	3,578.3
Fee income		215.8		621.0		38.9		3.1			878.8		—			878.8		(322.0	)(4)		556.8
Other revenues, excluding fee income		153.1		94.7		149.9		511.3			909.0	$	(76.5	)(1)		832.5		741.6	(4)		1,574.1
Intersegment revenues		56.2		15.5		5.7		(.9	)		76.5		(76.5	)(1)		—		—			—
Provision for credit losses		2,122.7		774.6		170.0		2.6			3,069.9		3.3	(2)		3,073.2		(1,024.3	)(4)		2,048.9
Net income		391.5		222.1		75.1		(18.3	)		670.4		(51.0	)		619.4		—			619.4
Operating net income (6)		391.5		222.1		75.1		149.0			837.7		(51.0	)		786.7		—			786.7
Six months ended June 30, 2002
Net interest margin	$	3,377.1	$	840.8	$	307.5	$	8.4		$	4,533.8		—		$	4,533.8	$	(1,307.9	)(4)	$	3,225.9
Fee income		172.9		527.0		23.2		4.2			727.3		—			727.3		(320.5	)(4)		406.8
Other revenues, excluding fee income		305.7		108.3		161.1		526.8			1,101.9	$	(100.7	)(1)		1,001.2		761.6	(4)		1,762.8
Intersegment revenues		78.6		18.2		4.8		(.9	)		100.7		(100.7	)(1)		—		—			—
Provision for credit losses		1,762.5		717.4		150.9		33.5			2,664.3		(23.6	)(2)		2,640.7		(866.8	)(4)		1,773.9
Net income		670.7		143.3		81.9		151.5			1,047.4		(49.0	)		998.4		—			998.4

(1) Eliminates intersegment revenues.

(2) Eliminates bad debt recovery sales and reclassifies loss reserves between operating segments.

(3) Eliminates investments in subsidiaries and intercompany borrowings.

(4) Reclassifies net interest margin, fee income and loss provisions relating to securitized receivables to other revenues.

(5) Represents receivables serviced with limited recourse.

(6) This non-GAAP financial measure is provided for comparison of our operating trends only and should be read in conjunction with our owned basis GAAP financial information. Operating results, percentages and ratios exclude $167.3 million (after-tax) of HSBC acquisition related costs and other merger related items incurred by Household.

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Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FINANCIAL HIGHLIGHTS

(Dollar amounts are in millions)	Three months ended June 30, 2003			Three months ended June 30, 2002			Combined six months ended June 30, 2003			Six months ended June 30, 2002
Net income	$	364.0		$	507.4		$	619.4	(1)	$	998.4
Net interest margin		1,945.3			1,629.0			3,578.3			3,225.9
Provision for credit losses on owned receivables		1,039.3			850.9			2,048.9			1,773.9
Owned Basis Ratios:
Return on average owned assets		1.32	%		2.18	%		1.18	%(1)		2.18	%
Return on average common shareholder’s(s’) equity		9.3			22.9			9.5	(1)		23.2
Net interest margin		8.51			7.62			7.91	(1)		7.72
Consumer net charge-off ratio, annualized		4.34			3.76			4.28			3.69
Reserves as a percentage of net charge-offs, annualized		98.2			97.4			101.3			100.5
Efficiency ratio (2)		42.0			37.5			44.9	(1)		37.3
Managed Basis Ratios: (3)
Return on average managed assets		1.08	%		1.78	%		.96	% (1)		1.77	%
Net interest margin		9.23			8.55			8.76	(1)		8.64
Consumer net charge-off ratio, annualized		4.89			4.26			4.82			4.17
Reserves as a percentage of net charge-offs, annualized		104.9			100.0			107.8			102.8
Efficiency ratio (2)		34.3			32.1			37.9	(1)		32.0
	Owned Basis						Managed Basis (3)
(Dollar amounts are in millions)	June 30, 2003			December 31, 2002			June 30, 2003			December 31, 2002
Total assets	$	111,579.4		$	97,860.6		$	135,847.6		$	122,794.1
Receivables		88,307.0			82,562.3			112,575.2			107,495.8
Two-month-and-over contractual delinquency ratio		5.38	%		5.34	%		5.30	%		5.24	%
Reserves as a percentage of receivables		4.14			4.04			5.01			4.74
Reserves as a percentage of nonperforming loans		94.6			94.5			116.4			112.6
Common and preferred equity to assets		14.54			10.64			11.94			8.48
Tangible shareholder’s(s’) equity to tangible managed assets (4)(5)		n/a			n/a			6.66			9.08
Tangible common equity to tangible managed assets (4)(6)		n/a			n/a			4.51			6.83

(1) The following non-GAAP financial information is provided for comparison of our operating trends only and should be read in conjunction with our owned basis GAAP financial information. For the six months ended

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June 30, 2003, the operating results, percentages and ratios exclude $167.3 million (after-tax) of HSBC acquisition related costs and other merger related items incurred by Household.

	Three months ended June 30, 2003			Three months ended June 30, 2002			Combined six months ended June 30, 2003			Six months ended June 30, 2002
Operating net income (in millions)	$	364.0		$	507.4		$	786.7		$	998.4
Return on average owned assets		1.32	%		2.18	%		1.49	%		2.18	%
Return on average common shareholder’s (s’) equity		9.3			22.9			12.2			23.2
Owned basis net interest margin		8.51			7.62			7.91			7.72
Owned basis efficiency ratio		42.0			37.5			36.8			37.3
Return on average managed assets		1.08			1.78			1.21			1.77
Managed basis net interest margin		9.23			8.55			8.76			8.64
Managed basis efficiency ratio		34.3			32.1			34.8			32.0

(2) Ratio of total costs and expenses less policyholders’ benefits to net interest margin and other revenues less policyholders’ benefits.

(3) We monitor our operations and evaluate trends on both an owned basis as shown in our financial statements and on a managed basis. Managed basis reporting adjustments assume that securitized receivables have not been sold and are still on our balance sheet. Managed basis information is intended to supplement, and should not be considered a substitute for, owned basis reporting and should be read in conjunction with reported owned basis results.

(4) Tangible shareholder’s(s’) equity to tangible managed assets (“TETMA”) and tangible common equity to tangible managed assets are non-GAAP financial ratios that are used by certain rating agencies as a measure to evaluate capital adequacy. These ratios may differ from similarly named measures presented by other companies. Because of its long-term subordinated nature and our ability to defer dividends, those rating agencies consider our company obligated mandatorily redeemable preferred securities of subsidiary trusts as equity in calculating these ratios. Because they include obligations to purchase HSBC ordinary shares in 2006, we include our Adjustable Conversion-Rate Equity Security Units as equity in calculating TETMA. Excluding the impact of “push-down” accounting on our assets and common shareholder’s equity, TETMA would have been 8.72 percent and tangible common equity to tangible managed assets would have been 6.61 percent at June 30, 2003. Common and preferred equity to total managed assets, the most directly comparable GAAP financial measure to TETMA, is also presented in our financial highlights.

(5) Tangible shareholder’s(s’) equity consists of common shareholder’s(s’) equity (excluding unrealized gains and losses on investments and cash flow hedging instruments), preferred stock, company obligated mandatorily redeemable preferred securities of subsidiary trusts, and Adjustable Conversion-Rate Equity Security Units, less acquired intangibles and goodwill. Tangible managed assets represents total managed assets less acquired intangibles, goodwill and derivative financial assets.

(6) Tangible common equity consists of common shareholder’s(s’) equity (excluding unrealized gains and losses on investments and cash flow hedging instruments) less acquired intangibles and goodwill. Tangible managed assets represents total managed assets less acquired intangibles, goodwill and derivative financial assets.

Basis of Reporting

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements, notes and tables included elsewhere in this report and in the Household International, Inc. Annual Report on Form 10-K for the year ended December 31, 2002 (the “2002 Form 10-K”). Management’s discussion and analysis may contain certain statements that may be forward-looking in nature within the meaning of the Private Securities Litigation Reform Act of 1995. Our results may differ materially from those noted in the forward-looking statements. Forward-looking statements are typically identified by words or phrases such as “believe”, “expect”, “anticipate”, “intend”, “probable”, “may”, “will”, “should”, “would” and “could”. Forward-looking statements involve risks and uncertainties and are based on current views and assumptions. For a list of important factors that may affect our actual results, see our 2002

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Form 10-K. In addition, as a subsidiary of HSBC, we may be affected by decisions made by HSBC or the perception investors, regulators or rating agencies have of HSBC. Such decisions and perceptions may also affect our forward-looking statements.

We monitor our operations and evaluate trends on a managed basis which assumes that securitized receivables have not been sold and are still on our balance sheet. We manage our operations on a managed basis because the receivables that we securitize are subjected to underwriting standards comparable to our owned portfolio, are serviced by operating personnel without regard to ownership and result in a similar credit loss exposure for us. In addition, we fund our operations, review our operating results and make decisions about allocating resources such as employees and capital on a managed basis. See Note 12, “Segment Reporting,” to the accompanying condensed consolidated financial statements for additional information related to our results on a managed basis.

Management’s discussion and analysis is presented on an owned basis of reporting unless specifically noted. On an owned basis of reporting, net interest margin, provision for credit losses and fee income resulting from securitized receivables are included as components of securitization revenue.

Merger with HSBC

On March 28, 2003, HSBC Holdings plc (“HSBC”) completed its acquisition of Household by way of merger with H2 Acquisition Corporation (“H2”), a wholly owned subsidiary of HSBC, in a purchase business combination (see Note 2 to the accompanying condensed consolidated financial statements). Subsequent to the merger, H2 was renamed “Household International, Inc.” In accordance with the guidelines for accounting for business combinations, the purchase price paid by HSBC plus related purchase accounting adjustments have been “pushed-down” and recorded in our financial statements for periods subsequent to March 28, 2003, resulting in a new basis of accounting for the “successor” period beginning March 29, 2003. As of the acquisition date, we recorded our assets and liabilities at their estimated fair values. During the second quarter, we made adjustments to our preliminary fair value estimates as additional information, including third party valuation data, was obtained. Information for all “predecessor” periods prior to the merger is presented on the historical basis of accounting.

To assist in the comparability of our financial results and to make it easier to discuss and understand our results of operations, the following discussion combines the “predecessor period” (January 1 to March 28, 2003) with the “successor period” (March 29 to June 30, 2003) to present “combined” results for the six months ended June 30, 2003.

Though we are still in the early stages of evaluating the impact that the merger may have on our total operations, we have identified the following items as near term priorities:

· Funding benefits—during the quarter, we received $3.3 billion in funding from affiliates of HSBC and $1.1 billion from HSBC’s customers. We currently anticipate that we will continue to use HSBC’s available funding to partially fund our operations. This will reduce our reliance on the debt markets. Since the merger, we have experienced lower funding costs because we are now a subsidiary of HSBC. We anticipate that the tighter spreads we have experienced as a result of our merger with HSBC along with other funding synergies will eventually lead to funding expense savings of approximately $1.0 billion per year. However, it will take us some time to realize the full amount of these savings as our existing term debt will mature over the course of the next several years.

· Technology integration.

· Exporting and using our consumer credit business models and “best practices” into HSBC’s operations.

· Expanding business opportunities including broader consumer product offerings and leveraging our existing business to business model with HSBC’s capabilities. This includes working with HSBC Bank

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USA to develop a customer referral program.

· Global processing opportunities.

It is too early to quantify the aggregate financial impact these business modifications may have with respect to Household.

Operations Summary

Our net income was $364.0 million in the second quarter of 2003, $255.4 million in the first quarter of 2003 and $507.4 million in the second quarter of 2002. Net income for the first six months of 2003 was $619.4 million, compared to $998.4 million in the year-ago period. Operating net income (a non-GAAP financial measurement of net income excluding HSBC acquisition related costs and other merger related items incurred by Household of $167.3 million, after-tax) was $786.7 million for the six months ended June 30, 2003. HSBC acquisition related costs include payments to executives under existing employment contracts and investment banking, legal and other costs relating to our acquisition by HSBC. We believe operating net income is an important measure in evaluating trends for comparison purposes.

Our net income during the second quarter of 2003 was positively impacted by purchase accounting adjustments which increased net income by $43.3 million and by the discontinuation of the shortcut method of accounting for our interest rate swaps under SFAS No. 133 due to the merger which increased net income by $47.3 million. Excluding these items as well as $167.3 million of HSBC acquisition related costs and other merger related items incurred by Household in the first quarter of 2003, our earnings declined compared to the prior quarter and prior year periods due to higher credit loss provision due to higher charge-offs and lower securitization activity in the current periods. Higher operating expenses to support receivables growth as well as increased legal and compliance costs also contributed to the decline over the prior year periods. Compared to the prior quarter, our net income also reflects lower revenue from our seasonal tax refund lending business. Partially offsetting these decreases to net income were higher net interest margin and, compared to the prior year periods, higher fee income. Excluding higher amortization of intangibles from purchase accounting adjustments and merger related charges, total costs and expenses declined from the prior quarter.

We are committed to taking a leadership role in the consumer finance industry by establishing a benchmark for quality. As a result, we will significantly increase our investment in compliance, monitoring and training to approximately $150 million during 2003 which is more than double the amount invested in 2002.

Segment Results—Managed Basis

Our Consumer segment reported net income of $175.2 million for the second quarter of 2003 compared to $363.5 million in the year-ago quarter. Year-to-date, net income was $391.5 million compared to $670.7 million for the first six months of 2002. Increases in net interest margin and fee income due to higher receivable levels were more than offset by higher credit loss provision due to higher charge-offs and higher operating expenses. Year-to-date results also reflect lower other revenues as a result of a decline in receivables securitized during the first six months of 2003 and the impact of higher securitization levels in 2002 as a result of our liquidity management plans. Our managed basis credit loss provision rose $341.4 million to $1.2 billion in the quarter and $360.2 million to $2.1 billion year-to-date as a result of increased levels of receivables and higher charge-offs. We increased our managed loss reserves by recording loss provision greater than charge-offs of $301.8 million in the quarter and $371.4 million year-to-date. Higher operating expenses were the result of additional operating costs to support the increased receivable levels and higher legal and compliance costs. Managed receivables grew to $84.0 billion at June 30, 2003, compared to $80.5 billion at March 31, 2003 and $80.1 billion at June 30, 2002. Compared to the prior quarter, growth was driven by higher real estate secured receivables in our correspondent business and portfolio acquisitions. During the quarter, we acquired a $1.2 billion private label portfolio and $.5 billion in newly originated auto finance loans from recently established strategic alliances. Compared to the prior

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year, growth was strongest in our private label portfolio as a result of portfolio acquisitions and organic growth. Real estate receivables grew modestly since June 30, 2002. Strong growth in our correspondent business was substantially offset by $5.4 billion of whole loan sales in the second half of 2002. Receivable levels in our branch-based Consumer Lending business continue to reflect weak sales momentum following our intentional fourth quarter 2002 slowdown and higher run-off. Return on average managed assets (“ROMA”) was 0.82 and 0.93 percent in the second quarter and first six months of 2003 compared to 1.81 and 1.68 percent in the year-ago periods. The decline in the ratios reflect higher credit loss provision, higher operating expenses and weaker receivables growth. The year-to-date ratio also reflects lower securitization revenue.

Our Credit Card Services segment reported improved results over the prior-year periods. Net income increased to $94.3 million for the second quarter compared to $65.9 million for the year-ago quarter. Year-to-date, net income increased to $222.1 million compared to $143.3 million for the first six months of 2002. The increase was due primarily to higher net interest margin and fee income. Net interest margin increased $48.6 million to $471.6 million for the quarter and $109.4 million to $950.2 million year-to-date as a result of higher receivable levels and margin spreads. Net interest margin as a percent of average receivables increased in the quarter as a result of lower funding costs and pricing floors which capped rate reductions on certain variable rate credit card products. Fee income increased $38.1 million to $294.6 million for the quarter and $94.0 million to $621.0 million year-to-date. Partially offsetting the revenue growth was higher credit loss provision which increased $36.5 million during the quarter and $57.2 million year-to-date as a result of the higher receivable levels and the continued weak economy. Managed receivables were $17.4 billion at June 30, 2003, compared to $17.2 billion at March 31, 2003 and $16.6 billion at June 30, 2002. ROMA was 1.90 and 2.21 percent in the second quarter and first six months of 2003 compared to 1.50 and 1.63 percent in the year-ago periods.

Our International segment reported net income of $43.9 million for the second quarter compared to $56.1 million for the year-ago quarter. Year-to-date, net income was $75.1 million compared to $81.9 million for the first six months of 2002. Net interest margin increased $26.7 million to $180.8 million for the quarter and $52.4 million to $359.9 million year-to-date due to higher receivable levels. Although receivable levels have increased over the prior year periods, net interest margin as a percentage of average receivables has declined due to mix and pricing. Credit loss provision rose $19.1 million to $170.0 million year-to-date primarily as a result of increased levels of receivables, but declined $3.7 million compared to the year-ago quarter. Total costs and expenses increased $22.0 million during the quarter and $46.5 million year-to-date primarily as a result of higher salary expenses to support receivables growth and higher policyholder benefits, which resulted from increased sales volumes. Managed receivables totaled $10.2 billion at June 30, 2003, compared to $9.1 billion at March 31, 2003 and $7.6 billion at June 30, 2002. Growth over the prior quarter was strongest in our private label portfolio as the result of a $.4 billion portfolio acquisition. Compared to the year ago quarter, growth was strongest in our MasterCard and Visa portfolio in the U.K. The increase in receivables over the June 2002 balance was also impacted by favorable translation adjustments of approximately $.8 billion. ROMA was 1.64 and 1.43 percent in the second quarter and first six months of 2003 compared to 2.68 and 1.96 percent in the year-ago periods.

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Balance Sheet Review

	June 30, 2003		Increase (decrease) from March 31, 2003					Increase (decrease) from June 30, 2002
(All dollar amounts are stated in millions)			$			%		$			%
Real estate secured	$	49,756.2	$	2,499.6		5.3	%	$	1,444.1		3.0	%
Auto finance		2,576.3		420.1		19.5			213.7		9.0
MasterCard(1)/Visa(1)		9,368.6		916.1		10.8			2,487.9		36.2
Private label		12,060.1		870.7		7.8			1,233.0		11.4
Personal non-credit card(2)		14,115.2		188.2		1.4			(157.4	)	(1.1	)
Commercial and other		430.6		(26.1	)	(5.7	)		(52.2	)	(10.8	)
Total owned receivables	$	88,307.0	$	4,868.6		5.8	%	$	5,169.1		6.2	%

(1) MasterCard is a registered trademark of MasterCard International, Incorporated and Visa is a registered trademark of VISA USA, Inc.

(2) Personal non-credit card receivables are comprised of the following:

(In millions)	June 30, 2003		March 31, 2003		June 30, 2002
Domestic personal unsecured	$	6,673.5	$	6,503.5	$	6,710.3
Union Plus personal unsecured		862.0		977.6		1,193.7
Personal homeowner loans		3,851.5		3,974.2		4,393.2
Foreign unsecured		2,728.2		2,471.7		1,975.4
Total personal non-credit card	$	14,115.2	$	13,927.0	$	14,272.6

Owned receivables of $88.3 billion at June 30, 2003 increased $5.2 billion from a year ago. Excluding acquisitions of $2.3 billion and dispositions of $5.4 billion, receivable growth was 10 percent during the last twelve months. Driven by growth in our correspondent business, real estate secured receivables increased $1.4 billion over the year-ago period, despite whole loan sales of $5.4 billion in the second half of 2002. Overall receivable growth in our branch-based Consumer Lending business throughout the first half of 2003 reflects weak sales momentum following our intentional fourth quarter 2002 slowdown and higher run-off. Auto finance receivables increased $213.7 million to $2.6 billion at June 30, 2003 which reflected $.6 billion in newly originated loans acquired from strategic alliances established during the year. Growth resulting from these channels and from originations was partially offset by securitization activity. MasterCard and Visa receivables increased $2.5 billion to $9.4 billion at June 30, 2003 despite increased securitization activity in 2002. MasterCard and Visa growth was strongest in our U.K. marbles^™ and domestic subprime direct mail portfolios. Our partner programs, which include both our GM and Union Plus portfolios, also reported growth. Private label receivables increased $1.2 billion to $12.1 billion. This growth reflects owned portfolio acquisitions of $1.2 billion during the current quarter and $.5 billion during the fourth quarter of 2002 as well as organic growth through existing merchants which were partially offset by securitization activity. Personal non-credit card receivable growth generated by our branches was more than offset by securitization activity in 2002.

Compared to March 31, 2003, growth in our real estate secured portfolio was due to growth in our correspondent business. MasterCard and Visa growth was largely due to growth in our GM portfolio and reduced securitization levels. As previously discussed, growth in private label receivables reflects portfolio acquisitions and growth in auto finance receivables reflects the benefit of new strategic alliances. Both our private label and auto finance portfolios were also impacted by higher levels of securitizations compared to the first quarter.

Owned consumer two-months-and-over contractual delinquency as a percent of owned consumer receivables was 5.38 percent at June 30, 2003, compared with 5.50 percent at March 31, 2003 and 4.53 percent at June 30, 2002. The annualized consumer owned charge-off ratio in the second quarter of 2003 was 4.34 percent, compared with 4.22 percent in the prior quarter and 3.76 percent in the year-ago quarter. See “Credit Loss Reserves” and “Credit Quality” for further discussion.

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Liquidity and Capital Resources

The merger with HSBC has improved our access to the capital markets and lowered our funding costs compared with those that we would have incurred had the merger not occurred. Following completion of the merger with HSBC, Standard & Poor’s upgraded our long-term debt rating to “A” and our short-term debt rating to “A-1”; Moody’s Investors Service (“Moody’s”) placed our long-term debt ratings on review for possible upgrade and Fitch Ratings confirmed our debt ratings and removed us from “Ratings Watch Evolving”. These revised ratings and actions also apply to our principal borrowing subsidiaries, including Household Finance Corporation (“HFC”). In June 2003, Moody’s upgraded our senior debt rating from A3 to A2 and HFC’s senior debt rating from A2 to A1.

Significant liquidity and capital transactions during the first half of 2003, included the following:

· We received $3.3 billion in funding from affiliates of HSBC during the current quarter. This total included $1.5 billion of short-term domestic funding, $1.5 billion in short-term U.K. funding and $300 million of long-term funding. The interest rates on this funding are comparable to those available to us from unaffiliated parties.

· We increased our outstanding commercial paper balance by $2.6 billion to $7.2 billion at June 30, 2003. The increase is attributable to the upgrade of our debt ratings following the HSBC merger which expanded our universe of potential buyers and to a new Euro commercial paper program. At June 30, 2003, outstanding Euro commercial paper totaled $1.4 billion, including $1.1 billion which was sold to customers of HSBC. This program has expanded our European investor base.

· We reduced our investment security liquidity portfolio from $3.9 billion at December 31, 2002 to $3.3 billion at June 30, 2003. Of these amounts, $2.3 billion was dedicated to our credit card bank at  June 30, 2003 and $2.2 billion was dedicated to our credit card bank at December 31, 2002. As the maintenance of this portfolio adversely impacts our net interest margin and net income due to the lower return generated by these assets, we plan to reduce this portfolio given the increased available liquidity arising from HSBC affiliates and customers. Our insurance subsidiaries held an additional $3.2 billion of investment securities at June 30, 2003 compared with $3.1 billion at December 31, 2002.

· We reduced our committed back-up lines of credit by $2.4 billion to $7.6 billion. We also reduced our conduit capacity for real estate secured receivables by $4.25 billion and for MasterCard and Visa receivables by $350 million. Both reductions were the result of additional liquidity capacity now available from HSBC and its affiliates.

· Deposits decreased $760.5 million as a result of maturities in the U.K. during the quarter which were replaced with funding from HSBC.

· We issued $850.0 million of domestic medium-term notes, $1.6 billion in foreign currency-denominated bonds and $2.05 billion of global debt.

· We issued $674.4 million of InterNotes^(SM) (retail-oriented medium-term notes).

· In July 2003 we called Household Capital Trusts I and IV. These company obligated mandatorily redeemable preferred securities of subsidiary trusts totaled $275 million and will be redeemed in August 2003. Capital Trusts I and IV are expected to be replaced with additional preferred stock issued to HSBC.

· The composition of receivables securitized (excluding replenishments of certificateholder interests) was as follows:

	Three months ended June 30,				Six months ended June 30,
(In millions)	2003		2002		2003		2002
MasterCard/Visa		—	$	613.4	$	320.0	$	1,213.4
Auto finance	$	596.3		925.0		1,007.1		1,350.0
Private label		250.0		—		250.0		500.0
Personal non-credit card		305.0		450.0		815.0		1,352.7
Total	$	1,151.3	$	1,988.4	$	2,392.1	$	4,416.1

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Securitization levels in the first half of 2002 reflect the impact of our liquidity management plans.

· During the first quarter of 2003, we redeemed outstanding shares of our $4.30, $4.50 and 5.00 percent cumulative preferred stock pursuant to their respective terms. Additionally, the outstanding shares of our 7.625, 7.60, 7.50 and 8.25 percent preferred stock were converted into the right to receive cash from HSBC in an amount equal to their liquidation value, plus accrued and unpaid dividends which was an aggregate amount of $1.1 billion. In consideration of HSBC transferring sufficient funds to make the payments described above with respect to our 7.625, 7.60, 7.50, and 8.25 percent preferred stock, we issued a new series of 6.50 percent cumulative preferred stock in the amount of $1.1 billion to HSBC on March 28, 2003.

Our ratio of tangible shareholder’s(s’) equity to tangible managed assets (“TETMA”) was 6.66 percent at June 30, 2003, 6.98 percent at March 31, 2003, and 9.08 percent at December 31, 2002. Tangible common equity to tangible managed assets was 4.51 percent at June 30, 2003, 4.79 percent at March 31, 2003, and 6.83 percent at December 31, 2002. These ratios represent non-GAAP financial ratios that are used by certain rating agencies to evaluate capital adequacy and may differ from similarly named measures presented by other companies. These ratios were negatively impacted by the purchase accounting adjustments which were “pushed down” to Household which increased goodwill by approximately $5.4 billion, acquired intangibles by approximately $2.6 billion, and common equity by approximately $5.6 billion at the time of acquisition. Excluding the impact of “push-down” accounting on our assets and common shareholder’s equity, TETMA would have been 8.72 percent at June 30, 2003 and 8.78 percent at March 31, 2003 and tangible common equity to tangible managed assets would have been 6.61 percent at June 30, 2003 and 6.60 percent at March 31, 2003. We are committed to maintaining at least a mid single “A” rating and will continue to review appropriate capital levels with our rating agencies. Common and preferred equity to total managed assets, the GAAP financial measure most directly comparable to TETMA, was 11.94 percent at both June 30, 2003 and March 31, 2003, and 8.48 percent at December 31, 2002. Because of its long-term subordinated nature and our ability to defer dividends, certain rating agencies consider our company obligated mandatorily redeemable preferred securities of subsidiary trusts as equity in calculating TETMA. Because they include obligations to purchase HSBC ordinary shares in 2006, we include our Adjustable Conversion-Rate Equity Security Units as equity in calculating TETMA.

Commercial paper, bank and other borrowings increased $3.2 billion from March 31, 2003 and $2.7 billion from year-end 2002 to $8.9 billion at June 30, 2003. The increases are due to the previously discussed increases in commercial paper. Senior and senior subordinated debt (with original maturities over one year) was $75.1 billion at June 30, 2003 and $74.8 billion at December 31, 2002. The increase reflects purchase accounting adjustments which have been “pushed down” to record our debt at fair value. Excluding purchase accounting adjustments, senior and senior subordinated debt decreased as maturities and retirements were replaced with short-term funding, including funding from affiliates of HSBC.

Prior to the merger with HSBC, the majority of our fair value and cash flow hedges qualified for shortcut accounting under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (“SFAS No. 133”). Under the Financial Accounting Standards Board’s interpretations of SFAS No. 133, the shortcut method of accounting is no longer allowed for interest rate swaps which were outstanding at the time of the merger. The discontinuation of shortcut accounting increased net income by $47.3 million during the second quarter of 2003 and has been recorded in other income. We currently are in the process of restructuring our swap portfolio to regain use of the shortcut method of accounting in order to reduce the potential volatility of future earnings.

Securitizations and Secured Financings    Securitizations (which are structured to receive sale treatment under Statement of Financial Accounting Standards No. 140 (“SFAS No. 140”) and secured financings (which do not receive sale treatment under SFAS No. 140) of consumer receivables have been, and will continue to be, a source of liquidity for us. Securitizations and secured financings are used to limit our reliance on the unsecured debt markets and often are more cost-effective than alternative funding sources.

In a securitization, a designated pool of non-real estate consumer receivables is removed from the balance sheet and tr ansferred to an unaffiliated trust. This unaffiliated trust is a qualifying special purpose entity

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(“QSPE”) as defined by SFAS No. 140 and, therefore, is not consolidated. The QSPE funds its receivable purchase through the issuance of securities to investors, entitling them to receive specified cash flows during the life of the securities. The securities are collateralized by the underlying receivables transferred to the QSPE. At the time of sale, an interest-only strip receivable is recorded, representing the present value of the cash flows we expect to receive over the life of the securitized receivables, net of estimated credit losses. Under the terms of the securitizations, we receive annual servicing fees on the outstanding balance of the securitized receivables and the rights to future residual cash flows on the sold receivables after the investors receive their contractual return. Cash flows related to the interest-only strip receivables and servicing the receivables are collected over the life of the underlying securitized receivables.

In a secured financing, a designated pool of receivables, typically real estate secured, are conveyed to a wholly owned limited purpose subsidiary which in turn transfers the receivables to a trust which sells interests to investors. Repayment of the debt issued by the trust is secured by the receivables transferred. The transactions are structured as secured financings under SFAS No. 140. Therefore, the receivables and the underlying debt of the trust remain on our balance sheet. We do not recognize a gain in a secured financing transaction. Because the receivables and the debt remain on our balance sheet, revenues and expenses are reported consistently with our owned balance sheet portfolio. Using this source of funding results in similar cash flows as issuing debt through alternative funding sources. As of June 30, 2003, closed-end real estate secured receivables totaling $6.5 billion secured $5.6 billion of outstanding debt related to these transactions. At December 31, 2002, closed-end real estate secured receivables totaling $8.5 billion secured $7.5 billion of outstanding debt related to these transactions.

Our securitized receivables totaled $24.3 billion at June 30, 2003, compared to $24.9 billion at December 31, 2002. We believe the market for securities backed by receivables is a reliable, efficient and cost-effective source of funds. At June 30, 2003, securitizations structured as sales represented 22 percent and secured financings represented 5 percent of the funding associated with our managed portfolio. At December 31, 2002, securitizations structured as sales represented 23 percent and secured financings represented 7 percent of the funding associated with our managed portfolio.

Results of Operations

Unless noted otherwise, the following discusses amounts reported in our owned basis statements of income.

Net interest margin    Net interest margin on an owned basis was $1.9 billion for the second quarter of 2003, up 19 percent from $1.6 billion for both the previous and prior-year quarters. Net interest margin on an owned basis for the first six months of 2003 was $3.6 billion, up from $3.2 billion in the prior-year period. The increases were primarily due to amortization of purchase accounting adjustments. Receivables growth and lower funding costs also contributed to the increase. Excluding amortization of purchase accounting adjustments, net interest margin on an owned basis was $1.7 billion in the current quarter and $3.3 billion year-to-date.

Net interest margin as a percent of average owned interest-earning assets, annualized, was 8.51 percent in the quarter and 7.91 percent in the first six months of 2003, compared to 7.62 and 7.72 percent in the year-ago periods. The increases were primarily attributable to lower interest expense resulting from amortization of purchase accounting fair value adjustments. Excluding amortization of the fair value adjustments, net interest margin as a percent of average interest-earning assets, annualized, was 7.40 percent in the quarter and 7.33 percent in the first six months of 2003. The decreases were attributable to lower yields on our receivables due to repricings and to our liquidity-related investment portfolio which was substantially increased during the first half of 2002 and has lower yields than our receivable portfolio, partially offset by lower funding costs.

Our net interest margin on a managed basis includes finance income earned on our owned receivables as well as on our securitized receivables. This finance income is offset by interest expense on the debt recorded on our balance sheet as well as the contractual rate of return on the instruments issued to investors when the receivables were securitized. Managed basis net interest margin was $2.7 billion in the second quarter of 2003,

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up from $2.4 billion in the previous quarter and $2.3 billion in the year-ago quarter. For the six months ended June 30, managed basis net interest margin was $5.0 billion in 2003 and $4.5 billion in 2002. Net interest margin as a percent of average managed interest-earning assets, annualized, was 9.23 percent in the current quarter and 8.76 percent for the first six months of 2003, compared to 8.55 and 8.64 percent in the year-ago periods. The increases in 2003 were attributable to lower interest expense partially offset by lower yields on our receivables as explained above.

Net interest margin as a percent of receivables on a managed basis is greater than on an owned basis because the managed basis portfolio includes relatively more unsecured loans, which have higher yields.

Provision for credit losses    The provision for credit losses for receivables was $1.0 billion for the second quarter of 2003, compared to $1.0 billion in the previous quarter and $850.9 million in the prior-year quarter. The provision for the first six months of 2003 was $2.0 billion, compared to $1.8 billion in the year-ago period. The provision as a percent of average owned receivables, annualized, was 4.82 percent in the second quarter of 2003, 4.85 percent in the first quarter of 2003 and 4.15 percent in the second quarter of 2002. Receivables growth, increases in personal bankruptcy filings, higher delinquencies and the weak economy contributed to the higher provision. We recorded owned loss provision greater than charge-offs of $108.1 million in the second quarter of 2003 and $243.8 million year-to-date. The provision for credit losses may vary from quarter to quarter, depending on the product mix and credit quality of loans in our portfolio. See Note 5, “Credit Loss Reserves” to the accompanying condensed consolidated financial statements for further discussion of factors affecting the provision for credit losses.

Other revenues    Total other revenues were $890.3 million and $2.1 billion for the second quarter and first six months of 2003, compared to $1.0 and $2.2 billion for the same periods in 2002 and included the following:

(In millions)	Three months ended June 30, 2003		Three months ended June 30, 2002		Combined six months ended June 30, 2003		Six months ended June 30, 2002
Securitization revenue	$	282.6	$	523.4	$	723.7	$	1,041.7
Insurance revenue		183.3		177.5		360.6		347.6
Investment income		33.2		44.0		114.5		90.2
Fee income		259.7		190.3		556.8		406.8
Other income		131.5		95.3		375.3		283.3
Total other revenues	$	890.3	$	1,030.5	$	2,130.9	$	2,169.6

Securitization revenue is the result of the securitization of our receivables and includes initial and replenishment gains on sale, net of our estimate of probable credit losses under the recourse provisions, as well as servicing revenue and excess spread.

Securitization revenue included the following:

(In millions)	Three months ended June 30, 2003		Three months ended June 30, 2002		Combined six months ended June 30, 2003		Six months ended June 30, 2002
Net initial gains	$	32.3	$	73.8	$	67.6	$	148.2
Net replenishment gains		134.5		127.0		271.4		251.2
Servicing revenue and excess spread		115.8		322.6		384.7		642.3
Total	$	282.6	$	523.4	$	723.7	$	1,041.7

The decreases in securitization revenue were due to decreases in the level of receivables securitized during the second quarter and first six months of 2003 and lower excess spread which included amortization of purchase

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accounting fair value adjustments to our interest-only strip receivables. Securitization levels in the first half of 2002 were higher pursuant to our liquidity management plans. Securitization revenue will vary each period based on the level and mix of receivables securitized in that particular period (which will impact the gross initial gains and related estimated probable credit losses under the recourse provisions). It is also affected by the overall level and mix of previously securitized receivables (which will impact servicing revenue and excess spread). The estimate for probable credit losses for securitized receivables is also impacted by the level and mix of current period securitizations because, depending upon loss estimates and severities, securitized receivables with longer lives may result in higher over-the-life losses than receivables securitized with shorter lives.

Our interest-only strip receivables, net of the related loss reserve and excluding the mark-to-market adjustment recorded in accumulated other comprehensive income (loss), decreased $192.7 million in the second quarter of 2003 and $234.2 million for the first six months of 2003, compared to increases of $29.8 in the second quarter and $58.8 million in the first six months of 2002.

Insurance revenue was $183.3 and $360.6 million in the second quarter and first six months of 2003 compared to $177.5 and $347.6 million in the year-ago periods. The increases reflected increased sales in our United Kingdom subsidiary.

Investment income, which includes interest income on investment securities in the insurance business as well as realized gains and losses from the sale of investment securities, was $33.2 and $114.5 million in the second quarter and first six months of 2003 compared to $44.0 and $90.2 million in the year-ago periods. The decrease in the quarter was primarily attributable to the amortization of purchase accounting adjustments. Gains from security sales totaled $40.5 million for the six months ended June 30, 2003 and $1.3 million in the prior year period.

Fee income, which includes revenues from fee-based products such as credit cards, was $259.7 and $556.8 million in the second quarter and first six months of 2003 compared to $190.3 and $406.8 million in the year-ago periods. The increases were due to higher levels of credit card fees from both credit card businesses. See Note 12, “Segment Reporting,” to the accompanying condensed consolidated financial statements for additional information on fee income on a managed basis.

Other income, which includes revenue from our tax refund lending business, was $131.5 and $375.3 million in the second quarter and first six months of 2003 compared to $95.3 and $283.3 million in the year-ago periods. The increases were primarily attributable to $74.4 million in SFAS No. 133 income due to our discontinuation of the shortcut method of accounting and higher revenues from our mortgage operations. These increases were partially offset by lower revenues from our tax refund lending business.

Expenses    Total costs and expenses were $1.2 billion for the second quarter of 2003, $1.4 billion in the previous quarter and $1.1 billion in the year-ago quarter. Excluding higher amortization of intangibles from purchase accounting adjustments and merger related charges, total costs and expenses declined from the first quarter. Year-to-date, total costs and expenses were $2.7 billion in 2003 and $2.1 billion in 2002. Our owned basis efficiency ratio was 42.0 percent for the second quarter of 2003, 47.8 percent for the previous quarter and 37.5 percent for the year-ago quarter. Year-to-date, our owned basis efficiency ratio was 44.9 percent in 2003 and 37.3 percent in 2002.

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Total costs and expenses included the following:

(In millions)	Three months ended June 30, 2003		Three months ended June 30, 2002		Combined six months ended June 30, 2003		Six months ended June 30, 2002
Salaries and fringe benefits	$	488.6	$	453.0	$	997.2	$	898.3
Sales incentives		83.2		67.6		122.3		121.7
Occupancy and equipment expense		100.0		93.3		201.2		185.5
Other marketing expenses		135.2		133.5		278.7		273.9
Other servicing and administrative expenses		263.7		204.1		586.6		435.8
Amortization of acquired intangibles		78.3		12.6		92.6		32.4
HSBC acquisition related costs incurred by Household		—		—		198.2		—
Policyholders’ benefits		98.4		87.4		192.4		171.4
Total costs and expenses	$	1,247.4	$	1,051.5	$	2,669.2	$	2,119.0

Salaries and fringe benefits for the second quarter and first six months of 2003 were $488.6 and $997.2 million compared to $453.0 and $898.3 million in the second quarter and first six months of 2002. The increases were primarily due to additional staffing in our businesses as well as higher employee benefit expenses.

Sales incentives for the second quarter and first six months of 2003 were $83.2 and $122.3 million compared to $67.6 and $121.7 million in the comparable prior-year periods. The increases were primarily due to increases in our Mortgage Services business. For the year-to-date period, these increases were substantially offset by lower new loan volume in our branches.

Occupancy and equipment expense for the second quarter and first six months of 2003 were $100.0 and $201.2 million compared to $93.3 and $185.5 million in the comparable prior-year periods. The increases were primarily the result of higher repairs and occupancy maintenance costs.

Other marketing expenses for the second quarter and first six months of 2003 of $135.2 and $278.7 million were comparable to $133.5 and $273.9 million in the same prior-year periods.

Other servicing and administrative expenses for the second quarter and first six months of 2003 were $263.7 and $586.6 million compared to $204.1 and $435.8 million in the comparable prior-year periods. The increases were primarily due to receivable growth as well as higher legal and compliance costs. Higher collection expenses also contributed to the increases.

Amortization of acquired intangibles for the second quarter and first six months of 2003 were $78.3 and $92.6 million compared to $12.6 and $32.4 million in the comparable prior-year periods. The increases were primarily attributable to acquired intangibles established in conjunction with the HSBC merger.

HSBC acquisition related costs incurred by Household in the first quarter of 2003 were $198.2 million. HSBC acquisition related costs include payments to executives under existing employment contracts and investment banking, legal and other costs relating to our acquisition by HSBC.

Policyholders’ benefits for the second quarter and first six months of 2003 were $98.4 and $192.4 million compared to $87.4 and $171.4 million in the comparable prior-year periods. The increases reflect amortization of fair value adjustments relating to our insurance business and for the six months ended June 30, 2003, higher sales in our United Kingdom subsidiary.

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Credit Loss Reserves

We maintain credit loss reserves to cover probable losses of principal, interest and fees, including late, overlimit and annual fees. Credit loss reserves are based on a range of estimates and intended to be adequate but not excessive. We estimate probable losses for consumer receivables based on delinquency and restructure status and past loss experience. Credit loss reserves take into account whether loans have been restructured, rewritten or are subject to forbearance, an external debt management plan, modification, extension, or deferment. Our credit loss reserves also take into consideration the loss severity expected based on the underlying collateral, if any, for the loan. Our consumer credit management policies focus on product type and specific portfolio risk factors. Our consumer credit portfolio is diversified by product and geographic location. See Note 4, “Receivables,” in the accompanying condensed consolidated financial statements for receivables by product type and Note 5, “Credit Loss Reserves,” for our credit loss reserve methodology and an analysis of changes in the credit loss reserves for the second quarter and first six months of 2003 and 2002.

The following table sets forth owned basis credit loss reserves for the periods indicated:

(All dollar amounts are stated in millions)	June 30, 2003			March 31, 2003			June 30, 2002
Owned credit loss reserves	$	3,658.6		$	3,483.1		$	2,983.3
Reserves as a percent of:
Receivables		4.14	%		4.17	%		3.59	%
Net charge-offs (1)		98.2			99.6			97.4
Nonperforming loans		94.6			92.7			97.2

(1) Quarter-to-date, annualized

Reserves as a percentage of receivables at June 30, 2003 reflect the impact of the weak economy, higher delinquency levels, and the continuing uncertainty as to the ultimate impact the weakened economy will have on charge-off and delinquency levels.

For securitized receivables, we also record a provision for estimated probable losses that we expect to incur under the recourse provisions. The following table sets forth managed credit loss reserves for the periods indicated:

(All dollar amounts are stated in millions)	June 30, 2003			March 31, 2003			June 30, 2002
Managed credit loss reserves	$	5,638.9		$	5,259.3		$	4,368.9
Reserves as a percent of:
Receivables		5.01	%		4.88	%		4.14	%
Net charge-offs (1)		104.9			103.3			100.0
Nonperforming loans		116.4			111.3			112.4

(1) Quarter-to-date, annualized

Credit Quality

HSBC intends, subject to receipt of regulatory and other approvals, to hold our domestic private label credit card receivables within HSBC’s U.S. banking subsidiary. As a result, HSBC anticipates regulatory accounting charge-off, loss provisioning and account management guidelines issued by the Federal Financial Institutions Examination Council, or FFIEC, will need to be applied to these receivables. Implementation of such guidelines will result in private label credit card receivables being charged-off at 6 months contractually delinquent (end of the month 60 days after notification for receivables involving a bankruptcy) versus the current practice of generally being charged-off the month following the month in which the account becomes 9 months contractually delinquent (end of the month 90 days after notification for receivables involving a bankruptcy). HSBC’s plans for ultimate collection on these receivables will therefore be demonstrably different from the current practice and

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may require different reserve requirements. As of June 30, 2003, we have not allocated any purchase price adjustment to owned loss reserves in contemplation of this change as the process for preparing regulatory approval requests for the movement of our private label card receivables to HSBC’s U.S. banking subsidiary has only recently been initiated. To the extent we proceed with this business plan, we currently estimate that such fair value adjustment to reflect the implementation of the regulatory guidelines would be an increase to owned loss reserves for such existing private label credit card receivables which were originated prior to March 29, 2003. We and HSBC are also evaluating whether select other products will also be held in the HSBC U.S. banking subsidiary.

Delinquency—Owned Basis

Two-Months-and-Over Contractual Delinquency (as a percent of consumer receivables):

	June 30, 2003		March 31, 2003		June 30, 2002(1)
Real estate secured	4.27	%	4.15	%	2.78	%
Auto finance	2.49		2.75		2.99
MasterCard/Visa	5.97		6.87		6.13
Private label	5.45		6.06		6.19
Personal non-credit card	9.39		9.23		8.69
Total	5.38	%	5.50	%	4.53	%

(1) As discussed in our quarterly report on Form 10-Q for the quarter ended March 31, 2003, owned two-months-and-over contractual delinquency for personal non-credit card was overstated due to a calculation error. The correct percentages are included in the table above. The managed two-months-and-over contractual delinquency ratios reported for prior periods were correct.

Total owned delinquency decreased compared to the prior quarter. The increase in our real estate secured portfolio reflects the seasoning and maturation of the portfolio, the impact of first payment default repurchases from previous loan sales, and higher levels of receivables in the process of foreclosure. The decrease in auto finance delinquency reflects the positive impact of second quarter acquisitions from strategic alliances which were partially offset by seasonal increases. The decrease in MasterCard and Visa delinquency is consistent with historical seasonal trends. Lower private label delinquency was due in large part to portfolio acquisitions during the quarter.

Compared to a year ago, higher levels of new bankruptcy filings and continued softness of the economy, including higher unemployment, caused the overall rise in the delinquency ratio. A major contributor to the higher real estate secured delinquency ratio was reduced growth in the portfolio due to loan sales and reduced originations, especially in the fourth quarter of 2002.

Net Charge-offs of Consumer Receivables—Owned Basis

Net Charge-offs of Consumer Receivables (as a percent, annualized, of average consumer receivables):

	June 30, 2003		March 31, 2003		June 30, 2002
Real estate secured	1.03	%	1.12	%	.85	%
Auto finance	5.30		7.71		4.80
MasterCard/Visa	10.43		9.26		9.94
Private label	6.41		6.27		5.86
Personal non-credit card	9.87		9.04		8.59
Total	4.34	%	4.22	%	3.76	%
Real estate charge-offs and REO expense as a percent of average real estate secured receivables	1.46	%	1.52	%	1.23	%

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The weakened economy caused the increase in charge-off ratios over both the previous and prior year quarters. Compared to the previous quarter, the decrease in auto finance charge-offs reflects improved seasonal trends and tightened credit standards on new originations and purchases over the last several months. Higher bankruptcies contributed to the increase in our MasterCard/Visa and personal non-credit card portfolios.

Compared to the prior year quarter, the increase in the charge-off ratio was primarily attributable to the weakened economy and higher bankruptcy filings. Charge-offs in our personal non-credit card portfolio increased more than most other products because our typical personal non-credit card customer is less resilient and, therefore, more exposed to the recent economic downturn.

Owned Nonperforming Assets

(In millions)	June 30, 2003			March 31, 2003			June 30, 2002(1)
Nonaccrual receivables	$	3,021.2		$	2,880.3		$	2,316.4
Accruing consumer receivables 90 or more days delinquent		843.8			877.9			750.6
Renegotiated commercial loans		1.5			1.4			1.4
Total nonperforming receivables		3,866.5			3,759.6			3,068.4
Real estate owned		486.3			444.9			456.7
Total nonperforming assets	$	4,352.8		$	4,204.5		$	3,525.1
Credit loss reserves as a percent of nonperforming receivables		94.6	%		92.7	%		97.2	%

(1) As discussed in our quarterly report on Form 10-Q for the quarter ended March 31, 2003, nonaccrual receivables, total nonperforming receivables and total nonperforming assets for personal non-credit card receivables were overstated due to a calculation error. As a result, credit loss reserves as a percentage of nonperforming receivables was understated in those periods. The correct amounts are included in the table above. The managed nonperforming asset statistics reported for prior periods were correct.

The increase in nonaccrual receivables is primarily attributable to increases in our real estate secured and personal non-credit card portfolios. Accruing consumer receivables 90 or more days delinquent includes domestic MasterCard and Visa and private label credit card receivables, consistent with industry practice. The increase in total nonperforming assets is attributable to growth in our owned portfolio as well as the weak economy.

Account Management Policies and Practices

Our policies and practices for the collection of consumer receivables, including our restructuring policies and practices, permit us to reset the contractual delinquency status of an account to current, based on indicia or criteria which, in our judgment, evidence continued payment probability. Such restructuring policies and practices vary by product and are designed to manage customer relationships, maximize collections and avoid foreclosure or repossession if reasonably possible. As summarized in the tables that follow, in the third quarter of 2003, we intend to implement certain changes to the restructuring policies that were disclosed in our 2002 Form 10-K. These changes are intended to eliminate and/or streamline exception provisions to our existing policies and will generally be effective for receivables originated or acquired after January 1, 2003. Receivables originated or acquired prior to January 1, 2003 will generally be subject to the restructure and account management policies described in our 2002 Form 10-K. However, certain business units may, for ease of administration, elect to adopt uniform policies for all products regardless of the date an account was originated or acquired. Though we anticipate that these changes may result in some short term increase in delinquency which may lead to higher charge-offs, we do not expect the changes to have a significant impact on our business model or on our results of operations as these changes will generally be phased in as new receivables are originated or acquired.

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Approximately two-thirds of all restructured receivables are secured products, which may have less loss severity exposure because of the underlying collateral. Credit loss reserves take into account whether loans have been restructured, rewritten or are subject to forbearance, an external debt management plan, modification, extension or deferment. Our credit loss reserves also take into consideration the loss severity expected based on the underlying collateral, if any, for the loan.

The main criteria for our restructuring policies and practices vary by product and are described in the table that follows. The fact that the restructuring criteria may be met for a particular account does not require us to restructure that account, and the extent to which we restructure accounts that are eligible under the criteria will vary depending upon our view of prevailing economic conditions and other factors which may change from period to period. In addition, for some products, accounts may be restructured without receipt of a payment in certain special circumstances (e.g. upon reaffirmation of a debt owed to us in connection with a Chapter 7 bankruptcy proceeding). As indicated, our account management policies and practices are designed to manage customer relationships and to help maximize collection opportunities. We use account restructuring as an account and customer management tool in an effort to increase the value of our account relationships, and accordingly, the application of this tool is subject to complexities, variations and changes from time to time. These policies and practices are continually under review and assessment to assure that they meet the goals outlined above, and accordingly, we modify or permit exceptions to these general policies and practices from time to time. In addition, exceptions to these policies and practices may be made in specific situations in response to legal or regulatory agreements or orders.

Changes to general policies and practices will be implemented with respect to various products during the third quarter of 2003 and, generally, will apply to loans originated or acquired in 2003. In the policies summarized below, “hardship restructures” and “workout restructures” refer to situations in which the payment and/or interest rate may be modified on a temporary or permanent basis. In each case, the contractual delinquency status is reset to current. “External debt management plans” refers to situations in which consumers receive assistance in negotiating or scheduling debt repayment through public or private agencies such as Consumers Credit Counseling Services.

Restructuring Policies and Practices In Effect as of June 30, 2003(1)(2)(3)	Changes to Existing Restructuring Policies and Practices Being Implemented in the Third Quarter 2003(1)(3)
REAL ESTATE SECURED	REAL ESTATE SECURED
Real Estate—Overall ·   An account may be restructured if we receive two qualifying payments within the 60 days preceding the restructure; we may restructure accounts in hardship, disaster or strike situations with one qualifying payment or no payments ·   Accounts that have filed for Chapter 7 bankruptcy protection may be restructured upon receipt of a signed reaffirmation agreement ·   Accounts subject to a Chapter 13 plan filed with a bankruptcy court generally require one qualifying payment to be restructured ·   Except for bankruptcy reaffirmation and filed Chapter 13 plans, agreed automatic payment withdrawal or hardship/disaster/strike, accounts are generally limited to one restructure every 12 months ·   Accounts generally are not eligible for restructure until on books for at least six months	Real Estate—Overall ·   Accounts in workout situations may be restructured with the equivalent of two qualifying payments ·   Except bankruptcy reaffirmation and filed Chapter 13 plans, generally an account will not be restructured more than once in a 12 month period ·   Accounts will be limited to four restructures in a rolling 60 month period ·   Customers affected by a disaster may be allowed to skip a payment

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Restructuring Policies and Practices In Effect as of June 30, 2003(1)(2)(3)	Changes to Existing Restructuring Policies and Practices Being Implemented in the Third Quarter 2003(1)(3)
Real Estate—Consumer Lending ·   Accounts that agree to pay by automatic withdrawal are generally restructured with one qualifying payment	Real Estate—Consumer Lending ·   Accounts will generally not be eligible for restructure until nine months after origination
	Real Estate—Mortgage Services(4) ·   Accounts will generally not be eligible for restructure until nine months after origination and six months after acquisition
AUTO FINANCE ·   Accounts may be extended if we receive one qualifying payment within the 60 days preceding the extension ·   Accounts may be extended no more than three months at a time and by no more than three months in any 12-month period ·   Extensions are limited to six months over the contractual life ·   Accounts that have filed for Chapter 7 bankruptcy protection may be restructured upon receipt of a signed reaffirmation agreement	AUTO FINANCE ·   Extensions will generally require two qualifying payments within the 60 days preceding the extension ·   Accounts will be limited to four extensions in a rolling 60 month period, but in no case will an account be extended more than a total of six months over the life of the account ·   Extensions will be limited to one every six months ·   Accounts will not be eligible for extensions until on the books for at least six months
MASTERCARD AND VISA ·   Typically, accounts qualify for restructuring if we receive two or three qualifying payments prior to the restructure, but accounts in approved external debt	MASTERCARD AND VISA ·   No changes
management programs may generally be restructured upon receipt of one qualifying payment ·   Generally, accounts may be restructured once every six months
PRIVATE LABEL(5) ·   An account may generally be restructured if we receive one or more qualifying payments, depending upon the merchant ·   Restructuring is limited to once every six months (or longer, depending upon the merchant) for revolving accounts and once every 12 months for closed-end accounts	PRIVATE LABEL(5) ·   Accounts originated after October 1, 2002 for certain merchants require two or three qualifying payments, except accounts in an approved, external debt management program may be restructured upon receipt of one qualifying payment. ·   Accounts must be on the books for nine months and we must receive the equivalent of two qualifying payments within the 60 days preceding the restructure ·   Accounts are not eligible for subsequent restructure until 12 months after a prior restructure and upon our receipt of three qualifying payments within the 90 days preceding the restructure

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Restructuring Policies and Practices In Effect as of June 30, 2003(1)(2)(3)

Changes to Existing Restructuring Policies and Practices Being Implemented in the Third Quarter 2003(1)(3)

PERSONAL NON-CREDIT CARD ·    Accounts may be restructured if we receive one qualifying payment within the 60 days preceding the restructure; may restructure accounts in a hardship/disaster/strike situation with one qualifying payment or no payments ·    If an account is never more than 90 days delinquent, it may generally be restructured up to three times per year ·    If an account is ever more than 90 days delinquent, it may be restructured with one qualifying payment no more than four times over its life; however, generally the account may thereafter be restructured if two qualifying payments are received ·    Accounts subject to programs for hardship or strike may require only the receipt of reduced payments in order to be restructured; disaster may be restructured with no payments

PERSONAL NON-CREDIT CARD ·    Accounts require at least two qualifying payments within the 60 days preceding the restructure ·    Accounts in a strike situation require two qualifying payments to be restructured ·    Accounts in a disaster situation may be allowed to skip a payment ·    Accounts will be limited to one restructure every six months ·    Accounts will be limited to four restructures in a rolling 60 month period ·    Accounts will not be eligible for restructure until six months after origination

(1) We employ account restructuring and other account management policies and practices as flexible account management tools. In addition to variances in criteria by product, criteria may also vary within a product line (for example, in our private label credit card business, criteria may vary from merchant to merchant). Also, we continually review our product lines and assess restructuring criteria and they are subject to modification or exceptions from time to time. Accordingly, the description of our account restructuring policies or practices provided in this table should be taken only as general guidance to the restructuring approach taken within each product line, and not as assurance that accounts not meeting these criteria will never be restructured, that every account meeting these criteria will in fact be restructured or that these criteria will not change or that exceptions will not be made in individual cases. In addition, in an effort to determine optimal account management strategies, management may run more conservative tests on some or all accounts in a product line for fixed periods of time in order to evaluate the impact of alternative policies and practices.

(2) For our United Kingdom business, all portfolios have a consistent account restructure policy. An account may be restructured if we receive two or more qualifying payments within two calendar months, limited to one restructure every 12 months, with a lifetime limit of three times. In hardship situations an account may be restructured if a customer makes three consecutive qualifying monthly payments within the last three calendar months. Only one hardship restructure is permitted in the life of a loan. There have been no changes to the restructure policies of our United Kingdom business in 2003.

(3) Generally, policy changes will not be applied to the entire portfolio on the date of implementation and may be applied to new, or recently originated or acquired accounts. However, for ease of administration, certain business units may elect to adopt uniform policies for all products regardless of the date an account was originated or acquired. Unless otherwise noted, the revisions to the restructure policies and practices implemented in the third quarter 2003 will generally be applied only to accounts originated or acquired after January 1, 2003 and the policies and practices in effect as of June 30, 2003 are effective for all accounts originated or acquired prior to January 1, 2003. Though we anticipate that the changes implemented in the third quarter 2003 may result in some short term increase in delinquency that may lead to higher charge-offs, we do not expect the changes to have a significant impact on our business model or results of operations as these changes will generally be phased in as receivables are originated or acquired.

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(4) Prior to January 1, 2003, accounts that had made at least six qualifying payments during the life of the loan and that agreed to pay by automatic withdrawal were generally restructured with one qualifying payment.

(5) For our Canadian business, private label is limited to one restructure every four months. For private label accounts in our Canadian business originated or acquired after January 1, 2003, two qualifying payments must be received, the account must be on the books for at least six months, at least six months must have elapsed since the last restructure, and there may be no more than four restructures in a rolling 60 month period.

In addition to our restructuring policies and practices, we employ other account management techniques, which we typically use on a more limited basis, that are similarly designed to manage customer relationships and maximize collections. These can include, at our discretion, actions such as extended payment arrangements, Credit Card Services approved external debt management plans, forbearance, modifications, loan rewrites and/or deferment pending a change in circumstances. We typically enter into forbearance agreements, extended payment and modification arrangements or deferments with individual borrowers in transitional situations, usually involving borrower hardship circumstances or temporary setbacks that are expected to affect the borrower’s ability to pay the contractually specified amount for some period of time. These actions vary by product and are under continual review and assessment to determine that they meet the goals outlined above. For example, under a forbearance agreement, we may agree not to take certain collection or credit agency reporting actions with respect to missed payments, often in return for the borrower’s agreeing to pay us an extra amount in connection with making future payments. In some cases, a forbearance agreement as well as extended payment or modification arrangements, deferments, Credit Card Services approved external debt management plans, or loan rewrites may involve us agreeing to lower the contractual payment amount and/or reduce the periodic interest rate. In most cases, the delinquency status of an account is considered to be current if the borrower immediately begins payment under the new account terms, although if the agreed terms are not adhered to by the customer the account status may be reversed and collection action resumed. When we use one of these account management techniques, we may treat the account as being contractually current and will not reflect it as a delinquent account in our delinquency statistics. We generally consider loan rewrites to involve an extension of a new loan, and such new loans are not reflected in our delinquency or restructuring statistics.

The tables below summarize approximate restructuring statistics in our managed basis domestic portfolio. Our restructure statistics are compiled using certain assumptions and estimates and we continue to enhance our ability to capture restructure data across all business units. When comparing restructuring statistics from different periods the fact that our restructure policies and practices will change over time, that exceptions are made to those policies and practices, and that our data capture methodologies will be enhanced over time, should be taken into account. Further, to the best of our knowledge, most of our competitors do not disclose account restructuring, reaging, loan rewriting, forbearance, modification, deferment or extended payment information comparable to the information we have disclosed, and the lack of such disclosure by other lenders may limit the ability to draw meaningful conclusions about us and our business based solely on data or information regarding account restructuring statistics or policies.

Total Restructured by Restructure Period—Domestic Portfolio(1) (Managed Basis)	June 30, 2003		March 31, 2003		June 30, 2002
Never restructured	83.7	%	83.3	%	83.3	%
Restructured:
Restructured in the last 6 months	7.2		7.5		7.4
Restructured in the last 7–12 months	3.8		3.6		5.1
Previously restructured beyond 12 months	5.3		5.6		4.2
Total ever restructured(2)	16.3		16.7		16.7
Total	100.0	%	100.0	%	100.0	%

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Total Restructured by Product—Domestic Portfolio(1) (Managed Basis)	June 30, 2003		March 31, 2003		June 30, 2002
	(In millions)
Real estate secured	$	9,225.0	$	9,163.4	$	9,045.1
Auto finance		1,360.1		1,247.7		1,094.1
MasterCard/Visa		579.6		549.2		519.7
Private label		1,146.3		1,225.8		1,233.4
Personal non-credit card		4,202.3		4,127.5		4,352.8
Total	$	16,513.3	$	16,313.6	$	16,245.1

	June 30, 2003		March 31, 2003		June 30, 2002
(As a percent of managed receivables)
Real estate secured	19.2	%	20.0	%	19.1	%
Auto finance	17.3		16.9		15.9
MasterCard/Visa	3.5		3.4		3.4
Private label	8.3		9.6		10.5
Personal non-credit card	26.8		25.8		27.1
Total (2)	16.3	%	16.7	%	16.7	%

(1) Excludes foreign businesses and commercial and other. Amounts also include accounts as to which the delinquency status has been reset to current for reasons other than restructuring (e.g. correcting the misapplication of a timely payment).

(2) Total including foreign businesses was 15.3 percent at June 30, 2003, 15.8 percent at March 31, 2003 and 15.9 percent at June 30, 2002.

The amount of managed receivables in forbearance, modification, Credit Card Services approved external debt management plans, rewrites or other account management techniques for which we have reset delinquency and that is not included in the restructured statistics above was approximately $1.1 billion or 1.0 percent of managed receivables at June 30, 2003, $1.0 billion or 0.9 percent of managed receivables at March 31, 2003 and approximately $700 million or 0.7 percent of managed receivables at June 30, 2002.

Item 4.   Controls and Procedures

We maintain a system of internal controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. Our Board of Directors, operating through its audit committee which, with one exception, is composed entirely of independent directors, provides oversight to our financial reporting process.

Within the 90-day period prior to the date of this report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to Household International, Inc. (including its consolidated subsidiaries) required to be included in this quarterly report on Form 10-Q.

There have been no significant changes in our internal controls or in other factors which could significantly affect internal controls subsequent to the date that we carried out our evaluation.

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PART II.  Other Information

Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits

3(i)	Amended and restated Certificate of Incorporation of Household International, Inc., as amended.
3(ii)	Bylaws of Household International, Inc., as amended.
12	Statement of Computation of Ratio of Earnings to Fixed Charges and to Combined Fixed Charges and Preferred Stock Dividends.
31	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Debt and Preferred Stock Securities Ratings.

(b)  Reports on Form 8-K

During the second quarter of 2003, the Registrant filed a Current Report on Form 8-K on May 20, 2003 with respect to the financial supplement pertaining to the financial results of Household International, Inc. for the quarter ended March 31, 2003.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HOUSEHOLD INTERNATIONAL, INC.

    (Registrant)

Date:    August 4, 2003

By: /S/    SIMON C. PENNEY

Simon C. Penney

Senior Executive Vice President and

Chief Financial Officer

and on behalf of Household International, Inc.

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EXHIBIT INDEX

3(i)	Amended and restated Certificate of Incorporation of Household International, Inc., as amended.
3(ii)	Bylaws of Household International, Inc., as amended.
12	Statement of Computation of Ratio of Earnings to Fixed Charges and to Combined Fixed Charges and Preferred Stock Dividends.
31	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Debt and Preferred Stock Securities Ratings.

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EX-3.I

                                                                   Exhibit 3(i)


                                     AMENDED
                         CERTIFICATE OF DESIGNATIONS OF
                       SERIES A CUMULATIVE PREFERRED STOCK
                        OF HOUSEHOLD INTERNATIONAL, INC.

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

                     Pursuant to Section 151 of the General
                    Corporation Law of the State of Delaware

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

     Household International Inc., a Delaware corporation (the "Corporation"),
in accordance with the provisions of Section 151(g) of the Delaware General
Corporation Law, hereby certifies on May 30, 2003 as follows:

     FIRST: The Amended and Restated Certificate of Incorporation of the
Corporation authorizes the issuance by the Board of Directors (the "Board") of
the Corporation of up to 1100 shares of preferred stock (the "Preferred Stock"),
par value $0.01 per share, in one or more series, and further authorizes the
Board to determine the designations, preferences, rights and qualifications,
limitations or restrictions granted to or imposed upon any such series of
Preferred Stock;

     SECOND: On March 26, 2003, the Board adopted a resolution authorizing the
creation and issuance of a series of said Preferred Stock to be known as "Series
A Cumulative Preferred Stock" and the Certificate of Designations for the Series
A Cumulative Preferred Stock was filed with the Secretary of State of the State
of Delaware on March 27, 2003;

     THIRD: As of May 29, 2003, the Board deemed it advisable to amend the
Certificate of Designation of the Series A Cumulative Preferred Stock and
adopted a resolution as set forth below, the effectiveness of such resolution to
be subject to approval of such amendment by HSBC Holdings plc, the sole owner of
all outstanding shares of the Series A Cumulative Preferred Stock and the sole
shareholder of the common stock of the Corporation; and

     FOURTH: As of May 30, 2003, HSBC Holdings plc approved the amendment to the
Certificate of Designation of the Series A Cumulative Preferred Stock as set
forth in the following resolution:

     RESOLVED, that the Board deems it advisable that, subject to approval of
HSBC Holdings plc, the sole shareholder of a series of authorized preferred
stock (the "Preferred Stock"), par value $0.01 per share of the Corporation,
that the Certificate of Designations for such Series shall be amended, and that
the designation and amount thereof and the voting powers, preferences and
relative, participating. optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof (in addition
to the powers, designations, preferences and relative, participating. optional
or other special rights, and the qualifications, limitations or restrictions
thereof, set forth in the Corporation's Amended and Restated Certificate of
Incorporation that are applicable to the Preferred Stock), are as follows:



     Section 1. Designation and Amount.

     The shares of such series shall be designated as the "Series A Cumulative
Preferred Stock" ("Series A Preferred Stock") and the number of shares
constituting such series shall be one thousand one hundred (1,100), which number
may be decreased by the Board of Directors (the "Board") of the Corporation
without a vote of stockholders; provided, however, that such number may not be
decreased below the number of then currently outstanding shares of Series A
Preferred Stock.

     Section 2. Dividends and Distributions.

     (a) The holders of shares of Series A Preferred Stock in preference to the
holders of shares of the Corporation's common stock (the "Common Stock") par
value $0.01 per share, and to any other capital stock of the Corporation ranking
junior to Series A Preferred Stock as to payment of dividends, shall be entitled
to receive when, as and if declared by the Board out of funds of the Corporation
legally available for the payment of dividends, cumulative dividends at, an
annual rate of 6.5% of the Redemption Price (as defined in Section 4(a)) per
share, and no more. Dividends payable in respect of the outstanding shares of
Series A Preferred Stock shall begin to accrue and be cumulative from the date
of original issue of such shares (which date is March 28, 2003, as reflected on
the certificates evidencing the same), and shall be payable in annual payments
on July 15 {or, if any such day is not a Business Day (as defined in Section 8)
the Business Day preceding such day) in each year (each such date being referred
to herein as "Annual Dividend Payment Date") for each of the fiscal year ended
June 30, commencing in respect of each share of Series A Preferred Stock on July
15, 2004.

     (b) The amount of dividends payable shall be determined on the basis of
twelve 30-day months and a 360-day year. Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such dividends at
the time accumulated and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
may fix a record date (a "Regular Record Date") for the determination of holders
(the "Registered Holders") of shares of Series A Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall be no
more than 75 days nor less than ten days prior to the date fixed for the payment
thereof. Any dividend declared by the Board as payable and punctually paid on an
Annual Dividend Payment Date will be paid to Registered Holders. All cash
payments shall be made in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.

     (c) If any applicable dividend payment or redemption payment is not made on
an Annual Dividend Payment Date or the date set for such redemption,
respectively, thereafter the Series A Preferred Stock shall accrue additional
dividends in respect of all such dividend payments and redemption payments that
are past due and unpaid (such amount, the "Arrearage"). Such additional
dividends in respect of any Arrearage shall be deemed to accumulate from day to
day whether or not earned or declared until the Arrearage is paid, shall be
calculated as of such successive Annual Dividend Payment Date and shall
constitute an additional Arrearage from and

                                       2



after any Annual Dividend Payment Date to the extent not paid on such Annual
Dividend Payment Date. References in any Section herein to dividends that have
accumulated or that have been deemed to have accumulated with respect to the
Series A Preferred Stock shall include the amount, if any, of any Arrearage
together with any dividends accumulated or deemed to have accumulated on such
Arrearage pursuant to the immediately preceding two sentences. Additional
dividends in respect of any Arrearage may be declared and paid at any time, in
whole or in part, without reference to any regular Annual Dividend Payment Date,
to the Registered Holders as they appear on the stock record books of the
Corporation `on such record date as may be fixed by the Board of Directors
(which record date shall be no more than 75 days nor less than ten days prior to
the corresponding payment date).

     (d) The holders of shares of Series A Preferred Stock shall not be entitled
to receive any dividends or other distributions in respect of such shares of
Series A Preferred Stock except as provided for hereby.

     Section 3. Restrictive Covenants: Voting Rights.

     (a) So long as any shares of Series A Preferred Stock shall be outstanding
and unless the consent or approval of a greater number of shares shall then be
required by law, without first obtaining the consent or approval of the holders
of a majority of the number of then-outstanding shares of Series A Preferred
Stock, given in person or by proxy at a meeting at which the holders of such
shares shall be entitled to vote separately as a class, or by written consent,
the Corporation shall not:

     (i) (A) authorize or create any class or series, or any shares of any class
or series, of capital stock of the Corporation having any preference or priority
(either as to dividends or upon redemption, liquidation, dissolution, or winding
up) over Series A Preferred Stock ("Senior Stock") or (B) issue shares of Senior
Stock; provided however, that no such vote shall be required with respect to the
authorization or creation by the Corporation of one or more classes and/or
series of Senior Stock if the proceeds of the Corporation's issuance of such
Senior Stock are sufficient, and are used, to redeem all outstanding shares of
Series A Preferred Stock concurrently with the issuance of such Senior Stock;

     (ii) (A) authorize or create any class or series, or any shares of any
class or series, of capital stock of the Corporation ranking on a parity (either
as to dividends or upon redemption, liquidation, dissolution or winding up) with
the Series A Preferred Stock ("Parity Stock") or (B) issue shares of Parity
Stock; provided, however, that no such vote shall be required with respect to
the authorization, creation or issuance by the Corporation of one or more
classes and/or series of Parity Stock if the proceeds of the Corporation's
issuance of such Parity Stock are sufficient, and are used to redeem all
outstanding shares of Series A Preferred Stock congruently with the issuance of
such Parity Stock;

     (iii) reclassify, convert or exchange any shares of any capital stock of
the Corporation into shares of Senior Stock or Parity Stock;

                                       3



     (iv) authorize any security exchangeable for, convertible into, or
evidencing the right to purchase any shares of Senior Stock or Parity Stock; or

     (v) amend alter or repeal the Corporation's Amended and Restated
Certificate of Incorporation, as it may be amended from time to time, or the
Corporation's By-Laws, as they may be amended from time to time, to alter or
change the powers, designations, preferences, rights and qualifications,
limitations or restrictions of Series A Preferred Stock or any Senior Stock or
Parity Stock so as to affect Series A Preferred Stock in any material adverse
respect.

     (b) The holders of the Series A Preferred Stock shall be entitled to one
vote for each share of Series A Preferred Stock voting together with the holders
of Common Stock as a single class, at all meetings of holders of shares of
Common Stock (and written actions in lieu of meetings) (i) at which any
resolution is proposed to (A) effect the voluntary liquidation, dissolution or
winding up of the Corporation. or (B) the sale, lease, conveyance or exchange of
all or substantially all of the assets, property or business of the Corporation;
or (ii) if the Corporation shall have failed to pay in full all cash dividends
due and payable on an Annual Dividend Payment Date (whether or not declared by
the Board) including any Arrearage; provided in the case of clause (i) above,
the holders of the Series A Preferred Stock will be entitled to vote only on any
resolution that is proposed to effect the voluntary liquidation, dissolution or
winding up of the Corporation, or the sale, lease, conveyance or exchange of all
or substantially all of the assets, property or business of the Corporation.

     (c) With respect to all matters to be voted on at meetings of holders of
shares of Common Stock (and written actions in lieu of meetings) and not
specifically covered by Section 3(b) above, the holders of Series A Preferred
Stock shall be entitled to vote with the holders of Common Stock, and shall have
such vote so that the holders of Series A Preferred Stock, in the aggregate,
hold 15% of the voting power with respect to such matters.

     (d) Except as otherwise expressly provided hereby, or as required by law,
the holders of shares of Series A Preferred Stock shall have no voting rights
and their consent shall not be required for the taking of any corporate action.

     Section 4. Redemption.

     (a) The Corporation may at its option redeem, in whole or in part, the
shares of Series A Preferred Stock on or after March 31, 2008, but only out of
funds legally available therefor, by paying therefor in cash $1,000,000 per
share (the "Redemption Price") plus an amount equal to all accumulated dividends
and any Arrearage thereon, to the date of redemption. If less than all
outstanding shares of Series A Preferred Stock are to be redeemed, the
Corporation shall redeem shares pro rata among the holders thereof in accordance
with the respective numbers of shares of Series A Preferred Stock held by each
of them.

     (b) In order to facilitate the redemption of shares of Series A Preferred
Stock pursuant to Section 4(a), the Board may fix a record date for the
determination of the holders of shares of Series A Preferred Stock to be
redeemed. not more than 60 days or less than 10 days prior to the


                                        4



date fixed for such redemption. Notice of any redemption of shares of Series A
Preferred Stock pursuant to Section 4(a) shall specify a date and procedures for
such redemption and shall be mailed not less than 10 nor more than 60 days prior
to such date fixed for redemption to each holder Registered Holder at such
Registered Holder's address as it appears on the transfer books of the
Corporation.

     (c) From and after the date of any redemption effected by the Corporation
pursuant to Sections 4(a), all dividends on shares of Series A Preferred Stock
thereby called for redemption shall cease to accrue and all rights of the
holders thereof as holders of Series A Preferred Stock shall, with respect to
shares thereby called for redemption, cease and terminate. Any interest allowed
on moneys which shall have been Set Apart for Payment (as defined in Section 8)
prior to the date of redemption for the payment of the Redemption Price (or any
accumulated dividends and any Arrearage thereon) shall be paid to the
Corporation. Any moneys so deposited which shall remain unclaimed by the holders
of such Series A Preferred Stock at the end of two years after the redemption
date shall to the fullest extent permitted by law become the property of, and be
paid by such bank or trust company to, the Corporation.

     Section 5. Reacquired Shares.

     Any shares of Series A Preferred Stock redeemed purchased or otherwise
acquired by the Corporation or any Subsidiary (as defined in Section 8) of the
Corporation in any manner whatsoever shall become authorized but unissued shares
of Preferred Stock, par value $0.01 per share, of the Corporation and may be
reissued as part of another class or series of Preferred Stock, subject to the
conditions or restrictions on authorizing or creating any class or series. or
any shares of any class or series, set forth in Section 3(a).

     Section 6. Liquidation, Dissolution or Winding Up.

     (a) If the Corporation shall liquidate, dissolve or wind up, whether
pursuant to federal bankruptcy laws, state laws or otherwise, no distribution
shall be made (i) to the holders of shares of search for term Common Stock,
unless prior thereto the holders of shares of Series A Preferred Stock shall
have received $1,000,000 per share plus an amount equal to all accumulated
dividends and any Arrearage thereon to the date of such payment or (ii) to the
holders of shares of Parity Stock, except distributions made ratably on Series A
Preferred Stock and all such Parity Stock in proportion to the total amounts
which the holders of, all such shares are entitled upon such liquidation,
dissolution or Winding up of the Corporation.

     (b) Neither the consolidation, merger or other business combination of the
Corporation with or into any other Person (as defined in Section 8) or Persons,
nor the sale, lease, exchange or conveyance of all or any part of the property,
assets or business of the Corporation to a Person or Persons shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 6.


                                        5



     Section 7. Rank.

     Series A Preferred Stock will rank, with respect to dividends and upon
distribution of assets in liquidation, dissolution or winding up, prior to the
Common Stock.

     Section 8. Definitions.

     As used herein, the following terms shall have the meanings indicated.

     "Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.

     "Person" means any individual, partnership, corporation, limited liability
company, unincorporated organization trust or joint venture. or a governmental
agency or political subdivision thereof.

     "Set Apart for Payment" means, when used with respect to funds of the
Corporation to be used to effect any redemption of shares of Series A Preferred
Stock, that funds of the Corporation sufficient to satisfy such payment of
redemption shall have been irrevocably deposited with a bank or trust company
doing business in the Borough of Manhattan in the City of New York and having a
capital and surplus of at least $50 million in trust for the exclusive benefit
of the holders of the shares of Series A Preferred Stock to be redeemed and that
such funds will be payable from and after the date of redemption to holders of
Series A Preferred Stock who surrender their certificates representing such
stock in accordance with the notice of redemption provided pursuant to Section
4(b).

     "Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Voting Stock (as defined below) is at the time owned or
controlled directly or indirectly by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii) any partnership
(A) the sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (B) the only general partners of which
are such Person or of one or more Subsidiaries of such Person (or any
combination thereof)

     "Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.


                                        6



                              CERTIFICATE OF MERGER
                                       of
                          HOUSEHOLD INTERNATIONAL, INC.
                                  with and into
                            H2 ACQUISITION CORPORATI0N

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

                     Pursuant to Section 251 of the General
                    Corporation Law of the State of Delaware

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

         H2 Acquisition Corporation, a Delaware corporation ("H2"), does hereby
 certify:

         FIRST: That the name and state of incorporation of each of the
 constituent corporations of the merger are as follows:



                  Name                             State of Incorporation
                  ----                             ----------------------
                                                
         Household International, Inc.                  Delaware
         H2 Acquisition Corporation                     Delaware


         SECOND: That an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of November 14, 2002, by and among HSBC Holdings plc, Household
International, Inc. ("Household") and H2 has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with the requirements of Section 251 of the Delaware General Corporation Law.

         THIRD: The name of the surviving corporation of the merger is "H2
Acquisition Corporation" (the "Surviving Corporation"), which will change its
name to "Household International, Inc." as provided in Article FOURTH hereof.

         FOURTH: Article I of the Amended and Restated Certificate of
Incorporation of H2 is hereby amended to read in its entirety as follows;

                  "The name of the corporation is Household International, Inc.
         (hereinafter referred to as the "Corporation")."

         Except for such amendment, the Restated Certificate of Incorporation of
the Surviving Corporation shall be the Amended and Restated Certificate of
Incorporation of H2.

         FIFTH: That the executed Merger Agreement is on file at the office of
the Surviving Corporation, the address of which is 2700 Sanders Road, Prospect
Heights, Illinois 60070.

         SIXTH: That a copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.

         SEVENTH: This Certificate of Merger shall become effective at
5:02 p.m., Eastern Standard Time, on March 28, 2003.

                                        7



         IN WITNESS WHEREOF, the undersigned duly executed this Certificate of
Merger as of the 28th day of March 2003.


                                      H2 ACQUISITION CORPORATION

                                      By:    /s/ Paul L. Lee
                                         ---------------------------------------
                                         Paul L. Lee
                                         Vice President, Secretary and Treasurer

                                        8



                                 CERTIFICATE OF
                AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                           H2 ACQUISITION CORPORATION

     Paul L. Lee, being the Vice-President, Secretary and Treasurer of H2
Acquisition Corporation, a Delaware corporation (the "Corporation") does hereby
certify as follows:

     1. That the Corporation filed its original Certificate of Incorporation
(the "Original Certificate") with the Delaware Secretary of State of the State
on November 13, 2002, and an Amended and Restated Certificate of Incorporation
(the "First Amendment") with the Delaware Secretary of State of the State on
March 24, 2003 (the Original Certificate, as amended by the First Amendment,
being hereinafter referred to as the "Certificate").

     2. That the Board of Directors of the Corporation, pursuant to Sections
141, 242 and 245 of the Delaware General Corporation Law (the "DGCL") adopted
resolutions authorizing the Corporation to amend and restate the Certificate and
adopt the Amended and Restated Certificate of Incorporation (the "Restated
Certificate") attached hereto as Exhibit A.

     3. That the sole holder of the Corporation's issued and outstanding capital
stock approved and adopted the Restated Certificate in accordance with Sections
228, 242 and 245 of the DGCL.

     IN WITNESS WHEREOF, the undersigned, being the Vice-President, Secretary
and Treasurer herein above named, for the purpose of the amending and restating
the Certificate and adopting the Restated Certificate pursuant to the DGCL,
under penalties of perjury, does hereby declare and certify that this is the act
and deed of the Corporation and the facts stated herein are true, and
accordingly has hereunto signed this certificate this 27th day of March 2003.

                                    By: /s/ Paul L. Lee
                                        ----------------------------------------
                                        Paul L. Lee
                                        Vice President, Secretary and Treasurer

                                       9



                              AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                           H2 ACQUISITION CORPORATION

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

                                 March 27, 2003

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

                                    Article I

     The name of the corporation is H2 Acquisition Corporation (hereinafter
referred to as the "Corporation").

                                   Article II

     The registered office of the Corporation is to be located at 1209 Orange
Street, in the City of Wilmington, in the County of New Castle, in the State of
Delaware. The name of its registered agent at that address is The Corporation
Trust Company.

                                   Article III

     The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware.

                                   Article IV

     (1) The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 1200 shares, of which 100
shares, par value $0.01, shall be of a class designated "common stock", and 1100
shares, par value $0.01 per share, shall be of a class designated "preferred
stock".

     (2) The common stock of the Corporation shall be subject to the express
terms of the preferred stock and any series thereof. Each share of common stock
shall have the right to cast on vote for each share for the election of
directors and on all other matters upon which stockholders are entitled to vote.

     (3) The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article IV, to provided for the issuance from
time to time in one or more series of any number of shares of preferred stock,
and, by filing a certificate pursuant to the Delaware General Corporation Law
(the "Preferred Stock Designation"), to establish the number of shares to be
included in each series, and to fix the designations, relative

                                       10



rights, preferences, qualifications and limitations of the shares of each such
series. The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:

     (i)    the designation of the series, which may be by distinguishing
            number, letter or title;

     (ii)   the number of shares of the series, which number the Board of
            Directors may thereafter (except where otherwise provided in the
            Preferred Stock Designation) increase or decrease (but not below the
            number of shares thereof them outstanding);

     (iii)  the voting rights, if any, of the holders of shares of the series;

     (iv)   shall be cumulative or noncumulative and the dividend rate of the
            series, and the preferences, if any, over any other series (or of
            any other series over such series) with respect to dividends;

     (v)    dates at which dividends, if any, shall be payable;

     (vi)   the redemption rights and price or prices, if any, for shares of the
            series;

     (vii)  the amounts payable on, and the preferences, if any, of shares of
            the series in the event of any voluntary or involuntary liquidation,
            dissolution, distribution of assets or winding up of the affairs of
            the Corporation;

     (viii) the terms and amount of any purchase, retirement or sinking fund
            provided for the purchase or redemption of shares of the series;

     (ix)   whether the shares of the series shall be convertible into or
            exchangeable for shares of any other class or series, or any other
            security, of the Corporation or any other corporation, and, if so,
            the specification of such other class or series of such other
            security, the conversion or exchange price or prices or rate or
            rates, any adjustments thereof, the date or dates at which such
            shares shall be convertible or exchangeable and all other terms and
            conditions upon which such conversion or exchange may be made;

     (x)    whether the issuance of additional shares of preferred stock shall
            be subject to restrictions as to issuance, or as to the powers,
            preferences or other rights of any other series;

                                       11



     (xi) the right of the shares of such series to the benefit of conditions
          and restrictions upon the creation of indebtedness of the Corporation
          or any subsidiary of the Corporation, upon the issue of any additional
          stock (including additional shares of such series or any other series)
          and upon the payment of dividends or the making of other distributions
          on, and the purchase, redemption or other acquisition by the
          Corporation or any subsidiary of any outstanding stock of the
          Corporation; and

    (xii) such other powers, preferences and relative, participating, optional
          and other special rights, and the qualifications, limitations and
          restrictions thereof as the Board of Directors shall determine.

     The holders of preferred stock shall not have any preemptive rights except
to the extent such rights shall be specifically provided for in the resolution
or resolutions providing for the issuance thereof adopted by the Board of
Directors.

                                    Article V

     The name and address of the incorporator is as follows:

     Brandon W. Gardner
     Cleary, Gottlieb, Steen & Hamilton
     One Liberty Plaza
     New York, New York 10006

                                   Article VI

     Names of the persons constituting the initial Board of Directors of the
Corporation are as follows:

     Youseef A. Nasr
     452 Fifth Ave., 10th Floor
     New York, NY 10018

     Paul L. Lee
     452 Fifth Ave., 7t Floor
     New York, NY 10018

                                   Article VII

     The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:


                                       12



     (1) The number of directors of the Corporation shall be such as from time
to time shall be fixed by, or in the manner provided in, the by-laws. Election
of directors need not be by ballot unless the by-laws so provide.

     (2) The Board of Directors shall have powers without the assent or vote of
the stockholders to make, alter, amend, change, add to or repeal the by-laws of
the Corporation; to fix and vary the amount to be served for any proper purpose;
to authorize and cause to be executed mortgages and liens upon all or any part
of the property of the Corporation; to determine the use and disposition of any
surplus or net profits; and to fix the times for the declaration and payment of
dividends.

     (3) The directors in their discretion may submit any contract or act for
approval or ratification at any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of considering any such act
or contract, and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the stock of the Corporation which is
represented in person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in person or
by proxy) shall be as valid and as binding upon the Corporation and upon all the
stockholders as though it had been approved or ratified by every stockholder of
the Corporation, whether or not the contract or act would otherwise be open to
legal attack because of directors' interest, or of any other reason.

     (4) In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation; subject, nevertheless, to the provisions of the statutes of
Delaware, of this certificate, and to any by-laws from time to time made by the
stockholders; provided, however, that no by-laws so made shall invalidate any
prior act of the directors which would have been valid if such by-law had not
been made.

                                  Article VIII

     The Corporation shall, to the full extend permitted by Section 145 of the
Delaware General Corporation Law, as amended from time to time, indemnify all
persons whom it may indemnify pursuant thereto.

                                   Article IX

     Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware, may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
section 291 of Title 8 of the


                                       13



Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for the Corporation under the provisions of
section 271 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.

                                    Article X

     The Corporation reserves the right to amend, alter, change or repeal any
provisions contained in this certificate of incorporation in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.

                                   Article XI

     The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of
Section 102 of the General Corporation Law of the State of Delaware, as the same
may be amended or supplemented.


                                       14



                         CERTIFICATE OF DESIGNATIONS OF
                       SERIES A CUMULATIVE PREFERRED STOCK
                          OF H2 ACQUISITION CORPORATION

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

                     Pursuant to Section 151 of the General
                    Corporation Law of the State of Delaware

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

     H2 Acquisition Corporation a Delaware corporation (the "Corporation"), in
accordance with the provisions of Section 151 (g) of the Delaware General
Corporation Law, hereby certifies on March 26, 2003 as follows:

     FIRST: The Amended and Restated Certificate of Incorporation of the
Corporation authorizes the issuance by the Board of Directors (the "Board") of
the Corporation of up to 1100 shares of preferred stock (the "Preferred Stock"),
par value $0.01 per share, in one or more series, and further authorizes the
Board to determine the designations, preferences, rights and qualifications,
limitations or restrictions granted to or imposed upon any such series of
Preferred Stock.

     SECOND: On March 26, 2003, the Board adopted the following resolution
authorizing the creation and issuance of a series of said Preferred Stock to be
known as "Series A Cumulative Preferred Stock":

     RESOLVED, that pursuant to the authority vested in the Board in accordance
with thc provisions of its Amended and Restated Certificate of Incorporation, a
series of the class of authorized preferred stock (the "Preferred Stock"), par
value $0.01 per share, of the Corporation be, and hereby is created, and that
the designation and amount thereof and the voting powers, preferences and
relative, participating. optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof (in addition
to the powers, designations, preferences and relative, participating. optional
or other special rights, and the qualifications, limitations or restrictions
thereof, set forth in the Corporation's Amended and Restated Certificate of
Incorporation that are applicable to the Preferred Stock), are as follows:

     Section 1. Designation and Amount.

     The shares of such series shall be designated as the "Series A Cumulative
Preferred Stock" ("Series A Preferred Stock") and the number of shares
constituting such series shall be one thousand one hundred (1,100), which number
may be decreased by the Board of Directors (the "Board") of the Corporation
without a vote of stockholders; provided, however, that such number may not be
decreased below the number of then currently outstanding shares of Series A
Preferred Stock.

                                       15



     Section 2. Dividends and Distributions.

     (a) The holders of shares of Series A Preferred Stock in preference to the
holders of shares of the Corporation's common stock (the "Common Stock") par
value $0.01 per share, and to any other capital stock of the Corporation ranking
junior to Series A Preferred Stock as to payment of dividends, shall be entitled
to receive, when, as and if declared by the Board out of funds of the
Corporation legally available for the payment of dividends, cumulative dividends
at, an annual rate of 6.5% of the Redemption Price (as defined in Section 4(a))
per share, and no more. Dividends payable in respect of the outstanding shares
of Series A Preferred Stock shall begin to accrue and be cumulative from the
respective dates of original issue of such shares (which dates shall be
reflected on the certificates evidencing the same), and shall be payable in
quarterly payments on January 15, April 15, July 15 and October 15 {or, if any
such day is not a Business Day (as defined in Section 8) the Business Day
preceding such day) in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date") for each of the fiscal quarters ended March
31, June 30, September 30 and December 31, respectively, commencing in respect
of each share of Series A Preferred Stock on July 15, 2003.

     (b) The amount of dividends payable shall be determined on the basis of
twelve 30-day months and a 360-day year. Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such dividends at
the time accumulated and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
may fix a record date (a "Regular Record Date") for the determination of holders
(the "Registered Holders") of shares of Series A Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall be no
more than 60 days nor less than ten days prior to the date fixed for the payment
thereof. Any dividend declared by the Board as payable and punctually paid on a
Quarterly Dividend Payment Date will be paid to Registered Holders. All cash
payments shall be made in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.

     (c) If any applicable dividend payment or redemption payment is not made on
a Quarterly Dividend Payment Date or the date set for such redemption,
respectively, thereafter the Series A Preferred Stock shall accrue additional
dividends in respect of all such dividend payments and redemption payments that
are past due and unpaid (such amount, the "Arrearage"). Such additional
dividends in respect of any Arrearage shall be deemed to accumulate from day to
day whether or not earned or declared until the Arrearage is paid, shall be
calculated as of such successive Quarterly Dividend Payment Date and shall
constitute an additional Arrearage from and after any Quarterly Dividend Payment
Date to the extent not paid on such Quarterly Dividend Payment Date. References
in any Section herein to dividends that have accumulated or that have been
deemed to have accumulated with respect to the Series A Preferred Stock shall
include the amount, if any, of any Arrearage together with any dividends
accumulated or deemed to have accumulated on such Arrearage pursuant to the
immediately preceding two sentences. Additional dividends in respect of any
Arrearage may be declared and paid at any time, in whole or in part, without
reference to any regular Quarterly Dividend Payment Date, to the Registered
Holders as they appear on the stock record books of the Corporation `on such
record date as may

                                       16



be fixed by the Board of Directors (which record date shall be no more than 60
days nor less than ten days prior to the corresponding payment date).

     (d) The holders of shares of Series A Preferred Stock shall not be entitled
to receive any dividends or other distributions in respect of such shares of
Series A Preferred Stock except as provided for hereby.

     Section 3. Restrictive Covenants: Voting Rights.

     (a) So long as any shares of Series A Preferred Stock shall be outstanding
and unless the consent or approval of a greater number of shares shall then be
required by law, without first obtaining the consent or approval of the holders
of a majority of the number of then- outstanding shares of Series A Preferred
Stock, given in person or by proxy at a meeting at which the holders of such
shares shall be entitled to vote separately as a class, or by written consent,
the Corporation shall not:

     (i) (A) authorize or create any class or series, or any shares of any class
or series, of capital stock of the Corporation having any preference or priority
(either as to dividends or upon redemption, liquidation, dissolution, or winding
up) over Series A Preferred Stock ("Senior Stock") or (B) issues shares of
Senior Stock; provided however, that no such vote shall be required with respect
to the authorization or creation by the Corporation of one or more classes
and/or series of Senior Stock if the proceeds of the Corporation's issuance of
such Senior Stock are sufficient, and are used, to redeem all outstanding shares
of Series A Preferred Stock concurrently with the issuance of such Senior Stock;

     (ii) (A) authorize or create any class or series, or any shares of any
class or series, of capital stock of the Corporation ranking on a parity (either
as to dividends or upon redemption, liquidation, dissolution or winding up) with
the Series A Preferred Stock ("Parity Stock") or (B) issue shares of Parity
Stock; provided, however, that no such vote shall be required with respect to
the authorization, creation or issuance by the Corporation of one or more
classes and/or series of Parity Stock if the proceeds of the Corporation's
issuance of such Parity Stock are sufficient, and are used to redeem all
outstanding shares of Series A Preferred Stock congruently with the issuance of
such Parity Stock;

     (iii) reclassify, convert or exchange any shares of any capital stock of
the Corporation into shares of Senior Stock or Parity Stock;

     (iv) authorize any security exchangeable for, convertible into, or
evidencing the right to purchase any shares of Senior Stock or Parity Stock; or

     (v) amend alter or repeal the Corporation's Amended and Restated
Certificate of Incorporation, as it may be amended from time to time, or the
Corporation's By-Laws, as they may be amended from time to time, to alter or
change the powers, designations, preferences, rights and qualifications,
limitations or restrictions of Series A Preferred Stock or any Senior Stock or
Parity Stock so as to affect Series A Preferred Stock in any material adverse
respect.

                                       17



     (b) The holders of the Series A Preferred Stock shall be entitled to one
vote for each share of Series A Preferred Stock voting together with the holders
of Common Stock as a single class, at all meetings of holders of shares of
Common Stock (and written actions in lieu of meetings) (i) at which any
resolution is proposed to (A) effect the voluntary liquidation, dissolution or
winding up of the Corporation. or (B) the sale, lease, conveyance or exchange of
all or substantially all of the assets, property or business of the Corporation;
or (ii) if the Corporation shall have failed to pay in full all cash dividends
due and payable on a Quarterly Dividend Payment Date (whether or not declared by
the Board) including any Arrearage; provided in the case of clause (i) above,
the holders of the Series A Preferred Stock will be entitled to vote only on any
resolution that is proposed to effect the voluntary liquidation, dissolution or
winding up of the Corporation, or the sale, lease, conveyance or exchange of all
or substantially all of the assets, property or business of the Corporation.

     (c) With respect to all matters to be voted on at meetings of holders of
shares of Common Stock (and written actions in lieu of meetings) and not
specifically covered by Section 3(b) above, the holders of Series A Preferred
Stock shall be entitled to vote with the holders of Common Stock, and shall have
such vote so that the holders of Series A Preferred Stock, in the aggregate,
hold 15% of the voting power with respect to such matters.

     (d) Except as otherwise expressly provided hereby, or as required by law,
the holders of shares of Series A Preferred Stock shall have no voting rights
and their consent shall not be required for the taking of any corporate action.

     Section 4. Redemption.

     (a) The Corporation may at its option redeem, in whole or in part, the
shares of Series A Preferred Stock on or after March 31, 2008, but only out of
funds legally available therefor, by paying therefor in cash $1,000,000 per
share (the "Redemption Price") plus an amount equal to all accumulated dividends
and any Arrearage thereon, to the date of redemption. If less than all
outstanding shares of Series A Preferred Stock are to be redeemed, the
Corporation shall redeem shares pro rata among the holders thereof in accordance
with the respective numbers of shares of Series A Preferred Stock held by each
of them.

     (b) In order to facilitate the redemption of shares of Series A Preferred
Stock pursuant to Section 4(a), the Board may fix a record date for the
determination of the holders of shares of Series A Preferred Stock to be
redeemed. not more than 60 days or less than 10 days prior to the date fixed for
such redemption. Notice of any redemption of shares of Series A Preferred Stock
pursuant to Section 4(a) shall specify a date and procedures for such redemption
and shall be mailed not less than 10 nor more than 60 days prior to such date
fixed for redemption to each holder Registered Holder at such Registered
Holder's address as it appears on the transfer books of the Corporation.

     (c) From and after the date of any redemption effected by the Corporation
pursuant to Sections 4(a), all dividends on shares of Series A Preferred Stock
thereby called for redemption shall cease to accrue and all rights of the
holders thereof as holders of Series A Preferred Stock

                                       18



shall, with respect to shares thereby called for redemption, cease and
terminate. Any interest allowed on moneys which shall have been Set Apart for
Payment (as defined in Section 8) prior to the date of redemption for the
payment of the Redemption Price (or any accumulated dividends and any Arrearage
thereon) shall be paid to the Corporation. Any moneys so deposited which shall
remain unclaimed by the holders of such Series A Preferred Stock at the end of
two years after the redemption date shall to the fullest extent permitted by law
become the property of, and be paid by such bank or trust company to, the
Corporation.

     Section 5. Reacquired Shares.

     Any shares of Series A Preferred Stock redeemed purchased or otherwise
acquired by the Corporation or any Subsidiary (as defined in Section 8) of the
Corporation in any manner whatsoever shall become authorized but unissued
shares of Preferred Stock, par value $0.01 per share, of the Corporation and
may be reissued as part of another class or series of Preferred Stock, subject
to the conditions or restrictions on authorizing or creating any class or
series, or any shares of any class or series, set forth in Section 3(a).

     Section 6. Liquidation, Dissolution or Winding Up.

     (a) If the Corporation sha1l liquidate, dissolve or wind up, whether
pursuant to federal bankruptcy laws, state laws or otherwise, no distribution
shall be made (i) to the holders of shares of Junior Stock or Common Stock,
unless prior thereto the holders of shares of Series A Preferred Stock shall
have received $1.000,000 per share plus an amount equal to all accumulated
dividends and any Arrearage thereon to the date of such payment or (ii) to the
holders of shares of Parity Stock, except distributions made ratably on Series A
Preferred Stock and all such Parity Stock in proportion to the total amounts
which the holders of, all such shares are entitled upon such liquidation,
dissolution or Winding up of the Corporation.

     (b) Neither the consolidation, merger or other business combination of the
Corporation with or into any other Person (as defined in Section 8) or Persons,
nor the sale, lease, exchange or conveyance of all or any part of the property,
assets or business of the Corporation to a Person Or Persons other than the
holders of Junior Stock shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Section 6.

     Section 7. Rank.

     Series A Preferred Stock will rank, with respect to dividends and upon
distribution of assets in liquidation, dissolution or winding up, prior to the
Common Stock.

     Section 8. Definitions.

     As used herein, the following terms shall have the meanings indicated.

                                       19



     "Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.

     "Person" means any individual, partnership, corporation, limited liability
company, unincorporated organization trust or joint venture, or a governmental
agency or political subdivision thereof.

     "Set Apart for Payment" means, when used with respect to funds of the
Corporation to be used to effect any redemption of shares of Series A Preferred
Stock, that funds of the Corporation sufficient to satisfy such payment of
redemption shall have been irrevocably deposited with a bank or trust company
doing business in the Borough of Manhattan in the City of New York and having a
capital and surplus of at least $50 million in trust for the exclusive benefit
of the holders of the shares of Series A Preferred Stock to be redeemed and that
such funds will be payable from and after the date of redemption to holders of
Series A Preferred Stock who surrender their certificates representing such
stock in accordance with the notice of redemption provided pursuant to Section
4(b).

     "Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 500/0 of the total
voting power of shares of Voting Stock (as defined below) is at the time owned
or controlled directly or indirectly by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii) any partnership
(A) the sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (B) the only general partners of which
are such Person or of one or more Subsidiaries of such Person (or any
combination thereof).

     "Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.

     IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed in its name and on its behalf and affirmed, under penalties of perjury on
the date first written above by a duly authorized officer of the Corporation.

                                      H2 ACQUISITION CORPORATION

                                  By: /s/ Paul L. Lee
                                      -----------------------------------------
                                      Paul L. Lee
                                      Vice President, Secretary and Treasurer

                                       20

EX-3.II

Exhibit 3(ii)

                          HOUSEHOLD INTERNATIONAL, INC.


                                     Bylaws

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

                           (As in effect May 14, 2003)



- --------------------------------------------------------------------------------
                                    BYLAWS OF

                          HOUSEHOLD INTERNATIONAL, INC.
- --------------------------------------------------------------------------------


                                   ARTICLE I.

                        DEFINITIONS, PLACES OF MEETINGS.

     SECTION l.  Definitions. When used herein, "Board" shall mean the Board of
Directors of this Corporation, and "Chairman" shall mean Chairman of the Board
of Directors.

     SECTION 2.  Places of Meetings of Stockholders and Directors. Unless the
Board shall fix another place for the holding of the meeting, meetings of
stockholders and of the Board shall be held at the Corporation's headquarters,
Prospect Heights, Cook County, Illinois, or at such other place specified by the
person or persons calling the meeting.

                                   ARTICLE II.

                             STOCKHOLDERS MEETINGS.

     SECTION l.  Annual Meeting of Stockholders. The annual meeting of
stockholders shall be held on such date and at such time as is fixed by the
Board. Any previously scheduled annual meeting of stockholders may be postponed
by resolution of the Board of Directors upon public announcement given prior to
the date previously scheduled for such annual meeting of stockholders.

     SECTION 2.  Special Meetings.

           CALL. Special meetings of the stockholders may be called at any time
by the Chief Executive Officer or a majority of the Board of Directors. Any
previously scheduled special meeting of stockholders may be postponed by
resolution of the Board of Directors upon notice to the stockholders given prior
to the date previously scheduled for such special meeting of stockholders.

           REQUISITES OF CALL. A call for a special meeting of stockholders
shall be in writing, filed with the Secretary, and shall specify the time and
place of holding such meeting and the purpose or purposes for which it is
called.

     SECTION 3.  Notice of Meetings. Written notice of a meeting of stockholders
setting forth the place, date, and hour of the meeting and the purpose or
purposes for which the meeting is

                                       -2-



called shall be mailed not less than ten nor more than sixty days before the
date of the meeting to each stockholder entitled to vote at the meeting.

     SECTION 4.  Quorum and Adjournments. At any meeting of stockholders, the
holders of a majority of all the outstanding shares entitled to vote, present in
person or by proxy, shall constitute a quorum for the transaction of business,
and a majority of such quorum shall prevail except as otherwise required by law,
the Certificate of Incorporation, or the bylaws.

     If the stockholders necessary for a quorum shall fail to be present at the
time and place fixed for any meeting, the holders of a majority of the shares
entitled to vote who are present in person or by proxy may adjourn the meeting
from time to time, until a quorum is present, provided, however, that any
stockholders' meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the Chairman of the meeting. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.

     SECTION 5.  Polls. The date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a meeting shall
be announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the inspectors after the
closing of the polls unless the Court of Chancery of the State of Delaware upon
application by a stockholder shall determine otherwise.

                                  ARTICLE III.

                               BOARD OF DIRECTORS.

     SECTION l.  General Powers. The business and affairs of this Corporation
shall be managed under the direction of the Board.

           NUMBER. The number of directors shall be fixed from time to time by
resolution of the Board.

           TENURE. The directors shall be elected at the annual meeting of
stockholders, except as provided in Section 5 of this Article III, and each
director shall hold office until his successor is elected and qualified or until
his earlier resignation or removal.

     SECTION 2.  Regular Meetings of the Board. Regular meetings of the Board
shall be held at such times and places as the Board may fix. No notice shall be
required.

                                       -3-





     SECTION 3.  Special Meetings of the Board. Special meetings of the Board
shall be held whenever called by the Chairman of the Board or Chief Executive
Officer or any four or more directors. At least twenty-four hours written notice
or oral notice of each special meeting shall be given to each director. If
mailed, notice must be deposited in the United States mail at least seventy-two
hours before the meeting.

     SECTION 4.  Quorum. A majority of the members of the Board if the total
number is odd or one-half thereof if the total number is even shall constitute a
quorum for the transaction of business, but if at any meeting of the Board there
is less than a quorum the majority of those present may adjourn the meeting from
time to time until a quorum is present. At any such adjourned meeting, a quorum
being present, any business may be transacted which might have been transacted
at the original meeting.

     Except as otherwise provided by law, the Certificate of Incorporation, or
the bylaws, all actions of the Board shall be decided by vote of a majority of
those present.

     SECTION 5.  Vacancies. When any vacancy occurs among the Board, the
remaining members of the Board may elect a director to fill each such vacancy at
any regular meeting of the Board, or at a special meeting called for that
purpose. A director elected to fill a vacancy shall serve for the unexpired
portion of the term of his predecessor in office.

     SECTION 6.  Removal of Directors. Any director may be removed either with
or without cause, at any time, by a vote of the holders of a majority of the
shares of the Corporation at any meeting of stockholders called for that
purpose.

     SECTION 7.  Committees. The Board may, by resolution passed by a majority
of the entire Board, designate one or more committees of directors which to the
extent provided in the resolution shall have and may exercise powers and
authority of the Board in the management of the business and affairs of the
Corporation.

     SECTION 8.  Action of the Board. Except as otherwise provided by law,
corporate action to be taken by the Board shall mean such action at a meeting of
the Board. Any action required or permitted to be taken by the Board may be
taken without a meeting if all members of the Board consent in writing to a
resolution authorizing the action. The resolution and the written consents
thereto shall be filed with the minutes of the proceedings of the Board. Any one
or more members of the Board may participate in a meeting of the Board by means
of a conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute

                                       -4-



presence in person at a meeting.

                                   ARTICLE IV.

                                    OFFICERS.

     SECTION 1.  Officers. The Policy Making Officers of the Corporation shall
be appointed by the Board of Directors at the next meeting of the Board
following the Annual Meeting of Stockholders. The Board of Directors shall also
appoint General Officers to manage the day-to-day business functions of the
Corporation. Policy Making Officers shall have the authority to appoint other
Assistant Officers to assist in the ministerial aspects of their area of
responsibilities.

     The Policy Making Officers of the Corporation shall be the Chairman of the
Board, the Chief Executive Officer, the Chief Operating Officer (if any), the
Chief Financial Officer (if any), the President (if any), any Vice Chairman (if
any), any Senior Executive Vice President, any Executive Vice President, any
Senior Vice President or Group Executive, the General Counsel (if any) and the
Chief Accounting Officer (if any). The General Officers of the Corporation shall
be any Vice President, any Managing Director, the Controller (if any), the
Treasurer and the Secretary. Any person holding the title of Chairman or Chief
Executive Officer shall be a director of the Corporation.

     The Board may from time to time designate, employ, or appoint such other
officers and assistant officers, agents, employees, counsel, and attorneys at
law or in fact as it shall deem desirable for such periods and on such terms as
it may deem advisable, and such persons shall have such titles, only such power
and authority, and perform such duties as the Board may determine.

     SECTION 2.  Duties of Chairman of the Board. The Chairman shall sign and
issue, jointly with the President (if any), all reports to the stockholders and
shall preside at all meetings of stockholders and of the Board. He shall, in
general, perform duties incident to the office of Chairman as may be prescribed
by the Board.

     SECTION 3.  Duties of Chief Executive Officer. At the next meeting of the
Board following the Annual Meeting of Stockholders, or other meeting at which
Policy Making Officers are or may be elected, the Board shall designate the
Chairman or the President (if any) as the Chief Executive Officer of the
Corporation. The Chief Executive Officer shall have general authority over all
matters relating to the business and affairs of the Corporation subject to the
control and direction of the Board. In the absence or inability of the Chief
Executive Officer to act, the Chair of

                                       -5-



the Executive Committee of the Board shall perform the duties of the Chief
Executive Officer.

     SECTION 4.  Duties of President. The President, if one is appointed by the
Board, shall, in general, perform all duties incident to the office of President
and shall perform such other duties as may be prescribed by the Board. In the
absence or inability of the Chairman, or the Chair of the Executive Committee in
accordance with Section 3 above, to act, the President shall perform the duties
of the Chairman and Chief Executive Officer for such time period as required.

     SECTION 5.  Duties of a Vice Chairman. A Vice Chairman, if one is appointed
by the Board, shall, in general, perform all duties incident to the office of a
Vice Chairman and shall perform such other duties as may be prescribed by the
Board. In the absence or inability of the President or the Chair of the
Executive Committee to act as the Chief Executive Officer in accordance with
Sections 3 and 4 above, the most senior Vice Chairman, as designated by the
Chairman, shall perform the duties of the Chief Executive Officer and Chairman
for such time period as required.

     SECTION 6.  Duties of Senior Executive Vice Presidents, Executive Vice
Presidents, Group Executives and Senior Vice Presidents. Each Senior Executive
Vice President, Executive Vice President, Group Executive and Senior Vice
President shall have such powers and perform such duties as may be prescribed by
the Chief Executive Officer of the Corporation or the Board. The order of
seniority, if any, among the Senior Executive Vice Presidents, Executive Vice
Presidents, Group Executives and Senior Vice Presidents shall be as designated
from time to time by the Chief Executive Officer of the Corporation. In the
absence or inability of any Vice Chairman to act as the Chief Executive Officer
as may be required in accordance with Section 5 above, the senior of the Senior
Executive Vice Presidents, Executive Vice Presidents, Group Executives and
Senior Vice Presidents, if one has been so designated, shall perform the duties
of the Chief Executive Officer and Chairman for such time period as required.

     SECTION 7.  Duties of Secretary. The Secretary shall record the proceedings
of meetings of the stockholders and directors, give notices of meetings, and
shall, in general, perform all duties incident to the office of Secretary and
such other duties as may be prescribed by the Board.

     SECTION 8.  Duties of Treasurer. The Treasurer shall have custody of all
funds, securities, evidences of indebtedness, and other similar property of the
Corporation, and shall, in general, perform all duties incident to the office of
Treasurer and such other duties as may be prescribed by the Board.

                                       -6-



                                   ARTICLE V.

                          STOCK AND STOCK CERTIFICATES.

     SECTION 1.  Transfers. Shares of stock shall be transferable on the books
of the Corporation only by the person named in the certificate or by an
attorney, lawfully constituted in writing, and upon surrender of the certificate
therefor. Every person becoming a stockholder by such transfer shall, in
proportion to his shares, succeed to all rights of the prior holder of such
shares.

     SECTION 2.  Stock Certificates. The certificates of stock of the
Corporation shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall exhibit the holder's name and number
of shares and shall be signed by the President or Vice President and the
Secretary or Treasurer. Every certificate shall have noted thereon any
information required to be set forth by the applicable law. If the Corporation
has a transfer agent or an assistant transfer agent or a transfer clerk acting
on its behalf and a registrar, the signature of any such officer may be a
facsimile. In case any officer or officers who shall have signed, or whose
facsimile signature or signatures shall have been used on any such certificate
or certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate or
certificates may nevertheless be adopted by the Corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signatures shall have been used thereon had not
ceased to be such officer or officers of the Corporation.

     SECTION 3.  Fixing Record Date.

           (A)   In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.

           (B)   If no record date is fixed:

           (1)   The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders

                                      -7-



shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.

           (2)   The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto.

     SECTION 4.  Registered Shareholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, save as expressly provided by
the law.

     SECTION 5.  Lost Certificates. Any person claiming a certificate of stock
to be lost or destroyed shall make an affidavit or affirmation of that fact and
advertise the same in such manner as the Board may require, and the Board may,
in its discretion, require the owner of the lost or destroyed certificate, or
his legal representative, to give the Corporation a bond, sufficient to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss of any such certificate. A new certificate of the
same tenor and for the same number of shares as the one alleged to be lost or
destroyed may be issued without requiring any bond when, in the judgment of the
Board, it is proper so to do.

                                   ARTICLE VI.

                                EMERGENCY BYLAWS.

     SECTION l.  When Operative. Notwithstanding any different provision in the
preceding Articles of the bylaws or in the Certificate of Incorporation, the
emergency bylaws provided in this Article VI shall be operative during any
emergency resulting from an attack on the United States or on a locality in
which the Corporation conducts its business or customarily holds meetings of its
Board or its stockholders, or during any nuclear or atomic disaster, or during
the existence of any catastrophe, or other similar emergency condition, as a
result of which a quorum of the Board or a standing committee thereof cannot
readily be convened for action.

     SECTION 2.  Board Meetings. During any such emergency, a meeting of the
Board may be called by any director or, if necessary, by any officer who is not
a director. The meeting shall be held at such time and place, within or without
Cook County, Illinois, specified by the person calling the meeting and

                                       -8-



in the notice of the meeting which shall be given to such of the directors as it
may be feasible to reach at the time and by such means as may be feasible at the
time, including publication or radio. Such advance notice shall be given as, in
the judgment of the person calling the meeting, circumstances permit. Two
directors shall constitute a quorum for the transaction of business. To the
extent required to constitute a quorum at the meeting, the officers present
shall be deemed, in order of rank and within the same rank in order of
seniority, directors for the meeting.

     SECTION 3.  Amendments to Emergency Bylaws. These emergency bylaws may be
amended, either before or during any emergency, to make any further or different
provision that may be practical and necessary for the circumstances of the
emergency.

                                  ARTICLE VII.

                          CONSENTS TO CORPORATE ACTION.

     SECTION 1.  Action by Written Consent. Unless otherwise provided in the
Certificate of Incorporation, any action which is required to be or may be taken
at any annual or special meeting of stockholders of the Corporation, subject to
the provisions of Sections (2) and (3) of this Article VII, may be taken without
a meeting, without prior notice and without a vote if a consent in writing,
setting forth the action so taken, shall have been signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or to take such action at a meeting at which all shares
entitled to vote thereon were present and voted; provided, however, that prompt
notice of the taking of the corporate action without a meeting and by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.

     SECTION 2.  Determination of Record Date for Action by Written Consent. The
record date for determining stockholders entitled to express consent to
corporate action in writing without a meeting shall be fixed by the Board of
Directors of the Corporation. Any stockholder seeking to have the stockholders
authorize or take corporate action by written consent without a meeting shall,
by written notice to the Secretary, request the Board of Directors to fix a
record date. Upon receipt of such a request, the Secretary shall, as promptly as
practicable, call a special meeting of the Board of Directors to be held as
promptly as practicable. At such meeting, the Board of Directors shall fix a
record date as provided in Section 213(b) (or its successor provision) of the
Delaware General Corporation Law; that record date, however, shall not be more
than 10 days after the date upon which the resolution fixing the record date is
adopted by the Board nor more than 15 days from the date of the receipt of the

                                       -9-



stockholder's request. Should the Board fail to fix a record date as provided
for in this Section 2, then the record date shall be the day on which the first
written consent is duly delivered pursuant to Section 213(b) (or its successor
provision) of the Delaware General Corporation Law, or, if prior action is
required by the Board with respect to such matter, the record date shall be at
the close of business on the day on which the Board adopts the resolution taking
such action.

     SECTION 3.  Procedures for Written Consent. In the event of the delivery to
the Corporation of a written consent or consents purporting to represent the
requisite voting power to authorize or take corporate action and/or related
revocations, the Secretary of the Corporation shall provide for the safekeeping
of such consents and revocations.

                                  ARTICLE VIII.

                            MISCELLANEOUS PROVISIONS.

     SECTION l.  Waiver of Notice. Whenever notice is required to be given, a
written waiver thereof signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.

     SECTION 2.  Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any manner reproduced.

     SECTION 3.  Fiscal Year. The Fiscal Year of the Corporation shall be the
calendar year.

     SECTION 4.  Records. The Bylaws and the proceedings of all meetings of the
stockholders and the Board shall be recorded in appropriate minute books
provided for the purpose. The minutes of each meeting shall be signed by the
Secretary or other officer appointed to act as Secretary of the meeting.

     SECTION 5.  Amendments. The Bylaws may be added to, amended, altered or
repealed at any regular meeting of the Board, by a vote of a majority of the
total number of the directors, or at any meeting of stockholders, duly called
and held, by a majority of the stock represented at such meeting.

                                      -10-



                                   ARTICLE IX.

                         INDEMNIFICATION AND INSURANCE.

     SECTION 1.  Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative, or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director, officer, or
employee of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another corporation or
of a partnership, joint venture, trust, or other enterprise, including service
with respect to employee benefit plans, shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability, and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes, or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that except as provided in
Section 2 of this Article IX, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition upon delivery
to the Corporation of any undertaking to repay all amounts so advanced if it
shall ultimately be determined that such person is not entitled to be
indemnified under this Section or otherwise. The Corporation may, by action of
its Board of Directors, provide indemnification to agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors,
officers, and employees.

     SECTION 2.  Determination of Right to Indemnification. If a claim under
Section 1 of this Article is not paid in full by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action

                                      -11-



brought to enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law and
Section 1 of this Article for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.

     SECTION 3.  Advances. The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its final disposition
conferred in this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision of these
Bylaws, agreement, contract, vote of stockholders or disinterested directors, or
otherwise.

     SECTION 4.  Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article, the
Delaware General Corporation Law, or otherwise.

                                      -12-

EX-12

EXHIBIT 12

HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS



- ------------------------------------------------------------------------------------------------------------
                                                     March 29              January 1              Six months
                                                      through                through                   ended
(In millions)                                   June 30, 2003         March 28, 2003           June 30, 2002
- ------------------------------------------------------------------------------------------------------------
                                                   (Successor)          (Predecessor)           (Predecessor)
                                                                                          
Net income                                      $       373.7         $        245.7           $       998.4
Income taxes                                            189.9                  181.8                   504.2
- ------------------------------------------------------------------------------------------------------------
Income before income taxes                              563.6                  427.5                 1,502.6
- ------------------------------------------------------------------------------------------------------------
Fixed charges:
  Interest expense (1)                                  574.5                  898.1                 1,917.2
  Interest portion of rentals (2)                        11.2                   18.2                    33.4
- ------------------------------------------------------------------------------------------------------------
Total fixed charges                                     585.7                  916.3                 1,950.6
- ------------------------------------------------------------------------------------------------------------
Total earnings as defined                       $     1,149.3         $      1,343.8           $     3,453.2
============================================================================================================
Ratio of earnings to fixed charges (4)                   1.96                   1.47                    1.77
Preferred stock dividends (3)                   $        32.8         $         32.3           $        36.2
Ratio of earnings to combined fixed charges
  and preferred stock dividends (4)                      1.86                   1.42                    1.74
- ------------------------------------------------------------------------------------------------------------


(1)    For financial statement purposes, interest expense includes income earned
       on temporary investment of excess funds, generally resulting from
       over-subscriptions of commercial paper.

(2)    Represents one-third of rentals, which approximates the portion
       representing interest.

(3)    Preferred stock dividends are grossed up to their pretax equivalents.

(4)    The ratios for the period January 1 through March 28, 2003 (predecessor),
       have been negatively impacted by $170.9 million (after-tax) of HSBC
       acquisition related costs incurred by Household. Excluding this item, our
       ratio of earnings to fixed charges would have been 1.69 percent and our
       ratio of earnings to combined fixed charges and preferred stock dividends
       would have been 1.64 percent. These non-GAAP financial ratios are
       provided for comparison of our operating trends only.

EX-31

EXHIBIT 31

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

                    Certification of Chief Executive Officer

I, William F. Aldinger, Chairman and Chief Executive Officer of Household
International, Inc., certify that:

1.   I have reviewed this report on Form 10-Q of Household
     International, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we
     have:

          a)   designed such disclosure controls and procedures, or caused such
               disclosure controls and procedures to be designed under our
               supervision, to ensure that material information relating to the
               registrant, including its consolidated subsidiaries, is made
               known to us by others within those entities, particularly during
               the period in which this report is being prepared;

          b)   evaluated the effectiveness of the registrant's disclosure
               controls and procedures and presented in this report our
               conclusions about the effectiveness of the disclosure controls,
               as of the end of the period covered by this report based on
               such evaluation; and

          c)   disclosed in this report any change in the registrant's internal
               control over financial reporting that occurred during the
               registrant's most recent fiscal quarter that has materially
               affected, or is reasonably likely to materially affect, the
               registrant's internal control over financial reporting;

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent function):

          a)   all significant deficiencies and material weaknesses in the
               design or operation of internal control over financial reporting
               which are reasonably likely to adversely affect the registrant's
               ability to record, process, summarize and report financial
               information; and

          b)   any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal control over financial reporting.

Date: August 4, 2003

                                          /s/ William F. Aldinger
                                          --------------------------------------
                                          William F. Aldinger
                                          Chairman and Chief Executive Officer



                    Certification of Chief Financial Officer

I, Simon C. Penney, Senior Executive Vice President and Chief Financial Officer
of Household International, Inc., certify that:

1.   I have reviewed this report on Form 10-Q of Household International, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we
     have:

          a)   designed such disclosure controls and procedures, or caused such
               disclosure controls and procedures to be designed under our
               supervision, to ensure that material information relating to the
               registrant, including its consolidated subsidiaries, is made
               known to us by others within those entities, particularly during
               the period in which this report is being prepared;

          b)   evaluated the effectiveness of the registrant's disclosure
               controls and procedures and presented in this report our
               conclusions about the effectiveness of the disclosure controls,
               as of the end of the period covered by this report based on such
               evaluation; and

          c)   disclosed in this report any change in the registrant's internal
               control over financial reporting that occurred during the
               registrant's most recent fiscal quarter that has materially
               affected, or is reasonably likely to materially affect, the
               registrant's internal control over financial reporting;

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent function):

          a)   all significant deficiencies and material weaknesses in the
               design or operation of internal control over financial reporting
               which are reasonably likely to adversely affect the registrant's
               ability to record, process, summarize and report financial
               information; and

          b)   any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal control over financial reporting.

Date: August 4, 2003

                                         /s/ Simon C. Penney
                                         ---------------------------------------
                                         Simon C. Penney
                                         Senior Executive Vice President and
                                         Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


                Certification Pursuant to 18 U.S.C. Section 1350,
      as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Household International, Inc. (the
"Company") on Form 10-Q for the period ending June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, William
F. Aldinger, Chairman and Chief Executive Officer of the Company, certify,
pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

     (1)  The Report fully complies with the requirements of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all
          material respects, the financial condition and results of operations
          of the Company.

                                      By: /s/ William F. Aldinger
                                      William F. Aldinger
                                      Chairman and Chief Executive Officer
                                      August 4, 2003

                Certification Pursuant to 18 U.S.C. Section 1350,
      as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Household International, Inc. (the
"Company") on Form 10-Q for the period ending June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the Report"), I, Simon C.
Penney, Senior Executive Vice President and Chief Financial Officer of the
Company, certify, pursuant to 18. U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1)  The Report fully complies with the requirements of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all
          material respects, the financial condition and results of operations
          of the Company.

                                      /s/ Simon C. Penney
                                      -----------------------------------
                                      Simon C. Penney
                                      Senior Executive Vice President and
                                      Chief Financial Officer
                                      August 4, 2003

Signed originals of these written statements required by Section 906 of the
Sarbanes-Oxley Act of 2002 have been provided to Household International, Inc.
and will be retained by Household International, Inc. and furnished to the
Securities Exchange Commission or its staff upon request.

EX-99

EXHIBIT 99.1


HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES

DEBT AND PREFERRED STOCK SECURITIES RATINGS

                                        Standard      Moody's
                                        & Poor's    Investors
                                     Corporation      Service     Fitch, Inc.
- -----------------------------------------------------------------------------
At June 30, 2003
- -----------------------------------------------------------------------------
Household International, Inc.
     Senior debt                               A           A2               A
     Preferred stock                        BBB+         Baa1              A-

Household Finance Corporation
     Senior debt                               A           A1               A
     Senior subordinated debt                 A-           A2              A-
     Commercial paper                        A-1          P-1             F-1

HFC Bank plc
     Senior debt                               A           A1               A
     Commercial paper                        A-1          P-1             F-1

Household Bank (Nevada), N.A./(1)/
     Senior debt                               A          A-1               A
- -----------------------------------------------------------------------------
/1/ On July 1, 2002, Household Bank (Nevada), N.A. was merged with and into
    Household Bank (SB), N.A.