Net revenues of € 11.7 billion in 2003 were € 546 million higher compared to € 11.2 billion in 2002 despite the negative impact of the strength of the euro on the value of our significant revenues in other currencies and in particular the U.S. dollar.
Sales and trading revenues (debt and other products) were € 6.1 billion in 2003 compared to € 5.6 billion in 2002, an improvement of € 502 million, or 9%. Global Markets maintained its leadership position in structured businesses, such as interest rate and credit, and securitizations. It is fast becoming a top-tier player in the U.S. bond market, complementing its leadership in Europe. Origination revenues (debt) of € 555 million increased by € 146 million particularly reflecting higher underwriting fees due to increased activity in the high-yield business.
Sales and trading revenues (equity) of € 3.1 billion increased by € 618 million compared to 2002 reflecting increased market activity and improved market sentiment. Lower trading-related net interest income and lower brokerage fees were more than offset by higher trading revenues. Trading-related revenues in 2002 included the negative effect of a single block trade. In 2003 Global Equities’ higher margin businesses had an outstanding year – the convertible bond business had its best ever and Equity Derivatives continued its strong performance. Its cash business maintained the number one position in terms of market share in Europe.
Revenues from origination (equity) of € 486 million increased by € 131 million. The increase was due to losses in 2002 from the underwriting-related effect of the aforementioned single block trade. Underwriting fees declined reflecting lower activity in the first half of the year.
Advisory revenues were € 470 million, down 11% from 2002, reflecting poor volumes and the general low level of market activity in the first half of 2003.
Revenues from loan products fell in 2003 to € 1.5 billion from € 2.1 billion in 2002. The decline was due to a further strategic reduction in loan volumes, corresponding lower net interest and fee income as well as € 285 million in hedge premium costs and mark-to-market losses incurred on the use of credit default swaps to hedge elements of the loan portfolios. Over the life of the credit derivative the losses on the mark-to-market element of these transactions will tend to materially offset, leaving the cost of the hedge as the ultimate expense.