Bear Stearns Reports Record Earnings and Net Income in 2003; Strong 4th Quarter Caps Second Consecutive Record Year

NEW YORK–(BUSINESS WIRE)–Dec. 17, 2003–The Bear Stearns Companies Inc. (NYSE:BSC)

— Annual Earnings Per Share of $8.52 and Net Income of $1.2

Billion, Rose 32% over 2002

— 2003 Annual Pre-Tax Profit Margin Hits 29.6%

— 2003 Annual ROE Reaches 20.2%

— 4th Quarter Earnings Per Share Increase 61% to $2.19

— Net Income for the Quarter Rises 51% to $288.3 Million

The Bear Stearns Companies Inc. (NYSE:BSC) today reported earnings per share (diluted) of $2.19 for the fourth quarter ended November 30, 2003, up 61.0% from $1.36 per share for the fourth quarter of 2002. Net income for the fourth quarter of 2003 was $288.3 million, up 51.3% from $190.5 million for the fourth quarter of 2002. Net revenues for the 2003 fourth quarter were $1.5 billion, up 35.9% from $1.1 billion for the 2002 fourth quarter. The annualized return on common stockholders’ equity for the fourth quarter of 2003 was 19.6%.

For the fiscal year ended November 30, 2003, earnings per share (diluted) were a record $8.52, up 31.7% from $6.47 in the prior year. Net income for the full year was $1.2 billion, up 31.7% from the $878.3 million earned in the twelve-month period ended November 30, 2002. Net revenues for fiscal year 2003 were $6.0 billion, an increase of 16.9% from $5.1 billion in the prior fiscal year. After-tax return on common stockholders’ equity was 20.2% for 2003.

“Bear Stearns posted its best ever results in 2003. In the face of difficult market conditions our array of businesses once again produced outstanding results,” said Bear Stearns chairman and chief executive officer, James E. Cayne. “Our Fixed Income Division continues to deliver exceptional results with strong performance across our mortgage, credit and interest rate products areas. The efforts to grow and deepen our franchise are evident not only in Fixed Income but also throughout the firm in Institutional Equities, Global Clearing Services, Investment Banking and Wealth Management. The investments we have made in our equity related businesses will continue to produce returns with improving market conditions, and our current quarter results are evidence of this trend. The increase in profit margins and return on common equity reflect both the growth and diversification of our businesses as well as our continued focus on risk and expense control.”

A brief discussion of the firm’s business segments follows:

CAPITAL MARKETS

Fourth Quarter

Capital Markets net revenues for the fourth quarter of 2003 were $1.2 billion, up 38.8% from $839.6 million for the fourth quarter ended November 30, 2002.

— Institutional Equities net revenues were $266.3 million, down

5.7% from $282.4 million for the fourth quarter of 2002. Lower

volume on the NYSE and depressed volatility levels reduced

institutional equities net revenues. Equity derivatives

revenues rose on improved customer activity.

— Fixed Income net revenues were $648.9 million, up 39.9% from

$463.9 million in the comparable prior year period. Low

interest rates and a steep yield curve continued to create

positive market conditions across the Fixed Income businesses,

including mortgage-backed securities and credit products. Net

revenues increased significantly reflecting these favorable

markets and increased customer activity. In addition, record

revenues were posted this quarter in interest rate products,

particularly in interest rate derivatives and foreign

exchange.

— Investment Banking net revenues were $250.3 million in the

fourth quarter of 2003, up 168.3% from the $93.3 million in

the comparable prior year period. The 2003 fourth quarter

included a $33.7 million realized gain from the sale of a

merchant banking investment in Aeropostale Inc. The fourth

quarter of 2002 included a $33.9 million unrealized loss

relating to a mark down of this investment. Excluding the

investment, Investment Banking net revenues in the quarter

were $216.6 million, up 70.3% from $127.2 million in fourth

quarter of 2002. Performance in equity underwriting, high

yield underwriting and merchant banking significantly

increased revenues when compared with the fourth quarter of

2002.

Full Year

Net revenues in Capital Markets, which includes Institutional Equities, Fixed Income and Investment Banking, were a record $4.8 billion for the fiscal year ended November 30, 2003, an increase of 22.3% over the prior fiscal year’s $3.9 billion.

— Institutional Equities net revenues for fiscal year 2003 were

down 16.6% to $932.6 million from $1.12 billion in fiscal

2002. Difficult market conditions had a negative effect on net

revenues from domestic institutional equities and convertible

and other equity arbitrage activity.

— The Fixed Income Division reported record results for the

third consecutive year, highlighting the strength and breadth

of the franchise. Record net revenues were posted in virtually

all product areas including corporate bonds, interest rate

products, high yield and distressed bonds, government bonds,

foreign exchange and mortgage-backed securities. Fixed Income

net revenues were $2.9 billion, up 51.0% from the $1.9 billion

recorded in 2002.

— Investment Banking net revenues for 2003 were $961.3 million,

up 8.8% from $883.7 million in fiscal 2002. Included in net

revenues are gains from the company’s merchant banking

investment in Aeropostale Inc. of $172.6 million in fiscal

year 2003 and $226.9 million in fiscal year 2002. Excluding

the merchant banking gains from Aeropostale Inc., net revenues

for fiscal 2003 were $788.7 million and for fiscal 2002 were

$656.8 million. The increase in revenues was primarily due to

an extremely strong performance in high yield underwriting. In

addition, merger and acquisition and advisory fees grew

significantly as compared with fiscal 2002.

GLOBAL CLEARING SERVICES

Fourth Quarter

Fourth quarter 2003 Global Clearing Services net revenues were $220.0 million, up 22.0% from $180.3 million in the fourth quarter of 2002, reflecting increased net interest revenues. Average customer margin debt balances for the quarter ended November 30, 2003 were $42.0 billion, up from $31.7 billion in the prior year quarter. Net interest revenue rose as the level of customer margin debt and customer short balances increased.

Full Year

Net revenues in Global Clearing Services were $784.1 million, up 0.8% from $778.1 million in fiscal 2002. Average customer margin debt balances for the year were $39.8 billion, versus $34.1 billion for the year ended November 30, 2002. An increase in net interest revenues attributable to higher customer margin balances was substantially offset by reduced commission revenues as customer volumes declined.

WEALTH MANAGEMENT

Fourth Quarter

Wealth Management net revenues for the quarter ended November 30, 2003 were $145.0 million, up 16.5% from $124.5 million in the fourth quarter of 2002.

— Private Client Service revenues were $105.1 million in the

fourth quarter of 2003, an increase of 21.5% from $86.5

million in the 2002 quarter reflecting improved customer

activity.

— Asset Management net revenues grew 5.0% to $39.9 million for

the fourth quarter of 2003 from $38.0 million in the prior

year’s quarter due to increased management fees.

Full Year

Net revenues in Wealth Management, which includes Private Client Services and Asset Management, were $511.3 million for fiscal 2003, up 2.6% versus $498.4 million in fiscal 2002.

— Revenues from the Private Client Service area rose 5.6% to

$378.8 million for the fiscal year from $358.8 million for

fiscal 2002. The improvement reflects an increase in customer

activity.

— The Asset Management business reported revenues of $132.5

million for the full fiscal year 2003 down 5.1% from $139.6

million in the prior year due to lower performance fees on

alternative investment products.

— Assets under management rose to $27.1 billion as of November

30, 2003 from $24.0 billion as of November 30, 2002.

EXPENSES

Fourth Quarter

— Compensation as a percentage of net revenues was 48.9% in the

fourth quarter of 2003 versus 50.2% for the quarter ended

November 30, 2002.

— Non-compensation expenses were $345.6 million for the quarter

ended November 30, 2003, up 19.7% from $288.9 million in the

2002 quarter. The increase in non-compensation expenses were

principally attributable to higher CAP Plan expenses

associated with improved earnings. Non-compensation expenses

as a percentage of net revenues declined to 22.6% for the 2003

fourth quarter from 25.6% for the fourth quarter of 2002.

Full Year

— For the twelve months ended November 30, 2003, compensation as

a percentage of net revenues was 48.1% versus 48.9% for fiscal

2002. Excluding the merchant banking gains from Aeropostale

Inc., compensation as a percentage of net revenues was 49.2%

for the fiscal year 2003 and 50.9% for the fiscal year 2002.

— Non-compensation expenses for the fiscal year 2003 were $1.34

billion, 2.5% higher than the $1.31 billion reported in 2002.

Non-compensation expense as a percentage of net revenues for

fiscal 2003 declined to 22.4% from 25.5% in fiscal 2002.

As of November 30, 2003, total capital, including stockholders’ equity and long-term borrowings, was approximately $37.5 billion. Book value as of November 30, 2003 was $48.69 per share, based on 142.4 million shares outstanding. The company repurchased approximately 14.0 million shares of its common stock during the fiscal year pursuant to its share repurchase plan.

Founded in 1923, The Bear Stearns Companies Inc. (NYSE: BSC) is the parent company of Bear, Stearns & Co. Inc., a leading investment banking and securities trading and brokerage firm. With approximately $37.5 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide. The company’s business includes corporate finance and mergers and acquisitions, institutional equities and fixed income sales, trading and research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services. Through Bear, Stearns Securities Corp., it offers financing, securities lending, clearing and technology solutions to hedge funds, broker-dealers and investment advisors. Headquartered in New York City, the company has approximately 10,500 employees worldwide. For additional information about Bear Stearns, please visit the firm’s Web site at http://www.bearstearns.com.

Financial Tables Attached <pre> THE BEAR STEARNS COMPANIES INC. SEGMENT DATA (UNAUDITED) Three Months Ended % Change From ———————————– —————– Nov. 30, Nov. 30, Aug. 31, Nov. 30, Aug. 31, 2003 2002 2003 2002 2003 ———– ———– ———– ——– ——– (In thousands) NET REVENUES Capital Markets Institutional Equities $ 266,254 $ 282,411 $ 200,506 (5.7%) 32.8% Fixed Income 648,948 463,908 720,128 39.9% (9.9%) Investment Banking 250,322 93,309 299,742 168.3% (16.5%) ———– ———– ———– Total Capital Markets 1,165,524 839,628 1,220,376 38.8% (4.5%) Global Clearing Services 219,960 180,293 200,929 22.0% 9.5% Wealth Management 144,966 124,462 126,351 16.5% 14.7% Other (1) 827 (17,375) (62,596) 104.8% 101.3% ———- ———- ———- Total net revenues $1,531,277 $1,127,008 $1,485,060 35.9% 3.1% =========== =========== =========== PRE-TAX INCOME Capital Markets $ 433,239 $ 251,460 $ 540,942 72.3% (19.9%) Global Clearing Services 87,127 55,590 68,456 56.7% 27.3% Wealth Management (1,301) 4,357 9,851 (129.9%) (113.2%) Other (1) (82,302) (38,627) (137,072) (113.1%) 40.0% ———– ———– ———– Total pre-tax income $ 436,763 $ 272,780 $ 482,177 60.1% (9.4%) =========== =========== =========== Twelve Months Ended % Change ————————- ———- Nov. 30, Nov. 30, 2003 2002 ———— ———— (In thousands) NET REVENUES Capital Markets Institutional Equities $ 932,567 $ 1,117,762 (16.6%) Fixed Income 2,925,483 1,938,045 51.0% Investment Banking 961,267 883,717 8.8% ———— ———— Total Capital Markets 4,819,317 3,939,524 22.3% Global Clearing Services 784,072 778,087 0.8% Wealth Management 511,307 498,411 2.6% Other (1) (120,205) (87,786) (36.9%) ———— ———— Total net revenues $ 5,994,491 $ 5,128,236 16.9% ============ ============ PRE-TAX INCOME Capital Markets $ 1,924,071 $ 1,343,912 43.2% Global Clearing Services 245,531 265,327 (7.5%) Wealth Management 19,217 11,616 65.4% Other (1) (416,550) (309,892) (34.4%) ———— ———— Total pre-tax income $ 1,772,269 $ 1,310,963 35.2% ============ ============ (1) Includes consolidation and elimination entries, unallocated revenues (predominantly interest) and certain corporate administrative functions, including certain legal costs and costs related to the Capital Accumulation Plan for Senior Managing Directors (“CAP Plan”). </pre> <pre> THE BEAR STEARNS COMPANIES INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended —————————————- Nov. 30, Nov. 30, Aug. 31, 2003 2002 2003 ————- ————- ————- (In thousands, except share and per share data) REVENUES Commissions $ 288,441 $ 276,048 $ 279,888 Principal transactions 790,486 614,366 724,023 Investment banking 225,763 81,236 298,716 Interest and dividends 495,514 505,351 503,135 Other income 64,842 43,870 36,509 ————- ————- ————- Total revenues 1,865,046 1,520,871 1,842,271 Interest expense 333,769 393,863 357,211 ————- ————- ————- Revenues, net of interest expense 1,531,277 1,127,008 1,485,060 ————- ————- ————- NON-INTEREST EXPENSES Employee compensation and benefits 748,880 565,370 681,745 Floor brokerage, exchange and clearance fees 43,498 52,435 44,830 Communications and technology 88,786 94,029 93,047 Occupancy 34,959 35,612 34,788 Advertising and market development 29,239 22,633 24,550 Professional fees 39,248 37,454 36,608 Other expenses 109,904 46,695 87,315 ————- ————- ————- Total non-interest expenses 1,094,514 854,228 1,002,883 ————- ————- ————- Income before provision for income taxes 436,763 272,780 482,177 Provision for income taxes 148,436 82,231 168,762 ————- ————- ————- Net income $ 288,327 $ 190,549 $ 313,415 ============= ============= ============= Net income applicable to common shares $ 280,533 $ 182,359 $ 305,621 ============= ============= ============= Adjusted net income used for diluted earnings per share (1) $ 308,521 $ 195,268 $ 334,180 ============= ============= ============= Basic earnings per share $ 2.43 $ 1.48 $ 2.54 ============= ============= ============= Diluted earnings per share $ 2.19 $ 1.36 $ 2.30 ============= ============= ============= Weighted average common shares outstanding: Basic 124,090,961 130,133,459 128,681,694 ============= ============= ============= Diluted 140,876,365 143,798,762 145,599,540 ============= ============= ============= Cash dividends declared per common share $ 0.20 $ 0.17 $ 0.20 ============= ============= ============= % Change From ————————- Nov. 30, Aug. 31, 2002 2003 ———— ———— REVENUES Commissions 4.5% 3.1% Principal transactions 28.7% 9.2% Investment banking 177.9% (24.4%) Interest and dividends (1.9%) (1.5%) Other income 47.8% 77.6% Total revenues 22.6% 1.2% Interest expense (15.3%) (6.6%) Revenues, net of interest expense 35.9% 3.1% NON-INTEREST EXPENSES Employee compensation and benefits 32.5% 9.8% Floor brokerage, exchange and clearance fees (17.0%) (3.0%) Communications and technology (5.6%) (4.6%) Occupancy (1.8%) 0.5% Advertising and market development 29.2% 19.1% Professional fees 4.8% 7.2% Other expenses 135.4% 25.9% Total non-interest expenses 28.1% 9.1% Income before provision for income taxes 60.1% (9.4%) Provision for income taxes 80.5% (12.0%) Net income 51.3% (8.0%) Net income applicable to common shares 53.8% (8.2%) Adjusted net income used for diluted earnings per share (1) 58.0% (7.7%) Basic earnings per share 64.2% (4.3%) Diluted earnings per share 61.0% (4.8%) (1) Represents net income reduced for preferred stock dividends and increased for costs related to the CAP Plan. For earnings per share, the costs related to the CAP Plan (net of tax) are added back as the shares related to the CAP Plan are included in weighted average common shares outstanding. </pre> <pre> THE BEAR STEARNS COMPANIES INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Twelve Months Ended % Change ————————— ——— November 30, November 30, 2003 2002 ————- ————- (In thousands, except share and per share data) REVENUES Commissions $ 1,077,926 $ 1,110,974 (3.0%) Principal transactions 3,292,888 2,537,799 29.8% Investment banking 904,612 833,480 8.5% Interest and dividends 1,955,373 2,232,159 (12.4%) Other income 164,645 176,404 (6.7%) ————- ————- Total revenues 7,395,444 6,890,816 7.3% Interest expense 1,400,953 1,762,580 (20.5%) ————- ————- Revenues, net of interest expense 5,994,491 5,128,236 16.9% ————- ————- NON-INTEREST EXPENSES Employee compensation and benefits 2,880,695 2,508,197 14.9% Floor brokerage, exchange and clearance fees 180,548 197,266 (8.5%) Communications and technology 365,317 382,857 (4.6%) Occupancy 137,778 152,523 (9.7%) Advertising and market development 106,506 102,984 3.4% Professional fees 133,304 132,927 0.3% Other expenses 418,074 340,519 22.8% ————- ————- Total non-interest expenses 4,222,222 3,817,273 10.6% ————- ————- Income before provision for income taxes 1,772,269 1,310,963 35.2% Provision for income taxes 615,863 432,618 42.4% ————- ————- Net income $ 1,156,406 $ 878,345 31.7% ============= ============= Net income applicable to common shares $ 1,125,031 $ 842,739 33.5% ============= ============= Adjusted net income used for diluted earnings per share (1) $ 1,235,991 $ 946,535 30.6% ============= ============= Basic earnings per share $ 9.44 $ 7.00 34.9% ============= ============= Diluted earnings per share $ 8.52 $ 6.47 31.7% ============= ============= Weighted average common shares outstanding: Basic 127,819,514 132,798,359 ============= ============= Diluted 145,027,266 146,346,111 ============= ============= Cash dividends declared per common share $ 0.74 $ 0.62 ============= ============= (1) Represents net income reduced for preferred stock dividends and increased for costs related to the CAP Plan and the redemption of preferred stock. For earnings per share, the costs related to the CAP Plan (net of tax) are added back as the shares related to the CAP Plan are included in weighted average common shares outstanding. </pre> <pre> THE BEAR STEARNS COMPANIES INC. SELECTED FINANCIAL INFORMATION (UNAUDITED) Twelve Months Ended ————————– Nov. 30, Nov. 30, 2003 2002 ————————– (In thousands, except common share data and other data) Results ——- Revenues, net of interest expense $ 5,994,491 $ 5,128,236 Net income $ 1,156,406 $ 878,345 Net income applicable to common shares $ 1,125,031 $ 842,739 Adjusted net income used for diluted earnings per share (1) $ 1,235,991 $ 946,535 Financial Position —————— Stockholders’ equity, at period end $ 7,470,088 $ 6,382,083 Total stockholders’ equity and trust issued preferred securities, at period end $ 8,032,588 $ 6,944,583 Total capital, at period end $ 37,463,053 $ 30,625,982 Common Share Data —————– Basic earnings per share $ 9.44 $ 7.00 Diluted earnings per share $ 8.52 $ 6.47 Book value per common share, at period end $ 48.69 $ 39.94 Weighted average common shares outstanding: Basic 127,819,514 132,798,359 Diluted 145,027,266 146,346,111 Common shares outstanding, at period end (2) 142,369,836 145,591,496 Financial Ratios —————- Return on average common equity (annualized) 20.2% 18.1% Adjusted pre-tax profit margin (3) 32.8% 28.6% Pre-tax profit margin (4) 29.6% 25.6% After-tax profit margin (5) 19.3% 17.1% Compensation & benefits / Revenues, net of interest expense 48.1% 48.9% Other Data (in billions, except employees) —————————————— Margin debt balances, at period end $ 43.6 $ 36.7 Margin debt balances, average for period $ 39.8 $ 34.1 Customer short balances, at period end $ 71.6 $ 58.8 Customer short balances, average for period $ 63.6 $ 54.6 Stock borrowed, at period end $ 56.5 $ 46.2 Stock borrowed, average for period $ 52.1 $ 44.1 Free credit balances, at period end $ 22.3 $ 17.1 Free credit balances, average for period $ 20.1 $ 19.3 Assets under management, at period end $ 27.1 $ 24.0 Employees, at period end 10,532 10,574 Three Months Ended ————————————————— Nov. 30, Aug. 31, May 31, Feb. 28, 2003 2003 2003 2003 —————————————————- (In thousands, except common share data and other data) Results ——- Revenues, net of interest expense $ 1,531,277 $ 1,485,060 $ 1,462,720 $ 1,515,434 Net income $ 288,327 $ 313,415 $ 280,411 $ 274,253 Net income applicable to common shares $ 280,533 $ 305,621 $ 272,616 $ 266,261 Adjusted net income used for diluted earnings per share (1) $ 308,521 $ 334,180 $ 299,533 $ 293,756 Financial Position —————— Stockholders' equity, at period end $ 7,470,088 $ 6,875,668 $ 6,714,397 $ 6,529,628 Total stockholders' equity and trust issued preferred securities, at period end $ 8,032,588 $ 7,438,168 $ 7,276,897 $ 7,092,128 Total capital, at period end $ 37,463,053 $ 34,438,022 $ 33,520,967 $ 31,987,917 Common Share Data —————– Basic earnings per share $ 2.43 $ 2.54 $ 2.27 $ 2.21 Diluted earnings per share $ 2.19 $ 2.30 $ 2.05 $ 2.00 Book value per common share, at period end $ 48.69 $ 45.46 $ 43.52 $ 41.64 Weighted average common shares outstanding: Basic 124,090,961 128,681,694 128,711,363 129,773,603 Diluted 140,876,365 145,599,540 146,062,838 147,029,224 Common shares outstanding, at period end (2) 142,369,836 146,662,752 146,915,258 146,659,224 Financial Ratios —————- Return on average common equity (annualized) 19.6% 21.3% 19.7% 19.9% Adjusted pre-tax profit margin (3) 31.7% 35.8% 32.4% 31.2% Pre-tax profit margin (4) 28.5% 32.5% 29.3% 28.1% After-tax profit margin (5) 18.8% 21.1% 19.2% 18.1% Compensation & benefits / Revenues, net of interest expense 48.9% 45.9% 47.3% 50.0% Other Data (in billions, except employees) —————– Margin debt balances, at period end $ 43.6 $ 40.9 $ 43.4 $ 37.3 Margin debt balances, average for period $ 42.0 $ 42.1 $ 39.0 $ 35.9 Customer short balances, at period end $ 71.6 $ 65.7 $ 65.5 $ 55.9 Customer short balances, average for period $ 69.3 $ 67.3 $ 61.4 $ 56.3 Stock borrowed, at period end $ 56.5 $ 53.4 $ 49.8 $ 41.6 Stock borrowed, average for period $ 59.1 $ 55.6 $ 48.5 $ 45.0 Free credit balances, at period end $ 22.3 $ 19.8 $ 18.6 $ 16.7 Free credit balances, average for period $ 22.4 $ 20.8 $ 18.8 $ 18.4 Assets under management, at period end $ 27.1 $ 25.7 $ 24.4 $ 23.3 Employees, at period end 10,532 10,515 10,472 10,506 Three Months Ended —————————————————- Nov. 30, Aug. 31, May 31, Feb. 28, 2002 2002 2002 2002 —————————————————- (In thousands, except common share data and other data) Results ——- Revenues, net of interest expense $ 1,127,008 $ 1,154,384 $ 1,607,666 $ 1,239,178 Net income $ 190,549 $ 164,418 $ 342,852 $ 180,526 Net income applicable to common shares $ 182,359 $ 156,094 $ 333,538 $ 170,748 Adjusted net income used for diluted earnings per share (1) $ 195,268 $ 178,994 $ 381,533 $ 190,739 Financial Position —————— Stockholders' equity, at period end $ 6,382,083 $ 5,954,431 $ 5,963,258 $ 5,760,905 Total stockholders' equity and trust issued preferred securities, at period end $ 6,944,583 $ 6,516,931 $ 6,525,758 $ 6,323,405 Total capital, at period end $ 30,625,982 $ 29,567,725 $ 31,038,949 $ 31,063,625 Common Share Data —————– Basic earnings per share $ 1.48 $ 1.32 $ 2.80 $ 1.39 Diluted earnings per share $ 1.36 $ 1.23 $ 2.59 $ 1.29 Book value per common share, at period end $ 39.94 $ 38.10 $ 37.16 $ 34.95 Weighted average common shares outstanding: Basic 130,133,459 132,436,184 133,772,110 134,793,949 Diluted 143,798,762 145,895,494 147,592,256 148,115,050 Common shares outstanding, at period end (2) 145,591,496 146,478,611 146,873,990 147,040,102 Financial Ratios —————- Return on average common equity (annualized) 14.5% 13.3% 29.5% 15.2% Adjusted pre-tax profit margin (3) 26.2% 24.0% 36.3% 24.9% Pre-tax profit margin (4) 24.2% 21.2% 32.3% 22.1% After-tax profit margin (5) 16.9% 14.2% 21.3% 14.6% Compensation & benefits / Revenues, net of interest expense 50.2% 51.6% 44.4% 51.1% Other Data (in billions, except employees) —————– Margin debt balances, at period end $ 36.7 $ 32.5 $ 36.7 $ 34.6 Margin debt balances, average for period $ 31.7 $ 33.7 $ 35.9 $ 35.1 Customer short balances, at period end $ 58.8 $ 52.6 $ 55.8 $ 54.5 Customer short balances, average for period $ 53.5 $ 52.1 $ 56.9 $ 55.9 Stock borrowed, at period end $ 46.2 $ 40.6 $ 43.3 $ 39.8 Stock borrowed, average for period $ 43.4 $ 41.9 $ 45.4 $ 45.6 Free credit balances, at period end $ 17.1 $ 18.3 $ 16.6 $ 17.9 Free credit balances, average for period $ 19.8 $ 19.4 $ 18.5 $ 19.6 Assets under management, at period end $ 24.0 $ 23.2 $ 24.8 $ 25.8 Employees, at period end 10,574 10,493 10,426 10,341 (1) Represents net income reduced for preferred stock dividends and increased for costs related to the CAP Plan and the redemption of preferred stock. For earnings per share, the costs related to the CAP Plan (net of tax) are added back as the shares related to the CAP Plan are included in weighted average common shares outstanding. (2) Represents shares used to calculate book value per common share. Common shares outstanding include units issued under certain stock compensation plans which will be distributed as shares of common stock. (3) Represents the ratio of income before both CAP Plan costs and provision for income taxes to revenues, net of interest expense. (4) Represents the ratio of income before provision for income taxes to revenues, net of interest expense. (5) Represents the ratio of net income to revenues, net of interest expense. </pre>

Certain statements contained in this discussion are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those discussed in the forward-looking statements. For a discussion of the risks and uncertainties that may affect the company’s future results, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Management” in the company’s 2002 Annual Report to Stockholders and similar sections in the company’s quarterly reports on Form 10-Q which have been filed with the Securities and Exchange Commission.

A conference call to discuss the company’s results will be held on Wednesday, December 17, at 9:00 a.m., E.S.T. The call will be open to the public. Those wishing to listen to the conference call should dial 1-888-806-9467 (or 1-703-871-3627 for international callers) at least 15 minutes prior to the commencement of the call to ensure connection. The conference call will also be accessible through our Web site at http://www.bearstearns.com. For those unable to listen to the live broadcast of the call, a replay will be available on our Web site or by dialing 1-888-836-6074 (or 1-703-925-2505 for international callers) at approximately 1:00 p.m. E.S.T. The pass code for the replay is 344758. The replay will be available until midnight on Friday, December 26. If you have any questions on how to obtain access to the conference call, please contact Kerri Kelly at 1-212-272-2529 or via email at [email protected].

Bear Stearns Reports Record Earnings and Net Income in 2003; Strong 4th Quarter Caps Second Consecutive Record Year

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