JPMorgan Chase & Co. (JPM) 8-K Jpmorgan Chase Reports 2002 Second Quarter Results

J.P. Morgan Chase & Co.
270 Park Avenue, New York, NY 10017-2070
NYSE symbol: JPM
www.jpmorganchase.com

News release: IMMEDIATE RELEASE

JPMORGAN CHASE REPORTS 2002 SECOND QUARTER RESULTS

New York, July 17, 2002– J.P. Morgan Chase & Co. (NYSE: JPM) today announced 2002 second quarterreportedearnings per share, inclusive of all restructuring charges, of $0.50, compared with $0.48 in the first quarter of 2002 and $0.18 in the second quarter of 2001. Reported net income was $1,028 million in the second quarter compared to $982 million in the first quarter and $378 million one year ago.

Operatingearnings per share, which exclude previously announced merger and restructuring charges, were $0.58 compared with $0.57 in the first quarter of 2002 and $0.38 in the second quarter of 2001. Operating earnings were $1,179 million in the second quarter compared to $1,150 million in the first quarter and $786 million one year ago. Operating earnings for 2001 have been increased by adding back amortization of goodwill to present 2001 results on a basis comparable to the results for 2002 which include the impact of the implementation on January 1, 2002 of SFAS 142. For a reconciliation between Operating and Reported earnings see the table on page 7.

OperatingROE for the second quarter was 11% and excluding JPMorgan Partners was 15%. The contribution of JPMorgan Partners to operating earnings per share was a loss of $0.08 in the second quarter compared to a $0.12 loss in the first quarter of 2002 and a $0.30 loss in the second quarter of 2001.

“Second quarter earnings continued to be affected by weak capital markets and remain well below the potential of this franchise,” said William B. Harrison, Jr., Chairman and Chief Executive Officer. “We are pleased with the strong results in our consumer and services businesses and the significant gains this quarter in market share across virtually all investment banking products. Our focus today is on financial discipline and delivering superior service and products to clients.”

Highlights for the second quarter of 2002

• Retail & Middle Market Financial Services reported record operating earnings of $686 million, up 29% from the first quarter of 2002 and up 60% from the second quarter of 2001.

• Trading revenues were down approximately 30% from both the first quarter of 2002 and the second quarter of 2001.

• Investment banking fees increased from the first quarter reflecting market share gains, particularly in equity underwriting.

• Treasury & Securities Services reported record operating earnings of $177 million, up 22% from the first quarter of 2002 and up 16% from the second quarter of 2001.

• Credit costs remained high but stable, while nonperforming assets were marginally higher than the first quarter of this year.

Investor Contact: John Borden
(212) 270-7318 Media Contact: Jon Diat
(212)270-5089
Joe Evangelisti
(212)270-7438

J.P. Morgan Chase & Co.
News Release

Business segment results

Retail & Middle Market Financial Serviceshad a second consecutive quarter of record revenues and operating earnings. Operating earnings of $686 million were up 29% from the first quarter and up 60% from the second quarter of 2001 driven by strong performances across the consumer credit businesses and middle market. ROE for the second quarter was 26%, compared to 21% last quarter and 19% for the second quarter of 2001.

Operating revenues of $3.50 billion were up 11% from the first quarter and 27% from the second quarter of 2001 driven by continued high production volumes across all consumer businesses and low interest rates. Home Finance revenues were driven by an increase in customer servicing balances and higher mortgage origination and servicing margins impacted by business mix and a strong housing environment as well as better than expected servicing risk management performance resulting from wider spreads. Managed credit card outstandings increased 29% from June 30, 2001 to $49.5 billion due to the Providian acquisition in the first quarter of 2002 and organic growth. There were close to 900,000 new accounts originated during the quarter, the seventh consecutive quarter of additions at this level. Total deposits grew 2% from the first quarter and 12% from the second quarter of 2001.

Operating expenses of $1.67 billion increased by 7% from the first quarter and by 16% from the second quarter of 2001. The increases reflected the impact of higher expenses related to higher volumes. Savings generated by Six Sigma productivity programs continued to partially offset the growth in expenses.

Managed credit costs of $736 million were 1% higher than the first quarter and were 17% higher than the second quarter of 2001, primarily due to increased charge-offs related to the full quarter impact of the Providian credit card portfolio.

The Investment Bankhad operating earnings of $485 million in the second quarter, a decline of 35% from the first quarter and 38% lower than the second quarter of 2001. Operating ROE was 10% for the quarter compared to 16% last quarter and 17% for the second quarter of 2001.

Operating revenues of $3.09 billion in the second quarter of 2002 were 14% lower than last quarter and down 17% from the second quarter of 2001.

Trading revenues (including related net interest income) and brokerage commissions of $1.41 billion decreased 28% from the first quarter and were down 23% from the second quarter of 2001. The decline from the first quarter was driven largely by fixed income results, particularly in interest-rate markets and emerging markets. The decline from the second quarter of 2001 was primarily due to lower equity derivatives revenues driven by difficult market conditions.

Investment banking fees totaled $783 million in the second quarter, an increase of 6% from the first quarter but 15% lower than the second quarter of 2001. The increase from the first quarter reflects a 33% increase in equity underwriting fees and flat M&A fees and debt underwriting revenues. Market

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J.P. Morgan Chase & Co.
News Release

share gains in the second quarter included global announced M&A (#1), U.S. and global equity and equity-related (#6), U.S. investment grade bonds (#2) and global loan syndications (#1). ¹

Operating expenses for the second quarter of $2.02 billion decreased by 4% from the first quarter and by 11% from the second quarter of 2001. Operating expenses in the second quarter included $123 million in severance and other costs associated with restructuring programs announced in 2002. This compared to $47 million of such costs in the first quarter. The overhead ratio for the second quarter was 65% compared to 58% in the first quarter and 61% in the second quarter of 2001.

Investment Management & Private Bankinghad operating earnings of $118 million, down 6% from the first quarter and 2% higher than the second quarter of 2001. Pre-tax margin in the second quarter was 21% compared with 22% last quarter and 19% in the second quarter of 2001.

Operating revenues of $691 million in the second quarter were 5% below the first quarter and 12% lower than the second quarter of 2001. Continued declines in global equity markets valuations and eroding investor activity levels accounted for most of the decreases. Operating expenses of $520 million for the quarter were 5% lower than the first quarter and down 18% from the second quarter of 2001 as a result of continued reductions in compensation and other expenses. Private Banking credit costs were unchanged from the first quarter but increased from the prior year.

Total assets under management at quarter-end of $541 billion were 7% lower than the first quarter and down 11% from the second quarter of 2001. Falling equity prices accounted for most of the year on year declines; outflows from institutional cash management products accounted for the balance. These effects outweighed continued positive flows and a year-over-year increase in assets under management for the retail mutual funds.

Treasury & Securities Serviceshad record operating earnings of $177 million, an increase of 22% from the first quarter and 16% from the second quarter of 2001. Operating ROE for the quarter was 23% compared to 20% in each of the last quarter and the second quarter of 2001.

Operating revenues were $985 million in the second quarter of 2002, up 5% from the first quarter and up 2% from the second quarter of 2001. Revenues in Investor Services were up 9% from the first quarter and were virtually flat compared to the second quarter of 2001. The increase from the first quarter was due to higher custody fees, foreign exchange revenue and securities lending fees. Institutional Trust revenues increased 9% from the first quarter of 2002 due to higher American Depositary Receipt revenues and new business. The 12% increase in Institutional Trust revenues from the second quarter of 2001 reflected the impact of acquisitions and new business wins partially offset by the effect of slower fixed income activity. The impact of lower interest rates on Treasury & Securities Services revenues was largely offset by higher deposits resulting from increased business volumes.

Operating expenses were virtually unchanged from the first quarter and declined 2% from the second quarter of 2001. The business continues to focus on cost containment and improving its overhead ratio, while selectively investing in acquisitions for future growth. The overhead ratio for the second quarter was 72% compared to 76% in each of the first quarter of 2002 and the second quarter of 2001.

¹ Derived from Thomson Financial Securities Data, based on proceeds

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J.P. Morgan Chase & Co.
News Release

JPMorgan Partnershad an operating loss of $165 million for the quarter compared to an operating loss of $248 million in the first quarter and an operating loss of $610 million in the second quarter of 2001.

Total net private equity gains were negative $125 million, as compared to negative $255 million in the first quarter and negative $823 million in the second quarter of 2001. The second quarter 2002 results were driven by writedowns and write-offs on private holdings of $216 million and net mark-to-market losses on public securities of $20 million, partially offset by net realized gains of $111 million. Losses were concentrated in telecommunications and technology investments. The private equity market continues to be unsettled, with limited exit opportunities and constrained financing.

Expenses

Operating expenses were $4.97 billion, a 3% decline from the first quarter of this year and a 5% reduction from the second quarter of 2001. Second quarter operating expenses included $162 million in costs related to headcount reductions and other costs associated with restructuring programs announced in 2002. This compared with $106 million of these expenses in the first quarter.

Credit

Commercialnet charge-offs in the second quarter of 2002 were $293 million, compared to $320 million in the previous quarter and $212 million in the second quarter of 2001. The charge-off ratio was 1.17% for the second quarter of 2002, 1.27% for the first quarter of 2002 and 0.77% for the second quarter of 2001.

Consumernet charge-offs on a managed basis were $862 million, up from $754 million in the prior quarter and $586 million in the second quarter of 2001. On a managed basis, the credit card net charge-off ratio was 6.42%, compared to 5.87% for the first quarter and 5.54% for the second quarter of 2001. The increase was primarily due to the inclusion of the Providian portfolio for the full quarter. Consumer credit trends continued to improve with positive trends in 30-, 60- and 90-day delinquencies in credit cards and lower delinquencies and low loss ratios in auto and home financing.

Provision for Loan Lossesequaled net charge-offs this quarter. The provision for loan losses also equaled net charge-offs in the first quarter of 2002 and the second quarter of 2001.

Total Nonperforming Assetswere $4.38 billion at June 30, 2002, which includes $1.13 billion related to the Enron surety receivables and letter of credit. Excluding this amount, which is the subject of litigation with creditworthy entities, nonperforming assets totaled $3.25 billion. This compares to $3.18 billion last quarter and $2.50 billion as of June 30, 2001. The increase from the first quarter of 2002 related primarily to nonperforming telecommunications loans.

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J.P. Morgan Chase & Co.
News Release

Total assets and capital

Total assets as of June 30, 2002 were $741 billion, compared with $713 billion as of both March 31, 2002 and June 30, 2001. The increase from March 31, 2002 was largely driven by growth in trading assets. Commercial loans increased 3%, or $2.9 billion, from the first quarter but fell 7%, or $8.1 billion, from the second quarter of 2001. Managed consumer loans declined by 1% from the first quarter and increased 8% from the second quarter of 2001. The Tier 1 capital ratio was 8.7% at June 30, compared to 8.6% at March 31, 2002 and 8.7% at June 30, 2001.

Other financial information

Special Itemsin the second quarter of 2002 included $229 million (pre-tax) in merger and restructuring costs, compared to $255 million (pre-tax) in the first quarter of 2002. Special items in the second quarter of 2001 included merger and restructuring costs (pre-tax) of $478 million.

J.P. Morgan Chase & Co. is a leading global financial services firm with assets of $741 billion and operations in more than 50 countries. With relationships with over 99% of theFortune1000 companies, the firm is a leader in investment banking, asset management, private banking, private equity, custody and transaction services and retail and middle market financial services. A component of the Dow Jones Industrial Average, JPMorgan Chase is headquartered in New York and serves more than 30 million consumer customers and the world’s most prominent corporate, institutional and government clients. Information about JPMorgan Chase is available on the internet at www.jpmorganchase.com.

JPMorgan Chase will hold a presentation for the investment community on Wednesday, July 17, 2002 at 11:00 a.m. (Eastern Daylight Time) to review second quarter 2002 financial results. A live audio webcast of the presentation will be available on www.jpmorganchase.com. In addition, persons interested in listening to the presentation by telephone may dial in at (973) 872-3100. A telephone replay of the presentation will be available beginning at 1:00 p.m. (EDT) on July 17, 2002 and continuing through 6:00 p.m. (EDT) on July 23, 2002 at (973) 341-3080 pin #3335966. The replay also will be available on www.jpmorganchase.com. Additional detailed financial, statistical and business-related information is included in a financial supplement. The earnings release and the financial supplement are available on the JPMorgan Chase web site (www.jpmorganchase.com).

This press release contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. These risks and uncertainties could cause our results to differ materially from those set forth in such forward-looking statements. Such risks and uncertainties are described in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 and in the 2001 Annual Report on Form 10-K, each filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission’s internet site (http://www.sec.gov), to which reference is hereby made.

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J.P. MORGAN CHASE & CO.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(in millions, except per share and ratio data)

												2QTR 2002												YTD 2002
												Over (Under)						YEAR TO DATE						Over (Under)
			2QTR			1QTR			2QTR
			2002			2002			2001			1Q 2002			2Q 2001			2002			2001			2001
OPERATING INCOME STATEMENT(a)(b)
OPERATING REVENUE:
Investment Banking Fees			$	785		$	755		$	929			4	%		(16	)%	$	1,540		$	1,870			(18	)%
Trading-Related Revenue (Incl. Trading NII)				1,136			1,720			1,594			(34	)		(29	)		2,856			3,761			(24	)
Fees and Commissions				2,745			2,493			2,422			10			13			5,238			4,504			16
Private Equity — Realized Gains (Losses)				(10	)		(10	)		(46	)		—			78			(20	)		366		NM
Private Equity — Unrealized Gains (Losses)				(115	)		(228	)		(783	)		50			85			(343	)		(1,068	)		68
Securities Gains				124			114			67			9			85			238			522			(54	)
Other Revenue				273			137			280			99			(3	)		410			537			(24	)
Net Interest Income (Excl. Trading NII)				2,970			2,938			2,759			1			8			5,908			5,296			12
		TOTAL OPERATING REVENUE		7,908			7,919			7,222			—			9			15,827			15,788			—
OPERATING EXPENSE:
Compensation Expense				2,761			2,823			3,026			(2	)		(9	)		5,584			6,362			(12	)
Noncompensation Expense				2,204			2,280			2,188			(3	)		1			4,484			4,381			2
	TOTAL OPERATING EXPENSE			4,965			5,103			5,214			(3	)		(5	)		10,068			10,743			(6	)
Credit Costs				1,155			1,074			798			8			45			2,229			1,486			50
Operating Income before Taxes				1,788			1,742			1,210			3			48			3,530			3,559			(1	)
Income Taxes				609			592			424			3			44			1,201			1,246			(4	)
OPERATING EARNINGS			$	1,179		$	1,150		$	786			3			50		$	2,329		$	2,313			1
Special Items & Change in Acctng Principle				(151	)		(168	)		(312	)		10			52			(319	)		(549	)		42
Amortization of Goodwill, Net of Taxes(c)				—			—			(96	)	NM			NM				—			(187	)	NM
NET INCOME			$	1,028		$	982		$	378			5			172		$	2,010		$	1,577			27
OPERATING BASIS
Diluted Earnings per Share			$	0.58		$	0.57		$	0.38			2			53		$	1.15		$	1.12			3
Shareholder Value Added				(57	)		(59	)		(481	)		3			88			(116	)		(196	)		41
Return on Managed Assets				0.62	%		0.63	%		0.42	%		(1	)bp		20	bp		0.63	%		0.62	%		1	bp
Return on Common Equity				11.4			11.4			7.4			—			400			11.4			11.0			40
Overhead Ratio				63			64			72			(100	)		(900	)		64			68			(400	)
Common Dividend Payout Ratio				59			60			89			(100	)		(3,000	)		60			60			—
Compensation Exp. as a % of Revenue				35			36			42			(100	)		(700	)		35			40			(500	)
Noncompensation Exp. as a % of Revenue				28			29			30			(100	)		(200	)		28			28			—
NET INCOME PER COMMON SHARE
Basic			$	0.51		$	0.49		$	0.18			4	%		183	%	$	1.00		$	0.78			28	%
Diluted				0.50			0.48			0.18			4			178			0.99			0.76			30
COMMON SHARES OUTSTANDING
Basic Average Shares Outstanding				1,982.6			1,978.2			1,978.4			—			—			1,980.4			1,972.6			—
Diluted Average Shares Outstanding				2,016.0			2,005.8			2,033.6			1			(1	)		2,011.0			2,033.0			(1	)
Common Shares Outstanding — Period End				1,993.4			1,990.2			1,989.2			—			—			1,993.4			1,989.2			—
CASH DIVIDENDS DECLARED PER SHARE			$	0.34		$	0.34		$	0.34			—			—		$	0.68		$	0.68			—
BOOK VALUE PER SHARE				20.93			20.16			20.81			4			1
CAPITAL RATIOS
Tier I Capital Ratio				8.7	%(d)		8.6	%		8.7	%		10	bp		—	bp
Total Capital Ratio				12.6	(d)		12.5			12.2			10			40
Tier I Leverage				5.4	(d)		5.4			5.4			—			—

Note: Prior periods have been restated to conform with current methodologies.

(a)	See page 10 for a reconciliation between reported results and operating results.
(b)	In the first quarter of 2002, the Firm implemented EITF 01-14, “Income Statement Characterization of Reimbursements Received for ‘Out-of-Pocket’ Expenses Incurred (Formerly EITF Abstracts, Topic D-103).” Consequently, prior period amounts have been restated.
(c)	Reported net income for 2002 reflects the adoption of SFAS 142 and, accordingly, the Firm ceased amortizing goodwill effective January 1, 2002. There was no impairment of goodwill upon adoption of SFAS 142. Previously reported operating earnings for 2001 have been adjusted by adding back amortization of goodwill to make 2001 results comparable to 2002.
(d)	Estimated

bp — Denotes basis points; 100 bp equals 1%

NM — Not meaningful

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J.P. MORGAN CHASE & CO
LINES OF BUSINESS FINANCIAL HIGHLIGHTS SUMMARY
(in millions, except per share and ratio data)

													2QTR 2002												YTD 2002
													Over (Under)						YEAR TO DATE						Over (Under)
				2QTR			1QTR			2QTR
				2002			2002			2001			1Q 2002			2Q 2001			2002			2001			2001
OPERATING REVENUE
Investment Bank				$	3,093		$	3,608		$	3,711			(14	)%		(17	)%	$	6,701		$	8,034			(17)	%
Treasury & Securities Services					985			934			962			5			2			1,919			1,915			—
Investment Management & Private Banking					691			729			789			(5	)		(12	)		1,420			1,592			(11	)
Retail & Middle Market Financial Services					3,504			3,154			2,769			11			27			6,658			5,448			22
Corporate (a)					(186	)		(203	)		(123	)		8			(51	)		(389	)		(402	)		3
	OPERATING REVENUE EXCL. JPMP				8,087			8,222			8,108			(2	)		—			16,309			16,587			(2	)
JPMorgan Partners					(179	)		(303	)		(886	)		41			80			(482	)		(799	)		40
		OPERATING REVENUE (b)		$	7,908		$	7,919		$	7,222			—			9		$	15,827		$	15,788			—
EARNINGS
Investment Bank				$	485		$	750		$	785			(35	)		(38	)	$	1,235		$	1,812			(32	)
Treasury & Securities Services					177			145			152			22			16			322			314			3
Investment Management & Private Banking					118			125			116			(6	)		2			243			217			12
Retail & Middle Market Financial Services					686			533			428			29			60			1,219			854			43
Corporate (a)					(122	)		(155	)		(85	)		21			(44	)		(277	)		(270	)		(3	)
		OPERATING EARNINGS EXCL. JPMP			1,344			1,398			1,396			(4	)		(4	)		2,742			2,927			(6	)
JPMorgan Partners					(165	)		(248	)		(610	)		33			73			(413	)		(614	)		33
		OPERATING EARNINGS (b)			1,179			1,150			786			3			50			2,329			2,313			1
Special Items & Change in Acctng Principle					(151	)		(168	)		(312	)		10			52			(319	)		(549	)		42
Amortization of Goodwill, Net of Taxes					—			—			(96	)	NM			NM				—			(187	)	NM
			NET INCOME (b)	$	1,028		$	982		$	378			5			172		$	2,010		$	1,577			27
EARNINGS PER SHARE — DILUTED
OPERATING EARNINGS EXCL. JPMP				$	0.66		$	0.69		$	0.68			(4	)		(3	)	$	1.35		$	1.42			(5	)
Impact of JPMP					(0.08	)		(0.12	)		(0.30	)		33			73			(0.20	)		(0.30	)		33
OPERATING EARNINGS (b)					0.58			0.57			0.38			2			53			1.15			1.12			3
Special Items & Change in Acctng Principle					(0.08	)		(0.09	)		(0.15	)		11			47			(0.16	)		(0.27	)		41
Amortization of Goodwill, Net of Taxes					—			—			(0.05	)	NM			NM				—			(0.09	)	NM
NET INCOME (b)				$	0.50		$	0.48		$	0.18			4			178		$	0.99		$	0.76			30
OPERATING RETURN ON COMMON EQUITY
Investment Bank					10.4	%		15.9	%		16.7	%		(550	)bp		(630	)bp		13.2	%		18.7	%		(550	)bp
Treasury & Securities Services					22.9			19.8			19.8			310			310			21.4			21.2			20
Investment Management & Private Banking					7.8			8.4			7.3			(60	)		50			8.1			6.7			140
Retail & Middle Market Financial Services					26.0			20.9			18.5			510			750			23.5			18.9			460
OPERATING RETURN ON COMMON EQUITY (b)					11.4			11.4			7.4			—			400			11.4			11.0			40

(a)	Includes Support Units and the effects remaining at the corporate level after the implementation of management accounting policies.
(b)	Represents consolidated JPMorgan Chase.

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J.P. MORGAN CHASE & CO.
CONSOLIDATED BALANCE SHEET
(in millions)

											Jun 30, 2002
		Jun 30th			Mar 31st			Jun 30th			Over (Under)
		2002			2002			2001			Mar 31, 02			Jun 30, 01
ASSETS
Cash and Due from Banks		$	21,878		$	22,637		$	24,219			(3	)%		(10	)%
Deposits with Banks			10,517			9,691			11,903			9			(12	)
Federal Funds Sold and Securities Purchased under Resale Agreements			71,740			76,719			61,308			(6	)		17
Securities Borrowed			48,429			40,880			38,296			18			26
Trading Assets:
	Debt and Equity Instruments		159,746			144,992			139,135			10			15
	Derivative Receivables		69,858			63,224			68,910			10			1
Securities			64,526			61,225			68,488			5			(6	)
Loans (Net of Allowance for Loan Losses)			207,080			209,541			216,245			(1	)		(4	)
Goodwill			8,089			8,055			8,640			—			(6	)
Other Intangibles:
	Mortgage Servicing Rights		5,689			6,918			7,073			(18	)		(20	)
	Purchased Credit Card Relationships		1,426			1,508			568			(5	)		151
	All Other Intangibles		313			327			74			(4	)	NM
Private Equity Investments			8,229			8,553			9,855			(4	)		(16	)
Other Assets			63,026			58,238			57,988			8			9
TOTAL ASSETS		$	740,546		$	712,508		$	712,702			4			4
LIABILITIES
Deposits		$	293,829		$	282,037		$	276,804			4			6
Federal Funds Purchased and Securities Sold under Repurchase Agreements			162,656			152,837			155,062			6			5
Commercial Paper			14,561			23,726			19,985			(39	)		(27	)
Other Borrowed Funds			17,352			16,968			18,418			2			(6	)
Trading Liabilities:
	Debt and Equity Instruments		67,952			71,141			53,571			(4	)		27
	Derivative Payables		55,575			44,997			62,373			24			(11	)
Accounts Payable and Other Liabilities (Including the Allowance for Credit Losses)			38,083			36,910			38,157			3			—
Long-Term Debt			42,363			37,322			40,917			14			4
Guaranteed Preferred Beneficial Interests in the Firm’s Junior Subordinated Deferrable Interest Debentures			5,439			5,439			4,439			—	��		23
TOTAL LIABILITIES			697,810			671,377			669,726			4			4
PREFERRED STOCK OF SUBSIDIARY			—			—			550		NM			NM
STOCKHOLDERS’ EQUITY
Preferred Stock			1,009			1,009			1,025			—			(2	)
Common Stock			2,020			2,016			1,990			—			2
Capital Surplus			13,111			12,783			12,000			3			9
Retained Earnings			27,605			27,278			28,265			1			(2	)
Accumulated Other Comprehensive Income (Loss)			79			(909	)		(834	)	NM			NM
Treasury Stock, at Cost			(1,088	)		(1,046	)		(20	)		(4	)	NM
TOTAL STOCKHOLDERS’ EQUITY			42,736			41,131			42,426			4			1
TOTAL LIABILITIES, PREFERRED STOCK OF SUBSIDIARY AND STOCKHOLDERS’ EQUITY		$	740,546		$	712,508		$	712,702			4			4

Note: Prior periods have been restated to conform with current methodologies.

Page 8

J.P. MORGAN CHASE & CO.
CREDIT-RELATED INFORMATION
(in millions, except ratios)

													Jun 30, 2002
				Jun 30th			Mar 31st			Jun 30th			Over (Under)
				2002			2002			2001			Mar 31, 02			Jun 30, 01
CREDIT-RELATED ASSETS:
Commercial Loans				$	104,701		$	101,752		$	112,790			3	%		(7	)%
Derivative and FX Contracts					69,858			63,224			68,910			10			1
	Total Commercial Credit-Related Assets (a)				174,559			164,976			181,700			6			(4	)
Managed Consumer Loans (b)					134,884			136,019			124,881			(1	)		8
	Total Managed Credit-Related Assets			$	309,443		$	300,995		$	306,581			3			1
NET CHARGE-OFFS: (c)
Commercial Loans				$	293		$	320		$	212			(8	)		38
Credit Card — Managed (b)					767			658			507			17			51
All Other Consumer					95			96			79			(1	)		20
Managed Consumer Loans					862			754			586			14			47
	Total Managed Net Charge-offs			$	1,155		$	1,074		$	798			8			45
NET CHARGE-OFF RATES — ANNUALIZED:
Total Commercial Loans					1.17	%		1.27	%		0.77	%		(10	)bp		40	bp
Credit Card — Managed					6.42			5.87			5.54			55			88
Total Managed Loans					1.96			1.82			1.37			14			59
NONPERFORMING ASSETS:
Commercial Loans				$	2,512		$	2,359		$	1,890			6	%		33	%
Derivative and FX Contracts					144			155			88			(7	)		64
Consumer Loans					450			534			401			(16	)		12
Assets Acquired in Loan Satisfactions					142			130			119			9			19
		Total			3,248			3,178			2,498			2			30
Other Receivables (d)					1,130			1,130			—			—		NM
			Total Nonperforming Assets	$	4,378	(e)	$	4,308		$	2,498			2			75
SELECTED COUNTRY TOTAL EXPOSURE
(in billions)
Argentina				$	0.4	(f)	$	0.5		$	1.4			(20	)		(71	)
Brazil					2.1	(f)		2.7			2.8			(22	)		(25	)
Turkey					0.1	(f)		0.1			0.2			—			(50	)
Venezuela					0.3	(f)		0.2			0.5			50			(40	)

(a)	Excludes unfunded commercial lending-related commitments totaling $241 billion at June 30, 2002, $243 billion at March 31, 2002 and $257 billion at June 30, 2001. Unused advised lines of credit totaling $18 billion at June 30, 2002, $19 billion at March 31, 2002 and $21 billion at June 30, 2001 are included within these unfunded commitments.
(b)	Includes credit card receivables that have been securitized.
(c)	Net charge-offs are presented for the quarter ended as of the date indicated.
(d)	This amount relates to the Enron-related surety receivables and letter of credit, which are the subject of litigation with credit-worthy entities. These receivables are classified in Other Assets at June 30, 2002.
(e)	Nonperforming assets have not been reduced for credit protection (single name credit default swaps and collateralized loan obligations) aggregating $37 million related to nonperforming counterparties. Nonperforming assets exclude nonaccrual loans held for sale (“HFS”) of $126 million, including $44 million of nonaccrual residential mortgages transferred to the HFS portfolio after recording charge-offs of $15 million during the second quarter of 2002. HFS loans are carried at lower of cost or market and declines in value are recorded in Other Revenue.
(f)	Estimated

Page 9

J.P. MORGAN CHASE & CO.
RECONCILIATION OF REPORTED TO OPERATING RESULTS
(in millions, except per share data)

	SECOND QUARTER 2002									SECOND QUARTER 2001
	REPORTED		CREDIT		SPECIAL			OPERATING		REPORTED		CREDIT		SPECIAL			AMORTIZATION			OPERATING
	RESULTS		CARD		ITEMS			BASIS		RESULTS		CARD		ITEMS			OF GOODWILL			BASIS
	(a)		(b)		(c)					(a)		(b)		(c)			(d)
INCOME STATEMENT
Revenue	$	7,574	$	334	$	—		$	7,908	$	6,949	$	273	$	—		$	—		$	7,222
Expense		4,873		—		—			4,873		5,178		—		—			—			5,178
Amortization of Intangibles		92		—		—			92		183		—		—			(147	)		36
Operating Margin		2,609		334		—			2,943		1,588		273		—			147			2,008
Credit Costs		821		334		—			1,155		525		273		—			—			798
Income before Merger and Restructuring Costs		1,788		—		—			1,788		1,063		—		—			147			1,210
Merger and Restructuring Costs		229		—		(229	)		—		478		—		(478	)		—			—
Income before Tax Expense		1,559		—		229			1,788		585		—		478			147			1,210
Tax Expense		531		—		78			609		207		—		166			51			424
Net Income	$	1,028	$	—	$	151		$	1,179	$	378	$	—	$	312		$	96		$	786
NET INCOME PER SHARE
Basic	$	0.51						$	0.59	$	0.18									$	0.39
Diluted		0.50							0.58		0.18										0.38

	YEAR TO DATE 2002									YEAR TO DATE 2001
	REPORTED		CREDIT		SPECIAL			OPERATING		REPORTED			CREDIT		SPECIAL			AMORTIZATION			OPERATING
	RESULTS		CARD		ITEMS			BASIS		RESULTS			CARD		ITEMS			OF GOODWILL			BASIS
	(a)		(b)		(c)					(a)			(b)		(c)			(d)
INCOME STATEMENT
Revenue	$	15,172	$	655	$	—		$	15,827	$	15,274		$	514	$	—		$	—		$	15,788
Expense		9,907		—		—			9,907		10,671			—		—			—			10,671
Amortization of Intangibles		161		—		—			161		360			—		—			(288	)		72
Operating Margin		5,104		655		—			5,759		4,243			514		—			288			5,045
Credit Costs		1,574		655		—			2,229		972			514		—			—			1,486
Income before Merger and Restructuring Costs		3,530		—		—			3,530		3,271			—		—			288			3,559
Merger and Restructuring Costs		484		—		(484	)		—		806			—		(806	)		—			—
Income before Tax Expense		3,046		—		484			3,530		2,465			—		806			288			3,559
Tax Expense		1,036		—		165			1,201		863			—		282			101			1,246
Income before Effect of Acctng Change		2,010		—		319			2,329		1,602			—		524			187			2,313
Net Effect of Change in Acctng Principle		—		—		—			—		(25	)		—		25			—			—
Net Income	$	2,010	$	—	$	319		$	2,329	$	1,577		$	—	$	549		$	187		$	2,313
NET INCOME PER SHARE
Basic	$	1.00						$	1.16	$	0.78	(e)									$	1.15
Diluted		0.99							1.15		0.76	(e)										1.12

(a)	Represents condensed results as reported in JPMorgan Chase’s financial statements.
(b)	This column excludes the impact of credit card securitizations. For receivables that have been securitized, amounts that would have been reported as net interest income and as provision for loan losses are instead reported as components of noninterest revenue.
(c)	Includes merger and restructuring costs and special items. The 2002 second quarter and year to date includes $229 million and $484 million, respectively, in merger and restructuring expenses. The 2001 second quarter and year to date includes $478 million and $806 million, respectively, in merger and restructuring expenses.
(d)	Reported net income for 2002 reflects the adoption of SFAS 142 and, accordingly, the Firm ceased amortizing goodwill effective January 1, 2002. There was no impairment of goodwill upon adoption of SFAS 142. Previously reported operating earnings for 2001 have been adjusted by adding back amortization of goodwill to make 2001 results comparable to 2002.
(e)	Includes the effect of the accounting change. Excluding the accounting change, basic and diluted net income per share were $0.79 and $0.77, respectively.

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