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 2003 THIRD QUARTER RESULTS
New York, October 22, 2003- J.P. Morgan Chase & Co. (NYSE: JPM) today reported 2003 third quarter net income of $1.63 billion, or $0.78 per share. Net income for the third quarter of 2002 was $40 million, or $0.01 per share, and net income for the second quarter of 2003 was $1.83 billion, or $0.89 per share. Return on average common equity for the quarter was 15%.
Last year, results were provided on both a reported basis and an operating basis, which excluded merger and restructuring costs and special items. Operating earnings for the third quarter of 2002 were $325 million, or $0.16 per share.
For the first nine months of 2003, reported net income was $4.86 billion, or $2.35 per share, 137% above last year’s reported results of $2.05 billion, or $1.00 per share, and 83% higher than last year’s operating results of $2.65 billion, or $1.30 per share. Return on average common equity was 15% for the first nine months of 2003.
“Our results for the quarter and the first nine months of 2003 show the substantial progress we have made this year. Our focus on execution against the backdrop of an improving economy has resulted in significant reductions in risk concentrations, strong year-over-year earnings growth and improved competitive positions. I am especially pleased by the improvements in our commercial credit portfolio,” said William B. Harrison, Jr., Chairman and Chief Executive Officer.
Highlights for the third quarter of 2003:
• | Commercial credit costs were approximately $1.5 billion lower than in the third quarter of 2002, while commercial non-performing assets were down 39%. |
• | The Investment Bank and Chase Financial Services posted returns on allocated capital of 19% and 20%, respectively. |
• | Treasury & Securities Services and Investment Management & Private Banking posted higher revenues, earnings and returns on allocated capital compared to the second quarter of 2003. JPMorgan Partners had private equity gains of $120 million. |
Investor Contact: | Ann Borowiec | Media Contact: | Joe Evangelisti | |||||
(212) 270-7318 | (212) 270-7438 |
J.P. Morgan Chase & Co.
News Release
Investment Bank (“IB”)
• | Investment banking feesof $636 million were 20% higher than in the third quarter of 2002 because of higher equity underwriting fees and advisory fees, driven by market share gains. Compared to the second quarter of 2003, investment banking fees were down 17% due to lower debt underwriting and loan syndication fees, reflecting lower market volumes. For the first nine months of the year, the firm improved its rankings in Global Announced M&A to #3 and Global Equity & Equity Related to #4 and maintained its #1 ranking in Global Loan Syndications and its #2 ranking in U.S. Investment Grade Bonds.1 |
• | Capital markets and lending revenuesfor the quarter were $2.57 billion, up 32% from the third quarter of 2002 and down 26% from the second quarter of 2003. |
• | Capital markets and lending total return revenuesfor the quarter were $2.76 billion. Total return revenues represent financial revenues plus the unrealized gains or losses on investment securities and hedges (included in comprehensive income) and internally transfer-priced assets and liabilities. The primary contributor to the difference between financial revenues and total return revenues is Global Treasury. Fixed income capital markets revenues were up 62% from the third quarter of 2002, driven by increased client revenues and significantly higher portfolio management revenues, which related to market making and proprietary risk taking activities. Fixed income revenues were down 28% from the strong levels in the second quarter of 2003 as higher client revenues were more than offset by lower portfolio management revenues, primarily in our global interest rate businesses. Equity capital markets revenues were up substantially from the third quarter of 2002. Compared to the second quarter of 2003, equity capital markets revenues declined 13% with higher revenues in the cash business more than offset by lower revenues in equity derivatives. Global Treasury had revenues of $492 million, up from both the third quarter of 2002 and the second quarter of 2003. |
• | Credit costs,reflecting a reduction in the allowance for credit losses, were negative $181 million for the quarter and negative $4 million for the second quarter of 2003. The lower provision resulted from restructurings of several non-performing commercial loans and improvement in the overall credit quality of the portfolio. In the third quarter of 2002, credit costs were $1.32 billion. |
• | Expensesof $1.83 billion increased 11% from the third quarter of 2002 primarily driven by higher incentives resulting from improved financial performance, partially offset by lower non-compensation expenses and severance and related costs. Expenses declined 26% from the second quarter of 2003. |
Chase Financial Services (“CFS”)
• | Revenueswere $3.35 billion for the quarter, down 9% from the third quarter of 2002 and 16% from the second quarter of 2003. Home Finance revenues of $662 million, comprised of operating and mortgage servicing hedging revenues, were down 32% from the third quarter of 2002. While markets were extremely volatile during the quarter, the hedging of mortgage servicing rights generated a small net loss of $6 million compared to excess hedging gains of $263 million in the third quarter of 2002 and |
1 | Derived from Thomson Financial Securities Data |
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J.P. Morgan Chase & Co.
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$233 million last quarter. Operating revenues were adversely affected by losses from the hedging of pipeline and warehouse loans and by customer rate lock extensions to accommodate record origination volumes. Year to date, Home Finance had record revenues, up 37% over the first nine months of 2002. Auto Finance revenues were $218 million, up 32% from the third quarter of 2002 reflecting continued strong origination volumes. Cardmember Services revenues were up 1% compared to the third quarter of 2002, reflecting slower growth in receivables. Regional Banking and Middle Market average deposits grew 8% and 20%, respectively, from the third quarter of 2002. However, both reported declining revenues as lower interest rates over the last year resulted in reduced net interest income, despite the higher balances. |
• | Expensesof $1.74 billion for the quarter were up 5% from the third quarter of 2002 reflecting higher business volumes and higher salaries and benefits. |
• | Credit costsof $883 million were 7% higher than the third quarter of 2002. Charge-offs increased 6% from the third quarter of 2002 as average managed loans increased 24%. |
Treasury & Securities Services (“T&SS”)
• | Revenuesfor the third quarter were $1.01 billion, down 2% from the third quarter of 2002, but up 3% from the second quarter of 2003. Adjusting for the gain last year, revenues were up 3% compared to the third quarter of 2002. Treasury Services revenues increased 7% from the third quarter of 2002 due to higher deposit balances, purchase card revenues and deposit balance deficiency fees. Institutional Trust Services revenues increased 8% from the prior year reflecting increased activity in the asset servicing business, higher deposit balances and the impact of acquisitions. Investor Services revenues declined 3% from the prior year, but increased 3% from the second quarter of 2003. |
• | Expensesincreased 5% from the third quarter of 2002, reflecting the impact of acquisitions, the cost associated with expensing of options and increased pension costs. |
Investment Management & Private Banking (“IMPB”)
• | Revenuesof $737 million were 6% above the same period last year and 9% higher than the second quarter of 2003 due primarily to higher global equity valuations and the acquisition of Retirement Plan Services (which closed in the second quarter of 2003). |
• | Expensesof $613 million were 9% above the third quarter of 2002 primarily as a result of the acquisition of Retirement Plan Services and higher compensation expenses related to improved performance. |
• | Credit costswere negative $7 million for the third quarter of 2003, reflecting recoveries and improved portfolio credit quality. This compared to credit costs of $26 million in the third quarter of 2002. |
• | Total assets under supervisionwere $720 billion at September 30, 2003, up 14% from the third quarter of 2002 and 4% higher than the second quarter of 2003. Not reflected in assets under supervision is the firm’s 44% interest in American Century Companies, Inc., which had assets under management of $80 billion as of the end of the third quarter of 2003. |
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J.P. Morgan Chase & Co.
News Release
JPMorgan Partners (“JPMP”)
• | During the quarter, JPMP’s direct private equity investments recorded net gains of $161 million compared to net losses of $239 million in the third quarter of 2002. The net gains included $134 million in realized cash gains, $26 million in mark-to-market gains on public securities and positive net valuation changes on private investments. The net valuation changes reflected writedowns of $65 million, which were entirely offset by $66 million of writeups related to investments for which recently completed financing activity provided indications of increased value. |
• | Limited partner interests held in third-party private equity funds resulted in net losses of $41 million compared to net losses of $60 million in the third quarter of 2002. |
Total Expenses
• | Expenseswere $5.10 billion, up 10% from operating expenses in the third quarter of 2002. The increase was primarily driven by higher compensation expenses resulting from higher performance-related incentive accruals. Expenses were down 13% from the second quarter of 2003 primarily reflecting lower incentive accruals. |
• | For the first nine months of 2003, expenses were $16.47 billion, an increase of 12% from operating expenses for the first nine months of last year. Expenses in the first nine months of 2003 included $100 million added to litigation reserves and $447 million in severance and related, including vacant real estate charges. Operating expenses in the first nine months of 2002 included $390 million in severance and related costs. |
Credit
• | Commercialloan net charge-offs in the third quarter of 2003 were $259 million compared to $834 million in the third quarter of 2002 and $257 million in the second quarter of 2003. The charge-off ratio for commercial loans was 1.09% in the third quarter of 2003, compared to 3.53% in the third quarter of 2002 and 1.20% in the second quarter of 2003. |
• | Consumerloan net charge-offs on a managed basis, which includes credit card securitizations, were $826 million, up from $786 million in the third quarter of 2002 and down from $837 million in the second quarter of 2003. On a managed basis, the credit card net charge-off ratio was 5.80% for the third quarter of 2003, compared to 5.51% for the third quarter of 2002 and 6.01% for the second quarter of 2003. Excluding credit card securitizations, consumer net charge-offs were $355 million in the third quarter of 2003 compared to $432 million in the third quarter of 2002 and $357 million in the second quarter of 2003. |
• | Credit costson a managed basis were $694 million in the third quarter of 2003 compared to $2.19 billion in the third quarter of 2002 and $915 million in the second quarter of 2003. In the third quarter of 2003, managed credit costs were $834 million for consumer loans and negative $140 million for commercial loans and lending-related commitments. |
• | Allowance for credit losseswas $5.08 billion at September 30, 2003, compared to $5.84 billion at September 30, 2002 and $5.47 billion at June 30, 2003. |
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J.P. Morgan Chase & Co.
News Release
• | Total nonperforming assetswere $3.68 billion at September 30, 2003, down 34% from the third quarter of 2002 and 9% from the second quarter of 2003. Commercial criticized exposures (including loans, derivative receivables and unfunded commitments) declined $6.4 billion, or 36%, since September 30, 2002 and $1.5 billion, or 12%, since June 30, 2003. |
Total assets and capital
• | Total assetsas of September 30, 2003 were $793 billion, compared with $742 billion as of September 30, 2002 and $803 billion as of June 30, 2003. The firm adopted FIN 46 related to variable interest entities in July 2003; prior periods are not restated. Total assets include the effect of adopting FIN 46, which added $15 billion in assets. Commercial loans, excluding the impact of FIN 46, were $77 billion, $20 billion lower than on September 30, 2002 and $14 billion lower than on June 30, 2003. Commercial loans were $88 billion, including $11 billion related to consolidated variable interest entities primarily associated with multi-seller asset-backed commercial paper conduits. Managed consumer loans increased 27% from September 30, 2002 and 7% from June 30, 2003, primarily from increases in mortgage loans. The Tier 1 capital ratio was 8.7% at September 30, 2003. The June 30, 2003 capital ratio was previously reported as 8.7%. The firm changed the way it calculates risk-weighted assets this quarter, and calculating the June 30, 2003 ratio on the same basis as for September 30 would produce a ratio of 8.4% for June 30. |
Other financial information (on a pre-tax basis)
• | There were no items characterized by management as non-operating in the first nine months of 2003, as restructuring costs are now included in reported results. Special items in the third quarter of 2002 and the first nine months of 2002 were $431 million and $915 million, respectively, in merger and restructuring costs and real estate charges. |
The line of business operating results set forth above for the quarter and for prior periods reflect the revised internal management reporting policies previously disclosed in the firm’sForm 8-K dated July 11, 2003. The line of business results set forth above are presented on an operating or managed basis, which enables management to assess each business and measure overall firm results against targeted goals. The definition of operating basis starts with the reported U.S. GAAP results and then excludes the impact of merger and restructuring costs, credit card securitizations and special items (which management defined as significant nonrecurring gains or losses of $75 million or more during 2002). Both restructuring charges and special items are viewed by management as transactions that are not part of the firm’s normal daily business operations or are unusual in nature and therefore are not indicative of trends.
J.P. Morgan Chase & Co. is a leading global financial services firm with assets of $793 billion and operations in more than 50 countries. The firm is a leader in investment banking, financial services for consumers and businesses, financial transaction processing, investment management, private banking and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase is headquartered in New York and serves more than 30 million consumers nationwide, and many of the world’s most prominent corporate, institutional and government clients. Information about JPMorgan Chase is available on the Internet atwww.jpmorganchase.com.
JPMorgan Chase will hold a conference call for the investment community on Wednesday, October 22, 2003 at 11:00 a.m. (Eastern Daylight Time) to review third quarter 2003 financial results. The dial-in number is (973) 628-9554. A live audio webcast of the call will be available onwww.jpmorganchase.com. Slides for the call will also be available onwww.jpmorganchase.com. A telephone replay of the presentation will be available beginning at 1:30 p.m. (EDT) on October 22, 2003 and continuing through 6:00 p.m. (EST) on October 28, 2003 at (973) 341-3080 pin #4205256. The replay also will be available onwww.jpmorganchase.com beginning at 1:30 p.m. (EDT) on October 22, 2003. Additional detailed financial, statistical and business-related information is included in a financial supplement. The earnings
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J.P. Morgan Chase & Co.
News Release
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 onForm 10-Q for the quarters ended June 30, 2003 and March 31, 2003 and in the 2002 Annual Report onForm 10-K, each filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission’s internet site (www.sec.gov), to which reference is hereby made.
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J.P. MORGAN CHASE & CO. CONSOLIDATED FINANCIAL HIGHLIGHTS — REPORTED BASIS (in millions, except per share, ratio and employee data) |
3QTR 2003 | 2003 | |||||||||||||||||||||||||||||||
3QTR | 2QTR | 3QTR | Over (Under) | YEAR TO DATE | Over (Under) | |||||||||||||||||||||||||||
2003 | 2003 | 2002 | 2Q 2003 | 3Q 2002 | 2003 | 2002 | 2002 | |||||||||||||||||||||||||
INCOME STATEMENT | ||||||||||||||||||||||||||||||||
REVENUE: | ||||||||||||||||||||||||||||||||
Investment Banking Fees | $ | 649 | $ | 779 | $ | 545 | (17 | )% | 19 | % | $ | 2,044 | $ | 2,085 | (2 | )% | ||||||||||||||||
Trading Revenue | 829 | 1,546 | 26 | (46 | ) | NM | 3,673 | 2,089 | 76 | |||||||||||||||||||||||
Fees and Commissions | 2,742 | 2,551 | 2,665 | 7 | 3 | 7,781 | 7,792 | — | ||||||||||||||||||||||||
Private Equity Gains (Losses) | 120 | (29 | ) | (315 | ) | NM | NM | (130 | ) | (678 | ) | 81 | ||||||||||||||||||||
Securities Gains | 164 | 768 | 578 | (79 | ) | (72 | ) | 1,417 | 816 | 74 | ||||||||||||||||||||||
Mortgage Fees and Related Income(a) | (17 | ) | 292 | 512 | NM | NM | 692 | 1,080 | (36 | ) | ||||||||||||||||||||||
Other Revenue | 213 | 64 | 200 | 233 | 7 | 385 | 390 | (1 | ) | |||||||||||||||||||||||
Total Noninterest Revenue | 4,700 | 5,971 | 4,211 | (21 | ) | 12 | 15,862 | 13,574 | 17 | |||||||||||||||||||||||
Net Interest Income | 3,048 | 3,063 | 2,736 | — | 11 | 9,326 | 8,545 | 9 | ||||||||||||||||||||||||
Revenue before Provision for Credit Losses | 7,748 | 9,034 | 6,947 | (14 | ) | 12 | 25,188 | 22,119 | 14 | |||||||||||||||||||||||
Provision for Credit Losses | 223 | 435 | 1,836 | (49 | ) | (88 | ) | 1,401 | 3,410 | (59 | ) | |||||||||||||||||||||
TOTAL NET REVENUE | 7,525 | 8,599 | 5,111 | (12 | ) | 47 | 23,787 | 18,709 | 27 | |||||||||||||||||||||||
EXPENSE: | ||||||||||||||||||||||||||||||||
Compensation Expense | 2,713 | 3,231 | 2,367 | (16 | ) | 15 | 9,118 | 7,951 | 15 | |||||||||||||||||||||||
Occupancy Expense | 391 | 543 | 478 | (28 | ) | (18 | ) | 1,430 | 1,181 | 21 | ||||||||||||||||||||||
Technology and Communications Expense | 719 | 732 | 625 | (2 | ) | 15 | 2,088 | 1,919 | 9 | |||||||||||||||||||||||
Other Expense | 1,272 | 1,226 | 1,248 | 4 | 2 | 3,732 | 3,735 | — | ||||||||||||||||||||||||
Surety Settlement and Litigation Reserve(b) | — | 100 | — | NM | NM | 100 | — | NM | ||||||||||||||||||||||||
Merger and Restructuring Costs | — | — | 333 | NM | NM | — | 817 | NM | ||||||||||||||||||||||||
TOTAL NONINTEREST EXPENSE | 5,095 | 5,832 | 5,051 | (13 | ) | 1 | 16,468 | 15,603 | 6 | |||||||||||||||||||||||
Income before Income Tax Expense | 2,430 | 2,767 | 60 | (12 | ) | NM | 7,319 | 3,106 | 136 | |||||||||||||||||||||||
Income Tax Expense | 802 | 940 | 20 | (15 | ) | NM | 2,464 | 1,056 | 133 | |||||||||||||||||||||||
NET INCOME | $ | 1,628 | $ | 1,827 | $ | 40 | (11 | ) | NM | $ | 4,855 | $ | 2,050 | 137 | ||||||||||||||||||
PER COMMON SHARE | ||||||||||||||||||||||||||||||||
Net Income: | ||||||||||||||||||||||||||||||||
Basic | $ | 0.80 | $ | 0.90 | $ | 0.01 | (11 | )% | NM | $ | 2.40 | $ | 1.01 | 138 | % | |||||||||||||||||
Diluted | 0.78 | 0.89 | 0.01 | (12 | ) | NM | 2.35 | 1.00 | 135 | |||||||||||||||||||||||
Cash Dividends Declared | 0.34 | 0.34 | 0.34 | — | — | % | 1.02 | 1.02 | — | |||||||||||||||||||||||
Share Price at Period End | 34.33 | 34.18 | 18.99 | — | 81 | |||||||||||||||||||||||||||
Book Value at Period End | 21.55 | 21.53 | 21.26 | — | 1 | |||||||||||||||||||||||||||
COMMON SHARES OUTSTANDING | ||||||||||||||||||||||||||||||||
Average Common Shares: | ||||||||||||||||||||||||||||||||
Basic | 2,012.2 | 2,005.6 | 1,986.0 | — | % | 1 | % | 2,006.0 | 1,982.3 | 1 | % | |||||||||||||||||||||
Diluted | 2,068.2 | 2,050.6 | 2,005.8 | 1 | 3 | 2,047.0 | 2,009.3 | 2 | ||||||||||||||||||||||||
Common Shares at Period End | 2,039.2 | 2,035.1 | 1,995.9 | — | 2 | 2,039.2 | 1,995.9 | 2 | ||||||||||||||||||||||||
PERFORMANCE RATIOS(c) | ||||||||||||||||||||||||||||||||
Return on Average Assets | 0.83 | % | 0.96 | % | 0.02 | % | (13 | )bp | 81 | bp | 0.84 | % | 0.38 | % | 46 | bp | ||||||||||||||||
Return on Average Common Equity | 15 | 17 | — | (200 | ) | 1,500 | 15 | 7 | 800 | |||||||||||||||||||||||
CAPITAL RATIOS | ||||||||||||||||||||||||||||||||
Tier I Capital Ratio | 8.7 | %(d) | 8.4 | %(e) | 8.7 | % | 30 | bp | — | bp | ||||||||||||||||||||||
Total Capital Ratio | 12.1 | (d) | 12.0 | (e) | 12.4 | 10 | (30 | ) | ||||||||||||||||||||||||
Tier I Leverage Ratio | 5.5 | (d) | 5.5 | 5.4 | — | 10 | ||||||||||||||||||||||||||
SELECTED BALANCE SHEET ITEMS | ||||||||||||||||||||||||||||||||
Net Loans | $ | 231,448 | $ | 222,307 | $ | 206,215 | 4 | % | 12 | % | ||||||||||||||||||||||
Total Assets | 792,700 | 802,603 | 741,759 | (1 | ) | 7 | ||||||||||||||||||||||||||
Deposits | 313,626 | 318,248 | 292,171 | (1 | ) | 7 | ||||||||||||||||||||||||||
Long-Term Debt(f) | 50,661 | 49,918 | 44,552 | 1 | 14 | |||||||||||||||||||||||||||
Common Stockholders’ Equity | 43,948 | 43,812 | 42,428 | — | 4 | |||||||||||||||||||||||||||
Total Stockholders’ Equity | 44,957 | 44,821 | 43,437 | — | 3 | |||||||||||||||||||||||||||
FULL-TIME EQUIVALENT EMPLOYEES | 92,940 | 92,256 | 95,637 | 1 | (3 | ) |
(a) | Includes all mortgage-related noninterest revenues except Securities Gains. Third quarter 2003 amounts reflect $209 million of Mortgage Servicing Fees, Net of Amortization, Writedowns and Derivatives Hedging (previously recorded in Fees and Commissions), $(86) million of Residential Mortgage Origination/Sales Activities (Other Revenue), $(161) million of hedging of pipeline activities (Trading Revenue), and $21 million of all other revenues (Fees and Commissions and Other Revenue). | |
(b) | Included in the second quarter of 2003 was a $100 million addition to the Enron-related litigation reserve. | |
(c) | Ratios are based on annualized amounts. | |
(d) | Estimated | |
(e) | The Firm changed the way it calculates risk-weighted assets during the third quarter of 2003. The June 30, 2003 Tier 1 and Total Capital ratios of 8.4% and 12.0%, respectively, are calculated on the same basis as for September 30, 2003. The June 30, 2003 Tier 1 and Total Capital ratios were previously reported as 8.7% and 12.4%, respectively. Prior quarters have not been restated. | |
(f) | Includes Junior Subordinated Deferrable Interest Debentures Held by Trusts that Issued Guaranteed Capital Debt Securities and Guaranteed Preferred Beneficial Interests in Capital Debt Securities Issued by Consolidated Trusts. Excludes Beneficial Interests of Consolidated Variable Interest Entities. |
NM — Not meaningful
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J.P. MORGAN CHASE & CO. RECONCILIATION OF QUARTERLY REPORTED TO OPERATING RESULTS (in millions, except per share data) |
THIRD QUARTER 2003 | ||||||||||||||||||||
REPORTED | CREDIT | SPECIAL | OPERATING | |||||||||||||||||
BASIS(a) | CARD(b) | ITEMS(c) | RECLASSES(d) | BASIS(e) | ||||||||||||||||
INCOME STATEMENT | ||||||||||||||||||||
Revenue | ||||||||||||||||||||
Investment Banking Fees | $ | 649 | $ | — | $ | — | $ | — | $ | 649 | ||||||||||
Trading Revenue | 829 | — | — | 449 | 1,278 | |||||||||||||||
Fees and Commissions | 2,742 | (173 | ) | — | — | 2,569 | ||||||||||||||
Private Equity — Gains (Losses) | 120 | — | — | — | 120 | |||||||||||||||
Securities Gains | 164 | — | — | — | 164 | |||||||||||||||
Mortgage Fees and Related Income | (17 | ) | — | — | — | (17 | ) | |||||||||||||
Other Revenue | 213 | (14 | ) | — | — | 199 | ||||||||||||||
Net Interest Income | 3,048 | 658 | — | (449 | ) | 3,257 | ||||||||||||||
Total Revenue | 7,748 | 471 | — | — | 8,219 | |||||||||||||||
Noninterest Expense | ||||||||||||||||||||
Compensation Expense(f) | 2,713 | — | — | — | 2,713 | |||||||||||||||
Noncompensation Expense(f)(g) | 2,382 | — | — | — | 2,382 | |||||||||||||||
Merger and Restructuring Costs | — | — | — | — | — | |||||||||||||||
Total Noninterest Expense | 5,095 | — | — | — | 5,095 | |||||||||||||||
Operating Margin | 2,653 | 471 | — | — | 3,124 | |||||||||||||||
Credit Costs | 223 | 471 | — | — | 694 | |||||||||||||||
Income before Income Tax Expense | 2,430 | — | — | — | 2,430 | |||||||||||||||
Income Tax Expense | 802 | — | — | — | 802 | |||||||||||||||
Net Income | $ | 1,628 | $ | — | $ | — | $ | — | $ | 1,628 | ||||||||||
EARNINGS PER SHARE — DILUTED | $ | 0.78 | $ | — | $ | — | $ | — | $ | 0.78 |
THIRD QUARTER 2002 | ||||||||||||||||||||
REPORTED | CREDIT | SPECIAL | OPERATING | |||||||||||||||||
BASIS(a) | CARD (b) | ITEMS (c) | RECLASSES (d) | BASIS (e) | ||||||||||||||||
INCOME STATEMENT | ||||||||||||||||||||
Revenue | ||||||||||||||||||||
Investment Banking Fees | $ | 545 | $ | — | $ | — | $ | — | $ | 545 | ||||||||||
Trading Revenue | 26 | — | — | 386 | 412 | |||||||||||||||
Fees and Commissions | 2,665 | (237 | ) | — | — | 2,428 | ||||||||||||||
Private Equity — Gains (Losses) | (315 | ) | — | — | — | (315 | ) | |||||||||||||
Securities Gains | 578 | — | — | — | 578 | |||||||||||||||
Mortgage Fees and Related Income | 512 | — | — | — | 512 | |||||||||||||||
Other Revenue | 200 | (10 | ) | — | — | 190 | ||||||||||||||
Net Interest Income | 2,736 | 601 | — | (386 | ) | 2,951 | ||||||||||||||
Total Revenue | 6,947 | 354 | — | — | 7,301 | |||||||||||||||
Noninterest Expense Compensation Expense(f) | 2,367 | — | — | — | 2,367 | |||||||||||||||
Noncompensation Expense(f)(g) | 2,351 | — | (98 | ) | — | 2,253 | ||||||||||||||
Merger and Restructuring Costs | 333 | — | (333 | ) | — | — | ||||||||||||||
Total Noninterest Expense | 5,051 | — | (431 | ) | — | 4,620 | ||||||||||||||
Operating Margin | 1,896 | 354 | 431 | — | 2,681 | |||||||||||||||
Credit Costs | 1,836 | 354 | — | — | 2,190 | |||||||||||||||
Income before Income Tax Expense | 60 | — | 431 | — | 491 | |||||||||||||||
Income Tax Expense | 20 | — | 146 | — | 166 | |||||||||||||||
Net Income | $ | 40 | $ | — | $ | 285 | $ | — | $ | 325 | ||||||||||
EARNINGS PER SHARE — DILUTED | $ | 0.01 | $ | — | $ | 0.15 | $ | — | $ | 0.16 |
(a) | Represents condensed results as reported in JPMorgan Chase’s financial statements. | |
(b) | Represents the impact of credit card securitizations. For securitized receivables, amounts that normally would be reported as net interest income and as provision for credit losses are reported as noninterest revenue. | |
(c) | Includes merger and restructuring costs and other special items. There were no special items reported in the third quarter of 2003. The 2002 third quarter included $333 million (pre-tax) of merger and restructuring costs, and a $98 million (pre-tax) charge for excess real estate capacity. | |
(d) | On an operating basis, JPMorgan Chase reclassifies trading-related net interest income from Net Interest Income to Trading Revenue. | |
(e) | In addition to analyzing the Firm’s results on a reported basis, management looks at results on an “operating basis” (or “managed basis”) to assess each of its businesses and to measure overall Firm results against targeted goals. The definition of operating basis starts with the reported U.S. GAAP results and then excludes the impact of merger and restructuring costs, credit card securitizations, and special items (which management defined as significant nonrecurring gains or losses of $75 million or more during 2002). Both restructuring charges and special items are viewed by management as transactions that are not part of the Firm’s normal daily business operations or are unusual in nature and therefore are not indicative of trends. For a more detailed explanation of how the Firm looks at results on an “operating basis,” see Reconciliation from Reported Results to Operating Basis on page 32 of JPMorgan Chase’s June 30, 2003, Quarterly Report on Form 10-Q and on page 22 of JPMorgan Chase’s 2002 Annual Report. | |
(f) | Includes severance and other related costs associated with expense containment programs implemented in 2002. | |
(g) | Includes Occupancy Expense, Technology and Communications Expense, Other Expense and Surety Settlement and Litigation Reserve. |
Page 8
J.P. MORGAN CHASE & CO. RECONCILIATION OF YEAR TO DATE REPORTED TO OPERATING RESULTS (in millions, except per share data) |
YEAR TO DATE 2003 | ||||||||||||||||||||
REPORTED | CREDIT | SPECIAL | OPERATING | |||||||||||||||||
BASIS(a) | CARD(b) | ITEMS(c) | RECLASSES(d) | BASIS(e) | ||||||||||||||||
INCOME STATEMENT | ||||||||||||||||||||
Revenue | ||||||||||||||||||||
Investment Banking Fees | $ | 2,044 | $ | — | $ | — | $ | — | $ | 2,044 | ||||||||||
Trading Revenue | 3,673 | — | — | 1,611 | 5,284 | |||||||||||||||
Fees and Commissions | 7,781 | (464 | ) | — | — | 7,317 | ||||||||||||||
Private Equity — Gains (Losses) | (130 | ) | — | — | — | (130 | ) | |||||||||||||
Securities Gains | 1,417 | — | — | — | 1,417 | |||||||||||||||
Mortgage Fees and Related Income | 692 | — | — | — | 692 | |||||||||||||||
Other Revenue | 385 | (42 | ) | — | — | 343 | ||||||||||||||
Net Interest Income | 9,326 | 1,914 | — | (1,611 | ) | 9,629 | ||||||||||||||
Total Revenue | 25,188 | 1,408 | — | — | 26,596 | |||||||||||||||
Noninterest Expense | ||||||||||||||||||||
Compensation Expense(f) | 9,118 | — | — | — | 9,118 | |||||||||||||||
Noncompensation Expense(f)(g) | 7,350 | — | — | — | 7,350 | |||||||||||||||
Merger and Restructuring Costs | — | — | — | — | — | |||||||||||||||
Total Noninterest Expense | 16,468 | — | — | — | 16,468 | |||||||||||||||
Operating Margin | 8,720 | 1,408 | — | — | 10,128 | |||||||||||||||
Credit Costs | 1,401 | 1,408 | — | — | 2,809 | |||||||||||||||
Income before Income Tax Expense | 7,319 | — | — | — | 7,319 | |||||||||||||||
Income Tax Expense | 2,464 | — | — | — | 2,464 | |||||||||||||||
Net Income | $ | 4,855 | $ | — | $ | — | $ | — | $ | 4,855 | ||||||||||
EARNINGS PER SHARE — DILUTED | $ | 2.35 | $ | — | $ | — | $ | — | $ | 2.35 |
YEAR TO DATE 2002 | ||||||||||||||||||||
REPORTED | CREDIT | SPECIAL | OPERATING | |||||||||||||||||
BASIS(a) | CARD(b) | ITEMS(c) | RECLASSES(d) | BASIS(e) | ||||||||||||||||
INCOME STATEMENT | ||||||||||||||||||||
Revenue | ||||||||||||||||||||
Investment Banking Fees | $ | 2,085 | $ | — | $ | — | $ | — | $ | 2,085 | ||||||||||
Trading Revenue | 2,089 | — | — | 1,212 | 3,301 | |||||||||||||||
Fees and Commissions | 7,792 | (468 | ) | — | — | 7,324 | ||||||||||||||
Private Equity — Gains (Losses) | (678 | ) | — | — | — | (678 | ) | |||||||||||||
Securities Gains | 816 | — | — | — | 816 | |||||||||||||||
Mortgage Fees and Related Income | 1,080 | — | — | — | 1,080 | |||||||||||||||
Other Revenue | 390 | (49 | ) | — | — | 341 | ||||||||||||||
Net Interest Income | 8,545 | 1,526 | — | (1,212 | ) | 8,859 | ||||||||||||||
Total Revenue | 22,119 | 1,009 | — | — | 23,128 | |||||||||||||||
Noninterest Expense | ||||||||||||||||||||
Compensation Expense(f) | 7,951 | — | — | — | 7,951 | |||||||||||||||
Noncompensation Expense(f)(g) | 6,835 | — | (98 | ) | — | 6,737 | ||||||||||||||
Merger and Restructuring Costs | 817 | — | (817 | ) | — | — | ||||||||||||||
Total Noninterest Expense | 15,603 | — | (915 | ) | — | 14,688 | ||||||||||||||
Operating Margin | 6,516 | 1,009 | 915 | — | 8,440 | |||||||||||||||
Credit Costs | 3,410 | 1,009 | — | — | 4,419 | |||||||||||||||
Income before Income Tax Expense | 3,106 | — | 915 | — | 4,021 | |||||||||||||||
Income Tax Expense | 1,056 | — | 311 | — | 1,367 | |||||||||||||||
Net Income | $ | 2,050 | $ | — | $ | 604 | $ | — | $ | 2,654 | ||||||||||
EARNINGS PER SHARE — DILUTED | $ | 1.00 | $ | — | $ | 0.30 | $ | — | $ | 1.30 |
(a) | Represents condensed results as reported in JPMorgan Chase’s financial statements. | |
(b) | Represents the impact of credit card securitizations. For securitized receivables, amounts that normally would be reported as net interest income and as provision for credit losses are reported as noninterest revenue. | |
(c) | Includes merger and restructuring costs and other special items. There were no special items reported in the first nine months of 2003. The first nine months of 2002 included $817 million (pre-tax) of merger and restructuring costs, and a $98 million (pre-tax) charge for excess real estate capacity. | |
(d) | On an operating basis, JPMorgan Chase reclassifies trading-related net interest income from Net Interest Income to Trading Revenue. | |
(e) | In addition to analyzing the Firm’s results on a reported basis, management looks at results on an “operating basis” (or “managed basis”) to assess each of its businesses and to measure overall Firm results against targeted goals. The definition of operating basis starts with the reported U.S. GAAP results and then excludes the impact of merger and restructuring costs, credit card securitizations, and special items (which management defined as significant nonrecurring gains or losses of $75 million or more during 2002). Both restructuring charges and special items are viewed by management as transactions that are not part of the Firm’s normal daily business operations or are unusual in nature and therefore are not indicative of trends. For a more detailed explanation of how the Firm looks at results on an “operating basis,” see Reconciliation from Reported Results to Operating Basis on page 32 of JPMorgan Chase’s June 30, 2003, Quarterly Report on Form 10-Q and on page 22 of JPMorgan Chase’s 2002 Annual Report. | |
(f) | Includes severance and other related costs associated with expense containment programs implemented in 2002. | |
(g) | Includes Occupancy Expense, Technology and Communications Expense, Other Expense and Surety Settlement and Litigation Reserve. |
Page 9
J.P. MORGAN CHASE & CO. CONSOLIDATED FINANCIAL HIGHLIGHTS — OPERATING BASIS (in millions, except per share and ratio data) |
3QTR 2003 | YTD 2003 | |||||||||||||||||||||||||||||||
3QTR | 2QTR | 3QTR | Over (Under) | YEAR TO DATE | Over (Under) | |||||||||||||||||||||||||||
2003 | 2003 | 2002 | 2Q 2003 | 3Q 2002 | 2003 | 2002 | 2002 | |||||||||||||||||||||||||
OPERATING INCOME STATEMENT(a) | ||||||||||||||||||||||||||||||||
OPERATING REVENUE: | ||||||||||||||||||||||||||||||||
Investment Banking Fees | $ | 649 | $ | 779 | $ | 545 | (17 | )% | 19 | % | $ | 2,044 | $ | 2,085 | (2 | )% | ||||||||||||||||
Trading-Related Revenue (Includes Trading NII) | 1,278 | 2,025 | 412 | (37 | ) | 210 | 5,284 | 3,301 | 60 | |||||||||||||||||||||||
Fees and Commissions | 2,569 | 2,429 | 2,428 | 6 | 6 | 7,317 | 7,324 | — | ||||||||||||||||||||||||
Private Equity Gains (Losses) | 120 | (29 | ) | (315 | ) | NM | NM | (130 | ) | (678 | ) | 81 | ||||||||||||||||||||
Securities Gains | 164 | 768 | 578 | (79 | ) | (72 | ) | 1,417 | 816 | 74 | ||||||||||||||||||||||
Mortgage Fees and Related Income | (17 | ) | 292 | 512 | NM | NM | 692 | 1,080 | (36 | ) | ||||||||||||||||||||||
Other Revenue | 199 | 40 | 190 | 398 | 5 | 343 | 341 | 1 | ||||||||||||||||||||||||
Net Interest Income (Excludes Trading NII) | 3,257 | 3,210 | 2,951 | 1 | 10 | 9,629 | 8,859 | 9 | ||||||||||||||||||||||||
TOTAL OPERATING REVENUE | 8,219 | 9,514 | 7,301 | (14 | ) | 13 | 26,596 | 23,128 | 15 | |||||||||||||||||||||||
OPERATING EXPENSE: | ||||||||||||||||||||||||||||||||
Compensation Expense(b) | 2,713 | 3,231 | 2,367 | (16 | ) | 15 | 9,118 | 7,951 | 15 | |||||||||||||||||||||||
Noncompensation Expense(b)(c) | 2,382 | 2,601 | 2,253 | (8 | ) | 6 | 7,350 | 6,737 | 9 | |||||||||||||||||||||||
TOTAL OPERATING EXPENSE | 5,095 | 5,832 | 4,620 | (13 | ) | 10 | 16,468 | 14,688 | 12 | |||||||||||||||||||||||
Credit Costs | 694 | 915 | 2,190 | (24 | ) | (68 | ) | 2,809 | 4,419 | (36 | ) | |||||||||||||||||||||
Corporate Credit Allocation | — | — | — | NM | NM | — | — | NM | ||||||||||||||||||||||||
Operating Income before Income Tax Expense | 2,430 | 2,767 | 491 | (12 | ) | 395 | 7,319 | 4,021 | 82 | |||||||||||||||||||||||
Income Tax Expense | 802 | 940 | 166 | (15 | ) | 383 | 2,464 | 1,367 | 80 | |||||||||||||||||||||||
OPERATING EARNINGS | 1,628 | 1,827 | 325 | (11 | ) | 401 | 4,855 | 2,654 | 83 | |||||||||||||||||||||||
Special Items | — | — | (285 | ) | NM | NM | — | (604 | ) | NM | ||||||||||||||||||||||
NET INCOME | $ | 1,628 | $ | 1,827 | $ | 40 | (11 | ) | NM | $ | 4,855 | $ | 2,050 | 137 | ||||||||||||||||||
OPERATING BASIS | ||||||||||||||||||||||||||||||||
Diluted Earnings per Share | $ | 0.78 | $ | 0.89 | $ | 0.16 | (12 | ) | 388 | $ | 2.35 | $ | 1.30 | 81 | ||||||||||||||||||
Shareholder Value Added | 311 | 536 | (964 | ) | (42 | ) | NM | 995 | (1,080 | ) | NM | |||||||||||||||||||||
Return on Average Managed Assets(d) | 0.79 | % | 0.92 | % | 0.17 | % | (13 | )bp | 62 | bp | 0.80 | % | 0.47 | % | 33 | bp | ||||||||||||||||
Return on Common Equity(d) | 15 | 17 | 3 | (200 | ) | 1,200 | 15 | 8 | 700 | |||||||||||||||||||||||
Common Dividend Payout Ratio | 44 | 40 | 222 | 400 | NM | 44 | 79 | (3,500 | ) | |||||||||||||||||||||||
Compensation Expense as a % of Revenue | 33 | 34 | 32 | (100 | ) | 100 | 34 | 34 | — | |||||||||||||||||||||||
Noncompensation Expense as a % of Revenue | 29 | 27 | 31 | 200 | (200 | ) | 28 | 29 | (100 | ) | ||||||||||||||||||||||
Overhead Ratio | 62 | 61 | 63 | 100 | (100 | ) | 62 | 64 | (200 | ) |
(a) | See pages 8 and 9 for a reconciliation of reported results to operating basis. | |
(b) | Includes severance and other related costs associated with expense containment programs implemented in 2002. | |
(c) | Includes Occupancy Expense, Technology and Communications Expense, Amortization of Intangibles, Other Expense and Surety Settlement and Litigation Reserve. | |
(d) | Ratios are based on annualized amounts. |
Page 10
J.P. MORGAN CHASE & CO. LINES OF BUSINESS FINANCIAL HIGHLIGHTS SUMMARY (in millions, except per share and ratio data) |
3QTR 2003 | YTD 2003 | |||||||||||||||||||||||||||||||
3QTR | 2QTR | 3QTR | Over (Under) | YEAR TO DATE | Over (Under) | |||||||||||||||||||||||||||
2003 | 2003 | 2002 | 2Q 2003 | 3Q 2002 | 2003 | 2002 | 2002 | |||||||||||||||||||||||||
OPERATING REVENUE | ||||||||||||||||||||||||||||||||
Investment Bank | $ | 3,203 | $ | 4,254 | $ | 2,481 | (25 | )% | 29 | % | $ | 11,518 | $ | 9,291 | 24 | % | ||||||||||||||||
Treasury & Securities Services | 1,013 | 985 | 1,029 | 3 | (2 | ) | 2,934 | 2,961 | (1 | ) | ||||||||||||||||||||||
Investment Management & Private Banking | 737 | 679 | 695 | 9 | 6 | 2,058 | 2,189 | (6 | ) | |||||||||||||||||||||||
JPMorgan Partners | 78 | (70 | ) | (359 | ) | NM | NM | (270 | ) | (860 | ) | 69 | ||||||||||||||||||||
Chase Financial Services | 3,350 | 3,976 | 3,667 | (16 | ) | (9 | ) | 11,021 | 10,121 | 9 | ||||||||||||||||||||||
Support Units and Corporate | (162 | ) | (310 | ) | (212 | ) | 48 | 24 | (665 | ) | (574 | ) | (16 | ) | ||||||||||||||||||
OPERATING REVENUE | $ | 8,219 | $ | 9,514 | $ | 7,301 | (14 | ) | 13 | $ | 26,596 | $ | 23,128 | 15 | ||||||||||||||||||
EARNINGS | ||||||||||||||||||||||||||||||||
Investment Bank | $ | 922 | $ | 1,086 | $ | (255 | ) | (15 | ) | NM | $ | 2,950 | $ | 1,024 | 188 | |||||||||||||||||
Treasury & Securities Services | 157 | 126 | 201 | 25 | (22 | ) | 414 | 503 | (18 | ) | ||||||||||||||||||||||
Investment Management & Private Banking | 85 | 67 | 68 | 27 | 25 | 187 | 250 | (25 | ) | |||||||||||||||||||||||
JPMorgan Partners | 10 | (91 | ) | (278 | ) | NM | NM | (298 | ) | (692 | ) | 57 | ||||||||||||||||||||
Chase Financial Services | 460 | 881 | 761 | (48 | ) | (40 | ) | 2,015 | 1,899 | 6 | ||||||||||||||||||||||
Support Units and Corporate | (6 | ) | (242 | ) | (172 | ) | 98 | 97 | (413 | ) | (330 | ) | (25 | ) | ||||||||||||||||||
OPERATING EARNINGS | 1,628 | 1,827 | 325 | (11 | ) | 401 | 4,855 | 2,654 | 83 | |||||||||||||||||||||||
Special Items (Net of Taxes): | ||||||||||||||||||||||||||||||||
Real Estate Charge | — | — | (65 | ) | NM | NM | — | (65 | ) | NM | ||||||||||||||||||||||
Merger and Restructuring Costs | — | — | (220 | ) | NM | NM | — | (539 | ) | NM | ||||||||||||||||||||||
NET INCOME | $ | 1,628 | $ | 1,827 | $ | 40 | (11 | ) | NM | $ | 4,855 | $ | 2,050 | 137 | ||||||||||||||||||
AVERAGE ALLOCATED CAPITAL | ||||||||||||||||||||||||||||||||
Investment Bank | $ | 18,910 | $ | 20,061 | $ | 19,448 | (6 | ) | (3 | ) | $ | 19,911 | $ | 19,779 | 1 | |||||||||||||||||
Treasury & Securities Services | 2,604 | 2,765 | 2,601 | (6 | ) | — | 2,708 | 2,678 | 1 | |||||||||||||||||||||||
Investment Management & Private Banking | 5,490 | 5,481 | 5,607 | — | (2 | ) | 5,470 | 5,678 | (4 | ) | ||||||||||||||||||||||
JPMorgan Partners | 5,721 | 5,916 | 6,183 | (3 | ) | (7 | ) | 5,873 | 6,358 | (8 | ) | |||||||||||||||||||||
Chase Financial Services | 8,991 | 8,650 | 8,634 | 4 | 4 | 8,705 | 8,650 | 1 | ||||||||||||||||||||||||
Support Units and Corporate | 1,415 | (114 | ) | (305 | ) | NM | NM | (80 | ) | (1,979 | ) | 96 | ||||||||||||||||||||
TOTAL ALLOCATED CAPITAL | $ | 43,131 | $ | 42,759 | $ | 42,168 | 1 | 2 | $ | 42,587 | $ | 41,164 | 3 | |||||||||||||||||||
EARNINGS PER SHARE – DILUTED | ||||||||||||||||||||||||||||||||
OPERATING EARNINGS | $ | 0.78 | $ | 0.89 | $ | 0.16 | (12 | ) | 388 | $ | 2.35 | $ | 1.30 | 81 | ||||||||||||||||||
Special Items (Net of Taxes): | ||||||||||||||||||||||||||||||||
Real Estate Charge | — | — | (0.03 | ) | NM | NM | — | (0.03 | ) | NM | ||||||||||||||||||||||
Merger and Restructuring Costs | — | — | (0.12 | ) | NM | NM | — | (0.27 | ) | NM | ||||||||||||||||||||||
NET INCOME | $ | 0.78 | $ | 0.89 | $ | 0.01 | (12 | ) | NM | $ | 2.35 | $ | 1.00 | 135 | ||||||||||||||||||
OPERATING RETURN ON ALLOCATED CAPITAL | ||||||||||||||||||||||||||||||||
Investment Bank | 19 | % | 22 | % | NM | (300 | )bp | NM | 20 | % | 7 | % | 1,300 | bp | ||||||||||||||||||
Treasury & Securities Services | 24 | 18 | 31 | % | 600 | (700 | )bp | 20 | 25 | (500 | ) | |||||||||||||||||||||
Investment Management & Private Banking | 6 | 5 | 5 | 100 | 100 | 4 | 6 | (200 | ) | |||||||||||||||||||||||
Chase Financial Services | 20 | 41 | 35 | (2,100 | ) | (1,500 | ) | 31 | 29 | 200 | ||||||||||||||||||||||
OPERATING RETURN ON ALLOCATED CAPITAL | 15 | 17 | 3 | (200 | ) | 1,200 | 15 | 8 | 700 |
Page 11
J.P. MORGAN CHASE & CO. CONSOLIDATED BALANCE SHEET (in millions) |
Sep 30, 2003 | ||||||||||||||||||||
Over (Under) | ||||||||||||||||||||
Sep 30 | Jun 30 | Sep 30 | Jun 30 | Sep 30 | ||||||||||||||||
2003 | 2003 | 2002 | 2003 | 2002 | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and Due from Banks | $ | 18,585 | $ | 23,398 | $ | 18,159 | (21 | )% | 2 | % | ||||||||||
Deposits with Banks | 10,601 | 10,393 | 13,447 | 2 | (21 | ) | ||||||||||||||
Federal Funds Sold and Securities Purchased under Resale Agreements | 88,752 | 69,748 | 63,748 | 27 | 39 | |||||||||||||||
Securities Borrowed | 37,096 | 41,067 | 35,283 | (10 | ) | 5 | ||||||||||||||
Trading Assets: | ||||||||||||||||||||
Debt and Equity Instruments | 146,731 | 139,275 | 151,264 | 5 | (3 | ) | ||||||||||||||
Derivative Receivables | 83,787 | 93,602 | 87,518 | (10 | ) | (4 | ) | |||||||||||||
Securities | 65,152 | 82,549 | 79,768 | (21 | ) | (18 | ) | |||||||||||||
Loans (Net of Allowance for Loan Losses) | 231,448 | 222,307 | 206,215 | 4 | 12 | |||||||||||||||
Private Equity Investments | 7,797 | 7,901 | 8,013 | (1 | ) | (3 | ) | |||||||||||||
Goodwill | 8,134 | 8,132 | 8,108 | — | — | |||||||||||||||
Mortgage Servicing Rights | 4,007 | 2,967 | 3,606 | 35 | 11 | |||||||||||||||
Other Intangibles: | ||||||||||||||||||||
Purchased Credit Card Relationships | 1,078 | 1,141 | 1,337 | (6 | ) | (19 | ) | |||||||||||||
All Other Intangibles | 311 | 320 | 311 | (3 | ) | — | ||||||||||||||
Other Assets | 89,221 | 99,803 | 64,982 | (11 | ) | 37 | ||||||||||||||
TOTAL ASSETS(a) | $ | 792,700 | $ | 802,603 | $ | 741,759 | (1 | ) | 7 | |||||||||||
LIABILITIES | ||||||||||||||||||||
Deposits | $ | 313,626 | $ | 318,248 | $ | 292,171 | (1 | ) | 7 | |||||||||||
Federal Funds Purchased and Securities Sold under Repurchase Agreements | 131,959 | 155,330 | 154,745 | (15 | ) | (15 | ) | |||||||||||||
Commercial Paper | 14,790 | 12,382 | 13,775 | 19 | 7 | |||||||||||||||
Other Borrowed Funds | 8,174 | 12,176 | 12,646 | (33 | ) | (35 | ) | |||||||||||||
Trading Liabilities: | ||||||||||||||||||||
Debt and Equity Instruments | 87,516 | 72,825 | 71,607 | 20 | 22 | |||||||||||||||
Derivative Payables | 68,285 | 72,831 | 70,593 | (6 | ) | (3 | ) | |||||||||||||
Accounts Payable, Accrued Expenses and Other Liabilities (including the Allowance for Lending-Related Commitments) | 54,333 | 64,072 | 38,233 | (15 | ) | 42 | ||||||||||||||
Beneficial Interests of Consolidated Variable Interest Entities | 18,399 | — | — | NM | NM | |||||||||||||||
Long-Term Debt | 43,945 | 43,371 | 39,113 | 1 | 12 | |||||||||||||||
Junior Subordinated Deferrable Interest Debentures Held by Trusts that Issued Guaranteed Capital Debt Securities | 6,716 | 1,108 | — | NM | NM | |||||||||||||||
Guaranteed Preferred Beneficial Interests in Capital Debt Securities Issued by Consolidated Trusts | — | 5,439 | 5,439 | NM | NM | |||||||||||||||
TOTAL LIABILITIES | 747,743 | 757,782 | 698,322 | (1 | ) | 7 | ||||||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Preferred Stock | 1,009 | 1,009 | 1,009 | — | — | |||||||||||||||
Common Stock | 2,041 | 2,036 | 2,023 | — | 1 | |||||||||||||||
Capital Surplus | 13,238 | 12,898 | 13,113 | 3 | 1 | |||||||||||||||
Retained Earnings | 28,540 | 27,633 | 26,940 | 3 | 6 | |||||||||||||||
Accumulated Other Comprehensive Income | 187 | 1,293 | 1,465 | (86 | ) | (87 | ) | |||||||||||||
Treasury Stock, at Cost | (58 | ) | (48 | ) | (1,113 | ) | (21 | ) | 95 | |||||||||||
TOTAL STOCKHOLDERS’ EQUITY | 44,957 | 44,821 | 43,437 | — | 3 | |||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 792,700 | $ | 802,603 | $ | 741,759 | (1 | ) | 7 | |||||||||||
(a) | At September 30, 2003, includes an incremental $15 billion related to variable interest entities that were consolidated during the third quarter of 2003 in accordance with FIN 46. Also includes approximately $3 billion of variable interest entities consolidated prior to the third quarter of 2003 that continue to be consolidated in accordance with FIN 46. |
Page 12
J.P. MORGAN CHASE & CO. CREDIT-RELATED INFORMATION (in millions, except ratios) |
Sep 30, 2003 | ||||||||||||||||||||
Over (Under) | ||||||||||||||||||||
Sep 30 | Jun 30 | Sep 30 | Jun 30 | Sep 30 | ||||||||||||||||
2003 | 2003 | 2002 | 2003 | 2002 | ||||||||||||||||
CREDIT EXPOSURE: | ||||||||||||||||||||
Commercial Loans(a) | $ | 88,408 | $ | 91,056 | $ | 97,486 | (3 | )% | (9 | )% | ||||||||||
Derivative Receivables(b) | 83,787 | 93,602 | 87,518 | (10 | ) | (4 | ) | |||||||||||||
Other Receivables(c) | 108 | 108 | 1,130 | — | (90 | ) | ||||||||||||||
Total Commercial Credit-Related Assets | 172,303 | 184,766 | 186,134 | (7 | ) | (7 | ) | |||||||||||||
Lending-Related Commitments(d)(e) | 209,042 | 229,119 | 238,150 | (9 | ) | (12 | ) | |||||||||||||
Total Commercial Credit Exposure(f) | 381,345 | 413,885 | 424,284 | (8 | ) | (10 | ) | |||||||||||||
Managed Consumer Loans(g) | 182,108 | 170,127 | 143,835 | 7 | 27 | |||||||||||||||
Total Credit Portfolio | $ | 563,453 | $ | 584,012 | $ | 568,119 | (4 | ) | (1 | ) | ||||||||||
NET CHARGE-OFFS: | ||||||||||||||||||||
Commercial Loans | $ | 259 | $ | 257 | $ | 834 | 1 | (69 | ) | |||||||||||
Lending-Related Commitments | — | — | — | NM | NM | |||||||||||||||
Total Commercial Credit Exposure | 259 | 257 | 834 | 1 | (69 | ) | ||||||||||||||
Managed Credit Card(g) | 734 | 748 | 687 | (2 | ) | 7 | ||||||||||||||
All Other Consumer | 92 | 89 | 99 | 3 | (7 | ) | ||||||||||||||
Total Managed Consumer Loans | 826 | 837 | 786 | (1 | ) | 5 | ||||||||||||||
Total Credit Portfolio | $ | 1,085 | $ | 1,094 | $ | 1,620 | (1 | ) | (33 | ) | ||||||||||
NET CHARGE-OFF RATES — ANNUALIZED: | ||||||||||||||||||||
Total Commercial Loans | 1.09 | % | 1.20 | % | 3.53 | % | (11 | )bp | (244 | )bp | ||||||||||
Managed Credit Card | 5.80 | 6.01 | 5.51 | (21 | ) | 29 | ||||||||||||||
Total Credit Portfolio | 0.88 | 0.91 | 1.36 | (3 | ) | (48 | ) | |||||||||||||
NONPERFORMING ASSETS: | ||||||||||||||||||||
Commercial Loans | $ | 2,598 | $ | 2,963 | $ | 3,596 | (12 | )% | (28 | )% | ||||||||||
Derivative Receivables | 260 | 276 | 169 | (6 | ) | 54 | ||||||||||||||
Other Receivables(c) | 108 | 108 | 1,130 | — | (90 | ) | ||||||||||||||
Consumer Loans | 513 | 493 | 507 | 4 | 1 | |||||||||||||||
Assets Acquired in Loan Satisfactions | 203 | 227 | 140 | (11 | ) | 45 | ||||||||||||||
Total Credit Portfolio(h) | $ | 3,682 | $ | 4,067 | $ | 5,542 | (9 | ) | (34 | ) | ||||||||||
(a) | At September 30, 2003, includes $10.9 billion of exposure related to consolidated variable interest entities in accordance with FIN 46, of which $10.4 billion is associated with multi-seller asset-backed commercial paper conduits. | |
(b) | At September 30, 2003, Derivative Receivables decreased $360 million in accordance with FIN 46. | |
(c) | Represents, at September 30, 2003, the Enron-related letter of credit, which continues to be the subject of litigation with a credit-worthy entity and which was classified in Other Assets. | |
(d) | At September 30, 2003, total commitments related to asset-backed commercial paper conduits consolidated in accordance with FIN 46 are $18.7 billion, of which $6.8 billion is included in Lending-Related Commitments. The remaining $11.9 billion of commitments related to these variable interest entities were excluded as their underlying assets are reported as follows: $10.4 billion in Loans and $1.5 billion in Available-for-sale Securities. | |
(e) | Includes unused advised lines of credit of $20 billion at September 30, 2003, $19 billion at June 30, 2003, and $18 billion at September 30, 2002. | |
(f) | Includes all Enron-related credit exposures. Credit exposure excludes risk participations and does not reflect the benefit of credit derivative hedges or liquid collateral held against derivatives contracts. | |
(g) | Includes securitized credit card receivables. | |
(h) | Nonperforming assets exclude nonaccrual loans held for sale (“HFS”) of $192 million at September 30, 2003. HFS loans are carried at the lower of cost or market, and declines in value are recorded in Other Revenue. |
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