![]() Forward-looking statements This presentation contains forward-looking statements 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. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause JPMorgan Chase’s actual results to differ materially from those described in the forward-looking statements can be found in JPMorgan Chase’s Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010, June 30, 2010, and September 30, 2010, each of which has been filed with the Securities and Exchange Commission and is available on JPMorgan Chase’s website (www.jpmorganchase.com) and on the Securities and Exchange Commission’s website (www.sec.gov). JPMorgan Chase does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements. Exhibit 99.1 |
![]() February 15, 2011 F I R M O V E R V I E W Doug Braunstein, Chief Financial Officer * * * * * * |
![]() I. JPMorgan Chase overview Performance summary LOB capital and performance targets II. Selected key investor topics Global opportunities Competitive advantages of cross-sell Corporate net income Loan growth and capital raised Firmwide capital topics Outlook III. Summary Agenda 1 |
![]() $O/(U) FY2009 FY2010 FY2009 Revenue (FTE)¹ $108,647 $104,842 ($3,805) Credit Costs¹ 38,458 16,639 (21,819) Expense 52,352 61,196 8,844 Reported Net Income $11,728 $17,370 $5,642 Net Income Applicable to Common Stock $8,774 $15,764 $6,990 Reported EPS $2.26 $3.96 $1.70 ROE 2,3 7% 10% ROTCE 2,3 11% 15% Tier 1 Common $105,284 $114,763 Net income - 2010 CB 12% Card 12% TSS 6% IB 38% RFS 15% Corp/PE 7% AM 10% JPMorgan Chase overview Performance summary 1 See note 1 on slide 38 2 Net income used to calculate the ratios for FY2009 excludes the one-time, non-cash negative adjustment of $1.1B resulting from the repayment of TARP preferred capital 3 See note 4 on slide 38 Total = $17.4B CB 9% Card 26% TSS 4% IB 20% RFS 32% Corp/PE 2% AM 7% Total = $43.6B $ in millions, excluding EPS Pretax pre-provision profit - 2010 2 |
![]() Asset Management Treasury & Securities Services JPMorgan Chase overview Breadth of the client franchise ~5,000 issuer and ~16,000 investor clients, including: Serving clients in 120+ countries 89% of Fortune 100 companies 76% of Fortune 500 companies 120+ sovereign government clients Total front office personnel of ~8,500 including 800+ in Global Research ~2,000 bankers¹ globally Investment Bank AM’s global footprint spans over 30 countries with employees in more than 200 locations 1,100 Investment professionals 130,000 Private Banking clients 3,400 sales people, including 2,600 client advisors and brokers Serving ~25,000 corporations, financial institutions, governments and municipalities in over 140 countries and territories² ~10,600 TSS clients with >$50K revenue WSS clients include 75% of the top 50 global asset managers TS clients include 70% of the Global Fortune 500 companies ~1,090 sales and relationship managers Commercial Banking 1 Includes Public Finance and Global Corporate Bankers 2 Represents TSS clients that meet certain revenue thresholds. Includes clients of IB, CB and AM 3 Nearly 24,000 clients and nearly 35,000 real estate investors and owners Nearly 21,000 Middle Market clients – Middle Market supports 3,200+ small business lending relationships with less than $20mm in sales More than 1,600 Mid-Corporate clients 1,960 employees calling on clients, including 1,061 bankers |
![]() JPMorgan Chase overview Breadth of the client franchise 5,268 Chase branches in 23 states served nearly 31mm US consumers and small businesses in 4Q10 23mm Retail Banking households served 18mm active online Retail Banking customers 2.2mm Business Banking customers 8.5mm mortgage loans serviced 3.3mm Auto accounts serviced Over 29,000 bankers Retail Financial Services More than 139mm cards in circulation held by approximately 57mm customers 2.3mm small business accounts Affluent and High Net Worth – 11.3mm open accounts, 1.6mm new accounts added in 2010 9.5mm Mass Affluent new accounts in 2010 Over 80 partner arrangements Over 600 sales people Card Services 4 |
![]() JPMorgan Chase overview Drivers of historical growth 5 1 2005 IB data represents heritage JPM only 2 Source: Dealogic 3 Source: SNL Corporation; all data is presented on a pro forma basis adjusted for acquisitions; excludes large branches (>$1B deposits) assumed to contain non-retail deposits 4 Source: Inside Mortgage Finance, 4Q05 and 4Q10 for 2005 and 2010, respectively 5 GPCC stands for General Purpose Credit Card. Excludes WaMu and industry data based on estimates and excludes Commercial Card 6 Includes deposits and deposits swept to on-balance sheet liabilities 7 Source: Lipper for the U.S. and Taiwan; Morningstar for the U.K., Luxembourg, France and Hong Kong; and Nomura for Japan 8 iMoneyNet |
![]() 2005 2010 2005-2010 CAGR Investment Bank 1 $5,018 $8,952 12% Retail Financial Services 6,245 13,892 17% Card Services 10,367 11,366 2% Commercial Banking 1,632 3,841 19% Treasury & Securities Services 1,489 1,777 4% Asset Management 1,804 2,872 10% Corporate 1 (6,617) 946 NM Pretax Pre-Provision $19,938 $43,646 17% Net Income $8,483 $17,370 15% JPMorgan Chase overview Market share gains translate into significant earnings power ¹ IB revenue includes annual payment from TSS, which is offset in Corporate Pretax pre-provision profit ($ in billions) 6 |
![]() JPMorgan Chase overview LOB Capital 2010 2011 O/(U) Investment Bank $40.0 $40.0 $0.0 Retail Financial Services 28.0 28.0 0.0 Card Services 15.0 13.0 (2.0) Commercial Banking 8.0 8.0 0.0 Treasury & Securities Svcs. 6.5 7.0 0.5 Asset Management 6.5 6.5 0.0 Total LOB Common Equity $104.0 $102.5 ($1.5) New vs. current LOB equity ($ in billions) Standalone capital levels, specific to each LOB, incorporate Tier 1 Common Basel III expectations LOB equity process takes into account the following factors: Known balance sheet actions Economic capital RWA stress Peer capital levels IB capital increased in 2010, incorporating anticipated RWA changes Card Services capital reduction reflects portfolio run-off and improving risk profile 7 |
![]() Target Metric Performance Performance 2008 2009 2010 Target IB ROE (5%) 21% 17% 17% +/- RFS 1 ROE 5% 0% 9% 30% +/- ROE Exc. RE 35% 36% 27% Card ROE 5% (15%) 14% 20% +/- CB ROE 20% 16% 26% 20% + TSS ROE 47% 25% 17% 25% +/- AM ROE 24% 20% 26% 35% +/- Target Metrics JPMorgan Chase overview LOB performance targets LOB performance targets ¹ Retail Banking ROE of 45%, 41% and 35% in 2008, 2009 and 2010, respectively; Mortgage Banking and Other Consumer Lending ROE of 23%, 28% and 17% in 2008, 2009 and 2010, respectively Note: TSS and AM pretax margin targets remain unchanged at 35% +/- through the cycle 8 |
![]() $6.6 $2.5 $2.1 $2.1 $1.1 $1.7 $1.3 IB RFS Card CB TSS AM Corporate/PE 2010 Net Income Net Income at Performance Targets¹ JPM JPMorgan Chase overview LOB performance at targets Net income by LOB ($ in billions) $24+/- $17.4 ¹ Net income projections based on performance target and steady state assumptions; TSS and AM ROE targets of 25% and 35%, respectively, are based on additional assumptions including steady state revenue and tax rate ² Analyst average for 2013 is composed of 5 analysts plus I/B/E/S LTG projections off of 2012 for 3 analysts; analyst average of $24.1 billion in 2013 Significant earnings upside if the Firm reaches performance targets $25.6 $21.3 Max = 2013 Analyst range² Min 9 |
![]() Selected key investor topics 11 Page Agenda 10 |
![]() US 60% International 40% US 78% International 22% Wholesale revenue by region — 2010 Firmwide revenue by region — 2010 Total = $102.7B Selected key investor topics Our current global footprint Total = $54.0B 1 Majority of the revenue in “Other” relates to activity in Canada 2 EMEA includes CIO gains in 2010 Developed EMEA ² 57% Asia 27% Emerging EMEA 7% LatAm 8% Other¹ 0.4% IB TSS 46% 49% AM 32% % International ’05-’10 CAGR EMEA Asia LatAm 12% 15% 13% Total = $21.7B International wholesale revenue — 2010 2 11 |
![]() Net income – Non U.S. ($ in millions) Revenue – Non U.S. ($ in millions) 2005 – 2010 International wholesale revenue and net income 0 5,000 10,000 15,000 20,000 25,000 2005 2006 2007 2008 2009 2010 LatAm EMEA Asia 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2005 2006 2007 2008 2009 2010 LatAm EMEA Asia Note: RFS and Card excluded from this analysis. EMEA includes CIO gains in 2010 CAGR: 19% 2005-2010 CAGR: 14% 2005-2010 12 |
![]() LatAm/Caribbean Asia Pacific EMEA Key international wholesale metrics 2010 revenue of $1.8B 2005 – 2010 CAGR: 13% Operate in 8 countries in the region 2 new offices opened in 2010 Headcount of 1,770 1 1,024 front office 160+ significant clients 2 $1.7B in deposits $16.5B in loans outstanding $32B in AUM 2010 revenue of $14.1B 2005 – 2010 CAGR: 13% Operate in 33 countries in the region 5 new offices opened in 2010 Headcount of 16,312 1 6,192 front office 940+ significant clients 2 $135.8B in deposits $27.9B in loans outstanding $281B in AUM 2010 revenue of $5.8B 2005 – 2010 CAGR: 15% Operate in 16 countries in the region 6 new offices opened in 2010 Headcount of 15,419 1 4,366 front office 450+ significant clients 2 $49.1B in deposits $20.6B in loans outstanding $118B in AUM 1 Includes headcount in offshore service centers supporting line of business operations in each region. Front office headcount defined as follows: IB - Front office includes bankers and sales and trading employees excluding front office support TSS - Front office includes sales, product and client service workforce AM - Front office includes sales, sales support and all product/investors staff 2 Significant clients defined as a company with over $1mm in international revenue in the region (excludes private banking clients) Note: RFS and Card excluded from this analysis. EMEA includes CIO gains in 2010 Loans outstanding are based on client domicile and exclude loans held-for-sale 13 |
![]() Major competitive advantage – cross-sell across wholesale Significant revenue generated from the CB client base 24% of gross domestic IB fee revenue generated from CB clients in 2010 $375mm firmwide revenue from FX/Derivatives for CB clients $2B revenue opportunity within 5 years 40% firmwide FX revenue generated via TSS offerings Investment Bank 40% TS Firmwide revenue from CB client base Global Corporate Bank effort Additional ~$1B of annual pretax income impact expected in 5 years Treasury & Securities Services 21% of IM liquidity AUM from TSS 12% of firmwide PB client revenue generated from IB products Asset Management 14 |
![]() Asset Management Treasury & Securities Services Business unlikely to exist without retail presence ~17mm transactions done by CB clients in 2010 at branches $650-800mm of projected long-term CB pretax income opportunity from build-out in the WaMu footprint (West and Southeast) Commercial Banking Card Services Retail branches are invaluable to the rest of our franchise ~25% of JPM IM US Retail AUM comes from the branches $31B of JPM investment product AUM $1B+/- incremental pretax income opportunity from Chase Private Client Services ~50% of Private Banking clients use the branch network 1.5 mm+/- cards sold through branches in 2010 35% of Card Services cards sold through branch network 1 >40% of revenue from new merchants is being sourced through the retail branches Use of core banking services (e.g., deposits and change orders) Check Cashing Agreements: cashing of employee payroll checks without a fee across branch network Chase At Work: better payroll management, convenient banking & discounts to employees 1 Excludes retail partner accounts 15 |
![]() Corporate Net income trend 2009 – 2011 ($ in billions) 2.8 1.9 ~1.1 1.4 1.7 ~0.1 (1.2) (2.9) 2009 2010 2011 CIO/Treasury NII CIO/Treasury Other¹ Corp. Other¹ Selected key investor topics Corporate net income guidance Reduction in NII reflects the cumulative effect of sales of high yielding securities that met price objectives Overall part of deleveraging the balance sheet Beginning to reposition for a rising rate environment Expect $300mm +/- corporate net income per quarter ($1.2B per annum, excl. PE and one-time items) largely driven by the characteristics of the investment portfolio Firmwide net interest income Immediate 100bps rise in interest rates would increase firmwide revenue by $1.5B Commentary Total Corp (ex. PE): $3.1 $0.7 ~$1.2 16 ¹ Corporate Other and CIO/Treasury Other includes one-time items for 2009 and 2010. Excludes Private Equity net income of ($78)mm loss in ’09 and $587mm gain in ’10. Corporate and Private Equity net income and Corporate Investment Securities portfolio previously disclosed. CIO/Treasury NII, CIO/Treasury Other, and Corp. Other not previously disclosed |
![]() $73 $56 $36 $54 $186 $219 $92 $67 $57 $60 $191 $870 $209 $1,490 $6 $1,577 $881 $9 2009 2010 Selected key investor topics Loan growth - Growth in new and renewed credit provided to and capital raised for clients in 2010¹ $ in billions Investment Bank Commercial Banking Asset Management TSS Card Services 5 Business Banking Other Consumer 6 Total Firm % ? 5% 26% 19% 58% 11% 50% 3% 6% 1% in total EOP balances ($B) 7 $1.5 $6.3 $8.2 ($19.8) ($0.2) ($23.2) ($19.2) % in EOP balances 2% 17% 43% (14)% (1)% (7)% (3)% $7.8 16% EOP ($B) $98.9 $44.1 $27.2 $123.9 $16.8 $314.8 $679.2 $56.9 2 3,4 3,4 2 4 4 17 1 New and renewed lending consists of debt and equity underwriting, loan syndication and other capital raised for states, municipalities, hospitals, schools and non-profits in the Investment Bank; new and renewed lending commitments to commercial clients; new originations and refinancing to consumers including first mortgages, home equity lines, US credit cards and other consumer lending such as auto loans, leases, student loans and other; new originations, renewals and increases to existing lending for small businesses 2 Consists of debt and equity underwriting, loan syndications distributed to third parties (as estimated) and other capital raised for states, municipalities, hospitals, schools and non-profits, excluding the portion retained in the credit portfolio (source: Dealogic and Thomson Reuters) 3 Consists of new and renewed lending held in IB’s credit portfolio, including the estimated retained portion of loan syndications 4 Also includes estimated bilateral and other lending activity not previously reported 5 Loan balances exclude the impact of the Washington Mutual transaction. New and renewed lending includes international originations starting January 1, 2010 6 Consumer includes Home Lending, Home Equity, Auto loans and leases, Student and Other 7 Total EOP loans are on a managed basis. Effective January 1, 2010, the Firm consolidated $15.1 billion of multi-seller conduit loans due to accounting guidance related to VIEs. CB loans for 2010 include the $3.5 billion Commercial Term Loan portfolio acquisition |
![]() Process overview Selected key investor topics Capital stress process Rigorous firmwide quarterly stress testing process in place Bottom-up P&L and balance sheet developed for different economic scenarios – 3-year outlook – Economic scenarios defined by JPM economists – P&L and balance sheet models developed by lines of business – Stress scenarios incorporate potential expense reduction initiatives across LOBs Capital actions evaluated Ongoing process adjusted to meet the Fed Comprehensive Capital Plan requirements Range of parameters used to model stress scenarios, including: GDP declines over 4% through 3Q11, then resumes slow growth through 4Q13 Peak unemployment of 11.7% in 4Q13 HPI peak-to-trough of 45% in 1Q12 Equity markets bottom at 850¹ during 2H11 and do not recover to 2010 levels until 4Q13 Fed funds stay at 20bps through 4Q13 JPM Stress: Example metrics ¹ S&P 500 18 |
![]() 8.4% 8.4% 8.4% 9.3% 9.7% 10.2% 11.1% 11.5% 12.1% 11.9% 12.1% 8.3% 9.2% 8.9% 8.9% 7.0% 7.0% 7.0% 6.9% 7.1% 6.8% 6.9% 7.2% 7.7% 8.2% 8.8% 9.1% 9.6% 9.5% 9.8% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% Selected key investor topics JPM has maintained a fortress balance sheet throughout the crisis Basel I Tier 1 Capital ratio excluding TARP¹ September 2008: Raised $11.5B related to WaMu acquisition June 2009: Raised $5.75B to repay TARP March 2008: JPM acquisition of BSC announced Tier 1 Capital Ratio Tier 1 Common Ratio Old Tier 1 Capital Target: 8.0 – 8.5% SCAP 1 Tier 1 Common Guideline: 4.0% ¹ Includes BSC RWA relief in 2Q08 – 1Q09 19 |
![]() ~10% ~11% ~12% 2011 2012 2013 Selected key investor topics Capital generation — Illustrative “stress” case based on analyst projections Analyst and “stressed” analyst projections ($ in billions)¹ , ² , ³ Assumptions Analyst Projections "Stressed" Analyst Projections 2010 2011 2012 2013 2011 2012 2013 Net Income $17.4 $19.6 $22.2 $24.1 ~$12 ~$13 ~$14 Net Share Repurchases 4 $4 $6 $7 $0 $0 $0 Total Common Dividends 5 $2 $5 $6 $2 $5 $6 Capital Generation $12 $10 $11 $9 $8 $8 Cumulative Cap. Gen. $34 $25 Basel I Tier 1 Common Ratio 9.8% 10.7% 11.4% 12.2% 2010 2011 2012 2013 Tier 1 Common Fed Guideline: 5.0% 6 Analyst Projections "Stressed" Analyst Projections 2010 2011 2012 2013 2011 2012 2013 7.0% ~8% ~10% ~11% ~8% ~9% ~10% Basel III Tier 1 Common Ratio 20 ¹ Analyst average for 2013 is composed of 5 analysts plus I/B/E/S LTG projections off of 2012 for 3 analysts; regulatory changes are assumed to be incorporated in the analyst projections. JPM does not endorse these projections ² “Stressed” Analyst Projections incorporate JPM stressed scenario assumptions ³ Analyst projection of capital deployment through common dividends of $13.7B and share repurchases of $17.3B from 2011-2013; “stressed” analyst projections include common dividend only 4 Represents repurchases above and beyond employee issuance 5 Analyst Projections and “Stressed” Analyst Projections assume dividends per share of $0.63, $1.28 and $1.56 in 2011, 2012 and 2013, respectively 6 Guideline communicated in the Federal Comprehensive Capital Plan 11/10 Note: Numbers rounded for presentation purposes. Ratios and other calculations may not round perfectly |
![]() Selected key investor topics Capital planning Federal Reserve Comprehensive Capital Plan Review Extensive data collection and analysis; 100+ person firmwide team submitted plan on January 7, 2011 Follow-up meetings with Fed currently under way Expect response by March 21, 2011 Capital Plan & Results Under both the JPM Stress and Fed Stress scenarios, JPM continues to maintain and grow its strong capital position Capital plan incorporates both dividend and share repurchase requests Capital Hierarchy Increase dividend to 30%+ payout ratio of normalized earnings over time Hierarchy of capital after restoration of the dividend: Organic growth Opportunistic share repurchase – subject to price Acquisitions 21 |
![]() Outlook Retail Financial Services Card Services Corporate/Private Equity Corporate Quarterly net income expected to be $300mm+/-, subject to the size and duration of the investment securities portfolio, excluding private equity Chase and WaMu credit losses expected to continue to improve; Chase losses expected to be below 6.50% in 1Q11 EOP outstandings for Chase (excluding WaMu) are projected to bottom out in 3Q11 and end the year in 2011 at $120B+/-, reflecting a better mix of customers 1Q11 outstandings expected to decline as much as $10B due to runoff and seasonal activity Card Services 2011 net interest income expected to be reduced by $1.4B+/- from the 2010 level Total quarterly net charge-offs running at $1.2B+/- Continued elevation in credit-related expense Residential real estate portfolios expected to decline by approximately 10-15% annually for the foreseeable future 2011 portfolio net interest income expected to be reduced by $700mm+/- from 2010 level Mortgage production volumes and margins remain sensitive to interest rates. If current rates remain unchanged or rise further expect a significant impact on both 22 |
![]() Significant earnings power JPM’s fundamentals remain extremely strong Excellent client franchises and businesses Each standalone business has a top 1, 2 or 3 position Unparalleled client relationships in 120+ countries Culture of innovation; new products and programs launched during crisis Excellent franchises Fortress balance sheet Continued investment across LOBs driving organic growth Consistent record of operating efficiency and delivering merger saves Businesses stronger together than apart; additional revenue streams generated Further strengthened balance sheet: Tier 1 Common 1 at $115B or 9.8%; estimated Basel III Tier 1 Common 1 at $112B or 7.0% High quality capital and high level of reserves $32.3B, loan loss coverage ratio of 4.46% 2 Strong funding and liquidity profile: ~$930B deposits, 1.3x loan coverage Benefits from diversification – funding, capital, lower volatility 1 See note 3 on slide 38 2 See note 2 on slide 38 23 |
![]() Agenda Page 24 Appendix 24 |
![]() Credit performance improvement is a key driver to improved earnings outlook 1.35% 0.50% 2010 Expectations for net charge-off rates through the cycle Through the cycle expectations IB 0.94% 0.50% CB 8.72% 4.50% Card (ex. WaMu) 3.63% Home Equity 2.60% 0.08% Prime Mortgage 0.25-0.35% +/- Reserve levels will adjust as underlying credit improves and certain portfolios run off ¹ See note 2 on slide 38 Reserves 12/31/10 ($ in billions) Allowance for Loan Losses¹ Loan Loss Coverage Ratio¹ Wholesale $4.8 2.1% Consumer 22.6 5.8% Firmwide $27.3 4.5% 25 |
![]() Firmwide coverage ratios remain strong Peer comparison $32.3B of loan loss reserves in 4Q10 2 , up ~$9.1B from $23.2B two years ago; loan loss coverage ratio of 4.46% 1 $7.5B (pretax) addition in allowance for loan losses related to the consolidation of credit card receivables in 1Q10 1 26 1 See note 1 on slide 38 2 Includes allowance for loan losses for purchased credit-impaired loans of $4.9B, $2.8B, $2.8B, $2.8B, $1.6B, and $1.1B at the end of 4Q10, 3Q10, 2Q10, 1Q10, 4Q09, and 3Q09, respectively 3 Peer average reflects equivalent metrics for key competitors. Peers are defined as C, BAC and WFC 4Q10 JPM 1 Peer Avg. 3 Consumer LLR/Total Loans 5.78 % 5.86% LLR/NPLs 255 % 195% Wholesale LLR/Total Loans 2.14 % 2.32% LLR/NPLs 86 % 59% Firmwide LLR/Total Loans 4.46 % 4.56% LLR/NPLs 190 % 138% |
![]() Fortress balance sheet $111 $108 $104 $105 $115 9.1% 9.5% 9.8% 9.6% 8.8% $0 $30 $60 $90 $120 4Q09 1Q10 2Q10 3Q10 4Q10 4.0% 6.0% 8.0% 10.0% 12.0% Basel I Tier 1 Common Basel I Tier 1 Common Ratio Tier 1 Common1 ($ in billions) Firmwide total credit reserves of $33B; loan loss coverage ratio of 4.46% 1 Strong liquidity position Global liquidity reserve of $262B 2,3 Deposit to loan ratio of 134% Basel III Tier 1 Common of 6.8% and 7.0% in 3Q10 and 4Q10, respectively 27 1 See note 2 on slide 38 2 Estimated for 4Q10 3 The Global Liquidity Reserve represents cash on deposit at central banks, and the cash proceeds expected to be received in connection with secured financing of highly liquid, unencumbered securities (such as sovereigns, FDIC and government guaranteed, agency and agency MBS). In addition, the Global Liquidity Reserve includes the firm’s borrowing capacity at the Federal Reserve Bank discount window and various other central banks and from various Federal Home Loan Banks, which capacity is maintained by the firm having pledged collateral to all such banks. These amounts represent preliminary estimates which may be revised in the firm’s 10-K for the period ending December 31, 2010 Note: Firmwide Level 3 assets are 5% of total firm assets at December 31, 2010 |
![]() Managed financial results 2005 2006 2007 2008 2009 2010 Investment Bank $3,673 $3,674 $3,139 $(1,175) $6,899 $6,639 Retail Financial Services 3,427 3,213 2,925 880 97 2,526 Card Services 1,907 3,206 2,919 780 (2,225) 2,074 Commercial Banking 951 1,010 1,134 1,439 1,271 2,084 Treasury & Securities Services 863 1,090 1,397 1,767 1,226 1,079 Asset Management 1,216 1,409 1,966 1,357 1,430 1,710 Corporate/Private Equity (3,554) 842 1,885 557 3,030 1,258 Total Firm Net Income $8,843 $14,444 $15,365 $5,605 $11,728 17,370 Firmwide results ($ in millions) Net income by line of business ($ in millions) 1 See note 1 on slide 38 2 Net income used to calculate the ratios for 2009 excludes the one-time, non-cash negative adjustment of $1.1B resulting from the repayment of TARP preferred capital 3 See note 4 on slide 38 28 2005 2006 2007 2008 2009 2010 Revenue (FTE) 1 $58,364 $65,113 $74,812 $72,772 $108,647 $104,842 Credit Costs 1 3,483 3,270 6,864 20,979 32,015 16,639 Expense 38,281 38,843 41,703 43,500 52,352 61,196 Reported Net Income $8,843 $14,444 $15,365 $5,605 $11,728 $17,370 Reported EPS $2.38 $4.04 $4.38 $1.35 $2.26 $3.96 ROE 2 8% 12% 13% 4% 7% 10% ROTCE 2,3 14% 22% 21% 6% 11% 15% |
![]() Investment Bank $ in millions Leadership positions Global IB Fee market leader, #1 ranking for the past two years 7 Ranked #2 in disclosed Markets revenue in 2010 (Based on top 10 competitors that have released as of February 11 th , 2011) Top 2 player in emerging markets over past 5 years 8 Ranked #1 2010 All-America Fixed Income and Equity Research team by Institutional Investor magazine 1 29 1 Results for 2008 include seven months of the combined Firm’s (JPMorgan Chase & Co.’s and Bear Stearns’) results and five months of heritage JPMorgan Chase results 2 The 2009 results reflect modest net gains on legacy leveraged lending and mortgage-related positions, compared with net markdowns of $10.6 billion in 2008 3 The compensation expense as a percentage of total net revenue ratio includes the impact of the U.K. Bank Payroll Tax on certain compensation awarded from December 9, 2009 to April 5, 2010 to relevant banking employees. For comparability to prior periods, IB excludes the impact of the U.K. Bank Payroll Tax expense, which results in a compensation expense as a percentage of total net revenue for 2010 of 35%, which is a non-GAAP financial measure 4 Loans held-for-sale and loans at fair value were excluded when calculating the loan loss coverage ratio and net charge-off rate 5 Calculated based on average equity 6 First six months of 2008 represent VAR at 99% confidence level, second six months of 2008, 2009 and 2010 Average Trading and Credit Portfolio VAR at 95% confidence interval 7 Dealogic based on revenue 8 Source: Coalition Development Ltd 2008 2009 2010 2010 Budget Revenue 2 $12,335 $28,109 $26,217 $27,336 IB Fees 5,907 7,169 6,186 5,972 Fixed Income Markets 1,957 17,564 15,025 14,847 Equity Markets 3,611 4,393 4,763 5,615 Credit Portfolio 860 (1,017) 243 902 Expense 13,844 15,401 17,265 16,105 Credit Costs 2,015 2,279 (1,200) 400 Net Income ($1,175) $6,899 $6,639 $7,224 Key Statistics ($B) Overhead Ratio 112% 55% 66% 59% Comp/Revenue 3 62% 33% 37% 38% EOP Loans $85.0 $49.1 $56.9 $63.5 Allow. for Loan Losses $3.4 $3.8 $1.9 $3.2 Net Charge-off Rate 4 0.14% 3.04% 1.35% 2.50% ALL / EOP Loans 4 4.83% 8.25% 3.51% 4.92% ROE 5 (5%) 21% 17% 22% VAR ($mm) 6 $176 $164 $87 EOP Equity $33.0 $33.0 $40.0 $33.0 |
![]() Retail Financial Services 1 Calculated based on average equity; average equity for 2010, 2009 and 2008 was $28B, $25B and $19B, respectively 2 Calculated based on average equity; average equity for 2010, 2009 and 2008 was $18.3B, $15.2B and $12.1B , respectively 3 Source: Inside Mortgage Finance, 4Q10 4 Source: Autocount as of YTD December 2010 Leadership positions Attractive footprint Tri-West Midwest California Top deposit shares in #1 New York #1 Chicago #1 Phoenix #1 Dallas/Ft. Worth #3 in Mortgage Originations with 10.7% market share 3 #3 in Mortgage Servicing with 11.9% market share 3 #2 non-captive in new/used vehicles sold at franchise dealers 4 $ in millions Northwest Florida Southwest #1 Houston #2 Seattle #3 Los Angeles 30 2008 2009 2010 Retail Financial Services Net Interest Income $14,165 $20,492 $19,528 Noninterest Revenue 9,355 12,200 12,228 Revenue 23,520 32,692 31,756 Expense 12,077 16,748 17,864 Pre-Provision Pretax 11,443 15,944 13,892 Credit Costs 9,905 15,940 9,452 Net Income $880 $97 $2,526 EOP Equity ($B) $25 $25 $28 ROE 1 5% - % 9% Memo: RFS Net Income Excl. Real Estate Portfolios $4,268 $5,546 $5,019 ROE Excl. Real Estate Portfolios 2 35% 36% 27% Retail Banking — Key Drivers¹ ($ in billions) Average Deposits $244.6 $340.8 $336.5 Deposit Margin 2.89% 2.96% 3.03% Checking Accts (mm) 24.5 25.7 27.3 # of Branches 5,474 5,154 5,268 Mortgage Banking & Other Consumer Lending — Key Drivers 1 ($ in billions) Mortgage Loan Originations $169.0 $150.7 $155.6 3rd Party Mortgage Loans Svc'd (EOP) 1,173 1,082 968 Auto Originations 19.4 23.7 23.0 Avg Loans 61.9 68.7 77.2 |
![]() Retail Financial Services Retail Banking and Mortgage Banking & Other Consumer Lending 1 Principally NII income ($5.4B in 2010 and $4.6B in 2011) $ in millions 31 2008 2009 2010 Retail Banking Net Interest Income 7,659 10,781 10,785 Noninterest Revenue 4,951 7,169 6,792 Revenue $12,610 $17,950 17,577 Expense 7,232 10,357 10657 Pre-provision pretax $5,378 $7,593 6,920 Credit Costs 449 1,142 607 Net Income $2,982 $3,903 $3,614 Mortgage Banking & Other Consumer Lending Revenue (excl. MSR Risk Management) $5,451 $6,594 $7,496 MSR Risk Management 1,517 1,628 1,136 Revenue 6,968 8,222 8,632 Memo: Repurchase Losses (Contra-Revenue) ($252) ($1,612) ($2,912) Expense 3,956 4,544 5,580 Pre-Provision Pretax 3,012 3,678 3,052 Credit Costs 895 1,235 614 Net Income $1,286 $1,643 $1,405 |
![]() Retail Financial Services Real Estate Portfolios 1 Excludes the impact of purchased credit-impaired loans acquired as part of the WaMu transaction. An allowance for loan losses of $4.9B and $1.6B was recorded for these loans at year end 2010 and 2009, respectively 2 Includes purchased credit-impaired loans acquired as part of the WaMu transaction $ in millions 32 2008 2009 2010 Real Estate Portfolios Total Revenue $3,942 $6,520 $5,547 Expense 889 1,847 1,627 Pre-Provision Pretax 3,053 4,673 3,920 Net charge-offs 3,894 8,343 6,450 Change in allowance 4,667 5,220 1,781 Credit Costs 8,561 13,563 8,231 Net Income (3,388) (5,449) (2,493) Memo: ALL/EOP Loans 1 3.79% 6.55% 6.47% Key Drivers ($ in billions) 2008 2009 2010 Total Avg loans $181.3 $270.5 $238.8 Avg Home Equity Loans Owned 2 107.0 135.9 120.3 Avg Mortgage Loans Owned 2 73.4 133.8 117.5 |
![]() Card Services 1 Calculated based on average equity 2 Excludes WaMu and industry data based on estimates and excludes Commercial Card 3 Based on internal JPM estimates $ in millions Leadership positions Chase is #1 Visa credit card issuer 18.8% market share of General Purpose Credit Card outstandings 2 18.4% market share of General Purpose Credit Card sales volume 2 #1 co-brand card issuer in the U.S. 3 #1 merchant acquirer in e-commerce payment processing 3 2008 2009 2010 Revenue $16,474 $20,304 $17,163 Expense 5,140 5,381 5,797 Credit Costs 10,059 18,462 8,037 Net Income $780 ($2,225) $2,074 Key Statistics Incl WaMu ($B) ROO (Pretax) 0.78% (2.05)% 2.31% ROE¹ 5% (15)% 14% EOP Equity $15.0 $15.0 $15.0 Key Statistics Excl WaMu ($B) Avg Outstandings $155.9 $148.8 $128.3 EOP Outstandings $162.1 $143.8 $123.9 New Accts Opened (mm) 14.4 10.2 11.3 Managed Margin 8.16% 8.97% 8.86% Net Charge-Off Rate 4.92% 8.45% 8.72% 30+ Day Delinquency Rate 4.36% 5.52% 3.66% 33 |
![]() Commercial Banking $ in millions Leadership positions Strong liquidity – only bank in peer group with a loan-to-deposit ratio under 100% Maintained top 3 leadership position nationally in market penetration and lead share 4 68% of Chase clients use Chase for their TS needs 4 #1 multi-family lender in the U.S. 5 #2 large middle market lender in the U.S. 6 2008 2009 2010 Revenue $4,777 $5,720 $6,040 Middle Market 2,939 3,055 3,060 Mid-Corp. Banking 921 1,102 1,154 Comm. Term Lending 243 875 1,023 Real Estate 413 461 460 Other 261 227 343 Expense 1,946 2,176 2,199 Credit Costs 464 1,454 297 Net Income $1,439 $1,271 $2,084 Key Statistics ($B) Avg Loans $82.3 $106.7 $97.0 EOP Loans $115.4 $97.4 $98.9 Avg Liability Balances 1 $103.1 $113.2 $138.9 Allow. for Loan Losses $2.8 $3.0 $2.6 NPLs $1.0 $2.8 $2.0 Net Charge-Off Rate² 0.35% 1.02% 0.94% ALL/Loans² 2.45% 3.12% 2.61% ROE 3 20% 16% 26% Overhead Ratio 41% 38% 36% EOP Equity $8.0 $8.0 $8.0 1 Includes deposits and deposits swept to on-balance sheet liabilities 2 Loans held-for-sale and loans at fair value were excluded when calculating the loan loss coverage ratio and net charge-off rate 3 Calculated based on average equity 4 Source: Greenwich Market Study FY2010 5 FDIC 9/30/10 6 Thomson Reuters FY10 34 |
![]() Treasury & Securities Services 1 Includes deposits and deposits swept to on-balance sheet liabilities 2 Calculated based on average equity 3 Source: Ernst & Young and Federal Reserve 4 Greenwich Associates, 2010 5 Source: JPM and peer 4Q10 company filings 6 Source: SEC 13-F filings by December 31, 2010 7 Source: Nilson Leadership positions #1 clearer of U.S. dollars in the world and #1 Automated Clearing House for originations 3 #1 (tied) in U.S. Corporate Cash management 4 #2 provider of custody services leveraging significant scale and global footprint with $16.1T in AUC 5 #2 in number of sponsored American Depository Receipt (ADR) shares 6 #1 Visa / MasterCard Commercial, Purchasing and Prepaid card issuer in the U.S. 7 $ in millions 35 2008 2009 2010 Revenue $8,134 $7,344 $7,381 Treasury Services 3,779 3,702 3,698 Worldwide Securities Svcs. 4,355 3,642 3,683 Expense 5,223 5,278 5,604 Credit Costs 82 55 (47) Net Income $1,767 $1,226 $1,079 Key Statistics Avg Liability Balances ($B) 1 $279.8 $248.1 $248.5 Assets Under Custody ($T) $13.2 $14.9 $16.1 Pretax Margin 33% 26% 23% ROE 2 47% 25% 17% TSS Firmwide Revenue $11,081 $10,231 $10,260 TS Firmwide Revenue $6,726 $6,589 $6,577 TSS Firmwide Avg Liab Bal ($B) 1 $382.9 $361.2 $387.3 EOP Equity ($B) $4.5 $5.0 $6.5 |
![]() Asset Management Leadership positions #1 Institutional Money Market Fund Manager Worldwide 2 #1 Ultra-High-Net-Worth Private Bank Globally 3 2010 Asset Manager of the Year for Asia and Hong Kong 4 Institutional Hedge Fund Manager of the Year 5 Gold Standard Fund Management, UK 6 (consecutively for eight years, 2003-2010) 1 Calculated based on average equity 2 Source: iMoney, 2010 3 Source: EuroMoney, 2010 4 Source: The Asset Magazine, 2010 5 Source: Institutional Investor, 2010 6 Source: Incisive Media $ in millions 2008 2009 2010 Revenue $7,584 $7,965 $8,984 Private Banking 4,189 4,320 $4,860 Institutional 1,775 2,065 2,180 Retail 1,620 1,580 1,944 Expense 5,298 5,473 6,122 Credit Costs 85 188 86 Net Income $1,357 $1,430 $1,710 Key Statistics ($B) Assets Under Management $1,133 $1,249 $1,298 Assets Under Supervision $1,496 $1,701 $1,840 Average Loans $38.1 $35.0 $38.9 EOP Loans $36.2 $37.8 $44.1 Average Deposits $70.2 $77.0 $86.1 Pretax Margin 29% 29% 31% ROE¹ 24% 20% 26% EOP Equity $7.0 $7.0 $6.5 36 |
![]() Corporate/Private Equity $6.9 $7.3 $8.7 6.9% 6.3% 5.8% $5.0 $6.0 $7.0 $8.0 $9.0 2008 2009 2010 5.0% 5.5% 6.0% 6.5% 7.0% Portfolio as % of equity ex. goodwill EOP Carrying value Private Equity portfolio ($ in billions) Net Income ($ in millions) 2008 2009 2010 Private Equity (690) (78) 588 Corporate 1,458 3,743 670 Merger Related (211) (635) - Net Income $557 $3,030 $1,258 37 |
![]() Notes on non-GAAP financial measures 38 1. In addition to analyzing the Firm’s results on a reported basis, management reviews the Firm’s results and the results of the lines of business on a “managed” basis, which is a non-GAAP financial measure. The Firm’s definition of managed basis starts with the reported U.S. GAAP results and includes certain reclassifications to present total net revenue for the Firm (and each of the business segments) on a FTE basis. Accordingly, revenue from tax-exempt securities and investments that receive tax credits is presented in the managed results on a basis comparable to taxable securities and investments. This non-GAAP financial measure allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The corresponding income tax impact related to these items is recorded within income tax expense. These adjustments have no impact on net income as reported by the Firm as a whole or by the lines of business. Prior to January 1, 2010, the Firm’s managed-basis presentation also included certain reclassification adjustments that assumed credit card loans securitized by CS remained on the balance sheet. Effective January 1, 2010, the Firm adopted accounting guidance that required the Firm to consolidate its Firm-sponsored credit card securitizations trusts. The income, expense and credit costs associated with these securitization activities are now recorded in the 2010 Consolidated Statements of Income in the same classifications that were previously used to report such items on a managed basis. As a result of the consolidation of the credit card securitization trusts, reported and managed basis relating to credit card securitizations are equivalent for periods beginning after January 1, 2010. The presentation of CS results prior to January 1, 2010 on a managed basis assumed that credit card loans that had been securitized and sold in accordance with U.S. GAAP remained on the Consolidated Balance Sheets, and that the earnings on the securitized loans were classified in the same manner as the earnings on retained loans recorded on the Consolidated Balance Sheets. JPMorgan Chase used the concept of managed basis to evaluate the credit performance and overall financial performance of the entire managed credit card portfolio. Operations were funded and decisions were made about allocating resources, such as employees and capital, based on managed financial information. In addition, the same underwriting standards and ongoing risk monitoring are used for both loans on the Consolidated Balance Sheets and securitized loans. Although securitizations result in the sale of credit card receivables to a trust, JPMorgan Chase retains the ongoing customer relationships, as the customers may continue to use their credit cards; accordingly, the customer’s credit performance affects both the securitized loans and the loans retained on the Consolidated Balance Sheets. JPMorgan Chase believed that this managed-basis information was useful to investors, as it enabled them to understand both the credit risks associated with the loans reported on the Consolidated Balance Sheets and the Firm’s retained interests in securitized loans. 2. The ratio for the allowance for loan losses to end-of-period loans excludes the following: loans accounted for at fair value and loans held-for-sale; purchased credit-impaired loans; the allowance for loan losses related to purchased credit-impaired loans; and loans from the Washington Mutual Master Trust, which were consolidated on the Firm's balance sheet at fair value during the second quarter of 2009. Additionally, Real Estate Portfolios net charge-off rates exclude the impact of purchased credit-impaired loans. The allowance for loan losses related to the purchased credit-impaired portfolio totaled $4.9 billion, $2.8 billion, and $1.6 billion at December 31, 2010, September 30, 2010, and December 31, 2009, respectively. 3. Basel I Tier 1 common ratio is Tier 1 common divided by risk- weighted assets. Tier 1 common is defined as Tier 1 capital less elements of capital not in the form of common equity – such as perpetual preferred stock, noncontrolling interests in subsidiaries and trust preferred capital debt securities. Tier 1 common, a non-GAAP financial measure, is used by banking regulators, investors and analysts to assess and compare the quality and composition of the Firm’s capital with the capital of other financial services companies. The Firm uses Tier 1 common along with the other capital measures to assess and monitor its capital position. 4. Tangible common equity (“TCE”) represents common stockholders’ equity (i.e., total stockholders’ equity less preferred stock) less identifiable intangible assets (other than MSRs) and goodwill, net of related deferred tax liabilities. ROTCE, a non-GAAP financial ratio, measures the Firm’s earnings as a percentage of TCE and is, in management’s view, a meaningful measure to assess the Firm’s use of equity. 5. Headcount-related expense includes salary and benefits (excluding performance-based incentives), and other noncompensation costs related to employees. |
![]() February 15, 2011 C O M M E R C I A L B A N K I N G Todd Maclin, Commercial Banking Chief Executive Officer * * * * * * * * * * |
![]() Agenda 1 Business performance 1 Current environment 8 Growth opportunities 12 2011 and 2012 outlook 18 |
![]() Commercial Banking transformation 2 |
![]() Our core business principals remain the same Bank strong companies with proven management teams Maintain long-term client relationships; average Middle Market relationship tenure is over 14 years Minimize concentrations in any industry or geography; maintain granularity Capitalize on JPMorgan Chase’s extensive and differentiated product suite to meet client needs Actively refer our customers to other LOBs Instill a culture of sensible spending Aggressively address variable expenses in downturns Expense management Cross-sell entire firm Underwrite on only strong principals Stop when the market is irrational; return when market has rationalized Pre-determined circuit breakers in place Manage real estate and cyclical exposures through-the-cycle Continuous investment in growth Invest in new markets and businesses to expand presence and market share Aggressively cover target markets Client selection 3 |
![]() 26% 16% 20% 17% 18% 28% 19% 10% 15% 20% 25% 30% 2005 2006 2007 2008 2009 2010 $3,488 $3,800 $4,103 $4,777 $5,720 $6,040 $1,856 $1,979 $1,958 $1,946 $2,176 $2,199 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 2005 2006 2007 2008 2009 2010 Revenue Expense Steady profitable growth and high efficiency Overhead ratio Revenue ($ in millions) 36% 38% 41% 48% 52% 53% 30% 35% 40% 45% 50% 55% 60% 2005 2006 2007 2008 2009 2010 Target: 20%+/- Target: <40% $951 $1,010 $1,134 $1,439 $1,271 $2,084 $500 $1,000 $1,500 $2,000 $2,500 2005 2006 2007 2008 2009 2010 Net income ($ in millions) Note: 2005 ROE of 19% based on $5.1 billion of equity to be consistent with Basel I methodology applicable beginning in 2006 Return on equity 4 |
![]() Strong revenue growth despite low rate environment CB product revenue Lending $1,215 Treasury Services $2,062 IB/other $211 Treasury Services $2,632 IB/other $659 Lending $2,749 2005 Revenue 2010 Revenue 59% 6% 35% Loan and deposit growth (Average, $ in billions) $3.5B $6.0B $66 $74 $88 $103 $113 $139 $97 $48 $54 $61 $82 $107 $40 $60 $80 $100 $120 $140 $160 2005 2006 2007 2008 2009 2010 Deposit Balance Loan Balance Loan and deposit spreads 0% 3% 2005 2006 2007 2008 2009 2010 Deposit Spread Loan Spread Increased loan spreads helping to offset low interest rate environment 44% 11% 45% 5 |
![]() Strong cross-sell has significantly increased fee revenue Non-interest revenue – CB reported ($ in millions) Non-interest revenue / Total revenue trend 36% Best-in- Class peer 36% $986 $1,073 $1,263 $1,481 $1,817 $2,200 $500 $1,000 $1,500 $2,000 $2,500 2005 2006 2007 2008 2009 2010 47% 11% 48% Note: Peer group comparison includes CB-equivalent segments at BAC, COF, CMA, FITB, PNC, STI, USB, WFC CB reported Fees from CB clients booked in other LOBs Peer median Best-in-Class peer 28% Peer median 36% 32% 31% 31% 28% 28% 0% 10% 20% 30% 40% 2005 2006 2007 2008 2009 2010 Note: Average product per relationship excludes CTL 8.1 7.4 7.2 7.0 2007 2008 2009 2010 Product sales to CB customers include TS, IB, AM, and Commercial Card Total CB NIR / Revenue vs. peers Average products per relationship 6 |
![]() Best-in-class performance among peer group 7 |
![]() Agenda 8 Current environment 8 Business performance 1 Growth opportunities 12 2011 and 2012 outlook 18 |
![]() 25% 35% 45% 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1.45% 1.75% 2.05% 2.35% 2.65% 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Market share appears to be driving our growth Loan volume (Chase CB $ in millions, Industry C&I $ in billions) Utilization rates 1,232 1,291 1,361 1,463 1,534 1,584 1,219 1,213 1,216 61,270 58,312 54,041 50,803 47,792 46,815 47,420 50,813 48,235 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1,000 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 1,900 Industry C&I Loans CB C&I Loans Source: C&I loans from the Federal Reserve; data released on a one week lag Loan spread trend …before stabilizing 9 Stabilization |
![]() Non-performing loan ratio by quarter Credit performance continues to improve 0.22% 0.40% 0.48% 0.67% 1.11% 1.92% 0.96% 0.74% 0.89% 1.16% 0.68% 0.75% 0.00% 0.50% 1.00% 1.50% 2.00% 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Net charge-off ratio by quarter 50bps through-the-cycle NCO ratio 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 0.72% 0.89% 1.38% 1.99% 2.26% 2.87% 3.13% 3.22% 3.00% 2.02% Approximately 50% of NPLs are current on principal and no more than one interest payment behind Total NCO ratio NCO ratio excluding impact of asset sales 10 |
![]() Monitoring exposure to States and Municipalities Municipal portfolio overview $9.7B represents 5% of total $187B CB exposure Granular portfolio – ~2,000 clients Primarily shorter-term debt allows for frequent re-evaluation – 74% under 5 year maturity Attractive risk characteristics Typically state constitutions prioritize debt service coverage as the 1st or 2nd budget item Portfolio primarily supports essential services with stable funding – Public Education – Municipal Utilities – Public Transportation Legal balanced budget requirement in all states but one (Vermont) General obligation debt to local governments viewed as secured given the municipality’s ability to levy and collect taxes Portfolio and risk profile 11 |
![]() Agenda 12 Growth opportunities 12 Business performance 1 Current environment 8 2011 and 2012 outlook 18 |
![]() Expansion and out-of-footprint markets create a huge opportunity Expansion and out-of-footprint presence Hire the right people Select the right clients Maximize the relationship Operational expansion state market 2011 Build-out market Out-of-footprint market Central 175 Northeast/ Mid-Atlantic 290 South 293 Mountain 68 Expansion 142 Midwest 168 National Businesses 391 # 2010 Middle Market client conversions 13 |
![]() Progress Opportunity Expansion markets¹ Opportunity¹ Progress¹ Only starting to tap market potential 1 Middle Market prospects only, does not include other CB LOB efforts in expansion states 2 Market equivalents based on target companies with $10mm -$1B in revenue. Source: D&B as of 3Q10 Out-of-footprint markets Long-term CB pretax income opportunity of $650-800mm New markets roughly equivalent to adding²: 1 Chicago 3 Dallas 3 Denver 3 Salt Lake City 1 Houston 1 Columbus Over 4,700 prospects; finding new ones daily Out-of-footprint markets roughly equivalent to covering: 3 Houston 3 Columbus 1 Dallas 1 Fort Worth 1 New Orleans 1 San Antonio Over 2,200 prospects More than 200 fully dedicated CB resources Over $1B in loans; expect to double in 2011 Over $1B in liabilities; expect to double in 2011 Expected to be fully self-funded in 2011 (third year into effort) Over 40 Commercial Bankers covering these markets Nearly 1,000 relationships across these markets 14 |
![]() ![]() ![]() ![]() ![]() ![]() ![]() International provides growth and differentiates from the competition International client coverage International deposit growth $958 $1,581 $2,834 $4,553 $5,906 $7,148 2005 2006 2007 2008 2009 2010 Existing Banker Location Additional 2011 Bankers Client Coverage Avg. balance in millions CB clients covered overseas 2,145 1,677 1,329 1,080 890 744 2005 2006 2007 2008 2009 2010 Note: Includes Canada; average deposits of $1,687mm in 2010 15 |
![]() $4 $5 $6 $7 $8 $9 $10 $11 $12 $13 $14 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 $25 $30 $35 $40 $45 REB Loan Balances CTL Loan Balances Well positioned to take advantage of the improving Commercial Real Estate cycle Commercial Term Lending loan pipeline ($ in millions) Real Estate Banking loan balances (EOP - $ in billions) Commercial Term Lending balances flat while reduction in Real Estate Banking balances leaves capacity for opportunistic growth Retail 11% Office 9% Industrial 6% Multifamily 68% CB CRE exposure - $52B Other CRE1, 6% $0 $800 $1,600 $2,400 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Commercial Term Lending pipeline up more than 450% in 2010 1 Other CRE includes Hospitality, Subscription IP, Commercial Land, and misc. other Industry-wide apartment rent rates2 $900 $930 $960 $990 $1,020 Underlying apartment rents increasing Granular Multifamily portfolio with over 34,000 clients Majority of CRE exposure is multifamily 2 National Effective Rent Rate, Source REIS 1 Exposure as of December 2010 16 |
![]() Gross IB revenue from CB clients ($ in millions) Gross domestic Investment Bank fees – Total JPM Gross domestic Investment Bank fees – Total JPM Investment Bank revenue remains a key cross-sell opportunity for Commercial Banking Win percent for IB deals pitched to CB clients $1,335 $1,163 $966 $888 $716 $552 2005 2006 2007 2008 2009 2010 0% 100% Total Loan Syndications M&A Equity High Yield Investment Grade Other 76% CB 24% …and accounted for almost a quarter of the firm’s gross domestic IB fees in 2010¹ IB revenue generated from CB clients has grown steadily… Historically high win rate when pitching deals to CB clients 0% 100% Pitch Rate Efforts underway to increase pitch rate for further IB revenue growth Opportunity 2010 Pitch Rate 1 24% calculated based on Gross IB revenue for SLF, M&A, Equity Underwriting, and Bond Underwriting, which make up $904MM of the total $1,335MM Gross IB revenue Win Rate Increasing pitch rate will drive revenue growth for both CB and IB 17 |
![]() Agenda 18 2011 and 2012 outlook 18 Business performance 1 Current environment 8 Growth opportunities 12 |
![]() 2011 and 2012 outlook Continued growth Market expansion New client conversion International Investment Bank cross-sell Commercial real estate More normalized environment = more normal spread earned on deposits Continued credit improvement Net charge-offs leveling off; moving toward 50bps through the cycle Current reserve levels adequate Improve efficiency Growth in front line staff to drive revenue Investing in technology and operations to improve efficiency and client experience 2011 and 2012 outlook 19 |
![]() Commercial Banking performance targets 20 |
![]() February 15, 2011 T R E A S U R Y & S E C U R I T I E S S E R V I C E S Mike Cavanagh, Chief Executive Officer Treasury & Securities Services * * * * * |
![]() Global Custody Fund Administration Broker-Dealer Services Depositary Receipts Treasury & Securities Services (TSS) – a global leader in transaction banking Offering global scale and breadth . . . ~25,000 clients across 140+ markets Essentially all of JPM’s major wholesale clients ~50% of revenue generated outside of U.S. ~29,000 employees around the world (~50% outside of U.S.) Treasury Services (TS) 2010 Reported revenue: $3.7B 2010 Firmwide revenue: $6.6 B TSS – Global cash, securities servicing, and trade business comprised of: Worldwide Securities Services (WSS) 2010 Revenue: $3.7B . . . with attractive financial characteristics Cash Management Global Payments and Clearing Working Capital Optimization Trade Revenue $7.4B Pretax income $1.7B Pretax margin 23% Equity capital $6.5B Return on equity 17% Liability balances $248B 1 |
![]() Generated 44% of $6B in revenue from sale of TS products in 2010 80%+ of CB clients use at least one TSS product TSS – a central business within JPMorgan Chase Treasury & Securities Services Leverage common DDA platform Business Banking clients use TS services Extensive branch network supports TS client collection needs Retail Financial Services TSS distributes Commercial Card products to clients Card Services manufactures products on its global platform Card Services TSS is the largest distributor of AM money market funds – $104B as of 2010 One of the largest WSS clients Source of referrals to WSS (e.g., pension funds) Commercial Banking Asset Management Key partner on the Global Corporate Bank (GCB) initiative for international expansion Collaborate on Prime Custody and FX Share ~2,800 common clients including MNCs and investors Shared capital and credit infrastructure Investment Bank 2 |
![]() Normalization of interest rate levels TSS earnings growth will come from three key sources Higher operating margins through greater efficiency Growth in higher-margin international business 2010 Target 23% 35%+/- Pretax margin 3 |
![]() TSS earnings will grow significantly in a normalized rate environment Current NII run rate reflects the full impact of today’s low rate environment While highly stable over time, TSS liability balances are mainly floating- rate – indexed to 1-month LIBOR or Fed Funds Assets invested in floating rate and mostly short-term instruments – minimal rate or duration risk First 100bps increase in 1-month LIBOR results in ~$300mm to $350mm of incremental NII as spread compression is recaptured 1-month LIBOR Estimated improvement in net interest income 100bps ~$300mm to $350mm 10-year swap rate 100bps < $50mm 4 |
![]() Premier client franchise 70 of top 100 global asset managers WSS – strong market position with the resources to grow 15 of top 25 U.S. life insurers 6 of top 10 sovereign wealth funds #2 Globally with $16.1T in AUC ~17% market share of top 10 global custodians ~60% Fixed Income / ~40% Equities #2 in U.S. Broker-Dealer Clearing Direct custody in 8 markets #3 Globally with $7.3T in AUA #2 Globally in Private Equity with $309B in AUA #2 in number of sponsored ADR shares with 9.7B shares 3 of 5 world’s largest DR programs Global Custody Broker-Dealer Services Global Fund Services Depositary Receipts 5 |
![]() 2005 2008 2010 WSS earnings have been significantly impacted by market forces in recent years 2005 revenue indexed to 100 100 271 86 Balances continue to recover modestly, but a return to peak levels not expected Lower demand by broker-dealers and hedge funds due to deleveraging and glut of U.S. Treasuries 67 31 39 68% drop 600bps of margin Securities Lending revenue and spreads (bps) Spread (bps) Securities Lending revenue 6 |
![]() WSS focus: Grow earnings by deepening wallet penetration of core clients and improving margins Re-engineer core platforms and operations (e.g., sec. lending, custody, utilities) Streamline offerings and platforms (e.g., firmwide clearing and asset servicing utility) Componentized our offering to exactly match client needs and provide flexibility Enhance client service and experience – grow wallet share with our top 200 clients Acquire new names from target markets Expand geographic footprint – selectively build out local capabilities Expanded asset class support (e.g., ETFs, Real Estate, Loan Servicing, Derivatives) Full support for complex investment strategies Refined product capability to enable clients to attract new assets and manage their risk Re-price / re-design unprofitable deals to achieve target returns Price new business based on rigorous assessment of complexity and cost Strong sales pipeline – 16% higher than previous year Continued investments in innovation and client experience Operating efficiency and pricing initiatives rolled out in 2011 – margin impact largely in 2012 and 2013 Client penetration Creative solutions Operating efficiency Pricing discipline 7 |
![]() Deep and broad relationship spanning WSS and the firm 8 |
![]() WSS – already a global business and continuing to grow outside the U.S. ~15% Global positioning ~5% Global custody network covers 90+ markets Client service and relationship management in 30 markets and growing Clearing on 40+ exchanges and 57 OTC markets #1 and #3 market positions in Luxembourg and Dublin offshore centers, respectively Direct custody in 8 markets, with plans to expand in targeted markets – recently completed acquisition of ANZ local custody in Australia Developed Markets Emerging Markets AUC growth (2007 – 2010 CAGR) ~4% ~13% ~5% Global revenue mix – 2010 Total = $3.7B North America ~40% ~35% Europe Middle East and Africa Asia Pacific and China Latin America ~25% 9 |
![]() TS – strong market position with the resources to grow #1 (tied) in Corporate Cash Management Based on penetration of U.S. Large Corporates #1 in U.S. ACH origination with 2.9B items (> 20% market share) Global Presence Clients in 140+ markets Capabilities in 36 markets Presence in 46 markets #1 Globally with > 20% market share Leading global Financial Institution franchise #1 U.S. Bank in Letters of Credit outstanding USD Clearing Trade U.S. Cash Management International Footprint Premier client franchise 70% of the global Fortune 500 World’s top 25 banks 9 of 10 largest central banks 10 |
![]() Working capital solutions across Trade, Supply Chain and Cash Building best-in-class treasury / client access platform – greater visibility for our clients Pre-paid and bill-pay platforms to capture card-based consumer payments Client service best practices across markets as we grow internationally Integrated local coverage and service Simplified on-boarding / implementation Re-engineering and streamlining platforms and processes (e.g., imaging, offshoring) Increased scalability and continued resiliency of core platforms as volumes grow Local lending in key markets via Global Corporate Bank initiative against core clients Deeper sales coverage in key markets (e.g., China, Brazil, India, Middle East) Fully integrated international footprint and platforms (e.g., Russia, South Africa, Saudi Arabia) TS focus: Grow earnings by extending our international footprint while leveraging best-in-class client service and driving efficiency measures Double-digit annual growth rates in international revenue Higher margins driven by: International growth Operating efficiencies 11 International growth Innovation and capabilities Best-in-class experience Operating efficiency |
![]() TS heavily penetrated in the U.S. and with global Financial Institutions ~3,200 core clients are spread around the world – ~75% headquartered outside North America Strategy is to continue to grow international revenue with core clients Our growth in TS will be driven by capturing our existing clients’ international wallets ~75% of global TS wallet is outside North America (vs. ~40% of TS revenue) Meaningful opportunity for TS to grow its international revenue and business profile NA / Europe MEA APAC LatAm TS revenue growth by region (2007 – 2010 CAGR) Global revenue mix – 2010 Total = ~$200B North America Europe, Middle East and Africa Latin America ~75% ~3% ~5% ~13% ~23% 12 Asia Pacific and China |
![]() Extend network and footprint in key countries (e.g., China, Russia) Continue to serve clients in other markets through network partners (e.g., Pakistan, Peru) Continue rollout and enhancements of international deposit and payment systems Build out international cash concentration and investment platform Enhance financing, transaction processing and structured trade solutions (e.g., supply chain) Build globally integrated multi-language trade platform Aggressive build-out of international TS capabilities is well underway… Strong global network 10 locations added in last 3 years 19 locations to be added by 2013 Integrated product platform and operating model across footprint Best-in-class working capital management solutions Footprint Cash management capabilities Trade and working capital 13 |
![]() …and we are already winning in the international marketplace Client Need Support suppliers amid difficult financial markets without compromising CAT’s financial flexibility JPM Solution Supply chain finance program combining standardized payment terms, better visibility, and JPM financing for key suppliers Enrolled hundreds of U.S. and European suppliers; expanding to Latin America and Asia Client Need Centralize and rationalize European payables and receivables JPM Solution Integrated cash management and liquidity structures across 15 countries and 11 currencies Improved investment of cash; streamlined and reduced cross-border transaction costs Client Need Capital to purchase 11 Boeing aircrafts in a challenging financial market JPM Solution Underwrote entirety of $1.1B structured trade loan Leveraged 45-year relationship with Export-Import Bank of the United States to secure a loan guarantee mitigating J.P. Morgan’s risk Air India will save over $30mm in interest costs Client Need Offer its corporate clients renminbi (RMB) clearing services as Korea’s trade volumes with China continue to grow JPM Solution Fast and efficient clearing of cross-border trade payments with China Reduced operating costs and mitigation of foreign exchange risk 14 |
![]() GCB is at the center of our international expansion strategy with our core wholesale clients ~3,200 clients – mostly pre-existing relationships Typical profile: Large and leading global Corporates, Financial Institutions, and public sector entities Significant presence outside of home country Complex set of needs, requiring solutions across IB, TSS and AM product sets Build broad relationships with J.P. Morgan wholesale clients Client account planning Opportunity identification Cover relationship at headquarters and local operating unit level Assess client credit needs and align with wallet opportunity 15 |
![]() The international wholesale opportunity is compelling and J.P. Morgan is one of the few who can capture it Supporting significant growth of international profits from GCB clients Additional ~$1B of annual pretax income in 5 years Doubling international profits through these clients Increased earnings embedded in the financials and long-term plans of TSS and IB Rigorous account planning against top clients validates significant opportunity across both TSS and IB flow products International wallet of developed markets MNCs (largely existing clients) Additional opportunity to serve EM-based top-tier companies both internationally and in the U.S. Opportunity Requirements and approach Coordinated build-out of international capability within TSS, IB and AM Increased lending to these clients, leveraging existing credit underwriting infrastructure GCB coverage and related expenses not material relative to global capability build within TSS and IB Credit and coverage expenses split 50 / 50 between TSS and IB 16 |
![]() In summary… Treasury Services and Worldwide Securities Services are very attractive businesses in which we have leadership positions Treasury Services and Worldwide Securities Services are critical to our wholesale client franchise and our international growth plans Earnings will increase substantially as: Operating efficiency improves; Growth initiatives are achieved, especially internationally; and Interest rates rise Committed to long-term success in these businesses 17 |
![]() February 15, 2011 R E T A I L F I N A N C I A L S E R V I C E S Charlie Scharf, Retail Financial Services Chief Executive Officer * * * * * |
![]() Retail Financial Services – earnings summary ($ in millions) Consistently strong earnings power and potential of underlying businesses Repurchase losses will reduce over time and Real Estate Portfolios will make a positive contribution to earnings and capital over time as credit losses are reduced 2005 2006 2007 2008 2009 2010 Retail Banking $1,645 $1,922 $2,245 $2,982 $3,903 $3,614 Mortgage Banking, Auto & Other Consumer Lending (excl. repurchase losses) 803 377 824 1,441 2,634 3,101 Subtotal $2,448 $2,299 $3,069 $4,423 $6,537 $6,715 Repurchase Losses (4) (4) (5) (155) (991) (1,696) Real Estate Portfolios 983 918 (139) (3,388) (5,449) (2,493) Retail Financial Services $3,427 $3,213 $2,925 $880 $97 $2,526 1 |
![]() Strong underlying performance in Retail Banking, Mortgage Banking and Auto Repurchase losses and Real Estate Portfolios headwinds remain Underlying businesses positioned to deliver target ROEs Retail Banking will be negatively affected by Durbin…but will earn back over time Mortgage Banking will settle back to 15% returns post-refi boom Auto back to 15%+ returns (excluding reserve actions) Real Estate Portfolios – smaller overall dollars but 15% returns Retail Financial Services – earnings summary ($ in millions) 4Q10 Target 4Q09 3Q10 4Q10 ROE ROE Retail Banking $1,027 $848 $954 37% 40%+/- Mortgage Banking, Auto & Other Consumer Lending (excl. Repurchase losses) 679 1,060 780 38% 15%+/- Subtotal $1,706 $1,908 $1,734 38% Repurchase Losses (413) (853) (203) NM Real Estate Portfolios (1,692) (148) (823) -34% 15%+/- Retail Financial Services ($399) $907 $708 10% 30%+/- 2 |
![]() 4Q10 results included significant negatives Credit and repurchase losses and other mortgage-related expenses will reduce over time improving earnings Portion of reserves released will become capital Capital will be freed up as Real Estate Portfolios run off After-tax ($mm) EOP Reserves ($B) Potential Excess Capital ($B) Mortgage Banking Foreclosure Delay Costs ($218) Repurchase Expenses¹ (203) 3.0 Sub-total ($421) $3.0 Real Estate Portfolios Foreclosed Asset Expenses ($131) Total reserve actions² (687) Non purchased credit-impaired LLR 9.7 Sub-total ($818) $9.7 Total ($1,239) $12.7 $10 +/- Memo: Purchased credit-impaired LLR $4.9 Purchased credit-impaired fair value mark 3 $13.3 3 1 RFS only. Excludes EMC 2 Excludes the impact of a one-time $632mm adjustment in 4Q10 related to the timing of when the Firm recognized charge-offs on delinquent loans 3 Remaining mark net of liquidation losses |
![]() Agenda Page 4 Credit 4 Strength of the franchise and growth opportunities 20 Strategic implications of legislation and regulation 39 |
![]() NCOs (annualized)¹ EOP Loan Loss Reserves Home Lending 2 $4,598 $9,653 Auto $282 $480 Student Loans³ 386 419 Retail Banking 686 875 Other 24 85 All Other $1,378 $1,859 Retail Financial Services $5,976 $11,512 Non credit-impaired ($ in millions) Reserve adequacy Net charge-offs1 vs. Loan loss reserve ($ in millions), excl PCI Total Home Lending reserves of $9.7B (excluding WaMu purchased credit- impaired) 4Q10 NCOs annualized (excluding one- time impact) of $4.6B Other consumer loan portfolios well reserved Loss guidance: Home Lending quarterly losses expected to be $1.2B+/- January actual losses lower $1,400 $1,600 $1,800 $2,000 $2,200 $2,400 $2,600 $2,800 $3,000 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 NCOs Loan Loss Reserves 1 4Q10 net charge-offs exclude the one-time impact of the $632mm adjustment related to the timing of when the Firm recognizes charge-offs on delinquent loans 2 Net charge-offs exclude loans insured by U.S. government agencies 3 Net charge-offs represent full year 2010 actuals Delinquencies and net charge-offs peaked 4Q09, significantly reduced 1H10 and leveled off/modestly improved 2H10 Sustained reduction in net charge-offs supports reserve actions 5 |
![]() Reserve adequacy (continued…) Agency repurchase exposure assessed and appropriately reserved Repurchase losses life-to-date of $2.6B End of period reserve balance of $3.0B; reserved for presented and probable future demands – 2011 realized losses estimated at $1.2B +/- Private label exposure – we have significant reserves Repurchase reserves Purchased credit-impaired The current mark reflects ~$35B of lifetime losses Current mark has roll rates ~flat through 2011 and improving in 2012 If roll rates remain ~flat through 2012, this would result in an incremental $1B+/- impairment Further economic deterioration (45% HPA and worsening roll rate) could result in an incremental $3B+/- in additional losses 6 |
![]() Total loans Non purchased credit-impaired Purchased credit- impaired Home Equity $116 $88 $28 Option ARM 39 8 31 Prime Mortgage 75 56 19 Subprime Mortgage 19 11 8 Total Home Lending portfolio¹ $249 $164 $86 Fair value mark² $13 NA $13 Home Lending carrying value 236 $164 73 Auto 48 48 NA Student and other 15 15 NA Total Consumer Lending portfolio $299 $227 $73 Loan loss reserve (LLR) $16.5 $11.5 $4.9 LLR as % of loans / LLR + FVM as % of UPB PCI NA 5.1% 20.8% 4Q10 Outstandings ($ in billions) Consumer Lending portfolio 5.1% reserve ratio on non purchased credit-impaired portfolio Purchased credit-impaired remaining mark and reserves of 20.8% - life of loan losses Purchased credit-impaired portfolio is appropriately reserved for best estimate of remaining lifetime losses 1 Credit-impaired represents Unpaid Principal Balance (UPB) not book value 2 Fair Value Mark (FVM) remaining is the original mark reduced by liquidation losses realized Note: Table above excludes prime mortgage loans and student loans classified as held-for-sale 7 |
![]() 1Q10 2Q10 3Q10 4Q10 Adjusted 2 4Q10 Home Equity $1,126 $796 $730 $725 $792 Prime Mortgage 1 482 286 276 252 570 Subprime Mortgage 457 282 206 182 429 Total Home Lending $2,065 $1,364 $1,212 $1,159 $1,791 Home Lending portfolio losses 1 Includes Option ARM 2 4Q10 net charge-offs exclude the one-time impact of the $632mm adjustment related to the timing of when the Firm recognizes charge-offs on delinquent loans Net charge-offs peaked 4Q09; significantly reduced in 1H10 in line with HPI and unemployment level stabilization; losses leveled off / modestly improved in 2H10 Total quarterly net charge-offs running at $1.2B+/- Losses expected to reduce over time following delinquencies Net charge-offs ($ in millions), excluding purchased credit-impaired portfolio 8 |
![]() Prime Mortgage delinquency trend ($ in millions) Commentary 30-150 showing stability across portfolios with some recent improvements 150+ stabilized in mortgage portfolios Consumer credit—delinquency trends Excluding purchased credit-impaired loans $0 $1,000 $2,000 $3,000 $4,000 $0 $1,300 $2,600 $3,900 $5,200 $6,500 $0 $1,000 $2,000 $3,000 $4,000 Note: Delinquencies prior to September 2008 are heritage Chase Prime Mortgage excludes held-for-sale, Asset Management and Government Insured loans 30 – 150 day delinquencies 150+ day delinquencies 30 – 150 day delinquencies 30 – 150 day delinquencies 150+ day delinquencies Home Equity delinquency trend ($ in millions) Subprime Mortgage delinquency trend ($ in millions) 9 |
![]() <80% current ECLTV 80 – 100% current ECLTV Delinquency and losses peaked and stabilizing across all ECLTV segments Home Equity 113 113 139 176 160 150 127 91 80 75 87 183 0 200 400 600 800 1000 1200 1400 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 0 100 200 300 400 500 600 21 52 167 279 481 407 361 314 216 251 239 535 0 200 400 600 800 1000 1200 1400 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 0 100 200 300 400 500 600 321 367 399 375 451 522 527 575 584 405 344 332 0 200 400 600 800 1000 1200 1400 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 0 100 200 300 400 500 600 Note: Data prior to September 2008 is heritage Chase ECLTV = estimated combined loan-to-value considering all available lien positions related to the property which we own or service Current ECLTVs are calculated using original appraised value adjusted using the latest HPI published by Moody's Economy.com Based on December 2010 curves 18 17 25 39 58 49 59 52 21 41 18 35 0 200 400 600 800 1000 1200 1400 1Q08 2Q083Q084Q081Q092Q093Q09 4Q091Q102Q103Q104Q10 0 100 200 300 400 500 600 100 – 150% current ECLTV >150% current ECLTV 30+ day delinquencies NCL $ 30+ day delinquencies NCL $ 30+ day delinquencies NCL $ 30+ day delinquencies NCL $ 10 |
![]() Home Equity balances migrating to >100% CLTV peaked in 2008 ($ in billions, excluding purchased credit-impaired) $3.7 $7.7 $7.4 $7.6 $3.9 $1.0 $0.4 $0.9 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 New dollars moving into > 100% CLTV down from peaks in 2008 Although some $ are still moving >100%, rate has slowed; expect loss rate to be lower Note: Graph based on Moody’s/Economy.com Case-Schiller. Baseline forecast as of December 2010 11 |
![]() Home equity losses when exceed >100% CLTV Note: Home Price Index, Moody’s/Economy.com Case-Shiller Forecast as of December 2010 1 4Q10 net charge-offs exclude the one-time impact of the adjustment related to the timing of when the Firm recognizes charge-offs on delinquent loans 75 – 80% of losses generated by loans > 100% CLTV Losses substantially down from peaks in 2009 on both a dollar and rate basis Net charge-offs ($ in millions), non credit-impaired portfolio Annualized Loss Rates Losses from >100% CLTV 1H08 2H08 1H09 2H09 1H10 2H10 1H09 2H10 Balances as of 12/10 ($B) Pre 2007 $115 $145 $173 $136 $96 $ 72 28.8% 17.4% $0.8 1st Half 07 $261 $334 $415 $320 $227 $148 32.4% 17.6% $1.6 2nd Half 07 $295 $443 $649 $585 $451 $330 20.7% 14.7% $4.3 1st Half 08 $ 90 $209 $394 $ 407 $349 $260 11.8% 9.9% $5.0 2nd Half 08 - $89 $258 $298 $245 $198 7.3% 7.5% $5.1 1st Half 09 - - $100 $87 $92 $87 7.1% 6.9% $2.5 2nd Half 09 - - - $36 $26 $23 5.5% $0.8 Full Year 10¹ - - - - $34 $ 48 10.1% $1.2 Total >100% $761 $1,220 $1,989 $1,869 $1,520 $1,166 15.0% 10.7% $21.4 80-100% $161 $171 $277 $343 $315 $226 2.3% 2.5% $20.3 <80 $36 $42 $97 $107 $87 $63 0.3% 0.2% $46.7 Total $958 $1,433 $2,363 $2,319 $1,922 $1,455 4.3% 3.2% $88.4 12 |
![]() Performance of 2nd liens is consistent whether we own, service or do not service the 1st 13 |
![]() Equity is a driver of 2 nd lien loss rates and delinquency timing Timing of 2nd Lien delinquency post 1st lien delinquency- ECLTV 20% 30% 40% 50% 60% 70% 80% 90% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Timing of 2nd Lien Delinquency post 1st Lien Delinquency <=100% 100-125% 125+% Performance of 2 nd liens significantly differentiated by ECLTV There is some differentiation in performance of 2nds behind modified vs. delinquent 1sts ~65% of 2 nd lien 125+% ECLTV loans go delinquent 3 months after the 1 st lien vs. ~40% for <100% ~80% of 2 nd lien 125+% ECLTV loans go delinquent by 15 months after the 1 st lien vs. ~60% for <100% 2nd Lien and we service the 1st (26% UPB) — 90+ or NCO in 16 months 31% 27% 23% 3% 43% 30% 28% 8% 19% 15% 12% 1% 0% 10% 20% 30% 40% 50% 60% 2nd Current w/Delinquent 1st 2nd Current and Modified 2nd Current w/Modified 1st 1st and 2nd Current Note: Excludes purchased credit-impaired loans < 100% ECLTV > 100% ECLTV Total 14 |
![]() Home Equity – performance of 2 nd lien relative to 1st lien UPB as of 12/31/10 ($ in billions), non purchased credit-impaired portfolio 2nd Lien status 1st liens $24.4 2nd liens $64.0 Total $88.4 Current 1st / Current 2nd $58.3 Current 1st / Delinquent 2nd $0.3 Delinquent 1st and 2nd $1.4 Current 2nd / Delinquent or Modified 1st $4.0 Total $64.0 15 |
![]() Performing 1st and 2nd Liens CLTV UPB Estimated Lifetime Loss Rates <=80% $25.4 ~ 1% 80-100% 14.5 4-5% 100+% 18.4 12-15% Total $58.3 5% +/- High risk 2nds – performing 2nds behind troubled borrowers Excluding purchased credit-impaired loans High Risk 2nd Liens 1st Lien Status UPB Estimated Lifetime Loss Rates >100+% CLTV Modified $0.9 ~50% 70% <150+ DPD 2.1 ~60% 44% 150+ DPD 1.0 ~95% 59% Total $4.0 60% +/- 54% We have considered the status of 1st lien and equity position of borrowers in our reserves Total Home Equity reserves as of year end 2010 were $6.5B Note: Grossed up based on 35% match rate Note: Grossed up based on 35% match rate 16 |
![]() Foreclosure and REO trends – serviced Units in process of foreclosure Units in REO Foreclosure inventory will decline as inflows decrease on lower delinquencies and outflows increase as foreclosure remediation population is cleared REO inventory forecasted to increase in 1H11 with the resumption of foreclosures in all states 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Actual Forecast Remediation 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Actual Forecast Remediation 17 |
![]() Estimated REO as a % of home sales – selected MSAs REO as a % of home sales 1Q09 4Q09 4Q10 4Q12 Riverside 68% 46% 43% 18 - 28% Sacramento 61% 37% 37% 19 - 31% San Francisco 21% 10% 11% 6 - 10% West Palm Beach 22% 11% 18% 12 - 18% Washington DC 41% 21% 17% 11 - 18% Miami 42% 23% 33% 23 - 35% Ft Lauderdale 37% 29% 26% 18 - 28% San Jose 45% 20% 17% 14 - 22% Oakland 59% 31% 27% 21 - 33% San Diego 50% 29% 27% 23 - 35% New York 7% 7% 5% 4 - 7% Phoenix 58% 35% 42% 32 - 45% Long Island 10% 8% 4% 4 - 6% Bridgeport 19% 10% 10% 10 - 15% Los Angeles 49% 30% 27% 27 - 44% Chicago 31% 23% 17% 16 - 26% Houston 19% 16% 19% 18 - 31% Dallas 25% 20% 25% 23 - 39% Santa Ana 37% 18% 19% 26 - 41% Seattle 13% 12% 15% 24 - 38% 18 |
![]() Update on foreclosure process Offered over 1mm modifications; 285,000 completed Prevented foreclosures at 2x the rate of those completed 51 Chase Home Ownership Centers (CHOCs) – plan to add 25 more in 2011 6,000 loss mitigation counselors to assist borrowers, across the country We make every effort to avoid foreclosure Average delinquency at foreclosure is 14 months Recent foreclosure sales showed the following customer/loan characteristics: 57% non-owner occupied, of which 52% were vacant at foreclosure 43% owner-occupied, of which: – 25% were vacant at foreclosure – 53% did not qualify for modification (e.g., High DTI, unemployed, etc.) – 18% did not respond to modification outreach efforts or meet all permanent modification requirements Key facts about foreclosures 19 |
![]() Agenda Page 20 Strength of the franchise and growth opportunities 20 Credit 4 Strategic implications of legislation and regulation 39 |
![]() $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 2008 2009 2010 0.10% 0.48% 0.86% 1.24% 1.62% 2.00% Net Income ROA Auto Finance ($ in millions) Record net income and returns in 2010 Market share gained as competition weakened from 4.13% in 2008 to 5.45% in 2010; originations increased 19% despite new vehicle sales declining by 12% since 2008 Portfolio loan spreads increased 50bps+/- reflecting change in mix and focus on higher return segments Strengthened relationships with strategic manufacturing partners Net income excluding LLR release 21 |
![]() Mortgage Banking ($ in millions, except where noted) Market share gains from 9.2% to 10.7%¹ Refi volumes remained high on low rate environment Production revenue up on strong margins Servicing revenue remained steady; includes strong MSR risk management results Repurchase losses increased primarily due to $1.6B in reserve build Default costs increased on higher headcount and foreclosure costs 2009 2010 Originations ($B) $150.7 $155.6 Net Income Production excl. repurchase losses $995 $1,570 Servicing 1,196 695 Total $2,191 $2,265 Repurchase Losses (991) (1,696) Total $1,200 $569 1 Source: Inside Mortgage Finance, 4Q09 and 4Q10, respectively. Full year 2009 and 2010 market share were 8.6% and 10.4% respectively 22 |
![]() Strong franchise with consistent business focus Consumer Banking Consistent business focus Acquire and deepen relationships Build distribution Customer service Customer engagement Leverage consumer growth Home Lending Auto Returns first, growth second Business Banking Focus on retail customers Bank branch Strategic markets Correspondent Strong positioning Proven organic growth track record An institutional franchise Industry leading brand Industry leading footprint Great and diverse customer base Industry leading products and services 23 |
![]() 3.6 1.7 3.0 1.9 2.2 3.9 2005 2006 2007 2008 2009 2010 Personal bankers 21,715 7,067 15,825 7,573 9,650 17,991 2005 2006 2007 2008 2009 2010 Retail Banking — consistent organic growth Strong growth through organic expansion and WaMu acquisition 25,712 10,839 9,995 24,499 8,793 27,252 2005 2006 2007 2008 2009 2010 CAGR 25% (hChase 11%) WaMu hChase CAGR 25% (hChase 14%) WaMu hChase Checking accounts (# in 000s) 4,324 3,734 3,506 2,922 2,592 2,229 2005 2006 2007 2008 2009 2010 CAGR 14% (hChase 13%) Sales production per branch (in units) CAGR 17% (hChase 9%) Net income ($ in billions) WaMu hChase WaMu hChase ($0.4)B impact of NSF/OD policy changes 24 |
![]() Strong and growing cross sell Cross Sell (# of Products and Services) 6.97 7.01 7.07 7.16 7.21 4 4.5 5 5.5 6 6.5 7 7.5 4Q09 1Q10 2Q10 3Q10 4Q10 H - Chase 6.26 6.48 6.57 6.63 6.68 4 4.5 5 5.5 6 6.5 7 7.5 4Q09 1Q10 2Q10 3Q10 4Q10 Combined 5.35 5.76 5.87 5.88 5.94 4 4.5 5 5.5 6 6.5 7 7.5 4Q09 1Q10 2Q10 3Q10 4Q10 H – WaMu Cross sell is a measure of penetration of products and services within Retail Financial Services households The measure above counts each product and service individually (e.g. A household with 2 checking accounts is counted as 2) 25 |
![]() Organic branch expansion All other branches New builds Note: Deposits adjusted to exclude large branches (+$1B) assumed to contain non-retail deposits Note: Percentages represent deposit share by CBSA Source: SNL Financial – FDIC deposit data as of 6/30/10 Seattle 1. Bank of America 20.0% 2. JPMorgan Chase 10.5% 3. Wells Fargo 9.1% 14.5% Los Angeles 2. Wells Fargo 1. Bank of America 21.3% 3. JPMorgan Chase 9.8% Houston 1. JPMorgan Chase 16.2% 2. Wells Fargo 12.9% 3. Bank of America 8.7% Total United States 1. Wells Fargo 8.5% 2. Bank of America 7.8% 3. JPMorgan Chase 5.7% Chicago 1. JPMorgan Chase 12.9% 2. BMO Financial 8.8% 3. Bank of America 5.4% New York 1. JPMorgan Chase 16.7% 2. Citigroup 9.9% 3. Toronto-Dominion 6.9% Miami 1. Wells Fargo 15.1% 2. Bank of America 14.1% 3. SunTrust 6.0% 4. JPMorgan Chase 5.9% Dallas-Fort Worth 1. JPMorgan Chase 13.6% 2. Bank of America 11.3% 3. Wells Fargo 10.8% 26 |
![]() ![]() Retail Banking – Strong presence in key deposit markets Note: Deposits adjusted to exclude large branches (+$1B) assumed to contain non-retail deposits Note: Percentages represent deposit share by CBSA Source: SNL Financial – FDIC deposit data as of 6/30/10 Significant presence in 21 of the top 30 markets These 21 markets represent 77% of balances in top 30 Chase has 11% deposit share Chase ranking - Top 30 CBSAs in footprint Not in footprint CBSA Ranking CBSA 6 Philadelphia, PA 7 Boston, MA 8 Washington, DC 14 Saint Louis, MO 15 Minneapolis, MN 16 Pittsburgh, PA 19 Baltimore, MD 25 Kansas City, MO 28 Providence, RI Total Deposits ($B) $604.8 CBSA Ranking CBSA Chase Ranking in Market 1 New York, NY 1 2 Los Angeles, CA 3 3 Chicago, IL 1 4 Miami, FL 4 5 San Francisco, CA 4 9 Houston, TX 1 10 Dallas-Fort Worth, TX 1 11 Atlanta, GA 17 12 Detroit, MI 2 13 Seattle, WA 2 17 San Diego, CA 3 18 San Jose, CA 3 20 Denver, CO 5 21 Phoenix, AZ 1 22 Tampa, FL 18 23 Cleveland, OH 8 24 Riverside, CA 3 26 Cincinnati, OH 7 27 Portland, OR 4 29 Bridgeport, CT 2 30 Milwaukee, WI 4 Total Deposits ($B) $2,043.5 27 |
![]() Retail Banking — Continuous organic reinvestment (excl. WaMu) Commitment to reinvest in our businesses drives continuous organic growth 1 Includes cumulative capital and operating expenses from 2006 to 2010 Investment % Growth in Investment Key Stats (2006-2010) 2010 vs. 2006 (Cumulative 2006-2010) New Builds¹ $3.9B 65% + 649 Branches; > 1,000 branches since 2002 Advertising and Marketing $1.4B 41% Excludes credit card brand spend Sales Headcount - Same Stores $1.1B 234% + 6,200 Incremental sales headcount Branch Signage / Interior upgrades $0.9B 23% +17,000 Branch projects completed Debit Rewards $0.7B NA ~10.8mm Cards / ~5.9mm Rewards ATM's $0.4B 41% + 4,300 ATMs Technology development $0.2B 21% +100 Incremental technology headcount Total Investment $ 8.6B 120% 28 |
![]() 52% 45% 45% 44% 46% 36% 41% 46% 27% 33% 26% 25% 31% 24% 32% 0% 10% 20% 30% 40% 50% 60% Convenience Products Trust Innovative Momentum Chase BAC WFC 53% 56% 47% 60% 63% 52% 0% 10% 20% 30% 40% 50% 60% 70% Retail Footprint Heritage Footprint Rebrand Footprint 4Q09 4Q10 Source: Q4 2010 Brand Tracker; Retail footprint YoY growth in Chase unaided brand awareness Industry leader in key consumer attributes – 4Q10 Chase brand – strength and positive momentum Heritage and rebrand footprint Convenience: Offer more convenient branch and ATM locations Products/Services: Offer products and services that meet my needs Momentum: Is growing more popular Trust: Is a bank I trust Innovative: Offers innovative products and services Awareness of a bank that offers checking 29 |
![]() Substantial opportunity to build branches in our current footprint Current footprint and growth opportunities Branch Share (2010) Branch Count (2010) Planned New Builds (2011) Potential New Builds Over Next 5 Years "Aggressive” Growth Areas California 11.0% 771 525 - 700 Florida 4.7% 248 375 - 500 Other locations 4.0% 183 400 - 550 Total "Aggressive” Growth Areas 7.1% 1,202 150+ 1,300 – 1,750 All Other "Fill In“ and In-Footprint Markets 10.9% 4,078 50+ 200 – 250 Grand Total 8.3% 5,280 200 - 225 1,500 - 2,000 30 |
![]() New build initiative ($ in millions) 2002 2003 2004 2005 2006 2007 2008 2009 2010 Branches Opened 35 59 124 146 125 127 126 117 154 Cumulative Branches Opened 35 94 218 364 489 616 742 859 1,013 $ contribution to 2010 pretax ($000s, per branch)1 $955 $877 $755 $532 $217 ($10) ($304) ($600) ($165) New Builds making a positive contribution to pretax (2002-2006) $284 New Builds not yet broken even (2007-2010) ($135) Total contribution of New Builds $148 New build economics Almost 2mm checking accounts from new build portfolio On average, branches breakeven at 30 months +/- 65 branches >36 months old have yet to break even On average, new builds pay back within 3-5 years 54 branches >60 months old have yet to pay back Contribution of new builds once seasoned is >$1mm per branch per year ~1,000 branches opened since 2002 will contribute $500mm +/- pretax by ~2013, and $1B+/- pretax by ~2018 1 2010 includes partial year pretax impact of 2010 new builds vintage 31 |
![]() New build economics ~1,000 new builds to date contribute $1B+/- in ~2018 Growing new builds to 200-225+/- in 2011, 300+/- in 2012 and 500+/- per year forward will create a drag on earnings but is a significant long term investment for growth 32 |
![]() 2011 products and services innovation QuickDeposit Square’s card reader Instant Issue Debit 2 Way Instant Action Alerts 33 |
![]() Capturing the Business Banking opportunity in heritage WaMu footprint WaMu branch productivity at Chase levels is a $1B+/- pretax opportunity Capturing the opportunity by leveraging the Chase Business Banking model Dedicated bankers to help small businesses in branches Full suite of small business products for deposits, cash management, credit and payments, etc. Significant progress has been made to date in banker productivity…. Average deposit balances per WaMu branch are still ~1/3 of Chase branches Average loan balances per WaMu branch are still ~1/6 of Chase branches But reaching full profitability targets will take several years $7.3 $9.3 2009 2010 Deposit Balances ($B) $58 $878 2009 2010 Loan Production ($mm) 731 478 2009 2010 Business Bankers 34 |
![]() Stronger demand and changes in lending policy continue to drive significant small business lending growth Business Banking loan originations ($ in billions) $1.3 $3.0 $4.2 $3.9 $2.3 $4.7 $5.5 $6.9 2007 2008 2009 2010 Stated Income Verified Income Key drivers of growth Demand for small business loans grew in 2010 4Q10 applications up 40%+ vs. 1Q10 Pipeline for larger ticket loans (>$250mm) set a new record at >$2B in 2010 Refined credit policies and programs provided incremental credit to small businesses Lowered debt service ratio requirements for established businesses Increased focus on providing SBA financing to customers – Chase became the #1 SBA lender by loan units Launched an automatic second review process Launched promotions for waiving upfront fees on certain loans (e.g., Owner Occupied Real Estate) 35 |
![]() Affluent banking opportunity is significant; we have a program to serve these clients $500k - $5mm of wealth 70% of assets are in investments 67% visit the branch quarterly 1.8mm Affluent clients in the Consumer Bank Chase Households 20mm Total $2.6T Wealth 1.8mm Total Wealth $3.8T Total The opportunity: 10% of clients with 70% of wealth Significant opportunity to capture more wallet share We have only 5% share of wallet, including only 2% of the investment wallet Dedicated teams of Personal Bankers, Investment Advisors and Service Specialists Located in exclusive, private setting within the branch Premier level of service Distinct, premium brand that leverages Chase and J.P. Morgan for investments Unified client experience across all channels delivered through common technology platform Banking products customized to meet the needs of the affluent Full spectrum of J.P. Morgan investment capabilities People Product Technology Positioning The Chase Private Client program 36 |
![]() Chase Private Client has made significant progress Created Chase Wealth Management with a complete management team Led by Barry Sommers, previously CEO of J.P. Morgan Securities Deep experience in both brokerage and banking Focused on enhancing program components and expanding presence Well integrated with Consumer Bank and Asset Management Will add 50 locations in 2011. Will have more than 150 locations by 2013 Expanding presence in NY area and Chicago Opening in Los Angeles, San Francisco and South Florida in 2011 Future priority markets include Texas, Washington, Arizona, other parts of California Recruiting over 100 Investment Advisors, 300 Bankers and 100 Service Specialists into the program by year-end Migrating investment technology to fully leverage JPMorgan Chase’s investment platform Recent progress and expansion Becoming a significant provider to 10-20% current affluent clients would result in incremental pretax income of $500mm - $1B Pilot beginning in 2007 in the NY area and Chicago Clients with balances below $250k¹ grew balances 575% Clients with balances above $250k¹ grew balances 13% Retention for high balance customers in CPC is 16% higher than non-CPC Over 40% of CPC households have investments, up from 17% prior to CPC The pilot has worked 1 Balances prior to joining CPC 37 |
![]() Retail Financial Services opportunities Significant growth opportunities remain across businesses Each is a $1B+/- incremental pretax opportunity WaMu Business Banking Chase Wealth Management (Affluent) New Builds Continue to execute in Chase same stores Build out WaMu consumer products and customer base Mortgage Banking – continue to focus on Retail customers (through loan officers and Correspondent) Auto – continue disciplined pricing and credit management 38 |
![]() Agenda Page 39 Strategic implications of legislation and regulation 39 Credit 4 Strength of the franchise and growth opportunities 20 |
![]() Durbin Amendment Flawed policy Merchants and consumers realize tremendous benefits from debit Products and services should be priced based on value, not an artificial concept of cost Definition of costs in Durbin is incomplete and extremely flawed Consumers will be harmed Pay more for basic banking services Restrictions on debit cards and banking services 5%+ will exit mainstream banking All banks and credit unions will be affected Reduced payment innovation Potential for less safe and secure payment system $14B annual wealth transfer from consumers to merchants, mostly large retail chains 40 |
![]() Regulatory reform Operate from a position of strength Will be a level playing field, and… We operate from a position of strength Broad customer relationships (good distribution of customers across all wallet segments) Superior and complete product set (i.e., credit cards, investments, deposits, loans, treasury services) Nationwide footprint (over 5,000 branches and 16,000 ATMs in 23 states) Willingness and ability to adapt and change 41 |
![]() Product and customer positioning We have a complete product set to meet our customers’ needs Products we offer Mass Mass Affluent Affluent Deposits (checking, savings and CDs) Cards Debit Credit Gift Lending Mortgages Home Equity loans Business Banking lending (including SBA and CRE) Auto lending Student lending Investments Financial / retirement planning Mutual Funds Annuities and Life Insurance Brokerage and Managed account Trusts Securities Lending Money Transfers Prepaid Debit 42 |
![]() <$5k 24% $25K - $100k 23% $5k - $25k 25% $100k - $500k 18% $500k - $5mm 10% Diverse customer base: strong penetration, but lots of opportunity % of Consumer Bank households based on deposit and investment wallet Consumer Bank wallet share by segment Share of wallet Segment Wallet range Deposit share Investment share Mass <$5k 43% 11% $5k - $25k 31% 6% $25K - $100k 29% 8% Mass Affluent $100k - $500k 25% 8% Affluent $500k - $5mm 12% 2% Total 18% 4% 43 |
![]() Lost contribution due to Durbin Amendment Segment Wallet range Lost revenue ($B) % of total lost revenue # of households no longer profitable due to Durbin Mass < $100k ($1.0) 79% 1.3mm Mass Affluent $100k - $500k ($0.2) 16% 0.1mm Affluent $500k - $5mm ($0.1) 6% < 0.1mm Total ($1.3)+/- 100% ~1.3mm Total contribution to Consumer Bank fixed costs Source: 2Q10 annualized Consumer Bank Profitability data 44 |
![]() Projections of customers potentially moving out of the banking system Percent of U.S. families with a checking account 84.9% 89.7% 1995 2007 Source: Federal Reserve Survey of Consumer Finance 5 percentage point difference Impact on customers Since “free checking” became widely available an additional 5% of US families have entered banking system If unable to qualify for free checking in the future these families may go unbanked Chase’s recent experience confirms that the impact will be meaningful: ~15% of customers are in less affluent households who will no longer qualify for free checking Based on current attrition rates, we expect 50% to 60% of these customers to leave Chase within the next year If half of these customers leave the banking system = 5% +/- of customers becoming unbanked 45 |
![]() Durbin customer impact – potential changes Restrictions on debit cards Limit maximum transactions amounts due to fraud costs, e.g., $50 max Restrict use of debit cards at higher risk merchants and merchant categories Eliminate 100% fraud protection and guaranteed payment for merchants Eliminate debit rewards More expensive banking services Monthly service fees (eliminate “free checking”) Debit card fees, e.g., monthly/annual fee, transaction fees (metering) Fees for other payment services, e.g., ACH Fees for account services, e.g., online banking, bill payment, mobile banking, paper statements Fees for banking services, e.g., teller, call center Recent Chase actions Converted 8mm free checking customers to $10- 12/month fee Stopped debit rewards Eliminated debit usage as a way to waive monthly service fee for all new customers Currently testing several other product and pricing concepts Lower income and less affluent households most affected by Durbin Customers without significant balances will pay more for basic banking services 5%+ customers will exit mainstream banking, e.g., pay day lenders, check cashers, pre-paid We plan to recoup revenue lost as a result of Durbin over time 46 |
![]() Mortgage banking economics — scenario Market Production $1.5T +/- Market Share 10% +/- Originations $150B +/- Pretax Margin 65bps +/- Pretax $1.0B +/- Average UPB $1.0T +/- Servicing & Other Revenue 44bps +/- Amortization 25bps +/- Servicing & Default Costs 10bps +/- MSR Risk Management +/- 10bps Pretax $1.0B +/- Production Servicing Quality of underwriting Pricing for risk Cost / Efficiency of platform (sales, operational, overhead, etc.) Market risk management – pipeline / warehouse Focus on customer service Size and average life of servicing book Management of operational risk Efficiency of platform Market risk management – MSR hedging Focus on customer service Affected by high repurchase expense Historically high refinance volumes and margins due to low interest rate environment 2011 refinance volumes and margins and repurchase expenses expected to decline Affected by high default driven costs Default costs expected to remain high for next couple of years to handle modification and foreclosure volumes Interest rate movements affect the business; require effective hedging strategies 47 |
![]() Mortgage Banking economics — sensitivity Production volume and margins are impacted by market interest rates and capacity Some of the highest historic production margins were experienced in 2010 Pretax servicing margin has been adversely affected by high default costs but generally can range from $500mm - $1.5B $ in billions $0.9 $0.7 $0.5 $1.3 $1.0 $0.7 $1.7 $1.3 $0.9 $2.0T Market $1.5T Market $1.0T Market 45 bps 65 bps 85 bps 45 bps 65 bps 85 bps 45 bps 65 bps 85 bps 2010 Production Pretax $2.7B Production Pretax Income 48 |
![]() Incremental value of adding mortgage to a banking relationship Mortgage increases the value of the overall customer relationship HH without a mortgage HH with a mortgage Note: Impact of customer following refinance of a non-Chase mortgage at Chase 100% 130% 9% 8% 13% Value of HH without mortgage Additional checking value Additional savings value Increased likelihood of capturing mortgage refinance Value of HH with a mortgage Relationship impact after acquiring a Chase mortgage Excludes any additional value attributed to cross sell (e.g. credit card, investments) Household checking annual attrition 49 |
![]() Servicer economics - modification vs. foreclosure Modification vs. foreclosure decision is made on behalf of the investor based on the best economic alternative From a servicer’s perspective, a performing loan is the best alternative A foreclosure is the worst economic alternative, primarily due to the loss of servicing fee income $ per loan Foreclosed Loan Modified Loan Servicing Fees 1,500 3,400 Loss Mitigation Incentives - 1,200 Total Fees 1,500 4,600 Servicing & Collection Cost 700 1,500 Loss Mitigation Cost 2,400 3,000 Foreclosure Processing Cost 1,500 600 Total Cost 4,600 5,100 Net Income/(Loss) (3,100) (500) 50 |
![]() Housing market reform A healthy, functioning mortgage market is critical to consumers and the economy Mortgage business is extremely complex and industry practices need to be strengthened GSE reform is necessary Regardless of the outcome, we continue to like our competitive position Existing customer relationships: over 67mm unique customer relationships ~7mm new customers acquired each year Processing scale Reasonable return on production and servicing - form may change A critical relationship product 51 |
![]() Key messages Earnings drag from significant negatives in 2010 will reduce over time Credit, repurchases, elevated default and servicing expenses, foreclosure costs Well reserved entering 2011 Capital will be freed up as reserves are released and Real Estate Portfolio runs-off Industry leading franchise with strong earnings power and potential Doubled investment $ over the last 5 years Consistent, 10% to 15%, organic growth in key drivers Strong presence in key markets Significant opportunity to grow organically in our footprint; potential to build 1,500+/- new branches over the next 5 years WaMu Business Banking and Chase Private Client is a combined $2.0B+/- pretax opportunity Strong and experienced management team Track record of execution and delivering growth Diverse customer base; strong penetration but lots of opportunity Complete product set; focus on innovation Regulatory reform will change our business; we are positioned to adapt and will price properly for the services and value we provide Quality of our franchise positions us to grow Our business model enables success even during significant change We will address legacy issues 52 |
![]() February 15, 2011 A S S E T M A N A G E M E N T Mary Erdoes, Asset Management Chief Executive Officer * * * |
![]() Agenda Page 1 Business Performance 1 |
![]() Asset Management framework designed for disciplined governance, risk management, and client focus in a complex and changing environment AM Investment Committee AM Risk Committee Private Banking Operating Committee Investment Management Operating Committee Highbridge Board Global Private Bank Private Wealth Management JPMorgan Securities Global Institutional Retail US EMEA / LatAm APAC Highbridge Hedge Funds Highbridge Principal Strategies Gávea Technology & Operations Finance Human Resources Risk Audit Legal & Compliance Assets under supervision $1.8T Global employees 17,000+ Investment professionals 1,200+ Investment strategies 200+ AM Operating Committee 2 “To be the most respected asset management firm by delivering exceptional risk adjusted investment performance, by offering a broad and innovative range of trust and investment products, and by providing the highest quality service through local management of client relationships.” |
![]() 2010 % change vs. 2009 Assets Under Management $1,298 4% Assets Under Supervision 1,840 8% Loans 44 17% Deposits 89 15% Long-term flows 69 35% Sales hires 453 15% ROE 26% 6% Equity $6.5 (7%) 2010 % change vs. 2009 Revenue: $8,984 13% Private Banking 4,860 13% Institutional 2,180 6% Retail 1,944 23% Credit Costs 86 (54%) Expense 6,112 12% Pretax Margin 31% 2% Net Income $1,710 20% 2010 results ($ in millions) In 2010, Asset Management showed strong growth, across all client segments Key Statistics ($ in billions) Record Record Record Record Record Record Record Record 1 2 1 The “percentage” change in pretax margin is the actual difference between 2010 and 2009 2 The “percentage” change in ROE is the actual difference between 2010 and 2009 3 |
![]() Asset Management has shown consistent profitability during the financial crisis 4 |
![]() Pretax margin and ROE consistently remain above peer average 15% 35% 25% 12% 18% 45% 22% 22% 31% Pretax margin – 2010 (%) JPM AM Peer Median Peers include: BAC, BLK, BNY, CS, MS, UBS, and TROW Note: GAAP pretax margins presented Peers: 7% 8% 16% 11% 22% 11% 26% ROE – 2010 (%) JPM AM Peer Median Peers: Peers include: BAC, BLK, MS, UBS, and TROW Note: GAAP ROE presented 5 |
![]() 484 687 245 422 420 731 2005 2010 Institutional Retail Private Banking $1,149 $1,840 Asset Management has grown assets in each client segment over the last five years Client segments ($ in billions) AUM and AUS AUM and AUS 197 216 261 258 270 284 $731 $636 $552 $545 $465 $420 2005 2006 2007 2008 2009 2010 AUM AUS $481 $538 $632 $681 $709 $686 2005 2006 2007 2008 2009 2010 169 259 300 194 270 328 $422 $355 $394 $245 $343 $262 2005 2006 2007 2008 2009 2010 AUM AUS AUS – 2005 to 2010 ($ in billions) AUM Flat 6 |
![]() Fixed Income and equities recorded strong flows along with performance improvement Long-term net flows ($ in billions) $19 $17 ($47) $28 $34 $24 2005 2006 2007 2008 2009 2010 $50 $34 ($12) $9 $11 $- 2005 2006 2007 2008 2009 2010 ($89) ($23) $210 $78 $44 $8 2005 2006 2007 2008 2009 2010 2010 2009 $512 $432 AUM ($ in billions) 2010 2009 $289 $226 2010 2009 $497 $591 +19% +28% -16% 7 |
![]() Asset Management greatly benefits from the power of the JPM network Retail Financial Services Fund accounting Transfer agency Custody Securities lending Interest Rate Risk Commercial Banking Investment Bank Structured products Execution Highlights Synergies of over $1B across LOBs Synergies account for over 10% of JPM AM revenues Investment Bank Securities offerings, structured products and trade execution offered to Private Banking clients Referrals in both directions Retail Financial Services Investment Management products offered to RFS clients through Chase branches US branches available to Private Banking clients Card Services issued to Private Banking clients Commercial Banking Investment Management products offered to Commercial Banking clients Referrals in both directions Treasury & Securities Services Liquidity products offered to TSS clients Referrals in both directions Corporate (Treasury/CIO) Manages Private Banking’s mortgage interest rate risk Corporate (Treasury / CIO) Fund management Fund management Fund management Credit Cards Fund management Treasury & Securities Services Card Services 8 |
![]() Growth Opportunities 9 Business Performance 1 International expansion Front-facing client expansion Market share gain: core products Market share gain: innovative products and solutions 1 2 3 4 9 |
![]() International expansion continues to be a priority LatAm EMEA Asia Pacific Ultra HNW continued growth Brazil: local offices and talent Ultra HNW continued growth HNW development where scalable Ultra HNW continued growth HNW build out Sales force growth Insurance, pensions Gávea Brazil – local manufacturing Sales force growth Sovereigns, Central Banks 2011 priorities ’05-’09 CAGR ’09-’10 revenue growth International growth 12% 26% 10% 10% 3% 17% 8% 19% 1 10 |
![]() Front-facing client coverage Private Banking – Client advisors (#) 1,868 2,164 2,310 2,660 2007 2008 2009 2010 2011 Talent 2010 Highlights Private Banking: Continued hiring throughout the crisis 2010: 15% growth (32% internationally) 2011: continue international expansion Training is a critical part of hiring strategy – 13 training programs globally – Cultural integration is key Global Investment Management: New senior sales leadership: – Global Institutional – Sovereigns – U.S. Retirement – Highbridge Institutional Metrics driven culture Cross-sell flows Global Investment Management – Sales headcount (#) 676 647 638 741 2007 2008 2009 2010 2011 +9% total +8% total 2 11 |
![]() Market share gain: core “category killers” 130/30 started in 2004; utilizes research to invest long and short $130 million annual research budget; 200 career analysts 5% annualized excess returns since inception 50% market share 130/30 Performance vs. benchmark (S&P 500 Index) 8.36% 1.67% 15.44% 2.29% -2.86% 15.06% 1 year 3 year 5 year Large Cap Core 130/30 Benchmark +0.38% +4.53% +6.07% Columbus Fixed Income Acquired through Bank One merger Long-term horizon based on analysis of individual securities, rather than macro themes Strongly rated by key consultants Strong flows across platform: Core Bond High Yield Intermediate Tax Free Performance vs. benchmark (Barclays Capital Agg.) 8.38% 7.74% 7.04% 6.54% 5.90% 5.80% 1 year 3 year 5 year Core Bond (Columbus) Benchmark +1.84% +1.84% +1.24% 3 12 |
![]() Market share gain: core “turnaround products” Revamped entire team Integrates top-down macro themes with bottoms- up securities selection Target diversified sources of returns and minimize reliance on any single strategy Build-out complete after two years of investment Recently upgraded by a number of consultants New York / London Fixed Income Performance vs. benchmark (Barclays Capital Agg.) 11.61% 3.14% 3.55% 6.54% 5.90% 5.80% 1 year 3 year 5 year Core Bond (NY/LON) Benchmark +5.07% -2.76% -2.25% Viewed as a pioneer and a global leader in the field of behavioral based investing Stock ranking methodology based on anomalies to be exploited 60 investment professionals globally with local teams Current environment more stable for investment process Behavioral finance Europe Equity Fund vs. MSCI Europe Net Index 0.1% 3.4% 2.2% 3.7% 2.8% -5.6% -8.5% 1.1% 5.3% 9.5% 7.4% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Excess returns (%) 3 Performance vs. benchmark 10-years Account return 9.6% Benchmark return (3.5%) Excess return 13.1% 13 |
![]() Global Merger Arbitrage Fund (2011) US Select Long Short Fund (2011) GEM Long Short Fund (2011) Highbridge Credit Fund (2011) “Muni” Strategic Income Opportunity Fund (2011) Strategic Bond (2010) Gold / Oil Market Plus Note (2010) Copper Quarterly Review Note (2010) Emerging Markets FX Note (2010) S&P 500 Contingent Buffer Note (2010) Market share gain: innovative products and solutions Gávea Macro Hedge Fund (2010) Global Maritime (2010) Distressed US Real Estate (2011) Brazil Private Equity, Gávea (2011) China Private Equity (2011) Multi Asset Income Fund (2010) Thematic Advisory Program (TAP) (2010) Highbridge Dynamic Commodity (2010) Alternatives Portfolios Fund (2011) Equity Fixed Income Multi-Asset Hedge Funds / Private Equity / Real Assets Structures 4 14 |
![]() Closing thoughts J.P. Morgan Asset Management Consistent, strong financial performance Alpha generation is at the core of what we do Sophisticated and engaged client base Organic growth from increasing local coverage, launching innovative products, and increasing market share Rapidly growing opportunities in international markets and high-net-worth segment Strong management team Fine balance of hiring / growth with preserving culture / performance Goal is to be the most respected, not the biggest 15 |
![]() J.P. Morgan is recognized as a global leader in Asset Management (2010 awards) #1 Ultra-High-Net-Worth Private Bank Globally Institutional Hedge Fund Manager of the Year Cash & Money Management Manager of the Year #1 Institutional Money Market Fund Manager Worldwide Largest U.S. based Hedge Fund Manager #1 Most Respected U.S. Private Bank U.S. Large Cap Core PM Tom Luddy named “Money Manager of the Year” #1 U.S. Real Estate Equity and Infrastructure Money Manager #1 U.S. Manager of Currency Alpha Strategies #1 U.S. Manager of Active Extension Equity Strategies # 2 Mutual Fund Family Best Asset Management Company of the Year – Asia and Hong Kong JF Asia Portfolio Manager Victor Lee named “Best Multi-Strategy Hedge Fund Manager” Leading Pan-European Fund Management Firm Fund Manager Peter Lawrence named “Leading Pan-European Fund Mgmt Individual” Gold Standard Fund Management, UK Investment Trust Group of the Year UK German Fund Service Award 16 |
![]() February 15, 2011 C A R D S E R V I C E S Gordon Smith, Chief Executive Officer Card Services * * * * * |
![]() Our business is returning to profitability and growth We are reaffirming our 20%+/- ROE target on reduced equity of $13B Net interest margin remains stable post CARD Act and we expect revenue margins to stabilize at 12%+/- Control of operating expenses has allowed us to expand marketing investment Credit loss trends continue to show improvement We expect to see <6.5% net credit loss rate in 1Q11 1 Through-the-cycle loss rate of 4.5%+/- in mid 2012 1 We have continued to invest in the business through the cycle Our new flagship proprietary products are gaining traction Blueprint is having a positive impact on customer engagement We have continued to expand our cobrand business by signing Ritz-Carlton, Hyatt and Fairmont Hotels Our branch network continues to generate 1.5mm+/- new card accounts and >40% of revenue from new merchants for Chase Paymentech Our strategy is gaining traction We have gained 234bps of sales market share since 2007 1 We expect end-of-period outstandings to stabilize at $120B for Chase and $10B for WaMu by year end 2011 Executive summary 1 Excludes WaMu 1 |
![]() Agenda Page 2 Our business is returning to profitability and growth 2 Credit loss trends continue to show improvement 12 We have continued to invest in the business through the cycle 19 Our strategy is gaining traction 33 |
![]() Pretax, pre-LLR income segment performance through the cycle 2010 EOP outstandings Sales volume 2005 2006 2007 2008 2009 2010 Through- the-cycle Affluent and High Net Worth $37 $148 Pretax, Pre-LLR income $1.8 $2.0 $2.1 $1.6 $0.6 $0.1 $1.7 - $1.9 ROE >30% >20% 4% 30% - 40% Mass Affluent $81 $132 Pretax, Pre-LLR income 1.2 2.8 2.6 1.5 (1.2) (2.3) 1.3 - 1.5 ROE 8% 18% 16% 9% (10)% (21)% 13% - 17% Small Business $6 $22 Pretax, Pre-LLR income 0.1 0.1 0.1 (0.0) (0.3) (0.3) 0.4 - 0.6 ROE 29% 35% 22% (6)% (32)% (25)% 30% - 40% Chase Paymentech¹ N/A N/A Pretax, Pre-LLR income 0.2 0.2 0.3 0.3 0.3 0.3 0.4 - 0.6 ROE 31% 37% 40% 35% 36% 41% 40% - 50% Card Services Corporate² N/A N/A Pretax, Pre-LLR income 0.0 (0.1) (0.3) (0.7) (1.1) (0.0) Total Card Services $124 $302 Pretax, Pre-LLR income (ex. WaMu) $3.3 $5.0 $4.8 $2.7 ($1.7) ($2.2) $3.8 - $4.6 Reported ROE 16% 23% 21% 5% (15)% 14% 20%+/- ($ in billions) 1 Prior to November 2008 pretax, pre-LLR income and ROE for Chase Paymentech represents Chase’s 51% share of joint venture business; Paymentech ROE represents return on tangible equity 2 Card Services Corporate total includes intangible amortization, deferral of loan fees (FAS 91) and securitization income 3 |
![]() $190 $163 $138 $0 $50 $100 $150 $200 2008 2009 2010 End-of-period outstandings ($ in billions) Equity applied to the business will be reduced by $2B due to improving risk profile and size of loan book 1Q09 1Q10 4Q10 Outstandings – bankcard debt > $20K, excluding WaMu Key drivers of equity reduction: We have reduced our exposure to higher risk, more indebted customers Our portfolio mix has shifted towards more rewards-engaged customers with lower risk profile 27% decrease 40% decrease 4 |
![]() NIM pre- CARD Act Penalty pricing Late fees Over-limit fees Due date rules Payment allocation rules Pricing Business model changes NIM post- CARD Act Steady state CARD Act impact on net interest margin (NIM) – bps on outstanding Business model changes have largely compensated for lost fee revenue $750mm after-tax impact of CARD Act 5 |
![]() Revenue margin trends have shown strength across each segment 2005 2006 2007 2008 2009 2010 Steady State Affluent and High Net Worth NIM 6.7% 6.4% 6.4% 6.5% 7.1% 6.4% Other income¹ 3.6% 3.5% 4.0% 3.9% 3.7% 4.1% Revenue margin 10.3% 10.0% 10.5% 10.4% 10.8% 10.6% 11% – 13% Mass Affluent NIM 9.3% 9.1% 8.9% 8.9% 9.7% 9.7% Other income¹ 1.7% 1.4% 1.3% 1.2% 1.1% 1.1% Revenue margin 10.9% 10.5% 10.3% 10.1% 10.8% 10.9% 10% – 12% Small Business² NIM 6.7% 6.2% 5.0% 5.3% 8.2% 8.2% Other income¹ 5.6% 4.9% 4.5% 3.8% 3.5% 4.4% Revenue margin 12.3% 11.0% 9.4% 9.0% 11.7% 12.6% 13% – 15% Total Card Services (excl. WaMu) 3 NIM 8.7% 8.4% 8.2% 8.2% 9.0% 8.9% ~9% Other income 1 2.6% 2.0% 2.0% 1.6% 1.6% 2.3% ~3% Revenue margin 11.3% 10.4% 10.2% 9.8% 10.6% 11.2% 12%+/- All rates are as a percentage of average outstandings and excludes WaMu Note: Revenue component numbers may not equal total revenue margin due to rounding 1 Other income includes net interchange income, annual fees and other revenue 2 Small business segment excludes cobrand partner accounts 3 Card Services total includes revenue from Chase Paymentech 6 |
![]() Historically, Chase has generated lower revenue margins vs. competitors but we have shown strong growth since 2008 1 AXP revenue has been adjusted to exclude estimated rewards costs; 4Q08 data includes a one-time charge of $96mm associated with an increase to Membership Rewards reserve 2 DFS revenues represent Direct Banking segment fiscal year ending November; 2008 data has been adjusted to exclude $863mm in VISA/MasterCard litigation payments in 4Q08 Key considerations: Fee-based charge card business Higher yielding, lower prime business Higher net interchange 7 |
![]() Operating expense control continues and investments in infrastructure are driving efficiencies 1 Headcount includes contractors 8 |
![]() Safe and secure payment system Incremental sales Outsourcing of credit extension to specialist provider Guaranteed funding on purchase transactions Elimination of cost of cash management Fraud control Efficient processing at point of sale Meets consumer and small business payment needs at home and abroad Access to credit for longer-term borrowing needs Tool to manage short-term cash flow Rewards Consumers Merchants Compelling value proposition of credit card: We are confident in the long-term health of the industry and our business model 9 |
![]() Changes in payment rate coincide with a decoupling of sales and outstandings growth 1 Organic outstandings excludes balance transfers (16)% (12)% (8)% (4)% 0% 4% 8% 12% 16% 20% (400) (300) (200) (100) 0 100 200 300 400 500 Payment rate - YoY change Sales - YoY growth Organic outstandings - YoY growth Trends in outstandings growth, sales growth and payment rate, excluding WaMu 1 10 |
![]() $190 $163 $130 1 Run-off balances include balance transfers and terminated partner portfolios End-of-period outstandings ($ in billions) $138 1 Loan portfolio is expected to stabilize in the second half of 2011 as WaMu and balance transfer portfolios stabilize 11 |
![]() Agenda Page 12 Credit loss trends continue to show improvement 12 Our business is returning to profitability and growth 2 We have continued to invest in the business through the cycle 19 Our strategy is gaining traction 33 |
![]() The credit environment continues to improve as initial jobless claims and the “short-term” unemployment rate show signs of stabilization 13 |
![]() Credit improvements are visible across all delinquency buckets, improvement in early delinquency is particularly strong Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Delinquency $ roll-rate from current to charge-off, excluding WaMu (0-180 days past due) Delinquency $ roll-rate from current to bucket 2, excluding WaMu (0-60 days past due) Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 14 |
![]() Credit line management strategy Closed inactive accounts, removing ~$50B of contingent liability since 2008 Lowered credit lines for high risk customers Reduced average credit line for new accounts Portfolio management approach Assess customers’ debt-to-income and total bankcard debt Reduced risk profile of new accounts Refinement of customer based risk model and strategies Less reliance on promotional pricing Reduced total outstandings in promotional pricing Sample of actions taken: We have reduced exposure to higher risk customers 15 |
![]() 2008 2010 16% decrease 1Q09 1Q10 4Q10 40% decrease 1 Average credit line for new accounts excludes Retail Partner accounts Average credit line for new accounts, excluding WaMu¹ Open to buy – customers with bankcard debt > $20K, excluding WaMu Line assignment has been right-sized 16 |
![]() New accounts continue to improve in credit quality Note: Excludes Retail Partner accounts 1 FICO and bankcard debt data represent portfolio averages at the time of acquisition 2 60+ day $ delinquency rate represents delinquency rate 6 months after acquisition for all new accounts booked in 2Q08 vs. 2Q10 11% 4% 0% 5% 10% 15% 2008 2010 11% 6% 0% 5% 10% 15% 2008 2010 60+ day $ delinquency rates – 6 months after new account acquisition, excluding WaMu² Percent of new accounts – bankcard debt >$20K, excluding WaMu¹ Percent of new accounts – FICO <660, excluding WaMu¹ 17 |
![]() $34 $28 $17 $0 $10 $20 $30 $40 $50 2008 2009 2010 Average outstandings in promotional pricing, excluding WaMu ($ in billions) Portfolio quality has improved as we have shifted our focus away from promotional pricing 50% decrease 18 |
![]() Agenda Page 19 We have continued to invest in the business through the cycle 19 Our business is returning to profitability and growth 2 Credit loss trends continue to show improvement 12 Our strategy is gaining traction 33 |
![]() Significant progress has been made against our strategy Create lifelong, engaged relationships with our customers by being a trusted provider of financial services Vision Brand Rewards Customer Experience Implemented premium servicing model for Chase Sapphire accounts Improved key “moment of truth” servicing strategies, specifically POS authorization rates, delivery of replacement cards and dispute processing Implemented new early engagement strategies to drive increased loyalty Proprietary rewards program, Ultimate Rewards, has surpassed 20mm accounts Ultimate Rewards customers generate higher revenue/account, lower attrition vs. legacy Chase rewards accounts Ultimate Rewards promotions are driving incremental traffic and value to our merchant partners Consistent YoY improvement in Chase brand awareness and consideration Strong traction with new products Signed Hyatt, Ritz-Carlton and Fairmont hotels in 2010 20 |
![]() Product features The new Chase rewards products are targeted at specific customer segments Products Small Business Mass Affluent Affluent Product features 21 |
![]() 4Q09 4Q10 Freedom Sapphire Ink Total new accounts acquired for all new Chase rewards products 1 First 12 months of spend for 4Q10 new accounts is based on internal estimates Acquisition efforts with our new rewards products are gaining traction 4Q09 4Q10 Freedom Sapphire Ink First 12 months of spend for all new Chase rewards accounts¹ YoY increase 11% 27% 76% 22 |
![]() Blueprint helps customers manage their spending and borrowing needs Key design goals: Reduce perceived barriers to credit card usage Providing customers with ultimate flexibility in controlling their spending and borrowing 23 |
![]() 4Q09 1Q10 2Q10 3Q10 4Q10 Blueprint adoption is increasing and is having a positive impact on customer engagement levels Feature Sales growth OS growth Attrition Full Pay Split Finish It Total Blueprint summary +16% +3% (3)% Key performance metrics 12 months after activation of feature: Blueprint average weekly plan activations + ++ ++ +31% +28% +15% +46% - 24 |
![]() We continue to selectively add outstanding brands to our cobrand business Partners Strategic 2010 new partners Deep, long-standing relationships with global brands Market leaders in industries such as Travel, Entertainment and e-tailing Differentiated products designed to meet customer needs Sophisticated data-sharing and cooperative marketing driven by powerful rewards and segmentation strategies 25 |
![]() 43% 52% 56% 58% 64% 69% 57% 48% 44% 42% 36% 31% 2005 2006 2007 2008 2009 2010 General purpose credit cards: Non-rewards General purpose credit cards: Rewards Note: Excludes Retail Partner accounts Our portfolio continues to shift towards more rewards-based relationships Rewards as a percent of end-of-period outstandings, excluding WaMu 73% 77% 81% 84% 87% 90% 27% 23% 19% 16% 13% 10% 2005 2006 2007 2008 2009 2010 General purpose credit cards: Non-rewards General purpose credit cards: Rewards Rewards as a percent of sales volume, excluding WaMu 26 |
![]() We have built a distinctive proprietary rewards program, Ultimate Rewards Rated #1 credit card rewards site in 2010 by Credit Card Monitor 1 An enterprise loyalty and marketing asset Added debit rewards customers, JPMorgan Private Bank customers Strong merchant partnerships deliver value to our customers 1 #1 rating for reward site based on Credit Card Monitor report produced by Corporate Insights – July 31, 2010 report 23 5 <1 Jun-09 Dec-09 Dec-10 Debit Credit Ultimate Rewards accounts (millions) 27 |
![]() Ultimate Rewards has helped our new proprietary rewards products drive increased customer engagement Cumulative 12 month revenue/account Average Outstandings/account Attrition rate Online redemption rate Legacy Chase rewards account (control) Ultimate Rewards account Comparison of key metrics – 12 months after adoption of Ultimate Rewards 7% higher 5% higher ~400bps lower attrition rates 10% higher 28 |
![]() Distance commuted from home to restaurant² 33% 29% 23% 14% Account distribution 1-2 6-10 10+ Monthly visits 3-5 4.5 20% in same zip code 10% 2-3 miles 41% 10+ miles 17% 5-10 miles 12% 4-5 miles 1 Data annualized (through November 2010) and based on Chase credit card customers that use their Chase credit card as their primary credit card for purchases 2 Distance calculated using latitude and longitude to measure distance between residence and merchant zip codes Frequency of restaurant visits On average, we have generated 4-10X increases in redemptions for key marketing partners during promotion Example customer profiling: restaurant illustration¹ Our card data delivers value to both merchants and cardholders 29 |
![]() 2010 average cost to acquire new accounts (indexed to Retail branch costs) The branch network continues to be a key contributor to growth Note: Excludes Retail Partner accounts New account distribution by channel, excluding WaMu 1 4 11 0 5 10 15 Retail branch Online Direct Mail 11% 25% 35% 24% 31% 34% 46% 30% 24% 14% 7% 19% 2006 2008 2010 Branch Online Direct Mail Other 30 |
![]() With good credit performance and engagement 1 60+ day $ delinquency rate represents the delinquency rate 6 months after acquisition for all new accounts booked; 2010 data represents all new accounts booked from January 2010 through June 2010 2 Debit active rate represents data for all accounts acquired January through June of each calendar year 46% 49% 53% 0% 25% 50% 75% 2008 2009 2010 Debit active rate for Retail branch sourced new accounts 6 months after acquisition² 700bps improvement 1.4% 1.0% 0.4% 0.0% 0.5% 1.0% 1.5% 2.0% 2008 2009 2010 60+ day $ delinquency rates 6 months after acquisition for Retail branch sourced new accounts¹ 100bps improvement 1.5mm+/- new accounts acquired through the branches 31 |
![]() Chase Paymentech has gained market share in the acquiring business Key business drivers: Processed more than 20B payment transactions in 2010 Chase Paymentech has gained ~40 bps of overall U.S. market share - from approximately 11% to 11.4% from 2009 to 2010 1 Invested in a single platform for merchant processing >40% of revenue from new merchants is being sourced through the retail branches 100 87 111 2008 2009 2010 100 51 60 65 2008 2009 2010 Total Chase Paymentech revenue2 (2008 = 100) Revenues from new sales2 (2008 = 100) 3 32 1 Market share increase based on Chase Paymentech estimates 2 2008 total revenues and revenues from new sales are calculated by annualizing the first 10 months of financial performance and adjusting for seasonality for the combined JV business 3 The Chase Paymentech JV Separation was effective October 31, 2008 when 49% of revenue-producing assets were allocated to First Data JPMC share of revenues immediately post JV separation |
![]() Agenda Page 33 Our strategy is gaining traction 33 Our business is returning to profitability and growth 2 Credit loss trends continue to show improvement 12 We have continued to invest in the business through the cycle 19 |
![]() Our new proprietary rewards products are driving improved engagement vs. legacy Chase products 37% 85% 44% 94% New Chase products vs. comparable legacy Chase products: 2010 vs. 2007, excluding WaMu Sales/ statement Transactions/ statement (33)% Average $ amount of balance transfer 14% 12% (22)% (28)% 34 |
![]() For customers that increased spend with Chase, we have driven increased wallet share and revenue even while payment rates have risen For customers where YoY spend increased Transactors Revolvers Payment rate: Payment rate: 77% 89% 15% 20% Interchange revenue Interchange and NIM 1 Transactors are customers with monthly spending of >75% of their total bankcard balances or customers with total revolving bankcard balance of <$300 2 Revolvers represent all customers with an open account excluding transactors 1 2 Chase share of balances 65% 57% 2009 2010 31% 34% 2009 2010 35 |
![]() Sales and transaction volumes hit record levels in 2010 1 Sales data excludes cash advances and balance transfers Sales volume and number of sales transactions, excluding WaMu¹ YoY sales volume growth for January 2011 was 10.1% 36 |
![]() 24.2% 18.4% 13.6% 9.9% 6.3% 5.9% AXP U.S. Card Chase¹ BAC2 C COF DFS Source: Earnings releases; Internal Chase estimates Note: GPCC includes consumer, small business, charge card but excludes commercial 1 Chase sales data excludes WaMu, cash advances, balance transfers and private label 2 BAC includes U.S. and International Consumer, excludes Small Business 3 C includes C Branded and excludes non-core Retail Partner portfolios 4 DFS sales data excludes cash advances Chase has gained sales market share vs. competitors over the past 3 years 2010 General Purpose Credit Card (GPCC) sales volume market share 4 3 Change in GPCC sales volume market share (bps) — 2007 vs. 2010 37 |
![]() Key messages Credit loss trends continue to show improvement across all aspects of the portfolio (expect <6.5% net credit loss rate in 1Q11, and through the cycle loss rate of 4.5% by mid-2012 1 ) We have continued to invest through the cycle across all of our businesses The new products are gaining traction helping to drive record sales levels and increased market share We expect outstandings to stabilize at $120B for Chase and $10B for WaMu by year end 2011 We have the right strategy to succeed in a post CARD Act environment and achieve our ROE target of 20%+/- on lower equity 1 Excludes WaMu 38 |
![]() February 15, 2011 I N V E S T M E N T B A N K Jes Staley, Investment Bank Chief Executive Officer * * * * * |
![]() Business evolution: 2005-2010 2005 2006 2007 2008 2009 2010 Global Markets¹ 8 8 6 5 3 2 Fixed Income Markets 5 7 5 4 3 1 Equity Markets 8 8 8 5 5 4 Investment Banking² IB Fees 2 2 2 2 1 1 Advisory 2 2 4 1 3 4 Equity underwriting 4 5 2 2 1 3 Syndicated loans 1 1 1 1 1 1 Long-term debt 2 3 3 3 1 2 Equity Research³ US 7 6 3 2 2 1 Europe 10 10 8 8 4 2 Fixed Income Research 3 US 2 2 2 2 2 1 Europe 1 1 1 1 2nd Tier 3rd Tier Top 3 Rankings 1 1 JPMorgan estimates share using public disclosure of Top 10 competitors; 2010 ranking utilizes available data as of February 11th 2011; ‘05-’07 is heritage JPM. Pro-formas based on industry mergers: JPM ‘08-’10, competitors ’05-’10 2 Source: Dealogic, pro forma for industry mergers. Except for IB fees, rankings are volume based 3 Institutional Investor; All-Europe Fixed Income rankings not published for 2009 and 2010 |
![]() 2010 Performance: Strength during a recovery year Near record performance Revenue: $26.2B Earnings: $6.6B ROE of 17% on capital of $40B Well capitalized (Tier 1 common ratios): Basel 2: 13.0% Basel 2.5: 9.2% Basel 3: 7.2% 1 Dealogic 1 Dealogic Investment Banking leadership: #1 in Global IB Fees: 8% market share 1 Record Debt underwriting revenue Fixed Income Markets: market leader Asia Pacific: record revenue Commodities: upside potential Equities: building electronic platform Business summary Financial results 2 |
![]() 2010 Accomplishments: Positioned for renewed client growth Risk Management Trading discipline Prudent capital management Strategy Clients Transitioned from “safe harbor” to “port of opportunity” Strengthened senior client coverage Expanded in key markets China JV: First Capital Securities Global Corporate Bank partnership with TSS International Technology Strategic Re-engineering Program (SRP): on target, in 3 rd year Electronic offering improved: competitive in US and Europe Strategic derivative solutions in FX and commodities Sempra acquisition Oil and base metals expertise; 1,000 new clients Commodities 3 |
![]() 2010 Accomplishments: Comprehensive solutions Positioned client balance sheets for growth, raised over $500B in debt and equity Led more equity and equity-related offerings than any another firm Ranked #1 in both high grade and high yield bonds Raised ~$90B for U.S. state and local governments, healthcare organizations, educational institutions and non-profits Led the largest municipal transaction in 2010 – sole bookrunner for the State of California's $10B Revenue Anticipation Notes Advised on 311 mergers and acquisitions globally Led large and complex transactions Arranged / loaned over $350B for 420 clients globally Ranked #1 in Global Loan Syndications First firm to re-enter the North American CMBS market First deal without government-sponsored lending support Source: 2010 Dealogic volume-based league tables; lead-left bookrunner basis for loans. US municipal/nonprofit capital raised per Thomson and internal sources Source: 2010 Dealogic volume-based league tables; lead-left bookrunner basis for loans. US municipal/nonprofit capital raised per Thomson and internal sources Issuer clients: ~5,000 Global IB fees wallet share: 8% 4 |
![]() 2010 Accomplishments: A world-class markets franchise 3,500+ Fixed Income and 2,000+ Equities sales and trading professionals 800+ research analysts 23 global trading centers 110+ global trading desks 3mm average daily trades Investor clients: ~16,000 Global Markets revenue share: 12% JPM markets reported revenue ($ in billions) $12 $10 $6 $22 $20 2006 2007 2008 2009 2010 8% 9% 10% 13% 12% 2006 2007 2008 2009 3Q10 YTD JPM markets revenue share1 (%) Rank: #8 #6 #5 #3 #2 1 JPM share of top 10 competitors 5 High volume markets Average notional ($ in millions) Annual volume (est. trades per year) Index Credit Derivative $50-250 44,300 NYMEX Gas Swap & Futures $5-20 68,300 G3 IR Swap $50-200 150,000 Index Equity Option $50-100 260,000 FX Spot $2-25 68,300,000 |
![]() 2010 Accomplishments: Flow-driven derivatives business IB average net revenue1: 2006-2010 1 Net revenue excludes net markdowns on legacy positions; revenue approximated to round percentages Rates 40% Commodities 10% Equities 20% Credit 20% FX 10% Non-Derivative revenue 70% Derivative revenue 30% Flow 85% Exotic 15% 6 |
![]() $37 $39 $21 $84 $76 $47 0 20 40 60 80 100 120 140 160 180 2005 2006 2007 2008 2009 2010 0 20 40 60 80 100 120 140 160 180 Daily Avg. Mkts. Rev. VaR 2010 Accomplishments: Revenue to risk relationship Note: 2005-2010 IB trading VaR measured at 95% confidence level. 2005-2008 IB trading VaR was previously reported on a 99% confidence level IB trading loss days 52 33 46 97 42 8 Daily average markets revenue and VaR ($ in millions) 7 |
![]() 2011 Initiatives: Increasing effectiveness for clients with complex needs Strategy Clients Vigilant focus on clients’ long-term interests 360 degree coverage Technology Streamlining processes, reducing cost of ownership Flexible framework supports quick product introduction Leverage flow, capture internalization, optimize cost Commodities Unparalleled strength across physical and financial markets Client flow and structured transactions drive growth International Developing markets Prime Brokerage Global Corporate Bank – 3,200 client initiative Risk management Credit and market risk discipline Efficient capital management; ongoing regulatory focus 8 |
![]() 2011 Initiatives: International – developing markets 9 |
![]() Global Corporate Bank 3,200 client initiative Banker additions Extending credit Increasing product capabilities Prime Brokerage Leveraging U.S. leadership to develop EMEA and Asia Significant progress developing international core competencies Clearing infrastructure Global reporting in local time zones Global synthetic financing capabilities New stock borrow loan platform Hiring experienced talent Platform extension well-received by existing clients Strong pipeline 2011 Initiatives: International – Prime Brokerage and Global Corporate Bank 10 |
![]() 2011 Initiatives: Commodities – focus on execution Principal locations Solutions Capabilities Research Financial Physical Oil Power & Gas Environmental Markets Metals Agricultural Investor products 600 employees 10+ main office locations 100+ warehouses in 11 locations Over 2,000 active clients including corporates, investors, and governments Diversification benefits with Fixed Income and Equities businesses Innovative risk management Commodity linked financing Asset optimization Storage and transportation Product offtake and supply arrangements Financial and physical 1 Includes oil storage, power & gas assets, metals warehouses, bullion vaults and vessels Main Office Locations Main Physical Assets¹ 11 |
![]() 2011 Initiatives: Commodities – focus on execution The breadth and depth of our financial and physical capabilities is unparalleled Full Requirements Load Serving for Electric Cooperatives Crude Supply Intermediation for Refineries Jet Fuel Hedging for Global Airlines Market making Financing Commodities-linked financing Risk management Research Product off-take and supply arrangements Commodity sourcing, storage and transportation Asset optimization (restructuring, rebalancing, and monetizing) Client examples 12 |
![]() 2011 Initiatives: Technology – Strategic Re-engineering Program (SRP) 2009 2010 2011 2012 2013 Leadership and monetization Innovation and time to market Consolidation and re-engineering Creativity Single client view Complexity handled easily Capacity Efficiency Control Financial Cost savings Revenue growth Comprehensive overhaul of platforms and client interface 13 |
![]() Risk Management: Well-established, disciplined processes Conflicts office Reputational Risk committee Client activity 10,000 potential conflicts reviewed 1,200 commitments examined 700+ lending transactions approved Risk committee Balance Sheet committee Commitments committee 14 |
![]() Derivative receivables, net (12/31/10; $ in billions) Risk Management: Prudent counterparty credit risk management 152 80 64 (16) (72) 266 143 Derivative receivables, gross of collateral Less cash collateral Derivative receivables, net of cash collateral Less other less liquid collateral Derivative receivables, net of all collateral Note: Derivatives, gross of collateral and net of collateral for 2009 was $146B and $65B, respectively Risk Group 2010 Investment grade 74% Sub-investment grade 26% at 12/31/08 Maturity (years) 2010 Less than 1 year 18% Between 1 and 5 years 38% Greater than 5 years 44% 79 88 Gross derivatives notional outstanding ($T) at 12/31/08 at 12/31/10 at 12/31/08 Other 83% Top 10 17% $16B ~6,000 clients 15 |
![]() Risk Management: IB municipal exposure 2010 US State / municipal exposure IB data excludes: State and Municipal securities inventory, Not-for-Profit traditional credit products ($6.4B) and derivatives ($1.8B) Derivatives: $3B ~350 clients Primarily pay-fixed swaps hedging variable-rate debt Traditional Credit Products: $19B ~130 clients Primarily liquidity back-stops, Letters of Credit and term loans AAA to AA- 78% A+ to A- 14% BBB+ to BBB- 7% BB+ and below 1% AAA to AA- 45% A+ to A- 39% BBB+ to BBB- 8% BB+ and below 7% 16 |
![]() Risk Management: Basel 3 Tier 1 Common Ratio already at 7.2% $462 $332 $43 $100 $390 $160 $550 $490 $289 Basel 1 4Q08 Basel 1 4Q10 Basel 2 impact Basel 2 4Q10 Basel 2.5 impact Basel 2.5 4Q10 Basel 3 impact Basel 3 4Q10 Basel 3 4Q11 Allocated equity ($B) Tier 1 common ratio 40 11.8% 40 13.0% 40 7.2% 40 8.0% IB Tier 1 common ratio walk forward ($ in billions) Risk Weighted Assets (RWA) Basel 1 Basel 2 Basel 2.5 40 9.2% Basel 3 17 |
![]() Regulation: Continue to serve clients Update Strong governance programs already in place: 350 people, 75+ projects Additional 300 rules to be issued/analyzed Clearing and Swap Execution Facilities (SEFs): Mandating clearing of most derivatives with U.S. nexus Meaningful portion of volume; less significant revenue impact Maintain market leadership, comply before deadlines Unresolved: margin, capital, non-U.S. Non-Bank Subsidiary (NBS) swap “push out”: Portions of below inv. grade CDS, equity and commodities derivatives affected May “push out” additional activities to support client requests No significant revenue and capital changes expected 18 |
![]() JPM IB: Achieving potential 19 |