UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): November 6, 2008
JPMORGAN CHASE & CO.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation)
| 1-5805 | 13-2624428 | |
| (Commission File Number) | (IRS Employer Identification No.) | |
| 270 Park Avenue, New York, NY |
10017 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
Registrant’s telephone number, including area code:
(212) 270-6000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01 | Regulation FD Disclosure |
On October 31, 2008, JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) presented information regarding the Firm’s Retail Financial Services business at the 2008 Bancanalysts Association of Boston Conference. The associated slide presentation is included as Exhibit 99.1 hereto.
The attached exhibit is being furnished pursuant to Item 7.01, and the information contained therein shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities under that Section. Furthermore, the information contained in the exhibit shall not be deemed to be incorporated by reference into the filings of the Firm under the Securities Act of 1933.
| Item 9.01 | Financial Statements and Exhibits |
(c) Exhibits
| Exhibit Number |
Description of Exhibit | |
| 99.1 | JPMorgan Chase & Co. Slide Presentation; Retail Financial Services | |
The attached exhibit 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 Current Report on Form 8-K dated September 26, 2008, its Quarterly Reports on Form 10-Q for the quarters ended June 30, 2008, and March 31, 2008, and its Annual Report on Form 10-K for the year ended December 31, 2007, each of which has been filed with the Securities and Exchange Commission and is available on JPMorgan Chase’s website (www.jpmchase.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.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| JPMORGAN CHASE & CO. (Registrant) | ||
| By: | /s/ Anthony J. Horan | |
| Anthony J. Horan Corporate Secretary | ||
Dated: November 6, 2008
3
EXHIBIT INDEX
| Exhibit Number |
Description of Exhibit | |
| 99.1 | JPMorgan Chase & Co. Slide Presentation; Retail Financial Services | |
4
 N
O V E M B E R 6 , 2 0 0 8 2 0 0 8 B A N C A N A L Y S T S A S S O C I A T I O N O F B O S T O N C O N F E R E N C E Charlie Scharf Chief Executive Officer, Retail Financial Services Exhibit 99.1 |
 Agenda Page Washington Mutual update Branch banking update Home lending credit and performance RFS financial results 1 1 3 14 22 The figures reflected in this presentation refer to heritage- JPMorgan Chase figures only, except where specifically noted as being pro forma combined for the Washington Mutual transaction
|
 YTD
YTD 3Q07 3Q08 $O/(U) Revenue $12,664 $14,592 $1,928 Credit Costs 1,559 5,502 3,943 Expense 7,360 8,012 652 Net Income $2,283 $626 ($1,657) Retail Banking $1,684 $1,942 $258 Loan Portfolio/Other $246 ($1,803) ($2,049) Mortgage $107 $251 $144 Auto Finance $246 $236 ($10) Revenue growth of 15% driven by: Regional Banking up 10% Mortgage Production up 37% Credit costs increased due to home equity and prime and subprime mortgage Expense growth reflects: Increased mortgage production and servicing Investment in retail distribution network YTD 3Q07 YTD 3Q08 $O/(U) Net Charge-offs $805 $2,926 $2,121 Increase in Allowance 754 2,576 1,822 Total Provision $1,559 $5,502 $3,943 Financial results ($mm) Credit costs ($mm) Comments Retail Financial Services results 2 |
 Agenda Page Washington Mutual update Branch banking update Home lending credit and performance RFS financial results 3 1 3 14 22 |
 Credit
performance 3Q07 4Q07 1Q08 2Q08 3Q08 Home Lending Portfolio Average Outstandings ($B) $134.3 $144.5 $153.0 $156.4 $155.5 Net Charge-offs ($mm) $199 $336 $646 $807 $1,113 Net Charge-off Rate 0.59% 0.92% 1.70% 2.07% 2.85% Allowance for Loan Losses ($mm) $1,304 $1,833 $3,619 $4,202 $4,896 Key credit statistics 1 Excludes loans held-for-sale 4 1 |
 Home
Lending - Significant credit actions taken * For Prime 1 Lien Products LTV>80% covered by MI and will be
underwritten by the MI Companies Significant credit policy actions Exited wholesale broker Eliminated Stated Docs Maximum CLTV range of 50-80% Exited Investor and Second Homes and Florida Condo Eliminated Tier 4 (~<670 FICO) Home Equity Exited wholesale broker Eliminated Stated/Reduced Docs Maximum CLTV of 55-85%*, implemented Declining Market Policy Exited Alt-A and Secure Flex Interest Only Affordability Product Exited Investor and Second Homes and Florida Condo Retail-tighten cash out limits from $500K to $250K Prime Mortgage – Jumbo Non- Agency Full Documentation unless Streamlined Rate & Term Refinance Tighter underwriting standards for LTV >80% * Exited Florida Wholesale Investor, Second Homes, Condo and 2-4 Units Prime Mortgage – Agency Loans Raised FICO score cut off to 580 Seller funded down payment assistance program eliminated Prime Mortgage – FHA/VA Loans Exited Subprime Mortgage Eliminated 10K Brokers & 300 Correspondents Other Owner-occupied Retail channel Full Docs Max CLTV = 80% (50% in some) FICO = 670 Owner-occupied Primarily retail Full Docs Max CLTV = 85% FICO = 660 Low DTI Tighter than Agency standards Tighter than FHA/VA policies None Reduced Continued business 5 Portfolio st |
 Home
Lending production by product ($B) and YoY % change Home Lending production
Overall Chase production has declined 17% vs. estimated market decline of
56% from 1Q07 to 3Q08 JPM increased 3Q08 market share to 13.6% and is
the #3 originator Conventional conforming and FHA production have increased to
90% of volume, while other products have decreased dramatically or been eliminated Note: Includes Private Banking volume which is included in ranking disclosures 0 10 20 30 40 50 Conventional Conforming FHA/VA Prime Jumbo Alt A Subprime Home Equity 3Q07 4Q07 1Q08 2Q08 3Q08 (77%) NM (96%) (72%) 255% 0% 1 Source: Inside Mortgage Finance as of October 31, 2008 6 1 1 |
 JPM
30-day delinquency trend Comments on home equity portfolio Home Equity Note: CLTV = Combined-Loan-to-Value. This metric represents how much
equity the borrower has in the property Key statistics 1.00% 1.50% 2.00% 2.50% 3.00% Sep- 05 Dec- 05 Mar- 06 Jun- 06 Sep- 06 Dec- 06 Mar- 07 Jun- 07 Sep- 07 Dec- 07 Mar- 08 Jun- 08 Sep- 08 3Q08 2Q08 3Q07 EOP owned portfolio ($B) $94.6 $95.1 $93.0 Net charge-offs ($mm) $663 $511 $150 Net charge-off rate 2.78% 2.16% 0.65% Nonperforming loans ($mm) $1,142 $1,008 $556 Significant underwriting changes made over the past year include elimination of stated income loans and state/MSA based reductions in maximum CLTVs based on expected housing price trends. Maximum CLTVs now range from 50% to 80% New originations down significantly in 3Q08 High CLTVs continue to perform poorly, exacerbated by housing price declines in key geographies
Continued deterioration — quarterly losses could be as high as $725-$800mm over the next several quarters (net charge-offs of 3.25% to 3.50%) 7 |
 Subprime
Mortgage JPM 30-day delinquency trend Comments on subprime mortgage portfolio 1 Excludes mortgage loans held in the Community Development loan portfolio Key statistics 0% 5% 10% 15% 20% 25% 30% Sep- 05 Dec- 05 Mar- 06 Jun- 06 Sep- 06 Dec- 06 Mar- 07 Jun- 07 Sep- 07 Dec- 07 Mar- 08 Jun- 08 Sep- 08 3Q08 2Q08 3Q07 EOP owned portfolio ($B) $13.4 $14.8 $12.1 Net charge-offs ($mm) $273 $192 $40 Net charge-off rate 7.65% 4.98% 1.62% Nonperforming loans ($mm) $2,384 $1,715 $790 Portfolio experiencing credit deterioration as a result of risk layering and housing price
declines Eliminated new production and portfolio is in run-off Continued deterioration — quarterly losses could be as high as $375-$425mm in early 2009 8 1 |
 3Q08 2Q08 3Q07 EOP balances in Corporate ($B) $42.0 $42.6 $32.8 EOP balances in RFS ($B) $4.9 $4.6 $2.8 Total EOP balances ($B) $46.9 $47.2 $35.6 Corporate net charge-offs ($mm) $130 $84 $4 RFS net charge-offs ($mm) $47 $20 $5 Total net charge-offs ($mm) $177 $104 $9 Net charge-off rate (%) 1.51% 0.91% 0.11% Nonperforming loans ($mm) $1,496 $1,232 $282 Comments on prime mortgage portfolio Note: CLTV = Combined-Loan-to-Value. This metric represents how much
equity the borrower has in the property Key statistics JPM 30-day delinquency trend 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% Sep- 05 Dec- 05 Mar- 06 Jun- 06 Sep- 06 Dec- 06 Mar- 07 Jun- 07 Sep- 07 Dec- 07 Mar- 08 Jun- 08 Sep- 08 CA/ FL exhibit the highest charge-off rates and account for 80% of 3Q08 losses while
only 37% of the outstanding portfolio The loss contribution is greatest from the 2006 and 2007 vintages Recent underwriting changes for non-conforming loans include: Eliminated stated income Reduced allowable CLTVs (all markets); set even tighter CLTV limits in markets with declining HPAs Exited broker business Tightened underwriting standards even further for Florida Quarterly losses could be as high as $300mm in early 2009 (net charge-offs of 2.25% to
2.50%) 1 Includes Construction Loans and Loans eligible for repurchase as well as loans repurchased from GNMA pools that are insured by US government agencies Prime Mortgage 9 1 |
  Impact of
housing 30+ Day Delinquency Rate NCO Rate Peak to Current HPA Sept ‘07 Sept ‘08 Sept ‘07 Sept ‘08 % YTD Losses Prime AZ, CA, FL (33%) 2.0% 8.1% 0.1% 3.6% 81% All Other (6%) 1.4% 2.7% 0.0% 0.5% 19% Home Equity AZ, CA, FL (33%) 1.6% 3.8% 1.3% 7.5% 62% All Other (6%) 1.5% 2.0% 0.6% 1.5% 38% HPA and credit statistics 10 |
  Emerging
impact of unemployment 30+ Day Delinquency Rate Sept ’08 Unemployment Rate Sept ’07 Sept ’08 % Sept ’08 Balances % YTD Losses Prime AZ, CA, FL 7.2% 2.0% 8.1% 40% 81% IN, MI, OH 7.5% 2.4% 3.3% 4% 3% All Other 5.9% 1.4% 2.6% 56% 16% Home Equity AZ, CA, FL 7.2% 1.6% 3.8% 27% 62% IN, MI, OH 7.5% 2.7% 3.2% 12% 8% All Other 5.9% 1.3% 1.9% 61% 30% Unemployment and credit statistics 11 |
 Foreclosure prevention efforts Foreclosure Prevention Efforts¹ Number of phone calls 125.5mm “Doors knocked” 205K Borrowers reached 1 6.1mm Total foreclosures prevented 2 250K Foreclosure prevention – total owned and securitized portfolio 1 3Q08 YTD foreclosure prevention efforts and borrowers reached 2 Total foreclosures prevented since early 2007 12 |
 New
actions to help families stay in their homes Systematically review the entire
mortgage portfolio to determine proactively which homeowners are most likely to require help – and try to provide it before they are unable to make payments Proactively reach out to homeowners to offer pre-qualified modifications Establish 24 new regional counseling centers to provide face-to-face help
Add 300 more loan counselors so that delinquent homeowners can work with the same
counselor throughout the process. Will add more counselors as needed
Create an independent process within Chase to review each mortgage before it is sent
into foreclosure – to validate each borrower was offered appropriate modifications Will not add any more Chase owned loans into the foreclosure process while implementing enhancements Disclose and explain in plain and simple terms the refinancing or modification alternatives for each kind of loan, including using in-language communications
Expand the range of alternatives offered to modify pay-option ARMs Offer discounts on or donate 500 homes to community groups or government programs Use more flexible eligibility criteria and modification terms Chase Foreclosure Prevention Program 13 |
 Agenda Page Washington Mutual update Branch banking update Home lending credit and performance RFS financial results 14 1 3 14 22 |
 3Q07 4Q07 1Q08 2Q08 3Q08 QoQ YoY Retail Banking (Consumer and Business) $591 $561 $545 $674 $723 7% 22% Loan Portfolio/Other 20 (190) (978) (320) (505) (58%) NM Total $611 $371 ($433) $354 $218 (38%) (64%) Net Income ($mm) 3Q08 Regional Banking key statistics Branch Banking profitability and growth drivers Deposits of $211.5 billion as of September 30, 2008, up from $206.7 billion as of September
30, 2007 11.7 million checking accounts, up 1.1 million or 10% from 3Q07 10,201 personal bankers, up 698 or 7% from 3Q07 3,179 branches, up from 3,096 in 3Q07 9,308 ATMs, up 365 or 4% from 3Q07 15 |
 Branch
Banking Priorities Managing margin through the cycle Continue to grow branch presence Growth in salesforce Growth in production and sales Washington Mutual integration 16 |
 ($mm) 3Q07 Margin $1,565 Deposits Account Growth $93 Avg. Account Balance (58) Migration / Spreads 155 Subtotal – Deposits $190 Lending/Other $1 Total Variance $191 3Q08 Margin $1,756 Retail Banking: managing through the cycle 2 Balance Sheet mix and margin Mix has remained fairly consistent 3Q07 thru 3Q08 Product spreads have increased through the cycle as the Fed has reduced rates Objective to maximize Net Interest Margin through disciplined pricing and new product introduction Highlights 3.06% 2.67% 2.64% 2.88% 2.75% 2.73% 0 50 100 150 200 250 300 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% Checking Savings Time Loan Balances FF Avg. 5.25% 5.18%
4.53% 3.20% 2.08% 2.00% 17 |
 2003 2004 2005 2006 2007 Thru Sep 2008 Total Metro NY - 13 51 22 28 11 125 Chicago 20 54 25 15 21 7 142 Arizona 7 10 19 11 15 9 71 Texas 17 30 26 22 35 15 145 Michigan 2 3 10 35 10 6 66 Colorado 5 2 6 12 9 4 38 Other 8 12 9 8 9 4 50 Total 59 124 146 125 127 56 637 Retail Banking new builds New branches 2008 Estimate of 100 – 125 Focused on expansion in major footprint markets Highlights 18 |
 $9 $11 $14 $14 3Q05 YTD 3Q06 YTD 3Q07 YTD 3Q08 YTD 486 889 1,068 1,158 3Q05 YTD 3Q06 YTD 3Q07 YTD 3Q08 YTD $5 $6 $8 $9 3Q05 YTD 3Q06 YTD 3Q07 YTD 3Q08 YTD Credit card sales up 6% Investment sales up 1% Credit Cards (# units in 000s) Highlights (3Q08 vs. 3Q07) Investment Sales ($B) Mortgage Sales ($B) Deepening growth in branch cross-sell 19 |
 Jan 2006 Jan 2007 Aug 2008 Total Households 8,829,843 9,232,883 10,631,487 Checking Households 81% 82% 85% with Credit Card 48% 53% 54% with Online Banking 42% 54% 65% with Online Billpay 14% 25% 34% Developing and deepening customer relationships Note: Households include only branch-based households (no credit card only or
out-of-footprint lending) Total core retail households Relationship economics The value of a product relationship is significantly greater than the value of
stand- alone products The relationship value is driven by improved retention and greater cross-sell 20 |
 Chase
Mobile On-demand, real-time account information Industry-first national launch of account access by texting in U.S. Rapid Cash Free funds transfer to Mexico for Chase checking customers Deposit-Friendly ATMs $290mm investment in ATM deposit automation to allow 24/7 deposit access Expect to have 45% of full function ATMs to be web- enabled by end of 2008 Debit Rewards Leisure with United & Continental Chase Picks Up the Tab Access Checking Checking with safeguards for consumers who don’t qualify for other checking products ATM Offers Instant checking offers on receipts for non-checking customers & prospects Debit upgrade offers Pre-approved credit cards Innovation Innovate to serve customers 21 SM SM |
 Agenda Page Washington Mutual update Branch banking update Home lending credit and performance RFS financial results 22 1 3 14 22 |
 Key terms
of acquisition of Washington Mutual’s banks from FDIC acting as receiver
Transaction: JPMorgan Chase acquired: Substantially all of the
assets of Washington Mutual’s banks All of the deposits and certain liabilities of Washington Mutual’s banks Transaction did not include: Assets and liabilities of
Washington Mutual Inc. (Holding Company) Unsecured senior debt,
subordinated debt and preferred of Washington Mutual’s
banks Consideration: $1.9 billion cash paid to FDIC 23 |
 Strategic Fit Greatly enhances retail banking platform in attractive markets Combined deposits of $911 billion and 5,410 branches at close¹ Expanding into attractive new markets (CA + FL)
Increases market share in existing largest fast-growing markets (NY, TX, IL, AZ,
CO, UT) Financially Compelling Accretive immediately. Net income impact of approximately $0.50 per share in 2009, largely
in RFS – pro rata amount expected to impact 4Q08 results Asset write-downs reduce risk to volatility in future earnings Allows significant margin for error Opportunity to grow revenue and realize significant cost savings Ability to bring expanded Chase products and services to WaMu branches Drive efficiencies in branch network and back office JPMorgan Chase maintains strong capital and liquidity positions Retail deposits add to stable funding base Ability to execute Proven capabilities with success in Bank One/Chase and Bank of New York transactions
Little overlap with Bear Stearns integration WaMu provides unique opportunity to expand retail banking franchise and generate attractive returns for JPMorgan Chase shareholders 1 Source: SNL Financial; branch data as of September 18, 2008; deposit data as of June 30,
2008 24 |
 Leader in
retail banking and deposit gathering Branches Deposits ($B) Source: 3Q08 Press Releases. JPMorgan Chase branch count from 9/30/08 reporting. Pro forma Wells Fargo branches from the 10/3/08 Wells Fargo Investor Presentation Note: Branch count represents Retail branches only, excluding PCS Rank Institution Branches (#) 1 Pro forma Wells Fargo 6,675 2 Bank of America 6,139 3 JPMorgan Chase 5,423 4 Pro forma PNC 2,576 5 U.S. Bancorp 2,556 Rank Institution Deposits ($B) 1 JPMorgan Chase $970 2 Bank of America 874 3 Citi 780 4 Pro forma Wells Fargo 772 5 Pro forma PNC 181 25 |
 Creates
broader branch network Source: 9/30/08 reporting Note: Branch count represents Retail branches only, excluding PCS Branch map Total JPMorgan Chase–WaMu combined branches — 5,423 Chase branches — 3,179 WaMu branches — 2,244 Branch overlap New markets 26 |
 Adds
branch presence in new markets # of branches Source: 9/30/08 reporting Note: Branch count represents Retail branches only, excluding PCS State Combined JPMorgan Chase Washington Mutual New York 873 629 244 Texas 732 474 258 California 709 - 709 Illinois 461 344 117 Arizona 307 242 65 Michigan 300 300 - Ohio 282 282 - Florida 270 8 262 New Jersey 252 165 87 Indiana 193 193 - Washington 189 - 189 Louisiana 160 160 - Colorado 131 91 40 Oregon 105 - 105 Wisconsin 83 83 - Other 376 208 168 Total 5,423 3,179 2,244 27 |
  $68.6 $29.3 $22.4 $14.4 $13.8 $12.4 $7.0 $16.5 $77.3 $9.7 $12.1 $12.4 $0.5 $3.4 $1.5 $1.3 New York California Texas Illinois Arizona Michigan Florida Washington Ohio New Jersey JPMorgan Chase Washington Mutual Adjusted deposits in 10 key states ($B) Source: SNL Financial Note: Deposit data as of June 30, 2008; excludes deposits greater than $500mm in a single
branch ¹ 2008-2013 projected demographic data Combined retail franchise has leading market share in key states 1 3 2 1 2 2 5 2 5 6 19.7% 11.2% 11.4% 8.8% 21.1% 9.1% 3.7% 11.8% 6.9% 5.2% 1.6% 6.8% 11.3% 4.0% 17.5% 2.0% 11.6% 8.0% 1.5% 2.9% Pop. growth (%)¹ Market share Rank $85.1 $77.3 $39.0 $24.0 $15.6 $13.8 $12.6 $12.4 $12.4 $10.4 28 |
 Source: SNL Financial; FDIC data as of June 30, 2008, with $1B branch exclusion Deposit Growth and CAGR: Claritas 2007, based on CBSA Deposits Top 3 ranking in the country’s largest MSAs Select MSAs by deposits ($mm) MSA Deposits in market Combined Market Share Combined Rank Deposit growth ‘07-‘12 CAGR ‘07-‘12 (%) New York, NY $441,222 19.7% 1 $36,209 2.1% Los Angeles, CA $249,907 13.6% 3 $28,970 2.9% Chicago, IL $191,064 12.3% 1 $19,377 2.6% Miami, FL $117,696 7.7% 3 $14,046 3.2% San Francisco, CA $103,562 11.4% 3 $11,803 2.4% Dallas-Fort Worth, TX $78,697 17.0% 1 $15,215 4.1% Houston, TX $74,599 20.3% 1 $13,889 3.9% Detroit, MI $60,220 14.7% 3 $5,685 2.1% Seattle, WA $51,112 16.0% 2 $7,442 3.2% San Diego, CA $44,868 16.7% 3 $7,076 3.5% Phoenix, AZ $41,783 23.2% 2 $11,845 4.9% San Jose, CA $42,917 12.0% 3 $4,263 2.1% 29 |
 Footprint
covers 46% of expected population growth — up from 18% Source: Branch data from 9/30/08 reporting. Claritas demographic data and projections Note: Demographic data and projections as of 2007 Combined JPMorgan Chase Washington Mutual Network Comparisons U.S. Households 42.3% 25.0% 30.3% Hispanic Households 67.9% 33.9% 58.3% Average Income $72,332 $71,595 $74,747 Businesses 45.6% 26.5% 33.0% Total # of Branches 5,423 3,179 2,244 Population Growth (2007-12) U.S. Population (millions) 129.9 75.0 94.1 5 Year Growth 4.9% 3.3% 5.6% % of Population Growth 46.2% 18.0% 37.9% 5 Year Hispanic Growth 19.3% 18.3% 18.8% % of Hispanic Growth 63.4% 29.9% 52.8% 30 |
 Transaction further strengthens the entire franchise 1 Source: IMF 2 Source: Company estimate. Includes JPM, WM, and EMC Note: Data as of 6/30/2008, except for Credit cards, which is as 31 Rank Size and metrics Retail Banking #2 14,300 ATMs 24.5mm checking accounts Credit cards #1 $187B outstanding Mortgage #3 $ Commercial Banking $113B
loans $106B
liabilities 1 2 1,500B total mortgage loans serviced of 9/30/2008 |
 Integration plan: invest to improve franchise, realize efficiencies and reduce risk Integrate branch system Close fewer than 10% of combined branches Optimize staffing in the branches Convert Washington Mutual branches to Chase’s platform Bring best sales and business practices to each Leverage Washington Mutual branch footprint for growth Introduce enhanced product offerings Build out Business Banking (for small business clients) Build out Middle Market Benefits Private Bank and Private Client Services Consumer lending Run-off existing home lending and sub-prime credit card portfolios Exit all non-bank branch retail lending Future originations to Chase standards Integrate mortgage servicing Integration plan generates top and bottom line growth Current View the Same Cautious 32 |
 Revenue
growth: credit card and investment sales Branch network provides opportunity to
cross-sell more products, particularly credit card and investment
sales: Credit card — In 2007, Chase produced 2x the per branch credit card production of WaMu — Achieving this productivity from WaMu branches would generate an additional 500,000 credit cards sold annually through the branches Investment sales — Chase’s % of retail bank households that have an investment product is 2x greater than WaMu — Chase’s Financial Advisors produce on average 60% more investment sales per year
— Achieving Chase investment sales productivity and increasing number of Financial Advisors
could lead to an additional $8-10B in sales annually through the
branches WaMu Chase Credit card sales per branch per month - 2007 2x higher WaMu Chase Investment sales per branch per month - 2007 3x higher 33 |
 2005
BNY 1H08 2005 BNY 1H08 Note: 1H07 and 1H08 are averages of 1Q and 2Q ¹ Based on average of comparable deposit size Chase branches in NY, NJ and CT Chase has a solid track record in enhancing branch productivity 1.0x 1.0x 1.4x higher 20.0x higher Bank of New York branches - credit cards¹ Bank of New York branches - investment sales¹ Chase successfully increased branch productivity for credit card and investment sales after the Bank of New York branch acquisition 34 |
 Branches
in new markets create opportunity for Business and Commercial Banking Business Banking Significant opportunity to expand Business Banking as Washington Mutual had limited market penetration Chase has 5x Washington Mutual’s average Business Banking checking balances Chase has 40% more fee income per customer Plans include expanded product offering and build out of business bankers/relationship
managers Commercial Banking Retail branch presence provides the basis for a strong middle market franchise Washington Mutual’s retail presence in select attractive markets combined with
Chase’s proven leadership provides significant opportunity to enhance
Chase’s Middle Market business Over 5,000 Middle Market companies for Chase
to pursue as customers in Los Angeles, San Diego, San Francisco, Seattle, and
Portland Incremental capabilities from Washington Mutual’s multi-family
lending business, a niche product offering with a good risk profile Ability to offer Treasury Services products to new customer base 35 |
 Integration update — on track People Senior management decisions within first 5 days Management teams announced across all staff and businesses On track for full people decisions by December 1 Branches Conversion timeline to be complete by December 1 All major systems converted by end of 2009 – if not sooner Business Deposit outflow reversed in first 5 days Foreclosure prevention effort announced 36 st st |
 Allowance
to loan losses coverage ratios Rough estimates—illustrative example of WaMu
impact on coverage ratios JPMorgan Chase (excl. WaMu) Washington Mutual JPMorgan Chase Consolidated As of 3Q08 As of 3Q08 As of 3Q08 Loan Balances¹ LLR LLR/ Loans Loan Balances² LLR LLR/ Loans Loan Balances LLR LLR/ Loans Home Lending: Home Equity $94,587 $22,217 $556 2.50% $116,804 Prime (incl. Corporate) 46,801 23,442 181 0.77% 70,243 Subprime 13,437 4,725 216 4.57% 18,162 Option ARMs — 18,989 390 2.05% 18,989 Total Home Lending $154,825 $4,896 3.16% $69,373 $1,343 1.94% $224,198 $6,239 2.78% (Incl. reserves; excl. WaMu marked loans) ($mm) 1 Loan balances exclude held-for-sale loans 2 These are net balances which are approximate as of 10/15/08 and subject to change Note: Consumer businesses reflect EOP balances Estimated WaMu marked portfolio (net) $78² Fair value marks $30 % of total marked loans 27.7% WaMu home lending marked loans ($B) Loans excluded from LLR/Loans 37 |
 Anticipated cost savings and merger costs Cost savings Projected cost savings of approximately $1.5 billion, or approximately 15%-20% of
Washington Mutual’s non-interest expense base, net of significant
investments in the business Majority of branch combinations to be completed by end of 2010 Merger costs Estimated initial transaction-related costs of approximately $1.5 billion
pre-tax Severance Technology and systems Real estate and facilities Additional merger costs of approximately $500 million (after-tax), with approximately $100 million (after-tax) of expense recognized in 4Q08 and the
remainder incurred through 2011 38 |
 Summary /
Outlook Washington Mutual integration underway A great strategic fit and a unique opportunity to expand retail banking franchise Cautious about economic environment and braced for increasing loan losses going forward Opportunity to gain share 39 |
 Forward-looking statements and additional information 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 current report on Form 8-K dated September 26, 2008, its Quarterly Reports
on Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008, and
its Annual Report on Form 10-K for the year ended December 31, 2007, each of
which has been filed with the Securities and Exchange Commission and 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. Additional information The figures reflected in this presentation refer to heritage-JPMorgan Chase figures
only, except where specifically noted as being pro forma combined for the
Washington Mutual transaction 40 |