JP MORGAN CHASE & CO.
Table of Contents

 
 

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): July 20, 2005

JPMORGAN CHASE & CO.

(Exact name of registrant as specified in its charter)
         
Delaware   1-5805   13-2624428
(State or Other Jurisdiction of
Incorporation)
  (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):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 

 


TABLE OF CONTENTS

Item 2.02. Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
SIGNATURE
EXHIBIT INDEX
EX-12.1: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EX-12.2: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
EX-99.1: EARNINGS RELEASE
EX-99.2: EARNINGS RELEASE FINANCIAL SUPPLEMENT


Table of Contents

Item 2.02. Results of Operations and Financial Condition

On July 20, 2005, JPMorgan Chase & Co. (“JPMorgan Chase”) reported 2005 second quarter net income of $1.0 billion, or $0.28 per share, compared to a net loss of ($0.5) billion, or ($0.27) per share, for the second quarter of 2004. A copy of the 2005 second quarter earnings release is attached hereto as Exhibit 99.1, and a copy of the earnings release financial supplement is attached hereto as Exhibit 99.2.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

     
Exhibit Number   Description of Exhibit
 
   
12.1
  JPMorgan Chase & Co. Computation of Ratio of Earnings to Fixed Charges
 
   
12.2
  JPMorgan Chase & Co. Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements
 
   
99.1
  JPMorgan Chase & Co. Earnings Release — Second Quarter 2005 Results
 
   
99.2
  JPMorgan Chase & Co. Earnings Release Financial Supplement — Second Quarter 2005

The earnings release 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 results to differ materially from those described in the forward-looking statements can be found in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, and in the 2004 Annual Report on Form 10-K for the year ended December 31, 2004, of JPMorgan Chase filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission’s Internet site (http://www.sec.gov).

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Table of Contents

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/ Joseph L. Sclafani      
 
 
      Joseph L. Sclafani    
 
 
           
 
 
      Executive Vice President and Controller
[Principal Accounting Officer]
   

Dated: July 20, 2005

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Table of Contents

EXHIBIT INDEX

     
Exhibit Number   Description of Exhibit
 
   
12.1
  JPMorgan Chase & Co. Computation of Ratio of Earnings to Fixed Charges
 
   
12.2
  JPMorgan Chase & Co. Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements
 
   
99.1
  JPMorgan Chase & Co. Earnings Release — Second Quarter 2005 Results
 
   
99.2
  JPMorgan Chase & Co. Earnings Release Financial Supplement — Second Quarter 2005

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EX-12.1:
 

EXHIBIT 12.1

JPMORGAN CHASE & CO.

Computation of Ratio of Earnings to Fixed Charges

         
Six Months Ended June 30, (in millions, except ratios)   2005  
 
       
Excluding Interest on Deposits
       
Income before income taxes
  $ 4,540  
 
     
 
       
Fixed charges:
       
Interest expense
    7,006  
One-third of rents, net of income from subleases (a)
    182  
 
     
Total fixed charges
    7,188  
 
     
 
       
Add: Equity in undistributed loss of affiliates
    71  
 
     
 
       
Earnings before taxes and fixed charges, excluding capitalized interest
  $ 11,799  
 
     
 
       
Fixed charges, as above
  $ 7,188  
 
     
 
       
Ratio of earnings to fixed charges
    1.64  
 
     
 
       
Including Interest on Deposits
       
Fixed charges, as above
  $ 7,188  
 
       
Add: Interest on deposits
    4,349  
 
     
 
       
Total fixed charges and interest on deposits
  $ 11,537  
 
     
 
       
Earnings before taxes and fixed charges, excluding capitalized interest, as above
  $ 11,799  
 
       
Add: Interest on deposits
    4,349  
 
     
 
       
Total earnings before taxes, fixed charges and interest on deposits
  $ 16,148  
 
     
 
       
Ratio of earnings to fixed charges
    1.40  
 
     
 
(a)  
The proportion deemed representative of the interest factor.

 

EX-12.2:
 

EXHIBIT 12.2

JPMORGAN CHASE & CO.

Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements

         
Six Months Ended June 30, (in millions, except ratios)   2005  
 
       
Excluding Interest on Deposits
       
Income before income taxes
  $ 4,540  
 
     
 
       
Fixed charges:
       
Interest expense
    7,006  
One-third of rents, net of income from subleases (a)
    182  
 
     
Total fixed charges
    7,188  
 
     
 
       
Add: Equity in undistributed loss of affiliates
    71  
 
     
 
       
Earnings before taxes and fixed charges, excluding capitalized interest
  $ 11,799  
 
     
 
       
Fixed charges, as above
  $ 7,188  
 
       
Preferred stock dividends (pre-tax)
    11  
 
     
 
       
Fixed charges including preferred stock dividends
  $ 7,199  
 
     
 
       
Ratio of earnings to fixed charges and preferred stock dividend requirements
    1.64  
 
     
 
       
Including Interest on Deposits
       
Fixed charges including preferred stock dividends, as above
  $ 7,199  
 
       
Add: Interest on deposits
    4,349  
 
     
 
       
Total fixed charges including preferred stock dividends and interest on deposits
  $ 11,548  
 
     
 
       
Earnings before taxes and fixed charges, excluding capitalized interest, as above
  $ 11,799  
 
       
Add: Interest on deposits
    4,349  
 
     
 
       
Total earnings before taxes, fixed charges and interest on deposits
  $ 16,148  
 
     
 
       
Ratio of earnings to fixed charges and preferred stock dividend requirements
    1.40  
 
     
 
(a)  
The proportion deemed representative of the interest factor.

 

EX-99.1:
 

     
JPMorgan Chase & Co.
270 Park Avenue, New York, NY 10017-2070
NYSE symbol: JPM
 
www.jpmorganchase.com
  (JPMorgan LOGO)
 
   
 

News release: IMMEDIATE RELEASE

JPMORGAN CHASE REPORTS 2005 SECOND-QUARTER NET INCOME OF $1.0 BILLION

     
 
   
REPORTED EARNINGS of $0.28 and OPERATING EARNINGS of $0.66(1)
     
 
   
INVESTMENT BANK – weak trading results; strong investment banking fees
     
 
   
RETAIL – strength in Consumer Banking and Home Equity businesses
     
 
   
CARD, TSS and AWM – produced double-or triple-digit earnings growth
     
 
   
Non-operating litigation reserve charge of $1.2 billion (after-tax)
     
 
   
Tier 1 ratio of 8.2% (est.)

New York, July 20, 2005 – JPMorgan Chase & Co. (NYSE: JPM) today reported 2005 second-quarter net income of $1.0 billion, or $0.28 per share, compared to a net loss of $0.5 billion, or $0.27 per share, for the second quarter of 2004. Current period results include a $1.9 billion (pre-tax) litigation reserve charge, or $0.33 per share, and $279 million (pre-tax) of merger charges, or $0.05 per share, reflecting the merger with Bank One Corporation completed on July 1, 2004. Excluding these charges, operating earnings would have been $2.3 billion, or $0.66 per share. Prior-year reported results included a $3.7 billion (pre-tax) litigation reserve charge, or $1.09 per share, and $90 million (pre-tax) of merger charges, or $0.03 per share, but do not include Bank One’s results. Excluding these charges, operating earnings would have been $1.8 billion, or $0.85 per share. Refer to the “Merger and other financial information” section of this press release for additional information concerning the merger.

William B. Harrison, Jr., Chairman and Chief Executive Officer, commented, “As we announced last month, trading performance for the second quarter was very weak. Our other major businesses, however, reported good results, with Card Services, Treasury & Securities Services and Asset & Wealth Management posting double-or triple-digit earnings growth, and Investment Banking fees remaining strong.” Commenting on the Enron litigation settlement and increased legal reserves, Mr. Harrison said, “Our resolution of the Enron class-action lawsuit substantially reduces our risk related to this matter. Given the current legal environment, litigation reserves were increased by $1.9 billion. We believe that with this action the firm’s litigation reserves are adequate to meet its remaining litigation exposure.”

James Dimon, President and Chief Operating Officer, said, “In our first full year as a combined firm, we have made significant progress in all of our businesses — both in terms of integrating the Bank One and JPMorgan Chase franchises and in executing our growth strategy. In the coming quarter we will execute the Texas market conversion and complete the platform conversion in Card Services. These conversions are among many projects underway to make our firm more efficient and drive improved profitability. During the second quarter, we launched a national advertising campaign that introduced a modernized Chase brand, and we began converting hundreds of Bank One branches and millions of Bank One credit cards to the Chase name.”

             
 
 
           
Investor Contact:
  Julia Bates   Media Contact:   Joe Evangelisti
 
  (212) 270-7318       (212) 270-7438

 


 

JPMorgan Chase & Co.
News Release

In the discussion of the business segments below, information is presented on an operating basis. Operating basis excludes the after-tax impact of non-operating litigation charges taken in the first and second quarters of 2005 and the second quarter of 2004, merger costs and costs related to the conformance of accounting policies. In addition, for the Investment Bank, operating basis includes in trading revenue net interest income related to trading activities; and for the case of Card Services, operating basis excludes the impact of credit card securitizations. Further, in the discussion below revenues are shown on a tax equivalent basis. For more information about operating basis, as well as other non-GAAP financial measures used by management, see Note 1 below.

The following discussion compares the second quarter of 2005 to the second quarter of 2004. Unless otherwise indicated, historical results for the 2004 second quarter are JPMorgan Chase (h-JPMC) on a standalone basis. The proforma combined lines of business information present the business segments of the company as if these segments had existed as of the earliest date indicated and reflect purchase accounting adjustments, reporting reclassifications and management accounting policy changes. For further information regarding the proforma combined financial information, including reconciliation to JPMorgan Chase GAAP financial information, see information furnished pursuant to Regulation FD by JPMorgan Chase on Form 8-K dated October 1, 2004, as amended on October 20, 2004, January 19, 2005, April 20, 2005 and July 20, 2005. In management’s view, the proforma combined financial results provide investors with information to enable them to better understand the underlying trends of the company and each of the lines of business. For a description of the firm’s business segments, see Note 2 below.

INVESTMENT BANK (IB)

                                                   
     
  Operating Results – IB               2Q04 h-JPMC       2Q04 Proforma    
  ($ millions)     2Q05       $ O/(U)     % O/(U)       $ O/(U)     % O/(U)    
                       
 
Net Revenues
    $ 2,750         ($189 )     (6 %)       ($647 )     (19 %)  
 
Provision for Credit Losses
      (343 )       (215 )     (168 )       (28 )     (9 )  
 
Noninterest Expenses
      2,178         122       6         3          
 
Operating Earnings
    $ 606         ($38 )     (6 %)       ($410 )     (40 %)  
                       

Discussion of Historical Results:
Operating earnings were $606 million, down $38 million, or 6%, from the prior year. The lower performance was due to decreased trading revenues, partially offset by the merger. Trading revenues for the quarter were $614 million, down $622 million, or 50%, from the prior year. The disappointing trading performance reflected a challenging market environment. This resulted in weak portfolio management results, lower proprietary trading revenues due to fewer market opportunities and reduced client flows. In addition, there were specific losses that affected equity trading results. Trading revenues were generally weaker in Europe than in the United States and Asia. Partially offsetting the weak trading results were strong investment banking fees and continued improvement in credit quality.

Total revenues of $2.8 billion were down $189 million, or 6%, compared to the prior year. Investment banking fees of $965 million remained strong, increasing $74 million, or 8%, compared to the prior year. Advisory revenues of $359 million were up 34% from the prior year and represent the highest quarter since 2000. Debt underwriting revenues of $502 million increased 25% from the prior year driven by higher levels of loan syndication fees, while equity underwriting fees of $104 million were down 53% reflecting reduced levels of market volumes. European investment banking fees remained particularly strong increasing by 33% from the prior year. Fixed Income Markets revenues of $1.4 billion were down $154 million, or 10% from the prior year. The decline was driven by weaker trading performance in credit and interest rate markets, reflecting weak portfolio management results within client-related market-making activities, as well as reduced proprietary trading results, partially offset by the merger. Equity Markets revenues of $72 million decreased $89 million, or 55%, versus the prior year. The decline was due to poor portfolio management trading results, primarily related to both losses from a few concentrated client-driven positions and a write-down in trade receivables in connection with a disputed claim with a creditworthy entity.

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JPMorgan Chase & Co.
News Release

The overall Investment Bank trading value-at-risk increased from $65 million to $102 million since the first quarter. This increase was driven by higher levels in fixed income and equity value-at-risk measures, which were partially offset by the benefit of diversification.

Credit Portfolio revenues of $295 million were down 6% compared to the prior year, reflecting lower trading revenues from hedging activity and lower net interest income from reduced loan balances and commitments, partially offset by the merger.

The provision for credit losses was a benefit of $343 million, compared to a benefit of $128 million in the prior year. The increased benefit was primarily attributable to a greater reduction in the allowance for credit losses, due to continued improvement in credit quality as a result of the change in the loan portfolio mix toward higher rated clients and net recoveries, as well as refinements in the data used to estimate the allowance for credit losses.

Expenses of $2.2 billion were up $122 million, or 6%, from the prior year due to the merger and increased compensation expense. The increase in compensation expense reflected the Cazenove joint venture, net investments in technology and operations staffing, and onboarding of previously externally contracted staff. Partially offsetting these increases was reduced performance-based incentive compensation.

Discussion of Proforma Combined Results:
Operating earnings were $606 million, down $410 million, or 40%, from the prior year and 54% from the prior quarter. The declines from both periods reflected significantly lower trading revenues. Trading revenues for the quarter were $614 million, down $714 million, or 54%, from the prior year and 72% from the prior quarter. The disappointing trading performance reflected a challenging market environment. This resulted in weak portfolio management results, lower proprietary trading revenues due to fewer market opportunities and reduced client flows. In addition, there were specific losses that affected equity trading. Trading results were generally weaker in Europe than in the United States and Asia. Partially offsetting the weak trading results were strong investment banking fees and continued improvement in credit quality.

Total revenues of $2.8 billion were down $647 million, or 19%, compared to the prior year. Investment banking fees of $965 million remained strong, increasing $28 million, or 3%, compared to the prior year. Advisory revenues of $359 million were up 33% from the prior year and represented the highest quarter since 2000. Debt underwriting revenues of $502 million increased 13% from the prior year driven by higher levels of loan syndication fees, while equity underwriting fees of $104 million were down 53% reflecting reduced levels of market volumes. European investment banking fees remained particularly strong increasing by 32% from the prior year. Fixed Income Markets revenues of $1.4 billion were down $397 million, or 22%, from the prior year. The decline was driven by weaker trading performance in credit and interest rate markets, reflecting weak portfolio management results within client-related market-making activities, as well as reduced proprietary trading results. Equity Markets revenues of $72 million decreased $122 million, or 63%, versus the prior year. The decline was due to poor portfolio management trading results, primarily related to both losses from a few concentrated client-driven positions and a write-down in trade receivables in connection with a disputed claim with a creditworthy entity.

The overall Investment Bank trading value-at-risk increased from $65 million to $102 million since the first quarter. This increase was driven by higher levels in fixed income and equity value-at-risk measures, which were partially offset by the benefit of diversification.

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JPMorgan Chase & Co.
News Release

Credit Portfolio revenues of $295 million were down 35% compared to the prior year, reflecting lower trading revenues from hedging activity and lower net interest income from reduced loan balances and commitments.

The provision for credit losses was a benefit of $343 million, compared to a benefit of $315 million in the prior year. The increased benefit was primarily attributable to a greater reduction in the allowance for credit losses, due to continued improvement in credit quality as a result of the change in the loan portfolio mix toward higher rated clients and net recoveries, as well as refinements in the data used to estimate the allowance for credit losses.

Expenses of $2.2 billion were essentially flat to last year as reduced performance-based incentive compensation expense was offset by increased staff costs from higher headcount levels. Headcount of 19,269 increased by 1,474 from the prior year, primarily due to the Cazenove joint venture, net investments in technology and operations staffing, and onboarding of previously externally contracted staff.

Other Highlights Include(3):

 
Return on equity was 12% for the quarter and 19% for the first half of 2005.
 
The Investment Bank continued to build its franchise by maintaining a top 3 ranking in global announced M&A and improving its global equity and equity-related market share to #4 from #6.
 
According to Dealogic, the Investment Bank ranked #1 globally in terms of IB fees earned from advisory and stock, bond and loan underwriting for the first half of 2005.
 
Average loans of $51.4 billion were up $3.9 billion from the prior quarter reflecting a 4% increase in Credit Portfolio loans and higher balances related to securitization and principal investment activities.
 
Allowance for loan losses to average loans was 2.90%; nonperforming assets were $946 million, down 44% from the prior year.
 
Announced agreement to acquire Neovest Holdings, Inc., a provider of high-performance equities trading technology and direct market access.

RETAIL FINANCIAL SERVICES (RFS)

                                                   
     
  Operating Results – RFS               2Q04 h- JPMC     2Q04 Proforma  
  ($ millions)     2Q05     $ O/(U)   % O/(U)     $ O/(U)   % O/(U)  
                       
 
Total Net Revenue
    $ 3,799       $ 1,964       107 %     $ (74 )     (2 )%  
 
Provision for Credit Losses
      94         16       21         (81 )     (46 )  
 
Noninterest Expense
      2,126         995       88         (144 )     (6 )  
 
Non-core Portfolio Operating Earnings(1)
                            (46 )     NM    
 
Operating Earnings
    $ 980       $ 584       147 %     $ 42       4 %  
                       
 
(1)  
Second quarter 2004 proforma results include operating earnings of $46 million ($74 million pre-tax) related to sales of heritage Bank One brokered home equity loans which were deemed non-core.

Discussion of Historical Results:
Operating earnings were $980 million, up $584 million from the prior year. The increase was largely due to the merger, but also reflected wider spreads on deposits, increased deposit balances, growth in retained consumer real estate loans and improved MSR risk management results. These benefits were partially offset by a reduction in revenue related to lower prime mortgage originations and the decision to retain subprime mortgage loans rather than securitize.

Net revenue increased to $3.8 billion, up $2.0 billion from the prior year. Net interest income of $2.6 billion increased $1.3 billion as a result of the merger, wider spreads on deposits, increased deposit balances, as well as growth in retained consumer real estate loans. These benefits were partially offset by

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JPMorgan Chase & Co.
News Release

the impact of lower first mortgage warehouse balances in the Home Finance business, lower production volumes in Auto & Education Finance, and the absence of loan portfolios sold in late 2004 and the first quarter of 2005. Noninterest revenue of $1.2 billion increased $617 million due to the merger and better MSR risk management results. These increases were offset partially by a drop in prime mortgage originations and the absence of subprime mortgage loan securitization gains.

The provision for credit losses totaled $94 million, up $16 million from last year. The increase was largely due to the merger, but also reflected higher provision expense related to the decision to retain subprime mortgage loans. These increases were partially offset by reductions in the allowance for loan losses due to lower net charge-offs and improved credit trends in most consumer lending portfolios.

Expenses rose to $2.1 billion, an increase of $1.0 billion from the prior year, primarily due to the merger. Results also included ongoing investments in retail banking distribution and sales. These costs were more than offset by expense savings in nearly all businesses.

Home Finance operating earnings were $413 million, up $92 million compared to the prior year. Operating earnings for the Prime Production & Servicing segment of $136 million were up $8 million. Results reflected improved MSR risk management results and lower expenses, offset by reduced production revenue given the drop in prime mortgage originations. Earnings for the Consumer Real Estate Lending segment of $277 million were up $84 million. Growth was largely due to the merger, but also reflected higher retained loan balances, merger-related expense savings and lower credit costs. These increases were partially offset by the absence of subprime loan securitization gains and the $4 billion manufactured home loan portfolio sold in late 2004.

Consumer & Small Business operating earnings totaled $437 million, up $435 million from the prior year largely driven by the merger. Results also benefited from wider spreads on deposits, increased balances, and cost savings initiatives. These benefits were partially offset by continued investment in the branch distribution network.

Auto & Education Finance operating earnings of $118 million were up $47 million from last year. Growth was primarily due to the merger. Results reflected lower production volumes due to the competitive nature of the operating environment, and the absence of the $2 billion recreational vehicle loan portfolio sold in early 2005.

Insurance operating earnings of $12 million were up $10 million from the prior year on net revenues of $149 million. The increase was primarily due to the merger.

Discussion of Proforma Combined Results:
Operating earnings of $980 million were up $42 million, or 4%, from the prior year. Prior year results included $46 million of operating earnings related to sales of heritage Bank One brokered home equity loans which were deemed non-core. Excluding this non-core income, operating earnings were up $88 million, or 10%, from the prior year. Performance reflected merger-related expense savings, wider spreads on deposit products, higher retained consumer real estate loan balances and improved MSR risk management results. These benefits were partially offset by a reduction in revenue due to lower prime mortgage originations and the decision to retain subprime mortgage loans rather than securitize.

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JPMorgan Chase & Co.
News Release

To illustrate the underlying business trends, the following description of RFS performance excludes the impact of the prior year’s non-core actions related to heritage Bank One brokered home equity loans, which added $46 million to operating earnings.

Net revenues of $3.8 billion were down $74 million, or 2%, from the prior year. Net interest income was down slightly at $2.6 billion, reflecting reduced mortgage warehouse balances, the absence of loan portfolios sold in late 2004 and the first quarter of 2005, and lower auto loan and lease balances. Favorable offsets were provided by wider spreads on deposit products and higher retained consumer real estate loans. Noninterest revenue of $1.2 billion was down $24 million, or 2%, from the prior year, driven by lower prime mortgage originations and the absence of subprime mortgage loan securitization gains. Improved MSR risk management results provided a partial offset.

The provision for credit losses totaled $94 million, down $81 million, or 46%, from the prior year. Results reflected lower net charge-offs, continued good credit quality trends across all business segments and the benefit of certain portfolios in run-off.

Expenses of $2.1 billion were down $144 million, or 6%, from the prior year, reflecting increased operating efficiencies in nearly all businesses, partially offset by ongoing investments in retail banking distribution and sales.

Home Finance operating earnings totaled $413 million, down $5 million, or 1%, from the prior year. Operating earnings for the Prime Production & Servicing segment totaled $136 million, down $7 million. Results reflected lower prime mortgage originations, partially offset by improved MSR risk management results. Earnings for the Consumer Real Estate Lending segment increased to $277 million, up $2 million, reflecting increased portfolio balances and lower provision for credit losses. These benefits were partially offset by the absence of subprime loan securitization gains and the $4 billion manufactured home loan portfolio that was sold in late 2004.

Other Highlights Include:

 
Mortgage loan originations of $30.9 billion were down 35% from the prior year and up 16% from the prior quarter.
 
Home equity loan originations of $15.8 billion were up 3% from the prior year and 33% from the prior quarter.
 
Mortgage loans serviced of $502 billion increased $26 billion, or 5%.
 
Average mortgage loans retained of $47.0 billion increased 18%; period-end mortgage loans were $47.4 billion.
 
Average home equity loans retained of $69.1 billion increased 11%; period-end home equity loans were $72.3 billion.
 
Nonperforming assets of $799 million declined $188 million, or 19%.
 
Net charge-off rate was 0.13%, down from 0.27%. The prior year net charge-off rate was 0.18% excluding charge-offs associated with the manufactured home portfolio.

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JPMorgan Chase & Co.
News Release

Consumer & Small Business operating earnings totaled $437 million, up $129 million from the prior year. Results reflected wider spreads on deposits, increased balances, and cost savings initiatives, partially offset by continued investment in the branch distribution network. Compared to the prior quarter, operating earnings decreased 8%, primarily due to the absence of the seasonal tax-refund anticipation lending business.

Other Highlights Include:

 
Checking accounts grew by 230,000 to 8.6 million during the quarter. Heritage Chase branches contributed significantly, adding nearly 66,000 accounts, compared to 19,000 accounts in the second quarter of 2004.
 
Average core deposits were $149 billion, up 1% from the prior year and flat to the prior quarter.
 
Average total deposits were $175 billion, up 1% from the prior year and prior quarter.
 
Branch sales of credit cards increased by 81% from the prior year and 16% from the prior quarter.
 
Overhead ratio decreased to 65% from 73% in the prior year, up from 62% in the first quarter, which benefited from inclusion of the tax-refund anticipation lending business.
 
Number of branches increased to 2,539, up 104 from the prior year and up 22 from the prior quarter.

Auto & Education Finance operating earnings were $118 million, down $26 million from the prior year. Performance reflected reduced loan and lease balances, and the absence of the $2 billion recreational vehicle loan portfolio sold last quarter. Expenses increased reflecting depreciation on owned automobiles subject to operating leases. Favorable credit trends provided a partial offset, with a reduction in the allowance for loan losses reported for the quarter. Overall results continue to reflect lower production volumes given the competitive nature of the operating environment.

Other Highlights Include:

 
Average loan receivables were $49.8 billion, down $4.1 billion, or 8%, from the prior year and down $3.5 billion, or 7%, from the prior quarter.
 
Average lease receivables of $6.6 billion declined $3.5 billion, or 35%, as planned.
 
The net charge-off rate dropped to 0.36% from 0.45%.

Insurance operating earnings totaled $12 million, down $10 million from the prior year, on net revenues of $149 million. The decline was primarily due to increased proprietary annuity sales commissions paid and investments in technology infrastructure.

Other Highlights Include:

 
Gross insurance-related revenues were $404 million, down $20 million, or 5%.
 
Proprietary annuity sales were $282 million, up from $74 million.
 
Term life premiums were $122 million, up 4%.

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JPMorgan Chase & Co.
News Release

CARD SERVICES (CS)

                                                   
     
  Operating Results – CS               2Q04 h- JPMC     2Q04 Proforma  
  ($ millions)     2Q05     $ O/(U)   % O/(U)     $ O/(U)   % O/(U)  
                       
 
Net Revenues
    $ 3,886       $ 2,299       145 %     $ 110       3 %  
 
Provision for Credit Losses
      1,641         893       119         (116 )     (7 )  
 
Noninterest Expenses
      1,383         818       145         17       1    
 
Operating Earnings
    $ 542       $ 366       208 %     $ 133       33 %  
                       

Discussion of Historical Results:
Operating earnings of $542 million increased $366 million from the prior year due to the merger, lower provision for credit losses and higher revenue, partially offset by higher marketing spend and a charge to increase litigation reserves.

Total revenues of $3.9 billion increased $2.3 billion, primarily due to the merger. Net interest income of $3.0 billion increased $1.7 billion, primarily due to the merger, including the acquisition of a private label portfolio and higher loan balances, partially offset by an increase in balances in their introductory period driven by a significant increase in new account originations. Noninterest revenue of $910 million increased $594 million, primarily due to the merger and increased interchange income from higher charge volume, partially offset by higher volume-driven payments to partners and higher rewards expense.

The managed provision for credit losses of $1.6 billion increased $893 million, primarily due to the merger, including the acquisition of a private label portfolio, and increased bankruptcy losses from accelerated filings due to the pending change in bankruptcy legislation, partially offset by lower contractual net charge-offs. Managed credit ratios remained strong, benefiting from the continued low level of delinquencies. The managed net charge-off rate for the quarter was 4.87%, down from 5.85% in the prior year. The 30-day managed delinquency rate was 3.34%, down from 4.26% in the prior year.

Expenses of $1.4 billion increased $818 million, primarily due to the merger, including the acquisition of a private label portfolio. Additionally, increased marketing spend and a charge to increase litigation reserves were primarily offset by merger saves, including lower processing costs and compensation expenses.

Discussion of Proforma Combined Results:
Operating earnings of $542 million increased $133 million, or 33%, from the prior year. Results were driven by lower provision for credit losses, higher revenue and merger saves, partially offset by higher marketing spend and a charge to increase litigation reserves.

Total revenues of $3.9 billion increased $110 million, or 3%. Net interest income of $3.0 billion increased $81 million, or 3%, due to higher loan balances and the acquisition of a private label portfolio. These benefits were partially offset by an increase in balances in their introductory period driven by a significant increase in new account originations. Noninterest revenue of $910 million increased $29 million, or 3%, from the prior year. Higher charge volume resulted in increased interchange income, partially offset by higher volume-driven payments to partners and rewards expense.

The managed provision for credit losses of $1.6 billion decreased $116 million, or 7%. This decrease was due to lower contractual net charge-offs, partially offset by increased bankruptcy losses from accelerated filings due to the pending change in bankruptcy legislation and the acquisition of a private label portfolio. Managed credit ratios remained strong, benefiting from a continued low level of delinquencies. The

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JPMorgan Chase & Co.
News Release

managed net charge-off rate for the quarter declined to 4.87% from 5.56% in the prior year, but was up slightly from 4.83% in the prior quarter. The 30-day managed delinquency rate was 3.34%, down from 3.72% in the prior year and 3.54% in the prior quarter, due to improved credit quality.

Expenses of $1.4 billion increased $17 million, or 1%. Increased marketing spend and a charge to increase litigation reserves were primarily offset by merger saves, including lower processing costs and compensation expenses.

Other Highlights Include:

 
Pre-tax income to average managed loans (ROO) was 2.56%, up 49 basis points.
 
Net interest income as a percentage of average managed loans was 8.83%.
 
Average managed loans of $135.2 billion increased $8.3 billion, or 7%.
 
Charge volume of $75.6 billion increased $5.0 billion, or 7%.
 
Merchant processing volume of $141.2 billion increased $21.9 billion, or 18%, and total transactions of 4.7 billion increased 809 million, or 21%.
 
Managed net charge-off rate of 4.87% was down from 5.56%, reflecting an overall improvement in credit quality.
 
Net accounts opened, excluding the private label acquisition, increased by 600,000, or 27%, to 2.8 million, driven by increased marketing effectiveness and investment.
 
Announced the rollout of “Chase credit cards with blink”, which provides contactless functionality that increases transaction speed and convenience.
 
New co-brand relationships announced included Coldwater Creek and Sheetz, Inc., and renewals included American Medical Association.

COMMERCIAL BANKING (CB)

                                                   
     
  Operating Results – CB               2Q04 h- JPMC     2Q04 Proforma  
  ($ millions)     2Q05     $ O/(U)   % O/(U)     $ O/(U)   % O/(U)  
                       
 
Net Revenues
    $ 900       $ 566       169 %     $ 34       4 %  
 
Provision for Credit Losses
      142         123       NM         124       NM    
 
Noninterest Expenses
      473         270       133         2          
 
Operating Earnings
    $ 174       $ 109       168         ($60 )     (26 )  
                       

Discussion of Historical Results:
Operating earnings were $174 million, an increase of $109 million from the prior year. The increase in results was primarily due to the merger, partially offset by increased provision for credit losses. The larger provision reflects higher reserves, primarily due to refinements in the data used to estimate the allowance for credit losses. Despite this increase, credit quality of the portfolio remains strong.

Revenues were $900 million, an increase of $566 million, primarily due to the merger. In addition, net interest income of $648 million was positively affected by wider spreads on liability balances and increases in loan and liability balances, partially offset by narrower loan spreads. Noninterest revenue of $252 million was negatively affected by lower fees in lieu of compensating balances and lower gains on the sales of assets acquired in the satisfaction of debt and real estate investments, partially offset by strong investment banking revenue.

Provision for credit losses was $142 million for the quarter, compared to $19 million in the prior year. The higher provision reflects refinements in the data used to estimate the allowance for credit losses, not a deterioration of credit quality. The credit quality of the portfolio remains strong with net recoveries of $3 million for the quarter compared to net charge-offs of $30 million in the prior year.

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JPMorgan Chase & Co.
News Release

Expenses increased $270 million to $473 million, primarily related to the merger. In addition, there was an increase in unit costs for Treasury Services products, partially offset by lower compensation-related and other expenses.

Discussion of Proforma Combined Results:
Operating earnings were $174 million, a decrease of $60 million, or 26%, from the prior year. These results were driven by the increase in provision for credit losses. The larger provision reflects higher reserves primarily due to refinements in the data used to estimate the allowance for credit losses. Despite this increase, credit quality of the portfolio remains strong. In addition to the effect of the provision, earnings benefited from growth in net interest income, partially offset by lower noninterest revenue.

Revenues were $900 million, an increase of $34 million, or 4%. Net interest income was $648 million, an increase of $55 million, or 9%, driven by wider spreads on liability balances and higher loan and liability balances, partially offset by narrower loan spreads. Noninterest revenue was $252 million, down $21 million, or 8%, primarily resulting from lower fees in lieu of compensating balances and lower gains on the sales of assets acquired in the satisfaction of debt and real estate investments, partially offset by strong investment banking revenue.

On a segment basis, revenue for Middle Market was $594 million, an increase of $32 million, or 6%, driven by increased Treasury Services and lending revenue. Corporate Banking revenue of $138 million increased $4 million, or 3%, driven by increased Treasury Services and Investment Banking revenue. Real Estate revenue was $131 million, a decline of $4 million, or 3%, primarily reflecting lower gains on the sale of investments.

Provision for credit losses was $142 million, compared to $18 million in the prior year. The higher charge reflects refinements in the data used to estimate the allowance for credit losses, not a deterioration of credit quality. The credit quality of the portfolio remains strong with net recoveries of $3 million, an improvement of $33 million, and nonperforming loans of $434 million, a decrease of $180 million, or 29%. The nonperforming loans to average loans ratio declined 38 bps to 0.85%, and the allowance for loan losses to average loans was 2.80%.

Expenses of $473 million increased $2 million, reflecting increased unit costs for Treasury Services products, partially offset by lower compensation-related and other expenses.

Other Highlights Include:

 
Average loan balances of $51.2 billion were up $1.5 billion, or 3%, from the prior year, driven by 8% growth in the Middle Market segment and 6% growth in Corporate Banking. Real Estate loans declined 11% from last year due to continued competitive market conditions.
 
Treasury Services revenue grew $73 million, or 15%, from the prior year, driven by improvement in liability spreads across all businesses and increased volumes primarily in Real Estate and Middle Market.
 
Overhead ratio of 53% declined 100 bps from last year and the prior quarter.

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JPMorgan Chase & Co.
News Release

TREASURY & SECURITIES SERVICES (TSS)

                                                   
     
  Operating Results – TSS               2Q04 h- JPMC     2Q04 Proforma  
  ($ millions)     2Q05     $ O/(U)   % O/(U)     $ O/(U)   % O/(U)  
                       
 
Net Revenue
    $ 1,588       $ 495       45 %     $ 220       16 %  
 
Noninterest Expense
      1,194         250       26 %       19       2 %  
 
Operating Earnings
    $ 229       $ 128       127 %     $ 126       122 %  
                       

Discussion of Historical Results:
Operating earnings for the quarter were $229 million, an increase of $128 million, due to widening spreads on liability balances (which include deposits and deposits swept into on-balance sheet liabilities), improved fee-based revenue, liability balance growth and the merger. Current period results include charges of $58 million (after-tax) to terminate a client contract. Prior year results include a software impairment charge of $42 million (after-tax) and a gain of $10 million (after-tax) on the sale of a business.

TSS net revenue of $1.6 billion increased $495 million, or 45%. Net interest income grew to $510 million, up $259 million, as a result of the merger, wider spreads on foreign and noninterest bearing liability balances, and average liability balance growth of 43%, to $164 billion. Noninterest revenue of $1.1 billion increased $236 million, or 28%. This improvement was due to the merger, an increase in assets under custody to $10.2 trillion driven by new business and market value appreciation, the acquisition of Vastera and growth in securities lending and wholesale cards. Partially offsetting this revenue growth were lower service charges on deposits and the absence, in the current period, of a gain on the sale of a business.

Treasury Services net revenue grew to $682 million, Investor Services to $544 million and Institutional Trust Services to $362 million. TSS firmwide net revenue, which includes Treasury Services net revenue recorded in other lines of business, grew to $2.2 billion, up $876 million, or 65%. In the aggregate, Treasury Services firmwide net revenue grew to $1.3 billion, up $697 million, or 113%.

Credit reimbursement to the Investment Bank was $38 million, an increase of $36 million, primarily as a result of the merger. TSS is charged a credit reimbursement related to certain exposures managed within the Investment Bank credit portfolio on behalf of clients shared with TSS.

Noninterest expense of $1.2 billion was up $250 million, or 26%, due to the merger, charges to terminate a client contract, the Vastera acquisition and onboarding fund accounting clients. Partially offsetting these increases were lower allocations of Corporate segment expenses and increased product unit costs charged to other lines of business, primarily Commercial Banking. The prior year included a software impairment charge of $67 million (pre-tax).

Discussion of Proforma Combined Results:
Operating earnings for the quarter were $229 million, an increase of $126 million due to widening spreads on liability balances (which include deposits and deposits swept into on-balance sheet liabilities), improved fee-based revenue and liability balance growth. Current period results include charges of $58 million (after-tax) to terminate a client contract. Prior year results include a software impairment charge of $42 million (after-tax) and a gain of $10 million (after-tax) on the sale of a business.

TSS net revenue of $1.6 billion improved by $220 million, or 16%. Net interest income of $510 million was up $139 million, or 37%, primarily resulting from wider spreads on liability balances, and an increase of 24% in average liability balances to $164 billion. Noninterest revenue of $1.1 billion increased by $81 million, or 8%. The improvement was due to an increase in assets under custody to $10.2 trillion driven

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JPMorgan Chase & Co.
News Release

by new business and market value appreciation, the acquisition of Vastera and growth in securities lending and wholesale cards. Partially offsetting this revenue growth were lower service charges on deposits and the absence, in the current period, of a gain on the sale of a business.

Treasury Services net revenue grew to $682 million, Investor Services grew to $544 million and Institutional Trust Services grew to $362 million. TSS firmwide net revenue, which includes Treasury Services net revenue recorded in other lines of business, grew to $2.2 billion, up $272 million, or 14%. In the aggregate, Treasury Services firmwide net revenue grew to $1.3 billion, up $150 million, or 13%.

Credit reimbursement to the Investment Bank was $38 million, down $5 million. TSS is charged a credit reimbursement related to certain exposures managed within the Investment Bank credit portfolio on behalf of clients shared with TSS.

Noninterest expense of $1.2 billion was up $19 million due to charges to terminate a client contract, the Vastera acquisition and onboarding fund accounting clients. Partially offsetting these increases were lower allocations of Corporate segment expenses and increased product unit costs charged to other lines of business, primarily Commercial Banking. The prior year included a software impairment charge of $67 million (pre-tax).

Other Highlights Include:

 
Pre-tax margin(4) was 22%, up from 11% in the prior year.
 
Average liability balances were $164 billion, an increase of 24%.
 
Assets under custody increased to $10.2 trillion, up 19% (excluding assets under custody added from Institutional Trust Services beginning March 31, 2005).
 
Corporate Trust Securities under administration were $6.7 trillion, an increase of 4%.
 
ACH transactions originated increased 21%, clearing volumes increased 15%, and wholesale cards issued increased 12%.
 
During the quarter Treasury Services successfully completed the U.S. dollar clearing, trade system and ACH merger-related conversions.

ASSET & WEALTH MANAGEMENT (AWM)

                                                   
     
  Operating Results – AWM               2Q04 h- JPMC     2Q04 Proforma  
  ($ millions)     2Q05     $ O/(U)   % O/(U)     $ O/(U)   % O/(U)  
                       
 
Net Revenues
    $ 1,343       $ 515       62 %     $ 158       13 %  
 
Provision for Credit Losses
      (20 )       (16 )     (400 )       (15 )     (300 )  
 
Noninterest Expenses
      917         236       35         23       3    
 
Operating Earnings
    $ 283       $ 184       186 %     $ 93       49 %  
                       

Discussion of Historical Results:
Operating earnings were $283 million, up $184 million from the prior year, due to the merger and increased revenue, partially offset by higher compensation expense.

Total revenue was $1.3 billion, up $515 million, or 62%. Noninterest revenue, principally fees and commissions, of $1.1 billion was up $358 million due to the merger, the acquisition of a majority interest in Highbridge Capital Management in the fourth quarter of 2004, net asset inflows and global equity market appreciation. Net interest income of $274 million was up $157 million due to higher deposit balances and an improved loan mix.

The provision for credit losses was a benefit of $20 million, an improvement of $16 million, driven by refinements in the data used to estimate the allowance for credit losses and increased recoveries.

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JPMorgan Chase & Co.
News Release

Expenses of $917 million increased $236 million, or 35%, reflecting the merger, the acquisition of Highbridge and increased compensation expense primarily due to higher performance-based incentives, which were driven by improved investment results.

Discussion of Proforma Combined Results:
Operating earnings were $283 million, up $93 million, or 49%, from the prior year. Performance was driven by increased revenues, partially offset by higher compensation expense.

Revenues were $1.3 billion, up $158 million, or 13%. Noninterest revenue, principally fees and commissions, of $1.1 billion was up $125 million, or 13%, due to the acquisition of a majority interest in Highbridge Capital Management in the fourth quarter of 2004, net asset inflows that were primarily equity-related and global equity market appreciation. Net interest income of $274 million was up $33 million, or 14%, benefiting primarily from higher deposit and loan balances and an improved product mix.

Private Bank client segment revenue grew 5% to $409 million, and Private Client Services client segment revenue grew 7% to $258 million, driven primarily by revenue growth from deposit products. Retail client segment revenue grew 15% to $363 million, as a result of increased global equity inflows from our third-party distribution network. Institutional client segment revenue grew 30% to $313 million, primarily due to the consolidation impact of Highbridge, as well as global equity market appreciation.

Provision for credit losses was a benefit of $20 million, an improvement of $15 million, driven by refinements in the data used to estimate the allowance for credit losses and increased recoveries.

Expenses of $917 million increased $23 million, or 3%, reflecting the acquisition of Highbridge and increased compensation expenses, primarily due to higher performance-based incentives, which were driven by improved investment results.

Other Highlights Include:

 
Pre-tax margin(4) was 33%, up from 25% in the prior year.
 
Assets under Supervision were $1.1 trillion, an increase of 8%.
 
Assets under Management were $783 billion, an increase of 4%.
 
Assets under Management do not reflect the firm’s 43% interest in American Century’s $98 billion of assets under management.
 
Loans were up 7% to $27 billion.
 
Deposits were up 10% to $41 billion.

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JPMorgan Chase & Co.
News Release

CORPORATE

                                                   
     
  Operating Results - Corporate               2Q04 h- JPMC     2Q04 Proforma  
  ($ millions)     2Q05     $ O/(U)   % O/(U)     $ O/(U)   % O/(U)  
                       
 
Net Revenues
      ($366 )       ($926 )     NM       $ (603 )     NM    
 
Provision for Credit Losses
      1         28       NM         28       NM    
 
Noninterest Expenses
      477         344       259         (11 )     (2 )  
 
Operating Earnings
      ($486 )       ($811 )     NM         ($383 )     (372 )  
                       

Discussion of Historical Results:
Operating earnings were a loss of $486 million, down from earnings of $325 million in the prior year.

Net revenues of negative $366 million were down $926 million from the prior year. Net interest income was negative $763 million compared to $20 million in the prior year. The decline was driven primarily by actions and policies adopted in conjunction with the merger and the repositioning of the treasury portfolio. Noninterest revenue of $397 million declined $143 million and included private equity gains of $300 million which were down $92 million.

Noninterest expenses were $477 million, up $344 million from the prior year, primarily due to the merger.

Discussion of Proforma Combined Results:
Operating earnings were a loss of $486 million compared to a loss of $103 million in the prior year.

Net revenues were negative $366 million, $603 million lower than the prior year. Net interest income was negative $763 million, a decline of $498 million, primarily due to the repositioning of the treasury portfolio. Noninterest revenue of $397 million declined $105 million and included private equity gains of $300 million which were down $92 million.

Noninterest expenses were $477 million, a decrease of $11 million, or 2%, from the prior year.

Other Highlights Include:

 
Private Equity portfolio was $6.4 billion, down from $8.6 billion in the prior year.

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JPMorgan Chase & Co.
News Release

JPMORGAN CHASE (JPMC)

                                                   
     
  Operating Results – JPMC               2Q04 h- JPMC     2Q04 Proforma  
  ($ millions)     2Q05     $ O/(U)   % O/(U)     $ O/(U)   % O/(U)  
                       
 
Net Revenues
    $ 13,900       $ 4,724       51 %     $ (876 )     (6 )%  
 
Provision for credit losses
      1,517         828       120 %       (89 )     (6 )%  
 
Noninterest Expenses
      8,748         3,035       53 %       (91 )     (1 )%  
 
Operating Earnings
    $ 2,328       $ 522       29 %     $ (459 )     (16 )%  
                       

Second quarter financial results for JPMC included the following:

                         
     
  ($ millions)     Pre-tax     After-tax  
                 
 
Reduction in wholesale allowance
    $ 166       $ 103    
 
MSR risk management results
      166         103    
                 

Discussion of Historical Results:
Operating earnings of $2.3 billion increased $522 million, or 29%, from the prior year, primarily as a result of the merger.

Total revenues were $13.9 billion, up $4.7 billion, or 51%, primarily due to the merger. Noninterest revenues of $7.4 billion were up $1.6 billion, or 28%, from the prior year, primarily due to the merger. Also contributing to the increase in noninterest revenues were higher asset management, administration and commissions revenues resulting from recent acquisitions, organic business growth and improved global equity markets. Partially offsetting these increases were lower trading revenues, down $727 million, or 55%, from the prior year, reflecting a challenging market environment, weak portfolio management results and lower proprietary trading revenues. Net interest income was $6.5 billion, up $3.1 billion, or 92%, primarily due to the merger, higher consumer loan and deposit balances, and wider spreads on consumer deposits and wholesale liabilities, partially offset by the reduced level of the treasury portfolio and tighter wholesale loan spreads.

The provision for credit losses was $1.5 billion, an increase of $828 million, primarily due to the merger. Total wholesale provision for credit losses was a benefit of $218 million for the quarter compared to a benefit of $137 million in the prior year, reflecting continued improvement in credit quality and, to a lesser degree, the refinements made in the data used to estimate the allowance for credit losses. The wholesale loan net recovery rate was 0.17% for the quarter compared to a net charge-off rate of 0.29% in the prior year. The increase in the consumer provision from the prior year was mainly due to the merger, but also reflected increased bankruptcy losses from accelerated filings and higher provision expense related to the decision to retain subprime mortgage loans rather than securitize. The managed net charge-off rate for Card Services declined to 4.87% from 5.85% in the prior year. Retail Financial Services net charge-off rate decreased to 0.25% compared to 0.29% in the prior year, primarily due to favorable loss severity for both real estate lending and vehicle finance as a result of strength in real estate and used car valuations. The firm had total nonperforming assets of $2.8 billion at June 30, 2005, up 14% from the prior year.

Expenses, which exclude the non-operating litigation charges discussed below, were $8.7 billion, up $3.0 billion, or 53%, from the prior year, primarily due to the merger. Additionally, recent acquisitions and charges to terminate a client contract were partially offset by merger-related savings and other efficiencies.

The firm took a $1.9 billion ($1.2 billion after-tax) non-operating litigation charge in connection with its settlement of the Enron class action litigation. In the second quarter of 2004, the firm took a $3.7 billion ($2.3 billion after-tax) non-operating charge to increase litigation reserves.

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JPMorgan Chase & Co.
News Release

Discussion of Proforma Combined Results:
Operating earnings were $2.3 billion, down $459 million, or 16%, from the prior year. The decrease in earnings was driven by significantly lower revenue partially offset by lower expense and lower provision for credit losses.

Total revenues were $13.9 billion, down $876 million, or 6%. Noninterest revenues of $7.4 billion were down $503 million, or 6%, from the prior year, primarily due to lower trading revenues. Trading revenues declined $822 million, or 58%, reflecting a challenging market environment, weak portfolio management results and lower proprietary trading revenues. Noninterest revenues were also negatively affected by lower lending and deposit-related fees as a result of higher interest rates. Partially offsetting these declines were increased asset management and commissions revenues related to the recent acquisitions, organic business growth, and improved global equity markets. Net interest income was $6.5 billion, down $373 million, or 5%, primarily due to the reduced level of the treasury portfolio and tighter wholesale loan spreads, partially offset by higher consumer loan and deposit balances and wider spreads on consumer deposits and wholesale liabilities.

The provision for credit losses was $1.5 billion, down $89 million, or 6%. Total wholesale provision for credit losses was a benefit of $218 million for the quarter compared to a benefit of $326 million in the prior year, reflecting continued improvement in credit quality and, to a lesser degree, the refinements made in the data used to estimate the allowance for credit losses. The wholesale loan net recovery rate was 0.17% for the quarter compared to a net charge-off rate of 0.13% in the prior year. Total consumer managed provision for credit losses decreased to $1.7 billion, down 10%, reflecting lower net charge-offs and positive delinquency trends. Partially offsetting the reduction was increased bankruptcy losses from accelerated filings. The managed net charge-off rate for Card Services declined to 4.87% from 5.56% in the prior year. Retail Financial Services net charge-off rate was 0.25% compared to 0.40% in the prior year. The improvement compared to the prior year reflected favorable loss severity for both real estate lending and vehicle finance as a result of strength in real estate and used car valuations. The firm had total nonperforming assets of $2.8 billion at June 30, 2005, down 30% from the prior year’s level of $4.1 billion.

Expenses, which exclude the non-operating litigation charges discussed below, were $8.7 billion, down $91 million, or 1%, from the prior year, driven primarily by merger-related savings and other efficiencies. Partially offsetting these improvements were higher expenses related to recent acquisitions and charges to terminate a client contract.

The firm took a $1.9 billion ($1.2 billion after-tax) non-operating litigation charge in connection with its settlement of the Enron class action litigation. In the second quarter of 2004, the firm took a $3.7 billion ($2.3 billion after-tax) non-operating charge to increase litigation reserves.

Other Corporate Items

 
Tier 1 capital ratio was 8.2% at June 30, 2005 (estimated), 8.6% at March 31, 2005 and 8.6% at June 30, 2004.
 
During the quarter, $594 million of common stock was repurchased, reflecting 16.8 million shares at an average price of $35.32 per share.
 
Headcount of approximately 168,461 was up 4,080 since March 31, 2005, primarily due to business growth, technology insourcing and the acquisition of Vastera.

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JPMorgan Chase & Co.
News Release

Merger and other financial information

 
Merger between JPMorgan Chase & Co. and Bank One Corporation: On July 1, 2004, JPMorgan Chase and Bank One completed the merger of their holding companies. The merger was accounted for as a purchase. Accordingly, the earnings for JPMorgan Chase and Bank One are combined for all periods since completion of the merger; all time periods prior to the merger date are, on a reported basis, JPMorgan Chase only.
 
Merger saves and costs: For the quarter ended June 30, 2005, approximately $440 million of merger savings have been realized, which is an annualized rate of $1.8 billion. Management continues to estimate annual merger savings of approximately $3.0 billion. Approximately two-thirds of the savings are anticipated to be realized by the end of 2005. Merger costs of approximately $279 million were expensed during the second quarter of 2005, bringing the total amount expensed year-to-date to $424 million and $1.8 billion cumulative since the merger announcement. Management continues to estimate remaining merger costs of $1.2 billion to $1.7 billion, which are expected to be expensed over the next two years.

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JPMorgan Chase & Co.
News Release

Notes:

  1.  
In addition to analyzing the firm’s results on a reported basis, management analyzes the firm’s and the lines of business results on an operating basis, which is a non-GAAP financial measure. The definition of operating basis starts with the reported U.S. GAAP results. In the case of the Investment Bank, noninterest revenue on an operating basis includes in trading revenue net interest income related to trading activities. Trading activities generate revenues, which are recorded for U.S. GAAP purposes in two line items on the income statement: trading revenue, which includes the mark-to-market gains or losses on trading positions; and net interest income, which includes the interest income or expense related to those positions. Combining both the trading revenue and related net interest income enables management to evaluate the Investment Bank’s trading activities, by considering all revenue related to these activities, and facilitates operating comparisons to other competitors. In the case of Card Services, operating, or managed, basis excludes the impact of credit card securitizations on total net revenue, the provision for credit losses, net charge-offs and loan receivables. JPMorgan Chase uses the concept of “managed receivables” to evaluate the credit performance and overall financial performance of the underlying credit card loans, both sold and not sold: as the same borrower is continuing to use the credit card for ongoing charges, a borrower’s credit performance will impact both the loan receivables sold under SFAS 140 and those not sold. Thus, in its disclosures regarding managed receivables, JPMorgan Chase treats the sold receivables as if they were still on the balance sheet in order to disclose the credit performance (such as net charge-off rates) of the entire managed credit card portfolio. Commencing with the first quarter of 2005, operating revenue (noninterest revenue and net interest income) for each of the segments and the firm is presented on a tax-equivalent basis. Accordingly, revenue from tax-exempt securities and investments that receive tax credits are presented in the operating results on a basis comparable to taxable securities and investments. This allows management to assess the comparability of revenues arising from both taxable and tax-exempt sources. The corresponding income tax impact related to these items is recorded within income tax expense. The Corporate sector’s and the firm’s operating revenue and income tax expense for the periods prior to the first quarter of 2005 have been restated to be similarly presented on a tax-equivalent basis. The restatement had no impact on the Corporate sector’s or the firm’s operating results. Finally, as noted above, operating basis excludes the non-operating litigation charges taken in the second and first quarters of 2005 and second quarter of 2004, merger costs and costs related to the conformance of certain accounting policies a result of the merger, as management believes these items are not part of the firm’s normal daily business operations and, therefore, not indicative of trends nor provide meaningful comparisons with other periods. See page 7 of JPMorgan Chase’s Earnings Release Financial Supplement (Second Quarter 2005) for a reconciliation of JPMorgan Chase’s income statement from a reported to operating basis.
  2.  
Following the merger with Bank One, JPMorgan Chase reorganized its business segments. The Investment Bank now includes portions of Bank One’s Commercial Bank; Global Treasury has been transferred to the Corporate segment. Retail Financial Services is comprised of Chase Financial Services, excluding Card Services and Middle Market, and includes Bank One’s Retail line of business and insurance activities. Card Services is the combination of Chase Card Services and Bank One Card Services. The Commercial Banking segment is comprised of Chase Middle Market, and the Middle Market portion of Bank One’s Commercial Bank. Treasury & Securities Services added Bank One’s Global Treasury Services (formerly in Commercial Bank). Asset & Wealth Management is JPMorgan Chase’s Investment Management & Private Bank plus Bank One’s Investment Management Group (excluding insurance activity). The Corporate segment is Bank One’s Corporate line of business excluding discontinued loan and lease portfolios (now in Retail Financial Services), plus JPMorgan Partners and Global Treasury.
  3.  
Market share data is from Thomson Financial and is proforma for the merger of JPMorgan Chase and Bank One.
  4.  
Pre-tax margin represents operating earnings before income taxes divided by total net revenue, which is, in management’s view, a comprehensive measure of pre-tax performance by measuring earnings after all costs are taken into consideration. It is therefore another basis by which management evaluates TSS’ and AWM’s performance and that of competitors.

18


 

JPMorgan Chase & Co.
News Release

JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $1.2 trillion and operations in more than 50 countries. The firm is a leader in investment banking, financial services for consumers and businesses, financial transaction processing, asset and wealth management, and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase has its corporate headquarters in New York and its U.S. consumer and commercial banking headquarters in Chicago. Under the JPMorgan, Chase and Bank One brands, the firm serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients. Information about the firm is available at www.jpmorganchase.com.

JPMorgan Chase will host a conference call today at 9:00 a.m. (Eastern time) to review second quarter financial results. Investors can dial (800) 289-0569 (domestic) / (913) 981-5542 (international), or via live audio webcast. The live audio webcast and presentation slides will be available on www.jpmorganchase.com. A replay of the conference call will be available beginning at 12:00 p.m. (Eastern time) on July 20, 2005 through 12:00 a.m. (Eastern time) on July 29, 2005 at (888) 203-1112 (domestic) or (719) 457-0820 (international); access code 7040918. The replay also will be available on www.jpmorganchase.com. Additional detailed financial, statistical and business-related information is included in a financial supplement. The earnings release and the financial supplement are available on the JPMorgan Chase Internet site (www.jpmorganchase.com).

This earnings release 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 results to differ materially from those described in the forward-looking statements can be found in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, and in the 2004 Annual Report on Form 10-K for the year December 31, 2004 of JPMorgan Chase, each filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission’s Internet site (http://www.sec.gov).

19


 

JPMORGAN CHASE & CO.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(in millions, except per share, ratio and headcount data)
  (JPMORGANCHASELOGO)
                                                                         
                    Heritage                       Heritage            
                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
SELECTED INCOME STATEMENT DATA
                                                                       
Total Net Revenue
  $ 12,743     $ 13,647     $ 8,631         (7 )%     48 %     $ 26,390     $ 17,642         50 %  
Provision for Credit Losses
    587       427       203         37       189         1,014       218         365    
Noninterest Expense
    10,899       9,937       9,503         10       15         20,836       15,596         34    
Net Income (Loss)
    994       2,264       (548 )       (56 )   NM         3,258       1,382         136    
Per Common Share:
                                                                       
Net Income (Loss) Per Share — Diluted
  $ 0.28     $ 0.63     $ (0.27 )       (56 )   NM       $ 0.91     $ 0.65         40    
Cash Dividends Declared Per Share
    0.34       0.34       0.34                       0.68       0.68            
Book Value Per Share
    29.95       29.78       21.52         1       39         29.95       21.52         39    
Closing Share Price
    35.32       34.60       38.77         2       (9 )       35.32       38.77         (9 )  
Common Shares Outstanding:
                                                                       
Weighted-Average Diluted Shares Outstanding
    3,548.3       3,569.8       2,042.8         (1 )     74         3,559.0       2,096.3         70    
Common Shares Outstanding at Period-end
    3,514.0       3,525.3       2,087.5               68         3,514.0       2,087.5         68    
SELECTED RATIOS:
                                                                       
Return on Common Equity (“ROE”) (a)
    4 %     9 %   NM       (500 )bp   NM         6 %     6 %     bp  
Return on Equity-Goodwill (“ROE-GW”) (a) (b)
    6       15     NM         (900 )   NM         11       7         400    
Return on Assets (“ROA”) (a) (c)
    0.34       0.79     NM         (45 )   NM         0.56       0.35         21    
Tier 1 Capital Ratio
    8.2 (d)     8.6       8.2 %       (40 )   bp                              
Total Capital Ratio
    11.3 (d)     11.9       11.2         (60 )     10                                
SELECTED BALANCE SHEET DATA (Period-end)
                                                                       
Total Assets
  $ 1,171,283     $ 1,178,305     $ 817,763         (1 )%     43 %                              
Wholesale Loans
    149,588       137,401       77,044         9       94                                
Consumer Loans
    266,437       265,268       148,894               79                                
Deposits
    534,640       531,379       346,539         1       54                                
Common Stockholders’ Equity
    105,246       105,001       44,932               134                                
Headcount
    168,461       164,381       94,615         2       78                                
LINE OF BUSINESS EARNINGS
                                                                       
Investment Bank
  $ 606     $ 1,325     $ 644         (54 )     (6 )     $ 1,931     $ 1,661         16 %  
Retail Financial Services
    980       988       396         (1 )     147         1,968       602         227    
Card Services
    542       522       176         4       208         1,064       338         215    
Commercial Banking
    174       243       65         (28 )     168         417       139         200    
Treasury & Securities Services
    229       245       101         (7 )     127         474       199         138    
Asset & Wealth Management
    283       276       99         3       186         559       221         153    
Corporate (e)
    (486 )     (687 )     325         29     NM         (1,173 )     576       NM    
 
                                                             
Total Operating Earnings
    2,328       2,912       1,806         (20 )     29         5,240       3,736         40    
Reconciling Items (After-Tax):
                                                                       
Merger Costs
    (173 )     (90 )     (60 )       92       188         (263 )     (60 )       338    
Litigation Reserve Charge
    (1,161 )     (558 )     (2,294 )       108       (49 )       (1,719 )     (2,294 )       (25 )  
Accounting Policy Conformity
                      NM     NM                     NM    
 
                                                             
Net Income (Loss)
  $ 994     $ 2,264     $ (548 )       (56 )   NM       $ 3,258     $ 1,382         136    
 
                                                             
                                                         

Note: Effective July 1, 2004, Bank One Corporation (“Bank One”) merged with and into JPMorgan Chase & Co. (“JPMorgan Chase”). Bank One’s results of operations are included in JPMorgan Chase’s results beginning July 1, 2004. In accordance with U.S. GAAP, the results of operations for the second and first quarters of 2005, each reflect three months of results of operations for the combined Firm, while the results of operations for the second quarter of 2004 reflects only the results of operations for heritage JPMorgan Chase. The results of operations for year-to-date 2005 reflect six months of results of operations for the combined Firm, while year-to-date 2004 reflects six months of results of operations for heritage JPMorgan Chase.

 
(a)  
Based on annualized amounts.
(b)  
Net income applicable to common stock divided by Total average common equity (net of goodwill). The Firm uses return on equity less goodwill, a non-GAAP financial measure, to evaluate the operating performance of the Firm. The Firm utilizes this measure to facilitate operating comparisons to other competitors.
(c)  
Represents Net income divided by Total average assets.
(d)  
Estimated
(e)  
Includes Private Equity, Treasury, and corporate staff and other centrally managed expenses.
NM  
— Not meaningful due to net loss.

20


 

JPMORGAN CHASE & CO.
PRO FORMA CONSOLIDATED FINANCIAL HIGHLIGHTS
(in millions, except per share, ratio and headcount data)
  (JPMORGANCHASELOGO)
                                                                         
                    PRO FORMA                       PRO FORMA            
                    COMBINED       2QTR 2005               COMBINED       YTD 2005    
    2QTR     1QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
SELECTED INCOME STATEMENT DATA
                                                                       
Total Net Revenue
  $ 12,743     $ 13,647     $ 13,279         (7 )%     (4 )%     $ 26,390     $ 27,086         (3 )%  
Provision for Credit Losses
    587       427       248         37       137         1,014       401         153    
Noninterest Expense
    10,899       9,937       12,629         10       (14 )       20,836       21,741         (4 )  
Net Income
    994       2,264       433         (56 )     130         3,258       3,460         (6 )  
Per Common Share:
                                                                       
Net Income Per Share — Diluted
  $ 0.28     $ 0.63     $ 0.12         (56 )     133       $ 0.91     $ 0.96         (5 )  
Cash Dividends Declared Per Share
    0.34       0.34       0.34                       0.68       0.68            
Book Value Per Share
    29.95       29.78       29.06         1       3         29.95       29.06         3    
Closing Share Price
    35.32       34.60       38.77         2       (9 )       35.32       38.77         (9 )  
Common Shares Outstanding:
                                                                       
Weighted-Average Diluted Shares Outstanding
    3,548.3       3,569.8       3,588.6         (1 )     (1 )       3,559.0       3,589.0         (1 )  
Common Shares Outstanding at Period-end
    3,514.0       3,525.3       3,559.0               (1 )       3,514.0       3,559.0         (1 )  
SELECTED RATIOS:
                                                                       
Return on Common Equity (“ROE”) (a)
    4 %     9 %     2 %     (500 )bp   200 bp       6 %     7 %     (100 )bp  
Return on Equity-Goodwill (“ROE-GW”) (a) (b)
    6       15       3         (900 )     300         11       11            
Return on Assets (“ROA”) (a) (c)
    0.34       0.79       0.15         (45 )     19         0.56       0.61         (5 )  
Tier 1 Capital Ratio
    8.2 (d)     8.6       8.6         (40 )     (40 )                              
Total Capital Ratio
    11.3 (d)     11.9       11.8         (60 )     (50 )                              
SELECTED BALANCE SHEET DATA (Period-end)
                                                                       
Total Assets
  $ 1,171,283     $ 1,178,305     $ 1,153,304         (1 )%     2 %                              
Wholesale Loans
    149,588       137,401       133,011         9       12                                
Consumer Loans
    266,437       265,268       225,557               18                                
Deposits
    534,640       531,379       511,386         1       5                                
Common Stockholders’ Equity
    105,246       105,001       103,439               2                                
Headcount
    168,461       164,381       165,608         2       2                                
LINE OF BUSINESS EARNINGS
                                                                       
Investment Bank
  $ 606     $ 1,325     $ 1,016         (54 )     (40 )     $ 1,931     $ 2,367         (18 )%  
Retail Financial Services
    980       988       938         (1 )     4         1,968       1,682         17    
Card Services
    542       522       409         4       33         1,064       745         43    
Commercial Banking
    174       243       234         (28 )     (26 )       417       523         (20 )  
Treasury & Securities Services
    229       245       103         (7 )     122         474       196         142    
Asset & Wealth Management
    283       276       190         3       49         559       419         33    
Corporate (e)
    (486 )     (687 )     (103 )       29       (372 )       (1,173 )     (118 )     NM    
 
                                                             
Total Operating Earnings
    2,328       2,912       2,787         (20 )     (16 )       5,240       5,814         (10 )  
Reconciling Items (After-Tax):
                                                                       
Merger Costs
    (173 )     (90 )     (60 )       92       188         (263 )     (60 )       338    
Litigation Reserve Charge
    (1,161 )     (558 )     (2,294 )       108       (49 )       (1,719 )     (2,294 )       (25 )  
Accounting Policy Conformity
                      NM     NM                     NM    
 
                                                             
Net Income
  $ 994     $ 2,264     $ 433         (56 )     130       $ 3,258     $ 3,460         (6 )  
 
                                                             
                                                         
 
(a)  
Based on annualized amounts.
(b)  
Net income applicable to common stock divided by Total average common equity (net of goodwill). The Firm uses return on equity less goodwill, a non-GAAP financial measure, to evaluate the operating performance of the Firm. The Firm utilizes this measure to facilitate operating comparisons to other competitors.
(c)  
Represents Net income divided by Total average assets.
(d)  
Estimated.
(e)  
Includes Private Equity, Treasury, and corporate staff and other centrally managed expenses.
NM  
— Not meaningful due to net loss.

21

EX-99.2:
 

Exhibit 99.2

(JPMORGANCHASE LOGO)

EARNINGS RELEASE FINANCIAL SUPPLEMENT

SECOND QUARTER 2005

 


 

JPMORGAN CHASE & CO.   (JPMORGANCHASE LOGO)
TABLE OF CONTENTS
         
    Page
Consolidated Results
       
Financial Highlights
    3  
Statements of Income — Reported Basis
    4  
Consolidated Balance Sheets
    5  
Condensed Average Balance Sheets and Annualized Yields
    6  
Reconciliation from Reported to Operating Basis Summary
    7  
Statements of Income — Operating Basis
    8  
 
       
Business Detail
       
Line of Business Financial Highlights — Operating Basis
    9  
Investment Bank
    10  
Retail Financial Services
    13  
Card Services — Managed Basis
    17  
Commercial Banking
    20  
Treasury & Securities Services
    21  
Asset & Wealth Management
    23  
Corporate
    26  
 
       
Consolidated Credit-Related Information
    28  
 
       
Supplemental Detail
       
Capital
    33  
 
       
Glossary of Terms
    34  
 
       
Appendix : Reconciliation from Reported to Operating Basis
    36  

Page 2


 

JPMORGAN CHASE & CO.   (JPMORGANCHASE LOGO)
CONSOLIDATED FINANCIAL HIGHLIGHTS    
(in millions, except per share, ratio and headcount data)    
                                                                                         
                                                         
                                    Heritage                                 Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
SELECTED INCOME STATEMENT DATA
                                                                                       
Total Net Revenue
  $ 12,743     $ 13,647     $ 12,950     $ 12,505     $ 8,631         (7 )%     48 %     $ 26,390     $ 17,642         50 %  
Provision for Credit Losses
    587       427       1,157       1,169       203         37       189         1,014       218         365    
Noninterest Expense
    10,899       9,937       9,386       9,377       9,503         10       15         20,836       15,596         34    
Net Income (Loss)
    994       2,264       1,666       1,418       (548 )       (56 )   NM         3,258       1,382         136    
 
                                                                                       
Per Common Share:
                                                                                       
Net Income (Loss) Per Share — Diluted
  $ 0.28     $ 0.63     $ 0.46     $ 0.39     $ (0.27 )       (56 )   NM       $ 0.91     $ 0.65         40    
Cash Dividends Declared Per Share
    0.34       0.34       0.34       0.34       0.34                       0.68       0.68            
Book Value Per Share
    29.95       29.78       29.61       29.42       21.52         1       39         29.95       21.52         39    
Closing Share Price
    35.32       34.60       39.01       39.73       38.77         2       (9 )       35.32       38.77         (9 )  
 
                                                                                       
Common Shares Outstanding:
                                                                                       
Weighted-Average Diluted Shares Outstanding
    3,548.3       3,569.8       3,602.0       3,592.0       2,042.8         (1 )     74         3,559.0       2,096.3         70    
Common Shares Outstanding at Period-end
    3,514.0       3,525.3       3,556.2       3,564.1       2,087.5               68         3,514.0       2,087.5         68    
 
                                                                                       
SELECTED RATIOS:
                                                                                       
Return on Common Equity (“ROE”) (a)
    4 %     9 %     6 %     5 %   NM       (500 )bp   NM         6 %     6 %       bp  
Return on Equity-Goodwill (“ROE-GW”) (a) (b)
    6       15       11       9     NM         (900 )   NM         11       7         400    
Return on Assets (“ROA”) (a) (c)
    0.34       0.79       0.57       0.50     NM         (45 )   NM         0.56       0.35         21    
Tier 1 Capital Ratio
    8.2 (d)     8.6       8.7       8.6       8.2 %       (40 )   bp                              
Total Capital Ratio
    11.3 (d)     11.9       12.2       12.0       11.2         (60 )     10                                
 
                                                                                       
SELECTED BALANCE SHEET DATA (Period-end)
                                                                                       
Total Assets
  $ 1,171,283     $ 1,178,305     $ 1,157,248     $ 1,138,469     $ 817,763         (1 )%     43 %                              
Wholesale Loans
    149,588       137,401       135,067       132,344       77,044         9       94                                
Consumer Loans
    266,437       265,268       267,047       261,357       148,894               79                                
Deposits
    534,640       531,379       521,456       496,454       346,539         1       54                                
Common Stockholders’ Equity
    105,246       105,001       105,314       104,844       44,932               134                                
 
                                                                                       
Headcount
    168,461       164,381       160,968       162,275       94,615         2       78                                
 
                                                                                       
LINE OF BUSINESS EARNINGS
                                                                                       
Investment Bank
  $ 606     $ 1,325     $ 660     $ 627     $ 644         (54 )     (6 )     $ 1,931     $ 1,661         16 %  
Retail Financial Services
    980       988       775       822       396         (1 )     147         1,968       602         227    
Card Services
    542       522       515       421       176         4       208         1,064       338         215    
Commercial Banking
    174       243       254       215       65         (28 )     168         417       139         200    
Treasury & Securities Services
    229       245       145       96       101         (7 )     127         474       199         138    
Asset & Wealth Management
    283       276       263       197       99         3       186         559       221         153    
Corporate (e)
    (486 )     (687 )     (296 )     (219 )     325         29     NM         (1,173 )     576       NM    
 
                                                                         
Total Operating Earnings
    2,328       2,912       2,316       2,159       1,806         (20 )     29         5,240       3,736         40    
Reconciling Items (After-Tax):
                                                                                       
Merger Costs
    (173 )     (90 )     (324 )     (462 )     (60 )       92       188       (263 )     (60 )       338    
Litigation Reserve Charge
    (1,161 )     (558 )                 (2,294 )       108       (49 )       (1,719 )     (2,294 )       (25 )  
Accounting Policy Conformity
                (326 )     (279 )           NM     NM                     NM    
 
                                                                         
Net Income (Loss)
  $ 994     $ 2,264     $ 1,666     $ 1,418     $ (548 )       (56 )   NM       $ 3,258     $ 1,382         136    
                                                             

Note: Effective July 1, 2004, Bank One Corporation (“Bank One”) merged with and into JPMorgan Chase & Co. (“JPMorgan Chase”). Bank One’s results of operations are included in JPMorgan Chase’s results beginning July 1, 2004. In accordance with U.S. GAAP, the results of operations for the second and first quarters of 2005, and fourth and third quarters of 2004, each reflect three months of results of operations for the combined Firm, while the results of operations for the second quarter of 2004 reflects only the results of operations for heritage JPMorgan Chase. The results of operations for year-to-date 2005 reflect six months of results of operations for the combined Firm, while year-to-date 2004 reflects six months of results of operations for heritage JPMorgan Chase.

 
(a)  
Based on annualized amounts.
(b)  
Net income applicable to common stock divided by Total average common equity (net of goodwill). The Firm uses return on equity less goodwill, a non-GAAP financial measure, to evaluate the operating performance of the Firm. The Firm utilizes this measure to facilitate operating comparisons to other competitors.
(c)  
Represents Net income divided by Total average assets.
(d)  
Estimated
(e)  
Includes Private Equity, Treasury, and corporate staff and other centrally managed expenses.
 
NM — Not meaningful due to net loss.

Page 3


 

JPMORGAN CHASE & CO.
STATEMENTS OF INCOME — REPORTED BASIS
(in millions, except per share, ratio and headcount data)
  (JPMORGANCHASE LOGO)
                                                                                         
                                                                           
                                    Heritage                                 Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
REVENUE
                                                                                       
Investment Banking Fees
  $ 961     $ 993     $ 1,073     $ 879     $ 893         (3 )%     8 %     $ 1,954     $ 1,585         23 %  
Trading Revenue (a)
    387       1,859       611       408       873         (79 )     (56 )       2,246       2,593         (13 )  
Lending & Deposit Related Fees
    851       820       903       943       412         4       107         1,671       826         102    
Asset Management, Administration and Commissions
    2,541       2,498       2,330       2,185       1,814         2       40         5,039       3,650         38    
Securities / Private Equity Gains (Losses)
    407       (45 )     569       413       460       NM       (12 )       362       892         (59 )  
Mortgage Fees and Related Income
    336       362       85       233       294         (7 )     14         698       488         43    
Credit Card Income
    1,763       1,734       1,822       1,782       631         2       179         3,497       1,236         183    
Other Income
    496       201       228       210       260         147       91         697       392         78    
 
                                                                         
Noninterest Revenue
    7,742       8,422       7,621       7,053       5,637         (8 )     37         16,164       11,662         39    
 
                                                                                       
Interest Income
    10,949       10,632       9,862       9,493       5,614         3       95         21,581       11,240         92    
Interest Expense
    5,948       5,407       4,533       4,041       2,620         10       127         11,355       5,260         116    
 
                                                                         
Net Interest Income
    5,001       5,225       5,329       5,452       2,994         (4 )     67         10,226       5,980         71    
 
                                                                         
 
                                                                                       
TOTAL NET REVENUE
    12,743       13,647       12,950       12,505       8,631         (7 )     48         26,390       17,642         50    
 
                                                                         
 
                                                                                       
Provision for Credit Losses
    587       427       1,157       1,169       203         37       189         1,014       218         365    
 
                                                                                       
NONINTEREST EXPENSE
                                                                                       
Compensation Expense
    4,266       4,702       4,211       4,050       2,943         (9 )     45         8,968       6,245         44    
Occupancy Expense
    580       525       609       604       440         10       32         1,105       871         27    
Technology and Communications Expense
    896       920       1,051       1,046       786         (3 )     14         1,816       1,605         13    
Professional & Outside Services
    1,130       1,074       1,191       1,103       752         5       50         2,204       1,568         41    
Marketing
    537       483       428       506       202         11       166         1,020       401         154    
Other Expense
    954       805       981       920       511         19       87         1,759       958         84    
Amortization of Intangibles
    385       383       392       396       79         1       387         768       158         386    
 
                                                                         
Total Noninterest Expense before Merger Costs and Litigation Reserve Charge
    8,748       8,892       8,863       8,625       5,713         (2 )     53         17,640       11,806         49    
Merger Costs
    279       145       523       752       90         92       210         424       90         371    
Litigation Reserve Charge
    1,872       900                   3,700         108       (49 )       2,772       3,700         (25 )  
 
                                                                         
TOTAL NONINTEREST EXPENSE
    10,899       9,937       9,386       9,377       9,503         10       15         20,836       15,596         34    
 
                                                                         
 
                                                                                       
Income (Loss) before Income Tax Expense
    1,257       3,283       2,407       1,959       (1,075 )       (62 )   NM         4,540       1,828         148    
Income Tax Expense (Benefit)
    263       1,019       741       541       (527 )       (74 )   NM         1,282       446         187    
 
                                                                         
NET INCOME (LOSS)
  $ 994     $ 2,264     $ 1,666     $ 1,418     $ (548 )       (56 )   NM       $ 3,258     $ 1,382         136    
 
                                                                         
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK
  $ 991     $ 2,259     $ 1,653     $ 1,405     $ (561 )       (56 )   NM       $ 3,250     $ 1,356         140    
 
                                                                         
 
                                                                                       
NET INCOME (LOSS) PER COMMON SHARE
                                                                                       
Basic Earnings per Share
  $ 0.28     $ 0.64     $ 0.47     $ 0.40     $ (0.27 )       (56 )   NM       $ 0.93     $ 0.67         39    
Diluted Earnings per Share
    0.28       0.63       0.46       0.39       (0.27 )       (56 )   NM         0.91       0.65         40    
Weighted—Average Basic Shares Outstanding
    3,493.0       3,517.5       3,514.7       3,513.5       2,042.8         (1 )     71         3,505.2       2,037.6         72    
Weighted—Average Diluted Shares Outstanding
    3,548.3       3,569.8       3,602.0       3,592.0       2,042.8         (1 )     74         3,559.0       2,096.3         70    
 
                                                                                       
FINANCIAL RATIOS
                                                                                       
ROE
    4 %     9 %     6 %     5 %   NM       (500 )bp   NM         6 %     6 %     bp  
ROE-GW
    6       15       11       9     NM         (900 )   NM         11       7         400    
ROA
    0.34       0.79       0.57       0.50     NM         (45 )   NM         0.56       0.35         21    
Effective Income Tax Rate
    21       31       31       28       49 %       (1,000 )   (2,800 )bp       28       24         400    
Overhead Ratio
    86       73       72       75       110         1,300       (2,400 )       79       88         (900 )  
 
                                                                                       
Headcount
    168,461       164,381       160,968       162,275       94,615         2 %     78 %       168,461       94,615         78 %  
                                                                           
 
(a)  
Trading NII is not included in Trading revenue. See page 10 for additional details.

Page 4


 

JPMORGAN CHASE & CO.
CONSOLIDATED BALANCE SHEETS
(in millions)
  (JPMORGANCHASE LOGO)
                                                             
                                             
                                    Heritage       Jun 30, 2005    
                                    JPMC Only       Change    
    Jun 30     Mar 31     Dec 31     Sep 30     Jun 30       Mar 31     Jun 30    
    2005     2005     2004     2004     2004       2005     2004    
ASSETS
                                                           
Cash and Due from Banks
  $ 35,092     $ 37,593     $ 35,168     $ 30,815     $ 23,525         (7 )%     49 %  
Deposits with Banks
    9,080       14,331       21,680       33,082       39,135         (37 )     (77 )  
Federal Funds Sold and Securities Purchased under Resale Agreements
    130,785       132,751       101,354       96,031       100,851         (1 )     30    
Securities Borrowed
    58,457       53,174       47,428       50,546       44,947         10       30    
Trading Assets:
                                                           
Debt and Equity Instruments
    235,803       230,725       222,832       214,852       187,640         2       26    
Derivative Receivables
    55,015       60,388       65,982       57,795       49,980         (9 )     10    
Securities
    58,573       75,251       94,512       92,816       64,915         (22 )     (10 )  
Interests in Purchased Receivables
    27,887       28,484       31,722       30,479               (2 )   NM    
Loans (Net of Allowance for Loan Losses)
    409,231       395,734       394,794       386,208       221,971         3       84    
Private Equity Investments
    6,488       7,333       7,735       8,547       6,663         (12 )     (3 )  
Accrued Interest and Accounts Receivable
    24,245       21,098       21,409       19,876       15,050         15       61    
Premises and Equipment
    9,354       9,344       9,145       8,880       6,268               49    
Goodwill
    43,537       43,440       43,203       42,947       8,731               399    
Other Intangible Assets:
                                                           
Mortgage Servicing Rights
    5,026       5,663       5,080       5,168       5,707         (11 )     (12 )  
Purchased Credit Card Relationships
    3,528       3,703       3,878       4,055       893         (5 )     295    
All Other Intangibles
    5,319       5,514       5,726       5,945       799         (4 )   NM    
Other Assets
    53,863       53,779       45,600       50,427       40,688               32    
 
                                             
TOTAL ASSETS
  $ 1,171,283     $ 1,178,305     $ 1,157,248     $ 1,138,469     $ 817,763         (1 )     43    
 
                                             
 
                                                           
LIABILITIES
                                                           
Deposits:
                                                           
U.S. Offices:
                                                           
Noninterest-Bearing
  $ 138,025     $ 130,533     $ 129,257     $ 122,054     $ 87,972         6       57    
Interest-Bearing
    263,952       271,592       261,673       254,611       141,118         (3 )     87    
Non-U.S. Offices:
                                                           
Noninterest-Bearing
    7,289       6,669       6,931       7,259       7,320         9          
Interest-Bearing
    125,374       122,585       123,595       112,530       110,129         2       14    
 
                                             
Total Deposits
    534,640       531,379       521,456       496,454       346,539         1       54    
Federal Funds Purchased and Securities Sold under Repurchase Agreements
    137,350       137,062       127,787       167,313       152,619               (10 )  
Commercial Paper
    12,842       13,063       12,605       10,307       15,300         (2 )     (16 )  
Other Borrowed Funds
    12,716       10,124       9,039       9,454       9,435         26       35    
Trading Liabilities:
                                                           
Debt and Equity Instruments
    83,011       96,090       87,942       78,767       82,338         (14 )     1    
Derivative Payables
    51,269       57,626       63,265       52,307       42,838         (11 )     20    
Accounts Payable, Accrued Expenses and Other Liabilities (including the Allowance for Lending-Related Commitments)
    77,064       72,183       75,722       68,675       56,576         7       36    
Beneficial Interests Issued by Consolidated VIEs
    43,826       44,827       48,061       45,840       6,562         (2 )   NM    
Long-Term Debt
    101,182       99,329       95,422       91,754       52,981         2       91    
Junior Subordinated Deferrable Interest Debentures Held by Trusts that Issued Guaranteed Capital Debt Securities
    11,998       11,282       10,296       11,745       6,634         6       81    
 
                                             
TOTAL LIABILITIES
    1,065,898       1,072,965       1,051,595       1,032,616       771,822         (1 )     38    
 
                                                           
STOCKHOLDERS’ EQUITY
                                                           
Preferred Stock
    139       339       339       1,009       1,009         (59 )     (86 )  
Common Stock
    3,604       3,598       3,585       3,576       2,095               72    
Capital Surplus
    73,911       73,394       72,801       72,183       14,426         1       412    
Retained Earnings
    31,032       31,253       30,209       29,779       29,596         (1 )     5    
Accumulated Other Comprehensive Income (Loss)
    (61 )     (623 )     (208 )     (242 )     (910 )       90       93    
Treasury Stock, at Cost
    (3,240 )     (2,621 )     (1,073 )     (452 )     (275 )       (24 )   NM    
 
                                             
TOTAL STOCKHOLDERS’ EQUITY
    105,385       105,340       105,653       105,853       45,941               129    
 
                                             
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 1,171,283     $ 1,178,305     $ 1,157,248     $ 1,138,469     $ 817,763         (1 )     43    
                                     

Page 5


 

JPMORGAN CHASE & CO.
CONDENSED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(in millions, except rates)
  (JPMORGANCHASE LOGO)
                                                                                         
                                    Heritage                 Heritage      
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
AVERAGE BALANCES
                                                                                       
ASSETS
                                                                                       
Deposits with Banks
  $ 18,646     $ 15,232     $ 31,799     $ 34,166     $ 26,905         22 %     (31 )%     $ 16,948     $ 24,220         (30 )%  
Federal Funds Sold and Securities Purchased under Resale Agreements
    139,864       121,189       104,038       102,042       87,080         15       61         130,580       84,818         54    
Securities Borrowed
    60,207       52,449       47,663       47,087       54,233         15       11         56,349       51,421         10    
Trading Assets — Debt Instruments
    193,660       187,669       186,013       170,663       153,548         3       26         190,681       159,968         19    
Securities
    67,705       93,438       92,294       94,720       64,148         (28 )     6         80,500       64,070         26    
Interests in Purchased Receivables
    28,082       29,277       30,491       28,917               (4 )   NM         28,676       1,268       NM    
Loans
    404,318       398,494       400,841       390,753       225,344         1       79         401,422       220,143         82    
 
                                                                         
Total Interest-Earning Assets
    912,482       897,748       893,139       868,348       611,258         2       49         905,156       605,908         49    
Trading Assets — Equity Instruments
    43,935       43,717       35,803       30,275       38,934               13         43,827       29,468         49    
All Other Noninterest-Earning Assets
    219,616       221,353       225,946       218,712       152,678         (1 )     44         220,479       151,718         45    
 
                                                                         
TOTAL ASSETS
  $ 1,176,033     $ 1,162,818     $ 1,154,888     $ 1,117,335     $ 802,870         1       46       $ 1,169,462     $ 787,094         49    
 
                                                                         
                                                                                         
LIABILITIES
                                                                                       
Interest-Bearing Deposits
  $ 394,455     $ 388,355     $ 377,368     $ 365,104     $ 254,034         2       55       $ 391,422     $ 246,120         59    
Federal Funds Purchased and Securities Sold under Repurchase Agreements
    158,268       151,335       158,633       163,206       155,335         5       2         154,821       150,354         3    
Commercial Paper
    12,496       12,665       10,885       12,497       14,283         (1 )     (13 )       12,580       13,718         (8 )  
Other Borrowings (a)
    98,936       98,259       89,674       84,387       80,364         1       23         98,600       80,375         23    
Beneficial Interests Issued by Consolidated VIEs
    43,743       45,294       46,366       43,308       7,433         (3 )     488         44,514       8,598         418    
Long-Term Debt
    111,858       108,004       104,599       101,061       57,019         4       96         109,941       55,297         99    
 
                                                                         
Total Interest-Bearing Liabilities
    819,756       803,912       787,525       769,563       568,468         2       44         811,878       554,462         46    
Noninterest-Bearing Liabilities
    250,792       253,222       261,487       242,394       186,529         (1 )     34         252,000       185,282         36    
 
                                                                         
TOTAL LIABILITIES
    1,070,548       1,057,134       1,049,012       1,011,957       754,997         1       42         1,063,878       739,744         44    
 
                                                                         
Preferred Stock
    216       339       1,002       1,009       1,009         (36 )     (79 )       277       1,009         (73 )  
Common Stockholders’ Equity
    105,269       105,345       104,874       104,369       46,864               125         105,307       46,341         127    
 
                                                                         
TOTAL STOCKHOLDERS’ EQUITY
    105,485       105,684       105,876       105,378       47,873               120         105,584       47,350         123    
 
                                                                         
TOTAL LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
  $ 1,176,033     $ 1,162,818     $ 1,154,888     $ 1,117,335     $ 802,870         1       46       $ 1,169,462     $ 787,094         49    
 
                                                                         
                                                                                         
AVERAGE RATES
                                                                                       
                                                                                         
INTEREST-EARNING ASSETS
                                                                                       
Deposits with Banks
    4.08 %     4.11 %     2.60 %     1.53 %     1.68 %     (3) bp   240 bp       4.09 %     1.66 %     243 bp  
Federal Funds Sold and Securities Purchased under Resale Agreements
    2.70       2.43       2.03       1.85       1.45         27       125         2.58       1.47         111    
Securities Borrowed
    2.08       1.71       1.34       1.01       0.66         37       142         1.91       0.72         119    
Trading Assets — Debt Instruments
    5.06       4.89       4.44       4.64       4.37         17       69         4.98       4.36         62    
Securities
    3.77       4.93       4.43       4.42       4.58         (116 )     (81 )       4.44       4.40         4    
Interests in Purchased Receivables
    3.08       2.58       2.11       1.63     NM         50     NM         2.83       1.79         104    
Loans
    6.24       6.11       5.66       5.67       4.85         13       139         6.18       4.92         126    
Total Interest-Earning Assets
    4.85       4.83       4.40       4.33       3.71         2       114         4.84       3.74         110    
                                                                                         
INTEREST-BEARING LIABILITIES
                                                                                       
Interest-Bearing Deposits
    2.39       2.09       1.76       1.44       1.29         30       110         2.24       1.33         91    
Federal Funds Purchased and Securities Sold under Repurchase Agreements
    2.69       2.48       1.96       1.53       1.17         21       152         2.59       1.20         139    
Commercial Paper
    2.42       2.00       1.65       1.08       0.79         42       163         2.21       0.76         145    
Other Borrowings (a)
    4.56       5.06       4.13       5.16       4.44         (50 )     12         4.81       4.48         33    
Beneficial Interests Issued by Consolidated VIEs
    2.92       2.44       1.97       1.58       2.04         48       88         2.68       1.79         89    
Long-Term Debt
    3.64       3.47       3.31       3.10       2.85         17       79         3.56       2.94         62    
Total Interest-Bearing Liabilities
    2.91       2.73       2.29       2.09       1.85         18       106         2.82       1.91         91    
                                                                                         
INTEREST RATE SPREAD
    1.94 %     2.10 %     2.11 %     2.24 %     1.86 %       (16 )     8         2.02 %     1.83 %       19    
 
                                                                         
NET YIELD ON INTEREST-EARNING ASSETS
    2.24 %     2.39 %     2.38 %     2.48 %     1.98 %       (15 )     26         2.31 %     2.00 %       31    
 
                                                                         
NET YIELD ON INTEREST-EARNING ASSETS ADJUSTED FOR SECURITIZATIONS
    2.76 %     2.95 %     2.95 %     3.05 %     2.40 %       (19 )     36         2.85 %     2.42 %       43    
                                                     

(a) Includes securities sold but not yet purchased.

Page 6


 

(J P MORGAN CHASE LOGO)

OPERATING BASIS

In addition to analyzing the Firm’s results on a reported basis, management reviews the Firm’s and the lines of business’ results on an “operating basis,” which is a non-GAAP financial measure. The definition of operating basis starts with the reported U.S. GAAP results. In the case of the IB, noninterest revenue on an operating basis includes, in Trading revenue, Net interest income related to trading activities. Trading activities generate revenues, which are recorded for U.S. GAAP purposes in two line items on the income statement: Trading revenue, which includes the mark-to-market gains or losses on trading positions; and Net interest income, which includes the interest income or expense related to those positions. Combining both the Trading revenue and related Net interest income enables management to evaluate IB’s trading activities, by considering all revenue related to these activities, and facilitates operating comparisons to other competitors.

In the case of Card Services, operating, or managed, basis excludes the impact of credit card securitizations on total net revenue, the Provision for credit losses, net charge-offs and loan receivables. JPMorgan Chase uses the concept of “managed receivables” to evaluate the credit performance and overall financial performance of the underlying credit card loans, both sold and not sold: as the same borrower is continuing to use the credit card for ongoing charges, a borrower’s credit performance will affect both the loan receivables sold under SFAS 140 and those not sold. Thus, in its disclosures regarding managed loan receivables, JPMorgan Chase treats the sold receivables as if they were still on the balance sheet in order to disclose the credit performance (such as net charge-off rates) of the entire managed credit card portfolio.

Operating basis also excludes merger costs, significant litigation reserve charges, and accounting policy conformity adjustments, as management believes these items are not part of the Firm’s normal daily business operations (and, therefore, are not indicative of trends) and do not provide meaningful comparisons with other periods.

Finally, commencing with the first quarter of 2005, Operating revenue (Noninterest Revenue and Net interest income) for each of the segments and the Firm is presented on a tax-equivalent basis. Accordingly, revenue from tax-exempt securities and investments that receive tax credits are presented in the operating results on a basis comparable to taxable securities and investments. This allows management to assess the comparability of revenues arising from both taxable and tax-exempt sources. The corresponding income tax impact related to these items is recorded within Income tax expense. The Corporate sector’s and the Firm’s operating revenue and income tax expense for the periods prior to the first quarter of 2005 have been restated to be similarly presented on a tax-equivalent basis. This restatement had no impact on the Corporate sector’s or the Firm’s operating results.


 

JPMORGAN CHASE & CO.
RECONCILIATION FROM REPORTED TO OPERATING BASIS SUMMARY
(in millions)
  (JPMORGANCHASE LOGO)  

JPMorgan Chase prepares its Consolidated financial statements using accounting principles generally accepted in the United States of America (“U.S. GAAP”), which is referred to as “reported basis.” This presentation provides the reader with an understanding of the Firm’s results that can be consistently tracked from year to year and enables comparisons to the Firm’s performance with other companies’ U.S. GAAP financial statements. In addition to analyzing the Firm’s results on a reported basis, management reviews line-of-business results on an “operating basis,” which is a non-GAAP financial measure. The financial information that is presented on the following pages is presented on an operating basis; for additional information, see the previous page for a more detailed definition of operating basis and the Appendix.

                                                                                         
                                    Heritage                 Heritage        
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
TOTAL NET REVENUE
                                                                                       
Total Net Revenue — Reported
  $ 12,743     $ 13,647     $ 12,950     $ 12,505     $ 8,631         (7 )%     48 %     $ 26,390     $ 17,642         50 %  
Impact of:
                                                                                       
Credit Card Securitizations
    930       917       1,011       928       486         1       91         1,847       959         93    
Accounting Policy Conformity Adjustments
                      118             NM     NM                     NM    
Tax Equivalent Adjustments
    227       176       188       28       59         29       285         403       107         277    
 
                                                                         
Total Net Revenue — Operating
  $ 13,900     $ 14,740     $ 14,149     $ 13,579     $ 9,176         (6 )     51       $ 28,640     $ 18,708         53    
 
                                                                         
                                                                                         
PROVISION FOR CREDIT LOSSES
                                                                                       
Provision for Credit Losses — Reported
  $ 587     $ 427     $ 1,157     $ 1,169     $ 203         37       189       $ 1,014     $ 218         365    
Impact of:
                                                                                       
Credit Card Securitizations
    930       917       1,011       928       486         1       91         1,847       959         93    
Accounting Policy Conformity Adjustments
                (525 )     (333 )           NM     NM                     NM    
 
                                                                         
Provision for Credit Losses — Operating
  $ 1,517     $ 1,344     $ 1,643     $ 1,764     $ 689         13       120       $ 2,861     $ 1,177         143    
 
                                                                         
                                                                                         
TOTAL NONINTEREST EXPENSE
                                                                                       
Total Noninterest Expense — Reported
  $ 10,899     $ 9,937     $ 9,386     $ 9,377     $ 9,503         10       15       $ 20,836     $ 15,596         34    
Impact of:
                                                                                       
Merger Costs
    (279 )     (145 )     (523 )     (752 )     (90 )       (92 )     (210 )       (424 )     (90 )       (371 )  
Litigation Reserve Charges
    (1,872 )     (900 )                 (3,700 )       (108 )     49         (2,772 )     (3,700 )       25    
 
                                                                         
Total Noninterest Expense — Operating
  $ 8,748     $ 8,892     $ 8,863     $ 8,625     $ 5,713         (2 )     53       $ 17,640     $ 11,806         49    
 
                                                                         
                                                                                         
INCOME TAX EXPENSE
                                                                                       
Income Tax Expense (Benefit) — Reported
  $ 263     $ 1,019     $ 741     $ 541     $ (527 )       (74 )   NM       $ 1,282     $ 446         187    
Impact of:
                                                                                       
Merger Costs
    106       55       199       290       30         93       253         161       30         437    
Litigation Reserve Charges
    711       342                   1,406         108       (49 )       1,053       1,406         (25 )  
Accounting Policy Conformity Adjustments
                199       172             NM     NM                     NM    
Tax Equivalent Adjustments
    227       176       188       28       59         29       285         403       107         277    
 
                                                                         
Income Tax Expense — Operating
  $ 1,307     $ 1,592     $ 1,327     $ 1,031     $ 968         (18 )     35       $ 2,899     $ 1,989         46    
 
                                                                         
                                                                                         
NET INCOME
                                                                                       
Net Income (Loss) — Reported
  $ 994     $ 2,264     $ 1,666     $ 1,418     $ (548 )       (56 )   NM       $ 3,258     $ 1,382         136    
Impact of:
                                                                                       
Merger Costs
    173       90       324       462       60         92       188         263       60         338    
Litigation Reserve Charges
    1,161       558                   2,294         108       (49 )       1,719       2,294         (25 )  
Accounting Policy Conformity Adjustments
                326       279             NM     NM                     NM    
 
                                                                         
Net Income — Operating
  $ 2,328     $ 2,912     $ 2,316     $ 2,159     $ 1,806         (20 )     29       $ 5,240     $ 3,736         40    
                                                     

Page 7


 

     
JPMORGAN CHASE & CO.
STATEMENTS OF INCOME — OPERATING BASIS
(in millions, except per share and ratio data)
  (JPMORGANCHASE LOGO)
                                                                                         
                                    Heritage                   Heritage        
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
REVENUE
                                                                                       
Investment Banking Fees
  $ 961     $ 993     $ 1,073     $ 879     $ 893         (3 )%     8 %     $ 1,954     $ 1,585         23 %  
Trading-Related Revenue (Including Trading NII)
    585       2,187       1,122       832       1,312         (73 )     (55 )       2,772       3,608         (23 )  
Lending & Deposit Related Fees
    851       820       903       943       412         4       107         1,671       826         102    
Asset Management, Administration and Commissions
    2,541       2,498       2,330       2,185       1,814         2       40         5,039       3,650         38    
Securities / Private Equity Gains (Losses)
    407       (45 )     569       413       460       NM       (12 )       362       892         (59 )  
Mortgage Fees and Related Income
    336       362       85       233       294         (7 )     14         698       488         43    
Credit Card Income
    1,035       919       1,036       934       324         13       219         1,954       603         224    
Other Income
    639       316       407       389       256         102       150         955       383         149    
 
                                                                         
Noninterest Revenue
    7,355       8,050       7,525       6,808       5,765         (9 )     28         15,405       12,035         28    
 
                                                                         
                                                                                         
Interest Income
    13,054       12,592       11,233       11,000       6,031         4       116         25,646       11,933         115    
Interest Expense
    6,509       5,902       4,609       4,229       2,620         10       148         12,411       5,260         136    
 
                                                                         
Net Interest Income
    6,545       6,690       6,624       6,771       3,411         (2 )     92         13,235       6,673         98    
 
                                                                         
                                                                                         
TOTAL NET REVENUE
    13,900       14,740       14,149       13,579       9,176         (6 )     51         28,640       18,708         53    
 
                                                                         
                                                                                         
Managed Provision for Credit Losses
    1,517       1,344       1,643       1,764       689         13       120         2,861       1,177         143    
                                                                                         
NONINTEREST EXPENSE
                                                                                       
Compensation Expense
    4,266       4,702       4,211       4,050       2,943         (9 )     45         8,968       6,245         44    
Occupancy Expense
    580       525       609       604       440         10       32         1,105       871         27    
Technology and Communications Expense
    896       920       1,051       1,046       786         (3 )     14         1,816       1,605         13    
Professional & Outside Services
    1,130       1,074       1,191       1,103       752         5       50         2,204       1,568         41    
Marketing
    537       483       428       506       202         11       166         1,020       401         154    
Other Expense
    954       805       981       920       511         19       87         1,759       958         84    
Amortization of Intangibles
    385       383       392       396       79         1       387         768       158         386    
 
                                                                         
TOTAL NONINTEREST EXPENSE
    8,748       8,892       8,863       8,625       5,713         (2 )     53         17,640       11,806         49    
 
                                                                         
                                                                                         
Operating Earnings before Income Tax Expense
    3,635       4,504       3,643       3,190       2,774         (19 )     31         8,139       5,725         42    
Income Tax Expense
    1,307       1,592       1,327       1,031       968         (18 )     35         2,899       1,989         46    
 
                                                                         
OPERATING EARNINGS
  $ 2,328     $ 2,912     $ 2,316     $ 2,159     $ 1,806         (20 )     29       $ 5,240     $ 3,736         40    
 
                                                                         
                                                                                         
Operating Earnings Per Common Share
                                                                                       
Diluted EPS
  $ 0.66     $ 0.81     $ 0.64     $ 0.60     $ 0.85         (19 )     (22 )     $ 1.47     $ 1.77         (17 )  
                                                                                         
Operating Financial Ratios
                                                                                       
ROE
    9 %     11 %     9 %     8 %     15 %     (200 )bp   (600 )bp       10 %     16 %     (600 )bp  
ROE-GW
    15       19       15       14       19         (400 )     (400 )       17       20         (300 )  
ROA
    0.75       0.96       0.75       0.72       0.87         (21 )     (12 )       0.85       0.92         (7 )  
Effective Income Tax Rate
    36       35       36       32       35         100       100         36       35         100    
Overhead Ratio
    63       60       63       64       62         300       100         62       63         (100 )  
                                                                                         
RECONCILIATION OF OPERATING EARNINGS PER SHARE TO NET INCOME (LOSS) PER SHARE — DILUTED
                                                                                       
Operating Earnings
  $ 0.66     $ 0.81     $ 0.64     $ 0.60     $ 0.85         (19 )%     (22 )%     $ 1.47     $ 1.77         (17 )%  
Reconciling Items (Net of Taxes):
                                                                                       
Merger Costs
    (0.05 )     (0.03 )     (0.09 )     (0.13 )     (0.03 )       (67 )     (67 )       (0.08 )     (0.03 )       (167 )  
Litigation Reserve Charge
    (0.33 )     (0.15 )                 (1.09 )       (120 )     70         (0.48 )     (1.09 )       56    
Accounting Policy Conformity
                (0.09 )     (0.08 )           NM     NM                     NM    
 
                                                                         
Net Income (Loss)
  $ 0.28     $ 0.63     $ 0.46     $ 0.39     $ (0.27 )       (56 )   NM       $ 0.91     $ 0.65         40    
                                                           

Page 8


 

     
JPMORGAN CHASE & CO.
LINE OF BUSINESS FINANCIAL HIGHLIGHTS — OPERATING BASIS
(in millions, except ratio data)
  (JPMORGANCHASE LOGO)
   
   
                                                                                         
                                    Heritage                   Heritage        
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
REVENUE
                                                                                       
Investment Bank
  $ 2,750     $ 4,180     $ 3,201     $ 2,701     $ 2,939         (34 )%     (6 )%     $ 6,930     $ 6,703         3 %  
Retail Financial Services
    3,799       3,847       3,545       3,800       1,835         (1 )     107         7,646       3,446         122    
Card Services
    3,886       3,779       3,830       3,771       1,587         3       145         7,665       3,144         144    
Commercial Banking
    900       850       885       833       334         6       169         1,750       656         167    
Treasury & Securities Services
    1,588       1,482       1,413       1,339       1,093         7       45         3,070       2,105         46    
Asset & Wealth Management
    1,343       1,361       1,310       1,193       828         (1 )     62         2,704       1,676         61    
Corporate
    (366 )     (759 )     (35 )     (58 )     560         52     NM         (1,125 )     978       NM    
 
                                                                         
TOTAL NET REVENUE
  $ 13,900     $ 14,740     $ 14,149     $ 13,579     $ 9,176         (6 )     51       $ 28,640     $ 18,708         53    
 
                                                                         
                                                                                         
OPERATING EARNINGS
                                                                                       
Investment Bank
  $ 606     $ 1,325     $ 660     $ 627     $ 644         (54 )     (6 )     $ 1,931     $ 1,661         16    
Retail Financial Services
    980       988       775       822       396         (1 )     147         1,968       602         227    
Card Services
    542       522       515       421       176         4       208         1,064       338         215    
Commercial Banking
    174       243       254       215       65         (28 )     168         417       139         200    
Treasury & Securities Services
    229       245       145       96       101         (7 )     127         474       199         138    
Asset & Wealth Management
    283       276       263       197       99         3       186         559       221         153    
Corporate
    (486 )     (687 )     (296 )     (219 )     325         29     NM         (1,173 )     576       NM    
 
                                                                         
TOTAL OPERATING EARNINGS
  $ 2,328     $ 2,912     $ 2,316     $ 2,159     $ 1,806         (20 )     29       $ 5,240     $ 3,736         40    
 
                                                                         
                                                                                         
AVERAGE EQUITY (a)
                                                                                       
Investment Bank
  $ 20,000     $ 20,000     $ 20,000     $ 20,000     $ 14,015               43       $ 20,000     $ 14,550         37    
Retail Financial Services
    13,250       13,100       13,050       13,050       5,005         1       165         13,175       5,091         159    
Card Services
    11,800       11,800       11,800       11,800       3,346               253         11,800       3,369         250    
Commercial Banking
    3,400       3,400       3,400       3,400       747               355         3,400       771         341    
Treasury & Securities Services
    1,900       1,900       1,900       1,900       3,203               (41 )       1,900       3,196         (41 )  
Asset & Wealth Management
    2,400       2,400       2,400       2,400       5,370               (55 )       2,400       5,420         (56 )  
Corporate (b)
    52,519       52,745       52,324       51,819       15,178               246         52,632       13,944         277    
 
                                                                         
TOTAL AVERAGE EQUITY
  $ 105,269     $ 105,345     $ 104,874     $ 104,369     $ 46,864               125       $ 105,307     $ 46,341         127    
 
                                                                         
                                                                                         
RETURN ON EQUITY (a)
                                                                                       
Investment Bank
    12 %     27 %     13 %     12 %     18 %     (1,500 )bp   (600 )bp       19 %     23 %     (400 )bp  
Retail Financial Services
    30       31       24       25       32         (100 )     (200 )       30       24         600    
Card Services
    18       18       17       14       21               (300 )       18       20         (200 )  
Commercial Banking
    21       29       30       25       35         (800 )     (1,400 )       25       36         (1,100 )  
Treasury & Securities Services
    48       52       30       20       13         (400 )     3,500         50       13         3,700    
Asset & Wealth Management
    47       47       44       33       7               4,000         47       8         3,900    
JPMC ROE
    9       11       9       8       15         (200 )     (600 )       10       16         (600 )  
JPMC ROE-GW
    15       19       15       14       19         (400 )     (400 )       17       20         (300 )  
                                                                     
 
(a)  
As a result of the Merger, new capital allocation methodologies were implemented during the third quarter of 2004. The capital allocated to each line of business considers several factors: stand-alone peer comparables, economic risk measures and regulatory capital requirements. In addition, effective with the third quarter of 2004, goodwill, as well as the associated capital, is only allocated to the Corporate line of business. Prior periods have not been revised to reflect these new methodologies and also may not be comparable to the presentation beginning in the third quarter of 2004.
(b)  
Effective with the third quarter of 2004, all goodwill is allocated to the Corporate line of business. Prior to the third quarter of 2004, goodwill was allocated to the various lines of business.

Page 9


 

     
JPMORGAN CHASE & CO.
INVESTMENT BANK
FINANCIAL HIGHLIGHTS
(in millions, except ratio data)
  (JP MORGAN LOGO)
                                                                                         
                                    Heritage                                 Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
INCOME STATEMENT
                                                                                       
REVENUE
                                                                                       
Investment Banking Fees:
                                                                                       
Advisory
  $ 359     $ 263     $ 250     $ 273     $ 268         37 %     34 %     $ 622     $ 415         50 %  
Equity Underwriting
    104       239       213       170       221         (56 )     (53 )       343       398         (14 )  
Debt Underwriting
    502       483       617       468       402         4       25         985       768         28    
 
                                                                         
Total Investment Banking Fees
    965       985       1,080       911       891         (2 )     8         1,950       1,581         23    
 
                                                                                       
Trading-Related Revenue:
                                                                                       
Fixed Income and Other
    940       1,915       1,173       657       1,293         (51 )     (27 )       2,855       3,178         (10 )  
Equities
    (280 )     225       (42 )     220       (86 )       NM       (226 )       (55 )     249         NM    
Credit Portfolio
    (46 )     59       (44 )     (35 )     29         NM       NM         13       85         (85 )  
 
                                                                         
Total Trading-Related Revenue (a)
    614       2,199       1,087       842       1,236         (72 )     (50 )       2,813       3,512         (20 )  
 
                                                                                       
Lending & Deposit Related Fees
    146       157       176       155       112         (7 )     30         303       208         46    
Asset Management, Administration and Commissions
    413       408       346       313       348         1       19         821       741         11    
Other Income
    270       127       178       91       45         113       500         397       59         NM    
 
                                                                         
Noninterest Revenue
    2,408       3,876       2,867       2,312       2,632         (38 )     (9 )       6,284       6,101         3    
Net Interest Income (a)
    342       304       334       389       307         13       11         646       602         7    
 
                                                                         
TOTAL NET REVENUE (b)
    2,750       4,180       3,201       2,701       2,939         (34 )     (6 )       6,930       6,703         3    
 
                                                                         
 
                                                                                       
Provision for Credit Losses
    (343 )     (366 )     (173 )     (151 )     (128 )       6       (168 )       (709 )     (316 )       (124 )  
Credit Reimbursement from TSS (c)
    38       38       43       43       2               NM         76       4         NM    
 
                                                                                       
NONINTEREST EXPENSE
                                                                                       
Compensation Expense
    1,192       1,616       1,389       992       1,126         (26 )     6         2,808       2,512         12    
Noncompensation Expense
    986       909       1,001       932       930         8       6         1,895       1,870         1    
 
                                                                         
TOTAL NONINTEREST EXPENSE
    2,178       2,525       2,390       1,924       2,056         (14 )     6         4,703       4,382         7    
 
                                                                         
 
                                                                                       
Operating Earnings Before Income Tax Expense
    953       2,059       1,027       971       1,013         (54 )     (6 )       3,012       2,641         14    
Income Tax Expense (Benefit)
    347       734       367       344       369         (53 )     (6 )       1,081       980         10    
 
                                                                         
OPERATING EARNINGS
  $ 606     $ 1,325     $ 660     $ 627     $ 644         (54 )     (6 )     $ 1,931     $ 1,661         16    
 
                                                                         
 
                                                                                       
FINANCIAL RATIOS
                                                                                       
ROE
    12 %     27 %     13 %     12 %     18 %       (1,500 )bp     (600 )bp       19 %     23 %       (400 )bp  
ROA
    0.41       0.95       0.49       0.50       0.59         (54 )     (18 )       0.67       0.78         (11 )  
Overhead Ratio
    79       60       75       71       70         1,900       900         68       65         300    
Compensation Expense as a % of Total Net Revenue
    43       39       43       37       38         400       500         41       37         400    
 
                                                                                       
REVENUE BY BUSINESS (d)
                                                                                       
Investment Banking Fees
  $ 965     $ 985     $ 1,080     $ 911     $ 891         (2 )%     8 %     $ 1,950     $ 1,581         23 %  
Fixed Income Markets
    1,418       2,289       1,530       1,115       1,572         (38 )     (10 )       3,707       3,669         1    
Equities Markets
    72       556       243       455       161         (87 )     (55 )       628       793         (21 )  
Credit Portfolio
    295       350       348       220       315         (16 )     (6 )       645       660         (2 )  
 
                                                                         
Total Net Revenue
  $ 2,750     $ 4,180     $ 3,201     $ 2,701     $ 2,939         (34 )     (6 )     $ 6,930     $ 6,703         3    
 
                                                                         
 
                                                                                       
REVENUE BY REGION
                                                                                       
Americas
  $ 1,833     $ 2,224     $ 1,829     $ 1,591     $ 1,497         (18 )     22       $ 4,057     $ 3,450         18    
Europe/Middle East/Africa
    554       1,535       1,013       741       1,032         (64 )     (46 )       2,089       2,328         (10 )  
Asia/Pacific
    363       421       359       369       410         (14 )     (11 )       784       925         (15 )  
 
                                                                         
Total Net Revenue
  $ 2,750     $ 4,180     $ 3,201     $ 2,701     $ 2,939         (34 )     (6 )     $ 6,930     $ 6,703         3    
                                                           
 
(a)  
Trading revenue, on a reported basis, excludes the impact of net interest income related to the IB’s trading activities; this income is recorded in Net interest income. However, in this presentation, to assess the profitability of the IB’s trading business, the Firm combines these revenues for segment reporting. The amount reclassified from Net interest income to Trading revenue was $207 million, $324 million, $511 million, $430 million and $427 million, during the quarters ended June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004, and June 30, 2004 and $531 million and $1.0 billion year-to-date June 30, 2005 and 2004 respectively.
(b)  
Total net revenue includes tax-equivalent adjustments, primarily due to tax-exempt income from municipal bonds and income tax credits related to affordable housing investments, of $206 million, $155 million, $167 million, $9 million and $54 million for the quarters ended June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004, and June 30, 2004, respectively. The year-to-date tax equivalent adjustments were $361 million and $98 million for 2005 and 2004, respectively.
(c)  
TSS is charged a credit reimbursement related to certain exposures managed within the IB credit portfolio on behalf of clients shared with TSS.
(d)  
See account details of Fixed Income Markets, Equities Markets and Credit Portfolio in the Composition of Revenues tables on page 12.

Page 10


 

JPMORGAN CHASE & CO.
INVESTMENT BANK
FINANCIAL HIGHLIGHTS, CONTINUED
(in millions, except headcount and rankings data)
  (JPMORGANCHASE LOGO)
                                                                                         
                                    Heritage                     Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
SELECTED BALANCE SHEETS DATA (Average)
                                                                                       
Total Assets
  $ 592,383     $ 566,778     $ 533,898     $ 496,347     $ 439,166         5 %     35 %     $ 579,651     $ 430,658         35 %  
Trading Assets — Debt and Equity Instruments
    232,980       225,367       219,466       197,150       186,975         3       25         229,194       181,881         26    
Trading Assets — Derivative Receivables
    56,436       63,574       65,417       60,465       51,925         (11 )     9         59,985       54,484         10    
Loans:
                                                                                       
Credit Portfolio
    30,435       29,236       31,289       31,129       26,192         4       16         29,838       26,956         11    
Other Loans (a)
    20,967       18,232       16,385       14,650       12,537         15       67         19,608       11,508         70    
 
                                                                         
Total Loans (b)
    51,402       47,468       47,674       45,779       38,729         8       33         49,446       38,464         29    
Adjusted Assets (c)
    453,895       445,840       432,085       401,010       373,461         2       22         449,845       370,493         21    
Equity (d)
    20,000       20,000       20,000       20,000       14,015               43         20,000       14,550         37    
 
                                                                                       
Headcount
    19,269       17,993       17,478       17,420       15,829         7       22         19,269       15,829         22    
 
                                                                                       
CREDIT DATA AND QUALITY STATISTICS
                                                                                       
Net Charge-offs (Recoveries)
  $ (47 )   $ (5 )   $ 14     $ (16 )   $ 15         NM       NM       $ (52 )   $ 49         NM    
Nonperforming Assets
                                                                                       
- Nonperforming Loans (e)
    711       814       954       1,075       1,202         (13 )     (41 )       711       1,202         (41 )  
- Other Nonperforming Assets
    235       242       242       246       339         (3 )     (31 )       235       339         (31 )  
Allowance for Loan Losses
    971       1,191       1,547       1,841       742         (18 )     31         971       742         31    
Allowance for Lending-Related Commitments
    225       296       305       358       183         (24 )     23         225       183         23    
 
                                                                                       
Net Charge-off (Recovery) Rate (b)
    (0.56 )%     (0.05 )%     0.14 %     (0.17 )%     0.18 %       (51 ) bp     (74 ) bp       (0.29 )%     0.30 %       (59 ) bp  
Allowance for Loan Losses to Average Loans (b)
    2.90       3.03       3.87       4.78       2.21         (13 )     69         2.67       2.23         44    
Allowance for Loan Losses to Nonperforming Loans (e)
    137       147       163       172       62         (1,000 )     7,500         137       62         7,500    
Nonperforming Loans to Average Loans
    1.38       1.71       2.00       2.35       3.10         (33 )     (172 )       1.44       3.13         (169 )  
 
                                                                                       
MARKET RISK — AVERAGE TRADING AND CREDIT PORTFOLIO VAR (f) (g)                                                
Trading Activities:
                                                                                       
Fixed Income (f)
  $ 82     $ 57     $ 68     $ 80     $ 77         44 %     6 %     $ 70     $ 75         (7 )%  
Foreign Exchange
    21       23       18       13       16         (9 )     31         22       19         16    
Equities
    45       18       20       25       29         150       55         32       35         (9 )  
Commodities and Other
    15       10       9       10       8         50       88         12       8         50    
Diversification
    (61 )     (43 )     (42 )     (43 )     (42 )       (42 )     (45 )       (52 )     (46 )       (13 )  
 
                                                                         
Total Trading VAR
    102       65       73       85       88         57       16         84       91         (8 )  
 
                                                                                       
Credit Portfolio VAR (g)
    13       13       13       13       15               (13 )       13       15         (13 )  
Diversification
    (13 )     (8 )     (7 )     (9 )     (9 )       (63 )     (44 )       (11 )     (8 )       (38 )  
 
                                                                         
Total Trading and Credit Portfolio VAR
  $ 102     $ 70     $ 79     $ 89     $ 94         46       9       $ 86     $ 98         (12 )  
                                                             
                                                                                     
    YTD   Full Year                                                                          
    2005   2004                                                                          
MARKET SHARES AND RANKINGS (h)
                                                                                   
Global Debt, Equity and Equity-Related
  6%/#5   7%/#3                                                                          
Global Syndicated Loans
  17%/#1   19%/#1                                                                          
Global Long-Term Debt
  6%/#4   7%/#2                                                                          
Global Equity and Equity-Related
  9%/#4   6%/#6                                                                          
Global Announced M&A
  22%/#3   25%/#2                                                                          
U.S. Debt, Equity and Equity-Related
  7%/#4   8%/#5                                                                          
U.S. Syndicated Loans
  31%/#1   32%/#1                                                                          
U.S. Long-Term Debt
  10%/#2   12%/#2                                                                          
U.S. Equity and Equity-Related
  8%/#5   8%/#6                                                                          
U.S. Announced M&A
  18%/#6   32%/#1                                                                          

(a)  
Other Loans consists of loans not directly managed by the Credit Portfolio Group and include (i) warehouse loans held as part of the IB’s mortgage-backed, asset-backed and other securitization businesses; (ii) loans held for principal investment purposes and (iii) certain other extension of loans that are directly managed outside of the Credit Portfolio Group.
(b)  
Loans include loans held-for-sale of $17,871 million, $8,154 million, $7,684 million, $7,281 million and $5,199 million for the quarters ended June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004 and June 30, 2004, respectively. The year-to-date average loans held-for-sale were $13,039 million and $5,222 million for 2005 and 2004, respectively. These amounts are not included in the allowance coverage ratios and net charge-off rates.
(c)  
Adjusted assets, a non-GAAP financial measure, equals total assets minus (i) securities purchased under resale agreements and securities borrowed less securities sold, not yet purchased; (ii) assets of variable interest entities (VIEs) consolidated under FIN 46R; (iii) cash and securities segregated and on deposit for regulatory and other purposes; and (iv) goodwill and intangibles. The amount of adjusted assets is presented to assist the reader in comparing the IB’s asset and capital levels to other investment banks in the securities industry. Asset-to-equity leverage ratios are commonly used as one measure to assess a company’s capital adequacy. The IB believes an adjusted asset amount, which excludes certain assets considered to have a low-risk profile, provides a more meaningful measure of balance sheet leverage in the securities industry.
(d)  
Equity includes $15.1 billion of economic risk capital assigned to the IB for the quarter ended June 30, 2005.
(e)  
Nonperforming loans include loans held-for-sale of $2 million, $2 million, $2 million, $4 million and $2 million at June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004, and June 30, 2004, respectively. These amounts are not included in the allowance coverage ratios.
(f)  
Includes all mark-to-market trading activities, plus available-for-sale securities held for proprietary purposes.
(g)  
Includes VAR on derivative credit valuation adjustments, credit valuation adjustment hedges and mark-to-market loan hedges, which are reported in Trading Revenue. This VAR does not include the accrual loan portfolio, which is not marked to market.
(h)  
Source: Thomson Financial Securities data. Global announced M&A is based on rank value; all other rankings are based on proceeds, with full credit to each book manager/equal if joint. Because of joint assignments, market share of all participants will add up to more than 100%. The market share and rankings for the year ended December 31, 2004 are presented on a combined basis, as if the merger of JPMorgan Chase and Bank One had been in effect during the period.

Page 11


 

JPMORGAN CHASE & CO.
INVESTMENT BANK
FINANCIAL HIGHLIGHTS, CONTINUED
(in millions)
  (JPMORGANCHASE LOGO)
                                                         
    SECOND QUARTER 2005  
                                           
COMPOSITION OF REVENUES                     Asset Management,                    
    Investment     Trading-Related     Lending & Deposit     Administration and     Other     Net Interest     Total Net  
    Banking Fees     Revenue     Related Fees     Commissions     Income     Income     Revenue  
Investment Banking Fees
  $ 965     $     $     $     $     $     $ 965  
Fixed Income Markets
          940       61       50       192       175       1,418  
Equities Markets
          (280 )           350       (17 )     19       72  
Credit Portfolio
          (46 )     85       13       95       148       295  
 
                                         
Total Net Revenue
  $ 965     $ 614     $ 146     $ 413     $ 270     $ 342     $ 2,750  
 
                                         
                                                         
    HERITAGE JPMC  
    SECOND QUARTER 2004  
                                           
                      Asset Management,                    
    Investment     Trading-Related     Lending & Deposit     Administration and     Other     Net Interest     Total Net  
    Banking Fees     Revenue     Related Fees     Commissions     Income     Income     Revenue  
Investment Banking Fees
  $ 891     $     $     $     $     $     $ 891  
Fixed Income Markets
          1,293       28       59       63       129       1,572  
Equities Markets
          (86 )           279       (52 )     20       161  
Credit Portfolio
          29       84       10       34       158       315  
 
                                         
Total Net Revenue
  $ 891     $ 1,236     $ 112     $ 348     $ 45     $ 307     $ 2,939  
 
                                         
                                                         
    YEAR-TO-DATE 2005  
                                           
                      Asset Management,                    
    Investment     Trading-Related     Lending & Deposit     Administration and     Other     Net Interest     Total Net  
    Banking Fees     Revenue     Related Fees     Commissions     Income     Income     Revenue  
Investment Banking Fees
  $ 1,950     $     $     $     $     $     $ 1,950  
Fixed Income Markets
          2,855       126       114       296       316       3,707  
Equities Markets
          (55 )           683       (37 )     37       628  
Credit Portfolio
          13       177       24       138       293       645  
 
                                         
Total Net Revenue
  $ 1,950     $ 2,813     $ 303     $ 821     $ 397     $ 646     $ 6,930  
 
                                         
                                                         
    HERITAGE JPMC  
    YEAR-TO-DATE 2004  
                                           
                      Asset Management,                    
    Investment     Trading-Related     Lending & Deposit     Administration and     Other     Net Interest     Total Net  
    Banking Fees     Revenue     Related Fees     Commissions     Income     Income     Revenue  
Investment Banking Fees
  $ 1,581     $     $     $     $     $     $ 1,581  
Fixed Income Markets
          3,178       54       119       112       206       3,669  
Equities Markets
          249             604       (99 )     39       793  
Credit Portfolio
          85       154       18       46       357       660  
 
                                         
Total Net Revenue
  $ 1,581     $ 3,512     $ 208     $ 741     $ 59     $ 602     $ 6,703  
 
                                         

Page 12


 

JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES
FINANCIAL HIGHLIGHTS
(in millions, except ratio and headcount data)
  (JPMORGANCHASE LOGO)
                                                                                         
                                    Heritage                       Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
INCOME STATEMENT
                                                                                       
REVENUE
                                                                                       
Lending & Deposit Related Fees
  $ 358     $ 340     $ 373     $ 395     $ 124         5 %     189 %     $ 698     $ 245         185 %  
Asset Management, Administration and Commissions (a)
    369       394       368       375       132         (6 )     180         763       277         175    
Securities / Private Equity Gains (Losses)
          10       (89 )     6             NM     NM         10             NM    
Mortgage Fees and Related Income (a)
    341       368       117       211       333         (7 )     2         709       538         32    
Credit Card Income
    105       94       97       89       25         12       320         199       44         352    
Other Income
    68       (12 )     27       18       10       NM     NM         56       (14 )     NM    
 
                                                                         
Noninterest Revenue
    1,241       1,194       893       1,094       624         4       99         2,435       1,090         123    
Net Interest Income
    2,558       2,653       2,652       2,706       1,211         (4 )     111         5,211       2,356         121    
 
                                                                         
TOTAL NET REVENUE
    3,799       3,847       3,545       3,800       1,835         (1 )     107         7,646       3,446         122    
 
                                                                         
                                                                                         
Provision for Credit Losses
    94       94       78       239       78               21         188       132         42    
                                                                                         
NONINTEREST EXPENSE
                                                                                       
Compensation Expense
    820       822       807       855       450               82         1,642       959         71    
Noncompensation Expense
    1,181       1,215       1,276       1,250       680         (3 )     74         2,396       1,411         70    
Amortization of Intangibles
    125       125       132       133       1             NM         250       2       NM    
 
                                                                         
TOTAL NONINTEREST EXPENSE
    2,126       2,162       2,215       2,238       1,131         (2 )     88         4,288       2,372         81    
 
                                                                         
                                                                                         
Operating Earnings Before Income Tax Expense
    1,579       1,591       1,252       1,323       626         (1 )     152         3,170       942         237    
Income Tax Expense (Benefit)
    599       603       477       501       230         (1 )     160         1,202       340         254    
 
                                                                         
OPERATING EARNINGS
  $ 980     $ 988     $ 775     $ 822     $ 396         (1 )     147       $ 1,968     $ 602         227    
 
                                                                         
                                                                                         
FINANCIAL RATIOS
                                                                                       
ROE
    30 %     31 %     24 %     25 %     32 %     (100 )bp   (200 )bp       30 %     24 %     600 bp  
ROA
    1.74       1.78       1.35       1.44       1.09         (4 )     65         1.76       0.85         91    
Overhead Ratio
    56       56       62       59       62               (600 )       56       69         (1,300 )  
                                                                                         
SELECTED BALANCE SHEETS (Ending)
                                                                                       
Total Assets
  $ 223,391     $ 224,562     $ 226,560     $ 227,952     $ 148,682         (1 )%     50 %     $ 223,391     $ 148,682         50 %  
Loans (b)
    197,927       199,215       202,473       201,116       131,712         (1 )     50         197,927       131,712         50    
Core Deposits (c)
    159,702       162,241       156,885       154,589       80,100         (2 )     99         159,702       80,100         99    
Total Deposits
    185,558       187,225       182,372       180,307       79,937         (1 )     132         185,558       79,937         132    
                                                                                         
SELECTED BALANCE SHEETS (Average)
                                                                                       
Total Assets
  $ 225,574     $ 225,120     $ 228,647     $ 227,716     $ 146,693               54       $ 225,348     $ 143,210         57    
Loans (d)
    197,707       198,494       202,419       198,244       128,225               54         198,098       124,791         59    
Core Deposits (c)
    161,044       159,682       159,015       158,800       84,897         1       90         160,367       82,189         95    
Total Deposits
    186,523       184,336       183,105       183,501       93,565         1       99         185,435       91,000         104    
Equity
    13,250       13,100       13,050       13,050       5,005         1       165         13,175       5,091         159    
                                                                                         
Headcount
    59,631       59,322       59,632       60,691       30,480         1       96         59,631       30,480         96    
                                                                                         
CREDIT DATA AND QUALITY STATISTICS
                                                                                       
Net Charge-offs
  $ 114     $ 152     $ 606     $ 219     $ 80         (25 )     43       $ 266     $ 165         61    
Nonperforming Loans (e)
    1,132       1,150       1,161       1,308       519         (2 )     118         1,132       519         118    
Nonperforming Assets
    1,319       1,351       1,385       1,557       693         (2 )     90         1,319       693         90    
Allowance for Loan Losses
    1,135       1,168       1,228       1,764       1,061         (3 )     7         1,135       1,061         7    
                                                                                         
Net Charge-off Rate (d)
    0.25 %     0.34 %     1.28 %     0.47 %     0.29 %     (9 )bp   (4 )bp       0.29 %     0.30 %     (1 )bp  
Allowance for Loan Losses to Ending Loans (b)
    0.61       0.64       0.67       0.94       0.90         (3 )     (29 )       0.61       0.90         (29 )  
Allowance for Loan Losses to Nonperforming Loans (e)
    103       104       107       143       223         (100 )     (12,000 )       103       223         (12,000 )  
Nonperforming Loans to Total Loans
    0.57       0.58       0.57       0.65       0.39         (1 )     18         0.57       0.39         18    
                                                                         
 
(a)  
Reflects the transfer of certain insurance revenues from Mortgage Fees and Related Income to Asset Management, Administration and Commissions.
(b)  
End-of-period loans include loans held-for-sale of $13,112 million, $16,532 million, $18,022 million, $12,816 million and $14,217 million at June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004, and June 30, 2004, respectively. These amounts are not included in the allowance coverage ratios.
(c)  
Includes demand and savings deposits.
(d)  
Average loans include loans held-for-sale of $14,620 million, $15,861 million, $13,534 million, $14,479 million and $15,638 million for the quarters ended June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004, and June 30, 2004, respectively. The year-to-date average loans held-for-sale were $15,237 million and $15,475 million for 2005 and 2004, respectively. These amounts are not included in the net charge-off rate.
(e)  
Nonperforming loans include loans held-for-sale of $26 million, $31 million, $13 million, $74 million and $44 million at June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004, and June 30, 2004, respectively. These amounts are not included in the allowance coverage ratios.

Page 13


 

JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES
FINANCIAL HIGHLIGHTS, CONTINUED
(in millions, except ratio data and where otherwise noted)
  (JPMORGANCHASE LOGO)
                                                                                         
                                    Heritage                       Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
RETAIL BUSINESSES
                                                                                       
HOME FINANCE
                                                                                       
PRIME PRODUCTION AND SERVICING
                                                                                       
Production
  $ 135     $ 228     $ 196     $ 168     $ 186         (41 )%     (27 )%     $ 363     $ 364         %  
Servicing:
                                                                                       
Mortgage Servicing Revenue, Net of Amortization
    142       146       169       134       193         (3 )     (26 )       288       348         (17 )  
MSR Risk Management Results
    166       106       (187 )     153       86         57       93         272       147         85    
 
                                                                         
Total Net Revenue
    443       480       178       455       465         (8 )     (5 )       923       859         7    
Noninterest Expense
    229       229       266       296       264               (13 )       458       553         (17 )  
Operating Earnings
    136       158       (56 )     103       128         (14 )     6         294       193         52    
                                                                                         
CONSUMER REAL ESTATE LENDING
                                                                                       
Total Net Revenue
  $ 707     $ 713     $ 725     $ 704     $ 512         (1 )     38       $ 1,420     $ 947         50    
Provision for Credit Losses
    38       30       (20 )     65       38         27               68       29         134    
Noninterest Expense
    234       238       283       264       172         (2 )     36         472       375         26    
Operating Earnings
    277       284       295       237       193         (2 )     44         561       349         61    
                                                                                         
TOTAL HOME FINANCE
                                                                                       
Total Net Revenue
  $ 1,150     $ 1,193     $ 903     $ 1,159     $ 977         (4 )     18       $ 2,343     $ 1,806         30    
Provision for Credit Losses
    38       30       (20 )     65       38         27               68       29         134    
Noninterest Expense
    463       467       549       560       436         (1 )     6         930       928            
Operating Earnings
    413       442       239       340       321         (7 )     29         855       542         58    
                                                                                         
Origination Volume by Channel (in billions)
                                                                                       
Retail
  $ 22.8     $ 18.3     $ 18.5     $ 19.7     $ 20.8         25       10       $ 41.1     $ 36.0         14    
Wholesale
    13.2       10.7       11.7       11.6       15.7         23       (16 )       23.9       25.2         (5 )  
Correspondent
    3.6       2.3       4.2       5.4       7.9         57       (54 )       5.9       13.2         (55 )  
Correspondent Negotiated Transactions
    7.1       7.2       10.0       11.3       12.5         (1 )     (43 )       14.3       20.2         (29 )  
 
                                                                         
Total
    46.7       38.5       44.4       48.0       56.9         21       (18 )       85.2       94.6         (10 )  
                                                                                         
Origination Volume by Business (in billions)
                                                                                       
Mortgage
  $ 30.9     $ 26.6     $ 32.4     $ 34.1     $ 47.1         16       (34 )     $ 57.5     $ 78.1         (26 )  
Home Equity
    15.8       11.9       12.0       13.9       9.8         33       61         27.7       16.5         68    
 
                                                                         
Total
    46.7       38.5       44.4       48.0       56.9         21       (18 )       85.2       94.6         (10 )  
                                                                                         
Business Metrics (in billions)
                                                                                       
Loans Serviced — Mortgage (Ending) (a)
  $ 501.7     $ 495.8     $ 492.5     $ 486.8     $ 464.6         1       8       $ 501.7     $ 464.6         8    
MSR Net Carrying Value (Ending)
    5.0       5.7       5.1       5.2       5.7         (12 )     (12 )       5.0       5.7         (12 )  
End of Period Loans Owned
                                                                                       
Mortgage Loans Held-for-Sale
    11.2       9.6       14.2       9.5       13.6         17       (18 )       11.2       13.6         (18 )  
Mortgage Loans Retained
    47.4       46.0       42.6       46.5       40.5         3       17         47.4       40.5         17    
Home Equity and Other Loans
    72.3       68.8       67.9       67.3       29.8         5       143         72.3       29.8         143    
 
                                                                         
Total End of Period Loans Owned
    130.9       124.4       124.7       123.3       83.9         5       56         130.9       83.9         56    
Average Loans Owned
                                                                                       
Mortgage Loans Held-for-Sale
    10.5       11.4       10.1       10.9       14.6         (8 )     (28 )       10.9       13.8         (21 )  
Mortgage Loans Retained
    47.0       44.3       44.6       44.0       38.2         6       23         45.7       37.0         24    
Home Equity and Other Loans
    69.1       66.5       70.1       66.2       27.0         4       156         67.8       25.6         165    
 
                                                                         
Total Average Loans Owned
    126.6       122.2       124.8       121.1       79.8         4       59         124.4       76.4         63    
Overhead Ratio
    40 %     39 %     61 %     48 %     45 %     100 bp   (500 )bp       40 %     51 %     (1,100 )bp  
                                                                                         
Credit Quality Statistics
                                                                                       
30+ Day Delinquency Rate (b)
    1.17 %     1.15 %     1.27 %     1.50 %     1.18 %       2       (1 )       1.17 %     1.18 %       (1 )  
Net Charge-offs
                                                                                       
Mortgage
  $ 8     $ 6     $ 5     $ 6     $ 5         33 %     60 %     $ 14     $ 8         75 %  
Home Equity and Other Loans
    30       35       449       57       23         (14 )     30         65       48         35    
 
                                                                         
Total Net Charge-offs
    38       41       454       63       28         (7 )     36         79       56         41    
Net Charge-off Rate
                                                                                       
Mortgage
    0.07 %     0.05 %     0.04 %     0.05 %     0.05 %     2 bp   2 bp       0.06 %     0.04 %     2 bp  
Home Equity and Other Loans
    0.17       0.21       2.55       0.34       0.34         (4 )     (17 )       0.19       0.38         (19 )  
Total Net Charge-off Rate (c)
    0.13       0.15       1.57       0.23       0.17         (2 )     (4 )       0.14       0.18         (4 )  
Nonperforming Assets
  $ 799     $ 841     $ 844     $ 997     $ 468         (5 )%     71 %     $ 799     $ 468         71 %  
                                                                         
 
(a)  
Includes prime first mortgage loans and subprime loans.
(b)  
Excludes delinquencies related to loans eligible for repurchase as well as loans repurchased from GNMA pools that are insured by government agencies of $0.7 billion, $0.7 billion, $0.9 billion, $0.9 billion, and $1.1 billion for June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004 and June 30, 2004 respectively. These amounts are excluded as reimbursement is proceeding normally.
(c)  
Excludes mortgage loans held for sale.

Page 14


 

JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES
FINANCIAL HIGHLIGHTS, CONTINUED
(in millions, except ratio data and where otherwise noted)
  (JPMORGANCHASE LOGO)
                                                                                         
                                    Heritage                       Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
RETAIL BUSINESSES, CONTINUED
                                                                                       
CONSUMER & SMALL BUSINESS BANKING
                                                                                       
Noninterest Revenue
  $ 741     $ 729     $ 710     $ 734     $ 222         2 %     234 %     $ 1,470     $ 420         250 %  
Net Interest Income
    1,364       1,428       1,395       1,342       393         (4 )     247         2,792       784         256    
 
                                                                         
Total Net Revenue
    2,105       2,157       2,105       2,076       615         (2 )     242         4,262       1,204         254    
Provision for Credit Losses
    25       36       39       79       20         (31 )     25         61       47         30    
Noninterest Expense
    1,362       1,339       1,362       1,379       593         2       130         2,701       1,240         118    
Operating Earnings (Loss)
    437       477       430       377       2         (8 )   NM         914       (47 )     NM    
                                                                                         
Business Metrics (in billions)
                                                                                       
End-of-Period Balances
Small Business Loans
  $ 12.5     $ 12.4     $ 12.5     $ 12.4     $ 2.2         1       468       $ 12.5     $ 2.2         468    
Consumer and Other Loans (a)
    1.8       2.2       2.2       2.3       1.9         (18 )     (5 )       1.8       1.9         (5 )  
 
                                                                         
Total Loans
    14.3       14.6       14.7       14.7       4.1         (2 )     249         14.3       4.1         249    
Core Deposits (b)
    147.9       150.8       146.3       144.5       69.7         (2 )     112         147.9       69.7         112    
Total Deposits
    173.7       175.7       171.8       170.2       79.5         (1 )     118         173.7       79.5         118    
Average Balances
                                                                                       
Small Business Loans
    12.4       12.4       12.4       12.4       2.2               464         12.4       2.2         464    
Consumer and Other Loans (a)
    1.9       2.6       2.2       2.3       1.9         (27 )             2.3       2.0         15    
 
                                                                         
Total Loans
    14.3       15.0       14.6       14.7       4.1         (5 )     249         14.7       4.2         250    
Core Deposits (b)
    149.3       149.3       147.8       147.8       72.1               107         149.3       71.1         110    
Total Deposits
    174.8       173.9       171.8       172.5       80.7         1       117         174.4       79.8         119    
                                                                                         
Number of:
                                                                                       
Branches
    2,539       2,517       2,508       2,467       569         22 #     1,970 #       2,539       569         1,970 #  
ATMs
    6,961       6,687       6,650       6,587       1,921         274       5,040         6,961       1,921         5,040    
Personal Bankers
    6,258       5,798       5,750       5,744       1,705         460       4,553         6,258       1,705         4,553    
Personal Checking Accounts (in thousands)
    7,662       7,445       7,286       7,222       1,982         217       5,680         7,662       1,982         5,680    
Business Checking Accounts (in thousands)
    918       905       894       891       352         13       566         918       352         566    
Active Online Customers (in thousands)
    4,053       3,671       3,359       3,152     NA         382     NM         4,053     NA       NM    
Debit Cards Issued (in thousands)
    8,834       8,596       8,392       8,282       2,430         238       6,404         8,834       2,430         6,404    
Overhead Ratio
    65 %     62 %     65 %     66 %     96 %     300 bp   (3,100 )bp       63 %     103 %     (4,000 )bp  
                                                                                         
Retail Brokerage Business Metrics
                                                                                       
Investment Sales Volume
  $ 2,907     $ 2,870     $ 2,770     $ 2,563     $ 1,047         1 %     178 %     $ 5,777     $ 1,991         190 %  
Number of Dedicated Investment Sales Representatives
    1,422       1,352       1,364       1,393       390         5       265         1,422       390         265    
                                                                                         
Credit Quality Statistics
                                                                                       
Net Charge-offs
                                                                                       
Small Business
  $ 25     $ 19     $ 32     $ 24     $ 12         32       108       $ 44     $ 21         110    
Consumer and Other Loans
    4       9       24       36       9         (56 )     (56 )       13       17         (24 )  
 
                                                                         
Total Net Charge-Offs
    29       28       56       60       21         4       38         57       38         50    
Net Charge-off Rate
                                                                                       
Small Business
    0.81 %     0.62 %     1.03 %     0.77 %     2.19 %     19 bp   (138 )bp       0.72 %     1.92 %     (120 )bp  
Consumer and Other Loans
    0.84       1.40       4.34       6.23       1.91         (56 )     (107 )       1.14       1.71         (57 )  
Total Net Charge-Off Rate
    0.81       0.76       1.53       1.62       2.06         5       (125 )       0.78       1.82         (104 )  
Nonperforming Assets
  $ 284     $ 293     $ 299     $ 313     $ 85         (3 )%     234 %     $ 284     $ 85         234 %  
                                                                         
 
(a)  
Primarily community development loans.
(b)  
Includes demand and savings deposits.

Page 15


 

JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES
FINANCIAL HIGHLIGHTS, CONTINUED
(in millions, except ratio data and where otherwise noted)
  (JP MORGAN CHASE LOGO)
                                                                                         
                                    Heritage                       Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
RETAIL BUSINESSES
                                                                                       
AUTO & EDUCATION FINANCE
                                                                                       
Total Net Revenue
  $ 395     $ 324     $ 364     $ 397     $ 218         22 %     81 %     $ 719     $ 384         87 %  
Provision for Credit Losses
    31       28       59       95       20         11       55         59       56         5    
Noninterest Expense
    170       205       166       163       80         (17 )     113         375       161         133    
Operating Earnings
    118       55       84       85       71         115       66         173       101         71    
Business Metrics (in billions)
                                                                                       
End-of-Period Loans and Lease Receivables
                                                                                       
Loans Outstanding
  $ 46.2     $ 52.8     $ 54.6     $ 53.7     $ 34.9         (13 )     32       $ 46.2     $ 34.9         32    
Lease Receivables
    6.1       7.0       8.0       8.9       8.6         (13 )     (29 )       6.1       8.6         (29 )  
 
                                                                         
Total End-of-Period Loans and Lease Receivables
    52.3       59.8       62.6       62.6       43.5         (13 )     20         52.3       43.5         20    
Average Loans and Lease Receivables
                                                                                       
Loans Outstanding (Average) (a)
  $ 49.8     $ 53.3     $ 54.2     $ 52.9     $ 35.2         (7 )     41       $ 51.5     $ 35.1         47    
Lease Receivables (Average)
    6.6       7.6       8.4       9.2       8.9         (13 )     (26 )       7.1       9.1         (22 )  
 
                                                                         
Total Average Loans and Lease Receivables (a)
    56.4       60.9       62.6       62.1       44.1         (7 )     28         58.6       44.2         33    
Overhead Ratio
    43 %     63 %     46 %     41 %     37 %     (2,000 )bp   600 bp       52 %     42 %     1,000 bp  
Credit Quality Statistics
                                                                                       
30+ Day Delinquency Rate
    1.46 %     1.33 %     1.55 %     1.38 %     1.04 %       13       42         1.46 %     1.04 %       42    
Net Charge-offs
                                                                                       
Loans
  $ 45     $ 74     $ 85     $ 83     $ 23         (39 )%     96 %     $ 119     $ 51         133 %  
Lease Receivables
    2       9       11       13       8         (78 )     (75 )       11       20         (45 )  
 
                                                                         
Total Net Charge-offs
    47       83       96       96       31         (43 )     52         130       71         83    
Net Charge-off Rate Loans (a)
    0.39 %     0.61 %     0.67 %     0.65 %     0.27 %     (22 )bp   12 bp       0.51 %     0.31 %     20 bp  
Lease Receivables
    0.12       0.48       0.52       0.56       0.36         (36 )     (24 )       0.31       0.44         (13 )  
Total Net Charge-off Rate (a)
    0.36       0.60       0.65       0.64       0.29         (24 )     7         0.48       0.34         14    
Nonperforming Assets
  $ 236     $ 217     $ 242     $ 247     $ 140         9 %     69 %     $ 236     $ 140         69 %  
INSURANCE
                                                                                       
Total Net Revenue
  $ 149     $ 173     $ 173     $ 168     $ 25         (14 )     496       $ 322     $ 52       NM    
Noninterest Expense
    131       151       138       136       22         (13 )     495         282       43       NM    
Operating Earnings
    12       14       22       20       2         (14 )     500         26       6         333    
Memo:
                                                                                       
Consolidated Gross Insurance-Related Revenue (b)
    404       416       421       429       165         (3 )     145         820       341         140    
Business Metrics — Ending Balances
                                                                                       
Invested Assets
  $ 7,641     $ 7,349     $ 7,368     $ 7,489     $ 1,729         4       342       $ 7,641     $ 1,729         342    
Policy Loans
    394       394       397       398                   NM         394             NM    
Insurance Policy and Claims Reserves
    7,562       7,337       7,279       7,477       1,255         3     NM         7,562       1,255       NM    
Term Life Premiums — First Year Annualized
    16       14       13       15               14     NM         30             NM    
Term Life Premiums — First Year Annualized and Renewals
    122       110       119       115               11     NM         232             NM    
Proprietary Annuity Sales
    282       119       35       39       58         137       386         401       134         199    
Number of Policies in Force — Direct / Assumed (in thousands)
    2,454       2,540       2,611       2,633       608         (3 )     304         2,454       608         304    
Insurance in Force — Direct / Assumed
    280,176       280,082       277,827       274,390       33,772             NM         280,176       33,772       NM    
Insurance in Force — Retained
    83,324       83,799       80,691       76,727       33,772         (1 )     147         83,324       33,772         147    
A.M. Best Rating
    A       A       A       A       A                           A       A              
                                                                         
 
(a)  
Average loans include loans held-for-sale of $4.1 billion, $4.5 billion, $3.4 billion, $2.2 billion and $1.1 billion for the quarters ended June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004, and June 30, 2004, respectively. The year-to-date average loans held-for-sale were $4.3 billion and $1.7 billion for 2005 and 2004, respectively. These are not included in the net charge-off rate.
(b)  
Includes revenue reported in the results of other businesses.

Page 16


 

JPMORGAN CHASE & CO.
CARD SERVICES — MANAGED BASIS
FINANCIAL HIGHLIGHTS
(in millions, except ratio data and where otherwise noted)
  (JP MORGAN CHASE LOGO)
                                                                                         
                                    Heritage                       Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
INCOME STATEMENT
                                                                                       
REVENUE
                                                                                       
Asset Management, Administration and Commissions
  $     $     $     $ 26     $ 25       NM     NM       $     $ 49       NM    
Credit Card Income
    868       761       886       784       271         14 %     220 %       1,629       509         220 %  
Other Income
    42       11       31       44       20         282       110         53       42         26    
 
                                                                         
Noninterest Revenue
    910       772       917       854       316         18       188         1,682       600         180    
Net Interest Income
    2,976       3,007       2,913       2,917       1,271         (1 )     134         5,983       2,544         135    
 
                                                                         
TOTAL NET REVENUE
    3,886       3,779       3,830       3,771       1,587         3       145         7,665       3,144         144    
 
                                                                         
Provision for Credit Losses
    1,641       1,636       1,735       1,662       748               119         3,277       1,454         125    
NONINTEREST EXPENSE
                                                                                       
Compensation Expense
    291       285       270       317       150         2       94         576       306         88    
Noncompensation Expense
    904       839       825       926       353         8       156         1,743       734         137    
Amortization of Intangibles
    188       189       187       194       62         (1 )     203         377       124         204    
 
                                                                         
TOTAL NONINTEREST EXPENSE
    1,383       1,313       1,282       1,437       565         5       145         2,696       1,164         132    
 
                                                                         
Operating Earnings Before Income Tax Expense
    862       830       813       672       274         4       215         1,692       526         222    
Income Tax Expense
    320       308       298       251       98         4       227         628       188         234    
 
                                                                         
OPERATING EARNINGS
  $ 542     $ 522     $ 515     $ 421     $ 176         4       208       $ 1,064     $ 338         215    
 
                                                                         
Memo: Net Securitization Gains (Amortization)
  $ 15     $ (12 )   $     $ (2 )   $ (4 )     NM     NM       $ 3     $ (6 )     NM    
 
                                                                         
FINANCIAL METRICS
                                                                                       
ROE
    18 %     18 %     17 %     14 %     21 %     bp   (300 )bp       18 %     20 %     (200 )bp  
Overhead Ratio
    36       35       33       38       36         100               35       37         (200 )  
% of Average Managed Outstandings:
                                                                                       
Net Interest Income
    8.83       9.13       8.79       8.90       9.98         (30 )     (115 )       8.98       9.97         (99 )  
Provision for Credit Losses
    4.87       4.97       5.24       5.07       5.88         (10 )     (101 )       4.92       5.70         (78 )  
Noninterest Revenue
    2.70       2.34       2.77       2.61       2.48         36       22         2.52       2.35         17    
Risk Adjusted Margin (a)
    6.66       6.51       6.32       6.44       6.59         15       7         6.58       6.62         (4 )  
Noninterest Expense
    4.10       3.99       3.87       4.39       4.44         11       (34 )       4.05       4.56         (51 )  
Pre-tax Income
    2.56       2.52       2.45       2.05       2.15         4       41         2.54       2.06         48    
Operating Earnings
    1.61       1.58       1.55       1.28       1.38         3       23         1.60       1.32         28    
BUSINESS METRICS
                                                                                       
Charge Volume (in billions)
  $ 75.6     $ 70.3     $ 75.3     $ 73.3     $ 23.5         8 %     222 %     $ 145.9     $ 45.0         224 %  
Net Accounts Opened (in thousands)
    2,789       2,744       2,729       2,755       1,013         2       175         5,533       2,039         171    
Credit Cards Issued (in thousands)
    95,465       94,367       94,285       95,946       35,529         1       169         95,465       35,529         169    
Number of Registered Internet Customers (in millions)
    12.0       10.9       13.6       12.4       4.5         10       167         12.0       4.5         167    
Merchant Acquiring Business Bank Card Volume (in billions)
  $ 141.2     $ 125.1     $ 135.9     $ 123.5     $ 71.8         13       97       $ 266.3     $ 136.8         95    
Total Transactions (in millions)
    4,735       4,285       4,462       3,972       1,875         11       153         9,020       3,632         148    
                                                                         
 
(a)  
Represents Total net revenue less Provision for credit losses.

Page 17


 

JPMORGAN CHASE & CO.
CARD SERVICES — MANAGED BASIS
FINANCIAL HIGHLIGHTS, CONTINUED
(in millions, except headcount and ratio data)
  (JPMORGANCHASE LOGO)
                                                                                         
                                    Heritage                       Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
SELECTED ENDING BALANCES
                                                                                       
Loans:
                                                                                       
Loans on Balance Sheets
  $ 68,510     $ 66,053     $ 64,575     $ 60,241     $ 17,182         4 %     299 %     $ 68,510     $ 17,182         299 %  
Securitized Loans
    68,808       67,328       70,795       71,256       34,138         2       102         68,808       34,138         102    
 
                                                                         
Managed Loans
  $ 137,318     $ 133,381     $ 135,370     $ 131,497     $ 51,320         3       168       $ 137,318     $ 51,320         168    
 
                                                                         
                                                                                         
SELECTED AVERAGE BALANCES
                                                                                       
Managed Assets
  $ 140,741     $ 138,512     $ 138,013     $ 136,753     $ 51,510         2       173       $ 139,632     $ 51,630         170    
Loans:
                                                                                       
Loans on Balance Sheets
  $ 67,131     $ 64,218     $ 61,317     $ 59,386     $ 17,155         5       291       $ 65,683     $ 17,096         284    
Securitized Loans
    68,075       69,370       70,505       70,980       34,052         (2 )     100         68,718       34,239         101    
 
                                                                         
Managed Loans
  $ 135,206     $ 133,588     $ 131,822     $ 130,366     $ 51,207         1       164       $ 134,401     $ 51,335         162    
 
                                                                         
Equity
    11,800       11,800       11,800       11,800       3,346               253         11,800       3,369         250    
                                                                                         
Headcount
    20,647       20,137       19,598       20,473       9,975         3 %     107 %       20,647       9,975         107 %  
                                                                                         
CREDIT QUALITY STATISTICS
                                                                                       
Net Charge-offs
  $ 1,641     $ 1,590     $ 1,735     $ 1,598     $ 745         3       120       $ 3,231     $ 1,488         117    
Net Charge-off Rate
    4.87 %     4.83 %     5.24 %     4.88 %     5.85 %     4 bp   (98 )bp       4.85 %     5.83 %     (98 )bp  
                                                                                         
Delinquency ratios
                                                                                       
30+ days
    3.34 %     3.54 %     3.70 %     3.81 %     4.26 %       (20 )     (92 )       3.34 %     4.26 %       (92 )  
90+ days
    1.54       1.71       1.72       1.75       1.94         (17 )     (40 )       1.54       1.94         (40 )  
                                                                                         
Allowance for Loan Losses
  $ 3,055     $ 3,040     $ 2,994     $ 2,273     $ 1,191         %     157 %     $ 3,055     $ 1,191         157 %  
Allowance for Loan Losses to Period-end Loans (a)
    4.46 %     4.60 %     4.64 %     3.77 %     6.93 %     (14 )bp   (247 )bp       4.46 %     6.93 %     (247 )bp  
                                                                         
 
(a)  
The heritage Bank One seller’s interest was decertificated effective July 1, 2004, and is reported in Loans on the Consolidated balance sheets. As a result, the Allowance for Loan Losses to Period-end Loans ratio beginning September 30, 2004, declined as the remaining portion of the decertificated seller’s interest was recorded at fair value without a corresponding allowance for loan loss.

Page 18


 

JPMORGAN CHASE & CO.
CARD RECONCILIATION OF REPORTED AND MANAGED DATA
(in millions)
  (JPMORGANCHASE LOGO)
                                                                                         
                                    Heritage                       Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
INCOME STATEMENT DATA (a)
                                                                                       
Credit Card Income
                                                                                       
Reported Data for the period
  $ 1,596     $ 1,576     $ 1,672     $ 1,632     $ 578         1 %     176 %     $ 3,172     $ 1,142         178 %  
Securitization Adjustments
    (728 )     (815 )     (786 )     (848 )     (307 )       11       (137 )       (1,543 )     (633 )       (144 )  
 
                                                                         
Managed Credit Card Income
  $ 868     $ 761     $ 886     $ 784     $ 271         14       220       $ 1,629     $ 509         220    
 
                                                                         
                                                                                         
Other Income
                                                                                       
Reported Data for the Period
  $ 42     $ 11     $ 30     $ 47     $ 65         282       (35 )     $ 53     $ 126         (58 )  
Securitization Adjustments
                1       (3 )     (45 )     NM     NM               (84 )     NM    
 
                                                                         
Managed Other Income
  $ 42     $ 11     $ 31     $ 44     $ 20         282       110       $ 53     $ 42         26    
 
                                                                         
                                                                                         
Net Interest Income
                                                                                       
Reported Data for the Period
  $ 1,318     $ 1,275     $ 1,117     $ 1,138     $ 433         3       204       $ 2,593     $ 868         199    
Securitization Adjustments
    1,658       1,732       1,796       1,779       838         (4 )     98         3,390       1,676         102    
 
                                                                         
Managed Net Interest Income
  $ 2,976     $ 3,007     $ 2,913     $ 2,917     $ 1,271         (1 )     134       $ 5,983     $ 2,544         135    
 
                                                                         
                                                                                         
Total Net Revenue (b)
                                                                                       
Reported Data for the Period
  $ 2,956     $ 2,862     $ 2,819     $ 2,843     $ 1,101         3       168       $ 5,818     $ 2,185         166    
Securitization Adjustments
    930       917       1,011       928       486         1       91         1,847       959         93    
 
                                                                         
Managed Total Net Revenue
  $ 3,886     $ 3,779     $ 3,830     $ 3,771     $ 1,587         3       145       $ 7,665     $ 3,144         144    
 
                                                                         
                                                                                         
Provision for Credit Losses
                                                                                       
Reported Data for the Period
  $ 711     $ 719     $ 724     $ 734     $ 262         (1 )     171       $ 1,430     $ 495         189    
Securitization Adjustments
    930       917       1,011       928       486         1       91         1,847       959         93    
 
                                                                         
Managed Provision for Credit Losses
  $ 1,641     $ 1,636     $ 1,735     $ 1,662     $ 748               119       $ 3,277     $ 1,454         125    
 
                                                                         
                                                                                         
BALANCE SHEETS — AVERAGE BALANCES
                                                                                       
Total Average Assets
                                                                                       
Reported Data for the Period
  $ 74,515     $ 71,003     $ 69,485     $ 67,718     $ 18,484         5       303       $ 72,768     $ 18,439         295    
Securitization Adjustments
    66,226       67,509       68,528       69,035       33,026         (2 )     101         66,864       33,191         101    
 
                                                                         
Managed Average Assets
  $ 140,741     $ 138,512     $ 138,013     $ 136,753     $ 51,510         2       173       $ 139,632     $ 51,630         170    
 
                                                                         
                                                                                         
CREDIT DATA AND QUALITY STATISTICS
                                                                                       
Net Charge-offs (Recoveries)
                                                                                       
Reported Net Charge-offs Data for the period
  $ 711     $ 673     $ 724     $ 670     $ 259         6       175       $ 1,384     $ 529         162    
Securitization Adjustments
    930       917       1,011       928       486         1       91         1,847       959         93    
 
                                                                         
Managed Net Charge-offs
  $ 1,641     $ 1,590     $ 1,735     $ 1,598     $ 745         3       120       $ 3,231     $ 1,488         117    
 
                                                                   
                                                                         
 
(a)  
JPMorgan Chase uses the concept of “managed receivables” to evaluate the credit performance and overall financial performance of the underlying credit card loans, both sold and not sold: as the same borrower is continuing to use the credit card for ongoing charges, a borrower’s credit performance will affect both the loan receivables sold under SFAS 140 and those not sold. Thus, in its disclosures regarding managed loan receivables, JPMorgan Chase treats the sold receivables as if they were still on the balance sheet in order to disclose the credit performance (such as net charge-off rates) of the entire managed credit card portfolio. Operating results exclude the impact of credit card securitizations on Total net revenue, the Provision for credit losses, net charge-offs and loan receivables. Securitization does not change reported net income versus operating earnings; however, it does affect the classification of items on the Consolidated statements of income.
(b)  
Includes Credit Card Income, Other Income and Net Interest Income.

Page 19


 

JPMORGAN CHASE & CO.
COMMERCIAL BANKING
FINANCIAL HIGHLIGHTS
(in millions, except ratio and headcount data)
  (JP MORGAN CHASE LOGO)
                                                                                         
                                    Heritage                       Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
INCOME STATEMENT
                                                                                       
REVENUE
                                                                                       
Lending & Deposit Related Fees
  $ 143     $ 142     $ 147     $ 162     $ 67         1 %     113 %     $ 285     $ 132         116 %  
Asset Management, Administration and Commissions
    15       15       12       12       4               275         30       8         275    
Other Income (a)
    94       68       103       51       29         38       224         162       55         195    
 
                                                                         
Noninterest Revenue
    252       225       262       225       100         12       152         477       195         145    
Net Interest Income
    648       625       623       608       234         4       177         1,273       461         176    
 
                                                                         
TOTAL NET REVENUE
    900       850       885       833       334         6       169         1,750       656         167    
 
                                                                         
Provision for Credit Losses
    142       (6 )     21       14       19       NM     NM         136       6       NM    
NONINTEREST EXPENSE
                                                                                       
Compensation Expense
    160       163       153       176       65         (2 )     146         323       136         138    
Noncompensation Expense
    296       278       281       286       138         6       114         574       276         108    
Amortization of Intangibles
    17       17       17       18                   NM         34             NM    
 
                                                                         
TOTAL NONINTEREST EXPENSE
    473       458       451       480       203         3       133         931       412         126    
 
                                                                         
Operating Earnings Before Income Tax Expense
    285       398       413       339       112         (28 )     154         683       238         187    
Income Tax Expense
    111       155       159       124       47         (28 )     136         266       99         169    
 
                                                                         
OPERATING EARNINGS
  $ 174     $ 243     $ 254     $ 215     $ 65         (28 )     168       $ 417     $ 139         200    
 
                                                                         
MEMO:
                                                                                       
Revenue by Product:
                                                                                       
Lending
  $ 285     $ 269     $ 280     $ 314     $ 86         6       231       $ 554     $ 170         226    
Treasury Services
    558       542       528       499       221         3       152         1,100       440         150    
Investment Banking
    62       40       61       24       20         55       210         102       35         191    
Other
    (5 )     (1 )     16       (4 )     7         (400 )   NM         (6 )     11       NM    
 
                                                                         
Total Commercial Banking Revenue
  $ 900     $ 850     $ 885     $ 833     $ 334         6       169       $ 1,750     $ 656         167    
 
                                                                         
Revenue by Business:
                                                                                       
Middle Market
  $ 594     $ 572     $ 571     $ 551     $ 192         4       209       $ 1,166     $ 377         209    
Corporate Banking
    138       123       142       109       59         12       134         261       116         125    
Real Estate
    131       119       133       123       60         10       118         250       112         123    
Other
    37       36       39       50       23         3       61         73       51         43    
 
                                                                         
Total Commercial Banking Revenue
  $ 900     $ 850     $ 885     $ 833     $ 334         6       169       $ 1,750     $ 656         167    
 
                                                                         
FINANCIAL RATIOS
                                                                                       
ROE
    21 %     29 %     30 %     25 %     35 %     (800 )bp   (1,400 )bp       25 %     36 %     (1,100 )bp  
ROA
    1.25       1.79       1.81       1.53       1.51         (54 )     (26 )       1.51       1.67         (16 )  
Overhead Ratio
    53       54       51       58       61         (100 )     (800 )       53       63         (1,000 )  
SELECTED BALANCE SHEETS DATA (Average)
                                                                                       
Total Assets
  $ 55,963     $ 55,080     $ 55,837     $ 55,957     $ 17,281         2 %     224 %     $ 55,524     $ 16,760         231 %  
Loans and Leases
    51,184       49,969       50,469       50,324       14,717         2       248         50,580       14,241         255    
Liability Balances (b)
    72,498       71,613       69,360       66,944       38,058         1       90         72,058       37,327         93    
Equity
    3,400       3,400       3,400       3,400       747               355         3,400       771         341    
MEMO:
                                                                                       
Loans by Business:
                                                                                       
Middle Market
  $ 31,051     $ 30,216     $ 29,997     $ 29,307     $ 5,203         3       497       $ 30,636     $ 5,156         494    
Corporate Banking
    6,239       5,788       6,109       6,087       2,608         8       139         6,015       2,579         133    
Real Estate
    10,169       10,345       10,679       11,646       4,330         (2 )     135         10,256       3,970         158    
Other
    3,725       3,620       3,684       3,284       2,576         3       45         3,673       2,536         45    
 
                                                                         
Total Commercial Banking Loans
  $ 51,184     $ 49,969     $ 50,469     $ 50,324     $ 14,717         2       248       $ 50,580     $ 14,241         255    
 
                                                                         
Headcount
    4,474       4,495       4,555       4,595       1,690               165         4,474       1,690         165    
CREDIT DATA AND QUALITY STATISTICS
                                                                                       
Net Charge-offs (Recoveries)
  $ (3 )   $ 2     $ 45     $ (13 )   $ 30       NM     NM       $ (1 )   $ 29       NM    
Nonperforming Loans
    434       433       527       579       132               229         434       132         229    
Allowance for Loan Losses
    1,431       1,312       1,322       1,350       107         9     NM         1,431       107       NM    
Allowance for Lending-Related Commitments
    196       170       169       164       24         15     NM         196       24       NM    
Net Charge-off (Recovery) Rate
    (0.02 )%     0.02 %     0.35 %     (0.10 )%     0.82 %     (4 )bp   (84 )bp       0.00 %     0.41 %     (41 )bp  
Allowance for Loan Losses to Average Loans
    2.80       2.63       2.62       2.68       0.73         17       207         2.83       0.75         208    
Allowance for Loan Losses to Nonperforming Loans
    330       303       251       233       81         2,700       24,900         330       81         24,900    
Nonperforming Loans to Average Loans
    0.85       0.87       1.04       1.15       0.90         (2 )     (5 )       0.86       0.93         (7 )  
                                                                         
 
(a)  
IB-related and commercial card revenues are included in Other Income.
(b)  
Liability balances include deposits and deposits that are swept to on-balance sheet liabilities.

Page 20


 

JPMORGAN CHASE & CO.
TREASURY & SECURITIES SERVICES
FINANCIAL HIGHLIGHTS
(in millions, except ratios, headcount data and otherwise noted)
  (JP MORGAN CHASE LOGO)
                                                                                         
                                    Heritage                       Heritage            
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
INCOME STATEMENT
                                                                                       
REVENUE
                                                                                       
Lending & Deposit Related Fees
  $ 197     $ 170     $ 200     $ 218     $ 111         16 %     77 %     $ 367     $ 229         60 %  
Asset Management, Administration and Commissions
    736       692       630       600       633         6       16         1,428       1,215         18    
Other Income
    145       124       112       103       98         17       48         269       167         61    
 
                                                                         
Noninterest Revenue
    1,078       986       942       921       842         9       28         2,064       1,611         28    
Net Interest Income
    510       496       471       418       251         3       103         1,006       494         104    
 
                                                                         
TOTAL NET REVENUE
    1,588       1,482       1,413       1,339       1,093         7       45         3,070       2,105         46    
 
                                                                         
Provision for Credit Losses
    2       (3 )     3             3       NM       (33 )       (1 )     4       NM    
Credit Reimbursement to IB (a)
    (38 )     (38 )     (43 )     (43 )     (2 )           NM         (76 )     (4 )     NM    
NONINTEREST EXPENSE
                                                                                       
Compensation Expense
    522       504       471       472       347         4       50         1,026       686         50    
Noncompensation Expense
    642       532       643       654       582         21       10         1,174       1,094         7    
Amortization of Intangibles
    30       29       32       30       15         3       100         59       31         90    
 
                                                                         
TOTAL NONINTEREST EXPENSE
    1,194       1,065       1,146       1,156       944         12       26         2,259       1,811         25    
 
                                                                         
Operating Earnings before Income Tax Expense
    354       382       221       140       144         (7 )     146         736       286         157    
Income Tax Expense
    125       137       76       44       43         (9 )     191         262       87         201    
 
                                                                         
OPERATING EARNINGS
  $ 229     $ 245     $ 145     $ 96     $ 101         (7 )     127       $ 474     $ 199         138    
 
                                                                         
REVENUE BY BUSINESS
                                                                                       
Treasury Services (“TS”)
  $ 682     $ 618     $ 642     $ 629     $ 366         10       86       $ 1,300     $ 723         80    
Investor Services (“IS”)
    544       508       454       404       453         7       20         1,052       851         24    
Institutional Trust Services (“ITS”)
    362       356       317       306       274         2       32         718       531         35    
 
                                                                         
TOTAL NET REVENUE
  $ 1,588     $ 1,482     $ 1,413     $ 1,339     $ 1,093         7       45       $ 3,070     $ 2,105         46    
 
                                                                         
FINANCIAL RATIOS
                                                                                       
ROE
    48 %     52 %     30 %     20 %     13 %     (400 )bp   3,500 bp       50 %     13 %     3,700 bp  
Overhead Ratio
    75       72       81       86       86         300       (1,100 )       74       86         (1,200 )  
Pre-tax Margin Ratio (b)
    22       26       16       10       13         (400 )     900         24       14         1,000    
BUSINESS METRICS
                                                                                       
Assets under Custody (in billions) (c)
  $ 10,190     $ 10,154     $ 9,300     $ 8,427     $ 7,980         %     28 %     $ 10,190     $ 7,980         28 %  
Corporate Trust Securities under Administration (in billions) (d)
    6,704       6,745       6,676       6,569       6,241         (1 )     7         6,704       6,241         7    
Number of:
                                                                                       
ACH transactions originated (in millions)
    727       699       693       651       341         4       113         1,426       650         119    
Total US$ Clearing Volume (in thousands)
    24,200       21,705       22,590       21,781       18,727         11       29         45,905       36,791         25    
Total Non-US$ Clearing Volume (in thousands)
    13,372       11,587       11,131       10,490       9,866         15       36         24,959       19,891         25    
Wholesale Check Volume (in millions)
    921       877     NA   NA   NA       5     NM         1,798     NA       NM    
Wholesale Cards Issued (in thousands) (e)
    12,075       11,834       11,787       11,260       9,420         2       28         23,909       18,379         30    
SELECTED BALANCE SHEETS (Average)
                                                                                       
Total Assets
  $ 26,437     $ 27,033     $ 28,538     $ 24,831     $ 21,040         (2 )     26       $ 26,733     $ 20,141         33    
Loans
    9,956       10,091       9,988       8,457       6,783         (1 )     47         10,023       6,460         55    
Liability Balances (f)
    164,036       154,673       147,789       136,606       114,624         6       43         159,380       109,046         46    
Equity
    1,900       1,900       1,900       1,900       3,203               (41 )       1,900       3,196         (41 )  
Headcount
    23,871       23,073       22,612       22,246       15,023         3       59         23,871       15,023         59    
FIRMWIDE DISCLOSURES
                                                                                       
Treasury Services Firmwide Revenue (g)
  $ 1,314     $ 1,237     $ 1,238     $ 1,205     $ 617         6       113       $ 2,551     $ 1,222         109    
Treasury & Securities Services Firmwide Revenue (g)
    2,220       2,101       2,009       1,915       1,344         6       65         4,321       2,604         66    
Treasury Services Firmwide Overhead Ratio (h)
    54 %     56 %     61 %     59 %     65 %     (200 )bp   (1,100 )bp       55 %     67 %     (1,200 )bp  
Treasury & Securities Services Firmwide Overhead Ratio (h)
    66       63       69       72       79         300       (1,300 )       64       79         (1,500 )  
Treasury Services Firmwide Liability Balances (i)
  $ 138,058     $ 133,770     $ 130,505     $ 125,813     $ 79,448         3 %     74 %     $ 135,926     $ 77,133         76 %  
Treasury & Securities Services Firmwide Liability Balances (i)
    236,534       226,286       217,149       203,550       152,682         5       55         231,438       146,373         58    
                                                                         

Page 21


 

JPMORGAN CHASE & CO.   (JPMORGANCHASE LOGO)
TREASURY & SECURITIES SERVICES    
FINANCIAL HIGHLIGHTS, CONTINUED    
(in millions)    

FOOTNOTES

 
(a)  
TSS is charged a credit reimbursement related to certain exposures managed within the IB credit portfolio on behalf of clients shared with TSS.
 
(b)  
Pre-tax margin represents Operating Earnings before Income Taxes divided by Total Net Revenue, which is a comprehensive measure of pre-tax performance and is another basis by which TSS management evaluates its performance and that of its competitors. Pre-tax margin is an effective measure of TSS’ earnings after all operating costs are taken into consideration.
 
(c)  
Beginning March 31, 2005, assets under custody include an estimated $400 billion of ITS assets under custody that have not been included previously. At June 30, 2005 approximately 5% of total assets under custody were trust related.
 
(d)  
Corporate Trust Securities under Administration include debt held in trust on behalf of third parties and debt serviced as agent.
 
(e)  
Wholesale cards issued include domestic commercial card, stored value card, prepaid card, and government electronic benefit card products.
 
(f)  
Liability balances include deposits and deposits swept to on-balance sheet liabilities.

FIRMWIDE DISCLOSURES

Treasury & Securities Services firmwide metrics include certain TSS product revenues and liability balances reported in other lines of business for customers who are also customers of those lines of business. In order to capture the firmwide impact of TS and TSS products and revenues, management reviews firmwide metrics such as liability balances, revenues and overhead ratios in assessing financial performance for TSS. Firmwide metrics are necessary in order to understand the aggregate TSS business.

  (g)  
Firmwide revenues include TS revenues recorded in the Commercial Banking, Consumer & Small Business Banking and Asset & Wealth Management lines of business (see below) and exclude FX revenues recorded in the IB for TSS-related FX activity. TSS firmwide FX revenue, which includes FX revenue recorded in TSS and FX revenue associated with TSS customers who are FX customers of the IB, was $96 million and $90 million for the quarters ended June 30, 2005 and March 31, 2005, respectively.
 
  (h)  
Overhead ratios have been calculated based on firmwide revenues and TSS and TS expenses, respectively, including those allocated to certain other lines of business. FX revenues and expenses recorded in the IB for TSS-related FX activity are not included in this ratio.
 
  (i)  
Firmwide liability balances include TS’ liability balances recorded in certain other lines of business. Liability balances associated with TS customers who are also customers of the Commercial Banking line of business are not included in TS liability balances.
                                                                                         
                                    Heritage                   Heritage        
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
Treasury Services Revenue Reported in Commercial Banking
  $ 558     $ 542     $ 528     $ 499     $ 221         3 %     152 %     $ 1,100     $ 440         150 %  
Treasury Services Revenue Reported in Other Lines of Business
    74       77       68       77       30         (4 )     147         151       59         156    
                                                                         

Page 22


 

JPMORGAN CHASE & CO.
ASSET & WEALTH MANAGEMENT
FINANCIAL HIGHLIGHTS
(in millions, except ratio, headcount and ranking data, and where otherwise noted)
  (JPMORGANCHASE LOGO)
                                                                                         
                                    Heritage                   Heritage        
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
INCOME STATEMENT
                                                                                       
REVENUE
                                                                                       
Lending & Deposit Related Fees
  $ 6     $ 9     $ 10     $ 10     $ 4         (33 )%     50 %     $ 15     $ 8         88 %  
Asset Management, Administration and Commissions
    994       975       952       859       657         2       51         1,969       1,329         48    
Other Income
    69       95       60       55       50         (27 )     38         164       100         64    
 
                                                                         
Noninterest Revenue
    1,069       1,079       1,022       924       711         (1 )     50         2,148       1,437         49    
Net Interest Income
    274       282       288       269       117         (3 )     134         556       239         133    
 
                                                                         
TOTAL NET REVENUE
    1,343       1,361       1,310       1,193       828         (1 )     62         2,704       1,676         61    
 
                                                                         
 
                                                                                       
Provision for Credit Losses
    (20 )     (7 )     (21 )     1       (4 )       (186 )     (400 )       (27 )     6       NM    
 
                                                                                       
NONINTEREST EXPENSE
                                                                                       
Compensation Expense
    509       538       459       452       343         (5 )     48         1,047       668         57    
Noncompensation Expense
    383       371       436       409       335         3       14         754       657         15    
Amortization of Intangibles
    25       25       24       23       3             NM         50       5       NM    
 
                                                                         
TOTAL NONINTEREST EXPENSE
    917       934       919       884       681         (2 )     35         1,851       1,330         39    
 
                                                                         
 
                                                                                       
Operating Earnings before Income Tax Expense
    446       434       412       308       151         3       195         880       340         159    
Income Tax Expense
    163       158       149       111       52         3       213         321       119         170    
 
                                                                         
OPERATING EARNINGS
  $ 283     $ 276     $ 263     $ 197     $ 99         3       186       $ 559     $ 221         153    
 
                                                                         
 
                                                                                       
FINANCIAL RATIOS
                                                                                       
ROE
    47 %     47 %     44 %     33 %     7 %     bp   4,000 bp       47 %     8 %     3,900 bp  
Overhead Ratio
    68       69       70       74       82         (100 )     (1,400 )       68       79         (1,100 )  
Pre-tax Margin Ratio (a)
    33       32       31       26       18         100       1,500         33       20         1,300    
 
                                                                                       
BUSINESS METRICS
                                                                                       
Number of:
                                                                                       
Client Advisors
    1,409       1,390       1,333       1,334       629         1 %     124 %       1,409       629         124 %  
Brown Co Average Daily Trades
    26,267       29,753       30,521       23,969       28,702         (12 )     (8 )       28,010       32,586         (14 )  
Retirement Planning Services Participants
    1,210,000       1,181,000       918,000       874,000       844,000         2       43         1,210,000       844,000         43    
Star Rankings: (b)
                                                                                       
% of Customer Assets in Funds Ranked 4 or Better
    50 %     48 %     48 %     56 %     48 %       4       4         50 %     48 %       4    
% of Customer Assets in Funds Ranked 3 or Better
    80 %     79 %     81 %     80 %     78 %       1       3         80 %     78 %       3    
Funds Quartile Ranking (1YR) : (c)
                                                                                       
% of AUM in 1st and 2nd Quartiles
    75 %     71 %     66 %     63 %     49 %       6       53         75 %     49 %       53    
 
                                                                                       
REVENUE BY CLIENT SEGMENT
                                                                                       
Private Bank
  $ 409     $ 422     $ 427     $ 383     $ 368         (3 )     11       $ 831     $ 744         12    
Retail
    363       346       358       292       269         5       35         709       534         33    
Institutional
    313       322       265       267       172         (3 )     82         635       359         77    
Private Client Services
    258       271       260       251       19         (5 )   NM         529       39       NM    
 
                                                                         
Total Net Revenue
  $ 1,343     $ 1,361     $ 1,310     $ 1,193     $ 828         (1 )     62       $ 2,704     $ 1,676         61    
 
                                                                         
 
                                                                                       
SELECTED BALANCE SHEETS DATA (Average)
                                                                                       
Total Assets
  $ 42,001     $ 39,716     $ 40,689     $ 39,882     $ 35,083         6       20       $ 40,865     $ 35,189         16    
Loans
    26,572       26,357       25,966       25,408       17,620         1       51         26,465       17,359         52    
Deposits (d)
    40,774       42,043       43,415       38,940       24,069         (3 )     69         41,405       23,589         76    
Equity
    2,400       2,400       2,400       2,400       5,370               (55 )       2,400       5,420         (56 )  
 
                                                                                       
Headcount
    12,455       12,378       12,287       12,368       8,690         1       43         12,455       8,690         43    
 
                                                                                       
CREDIT DATA AND QUALITY STATISTICS
                                                                                       
Net Charge-offs (Recoveries)
  $ (2 )   $ (6 )   $ 5     $ 6     $ 6         67     NM       $ (8 )   $ 61       NM    
Nonperforming Loans
    100       78       79       125       102         28       (2 )       100       102         (2 )  
Allowance for Loan Losses
    195       214       216       241       76         (9 )     157         195       76         157    
Allowance for Lending Related Commitments
    3       5       5       5       2         (40 )     50         3       2         50    
 
                                                                                       
Net Charge-off (Recovery) Rate
    (0.03 )%     (0.09 )%     0.08 %     0.09 %     0.14 %     6 bp   (17) bp       (0.06 )%     0.71 %     (77 )bp  
Allowance for Loan Losses to Average Loans
    0.73       0.81       0.83       0.95       0.43         (8 )     30         0.74       0.44         30    
Allowance for Loan Losses to Nonperforming Loans
    195       274       273       193       75         (7,900 )     12,000         195       75         12,000    
Nonperforming Loans to Average Loans
    0.38       0.30       0.30       0.49       0.58         8       (20 )       0.38       0.59         (21 )  
                                                                         
 
(a)  
Pre-tax margin represents Operating Earnings before Income Tax Expense divided by Total Net Revenue, which is a comprehensive measure of pre-tax performance and is another basis by which AWM management evaluates its performance and that of its competitors. Pre-tax margin is an effective measure of AWM’s earnings, after all costs are taken into consideration.
(b)  
Derived from Morningstar for the United States; Micropal for the United Kingdom, Luxembourg, Hong Kong and Taiwan; and Nomura for Japan.
(c)  
Quartile ranking sourced from Lipper for the United States and Taiwan; Micropal for the United Kingdom, Luxemburg and Hong Kong; and Nomura for Japan.
(d)  
Reflects the transfer of certain consumer deposits from Retail Financial Services to Asset & Wealth Management.

Page 23


 

JPMORGAN CHASE & CO.   (JPMORGANCHASE LOGO)
ASSET & WEALTH MANAGEMENT    
FINANCIAL HIGHLIGHTS, CONTINUED    
(in billions)    
                                                             
                                    Heritage        
                                    JPMC Only       2QTR 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004    
Asset Class
                                                           
Liquidity
  $ 223     $ 228     $ 232     $ 210     $ 152         (2 )%     47 %  
Fixed Income
    171       171       171       174       117               46    
Equities & Balanced
    323       326       326       298       261         (1 )     24    
Alternatives
    66       65       62       53       45         2       47    
 
                                                 
Assets under Management
    783       790       791       735       575         (1 )     36    
Custody / Brokerage / Administration / Deposits
    310       302       315       268       221         3       40    
 
                                                 
Total Assets under Supervision
  $ 1,093     $ 1,092     $ 1,106     $ 1,003     $ 796               37    
 
                                                 
 
                                                           
Client Segment
                                                           
Private Bank
                                                           
Assets under Management
  $ 135     $ 138     $ 139     $ 136     $ 139         (2 )     (3 )  
Custody / Brokerage / Administration / Deposits
    165       161       165       143       138         2       20    
 
                                                 
Assets under Supervision
    300       299       304       279       277               8    
Retail
                                                           
Assets under Management
    141       138       133       122       101         2       40    
Custody / Brokerage / Administration / Deposits
    97       94       88       81       80         3       21    
 
                                                 
Assets under Supervision
    238       232       221       203       181         3       31    
Institutional
                                                           
Assets under Management
    455       462       466       426       328         (2 )     39    
Custody / Brokerage / Administration / Deposits
    3       5       21       4               (40 )   NM    
 
                                                 
Assets under Supervision
    458       467       487       430       328         (2 )     40    
Private Client Services
                                                           
Assets under Management
    52       52       53       51       7             NM    
Custody / Brokerage / Administration / Deposits
    45       42       41       40       3         7     NM    
 
                                                 
Assets under Supervision
    97       94       94       91       10         3     NM    
 
                                                 
Total Assets under Supervision
  $ 1,093     $ 1,092     $ 1,106     $ 1,003     $ 796               37    
 
                                                 
 
                                                           
Geographic Region
                                                           
Americas
                                                           
Assets under Management
  $ 535     $ 558     $ 562     $ 531     $ 370         (4 )     45    
Custody / Brokerage / Administration / Deposits
    270       263       281       238       189         3       43    
 
                                                 
Assets under Supervision
    805       821       843       769       559         (2 )     44    
International
                                                           
Assets under Management
    248       232       229       204       205         7       21    
Custody / Brokerage / Administration / Deposits
    40       39       34       30       32         3       25    
 
                                                 
Assets under Supervision
    288       271       263       234       237         6       22    
 
                                                 
Total Assets under Supervision
  $ 1,093     $ 1,092     $ 1,106     $ 1,003     $ 796               37    
 
                                                 
 
                                                           
Memo:
                                                           
Mutual Funds Assets:
                                                           
Liquidity
  $ 174     $ 175     $ 183     $ 163     $ 117         (1 )     49    
Fixed Income
    41       45       41       48       30         (9 )     37    
Equities, Balanced & Alternatives
    114       106       104       97       74         8       54    
 
                                                 
Total Mutual Funds Assets
  $ 329     $ 326     $ 328     $ 308     $ 221         1       49    
                                       

Page 24


 

JPMORGAN CHASE & CO.   (JPMORGANCHASE LOGO)
ASSET & WEALTH MANAGEMENT    
FINANCIAL HIGHLIGHTS, CONTINUED    
(in billions)    
                                                                 
                                    Heritage                     Heritage  
                                    JPMC Only                     JPMC Only  
    2QTR     1QTR     4QTR     3QTR     2QTR             Year-to-date  
    2005     2005     2004     2004     2004             2005     2004  
 
                                                               
Assets Under Management Rollforward
                                                               
Beginning Balance
  $ 790     $ 791     $ 735     $ 575     $ 589             $ 791     $ 561  
Liquidity Net Asset Flows
    (5 )     (6 )     16       (9 )     (7 )             (11 )     (4 )
Fixed Income Net Asset Flows
    (2 )     4       (2 )     (5 )                   2       (1 )
Equities, Balanced & Alternatives Net Asset Flows
    8       1       6       (2 )     3               9       10  
Acquisitions (a)
                7       176                            
Market / Other Impacts (b)
    (8 )           29             (10 )             (8 )     9  
 
                                                 
Ending Balance
  $ 783     $ 790     $ 791     $ 735     $ 575             $ 783     $ 575  
 
                                                 
 
                                                               
Custody / Brokerage / Administration / Deposits Rollforward
                                                               
Beginning Balance
  $ 302     $ 315     $ 268     $ 221     $ 216             $ 315     $ 203  
Custody / Brokerage / Administration / Deposits Net Asset Flows
    (1 )     7       12       12       3               6       9  
Acquisitions (a)
                      38                            
Market / Other Impacts
    9       (20 )     35       (3 )     2               (11 )     9  
 
                                                 
Ending Balance
  $ 310     $ 302     $ 315     $ 268     $ 221             $ 310     $ 221  
 
                                                 
 
                                                               
Assets Under Supervision Rollforward
                                                               
Beginning Balance
  $ 1,092     $ 1,106     $ 1,003     $ 796     $ 805             $ 1,106     $ 764  
Net Asset Flows
          6       32       (4 )     (1 )             6       14  
Acquisitions (a)
                7       214                            
Market / Other Impacts (b)
    1       (20 )     64       (3 )     (8 )             (19 )     18  
 
                                                 
Ending Balance
  $ 1,093     $ 1,092     $ 1,106     $ 1,003     $ 796             $ 1,093     $ 796  
 
                                                 
 
(a)  
Reflects the Merger with Bank One ($214 billion) in the third quarter of 2004 and the acquisition of a majority interest in Highbridge Capital Management in the fourth quarter of 2004 ($7 billion).
(b)  
Includes AWM’s strategic decision to exit the Institutional Fiduciary business in the second quarter of 2005 ($12bn).

Page 25


 

JPMORGAN CHASE & CO.   (JPMORGANCHASE LOGO)
CORPORATE    
FINANCIAL HIGHLIGHTS    
(in millions, except headcount data)    
                                                                                         
                                    Heritage                   Heritage        
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
INCOME STATEMENT
                                                                                       
Revenue
                                                                                       
Securities / Private Equity Gains (Losses)
  $ 310     $ (130 )   $ 584     $ 347     $ 436         NM %     (29 )%     $ 180     $ 855         (79 )%  
Other Income
    87       48       38       131       104         81       (16 )       135       146         (8 )  
 
                                                                         
Noninterest Revenue
    397       (82 )     622       478       540       NM       (26 )       315       1,001         (69 )  
Net Interest Income
    (763 )     (677 )     (657 )     (536 )     20         (13 )   NM         (1,440 )     (23 )     NM    
 
                                                                         
TOTAL NET REVENUE
    (366 )     (759 )     (35 )     (58 )     560         52     NM         (1,125 )     978       NM    
 
                                                                         
 
                                                                                       
Provision for Credit Losses
    1       (4 )           (1 )     (27 )     NM     NM         (3 )     (109 )       97    
 
                                                                                       
Noninterest Expense
                                                                                       
Compensation Expense
    772       774       662       786       462               67         1,546       978         58    
Noncompensation Expense
    1,042       996       1,215       1,146       857         5       22         2,038       1,727         18    
 
                                                                         
Subtotal
    1,814       1,770       1,877       1,932       1,319         2       38         3,584       2,705         32    
Net Expenses Allocated to Other Businesses
    (1,337 )     (1,335 )     (1,417 )     (1,426 )     (1,186 )             (13 )       (2,672 )     (2,370 )       (13 )  
 
                                                                         
TOTAL NONINTEREST EXPENSE
    477       435       460       506       133         10       259         912       335         172    
 
                                                                         
 
                                                                                       
Operating Earnings before Income Tax Expense
    (844 )     (1,190 )     (495 )     (563 )     454         29     NM         (2,034 )     752       NM    
Income Tax Expense (Benefit)
    (358 )     (503 )     (199 )     (344 )     129         29     NM         (861 )     176       NM    
 
                                                                         
OPERATING EARNINGS
  $ (486 )   $ (687 )   $ (296 )   $ (219 )   $ 325         29     NM       $ (1,173 )   $ 576       NM    
 
                                                                         
 
                                                                                       
SELECTED AVERAGE BALANCE SHEETS
                                                                                       
Short-term Investments (a)
  $ 16,779     $ 13,164     $ 19,252     $ 26,432     $ 9,903         27       69       $ 14,982     $ 6,248         140    
Investment Portfolio (b)
    50,751       74,795       72,583       74,708       58,043         (32 )     (13 )       62,707       58,240         8    
Goodwill (c)
    43,524       43,306       42,980       42,958       342         1     NM         43,415       344       NM    
Total Assets
    159,160       178,089       197,794       204,884       125,122         (11 )     27         168,572       122,697         37    
 
                                                                                       
Headcount
    28,114       26,983       24,806       24,482       12,928         4       117         28,114       12,928         117    
 
                                                                                       
TREASURY
                                                                                       
Securities Gains (Losses) (d)
  $ 6     $ (918 )   $ 77     $ 109     $ 41       NM       (85 )     $ (912 )   $ 161       NM    
 
                                                                         
Investment Portfolio (Average)
  $ 43,652     $ 65,646     $ 63,362     $ 65,508     $ 51,509         (34 )     (15 )     $ 54,588     $ 51,044         7    
 
                                                                         
Investment Portfolio (Ending)
  $ 34,319     $ 46,943     $ 64,949     $ 61,331     $ 49,133         (27 )     (30 )     $ 34,319     $ 49,133         (30 )  
                                                           
 
(a)  
Represents Federal funds sold, Securities borrowed, Trading assets — debt and equity instruments and Trading assets — derivative receivables.
(b)  
Represents investment securities and private equity investments.
(c)  
Effective with the third quarter of 2004, all goodwill is allocated to the Corporate line of business. Prior to the third quarter of 2004, goodwill was allocated to the various lines of business.
(d)  
Losses in the first quarter of 2005 were primarily due to the sale of $20 billion of investment securities during the month of March 2005. Excludes gains/losses on securities used to manage risk associated with mortgage servicing rights.

Page 26


 

JPMORGAN CHASE & CO.   (JPMORGANCHASE LOGO)
CORPORATE    
FINANCIAL HIGHLIGHTS, CONTINUED    
(in millions)    
                                                                                         
                                    Heritage                   Heritage        
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
PRIVATE EQUITY
                                                                                       
Private Equity Gains (Losses)
                                                                                       
Direct Investments
                                                                                       
Realized Gains
  $ 555     $ 633     $ 442     $ 277     $ 402         (12 )%     38 %     $ 1,188     $ 704         69 %  
Write-ups / (Write-downs)
    (133 )     206       (111 )     (31 )     (27 )     NM       (393 )       73       (50 )     NM    
Mark-to-Market Gains (Losses)
    (153 )     (89 )     167       (27 )     (1 )       (72 )   NM         (242 )     24       NM    
 
                                                                         
Total Direct Investments
    269       750       498       219       374         (64 )     (28 )       1,019       678         50    
Third-Party Fund Investments
    31       39       8       16       18         (21 )     72         70       10       NM    
 
                                                                         
Total Private Equity Gains
    300       789       506       235       392         (62 )     (23 )       1,089       688         58    
Other Income
    11       5       16       14       11         120               16       23         (30 )  
Net Interest Income
    (56 )     (50 )     (70 )     (89 )     (53 )       (12 )     (6 )       (106 )     (112 )       5    
 
                                                                         
Total Net Revenue
    255       744       452       160       350         (66 )     (27 )       999       599         67    
Total Noninterest Expense
    66       62       79       73       67         6       (1 )       128       136         (6 )  
 
                                                                         
Operating Earnings before Income Tax Expense
    189       682       373       87       283         (72 )     (33 )       871       463         88    
Income Tax Expense
    67       245       134       27       96         (73 )     (30 )       312       160         95    
 
                                                                         
OPERATING EARNINGS
  $ 122     $ 437     $ 239     $ 60     $ 187         (72 )     (35 )     $ 559     $ 303         84    
 
                                                                         
 
                                                                                       
Private Equity Portfolio Information
                                                                                       
Direct Investments
                                                                                       
Publicly-Held Securities
                                                                                       
Carrying Value
  $ 761     $ 1,149     $ 1,170     $ 958     $ 811         (34 )     (6 )                              
Cost
    580       808       744       675       566         (28 )     2                                
Quoted Public Value
    1,082       1,713       1,758       1,415       1,306         (37 )     (17 )                              
Privately-Held Direct Securities
                                                                                       
Carrying Value
    5,037       5,490       5,686       6,011       4,821         (8 )     4                                
Cost
    6,362       6,689       7,178       7,551       6,307         (5 )     1                                
Third-Party Fund Investments
                                                                                       
Carrying Value
    552       550       641       1,138       751               (26 )                              
Cost
    921       934       1,042       1,761       1,208         (1 )     (24 )                              
 
                                                                             
 
                                                                                       
Total Private Equity Portfolio — Carrying Value
  $ 6,350     $ 7,189     $ 7,497     $ 8,107     $ 6,383         (12 )     (1 )                              
 
                                                                             
 
                                                                                       
Total Private Equity Portfolio — Cost
  $ 7,863     $ 8,431     $ 8,964     $ 9,987     $ 8,081         (7 )     (3 )                              
                                                               

Page 27


 

JPMORGAN CHASE & CO.   (JPMORGANCHASE LOGO)
CREDIT-RELATED INFORMATION    
(in millions)    
                                                             
                                               
                                    Heritage       Jun 30, 2005    
                                    JPMC Only       Change    
    Jun 30     Mar 31     Dec 31     Sep 30     Jun 30       Mar 31     Jun 30    
    2005     2005     2004     2004     2004       2005     2004    
CREDIT EXPOSURE
                                                           
WHOLESALE (a)
                                                           
Loans — U.S.
  $ 110,096     $ 101,261     $ 99,868     $ 99,451     $ 45,532         9 %     142 %  
Loans — Non-U.S.
    39,492       36,140       35,199       32,893       31,512         9       25    
 
                                                 
TOTAL WHOLESALE LOANS — REPORTED
    149,588       137,401       135,067       132,344       77,044         9       94    
 
                                                           
CONSUMER (b)
                                                           
Home Finance
                                                           
Home Equity and Other
    72,346       68,779       67,837       67,368       29,969         5       141    
Mortgage
    58,594       55,588       56,816       56,035       54,060         5       8    
 
                                                 
Total Home Finance
    130,940       124,367       124,653       123,403       84,029         5       56    
Auto & Education Finance
    52,309       59,837       62,712       62,587       43,543         (13 )     20    
Consumer & Small Business and Other
    14,678       15,011       15,107       15,126       4,140         (2 )     255    
Credit Card Receivables — Reported
    68,510       66,053       64,575       60,241       17,182         4       299    
 
                                                 
TOTAL CONSUMER LOANS — REPORTED
    266,437       265,268       267,047       261,357       148,894               79    
 
                                                           
TOTAL LOANS — REPORTED
    416,025       402,669       402,114       393,701       225,938         3       84    
Credit Card Securitizations
    68,808       67,328       70,795       71,256       34,138         2       102    
 
                                                 
TOTAL LOANS — MANAGED
    484,833       469,997       472,909       464,957       260,076         3       86    
Derivative Receivables
    55,015       60,388       65,982       57,795       49,980         (9 )     10    
Interests in Purchased Receivables (c)
    27,887       28,484       31,722       30,479               (2 )   NM    
Other Receivables
                            108       NM     NM    
 
                                                 
TOTAL CREDIT-RELATED ASSETS
    567,735       558,869       570,613       553,231       310,164         2       83    
Wholesale Lending-Related Commitments
    314,034       316,282       309,399       315,946       213,671         (1 )     47    
 
                                                 
TOTAL
  $ 881,769     $ 875,151     $ 880,012     $ 869,177     $ 523,835         1       68    
 
                                                 
 
                                                           
Memo: Total by Category
                                                           
Total Wholesale Exposure (d)
  $ 546,524     $ 542,555     $ 542,170     $ 536,564     $ 340,803         1       60    
Total Consumer Managed Loans (e)
    335,245       332,596       337,842       332,613       183,032         1       83    
 
                                                 
Total
  $ 881,769     $ 875,151     $ 880,012     $ 869,177     $ 523,835         1       68    
 
                                                 
 
                                                           
Risk Profile of Wholesale Credit Exposure:
                                                           
Investment-Grade
  $ 427,966     $ 433,928     $ 441,930     $ 429,198     $ 282,127         (1 )     52    
Noninvestment-Grade:
                                                           
Noncriticized
    112,140       101,859       91,605       97,126       52,438         10       114    
Criticized Performing (f)
    4,536       4,859       6,263       8,113       3,738         (7 )     21    
Criticized Nonperforming (f)
    1,504       1,590       2,021       1,772       2,126         (5 )     (29 )  
 
                                                 
Total Noninvestment-Grade
  $ 118,180     $ 108,308     $ 99,889     $ 107,011     $ 58,302         9       103    
 
                                                 
Purchased Held-for-Sale Wholesale Loans (g)
  $ 378     $ 319     $ 351     $ 355     $ 374         18       1    
                                                 
 
(a)  
Includes Investment Bank, Commercial Banking, Treasury & Securities Services and Asset & Wealth Management.
(b)  
Includes Retail Financial Services and Card Services.
(c)  
These represent undivided interests in pools of receivables and similar types of assets.
(d)  
Represents Total Wholesale Loans, Derivative Receivables, Interests in Purchased Receivables, Other Receivables and Wholesale Lending-Related Commitments.
(e)  
Represents Total Consumer Loans plus Credit Card Securitizations, excluding consumer lending-related commitments.
(f)  
For the quarter ended March 31, 2005, the Firm conformed its methodology for reporting Criticized exposure. Excluding this change in methodology, Criticized exposure would have been $7,632 million in the first quarter of 2005.
(g)  
Represents distressed wholesale loans purchased as part of IB’s proprietary investing activities.

Note:   The risk profile is based on JPMorgan Chase’s internal risk ratings, which generally correspond to the following ratings as defined by Standard & Poor’s / Moody’s:
   Investment-Grade: AAA / Aaa to BBB- / Baa3
Noninvestment-Grade: BB+ / Ba1 and below

Page 28


 

JPMORGAN CHASE & CO.
CREDIT-RELATED INFORMATION, CONTINUED
(in millions, except ratio data)
  (JPMORGANCHASE LOGO)
                                                             
                                               
                                    Heritage       Jun 30, 2005    
                                    JPMC Only       Change    
    Jun 30     Mar 31     Dec 31     Sep 30     Jun 30       Mar 31     Jun 30    
    2005     2005     2004     2004     2004       2005     2004    
NONPERFORMING ASSETS AND RATIOS
                                                           
WHOLESALE LOANS
                                                           
Loans — U.S.
  $ 959     $ 1,005     $ 1,228     $ 1,405     $ 726         (5 )%     32 %  
Loans — Non-U.S.
    292       324       346       378       715         (10 )     (59 )  
 
                                                 
TOTAL WHOLESALE LOANS-REPORTED (a)
    1,251       1,329       1,574       1,783       1,441         (6 )     (13 )  
 
                                                           
CONSUMER LOANS
                                                           
Home Finance
    662       691       673       789       320         (4 )     107    
Auto & Education Finance
    190       171       193       211       114         11       67    
Consumer & Small Business and Other
    280       288       295       308       85         (3 )     229    
Credit Card Receivables — Reported
    9       8       8       9       9         13          
 
                                                 
TOTAL CONSUMER LOANS-REPORTED
    1,141       1,158       1,169       1,317       528         (1 )     116    
 
                                                           
TOTAL LOANS REPORTED (a)
    2,392       2,487       2,743       3,100       1,969         (4 )     21    
Derivative Receivables
    234       241       241       238       223         (3 )     5    
Other Receivables
                            108       NM     NM    
Assets Acquired in Loan Satisfactions
    206       221       247       299       182         (7 )     13    
 
                                                 
TOTAL NONPERFORMING ASSETS (a)
  $ 2,832     $ 2,949     $ 3,231     $ 3,637     $ 2,482         (4 )     14    
 
                                                 
 
                                                           
PURCHASED HELD-FOR-SALE WHOLESALE LOANS (b)
  $ 378     $ 319     $ 351     $ 355     $ 374         18       1    
 
                                                 
 
                                                           
TOTAL NONPERFORMING LOANS TO TOTAL LOANS
    0.57 %     0.62 %     0.68 %     0.79 %     0.87 %     (5 )bp   (30 )bp  
 
                                                           
NONPERFORMING ASSETS BY LOB
                                                           
Investment Bank
  $ 946     $ 1,056     $ 1,196     $ 1,321     $ 1,541         (10 )%     (39 )%  
Retail Financial Services
    1,319       1,351       1,385       1,557       693         (2 )     90    
Card Services
    9       8       8       9       9         13          
Commercial Banking
    452       452       547       606       132               242    
Treasury & Securities Services
    6       4       14       4       5         50       20    
Asset and Wealth Management
    100       78       81       140       102         28       (2 )  
 
                                                 
TOTAL
  $ 2,832     $ 2,949     $ 3,231     $ 3,637     $ 2,482         (4 )     14    
                                       
 
(a)  
Excludes purchased held-for-sale (“HFS”) wholesale loans.
(b)  
Represents distressed wholesale loans purchased as part of IB’s proprietary investing activities.

Page 29


 

JPMORGAN CHASE & CO.   (JPMORGANCHASE LOGO)
CREDIT-RELATED INFORMATION, CONTINUED    
(in millions, except ratio data)    
                                                                                         
                                    Heritage                   Heritage        
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
GROSS CHARGE-OFFS
                                                                                       
 
                                                                                       
Wholesale Loans
  $ 31     $ 61     $ 123     $ 80     $ 172         (49 )%     (82 )%     $ 92     $ 340         (73 )%  
Consumer (Excluding Card)
    167       219       658       269       104         (24 )     61         386       216         79    
Credit Card Receivables — Reported
    811       753       784       760       281         8       189         1,564       575         172    
 
                                                                         
Total Loans — Reported
    1,009       1,033       1,565       1,109       557         (2 )     81         2,042       1,131         81    
Credit Card Securitizations
    1,060       1,034       1,126       1,039       540         3       96         2,094       1,067         96    
 
                                                                         
Total Loans — Managed
    2,069       2,067       2,691       2,148       1,097               89         4,136       2,198         88    
 
                                                                         
 
                                                                                       
RECOVERIES
                                                                                       
 
                                                                                       
Wholesale Loans
    83       70       55       104       119         19       (30 )       153       198         (23 )  
Consumer (Excluding Card)
    53       67       52       50       24         (21 )     121         120       51         135    
Credit Card Receivables — Reported
    100       80       60       90       22         25       355         180       46         291    
 
                                                                         
Total Loans — Reported
    236       217       167       244       165         9       43         453       295         54    
Credit Card Securitizations
    130       117       115       111       54         11       141         247       108         129    
 
                                                                         
Total Loans — Managed
    366       334       282       355       219         10       67         700       403         74    
 
                                                                         
 
                                                                                       
NET CHARGE-OFFS
                                                                                       
 
                                                                                       
Wholesale Loans
    (52 )     (9 )     68       (24 )     53         (478 )   NM         (61 )     142       NM    
Consumer (Excluding Card)
    114       152       606       219       80         (25 )     43         266       165         61    
Credit Card Receivables — Reported
    711       673       724       670       259         6       175         1,384       529         162    
 
                                                                         
Total Loans — Reported
    773       816       1,398       865       392         (5 )     97         1,589       836         90    
Credit Card Securitizations
    930       917       1,011       928       486         1       91         1,847       959         93    
 
                                                                         
Total Loans — Managed
  $ 1,703     $ 1,733     $ 2,409     $ 1,793     $ 878         (2 )     94       $ 3,436     $ 1,795         91    
 
                                                                         
 
                                                                                       
NET CHARGE-OFF RATES — ANNUALIZED
                                                                                       
 
                                                                                       
Wholesale Loans (a)
    (0.17 )%     (0.03 )%     0.21 %     (0.08 )%     0.29 %     (14 )bp   (46 )bp       (0.10 )%     0.39 %     (49 )bp  
Consumer (Excluding Card) (b)
    0.25       0.34       1.28       0.47       0.29         (9 )     (4 )       0.29       0.30         (1 )  
Credit Card Receivables — Reported
    4.25       4.25       4.70       4.49       6.07               (182 )       4.25       6.22         (197 )  
Total Loans — Reported (a) (b)
    0.83       0.88       1.47       0.93       0.77         (5 )     6         0.86       0.84         2    
Credit Card Securitizations
    5.48       5.36       5.70       5.20       5.74         12       (26 )       5.42       5.63         (21 )  
Total Loans — Managed (a) (b)
    1.55       1.58       2.13       1.62       1.48         (3 )     7         1.57       1.54         3    
 
                                                                                       
Memo: Credit Card — Managed
    4.87       4.83       5.24       4.88       5.85         4       (98 )       4.85       5.83         (98 )  
                                                                         
 
(a)  
Wholesale loans held-for-sale were $17,871 million, $8,154 million, $7,684 million, $7,281 million and $5,199 million for the quarters ended June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004 and June 30, 2004, respectively. The year-to-date average loans held-for-sale were $13,039 million and $5,222 million for 2005 and 2004, respectively. These amounts are not included in the net charge-off rates.
(b)  
Average consumer loans (excluding Card) held-for-sale were $14,620 million, $15,861 million, $13,534 million, $14,479 million and $15,638 million for the quarters ended June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004 and June 30, 2004, respectively. The year-to-date average loans held-for-sale were $15,237 million and $15,475 million for 2005 and 2004, respectively. These amounts are not included in the net charge-off rates.

Page 30


 

JPMORGAN CHASE & CO.
CREDIT-RELATED INFORMATION, CONTINUED
(in millions, except ratio data)
  (JPMORGANCHASE LOGO)
                                                                                         
                                    Heritage                   Heritage        
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
SUMMARY OF CHANGES IN THE ALLOWANCE FOR LOAN LOSSES
                                                                                       
Beginning Balance
  $ 6,935     $ 7,320     $ 7,493     $ 3,967     $ 4,120         (5 )%     68 %     $ 7,320     $ 4,523         62 %  
Addition Resulting from the Bank One Merger, July 1, 2004
                      3,123             NM     NM                     NM    
Net Charge-Offs
    (773 )     (816 )     (1,398 )     (865 )     (392 )       5       (97 )       (1,589 )     (836 )       (90 )  
Provision for Loan Losses:
                                                                                       
Provision Excluding Accounting Policy Conformity
    636       431       681       835       240         48       165         1,067       282         278    
Accounting Policy Conformity
                525       560             NM     NM                     NM    
 
                                                                         
Total Provision for Loan Losses
    636       431       1,206       1,395       240         48       165         1,067       282         278    
Other
    (4 )           19       (127 )(a)     (1 )     NM       (300 )       (4 )     (2 )       (100 )  
 
                                                                         
Ending Balance
  $ 6,794     $ 6,935     $ 7,320     $ 7,493     $ 3,967         (2 )     71       $ 6,794     $ 3,967         71    
 
                                                                         
 
                                                                                       
SUMMARY OF CHANGES IN THE ALLOWANCE FOR LENDING-RELATED COMMITMENTS
                                                                                       
Beginning Balance
  $ 488     $ 492     $ 541     $ 260     $ 297         (1 )     64       $ 492     $ 324         52    
Addition Resulting from the Bank One Merger, July 1, 2004
                      508             NM     NM                     NM    
Provision for Lending-Related Commitments:
                                                                                       
Provision Excluding Accounting Policy Conformity
    (49 )     (4 )     (49 )     1       (37 )     NM       (32 )       (53 )     (64 )       17    
Accounting Policy Conformity
                      (227 )           NM     NM                     NM    
 
                                                                         
Total Provision for Lending-Related Commitments
    (49 )     (4 )     (49 )     (226 )     (37 )     NM       (32 )       (53 )     (64 )       17    
Other
                      (1 )           NM     NM                     NM    
 
                                                                         
Ending Balance
  $ 439     $ 488     $ 492     $ 541     $ 260         (10 )     69       $ 439     $ 260         69    
 
                                                                         
 
                                                                                       
ALLOWANCE COMPONENTS AND RATIOS
                                                                                       
ALLOWANCE FOR LOAN LOSSES
                                                                                       
Wholesale
                                                                                 
Asset Specific
  $ 314     $ 385     $ 469     $ 498     NA       (18 )   NM                                
Formula — Based (b)
Statistical Calculation
    1,604       1,448       1,639       1,832     NA       11     NM                                
Adjustments to the Statistical Calculation
    686       894       990       1,126     NA       (23 )   NM                                
 
                                                                             
Total Wholesale
    2,604       2,727       3,098       3,456       1,715         (5 )     52                                
 
                                                                             
 
                                                                                       
Consumer
                                                                                 
Formula — Based
Statistical Calculation
    3,064       3,113       3,169       3,159     NA       (2 )   NM                                
Adjustments to the Statistical Calculation
    1,126       1,095       1,053       878     NA       3     NM                                
 
                                                                             
Total Consumer
    4,190       4,208       4,222       4,037       2,252               86                                
 
                                                                             
 
                                                                                       
Total Allowance for Loan Losses
    6,794       6,935       7,320       7,493       3,967         (2 )     71                                
Allowance for Lending-Related Commitments
    439       488       492       541       260         (10 )     69                                
 
                                                                             
Total Allowance for Credit Losses
  $ 7,233     $ 7,423     $ 7,812     $ 8,034     $ 4,227         (3 )     71                                
 
                                                                             
 
                                                                                       
Wholesale Allowance for Loan Losses to Total Wholesale Loans (c)
    1.98 %     2.11 %     2.43 %     2.76 %     2.39 %     (13 )bp   (41 )bp                              
Consumer Allowance for Loan Losses to Total Consumer Loans (d)
    1.65       1.69       1.70       1.62       1.67         (4 )     (2 )                              
Allowance for Loan Losses to Total Loans (c) (d)
    1.76       1.83       1.94       2.01       1.92         (7 )     (16 )                              
Allowance for Loan Losses to Total Nonperforming Loans (e)
    287       283       268       248       206         400       8,100                                
 
                                                                                       
ALLOWANCE FOR LOAN LOSSES BY LOB
                                                                                       
Investment Bank
  $ 971     $ 1,191     $ 1,547     $ 1,841     $ 742         (18 )%     31 %                              
Retail Financial Services
    1,135       1,168       1,228       1,764       1,061         (3 )     7                                
Card Services
    3,055       3,040       2,994       2,273       1,191               157                                
Commercial Banking
    1,431       1,312       1,322       1,350       107         9     NM                                
Treasury & Securities Services
    7       5       9       9       2         40       250                                
Asset and Wealth Management
    195       214       216       241       76         (9 )     157                                
Corporate
          5       4       15       788       NM     NM                                
 
                                                                             
Total
  $ 6,794     $ 6,935     $ 7,320     $ 7,493     $ 3,967         (2 )     71                                
                                                               
 
(a)  
Related to the transfer of the allowance for accrued interest and fees on reported and securitized credit card loans.
(b)  
During the second quarter 2005, the Firm refined its historical and market based inputs used for estimating the Formula Based component of the allowance. These refinements resulted in an increase to the Statistical Calculation and a decrease to the Adjustments to the Statistical Calculation, the component of the allowance that covers estimate imprecision.
(c)  
Loans held-for-sale were $17,871 million, $8,154 million, $7,684 million, $7,281 million and $5,199 million at June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004 and June 30, 2004, respectively. These amounts are not included in the allowance coverage ratios.
(d)  
Loans held-for-sale were $13,112 million, $16,532 million, $18,022 million, $12,816 million and $14,217 million at June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004 and June 30, 2004, respectively. These amounts are not included in the allowance coverage ratios.
(e)  
Nonperforming loans held-for-sale were $28 million, $33 million, $15 million, $78 million and $46 million at June 30, 2005, March 31, 2005, December 31, 2004, September 30, 2004 and June 30, 2004, respectively. These amounts are not included in the allowance coverage ratios.

Page 31


 

JPMORGAN CHASE & CO.
CREDIT-RELATED INFORMATION, CONTINUED
(in millions)
  (JPMORGANCHASE LOGO)
                                                                                         
                                    Heritage                   Heritage        
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
PROVISION FOR CREDIT LOSSES
                                                                                       
LOANS
                                                                                       
Investment Bank
  $ (271 )   $ (356 )   $ (120 )   $ (148 )   $ (96 )       24 %     (182 )%     $ (627 )   $ (257 )       (144 )%  
Commercial Banking
    116       (8 )     17       10       23       NM       404         108       8       NM    
Treasury & Securities Services
    2       (5 )     3             3       NM       (33 )       (3 )     4       NM    
Asset & Wealth Management
    (18 )     (7 )     (21 )     1       (3 )       (157 )     (500 )       (25 )     8       NM    
Corporate
    1       (4 )           (1 )     (27 )     NM     NM         (3 )     (109 )       97    
 
                                                                         
Total Wholesale
    (170 )     (380 )     (121 )     (138 )     (100 )       55       (70 )       (550 )     (346 )       (59 )  
Retail Financial Services
    95       92       78       239       78         3       22         187       133         41    
Card Services
    711       719       724       734       262         (1 )     171         1,430       495         189    
 
                                                                         
Total Consumer
    806       811       802       973       340         (1 )     137         1,617       628         157    
Accounting Policy Conformity (a)
                525       560             NM     NM                     NM    
 
                                                                         
Total Provision for Loan Losses
    636       431       1,206       1,395       240         48       165         1,067       282         278    
 
                                                                         
 
                                                                                       
LENDING-RELATED COMMITMENTS
                                                                                       
Investment Bank
  $ (72 )   $ (10 )   $ (53 )   $ (3 )   $ (32 )     NM       (125 )     $ (82 )   $ (59 )       (39 )  
Commercial Banking
    26       2       4       4       (4 )     NM     NM         28       (2 )     NM    
Treasury & Securities Services
          2                         NM     NM         2             NM    
Asset & Wealth Management
    (2 )                       (1 )     NM       (100 )       (2 )     (2 )          
Corporate
                                  NM     NM                     NM    
 
                                                                         
Total Wholesale
    (48 )     (6 )     (49 )     1       (37 )     NM       (30 )       (54 )     (63 )       14    
Retail Financial Services
    (1 )     2                         NM     NM         1       (1 )     NM    
Card Services
                                  NM     NM                     NM    
 
                                                                         
Total Consumer
    (1 )     2                         NM     NM         1       (1 )     NM    
Accounting Policy Conformity (b)
                      (227 )           NM     NM                     NM    
 
                                                                         
Total Provision for Lending-Related Commitments
    (49 )     (4 )     (49 )     (226 )     (37 )     NM       (32 )       (53 )     (64 )       17    
 
                                                                         
 
                                                                                       
TOTAL PROVISION FOR CREDIT LOSSES
                                                                                       
Investment Bank
  $ (343 )   $ (366 )   $ (173 )   $ (151 )   $ (128 )       6       (168 )     $ (709 )   $ (316 )       (124 )  
Commercial Banking
    142       (6 )     21       14       19       NM     NM         136       6       NM    
Treasury & Securities Services
    2       (3 )     3             3       NM       (33 )       (1 )     4       NM    
Asset & Wealth Management
    (20 )     (7 )     (21 )     1       (4 )       (186 )     (400 )       (27 )     6       NM    
Corporate
    1       (4 )           (1 )     (27 )     NM     NM         (3 )     (109 )       97    
 
                                                                         
Total Wholesale
    (218 )     (386 )     (170 )     (137 )     (137 )       44       (59 )       (604 )     (409 )       (48 )  
Retail Financial Services
    94       94       78       239       78               21         188       132         42    
Card Services
    711       719       724       734       262         (1 )     171         1,430       495         189    
 
                                                                         
Total Consumer
    805       813       802       973       340         (1 )     137         1,618       627         158    
Accounting Policy Conformity
                525       333             NM     NM                     NM    
 
                                                                         
Total Provision for Credit Losses
    587       427       1,157       1,169       203         37       189         1,014       218         365    
 
                                                                         
 
                                                                                       
Securitized Credit Losses
    930       917       1,011       928       486         1       91         1,847       959         93    
Accounting Policy Conformity
                (525 )     (333 )           NM     NM                     NM    
 
                                                                         
Managed Provision for Credit Losses
  $ 1,517     $ 1,344     $ 1,643     $ 1,764     $ 689         13       120       $ 2,861     $ 1,177         143    
                                                           
 
(a)  
Reflects an increase of $721 million for both the fourth quarter and third quarter of 2004, as a result of the decertification of heritage Bank One seller’s interest in credit card securitizations, partially offset by reductions of $196 million and $161 million to conform methodologies in the fourth and third quarters of 2004, respectively.
(b)  
Reflects a reduction of $227 million for the third quarter of 2004 to conform methodologies in the wholesale portfolio.

Page 32


 

JPMORGAN CHASE & CO.
CAPITAL
  (JPMORGANCHASE LOGO)
(in millions, except ratio and per share data)    
                                                                                         
                                    Heritage                   Heritage        
                                    JPMC Only       2QTR 2005               JPMC Only       YTD 2005    
    2QTR     1QTR     4QTR     3QTR     2QTR       Change       Year-to-date       Change    
    2005     2005     2004     2004     2004       1QTR 2005     2QTR 2004       2005     2004       2004    
COMMON SHARES OUTSTANDING
                                                                                       
Weighted-Average Basic Shares Outstanding
    3,493.0       3,517.5       3,514.7       3,513.5       2,042.8         (1 )%     71 %       3,505.2       2,037.6         72 %  
Weighted-Average Diluted Shares Outstanding
    3,548.3       3,569.8       3,602.0       3,592.0       2,042.8         (1 )     74         3,559.0       2,096.3         70    
Common Shares Outstanding — at Period End
    3,514.0       3,525.3       3,556.2       3,564.1       2,087.5               68         3,514.0       2,087.5         68    
Cash Dividends Declared per Share
  $ 0.34     $ 0.34     $ 0.34     $ 0.34     $ 0.34                     $ 0.68     $ 0.68            
Book Value per Share
    29.95       29.78       29.61       29.42       21.52         1       39         29.95       21.52         39    
Dividend Payout
    122 %     54 %     74 %     87 %   NM       6,800 bp   NM bp       75 %     106 %     (3,100 )bp  
                                                                                         
SHARE PRICE
                                                                                       
High
  $ 36.50     $ 39.69     $ 40.45     $ 40.25     $ 42.57         (8 )%     (14 )%     $ 39.69     $ 43.84         (9 )%  
Low
    33.35       34.32       36.32       35.50       34.62         (3 )     (4 )       33.35       34.62         (4 )  
Close
    35.32       34.60       39.01       39.73       38.77         2       (9 )       35.32       38.77         (9 )  
                                                                                         
STOCK REPURCHASE PROGRAM (b)
                                                                                       
Aggregate Repurchases
  $ 593.7     $ 1,315.6     $ 599.8     $ 137.9     NM                         $ 1,909.3     NM              
Common Shares Repurchased
    16.8       36.0       15.8       3.5     NM                           52.8     NM              
Average Purchase Price
  $ 35.32     $ 36.57     $ 38.01     $ 39.42     NM                         $ 36.17     NM              
                                                                                         
CAPITAL RATIOS
                                                                                       
Tier 1 Capital
  $ 69,779 (a)   $ 69,435     $ 68,621     $ 69,309     $ 43,537           60                                
Total Capital
    96,086 (a)     96,378       96,807       96,666       59,357           62                                
Risk-Weighted Assets
    848,394 (a)     811,822       791,373       803,464       530,270       5     60                                
Adjusted Average Assets
    1,135,653 (a)     1,110,058       1,102,456       1,065,244       790,390       2     44                                
Tier 1 Capital Ratio
    8.2 %(a)     8.6 %     8.7 %     8.6 %     8.2 %     (40 )bp   bp                              
Total Capital Ratio
    11.3 (a)     11.9       12.2       12.0       11.2         (60 )     10                                
Tier 1 Leverage Ratio
    6.1 (a)     6.3       6.2       6.5       5.5         (20 )     60                                
                                                                                         
INTANGIBLE ASSETS
                                                                                       
Goodwill
  $ 43,537     $ 43,440     $ 43,203     $ 42,947     $ 8,731         %     399 %                              
Mortgage Servicing Rights
    5,026       5,663       5,080       5,168       5,707         (11 )     (12 )                              
Purchased Credit Card Relationships
    3,528       3,703       3,878       4,055       893         (5 )     295                                
All Other Intangibles
    5,319       5,514       5,726       5,945       799         (4 )   NM                                
 
                                                                             
Total Intangibles
  $ 57,410     $ 58,320     $ 57,887     $ 58,115     $ 16,130         (2 )     256                                
                                                               
 
(a)  
Estimated
(b)  
Excludes commission costs.

Page 33


 

     
JPMORGAN CHASE & CO.
Glossary of Terms
  (JPMORGANCHASE LOGO)

ACH: Automated Clearing House

Assets Under Management: Represent assets actively managed by Asset & Wealth Management on behalf of institutional, private banking, private client services and retail clients. Excludes assets managed by American Century Companies, Inc., in which the Firm has a 43% ownership interest.

Assets Under Supervision: Represent assets under management as well as custody, brokerage, administration and deposit accounts.

Average Managed Assets: Refers to total assets on the Firm’s balance sheet plus credit card receivables that have been securitized.

bp: Denotes basis points; 100 bp equals 1%.

Contractual Credit Card Charge-off: In accordance with the Federal Financial Institutions Examination Council Policy, credit card loans are charged-off by the end of the month in which the account becomes 180 days past due or within 60 days from receiving notification of the filing of bankruptcy, whichever is earlier.

Corporate: Includes Private Equity, Treasury, and corporate staff and other centrally managed expenses.

Managed Credit Card Receivables or Managed Basis: Refers to credit card receivables on the Firm’s balance sheet plus credit card receivables that have been securitized.

NA: Data is not applicable for the period presented.

NM: Not meaningful

Operating Basis or Operating Earnings: Reported results excluding the impact of merger costs, other special items and credit card securitizations.

Overhead Ratio: Noninterest expense as a percentage of total net revenue.

Reported Basis: Financial statements prepared under accounting principles generally accepted in the United States of America (“U.S. GAAP”). The reported basis includes the impact of merger costs, other special items and credit card securitizations.

Segment Results: All periods are on a comparable basis, although restatements may occur in future periods to reflect further alignment of management accounting policies or changes in organizational structures between businesses.

Special Items: Includes merger costs, litigation reserve charge and accounting policy conformity adjustments.

Unaudited: The financial statements and information included throughout this document are unaudited and have not been subjected to auditing procedures sufficient to permit an independent certified public accountant to express an opinion.

Value-at-Risk (“VAR”): A measure of the dollar amount of potential loss from adverse market moves in an ordinary market environment.

 

Page 34


 

     
JPMORGAN CHASE & CO.
Line of Business Metrics
  (JPMORGANCHASE LOGO)

Investment Banking

IB’s revenues are comprised of the following:

1. Investment banking fees includes advisory, equity underwriting, bond underwriting and loan syndication fees.

2. Fixed income markets includes client and portfolio management revenue related to both market-making and proprietary risk-taking across global fixed income markets, including government and corporate debt, foreign exchange, interest rate and commodities markets.

3. Equities markets includes client and portfolio management revenue related to market-making and proprietary risk-taking across global equity products, including cash instruments, derivatives and convertibles.

4. Credit portfolio revenue includes Net interest income, fees and loan sale activity for IB’s credit portfolio. Credit portfolio revenue also includes gains or losses on securities received as part of a loan restructuring, and changes in the credit valuation adjustment (“CVA”), which is the component of the fair value of a derivative that reflects the credit quality of the counterparty. Credit portfolio revenue also includes the results of risk management related to the Firm’s lending and derivative activities.

Retail Financial Services

Description of selected business metrics within Home Finance:

1. Secondary marketing involves the sale of mortgage loans into the secondary market and risk management of this activity from the point of loan commitment to customers through loan closing and subsequent sale.

Home Finance’s origination channels are comprised of the following:

1. Retail – A mortgage banker employed by the Firm directly contacts borrowers who are buying or refinancing a home through a branch office, through the Internet or by phone. Borrowers are frequently referred to a mortgage banker by real estate brokers, home builders or other third parties.

2. Wholesale – A third-party mortgage broker refers loans to a mortgage banker at the Firm. Brokers are independent loan originators that specialize in finding and counseling borrowers but do not provide funding for loans.

3. Correspondent – Banks, thrifts, other mortgage banks and other financial institutions sell closed loans to the Firm.

4. Correspondent negotiated transactions (“CNT”) – Mid- to large-sized mortgage lenders, banks and bank-owned mortgage companies sell servicing to the Firm on an as-originated basis. These transactions supplement traditional production channels and provide growth opportunities in the servicing portfolio in stable and rising-rate periods.

Description of selected business metrics within Consumer & Small Business Banking:

1. Personal bankers – Retail branch office personnel who acquire, retain and expand new and existing customer relationships by assessing customer needs and recommending and selling appropriate banking products and services.

2. Investment sales representatives – Licensed retail branch sales personnel, assigned to support several branches, who assist with the sale of investment products including college planning accounts, mutual funds, annuities and retirement accounts.

Description of selected business metrics within Insurance:

1. Proprietary annuity sales represent annuity contracts marketed through and issued by subsidiaries of the Firm.

2. Insurance in force – direct/assumed includes the aggregate face amount of insurance policies directly underwritten and assumed through reinsurance.

3. Insurance in force – retained includes the aggregate face amounts of insurance policies directly underwritten and assumed through reinsurance, after reduction for face amounts ceded to reinsurers.

Card Services

Description of selected business metrics within Card Services:

1. Charge volume – Represents the dollar amount of cardmember purchases, balance transfers and cash advance activity.

2. Net accounts opened – Includes originations, purchases and sales.

3. Merchant acquiring business – Represents an entity that processes payments for merchants. JPMorgan Chase is a majority owner of Paymentech, Inc. and a 50% owner of Chase Merchant Services.

4. Bank card volume – Represents the dollar amount of transactions processed for the merchants.

5. Total transactions – Represents the number of transactions and authorizations processed for the merchants.

Commercial Banking

Commercial Banking revenues are comprised of the following:

1. Lending incorporates a variety of financing alternatives, such as term loans, revolving lines of credit and asset-based structures and leases, which are often secured by receivables, inventory, equipment or real estate.

2. Treasury services incorporates a broad range of products and services to help clients manage short-term liquidity through deposits and sweeps, and longer-term investment needs through money market accounts, certificates of deposit and mutual funds; manage working capital through lockbox, global trade, global clearing and commercial card products; and have ready access to information to manage their business through on-line reporting tools.

3. Investment banking products provide clients with more sophisticated capital-raising alternatives, through loan syndications, investment-grade debt, asset-backed securities, private placements, high-yield bonds and equity underwriting, and balance sheet and risk management tools through foreign exchange, derivatives, M&A and advisory services.

Treasury & Securities Services

Treasury & Securities Services firmwide metrics include certain TSS product revenues and liability balances reported in other lines of business for customers who are also customers of those lines of business. In order to capture the firmwide impact of TS and TSS products and revenues, management reviews firmwide metrics such as firmwide liability balances, firmwide revenue and firmwide overhead ratios in assessing financial performance for TSS. Firmwide metrics are necessary in order to understand the aggregate TSS business.

Asset & Wealth Management

AWM’s client segments are comprised of the following:

1. The Private bank addresses every facet of wealth management for ultra-high-net-worth individuals and families worldwide, including investment management, capital markets and risk management, tax and estate planning, banking, capital raising and specialty wealth advisory services.

2. Retail provides more than 2 million customers worldwide with investment management, retirement planning and administration, and brokerage services through third-party and direct distribution channels.

3. Institutional serves more than 3,000 large and mid-size corporate and public institutions, endowments and foundations, and governments globally. AWM offers institutions comprehensive global investment services, including investment management across asset classes, pension analytics, asset-liability management, active risk budgeting and overlay strategies.

4. Private client services offers high-net-worth individuals, families and business owners comprehensive wealth management solutions that include financial planning, personal trust, investment and banking products and services.

 

Page 35


 

(JPMORGANCHASE LOGO)

APPENDIX

 


 

     
JPMORGAN CHASE & CO.
RECONCILIATION
 FROM REPORTED TO OPERATING BASIS
(in millions, except per share and ratio data)
  (JPMORGANCHASE LOGO)
                                                                 
    SECOND QUARTER 2005  
       
                            Special Items (c)              
    Reported     Trading     Credit     Merger     Litigation     Accounting     Tax Equivalent     Operating  
    Results     Reclass (a)     Card (b)     Costs     Reserves     Policy Conformity     Adjustments (d)     Basis  
REVENUE
                                                               
Investment Banking Fees
  $ 961     $     $     $     $     $     $     $ 961  
Trading Revenue
    387       198                                     585  
Lending & Deposit Related Fees
    851                                           851  
Asset Management, Administration and Commissions
    2,541                                           2,541  
Securities / Private Equity Gains (Losses)
    407                                           407  
Mortgage Fees and Related Income
    336                                           336  
Credit Card Income
    1,763             (728 )                             1,035  
Other Income
    496                                     143       639  
 
                                               
Noninterest Revenue
    7,742       198       (728 )                       143       7,355  
 
                                                               
Net Interest Income
    5,001       (198 )     1,658                         84       6,545  
 
                                               
 
                                                               
TOTAL NET REVENUE
    12,743             930                         227       13,900  
 
                                               
 
                                                               
Provision for Credit Losses
    587             930                               1,517  
 
                                                               
NONINTEREST EXPENSE
                                                               
Compensation Expense
    4,266                                           4,266  
Occupancy Expense
    580                                           580  
Technology and Communications Expense
    896                                           896  
Professional & Outside Services
    1,130                                           1,130  
Marketing
    537                                           537  
Other Expense
    954                                           954  
Amortization of Intangibles
    385                                           385  
 
                                               
Total Noninterest Expense before Merger Costs and Litigation Reserve Charge
    8,748                                           8,748  
Merger Costs
    279                   (279 )                        
Litigation Reserve Charge
    1,872                         (1,872 )                  
 
                                               
TOTAL NONINTEREST EXPENSE
    10,899                   (279 )     (1,872 )                 8,748  
 
                                               
 
                                                               
Income (Loss) before Income Tax Expense
    1,257                   279       1,872             227       3,635  
Income Tax Expense (Benefit)
    263                   106       711             227       1,307  
 
                                               
NET INCOME (LOSS)
  $ 994     $     $     $ 173     $ 1,161     $     $     $ 2,328  
 
                                               
       
FINANCIAL RATIOS
                                                               
Diluted Earnings per Share
  $ 0.28     $     $     $ 0.05     $ 0.33     $     $     $ 0.66  
ROE
    4 %     %     %     1 %     4 %     %     %     9 %
ROE-GW
    6                   1       8                   15  
ROA
    0.34     NM     NM     NM     NM     NM     NM       0.75  
Overhead Ratio
    86     NM     NM     NM     NM     NM     NM       63  
Effective Income Tax Rate
    21     NM     NM       38       38     NM       100       36  
 
(a)  
The reclassification of trading-related net interest income from Net Interest Income to Trading Revenue primarily impacts the Investment Bank segment results.
(b)  
The impact of credit card securitizations affects Card Services. See page 19 for further information.
(c)  
Special items are excluded from Operating earnings, as management believes these items are not part of the Firm’s normal daily business operations (and, therefore, are not indicative of trends), and do not provide meaningful comparisons with other periods. These items include Merger costs, significant litigation charges, charges to conform accounting policies and other items. Merger costs of $279 million reflects costs associated with the merger; significant litigation charges of $1.9 billion were taken in the second quarter of 2005.
(d)  
For a description of the tax-equivalent adjustments, see the Operating Basis cover page.

Page 36


 

     
JPMORGAN CHASE & CO.
RECONCILIATION
 FROM REPORTED TO OPERATING BASIS
(in millions, except per share and ratio data)
  (JPMORGANCHASE LOGO)
                                                                 
    FIRST QUARTER 2005  
       
                            Special Items (c)              
    Reported     Trading     Credit     Merger     Litigation     Accounting     Tax Equivalent     Operating  
    Results     Reclass (a)     Card (b)     Costs     Reserves     Policy Conformity     Adjustments (d)     Basis  
REVENUE
                                                               
Investment Banking Fees
  $ 993     $     $     $     $     $     $     $ 993  
Trading Revenue
    1,859       328                                     2,187  
Lending & Deposit Related Fees
    820                                           820  
Asset Management, Administration and Commissions
    2,498                                           2,498  
Securities / Private Equity Gains (Losses)
    (45 )                                         (45 )
Mortgage Fees and Related Income
    362                                           362  
Credit Card Income
    1,734             (815 )                             919  
Other Income
    201                                     115       316  
 
                                               
Noninterest Revenue
    8,422       328       (815 )                       115       8,050  
 
                                                               
Net Interest Income
    5,225       (328 )     1,732                         61       6,690  
 
                                               
 
                                                               
TOTAL NET REVENUE
    13,647             917                         176       14,740  
 
                                               
 
                                                               
Provision for Credit Losses
    427             917                               1,344  
                                                                 
NONINTEREST EXPENSE
                                                               
Compensation Expense
    4,702                                           4,702  
Occupancy Expense
    525                                           525  
Technology and Communications Expense
    920                                           920  
Professional & Outside Services
    1,074                                           1,074  
Marketing
    483                                           483  
Other Expense
    805                                           805  
Amortization of Intangibles
    383                                           383  
 
                                               
Total Noninterest Expense before Merger Costs and Litigation Reserve Charge
    8,892                                           8,892  
Merger Costs
    145                   (145 )                        
Litigation Reserve Charge
    900                         (900 )                  
 
                                               
TOTAL NONINTEREST EXPENSE
    9,937                   (145 )     (900 )                 8,892  
 
                                               
 
                                                               
Income (Loss) before Income Tax Expense
    3,283                   145       900             176       4,504  
Income Tax Expense (Benefit)
    1,019                   55       342             176       1,592  
 
                                               
NET INCOME (LOSS)
  $ 2,264     $     $     $ 90     $ 558     $     $     $ 2,912  
 
                                               
                                                                 
FINANCIAL RATIOS
                                                               
Diluted Earnings per Share
  $ 0.63     $     $     $ 0.03     $ 0.15     $     $     $ 0.81  
ROE
    9 %     %     %     %     2 %     %     %     11 %
ROE-GW
    15                   1       3                   19  
ROA
    0.79     NM     NM     NM     NM     NM     NM       0.96  
Overhead Ratio
    73     NM     NM     NM     NM     NM     NM       60  
Effective Income Tax Rate
    31     NM     NM       38       38     NM       100       35  
 
(a)  
The reclassification of trading-related net interest income from Net Interest Income to Trading Revenue primarily impacts the Investment Bank segment results.
(b)  
The impact of credit card securitizations affects Card Services. See page 19 for further information.
(c)  
Special items are excluded from Operating earnings, as management believes these items are not part of the Firm’s normal daily business operations (and, therefore, are not indicative of trends), and do not provide meaningful comparisons with other periods. These items include merger costs, significant litigation charges, charges to conform accounting policies and other items. Merger costs of $145 million reflects costs associated with the merger; significant litigation charges of $900 million were taken in the first quarter of 2005.
(d)  
For a description of the tax-equivalent adjustments, see the Operating Basis cover page.

Page 37


 

     
JPMORGAN CHASE & CO.
RECONCILIATION
 FROM REPORTED TO OPERATING BASIS
(in millions, except per share and ratio data)
  (JPMORGANCHASE LOGO)
                                                                 
    FOURTH QUARTER 2004  
       
                            Special Items (c)              
    Reported     Trading     Credit     Merger     Litigation     Accounting     Tax Equivalent     Operating  
    Results     Reclass (a)     Card (b)     Costs     Reserves     Policy Conformity     Adjustments (d)     Basis  
REVENUE
                                                               
Investment Banking Fees
  $ 1,073     $     $     $     $     $     $     $ 1,073  
Trading Revenue
    611       511                                     1,122  
Lending & Deposit Related Fees
    903                                           903  
Asset Management, Administration and Commissions
    2,330                                           2,330  
Securities / Private Equity Gains (Losses)
    569                                           569  
Mortgage Fees and Related Income
    85                                           85  
Credit Card Income
    1,822             (786 )                             1,036  
Other Income
    228             1                         178       407  
 
                                               
Noninterest Revenue
    7,621       511       (785 )                       178       7,525  
 
                                                               
Net Interest Income
    5,329       (511 )     1,796                         10       6,624  
 
                                               
 
                                                               
TOTAL NET REVENUE
    12,950             1,011                         188       14,149  
 
                                               
 
                                                               
Provision for Credit Losses
    1,157             1,011                   (525 )           1,643  
 
                                                               
NONINTEREST EXPENSE
                                                               
Compensation Expense
    4,211                                           4,211  
Occupancy Expense
    609                                           609  
Technology and Communications Expense
    1,051                                           1,051  
Professional & Outside Services
    1,191                                           1,191  
Marketing
    428                                           428  
Other Expense
    981                                           981  
Amortization of Intangibles
    392                                           392  
 
                                               
Total Noninterest Expense before Merger Costs and Litigation Reserve Charge
    8,863                                           8,863  
Merger Costs
    523                   (523 )                        
Litigation Reserve Charge
                                               
 
                                               
TOTAL NONINTEREST EXPENSE
    9,386                   (523 )                       8,863  
 
                                               
 
                                                               
Income (Loss) before Income Tax Expense
    2,407                   523             525       188       3,643  
Income Tax Expense (Benefit)
    741                   199             199       188       1,327  
 
                                               
NET INCOME (LOSS)
  $ 1,666     $     $     $ 324     $     $ 326     $     $ 2,316  
 
                                               
       
FINANCIAL RATIOS
                                                               
Diluted Earnings per Share
  $ 0.46     $     $     $ 0.09     $     $ 0.09     $     $ 0.64  
ROE
    6 %     %     %     1 %     %     2 %     %     9 %
ROE-GW
    11                   2             2             15  
ROA
    0.57     NM     NM     NM     NM     NM     NM       0.75  
Overhead Ratio
    72     NM     NM     NM     NM     NM     NM       63  
Effective Income Tax Rate
    31     NM     NM       38     NM       38       100       36  
 
(a)  
The reclassification of trading-related net interest income from Net Interest Income to Trading Revenue primarily impacts the Investment Bank segment results.
(b)  
The impact of credit card securitizations affects Card Services. See page 19 for further information.
(c)  
Special items are excluded from Operating earnings, as management believes these items are not part of the Firm’s normal daily business operations (and, therefore, are not indicative of trends), and do not provide meaningful comparisons with other periods. These items include merger costs, significant litigation charges, charges to conform accounting policies and other items. Merger costs of $523 million reflects costs associated with the merger.
(d)  
For a description of the tax-equivalent adjustments, see the Operating Basis cover page.

Page 38


 

     
JPMORGAN CHASE & CO.
  (JPMORGANCHASE LOGO)
RECONCILIATION FROM REPORTED TO OPERATING BASIS
   
(in millions, except per share and ratio data)
   
                                                                 
    THIRD QUARTER 2004  
                                           
                            Special Items (c)              
    Reported     Trading     Credit     Merger     Litigation     Accounting     Tax Equivalent     Operating  
    Results     Reclass (a)     Card (b)     Costs     Reserves     Policy Conformity     Adjustments (d)     Basis  
REVENUE
                                                               
Investment Banking Fees
  $ 879     $     $     $     $     $     $     $ 879  
Trading Revenue
    408       424                                     832  
Lending & Deposit Related Fees
    943                                           943  
Asset Management, Administration and Commissions
    2,185                                           2,185  
Securities / Private Equity Gains (Losses)
    413                                           413  
Mortgage Fees and Related Income
    233                                           233  
Credit Card Income
    1,782             (848 )                             934  
Other Income
    210             (3 )                 118       64       389  
 
                                               
Noninterest Revenue
    7,053       424       (851 )                 118       64       6,808  
 
                                                               
Net Interest Income
    5,452       (424 )     1,779                         (36 )     6,771  
 
                                               
 
                                                               
TOTAL NET REVENUE
    12,505             928                   118       28       13,579  
 
                                               
 
                                                               
Provision for Credit Losses
    1,169             928                   (333 )           1,764  
 
                                                               
NONINTEREST EXPENSE
                                                               
Compensation Expense
    4,050                                           4,050  
Occupancy Expense
    604                                           604  
Technology and Communications Expense
    1,046                                           1,046  
Professional & Outside Services
    1,103                                           1,103  
Marketing
    506                                           506  
Other Expense
    920                                           920  
Amortization of Intangibles
    396                                           396  
 
                                               
Total Noninterest Expense before Merger Costs and
    8,625                                           8,625  
Litigation Reserve Charge
                                                               
Merger Costs
    752                   (752 )                        
Litigation Reserve Charge
                                               
 
                                               
TOTAL NONINTEREST EXPENSE
    9,377                   (752 )                       8,625  
 
                                               
 
                                                               
Income (Loss) before Income Tax Expense
    1,959                   752             451       28       3,190  
Income Tax Expense (Benefit)
    541                   290             172       28       1,031  
 
                                               
NET INCOME (LOSS)
  $ 1,418     $     $     $ 462     $     $ 279     $     $ 2,159  
 
                                               
 
                                                               
FINANCIAL RATIOS
                                                               
Diluted Earnings per Share
  $ 0.39     $     $     $ 0.13     $     $ 0.08     $     $ 0.60  
ROE
    5 %     %     %     2 %     %     1 %     %     8 %
ROE-GW
    9                   3             2             14  
ROA
    0.50       NM       NM       NM       NM       NM       NM       0.72  
Overhead Ratio
    75       NM       NM       NM       NM       NM       NM       64  
Effective Income Tax Rate
    28       NM       NM       39       NM       38       100       32  
 
(a)  
The reclassification of trading-related net interest income from Net Interest Income to Trading Revenue primarily impacts the Investment Bank segment results.
(b)  
The impact of credit card securitizations affects Card Services. See page 19 for further information.
(c)  
Special items are excluded from Operating earnings, as management believes these items are not part of the Firm’s normal daily business operations (and, therefore, are not indicative of trends), and do not provide meaningful comparisons with other periods. These items include merger costs, significant litigation charges, charges to conform accounting policies and other items. Merger costs of $752 million reflects costs associated with the merger.
(d)  
For a description of the tax-equivalent adjustments, see the Operating Basis cover page.

Page 39


 

     
JPMORGAN CHASE & CO.
  (JPMORGANCHASE LOGO)
RECONCILIATION FROM REPORTED TO OPERATING BASIS
   
(in millions, except per share and ratio data)
   
                                                                 
    SECOND QUARTER 2004  
                                           
                            Special Items (c)              
    Reported     Trading     Credit     Merger     Litigation     Accounting     Tax Equivalent     Operating  
    Results     Reclass (a)     Card (b)     Costs     Reserves     Policy Conformity     Adjustments (d)     Basis  
REVENUE
                                                               
Investment Banking Fees
  $ 893     $     $     $     $     $     $     $ 893  
Trading Revenue
    873       439                                     1,312  
Lending & Deposit Related Fees
    412                                           412  
Asset Management, Administration and Commissions
    1,814                                           1,814  
Securities / Private Equity Gains (Losses)
    460                                           460  
Mortgage Fees and Related Income
    294                                           294  
Credit Card Income
    631             (307 )                             324  
Other Income
    260             (45 )                       41       256  
 
                                               
Noninterest Revenue
    5,637       439       (352 )                       41       5,765  
 
                                                               
Net Interest Income
    2,994       (439 )     838                         18       3,411  
 
                                               
 
                                                               
TOTAL NET REVENUE
    8,631             486                         59       9,176  
 
                                               
 
                                                               
Provision for Credit Losses
    203             486                               689  
 
                                                               
NONINTEREST EXPENSE
                                                               
Compensation Expense
    2,943                                           2,943  
Occupancy Expense
    440                                           440  
Technology and Communications Expense
    786                                           786  
Professional & Outside Services
    752                                           752  
Marketing
    202                                           202  
Other Expense
    511                                           511  
Amortization of Intangibles
    79                                           79  
 
                                               
Total Noninterest Expense before Merger Costs and
    5,713                                           5,713  
Litigation Reserve Charge
                                                               
Merger Costs
    90                   (90 )                        
Litigation Reserve Charge
    3,700                         (3,700 )                  
 
                                               
TOTAL NONINTEREST EXPENSE
    9,503                   (90 )     (3,700 )                 5,713  
 
                                               
 
                                                               
Income (Loss) before Income Tax Expense
    (1,075 )                 90       3,700             59       2,774  
Income Tax Expense (Benefit)
    (527 )                 30       1,406             59       968  
 
                                               
NET INCOME (LOSS)
  $ (548 )   $     $     $ 60     $ 2,294     $     $     $ 1,806  
 
                                               
 
                                                               
FINANCIAL RATIOS
                                                               
Diluted Earnings per Share
  $ (0.27 )   $     $     $ 0.03     $ 1.09     $     $     $ 0.85  
ROE
    NM       NM       NM       NM       NM       NM       NM       15 %
ROE-GW
    NM       NM       NM       NM       NM       NM       NM       19  
ROA
    NM       NM       NM       NM       NM       NM       NM       0.87  
Overhead Ratio
    110 %     NM       NM       NM       NM       NM       NM       62  
Effective Income Tax Rate
    49       NM       NM       33 %     38 %     NM       100 %     35  
 
(a)  
The reclassification of trading-related net interest income from Net Interest Income to Trading Revenue primarily impacts the Investment Bank segment results.
(b)  
The impact of credit card securitizations affects Card Services. See page 19 for further information.
(c)  
Special items are excluded from Operating earnings, as management believes these items are not part of the Firm’s normal daily business operations (and, therefore, are not indicative of trends), and do not provide meaningful comparisons with other periods. These items include merger costs, significant litigation charges, charges to conform accounting policies and other items. Merger costs of $90 million reflects costs associated with the merger; significant litigation charges of $3.7 billion were taken in the second quarter of 2004.
(d)  
For a description of the tax-equivalent adjustments, see the Operating Basis cover page.

Page 40


 

     
JPMORGAN CHASE & CO.
  (JPMORGANCHASE LOGO)
RECONCILIATION FROM REPORTED TO OPERATING BASIS
   
(in millions, except per share and ratio data)
   
                                                                 
    YEAR-TO-DATE 2005  
                                           
                            Special Items (c)              
    Reported     Trading     Credit     Merger     Litigation     Accounting     Tax Equivalent     Operating  
    Results     Reclass (a)     Card (b)     Costs     Reserves     Policy Conformity     Adjustments (d)     Basis  
REVENUE
                                                               
Investment Banking Fees
  $ 1,954     $     $     $     $     $     $     $ 1,954  
Trading Revenue
    2,246       526                                     2,772  
Lending & Deposit Related Fees
    1,671                                           1,671  
Asset Management, Administration and Commissions
    5,039                                           5,039  
Securities / Private Equity Gains (Losses)
    362                                           362  
Mortgage Fees and Related Income
    698                                           698  
Credit Card Income
    3,497             (1,543 )                             1,954  
Other Income
    697                                     258       955  
 
                                               
Noninterest Revenue
    16,164       526       (1,543 )                       258       15,405  
 
                                                               
Net Interest Income
    10,226       (526 )     3,390                         145       13,235  
 
                                               
 
                                                               
TOTAL NET REVENUE
    26,390             1,847                         403       28,640  
 
                                               
 
                                                               
Provision for Credit Losses
    1,014             1,847                               2,861  
 
                                                               
NONINTEREST EXPENSE
                                                               
Compensation Expense
    8,968                                           8,968  
Occupancy Expense
    1,105                                           1,105  
Technology and Communications Expense
    1,816                                           1,816  
Professional & Outside Services
    2,204                                           2,204  
Marketing
    1,020                                           1,020  
Other Expense
    1,759                                           1,759  
Amortization of Intangibles
    768                                           768  
 
                                               
Total Noninterest Expense before Merger Costs and
    17,640                                           17,640  
Litigation Reserve Charge
                                                               
Merger Costs
    424                   (424 )                        
Litigation Reserve Charge
    2,772                         (2,772 )                  
 
                                               
TOTAL NONINTEREST EXPENSE
    20,836                   (424 )     (2,772 )                 17,640  
 
                                               
 
                                                               
Income (Loss) before Income Tax Expense
    4,540                   424       2,772             403       8,139  
Income Tax Expense (Benefit)
    1,282                   161       1,053             403       2,899  
 
                                               
NET INCOME (LOSS)
  $ 3,258     $     $     $ 263     $ 1,719     $     $     $ 5,240  
 
                                               
 
                                                               
FINANCIAL RATIOS
                                                               
Diluted Earnings per Share
  $ 0.91     $     $     $ 0.08     $ 0.48     $     $     $ 1.47  
ROE
    6 %     %     %     1 %     3 %     %     %     10 %
ROE-GW
    11                   1       5                   17  
ROA
    0.56       NM       NM       NM       NM       NM       NM       0.85  
Overhead Ratio
    79       NM       NM       NM       NM       NM       NM       62  
Effective Income Tax Rate
    28       NM       NM       38       38       NM       100       36  
 
(a)  
The reclassification of trading-related net interest income from Net Interest Income to Trading Revenue primarily impacts the Investment Bank segment results.
(b)  
The impact of credit card securitizations affects Card Services. See page 19 for further information.
(c)  
Special items are excluded from Operating earnings, as management believes these items are not part of the Firm’s normal daily business operations (and, therefore, are not indicative of trends), and do not provide meaningful comparisons with other periods. These items include Merger costs, significant litigation charges, charges to conform accounting policies and other items. Merger costs of $424 million reflects costs associated with the merger; significant litigation charges of $2.8 billion were taken in the first six months of 2005.
(d)  
For a description of the tax-equivalent adjustments, see the Operating Basis cover page.

Page 41


 

     
JPMORGAN CHASE & CO.
RECONCILIATION FROM REPORTED TO OPERATING BASIS
  (JPMORGANCHASE LOGO)
(in millions, except per share and ratio data)
   
                                                                 
    YEAR-TO-DATE 2004  
                                           
                            Special Items (c)              
    Reported     Trading     Credit     Merger     Litigation     Accounting     Tax Equivalent     Operating  
    Results     Reclass (a)     Card (b)     Costs     Reserves     Policy Conformity     Adjustments (d)     Basis  
REVENUE
                                                               
Investment Banking Fees
  $ 1,585     $     $     $     $     $     $     $ 1,585  
Trading Revenue
    2,593       1,015                                     3,608  
Lending & Deposit Related Fees
    826                                           826  
Asset Management, Administration and Commissions
    3,650                                           3,650  
Securities / Private Equity Gains (Losses)
    892                                           892  
Mortgage Fees and Related Income
    488                                           488  
Credit Card Income
    1,236             (633 )                             603  
Other Income
    392             (84 )                       75       383  
 
                                               
Noninterest Revenue
    11,662       1,015       (717 )                       75       12,035  
 
                                                               
Net Interest Income
    5,980       (1,015 )     1,676                         32       6,673  
 
                                               
 
                                                               
TOTAL NET REVENUE
    17,642             959                         107       18,708  
 
                                               
 
                                                               
Provision for Credit Losses
    218             959                               1,177  
 
                                                               
NONINTEREST EXPENSE
                                                               
Compensation Expense
    6,245                                           6,245  
Occupancy Expense
    871                                           871  
Technology and Communications Expense
    1,605                                           1,605  
Professional & Outside Services
    1,568                                           1,568  
Marketing
    401                                           401  
Other Expense
    958                                           958  
Amortization of Intangibles
    158                                           158  
 
                                               
Total Noninterest Expense before Merger Costs and
    11,806                                           11,806  
Litigation Reserve Charge
                                                               
Merger Costs
    90                   (90 )                        
Litigation Reserve Charge
    3,700                         (3,700 )                  
 
                                               
TOTAL NONINTEREST EXPENSE
    15,596                   (90 )     (3,700 )                 11,806  
 
                                               
 
                                                               
Income (Loss) before Income Tax Expense
    1,828                   90       3,700             107       5,725  
Income Tax Expense (Benefit)
    446                   30       1,406             107       1,989  
 
                                               
NET INCOME (LOSS)
  $ 1,382     $     $     $ 60     $ 2,294     $     $     $ 3,736  
 
                                               
 
                                                               
FINANCIAL RATIOS
                                                               
Diluted Earnings per Share
  $ 0.65     $     $     $ 0.03     $ 1.09     $     $     $ 1.77  
ROE
    6 %     %     %     %     10 %     %     %     16 %
ROE-GW
    7                         13                   20  
ROA
    0.35       NM       NM       NM       NM       NM       NM       0.92  
Overhead Ratio
    88       NM       NM       NM       NM       NM       NM       63  
Effective Income Tax Rate
    24       NM       NM       33       38       NM       100       35  
 
(a)  
The reclassification of trading-related net interest income from Net Interest Income to Trading Revenue primarily impacts the Investment Bank segment results.
(b)  
The impact of credit card securitizations affects Card Services. See page 19 for further information.
(c)  
Special items are excluded from Operating earnings, as management believes these items are not part of the Firm’s normal daily business operations (and, therefore, are not indicative of trends), and do not provide meaningful comparisons with other periods. These items include Merger costs, significant litigation charges, charges to conform accounting policies and other items. Merger costs of $90 million reflects costs associated with the merger; significant litigation charges of $3.7 billion were taken in the first six months of 2004.
(d)  
For a description of the tax-equivalent adjustments, see the Operating Basis cover page.

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