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): February 27, 2008
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):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Table of Contents
| Item 7.01 Regulation FD Disclosure | 2 | |
| Item 9.01 Financial Statements and Exhibits | 2 | |
| 3 | ||
| 4 | ||
| EX-99.1: ANALYST PRESENTATION SLIDES |
Table of Contents
Item 7.01 Regulation FD Disclosure
On February 27, 2008, JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) held an Investor Day, providing a related investor presentation.
Exhibit 99.1 is a copy of slides furnished at, and posted on the Firm’s website in connection with, the presentation. The slides are being furnished pursuant to Item 7.01, and the information contained therein shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities under that Section. Furthermore, the information contained in Exhibit 99.1 shall not be deemed to be incorporated by reference into the filings of the Firm under the Securities Act of 1933.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
| Exhibit |
Description of Exhibit | |
| 99.1 | JPMorgan Chase & Co. Investor Day Presentation Slides |
The information in, or attached as an Exhibit to, this Form 8-K 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 Firm’s Annual Report on Form 10-K for the year ended December 31, 2007, filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission’s Internet site ( http://www.sec.gov ).
2
Table of Contents
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/ Louis Rauchenberger | |
| Louis Rauchenberger | ||
| Managing Director and Controller [Principal Accounting Officer] | ||
Dated: March 4, 2008
3
Table of Contents
| Exhibit |
Description of Exhibit | |
| 99.1 | JPMorgan Chase & Co. Investor Day Presentation Slides |
4
 February 27, 2008 |
 This
presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current
beliefs and expectations of JPMorgan Chase’s management and are subject to
significant risks and uncertainties. Actual results may differ from those
set forth in the forward- looking statements. Factors that could cause
JPMorgan Chase’s results to differ materially from those described in the
forward-looking statements can be found in the firm’s Quarterly Report
on Form 10-Q for the quarters ended September 30, 2007, June 30, 2007 and
March 31, 2007 and in the Annual Report on Form 10-K for the year ended December 31, 2006 (as amended), filed with the Securities and Exchange Commission and available at
the Securities and Exchange Commission’s Internet site
(http://www.sec.gov). The 2003 and 2004 financial information provided in this
presentation is presented on a pro forma combined basis, which includes purchase
accounting adjustments made in connection with the merger of JPMorgan Chase and
Bank One. The 2003 and 2004 pro forma combined historical results represent how
the financial information of JPMorgan Chase and Bank One may have appeared on a combined basis had the two companies been merged as of January 1, 2003. Additional information, including a reconciliation from pro forma results to GAAP, can be found on the Form 8-K/As furnished to the Securities and Exchange Commission on
April 20, 2005 and July 20, 2005. Disclaimer |
 Opening
Remarks – Jamie Dimon Firm Overview – Mike Cavanagh Retail Financial Services – Charlie Scharf Break Treasury & Securities Services – Heidi Miller Commercial Banking – Todd Maclin Lunch Infrastructure as a Strategic Asset – Frank Bisignano Investment Bank – Steve Black & Bill Winters Asset Management – Jes Staley Break Card Services – Gordon Smith Closing Remarks and Q&A – Jamie Dimon 8:45 a.m. 9:00 a.m. 9:30 a.m. 10:30 a.m. 10:45 a.m. 11:15 a.m. 11:45 a.m. 1:00 p.m. 1:30 p.m. 2:30 p.m. 3:00 p.m. 3:15 p.m. 4:00 p.m. 2008 Investor Day Agenda |
 F
E B R U A R Y 2 7 , 2 0 0 8 J P M O R G A N C H A S E Mike Cavanagh, CFO |
 Recap of
2004-2007 Line of business results Outlook/Conclusions Overview 1 |
 Financial
performance $mm Note: 2004 data is presented on an unaudited pro forma combined basis that represents how the
financial information of JPMorgan Chase & Co. and Bank One Corporation may have appeared had the two companies been merged for the full year 1 Managed basis presents revenue and credit costs without the effect of credit card
securitizations. All references to credit costs refer to managed provision for credit losses 2 Includes merger costs of $209mm in 2007, $305mm in 2006, $772mm in 2005 and $1,365mm in 2004 3 Represents income from continuing operations. Excludes income from discontinued operations
related to the exchange of selected corporate trust businesses to The Bank of New York of $795mm in 2006, $229mm in 2005 and $206mm in 2004 4 Ratios are based upon income from continuing operations 5 See note 1 on slide 20 Four major areas of focus including improving operating margins, investing for growth, managing credit through the cycle and balance sheet strength contributed to improved performance 2 2004 2005 2006 2007 Revenue (FTE) 1 $57,281 $58,364 $65,113 $74,812 Credit Costs 1 7,348 7,259 5,480 9,244 Expense 2 40,481 38,426 38,843 41,703 Pretax income from Cont. Ops 9,452 12,679 20,790 23,865 Income from Cont. Ops 3 $6,338 $8,254 $13,649 $15,365 EPS 3 $1.75 $2.32 $3.82 $4.38 ROE 4 6% 8% 12% 13% ROTCE 4 , 5 12% 16% 23% 23% |
 Improving
operating margins Pretax preprovision profit ($mm) Note: 2004 data is presented on an unaudited pro forma combined basis that represents how the
financial information of JPMorgan Chase & Co. and Bank One Corporation may have appeared had the two companies been merged for the full year 2004 2005 2006 2007 Investment Bank $4,605 $4,864 $5,973 $5,096 Retail Financial Services 5,974 6,245 5,898 7,579 Card Services 9,553 10,367 9,659 10,321 Commercial Banking 1,486 1,632 1,821 2,145 Treasury & Sec. Services 549 1,489 1,843 2,365 Asset Management 1,359 1,804 2,209 3,120 Corporate Private Equity 836 1,278 975 3,377 Corporate (ex. Private Equity) (7,562) (7,741) (2,108) (894) Pretax preprovision profit $16,800 $19,938 $26,270 $33,109 3 |
 Managing
credit through the cycle Net charge-off ratio analysis (managed basis)
Note: 2004 data is presented on an unaudited pro forma combined basis that represents
how the financial information of JPMorgan Chase & Co. and Bank One Corporation may have appeared had the two companies been merged for the full year 1 $19.4B of prime mortgage loans were transferred to Corporate on 1/1/07 2 Excludes other changes in allowance of ($45mm) in 2007, $85mm in 2006, $14mm in 2005 and ($136mm) in 2004 4 2004 2005 2006 2007 Investment Bank 0.06% (0.28)% (0.05)% 0.06% Commercial Banking 0.13% 0.05% 0.05% 0.07% Card Services 5.28% 5.21% 3.33% 3.68% Retail Financial Svc. 0.69% 0.31% 0.31% 0.79% Home Equity 0.27% 0.20% 0.18% 0.62% Mortgage 1 0.05% 0.06% 0.12% 1.52% Auto Finance 0.61% 0.54% 0.56% 0.86% TSS, AM and Corporate 0.23% 0.06% (0.04%) 0.02% Total Firm 1.88% 1.68% 1.09% 1.33% Net Charge -offs ($mm) $8,209 $7,595 $5,252 $6,918 Change in Allowance ($mm) 2 (861) (336) 228 2,326 Total Credit Costs ($mm) $7,348 $7,259 $5,480 $9,244 |
 Investing
for growth Growth drivers ($mm) Note: 2004 data is presented on an unaudited pro forma combined basis that represents how the
financial information of JPMorgan Chase & Co. and Bank One Corporation may have appeared had the two companies been merged for the full year 1 Figure represents 2005 to 2007 CAGR 5 2004 2005 2006 2007 2004-2007 CAGR Retail Financial Services Avg deposits (Regional Bkg) ($B) $171.8 $175.3 $190.2 $206.9 6.4% # of Checking Accounts (000's) 8,124 8,793 9,995 10,839 10.1% Investment sales 10,811 11,144 14,882 18,360 19.3% Credit cards originated in branches 408,794 667,499 1,152,166 1,420,884 51.5% # of Branches 2,508 2,641 3,079 3,152 7.9% Card Services Average outstandings $128,839 $136,389 $141,107 $149,318 5.0% Charge Volume ($B) 282.7 301.9 339.6 354.6 7.8% Sales Volume ($B) 218.1 233.7 267.6 292.1 10.2% # of New accts opened (000's) 9,697 11,362 15,870 16,152 18.5% Commercial Banking Average Loans and Leases $46,341 $48,117 $53,596 $61,094 9.7% Average Liability Balances 62,591 66,055 73,613 87,726 11.9% IB Revenue, Gross¹ NA 552 716 888 26.8% TSS Revenue 1,852 2,062 2,243 2,350 8.3% |
 Investing
for growth, continued Growth drivers ($mm) Note: 2004 data is presented on an unaudited pro forma combined basis that represents how the
financial information of JPMorgan Chase & Co. and Bank One Corporation may have appeared had the two companies been merged for the full year 1 International revenue represents all non-Americas revenue 2 RPS represents Retirement Planning Services 2004 2005 2006 2007 2004-2007 CAGR Investment Bank IB Fees $3,671 $4,096 $5,537 $6,616 21.7% Advisory 939 1,263 1,659 2,273 34.3% Equity and Debt Underwriting 2,732 2,833 3,878 4,343 16.7% Equity Markets 1,704 1,799 3,458 3,903 31.8% International revenue¹ 5,985 6,355 9,232 10,005 18.7% Treasury & Securities Services Average Liability Bal ($B) $127.5 $154.7 $189.5 $228.9 21.5% Assets under Custody ($T) 9.3 10.7 13.9 15.9 19.6% US$ ACH transactions originations (mm) 2,509 2,966 3,503 3,870 15.5% Int'l Clearing Volumes (mm) 46.6 89.5 145.3 168.6 53.5% Asset Management Assets under Management ($B) $791 $847 $1,013 $1,193 14.7% AUM Flows ($B) 4 32 89 115 206.3% Average Deposits ($B) 38.6 42.1 50.6 58.9 15.1% # of RPS Participants² 918,000 1,299,000 1,362,000 1,501,000 17.8% 6 |
 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5% 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 JPM BAC C WB WFC Tier 1 Capital ratio Source: Company filings Building strong balance sheet and capital JPM WFC WB C BAC 7 |
 Agenda Page Overview of 2007 performance 8 8 |
 Investment
Bank Leadership positions Outlook Financial results ($mm) 2006 2007 O/(U) Revenue $18,833 $18,170 (4)% IB Fees 5,537 6,616 19 Fixed Income Markets 8,736 6,339 (27) Equity Markets 3,458 3,903 13 Credit Portfolio 1,102 1,312 19 Credit Costs 191 654 242 Expense 12,860 13,074 2 Net Income $3,674 $3,139 (15)% Key statistics Overhead Ratio 68% 72% Comp/Revenue 43%¹ 44% Allowance for Loan Losses to Loans² 1.79% 1.92% ROE 18% 15% VAR ($mm)³ $88 $106 Uncertain environment; substantial risks remain Good progress; continue to build/invest Expect volatility of returns through cycle 1 Ratio is calculated excluding effect of SFAS 123R 2 Allowance for loan losses to loans is based on average loan balances for 2006 and period end
retained loan balances for 2007 3 Average Trading and Credit Portfolio VAR 4 Source: Dealogic, Dec FY 2007 5 Source: Thomson Financial, Dec FY 2007 Institutional Investor’s America’s Investment Bank of the Year Risk magazine’s 2007 Derivatives House of the Year Best Derivatives House for the Past 20 Years Best Credit Derivatives House - Pioneer and Modern Great #1 Global Investment Banking fees 4 #1 Global Loan Syndications 5 #1 Global High Yield Bonds 5 #2 Global Equity and Equity-Related 5 #2 Global Debt, Equity and Equity- Related 5 9 |
 Leveraged
lending $4.9B of funded and unfunded commitments were transferred from
held-for-sale to held to maturity classification on the balance
sheet $21.4B of funded and unfunded commitments remain as
held-for-sale CMBS / Alt-A CMBS - $15.2B of total gross exposure which was all funded on the balance sheet; majority is comprised of loans and securities which are 65% AAA-rated Alt-A - $6.3B of total exposure; mostly AAA securities and first lien mortgages Subprime and subprime CDO-related $2.4B of total subprime and subprime CDO exposure; exposure is hedged by approximately $1.7B of hedges and short positions CDO warehouse and unsold positions $5.4B of CDO warehouse and unsold positions; 92% corporate credit underlying Investment Bank risk topics (all exposures as of 1/31/08) 10 |
 Retail
Financial Services 2006 2007 O/(U) Origination Volumes Home Equity Originations $51.9 $48.3 (7)% Mortgage Loan Originations 119.2 159.4 34 Auto Originations $19.3 $21.3 10% Average Balances Regional Banking Deposits $190.2 $206.9 9% Other Metrics Checking Accounts (mm) 10.0 10.8 8% # of Branches 3,079 3,152 2 # of ATMs 8,506 9,186 8 Investment Sales ($mm) $14,882 $18,360 23 3rd Party Mortgage Loans Serviced $527 $615 17% Key statistics ($B) Leadership positions Expanded market share in mortgages and home equity to 8.6%¹ by originating $208B while raising credit standards #2 in deposit market share²
#2 in home equity originations³ #4 in branch
network 4 #4 in mortgage servicing 5 #1 in auto finance (non-captive) 6 1 Source: Inside Mortgage Finance, National Mortgage News, Home Mortgage Estimates, Full Year
2007 2 Source: FDIC data as of June 2007 3 Source: National Mortgage News 3Q07 4 Source: 4Q07 company reports 5 Source: Inside Mortgage Finance/National Mortgage News as of 3Q07 6 Source: Autocount (franchise), January 2008 11 |
 Retail
Financial Services Financial results ($mm) 2006 2007 O/(U) Net Interest Income $10,165 $10,676 5% Noninterest Revenue 4,660 6,803 46 Net Revenue¹ 14,825 17,479 18 Credit Costs 561 2,610 365 Net Charge-offs 576 1,327 130 Change in Allowance (15) 1,283 NM Expense¹ 8,927 9,900 11 Net Income 3,213 3,035 (6) Regional Banking 2,884 2,301 (20) Mortgage Banking (17) 439 NM Auto Finance $346 $295 (15)% Key statistics Net Charge-off Rate 0.31% 0.79% Allowance for Loan Losses to EOP Loans 0.77% 1.46% ROE 22% 19% Regional Banking OH Ratio (ex. CDI) 53% 50% Outlook Continued build-out of branches Continued market share gain in mortgage Home equity losses continue to trend higher Expect to add to loan loss reserves in 1Q08 1 As a result of the adoption of SFAS 159 ("Fair Value Option") certain loan origination costs commenced being recorded as expense in 1Q07 12 |
 Card
Services Financial results¹ ($mm) Outlook 2006 2007 O/(U) Net Revenue $14,745 $15,235 3% Credit Costs 4,598 5,711 24 Noninterest Expense 5,086 4,914 (3) Net Income $3,206 $2,919 (9)% Key statistics ($B) Avg Outstandings $141.1 $149.3 6% EOP Outstandings $152.8 $157.1 3 Charge Volume² $339.6 $354.6 4 Net Accts Opened (mm) 45.9³ 16.4 (64)% Net Charge-off Rate 3.33% 3.68% 30-Day Delinquency Rate 3.13% 3.48% ROO (pretax) 3.59% 3.09% ROE 23% 21% Visible losses of 4.50% +/- in 1H08 2H08 losses depend on economy and unemployment Industry outstandings – 12/31/2007 4 Chase 20% Citigroup 16% Amex 9% Capital One 7% Discover 6% Bank of America 21% Others 21% 1 Financial results are presented on a managed basis 2 Chase charge volume as reported in table above includes balance transfers 3 FY 2006 included approximately 21mm accounts from the acquisition of the Kohl’s private
label portfolio and approximately 9mm accounts from the acquisitions of the BP
and Pier 1 Imports, Inc. private label portfolios 4 Domestic GPCC O/S, Source: 4Q07 Company reports; Amex data represents proprietary U.S.
consumer and small business. Bank of America data represents U.S. consumer and
small business 13 |
 Commercial
Banking Financial results ($mm) Outlook Leadership positions 2006 2007 O/(U) Net Revenue $3,800 $4,103 8% Middle Market Banking 2,535 2,689 6 Mid-Corporate Banking 656 815 24 Real Estate Banking 458 421 (8) Other 151 178 18 Credit Costs 160 279 74 Noninterest Expense 1,979 1,958 (1) Net Income $1,010 $1,134 12% Key statistics ($B) Avg. Loans & Leases $53.6 $61.1 14% Avg. Liability Balances¹ $73.6 $87.7 19% Overhead Ratio 52% 48% Net Charge-off Rate 0.05% 0.07% ROE 18% 17% Continued expense discipline to reach overhead ratio target of 45% Continued prudent credit risk management of loan portfolio Gross IB revenue of approximately $1B 1 Includes deposits and deposits swept to on-balance sheet liabilities 2 Source: SRBI Footprint Study, 2007 3 Source: Loan Pricing Corporation, 4Q07 #1 commercial bank in market penetration within Chase’s retail branch footprint² #2 large middle-market lender in the United States³ #2 asset-based lender in the United States³ 14 |
 Treasury
& Securities Services Financial results ($mm) Outlook Leadership positions 2006 2007 O/(U) Net Revenue $6,109 $6,945 14% Treasury Services 2,792 3,013 8 Worldwide Sec Svcs 3,317 3,932 19 Noninterest Expense 4,266 4,580 7 Net Income $1,090 $1,397 28% Key statistics Avg Liability Balances ($B) 1
$189.5 $228.9 21% Assets under Custody ($T) $13.9 $15.9 15% Pretax Margin 28% 32% ROE 48% 47% TSS Firmwide Revenue $8,559 $9,565 12% TS Firmwide Revenue $5,242 $5,633 7 TSS Firmwide Avg Liab Bal ($B)¹ $262.7 $316.7 21% 4Q07 results positively affected by positive impact of market conditions, primarily on securities lending, flight to quality and seasonal strength in depository receipts Continued investment in new product platforms Impact of weakening economy on: Business and deposit volumes Level of Assets under Custody 1 Includes deposits and deposits swept to on-balance sheet liabilities 2 NACHA, 2007 3 Source: Federal Reserve 2007 4 Source: FImetrix 2007 Industry Studies 5 Source: SEC Filings, 4Q07 6 Source: 2007 Mutual Fund Service Guide #1 in Automated Clearing House Originations², CHIPS and Fedwire³ #1 in USD clearing & commercial payments 4 #2 Securities custodian 5 #2 Fund services provider for non- U.S. domiciled funds 6 #2 ADR bank in market cap under management 5 15 |
 Asset
Management Financial results ($mm) Outlook Leadership positions 2006 2007 O/(U) Net Revenue $6,787 $8,635 27% Private Bank 1,907 2,605 37 Institutional 1,972 2,525 28 Retail 1,885 2,408 28 Private Client Services 1,023 1,097 7 Credit Costs (28) (18) 36 Noninterest Expense 4,578 5,515 20 Net Income $1,409 $1,966 40% Key statistics ($B) Assets under Management $1,013 $1,193 18% Average Loans¹ $26.5 $29.5 11% Average Deposits $50.6 $58.9 16% Pretax Margin 33% 36% ROE 40% 51% 4Q07 results benefited from seasonal strength in performance fees Impact of weakening markets on: Mutual funds flows especially in Europe Level of Assets under Management 1 Held-for-investment prime mortgage loans that transferred from AM to Corporate during
3Q07 and 1Q07 totaled $1.2B and $5.3B, respectively 2 Absolute Return Magazine, September 2007 issue 3 iMoneyNet, October 2007 4 Investment Week, June 2007 5 Derived from following rating services: Morningstar for the United States; Micropal for the United Kingdom, Luxembourg, Hong Kong and Taiwan; and Nomura for Japan 6 Derived from following rating services: Lipper for the United States and Taiwan; Micropal for the United Kingdom, Luxembourg and Hong Kong; and Nomura for Japan Largest hedge fund manager² Largest international AAA-rated liquidity fund³ Best Emerging Markets Fund 4 % of AUM in 1st and 2nd Quartiles 5 1 year - 57% 3 year - 75% 5 year - 76% 55% of customer assets in 4 & 5 star funds in 2007 6 16 |
 Corporate Financial results ($mm) Outlook Net Income 2006 2007 O/(U) Private Equity $627 $2,165 245% Corporate (391) (260) 34% Net Income from continuing ops.¹ $47 $1,775 NM Private equity significantly lower throughout 2008 Expect minimal gains in 1Q08 Low visibility past 1Q08 Treasury/Corporate Expect combined net loss to be $50mm – $100mm per quarter on average VISA Gain on sale of 50% of $1.8B - $2.0B pretax before VISA escrow for litigation JPM share of litigation escrow of approximately $0.7B Net pretax gain of $1.1B - $1.3B 1 Includes after-tax merger costs of $189mm in 2006 and $130mm in 2007 17 |
 Capital
management 18 Capital management ($B) 1 See note 1 on slide 20 2005 2006 2007 Capital (End of Period) Total Shareholders' Equity $107.2 $115.8 $123.2 Equity net of Goodwill 63.6 70.6 78.0 Tangible Common Equity 1 $55.5 $63.3 $71.9 Balance Sheet Total Assets $1,198.9 $1,351.5 $1,562.1 Mgd Ris k Weighted Assets $912.6 $995. 6 $1,11 8.4 Key Ratios Capitalization Tier 1/RWA 8.5 % 8.7% 8.4% TCE/Mgd RWA 1 6.0 % 6.5% 6.7 % Tier 1 Leverage 6.3 % 6.2% 6.0% |
 2008
Outlook Investment Bank Uncertain environment; substantial risks remain Good progress; continue to build/invest Expect volatility of returns through cycle Retail Financial Services Continued build-out of branches Continued market share gain in mortgage Home equity losses continue to trend higher Expect to add to loan loss reserves in 1Q08 Visible losses of 4.50% +/- in 1H08 2H08 losses depend on economy and unemployment Card Services Private Equity / Corporate Private Equity significantly lower Minimal gains in 1Q08 Low visibility past 1Q08 Corporate Expect combined net loss to be $50mm – $100mm per quarter on average VISA Gain on sale of 50% of $1.8B - $2.0B pretax before VISA escrow for litigation JPM share of litigation escrow of approximately $0.7B Net pretax gain of $1.1B - $1.3B Overall Expansion of TSS, AM, CB Impact of weakening economy on: Credit losses Loan loss reserves Business volumes 19 |
 Notes on
non-GAAP financial measures 20 This presentation includes non-GAAP financial measures. 1. TCE as used on slide 2 for purposes of a return on tangible common equity and presented as
Tangible Common Equity on slide 18 is defined as common stockholders’ equity less identifiable intangible assets (other than MSRs) and goodwill. TCE as used in slide 18 in the TCE/Managed RWA ratio,
which is used for purposes of a capital strength calculation, is defined as
common stockholders’ equity plus a portion of junior subordinated notes (which have certain equity-like characteristics due to
their subordinated and long-term nature) less identifiable intangible assets
(other than MSRs) and goodwill. The latter definition of TCE is used by
the firm and some analysts and creditors of the firm when analyzing the firm’s capital strength. The TCE measures used in this presentation are not necessarily
comparable to similarly titled measures provided by other firms due to
differences in calculation methodologies. 2. Financial results are presented on a managed basis, as such basis is described in the
firm’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2007 and in the Annual Report on Form 10-K for the year ended December
31, 2006 (as amended). 3. All non-GAAP financial measures included in this presentation are provided to assist
readers in understanding certain trend information. Additional information concerning such non-GAAP financial measures can be found in the above-referenced filings, to which reference is hereby
made. |
 F
E B R U A R Y 2 7 , 2 0 0 8 R E T A I L F I N A N C I A L S E R V I C E S Charlie Scharf, CEO |
 Agenda Page Business update Auto credit Home Equity credit RFS financial results 1 1 5 33 37 |
 Retail
Financial Services 2007 results 2006 2007 O/(U) Revenue¹ $14,825 $17,479 $2,654 Credit costs 561 2,610 2,049 Expense¹ 8,927 9,900 973 Net income 3,213 3,035 (178) Regional Banking 2,884 2,301 (583) Mortgage Banking (17) 439 456 Auto Finance $346 $295 ($51) ROE 22% 19% Overhead (ex. CDI) 57% 54% Financial results ($mm) 2007 includes impact of BNY Revenue growth of 18% Credit costs increased due to home equity and subprime mortgage Expense growth reflects Increased production and sales Investment in retail distribution Comments Credit costs ($mm) 2006 2007 O/(U) Net charge-offs $576 $1,327 $751 Change in allowance (15) 1,283 1,298 Total $561 $2,610 $2,049 ¹ As a result of the adoption of SFAS 159 ("Fair Value Option") certain loan origination costs commenced being recorded as expense in 1Q07 Net charge-off detail ($mm) 2006 2007 O/(U) Home equity $143 $564 $421 Mortgage 56 159 103 Business Banking 91 126 35 Other loans 48 116 68 Auto Finance $238 $354 $116 2 |
 Revenue
and expense growth detail Revenue growth detail ($mm) Expense growth detail ($mm) 2006 2007 O/(U) Retail Banking margin $5,698 $6,193 $495 Retail Banking NIR 3,259 3,763 504 Lending 2,554 2,907 353 Insr. and other 460 145 (315) Regional Banking 11,972 13,006 1,034 Mortgage Banking¹ , ² 1,314 2,702 1,388 Auto Finance 1,539 1,757 218 Total RFS $14,825 $17,479 $2,654 2006 2007 O/(U) Retail Banking $5,667 $6,165 $499 Lending 829 802 (27) Insr. and other 330 55 (275) Regional Banking 6,825 7,023 198 Mortgage Banking¹ 1,341 1,987 646 Auto Finance 761 890 129 Total RFS $8,927 $9,900 $973 Revenue growth of 18% Revenue growth excl. BNY and Insurance sale in 2006, up 17% Regional Banking up 9% (4% excl. BNY) Mortgage production up 63% Mortgage servicing up 179% Note: Lending includes Home Equity, Education, and Mortgage Portfolio ¹ As a result of the adoption of SFAS 159 ("Fair Value Option") certain loan origination costs commenced being recorded as expense in 1Q07 ² Mortgage Banking revenue includes provision as per 4Q07 Press Release 3 |
 Consumer
real estate exposure Balances ¹ Prime warehouse loans include prime mortgage loans originated with the intent to sell, which,
for new originations on or after January 01, 2007, were accounted for at fair value under FAS 159. These loans, classified as Trading Assets on the Consolidated Balance Sheet totaled $12.6B, $14.4B, $15.2B, and $11.6B at December 31, 2007, September 30, 2007, June 30, 2007, March 31, 2007 ² Includes ($329mm) in 2Q07, ($306mm) in 3Q07, and ($395mm) in 4Q07 ³ Held-for-investment prime mortgage loans were transferred from RFS to the Corporate segment for risk management and reporting purposes Balances EOP ($B) Markdowns/ net reserve build ($mm) 1Q07 2Q07 3Q07 4Q07 FY2007 Mortgage Banking Warehouse¹ $20.3 $20.0 $14.7 $13.1 ($241) RFS—Portfolio Prime Mortgage $2.4 $2.3 $2.5 $3.0 Sub-prime Mortgage 9.0 8.7 12.1 15.5 (166) Home Equity 87.7 91.0 93.0 94.8 (1,030)² RFS Portfolio $99.1 $102.0 $107.6 $113.3 Prime Mortgage—Corporate³ 26.5 27.3 32.8 36.9 Total Consumer Real Estate Exposure $125.6 $129.3 $140.4 $150.2 4 |
 Agenda Page Business update Auto credit Home Equity credit RFS financial results 5 1 5 33 37 |
 Credit
performance Key credit statistics 4Q06 1Q07 2Q07 3Q07 4Q07 Home Equity Net charge-offs ($mm) $51 $68 $98 $150 $248 Net charge-off rate 0.24% 0.32% 0.44% 0.65% 1.05% Average outstandings ($B) $84.2 $86.3 $89.2 $91.8 $94.0 Total RFS Allowance for loan losses ($mm) $1,392 $1,453 $1,772 $2,105 $2,634 Non-performing loans ($mm)¹ $1,677 $1,655 $1,760 $1,991 $2,704 Allowance to annualized NCOs² 1.6x 2.0x 1.7x 1.5x 1.3x Allowance to NPLs² 89% 94% 115% 107% 100% ¹ NPLs included loans held-for-sale and loans accounted for at fair value under SFAS
159 ² Loans held-for-sale and Loans accounted for at fair value under SFAS 159 were
excluded when calculating the allowance coverage ratio and the Net charge-off rate 6 |
 Net
charge-offs Competitor Home Equity performance 0.24% 0.27% 0.09% 0.08% 0.22% 0.65% 0.83% 0.20% 0.70% 1.59% 1.05% 1.46% 0.63% 1.63% 1.70% JPM WFC BAC WM CFC 4Q06 3Q07 4Q07 Nonperforming loans 0.54% 0.31% 0.34% 0.44% 0.70% 0.62% 0.32% 0.76% 0.86% 0.90% 0.85% 0.37% 1.17% 1.34% 1.60% JPM WFC BAC WM CFC 4Q06 3Q07 4Q07 Source: Company reports; Home Equity and NPL as defined by each company 7 |
 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% Dec-05 Jan-06 Mar-06 Apr-06 Jun-06 Aug-06 Sep-06 Nov-06 Jan-07 Feb-07 Portfolio view Home Equity 30+ day delinquency—a year ago 8 |
 Prime Home
Equity—origination profile Banking Center Channel¹ 2003 2004 2005 2006 2007 Origination ($B) $14.3 $16.4 $17.5 $15.2 $16.7 Weighted avg. FICO 736 733 737 745 749 Weighted avg. CLTV 67% 68% 68% 68% 67% % CLTV >90 10% 10% 8% 6% 3% % CA and FL 0.4% 0.6% 0.8% 0.7% 0.7% ¹ CLTV and FICO at origination Low average CLTVs Small volume of high CLTVs Know the customer 9 |
 Prime Home
Equity—origination profile 2003 2004 2005 2006 2007 Origination ($B) $8.5 $14.6 $15.9 $13.7 $11.3 Weighted avg. FICO 733 735 739 742 747 Weighted avg. CLTV 78% 78% 80% 81% 81% % CLTV 80—85 10% 9% 8% 7% 6% % CLTV 85—90 28% 27% 29% 26% 25% % CLTV >90 11% 16% 20% 27% 28% % CA and FL 51% 50% 45% 44% 44% Broker Channel¹ ¹ CLTV and FICO at origination 10 |
 Prime Home
Equity loss rates—historical experience CLTV % at origination 2004 2005 2006 < 80 0.05% 0.04% 0.05% 80—90 0.12% 0.12% 0.18% 90—95 0.20% 0.17% 0.29% > 95 0.92% 0.71% 0.79% Total 0.16% 0.13% 0.17% Losses by CLTV Appeared okay as long as we were pricing for the risk 11 |
 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 1 2 3 4 5 6 7 8 9 10 11 12 15 18 21 24 27 30 33 36 Cumulative loss rates by months on books as of 12/31/2007 Prime Home Equity—banking center channel 2002 2003 1Q06 1H05 2H05 2Q06 3Q06 4Q06 1Q07 3Q07 2004 2Q07 # of months on books 12 |
 Cumulative loss rates by months on books as of 9/30/2006 Prime Home Equity—broker channel 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 1 2 3 4 5 6 7 8 9 10 11 12 15 18 21 24 27 30 33 36 2002 2003 1Q06 2H05 2004 1H05 2Q06 # of months on books 13 |
 Cumulative loss rates by months on books as of 12/31/2006 Prime Home Equity—broker channel 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 1 2 3 4 5 6 7 8 9 10 11 12 15 18 21 24 27 30 33 36 2002 2003 2Q06 1H05 1Q06 3Q06 2004 2H05 # of months on books 14 |
 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1 2 3 4 5 6 7 8 9 10 11 12 15 18 21 24 27 30 33 36 Cumulative loss rates by months on books as of 12/31/2007 Prime Home Equity—broker channel 2H05 1Q06 2Q07 3Q06 1Q07 3Q07 2Q06 4Q06 1H05 2004 2003 2002 # of months on books 1. More losses and earlier Recent vintages still getting worse 2. Slope No turn yet in earlier vintages 15 |
 Portfolio
view Home Equity 30+ day delinquency 0.00% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Multiple rounds of credit changes Underwriting changes proven to be not enough Apr-07: Underwriting changes Round I Jun-07: Underwriting changes Round II Aug-07: Underwriting changes Round III Nov/Dec-07: Underwriting changes Round IV 16 |
 Prime Home
Equity loss rates—current experience CLTV % at origination 1Q07 2Q07 3Q07 4Q07 < 80 0.08% 0.10% 0.13% 0.14% 80—90 0.32% 0.33% 0.60% 0.81% 90—95 0.40% 0.60% 1.23% 1.90% > 95 1.14% 1.54% 2.08% 4.29% Total 0.27% 0.35% 0.53% 0.86% Losses by CLTV Losses well beyond our stress modeling 17 |
 Prime
Home Equity - performance of 1 st vs. 2 nd liens Problems isolated to 2 nd liens 1 st liens 22%, 2 nd liens 78% of portfolio Total portfolio 1st Liens 2nd Liens 1 2 3 4 5 6 7 8 9 10 11 12 15 18 21 24 27 30 33 36 1 2 3 4 5 6 7 8 9 10 11 12 15 18 21 24 27 30 33 36 1 2 3 4 5 6 7 8 9 10 11 12 15 18 21 24 27 30 33 36 2003 2004 1H05 2H05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 18 |
 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 With Chase Prime 1st With Non-Chase 1st 2nd lien 30+ delinquency Prime Home Equity 2nd lien performance No real differentiation 19 |
 2007 Prime
Home Equity roll rates 1-29 days past due Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 60-89 days past due Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 30-59 days past due Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 90-119 days past due Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 120-149 days past due Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 Continuing to deteriorate 20 |
 Jun- 06 Jul- 06 Aug- 06 Sep- 06 Oct- 06 Nov- 06 Dec- 06 Jan- 07 Feb- 07 Mar- 07 Apr- 07 May- 07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov- 07 Dec- 07 No equity walks ($mm) Gross charge offs ($mm) 12 Mo. YoY HPA% (US Total) Charge off and ‘Walk’ trends ($mm) Prime Home Equity loss severities Severity of housing price decline is totally eliminating equity-not just reducing
it 1 Source: Economy.com 1 21 |
 0% 10% 20% 30% 40% 50% 60% 70% No equity walk contribution to gross credit losses Prime Home Equity walk trends Loss severities increasing 22 |
 Total Home
Equity Portfolio by CLTV and FICO at origination $B outstanding as of 12/31/07
CLTV FICO <80% 80—85% 85—90% 90—95% >95% Total 700+ $39.7 $4.3 $11.6 $4.7 $7.7 $68.0 640—700 12.1 1.5 4.0 1.3 2.6 21.5 < 640 3.4 0.3 0.9 0.2 0.5 5.3 Total $55.2 $6.1 $16.5 $6.2 $10.8 $94.8 23 |
 Percent of
Prime Home Equity portfolio with current CLTV >100% — estimated Source: Economy.com, internal estimates Note: Current CLTV defined as total line balance as a % of current home value estimated by applying Economy.com MSA level HPA estimates as of 12/31/07 2.80% 3% 3.60% 4.10% 4.50% 5.20% 6.20% 7.30% 8.20% 8.80% 9.40% 10% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 (7.0)% (6.0)% (5.0)% (4.0)% (3.0)% (2.0)% (1.0)% 0.0% 24 |
 Prime Home
Equity portfolio by current CLTV - estimated $B Outstanding balances as of 12/31/07 Source: Economy.com, internal estimates Note: Top 10 states by portfolio size Current CLTV defined as total line balance as a % of current home value estimated by applying
Economy.com MSA level HPA estimates as of 12/31/07 14.5 13.6 6.6 6.0 5.7 5.2 5.1 4.2 3.7 2.4 CA NY IL TX AZ FL OH NJ MI IN CLTV <=80 CLTV 80-90 CLTV 90-100 CLTV >100 $9B estimated to be >100% current CLTV as of 12/31/07 25 |
 Prime Home
Equity losses by current CLTV band 4Q07 loss rates Current estimated CLTV State <80% 80—85% 85—90% 90—95% 95—100% >100% California 0.10% 0.08% 0.17% 0.83% 1.64% 5.61% New York 0.07% 0.44% 0.57% 0.80% 1.07% 9.07% Illinois 0.10% 0.41% 0.63% 0.69% 1.04% 7.25% Texas 0.05% 0.27% 0.14% 2.18% 4.05% 0.00% Arizona 0.03% 0.43% 0.24% 0.56% 0.54% 2.76% Florida 0.16% 1.21% 0.79% 0.81% 3.38% 10.04% Ohio 0.46% 0.53% 1.07% 1.20% 1.71% 1.56% New Jersey 0.09% 0.32% 0.04% 0.05% 0.61% 3.37% Michigan 0.37% 0.63% 1.79% 1.73% 2.15% 4.72% Indiana 0.50% 1.33% 0.89% 1.96% 1.11% 1.09% Total Portfolio 0.14% 0.45% 0.53% 0.93% 1.69% 5.47% % of 4Q07 losses 9% 5% 5% 9% 12% 60% Source: Economy.com Note: Top 10 states by portfolio size Current CLTV defined as total line balance as a % of current home value estimated by applying Economy.com MSA level HPA estimates as of 12/31/07 26 |
 Potential
distribution of Prime Home Equity portfolio by CLTV as of 12/31/08 - estimated $B Outstanding Balances Source: Economy.com projected housing price depreciation; balances as of 12/31/07 Note: Top 10 states by portfolio size Current CLTV defined as total line balance as a % of current home value estimated by applying
Economy.com MSA level HPA estimates as of 12/31/07 4.2 3.7 2.4 5.1 5.2 5.7 6.0 6.6 13.6 14.5 CA NY IL TX AZ FL OH NJ MI IN CLTV <100 CLTV >100 Projected 2008 Housing Price Depreciation CA -12% NY -5% IL -1% TX +3% AZ -13% FL -14% OH +2% NJ -10% MI -2% IN +3% 27 |
 Home
Equity underwriting Changes and Impacts 2007 changes Changed maximum CLTV to 90% in broker channel Eliminated stated income across wholesale channel Eliminated stated income with debt-to-income over 50% across all channels Investor/second homes CLTV capped at 80% Significantly strengthened underwriting process relating to appraisal, income/cash flow
assessment and owner occupancy Stopped originating subprime home equity 2008 changes Maximum CLTV adjusted to 90% of expected future home price (net of depreciation) Maximum CLTV reduced to 85% in all markets Less where there is expected depreciation - as low as 60% Eliminated all Stated Income Reduced Maximum DTIs Minimum FICO = 660 Source: Economy.com, Internal Estimates 28 |
 Underwriting process enhancements Business issue Action Outcome Collateral valuation Introduced new valuation tools and review process Onsite appraisers hired. Review process strengthened—increased percentage
of accounts reviewed, declined or counter offered New valuation tool pilot significantly improved high risk account identification Underwriters re-trained and certified based on new standards. Increased
appraisal referrals to onsite appraisers Housing Price trends analysis and application Implemented new database and communication mechanisms to improve understanding of market changes Home Price Appreciation (HPA) database at zip code level deployed. Identifies areas most affected by price declines Established monthly Risk Management forum to analyze local market trends and adjust underwriting process appropriately Valuation committee established to drive policies across the company Owner occupancy More rigor around establishing owner occupancy New software implemented. Significant improvement in occupancy classification Owner occupancy included in fraud training Detailed analysis of credit bureau information to identify owner occupancy misrepresentation Further occupancy validations implemented Income reasonableness Better measure borrowers’ capacity to pay Stated Income Verified Asset (SIVA) policy eliminated Enhanced income calculation process and reporting for full document loans
Tightened norms applied for employment verification 29 |
 2007 4Q07 4Q07 pro forma Originations $16.7 $4.0 % CLTV >90 3% 1% 0% 2007 4Q07 4Q07 pro forma Originations $11.3 $1.7 % CLTV 80—85 6% 6% 5% % CLTV 85—90 25% 30% 0% % CLTV >90 28% 6% 0% Prime Home Equity—expected effect of underwriting changes Banking Center Channel¹ ($B) Broker Channel¹ ($B) ¹ CLTV and FICO at origination Total originations expected to be about half of 2006-2007 level 30 |
 HPA
Assumptions US California New York Arizona Florida Potential loss range ($B) (5.0)% (8.0)% (2.0)% (10.0)% (12.0)% $2.0—$2.5 (10.0)% (15.0)% (7.0)% (20.0)% (20.0)% $3.2—$3.7 Potential losses by HPA scenario 31 2008 Change in home prices Source: Economy.com, Internal Estimates Assumptions: Roll rates continue to deteriorate Severities do not worsen or improve (especially at higher LTVs) No major changes in unemployment Very difficult to model given lack of historical experience with consumer payment behavior in negative equity scenario |
 Home
Equity—mistakes made 1. Backward looking analysis Relied on historical fundamentals – FICO primary driver of credit performance House value was “belts & suspenders” Analyzed impact of potential housing decline – severely underestimated (5-10% vs. 20-30%) Would never do 80+ LTV if we believed value would fall 20-30% 2. Judgment Broker performance/behavior masked by HPA increases – we knew better Incremental changes to underwriting over several years resulted in: — Massive risk layering — Opportunity for speculation and fraud Missed the “bubble” A fundamentally different business over time 32 |
 Agenda Page Business update Auto credit Home Equity credit RFS financial results 33 1 5 33 37 |
 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00% 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 30+ Delinquency % Charge-Off Rate Delinquency and charge-off trends 2006 and 2007 Chase Auto performance 1.65% 1.85% 0.97% 1.27% 1.33% 1.43% 0.59% 0.61% 1.61% 1.72% 0.64% 0.75% 1.39% 1.37% 0.46% 0.43% 30+ Delinquency % Charge-Off Rate 34 |
 Auto
credit 1 Change in loss rates²—4Q06 vs. 4Q07 Deteriorating from historical lows Deterioration concentrated in declining HPA MSAs Increases appear manageable 1 Loss rates for retail portfolio only; excludes dealer commercial and direct portfolios
2 Loss rates reflect net charge-offs without consideration of FFIEC and other accounting
adjustments 3 Source: Economy.com 35 Change in HPA 3 Prime Near Prime Sub-prime (4.5)% + worse 95% 142% 40% (4.5)% to + 3.7% 36% 51% 22% Better than + 3.7% 4% 21% 0% Total 42% 60% 20% |
 Prime and
Near Prime credit actions Changed underwriting criteria for HPA declining versus
HPA stable states Raised Minimum Collateral Values for Extended Term in High Risk States – AZ, CA, NV, and UT Removed Tax, Title, and License from West Region Advance Policy, effectively reducing LTV cutoffs by 10% in High Risk Markets Raised Custom Score Cut-off by 10 points for LTV > 110 Reduced High Advance/Extended Term Added High Risk Layer Policy 36 |
 Agenda Page Business update Auto credit Home Equity credit RFS financial results 37 1 5 33 37 |
 Home
Lending Market share and rank 4Q06 4Q07 Channel % Share Ranking % Share Ranking Retail 7.2% 5 8.4% 4 Wholesale 6.4% 3 10.1% 1 Correspondent 4.9% 6 17.7% 2 Total JPM 6.0% 5 11.2% 3 FY06 FY07 FY07 H/(L) Actual Actual FY06 Production revenue $833 $1,360 $527 Servicing revenue 481 1,342 861 Total revenue $1,314 $2,702 $1,388 Total expense 1,341 1,987 646 Pre-tax Income ($27) $715 $742 Mortgage Banking Source: Inside Mortgage Finance 38 |
 Home
Lending Loan officer recruiting — October 2007 to present Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Total Beginning count 2,317 2,372 2,423 2,552 2,538 2,317 Net hires from Large weakened competitors 31 30 101 42 24 228 All other 24 21 28 (56) 11 28 Total Hires 55 51 129 (14) 35 256 Ending count 2,372 2,423 2,552 2,538 2,573 2,573 Continuing to grow the sales force Attracting top talent from weakened competitors 39 |
 Bank
branch penetration Mortgage production in bank branches 2005 2006 2007 If we sell 1 more per branch/month Sales ($B) $6.4 $8.1 $10.4 $18.9 Number of loans/branch/month 1.0 1.1 1.3 2.3 Homeowner HHs (mm) 4.5 4.6 5.0 5.0 Chase Mortgage HHs (mm) 0.60 0.68 0.81 0.90 % HHs with a Chase Mortgage 8% 8% 9% 10% % Homeowners with a Chase Mortgage 13% 15% 16% 18% Lots of progress Opportunity still large Meaningful in many ways 40 |
 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 Consumer and Business Banking $498 $490 $506 $585 $591 $561 Loan Portfolio/Other 246 129 184 44 20 (190) Total $744 $619 $690 $629 $611 $371 Branch banking profitability and growth drivers Average deposits of $209B, up 4% 3,152 branches, up by 73 9,186 ATMs, up by 680 1 Growth rates are YoY 4Q07 key statistics¹ Net income ($mm) 41 |
 7,312 8,506 9,186 2005 2006 2007 7,067 7,573 9,650 3,214 3,614 4,105 12/31/2005 12/31/2006 12/31/2007 Personal Bankers Sales Specialists Continuing to grow distribution Salesforce growth ATMs Branches Active online customers 4,231 4,909 5,918 2005 2006 2007 2,641 3,079 3,152 2005 2006 2007 42 |
 2003 2004 2005 2006 2007 Total Metro NY — 13 51 22 28 114 Chicago 20 54 25 15 21 135 Arizona 7 10 19 11 15 62 Texas 17 30 26 22 35 130 Michigan 2 3 10 35 10 60 Colorado 5 2 6 12 9 34 Other 8 12 9 8 9 46 Total 59 124 146 125 127 581 New build investment continues Completed 127 new branches in 2007; 125—150 branches annually 2008 estimate of 100—150 Focused on expansion in major footprint markets New branches 43 |
 Retail
Banking Checking Accounts 596 664 862 2005 2006 2007 Net New Checking Accounts (000s) New Checking Accounts (000s) 2,105 2,418 2,877 2005 2006 2007 Continue to grow net checking 44 |
 Deepen
growth in cross-sell Note: Results include acquisition of BNY beginning
October 1, 2006 667 1,152 1,421 2005 2006 2007 $10 $8 $6 2005 2006 2007 Mortgage sales ($B) Credit cards (# units in 000s) Highlights Investment sales ($B) Highlights (4Q07 vs 4Q06): Credit card sales up 34% Mortgage originations up 4% Home Equity originations up 3% $18 $15 $11 2005 2006 2007 45 |
 Growth in
Bank of New York cross-sell 1 Based on average of comparable deposit size Chase branches in NY, NJ and CT 2 Target exit rate at end of 2008 3 1H07 and 2H07 are averages of the quarters Credit Cards¹ New Checking Accounts¹ Investment Sales¹ Mortgage and Home Equity¹ 2005 BNY 4Q06 1H07³ 2H07³ Target 2008² 2005 BNY 4Q06 1H07³ 2H07³ Target 2008² 2005 BNY 4Q06 1H07³ 2H07³ Target 2008² 2005 BNY 4Q06 1H07³ 2H07³ Target 2008² 1.0x 2.0x 3.0x higher 40.0x higher 1.0x 2.2x higher 1.0x 26.6x 1.2x 2.3x higher 2.2x 1.0x 46 |
 Developing
and deepening customer relationships Percent of core retail households¹
Jan 2006 Dec 2007 Multi-product households 66% 71% Checking households 81% 84% With Credit Card 48% 54% With Online Banking 42% 59% With Online Billpay 14% 28% ¹ Branch based households (i.e. no credit card only or out of footprint lending) Lots of progress Lots of opportunity 47 |
 Innovate
to serve customers Chase Mobile On-demand, real-time account information Industry-first national launch of account access by texting in U.S. Rapid Cash Free funds transfer to Mexico for Chase checking customers Deposit-Friendly ATMs SM $290MM investment in ATM deposit automation to allow 24/7 deposit access Debit Rewards United, Continental Chase Picks Up the Tab SM Access Checking Checking with safeguards for consumers who don’t qualify for other checking products ATM Offers Instant checking offers on receipts for non- checking customers & prospects Debit upgrade offers Pre-approved credit cards Innovation 48 |
 Chase What
Matters A new positioning for the Chase brand: What Matters To Our
Customers, Matters To Chase. Chase What Matters Key pillars - access, protection, advocacy, recognition, and value Print: Free Chase Account Alerts PROTECTION MATTERS 24/7 ACCESS MATTERS CONTROL MATTERS REAL-TIME INFO MATTERS 49 |
 Forward
Looking Comments Credit deterioration to continue in all asset classes driven by high HPA MSAs and high LTVs Mortgage volume and profitability strong but slowing Servicing asset very volatile this quarter Banking and Mortgage growth to continue Performance targets not achievable until housing market correction ends 50 |
 F
E B R U A R Y 2 7 , 2 0 0 8 T R E A S U R Y & S E C U R I T I E S S E R V I C E S Heidi Miller, CEO |
 $0.4 $1.3 $1.7 $2.2 $4.7 $5.5 $6.1 $6.9 2004 2005 2006 2007 TSS Revenue and Pretax Income ($B) Healthy growth in margins and revenue Revenue Pretax income Eff. Ratio 88% 70% 73% 66% 1 1 Figures are pro forma for the Bank One merger and Discontinued Operations 1 Figures are pro forma for the Bank One merger and Discontinued Operations 1 |
 Growth
reflects expanded volumes across all products Metric Highlights² Assets Under Custody ($T) USD Clearing Trans Originated (mm) International Clearing Vols (mm) USD ACH Transfers Originated (B) Liability Balances ($B) Sec. Lending Loans Outstanding ($mm) Net Asset Values (mm) ADR Shares Issued / Cancelled (B) GlobeClear Volumes (mm) Americas AUC increased by $3.7T since 2004 Americas AUC increased by $3.7T since 2004 Substantial market share and scale advantage Substantial market share and scale advantage Improved functionality/competitiveness Improved functionality/competitiveness Rollout of Accounts Receivables Conversion product Rollout of Accounts Receivables Conversion product Foreign Deposits growing at 23% Foreign Deposits growing at 23% Increase in lendable assets and utilization Increase in lendable assets and utilization EMEA NAVs growing at 94% EMEA NAVs growing at 94% Surge in cross-border equity investment as investors seek global returns (e.g., Russia, Brazil) Surge in cross-border equity investment as investors seek global returns (e.g., Russia, Brazil) CAGR +20% +20% +11% +11% +55% +55% +16% +22% +22% +20% +20% +55% +55% +22% +22% +77% +77% Entered 38 new markets since 2004. On- exchange clearing grew 145% Entered 38 new markets since 2004. On- exchange clearing grew 145% 9.3 9.3 81 81 46 46 2.5 128 128 221 221 0.6 0.6 1.7 1.7 1.1 1.1 15.9 15.9 111 111 169 169 3.9 229 229 386 386 2.1 2.1 3.1 3.1 6.0 6.0 2004¹ 2007 1 Figures are pro forma for the Bank One merger and Discontinued Operations 2 Growth figures represent a 2004 to 2007 CAGR 1 Figures are pro forma for the Bank One merger and Discontinued Operations 2 Growth figures represent a 2004 to 2007 CAGR 2 |
 Alternative AUA ($B) Growth drivers Investment in organic growth is paying off: Increasing alternative assets under administration (AUA) Traditional Securities Company clients are investing more in private equity and hedge fund assets (reached 52% of AUA in 2007) Alternative Investment Services expanding capabilities internationally HFS: Luxembourg and Hong Kong PEFS: Australia and United Kingdom New product capabilities are being introduced: HFS: Fund of Hedge Funds Product in EMEA PEFS: DealVault 49 63 67 161 141 235 2006 2007 +29% +140% +67% % Change Leveraged Loan Services (LLS) Private Equity Fund Services (PEFS) Hedge Fund Services (HFS) $157 $459 3 |
 66% 52% 26% 37% 9% 11% 2004 2007 Change in regional TSS Revenue mix ($B) Highlights Investment in organic growth is paying off: Expanding international franchise “In-Country” presence: Staff in 41 countries and branches in 27 countries Growth drivers: Worldwide Securities Services — Depositary Receipts — Clearance — Collateral Management — Escrow — Custody & Fund Accounting — Securities Lending Treasury Services — Non-US Dollar deposits and investments — USD Clearing — Trade +15% +120% +100% $4.7 $6.9 % Change Asia Pacific Europe, Middle East, Africa The Americas 4 |
                                 Significant
expansion of international capabilities in 2007 TSS Int’l office
locations Countries with TSS presence Treasury Services Worldwide Securities Services PEFS Pension Fund win Auckland Branch approval South Africa Trade Ops Locally Incorporated Bank, local currency RMB capabilities Regional HQ set up New Dubai office New Riyadh office DRs introduced to Vietnam First LatAm trade management consulting deal UK Corp Card Rollout and Private Equity (PEFS) launch Ruble Clearing launched Swedbank is the first Custody Connect client Swiss Gov’t Pension Fund comprehensive services Resurgence of LatAm DR market Lux. Hedge Fund Services Staff in Nigeria Rupee clearing, paper in Mumbai First GDR 5 |
    International expansion continues to be a top priority: Key drivers Europe, Asia, and Latin America Global trade, especially intra-region Regulatory changes, e.g., SEPA¹, MiFID²
, Basel II³ Growing international markets Changing sources of cross-border investment Non-US Corporations and Sovereign Wealth Funds Investment between developed and emerging economies changing Currency reserves shifting away from US Dollar Evolving investment strategies Pension funds diversifying into alternative assets Hedge funds and private equity in Asia Market-specific products, e.g., Islamic Finance Growth in scale & complexity of international funds 6 1 SEPA (Single Euro Payments Area): Creates a zone for the EURO where all electronic payments
are considered domestic and there is no longer a difference between national and intra-European cross border payments (European Central Bank) 2 MiFID (Markets in Financial Instruments Directive): Introduces a single market & regulatory regime for investment services across the 30 members of the European Economic Area (Deloitte) 3 Basel II: Creates an international banking standard that regulators can use when
creating regulations about how much capital banks need to put aside to guard against the types of financial and operational risks banks face (Bank for International Settlements)
|
              International expansion continues to be a top priority: Broader product capability in international locations In-country
sales & service Full local capabilities Additional local services FX Liquidity ADR/GDR Trade Finance USD Clearing Global Custody Escrow FX Liquidity ADR/GDR Trade Finance USD Clearing Global Custody Escrow Hedge and traditional local fund accounting Local DRs and Escrow Sub-Custody GlobeClear FX Liquidity ADR/GDR Trade Finance USD Clearing Global Custody Escrow Hedge and traditional local fund accounting Local DRs and Escrow Sub-Custody GlobeClear Local Clearing Local Lending Local Deposits 7 |
 Continue
to capitalize on partnership with Investment Bank and Asset Management Leverage IB advisory or underwriting relationship to generate Cash Management or Escrow business Generate IB syndication and receivables business from TSS Trade Finance clients (e.g., Stand- By Letters of Credit) Leverage underwriting relationships to win DR mandates from both new and existing IB clients Increase shared use of TSS- or IB-only presence in-country Multiple deals completed across numerous industries (e.g., Automobiles, Publishing, Telecomm) Boeing (Korea & Singapore) Guaranty Trust (Nigeria), Almacenes Éxito (Colombia), WuXi PharmaTech (China), Sanofi-Aventis (France) Dubai, Lisbon, Stockholm, Buenos Aires, Tashkent Local Market IPO Depositary Receipt Trade Finance Structured Finance Mergers & Acquisitions Liquidity and Escrow Leverage existing infrastructure Sweep Account clients invested in money market funds with JPM Asset Management Multiple deals completed across numerous industries (e.g., Sovereign Wealth Funds, natural resources) Liquidity Asset Management Description Examples 8 |
 In
Summary… Continued healthy top and bottom line growth driven by Increased volumes across all products Investments made in expanded product capabilities & international franchise A number of global changes will keep international expansion at the top of our agenda International markets are growing Cross-border investment sources are changing Investment strategies are evolving Significant progress in 2007 and an aggressive agenda for 2008 to continue to invest internationally in Delivery of new and existing products locally Capitalizing on our partnership with the IB 9 |
 F
E B R U A R Y 2 7 , 2 0 0 8 C O M M E R C I A L B A N K I N G Todd Maclin, CEO |
 Hard work
begins to pay-off Building on momentum from 2007 performance Calling and sales results Nearly 100,000 client calls Over 33,000 prospect calls 35,100+ deals pitched 2,200+ new relationships 9,200+ expanded relationships 7,400+ internal cross-sell referrals Top peer quartile NCO and NPL ratio Real estate concentration below competitors Disciplined hold positions Active portfolio management Expense discipline Expense down 1% YoY Top peer quartile expense management Top peer quartile operating leverage 1 |
 Improved
client satisfaction 2007 Barlow Footprint Study: Online score refers to ease of
use of platforms; TS refers to satisfaction with up to date services Likely to stay 93% 700 bps Current Score ’05-’07 Increase Service satisfaction 86% 600 bps Likely to recommend 83% 1,100 bps TS satisfaction 73% 1,400 bps Online satisfaction 73% 1,700 bps 2 |
 Strong
performance relative to peers across metrics 9% 8% 7% (1)% 2006 2007 Revenue growth Expense management Loan growth Deposit growth 7% (1)% 9% 5% 2006 2007 11% 14% 11% 14% 2006 2007 11% 19% 9% 8% 2006 2007 Commercial Banking Peer median 1 Peers include comparable segment at BAC, C, CMA, FITB, NCC, PNC, STI, USB, WB, WFC, ZION 3 1 |
 We said
in 2006 and 2007 The facts Portfolio granularity and diversification Conservative underwriting Dynamic portfolio management Strong capital, reserves, and liquidity Allowance/loan ratio 2.7% Deposits/loans > 1.4x Best-in-class NCO and NPL ratios Conservative industry concentrations Real estate portfolio < peers Disciplined hold positions Limited loan-only relationships Limited leveraged lending Exited $1.5B marginal credits annually¹ $130mm loans sold in 2007 We run the business with a full credit cycle in mind 4 1 $1.5B exited annually since 2005 2 Ratio based on average loan balances for 4Q07. The allowance for loan losses to
period-end loans was 2.64% at 12/31/07 2 |
 Well
diversified credit portfolio Northeast 23% Midwest 30% Southwest 19% South Ctrl & Mtn 10% Central 18% Industry (total commercial RCE) ¹ Note: Midwest includes IL, WI, MN, MI; Central: IN, OH, KY; Southwest: AZ, TX; South Ctrl & Mtn: UT, CO, LA, OK; Northeast: NY, NJ, CT Real Estate 12% Consumer Products 7% Oil and Gas 7% Utilities 5% Healthcare 8% Machinery & Equip 4% Business Services 5% Retail/ Consumer 8% Bldg Materials 5% Diversified 25% Banks & Fin 3% Tech 4% Govt / Muni 7% Geography (Middle Market RCE) ¹ 1 RCE, or reported credit exposure is defined as total commitments 2 Diversified includes no concentrations > 3%: metals/mining, media, automotive, etc.
3 Real estate includes all investor real estate throughout Commercial Banking 2 12/31/07 Total commitments: $143B 3 12/31/07 Total MM commitments: $80B 5 |
 Responsible approach to loan growth Limited real estate exposure Loan growth by business ($B) $0 $5 $10 $15 $20 $25 $30 $35 $40 Middle Market Mid-Corporate Real Estate 2005 2006 2007 CAGR 9.4% CAGR 40% CAGR 1.5% 2005 2006 2007 2005 2006 2007 1 Real Estate reflects loans in Real Estate Banking only. Taking into account loans transferred
from Real Estate Banking to Middle Market for coverage in 2007, CAGR still low at
4% 1 6 |
 Non-lending income focus = higher reward for credit risk ~2/3 of revenue is non-lending Total 2007 Revenue Lending 35% Other 1% IB 11% TS 88% Non-lending 65% % of non- lending revenue 7 |
 Real
estate 37% All other 63% Real estate 12% All other 88% Real estate % of total portfolio Commercial Bank Peer median² Reported real estate outstanding ($B) $10 $20 $25 Commercial Bank Peer median Peer average Real estate exposure well below major competitors 1 Reflects $7B reported in Real Estate Banking; approx. $3B resides throughout Middle Market
and Mid-Corporate; total commitments of approx. $16B 2 Peers include comparable segment at BAC, C, CMA, FITB, NCC, PNC, STI, USB, WB, WFC, ZION; reported outstandings as of 12/31/07 1 2 2 8 |
 Single Family 15% Office 13% Multi-Family 15% Industrial 8% Coml Land 3% Coml Subscription Line 7% Other 5% Retail 17% Residentia Land 1% Housing Subscription Line 7% Residential Lots 4% Condo 5% CB real estate exposure ($B) Real Estate Banking outstanding Total outstanding: $7.3B Investment Real Estate: O/S RCE Real Estate Banking $7.3 $12.3 Middle Market & Mid-Corporate 2.9 4.2 Total Investment $10.2 $16.5 % of total CB 16% 12% Owner-Occupied 4.2 5.9 Total Investment & Owner- Occupied $14.4 $22.4 % of total CB 22% 16% Note: reported outstandings as of 12/31/07 Diversified Real Estate portfolio 9 |
 NPL Ratio
by business NCO Ratio by business Credit environment is changing Majority of NPLs have come from real estate, as expected 0.09% 0.01% (0.05)% 0.00% 0.03% 0.06% 0.00% 0.01% 0.23% -0.1% -0.1% 0.0% 0.1% 0.1% 0.2% 0.2% 0.3% Middle Market Mid-Corporate Real Estate Banking¹ 0.69% 0.32% 0.15% 0.29% 0.01% 0.03% 0.17% 0.04% 0.70% 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% Middle Market Mid-Corporate Real Estate Banking 4Q05 4Q06 4Q07 4Q05 4Q06 4Q07 4Q05 4Q06 4Q07 2005 2006 2007 2005 2006 2007 2005 2006 2007 1 Real Estate reflects credit ratios in Real Estate Banking only 1 10 |
 Expect our
conservative portfolio positioning to outperform industry average But expect higher
NCOs and NPLs in 2008 Net Charge-off Ratio (bps) Nonperforming Loans (NPL) Ratio (bps) 1 Peers include comparable segment at BAC, C, CMA, FITB, NCC, PNC, STI, USB, WB, WFC, ZION 23 24 38 70 2006 2007 5 7 15 28 2006 2007 Commercial Banking Peer median¹ 11 |
 Client
product penetration (% of total) Note: Product definition: max product penetration = 40 products, one product count per product category Strong client relationships, multiple product focus Average client uses 7.4 products today 11% 14% 12% 62% 22% 24% 29% 25% 0 to 1 2 to 4 5 to 8 9+ Lending clients Non-lending clients 12 |
 Selling
beyond loans provides higher ROE Commercial Banking portfolio – 2007 product ROE Note: illustrative purposes only, represents entire Commercial Banking portfolio and 100% of firmwide revenue Lending Lending + TS Lending + TS + IB 7-10% 18-20% 24-26% 13 |
 Gross
IB Fees ($mm) Treasury Services ($mm) International ($mm) 37 60 96 2005 2006 2007 552 716 888 2005 2006 2007 Growth from our differentiated product set Lending Core Cash Mgmt Investment Banking Treasury Services Products Custody & Fiduciary Retail & Credit Cards Alternative Financing Int’l TS Asset Management Regional competitors JPMC product capabilities 61% CAGR 27% CAGR 2,062 2,243 2,350 2005 2006 2007 7% CAGR 14 |
 2008
Goals Consistent game plan – continuously improving execution! Respect dramatically evolving credit environment Active portfolio management Strive to achieve 45% Overhead Ratio Clients, assets, talent Watch “nickels & dimes” Maintain high level of calling and coverage Increase products per client Invest opportunistically 5% YoY growth Reach 8 avg. products per client 15 |
 F E B R U A R Y 2 7 , 2 0 0 8 I N F R A S T R U C T U R E A S A S T R A T E G I C A S S E T Frank Bisignano, CAO |
 Infrastructure as a strategic asset Development productivity Data center capacity Operations productivity Real estate / footprint 1 |
 Firmwide
technology spend as a % of total firm revenue Managing technology expense 0% 2% 4% 6% 8% 10% 12% 14% 2005 2006 2007 2 |
 Rationalization and management of applications 2004 2007 % reduction Investment Bank 2,161 1,105 49% Retail Financial Services 1,168 674 42% Asset Management 1,150 724 37% Treasury Services & Commercial Bank 1,697 1,089 36% Card Services 434 369 15% Corporate Technology 1,258 802 36% Total 7,868 4,763 39% Number of applications 3 |
 Increased
data center capacity while reducing costs Size of computer power
2005 2006 2007 MIPs 43,000 56,000 69,000 # of servers 40,000 36,000 35,000 Online storage (TBs) 3.4k 6.8k 9.8k Increased resiliency and data protection 2005 2006 2007 Data center space-highest resiliency 47% 67% 69% Expense ($mm) $2,848 $2,651 $2,447 4 |
 Operations productivity IB trade volume vs. headcount Check processing vs. headcount (000s) Daily NAVs produced vs. headcount Commercial loan volume vs. headcount 389,341 1,138,604 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 4Q05 4Q07 0 800 1,600 2,400 3,200 4,000 4,800 Volume Headcount 186,724 102,484 0 50,000 100,000 150,000 200,000 4Q05 4Q07 0 500 1,000 1,500 2,000 Volume Headcount 273,400 266,500 262,000 264,000 266,000 268,000 270,000 272,000 274,000 4Q05 4Q07 0 200 400 600 800 1,000 Volume Headcount 462,466 434,305 420,000 430,000 440,000 450,000 460,000 470,000 4Q05 4Q07 0 400 800 1,200 1,600 2,000 Volume Headcount 5 |
 Increased
branches, vacancy reduction…build for the future 2005 2006 2007 Branches 2,641 3,079 3,152 Data center square foot (mm) 1.0 0.7 0.8 Total RSF (mm) 71.4 67.4 63.9 Total vacant RSF (mm) 13.0 9.6 8.5 Total RSF per employee 415 377 346 Build of new IB headquarters in NY Build of new IB headquarters in London Renovation of JPMorgan Chase headquarters at 270 Park Avenue Three major investments Note: RSF is defined as rentable square feet 6 |
 Employees
by location — top cities New York 24,472 Wilmington -6,079 Columbus - 14,035 Houston – 5,718 Phoenix - 6,433 Dallas - 7,695 Tampa – 3,644 Indianapolis – 2,235 London – 8,816 Bournemouth – 4,097 Mumbai – 7,273 Bangalore - 1,951 Hong Kong – 2,858 Singapore – 1,120 Sydney – 1,280 Chicago – 10,866 San Antonio – 2,414 Orlando – 1,631 Springfield – 1,494 Monroe – 1,468 Louisville – 1,337 Tokyo – 1,484 Manila – 1,625 Milwaukee- 1,156 7 |
 2008 Key
initiatives Development efficiency Data center build-outs Ultra long haul network Data protection initiatives Check image processing and deposit friendly ATMs Location strategy Internal leverage 8 |
 F E B R U A R Y 2 7 , 2 0 0 8 I N V E S T M E N T B A N K Steve Black & Bill Winters, Co-CEOs |
 Agenda Page Wrap-up Discipline: risk management 2007 highlights 1 1 15 23 Growth 5 |
 Strong
relative revenue performance in 2007 Total IB Revenue ($B) IB Fees ($B) 2.7 14.7 16.2 17.6 23.9 33.3 18.2 1.1 (0.5) (2.7) GS DB JPM CS LEH MS C BAC UBS MER 3.9 2.5 3.9 4.9 6.1 4.9 5.5 5.5 6.6 7.6 GS JPM UBS MS C MER CS LEH DB BAC YoY YoY 23% (4)% 7% (2)% Note: Includes all mortgage-related and leveraged lending marks; Includes top 10 IB segment results for competitors disclosing 4Q07 results as of 2/15/08; GS’ and MS’ revenue exclude principal investments; C’s and UBS’s fees are firmwide 0% (27)% (89)% NM NM (87)% 34% 31% 4% 31% 19% 22% 24% (8)% 2% 3% 2 |
 Derivatives House of the Year Best Derivatives House over the Past 20 Years Best Credit Derivatives House – Pioneer and Modern Great League table results 2007 performance highlights Major 2007 Awards Best Overall Investment Bank Five bankers named to 2007 Rainmaker List Best Equity Capital Markets – Global Best Debt House- Western Europe Supranational/ Sovereign/ Agency/ Regional Bond House Asia-Pacific Equity-linked House U.S. Leveraged Finance House Source: Thomson Financial 1 Global announced M&A market share and ranking for 2006 includes transactions withdrawn
since 12/31/06 3 2006 2007 Rank Share Rank Share Global M&A Announced 1 #4 26% #4 24% Global Debt, Equity & Equity -related #2 7% #2 7% US Debt, Equity & Equity -related #2 9% #2 10% Global Equity & Equity -related #6 7% #2 9% Global IPOs #6 5% #4 7% Global Converts #5 7% #1 15% US Equity & Equity -related #6 8% #5 11% Global Long-term Debt #3 6% #2 7% Global Investment Grade Debt #3 6% #3 7% Global High Yield Debt #1 14% #1 12% Global ABS #6 6% #2 9% Global Loan Syndications #1 14% #1 13% |
 Improved
diversification: by region and asset class Revenue by product³ 2007 2006 Total = $17.7B 2003 Total = $12.6B Fees 26% Equity 12% Fixed income 62% Fees 31% Equity 20% Fixed income 49% Total = $16.9B Fees 39% Equity 23% Fixed income 38% 1 Total IB revenue, including Credit Portfolio 2 2003 data is presented on an unaudited pro forma combined basis that represents how the financial information of JPMorgan Chase & Co. and Bank One Corporation may have appeared had the two companies been merged for the full year 3 Total IB revenue, excluding Credit Portfolio Revenue by region¹ 2007 Total = $18.2B 2006 Total = $18.8B 2003 Total = $14.3B Americas 61% Asia Pacific 8% EMEA 31% Americas 51% Asia Pacific 10% EMEA 39% Americas 45% Asia Pacific 15% EMEA 40% 4 2 2 |
 The
themes we focused on over the past few years — growth, discipline and people — are still core to our 2008 strategy Growth Grow our core business Invest in international markets Expand our client base and deepen client loyalty Deliver the whole firm Invest in distressed assets Discipline Improve return on risk Strengthen controls Build technology capabilities Relentlessly focus on productivity People Attract and retain the best people Develop our people Drive management accountability Reinforce our culture Capitalize on our position of strength in everything we do 5 |
 World-class Rates and FX: now a merged platform Strongest Rates performance since 2001 and Record FX annual revenues Strong client growth: Derivative and FX revenues from IB corporate and CB clients up 88%
YoY Aggressive rollout of extended e-trading capabilities on Bloomberg, TradeWeb and Reuters Top 2 Rates / Top 3 FX eCommerce Rankings 2007 progress Integrated FX/Rates platform Global capabilities with 24 hour servicing Strong market share across rates/FX Electronic platform offering Risk management capabilities Client business and proprietary trading balance JPM competitive advantages Build-out of Asia Rates/FX business Further extension of ecommerce offerings Enhanced intra-day risk management and other infrastructure capabilities Improved Straight-Through Processing Increased leverage of economies of scale 2008 priorities 1. Based on number of top 3 rankings across US and European rate products #1 ranking in Global Rates & FX Strategy¹ Derivatives House of the Year 2007 Awards Top Derivatives House of the Last 20 Years 6 |
 2007
progress 2008 priorities Leverage our leading derivatives franchise to structure more products for high net worth and retail investors globally Grow our client franchise in emerging markets where we are building - Latin America, Russia, India, the Middle East Further develop our electronic market making capabilities in derivatives and cash products Record equity underwriting, up 45% YoY Ranked #2 in Global Equity & Equity-related 3 Higher share in fee and volume 4 Record equity markets, up 13% YoY Cash sales & trading up 32% YoY Record F&O revenues $1.7 $3.9 2004 2007 Equity underwriting ($B) Equity markets ($B) $0.8 $1.7 2004 2007 Competitor CAGR = 29% Competitor CAGR = 19% Equities: multi-year investments paying off JPM CAGR = 32% JPM CAGR = 30% 1 Average 04-07 CAGR of the following firms: GS, LEH, MER, MS, BAC, C, CS, UBS and DB 2 2004 results presented on a pro forma basis 3 Source: Thomson Financial for 2007 4 Sources: Thomson for volumes; Dealogic for ECM fees, both for 2007 versus 2006 2 2 7 1 1 |
 Commodities: continued platform investment 2007 progress 2008 priorities Continue to build out: products, talent and capabilities Expand physical product set Further leverage our corporate client franchise Capitalize on investments and opportunities in the Environmental Markets space New management team Hired 50+ experienced professionals Improved risk return performance and significantly diversified risk taking Formed Environmental Markets business Established a Principal Investments practice, focused on Environmental Markets JPM competitive advantages Extraordinary client franchise across IB, CB and PB Leading Energy franchise Derivative and structuring capabilities Strong balance sheet and capital position Metals (Base and Bullion) Oil, Power, and Gas Trading Physical Gas Emissions Origination Softs: Agriculture & Livestock New Indices Physical Natural Gas Liquids Alternative Energy Physical Coal Natural Gas Liquids Physical Oil Product platform Secondary Emissions Trading 2005 2006 2007 2008 We continue to grow our commodities platform towards a revenue goal of $1B 8 |
 Principal
investing: putting capital to work Continue to build US and EMEA real
estate Deploy capital to growth markets in EMEA and Asia Invest in distressed assets Pursue commodities-related investments 2007 progress 2008 priorities Built out capabilities in Asia, Real Estate and ABS Built out large-cap mezzanine portfolio: >$300mm in 19 investments Significant increase in affordable housing and wind portfolio investments Recent transactions Sale of two real estate JVs in China Gains from Binani Cement Limited IPO Equity investment in Nevada Solar One plant project Equity investments in Georgia and California housing developments Lead financier of Horizon Wind Energy LLC portfolio 9 |
 Market-driven opportunities to act as principal or assist clients through troubled markets Northern Rock ERM purchase On 1/11/08 JPM purchased the full equitable interest in a £2.2B Equity Release Mortgage (ERM) portfolio from Northern Rock A unique opportunity to acquire one of the largest portfolios in the £7B UK market, which is growing at approximately £1.5B annually JPM served as Lead Arranger, Joint Bookrunner & Sole Syndication Agent on a $31B 364-day ABCP Conduit Facility JPM was able to: Assemble a $31B facility from a syndicate of seven banks Improve pricing and credit terms of facility Reduce exposure Principal investing Client-driven opportunity Sallie Mae ABCP facility MBIA transactions JPM provided key components of MBIA's capitalization plan: JPM acted as joint bookrunner on MBIA's $1B surplus notes offering in January 2008 JPM acted as joint bookrunner on MBIA's $1B follow-on offering in February 2008 10 |
 Powerful
issuer client base, with room for growth Highlights Global Corporate Banking JV between IB and TSS posted 19% YoY revenue growth Cost effective model for entering new markets #1 in IB fees per Dealogic for 4 of the past 5 years Gross IB revenue from CB clients up 24% YoY 2007 industry fee wallet ($B) Client wallet - Non-JPM fees 56% JPM IB fees 7% Non-client wallet 37% 2007 JPM fees ($B) Existing clients 66% New clients 34% Total = $86B Total = $6.6B¹ Non-client wallet opportunity = $32B 1 JPMorgan Global IB fees as reported; differs from Dealogic JPM Global IB fees of $6.3B 11 |
 Other 4 7% Rates/FX 33% Equities 36% Credit/ SPG³ 24% Investor clients: strong growth, increasingly
diverse Revenue growth¹ by investor client type Client base² 9% 32% 28% 29% 57% 45% Insurance Banks Asset Managers Hedge Funds Pensions Total 1 2007 client revenue growth versus 2006; excludes portfolio management and proprietary trading
revenues 2 Pie charts show 2007 client revenue from investor clients 3 SPG = Securitized Products Group 4 Other includes F&O, Commodities and Prime Brokerage Product set² Insurance 3% Hedge Funds 24% Pension 5% Banks 29% Asset mgrs 39% 12 |
 Asia:
record results 2007 progress IB revenue in Asia ($B) Expand principal investing, commodities and CMBS/ABS Improve synergies with CB, T&SS and Private Bank Renewed focus on Japan $2.7 $1.8 2006 2007 10% 15% +49% 2007 YoY revenue growth by country 227% 153% 127% 109% 60% 57% 55% 49% 42% 39% India Thailand China Malaysia Korea Hong Kong Australia Taiwan Philippines Indonesia Countries shown represent ~75% of total Asia revenue Record revenue of $2.7B, up 49% YoY #3 in fees, up from #9 in 2006¹ Strong markets growth across products, particularly in Asia ex-Japan 1 Source: Dealogic for Asia-Pacific region Business mix—revenue trend FI markets Equity markets IB fees 2006 2007 +15% +28% + 60% 2008 priorities 13 |
 3% 3% 5% 3% 4% 5% 10% 11% 13% 2005 2006 2007 Asia Ex Japan CEEMEA3 LatAm % of advisory, equity fees & markets¹ Emerging markets: investments paying off 6% 7% 9% 5% 6% 8% 2% 4% 8% 2005 2006 2007 Asia Ex Japan CEEMEA LatAm % of fixed income fees & markets² 15% 17% 23% 13% 17% 25% Brazil China India Growth highlights Revenue growth of 30% YoY M&A revenue up 200% ECM revenue up 700% Cash equities and derivative revenue up 200% Revenue tripled YoY IB fees up 200% Fixed Income Markets revenue, including strong principal investment gains, up 250% Equity markets revenue up 32% Revenue more than doubled YoY Fixed Income and Equity Markets revenue up 50%+ Strong principal investment gains JV with Zhongshan Futures established Established local incorporated bank during 2007 3 1 Global Equities exclude proprietary trading and secondary converts. Bars do not sum to
total due to rounding 2 Fixed Income businesses exclude proprietary trading and PIM business 3 Central and Eastern Europe, Middle East & Africa 14 |
 Agenda Page Wrap-up Discipline: risk management 2007 highlights 15 1 15 23 Growth 5 |
 Risk
management results Leveraged lending Subprime & subprime CDO exposure CDO warehouse & unsold positions CMBS Alt-A Level 3 assets Exposure as of 1/31/08 (except Level 3 assets) 1 Estimate includes assets measured at fair value on a recurring basis and Level 3
held-for-sale loans which are accounted for under LOCOM $21.4B of funded
and unfunded commitments $4.9B of funded and unfunded commitments were
transferred from held for sale to held to maturity classification on the balance sheet $2.4B of total subprime and subprime CDO exposure Exposure is hedged by approximately $1.7B of hedges and short positions $5.4B of CDO warehouse and unsold positions 92% corporate credit underlying $15.2B of total gross exposure which was all funded on the balance sheet Majority is comprised of loans and securities which are 65% AAA-rated $6.3B of total exposure; mostly AAA securities and first lien mortgages Expected to move from 4% to 5%¹ of total firmwide assets in 4Q07 16 |
 Discipline: limited write-downs compared to peers Marks disclosed to date ($B) 1 Based on a 3Q07 USD/EUR exchange rate of 1.37 and a 4Q07 USD/EUR exchange rate of 1.45
2 SocGen 4Q marks include $7.2B loss related to rogue trader activities 3 Based on a 3Q07 CHF/USD exchange rate of 1.20 and a 4Q07 CHF/USD exchange rate of 1.15
4 CS 1Q08 marks estimate based on press release dated 2/19/08 4.8 1.4 1.7 5.3 0.7 1.8 0.7 1.6 8.4 2.9 0.3 0.7 1.8 1.5 1.3 13.9 13.6 17.5 10.2 2 9.4 2.0 1.9 0.1 2.9 4 18.7 20.4 22.0 10.6 2 10.1 6.7 4 6.7 2.9 2.6 2.2 1.9 MER C UBS SocGen1 MS CS BAC JPM BSC LEH DB GS 3Q07 marks 4Q07 marks 1Q08 marks Note: includes mortgage related, structured credit and leveraged lending related marks 3 1 17 |
 JPMorgan leveraged lending commitments ($B) Leveraged finance positioning Leveraged finance competitor summary 1 Total 4Q07 commitments based on leveraged finance commitments of Euro 36.2B as of 12/31/07 and a USD/EUR exchange rate of 1.45. 2007 disclosed net marks calculated using a USD/EUR exchange rate of 1.35 for 2Q07, 1.37 for 3Q07 and 1.45 for 4Q07 2 2007 marks include positive valuation gains realized during 4Q07 of $500mm for GS, $70mm for
C and Euro 80mm for DB 3 Total 4Q07 commitments based on leveraged finance commitments of CHF 36.0B as of 12/31/07 and a CHF/USD exchange rate of 1.15. 2007 disclosed net marks calculated using a CHF/USD exchange rate of 1.20 for 3Q07 and 1.15 for 4Q07 4 MS and BAC did not disclose 4Q07 leverage finance net marks 5 Competitor averages includes DB, C, GS, CS and ML; does not include MS and BAC as 4Q07 net
marks were not disclosed 40.6 26.4 -16.5 2.3 Commitments as of 3Q07 Deals closed & other reductions New commitments Commitments as of 4Q07 Bank Total 4Q07 commitments ($B) 2007 disclosed net marks ($B) 2006 Dealogic HY bond & leveraged loan fees ($B) Marks as % of FY06 wallet 2007 disclosed net marks as % of 4Q07 commitments DB 1,2 $52.4 $1.0 $1.2 0.9x 2.0% C2
43.0 1.5 1.3 1.2x 3.5% GS² 36.0 1.2 0.8 1.5x 3.3% CS³ 31.4 0.7 1.2 0.6x 2.3% MS 4 30.0 NA 0.6 NA NA JPM 26.4 1.3 1.7 0.8x 4.9% ML 18.0 0.6 0.7 0.9x 3.3% BAC 4
12.0 NA 1.3 NA NA Competitor avg. 5 $36.2 $1.0 $1.0 1.0x 2.9% 18 |
     Risk
management critical success factors Strong senior management oversight
Disciplined risk management culture, incl weekly discussions with senior management on current and emerging risks Made decisions about aggregate firm-wide exposure & risk mitigation rather than relying solely on “siloed” judgment Employed macro hedging strategies Communication among senior mgmt, businesses & risk mgmt functions Critical success factors JPM self-assessment Management of balance sheet & capital positions Used a wide range of informative risk measures to discuss & challenge views on credit and market risk broadly Understood the limitations of individual risk measures Adaptable MIS – integration of market and counterparty risk - significant investment in risk infrastructure started in 2004 Sophistication, diversity & adaptability of risk measures Invested in the development of independent pricing models & staff with specialized expertise Skeptical of, and less reliant on, external ratings Used margin disputes as source of valuation information Learned lessons from past crises Discipline, skepticism & judgment in valuation Senior management is actively involved in setting limits and risk policy Strong processes around allocation of capital Not focused on consolidated positions - more agile in reducing and hedging exposure 19 |
 Risk
management, organization & governance: LOB & committee structure 20 |
 Market
risk limit overview Multi-level limit framework Limit structure Limits aligned with management risk appetite Annual formal limit review with appropriate intra-cycle updates Non-statistical limits are business- specific Resolution process Daily monitoring of limits, including drawdown limits Daily excess and loss reporting to head of relevant business level, depending on excess Business in excess must: Reduce risk within limit, Agree to follow-up action plan, One-off approvals may be granted to accommodate large client transactions or market conditions Firm level IB level Business level Business level (e.g. Global Equities) VAR; stress loss; non-statistical; drawdown limits IB level VAR and stress loss; drawdown limits Firm level (JPMC) VAR and stress loss (corporate scenarios) 21 |
 Credit
risk framework All underwriting decisions are made with the assumption that we
will have to hold all the risk Limits based on economic capital Includes both credit and private equity Industry Country Includes all equity and debt instruments External risk ratings used to determine exposure limits Single name issuer Notional and capital based limits Grid-based thresholds, dependant upon risk rating of client Credit family Risk approvals Portfolio management Problem credits Independent review Applies to all emerging market countries Both notional exposures and stress-based limits are monitored Credit risk management Concentration management 22 |
 Agenda Page Wrap-up Discipline: risk management 2007 highlights 23 1 15 23 Growth 5 |
 What you
can expect from the Investment Bank Continue to invest across our businesses in
a disciplined manner Fully leverage our capital strength through client and principal opportunities Maintain a disciplined approach to risk, returns, efficiency and controls Improve our earnings consistency 24 |
 F E B R U A R Y 2 7 , 2 0 0 8 A S S E T M A N A G E M E N T Jes Staley, CEO |
 Agenda Asia growth opportunity Private Bank growth Investment performance and markets 1 |
 $0.3 $3.7 $13.2 $1.1 2005 2006 2007 China JV QDII Assets under Management in Asia ex Japan ($B) Assets under Management in China ($B) Our business in Asia is growing rapidly $28.2 $46.8 $73.7 2005 2006 2007 2 |
 Asia
growth opportunity Key new growth areas China: JV firmly established - 3% market share and $13B AUM (up 261% from 2006); additional $1B managed offshore India: launched first four funds and established country wide coverage with six regional offices; over 900 distribution agreements signed South Korea: eight retail funds, 21 distribution agreements, $3.5B AUM (up 170% from 2006) Strong existing presence Hong Kong: $14B AUM (up 73% over 2006), 84,000 retail and 81 institutional clients Taiwan: $13B AUM (up 30% over 2006), over 140,000 retail customers Asian Sovereigns ($14B AUM), Liquidity ($9B AUM) 3 |
 China
highlights China JV 5.2 million clients, $13B AUM managed by joint venture QDII Asia Pacific Advantage Fund was oversubscribed almost 4 times, raising over $15B in one day, attracting 2 million new investors AM launched two QDII funds through Hong Kong – over $1B AUM In partnership with: — Industrial and Commercial Bank of China — China Construction Bank Greater China Property Fund (GCPF) Raised $575mm, targeting additional $200mm $145mm invested to date Asia Infrastructure and Related Resources Fund Targeting first close in 1Q08 The fund invests in critical infrastructure businesses across Asia 4 |
 2004 2005 2006 2007 Private Bank Revenue ($mm) Private Bank growth 18% CAGR (’04–’07) $2,605 $1,592 $1,689 $1,907 Pretax margin: 20%+ Pretax margin: 35%+ 5 Note: 2004 data is presented on an unaudited pro forma combined basis that represents how the financial information of JPMorgan Chase & Co. and Bank One Corporation may have appeared had the two companies been merged for the full year |
 Private
Bank highlights Total PB revenue up 37% from 2006 Over 1,000 net new clients (over 40% increase from 2006) Record net AUS flows of $50B (up from $24B flows in 2006) Over 100 net new PB client advisors (versus over 60 net new client advisors in 2006) High growth areas $201B $159B Assets under management 2007 2006 +47% growth YoY Placement fees +89% growth YoY Performance fees +43% growth YoY Structured products revenue +33% growth YoY NII and banking fees 6 |
 Private
Bank clients are benefiting from improvements to our investment approach Number of alpha strategies: 3 Expected performance¹: 8.8% return, 5.6% volatility Number of alpha strategies: 40+ Actual performance²: 10.4% return, 4.7% volatility Fixed income – 30% Equities – 70% Equities – 26% Fixed income & cash – 31% Hedge funds – 18% Structured products – 14% Real estate & hard assets – 6% Private equity – 5% 1 Based on performance of benchmarks over a 2-year period ending December 2007 2 Actual performance over a 2-year period ending December 2007 7 Model portfolio - 2008 Model portfolio - 1995 Asset allocation - 2008 Asset allocation - 1995 |
 Investment performance One-year mutual fund performance: 57% of global long term mutual fund assets in top two quartiles, versus 65% target Net outflows in European equity funds Highbridge – Statistical Arbitrage Fixed income avoided major problems, but some performance impact 8 |
 Continue to focus on investment performance Market conditions will affect financial performance Take measures to reduce expense Consolidate our business after several years of rapid growth Looking forward 9 |
 F E B R U A R Y 2 7 , 2 0 0 8 C A R D S E R V I C E S Gordon Smith, CEO |
 Overarching themes We are in a much tougher credit environment than recent years and will see rising credit losses in 2008/2009 However, our portfolio is amongst the most credit worthy in the industry driven by rigorous risk management capabilities, systems, best practices from multiple mergers, and a strong rewards centric customer base We see real organic growth opportunities in both US consumer and business segments Our leadership position in cobrand rewards enables us to bring a strong and distinctive set of capabilities to our proprietary rewards platform We have a clear strategy and strong leadership team 1 |
 Agenda Page Growth opportunities Credit performance 2 Historical credit performance Health of our portfolio Impact of housing slump and mitigating actions 2 10 |
 Credit
trends - Chase Card Services vs. industry Our strong cobrand partnerships, rewards focus, and risk management/controls have translated to lower loss rates Losses continue to normalize post bankruptcy legislation but are still low relative to historical levels Net credit loss rate Delinquencies (30 Day+ except Citi) 2.5% 3.5% 4.5% 5.5% 6.5% 7.5% 2003 2004 2005 2006 2007 Chase Citi American Express Capital One Bank of America Source: Earnings releases; SEC filings Notes: Bank of America US Consumer and Small Business segment; Citi US Card segment includes Canada and Puerto Rico but excludes Mexico; Capital One US Card segment excludes international credit card and small business; Discover data includes international loans; American Express US consumer and small business lending portfolios 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 2003 2004 2005 2006 2007 Chase Citi 90+ American Express Capital One Bank of America Chase 90+ 3 |
 Impact of
bankruptcy reform 100% 132% 37% 52% 75% 0% 50% 100% 150% 0.0 0.8 1.6 2.4 Bankruptcy filings expected to continue to normalize in 2008 National bankruptcy filings Source: Administrative office of the US Courts; Economy.com for 2008 forecast of bankruptcy
filings National bankruptcy filing indexed to 2004 National bankruptcy filings (mm) 2008 forecast 2004 2005 2006 2007 4 |
 Trends in
credit losses vs. unemployment rate Net credit loss rate (NCL) vs. unemployment
rate Source: Bureau of Labor Statistics for unemployment rate 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% We expect losses to continue to normalize in 2008 Visible losses of 4.50% +/- in 1H08 2H08 losses depend on economy and unemployment 5.0% Loss rate through the cycle 5 Net credit loss rate Unemployment rate |
 Increased
focus on rewards to drive loyalty and engagement Rewards as a percentage of
outstandings¹ ($B) Rewards as a percentage of
outstandings¹ ($B) Cards with rewards have higher
level of loyalty and engagement, which drives higher revenue Rewards have increased from 32% of outstandings in 2003 to 57% in 2007 $0 $45 $90 $135 $180 2003 2004 2005 2006 2007 Rewards Non rewards 1 Based on end of period outstandings 32% 68% 40% 60% 44% 56% 53% 47% 57% 43% 6 |
 Lending
securitization trust receivables – FICO< 660 (as of 12/31/07) FICO distribution of securitized receivables Due to our strong underwriting as well as our high concentration of co-brand, T&E and reward products, we experience better performance within FICO score bands which leads to lower delinquencies and lower losses 29.4% 29.0% 26.6% 25.5% 16.0% 16.3% 0% 5% 10% 15% 20% 25% 30% 35% 40% Capital One Bank of America Discover Citigroup Amex Chase Source: SEC Filings 7 |
 Vermont Alabama Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Virginia Washington West Virginia Wisconsin Wyoming We are closely monitoring housing price changes and the potential impact on consumer credit U.S. consumer market – less CA, NV, MI, FL, AZ U.S. consumer market – CA, NV, MI, FL, AZ U.S. (less CA,NV,MI,FL,AZ) Dec 2007 YoY Housing price change¹ 0.9% Card delinquency 3.29% Card charge-off rate 3.92% 1 Data from Case Schiller Index and is based on latest data available for housing price change
(data as of 3Q07) California Michigan Florida Nevada 8 Arizona CA, NV, MI, FL, AZ Dec 2007 YoY Housing price change 1 (9.6)% Card delinquency 4.02% Card charge-off rate 5.13% |
 We
continually monitor portfolio activity to decrease magnitude of losses As leading indicators began to change in the beginning of 2007, we adjusted our risk management policies and procedures to better manage potential losses Started utilizing actual and forecasted view of housing prices to identify regions at risk Increased score cutoffs for targeted credit line increase programs Increased score cutoffs in acquisition direct mail Increased collections activity by hiring additional collectors Accelerated high risk judgmental reviews Proactively decreasing lines where appropriate 9 |
 Agenda Page Growth opportunities Credit performance 10 Industry and Chase Card Services positioning Growth strategy Organizing for success 2 10 |
 Source: Earnings Releases; CardData; as of 12/31/07 Note: Amex outstanding market share excludes charge card receivables 1 General Purpose Credit Card (GPCC) market share US consumer payments landscape Small Business payments landscape Consumer/Small Business purchase share² Industry position Card penetration of the payments landscape yields significant potential for organic
growth Consumer/Small Business O/S market share¹
2006 Cash 21% Checks 25% GPCC & PL Cards 25% Debit cards 14% Other plastic 2% Electronic 10% 2006 Credit cards 9% All other 91% Bank of America 21% Chase 20% Amex 9% Capital One 7% Other 21% Citigroup 16% Discover 6% Chase Card Services has a large market share in both outstandings and purchase volume
Bank of America 14% Chase 17% Amex 22% Capital One 5% Other 16% Citigroup 19% Discover 7% ~10% of spend is captured on credit cards ~50% of spend still on cash and check Source: Nilson Report (Issue # 890) Source: TowerGroup; Internal JPMC analysis Source: Earnings Releases; Nilson Report (Issue # 895); data reflects full year 2007 Other Paper 2% 11 |
 Chase
Card Services positioning Strengths Strong leadership team High quality, credit worthy customer base Strong technology and systems infrastructure Well known and well respected brand Assets of broad retail business Challenges Fewer opportunities for growth by acquisition Legislative pressures on traditional growth levers Increased competition for share of wallet Leverage the Chase brand Build customer loyalty through superior rewards Strengthen relationships with customers via world-class customer service Strategic focus 12 |
 Growth
strategy We create lifelong, engaged relationships with our customers by being a trusted provider of financial services Vision What Create a differentiated brand Build brand equity that delivers high performance Create energetic tone How Ensure business strategies are aligned with brand positioning Deploy in all media Ensure consistency across all channels Rationalize existing rewards products Develop proprietary rewards platform Develop targeted offers for each customer segment Redemption to be easy and intuitive Engage the customer early in the lifecycle Leverage every interaction to enhance the relationship Create a superior online experience Improve customer service POS authorizations Disputes Card replacement Brand Rewards Customer experience 13 |
 Brand Increased spending Greater retention Benefits of rewards-based customer engagement 3.8x 1.3x Spend per account Balance per account Balance attrition Account attrition 52% lower 83% lower Better credit performance Improved profit Net credit loss rate Delinquency rate 29% lower 27% lower 1.7x Revenue per account Activation rate 13% higher Rewards Customer Experience Note: Opportunity is defined as estimated annual pretax income generated if entire pool of
non-rewards customers exhibit same level of engagement as rewards customers. Note that opportunities are not necessarily additive. Rewards customers have higher level of engagement which drives higher revenue Opportunity exists to increase level of engagement for non-rewards customers 14 |
 Brand—Chase What Matters “WHAT MATTERS TO YOU, MATTERS TO US” Access We make it easy—we give customers the tools they need to manage their accounts, loans, or cash flow however and whenever they choose—on their terms and their time We give customers a heads up when they need it to help them save time and money—through email, phone, or text alerts Advocacy We protect our customers against fraud and identity theft with industry- leading tools Protection We deliver competitive products together with great service and innovative features Value We reward customers for their business with programs that recognize their individuality and loyalty, Chase Freedom Card automatically gives customers triple rewards where they spend the most Recognition Brand Rewards Customer Experience 15 In January 2008, we launched a new media campaign—Chase What Matters
|
 Brand—Secret Agent Man advertisement Brand Rewards Customer Experience 16 Secret Agent Man commercial |
 Rewards—Building a brand new Chase proprietary rewards program Next Wave Freedom Key features Differentiated and branded proprietary rewards program with best-in-class value proposition Easy to earn and redeem points Whole family can contribute to one rewards account Broad redemption choices that include merchandise, travel, electronics, charitable giving, etc. The Freedom to change—Customer can change between cash back and points without losing earned rewards The Freedom to earn more—Customer earns 3% for gas, grocery & Quick Serve Restaurant purchases; 1% for all other purchases Targets Existing customers Relevance across customer segments Everyday spend New customers, younger demographic, higher spend Results No. 1 product sold in Chase branches Strong activation and spending numbers Increased brand awareness from 34% to 57% in December 2007 Continuous improvements to our platform Brand Rewards Customer Experience 17 |
 Customer
experience—“Moments of truth” should be positive experiences
Dispute Processing POS Authorization Card Replacement Dedicated advisors for high-touch treatment Proactive status call Remove paper for the customer Constantly improve point of sale approval rate Apply VIP credit and fraud authorization strategies for our best customers Focus on improving international purchase approval rates Empower advisors to do the right thing Proactively offer to replace unusable or lost card overnight Brand Rewards Customer Experience 18 |
 Key
segment positioning Chase Card Services opportunity Chase Card Services positioning Potential to improve penetration Need differentiated rewards platform Build brand equity Highly profitable customer base High concentration of spend Chase high net worth Build brand equity Focus on capturing spend Increase share of outstandings 20% share of O/S – one of top players Large customer pool with prime+ credit orientation Chase mass affluent Potential to improve penetration of partner segment Opportunity to cross-sell other products into non-cardmember partner base Over 300 partnerships with largest T&E cobrand portfolio Strong capability to manage across broad range of sectors Cobrand partners Opportunity to gain share with CoBrand and Private Label products Gaining market share Targeting key brands Retail partners Build Small Business appropriate product and deliver capabilities Need to build brand Gaining market share Significant assets to leverage (partners, Retail Financial Services, Chase Loyalty Solutions) Small business card By defining distinct segments of the market, we can focus efforts clearly on the customer,
tailor product innovation, enable delineated target marketing, and increase
organization accountability 19 |
 Segment
strategies Brand Leverage the affinity of the partner brand for the cobrand and retail segments Target card campaigns in Designated Market Areas (DMAs) where brand awareness is high for the branded portfolio Leverage the value of the JPMC enterprise Chase high net worth Chase mass affluent Cobrand partners Retail partners Small business card Rewards Engage customers early with a compelling rewards program Leverage portfolio of value-added services and products, e.g., offer them to loyalty program non-cardholders Facilitate rewards redemption Customer experience Improve authorizations to increase spend, e.g., recognize international travel of High Net Worth segment Develop segment-specific policies and procedures: disputes, fees Leverage segmentation and customer management platform Segments 20 |
 Key
overall messages We have maintained market share, however revenue growth has
lagged We see real organic growth opportunities based on low card penetration of
the payments landscape We derive real value being part of JPMC We are in a much tougher credit environment than recent years and will see rising credit losses in 2008 and 2009 However, our portfolio quality will position us well on a relative basis Our vision is to create lifelong, engaged relationships with our customers through the Chase Brand, rewards, and the customer experience As a result, we have organized along five key business segments in order to fully capture the profit growth potential Our performance target is 23% – 25% ROE through the cycle 21 |