1 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: October 18, 2000 Commission file number 1-5805 ---------------- ------ THE CHASE MANHATTAN CORPORATION ------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-2624428 -------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation 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 -------------
2 Item 5. Other Events - ---------------------- On October 18, 2000, The Chase Manhattan Corporation ("Chase") announced diluted operating earnings (which excludes special items) for the third quarter of 2000 of $0.68 per share, compared with $0.92 per share for the same 1999 period. Earnings in the 2000 third quarter were $905 million, compared with $1.19 billion in the same quarter of 1999. On the same basis, diluted earnings per share were $2.68 per share for the first nine months of 2000, compared with $2.83 per share for the same period of the prior year. Earnings in the first nine months of 2000 were $3.48 billion, compared with $3.71 billion for the first nine months of 1999. On a reported basis (which includes special items) diluted earnings per share for the third quarter of 2000 were $0.66 per share, compared with $0.92 per share for the same 1999 period. Net income in the 2000 third quarter was $884 million, compared with $1.19 billion in the same quarter of 1999. On the same basis, diluted earnings per share were $2.57 per share for the first nine months of 2000, compared with $2.86 per share for the same period of the prior year. Net income in the first nine months of 2000 was $3.34 billion, compared with $3.75 billion for the first nine months of 1999. A copy of Chase's press release is attached as an exhibit hereto. That press release may contain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon Chase management's current beliefs and expectations and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These uncertainties include: the risk that the businesses of Chase and J.P. Morgan and Co. Incorporated ("JP Morgan") will not be combined successfully; the risk that the growth opportunities and cost savings from the merger may not be fully realized or may take longer to realize than expected; the risk that the integration process may result in the disruption of ongoing business or the loss of key employees or may adversely effect relationships with employees and clients; the risk that stockholder or required regulatory approvals of the merger will not be obtained or that adverse regulatory conditions will be imposed in connection with a regulatory approval of the merger; the risk of adverse impacts from an economic downturn; the risks associated with increased competition, unfavorable political or other developments in foreign markets, adverse governmental or regulatory policies, and volatility in securities markets, interest or foreign exchange rates or indices; or other factors impacting operational plans. Additional factors that could cause Chase's results to differ materially from those described in the forward-looking statements can be found in the 1999 Annual Report of Form 10-K of Chase and in the Registration Statement on Form S-4 filed by Chase on October 5, 2000 with the Securities and Exchange Commission. 2
3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS The following exhibit is filed with this report: Exhibit Number Description 99.1 Press Release - 2000 Third Quarter Earnings 3
4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE CHASE MANHATTAN CORPORATION (Registrant) /s/ Dina Dublon ------------------------- Dated: October 18, 2000 Dina Dublon Chief Financial Officer 4
5 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION PAGE AT WHICH LOCATED 99.1 Press Release - 2000 Third 6 Quarter Earnings 5
1 Investor Contact: John Borden Media Contact: Jon Diat 212-270-7318 212-270-5089 CHASE MANHATTAN REPORTS THIRD QUARTER RESULTS NEW YORK, OCTOBER 18, 2000 - The Chase Manhattan Corporation (NYSE:CMB) today announced third quarter results. Operating earnings: On an operating basis, which excludes special items, diluted earnings per share for the third quarter of 2000 were $0.68 per share, compared with $0.92 per share for the same 1999 period. Earnings in the 2000 third quarter were $905 million, compared with $1.19 billion in the same quarter of 1999. On the same basis, diluted earnings per share were $2.68 per share for the first nine months of 2000, compared with $2.83 per share for the same period of the prior year. Earnings in the first nine months of 2000 were $3.48 billion, compared with $3.71 billion for the first nine months of 1999. Reported earnings: On a reported basis, which includes special items, diluted earnings per share for the third quarter of 2000 were $0.66 per share, compared with $0.92 per share for the same 1999 period. Net income in the 2000 third quarter was $884 million, compared with $1.19 billion in the same quarter of 1999. On the same basis, diluted earnings per share were $2.57 per share for the first nine months of 2000, compared with $2.86 per share for the same period of the prior year. Net income in the first nine months of 2000 was $3.34 billion, compared with $3.75 billion for the first nine months of 1999. THIRD QUARTER HIGHLIGHTS: Earnings for the third quarter of 2000 were lower than last year's third quarter results and lower than analysts' estimates primarily due to lower income in Chase Capital Partners and to a lesser extent in the Investment Bank: - - In Chase Capital Partners, unrealized write-downs, primarily due to price declines in publicly-held securities, more than offset record realized (cash) gains of $538 million on the sales of investments. (See page 7 for a comparison of the corporation's key financial measures including and excluding Chase Capital Partners for the current and previous quarters of 2000 and those of 1999.) - - In the Investment Bank, trading revenues and corporate finance fees were up from the third quarter of 1999 but down from the second quarter of 2000 due to lower market volatility and trading volumes and a slowdown in leveraged finance. The expense growth rate was high because of the buildup of the investment banking platform. Strengths during the third quarter of 2000 included: - - Record earnings in Global Services, National Consumer Services and Wealth Management.
2 - - Sound management of credit and market risk. Credit losses and nonperforming assets in the quarter were lower than the previous quarter and the year ago quarter. There were no days in the third quarter in which Chase had a trading loss. "While third quarter performance did not meet our expectations, the results do not diminish the confidence we have in the growth capacity of our businesses," said William B. Harrison, Jr., Chairman and Chief Executive Officer. "Though the value of our private equity investment portfolio may vary from quarter to quarter, we remain firmly committed to Chase Capital Partners' with its ability to create substantial long-term cash returns on investments. In addition, we are focused on achieving a better balance of expense to revenue growth in the Investment Bank. Across the franchise, our Global Services, National Consumer Services and Wealth Management businesses achieved record results, underscoring the importance of a diverse business mix." MERGER UPDATE: On September 13, 2000, The Chase Manhattan Corporation and J.P. Morgan & Co. Incorporated agreed to merge. The merged firm will be named J.P. Morgan Chase & Co. The merger is expected to be consummated by the first quarter of 2001. Since the merger was announced, the following progress has been made: - - Over 35 senior positions were named upon the announcement of the merger; an additional 250 key positions will have been announced by the end of this week. - - The major U.S. regulatory applications have been filed; the joint proxy statement was filed with the SEC on October 5. - - Clients are reacting favorably to the proposed merger by inviting Chase and J.P. Morgan to make joint pitches for business; the two firms have won a number of joint investment banking mandates as a result. "Integration efforts have been proceeding swiftly," said Mr. Harrison. "We have more evidence that the combined and complementary product mix and client base of the new firm will promote growth opportunities and business synergies ahead. We will have a broader and more diversified wholesale banking platform, along with significant opportunities to moderate investment spending and to improve operating efficiencies." FINANCIAL INFORMATION: Third quarter 2000 results reflect the acquisitions of The Beacon Group, LLC, on July 6, and Robert Fleming Holdings Limited on August 1. INVESTMENT BANK Operating revenues in the investment bank were $1.87 billion in the third quarter of 2000, up 16 percent from $1.62 billion in the third quarter of 1999. Cash operating earnings in the third quarter of 2000 were $384 million, down nine percent from $420 million in the third quarter of 1999. A decline in shareholder value added during the third quarter to $46 million reflected both the decline in cash operating earnings and the higher equity allocated to the Investment Bank as a result of the acquisition of Flemings. 2
3 - - Total trading revenues, including related net interest income, were $680 million, compared with $679 million in the third quarter of 1999 and $841 million in the second quarter of 2000. Gains in fixed income trading were offset by declines in foreign exchange and interest rate derivatives due to slower trading activity and an overall decline in market volatility, which adversely affected the flows and spreads of those businesses. - - Investment banking fees were $613 million, up 26 percent from third quarter 1999 levels, and down from $639 million in the second quarter of 2000. Growth in fees from merger and acquisition advisory services and equity underwriting was partially offset by lower fees from loan syndication and high yield bond underwriting due to a slowdown in the leveraged lending markets. - - Cash expenses of $1.26 billion in the third quarter of 2000 were up 47 percent from the 1999 third quarter, and up from $1.06 billion in the second quarter of 2000. Increases were driven by acquisitions and spending to build up the investment banking platform. CHASE CAPITAL PARTNERS Private equity gains in the third quarter of 2000 were negative $25 million, compared with gains of $377 million in the same 1999 quarter and $298 million in the second quarter of 2000. Gains included cash realized from the sale of both private and public securities that were held in the portfolio and the unrealized change in the value of investments held in the portfolio, primarily publicly traded securities. Realized (cash) gains on the sale of securities in the third quarter of 2000 were $538 million, more than double the amount of cash gains realized in the third quarter of 1999. These gains were more than offset by declines in the carrying values of investments (primarily in telecommunications) in the publicly held portion of the portfolio. Despite these declines, the current carrying value of the investments in the publicly traded portfolio is approximately 2.6 times their original cost. Approximately 80 percent of the carrying value of the Chase Capital Partners' portfolio consist of privately-held securities. GLOBAL SERVICES In the third quarter of 2000, Global Services' operating revenues increased nine percent over the third quarter of 1999 to $875 million, reflecting increased activity in its securities businesses. Cash operating earnings for Global Services for the third quarter of 2000 were up 24 percent compared with the third quarter of 1999. Shareholder value added increased to $93 million, an 82 percent increase over the prior-year quarter. Operating revenues in Global Investor Services (custody) increased 14 percent from last year, reflecting net asset growth and higher transaction volume and net interest income, partially offset by a decline in foreign exchange revenue. Capital Markets Fiduciary Services' (institutional trust) operating revenues increased 20 percent from last year primarily in structured finance in the U.S. and U.K. Chase Treasury Solutions' (cash management) operating revenues increased two percent over the 1999 third quarter, driven by higher product revenues across all products and higher balances, partially offset by the repositioning of the trade finance business. Operating leverage continues to improve, with expenses growing at a slower rate than revenues. 3
4 WEALTH MANAGEMENT Chase's wealth management businesses include private banking and asset management. - - Revenues from the Global Private Bank increased to $305 million, up 36 percent from the third quarter of 1999. These results reflect broad-based global growth. Cash operating earnings grew 16 percent compared with the prior year. As of September 30, the Global Private Bank had over $180 billion in client assets. - - Revenues from Asset Management increased to $165 million, compared with $43 million in the third quarter of 1999. Results include revenues from Flemings. As of September 30, assets under management were $182 billion. NATIONAL CONSUMER SERVICES Operating revenues for National Consumer Services increased to $2.6 billion, an increase of three percent over the third quarter of 1999. Cash operating earnings of $492 million increased by 13 percent over the third quarter of 1999. All five businesses reported double-digit earnings growth. - - Cash operating earnings for cardmember services for the third quarter of 2000 were up 14 percent compared with the third quarter of 1999, reflecting significantly improved credit quality. Operating revenues were essentially flat from the prior year and up six percent from the second quarter of 2000, as higher consumer purchase volume and higher fee-based revenues offset the impact of higher interest rates and a lower level of late fees. Expenses were up reflecting the impact of higher marketing spending. New account acquisitions were significantly higher, and credit card outstandings were up over $1 billion from the second quarter of this year. - - Home finance cash operating earnings were up 21 percent, and revenues increased 13 percent, from the third quarter of 1999. The improved results were due to growth in servicing fee income and gains on securities to hedge mortgage servicing, partially offset by declines in residential mortgage warehouse activity. - - Regional banking group cash operating earnings grew 36 percent, and revenues rose seven percent, from the third quarter of 1999, reflecting higher deposit levels in the consumer and small business sector, higher banking, debit card, and brokerage fee income and disciplined expense management. - - Diversified consumer services cash operating earnings were up 24 percent, and revenues increased five percent from the same 1999 quarter. Income growth was positively affected by a change in internal cost allocation as well as improving auto origination volumes and growth in the discount brokerage business, which was partially offset by the effect of higher interest rates. Brown & Co., Chase's online trading business, averaged over 41,000 trades per day during the third quarter of 2000 versus 32,000 trades per day during the same period of 1999. - - Middle markets cash operating earnings were up 13 percent and revenues increased four percent from the third quarter of 1999. These results reflect new business and disciplined expense management. 4
5 ADDITIONAL FINANCIAL INFORMATION - - The merger agreement between Chase and J.P. Morgan & Co. Incorporated, which has been approved by the boards of directors of both companies, provides that 3.7 shares of Chase common stock will be exchanged for each share of J.P. Morgan common stock. Each series of preferred stock of J.P. Morgan will be exchanged for a similar series of preferred stock of Chase, the surviving corporation of the merger. The transaction is expected to be accounted for as a pooling of interests and to be tax-free to J.P. Morgan and Chase stockholders and is subject to approval by stockholders of both companies, as well as by the U.S. Federal and state and foreign regulatory authorities. - - Chase's operating revenues, excluding the impact of Flemings and Chase Capital Partners, were up five percent compared with the third quarter of 1999. Cash expenses, on the same basis, were up nine percent compared with the third quarter of 1999. Amortization of goodwill, a non-cash charge to earnings, amounted to $0.11 per share, or $149 million, in the third quarter of 2000, compared with $0.05 per share, or $70 million, in the third quarter of 1999. Similarly, the non-cash charge for the first nine months of 2000 was $0.25 per share, or $318 million, compared with $0.17 per share, or $219 million, for the first nine months of 1999. - - On September 1, Chase announced it had agreed to sell its Hong Kong-based retail banking business, including Chase Manhattan Card Company Limited, to Standard Chartered PLC for approximately $1.3 billion in cash. Subject to regulatory approvals and satisfaction of certain conditions, the sale is expected to be completed by December 2000. - - On October 16, Chase agreed to sell its interest in ChaseMellon Shareholder Services, currently a 50-50 joint venture between Chase and Mellon Financial Corporation. The transaction, the terms of which were not disclosed, is expected to be completed during the fourth quarter of this year, pending regulatory approvals. - - Total assets at September 30, 2000 were $426 billion, compared with $396 billion at June 30, 2000 and $371 billion at September 30, 1999. Chase's Tier One capital ratio was 7.9 percent at September 30, 2000, compared with 8.7 percent on June 30, 2000. The decline is due to the acquisition of Flemings. There were no repurchases of Chase common stock during the third quarter of 2000. - - On a managed basis, including securitizations, net credit losses were $541 million in the third quarter of 2000, down from $574 million in the second quarter of 2000 and down from $633 million in the third quarter of 1999. Consumer net charge-offs on a managed basis were $476 million, down from $482 million in the second quarter of 2000 and $531 million in the third quarter of 1999, primarily reflecting a decline in the credit card net charge-off ratio to 4.97 percent. Commercial net charge-offs in the third quarter of 2000 were $65 million, compared with $92 million in the second quarter of 2000 and $102 million in the third quarter of 1999. For the third quarter of 2000, total net charge-offs on a reported basis were $305 million, and the provision for loan losses was $305 million. The allowance for loan losses was $3.49 billion at the end of the third quarter of 2000, compared with $3.46 billion at the end of the second quarter of 2000. Nonperforming assets at September 30, 2000 were $1.82 billion, compared with $1.90 billion at June 30, 2000 and $2.02 billion at September 30, 1999. 5
6 - - Operating results (revenues, expenses and earnings) exclude the impact of credit card securitizations, restructuring costs and special items. In the third quarter of 2000, special items included a gain of $53 million (after-tax) from the sale of a business in Panama, a loss of $23 million (after-tax) resulting from the economic hedge of the purchase price of Robert Fleming Holdings Limited prior to its acquisition, and the restructuring costs of $51 million (after-tax) associated with previously announced relocation initiatives. There were no special items in the third quarter of 1999. For the first nine months of 2000, special items included a loss of $115 million (after-tax) resulting from the economic hedge of the purchase price of Flemings prior to its acquisition, $83 million (after-tax) of restructuring costs associated with previously announced relocation initiatives, and the $53 million (after-tax) gain from the sale of a business in Panama. For the first nine months of 1999, special items included a $61 million (after-tax) gain on the sale of a building, a $46 million (after-tax) gain on the sale of branches in Texas, and a $65 million (after-tax) special contribution to The Chase Manhattan Foundation. Chase, with $426 billion in assets, is one of the world's premier financial services institutions, with operations in more than 50 countries around the world. Chase has top-tier rankings in many areas of investment banking, asset management, private banking, trading and global markets activities as well as information and transaction processing. Chase is a leading provider of financial solutions to large corporations, government entities, commercial banking clients, small businesses and individuals, and has relationships with more than 30 million consumers across the United States. Chase can be reached on the web at www.chase.com. Chase will hold a presentation for the investment community on October 18, 2000 to discuss its third quarter earnings and to update information about its proposed merger with J.P. Morgan & Co. Incorporated. A live audio webcast of that presentation will be available through the investor relations site of www.chase.com at 11 a.m. on October 18. In addition, persons interested in listening to the presentation by telephone may dial in at (973) 872-3100. ----------------------- This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements are based on management's current expectations or beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For a discussion of certain factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to Chase's filings with the Securities and Exchange Commission, particularly the section entitled "Important Factors that may Affect Future Results" in Chase's Annual Report on Form 10-K for the year ended December 31, 1999 and the section entitled "Risk Factors" in the Registration Statement on Form S-4 filed by Chase on October 5, 2000. Stockholders of Chase and J.P. Morgan should read the definitive joint proxy statement/prospectus regarding the proposed merger when it becomes available, because it will contain important information. Stockholders will be able to obtain a free copy of the definitive joint proxy statement/prospectus, as well as other filings containing information about Chase and J.P. Morgan, without charge, at the SEC's internet site (http://www.sec.gov). Copies of the definitive joint proxy statement/prospectus and the SEC filings that will be incorporated by reference in the definitive joint proxy statement/prospectus can also be obtained, without charge, by directing a request to The Chase Manhattan Corporation, 270 Park Avenue, New York, NY 10017, Attention: Office of the Corporate Secretary (212-270-6000) or to J.P. Morgan, 60 Wall Street, New York, NY 10260, Attention: Investor Relations (212-483-2323). Information regarding the participants in the proxy solicitation and a description of their direct and indirect interest, by security holdings or otherwise, is contained in the materials filed with the SEC by each of J.P. Morgan and Chase on September 13 and 14, 2000, respectively. # # # # 6
7 THE CHASE MANHATTAN CORPORATION SUMMARY OF SELECTED FINANCIAL HIGHLIGHTS - OPERATING BASIS (a) (in millions, except per share and ratio data) INCLUDING CHASE CAPITAL PARTNERS -------------------------------------------------------------------------------------- 2000 1999 ---------------------------------- ----------------------------------------------- Third Second First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------- ------- ------- ------- ------- ------- ------- Operating Revenue $5,590 $5,799 $6,179 $6,444 $5,429 $5,696 $5,413 Operating Noninterest Expense 3,656 3,357 3,490 3,179 2,981 2,968 2,945 Operating Earnings 905 1,215 1,360 1,683 1,187 1,351 1,173 Operating Diluted Earnings Per Share 0.68 0.95 1.06 1.31 0.92 1.03 0.88 Return on Average Common Equity (b) 13.5% 21.0% 24.0% 30.2% 21.7% 24.3% 20.6% Overhead Ratio (c) 65 58 56 49 55 52 54 Cash Operating Earnings $1,054 $1,299 $1,445 $1,761 $1,257 $1,427 $1,246 Cash Diluted Earnings Per Share 0.79 1.02 1.13 1.38 0.97 1.09 0.94 Shareholder Value Added 181 542 701 1,027 539 696 501 Cash Return on Average Common Equity (b) 15.8% 22.5% 25.5% 31.6% 23.0% 25.7% 21.9% Cash Overhead Ratio (c) 63 56 55 48 53 51 53 EXCLUDING CHASE CAPITAL PARTNERS ---------------------------------------------------------------------------------------- 2000 1999 ----------------------------------- ----------------------------------------------- Third Second First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------- ------- ------- ------- ------- ------- ------- Operating Revenue $5,678 $5,550 $5,729 $5,134 $5,110 $5,193 $5,108 Operating Noninterest Expense 3,566 3,303 3,410 3,125 2,937 2,929 2,909 Operating Earnings 1,017 1,088 1,121 879 1,011 1,054 1,001 Operating Diluted Earnings Per Share 0.77 0.85 0.88 0.68 0.78 0.80 0.75 Return on Average Common Equity (b) 20.2% 26.0% 27.0% 20.4% 23.2% 23.0% 20.9% Overhead Ratio (c) 63 59 59 61 57 56 57 Cash Operating Earnings $1,160 $1,169 $1,204 $ 956 $1,081 $1,130 $1,074 Cash Diluted Earnings Per Share 0.88 0.92 0.94 0.74 0.84 0.86 0.81 Shareholder Value Added 501 619 658 391 508 526 446 Cash Return on Average Common Equity (b) 23.2% 28.0% 29.0% 22.2% 24.9% 24.6% 22.5% Cash Overhead Ratio (c) 60 58 58 59 56 55 56 INCLUDING CHASE CAPITAL PARTNERS EXCLUDING CHASE CAPITAL PARTNERS ----------------------------------------- ------------------------------------- NINE MONTHS OVER/(UNDER) NINE MONTHS OVER/(UNDER) ----------------------- ------------------- 2000 1999 1999 2000 1999 1999 ---- ---- ---- ---- ---- ---- Operating Revenue $17,568 $16,538 6% $16,957 $15,411 10% Operating Noninterest Expense 10,503 8,894 18% 10,279 8,775 17% Operating Earnings 3,480 3,711 (6%) 3,226 3,066 5% Operating Diluted Earnings Per Share 2.68 2.83 (5%) 2.49 2.34 6% Return on Average Common Equity (b) 19.2% 22.2% (300)bp 24.1% 22.3% 180bp Overhead Ratio (c) 60 54 600 60 57 300 Cash Operating Earnings $ 3,798 $ 3,930 (3%) $ 3,533 $ 3,285 8% Cash Diluted Earnings Per Share 2.93 3.00 (2%) 2.73 2.51 9% Shareholder Value Added 1,424 1,736 (18%) 1,778 1,480 20% Cash Return on Average Common Equity (b) 21.0% 23.6% (260)bp 26.5% 23.9% 260bp Cash Overhead Ratio (c) 58 52 600 59 56 300 See notes on page 8. Unaudited 7
8 THE CHASE MANHATTAN CORPORATION SUMMARY OF SELECTED FINANCIAL HIGHLIGHTS - REPORTED BASIS (CONTINUED) (IN MILLIONS, EXCEPT PER SHARE AND RATIO DATA) % % AS OF OR FOR THE PERIOD ENDED THIRD QUARTER OVER/(UNDER) NINE MONTHS OVER/(UNDER) ------------------------------ ------------------------------ 2000 1999 1999 2000 1999 1999 ------------- ------------- ------------ -------------- ------------ ---------- AS REPORTED BASIS Revenue $ 5,400 $ 5,191 4% $ 16,741 $ 15,951 5% Noninterest Expense (Excluding Restructuring Costs) 3,656 2,981 23% 10,503 8,994 17% Restructuring Costs 79 -- NM 129 -- NM Provision for Loan Losses 305 398 (23%) 979 1,167 (16%) Net Income $ 884 $ 1,187 (26%) $ 3,335 $ 3,753 (11%) Net Income Per Share: Basic $ 0.69 $ 0.95 (27%) $ 2.66 $ 2.96 (10%) Diluted 0.66 0.92 (28%) 2.57 2.86 (10%) Cash Dividends Declared 0.32 0.27 19% 0.96 0.81 19% Share Price at Period End 46.19 50.25 (8%) Book Value at Period End 21.84 17.34 26% Common Shares Outstanding: Average Common Shares: Basic 1,267.3 1,232.3 3% 1,235.4 1,248.9 (1%) Diluted 1,311.8 1,274.5 3% 1,279.1 1,291.4 (1%) Common Shares at Period End 1,310.0 1,234.8 6% Performance Ratios: Return on Average Total Assets (b) 0.85 % 1.29 % 1.11 % 1.38 % Return on Average Common Equity (b) 13.2 21.7 18.4 22.5 Selected Balance Sheet Items at Period End: Loans $ 191,258 $ 173,458 10% Total Assets 425,816 371,044 15% Deposits 229,601 219,623 5% Total Stockholders' Equity 29,440 22,341 32% Capital Ratios: Tier I Capital Ratio 7.9 %(d) 8.2 % Total Capital Ratio 11.6 (d) 11.8 Tier I Leverage 6.3 (d) 6.7 NOTES: Share-related data for all periods have been restated to reflect a 3-for-2 common stock split, effective June 12, 2000. On August 1, 2000, Chase acquired Robert Fleming Holdings Limited ("Flemings") which was accounted for under the purchase method, and accordingly, results for Flemings are included from the date of acquisition. On September 13, 2000, Chase and J.P. Morgan & Co. Incorporated ("J.P. Morgan") agreed to merge. This merger is expected to close by the end of the first quarter of 2001. The results for J.P. Morgan are not included in these financials. (a) Excludes the impact of credit card securitizations, restructuring costs and special items. For a reconciliation of Reported Results as shown on the Consolidated Statement of Income to results on an Operating Basis, see page 13. (b) Based on annualized amounts. (c) Noninterest expense as a percentage of the total of net interest income and noninterest revenue (excluding restructuring costs, special items and costs associated with the REIT). The cash overhead ratio excludes the impact of amortization of goodwill and certain other intangibles. (d) Estimated NM - Not meaningful Unaudited 8
9 THE CHASE MANHATTAN CORPORATION LINES OF BUSINESS RESULTS (in millions, except ratios) INVESTMENT BANK (a) CHASE CAPITAL PARTNERS GLOBAL SERVICES ----------------------------- ---------------------------- --------------------------- THIRD QUARTER 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 - --------------------------------- -------- ------------------ -------- ------------------ -------- ----------------- OPERATING REVENUE $ 1,870 $ 251 16% $ (88) $ (407) NM $ 875 $ 75 9% OPERATING EARNINGS 349 (60) (15) (112) (288) NM 167 34 26 CASH OPERATING EARNINGS 384 (36) (9) (106) (282) NM 183 35 24 AVERAGE COMMON EQUITY 10,204 1,840 22 6,472 2,177 51% 2,706 (199) (7) AVERAGE MANAGED ASSETS (b) 230,598 20,827 10 12,377 3,811 44 16,230 (212) (1) SHAREHOLDER VALUE ADDED (SVA) (c) 46 (93) (67) (320) (352) NM 93 42 82 CASH RETURN ON COMMON EQUITY 14.8% (480)bp NM NM 26.7% 680bp CASH OVERHEAD RATIO 67 1,400 NM NM 67 (400) WEALTH MANAGEMENT (a) NATIONAL CONSUMER SERVICES TOTAL (d) ---------------------------- ------------------------------ ------------------------------ THIRD QUARTER 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 - --------------------------------- -------- ----------------- ---------- ------------------ --------- ------------------ OPERATING REVENUE $ 470 $ 203 76% $ 2,587 $ 73 3% $ 5,590 $ 161 3% OPERATING EARNINGS 53 9 20 455 56 14 905 (282) (24) CASH OPERATING EARNINGS 95 51 116 492 57 13 1,054 (203) (16) AVERAGE COMMON EQUITY 3,582 2,720 316 8,033 298 4 26,290 4,962 23 AVERAGE MANAGED ASSETS (b) 21,845 8,447 63 148,165 17,119 13 432,853 50,759 13 SHAREHOLDER VALUE ADDED (SVA) (c) (23) (38) NM 227 52 30 181 (358) (66) CASH RETURN ON COMMON EQUITY 10.4% (950)bp 24.2% 220bp 15.8% (720)bp CASH OVERHEAD RATIO 72 -- 50 (100) 63 1,000 - -------------------------------------------------------------------------------- INVESTMENT BANK - KEY FINANCIAL MEASURES THIRD QUARTER 2000 OVER/(UNDER) 1999 --------------------------------- --------------------------------- CASH CASH CASH CASH OPERATING OPERATING OVERHEAD OPERATING OPERATING OVERHEAD REVENUES EARNINGS RATIO REVENUES EARNINGS RATIO ---------- -------- --------- --------- --------- -------- GLOBAL MARKETS $ 880 $ 170 73% (4%) (35%) 1,700bp GLOBAL INVESTMENT BANKING 623 74 80 54 (15) 1,600 CORPORATE LENDING & PORTFOLIO MANAGEMENT 389 143 26 1 4 (200) OTHER INVESTMENT BANK (22) (3) NM NM NM NM ------- ----- TOTALS $ 1,870 $ 384 67% 16% (9%) 1,400bp ======= ===== - -------------------------------------------------------------------------------- NATIONAL CONSUMER SERVICES - KEY FINANCIAL MEASURES THIRD QUARTER 2000 OVER/(UNDER) 1999 ----------------------------------- ------------------------------------------ CASH CASH CASH CASH OPERATING OPERATING OVERHEAD OPERATING OPERATING OVERHEAD REVENUES EARNINGS RATIO REVENUES EARNINGS RATIO --------- --------- ----------- ------------- ------------ ------------ CHASE CARDMEMBER SERVICES $ 943 $ 141 36% -- % 14% 200bp REGIONAL BANKING GROUP 771 139 64 7 36 (600) CHASE HOME FINANCE 354 94 56 13 21 - DIVERSIFIED CONSUMER SERVICES 160 36 49 5 24 (700) MIDDLE MARKETS 274 70 52 4 13 (200) OTHER NCS 85 12 NM NM NM NM -------- ----- TOTALS $ 2,587 $ 492 50% 3 % 13% (100)bp ======= ===== - -------------------------------------------------------------------------------- (a) Prior periods have been restated to reflect refinements in management reporting policies or changes to the management organization. For example, commencing with the third quarter of 2000, Chase's previously reported Global Bank has been reorganized into Investment Bank (Global Markets, Investment Banking and Corporate Lending) and Wealth Management (Global Private Bank and Asset Management). (b) Excludes the impact of credit card securitizations. (c) SVA is Chase's primary measure of business unit performance. SVA represents operating earnings excluding the amortization of goodwill and certain other intangibles (i.e., cash operating earnings), minus preferred dividends and an explicit charge for capital. (d) Total column includes Support Units and the effects remaining at the Corporate level after the implementation of management accounting policies. NM - Not meaningful bp - basis points Unaudited 9
10 THE CHASE MANHATTAN CORPORATION LINES OF BUSINESS RESULTS (IN MILLIONS, EXCEPT RATIOS) INVESTMENT BANK (a) CHASE CAPITAL PARTNERS GLOBAL SERVICES ----------------------------- ---------------------------- --------------------------- NINE MONTHS 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 - --------------------------------- --------- ------------------ -------- ------------------ -------- ----------------- OPERATING REVENUE $ 5,989 $ 749 14% $ 611 $ (517) (46%) $ 2,604 $ 304 13% OPERATING EARNINGS 1,464 (42) (3) 254 (392) (61) 447 100 29 CASH OPERATING EARNINGS 1,531 (8) (1) 265 (381) (59) 495 102 26 AVERAGE COMMON EQUITY 9,127 517 6 6,261 2,373 61 2,703 (197) (7) AVERAGE MANAGED ASSETS (b) 225,976 15,753 7 11,862 4,024 51 15,912 (721) (4) SHAREHOLDER VALUE ADDED (SVA) (c) 628 (53) (8) (354) (612) NM 227 123 118 CASH RETURN ON COMMON EQUITY 22.2% (140)bp 5.4% (1,650)bp 24.2% 640bp CASH OVERHEAD RATIO 58 1,000 34 2,300 70 (300) WEALTH MANAGEMENT (a) NATIONAL CONSUMER SERVICES TOTAL (d) ----------------------------- ----------------------------- ---------------------------- NINE MONTHS 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 - --------------------------------- --------- ------------------ --------- ------------------ --------- ----------------- OPERATING REVENUE $ 1,168 $ 401 52% $ 7,487 $ 104 1% $ 17,568 $ 1,030 6% OPERATING EARNINGS 180 67 59 1,176 51 5 3,480 (231) (6) CASH OPERATING EARNINGS 225 111 97 1,287 42 3 3,798 (132) (3) AVERAGE COMMON EQUITY 1,834 986 116 8,084 427 6 23,913 1,916 9 AVERAGE MANAGED ASSETS (b) 17,465 4,651 36 144,650 15,969 12 419,397 37,493 10 SHAREHOLDER VALUE ADDED (SVA) (c) 44 14 47 487 5 1 1,424 (312) (18) CASH RETURN ON COMMON EQUITY 16.2% (150)bp 21.0% (40)bp 21.0% (260)bp CASH OVERHEAD RATIO 70 (400) 52 200 58 600 - -------------------------------------------------------------------------------- INVESTMENT BANK - KEY FINANCIAL MEASURES NINE MONTHS 2000 OVER/(UNDER) 1999 ------------------------------ ------------------------------ CASH CASH CASH CASH OPERATING OPERATING OVERHEAD OPERATING OPERATING OVERHEAD REVENUES EARNINGS RATIO REVENUES EARNINGS RATIO --------- --------- -------- --------- --------- -------- GLOBAL MARKETS $ 3,100 $ 880 57% (3%) (17%) 900bp GLOBAL INVESTMENT BANKING 1,938 317 72 75 55 400 CORPORATE LENDING & PORTFOLIO MANAGEMENT 1,115 397 28 (2) (1) 100 OTHER INVESTMENT BANK (164) (63) NM NM NM NM ------- -------- TOTALS $ 5,989 $ 1,531 58% 14% (1%) 1,000bp ======= ======== - -------------------------------------------------------------------------------- NATIONAL CONSUMER SERVICES - KEY FINANCIAL MEASURES NINE MONTHS 2000 OVER/(UNDER) 1999 ------------------------------ ------------------------------ CASH CASH CASH CASH OPERATING OPERATING OVERHEAD OPERATING OPERATING OVERHEAD REVENUES EARNINGS RATIO REVENUES EARNINGS RATIO --------- --------- -------- --------- --------- -------- CHASE CARDMEMBER SERVICES $ 2,719 $ 348 35% (4%) 1% 200bp REGIONAL BANKING GROUP 2,277 390 65 8 29 (400) CHASE HOME FINANCE 997 239 59 13 10 200 DIVERSIFIED CONSUMER SERVICES 404 53 62 (11) (44) 1,000 MIDDLE MARKETS 811 196 53 6 15 (300) OTHER NCS 279 61 NM NM NM NM ------- ------- TOTALS $ 7,487 $ 1,287 52% 1% 3% 200bp ======= ======= - -------------------------------------------------------------------------------- (a) Prior periods have been restated to reflect refinements in management reporting policies or changes to the management organization. For example, commencing with the third quarter of 2000, Chase's previously reported Global Bank has been reorganized into Investment Bank (Global Markets, Investment Banking and Corporate Lending) and Wealth Management (Global Private Bank and Asset Management). (b) Excludes the impact of credit card securitizations. (c) SVA is Chase's primary measure of business unit performance. SVA represents operating earnings excluding the amortization of goodwill and certain other intangibles (i.e., cash operating earnings), minus preferred dividends and an explicit charge for capital. (d) Total column includes Support Units and the effects remaining at the Corporate level after the implementation of management accounting policies. NM - Not meaningful bp - basis points Unaudited 10
11 THE CHASE MANHATTAN CORPORATION CONSOLIDATED STATEMENT OF INCOME (IN MILLIONS, EXCEPT PER SHARE DATA) % % THIRD QUARTER OVER/(UNDER) NINE MONTHS OVER/(UNDER) ------------- ----------- 2000 1999 1999 2000 1999 1999 ---- ---- ---- ---- ---- ---- INTEREST INCOME Loans $ 3,997 $ 3,288 $ 11,108 $ 9,662 Securities 994 762 2,879 2,344 Trading Assets 530 399 1,425 1,228 Federal Funds Sold and Securities Purchased Under Resale Agreements 452 352 1,349 1,122 Deposits with Banks 96 195 331 540 -------- -------- -------- -------- Total Interest Income 6,069 4,996 17,092 14,896 -------- -------- -------- -------- INTEREST EXPENSE Deposits 2,251 1,650 6,302 4,806 Short-Term and Other Borrowings 1,333 870 3,678 2,635 Long-Term Debt 492 306 1,243 936 -------- -------- -------- -------- Total Interest Expense 4,076 2,826 11,223 8,377 -------- -------- -------- -------- NET INTEREST INCOME 1,993 2,170 (8%) 5,869 6,519 (10%) Provision for Loan Losses 305 398 (23%) 979 1,167 (16%) -------- -------- -------- -------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,688 1,772 (5%) 4,890 5,352 (9%) -------- -------- -------- -------- NONINTEREST REVENUE Investment Banking Fees 613 486 26% 1,900 1,388 37% Trust, Custody and Investment Management Fees 664 457 45% 1,718 1,332 29% Credit Card Revenue 471 441 7% 1,311 1,258 4% Fees for Other Financial Services 775 637 22% 2,201 1,777 24% Trading Revenue 603 462 31% 2,448 1,606 52% Securities Gains (Losses) 96 (1) NM 167 160 4% Private Equity Gains (Losses) (25) 377 NM 773 1,215 (36%) Other Revenue 210 162 30% 354 696 (49%) -------- -------- -------- -------- Total Noninterest Revenue 3,407 3,021 13% 10,872 9,432 15% -------- -------- -------- -------- NONINTEREST EXPENSE Salaries 1,761 1,417 24% 5,128 4,217 22% Employee Benefits 256 238 8% 795 731 9% Occupancy Expense 247 218 13% 689 642 7% Equipment Expense 297 255 16% 856 737 16% Other Expense 1,095 853 28% 3,035 2,667 14% -------- -------- -------- -------- Total Noninterest Expense Before Restructuring Costs 3,656 2,981 23% 10,503 8,994 17% Restructuring Costs 79 -- NM 129 -- NM -------- -------- -------- -------- Total Noninterest Expense 3,735 2,981 25% 10,632 8,994 18% -------- -------- -------- -------- INCOME BEFORE INCOME TAX EXPENSE 1,360 1,812 (25%) 5,130 5,790 (11%) Income Tax Expense 476 625 (24%) 1,795 2,037 (12%) ======== ======= ======== ======== NET INCOME $ 884 $ 1,187 (26%) $ 3,335 $ 3,753 (11%) ======== ======= ======== ======== NET INCOME APPLICABLE TO COMMON STOCK $ 871 $ 1,168 (25%) $ 3,289 $ 3,698 (11%) ======== ======= ======== ======== NET INCOME PER COMMON SHARE: Basic $ 0.69 $ 0.95 (27%) $ 2.66 $ 2.96 (10%) Diluted $ 0.66 $ 0.92 (28%) $ 2.57 $ 2.86 (10%) NM - Not meaningful Unaudited 11
12 THE CHASE MANHATTAN CORPORATION NONINTEREST REVENUE AND NONINTEREST EXPENSE DETAIL (IN MILLIONS) THIRD QUARTER % NINE MONTHS % ---------------- OVER/(UNDER) ---------------- OVER/(UNDER) NONINTEREST REVENUE 2000 1999 1999 2000 1999 1999 ---- ---- ---- ---- ---- ---- FEES FOR OTHER FINANCIAL SERVICES: Mortgage Servicing Fees $ 140 $ 96 46% $ 421 $ 238 77% Brokerage and Investment Services 150 43 249% 333 136 145% Service Charges on Deposit Accounts 103 104 (1%) 305 289 6% Fees in Lieu of Compensating Balances 81 106 (24%) 256 287 (11%) Commissions on Letters of Credit and Acceptances 51 69 (26%) 179 207 (14%) Insurance Fees 58 44 32% 154 124 24% Loan Commitment Fees 36 44 (18%) 108 111 (3%) Other Fees 156 131 19% 445 385 16% ------- ------- ------- ------- Total $ 775 $ 637 22% $ 2,201 $ 1,777 24% ======= ======= ======= ======= TRADING-RELATED REVENUE: (a) Interest Rate Contracts $ 117 $ 223 (48%) $ 654 $ 805 (19%) Foreign Exchange Revenue 207 199 4% 744 616 21% Equities and Commodities 167 129 29% 574 303 89% Debt Instruments and Other 189 128 48% 594 525 13% ------- ------- ------- ------- Total $ 680 $ 679 -- $ 2,566 $ 2,249 14% ======= ======= ======= ======= OTHER REVENUE: Residential Mortgage Origination/Sales Activities $ 50 $ 95 (47%) $ 135 $ 275 (51%) Loss on Economic Hedge of the Flemings Purchase (b) (35) -- NM (176) -- NM Gains on Sales of Nonstrategic Assets (c) 81 -- NM 81 166 (51%) All Other Revenue 114 67 70% 314 255 23% ------- ------- ------- ------- Total $ 210 $ 162 30% $ 354 $ 696 (49%) ======= ======= ======= ======= - --------------------------------------------------------------------------------------------------------------------------------- NONINTEREST EXPENSE OTHER EXPENSE: Professional Services $ 212 $ 170 25% $ 569 $ 510 12% Marketing Expense 146 128 14% 367 356 3% Amortization of Intangibles 149 70 113% 318 219 45% Telecommunications 112 96 17% 316 284 11% Travel and Entertainment 86 54 59% 229 163 40% Minority Interest (d) 12 12 -- 42 37 14% Foreclosed Property Expense 1 6 (83%) (2) 14 NM Special Contribution to the Foundation (e) -- -- -- -- 100 NM All Other 377 317 19% 1,196 984 22% ------- ------- ------- ------- Total $ 1,095 $ 853 28% $ 3,035 $ 2,667 14% ======= ======= ======= ======= (a) Trading-related revenue includes net interest income attributable to trading activities. (b) Loss is the result of the economic hedge of the purchase price of Flemings prior to its acquisition. (c) Third quarter and nine months 2000 includes an $81 million gain on the sale of a business in Panama. Nine months 1999 includes a $95 million gain on the sale of One New York Plaza and a $71 million gain on the sale of branches in Beaumont, Texas. (d) Includes REIT minority interest of $11 million in each quarter and $33 million in each nine months. (e) Represents a $100 million special contribution to The Chase Manhattan Foundation. NM - Not meaningful Unaudited 12
13 THE CHASE MANHATTAN CORPORATION OPERATING INCOME RECONCILIATION (IN MILLIONS, EXCEPT PER SHARE DATA) THIRD QUARTER 2000 THIRD QUARTER 1999 ------------------------------------------ ---------------------------------------- REPORTED CREDIT SPECIAL OPERATING REPORTED CREDIT SPECIAL OPERATING RESULTS CARD ITEMS BASIS RESULTS CARD ITEMS BASIS (a) (b) (c) (a) (b) (c) ------ ------ ------ ------ ------ ------ ------ ------ EARNINGS Market-Sensitive Revenue $1,364 $ -- $ -- $1,364 $1,541 $ -- $ -- $1,541 Less Market-Sensitive Revenue 4,036 236 (46) 4,226 3,650 238 -- 3,888 ------ ------ ------ ------ ------ ------ ------ ------ Total Revenue 5,400 236 (46) 5,590 5,191 238 -- 5,429 Noninterest Expense 3,656 -- -- 3,656 2,981 -- -- 2,981 ------ ------ ------ ------ ------ ------ ------ ------ Operating Margin 1,744 236 (46) 1,934 2,210 238 -- 2,448 Credit Costs 305 236 -- 541 398 238 -- 636 ------ ------ ------ ------ ------ ------ ------ ------ Income Before Restructuring Costs 1,439 -- (46) 1,393 1,812 -- -- 1,812 Restructuring Costs 79 -- (79) -- -- -- -- -- ------ ------ ------ ------ ------ ------ ------ ------ Income Before Income Tax Expense 1,360 -- 33 1,393 1,812 -- -- 1,812 Tax Expense 476 -- 12 488 625 -- -- 625 ------ ------ ------ ------ ------ ------ ------ ------ Net Income $ 884 $ -- $ 21 $ 905 $1,187 $ -- $ -- $1,187 ------ ------ ------ ------ ------ ------ ------ ------ NET INCOME PER COMMON SHARE Basic $ 0.69 $ 0.70 $ 0.95 $ 0.95 Diluted $ 0.66 $ 0.68 $ 0.92 $ 0.92 - ----------------------------------------------------------------------------------------------------------------------------------- NINE MONTHS 2000 NINE MONTHS 1999 ---------------------------------------------- --------------------------------------------- REPORTED CREDIT SPECIAL OPERATING REPORTED CREDIT SPECIAL OPERATING RESULTS CARD ITEMS BASIS RESULTS CARD ITEMS BASIS (a) (b) (c) (a) (b) (c) ------- ------- ------- ------- ------- ------- ------- ------- EARNINGS Market-Sensitive Revenue $ 5,406 $ -- $ -- $ 5,406 $ 5,012 $ -- $ -- $ 5,012 Less Market-Sensitive Revenue 11,335 732 95 12,162 10,939 753 (166) 11,526 ------- ------- ------- ------- ------- ------- ------- ------- Total Revenue 16,741 732 95 17,568 15,951 753 (166) 16,538 Noninterest Expense 10,503 -- -- 10,503 8,994 -- (100) 8,894 ------- ------- ------- ------- ------- ------- ------- ------- Operating Margin 6,238 732 95 7,065 6,957 753 (66) 7,644 Credit Costs 979 732 -- 1,711 1,167 753 -- 1,920 ------- ------- ------- ------- ------- ------- ------- ------- Income Before Restructuring Costs 5,259 -- 95 5,354 5,790 -- (66) 5,724 Restructuring Costs 129 -- (129) -- -- -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- Income Before Income Tax Expense 5,130 -- 224 5,354 5,790 -- (66) 5,724 Tax Expense 1,795 -- 79 1,874 2,037 -- (24) 2,013 ------- ------- ------- ------- ------- ------- ------- ------- Net Income $ 3,335 $ -- $ 145 $ 3,480 $ 3,753 $ -- $ (42) $ 3,711 ------- ------- ------- ------- ------- ------- ------- ------- NET INCOME PER COMMON SHARE Basic $ 2.66 $ 2.78 $ 2.96 $ 2.93 Diluted $ 2.57 $ 2.68 $ 2.86 $ 2.83 - ----------------------------------------------------------------------------------------------------------------------------------- (a) Represent results as reported in Chase's financial statements. The only exception is that revenues are categorized between market-sensitive and less market-sensitive revenues. Market-sensitive revenue includes investment banking fees, trading-related revenue (including trading-related net interest income), securities gains and private equity gains. (b) This column excludes the impact of credit card securitizations. For securitized receivables, amounts that previously would have been reported as net interest income and as provision for loan losses are instead reported as components of noninterest revenue. (c) Includes restructuring costs and special items. The 2000 third quarter includes an $81 million gain (the same for the nine months) from the sale of a business in Panama, a $35 million loss ($176 million loss in the nine months) resulting from the economic hedge of the purchase price of Flemings prior to its acquisition, and $79 million ($129 million for the nine months) of restructuring costs associated with previously announced relocation initiatives. The 1999 nine months included $166 million in gains from sales of nonstrategic assets, of which $95 million was from the sale of a building and $71 million was from the sale of branches in Texas, and a special contribution to The Chase Manhattan Foundation of $100 million. Unaudited 13
14 THE CHASE MANHATTAN CORPORATION CONSOLIDATED BALANCE SHEET (IN MILLIONS) SEPTEMBER 30, % ------------- OVER/(UNDER) 2000 1999 1999 ---- ---- ---- ASSETS Cash and Due from Banks $ 19,403 $ 16,490 18% Deposits with Banks 3,513 5,856 (40%) Federal Funds Sold and Securities Purchased Under Resale Agreements 27,175 28,368 (4%) Trading Assets: Debt and Equity Instruments 36,113 26,069 39% Risk Management Instruments 31,479 31,123 1% Securities 66,232 55,113 20% Loans (Net of Allowance for Loan Losses of $3,491 in 2000 and $3,555 in 1999) 187,767 169,903 11% Other Assets 54,134 38,122 42% --------- --------- TOTAL ASSETS $ 425,816 $ 371,044 15% ========= ========= LIABILITIES Deposits: Domestic: Noninterest-Bearing $ 47,067 $ 49,722 (5%) Interest-Bearing 81,003 78,993 3% Foreign: Noninterest-Bearing 6,054 6,363 (5%) Interest-Bearing 95,477 84,545 13% --------- --------- Total Deposits 229,601 219,623 5% Federal Funds Purchased and Securities Sold Under Repurchase Agreements 61,943 43,879 41% Commercial Paper 7,338 5,996 22% Other Borrowed Funds 7,252 7,046 3% Trading Liabilities 40,688 37,084 10% Accounts Payable, Accrued Expenses and Other Liabilities, Including the Allowance for Credit Losses of $170 in 2000 and 1999 22,058 15,343 44% Long-Term Debt 24,157 16,644 45% Guaranteed Preferred Beneficial Interests in Corporation's Junior Subordinated Deferrable Interest Debentures 2,789 2,538 10% --------- --------- TOTAL LIABILITIES 395,826 348,153 14% --------- --------- PREFERRED STOCK OF SUBSIDIARY 550 550 -- --------- --------- STOCKHOLDERS' EQUITY Preferred Stock 828 928 (11%) Common Stock 1,323 882 50% Capital Surplus 9,300 9,635 (3%) Retained Earnings 19,626 16,210 21% Accumulated Other Comprehensive Loss (1,005) (1,038) (3%) Treasury Stock, at Cost (632) (4,276) (85%) --------- --------- TOTAL STOCKHOLDERS' EQUITY 29,440 22,341 32% --------- --------- TOTAL LIABILITIES, PREFERRED STOCK OF SUBSIDIARY AND STOCKHOLDERS' EQUITY $ 425,816 $ 371,044 15% ========= ========= Unaudited 14
15 THE CHASE MANHATTAN CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (IN MILLIONS) NINE MONTHS --------------------- 2000 1999 -------- -------- PREFERRED STOCK Balance at Beginning of Year $ 928 $ 1,028 Redemption of Stock (100) (100) -------- -------- Balance at End of Period $ 828 $ 928 -------- -------- COMMON STOCK Balance at Beginning of Year $ 882 $ 882 Issuance of Common Stock for a Three-for-Two Stock Split 441 -- -------- -------- Balance at End of Period $ 1,323 $ 882 -------- -------- CAPITAL SURPLUS Balance at Beginning of Year $ 9,714 $ 9,836 Issuance of Common Stock for a Three-for-Two Stock Split (441) -- Issuance of Common Stock for (Purchase Accounting) Acquisitions (a) 136 -- Shares Issued and Commitments to Issue Common Stock for Employee Stock-Based Awards and Related Tax Effects (109) (201) -------- -------- Balance at End of Period $ 9,300 $ 9,635 -------- -------- RETAINED EARNINGS Balance at Beginning of Year $ 17,547 $ 13,544 Net Income 3,335 3,753 Cash Dividends Declared: Preferred Stock (46) (55) Common Stock (1,210) (1,032) -------- -------- Balance at End of Period $ 19,626 $ 16,210 -------- -------- ACCUMULATED OTHER COMPREHENSIVE LOSS Balance at Beginning of Year $ (1,454) $ 392 Other Comprehensive Income (Loss) 449 (1,430) -------- -------- Balance at End of Period $ (1,005) $ (1,038) -------- -------- TREASURY STOCK, AT COST Balance at Beginning of Year $ (4,000) $ (1,844) Purchase of Treasury Stock (1,072) (4,172) Reissuance of Treasury Stock 1,025 1,740 Reissuance of Treasury Stock for (Purchase Accounting) Acquisitions (a) 3,415 -- -------- -------- Balance at End of Period $ (632) $ (4,276) -------- -------- TOTAL STOCKHOLDERS' EQUITY $ 29,440 $ 22,341 ======== ======== - ---------------------------------------------------------------------------------------------- COMPREHENSIVE INCOME Net Income $ 3,335 $ 3,753 Other Comprehensive Income (Loss) 449 (1,430) -------- -------- Comprehensive Income $ 3,784 $ 2,323 ======== ======== (a) In the 2000 third quarter, Chase acquired Robert Fleming Holdings Limited, The Beacon Group LLC and Goldman, Lichtenberg, Wasserman & Grossman. These transactions were accounted for under the purchase method. Unaudited 15
16 THE CHASE MANHATTAN CORPORATION CREDIT RELATED INFORMATION (IN MILLIONS) % % CREDIT-RELATED ASSETS OVER/(UNDER) NONPERFORMING ASSETS OVER/(UNDER) --------------------- ----------- -------------------- ---------- SEPTEMBER 30, 2000 1999 1999 2000 1999 1999 - ------------------------------------- -------- -------- ---- -------- -------- ---- CONSUMER LOANS Domestic Consumer: 1-4 Family Residential Mortgages $ 48,858 $ 42,134 16% $ 273 $ 308 (11%) Credit Card - Reported 14,981 14,246 5% 30 (a) -- NM Credit Card Securitizations (b) 18,022 18,028 -- -- -- NM -------- -------- -------- -------- Credit Card - Managed 33,003 32,274 2% 30 -- NM Auto Financings 19,921 18,429 8% 80 73 10% Other Consumer 6,931 6,536 6% 4 5 (20%) -------- -------- -------- -------- Total Domestic Consumer 108,713 99,373 9% 387 386 -- Total Foreign Consumer 2,551 2,822 (10%) 9 30 (70%) -------- -------- -------- -------- TOTAL CONSUMER LOANS 111,264 102,195 9% 396 416 (5%) -------- -------- -------- -------- COMMERCIAL LOANS Domestic Commercial: Commercial and Industrial 55,668 51,994 7% 581 458 27% Commercial Real Estate 3,151 3,363 (6%) 64 50 28% -------- -------- -------- -------- Total Domestic Commercial 58,819 55,357 6% 645 508 27% Total Foreign Commercial 39,197 33,934 16% 642 950 (32%) -------- -------- -------- -------- TOTAL COMMERCIAL LOANS 98,016 89,291 10% 1,287 1,458 (12%) DERIVATIVE AND FX CONTRACTS (c) 31,926 31,408 2% 52 36 44% -------- -------- -------- -------- TOTAL COMMERCIAL CREDIT-RELATED 129,942 120,699 8% 1,339 1,494 (10%) -------- -------- -------- -------- TOTAL MANAGED CREDIT-RELATED $241,206 $222,894 8% 1,735 1,910 (9%) ======== ======== -------- -------- Assets Acquired as Loan Satisfactions 81 105 (23%) -------- -------- TOTAL NONPERFORMING ASSETS $ 1,816 $ 2,015 (10%) ======== ======== - -------------------------------------------------------------------------------- % % THIRD QUARTER OVER/(UNDER) NINE MONTHS OVER/(UNDER) NET CHARGE-OFFS 2000 1999 1999 2000 1999 1999 --------------- ------- ------- ------------ ------- ------- ------------ CONSUMER LOANS Domestic Consumer: 1-4 Family Residential Mortgages $ 7 $ 9 (22%) $ 26 $ 19 37% Credit Card - Reported 167 207 (19%) 521 641 (19%) Credit Card Securitizations (b) 236 238 (1%) 732 753 (3%) ------- ------- ------- ------- Credit Card - Managed (d) 403 445 (9%) 1,253 1,394 (10%) Auto Financings 20 19 5% 63 57 11% Other Consumer 38 49 (22%) 113 144 (22%) ------- ------- ------- ------- Total Domestic Consumer 468 522 (10%) 1,455 1,614 (10%) Total Foreign Consumer 8 9 (11%) 27 27 -- ------- ------- ------- ------- TOTAL CONSUMER LOANS 476 531 (10%) 1,482 1,641 (10%) ------- ------- ------- ------- COMMERCIAL LOANS Domestic Commercial: Commercial and Industrial 65 68 (4%) 184 145 27% Commercial Real Estate (3) (2) NM (6) (13) NM ------- ------- ------- ------- Total Domestic Commercial 62 66 (6%) 178 132 35% Total Foreign Commercial 3 36 (92%) 51 143 (64%) ------- ------- ------- ------- TOTAL COMMERCIAL LOANS 65 102 (36%) 229 275 (17%) ------- ------- ------- ------- TOTAL MANAGED NET CHARGE-OFFS $ 541 $ 633 (15%) $ 1,711 $ 1,916 (11%) ======= ======= ======= ======= (a) Includes currently performing loans placed on a cash basis because of concerns as to collectibility. (b) Represents the portion of Chase's credit card receivables that have been securitized. (c) Charge-offs for risk management instruments are included in trading revenue. (d) Including domestic and international consumer and commercial credit card activity, net charge-offs as a percentage of average managed credit card receivables for the third quarter of 2000 and 1999 and first nine months of 2000 and 1999 were 4.97%, 5.53%, 5.16% and 5.81%, respectively. NM - Not meaningful Unaudited 16
17 THE CHASE MANHATTAN CORPORATION CONDENSED AVERAGE CONSOLIDATED BALANCE SHEET, INTEREST AND RATES (TAXABLE-EQUIVALENT INTEREST AND RATES; IN MILLIONS) THIRD QUARTER 2000 ------------------------------------------------------ AVERAGE RATE BALANCE INTEREST (ANNUALIZED) ------- -------- ------------ ASSETS Liquid Interest-Earning Assets $ 70,002 $ 1,078 6.12% Securities 64,740 1,000 6.15% Loans 187,210 3,997 8.50% --------- ------- Total Interest-Earning Assets 321,952 6,075 7.51% Noninterest-Earning Assets 91,908 --------- Total Assets $ 413,860 ========= LIABILITIES Interest-Bearing Deposits $ 173,940 2,251 5.15% Short-Term and Long-Term Debt 113,923 1,825 6.38% --------- ------- Total Interest-Bearing Liabilities 287,863 4,076 5.63% ------- Noninterest-Bearing Deposits 50,731 Other Noninterest-Bearing Liabilities 47,598 --------- Total Liabilities 386,192 --------- PREFERRED STOCK OF SUBSIDIARY 550 --------- STOCKHOLDERS' EQUITY Preferred Stock 828 Common Stockholders' Equity 26,290 --------- Total Stockholders' Equity 27,118 --------- Total Liabilities, Preferred Stock of Subsidiary and Stockholders' Equity $ 413,860 ========= INTEREST RATE SPREAD 1.88% ===== NET INTEREST INCOME AND NET YIELD ON INTEREST-EARNING ASSETS $ 1,999 2.47% ======= ===== NET INTEREST INCOME AND NET YIELD ON INTEREST-EARNING ASSETS (a) $ 2,352 2.75% ======= ===== THIRD QUARTER 1999 --------------------------------------------------------- AVERAGE RATE BALANCE INTEREST (ANNUALIZED) ------- -------- ------------ ASSETS Liquid Interest-Earning Assets $ 63,983 $ 946 5.86% Securities 53,016 767 5.74% Loans 173,246 3,289 7.53% -------- ------ Total Interest-Earning Assets 290,245 5,002 6.84% Noninterest-Earning Assets 74,600 -------- Total Assets $364,845 ======== LIABILITIES Interest-Bearing Deposits $160,820 1,650 4.07% Short-Term and Long-Term Debt 90,399 1,176 5.16% -------- ------ Total Interest-Bearing Liabilities 251,219 2,826 4.46% ------ Noninterest-Bearing Deposits 48,636 Other Noninterest-Bearing Liabilities 42,086 -------- Total Liabilities 341,941 -------- PREFERRED STOCK OF SUBSIDIARY 550 -------- STOCKHOLDERS' EQUITY Preferred Stock 1,026 Common Stockholders' Equity 21,328 -------- Total Stockholders' Equity 22,354 -------- Total Liabilities, Preferred Stock of Subsidiary and Stockholders' Equity $364,845 ======== INTEREST RATE SPREAD 2.38% ===== NET INTEREST INCOME AND NET YIELD ON INTEREST-EARNING ASSETS $ 2,176 2.97% ======== ===== NET INTEREST INCOME AND NET YIELD ON INTEREST-EARNING ASSETS (a) $ 2,508 3.24% ======= ===== - -------------------------------------------------------------------------------- NINE MONTHS 2000 --------------------------------------------- AVERAGE RATE BALANCE INTEREST (ANNUALIZED) ------- -------- ------------ ASSETS Liquid Interest-Earning Assets $ 68,505 $ 3,105 6.05% Securities 63,409 2,898 6.11% Loans 181,111 11,111 8.20% -------- ------- Total Interest-Earning Assets 313,025 17,114 7.30% Noninterest-Earning Assets 87,385 -------- Total Assets $400,410 ======== LIABILITIES Interest-Bearing Deposits $172,514 6,302 4.88% Short-Term and Long-Term Debt 108,135 4,921 6.08% -------- ------- Total Interest-Bearing Liabilities 280,649 11,223 5.34% ------- Noninterest-Bearing Deposits 50,796 Other Noninterest-Bearing Liabilities 43,608 -------- Total Liabilities 375,053 -------- PREFERRED STOCK OF SUBSIDIARY 550 -------- STOCKHOLDERS' EQUITY Preferred Stock 894 Common Stockholders' Equity 23,913 -------- Total Stockholders' Equity 24,807 -------- Total Liabilities, Preferred Stock of Subsidiary and Stockholders' Equity $400,410 ======== INTEREST RATE SPREAD 1.96% ===== NET INTEREST INCOME AND NET YIELD ON INTEREST-EARNING ASSETS $ 5,891 2.51% ======= ===== NET INTEREST INCOME AND NET YIELD ON INTEREST-EARNING ASSETS (a) $ 6,921 2.78% ======= ===== NINE MONTHS 1999 ----------------------------------------------- AVERAGE RATE BALANCE INTEREST (ANNUALIZED) ------- -------- ------------ ASSETS Liquid Interest-Earning Assets $ 61,997 $ 2,890 6.23% Securities 54,948 2,355 5.73% Loans 173,078 9,666 7.47% -------- ------- Total Interest-Earning Assets 290,023 14,911 6.87% Noninterest-Earning Assets 74,246 -------- Total Assets $364,269 -======= LIABILITIES Interest-Bearing Deposits $160,809 4,806 4.00% Short-Term and Long-Term Debt 89,729 3,571 5.32% -------- ------ Total Interest-Bearing Liabilities 250,538 8,377 4.47% ------- Noninterest-Bearing Deposits 48,091 Other Noninterest-Bearing Liabilities 42,066 -------- Total Liabilities 340,695 -------- PREFERRED STOCK OF SUBSIDIARY 550 -------- STOCKHOLDERS' EQUITY Preferred Stock 1,027 Common Stockholders' Equity 21,997 -------- Total Stockholders' Equity 23,024 -------- Total Liabilities, Preferred Stock of Subsidiary and Stockholders' Equity $364,269 ======== INTEREST RATE SPREAD 2.40% ===== NET INTEREST INCOME AND NET YIELD ON INTEREST-EARNING ASSETS $6,534 3.01% ======= ===== NET INTEREST INCOME AND NET YIELD ON INTEREST-EARNING ASSETS (a) $7,534 3.27% ======= ===== (a) Excludes the impact of the credit card securitizations. Unaudited 17
18 THE CHASE MANHATTAN CORPORATION Chase Capital Partners INVESTMENT PORTFOLIO (in millions) SEPTEMBER 30, 2000 JUNE 30, 2000 ------------------ ------------- CARRYING CARRYING VALUE COST VALUE COST ----- ---- ----- ---- Total Public Securities (191 companies) $ 2,103 $ 801 $ 2,778 $ 789 Total Private Direct Investments (822 companies) 5,957 5,879 5,764 5,736 Total Private Fund Investments (381 funds) 2,456 2,469 2,353 2,337 ------- ------- ------- ------- Total Investment Portfolio $10,516 $ 9,149 $10,895 $ 8,862 ======= ======= ======= ======= PUBLIC SECURITIES INVESTMENTS AT SEPTEMBER 30, 2000 * (DOLLARS AND SHARES IN MILLIONS) QUOTED PUBLIC SYMBOL SHARES VALUE COST ------ ------ ----- ---- TRITON PCS HOLDING, INC TPCS 11.7 $ 321 $ 50 PRAECIS PHARMACEUTICALS INC PRCS 6.1 260 26 TELECORP PCS TLCP 12.4 235 8 ONI SYSTEMS CORP ONIS 2.5 220 2 AMERICAN TOWER CORP AMT 5.8 218 15 DDI CORP DDIC 3.0 135 20 FISHER SCIENTIFIC FSH 3.3 112 27 RESONATE RSNT 2.7 108 6 VIASYSTEMS VG 5.9 101 44 STARMEDIA NETWORK, INC STRM 11.1 83 27 ----- ------ TOP TEN PUBLIC SECURITIES $1,793 $ 225 OTHER PUBLIC SECURITIES (181 companies) 1,316 576 ----- ------ TOTAL PUBLIC SECURITIES (191 companies) $3,109 $ 801 ====== ====== * - Publicly traded positions only. POLICY: Public securities held by Chase Capital Partners are marked-to-market at the quoted public value less liquidity discounts, with the resulting unrealized gains/losses included in the income statement. Chase's valuation policy for public securities incorporates the use of these liquidity discounts and price averaging methodologies in certain circumstances to take into account the fact that Chase can not immediately realize such public quoted values due to the numerous regulatory, corporate and contractual sales restrictions. Private investments are carried at cost, which is viewed as an approximation of fair value. The carrying value of private investments is adjusted for holdings in which a subsequent investment by an unaffiliated party indicates a valuation in excess of cost and holdings for which evidence of an other-than-temporary decline in value exists.