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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): May 7, 2009
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 8.01 Other Events | 3 | |
| Item 7.01 Regulation FD Disclosure | 3 | |
| SIGNATURE | 4 | |
| EXHIBIT INDEX | 5 | |
| EX-99.1 | ||
| EX-99.2 |
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On May 7, 2009, JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) confirmed that the U.S. Government’s Supervisory Capital Assessment Program (“SCAP”) concluded that JPMorgan Chase’s capital position would remain strong under far more highly stressed conditions than exist today, and that there is no need for the Firm to raise additional capital at this time. A copy of the press release relating to this announcement is attached hereto as Exhibit 99.1. Exhibit 99.1 shall be deemed to be “filed” for purposes of the Securities Exchange Act of 1934 and the information contained in Exhibit 99.1 shall be deemed to be incorporated by reference into the filings of the Firm under the Securities Act of 1933.
Item 7.01 Regulation FD Disclosure
On May 7, 2009, JPMorgan Chase held an investor call relating to the U.S. Government’s SCAP results for the Firm. In connection with that call, JPMorgan Chase made available an investor presentation. Exhibit 99.2 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 99.2 shall not be deemed to be incorporated by reference into the filings of the Firm under the Securities Act of 1933.
This current report on Form 8-K (including the Exhibits hereto) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause JPMorgan Chase’s actual results to differ materially from those described in the forward-looking statements can be found in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2008 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, filed with the Securities and Exchange Commission and available on JPMorgan Chase’s website (www.jpmorganchase.com) and on the Securities and Exchange Commission’s website (www.sec.gov). JPMorgan Chase does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit |
Description of Exhibit | |
| 99.1 |
JPMorgan Chase & Co. press release, dated May 7, 2009 | |
| 99.2 |
JPMorgan Chase & Co. Investor Presentation Slides, dated May 7, 2009 |
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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 | ||||
| Dated: May 7, 2009 | [Principal Accounting Officer] | |||
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| Exhibit |
Description of Exhibit | |
| 99.1 | JPMorgan Chase & Co. press release, dated May 7, 2009 | |
| 99.2 | JPMorgan Chase & Co. Investor Presentation Slides, dated May 7, 2009 |
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Exhibit 99.1
News release: IMMEDIATE
GOVERNMENT CONCLUDES NO NEED FOR JPMORGAN CHASE TO RAISE ADDITIONAL CAPITAL
COMPANY’S TIER 1 COMMON RATIO AT 7.3% AS OF 3/31/09; WOULD REMAIN WELL IN EXCESS OF GOVERNMENT’S 4.0% BUFFER LEVEL UNDER MORE ADVERSE SCENARIO
TIER 1 CAPITAL OF 11.4% AS OF 3/31/09 (9.3% EXCLUDING TARP) ALSO WOULD REMAIN VERY STRONG UNDER GOVERNMENT SCENARIO
New York, May 7, 2009 — JPMorgan Chase & Co. (NYSE: JPM) confirmed today that it has completed the U.S. Government’s Supervisory Capital Assessment Program (SCAP), which determined that JPMorgan Chase’s capital position would remain strong under far more highly stressed conditions than exist today, and that there is no need for the company to raise additional capital at this time.
JPMorgan Chase’s existing strong capital base and loan-loss reserves, together with its significant pretax, pre-provision earnings power, would enable it to weather adverse scenarios envisioned by SCAP, while still maintaining very strong capital ratios. JPMC’s ratios under SCAP would remain very strong even when excluding TARP preferred stock. Importantly, the company believes it could handle a substantially worse environment than the Government’s adverse conditions, even though the company is not expecting such a scenario.
Specifically, JPMorgan Chase’s Tier 1 Capital Ratio is 11.4% — or 9.3% excluding TARP — as of March 31, 2009. The company’s Tier 1 Common Ratio is 7.3% as of March 31, 2009, which is well in excess of the Government’s 4.0% buffer level, and would remain so even under more highly adverse scenarios.
| Media contact: | ||||
| Joseph Evangelisti | 212-270-7438 | joseph.evangelisti@jpmchase.com | ||
| Investor contact: | ||||
| Julia Bates | 212-270-7325 | julia.b.bates@jpmorgan.com |
Jamie Dimon, Chairman and Chief Executive Officer, said, “JPMorgan Chase has worked hard to maintain its fortress balance sheet and strong capital position in this challenging environment.” He added, “We are committed to supporting healthy economic growth and to doing our part to help our country through these tough times. In particular, we remain committed to safe and sound lending and to being a responsible corporate citizen. In the first quarter of this year alone, JPMorgan Chase lent more than $150 billion to consumers, small businesses, non-profits, municipalities, corporations and others.”
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.1 trillion and operations in more than 60 countries. The firm is a leader in investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan, Chase, and WaMu brands. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.
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Exhibit 99.2
MAY 7, 2009
J P M O R G A N C H A S E S U P E R V I S O R Y C A P I T A L A S S E S S M E N T P R O G R A M R E S U L T S
JPMORGAN GHASE & CO.
JPMORGAN CHASE SUPERVISORY CAPITAL ASSESSMENT PROGRAM RESULTS
Supervisory Capital Assessment Program (SCAP) outcome
Government confirms no need for additional capital under SCAP More Adverse scenario
JPM capital base and fortress balance sheet can handle an environment even worse than SCAP More Adverse scenario
JPM actual Tier 1 ratio (ex. TARP) of 9.3% and Tier 1 Common ratio of 7.3% as of 3/31/09
Project capital levels well in excess of “government buffers” of Tier 1 ratio of at least 6% and Tier 1 Common ratio of at least 4% at year-end 2010, even when excluding TARP
JPMORGAN GHASE & CO.
Government template for JPM
Estimates for JPM for the More Adverse economic scenario
The estimates below represent a hypothetical ‘what-if’ scenario that involves an economic outcome that is more adverse than expected. These estimates are not forecasts of expected losses or revenue
JPMorgan Chase & Co. As of December 31, 2008 $ Billions As % of RWA
Tier 1 Capital $136.2 10.2% Capital levels represent actuals Tier 1 Common Equity 87.0 6.5% at 12/31/08. RWA adjustments Risk-Weighted Assets 1,337.5 per SCAP result in lower ratios than reported More Adverse Scenario Estimated for 2009 and 2010 for the More Adverse Scenario $ Billions As % of Loans
Total Estimated Losses (Before purchase accounting adjustments) 97.4 First Lien Mortgages 18.8 10.2%
Second/Junior Lien Mortgages 20.1 13.9% Generally agree with aggregate Commercial and Industrial Loans 10.3 6.8% SCAP credit losses Commercial Real Estate Loans 3.7 5.5% Credit Card Loans 21.2 22.4% Securities (AFS and HTM) 1.2 -na- JPM would expect substantially different outcome in capital Trading & Counterparty 16.7 -na- markets stress event Other (1) 5.3 -na- Memo: Purchase Accounting Adjustments 19.9 Includes pre-provision net revenue and change in reserves. Resources Other Than Capital to Absorb Losses (2) 72.4 JPM expects to do better
SCAP Buffer Added for More Adverse Scenario (SCAP buffer defined as additional Tier 1 common/contingent common) Indicated SCAP Buffer as of December 31, 2008 No Need
1Q09 true-up Less: Capital actions and effects of 1Q09 results (3) 2.5
SCAP Buffer No Need Significant excess above
Includes other consumer and non-consumer loans and miscellaneous commitments and obligations government buffers based on (2) Resources to absorb losses include pre-provision net revenue less the change in the allowance for losses on loans and leases SCAP results (3) Capital Actions include completed or contracted transaction since 4Q08 Note: Numbers may not sum due to rounding 2
JPMORGAN GHASE & CO.
Summary results hypothetical earnings under More Adverse scenario
Total Impact on Capital from ‘09-’10 Results ($ in billions)1 Total Impact on Capital from ‘09-’10 Results ($ in billions)1
More Adverse Scenario SCAP JPM Likely Results Outcome Resources Other Than Capital to Absorb Losses2 $72.4 $80.0 Less: Trading & Counterparty Losses (16.7) (7.0) Securities (AFS & HTM) Losses (1.2) -Earnings pre Credit Losses 54.5 73.0 Credit Losses3 (59.5) (59.5)
Estimated Net Income (3.1) 8.4 Effects of 1Q09 Results per SCAP 2.5 2.5 Total Impact on Capital ($0.6) $10.9
Note: Data in gray italics represents approximation by JPM since specific figures not provided under SCAP
Explanations Explanations of of JPM JPM Likely Likely Outcome Outcome
Primary difference is expense reductions. Assumes $3B loan loss reserve build
Multiple JPM stress scenarios currently suggest maximum losses of $5-6B for trading and $1-2B for private equity positions; JPM outcome does not relate to SCAP scenario
JPM has no intent to sell positions; no writedowns are expected
True-ups represent actual 1Q09 results
JPM believes it will be profitable under More Adverse scenario
No drastic measures assumed by JPM to reduce expense or discretionary investments
No gains on securities portfolio or business sales nor other extraordinary items
Even in a case worse than More Adverse scenario, JPM believes a loss over 2 years is unlikely because of incremental actions that could be taken
1 SCAP results are on held, not managed, basis for credit card
2 Resources Other Than Capital to Absorb Losses include pre-provision net revenue less the change in the allowance for losses on
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loans and leases
3 Net of purchase accounting adjustments
JPMORGAN GHASE & CO.
Summary results hypothetical credit losses under More Adverse scenario
SCAP SCAP Credit Credit Losses Losses in in More More Adverse Adverse scenario scenario ( ($ $ in in billions) billions)
‘09-’10 ‘09-’10 Losses ($) Losses (%) First Lien Mortgages $18.8 10.2% Second Lien Mortgages 20.1 13.9 C&I Loans 10.3 6.8 CRE Loans 3.7 5.5 Credit Cards (held)1 21.2 22.4 Other 5.3 NA
Total Est. Credit Losses pre-PAA 79.4
Purchase Accounting (19.9) Adjustments (PAA)
Total Est. Credit Losses net PAA $59.5
Independent of the government, JPM performed its own detailed analysis on forecasted credit losses under the More Adverse scenario considering, among other items:
FICO scores
LTV levels
Historical peak loss rates
Historical performance by risk rating
Forecasted HPI by market
Credit quality migration: NPL rates, roll rates
Geographic and industry concentrations
Collateral levels
Purchase accounting adjustment represents losses on WaMu credit-impaired loans written down at the time of acquisition
In aggregate, JPM estimate of credit losses is roughly in line with SCAP results in More Adverse scenario
1 SCAP results are on held, not managed, basis for credit card
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JPMORGAN GHASE & CO.
Summary results hypothetical capital under More Adverse scenario
( ($ $ in in billions) billions)
SCAP JPM Likely Template JPM Actual Outcome (12/31/08) (3/31/09) (12/31/10) Tier 1 Capital $136 $137 $151 Tier 1 Capital (ex. TARP) 111 112 126 Tier 1 Common Capital 87 88 101 RWA 1,338 1,207 1,275 Allowance for Loan Losses 23 27 30
Tier 1 Ratio 10.2% 11.4% 11.8% Tier 1 Ratio (ex. TARP) 8.3 9.3 9.9 Tier 1 Common Ratio 6.5 7.3 7.9 LLR / Loans 3.6 4.5 5.0
Note: Data in gray italics represents approximation by JPM since specific figures not provided under SCAP
Current balance sheet pro forma for JPM estimated impact from amendment of FAS 140
JPM likely outcome reflects:
Estimated impact on capital from ‘09-’10 results of ~$11B (see slide 3)
RWA of $1,275B reflects consolidation impact from amendment of FAS 140
Fortress balance sheet can handle far worse environment
Capital ratios well in excess of “government buffers” of Tier 1 ratio of at least 6% and Tier 1 Common ratio of at least 4%
Extremely strong reserve levels
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JPMORGAN GHASE & CO.
Summary
More Adverse scenario is a conservative stress test for a worse than expected environment
JPM’s existing strong capital and loan loss reserves together with extremely strong earnings power allow us to weather the SCAP stress test with no additional capital required
We can handle a substantially worse environment though we are not expecting it
In all cases we have the capital and intention to support an economic recovery by serving our clients needs, including credit
Subject to safe and sound lending practices
We remain very confident in the future prospects of our company
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JPMORGAN GHASE & CO.
Forward-looking statements and notes on financial information
Forward-looking statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause JPMorgan Chase’s actual results to differ materially from those described in the forward-looking statements can be found in JPMorgan Chase’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 and Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission and available on JPMorgan Chase’s website (www.jpmorganchase.com) and on the Securities and Exchange Commission’s website (www.sec.gov). JPMorgan Chase does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
Notes on financial information
This presentation includes certain information that was prepared at the request of federal bank regulatory agencies pursuant to the federal bank regulatory agencies’ supervisory authority. This information reflects estimates by JPMorgan Chase based upon assumptions contained in the “Supervisory Capital Assessment Program: Design and Implementation,” dated April 24, 2009, and as a result, such information may not have been prepared in accordance with generally accepted accounting principles.
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JPMORGAN GHASE & CO.