For the Quarterly Period Ended September 30, 2005 | Commission file number 1-5805 |
Delaware | 13-2624428 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
270 Park Avenue, New York, New York | 10017 | |
(Address of principal executive offices) | (Zip Code) |
Common Stock, $1 Par Value | 3,499,064,504 |
Page | ||||||||
Part I Financial information | ||||||||
Item 1 | Consolidated Financial Statements JPMorgan Chase & Co.: |
|||||||
65 | ||||||||
66 | ||||||||
67 | ||||||||
68 | ||||||||
69 | ||||||||
89 | ||||||||
91 | ||||||||
Item 2 | ||||||||
3 | ||||||||
4 | ||||||||
6 | ||||||||
8 | ||||||||
11 | ||||||||
15 | ||||||||
42 | ||||||||
43 | ||||||||
46 | ||||||||
47 | ||||||||
62 | ||||||||
63 | ||||||||
63 | ||||||||
Item 3 | 96 | |||||||
Item 4 | 96 | |||||||
Part II Other information | ||||||||
Item 1 | 96 | |||||||
Item 2 | 97 | |||||||
Item 3 | 98 | |||||||
Item 4 | 98 | |||||||
Item 5 | 98 | |||||||
Item 6 | 98 |
2
Nine months ended | ||||||||||||||||||||||||||||
(in millions, except per share, ratio and headcount data) | September 30, | |||||||||||||||||||||||||||
As of or for the period ended |
3Q 2005 | 2Q 2005 | 1Q 2005 | 4Q 2004 | 3Q 2004 | 2005 | 2004 | (f) | ||||||||||||||||||||
Selected income statement data |
||||||||||||||||||||||||||||
Net interest income |
$ | 4,852 | $ | 5,001 | $ | 5,225 | $ | 5,329 | $ | 5,452 | $ | 15,078 | $ | 11,432 | ||||||||||||||
Noninterest revenue |
9,613 | 7,742 | 8,422 | 7,621 | 7,053 | 25,777 | 18,715 | |||||||||||||||||||||
Total net revenue |
14,465 | 12,743 | 13,647 | 12,950 | 12,505 | 40,855 | 30,147 | |||||||||||||||||||||
Provision for credit losses(a) |
1,245 | 587 | 427 | 1,157 | 1,169 | 2,259 | 1,387 | |||||||||||||||||||||
Noninterest expense before Merger costs
and Litigation reserve charge |
9,243 | 8,748 | 8,892 | 8,863 | 8,625 | 26,883 | 20,431 | |||||||||||||||||||||
Merger costs |
221 | 279 | 145 | 523 | 752 | 645 | 842 | |||||||||||||||||||||
Litigation reserve charge |
| 1,872 | 900 | | | 2,772 | 3,700 | |||||||||||||||||||||
Total noninterest expense |
9,464 | 10,899 | 9,937 | 9,386 | 9,377 | 30,300 | 24,973 | |||||||||||||||||||||
Income before income tax expense |
3,756 | 1,257 | 3,283 | 2,407 | 1,959 | 8,296 | 3,787 | |||||||||||||||||||||
Income tax expense |
1,229 | 263 | 1,019 | 741 | 541 | 2,511 | 987 | |||||||||||||||||||||
Net income |
$ | 2,527 | $ | 994 | $ | 2,264 | $ | 1,666 | $ | 1,418 | $ | 5,785 | $ | 2,800 | ||||||||||||||
Per common share |
||||||||||||||||||||||||||||
Net income per share: |
||||||||||||||||||||||||||||
Basic |
$ | 0.72 | $ | 0.28 | $ | 0.64 | $ | 0.47 | $ | 0.40 | $ | 1.65 | $ | 1.09 | ||||||||||||||
Diluted |
0.71 | 0.28 | 0.63 | 0.46 | 0.39 | 1.62 | 1.06 | |||||||||||||||||||||
Cash dividends declared per share |
0.34 | 0.34 | 0.34 | 0.34 | 0.34 | 1.02 | 1.02 | |||||||||||||||||||||
Book value per share |
30.26 | 29.95 | 29.78 | 29.61 | 29.42 | |||||||||||||||||||||||
Common shares outstanding (average) |
||||||||||||||||||||||||||||
Basic |
3,485 | 3,493 | 3,518 | 3,515 | 3,514 | 3,498 | 2,533 | |||||||||||||||||||||
Diluted |
3,548 | 3,548 | 3,570 | 3,602 | 3,592 | 3,555 | 2,599 | |||||||||||||||||||||
Common shares at period-end |
3,503 | 3,514 | 3,525 | 3,556 | 3,564 | |||||||||||||||||||||||
Selected ratios |
||||||||||||||||||||||||||||
Return on common equity (ROE)(b) |
9 | % | 4 | % | 9 | % | 6 | % | 5 | % | 7 | % | 6 | % | ||||||||||||||
Return on assets (ROA)(b)(c) |
0.84 | 0.34 | 0.79 | 0.57 | 0.50 | 0.66 | 0.42 | |||||||||||||||||||||
Tier 1 capital ratio |
8.2 | 8.2 | 8.6 | 8.7 | 8.6 | |||||||||||||||||||||||
Total capital ratio |
11.3 | 11.3 | 11.9 | 12.2 | 12.0 | |||||||||||||||||||||||
Tier 1 leverage ratio |
6.2 | 6.2 | 6.3 | 6.2 | 6.5 | |||||||||||||||||||||||
Selected balance sheet data (period-end) |
||||||||||||||||||||||||||||
Total assets |
$ | 1,203,033 | $ | 1,171,283 | $ | 1,178,305 | $ | 1,157,248 | $ | 1,138,469 | ||||||||||||||||||
Securities |
68,697 | 58,573 | 75,251 | 94,512 | 92,816 | |||||||||||||||||||||||
Total loans |
420,504 | 416,025 | 402,669 | 402,114 | 393,701 | |||||||||||||||||||||||
Deposits |
535,123 | 534,640 | 531,379 | 521,456 | 496,454 | |||||||||||||||||||||||
Long-term debt |
101,853 | 101,182 | 99,329 | 95,422 | 91,754 | |||||||||||||||||||||||
Common stockholders equity |
105,996 | 105,246 | 105,001 | 105,314 | 104,844 | |||||||||||||||||||||||
Total stockholders equity |
106,135 | 105,385 | 105,340 | 105,653 | 105,853 | |||||||||||||||||||||||
Credit quality metrics |
||||||||||||||||||||||||||||
Allowance for credit losses |
$ | 7,615 | $ | 7,233 | $ | 7,423 | $ | 7,812 | $ | 8,034 | $ | 7,615 | $ | 8,034 | ||||||||||||||
Nonperforming assets |
2,839 | 2,832 | 2,949 | 3,231 | 3,637 | 2,839 | 3,637 | |||||||||||||||||||||
Allowance for loan losses to total
loans(d) |
1.88 | % | 1.76 | % | 1.83 | % | 1.94 | % | 2.01 | % | 1.88 | % | 2.01 | % | ||||||||||||||
Net charge-offs |
$ | 870 | $ | 773 | $ | 816 | $ | 1,398 | $ | 865 | $ | 2,459 | $ | 1,701 | ||||||||||||||
Net charge-off rate(b)(d) |
0.90 | % | 0.83 | % | 0.88 | % | 1.47 | % | 0.93 | % | 0.87 | % | 0.89 | % | ||||||||||||||
Wholesale net charge-off (recovery)
rate(b)(d) |
(0.12 | ) | (0.17 | ) | (0.03 | ) | 0.21 | (0.08 | ) | (0.11 | ) | 0.17 | ||||||||||||||||
Managed Card net charge-off rate(b) |
4.70 | 4.87 | 4.83 | 5.24 | 4.88 | 4.80 | 5.29 | |||||||||||||||||||||
Headcount |
168,955 | 168,708 | 164,381 | 160,968 | 162,275 | |||||||||||||||||||||||
Share price(e) |
||||||||||||||||||||||||||||
High |
$ | 35.95 | $ | 36.50 | $ | 39.69 | $ | 40.45 | $ | 40.25 | $ | 39.69 | $ | 43.84 | ||||||||||||||
Low |
33.31 | 33.35 | 34.32 | 36.32 | 35.50 | 33.31 | 34.62 | |||||||||||||||||||||
Close |
33.93 | 35.32 | 34.60 | 39.01 | 39.73 | 33.93 | 39.73 | |||||||||||||||||||||
(a) | Third quarter 2005 includes a $400 million special provision related to Hurricane Katrina:
Retail Financial Services $250 million, Card Services $100 million, Commercial Banking $35
million, Asset & Wealth Management $3 million and Corporate $12 million. |
|
(b) | Based on annualized amounts. |
|
(c) | Represents Net income divided by Total average assets. |
|
(d) | Excluded from this ratio were loans held-for-sale. |
|
(e) | JPMorgan Chases common stock is listed and traded on the New York Stock Exchange, the London
Stock Exchange Limited and the Tokyo Stock Exchange. The high, low and closing prices of
JPMorgan Chases common stock are from The New York Stock Exchange Composite Transaction Tape. |
|
(f) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
3
4
5
6
7
Total net revenue | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004(a) | Change | |||||||||||||||||||||
Investment banking fees |
$ | 989 | $ | 879 | 13 | % | $ | 2,943 | $ | 2,464 | 19 | % | |||||||||||||||
Trading revenue |
2,499 | 408 | NM | 4,745 | 3,001 | 58 | |||||||||||||||||||||
Lending & deposit related fees |
865 | 943 | (8 | ) | 2,536 | 1,769 | 43 | ||||||||||||||||||||
Asset management, administration and
commissions |
2,628 | 2,185 | 20 | 7,667 | 5,835 | 31 | |||||||||||||||||||||
Securities/private equity gains (losses) |
343 | 413 | (17 | ) | 705 | 1,305 | (46 | ) | |||||||||||||||||||
Mortgage fees and related income |
201 | 233 | (14 | ) | 899 | 721 | 25 | ||||||||||||||||||||
Credit card income |
1,855 | 1,782 | 4 | 5,352 | 3,018 | 77 | |||||||||||||||||||||
Other income |
233 | 210 | 11 | 930 | 602 | 54 | |||||||||||||||||||||
Noninterest revenue |
9,613 | 7,053 | 36 | 25,777 | 18,715 | 38 | |||||||||||||||||||||
Net interest income |
4,852 | 5,452 | (11 | ) | 15,078 | 11,432 | 32 | ||||||||||||||||||||
Total net revenue |
$ | 14,465 | $ | 12,505 | 16 | % | $ | 40,855 | $ | 30,147 | 36 | % | |||||||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase results. |
8
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004(a) | Change | ||||||||||||||||||
Compensation expense |
$ | 5,001 | $ | 4,050 | 23 | % | $ | 13,969 | $ | 10,295 | 36 | % | ||||||||||||
Occupancy expense |
549 | 604 | (9 | ) | 1,654 | 1,475 | 12 | |||||||||||||||||
Technology and communications
expense |
899 | 1,046 | (14 | ) | 2,715 | 2,651 | 2 | |||||||||||||||||
Professional & outside services |
1,018 | 1,103 | (8 | ) | 3,222 | 2,671 | 21 | |||||||||||||||||
Marketing |
512 | 506 | 1 | 1,532 | 907 | 69 | ||||||||||||||||||
Other expense |
882 | 920 | (4 | ) | 2,641 | 1,878 | 41 | |||||||||||||||||
Amortization of intangibles |
382 | 396 | (4 | ) | 1,150 | 554 | 108 | |||||||||||||||||
Total noninterest expense before
merger costs and litigation
reserve charge |
9,243 | 8,625 | 7 | 26,883 | 20,431 | 32 | ||||||||||||||||||
Merger costs |
221 | 752 | (71 | ) | 645 | 842 | (23 | ) | ||||||||||||||||
Litigation reserve charge |
| | NM | 2,772 | 3,700 | (25 | ) | |||||||||||||||||
Total noninterest expense |
$ | 9,464 | $ | 9,377 | 1 | % | $ | 30,300 | $ | 24,973 | 21 | % | ||||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage
JPMorgan Chase results. |
9
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(in millions, except rate) | 2005 | 2004 | 2005 | 2004(a) | ||||||||||||
Income before income tax expense |
$ | 3,756 | $ | 1,959 | $ | 8,296 | $ | 3,787 | ||||||||
Income tax expense |
1,229 | 541 | 2,511 | 987 | ||||||||||||
Effective tax rate |
32.7 | % | 27.6 | % | 30.3 | % | 26.1 | % | ||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
10
11
Three months ended September 30, | 2005 | |||||||||||||||||||||||||||
Reported | Trading | Credit | Merger | Litigation | Tax-equivalent | Operating | ||||||||||||||||||||||
(in millions, except per share and ratio data) | results | reclass(d) | card(e) | costs(f) | charge(f) | adjustments | basis | |||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 989 | $ | | $ | | $ | | $ | | $ | | $ | 989 | ||||||||||||||
Trading revenue |
2,499 | (103 | ) | | | | | 2,396 | ||||||||||||||||||||
Lending & deposit related fees |
865 | | | | | | 865 | |||||||||||||||||||||
Asset management, administration
and commissions |
2,628 | | | | | | 2,628 | |||||||||||||||||||||
Securities/private equity gains (losses) |
343 | | | | | | 343 | |||||||||||||||||||||
Mortgage fees and related income |
201 | | | | | | 201 | |||||||||||||||||||||
Credit card income |
1,855 | | (733 | ) | | | | 1,122 | ||||||||||||||||||||
Other income |
233 | | | | | 155 | 388 | |||||||||||||||||||||
Noninterest revenue |
9,613 | (103 | ) | (733 | ) | | | 155 | 8,932 | |||||||||||||||||||
Net interest income |
4,852 | 103 | 1,600 | | | 67 | 6,622 | |||||||||||||||||||||
Total net revenue |
14,465 | | 867 | | | 222 | 15,554 | |||||||||||||||||||||
Provision for credit losses(a) |
1,245 | | 867 | | | | 2,112 | |||||||||||||||||||||
Noninterest expense Merger costs |
221 | | | (221 | ) | | | | ||||||||||||||||||||
Litigation reserve charge |
| | | | | | | |||||||||||||||||||||
All other noninterest expense |
9,243 | | | | | | 9,243 | |||||||||||||||||||||
Total noninterest expense |
9,464 | | | (221 | ) | | | 9,243 | ||||||||||||||||||||
Income before income tax expense |
3,756 | | | 221 | | 222 | 4,199 | |||||||||||||||||||||
Income tax expense |
1,229 | | | 84 | | 222 | 1,535 | |||||||||||||||||||||
Net income |
$ | 2,527 | $ | | $ | | $ | 137 | $ | | $ | | $ | 2,664 | ||||||||||||||
Earnings per share diluted |
$ | 0.71 | $ | | $ | | $ | 0.04 | $ | | $ | | $ | 0.75 | ||||||||||||||
Return on common equity |
9 | % | | % | | % | 1 | % | | % | | % | 10 | % | ||||||||||||||
Return on equity goodwill(b) |
16 | | | 1 | | | 17 | |||||||||||||||||||||
Return on assets |
0.84 | NM | NM | NM | NM | NM | 0.84 | |||||||||||||||||||||
Overhead ratio |
65 | NM | NM | NM | NM | NM | 59 | |||||||||||||||||||||
Effective income tax rate |
33 | NM | NM | 38 | NM | 100 | 37 | |||||||||||||||||||||
Three months ended September 30, | 2004 | |||||||||||||||||||||||||||||||
Accounting | ||||||||||||||||||||||||||||||||
Reported | Trading | Credit | Merger | Litigation | policy | Tax-equivalent | Operating | |||||||||||||||||||||||||
(in millions, except per share and ratio data) | results | reclass(d) | card(e) | costs(f) | charge(f) | conformity | adjustments | basis | ||||||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||||||
Investment banking fees |
$ | 879 | $ | | $ | | $ | | $ | | $ | | $ | | $ | 879 | ||||||||||||||||
Trading revenue |
408 | 424 | | | | | | 832 | ||||||||||||||||||||||||
Lending & deposit related fees |
943 | | | | | | | 943 | ||||||||||||||||||||||||
Asset management, administration
and commissions |
2,185 | | | | | | | 2,185 | ||||||||||||||||||||||||
Securities/private equity gains (losses) |
413 | | | | | | | 413 | ||||||||||||||||||||||||
Mortgage fees and related income |
233 | | | | | | | 233 | ||||||||||||||||||||||||
Credit card income |
1,782 | | (848 | ) | | | | | 934 | |||||||||||||||||||||||
Other income |
210 | | (3 | ) | | | 118 | 64 | 389 | |||||||||||||||||||||||
Noninterest revenue |
7,053 | 424 | (851 | ) | | | 118 | 64 | 6,808 | |||||||||||||||||||||||
Net interest income |
5,452 | (424 | ) | 1,779 | | | | (36 | ) | 6,771 | ||||||||||||||||||||||
Total net revenue |
12,505 | | 928 | | | 118 | 28 | 13,579 | ||||||||||||||||||||||||
Provision for credit losses |
1,169 | | 928 | | | (333 | ) | | 1,764 | |||||||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||||||||||
Merger costs |
752 | | | (752 | ) | | | | | |||||||||||||||||||||||
Litigation reserve charge |
| | | | | | | | ||||||||||||||||||||||||
All other noninterest expense |
8,625 | | | | | | | 8,625 | ||||||||||||||||||||||||
Total noninterest expense |
9,377 | | | (752 | ) | | | | 8,625 | |||||||||||||||||||||||
Income before income tax expense |
1,959 | | | 752 | | 451 | 28 | 3,190 | ||||||||||||||||||||||||
Income tax expense |
541 | | | 290 | | 172 | 28 | 1,031 | ||||||||||||||||||||||||
Net income |
$ | 1,418 | $ | | $ | | $ | 462 | $ | | $ | 279 | $ | | $ | 2,159 |
12
Earnings per share diluted |
$ | 0.39 | $ | | $ | | $ | 0.13 | $ | | $ | 0.08 | $ | | $ | 0.60 | ||||||||||||||||
Return on common equity |
5 | % | | | 2 | % | | 1 | % | | 8 | % | ||||||||||||||||||||
Return on equity goodwill(b) |
9 | | | 3 | | 2 | | 14 | ||||||||||||||||||||||||
Return on assets |
0.50 | NM | NM | NM | NM | NM | NM | 0.72 | ||||||||||||||||||||||||
Overhead ratio |
75 | NM | NM | NM | NM | NM | NM | 64 | ||||||||||||||||||||||||
Effective income tax rate |
28 | NM | NM | 39 | NM | 38 | 100 | % | 32 | |||||||||||||||||||||||
Nine months ended September 30, | 2005 | |||||||||||||||||||||||||||
Reported | Trading | Credit | Merger | Litigation | Tax-equivalent | Operating | ||||||||||||||||||||||
(in millions, except per share and ratio data) | results | reclass(d) | card(e) | costs(f) | charge(f) | adjustments | basis | |||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 2,943 | $ | | $ | | $ | | $ | | $ | | $ | 2,943 | ||||||||||||||
Trading revenue |
4,745 | 423 | | | | | 5,168 | |||||||||||||||||||||
Lending & deposit related fees |
2,536 | | | | | | 2,536 | |||||||||||||||||||||
Asset management, administration
and commissions |
7,667 | | | | | | 7,667 | |||||||||||||||||||||
Securities/private equity gains (losses) |
705 | | | | | | 705 | |||||||||||||||||||||
Mortgage fees and related income |
899 | | | | | | 899 | |||||||||||||||||||||
Credit card income |
5,352 | | (2,276 | ) | | | | 3,076 | ||||||||||||||||||||
Other income |
930 | | | | | 413 | 1,343 | |||||||||||||||||||||
Noninterest revenue |
25,777 | 423 | (2,276 | ) | | | 413 | 24,337 | ||||||||||||||||||||
Net interest income |
15,078 | (423 | ) | 4,990 | | | 212 | 19,857 | ||||||||||||||||||||
Total net revenue |
40,855 | | 2,714 | | | 625 | 44,194 | |||||||||||||||||||||
Provision for credit losses(a) |
2,259 | | 2,714 | | | | 4,973 | |||||||||||||||||||||
Noninterest
expense Merger costs |
645 | | | (645 | ) | | | | ||||||||||||||||||||
Litigation reserve charge |
2,772 | | | | (2,772 | ) | | | ||||||||||||||||||||
All other noninterest expense |
26,883 | | | | | | 26,883 | |||||||||||||||||||||
Total noninterest expense |
30,300 | | | (645 | ) | (2,772 | ) | | 26,883 | |||||||||||||||||||
Income before income tax expense |
8,296 | | | 645 | 2,772 | 625 | 12,338 | |||||||||||||||||||||
Income tax expense |
2,511 | | | 245 | 1,053 | 625 | 4,434 | |||||||||||||||||||||
Net income |
$ | 5,785 | $ | | $ | | $ | 400 | $ | 1,719 | $ | | $ | 7,904 | ||||||||||||||
Earnings per share diluted |
$ | 1.62 | $ | | $ | | $ | 0.12 | $ | 0.48 | $ | | $ | 2.22 | ||||||||||||||
Return on common equity |
7 | % | | % | | % | 1 | % | 2 | % | | % | 10 | % | ||||||||||||||
Return on equity goodwill(b) |
12 | | | 1 | 4 | | 17 | |||||||||||||||||||||
Return on assets |
0.66 | NM | NM | NM | NM | NM | 0.85 | |||||||||||||||||||||
Overhead ratio |
74 | NM | NM | NM | NM | NM | 61 | |||||||||||||||||||||
Effective income tax rate |
30 | NM | NM | 38 | 38 | 100 | 36 | |||||||||||||||||||||
13
Nine months ended September 30,(c) | 2004 | |||||||||||||||||||||||||||||||
Accounting | ||||||||||||||||||||||||||||||||
(in millions, except per share and | Reported | Trading | Credit | Merger | Litigation | policy | Tax-equivalent | Operating | ||||||||||||||||||||||||
ratio data) | results | reclass(d) | card(e) | costs(f) | charge(f) | conformity | adjustments | basis | ||||||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||||||
Investment banking fees |
$ | 2,464 | $ | | $ | | $ | | $ | | $ | | $ | | $ | 2,464 | ||||||||||||||||
Trading revenue |
3,001 | 1,439 | | | | | | 4,440 | ||||||||||||||||||||||||
Lending & deposit related fees |
1,769 | | | | | | | 1,769 | ||||||||||||||||||||||||
Asset management, administration
and commissions |
5,835 | | | | | | | 5,835 | ||||||||||||||||||||||||
Securities/private equity gains
(losses) |
1,305 | | | | | | | 1,305 | ||||||||||||||||||||||||
Mortgage fees and related income |
721 | | | | | | | 721 | ||||||||||||||||||||||||
Credit card income |
3,018 | | (1,481 | ) | | | | | 1,537 | |||||||||||||||||||||||
Other income |
602 | | (87 | ) | | | 118 | 139 | 772 | |||||||||||||||||||||||
Noninterest revenue |
18,715 | 1,439 | (1,568 | ) | | | 118 | 139 | 18,843 | |||||||||||||||||||||||
Net interest income |
11,432 | (1,439 | ) | 3,455 | | | | (4 | ) | 13,444 | ||||||||||||||||||||||
Total net revenue |
30,147 | | 1,887 | | | 118 | 135 | 32,287 | ||||||||||||||||||||||||
Provision for credit losses |
1,387 | | 1,887 | | | (333 | ) | | 2,941 | |||||||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||||||||||
Merger costs |
842 | | | (842 | ) | | | | | |||||||||||||||||||||||
Litigation reserve charge |
3,700 | | | | (3,700 | ) | | | | |||||||||||||||||||||||
All other noninterest expense |
20,431 | | | | | | | 20,431 | ||||||||||||||||||||||||
Total noninterest expense |
24,973 | | | (842 | ) | (3,700 | ) | | | 20,431 | ||||||||||||||||||||||
Income before income tax expense |
3,787 | | | 842 | 3,700 | 451 | 135 | 8,915 | ||||||||||||||||||||||||
Income tax expense |
987 | | | 320 | 1,406 | 172 | 135 | 3,020 | ||||||||||||||||||||||||
Net income |
$ | 2,800 | $ | | $ | | $ | 522 | $ | 2,294 | $ | 279 | $ | | $ | 5,895 | ||||||||||||||||
Earnings per share diluted |
$ | 1.06 | $ | | $ | | $ | 0.20 | $ | 0.88 | $ | 0.11 | $ | | $ | 2.25 | ||||||||||||||||
Return on common equity |
6 | % | | % | | % | 1 | % | 5 | % | | % | | % | 12 | % | ||||||||||||||||
Return on equity goodwill(b) |
8 | | | 2 | 6 | 1 | | 17 | ||||||||||||||||||||||||
Return on assets |
0.42 | NM | NM | NM | NM | NM | NM | 0.83 | ||||||||||||||||||||||||
Overhead ratio |
83 | NM | NM | NM | NM | NM | NM | 63 | ||||||||||||||||||||||||
Effective income tax rate |
26 | NM | NM | 38 | 38 | 38 | 100 | 34 | ||||||||||||||||||||||||
(a) | Third quarter 2005 includes a $400 million special provision related to Hurricane
Katrina: Retail Financial Services $250 million, Card Services $100 million, Commercial
Banking $35 million, Asset & Wealth Management $3 million and Corporate $12 million. |
|
(b) | Net income applicable to common stock divided by total average common equity (net of
goodwill). The Firm uses return on equity less goodwill, a non-GAAP financial measure, to
evaluate the operating performance of the Firm. The Firm utilizes this measure to facilitate
operating comparisons to other competitors. |
|
(c) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
|
(d) | The reclassification of trading-related net interest income from Net interest income to
Trading revenue primarily impacts the Investment Bank segment results. |
|
(e) | The impact of credit card
securitizations affects Card Services. See pages 2830 of this
Form 10Q for further information. |
|
(f) | The impact of Merger costs and nonoperating Litigation reserve charges are excluded from
Operating earnings, as management believes these items are not part of the Firms normal daily
business operations (and, therefore, are not indicative of trends), and do not provide
meaningful comparisons with other periods. |
Three months ended September 30, | 2005 | 2004 | ||||||||||||||||||||||
(in millions) | Reported | Securitized | Managed | Reported | Securitized | Managed | ||||||||||||||||||
Loans Period-end |
$ | 420,504 | $ | 69,095 | $ | 489,599 | $ | 393,701 | $ | 71,256 | $ | 464,957 | ||||||||||||
Total assets average |
1,196,045 | 67,021 | 1,263,066 | 1,117,335 | 69,035 | 1,186,370 | ||||||||||||||||||
Nine months ended September 30, | 2005 | 2004 | ||||||||||||||||||||||
(in millions) | Reported | Securitized | Managed | Reported | Securitized | Managed | ||||||||||||||||||
Loans Period-end |
$ | 420,504 | $ | 69,095 | $ | 489,599 | $ | 393,701 | $ | 71,256 | $ | 464,957 | ||||||||||||
Total assets average |
1,178,420 | 66,917 | 1,245,337 | 897,978 | (a) | 45,227 | (a) | 943,205 | (a) | |||||||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase results. |
14
Segment results Operating basis(a) | Return on | |||||||||||||||||||||||||||||||||||||||||||
Three months ended September 30, | Total net revenue | Noninterest expense | Operating earnings | equity-goodwill | ||||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | |||||||||||||||||||||||||||||||||
Investment Bank |
$ | 4,461 | $ | 2,701 | 65 | % | $ | 2,875 | $ | 1,924 | 49 | % | $ | 1,063 | $ | 627 | 70 | % | 21 | % | 12 | % | ||||||||||||||||||||||
Retail Financial Services |
3,590 | 3,800 | (6 | ) | 2,156 | 2,238 | (4 | ) | 656 | 822 | (20 | ) | 19 | 25 | ||||||||||||||||||||||||||||||
Card Services |
3,980 | 3,771 | 6 | 1,286 | 1,437 | (11 | ) | 541 | 421 | 29 | 18 | 14 | ||||||||||||||||||||||||||||||||
Commercial Banking |
909 | 833 | 9 | 461 | 480 | (4 | ) | 301 | 215 | 40 | 35 | 25 | ||||||||||||||||||||||||||||||||
Treasury & Securities
Services |
1,556 | 1,339 | 16 | 1,107 | 1,156 | (4 | ) | 263 | 96 | 174 | 55 | 20 | ||||||||||||||||||||||||||||||||
Asset & Wealth Management |
1,449 | 1,193 | 21 | 976 | 884 | 10 | 315 | 197 | 60 | 52 | 33 | |||||||||||||||||||||||||||||||||
Corporate |
(391 | ) | (58 | ) | NM | 382 | 506 | (25 | ) | (475 | ) | (219 | ) | (117 | ) | NM | NM | |||||||||||||||||||||||||||
Total |
$ | 15,554 | $ | 13,579 | 15 | % | $ | 9,243 | $ | 8,625 | 7 | % | $ | 2,664 | $ | 2,159 | 23 | % | 17 | % | 14 | % | ||||||||||||||||||||||
Return on | ||||||||||||||||||||||||||||||||||||||||||||
Nine months ended September 30,(b) | Total net revenue | Noninterest expense | Operating earnings | equity-goodwill | ||||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | |||||||||||||||||||||||||||||||||
Investment Bank |
$ | 11,391 | $ | 9,404 | 21 | % | $ | 7,578 | $ | 6,306 | 20 | % | $ | 2,994 | $ | 2,288 | 31 | % | 20 | % | 19 | % | ||||||||||||||||||||||
Retail Financial Services |
11,236 | 7,246 | 55 | 6,444 | 4,610 | 40 | 2,624 | 1,424 | 84 | 26 | 24 | |||||||||||||||||||||||||||||||||
Card Services |
11,645 | 6,915 | 68 | 3,982 | 2,601 | 53 | 1,605 | 759 | 111 | 18 | 16 | |||||||||||||||||||||||||||||||||
Commercial Banking |
2,659 | 1,489 | 79 | 1,392 | 892 | 56 | 718 | 354 | 103 | 28 | 29 | |||||||||||||||||||||||||||||||||
Treasury & Securities
Services |
4,626 | 3,444 | 34 | 3,366 | 2,967 | 13 | 737 | 295 | 150 | 52 | 14 | |||||||||||||||||||||||||||||||||
Asset & Wealth Management |
4,153 | 2,869 | 45 | 2,827 | 2,214 | 28 | 874 | 418 | 109 | 49 | 13 | |||||||||||||||||||||||||||||||||
Corporate |
(1,516 | ) | 920 | NM | 1,294 | 841 | 54 | (1,648 | ) | 357 | NM | NM | NM | |||||||||||||||||||||||||||||||
Total |
$ | 44,194 | $ | 32,287 | 37 | % | $ | 26,883 | $ | 20,431 | 32 | % | $ | 7,904 | $ | 5,895 | 34 | % | 17 | % | 17 | % | ||||||||||||||||||||||
(a) | Represents reported results on a tax-equivalent basis and excludes the impact of credit
card securitizations, Merger costs and litigation reserve charges deemed nonoperating. |
|
(b) | Year-to-date 2004 results include three months of the combined Firms results and six months of
heritage JPMorgan Chase results. |
15
Selected income statement data(a) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004(f) | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Investment banking fees: |
||||||||||||||||||||||||
Advisory |
$ | 300 | $ | 273 | 10 | % | $ | 922 | $ | 688 | 34 | % | ||||||||||||
Equity underwriting |
210 | 170 | 24 | 553 | 568 | (3 | ) | |||||||||||||||||
Debt underwriting |
475 | 468 | 1 | 1,460 | 1,236 | 18 | ||||||||||||||||||
Total investment banking fees |
985 | 911 | 8 | 2,935 | 2,492 | 18 | ||||||||||||||||||
Trading-related revenue: |
||||||||||||||||||||||||
Fixed income and other |
2,083 | 657 | 217 | 4,938 | 3,835 | 29 | ||||||||||||||||||
Equities |
329 | 220 | 50 | 274 | 469 | (42 | ) | |||||||||||||||||
Credit portfolio |
23 | (35 | ) | NM | 36 | 50 | (28 | ) | ||||||||||||||||
Total trading-related
revenue(b) |
2,435 | 842 | 189 | 5,248 | 4,354 | 21 | ||||||||||||||||||
Lending & deposit related fees |
148 | 155 | (5 | ) | 451 | 363 | 24 | |||||||||||||||||
Asset management, administration
and commissions |
445 | 313 | 42 | 1,266 | 1,054 | 20 | ||||||||||||||||||
Other income |
94 | 91 | 3 | 491 | 150 | 227 | ||||||||||||||||||
Noninterest revenue |
4,107 | 2,312 | 78 | 10,391 | 8,413 | 24 | ||||||||||||||||||
Net interest income(b) |
354 | 389 | (9 | ) | 1,000 | 991 | 1 | |||||||||||||||||
Total net revenue(c) |
4,461 | 2,701 | 65 | 11,391 | 9,404 | 21 | ||||||||||||||||||
Provision for credit losses |
(46 | ) | (151 | ) | 70 | (755 | ) | (467 | ) | (62 | ) | |||||||||||||
Credit reimbursement from TSS(d) |
38 | 43 | (12 | ) | 114 | 47 | 143 | |||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
1,883 | 992 | 90 | 4,691 | 3,504 | 34 | ||||||||||||||||||
Noncompensation expense |
992 | 932 | 6 | 2,887 | 2,802 | 3 | ||||||||||||||||||
Total noninterest expense |
2,875 | 1,924 | 49 | 7,578 | 6,306 | 20 | ||||||||||||||||||
Operating earnings before income
tax expense |
1,670 | 971 | 72 | 4,682 | 3,612 | 30 | ||||||||||||||||||
Income tax expense |
607 | 344 | 76 | 1,688 | 1,324 | 27 | ||||||||||||||||||
Operating earnings |
$ | 1,063 | $ | 627 | 70 | $ | 2,994 | $ | 2,288 | 31 | ||||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
21 | % | 12 | % | 20 | % | 19 | % | ||||||||||||||||
ROA |
0.68 | 0.50 | 0.68 | 0.68 | ||||||||||||||||||||
Overhead ratio |
64 | 71 | 67 | 67 | ||||||||||||||||||||
Compensation expense as % of total
net revenue |
42 | 37 | 41 | 37 | ||||||||||||||||||||
Revenue by business(e) |
||||||||||||||||||||||||
Investment banking fees |
$ | 985 | $ | 911 | 8 | $ | 2,935 | $ | 2,492 | 18 | ||||||||||||||
Fixed income markets |
2,431 | 1,115 | 118 | 6,138 | 4,784 | 28 | ||||||||||||||||||
Equities markets |
713 | 455 | 57 | 1,341 | 1,248 | 7 | ||||||||||||||||||
Credit portfolio |
332 | 220 | 51 | 977 | 880 | 11 | ||||||||||||||||||
Total net revenue |
$ | 4,461 | $ | 2,701 | 65 | $ | 11,391 | $ | 9,404 | 21 | ||||||||||||||
Revenue by region |
||||||||||||||||||||||||
Americas |
$ | 2,690 | $ | 1,591 | 69 | $ | 6,747 | $ | 5,041 | 34 | ||||||||||||||
Europe/Middle East/Africa |
1,272 | 741 | 72 | 3,361 | 3,069 | 10 | ||||||||||||||||||
Asia/Pacific |
499 | 369 | 35 | 1,283 | 1,294 | (1 | ) | |||||||||||||||||
Total net revenue |
$ | 4,461 | $ | 2,701 | 65 | $ | 11,391 | $ | 9,404 | 21 | ||||||||||||||
(a) | For a discussion of selected lines of business metrics, see page 93 of this Form 10Q. |
|
(b) | Trading revenue, on a reported basis, excludes the impact of net interest income related to
the IBs trading activities; this income is recorded in Net interest income. However, in this
presentation, to assess the profitability of the IBs trading business, the Firm combines
these revenues for segment reporting. The amount reclassified from Net interest income to
Trading revenue was $(101) million and $430 million for the three months ended September 30,
2005 and 2004, respectively, and $430 million and $1.4 billion for the nine months ended
September 30, 2005 and 2004, respectively. |
16
(c) | Total net revenue includes tax-equivalent adjustments, primarily due to tax-exempt income
from municipal bonds and income tax credits related to affordable housing investments, of $200
million and $9 million for the three months ended September 30, 2005 and 2004, respectively,
and $561 million and $107 million for the nine months ended September 30, 2005 and 2004,
respectively. |
|
(d) | TSS is charged a credit reimbursement related to certain exposures managed within the IB
credit portfolio on behalf of clients shared with TSS. For a further discussion, see Credit
reimbursement on page 29 of the JPMorgan Chase 2004 Annual Report. |
|
(e) | See account details of Fixed Income Markets, Equities Markets and Credit Portfolio in the
Composition of Revenues table on pages 1920. |
|
(f) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
17
Selected metrics | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except headcount | ||||||||||||||||||||||||
and ratio data) | 2005 | 2004 | Change | 2005 | 2004(h) | Change | ||||||||||||||||||
Selected balance sheets data (average) |
||||||||||||||||||||||||
Total assets |
$ | 615,888 | $ | 496,347 | 24 | % | $ | 591,863 | $ | 452,714 | 31 | % | ||||||||||||
Trading assetsdebt and equity instruments |
234,722 | 197,150 | 19 | 231,057 | 187,008 | 24 | ||||||||||||||||||
Trading assetsderivatives receivables |
52,399 | 60,465 | (13 | ) | 57,429 | 56,492 | 2 | |||||||||||||||||
Loans: |
||||||||||||||||||||||||
Credit portfolio |
33,819 | 31,129 | 9 | 31,180 | 28,357 | 10 | ||||||||||||||||||
Other loans(a) |
24,517 | 14,650 | 67 | 21,262 | 12,563 | 69 | ||||||||||||||||||
Total loans(b) |
58,336 | 45,779 | 27 | 52,442 | 40,920 | 28 | ||||||||||||||||||
Adjusted assets(c) |
462,056 | 401,010 | 15 | 453,990 | 380,740 | 19 | ||||||||||||||||||
Equity(d) |
20,000 | 20,000 | | 20,000 | 16,380 | 22 | ||||||||||||||||||
Headcount |
19,526 | 17,420 | 12 | 19,526 | 17,420 | 12 | ||||||||||||||||||
Credit data and quality statistics |
||||||||||||||||||||||||
Net charge-offs (recovery) |
$ | (69 | ) | $ | (16 | ) | (331 | ) | $ | (121 | ) | $ | 33 | NM | ||||||||||
Nonperforming assets: |
||||||||||||||||||||||||
Nonperforming loans(e) |
702 | 1,075 | (35 | ) | 702 | 1,075 | (35 | ) | ||||||||||||||||
Other nonperforming assets |
232 | 246 | (6 | ) | 232 | 246 | (6 | ) | ||||||||||||||||
Allowance for loan losses |
1,002 | 1,841 | (46 | ) | 1,002 | 1,841 | (46 | ) | ||||||||||||||||
Allowance for lending-related commitments |
211 | 358 | (41 | ) | 211 | 358 | (41 | ) | ||||||||||||||||
Net charge-off (recovery) rate(b) |
(0.67 | )% | (0.17 | )% | (0.43 | )% | 0.13 | % | ||||||||||||||||
Allowance for loan losses to average loans(b) |
2.45 | 4.78 | 2.65 | 5.26 | ||||||||||||||||||||
Allowance
for loan losses to nonperforming
loans(e) |
168 | 172 | 168 | 172 | ||||||||||||||||||||
Nonperforming loans to average loans |
1.20 | 2.35 | 1.34 | 2.63 | ||||||||||||||||||||
Market riskaverage trading and credit portfolio VAR(f)(g) |
||||||||||||||||||||||||
Trading activities: |
||||||||||||||||||||||||
Fixed income(f) |
$ | 57 | $ | 80 | (29 | ) | $ | 66 | $ | 77 | (14 | ) | ||||||||||||
Foreign exchange |
24 | 13 | 85 | 23 | 17 | 35 | ||||||||||||||||||
Equities |
41 | 25 | 64 | 35 | 31 | 13 | ||||||||||||||||||
Commodities and other |
24 | 10 | 140 | 16 | 9 | 78 | ||||||||||||||||||
Diversification |
(62 | ) | (43 | ) | (44 | ) | (56 | ) | (45 | ) | (24 | ) | ||||||||||||
Total trading VAR |
84 | 85 | (1 | ) | 84 | 89 | (6 | ) | ||||||||||||||||
Credit portfolio VAR(g) |
15 | 13 | 15 | 14 | 14 | | ||||||||||||||||||
Diversification |
(13 | ) | (9 | ) | (44 | ) | (12 | ) | (8 | ) | (50 | ) | ||||||||||||
Total trading and credit portfolio VAR |
$ | 86 | $ | 89 | (3 | ) | $ | 86 | $ | 95 | (9 | ) | ||||||||||||
(a) | Other Loans include warehouse loans held as part of the IBs mortgage-backed,
asset-backed and other securitization businesses, loans held for proprietary investing
purposes and certain other loans. |
|
(b) | Total loans include loans held-for-sale, which are excluded from Total loans for the
allowance coverage ratio and net charge-off rate. Average third quarter 2005 loans
held-for-sale were $17,357 million. Prior end-of-period loans held-for-sale were $7,281
million for the quarter ended September 30, 2004. |
|
(c) | Adjusted assets, a non-GAAP financial measure, equals total assets minus (i) securities
purchased under resale agreements and securities borrowed less securities sold, not yet
purchased; (ii) assets of variable interest entities (VIEs) consolidated under FIN 46R; (iii)
cash and securities segregated and on deposit for regulatory and other purposes; and (iv)
goodwill and intangibles. The amount of adjusted assets is presented to assist the reader in
comparing the IBs asset and capital levels to other investment banks in the securities
industry. Asset-to-equity leverage ratios are commonly used as one measure to assess a
companys capital adequacy. The IB believes an adjusted asset amount, which excludes certain
assets considered to have a low-risk profile, provides a more meaningful measure of balance
sheet leverage in the securities industry. See Capital management on pages 4345 of this Form
10Q for a discussion of the Firms overall capital adequacy and capital management. |
|
(d) | Equity includes $15.2 billion and $15.7 billion of economic risk capital assigned to the IB
for the quarters ended September 30, 2005 and 2004, respectively. |
18
(e) | Nonperforming loans include loans held-for-sale of $106 million and $4 million as of
September 30, 2005 and 2004, respectively. These amounts are not included in the allowance
coverage ratios. |
|
(f) | Includes all mark-to-market trading activities, plus available-for-sale securities held for
proprietary purposes. |
|
(g) | Includes VAR on derivative credit valuation adjustments, credit valuation adjustment hedges
and mark-to-market hedges of the accrual loan portfolio, which are all reported in Trading
revenue. This VAR does not include the accrual loan portfolio, which is not marked to market. |
|
(h) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
Nine months ended September 30, 2005 | Full Year 2004 | |||||||||||||||
Market shares and rankings(a) | Market Share | Rankings | Market Share | Rankings | ||||||||||||
Global debt, equity and equity-related |
6 | % | # 4 | 7 | % | # 3 | ||||||||||
Global syndicated loans |
16 | # 1 | 19 | # 1 | ||||||||||||
Global long-term debt |
6 | # 4 | 7 | # 2 | ||||||||||||
Global equity and equity-related |
7 | # 6 | 6 | # 6 | ||||||||||||
Global announced M&A |
22 | # 3 | 25 | # 2 | ||||||||||||
U.S. debt, equity and equity-related |
7 | # 4 | 8 | # 5 | ||||||||||||
U.S. syndicated loans |
29 | # 1 | 32 | # 1 | ||||||||||||
U.S. long-term debt |
11 | # 2 | 12 | # 2 | ||||||||||||
U.S. equity and equity-related |
8 | # 6 | 8 | # 6 | ||||||||||||
U.S. announced M&A |
16 | # 8 | 33 | # 1 | ||||||||||||
(a) | Source: Thomson Financial Securities data. Global announced M&A is based upon rank value; all other rankings
are based upon proceeds, with full credit to each book manager/equal if joint. Because of joint assignments, market share
of all participants will add up to more than 100%. The market share and rankings for the year ended December 31, 2004,
are presented on a combined basis, as if the merger of JPMorgan Chase and Bank One had been in effect during the period. |
Asset | ||||||||||||||||||||||||||||
Investment | Trading- | Lending & | management, | |||||||||||||||||||||||||
Three months ended September 30, | banking | related | deposit | administration | Other | Total net | ||||||||||||||||||||||
(in millions) | fees | revenue | related fees | and commissions | income | NII | revenue | |||||||||||||||||||||
2005 |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 985 | $ | | $ | | $ | | $ | | $ | | $ | 985 | ||||||||||||||
Fixed income markets |
| 2,083 | 64 | 52 | 40 | 192 | 2,431 | |||||||||||||||||||||
Equities markets |
| 329 | | 384 | (18 | ) | 18 | 713 | ||||||||||||||||||||
Credit portfolio |
| 23 | 84 | 9 | 72 | 144 | 332 | |||||||||||||||||||||
Total |
$ | 985 | $ | 2,435 | $ | 148 | $ | 445 | $ | 94 | $ | 354 | $ | 4,461 | ||||||||||||||
2004 |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 911 | $ | | $ | | $ | | $ | | $ | | $ | 911 | ||||||||||||||
Fixed income markets |
| 657 | 69 | 54 | 154 | 181 | 1,115 | |||||||||||||||||||||
Equities markets |
| 220 | | 252 | (29 | ) | 12 | 455 | ||||||||||||||||||||
Credit portfolio |
| (35 | ) | 86 | 7 | (34 | ) | 196 | 220 | |||||||||||||||||||
Total |
$ | 911 | $ | 842 | $ | 155 | $ | 313 | $ | 91 | $ | 389 | $ | 2,701 | ||||||||||||||
19
Asset | ||||||||||||||||||||||||||||
Investment | Trading- | Lending & | management, | |||||||||||||||||||||||||
Nine months ended September 30, | banking | related | deposit | administration | Other | Total net | ||||||||||||||||||||||
(in millions) | fees | revenue | related fees | and commissions | income | NII | revenue | |||||||||||||||||||||
2005 |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 2,935 | $ | | $ | | $ | | $ | | $ | | $ | 2,935 | ||||||||||||||
Fixed income markets |
| 4,938 | 189 | 166 | 336 | 509 | 6,138 | |||||||||||||||||||||
Equities markets |
| 274 | | 1,067 | (55 | ) | 55 | 1,341 | ||||||||||||||||||||
Credit portfolio |
| 36 | 262 | 33 | 210 | 436 | 977 | |||||||||||||||||||||
Total |
$ | 2,935 | $ | 5,248 | $ | 451 | $ | 1,266 | $ | 491 | $ | 1,000 | $ | 11,391 | ||||||||||||||
2004(a) |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 2,492 | $ | | $ | | $ | | $ | | $ | | $ | 2,492 | ||||||||||||||
Fixed income markets |
| 3,835 | 123 | 222 | 215 | 389 | 4,784 | |||||||||||||||||||||
Equities markets |
| 469 | | 809 | (80 | ) | 50 | 1,248 | ||||||||||||||||||||
Credit portfolio |
| 50 | 240 | 23 | 15 | 552 | 880 | |||||||||||||||||||||
Total |
$ | 2,492 | $ | 4,354 | $ | 363 | $ | 1,054 | $ | 150 | $ | 991 | $ | 9,404 | ||||||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004(b) | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Lending & deposit related fees |
$ | 380 | $ | 395 | (4 | )% | $ | 1,078 | $ | 640 | 68 | % | ||||||||||||
Asset management, administration and
commissions |
370 | 375 | (1 | ) | 1,133 | 652 | 74 | |||||||||||||||||
Securities/private equity gains |
| 6 | NM | 10 | 6 | 67 | ||||||||||||||||||
Mortgage fees and related income |
212 | 211 | | 921 | 749 | 23 | ||||||||||||||||||
Credit card income |
109 | 89 | 22 | 308 | 133 | 132 | ||||||||||||||||||
Other income |
7 | 18 | (61 | ) | 63 | 4 | NM | |||||||||||||||||
Noninterest revenue |
1,078 | 1,094 | (1 | ) | 3,513 | 2,184 | 61 | |||||||||||||||||
Net interest income |
2,512 | 2,706 | (7 | ) | 7,723 | 5,062 | 53 | |||||||||||||||||
Total net revenue |
3,590 | 3,800 | (6 | ) | 11,236 | 7,246 | 55 | |||||||||||||||||
Provision for credit
losses(a) |
378 | 239 | 58 | 566 | 371 | 53 | ||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
842 | 855 | (2 | ) | 2,484 | 1,814 | 37 | |||||||||||||||||
Noncompensation expense |
1,189 | 1,250 | (5 | ) | 3,585 | 2,661 | 35 | |||||||||||||||||
Amortization of intangibles |
125 | 133 | (6 | ) | 375 | 135 | 178 | |||||||||||||||||
Total noninterest expense |
2,156 | 2,238 | (4 | ) | 6,444 | 4,610 | 40 | |||||||||||||||||
Operating earnings before income
tax expense |
1,056 | 1,323 | (20 | ) | 4,226 | 2,265 | 87 | |||||||||||||||||
Income tax expense |
400 | 501 | (20 | ) | 1,602 | 841 | 90 | |||||||||||||||||
Operating earnings |
$ | 656 | $ | 822 | (20 | ) | $ | 2,624 | $ | 1,424 | 84 | |||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
19 | % | 25 | % | 26 | % | 24 | % | ||||||||||||||||
ROA |
1.14 | 1.44 | 1.55 | 1.11 | ||||||||||||||||||||
Overhead ratio |
60 | 59 | 57 | 64 | ||||||||||||||||||||
(a) | Third quarter 2005 includes a $250 million special provision related to Hurricane Katrina
allocated as follows: $140 million in Consumer Real Estate Lending, $90 million in Consumer &
Small Business Banking and $20 million in Auto & Education Finance. |
|
(b) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
20
Selected metrics | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except headcount and ratios) | 2005 | 2004 | Change | 2005 | 2004(e) | Change | ||||||||||||||||||
Selected balance sheets (ending) |
||||||||||||||||||||||||
Total assets |
$ | 230,698 | $ | 227,952 | 1 | % | $ | 230,698 | $ | 227,952 | 1 | % | ||||||||||||
Loans(a) |
200,434 | 201,116 | | 200,434 | 201,116 | | ||||||||||||||||||
Core deposits(b) |
160,592 | 154,589 | 4 | 160,592 | 154,589 | 4 | ||||||||||||||||||
Total deposits |
187,621 | 180,307 | 4 | 187,621 | 180,307 | 4 | ||||||||||||||||||
Selected balance sheets (average) |
||||||||||||||||||||||||
Total assets |
$ | 227,875 | $ | 227,716 | | $ | 226,200 | $ | 171,585 | 32 | ||||||||||||||
Loans(c) |
199,057 | 198,244 | | 198,421 | 149,454 | 33 | ||||||||||||||||||
Core deposits(b) |
160,914 | 158,800 | 1 | 160,552 | 107,912 | 49 | ||||||||||||||||||
Total deposits |
187,216 | 183,501 | 2 | 186,035 | 122,059 | 52 | ||||||||||||||||||
Equity |
13,475 | 13,050 | 3 | 13,276 | 7,764 | 71 | ||||||||||||||||||
Headcount |
60,375 | 60,691 | (1 | ) | 60,375 | 60,691 | (1 | ) |
21
Credit data and quality statistics |
||||||||||||||||||||||||
Net charge-offs |
$ | 144 | $ | 219 | (34 | ) | $ | 410 | $ | 384 | 7 | |||||||||||||
Nonperforming loans(d) |
1,203 | 1,308 | (8 | ) | 1,203 | 1,308 | (8 | ) | ||||||||||||||||
Nonperforming assets |
1,387 | 1,557 | (11 | ) | 1,387 | 1,557 | (11 | ) | ||||||||||||||||
Allowance for loan losses |
1,375 | 1,764 | (22 | ) | 1,375 | 1,764 | (22 | ) | ||||||||||||||||
Net charge-off rate(c) |
0.31 | % | 0.47 | % | 0.30 | % | 0.38 | % | ||||||||||||||||
Allowance for loan losses to ending loans(a) |
0.75 | 0.94 | 0.75 | 0.94 | ||||||||||||||||||||
Allowance for loan losses to nonperforming
loans(d) |
115 | 143 | 115 | 143 | ||||||||||||||||||||
Nonperforming loans to total loans |
0.60 | 0.65 | 0.60 | 0.65 | ||||||||||||||||||||
(a) | Includes loans held-for-sale of $17,695 million and $12,816 million at September 30, 2005
and 2004, respectively. These amounts are not included in the allowance coverage ratios. |
|
(b) | Includes demand and savings deposits. |
|
(c) | Average loans include loans held-for-sale of $15,707 million and $14,479 million for the
quarters ended September 30, 2005 and 2004, respectively. The year-to-date average loans
held-for-sale were $15,395 million and $15,140 million for 2005 and 2004, respectively. These
amounts are not included in the net charge-off rate. |
|
(d) | Nonperforming loans include loans held-for-sale of $10 million and $74 million at September
30, 2005 and 2004, respectively. These amounts are not included in the allowance coverage
ratios. |
|
(e) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004(a) | Change | ||||||||||||||||||
Prime production and servicing |
||||||||||||||||||||||||
Production |
$ | 214 | $ | 168 | 27 | % | $ | 577 | $ | 532 | 8 | % | ||||||||||||
Servicing: |
||||||||||||||||||||||||
Mortgage servicing revenue, net of
amortization |
161 | 134 | 20 | 449 | 482 | (7 | ) | |||||||||||||||||
MSR risk management results |
(38 | ) | 153 | NM | 234 | 300 | (22 | ) | ||||||||||||||||
Total net revenue |
337 | 455 | (26 | ) | 1,260 | 1,314 | (4 | ) | ||||||||||||||||
Noninterest expense |
231 | 296 | (22 | ) | 689 | 849 | (19 | ) | ||||||||||||||||
Operating earnings |
67 | 103 | (35 | ) | 361 | 296 | 22 | |||||||||||||||||
Consumer real estate lending |
||||||||||||||||||||||||
Total net revenue |
$ | 684 | $ | 704 | (3 | ) | $ | 2,104 | $ | 1,651 | 27 | |||||||||||||
Provision for credit losses |
177 | 65 | 172 | 245 | 94 | 161 | ||||||||||||||||||
Noninterest expense |
244 | 264 | (8 | ) | 716 | 639 | 12 | |||||||||||||||||
Operating earnings |
168 | 237 | (29 | ) | 729 | 586 | 24 | |||||||||||||||||
Total Home Finance |
||||||||||||||||||||||||
Total net revenue |
$ | 1,021 | $ | 1,159 | (12 | ) | $ | 3,364 | $ | 2,965 | 13 | |||||||||||||
Provision for credit losses |
177 | 65 | 172 | 245 | 94 | 161 | ||||||||||||||||||
Noninterest expense |
475 | 560 | (15 | ) | 1,405 | 1,488 | (6 | ) | ||||||||||||||||
Operating earnings |
235 | 340 | (31 | ) | 1,090 | 882 | 24 | |||||||||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
22
Selected metrics(a) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios and where | ||||||||||||||||||||||||
otherwise noted) | 2005 | 2004 | Change | 2005 | 2004(f) | Change | ||||||||||||||||||
Origination volume by channel (in
billions) |
||||||||||||||||||||||||
Retail |
$ | 23.7 | $ | 19.7 | 20 | % | $ | 64.8 | $ | 55.7 | 16 | % | ||||||||||||
Wholesale |
14.6 | 11.6 | 26 | 38.5 | 36.8 | 5 | ||||||||||||||||||
Correspondent |
5.1 | 5.4 | (6 | ) | 11.0 | 18.6 | (41 | ) | ||||||||||||||||
Correspondent negotiated transactions |
10.2 | 11.3 | (10 | ) | 24.5 | 31.5 | (22 | ) | ||||||||||||||||
Total |
$ | 53.6 | $ | 48.0 | 12 | $ | 138.8 | $ | 142.6 | (3 | ) | |||||||||||||
Origination volume by business (in
billions) |
||||||||||||||||||||||||
Mortgage |
$ | 39.3 | $ | 34.1 | 15 | $ | 96.8 | $ | 112.2 | (14 | ) | |||||||||||||
Home equity |
14.3 | 13.9 | 3 | 42.0 | 30.4 | 38 | ||||||||||||||||||
Total |
$ | 53.6 | $ | 48.0 | 12 | $ | 138.8 | $ | 142.6 | (3 | ) | |||||||||||||
Business metrics (in billions) |
||||||||||||||||||||||||
Third party mortgage loans serviced
(ending)(b) |
$ | 450.3 | $ | 427.3 | 5 | $ | 450.3 | $ | 427.3 | 5 | ||||||||||||||
MSR net carrying value (ending) |
6.1 | 5.2 | 17 | 6.1 | 5.2 | 17 | ||||||||||||||||||
End of period loans owned |
||||||||||||||||||||||||
Mortgage loans held-for-sale |
$ | 13.4 | $ | 9.5 | 41 | $ | 13.4 | $ | 9.5 | 41 | ||||||||||||||
Mortgage loans retained |
46.7 | 46.5 | | 46.7 | 46.5 | | ||||||||||||||||||
Home equity and other loans |
74.3 | 67.3 | 10 | 74.3 | 67.3 | 10 | ||||||||||||||||||
Total end of period loans owned |
$ | 134.4 | $ | 123.3 | 9 | $ | 134.4 | $ | 123.3 | 9 | ||||||||||||||
Average loans owned |
||||||||||||||||||||||||
Mortgage loans held-for-sale |
$ | 13.5 | $ | 10.9 | 24 | $ | 11.8 | $ | 12.8 | (8 | ) | |||||||||||||
Mortgage loans retained |
47.6 | 44.0 | 8 | 46.3 | 39.4 | 18 | ||||||||||||||||||
Home equity and other loans |
71.8 | 66.2 | 8 | 69.2 | 39.2 | 77 | ||||||||||||||||||
Total average loans owned |
$ | 132.9 | $ | 121.1 | 10 | $ | 127.3 | $ | 91.4 | 39 | ||||||||||||||
Overhead ratio |
47 | % | 48 | % | 42 | % | 50 | % | ||||||||||||||||
Credit quality statistics |
||||||||||||||||||||||||
30+ day delinquency rate(c) |
1.31 | % | 1.50 | % | 1.31 | % | 1.50 | % | ||||||||||||||||
Net charge-offs |
||||||||||||||||||||||||
Mortgage |
$ | 6 | $ | 6 | | $ | 20 | $ | 14 | 43 | ||||||||||||||
Home equity and other loans |
32 | 57 | (44 | ) | 97 | 105 | (8 | ) | ||||||||||||||||
Total net charge-offs |
38 | 63 | (40 | ) | 117 | 119 | (2 | ) | ||||||||||||||||
Net charge-off rate |
||||||||||||||||||||||||
Mortgage |
0.05 | % | 0.05 | % | 0.06 | % | 0.05 | % | ||||||||||||||||
Home equity and other loans |
0.18 | 0.34 | 0.19 | 0.36 | ||||||||||||||||||||
Total net charge-off rate(d) |
0.13 | 0.23 | 0.14 | 0.20 | ||||||||||||||||||||
Nonperforming assets(e) |
$ | 846 | $ | 997 | (15 | ) | $ | 846 | $ | 997 | (15 | ) | ||||||||||||
(a) | For a discussion of selected line of business metrics, see page 93 of this Form 10Q. |
|
(b) | Includes prime first mortgage loans and subprime loans. |
|
(c) | Excludes delinquencies related to loans eligible for repurchase as well as loans repurchased
from GNMA pools that are insured by government agencies of $0.8 billion and $0.9 billion, for
September 30, 2005 and 2004, respectively. These amounts are excluded as reimbursement is
proceeding normally. |
|
(d) | Excludes mortgage loans held for sale. |
23
(e) | Excludes nonperforming assets related to loans eligible for repurchase as well as loans
repurchased from GNMA pools that are insured by government agencies of $1.0 billion and $1.3
billion for September 30, 2005 and 2004, respectively. These amounts are excluded as
reimbursement is proceeding normally. |
|
(f) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
Prime production | Consumer real | |||||||||||||||||||||||
Three months ended September 30, | and servicing | estate lending | Total revenue | |||||||||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||
Net interest income |
$ | 115 | $ | 183 | $ | 663 | $ | 732 | $ | 778 | $ | 915 | ||||||||||||
Securities/private equity gains |
| 5 | | | | 5 | ||||||||||||||||||
Mortgage fees and related
income(a) |
222 | 267 | 21 | (28 | ) | 243 | 239 | |||||||||||||||||
Total |
$ | 337 | $ | 455 | $ | 684 | $ | 704 | $ | 1,021 | $ | 1,159 | ||||||||||||
Prime production | Consumer real | |||||||||||||||||||||||
Nine months ended September 30,(b) | and servicing | estate lending | Total revenue | |||||||||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||
Net interest income |
$ | 341 | $ | 568 | $ | 2,014 | $ | 1,538 | $ | 2,355 | $ | 2,106 | ||||||||||||
Securities/private equity gains |
3 | 1 | | | 3 | 1 | ||||||||||||||||||
Mortgage fees and related
income(a) |
916 | 745 | 90 | 113 | 1,006 | 858 | ||||||||||||||||||
Total |
$ | 1,260 | $ | 1,314 | $ | 2,104 | $ | 1,651 | $ | 3,364 | $ | 2,965 | ||||||||||||
(a) | Includes activity reported elsewhere as Other income. |
|
(b) | Year-to-date 2004 results include three months of the combined Firms results and six months
of heritage JPMorgan Chase results. |
MSR Risk Management Results | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004(c) | ||||||||||||
Reported amounts: |
||||||||||||||||
MSR valuation adjustments(a) |
$ | 775 | $ | (722 | ) | $ | 623 | $ | (126 | ) | ||||||
Derivative valuation adjustments and other
risk management gains (losses)(b) |
(813 | ) | 875 | (389 | ) | 426 | ||||||||||
MSR risk management results |
$ | (38 | ) | $ | 153 | $ | 234 | $ | 300 | |||||||
(a) | Excludes subprime loan MSR activity of $(9) million and $(4) million for the three months
ended September 30, 2005 and 2004, respectively, and $(10) million for the nine months ended
September 30, 2005. Subprime MSR loan activity for the nine months ended September 30, 2004,
was less than $1 million. |
|
(b) | Includes gains, losses, and interest income associated with derivatives, both designated and
not designated, as a SFAS 133 hedge, and securities classified as both trading and
available-for-sale. |
|
(c) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
24
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004(a) | Change | ||||||||||||||||||
Noninterest revenue |
$ | 733 | $ | 734 | | % | $ | 2,203 | $ | 1,154 | 91 | % | ||||||||||||
Net interest income |
1,336 | 1,342 | | 4,128 | 2,126 | 94 | ||||||||||||||||||
Total net revenue |
2,069 | 2,076 | | 6,331 | 3,280 | 93 | ||||||||||||||||||
Provision for credit losses |
119 | 79 | 51 | 180 | 126 | 43 | ||||||||||||||||||
Noninterest expense |
1,369 | 1,379 | (1 | ) | 4,070 | 2,619 | 55 | |||||||||||||||||
Operating earnings |
356 | 377 | (6 | ) | 1,270 | 330 | 285 | |||||||||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
Selected metrics(a) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios and where | ||||||||||||||||||||||||
otherwise noted) | 2005 | 2004 | Change | 2005 | 2004(d) | Change | ||||||||||||||||||
Business metrics (in billions) |
||||||||||||||||||||||||
End-of-period balances |
||||||||||||||||||||||||
Small business loans |
$ | 12.6 | $ | 12.4 | 2 | % | $ | 12.6 | $ | 12.4 | 2 | % | ||||||||||||
Consumer and other loans(b) |
1.7 | 2.3 | (26 | ) | 1.7 | 2.3 | (26 | ) | ||||||||||||||||
Total loans |
14.3 | 14.7 | (3 | ) | 14.3 | 14.7 | (3 | ) | ||||||||||||||||
Core deposits(c) |
149.0 | 144.5 | 3 | 149.0 | 144.5 | 3 | ||||||||||||||||||
Total deposits |
176.0 | 170.2 | 3 | 176.0 | 170.2 | 3 | ||||||||||||||||||
Average balances |
||||||||||||||||||||||||
Small business loans |
12.5 | 12.4 | 1 | 12.4 | 5.6 | 121 | ||||||||||||||||||
Consumer and other loans(b) |
1.8 | 2.3 | (22 | ) | 2.1 | 2.1 | | |||||||||||||||||
Total loans |
14.3 | 14.7 | (3 | ) | 14.5 | 7.7 | 88 | |||||||||||||||||
Core deposits(c) |
148.0 | 147.8 | | 148.9 | 96.8 | 54 | ||||||||||||||||||
Total deposits |
174.2 | 172.5 | 1 | 174.3 | 110.9 | 57 | ||||||||||||||||||
Number of: |
||||||||||||||||||||||||
Branches |
2,549 | 2,467 | 82 | # | 2,549 | 2,467 | 82 | # | ||||||||||||||||
ATMs |
7,136 | 6,587 | 549 | 7,136 | 6,587 | 549 | ||||||||||||||||||
Personal bankers |
6,719 | 5,744 | 975 | 6,719 | 5,744 | 975 | ||||||||||||||||||
Personal checking accounts (in thousands) |
7,866 | 7,222 | 644 | 7,866 | 7,222 | 644 | ||||||||||||||||||
Business checking accounts (in thousands) |
930 | 891 | 39 | 930 | 891 | 39 | ||||||||||||||||||
Active online customers (in thousands) |
4,099 | 3,152 | 947 | 4,099 | 3,152 | 947 | ||||||||||||||||||
Debit cards issued (in thousands) |
9,102 | 8,282 | 820 | 9,102 | 8,282 | 820 | ||||||||||||||||||
Overhead ratio |
66 | % | 66 | % | 64 | % | 80 | % | ||||||||||||||||
Retail brokerage business metrics |
||||||||||||||||||||||||
Investment sales volume |
$ | 2,745 | $ | 2,563 | 7 | % | $ | 8,522 | $ | 4,554 | 87 | % | ||||||||||||
Number of dedicated investment sales
representatives |
1,478 | 1,393 | 6 | 1,478 | 1,393 | 6 |
25
Credit quality statistics |
||||||||||||||||||||||||
Net charge-offs Small business |
$ | 25 | $ | 24 | 4 | $ | 69 | $ | 45 | 53 | ||||||||||||||
Consumer and other loans |
11 | 36 | (69 | ) | 24 | 53 | (55 | ) | ||||||||||||||||
Total net charge-offs |
36 | 60 | (40 | ) | 93 | 98 | (5 | ) | ||||||||||||||||
Net charge-off rate Small business |
0.79 | % | 0.77 | % | 0.74 | % | 1.07 | % | ||||||||||||||||
Consumer and other loans |
2.42 | 6.23 | 1.53 | 3.37 | ||||||||||||||||||||
Total net charge-off rate |
1.00 | 1.62 | 0.86 | 1.70 | ||||||||||||||||||||
Nonperforming assets |
$ | 293 | $ | 313 | (6 | ) | $ | 293 | $ | 313 | (6 | ) | ||||||||||||
(a) | For a discussion of selected line of business metrics, see page 93 of this Form 10-Q. |
|
(b) | Primarily community development loans. |
|
(c) | Includes demand and savings deposits. |
|
(d) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004(a) | Change | ||||||||||||||||||
Total net revenue |
$ | 342 | $ | 397 | (14 | )% | $ | 1,061 | $ | 781 | 36 | % | ||||||||||||
Provision for credit losses |
82 | 95 | (14 | ) | 141 | 151 | (7 | ) | ||||||||||||||||
Noninterest expense |
184 | 163 | 13 | 559 | 324 | 73 | ||||||||||||||||||
Operating earnings |
47 | 85 | (45 | ) | 220 | 186 | 18 | |||||||||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
Selected metrics | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios and where otherwise noted) |
2005 | 2004 | Change | 2005 | 2004(d) | Change | ||||||||||||||||||
Business metrics (in billions) |
||||||||||||||||||||||||
End of period loans and lease related assets |
||||||||||||||||||||||||
Loans outstanding |
$ | 46.2 | $ | 53.7 | (14 | )% | $ | 46.2 | $ | 53.7 | (14 | )% | ||||||||||||
Lease related assets(a) |
5.8 | 8.9 | (35 | ) | 5.8 | 8.9 | (35 | ) | ||||||||||||||||
Total end-of-period loans and lease
related assets |
52.0 | 62.6 | (17 | ) | 52.0 | 62.6 | (17 | ) | ||||||||||||||||
Average loans and lease related assets |
||||||||||||||||||||||||
Loans outstanding(b) |
$ | 45.9 | $ | 52.9 | (13 | ) | $ | 49.6 | $ | 41.1 | 21 | |||||||||||||
Lease related assets(c) |
6.2 | 9.2 | (33 | ) | 6.9 | 9.1 | (24 | ) | ||||||||||||||||
Total average loans and lease related
assets(b)(c) |
52.1 | 62.1 | (16 | ) | 56.5 | 50.2 | 13 | |||||||||||||||||
Overhead ratio |
54 | % | 41 | % | 53 | % | 41 | % |
26
Credit quality statistics |
||||||||||||||||||||||||
30+ day delinquency rate |
1.59 | % | 1.38 | % | 1.59 | % | 1.38 | % | ||||||||||||||||
Net charge-offs |
||||||||||||||||||||||||
Loans |
$ | 66 | $ | 83 | (20 | ) | $ | 185 | $ | 134 | 38 | |||||||||||||
Lease receivables(c) |
4 | 13 | (69 | ) | 15 | 33 | (55 | ) | ||||||||||||||||
Total net charge-offs |
70 | 96 | (27 | ) | 200 | 167 | 20 | |||||||||||||||||
Net charge off rate |
||||||||||||||||||||||||
Loans(b) |
0.60 | % | 0.65 | % | 0.54 | % | 0.46 | % | ||||||||||||||||
Lease receivables |
0.28 | 0.56 | 0.30 | 0.48 | ||||||||||||||||||||
Total net charge-off rate(b) |
0.56 | 0.64 | 0.51 | 0.46 | ||||||||||||||||||||
Nonperforming assets |
$ | 248 | $ | 247 | | $ | 248 | $ | 247 | | ||||||||||||||
(a) | Includes operating lease related assets of $0.7 billion for the quarter ended September
30, 2005. Balances prior to March 31, 2005, were insignificant. |
|
(b) | Average loans include loans held-for-sale of $2.2 billion for each of the quarters ended
September 30, 2005 and 2004. The year-to-date average loans held-for-sale were $3.6 billion
and $1.9 billion for 2005 and 2004, respectively. These are not included in the net charge-off
rate. |
|
(c) | Includes operating lease related assets of $0.6 billion for the quarter ended September 30,
2005. The year-to-date average operating lease related assets were $0.3 billion for 2005.
Balances prior to March 31, 2005, were insignificant. These are not included in the net
charge-off rate. |
|
(d) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004(b) | Change | ||||||||||||||||||
Total net revenue |
$ | 158 | $ | 168 | (6 | )% | $ | 480 | $ | 220 | 118 | % | ||||||||||||
Noninterest expense |
128 | 136 | (6 | ) | 410 | 179 | 129 | |||||||||||||||||
Operating earnings |
18 | 20 | (10 | ) | 44 | 26 | 69 | |||||||||||||||||
Memo: Consolidated gross insurance-related
revenue(a) |
409 | 429 | (5 | ) | 1,229 | 770 | 60 | |||||||||||||||||
(a) | Includes revenue reported in the results of other businesses. |
|
(b) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
Selected metrics(a) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except where otherwise noted) | 2005 | 2004 | Change | 2005 | 2004(b) | Change | ||||||||||||||||||
Business metrics ending balances |
||||||||||||||||||||||||
Invested assets |
$ | 7,754 | $ | 7,489 | 4 | % | $ | 7,754 | $ | 7,489 | 4 | % | ||||||||||||
Policy loans |
391 | 398 | (2 | ) | 391 | 398 | (2 | ) | ||||||||||||||||
Insurance policy and claims reserves |
7,672 | 7,477 | 3 | 7,672 | 7,477 | 3 | ||||||||||||||||||
Term life sales first year annualized
premiums |
15 | 15 | | 45 | 15 | 200 | ||||||||||||||||||
Term life premium revenues |
119 | 115 | 3 | 351 | 115 | 205 | ||||||||||||||||||
Proprietary annuity sales |
151 | 39 | 287 | 552 | 173 | 219 | ||||||||||||||||||
Number of policies in force direct/assumed
(in thousands) |
2,195 | 2,633 | (17 | ) | 2,195 | 2,633 | (17 | ) | ||||||||||||||||
Insurance in force direct/assumed |
283,766 | 274,390 | 3 | 283,766 | 274,390 | 3 | ||||||||||||||||||
Insurance in force retained |
87,764 | 76,727 | 14 | 87,764 | 76,727 | 14 | ||||||||||||||||||
A.M. Best rating |
A | A | A | A | ||||||||||||||||||||
(a) | For a discussion of selected line of business metrics, see page 93 of this Form
10-Q. |
|
(b) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
27
Selected income statement data managed basis | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004(b) | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Asset management, administration and
commissions |
$ | | $ | 26 | NM | $ | | $ | 75 | NM | ||||||||||||||
Credit card income |
950 | 784 | 21 | % | 2,579 | 1,293 | 99 | % | ||||||||||||||||
Other income |
60 | 44 | 36 | 113 | 86 | 31 | ||||||||||||||||||
Noninterest revenue |
1,010 | 854 | 18 | 2,692 | 1,454 | 85 | ||||||||||||||||||
Net interest income |
2,970 | 2,917 | 2 | 8,953 | 5,461 | 64 | ||||||||||||||||||
Total net revenue |
3,980 | 3,771 | 6 | 11,645 | 6,915 | 68 | ||||||||||||||||||
Provision for credit losses(a) |
1,833 | 1,662 | 10 | 5,110 | 3,116 | 64 | ||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
284 | 317 | (10 | ) | 860 | 623 | 38 | |||||||||||||||||
Noncompensation expense |
813 | 926 | (12 | ) | 2,556 | 1,660 | 54 | |||||||||||||||||
Amortization of intangibles |
189 | 194 | (3 | ) | 566 | 318 | 78 | |||||||||||||||||
Total noninterest expense |
1,286 | 1,437 | (11 | ) | 3,982 | 2,601 | 53 | |||||||||||||||||
Operating earnings before income tax
expense |
861 | 672 | 28 | 2,553 | 1,198 | 113 | ||||||||||||||||||
Income tax expense |
320 | 251 | 27 | 948 | 439 | 116 | ||||||||||||||||||
Operating earnings |
$ | 541 | $ | 421 | 29 | $ | 1,605 | $ | 759 | 111 | ||||||||||||||
Financial metrics |
||||||||||||||||||||||||
ROE |
18 | % | 14 | % | 18 | % | 16 | % | ||||||||||||||||
Overhead ratio |
32 | 38 | 34 | 38 | ||||||||||||||||||||
(a) | Third quarter 2005 includes a $100 million special provision related to Hurricane
Katrina. |
|
(b) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
28
Selected metrics(a) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except headcount, ratios and where otherwise noted) |
2005 | 2004 | Change | 2005 | 2004(d) | Change | ||||||||||||||||||
Net securitization gains (amortization) |
$ | 25 | $ | (2 | ) | NM | $ | 28 | $ | (8 | ) | NM | ||||||||||||
% of average managed outstandings: |
||||||||||||||||||||||||
Net interest income |
8.55 | % | 8.90 | % | 8.83 | % | 9.37 | % | ||||||||||||||||
Provision for credit losses |
5.28 | 5.07 | 5.04 | 5.35 | ||||||||||||||||||||
Noninterest revenue |
2.91 | 2.61 | 2.66 | 2.49 | ||||||||||||||||||||
Risk adjusted margin(b) |
6.18 | 6.44 | 6.45 | 6.52 | ||||||||||||||||||||
Noninterest expense |
3.70 | 4.39 | 3.93 | 4.46 | ||||||||||||||||||||
Pre-tax income |
2.48 | 2.05 | 2.52 | 2.05 | ||||||||||||||||||||
Operating earnings |
1.56 | 1.28 | 1.58 | 1.30 | ||||||||||||||||||||
Business metrics |
||||||||||||||||||||||||
Charge volume (in billions) |
$ | 76.4 | $ | 73.3 | 4 | % | $ | 222.3 | $ | 118.3 | 88 | % | ||||||||||||
Net accounts opened (in thousands) |
3,022 | 2,755 | 10 | 8,555 | 4,794 | 78 | ||||||||||||||||||
Credit cards issued (in thousands) |
98,236 | 95,946 | 2 | 98,236 | 95,946 | 2 | ||||||||||||||||||
Number of registered internet customers
(in millions) |
14.6 | 12.4 | 18 | 14.6 | 12.4 | 18 | ||||||||||||||||||
Merchant acquiring business |
||||||||||||||||||||||||
Bank card volume (in billions) |
$ | 143.4 | $ | 123.5 | 16 | $ | 409.7 | $ | 260.3 | 57 | ||||||||||||||
Total transactions (in millions) |
4,872 | 3,972 | 23 | 13,892 | 7,604 | 83 | ||||||||||||||||||
Selected ending balances |
||||||||||||||||||||||||
Loans: |
||||||||||||||||||||||||
Loans on balance sheets |
$ | 68,479 | $ | 60,241 | 14 | $ | 68,479 | $ | 60,241 | 14 | ||||||||||||||
Securitized loans |
69,095 | 71,256 | (3 | ) | 69,095 | 71,256 | (3 | ) | ||||||||||||||||
Managed loans |
$ | 137,574 | $ | 131,497 | 5 | $ | 137,574 | $ | 131,497 | 5 | ||||||||||||||
Selected average balances |
||||||||||||||||||||||||
Managed assets |
$ | 144,225 | $ | 136,753 | 5 | $ | 141,180 | $ | 80,211 | 76 | ||||||||||||||
Loans: |
||||||||||||||||||||||||
Loans on balance sheets |
$ | 68,877 | $ | 59,386 | 16 | $ | 66,759 | $ | 31,296 | 113 | ||||||||||||||
Securitized loans |
68,933 | 70,980 | (3 | ) | 68,791 | 46,575 | 48 | |||||||||||||||||
Managed loans |
$ | 137,810 | $ | 130,366 | 6 | $ | 135,550 | $ | 77,871 | 74 | ||||||||||||||
Equity |
11,800 | 11,800 | | 11,800 | 6,200 | 90 | ||||||||||||||||||
Headcount |
19,463 | 20,473 | (5 | ) | 19,463 | 20,473 | (5 | ) |
29
Credit quality statistics |
||||||||||||||||||||||||
Net charge-offs |
$ | 1,633 | $ | 1,598 | 2 | $ | 4,864 | $ | 3,086 | 58 | ||||||||||||||
Net charge-off rate |
4.70 | % | 4.88 | % | 4.80 | % | 5.29 | % | ||||||||||||||||
12 month lagged loss ratio(c) |
4.97 | 5.08 | 5.09 | NA | ||||||||||||||||||||
Delinquency ratios |
||||||||||||||||||||||||
30+ days |
3.39 | % | 3.81 | % | 3.39 | % | 3.81 | % | ||||||||||||||||
90+ days |
1.55 | 1.75 | 1.55 | 1.75 | ||||||||||||||||||||
Allowance for loan losses |
$ | 3,255 | $ | 2,273 | 43 | $ | 3,255 | $ | 2,273 | 43 | ||||||||||||||
Allowance for loan losses to period-end
loans |
4.75 | % | 3.77 | % | 4.75 | % | 3.77 | % | ||||||||||||||||
(a) | For a discussion of selected line of business metrics, see page 94 of this Form 10Q. |
|
(b) | Represents Total net revenue less Provision for credit losses. |
|
(c) | For further information on this business metric, see the Form 8-K/A furnished by JPMorgan
Chase to the Securities and Exchange Commission on July 20, 2005. |
|
(d) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004(c) | Change | ||||||||||||||||||
Income statement data |
||||||||||||||||||||||||
Credit card income |
||||||||||||||||||||||||
Reported data for the period |
$ | 1,683 | $ | 1,632 | 3 | % | $ | 4,855 | $ | 2,774 | 75 | % | ||||||||||||
Securitization adjustments |
(733 | ) | (848 | ) | 14 | (2,276 | ) | (1,481 | ) | (54 | ) | |||||||||||||
Managed credit card income |
$ | 950 | $ | 784 | 21 | $ | 2,579 | $ | 1,293 | 99 | ||||||||||||||
Other income |
||||||||||||||||||||||||
Reported data for the period |
$ | 60 | $ | 47 | 28 | $ | 113 | $ | 173 | (35 | ) | |||||||||||||
Securitization adjustments |
| (3 | ) | NM | | (87 | ) | NM | ||||||||||||||||
Managed other income |
$ | 60 | $ | 44 | 36 | $ | 113 | $ | 86 | 31 | ||||||||||||||
Net interest income |
||||||||||||||||||||||||
Reported data for the period |
$ | 1,370 | $ | 1,138 | 20 | $ | 3,963 | $ | 2,006 | 98 | ||||||||||||||
Securitization adjustments |
1,600 | 1,779 | (10 | ) | 4,990 | 3,455 | 44 | |||||||||||||||||
Managed net interest income |
$ | 2,970 | $ | 2,917 | 2 | $ | 8,953 | $ | 5,461 | 64 | ||||||||||||||
Total net revenue(a) |
||||||||||||||||||||||||
Reported data for the period |
$ | 3,113 | $ | 2,843 | 9 | $ | 8,931 | $ | 5,028 | 78 | ||||||||||||||
Securitization adjustments |
867 | 928 | (7 | ) | 2,714 | 1,887 | 44 | |||||||||||||||||
Managed total net revenue |
$ | 3,980 | $ | 3,771 | 6 | $ | 11,645 | $ | 6,915 | 68 | ||||||||||||||
Provision for credit losses |
||||||||||||||||||||||||
Reported data for the period(b) |
$ | 966 | $ | 734 | 32 | $ | 2,396 | $ | 1,229 | 95 | ||||||||||||||
Securitization adjustments |
867 | 928 | (7 | ) | 2,714 | 1,887 | 44 | |||||||||||||||||
Managed provision for credit losses(b) |
$ | 1,833 | $ | 1,662 | 10 | $ | 5,110 | $ | 3,116 | 64 | ||||||||||||||
Balance sheets average balances |
||||||||||||||||||||||||
Total average assets |
||||||||||||||||||||||||
Reported data for the period |
$ | 77,204 | $ | 67,718 | 14 | $ | 74,263 | $ | 34,984 | 112 | ||||||||||||||
Securitization adjustments |
67,021 | 69,035 | (3 | ) | 66,917 | 45,227 | 48 | |||||||||||||||||
Managed average assets |
$ | 144,225 | $ | 136,753 | 5 | $ | 141,180 | $ | 80,211 | 76 | ||||||||||||||
Credit quality statistics |
||||||||||||||||||||||||
Net charge-offs |
||||||||||||||||||||||||
Reported net charge-offs data for the period |
$ | 766 | $ | 670 | 14 | $ | 2,150 | $ | 1,199 | 79 | ||||||||||||||
Securitization adjustments |
867 | 928 | (7 | ) | 2,714 | 1,887 | 44 | |||||||||||||||||
Managed net charge-offs |
$ | 1,633 | $ | 1,598 | 2 | $ | 4,864 | $ | 3,086 | 58 | ||||||||||||||
(a) | Includes Credit card income, Other income and Net interest income. |
|
(b) | Third quarter 2005 includes a $100 million special provision related to Hurricane Katrina. |
|
(c) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
30
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004(c) | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Lending & deposit related fees |
$ | 146 | $ | 162 | (10 | )% | $ | 431 | $ | 294 | 47 | % | ||||||||||||
Asset management, administration and
commissions |
16 | 12 | 33 | 46 | 20 | 130 | ||||||||||||||||||
Other income(a) |
93 | 51 | 82 | 255 | 106 | 141 | ||||||||||||||||||
Noninterest revenue |
255 | 225 | 13 | 732 | 420 | 74 | ||||||||||||||||||
Net interest income |
654 | 608 | 8 | 1,927 | 1,069 | 80 | ||||||||||||||||||
Total net revenue |
909 | 833 | 9 | 2,659 | 1,489 | 79 | ||||||||||||||||||
Provision for credit losses(b) |
(46 | ) | 14 | NM | 90 | 20 | 350 | |||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
165 | 176 | (6 | ) | 488 | 312 | 56 | |||||||||||||||||
Noncompensation expense |
281 | 286 | (2 | ) | 855 | 562 | 52 | |||||||||||||||||
Amortization of intangibles |
15 | 18 | (17 | ) | 49 | 18 | 172 | |||||||||||||||||
Total noninterest expense |
461 | 480 | (4 | ) | 1,392 | 892 | 56 | |||||||||||||||||
Operating earnings before income tax
expense |
494 | 339 | 46 | 1,177 | 577 | 104 | ||||||||||||||||||
Income tax expense |
193 | 124 | 56 | 459 | 223 | 106 | ||||||||||||||||||
Operating earnings |
$ | 301 | $ | 215 | 40 | $ | 718 | $ | 354 | 103 | ||||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
35 | % | 25 | % | 28 | % | 29 | % | ||||||||||||||||
ROA |
2.12 | 1.53 | 1.72 | 1.58 | ||||||||||||||||||||
Overhead ratio |
51 | 58 | 52 | 60 | ||||||||||||||||||||
(a) | IB-related and commercial card revenues are included in Other income. |
|
(b) | Third quarter 2005 includes a $35 million special provision related to Hurricane Katrina. |
|
(c) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
31
Selected metrics(a) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except headcount and ratio data) | 2005 | 2004 | Change | 2005 | 2004(c) | Change | ||||||||||||||||||
Revenue by product: |
||||||||||||||||||||||||
Lending |
$ | 265 | $ | 314 | (16 | )% | $ | 819 | $ | 484 | 69 | % | ||||||||||||
Treasury services |
582 | 499 | 17 | 1,682 | 939 | 79 | ||||||||||||||||||
Investment banking |
53 | 24 | 121 | 155 | 59 | 163 | ||||||||||||||||||
Other |
9 | (4 | ) | NM | 3 | 7 | (57 | ) | ||||||||||||||||
Total Commercial Banking revenue |
$ | 909 | $ | 833 | 9 | $ | 2,659 | $ | 1,489 | 79 | ||||||||||||||
Revenue by business: |
||||||||||||||||||||||||
Middle market |
$ | 592 | $ | 551 | 7 | $ | 1,758 | $ | 928 | 89 | ||||||||||||||
Corporate banking |
140 | 109 | 28 | 401 | 225 | 78 | ||||||||||||||||||
Real estate |
143 | 123 | 16 | 393 | 235 | 67 | ||||||||||||||||||
Other |
34 | 50 | (32 | ) | 107 | 101 | 6 | |||||||||||||||||
Total Commercial Banking revenue |
$ | 909 | $ | 833 | 9 | $ | 2,659 | $ | 1,489 | 79 | ||||||||||||||
Selected balance sheet data (average) |
||||||||||||||||||||||||
Total assets |
$ | 56,265 | $ | 55,957 | 1 | $ | 55,774 | $ | 29,921 | 86 | ||||||||||||||
Loans and leases |
51,756 | 50,324 | 3 | 50,976 | 26,356 | 93 | ||||||||||||||||||
Liability balances(b) |
72,699 | 66,944 | 9 | 72,274 | 47,271 | 53 | ||||||||||||||||||
Equity |
3,400 | 3,400 | | 3,400 | 1,654 | 106 | ||||||||||||||||||
Memo: |
||||||||||||||||||||||||
Loans by business: |
||||||||||||||||||||||||
Middle market |
$ | 31,362 | $ | 29,307 | 7 | $ | 30,880 | $ | 13,265 | 133 | ||||||||||||||
Corporate banking |
6,421 | 6,087 | 5 | 6,152 | 3,757 | 64 | ||||||||||||||||||
Real estate |
10,433 | 11,646 | (10 | ) | 10,316 | 6,547 | 58 | |||||||||||||||||
Other |
3,540 | 3,284 | 8 | 3,628 | 2,787 | 30 | ||||||||||||||||||
Total Commercial Banking loans |
$ | 51,756 | $ | 50,324 | 3 | $ | 50,976 | $ | 26,356 | 93 | ||||||||||||||
Headcount |
4,478 | 4,595 | (3 | ) | 4,478 | 4,595 | (3 | ) | ||||||||||||||||
Credit data and quality statistics |
||||||||||||||||||||||||
Net charge-offs (recoveries) |
$ | 6 | $ | (13 | ) | NM | $ | 5 | $ | 16 | (69 | ) | ||||||||||||
Nonperforming loans |
369 | 579 | (36 | ) | 369 | 579 | (36 | ) | ||||||||||||||||
Allowance for loan losses |
1,423 | 1,350 | 5 | 1,423 | 1,350 | 5 | ||||||||||||||||||
Allowance for lending-related commitments |
161 | 164 | (2 | ) | 161 | 164 | (2 | ) | ||||||||||||||||
Net charge-off (recovery) rate |
0.05 | % | (0.10 | )% | 0.01 | % | 0.08 | % | ||||||||||||||||
Allowance for loan losses to average loans |
2.75 | 2.68 | 2.79 | 5.12 | ||||||||||||||||||||
Allowance for loan losses to nonperforming
loans |
386 | 233 | 386 | 233 | ||||||||||||||||||||
Nonperforming loans to average loans |
0.71 | 1.15 | 0.72 | 2.20 | ||||||||||||||||||||
(a) | For a discussion of selected line of business metrics, see page 94 of this Form 10Q. |
|
(b) | Liability balances include deposits and deposits that are swept to on-balance sheet
liabilities. |
|
(c) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
32
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004(c) | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Lending & deposit related fees |
$ | 178 | $ | 218 | (18 | )% | $ | 545 | $ | 447 | 22 | % | ||||||||||||
Asset management, administration and
commissions |
733 | 600 | 22 | 2,161 | 1,815 | 19 | ||||||||||||||||||
Other income |
135 | 103 | 31 | 404 | 270 | 50 | ||||||||||||||||||
Noninterest revenue |
1,046 | 921 | 14 | 3,110 | 2,532 | 23 | ||||||||||||||||||
Net interest income |
510 | 418 | 22 | 1,516 | 912 | 66 | ||||||||||||||||||
Total net revenue |
1,556 | 1,339 | 16 | 4,626 | 3,444 | 34 | ||||||||||||||||||
Provision for credit losses |
(1 | ) | | NM | (2 | ) | 4 | NM | ||||||||||||||||
Credit reimbursement to IB(a) |
(38 | ) | (43 | ) | 12 | (114 | ) | (47 | ) | (143 | ) | |||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
533 | 472 | 13 | 1,559 | 1,158 | 35 | ||||||||||||||||||
Noncompensation expense |
546 | 654 | (17 | ) | 1,720 | 1,748 | (2 | ) | ||||||||||||||||
Amortization of intangibles |
28 | 30 | (7 | ) | 87 | 61 | 43 | |||||||||||||||||
Total noninterest expense |
1,107 | 1,156 | (4 | ) | 3,366 | 2,967 | 13 | |||||||||||||||||
Operating earnings before income tax
expense |
412 | 140 | 194 | 1,148 | 426 | 169 | ||||||||||||||||||
Income tax expense |
149 | 44 | 239 | 411 | 131 | 214 | ||||||||||||||||||
Operating earnings |
$ | 263 | $ | 96 | 174 | $ | 737 | $ | 295 | 150 | ||||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
55 | % | 20 | % | 52 | % | 14 | % | ||||||||||||||||
Overhead ratio |
71 | 86 | 73 | 86 | ||||||||||||||||||||
Pre-tax margin ratio(b) |
26 | 10 | 25 | 12 | ||||||||||||||||||||
(a) | TSS is charged a credit reimbursement related to certain exposures managed within the IB
credit portfolio on behalf of clients shared with TSS. For a further discussion, see Credit
reimbursement on page 29 of the JPMorgan Chase 2004 Annual Report. |
|
(b) | Pre-tax margin represents operating earnings before income taxes divided by total net
revenue, which is a comprehensive measure of pre-tax performance and is another basis by which
TSS management evaluates its performance and that of its competitors. Pre-tax margin is an
effective measure of TSS earnings after all operating costs are taken into consideration. |
|
(c) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
33
Selected metrics(a) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except headcount and where otherwise noted) |
2005 | 2004 | Change | 2005 | 2004(k) | Change | ||||||||||||||||||
Revenue by business |
||||||||||||||||||||||||
Treasury Services |
$ | 648 | $ | 629 | 3 | % | $ | 1,948 | $ | 1,352 | 44 | % | ||||||||||||
Investor Services |
536 | 404 | 33 | 1,588 | 1,255 | 27 | ||||||||||||||||||
Institutional Trust Services |
372 | 306 | 22 | 1,090 | 837 | 30 | ||||||||||||||||||
Total net revenue |
$ | 1,556 | $ | 1,339 | 16 | $ | 4,626 | $ | 3,444 | 34 | ||||||||||||||
Business metrics |
||||||||||||||||||||||||
Assets under custody (in billions)(b) |
$ | 10,991 | $ | 8,427 | 30 | $ | 10,991 | $ | 8,427 | 30 | ||||||||||||||
Corporate trust securities under administration
(in billions)(c) |
6,706 | 6,569 | 2 | 6,706 | 6,569 | 2 | ||||||||||||||||||
Number of: |
||||||||||||||||||||||||
US$ ACH transactions originated (in millions) |
753 | 651 | 16 | 2,179 | 1,301 | 67 | ||||||||||||||||||
Total US$ clearing volume (in thousands) |
24,906 | 21,781 | 14 | 70,811 | 58,572 | 21 | ||||||||||||||||||
International electronic funds transfer volume
(in thousands)(d)(e) |
22,723 | 11,794 | 93 | 59,896 | 29,911 | 100 | ||||||||||||||||||
Wholesale check volume (in millions)(e) |
952 | NA | NM | 2,953 | NA | NM | ||||||||||||||||||
Wholesale cards issued (in thousands)(f) |
12,810 | 11,260 | 14 | 12,810 | 11,260 | 14 |
34
Selected balance sheets (average) |
||||||||||||||||||||||||
Total assets |
$ | 26,798 | $ | 24,831 | 8 | $ | 26,755 | $ | 21,715 | 23 | ||||||||||||||
Loans |
10,328 | 8,457 | 22 | 10,126 | 7,131 | 42 | ||||||||||||||||||
Liability balances(g) |
166,836 | 136,606 | 22 | 161,893 | 118,299 | 37 | ||||||||||||||||||
Equity |
1,900 | 1,900 | | 1,900 | 2,761 | (31 | ) | |||||||||||||||||
Headcount |
24,176 | 22,246 | 9 | 24,176 | 22,246 | 9 | ||||||||||||||||||
TSS Firmwide metrics |
||||||||||||||||||||||||
Treasury Services firmwide revenue(h) |
$ | 1,306 | $ | 1,205 | 8 | $ | 3,857 | $ | 2,427 | 59 | ||||||||||||||
Treasury & Securities Services firmwide
revenue(h) |
2,214 | 1,915 | 16 | 6,535 | 4,519 | 45 | ||||||||||||||||||
Treasury Services firmwide overhead ratio(i) |
56 | % | 59 | % | 55 | % | 63 | % | ||||||||||||||||
Treasury & Securities Services firmwide
overhead ratio(i) |
62 | 72 | 63 | 76 | ||||||||||||||||||||
Treasury Services firmwide liability balances(j) |
$ | 140,079 | $ | 125,813 | 11 | $ | 137,325 | $ | 93,478 | 47 | ||||||||||||||
Treasury & Securities Services firmwide liability
balances(j) |
239,535 | 203,550 | 18 | 234,167 | 165,571 | 41 | ||||||||||||||||||
(a) | For a discussion of selected line of business metrics, see page 94 of this Form
10Q. |
|
(b) | Beginning March 31, 2005, assets under custody include an estimated $400 billion of
Institutional Trust Services (ITS) assets under custody that have not been included
previously. At September 30, 2005, an additional estimate of $130 billion of ITS-related AUC
were included in the amount. Approximately 6% of total assets under custody were trust
related. |
|
(c) | Corporate trust securities under administration include debt held in trust on behalf of third
parties and debt serviced as agent. |
|
(d) | International electronic funds transfer includes non-US$ ACH and clearing volume.
|
|
(e) | Prior periods have been restated to conform to current period presentation. |
|
(f) | Wholesale cards issued include domestic commercial card, stored value card, prepaid card, and
government electronic benefit card products. |
|
(g) | Liability balances include deposits and deposits swept to on-balance sheet liabilities. |
(h) | Firmwide revenue includes TS revenue recorded in the Commercial Banking, Consumer &
Small Business Banking and Asset & Wealth Management businesses (see below) and exclude FX
revenues recorded in the IB for TSS-related FX activity. TSS firmwide FX revenue, which
include FX revenue recorded in TSS and FX revenue associated with TSS customers who are FX
customers of the IB, was $96 million for the quarter ended September 30, 2005, and $282
million for the nine months ended September 30, 2005. |
||
(i) | Overhead ratios have been calculated based on firmwide revenues and TSS and TS
expenses, respectively, including those allocated to certain other lines of business. FX
revenues and expenses recorded in the IB for TSS-related FX activity are not included in
this ratio. |
||
(j) | Firmwide liability balances include TS liability balances recorded in certain lines of business. Liability balances associated with TS customers who are also customers of the
Commercial Banking line of business are not included in TS liability balances. |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
2005 | 2004 | Change | 2005 | 2004(k) | Change | |||||||||||||||||||
Treasury Services revenue reported in Commercial Banking |
$ | 582 | $ | 499 | 17 | % | $ | 1,682 | $ | 939 | 79 | % | ||||||||||||
Treasury Services revenue reported in other lines of business |
76 | 77 | (1 | ) | 227 | 136 | 67 | |||||||||||||||||
(k) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
35
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004(c) | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Lending & deposit related fees |
$ | 7 | $ | 10 | (30 | )% | $ | 22 | $ | 18 | 22 | % | ||||||||||||
Asset management, administration and
commissions |
1,065 | 859 | 24 | 3,034 | 2,188 | 39 | ||||||||||||||||||
Other income |
110 | 55 | 100 | 274 | 155 | 77 | ||||||||||||||||||
Noninterest revenue |
1,182 | 924 | 28 | 3,330 | 2,361 | 41 | ||||||||||||||||||
Net interest income |
267 | 269 | (1 | ) | 823 | 508 | 62 | |||||||||||||||||
Total net revenue |
1,449 | 1,193 | 21 | 4,153 | 2,869 | 45 | ||||||||||||||||||
Provision for credit losses(a) |
(19 | ) | 1 | NM | (46 | ) | 7 | NM | ||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
554 | 452 | 23 | 1,601 | 1,120 | 43 | ||||||||||||||||||
Noncompensation expense |
397 | 409 | (3 | ) | 1,151 | 1,066 | 8 | |||||||||||||||||
Amortization of intangibles |
25 | 23 | 9 | 75 | 28 | 168 | ||||||||||||||||||
Total noninterest expense |
976 | 884 | 10 | 2,827 | 2,214 | 28 | ||||||||||||||||||
Operating earnings before income tax
expense |
492 | 308 | 60 | 1,372 | 648 | 112 | ||||||||||||||||||
Income tax expense |
177 | 111 | 59 | 498 | 230 | 117 | ||||||||||||||||||
Operating earnings |
$ | 315 | $ | 197 | 60 | $ | 874 | $ | 418 | 109 | ||||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
52 | % | 33 | % | 49 | % | 13 | % | ||||||||||||||||
Overhead ratio |
67 | 74 | 68 | 77 | ||||||||||||||||||||
Pre-tax margin ratio(b) |
34 | 26 | 33 | 23 | ||||||||||||||||||||
(a) | Third quarter 2005 includes a $3 million special provision related to Hurricane Katrina. |
|
(b) | Pre-tax margin represents Operating earnings before income tax expense divided by Total net
revenue, which is a comprehensive measure of pre-tax performance and is another basis by which
AWM management evaluates its performance and that of its competitors. Pre-tax margin is an
effective measure of AWMs earnings, after all costs are taken into consideration. |
|
(c) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
36
Selected metrics(a) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratio, headcount and ranking data, and where otherwise noted) |
2005 | 2004 | Change | 2005 | 2004(e) | Change | ||||||||||||||||||
Revenue by client segment |
||||||||||||||||||||||||
Private bank |
$ | 421 | $ | 383 | 10 | % | $ | 1,252 | $ | 1,127 | 11 | % | ||||||||||||
Retail |
415 | 292 | 42 | 1,124 | 826 | 36 | ||||||||||||||||||
Institutional |
358 | 267 | 34 | 993 | 626 | 59 | ||||||||||||||||||
Private client services |
255 | 251 | 2 | 784 | 290 | 170 | ||||||||||||||||||
Total net revenue |
$ | 1,449 | $ | 1,193 | 21 | $ | 4,153 | $ | 2,869 | 45 | ||||||||||||||
Business metrics |
||||||||||||||||||||||||
Number of: |
||||||||||||||||||||||||
Client advisors |
1,417 | 1,334 | 6 | 1,417 | 1,334 | 6 | ||||||||||||||||||
BrownCo average daily trades |
28,357 | 23,969 | 18 | 28,126 | 29,714 | (5 | ) | |||||||||||||||||
Retirement plan services participants |
1,293,000 | 874,000 | 48 | 1,293,000 | 874,000 | 48 | ||||||||||||||||||
Star rankings:(b) |
||||||||||||||||||||||||
% of customer assets in funds ranked 4 or better |
44 | % | 56 | % | (21 | ) | 44 | % | 56 | % | (21 | ) | ||||||||||||
% of customer assets in funds ranked 3 or better |
77 | % | 80 | % | (4 | ) | 77 | % | 80 | % | (4 | ) | ||||||||||||
Funds quartile ranking (1 year):(c) |
||||||||||||||||||||||||
% of AUM in 1st and 2nd quartiles |
62 | % | 63 | % | (2 | ) | 62 | % | 63 | % | (2 | ) | ||||||||||||
Selected balance sheet data (average) |
||||||||||||||||||||||||
Total assets |
$ | 42,427 | $ | 39,882 | 6 | $ | 41,391 | $ | 36,765 | 13 | ||||||||||||||
Loans |
26,850 | 25,408 | 6 | 26,595 | 20,061 | 33 | ||||||||||||||||||
Deposits(d) |
41,453 | 38,940 | 6 | 41,421 | 28,743 | 44 | ||||||||||||||||||
Equity |
2,400 | 2,400 | | 2,400 | 4,406 | (46 | ) | |||||||||||||||||
Headcount |
12,531 | 12,368 | 1 | 12,531 | 12,368 | 1 | ||||||||||||||||||
Credit quality statistics |
||||||||||||||||||||||||
Net charge-offs |
$ | 23 | $ | 6 | 283 | $ | 15 | $ | 67 | (78 | ) | |||||||||||||
Nonperforming loans |
118 | 125 | (6 | ) | 118 | 125 | (6 | ) | ||||||||||||||||
Allowance for loan losses |
148 | 241 | (39 | ) | 148 | 241 | (39 | ) | ||||||||||||||||
Allowance for lending-related commitments |
6 | 5 | 20 | 6 | 5 | 20 | ||||||||||||||||||
Net charge-off rate |
0.34 | % | 0.09 | % | 0.08 | % | 0.45 | % | ||||||||||||||||
Allowance for loan losses to average loans |
0.55 | 0.95 | 0.56 | 1.20 | ||||||||||||||||||||
Allowance for loan losses to nonperforming loans |
125 | 193 | 125 | 193 | ||||||||||||||||||||
Nonperforming loans to average loans |
0.44 | 0.49 | 0.44 | 0.62 | ||||||||||||||||||||
(a) | For a discussion of selected line of business metrics, see page 94 of this Form 10Q. |
|
(b) | Derived from Morningstar for the United States; Micropal for the United Kingdom, Luxembourg,
Hong Kong and Taiwan; and Nomura for Japan. |
37
(c) | Quartile rankings sourced from Lipper for the United States and Taiwan; Micropal for the
United Kingdom, Luxembourg, and Hong Kong; and Nomura for Japan. |
|
(d) | Reflects the transfer of certain consumer deposits from Retail Financial Services to Asset &
Wealth Management. |
|
(e) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
ASSETS UNDER SUPERVISION(a) | ||||||||
September 30, (in billions) | 2005 | 2004 | ||||||
Asset class |
||||||||
Liquidity |
$ | 239 | $ | 210 | ||||
Fixed income |
166 | 174 | ||||||
Equities & balanced |
351 | 298 | ||||||
Alternatives |
72 | 53 | ||||||
Assets under management |
828 | 735 | ||||||
Custody/brokerage/administration/deposits |
325 | 268 | ||||||
Total Assets under supervision |
$ | 1,153 | $ | 1,003 | ||||
Client segment |
||||||||
Institutional |
||||||||
Assets under management |
$ | 479 | $ | 426 | ||||
Custody/brokerage/administration/deposits |
4 | 4 | ||||||
Assets under supervision |
483 | 430 | ||||||
Private bank |
||||||||
Assets under management |
142 | 136 | ||||||
Custody/brokerage/administration/deposits |
167 | 143 | ||||||
Assets under supervision |
309 | 279 | ||||||
Retail |
||||||||
Assets under management |
155 | 122 | ||||||
Custody/brokerage/administration/deposits |
106 | 81 | ||||||
Assets under supervision |
261 | 203 | ||||||
Private client services |
||||||||
Assets under management |
52 | 51 | ||||||
Custody/brokerage/administration/deposits |
48 | 40 | ||||||
Assets under supervision |
100 | 91 | ||||||
Total Assets under supervision |
$ | 1,153 | $ | 1,003 | ||||
Geographic region |
||||||||
Americas |
||||||||
Assets under management |
$ | 557 | $ | 531 | ||||
Custody/brokerage/administration/deposits |
287 | 238 | ||||||
Assets under supervision |
844 | 769 | ||||||
International |
||||||||
Assets under management |
271 | 204 | ||||||
Custody/brokerage/administration/deposits |
38 | 30 | ||||||
Assets under supervision |
309 | 234 | ||||||
Total Assets under supervision |
$ | 1,153 | $ | 1,003 | ||||
Memo: |
||||||||
Mutual fund assets: |
||||||||
Liquidity |
$ | 188 | $ | 163 | ||||
Fixed income |
39 | 48 | ||||||
Equity, balanced & alternatives |
137 | 97 | ||||||
Total mutual funds assets |
$ | 364 | $ | 308 | ||||
38
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
Assets under management rollforward | 2005 | 2004 | 2005 | 2004(d) | ||||||||||||
Beginning balance |
$ | 783 | $ | 575 | $ | 791 | $ | 561 | ||||||||
Liquidity net asset flows |
19 | (9 | ) | 8 | (13 | ) | ||||||||||
Fixed income net asset flows |
(4 | ) | (5 | ) | (2 | ) | (6 | ) | ||||||||
Equity, balanced & alternative net asset
flows |
4 | (2 | ) | 13 | 8 | |||||||||||
Acquisitions(b) |
| 176 | | 176 | ||||||||||||
Market/performance/other
impacts(c) |
26 | | 18 | 9 | ||||||||||||
Ending balance |
$ | 828 | $ | 735 | $ | 828 | $ | 735 | ||||||||
Custody/brokerage/administration/deposits
rollforward |
||||||||||||||||
Beginning balance |
$ | 310 | $ | 221 | $ | 315 | $ | 203 | ||||||||
Custody/brokerage/administration net asset
flows |
9 | 12 | 15 | 21 | ||||||||||||
Acquisitions(b) |
| 38 | | 38 | ||||||||||||
Market/performance/other impacts(c) |
6 | (3 | ) | (5 | ) | 6 | ||||||||||
Ending balance |
$ | 325 | $ | 268 | $ | 325 | $ | 268 | ||||||||
Assets under supervision rollforward |
||||||||||||||||
Beginning balance |
$ | 1,093 | $ | 796 | $ | 1,106 | $ | 764 | ||||||||
Net asset flows |
28 | (4 | ) | 34 | 10 | |||||||||||
Acquisitions(b) |
| 214 | | 214 | ||||||||||||
Market/performance/other impacts(c) |
32 | (3 | ) | 13 | 15 | |||||||||||
Ending balance |
$ | 1,153 | $ | 1,003 | $ | 1,153 | $ | 1,003 | ||||||||
(a) | Excludes assets under management of American Century. |
|
(b) | Reflects the Merger with Bank One in the third quarter of 2004 ($214 billion). |
|
(c) | Includes AWMs strategic decision to exit the Institutional Fiduciary business in the second
quarter of 2005 ($12 billion). |
|
(d) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005(b) | 2004(c) | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Securities/private equity gains (losses) |
$ | 274 | $ | 347 | (21 | )% | $ | 454 | $ | 1,202 | (62 | )% | ||||||||||||
Other income |
(20 | ) | 131 | NM | 115 | 277 | (58 | ) | ||||||||||||||||
Noninterest revenue |
254 | 478 | (47 | ) | 569 | 1,479 | (62 | ) | ||||||||||||||||
Net interest income |
(645 | ) | (536 | ) | (20 | ) | (2,085 | ) | (559 | ) | (273 | ) | ||||||||||||
Total net revenue |
(391 | ) | (58 | ) | NM | (1,516 | ) | 920 | NM | |||||||||||||||
Provision for credit losses(a) |
13 | (1 | ) | NM | 10 | (110 | ) | NM | ||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
740 | 786 | (6 | ) | 2,286 | 1,764 | 30 | |||||||||||||||||
Noncompensation expense |
987 | 1,146 | (14 | ) | 3,025 | 2,873 | 5 | |||||||||||||||||
Subtotal |
1,727 | 1,932 | (11 | ) | 5,311 | 4,637 | 15 | |||||||||||||||||
Net expenses allocated to other businesses |
(1,345 | ) | (1,426 | ) | 6 | (4,017 | ) | (3,796 | ) | (6 | ) | |||||||||||||
Total noninterest expense |
382 | 506 | (25 | ) | 1,294 | 841 | 54 | |||||||||||||||||
Operating earnings before income tax expense |
(786 | ) | (563 | ) | (40 | ) | (2,820 | ) | 189 | NM | ||||||||||||||
Income tax expense (benefit) |
(311 | ) | (344 | ) | 10 | (1,172 | ) | (168 | ) | NM | ||||||||||||||
Operating earnings (loss) |
$ | (475 | ) | $ | (219 | ) | (117 | ) | $ | (1,648 | ) | $ | 357 | NM | ||||||||||
(a) | Third quarter 2005 includes a $12 million special provision related to Hurricane
Katrina. |
|
(b) | In the first quarter of 2005, the Corporate sectors and the Firms operating revenue and
income tax expense have been restated to be presented on a tax-equivalent basis. Previously,
only the business segments operating revenue and income tax expense were presented on a
tax-equivalent basis, and the impact of the business segments tax-equivalent adjustments was
eliminated in the Corporate sector. This restatement had no impact on the Corporate sectors
or the Firms operating earnings. |
|
(c) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
39
Selected metrics | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except headcount data) | 2005 | 2004 | Change | 2005 | 2004(e) | Change | ||||||||||||||||||
Selected average balance sheets |
||||||||||||||||||||||||
Short-term investments(a) |
$ | 15,538 | $ | 26,432 | (41 | )% | $ | 15,169 | $ | 13,025 | 16 | % | ||||||||||||
Investment portfolio(b) |
47,311 | 74,708 | (37 | ) | 57,518 | 63,769 | (10 | ) | ||||||||||||||||
Goodwill(c) |
43,535 | 42,958 | 1 | 43,456 | 14,652 | 197 | ||||||||||||||||||
Total assets |
149,589 | 204,884 | (27 | ) | 162,175 | 150,293 | 8 | |||||||||||||||||
Headcount |
28,406 | 24,482 | 16 | 28,406 | 24,482 | 16 | ||||||||||||||||||
Treasury |
||||||||||||||||||||||||
Securities gains (losses)(d) |
$ | (43 | ) | $ | 109 | NM | $ | (955 | ) | $ | 270 | NM | ||||||||||||
Investment portfolio (average) |
39,351 | 65,508 | (40 | ) | 49,453 | 55,901 | (12 | ) | ||||||||||||||||
Investment portfolio (ending) |
42,754 | 61,331 | (30 | ) | 42,754 | 61,331 | (30 | ) | ||||||||||||||||
(a) | Represents Federal funds sold, Securities borrowed, Trading assets debt and equity
instruments, and Trading assets derivative receivables. |
|
(b) | Represents investment securities and private equity investments. |
|
(c) | Effective with the third quarter of 2004, all goodwill is allocated to the Corporate line of
business. Prior to the third quarter of 2004, goodwill was allocated to the various lines of
business. |
|
(d) | Losses in the first quarter of 2005 were primarily due to the sale of $20 billion of
investment securities during the month of March 2005. Excludes gains/losses on securities used
to manage risk associated with MSRs. |
|
(e) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
40
Selected income statement and balance sheet data Private equity | ||||||||||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004(c) | Change | ||||||||||||||||||
Private equity gains (losses) |
||||||||||||||||||||||||
Direct investments |
||||||||||||||||||||||||
Realized gains |
$ | 430 | $ | 277 | 55 | % | $ | 1,618 | $ | 981 | 65 | % | ||||||||||||
Write-ups/(write-downs) |
(71 | ) | (31 | ) | (129 | ) | 2 | (81 | ) | NM | ||||||||||||||
Mark-to-market (losses) |
(64 | ) | (27 | ) | (137 | ) | (306 | ) | (3 | ) | NM | |||||||||||||
Total direct investments |
295 | 219 | 35 | 1,314 | 897 | 46 | ||||||||||||||||||
Third-party fund investments |
18 | 16 | 13 | 88 | 26 | 238 | ||||||||||||||||||
Total private equity gains (losses) |
313 | 235 | 33 | 1,402 | 923 | 52 | ||||||||||||||||||
Other income |
10 | 14 | (29 | ) | 26 | 37 | (30 | ) | ||||||||||||||||
Net interest income |
(51 | ) | (89 | ) | 43 | (157 | ) | (201 | ) | 22 | ||||||||||||||
Total net revenue |
272 | 160 | 70 | 1,271 | 759 | 67 | ||||||||||||||||||
Total noninterest expense |
53 | 73 | (27 | ) | 181 | 209 | (13 | ) | ||||||||||||||||
Operating earnings before income tax expense |
219 | 87 | 152 | 1,090 | 550 | 98 | ||||||||||||||||||
Income tax expense |
78 | 27 | 189 | 390 | 187 | 109 | ||||||||||||||||||
Operating earnings |
$ | 141 | $ | 60 | 135 | $ | 700 | $ | 363 | 93 | ||||||||||||||
Private equity portfolio information(a) | ||||||||||||||||||||||||
Direct investments | September 30, 2005 | December 31, 2004 | Change | |||||||||||||||||||||
Publicly-held securities |
||||||||||||||||||||||||
Carrying value |
$ | 563 | $ | 1,170 | (52 | )% | ||||||||||||||||||
Cost |
451 | 744 | (39 | ) | ||||||||||||||||||||
Quoted public value |
795 | 1,758 | (55 | ) | ||||||||||||||||||||
Privately-held direct securities |
||||||||||||||||||||||||
Carrying value |
4,793 | 5,686 | (16 | ) | ||||||||||||||||||||
Cost |
6,187 | 7,178 | (14 | ) | ||||||||||||||||||||
Third-party fund investments(b) |
||||||||||||||||||||||||
Carrying value |
561 | 641 | (12 | ) | ||||||||||||||||||||
Cost |
920 | 1,042 | (12 | ) | ||||||||||||||||||||
Total private equity portfolio |
||||||||||||||||||||||||
Carrying value |
$ | 5,917 | $ | 7,497 | (21 | ) | ||||||||||||||||||
Cost |
$ | 7,558 | $ | 8,964 | (16 | ) | ||||||||||||||||||
(a) | For further information on the Firms policies regarding the valuation of the private
equity portfolio, see Note 9 on pages 98100 of JPMorgan Chases 2004 Annual Report. |
|
(b) | Unfunded commitments to private third-party equity funds were $402 million and $563 million
at September 30, 2005, and December 31, 2004, respectively. |
|
(c) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
41
Selected balance sheet data (in millions) | September 30, 2005 | December 31, 2004 | ||||||
Assets |
||||||||
Cash and due from banks |
$ | 33,036 | $ | 35,168 | ||||
Deposits with banks and Federal funds sold |
19,804 | 28,958 | ||||||
Securities purchased under resale agreements and Securities
borrowed |
181,790 | 141,504 | ||||||
Trading assets debt and equity instruments |
250,171 | 222,832 | ||||||
Trading assets derivative receivables |
54,389 | 65,982 | ||||||
Securities: |
||||||||
Available-for-sale |
68,613 | 94,402 | ||||||
Held-to-maturity |
84 | 110 | ||||||
Loans, net of allowance for loan losses |
413,284 | 394,794 | ||||||
Other receivables |
39,630 | 31,086 | ||||||
Goodwill and other intangible assets |
58,103 | 57,887 | ||||||
All other assets |
84,129 | 84,525 | ||||||
Total assets |
$ | 1,203,033 | $ | 1,157,248 | ||||
Liabilities |
||||||||
Deposits |
$ | 535,123 | $ | 521,456 | ||||
Securities sold under repurchase agreements and securities
lent |
134,027 | 112,347 | ||||||
Trading liabilities debt and equity instruments |
99,163 | 87,942 | ||||||
Trading liabilities derivative payables |
53,329 | 63,265 | ||||||
Long-term debt and capital debt securities |
113,475 | 105,718 | ||||||
All other liabilities |
161,781 | 160,867 | ||||||
Total liabilities |
1,096,898 | 1,051,595 | ||||||
Stockholders equity |
106,135 | 105,653 | ||||||
Total liabilities and stockholders equity |
$ | 1,203,033 | $ | 1,157,248 | ||||
42
43
(in billions) | Quarterly Averages | |||||||
Line of business equity | 3Q05 | 3Q04 | ||||||
Investment Bank |
$ | 20.0 | $ | 20.0 | ||||
Retail Financial Services |
13.5 | 13.1 | ||||||
Card Services |
11.8 | 11.8 | ||||||
Commercial Banking |
3.4 | 3.4 | ||||||
Treasury & Securities Services |
1.9 | 1.9 | ||||||
Asset & Wealth Management |
2.4 | 2.4 | ||||||
Corporate(a) |
52.5 | 51.8 | ||||||
Total common stockholders equity |
$ | 105.5 | $ | 104.4 | ||||
(a) | Third quarter of 2005 includes $43.5 billion of equity to offset goodwill and $9.0
billion of equity primarily related to Treasury, Private Equity and the Corporate Pension
Plan. |
(in billions) | Quarterly Averages | |||||||
Economic risk capital | 3Q05 | 3Q04 | ||||||
Credit risk |
$ | 22.2 | $ | 24.1 | ||||
Market risk |
10.3 | 9.3 | ||||||
Operational risk |
5.5 | 5.7 | ||||||
Business risk |
2.1 | 2.1 | ||||||
Private equity risk |
3.7 | 4.5 | ||||||
Economic risk capital |
43.8 | 45.7 | ||||||
Goodwill |
43.5 | 43.0 | ||||||
Other(a) |
18.2 | 15.7 | ||||||
Total common stockholders equity |
$ | 105.5 | $ | 104.4 | ||||
(a) | Additional capital required to meet internal regulatory/debt rating objectives. |
44
Tier 1 | Total | Risk-weighted | Adjusted average |
Tier 1 | Total | Tier 1 | ||||||||||||||||||||||
(in millions, except ratios) | capital | capital | assets(c) | assets(d) | capital ratio | capital ratio | leverage ratio | |||||||||||||||||||||
September 30, 2005 |
||||||||||||||||||||||||||||
JPMorgan Chase & Co.(a) |
$ | 70,745 | $ | 98,254 | $ | 866,289 | $ | 1,143,449 | 8.2 | % | 11.3 | % | 6.2 | % | ||||||||||||||
JPMorgan Chase Bank, N.A. |
60,074 | 82,409 | 758,838 | 972,393 | 7.9 | 10.9 | 6.2 | |||||||||||||||||||||
Chase Bank USA, N.A. |
9,414 | 11,679 | 67,336 | 71,865 | 14.0 | 17.3 | 13.1 | |||||||||||||||||||||
December 31,
2004 JPMorgan Chase & Co.(a) |
$ | 68,621 | $ | 96,807 | $ | 791,373 | $ | 1,102,456 | 8.7 | % | 12.2 | % | 6.2 | % | ||||||||||||||
JPMorgan Chase Bank, N.A. |
55,489 | 78,478 | 670,295 | 922,877 | 8.3 | 11.7 | 6.0 | |||||||||||||||||||||
Chase Bank USA, N.A. |
8,726 | 11,186 | 86,955 | 71,797 | 10.0 | 12.9 | 12.2 | |||||||||||||||||||||
Well capitalized ratios(b) |
6.0 | % | 10.0 | % | 5.0 | %(e) | ||||||||||||||||||||||
Minimum capital ratios(b) |
4.0 | 8.0 | 3.0 | (f) | ||||||||||||||||||||||||
(a) | Assets and capital amounts for JPMorgan Chases banking subsidiaries include intercompany
transactions, whereas the respective amounts for JPMorgan Chase reflect the elimination of
intercompany transactions. |
|
(b) | As defined by the regulations issued by the FRB, Federal Deposit Insurance Corporation
(FDIC), and OCC. |
|
(c) | Includes offbalance sheet risk-weighted assets in the amounts of $268.4 billion, $251.1
billion and $11.7 billion, respectively at September 30, 2005, and $250.3 billion, $229.6
billion and $15.5 billion, respectively, at December 31, 2004. |
|
(d) | Average adjusted assets for purposes of calculating the leverage ratio include total average
assets adjusted for unrealized gains/losses on securities, less deductions for disallowed
goodwill and other intangible assets, investments in subsidiaries and the total adjusted
carrying value of nonfinancial equity investments that are subject to deductions from Tier 1
capital. |
|
(e) | Represents requirements
for bank subsidiaries pursuant to regulations issued under the
Federal Deposit Insurance Corporation
Improvement Act. There is no Tier 1 leverage component in the definition of a well-capitalized
bank holding company. |
|
(f) | The minimum Tier 1 leverage ratio is 3% at the Bank Holding Company level, and 3% or 4% at
the Bank level as specified in regulations issued by the FRB and OCC. |
45
Three months ended September 30, | Nine months ended September 30,(b) | |||||||||||||||||||||||
(in millions) | VIEs(a) | QSPEs | Total | VIEs(a) | QSPEs | Total | ||||||||||||||||||
2005 |
$ | 57 | $ | 415 | $ | 472 | $ | 167 | $ | 1,207 | $ | 1,374 | ||||||||||||
2004 |
53 | 424 | 477 | 96 | 979 | 1,075 | ||||||||||||||||||
(a) | Includes VIE-related revenue (i.e., revenue associated with consolidated and significant
interests in nonconsolidated VIEs). |
|
(b) | Year-to-date 2004 results include three months of the combined Firms results and six months
of heritage JPMorgan Chase results. |
Dec. 31, | ||||||||||||||||||||||||
Offbalance sheet lending-related financial instruments | September 30, 2005 | 2004 | ||||||||||||||||||||||
By remaining maturity | Under | 13 | 35 | Over | ||||||||||||||||||||
(in millions) | 1 year | years | years | 5 years | Total | Total | ||||||||||||||||||
Consumer |
$ | 574,605 | $ | 3,478 | $ | 3,090 | $ | 51,137 | $ | 632,310 | $ | 601,196 | ||||||||||||
Wholesale: |
||||||||||||||||||||||||
Other unfunded commitments to extend credit(a)(b) |
91,809 | 65,273 | 62,762 | 16,098 | 235,942 | 225,152 | ||||||||||||||||||
Standby letters of credit and guarantees(a)(c) |
28,033 | 18,379 | 23,444 | 4,007 | 73,863 | 78,084 | ||||||||||||||||||
Other letters of credit(a) |
6,340 | 640 | 181 | 18 | 7,179 | 6,163 | ||||||||||||||||||
Total wholesale |
126,182 | 84,292 | 86,387 | 20,123 | 316,984 | 309,399 | ||||||||||||||||||
Total off-balance sheet lending-related financial
instruments |
$ | 700,787 | $ | 87,770 | $ | 89,477 | $ | 71,260 | $ | 949,294 | $ | 910,595 | ||||||||||||
(a) | Represents contractual amount net of risk participations totaling $28.5 billion at
September 30, 2005, and $26.4 billion at December 31, 2004. |
|
(b) | Includes unused advised lines of credit totaling $24.9 billion at September 30, 2005, and
$22.8 billion at December 31, 2004, which are not legally binding. In regulatory filings with
the FRB, unused advised lines are not reportable. |
|
(c) | Includes unused commitments to issue standby letters of credit of $34.7 billion at September
30, 2005, and $38.4 billion at December 31, 2004. |
46
47
Short-term debt | Senior long-term debt | |||||||||||||||||||||||
Moodys | S&P | Fitch | Moodys | S&P | Fitch | |||||||||||||||||||
JPMorgan Chase & Co. |
P-1 | A-1 | F1 | Aa3 | A+ | A+ | ||||||||||||||||||
JPMorgan Chase Bank, N.A. |
P-1 | A-1+ | F1+ | Aa2 | AA- | A+ | ||||||||||||||||||
Chase Bank USA, N.A. |
P-1 | A-1+ | F1+ | Aa2 | AA- | A+ | ||||||||||||||||||
Moodys | S&P | A.M. Best | ||||||||||
Chase Insurance Life and Annuity
Company |
A2 | A+ | A | |||||||||
Chase Insurance Life Company |
A2 | A+ | A | |||||||||
48
Credit exposure | Nonperforming assets(n)(o) | |||||||||||||||
(in millions, except ratios) | Sept. 30, 2005 | Dec. 31, 2004 | Sept. 30, 2005 | Dec. 31, 2004 | ||||||||||||
Wholesale |
||||||||||||||||
Loans reported(a) |
$ | 151,591 | $ | 135,067 | $ | 1,192 | $ | 1,574 | ||||||||
Derivative receivables(b) |
54,389 | 65,982 | 231 | 241 | ||||||||||||
Interests in purchased receivables |
28,766 | 31,722 | | | ||||||||||||
Total wholesale credit-related assets |
234,746 | 232,771 | 1,423 | 1,815 | ||||||||||||
Lending-related commitments(c)(d) |
316,984 | 309,399 | NA | NA | ||||||||||||
Total wholesale credit exposure |
$ | 551,730 | $ | 542,170 | $ | 1,423 | $ | 1,815 | ||||||||
Consumer |
||||||||||||||||
Loans reported(e) |
$ | 268,913 | $ | 267,047 | $ | 1,212 | (p) | $ | 1,169 | (p) | ||||||
Loans securitized(e)(f) |
69,095 | 70,795 | | | ||||||||||||
Total managed consumer loans |
338,008 | 337,842 | 1,212 | 1,169 | ||||||||||||
Lending-related commitments |
632,310 | 601,196 | NA | NA | ||||||||||||
Total consumer credit exposure |
$ | 970,318 | $ | 939,038 | $ | 1,212 | $ | 1,169 | ||||||||
Total credit portfolio |
||||||||||||||||
Loans reported(g) |
$ | 420,504 | $ | 402,114 | $ | 2,404 | $ | 2,743 | ||||||||
Loans securitized |
69,095 | 70,795 | | | ||||||||||||
Total managed loans |
489,599 | 472,909 | 2,404 | 2,743 | ||||||||||||
Derivative receivables |
54,389 | 65,982 | 231 | 241 | ||||||||||||
Interests in purchased receivables |
28,766 | 31,722 | | | ||||||||||||
Total managed credit-related assets |
572,754 | 570,613 | 2,635 | 2,984 | ||||||||||||
Wholesale lending-related commitments |
316,984 | 309,399 | NA | NA | ||||||||||||
Consumer lending-related commitments |
632,310 | 601,196 | NA | NA | ||||||||||||
Assets acquired in loan satisfactions(h) |
NA | NA | 204 | 247 | ||||||||||||
Total credit portfolio |
$ | 1,522,048 | $ | 1,481,208 | $ | 2,839 | $ | 3,231 | ||||||||
Purchased held-for-sale wholesale loans(i) |
$ | 358 | $ | 351 | $ | 358 | $ | 351 | ||||||||
Credit derivative hedges notional(j) |
(32,131 | ) | (37,200 | ) | (17 | ) | (15 | ) | ||||||||
Collateral held against derivatives |
(7,236 | ) | (9,301 | ) | NA | NA | ||||||||||
49
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
Net charge-offs | Net charge-off rate | Net charge-offs | Net charge-off rate | |||||||||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004(q) | 2005 | 2004(q) | ||||||||||||||||||||||||
Wholesale(k) |
||||||||||||||||||||||||||||||||
Loans reported(l) |
$ | (40 | ) | $ | (24 | ) | (0.12 | )% | (0.08 | )% | $ | (101 | ) | $ | 118 | (0.11 | )% | 0.17 | % | |||||||||||||
Consumer |
||||||||||||||||||||||||||||||||
Loans reported(m) |
$ | 910 | $ | 889 | 1.43 | % | 1.45 | % | $ | 2,560 | $ | 1,583 | 1.37 | % | 1.28 | % | ||||||||||||||||
Loans securitized |
867 | 928 | 4.99 | 5.20 | 2,714 | 1,887 | 5.27 | 5.41 | ||||||||||||||||||||||||
Total managed consumer loans |
1,777 | 1,817 | 2.20 | 2.30 | 5,274 | 3,470 | 2.21 | 2.18 | ||||||||||||||||||||||||
Lending-related commitments |
NA | NA | NA | NA | NA | NA | NA | NA | ||||||||||||||||||||||||
Total consumer credit exposure |
$ | 1,777 | $ | 1,817 | 2.20 | % | 2.30 | % | $ | 5,274 | $ | 3,470 | 2.21 | % | 2.18 | % | ||||||||||||||||
Total credit portfolio |
||||||||||||||||||||||||||||||||
Loans reported |
$ | 870 | $ | 865 | 0.90 | % | 0.93 | % | $ | 2,459 | $ | 1,701 | 0.87 | % | 0.89 | % | ||||||||||||||||
Loans securitized |
867 | 928 | 4.99 | 5.20 | 2,714 | 1,887 | 5.27 | 5.41 | ||||||||||||||||||||||||
Total managed loans |
$ | 1,737 | $ | 1,793 | 1.53 | % | 1.62 | % | $ | 5,173 | $ | 3,588 | 1.55 | % | 1.58 | % | ||||||||||||||||
(a) | Wholesale loans past-due 90 days and over and accruing were $6 million and $8 million as of
September 30, 2005, and December 31, 2004, respectively. |
|
(b) | The Firm also views its credit exposure on an economic basis. For derivative receivables,
economic credit exposure is the three-year average of a measure known as Average exposure
(which is the expected MTM value of derivative receivables at future time periods, including
the benefit of collateral). Average exposure was $37 billion and $38 billion at September 30,
2005, and December 31, 2004, respectively. See pages 5355 of this Form 10Q, and pages 6265
of JPMorgan Chases 2004 Annual Report, for a further discussion of the Firms derivative
receivables. |
|
(c) | The Firm also views its credit exposure on an economic basis. For lending-related
commitments, economic credit exposure is represented by a loan equivalent amount, which is
the portion of the unused commitment or other contingent exposure that is expected, based upon
average portfolio historical experience, to become outstanding in the event of a default by
the obligor. Loan equivalents were $175 billion and $162 billion at September 30, 2005, and
December 31, 2004, respectively. See page 55 of this Form 10Q for a further discussion of
this measure. |
|
(d) | Includes unused advised lines of credit totaling $24.9 billion and $22.8 billion at September
30, 2005, and December 31, 2004, respectively, which are not legally binding. In regulatory
filings with the Federal Reserve Board, unused advised lines are not reportable. |
|
(e) | Consumer loans past-due 90 days and over and accruing include credit card receivables of $1.1
billion and $1.0 billion, and related credit card securitizations of $1.0 billion and $1.3
billion at September 30, 2005, and December 31, 2004, respectively. |
|
(f) | Represents securitized credit card receivables. For a further discussion of credit card
securitizations, see Card Services on pages 2830 of this Form 10Q. |
|
(g) | Loans are presented net of unearned income of $3.2 billion and $4.1 billion at September 30,
2005, and December 31, 2004, respectively. |
|
(h) | At September 30, 2005, and December 31, 2004, includes $20 million and $23 million,
respectively, of wholesale assets acquired in loan satisfactions, and $184 million and $224
million, respectively, of consumer assets acquired in loan satisfactions. |
|
(i) | Represents distressed wholesale loans purchased as part of IBs proprietary activities, which are included in wholesale loans held-for-sale, but are excluded from nonperforming assets. |
|
(j) | Represents the net notional amount of protection bought and sold of single-name and portfolio
credit derivatives used to manage the credit risk of wholesale credit exposure; these
derivatives do not qualify for hedge accounting under SFAS 133. |
|
(k) | Wholesale net charge-offs are not applicable for Derivative receivables, Interests in
purchased receivables and lending-related commitments. |
|
(l) | Net charge-off rates exclude average wholesale loans HFS of $17.4 billion as of September 30,
2005, and $7.3 billion at September 30, 2004. |
|
(m) | Net charge-off rates exclude average HFS retail loans in the amount of $15.7 billion and
$14.5 billion for the three months ended September 30, 2005 and 2004, respectively, and $15.4
billion and $15.1 billion for the nine months ended September 30, 2005 and 2004, respectively.
Card Services has no average held-for-sale loans. |
|
(n) | Nonperforming assets include wholesale HFS loans of $106 million and $2 million as of
September 30, 2005, and December 31, 2004, and consumer HFS loans of $10 million and $13
million as of September 30, 2005, and December 31, 2004, respectively. |
|
(o) | Excludes purchased HFS wholesale loans. |
|
(p) | Excludes nonperforming assets related to loans eligible for repurchase as well as loans
repurchased from GNMA pools that are insured by government agencies of $1.0 billion and $1.5
billion for September 30, 2005, and December 31, 2004, respectively. These amounts are
excluded, as reimbursement is proceeding normally. |
|
(q) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
50
Maturity profile(a) | Ratings profile | |||||||||||||||||||||||||||||||
Investment-grade | ||||||||||||||||||||||||||||||||
(IG) | Noninvestment-grade | |||||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||
At September 30, 2005 | % of | |||||||||||||||||||||||||||||||
(in billions, except ratios) | <1 year | 15 years | > 5 years | Total | AAA to BBB- | BB+ & below | Total | IG | ||||||||||||||||||||||||
Loans |
50 | % | 37 | % | 13 | % | 100 | % | $ | 90 | $ | 62 | $ | 152 | 59 | % | ||||||||||||||||
Derivative receivables(b) |
10 | 40 | 50 | 100 | 44 | 10 | 54 | 81 | ||||||||||||||||||||||||
Interests in purchased |
||||||||||||||||||||||||||||||||
receivables |
30 | 66 | 4 | 100 | 29 | | 29 | 100 | ||||||||||||||||||||||||
Lending-related |
||||||||||||||||||||||||||||||||
commitments(b)(c) |
40 | 54 | 6 | 100 | 274 | 43 | 317 | 86 | ||||||||||||||||||||||||
Total exposure(d) |
40 | % | 48 | % | 12 | % | 100 | % | $ | 437 | $ | 115 | $ | 552 | 79 | % | ||||||||||||||||
Credit derivative |
||||||||||||||||||||||||||||||||
hedges notional(e) |
15 | % | 74 | % | 11 | % | 100 | % | $ | (28 | ) | $ | (4 | ) | $ | (32 | ) | 88 | % | |||||||||||||
Total | ||||||||||||||||||||||||||||||||
At December 31, 2004 | % of | |||||||||||||||||||||||||||||||
(in billions, except ratios) | <1 year | 1-5 years | > 5 years | Total | AAA to BBB- | BB+ & below | Total | IG | ||||||||||||||||||||||||
Loans |
43 | % | 43 | % | 14 | % | 100 | % | $ | 87 | $ | 48 | $ | 135 | 64 | % | ||||||||||||||||
Derivative receivables(b) |
19 | 39 | 42 | 100 | 57 | 9 | 66 | 86 | ||||||||||||||||||||||||
Interests in purchased |
||||||||||||||||||||||||||||||||
receivables |
37 | 61 | 2 | 100 | 32 | | 32 | 100 | ||||||||||||||||||||||||
Lending-related |
||||||||||||||||||||||||||||||||
commitments(b)(c) |
46 | 52 | 2 | 100 | 266 | 43 | 309 | 86 | ||||||||||||||||||||||||
Total exposure(d) |
42 | % | 49 | % | 9 | % | 100 | % | $ | 442 | $ | 100 | $ | 542 | 82 | % | ||||||||||||||||
Credit derivative |
||||||||||||||||||||||||||||||||
hedges notional(e) |
18 | % | 77 | % | 5 | % | 100 | % | $ | (35 | ) | $ | (2 | ) | $ | (37 | ) | 95 | % | |||||||||||||
(a) | The maturity profile of loans and lending-related commitments is based upon the remaining
contractual maturity. The maturity profile of derivative receivables is based upon the
maturity profile of Average exposure. See footnote (b) on page 50 of this Form 10Q for a
further discussion of Average exposure. |
|
(b) | Based upon economic credit exposure, the total percentage of Investment-grade for derivative
receivables was 88% and 92% as of September 30, 2005, and December 31, 2004, respectively, and
for lending-related commitments was 87% and 85% as of September 30, 2005, and December 31,
2004, respectively. See footnotes (b) and (c) on page 50 of this Form 10Q for a further
discussion of economic credit exposure. |
|
(c) | Based upon economic credit exposure, the maturity profile for the <1 year, 15 years and
>5 years categories would have been 27%, 64% and 9%, respectively, as of September 30,
2005, and 31%, 65% and 4%, respectively, as of December 31, 2004. See footnote (c) on page 50
of this Form 10Q for a further discussion of economic credit exposure. |
|
(d) | Based upon economic credit exposure, the maturity profile for <1 year, 15 years and >5
years categories would have been 34%, 51% and 15%, respectively, as of September 30, 2005, and
35%, 54% and 11%, respectively, as of December 31, 2004. See footnotes (b) and (c) on page 50
of this Form 10Q for a further discussion of economic credit exposure. |
|
(e) | Ratings are based upon the underlying referenced assets. |
51
September 30, 2005 | December 31, 2004 | |||||||||||||||
Top 10 industries(a) | Credit | % of | Credit | % of | ||||||||||||
(in millions, except ratios) | exposure | portfolio | exposure | portfolio | ||||||||||||
Banks and finance companies |
$ | 54,466 | 9.9 | % | $ | 56,184 | 10.4 | % | ||||||||
Real estate |
31,578 | 5.7 | 28,230 | 5.2 | ||||||||||||
State and municipal
governments(b) |
27,348 | 5.0 | 19,794 | 3.7 | ||||||||||||
Consumer products |
24,455 | 4.4 | 21,427 | 4.0 | ||||||||||||
Healthcare |
23,365 | 4.2 | 22,003 | 4.1 | ||||||||||||
Utilities |
20,253 | 3.7 | 21,262 | 3.9 | ||||||||||||
Asset managers |
19,653 | 3.6 | 20,389 | 3.8 | ||||||||||||
Oil and gas |
19,617 | 3.6 | 14,523 | 2.7 | ||||||||||||
Retail and consumer services(b) |
19,398 | 3.5 | 21,732 | 4.0 | ||||||||||||
Securities firms and exchanges |
18,222 | 3.3 | 18,176 | 3.4 | ||||||||||||
All Other |
293,375 | 53.1 | 298,450 | 54.8 | ||||||||||||
Total |
$ | 551,730 | 100.0 | % | $ | 542,170 | 100.0 | % | ||||||||
(a) | Based upon September 30, 2005 determination of Top 10 industries. |
|
(b) | During the second quarter of 2005, the Firm revised its industry classification for
educational institutions to better reflect risk correlations and enhance the Firms management
of industry risk, resulting in an increase to State and municipal governments and a decrease
to Retail and consumer services. |
September 30, 2005 | December 31, 2004 | |||||||||||||||
Criticized exposure industry concentrations | % of | % of | ||||||||||||||
(in millions, except ratios) | Amount | portfolio | Amount | portfolio | ||||||||||||
Media |
$ | 958 | 13.9 | % | $ | 509 | 6.1 | % | ||||||||
Consumer products |
661 | 9.6 | 479 | 5.8 | ||||||||||||
Utilities |
625 | 9.0 | 890 | 10.7 | ||||||||||||
Real estate |
384 | 5.6 | 765 | 9.2 | ||||||||||||
Airlines |
370 | 5.4 | 450 | 5.4 | ||||||||||||
Automotive |
351 | 5.0 | 359 | 4.3 | ||||||||||||
Machinery and equipment manufacturing |
345 | 5.0 | 459 | 5.6 | ||||||||||||
Retail and consumer services |
337 | 4.9 | 393 | 4.8 | ||||||||||||
Building materials/construction |
318 | 4.6 | 430 | 5.2 | ||||||||||||
Business services |
279 | 4.0 | 444 | 5.4 | ||||||||||||
All Other |
2,281 | 33.0 | 3,106 | 37.5 | ||||||||||||
Total |
$ | 6,909 | 100.0 | % | $ | 8,284 | 100.0 | % | ||||||||
52
Nonperforming assets by line of business
(in millions, except ratios) | Sept. 30, 2005 | % of NPA | December 31, 2004 | % of NPA | Change | |||||||||||||||
Investment Bank |
$ | 934 | 65 | % | $ | 1,196 | 65 | % | (22 | )% | ||||||||||
Commercial Banking |
388 | 27 | 547 | 30 | (29 | ) | ||||||||||||||
Treasury & Securities Services |
3 | | 14 | 1 | (79 | ) | ||||||||||||||
Asset & Wealth Management |
118 | 8 | 81 | 4 | 46 | |||||||||||||||
Total(a) |
$ | 1,443 | 100 | % | $ | 1,838 | 100 | % | (21 | )% | ||||||||||
(a) | Includes assets acquired in loan satisfactions of $20 million and $23 million at
September 30, 2005, and December 31, 2004, respectively. |
(in billions) | Notional amounts(a) | Derivative receivables MTM | ||||||||||||||
September 30, 2005 | December 31, 2004 | September 30, 2005 | December 31, 2004 | |||||||||||||
Interest rate |
$ | 38,293 | $ | 37,022 | $ | 33 | $ | 46 | ||||||||
Foreign exchange |
1,760 | 1,886 | 4 | 8 | ||||||||||||
Equity |
542 | 434 | 7 | 6 | ||||||||||||
Credit derivatives |
2,039 | 1,071 | 4 | 3 | ||||||||||||
Commodity |
218 | 101 | 6 | 3 | ||||||||||||
Total |
$ | 42,852 | $ | 40,514 | $ | 54 | $ | 66 | ||||||||
Collateral held
against derivative
receivables |
NA | NA | (7) | (b) | (9 | )(c) | ||||||||||
Total |
NA | NA | $ | 47 | $ | 57 | ||||||||||
(a) | The notional amounts represent the gross sum of long and short third-party notional
derivative contracts, excluding written options and foreign exchange spot contracts. |
|
(b) | The Firm held $38 billion of collateral against derivative receivables as of September 30,
2005, consisting of $31 billion in net cash received under credit support annexes to legally
enforceable master netting agreements, and $7 billion of other highly liquid collateral. The
benefit of the $31 billion is reflected within the $54 billion of derivative receivables MTM.
Excluded from the $38 billion of collateral is $11 billion of collateral delivered by clients
at the initiation of transactions; this collateral secures exposure that could arise in the
existing derivatives portfolio should the MTM of the clients transactions move in the Firms
favor. Also excluded are credit enhancements in the form of letter-of-credit and surety
receivables. |
|
(c) | The Firm held $41 billion of collateral against derivative receivables as of December 31,
2004, consisting of $32 billion in net cash received under credit support annexes to legally
enforceable master netting agreements, and $9 billion of other highly liquid collateral. The
benefit of the $32 billion is reflected within the $66 billion of derivative receivables MTM.
Excluded from the $41 billion of collateral is $10 billion of collateral delivered by clients
at the initiation of transactions; this collateral secures exposure that could arise in the
existing derivatives portfolio should the MTM of the clients transactions move in the Firms
favor. Also excluded are credit enhancements in the form of letter-of-credit and surety
receivables. |
53
September 30, 2005 | December 31, 2004 | |||||||||||||||
Rating equivalent | Exposure net | % of exposure | Exposure net | % of exposure | ||||||||||||
(in millions) | of collateral(a) | net of collateral | of collateral(b) | net of collateral | ||||||||||||
AAA to AA- |
$ | 20,978 | 45 | % | $ | 30,384 | 53 | % | ||||||||
A+ to A- |
8,225 | 17 | 9,109 | 16 | ||||||||||||
BBB+ to BBB- |
9,496 | 20 | 9,522 | 17 | ||||||||||||
BB+ to B- |
8,065 | 17 | 7,271 | 13 | ||||||||||||
CCC+ and below |
390 | 1 | 395 | 1 | ||||||||||||
Total |
$ | 47,154 | 100 | % | $ | 56,681 | 100 | % | ||||||||
(a) | See footnote (b) on page 53. |
|
(b) | See footnote (c) on page 53. |
Notional amount | ||||||||||||||||||||
Portfolio management | Dealer/client | |||||||||||||||||||
Protection | Protection | Protection | Protection | |||||||||||||||||
(in millions) | bought | sold | bought | sold | Total | |||||||||||||||
September 30, 2005 |
$ | 33,334 | $ | 1,203 | $ | 986,810 | $ | 1,017,837 | $ | 2,039,184 | ||||||||||
December 31, 2004 |
37,237 | 37 | 501,266 | 532,335 | 1,070,875 | |||||||||||||||
Notional amount of protection bought | ||||||||
(in millions) | September 30, 2005 | December 31, 2004 | ||||||
Credit derivatives used to manage: |
||||||||
Loans and lending-related commitments |
$ | 20,739 | $ | 25,002 | ||||
Derivative receivables |
12,595 | 12,235 | ||||||
Total |
$ | 33,334 | $ | 37,237 | ||||
54
55
Credit-related exposure | Nonperforming assets | |||||||||||||||
(in millions, except ratios) | Sept. 30, 2005 | Dec. 31, 2004 | Sept. 30, 2005 | Dec. 31, 2004 | ||||||||||||
Home finance |
||||||||||||||||
Home equity and other |
$ | 74,309 | $ | 67,837 | $ | 316 | $ | 416 | ||||||||
Mortgage |
60,076 | 56,816 | 394 | 257 | ||||||||||||
Total Home finance |
134,385 | 124,653 | 710 | 673 | ||||||||||||
Auto & education finance |
51,309 | 62,712 | 204 | 193 | ||||||||||||
Consumer & small business and other |
14,740 | 15,107 | 289 | 295 | ||||||||||||
Credit card receivables reported(a) |
68,479 | 64,575 | 9 | 8 | ||||||||||||
Total consumer loans reported |
268,913 | 267,047 | 1,212 | 1,169 | ||||||||||||
Credit card securitizations(a)(b) |
69,095 | 70,795 | | | ||||||||||||
Total consumer loans managed |
338,008 | 337,842 | 1,212 | 1,169 | ||||||||||||
Assets acquired in loan satisfactions |
N/A | N/A | 184 | 224 | ||||||||||||
Total consumer related assets managed |
338,008 | 337,842 | 1,396 | 1,393 | ||||||||||||
Consumer lending-related commitments: |
||||||||||||||||
Home finance |
64,987 | 53,223 | N/A | N/A | ||||||||||||
Auto & education finance |
6,686 | 5,193 | N/A | N/A | ||||||||||||
Consumer & small business and other |
5,186 | 10,312 | N/A | N/A | ||||||||||||
Credit cards |
555,451 | 532,468 | N/A | N/A | ||||||||||||
Total lending-related commitments |
632,310 | 601,196 | N/A | N/A | ||||||||||||
Total consumer credit portfolio |
$ | 970,318 | $ | 939,038 | $ | 1,396 | $ | 1,393 | ||||||||
Average annual net | Average annual net | |||||||||||||||||||||||||||||||
Net Charge-offs | charge-off rate(c) | Net Charge-offs | charge-off rate(c) | |||||||||||||||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004(d) | 2005 | 2004(d) | ||||||||||||||||||||||||
Home finance |
||||||||||||||||||||||||||||||||
Home equity and other |
$ | 32 | $ | 57 | 0.18 | % | 0.34 | % | $ | 97 | $ | 105 | 0.19 | % | 0.36 | % | ||||||||||||||||
Mortgage |
6 | 6 | 0.05 | 0.05 | 20 | 14 | 0.06 | 0.05 | ||||||||||||||||||||||||
Total Home finance |
38 | 63 | 0.13 | 0.23 | 117 | 119 | 0.14 | 0.20 | ||||||||||||||||||||||||
Auto & education finance |
70 | 96 | 0.56 | 0.64 | 200 | 167 | 0.51 | 0.46 | ||||||||||||||||||||||||
Consumer & small business and other |
36 | 60 | 1.00 | 1.62 | 93 | 98 | 0.86 | 1.70 | ||||||||||||||||||||||||
Credit card receivables reported |
766 | 670 | 4.41 | 4.49 | 2,150 | 1,199 | 4.31 | 5.12 | ||||||||||||||||||||||||
Total consumer loans reported |
910 | 889 | 1.43 | 1.45 | 2,560 | 1,583 | 1.37 | 1.28 | ||||||||||||||||||||||||
Credit card securitizations(b) |
867 | 928 | 4.99 | 5.20 | 2,714 | 1,887 | 5.27 | 5.41 | ||||||||||||||||||||||||
Total consumer loans managed |
$ | 1,777 | $ | 1,817 | 2.20 | % | 2.30 | % | $ | 5,274 | $ | 3,470 | 2.21 | % | 2.18 | % | ||||||||||||||||
Memo: Credit card managed |
$ | 1,633 | $ | 1,598 | 4.70 | % | 4.88 | % | $ | 4,864 | $ | 3,086 | 4.80 | % | 5.29 | % | ||||||||||||||||
(a) | Past-due loans 90 days and over and accruing includes credit card receivables of $1.1
billion and $1.0 billion, and related credit card securitizations of $1.0 billion and $1.3
billion at September 30, 2005, and December 31, 2004, respectively. |
|
(b) | Represents securitized credit card receivables. For a further discussion of credit card
securitizations, see Card Services on pages 2830 of this Form 10Q. |
|
(c) | Net charge-off rates exclude average HFS retail loans in the amount of $15.7 billion and
$14.5 billion for the three months ended September 30, 2005 and 2004, respectively, and $15.4
billion and $15.1 billion for the nine months ended September 30, 2005 and 2004,
respectively. Card Services has no average held-for-sale loans. |
|
(d) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
56
57
Nine months ended September 30, | 2005 | 2004(d) | ||||||||||||||||||||||
(in millions) | Wholesale | Consumer | Total | Wholesale | Consumer | Total | ||||||||||||||||||
Loans: |
||||||||||||||||||||||||
Beginning balance at January 1 |
$ | 3,098 | $ | 4,222 | $ | 7,320 | $ | 2,204 | $ | 2,319 | $ | 4,523 | ||||||||||||
Addition resulting from the merger, July 1 |
| | | 1,788 | 1,335 | 3,123 | ||||||||||||||||||
Gross charge-offs |
(132 | ) | (3,024 | ) | (3,156 | ) | (420 | ) | (1,820 | ) | (2,240 | ) | ||||||||||||
Gross recoveries |
233 | 464 | 697 | 302 | 237 | 539 | ||||||||||||||||||
Net charge-offs |
101 | (2,560 | ) | (2,459 | ) | (118 | ) | (1,583 | ) | (1,701 | ) | |||||||||||||
Provision for loan losses: |
||||||||||||||||||||||||
Provision excluding accounting policy conformity |
(603 | ) | 2,959 | 2,356 | (484 | ) | 1,601 | 1,117 | ||||||||||||||||
Accounting policy conformity |
| | | 66 | 494 | 560 | (g) | |||||||||||||||||
Total provision for loan losses |
(603 | ) | 2,959 | 2,356 | (418 | ) | 2,095 | 1,677 | ||||||||||||||||
Other |
(6 | ) | 9 | 3 | | (129 | ) | (129 | )(h) | |||||||||||||||
Ending balance at September 30 |
$ | 2,590 | (a) | $ | 4,630 | (b) | $ | 7,220 | $ | 3,456 | (e) | $ | 4,037 | (f) | $ | 7,493 | ||||||||
Lending-related commitments: |
||||||||||||||||||||||||
Beginning balance at January 1 |
$ | 480 | $ | 12 | $ | 492 | $ | 320 | $ | 4 | $ | 324 | ||||||||||||
Addition resulting from the merger, July 1 |
| | | 499 | 9 | 508 | ||||||||||||||||||
Provision for lending-related commitments: |
||||||||||||||||||||||||
Provision excluding accounting policy conformity |
(100 | ) | 3 | (97 | ) | (63 | ) | | (63 | ) | ||||||||||||||
Accounting policy conformity |
| | | (227 | ) | | (227 | ) | ||||||||||||||||
Total provision for lending-related commitments |
(100 | ) | 3 | (97 | ) | (290 | ) | | (290 | ) | ||||||||||||||
Other |
| | | | (1 | ) | (1 | ) | ||||||||||||||||
Ending balance at September 30 |
$ | 380 | $ | 15 | $ | 395 | (c) | $ | 529 | $ | 12 | $ | 541 | (i) | ||||||||||
(a) | Includes $341 million of asset-specific and $2.3 billion of formula-based allowance.
Included within the formula-based allowance is $1.6 billion related to a statistical
calculation (including $50 million related to Hurricane Katrina), and adjustments to the
statistical calculation of $659 million. |
|
(b) | Includes $3.4 billion of the consumer statistical component (including $350 million related
to Hurricane Katrina) and $1.2 billion of adjustments to the statistical component. |
|
(c) | Includes $90 million of asset-specific and $305 million of formula-based allowance at
September 30, 2005. The formula-based allowance for lending-related commitments is based upon
statistical calculation. There is no adjustment to the statistical calculation for
lending-related commitments. |
|
(d) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
|
(e) | Includes $498 million of asset-specific and $3.0 billion of formula-based allowance. Included
within the formula-based allowance is $1.9 billion related to a statistical calculation and
adjustments to the statistical calculation of $1.1 billion. |
|
(f) | Includes $3.1 billion and $878 million of the consumer statistical component and adjustments
to the statistical component, respectively. |
|
(g) | Reflects an increase of $721 million as a result of the decertification of heritage Bank One
sellers interest in credit card securitizations, partially offset by a $161 million decrease
in the allowance to conform methodologies during the third quarter of 2004. |
|
(h) | Primarily represents the transfer of the allowance for accrued interest and fees on reported
and securitized credit card loans. |
|
(i) | Includes $107 million of asset-specific and $434 million of formula-based allowance at
September 30, 2004. The formula-based allowance for lending-related commitments is based upon
a statistical calculation. There is no adjustment to the statistical calculation for
lending-related commitments. |
58
Provision for | ||||||||||||||||||||||||
lending-related | Total provision for | |||||||||||||||||||||||
Provision for loan losses | commitments | credit losses | ||||||||||||||||||||||
Three months ended September 30, (in millions) | 2005 | 2004 | 2005 | 2004 | 2005(c) | 2004 | ||||||||||||||||||
Investment Bank |
$ | (32 | ) | $ | (148 | ) | $ | (14 | ) | $ | (3 | ) | $ | (46 | ) | $ | (151 | ) | ||||||
Commercial Banking |
(11 | ) | 10 | (35 | ) | 4 | (46 | ) | 14 | |||||||||||||||
Treasury & Securities Services |
(1 | ) | | | | (1 | ) | | ||||||||||||||||
Asset & Wealth Management |
(22 | ) | 1 | 3 | | (19 | ) | 1 | ||||||||||||||||
Corporate |
13 | (1 | ) | | | 13 | (1 | ) | ||||||||||||||||
Total Wholesale |
(53 | ) | (138 | ) | (46 | ) | 1 | (99 | ) | (137 | ) | |||||||||||||
Retail Financial Services |
376 | 239 | 2 | | 378 | 239 | ||||||||||||||||||
Card Services reported |
966 | 734 | | | 966 | 734 | ||||||||||||||||||
Total Consumer |
1,342 | 973 | 2 | | 1,344 | 973 | ||||||||||||||||||
Accounting policy conformity |
| 560 | | (227 | ) | | 333 | |||||||||||||||||
Total provision(a) |
1,289 | 1,395 | (44 | ) | (226 | ) | 1,245 | 1,169 | ||||||||||||||||
Credit card securitizations |
867 | 928 | | | 867 | 928 | ||||||||||||||||||
Accounting policy conformity |
| (560 | ) | | 227 | | (333 | ) | ||||||||||||||||
Total managed provision |
$ | 2,156 | $ | 1,763 | $ | (44 | ) | $ | 1 | $ | 2,112 | $ | 1,764 | |||||||||||
Provision for | ||||||||||||||||||||||||
lending-related | Total provision for | |||||||||||||||||||||||
Provision for loan losses | commitments | credit losses | ||||||||||||||||||||||
Nine months ended September 30, (in millions) | 2005 | 2004(b) | 2005 | 2004(b) | 2005(c) | 2004(b) | ||||||||||||||||||
Investment Bank |
$ | (659 | ) | $ | (405 | ) | $ | (96 | ) | $ | (62 | ) | $ | (755 | ) | $ | (467 | ) | ||||||
Commercial Banking |
97 | 18 | (7 | ) | 2 | 90 | 20 | |||||||||||||||||
Treasury & Securities Services |
(4 | ) | 4 | 2 | | (2 | ) | 4 | ||||||||||||||||
Asset & Wealth Management |
(47 | ) | 9 | 1 | (2 | ) | (46 | ) | 7 | |||||||||||||||
Corporate |
10 | (110 | ) | | | 10 | (110 | ) | ||||||||||||||||
Total Wholesale |
(603 | ) | (484 | ) | (100 | ) | (62 | ) | (703 | ) | (546 | ) | ||||||||||||
Retail Financial Services |
563 | 372 | 3 | (1 | ) | 566 | 371 | |||||||||||||||||
Card Services reported |
2,396 | 1,229 | | | 2,396 | 1,229 | ||||||||||||||||||
Total Consumer |
2,959 | 1,601 | 3 | (1 | ) | 2,962 | 1,600 | |||||||||||||||||
Accounting policy conformity |
| 560 | | (227 | ) | | 333 | |||||||||||||||||
Total provision(a) |
2,356 | 1,677 | (97 | ) | (290 | ) | 2,259 | 1,387 | ||||||||||||||||
Credit card securitizations |
2,714 | 1,887 | | | 2,714 | 1,887 | ||||||||||||||||||
Accounting policy conformity |
| (560 | ) | | 227 | | (333 | ) | ||||||||||||||||
Total managed provision |
$ | 5,070 | $ | 3,004 | $ | (97 | ) | $ | (63 | ) | $ | 4,973 | $ | 2,941 | ||||||||||
(a) | The provision for loan losses in the third quarter of 2004 includes an increase of $721
million as a result of the decertification of heritage Bank One sellers interest in credit
card securitizations, partially offset by a reduction of $161 million to conform provision
methodologies. The provision for lending-related commitments in the third quarter of 2004
reflects a reduction of $227 million to conform provision methodologies in the wholesale
portfolio. |
|
(b) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
|
(c) | Third quarter 2005 includes a $400 million special provision related to Hurricane Katrina:
Retail Financial Services $250 million, Card Services $100 million, Commercial Banking $35
million, Asset & Wealth Management $3 million and Corporate $12 million. |
59
2005 | 2004(e) | |||||||||||||||||||||||||||||||
At | At | |||||||||||||||||||||||||||||||
Nine months ended Sept. 30, | Average | Minimum | Maximum | September 30, | Average | Minimum | Maximum | September 30, | ||||||||||||||||||||||||
(in millions) | VAR | VAR | VAR | 2005 | VAR | VAR | VAR | 2004 | ||||||||||||||||||||||||
By risk type: |
||||||||||||||||||||||||||||||||
Fixed income |
$ | 65.6 | $ | 37.2 | $ | 110.2 | $ | 62.1 | $ | 76.7 | $ | 45.3 | $ | 117.5 | $ | 73.0 | ||||||||||||||||
Foreign exchange |
22.5 | 16.7 | 30.0 | 26.9 | 17.1 | 10.2 | 32.8 | 11.9 | ||||||||||||||||||||||||
Equities |
35.0 | 15.3 | 64.9 | 34.9 | 30.9 | 19.7 | 57.8 | 22.0 | ||||||||||||||||||||||||
Commodities and other |
16.2 | 6.5 | 37.8 | 37.8 | 8.6 | 6.9 | 12.2 | 10.2 | ||||||||||||||||||||||||
Less: portfolio diversification |
(55.4 | )(c) | N/A | (d) | N/A | (d) | (67.2 | )(c) | (44.4 | )(c) | N/A | (d) | N/A | (d) | (38.5 | )(c) | ||||||||||||||||
Total trading VAR |
$ | 83.9 | $ | 52.9 | $ | 129.9 | $ | 94.5 | $ | 88.9 | $ | 51.6 | $ | 125.2 | $ | 78.6 | ||||||||||||||||
Credit portfolio VAR(b) |
14.0 | 11.3 | 16.6 | 15.7 | 14.2 | 10.8 | 16.6 | 13.2 | ||||||||||||||||||||||||
Less: portfolio diversification |
(11.8 | )(c) | N/A | (d) | N/A | (d) | (11.7 | )(c) | (8.5 | )(c) | N/A | (d) | N/A | (d) | (8.2 | )(c) | ||||||||||||||||
Total trading and credit
portfolio VAR |
$ | 86.1 | $ | 57.4 | $ | 129.9 | $ | 98.5 | $ | 94.6 | $ | 55.3 | $ | 131.6 | $ | 83.6 | ||||||||||||||||
(a) | Includes all mark-to-market trading activities in the IB, plus available-for-sale
securities held for the IBs proprietary purposes (included within Fixed income). Amounts
exclude VAR related to the Firms private equity business. For a discussion of Private equity
risk management, see page 62 of this Form 10Q. |
|
(b) | Includes VAR on derivative credit valuation adjustments, credit valuation adjustment hedges
and mark-to-market hedges of the accrual loan portfolio, which are all reported in Trading
revenue. This VAR does not include the accrual loan portfolio, which is not marked to market. |
|
(c) | JPMorgan Chases average and period-end VARs are less than the sum of the VARs of its market
risk components, due to risk offsets resulting from portfolio diversification. The
diversification effect reflects the fact that the risks are not perfectly correlated. The risk
of a portfolio of positions is therefore usually less than the sum of the risks of the
positions themselves. |
|
(d) | Designated as NM because the minimum and maximum may occur on different days for different
risk components, and hence it is not meaningful to compute a portfolio diversification effect. |
|
(e) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
60
61
Immediate change in rates | ||||||||||||
(in millions) | +200bp | +100bp | -100bp | |||||||||
September 30,
2005 |
$ | (195 | ) | $ | (52 | ) | $ | 51 | ||||
December 31, 2004 |
(557 | ) | (164 | ) | (180 | ) | ||||||
62
Trading assets | Trading liabilities | |||||||||||||||||||
Securities | Securities | AFS | ||||||||||||||||||
purchased(a) | Derivatives(b) | sold(a) | Derivatives(b) | securities | ||||||||||||||||
Fair value based on: |
||||||||||||||||||||
Quoted market prices |
85 | % | 2 | % | 97 | % | 1 | % | 94 | % | ||||||||||
Internal models with significant
observable market parameters |
14 | 97 | 2 | 97 | 5 | |||||||||||||||
Internal models with significant
unobservable market parameters |
1 | 1 | 1 | 2 | 1 | |||||||||||||||
Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
(a) | Reflected as debt and equity instruments on the Firms Consolidated balance sheets. |
|
(b) | Based on gross mark-to-market valuations of the Firms derivatives portfolio prior to netting
positions pursuant to FIN 39, as cross-product netting is not relevant to an analysis based
upon valuation methodologies. |
63
64
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004(a) | |||||||||||||
Revenue |
||||||||||||||||
Investment banking fees |
$ | 989 | $ | 879 | $ | 2,943 | $ | 2,464 | ||||||||
Trading revenue |
2,499 | 408 | 4,745 | 3,001 | ||||||||||||
Lending & deposit related fees |
865 | 943 | 2,536 | 1,769 | ||||||||||||
Asset management, administration and commissions |
2,628 | 2,185 | 7,667 | 5,835 | ||||||||||||
Securities/private equity gains (losses) |
343 | 413 | 705 | 1,305 | ||||||||||||
Mortgage fees and related income |
201 | 233 | 899 | 721 | ||||||||||||
Credit card income |
1,855 | 1,782 | 5,352 | 3,018 | ||||||||||||
Other income |
233 | 210 | 930 | 602 | ||||||||||||
Noninterest revenue |
9,613 | 7,053 | 25,777 | 18,715 | ||||||||||||
Interest income |
11,435 | 9,493 | 33,016 | 20,733 | ||||||||||||
Interest expense |
6,583 | 4,041 | 17,938 | 9,301 | ||||||||||||
Net interest income |
4,852 | 5,452 | 15,078 | 11,432 | ||||||||||||
Total net revenue |
14,465 | 12,505 | 40,855 | 30,147 | ||||||||||||
Provision for credit losses |
1,245 | 1,169 | 2,259 | 1,387 | ||||||||||||
Noninterest expense |
||||||||||||||||
Compensation expense |
5,001 | 4,050 | 13,969 | 10,295 | ||||||||||||
Occupancy expense |
549 | 604 | 1,654 | 1,475 | ||||||||||||
Technology and communications expense |
899 | 1,046 | 2,715 | 2,651 | ||||||||||||
Professional & outside services |
1,018 | 1,103 | 3,222 | 2,671 | ||||||||||||
Marketing |
512 | 506 | 1,532 | 907 | ||||||||||||
Other expense |
882 | 920 | 2,641 | 1,878 | ||||||||||||
Amortization of intangibles |
382 | 396 | 1,150 | 554 | ||||||||||||
Total noninterest expense
before merger costs and
litigation reserve charge |
9,243 | 8,625 | 26,883 | 20,431 | ||||||||||||
Merger costs |
221 | 752 | 645 | 842 | ||||||||||||
Litigation reserve charge |
| | 2,772 | 3,700 | ||||||||||||
Total noninterest expense |
9,464 | 9,377 | 30,300 | 24,973 | ||||||||||||
Income before income tax expense |
3,756 | 1,959 | 8,296 | 3,787 | ||||||||||||
Income tax expense |
1,229 | 541 | 2,511 | 987 | ||||||||||||
Net income |
$ | 2,527 | $ | 1,418 | $ | 5,785 | $ | 2,800 | ||||||||
Net income applicable to common stock |
$ | 2,524 | $ | 1,405 | $ | 5,774 | $ | 2,761 | ||||||||
Net income per common share |
||||||||||||||||
Basic earnings per share |
$ | 0.72 | $ | 0.40 | $ | 1.65 | $ | 1.09 | ||||||||
Diluted earnings per share |
0.71 | 0.39 | 1.62 | 1.06 | ||||||||||||
Average basic shares |
3,485.0 | 3,513.5 | 3,498.4 | 2,533.1 | ||||||||||||
Average diluted shares |
3,547.7 | 3,592.0 | 3,555.1 | 2,598.5 | ||||||||||||
Cash dividends per common share |
$ | 0.34 | $ | 0.34 | $ | 1.02 | $ | 1.02 | ||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
65
September 30, | December 31, | |||||||
2005 | 2004 | |||||||
Assets |
||||||||
Cash and due from banks |
$ | 33,036 | $ | 35,168 | ||||
Deposits with banks |
14,337 | 21,680 | ||||||
Federal funds sold and securities purchased under resale agreements |
122,876 | 101,354 | ||||||
Securities borrowed |
64,381 | 47,428 | ||||||
Trading assets (including assets pledged of $108,558 at September 30, 2005, and $77,266 at December 31, 2004) |
304,560 | 288,814 | ||||||
Securities: |
||||||||
Available-for-sale (including assets pledged of $23,595 at September 30, 2005, and $26,881 at December 31, 2004) |
68,613 | 94,402 | ||||||
Held-to-maturity (fair value: $88 at September 30, 2005, and $117 at December 31, 2004) |
84 | 110 | ||||||
Interests in purchased receivables |
28,766 | 31,722 | ||||||
Loans |
420,504 | 402,114 | ||||||
Allowance for loan losses |
(7,220 | ) | (7,320 | ) | ||||
Loans, net of Allowance for loan losses |
413,284 | 394,794 | ||||||
Private equity investments |
6,081 | 7,735 | ||||||
Accrued interest and accounts receivable |
28,872 | 21,409 | ||||||
Premises and equipment |
9,297 | 9,145 | ||||||
Goodwill |
43,555 | 43,203 | ||||||
Other intangible assets: |
||||||||
Mortgage servicing rights |
6,057 | 5,080 | ||||||
Purchased credit card relationships |
3,352 | 3,878 | ||||||
All other intangibles |
5,139 | 5,726 | ||||||
Other assets |
50,743 | 45,600 | ||||||
Total assets |
$ | 1,203,033 | $ | 1,157,248 | ||||
Liabilities |
||||||||
Deposits: |
||||||||
U.S. offices: |
||||||||
Noninterest-bearing |
$ | 134,129 | $ | 129,257 | ||||
Interest-bearing |
267,288 | 261,673 | ||||||
Non-U.S. offices: |
||||||||
Noninterest-bearing |
6,723 | 6,931 | ||||||
Interest-bearing |
126,983 | 123,595 | ||||||
Total deposits |
535,123 | 521,456 | ||||||
Federal funds purchased and securities sold under repurchase agreements |
143,404 | 127,787 | ||||||
Commercial paper |
16,166 | 12,605 | ||||||
Other borrowed funds |
15,400 | 9,039 | ||||||
Trading liabilities |
152,492 | 151,207 | ||||||
Accounts payable, accrued expenses and other liabilities (including the Allowance for lending-related
commitments of $395 at September 30, 2005, and $492 at December 31, 2004) |
74,698 | 75,722 | ||||||
Beneficial interests issued by consolidated VIEs |
46,140 | 48,061 | ||||||
Long-term debt |
101,853 | 95,422 | ||||||
Junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities |
11,622 | 10,296 | ||||||
Total liabilities |
1,096,898 | 1,051,595 | ||||||
Commitments and contingencies (see Note 17 of this Form 10Q) |
||||||||
Stockholders equity |
||||||||
Preferred stock |
139 | 339 | ||||||
Common stock (authorized 9,000,000,000 shares; issued 3,608,462,457 shares and 3,584,747,502 shares
at September 30, 2005, and December 31, 2004, respectively) |
3,608 | 3,585 | ||||||
Capital surplus |
74,396 | 72,801 | ||||||
Retained earnings |
32,350 | 30,209 | ||||||
Accumulated other comprehensive income (loss) |
(602 | ) | (208 | ) | ||||
Treasury stock, at cost (105,055,027 shares at September 30, 2005, and 28,556,534 shares at December 31, 2004) |
(3,756 | ) | (1,073 | ) | ||||
Total stockholders equity |
106,135 | 105,653 | ||||||
Total liabilities and stockholders equity |
$ | 1,203,033 | $ | 1,157,248 | ||||
66
Nine months ended | ||||||||
September 30, | ||||||||
2005 | 2004(a) | |||||||
Preferred stock |
||||||||
Balance at beginning of the year |
$ | 339 | $ | 1,009 | ||||
Redemption of preferred stock |
(200 | ) | | |||||
Balance at end of period |
139 | 1,009 | ||||||
Common stock |
||||||||
Balance at beginning of year |
3,585 | 2,044 | ||||||
Issuance of common stock |
23 | 63 | ||||||
Issuance of common stock for purchase accounting acquisition |
| 1,469 | ||||||
Balance at end of period |
3,608 | 3,576 | ||||||
Capital surplus |
||||||||
Balance at beginning of year |
72,801 | 13,512 | ||||||
Issuance of common stock and options for purchase accounting acquisition |
| 55,867 | ||||||
Issuance of common stock and commitments to issue common stock for employee
stock-based awards and related tax effects |
1,595 | 2,804 | ||||||
Balance at end of period |
74,396 | 72,183 | ||||||
Retained earnings |
||||||||
Balance at beginning of year |
30,209 | 29,681 | ||||||
Net income |
5,785 | 2,800 | ||||||
Cash dividends declared: |
||||||||
Preferred stock |
(11 | ) | (39 | ) | ||||
Common stock ($1.02 per share each period) |
(3,633 | ) | (2,663 | ) | ||||
Balance at end of period |
32,350 | 29,779 | ||||||
Accumulated other comprehensive income (loss) |
||||||||
Balance at beginning of year |
(208 | ) | (30 | ) | ||||
Other comprehensive income (loss) |
(394 | ) | (212 | ) | ||||
Balance at end of period |
(602 | ) | (242 | ) | ||||
Treasury stock, at cost |
||||||||
Balance at beginning of year |
(1,073 | ) | (62 | ) | ||||
Purchase of treasury stock |
(2,411 | ) | (138 | ) | ||||
Share repurchases related to employee stock-based awards |
(272 | ) | (252 | ) | ||||
Balance at end of period |
(3,756 | ) | (452 | ) | ||||
Total stockholders equity at end of period |
$ | 106,135 | $ | 105,853 | ||||
Comprehensive income |
||||||||
Net income |
$ | 5,785 | $ | 2,800 | ||||
Other comprehensive income (loss) |
(394 | ) | (212 | ) | ||||
Comprehensive income |
$ | 5,391 | $ | 2,588 | ||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
67
Nine months ended September 30, | ||||||||
2005 | 2004(a) | |||||||
Operating activities |
||||||||
Net income |
$ | 5,785 | $ | 2,800 | ||||
Adjustments to reconcile net income to net cash (used in) operating
activities: |
||||||||
Provision for credit losses |
2,259 | 1,387 | ||||||
Depreciation and amortization |
3,255 | 2,604 | ||||||
Deferred tax benefit |
(531 | ) | (684 | ) | ||||
Investment securities (gains) losses |
796 | (305 | ) | |||||
Private equity unrealized (gains) losses |
30 | (408 | ) | |||||
Net change in: |
||||||||
Trading assets |
(13,400 | ) | (29,795 | ) | ||||
Securities borrowed |
(16,953 | ) | (7,934 | ) | ||||
Accrued interest and accounts receivable |
(7,414 | ) | (858 | ) | ||||
Other assets |
(7,315 | ) | (8,585 | ) | ||||
Trading liabilities |
768 | (5,293 | ) | |||||
Accounts payable, accrued expenses and other liabilities |
(290 | ) | 5,942 | |||||
Other operating adjustments |
| (64 | ) | |||||
Net cash (used in) operating activities |
(33,010 | ) | (41,193 | ) | ||||
Investing activities |
||||||||
Net change in: |
||||||||
Deposits with banks |
7,460 | (15,598 | ) | |||||
Federal funds sold and securities purchased under resale agreements |
(21,364 | ) | (7,778 | ) | ||||
Other change in loans |
(109,283 | ) | (100,866 | ) | ||||
Held-to-maturity securities: |
||||||||
Proceeds |
26 | 55 | ||||||
Available-for-sale securities: |
||||||||
Proceeds from maturities |
24,113 | 8,554 | ||||||
Proceeds from sales |
58,159 | 108,314 | ||||||
Purchases |
(62,709 | ) | (108,530 | ) | ||||
Loans due to sales and securitizations |
88,449 | 82,463 | ||||||
Net cash (used) received in business acquisitions |
(503 | ) | 14,281 | |||||
All other investing activities, net |
4,445 | 515 | ||||||
Net cash (used in) investing activities |
(11,207 | ) | (18,590 | ) | ||||
Financing activities |
||||||||
Net change in: |
||||||||
Deposits |
12,153 | 23,178 | ||||||
Federal funds purchased and securities sold under repurchase agreements |
15,617 | 46,591 | ||||||
Commercial paper and other borrowed funds |
9,922 | (6,226 | ) | |||||
Proceeds from the issuance of long-term debt and capital debt securities |
31,995 | 19,828 | ||||||
Repayments of long-term debt and capital debt securities |
(22,211 | ) | (11,580 | ) | ||||
Net issuance of stock and stock-based awards |
429 | 1,444 | ||||||
Redemption of preferred stock |
(200 | ) | | |||||
Treasury stock purchased |
(2,411 | ) | (138 | ) | ||||
Cash dividends paid |
(3,669 | ) | (2,691 | ) | ||||
All other financing activities, net |
804 | | ||||||
Net cash provided by financing activities |
42,429 | 70,406 | ||||||
Effect of exchange rate changes on cash and due from banks |
(344 | ) | (76 | ) | ||||
Net increase (decrease) in cash and due from banks |
(2,132 | ) | 10,547 | |||||
Cash and due from banks at the beginning of the year |
35,168 | 20,268 | ||||||
Cash and due from banks at the end of the period |
$ | 33,036 | $ | 30,815 | ||||
Cash interest paid |
$ | 17,849 | $ | 9,152 | ||||
Cash income taxes paid |
3,585 | 947 | ||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
68
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(in millions, except per share data) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Net interest income |
$ | 30 | $ | 25 | $ | 83 | $ | 69 | ||||||||
Noninterest revenue |
22 | 18 | 67 | 64 | ||||||||||||
Total net revenue |
52 | 43 | 150 | 133 | ||||||||||||
Provision for credit losses |
| | | | ||||||||||||
Noninterest expense |
31 | 36 | 96 | 102 | ||||||||||||
Operating earnings before income taxes |
21 | 7 | 54 | 31 | ||||||||||||
Income tax expense |
8 | 2 | 21 | 9 | ||||||||||||
Operating earnings |
$ | 13 | $ | 5 | $ | 33 | $ | 22 | ||||||||
JPMorgan Chase basic earnings per share: |
||||||||||||||||
Including BrownCo |
$ | 0.72 | $ | 0.40 | $ | 1.65 | $ | 1.09 | ||||||||
Excluding BrownCo |
0.72 | 0.40 | 1.64 | 1.08 | ||||||||||||
JPMorgan Chase diluted earnings per share: |
||||||||||||||||
Including BrownCo |
$ | 0.71 | $ | 0.39 | $ | 1.62 | $ | 1.06 | ||||||||
Excluding BrownCo |
0.71 | 0.39 | 1.61 | 1.05 | ||||||||||||
Selected balance sheet data (average) |
||||||||||||||||
Total assets |
$ | 3,892 | $ | 3,906 | $ | 3,866 | $ | 3,944 | ||||||||
Loans |
3,031 | 2,741 | 2,994 | 2,662 | ||||||||||||
Deposits |
3,118 | 3,414 | 3,339 | 3,460 | ||||||||||||
Equity |
284 | 284 | 284 | 284 | ||||||||||||
Business metrics |
||||||||||||||||
Assets under supervision (in billions) |
$ | 34 | $ | 30 | ||||||||||||
69
Nine months ended | ||||
(in millions, except per share data) | September 30, 2004 | |||
Noninterest revenue |
$ | 23,554 | ||
Net interest income |
16,037 | |||
Total net revenue |
39,591 | |||
Provision for credit losses |
1,570 | |||
Noninterest expense |
31,118 | |||
Income before income tax expense |
6,903 | |||
Net income |
$ | 4,878 | ||
Net income per common share: |
||||
Basic |
$ | 1.38 | ||
Diluted |
1.35 | |||
Average common shares outstanding: |
||||
Basic |
3,508.9 | |||
Diluted |
3,590.0 | |||
70
September 30, | December 31, | |||||||
(in millions) | 2005 | 2004 | ||||||
Trading assets |
||||||||
Debt and equity instruments: |
||||||||
U.S. government and federal agency obligations |
$ | 17,883 | $ | 16,867 | ||||
U.S. government-sponsored enterprise obligations |
35,287 | 23,513 | ||||||
Obligations of state and political subdivisions |
7,914 | 3,486 | ||||||
Certificates of deposit, bankers acceptances and commercial paper |
8,542 | 7,341 | ||||||
Debt securities issued by non-U.S. governments |
54,393 | 50,699 | ||||||
Corporate securities and other |
126,152 | 120,926 | ||||||
Total debt and equity instruments |
250,171 | 222,832 | ||||||
Derivative receivables(a) |
||||||||
Interest rate |
33,043 | 45,892 | ||||||
Foreign exchange |
4,069 | 7,939 | ||||||
Equity |
6,659 | 6,120 | ||||||
Credit derivatives |
3,975 | 2,945 | ||||||
Commodity |
6,643 | 3,086 | ||||||
Total derivative receivables |
54,389 | 65,982 | ||||||
Total trading assets |
$ | 304,560 | $ | 288,814 | ||||
Trading liabilities |
||||||||
Debt and equity instruments(b) |
$ | 99,163 | $ | 87,942 | ||||
Derivative payables:(a) |
||||||||
Interest rate |
31,283 | 41,075 | ||||||
Foreign exchange |
4,114 | 8,969 | ||||||
Equity |
10,739 | 9,096 | ||||||
Credit derivatives |
2,435 | 2,499 | ||||||
Commodity |
4,758 | 1,626 | ||||||
Total derivative payables |
53,329 | 63,265 | ||||||
Total trading liabilities |
$ | 152,492 | $ | 151,207 | ||||
(a) | Included in Trading assets and Trading liabilities are the reported receivables
(unrealized gains) and payables (unrealized losses) related to derivatives. These amounts
include the effect of legally enforceable master netting agreements, including cash paid and
received. |
|
(b) | Primarily represents securities sold, not yet purchased. |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(in millions) |
2005 | 2004 | 2005 | 2004 | (a) | |||||||||||
Interest income |
||||||||||||||||
Loans |
$ | 6,721 | $ | 5,648 | $ | 19,050 | $ | 11,029 | ||||||||
Securities |
707 | 1,011 | 2,395 | 2,390 | ||||||||||||
Trading assets |
2,237 | 1,990 | 6,853 | 5,455 | ||||||||||||
Federal funds sold and securities purchased under
resale agreements |
1,094 | 474 | 2,762 | 1,095 | ||||||||||||
Securities borrowed |
301 | 120 | 835 | 303 | ||||||||||||
Deposits with banks |
128 | 131 | 472 | 331 | ||||||||||||
Interests in purchased receivables |
247 | 119 | 649 | 130 | ||||||||||||
Total interest income |
11,435 | 9,493 | 33,016 | 20,733 | ||||||||||||
Interest expense |
||||||||||||||||
Interest-bearing deposits |
2,720 | 1,324 | 7,069 | 2,956 | ||||||||||||
Short-term and other liabilities |
2,469 | 1,758 | 6,945 | 4,502 | ||||||||||||
Long-term debt |
1,031 | 788 | 2,970 | 1,595 | ||||||||||||
Beneficial interests issued by consolidated VIEs |
363 | 171 | 954 | 248 | ||||||||||||
Total interest expense |
6,583 | 4,041 | 17,938 | 9,301 | ||||||||||||
Net interest income |
4,852 | 5,452 | 15,078 | 11,432 | ||||||||||||
Provision for credit losses |
1,245 | 1,169 | 2,259 | 1,387 | ||||||||||||
Net interest income after provision for credit losses |
$ | 3,607 | $ | 4,283 | $ | 12,819 | $ | 10,045 | ||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
71
Other | |||||||||||||||||||||||||
Pension plans | Postretirement | ||||||||||||||||||||||||
U.S. | Non-U.S. | benefit plans | |||||||||||||||||||||||
Three months ended September 30, (in millions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||||||||||||||
Components of net periodic benefit costs |
|||||||||||||||||||||||||
Defined benefit plans: |
|||||||||||||||||||||||||
Benefits earned during the period |
$ | 60 | $ | 74 | $ | 7 | $ | 4 | $ | 2 | $ | 3 | |||||||||||||
Interest cost on benefit obligations |
108 | 108 | 26 | 21 | 18 | 20 | |||||||||||||||||||
Expected return on plan assets |
(174 | ) | (195 | ) | (27 | ) | (22 | ) | (24 | ) | (22 | ) | |||||||||||||
Amortization of unrecognized amounts: |
|||||||||||||||||||||||||
Prior service cost |
(1 | ) | 2 | | | (9 | ) | | |||||||||||||||||
Net actuarial (gain) loss |
4 | (9 | ) | 9 | 11 | 10 | | ||||||||||||||||||
Curtailment (gain) loss |
| | | | (16 | ) | 8 | ||||||||||||||||||
Settlement loss |
| | | | | | |||||||||||||||||||
Subtotal |
(3 | ) | (20 | ) | 15 | 14 | (19 | ) | 9 | ||||||||||||||||
Other defined benefit pension plans(a) |
7 | 6 | 9 | 5 | | | |||||||||||||||||||
Total defined benefit pension plans |
4 | (14 | ) | 24 | 19 | (19 | ) | 9 | |||||||||||||||||
Defined contribution plans |
60 | 60 | 42 | 43 | | | |||||||||||||||||||
Total pension and other postretirement benefit expense |
$ | 64 | $ | 46 | $ | 66 | $ | 62 | $ | (19 | ) | $ | 9 | ||||||||||||
Other | |||||||||||||||||||||||||
Pension plans | Postretirement | ||||||||||||||||||||||||
U.S. | Non-U.S. | benefit plans | |||||||||||||||||||||||
Nine months ended September 30, (in millions)(b) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||||||||||||||
Components of net periodic benefit costs |
|||||||||||||||||||||||||
Defined benefit plans: |
|||||||||||||||||||||||||
Benefits earned during the period |
$ | 210 | $ | 172 | $ | 19 | $ | 11 | $ | 10 | $ | 12 | |||||||||||||
Interest cost on benefit obligations |
323 | 242 | 79 | 64 | 60 | 58 | |||||||||||||||||||
Expected return on plan assets |
(520 | ) | (386 | ) | (82 | ) | (66 | ) | (68 | ) | (64 | ) | |||||||||||||
Amortization of unrecognized amounts: |
|||||||||||||||||||||||||
Prior service cost |
3 | 10 | | | (7 | ) | | ||||||||||||||||||
Net actuarial (gain) loss |
4 | 12 | 29 | 33 | 10 | | |||||||||||||||||||
Curtailment loss |
| | | | (16 | ) | 8 | ||||||||||||||||||
Settlement loss |
| | | 5 | | | |||||||||||||||||||
Subtotal |
20 | 50 | 45 | 47 | (11 | ) | 14 | ||||||||||||||||||
Other defined benefit pension plans(a) |
20 | 21 | 29 | 22 | | | |||||||||||||||||||
Total defined benefit pension plans |
40 | 71 | 74 | 69 | (11 | ) | 14 | ||||||||||||||||||
Defined contribution plans |
182 | 132 | 130 | 103 | | | |||||||||||||||||||
Total pension and other postretirement benefit expense |
$ | 222 | $ | 203 | $ | 204 | $ | 172 | $ | (11 | ) | $ | 14 | ||||||||||||
(a) | Includes U.S. defined benefit pension plans not subject to Title IV of the Employee
Retirement Income Security Act of 1974 (e.g., Excess Retirement Plan) and immaterial non-U.S.
defined benefit pension plans. |
|
(b) | Year-to-date 2004 results include three months of the combined Firms results and six months
of heritage JPMorgan Chase results. |
72
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30 | ||||||||||||||||
(in millions, except per share data) | 2005 | 2004 | 2005 | 2004(a) | |||||||||||||
Net income as reported |
$ | 2,527 | $ | 1,418 | $ | 5,785 | $ | 2,800 | |||||||||
Add: Employee stock-based compensation expense originally
included in reported net income |
205 | 227 | 649 | 581 | |||||||||||||
Deduct: Employee stock-based compensation expense determined
under the fair value method for all awards |
(238 | ) | (265 | ) | (775 | ) | (703 | ) | |||||||||
Pro forma net income |
$ | 2,494 | $ | 1,380 | $ | 5,659 | $ | 2,678 | |||||||||
Earnings per share: |
|||||||||||||||||
Basic: As reported |
$ | 0.72 | $ | 0.40 | $ | 1.65 | $ | 1.09 | |||||||||
Pro forma |
0.71 | 0.39 | 1.61 | 1.04 | |||||||||||||
Diluted: As reported |
$ | 0.71 | $ | 0.39 | $ | 1.62 | $ | 1.06 | |||||||||
Pro forma |
0.70 | 0.38 | 1.59 | 1.01 | |||||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004(b) | |||||||||||||
Expense category |
|||||||||||||||||
Compensation |
$ | 11 | $ | 380 | $ | 175 | $ | 445 | |||||||||
Occupancy |
17 | 147 | 42 | 167 | |||||||||||||
Technology and communications and other |
193 | 225 | 428 | 230 | |||||||||||||
Total(a) |
$ | 221 | $ | 752 | $ | 645 | $ | 842 | |||||||||
(a) | With the exception of occupancy-related write-offs, all of the costs in the table require
the expenditure of cash. |
|
(b) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
(in millions) | 2005 | |||
Liability balance, January 1 |
$ | 952 | ||
Recorded as merger costs |
645 | |||
Recorded as goodwill |
(460 | ) | ||
Liability utilized |
(815 | ) | ||
Liability balance, September 30 |
$ | 322 | ||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004(a) | |||||||||||||
Realized gains |
$ | 25 | $ | 167 | $ | 263 | $ | 423 | |||||||||
Realized losses |
(69 | ) | (27 | ) | (1,059 | ) | (118 | ) | |||||||||
Net realized securities gains (losses) |
(44 | ) | 140 | (796 | ) | 305 | |||||||||||
Private equity gains |
387 | 273 | 1,501 | 1,000 | |||||||||||||
Total Securities/private equity gains (losses) |
$ | 343 | $ | 413 | $ | 705 | $ | 1,305 | |||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
73
September 30, 2005 | December 31, 2004 | |||||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Amortized | unrealized | unrealized | Fair | Amortized | unrealized | unrealized | Fair | |||||||||||||||||||||||||
(in millions) | cost | gains | losses | value | cost | gains | losses | value | ||||||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||||||||||||||
U.S. government and federal
agency obligations: |
||||||||||||||||||||||||||||||||
U.S. treasuries |
$ | 11,098 | $ | 1 | $ | 164 | $ | 10,935 | $ | 13,621 | $ | 7 | $ | 222 | $ | 13,406 | ||||||||||||||||
Mortgage-backed securities |
83 | 3 | | 86 | 2,405 | 41 | 17 | 2,429 | ||||||||||||||||||||||||
Agency obligations |
90 | 7 | 1 | 96 | 12 | | | 12 | ||||||||||||||||||||||||
Collateralized mortgage obligations |
39 | | | 39 | 71 | 4 | 4 | 71 | ||||||||||||||||||||||||
U.S. government-sponsored enterprise
obligations |
29,024 | 10 | 638 | 28,396 | 46,143 | 142 | 593 | 45,692 | ||||||||||||||||||||||||
Obligations of state and political subdivisions |
724 | 25 | 6 | 743 | 2,748 | 126 | 8 | 2,866 | ||||||||||||||||||||||||
Debt securities issued by non-U.S. governments |
5,444 | 16 | 13 | 5,447 | 7,901 | 59 | 38 | 7,922 | ||||||||||||||||||||||||
Corporate debt securities |
6,141 | 63 | 45 | 6,159 | 7,007 | 127 | 18 | 7,116 | ||||||||||||||||||||||||
Equity securities |
3,470 | 176 | 6 | 3,640 | 5,810 | 39 | 14 | 5,835 | ||||||||||||||||||||||||
Other, primarily asset-backed securities(a) |
13,052 | 56 | 36 | 13,072 | 9,103 | 25 | 75 | 9,053 | ||||||||||||||||||||||||
Total available-for-sale securities |
$ | 69,165 | $ | 357 | $ | 909 | $ | 68,613 | $ | 94,821 | $ | 570 | $ | 989 | $ | 94,402 | ||||||||||||||||
Held-to-maturity securities(b) |
||||||||||||||||||||||||||||||||
Total held-to-maturity securities |
$ | 84 | $ | 4 | $ | | $ | 88 | $ | 110 | $ | 7 | $ | | $ | 117 | ||||||||||||||||
(a) | Includes collateralized mortgage obligations of private issuers. |
|
(b) | Consists primarily of mortgage-backed securities issued by U.S. government-sponsored
enterprises. |
September 30, 2005 | December 31, 2004 | |||||||||||||||
(in millions) | Carrying value | Cost | Carrying value | Cost | ||||||||||||
Total private equity investments |
$ | 6,081 | $ | 7,712 | $ | 7,735 | $ | 9,103 | ||||||||
(in millions) | September 30, 2005 | December 31, 2004 | ||||||
Securities purchased under resale agreements |
$ | 117,409 | $ | 94,076 | ||||
Securities borrowed |
64,381 | 47,428 | ||||||
Securities sold under repurchase agreements |
$ | 123,688 | $ | 105,912 | ||||
Securities loaned |
10,339 | 6,435 | ||||||
74
(in millions) | September 30, 2005 | December 31, 2004 | ||||||
U.S. wholesale loans: |
||||||||
Commercial and industrial |
$ | 64,852 | $ | 60,223 | ||||
Real estate |
14,115 | 13,038 | ||||||
Financial institutions |
16,178 | 14,060 | ||||||
Lease financing receivables |
2,724 | 4,043 | ||||||
Other |
15,179 | 8,504 | ||||||
Total U.S. wholesale loans |
113,048 | 99,868 | ||||||
Non-U.S. wholesale loans: |
||||||||
Commercial and industrial |
26,185 | 25,115 | ||||||
Real estate |
2,306 | 1,747 | ||||||
Financial institutions |
9,014 | 7,269 | ||||||
Lease financing receivables |
1,038 | 1,068 | ||||||
Total non-U.S. wholesale loans |
38,543 | 35,199 | ||||||
Total wholesale loans:(a) |
||||||||
Commercial and industrial |
91,037 | 85,338 | ||||||
Real estate(b) |
16,421 | 14,785 | ||||||
Financial institutions |
25,192 | 21,329 | ||||||
Lease financing receivables |
3,762 | 5,111 | ||||||
Other |
15,179 | 8,504 | ||||||
Total wholesale loans |
151,591 | 135,067 | ||||||
Total consumer loans:(c) |
||||||||
Home finance
Home equity & other |
74,309 | 67,837 | ||||||
Mortgage |
60,076 | 56,816 | ||||||
Total Home finance |
134,385 | 124,653 | ||||||
Auto & education finance |
51,309 | 62,712 | ||||||
Consumer & small business and other |
14,740 | 15,107 | ||||||
Credit card receivables(d) |
68,479 | 64,575 | ||||||
Total consumer loans |
268,913 | 267,047 | ||||||
Total loans(e)(f)(g) |
$ | 420,504 | $ | 402,114 | ||||
(a) | Includes Investment Bank, Commercial Banking, Treasury & Securities Services and Asset &
Wealth Management. |
|
(b) | Represents credits extended for real estaterelated purposes to borrowers who are primarily
in the real estate development or investment businesses and for which the primary repayment is
from the sale, lease, management, operations or refinancing of the property. |
|
(c) | Includes Retail Financial Services and Card Services. |
|
(d) | Includes billed finance charges and fees net of an allowance for uncollectible amounts. |
|
(e) | Loans are presented net
of unearned income of $3.2 billion and $4.1 billion at September 30,
2005, and December 31, 2004, respectively. |
|
(f) | Includes loans held-for-sale (principally mortgage-related loans) of $35.6 billion and $25.7
billion at September 30, 2005, and December 31, 2004, respectively. |
|
(g) | Amounts are presented gross of the Allowance for loan losses. |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004(a) | ||||||||||||
Net gains on sales of loans held-for-sale |
$ | 158 | $ | (6 | ) | $ | 459 | $ | 287 | |||||||
Lower of cost or market adjustments |
(76 | ) | 15 | (193 | ) | 25 | ||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
75
Nine months ended September 30, | ||||||||
(in millions) | 2005 | 2004(b) | ||||||
Allowance for loan losses at January 1 |
$ | 7,320 | $ | 4,523 | ||||
Addition resulting from the Merger, July 1 |
| 3,123 | ||||||
Gross charge-offs |
(3,156 | ) | (2,240 | ) | ||||
Gross recoveries |
697 | 539 | ||||||
Net charge-offs |
(2,459 | ) | (1,701 | ) | ||||
Provision for loan losses: |
||||||||
Provision excluding accounting policy
conformity |
2,356 | 1,117 | ||||||
Accounting policy conformity |
| 560 | (c) | |||||
Total provision for loan losses |
2,356 | 1,677 | ||||||
Other |
3 | (129 | )(d) | |||||
Allowance for loan losses at September 30 |
$ | 7,220 | (a) | $ | 7,493 | (e) | ||
(a) | Includes $341 million of asset-specific and $6.9 billion of formula-based allowance at
September 30, 2005. Included within the formula-based allowance is $5.0 billion related to a
statistical calculation (including $400 million related to Hurricane Katrina), and an
adjustment to the statistical calculation of $1.9 billion. |
|
(b) | Includes three months of the combined Firms results and six months of heritage JPMorgan Chase
results. |
|
(c) | Represents an increase of $721 million as a result of the decertification of heritage Bank
One sellers interest in credit card securitizations, partially offset by a reduction of $161
million to conform provision methodologies. |
|
(d) | Primarily represents the transfer of the allowance for accrued interest and fees on reported
and securitized credit card loans. |
|
(e) | Includes $498 million of asset-specific and $7.0 billion of formula-based allowance at
December 31, 2004. Included within the formula-based allowance is $5.0 billion related to a
statistical calculation and an adjustment to the statistical calculation of $2.0 billion. |
Nine months ended September 30, | ||||||||
(in millions) | 2005 | 2004(b) | ||||||
Allowance for lending-related commitments at January 1 |
$ | 492 | $ | 324 | ||||
Addition resulting from the Merger, July 1 |
| 508 | ||||||
Provision for lending-related commitments: |
||||||||
Provision excluding accounting policy
conformity |
(97 | ) | (63 | ) | ||||
Accounting policy conformity |
| (227 | ) | |||||
Total provision for lending-related
commitments |
(97 | ) | (290 | ) | ||||
Other |
| (1 | ) | |||||
Allowance for lending-related commitments at September 30 |
$ | 395 | (a) | $ | 541 | (c) | ||
(a) | Includes $90 million of asset-specific and $305 million of formula-based allowance at
September 30, 2005. The formula-based allowance for lending-related commitments is based on a
statistical calculation. There is no adjustment to the statistical calculation for
lending-related commitments. |
|
(b) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
|
(c) | Includes $107 million of asset specific and $434 million of formula-based allowance at
September 30, 2004. The formula-based allowance for lending-related commitments is based on a
statistical calculation. There is no adjustment to the statistical calculation for
lending-related commitments. |
76
(in billions) | September 30, 2005 | December 31, 2004 | ||||||
Credit card receivables |
$ | 96.3 | $ | 106.3 | ||||
Residential mortgage receivables |
24.4 | 19.1 | ||||||
Wholesale activities(a) |
61.7 | 44.8 | ||||||
Automobile loans |
4.9 | 4.9 | ||||||
Total |
$ | 187.3 | $ | 175.1 | ||||
(a) | Co-sponsored securitizations may include non-JPMC originated assets. |
Three months ended September 30, | ||||||||||||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||||||||||
Wholesale | Wholesale | |||||||||||||||||||||||||||||||
(in millions) | Mortgage(b) | Credit card | Automobile | Activities(c) | Mortgage | Credit card | Automobile | Activities | ||||||||||||||||||||||||
Principal securitized |
$ | 4,775 | $ | 4,825 | $ | | $ | 7,364 | $ | 841 | $ | 3,050 | $ | | $ | 1,920 | ||||||||||||||||
Pre-tax gains (losses) |
2 | 32 | | 20 | (12 | ) | 17 | | 25 | |||||||||||||||||||||||
Cash flow information: |
||||||||||||||||||||||||||||||||
Proceeds from securitizations |
$ | 4,772 | $ | 4,825 | $ | | $ | 7,467 | $ | 839 | $ | 3,050 | $ | | $ | 1,511 | ||||||||||||||||
Servicing fees collected |
5 | 31 | | | 3 | 22 | | 1 | ||||||||||||||||||||||||
Other cash flows received |
| 114 | | | | 74 | | | ||||||||||||||||||||||||
Proceeds from collections reinvested
in revolving securitizations |
| 33,117 | | | | 42,044 | | | ||||||||||||||||||||||||
Key assumptions (rates per annum): |
||||||||||||||||||||||||||||||||
Prepayment rate(a) |
| 20 | % | | 0-41 | % | | 16.7 | % | | 50.0 | % | ||||||||||||||||||||
PPR | PPR | |||||||||||||||||||||||||||||||
Weighted-average life (in years) |
| 0.4 | | 1.8-13.3 | | 0.5 | | 2.0 | ||||||||||||||||||||||||
Expected credit losses |
| 4.7 | % | | 0.8-1.8 | % | | 5.6 | % | | NA | (e) | ||||||||||||||||||||
Discount rate |
| 12.0 | % | | 11.1-20.0 | % | | 12.0 | % | | 0.7 | % | ||||||||||||||||||||
Nine months ended September 30, | ||||||||||||||||||||||||||||||||
2005 | 2004(f) | |||||||||||||||||||||||||||||||
Wholesale | Wholesale | |||||||||||||||||||||||||||||||
(in millions) | Mortgage(b) | Credit card | Automobile | Activities(c) | Mortgage | Credit card | Automobile | Activities | ||||||||||||||||||||||||
Principal securitized |
$ | 11,056 | $ | 10,100 | $ | 2,300 | $ | 13,760 | $ | 4,650 | $ | 6,300 | $ | 1,600 | $ | 6,401 | ||||||||||||||||
Pre-tax gains (losses) |
22 | 67 | 10 | (d) | 74 | 52 | 36 | (3 | ) | 94 | ||||||||||||||||||||||
Cash flow information: |
||||||||||||||||||||||||||||||||
Proceeds from securitizations |
$ | 11,074 | $ | 10,100 | $ | 1,618 | $ | 13,912 | $ | 4,702 | $ | 6,300 | $ | 1,597 | $ | 6,471 | ||||||||||||||||
Servicing fees collected |
9 | 44 | 2 | | 7 | 35 | 1 | 2 | ||||||||||||||||||||||||
Other cash flows received |
| 169 | | | | 109 | | 12 | ||||||||||||||||||||||||
Proceeds from collections reinvested
in revolving securitizations |
| 95,623 | | | | 71,234 | | | ||||||||||||||||||||||||
Key assumptions (rates per annum): |
||||||||||||||||||||||||||||||||
Prepayment rate(a) |
| 16.7-20.0 | % | 1.5 | % | 0-50 | % | 23.8-25.9 | % | 15.5-16.7 | % | 1.5 | % | 17.0-50.0 | % | |||||||||||||||||
PPR | ABS | CPR | PPR | ABS | ||||||||||||||||||||||||||||
Weighted-average life (in years) |
| 0.4-0.5 | 1.5 | 1.0-13.3 | 2.8-3.0 | 0.5-0.6 | 1.8 | 2.0-4.0 | ||||||||||||||||||||||||
Expected credit losses |
| 4.7-5.7 | % | 0.6 | % | 0-1.8 | % | 1.0 | %(e) | 5.5-5.8 | % | 0.6 | % | NA | (e) | |||||||||||||||||
Discount rate |
| 12.0 | % | 6.3 | % | 0.6-20.0 | % | 15.0-30.0 | % | 12.0 | % | 4.1 | % | 0.6-5.0 | % | |||||||||||||||||
(a) | CPR: constant prepayment rate; ABS: absolute prepayment speed; PPR: principal payment
rate. |
|
(b) | No interests other than servicing assets were retained in Mortgage in the first three
quarters of 2005. |
|
(c) | Wholesale activities consist of wholesale loans (primarily commercial real estate) originated
by the Investment Bank as well as $4.4 billion and $6.3 billion for the three months and nine
months ended September 30, 2005, respectively, of consumer loans purchased from the market,
packaged and securitized by the Investment Bank. |
|
(d) | The auto securitization gain of $10 million does not include the write-down of loans
transferred to held-for-sale in the first quarter of 2005 and risk management activities
intended to protect the economic value of loans while held-for-sale. |
|
(e) | Expected credit losses for prime residential mortgage and certain wholesale securitizations
are minimal and are incorporated into other assumptions. |
|
(f) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
77
(in millions) | September 30, 2005 | December 31, 2004 | ||||||
Residential mortgage(a) |
$ | 272 | $ | 433 | ||||
Credit card(a) |
473 | 494 | ||||||
Automobile(a)(b) |
116 | 85 | ||||||
Wholesale activities |
167 | 23 | ||||||
Total |
$ | 1,028 | $ | 1,035 | ||||
(a) | Pre-tax unrealized gains (losses) recorded in Stockholders equity that relate to
retained securitization interests totaled $93 million and $118 million for residential
mortgage; $3 million and $(3) million for credit cards; and $7 million and $11 million for
automobile at September 30, 2005, and December 31, 2004, respectively. |
|
(b) | In addition to the automobile retained interest amounts noted above, the Firm also retained
senior securities from a second quarter 2005 auto securitization that are classified as
available-for-sale securities. The remaining balance of $348 million at September 30, 2005, is
valued using quoted market prices. These securities are not included in the key economic
assumption and sensitivities table below. |
September 30, 2005 (in millions) | Mortgage | Credit card | Automobile | Wholesale activities | ||||||||||||
Weighted-average life (in years) |
0.6-3.6 | 0.4-0.8 | 1.1 | 0.2-13.3 | ||||||||||||
Prepayment rate |
10.6-43.3 | % CPR | 11.1-20.0 | % PPR | 1.5 | % ABS | 0.0-50.0 | %(a) | ||||||||
Impact of 10% adverse change |
$ | (1 | ) | $ | (39 | ) | $ | (2 | ) | $ | (4 | ) | ||||
Impact of 20% adverse change |
(3 | ) | (77 | ) | (5 | ) | (7 | ) | ||||||||
Loss assumption |
0.0-4.7 | %(b) | 4.8-8.3 | % | 0.7 | % | 0.8-1.8 | % | ||||||||
Impact of 10% adverse change |
$ | (10 | ) | $ | (115 | ) | $ | (4 | ) | $ | (4 | ) | ||||
Impact of 20% adverse change |
(19 | ) | (229 | ) | (7 | ) | (7 | ) | ||||||||
Discount rate |
13.0-30.0 | %(c) | 4.5-12.0 | % | 6.6 | % | 0.2-20.0 | % | ||||||||
Impact of 10% adverse change |
$ | (5 | ) | $ | (1 | ) | $ | (1 | ) | $ | (4 | ) | ||||
Impact of 20% adverse change |
(9 | ) | (3 | ) | (2 | ) | (8 | ) | ||||||||
December 31, 2004 (in millions) | Mortgage | Credit card | Automobile | Wholesale activities | ||||||||||||
Weighted-average life (in years) |
0.83.4 | 0.51.0 | 1.3 | 0.24.0 | ||||||||||||
Prepayment rate |
15.137.1 | % CPR | 8.316.7 | % PPR | 1.4 | % ABS | 0.050.0 | %(a) | ||||||||
Impact of 10% adverse change |
$ | (5 | ) | $ | (34 | ) | $ | (6 | ) | $ | (1 | ) | ||||
Impact of 20% adverse change |
(8 | ) | (69 | ) | (13 | ) | (1 | ) | ||||||||
Loss assumption |
0.05.0 | %(b) | 5.78.4 | % | 0.7 | % | 0.03.0 | % (b) | ||||||||
Impact of 10% adverse change |
$ | (17 | ) | $ | (144 | ) | $ | (4 | ) | $ | | |||||
Impact of 20% adverse change |
(34 | ) | (280 | ) | (8 | ) | | |||||||||
Discount rate |
13.030.0 | %(c) | 4.912.0 | % | 5.5 | % | 1.022.9 | % | ||||||||
Impact of 10% adverse change |
$ | (9 | ) | $ | (2 | ) | $ | (1 | ) | $ | | |||||
Impact of 20% adverse change |
(18 | ) | (4 | ) | (2 | ) | | |||||||||
78
(a) | Prepayment risk on certain wholesale retained interests are minimal and are incorporated
into other assumptions. |
|
(b) | Expected credit losses for prime residential mortgage and certain wholesale securitizations
are minimal and are incorporated into other assumptions. |
|
(c) | The Firm sells certain residual interests from subprime mortgage securitizations via Net
Interest Margin (NIM) securitizations and retains residual interests in these NIM
transactions, which are valued using a 30% discount rate. |
Nonaccrual and 90 days | ||||||||||||||||||||||||||||||||
Total Loans | or more past due | Net loan charge-offs | ||||||||||||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Sept. 30, | Dec. 31, | September 30, | September 30, | |||||||||||||||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004(d) | ||||||||||||||||||||||||
Loans reported |
||||||||||||||||||||||||||||||||
Home finance |
$ | 134,385 | $ | 124,653 | $ | 710 | $ | 673 | $ | 38 | $ | 63 | $ | 117 | $ | 119 | ||||||||||||||||
Auto & education finance |
51,309 | 62,712 | 204 | 193 | 70 | 96 | 200 | 167 | ||||||||||||||||||||||||
Consumer & small
business and other |
14,740 | 15,107 | 289 | 295 | 36 | 60 | 93 | 98 | ||||||||||||||||||||||||
Credit card receivables |
68,479 | 64,575 | 1,110 | 1,006 | 766 | 670 | 2,150 | 1,199 | ||||||||||||||||||||||||
Total consumer loans |
268,913 | 267,047 | 2,313 | 2,167 | 910 | 889 | 2,560 | 1,583 | ||||||||||||||||||||||||
Total wholesale loans |
151,591 | 135,067 | 1,198 | 1,582 | (40 | ) | (24 | ) | (101 | ) | 118 | |||||||||||||||||||||
Total loans reported |
420,504 | 402,114 | 3,511 | 3,749 | 870 | 865 | 2,459 | 1,701 | ||||||||||||||||||||||||
Securitized loans: |
||||||||||||||||||||||||||||||||
Residential
mortgage(a) |
8,146 | 11,533 | 356 | 460 | 22 | 39 | 81 | 119 | ||||||||||||||||||||||||
Automobile |
4,840 | 4,763 | 10 | 12 | 4 | 6 | 11 | 18 | ||||||||||||||||||||||||
Credit card |
69,095 | 70,795 | 1,037 | 1,337 | 867 | 928 | 2,714 | 1,887 | ||||||||||||||||||||||||
Total consumer loans
securitized |
82,081 | 87,091 | 1,403 | 1,809 | 893 | 973 | 2,806 | 2,024 | ||||||||||||||||||||||||
Securitized wholesale activities |
5,329 | 1,401 | | | | 12 | | | ||||||||||||||||||||||||
Total loan
securitized(b) |
87,410 | 88,492 | 1,403 | 1,809 | 893 | 985 | 2,806 | 2,024 | ||||||||||||||||||||||||
Total loans reported and
securitized(c) |
$ | 507,914 | $ | 490,606 | $ | 4,914 | $ | 5,558 | $ | 1,763 | $ | 1,850 | $ | 5,265 | $ | 3,725 | ||||||||||||||||
(a) | Includes $6.7 billion and $10.3 billion of outstanding principal balances on securitized
subprime 14 family residential mortgage loans as of September 30, 2005, and December 31,
2004, respectively. |
|
(b) | Total assets held in
securitization-related SPEs were $187.3 billion and $175.1 billion at
September 30, 2005, and December 31, 2004, respectively.
The $87.4 billion and $88.5 billion
of loans securitized at September 30, 2005, and December 31, 2004, respectively, excludes:
$72.5 billion and $50.8 billion, respectively, of securitized loans in which the Firms only
continuing involvement is the servicing of the assets; $26.6 billion and $35.2 billion,
respectively, of sellers interests in credit card master
trusts; and $0.8 billion and $0.6
billion, respectively, of escrow accounts and other assets. |
|
(c) | Represents both loans on the Consolidated balance sheets and loans that have been
securitized, but excludes loans for which the Firms only continuing involvement is servicing
of the assets. |
|
(d) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
Consolidated | Nonconsolidated | Total | ||||||||||||||||||||||
(in billions) | Sept. 30, 2005 | Dec. 31, 2004 | Sept. 30, 2005 | Dec. 31, 2004 | Sept. 30, 2005 | Dec. 31, 2004 | ||||||||||||||||||
Total commercial paper issued by
conduits |
$ | 31.5 | $ | 35.8 | $ | 8.3 | $ | 9.3 | $ | 39.8 | $ | 45.1 | ||||||||||||
Commitments |
||||||||||||||||||||||||
Asset-purchase agreements |
$ | 45.7 | $ | 47.2 | $ | 15.3 | $ | 16.3 | $ | 61.0 | $ | 63.5 | ||||||||||||
Program-wide liquidity commitments |
4.0 | 4.0 | 1.0 | 2.0 | 5.0 | 6.0 | ||||||||||||||||||
Limited credit enhancements |
1.3 | 1.4 | 1.0 | 1.2 | 2.3 | 2.6 | ||||||||||||||||||
Maximum exposure to loss(a) |
46.4 | 48.2 | 15.6 | 16.9 | 62.0 | 65.1 | ||||||||||||||||||
79
(a) | The Firms maximum exposure to loss is limited to the amount of drawn commitments (i.e.,
sellers assets held by the multi-seller conduits for which the Firm provides liquidity
support) of $37.3 billion and $42.2 billion at September 30, 2005, and December 31, 2004,
respectively, plus contractual but undrawn commitments of $24.7 billion and $22.9 billion at
September 30, 2005, and December 31, 2004, respectively. Since the Firm provides credit
enhancement and liquidity to these multi-seller conduits, the maximum exposure is not adjusted
to exclude exposure absorbed by third-party liquidity providers. |
(in billions) | September 30, 2005 | December 31, 2004 | ||||||
Credit-linked note vehicles(a) |
$ | 16.2 | $ | 17.8 | ||||
Municipal bond vehicles(b) |
12.7 | 7.5 | ||||||
(a) | Assets of $1.9 billion and $2.3 billion reported in the table above were recorded on the
Firms Consolidated balance sheets at September 30, 2005, and December 31, 2004, respectively,
due to contractual relationships held by the Firm that relate to collateral held by the VIE. |
|
(b) | Total amounts consolidated due to the Firm owning residual interests was $4.5 billion and
$2.6 billion at September 30, 2005, and December 31, 2004, and are reported in the table
above. Total liquidity commitments were $5.7 billion and $3.1 billion at September 30, 2005,
and December 31, 2004, respectively. The Firms maximum credit exposure to all municipal bond
vehicles was $10.2 billion and $5.7 billion at September 30, 2005, and December 31, 2004,
respectively. |
(in billions) | September 30, 2005 | December 31, 2004 | ||||||||
Consolidated VIE assets(a)
|
||||||||||
Investment securities |
$ | 9.3 | $ | 10.6 | ||||||
Trading assets(b) |
8.6 | 4.7 | ||||||||
Loans |
5.5 | 3.4 | ||||||||
Interests in purchased receivables |
28.7 | 31.6 | ||||||||
Other assets |
3.0 | 0.4 | ||||||||
Total consolidated assets |
$ | 55.1 | $ | 50.7 | ||||||
(a) | The Firm also holds $4.2 billion and $3.4 billion of assets, at September 30, 2005, and
December 31, 2004, respectively, primarily as a sellers interest, in certain consumer
securitizations in a segregated entity, as part of a two-step securitization transaction. This
interest is included in the securitization activities disclosed in Note 12 on pages 7679 of
this Form 10Q. |
|
(b) | Includes the fair value of securities and derivatives. |
80
(in millions) | September 30, 2005 | December 31, 2004 | ||||||
Goodwill |
$ | 43,555 | $ | 43,203 | ||||
Mortgage servicing rights |
6,057 | 5,080 | ||||||
Purchased credit card relationships |
3,352 | 3,878 | ||||||
All other intangibles: |
||||||||
Other credit card-related intangibles |
$ | 239 | $ | 272 | ||||
Core deposit intangibles |
2,859 | 3,328 | ||||||
Other intangibles |
2,041 | 2,126 | ||||||
Total All other intangible assets |
$ | 5,139 | $ | 5,726 | ||||
Goodwill resulting | ||||||||||||
(in millions) | September 30, 2005 | December 31, 2004 | from the Merger | |||||||||
Investment Bank |
$ | 3,550 | $ | 3,309 | $ | 1,179 | ||||||
Retail Financial Services |
15,027 | 15,022 | 14,576 | |||||||||
Card Services |
12,835 | 12,781 | 12,802 | |||||||||
Commercial Banking |
2,659 | 2,650 | 2,599 | |||||||||
Treasury & Securities Services |
2,059 | 2,044 | 465 | |||||||||
Asset & Wealth Management |
7,048 | 7,020 | 2,539 | |||||||||
Corporate (Private Equity) |
377 | 377 | | |||||||||
Total goodwill |
$ | 43,555 | $ | 43,203 | $ | 34,160 | ||||||
Nine months ended September 30, (in millions) | 2005 | 2004(a) | ||||||
Balance at January 1 |
$ | 6,111 | $ | 6,159 | ||||
Additions |
1,350 | 1,400 | ||||||
Additions resulting from the Merger, July 1 |
| 90 | ||||||
Sales |
| (3 | ) | |||||
Other-than-temporary impairment |
| (126 | ) | |||||
Amortization |
(987 | ) | (974 | ) | ||||
SFAS 133 hedge valuation adjustments |
18 | (588 | ) | |||||
Balance at September 30 |
6,492 | 5,958 | ||||||
Less: valuation allowance |
435 | 790 | ||||||
Balance at September 30, after valuation allowance |
$ | 6,057 | $ | 5,168 | ||||
Estimated fair value at September 30 |
$ | 6,118 | $ | 5,254 | ||||
Weighted-average prepayment speed assumption (CPR) |
13.8 | % | 17.7 | % | ||||
Weighted-average discount rate |
8.96 | % | 7.55 | % | ||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
|
CPR: Constant prepayment rate |
81
Nine months ended September 30, (in millions) | 2005 | 2004(a) | ||||||
Balance at January 1 |
$ | 1,031 | $ | 1,378 | ||||
Other-than-temporary impairment |
| (126 | ) | |||||
SFAS 140 impairment (recovery) adjustment |
(596 | ) | (462 | ) | ||||
Balance at September 30 |
$ | 435 | $ | 790 | ||||
(a) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
September 30, 2005 | December 31, 2004 | |||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||
Gross | Accumulated | carrying | Gross | Accumulated | carrying | |||||||||||||||||||
(in millions) | amount | amortization | value | amount | amortization | value | ||||||||||||||||||
Purchased credit card relationships |
$ | 5,225 | $ | 1,873 | $ | 3,352 | $ | 5,225 | $ | 1,347 | $ | 3,878 | ||||||||||||
All other intangibles: |
||||||||||||||||||||||||
Other credit card-related intangibles |
$ | 295 | $ | 56 | $ | 239 | $ | 295 | $ | 23 | $ | 272 | ||||||||||||
Core deposit intangibles |
3,797 | 938 | 2,859 | 3,797 | 469 | 3,328 | ||||||||||||||||||
Other intangibles |
2,576 | 535 | (a) | 2,041 | 2,528 | 402 | (a) | 2,126 | ||||||||||||||||
Total All other intangibles |
$ | 6,668 | $ | 1,529 | $ | 5,139 | $ | 6,620 | $ | 894 | $ | 5,726 | ||||||||||||
Three months ended | Nine months ended | |||||||||||||||
Amortization expense | September 30, | September 30, | ||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004(b) | ||||||||||||
Purchased credit card relationships |
$ | 176 | $ | 179 | $ | 526 | $ | 299 | ||||||||
Other credit card-related intangibles |
11 | 15 | 33 | 15 | ||||||||||||
Core deposit intangibles |
157 | 164 | 469 | 165 | ||||||||||||
Other intangibles |
38 | 38 | 122 | 75 | ||||||||||||
Total amortization expense |
$ | 382 | $ | 396 | $ | 1,150 | $ | 554 | ||||||||
(a) | Includes $11 million and $13 million of amortization expense related to servicing assets
on securitized automobile loans, which is recorded in Asset management, administration and
commissions for the nine months ended September 30, 2005 and 2004, respectively. |
|
(b) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
Purchased | Other credit | Core | ||||||||||||||||||
credit card | card-related | deposit | Other | |||||||||||||||||
For the year: (in millions) | relationships | intangibles | intangibles | intangibles | Total | |||||||||||||||
2005(a) |
$ | 701 | $ | 45 | $ | 622 | $ | 177 | $ | 1,545 | ||||||||||
2006 |
674 | 42 | 532 | 162 | 1,410 | |||||||||||||||
2007 |
606 | 36 | 410 | 145 | 1,197 | |||||||||||||||
2008 |
502 | 32 | 314 | 134 | 982 | |||||||||||||||
2009 |
360 | 29 | 256 | 126 | 771 | |||||||||||||||
2010 |
301 | 25 | 232 | 113 | 671 | |||||||||||||||
(a) | Includes $526 million, $33 million, $469 million and $122 million of amortization
expense related to Purchased credit card relationships, other credit card-related
intangibles, core deposit intangibles and other intangibles, respectively, recognized during
the first nine months of 2005. |
82
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(in millions, except per share amounts) | 2005 | 2004 | 2005 | 2004(b) | ||||||||||||
Basic earnings per share |
||||||||||||||||
Net income |
$ | 2,527 | $ | 1,418 | $ | 5,785 | $ | 2,800 | ||||||||
Less: preferred stock dividends |
3 | 13 | 11 | 39 | ||||||||||||
Net income applicable to common stock |
$ | 2,524 | $ | 1,405 | $ | 5,774 | $ | 2,761 | ||||||||
Weighted-average basic shares outstanding |
3,485.0 | 3,513.5 | 3,498.4 | 2,533.1 | ||||||||||||
Net income per share |
$ | 0.72 | $ | 0.40 | $ | 1.65 | $ | 1.09 | ||||||||
Diluted earnings per share |
||||||||||||||||
Net income applicable to common stock |
$ | 2,524 | $ | 1,405 | $ | 5,774 | $ | 2,761 | ||||||||
Weighted-average basic shares outstanding |
3,485.0 | 3,513.5 | 3,498.4 | 2,533.1 | ||||||||||||
Add: Broad-based options |
3.3 | 4.5 | 3.5 | 5.7 | ||||||||||||
Restricted stock and key employee options |
59.4 | 74.0 | 53.2 | 59.7 | ||||||||||||
Weighted-average diluted shares outstanding |
3,547.7 | 3,592.0 | 3,555.1 | 2,598.5 | ||||||||||||
Net income per share(a) |
$ | 0.71 | $ | 0.39 | $ | 1.62 | $ | 1.06 | ||||||||
(a) | Options issued under employee benefit plans to purchase 383 million and 207 million
shares of common stock were outstanding for the three months ended September 30, 2005 and
2004, respectively, but were not included in the computation of diluted EPS because the
options exercise prices were greater than the average market price of the common shares. For
the nine months ended September 30, 2005 and 2004, options issued under employee benefit plans
to purchase common stock excluded from the computation were 361 million and 207 million
shares, respectively. |
|
(b) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
Unrealized | Cash | Accumulated other | ||||||||||||||
(in millions) | gains (losses) | Translation | flow | comprehensive | ||||||||||||
Nine months ended September 30, 2005 | on AFS securities(a) | adjustments | hedges | income (loss) | ||||||||||||
Balance at December 31, 2004 |
$ | (61 | ) | $ | (8 | ) | $ | (139 | ) | $ | (208 | ) | ||||
Net change |
(192) | (b) | | (c) | (202) | (d) | (394 | ) | ||||||||
Balance at September 30, 2005 |
$ | (253 | ) | $ | (8 | ) | $ | (341 | ) | $ | (602 | ) | ||||
Nine months ended September 30, 2004 |
||||||||||||||||
Balance at December 31, 2003 |
$ | 19 | $ | (6 | ) | $ | (43 | ) | $ | (30 | ) | |||||
Net change |
(88 | )(b) | (2 | )(c) | (122 | )(d) | (212 | ) | ||||||||
Balance at September 30, 2004 |
$ | (69 | ) | $ | (8 | ) | $ | (165 | ) | $ | (242 | ) | ||||
(a) | Represents the after-tax difference between the fair value and amortized cost of the AFS
securities portfolio and retained interests in securitizations recorded in Other assets. |
|
(b) | The net change for the nine months ended September 30, 2005, was primarily due to higher
interest rates, partially offset by sales of investment securities. The net change for the
nine months ended September 30, 2004, was primarily due to rising interest rates. |
|
(c) | At September 30, 2005 and 2004, included $(259) million and $(31) million, respectively, of
after-tax gains (losses) on foreign currency translation from operations for which the
functional currency is other than the U.S. dollar, offset by $259 million and $29 million,
respectively, of after-tax gains (losses) on hedges. |
|
(d) | The net change for the nine months ended September 30, 2005, included $24 million of
after-tax losses recognized in income and $226 million of after-tax losses representing the
net change in derivative fair values that were recorded in comprehensive income. The net
change for the nine months ended September 30, 2004, included $36 million of after-tax losses
recognized in income and $158 million of after-tax losses representing the net change in
derivative fair values that were reported in comprehensive income. |
83
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004(b) | ||||||||||||
Fair value hedge ineffective net losses(a) |
$ | (101 | ) | $ | 34 | $ | (142 | ) | $ | (66 | ) | |||||
Cash flow hedge ineffective net losses(a) |
| (1 | ) | | (2 | ) | ||||||||||
Cash flow hedging gains on forecasted transactions that failed to occur |
| | | | ||||||||||||
(a) | Includes ineffectiveness and the components of hedging instruments that have been
excluded from the assessment of hedge effectiveness. |
|
(b) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
84
Allowance for lending- | ||||||||||||||||
Contractual amount | related commitments | |||||||||||||||
September 30, | December 31, | September 30, | December 31, | |||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Consumer |
$ | 632,310 | $ | 601,196 | $ | 15 | $ | 12 | ||||||||
Wholesale: |
||||||||||||||||
Other unfunded commitments to extend credit(a)(b)(c) |
235,942 | 225,152 | 165 | 185 | ||||||||||||
Standby letters of credit and guarantees(a)(d)(e) |
73,863 | 78,084 | 210 | 292 | ||||||||||||
Other letters of credit(a) |
7,179 | 6,163 | 5 | 3 | ||||||||||||
Total wholesale |
316,984 | 309,399 | 380 | 480 | ||||||||||||
Total off-balance sheet lending-related financial instruments |
$ | 949,294 | $ | 910,595 | $ | 395 | $ | 492 | ||||||||
Customers securities lent(f) |
$ | 235,069 | $ | 215,972 | $ | NA | NA | |||||||||
(a) | Represents contractual amount net of risk participations totaling $28.5 billion and
$26.4 billion at September 30, 2005, and December 31, 2004, respectively. |
|
(b) | Includes unused advised lines of credit totaling $24.9 billion and $22.8 billion at September
30, 2005, and December 31, 2004, respectively, which are not legally binding. In regulatory
filings with the Federal Reserve Board, unused advised lines are not reportable. |
|
(c) | Includes certain asset purchase agreements to the Firms administered multi-seller
asset-backed commercial paper conduits of $32.4 billion and $31.8 billion at September 30,
2005, and December 31, 2004, respectively; excludes $28.6 billion and $31.7 billion at
September 30, 2005, and December 31, 2004, respectively, of asset purchase agreements related
to the Firms administered multi-seller asset-backed commercial paper conduits consolidated in
accordance with FIN 46R, as the underlying assets of the conduits are reported in the Firms
Consolidated balance sheets. It also includes $3.2 billion and $7.5 billion at September 30,
2005, and December 31, 2004, respectively, of asset purchase agreements to structured
wholesale loan vehicles and other third-party entities. The allowance for credit losses on
lending-related commitments related to these agreements was insignificant at September 30,
2005, and December 31, 2004. |
|
(d) | JPMorgan Chase held collateral relating to $8.6 billion and $7.4 billion of these
arrangements at September 30, 2005, and December 31, 2004, respectively. |
|
(e) | Includes unused commitments to issue standby letters of credit of $34.7 billion and $38.4
billion at September 30, 2005, and December 31, 2004, respectively. |
|
(f) | Collateral held by the Firm in support of securities lending indemnification agreements was
$241.5 billion and $221.6 billion at September 30, 2005, and December 31, 2004, respectively. |
85
Retail | Treasury & | Asset | Corporate/ | |||||||||||||||||||||||||||||
(in millions, except ratios) | Investment | Financial | Card | Commercial | Securities | & Wealth | Reconciling | |||||||||||||||||||||||||
Three months ended Sept. 30, 2005 | Bank(d) | Services | Services(e) | Banking | Services | Management | Items(d)(e)(f) | Total | ||||||||||||||||||||||||
Net interest income |
$ | 354 | $ | 2,512 | $ | 2,970 | $ | 654 | $ | 510 | $ | 267 | $ | (2,415 | ) | $ | 4,852 | |||||||||||||||
Noninterest revenue |
4,107 | 1,078 | 1,010 | 255 | 1,046 | 1,182 | 935 | 9,613 | ||||||||||||||||||||||||
Total net revenue |
4,461 | 3,590 | 3,980 | 909 | 1,556 | 1,449 | (1,480 | ) | 14,465 | |||||||||||||||||||||||
Provision for credit losses |
(46 | ) | 378 | 1,833 | (46 | ) | (1 | ) | (19 | ) | (854 | ) | 1,245 | |||||||||||||||||||
Credit reimbursement (to)/from TSS(b) |
38 | | | | (38 | ) | | | | |||||||||||||||||||||||
Merger costs |
| | | | | | 221 | (g) | 221 | |||||||||||||||||||||||
Litigation reserve charge |
| | | | | | | | ||||||||||||||||||||||||
Other noninterest expense |
2,875 | 2,156 | 1,286 | 461 | 1,107 | 976 | 382 | 9,243 | ||||||||||||||||||||||||
Income (loss) before income tax expense |
1,670 | 1,056 | 861 | 494 | 412 | 492 | (1,229 | ) | 3,756 | |||||||||||||||||||||||
Income tax expense (benefit) |
607 | 400 | 320 | 193 | 149 | 177 | (617 | ) | 1,229 | |||||||||||||||||||||||
Net income (loss) |
$ | 1,063 | $ | 656 | $ | 541 | $ | 301 | $ | 263 | $ | 315 | $ | (612 | ) | $ | 2,527 | |||||||||||||||
Average equity |
$ | 20,000 | $ | 13,475 | $ | 11,800 | $ | 3,400 | $ | 1,900 | $ | 2,400 | $ | 52,506 | $ | 105,481 | ||||||||||||||||
Average assets |
615,888 | 227,875 | 144,225 | 56,265 | 26,798 | 42,427 | 82,567 | 1,196,045 | ||||||||||||||||||||||||
Return on average equity |
21 | % | 19 | % | 18 | % | 35 | % | 55 | % | 52 | % | NM | 9 | % | |||||||||||||||||
Overhead ratio |
64 | 60 | 32 | 51 | 71 | 67 | NM | 65 | ||||||||||||||||||||||||
Retail | Treasury & | Asset | Corporate/ | |||||||||||||||||||||||||||||
(in millions, except ratios) | Investment | Financial | Card | Commercial | Securities | & Wealth | Reconciling | |||||||||||||||||||||||||
Three months ended Sept. 30, 2004 | Bank(d) | Services | Services(e) | Banking | Services | Management | Items(d)(e)(f) | Total | ||||||||||||||||||||||||
Net interest income |
$ | 389 | $ | 2,706 | $ | 2,917 | $ | 608 | $ | 418 | $ | 269 | $ | (1,855 | ) | $ | 5,452 | |||||||||||||||
Noninterest revenue |
2,312 | 1,094 | 854 | 225 | 921 | 924 | 723 | 7,053 | ||||||||||||||||||||||||
Total net revenue |
2,701 | 3,800 | 3,771 | 833 | 1,339 | 1,193 | (1,132 | ) | 12,505 | |||||||||||||||||||||||
Provision for credit losses |
(151 | ) | 239 | 1,662 | 14 | | 1 | (596 | ) | 1,169 | ||||||||||||||||||||||
Credit reimbursement (to)/from
TSS(b) |
43 | | | | (43 | ) | | | | |||||||||||||||||||||||
Merger costs |
| | | | | | 752 | (g) | 752 | |||||||||||||||||||||||
Litigation reserve charge |
| | | | | | | | ||||||||||||||||||||||||
Other noninterest expense |
1,924 | 2,238 | 1,437 | 480 | 1,156 | 884 | 506 | 8,625 | ||||||||||||||||||||||||
Income (loss) before income tax
expense |
971 | 1,323 | 672 | 339 | 140 | 308 | (1,794 | ) | 1,959 | |||||||||||||||||||||||
Income tax expense (benefit) |
344 | 501 | 251 | 124 | 44 | 111 | (834 | ) | 541 | |||||||||||||||||||||||
Net income (loss) |
$ | 627 | $ | 822 | $ | 421 | $ | 215 | $ | 96 | $ | 197 | $ | (960 | ) | $ | 1,418 | |||||||||||||||
Average equity |
$ | 20,000 | $ | 13,050 | $ | 11,800 | $ | 3,400 | $ | 1,900 | $ | 2,400 | $ | 51,819 | $ | 104,369 | ||||||||||||||||
Average assets |
496,347 | 227,716 | 136,753 | 55,957 | 24,831 | 39,882 | 135,849 | 1,117,335 | ||||||||||||||||||||||||
Return on average equity |
12 | % | 25 | % | 14 | % | 25 | % | 20 | % | 33 | % | NM | 5 | % | |||||||||||||||||
Overhead ratio |
71 | 59 | 38 | 58 | 86 | 74 | NM | 75 | ||||||||||||||||||||||||
86
Retail | Treasury & | Asset | Corporate/ | |||||||||||||||||||||||||||||
(in millions, except ratios) | Investment | Financial | Card | Commercial | Securities | & Wealth | Reconciling | |||||||||||||||||||||||||
Nine months ended Sept. 30, 2005 | Bank(d) | Services | Services(e) | Banking | Services | Management | Items(d)(e)(f) | Total | ||||||||||||||||||||||||
Net interest income |
$ | 1,000 | $ | 7,723 | $ | 8,953 | $ | 1,927 | $ | 1,516 | $ | 823 | $ | (6,864 | ) | $ | 15,078 | |||||||||||||||
Noninterest revenue |
10,391 | 3,513 | 2,692 | 732 | 3,110 | 3,330 | 2,009 | 25,777 | ||||||||||||||||||||||||
Total net revenue |
11,391 | 11,236 | 11,645 | 2,659 | 4,626 | 4,153 | (4,855 | ) | 40,855 | |||||||||||||||||||||||
Provision for credit losses |
(755 | ) | 566 | 5,110 | 90 | (2 | ) | (46 | ) | (2,704 | ) | 2,259 | ||||||||||||||||||||
Credit reimbursement (to)/from
TSS(b) |
114 | | | | (114 | ) | | | | |||||||||||||||||||||||
Merger costs |
| | | | | | 645 | (g) | 645 | |||||||||||||||||||||||
Litigation reserve charge |
| | | | | | 2,772 | 2,772 | ||||||||||||||||||||||||
Other noninterest expense |
7,578 | 6,444 | 3,982 | 1,392 | 3,366 | 2,827 | 1,294 | 26,883 | ||||||||||||||||||||||||
Income (loss) before income tax
expense |
4,682 | 4,226 | 2,553 | 1,177 | 1,148 | 1,372 | (6,862 | ) | 8,296 | |||||||||||||||||||||||
Income tax expense (benefit) |
1,688 | 1,602 | 948 | 459 | 411 | 498 | (3,095 | ) | 2,511 | |||||||||||||||||||||||
Net income (loss) |
$ | 2,994 | $ | 2,624 | $ | 1,605 | $ | 718 | $ | 737 | $ | 874 | $ | (3,767 | ) | $ | 5,785 | |||||||||||||||
Average equity |
$ | 20,000 | $ | 13,276 | $ | 11,800 | $ | 3,400 | $ | 1,900 | $ | 2,400 | $ | 52,590 | $ | 105,366 | ||||||||||||||||
Average assets |
591,863 | 226,200 | 141,180 | 55,774 | 26,755 | 41,391 | 95,257 | 1,178,420 | ||||||||||||||||||||||||
Return on average equity |
20 | % | 26 | % | 18 | % | 28 | % | 52 | % | 49 | % | NM | 7 | % | |||||||||||||||||
Overhead ratio |
67 | 57 | 34 | 52 | 73 | 68 | NM | 74 | ||||||||||||||||||||||||
Retail | Treasury & | Asset | Corporate/ | |||||||||||||||||||||||||||||
(in millions, except ratios) | Investment | Financial | Card | Commercial | Securities | & Wealth | Reconciling | |||||||||||||||||||||||||
Nine months ended Sept. 30, 2004(c) | Bank(d) | Services | Services(e) | Banking | Services | Management | Items(d)(e)(f) | Total | ||||||||||||||||||||||||
Net interest income |
$ | 991 | $ | 5,062 | $ | 5,461 | $ | 1,069 | $ | 912 | $ | 508 | $ | (2,571 | ) | $ | 11,432 | |||||||||||||||
Noninterest revenue |
8,413 | 2,184 | 1,454 | 420 | 2,532 | 2,361 | 1,351 | 18,715 | ||||||||||||||||||||||||
Total net revenue |
9,404 | 7,246 | 6,915 | 1,489 | 3,444 | 2,869 | (1,220 | ) | 30,147 | |||||||||||||||||||||||
Provision for credit losses |
(467 | ) | 371 | 3,116 | 20 | 4 | 7 | (1,664 | ) | 1,387 | ||||||||||||||||||||||
Credit reimbursement (to)/from TSS(b) |
47 | | | | (47 | ) | | | | |||||||||||||||||||||||
Merger costs |
| | | | | | 842 | (g) | 842 | |||||||||||||||||||||||
Litigation reserve charge |
| | | | | | 3,700 | 3,700 | ||||||||||||||||||||||||
Other noninterest expense |
6,306 | 4,610 | 2,601 | 892 | 2,967 | 2,214 | 841 | 20,431 | ||||||||||||||||||||||||
Income (loss) before income tax expense |
3,612 | 2,265 | 1,198 | 577 | 426 | 648 | (4,939 | ) | 3,787 | |||||||||||||||||||||||
Income tax expense (benefit) |
1,324 | 841 | 439 | 223 | 131 | 230 | (2,201 | ) | 987 | |||||||||||||||||||||||
Net income (loss) |
$ | 2,288 | $ | 1,424 | $ | 759 | $ | 354 | $ | 295 | $ | 418 | $ | (2,738 | ) | $ | 2,800 | |||||||||||||||
Average equity |
$ | 16,380 | $ | 7,764 | $ | 6,200 | $ | 1,654 | $ | 2,761 | $ | 4,406 | $ | 26,660 | $ | 65,825 | ||||||||||||||||
Average assets |
452,714 | 171,585 | 80,211 | 29,921 | 21,715 | 36,765 | 105,067 | 897,978 | ||||||||||||||||||||||||
Return on average equity |
19 | % | 24 | % | 16 | % | 29 | % | 14 | % | 13 | % | NM | 6 | % | |||||||||||||||||
Overhead ratio |
67 | 64 | 38 | 60 | 86 | 77 | NM | 83 | ||||||||||||||||||||||||
(a) | In addition to analyzing the Firms results on a reported basis, management reviews the
line of business results on an operating basis, which is a non-GAAP financial measure. The
definition of operating basis starts with the reported U.S. GAAP results. In the case of the
Investment Bank, operating basis noninterest revenue includes, in Trading revenue, Net
interest income (NII) related to trading activities. In the case of Card Services, refer to
footnote (e). These adjustments do not change JPMorgan Chases reported net income. Operating
basis also excludes Merger costs and nonoperating Litigation reserve charges, as management
believes these items are not part of the Firms normal daily business operations (and,
therefore, not indicative of trends) and do not provide meaningful comparisons with other
periods. Finally, operating results reflect revenues (Noninterest revenue and NII) on a
tax-equivalent basis. Refer to footnote (f) for the impact of these adjustments. |
|
(b) | TSS reimburses the IB for credit portfolio exposures the IB manages on behalf of clients the
segments share. At the time of the Merger, the reimbursement methodology was revised to be
based upon pre-tax earnings, net of the cost of capital related to those exposures. Prior to
the Merger, the credit reimbursement was based upon pre-tax earnings, plus the allocated
capital associated with the shared clients. |
|
(c) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
|
(d) | Segment operating results include the reclassification of NII related to trading activities
to Trading revenue within Noninterest revenue, which primarily impacts the Investment Bank.
Trading-related NII reclassified to Trading revenue was $(103) million and $424 million for
the three months ended September 30, 2005 and 2004, respectively, and $423 million and $1.4
billion for the nine months ended September 30, 2005 and 2004, respectively. These amounts are
eliminated in Corporate/reconciling items to arrive at NII and Noninterest revenue on a
reported GAAP basis for JPMorgan Chase. |
87
(e) | Operating results for Card Services exclude the impact of credit card securitizations on
revenue, provision for credit losses and average assets, as JPMorgan Chase treats the sold
receivables as if they were still on the balance sheet in evaluating the overall performance
of the credit card portfolio. The related securitization adjustments were as follows: |
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004(a) | ||||||||||||
Net interest income |
$ | 1,600 | $ | 1,779 | $ | 4,990 | $ | 3,455 | ||||||||
Noninterest revenue |
(733 | ) | (851 | ) | (2,276 | ) | (1,568 | ) | ||||||||
Provision for credit losses |
867 | 928 | 2,714 | 1,887 | ||||||||||||
Average assets |
67,021 | 69,035 | 66,917 | 45,227 | ||||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage
JPMorgan Chase results. |
|
These adjustments are eliminated in Corporate/reconciling items to arrive at the Firms reported GAAP results. |
(f) | Segment operating results reflect revenues on a tax-equivalent basis with the corresponding
income tax impact recorded within income tax expense. Tax-equivalent adjustments were as
follows: |
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004(a) | ||||||||||||
Net interest income |
$ | 67 | $ | (36 | ) | $ | 212 | $ | (4 | ) | ||||||
Noninterest revenue |
155 | 64 | 413 | 139 | ||||||||||||
Income tax expense |
222 | 28 | 625 | 135 | ||||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage
JPMorgan Chase results. |
|
These adjustments are eliminated in Corporate/reconciling items to arrive at the Firms reported GAAP results. |
(g) | Merger costs attributed to the lines of business were as follows: |
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004(a) | ||||||||||||
Investment Bank |
$ | 4 | $ | 38 | $ | 18 | $ | 43 | ||||||||
Retail Financial Services |
24 | 148 | 101 | 171 | ||||||||||||
Card Services |
100 | 71 | 185 | 72 | ||||||||||||
Commercial Banking |
3 | 14 | 2 | 20 | ||||||||||||
Treasury & Securities Services |
24 | 43 | 67 | 48 | ||||||||||||
Asset & Wealth Management |
9 | 17 | 47 | 17 | ||||||||||||
Corporate |
57 | 421 | 225 | 471 | ||||||||||||
(a) | Includes three months of the combined Firms results and six months of heritage
JPMorgan Chase results. |
88
Three months ended September 30, 2005 | Three months ended September 30, 2004 | |||||||||||||||||||||||
Average | Rate | Average | Rate | |||||||||||||||||||||
Balance | Interest | (Annualized) | Balance | Interest | (Annualized) | |||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
Deposits with Banks |
$ | 11,388 | $ | 128 | 4.48 | % | $ | 34,166 | $ | 131 | 1.53 | % | ||||||||||||
Federal Funds Sold and Securities Purchased
under Resale Agreements |
146,048 | 1,094 | 2.97 | 102,042 | 474 | 1.85 | ||||||||||||||||||
Securities Borrowed |
66,817 | 301 | 1.78 | 47,087 | 120 | 1.01 | ||||||||||||||||||
Trading Assets Debt Instruments |
189,198 | 2,286 | 4.79 | 170,663 | 1,991 | 4.64 | ||||||||||||||||||
Securities: Available-for-sale |
65,103 | 746 | 4.55 | (a) | 94,590 | 1,048 | 4.41 | (a) | ||||||||||||||||
Held-to-maturity |
89 | 3 | 12.36 | 130 | 3 | 10.02 | ||||||||||||||||||
Interests in purchased receivables |
27,905 | 247 | 3.52 | 28,917 | 119 | 1.63 | ||||||||||||||||||
Loans |
415,676 | 6,696 | 6.39 | 390,753 | 5,571 | 5.67 | ||||||||||||||||||
Total Interest-Earning Assets |
922,224 | 11,501 | 4.95 | 868,348 | 9,457 | 4.33 | ||||||||||||||||||
Allowance for loan losses |
(7,003 | ) | (7,450 | ) | ||||||||||||||||||||
Cash and due from banks |
32,166 | 30,773 | ||||||||||||||||||||||
Trading assets Equity instruments |
53,025 | 30,275 | ||||||||||||||||||||||
Trading assets Derivative receivables |
54,522 | 59,232 | ||||||||||||||||||||||
Other assets |
141,111 | 136,157 | ||||||||||||||||||||||
Total Assets |
$ | 1,196,045 | $ | 1,117,335 | ||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||
Interest-Bearing Deposits |
$ | 398,059 | $ | 2,720 | 2.71 | % | $ | 365,104 | $ | 1,324 | 1.44 | % | ||||||||||||
Federal Funds Purchased and Securities Sold
under Repurchase Agreements |
160,967 | 1,137 | 2.80 | 163,206 | 629 | 1.53 | ||||||||||||||||||
Commercial Paper |
15,188 | 120 | 3.13 | 12,497 | 34 | 1.08 | ||||||||||||||||||
Other Borrowings(b) |
111,010 | 1,212 | 4.33 | 84,387 | 1,095 | 5.16 | ||||||||||||||||||
Beneficial interests issued
by consolidated VIEs |
44,381 | 363 | 3.25 | 43,308 | 171 | 1.58 | ||||||||||||||||||
Long-term debt |
111,921 | 1,031 | 3.65 | 101,061 | 788 | 3.10 | ||||||||||||||||||
Total Interest-Bearing Liabilities |
841,526 | 6,583 | 3.10 | 769,563 | 4,041 | 2.09 | ||||||||||||||||||
Noninterest-Bearing deposits |
129,512 | 120,991 | ||||||||||||||||||||||
Trading liabilities Derivative payables |
51,128 | 51,387 | ||||||||||||||||||||||
All other liabilities, including the allowance
for lending-related commitments |
68,259 | 70,016 | ||||||||||||||||||||||
Total Liabilities |
1,090,425 | 1,011,957 | ||||||||||||||||||||||
STOCKHOLDERS EQUITY |
||||||||||||||||||||||||
Preferred Stock |
139 | 1,009 | ||||||||||||||||||||||
Common Stockholders Equity |
105,481 | 104,369 | ||||||||||||||||||||||
Total Stockholders Equity |
105,620 | 105,378 | ||||||||||||||||||||||
Total Liabilities, Preferred Stock and
Stockholders Equity |
$ | 1,196,045 | $ | 1,117,335 | ||||||||||||||||||||
INTEREST RATE SPREAD |
1.85 | % | 2.24 | % | ||||||||||||||||||||
NET INTEREST INCOME AND MARGIN
ON INTEREST-EARNING ASSETS |
$ | 4,918 | 2.12 | % | $ | 5,416 | 2.48 | % | ||||||||||||||||
(a) | For the three months ended September 30, 2005 and 2004, the annualized rate for
available-for-sale securities based on amortized cost was 4.54% and 4.38%, respectively. |
|
(b) | Includes securities sold but not yet purchased. |
89
Nine months ended September 30, 2005 | Nine months ended September 30, 2004(c) | |||||||||||||||||||||||
Average | Rate | Average | Rate | |||||||||||||||||||||
Balance | Interest | (Annualized) | Balance | Interest | (Annualized) | |||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
Deposits with Banks |
$ | 15,075 | $ | 472 | 4.19 | % | $ | 27,560 | $ | 331 | 1.60 | % | ||||||||||||
Federal Funds Sold and Securities Purchased
under Resale Agreements |
135,792 | 2,762 | 2.72 | 90,601 | 1,095 | 1.61 | ||||||||||||||||||
Securities Borrowed |
59,877 | 835 | 1.86 | 49,966 | 303 | 0.81 | ||||||||||||||||||
Trading Assets Debt Instruments |
190,181 | 6,995 | 4.92 | 163,559 | 5,459 | 4.46 | ||||||||||||||||||
Securities: Available-for-sale |
75,244 | 2,513 | 4.47 | (a) | 74,171 | 2,443 | 4.40 | (a) | ||||||||||||||||
Held-to-maturity |
97 | 8 | 10.42 | 191 | 9 | 6.46 | ||||||||||||||||||
Interests in purchased receivables |
28,416 | 649 | 3.06 | 10,552 | 130 | 1.64 | ||||||||||||||||||
Loans |
406,226 | 18,994 | 6.25 | 277,428 | 10,959 | 5.28 | ||||||||||||||||||
Total Interest-Earning Assets |
910,908 | 33,228 | 4.88 | 694,028 | 20,729 | 3.99 | ||||||||||||||||||
Allowance for loan losses |
(7,050 | ) | (5,363 | ) | ||||||||||||||||||||
Cash and due from banks |
30,474 | 23,494 | ||||||||||||||||||||||
Trading assets Equity instruments |
46,926 | 29,739 | ||||||||||||||||||||||
Trading assets Derivative receivables |
59,315 | 57,151 | ||||||||||||||||||||||
Other assets |
137,847 | 98,929 | ||||||||||||||||||||||
Total Assets |
$ | 1,178,420 | $ | 897,978 | ||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||
Interest-Bearing Deposits |
$ | 393,659 | $ | 7,069 | 2.40 | % | $ | 286,071 | $ | 2,956 | 1.38 | % | ||||||||||||
Federal Funds Purchased and Securities Sold
under Repurchase Agreements |
156,892 | 3,122 | 2.66 | 154,669 | 1,530 | 1.32 | ||||||||||||||||||
Commercial Paper |
13,459 | 258 | 2.56 | 13,308 | 85 | 0.86 | ||||||||||||||||||
Other Borrowings(b) |
102,782 | 3,565 | 4.64 | 81,722 | 2,887 | 4.72 | ||||||||||||||||||
Beneficial interests issued
by consolidated VIEs |
44,469 | 954 | 2.87 | 20,253 | 248 | 1.64 | ||||||||||||||||||
Long-term debt |
110,608 | 2,970 | 3.59 | 70,663 | 1,595 | 3.02 | ||||||||||||||||||
Total Interest-Bearing Liabilities |
821,869 | 17,938 | 2.92 | 626,686 | 9,301 | 1.98 | ||||||||||||||||||
Noninterest-Bearing deposits |
128,259 | 93,487 | ||||||||||||||||||||||
Trading liabilities Derivative payables |
56,747 | 49,701 | ||||||||||||||||||||||
All other liabilities, including the allowance
for lending-related commitments |
65,949 | 61,270 | ||||||||||||||||||||||
Total Liabilities |
1,072,824 | 831,144 | ||||||||||||||||||||||
STOCKHOLDERS EQUITY |
||||||||||||||||||||||||
Preferred Stock |
230 | 1,009 | ||||||||||||||||||||||
Common Stockholders Equity |
105,366 | 65,825 | ||||||||||||||||||||||
Total Stockholders Equity |
105,596 | 66,834 | ||||||||||||||||||||||
Total Liabilities, Preferred Stock and
Stockholders Equity |
$ | 1,178,420 | $ | 879,978 | ||||||||||||||||||||
INTEREST RATE SPREAD |
1.96 | % | 2.01 | % | ||||||||||||||||||||
NET INTEREST INCOME AND MARGIN
ON INTEREST-EARNING ASSETS |
$ | 15,290 | 2.24 | % | $ | 11,428 | 2.20 | % | ||||||||||||||||
(a) | For the nine months ended September 30, 2005 and 2004, the annualized rate for
available-for-sale securities based upon amortized cost was 4.45% and 4.37%, respectively. |
|
(b) | Includes securities sold but not yet purchased. |
|
(c) | Includes three months of the combined Firms results and six months of heritage JPMorgan
Chase results. |
90
91
92
93
94
Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Words such as believes, anticipates, expects, intends, plans, estimates, targeted and similar expressions, and future or conditional verbs, such as will, would, should, could or may, are intended to identify forward-looking statements but are not the only means to identify these statements. | ||
Forward-looking statements involve risks and uncertainties. Actual conditions, events or results may differ materially from those contemplated by a forward-looking statement. Factors that could cause this differencemany of which are beyond the Firms controlinclude the following, without limitation: | ||
| Local, regional and international business or economic conditions may differ from those expected. | |
| The effects of and changes in trade, monetary and fiscal policies and laws, including the U.S. Federal Reserve Boards interest rate policies, may adversely affect the Firms business. | |
| The timeliness of development and acceptance of new products and services may be different than anticipated. | |
| Technological changes instituted by the Firm and by persons who may affect the Firms business may be more difficult to accomplish or more expensive than anticipated or may have unforeseen consequences. | |
| Mergers and/or acquisitions and integration of merged and/or acquired businesses may be more difficult or expensive than expected. | |
| The ability to increase market share and control expenses may be more difficult than anticipated. | |
| Competitive pressures among financial services companies may increase significantly. | |
| Changes in laws and regulatory requirements (including those concerning taxes, banking, securities and insurance) may adversely affect the Firm or its businesses. | |
| Changes in accounting policies and practices, as may be adopted by regulatory agencies, the Public Company Accounting Oversight Board and the Financial Accounting Standards Board, may affect expected financial reporting. | |
| The costs, effects and outcomes of litigation may adversely affect the Firm or its businesses. | |
| The Firm may not manage the risks involved in the foregoing as well as anticipated. |
95
96
Total open | Average | Dollar value of | ||||||||||
For the nine months ended | market shares | price paid | remaining authorized | |||||||||
September 30, 2005 | repurchased | per share(a) | repurchase program | |||||||||
First quarter |
35,972,000 | $ | 36.57 | $ | 3,946 | |||||||
Second quarter |
16,807,465 | 35.32 | 3,352 | |||||||||
July |
1,759,000 | 35.38 | 3,290 | |||||||||
August |
8,574,600 | 34.57 | 2,994 | |||||||||
September |
4,111,700 | 34.36 | 2,853 | |||||||||
Third quarter |
14,445,300 | 34.61 | ||||||||||
Year-to-date |
67,224,765 | $ | 35.84 | |||||||||
(a) | Excludes commission costs. |
97
31.1
|
| Certification | ||
31.2
|
| Certification | ||
31.3
|
| Certification | ||
32
|
| Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
98
JPMORGAN CHASE & CO. | ||||
(Registrant) | ||||
Date: November 8, 2005 |
||||
By | /s/ Joseph L. Sclafani | |||
Joseph L. Sclafani Executive Vice President and Controller [Principal Accounting Officer] |
99
EXHIBIT NO. | EXHIBITS | PAGE AT WHICH LOCATED | ||||||
31.1 | Certification
|
101 | ||||||
31.2 | Certification
|
102 | ||||||
31.3 | Certification
|
103 | ||||||
The following exhibit shall not be deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934, or otherwise subject to the liability of that
Section. In addition, Exhibit No. 32 shall not be deemed incorporated into any filing
under the Securities Act of 1933 or the Securities Exchange Act of 1934. |
||||||||
32 | Certification Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
104 |
100
I, William B. Harrison, Jr., certify that: |
||
1. | I have reviewed this
quarterly report on Form 10Q of JPMorgan Chase & Co.; |
|
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. | Based on my knowledge, the Consolidated financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented
in this report; |
|
4. | The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
||
(b) | Designed such internal controls over financial reporting, or caused such internal
controls over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles; |
||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and |
||
(d) | Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
function): |
(a) | All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and |
||
(b) | Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
101
I, James Dimon, certify that: |
||
1. | I have reviewed this quarterly report on Form 10Q of JPMorgan Chase & Co.; |
|
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. | Based on my knowledge, the Consolidated financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented
in this report; |
|
4. | The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
||
(b) | Designed such internal controls over financial reporting, or caused such internal
controls over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles; |
||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and |
||
(d) | Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
function): |
(a) | All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and |
||
(b) | Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
102
I, Michael J. Cavanagh, certify that: |
||
1. | I have reviewed this
quarterly report on Form 10Q of JPMorgan Chase & Co.; |
|
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. | Based on my knowledge, the Consolidated financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented
in this report; |
|
4. | The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
||
(b) | Designed such internal controls over financial reporting, or caused such internal
controls over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles; |
||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and |
||
(d) | Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
function): |
(a) | All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and |
||
(b) | Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
103
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and |
|
2. | The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of JPMorgan Chase & Co. |
Date: November 8, 2005
|
By: | /s/ William B. Harrison, Jr. | ||
William B. Harrison, Jr. Chairman and Chief Executive Officer |
||||
Date: November 8, 2005
|
By: | /s/ James Dimon | ||
James Dimon President and Chief Operating Officer |
||||
Date: November 8, 2005
|
By: | /s/ Michael J. Cavanagh | ||
Michael J. Cavanagh Executive Vice President and Chief Financial Officer |
104