1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT JANUARY 17, 2001 COMMISSION FILE NUMBER 1-5805 ----------------- ------ J.P. MORGAN CHASE & CO. ----------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-2624428 ------------------------------- ------------------ (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 270 PARK AVENUE, NEW YORK, NEW YORK 10017 --------------------------------------- --------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 270-6000 --------------
2 ITEM 5. OTHER EVENTS - --------------------- J.P. Morgan Chase & Co. announced fourth quarter 2000 operating earnings per share (before special items) of $0.37, compared with $1.09 in the fourth quarter of 1999. Operating income was $763 million, compared with $2.18 billion in the prior year. Reported net income, which includes special items, was $708 million, or $0.34 per share in the 2000 fourth quarter, compared with $2.20 billion, or $1.10 per share, in the 1999 fourth quarter. Special items include a merger-related charge of $1.25 billion, offset by non-recurring gains of $1.23 billion. For the full year 2000, operating earnings per share were $2.96, compared with $3.65 in 1999. Operating income was $5.93 billion, compared with $7.43 billion in 1999. Reported net income was $5.73 billion, or $2.86 per share, compared with $7.50 billion, or $3.69 per share, in 1999. The press release contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of J.P. Morgan Chase's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These uncertainties include: the risk that the businesses of Chase and J.P. Morgan will not be integrated successfully; the risk that the revenue synergies and cost savings anticipated from the merger may not be fully realized or may take longer to realize than expected; the risk that the integration process may result in the disruption of ongoing business or in the loss of key employees or may adversely affect relationships with employees, clients or suppliers; the risks of adverse movements or volatility in the securities markets or in interest or foreign exchange rates or indices; the risk of adverse impacts from an economic downturn; the risk of a downturn in domestic or foreign securities and trading conditions or markets; the risks associated with increased competition; the risks associated with unfavorable political and diplomatic developments in foreign markets or adverse changes in domestic or foreign governmental or regulatory policies; or other factors impacting operational plans. Additional factors that could cause J.P. Morgan Chase's results to differ materially from those described in the forward-looking statements can be found in the 1999 Annual Reports on Form 10-K of J.P. Morgan Chase & Co. (formerly known as The Chase Manhattan Corporation) filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission's internet site (http://www.sec.gov). 2
3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. J.P. MORGAN CHASE & CO. ------------------------------ (Registrant) Date January 17, 2001 By /s/ Joseph L. Sclafani ------------------- ------------------------ Joseph L. Sclafani Executive Vice President and Controller [Principal Accounting Officer] 3
4 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION PAGE ----------- ----------- ---- 99.1 Press Release - 2000 Fourth Quarter Earnings 5 4
1 J.P. Morgan Chase & Co. 270 Park Avenue, New York, NY 10017-2070 [JPMORGANCHASE LOGO] NYSE symbol: JPM www.jpmorganchase.com - -------------------------------------------------------------------------------- News release: IMMEDIATE RELEASE January 17, 2001 J.P. MORGAN CHASE REPORTS FOURTH QUARTER AND FULL YEAR 2000 RESULTS NEW YORK, JANUARY 17, 2001 - J.P. Morgan Chase & Co. (NYSE: JPM) today announced fourth quarter 2000 operating earnings per share (before special items) of $0.37, compared with $1.09 in the fourth quarter of 1999. Operating income was $763 million, compared with $2.18 billion in the prior year. Reported net income, which includes special items, was $708 million, or $0.34 per share in the most recent quarter, compared with $2.20 billion, or $1.10 per share, in the 1999 quarter. Special items include a merger-related charge of $1.25 billion, offset by non-recurring gains of $1.23 billion. For the full year 2000, operating earnings per share were $2.96, compared with $3.65 in 1999. Operating income was $5.93 billion, compared with $7.43 billion in 1999. Reported net income was $5.73 billion, or $2.86 per share, compared with $7.50 billion, or $3.69 per share, in 1999. The annualized cash operating return on common equity was 9.1% for the fourth quarter and 17.6% for the full year 2000. See the Financial Highlights exhibit for consolidated results on a cash basis. Results for all periods give effect to the merger of The Chase Manhattan Corporation and J.P. Morgan & Co. on December 31, 2000. HIGHLIGHTS FOR THE FOURTH QUARTER AND FULL YEAR 2000 - - Total operating revenues excluding private equity (J.P. Morgan Partners) rose 10% for the fourth quarter and 12% for the full year over the comparable 1999 periods. - - J.P. Morgan Partners had negative fourth quarter private equity revenues of $92 million because of unrealized write-downs, primarily in Nasdaq-listed public securities. - - Investment Management & Private Banking, Treasury & Securities Services, and Retail & Middle Market Banking each posted solid fourth quarter and full year results. - - Total operating expenses were 24% and 20% higher for the fourth quarter and full year 2000, respectively. The increases reflect the buildup of the investment banking platform, which is not expected to continue at a comparable rate in 2001. - - Market and credit risk measures remained stable. Non-performing assets of $1.92 billion at the end of 2000 were down slightly from September 30, 2000; commercial charge-offs increased by $76 million from the third quarter. - -------------------------------------------------------------------------------- Investor Contact: John Borden Media Contact: Jon Diat 212-270-7318 212-270-5089
2 "Last year was a watershed that culminated in the closing of our merger ahead of schedule," said William B. Harrison, Jr., Chief Executive Officer. "While results were depressed by a challenging market environment and significant investment in our wholesale franchise, the pieces of our platform are now in place. The integration is on track, and with reasonably cooperative financial markets we should see a meaningful rebound in profitability this year. We have set as long-term goals for the company annual revenue growth of 10% to 12%, cash earnings per share growth of 15% per year, and an average cash return on equity of 20% to 25%." BUSINESS SEGMENT RESULTS INVESTMENT BANKING operating revenues were $3.67 billion in the fourth quarter of 2000, up 20% from the prior year's quarter. Investment banking fees rose to $1.05 billion, led by strong growth in advisory fees and the benefit of the acquisition of Hambrecht and Quist (H&Q) and Robert Fleming Holdings (Fleming). Trading revenues (including related net interest income) of $1.27 billion were down from $1.48 billion in the 1999 quarter, primarily due to the impact of widening credit spreads on results in emerging markets and North American credit markets. Fees and commissions of $448 million were up 54% from the 1999 quarter, reflecting higher equity brokerage commissions and the benefit of the H&Q and Fleming acquisitions. Securities gains compared favorably with the 1999 quarter, which saw substantial losses on the sale of U.S. government agency securities. For the full year, operating revenues rose 16% to $15.75 billion. Investment banking fees were up 23% to a record $4.29 billion, driven by gains in both advisory and underwriting revenues and the inclusion of H&Q and Fleming. Trading revenues (including related net interest income) rose 3% to $6.67 billion on strength in equity derivatives, partially offset by lower results in emerging markets. Cash operating expenses for Investment Banking rose 37% in the fourth quarter and 29% for the year. The increases in expenses were primarily due to the build-out of the investment banking platform and the inclusion of Hambrecht & Quist and Flemings in the current periods, as well as higher variable costs driven by revenue growth. Cash operating earnings of $528 million for the fourth quarter were down 9% from the prior-year quarter. For the full year 2000, cash operating earnings were $3.53 billion, flat with 1999. TREASURY AND SECURITIES SERVICES operating revenues rose 9% to $907 million in the fourth quarter. Strong growth in Investor Services (custody) drove the increase, reflecting growth in net assets and new business, coupled with higher volumes. Operating revenues for the full year 2000 were $3.55 billion, 12% ahead of 1999. Broad-based growth in Investor Services and higher Institutional Trust revenues led the increase. Expenses rose more slowly than revenues, reflecting aggressive expense management in Treasury Services. Cash operating expenses rose 2% for the fourth quarter and 7% for the full year 2000, leading to significant margin improvements and earnings growth. Cash operating earnings of $182 million and $693 million were up 29% and 25% in the quarter and the full year, respectively. - 2 -
3 INVESTMENT MANAGEMENT AND PRIVATE BANKING had operating revenues of $894 million in the fourth quarter, compared with $645 million in the 1999 quarter. The increase was largely due to the inclusion of revenues from Fleming and H&Q in the 2000 quarter. On a pro-forma basis, client acquisition and higher assets under management in private banking were offset by the impact of weak equity markets in investment management. Full-year operating revenues were $3.30 billion, compared with $2.44 billion in 1999. Pro-forma for the acquisitions, private banking revenues were up, led by strong commission revenues and structuring fees in the first half of the year. Investment management revenues also saw double-digit growth on a pro-forma basis. Cash operating expenses of $710 million for the quarter and $2.43 billion for the year also reflect the impact of Fleming and H&Q. Cash operating earnings were $125 million for the fourth quarter and $586 million for the year. On a pro-forma basis, cash operating earnings grew 12% in the quarter and 51% in the full year. Assets under management within Investment Management and Private Banking stood at $638 billion as of December 31, 2000, up from $634 billion at the end of 1999. This excludes assets managed within other lines of business and assets attributable to the company's 45% stake in American Century. J.P. MORGAN PARTNERS had private equity losses of $92 million in the fourth quarter, compared with gains of $1.62 billion in the fourth quarter of 1999. Included in the fourth quarter results were $373 million in realized cash gains from public and private positions, compared with $658 million during the fourth quarter of 1999. Fourth quarter realized revenues were more than offset by a $465 million net decline in the unrealized value of the portfolio, primarily due to investments in the telecommunications and technology sectors. Despite this decline, the public equity portfolio maintains a quoted value of 2.7 times its original cost. For the full year, private equity gains were $988 million, down from $3.14 billion in 1999. Realized cash gains were $2.04 billion, up from $1.68 billion in 1999. The change in the unrealized value of the portfolio during 2000 was negative $1.05 billion, compared with a $1.46 billion gain recorded in 1999. RETAIL AND MIDDLE MARKET BANKING operating revenues were $2.56 billion, up 1% from the prior year's quarter. Cardmember Services revenues increased, despite the impact of higher funding costs, driven by growth in purchase volumes and fees and increased account acquisitions. Regional Banking revenues increased due to continued growth in deposit volumes. These positives were partially offset by the impact of the sales of operations in Hong Kong and Panama. Cash operating earnings for the fourth quarter rose 3% to $440 million and reflected continued improvement in credit quality. Full year 2000 operating revenues rose 1% to $10.05 billion and cash operating earnings rose 3% to $1.73 billion. Solid growth in Regional Banking and Middle Market Banking was offset by the negative impact of higher funding costs on Cardmember Services, and by a one-time increase in auto lease residual losses in the first quarter of 2000. Credit quality in Cardmember Services improved significantly, adding to the positive result. - 3 -
4 CREDIT RISK Nonperforming assets as of December 31, 2000 were down slightly from the prior quarter at $1.92 billion. The allowance for loan losses as of December 31, 2000 was $3.67 billion, compared with $3.75 billion at the end of the third quarter. The reported provision for loan losses in the fourth quarter was $409 million, which equaled net loan charge-offs adjusted for the effect of securitizations and a non-recurring charge described below. COMMERCIAL net charge-offs in the fourth quarter of 2000 were $159 million, down from $282 million in the 1999 fourth quarter. Charge-offs rose from $83 million in the third quarter, reflecting increased charge-offs in the foreign commercial portfolio. CONSUMER charge-offs on a managed basis (i.e., including securitizations) were $495 million, not including a non-recurring charge of $93 million to conform to a recently issued regulatory policy establishing uniform guidelines for consumer loan charge-offs. Excluding this charge, consumer charge-offs were down 5% from the fourth quarter of 1999 and up 4% from the third quarter. On a managed basis, the credit card net charge-off ratio excluding the charge was 4.87%, down from 5.24% in the fourth quarter of 1999 and 4.97% in the third quarter of 2000. TOTAL ASSETS AND CAPITAL Total assets as of December 31, 2000 were $715 billion, compared with $707 billion as of September 30, 2000, and $667 billion as of December 31, 1999. J.P. Morgan Chase's Tier One capital ratio as of December 31, 2000 was 8.4%, compared with 8.1% as of September 30, 2000. OTHER FINANCIAL INFORMATION MERGER BETWEEN CHASE AND J.P. MORGAN: On December 31, 2000, The Chase Manhattan Corporation and J.P. Morgan & Co. Incorporated completed the merger of their holding companies. The merger was accounted for as a pooling of interests. As a result, all financial information presented here for the combined entity, J.P. Morgan Chase & Co., reflects the results of Chase and J.P. Morgan as if the merger had been in effect for all periods presented. MERGER COSTS: Management estimates that the company will incur one-time, pre-tax costs of $3.2 billion related to the merger. The fourth quarter included a pre-tax charge of $1.25 billion, with the balance of the costs expected to be incurred during 2001 and 2002. SALE OF CHASE'S HONG KONG RETAIL BANKING BUSINESS: During the fourth quarter of 2000 Chase completed the previously announced sale of its Hong-Kong-based retail banking business, including Chase Manhattan Card Company Limited, to Standard Chartered PLC for $1.3 billion in cash. The sale resulted in a pre-tax gain of $827 million ($537 million after tax) TRANSFER OF EUROCLEAR-RELATED BUSINESSES: As previously announced, on December 31, 2000 a newly formed bank, Euroclear Bank, assumed operations of the Euroclear system from J.P. Morgan. The management and staff of Euroclear, comprising approximately 1,200 former J.P. Morgan employees, have become employees of the new entity. In connection with the transfer, a pre-tax gain of $399 million ($267 million after tax) was recorded in the fourth quarter. - 4 -
5 J.P. Morgan Chase & Co. is a premier global financial services firm with assets of $715 billion and operations in over 60 countries. The firm is a leader in investment banking, asset management, private equity, consumer banking, private banking, e-finance, and custody and processing services. Headquartered in New York, J.P. Morgan Chase serves 32 million consumer customers and over 5,000 corporate, institutional, and government clients. J.P. Morgan Chase will hold a presentation for the investment community on Wednesday, January 17, at 11:00 a.m. (Eastern Standard Time) to review fourth quarter and full year 2000 financial results, which are scheduled to be released early in the morning of January 17th. A live audio webcast of the presentation will be available on www.jpmorganchase.com. In addition, persons interested in listening to the presentation by telephone may dial in at (973) 872-3100. ----------------------- This press release contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of J.P. Morgan Chase's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These uncertainties include: the risk that the businesses of Chase and J.P. Morgan will not be integrated successfully; the risk that the revenue synergies and cost savings anticipated from the merger may not be fully realized or may take longer to realize than expected; the risk that the integration process may result in the disruption of ongoing business or in the loss of key employees or may adversely affect relationships with employees, clients or suppliers; the risks of adverse movements or volatility in the securities markets or in interest or foreign exchange rates or indices; the risk of adverse impacts from an economic downturn; the risk of a downturn in domestic or foreign securities and trading conditions or markets; the risks associated with increased competition; the risks associated with unfavorable political and diplomatic developments in foreign markets or adverse changes in domestic or foreign governmental or regulatory policies; or other factors impacting operational plans. Additional factors that could cause J.P. Morgan Chase's results to differ materially from those described in the forward-looking statements can be found in the 1999 Annual Reports on Form 10-K of The Chase Manhattan Corporation, filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission's internet site (http://www.sec.gov). # # # - 5 -
6 J.P. MORGAN CHASE & CO. FINANCIAL HIGHLIGHTS (IN MILLIONS, EXCEPT PER SHARE AND RATIO DATA) EXCLUDING J.P. MORGAN PARTNERS (d) --------------------------------------------------------------------------------- FOURTH QUARTER FOR THE YEAR ---------------------- OVER/(UNDER) ----------------------- OVER/(UNDER) 2000 1999 1999 2000 1999 1999 -------- -------- ------------ -------- -------- ------------ OPERATING BASIS (a) Operating Revenue $ 7,711 $ 6,997 10% $32,000 $28,610 12% Operating Noninterest Expense 5,655 4,513 25% 20,982 17,559 19% Operating Earnings 903 1,212 (25%) 5,674 5,656 -- Operating Diluted Earnings Per Share 0.44 0.61 (28%) 2.84 2.78 2% Return on Average Common Equity (b) 10.8 % 18.2 % (740)bp 19.8 % 20.6 % (80)bp Overhead Ratio (c) 73 65 800bp 66 61 500bp CASH BASIS: Cash Operating Earnings $ 1,081 $ 1,298 (17%) $ 6,180 $ 5,985 3% Cash Diluted Earnings Per Share 0.53 0.65 (18%) 3.10 2.94 5% Shareholder Value Added (2) 428 NM 2,427 2,385 2% Cash Return on Average Common Equity (b) 13.0 % 19.5 % (650)bp 21.6 % 21.8 % (20)bp Cash Overhead Ratio (c) 71 63 800bp 64 60 400bp INCLUDING J.P. MORGAN PARTNERS (d) --------------------------------------------------------------------------------- OPERATING BASIS (a) Operating Revenue $ 7,575 $ 8,616 (12%) $32,793 $31,695 3% Operating Noninterest Expense 5,742 4,629 24% 21,393 17,872 20% Operating Earnings 763 2,176 (65%) 5,927 7,433 (20%) Operating Diluted Earnings Per Share 0.37 1.09 (66%) 2.96 3.65 (19%) Return on Average Common Equity (b) 7.3 % 25.9 % (1,860)bp 16.1 % 22.2 % (610)bp Overhead Ratio (c) 76 54 2,200bp 65 56 900bp CASH BASIS: Cash Operating Earnings $ 949 $ 2,262 (58%) $ 6,455 $ 7,762 (17%) Cash Diluted Earnings Per Share 0.46 1.13 (59%) 3.23 3.82 (15%) Shareholder Value Added (391) 1,159 NM 1,656 3,375 (51%) Cash Return on Average Common Equity (b) 9.1 % 27.0 % (1,790)bp 17.6 % 23.2 % (560)bp Cash Overhead Ratio (c) 73 53 2,000bp 64 55 900bp - ------------------------------------------------------------------------------------------------------------------------------- REPORTED BASIS Revenue $ 8,543 $ 8,438 1% $32,934 $30,930 6% Noninterest Expense (Excluding Merger and Restructuring Costs) 5,742 4,629 24% 21,393 17,972 19% Merger and Restructuring Costs 1,302 23 NM 1,431 23 NM Provision for Loan Losses 409 429 (5%) 1,377 1,446 (5%) Net Income $ 708 $ 2.202 (68%) $ 5.727 $ 7.501 (24%) Net Income Per Share: - --------------------- Basic $ 0.36 $ 1.16 (69%) $ 2.99 $ 3.87 (23%) Diluted 0.34 1.10 (69%) 2.86 3.69 (22%) Cash Dividends Declared 0.32 0.27 19% 1.28 1.08 19% Share Price at Period End 45.44 51.79 (12%) Book Value at Period End 21.17 18.07 17% Common Shares Outstanding: - -------------------------- Average Common Shares: Basic 1924.8 1880.1 2% 1884.1 1912.9 (2%) Diluted 2007.1 1971.4 2% 1969.0 2004.8 (2%) Common Shares at Period End 1928.5 1850.5 4% Performance Ratios: - ------------------- Return on Average Total Assets (b) 0.40 % 1.38 % (98)bp 0.85 % 1.19 % (34)bp Return on Average Common Equity (b) 6.8 26.3 (1,950)bp 15.6 22.5 (690)bp Capital Ratios: - --------------- Tier I Capital Ratio 8.4 %(e) 8.5 % Total Capital Ratio 12.0 (e) 12.3 Tier I Leverage 5.4 (e) 5.9 NOTES: On December 31, 2000, J.P. Morgan & Co. Incorporated ("J.P. Morgan") merged with and into The Chase Manhattan Corporation ("Chase") and became J.P. Morgan Chase & Co. ("J.P. Morgan Chase"). The merger was accounted for as a pooling of interests and, accordingly, the information included in this press release reflects the combined results of Chase and J.P. Morgan as if the merger had been in effect for all periods presented. (a) Operating Basis: excludes the impact of credit card securitizations, merger and restructuring costs and special items. See page 11 for a reconciliation of results on a reported and operating basis. (b) Quarterly ratios are based on annualized amounts. (c) Noninterest expense as a percentage of the total of net interest income and noninterest revenue (excluding merger and restructuring costs and special items). The cash overhead ratio excludes the impact of amortization of goodwill and certain other intangibles. (d) J.P. Morgan Partners is J.P. Morgan Chase's private equity investment business. See pages 7 and 8 for its line of business results. (e) Estimated NM - Not meaningful Unaudited - 6 -
7 J.P. MORGAN CHASE & CO. LINES OF BUSINESS RESULTS (IN MILLIONS, EXCEPT RATIOS) INVESTMENT BANKING TREASURY & SECURITIES SERVICES ------------------------------- -------------------------------- FOURTH QUARTER 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 - ------------------------------------ ---------- -------------------- ---------- ------------------- Investment Banking Fees $ 1,047 $ 172 20% $ 3 $ -- Trading Revenue 1,273 (202) (14%) (1) (5) Fees and Commissions 448 157 54% 498 51 11% Private Equity Gains (Losses) (1) 4 -- -- Securities Gains (Losses) (11) 226 -- -- Other Revenue 252 201 NM 47 6 15% Net Interest Income 660 55 9% 360 26 8% ---------- ----------- ---------- ---------- Operating Revenue 3,668 613 20% 907 78 9% Cash Expense 2,797 756 37% 625 11 2% Cash Operating Earnings $ 528 $ (50) (9%) $ 182 $ 41 29% Average Common Equity $ 18,667 $ 2,726 17% $ 2,737 $ (215) (7%) Average Assets (a) $488,977 $ 35,210 8% $ 16,538 $ 47 -- Shareholder Value Added (SVA)(b) $ (82) $ (155) NM $ 92 $ 49 114% Cash Return on Average Common Equity 11.0% (300) bp 26.3% 800 bp INVESTMENT MGMT & PRIVATE BANKING ----------------------------------- FOURTH QUARTER 2000 OVER/(UNDER) 1999 - ------------------------------------ ---------- ------------------------ Investment Banking Fees $ -- $ (4) Trading Revenue 45 12 36% Fees and Commissions 653 203 45% Private Equity Gains (Losses) -- -- Securities Gains (Losses) -- -- Other Revenue 47 17 57% Net Interest Income 149 21 16% ---------- ----------- Operating Revenue 894 249 39% Cash Expense 710 148 26% Cash Operating Earnings $ 125 $ 72 136% Average Common Equity $ 5,396 $ 3,897 260% Average Assets (a) $ 34,886 $ 12,696 57% Shareholder Value Added (SVA)(b) $ (53) $ (63) NM Cash Return on Average Common Equity 9.1% (400) bp J.P. MORGAN PARTNERS RETAIL & MIDDLE MARKET BANKING ------------------------------- -------------------------------- FOURTH QUARTER 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 - ------------------------------------ ---------- -------------------- ---------- ------------------- Investment Banking Fees $ -- $ (1) $ 1 $ (1) Trading Revenue -- -- 3 -- Fees and Commissions 30 15 741 (94) (11%) Private Equity Gains (Losses) (92) (1,711) NM -- (2) Securities Gains -- -- 151 150 NM Other Revenue 21 18 110 21 Net Interest Income (95) (76) 1,551 (37) (2%) ---------- ----------- ---------- ---------- Operating Revenue (136) (1,755) NM 2,557 (d) 37 1% Cash Expense 79 (37) (32%) 1,344 42 3% Cash Operating Earnings (Loss) $ (134) $ (1,098) NM $ 440 (e) $ 12 3% Average Common Equity $ 7,708 $ 784 11% $ 8,042 $ 56 1% Average Assets (a) $ 13,110 $ 1,268 11% $151,885 $15,542 11% Shareholder Value Added (SVA) (b) $ (334) $ (1,093) NM $ 173 $ 12 7% Cash Return on Average Common Equity NM NM 21.6% 100 bp TOTAL (C) ----------------------------------- FOURTH QUARTER 2000 OVER/(UNDER) 1999 - ------------------------------------ ---------- ------------------------ Investment Banking Fees $ 1,051 $167 19% Trading Revenue 1,356 (122) (8%) Fees and Commissions 2,323 292 14% Private Equity Gains (Losses) (98) (1,712) NM Securities Gains 118 353 NM Other Revenue 258 57 28% Net Interest Income 2,567 (76) (3%) ---------- ----------- Operating Revenue 7,575 (1,041) (12%) Cash Expense 5,556 1,013 22% Cash Operating Earnings (Loss) $ 949 $ (1,313) (58%) Average Common Equity $ 40,372 $ 7,481 23% Average Assets (a) $721,767 $ 68,577 11% Shareholder Value Added (SVA) (b) $ (391) $ (1,550) NM Cash Return on Average Common Equity 9.1% (1,790) bp Notes: J.P. Morgan Chase has organized itself into five lines of business. All periods are on a comparable basis, although restatements will occur in future periods to reflect further alignment of management accounting policies. (a) Excludes the impact of credit card securitizations. (b) SVA is J.P. Morgan Chase's primary measure of business unit performance. SVA represents operating earnings excluding the amortization of goodwill and certain other intangibles (i.e., cash operating earnings), minus preferred dividends and an explicit charge for capital. (c) Total column includes Support Units and the effects remaining at the Corporate level after the implementation of management accounting policies. (d) Operating Revenue for Retail & Middle Market Banking consists of $969 million from Card Services (an increase of $51 million from the prior year period), $772 million from Regional Banking (an increase of $26 million from the prior year period), $333 million from Home Finance (a decrease of $12 million from the prior year period), $260 million from Middle Markets (a decrease of $3 million from the prior year period), $178 million from Diversified Consumer Services (an increase of $14 million from the prior year period) and $45 million from other businesses (a decrease of $39 million from the prior year period). (e) Cash Operating Earnings for Retail & Middle Market Banking consists of $141 million from Card Services (an increase of $11 million from the prior year period), $134 million from Regional Banking (an increase of $15 million from the prior year period), $76 million from Home Finance (a decrease of $9 million from the prior year period), $58 million from Middle Markets (a decrease of $1 million from the prior year period), $42 million from Diversified Consumer Services (an increase of $8 million from the prior year period) and $(11) million from other businesses (a decrease of $12 million from the prior year period). NM - Not meaningful bp - basis points Unaudited - 7 -
8 J.P. MORGAN CHASE & CO. LINES OF BUSINESS RESULTS (IN MILLIONS, EXCEPT RATIOS) INVESTMENT BANKING TREASURY & SECURITIES SERVICES -------------------------------- ------------------------------ FULL YEAR 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 --------- --------- ----------------- -------- ------------------ Investment Banking Fees $ 4,288 $ 812 23% $ 9 $ (3) Trading Revenue 6,672 165 3% - (58) Fees and Commissions 1,547 431 39% 1,939 207 12% Private Equity Gains 31 35 - - Securities Gains (Losses) (8) 202 - - Other Revenue 761 587 NM 215 87 68% Net Interest Income 2,457 (34) (1%) 1,391 149 12% --------- --------- --------- ------- Operating Revenue 15,748 2,198 16% 3,554 382 12% Cash Expense 10,012 2,280 29% 2,476 168 7% Cash Operating Earnings $ 3,528 $ (6) - $ 693 $ 140 25% Average Common Equity $ 17,089 $ (224) (1%) $ 2,729 $ (189) (6%) Average Assets (a) $ 474,477 $ 19,611 4% $ 16,054 $ (541) (3%) Shareholder Value Added (SVA) (b) $ 1,380 $ (25) (2%) $ 335 $ 169 102% Cash Return on Average Common Equity 20.4% - bp 25.2% 700 bp INVESTMENT MGMT & PRIVATE BANKING --------------------------------- FULL YEAR 2000 OVER/(UNDER) 1999 --------- -------- ----------------- Investment Banking Fees $ 37 $ 22 Trading Revenue 223 149 201% Fees and Commissions 2,248 509 29% Private Equity Gains - 1 Securities Gains (Losses) - - Other Revenue 193 88 84% Net Interest Income 597 89 18% ------- ------ Operating Revenue 3,298 858 35% Cash Expense 2,431 503 26% Cash Operating Earnings $ 586 $ 261 80% Average Common Equity $ 3,168 $1,732 121% Average Assets (a) $30,643 $9,617 46% Shareholder Value Added (SVA) (b) $ 177 $ 11 7% Cash Return on Average Common Equity 18.2% (400)bp J.P. MORGAN PARTNERS RETAIL & MIDDLE MARKET BANKING ---------------------------- ------------------------------ FULL YEAR 2000 OVER/(UNDER) 1999 2000 OVER/(UNDER) 1999 --------- -------- ----------------- --------- ----------------- Investment Banking Fees $ 5 $ (6) 20 $ 2 Trading Revenue (13) (13) 14 2 Fees and Commissions 86 48 3,148 162 5% Private Equity Gains 988 (2,155) NM - (10) Securities Gains - (5) 252 251 NM Other Revenue 33 (11) 418 (113) Net Interest Income (306) (150) 6,195 (145) (2%) ------- ------- -------- ------- Operating Revenue 793 (2,292) (74%) 10,047(d) 140 1% Cash Expense 389 76 24% 5,226 211 4% Cash Operating Earnings $ 269 $(1,508) (85%) $ 1,728(e) $ 53 3% Average Common Equity $ 7,881 $ 1,963 33% $ 8,074 $ 334 4% Average Assets (a) $13,480 $ 3,679 38% $146,487 $15,870 12% Shareholder Value Added (SVA) (b) $ (686) $(1,779) NM $ 661 $ 16 2% Cash Return on Average Common Equity 3.2% (2,700)bp 21.2% - bp TOTAL(c) ----------------------------- FULL YEAR 2000 OVER/(UNDER) 1999 --------- -------- -------------------- Investment Banking Fees $ 4,362 $ 845 24% Trading Revenue 7,006 310 5% Fees and Commissions 8,879 1,321 17% Private Equity Gains 1,015 (2,132) NM Securities Gains 229 421 NM Other Revenue 1,148 293 34% Net Interest Income 10,154 40 - -------- ------- Operating Revenue 32,793 1,098 3% Cash Expense 20,865 3,322 19% Cash Operating Earnings $ 6,455 $(1,307) 17%) Average Common Equity $ 36,176 $ 3,245 10% Average Assets (a) $695,580 $47,832 7% Shareholder Value Added (SVA) (b) $ 1,656 $(1,719) (51%) Cash Return on Average Common Equity 17.6% (560) bp Notes: J.P. Morgan Chase has organized itself into five lines of business. All periods are on a comparable basis, although restatements will occur in future periods to reflect further alignment of management accounting policies. (a) Excludes the impact of credit card securitizations. (b) SVA is J.P. Morgan Chase's primary measure of business unit performance. SVA represents operating earnings excluding the amortization of goodwill and certain other intangibles (i.e., cash operating earnings), minus preferred dividends and an explicit charge for capital. (c) Total column includes Support Units and the effects remaining at the Corporate level after the implementation of management accounting policies. (d) Operating Revenue for Retail & Middle Market Banking consists of $3,688 million from Card Services (a decrease of $56 million from the prior year), $3,051 million from Regional Banking (an increase of $197 million from the prior year), $1,330 million from Home Finance (an increase of $105 million from the prior year), $1,071 million from Middle Markets (an increase of $40 million from the prior year), $581 million from Diversified Consumer Services (a decrease of $40 million from the prior year) and $326 million from other businesses (a decrease of $106 million from the prior year). (e) Cash Operating Earnings for Retail & Middle Market Banking consists of $489 million from Card Services (an increase of $14 million from the prior year), $526 million from Regional Banking (an increase of $102 million from the prior year), $315 million from Home Finance (an increase of $12 million from the prior year), $254 million from Middle Markets (an increase of $25 million from the prior year), $95 million from Diversified Consumer Services (a decrease of $35 million from the prior year) and $49 million from other businesses (a decrease of $65 million from the prior year). NM - Not meaningful bp - basis points Unaudited - 8 -
9 J.P. MORGAN CHASE & CO. CONSOLIDATED STATEMENT OF INCOME (IN MILLIONS, EXCEPT PER SHARE DATA) FOURTH QUARTER % FOR THE YEAR % ----------------------- OVER/(UNDER) ----------------------- OVER/(UNDER) 2000 1999 1999 2000 1999 1999 -------- -------- ------------ -------- -------- ------------ REVENUES Investment Banking Fees $ 1,051 $ 884 19% $ 4,362 $ 3,517 24% Trading Revenue 1,142 1,285 (11%) 6,298 5,252 20% Fees and Commissions 2,387 2,122 12% 9,229 7,876 17% Private Equity - Realized Gains 373 658 (43%) 2,051 1,690 21% Private Equity - Unrealized Gains (Losses) (471) 956 NM (1,036) 1,457 NM Securities Gains (Losses) 118 (235) NM 229 (192) NM Other Revenue 1,482 205 623% 2,289 1,045 119% -------- -------- -------- -------- TOTAL NONINTEREST REVENUE 6,082 5,875 4% 23,422 20,645 13% -------- -------- -------- -------- Interest Income 9,922 8,058 23% 36,643 31,207 17% Interest Expense 7,461 5,495 36% 27,131 20,922 30% -------- -------- -------- -------- NET INTEREST INCOME 2,461 2,563 (4%) 9,512 10,285 (8%) -------- -------- -------- -------- REVENUES BEFORE PROVISION FOR LOAN LOSSES 8,543 8,438 1% 32,934 30,930 6% Provision for Loan Losses 409 429 (5%) 1,377 1,446 (5%) -------- -------- -------- -------- TOTAL NET REVENUES 8,134 8,009 2% 31,557 29,484 7% -------- -------- -------- -------- EXPENSES Compensation Expense 3,310 2,631 26% 12,748 10,534 21% Occupancy Expense 351 304 15% 1,294 1,190 9% Technology and Communications 668 579 15% 2,454 2,179 13% Other Expense 1,227 1,029 19% 4,369 3,740 17% Merger and Restructuring Costs 1,302 23 NM 1,431 23 NM -------- -------- -------- -------- TOTAL CASH EXPENSES 6,858 4,566 50% 22,296 17,666 26% Amortization of Intangibles 186 86 116% 528 329 60% -------- -------- -------- -------- TOTAL EXPENSES 7,044 4,652 51% 22,824 17,995 27% INCOME BEFORE INCOME TAX EXPENSE 1,090 3,357 (68%) 8,733 11,489 (24%) Income Tax Expense 382 1,155 (67%) 3,006 3,988 (25%) -------- -------- -------- -------- NET INCOME $ 708 $ 2,202 (68%) $ 5,727 $ 7,501 (24%) -------- -------- -------- -------- NET INCOME APPLICABLE TO COMMON STOCK $ 687 $ 2,177 (68%) $ 5,631 $ 7,395 (24%) ======== ======== ======== ======== NET INCOME PER COMMON SHARE: Basic $ 0.36 $ 1.16 (69%) $ 2.99 $ 3.87 (23%) Diluted $ 0.34 $ 1.10 (69%) $ 2.86 $ 3.69 (22%) NM - Not meaningful Unaudited - 9 -
10 J.P. MORGAN CHASE & CO. NONINTEREST REVENUE AND NONINTEREST EXPENSE DETAIL (IN MILLIONS) FOURTH QUARTER % FOR THE YEAR % -------------------- OVER/(UNDER) -------------------- OVER/(UNDER) NONINTEREST REVENUE 2000 1999 1999 2000 1999 1999 -------- -------- ----------- -------- -------- ------------ INVESTMENT BANKING FEES: Advisory $ 407 $ 289 41% $ 1,523 $ 1,024 49% Underwriting and Other Fees 644 595 8% 2,839 2,493 14% -------- -------- -------- -------- Total $ 1,051 $ 884 19% $ 4,362 $ 3,517 24% ======== ======== ======== ======== TRADING-RELATED REVENUE: (a) Equities $ 187 $ 353 (47%) $ 1,762 $ 1,194 48% Debt Instruments 249 228 9% 546 245 123% Foreign Exchange, Interest Rate, Commodities and Other 706 704 -- 3,990 3,813 5% -------- -------- -------- -------- Total Trading Revenue $ 1,142 $ 1,285 (11%) $ 6,298 $ 5,252 20% Trading-Related NII 214 193 11% 708 1,444 (51%) -------- -------- -------- -------- Total Trading-Related Revenue $ 1,356 $ 1,478 (8%) $ 7,006 $ 6,696 5% ======== ======== ======== ======== FEES AND COMMISSIONS: Investment Management, Custody and Processing Services $ 1,008 $ 736 37% $ 3,628 $ 2,868 26% Credit Card Revenue 460 440 5% 1,771 1,698 4% Brokerage and Investment Services 343 218 57% 1,228 768 60% Deposit Service Charges 238 228 4% 906 895 1% Lending Related Service Fees 164 337 (51%) 1,031 1,061 (3%) Other Fees 174 163 7% 665 586 13% -------- -------- -------- -------- Total $ 2,387 $ 2,122 12% $ 9,229 $ 7,876 17% ======== ======== ======== ======== OTHER REVENUE: Residential Mortgage Origination/Sales Activities $ 59 $ 48 23% $ 194 $ 323 (40%) Loss on Economic Hedge of the Flemings Purchase (b) -- -- NM (176) -- NM Gains on Sales of Nonstrategic Assets (c) 1,226 -- NM 1,307 166 NM All Other Revenue 197 157 25% 964 556 73% -------- -------- -------- -------- Total $ 1,482 $ 205 623% $ 2,289 $ 1,045 119% ======== ======== ======== ======== - ---------------------------------------------------------------------------------------------------------------------------------- NONINTEREST EXPENSE OTHER EXPENSE: Professional Services $ 365 $ 291 25% $ 1,203 $ 1,012 19% Marketing Expense 173 119 45% 595 503 18% Travel and Entertainment 143 91 57% 490 350 40% Special Contribution to the Foundation (d) -- -- NM -- 100 NM All Other 546 528 3% 2,081 1,775 17% -------- -------- -------- -------- Total $ 1,227 $ 1,029 19% $ 4,369 $ 3,740 17% ======== ======== ======== ======== (a) Trading-related revenue includes net interest income attributable to trading activities. (b) Loss is the result of the economic hedge of the purchase price of Fleming prior to its acquisition. (c) Fourth quarter 2000 includes an $827 million gain on the sale of the Hong Kong retail banking business and a $399 million gain on the transfer of Euroclear related business. Full year 2000 also includes an $81 million gain on the sale of a business in Panama. 1999 includes a $95 million gain on the sale of One New York Plaza and a $71 million gain on the sale of branches in Beaumont, Texas. (d) Represents a $100 million special contribution to The Chase Manhattan Foundation. NM - Not meaningful Unaudited - 10 -
11 J.P. MORGAN CHASE & CO. OPERATING INCOME RECONCILIATION (IN MILLIONS, EXCEPT PER SHARE DATA) FOURTH QUARTER 2000 FOURTH QUARTER 1999 --------------------------------------- -------------------------------------- REPORTED CREDIT SPECIAL OPERATING REPORTED CREDIT SPECIAL OPERATING RESULTS CARD ITEMS BASIS RESULTS CARD ITEMS BASIS (a) (b) (c) (a) (b) (c) -------- ------ ------- --------- -------- ------ ------- --------- EARNINGS - -------- Total Revenue $ 8,543 $ 258 $ (1,226) $ 7,575 $ 8,438 $ 240 $ (62) $ 8,616 Noninterest Expense 5,742 - - 5,742 4,629 - - 4,629 -------- ------ ------- --------- -------- ------ ------- --------- Operating Margin 2,801 258 (1,226) 1,833 3,809 240 (62) 3,987 Credit Costs 409 258 - 667 429 240 - 669 -------- ------ ------- --------- -------- ------ ------- --------- Income Before Merger and Restructuring Costs 2,392 - (1,226) 1,166 3,380 - (62) 3,318 Merger and Restructuring Costs 1,302 - (1,302) - 23 - (23) - -------- ------ ------- --------- -------- ------ ------- --------- Income Before Income Tax Expense 1,090 - 76 1,166 3,357 - (39) 3,318 Tax Expense 382 - 21 403 1,155 - (13) 1,142 -------- ------ ------- --------- -------- ------ ------- --------- Net Income $ 708 $ - $ 55 $ 763 $ 2,202 $ - $ (26) $ 2,176 -------- ------ ------- --------- -------- ------ ------- --------- NET INCOME PER COMMON SHARE - --------------------------- Basic $ 0.36 $ 0.39 $ 1.16 $ 1.14 Diluted $ 0.34 $ 0.37 $ 1.10 $ 1.09 - ------------------------------------------------------------------------------------------------------------------ FOR THE YEAR 2000 FOR THE YEAR 1999 ------------------------------------------- -------------------------------------- REPORTED CREDIT SPECIAL OPERATING REPORTED CREDIT SPECIAL OPERATING RESULTS CARD ITEMS BASIS RESULTS CARD ITEMS BASIS (a) (b) (c) (a) (b) (c) --------- ------ --------- --------- --------- ------ ------- --------- EARNINGS - -------- Total Revenue $ 32,934 $ 990 $ (1,131) $ 32,793 $ 30,930 $ 993 $ (228) $ 31,695 Noninterest Expense 21,393 - - 21,393 17,972 - (100) 17,872 --------- ------ --------- --------- --------- ------ ------- --------- Operating Margin 11,541 990 (1,131) 11,400 12,958 993 (128) 13,823 Credit Costs 1,377 990 - 2,367 1,446 993 - 2,439 --------- ------ --------- --------- --------- ------ ------- --------- Income Before Merger and Restructuring Costs 10,164 - (1,131) 9,033 11,512 - (128) 11,384 Merger and Restructuring Costs 1,431 - (1,431) - 23 - (23) - --------- ------ --------- --------- --------- ------ ------- --------- Income Before Income Tax Expense 8,733 - 300 9,033 11,489 - (105) 11,384 Tax Expense 3,006 - 100 3,106 3,988 - (37) 3,951 --------- ------ --------- --------- --------- ------ ------- --------- Net Income $ 5,727 $ - $ 200 $ 5,927 $ 7,501 $ - $ (68) $ 7,433 --------- ------ --------- --------- --------- ------ ------- --------- NET INCOME PER COMMON SHARE - --------------------------- Basic $ 2.99 $ 3.09 $ 3.87 $ 3.83 Diluted $ 2.86 $ 2.96 $ 3.69 $ 3.65 - --------------------------------------------------------------------------------------------------------- (a) Represents condensed results as reported in J.P. Morgan Chase's financial statements. (b) This column excludes the impact of credit card securitizations. For securitized receivables, amounts that previously would have been reported as net interest income and as provision for loan losses are instead reported as components of noninterest revenue. (c) Includes merger and restructuring costs and special items. The 2000 fourth quarter includes an $827 million gain on the sale of the Hong Kong retail banking business, a $399 million gain from the transfer of Euroclear related business, $52 million of restructuring costs associated with previously announced relocation initiatives ($181 million for the full year) and $1,250 million in merger expenses. Also included in the 2000 full year was an $81 million gain from the sale of a business in Panama and a $176 million loss resulting from the economic hedge of the purchase price of Fleming prior to its acquisition. The 1999 fourth quarter included interest income from prior years' tax refunds of $62 million and restructuring costs of $23 million. The 1999 full year also included $166 million in gains from sales of nonstrategic assets, of which $95 million was from the sale of One New York Plaza and $71 million was from the sale of branches in Beaumont, Texas, and a special contribution to The Chase Manhattan Foundation of $100 million. Unaudited - 11 -
12 J.P. MORGAN CHASE & CO. CONSOLIDATED BALANCE SHEET (IN MILLIONS) DECEMBER 31, % ----------------------------------- OVER/(UNDER) 2000 1999 1999 ------------- -------------- ------------- ASSETS Cash and Due from Banks $ 23,972 $ 18,692 28% Deposits with Banks 8,333 30,421 (73%) Federal Funds Sold and Securities Purchased Under Resale Agreements 69,474 58,981 18% Securities Borrowed 32,371 35,528 (9%) Trading Assets: Debt and Equity Instruments 139,249 104,125 34% Derivative Receivables 76,373 76,736 -- Securities 73,695 75,799 (3%) Loans (Net of Allowance for Loan Losses of $3,665 in 2000 and $3,738 in 1999) 212,385 199,270 7% Goodwill & Other Intangibles 15,833 9,632 64% Other Assets 63,663 57,819 10% ------------- -------------- TOTAL ASSETS $ 715,348 $ 667,003 7% ============= ============== LIABILITIES Deposits: Domestic: Noninterest-Bearing $ 55,933 $ 50,366 11% Interest-Bearing 89,370 84,341 6% Foreign: Noninterest-Bearing 6,780 6,559 3% Interest-Bearing 127,282 145,798 (13%) ------------- -------------- Total Deposits 279,365 287,064 (3%) Federal Funds Purchased and Securities Sold Under Repurchase Agreements 131,738 109,841 20% Commercial Paper 24,851 20,363 22% Other Borrowed Funds 19,840 15,403 29% Trading Liabilities: Debt and Equity Instruments 52,157 46,268 13% Derivative Payables 76,517 72,722 5% Accounts Payable, Accrued Expenses and Other Liabilities, Including the Allowance for Credit Losses of $283 in 2000 and $295 in 1999 40,754 34,196 19% Long-Term Debt 43,299 41,852 3% Guaranteed Preferred Beneficial Interests in Corporation's Junior Subordinated Deferrable Interest Debentures 3,939 3,688 7% ------------- -------------- TOTAL LIABILITIES 672,460 631,397 7% ------------- -------------- PREFERRED STOCK OF SUBSIDIARY 550 550 -- ------------- -------------- STOCKHOLDERS' EQUITY Preferred Stock 1,520 1,622 (6%) Common Stock 1,940 1,625 19% Capital Surplus 11,598 12,724 (9%) Retained Earnings 28,096 28,455 (1%) Accumulated Other Comprehensive Loss (241) (1,428) (83%) Treasury Stock, at Cost (575) (7,942) (93%) ------------- -------------- TOTAL STOCKHOLDERS' EQUITY 42,338 35,056 21% ------------- -------------- TOTAL LIABILITIES, PREFERRED STOCK OF SUBSIDIARY AND STOCKHOLDERS' EQUITY $ 715,348 $ 667,003 7% ============= ============== Unaudited - 12 -
13 J.P. MORGAN CHASE & CO. CREDIT RELATED INFORMATION AND SELECTED AVERAGE BALANCES AND YIELDS (IN MILLIONS, EXCEPT RATIOS) CREDIT-RELATED ASSETS % NONPERFORMING ASSETS % ------------------------ OVER/(UNDER) ------------------------ OVER/(UNDER) DECEMBER 31, 2000 1999 1999 2000 1999 1999 - --------------------------------------- ----------- ----------- ------------ ---------- ----------- ------------ WHOLESALE: Domestic Commercial Loans $ 73,939 $ 69,780 6% $ 821 $ 474 73% Foreign Commercial Loans 42,367 43,292 (2%) 613 825 (26%) ----------- ----------- ---------- ----------- TOTAL COMMERCIAL LOANS 116,306 113,072 3% 1,434 1,299 10% DERIVATIVE RECEIVABLES (a) 76,373 76,736 -- 37 34 9% ----------- ----------- ---------- ----------- TOTAL WHOLESALE 192,679 189,808 2% 1,471 1,333 10% ----------- ----------- ---------- ----------- CONSUMER: Credit Card - Reported 18,501 16,379 13% 26 (b) 40 (b) (35%) Credit Card Securitizations (c) 17,871 17,939 -- -- -- NM ----------- ----------- ---------- ----------- Credit Card - Managed 36,372 34,318 6% 26 40 (35%) 1-4 Family Residential Mortgages 50,594 45,834 10% 273 305 (10%) Other Consumer (d) 30,649 27,723 11% 85 93 (9%) ----------- ----------- ---------- ----------- TOTAL CONSUMER LOANS 117,615 107,875 9% 384 438 (12%) ----------- ----------- ---------- ----------- TOTAL MANAGED CREDIT-RELATED $ 310,294 $ 297,683 4% $ 1,855 $ 1,771 5% =========== =========== ========== =========== Assets Acquired as Loan Satisfactions 68 102 (33%) ---------- ----------- TOTAL NONPERFORMING ASSETS $ 1,923 $ 1,873 3% ========== =========== NET LOAN CHARGE-OFFS --------------------------------------------------------------- FOURTH QUARTER FOR THE YEAR ---------------------------- ----------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- WHOLESALE: Domestic Commercial Loans $ 88 $ 105 $ 290 $ 272 Foreign Commercial Loans 71 177 110 304 ----------- ----------- ----------- ----------- TOTAL COMMERCIAL LOANS 159 282 400 576 ----------- ----------- ----------- ----------- CONSUMER: Credit Card - Reported 174 195 714 854 Credit Card Securitizations (c) 245 240 977 993 ----------- ----------- ----------- ----------- Credit Card - Managed 419 435 1,691 1,847 1-4 Family Residential Mortgages 10 11 37 30 Other Consumer (d) 66 77 249 287 ----------- ----------- ----------- ----------- TOTAL CONSUMER LOANS 495 523 1,977 2,164 Charge to conform to FFIEC policy revision (f) 93 -- 93 -- ----------- ----------- ----------- ----------- TOTAL MANAGED NET LOAN CHARGE-OFFS $ 747 $ 805 $ 2,470 $ 2,740 =========== =========== =========== =========== NET LOAN CHARGE-OFF RATE --------------------------------------------------------------- FOURTH QUARTER (e) FOR THE YEAR ---------------------------- ----------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- WHOLESALE: Domestic Commercial Loans 0.42% 0.51% 0.35% 0.34% Foreign Commercial Loans 0.77 2.13 0.31 0.89 TOTAL COMMERCIAL LOANS 0.53 0.98 0.34 0.50 CONSUMER: Credit Card - Reported 4.27 5.12 4.92 5.72 Credit Card Securitizations (c) 5.40 5.34 5.20 5.60 Credit Card - Managed 4.87 5.24 5.08 5.65 1-4 Family Residential Mortgages 0.08 0.10 0.08 0.07 Other Consumer (d) 0.92 1.18 0.92 1.09 TOTAL CONSUMER LOANS 1.74 2.01 1.81 2.10 Charge to conform to FFIEC policy revision (f) NM NM NM NM TOTAL MANAGED NET LOAN CHARGE-OFFS 1.28% 1.47% 1.08% 1.26% (a) Charge-offs for derivative receivables are included in trading revenue. (b) Includes currently performing loans placed on a cash basis because of concerns as to collectibility. (c) Represents the portion of J.P. Morgan Chase's credit card receivables that have been securitized. (d) Consists of auto financings, installment loans (direct and indirect types of consumer finance), student loans and unsecured revolving lines of credit. (e) Annualized (f) In the fourth quarter 2000, J.P. Morgan Chase incurred a $93 million charge to conform to the Federal Financial Institutions Examination Council's ("FFIEC") revised policy establishing uniform guidelines for the charge-off of consumer loans to delinquent, bankrupt, deceased and fraudulent borrowers. Of this total amount, $12 million related to reported credit cards, $13 million related to securitized credit cards, $35 million related to residential mortgages, $30 million related to auto financings, and $3 million related to other loans. NM - Not meaningful - -------------------------------------------------------------------------------- FOURTH QUARTER % FOR THE YEAR % --------------------------- OVER/(UNDER) ------------------------------ OVER/(UNDER) 2000 1999 1999 2000 1999 1999 ------------- ------------- ------------- ------------- ------------- ------------ SELECTED AVERAGE BALANCES: - -------------------------- Loans $ 215,422 $ 201,324 7% $ 209,488 $ 199,912 5% Total Interest-Earning Assets 540,559 485,586 11% 513,404 483,222 6% Total Assets 703,624 635,200 11% 676,805 630,023 7% Interest-Bearing Deposits 215,147 216,216 -- 214,411 214,290 -- Total Interest-Bearing Liabilities 498,067 442,296 13% 471,601 439,126 7% Total Liabilities 661,180 600,137 10% 638,508 594,846 7% Common Stockholders' Equity 40,372 32,891 23% 36,176 32,931 10% Total Stockholders' Equity 41,894 34,513 21% 37,747 34,627 9% SELECTED YIELDS: - ---------------- Loans 8.66% 7.63% 8.23% 7.40% Total Interest-Earning Assets 7.31% 6.60% 7.15% 6.48% Interest-Bearing Deposits 5.40% 4.25% 5.05% 4.13% Total Interest-Bearing Liabilities 5.96% 4.93% 5.75% 4.76% Net Yield on Interest-Earning Assets 1.82% 2.11% 1.87% 2.15% Unaudited - 13 -
14 J.P. MORGAN CHASE & CO. J.P. MORGAN PARTNERS INVESTMENT PORTFOLIO (IN MILLIONS) ================================================================================================== DECEMBER 31, 2000 ------------------------ CARRYING VALUE COST ---------- --------- Total Public Securities (220 companies) $ 1,859 $ 967 Total Private Direct Investments (1,002 companies) 7,538 7,480 Total Private Fund Investments (328 funds) 2,362 2,379 ---------- --------- Total Investment Portfolio $ 11,759 $ 10,826 ========== ========= ================================================================================================== PUBLIC SECURITIES INVESTMENTS AT DECEMBER 31, 2000 * (DOLLARS AND SHARES IN MILLIONS) ================================================================================================== QUOTED PUBLIC SYMBOL SHARES VALUE COST -------- ---------- ---------- --------- TRITON PCS HOLDING, INC. TPCS 21.8 $ 739 $ 96 TELECORP PCS TLCP 11.4 256 8 AMERICAN TOWER CORP. AMT 5.8 218 15 FISHER SCIENTIFIC FSH 3.0 109 27 PRAECIS PHARMACEUTICALS INC. PRCS 3.1 90 20 EDISON SCHOOLS, INC. EDSN 2.7 84 21 ONI SYSTEMS CORP ONIS 1.8 72 2 DDI CORP DDIC 2.5 69 18 GUITAR CENTER INC. GTRC 5.0 57 54 CROWN MEDIA HOLDINGS INC. CRWN 2.7 56 40 ---------- --------- TOP TEN PUBLIC SECURITIES $ 1,750 $ 301 OTHER PUBLIC SECURITIES (210 COMPANIES) 837 666 ---------- --------- TOTAL PUBLIC SECURITIES (220 COMPANIES) $ 2,587 $ 967 ========== ========= * - Publicly traded positions only. ================================================================================================== ================================================================================ POLICY: Public securities held by J.P. Morgan Partners are marked-to-market at the quoted public value less liquidity discounts, with the resulting unrealized gains/losses included in the income statement. J.P. Morgan Partners' valuation policy for public securities incorporates the use of these liquidity discounts and price averaging methodologies in certain circumstances to take into account the fact that J.P. Morgan Partners can not immediately realize such public quoted values due to the numerous regulatory, corporate and contractual sales restrictions. Private investments are carried at cost, which is viewed as an approximation of fair value. The carrying value of private investments is adjusted for holdings in which a subsequent investment by an unaffiliated party indicates a valuation in excess of cost and holdings for which evidence of an other-than-temporary decline in value exists. ================================================================================ - 14 -
15 J.P. MORGAN CHASE & CO. QUARTERLY FINANCIAL HIGHLIGHTS (IN MILLIONS, EXCEPT PER SHARE AND RATIO DATA) EXCLUDING J.P. MORGAN PARTNERS (d) ------------------------------------------------- 2000 ------------------------------------------------- FOURTH THIRD SECOND FIRST QUARTER QUARTER QUARTER QUARTER ---------- ---------- ---------- --------- OPERATING BASIS (a) Operating Revenue $ 7,711 $ 7,983 $ 7,891 $ 8,415 Operating Noninterest Expense 5,655 5,153 4,947 5,227 Operating Earnings 903 1,539 1,555 1,677 Operating Diluted Earnings Per Share 0.44 0.77 0.79 0.85 Overhead Ratio (c) 73 % 65 % 63 % 62 % CASH BASIS: Cash Operating Earnings $ 1,081 $ 1,689 $ 1,643 $ 1,767 Cash Diluted Earnings Per Share 0.53 0.84 0.84 0.90 Cash Overhead Ratio (c) 71 % 63 % 62 % 61 % INCLUDING J.P. MORGAN PARTNERS (d) ------------------------------------------------- OPERATING BASIS (a) Operating Revenue $ 7,575 $ 7,913 $ 8,282 $ 9,023 Operating Noninterest Expense 5,742 5,273 5,025 5,353 Operating Earnings 763 1,419 1,757 1,988 Operating Diluted Earnings Per Share 0.37 0.70 0.89 1.01 Return on Average Common Equity (b) 7.3 % 14.9 % 20.6 % 23.8 % Overhead Ratio (c) 76 67 61 59 CASH BASIS: Cash Operating Earnings $ 949 $ 1,576 $ 1,849 $ 2,081 Cash Diluted Earnings Per Share 0.46 0.78 0.94 1.06 Cash Return on Average Common Equity (b) 9.1 % 16.5 % 21.7 % 24.9 % Cash Overhead Ratio (c) 73 65 60 58 - ------------------------------------------------------------------------------------------------ REPORTED BASIS Revenue $ 8,543 $ 7,723 $ 7,899 $ 8,769 Noninterest Expense (Excluding Merger and Restructuring Costs) 5,742 5,273 5,025 5,353 Merger and Restructuring Costs 1,302 79 50 - Provision for Loan Losses 409 298 328 342 Net Income (Loss) $ 708 $ 1,398 $ 1,633 $ 1,988 Net Income (Loss) Per Share: - --------------------------- Basic $ 0.36 $ 0.73 $ 0.87 $ 1.06 Diluted 0.34 0.69 0.83 1.01 Cash Dividends Declared 0.32 0.32 0.32 0.32 Share Price at Period End 45.44 46.19 46.06 58.13 Book Value at Period End 21.17 20.98 19.19 18.49 Performance Ratios: - ------------------- Return on Average Total Assets (b) 0.40 % 0.81 % 0.98 % 1.23 % Return on Average Common Equity (b) 6.8 14.6 19.1 23.8 Capital Ratios: - --------------- Tier I Capital Ratio 8.4 %(e) 8.1 % 8.6 % 8.5 % Total Capital Ratio 12.0 (e) 11.7 12.3 12.2 Tier I Leverage 5.4 (e) 5.6 5.8 5.8 EXCLUDING J.P. MORGAN PARTNERS (d) ---------------------------------------------- 1999 ---------------------------------------------- FOURTH THIRD SECOND FIRST QUARTER QUARTER QUARTER QUARTER ---------- ---------- --------- ---------- OPERATING BASIS (a) Operating Revenue $ 6,997 $ 6,726 $ 7,270 $ 7,617 Operating Noninterest Expense 4,513 4,234 4,341 4,471 Operating Earnings 1,212 1,272 1,555 1,617 Operating Diluted Earnings Per Share 0.61 0.63 0.76 0.78 Overhead Ratio (c) 65 % 63 % 60 % 59 % CASH BASIS: Cash Operating Earnings $ 1,298 $ 1,350 $ 1,639 $ 1,698 Cash Diluted Earnings Per Share 0.65 0.67 0.80 0.82 Cash Overhead Ratio (c) 63 % 62 % 59 % 58 % INCLUDING J.P. MORGAN PARTNERS (d) ---------------------------------------------- OPERATING BASIS (a) Operating Revenue $ 8,616 $ 7,377 $ 7,790 $ 7,912 Operating Noninterest Expense 4,629 4,330 4,393 4,520 Operating Earnings 2,176 1,629 1,855 1,773 Operating Diluted Earnings Per Share 1.09 0.80 0.91 0.86 Return on Average Common Equity (b) 25.9 % 19.6 % 22.2 % 21.2 % Overhead Ratio (c) 54 59 56 57 CASH BASIS: Cash Operating Earnings $ 2,262 $ 1,707 $ 1,939 $ 1,854 Cash Diluted Earnings Per Share 1.13 0.84 0.95 0.90 Cash Return on Average Common Equity (b) 27.0 % 20.6 % 23.2 % 22.2 % Cash Overhead Ratio (c) 53 58 55 56 - -------------------------------------------------------------------------------------------- REPORTED BASIS Revenue $ 8,438 $ 7,139 $ 7,710 $ 7,643 Noninterest Expense (Excluding Merger and Restructuring Costs) 4,629 4,330 4,493 4,520 Merger and Restructuring Costs 23 - - - Provision for Loan Losses 429 353 283 381 Net Income (Loss) $ 2,202 $ 1,629 $ 1,897 $ 1,773 Net Income (Loss) Per Share: - --------------------------- Basic $ 1.16 $ 0.84 $ 0.97 $ 0.90 Diluted 1.10 0.80 0.93 0.86 Cash Dividends Declared 0.27 0.27 0.27 0.27 Share Price at Period End 51.79 50.25 57.67 54.25 Book Value at Period End 18.07 17.39 17.26 17.27 Performance Ratios: - ------------------- Return on Average Total Assets (b) 1.38 % 1.04 % 1.21 % 1.13 % Return on Average Common Equity (b) 26.3 19.6 22.7 21.2 Capital Ratios: - --------------- Tier I Capital Ratio 8.5 % 8.5 % 8.4 % 8.3 % Total Capital Ratio 12.3 12.2 12.2 12.2 Tier I Leverage 5.9 5.9 5.8 5.6 See notes on page 6. Unaudited - 15 -