SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
| Date of Report: | Commission file number | |
| July 11, 2003 | 1-5805 |
J.P. MORGAN CHASE & CO.
| Delaware | 13-2624428 | |
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| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 270 Park Avenue, New York, NY | 10017 | |||
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| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 270-6000
Item 7. Financial Statements and
Exhibits
(c) Exhibits
| Exhibit No. | Description of Exhibit | ||
| 99.1 | Restatement of Business Segment Financial Results and Capital | ||
| 99.2 | Reconciliation of Certain Non-GAAP Measures |
Item 9. Regulation FD Disclosure (and Item 12. Results of Operations and Financial Condition)
As discussed in its Annual Report on Form 10-K for the year ended December 31, 2002, and its Form 10-Q for the quarter ended March 31, 2003, J.P. Morgan Chase & Co. (“JPMorgan Chase” or the “Firm”) has undertaken, during the past several months, a review of its capital measurement methodologies for commercial credit risk, operating risk and private equity risk, as well as the assumed correlations among the various risks. That review has been completed, resulting in the reallocation of capital among risk categories and certain business segments. The Firm has also revised its internal management reporting policies to: (1) allocate certain revenues, expenses and tax-related items that had been recorded within the Corporate segment to the other business segments and (2) assign to Treasury & Securities Services (“T&SS”) a corporate credit allocation associated with certain credit exposures managed within the Investment Bank’s (“IB”) credit portfolio related to certain shared clients. A more complete description of these changes in policies follows.
As a result of these revisions, the operating results of the lines of business have been affected, although the Firm’s reported consolidated results have not been affected in any way. Attached to this Form 8-K, as Exhibit 99.1, are restated line of business results for (1) each of full-year 2000, 2001 and 2002 and (2) each quarter of 2002 and the first quarter of 2003. The schedule on page 3 of Exhibit 99.1 reflects the dollar change, after these restatements, to the line of business operating results disclosed in the 2002 JPMorgan Chase Annual Report. Commencing with the second quarter of 2003, line of business operating results will be reported on a basis consistent with the presentation set forth in this restatement.
Capital Allocation
JPMorgan Chase assigns economic risk capital based primarily on four risk factors:
credit risk, market risk, operating risk and private equity risk. Effective with the second quarter of 2003,
the capital measurement methodologies for commercial credit risk, operating
risk and private equity risk have been revised. These new methodologies have
changed the level of capital allocated to individual business segments, but have not
resulted in a significant change in the total capital allocated to
the business
segments as a whole.
The Firm has revised its methodology for the assessment of credit risk capital allocated to the commercial credit portfolio, more closely aligning capital with current market conditions. Specifically, the new approach employs estimates of default likelihood that are derived from current market parameters and is intended to capture the impact of both defaults and declines in market value due to credit deterioration. This approach is intended to more accurately reflect current risk conditions as well as to enhance the management of commercial credit risk by encouraging the utilization of the growing market in credit derivatives and secondary market loan sales. For the first quarter of 2003, the capital attributed to credit risk increased 17% from $12.9 billion to $15.1 billion, driven by the revised methodology for commercial credit risk.
Operating risk has been separated into its two components: operational risk and business risk. Operational risk is the risk of loss resulting from inadequate or failed processes or systems, human
2
factors or external events. Under the prior methodology, operating risk capital was allocated to each business based on its complexity, expense base and control quality. The new operational risk model is loss-based, with adjustments to reflect changes in the quality of the control environment, and with a potential offset for the use of risk-transfer products. Business risk is defined as the risk associated with the volatility in the Firm’s earnings due to factors not captured by other parts of the Firm’s economic capital framework. For business risk, capital is allocated to each business based on historical revenue volatility and measures of fixed and variable expenses. Earnings volatility arising from other risk factors such as credit, market or operational risks is excluded from the measurement of business risk capital, as these factors are captured under those risk capital models. The revised methodology resulted in an overall lower amount of capital allocated to the businesses in respect of operational and business risks. The combined capital attributed to operational and business risks declined 47% from $9.9 billion under the prior methodology to $5.2 billion under the revised methodology for the first quarter of 2003.
In refining the capital methodology for private equity risk, JPMorgan Chase has assigned a moderately higher amount of capital for this risk, given changes made to stress test parameters for the private equity portfolio, as well as liquidity-adjusted VAR (i.e., Value-at-Risk) measurements for the public equity portfolio. Most of the private equity capital is assigned to JPMorgan Partners. The capital attributed to private equity risk increased 10% from $4.9 billion under the prior methodology to $5.4 billion under the revised methodology for the first quarter of 2003.
The changes to average economic capital for each line of business are shown for full year 2000, 2001 and 2002 on page 3 of Exhibit 99.1. For 2002, the economic capital in the Investment Bank increased 9% from $18.3 billion under the prior methodologies to $19.9 billion under the revised methodologies. This increase was driven primarily by an increase in the capital attributed to credit risk and to a lesser extent by an increase in the capital attributed to operational and business risk. In Treasury & Securities Services, economic capital decreased 10% from $3.0 billion to $2.7 billion. The drop was due to a decline in the capital attributed to operational and business risk, partially offset by an increase in the capital attributed to the corporate credit allocation discussed below. Investment Management & Private Banking's economic capital declined 8% from $6.1 billion to $5.6 billion driven by declines in the capital attributed to operational and business risk and to credit risk. Economic capital in JPMorgan Partners increased 15% from $5.5 billion to $6.3 billion driven by increases in capital attributed to private equity risk as well as to operational and business risk. In Chase Financial Services, economic capital decreased 17% from $10.3 billion to $8.6 billion due primarily to a decline in the capital attributed to operational and business risk.
Corporate Segment
The Corporate segment has historically reported a net loss, primarily driven by negative revenue. Negative revenue in the Corporate segment results from the overallocation to business segments of economic capital (thus generating negative net interest income) as well as revenues that arise from the application of funds transfer pricing and other management accounting policies. Expense items in the Corporate segment may result from timing differences in allocations to business segments, residuals from interoffice allocation among the business segments and other items considered appropriate to retain in the Corporate segment. Although the Corporate segment generally has no credit exposures, the residual component of the allowance for credit losses is maintained in this segment and is not allocated to any specific business segment.
In the first quarter of 2003, the Firm initiated a review of its management accounting policies. As a result of such review, for the first quarter of 2003 approximately $50 million of the previously reported operating loss of $223 million recorded within the Corporate segment has been allocated to the other business segments. This includes certain income tax expenses that had originally been recorded within
3
the Corporate segment and have been allocated to other business segments, principally to Investment Management & Private Banking. Prior periods have been restated to reflect current methodologies. Management is continuing to assess the appropriate allocation of items remaining in the Corporate segment and anticipates additional allocations from the Corporate segment to the other business segments in the future.
Credit Portfolio Transfer to Treasury & Securities Services
Management has decided to assign to T&SS a corporate credit allocation, together with the associated economic capital. The corporate credit allocation is the amount of net earnings related to certain credit exposures managed within the IB credit portfolio on behalf of clients shared with T&SS. The allocation is presented on a separate line in the operating income statement. This change increased T&SS operating earnings by $8 million and average economic capital by $852 million for the first quarter of 2003. Shareholder value added in T&SS was reduced by $17 million in the first quarter of 2003. The IB’s operating earnings, economic capital and shareholder value added for the same period exactly offset the impact to T&SS.
Exhibit 99.2
Also attached as Exhibit 99.2 to this Form 8-K is a reconciliation to GAAP measures of certain non-GAAP measures used by the Firm.
4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| J.P. MORGAN CHASE & CO. | ||
| (Registrant) |
| By: | /s/ Joseph L. Sclafani | ||||
| Joseph L. Sclafani | |||||
| Executive Vice President and Controller | |||||
| [Principal Accounting Officer] | |||||
Dated: July 11, 2003
5
EXHIBIT INDEX
| Exhibit No. | Description of Exhibit | ||
| 99.1 | Restatement of Business Segment Financial Results and Capital | ||
| 99.2 | Reconciliation of Certain Non-GAAP Measures |
6
EXHIBIT 99.1
RESTATEMENT OF BUSINESS SEGMENT FINANCIAL RESULTS AND CAPITAL
FULL YEAR 2000 – 2002
FIVE QUARTER TREND: FIRST QUARTER 2002 – FIRST QUARTER 2003
| J.P. MORGAN CHASE & CO. | ||
| TABLE OF CONTENTS |
 |
| Page | ||||
Lines of Business Restatement Summary |
3 | |||
Lines of Business Financial Highlights Summary |
4 | |||
Segment Detail |
||||
Investment Bank |
5 | |||
Business-Related Metrics |
6 | |||
Treasury & Securities Services |
7 | |||
Investment Management & Private Banking |
8 | |||
JPMorgan Partners |
9 | |||
Chase Financial Services |
10 | |||
Supports Units and Corporate |
11 | |||
Capital |
||||
Available Versus Required Economic Capital |
12 | |||
Glossary of Terms |
13 | |||
Page 2
| J.P. MORGAN CHASE & CO. | ||
| LINES OF BUSINESS RESTATEMENT SUMMARY | ||
| (in millions, except ratios) |
|
| BEFORE RESTATEMENT (a) | AFTER RESTATEMENT (b) | ||||||||||||||||||||||||
| Year Ended December 31, | 2002 | 2001 | 2000 | 2002 | 2001 | 2000 | |||||||||||||||||||
OPERATING REVENUE |
|||||||||||||||||||||||||
Investment Bank |
$ | 12,399 | $ | 14,671 | $ | 15,692 | $ | 12,645 | $ | 14,873 | $ | 15,837 | |||||||||||||
Treasury & Securities Services |
4,046 | 3,978 | 3,930 | 3,903 | 3,821 | 3,781 | |||||||||||||||||||
Investment Management & Private Banking |
2,868 | 3,226 | 3,543 | 2,841 | 3,197 | 3,520 | |||||||||||||||||||
JPMorgan Partners |
(954 | ) | (1,470 | ) | 786 | (943 | ) | (1,435 | ) | 849 | |||||||||||||||
Chase Financial Services |
13,541 | 10,951 | 10,059 | 13,457 | 10,870 | 9,973 | |||||||||||||||||||
Support Units and Corporate |
(847 | ) | (964 | ) | (965 | ) | (850 | ) | (934 | ) | (915 | ) | |||||||||||||
OPERATING REVENUE (c) |
31,053 | 30,392 | 33,045 | 31,053 | 30,392 | 33,045 | |||||||||||||||||||
Impact of Credit Card Securitizations |
(1,439 | ) | (1,048 | ) | (990 | ) | (1,439 | ) | (1,048 | ) | (990 | ) | |||||||||||||
Impact of Special Items |
— | — | 1,131 | — | — | 1,131 | |||||||||||||||||||
REPORTED REVENUE (c) |
$ | 29,614 | $ | 29,344 | $ | 33,186 | $ | 29,614 | $ | 29,344 | $ | 33,186 | |||||||||||||
OPERATING EARNINGS (d) |
|||||||||||||||||||||||||
Investment Bank |
$ | 1,365 | $ | 2,918 | $ | 3,522 | $ | 1,383 | $ | 2,929 | $ | 3,506 | |||||||||||||
Treasury & Securities Services |
677 | 632 | 671 | 631 | 607 | 668 | |||||||||||||||||||
Investment Management & Private Banking |
384 | 479 | 613 | 262 | 363 | 544 | |||||||||||||||||||
JPMorgan Partners |
(789 | ) | (1,116 | ) | 262 | (787 | ) | (1,098 | ) | 299 | |||||||||||||||
Chase Financial Services |
2,490 | 1,538 | 1,638 | 2,362 | 1,451 | 1,540 | |||||||||||||||||||
Support Units and Corporate |
(743 | ) | (649 | ) | (530 | ) | (467 | ) | (450 | ) | (381 | ) | |||||||||||||
OPERATING EARNINGS (c) |
3,384 | 3,802 | 6,176 | 3,384 | 3,802 | 6,176 | |||||||||||||||||||
Impact of Merger and Restructuring Costs and Special Items |
(1,721 | ) | (1,715 | ) | (200 | ) | (1,721 | ) | (1,715 | ) | (200 | ) | |||||||||||||
Impact of Pre-SFAS 142 Goodwill Amortization |
NA | (393 | ) | (249 | ) | NA | (393 | ) | (249 | ) | |||||||||||||||
NET INCOME (c) |
$ | 1,663 | $ | 1,694 | $ | 5,727 | $ | 1,663 | $ | 1,694 | $ | 5,727 | |||||||||||||
AVERAGE ECONOMIC CAPITAL |
|||||||||||||||||||||||||
Investment Bank |
$ | 18,323 | $ | 18,964 | $ | 18,335 | $ | 19,907 | $ | 20,196 | $ | 18,450 | |||||||||||||
Treasury & Securities Services |
2,998 | 2,958 | 2,883 | 2,694 | 2,910 | 2,911 | |||||||||||||||||||
Investment Management & Private Banking |
6,115 | 6,275 | 4,447 | 5,643 | 5,781 | 4,105 | |||||||||||||||||||
JPMorgan Partners |
5,454 | 6,475 | 7,590 | 6,293 | 7,557 | 8,932 | |||||||||||||||||||
Chase Financial Services |
10,293 | 9,118 | 8,668 | 8,618 | 7,740 | 7,701 | |||||||||||||||||||
Support Units and Corporate |
(1,815 | ) | (2,266 | ) | (5,747 | ) | (1,787 | ) | (2,660 | ) | (5,923 | ) | |||||||||||||
TOTAL ECONOMIC CAPITAL (c) (e) |
$ | 41,368 | $ | 41,524 | $ | 36,176 | $ | 41,368 | $ | 41,524 | $ | 36,176 | |||||||||||||
SHAREHOLDER VALUE ADDED |
|||||||||||||||||||||||||
Investment Bank |
$ | (853 | ) | $ | 615 | $ | 1,280 | $ | (1,028 | ) | $ | 475 | $ | 1,247 | |||||||||||
Treasury & Securities Services |
313 | 272 | 319 | 306 | 255 | 314 | |||||||||||||||||||
Investment Management & Private Banking |
(357 | ) | (284 | ) | 70 | (421 | ) | (339 | ) | 42 | |||||||||||||||
JPMorgan Partners |
(1,614 | ) | (2,097 | ) | (894 | ) | (1,738 | ) | (2,243 | ) | (1,061 | ) | |||||||||||||
Chase Financial Services |
1,242 | 430 | 578 | 1,318 | 510 | 598 | |||||||||||||||||||
Support Units and Corporate |
(362 | ) | (183 | ) | 386 | (68 | ) | 95 | 599 | ||||||||||||||||
TOTAL SHAREHOLDER VALUE ADDED (c) (f) |
$ | (1,631 | ) | $ | (1,247 | ) | $ | 1,739 | $ | (1,631 | ) | $ | (1,247 | ) | $ | 1,739 | |||||||||
OPERATING RETURN ON ECONOMIC CAPITAL |
|||||||||||||||||||||||||
Investment Bank |
7 | % | 15 | % | 19 | % | 7 | % | 14 | % | 19 | % | |||||||||||||
Treasury & Securities Services |
23 | 21 | 23 | 23 | 21 | 23 | |||||||||||||||||||
Investment Management & Private Banking |
6 | 8 | 14 | 5 | 6 | 13 | |||||||||||||||||||
Chase Financial Services |
24 | 17 | 19 | 27 | 19 | 20 | |||||||||||||||||||
OPERATING RETURN ON ECONOMIC CAPITAL (c) |
8 | 9 | 17 | 8 | 9 | 17 | |||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| CHANGE | |||||||||||||
| Year Ended December 31, | 2002 | 2001 | 2000 | ||||||||||
OPERATING REVENUE |
|||||||||||||
Investment Bank |
$ | 246 | $ | 202 | $ | 145 | |||||||
Treasury & Securities Services |
(143 | ) | (157 | ) | (149 | ) | |||||||
Investment Management & Private Banking |
(27 | ) | (29 | ) | (23 | ) | |||||||
JPMorgan Partners |
11 | 35 | 63 | ||||||||||
Chase Financial Services |
(84 | ) | (81 | ) | (86 | ) | |||||||
Support Units and Corporate |
(3 | ) | 30 | 50 | |||||||||
OPERATING REVENUE (c) |
— | — | — | ||||||||||
Impact of Credit Card Securitizations |
— | — | — | ||||||||||
Impact of Special Items |
— | — | — | ||||||||||
REPORTED REVENUE (c) |
— | — | — | ||||||||||
OPERATING EARNINGS (d) |
|||||||||||||
Investment Bank |
18 | 11 | (16 | ) | |||||||||
Treasury & Securities Services |
(46 | ) | (25 | ) | (3 | ) | |||||||
Investment Management & Private Banking |
(122 | ) | (116 | ) | (69 | ) | |||||||
JPMorgan Partners |
2 | 18 | 37 | ||||||||||
Chase Financial Services |
(128 | ) | (87 | ) | (98 | ) | |||||||
Support Units and Corporate |
276 | 199 | 149 | ||||||||||
OPERATING EARNINGS (c) |
— | — | — | ||||||||||
Impact of Merger and Restructuring Costs and Special Items |
— | — | — | ||||||||||
Impact of Pre-SFAS 142 Goodwill Amortization |
— | — | — | ||||||||||
NET INCOME (c) |
— | — | — | ||||||||||
AVERAGE ECONOMIC CAPITAL |
|||||||||||||
Investment Bank |
1,584 | 1,232 | 115 | ||||||||||
Treasury & Securities Services |
(304 | ) | (48 | ) | 28 | ||||||||
Investment Management & Private Banking |
(472 | ) | (494 | ) | (342 | ) | |||||||
JPMorgan Partners |
839 | 1,082 | 1,342 | ||||||||||
Chase Financial Services |
(1,675 | ) | (1,378 | ) | (967 | ) | |||||||
Support Units and Corporate |
28 | (394 | ) | (176 | ) | ||||||||
TOTAL ECONOMIC CAPITAL (c) (e) |
— | — | — | ||||||||||
SHAREHOLDER VALUE ADDED |
|||||||||||||
Investment Bank |
(175 | ) | (140 | ) | (33 | ) | |||||||
Treasury & Securities Services |
(7 | ) | (17 | ) | (5 | ) | |||||||
Investment Management & Private Banking |
(64 | ) | (55 | ) | (28 | ) | |||||||
JPMorgan Partners |
(124 | ) | (146 | ) | (167 | ) | |||||||
Chase Financial Services |
76 | 80 | 20 | ||||||||||
Support Units and Corporate |
294 | 278 | 213 | ||||||||||
TOTAL SHAREHOLDER VALUE ADDED (c) (f) |
— | — | — | ||||||||||
OPERATING RETURN ON ECONOMIC CAPITAL |
|||||||||||||
Investment Bank |
— | bp | (100 | ) bp | — | bp | |||||||
Treasury & Securities Services |
— | — | — | ||||||||||
Investment Management & Private Banking |
(100 | ) | (200 | ) | (100 | ) | |||||||
Chase Financial Services |
300 | 200 | 100 | ||||||||||
OPERATING RETURN ON ECONOMIC CAPITAL (c) |
— | — | — | ||||||||||
| (a) | Reflects the original reported results as disclosed in the 2002 JPMorgan Chase Annual Report. | |
| (b) | Reflects results after the restatement as discussed in Item 9 (and Item 12) of this Form 8-K. | |
| (c) | Represents consolidated JPMorgan Chase. | |
| (d) | For a discussion of the Firm’s approach regarding operating earnings, see footnote (b) on page 4. | |
| (e) | Represents the Firm’s average common stockholders’ equity. | |
| (f) | For a reconciliation of net income to shareholder value added, see Exhibit 99.2. |
Page 3
| J.P. MORGAN CHASE & CO. | ||
| LINES OF BUSINESS FINANCIAL HIGHLIGHTS SUMMARY – RESTATED | ||
| (in millions, except ratios) |
|
| 1QTR 2003 | |||||||||||||||||||||||||||||
| Over (Under) | |||||||||||||||||||||||||||||
| 1QTR | 4QTR | 3QTR | 2QTR | 1QTR | |||||||||||||||||||||||||
| 2003 | 2002 | 2002 | 2002 | 2002 | 4Q 2002 | 1Q 2002 | |||||||||||||||||||||||
OPERATING REVENUE |
|||||||||||||||||||||||||||||
Investment Bank |
$ | 4,068 | $ | 3,355 | $ | 2,481 | $ | 3,154 | $ | 3,655 | 21 | % | 11 | % | |||||||||||||||
Treasury & Securities Services |
935 | 941 | 1,029 | 991 | 942 | (1 | ) | (1 | ) | ||||||||||||||||||||
Investment Management & Private Banking |
643 | 652 | 695 | 729 | 765 | (1 | ) | (16 | ) | ||||||||||||||||||||
JPMorgan Partners |
(278 | ) | (83 | ) | (359 | ) | (193 | ) | (308 | ) | (235 | ) | 10 | ||||||||||||||||
Chase Financial Services |
3,696 | 3,334 | 3,668 | 3,400 | 3,055 | 11 | 21 | ||||||||||||||||||||||
Support Units and Corporate |
(201 | ) | (274 | ) | (213 | ) | (173 | ) | (190 | ) | 27 | (6 | ) | ||||||||||||||||
OPERATING REVENUE (a) |
8,863 | 7,925 | 7,301 | 7,908 | 7,919 | 12 | 12 | ||||||||||||||||||||||
Impact of Credit Card Securitizations |
(457 | ) | (430 | ) | (354 | ) | (334 | ) | (321 | ) | (6 | ) | (42 | ) | |||||||||||||||
Impact of Special Items |
— | — | — | — | — | NM | NM | ||||||||||||||||||||||
REPORTED REVENUE (a) |
$ | 8,406 | $ | 7,495 | $ | 6,947 | $ | 7,574 | $ | 7,598 | 12 | 11 | |||||||||||||||||
OPERATING EARNINGS (b) |
|||||||||||||||||||||||||||||
Investment Bank |
$ | 946 | $ | 363 | $ | (256 | ) | $ | 507 | $ | 769 | 161 | 23 | ||||||||||||||||
Treasury & Securities Services |
131 | 129 | 201 | 165 | 136 | 2 | (4 | ) | |||||||||||||||||||||
Investment Management & Private Banking |
36 | 12 | 68 | 82 | 100 | 200 | (64 | ) | |||||||||||||||||||||
JPMorgan Partners |
(217 | ) | (96 | ) | (278 | ) | (168 | ) | (245 | ) | (126 | ) | 11 | ||||||||||||||||
Chase Financial Services |
677 | 467 | 760 | 649 | 486 | 45 | 39 | ||||||||||||||||||||||
Support Units and Corporate |
(173 | ) | (145 | ) | (170 | ) | (56 | ) | (96 | ) | (19 | ) | (80 | ) | |||||||||||||||
OPERATING EARNINGS (a) |
1,400 | 730 | 325 | 1,179 | 1,150 | 92 | 22 | ||||||||||||||||||||||
Impact of Merger and Restructuring Costs and Special Items |
— | (1,117 | ) | (285 | ) | (151 | ) | (168 | ) | NM | NM | ||||||||||||||||||
Impact of Pre-SFAS 142 Goodwill Amortization |
NA | NA | NA | NA | NA | NA | NA | ||||||||||||||||||||||
NET INCOME (a) |
$ | 1,400 | $ | (387 | ) | $ | 40 | $ | 1,028 | $ | 982 | NM | 43 | ||||||||||||||||
OPERATING RETURN ON ECONOMIC CAPITAL |
|||||||||||||||||||||||||||||
Investment Bank |
18 | % | 7 | % | NM | 10 | % | 15 | % | 1,100 | bp | 300 | bp | ||||||||||||||||
Treasury & Securities Services |
19 | 19 | 31 | % | 25 | 20 | — | (100 | ) | ||||||||||||||||||||
Investment Management & Private Banking |
3 | 1 | 5 | 6 | 7 | 200 | (400 | ) | |||||||||||||||||||||
Chase Financial Services |
32 | 22 | 35 | 30 | 23 | 1,000 | 900 | ||||||||||||||||||||||
OPERATING RETURN ON ECONOMIC CAPITAL (a) |
13 | 7 | 3 | 11 | 11 | 600 | 200 | ||||||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| 2002 | |||||||||||||||||
| FULL YEAR | Over (Under) | ||||||||||||||||
| 2002 | 2001 | 2000 | 2001 | ||||||||||||||
OPERATING REVENUE |
|||||||||||||||||
Investment Bank |
$ | 12,645 | $ | 14,873 | $ | 15,837 | (15 | )% | |||||||||
Treasury & Securities Services |
3,903 | 3,821 | 3,781 | 2 | |||||||||||||
Investment Management & Private Banking |
2,841 | 3,197 | 3,520 | (11 | ) | ||||||||||||
JPMorgan Partners |
(943 | ) | (1,435 | ) | 849 | 34 | |||||||||||
Chase Financial Services |
13,457 | 10,870 | 9,973 | 24 | |||||||||||||
Support Units and Corporate |
(850 | ) | (934 | ) | (915 | ) | 9 | ||||||||||
OPERATING REVENUE (a) |
31,053 | 30,392 | 33,045 | 2 | |||||||||||||
Impact of Credit Card Securitizations |
(1,439 | ) | (1,048 | ) | (990 | ) | (37 | ) | |||||||||
Impact of Special Items |
— | — | 1,131 | NM | |||||||||||||
REPORTED REVENUE (a) |
$ | 29,614 | $ | 29,344 | $ | 33,186 | 1 | ||||||||||
OPERATING EARNINGS (b) |
|||||||||||||||||
Investment Bank |
$ | 1,383 | $ | 2,929 | $ | 3,506 | (53 | ) | |||||||||
Treasury & Securities Services |
631 | 607 | 668 | 4 | |||||||||||||
Investment Management & Private Banking |
262 | 363 | 544 | (28 | ) | ||||||||||||
JPMorgan Partners |
(787 | ) | (1,098 | ) | 299 | 28 | |||||||||||
Chase Financial Services |
2,362 | 1,451 | 1,540 | 63 | |||||||||||||
Support Units and Corporate |
(467 | ) | (450 | ) | (381 | ) | (4 | ) | |||||||||
OPERATING EARNINGS (a) |
3,384 | 3,802 | 6,176 | (11 | ) | ||||||||||||
Impact of Merger and Restructuring Costs and Special Items |
(1,721 | ) | (1,715 | ) | (200 | ) | — | ||||||||||
Impact of Pre-SFAS 142 Goodwill Amortization |
NA | (393 | ) | (249 | ) | NA | |||||||||||
NET INCOME (a) |
$ | 1,663 | $ | 1,694 | $ | 5,727 | (2 | ) | |||||||||
OPERATING RETURN ON ECONOMIC CAPITAL |
|||||||||||||||||
Investment Bank |
7 | % | 14 | % | 19 | % | (700 | ) bp | |||||||||
Treasury & Securities Services |
23 | 21 | 23 | 200 | |||||||||||||
Investment Management & Private Banking |
5 | 6 | 13 | (100 | ) | ||||||||||||
Chase Financial Services |
27 | 19 | 20 | 800 | |||||||||||||
OPERATING RETURN ON ECONOMIC CAPITAL (a) |
8 | 9 | 17 | (100 | ) | ||||||||||||
| (a) | Represents consolidated JPMorgan Chase. | |
| (b) | In addition to analyzing the Firm’s results on a reported basis, management looks at operating earnings (or “operating basis”) to assess each of its businesses and to measure overall Firm results against targeted goals. The definition of operating basis starts with the reported U.S. GAAP (accounting principles generally accepted in the United States of America) results and then excludes the impact of merger and restructuring costs, credit card securitizations, the amortization of goodwill and special items (which management defined as significant nonrecurring gains or losses of $75 million or more during 2002 and $50 million or more prior to 2002). Both restructuring charges and special items are viewed by management as transactions that are not part of the Firm’s normal daily business operations or are unusual in nature and therefore are not indicative of trends. For a more detailed explanation of how the Firm looks at results on an “operating basis,” see Reconciliation from Reported Results to Operating Basis on page 29 of JPMorgan Chase’s March 31, 2003, Quarterly Report on Form 10-Q and on page 22 of JPMorgan Chase’s 2002 Annual Report. |
Page 4
SEGMENT DETAIL
| J.P. MORGAN CHASE & CO. | ||
| INVESTMENT BANK | ||
| FINANCIAL HIGHLIGHTS – RESTATED | ||
| (in millions, except ratios) |
|
| 1QTR 2003 | |||||||||||||||||||||||||||||
| Over (Under) | |||||||||||||||||||||||||||||
| 1QTR | 4QTR | 3QTR | 2QTR | 1QTR | |||||||||||||||||||||||||
| 2003 | 2002 | 2002 | 2002 | 2002 | 4Q 2002 | 1Q 2002 | |||||||||||||||||||||||
OPERATING INCOME STATEMENT |
|||||||||||||||||||||||||||||
REVENUE: |
|||||||||||||||||||||||||||||
Trading Revenue (Includes Trading NII): |
|||||||||||||||||||||||||||||
Fixed Income and Other |
$ | 1,730 | $ | 1,298 | $ | 631 | $ | 1,034 | $ | 1,503 | 33 | % | 15 | % | |||||||||||||||
Equities |
199 | (33 | ) | (254 | ) | 96 | 201 | NM | (1 | ) | |||||||||||||||||||
| 1,929 | 1,265 | 377 | 1,130 | 1,704 | 52 | 13 | |||||||||||||||||||||||
Investment Banking Fees |
620 | 650 | 529 | 781 | 736 | (5 | ) | (16 | ) | ||||||||||||||||||||
Net Interest Income |
735 | 674 | 681 | 681 | 757 | 9 | (3 | ) | |||||||||||||||||||||
Fees and Commissions |
380 | 370 | 432 | 429 | 388 | 3 | (2 | ) | |||||||||||||||||||||
Securities Gains |
383 | 376 | 465 | 108 | 127 | 2 | 202 | ||||||||||||||||||||||
All Other Revenue |
21 | 20 | (3 | ) | 25 | (57 | ) | 5 | NM | ||||||||||||||||||||
TOTAL OPERATING REVENUE |
4,068 | 3,355 | 2,481 | 3,154 | 3,655 | 21 | 11 | ||||||||||||||||||||||
EXPENSE: |
|||||||||||||||||||||||||||||
Compensation Expense |
1,321 | 1,065 | 721 | 1,057 | 1,130 | 24 | 17 | ||||||||||||||||||||||
Noncompensation Expense |
836 | 882 | 848 | 820 | 905 | (5 | ) | (8 | ) | ||||||||||||||||||||
Operating Expense (Excludes Severance and Related Costs) |
2,157 | 1,947 | 1,569 | 1,877 | 2,035 | 11 | 6 | ||||||||||||||||||||||
Severance and Related Costs |
104 | 337 | 79 | 124 | 47 | (69 | ) | 121 | |||||||||||||||||||||
TOTAL OPERATING EXPENSE |
2,261 | 2,284 | 1,648 | 2,001 | 2,082 | (1 | ) | 9 | |||||||||||||||||||||
Operating Margin |
1,807 | 1,071 | 833 | 1,153 | 1,573 | 69 | 15 | ||||||||||||||||||||||
Credit Costs |
245 | 489 | 1,316 | 306 | 282 | (50 | ) | (13 | ) | ||||||||||||||||||||
Corporate Credit Allocation |
(14 | ) | (19 | ) | (25 | ) | (21 | ) | (22 | ) | 26 | 36 | |||||||||||||||||
Operating Income (Loss) Before Income Tax Expense |
1,548 | 563 | (508 | ) | 826 | 1,269 | 175 | 22 | |||||||||||||||||||||
Income Tax Expense (Benefit) |
602 | 200 | (252 | ) | 319 | 500 | 201 | 20 | |||||||||||||||||||||
OPERATING EARNINGS (LOSS) |
$ | 946 | $ | 363 | $ | (256 | ) | $ | 507 | $ | 769 | 161 | 23 | ||||||||||||||||
Average Economic Capital |
$ | 20,825 | $ | 20,317 | $ | 19,443 | $ | 19,638 | $ | 20,233 | 3 | 3 | |||||||||||||||||
Average Assets |
525,613 | 515,614 | 494,699 | 503,339 | 467,616 | 2 | 12 | ||||||||||||||||||||||
Shareholder Value Added |
324 | (258 | ) | (849 | ) | (86 | ) | 165 | NM | 96 | |||||||||||||||||||
Return on Economic Capital |
18 | % | 7 | % | NM | 10 | % | 15 | % | 1,100 | bp | 300 | bp | ||||||||||||||||
Overhead Ratio |
56 | 68 | 66 | % | 63 | 57 | (1,200 | ) | (100 | ) | |||||||||||||||||||
Overhead Ratio Excl. Severance and Related Costs |
53 | 58 | 63 | 60 | 56 | (500 | ) | (300 | ) | ||||||||||||||||||||
Compensation Expense as a % of Operating Revenue
Excl. Severance and Related Costs |
32 | 32 | 29 | 34 | 31 | — | 100 | ||||||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| 2002 | |||||||||||||||||
| FULL YEAR | Over (Under) | ||||||||||||||||
| 2002 | 2001 | 2000 | 2001 | ||||||||||||||
OPERATING INCOME STATEMENT |
|||||||||||||||||
REVENUE: |
|||||||||||||||||
Trading Revenue (Includes Trading NII): |
|||||||||||||||||
Fixed Income and Other |
$ | 4,466 | $ | 5,013 | $ | 5,122 | (11 | )% | |||||||||
Equities |
10 | 1,190 | 1,636 | (99 | ) | ||||||||||||
| 4,476 | 6,203 | 6,758 | (28 | ) | |||||||||||||
Investment Banking Fees |
2,696 | 3,591 | 4,345 | (25 | ) | ||||||||||||
Net Interest Income |
2,793 | 3,112 | 2,563 | (10 | ) | ||||||||||||
Fees and Commissions |
1,619 | 1,501 | 1,537 | 8 | |||||||||||||
Securities Gains |
1,076 | 538 | (8 | ) | 100 | ||||||||||||
All Other Revenue |
(15 | ) | (72 | ) | 642 | 79 | |||||||||||
TOTAL OPERATING REVENUE |
12,645 | 14,873 | 15,837 | (15 | ) | ||||||||||||
EXPENSE: |
|||||||||||||||||
Compensation Expense |
3,973 | 5,278 | 6,240 | (25 | ) | ||||||||||||
Noncompensation Expense |
3,455 | 3,509 | 3,593 | (2 | ) | ||||||||||||
Operating Expense (Excludes Severance and Related Costs) |
7,428 | 8,787 | 9,833 | (15 | ) | ||||||||||||
Severance and Related Costs |
587 | — | — | NM | |||||||||||||
TOTAL OPERATING EXPENSE |
8,015 | 8,787 | 9,833 | (9 | ) | ||||||||||||
Operating Margin |
4,630 | 6,086 | 6,004 | (24 | ) | ||||||||||||
Credit Costs |
2,393 | 1,159 | 246 | 106 | |||||||||||||
Corporate Credit Allocation |
(87 | ) | (98 | ) | (124 | ) | 11 | ||||||||||
Operating Income (Loss) Before Income Tax Expense |
2,150 | 4,829 | 5,634 | (55 | ) | ||||||||||||
Income Tax Expense (Benefit) |
767 | 1,900 | 2,128 | (60 | ) | ||||||||||||
OPERATING EARNINGS (LOSS) |
$ | 1,383 | $ | 2,929 | $ | 3,506 | (53 | ) | |||||||||
Average Economic Capital |
$ | 19,907 | $ | 20,196 | $ | 18,450 | (1 | ) | |||||||||
Average Assets |
495,447 | 510,668 | 470,036 | (3 | ) | ||||||||||||
Shareholder Value Added |
(1,028 | ) | 475 | 1,247 | NM | ||||||||||||
Return on Economic Capital |
7 | % | 14 | % | 19 | % | (700 | ) bp | |||||||||
Overhead Ratio |
63 | 59 | 62 | 400 | |||||||||||||
Overhead Ratio Excl. Severance and Related Costs |
59 | 59 | 62 | — | |||||||||||||
Compensation Expense as a % of Operating Revenue
Excl. Severance and Related Costs |
31 | 35 | 39 | (400 | ) | ||||||||||||
Page 5
| J.P. MORGAN CHASE & CO. | ||
| INVESTMENT BANK | ||
| BUSINESS-RELATED METRICS – RESTATED | ||
| (in millions) |
|
| 1QTR 2003 | |||||||||||||||||||||||||||||
| Over (Under) | |||||||||||||||||||||||||||||
| 1QTR | 4QTR | 3QTR | 2QTR | 1QTR | |||||||||||||||||||||||||
| 2003 | 2002 | 2002 | 2002 | 2002 | 4Q 2002 | 1Q 2002 | |||||||||||||||||||||||
BUSINESS REVENUE: |
|||||||||||||||||||||||||||||
INVESTMENT BANKING FEES |
|||||||||||||||||||||||||||||
Advisory |
$ | 160 | $ | 216 | $ | 139 | $ | 194 | $ | 194 | (26 | )% | (18 | )% | |||||||||||||||
Underwriting and Other Fees |
460 | 434 | 390 | 587 | 542 | 6 | (15 | ) | |||||||||||||||||||||
TOTAL |
620 | 650 | 529 | 781 | 736 | (5 | ) | (16 | ) | ||||||||||||||||||||
CAPITAL MARKETS & LENDING |
|||||||||||||||||||||||||||||
Fixed Income |
1,992 | 1,580 | 909 | 1,289 | 1,763 | 26 | 13 | ||||||||||||||||||||||
Treasury |
607 | 578 | 607 | 269 | 385 | 5 | 58 | ||||||||||||||||||||||
Credit Portfolio |
413 | 356 | 440 | 442 | 329 | 16 | 26 | ||||||||||||||||||||||
Equities |
436 | 191 | (4 | ) | 373 | 442 | 128 | (1 | ) | ||||||||||||||||||||
TOTAL |
3,448 | 2,705 | 1,952 | 2,373 | 2,919 | 27 | 18 | ||||||||||||||||||||||
TOTAL OPERATING REVENUE |
$ | 4,068 | $ | 3,355 | $ | 2,481 | $ | 3,154 | $ | 3,655 | 21 | 11 | |||||||||||||||||
MEMO: |
|||||||||||||||||||||||||||||
CAPITAL MARKETS & LENDING TOTAL RETURN REVENUE (a) |
|||||||||||||||||||||||||||||
Fixed Income |
$ | 1,954 | $ | 1,497 | $ | 943 | $ | 1,362 | $ | 1,721 | 31 | 14 | |||||||||||||||||
Treasury |
536 | 464 | 364 | 215 | 470 | 16 | 14 | ||||||||||||||||||||||
Credit Portfolio |
413 | 356 | 440 | 442 | 329 | 16 | 26 | ||||||||||||||||||||||
Equities |
436 | 191 | (4 | ) | 373 | 442 | 128 | (1 | ) | ||||||||||||||||||||
TOTAL |
$ | 3,339 | $ | 2,508 | $ | 1,743 | $ | 2,392 | $ | 2,962 | 33 | 13 | |||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| 2002 | |||||||||||||||||
| FULL YEAR | Over (Under) | ||||||||||||||||
| 2002 | 2001 | 2000 | 2001 | ||||||||||||||
BUSINESS REVENUE: |
|||||||||||||||||
INVESTMENT BANKING FEES |
|||||||||||||||||
Advisory |
$ | 743 | $ | 1,248 | $ | 1,802 | (40 | )% | |||||||||
Underwriting and Other Fees |
1,953 | 2,343 | 2,543 | (17 | ) | ||||||||||||
TOTAL |
2,696 | 3,591 | 4,345 | (25 | ) | ||||||||||||
CAPITAL MARKETS & LENDING |
|||||||||||||||||
Fixed Income |
5,541 | 6,294 | 5,940 | (12 | ) | ||||||||||||
Treasury |
1,839 | 1,520 | 619 | 21 | |||||||||||||
Credit Portfolio |
1,567 | 1,227 | 2,268 | 28 | |||||||||||||
Equities |
1,002 | 2,241 | 2,665 | (55 | ) | ||||||||||||
TOTAL |
9,949 | 11,282 | 11,492 | (12 | ) | ||||||||||||
TOTAL OPERATING REVENUE |
$ | 12,645 | $ | 14,873 | $ | 15,837 | (15 | ) | |||||||||
MEMO: |
|||||||||||||||||
CAPITAL MARKETS & LENDING TOTAL RETURN REVENUE (a) |
|||||||||||||||||
Fixed Income |
$ | 5,523 | $ | 6,380 | $ | 6,083 | (13 | ) | |||||||||
Treasury |
1,513 | 949 | 1,078 | 59 | |||||||||||||
Credit Portfolio |
1,567 | 1,227 | 2,268 | 28 | |||||||||||||
Equities |
1,002 | 2,241 | 2,665 | (55 | ) | ||||||||||||
TOTAL |
$ | 9,605 | $ | 10,797 | $ | 12,094 | (11 | ) | |||||||||
| (a) | Total return revenue includes operating revenues plus the unrealized gains or losses on third-party or internally transfer-priced assets and liabilities, primarily in fixed income and treasury activities, which are not accounted for on a mark-to-market basis through earnings. |
Page 6
| J.P. MORGAN CHASE & CO. | ||
| TREASURY & SECURITIES SERVICES | ||
| FINANCIAL HIGHLIGHTS – RESTATED | ||
| (in millions, except ratios) |
|
| 1QTR 2003 | |||||||||||||||||||||||||||||
| Over (Under) | |||||||||||||||||||||||||||||
| 1QTR | 4QTR | 3QTR | 2QTR | 1QTR | |||||||||||||||||||||||||
| 2003 | 2002 | 2002 | 2002 | 2002 | 4Q 2002 | 1Q 2002 | |||||||||||||||||||||||
OPERATING INCOME STATEMENT |
|||||||||||||||||||||||||||||
REVENUE: |
|||||||||||||||||||||||||||||
Fees and Commissions |
$ | 598 | $ | 581 | $ | 605 | $ | 621 | $ | 606 | 3 | % | (1 | )% | |||||||||||||||
Net Interest Income |
299 | 314 | 312 | 310 | 301 | (5 | ) | (1 | ) | ||||||||||||||||||||
All Other Revenue |
38 | 46 | 112 | 60 | 35 | (17 | ) | 9 | |||||||||||||||||||||
TOTAL OPERATING REVENUE |
935 | 941 | 1,029 | 991 | 942 | (1 | ) | (1 | ) | ||||||||||||||||||||
EXPENSE: |
|||||||||||||||||||||||||||||
Compensation Expense |
319 | 285 | 290 | 302 | 304 | 12 | 5 | ||||||||||||||||||||||
Noncompensation Expense |
425 | 467 | 450 | 449 | 445 | (9 | ) | (4 | ) | ||||||||||||||||||||
TOTAL OPERATING EXPENSE |
744 | 752 | 740 | 751 | 749 | (1 | ) | (1 | ) | ||||||||||||||||||||
Operating Margin |
191 | 189 | 289 | 240 | 193 | 1 | (1 | ) | |||||||||||||||||||||
Credit Costs |
1 | 2 | (1 | ) | (1 | ) | 1 | (50 | ) | — | |||||||||||||||||||
Corporate Credit Allocation |
14 | 19 | 25 | 21 | 22 | (26 | ) | (36 | ) | ||||||||||||||||||||
Operating Income Before Income Tax Expense |
204 | 206 | 315 | 262 | 214 | (1 | ) | (5 | ) | ||||||||||||||||||||
Income Tax Expense |
73 | 77 | 114 | 97 | 78 | (5 | ) | (6 | ) | ||||||||||||||||||||
OPERATING EARNINGS |
$ | 131 | $ | 129 | $ | 201 | $ | 165 | $ | 136 | 2 | (4 | ) | ||||||||||||||||
Average Economic Capital |
$ | 2,759 | $ | 2,720 | $ | 2,603 | $ | 2,662 | $ | 2,792 | 1 | (1 | ) | ||||||||||||||||
Average Assets |
17,504 | 19,279 | 15,943 | 18,919 | 16,978 | (9 | ) | 3 | |||||||||||||||||||||
Shareholder Value Added |
49 | 46 | 122 | 85 | 53 | 7 | (8 | ) | |||||||||||||||||||||
Return on Economic Capital |
19 | % | 19 | % | 31 | % | 25 | % | 20 | % | — | bp | (100 | ) bp | |||||||||||||||
Overhead Ratio |
80 | 80 | 72 | 76 | 80 | — | — | ||||||||||||||||||||||
OPERATING REVENUE BY BUSINESS: |
|||||||||||||||||||||||||||||
Treasury Services |
$ | 479 | $ | 470 | $ | 467 | $ | 440 | $ | 447 | 2 | % | 7 | % | |||||||||||||||
Investor Services |
340 | 334 | 384 | 416 | 381 | 2 | (11 | ) | |||||||||||||||||||||
Institutional Trust Services |
205 | 225 | 221 | 222 | 203 | (9 | ) | 1 | |||||||||||||||||||||
Other |
(89 | ) | (88 | ) | (43 | ) | (87 | ) | (89 | ) | (1 | ) | — | ||||||||||||||||
Total Treasury & Securities Services |
$ | 935 | $ | 941 | $ | 1,029 | $ | 991 | $ | 942 | (1 | ) | (1 | ) | |||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| 2002 | |||||||||||||||||
| FULL YEAR | Over (Under) | ||||||||||||||||
| 2002 | 2001 | 2000 | 2001 | ||||||||||||||
OPERATING INCOME STATEMENT |
|||||||||||||||||
REVENUE: |
|||||||||||||||||
Fees and Commissions |
$ | 2,413 | $ | 2,291 | $ | 2,095 | 5 | % | |||||||||
Net Interest Income |
1,237 | 1,316 | 1,390 | (6 | ) | ||||||||||||
All Other Revenue |
253 | 214 | 296 | 18 | |||||||||||||
TOTAL OPERATING REVENUE |
3,903 | 3,821 | 3,781 | 2 | |||||||||||||
EXPENSE: |
|||||||||||||||||
Compensation Expense |
1,181 | 1,153 | 1,061 | 2 | |||||||||||||
Noncompensation Expense |
1,811 | 1,809 | 1,769 | — | |||||||||||||
TOTAL OPERATING EXPENSE |
2,992 | 2,962 | 2,830 | 1 | |||||||||||||
Operating Margin |
911 | 859 | 951 | 6 | |||||||||||||
Credit Costs |
1 | 7 | 4 | (86 | ) | ||||||||||||
Corporate Credit Allocation |
87 | 98 | 124 | (11 | ) | ||||||||||||
Operating Income Before Income Tax Expense |
997 | 950 | 1,071 | 5 | |||||||||||||
Income Tax Expense |
366 | 343 | 403 | 7 | |||||||||||||
OPERATING EARNINGS |
$ | 631 | $ | 607 | $ | 668 | 4 | ||||||||||
Average Economic Capital |
$ | 2,694 | $ | 2,910 | $ | 2,911 | (7 | ) | |||||||||
Average Assets |
17,781 | 18,553 | 16,555 | (4 | ) | ||||||||||||
Shareholder Value Added |
306 | 255 | 314 | 20 | |||||||||||||
Return on Economic Capital |
23 | % | 21 | % | 23 | % | 200 | bp | |||||||||
Overhead Ratio |
77 | 78 | 75 | (100 | ) | ||||||||||||
OPERATING REVENUE BY BUSINESS: |
|||||||||||||||||
Treasury Services |
$ | 1,824 | $ | 1,724 | $ | 1,708 | 6 | % | |||||||||
Investor Services |
1,515 | 1,650 | 1,720 | (8 | ) | ||||||||||||
Institutional Trust Services |
871 | 760 | 656 | 15 | |||||||||||||
Other |
(307 | ) | (313 | ) | (303 | ) | 2 | ||||||||||
Total Treasury & Securities Services |
$ | 3,903 | $ | 3,821 | $ | 3,781 | 2 | ||||||||||
Page 7
| J.P. MORGAN CHASE & CO. | ||
| INVESTMENT MANAGEMENT & PRIVATE BANKING | ||
| FINANCIAL HIGHLIGHTS – RESTATED | ||
| (in millions, except ratios) |
|
| 1QTR 2003 | ||||||||||||||||||||||||||||||
| Over (Under) | ||||||||||||||||||||||||||||||
| 1QTR | 4QTR | 3QTR | 2QTR | 1QTR | ||||||||||||||||||||||||||
| 2003 | 2002 | 2002 | 2002 | 2002 | 4Q 2002 | 1Q 2002 | ||||||||||||||||||||||||
OPERATING INCOME STATEMENT |
||||||||||||||||||||||||||||||
REVENUE: |
||||||||||||||||||||||||||||||
Fees and Commissions |
$ | 511 | $ | 507 | $ | 519 | $ | 560 | $ | 590 | 1 | % | (13 | )% | ||||||||||||||||
Net Interest Income |
116 | 107 | 117 | 113 | 112 | 8 | 4 | |||||||||||||||||||||||
All Other Revenue |
16 | 38 | 59 | 56 | 63 | (58 | ) | (75 | ) | |||||||||||||||||||||
TOTAL OPERATING REVENUE |
643 | 652 | 695 | 729 | 765 | (1 | ) | (16 | ) | |||||||||||||||||||||
EXPENSE: |
||||||||||||||||||||||||||||||
Compensation Expense |
285 | 311 | 267 | 261 | 286 | (8 | ) | — | ||||||||||||||||||||||
Noncompensation Expense |
289 | 315 | 296 | 315 | 295 | (8 | ) | (2 | ) | |||||||||||||||||||||
TOTAL OPERATING EXPENSE |
574 | 626 | 563 | 576 | 581 | (8 | ) | (1 | ) | |||||||||||||||||||||
Operating Margin |
69 | 26 | 132 | 153 | 184 | 165 | (63 | ) | ||||||||||||||||||||||
Credit Costs |
6 | 12 | 26 | 23 | 23 | (50 | ) | (74 | ) | |||||||||||||||||||||
Operating Income Before Income Tax Expense |
63 | 14 | 106 | 130 | 161 | 350 | (61 | ) | ||||||||||||||||||||||
Income Tax Expense |
27 | 2 | 38 | 48 | 61 | NM | (56 | ) | ||||||||||||||||||||||
OPERATING EARNINGS |
$ | 36 | $ | 12 | $ | 68 | $ | 82 | $ | 100 | 200 | (64 | ) | |||||||||||||||||
Average Economic Capital |
$ | 5,432 | $ | 5,540 | $ | 5,607 | $ | 5,741 | $ | 5,686 | (2 | ) | (4 | ) | ||||||||||||||||
Average Assets |
32,346 | 33,522 | 34,968 | 36,478 | 38,007 | (4 | ) | (15 | ) | |||||||||||||||||||||
Shareholder Value Added |
(126 | ) | (155 | ) | (104 | ) | (92 | ) | (70 | ) | 19 | (80 | ) | |||||||||||||||||
Tangible Shareholder Value Added |
(1 | ) | (28 | ) | 26 | 37 | 59 | 96 | NM | |||||||||||||||||||||
Return on Economic Capital |
3 | % | 1 | % | 5 | % | 6 | % | 7 | % | 200 | bp | (400 | ) bp | ||||||||||||||||
Tangible Return on Economic Capital |
12 | 5 | 19 | 21 | 27 | 700 | (1,500 | ) | ||||||||||||||||||||||
Overhead Ratio |
89 | 96 | 81 | 79 | 76 | (700 | ) | 1,300 | ||||||||||||||||||||||
Pre-Tax Margin Ratio |
10 | 2 | 15 | 18 | 21 | 800 | (1,100 | ) | ||||||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| 2002 | ||||||||||||||||||
| FULL YEAR | Over (Under) | |||||||||||||||||
| 2002 | 2001 | 2000 | 2001 | |||||||||||||||
OPERATING INCOME STATEMENT |
||||||||||||||||||
REVENUE: |
||||||||||||||||||
Fees and Commissions |
$ | 2,176 | $ | 2,399 | $ | 2,315 | (9 | )% | ||||||||||
Net Interest Income |
449 | 557 | 683 | (19 | ) | |||||||||||||
All Other Revenue |
216 | 241 | 522 | (10 | ) | |||||||||||||
TOTAL OPERATING REVENUE |
2,841 | 3,197 | 3,520 | (11 | ) | |||||||||||||
EXPENSE: |
||||||||||||||||||
Compensation Expense |
1,125 | 1,302 | 1,416 | (14 | ) | |||||||||||||
Noncompensation Expense |
1,221 | 1,264 | 1,172 | (3 | ) | |||||||||||||
TOTAL OPERATING EXPENSE |
2,346 | 2,566 | 2,588 | (9 | ) | |||||||||||||
Operating Margin |
495 | 631 | 932 | (22 | ) | |||||||||||||
Credit Costs |
84 | 36 | 25 | 133 | ||||||||||||||
Operating Income Before Income Tax Expense |
411 | 595 | 907 | (31 | ) | |||||||||||||
Income Tax Expense |
149 | 232 | 363 | (36 | ) | |||||||||||||
OPERATING EARNINGS |
$ | 262 | $ | 363 | $ | 544 | (28 | ) | ||||||||||
Average Economic Capital |
$ | 5,643 | $ | 5,781 | $ | 4,105 | (2 | ) | ||||||||||
Average Assets |
35,729 | 36,896 | 33,674 | (3 | ) | |||||||||||||
Shareholder Value Added |
(421 | ) | (339 | ) | 42 | (24 | ) | |||||||||||
Tangible Shareholder Value Added |
94 | 172 | 305 | (45 | ) | |||||||||||||
Return on Economic Capital |
5 | % | 6 | % | 13 | % | (100 | ) bp | ||||||||||
Tangible Return on Economic Capital |
18 | 23 | 29 | (500 | ) | |||||||||||||
Overhead Ratio |
83 | 80 | 74 | 300 | ||||||||||||||
Pre-Tax Margin Ratio |
14 | 19 | 26 | (500 | ) | |||||||||||||
Page 8
| J.P. MORGAN CHASE & CO. | ||
| JPMORGAN PARTNERS | ||
| FINANCIAL HIGHLIGHTS – RESTATED | ||
| (in millions) |
|
| 1QTR 2003 | ||||||||||||||||||||||||||||||||
| Over (Under) | ||||||||||||||||||||||||||||||||
| 1QTR | 4QTR | 3QTR | 2QTR | 1QTR | ||||||||||||||||||||||||||||
| 2003 | 2002 | 2002 | 2002 | 2002 | 4Q 2002 | 1Q 2002 | ||||||||||||||||||||||||||
OPERATING INCOME STATEMENT |
||||||||||||||||||||||||||||||||
REVENUE: |
||||||||||||||||||||||||||||||||
Direct Investments: |
||||||||||||||||||||||||||||||||
Realized Cash Gains (Net) |
$ | 46 | $ | 144 | $ | 91 | $ | 91 | $ | 126 | (68 | )% | (63 | )% | ||||||||||||||||||
Write-downs / Write-offs |
(176 | ) | (225 | ) | (210 | ) | (206 | ) | (184 | ) | 22 | 4 | ||||||||||||||||||||
Mark-to-Market |
(6 | ) | 108 | (120 | ) | (20 | ) | (178 | ) | NM | 97 | |||||||||||||||||||||
Total Direct Investments |
(136 | ) | 27 | (239 | ) | (135 | ) | (236 | ) | NM | 42 | |||||||||||||||||||||
Third Party Funds (Net) |
(94 | ) | (80 | ) | (60 | ) | 9 | (19 | ) | (18 | ) | (395 | ) | |||||||||||||||||||
Total Private Equity Gains (Losses) |
(230 | ) | (53 | ) | (299 | ) | (126 | ) | (255 | ) | (334 | ) | 10 | |||||||||||||||||||
Net Interest Income (Loss) |
(62 | ) | (58 | ) | (63 | ) | (74 | ) | (73 | ) | (7 | ) | 15 | |||||||||||||||||||
Fees and Other Revenue |
14 | 28 | 3 | 7 | 20 | (50 | ) | (30 | ) | |||||||||||||||||||||||
TOTAL OPERATING REVENUE |
(278 | ) | (83 | ) | (359 | ) | (193 | ) | (308 | ) | (235 | ) | 10 | |||||||||||||||||||
EXPENSE: |
||||||||||||||||||||||||||||||||
Compensation Expense |
34 | 24 | 33 | 34 | 37 | 42 | (8 | ) | ||||||||||||||||||||||||
Noncompensation Expense |
29 | 45 | 46 | 39 | 41 | (36 | ) | (29 | ) | |||||||||||||||||||||||
TOTAL OPERATING EXPENSE |
63 | 69 | 79 | 73 | 78 | (9 | ) | (19 | ) | |||||||||||||||||||||||
Operating Income (Loss) Before Income Tax Expense |
(341 | ) | (152 | ) | (438 | ) | (266 | ) | (386 | ) | (124 | ) | 12 | |||||||||||||||||||
Income Tax Expense (Benefit) |
(124 | ) | (56 | ) | (160 | ) | (98 | ) | (141 | ) | (121 | ) | 12 | |||||||||||||||||||
OPERATING EARNINGS (LOSS) |
$ | (217 | ) | $ | (96 | ) | $ | (278 | ) | $ | (168 | ) | $ | (245 | ) | (126 | ) | 11 | ||||||||||||||
Average Economic Capital |
$ | 5,985 | $ | 6,102 | $ | 6,183 | $ | 6,330 | $ | 6,565 | (2 | ) | (9 | ) | ||||||||||||||||||
Average Assets |
9,428 | 9,629 | 9,404 | 9,611 | 10,074 | (2 | ) | (6 | ) | |||||||||||||||||||||||
Shareholder Value Added |
(440 | ) | (327 | ) | (514 | ) | (407 | ) | (490 | ) | (35 | ) | 10 | |||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| 2002 | ||||||||||||||||||||
| FULL YEAR | Over (Under) | |||||||||||||||||||
| 2002 | 2001 | 2000 | 2001 | |||||||||||||||||
OPERATING INCOME STATEMENT |
||||||||||||||||||||
REVENUE: |
||||||||||||||||||||
Direct Investments: |
||||||||||||||||||||
Realized Cash Gains (Net) |
$ | 452 | $ | 957 | $ | 2,009 | (53 | )% | ||||||||||||
Write-downs / Write-offs |
(825 | ) | (1,415 | ) | (296 | ) | 42 | |||||||||||||
Mark-to-Market |
(210 | ) | (522 | ) | (1,096 | ) | 60 | |||||||||||||
Total Direct Investments |
(583 | ) | (980 | ) | 617 | 41 | ||||||||||||||
Third Party Funds (Net) |
(150 | ) | (203 | ) | 380 | 26 | ||||||||||||||
Total Private Equity Gains (Losses) |
(733 | ) | (1,183 | ) | 997 | 38 | ||||||||||||||
Net Interest Income (Loss) |
(268 | ) | (273 | ) | (237 | ) | 2 | |||||||||||||
Fees and Other Revenue |
58 | 21 | 89 | 176 | ||||||||||||||||
TOTAL OPERATING REVENUE |
(943 | ) | (1,435 | ) | 849 | 34 | ||||||||||||||
EXPENSE: |
||||||||||||||||||||
Compensation Expense |
128 | 144 | 162 | (11 | ) | |||||||||||||||
Noncompensation Expense |
171 | 149 | 234 | 15 | ||||||||||||||||
TOTAL OPERATING EXPENSE |
299 | 293 | 396 | 2 | ||||||||||||||||
Operating Income (Loss) Before Income Tax Expense |
(1,242 | ) | (1,728 | ) | 453 | 28 | ||||||||||||||
Income Tax Expense (Benefit) |
(455 | ) | (630 | ) | 154 | 28 | ||||||||||||||
OPERATING EARNINGS (LOSS) |
$ | (787 | ) | $ | (1,098 | ) | $ | 299 | 28 | |||||||||||
Average Economic Capital |
$ | 6,293 | $ | 7,557 | $ | 8,932 | (17 | ) | ||||||||||||
Average Assets |
9,677 | 11,698 | 13,345 | (17 | ) | |||||||||||||||
Shareholder Value Added |
(1,738 | ) | (2,243 | ) | (1,061 | ) | 23 | |||||||||||||
Page 9
| J.P. MORGAN CHASE & CO. | ||
| CHASE FINANCIAL SERVICES | ||
| FINANCIAL HIGHLIGHTS – RESTATED | ||
| (in millions, except ratios) |
|
| 1QTR 2003 | ||||||||||||||||||||||||||||||
| Over (Under) | ||||||||||||||||||||||||||||||
| 1QTR | 4QTR | 3QTR | 2QTR | 1QTR | ||||||||||||||||||||||||||
| 2003 | 2002 | 2002 | 2002 | 2002 | 4Q 2002 | 1Q 2002 | ||||||||||||||||||||||||
OPERATING INCOME STATEMENT |
||||||||||||||||||||||||||||||
REVENUE: |
||||||||||||||||||||||||||||||
Net Interest Income |
$ | 2,319 | $ | 2,128 | $ | 2,107 | $ | 2,072 | $ | 1,986 | 9 | % | 17 | % | ||||||||||||||||
Fees and Commissions |
935 | 603 | 1,233 | 1,134 | 894 | 55 | 5 | |||||||||||||||||||||||
Securities Gains (Losses) |
102 | 375 | 112 | 19 | (13 | ) | (73 | ) | NM | |||||||||||||||||||||
All Other Revenue |
340 | 228 | 216 | 175 | 188 | 49 | 81 | |||||||||||||||||||||||
TOTAL OPERATING REVENUE |
3,696 | 3,334 | 3,668 | 3,400 | 3,055 | 11 | 21 | |||||||||||||||||||||||
EXPENSE: |
||||||||||||||||||||||||||||||
Compensation Expense |
733 | 634 | 677 | 668 | 645 | 16 | 14 | |||||||||||||||||||||||
Noncompensation Expense |
1,021 | 1,078 | 981 | 958 | 899 | (5 | ) | 14 | ||||||||||||||||||||||
TOTAL OPERATING EXPENSE |
1,754 | 1,712 | 1,658 | 1,626 | 1,544 | 2 | 14 | |||||||||||||||||||||||
Operating Margin |
1,942 | 1,622 | 2,010 | 1,774 | 1,511 | 20 | 29 | |||||||||||||||||||||||
Credit Costs |
877 | 875 | 823 | 736 | 726 | — | 21 | |||||||||||||||||||||||
Operating Income Before Income Tax Expense |
1,065 | 747 | 1,187 | 1,038 | 785 | 43 | 36 | |||||||||||||||||||||||
Income Tax Expense |
388 | 280 | 427 | 389 | 299 | 39 | 30 | |||||||||||||||||||||||
OPERATING EARNINGS |
$ | 677 | $ | 467 | $ | 760 | $ | 649 | $ | 486 | 45 | 39 | ||||||||||||||||||
Average Economic Capital |
$ | 8,469 | $ | 8,516 | $ | 8,637 | $ | 8,716 | $ | 8,606 | (1 | ) | (2 | ) | ||||||||||||||||
Average Managed Assets (a) |
202,341 | 188,478 | 178,825 | 175,555 | 175,593 | 7 | 15 | |||||||||||||||||||||||
Shareholder Value Added |
424 | 207 | 496 | 386 | 229 | 105 | 85 | |||||||||||||||||||||||
Return on Economic Capital |
32 | % | 22 | % | 35 | % | 30 | % | 23 | % | 1,000 | bp | 900 | bp | ||||||||||||||||
Overhead Ratio |
47 | 51 | 45 | 48 | 51 | (400 | ) | (400 | ) | |||||||||||||||||||||
CHASE FINANCIAL SERVICES’ BUSINESSES |
||||||||||||||||||||||||||||||
CHASE HOME FINANCE: |
||||||||||||||||||||||||||||||
Operating Revenue |
$ | 1,137 | $ | 637 | $ | 971 | $ | 770 | $ | 527 | 78 | % | 116 | % | ||||||||||||||||
Operating Expense |
361 | 380 | 312 | 312 | 297 | (5 | ) | 22 | ||||||||||||||||||||||
Operating Earnings |
431 | 146 | 385 | 261 | 128 | 195 | 237 | |||||||||||||||||||||||
Overhead Ratio |
32 | % | 60 | % | 32 | % | 41 | % | 56 | % | (2,800 | ) bp | (2,400 | ) bp | ||||||||||||||||
CHASE CARDMEMBER SERVICES: |
||||||||||||||||||||||||||||||
Operating Revenue |
$ | 1,469 | $ | 1,571 | $ | 1,557 | $ | 1,486 | $ | 1,352 | (6 | )% | 9 | % | ||||||||||||||||
Operating Expense |
535 | 610 | 547 | 523 | 481 | (12 | ) | 11 | ||||||||||||||||||||||
Operating Earnings |
153 | 140 | 232 | 166 | 138 | 9 | 11 | |||||||||||||||||||||||
Overhead Ratio |
36 | % | 39 | % | 35 | % | 35 | % | 36 | % | (300 | ) bp | — | bp | ||||||||||||||||
CHASE AUTO FINANCE: |
||||||||||||||||||||||||||||||
Operating Revenue |
$ | 199 | $ | 187 | $ | 165 | $ | 165 | $ | 171 | 6 | % | 16 | % | ||||||||||||||||
Operating Expense |
67 | 65 | 61 | 61 | 61 | 3 | 10 | |||||||||||||||||||||||
Operating Earnings |
39 | 36 | 24 | 79 | 30 | 8 | 30 | |||||||||||||||||||||||
Overhead Ratio |
34 | % | 35 | % | 37 | % | 37 | % | 36 | % | (100 | ) bp | (200 | ) bp | ||||||||||||||||
CHASE REGIONAL BANKING: |
||||||||||||||||||||||||||||||
Operating Revenue |
$ | 632 | $ | 694 | $ | 699 | $ | 713 | $ | 727 | (9 | )% | (13 | )% | ||||||||||||||||
Operating Expense |
564 | 565 | 550 | 553 | 558 | — | 1 | |||||||||||||||||||||||
Operating Earnings |
36 | 79 | 76 | 90 | 114 | (54 | ) | (68 | ) | |||||||||||||||||||||
Overhead Ratio |
89 | % | 82 | % | 79 | % | 78 | % | 77 | % | 700 | bp | 1,200 | bp | ||||||||||||||||
CHASE MIDDLE MARKET: |
||||||||||||||||||||||||||||||
Operating Revenue |
$ | 364 | $ | 358 | $ | 377 | $ | 362 | $ | 371 | 2 | % | (2 | )% | ||||||||||||||||
Operating Expense |
210 | 225 | 201 | 210 | 206 | (7 | ) | 2 | ||||||||||||||||||||||
Operating Earnings |
91 | 57 | 94 | 90 | 83 | 60 | 10 | |||||||||||||||||||||||
Overhead Ratio |
58 | % | 63 | % | 53 | % | 58 | % | 56 | % | (500 | ) bp | 200 | bp | ||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| 2002 | ||||||||||||||||||
| FULL YEAR | Over (Under) | |||||||||||||||||
| 2002 | 2001 | 2000 | 2001 | |||||||||||||||
OPERATING INCOME STATEMENT |
||||||||||||||||||
REVENUE: |
||||||||||||||||||
Net Interest Income |
$ | 8,293 | $ | 6,832 | $ | 6,098 | 21 | % | ||||||||||
Fees and Commissions |
3,864 | 2,894 | 3,216 | 34 | ||||||||||||||
Securities Gains (Losses) |
493 | 378 | 252 | 30 | ||||||||||||||
All Other Revenue |
807 | 766 | 407 | 5 | ||||||||||||||
TOTAL OPERATING REVENUE |
13,457 | 10,870 | 9,973 | 24 | ||||||||||||||
EXPENSE: |
||||||||||||||||||
Compensation Expense |
2,624 | 2,368 | 2,218 | 11 | ||||||||||||||
Noncompensation Expense |
3,916 | 3,308 | 3,153 | 18 | ||||||||||||||
TOTAL OPERATING EXPENSE |
6,540 | 5,676 | 5,371 | 15 | ||||||||||||||
Operating Margin |
6,917 | 5,194 | 4,602 | 33 | ||||||||||||||
Credit Costs |
3,160 | 2,874 | 2,094 | 10 | ||||||||||||||
Operating Income Before Income Tax Expense |
3,757 | 2,320 | 2,508 | 62 | ||||||||||||||
Income Tax Expense |
1,395 | 869 | 968 | 61 | ||||||||||||||
OPERATING EARNINGS |
$ | 2,362 | $ | 1,451 | $ | 1,540 | 63 | |||||||||||
Average Economic Capital |
$ | 8,618 | $ | 7,740 | $ | 7,701 | 11 | |||||||||||
Average Managed Assets (a) |
179,646 | 163,001 | 146,966 | 10 | ||||||||||||||
Shareholder Value Added |
1,318 | 510 | 598 | 158 | ||||||||||||||
Return on Economic Capital |
27 | % | 19 | % | 20 | % | 800 | bp | ||||||||||
Overhead Ratio |
49 | 52 | 54 | (300 | ) | |||||||||||||
CHASE FINANCIAL SERVICES’ BUSINESSES |
||||||||||||||||||
CHASE HOME FINANCE: |
||||||||||||||||||
Operating Revenue |
$ | 2,905 | $ | 1,678 | $ | 1,326 | 73 | % | ||||||||||
Operating Expense |
1,301 | 993 | 796 | 31 | ||||||||||||||
Operating Earnings |
920 | 394 | 309 | 134 | ||||||||||||||
Overhead Ratio |
45 | % | 59 | % | 60 | % | (1,400 | ) bp | ||||||||||
CHASE CARDMEMBER SERVICES: |
||||||||||||||||||
Operating Revenue |
$ | 5,966 | $ | 4,453 | $ | 3,805 | 34 | % | ||||||||||
Operating Expense |
2,161 | 1,598 | 1,429 | 35 | ||||||||||||||
Operating Earnings |
676 | 478 | 410 | 41 | ||||||||||||||
Overhead Ratio |
36 | % | 36 | % | 38 | % | — | bp | ||||||||||
CHASE AUTO FINANCE: |
||||||||||||||||||
Operating Revenue |
$ | 688 | $ | 544 | $ | 333 | 26 | % | ||||||||||
Operating Expense |
248 | 202 | 178 | 23 | ||||||||||||||
Operating Earnings |
169 | 123 | 38 | 37 | ||||||||||||||
Overhead Ratio |
36 | % | 37 | % | 54 | % | (100 | ) bp | ||||||||||
CHASE REGIONAL BANKING: |
||||||||||||||||||
Operating Revenue |
$ | 2,833 | $ | 3,091 | $ | 3,148 | (8 | )% | ||||||||||
Operating Expense |
2,226 | 2,183 | 2,195 | 2 | ||||||||||||||
Operating Earnings |
359 | 475 | 494 | (24 | ) | |||||||||||||
Overhead Ratio |
79 | % | 71 | % | 70 | % | 800 | bp | ||||||||||
CHASE MIDDLE MARKET: |
||||||||||||||||||
Operating Revenue |
$ | 1,468 | $ | 1,413 | $ | 1,420 | 4 | % | ||||||||||
Operating Expense |
842 | 813 | 805 | 4 | ||||||||||||||
Operating Earnings |
324 | 275 | 316 | 18 | ||||||||||||||
Overhead Ratio |
57 | % | 58 | % | 57 | % | (100 | ) bp | ||||||||||
Page 10
| J.P. MORGAN CHASE & CO. | ||
| SUPPORT UNITS AND CORPORATE | ||
| FINANCIAL HIGHLIGHTS – RESTATED | ||
| (in millions) |
|
| 1QTR 2003 | ||||||||||||||||||||||||||||
| Over (Under) | ||||||||||||||||||||||||||||
| 1QTR | 4QTR | 3QTR | 2QTR | 1QTR | ||||||||||||||||||||||||
| 2003 | 2002 | 2002 | 2002 | 2002 | 4Q 2002 | 1Q 2002 | ||||||||||||||||||||||
OPERATING INCOME STATEMENT |
||||||||||||||||||||||||||||
OPERATING REVENUE |
$ | (201 | ) | $ | (274 | ) | $ | (213 | ) | $ | (173 | ) | $ | (190 | ) | 27 | % | (6 | )% | |||||||||
OPERATING EXPENSE |
145 | 25 | (68 | ) | (62 | ) | 69 | 480 | 110 | |||||||||||||||||||
Credit Costs |
71 | (27 | ) | 26 | 91 | 42 | NM | 69 | ||||||||||||||||||||
Pre-Tax Loss |
(417 | ) | (272 | ) | (171 | ) | (202 | ) | (301 | ) | (53 | ) | (39 | ) | ||||||||||||||
Income Tax Benefit |
(244 | ) | (127 | ) | (1 | ) | (146 | ) | (205 | ) | (92 | ) | (19 | ) | ||||||||||||||
OPERATING EARNINGS (LOSS) |
$ | (173 | ) | $ | (145 | ) | $ | (170 | ) | $ | (56 | ) | $ | (96 | ) | (19 | ) | (80 | ) | |||||||||
Average Economic Capital |
$ | (1,612 | ) | $ | (1,225 | ) | $ | (305 | ) | $ | (2,198 | ) | $ | (3,465 | ) | (32 | ) | 53 | ||||||||||
Average Assets |
22,840 | 19,200 | 18,875 | 16,333 | 32,143 | 19 | (29 | ) | ||||||||||||||||||||
Shareholder Value Added |
(83 | ) | (64 | ) | (115 | ) | 57 | 54 | (30 | ) | NM | |||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| 2002 | ||||||||||||||||
| FULL YEAR | Over (Under) | |||||||||||||||
| 2002 | 2001 | 2000 | 2001 | |||||||||||||
OPERATING INCOME STATEMENT |
||||||||||||||||
OPERATING REVENUE |
$ | (850 | ) | $ | (934 | ) | $ | (915 | ) | 9 | % | |||||
OPERATING EXPENSE |
(36 | ) | 204 | 240 | NM | |||||||||||
Credit Costs |
132 | 154 | 1 | (14 | ) | |||||||||||
Pre-Tax Loss |
(946 | ) | (1,292 | ) | (1,156 | ) | 27 | |||||||||
Income Tax Benefit |
(479 | ) | (842 | ) | (775 | ) | 43 | |||||||||
OPERATING EARNINGS (LOSS) |
$ | (467 | ) | $ | (450 | ) | $ | (381 | ) | (4 | ) | |||||
Average Economic Capital |
$ | (1,787 | ) | $ | (2,660 | ) | $ | (5,923 | ) | 33 | ||||||
Average Assets |
21,596 | 13,132 | 15,004 | 64 | ||||||||||||
Shareholder Value Added |
(68 | ) | 95 | 599 | NM | |||||||||||
Page 11
CAPITAL
| J.P. MORGAN CHASE & CO. | ||
| AVAILABLE VERSUS REQUIRED ECONOMIC CAPITAL |
 |
|
| (in billions) |
| BEFORE RESTATEMENT | AFTER RESTATEMENT | ||||||||||||||||||||||||||
| Year Ended December 31, | 2002 | 2001 | 2000 | 2002 | 2001 | 2000 | |||||||||||||||||||||
Common Stockholders’ Equity |
$ | 41.4 | $ | 41.5 | $ | 36.2 | $ | 41.4 | $ | 41.5 | $ | 36.2 | |||||||||||||||
Required Economic Capital |
|||||||||||||||||||||||||||
Credit Risk |
13.1 | 12.8 | 12.4 | 14.0 | 13.7 | 13.6 | |||||||||||||||||||||
Market Risk |
4.8 | 4.6 | 4.5 | 4.7 | 4.5 | 4.5 | |||||||||||||||||||||
Operating Risk |
8.7 | 8.8 | 9.2 | — | — | — | |||||||||||||||||||||
Operational Risk |
— | — | — | 3.5 | 3.5 | 3.5 | |||||||||||||||||||||
Business Risk |
— | — | — | 1.8 | 1.8 | 1.8 | |||||||||||||||||||||
Private Equity Risk |
5.1 | 6.4 | 7.2 | 5.8 | 7.2 | 8.2 | |||||||||||||||||||||
Economic Risk Capital |
31.7 | 32.6 | 33.3 | 29.8 | 30.7 | 31.6 | |||||||||||||||||||||
Goodwill / Intangibles |
8.8 | 8.5 | 6.1 | 8.8 | 8.5 | 6.1 | |||||||||||||||||||||
Asset Capital Tax |
3.8 | 3.9 | 3.8 | 3.9 | 3.9 | 3.8 | |||||||||||||||||||||
Capital Against Nonrisk Factors |
12.6 | 12.4 | 9.9 | 12.7 | 12.4 | 9.9 | |||||||||||||||||||||
Diversification Effect |
(7.0 | ) | (7.2 | ) | (7.3 | ) | (5.3 | ) | (5.5 | ) | (5.6 | ) | |||||||||||||||
Total Required Economic Capital |
37.3 | 37.8 | 35.9 | 37.2 | 37.6 | 35.9 | |||||||||||||||||||||
Capital in Excess of Required Economic Capital |
$ | 4.1 | $ | 3.7 | $ | 0.3 | $ | 4.2 | $ | 3.9 | $ | 0.3 | |||||||||||||||
| QUARTERLY AVERAGES | 1QTR 2003 | ||||||||||||||||||||||||||||||
| 1QTR | 4QTR | 3QTR | 2QTR | 1QTR | Over (Under) | ||||||||||||||||||||||||||
| AFTER RESTATEMENT | 2003 | 2002 | 2002 | 2002 | 2002 | 4Q 2002 | 1Q 2002 | ||||||||||||||||||||||||
Common Stockholders’ Equity |
$ | 41.9 | $ | 42.0 | $ | 42.2 | $ | 40.9 | $ | 40.4 | — | % | 4 | % | |||||||||||||||||
Required Economic Capital |
|||||||||||||||||||||||||||||||
Credit Risk |
15.1 | 14.7 | 13.5 | 13.5 | 14.3 | 3 | 6 | ||||||||||||||||||||||||
Market Risk |
4.2 | 4.1 | 4.8 | 4.9 | 5.3 | 2 | (21 | ) | |||||||||||||||||||||||
Operational Risk |
3.5 | 3.5 | 3.5 | 3.5 | 3.5 | — | — | ||||||||||||||||||||||||
Business Risk |
1.7 | 1.8 | 1.8 | 1.8 | 1.8 | (6 | ) | (6 | ) | ||||||||||||||||||||||
Private Equity Risk |
5.4 | 5.5 | 5.7 | 5.9 | 5.9 | (2 | ) | (8 | ) | ||||||||||||||||||||||
Economic Risk Capital |
29.9 | 29.6 | 29.3 | 29.6 | 30.8 | 1 | (3 | ) | |||||||||||||||||||||||
Goodwill / Intangibles |
8.9 | 8.9 | 8.9 | 8.9 | 8.6 | — | 3 | ||||||||||||||||||||||||
Asset Capital Tax |
4.0 | 3.9 | 3.8 | 3.9 | 3.8 | 3 | 5 | ||||||||||||||||||||||||
Capital Against Nonrisk Factors |
12.9 | 12.8 | 12.7 | 12.8 | 12.4 | 1 | 4 | ||||||||||||||||||||||||
Diversification Effect |
(5.0 | ) | (4.9 | ) | (5.3 | ) | (5.4 | ) | (5.7 | ) | (2 | ) | 12 | ||||||||||||||||||
Total Required Economic Capital |
37.8 | 37.5 | 36.7 | 37.0 | 37.5 | 1 | 1 | ||||||||||||||||||||||||
Capital in Excess of Required Economic Capital |
$ | 4.1 | $ | 4.5 | $ | 5.5 | $ | 3.9 | $ | 2.9 | (9 | ) | 41 | ||||||||||||||||||
Page 12
| J.P. MORGAN CHASE & CO. | ||
| Glossary of Terms |
|
| Average Economic Capital: Represents the portion of average common stockholders’ equity allocated to the business segments. The total average economic capital of all business segments equals the total average common stockholders’ equity of the Firm. | Tangible Return on Economic Capital: Excludes the impact of goodwill on operating earnings and average common equity. | |
| bp: Denotes basis points; 100 bp equals 1%. | Tangible Shareholder Value Added: Excludes the impact of goodwill on operating earnings and capital charges. | |
| NA: Not applicable | ||
| NM: Not meaningful |
Page 13
| J.P. MORGAN CHASE & CO. | EXHIBIT 99.2 | |
| RECONCILIATION OF CERTAIN
NON-GAAP MEASURES (in millions) |
|
| 1QTR 2003 | ||||||||||||||||||||||||||||
| Over (Under) | ||||||||||||||||||||||||||||
| 1QTR | 4QTR | 3QTR | 2QTR | 1QTR | ||||||||||||||||||||||||
| 2003 | 2002 | 2002 | 2002 | 2002 | 4Q 2002 | 1Q 2002 | ||||||||||||||||||||||
Shareholder Value Added |
||||||||||||||||||||||||||||
Net Income |
$ | 1,400 | $ | (387 | ) | $ | 40 | $ | 1,028 | $ | 982 | NM | 43 | % | ||||||||||||||
Impact of Merger and Restructuring Costs and Special Items |
— | 1,117 | 285 | 151 | 168 | NM | NM | |||||||||||||||||||||
Impact of Pre-SFAS 142 Goodwill Amortization |
NA | NA | NA | NA | NA | NA | NA | |||||||||||||||||||||
Operating Earnings |
1,400 | 730 | 325 | 1,179 | 1,150 | 92 | % | 22 | ||||||||||||||||||||
Less: Preferred Dividends |
13 | 12 | 13 | 13 | 13 | 8 | — | |||||||||||||||||||||
Adjusted Operating Earnings |
1,387 | 718 | 312 | 1,166 | 1,137 | 93 | 22 | |||||||||||||||||||||
Less: Cost of Capital (a) |
1,239 | 1,269 | 1,276 | 1,223 | 1,196 | (2 | ) | 4 | ||||||||||||||||||||
Total Shareholder Value Added |
$ | 148 | $ | (551 | ) | $ | (964 | ) | $ | (57 | ) | $ | (59 | ) | NM | NM | ||||||||||||
Average Managed Assets |
||||||||||||||||||||||||||||
Average Assets |
$ | 778,238 | $ | 755,166 | $ | 724,366 | $ | 734,946 | $ | 718,646 | 3 | % | 8 | % | ||||||||||||||
Average Credit Card Securitizations |
31,834 | 30,556 | 28,348 | 25,289 | 21,765 | 4 | 46 | |||||||||||||||||||||
Average Managed Assets |
$ | 810,072 | $ | 785,722 | $ | 752,714 | $ | 760,235 | $ | 740,411 | 3 | 9 | ||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| 2002 | ||||||||||||||||
| FULL YEAR | Over (Under) | |||||||||||||||
| 2002 | 2001 | 2000 | 2001 | |||||||||||||
Shareholder Value Added |
||||||||||||||||
Net Income |
$ | 1,663 | $ | 1,694 | $ | 5,727 | (2) | % | ||||||||
Impact of Merger and Restructuring Costs and Special Items |
1,721 | 1,715 | 200 | — | ||||||||||||
Impact of Pre-SFAS 142 Goodwill Amortization |
NA | 393 | 249 | NA | ||||||||||||
Operating Earnings |
3,384 | 3,802 | 6,176 | (11 | ) | |||||||||||
Less: Preferred Dividends |
51 | 66 | 96 | (23 | ) | |||||||||||
Adjusted Operating Earnings |
3,333 | 3,736 | 6,080 | (11 | ) | |||||||||||
Less: Cost of Capital (a) |
4,964 | 4,983 | 4,341 | — | ||||||||||||
Total Shareholder Value Added |
$ | (1,631 | ) | $ | (1,247 | ) | $ | 1,739 | (31 | ) | ||||||
Average Managed Assets |
||||||||||||||||
Average Assets |
$ | 733,357 | $ | 735,973 | $ | 676,805 | — | % | ||||||||
Average Credit Card Securitizations |
26,519 | 17,975 | 18,775 | 48 | ||||||||||||
Average Managed Assets |
$ | 759,876 | $ | 753,948 | $ | 695,580 | 1 | |||||||||
| (a) | A 12% (after-tax) cost of capital, based on average economic capital, is used for the Firm. To derive shareholder value added for the business segments, a 12% (after-tax) cost of capital is applied for each business segment, except for JPMorgan Partners, which is charged a 15% (after-tax) cost of capital. |