1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF THE REPORT: OCTOBER 21, 1997 COMMISSION FILE NUMBER 1-5805
THE CHASE MANHATTAN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-2624428
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
270 PARK AVENUE, NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 270-6000
2
Item 5. Other Events
1. The Chase Manhattan Corporation (the "Corporation") reported on October 21,
1997 that fully diluted earnings per share before restructuring costs, rose to
$2.26 in the 1997 third quarter from $1.83 in the third quarter of 1996. Net
income on the same basis rose to $1,027 million for the 1997 third quarter from
$878 million in the prior year period. Including merger-related restructuring
costs, net income was $982 million in the third quarter of 1997, versus $858
million in the third quarter of 1996.
2. On October 21,1997, the Corporation announced that it agreed to purchase
substantially all of The Bank of New York's credit card portfolio, totaling
approximately 3.5 million accounts and approximately $4 billion in outstandings.
The acquisition is expected to be completed by year-end 1997.
Copies of the Corporation's press releases are attached as exhibits hereto. The
press releases contain statements that are forward-looking within the meaning of
the Private Securities Litigation Reform Act of 1995. Such statements are
subject to risks and uncertainties and the Corporation's actual results may
differ materially from those set forth in such forward-looking statements.
Factors that would affect the prospects of the Corporation's business are
discussed in the Annual Report to Stockholders on Form 10-K for the year ended
December 31,1996, to which reference is hereby made.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
The following exhibits are filed with this Report:
Exhibit Number Description
-------------- -----------
99.1 Press Release - 1997 Third Quarter Earnings.
99.2 Press Release - Chase to Acquire Bank of New York's
Credit Card Portfolio.
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.
THE CHASE MANHATTAN CORPORATION
(Registrant)
Dated October 21, 1997 by /s/ JOSEPH L. SCLAFANI
--------------------------------
Joseph L. Sclafani
Controller
[Principal Accounting Officer]
4
EXHIBIT INDEX
Exhibit Page at
Number Description which located
------- ----------- -------------
99.1 Press Release - 1997 Third Quarter Earnings. 5
99.2 Press Release - Chase to Acquire Bank of New York's 20
Credit Card Portfolio.
1
EXHIBIT 99.1
THE CHASE MANHATTAN CORPORATION
270 Park Avenue
New York, NY 10017-2070
NEWS RELEASE
Investor Contact: John Borden Press Contacts: Kathleen Baum
212-270-7318 212-270-5089
John Stefans
For Immediate Release 212-270-7438
CHASE'S EARNINGS PER SHARE UP 23 PERCENT IN THIRD QUARTER
New York, October 21, 1997 -- The Chase Manhattan Corporation (NYSE:CMB)
today reported that fully diluted earnings per share before restructuring costs
rose to $2.26 from $1.83 in the third quarter of 1996. Net income on the same
basis rose to $1,027 million from $878 million in the prior year quarter.
Including merger-related restructuring costs, net income was $982 million,
versus $858 million in the third quarter of 1996.
THIRD QUARTER HIGHLIGHTS
- Revenue on a managed basis rose 15 percent, with double-digit growth in
a range of businesses including consumer credit, asset management and
private banking, operating services, trading and investment banking.
- Total noninterest expenses, before merger-related restructuring costs,
rose 13 percent, including $85 million related to the accelerated
vesting of stock-based incentive awards.
- Return on average common stockholders' equity rose to 21 percent, from
18 percent in the third quarter of 1996.
- The efficiency ratio improved to 53 percent, on an operating basis
excluding the $85 million charge mentioned above.
"It was another excellent quarter for Chase with strong revenue and bottom
line results validating the power of our franchise across both wholesale and
consumer businesses," said Walter V. Shipley, chairman and chief executive
officer.
(More)
2
2
THIRD QUARTER LINE OF BUSINESS RESULTS
Global Wholesale Banking
Operating net income from Global Wholesale Banking rose 50 percent to $736
million, as total revenues increased 23 percent.
Net income from Chase's global markets businesses rose 32 percent, spurred
by a second consecutive quarter of record trading results. Total trading
revenues were $678 million, including $173 million of trading related net
interest income. Chase's market-making and client-driven activities continued to
benefit from increasing demand and a positive trading environment. Revenues from
foreign exchange, emerging market activities and derivatives were particularly
strong.
Corporate finance and loan syndication fees of $308 million surpassed record
second quarter 1997 levels and were 30 percent higher than in the third quarter
of 1996. Investment banking deal flow continued to be robust, reflecting market
share gains in high-yield and investment-grade underwriting and higher levels of
corporate finance activities outside the United States.
Net income from global operating services rose 61 percent, as revenues
increased by 13 percent and expenses remained flat. Global investor services and
global trust saw particularly vibrant revenue growth, reflecting new business
and higher levels of assets under trust and custody.
Net income from global asset management and private banking rose 59 percent.
Revenues grew 22 percent, reflecting an increased volume of global banking
transactions for private banking clients and higher levels of client assets.
Equity-related investment revenues of $243 million rose substantially from
year-ago levels, reflecting gains in Chase's $3.2 billion portfolio, as market
conditions continued to favor corporate mergers and small cap stocks.
Regional and Nationwide Consumer Banking
Operating net income from Regional and Nationwide Consumer Banking rose 12
percent to $387 million, driven by a nine percent rise in revenues.
Credit card revenues rose 15 percent as average managed receivables
increased by 13 percent, reflecting growth in both the core portfolio and from
co-branded initiatives. Net income was $86 million, significantly higher than
1997 second quarter levels, and up six percent from the third quarter of 1996.
Credit card charge-offs declined from second quarter levels, reflecting the
improvement in credit card loss ratios and delinquency rates.
3
3
Net income from mortgage banking rose 46 percent, reflecting continuing
benefits from the reengineering of Chase's mortgage origination business. Both
loan origination and mortgage servicing levels increased, boosting revenues by
15 percent.
National consumer finance revenues increased by 13 percent, with solid
growth in both Chase auto finance and other consumer credit activities. Average
managed auto finance receivables rose 15 percent from 1996 third quarter levels.
Net income for tri-state regional banking, which includes retail payment and
investments and middle market banking, increased by 18 percent, reflecting
modest revenue growth and the benefits of ongoing productivity and efficiency
initiatives.
Texas Commerce Bank's net income rose by 17 percent, with higher loan
volumes and fee-based activities contributing to an 11 percent increase in
revenues.
THIRD QUARTER FINANCIAL INFORMATION
Asset Quality
The provision for credit losses was $190 million, compared with $220 million
in the third quarter of 1996.
Total managed consumer net charge-offs in the third quarter of 1997 were
$442 million, of which $196 million were related to assets retained on the
balance sheet. That compared with net charge-offs of $354 million in the third
quarter of 1996, of which $210 million were related to retained assets.
Managed credit card net charge-offs were 5.57 percent of average managed
receivables, down from their peak of 5.99 percent in the second quarter. Managed
credit card net charge-offs in the third quarter of 1996 were 4.95 percent.
Total domestic commercial net charge-offs were $1 million in the third
quarter of 1997 compared with total net charge-offs of $2 million in the third
quarter of 1996.
Nonperforming assets, at September 30, 1997, were $1,036 million, compared
with $1,106 million on June 30, 1997, and $1,517 million on September 30, 1996.
4
4
Other Financial Data
Total noninterest operating expense rose to $2,488 in the third quarter of
1997. The quarter included incremental merger savings of $130 million, which
were offset by investment spending and increased incentives related to higher
revenues. The quarter also included $85 million of expenses related to the
accelerated vesting of stock-based incentive awards, and restructuring expenses
of $71 million.
During the 1997 third quarter, Chase purchased approximately 7.0 million
common shares as part of a stock repurchase plan announced in October of 1996.
Chase reissued approximately 4.3 million treasury shares under its employee
benefit plans, resulting in a net repurchase of 2.7 million shares ($348
million) of its common stock.
The Adoption of New Market Risk Capital Guidelines
During the third quarter, Chase elected early adoption of the Federal
Reserve Board's new guidelines for incorporating market risk in the calculation
of risk adjusted capital. These guidelines incorporate the use of internal
models to measure market risk. In addition, the capital and assets of Chase
Securities Inc. are included in the calculation of risk-based capital ratios at
the holding company level.
At September 30, 1997, Chase's estimated Tier 1 and total risk-based capital
ratios were 7.8 percent and 11.6 percent, respectively, and its leverage ratio
was 6.1 percent.
# # #
CHASE'S NEWS RELEASES AND QUARTERLY FINANCIAL RESULTS ARE AVAILABLE ON THE
INTERNET AT www.Chase.com.
5
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(IN MILLIONS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
EARNINGS:
Income Before Restructuring Costs $ 1,027 $ 878 $ 2,942 $ 2,685 (a)
Restructuring Costs (After-Tax) (b) (45) (20) (108) (1,060)
--------- --------- --------- ---------
Net Income $ 982 $ 858 $ 2,834 $ 1,625
========= ========= ========= =========
Net Income Applicable to Common Stock $ 941 $ 803 $ 2,687 $ 1,461
========= ========= ========= =========
INCOME PER COMMON SHARE:
Primary:
Income Before Restructuring Costs $ 2.27 $ 1.85 $ 6.40 $ 5.66 (a)
Restructuring Costs (After-Tax) (b) (0.10) (0.05) (0.24) (2.38)
--------- --------- --------- ---------
Net Income $ 2.17 $ 1.80 $ 6.16 $ 3.28
========= ========= ========= =========
Assuming Full Dilution:
Income Before Restructuring Costs $ 2.26 $ 1.83 $ 6.32 $ 5.57 (a)
Restructuring Costs (After-Tax) (b) (0.10) (0.05) (0.24) (2.34)
--------- --------- --------- ---------
Net Income $ 2.16 $ 1.78 $ 6.08 $ 3.23
========= ========= ========= =========
PER COMMON SHARE:
Book Value at September 30, $ 46.19 $ 42.03 $ 46.19 $ 42.03
Market Value at September 30, $ 118.00 $ 80.13 $ 118.00 $ 80.13
Common Stock Dividends Declared (c) $ 0.62 $ 0.56 $ 1.86 $ 1.68
COMMON SHARES OUTSTANDING:
Average Common and Common Equivalent Shares 433.6 447.2 436.5 446.0
Average Common Shares Assuming Full Dilution 436.3 450.5 442.2 452.3
Common Shares at Period End 420.6 439.9 420.6 439.9
PERFORMANCE RATIOS: (AVERAGE BALANCES) (d)
Income Before Restructuring Costs:
Return on Assets 1.13% 1.08% 1.13% 1.13%
Return on Common Stockholders' Equity 20.56% 18.35% 20.11% 18.96% (a)
Return on Total Stockholders' Equity 19.40% 17.04% 18.77% 17.57%
Net Income:
Return on Assets 1.08% 1.06% 1.08% 0.68%
Return on Common Stockholders' Equity 19.63% 17.90% 19.33% 10.99%
Return on Total Stockholders' Equity 18.55% 16.65% 18.08% 10.63%
Efficiency Ratio (e) 57% 58% 57% 59%
Efficiency Ratio - Excluding Securitizations (e) 53% 56% 54% 57%
CAPITAL RATIOS AT SEPTEMBER 30:
Common Stockholders' Equity to Assets 5.3% 5.7%
Total Stockholders' Equity to Assets 5.8% 6.6%
Tier 1 Leverage 6.1% (f) 7.0%
Risk-Based Capital:
Tier 1 (4.0% required) 7.8% (f)* 8.4%
Total (8.0% required) 11.6% (f)* 12.2%
FULL-TIME EQUIVALENT EMPLOYEES AT SEPTEMBER 30, 68,396 67,828
(a) Includes nonrecurring items which had a $70 million net favorable impact on
net income. Excluding these items, net income was $2,615 million, primary
earnings per share was $5.50, fully-diluted earnings per share was $5.42 and
return on common stockholders' equity was 18.43%.
(b) Reflects merger-related restructuring charge of $1,022 million, after-tax,
which was recorded on March 31, 1996. In addition, after-tax merger-related
expenses were incurred and recognized under an existing accounting
pronouncement ($45 million in the third quarter of 1997 and $108 million in
the first nine months of 1997, compared with $20 million and $38 million,
respectively, for the prior year's periods).
(c) The Corporation increased its quarterly common stock dividend to $0.62 per
share, from $0.56 per share, in the first quarter of 1997.
(d) Performance ratios are based on annualized amounts.
(e) Excludes restructuring costs, foreclosed property expense, charges for
accelerated vesting of stock-based incentive awards and nonrecurring items.
(f) During the third quarter, the Corporation elected early adoption of the
Federal Reserve Board's new guidelines for calculating risk-adjusted
capital. The guidelines incorporate a measure of market risk and now include
the assets and off-balance sheet financial instruments of the Corporation's
securities subsidiary, Chase Securities Inc., as well as the Corporation's
investment in this subsidiary. Prior period ratios have not been restated.
* Estimated
6
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
--------------------------------
SEPT. 30, JUNE 30, SEPT. 30,
1997 1997 1996
------ ------ ------
INTEREST INCOME
Loans $3,271 $3,082 $3,042
Securities 720 735 690
Trading Assets 732 705 482
Federal Funds Sold and Securities Purchased Under Resale
Agreements 623 697 549
Deposits with Banks 149 114 112
------ ------ ------
Total Interest Income 5,495 5,333 4,875
------ ------ ------
INTEREST EXPENSE
Deposits 1,714 1,568 1,416
Short-Term and Other Borrowings 1,451 1,510 1,213
Long-Term Debt 284 273 220
------ ------ ------
Total Interest Expense 3,449 3,351 2,849
------ ------ ------
NET INTEREST INCOME 2,046 1,982 2,026
Provision for Credit Losses 190 189 220
------ ------ ------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 1,856 1,793 1,806
------ ------ ------
NONINTEREST REVENUE
Corporate Finance and Syndication Fees 308 283 237
Trust, Custody and Investment Management Fees 338 321 295
Credit Card Revenue 304 248 277
Service Charges on Deposit Accounts 94 95 97
Fees for Other Financial Services 411 392 393
Trading Revenue 505 491 343
Securities Gains 58 30 34
Revenue from Equity-Related Investments 243 179 112
Other Revenue 102 119 111
------ ------ ------
Total Noninterest Revenue 2,363 2,158 1,899
------ ------ ------
NONINTEREST EXPENSE
Salaries 1,292 (a) 1,110 1,040
Employee Benefits 206 219 211
Occupancy Expense 194 193 204
Equipment Expense 192 193 179
Foreclosed Property Expense 6 -- 2
Other Expense 700 (b) 685 (b) 652
------ ------ ------
Total Noninterest Expense Before Restructuring Charge 2,590 2,400 2,288
Restructuring Charge and Expenses 71 71 32
------ ------ ------
Total Noninterest Expense 2,661 2,471 2,320
------ ------ ------
INCOME BEFORE INCOME TAX EXPENSE 1,558 1,480 1,385
Income Tax Expense 576 555 527
------ ------ ------
NET INCOME $ 982 $ 925 $ 858
====== ====== ======
NET INCOME APPLICABLE TO COMMON STOCK $ 941 $ 874 $ 803
====== ====== ======
NET INCOME PER COMMON SHARE:
Primary $ 2.17 $ 2.00 $ 1.80
====== ====== ======
Assuming Full Dilution $ 2.16 $ 2.00 $ 1.78
====== ====== ======
(a) Includes $85 million of costs for the accelerated vesting of stock-based
incentive awards.
(b) Includes minority interest related to the issuance of preferred stock by a
subsidiary ("Series A Preferred Shares") of $11 million in each of the third
and second quarters of 1997.
Certain amounts have been reclassified to conform to current presentation.
7
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
-------- --------
INTEREST INCOME
Loans $ 9,465 $ 9,311
Securities 2,177 2,095
Trading Assets 2,063 1,283
Federal Funds Sold and Securities Purchased Under Resale
Agreements 1,879 1,564
Deposits with Banks 369 440
-------- --------
Total Interest Income 15,953 14,693
-------- --------
INTEREST EXPENSE
Deposits 4,797 4,518
Short-Term and Other Borrowings 4,263 3,326
Long-Term Debt 814 668
-------- --------
Total Interest Expense 9,874 8,512
-------- --------
NET INTEREST INCOME 6,079 6,181 (a)
Provision for Credit Losses 599 715
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 5,480 5,466
-------- --------
NONINTEREST REVENUE
Corporate Finance and Syndication Fees 767 731
Trust, Custody and Investment Management Fees 969 882
Credit Card Revenue 830 743
Service Charges on Deposit Accounts 280 296
Fees for Other Financial Services 1,186 1,152
Trading Revenue 1,401 1,085
Securities Gains 189 110
Revenue from Equity-Related Investments 586 554
Other Revenue 412 (b) 180 (c)
-------- --------
Total Noninterest Revenue 6,620 5,733
-------- --------
NONINTEREST EXPENSE
Salaries 3,526 (d) 3,162
Employee Benefits 647 741 (e)
Occupancy Expense 574 632
Equipment Expense 575 544
Foreclosed Property Expense 9 (15)
Other Expense 2,076 1,963
-------- --------
Total Noninterest Expense Before Restructuring Charge 7,407 7,027
Restructuring Charge and Expenses 172 1,710
-------- --------
Total Noninterest Expense 7,579 8,737
-------- --------
INCOME BEFORE INCOME TAX EXPENSE 4,521 2,462
Income Tax Expense 1,687 837 (f)
-------- --------
NET INCOME $ 2,834 $ 1,625
======== ========
NET INCOME APPLICABLE TO COMMON STOCK $ 2,687 $ 1,461
======== ========
NET INCOME PER COMMON SHARE:
Primary $ 6.16 $ 3.28
======== ========
Assuming Full Dilution $ 6.08 $ 3.23
======== ========
(a) Includes $54 million of interest related to tax audit settlements.
(b) Includes $44 million gain on the sale of a partially-owned foreign
investment.
(c) Includes $60 million loss on the sale of a building in Japan.
(d) Includes $135 million of costs for the accelerated vesting of stock-based
incentive awards.
(e) Includes $40 million charge related to combining the Corporation's foreign
retirement plans.
(f) Includes tax benefits related to the restructuring charge as well as
aggregate tax benefits and refunds.
Certain amounts have been reclassified to conform to current presentation.
8
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
NONINTEREST REVENUE DETAIL
(IN MILLIONS)
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- ------------------
SEPT. 30, JUNE 30, SEPT. 30, SEPTEMBER 30,
1997 1997 1996 1997 1996
------- ------- ------- ------- -------
FEES FOR OTHER FINANCIAL SERVICES:
Fees in Lieu of Compensating Balances $ 81 $ 74 $ 75 $ 236 $ 223
Commissions on Letters of Credit and
Acceptances 78 74 81 224 252
Mortgage Servicing Fees 59 62 55 177 159
Loan Commitment Fees 30 29 32 86 92
Other Fees 163 153 150 463 426
------- ------- ------- ------- -------
Total $ 411 $ 392 $ 393 $ 1,186 $ 1,152
======= ======= ======= ======= =======
TRADING-RELATED REVENUE: (a)
Interest Rate Contracts $ 159 $ 217 $ 124 $ 559 $ 450
Foreign Exchange Revenue 228 175 108 572 341
Debt Instruments and Other 291 263 243 780 711
------- ------- ------- ------- -------
Total $ 678 $ 655 $ 475 $ 1,911 $ 1,502
======= ======= ======= ======= =======
OTHER REVENUE:
Residential Mortgage
Origination/Sales Activities $ 37 $ 30 $ 15 $ 98 $ 41
Net Losses on Emerging Markets
Securities Sales -- -- -- -- (65)
Gain on Sale of Partially-owned
Foreign Investment -- -- -- 44 --
Loss on Sale of a Building in Japan -- -- -- -- (60)
All Other Revenue 65 89 96 270 264
------- ------- ------- ------- -------
Total $ 102 $ 119 $ 111 $ 412 $ 180
======= ======= ======= ======= =======
(a) Includes net interest income attributable to trading activities.
Certain amounts have been reclassified to conform to current presentation.
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
NONINTEREST EXPENSE DETAIL
(IN MILLIONS)
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------- -------------------
SEPT. 30, JUNE 30, SEPT. 30, SEPTEMBER 30,
1997 1997 1996 1997 1996
------ ------ ------ ------ ------
OTHER EXPENSE:
Professional Services $ 139 $ 136 $ 127 $ 408 $ 397
Marketing Expense 90 107 73 300 236
Telecommunications 77 73 82 225 249
Amortization of Intangibles 41 41 42 123 127
Minority Interest 19 (a) 20 (a) 16 58 (a) 36
All Other 334 308 312 962 918
------ ------ ------ ------ ------
Total $ 700 $ 685 $ 652 $2,076 $1,963
====== ====== ====== ====== ======
(a) Includes minority interest related to the Series A Preferred Shares of $11
million in each of the third, second and first quarters of 1997.
9
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN MILLIONS)
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
--------- ---------
ASSETS
Cash and Due from Banks $ 14,367 $ 13,729
Deposits with Banks 4,152 4,433
Federal Funds Sold and Securities Purchased Under Resale Agreements 38,958 26,586
Trading Assets:
Debt and Equity Instruments 42,456 32,952
Risk Management Instruments 33,296 (a) 26,883
Securities:
Available-for-Sale 43,987 42,477
Held-to-Maturity 3,254 3,956
Loans (Net of Allowance for Loan Losses of $3,462 in 1997 and $3,697 in 1996) 159,625 (a) 146,636
Premises and Equipment 3,733 3,636
Due from Customers on Acceptances 2,226 2,789
Accrued Interest Receivable 3,685 2,828
Other Assets 16,835 15,699
--------- ---------
TOTAL ASSETS $ 366,574 $ 322,604
========= =========
LIABILITIES
Deposits:
Domestic:
Noninterest-Bearing $ 39,131 $ 37,382
Interest-Bearing 69,587 64,374
Foreign:
Noninterest-Bearing 3,777 3,591
Interest-Bearing 69,293 59,695
--------- ---------
Total Deposits 181,788 165,042
Federal Funds Purchased and Securities Sold Under Repurchase Agreements 65,453 57,533
Commercial Paper 4,584 5,115
Other Borrowed Funds 7,085 12,509
Acceptances Outstanding 2,226 2,776
Trading Liabilities 53,498 32,972
Accounts Payable, Accrued Expenses and Other Liabilities 14,935 (a) 12,588
Long-Term Debt 13,899 12,379
Guaranteed Preferred Beneficial Interests in Corporation's
Junior Subordinated Deferrable Interest Debentures 1,390 (b) --
--------- ---------
TOTAL LIABILITIES 344,858 300,914
--------- ---------
PREFERRED STOCK OF SUBSIDIARY 550 550
--------- ---------
STOCKHOLDERS' EQUITY
Preferred Stock 1,740 2,650
Common Stock 441 440
Capital Surplus 10,357 10,444
Retained Earnings 10,526 8,091
Net Unrealized Gain (Loss) on Securities Available-for-Sale,
Net of Taxes 126 (480)
Treasury Stock, at Cost (2,024) (5)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 21,166 21,140
--------- ---------
TOTAL LIABILITIES, PREFERRED STOCK OF SUBSIDIARY
AND STOCKHOLDERS' EQUITY $ 366,574 $ 322,604
========= =========
(a) In accordance with a recently issued accounting pronouncement, the allowance
for credit losses has been allocated into three components: a $3,462 million
allowance for loan losses, which is reported net in Loans; an allowance for
credit losses on derivative and foreign exchange financial instruments of
$75 million, which is reported net in Trading Assets Risk Management
Instruments; and an allowance for credit losses on letters of credit and
guarantees of $170 million, which is reported in Other Liabilities. Prior
period amounts have not been reclassified due to immateriality.
(b) Reflects issuances, by subsidiaries of the Corporation, in the fourth
quarter 1996 and first quarter 1997 of Capital Securities which qualify as
Tier l Capital for the Corporation.
10
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
(IN MILLIONS)
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1996
-------- --------
PREFERRED STOCK:
Balance at Beginning of Year $ 2,650 $ 2,650
Redemption of Stock (910) --
-------- --------
Balance at End of Period $ 1,740 $ 2,650
-------- --------
COMMON STOCK:
Balance at Beginning of Year $ 441 $ 458
Retirement of Treasury Stock -- (20)
Issuance of Common Stock -- 2
-------- --------
Balance at End of Period $ 441 $ 440
-------- --------
CAPITAL SURPLUS:
Balance at Beginning of Year $ 10,459 $ 11,075
Retirement of Treasury Stock -- (433)
Shares Issued for Employee Stock-Based
Awards and Certain Related Tax Benefits (102) (198)
-------- --------
Balance at End of Period $ 10,357 $ 10,444
-------- --------
RETAINED EARNINGS:
Balance at Beginning of Year $ 8,627 $ 7,997
Net Income 2,834 1,625
Retirement of Treasury Stock -- (557)
Cash Dividends Declared:
Preferred Stock (147) (164)
Common Stock (789) (818) (a)
Accumulated Translation Adjustment 1 8
-------- --------
Balance at End of Period $ 10,526 $ 8,091
-------- --------
NET UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE-FOR-SALE:
Balance at Beginning of Year $ (288) $ (237)
Net Change in Fair Value of Securities Available-for-Sale,
Net of Taxes 414 (243)
-------- --------
Balance at End of Period $ 126 $ (480)
-------- --------
COMMON STOCK IN TREASURY, AT COST:
Balance at Beginning of Year $ (895) $ (1,107)
Retirement of Treasury Stock -- 1,010
Purchase of Treasury Stock (2,036) (1,007)
Reissuance of Treasury Stock 907 1,099
-------- --------
Balance at End of Period $ (2,024) $ (5)
-------- --------
TOTAL STOCKHOLDERS' EQUITY $ 21,166 $ 21,140
======== ========
(a) Includes fourth quarter 1995 common stock dividends of $80 million declared
and paid by old Chase in the 1996 first quarter.
11
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
CREDIT RELATED INFORMATION
(IN MILLIONS)
LOANS OUTSTANDING NONPERFORMING ASSETS
-------------------- --------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
-------- -------- -------- --------
Domestic Commercial:
Commercial Real Estate $ 6,555 $ 6,078 $ 119 $ 430
Other Commercial 43,908 38,368 310 459
-------- -------- -------- --------
Total Commercial Loans 50,463 44,446 429 889
-------- -------- -------- --------
Domestic Consumer:
Residential Mortgage 38,730 35,672 324 269
Credit Card 11,618 12,600 -- --
Other Consumer 21,712 22,176 32 28
-------- -------- -------- --------
Total Consumer Loans 72,060 70,448 356 297
-------- -------- -------- --------
Total Domestic Loans 122,523 114,894 785 1,186
Foreign 40,564 35,439 146 184
-------- -------- -------- --------
Total Loans $163,087 $150,333 931 1,370
======== ========
Assets Acquired as Loan Satisfactions 105 147
-------- --------
Total Nonperforming Assets $ 1,036 $ 1,517
======== ========
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- ---------------
1997 1996 1997 1996
----- ----- ----- -----
Net Charge-Offs:
Domestic Commercial:
Commercial Real Estate $ (13) $ 6 $ (23) $ 32
Other Commercial 14 (4) 32 90
----- ----- ----- -----
Total Commercial 1 2 9 122
----- ----- ----- -----
Domestic Consumer:
Residential Mortgage 8 7 21 22
Credit Card 132 152 403 462
Other Consumer 56 51 171 128
----- ----- ----- -----
Total Consumer 196 210 595 612
----- ----- ----- -----
Total Domestic Net Charge-offs 197 212 604 734
Foreign (7) 8 (5) (19)
----- ----- ----- -----
Subtotal Net Charge-offs 190 220 599 715
Charge Related to Conforming Credit Card
Charge-off Policies -- -- -- 102
----- ----- ----- -----
Total Net Charge-offs $ 190 $ 220 $ 599 $ 817
===== ===== ===== =====
12
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
CREDIT CARD RELATED INFORMATION
(IN MILLIONS, EXCEPT RATIOS)
AS OF OR FOR THE AS OF OR FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
MANAGED CREDIT CARD PORTFOLIO:
Average Managed Credit Card Receivables $27,089 $23,936 $25,996 $23,457
Past Due 90 Days & Over and Accruing $ 523 $ 469 $ 523 $ 469
As a Percentage of Average Credit Card Receivables 1.93% 1.96% 2.01% 2.00%
Net Charge-offs (a) $ 378 $ 296 $ 1,119 $ 845
As a Percentage of Average Credit Card Receivables 5.57% 4.95% 5.74% 4.80%
(a) Excludes charges related to conforming credit card charge-off policies.
FAVORABLE (UNFAVORABLE) IMPACT OF CREDIT CARD THREE MONTHS ENDED NINE MONTHS ENDED
SECURITIZATIONS ON REPORTED CONSOLIDATED SEPTEMBER 30, SEPTEMBER 30,
STATEMENT OF INCOME LINE ITEMS: --------------- ---------------
1997 1996 1997 1996
----- ----- ----- -----
Net Interest Income $(319) $(244) $(913) $(639)
Provision for Credit Losses 249 148 730 409
Credit Card Revenue 58 95 152 217
Other Revenue (7) -- (9) 11
----- ----- ----- -----
Pre-tax Income (Loss) Impact of Securitizations $ (19) $ (1) $ (40) $ (2)
===== ===== ===== =====
13
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
CONDENSED AVERAGE CONSOLIDATED BALANCE SHEET, INTEREST AND RATES
(TAXABLE-EQUIVALENT INTEREST AND RATES; IN MILLIONS)
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
----------------------------------------- -----------------------------------------
AVERAGE RATE AVERAGE RATE
BALANCE INTEREST (ANNUALIZED) BALANCE INTEREST (ANNUALIZED)
------- -------- ------------ ------- -------- ------------
ASSETS
Liquid Interest-Earning
Assets $83,332 $1,504 7.16% $70,864 $1,143 6.42%
Securities 45,038 725 6.38% 42,478 694 6.50%
Loans 161,247 3,273 8.06% 150,076 3,045 8.07%
------- ----- ------- -----
Total Interest-Earning
Assets 289,617 5,502 7.54% 263,418 4,882 7.37%
Total Noninterest-Earning
Assets 70,697 59,495
------ ------
Total Assets $360,314 $322,913
======== ========
LIABILITIES
Total Interest-Bearing
Deposits $139,091 1,714 4.89% $125,179 1,416 4.50%
Total Short-Term and
Other Borrowings 93,693 1,451 6.14% 83,917 1,213 5.75%
Long-Term Debt 14,552 284 7.75% 12,454 220 7.05%
------ --- ------ ---
Total Interest-Bearing
Liabilities 247,336 3,449 5.53% 221,550 2,849 5.12%
----- -----
Noninterest-Bearing
Deposits 41,935 41,628
Other Noninterest-Bearing
Liabilities 49,493 39,162
------ ------
Total Liabilities 338,764 302,340
------- -------
PREFERRED STOCK OF
SUBSIDIARY 550 78
--- --
STOCKHOLDERS' EQUITY
Preferred Stock 1,977 2,650
Common Stockholders'
Equity 19,023 17,845
------ ------
Total Stockholders'
Equity 21,000 20,495
------ ------
Total Liabilities
and Stockholders' Equity $360,314 $322,913
======== ========
INTEREST RATE SPREAD 2.01% 2.25%
===== =====
NET INTEREST INCOME AND
NET YIELD ON INTEREST-
EARNING ASSETS $2,053 2.81% $2,033 3.07%
====== ===== ====== =====
NET INTEREST INCOME AND
NET YIELD ON INTEREST-
EARNING ASSETS -
MANAGED BASIS (a) $2,372 3.09% $2,277 3.29%
====== ===== ====== =====
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
----------------------------------------- -------------------------------------------
AVERAGE RATE AVERAGE RATE
BALANCE INTEREST (ANNUALIZED) BALANCE INTEREST (ANNUALIZED)
------- -------- ------------ ------- -------- ------------
ASSETS
Liquid Interest-Earning
Assets $79,828 $4,311 7.22% $65,733 $3,287 6.68%
Securities 44,329 2,190 6.61% 42,574 2,110 6.62%
Loans 156,942 9,471 8.07% 150,107 9,320 8.29%
------- ----- ------- -----
Total Interest-Earning
Assets 281,099 15,972 7.60% 258,414 14,717 7.61%
Total Noninterest-Earning
Assets 68,470 59,410
------ ------
Total Assets $349,569 $317,824
======== ========
LIABILITIES
Total Interest-Bearing
Deposits $135,332 4,797 4.74% $129,878 4,518 4.65%
Total Short-Term and
Other Borrowings 89,048 4,263 6.40% 74,710 3,326 5.95%
Long-Term Debt 14,040 814 7.75% 12,781 668 6.98%
------ --- ------ ---
Total Interest-Bearing
Liabilities 238,420 9,874 5.54% 217,369 8,512 5.23%
----- -----
Noninterest-Bearing
Deposits 41,302 39,150
Other Noninterest-Bearing
Liabilities 48,343 40,867
------ ------
Total Liabilities 328,065 297,386
------- -------
PREFERRED STOCK OF
SUBSIDIARY 550 26
--- --
STOCKHOLDERS' EQUITY
Preferred Stock 2,371 2,650
Common Stockholders'
Equity 18,583 17,762
------ ------
Total Stockholders'
Equity 20,954 20,412
------ ------
Total Liabilities
and Stockholders' Equity $349,569 $317,824
======== ========
INTEREST RATE SPREAD 2.06% 2.38%
===== =====
NET INTEREST INCOME AND
NET YIELD ON INTEREST-
EARNING ASSETS $6,098 2.90% $6,205 3.21%
====== ===== ====== =====
NET INTEREST INCOME AND
NET YIELD ON INTEREST-
EARNING ASSETS - MANAGED
BASIS (a) $7,011 3.18% $6,844 3.40%
====== ===== ====== =====
(a) Excludes the impact of the credit card securitizations.
14
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
LINES OF BUSINESS RESULTS
(IN MILLIONS, EXCEPT RATIOS)
GLOBAL REGIONAL AND NATIONWIDE
THREE MONTHS ENDED WHOLESALE BANKING CONSUMER BANKING TOTAL (a)
--------------------- ---------------------- ---------------------
SEPTEMBER 30, 1997 1996 1997 1996 1997 1996
- ------------------------------ -------- -------- -------- -------- -------- --------
REVENUES $ 2,495 $ 2,036 $ 2,254 $ 2,069 $ 4,409 $ 3,925
OPERATING NET INCOME 736 491 387 347 1,027 878
AVERAGE COMMON EQUITY 9,884 9,535 6,601 6,483 19,023 17,845
AVERAGE ASSETS 248,181 217,921 122,241 114,417 360,314 322,913
RETURN ON COMMON EQUITY (ROCE) 28.7% 19.3% 22.4% 20.0% 20.6% 18.4%
EFFICIENCY RATIO 50% 57% 51% 55% 59% 58%
GLOBAL WHOLESALE BANKING
KEY FINANCIAL MEASURES
1997 1996
-------------------------------------- ----------------------------------------
THREE MONTHS ENDED NET EFFICIENCY NET EFFICIENCY
SEPTEMBER 30, REVENUE INCOME ROCE RATIO REVENUE INCOME ROCE RATIO
- --------------------- ------- ------ ----- ---------- ------- ------ ----- ----------
GLOBAL INVESTMENT BANKING
AND CORPORATE LENDING $ 577 $ 177 19.5% 40% $ 577 $ 181 20.2% 38%
GLOBAL MARKETS 869 287 44.9 48 684 217 37.7 51
CHASE CAPITAL PARTNERS 220 123 35.1 12 69 33 10.5 24
GLOBAL ASSET MANAGEMENT
AND PRIVATE BANKING 199 43 42.5 64 163 27 22.1 71
GLOBAL SERVICES 558 103 42.0 70 496 64 22.9 79
TERMINAL BUSINESSES (b) 25 -- NM NM 1 (20) NM NM
REGIONAL AND NATIONWIDE CONSUMER BANKING
KEY FINANCIAL MEASURES
1997 1996
------------------------------------------ -------------------------------------------
THREE MONTHS ENDED NET EFFICIENCY NET EFFICIENCY
SEPTEMBER 30, REVENUE INCOME ROCE RATIO REVENUE INCOME ROCE RATIO
- -------------------------- ------- ------ ---- ---------- ------- ------ ---- ----------
CREDIT CARDS $778 $ 86 18.5% 34% $674 $ 81 21.7% 37%
RETAIL PAYMENTS AND
INVESTMENTS (c) 519 82 30.0 72 509 68 24.5 76
MIDDLE MARKET 209 52 23.8 49 204 46 16.7 53
MORTGAGE BANKING 194 51 19.2 53 168 35 10.6 60
NATIONAL CONSUMER FINANCE 163 32 27.8 40 144 31 26.1 43
INTERNATIONAL CONSUMER 65 12 61.2 67 64 15 77.6 58
TEXAS COMMERCE 348 84 22.6 59 314 72 20.3 62
(a) Total column includes Corporate results.
(b) Represents discontinued portfolios, primarily the remaining refinancing
country debt and commercial real estate problem asset and nonperforming
portfolio.
(c) Insurance products managed within Retail Payments and Investments, but
included for reporting purposes in Credit Cards, Mortgage Banking, and
National Consumer Finance, generated revenues of $24 million and $20 million
in 1997 and 1996, respectively.
NM - Not meaningful
15
THE CHASE MANHATTAN CORPORATION AND SUBSIDIARIES
LINES OF BUSINESS RESULTS
(IN MILLIONS, EXCEPT RATIOS)
GLOBAL REGIONAL AND NATIONWIDE
WHOLESALE BANKING CONSUMER BANKING TOTAL (a)
----------------------- ------------------------ ------------------------
NINE MONTHS ENDED
SEPTEMBER 30, 1997 1996 1997 1996 1997 1996
- --------------------- -------- -------- -------- -------- -------- --------
REVENUES $ 7,133 $ 6,388 $ 6,590 $ 6,112 $ 12,699 $ 11,920
OPERATING NET INCOME 2,078 1,656 1,054 1,019 2,942 2,615
AVERAGE COMMON EQUITY 9,539 9,619 6,582 6,452 18,583 17,762
AVERAGE ASSETS 240,882 215,931 119,968 112,266 349,569 317,824
RETURN ON COMMON EQUITY (ROCE) 28.1% 21.8% 20.4% 19.9% 20.1% 18.4%
EFFICIENCY RATIO 51% 55% 53% 56% 58% 59%
GLOBAL WHOLESALE BANKING
KEY FINANCIAL MEASURES
1997 1996
------------------------------------------------- -----------------------------------------------
NINE MONTHS ENDED NET EFFICIENCY NET EFFICIENCY
SEPTEMBER 30, REVENUE INCOME ROCE RATIO REVENUE INCOME ROCE RATIO
- --------------------- ------- ------ ---- ---------- ------- ------ ---- ----------
GLOBAL INVESTMENT BANKING
AND CORPORATE LENDING $1,614 $ 491 18.2% 39% $1,676 $ 535 19.9% 37%
GLOBAL MARKETS 2,590 898 52.5 46 1,985 595 33.6 54
CHASE CAPITAL PARTNERS 532 292 33.2 13 529 300 36.6 9
GLOBAL ASSET MANAGEMENT
AND PRIVATE BANKING 552 110 32.9 67 499 87 24.1 69
GLOBAL SERVICES 1,593 262 33.0 73 1,459 189 22.6 79
TERMINAL BUSINESSES (b) 51 (20) NM NM 30 (40) NM NM
REGIONAL AND NATIONWIDE CONSUMER BANKING
KEY FINANCIAL MEASURES
1997 1996
------------------------------------------------- -----------------------------------------------
NINE MONTHS ENDED NET EFFICIENCY NET EFFICIENCY
SEPTEMBER 30, REVENUE INCOME ROCE RATIO REVENUE INCOME ROCE RATIO
- --------------------- ------- ------ ---- ---------- ------- ------ ---- ----------
CREDIT CARDS $2,228 $ 180 14.9% 37% $1,949 $ 224 19.9% 39%
RETAIL PAYMENTS AND
INVESTMENTS (c) 1,548 241 29.2 73 1,514 212 25.9 75
MIDDLE MARKET 632 162 21.6 48 620 142 17.6 52
MORTGAGE BANKING 566 143 16.1 54 492 84 8.5 66
NATIONAL CONSUMER FINANCE 480 87 25.2 41 447 101 29.4 42
INTERNATIONAL CONSUMER 195 41 71.4 62 188 44 76.9 59
TEXAS COMMERCE 993 222 19.9 61 925 204 19.2 63
(a) Total column includes Corporate results.
(b) Represents discontinued portfolios, primarily the remaining refinancing
country debt and commercial real estate problem asset and nonperforming
portfolio.
(c) Insurance products managed within Retail Payments and Investments, but
included for reporting purposes in Credit Cards, Mortgage Banking, and
National Consumer Finance, generated revenues of $74 million and $55 million
in 1997 and 1996, respectively.
NM - Not meaningful
1
EXHIBIT 99.2
THE CHASE MANHATTAN CORPORATION
270 Park Avenue
New York, NY 10017-2070
NEWS RELEASE
For Immediate Release Press Contacts: Ken Herz
212-270-4621
John Stefans
212-270-7438
Investor Contact: John Borden
212-270-7318
CHASE TO ACQUIRE BANK OF NEW YORK'S CREDIT CARD PORTFOLIO
New York, October 21, 1997 -- The Chase Manhattan Corporation
(NYSE:CMB) said today that it has agreed to purchase substantially all of The
Bank of New York's credit card portfolio, totaling approximately 3.5 million
accounts and approximately $4 billion in outstandings.
The purchase will exclude The Bank of New York's late cycle delinquent
and bankrupt accounts. The agreement will afford The Bank of New York the
ability to offer credit cards to its customers through an agent program with
Chase. Chase said that it expects to offer employment to the majority of The
Bank of New York's credit card employees in Newark, Delaware.
The acquisition, expected to be completed by year-end, will increase
Chase's portfolio to more than 20 million accounts and more than $30 billion in
outstandings and expand Chase's consumer banking customer base to nearly 30
million individuals and households coast to coast.
"The purchase demonstrates our commitment to the credit card business,"
said Donald L. Boudreau, vice chairman for nationwide consumer credit. "It is
also consistent with our view that ongoing consolidation within the card
industry provides attractive opportunities to grow through economically sound
acquisitions that allow us to take advantage of our existing scale and
technology platforms."
Chase presently ranks as the fourth largest bank card issuer in the
United States. Its joint venture with First Data Corporation is the largest
merchant processor in the U.S.
The Chase Manhattan Corporation is the nation's largest banking
company, with $352 billion in assets, offices in 39 states and a market
capitalization of approximately $50 billion. All told, Chase's integrated global
financial services business encompasses operations in 52 countries and customers
in more than 200.
###
