SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report October 17, 2001 Commission file number 1-5805 ---------------- ---- J.P. MORGAN CHASE & CO. ----------------------- (Exact name of registrant as specified in its charter) Delaware 13-2624428 ------------------------------- -------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 270 Park Avenue, New York, New York 10017 ----------------------------------------- --------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 270-6000 --------------
Item 5. Other Events --------------------- J.P. Morgan Chase & Co. (NYSE: JPM) announced third quarter 2001 operating earnings per share of $0.51, compared with $0.33 in the second quarter of 2001 and $0.70 in the third quarter of 2000. Operating income was $1,036 million in the 2001 third quarter, compared to $690 million in the second quarter of 2001 and $1,419 million one year ago. Reported net income, which includes merger and restructuring costs, was $449 million, or $0.22 per share, in the third quarter of 2001. This compares with $378 million, or $0.18 per share, in the second quarter of 2001 and $1,398 million, or $0.69 per share, in the third quarter of 2000. The press release contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of JPMorgan Chase's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These uncertainties include the risk that the tragic events of September 11, 2001 and their aftermath will have an adverse effect upon markets and businesses in general and exacerbate the other risks and uncertainties that could cause our results to differ materially from such forward looking statements. Such other risks and uncertainties are described in the 2000 Annual Report on Form 10-K of J.P. Morgan Chase & Co., filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission's internet site (http://www.sec.gov), to which reference is hereby made. -2-
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. J.P. MORGAN CHASE & CO. ----------------------------- (Registrant) Date October 19, 2001 By /s/ Joseph L. Sclafani ---------------- ---------------------------- Joseph L. Sclafani Executive Vice President and Controller [Principal Accounting Officer] -3-
EXHIBIT INDEX Exhibit No. Description Page ----------- ----------- ---- 12 (a) Computation of Ratio of Earnings to Fixed Charges 5 12 (b) Computation of Ratio of Earnings to Fixed Charges and Preferred Stock 6 Dividend Requirements 99.1 Press Release - 2001 Third Quarter Earnings 7 99.2 Press Release - 2001 Third Quarter Financial Supplement 8 -4-
EXHIBIT 12(a) J.P. MORGAN CHASE & CO. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (IN MILLIONS, EXCEPT RATIOS) NINE MONTHS ENDED SEPTEMBER 30, 2001 ------------------ EXCLUDING INTEREST ON DEPOSITS ------------------------------ Income before income taxes and effect of accounting change $ 3,134 ----------- Fixed charges: Interest expense 10,922 One-third of rents, net of income from subleases (a) 169 ----------- Total fixed charges 11,091 ----------- Less: Equity in undistributed income of affiliates (86) Earnings before taxes, effect of accounting change and fixed charges, excluding capitalized interest $ 14,139 =========== Fixed charges, as above $ 11,091 =========== Ratio of earnings to fixed charges 1.27 =========== INCLUDING INTEREST ON DEPOSITS ------------------------------ Fixed charges, as above $ 11,091 Add: Interest on deposits 6,578 ----------- Total fixed charges and interest on deposits $ 17,669 =========== Earnings before taxes, effect of accounting change and fixed charges, excluding capitalized interest, as above $ 14,139 Add: Interest on deposits 6,578 ----------- Total earnings before taxes, effect of accounting change, fixed charges and interest on deposits $ 20,717 =========== Ratio of earnings to fixed charges 1.17 =========== --------------------------------------------------------------------------------------------------------------------- (a) The proportion deemed representative of the interest factor.
EXHIBIT 12(b) J.P. MORGAN CHASE & CO. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS (IN MILLIONS, EXCEPT RATIOS) NINE MONTHS ENDED SEPTEMBER 30, 2001 ------------------ EXCLUDING INTEREST ON DEPOSITS ------------------------------ Income before income taxes and effect of accounting change $ 3,134 ----------- Fixed charges: Interest expense 10,922 One-third of rents, net of income from subleases (a) 169 ----------- Total fixed charges 11,091 ----------- Less: Equity in undistributed income of affiliates (86) ----------- Earnings before taxes, effect of accounting change and fixed charges, excluding capitalized interest $ 14,139 =========== Fixed charges, as above $ 11,091 Preferred stock dividends 53 ----------- Fixed charges including preferred stock dividends $ 11,144 =========== Ratio of earnings to fixed charges and preferred stock dividend requirements 1.27 =========== INCLUDING INTEREST ON DEPOSITS ------------------------------ Fixed charges including preferred stock dividends, as above $ 11,144 Add: Interest on deposits 6,578 ----------- Total fixed charges including preferred stock dividends and interest on deposits $ 17,722 =========== Earnings before taxes, effect of accounting change and fixed charges, excluding capitalized interest, as above $ 14,139 Add: Interest on deposits 6,578 ----------- Total earnings before taxes, effect of accounting change, fixed charges and interest on deposits $ 20,717 =========== Ratio of earnings to fixed charges and preferred stock dividend requirements 1.17 =========== --------------------------------------------------------------------------------------------------------------------- (a) The proportion deemed representative of the interest factor.
J.P. Morgan Chase & Co. [J.P. MORGAN CHASE & CO. LOGO] 270 Park Avenue, New York, NY 10017-2070 NYSE symbol: JPM www.jpmorganchase.com -------------------------------------------------------------------------------- News release: IMMEDIATE RELEASE JPMORGAN CHASE REPORTS THIRD QUARTER 2001 RESULTS NEW YORK, OCTOBER 17, 2001 - J.P. Morgan Chase & Co. (NYSE: JPM) today announced third quarter 2001 operating earnings per share of $0.51, compared with $0.33 in the second quarter of 2001 and $0.70 in the third quarter of 2000. Operating income was $1,036 million in the 2001 third quarter, compared to $690 million in the second quarter of 2001 and $1,419 million one year ago. The contribution to operating earnings per share of JPMorgan Partners, the company's private equity unit, was a loss of $0.08 in the third quarter, compared to a $0.31 loss in the second quarter and a loss of $0.07 in the third quarter of 2000. Excluding the results of JPMorgan Partners, operating earnings per share were $0.59 in the quarter. This compares with $0.64 in the second quarter of 2001 and $0.77 in the third quarter of 2000. Reported net income, which includes merger and restructuring costs, was $449 million, or $0.22 per share, in the third quarter of 2001. This compares with $378 million, or $0.18 per share, in the second quarter of 2001 and $1,398 million, or $0.69 per share, in the third quarter of 2000. Annual savings associated with merger and restructuring activities are currently projected to be $3.6 billion, compared with an original projection of $2.0 billion at the time of the merger. Savings in 2001 are estimated at $1.8 billion with approximately 90% of the total savings of $3.6 billion expected to be realized by the end of 2002. The current estimate for total merger and other restructuring costs is now $4.3 billion, $1.1 billion higher than originally estimated. "Overshadowing this quarter were the tragic events of September 11, " said William B. Harrison, Jr., President and Chief Executive Officer. "Our attention has been focused on the impact of these events on our clients, our employees and our community. In this challenging environment, we think the best strategy is a tight focus on controlling risk and expenses. As the markets return to a more normal environment, our strategic platform will provide significant positive operating leverage." -------------------------------------------------------------------------------- Investor Contact: John Borden Media Contact: Jon Diat (212)270-7318 (212) 270-5089
J.P. Morgan Chase & Co. News Release HIGHLIGHTS FOR THE THIRD QUARTER 2001 - Cash operating expenses declined by 4% from the prior quarter and by 7% from the third quarter of 2000, including Flemings on a pro-forma basis. - Trading revenues reflected a strong performance in fixed income and other trading activities offset by a significant decline in equity trading. - We maintained important product leadership positions in leveraged and syndicated lending and U.S. high-grade bonds while increasing market share in announced M&A transactions from last quarter. - Our leadership positions in risk management were recently highlighted by Risk magazine's annual global derivative rankings, which placed JPMorgan #1 in 10 out of the 14 derivative categories. - Charge-offs and nonperforming assets did not increase significantly from the previous quarter; however, given the weaker economic outlook, we increased the allowance for possible credit losses by charging earnings $200 million in excess of net charge-offs. - Retail & Middle Market Financial Services and Treasury & Securities Services produced cash operating ROE of 20% and 25%, respectively. BUSINESS SEGMENT RESULTS (All comparisons to periods in 2000 are on a pro forma basis, which assumes that the purchase of Flemings occurred at the beginning of that year). THE INVESTMENT BANK'S operating revenues were $3.60 billion in the third quarter of 2001, a decline of 4% from the second quarter and a decline of 10% from the third quarter of 2000. Cash operating expenses of $2.18 billion were down by 7% from the second quarter and 15% from the third quarter of 2000. The decline in expenses was spread across all expense categories and reflects merger synergies and expense management initiatives. These initiatives resulted in stable operating margins despite difficult market conditions, as the overhead ratio for the quarter was 61%. By year-end we are expecting to have eliminated approximately 6,000 positions in the Investment Bank since the merger announcement date. Investment banking trading revenues (including related net interest income) of $1.52 billion declined by 6% from the second quarter and by 3% from the third quarter of 2000. Overall trading was only marginally down, as our fixed income and other trading activities generated higher revenues compared to the prior periods while equity trading was down reflecting market conditions. In addition, due to heightened market activity in September we saw a greater demand for our market-making services across a broad range of products. Investment banking fees totaled $807 million in the third quarter, declining 12% from the second quarter and 24% from the third quarter of 2000. High grade bond underwriting continued to generate strong results, although results were lower than the record level in the second quarter. The continued weak equity market conditions resulted in lower equity underwriting fees. Advisory revenues in the third quarter were up 9% from the second quarter, but down 28% from the third quarter of 2000. 2
J.P. Morgan Chase & Co. News Release During the first nine months of 2001, important product leadership positions were maintained in leveraged and syndicated lending (#1) and U.S. high grade bonds (#2)(1). In addition, we increased our market share of global announced M&A transactions to 21% for the first nine months of 2001 from 18% in 2000.(2) See the press release financial supplement exhibit. Fees and commissions of $390 million in the third quarter declined by 2% from the second quarter and by 12% from the third quarter of 2000. In each instance, the declines reflected lower equity brokerage commissions. The Investment Bank's cash operating earnings totaled $710 million in the third quarter, a 10% decline from the second quarter and a 19% reduction from the third quarter of 2000. Earnings declines were affected negatively by higher credit costs, including $140 million in provisions in excess of charge-offs. For the first nine months of 2001, the Investments Bank's cash overhead ratio was 61%, and cash ROE was 18%. INVESTMENT MANAGEMENT & PRIVATE BANKING had operating revenues of $733 million in the third quarter, an 8% decline from the second quarter and a 23% decline from the third quarter of 2000. The decline from last year was primarily a result of lower assets under management and associated lower management fees as a result of market conditions. Revenues from commissions and spreads were also down from last quarter and from a year ago. Total assets under management (excluding our 45% stake in American Century Companies Inc.) of $584 billion were 10% lower than a year ago and 4% lower than last quarter. Net flows for the quarter were positive, led by significant increases in cash and money markets assets. Cash operating expenses of $574 million dropped 11% from last quarter and 19% from the third quarter of 2000 driven by lower compensation expense. We are expecting a reduction by year-end 2001 of 1,500 positions within IM & PB since the merger announcement date. The reduction in cash expenses in the third quarter resulted in improvement in the pre-tax margin from 19% in the second quarter to 21% this quarter. Cash operating earnings were down 2% and 29% from last quarter and last year, respectively. JPMORGAN PARTNERS had private equity losses of $103 million in the third quarter, compared to losses of $826 million in the second quarter and $20 million in the third quarter of 2000. Third quarter losses included $306 million in unrealized losses, primarily related to mark-to-market losses taken on public positions during the quarter, partially offset by net realized gains of $203 million. Third quarter realized gains include investment returns from both direct and third party fund investments - especially in the energy sector. ---------- (1) Derived from Thomson Financial Securities Data, based on proceeds (2) Thomson Financial Securities Data 3
J.P. Morgan Chase & Co. News Release RETAIL & MIDDLE MARKET FINANCIAL SERVICES operating revenues were $2.78 billion, increasing by 4% and 6% from the second quarter of 2001 and the third quarter of 2000, respectively. The growth reflected higher production in home and auto financing, growth in managed credit card outstandings and higher deposit volumes in retail and middle market banking. These increases were partially offset by the impact of lower rates on deposit spreads and mortgage servicing prepayments. Cash operating expenses increased by 2% from the prior quarter and 6% from the third quarter of last year reflecting higher production volumes. Cash operating earnings of $439 million for the third quarter were down 3% from the second quarter and 15% from the record third quarter 2000 due to higher net charge-offs and a $60 million provision in excess of charge-offs. Cash ROE for the third quarter was 20% and for year to date was 21%. Mortgage and auto originations totaled $47.0 billion and a record $5.2 billion, respectively, in the third quarter. Mortgage originations were down 13% from record second quarter levels but grew by 132% from the third quarter of 2000. Credit card related outstandings grew more than 14%, to over $39 billion, from one year ago. The deposit businesses within regional banking and middle market were negatively affected by the lower rate environment, but both have posted deposit growth compared to the third quarter of 2000 of 4% and 6%, respectively. TREASURY & SECURITIES SERVICES operating revenues were $917 million in the third quarter of 2001, essentially flat with the second quarter of 2001 and an increase of 3% from the third quarter of 2000. Operating revenues for Treasury Services increased by 3% from the second quarter and by 7% from the prior year reflecting higher product revenues in the U.S. and Europe that offset the negative effect of declining short-term interest rates on deposits. Institutional Trust revenues increased 12% when compared with the third quarter of 2000 driven by good volumes in debt markets as well as the impact of acquisitions. Investor Services operating revenues were virtually flat when compared with the second quarter of 2001, but declined 3% from the third quarter of 2000, reflecting lower asset based fees, lower foreign exchange revenue and lower spreads on deposits. Operating expenses declined 3% from the second quarter of 2001 but increased 6% from the third quarter of 2000. The combination of modest revenue growth and improved expense control resulted in a 9% improvement in cash operating earnings from the second quarter. Cash operating earnings declined 1% from the third quarter of 2000. Cash ROE was 25% in the third quarter of 2001 and 24% year to date. EXPENSES Total cash operating noninterest expense was $4.88 billion, a 4% decline from the second quarter of 2001 and a 7% decline from the third quarter of 2000 (pro forma for Flemings). Areas affected by the merger have experienced declines greater than 4% and 7%, respectively; these declines were partially offset by expense growth in non-merger areas. The expense reductions reflect acceleration of merger execution and a response to the weaker market environment. By year-end 2001, we expect 4
J.P. Morgan Chase & Co. News Release that over 7,500 positions will have been eliminated since the merger announcement date in areas affected by the merger. Amortization of intangibles was $182 million in the third quarter of 2001 compared to $183 million in the second quarter and $157 million one year ago. Amortization of intangibles was $0.09 per share in the third quarter of 2001, $0.09 per share in the second quarter, and $0.08 per share one year ago. CREDIT COSTS COMMERCIAL net charge-offs in the third quarter of 2001 were $189 million, compared to $212 million in the second quarter and $83 million in the third quarter of 2000. Net charge-offs in the third quarter related to both U.S. and foreign commercial and industrial loans. The charge-off ratio was 0.65% for the third quarter of 2001 and 0.64% year to date. CONSUMER charge-offs on a managed basis (i.e., including securitized assets) were $626 million, up from $586 million in the second quarter and $476 million in the third quarter of 2000. On a managed basis, the credit card net charge-off ratio was 5.64%, an increase from 5.54% in the second quarter and 4.99% in the third quarter of 2000. PROVISIONS in excess of charge-offs of $200 million were recorded in the third quarter. Based on our analysis of expected loss and other factors, $140 million of the provision related to the commercial portfolio and $60 million related to the consumer portfolio. We will continue to adjust our allowance as needed in response to changes in the economic environment. TOTAL NONPERFORMING ASSETS were $2.65 billion at September 30, 2001, compared to $2.50 billion and $1.94 billion at June 30, 2001 and September 30, 2000, respectively. TOTAL ASSETS AND CAPITAL Total assets as of September 30, 2001 were $799 billion, compared with $713 billion as of June 30, 2001 and $707 billion one year ago. Most of the increase from June 30 is related to settlement and clearing problems experienced by some of our counterparties in the last few weeks of the quarter, but these are expected to be temporary. Our Tier One capital ratio was 8.2% at September 30, 2001, as compared to 8.7% at June 30, 2001, and 8.1% one year ago. We repurchased approximately 19 million shares of common stock during the quarter pursuant to our authorized program. Our cost for these repurchases, net of stock issuance, was over $500 million. We announced last quarter that the Board had authorized the repurchase of up to $6 billion of common stock. OTHER FINANCIAL INFORMATION SPECIAL ITEMS in the third quarter of 2001 included $876 million (pre-tax) in merger and restructuring costs, including an additional $300 million related to the right-sizing of certain businesses beyond that planned at the time of the merger. Special items in the third quarter of 2000 5
J.P. Morgan Chase & Co. News Release included a $35 million loss resulting from the economic hedge of the purchase price of Flemings prior to its acquisition, $79 million in merger and restructuring costs and an $81 million gain from the sale of a business in Panama. ANNUALIZED CASH OPERATING RETURN ON COMMON EQUITY was 12% for the third quarter of 2001, 15% excluding the results of JPMorgan Partners. See the Financial Highlights exhibit for consolidated results on a cash basis. Results for all periods give effect to the merger of The Chase Manhattan Corporation and J.P. Morgan & Co. Incorporated on December 31, 2000. THE MERGER of The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York currently is scheduled to occur in November 2001. J.P. Morgan Chase & Co. is a leading global financial services firm with assets of $799 billion and operations in more than 50 countries. With relationships with over 99% of the Fortune 1000 companies, the firm is a leader in investment banking, asset management, private banking, private equity, custody and transaction services, retail and middle market financial services, and e-finance. A component of the Dow Jones Industrial Average, JPMorgan Chase is headquartered in New York and serves more than 30 million consumer customers and the world's most prominent corporate, institutional and government clients. Information about JPMorgan Chase is available on the internet at www.jpmorganchase.com. JPMorgan Chase will hold a presentation for the investment community on Wednesday, October 17, 2001 at 11:00 a.m. (Eastern Daylight Time) to review third quarter 2001 financial results. A live audio webcast of the presentation will be available on www.jpmorganchase.com. In addition, persons interested in listening to the presentation by telephone may dial in at (973) 321-1040. A telephone replay of the presentation will be available beginning at 1:30 p.m. (EDT) on October 17, 2001 and continuing through 6:00 p.m. (EDT) on October 23, 2001 at (973) 341-3080. The replay also will be available on www.jpmorganchase.com. A financial summary of our results follow. Additional detailed financial, statistical and business-related information is included in a financial supplement. Both the earnings release and the financial supplement are available on the JPMorgan Chase web site (www.jpmorganchase.com). This press release contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of JPMorgan Chase's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These uncertainties include the risk that the tragic events of September 11, 2001 and their aftermath will have an adverse effect upon markets and businesses in general and exacerbate the other risks and uncertainties that could cause our results to differ materially from such forward looking statements. Such other risks and uncertainties are described in the 2000 Annual Report on Form 10-K of J.P. Morgan Chase & Co., filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission's internet site (http://www.sec.gov), to which reference is hereby made. 6
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] CONSOLIDATED FINANCIAL HIGHLIGHTS (IN MILLIONS, EXCEPT PER SHARE AND RATIO DATA) --------------------------- 3QTR 2001 OVER (UNDER) 3QTR 2QTR 3QTR ----------------------- 2001 2001 2000 2Q 2001 3Q 2000 ------ ------- ------- --------- --------- OPERATING INCOME STATEMENT -------------------------- OPERATING REVENUE: Investment Banking Fees $ 811 $ 929 $ 1,013 (13) % (20) % Trading-Related Revenue (Including Trading NII) 1,614 1,594 1,632 1 (1) Fees and Commissions 2,231 2,350 2,314 (5) (4) Private Equity - Realized Gains (Losses) 204 (46) 656 NM (69) Private Equity - Unrealized Gains (Losses) (311) (783) (676) 60 54 Securities Gains 142 67 90 112 58 Other Revenue 203 274 365 (26) (44) Net Interest Income 2,725 2,759 2,519 (1) 8 ------- ------- ------- TOTAL OPERATING REVENUE 7,619 7,144 7,913 7 (4) OPERATING EXPENSE: Compensation Expense 2,883 3,052 3,135 (6) (8) Noncompensation Expense (a) 1,994 2,048 1,981 (3) 1 ------- ------- ------- TOTAL CASH EXPENSE 4,877 5,100 5,116 (4) (5) Credit Costs 1,015 798 534 27 90 ------- ------- ------- Cash Operating Income before Taxes 1,727 1,246 2,263 39 (24) Income Taxes 509 373 687 36 (26) ------- ------- ------- CASH OPERATING INCOME 1,218 873 1,576 40 (23) Less: Amortization of Intangibles 182 183 157 (1) 16 ------- ------- ------- OPERATING INCOME 1,036 690 1,419 50 (27) Restructuring/Merger Expenses & Special Items (587) (312) (21) 88 NM ------- ------- ------- NET INCOME $ 449 $ 378 $ 1,398 19 (68) ======= ======= ======= EARNINGS PER SHARE ------------------ Diluted Earnings per Share - Operating $ 0.51 $ 0.33 $ 0.70 55 (27) Diluted Earnings per Share - Operating (Excl. JPMP) 0.59 0.64 0.77 (8) (23) Diluted Earnings per Share - Net Income 0.22 0.18 0.69 22 (68) CASH OPERATING BASIS -------------------- Diluted Earnings per Share $ 0.60 $ 0.42 $ 0.78 43 (23) Shareholder Value Added (50) (394) 426 87 NM Return on Managed Assets 0.64 % 0.47 % 0.89 % 17 bp (25) bp Return on Common Equity 11.5 8.2 16.5 330 (500) Overhead Ratio 64 71 65 (700) (100) Compensation Expense as a % of Revenue 38 43 40 (500) (200) Noncompensation Expense as a % of Revenue 26 29 25 (300) 100 COMMON SHARES OUTSTANDING ------------------------- Basic Average Shares Outstanding 1,975.3 1,978.4 1,893.3 -- % 4 % Diluted Average Shares Outstanding 2,020.9 2,033.6 1,983.4 (1) 2 Common Shares Outstanding - at Period End 1,972.9 1,989.2 1,901.1 (1) 4 CASH DIVIDENDS DECLARED PER SHARE $ 0.34 $ 0.34 $ 0.32 -- 6 BOOK VALUE PER SHARE 21.15 20.81 20.98 2 1 COMMON DIVIDEND PAYOUT RATIO (C) 66 % 102 % 42 % (3,600) bp 2,400 bp CAPITAL RATIOS -------------- Tier I Capital Ratio 8.2 %(b) 8.7 % 8.1 % (50) bp 10 bp Total Capital Ratio 11.6 (b) 12.2 11.7 (60) (10) Tier I Leverage 5.3 (b) 5.4 5.6 (10) (30) --------------------------- ---------------- YTD 2001 YEAR TO DATE OVER (UNDER) ------------ ------------ 2001 2000 2000 -------- -------- ------------ OPERATING INCOME STATEMENT ------------------------- OPERATING REVENUE: Investment Banking Fees $ 2,681 $ 3,311 (19) % Trading-Related Revenue (Including Trading NII) 5,375 5,728 (6) Fees and Commissions 6,597 6,556 1 Private Equity - Realized Gains (Losses) 570 1,678 (66) Private Equity - Unrealized Gains (Losses) (1,379) (565) NM Securities Gains 664 111 NM Other Revenue 728 890 (18) Net Interest Income 8,021 7,509 7 -------- -------- TOTAL OPERATING REVENUE 23,257 25,218 (8) OPERATING EXPENSE: Compensation Expense 9,292 9,438 (2) Noncompensation Expense (a) 6,106 5,871 4 -------- -------- TOTAL CASH EXPENSE 15,398 15,309 1 Credit Costs 2,501 1,700 47 -------- -------- Cash Operating Income before Taxes 5,358 8,209 (35) Income Taxes 1,654 2,703 (39) -------- -------- CASH OPERATING INCOME 3,704 5,506 (33) Less: Amortization of Intangibles 542 342 58 -------- -------- OPERATING INCOME 3,162 5,164 (39) Restructuring/Merger Expenses & Special Items (1,136) (145) NM -------- -------- NET INCOME $ 2,026 $ 5,019 (60) ======== ======== EARNINGS PER SHARE ------------------ Diluted Earnings per Share - Operating $ 1.53 $ 2.60 (41) Diluted Earnings per Share - Operating (Excl. JPMP) 1.94 2.41 (20) Diluted Earnings per Share - Net Income 0.97 2.53 (62) CASH OPERATING BASIS -------------------- Diluted Earnings per Share $ 1.80 $ 2.78 (35) Shareholder Value Added (74) 2,308 NM Return on Managed Assets 0.66 % 1.07 % (41) bp Return on Common Equity 11.8 20.9 (910) Overhead Ratio 66 61 500 Compensation Expense as a % of Revenue 40 37 300 Noncompensation Expense as a % of Revenue 26 23 300 COMMON SHARES OUTSTANDING ------------------------- Basic Average Shares Outstanding 1,973.5 1,870.7 5 % Diluted Average Shares Outstanding 2,028.9 1,955.8 4 Common Shares Outstanding - at Period End 1,972.9 1,901.1 4 CASH DIVIDENDS DECLARED PER SHARE $ 1.02 $ 0.96 6 BOOK VALUE PER SHARE COMMON DIVIDEND PAYOUT RATIO (C) 66 % 34 % 3,200 bp CAPITAL RATIOS -------------- Tier I Capital Ratio Total Capital Ratio Tier I Leverage ---------------- (a) Excludes the amortization of intangibles. (b) Estimated (c) Operating basis bp - Denotes basis points; 100 bp equals 1% Page 7
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] LINES OF BUSINESS FINANCIAL HIGHLIGHTS SUMMARY (IN MILLIONS, EXCEPT PER SHARE AND RATIO DATA) ----------------------------------- 3QTR 2001 OVER (UNDER) ----------------------------------- PROFORMA 3QTR 2QTR 3QTR 2Q 3Q 3Q 2001 2001 2000 2001 2000 2000(a) -------- -------- -------- -------- -------- -------- OPERATING REVENUE Investment Bank $ 3,601 $ 3,769 $ 3,881 (4)% (7)% (10)% Investment Management & Private Banking 733 793 890 (8) (18) (23) Retail & Middle Market Financial Services 2,782 2,675 2,623 4 6 Treasury & Securities Services 917 911 889 1 3 Corporate/Support Units (235) (112) (297) NM NM -------- -------- -------- OPERATING REVENUES EXCLUDING JPMP 7,798 8,036 7,986 (3) (2) (4) JPMorgan Partners (179) (892) (73) 80 NM -------- -------- -------- OPERATING REVENUES (b) $ 7,619 $ 7,144 $ 7,913 7 (4) (6) ======== ======== ======== EARNINGS Investment Bank $ 710 $ 789 $ 855 (10) (17) (19) Investment Management & Private Banking 118 120 157 (2) (25) (29) Retail & Middle Market Financial Services 439 451 519 (3) (15) Treasury & Securities Services 184 169 186 9 (1) Corporate/Support Units (78) (34) (23) NM NM -------- -------- -------- CASH OPERATING EARNINGS EXCLUDING JPMP 1,373 1,495 1,694 (8) (19) (20) JPMorgan Partners (155) (622) (118) 75 (31) -------- -------- -------- CASH OPERATING EARNINGS (b) 1,218 873 1,576 40 (23) (23) Less: Amortization of Intangibles 182 183 157 (1) 16 -------- -------- -------- OPERATING EARNINGS (b) 1,036 690 1,419 50 (27) (26) Restructuring/Merger Expenses & Special Items (587) (312) (21) 88 NM -------- -------- -------- NET INCOME (b) $ 449 $ 378 $ 1,398 19 (68) (68) ======== ======== ======== EARNINGS PER SHARE - DILUTED CASH OPERATING EARNINGS EXCLUDING JPMP $ 0.67 $ 0.73 $ 0.84 (8) (20) (21) Impact of JPMP (0.07) (0.31) (0.06) (77) 17 -------- -------- -------- CASH OPERATING EARNINGS (b) 0.60 0.42 0.78 43 (23) (24) Impact of Intangibles (0.09) (0.09) (0.08) -- 13 -------- -------- -------- OPERATING EARNINGS (b) 0.51 0.33 0.70 55 (27) (27) Restructuring/Merger Expenses & Special Items (0.29) (0.15) (0.01) 93 NM -------- -------- -------- NET INCOME (b) $ 0.22 $ 0.18 $ 0.69 22 (68) ======== ======== ======== CASH OPERATING RETURN ON COMMON EQUITY Investment Bank 15.1% 16.5% 17.2% (140) bp (210) bp (180) bp Investment Management & Private Banking 7.7 7.8 11.5 (10) (380) (220) Retail & Middle Market Financial Services 19.8 21.1 24.6 (130) (480) Treasury & Securities Services 25.1 22.4 26.3 270 (120) CASH OPERATING RETURN ON COMMON EQUITY (b) 11.5 8.2 16.5 330 (500) OPERATING RETURN ON COMMON EQUITY (b) 9.8 6.5 14.9 330 (510) ----------------------------------- --------------------------- YTD 2001 OVER (UNDER) --------------------------- YEAR TO DATE PROFORMA 2001 2000 2000 2000(a) -------- -------- -------- -------- OPERATING REVENUE Investment Bank $ 11,794 $ 12,251 (4)% (9)% Investment Management & Private Banking 2,337 2,453 (5) (20) Retail & Middle Market Financial Services 8,038 7,595 6 Treasury & Securities Services 2,733 2,650 3 Corporate/Support Units (634) (656) NM -------- -------- OPERATING REVENUES EXCLUDING JPMP 24,268 24,293 -- (5) JPMorgan Partners (1,011) 925 NM -------- -------- OPERATING REVENUES (b) $ 23,257 $ 25,218 (8) (12) ======== ======== EARNINGS Investment Bank $ 2,546 $ 2,972 (14) (18) Investment Management & Private Banking 340 429 (21) (35) Retail & Middle Market Financial Services 1,339 1,336 -- Treasury & Securities Services 530 518 2 Corporate/Support Units (257) (155) NM -------- -------- CASH OPERATING EARNINGS EXCLUDING JPMP 4,498 5,100 (12) (15) JPMorgan Partners (794) 406 (296) -------- -------- CASH OPERATING EARNINGS (b) 3,704 5,506 (33) (35) Less: Amortization of Intangibles 542 342 58 -------- -------- OPERATING EARNINGS (b) 3,162 5,164 (39) (39) Restructuring/Merger Expenses & Special Items (1,136) (145) NM -------- -------- NET INCOME (b) $ 2,026 $ 5,019 (60) (60) ======== ======== EARNINGS PER SHARE - DILUTED CASH OPERATING EARNINGS EXCLUDING JPMP $ 2.19 $ 2.58 (15) (18) Impact of JPMP (0.39) 0.20 NM -------- -------- CASH OPERATING EARNINGS (b) 1.80 2.78 (35) (38) Impact of Intangibles (0.27) (0.18) 50 -------- -------- OPERATING EARNINGS (b) 1.53 2.60 (41) (41) Restructuring/Merger Expenses & Special Items (0.56) (0.07) NM -------- -------- NET INCOME (b) $ 0.97 $ 2.53 (62) ======== ======== CASH OPERATING RETURN ON COMMON EQUITY Investment Bank 17.6% 21.9% (430) bp (320) bp Investment Management & Private Banking 7.3 15.9 (860) (340) Retail & Middle Market Financial Services 20.9 20.4 50 Treasury & Securities Services 24.1 24.2 (10) CASH OPERATING RETURN ON COMMON EQUITY (b) 11.8 20.9 (910) OPERATING RETURN ON COMMON EQUITY (b) 10.0 19.6 (960) --------------------------- (a) Pro forma results assume that the purchase of Flemings occurred at the beginning of 2000. (b) Represents consolidated JPMorgan Chase. Page 8
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] CONSOLIDATED BALANCE SHEET (IN MILLIONS) -------------------------- SEP 30, 2001 Over (Under) Sep 30th Jun 30th Sep 30th -------------------------- 2001 2001 2000 Jun 30, 01 Sep 30, 00 --------- --------- --------- ---------- ---------- ASSETS Cash and Due from Banks $ 22,299 $ 24,219 $ 20,284 (8)% 10% Deposits with Banks 9,341 11,903 8,669 (22) 8 Federal Funds Sold and Securities Purchased Under Resale Agreements 78,997 61,308 69,413 29 14 Securities Borrowed 37,499 38,296 36,424 (2) 3 Trading Assets 250,550 208,045 208,020 20 20 Securities 66,468 68,488 71,282 (3) (7) Loans (Net of Allowance for Loan Losses) 219,411 216,245 214,496 1 2 Goodwill and Other Intangibles 14,683 16,224 15,678 (9) (6) Private Equity Investments 9,628 9,855 11,502 (2) (16) Other Assets 90,424 58,119 51,729 56 75 --------- --------- --------- TOTAL ASSETS $ 799,300 $ 712,702 $ 707,497 12 13 ========= ========= ========= LIABILITIES Deposits $ 281,604 $ 276,804 $ 269,785 2 4 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 181,775 155,062 145,210 17 25 Commercial Paper 19,299 19,985 19,462 (3) (1) Other Borrowed Funds 21,941 18,418 20,065 19 9 Trading Liabilities 129,411 115,944 124,225 12 4 Accounts Payable, Accrued Expenses and Other Liabilities (Including the Allowance for Credit Losses) 75,231 38,157 37,225 97 102 Long-Term Debt 42,315 40,917 45,634 3 (7) Guaranteed Preferred Beneficial Interests in the Firm's Junior Subordinated Deferrable Interest Debentures 4,439 4,439 3,939 -- 13 --------- --------- --------- TOTAL LIABILITIES 756,015 669,726 665,545 13 14 PREFERRED STOCK OF SUBSIDIARY 550 550 550 -- -- STOCKHOLDERS' EQUITY Preferred Stock 1,009 1,025 1,522 (2) (34) Common Stock 1,993 1,990 2,066 -- (4) Capital Surplus 12,244 12,000 12,427 2 (1) Retained Earnings 28,021 28,265 31,678 (1) (12) Accumulated Other Comprehensive Income (Loss) 267 (834) (995) NM NM Treasury Stock, at Cost (799) (20) (5,296) NM (85) --------- --------- --------- TOTAL STOCKHOLDERS' EQUITY 42,735 42,426 41,402 1 3 --------- --------- --------- TOTAL LIABILITIES, PREFERRED STOCK OF SUBSIDIARY AND STOCKHOLDERS' EQUITY $ 799,300 $ 712,702 $ 707,497 12 13 ========= ========= ========= =================================================================================================================================== CREDIT-RELATED INFORMATION CREDIT-RELATED ASSETS: Commercial Loans $ 116,578 $ 112,790 $ 124,958 3% (7)% Derivative and FX Contracts 85,407 68,910 67,028 24 27 --------- --------- --------- Total Commercial Credit-Related Assets 201,985 181,700 191,986 11 5 Managed Consumer Loans 125,431 124,881 111,309 -- 13 --------- --------- --------- TOTAL MANAGED CREDIT-RELATED ASSETS $ 327,416 $ 306,581 $ 303,295 7 8 ========= ========= ========= NET CHARGE-OFFS: (a) Commercial Loans $ 189 $ 212 $ 83 (11) 128 --------- --------- --------- Credit Card - Managed 534 507 403 5 33 All Other Consumer 92 79 73 16 26 --------- --------- --------- Managed Consumer Loans 626 586 476 7 32 --------- --------- --------- TOTAL MANAGED NET CHARGE-OFFS $ 815 $ 798 $ 559 2 46 ========= ========= ========= NONPERFORMING ASSETS: Commercial Loans $ 2,018 $ 1,890 $ 1,415 7 43 Derivative and FX Contracts 46 88 52 (48) (12) --------- --------- --------- Total Commercial Credit-Related Assets 2,064 1,978 1,467 4 41 Managed Consumer Loans 459 401 396 14 16 --------- --------- --------- Total Managed Credit-Related Assets 2,523 2,379 1,863 6 35 Assets Acquired in Loan Satisfactions 123 119 81 3 52 --------- --------- --------- TOTAL NONPERFORMING ASSETS $ 2,646 $ 2,498 $ 1,944 6 36 ========= ========= ========= ------------------------- (a) Net charge-offs are presented for the quarter ended as of the date indicated. Page 9
[J.P. MORGAN CHASE & CO. LOGO] PRESS RELEASE FINANCIAL SUPPLEMENT THIRD QUARTER 2001
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] TABLE OF CONTENTS PAGE JPMORGAN CHASE CONSOLIDATED --------------------------- Statement of Income - Reported Basis 3 Lines of Business Financial Highlights Summary 4 Statement of Income - Operating Basis Excluding JPMorgan Partners 5 Statement of Income - Operating Basis 6 Reconciliation from Reported to Operating Basis 7 SEGMENT DETAIL -------------- INVESTMENT BANK 8 INVESTMENT MANAGEMENT & PRIVATE BANKING 9 TREASURY & SECURITIES SERVICES 10 JPMORGAN PARTNERS 11 Investment Portfolio - Private and Public Securities 12 RETAIL & MIDDLE MARKET FINANCIAL SERVICES 13 SUPPLEMENTAL DETAIL ------------------- Noninterest Revenue and Noninterest Expense Detail 14 Consolidated Balance Sheet 15 Condensed Average Balance Sheet and Annualized Yields 16 Credit-Related Information 17-18 Capital 19 GLOSSARY OF TERMS 20 ----------------- ================================================================================ On December 31, 2000, J.P. Morgan & Co. Incorporated ("J.P. Morgan") merged with and into The Chase Manhattan Corporation ("Chase"). Upon consummation of the merger, Chase changed its name to J.P. Morgan Chase & Co. ("JPMorgan Chase" or "the Firm"). The merger was accounted for as a pooling of interests and, accordingly, the information included in this document reflects the combined results of Chase and J.P. Morgan as if the merger had been in effect for all periods presented. In addition, certain amounts have been reclassified to conform to the current presentation. ================================================================================ Page 2
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] STATEMENT OF INCOME - REPORTED BASIS (IN MILLIONS, EXCEPT PER SHARE AND RATIO DATA) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 -------- -------- -------- -------- -------- REVENUE ------- Investment Banking Fees $ 811 $ 929 $ 941 $ 1,051 $ 1,013 Trading Revenue 1,301 1,261 2,001 1,142 1,455 Fees and Commissions 2,331 2,388 2,065 2,387 2,427 Private Equity - Realized Gains (Losses) 204 (46) 412 373 656 Private Equity - Unrealized Gains (Losses) (311) (783) (285) (471) (676) Securities Gains 142 67 455 118 90 Other Revenue 212 274 246 1,482 415 -------- -------- -------- -------- -------- TOTAL NONINTEREST REVENUE 4,690 4,090 5,835 6,082 5,380 Interest Income 7,709 8,469 9,180 9,922 9,423 Interest Expense 5,050 5,688 6,762 7,461 7,080 -------- -------- -------- -------- -------- NET INTEREST INCOME 2,659 2,781 2,418 2,461 2,343 -------- -------- -------- -------- -------- Revenue before Provision for Loan Losses 7,349 6,871 8,253 8,543 7,723 Provision for Loan Losses 745 525 447 409 298 -------- -------- -------- -------- -------- TOTAL NET REVENUE 6,604 6,346 7,806 8,134 7,425 -------- -------- -------- -------- -------- EXPENSE ------- Compensation Expense 2,883 3,052 3,357 3,310 3,135 Occupancy Expense 339 327 348 351 338 Technology and Communications 663 674 654 668 632 Merger and Restructuring Costs 876 478 328 1,302 79 Other Expense 992 1,047 1,062 1,227 1,011 Amortization of Intangibles 182 183 177 186 157 -------- -------- -------- -------- -------- TOTAL EXPENSE 5,935 5,761 5,926 7,044 5,352 -------- -------- -------- -------- -------- Income before Tax Expense 669 585 1,880 1,090 2,073 Income Tax Expense 220 207 656 382 675 -------- -------- -------- -------- -------- INCOME BEFORE EFFECT OF ACCOUNTING CHANGE 449 378 1,224 708 1,398 Net Effect of Change in Accounting Principle -- -- (25) -- -- -------- -------- -------- -------- -------- NET INCOME $ 449 $ 378 $ 1,199 $ 708 $ 1,398 ======== ======== ======== ======== ======== NET INCOME PER SHARE -------------------- Basic $ 0.22 $ 0.18 $ 0.60 $ 0.36 $ 0.73 Diluted 0.22 0.18 0.58 0.34 0.69 PERFORMANCE RATIOS ------------------ Return on Average Assets 0.24 % 0.21 % 0.67 % 0.40 % 0.81 % Return on Average Common Equity 4.2 3.5 11.6 6.8 14.6 FULL-TIME EQUIVALENT EMPLOYEES (a) 96,633 97,224 98,518 99,757 99,189 ------------------------------ ----------------- 3QTR 2001 YTD 2001 OVER (UNDER) YEAR TO DATE OVER (UNDER) ----------------------- ----------------------- ------------ 2Q 2001 3Q 2000 2001 2000 2000 -------- -------- -------- -------- ------------ REVENUE ------- Investment Banking Fees (13) % (20) % $ 2,681 $ 3,311 (19) % Trading Revenue 3 (11) 4,563 5,156 (12) Fees and Commissions (2) (4) 6,784 6,842 (1) Private Equity - Realized Gains (Losses) NM (69) 570 1,678 (66) Private Equity - Unrealized Gains (Losses) 60 54 (1,379) (565) NM Securities Gains 112 58 664 111 NM Other Revenue (23) (49) 732 807 (9) -------- -------- TOTAL NONINTEREST REVENUE 15 (13) 14,615 17,340 (16) Interest Income (9) (18) 25,358 26,721 (5) Interest Expense (11) (29) 17,500 19,670 (11) -------- -------- NET INTEREST INCOME (4) 13 7,858 7,051 11 -------- -------- Revenue before Provision for Loan Losses 7 (5) 22,473 24,391 (8) Provision for Loan Losses 42 150 1,717 968 77 -------- -------- TOTAL NET REVENUE 4 (11) 20,756 23,423 (11) -------- -------- EXPENSE ------- Compensation Expense (6) (8) 9,292 9,438 (2) Occupancy Expense 4 -- 1,014 943 8 Technology and Communications (2) 5 1,991 1,786 11 Merger and Restructuring Costs 83 NM 1,682 129 NM Other Expense (5) (2) 3,101 3,142 (1) Amortization of Intangibles (1) 16 542 342 58 -------- -------- TOTAL EXPENSE 3 11 17,622 15,780 12 -------- -------- Income before Tax Expense 14 (68) 3,134 7,643 (59) Income Tax Expense 6 (67) 1,083 2,624 (59) -------- -------- INCOME BEFORE EFFECT OF ACCOUNTING CHANGE 19 (68) 2,051 5,019 (59) Net Effect of Change in Accounting Principle NM NM (25) -- NM -------- -------- NET INCOME 19 (68) $ 2,026 $ 5,019 (60) ======== ======== NET INCOME PER SHARE -------------------- Basic 22 (70) $ 1.00 $ 2.64 (62) Diluted 22 (68) 0.97 2.53 (62) PERFORMANCE RATIOS ------------------ Return on Average Assets 3 bp (57) bp 0.37 % 1.00 % (63) bp Return on Average Common Equity 70 (1,040) 6.4 19.0 (1,260) ----------------- FULL-TIME EQUIVALENT EMPLOYEES (a) (1) % (3) % ------------------------------ (a) Represents actual period end amount for each respective quarter. Page 3
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] LINES OF BUSINESS FINANCIAL HIGHLIGHTS SUMMARY (IN MILLIONS, EXCEPT PER SHARE AND RATIO DATA) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 -------- -------- -------- -------- -------- OPERATING REVENUE ----------------- Investment Bank $ 3,601 $ 3,769 $ 4,424 $ 3,706 $ 3,881 Investment Management & Private Banking 733 793 811 910 890 Retail & Middle Market Financial Services 2,782 2,675 2,581 2,595 2,623 Treasury & Securities Services 917 911 905 914 889 Corporate/Support Units (235) (112) (287) (414) (297) -------- -------- -------- -------- -------- OPERATING REVENUES EXCLUDING JPMP 7,798 8,036 8,434 7,711 7,986 JPMorgan Partners (179) (892) 60 (136) (73) -------- -------- -------- -------- -------- OPERATING REVENUES (b) $ 7,619 $ 7,144 $ 8,494 $ 7,575 $ 7,913 ======== ======== ======== ======== ======== EARNINGS -------- Investment Bank $ 710 $ 789 $ 1,047 $ 491 $ 855 Investment Management & Private Banking 118 120 102 139 157 Retail & Middle Market Financial Services 439 451 449 459 519 Treasury & Securities Services 184 169 177 186 186 Corporate/Support Units (78) (34) (145) (189) (23) -------- -------- -------- -------- -------- CASH OPERATING EARNINGS EXCLUDING JPMP 1,373 1,495 1,630 1,086 1,694 JPMorgan Partners (155) (622) (17) (137) (118) -------- -------- -------- -------- -------- CASH OPERATING EARNINGS (b) 1,218 873 1,613 949 1,576 Amortization of Intangibles 182 183 177 186 157 -------- -------- -------- -------- -------- OPERATING EARNINGS (b) 1,036 690 1,436 763 1,419 Restructuring/Merger Expenses & Special Items (587) (312) (237) (55) (21) -------- -------- -------- -------- -------- NET INCOME (b) $ 449 $ 378 $ 1,199 $ 708 $ 1,398 ======== ======== ======== ======== ======== EARNINGS PER SHARE - DILUTED ---------------------------- CASH OPERATING EARNINGS EXCLUDING JPMP $ 0.67 $ 0.73 $ 0.79 $ 0.53 $ 0.84 Impact of JPMP (0.07) (0.31) (0.01) (0.07) (0.06) -------- -------- -------- -------- -------- CASH OPERATING EARNINGS (b) 0.60 0.42 0.78 0.46 0.78 Impact of Intangibles (0.09) (0.09) (0.08) (0.09) (0.08) -------- -------- -------- -------- -------- OPERATING EARNINGS (b) 0.51 0.33 0.70 0.37 0.70 Restructuring/Merger Expenses & Special Items (0.29) (0.15) (0.12) (0.03) (0.01) -------- -------- -------- -------- -------- NET INCOME (b) $ 0.22 $ 0.18 $ 0.58 $ 0.34 $ 0.69 ======== ======== ======== ======== ======== CASH OPERATING RETURN ON COMMON EQUITY -------------------------------------- Investment Bank 15.1 % 16.5 % 21.0 % 9.2 % 17.2 % Investment Management & Private Banking 7.7 7.8 6.4 8.3 11.5 Retail & Middle Market Financial Services 19.8 21.1 21.9 21.6 24.6 Treasury & Securities Services 25.1 22.4 25.0 25.6 26.3 CASH OPERATING RETURN ON COMMON EQUITY (b) 11.5 8.2 15.6 9.1 16.5 OPERATING RETURN ON COMMON EQUITY (b) 9.8 6.5 13.9 7.3 14.9 ---------------------------------------------- 3QTR 2001 OVER (UNDER) ---------------------------------------- YEAR TO DATE PROFORMA ----------------------- 2Q 2001 3Q 2000 3Q 2000 (a) 2001 2000 -------- -------- ----------- -------- -------- OPERATING REVENUE ----------------- Investment Bank (4) % (7) % (10) % $ 11,794 $ 12,251 Investment Management & Private Banking (8) (18) (23) 2,337 2,453 Retail & Middle Market Financial Services 4 6 8,038 7,595 Treasury & Securities Services 1 3 2,733 2,650 Corporate/Support Units NM NM (634) (656) -------- -------- OPERATING REVENUES EXCLUDING JPMP (3) (2) (4) 24,268 24,293 JPMorgan Partners 80 NM (1,011) 925 -------- -------- OPERATING REVENUES (b) 7 (4) (6) $ 23,257 $ 25,218 ======== ======== EARNINGS -------- Investment Bank (10) (17) (19) $ 2,546 $ 2,972 Investment Management & Private Banking (2) (25) (29) 340 429 Retail & Middle Market Financial Services (3) (15) 1,339 1,336 Treasury & Securities Services 9 (1) 530 518 Corporate/Support Units NM NM (257) (155) -------- -------- CASH OPERATING EARNINGS EXCLUDING JPMP (8) (19) (20) 4,498 5,100 JPMorgan Partners 75 (31) (794) 406 -------- -------- CASH OPERATING EARNINGS (b) 40 (23) (23) 3,704 5,506 Amortization of Intangibles (1) 16 542 342 -------- -------- OPERATING EARNINGS (b) 50 (27) (26) 3,162 5,164 Restructuring/Merger Expenses & Special Items 88 NM (1,136) (145) -------- -------- NET INCOME (b) 19 (68) (68) $ 2,026 $ 5,019 ======== ======== EARNINGS PER SHARE - DILUTED ---------------------------- CASH OPERATING EARNINGS EXCLUDING JPMP (8) (20) $ 2.19 $ 2.58 Impact of JPMP (77) 17 (0.39) 0.20 -------- -------- CASH OPERATING EARNINGS (b) 43 (23) 1.80 2.78 Impact of Intangibles -- 13 (0.27) (0.18) -------- -------- OPERATING EARNINGS (b) 55 (27) 1.53 2.60 Restructuring/Merger Expenses & Special Items 93 NM (0.56) (0.07) -------- -------- NET INCOME (b) 22 (68) $ 0.97 $ 2.53 ======== ======== CASH OPERATING RETURN ON COMMON EQUITY -------------------------------------- Investment Bank (140) bp (210) bp (180) bp 17.6 % 21.9 % Investment Management & Private Banking (10) (380) (220) 7.3 15.9 Retail & Middle Market Financial Services (130) (480) 20.9 20.4 Treasury & Securities Services 270 (120) 24.1 24.2 CASH OPERATING RETURN ON COMMON EQUITY (b) 330 (500) 11.8 20.9 OPERATING RETURN ON COMMON EQUITY (b) 330 (510) 10.0 19.6 ---------------------------------------------- ------------------------------- YTD 2001 OVER (UNDER) ----------------------- PROFORMA 2000 2000 (a) -------- -------- OPERATING REVENUE ----------------- Investment Bank (4) % (9) % Investment Management & Private Banking (5) (20) Retail & Middle Market Financial Services 6 Treasury & Securities Services 3 Corporate/Support Units NM OPERATING REVENUES EXCLUDING JPMP -- (5) JPMorgan Partners NM OPERATING REVENUES (b) (8) (12) EARNINGS -------- Investment Bank (14) (18) Investment Management & Private Banking (21) (35) Retail & Middle Market Financial Services -- Treasury & Securities Services 2 Corporate/Support Units NM CASH OPERATING EARNINGS EXCLUDING JPMP (12) (15) JPMorgan Partners NM CASH OPERATING EARNINGS (b) (33) (35) Amortization of Intangibles 58 OPERATING EARNINGS (b) (39) (39) Restructuring/Merger Expenses & Special Items NM NET INCOME (b) (60) (60) EARNINGS PER SHARE - DILUTED ---------------------------- CASH OPERATING EARNINGS EXCLUDING JPMP (15) Impact of JPMP NM CASH OPERATING EARNINGS (b) (35) Impact of Intangibles 50 OPERATING EARNINGS (b) (41) Restructuring/Merger Expenses & Special Items NM NET INCOME (b) (62) CASH OPERATING RETURN ON COMMON EQUITY -------------------------------------- Investment Bank (430) bp (320) bp Investment Management & Private Banking (860) (340) Retail & Middle Market Financial Services 50 Treasury & Securities Services (10) CASH OPERATING RETURN ON COMMON EQUITY (b) (910) OPERATING RETURN ON COMMON EQUITY (b) (960) ------------------------------- (a) Pro forma results assume that the purchase of Flemings occurred at the beginning of 2000. (b) Represents consolidated JPMorgan Chase. Page 4
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] STATEMENT OF INCOME - OPERATING BASIS EXCLUDING JPMORGAN PARTNERS (IN MILLIONS, EXCEPT PER SHARE AND RATIO DATA) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 -------- -------- -------- -------- -------- OPERATING REVENUE ----------------- Investment Banking Fees $ 812 $ 928 $ 942 $ 1,051 $ 1,011 Trading-Related Revenue (Including Trading NII) 1,614 1,594 2,167 1,414 1,634 Fees and Commissions 2,222 2,330 2,004 2,294 2,287 Private Equity - Realized Gains (Losses) 1 14 -- 1 4 Private Equity - Unrealized Gains (Losses) (5) (17) (5) (6) (4) Securities Gains 142 67 455 118 90 Other Revenue 200 280 250 236 353 Net Interest Income 2,812 2,840 2,621 2,603 2,611 -------- -------- -------- -------- -------- TOTAL OPERATING REVENUE 7,798 8,036 8,434 7,711 7,986 ======== ======== ======== ======== ======== OPERATING EXPENSE ----------------- Compensation Expense 2,850 3,019 3,315 3,282 3,090 Noncompensation Expense (Excluding Intangibles) 1,962 2,011 2,013 2,194 1,911 -------- -------- -------- -------- -------- TOTAL CASH EXPENSE 4,812 5,030 5,328 5,476 5,001 Credit Costs 1,015 798 688 667 534 -------- -------- -------- -------- -------- Cash Operating Income before Taxes 1,971 2,208 2,418 1,568 2,451 Income Taxes 598 713 788 482 757 -------- -------- -------- -------- -------- CASH OPERATING INCOME 1,373 1,495 1,630 1,086 1,694 Less: Amortization of Intangibles 177 178 171 181 152 -------- -------- -------- -------- -------- OPERATING INCOME $ 1,196 $ 1,317 $ 1,459 $ 905 $ 1,542 ======== ======== ======== ======== ======== OPERATING BASIS --------------- Diluted Earnings per Share $ 0.59 $ 0.64 $ 0.71 $ 0.44 $ 0.77 CASH OPERATING BASIS -------------------- Diluted Earnings per Share $ 0.67 $ 0.73 $ 0.79 $ 0.53 $ 0.84 Compensation Expense as a % of Operating Revenue 37 % 38 % 39 % 43 % 39 % Noncompensation Expense as a % of Operating Revenue 25 25 24 28 24 -------------------------------------------- 3QTR 2001 OVER (UNDER) ---------------------------------------- YEAR TO DATE PROFORMA ----------------------- 2Q 2001 3Q 2000 3Q 2000 (a) 2001 2000 -------- -------- ----------- -------- -------- OPERATING REVENUE ----------------- Investment Banking Fees (13) % (20) % (22) % $ 2,682 $ 3,305 Trading-Related Revenue (Including Trading NII) 1 (1) (2) 5,375 5,741 Fees and Commissions (5) (3) (7) 6,556 6,495 Private Equity - Realized Gains (Losses) (93) (75) (75) 15 9 Private Equity - Unrealized Gains (Losses) 71 (25) (25) (27) 23 Securities Gains 112 58 56 664 111 Other Revenue (29) (43) (45) 730 885 Net Interest Income (1) 8 7 8,273 7,724 -------- -------- TOTAL OPERATING REVENUE (3) (2) (4) 24,268 24,293 ======== ======== OPERATING EXPENSE ----------------- Compensation Expense (6) (8) (10) 9,184 9,302 Noncompensation Expense (Excluding Intangibles) (2) 3 -- 5,986 5,691 -------- -------- TOTAL CASH EXPENSE (4) (4) (7) 15,170 14,993 Credit Costs 27 90 89 2,501 1,700 -------- -------- Cash Operating Income before Taxes (11) (20) (20) 6,597 7,600 Income Taxes (16) (21) (20) 2,099 2,500 -------- -------- CASH OPERATING INCOME (8) (19) (20) 4,498 5,100 Less: Amortization of Intangibles (1) 16 (3) 526 332 -------- -------- OPERATING INCOME (9) (22) (22) $ 3,972 $ 4,768 ======== ======== OPERATING BASIS --------------- Diluted Earnings per Share (8) (23) (23) $ 1.94 $ 2.41 CASH OPERATING BASIS -------------------- Diluted Earnings per Share (8) (20) (21) $ 2.19 $ 2.58 Compensation Expense as a % of Operating Revenue (100) bp (200) bp (200) bp 38 % 38 % Noncompensation Expense as a % of Operating Revenue -- 100 100 25 23 -------------------------------------------- ------------------------------- YTD 2001 OVER (UNDER) ----------------------- PROFORMA 2000 2000 (a) -------- -------- OPERATING REVENUE ----------------- Investment Banking Fees (19) % (22) % Trading-Related Revenue (Including Trading NII) (6) (8) Fees and Commissions 1 (10) Private Equity - Realized Gains (Losses) 67 67 Private Equity - Unrealized Gains (Losses) NM NM Securities Gains NM NM Other Revenue (18) (28) Net Interest Income 7 6 TOTAL OPERATING REVENUE -- (5) OPERATING EXPENSE ----------------- Compensation Expense (1) (8) Noncompensation Expense (Excluding Intangibles) 5 -- TOTAL CASH EXPENSE 1 (5) Credit Costs 47 46 Cash Operating Income before Taxes (13) (16) Income Taxes (16) (16) CASH OPERATING INCOME (12) (15) Less: Amortization of Intangibles 58 (3) OPERATING INCOME (17) (17) OPERATING BASIS --------------- Diluted Earnings per Share (20) (20) CASH OPERATING BASIS -------------------- Diluted Earnings per Share (15) (18) Compensation Expense as a % of Operating Revenue -- bp (100) bp Noncompensation Expense as a % of Operating Revenue 200 200 ------------------------------- (a) Pro forma results assume that the purchase of Flemings occurred at the beginning of 2000. Page 5
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] STATEMENT OF INCOME - OPERATING BASIS (IN MILLIONS, EXCEPT PER SHARE AND RATIO DATA) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 -------- -------- -------- -------- -------- OPERATING REVENUE Investment Banking Fees $ 811 $ 929 $ 941 $ 1,051 $ 1,013 Trading-Related Revenue (Including Trading NII) 1,614 1,594 2,167 1,414 1,632 Fees and Commissions 2,231 2,350 2,016 2,323 2,314 Private Equity - Realized Gains (Losses) 204 (46) 412 373 656 Private Equity - Unrealized Gains (Losses) (311) (783) (285) (471) (676) Securities Gains 142 67 455 118 90 Other Revenue 203 274 251 258 365 Net Interest Income 2,725 2,759 2,537 2,509 2,519 -------- -------- -------- -------- -------- TOTAL OPERATING REVENUE 7,619 7,144 8,494 7,575 7,913 -------- -------- -------- -------- -------- OPERATING EXPENSE Compensation Expense 2,883 3,052 3,357 3,310 3,135 Noncompensation Expense (Excluding Intangibles) 1,994 2,048 2,064 2,246 1,981 -------- -------- -------- -------- -------- TOTAL CASH EXPENSE 4,877 5,100 5,421 5,556 5,116 Credit Costs 1,015 798 688 667 534 -------- -------- -------- -------- -------- Cash Operating Income before Taxes 1,727 1,246 2,385 1,352 2,263 Income Taxes 509 373 772 403 687 -------- -------- -------- -------- -------- CASH OPERATING INCOME 1,218 873 1,613 949 1,576 Less: Amortization of Intangibles 182 183 177 186 157 -------- -------- -------- -------- -------- OPERATING INCOME $ 1,036 $ 690 $ 1,436 $ 763 $ 1,419 ======== ======== ======== ======== ======== OPERATING BASIS Diluted Earnings per Share $ 0.51 $ 0.33 $ 0.70 $ 0.37 $ 0.70 Common Dividend Payout Ratio 66 % 102 % 48 % 85 % 42 % CASH OPERATING BASIS Diluted Earnings per Share $ 0.60 $ 0.42 $ 0.78 $ 0.46 $ 0.78 SVA (50) (394) 370 (290) 426 Return on Managed Assets 0.64 % 0.47 % 0.87 % 0.52 % 0.89 % Return on Common Equity 11.5 8.2 15.6 9.1 16.5 Overhead Ratio 64 71 64 73 65 Compensation Expense as a % of Operating Revenue 38 43 40 44 40 Noncompensation Expense as a % of Operating Revenue 26 29 24 30 25 ------------------------------------ 3QTR 2001 OVER (UNDER) ------------------------------------ YEAR TO DATE PROFORMA ---------------------- 2Q 2001 3Q 2000 3Q 2000(a) 2001 2000 -------- -------- ---------- -------- -------- OPERATING REVENUE Investment Banking Fees (13)% (20)% (23)% $ 2,681 $ 3,311 Trading-Related Revenue (Including Trading NII) 1 (1) (2) 5,375 5,728 Fees and Commissions (5) (4) (7) 6,597 6,556 Private Equity - Realized Gains (Losses) NM (69) (69) 570 1,678 Private Equity - Unrealized Gains (Losses) 60 54 54 (1,379) (565) Securities Gains 112 58 56 664 111 Other Revenue (26) (44) (46) 728 890 Net Interest Income (1) 8 8 8,021 7,509 -------- -------- TOTAL OPERATING REVENUE 7 (4) (6) 23,257 25,218 -------- -------- OPERATING EXPENSE Compensation Expense (6) (8) (11) 9,292 9,438 Noncompensation Expense (Excluding Intangibles) (3) 1 (2) 6,106 5,871 -------- -------- TOTAL CASH EXPENSE (4) (5) (7) 15,398 15,309 Credit Costs 27 90 89 2,501 1,700 -------- -------- Cash Operating Income before Taxes 39 (24) (24) 5,358 8,209 Income Taxes 36 (26) (25) 1,654 2,703 -------- -------- CASH OPERATING INCOME 40 (23) (23) 3,704 5,506 Less: Amortization of Intangibles (1) 16 (3) 542 342 -------- -------- OPERATING INCOME 50 (27) (26) $ 3,162 $ 5,164 ======== ======== OPERATING BASIS Diluted Earnings per Share 55 (27) (27) $ 1.53 $ 2.60 Common Dividend Payout Ratio (3,600)bp 2,400 bp 66 % 34 % CASH OPERATING BASIS Diluted Earnings per Share 43 % (23)% (24)% $ 1.80 $ 2.78 SVA 87 NM (74) 2,308 Return on Managed Assets 17 bp (25)bp 0.66 % 1.07 % Return on Common Equity 330 (500) 11.8 20.9 Overhead Ratio (700) (100) (100)bp 66 61 Compensation Expense as a % of Operating Revenue (500) (200) (200) 40 37 Noncompensation Expense as a % of Operating Revenue (300) 100 100 26 23 ------------------------------------ ---------------------- YTD 2001 OVER (UNDER) ---------------------- PROFORMA 2000 2000 (a) -------- -------- OPERATING REVENUE Investment Banking Fees (19)% (22)% Trading-Related Revenue (Including Trading NII) (6) (8) Fees and Commissions 1 (11) Private Equity - Realized Gains (Losses) (66) (66) Private Equity - Unrealized Gains (Losses) NM NM Securities Gains NM NM Other Revenue (18) (28) Net Interest Income 7 6 TOTAL OPERATING REVENUE (8) (12) OPERATING EXPENSE Compensation Expense (2) (9) Noncompensation Expense (Excluding Intangibles) 4 (1) TOTAL CASH EXPENSE 1 (6) Credit Costs 47 46 Cash Operating Income before Taxes (35) (36) Income Taxes (39) (39) CASH OPERATING INCOME (33) (35) Less: Amortization of Intangibles 58 (2) OPERATING INCOME (39) (39) OPERATING BASIS Diluted Earnings per Share (41) (41) Common Dividend Payout Ratio 3,200bp CASH OPERATING BASIS Diluted Earnings per Share (35)% (38)% SVA NM Return on Managed Assets (41)bp Return on Common Equity (910) Overhead Ratio 500 400 bp Compensation Expense as a % of Operating Revenue 300 200 Noncompensation Expense as a % of Operating Revenue 300 300 ---------------------- (a) Pro forma results assume that the purchase of Flemings occurred at the beginning of 2000. Page 6
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] RECONCILIATION FROM REPORTED TO OPERATING BASIS (IN MILLIONS) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 -------- -------- -------- -------- -------- REVENUE TRADING REVENUE Reported $ 1,301 $ 1,261 $ 2,001 $ 1,142 $ 1,455 Add: Trading-Related NII 313 333 166 272 177 -------- -------- -------- -------- -------- OPERATING $ 1,614 $ 1,594 $ 2,167 $ 1,414 $ 1,632 ======== ======== ======== ======== ======== CREDIT CARD REVENUE(a) Reported $ 548 $ 465 $ 433 $ 460 $ 471 Less: Impact of Securitizations (100) (38) (49) (64) (113) -------- -------- -------- -------- -------- OPERATING $ 448 $ 427 $ 384 $ 396 $ 358 ======== ======== ======== ======== ======== OTHER REVENUE Reported $ 212 $ 274 $ 246 $ 1,482 $ 415 Less: Gain on Sale of Hong Kong Retail Banking(b) -- -- -- (827) -- Gain on Transfer of Euroclear(b) -- -- -- (399) -- Gain on Sale of Panama Operations(b) -- -- -- -- (81) Loss on Economic Hedge of Flemings Purchase Price(b) -- -- -- -- 35 Credit Card Securitizations (9) -- 5 2 (4) -------- -------- -------- -------- -------- OPERATING $ 203 $ 274 $ 251 $ 258 $ 365 ======== ======== ======== ======== ======== NET INTEREST INCOME Reported $ 2,659 $ 2,781 $ 2,418 $ 2,461 $ 2,343 Add: Impact of Credit Card Securitizations 379 311 285 320 353 Less: Trading-Related NII (313) (333) (166) (272) (177) -------- -------- -------- -------- -------- OPERATING $ 2,725 $ 2,759 $ 2,537 $ 2,509 $ 2,519 ======== ======== ======== ======== ======== TOTAL REVENUE Reported $ 7,349 $ 6,871 $ 8,253 $ 8,543 $ 7,723 Less: Credit Card Securitizations 270 273 241 258 236 Special Items (See above) -- -- -- (1,226) (46) -------- -------- -------- -------- -------- TOTAL OPERATING REVENUE $ 7,619 $ 7,144 $ 8,494 $ 7,575 $ 7,913 ======== ======== ======== ======== ======== EXPENSES Reported $ 5,935 $ 5,761 $ 5,926 $ 7,044 $ 5,352 Merger and Restructuring Costs (876) (478) (328) (1,302) (79) -------- -------- -------- -------- -------- OPERATING EXPENSES 5,059 5,283 5,598 5,742 5,273 Less: Amortization of Intangibles (182) (183) (177) (186) (157) -------- -------- -------- -------- -------- CASH OPERATING EXPENSES $ 4,877 $ 5,100 $ 5,421 $ 5,556 $ 5,116 ======== ======== ======== ======== ======== CREDIT COSTS Provision for Loan Losses - Reported $ 745 $ 525 $ 447 $ 409 $ 298 Add: Impact of Credit Card Securitizations 270 273 241 258 236 -------- -------- -------- -------- -------- CREDIT COSTS - OPERATING $ 1,015 $ 798 $ 688 $ 667 $ 534 ======== ======== ======== ======== ======== --------------------- ------------ 3QTR 2001 YTD 2001 OVER (UNDER) YEAR TO DATE OVER (UNDER) ---------------------- --------------------- ------------ 2Q 2001 3Q 2000 2001 2000 2000 -------- -------- -------- -------- -------- REVENUE TRADING REVENUE Reported 3 % (11)% $ 4,563 $ 5,156 (12)% Add: Trading-Related NII (6) 77 812 572 42 -------- -------- OPERATING 1 (1) $ 5,375 $ 5,728 (6) ======== ======== CREDIT CARD REVENUE(a) Reported 18 16 $ 1,446 $ 1,311 10 Less: Impact of Securitizations 163 (12) (187) (286) (35) -------- -------- OPERATING 5 25 $ 1,259 $ 1,025 23 ======== ======== OTHER REVENUE Reported (23) (49) $ 732 $ 807 (9) Less: Gain on Sale of Hong Kong Retail Banking(b) NM NM -- -- NM Gain on Transfer of Euroclear(b) NM NM -- -- NM Gain on Sale of Panama Operations(b) NM NM -- (81) NM Loss on Economic Hedge of Flemings -- Purchase Price(b) NM NM -- 176 NM Credit Card Securitizations NM NM (4) (12) (67) -------- -------- OPERATING (26) (44) $ 728 $ 890 (18) ======== ======== NET INTEREST INCOME Reported (4) 13 $ 7,858 $ 7,051 11 Add: Impact of Credit Card Securitizations 22 7 975 1,030 (5) Less: Trading-Related NII (6) 77 (812) (572) 42 -------- -------- OPERATING (1) 8 $ 8,021 $ 7,509 7 ======== ======== TOTAL REVENUE Reported 7 (5) $ 22,473 $ 24,391 (8) Less: Credit Card Securitizations (1) 14 784 732 7 Special Items (See above) -- NM -- 95 NM -------- -------- TOTAL OPERATING REVENUE 7 (4) $ 23,257 $ 25,218 (8) ======== ======== EXPENSES Reported 3 11 $ 17,622 $ 15,780 12 Merger and Restructuring Costs 83 NM (1,682) (129) NM -------- -------- OPERATING EXPENSES (4) (4) 15,940 15,651 2 Less: Amortization of Intangibles (1) 16 (542) (342) 58 -------- -------- CASH OPERATING EXPENSES (4) (5) $ 15,398 $ 15,309 1 ======== ======== CREDIT COSTS Provision for Loan Losses - Reported 42 150 $ 1,717 $ 968 77 Add: Impact of Credit Card Securitizations (1) 14 784 732 7 -------- -------- CREDIT COSTS - OPERATING 27 90 $ 2,501 $ 1,700 47 ======== ======== --------------------- ------------ (a) Included in Fees and Commissions. (b) Represents special items. Page 7
[J.P. MORGAN CHASE & CO. LOGO] SEGMENT DETAIL
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] INVESTMENT BANK FINANCIAL HIGHLIGHTS (IN MILLIONS, EXCEPT RATIOS) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 -------- -------- -------- -------- -------- OPERATING INCOME STATEMENT REVENUE: Trading Revenue (Including Trading NII) $ 1,523 $ 1,626 $ 2,127 $ 1,337 $ 1,562 Investment Banking Fees 807 921 939 1,045 1,044 Net Interest Income 812 733 713 661 617 Fees and Commissions 390 398 468 451 396 All Other Revenue 69 91 177 212 262 -------- -------- -------- -------- -------- TOTAL OPERATING REVENUE 3,601 3,769 4,424 3,706 3,881 EXPENSES: Compensation Costs 1,355 1,476 1,731 1,820 1,586 Noncompensation Costs (Excluding Intangibles) 825 867 886 997 902 -------- -------- -------- -------- -------- TOTAL CASH EXPENSES 2,180 2,343 2,617 2,817 2,488 Amortization of Intangibles 33 37 35 41 30 -------- -------- -------- -------- -------- TOTAL OPERATING EXPENSES 2,213 2,380 2,652 2,858 2,518 -------- -------- -------- -------- -------- Operating Margin 1,388 1,389 1,772 848 1,363 Credit Costs 270 169 97 141 10 -------- -------- -------- -------- -------- Operating Income Before Taxes 1,118 1,220 1,675 707 1,353 Income Taxes 437 464 659 252 524 -------- -------- -------- -------- -------- OPERATING INCOME 681 756 1,016 455 829 Add Back: Amortization of Intangibles 29 33 31 36 26 -------- -------- -------- -------- -------- CASH OPERATING INCOME $ 710 $ 789 $ 1,047 $ 491 $ 855 ======== ======== ======== ======== ======== Average Common Equity $ 18,575 $ 18,943 $ 20,070 $ 20,789 $ 19,538 Average Managed Assets 514,518 506,790 511,814 487,848 471,430 SVA 142 214 444 (146) 255 Cash Return on Common Equity 15.1 % 16.5 % 21.0 % 9.2 % 17.2 % Cash Overhead Ratio 61 62 59 76 64 Compensation Expense as a % of Operating Revenue 38 39 39 49 41 TRADING-RELATED REVENUE Equities $ 239 $ 429 $ 475 $ 229 $ 432 Fixed Income and Other 1,284 1,197 1,652 1,108 1,130 -------- -------- -------- -------- -------- Total $ 1,523 $ 1,626 $ 2,127 $ 1,337 $ 1,562 ======== ======== ======== ======== ======== INVESTMENT BANKING FEES Advisory $ 329 $ 303 $ 349 $ 462 $ 448 Underwriting and Other Fees 478 618 590 583 596 -------- ------- -------- -------- -------- Total $ 807 $ 921 $ 939 $ 1,045 $ 1,044 ======== ======= ======-= ======== ======== MARKET SHARE AND RANKINGS: (b) Global Announced M&A Global Syndicated Loans U.S. Equity Proceeds U.S. High Grade Bond U.S. High Yield Bond ---------------------------------- ------------------- 3QTR 2001 YTD 2001 OVER (UNDER) OVER (UNDER) ---------------------------------- ------------------- YEAR TO DATE PROFORMA -------------------- PROFORMA 2Q 2001 3Q 2000 3Q 2000 (a) 2001 2000 2000 2000 (a) -------- -------- ----------- -------- -------- -------- -------- OPERATING INCOME STATEMENT REVENUE: Trading Revenue (Including Trading NII) (6) % (2) % (3) % $ 5,276 $ 5,484 (4) % (5) % Investment Banking Fees (12) (23) (24) 2,667 3,311 (19) (23) Net Interest Income 11 32 28 2,258 1,928 17 11 Fees and Commissions (2) (2) (12) 1,256 1,102 14 (13) All Other Revenue (24) (74) (75) 337 426 (21) (37) -------- -------- TOTAL OPERATING REVENUE (4) (7) (10) 11,794 12,251 (4) (9) EXPENSES: Compensation Costs (8) (15) (18) 4,562 4,820 (5) (14) Noncompensation Costs (Excluding Intangibles) (5) (9) (10) 2,578 2,459 5 (1) -------- -------- TOTAL CASH EXPENSES (7) (12) (15) 7,140 7,279 (2) (9) Amortization of Intangibles (11) 10 (15) 105 53 98 (7) -------- -------- TOTAL OPERATING EXPENSES (7) (12) (15) 7,245 7,332 (1) (9) -------- -------- Operating Margin - 2 1 4,549 4,919 (8) (10) Credit Costs 60 NM NM 536 115 366 316 -------- -------- Operating Income Before Taxes (8) (17) (18) 4,013 4,804 (16) (18) Income Taxes (6) (17) (17) 1,560 1,873 (17) (18) -------- -------- OPERATING INCOME (10) (18) (19) 2,453 2,931 (16) (18) Add Back: Amortization of Intangibles (12) 12 (17) 93 41 127 (8) -------- -------- CASH OPERATING INCOME (10) (17) (19) $ 2,546 $ 2,972 (14) (18) ======== ======== Average Common Equity (2) % (5) % (8) % $ 19,191 $ 17,952 7 % (3) % Average Managed Assets 2 9 8 511,051 465,682 10 7 SVA (34) (44) (43) 800 1,325 (40) (38) Cash Return on Common Equity (140) bp (210) bp (180) bp 17.6 % 21.9 % (430) bp (320) bp Cash Overhead Ratio (100) (300) (400) 61 59 200 - Compensation Expense as a % of Operating Revenue (100) (300) (300) 39 39 - (200) TRADING-RELATED REVENUE Equities (44) % (45)% (46) % $ 1,143 $ 1,407 (19) % (22) % Fixed Income and Other 7 14 13 4,133 4,077 1 1 -------- -------- Total (6) (2) (3) $ 5,276 $ 5,484 (4) (5) ======== ======== INVESTMENT BANKING FEES Advisory 9 % (27)% (28) % $ 981 $ 888 10 % (32) % Underwriting and Other Fees (23) (20) (21) 1,686 2,423 (30) (17) -------- -------- Total (12) (23) (24) $ 2,667 $ 3,311 (19) (23) ---------------------------------- ======== ======== ------------------- ----------------------------------------------------------- Nine Months ended 2001 Year ended 2000 ---------------------- ----------------------- MARKET SHARE AND RANKINGS: (b) Market Share Ranking Market Share Ranking ---------------------- ----------------------- Global Announced M&A 21 % #5 18 % #6 Global Syndicated Loans 28 #1 23 #1 U.S. Equity Proceeds 3 #9 6 #6 U.S. High Grade Bond 15 #2 15 #2 U.S. High Yield Bond 9 #6 10 #5 ----------------------------------------------------------- (a) Pro forma results assume that the purchase of Flemings occurred at the beginning of 2000. (b) Derived from Thomson Financial Securities Data. Global announced M&A based on rank value; all others based on proceeds, with full credit to each book manager/equal if joint. 2001 rankings and market share are for nine months ending September 30, 2001. 2000 rankings and market share are for full year ending December 31, 2000. Note: Prior periods have been restated to conform with current methodologies. Page 8
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] INVESTMENT MANAGEMENT & PRIVATE BANKING FINANCIAL HIGHLIGHTS (IN MILLIONS, EXCEPT RATIOS) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 --------- --------- ---------- ------------ --------- OPERATING INCOME STATEMENT -------------------------- REVENUE: Fees and Commissions $ 558 $ 593 $ 598 $ 655 $ 610 Net Interest Income 124 130 137 161 159 Trading Revenue (Including Trading NII) 11 19 22 32 41 All Other Revenue 40 51 54 62 80 --------- --------- --------- --------- --------- TOTAL OPERATING REVENUE 733 793 811 910 890 --------- --------- --------- --------- --------- EXPENSE: Compensation Expense 298 340 378 386 383 Noncompensation Expense (Excluding Intangibles) 276 306 308 339 282 --------- --------- --------- --------- --------- TOTAL CASH EXPENSE 574 646 686 725 665 Amortization of Intangibles 76 71 71 71 52 --------- --------- --------- --------- --------- TOTAL OPERATING EXPENSES 650 717 757 796 717 --------- --------- --------- --------- --------- Operating Margin 83 76 54 114 173 Credit Costs 6 - 6 6 7 --------- --------- --------- --------- --------- Operating Income Before Taxes 77 76 48 108 166 Income Taxes 35 26 16 39 60 --------- --------- --------- --------- --------- OPERATING INCOME 42 50 32 69 106 Add Back: Amortization of Intangibles 76 70 70 70 51 --------- --------- --------- --------- --------- CASH OPERATING INCOME $ 118 $120 $102 $ 139 $157 ========= ========= ========= ========= ========= Average Common Equity $ 5,952 $ 6,064 $ 6,319 $ 6,473 $ 5,316 Average Managed Assets 33,970 33,510 35,240 34,510 33,886 SVA (65) (64) (88) (60) (7) Cash Return on Common Equity 7.7 % 7.8 % 6.4 % 8.3 % 11.5 % Cash Overhead Ratio 78 81 85 80 75 Compensation Expense as a % of Operating Revenue 41 43 47 42 43 ASSETS UNDER MANAGEMENT (IN BILLIONS) $ 584 (b) $ 611 $ 608 $ 638 $ 652 ----------------------- Private Banking / (Assets Under Supervision) 137/(302) (b) 144/(316) 146/(320) 152/(342) 155/(351) Institutional 390 (b) 406 404 424 433 Retail 57 (b) 61 58 62 64 ASSETS UNDER MANAGEMENT $ 584 (b) $ 611 $ 608 $ 638 $ 652 Americas 423 (b) 433 429 440 440 Europe & Asia 161 (b) 178 179 198 212 ASSETS UNDER MANAGEMENT $ 584 (b) $ 611 $ 608 $ 638 $ 652 Fixed Income & Cash 314 (b) 308 310 297 279 Equities & Other 270 (b) 303 298 341 373 -------------------------------------- ------------------- 3QTR 2001 YTD 2001 OVER (UNDER) OVER (UNDER) -------------------------------------- ------------------- YEAR TO DATE PROFORMA --------------------- PROFORMA 2Q 2001 3Q 2000 3Q 2000 (a) 2001 2000 2000 2000 (a) ----------- ------------ ----------- ---------- --------- -------- -------- OPERATING INCOME STATEMENT -------------------------- REVENUE: Fees and Commissions (6) % (9) % (15) % $ 1,749 $ 1,586 10 % (11) % Net Interest Income (5) (22) (23) 391 485 (19) (21) Trading Revenue (Including Trading NII) (42) (73) (73) 52 140 (63) (63) All Other Revenue (22) (50) (56) 145 242 (40) (56) ------- ------- TOTAL OPERATING REVENUE (8) (18) (23) 2,337 2,453 (5) (20) ------- ------- EXPENSE: Compensation Expense (12) (22) (27) 1,016 1,021 - (16) Noncompensation Expense (Excluding Intangibles) (10) (2) (8) 890 770 16 (2) ------- ------- TOTAL CASH EXPENSE (11) (14) (19) 1,906 1,791 6 (10) Amortization of Intangibles 7 46 46 218 74 195 195 ------- ------- TOTAL OPERATING EXPENSES (9) (9) (14) 2,124 1,865 14 (3) ------- ------- Operating Margin 9 (52) (56) 213 588 (64) (71) Credit Costs NM (14) (14) 12 20 (40) (40) ------- ------- Operating Income Before Taxes 1 (54) (58) 201 568 (65) (72) Income Taxes 35 (42) (48) 77 211 (64) (71) ------- ------- OPERATING INCOME (16) (60) (64) 124 357 (65) (73) Add Back: Amortization of Intangibles 9 49 49 216 72 200 200 ------- ------- CASH OPERATING INCOME (2) (25) (29) $ 340 $ 429 (21) (35) ======= ======= Average Common Equity (2) % 12 % (10) % $ 6,110 $ 3,549 72 % (6) % Average Managed Assets 1 - (8) 34,235 29,104 18 (4) SVA (2) NM NM (217) 104 (309) 234 Cash Return on Common Equity (10) bp (380) bp (220) bp 7.3 % 15.9 % (860) bp (340) bp Cash Overhead Ratio (300) 300 300 82 73 900 1,000 Compensation Expense as a % of Operating Revenue (200) (200) (200) 43 42 100 200 ------------------- ASSETS UNDER MANAGEMENT (IN BILLIONS) (4) % (10) % ----------------------- Private Banking / (Assets Under Supervision) (5)/(4) (12)/(14) Institutional (4) (10) Retail (7) (11) ASSETS UNDER MANAGEMENT (4) (10) Americas (2) (4) Europe & Asia (10) (24) ASSETS UNDER MANAGEMENT (4) (10) Fixed Income & Cash 2 13 Equities & Other (11) (28) ------------------------------------- (a) Pro forma results assume that the purchase of Flemings occurred at the beginning of 2000. (b) Estimated Note: Prior periods have been restated to conform with current methodologies. Page 9
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] TREASURY & SECURITIES SERVICES FINANCIAL HIGHLIGHTS (IN MILLIONS, EXCEPT RATIOS) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 --------- --------- --------- --------- ---------- OPERATING INCOME STATEMENT REVENUE: Fees and Commissions $ 511 $ 521 $ 505 $ 495 $ 479 Net Interest Income 350 341 359 368 362 All Other Revenue 56 49 41 51 48 -------- ------- ------- ------- ------- TOTAL OPERATING REVENUE 917 911 905 914 889 -------- ------- ------- ------- ------- EXPENSE: Compensation Expense 287 287 298 256 268 Noncompensation Expense (Excluding Intangibles) 347 364 333 370 331 -------- ------- ------- ------- ------- TOTAL CASH EXPENSE 634 651 631 626 599 Amortization of Intangibles 20 21 19 18 18 -------- ------- ------- ------- ------- TOTAL OPERATING EXPENSES 654 672 650 644 617 -------- ------- ------- ------- ------- Operating Margin 263 239 255 270 272 Credit Costs 1 1 1 1 1 -------- ------- ------- ------- ------- Operating Income Before Taxes 262 238 254 269 271 Income Taxes 96 88 95 100 101 -------- ------- ------- ------- ------- OPERATING INCOME 166 150 159 169 170 Add Back: Amortization of Intangibles 18 19 18 17 16 -------- ------- ------- ------- ------- CASH OPERATING INCOME $ 184 $ 169 $ 177 $ 186 $ 186 ======== ======= ======= ======= ======= Average Common Equity $ 2,888 $ 3,004 $ 2,856 $ 2,871 $ 2,794 Average Managed Assets 18,555 18,614 17,199 17,299 16,720 SVA 94 78 92 98 100 Cash Return on Common Equity 25.1 % 22.4 % 25.0 % 25.6 % 26.3 % Cash Overhead Ratio 69 71 70 68 67 Compensation Expense as a % of Operating Revenue 31 32 33 28 30 REVENUE Treasury Services Operating Revenue $ 344 $ 335 $ 322 $ 356 $ 323 Investor Services Operating Revenue 393 391 400 398 405 Institutional Trust Services Operating Revenue 174 180 179 156 156 Other 6 5 4 4 5 -------- ------- ------- ------- ------- Total Treasury & Securities Services Operating Revenue $ 917 $ 911 $ 905 $ 914 $ 889 ======== ======= ======= ======= ======= ---------------------- ------------ 3QTR 2001 YTD 2001 OVER (UNDER) YEAR TO DATE OVER (UNDER) ---------------------- ----------------------- ------------ 2Q 2001 3Q 2000 2001 2000 2000 -------- -------- --------- --------- ------------ OPERATING INCOME STATEMENT REVENUE: Fees and Commissions (2) % 7 % $ 1,537 $ 1,442 7 % Net Interest Income 3 (3) 1,050 1,035 1 All Other Revenue 14 17 146 173 (16) ------- ------- TOTAL OPERATING REVENUE 1 3 2,733 2,650 3 ------- ------- EXPENSE: Compensation Expense -- 7 872 816 7 Noncompensation Expense (Excluding Intangibles) (5) 5 1,044 1,030 1 ------- ------- TOTAL CASH EXPENSE (3) 6 1,916 1,846 4 Amortization of Intangibles (5) 11 60 52 15 ------- ------- TOTAL OPERATING EXPENSES (3) 6 1,976 1,898 4 ------- ------- Operating Margin 10 (3) 757 752 1 Credit Costs -- -- 3 4 (25) ------- ------- Operating Income Before Taxes 10 (3) 754 748 1 Income Taxes 9 (5) 279 277 1 ------- ------- OPERATING INCOME 11 (2) 475 471 1 Add Back: Amortization of Intangibles (5) 13 55 47 17 ------- ------- CASH OPERATING INCOME 9 (1) $ 530 $ 518 2 ======= ======= Average Common Equity (4) % 3 % $ 2,916 $ 2,836 3 % Average Managed Assets -- 11 18,128 16,351 11 SVA 21 (6) 264 258 2 Cash Return on Common Equity 270 bp (120) bp 24.1 % 24.2 % (10) bp Cash Overhead Ratio (200) 200 70 70 -- Compensation Expense as a % of Operating Revenue (100) 100 32 31 100 REVENUE Treasury Services Operating Revenue 3 % 7 % $ 1,001 $ 955 5 % Investor Services Operating Revenue 1 (3) 1,184 1,215 (3) Institutional Trust Services Operating Revenue (3) 12 533 464 15 Other 20 20 15 16 (6) ------- ------- Total Treasury & Securities Services Operating Revenue 1 3 $ 2,733 $ 2,650 3 --------------------- ======= ======= ----------- Note: Prior periods have been restated to conform with current methodologies. Page 10
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] JPMORGAN PARTNERS FINANCIAL HIGHLIGHTS (IN MILLIONS, EXCEPT RATIOS) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 -------- -------- -------- -------- -------- OPERATING INCOME STATEMENT REVENUE: Private Equity Realized Gains (Losses) $ 203 $ (60) $ 412 $ 372 $ 652 Private Equity Unrealized Gains (Losses) (306) (766) (280) (465) (672) Net Interest Income (87) (81) (84) (94) (92) Fees and Other Revenue 11 15 12 51 39 ------- ------- ------- ------- ------- TOTAL OPERATING REVENUE (179) (892) 60 (136) (73) EXPENSES: Compensation Costs 33 33 42 28 45 Noncompensation Costs (Excluding Intangibles) 30 35 51 50 68 ------- ------- ------- ------- ------- TOTAL CASH EXPENSES 63 68 93 78 113 Amortization of Intangibles 7 7 6 7 7 ------- ------- ------- ------- ------- TOTAL OPERATING EXPENSES 70 75 99 85 120 ------- ------- ------- ------- ------- Operating Margin (249) (967) (39) (221) (193) Credit Costs - - - - - ------- ------- ------- ------- ------- Operating Income Before Taxes (249) (967) (39) (221) (193) Income Taxes (89) (340) (16) (79) (70) ------- ------- ------- ------- ------- OPERATING INCOME (160) (627) (23) (142) (123) Add Back: Amortization of Intangibles 5 5 6 5 5 ------- ------- ------- ------- ------- CASH OPERATING INCOME $ (155) $ (622) $ (17) $ (137) $ (118) ======= ======= ======= ======= ======= Average Common Equity $ 5,989 $ 6,493 $ 7,015 $ 7,454 $ 7,639 Average Managed Assets 10,744 11,681 13,156 12,961 13,799 Cash Return on Common Equity NM NM NM NM NM SVA (383) (867) (281) (421) (411) ------------------- ------------ 3QTR 2001 YTD 2001 OVER (UNDER) YEAR TO DATE OVER (UNDER) ------------------ ---------------------- ------------ 2Q 2001 3Q 2000 2001 2000 2000 ------- ------- -------- ---------- ------------ OPERATING INCOME STATEMENT REVENUE: Private Equity Realized Gains (Losses) NM (69) % $ 555 $ 1,669 (67) % Private Equity Unrealized Gains (Losses) 60 % 54 (1,352) (588) NM Net Interest Income (7) 5 (252) (215) (17) Fees and Other Revenue (27) (72) 38 59 (36) ------- ------- TOTAL OPERATING REVENUE 80 NM (1,011) 925 NM EXPENSES: Compensation Costs -- (27) 108 136 (21) Noncompensation Costs (Excluding Intangibles) (14) (56) 116 176 (34) ------- ------- TOTAL CASH EXPENSES (7) (44) 224 312 (28) Amortization of Intangibles -- -- 20 14 43 ------- ------- TOTAL OPERATING EXPENSES (7) (42) 244 326 (25) ------- ------- Operating Margin 74 (29) (1,255) 599 NM Credit Costs NM NM - - NM ------- ------- Operating Income Before Taxes 74 (29) (1,255) 599 NM Income Taxes NM NM (445) 203 NM ------- ------- OPERATING INCOME 74 (30) (810) 396 NM Add Back: Amortization of Intangibles -- -- 16 10 60 ------- ------- CASH OPERATING INCOME 75 (31) $ (794) $ 406 NM ======= ======= Average Common Equity (8) % (22) % $ 6,495 $ 7,541 (14) % Average Managed Assets (8) (22) 11,852 13,439 (12) Cash Return on Common Equity -- -- NM 6.9 % -- SVA 56 7 (1,531) (456) NM ------------------ ------------ Note: Prior periods have been restated to conform with current methodologies. Page 11
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] JPMORGAN PARTNERS INVESTMENT PORTFOLIO - PRIVATE AND PUBLIC SECURITIES (IN MILLIONS, EXCEPT RATIOS) ----------------------------- SEP 30, 2001 ------------------------ OVER (UNDER) SEP 30TH JUN 30TH MAR 31ST DEC 31ST SEP 30TH ------------------------ 2001 2001 2001 2000 2000 JUN 30, 01 SEP 30, 00 -------- -------- -------- -------- -------- ---------- ---------- PORTFOLIO INFORMATION --------------------- Public Securities (169 companies) (a) Carrying Value $ 1,149 $ 1,680 $ 1,611 $ 1,859 $ 2,486 (32) % (54) % Cost 829 974 1,018 967 999 (15) (17) Private Direct Securities (927 companies) (a) Carrying Value 6,371 6,089 7,144 7,538 6,873 5 (7) Cost 7,322 6,998 7,318 7,480 6,762 5 8 Private Fund Investments (344 funds) (a) Carrying Value 2,108 2,086 2,122 2,362 2,575 1 (18) Cost 2,217 2,201 2,141 2,379 2,588 1 (14) ------- ------- ------- ------- ------- ------- ------- Total Investment Portfolio - Carrying Value $ 9,628 $ 9,855 $10,877 $11,759 $11,934 (2) (19) ======= ======= ======= ======= ======= Total Investment Portfolio - Cost $10,368 $10,173 $10,477 $10,826 $10,349 2 -- ======= ======= ======= ======= ======= ----------------------------- ================================================================================ PUBLIC SECURITIES INVESTMENTS AT SEPTEMBER 30, 2001 QUOTED PUBLIC SYMBOL SHARES VALUE COST ---------- ---------- ------------ -------------- TRITON PCS HOLDING, INC. TPCS 20.2 $ 769 $ 89 TELECORP PCS TLCP 11.4 126 8 AMERICAN TOWER CORP. AMT 5.8 81 18 WESCO INTERNATIONAL, INC. WCC 4.4 23 47 GUITAR CENTER INC. GTRC 4.7 56 50 FISHER SCIENTIFIC INTERNATIONAL FSH 3.0 74 27 ENCORE ACQUISITION COMPANY EAC 6.4 97 44 PACKAGING CORP OF AMERICA PKG 3.9 60 18 1-800 FLOWERS.COM FLWS 4.1 49 15 CROWN MEDIA HOLDINGS INC. CRWN 2.7 28 40 ---------- ---------- TOP TEN PUBLIC SECURITIES $ 1,363 $ 356 Other Public Securities (159 companies) 307 473 ---------- ---------- TOTAL PUBLIC SECURITIES (169 companies) $ 1,670 $ 829 ========== ========== (a) Total number of companies/funds are as of September 30, 2001. Page 12
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] RETAIL & MIDDLE MARKET FINANCIAL SERVICES FINANCIAL HIGHLIGHTS (IN MILLIONS, EXCEPT RATIOS) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 --------- --------- --------- --------- --------- OPERATING INCOME STATEMENT -------------------------- REVENUE: Net Interest Income $ 1,777 $ 1,715 $ 1,632 $ 1,588 $ 1,628 Fees and Commissions 774 766 699 720 676 Securities Gains 1 -- 316 151 65 All Other Revenue 230 194 (66) 136 254 --------- --------- --------- --------- --------- TOTAL OPERATING REVENUE 2,782 2,675 2,581 2,595 2,623 EXPENSES: Compensation Costs 626 604 573 560 552 Noncompensation Costs (Excluding Intangibles) 756 751 732 793 747 --------- --------- --------- --------- --------- TOTAL CASH EXPENSES 1,382 1,355 1,305 1,353 1,299 Amortization of Intangibles 45 45 45 48 50 --------- --------- --------- --------- --------- TOTAL OPERATING EXPENSES 1,427 1,400 1,350 1,401 1,349 --------- --------- --------- --------- --------- Operating Margin 1,355 1,275 1,231 1,194 1,274 Credit Costs 712 609 564 520 502 --------- --------- --------- --------- --------- Operating Income Before Taxes 643 666 667 674 772 Income Taxes 245 258 261 261 300 --------- --------- --------- --------- --------- OPERATING INCOME 398 408 406 413 472 Add Back: Amortization of Intangibles 41 43 43 46 47 --------- --------- --------- --------- --------- CASH OPERATING INCOME $ 439 $ 451 $ 449 $ 459 $ 519 ========= ========= ========= ========= ========= Average Common Equity $ 8,739 $ 8,497 $ 8,239 $ 8,360 $ 8,323 Average Managed Assets 167,160 166,887 158,955 153,606 149,823 SVA 172 193 201 202 263 Cash Return on Common Equity 19.8 % 21.1 % 21.9 % 21.6 % 24.6 % Cash Overhead Ratio 50 51 51 52 50 Compensation Expense as a % of Operating Revenue 23 23 22 22 21 RETAIL & MIDDLE MARKET FINANCIAL SERVICES' BUSINESSES ----------------------------------------------------- CARDMEMBER SERVICES: Operating Revenues $ 1,135 $ 1,058 $ 987 $ 995 $ 971 Cash Operating Earnings 149 133 116 147 146 HOME FINANCE: Operating Revenues $ 448 $ 394 $ 344 $ 330 $ 351 Cash Operating Earnings 114 90 84 74 95 REGIONAL BANKING: Operating Revenues $ 737 $ 759 $ 777 $ 784 $ 793 Cash Operating Earnings 120 130 144 128 143 MIDDLE MARKET: Operating Revenues $ 298 $ 298 $ 311 $ 301 $ 314 Cash Operating Earnings 77 72 85 77 88 AUTO FINANCE: Operating Revenues $ 136 $ 133 $ 110 $ 106 $ 102 Cash Operating Earnings 31 35 22 22 22 ------------------------------- ---------------- 3QTR 2001 YTD 2001 OVER (UNDER) YEAR TO DATE OVER (UNDER) ------------------------- ------------------------ ------------ 2Q 2001 3Q 2000 2001 2000 2000 --------- --------- --------- --------- ------------ OPERATING INCOME STATEMENT -------------------------- REVENUE: Net Interest Income 4 % 9 % $ 5,124 $ 4,745 8 % Fees and Commissions 1 14 2,239 1,984 13 Securities Gains NM NM 317 101 214 All Other Revenue 19 (9) 358 765 (53) --------- --------- TOTAL OPERATING REVENUE 4 6 8,038 7,595 6 EXPENSES: Compensation Costs 4 13 1,803 1,688 7 Noncompensation Costs (Excluding Intangibles) 1 1 2,239 2,233 -- --------- --------- TOTAL CASH EXPENSES 2 6 4,042 3,921 3 Amortization of Intangibles -- (10) 135 148 (9) --------- --------- TOTAL OPERATING EXPENSES 2 6 4,177 4,069 3 --------- --------- Operating Margin 6 6 3,861 3,526 10 Credit Costs 17 42 1,885 1,563 21 --------- --------- Operating Income Before Taxes (3) (17) 1,976 1,963 1 Income Taxes (5) (18) 764 767 -- --------- --------- OPERATING INCOME (2) (16) 1,212 1,196 1 Add Back: Amortization of Intangibles (5) (13) 127 140 (9) --------- --------- CASH OPERATING INCOME (3) (15) $ 1,339 $ 1,336 -- ========= ========= Average Common Equity 3 % 5 % $ 8,493 $ 8,621 (1) % Average Managed Assets -- 12 164,364 146,473 12 SVA (11) (35) 566 545 4 Cash Return on Common Equity (130) bp (480) bp 20.9 % 20.4 % 50 bp Cash Overhead Ratio (100) -- 50 52 (200) Compensation Expense as a % of Operating Revenue -- 200 22 22 -- RETAIL & MIDDLE MARKET FINANCIAL SERVICES' BUSINESSES ----------------------------------------------------- CARDMEMBER SERVICES: Operating Revenues 7 % 17 % $ 3,180 $ 2,803 13 % Cash Operating Earnings 12 2 398 364 9 HOME FINANCE: Operating Revenues 14 28 $ 1,186 $ 988 20 Cash Operating Earnings 27 20 288 234 23 REGIONAL BANKING: Operating Revenues (3) (7) $ 2,273 $ 2,344 (3) Cash Operating Earnings (8) (16) 394 421 (6) MIDDLE MARKET: Operating Revenues -- (5) $ 907 $ 930 (2) Cash Operating Earnings 7 (13) 234 246 (5) AUTO FINANCE: Operating Revenues 2 33 $ 379 $ 226 68 Cash Operating Earnings (11) 41 88 17 NM ------------------------------- ---------------- Note: Prior periods have been restated to conform with current methodologies. Page 13
[J.P. MORGAN CHASE & CO. LOGO] SUPPLEMENTAL DETAIL
[J.P. MORGAN CHASE LOGO] J.P. MORGAN CHASE & CO. NONINTEREST REVENUE AND NONINTEREST EXPENSE DETAIL ON A REPORTED BASIS (IN MILLIONS) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 ------- ------- ------- ------- ------- NONINTEREST REVENUE INVESTMENT BANKING FEES: Advisory $ 329 $ 308 $ 340 $ 407 $ 362 Underwriting and Other Fees 482 621 601 644 651 ------- ------- ------- ------- ------- TOTAL $ 811 $ 929 $ 941 $ 1,051 $ 1,013 ======= ======= ======= ======= ======= TRADING-RELATED REVENUE: (a) Equities $ 251 $ 450 $ 505 $ 262 $ 471 Fixed Income and Other 1,363 1,144 1,662 1,152 1,161 ------- ------- ------- ------- ------- TOTAL $ 1,614 $ 1,594 $ 2,167 $ 1,414 $ 1,632 ======= ======= ======= ======= ======= FEES AND COMMISSIONS: Investment Management, Custody and Processing Services $ 918 $ 943 $ 974 $ 1,008 $ 963 Credit Card Revenue 548 465 433 460 471 Brokerage and Investment Services 268 308 363 343 313 Mortgage Servicing Fees, Net of Amortization and Writedowns 9 75 (233) 21 139 Other Lending-Related Service Fees 125 122 130 143 143 Deposit Service Charges 262 258 226 238 221 Other Fees 201 217 172 174 177 ------- ------- ------- ------- ------- TOTAL $ 2,331 $ 2,388 $ 2,065 $ 2,387 $ 2,427 ======= ======= ======= ======= ======= OTHER REVENUE: Residential Mortgage Origination/Sales Activities $ 151 $ 146 $ 99 $ 59 $ 81 Gains on Sales of Nonstrategic Assets -- -- -- 1,226 50 Loss on Economic Hedge of the Flemings Purchase Price (b) -- -- -- -- (35) All Other Revenue 61 128 147 197 319 ------- ------- ------- ------- ------- TOTAL $ 212 $ 274 $ 246 $ 1,482 $ 415 ======= ======= ======= ======= ======= NONINTEREST EXPENSE OTHER EXPENSE: Professional Services $ 267 $ 288 $ 295 $ 365 $ 275 Outside Services 181 166 166 171 161 Marketing 137 144 141 173 161 Travel and Entertainment 116 137 122 143 115 All Other 291 312 338 375 299 ------- ------- ------- ------- ------- TOTAL $ 992 $ 1,047 $ 1,062 $ 1,227 $ 1,011 ======= ======= ======= ======= ======= 3QTR 2001 YTD 2001 OVER (UNDER) YEAR TO DATE OVER (UNDER) ------------------- --------------------- ----------- 2Q 2001 3Q 2000 2001 2000 2000 ------- ------- ------- ------- ----------- NONINTEREST REVENUE INVESTMENT BANKING FEES: Advisory 7 % (9) % $ 977 $ 1,116 (12) % Underwriting and Other Fees (22) (26) 1,704 2,195 (22) ------- ------- TOTAL (13) (20) $ 2,681 $ 3,311 (19) ======= ======= TRADING-RELATED REVENUE: (A) Equities (44) (47) $ 1,206 $ 1,535 (21) Fixed Income and Other 19 17 4,169 4,193 (1) ------- ------- TOTAL 1 (1) $ 5,375 $ 5,728 (6) ======= ======= FEES AND COMMISSIONS: Investment Management, Custody and Processing Services (3) (5) $ 2,835 $ 2,620 8 Credit Card Revenue 18 16 1,446 1,311 10 Brokerage and Investment Services (13) (14) 939 885 6 Mortgage Servicing Fees, Net of Amortization and Writedowns (88) (94) (149) 420 NM Other Lending-Related Service Fees 2 (13) 377 447 (16) Deposit Service Charges 2 19 746 668 12 Other Fees (7) 14 590 491 20 ------- ------- TOTAL (2) (4) $ 6,784 $ 6,842 (1) ======= ======= OTHER REVENUE: Residential Mortgage Origination/Sales Activities 3 86 $ 396 $ 166 139 Gains on Sales of Nonstrategic Assets NM NM -- 50 NM Loss on Economic Hedge of the Flemings Purchase Price (b) NM NM -- (176) NM All Other Revenue (52) (81) 336 767 (56) ------- ------- TOTAL (23) (49) $ 732 $ 807 (9) ======= ======= NONINTEREST EXPENSE OTHER EXPENSE: Professional Services (7) (3) $ 850 $ 838 1 Outside Services 9 12 513 477 8 Marketing (5) (15) 422 422 -- Travel and Entertainment (15) 1 375 347 8 All Other (7) (3) 941 1,058 (11) ------- ------- TOTAL (5) (2) $ 3,101 $ 3,142 (1) ======= ======= (a) Includes trading-related net interest income. (b) Loss is the result of the economic hedge of the purchase price of Flemings prior to its acquisition. Page 14
[J.P. MORGAN CHASE LOGO] J.P. MORGAN CHASE & CO. CONSOLIDATED BALANCE SHEET (IN MILLIONS) SEP 30TH JUN 30TH MAR 31ST DEC 31ST SEP 30TH 2001 2001 2001 2000 2000 -------- -------- -------- -------- -------- ASSETS Cash and Due from Banks $ 22,299 $ 24,219 $ 22,371 $ 23,972 $ 20,284 Deposits with Banks 9,341 11,903 7,979 8,333 8,669 Federal Funds Sold and Securities Purchased Under Resale Agreements 78,997 61,308 71,147 69,474 69,413 Securities Borrowed 37,499 38,296 37,264 32,371 36,424 Trading Assets: Debt and Equity Instruments 165,143 139,135 138,270 139,249 140,992 Derivative Receivables 85,407 68,910 78,907 76,373 67,028 Securities 66,468 68,488 69,731 73,695 71,282 Loans (Net of Allowance for Loan Losses) 219,411 216,245 213,116 212,385 214,496 Goodwill and Other Intangibles 14,683 16,224 15,351 15,833 15,678 Private Equity Investments 9,628 9,855 10,877 11,428 11,502 Other Assets 90,424 58,119 48,611 52,235 51,729 --------- --------- --------- --------- --------- TOTAL ASSETS $ 799,300 $ 712,702 $ 713,624 $ 715,348 $ 707,497 ========= ========= ========= ========= ========= LIABILITIES Deposits: Noninterest-Bearing $ 72,734 $ 64,231 $ 59,686 $ 62,713 $ 54,903 Interest-Bearing 208,870 212,573 212,886 216,652 214,882 --------- --------- --------- --------- --------- Total Deposits 281,604 276,804 272,572 279,365 269,785 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 181,775 155,062 145,703 131,738 145,210 Commercial Paper 19,299 19,985 16,281 24,851 19,462 Other Borrowed Funds 21,941 18,418 28,716 19,840 20,065 Trading Liabilities: Debt and Equity Instruments 58,594 53,571 52,501 52,157 58,972 Derivative Payables 70,817 62,373 73,312 76,517 65,253 Accounts Payable, Accrued Expenses and Other Liabilities (Including the Allowance for Credit Losses) 75,231 38,157 33,575 40,754 37,225 Long-Term Debt 42,315 40,917 42,609 43,299 45,634 Guaranteed Preferred Beneficial Interests in the Firm's Junior Subordinated Deferrable Interest Debentures 4,439 4,439 4,439 3,939 3,939 --------- --------- --------- --------- --------- TOTAL LIABILITIES 756,015 669,726 669,708 672,460 665,545 PREFERRED STOCK OF SUBSIDIARY 550 550 550 550 550 STOCKHOLDERS' EQUITY Preferred Stock 1,009 1,025 1,362 1,520 1,522 Common Stock 1,993 1,990 1,984 1,940 2,066 Capital Surplus 12,244 12,000 11,663 11,598 12,427 Retained Earnings 28,021 28,265 28,592 28,096 31,678 Accumulated Other Comprehensive Income (Loss) 267 (834) (214) (241) (995) Treasury Stock, at Cost (799) (20) (21) (575) (5,296) --------- --------- --------- --------- --------- TOTAL STOCKHOLDERS' EQUITY 42,735 42,426 43,366 42,338 41,402 --------- --------- --------- --------- --------- TOTAL LIABILITIES, PREFERRED STOCK OF SUBSIDIARY AND STOCKHOLDERS' EQUITY $ 799,300 $ 712,702 $ 713,624 $ 715,348 $ 707,497 ========= ========= ========= ========= ========= SEP 30, 2001 OVER (UNDER) -------------------------- JUN 30, 01 SEP 30, 00 ---------- ---------- ASSETS Cash and Due from Banks (8) % 10 % Deposits with Banks (22) 8 Federal Funds Sold and Securities Purchased Under Resale Agreements 29 14 Securities Borrowed (2) 3 Trading Assets: Debt and Equity Instruments 19 17 Derivative Receivables 24 27 Securities (3) (7) Loans (Net of Allowance for Loan Losses) 1 2 Goodwill and Other Intangibles (9) (6) Private Equity Investments (2) (16) Other Assets 56 75 TOTAL ASSETS 12 13 LIABILITIES Deposits: Noninterest-Bearing 13 32 Interest-Bearing (2) (3) Total Deposits 2 4 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 17 25 Commercial Paper (3) (1) Other Borrowed Funds 19 9 Trading Liabilities: Debt and Equity Instruments 9 (1) Derivative Payables 14 9 Accounts Payable, Accrued Expenses and Other Liabilities (Including the Allowance for Credit Losses) 97 102 Long-Term Debt 3 (7) Guaranteed Preferred Beneficial Interests in the Firm's Junior Subordinated Deferrable Interest Debentures -- 13 TOTAL LIABILITIES 13 14 PREFERRED STOCK OF SUBSIDIARY -- -- STOCKHOLDERS' EQUITY Preferred Stock (2) (34) Common Stock -- (4) Capital Surplus 2 (1) Retained Earnings (1) (12) Accumulated Other Comprehensive Income (Loss) NM NM Treasury Stock, at Cost NM NM TOTAL STOCKHOLDERS' EQUITY 1 3 TOTAL LIABILITIES, PREFERRED STOCK OF SUBSIDIARY AND STOCKHOLDERS' EQUITY 12 13 Page 15
J.P. MORGAN CHASE & CO. CONDENSED AVERAGE BALANCE SHEET AND ANNUALIZED YIELDS [J.P. MORGAN CHASE LOGO] (IN MILLIONS, EXCEPT RATES) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 -------- ------- -------- -------- -------- AVERAGE BALANCES ASSETS Deposits with Banks $ 8,583 $ 9,535 $ 7,517 $ 10,209 $ 8,258 Federal Funds Sold and Securities Purchased Under Resale Agreements 80,396 86,556 82,836 80,405 79,495 Securities and Trading Assets 200,161 194,736 200,872 197,636 179,233 Securities Borrowed 38,122 38,006 37,261 36,887 37,270 Loans 224,125 217,447 219,133 215,422 213,312 -------- ------- -------- -------- -------- Total Interest-Earning Assets 551,387 546,280 547,619 540,559 517,568 Noninterest-Earning Assets 185,891 189,488 183,339 163,065 166,717 -------- ------- -------- -------- -------- TOTAL ASSETS $737,278 $735,768 $730,958 $703,624 $684,285 ======== ======== ======== ======== ======== LIABILITIES Interest-Bearing Deposits $207,430 $215,987 $216,749 $215,147 $212,918 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 170,708 167,126 152,675 149,237 134,478 Commercial Paper 21,307 17,818 17,963 21,889 16,851 Other Borrowings 67,218 63,038 70,606 65,071 61,770 Long-Term Debt 44,788 45,173 47,445 46,723 47,113 -------- ------- -------- -------- -------- Total Interest-Bearing Liabilities 511,451 509,142 505,438 498,067 473,130 Noninterest Bearing-Liabilities 182,757 183,118 182,218 163,113 171,764 -------- ------- -------- -------- -------- TOTAL LIABILITIES 694,208 692,260 687,656 661,180 644,894 ======== ======== ======== ======== ======== PREFERRED STOCK OF SUBSIDIARY 550 550 550 550 550 ======== ======== ======== ======== ======== Preferred Stock 1,017 1,239 1,487 1,522 1,522 Common Stockholders' Equity 41,503 41,719 41,265 40,372 37,319 -------- ------- -------- -------- -------- TOTAL STOCKHOLDERS' EQUITY 42,520 42,958 42,752 41,894 38,841 ======== ======== ======== ======== ======== TOTAL LIABILITIES, PREFERRED STOCK OF SUBSIDIARY AND STOCKHOLDERS' EQUITY $737,278 $735,768 $730,958 $703,624 $684,285 ======== ======== ======== ======== ======== AVERAGE RATES INTEREST-EARNING ASSETS Deposits with Banks 4.64 % 4.65 % 7.51 % 7.96 % 8.68 % Federal Funds Sold and Securities Purchased Under Resale Agreements 4.19 4.98 5.86 6.27 5.97 Securities and Trading Assets 5.51 5.90 5.86 6.34 6.58 Securities Borrowed 3.17 3.66 5.37 6.80 6.48 Loans 6.54 7.55 8.27 8.66 8.39 TOTAL INTEREST-EARNING ASSETS 5.56 6.23 6.81 7.31 7.26 INTEREST-BEARING LIABILITIES Interest-Bearing Deposits 3.48 3.94 4.93 5.40 5.17 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3.81 4.29 5.67 6.22 6.06 Commercial Paper 3.53 4.39 5.98 6.21 6.65 Other Borrowings 5.31 6.04 5.64 6.37 7.27 Long-Term Debt 4.43 5.63 6.36 7.03 7.24 TOTAL INTEREST-BEARING LIABILITIES 3.92 4.48 5.43 5.96 5.95 TOTAL INVESTABLE FUNDS 3.63 4.17 5.01 5.49 5.44 INTEREST RATE SPREAD 1.64% 1.75% 1.38% 1.35% 1.31% ======== ======== ======== ======== ======== NET INTEREST MARGIN 1.93% 2.06% 1.80% 1.82% 1.82% ======== ======== ======== ======== ======== NET INTEREST MARGIN ADJUSTED FOR SECURITIZATIONS 2.13% 2.22% 1.96% 1.99% 2.01% ======== ======== ======== ======== ======== ----------------------- ----------- 3QTR 2001 YTD 2001 OVER (UNDER) YEAR TO DATE OVER (UNDER) ----------------------- ------------------------ ----------- 2Q 2001 3Q 2000 2001 2000 2000 -------- ------- -------- --------- ----------- AVERAGE BALANCES ASSETS Deposits with Banks (10) % 4 % $ 8,549 $ 9,133 (6) % Federal Funds Sold and Securities Purchased Under Resale Agreements (7) 1 83,254 78,988 5 Securities and Trading Assets 3 12 198,587 172,436 15 Securities Borrowed -- 2 37,799 36,234 4 Loans 3 5 220,253 207,496 6 -------- --------- Total Interest-Earning Assets 1 7 548,442 504,287 9 Noninterest-Earning Assets (2) 12 186,249 163,513 14 -------- --------- TOTAL ASSETS -- 8 $734,691 $667,800 10 ======== ========= LIABILITIES Interest-Bearing Deposits (4) (3) $213,355 $214,164 -- Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2 27 163,569 128,489 27 Commercial Paper 20 26 19,042 16,636 14 Other Borrowings 7 9 66,941 57,292 17 Long-Term Debt (1) (5) 45,792 46,134 (1) -------- --------- Total Interest-Bearing Liabilities -- 8 508,699 462,715 10 Noninterest Bearing-Liabilities -- 6 182,699 168,181 9 -------- --------- TOTAL LIABILITIES -- 8 691,398 630,896 10 ======== ========= PREFERRED STOCK OF SUBSIDIARY -- -- 550 550 -- ======== ========= Preferred Stock (18) (33) 1,246 1,588 (22) Common Stockholders' Equity (1) 11 41,497 34,766 19 -------- --------- TOTAL STOCKHOLDERS' EQUITY (1) 9 42,743 36,354 18 ======== ========= TOTAL LIABILITIES, PREFERRED STOCK OF SUBSIDIARY AND STOCKHOLDERS' EQUITY -- 8 $734,691 $667,800 10 ======== ========= AVERAGE RATES INTEREST-EARNING ASSETS Deposits with Banks (1) bp (404) bp 5.48 % 8.31 % (283) bp Federal Funds Sold and Securities Purchased Under Resale Agreements (79) (178) 5.01 5.89 (88) Securities and Trading Assets (39) (107) 5.75 6.59 (84) Securities Borrowed (49) (331) 4.05 6.13 (208) Loans (101) (185) 7.44 8.09 (65) TOTAL INTEREST-EARNING ASSETS (67) (170) 6.20 7.10 (90) INTEREST-BEARING LIABILITIES Interest-Bearing Deposits (46) (169) 4.12 4.94 (82) Federal Funds Purchased and Securities Sold Under Repurchase Agreements (48) (225) 4.55 5.70 (115) Commercial Paper (86) (312) 4.56 6.25 (169) Other Borrowings (73) (196) 5.66 7.28 (162) Long-Term Debt (120) (281) 5.48 6.85 (137) TOTAL INTEREST-BEARING LIABILITIES (56) (203) 4.60 5.68 (108) TOTAL INVESTABLE FUNDS (54) (181) 4.27 5.21 (94) INTEREST RATE SPREAD (11) 33 1.60% 1.42% 18 ======== ========= NET INTEREST MARGIN (13) 11 1.93% 1.89% 4 ======== ========= NET INTEREST MARGIN ADJUSTED FOR SECURITIZATIONS (9) 12 2.10% 2.08% 2 ----------------------- ======== ========= ------------ Page 16
[J.P. MORGAN CHASE & CO LOGO] J.P. MORGAN CHASE & CO. CREDIT-RELATED INFORMATION (IN MILLIONS, EXCEPT RATIOS) SEP 30TH JUN 30TH MAR 31ST DEC 31ST SEP 30TH 2001 2001 2001 2000 2000 -------- -------- -------- -------- -------- CREDIT-RELATED ASSETS COMMERCIAL LOANS Domestic Commercial $ 77,712 $ 74,563 $ 73,046 $ 76,207 $ 75,156 Foreign Commercial 38,866 38,227 40,171 43,253 49,802 -------- -------- -------- -------- -------- Total Commercial Loans 116,578 112,790 113,217 119,460 124,958 Derivative and FX Contracts 85,407 68,910 78,907 76,373 67,028 -------- -------- -------- -------- -------- TOTAL COMMERCIAL CREDIT-RELATED 201,985 181,700 192,124 195,833 191,986 CONSUMER LOANS Credit Card - Reported 19,255 19,531 19,835 18,495 14,981 Credit Card - Securitizations 18,724 17,753 16,625 17,871 18,022 -------- -------- -------- -------- -------- Credit Card - Managed 37,979 37,284 36,460 36,366 33,003 1-4 Family Residential Mortgages 55,160 56,743 54,143 50,302 48,902 Auto Financings 24,448 23,322 21,457 19,802 19,921 Other Consumer 7,844 7,532 8,136 7,991 9,483 -------- -------- -------- -------- -------- TOTAL MANAGED CONSUMER LOANS 125,431 124,881 120,196 114,461 111,309 -------- -------- -------- -------- -------- TOTAL MANAGED CREDIT-RELATED ASSETS $327,416 $306,581 $312,320 $310,294 $303,295 ======== ======== ======== ======== ======== NONPERFORMING ASSETS AND RATIOS COMMERCIAL LOANS Domestic Commercial $ 1,438 $ 1,528 $ 1,209 $ 821 $ 671 Foreign Commercial 580 362 428 613 744 -------- -------- -------- -------- -------- Total Commercial Loans 2,018 1,890 1,637 1,434 1,415 Derivative and FX Contracts 46 88 109 37 52 -------- -------- -------- -------- -------- TOTAL COMMERCIAL CREDIT-RELATED ASSETS 2,064 1,978 1,746 1,471 1,467 CONSUMER LOANS Credit Card - Reported 23 25 24 26 30 Credit Card - Securitizations -- -- -- -- -- -------- -------- -------- -------- -------- Credit Card - Managed 23 25 24 26 30 1-4 Family Residential Mortgages 273 263 254 269 273 Auto Financings 110 97 84 76 80 Other Consumer 53 16 15 13 13 -------- -------- -------- -------- -------- TOTAL CONSUMER LOANS 459 401 377 384 396 -------- -------- -------- -------- -------- TOTAL MANAGED CREDIT-RELATED ASSETS 2,523 2,379 2,123 1,855 1,863 Assets Acquired in Loan Satisfactions 123 119 111 68 81 -------- -------- -------- -------- -------- TOTAL NONPERFORMING ASSETS $ 2,646 (a) $ 2,498 $ 2,234 $ 1,923 $ 1,944 ======== ======== ======== ======== ======== TOTAL NONPERFORMING ASSETS TO TOTAL ASSETS 0.33% 0.35% 0.31% 0.27% 0.27% ======== ======== ======== ======== ======== PAST DUE 90 DAYS AND OVER AND ACCRUING COMMERCIAL LOANS Domestic Commercial $ 19 $ 48 $ 114 $ 98 $ 105 Foreign Commercial 44 34 -- 1 1 -------- -------- -------- -------- -------- TOTAL COMMERCIAL CREDIT-RELATED 63 82 114 99 106 CONSUMER LOANS Credit Card - Reported 394 326 352 327 266 Credit Card - Securitizations 348 374 374 387 329 -------- -------- -------- -------- -------- Credit Card - Managed 742 700 726 714 595 1-4 Family Residential Mortgages -- -- 3 2 1 Auto Financings 1 1 1 1 1 Other Consumer 28 66 69 71 64 -------- -------- -------- -------- -------- TOTAL CONSUMER LOANS 771 767 799 788 661 -------- -------- -------- -------- -------- TOTAL CR.-REL. ACCRUING ASSETS PAST DUE 90 DAYS $ 834 $ 849 $ 913 $ 887 $ 767 ======== ======== ======== ======== ======== ---------------------------- SEP 30, 2001 OVER (UNDER) ---------------------------- JUN 30, 01 SEP 30, 00 ---------- ---------- CREDIT-RELATED ASSETS COMMERCIAL LOANS Domestic Commercial 4 % 3 % Foreign Commercial 2 (22) Total Commercial Loans 3 (7) Derivative and FX Contracts 24 27 TOTAL COMMERCIAL CREDIT-RELATED 11 5 CONSUMER LOANS Credit Card - Reported (1) 29 Credit Card - Securitizations 5 4 Credit Card - Managed 2 15 1-4 Family Residential Mortgages (3) 13 Auto Financings 5 23 Other Consumer 4 (17) TOTAL MANAGED CONSUMER LOANS -- 13 TOTAL MANAGED CREDIT-RELATED ASSETS 7 8 NONPERFORMING ASSETS AND RATIOS COMMERCIAL LOANS Domestic Commercial (6) 114 Foreign Commercial 60 (22) Total Commercial Loans 7 43 Derivative and FX Contracts (48) (12) TOTAL COMMERCIAL CREDIT-RELATED ASSETS 4 41 CONSUMER LOANS Credit Card - Reported (8) (23) Credit Card - Securitizations NM NM Credit Card - Managed (8) (23) 1-4 Family Residential Mortgages 4 -- Auto Financings 13 38 Other Consumer NM NM TOTAL CONSUMER LOANS 14 16 TOTAL MANAGED CREDIT-RELATED ASSETS 6 35 Assets Acquired in Loan Satisfactions 3 52 TOTAL NONPERFORMING ASSETS 6 36 TOTAL NONPERFORMING ASSETS TO TOTAL ASSETS (2) bp 6 bp PAST DUE 90 DAYS AND OVER AND ACCRUING COMMERCIAL LOANS Domestic Commercial (60) % (82) % Foreign Commercial 29 NM TOTAL COMMERCIAL CREDIT-RELATED (23) (41) CONSUMER LOANS Credit Card - Reported 21 48 Credit Card - Securitizations (7) 6 Credit Card - Managed 6 25 1-4 Family Residential Mortgages NM (100) Auto Financings -- -- Other Consumer (58) (56) TOTAL CONSUMER LOANS 1 17 TOTAL CR.-REL. ACCRUING ASSETS PAST DUE 90 DAYS (2) 9 --------------------------- (a) Nonperforming assets have not been reduced for credit protection (single name credit default swaps and collateralized loan obligations) aggregating $114 million related to nonperforming counterparties. Page 17
[J.P. MORGAN CHASE LOGO] J.P. MORGAN CHASE & CO. CREDIT-RELATED INFORMATION (CONT.) (IN MILLIONS, EXCEPT RATIOS) 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 ------ ------ ------ ------ ------ NET CHARGE-OFFS COMMERCIAL LOANS Domestic Commercial $ 126 $ 177 $ 126 $ 88 $ 80 Foreign Commercial 63 35 22 71 3 ------ ------ ------ ------ ------ TOTAL COMMERCIAL LOANS 189 212 148 159 83 CONSUMER LOANS Credit Card - Reported 264 234 218 172 167 Credit Card - Securitizations 270 273 241 245 236 ------ ------ ------ ------ ------ Credit Card - Managed 534 507 459 417 403 1-4 Family Residential Mortgages 15 7 10 10 7 Auto Financings 32 26 29 26 20 Other Consumer 45 46 42 42 46 ------ ------ ------ ------ ------ TOTAL CONSUMER LOANS 626 586 540 495 476 FFIEC CONFORMITY -- -- -- 93 -- ------ ------ ------ ------ ------ TOTAL MANAGED NET CHARGE-OFFS $ 815 $ 798 $ 688 $ 747 $ 559 ====== ====== ====== ====== ====== NET CHARGE-OFF RATES - ANNUALIZED COMMERCIAL LOANS Domestic Commercial 0.59 % 0.90 % 0.62 % 0.42 % 0.38 % Foreign Commercial 0.79 0.46 0.24 0.77 0.03 TOTAL COMMERCIAL LOANS 0.65 0.77 0.50 0.53 0.27 CONSUMER LOANS Credit Card - Reported 5.47 4.69 4.44 4.27 5.06 Credit Card - Securitizations 5.82 6.55 5.77 5.40 4.94 Credit Card - Managed 5.64 5.54 5.05 4.86 4.99 1-4 Family Residential Mortgages 0.10 0.05 0.08 0.08 0.06 Auto Financings 0.53 0.46 0.56 0.51 0.41 Other Consumer 2.33 2.30 1.91 1.73 1.94 TOTAL CONSUMER LOANS 1.96 1.89 1.83 1.74 1.72 TOTAL MANAGED NET CHARGE-OFF RATES 1.33 1.37 1.17 1.28 0.96 ALLOWANCE FOR LOAN LOSSES AND RATIOS Allowance for Loan Losses (a) $ 3,874 $ 3,673 $ 3,672 $ 3,665 $ 3,749 To Total Loans 1.74 % 1.67 % 1.69 % 1.70 % 1.72 % To Total Nonperforming Loans 156 160 182 202 207 To Total Nonperforming Assets 146 147 164 191 193 SELECTED COUNTRY TOTAL EXPOSURE (a) (IN BILLIONS) Argentina $0.9 (b) $ 1.4 $ 1.8 $ 1.4 N/A Brazil 3.2 (b) 2.8 1.9 2.4 N/A Turkey 0.2 (b) 0.2 0.3 0.7 N/A ---------------------- ------------ 3QTR 2001 YTD 2001 OVER (UNDER) YEAR TO DATE OVER (UNDER) ---------------------- -------------------- ----------- 2Q 2001 3Q 2000 2001 2000 2000 ------- ------- ------ ------- ----------- NET CHARGE-OFFS COMMERCIAL LOANS Domestic Commercial (29) % 58 % $ 429 $ 202 112 % Foreign Commercial 80 NM 120 39 208 ------- -------- TOTAL COMMERCIAL LOANS (11) 128 549 241 128 CONSUMER LOANS Credit Card - Reported 13 58 716 521 37 Credit Card - Securitizations (1) 14 784 732 7 ------- -------- Credit Card - Managed 5 33 1,500 1,253 20 1-4 Family Residential Mortgages 114 114 32 26 23 Auto Financings 23 60 87 63 38 Other Consumer (2) (2) 133 140 (5) ------- -------- TOTAL CONSUMER LOANS 7 32 1,752 1,482 18 FFIEC CONFORMITY NM NM -- -- NM ------- -------- TOTAL MANAGED NET CHARGE-OFFS 2 46 $2,301 $ 1,723 34 ======= ======= NET CHARGE-OFF RATES - ANNUALIZED COMMERCIAL LOANS Domestic Commercial (31) bp 21 bp 0.70 % 0.32 % 38 bp Foreign Commercial 33 76 0.49 0.15 34 TOTAL COMMERCIAL LOANS (12) 38 0.64 0.27 37 CONSUMER LOANS Credit Card - Reported 78 41 4.88 5.28 (40) Credit Card - Securitizations (73) 88 6.06 5.15 91 Credit Card - Managed 10 65 5.43 5.20 23 1-4 Family Residential Mortgages 5 4 0.08 0.07 1 Auto Financings 7 12 0.52 0.44 8 Other Consumer 3 39 2.18 1.90 28 TOTAL CONSUMER LOANS 7 24 1.90 1.84 6 TOTAL MANAGED NET CHARGE-OFF RATES (4) 37 1.30 1.02 28 ALLOWANCE FOR LOAN LOSSES AND RATIOS Allowance for Loan Losses (a) 5 % 3 % To Total Loans 7 bp 2 bp To Total Nonperforming Loans (400) NM To Total Nonperforming Assets (100) NM SELECTED COUNTRY TOTAL EXPOSURE (a) (IN BILLIONS) Argentina (36) % N/A Brazil 14 N/A Turkey - N/A ---------------------- ------------ (a) Represents period end balances for each respective quarter. (b) Estimated Page 18
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] CAPITAL 3QTR 2QTR 1QTR 4QTR 3QTR 2001 2001 2001 2000 2000 --------- --------- --------- --------- --------- SOURCES AND USES OF TIER 1 CAPITAL ---------------------------------- (IN BILLIONS) SOURCES OF FREE CASH FLOW Cash Operating Earnings Less Dividends $ 0.5 (a) $ 0.2 $ 0.9 $ 0.3 $ 1.0 Plus: Preferred Stock and Equivalents/Other Items (0.6)(a) (0.7) 0.2 (0.1) 0.2 Less: Capital for Internal Asset Growth (1.1)(a) (0.5) (0.5) 1.3 -- --------- --------- --------- --------- --------- TOTAL SOURCES OF FREE CASH FLOW $ (1.2) $ (1.0) $ 0.6 $ 1.5 $ 1.2 ========= ========= ========= ========= ========= USES OF FREE CASH FLOW Increases (Decreases) in Capital Ratios $ (1.7)(a) $ (0.7) $ 1.2 $ 1.6 $ (1.9) Acquisitions -- (a) -- 0.1 -- 6.8 Repurchases Net of Stock Issuances 0.5 (a) (0.3) (0.7) (0.1) (3.7) --------- --------- --------- --------- --------- TOTAL USES OF FREE CASH FLOW $ (1.2) $ (1.0) $ 0.6 $ 1.5 $ 1.2 ========= ========= ========= ========= ========= COMMON SHARES OUTSTANDING ------------------------- (IN MILLIONS) Basic Weighted-Average Shares Outstanding 1,975.3 1,978.4 1,966.6 1,924.8 1,893.3 Diluted Weighted-Average Shares Outstanding 2,020.9 2,033.6 2,032.2 2,007.1 1,983.4 Common Shares Outstanding - at Period End 1,972.9 1,989.2 1,984.2 1,928.5 1,901.1 CASH DIVIDENDS DECLARED PER SHARE $ 0.34 $ 0.34 $ 0.34 $ 0.32 $ 0.32 BOOK VALUE PER SHARE 21.15 20.81 21.17 21.17 20.98 SHARE PRICE ----------- High $ 46.01 $ 50.60 $ 59.19 $ 48.13 $ 58.38 Low 29.04 39.21 37.58 32.38 44.56 Close 34.15 44.60 44.90 45.44 46.19 CAPITAL RATIOS -------------- Tier I Capital Ratio 8.2%(a) 8.7% 8.7% 8.5% 8.1% Total Capital Ratio 11.6 (a) 12.2 12.3 12.0 11.7 Tier I Leverage 5.3 (a) 5.4 5.4 5.4 5.6 ---------------------- ------------ 3QTR 2001 YTD 2001 OVER (UNDER) YEAR TO DATE OVER (UNDER) ---------------------- --------------------------- ------------ 2Q 2001 3Q 2000 2001 2000 2000 --------- --------- --------- --------- ------------ SOURCES AND USES OF TIER 1 CAPITAL ---------------------------------- (IN BILLIONS) SOURCES OF FREE CASH FLOW Cash Operating Earnings Less Dividends 150% (50)% $ 1.6 (a) $ 3.7 (57)% Plus: Preferred Stock and Equivalents/Other Items (14) NM (1.1)(a) (0.1) NM Less: Capital for Internal Asset Growth 120 NM (2.1)(a) (1.2) 75 --------- --------- TOTAL SOURCES OF FREE CASH FLOW 20 NM $ (1.6) $ 2.4 NM ========= ========= USES OF FREE CASH FLOW Increases (Decreases) in Capital Ratios 143 (11) $ (1.2)(a) $ (1.6) (25) Acquisitions NM NM 0.1 (a) 6.8 (99) Repurchases Net of Stock Issuances NM NM (0.5)(a) (2.8) (82) --------- --------- TOTAL USES OF FREE CASH FLOW 20 NM $ (1.6) $ 2.4 NM ========= ========= COMMON SHARES OUTSTANDING ------------------------- (IN MILLIONS) Basic Weighted-Average Shares Outstanding -- 4 1,973.5 1,870.7 5 Diluted Weighted-Average Shares Outstanding (1) 2 2,028.9 1,955.8 4 Common Shares Outstanding - at Period End (1) 4 1,972.9 1,901.1 4 CASH DIVIDENDS DECLARED PER SHARE -- 6 $ 1.02 $ 0.96 6 BOOK VALUE PER SHARE 2 1 SHARE PRICE ----------- High (9) (21) $ 59.19 $ 67.17 (12) Low (26) (35) 29.04 44.13 (34) Close (23) (26) 34.15 46.19 (26) ------------ CAPITAL RATIOS -------------- Tier I Capital Ratio (50)bp 10 bp Total Capital Ratio (60) (10) Tier I Leverage (10) (30) ---------------------- (a) Estimated Page 19
J.P. MORGAN CHASE & CO. [J.P. MORGAN CHASE & CO. LOGO] Glossary of Terms AVERAGE MANAGED ASSETS: Excludes the impact of credit card securitizations. bp: Denotes basis points; 100 bp equals 1%. CASH OPERATING EARNINGS: Operating earnings excluding the impact of the amortization of intangibles. CASH OVERHEAD RATIO: Noninterest expense, excluding amortization of intangibles, as a percentage of the total of net interest income and noninterest revenue (excluding merger and restructuring costs and special items). CORPORATE AND SUPPORT UNITS: Includes LabMorgan and the effects remaining at the corporate level after the implementation of management accounting policies. JPMORGAN PARTNERS ("JPMP"): JPMorgan Chase's private equity business. Public securities held by JPMP are marked-to-market at the quoted public value less liquidity discounts, with the resulting unrealized gains/losses included in the income statement. JPMP's valuation policy for public securities incorporates the use of liquidity discounts and price averaging methodologies in certain circumstances to take into account the fact that JPMP cannot immediately realize the quoted public values as a result of the regulatory, corporate and contractual sales restrictions generally imposed on these holdings. Private investments are initially carried at cost, which is viewed as an approximation of fair value. The carrying value of private investments is adjusted to reflect valuation changes resulting from unaffiliated party transactions and for evidence of a decline in value. LINES OF BUSINESS RESULTS - All periods are on a comparable basis, although restatements will occur in the future periods to reflect further alignment of management accounting policies. MANAGED CREDIT CARD RECEIVABLES OR MANAGED BASIS: JPMorgan Chase uses this terminology to refer to its credit card receivables on the balance sheet plus securitized credit card receivables. MARK-TO-MARKET EXPOSURE: A measure, at a point in time, of the value of a derivative or foreign exchange contract in the open market. When the mark- to-market is positive, it indicates the counterparty owes JPMorgan Chase and, therefore, creates a repayment risk for JPMorgan Chase. When the mark-to-market is negative, JPMorgan Chase owes the counterparty. In this situation, JPMorgan Chase does not have repayment risk. N/A: Not available NM: Not meaningful NONCOMPENSATION EXPENSE: Includes total operating expenses less compensation expense and amortization of intangibles. OPERATING BASIS OR OPERATING EARNINGS: Reported results excluding the impact of credit card securitizations, merger and restructuring costs, and special items. OTHER CONSUMER LOANS: Consists of installment loans (direct and indirect types of consumer finance), student loans, unsecured lines of credit and foreign consumer. OVERHEAD RATIO: Noninterest expense as a percentage of the total of net interest income and noninterest revenue (excluding merger and restructuring costs and special items). PRO FORMA RESULTS: Assumes that the purchase of Robert Fleming Holdings Limited ("Flemings") occurred at the beginning of 2000 and primarily affected Investment Bank, Investment Management & Private Banking and total consolidated results. REPORTED BASIS: Net Income for the nine months of 2001 includes the cumulative effect of a transition adjustment of $(25) million, net of taxes, related to the adoption of Statement of Financial Accounting Standards ("SFAS") 133, relating to the accounting for derivative instruments and hedging activities. The impact on each of basic and diluted earnings per share was $(0.01). SHAREHOLDER VALUE ADDED ("SVA"): SVA is JPMorgan Chase's primary performance measure of its businesses. SVA represents operating earnings excluding the amortization of goodwill and certain other intangibles (i.e., cash operating earnings) minus preferred dividends and an explicit charge for capital. A new framework for capital allocation and for business performance measurement was adopted during the first quarter of 2001. The SVA framework now utilizes a 12% cost of equity capital for each business, with the exception of JPMP which is charged a 15% cost of equity capital. All periods prior to the first quarter of 2001 have been restated. SPECIAL ITEMS: Includes merger and restructuring costs and special items. TRADING-RELATED REVENUE: Includes net interest income ("NII") attributable to trading activities. Trading-related NII has been restated in the prior periods to conform to the current presentation which began in the second quarter of 2001. UNAUDITED: The financial statements and information included throughout this document are unaudited. Page 20