Delaware | 13-2624428 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
270 Park Avenue, New York, New York | 10017 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Page | ||||||||
Part I Financial information |
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Item 1 Consolidated Financial Statements JPMorgan Chase & Co.: |
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EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
2
(unaudited) | Nine months ended | |||||||||||||||||||||||||||
(in millions, except per share, headcount and ratios) | September 30, | |||||||||||||||||||||||||||
As of or for the period ended, | 3Q09 | 2Q09 | 1Q09 | 4Q08 | 3Q08 | 2009 | 2008 | |||||||||||||||||||||
Selected income statement data |
||||||||||||||||||||||||||||
Noninterest revenue |
$ | 13,885 | $ | 12,953 | $ | 11,658 | $ | 3,394 | $ | 5,743 | $ | 38,496 | $ | 25,079 | ||||||||||||||
Net interest income |
12,737 | 12,670 | 13,367 | 13,832 | 8,994 | 38,774 | 24,947 | |||||||||||||||||||||
Total net revenue |
26,622 | 25,623 | 25,025 | 17,226 | 14,737 | 77,270 | 50,026 | |||||||||||||||||||||
Noninterest expense |
13,455 | 13,520 | 13,373 | 11,255 | 11,137 | 40,348 | 32,245 | |||||||||||||||||||||
Pre-provision profit(a) |
13,167 | 12,103 | 11,652 | 5,971 | 3,600 | 36,922 | 17,781 | |||||||||||||||||||||
Provision for credit losses |
8,104 | 8,031 | 8,596 | 7,755 | 3,811 | 24,731 | 11,690 | |||||||||||||||||||||
Provision for credit losses accounting
conformity(b) |
| | | (442 | ) | 1,976 | | 1,976 | ||||||||||||||||||||
Income/(loss) before income tax
expense and extraordinary gain |
5,063 | 4,072 | 3,056 | (1,342 | ) | (2,187 | ) | 12,191 | 4,115 | |||||||||||||||||||
Income tax expense/(benefit)(c) |
1,551 | 1,351 | 915 | (719 | ) | (2,133 | ) | 3,817 | (207 | ) | ||||||||||||||||||
Income/(loss) before extraordinary gain |
3,512 | 2,721 | 2,141 | (623 | ) | (54 | ) | 8,374 | 4,322 | |||||||||||||||||||
Extraordinary gain(d) |
76 | | | 1,325 | 581 | 76 | 581 | |||||||||||||||||||||
Net income |
$ | 3,588 | $ | 2,721 | $ | 2,141 | $ | 702 | $ | 527 | $ | 8,450 | $ | 4,903 | ||||||||||||||
Per
common share data |
||||||||||||||||||||||||||||
Basic earnings(e) |
||||||||||||||||||||||||||||
Income/(loss) before extraordinary gain |
$ | 0.80 | $ | 0.28 | $ | 0.40 | $ | (0.29 | ) | $ | (0.08 | ) | $ | 1.50 | $ | 1.14 | ||||||||||||
Net income |
0.82 | 0.28 | 0.40 | 0.06 | 0.09 | 1.52 | 1.31 | |||||||||||||||||||||
Diluted earnings(e)(f) |
||||||||||||||||||||||||||||
Income/(loss) before extraordinary gain |
$ | 0.80 | $ | 0.28 | $ | 0.40 | $ | (0.29 | ) | $ | (0.08 | ) | $ | 1.50 | $ | 1.13 | ||||||||||||
Net income |
0.82 | 0.28 | 0.40 | 0.06 | 0.09 | 1.51 | 1.30 | |||||||||||||||||||||
Cash dividends declared per share |
0.05 | 0.05 | 0.05 | 0.38 | 0.38 | 0.15 | 1.14 | |||||||||||||||||||||
Book value per share |
39.12 | 37.36 | 36.78 | 36.15 | 36.95 | |||||||||||||||||||||||
Common shares outstanding |
||||||||||||||||||||||||||||
Weighted average: Basic |
3,937.9 | 3,811.5 | 3,755.7 | 3,737.5 | 3,444.6 | 3,835.0 | 3,422.3 | |||||||||||||||||||||
Diluted(e) |
3,962.0 | 3,824.1 | 3,758.7 | 3,737.5 | (m) | 3,444.6 | (m) | 3,848.3 | 3,446.2 | |||||||||||||||||||
Common shares at period end(g) |
3,938.7 | 3,924.1 | 3,757.7 | 3,732.8 | 3,726.9 | |||||||||||||||||||||||
Share price(h) |
||||||||||||||||||||||||||||
High |
$ | 46.50 | $ | 38.94 | $ | 31.64 | $ | 50.63 | $ | 49.00 | $ | 46.50 | $ | 49.95 | ||||||||||||||
Low |
31.59 | 25.29 | 14.96 | 19.69 | 29.24 | 14.96 | 29.24 | |||||||||||||||||||||
Close |
43.82 | 34.11 | 26.58 | 31.53 | 46.70 | |||||||||||||||||||||||
Market capitalization |
172,596 | 133,852 | 99,881 | 117,695 | 174,048 | |||||||||||||||||||||||
Financial ratios |
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Return on common equity (ROE)(i) |
||||||||||||||||||||||||||||
Income/(loss) before extraordinary gain |
9 | % | 3 | % | 5 | % | (3 | )% | (1 | )% | 6 | % | 4 | % | ||||||||||||||
Net income |
9 | 3 | 5 | 1 | 1 | 6 | 5 | |||||||||||||||||||||
Return on tangible common equity
(ROTCE)(i)(j) |
||||||||||||||||||||||||||||
Income/(loss) before extraordinary gain |
13 | 5 | 8 | (5 | ) | (1 | ) | 9 | 7 | |||||||||||||||||||
Net income |
14 | 5 | 8 | 1 | 2 | 9 | 8 | |||||||||||||||||||||
Return on assets (ROA) |
||||||||||||||||||||||||||||
Income/(loss) before extraordinary gain |
0.70 | 0.54 | 0.42 | (0.11 | ) | (0.01 | ) | 0.55 | 0.35 | |||||||||||||||||||
Net income |
0.71 | 0.54 | 0.42 | 0.13 | 0.12 | 0.56 | 0.39 | |||||||||||||||||||||
Overhead ratio |
51 | 53 | 53 | 65 | 76 | 52 | 64 | |||||||||||||||||||||
Tier 1 capital ratio |
10.2 | 9.7 | 11.4 | 10.9 | 8.9 | |||||||||||||||||||||||
Total capital ratio |
13.9 | 13.3 | 15.2 | 14.8 | 12.6 | |||||||||||||||||||||||
Tier 1 leverage ratio |
6.5 | 6.2 | 7.1 | 6.9 | 7.2 | |||||||||||||||||||||||
Tier 1 common capital ratio(k) |
8.2 | 7.7 | 7.3 | 7.0 | 6.8 | |||||||||||||||||||||||
Selected balance sheet data (period-end) |
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Trading assets |
$ | 424,435 | $ | 395,626 | $ | 429,700 | $ | 509,983 | $ | 520,257 | ||||||||||||||||||
Securities |
372,867 | 345,563 | 333,861 | 205,943 | 150,779 | |||||||||||||||||||||||
Loans |
653,144 | 680,601 | 708,243 | 744,898 | 761,381 | |||||||||||||||||||||||
Total assets |
2,041,009 | 2,026,642 | 2,079,188 | 2,175,052 | 2,251,469 | |||||||||||||||||||||||
Deposits |
867,977 | 866,477 | 906,969 | 1,009,277 | 969,783 | |||||||||||||||||||||||
Long-term debt |
254,413 | 254,226 | 243,569 | 252,094 | 238,034 | |||||||||||||||||||||||
Common stockholders equity |
154,101 | 146,614 | 138,201 | 134,945 | 137,691 | |||||||||||||||||||||||
Total stockholders equity |
162,253 | 154,766 | 170,194 | 166,884 | 145,843 | |||||||||||||||||||||||
Headcount |
220,861 | 220,255 | 219,569 | 224,961 | 228,452 | |||||||||||||||||||||||
3
(unaudited) | Nine months ended | |||||||||||||||||||||||||||
(in millions, except ratios) | September 30, | |||||||||||||||||||||||||||
As of or for the period ended, | 3Q09 | 2Q09 | 1Q09 | 4Q08 | 3Q08 | 2009 | 2008 | |||||||||||||||||||||
Credit quality metrics |
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Allowance for credit losses |
$ | 31,454 | $ | 29,818 | $ | 28,019 | $ | 23,823 | $ | 19,765 | ||||||||||||||||||
Allowance for loan losses to total
retained
loans |
4.74 | % | 4.33 | % | 3.95 | % | 3.18 | % | 2.56 | % | ||||||||||||||||||
Allowance for loan losses to retained
loans excluding purchased credit-
impaired loans(l) |
5.28 | 5.01 | 4.53 | 3.62 | 2.87 | |||||||||||||||||||||||
Nonperforming assets |
$ | 20,362 | $ | 17,517 | $ | 14,654 | $ | 12,714 | $ | 9,520 | ||||||||||||||||||
Net charge-offs |
6,373 | 6,019 | 4,396 | 3,315 | 2,484 | $ | 16,788 | $ | 6,520 | |||||||||||||||||||
Net charge-off rate |
3.84 | % | 3.52 | % | 2.51 | % | 1.80 | % | 1.91 | % | 3.28 | % | 1.70 | % | ||||||||||||||
Wholesale net charge-off rate |
1.93 | 1.19 | 0.32 | 0.33 | 0.10 | 1.13 | 0.12 | |||||||||||||||||||||
Consumer net charge-off rate |
4.79 | 4.69 | 3.61 | 2.59 | 3.13 | 4.36 | 2.78 | |||||||||||||||||||||
(a) | Pre-provision profit is total net revenue less noninterest expense. The Firm believes that this financial measure is useful in assessing the ability of a lending institution to generate income in excess of its provision for credit losses. | |
(b) | The third and fourth quarters of 2008 included an accounting conformity loan loss reserve provision related to the acquisition of Washington Mutuals banking operations. | |
(c) | The income tax benefit in the third quarter of 2008 included the realization of a benefit from the release of deferred tax liabilities associated with the undistributed earnings of certain non-U.S. subsidiaries that were deemed to be reinvested indefinitely. | |
(d) | JPMorgan Chase acquired the banking operations of Washington Mutual Bank for $1.9 billion. The fair value of the net assets acquired exceeded the purchase price, which resulted in negative goodwill. In accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for business combinations, nonfinancial assets that are not held-for-sale were written down against that negative goodwill. The negative goodwill that remained after writing down nonfinancial assets was recognized as an extraordinary gain. As a result of the final refinement of the purchase price allocation during the third quarter of 2009, the Firm recognized a $76 million increase in the extraordinary gain. | |
(e) | Effective January 1, 2009, the Firm implemented new FASB guidance for participating securities. Accordingly, prior-period amounts have been revised as required. For further discussion of the guidance, see Note 21 on pages 166-167 of this Form 10-Q. | |
(f) | The calculation of both the second-quarter and nine months ended 2009 earnings per share includes a one-time, noncash reduction of $1.1 billion, or $0.27 per share, resulting from repayment of U.S. Troubled Asset Relief Program (TARP) preferred capital. For further discussion, see Impact on diluted earnings per share of redemption of TARP preferred stock issued to the U.S. Treasury on page 19 of this Form 10-Q. | |
(g) | On June 5, 2009, the Firm issued 163 million shares of its common stock at $35.25 per share; and on September 30, 2008, the Firm issued 284 million shares of its common stock at $40.50 per share. | |
(h) | The principal market for JPMorgan Chases common stock is the New York Stock Exchange. JPMorgan Chases common stock is also listed and traded on the London Stock Exchange and the Tokyo Stock Exchange. | |
(i) | The calculation of second-quarter 2009 net income applicable to common equity includes a one-time, noncash reduction of $1.1 billion resulting from repayment of TARP preferred capital. Excluding this reduction, the adjusted ROE and ROTCE were 6% and 10% for the second quarter of 2009, respectively. For further discussion of adjusted ROE, see Explanation and reconciliation of the Firms use of non-GAAP financial measures on pages 15-19 of this Form 10-Q. | |
(j) | For further discussion of ROTCE, a non-GAAP financial measure, see Explanation and reconciliation of the Firms use of non-GAAP financial measures on pages 15-19 of this Form 10-Q. | |
(k) | Tier 1 common is calculated as Tier 1 capital less qualifying perpetual preferred stock, qualifying trust preferred securities and qualifying minority interest in subsidiaries. The Firm uses the Tier 1 common capital ratio, a non-GAAP financial measure, to assess and compare the quality and composition of the Firms capital with the capital of other financial services companies. For further discussion, see Regulatory capital on pages 55-57 of this Form 10-Q. | |
(l) | Excludes the impact of home lending purchased credit-impaired loans and loans held by the Washington Mutual Master Trust. For further discussion, see Allowance for credit losses on pages 81-84 of this Form 10-Q. | |
(m) | Common equivalent shares have been excluded from the computation of diluted earnings per share for the third and fourth quarters of 2008, as the effect on income/(loss) before extraordinary gain would be antidilutive. |
4
5
6
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
(in millions, except per share data and ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Selected income statement data |
||||||||||||||||||||||||
Total net revenue |
$ | 26,622 | $ | 14,737 | 81 | % | $ | 77,270 | $ | 50,026 | 54 | % | ||||||||||||
Total noninterest expense |
13,455 | 11,137 | 21 | 40,348 | 32,245 | 25 | ||||||||||||||||||
Pre-provision profit |
13,167 | 3,600 | 266 | 36,922 | 17,781 | 108 | ||||||||||||||||||
Provision for credit losses(a) |
8,104 | 5,787 | 40 | 24,731 | 13,666 | 81 | ||||||||||||||||||
Income/(loss) before extraordinary gain |
3,512 | (54 | ) | NM | 8,374 | 4,322 | 94 | |||||||||||||||||
Extraordinary gain(b) |
76 | 581 | (87 | ) | 76 | 581 | (87 | ) | ||||||||||||||||
Net income |
3,588 | 527 | NM | 8,450 | 4,903 | 72 | ||||||||||||||||||
Diluted earnings per share(c)(d) |
||||||||||||||||||||||||
Income/(loss) before extraordinary gain |
$ | 0.80 | $ | (0.08 | ) | NM | $ | 1.50 | $ | 1.13 | 33 | |||||||||||||
Net income |
0.82 | 0.09 | NM | 1.51 | 1.30 | 16 | ||||||||||||||||||
Return on common equity |
||||||||||||||||||||||||
Income/(loss) before extraordinary gain |
9 | % | (1 | )% | 6 | % | 4 | % | ||||||||||||||||
Net income |
9 | 1 | 6 | 5 | ||||||||||||||||||||
(a) | The third quarter of 2008 included an accounting conformity loan loss reserve provision related to the acquisition of Washington Mutuals banking operations. | |
(b) | JPMorgan Chase acquired Washington Mutuals banking operations from the Federal Deposit Insurance Corporation (FDIC) for $1.9 billion. The fair value of Washington Mutual net assets acquired exceeded the purchase price, which resulted in negative goodwill. In accordance with U.S. GAAP for business combinations, nonfinancial assets that are not held-for-sale were written down against that negative goodwill. The negative goodwill that remained after writing down nonfinancial assets was recognized as an extraordinary gain. As a result of the final refinement of the purchase price allocation during the third quarter of 2009, the Firm recognized a $76 million increase in the extraordinary gain. | |
(c) | Effective January 1, 2009, the Firm implemented new FASB guidance for participating securities. Accordingly, prior-period amounts have been revised. For further discussion of the guidance, see Note 21 on pages 166-167 of this Form 10-Q. | |
(d) | The calculation of EPS for the nine months ended September 30, 2009, includes a one-time noncash reduction of $1.1 billion, or $0.27 per share, resulting from the redemption of Series K preferred stock issued to the U.S. Treasury. |
7
8
9
10
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
(in millions) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Investment banking fees |
$ | 1,679 | $ | 1,316 | 28 | % | $ | 5,171 | $ | 4,144 | 25 | % | ||||||||||||
Principal transactions |
3,860 | (2,763 | ) | NM | 8,958 | (2,814 | ) | NM | ||||||||||||||||
Lending and deposit-related fees |
1,826 | 1,168 | 56 | 5,280 | 3,312 | 59 | ||||||||||||||||||
Asset management,
administration and commissions |
3,158 | 3,485 | (9 | ) | 9,179 | 10,709 | (14 | ) | ||||||||||||||||
Securities gains |
184 | 424 | (57 | ) | 729 | 1,104 | (34 | ) | ||||||||||||||||
Mortgage fees and related income |
843 | 457 | 84 | 3,228 | 1,678 | 92 | ||||||||||||||||||
Credit card income |
1,710 | 1,771 | (3 | ) | 5,266 | 5,370 | (2 | ) | ||||||||||||||||
Other income |
625 | (115 | ) | NM | 685 | 1,576 | (57 | ) | ||||||||||||||||
Noninterest revenue |
13,885 | 5,743 | 142 | 38,496 | 25,079 | 53 | ||||||||||||||||||
Net interest income |
12,737 | 8,994 | 42 | 38,774 | 24,947 | 55 | ||||||||||||||||||
Total net revenue |
$ | 26,622 | $ | 14,737 | 81 | $ | 77,270 | $ | 50,026 | 54 | ||||||||||||||
11
Provision for credit losses | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Wholesale |
$ | 779 | $ | 962 | (19 | )% | $ | 3,553 | $ | 2,214 | 60 | % | ||||||||||||
Consumer |
7,325 | 4,825 | 52 | 21,178 | 11,452 | 85 | ||||||||||||||||||
Total provision for credit losses |
$ | 8,104 | $ | 5,787 | 40 | $ | 24,731 | $ | 13,666 | 81 | ||||||||||||||
12
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
(in millions) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Compensation expense |
$ | 7,311 | $ | 5,858 | 25 | % | $ | 21,816 | $ | 17,722 | 23 | % | ||||||||||||
Noncompensation expense: |
||||||||||||||||||||||||
Occupancy expense |
923 | 766 | 20 | 2,722 | 2,083 | 31 | ||||||||||||||||||
Technology, communications and
equipment expense |
1,140 | 1,112 | 3 | 3,442 | 3,108 | 11 | ||||||||||||||||||
Professional & outside services |
1,517 | 1,451 | 5 | 4,550 | 4,234 | 7 | ||||||||||||||||||
Marketing |
440 | 453 | (3 | ) | 1,241 | 1,412 | (12 | ) | ||||||||||||||||
Other expense(a) |
1,767 | 1,096 | 61 | 5,332 | 2,498 | 113 | ||||||||||||||||||
Amortization of intangibles |
254 | 305 | (17 | ) | 794 | 937 | (15 | ) | ||||||||||||||||
Total noncompensation expense |
6,041 | 5,183 | 17 | 18,081 | 14,272 | 27 | ||||||||||||||||||
Merger costs |
103 | 96 | 7 | 451 | 251 | 80 | ||||||||||||||||||
Total noninterest expense |
$ | 13,455 | $ | 11,137 | 21 | $ | 40,348 | $ | 32,245 | 25 | ||||||||||||||
(a) | Includes $675 million accrued for an FDIC special assessment in the second quarter of 2009. |
13
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(in millions, except rate) | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Income/(loss) before income tax expense/(benefit) |
$ | 5,063 | $ | (2,187 | ) | $ | 12,191 | $ | 4,115 | |||||||
Income tax expense/(benefit) |
1,551 | (2,133 | ) | 3,817 | (207 | ) | ||||||||||
Effective tax rate |
30.6 | % | 97.5 | % | 31.3 | % | (5.0 | )% | ||||||||
14
15
Three months ended September 30, 2009 | ||||||||||||||||
Reported | Credit | Fully tax-equivalent | Managed | |||||||||||||
(in millions, except per share and ratios) | results | card(d) | adjustments | basis | ||||||||||||
Revenue |
||||||||||||||||
Investment banking fees |
$ | 1,679 | $ | | $ | | $ | 1,679 | ||||||||
Principal transactions |
3,860 | | | 3,860 | ||||||||||||
Lending- and deposit-related fees |
1,826 | | | 1,826 | ||||||||||||
Asset management, administration and commissions |
3,158 | | | 3,158 | ||||||||||||
Securities gains |
184 | | | 184 | ||||||||||||
Mortgage fees and related income |
843 | | | 843 | ||||||||||||
Credit card income |
1,710 | (285 | ) | | 1,425 | |||||||||||
Other income |
625 | | 371 | 996 | ||||||||||||
Noninterest revenue |
13,885 | (285 | ) | 371 | 13,971 | |||||||||||
Net interest income |
12,737 | 1,983 | 89 | 14,809 | ||||||||||||
Total net revenue |
26,622 | 1,698 | 460 | 28,780 | ||||||||||||
Noninterest expense |
13,455 | | | 13,455 | ||||||||||||
Pre-provision profit |
13,167 | 1,698 | 460 | 15,325 | ||||||||||||
Provision for credit losses |
8,104 | 1,698 | | 9,802 | ||||||||||||
Income before income tax expense and extraordinary gain |
5,063 | | 460 | 5,523 | ||||||||||||
Income tax expense |
1,551 | | 460 | 2,011 | ||||||||||||
Income before extraordinary gain |
3,512 | | | 3,512 | ||||||||||||
Extraordinary gain |
76 | | | 76 | ||||||||||||
Net income |
$ | 3,588 | $ | | $ | | $ | 3,588 | ||||||||
Diluted earnings per share(a)(b) |
$ | 0.80 | $ | | $ | | $ | 0.80 | ||||||||
Return on assets(b) |
0.70 | % | NM | NM | 0.67 | % | ||||||||||
Overhead ratio |
51 | NM | NM | 47 | ||||||||||||
Three months ended September 30, 2008 | ||||||||||||||||
Reported | Credit | Fully tax-equivalent | Managed | |||||||||||||
(in millions, except per share and ratios) | results | card(d) | adjustments | basis | ||||||||||||
Revenue |
||||||||||||||||
Investment banking fees |
$ | 1,316 | $ | | $ | | $ | 1,316 | ||||||||
Principal transactions |
(2,763 | ) | | | (2,763 | ) | ||||||||||
Lending- and deposit-related fees |
1,168 | | | 1,168 | ||||||||||||
Asset management, administration and commissions |
3,485 | | | 3,485 | ||||||||||||
Securities gains |
424 | | | 424 | ||||||||||||
Mortgage fees and related income |
457 | | | 457 | ||||||||||||
Credit card income |
1,771 | (843 | ) | | 928 | |||||||||||
Other income |
(115 | ) | | 323 | 208 | |||||||||||
Noninterest revenue |
5,743 | (843 | ) | 323 | 5,223 | |||||||||||
Net interest income |
8,994 | 1,716 | 155 | 10,865 | ||||||||||||
Total net revenue |
14,737 | 873 | 478 | 16,088 | ||||||||||||
Noninterest expense |
11,137 | | | 11,137 | ||||||||||||
Pre-provision profit |
3,600 | 873 | 478 | 4,951 | ||||||||||||
Provision for credit losses |
3,811 | 873 | | 4,684 | ||||||||||||
Provision for credit losses accounting conformity(c) |
1,976 | | | 1,976 | ||||||||||||
Income/(loss) before income tax expense/(benefit) and
extraordinary gain |
(2,187 | ) | | 478 | (1,709 | ) | ||||||||||
Income tax expense/(benefit) |
(2,133 | ) | | 478 | (1,655 | ) | ||||||||||
Income/(loss) before extraordinary gain |
(54 | ) | | | (54 | ) | ||||||||||
Extraordinary gain |
581 | | | 581 | ||||||||||||
Net income |
$ | 527 | $ | | $ | | $ | 527 | ||||||||
Diluted earnings (loss) per share(a)(b) |
$ | (0.08 | ) | $ | | $ | | $ | (0.08 | ) | ||||||
Return on assets(b) |
(0.01 | )% | NM | NM | (0.01 | )% | ||||||||||
Overhead ratio |
76 | NM | NM | 69 | ||||||||||||
16
Nine months ended September 30, 2009 | ||||||||||||||||
Reported | Credit | Fully tax-equivalent | Managed | |||||||||||||
(in millions, except per share and ratios) | results | card(d) | adjustments | basis | ||||||||||||
Revenue |
||||||||||||||||
Investment banking fees |
$ | 5,171 | $ | | $ | | $ | 5,171 | ||||||||
Principal transactions |
8,958 | | | 8,958 | ||||||||||||
Lending- and deposit-related fees |
5,280 | | | 5,280 | ||||||||||||
Asset management, administration and commissions |
9,179 | | | 9,179 | ||||||||||||
Securities gains |
729 | | | 729 | ||||||||||||
Mortgage fees and related income |
3,228 | | | 3,228 | ||||||||||||
Credit card income |
5,266 | (1,119 | ) | | 4,147 | |||||||||||
Other income |
685 | | 1,043 | 1,728 | ||||||||||||
Noninterest revenue |
38,496 | (1,119 | ) | 1,043 | 38,420 | |||||||||||
Net interest income |
38,774 | 5,945 | 272 | 44,991 | ||||||||||||
Total net revenue |
77,270 | 4,826 | 1,315 | 83,411 | ||||||||||||
Noninterest expense |
40,348 | | | 40,348 | ||||||||||||
Pre-provision profit |
36,922 | 4,826 | 1,315 | 43,063 | ||||||||||||
Provision for credit losses |
24,731 | 4,826 | | 29,557 | ||||||||||||
Income before income tax expense and extraordinary gain |
12,191 | | 1,315 | 13,506 | ||||||||||||
Income tax expense |
3,817 | | 1,315 | 5,132 | ||||||||||||
Income before extraordinary gain |
8,374 | | | 8,374 | ||||||||||||
Extraordinary gain |
76 | | | 76 | ||||||||||||
Net income |
$ | 8,450 | $ | | $ | | $ | 8,450 | ||||||||
Diluted earnings per share(a)(b) |
$ | 1.50 | $ | | $ | | $ | 1.50 | ||||||||
Return on assets(b) |
0.55 | % | NM | NM | 0.53 | % | ||||||||||
Overhead ratio |
52 | NM | NM | 48 | ||||||||||||
Nine months ended September 30, 2008 | ||||||||||||||||
Reported | Credit | Fully tax-equivalent | Managed | |||||||||||||
(in millions, except per share and ratios) | results | card(d) | adjustments | basis | ||||||||||||
Revenue |
||||||||||||||||
Investment banking fees |
$ | 4,144 | $ | | $ | | $ | 4,144 | ||||||||
Principal transactions |
(2,814 | ) | | | (2,814 | ) | ||||||||||
Lending- and deposit-related fees |
3,312 | | | 3,312 | ||||||||||||
Asset management, administration and commissions |
10,709 | | | 10,709 | ||||||||||||
Securities gains |
1,104 | | | 1,104 | ||||||||||||
Mortgage fees and related income |
1,678 | | | 1,678 | ||||||||||||
Credit card income |
5,370 | (2,623 | ) | | 2,747 | |||||||||||
Other income |
1,576 | | 773 | 2,349 | ||||||||||||
Noninterest revenue |
25,079 | (2,623 | ) | 773 | 23,229 | |||||||||||
Net interest income |
24,947 | 5,007 | 481 | 30,435 | ||||||||||||
Total net revenue |
50,026 | 2,384 | 1,254 | 53,664 | ||||||||||||
Noninterest expense |
32,245 | | | 32,245 | ||||||||||||
Pre-provision profit |
17,781 | 2,384 | 1,254 | 21,419 | ||||||||||||
Provision for credit losses |
11,690 | 2,384 | | 14,074 | ||||||||||||
Provision for credit losses accounting conformity(c) |
1,976 | | | 1,976 | ||||||||||||
Income before income tax expense/(benefit) and extraordinary gain |
4,115 | | 1,254 | 5,369 | ||||||||||||
Income tax expense/(benefit) |
(207 | ) | | 1,254 | 1,047 | |||||||||||
Income before extraordinary gain |
4,322 | | | 4,322 | ||||||||||||
Extraordinary gain |
581 | | | 581 | ||||||||||||
Net income |
$ | 4,903 | $ | | $ | | $ | 4,903 | ||||||||
Diluted earnings per share(a)(b) |
$ | 1.13 | $ | | $ | | $ | 1.13 | ||||||||
Return on assets(b) |
0.35 | % | NM | NM | 0.33 | % | ||||||||||
Overhead ratio |
64 | NM | NM | 60 | ||||||||||||
(a) | Effective January 1, 2009, the Firm implemented new FASB guidance for participating securities. Accordingly, prior-period amounts have been revised. For further discussion of the guidance, see Note 21 on pages 166-167 of this Form 10-Q. | |
(b) | Based on income/(loss) before extraordinary gain. | |
(c) | The third quarter of 2008 included an accounting conformity loan loss reserve provision related to the acquisition of Washington Mutuals banking operations. | |
(d) | See pages 33-36 of this Form 10-Q for a discussion of the effect of credit card securitizations on CS. |
17
Three months ended September 30, | 2009 | 2008 | ||||||||||||||||||||||
(in millions) | Reported | Securitized | Managed | Reported | Securitized | Managed | ||||||||||||||||||
Loans Period-end |
$ | 653,144 | $ | 87,028 | $ | 740,172 | $ | 761,381 | $ | 93,664 | $ | 855,045 | ||||||||||||
Total assets average |
1,999,176 | 82,779 | 2,081,955 | 1,756,359 | 75,712 | 1,832,071 | ||||||||||||||||||
Nine months ended September 30, | 2009 | 2008 | ||||||||||||||||||||||
(in millions) | Reported | Securitized | Managed | Reported | Securitized | Managed | ||||||||||||||||||
Loans Period-end |
$ | 653,144 | $ | 87,028 | $ | 740,172 | $ | 761,381 | $ | 93,664 | $ | 855,045 | ||||||||||||
Total assets average |
2,034,640 | 82,383 | 2,117,023 | 1,665,285 | 73,966 | 1,739,251 | ||||||||||||||||||
Three months ended | Nine months ended September 30, | |||||||||||||||||||||||||||
(in millions) | Sept. 30, 2009 | June 30, 2009 | March 31, 2009 | Dec. 31, 2008 | Sept. 30, 2008 | 2009 | 2008 | |||||||||||||||||||||
Common stockholders equity |
$ | 149,468 | $ | 140,865 | $ | 136,493 | $ | 138,757 | $ | 126,640 | $ | 142,322 | $ | 125,878 | ||||||||||||||
Less: Goodwill |
48,328 | 48,273 | 48,071 | 46,838 | 45,947 | 48,225 | 45,809 | |||||||||||||||||||||
Less: Certain
identifiable
intangible assets |
4,984 | 5,218 | 5,443 | 5,586 | 5,512 | 5,214 | 5,845 | |||||||||||||||||||||
Add: Deferred
tax liabilities(a) |
2,531 | 2,518 | 2,609 | 2,547 | 2,378 | 2,552 | 2,309 | |||||||||||||||||||||
Tangible common
equity (TCE) |
$ | 98,687 | $ | 89,892 | $ | 85,588 | $ | 88,880 | $ | 77,559 | $ | 91,435 | $ | 76,533 | ||||||||||||||
(a) | Represents deferred tax liabilities related to tax-deductible goodwill and to identifiable intangibles created in non-taxable transactions, which are netted against goodwill and other intangibles when calculating TCE. |
Three months ended June 30, 2009 | ||||||||
Excluding the | ||||||||
(in millions, except ratios) | As reported | TARP redemption | ||||||
Return on equity |
||||||||
Net income |
$ | 2,721 | $ | 2,721 | ||||
Less: Preferred stock dividends |
473 | 473 | ||||||
Less: Accelerated amortization from redemption of preferred stock issued to
the U.S. Treasury |
1,112 | | ||||||
Net income applicable to common equity |
$ | 1,136 | $ | 2,248 | ||||
Average common stockholders equity |
$ | 140,865 | $ | 140,865 | ||||
ROE |
3 | % | 6 | % | ||||
18
Three months ended June 30, 2009 | Nine months ended September 30, 2009 | |||||||||||||||
Effect of | Effect of | |||||||||||||||
(in millions, except per share) | As reported | TARP redemption | As reported | TARP redemption | ||||||||||||
Diluted earnings per share |
||||||||||||||||
Net income |
$ | 2,721 | $ | | $ | 8,450 | $ | | ||||||||
Less: Preferred stock dividends |
473 | | 1,165 | | ||||||||||||
Less: Accelerated
amortization from redemption
of preferred stock issued to
the U.S. Treasury |
1,112 | 1,112 | 1,112 | 1,112 | ||||||||||||
Net income applicable to
common equity |
$ | 1,136 | $ | (1,112 | ) | $ | 6,173 | $ | (1,112 | ) | ||||||
Less: Dividends and
undistributed earnings
allocated to participating
securities |
64 | (64 | ) | 348 | (64 | ) | ||||||||||
Net income applicable to
common stockholders |
$ | 1,072 | $ | (1,048 | ) | $ | 5,825 | $ | (1,048 | ) | ||||||
Total weighted average diluted
shares outstanding |
3,824.1 | 3,824.1 | 3,848.3 | 3,848.3 | ||||||||||||
Net income per share |
$ | 0.28 | $ | (0.27 | ) | $ | 1.51 | $ | (0.27 | ) | ||||||
19
Three months ended | Return | ||||||||||||||||||||||||||||||||||||||||||||
September 30, | Total net revenue | Noninterest expense | Net income/(loss) | on equity | |||||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | 2009 | 2008 | Change | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
Investment Bank(c) |
$ | 7,508 | $ | 4,066 | 85 | % | $ | 4,274 | $ | 3,816 | 12 | % | $ | 1,921 | $ | 882 | 118 | % | 23 | % | 13 | % | |||||||||||||||||||||||
Retail Financial Services |
8,218 | 4,963 | 66 | 4,196 | 2,779 | 51 | 7 | 64 | (89 | ) | | 1 | |||||||||||||||||||||||||||||||||
Card Services |
5,159 | 3,887 | 33 | 1,306 | 1,194 | 9 | (700 | ) | 292 | NM | (19 | ) | 8 | ||||||||||||||||||||||||||||||||
Commercial Banking |
1,459 | 1,125 | 30 | 545 | 486 | 12 | 341 | 312 | 9 | 17 | 18 | ||||||||||||||||||||||||||||||||||
Treasury & Securities Services |
1,788 | 1,953 | (8 | ) | 1,280 | 1,339 | (4 | ) | 302 | 406 | (26 | ) | 24 | 46 | |||||||||||||||||||||||||||||||
Asset Management |
2,085 | 1,961 | 6 | 1,351 | 1,362 | (1 | ) | 430 | 351 | 23 | 24 | 25 | |||||||||||||||||||||||||||||||||
Corporate/Private Equity(c) |
2,563 | (1,867 | ) | NM | 503 | 161 | 212 | 1,287 | (1,780 | ) | NM | NM | NM | ||||||||||||||||||||||||||||||||
Total |
$ | 28,780 | $ | 16,088 | 79 | % | $ | 13,455 | $ | 11,137 | 21 | % | $ | 3,588 | $ | 527 | NM | 9 | % | 1 | % | ||||||||||||||||||||||||
Nine months ended | Return | |||||||||||||||||||||||||||||||||||||||||||
September 30, | Total net revenue | Noninterest expense | Net income/(loss) | on equity | ||||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | 2009 | 2008 | Change | 2009 | 2008 | |||||||||||||||||||||||||||||||||
Investment Bank(c) |
$ | 23,180 | $ | 12,607 | 84 | % | $ | 13,115 | $ | 11,103 | 18 | % | $ | 4,998 | $ | 1,189 | 320 | % | 20 | % | 7 | % | ||||||||||||||||||||||
Retail Financial Services |
25,023 | 14,836 | 69 | 12,446 | 8,031 | 55 | 496 | 256 | 94 | 3 | 2 | |||||||||||||||||||||||||||||||||
Card Services |
15,156 | 11,566 | 31 | 3,985 | 3,651 | 9 | (1,919 | ) | 1,151 | NM | (17 | ) | 11 | |||||||||||||||||||||||||||||||
Commercial Banking |
4,314 | 3,298 | 31 | 1,633 | 1,447 | 13 | 1,047 | 959 | 9 | 17 | 18 | |||||||||||||||||||||||||||||||||
Treasury & Securities Services |
5,509 | 5,885 | (6 | ) | 3,887 | 3,884 | | 989 | 1,234 | (20 | ) | 26 | 47 | |||||||||||||||||||||||||||||||
Asset Management |
5,770 | 5,926 | (3 | ) | 4,003 | 4,085 | (2 | ) | 1,006 | 1,102 | (9 | ) | 19 | 28 | ||||||||||||||||||||||||||||||
Corporate/Private Equity(c) |
4,459 | (454 | ) | NM | 1,279 | 44 | NM | 1,833 | (988 | ) | NM | NM | NM | |||||||||||||||||||||||||||||||
Total |
$ | 83,411 | $ | 53,664 | 55 | % | $ | 40,348 | $ | 32,245 | 25 | % | $ | 8,450 | $ | 4,903 | 72 | 6 | % | 5 | % | |||||||||||||||||||||||
(a) | Represents reported results on a fully tax-equivalent basis, excluding the impact of credit card securitizations. | |
(b) | On September 25, 2008, JPMorgan Chase acquired the banking operations of Washington Mutual Bank. On May 30, 2008, the Bear Stearns merger was consummated. Each of these transactions was accounted for as a purchase, and their respective results of operations are included in the Firms results from each respective transaction date. For additional information on these transactions, see Note 2 on pages 123-127 of JPMorgan Chases 2008 Annual Report and Note 2 on pages 102-106 of this Form 10-Q. | |
(c) | In the second quarter of 2009, IB began reporting credit reimbursement from TSS as a component of total net revenue, whereas TSS continues to report its credit reimbursement to IB as a separate line item on its income statement (not part of total net revenue). Corporate/Private Equity includes an adjustment to offset IBs inclusion of the credit reimbursement in total net revenue. Prior periods have been revised for IB and Corporate/Private Equity to reflect this presentation. |
20
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Investment banking fees |
$ | 1,658 | $ | 1,593 | 4 | % | $ | 5,277 | $ | 4,534 | 16 | % | ||||||||||||
Principal transactions |
2,714 | (922 | ) | NM | 8,070 | (882 | ) | NM | ||||||||||||||||
Lending- and deposit-related fees |
185 | 118 | 57 | 490 | 325 | 51 | ||||||||||||||||||
Asset management, administration and
commissions |
633 | 847 | (25 | ) | 2,042 | 2,300 | (11 | ) | ||||||||||||||||
All other income(a) |
63 | (248 | ) | NM | (101 | ) | (480 | ) | 79 | |||||||||||||||
Noninterest revenue |
5,253 | 1,388 | 278 | 15,778 | 5,797 | 172 | ||||||||||||||||||
Net interest income(b) |
2,255 | 2,678 | (16 | ) | 7,402 | 6,810 | 9 | |||||||||||||||||
Total net revenue(c) |
7,508 | 4,066 | 85 | 23,180 | 12,607 | 84 | ||||||||||||||||||
Provision for credit losses |
379 | 234 | 62 | 2,460 | 1,250 | 97 | ||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
2,778 | 2,162 | 28 | 8,785 | 6,535 | 34 | ||||||||||||||||||
Noncompensation expense |
1,496 | 1,654 | (10 | ) | 4,330 | 4,568 | (5 | ) | ||||||||||||||||
Total noninterest expense |
4,274 | 3,816 | 12 | 13,115 | 11,103 | 18 | ||||||||||||||||||
Income before income tax expense/(benefit) |
2,855 | 16 | NM | 7,605 | 254 | NM | ||||||||||||||||||
Income tax expense/(benefit)(d) |
934 | (866 | ) | NM | 2,607 | (935 | ) | NM | ||||||||||||||||
Net income |
$ | 1,921 | $ | 882 | 118 | $ | 4,998 | $ | 1,189 | 320 | ||||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
23 | % | 13 | % | 20 | % | 7 | % | ||||||||||||||||
ROA |
1.12 | 0.39 | 0.94 | 0.19 | ||||||||||||||||||||
Overhead ratio |
57 | 94 | 57 | 88 | ||||||||||||||||||||
Compensation expense as a percentage
of total net revenue |
37 | 53 | 38 | 52 | ||||||||||||||||||||
Revenue by business |
||||||||||||||||||||||||
Investment banking fees: |
||||||||||||||||||||||||
Advisory |
$ | 384 | $ | 576 | (33 | ) | $ | 1,256 | $ | 1,429 | (12 | ) | ||||||||||||
Equity underwriting |
681 | 518 | 31 | 2,092 | 1,419 | 47 | ||||||||||||||||||
Debt underwriting |
593 | 499 | 19 | 1,929 | 1,686 | 14 | ||||||||||||||||||
Total investment banking fees |
1,658 | 1,593 | 4 | 5,277 | 4,534 | 16 | ||||||||||||||||||
Fixed income markets |
5,011 | 815 | NM | 14,829 | 3,628 | 309 | ||||||||||||||||||
Equity markets |
941 | 1,650 | (43 | ) | 3,422 | 3,705 | (8 | ) | ||||||||||||||||
Credit portfolio |
(102 | ) | 8 | NM | (348 | ) | 740 | NM | ||||||||||||||||
Total net revenue |
$ | 7,508 | $ | 4,066 | 85 | $ | 23,180 | $ | 12,607 | 84 | ||||||||||||||
Revenue by region |
||||||||||||||||||||||||
Americas |
$ | 3,913 | $ | 1,072 | 265 | $ | 12,890 | $ | 4,813 | 168 | ||||||||||||||
Europe/Middle East/Africa |
2,855 | 2,517 | 13 | 7,685 | 5,684 | 35 | ||||||||||||||||||
Asia/Pacific |
740 | 477 | 55 | 2,605 | 2,110 | 23 | ||||||||||||||||||
Total net revenue |
$ | 7,508 | $ | 4,066 | 85 | $ | 23,180 | $ | 12,607 | 84 | ||||||||||||||
(a) | TSS was charged a credit reimbursement related to certain exposures managed within IB credit portfolio on behalf of clients shared with TSS. IB recognizes this credit reimbursement in its credit portfolio business in All other income. Prior periods have been revised to conform to the current presentation. | |
(b) | The decrease in net interest income in the third quarter was due to a lower amount of interest-earning assets, while the increase in year-to-date 2009 was driven by higher spreads across several fixed income trading businesses, partially offset by lower balances. | |
(c) | Total net revenue included tax-equivalent adjustments, predominantly due to income tax credits related to affordable housing and alternative energy investments, as well as tax-exempt income from municipal bond investments of $371 million and $427 million for the quarters ended September 30, 2009 and 2008, respectively, and $1.1 billion for both year-to-date 2009 and 2008. | |
(d) | The income tax benefit in the third quarter and year-to-date 2008 was predominantly the result of reduced deferred tax liabilities on overseas earnings. |
21
22
Selected metrics | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except headcount and ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Selected balance sheet data (period-end) |
||||||||||||||||||||||||
Loans: |
||||||||||||||||||||||||
Loans retained(a) |
$ | 55,703 | $ | 73,347 | (24 | )% | $ | 55,703 | $ | 73,347 | (24 | )% | ||||||||||||
Loans held-for-sale and loans at fair value |
4,582 | 16,667 | (73 | ) | 4,582 | 16,667 | (73 | ) | ||||||||||||||||
Total loans |
60,285 | 90,014 | (33 | ) | 60,285 | 90,014 | (33 | ) | ||||||||||||||||
Equity |
33,000 | 33,000 | | 33,000 | 33,000 | | ||||||||||||||||||
Selected balance sheet data (average) |
||||||||||||||||||||||||
Total assets |
$ | 678,796 | $ | 890,040 | (24 | ) | $ | 707,396 | $ | 820,497 | (14 | ) | ||||||||||||
Trading assets debt and equity instruments |
270,695 | 360,821 | (25 | ) | 269,668 | 365,802 | (26 | ) | ||||||||||||||||
Trading assets derivative receivables |
86,651 | 105,462 | (18 | ) | 103,929 | 98,390 | 6 | |||||||||||||||||
Loans: |
||||||||||||||||||||||||
Loans retained(a) |
61,269 | 69,022 | (11 | ) | 66,479 | 73,107 | (9 | ) | ||||||||||||||||
Loans held-for-sale and loans at fair value |
4,981 | 17,612 | (72 | ) | 8,745 | 19,215 | (54 | ) | ||||||||||||||||
Total loans |
66,250 | 86,634 | (24 | ) | 75,224 | 92,322 | (19 | ) | ||||||||||||||||
Adjusted assets(b) |
515,718 | 694,459 | (26 | ) | 545,235 | 677,945 | (20 | ) | ||||||||||||||||
Equity |
33,000 | 26,000 | 27 | 33,000 | 23,781 | 39 | ||||||||||||||||||
Headcount |
24,828 | 30,993 | (20 | ) | 24,828 | 30,993 | (20 | ) | ||||||||||||||||
Credit data and quality statistics |
||||||||||||||||||||||||
Net charge-offs |
$ | 750 | $ | 13 | NM | $ | 1,219 | $ | 18 | NM | ||||||||||||||
Nonperforming assets: |
||||||||||||||||||||||||
Nonperforming loans: |
||||||||||||||||||||||||
Nonperforming loans retained(a)(c) |
4,782 | 404 | NM | 4,782 | 404 | NM | ||||||||||||||||||
Nonperforming loans held-for-sale and
loans at fair value |
128 | 32 | 300 | 128 | 32 | 300 | ||||||||||||||||||
Total nonperforming loans |
4,910 | 436 | NM | 4,910 | 436 | NM | ||||||||||||||||||
Derivative receivables |
624 | 34 | NM | 624 | 34 | NM | ||||||||||||||||||
Assets acquired in loan satisfactions |
248 | 113 | 119 | 248 | 113 | 119 | ||||||||||||||||||
Total nonperforming assets |
5,782 | 583 | NM | 5,782 | 583 | NM | ||||||||||||||||||
Allowance for credit losses: |
||||||||||||||||||||||||
Allowance for loan losses |
4,703 | 2,654 | 77 | 4,703 | 2,654 | 77 | ||||||||||||||||||
Allowance for lending-related
commitments |
401 | 463 | (13 | ) | 401 | 463 | (13 | ) | ||||||||||||||||
Total allowance for credit losses |
5,104 | 3,117 | 64 | 5,104 | 3,117 | 64 | ||||||||||||||||||
Net charge-off rate(a)(d) |
4.86 | % | 0.07 | % | 2.45 | % | 0.03 | % | ||||||||||||||||
Allowance for loan losses to period-end loans
retained(a)(d) |
8.44 | 3.62 | 8.44 | 3.62 | ||||||||||||||||||||
Allowance for loan losses to average loans
retained(a)(d) |
7.68 | 3.85 | (i) | 7.07 | 3.63 | (i) | ||||||||||||||||||
Allowance for loan losses to nonperforming
loans retained (c) |
98 | 657 | 98 | 657 | ||||||||||||||||||||
Nonperforming loans to total period-end loans |
8.14 | 0.48 | 8.14 | 0.48 | ||||||||||||||||||||
Nonperforming loans to total average loans |
7.41 | 0.50 | 6.53 | 0.47 | ||||||||||||||||||||
Market risk-average trading and credit
portfolio VaR - 99% confidence
level(e) |
||||||||||||||||||||||||
Trading activities: |
||||||||||||||||||||||||
Fixed income |
$ | 243 | $ | 183 | 33 | $ | 237 | $ | 150 | 58 | ||||||||||||||
Foreign exchange |
30 | 20 | 50 | 32 | 27 | 19 | ||||||||||||||||||
Equities |
28 | 80 | (65 | ) | 88 | 47 | 87 | |||||||||||||||||
Commodities and other |
38 | 41 | (7 | ) | 34 | 33 | 3 | |||||||||||||||||
Diversification(f) |
(134 | ) | (104 | ) | (29 | ) | (144 | ) | (95 | ) | (52 | ) | ||||||||||||
Total trading VaR(g) |
205 | 220 | (7 | ) | 247 | 162 | 52 | |||||||||||||||||
Credit portfolio VaR(h) |
50 | 47 | 6 | 120 | 38 | 216 | ||||||||||||||||||
Diversification(f) |
(49 | ) | (49 | ) | | (99 | ) | (39 | ) | (154 | ) | |||||||||||||
Total trading and credit portfolio VaR |
$ | 206 | $ | 218 | (6 | ) | $ | 268 | $ | 161 | 66 | |||||||||||||
(a) | Loans retained included credit portfolio loans, leveraged leases and other accrual loans, and excluded loans held-for-sale and loans accounted for at fair value. |
23
(b) | Adjusted assets, a non-GAAP financial measure, equals total assets minus: (1) securities purchased under resale agreements and securities borrowed less securities sold, not yet purchased; (2) assets of consolidated variable interest entities (VIEs); (3) cash and securities segregated and on deposit for regulatory and other purposes; (4) goodwill and intangibles; (5) securities received as collateral; and (6) investments purchased under the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AML Facility). The amount of adjusted assets is presented to assist the reader in comparing IBs asset and capital levels to other investment banks in the securities industry. Asset-to-equity leverage ratios are commonly used as one measure to assess a companys capital adequacy. IB believes an adjusted asset amount that excludes the assets discussed above, which were considered to have a low risk profile, provides a more meaningful measure of balance sheet leverage in the securities industry. | |
(c) | Allowance for loan losses of $1.8 billion and $72 million were held against these nonperforming loans at September 30, 2009 and 2008, respectively. Nonperforming loans excluded distressed loans held-for-sale that were purchased as part of IBs proprietary activities. | |
(d) | Loans held-for-sale and loans at fair value were excluded when calculating the allowance coverage ratio and net charge-off rate. | |
(e) | Results for year-to-date 2008 include four months of the combined Firms (JPMorgan Chase & Co.s and Bear Stearns) results and five months of heritage JPMorgan Chase & Co results. For a more complete description of value-at-risk, see pages 84-89 of this Form 10-Q. | |
(f) | Average VaRs were less than the sum of the VaRs of their market risk components, which was due to risk offsets resulting from portfolio diversification. The diversification effect reflected the fact that the risks were not perfectly correlated. The risk of a portfolio of positions is usually less than the sum of the risks of the positions themselves. | |
(g) | Trading VaR includes predominantly all trading activities in IB. Trading VaR does not include VaR related to held-for-sale funded loans and unfunded commitments, nor the debit valuation adjustments (DVA) taken on derivative and structured liabilities to reflect the credit quality of the Firm. See the DVA Sensitivity table on page 89 of this Form 10-Q for further details. Trading VaR also does not include the MSR portfolio or VaR related to other corporate functions, such as Corporate/Private Equity. Beginning in the fourth quarter of 2008, trading VaR includes the estimated credit spread sensitivity of certain mortgage products. | |
(h) | Includes VaR on derivative credit valuation adjustments (CVA), hedges of the CVA and mark-to-market hedges of the retained loan portfolio, which were all reported in principal transactions revenue. This VaR does not include the retained loan portfolio. | |
(i) | Excluding the impact of a loan originated in March 2008 to Bear Stearns, the adjusted ratio would be 3.76% for year-to-date 2008. The average balance of the loan extended to Bear Stearns was $2.6 billion for year-to-date 2008. |
Nine months ended September 30, 2009 | Full-year 2008 | |||||||||||||||
Market shares and rankings(a) | Market Share | Rankings | Market Share | Rankings | ||||||||||||
Global debt, equity and equity-related |
10 | % | #1 | 9 | % | #1 | ||||||||||
Global syndicated loans |
9 | #1 | 11 | #1 | ||||||||||||
Global long-term debt(b) |
9 | #1 | 9 | #3 | ||||||||||||
Global equity and equity-related(c) |
15 | #1 | 10 | #1 | ||||||||||||
Global announced M&A(d) |
25 | #4 | 28 | #2 | ||||||||||||
U.S. debt, equity and equity-related |
15 | #1 | 15 | #2 | ||||||||||||
U.S. syndicated loans |
23 | #1 | 25 | #1 | ||||||||||||
U.S. long-term debt(b) |
14 | #1 | 15 | #2 | ||||||||||||
U.S. equity and equity-related(c) |
18 | #1 | 11 | #1 | ||||||||||||
U.S. announced M&A(d) |
33 | #4 | 35 | #2 | ||||||||||||
(a) | Source: Thomson Reuters. Full-year 2008 results are pro forma for the Bear Stearns merger. | |
(b) | Includes asset-backed securities, mortgage-backed securities and municipal securities. | |
(c) | Includes rights offerings, and U.S.-domiciled equity and equity-related transactions. | |
(d) | Global announced M&A is based on rank value; all other rankings are based on proceeds, with full credit to each book manager/equal if joint. Because of joint assignments, market share of all participants will add up to more than 100%. Global and U.S. announced M&A market share and rankings for 2008 include transactions withdrawn since December 31, 2008. U.S. announced M&A represents any U.S. involvement ranking. |
24
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Lending- and deposit-related fees |
$ | 1,046 | $ | 538 | 94 | % | $ | 2,997 | $ | 1,496 | 100 | % | ||||||||||||
Asset management, administration
and commissions |
408 | 346 | 18 | 1,268 | 1,098 | 15 | ||||||||||||||||||
Mortgage fees and related income |
873 | 438 | 99 | 3,313 | 1,659 | 100 | ||||||||||||||||||
Credit card income |
416 | 204 | 104 | 1,194 | 572 | 109 | ||||||||||||||||||
Other income |
321 | 206 | 56 | 829 | 556 | 49 | ||||||||||||||||||
Noninterest revenue |
3,064 | 1,732 | 77 | 9,601 | 5,381 | 78 | ||||||||||||||||||
Net interest income |
5,154 | 3,231 | 60 | 15,422 | 9,455 | 63 | ||||||||||||||||||
Total net revenue |
8,218 | 4,963 | 66 | 25,023 | 14,836 | 69 | ||||||||||||||||||
Provision for credit losses |
3,988 | 2,056 | 94 | 11,711 | 6,329 | 85 | ||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
1,728 | 1,120 | 54 | 4,990 | 3,464 | 44 | ||||||||||||||||||
Noncompensation expense |
2,385 | 1,559 | 53 | 7,207 | 4,267 | 69 | ||||||||||||||||||
Amortization of intangibles |
83 | 100 | (17 | ) | 249 | 300 | (17 | ) | ||||||||||||||||
Total noninterest expense |
4,196 | 2,779 | 51 | 12,446 | 8,031 | 55 | ||||||||||||||||||
Income before income tax expense |
34 | 128 | (73 | ) | 866 | 476 | 82 | |||||||||||||||||
Income tax expense |
27 | 64 | (58 | ) | 370 | 220 | 68 | |||||||||||||||||
Net income |
$ | 7 | $ | 64 | (89 | ) | $ | 496 | $ | 256 | 94 | |||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
| % | 1 | % | 3 | % | 2 | % | ||||||||||||||||
Overhead ratio |
51 | 56 | 50 | 54 | ||||||||||||||||||||
Overhead ratio excluding core
deposit
intangibles(a) |
50 | 54 | 49 | 52 | ||||||||||||||||||||
(a) | Retail Financial Services uses the overhead ratio (excluding the amortization of core deposit intangibles (CDI)), a non-GAAP financial measure, to evaluate the underlying expense trends of the business. Including CDI amortization expense in the overhead ratio calculation results in a higher overhead ratio in the earlier years and a lower overhead ratio in later years; this method would result in an improving overhead ratio over time, all things remaining equal. This non-GAAP ratio excludes Retail Bankings core deposit intangible amortization expense, related to the 2006 Bank of New York transaction and the 2004 Bank One merger, of $83 million and $99 million for the quarters ended September 30, 2009 and 2008, respectively, and $248 million and $297 million for year-to-date September 30, 2009 and 2008, respectively. |
25
Selected metrics | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except headcount and ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Selected balance sheet data (period-end) |
||||||||||||||||||||||||
Assets |
$ | 397,673 | $ | 426,435 | (7 | )% | $ | 397,673 | $ | 426,435 | (7 | )% | ||||||||||||
Loans: |
||||||||||||||||||||||||
Loans retained |
346,765 | 371,153 | (7 | ) | 346,765 | 371,153 | (7 | ) | ||||||||||||||||
Loans held-for-sale and loans at fair value(a) |
14,303 | 10,223 | 40 | 14,303 | 10,223 | 40 | ||||||||||||||||||
Total loans |
361,068 | 381,376 | (5 | ) | 361,068 | 381,376 | (5 | ) | ||||||||||||||||
Deposits |
361,046 | 353,660 | 2 | 361,046 | 353,660 | 2 | ||||||||||||||||||
Equity |
25,000 | 25,000 | | 25,000 | 25,000 | | ||||||||||||||||||
Selected balance sheet data (average) |
||||||||||||||||||||||||
Assets |
$ | 401,620 | $ | 265,367 | 51 | $ | 411,693 | $ | 264,400 | 56 | ||||||||||||||
Loans: |
||||||||||||||||||||||||
Loans retained |
349,762 | 222,640 | 57 | 358,623 | 219,464 | 63 | ||||||||||||||||||
Loans held-for-sale and loans at fair value(a) |
19,025 | 16,037 | 19 | 18,208 | 18,116 | 1 | ||||||||||||||||||
Total loans |
368,787 | 238,677 | 55 | 376,831 | 237,580 | 59 | ||||||||||||||||||
Deposits |
366,944 | 222,180 | 65 | 371,482 | 224,731 | 65 | ||||||||||||||||||
Equity |
25,000 | 17,000 | 47 | 25,000 | 17,000 | 47 | ||||||||||||||||||
Headcount |
106,951 | 101,826 | 5 | 106,951 | 101,826 | 5 | ||||||||||||||||||
26
Selected metrics | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Credit data and quality statistics |
||||||||||||||||||||||||
Net charge-offs |
$ | 2,550 | $ | 1,326 | 92 | $ | 7,375 | $ | 3,176 | 132 | ||||||||||||||
Nonperforming loans: |
||||||||||||||||||||||||
Nonperforming loans retained |
10,091 | 5,517 | 83 | 10,091 | 5,517 | 83 | ||||||||||||||||||
Nonperforming loans held-for-sale and loans
at fair value |
242 | 207 | 17 | 242 | 207 | 17 | ||||||||||||||||||
Total nonperforming loans(b)(c)(d) |
10,333 | 5,724 | 81 | 10,333 | 5,724 | 81 | ||||||||||||||||||
Nonperforming assets(b)(c)(d) |
11,883 | 8,085 | 47 | 11,883 | 8,085 | 47 | ||||||||||||||||||
Allowance for loan losses |
13,286 | 7,517 | 77 | 13,286 | 7,517 | 77 | ||||||||||||||||||
Net charge-off rate(e) |
2.89 | % | 2.37 | % | 2.75 | % | 1.93 | % | ||||||||||||||||
Net charge-off rate excluding purchased
credit-impaired loans(e)(f) |
3.81 | 2.37 | 3.62 | 1.93 | ||||||||||||||||||||
Allowance for loan losses to ending loans
retained(e) |
3.83 | 2.03 | 3.83 | 2.03 | ||||||||||||||||||||
Allowance for loan losses to ending loans
retained excluding purchased credit-impaired
loans(e)(f) |
4.63 | 2.56 | 4.63 | 2.56 | ||||||||||||||||||||
Allowance for loan losses to nonperforming loans retained(b)(e)(f) |
121 | 136 | 121 | 136 | ||||||||||||||||||||
Nonperforming loans to total loans |
2.86 | 1.50 | 2.86 | 1.50 | ||||||||||||||||||||
Nonperforming loans to total loans excluding
purchased credit-impaired loans(b) |
3.72 | 1.88 | 3.72 | 1.88 | ||||||||||||||||||||
(a) | Loans at fair value consist of prime mortgages originated with the intent to sell that are accounted for at fair value and classified as trading assets on the Consolidated Balance Sheets. These loans totaled $12.8 billion and $8.6 billion at September 30, 2009 and 2008, respectively. Average balances of these loans totaled $17.7 billion and $14.5 billion for the quarters ended September 30, 2009 and 2008, respectively, and $15.8 billion and $14.9 billion for year-to-date 2009 and 2008, respectively. | |
(b) | Excludes purchased credit-impaired loans that were acquired as part of the Washington Mutual transaction. These loans are accounted for on a pool basis, and the pools are considered to be performing. | |
(c) | Certain of these loans are classified as trading assets on the Consolidated Balance Sheets. | |
(d) | At September 30, 2009 and 2008, nonperforming loans and assets excluded: (1) mortgage loans insured by U.S. government agencies of $7.0 billion and $1.4 billion, respectively; (2) real estate owned insured by U.S. government agencies of $579 million and $370 million, respectively; and (3) student loans that are 90 days past due and still accruing, which are insured by U.S. government agencies under the Federal Family Education Loan Program, of $511 million and $405 million, respectively. These amounts are excluded, as reimbursement is proceeding normally. | |
(e) | Loans held-for-sale and loans accounted for at fair value were excluded when calculating the allowance coverage ratio and the net charge-off rate. | |
(f) | Excludes the impact of purchased credit-impaired loans that were acquired as part of the Washington Mutual transaction. These loans were accounted for at fair value on the acquisition date, which incorporated managements estimate, as of that date, of credit losses over the remaining life of the portfolio. During the third quarter of 2009, an allowance for loan losses of $1.1 billion was recorded for these loans. To date, no charge-offs have been recorded for these loans. |
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Noninterest revenue |
$ | 1,844 | $ | 1,089 | 69 | % | $ | 5,365 | $ | 3,117 | 72 | % | ||||||||||||
Net interest income |
2,732 | 1,756 | 56 | 8,065 | 4,972 | 62 | ||||||||||||||||||
Total net revenue |
4,576 | 2,845 | 61 | 13,430 | 8,089 | 66 | ||||||||||||||||||
Provision for credit losses |
208 | 70 | 197 | 894 | 181 | 394 | ||||||||||||||||||
Noninterest expense |
2,646 | 1,580 | 67 | 7,783 | 4,699 | 66 | ||||||||||||||||||
Income before income tax expense |
1,722 | 1,195 | 44 | 4,753 | 3,209 | 48 | ||||||||||||||||||
Net income |
$ | 1,043 | $ | 723 | 44 | $ | 2,876 | $ | 1,942 | 48 | ||||||||||||||
Overhead ratio |
58 | % | 56 | % | 58 | % | 58 | % | ||||||||||||||||
Overhead ratio excluding core
deposit
intangibles(a) |
56 | 52 | 56 | 54 | ||||||||||||||||||||
(a) | Retail Banking uses the overhead ratio (excluding the amortization of CDI), a non-GAAP financial measure, to evaluate the underlying expense trends of the business. Including CDI amortization expense in the overhead ratio calculation results in a higher overhead ratio in the earlier years and a lower overhead ratio in later years; this method would result in an improving overhead ratio over time, all things remaining equal. This non-GAAP ratio excludes Retail Bankings CDI amortization expense, related to the 2006 Bank of New York transaction and the 2004 Bank One merger, of $83 million and $99 million for the quarters ended September 30, 2009 and 2008, respectively, and $248 million and $297 million for year-to-date 2009 and 2008, respectively. |
27
Selected metrics | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in billions, except ratios and where otherwise noted) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Business metrics |
||||||||||||||||||||||||
Selected ending balances |
||||||||||||||||||||||||
Business banking origination volume |
$ | 0.5 | $ | 1.2 | (58 | )% | $ | 1.6 | $ | 4.7 | (66 | )% | ||||||||||||
End-of-period loans owned |
17.4 | 18.6 | (6 | ) | 17.4 | 18.6 | (6 | ) | ||||||||||||||||
End-of-period deposits: |
||||||||||||||||||||||||
Checking |
$ | 115.5 | $ | 106.7 | 8 | $ | 115.5 | $ | 106.7 | 8 | ||||||||||||||
Savings |
151.6 | 146.4 | 4 | 151.6 | 146.4 | 4 | ||||||||||||||||||
Time and other |
66.6 | 85.8 | (22 | ) | 66.6 | 85.8 | (22 | ) | ||||||||||||||||
Total end-of-period deposits |
333.7 | 338.9 | (2 | ) | 333.7 | 338.9 | (2 | ) | ||||||||||||||||
Average loans owned |
$ | 17.7 | $ | 16.6 | 7 | $ | 18.0 | $ | 16.2 | 11 | ||||||||||||||
Average deposits: |
||||||||||||||||||||||||
Checking |
$ | 114.0 | $ | 68.0 | 68 | $ | 112.6 | $ | 67.5 | 67 | ||||||||||||||
Savings |
151.2 | 105.4 | 43 | 150.1 | 103.9 | 44 | ||||||||||||||||||
Time and other |
74.4 | 36.7 | 103 | 81.8 | 41.3 | 98 | ||||||||||||||||||
Total average deposits |
339.6 | 210.1 | 62 | 344.5 | 212.7 | 62 | ||||||||||||||||||
Deposit margin |
2.99 | % | 3.06 | % | 2.92 | % | 2.86 | % | ||||||||||||||||
Average assets |
$ | 28.1 | $ | 25.6 | 10 | $ | 29.1 | $ | 25.6 | 14 | ||||||||||||||
Credit data and quality statistics
(in millions, except ratio) |
||||||||||||||||||||||||
Net charge-offs |
$ | 208 | $ | 68 | 206 | $ | 594 | $ | 178 | 234 | ||||||||||||||
Net charge-off rate |
4.66 | % | 1.63 | % | 4.41 | % | 1.47 | % | ||||||||||||||||
Nonperforming assets |
$ | 816 | $ | 380 | 115 | $ | 816 | $ | 380 | 115 | ||||||||||||||
Retail branch business metrics |
||||||||||||||||||||||||
Investment sales volume (in millions) |
$ | 6,243 | $ | 4,389 | 42 | $ | 15,933 | $ | 13,684 | 16 | ||||||||||||||
Number of: |
||||||||||||||||||||||||
Branches |
5,126 | 5,423 | (5 | ) | 5,126 | 5,423 | (5 | ) | ||||||||||||||||
ATMs |
15,038 | 14,389 | 5 | 15,038 | 14,389 | 5 | ||||||||||||||||||
Personal bankers |
16,941 | 15,491 | 9 | 16,941 | 15,491 | 9 | ||||||||||||||||||
Sales specialists |
5,530 | 5,899 | (6 | ) | 5,530 | 5,899 | (6 | ) | ||||||||||||||||
Active online customers (in thousands) |
13,852 | 11,682 | 19 | 13,852 | 11,682 | 19 | ||||||||||||||||||
Checking accounts (in thousands) |
25,546 | 24,490 | 4 | 25,546 | 24,490 | 4 | ||||||||||||||||||
28
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratio) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Noninterest revenue |
$ | 1,220 | $ | 643 | 90 | % | $ | 4,236 | $ | 2,264 | 87 | % | ||||||||||||
Net interest income |
2,422 | 1,475 | 64 | 7,357 | 4,483 | 64 | ||||||||||||||||||
Total net revenue |
3,642 | 2,118 | 72 | 11,593 | 6,747 | 72 | ||||||||||||||||||
Provision for credit losses |
3,780 | 1,986 | 90 | 10,817 | 6,148 | 76 | ||||||||||||||||||
Noninterest expense |
1,550 | 1,199 | 29 | 4,663 | 3,332 | 40 | ||||||||||||||||||
Income/(loss) before income tax expense |
(1,688 | ) | (1,067 | ) | (58 | ) | (3,887 | ) | (2,733 | ) | (42 | ) | ||||||||||||
Net income/(loss) |
$ | (1,036 | ) | $ | (659 | ) | (57 | ) | $ | (2,380 | ) | $ | (1,686 | ) | (41 | ) | ||||||||
Overhead ratio |
43 | % | 57 | % | 40 | % | 49 | % | ||||||||||||||||
29
Selected metrics | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in billions) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Business metrics |
||||||||||||||||||||||||
Selected ending balances |
||||||||||||||||||||||||
Loans excluding purchased credit-impaired
loans(a) |
||||||||||||||||||||||||
End-of-period loans owned: |
||||||||||||||||||||||||
Home equity |
$ | 104.8 | $ | 116.8 | (10 | )% | $ | 104.8 | $ | 116.8 | (10 | )% | ||||||||||||
Prime mortgage |
60.1 | 63.0 | (5 | ) | 60.1 | 63.0 | (5 | ) | ||||||||||||||||
Subprime mortgage |
13.3 | 18.1 | (27 | ) | 13.3 | 18.1 | (27 | ) | ||||||||||||||||
Option ARMs |
8.9 | 19.0 | (53 | ) | 8.9 | 19.0 | (53 | ) | ||||||||||||||||
Student loans |
15.5 | 15.3 | 1 | 15.5 | 15.3 | 1 | ||||||||||||||||||
Auto loans |
44.3 | 43.3 | 2 | 44.3 | 43.3 | 2 | ||||||||||||||||||
Other |
0.8 | 1.0 | (20 | ) | 0.8 | 1.0 | (20 | ) | ||||||||||||||||
Total end-of-period loans |
$ | 247.7 | $ | 276.5 | (10 | ) | $ | 247.7 | $ | 276.5 | (10 | ) | ||||||||||||
Average loans owned: |
||||||||||||||||||||||||
Home equity |
$ | 106.6 | $ | 94.8 | 12 | $ | 110.0 | $ | 95.0 | 16 | ||||||||||||||
Prime mortgage |
60.6 | 39.7 | 53 | 63.1 | 38.4 | 64 | ||||||||||||||||||
Subprime mortgage |
13.6 | 14.2 | (4 | ) | 14.3 | 15.1 | (5 | ) | ||||||||||||||||
Option ARMs |
8.9 | | NM | 8.9 | | NM | ||||||||||||||||||
Student loans |
15.2 | 14.1 | 8 | 16.3 | 12.9 | 26 | ||||||||||||||||||
Auto loans |
43.3 | 43.9 | (1 | ) | 43.0 | 44.0 | (2 | ) | ||||||||||||||||
Other |
0.9 | 0.9 | | 1.1 | 1.1 | | ||||||||||||||||||
Total average loans |
$ | 249.1 | $ | 207.6 | 20 | $ | 256.7 | $ | 206.5 | 24 | ||||||||||||||
Purchased credit-impaired loans(a) |
||||||||||||||||||||||||
End-of-period loans owned: |
||||||||||||||||||||||||
Home equity |
$ | 27.1 | $ | 26.5 | 2 | $ | 27.1 | $ | 26.5 | 2 | ||||||||||||||
Prime mortgage |
20.2 | 24.7 | (18 | ) | 20.2 | 24.7 | (18 | ) | ||||||||||||||||
Subprime mortgage |
6.1 | 3.9 | 56 | 6.1 | 3.9 | 56 | ||||||||||||||||||
Option ARMs |
29.8 | 22.6 | 32 | 29.8 | 22.6 | 32 | ||||||||||||||||||
Total end-of-period loans |
$ | 83.2 | $ | 77.7 | 7 | $ | 83.2 | $ | 77.7 | 7 | ||||||||||||||
Average loans owned: |
||||||||||||||||||||||||
Home equity |
$ | 27.4 | $ | | NM | $ | 27.9 | $ | | NM | ||||||||||||||
Prime mortgage |
20.5 | | NM | 21.1 | | NM | ||||||||||||||||||
Subprime mortgage |
6.2 | | NM | 6.5 | | NM | ||||||||||||||||||
Option ARMs |
30.2 | | NM | 30.8 | | NM | ||||||||||||||||||
Total average loans |
$ | 84.3 | $ | | NM | $ | 86.3 | $ | | NM | ||||||||||||||
Total consumer lending portfolio |
||||||||||||||||||||||||
End-of-period loans owned: |
||||||||||||||||||||||||
Home equity |
$ | 131.9 | $ | 143.3 | (8 | ) | $ | 131.9 | $ | 143.3 | (8 | ) | ||||||||||||
Prime mortgage |
80.3 | 87.7 | (8 | ) | 80.3 | 87.7 | (8 | ) | ||||||||||||||||
Subprime mortgage |
19.4 | 22.0 | (12 | ) | 19.4 | 22.0 | (12 | ) | ||||||||||||||||
Option ARMs |
38.7 | 41.6 | (7 | ) | 38.7 | 41.6 | (7 | ) | ||||||||||||||||
Student loans |
15.5 | 15.3 | 1 | 15.5 | 15.3 | 1 | ||||||||||||||||||
Auto loans |
44.3 | 43.3 | 2 | 44.3 | 43.3 | 2 | ||||||||||||||||||
Other |
0.8 | 1.0 | (20 | ) | 0.8 | 1.0 | (20 | ) | ||||||||||||||||
Total end-of-period loans |
$ | 330.9 | $ | 354.2 | (7 | ) | $ | 330.9 | $ | 354.2 | (7 | ) | ||||||||||||
Average loans owned: |
||||||||||||||||||||||||
Home equity |
$ | 134.0 | $ | 94.8 | 41 | $ | 137.9 | $ | 95.0 | 45 | ||||||||||||||
Prime mortgage |
81.1 | 39.7 | 104 | 84.2 | 38.4 | 119 | ||||||||||||||||||
Subprime mortgage |
19.8 | 14.2 | 39 | 20.8 | 15.1 | 38 | ||||||||||||||||||
Option ARMs |
39.1 | | NM | 39.7 | | NM | ||||||||||||||||||
Student loans |
15.2 | 14.1 | 8 | 16.3 | 12.9 | 26 | ||||||||||||||||||
Auto loans |
43.3 | 43.9 | (1 | ) | 43.0 | 44.0 | (2 | ) | ||||||||||||||||
Other |
0.9 | 0.9 | | 1.1 | 1.1 | | ||||||||||||||||||
Total average loans owned(b) |
$ | 333.4 | $ | 207.6 | 61 | $ | 343.0 | $ | 206.5 | 66 | ||||||||||||||
(a) | Purchased credit-impaired loans represent loans acquired in the Washington Mutual transaction for which a deterioration in credit quality occurred between the origination date and JPMorgan Chases acquisition date. These loans were initially recorded at fair value and accrete interest income over the estimated life of the loan when cash flows are reasonably estimable, even if the underlying loans are contractually past due. | |
(b) | Total average loans owned includes loans held-for-sale of $1.3 billion and $1.5 billion for the quarters ended September 30, 2009 and 2008, respectively; and $2.4 billion and $3.2 billion for year-to-date 2009 and 2008, respectively. |
30
Credit data and quality statistics | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Net charge-offs excluding purchased
credit-impaired loans(a): |
||||||||||||||||||||||||
Home equity |
$ | 1,142 | $ | 663 | 72 | % | $ | 3,505 | $ | 1,621 | 116 | % | ||||||||||||
Prime mortgage |
525 | 177 | 197 | 1,318 | 331 | 298 | ||||||||||||||||||
Subprime mortgage |
422 | 273 | 55 | 1,196 | 614 | 95 | ||||||||||||||||||
Option ARMs |
15 | | NM | 34 | | NM | ||||||||||||||||||
Auto loans |
159 | 124 | 28 | 479 | 361 | 33 | ||||||||||||||||||
Other |
79 | 21 | 276 | 249 | 71 | 251 | ||||||||||||||||||
Total net charge-offs |
$ | 2,342 | $ | 1,258 | 86 | $ | 6,781 | $ | 2,998 | 126 | ||||||||||||||
Net charge-off rate excluding purchased
credit-impaired loans(a): |
||||||||||||||||||||||||
Home equity |
4.25 | % | 2.78 | % | 4.26 | % | 2.28 | % | ||||||||||||||||
Prime mortgage |
3.45 | 1.79 | 2.81 | 1.16 | ||||||||||||||||||||
Subprime mortgage |
12.31 | 7.65 | 11.18 | 5.43 | ||||||||||||||||||||
Option ARMs |
0.67 | | 0.51 | | ||||||||||||||||||||
Auto loans |
1.46 | 1.12 | 1.49 | 1.10 | ||||||||||||||||||||
Other |
2.08 | 0.60 | 2.16 | 0.84 | ||||||||||||||||||||
Total
net charge-off rate excluding purchased credit-impaired loans(b) |
3.75 | 2.43 | 3.57 | 1.97 | ||||||||||||||||||||
Net charge-off rate reported: |
||||||||||||||||||||||||
Home equity |
3.38 | % | 2.78 | % | 3.40 | % | 2.28 | % | ||||||||||||||||
Prime mortgage |
2.58 | 1.79 | 2.10 | 1.16 | ||||||||||||||||||||
Subprime mortgage |
8.46 | 7.65 | 7.69 | 5.43 | ||||||||||||||||||||
Option ARMs |
0.15 | | 0.11 | | ||||||||||||||||||||
Auto loans |
1.46 | 1.12 | 1.49 | 1.10 | ||||||||||||||||||||
Other |
2.08 | 0.60 | 2.16 | 0.84 | ||||||||||||||||||||
Total net charge-off rate reported(b) |
2.80 | 2.43 | 2.66 | 1.97 | ||||||||||||||||||||
30+ day
delinquency rate excluding purchased credit-impaired loans(c)(d)(e) |
5.85 | % | 3.16 | % | 5.85 | % | 3.16 | % | ||||||||||||||||
Nonperforming assets(f)(g) |
$ | 11,068 | $ | 7,705 | 44 | $ | 11,068 | $ | 7,705 | 44 | ||||||||||||||
Allowance for loan losses to ending loans retained |
3.74 | % | 1.95 | % | 3.74 | % | 1.95 | % | ||||||||||||||||
Allowance for loan losses to ending loans
retained excluding purchased credit-impaired
loans(a) |
4.56 | 2.50 | 4.56 | 2.50 | ||||||||||||||||||||
(a) | Excludes the impact of purchased credit-impaired loans that were acquired as part of the Washington Mutual transaction. These loans were accounted for at fair value on the acquisition date, which incorporated managements estimate, as of that date, of credit losses over the remaining life of the portfolio. An allowance for loan losses of $1.1 billion has been recorded for these loans as of September 30, 2009. To date, no charge-offs have been recorded for these loans. | |
(b) | Average loans held-for-sale of $1.3 billion and $1.5 billion for the quarters ended September 30, 2009 and 2008, respectively, and $2.4 billion and $3.2 billion for year-to-date 2009 and 2008, respectively, were excluded when calculating the net charge-off rate. | |
(c) | Excluded mortgage loans that are insured by U.S. government agencies of $7.7 billion and $2.2 billion at September 30, 2009 and 2008, respectively. These amounts are excluded, as reimbursement is proceeding normally. | |
(d) | Excluded loans that are 30 days past due and still accruing, which are insured by U.S. government agencies under the Federal Family Education Loan Program, of $903 million and $787 million at September 30, 2009 and 2008, respectively. These amounts are excluded, as reimbursement is proceeding normally. | |
(e) | The delinquency rate for purchased credit-impaired loans was 25.56% and 13.21% at September 30, 2009 and 2008, respectively. | |
(f) | At September 30, 2009 and 2008, nonperforming assets excluded: (1) mortgage loans insured by U.S. government agencies of $7.0 billion and $1.4 billion, respectively; (2) real estate owned insured by U.S. government agencies of $579 million and $370 million, respectively; and (3) student loans that are 90 days past due and still accruing, which are insured by U.S. government agencies under the Federal Family Education Loan Program, of $511 million and $405 million, respectively. These amounts are excluded, as reimbursement is proceeding normally. | |
(g) | Excludes purchased credit-impaired loans that were acquired as part of the Washington Mutual transaction. These loans are accounted for on a pool basis, and the pools are considered to be performing. |
31
Consumer Lending (continued) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in billions, except where otherwise noted) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Origination volume: |
||||||||||||||||||||||||
Mortgage origination volume by channel |
||||||||||||||||||||||||
Retail |
$ | 13.3 | $ | 8.4 | 58 | % | $ | 41.6 | $ | 33.5 | 24 | % | ||||||||||||
Wholesale(a) |
3.4 | 5.9 | (42 | ) | 8.4 | 25.6 | (67 | ) | ||||||||||||||||
Correspondent |
18.4 | 13.2 | 39 | 55.6 | 42.2 | 32 | ||||||||||||||||||
CNT (negotiated transactions) |
2.0 | 10.2 | (80 | ) | 10.3 | 39.6 | (74 | ) | ||||||||||||||||
Total mortgage origination volume |
37.1 | 37.7 | (2 | ) | 115.9 | 140.9 | (18 | ) | ||||||||||||||||
Home equity |
0.5 | 2.6 | (81 | ) | 2.0 | 14.6 | (86 | ) | ||||||||||||||||
Student loans |
1.5 | 2.6 | (42 | ) | 3.6 | 5.9 | (39 | ) | ||||||||||||||||
Auto loans |
6.9 | 3.8 | 82 | 17.8 | 16.6 | 7 | ||||||||||||||||||
Application volume: |
||||||||||||||||||||||||
Mortgage application volume by channel |
||||||||||||||||||||||||
Retail |
$ | 17.8 | $ | 17.1 | 4 | $ | 73.5 | $ | 64.9 | 13 | ||||||||||||||
Wholesale(a) |
4.7 | 11.7 | (60 | ) | 12.7 | 54.2 | (77 | ) | ||||||||||||||||
Correspondent |
23.0 | 18.2 | 26 | 77.0 | 61.3 | 26 | ||||||||||||||||||
Total mortgage application volume |
45.5 | 47.0 | (3 | ) | 163.2 | 180.4 | (10 | ) | ||||||||||||||||
Average mortgage loans held-for-sale and loans
at fair value(b) |
18.0 | 14.9 | 21 | 16.2 | 15.4 | 5 | ||||||||||||||||||
Average assets |
373.5 | 239.8 | 56 | 382.6 | 238.8 | 60 | ||||||||||||||||||
Third-party mortgage loans serviced (ending) |
1,098.9 | 1,114.8 | (1 | ) | 1,098.9 | 1,114.8 | (1 | ) | ||||||||||||||||
MSR net carrying value (ending) |
13.6 | 16.4 | (17 | ) | 13.6 | 16.4 | (17 | ) | ||||||||||||||||
Supplemental mortgage fees and related
income details (in millions) |
||||||||||||||||||||||||
Production revenue |
$ | (70 | ) | $ | 66 | NM | $ | 695 | $ | 836 | (17 | ) | ||||||||||||
Net mortgage servicing revenue: |
||||||||||||||||||||||||
Operating revenue: |
||||||||||||||||||||||||
Loan servicing revenue |
1,220 | 654 | 87 | 3,721 | 1,892 | 97 | ||||||||||||||||||
Other changes in fair value |
(712 | ) | (390 | ) | (83 | ) | (2,622 | ) | (1,209 | ) | (117 | ) | ||||||||||||
Total operating revenue |
508 | 264 | 92 | 1,099 | 683 | 61 | ||||||||||||||||||
Risk management: |
||||||||||||||||||||||||
Due to inputs or assumptions in model |
(1,099 | ) | (786 | ) | (40 | ) | 4,042 | 101 | NM | |||||||||||||||
Derivative valuation adjustments and other |
1,534 | 894 | 72 | (2,523 | ) | 39 | NM | |||||||||||||||||
Total risk management |
435 | 108 | 303 | 1,519 | 140 | NM | ||||||||||||||||||
Total net mortgage servicing revenue |
943 | 372 | 153 | 2,618 | 823 | 218 | ||||||||||||||||||
Mortgage fees and related income |
873 | 438 | 99 | 3,313 | 1,659 | 100 | ||||||||||||||||||
(a) | Includes rural housing loans sourced through brokers and underwritten under U.S. Department of Agriculture guidelines. | |
(b) | Loans at fair value consist of prime mortgages originated with the intent to sell that are accounted for at fair value and classified as trading assets on the Consolidated Balance Sheets. Average balances of these loans totaled $17.7 billion and $14.5 billion for the quarters ended September 30, 2009 and 2008, respectively, and $15.8 billion and $14.9 billion for year-to-date 2009 and 2008, respectively. |
32
Selected income statement data - managed basis | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Credit card income |
$ | 916 | $ | 633 | 45 | % | $ | 2,681 | $ | 1,906 | 41 | % | ||||||||||||
All other income |
(85 | ) | 13 | NM | (646 | ) | 223 | NM | ||||||||||||||||
Noninterest revenue |
831 | 646 | 29 | 2,035 | 2,129 | (4 | ) | |||||||||||||||||
Net interest income |
4,328 | 3,241 | 34 | 13,121 | 9,437 | 39 | ||||||||||||||||||
Total net revenue |
5,159 | 3,887 | 33 | 15,156 | 11,566 | 31 | ||||||||||||||||||
Provision for credit losses |
4,967 | 2,229 | 123 | 14,223 | 6,093 | 133 | ||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
354 | 267 | 33 | 1,040 | 792 | 31 | ||||||||||||||||||
Noncompensation expense |
829 | 773 | 7 | 2,552 | 2,377 | 7 | ||||||||||||||||||
Amortization of intangibles |
123 | 154 | (20 | ) | 393 | 482 | (18 | ) | ||||||||||||||||
Total noninterest expense |
1,306 | 1,194 | 9 | 3,985 | 3,651 | 9 | ||||||||||||||||||
Income/(loss) before income tax
expense |
(1,114 | ) | 464 | NM | (3,052 | ) | 1,822 | NM | ||||||||||||||||
Income tax expense/(benefit) |
(414 | ) | 172 | NM | (1,133 | ) | 671 | NM | ||||||||||||||||
Net income/(loss) |
$ | (700 | ) | $ | 292 | NM | $ | (1,919 | ) | $ | 1,151 | NM | ||||||||||||
Memo: Net securitization income/(loss) |
$ | (43 | ) | $ | (28 | ) | (54 | ) | $ | (491 | ) | $ | 78 | NM | ||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
(19 | )% | 8 | % | (17 | )% | 11 | % | ||||||||||||||||
Overhead ratio |
25 | 31 | 26 | 32 | ||||||||||||||||||||
33
Selected metrics | ||||||||||||||||||||||||
(in millions, except headcount, ratios and | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
where otherwise noted) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Financial metrics |
||||||||||||||||||||||||
Percentage of average managed outstandings: |
||||||||||||||||||||||||
Net interest income |
10.15 | % | 8.18 | % | 10.00 | % | 8.15 | % | ||||||||||||||||
Provision for credit losses |
11.65 | 5.63 | 10.84 | 5.26 | ||||||||||||||||||||
Noninterest revenue |
1.95 | 1.63 | 1.55 | 1.84 | ||||||||||||||||||||
Risk adjusted margin(a) |
0.45 | 4.19 | 0.71 | 4.73 | ||||||||||||||||||||
Noninterest expense |
3.06 | 3.01 | 3.04 | 3.15 | ||||||||||||||||||||
Pretax income/(loss) (ROO)(b) |
(2.61 | ) | 1.17 | (2.32 | ) | 1.57 | ||||||||||||||||||
Net income/(loss) |
(1.64 | ) | 0.74 | (1.46 | ) | 0.99 | ||||||||||||||||||
Business metrics |
||||||||||||||||||||||||
Charge volume (in billions) |
$ | 82.6 | $ | 93.9 | (12 | )% | $ | 241.4 | $ | 272.9 | (12 | )% | ||||||||||||
Net accounts opened (in millions)(c) |
2.4 | 16.6 | (86 | ) | 7.0 | 23.6 | (70 | ) | ||||||||||||||||
Credit cards issued (in millions) |
146.6 | 171.9 | (15 | ) | 146.6 | 171.9 | (15 | ) | ||||||||||||||||
Number of registered internet customers
(in millions) |
31.3 | 34.3 | (9 | ) | 31.3 | 34.3 | (9 | ) | ||||||||||||||||
Merchant acquiring business(d) |
||||||||||||||||||||||||
Bank card volume (in billions) |
$ | 103.5 | $ | 197.1 | (47 | ) | $ | 299.3 | $ | 578.8 | (48 | ) | ||||||||||||
Total transactions (in billions) |
4.5 | 5.7 | (21 | ) | 13.1 | 16.5 | (21 | ) | ||||||||||||||||
Selected balance sheet data (period-end) |
||||||||||||||||||||||||
Loans: |
||||||||||||||||||||||||
Loans on balance sheets |
$ | 78,215 | $ | 92,881 | (16 | ) | $ | 78,215 | $ | 92,881 | (16 | ) | ||||||||||||
Securitized loans |
87,028 | 93,664 | (7 | ) | 87,028 | 93,664 | (7 | ) | ||||||||||||||||
Managed loans |
$ | 165,243 | $ | 186,545 | (11 | ) | $ | 165,243 | $ | 186,545 | (11 | ) | ||||||||||||
Equity |
$ | 15,000 | $ | 15,000 | | $ | 15,000 | $ | 15,000 | | ||||||||||||||
Selected balance sheet data (average) |
||||||||||||||||||||||||
Managed assets |
$ | 192,141 | $ | 169,413 | 13 | $ | 195,517 | $ | 163,560 | 20 | ||||||||||||||
Loans: |
||||||||||||||||||||||||
Loans on balance sheets |
$ | 83,146 | $ | 79,183 | 5 | $ | 90,154 | $ | 78,090 | 15 | ||||||||||||||
Securitized loans |
86,017 | 78,371 | 10 | 85,352 | 76,564 | 11 | ||||||||||||||||||
Managed average loans |
$ | 169,163 | $ | 157,554 | 7 | $ | 175,506 | $ | 154,654 | 13 | ||||||||||||||
Equity |
$ | 15,000 | $ | 14,100 | 6 | $ | 15,000 | $ | 14,100 | 6 | ||||||||||||||
Headcount |
22,850 | 22,283 | 3 | 22,850 | 22,283 | 3 | ||||||||||||||||||
34
Selected metrics | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Managed credit quality statistics |
||||||||||||||||||||||||
Net charge-offs |
$ | 4,392 | $ | 1,979 | 122 | % | $ | 12,238 | $ | 5,543 | 121 | % | ||||||||||||
Net charge-off rate(e) |
10.30 | % | 5.00 | % | 9.32 | % | 4.79 | % | ||||||||||||||||
Managed delinquency rates |
||||||||||||||||||||||||
30+ day(e) |
5.99 | % | 3.91 | % | 5.99 | % | 3.91 | % | ||||||||||||||||
90+ day(e) |
2.76 | 1.77 | 2.76 | 1.77 | ||||||||||||||||||||
Allowance for loan losses(f) |
$ | 9,297 | $ | 5,946 | 56 | $ | 9,297 | $ | 5,946 | 56 | ||||||||||||||
Allowance for loan losses to period-end loans(f)(g) |
11.89 | % | 6.40 | % | 11.89 | % | 6.40 | % | ||||||||||||||||
Key stats Washington Mutual only |
||||||||||||||||||||||||
Managed loans |
$ | 21,163 | $ | 27,235 | (22 | ) | $ | 21,163 | $ | 27,235 | (22 | ) | ||||||||||||
Managed average loans |
22,287 | NM | 24,742 | NM | ||||||||||||||||||||
Net interest income(h) |
17.04 | % | 17.11 | % | ||||||||||||||||||||
Risk adjusted margin(a)(h) |
(4.45 | ) | (1.01 | ) | ||||||||||||||||||||
Net charge-off rate(i) |
21.94 | 18.32 | ||||||||||||||||||||||
30+ day delinquency rate(i) |
12.44 | 7.53 | % | 12.44 | 7.53 | % | ||||||||||||||||||
90+ day delinquency rate(i) |
6.21 | 3.51 | 6.21 | 3.51 | ||||||||||||||||||||
Key stats excluding Washington Mutual |
||||||||||||||||||||||||
Managed loans |
$ | 144,080 | $ | 159,310 | (10 | ) | $ | 144,080 | $ | 159,310 | (10 | ) | ||||||||||||
Managed average loans |
146,876 | 157,554 | (7 | ) | 150,764 | 154,654 | (3 | ) | ||||||||||||||||
Net interest income(h) |
9.10 | % | 8.18 | % | 8.83 | % | 8.15 | % | ||||||||||||||||
Risk adjusted margin(a)(h) |
1.19 | 4.19 | 0.99 | 4.73 | ||||||||||||||||||||
Net charge-off rate |
9.41 | 5.00 | 8.39 | 4.79 | ||||||||||||||||||||
30+ day delinquency rate |
5.38 | 3.69 | 5.38 | 3.69 | ||||||||||||||||||||
90+ day delinquency rate |
2.48 | 1.74 | 2.48 | 1.74 | ||||||||||||||||||||
(a) | Represents total net revenue less provision for credit losses. | |
(b) | Pretax return on average managed outstandings. | |
(c) | Third quarter of 2008 included approximately 13 million credit card accounts acquired by JPMorgan Chase in the Washington Mutual transaction. | |
(d) | The Chase Paymentech Solutions joint venture was dissolved effective November 1, 2008. JPMorgan Chase retained approximately 51% of the business and operates the business under the name Chase Paymentech Solutions. For the three and nine months ended September 30, 2008, the data presented represents activity for the Chase Paymentech Solutions joint venture, and for the three and nine months ended September 30, 2009, the data presented represents activity for Chase Paymentech Solutions. | |
(e) | Results reflect the impact of purchase accounting adjustments related to the Washington Mutual transaction and the consolidation of the Washington Mutual Master Trust. | |
(f) | Based on loans on balance sheets (reported basis). | |
(g) | Includes $3.0 billion of loans at September 30, 2009, held by the Washington Mutual Master Trust, which were consolidated onto the Card Services balance sheet at fair value during the second quarter of 2009. No allowance for loan losses was recorded for these loans as of September 30, 2009. Excluding these loans, the allowance for loan losses to period-end loans was 12.36%. | |
(h) | As a percentage of average managed outstandings. | |
(i) | Excludes the impact of purchase accounting adjustments related to the Washington Mutual transaction and the consolidation of the Washington Mutual Master Trust. |
35
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
(in millions) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Income statement data(a) |
||||||||||||||||||||||||
Credit card income |
||||||||||||||||||||||||
Reported |
$ | 1,201 | $ | 1,476 | (19 | )% | $ | 3,800 | $ | 4,529 | (16 | )% | ||||||||||||
Securitization adjustments |
(285 | ) | (843 | ) | 66 | (1,119 | ) | (2,623 | ) | 57 | ||||||||||||||
Managed credit card income |
$ | 916 | $ | 633 | 45 | $ | 2,681 | $ | 1,906 | 41 | ||||||||||||||
Net interest income |
||||||||||||||||||||||||
Reported |
$ | 2,345 | $ | 1,525 | 54 | $ | 7,176 | $ | 4,430 | 62 | ||||||||||||||
Securitization adjustments |
1,983 | 1,716 | 16 | 5,945 | 5,007 | 19 | ||||||||||||||||||
Managed net interest income |
$ | 4,328 | $ | 3,241 | 34 | $ | 13,121 | $ | 9,437 | 39 | ||||||||||||||
Total net revenue |
||||||||||||||||||||||||
Reported |
$ | 3,461 | $ | 3,014 | 15 | $ | 10,330 | $ | 9,182 | 13 | ||||||||||||||
Securitization adjustments |
1,698 | 873 | 95 | 4,826 | 2,384 | 102 | ||||||||||||||||||
Managed total net revenue |
$ | 5,159 | $ | 3,887 | 33 | $ | 15,156 | $ | 11,566 | 31 | ||||||||||||||
Provision for credit losses |
||||||||||||||||||||||||
Reported |
$ | 3,269 | $ | 1,356 | 141 | $ | 9,397 | $ | 3,709 | 153 | ||||||||||||||
Securitization adjustments |
1,698 | 873 | 95 | 4,826 | 2,384 | 102 | ||||||||||||||||||
Managed provision for credit losses |
$ | 4,967 | $ | 2,229 | 123 | $ | 14,223 | $ | 6,093 | 133 | ||||||||||||||
Balance sheet average balances(a) |
||||||||||||||||||||||||
Total average assets |
||||||||||||||||||||||||
Reported |
$ | 109,362 | $ | 93,701 | 17 | $ | 113,134 | $ | 89,594 | 26 | ||||||||||||||
Securitization adjustments |
82,779 | 75,712 | 9 | 82,383 | 73,966 | 11 | ||||||||||||||||||
Managed average assets |
$ | 192,141 | $ | 169,413 | 13 | $ | 195,517 | $ | 163,560 | 20 | ||||||||||||||
Credit quality statistics(a) |
||||||||||||||||||||||||
Net charge-offs |
||||||||||||||||||||||||
Reported |
$ | 2,694 | $ | 1,106 | 144 | $ | 7,412 | $ | 3,159 | 135 | ||||||||||||||
Securitization adjustments |
1,698 | 873 | 95 | 4,826 | 2,384 | 102 | ||||||||||||||||||
Managed net charge-offs |
$ | 4,392 | $ | 1,979 | 122 | $ | 12,238 | $ | 5,543 | 121 | ||||||||||||||
Net charge-off rates |
||||||||||||||||||||||||
Reported |
12.85 | % | 5.56 | % | 10.99 | % | 5.40 | % | ||||||||||||||||
Securitized |
7.83 | 4.43 | 7.56 | 4.16 | ||||||||||||||||||||
Managed net charge-off rate |
10.30 | 5.00 | 9.32 | 4.79 | ||||||||||||||||||||
(a) | JPMorgan Chase uses the concept of managed basis to evaluate the credit performance and overall performance of the underlying credit card loans, both sold and not sold; as the same borrower is continuing to use the credit card for ongoing charges, a borrowers credit performance will affect both the receivables sold and those not sold. Thus, in its disclosures regarding managed receivables, JPMorgan Chase treats the sold receivables as if they were still on the balance sheet in order to disclose the credit performance (such as net charge-off rates) of the entire managed credit card portfolio. Managed results exclude the impact of credit card securitizations on total net revenue, the provision for credit losses, net charge-offs and loan receivables. Securitization does not change reported net income versus managed earnings; however, it does affect the classification of items on the Consolidated Statements of Income and Consolidated Balance Sheets. For further information, see Explanation and Reconciliation of the Firms Use of Non-GAAP Financial Measures on pages 15-19 of this Form 10-Q. |
36
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Lending- and deposit-related fees |
$ | 269 | $ | 212 | 27 | % | $ | 802 | $ | 612 | 31 | % | ||||||||||||
Asset management, administration and
commissions |
35 | 29 | 21 | 105 | 81 | 30 | ||||||||||||||||||
All other income(a) |
170 | 147 | 16 | 447 | 412 | 8 | ||||||||||||||||||
Noninterest revenue |
474 | 388 | 22 | 1,354 | 1,105 | 23 | ||||||||||||||||||
Net interest income |
985 | 737 | 34 | 2,960 | 2,193 | 35 | ||||||||||||||||||
Total net revenue |
1,459 | 1,125 | 30 | 4,314 | 3,298 | 31 | ||||||||||||||||||
Provision for credit losses |
355 | 126 | 182 | 960 | 274 | 250 | ||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
196 | 177 | 11 | 593 | 528 | 12 | ||||||||||||||||||
Noncompensation expense |
339 | 298 | 14 | 1,008 | 882 | 14 | ||||||||||||||||||
Amortization of intangibles |
10 | 11 | (9 | ) | 32 | 37 | (14 | ) | ||||||||||||||||
Total noninterest expense |
545 | 486 | 12 | 1,633 | 1,447 | 13 | ||||||||||||||||||
Income before income tax expense |
559 | 513 | 9 | 1,721 | 1,577 | 9 | ||||||||||||||||||
Income tax expense |
218 | 201 | 8 | 674 | 618 | 9 | ||||||||||||||||||
Net income |
$ | 341 | $ | 312 | 9 | $ | 1,047 | $ | 959 | 9 | ||||||||||||||
Revenue by product: |
||||||||||||||||||||||||
Lending |
$ | 675 | $ | 377 | 79 | $ | 2,024 | $ | 1,132 | 79 | ||||||||||||||
Treasury services |
672 | 643 | 5 | 1,997 | 1,889 | 6 | ||||||||||||||||||
Investment banking |
99 | 87 | 14 | 286 | 246 | 16 | ||||||||||||||||||
Other |
13 | 18 | (28 | ) | 7 | 31 | (77 | ) | ||||||||||||||||
Total Commercial Banking revenue |
$ | 1,459 | $ | 1,125 | 30 | $ | 4,314 | $ | 3,298 | 31 | ||||||||||||||
IB revenue, gross(b) |
$ | 301 | $ | 252 | 19 | $ | 835 | $ | 725 | 15 | ||||||||||||||
Revenue by business: |
||||||||||||||||||||||||
Middle Market Banking |
$ | 771 | $ | 729 | 6 | $ | 2,295 | $ | 2,143 | 7 | ||||||||||||||
Commercial Term Lending(c) |
232 | | NM | 684 | | NM | ||||||||||||||||||
Mid-Corporate Banking |
278 | 236 | 18 | 825 | 678 | 22 | ||||||||||||||||||
Real Estate Banking(c) |
121 | 91 | 33 | 361 | 282 | 28 | ||||||||||||||||||
Other(c) |
57 | 69 | (17 | ) | 149 | 195 | (24 | ) | ||||||||||||||||
Total Commercial Banking revenue |
$ | 1,459 | $ | 1,125 | 30 | $ | 4,314 | $ | 3,298 | 31 | ||||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
17 | % | 18 | % | 17 | % | 18 | % | ||||||||||||||||
Overhead ratio |
37 | 43 | 38 | 44 | ||||||||||||||||||||
(a) | Revenue from investment banking products sold to CB clients and commercial card revenue is included in all other income. | |
(b) | Represents the total revenue related to investment banking products sold to CB clients. | |
(c) | Results for 2009 include total net revenue on net assets acquired in the Washington Mutual transaction. |
37
38
Selected metrics | ||||||||||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
(in millions, except headcount and ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Selected balance sheet data
(period-end): |
||||||||||||||||||||||||
Loans: |
||||||||||||||||||||||||
Loans retained |
$ | 101,608 | $ | 117,316 | (13 | )% | $ | 101,608 | $ | 117,316 | (13 | )% | ||||||||||||
Loans held-for-sale and loans at fair
value |
288 | 313 | (8 | ) | 288 | 313 | (8 | ) | ||||||||||||||||
Total loans |
101,896 | 117,629 | (13 | ) | 101,896 | 117,629 | (13 | ) | ||||||||||||||||
Equity |
8,000 | 8,000 | | 8,000 | 8,000 | | ||||||||||||||||||
Selected balance sheet data
(average): |
||||||||||||||||||||||||
Total assets |
$ | 130,316 | $ | 101,681 | 28 | $ | 137,248 | $ | 102,374 | 34 | ||||||||||||||
Loans: |
||||||||||||||||||||||||
Loans retained |
103,752 | 71,901 | 44 | 108,654 | 70,038 | 55 | ||||||||||||||||||
Loans held-for-sale and loans at fair
value |
297 | 397 | (25 | ) | 294 | 432 | (32 | ) | ||||||||||||||||
Total loans |
104,049 | 72,298 | 44 | 108,948 | 70,470 | 55 | ||||||||||||||||||
Liability balances(a) |
109,293 | 99,410 | 10 | 110,012 | 99,430 | 11 | ||||||||||||||||||
Equity |
8,000 | 7,000 | 14 | 8,000 | 7,000 | 14 | ||||||||||||||||||
Average loans by business: |
||||||||||||||||||||||||
Middle Market Banking |
$ | 36,200 | $ | 43,155 | (16 | ) | $ | 38,357 | $ | 42,052 | (9 | ) | ||||||||||||
Commercial Term Lending(b) |
36,943 | | NM | 36,907 | | NM | ||||||||||||||||||
Mid-Corporate Banking |
14,933 | 16,491 | (9 | ) | 16,774 | 15,669 | 7 | |||||||||||||||||
Real Estate Banking(b) |
11,547 | 7,513 | 54 | 12,380 | 7,490 | 65 | ||||||||||||||||||
Other(b) |
4,426 | 5,139 | (14 | ) | 4,530 | 5,259 | (14 | ) | ||||||||||||||||
Total Commercial Banking loans |
$ | 104,049 | $ | 72,298 | 44 | $ | 108,948 | $ | 70,470 | 55 | ||||||||||||||
Headcount |
4,177 | 5,298 | (21 | ) | 4,177 | 5,298 | (21 | ) | ||||||||||||||||
Credit data and quality statistics: |
||||||||||||||||||||||||
Net charge-offs |
$ | 291 | $ | 40 | NM | $ | 606 | $ | 170 | 256 | ||||||||||||||
Nonperforming loans: |
||||||||||||||||||||||||
Nonperforming loans retained(c) |
2,284 | 844 | 171 | 2,284 | 844 | 171 | ||||||||||||||||||
Nonperforming loans held-for-sale
and loans at fair value |
18 | | NM | 18 | | NM | ||||||||||||||||||
Total nonperforming loans |
2,302 | 844 | 173 | 2,302 | 844 | 173 | ||||||||||||||||||
Nonperforming assets |
2,461 | 923 | 167 | 2,461 | 923 | 167 | ||||||||||||||||||
Allowance for credit losses: |
||||||||||||||||||||||||
Allowance for loan losses |
3,063 | 2,698 | 14 | 3,063 | 2,698 | 14 | ||||||||||||||||||
Allowance for lending-related
commitments |
300 | 191 | 57 | 300 | 191 | 57 | ||||||||||||||||||
Total allowance for credit losses |
3,363 | 2,889 | 16 | 3,363 | 2,889 | 16 | ||||||||||||||||||
Net charge-off rate |
1.11 | % | 0.22 | % | 0.75 | % | 0.32 | % | ||||||||||||||||
Allowance for loan losses to period-end
loans retained |
3.01 | 2.30 | 3.01 | 2.30 | ||||||||||||||||||||
Allowance for loan losses to average
loans retained |
2.95 | 2.32 | (d) | 2.82 | 3.18 | (d) | ||||||||||||||||||
Allowance for loan losses to
nonperforming loans retained |
134 | 320 | 134 | 320 | ||||||||||||||||||||
Nonperforming loans to total period-end
loans |
2.26 | 0.72 | 2.26 | 0.72 | ||||||||||||||||||||
Nonperforming loans to total average loans |
2.21 | 0.72 | (d) | 2.11 | 0.99 | (d) | ||||||||||||||||||
(a) | Liability balances include deposits and deposits swept to on-balance sheet liabilities, such as commercial paper, federal funds purchased and securities loaned or sold under repurchase agreements. | |
(b) | Results for 2009 include loans acquired in the Washington Mutual transaction. | |
(c) | Allowance for loan losses of $496 million and $135 million were held against nonperforming loans retained at September 30, 2009 and 2008, respectively. | |
(d) | Average loans in the calculation of this ratio were adjusted to include $44.5 billion of loans acquired from Washington Mutual as if the transaction occurred on July 1, 2008. Excluding this adjustment, the unadjusted allowance for loan losses to average loans retained and nonperforming loans to total average loans ratios would have been 3.75% and 1.17%, respectively, for the period ended September 30, 2008, and 3.85% and 1.20%, respectively, for the nine months ended September 30, 2008. |
39
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except headcount and ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Lending- and deposit-related fees |
$ | 316 | $ | 290 | 9 | % | $ | 955 | $ | 842 | 13 | % | ||||||||||||
Asset management, administration and
commissions |
620 | 719 | (14 | ) | 1,956 | 2,385 | (18 | ) | ||||||||||||||||
All other income |
201 | 221 | (9 | ) | 619 | 649 | (5 | ) | ||||||||||||||||
Noninterest revenue |
1,137 | 1,230 | (8 | ) | 3,530 | 3,876 | (9 | ) | ||||||||||||||||
Net interest income |
651 | 723 | (10 | ) | 1,979 | 2,009 | (1 | ) | ||||||||||||||||
Total net revenue |
1,788 | 1,953 | (8 | ) | 5,509 | 5,885 | (6 | ) | ||||||||||||||||
Provision for credit losses |
13 | 18 | (28 | ) | 2 | 37 | (95 | ) | ||||||||||||||||
Credit reimbursement to IB(a) |
(31 | ) | (31 | ) | | (91 | ) | (91 | ) | | ||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
629 | 664 | (5 | ) | 1,876 | 1,974 | (5 | ) | ||||||||||||||||
Noncompensation expense |
633 | 661 | (4 | ) | 1,954 | 1,864 | 5 | |||||||||||||||||
Amortization of intangibles |
18 | 14 | 29 | 57 | 46 | 24 | ||||||||||||||||||
Total noninterest expense |
1,280 | 1,339 | (4 | ) | 3,887 | 3,884 | | |||||||||||||||||
Income before income tax expense |
464 | 565 | (18 | ) | 1,529 | 1,873 | (18 | ) | ||||||||||||||||
Income tax expense |
162 | 159 | 2 | 540 | 639 | (15 | ) | |||||||||||||||||
Net income |
$ | 302 | $ | 406 | (26 | ) | $ | 989 | $ | 1,234 | (20 | ) | ||||||||||||
Revenue by business |
||||||||||||||||||||||||
Treasury Services(b) |
$ | 919 | $ | 946 | (3 | ) | $ | 2,784 | $ | 2,711 | 3 | |||||||||||||
Worldwide Securities Services(b) |
869 | 1,007 | (14 | ) | 2,725 | 3,174 | (14 | ) | ||||||||||||||||
Total net revenue |
$ | 1,788 | $ | 1,953 | (8 | ) | $ | 5,509 | $ | 5,885 | (6 | ) | ||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
24 | % | 46 | % | 26 | % | 47 | % | ||||||||||||||||
Overhead ratio |
72 | 69 | 71 | 66 | ||||||||||||||||||||
Pretax margin ratio(c) |
26 | 29 | 28 | 32 | ||||||||||||||||||||
Selected balance sheet data (period-end) |
||||||||||||||||||||||||
Loans |
$ | 19,693 | $ | 40,675 | (52 | ) | $ | 19,693 | $ | 40,675 | (52 | ) | ||||||||||||
Equity |
5,000 | 4,500 | 11 | 5,000 | 4,500 | 11 | ||||||||||||||||||
Selected balance sheet data (average) |
||||||||||||||||||||||||
Total assets |
$ | 33,117 | $ | 49,386 | (33 | ) | $ | 35,753 | $ | 54,243 | (34 | ) | ||||||||||||
Loans(d) |
17,062 | 26,650 | (36 | ) | 18,231 | 24,527 | (26 | ) | ||||||||||||||||
Liability balances(e) |
231,502 | 259,992 | (11 | ) | 247,219 | 260,882 | (5 | ) | ||||||||||||||||
Equity |
5,000 | 3,500 | 43 | 5,000 | 3,500 | 43 | ||||||||||||||||||
Headcount |
26,389 | 27,592 | (4 | ) | 26,389 | 27,592 | (4 | ) | ||||||||||||||||
(a) | IB credit portfolio group manages certain exposures on behalf of clients shared with TSS. TSS reimburses IB for a portion of the total cost of managing the credit portfolio. IB recognizes this credit reimbursement as a component of noninterest revenue. | |
(b) | Reflects an internal reorganization for escrow products from Worldwide Securities Services to Treasury Services revenue of $38 million and $49 million for the three months ended September 30, 2009 and 2008, respectively, and $129 million and $148 million for the nine months ended September 30, 2009 and 2008, respectively. | |
(c) | Pretax margin represents income before income tax expense divided by total net revenue, which is a measure of pretax performance and another basis by which management evaluates its performance and that of its competitors. | |
(d) | Loan balances include wholesale overdrafts, commercial card and trade finance loans. | |
(e) | Liability balances include deposits and deposits swept to on-balance sheet liabilities, such as commercial paper, federal funds purchased and securities loaned or sold under repurchase agreements. |
40
41
Selected metrics | ||||||||||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
(in millions, except ratios and where otherwise noted) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
TSS firmwide disclosures |
||||||||||||||||||||||||
Treasury Services revenue -
reported(a) |
$ | 919 | $ | 946 | (3 | )% | $ | 2,784 | $ | 2,711 | 3 | % | ||||||||||||
Treasury Services revenue reported
in CB |
672 | 643 | 5 | 1,997 | 1,889 | 6 | ||||||||||||||||||
Treasury Services revenue reported
in other lines of business |
63 | 76 | (17 | ) | 188 | 217 | (13 | ) | ||||||||||||||||
Treasury Services firmwide
revenue(a)(b) |
1,654 | 1,665 | (1 | ) | 4,969 | 4,817 | 3 | |||||||||||||||||
Worldwide Securities Services
revenue(a) |
869 | 1,007 | (14 | ) | 2,725 | 3,174 | (14 | ) | ||||||||||||||||
Treasury & Securities Services
firmwide revenue(b) |
$ | 2,523 | $ | 2,672 | (6 | ) | $ | 7,694 | $ | 7,991 | (4 | ) | ||||||||||||
Treasury Services firmwide
liability balances
(average)(c)(d) |
$ | 261,059 | $ | 248,075 | 5 | $ | 269,568 | $ | 247,956 | 9 | ||||||||||||||
Treasury & Securities Services
firmwide liability balances
(average)(c) |
340,795 | 359,401 | (5 | ) | 357,231 | 360,302 | (1 | ) | ||||||||||||||||
TSS firmwide financial ratios |
||||||||||||||||||||||||
Treasury Services firmwide overhead
ratio(e) |
52 | % | 52 | % | 52 | % | 53 | % | ||||||||||||||||
Treasury & Securities Services
firmwide overhead
ratio(e) |
62 | 60 | 61 | 59 | ||||||||||||||||||||
Firmwide business metrics |
||||||||||||||||||||||||
Assets under custody (in billions) |
$ | 14,887 | $ | 14,417 | 3 | $ | 14,887 | $ | 14,417 | 3 | ||||||||||||||
Number of: |
||||||||||||||||||||||||
U.S.$ ACH transactions originated
(in millions) |
965 | 997 | (3 | ) | 2,921 | 2,994 | (2 | ) | ||||||||||||||||
Total U.S.$ clearing volume
(in thousands) |
28,604 | 29,277 | (2 | ) | 83,983 | 86,396 | (3 | ) | ||||||||||||||||
International electronic funds
transfer volume (in
thousands)(f) |
48,533 | 41,831 | 16 | 139,994 | 123,302 | 14 | ||||||||||||||||||
Wholesale check volume (in millions) |
530 | 595 | (11 | ) | 1,670 | 1,836 | (9 | ) | ||||||||||||||||
Wholesale cards issued (in
thousands)(g) |
26,977 | 21,858 | 23 | 26,977 | 21,858 | 23 | ||||||||||||||||||
Credit data and quality statistics |
||||||||||||||||||||||||
Net charge-offs (recoveries) |
$ | | $ | | | $ | 19 | $ | (2 | ) | NM | |||||||||||||
Nonperforming loans |
14 | | NM | 14 | | NM | ||||||||||||||||||
Allowance for credit losses: |
||||||||||||||||||||||||
Allowance for loan losses |
15 | 47 | (68 | ) | 15 | 47 | (68 | ) | ||||||||||||||||
Allowance for lending-related
commitments |
104 | 45 | 131 | 104 | 45 | 131 | ||||||||||||||||||
Total allowance for credit losses |
119 | 92 | 29 | 119 | 92 | 29 | ||||||||||||||||||
Net charge-off (recovery) rate |
| % | | % | 0.14 | % | (0.01 | )% | ||||||||||||||||
Allowance for loan losses to
period-end loans |
0.08 | 0.12 | 0.08 | 0.12 | ||||||||||||||||||||
Allowance for loan losses to
average loans |
0.09 | 0.18 | 0.08 | 0.19 | ||||||||||||||||||||
Allowance for loan losses to
nonperforming loans |
107 | NM | 107 | NM | ||||||||||||||||||||
Nonperforming loans to period-end
loans |
0.07 | | 0.07 | | ||||||||||||||||||||
Nonperforming loans to average loans |
0.08 | | 0.08 | | ||||||||||||||||||||
(a) | Reflects an internal reorganization for escrow products, from Worldwide Securities Services to Treasury Services revenue, of $38 million and $49 million for the three months ended September 30, 2009 and 2008, respectively, and $129 million and $148 million for the nine months ended September 30, 2009 and 2008, respectively. | |
(b) | TSS firmwide revenue includes FX revenue recorded in TSS and FX revenue associated with TSS customers who are FX customers of IB. However, some of the FX revenue associated with TSS customers who are FX customers of IB is not included in TS and TSS firmwide revenue. These amounts were $154 million and $196 million, for the three months ended September 30, 2009 and 2008, respectively, and $499 million and $609 million for the nine months ended September 30, 2009 and 2008, respectively. |
42
(c) | Firmwide liability balances include liability balances recorded in Commercial Banking. | |
(d) | Reflects an internal reorganization for escrow products, from Worldwide Securities Services to Treasury Services liability balances, of $13.9 billion and $20.3 billion for the three months ended September 30, 2009 and 2008, respectively, and $15.6 billion and $21.2 billion for the nine months ended September 30, 2009 and 2008, respectively. | |
(e) | Overhead ratios have been calculated based on firmwide revenue and TSS and TS expense, respectively, including those allocated to certain other lines of business. FX revenue and expense recorded in IB for TSS-related FX activity are not included in this ratio. | |
(f) | International electronic funds transfer includes non-U.S. dollar ACH and clearing volume. | |
(g) | Wholesale cards issued include domestic commercial, stored value, prepaid and government electronic benefit card products. |
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Asset management, administration
and commissions |
$ | 1,443 | $ | 1,538 | (6 | )% | $ | 3,989 | $ | 4,642 | (14 | )% | ||||||||||||
All other income |
238 | 43 | 453 | 560 | 232 | 141 | ||||||||||||||||||
Noninterest revenue |
1,681 | 1,581 | 6 | 4,549 | 4,874 | (7 | ) | |||||||||||||||||
Net interest income |
404 | 380 | 6 | 1,221 | 1,052 | 16 | ||||||||||||||||||
Total net revenue |
2,085 | 1,961 | 6 | 5,770 | 5,926 | (3 | ) | |||||||||||||||||
Provision for credit losses |
38 | 20 | 90 | 130 | 53 | 145 | ||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
858 | 816 | 5 | 2,468 | 2,527 | (2 | ) | |||||||||||||||||
Noncompensation expense |
474 | 525 | (10 | ) | 1,478 | 1,496 | (1 | ) | ||||||||||||||||
Amortization of intangibles |
19 | 21 | (10 | ) | 57 | 62 | (8 | ) | ||||||||||||||||
Total noninterest expense |
1,351 | 1,362 | (1 | ) | 4,003 | 4,085 | (2 | ) | ||||||||||||||||
Income before income tax expense |
696 | 579 | 20 | 1,637 | 1,788 | (8 | ) | |||||||||||||||||
Income tax expense |
266 | 228 | 17 | 631 | 686 | (8 | ) | |||||||||||||||||
Net income |
$ | 430 | $ | 351 | 23 | $ | 1,006 | $ | 1,102 | (9 | ) | |||||||||||||
Revenue by client segment |
||||||||||||||||||||||||
Private Bank |
$ | 639 | $ | 631 | 1 | $ | 1,862 | $ | 1,935 | (4 | ) | |||||||||||||
Institutional |
534 | 486 | 10 | 1,481 | 1,448 | 2 | ||||||||||||||||||
Retail |
471 | 399 | 18 | 1,135 | 1,355 | (16 | ) | |||||||||||||||||
Private Wealth Management |
339 | 352 | (4 | ) | 985 | 1,057 | (7 | ) | ||||||||||||||||
Bear Stearns Private Client Services |
102 | 93 | 10 | 307 | 131 | 134 | ||||||||||||||||||
Total net revenue |
$ | 2,085 | $ | 1,961 | 6 | $ | 5,770 | $ | 5,926 | (3 | ) | |||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
24 | % | 25 | % | 19 | % | 28 | % | ||||||||||||||||
Overhead ratio |
65 | 69 | 69 | 69 | ||||||||||||||||||||
Pretax margin ratio(a) |
33 | 30 | 28 | 30 | ||||||||||||||||||||
(a) | Pretax margin represents income before income tax expense divided by total net revenue, which is a measure of pretax performance and another basis by which management evaluates its performance and that of its competitors. |
43
44
(in millions, except headcount, ratios and | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
ranking data, and where otherwise noted) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Number of: |
||||||||||||||||||||||||
Client advisors(a) |
1,891 | 1,814 | 4 | % | 1,891 | 1,814 | 4 | % | ||||||||||||||||
Retirement planning services participants |
1,620,000 | 1,492,000 | 9 | 1,620,000 | 1,492,000 | 9 | ||||||||||||||||||
Bear Stearns brokers |
365 | 323 | 13 | 365 | 323 | 13 | ||||||||||||||||||
% of customer assets in 4 & 5 Star Funds(b) |
39 | % | 39 | % | | 39 | % | 39 | % | | ||||||||||||||
% of AUM in 1st and 2nd quartiles:(c) |
||||||||||||||||||||||||
1 year |
60 | % | 49 | % | 22 | 60 | % | 49 | % | 22 | ||||||||||||||
3 years |
70 | % | 67 | % | 4 | 70 | % | 67 | % | 4 | ||||||||||||||
5 years |
74 | % | 77 | % | (4 | ) | 74 | % | 77 | % | (4 | ) | ||||||||||||
Selected balance sheet data (period-end) |
||||||||||||||||||||||||
Loans |
$ | 35,925 | $ | 39,720 | (10 | ) | $ | 35,925 | $ | 39,720 | (10 | ) | ||||||||||||
Equity |
7,000 | 7,000 | | 7,000 | 7,000 | | ||||||||||||||||||
Selected balance sheet data (average) |
||||||||||||||||||||||||
Total assets |
$ | 60,345 | $ | 71,189 | (15 | ) | $ | 59,309 | $ | 65,518 | (9 | ) | ||||||||||||
Loans |
34,822 | 39,750 | (12 | ) | 34,567 | 38,552 | (10 | ) | ||||||||||||||||
Deposits |
73,649 | 65,621 | 12 | 76,888 | 67,918 | 13 | ||||||||||||||||||
Equity |
7,000 | 5,500 | 27 | 7,000 | 5,190 | 35 | ||||||||||||||||||
Headcount |
14,919 | 15,493 | (4 | ) | 14,919 | 15,493 | (4 | ) | ||||||||||||||||
Credit data and quality statistics |
||||||||||||||||||||||||
Net charge-offs (recoveries) |
$ | 17 | $ | (1 | ) | NM | $ | 82 | $ | (1 | ) | NM | ||||||||||||
Nonperforming loans |
409 | 121 | 238 | 409 | 121 | 238 | ||||||||||||||||||
Allowance for credit losses: |
||||||||||||||||||||||||
Allowance for loan losses |
251 | 170 | 48 | 251 | 170 | 48 | ||||||||||||||||||
Allowance for lending-related
commitments |
5 | 5 | | 5 | 5 | | ||||||||||||||||||
Total allowance for credit losses |
256 | 175 | 46 | 256 | 175 | 46 | ||||||||||||||||||
Net charge-off (recovery) rate |
0.19 | % | (0.01 | )% | 0.32 | % | | % | ||||||||||||||||
Allowance for loan losses to period-end loans |
0.70 | 0.43 | 0.70 | 0.43 | ||||||||||||||||||||
Allowance for loan losses to average loans |
0.72 | 0.43 | 0.73 | 0.44 | ||||||||||||||||||||
Allowance for loan losses to nonperforming loans |
61 | 140 | 61 | 140 | ||||||||||||||||||||
Nonperforming loans to period-end loans |
1.14 | 0.30 | 1.14 | 0.30 | ||||||||||||||||||||
Nonperforming loans to average loans |
1.17 | 0.30 | 1.18 | 0.31 | ||||||||||||||||||||
(a) | Prior periods have been restated to conform to current methodologies. | |
(b) | Derived from the following rating services: Morningstar for the United States; Micropal for the United Kingdom, Luxembourg, Hong Kong and Taiwan; and Nomura for Japan. | |
(c) | Derived from the following rating services: Lipper for the United States and Taiwan; Micropal for the United Kingdom, Luxembourg and Hong Kong; and Nomura for Japan. |
45
ASSETS UNDER SUPERVISION(a) (in billions) | ||||||||
As of September 30, | 2009 | 2008 | ||||||
Assets by asset class |
||||||||
Liquidity |
$ | 634 | $ | 524 | ||||
Fixed income |
215 | 189 | ||||||
Equities & balanced |
316 | 308 | ||||||
Alternatives |
94 | 132 | ||||||
Total assets under management |
1,259 | 1,153 | ||||||
Custody/brokerage/administration/deposits |
411 | 409 | ||||||
Total assets under supervision |
$ | 1,670 | $ | 1,562 | ||||
Assets by client segment |
||||||||
Institutional |
$ | 737 | $ | 653 | ||||
Private Bank |
180 | 194 | ||||||
Retail |
256 | 223 | ||||||
Private Wealth Management |
71 | 75 | ||||||
Bear Stearns Private Client Services |
15 | 8 | ||||||
Total assets under management |
$ | 1,259 | $ | 1,153 | ||||
Institutional |
$ | 737 | $ | 653 | ||||
Private Bank |
414 | 417 | ||||||
Retail |
339 | 303 | ||||||
Private Wealth Management |
131 | 134 | ||||||
Bear Stearns Private Client Services |
49 | 55 | ||||||
Total assets under supervision |
$ | 1,670 | $ | 1,562 | ||||
Assets by geographic region |
||||||||
U.S./Canada |
$ | 862 | $ | 785 | ||||
International |
397 | 368 | ||||||
Total assets under management |
$ | 1,259 | $ | 1,153 | ||||
U.S./Canada |
$ | 1,179 | $ | 1,100 | ||||
International |
491 | 462 | ||||||
Total assets under supervision |
$ | 1,670 | $ | 1,562 | ||||
Mutual fund assets by asset class |
||||||||
Liquidity |
$ | 576 | $ | 470 | ||||
Fixed income |
57 | 44 | ||||||
Equities |
133 | 127 | ||||||
Alternatives |
10 | 7 | ||||||
Total mutual fund assets |
$ | 776 | $ | 648 | ||||
(a) | Excludes assets under management of American Century Companies, Inc., in which the Firm retained 42% and 43% ownership at September 30, 2009 and 2008, respectively. |
46
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
Assets under management rollforward | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Beginning balance |
$ | 1,171 | $ | 1,185 | $ | 1,133 | $ | 1,193 | ||||||||
Net asset flows: |
||||||||||||||||
Liquidity |
9 | 55 | 21 | 124 | ||||||||||||
Fixed income |
13 | (4 | ) | 22 | (5 | ) | ||||||||||
Equities, balanced and alternatives |
12 | (5 | ) | 9 | (29 | ) | ||||||||||
Market/performance/other impacts |
54 | (78 | ) | 74 | (130 | ) | ||||||||||
Total assets under management |
$ | 1,259 | $ | 1,153 | $ | 1,259 | $ | 1,153 | ||||||||
Assets under supervision rollforward |
||||||||||||||||
Beginning balance |
$ | 1,543 | $ | 1,611 | $ | 1,496 | $ | 1,572 | ||||||||
Net asset flows |
45 | 61 | 61 | 108 | ||||||||||||
Market/performance/other impacts |
82 | (110 | ) | 113 | (118 | ) | ||||||||||
Total assets under supervision |
$ | 1,670 | $ | 1,562 | $ | 1,670 | $ | 1,562 | ||||||||
Selected income statement data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions, except headcount) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Principal transactions |
$ | 1,109 | $ | (1,876 | ) | NM | $ | 859 | $ | (1,968 | ) | NM | ||||||||||||
Securities gains |
181 | 440 | (59 | )% | 761 | 1,138 | (33 | )% | ||||||||||||||||
All other income(a) |
273 | (275 | ) | NM | 45 | 988 | (95 | ) | ||||||||||||||||
Noninterest revenue |
1,563 | (1,711 | ) | NM | 1,665 | 158 | NM | |||||||||||||||||
Net interest income (expense) |
1,031 | (125 | ) | NM | 2,885 | (521 | ) | NM | ||||||||||||||||
Total net revenue |
2,594 | (1,836 | ) | NM | 4,550 | (363 | ) | NM | ||||||||||||||||
Provision for credit losses(b) |
62 | 1,977 | (97 | ) | 71 | 2,014 | (96 | ) | ||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
768 | 652 | 18 | 2,064 | 1,902 | 9 | ||||||||||||||||||
Noncompensation expense(c) |
875 | 563 | 55 | 2,539 | 1,168 | 117 | ||||||||||||||||||
Merger costs |
103 | 96 | 7 | 451 | 251 | 80 | ||||||||||||||||||
Subtotal |
1,746 | 1,311 | 33 | 5,054 | 3,321 | 52 | ||||||||||||||||||
Net expense allocated to other businesses |
(1,243 | ) | (1,150 | ) | (8 | ) | (3,775 | ) | (3,277 | ) | (15 | ) | ||||||||||||
Total noninterest expense |
503 | 161 | 212 | 1,279 | 44 | NM | ||||||||||||||||||
Income/(loss) before income tax expense
and extraordinary gain |
2,029 | (3,974 | ) | NM | 3,200 | (2,421 | ) | NM | ||||||||||||||||
Income tax expense/(benefit) |
818 | (1,613 | ) | NM | 1,443 | (852 | ) | NM | ||||||||||||||||
Income/(loss) before extraordinary gain |
1,211 | (2,361 | ) | NM | 1,757 | (1,569 | ) | NM | ||||||||||||||||
Extraordinary gain(d) |
76 | 581 | (87 | ) | 76 | 581 | (87 | ) | ||||||||||||||||
Net income/(loss) |
$ | 1,287 | $ | (1,780 | ) | NM | $ | 1,833 | $ | (988 | ) | NM | ||||||||||||
Total net revenue |
||||||||||||||||||||||||
Private equity |
$ | 172 | $ | (216 | ) | NM | $ | (278 | ) | $ | 144 | NM | ||||||||||||
Corporate |
2,422 | (1,620 | ) | NM | 4,828 | (507 | ) | NM | ||||||||||||||||
Total net revenue |
$ | 2,594 | $ | (1,836 | ) | NM | $ | 4,550 | $ | (363 | ) | NM | ||||||||||||
Net income/(loss) |
||||||||||||||||||||||||
Private equity |
$ | 88 | $ | (164 | ) | NM | $ | (219 | ) | $ | (8 | ) | NM | |||||||||||
Corporate |
1,269 | (881 | ) | NM | 2,514 | 295 | NM | |||||||||||||||||
Merger-related items(e) |
(70 | ) | (735 | ) | 90 | (462 | ) | (1,275 | ) | 64 | ||||||||||||||
Total net income/(loss) |
$ | 1,287 | $ | (1,780 | ) | NM | $ | 1,833 | $ | (988 | ) | NM | ||||||||||||
Headcount |
20,747 | 24,967 | (17 | ) | 20,747 | 24,967 | (17 | ) | ||||||||||||||||
(a) | Included $423 million representing the Firms share of Bear Stearns losses from April 8 to May 30, 2008, in the second quarter of 2008, and proceeds of $1.5 billion from the sale of Visa shares in its initial public offering in the first quarter of 2008. | |
(b) | 2008 included an accounting conformity loan loss reserve provision related to the acquisition of Washington Mutuals banking operations. For a further discussion, see Consumer Credit Portfolio on page 103 of JPMorgan Chases 2008 Annual Report. | |
(c) | Second quarter of 2009 included an accrual of $675 million for an FDIC special assessment. The first quarter of 2008 included a release of credit card litigation reserves. |
47
(d) | JPMorgan Chase acquired the banking operations of Washington Mutual Bank for $1.9 billion. The fair value of the net assets acquired exceeded the purchase price, which resulted in negative goodwill. In accordance with U.S. GAAP for business combinations, nonfinancial assets that are not held-for-sale were written down against that negative goodwill. The negative goodwill that remained after writing down nonfinancial assets was recognized as an extraordinary gain. As a result of the final refinement of the purchase price allocation during the third quarter of 2009, the Firm recognized a $76 million increase in the extraordinary gain. | |
(e) | Included costs related to the Washington Mutual transaction, as well as items related to the Bear Stearns merger. |
Selected income statement and balance sheet data | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Treasury |
||||||||||||||||||||||||
Securities gains(a) |
$ | 181 | $ | 442 | (59 | )% | $ | 769 | $ | 1,140 | (33 | )% | ||||||||||||
Investment securities portfolio
(average)(b) |
339,745 | 108,728 | 212 | 314,202 | 97,498 | 222 | ||||||||||||||||||
Investment securities portfolio (ending)(b) |
351,823 | 119,085 | 195 | 351,823 | 119,085 | 195 | ||||||||||||||||||
Mo |