For the Quarterly Period Ended June 30, 2005 | Commission file number 1-5805 |
Delaware | 13-2624428 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
270 Park Avenue, New York, New York | 10017 | |
(Address of principal executive offices) | (Zip Code) |
Common Stock, $1 Par Value | 3,512,844,100 |
Page | ||||||
Part I Financial information | ||||||
Item 1 | Consolidated Financial Statements JPMorgan Chase & Co.: |
|||||
Consolidated statements of income (unaudited) for the three and six months
ended June 30, 2005, and June 30, 2004
|
64 | |||||
Consolidated balance sheets (unaudited) at June 30, 2005, and December 31, 2004
|
65 | |||||
Consolidated statements of changes in stockholders equity (unaudited) for
the six months ended June 30, 2005, and June 30, 2004 |
66 | |||||
Consolidated statements of cash flows (unaudited) for the six months ended
June 30, 2005, and June 30, 2004
|
67 | |||||
Notes to consolidated financial statements (unaudited)
|
68 | |||||
Consolidated average balance sheet, interest and rates (unaudited) for the three and six months
ended
June 30, 2005, and June 30, 2004
|
89 | |||||
Glossary of Terms and Line of Business Metrics
|
91 | |||||
Item 2 | Managements Discussion and Analysis of Financial Condition and Results of Operations: |
|||||
Consolidated Financial Highlights
|
3 | |||||
Introduction
|
4 | |||||
Executive Overview
|
6 | |||||
Consolidated Results of Operations
|
8 | |||||
Explanation and Reconciliation of the Firms Use of Non-GAAP Financial Measures
|
10 | |||||
Business Segment Results
|
14 | |||||
Balance Sheet Analysis
|
41 | |||||
Capital Management
|
42 | |||||
Off-Balance Sheet Arrangements and Contractual Cash Obligations
|
44 | |||||
Risk Management
|
45 | |||||
Supervision and Regulation
|
61 | |||||
Critical Accounting Estimates Used by the Firm
|
62 | |||||
Accounting and Reporting Developments
|
63 | |||||
Item 3 | Quantitative and Qualitative Disclosures About Market Risk
|
95 | ||||
Item 4 | Controls and Procedures
|
95 | ||||
Part II Other information | ||||||
Item 1 | Legal Proceedings
|
95 | ||||
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds
|
96 | ||||
Item 3 | Defaults Upon Senior Securities
|
96 | ||||
Item 4 | Submission of Matters to a Vote of Security Holders
|
96 | ||||
Item 5 | Other Information
|
96 | ||||
Item 6 | Exhibits
|
96 | ||||
2
(in millions, except per share, ratio and headcount data) | Six months ended June 30, | |||||||||||||||||||||||||||
As of or for the period ended (a) | 2Q 2005 | 1Q 2005 | 4Q 2004 | 3Q 2004 | 2Q 2004 | 2005 | 2004 | |||||||||||||||||||||
Selected income statement data |
||||||||||||||||||||||||||||
Net interest income |
$ | 5,001 | $ | 5,225 | $ | 5,329 | $ | 5,452 | $ | 2,994 | $ | 10,226 | $ | 5,980 | ||||||||||||||
Noninterest revenue |
7,742 | 8,422 | 7,621 | 7,053 | 5,637 | 16,164 | 11,662 | |||||||||||||||||||||
Total net revenue |
12,743 | 13,647 | 12,950 | 12,505 | 8,631 | 26,390 | 17,642 | |||||||||||||||||||||
Provision for credit losses |
587 | 427 | 1,157 | 1,169 | 203 | 1,014 | 218 | |||||||||||||||||||||
Noninterest expense before Merger costs
and Litigation reserve charge |
8,748 | 8,892 | 8,863 | 8,625 | 5,713 | 17,640 | 11,806 | |||||||||||||||||||||
Merger costs |
279 | 145 | 523 | 752 | 90 | 424 | 90 | |||||||||||||||||||||
Litigation reserve charge |
1,872 | 900 | | | 3,700 | 2,772 | 3,700 | |||||||||||||||||||||
Total noninterest expense |
10,899 | 9,937 | 9,386 | 9,377 | 9,503 | 20,836 | 15,596 | |||||||||||||||||||||
Income (loss) before income tax expense (benefit) |
1,257 | 3,283 | 2,407 | 1,959 | (1,075 | ) | 4,540 | 1,828 | ||||||||||||||||||||
Income tax expense (benefit) |
263 | 1,019 | 741 | 541 | (527 | ) | 1,282 | 446 | ||||||||||||||||||||
Net income (loss) |
$ | 994 | $ | 2,264 | $ | 1,666 | $ | 1,418 | $ | (548 | ) | $ | 3,258 | $ | 1,382 | |||||||||||||
Per common share |
||||||||||||||||||||||||||||
Net income (loss) per share: |
||||||||||||||||||||||||||||
Basic |
$ | 0.28 | $ | 0.64 | $ | 0.47 | $ | 0.40 | $ | (0.27 | ) | $ | 0.93 | $ | 0.67 | |||||||||||||
Diluted |
0.28 | 0.63 | 0.46 | 0.39 | (0.27 | ) | 0.91 | 0.65 | ||||||||||||||||||||
Cash dividends declared per share |
0.34 | 0.34 | 0.34 | 0.34 | 0.34 | 0.68 | 0.68 | |||||||||||||||||||||
Book value per share |
29.95 | 29.78 | 29.61 | 29.42 | 21.52 | |||||||||||||||||||||||
Common shares outstanding (average) |
||||||||||||||||||||||||||||
Basic |
3,493 | 3,518 | 3,515 | 3,514 | 2,043 | 3,505 | 2,038 | |||||||||||||||||||||
Diluted |
3,548 | 3,570 | 3,602 | 3,592 | 2,043 | 3,559 | 2,096 | |||||||||||||||||||||
Common shares at period-end |
3,514 | 3,525 | 3,556 | 3,564 | 2,088 | |||||||||||||||||||||||
Selected ratios |
||||||||||||||||||||||||||||
Return on common equity (ROE)(b) |
4 | % | 9 | % | 6 | % | 5 | % | NM | 6 | % | 6 | % | |||||||||||||||
Return on assets (ROA)(b)(c) |
0.34 | 0.79 | 0.57 | 0.50 | NM | 0.56 | 0.35 | |||||||||||||||||||||
Tier 1 capital ratio |
8.2 | 8.6 | 8.7 | 8.6 | 8.2 | % | ||||||||||||||||||||||
Total capital ratio |
11.3 | 11.9 | 12.2 | 12.0 | 11.2 | |||||||||||||||||||||||
Tier 1 leverage ratio |
6.2 | 6.3 | 6.2 | 6.5 | 5.5 | |||||||||||||||||||||||
Selected balance sheet data (period-end) |
||||||||||||||||||||||||||||
Total assets |
$ | 1,171,283 | $ | 1,178,305 | $ | 1,157,248 | $ | 1,138,469 | $ | 817,763 | ||||||||||||||||||
Securities |
58,573 | 75,251 | 94,512 | 92,816 | 64,915 | |||||||||||||||||||||||
Total loans |
416,025 | 402,669 | 402,114 | 393,701 | 225,938 | |||||||||||||||||||||||
Deposits |
534,640 | 531,379 | 521,456 | 496,454 | 346,539 | |||||||||||||||||||||||
Long-term debt |
101,182 | 99,329 | 95,422 | 91,754 | 52,981 | |||||||||||||||||||||||
Common stockholders equity |
105,246 | 105,001 | 105,314 | 104,844 | 44,932 | |||||||||||||||||||||||
Total stockholders equity |
105,385 | 105,340 | 105,653 | 105,853 | 45,941 | |||||||||||||||||||||||
Credit quality metrics |
||||||||||||||||||||||||||||
Allowance for credit losses |
$ | 7,233 | $ | 7,423 | $ | 7,812 | $ | 8,034 | $ | 4,227 | $ | 7,233 | $ | 4,227 | ||||||||||||||
Nonperforming assets |
2,832 | 2,949 | 3,231 | 3,637 | 2,482 | 2,832 | 2,482 | |||||||||||||||||||||
Allowance for loan losses to total loans(d) |
1.76 | % | 1.83 | % | 1.94 | % | 2.01 | % | 1.92 | % | 1.76 | % | 1.92 | % | ||||||||||||||
Net charge-offs |
$ | 773 | $ | 816 | $ | 1,398 | $ | 865 | $ | 392 | $ | 1,589 | $ | 836 | ||||||||||||||
Net charge-off rate(b)(e) |
0.83 | % | 0.88 | % | 1.47 | % | 0.93 | % | 0.77 | % | 0.86 | % | 0.84 | % | ||||||||||||||
Wholesale net charge-off (recovery) rate(b)(e) |
(0.17 | ) | (0.03 | ) | 0.21 | (0.08 | ) | 0.29 | (0.10 | ) | 0.39 | |||||||||||||||||
Managed Card net charge-off rate(b) |
4.87 | 4.83 | 5.24 | 4.88 | 5.85 | 4.85 | 5.83 | |||||||||||||||||||||
Headcount |
168,461 | 164,381 | 160,968 | 162,275 | 94,615 | |||||||||||||||||||||||
Share price(f) |
||||||||||||||||||||||||||||
High |
$ | 36.50 | $ | 39.69 | $ | 40.45 | $ | 40.25 | $ | 42.57 | $ | 39.69 | $ | 43.84 | ||||||||||||||
Low |
33.35 | 34.32 | 36.32 | 35.50 | 34.62 | 33.35 | 34.62 | |||||||||||||||||||||
Close |
35.32 | 34.60 | 39.01 | 39.73 | 38.77 | 35.32 | 38.77 | |||||||||||||||||||||
(a) | Results for each quarter commencing with the third quarter of 2004, and for the six
months ended June 30, 2005, include the combined Firms results; results for the second
quarter of 2004 and six months ended June 30, 2004, reflect the results of heritage JPMorgan
Chase only. |
|
(b) | Based on annualized amounts. |
|
(c) | Represents Net income divided by Total average assets. |
|
(d) | Excluded from this ratio were loans held-for-sale. |
|
(e) | Excluded from this ratio were average loans held-for-sale. |
|
(f) | JPMorgan Chases common stock is listed and traded on the New York Stock Exchange, the London
Stock Exchange Limited and the Tokyo Stock Exchange. The high, low and closing prices of
JPMorgan Chases common stock are from The New York Stock Exchange Composite Transaction Tape. |
3
4
5
6
7
Total net revenue(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Investment banking fees |
$ | 961 | $ | 893 | 8 | % | $ | 1,954 | $ | 1,585 | 23 | % | ||||||||||||
Trading revenue |
387 | 873 | (56 | ) | 2,246 | 2,593 | (13 | ) | ||||||||||||||||
Lending & deposit related fees |
851 | 412 | 107 | 1,671 | 826 | 102 | ||||||||||||||||||
Asset management,
administration
and commissions |
2,541 | 1,814 | 40 | 5,039 | 3,650 | 38 | ||||||||||||||||||
Securities/private equity
gains (losses) |
407 | 460 | (12 | ) | 362 | 892 | (59 | ) | ||||||||||||||||
Mortgage fees and related
income |
336 | 294 | 14 | 698 | 488 | 43 | ||||||||||||||||||
Credit card income |
1,763 | 631 | 179 | 3,497 | 1,236 | 183 | ||||||||||||||||||
Other income |
496 | 260 | 91 | 697 | 392 | 78 | ||||||||||||||||||
Noninterest revenue |
7,742 | 5,637 | 37 | 16,164 | 11,662 | 39 | ||||||||||||||||||
Net interest income |
5,001 | 2,994 | 67 | 10,226 | 5,980 | 71 | ||||||||||||||||||
Total net revenue |
$ | 12,743 | $ | 8,631 | 48 | % | $ | 26,390 | $ | 17,642 | 50 | % | ||||||||||||
8
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||
(in millions)(a) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Compensation expense |
$ | 4,266 | $ | 2,943 | 45 | % | $ | 8,968 | $ | 6,245 | 44 | % | ||||||||||||
Occupancy expense |
580 | 440 | 32 | 1,105 | 871 | 27 | ||||||||||||||||||
Technology and communications
expense |
896 | 786 | 14 | 1,816 | 1,605 | 13 | ||||||||||||||||||
Professional & outside services |
1,130 | 752 | 50 | 2,204 | 1,568 | 41 | ||||||||||||||||||
Marketing |
537 | 202 | 166 | 1,020 | 401 | 154 | ||||||||||||||||||
Other expense |
954 | 511 | 87 | 1,759 | 958 | 84 | ||||||||||||||||||
Amortization of intangibles |
385 | 79 | 387 | 768 | 158 | 386 | ||||||||||||||||||
Total noninterest expense before
merger costs and litigation
reserve charge |
8,748 | 5,713 | 53 | 17,640 | 11,806 | 49 | ||||||||||||||||||
Merger costs |
279 | 90 | 210 | 424 | 90 | 371 | ||||||||||||||||||
Litigation reserve charge |
1,872 | 3,700 | (49 | ) | 2,772 | 3,700 | (25 | ) | ||||||||||||||||
Total noninterest expense |
$ | 10,899 | $ | 9,503 | 15 | % | $ | 20,836 | $ | 15,596 | 34 | % | ||||||||||||
9
Six months ended June 30, | ||||||||||||||||
(in millions, except rate)(a) | 2Q05 | 2Q04 | 2005 | 2004 | ||||||||||||
Income (loss) before income tax expense
(benefit) |
$ | 1,257 | $ | (1,075 | ) | $ | 4,540 | $ | 1,828 | |||||||
Income tax expense (benefit) |
263 | (527 | ) | 1,282 | 446 | |||||||||||
Effective tax rate |
20.9 | % | 49.0 | % | 28.2 | % | 24.4 | % | ||||||||
10
Three months ended June 30, (a) | 2005 | |||||||||||||||||||||||||||
(in millions, except per share and | Reported | Trading | Credit | Merger | Litigation | Tax-equivalent | Operating | |||||||||||||||||||||
ratio data) |
results | reclass(c) | card(d) | costs(e) | charge(e) | adjustments | basis | |||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 961 | $ | | $ | | $ | | $ | | $ | | $ | 961 | ||||||||||||||
Trading revenue |
387 | 198 | | | | | 585 | |||||||||||||||||||||
Lending & deposit related fees |
851 | | | | | | 851 | |||||||||||||||||||||
Asset management, administration
and commissions |
2,541 | | | | | | 2,541 | |||||||||||||||||||||
Securities/private equity gains
(losses) |
407 | | | | | | 407 | |||||||||||||||||||||
Mortgage fees and related income |
336 | | | | | | 336 | |||||||||||||||||||||
Credit card income |
1,763 | | (728 | ) | | | | 1,035 | ||||||||||||||||||||
Other income |
496 | | | | | 143 | 639 | |||||||||||||||||||||
Noninterest revenue |
7,742 | 198 | (728 | ) | | | 143 | 7,355 | ||||||||||||||||||||
Net interest income |
5,001 | (198 | ) | 1,658 | | | 84 | 6,545 | ||||||||||||||||||||
Total net revenue |
12,743 | | 930 | | | 227 | 13,900 | |||||||||||||||||||||
Provision for credit losses |
587 | | 930 | | | | 1,517 | |||||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||||||
Merger costs |
279 | | | (279 | ) | | | | ||||||||||||||||||||
Litigation reserve charge |
1,872 | | | | (1,872 | ) | | | ||||||||||||||||||||
All other noninterest expense |
8,748 | | | | | | 8,748 | |||||||||||||||||||||
Total noninterest expense |
10,899 | | | (279 | ) | (1,872 | ) | | 8,748 | |||||||||||||||||||
Income before income tax expense |
1,257 | | | 279 | 1,872 | 227 | 3,635 | |||||||||||||||||||||
Income tax expense |
263 | | | 106 | 711 | 227 | 1,307 | |||||||||||||||||||||
Net income |
$ | 994 | $ | | $ | | $ | 173 | $ | 1,161 | $ | | $ | 2,328 | ||||||||||||||
11
Earnings per share diluted |
$ | 0.28 | $ | | $ | | $ | 0.05 | $ | 0.33 | $ | | $ | 0.66 | ||||||||||||||
Return on common equity |
4 | % | | % | | % | 1 | % | 4 | % | | % | 9 | % | ||||||||||||||
Return on equity
goodwill(b) |
6 | | | 1 | 8 | | 15 | |||||||||||||||||||||
Return on assets |
0.34 | NM | NM | NM | NM | NM | 0.75 | |||||||||||||||||||||
Overhead ratio |
86 | NM | NM | NM | NM | NM | 63 | |||||||||||||||||||||
Effective income tax rate |
21 | NM | NM | 38 | 38 | 100 | 36 | |||||||||||||||||||||
Three months ended June 30,(a) | 2004 | |||||||||||||||||||||||||||
(in millions, except per share and | Reported | Trading | Credit | Merger | Litigation | Tax-equivalent | Operating | |||||||||||||||||||||
ratio data) |
results | reclass(c) | card(d) | costs(e) | charge(e) | adjustments | basis | |||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 893 | $ | | $ | | $ | | $ | | $ | | $ | 893 | ||||||||||||||
Trading revenue |
873 | 439 | | | | | 1,312 | |||||||||||||||||||||
Lending & deposit related fees |
412 | | | | | | 412 | |||||||||||||||||||||
Asset management, administration
and commissions |
1,814 | | | | | | 1,814 | |||||||||||||||||||||
Securities/private equity gains
(losses) |
460 | | | | | | 460 | |||||||||||||||||||||
Mortgage fees and related income |
294 | | | | | | 294 | |||||||||||||||||||||
Credit card income |
631 | | (307 | ) | | | | 324 | ||||||||||||||||||||
Other income |
260 | | (45 | ) | | | 41 | 256 | ||||||||||||||||||||
Noninterest revenue |
5,637 | 439 | (352 | ) | | | 41 | 5,765 | ||||||||||||||||||||
Net interest income |
2,994 | (439 | ) | 838 | | | 18 | 3,411 | ||||||||||||||||||||
Total net revenue |
8,631 | | 486 | | | 59 | 9,176 | |||||||||||||||||||||
Provision for credit losses |
203 | | 486 | | | | 689 | |||||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||||||
Merger costs |
90 | | | (90 | ) | | | | ||||||||||||||||||||
Litigation reserve charge |
3,700 | | | | (3,700 | ) | | | ||||||||||||||||||||
All other noninterest expense |
5,713 | | | | | | 5,713 | |||||||||||||||||||||
Total noninterest expense |
9,503 | | | (90 | ) | (3,700 | ) | | 5,713 | |||||||||||||||||||
Income before income tax expense |
(1,075 | ) | | | 90 | 3,700 | 59 | 2,774 | ||||||||||||||||||||
Income tax expense |
(527 | ) | | | 30 | 1,406 | 59 | 968 | ||||||||||||||||||||
Net income |
$ | (548 | ) | $ | | $ | | $ | 60 | $ | 2,294 | $ | | $ | 1,806 | |||||||||||||
Earnings per share diluted |
$ | (0.27 | ) | $ | | $ | | $ | 0.03 | $ | 1.09 | $ | | $ | 0.85 | |||||||||||||
Return on common equity |
NM | NM | NM | NM | NM | NM | 15 | % | ||||||||||||||||||||
Return on
equity
goodwill(b) |
NM | NM | NM | NM | NM | NM | 19 | |||||||||||||||||||||
Return on assets |
NM | NM | NM | NM | NM | NM | 0.87 | |||||||||||||||||||||
Overhead ratio |
110 | % | NM | NM | NM | NM | NM | 62 | ||||||||||||||||||||
Effective income tax rate |
49 | NM | NM | 33 | % | 38 | % | 100 | % | 35 | ||||||||||||||||||
12
Six months ended June 30, (a) | 2005 | |||||||||||||||||||||||||||
(in millions, except per share and | Reported | Trading | Credit | Merger | Litigation | Tax-equivalent | Operating | |||||||||||||||||||||
ratio data) |
results | reclass(c) | card(d) | costs(e) | charge(e) | adjustments | basis | |||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 1,954 | $ | | $ | | $ | | $ | | $ | | $ | 1,954 | ||||||||||||||
Trading revenue |
2,246 | 526 | | | | | 2,772 | |||||||||||||||||||||
Lending & deposit related fees |
1,671 | | | | | | 1,671 | |||||||||||||||||||||
Asset management, administration
and commissions |
5,039 | | | | | | 5,039 | |||||||||||||||||||||
Securities/private equity gains
(losses) |
362 | | | | | | 362 | |||||||||||||||||||||
Mortgage fees and related income |
698 | | | | | | 698 | |||||||||||||||||||||
Credit card income |
3,497 | | (1,543 | ) | | | | 1,954 | ||||||||||||||||||||
Other income |
697 | | | | | 258 | 955 | |||||||||||||||||||||
Noninterest revenue |
16,164 | 526 | (1,543 | ) | | | 258 | 15,405 | ||||||||||||||||||||
Net interest income |
10,226 | (526 | ) | 3,390 | | | 145 | 13,235 | ||||||||||||||||||||
Total net revenue |
26,390 | | 1,847 | | | 403 | 28,640 | |||||||||||||||||||||
Provision for credit losses |
1,014 | | 1,847 | | | | 2,861 | |||||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||||||
Merger costs |
424 | | | (424 | ) | | | | ||||||||||||||||||||
Litigation reserve charge |
2,772 | | | | (2,772 | ) | | | ||||||||||||||||||||
All other noninterest expense |
17,640 | | | | | | 17,640 | |||||||||||||||||||||
Total noninterest expense |
20,836 | | | (424 | ) | (2,772 | ) | | 17,640 | |||||||||||||||||||
Income before income tax expense |
4,540 | | | 424 | 2,772 | 403 | 8,139 | |||||||||||||||||||||
Income tax expense |
1,282 | | | 161 | 1,053 | 403 | 2,899 | |||||||||||||||||||||
Net income |
$ | 3,258 | $ | | $ | | $ | 263 | $ | 1,719 | $ | | $ | 5,240 | ||||||||||||||
Earnings per share diluted |
$ | 0.91 | $ | | $ | | $ | 0.08 | $ | 0.48 | $ | | $ | 1.47 | ||||||||||||||
Return on common equity |
6 | % | | % | | % | 1 | % | 3 | % | | % | 10 | % | ||||||||||||||
Return on
equity
goodwill(b) |
11 | | | 1 | 5 | | 17 | |||||||||||||||||||||
Return on assets |
0.56 | NM | NM | NM | NM | NM | 0.85 | |||||||||||||||||||||
Overhead ratio |
79 | NM | NM | NM | NM | NM | 62 | |||||||||||||||||||||
Effective income tax rate |
28 | NM | NM | 38 | 38 | 100 | 36 | |||||||||||||||||||||
Six months ended June 30, (a) | 2004 | |||||||||||||||||||||||||||
(in millions, except per share and | Reported | Trading | Credit | Merger | Litigation | Tax-equivalent | Operating | |||||||||||||||||||||
ratio data) |
results | reclass(c) | card(d) | costs(e) | charge(e) | adjustments | basis | |||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 1,585 | $ | | $ | | $ | | $ | | $ | | $ | 1,585 | ||||||||||||||
Trading revenue |
2,593 | 1,015 | | | | | 3,608 | |||||||||||||||||||||
Lending & deposit related fees |
826 | | | | | | 826 | |||||||||||||||||||||
Asset management, administration
and commissions |
3,650 | | | | | | 3,650 | |||||||||||||||||||||
Securities/private equity gains
(losses) |
892 | | | | | | 892 | |||||||||||||||||||||
Mortgage fees and related income |
488 | | | | | | 488 | |||||||||||||||||||||
Credit card income |
1,236 | | (633 | ) | | | | 603 | ||||||||||||||||||||
Other income |
392 | | (84 | ) | | | 75 | 383 | ||||||||||||||||||||
Noninterest revenue |
11,662 | 1,015 | (717 | ) | | | 75 | 12,035 | ||||||||||||||||||||
Net interest income |
5,980 | (1,015 | ) | 1,676 | | | 32 | 6,673 | ||||||||||||||||||||
Total net revenue |
17,642 | | 959 | | | 107 | 18,708 | |||||||||||||||||||||
Provision for credit losses |
218 | | 959 | | | | 1,177 | |||||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||||||
Merger costs |
90 | | | (90 | ) | | | | ||||||||||||||||||||
Litigation reserve charge |
3,700 | | | | (3,700 | ) | | | ||||||||||||||||||||
All other noninterest expense |
11,806 | | | | | | 11,806 | |||||||||||||||||||||
Total noninterest expense |
15,596 | | | (90 | ) | (3,700 | ) | | 11,806 | |||||||||||||||||||
Income before income tax expense |
1,828 | | | 90 | 3,700 | 107 | 5,725 | |||||||||||||||||||||
Income tax expense |
446 | | | 30 | 1,406 | 107 | 1,989 | |||||||||||||||||||||
Net income |
$ | 1,382 | $ | | $ | | $ | 60 | $ | 2,294 | $ | | $ | 3,736 | ||||||||||||||
13
Earnings per share diluted |
$ | 0.65 | $ | | $ | | $ | 0.03 | $ | 1.09 | $ | | $ | 1.77 | ||||||||||||||
Return on common equity |
6 | % | | % | | % | | % | 10 | % | | % | 16 | % | ||||||||||||||
Return on
equity
goodwill(b) |
7 | | | | 13 | | 20 | |||||||||||||||||||||
Return on assets |
0.35 | NM | NM | NM | NM | NM | 0.92 | |||||||||||||||||||||
Overhead ratio |
88 | NM | NM | NM | NM | NM | 63 | |||||||||||||||||||||
Effective income tax rate |
24 | NM | NM | 33 | 38 | 100 | 35 | |||||||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Net income applicable to common stock divided by Total average common equity (net of
goodwill). The Firm uses return on equity less goodwill, a non-GAAP financial measure, to
evaluate the operating performance of the Firm. The Firm utilizes this measure to facilitate
operating comparisons to other competitors. |
|
(c) | The reclassification of trading-related net interest income from Net interest income to
Trading revenue primarily impacts the Investment Bank segment results. |
|
(d) | The impact of credit card
securitizations affects Card Services. See pages 2729 of this Form
10Q for further information. |
|
(e) | The impact of Merger costs and nonoperating Litigation reserve charges are excluded from
Operating earnings, as management believes these items are not part of the Firms normal daily
business operations (and, therefore, are not indicative of trends), and do not provide
meaningful comparisons with other periods. |
Three months ended June 30, (a) | 2005 | 2004 | ||||||||||||||||||||||
(in millions) | Reported | Securitized | Managed | Reported | Securitized | Managed | ||||||||||||||||||
Loans Period-end |
$ | 416,025 | $ | 68,808 | $ | 484,833 | $ | 225,938 | $ | 34,138 | $ | 260,076 | ||||||||||||
Total assets average |
1,176,033 | 66,226 | 1,242,259 | 802,870 | 33,026 | 835,896 | ||||||||||||||||||
Six months ended June 30, (a) | 2005 | 2004 | ||||||||||||||||||||||
(in millions) | Reported | Securitized | Managed | Reported | Securitized | Managed | ||||||||||||||||||
Loans Period-end |
$ | 416,025 | $ | 68,808 | $ | 484,833 | $ | 225,938 | $ | 34,138 | $ | 260,076 | ||||||||||||
Total assets average |
1,169,462 | 66,864 | 1,236,326 | 787,094 | 33,191 | 820,285 | ||||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
Segment results Operating basis(a) | Return on | |||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, (b) | Total net revenue | Noninterest expense | Operating earnings | equitygoodwill | ||||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | |||||||||||||||||||||||||||||||||
Investment Bank |
$ | 2,750 | $ | 2,939 | (6 | )% | $ | 2,178 | $ | 2,056 | 6 | % | $ | 606 | $ | 644 | (6 | )% | 12 | % | 18 | % | ||||||||||||||||||||||
Retail Financial Services |
3,799 | 1,835 | 107 | 2,126 | 1,131 | 88 | 980 | 396 | 147 | 30 | 32 | |||||||||||||||||||||||||||||||||
Card Services |
3,886 | 1,587 | 145 | 1,383 | 565 | 145 | 542 | 176 | 208 | 18 | 21 | |||||||||||||||||||||||||||||||||
Commercial Banking |
900 | 334 | 169 | 473 | 203 | 133 | 174 | 65 | 168 | 21 | 35 | |||||||||||||||||||||||||||||||||
Treasury & Securities Services |
1,588 | 1,093 | 45 | 1,194 | 944 | 26 | 229 | 101 | 127 | 48 | 13 | |||||||||||||||||||||||||||||||||
Asset & Wealth Management |
1,343 | 828 | 62 | 917 | 681 | 35 | 283 | 99 | 186 | 47 | 7 | |||||||||||||||||||||||||||||||||
Corporate |
(366 | ) | 560 | NM | 477 | 133 | 259 | (486 | ) | 325 | NM | NM | NM | |||||||||||||||||||||||||||||||
Total |
$ | 13,900 | $ | 9,176 | 51 | % | $ | 8,748 | $ | 5,713 | 53 | % | $ | 2,328 | $ | 1,806 | 29 | % | 15 | % | 19 | % | ||||||||||||||||||||||
14
Return on | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, (b) | Total net revenue | Noninterest expense | Operating earnings | equitygoodwill | ||||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | |||||||||||||||||||||||||||||||||
Investment Bank |
$ | 6,930 | $ | 6,703 | 3 | % | $ | 4,703 | $ | 4,382 | 7 | % | $ | 1,931 | $ | 1,661 | 16 | % | 19 | % | 23 | % | ||||||||||||||||||||||
Retail Financial Services |
7,646 | 3,446 | 122 | 4,288 | 2,372 | 81 | 1,968 | 602 | 227 | 30 | 24 | |||||||||||||||||||||||||||||||||
Card Services |
7,665 | 3,144 | 144 | 2,696 | 1,164 | 132 | 1,064 | 338 | 215 | 18 | 20 | |||||||||||||||||||||||||||||||||
Commercial Banking |
1,750 | 656 | 167 | 931 | 412 | 126 | 417 | 139 | 200 | 25 | 36 | |||||||||||||||||||||||||||||||||
Treasury & Securities Services |
3,070 | 2,105 | 46 | 2,259 | 1,811 | 25 | 474 | 199 | 138 | 50 | 13 | |||||||||||||||||||||||||||||||||
Asset & Wealth Management |
2,704 | 1,676 | 61 | 1,851 | 1,330 | 39 | 559 | 221 | 153 | 47 | 8 | |||||||||||||||||||||||||||||||||
Corporate |
(1,125 | ) | 978 | NM | 912 | 335 | 172 | (1,173 | ) | 576 | NM | NM | NM | |||||||||||||||||||||||||||||||
Total |
$ | 28,640 | $ | 18,708 | 53 | % | $ | 17,640 | $ | 11,806 | 49 | % | $ | 5,240 | $ | 3,736 | 40 | % | 17 | % | 20 | % | ||||||||||||||||||||||
(a) | Represents reported results excluding the impact of credit card securitizations, Merger
costs and litigation reserve charges deemed nonoperating. |
|
(b) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan
Chase only. |
Selected income statement data(a)(b) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Investment banking fees: |
||||||||||||||||||||||||
Advisory |
$ | 359 | $ | 268 | 34 | % | $ | 622 | $ | 415 | 50 | % | ||||||||||||
Equity underwriting |
104 | 221 | (53 | ) | 343 | 398 | (14 | ) | ||||||||||||||||
Debt underwriting |
502 | 402 | 25 | 985 | 768 | 28 | ||||||||||||||||||
Total investment banking fees |
965 | 891 | 8 | 1,950 | 1,581 | 23 | ||||||||||||||||||
Trading-related revenue: |
||||||||||||||||||||||||
Fixed income and other |
940 | 1,293 | (27 | ) | 2,855 | 3,178 | (10 | ) | ||||||||||||||||
Equities |
(280 | ) | (86 | ) | (226 | ) | (55 | ) | 249 | NM | ||||||||||||||
Credit portfolio |
(46 | ) | 29 | NM | 13 | 85 | (85 | ) | ||||||||||||||||
Total trading-related
revenue(c) |
614 | 1,236 | (50 | ) | 2,813 | 3,512 | (20 | ) | ||||||||||||||||
Lending & deposit related fees |
146 | 112 | 30 | 303 | 208 | 46 | ||||||||||||||||||
Asset management, administration
and commissions |
413 | 348 | 19 | 821 | 741 | 11 | ||||||||||||||||||
Other income |
270 | 45 | 500 | 397 | 59 | NM | ||||||||||||||||||
Noninterest revenue |
2,408 | 2,632 | (9 | ) | 6,284 | 6,101 | 3 | |||||||||||||||||
Net interest income(c) |
342 | 307 | 11 | 646 | 602 | 7 | ||||||||||||||||||
Total net revenue(d) |
2,750 | 2,939 | (6 | ) | 6,930 | 6,703 | 3 | |||||||||||||||||
Provision for credit losses |
(343 | ) | (128 | ) | (168 | ) | (709 | ) | (316 | ) | (124 | ) | ||||||||||||
Credit reimbursement from
TSS(e) |
38 | 2 | NM | 76 | 4 | NM | ||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
1,192 | 1,126 | 6 | 2,808 | 2,512 | 12 | ||||||||||||||||||
Noncompensation expense |
986 | 930 | 6 | 1,895 | 1,870 | 1 | ||||||||||||||||||
Total noninterest expense |
2,178 | 2,056 | 6 | 4,703 | 4,382 | 7 | ||||||||||||||||||
Operating earnings before income
tax expense |
953 | 1,013 | (6 | ) | 3,012 | 2,641 | 14 | |||||||||||||||||
Income tax expense |
347 | 369 | (6 | ) | 1,081 | 980 | 10 | |||||||||||||||||
Operating earnings |
$ | 606 | $ | 644 | (6 | ) | $ | 1,931 | $ | 1,661 | 16 | |||||||||||||
15
Financial ratios ROE |
12 | % | 18 | % | (600 | )bp | 19 | % | 23 | % | (400 | )bp | ||||||||||||
ROA |
0.41 | 0.59 | (18 | ) | 0.67 | 0.78 | (11 | ) | ||||||||||||||||
Overhead ratio |
79 | 70 | 900 | 68 | 65 | 300 | ||||||||||||||||||
Compensation expense as % of
total
net revenue |
43 | 38 | 500 | 41 | 37 | 400 | ||||||||||||||||||
Revenue by
business(f) Investment banking fees |
$ | 965 | $ | 891 | 8 | % | $ | 1,950 | $ | 1,581 | 23 | % | ||||||||||||
Fixed income markets |
1,418 | 1,572 | (10 | ) | 3,707 | 3,669 | 1 | |||||||||||||||||
Equities markets |
72 | 161 | (55 | ) | 628 | 793 | (21 | ) | ||||||||||||||||
Credit portfolio |
295 | 315 | (6 | ) | 645 | 660 | (2 | ) | ||||||||||||||||
Total net revenue |
$ | 2,750 | $ | 2,939 | (6 | ) | $ | 6,930 | $ | 6,703 | 3 | |||||||||||||
Revenue by region Americas |
$ | 1,833 | $ | 1,497 | 22 | $ | 4,057 | $ | 3,450 | 18 | ||||||||||||||
Europe/Middle East/Africa |
554 | 1,032 | (46 | ) | 2,089 | 2,328 | (10 | ) | ||||||||||||||||
Asia/Pacific |
363 | 410 | (11 | ) | 784 | 925 | (15 | ) | ||||||||||||||||
Total net revenue |
$ | 2,750 | $ | 2,939 | (6 | ) | $ | 6,930 | $ | 6,703 | 3 | |||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | For a discussion of
selected lines of business metrics, see page 93 of this Form
10Q. |
|
(c) | Trading revenue, on a reported basis, excludes the impact of net interest income related to
the IBs trading activities; this income is recorded in Net interest income. However, in this
presentation, to assess the profitability of the IBs trading business, the Firm combines
these revenues for segment reporting. The amount reclassified from Net interest income to
Trading revenue was $207 million and $427 million for the three months ended June 30, 2005 and
2004, respectively, and $531 million and $1.0 billion for the six months ended June 30, 2005
and 2004, respectively. |
|
(d) | Total net revenue includes tax-equivalent adjustments, primarily due to tax-exempt income
from municipal bonds and income tax credits related to affordable housing investments, of $206
million and $54 million for the three months ended June 30, 2005 and 2004, respectively and
$361 million and $98 million for the six months ended June 30, 2005 and 2004, respectively. |
|
(e) | TSS is charged a credit reimbursement related to certain exposures managed within the IB
credit portfolio on behalf of clients shared with TSS. For a further discussion, see Credit
reimbursement on page 29 of the JPMorgan Chase 2004 Annual Report. |
|
(f) | See account details of Fixed Income Markets, Equities Markets and Credit Portfolio in the
Composition of Revenues table on page 19. |
16
Selected metrics (a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except headcount and | ||||||||||||||||||||||||
ratio data) |
2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Selected balance sheets data (average) |
||||||||||||||||||||||||
Total assets |
$ | 592,383 | $ | 439,166 | 35 | % | $ | 579,651 | $ | 430,658 | 35 | % | ||||||||||||
Trading
assetsdebt and equity
instruments |
232,980 | 186,975 | 25 | 229,194 | 181,881 | 26 | ||||||||||||||||||
Trading
assetsderivatives receivables |
56,436 | 51,925 | 9 | 59,985 | 54,484 | 10 | ||||||||||||||||||
Loan Credit portfolio |
30,435 | 26,192 | 16 | 29,838 | 26,956 | 11 | ||||||||||||||||||
Other loans (b) |
20,967 | 12,537 | 67 | 19,608 | 11,508 | 70 | ||||||||||||||||||
Total loans(c) |
51,402 | 38,729 | 33 | 49,446 | 38,464 | 29 | ||||||||||||||||||
Adjusted assets(d) |
453,895 | 373,461 | 22 | 449,845 | 370,493 | 21 | ||||||||||||||||||
Equity(e) |
20,000 | 14,015 | 43 | 20,000 | 14,550 | 37 | ||||||||||||||||||
Headcount |
19,269 | 15,829 | 22 | 19,269 | 15,829 | 22 | ||||||||||||||||||
Credit data and quality statistics |
||||||||||||||||||||||||
Net charge-offs (recovery) |
$ | (47 | ) | $ | 15 | NM | $ | (52 | ) | $ | 49 | NM | ||||||||||||
Nonperforming assets: |
||||||||||||||||||||||||
Nonperforming loans(f) |
711 | 1,202 | (41 | ) | 711 | 1,202 | (41 | ) | ||||||||||||||||
Other nonperforming assets |
235 | 339 | (31 | ) | 235 | 339 | (31 | ) | ||||||||||||||||
Allowance for loan losses |
971 | 742 | 31 | 971 | 742 | 31 | ||||||||||||||||||
Allowance for lending-related
commitments |
225 | 183 | 23 | 225 | 183 | 23 | ||||||||||||||||||
Net charge-off (recovery)
rate(c) |
(0.56 | )% | 0.18 | % | (74 | )bp | (0.29 | )% | 0.30 | % | (59 | )bp | ||||||||||||
Allowance for loan losses to average
loans(c) |
2.90 | 2.21 | 69 | 2.67 | 2.23 | 44 | ||||||||||||||||||
Allowance for loan losses to
nonperforming loans(f) |
137 | 62 | 7,500 | 137 | 62 | 7,500 | ||||||||||||||||||
Nonperforming loans to average loans |
1.38 | 3.10 | (172 | ) | 1.44 | 3.13 | (169 | ) |
17
Market
riskaverage trading and
credit portfolio VAR(g)(h) |
||||||||||||||||||||||||
Trading activities: |
||||||||||||||||||||||||
Fixed income(g) |
$ | 82 | $ | 77 | 6 | % | $ | 70 | $ | 75 | (7 | )% | ||||||||||||
Foreign exchange |
21 | 16 | 31 | 22 | 19 | 16 | ||||||||||||||||||
Equities |
45 | 29 | 55 | 32 | 35 | (9 | ) | |||||||||||||||||
Commodities and other |
15 | 8 | 88 | 12 | 8 | 50 | ||||||||||||||||||
Diversification |
(61 | ) | (42 | ) | (45 | ) | (52 | ) | (46 | ) | (13 | ) | ||||||||||||
Total trading VAR |
102 | 88 | 16 | 84 | 91 | (8 | ) | |||||||||||||||||
Credit portfolio VAR(h) |
13 | 15 | (13 | ) | 13 | 15 | (13 | ) | ||||||||||||||||
Diversification |
(13 | ) | (9 | ) | (44 | ) | (11 | ) | (8 | ) | (38 | ) | ||||||||||||
Total trading and credit portfolio VAR |
$ | 102 | $ | 94 | 9 | % | $ | 86 | $ | 98 | (12 | )% | ||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Other Loans consists of loans not directly managed by the Credit Portfolio Group and include
(i) warehouse loans held as part of the IBs mortgage-backed, asset-backed and other
securitization businesses; (ii) loans held for proprietary investing purposes and (iii)
certain other extension of loans that are directly managed outside of the Credit Portfolio
Group. |
|
(c) | Loans include loans held-for-sale of $17.9 billion and $5.2 billion for the periods ended
June 30, 2005 and 2004, respectively. The year-to-date average loans held-for-sale were $13.0
billion and $5.2 billion for the periods ended June 30, 2005 and 2004, respectively. These
amounts are not included in the allowance coverage ratios and net charge-off rates. See page
41 for a discussion of the change in loan balances. |
|
(d) | Adjusted assets, a non-GAAP financial measure, equals total assets minus (i) securities
purchased under resale agreements and securities borrowed less securities sold, not yet
purchased; (ii) assets of variable interest entities (VIEs) consolidated under FIN 46R; (iii)
cash and securities segregated and on deposit for regulatory and other purposes; and (iv)
goodwill and intangibles. The amount of adjusted assets is presented to assist the reader in
comparing the 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. The IB believes an adjusted asset amount, which excludes certain
assets considered to have a low-risk profile, provides a more meaningful measure of balance
sheet leverage in the securities industry. See Capital management on
pages 4244 of this Form
10Q for a discussion of the Firms overall capital adequacy and capital management. |
|
(e) | Equity includes $15.1 billion of economic risk capital assigned to the IB for the quarter
ended June 30, 2005. |
|
(f) | Nonperforming loans include loans held-for-sale of $2 million as of both June 30, 2005 and
2004, respectively. These amounts are not included in the allowance coverage ratios. |
|
(g) | Includes all mark-to-market trading activities, plus available-for-sale securities held for
proprietary purposes. |
|
(h) | Includes VAR on derivative credit valuation adjustments, credit valuation adjustment hedges
and mark-to-market loan hedges, which are reported in Trading revenue. This VAR does not
include the accrual loan portfolio, which is not marked to market. |
Six months ended June 30, 2005 | Full Year 2004 | |||||||||||||||
Market shares and rankings(a) | Market Share | Rankings | Market Share | Rankings | ||||||||||||
Global debt, equity and equity-related |
6 | % | #5 | 7 | % | # 3 | ||||||||||
Global syndicated loans |
17 | #1 | 19 | # 1 | ||||||||||||
Global long-term debt |
6 | #4 | 7 | # 2 | ||||||||||||
Global equity and equity-related |
9 | #4 | 6 | # 6 | ||||||||||||
Global announced M&A |
22 | #3 | 25 | # 2 | ||||||||||||
U.S. debt, equity and equity-related |
7 | #4 | 8 | # 5 | ||||||||||||
U.S. syndicated loans |
31 | #1 | 32 | # 1 | ||||||||||||
U.S. long-term debt |
10 | #2 | 12 | # 2 | ||||||||||||
U.S. equity and equity-related |
8 | #5 | 8 | # 6 | ||||||||||||
U.S. announced M&A |
18 | #6 | 32 | #1 | ||||||||||||
(a) | Source: Thomson Financial Securities data. 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%. The market share and rankings for the year ended December 31, 2004 are presented on a combined basis, as if the merger
of JPMorgan Chase and Bank One had been in effect during the period.
|
18
Asset | ||||||||||||||||||||||||||||
Investment | Trading- | Lending & | management, | |||||||||||||||||||||||||
Three months ended June 30,(a) | banking | related | deposit | administration | Other | Total net | ||||||||||||||||||||||
(in millions) | fees | revenue | related fees | and commissions | income | NII | revenue | |||||||||||||||||||||
2005 |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 965 | $ | | $ | | $ | | $ | | $ | | $ | 965 | ||||||||||||||
Fixed income markets |
| 940 | 61 | 50 | 192 | 175 | 1,418 | |||||||||||||||||||||
Equities markets |
| (280 | ) | | 350 | (17 | ) | 19 | 72 | |||||||||||||||||||
Credit portfolio |
| (46 | ) | 85 | 13 | 95 | 148 | 295 | ||||||||||||||||||||
Total |
$ | 965 | $ | 614 | $ | 146 | $ | 413 | $ | 270 | $ | 342 | $ | 2,750 | ||||||||||||||
2004 |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 891 | $ | | $ | | $ | | $ | | $ | | $ | 891 | ||||||||||||||
Fixed income markets |
| 1,293 | 28 | 59 | 63 | 129 | 1,572 | |||||||||||||||||||||
Equities markets |
| (86 | ) | | 279 | (52 | ) | 20 | 161 | |||||||||||||||||||
Credit portfolio |
| 29 | 84 | 10 | 34 | 158 | 315 | |||||||||||||||||||||
Total |
$ | 891 | $ | 1,236 | $ | 112 | $ | 348 | $ | 45 | $ | 307 | $ | 2,939 | ||||||||||||||
Asset | ||||||||||||||||||||||||||||
Investment | Trading- | Lending & | management, | |||||||||||||||||||||||||
Six months ended June 30,(a) | banking | related | deposit | administration | Other | Total net | ||||||||||||||||||||||
(in millions) | fees | revenue | related fees | and commissions | income | NII | revenue | |||||||||||||||||||||
2005 |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 1,950 | $ | | $ | | $ | | $ | | $ | | $ | 1,950 | ||||||||||||||
Fixed income markets |
| 2,855 | 126 | 114 | 296 | 316 | 3,707 | |||||||||||||||||||||
Equities markets |
| (55 | ) | | 683 | (37 | ) | 37 | 628 | |||||||||||||||||||
Credit portfolio |
| 13 | 177 | 24 | 138 | 293 | 645 | |||||||||||||||||||||
Total |
$ | 1,950 | $ | 2,813 | $ | 303 | $ | 821 | $ | 397 | $ | 646 | $ | 6,930 | ||||||||||||||
2004 |
||||||||||||||||||||||||||||
Investment banking fees |
$ | 1,581 | $ | | $ | | $ | | $ | | $ | | $ | 1,581 | ||||||||||||||
Fixed income markets |
| 3,178 | 54 | 119 | 112 | 206 | 3,669 | |||||||||||||||||||||
Equities markets |
| 249 | | 604 | (99 | ) | 39 | 793 | ||||||||||||||||||||
Credit portfolio |
| 85 | 154 | 18 | 46 | 357 | 660 | |||||||||||||||||||||
Total |
$ | 1,581 | $ | 3,512 | $ | 208 | $ | 741 | $ | 59 | $ | 602 | $ | 6,703 | ||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
19
Selected income statement data(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Lending & deposit related fees |
$ | 358 | $ | 124 | 189 | % | $ | 698 | $ | 245 | 185 | % | ||||||||||||
Asset management, administration and
commissions(b) |
369 | 132 | 180 | 763 | 277 | 175 | ||||||||||||||||||
Securities/private equity gains (losses) |
| | NM | 10 | | NM | ||||||||||||||||||
Mortgage fees and related income(b) |
341 | 333 | 2 | 709 | 538 | 32 | ||||||||||||||||||
Credit card income |
105 | 25 | 320 | 199 | 44 | 352 | ||||||||||||||||||
Other income |
68 | 10 | NM | 56 | (14 | ) | NM | |||||||||||||||||
Noninterest revenue |
1,241 | 624 | 99 | 2,435 | 1,090 | 123 | ||||||||||||||||||
Net interest income |
2,558 | 1,211 | 111 | 5,211 | 2,356 | 121 | ||||||||||||||||||
Total net revenue |
3,799 | 1,835 | 107 | 7,646 | 3,446 | 122 | ||||||||||||||||||
Provision for credit losses |
94 | 78 | 21 | 188 | 132 | 42 | ||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
820 | 450 | 82 | 1,642 | 959 | 71 | ||||||||||||||||||
Noncompensation expense |
1,181 | 680 | 74 | 2,396 | 1,411 | 70 | ||||||||||||||||||
Amortization of intangibles |
125 | 1 | NM | 250 | 2 | NM | ||||||||||||||||||
Total noninterest expense |
2,126 | 1,131 | 88 | 4,288 | 2,372 | 81 | ||||||||||||||||||
Operating earnings before income
tax expense |
1,579 | 626 | 152 | 3,170 | 942 | 237 | ||||||||||||||||||
Income tax expense |
599 | 230 | 160 | 1,202 | 340 | 254 | ||||||||||||||||||
Operating earnings |
$ | 980 | $ | 396 | 147 | % | $ | 1,968 | $ | 602 | 227 | % | ||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
30 | % | 32 | % | (200 | )bp | 30 | % | 24 | % | 600 | bp | ||||||||||||
ROA |
1.74 | 1.09 | 65 | 1.76 | 0.85 | 91 | ||||||||||||||||||
Overhead ratio |
56 | 62 | (600 | ) | 56 | 69 | (1,300 | ) | ||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Reflects the transfer of certain insurance revenues from Mortgage fees and related income to
Asset management, administration and commissions in the second quarter of 2005. Prior periods
have been restated to reflect the current presentation. |
20
Selected metrics(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except headcount and ratios) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Selected balance sheets (ending) |
||||||||||||||||||||||||
Total assets |
$ | 223,391 | $ | 148,682 | 50 | % | $ | 223,391 | $ | 148,682 | 50 | % | ||||||||||||
Loans(b) |
197,927 | 131,712 | 50 | 197,927 | 131,712 | 50 | ||||||||||||||||||
Core deposits(c) |
159,702 | 80,100 | 99 | 159,702 | 80,100 | 99 | ||||||||||||||||||
Total deposits |
185,558 | 79,937 | 132 | 185,558 | 79,937 | 132 | ||||||||||||||||||
Selected balance sheets (average) |
||||||||||||||||||||||||
Total assets |
$ | 225,574 | $ | 146,693 | 54 | $ | 225,348 | $ | 143,210 | 57 | ||||||||||||||
Loans(d) |
197,707 | 128,225 | 54 | 198,098 | 124,791 | 59 | ||||||||||||||||||
Core deposits(c) |
161,044 | 84,897 | 90 | 160,367 | 82,189 | 95 | ||||||||||||||||||
Total deposits |
186,523 | 93,565 | 99 | 185,435 | 91,000 | 104 | ||||||||||||||||||
Equity |
13,250 | 5,005 | 165 | 13,175 | 5,091 | 159 | ||||||||||||||||||
Headcount |
59,631 | 30,480 | 96 | 59,631 | 30,480 | 96 | ||||||||||||||||||
Credit data and quality statistics |
||||||||||||||||||||||||
Net charge-offs |
$ | 114 | $ | 80 | 43 | $ | 266 | $ | 165 | 61 | ||||||||||||||
Nonperforming loans(e) |
1,132 | 519 | 118 | 1,132 | 519 | 118 | ||||||||||||||||||
Nonperforming assets |
1,319 | 693 | 90 | 1,319 | 693 | 90 | ||||||||||||||||||
Allowance for loan losses |
1,135 | 1,061 | 7 | 1,135 | 1,061 | 7 | ||||||||||||||||||
Net charge-off rate(d) |
0.25 | % | 0.29 | % | (4 | )bp | 0.29 | % | 0.30 | % | (1 | )bp | ||||||||||||
Allowance for loan losses to ending loans(b) |
0.61 | 0.90 | (29 | ) | 0.61 | 0.90 | (29 | ) | ||||||||||||||||
Allowance for loan losses to nonperforming
loans(e) |
103 | 223 | (12,000 | ) | 103 | 223 | (12,000 | ) | ||||||||||||||||
Nonperforming loans to total loans |
0.57 | 0.39 | 18 | 0.57 | 0.39 | 18 | ||||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Includes loans held-for-sale of $13,112 million and $14,217 million at June 30, 2005 and
2004, respectively. These amounts are not included in the allowance coverage ratios. |
|
(c) | Includes demand and savings deposits. |
|
(d) | Average loans include loans held-for-sale of $14,620 million and $15,638 million for the
three months ended June 30, 2005 and 2004, respectively, and $15,237 million and $15,475
million for the six months ended June 30, 2005 and 2004, respectively. These amounts are not
included in the net charge-off rate. |
|
(e) | Nonperforming loans include loans held-for-sale of $26 million and $44 million at June 30,
2005 and 2004, respectively. These amounts are not included in the allowance coverage ratios. |
21
Selected income statement data(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Prime production and servicing |
||||||||||||||||||||||||
Production |
$ | 135 | $ | 186 | (27 | )% | $ | 363 | $ | 364 | | % | ||||||||||||
Servicing: |
||||||||||||||||||||||||
Mortgage servicing revenue, net of
amortization |
142 | 193 | (26 | ) | 288 | 348 | (17 | ) | ||||||||||||||||
MSR risk management results |
166 | 86 | 93 | 272 | 147 | 85 | ||||||||||||||||||
Total net revenue |
443 | 465 | (5 | ) | 923 | 859 | 7 | |||||||||||||||||
Noninterest expense |
229 | 264 | (13 | ) | 458 | 553 | (17 | ) | ||||||||||||||||
Operating earnings |
136 | 128 | 6 | 294 | 193 | 52 | ||||||||||||||||||
Consumer real estate lending |
||||||||||||||||||||||||
Total net revenue |
$ | 707 | $ | 512 | 38 | $ | 1,420 | $ | 947 | 50 | ||||||||||||||
Provision for credit losses |
38 | 38 | | 68 | 29 | 134 | ||||||||||||||||||
Noninterest expense |
234 | 172 | 36 | 472 | 375 | 26 | ||||||||||||||||||
Operating earnings |
277 | 193 | 44 | 561 | 349 | 61 | ||||||||||||||||||
Total Home Finance |
||||||||||||||||||||||||
Total net revenue |
$ | 1,150 | $ | 977 | 18 | $ | 2,343 | $ | 1,806 | 30 | ||||||||||||||
Provision for credit losses |
38 | 38 | | 68 | 29 | 134 | ||||||||||||||||||
Noninterest expense |
463 | 436 | 6 | 930 | 928 | | ||||||||||||||||||
Operating earnings |
413 | 321 | 29 | 855 | 542 | 58 | ||||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
Selected metrics(a)(b) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except ratios and where otherwise noted) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Origination volume by channel (in billions) |
||||||||||||||||||||||||
Retail |
$ | 22.8 | $ | 20.8 | 10 | % | $ | 41.1 | $ | 36.0 | 14 | % | ||||||||||||
Wholesale |
13.2 | 15.7 | (16 | ) | 23.9 | 25.2 | (5 | ) | ||||||||||||||||
Correspondent |
3.6 | 7.9 | (54 | ) | 5.9 | 13.2 | (55 | ) | ||||||||||||||||
Correspondent negotiated transactions |
7.1 | 12.5 | (43 | ) | 14.3 | 20.2 | (29 | ) | ||||||||||||||||
Total |
$ | 46.7 | $ | 56.9 | (18 | ) | $ | 85.2 | $ | 94.6 | (10 | ) | ||||||||||||
Origination volume by business (in billions) |
||||||||||||||||||||||||
Mortgage |
$ | 30.9 | $ | 47.1 | (34 | ) | $ | 57.5 | $ | 78.1 | (26 | ) | ||||||||||||
Home equity |
15.8 | 9.8 | 61 | 27.7 | 16.5 | 68 | ||||||||||||||||||
Total |
$ | 46.7 | $ | 56.9 | (18 | ) | $ | 85.2 | $ | 94.6 | (10 | ) | ||||||||||||
22
Business metrics (in billions) |
||||||||||||||||||||||||
Loans serviced Mortgage
(ending)(c) |
$ | 501.7 | $ | 464.6 | 8 | $ | 501.7 | $ | 464.6 | 8 | ||||||||||||||
MSR net carrying value (ending) |
5.0 | 5.7 | (12 | ) | 5.0 | 5.7 | (12 | ) | ||||||||||||||||
End of period loans owned |
||||||||||||||||||||||||
Mortgage loans held-for-sale |
$ | 11.2 | $ | 13.6 | (18 | ) | $ | 11.2 | $ | 13.6 | (18 | ) | ||||||||||||
Mortgage loans retained |
47.4 | 40.5 | 17 | 47.4 | 40.5 | 17 | ||||||||||||||||||
Home equity and other loans |
72.3 | 29.8 | 143 | 72.3 | 29.8 | 143 | ||||||||||||||||||
Total end of period loans owned |
$ | 130.9 | $ | 83.9 | 56 | $ | 130.9 | $ | 83.9 | 56 | ||||||||||||||
Average loans owned |
||||||||||||||||||||||||
Mortgage loans held-for-sale |
$ | 10.5 | $ | 14.6 | (28 | ) | $ | 10.9 | $ | 13.8 | (21 | ) | ||||||||||||
Mortgage loans retained |
47.0 | 38.2 | 23 | 45.7 | 37.0 | 24 | ||||||||||||||||||
Home equity and other loans |
69.1 | 27.0 | 156 | 67.8 | 25.6 | 165 | ||||||||||||||||||
Total average loans owned |
$ | 126.6 | $ | 79.8 | 59 | $ | 124.4 | $ | 76.4 | 63 | ||||||||||||||
Overhead ratio |
40 | % | 45 | % | (500 | )bp | 40 | % | 51 | % | (1,100 | )bp | ||||||||||||
Credit quality statistics |
||||||||||||||||||||||||
30+ day delinquency rate(d) |
1.17 | % | 1.18 | % | (1 | )bp | 1.17 | % | 1.18 | % | (1 | )bp | ||||||||||||
Net charge-offs |
||||||||||||||||||||||||
Mortgage |
$ | 8 | $ | 5 | 60 | % | $ | 14 | $ | 8 | 75 | % | ||||||||||||
Home equity and other loans |
30 | 23 | 30 | 65 | 48 | 35 | ||||||||||||||||||
Total net charge-offs |
38 | 28 | 36 | 79 | 56 | 41 | ||||||||||||||||||
Net charge-off rate |
||||||||||||||||||||||||
Mortgage |
0.07 | % | 0.05 | % | 2 | bp | 0.06 | % | 0.04 | % | 2 | bp | ||||||||||||
Home equity and other loans |
0.17 | 0.34 | (17 | ) | 0.19 | 0.38 | (19 | ) | ||||||||||||||||
Total net charge-off rate(e) |
0.13 | 0.17 | (4 | ) | 0.14 | 0.18 | (4 | ) | ||||||||||||||||
Nonperforming assets |
$ | 799 | $ | 468 | 71 | % | $ | 799 | $ | 468 | 71 | % | ||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | For a discussion of
selected line of business metrics, see page 93 of this Form 10Q. |
|
(c) | Includes prime first mortgage loans and subprime loans. |
|
(d) | Excludes delinquencies related to loans eligible for repurchase as well as loans repurchased
from GNMA pools that are insured by government agencies of $0.7 billion and $1.1 billion for
June 30, 2005 and 2004, respectively. These amounts are excluded as reimbursement is
proceeding normally. |
|
(e) | Excludes mortgage loans held-for-sale. |
Prime production | Consumer real | |||||||||||||||||||||||
Three months ended June 30,(a) | and servicing | estate lending | Total revenue | |||||||||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||
Net interest income |
$ | 111 | $ | 202 | $ | 673 | $ | 410 | $ | 784 | $ | 612 | ||||||||||||
Securities / private equity gains (losses) |
1 | | | | 1 | | ||||||||||||||||||
Mortgage fees and related
income(b) |
331 | 263 | 34 | 102 | 365 | 365 | ||||||||||||||||||
Total |
$ | 443 | $ | 465 | $ | 707 | $ | 512 | $ | 1,150 | $ | 977 | ||||||||||||
Prime production | Consumer real | |||||||||||||||||||||||
Six months ended June 30,(a) | and servicing | estate lending | Total revenue | |||||||||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||
Net interest income |
$ | 226 | $ | 384 | $ | 1,351 | $ | 807 | $ | 1,577 | $ | 1,191 | ||||||||||||
Securities / private equity gains (losses) |
3 | (4 | ) | | | 3 | (4 | ) | ||||||||||||||||
Mortgage fees and related
income(b) |
694 | 479 | 69 | 140 | 763 | 619 | ||||||||||||||||||
Total |
$ | 923 | $ | 859 | $ | 1,420 | $ | 947 | $ | 2,343 | $ | 1,806 | ||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Includes activity reported elsewhere as Other income. |
23
MSR Risk Management Results(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Reported amounts: |
||||||||||||||||
MSR valuation adjustments(b) |
$ | (703 | ) | $ | 1,221 | $ | (152 | ) | $ | 596 | ||||||
Derivative valuation adjustments and other
risk management gains (losses)(c) |
869 | (1,135 | ) | 424 | (449 | ) | ||||||||||
MSR risk management results |
$ | 166 | $ | 86 | $ | 272 | $ | 147 | ||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Excludes subprime loan MSR activity of $2 million for the three months ended June 30, 2005,
and $(1) million and $4 million for the six months ended June 30, 2005 and 2004, respectively.
There was no subprime MSR loan activity during the second quarter of 2004. |
|
(c) | Includes gains, losses, and interest income associated with derivatives, both designated and
not designated, as a SFAS 133 hedge, and securities classified as both trading and
available-for-sale. |
Selected income statement data(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Noninterest revenue |
$ | 741 | $ | 222 | 234 | % | $ | 1,470 | $ | 420 | 250 | % | ||||||||||||
Net interest income |
1,364 | 393 | 247 | 2,792 | 784 | 256 | ||||||||||||||||||
Total net revenue |
2,105 | 615 | 242 | 4,262 | 1,204 | 254 | ||||||||||||||||||
Provision for credit losses |
25 | 20 | 25 | 61 | 47 | 30 | ||||||||||||||||||
Noninterest expense |
1,362 | 593 | 130 | 2,701 | 1,240 | 118 | ||||||||||||||||||
Operating earnings (loss) |
437 | 2 | NM | 914 | (47 | ) | NM | |||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
24
Selected metrics(a)(b) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except ratios and where otherwise noted) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Business metrics (in billions) |
||||||||||||||||||||||||
End-of-period balances |
||||||||||||||||||||||||
Small business loans |
$ | 12.5 | $ | 2.2 | 468 | % | $ | 12.5 | $ | 2.2 | 468 | % | ||||||||||||
Consumer and other loans(c) |
1.8 | 1.9 | (5 | ) | 1.8 | 1.9 | (5 | ) | ||||||||||||||||
Total loans |
14.3 | 4.1 | 249 | 14.3 | 4.1 | 249 | ||||||||||||||||||
Core deposits(d) |
147.9 | 69.7 | 112 | 147.9 | 69.7 | 112 | ||||||||||||||||||
Total deposits |
173.7 | 79.5 | 118 | 173.7 | 79.5 | 118 | ||||||||||||||||||
Average balances |
||||||||||||||||||||||||
Small business loans |
12.4 | 2.2 | 464 | 12.4 | 2.2 | 464 | ||||||||||||||||||
Consumer and other loans(c) |
1.9 | 1.9 | | 2.3 | 2.0 | 15 | ||||||||||||||||||
Total loans |
14.3 | 4.1 | 249 | 14.7 | 4.2 | 250 | ||||||||||||||||||
Core deposits(d) |
149.3 | 72.1 | 107 | 149.3 | 71.1 | 110 | ||||||||||||||||||
Total deposits |
174.8 | 80.7 | 117 | 174.4 | 79.8 | 119 | ||||||||||||||||||
Number of: |
||||||||||||||||||||||||
Branches |
2,539 | 569 | 1,970 | # | 2,539 | 569 | 1,970 | # | ||||||||||||||||
ATMs |
6,961 | 1,921 | 5,040 | 6,961 | 1,921 | 5,040 | ||||||||||||||||||
Personal bankers |
6,258 | 1,705 | 4,553 | 6,258 | 1,705 | 4,553 | ||||||||||||||||||
Personal checking accounts (in thousands) |
7,662 | 1,982 | 5,680 | 7,662 | 1,982 | 5,680 | ||||||||||||||||||
Business checking accounts (in thousands) |
918 | 352 | 566 | 918 | 352 | 566 | ||||||||||||||||||
Active online customers (in thousands) |
4,053 | NA | NM | 4,053 | NA | NM | ||||||||||||||||||
Debit cards issued (in thousands) |
8,834 | 2,430 | 6,404 | 8,834 | 2,430 | 6,404 | ||||||||||||||||||
Overhead ratio |
65 | % | 96 | % | (3,100 | )bp | 63 | % | 103 | % | (4,000 | )bp | ||||||||||||
Retail brokerage business metrics |
||||||||||||||||||||||||
Investment sales volume |
$ | 2,907 | $ | 1,047 | 178 | % | $ | 5,777 | $ | 1,991 | 190 | % | ||||||||||||
Number of dedicated investment sales
representatives |
1,422 | 390 | 265 | 1,422 | 390 | 265 | ||||||||||||||||||
Credit quality statistics |
||||||||||||||||||||||||
Net charge-offs |
||||||||||||||||||||||||
Small business |
$ | 25 | $ | 12 | 108 | $ | 44 | $ | 21 | 110 | ||||||||||||||
Consumer and other loans |
4 | 9 | (56 | ) | 13 | 17 | (24 | ) | ||||||||||||||||
Total net charge-offs |
29 | 21 | 38 | 57 | 38 | 50 | ||||||||||||||||||
Net charge-off rate |
||||||||||||||||||||||||
Small business |
0.81 | % | 2.19 | % | (138 | )bp | 0.72 | % | 1.92 | % | (120 | )bp | ||||||||||||
Consumer and other loans |
0.84 | 1.91 | (107 | ) | 1.14 | 1.71 | (57 | ) | ||||||||||||||||
Total net charge-off rate |
0.81 | 2.06 | (125 | ) | 0.78 | 1.82 | (104 | ) | ||||||||||||||||
Nonperforming assets |
$ | 284 | $ | 85 | 234 | % | $ | 284 | $ | 85 | 234 | % | ||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | For a discussion of selected line of business metrics, see page 93 of this Form 10Q. |
|
(c) | Primarily community development loans. |
|
(d) | Includes demand and savings deposits. |
Selected income statement data(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Total net revenue |
$ | 395 | $ | 218 | 81 | % | $ | 719 | $ | 384 | 87 | % | ||||||||||||
Provision for credit losses |
31 | 20 | 55 | 59 | 56 | 5 | ||||||||||||||||||
Noninterest expense |
170 | 80 | 113 | 375 | 161 | 133 | ||||||||||||||||||
Operating earnings |
118 | 71 | 66 | 173 | 101 | 71 | ||||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
25
Selected metrics(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except ratios and where otherwise noted) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Business metrics (in billions) |
||||||||||||||||||||||||
End of period loans and lease receivables |
||||||||||||||||||||||||
Loans outstanding |
$ | 46.2 | $ | 34.9 | 32 | % | $ | 46.2 | $ | 34.9 | 32 | % | ||||||||||||
Lease receivables |
6.1 | 8.6 | (29 | ) | 6.1 | 8.6 | (29 | ) | ||||||||||||||||
Total end-of-period loans and lease receivables |
52.3 | 43.5 | 20 | 52.3 | 43.5 | 20 | ||||||||||||||||||
Average loans and lease receivables |
||||||||||||||||||||||||
Loans outstanding (average)(b) |
$ | 49.8 | $ | 35.2 | 41 | $ | 51.5 | $ | 35.1 | 47 | ||||||||||||||
Lease receivables (average) |
6.6 | 8.9 | (26 | ) | 7.1 | 9.1 | (22 | ) | ||||||||||||||||
Total average loans and lease receivables(b) |
56.4 | 44.1 | 28 | 58.6 | 44.2 | 33 | ||||||||||||||||||
Overhead ratio |
43 | % | 37 | % | 600 | bp | 52 | % | 42 | % | 1,000 | bp | ||||||||||||
Credit quality statistics |
||||||||||||||||||||||||
30+ day delinquency rate |
1.46 | % | 1.04 | % | 42 | bp | 1.46 | % | 1.04 | % | 42 | bp | ||||||||||||
Net charge-offs |
||||||||||||||||||||||||
Loans |
$ | 45 | $ | 23 | 96 | % | $ | 119 | $ | 51 | 133 | % | ||||||||||||
Lease receivables |
2 | 8 | (75 | ) | 11 | 20 | (45 | ) | ||||||||||||||||
Total net charge-offs |
47 | 31 | 52 | 130 | 71 | 83 | ||||||||||||||||||
Net charge off rate |
||||||||||||||||||||||||
Loans(b) |
0.39 | % | 0.27 | % | 12 | bp | 0.51 | % | 0.31 | % | 20 | bp | ||||||||||||
Lease receivables |
0.12 | 0.36 | (24 | ) | 0.31 | 0.44 | (13 | ) | ||||||||||||||||
Total net charge-off rate(b) |
0.36 | 0.29 | 7 | 0.48 | 0.34 | 14 | ||||||||||||||||||
Nonperforming assets |
$ | 236 | $ | 140 | 69 | % | $ | 236 | $ | 140 | 69 | % | ||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Average loans include loans held-for-sale of $4.1 billion and $1.1 billion for the second
quarter of 2005 and 2004, respectively, and $4.3 billion and $1.7 billion for the six months
ended June 30, 2005 and 2004, respectively. These are not included in the net charge-off rate. |
Selected income statement data(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Total net revenue |
$ | 149 | $ | 25 | 496 | % | $ | 322 | $ | 52 | NM | |||||||||||||
Noninterest expense |
131 | 22 | 495 | 282 | 43 | NM | ||||||||||||||||||
Operating earnings |
12 | 2 | 500 | 26 | 6 | 333 | % | |||||||||||||||||
Memo: Consolidated gross insurance-related
revenue(b) |
404 | 165 | 145 | 820 | 341 | 140 | ||||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Includes revenue reported in the results of other businesses. |
26
Selected metrics(a)(b) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except where otherwise noted) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Business metrics ending balances |
||||||||||||||||||||||||
Invested assets |
$ | 7,641 | $ | 1,729 | 342 | % | $ | 7,641 | $ | 1,729 | 342 | % | ||||||||||||
Policy loans |
394 | | NM | 394 | | NM | ||||||||||||||||||
Insurance policy and claims reserves |
7,562 | 1,255 | NM | 7,562 | 1,255 | NM | ||||||||||||||||||
Term life premiums first year annualized |
16 | | NM | 30 | | NM | ||||||||||||||||||
Term life premiums first year annualized and
renewals |
122 | | NM | 232 | | NM | ||||||||||||||||||
Proprietary annuity sales |
282 | 58 | 386 | 401 | 134 | 199 | ||||||||||||||||||
Number of policies in force direct/assumed
(in thousands) |
2,454 | 608 | 304 | 2,454 | 608 | 304 | ||||||||||||||||||
Insurance in force direct/assumed |
280,176 | 33,772 | NM | 280,176 | 33,772 | NM | ||||||||||||||||||
Insurance in force retained |
83,324 | 33,772 | 147 | 83,324 | 33,772 | 147 | ||||||||||||||||||
A.M. Best rating |
A | A | A | A | ||||||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | For a discussion of selected line of business metrics, see page 93 of this Form 10Q. |
Selected income statement data managed basis(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Asset management, administration and commissions |
$ | | $ | 25 | NM | $ | | $ | 49 | NM | ||||||||||||||
Credit card income |
868 | 271 | 220 | % | 1,629 | 509 | 220 | % | ||||||||||||||||
Other income |
42 | 20 | 110 | 53 | 42 | 26 | ||||||||||||||||||
Noninterest revenue |
910 | 316 | 188 | 1,682 | 600 | 180 | ||||||||||||||||||
Net interest income |
2,976 | 1,271 | 134 | 5,983 | 2,544 | 135 | ||||||||||||||||||
Total net revenue |
3,886 | 1,587 | 145 | 7,665 | 3,144 | 144 | ||||||||||||||||||
Provision for credit losses |
1,641 | 748 | 119 | 3,277 | 1,454 | 125 | ||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
291 | 150 | 94 | 576 | 306 | 88 | ||||||||||||||||||
Noncompensation expense |
904 | 353 | 156 | 1,743 | 734 | 137 | ||||||||||||||||||
Amortization of intangibles |
188 | 62 | 203 | 377 | 124 | 204 | ||||||||||||||||||
Total noninterest expense |
1,383 | 565 | 145 | 2,696 | 1,164 | 132 | ||||||||||||||||||
Operating earnings before income tax expense |
862 | 274 | 215 | 1,692 | 526 | 222 | ||||||||||||||||||
Income tax expense |
320 | 98 | 227 | 628 | 188 | 234 | ||||||||||||||||||
Operating earnings |
$ | 542 | $ | 176 | 208 | $ | 1,064 | $ | 338 | 215 | ||||||||||||||
Financial metrics |
||||||||||||||||||||||||
ROE |
18 | % | 21 | % | (300 | )bp | 18 | % | 20 | % | (200 | )bp | ||||||||||||
Overhead ratio |
36 | 36 | | 35 | 37 | (200 | ) | |||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
27
Selected metrics (a)(b) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except headcount, ratios and where otherwise noted) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Net securitization gains (amortization) |
$ | 15 | $ | (4 | ) | NM | $ | 3 | $ | (6 | ) | NM | ||||||||||||
% of average managed outstandings: |
||||||||||||||||||||||||
Net interest income |
8.83 | % | 9.98 | % | (115 | )bp | 8.98 | % | 9.97 | % | (99 | )bp | ||||||||||||
Provision for credit losses |
4.87 | 5.88 | (101 | ) | 4.92 | 5.70 | (78 | ) | ||||||||||||||||
Noninterest revenue |
2.70 | 2.48 | 22 | 2.52 | 2.35 | 17 | ||||||||||||||||||
Risk adjusted margin(c) |
6.66 | 6.59 | 7 | 6.58 | 6.62 | (4 | ) | |||||||||||||||||
Noninterest expense |
4.10 | 4.44 | (34 | ) | 4.05 | 4.56 | (51 | ) | ||||||||||||||||
Pre-tax income |
2.56 | 2.15 | 41 | 2.54 | 2.06 | 48 | ||||||||||||||||||
Operating earnings |
1.61 | 1.38 | 23 | 1.60 | 1.32 | 28 | ||||||||||||||||||
Business metrics |
||||||||||||||||||||||||
Charge volume (in billions) |
$ | 75.6 | $ | 23.5 | 222 | % | $ | 145.9 | $ | 45.0 | 224 | % | ||||||||||||
Net accounts opened (in thousands) |
2,789 | 1,013 | 175 | 5,533 | 2,039 | 171 | ||||||||||||||||||
Credit cards issued (in thousands) |
95,465 | 35,529 | 169 | 95,465 | 35,529 | 169 | ||||||||||||||||||
Number of registered internet customers
(in millions) |
12.0 | 4.5 | 167 | 12.0 | 4.5 | 167 | ||||||||||||||||||
Merchant acquiring business |
||||||||||||||||||||||||
Bank card volume (in billions) |
$ | 141.2 | $ | 71.8 | 97 | $ | 266.3 | $ | 136.8 | 95 | ||||||||||||||
Total transactions (in millions) |
4,735 | 1,875 | 153 | 9,020 | 3,632 | 148 | ||||||||||||||||||
Selected ending balances |
||||||||||||||||||||||||
Loans: |
||||||||||||||||||||||||
Loans on balance sheets |
$ | 68,510 | $ | 17,182 | 299 | $ | 68,510 | $ | 17,182 | 299 | ||||||||||||||
Securitized loans |
68,808 | 34,138 | 102 | 68,808 | 34,138 | 102 | ||||||||||||||||||
Managed loans |
$ | 137,318 | $ | 51,320 | 168 | $ | 137,318 | $ | 51,320 | 168 | ||||||||||||||
28
Selected average balances |
||||||||||||||||||||||||
Managed assets |
$ | 140,741 | $ | 51,510 | 173 | $ | 139,632 | $ | 51,630 | 170 | ||||||||||||||
Loans: |
||||||||||||||||||||||||
Loans on balance sheets |
$ | 67,131 | $ | 17,155 | 291 | $ | 65,683 | $ | 17,096 | 284 | ||||||||||||||
Securitized loans |
68,075 | 34,052 | 100 | 68,718 | 34,239 | 101 | ||||||||||||||||||
Managed loans |
$ | 135,206 | $ | 51,207 | 164 | $ | 134,401 | $ | 51,335 | 162 | ||||||||||||||
Equity |
11,800 | 3,346 | 253 | 11,800 | 3,369 | 250 | ||||||||||||||||||
Headcount |
20,647 | 9,975 | 107 | 20,647 | 9,975 | 107 | ||||||||||||||||||
Credit quality statistics |
||||||||||||||||||||||||
Net charge-offs |
$ | 1,641 | $ | 745 | 120 | $ | 3,231 | $ | 1,488 | 117 | ||||||||||||||
Net charge-off rate |
4.87 | % | 5.85 | % | (98 | )bp | 4.85 | % | 5.83 | % | (98 | )bp | ||||||||||||
Delinquency ratios |
||||||||||||||||||||||||
30+ days |
3.34 | % | 4.26 | % | (92 | ) | 3.34 | % | 4.26 | % | (92 | ) | ||||||||||||
90+ days |
1.54 | 1.94 | (40 | ) | 1.54 | 1.94 | (40 | ) | ||||||||||||||||
Allowance for loan losses |
$ | 3,055 | $ | 1,191 | 157 | % | $ | 3,055 | $ | 1,191 | 157 | % | ||||||||||||
Allowance for loan losses to period-end loans |
4.46 | % | 6.93 | % | (247 | )bp | 4.46 | % | 6.93 | % | (247 | )bp | ||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | For a discussion of selected line of business metrics, see page 94 of this Form 10Q. |
|
(c) | Represents Total net revenue less Provision for credit losses. |
Three months ended June 30,(a) | Six months ended June 30,(a) | |||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Income statement data |
||||||||||||||||||||||||
Credit card income |
||||||||||||||||||||||||
Reported data for the period |
$ | 1,596 | $ | 578 | 176 | % | $ | 3,172 | $ | 1,142 | 178 | % | ||||||||||||
Securitization adjustments |
(728 | ) | (307 | ) | (137 | ) | (1,543 | ) | (633 | ) | (144 | ) | ||||||||||||
Managed credit card income |
$ | 868 | $ | 271 | 220 | $ | 1,629 | $ | 509 | 220 | ||||||||||||||
Other income |
||||||||||||||||||||||||
Reported data for the period |
$ | 42 | $ | 65 | (35 | ) | $ | 53 | $ | 126 | (58 | ) | ||||||||||||
Securitization adjustments |
| (45 | ) | NM | | (84 | ) | NM | ||||||||||||||||
Managed other income |
$ | 42 | $ | 20 | 110 | $ | 53 | $ | 42 | 26 | ||||||||||||||
Net interest income |
||||||||||||||||||||||||
Reported data for the period |
$ | 1,318 | $ | 433 | 204 | $ | 2,593 | $ | 868 | 199 | ||||||||||||||
Securitization adjustments |
1,658 | 838 | 98 | 3,390 | 1,676 | 102 | ||||||||||||||||||
Managed net interest income |
$ | 2,976 | $ | 1,271 | 134 | $ | 5,983 | $ | 2,544 | 135 | ||||||||||||||
Total net revenue(b) |
||||||||||||||||||||||||
Reported data for the period |
$ | 2,956 | $ | 1,101 | 168 | $ | 5,818 | $ | 2,185 | 166 | ||||||||||||||
Securitization adjustments |
930 | 486 | 91 | 1,847 | 959 | 93 | ||||||||||||||||||
Managed total net revenue |
$ | 3,886 | $ | 1,587 | 145 | $ | 7,665 | $ | 3,144 | 144 | ||||||||||||||
Provision for credit losses |
||||||||||||||||||||||||
Reported data for the period |
$ | 711 | $ | 262 | 171 | $ | 1,430 | $ | 495 | 189 | ||||||||||||||
Securitization adjustments |
930 | 486 | 91 | 1,847 | 959 | 93 | ||||||||||||||||||
Managed provision for credit losses |
$ | 1,641 | $ | 748 | 119 | $ | 3,277 | $ | 1,454 | 125 | ||||||||||||||
Balance sheets average balances |
||||||||||||||||||||||||
Total average assets |
||||||||||||||||||||||||
Reported data for the period |
$ | 74,515 | $ | 18,484 | 303 | $ | 72,768 | $ | 18,439 | 295 | ||||||||||||||
Securitization adjustments |
66,226 | 33,026 | 101 | 66,864 | 33,191 | 101 | ||||||||||||||||||
Managed average assets |
$ | 140,741 | $ | 51,510 | 173 | $ | 139,632 | $ | 51,630 | 170 | ||||||||||||||
Credit quality statistics |
||||||||||||||||||||||||
Net charge-offs |
||||||||||||||||||||||||
Reported net charge-offs data for the period |
$ | 711 | $ | 259 | 175 | $ | 1,384 | $ | 529 | 162 | ||||||||||||||
Securitization adjustments |
930 | 486 | 91 | 1,847 | 959 | 93 | ||||||||||||||||||
Managed net charge-offs |
$ | 1,641 | $ | 745 | 120 | $ | 3,231 | $ | 1,488 | 117 | ||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Includes Credit card income, Other income and Net interest income. |
29
Selected income statement data(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Lending & deposit related fees |
$ | 143 | $ | 67 | 113 | % | $ | 285 | $ | 132 | 116 | % | ||||||||||||
Asset management, administration and
commissions |
15 | 4 | 275 | 30 | 8 | 275 | ||||||||||||||||||
Other income(b) |
94 | 29 | 224 | 162 | 55 | 195 | ||||||||||||||||||
Noninterest revenue |
252 | 100 | 152 | 477 | 195 | 145 | ||||||||||||||||||
Net interest income |
648 | 234 | 177 | 1,273 | 461 | 176 | ||||||||||||||||||
Total net revenue |
900 | 334 | 169 | 1,750 | 656 | 167 | ||||||||||||||||||
Provision for credit losses |
142 | 19 | NM | 136 | 6 | NM | ||||||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
160 | 65 | 146 | 323 | 136 | 138 | ||||||||||||||||||
Noncompensation expense |
296 | 138 | 114 | 574 | 276 | 108 | ||||||||||||||||||
Amortization of intangibles |
17 | | NM | 34 | | NM | ||||||||||||||||||
Total noninterest expense |
473 | 203 | 133 | 931 | 412 | 126 | ||||||||||||||||||
Operating earnings before income tax expense |
285 | 112 | 154 | 683 | 238 | 187 | ||||||||||||||||||
Income tax expense |
111 | 47 | 136 | 266 | 99 | 169 | ||||||||||||||||||
Operating earnings |
$ | 174 | $ | 65 | 168 | $ | 417 | $ | 139 | 200 | ||||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
21 | % | 35 | % | (1,400 | )bp | 25 | % | 36 | % | (1,100 | )bp | ||||||||||||
ROA |
1.25 | 1.51 | (26 | ) | 1.51 | 1.67 | (16 | ) | ||||||||||||||||
Overhead ratio |
53 | 61 | (800 | ) | 53 | 63 | (1,000 | ) | ||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | IB-related and commercial card revenues are included in Other income. |
30
Selected metrics(a)(b) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except headcount and ratio data) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Revenue by product: |
||||||||||||||||||||||||
Lending |
$ | 285 | $ | 86 | 231 | % | $ | 554 | $ | 170 | 226 | % | ||||||||||||
Treasury services |
558 | 221 | 152 | 1,100 | 440 | 150 | ||||||||||||||||||
Investment banking |
62 | 20 | 210 | 102 | 35 | 191 | ||||||||||||||||||
Other |
(5 | ) | 7 | NM | (6 | ) | 11 | NM | ||||||||||||||||
Total Commercial Banking revenue |
$ | 900 | $ | 334 | 169 | $ | 1,750 | $ | 656 | 167 | ||||||||||||||
Revenue by business: |
||||||||||||||||||||||||
Middle market |
$ | 594 | $ | 192 | 209 | $ | 1,166 | $ | 377 | 209 | ||||||||||||||
Corporate banking |
138 | 59 | 134 | 261 | 116 | 125 | ||||||||||||||||||
Real estate |
131 | 60 | 118 | 250 | 112 | 123 | ||||||||||||||||||
Other |
37 | 23 | 61 | 73 | 51 | 43 | ||||||||||||||||||
Total Commercial Banking revenue |
$ | 900 | $ | 334 | 169 | $ | 1,750 | $ | 656 | 167 | ||||||||||||||
Selected balance sheet data (average) |
||||||||||||||||||||||||
Total assets |
$ | 55,963 | $ | 17,281 | 224 | $ | 55,524 | $ | 16,760 | 231 | ||||||||||||||
Loans and leases |
51,184 | 14,717 | 248 | 50,580 | 14,241 | 255 | ||||||||||||||||||
Liability balances(c) |
72,498 | 38,058 | 90 | 72,058 | 37,327 | 93 | ||||||||||||||||||
Equity |
3,400 | 747 | 355 | 3,400 | 771 | 341 | ||||||||||||||||||
Memo: |
||||||||||||||||||||||||
Loans by business: |
||||||||||||||||||||||||
Middle market |
$ | 31,051 | $ | 5,203 | 497 | $ | 30,636 | $ | 5,156 | 494 | ||||||||||||||
Corporate banking |
6,239 | 2,608 | 139 | 6,015 | 2,579 | 133 | ||||||||||||||||||
Real estate |
10,169 | 4,330 | 135 | 10,256 | 3,970 | 158 | ||||||||||||||||||
Other |
3,725 | 2,576 | 45 | 3,673 | 2,536 | 45 | ||||||||||||||||||
Total Commercial Banking loans |
$ | 51,184 | $ | 14,717 | 248 | $ | 50,580 | $ | 14,241 | 255 | ||||||||||||||
Headcount |
4,474 | 1,690 | 165 | 4,474 | 1,690 | 165 | ||||||||||||||||||
Credit data and quality statistics |
||||||||||||||||||||||||
Net charge-offs (recoveries) |
$ | (3 | ) | $ | 30 | NM | $ | (1 | ) | $ | 29 | NM | ||||||||||||
Nonperforming loans |
434 | 132 | 229 | 434 | 132 | 229 | ||||||||||||||||||
Allowance for loan losses |
1,431 | 107 | NM | 1,431 | 107 | NM | ||||||||||||||||||
Allowance for lending-related commitments |
196 | 24 | NM | 196 | 24 | NM | ||||||||||||||||||
Net charge-off (recovery) rate |
(0.02 | )% | 0.82 | % | (84 | )bp | | % | 0.41 | % | (41 | )bp | ||||||||||||
Allowance for loan losses to average loans |
2.80 | 0.73 | 207 | 2.83 | 0.75 | 208 | ||||||||||||||||||
Allowance for loan losses to nonperforming
loans |
330 | 81 | NM | 330 | 81 | NM | ||||||||||||||||||
Nonperforming loans to average loans |
0.85 | 0.90 | (5 | ) | 0.86 | 0.93 | (7 | ) | ||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | For a discussion of selected line of business metrics, see page 94 of this Form 10Q. |
|
(c) | Liability balances include deposits and deposits that are swept to on-balance sheet
liabilities. |
31
Selected income statement data(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Lending & deposit related fees |
$ | 197 | $ | 111 | 77 | % | $ | 367 | $ | 229 | 60 | % | ||||||||||||
Asset management, administration and commissions |
736 | 633 | 16 | 1,428 | 1,215 | 18 | ||||||||||||||||||
Other income |
145 | 98 | 48 | 269 | 167 | 61 | ||||||||||||||||||
Noninterest revenue |
1,078 | 842 | 28 | 2,064 | 1,611 | 28 | ||||||||||||||||||
Net interest income |
510 | 251 | 103 | 1,006 | 494 | 104 | ||||||||||||||||||
Total net revenue |
1,588 | 1,093 | 45 | 3,070 | 2,105 | 46 | ||||||||||||||||||
Provision for credit losses |
2 | 3 | (33 | ) | (1 | ) | 4 | NM | ||||||||||||||||
Credit reimbursement to IB(b) |
(38 | ) | (2 | ) | NM | (76 | ) | (4 | ) | NM | ||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
522 | 347 | 50 | 1,026 | 686 | 50 | ||||||||||||||||||
Noncompensation expense |
642 | 582 | 10 | 1,174 | 1,094 | 7 | ||||||||||||||||||
Amortization of intangibles |
30 | 15 | 100 | 59 | 31 | 90 | ||||||||||||||||||
Total noninterest expense |
1,194 | 944 | 26 | 2,259 | 1,811 | 25 | ||||||||||||||||||
Operating earnings before income tax expense |
354 | 144 | 146 | 736 | 286 | 157 | ||||||||||||||||||
Income tax expense |
125 | 43 | 191 | 262 | 87 | 201 | ||||||||||||||||||
Operating earnings |
$ | 229 | $ | 101 | 127 | % | $ | 474 | $ | 199 | 138 | % | ||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
48 | % | 13 | % | 3,500 | bp | 50 | % | 13 | % | 3,700 | bp | ||||||||||||
Overhead ratio |
75 | 86 | (1,100 | ) | 74 | 86 | (1,200 | ) | ||||||||||||||||
Pre-tax margin ratio(c) |
22 | 13 | 900 | 24 | 14 | 1,000 | ||||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | TSS is charged a credit reimbursement related to certain exposures managed within the IB
credit portfolio on behalf of clients shared with TSS. For a further discussion, see Credit
reimbursement on page 29 of the JPMorgan Chase 2004 Annual Report. |
|
(c) | Pre-tax margin represents operating earnings before income tax divided by total net revenue,
which is a comprehensive measure of pre-tax performance and is another basis by which TSS
management evaluates its performance and that of its competitors. Pre-tax margin is an
effective measure of TSSs earnings after all operating costs are taken into consideration. |
32
Selected metrics(a)(b) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except headcount and where otherwise noted) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Revenue by business |
||||||||||||||||||||||||
Treasury Services (TS) |
$ | 682 | $ | 366 | 86 | % | $ | 1,300 | $ | 723 | 80 | % | ||||||||||||
Investor Services (IS) |
544 | 453 | 20 | 1,052 | 851 | 24 | ||||||||||||||||||
Institutional Trust Services (ITS) |
362 | 274 | 32 | 718 | 531 | 35 | ||||||||||||||||||
Total net revenue |
$ | 1,588 | $ | 1,093 | 45 | $ | 3,070 | $ | 2,105 | 46 | ||||||||||||||
Business metrics |
||||||||||||||||||||||||
Assets under custody (in billions)(c) |
$ | 10,190 | $ | 7,980 | 28 | $ | 10,190 | $ | 7,980 | 28 | ||||||||||||||
Corporate trust securities under administration
(in billions)(d) |
6,704 | 6,241 | 7 | 6,704 | 6,241 | 7 | ||||||||||||||||||
Number of: |
||||||||||||||||||||||||
ACH transactions originated (in millions) |
727 | 341 | 113 | 1,426 | 650 | 119 | ||||||||||||||||||
Total US$ clearing volume (in thousands) |
24,200 | 18,727 | 29 | 45,905 | 36,791 | 25 | ||||||||||||||||||
Total non-US$ clearing volume (in thousands) |
13,372 | 9,866 | 36 | 24,959 | 19,891 | 25 | ||||||||||||||||||
Wholesale check volume (in millions) |
921 | NA | NM | 1,798 | NA | NM | ||||||||||||||||||
Wholesale cards issued (in thousands)(e) |
12,075 | 9,420 | 28 | 23,909 | 18,379 | 30 | ||||||||||||||||||
Selected balance sheets (average) |
||||||||||||||||||||||||
Total assets |
$ | 26,437 | $ | 21,040 | 26 | $ | 26,733 | $ | 20,141 | 33 | ||||||||||||||
Loans |
9,956 | 6,783 | 47 | 10,023 | 6,460 | 55 | ||||||||||||||||||
Liability balances(f) |
164,036 | 114,624 | 43 | 159,380 | 109,046 | 46 | ||||||||||||||||||
Equity |
1,900 | 3,203 | (41 | ) | 1,900 | 3,196 | (41 | ) | ||||||||||||||||
Headcount |
23,871 | 15,023 | 59 | 23,871 | 15,023 | 59 |
33
(in millions, except headcount and where otherwise noted) | ||||||||||||||||||||||||
Firmwide disclosures |
||||||||||||||||||||||||
Treasury Services firmwide revenue(g) |
$ | 1,314 | $ | 617 | 113 | $ | 2,551 | $ | 1,222 | 109 | ||||||||||||||
Treasury & Securities Services firmwide
revenue(g) |
2,220 | 1,344 | 65 | 4,321 | 2,604 | 66 | ||||||||||||||||||
Treasury Services firmwide overhead ratio(h) |
54 | % | 65 | % | (1,100 | )bp | 55 | % | 67 | % | (1,200 | )bp | ||||||||||||
Treasury & Securities Services firmwide
overhead ratio(h) |
66 | 79 | (1,300 | ) | 64 | 79 | (1,500 | ) | ||||||||||||||||
Treasury Services firmwide liability balances(i) |
$ | 138,058 | $ | 79,448 | 74 | % | $ | 135,926 | $ | 77,133 | 76 | % | ||||||||||||
Treasury & Securities Services firmwide liability
balances(i) |
236,534 | 152,682 | 55 | 231,438 | 146,373 | 58 | ||||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | For a discussion of selected line of business metrics, see page 94 of this Form 10Q. |
|
(c) | Beginning March 31, 2005, assets under custody include an estimated $400 billion of ITS
assets under custody that have not been included previously. At June 30, 2005, approximately
5% of total assets under custody were trust related. |
|
(d) | Corporate trust securities under administration include debt held in trust on behalf of third
parties and debt serviced as agent. |
|
(e) | Wholesale cards issued include domestic commercial card, stored value card, prepaid card, and
government electronic benefit card products. |
|
(f) | Liability balances include deposits and deposits swept to on-balance sheet liabilities. |
(g) | Firmwide revenue includes TS revenue recorded in the Commercial Banking, Consumer &
Small Business Banking and Asset & Wealth Management lines of business (see below) and
exclude FX revenue recorded in the IB for TSS-related FX activity. TSS firmwide FX revenue,
which include FX revenue recorded in TSS and FX revenue associated with TSS customers who
are FX customers of the IB, was $96 million for the quarter ended June 30, 2005, and $186
million for the six months ended June 30, 2005. |
|
(h) | Overhead ratios have been calculated based on firmwide revenues and TSS and TS
expenses, respectively, including those allocated to certain other lines of business. FX
revenues and expenses recorded in the IB for TSS-related FX activity are not included in
this ratio. |
|
(i) | Firmwide liability balances include TS liability balances recorded in certain lines of
business. Liability balances associated with TS customers who are also customers of the
Commercial Banking line of business are not included in TS liability balances. |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||
2005 | 2004 | Change | 2005 | 2004 | Change | |||||||||||||||||||
Treasury Services revenue reported in Commercial Banking |
$ | 558 | $ | 221 | 152 | % | $ | 1,100 | $ | 440 | 150 | % | ||||||||||||
Treasury Services revenue reported in other lines of
business |
74 | 30 | 147 | 151 | 59 | 156 | ||||||||||||||||||
34
Selected income statement data(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Lending & deposit related fees |
$ | 6 | $ | 4 | 50 | % | $ | 15 | $ | 8 | 88 | % | ||||||||||||
Asset management, administration and
commissions |
994 | 657 | 51 | 1,969 | 1,329 | 48 | ||||||||||||||||||
Other income |
69 | 50 | 38 | 164 | 100 | 64 | ||||||||||||||||||
Noninterest revenue |
1,069 | 711 | 50 | 2,148 | 1,437 | 49 | ||||||||||||||||||
Net interest income |
274 | 117 | 134 | 556 | 239 | 133 | ||||||||||||||||||
Total net revenue |
1,343 | 828 | 62 | 2,704 | 1,676 | 61 | ||||||||||||||||||
Provision for credit losses |
(20 | ) | (4 | ) | (400 | ) | (27 | ) | 6 | NM | ||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
509 | 343 | 48 | 1,047 | 668 | 57 | ||||||||||||||||||
Noncompensation expense |
383 | 335 | 14 | 754 | 657 | 15 | ||||||||||||||||||
Amortization of intangibles |
25 | 3 | NM | 50 | 5 | NM | ||||||||||||||||||
Total noninterest expense |
917 | 681 | 35 | 1,851 | 1,330 | 39 | ||||||||||||||||||
Operating earnings before income tax expense |
446 | 151 | 195 | 880 | 340 | 159 | ||||||||||||||||||
Income tax expense |
163 | 52 | 213 | 321 | 119 | 170 | ||||||||||||||||||
Operating earnings |
$ | 283 | $ | 99 | 186 | $ | 559 | $ | 221 | 153 | ||||||||||||||
Financial ratios |
||||||||||||||||||||||||
ROE |
47 | % | 7 | % | 4,000 | bp | 47 | % | 8 | % | 3,900 | bp | ||||||||||||
Overhead ratio |
68 | 82 | (1,400 | ) | 68 | 79 | (1,100 | ) | ||||||||||||||||
Pre-tax margin ratio(b) |
33 | 18 | 1,500 | 33 | 20 | 1,300 | ||||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Pre-tax margin represents Operating earnings before income tax expense divided by Total net
revenue, which is a comprehensive measure of pre-tax performance and is another basis by which
AWM management evaluates its performance and that of its competitors. Pre-tax margin is an
effective measure of AWMs earnings, after all costs are taken into consideration. |
35
Selected metrics(a)(b) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except ratio, headcount and ranking data, and where otherwise noted) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Revenue by client segment |
||||||||||||||||||||||||
Private bank |
$ | 409 | $ | 368 | 11 | % | $ | 831 | $ | 744 | 12 | % | ||||||||||||
Retail |
363 | 269 | 35 | 709 | 534 | 33 | ||||||||||||||||||
Institutional |
313 | 172 | 82 | 635 | 359 | 77 | ||||||||||||||||||
Private client services |
258 | 19 | NM | 529 | 39 | NM | ||||||||||||||||||
Total net revenue |
$ | 1,343 | $ | 828 | 62 | $ | 2,704 | $ | 1,676 | 61 | ||||||||||||||
Business metrics |
||||||||||||||||||||||||
Number of: |
||||||||||||||||||||||||
Client advisors |
1,409 | 629 | 124 | % | 1,409 | 629 | 124 | % | ||||||||||||||||
Brown Co. average daily trades |
26,267 | 28,702 | (8 | ) | 28,010 | 32,586 | (14 | ) | ||||||||||||||||
Retirement plan services participants |
1,210,000 | 844,000 | 43 | 1,210,000 | 844,000 | 43 | ||||||||||||||||||
Star rankings:(c) |
||||||||||||||||||||||||
% of customer assets in funds ranked 4 or better |
50 | % | 48 | % | 4 | 50 | % | 48 | % | 4 | ||||||||||||||
% of customer assets in funds ranked 3 or better |
80 | % | 78 | % | 3 | 80 | % | 78 | % | 3 | ||||||||||||||
Funds quartile ranking (1 year):(d) |
||||||||||||||||||||||||
% of AUM in 1st and 2nd quartiles |
75 | % | 49 | % | 53 | 75 | % | 49 | % | 53 | ||||||||||||||
Selected balance sheet data (average) |
||||||||||||||||||||||||
Total assets |
$ | 42,001 | $ | 35,083 | 20 | $ | 40,865 | $ | 35,189 | 16 | ||||||||||||||
Loans |
26,572 | 17,620 | 51 | 26,465 | 17,359 | 52 | ||||||||||||||||||
Deposits(e) |
40,774 | 24,069 | 69 | 41,405 | 23,589 | 76 | ||||||||||||||||||
Equity |
2,400 | 5,370 | (55 | ) | 2,400 | 5,420 | (56 | ) | ||||||||||||||||
Headcount |
12,455 | 8,690 | 43 | 12,455 | 8,690 | 43 | ||||||||||||||||||
Credit quality statistics |
||||||||||||||||||||||||
Net charge-offs (recoveries) |
$ | (2 | ) | $ | 6 | NM | $ | (8 | ) | $ | 61 | NM | ||||||||||||
Nonperforming loans |
100 | 102 | (2 | ) | 100 | 102 | (2 | ) | ||||||||||||||||
Allowance for loan losses |
195 | 76 | 157 | 195 | 76 | 157 | ||||||||||||||||||
Allowance for lending-related commitments |
3 | 2 | 50 | 3 | 2 | 50 | ||||||||||||||||||
Net charge-off (recovery) rate |
(0.03 | )% | 0.14 | % | (17 | )bp | (0.06 | )% | 0.71 | % | (77 | )bp | ||||||||||||
Allowance for loan losses to average loans |
0.73 | 0.43 | 30 | 0.74 | 0.44 | 30 | ||||||||||||||||||
Allowance for loan losses to nonperforming loans |
195 | 75 | 12,000 | 195 | 75 | 12,000 | ||||||||||||||||||
Nonperforming loans to average loans |
0.38 | 0.58 | (20 | ) | 0.38 | 0.59 | (21 | ) | ||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | For a discussion of
selected line of business metrics, see page 94 of this Form 10Q. |
|
(c) | Derived from Morningstar for the United States; Micropal for the United Kingdom, Luxembourg,
Hong Kong and Taiwan; and Nomura for Japan. |
|
(d) | Quartile rankings sourced from Lipper for the United States and Taiwan; Micropal for the
United Kingdom, Luxembourg, and Hong Kong; and Nomura for Japan. |
|
(e) | Reflects the transfer of certain consumer deposits from Retail Financial Services to Asset &
Wealth Management. |
36
ASSETS UNDER SUPERVISION(a)(b) | ||||||||
June 30, (in billions) | 2005 | 2004 | ||||||
Asset class |
||||||||
Liquidity |
$ | 223 | $ | 152 | ||||
Fixed income |
171 | 117 | ||||||
Equities & balanced |
323 | 261 | ||||||
Alternatives |
66 | 45 | ||||||
Assets under management |
783 | 575 | ||||||
Custody/brokerage/administration/deposits |
310 | 221 | ||||||
Total Assets under supervision |
$ | 1,093 | $ | 796 | ||||
Client segment |
||||||||
Private bank |
||||||||
Assets under management |
$ | 135 | $ | 139 | ||||
Custody/brokerage/administration/deposits |
165 | 138 | ||||||
Assets under supervision |
300 | 277 | ||||||
Retail |
||||||||
Assets under management |
141 | 101 | ||||||
Custody/brokerage/administration/deposits |
97 | 80 | ||||||
Assets under supervision |
238 | 181 | ||||||
Institutional |
||||||||
Assets under management |
455 | 328 | ||||||
Custody/brokerage/administration/deposits |
3 | | ||||||
Assets under supervision |
458 | 328 | ||||||
Private client services |
||||||||
Assets under management |
52 | 7 | ||||||
Custody/brokerage/administration/deposits |
45 | 3 | ||||||
Assets under supervision |
97 | 10 | ||||||
Total Assets under supervision |
$ | 1,093 | $ | 796 | ||||
Geographic region |
||||||||
Americas |
||||||||
Assets under management |
$ | 535 | $ | 370 | ||||
Custody/brokerage/administration/deposits |
270 | 189 | ||||||
Assets under supervision |
805 | 559 | ||||||
International |
||||||||
Assets under management |
248 | 205 | ||||||
Custody/brokerage/administration/deposits |
40 | 32 | ||||||
Assets under supervision |
288 | 237 | ||||||
Total Assets under supervision |
$ | 1,093 | $ | 796 | ||||
Memo: |
||||||||
Mutual fund assets: |
||||||||
Liquidity |
$ | 174 | $ | 117 | ||||
Fixed income |
41 | 30 | ||||||
Equity, balanced & alternatives |
114 | 74 | ||||||
Total mutual funds assets |
$ | 329 | $ | 221 | ||||
37
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
Assets under management rollforward | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Beginning balance |
$ | 790 | $ | 589 | $ | 791 | $ | 561 | ||||||||
Liquidity net asset flows |
(5 | ) | (7 | ) | (11 | ) | (4 | ) | ||||||||
Fixed income net asset flows |
(2 | ) | | 2 | (1 | ) | ||||||||||
Equity, balanced & alternative net asset
flows |
8 | 3 | 9 | 10 | ||||||||||||
Market/other impacts(c) |
(8 | ) | (10 | ) | (8 | ) | 9 | |||||||||
Ending balance |
$ | 783 | $ | 575 | $ | 783 | $ | 575 | ||||||||
Custody/brokerage/administration/deposits rollforward |
||||||||||||||||
Beginning balance |
$ | 302 | $ | 216 | $ | 315 | $ | 203 | ||||||||
Custody / brokerage / administration net asset flows |
(1 | ) | 3 | 6 | 9 | |||||||||||
Market/other impacts |
9 | 2 | (11 | ) | 9 | |||||||||||
Ending balance |
$ | 310 | $ | 221 | $ | 310 | $ | 221 | ||||||||
Assets under supervision rollforward |
||||||||||||||||
Beginning balance |
$ | 1,092 | $ | 805 | $ | 1,106 | $ | 764 | ||||||||
Net asset flows |
| (1 | ) | 6 | 14 | |||||||||||
Market/other impacts(c) |
1 | (8 | ) | (19 | ) | 18 | ||||||||||
Ending balance |
$ | 1,093 | $ | 796 | $ | 1,093 | $ | 796 | ||||||||
(a) | Excludes Assets under management of American Century. |
|
(b) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(c) | Includes AWMs strategic decision to exit the Institutional Fiduciary business in the second
quarter of 2005 ($12 billion). |
SELECTED INCOME STATEMENT DATA | Three months ended June 30,(a)(b) | Six months ended June 30,(a)(b) | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Securities/private equity gains (losses) |
$ | 310 | $ | 436 | (29 | )% | $ | 180 | $ | 855 | (79 | )% | ||||||||||||
Other income |
87 | 104 | (16 | ) | 135 | 146 | (8 | ) | ||||||||||||||||
Noninterest revenue |
397 | 540 | (26 | ) | 315 | 1,001 | (69 | ) | ||||||||||||||||
Net interest income |
(763 | ) | 20 | NM | (1,440 | ) | (23 | ) | NM | |||||||||||||||
Total net revenue |
(366 | ) | 560 | NM | (1,125 | ) | 978 | NM | ||||||||||||||||
Provision for credit losses |
1 | (27 | ) | NM | (3 | ) | (109 | ) | 97 | |||||||||||||||
Noninterest expense |
||||||||||||||||||||||||
Compensation expense |
772 | 462 | 67 | 1,546 | 978 | 58 | ||||||||||||||||||
Noncompensation expense |
1,042 | 857 | 22 | 2,038 | 1,727 | 18 | ||||||||||||||||||
Subtotal |
1,814 | 1,319 | 38 | 3,584 | 2,705 | 32 | ||||||||||||||||||
Net expenses allocated to other businesses |
(1,337 | ) | (1,186 | ) | (13 | ) | (2,672 | ) | (2,370 | ) | (13 | ) | ||||||||||||
Total noninterest expense |
477 | 133 | 259 | 912 | 335 | 172 | ||||||||||||||||||
Operating earnings before income tax expense |
(844 | ) | 454 | NM | (2,034 | ) | 752 | NM | ||||||||||||||||
Income tax expense (benefit) |
(358 | ) | 129 | NM | (861 | ) | 176 | NM | ||||||||||||||||
Operating earnings (loss) |
$ | (486 | ) | $ | 325 | NM | $ | (1,173 | ) | $ | 576 | NM | ||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | In the first quarter of 2005, the Corporate sectors and the Firms operating revenue and
income tax expense have been restated to be presented on a tax-equivalent basis. Previously,
only the business segments operating revenue and income tax expense were presented on a
tax-equivalent basis, and the impact of the business segments tax-equivalent adjustments was
eliminated in the Corporate sector. This restatement had no impact on the Corporate sectors
or the Firms operating earnings. |
38
Selected metrics(a) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Selected average balance sheet |
||||||||||||||||||||||||
Short-term investments(b) |
$ | 16,779 | $ | 9,903 | 69 | % | $ | 14,982 | $ | 6,248 | 140 | % | ||||||||||||
Investment portfolio(c) |
50,751 | 58,043 | (13 | ) | 62,707 | 58,240 | 8 | |||||||||||||||||
Goodwill(d) |
43,524 | 342 | NM | 43,415 | 344 | NM | ||||||||||||||||||
Total assets |
159,160 | 125,122 | 27 | 168,572 | 122,697 | 37 | ||||||||||||||||||
Headcount |
28,114 | 12,928 | 117 | 28,114 | 12,928 | 117 | ||||||||||||||||||
Treasury |
||||||||||||||||||||||||
Securities gains (losses)(e) |
$ | 6 | $ | 41 | (85 | ) | $ | (912 | ) | $ | 161 | NM | ||||||||||||
Investment portfolio (average) |
43,652 | 51,509 | (15 | ) | 54,588 | 51,044 | 7 | |||||||||||||||||
Investment portfolio (ending) |
34,319 | 49,133 | (30 | ) | 34,319 | 49,133 | (30 | ) | ||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Represents Federal funds sold, Securities borrowed, Trading assets debt and equity
instruments, and Trading assets derivative receivables. |
|
(c) | Represents investment securities and private equity investments. |
|
(d) | Effective with the third quarter of 2004, all goodwill is allocated to the Corporate line of
business. Prior to the third quarter of 2004, goodwill was allocated to the various lines of
business. |
|
(e) | Losses in the first quarter of 2005 were primarily due to the sale of $20 billion of
investment securities during the month of March 2005. Excludes gains/losses on securities used
to manage risk associated with MSRs. |
39
Selected income statement and balance sheet data Private equity | ||||||||||||||||||||||||
Three months ended June 30,(a) | Six months ended June 30,(a) | |||||||||||||||||||||||
(in millions) | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Private equity gains (losses) |
||||||||||||||||||||||||
Direct investments |
||||||||||||||||||||||||
Realized gains |
$ | 555 | $ | 402 | 38 | % | $ | 1,188 | $ | 704 | 69 | % | ||||||||||||
Write-ups / (write-downs) |
(133 | ) | (27 | ) | (393 | ) | 73 | (50 | ) | NM | ||||||||||||||
Mark-to-market gains (losses) |
(153 | ) | (1 | ) | NM | (242 | ) | 24 | NM | |||||||||||||||
Total direct investments |
269 | 374 | (28 | ) | 1,019 | 678 | 50 | |||||||||||||||||
Third-party fund investments |
31 | 18 | 72 | 70 | 10 | NM | ||||||||||||||||||
Total private equity gains (losses) |
300 | 392 | (23 | ) | 1,089 | 688 | 58 | |||||||||||||||||
Other income |
11 | 11 | | 16 | 23 | (30 | ) | |||||||||||||||||
Net interest income |
(56 | ) | (53 | ) | (6 | ) | (106 | ) | (112 | ) | 5 | |||||||||||||
Total net revenue |
255 | 350 | (27 | ) | 999 | 599 | 67 | |||||||||||||||||
Total noninterest expense |
66 | 67 | (1 | ) | 128 | 136 | (6 | ) | ||||||||||||||||
Operating earnings before income tax expense |
189 | 283 | (33 | ) | 871 | 463 | 88 | |||||||||||||||||
Income tax expense |
67 | 96 | (30 | ) | 312 | 160 | 95 | |||||||||||||||||
Operating earnings |
$ | 122 | $ | 187 | (35 | ) | $ | 559 | $ | 303 | 84 | |||||||||||||
Private equity portfolio information(b) | ||||||||||||
Direct investments | June 30, 2005 | December 31, 2004 | Change | |||||||||
Publicly-held securities |
||||||||||||
Carrying value |
$ | 761 | $ | 1,170 | (35 | )% | ||||||
Cost |
580 | 744 | (22 | ) | ||||||||
Quoted public value |
1,082 | 1,758 | (38 | ) | ||||||||
Privately-held direct securities |
||||||||||||
Carrying value |
5,037 | 5,686 | (11 | ) | ||||||||
Cost |
6,362 | 7,178 | (11 | ) | ||||||||
Third-party fund investments(c) |
||||||||||||
Carrying value |
552 | 641 | (14 | ) | ||||||||
Cost |
921 | 1,042 | (12 | ) | ||||||||
Total private equity portfolio |
||||||||||||
Carrying value |
$ | 6,350 | $ | 7,497 | (15 | ) | ||||||
Cost |
$ | 7,863 | $ | 8,964 | (12 | ) | ||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | For further information on the Firms policies regarding the valuation of the private equity
portfolio, see Note 9 on pages 98100 of JPMorgan Chases 2004 Annual Report. |
|
(c) | Unfunded commitments to private third-party equity funds were $434 million and $563 million
at June 30, 2005, and December 31, 2004, respectively. |
40
Selected balance sheet data (in millions) | June 30, 2005 | December 31, 2004 | ||||||
Assets |
||||||||
Cash and due from banks |
$ | 35,092 | $ | 35,168 | ||||
Deposits with banks and Federal funds sold |
10,440 | 28,958 | ||||||
Securities purchased under resale agreements and Securities
borrowed |
187,882 | 141,504 | ||||||
Trading assets debt and equity instruments |
235,803 | 222,832 | ||||||
Trading assets derivative receivables |
55,015 | 65,982 | ||||||
Securities: |
||||||||
Available-for-sale |
58,481 | 94,402 | ||||||
Held-to-maturity |
92 | 110 | ||||||
Loans, net of allowance |
409,231 | 394,794 | ||||||
Other receivables |
37,876 | 31,086 | ||||||
Goodwill and other intangible assets |
57,410 | 57,887 | ||||||
All other assets |
83,961 | 84,525 | ||||||
Total assets |
$ | 1,171,283 | $ | 1,157,248 | ||||
Liabilities |
||||||||
Deposits |
$ | 534,640 | $ | 521,456 | ||||
Securities sold under repurchase agreements and securities
lent |
128,743 | 112,347 | ||||||
Trading liabilities debt and equity instruments |
83,011 | 87,942 | ||||||
Trading liabilities derivative payables |
51,269 | 63,265 | ||||||
Long-term debt and capital securities |
113,180 | 105,718 | ||||||
All other liabilities |
155,055 | 160,867 | ||||||
Total liabilities |
1,065,898 | 1,051,595 | ||||||
Stockholders equity |
105,385 | 105,653 | ||||||
Total liabilities and stockholders equity |
$ | 1,171,283 | $ | 1,157,248 | ||||
41
(in billions) | Quarterly Averages | |||||||
Line of business equity(a) | 2Q05 | 2Q04 | ||||||
Investment Bank |
$ | 20.0 | $ | 14.0 | ||||
Retail Financial Services |
13.3 | 5.0 | ||||||
Card Services |
11.8 | 3.3 | ||||||
Commercial Banking |
3.4 | 0.7 | ||||||
Treasury & Securities Services |
1.9 | 3.2 | ||||||
Asset & Wealth Management |
2.4 | 5.4 | ||||||
Corporate(b) |
52.5 | 15.3 | ||||||
Total common stockholders equity |
$ | 105.3 | $ | 46.9 | ||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan Chase only. |
|
(b) | Second quarter of 2005 includes $43.5 billion of equity to offset goodwill and $9.0 billion of equity primarily related to Treasury, Private Equity and the Corporate Pension Plan. |
42
(in billions) | Quarterly Averages | |||||||
Economic risk capital(a) | 2Q05 | 2Q04 | ||||||
Credit risk |
$ | 23.2 | $ | 8.2 | ||||
Market risk |
9.6 | 5.8 | ||||||
Operational risk |
5.6 | 3.2 | ||||||
Business risk |
2.1 | 1.7 | ||||||
Private equity risk |
3.9 | 4.2 | ||||||
Economic risk capital |
44.4 | 23.1 | ||||||
Goodwill |
43.5 | 8.7 | ||||||
Other(b) |
17.4 | 15.1 | ||||||
Total common stockholders equity |
$ | 105.3 | $ | 46.9 | ||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan Chase only. |
|
(b) | Additional capital required to meet internal regulatory/debt rating objectives. |
Tier 1 | Total | Risk-weighted | Adjusted average |
Tier 1 | Total | Tier 1 | ||||||||||||||||||||||
(in millions, except ratios) | capital | capital | assets(b) | assets(c) | capital ratio | capital ratio | leverage ratio | |||||||||||||||||||||
June 30, 2005 |
||||||||||||||||||||||||||||
JPMorgan Chase & Co.(a) |
$ | 69,782 | $ | 96,089 | $ | 850,241 | $ | 1,123,609 | 8.2 | % | 11.3 | % | 6.2 | % | ||||||||||||||
JPMorgan Chase Bank, N.A. |
57,747 | 79,926 | 719,344 | 944,727 | 8.0 | 11.1 | 6.1 | |||||||||||||||||||||
Chase Bank USA, N.A. |
9,416 | 11,883 | 86,633 | 74,662 | 10.9 | 13.7 | 12.6 | |||||||||||||||||||||
December 31, 2004 |
||||||||||||||||||||||||||||
JPMorgan Chase & Co.(a) |
$ | 68,621 | $ | 96,807 | $ | 791,373 | $ | 1,102,456 | 8.7 | % | 12.2 | % | 6.2 | % | ||||||||||||||
JPMorgan Chase Bank, N.A. |
55,489 | 78,478 | 670,295 | 922,877 | 8.3 | 11.7 | 6.0 | |||||||||||||||||||||
Chase Bank USA, N.A. |
8,726 | 11,186 | 86,955 | 71,797 | 10.0 | 12.9 | 12.2 | |||||||||||||||||||||
Well capitalized ratios(d) |
6.0 | % | 10.0 | % | 5.0 | %(e) | ||||||||||||||||||||||
Minimum capital ratios(d) |
4.0 | 8.0 | 3.0 | (f) | ||||||||||||||||||||||||
(a) | Assets and capital amounts for JPMorgan Chases banking subsidiaries include intercompany
transactions, whereas the respective amounts for JPMorgan Chase reflect the elimination of
intercompany transactions. |
|
(b) | Includes offbalance
sheet risk-weighted assets in the amounts of $274.6 billion,
$254.6
billion and $15.1 billion, respectively at June 30, 2005, and $250.3 billion, $229.6 billion
and $15.5 billion, respectively, at December 31, 2004. |
43
(c) | Average adjusted assets for purposes of calculating the leverage ratio include total average
assets adjusted for unrealized gains/losses on securities, less deductions for disallowed
goodwill and other intangible assets, investments in subsidiaries and the total adjusted
carrying value of nonfinancial equity investments that are subject to deductions from Tier 1
capital. |
|
(d) | As defined by the regulations issued by the FRB, Federal Deposit Insurance Corporation
(FDIC), and OCC. |
|
(e) | Represents requirements for bank subsidiaries pursuant to regulations issued under the
Federal Deposit Insurance Corporation Improvement Act. There is no Tier 1 leverage component
in the definition of a well-capitalized bank holding company. |
|
(f) | The minimum Tier 1 leverage ratio is 3% at the Bank Holding Company level, and 3% or 4% at
the Bank level as specified in regulations issued by the FRB and OCC. |
44
Three months ended June 30,(a) | Six months ended June 30,(a) | |||||||||||||||||||||||
(in millions) | VIEs(b) | QSPEs | Total | VIEs(b) | QSPEs | Total | ||||||||||||||||||
2005 |
$ | 53 | $ | 388 | $ | 441 | $ | 110 | $ | 792 | $ | 902 | ||||||||||||
2004 |
20 | 290 | 310 | 43 | 555 | 598 | ||||||||||||||||||
(a) | 2005 activity includes six months of combined Firms activity, while 2004 reflects the results of heritage JPMorgan Chase only. |
|
(b) | Includes VIE-related revenue (i.e., revenue associated with consolidated and significant interests in nonconsolidated VIEs). |
Dec. 31, | ||||||||||||||||||||||||
Offbalance sheet lending-related financial instruments | June 30, 2005 | 2004 | ||||||||||||||||||||||
By remaining maturity | Under | 13 | 35 | After | ||||||||||||||||||||
(in millions) | 1 year | years | years | 5 years | Total | Total | ||||||||||||||||||
Consumer |
$ | 557,692 | $ | 3,998 | $ | 3,931 | $ | 42,792 | $ | 608,413 | $ | 601,196 | ||||||||||||
Wholesale: |
||||||||||||||||||||||||
Other unfunded commitments to extend credit(a)(b) |
92,078 | 66,297 | 59,571 | 14,676 | 232,622 | 225,152 | ||||||||||||||||||
Standby letters of credit and guarantees(a)(c) |
28,552 | 19,611 | 21,598 | 5,073 | 74,834 | 78,084 | ||||||||||||||||||
Other letters of credit(a) |
3,494 | 2,846 | 219 | 19 | 6,578 | 6,163 | ||||||||||||||||||
Total wholesale |
124,124 | 88,754 | 81,388 | 19,768 | 314,034 | 309,399 | ||||||||||||||||||
Total
offbalance sheet lending-related financial
instruments |
$ | 681,816 | $ | 92,752 | $ | 85,319 | $ | 62,560 | $ | 922,447 | $ | 910,595 | ||||||||||||
(a) | Represents contractual amount net of risk participations totaling $27.0 billion at June 30, 2005, and $26.4 billion at December 31, 2004. |
|
(b) | Includes unused advised lines of credit totaling $23.6 billion at June 30, 2005, and $22.8
billion at December 31, 2004, which are not legally binding. In regulatory filings with the
FRB, unused advised lines are not reportable. |
|
(c) | Includes unused commitments to issue standby letters of credit of $34.8 billion at June 30, 2005, and $38.4 billion at December 31, 2004. |
45
46
Short-term debt | Senior long-term debt | |||||||||||||||||||||||
Moody's | S&P | Fitch | Moody's | S&P | Fitch | |||||||||||||||||||
JPMorgan Chase & Co. |
P-1 | A-1 | F1 | Aa3 | A+ | A+ | ||||||||||||||||||
JPMorgan Chase Bank, N.A. |
P-1 | A-1+ | F1+ | Aa2 | AA- | A+ | ||||||||||||||||||
Chase Bank USA, N.A. |
P-1 | A-1+ | F1+ | Aa2 | AA- | A+ | ||||||||||||||||||
Moody's | S&P | A.M. Best | ||||||||||
Chase Insurance Life and Annuity Company |
A2 | A+ | A | |||||||||
Chase Insurance Life Company |
A2 | A+ | A | |||||||||
47
Credit exposure | Nonperforming assets(o)(p) | |||||||||||||||
(in millions, except ratios) | June 30, 2005 | Dec. 31, 2004 | June 30, 2005 | Dec. 31, 2004 | ||||||||||||
Wholesale(a) |
||||||||||||||||
Loans reported(b)(c)(d) |
$ | 149,588 | $ | 135,067 | $ | 1,251 | $ | 1,574 | ||||||||
Derivative receivables(e) |
55,015 | 65,982 | 234 | 241 | ||||||||||||
Interests in purchased receivables |
27,887 | 31,722 | | | ||||||||||||
Total wholesale credit-related assets |
232,490 | 232,771 | 1,485 | 1,815 | ||||||||||||
Lending-related commitments(f)(g) |
314,034 | 309,399 | NA | NA | ||||||||||||
Total wholesale credit exposure |
$ | 546,524 | $ | 542,170 | $ | 1,485 | $ | 1,815 | ||||||||
Consumer |
||||||||||||||||
Loans reported(b)(h)(i) |
$ | 266,437 | $ | 267,047 | $ | 1,141 | (q) | $ | 1,169 | (q) | ||||||
Loans securitized(i)(j) |
68,808 | 70,795 | | | ||||||||||||
Total managed consumer loans |
335,245 | 337,842 | 1,141 | 1,169 | ||||||||||||
Lending-related commitments |
608,413 | 601,196 | NA | NA | ||||||||||||
Total consumer credit exposure |
$ | 943,658 | $ | 939,038 | $ | 1,141 | $ | 1,169 | ||||||||
Total credit portfolio |
||||||||||||||||
Loans reported(b)(k) |
$ | 416,025 | $ | 402,114 | $ | 2,392 | $ | 2,743 | ||||||||
Loans securitized |
68,808 | 70,795 | | | ||||||||||||
Total managed loans |
484,833 | 472,909 | 2,392 | 2,743 | ||||||||||||
Derivative receivables |
55,015 | 65,982 | 234 | 241 | ||||||||||||
Interests in purchased receivables |
27,887 | 31,722 | | | ||||||||||||
Total managed credit-related assets |
567,735 | 570,613 | 2,626 | 2,984 | ||||||||||||
Wholesale lending-related commitments |
314,034 | 309,399 | NA | NA | ||||||||||||
Consumer lending-related commitments |
608,413 | 601,196 | NA | NA | ||||||||||||
Assets acquired in loan satisfactions(l) |
NA | NA | 206 | (q) | 247 | (q) | ||||||||||
Total credit portfolio |
$ | 1,490,182 | $ | 1,481,208 | $ | 2,832 | $ | 3,231 | ||||||||
Purchased held-for-sale wholesale loans(m) |
$ | 378 | $ | 351 | $ | 378 | $ | 351 | ||||||||
Credit derivative hedges notional(n) |
(33,329 | ) | (37,200 | ) | (17 | ) | (15 | ) | ||||||||
Collateral held against derivatives |
(9,340 | ) | (9,301 | ) | NA | NA | ||||||||||
48
Three months ended June 30,(r) | Six months ended June 30,(r) | |||||||||||||||||||||||||||||||
Net charge-offs | Net charge-off rate | Net charge-offs | Net charge-off rate | |||||||||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||||||||
Wholesale(a) |
||||||||||||||||||||||||||||||||
Loans reported(c) |
$ | (52 | ) | $ | 53 | (0.17 | )% | 0.29 | % | $ | (61 | ) | $ | 142 | (0.10 | )% | 0.39 | % | ||||||||||||||
Derivative receivables |
NA | NA | NA | NA | NA | NA | NA | NA | ||||||||||||||||||||||||
Interests in purchased receivables |
NA | NA | NA | NA | NA | NA | NA | NA | ||||||||||||||||||||||||
Total wholesale credit-related assets |
(52 | ) | 53 | (0.17 | ) | 0.29 | (61 | ) | 142 | (0.10 | ) | 0.39 | ||||||||||||||||||||
Lending-related commitments |
NA | NA | NA | NA | NA | NA | NA | NA | ||||||||||||||||||||||||
Total wholesale credit exposure |
$ | (52 | ) | $ | 53 | (0.17 | )% | 0.29 | % | $ | (61 | ) | $ | 142 | (0.10 | )% | 0.39 | % | ||||||||||||||
Consumer |
||||||||||||||||||||||||||||||||
Loans reported(h) |
$ | 825 | $ | 339 | 1.32 | % | 1.05 | % | $ | 1,650 | $ | 694 | 1.34 | % | 1.10 | % | ||||||||||||||||
Loans securitized |
930 | 486 | 5.48 | 5.74 | 1,847 | 959 | 5.42 | 5.63 | ||||||||||||||||||||||||
Total managed consumer loans |
1,755 | 825 | 2.21 | 2.03 | 3,497 | 1,653 | 2.22 | 2.07 | ||||||||||||||||||||||||
Lending-related commitments |
NA | NA | NA | NA | NA | NA | NA | NA | ||||||||||||||||||||||||
Total consumer credit exposure |
$ | 1,755 | $ | 825 | 2.21 | % | 2.03 | % | $ | 3,497 | $ | 1,653 | 2.22 | % | 2.07 | % | ||||||||||||||||
Total credit portfolio |
||||||||||||||||||||||||||||||||
Loans reported |
$ | 773 | $ | 392 | 0.83 | % | 0.77 | % | $ | 1,589 | $ | 836 | 0.86 | % | 0.84 | % | ||||||||||||||||
Loans securitized |
930 | 486 | 5.48 | 5.74 | 1,847 | 959 | 5.42 | 5.63 | ||||||||||||||||||||||||
Total managed loans |
$ | 1,703 | $ | 878 | 1.55 | % | 1.48 | % | $ | 3,436 | $ | 1,795 | 1.57 | % | 1.54 | % | ||||||||||||||||
(a) | Includes Investment Bank, Commercial Banking, Treasury & Securities Services and Asset & Wealth Management. |
|
(b) | Amounts are presented gross of the Allowance for loan losses. |
|
(c) | Net charge-off rates exclude wholesale loans HFS of $17.9 billion and $5.2 billion as of June
30, 2005 and 2004, respectively, and average wholesale loans HFS of $13.0 billion and $5.2
billion for the six months ended June 30, 2005 and 2004, respectively. |
|
(d) | Wholesale loans past-due 90 days and over and accruing were $8 million at both June 30, 2005,
and December 31, 2004. |
|
(e) | The Firm also views its credit exposure on an economic basis. For derivative receivables,
economic credit exposure is the three-year average of a measure known as Average exposure
(which is the expected MTM value of derivative receivables at future time periods, including
the benefit of collateral). Average exposure was $37 billion and $38 billion at June 30, 2005,
and December 31, 2004, respectively. See pages 5154 of
this Form 10Q, and pages 6265 of
JPMorgan Chases 2004 Annual Report, for a further discussion of the Firms derivative
receivables. |
|
(f) | The Firm also views its credit exposure on an economic basis. For lending-related
commitments, economic credit exposure is represented by a loan equivalent amount, which is
the portion of the unused commitment or other contingent exposure that is expected, based on
average portfolio historical experience, to become outstanding in the event of a default by
the obligor. Loan equivalents were $167 billion and $162 billion at June 30, 2005, and
December 31, 2004, respectively. See page 54 of this Form
10Q for a further discussion of
this measure. |
|
(g) | Includes unused advised lines of credit totaling $23.6 billion and $22.8 billion at June 30,
2005, and December 31, 2004, respectively, which are not legally binding. In regulatory
filings with the Federal Reserve Board, unused advised lines are not reportable. |
|
(h) | Net charge-off rates exclude average HFS retail loans in the amount of $14.6 billion and
$15.6 billion for the three months ended June 30, 2005 and 2004, respectively, and $15.2
billion and $15.5 billion for the six months ended June 30, 2005 and 2004, respectively.
Card Services has no average held-for-sale loans. |
|
(i) | Past-due loans 90 days and over and accruing include credit card receivables of $1.0 billion
and $1.0 billion, and related credit card securitizations of $1.1 billion and $1.3 billion at
June 30, 2005, and December 31, 2004, respectively. |
|
(j) | Represents securitized credit card receivables. For a further discussion of credit card
securitizations, see Card Services on pages 2729 of this
Form 10Q. |
|
(k) | Loans are presented net of unearned income of $3.3 billion and $4.1 billion at June 30, 2005,
and December 31, 2004, respectively. |
|
(l) | At June 30, 2005, and December 31, 2004, includes $19 million and $23 million, respectively,
of wholesale assets acquired in loan satisfactions, and $187 million and $224 million,
respectively, of consumer assets acquired in loan satisfactions. |
|
(m) | Represents distressed wholesale loans purchased as part of IBs proprietary investing
activities. |
|
(n) | Represents the net notional amount of protection bought and sold of single-name and portfolio
credit derivatives used to manage the credit risk of wholesale credit exposure; these
derivatives do not qualify for hedge accounting under SFAS 133. |
|
(o) | Excludes purchased HFS wholesale loans. |
|
(p) | Nonperforming assets include wholesale HFS loans of $2 million at both June 30, 2005, and
December 31, 2004, and consumer HFS loans of $26 million and $13 million at June 30, 2005, and
December 31, 2004, respectively. HFS loans are carried at the lower of cost or market, and
declines in value are recorded in Other income. |
|
(q) | Excludes nonperforming assets related to loans eligible for repurchase as well as loans
repurchased from GNMA pools that are insured by government agencies of $1.0 billion and $1.5
billion for June 30, 2005, and December 31, 2004, respectively. These amounts are excluded, as
reimbursement is proceeding normally. |
|
(r) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
NA | Not applicable. |
49
Maturity profile(a) | Ratings profile | |||||||||||||||||||||||||||||||
Investment-grade | ||||||||||||||||||||||||||||||||
(IG) | Noninvestment-grade | |||||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||
At June 30, 2005 | % of | |||||||||||||||||||||||||||||||
(in billions, except ratios) | <1 year | 15 years | > 5 years | Total | AAA to BBB- | BB+ & below | Total | IG | ||||||||||||||||||||||||
Loans |
47 | % | 36 | % | 17 | % | 100 | % | $ | 89 | $ | 61 | $ | 150 | 59 | % | ||||||||||||||||
Derivative receivables(b) |
8 | 52 | 40 | 100 | 43 | 12 | 55 | 78 | ||||||||||||||||||||||||
Interests in purchased
receivables |
43 | 54 | 3 | 100 | 28 | | 28 | 100 | ||||||||||||||||||||||||
Lending-related
commitments(b)(c) |
40 | 54 | 6 | 100 | 268 | 46 | 314 | 85 | ||||||||||||||||||||||||
Total exposure(d) |
39 | % | 49 | % | 12 | % | 100 | % | $ | 428 | $ | 119 | $ | 547 | 78 | % | ||||||||||||||||
Credit derivative
hedges notional(e) |
18 | % | 74 | % | 8 | % | 100 | % | $ | (30 | ) | $ | (3 | ) | $ | (33 | ) | 91 | % | |||||||||||||
Total | ||||||||||||||||||||||||||||||||
At December 31, 2004 |
% of | |||||||||||||||||||||||||||||||
(in billions, except ratios) |
<1 year | 1-5 years | > 5 years | Total | AAA to BBB- | BB+ & below | Total | IG | ||||||||||||||||||||||||
Loans |
43 | % | 43 | % | 14 | % | 100 | % | $ | 87 | $ | 48 | $ | 135 | 64 | % | ||||||||||||||||
Derivative
receivables(b) |
19 | 39 | 42 | 100 | 57 | 9 | 66 | 86 | ||||||||||||||||||||||||
Interests in purchased
receivables |
37 | 61 | 2 | 100 | 32 | | 32 | 100 | ||||||||||||||||||||||||
Lending-related
commitments(b)(c) |
46 | 52 | 2 | 100 | 266 | 43 | 309 | 86 | ||||||||||||||||||||||||
Total exposure(d) |
42 | % | 49 | % | 9 | % | 100 | % | $ | 442 | $ | 100 | $ | 542 | 82 | % | ||||||||||||||||
Credit derivative
hedges notional(e) |
18 | % | 77 | % | 5 | % | 100 | % | $ | (35 | ) | $ | (2 | ) | $ | (37 | ) | 95 | % | |||||||||||||
(a) | The maturity profile of loans and lending-related commitments is based upon the remaining
contractual maturity. The maturity profile of derivative receivables is based upon the
maturity profile of Average exposure. See footnote (e) on page
49 of this Form 10Q for a
further discussion of Average exposure. |
|
(b) | Based on economic credit exposure, the total percentage of Investment-grade for derivative
receivables was 86% and 92% as of June 30, 2005, and December 31, 2004, respectively, and for
lending-related commitments was 85% at both June 30, 2005, and December 31, 2004. See
footnotes (e) and (f) on page 49 of this
Form 10Q for a further discussion of economic
credit exposure. |
|
(c) | Based on economic credit exposure, the maturity profile for the <1 year, 1-5 years and
>5 years categories would have been 29%, 62% and 9%, respectively, as of June 30, 2005, and
31%, 65% and 4%, respectively, as of December 31, 2004. See
footnote (f) on page 49 of
this Form 10Q for a further discussion of economic credit exposure. |
|
(d) | Based on economic credit
exposure, the maturity profile for <1 year, 15 years and >5
years categories would have been 35%, 50% and 15%, respectively, as of June 30, 2005, and 35%,
54% and 11%, respectively, as of December 31, 2004. See
footnotes (e) and (f) on page 49
of this Form 10Q for a further discussion of economic credit exposure. |
|
(e) | Ratings are based on the underlying referenced assets. |
50
June 30, 2005 | December 31, 2004 | |||||||||||||||
Criticized exposure industry concentrations | % of | % of | ||||||||||||||
(in millions, except ratios) | Amount | portfolio | Amount | portfolio | ||||||||||||
Media |
$ | 656 | 10.9 | % | $ | 509 | 6.1 | % | ||||||||
Utilities |
639 | 10.6 | 890 | 10.7 | ||||||||||||
Consumer products |
452 | 7.5 | 479 | 5.8 | ||||||||||||
Real estate |
420 | 6.9 | 765 | 9.2 | ||||||||||||
Building materials/construction |
360 | 6.0 | 430 | 5.2 | ||||||||||||
Airlines |
352 | 5.8 | 450 | 5.4 | ||||||||||||
Business services |
328 | 5.4 | 444 | 5.4 | ||||||||||||
Machinery and equipment manufacturing |
316 | 5.2 | 459 | 5.6 | ||||||||||||
Chemicals/plastics |
250 | 4.1 | 488 | 5.9 | ||||||||||||
Metals/mining |
234 | 3.9 | 438 | 5.3 | ||||||||||||
All Other |
2,033 | 33.7 | 2,932 | 35.4 | ||||||||||||
Total |
$ | 6,040 | 100.0 | % | $ | 8,284 | 100.0 | % | ||||||||
Nonperforming assets by line of business | ||||||||||||||||||||
(in millions, except ratios) | June 30, 2005 | % of NPA | December 31, 2004 | % of NPA | Change | |||||||||||||||
Investment Bank |
$ | 946 | 63 | % | $ | 1,196 | 65 | % | (21 | )% | ||||||||||
Commercial Banking |
452 | 30 | 547 | 30 | (17 | ) | ||||||||||||||
Treasury & Securities Services |
6 | | 14 | 1 | (57 | ) | ||||||||||||||
Asset & Wealth Management |
100 | 7 | 81 | 4 | 23 | |||||||||||||||
Total(a) |
$ | 1,504 | 100 | % | $ | 1,838 | 100 | % | (18 | )% | ||||||||||
(a) | Includes assets acquired in loan satisfactions of $19 million and $23 million at June 30, 2005, and December 31, 2004, respectively. |
51
Notional amounts(a) | Derivative receivables MTM | |||||||||||||||
(in billions) | June 30, 2005 | December 31, 2004 | June 30, 2005 | December 31, 2004 | ||||||||||||
Interest rate |
$ | 38,114 | $ | 37,022 | $ | 37 | $ | 46 | ||||||||
Foreign exchange |
1,673 | 1,886 | 6 | 8 | ||||||||||||
Equity |
482 | 434 | 4 | 6 | ||||||||||||
Credit derivatives |
1,626 | 1,071 | 4 | 3 | ||||||||||||
Commodity |
156 | 101 | 4 | 3 | ||||||||||||
Total |
$ | 42,051 | $ | 40,514 | $ | 55 | $ | 66 | ||||||||
Collateral held against derivative receivables |
NA | NA | (9) | (b) | (9 | )(c) | ||||||||||
Total |
NA | NA | $ | 46 | $ | 57 | ||||||||||
(a) | The notional amounts represent the gross sum of long and short third-party notional
derivative contracts, excluding written options and foreign exchange spot contracts. |
|
(b) | The Firm held $42 billion of collateral against derivative receivables as of June 30, 2005,
consisting of $33 billion in net cash received under credit support annexes to legally
enforceable master netting agreements, and $9 billion of other highly liquid collateral. The
benefit of the $33 billion is reflected within the $55 billion of derivative receivables MTM.
Excluded from the $42 billion of collateral is $12 billion of collateral delivered by clients
at the initiation of transactions; this collateral secures exposure that could arise in the
existing derivatives portfolio should the MTM of the clients transactions move in the Firms
favor. Also excluded are credit enhancements in the form of letter-of-credit and surety
receivables. |
|
(c) | The Firm held $41 billion of collateral against derivative receivables as of December 31,
2004, consisting of $32 billion in net cash received under credit support annexes to legally
enforceable master netting agreements, and $9 billion of other highly liquid collateral. The
benefit of the $32 billion is reflected within the $66 billion of derivative receivables MTM.
Excluded from the $41 billion of collateral is $10 billion of collateral delivered by clients
at the initiation of transactions; this collateral secures exposure that could arise in the
existing derivatives portfolio should the MTM of the clients transactions move in the Firms
favor. Also excluded are credit enhancements in the form of letter-of-credit and surety
receivables. |
June 30, 2005 | December 31, 2004 | |||||||||||||||
Rating equivalent | Exposure net | % of exposure | Exposure net | % of exposure | ||||||||||||
(in millions) | of collateral(a) | net of collateral | of collateral (b) | net of collateral | ||||||||||||
AAA to AA- |
$ | 20,164 | 44 | % | $ | 30,384 | 53 | % | ||||||||
A+ to A- |
6,960 | 15 | 9,109 | 16 | ||||||||||||
BBB+ to BBB- |
8,085 | 18 | 9,522 | 17 | ||||||||||||
BB+ to B- |
10,101 | 22 | 7,271 | 13 | ||||||||||||
CCC+ and below |
365 | 1 | 395 | 1 | ||||||||||||
Total |
$ | 45,675 | 100 | % | $ | 56,681 | 100 | % | ||||||||
(a) | See footnote (b) above. |
|
(b) | See footnote (c) above. |
52
Notional amount | ||||||||||||||||||||
Portfolio management | Dealer/client | |||||||||||||||||||
Protection | Protection | Protection | Protection | |||||||||||||||||
(in millions) | bought | (a) | sold | bought | sold | Total | ||||||||||||||
June 30, 2005 |
$ | 34,066 | $ | 737 | $ | 770,609 | $ | 820,323 | $ | 1,625,735 | ||||||||||
December 31, 2004 |
37,237 | 37 | 501,266 | 532,335 | 1,070,875 | |||||||||||||||
(a) | Includes $2 billion at both June 30, 2005, and December 31, 2004, of portfolio credit derivatives. |
Notional amount of protection bought | ||||||||
(in millions) | June 30, 2005 | December 31, 2004 | ||||||
Credit derivatives used to manage: |
||||||||
Loans and lending-related commitments |
$ | 21,998 | $ | 25,002 | ||||
Derivative receivables |
12,068 | 12,235 | ||||||
Total |
$ | 34,066 | $ | 37,237 | ||||
53
54
Credit-related exposure | Nonperforming assets | |||||||||||||||
(in millions, except ratios) | June 30, 2005 | Dec. 31, 2004 | June 30, 2005 | Dec. 31, 2004 | ||||||||||||
Home finance |
||||||||||||||||
Home equity and other |
$ | 72,346 | $ | 67,837 | $ | 368 | $ | 416 | ||||||||
Mortgage |
58,594 | 56,816 | 294 | 257 | ||||||||||||
Total Home finance |
130,940 | 124,653 | 662 | 673 | ||||||||||||
Auto & education finance |
52,309 | 62,712 | 190 | 193 | ||||||||||||
Consumer & small business and other |
14,678 | 15,107 | 280 | 295 | ||||||||||||
Credit card receivables reported(a) |
68,510 | 64,575 | 9 | 8 | ||||||||||||
Total consumer loans reported |
266,437 | 267,047 | 1,141 | 1,169 | ||||||||||||
Credit card securitizations(a)(b) |
68,808 | 70,795 | | | ||||||||||||
Total consumer loans managed |
335,245 | 337,842 | 1,141 | 1,169 | ||||||||||||
Assets acquired in loan satisfactions |
NA | NA | 187 | 224 | ||||||||||||
Total consumer related assets managed |
335,245 | 337,842 | 1,328 | 1,393 | ||||||||||||
Consumer
lendingrelated commitments: |
||||||||||||||||
Home finance |
58,839 | 53,223 | NA | NA | ||||||||||||
Auto & education finance |
5,979 | 5,193 | NA | NA | ||||||||||||
Consumer & small business and other |
5,199 | 10,312 | NA | NA | ||||||||||||
Credit cards |
538,396 | 532,468 | NA | NA | ||||||||||||
Total lending-related commitments |
608,413 | 601,196 | NA | NA | ||||||||||||
Total consumer credit portfolio |
$ | 943,658 | $ | 939,038 | $ | 1,328 | $ | 1,393 | ||||||||
Average annual net | Average annual net | |||||||||||||||||||||||||||||||
Net Charge-offs | charge-off rate(d) | Net Charge-offs | charge-off rate(d) | |||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||
(in millions, except ratios) | 2005 | 2004(c) | 2005 | 2004(c) | 2005 | 2004(c) | 2005 | 2004(c) | ||||||||||||||||||||||||
Home finance |
||||||||||||||||||||||||||||||||
Home equity and other |
$ | 30 | $ | 23 | 0.17 | % | 0.34 | % | $ | 65 | $ | 48 | 0.19 | % | 0.38 | % | ||||||||||||||||
Mortgage |
8 | 5 | 0.07 | 0.05 | 14 | 8 | 0.06 | 0.04 | ||||||||||||||||||||||||
Total Home finance |
38 | 28 | 0.13 | 0.17 | 79 | 56 | 0.14 | 0.18 | ||||||||||||||||||||||||
Auto & education finance |
47 | 31 | 0.36 | 0.29 | 130 | 71 | 0.48 | 0.34 | ||||||||||||||||||||||||
Consumer & small business and other |
29 | 21 | 0.81 | 2.06 | 57 | 38 | 0.78 | 1.82 | ||||||||||||||||||||||||
Credit card receivables reported |
711 | 259 | 4.25 | 6.07 | 1,384 | 529 | 4.25 | 6.22 | ||||||||||||||||||||||||
Total consumer loans reported |
825 | 339 | 1.32 | 1.05 | 1,650 | 694 | 1.34 | 1.10 | ||||||||||||||||||||||||
Credit card securitizations (b) |
930 | 486 | 5.48 | 5.74 | 1,847 | 959 | 5.42 | 5.63 | ||||||||||||||||||||||||
Total consumer loans managed |
$ | 1,755 | $ | 825 | 2.21 | % | 2.03 | % | $ | 3,497 | $ | 1,653 | 2.22 | % | 2.07 | % | ||||||||||||||||
Memo: Credit card managed |
$ | 1,641 | $ | 745 | 4.87 | % | 5.85 | % | $ | 3,231 | $ | 1,488 | 4.85 | % | 5.83 | % | ||||||||||||||||
(a) | Past-due loans 90 days and over and accruing includes credit card receivables of $1.0
billion and $1.0 billion, and related credit card securitizations of $1.1 billion and $1.3
billion at June 30, 2005, and December 31, 2004, respectively. |
|
(b) | Represents securitized credit card receivables. For a further discussion of credit card
securitizations, see Card Services on pages 2729 of this
Form 10Q. |
|
(c) | Heritage JPMorgan Chase only. |
|
(d) | Net charge-off rates exclude average HFS retail loans in the amount of $14.6 billion and
$15.6 billion for the three months ended June 30, 2005 and 2004, respectively, and $15.2
billion and $15.5 billion for the six months ended June 30, 2005 and 2004, respectively.
Card Services has no average held-for-sale loans. |
|
NA | Not applicable. |
55
56
Six months ended June 30,(a) | 2005 | 2004 | ||||||||||||||||||||||
(in millions) | Wholesale | Consumer | Total | Wholesale | Consumer | Total | ||||||||||||||||||
Loans: |
||||||||||||||||||||||||
Beginning balance at January 1 |
$ | 3,098 | $ | 4,222 | $ | 7,320 | $ | 2,204 | $ | 2,319 | $ | 4,523 | ||||||||||||
Gross charge-offs |
(92 | ) | (1,950 | ) | (2,042 | ) | (340 | ) | (791 | ) | (1,131 | ) | ||||||||||||
Gross recoveries |
153 | 300 | 453 | 198 | 97 | 295 | ||||||||||||||||||
Net charge-offs |
61 | (1,650 | ) | (1,589 | ) | (142 | ) | (694 | ) | (836 | ) | |||||||||||||
Provision for loan losses |
(550 | ) | 1,617 | 1,067 | (346 | ) | 628 | 282 | ||||||||||||||||
Other |
(5 | ) | 1 | (4 | ) | (1 | ) | (1 | ) | (2 | ) | |||||||||||||
Ending balance at June 30 |
$ | 2,604 | (b) | $ | 4,190 | (c) | $ | 6,794 | $ | 1,715 | $ | 2,252 | $ | 3,967 | ||||||||||
Lending-related commitments: |
||||||||||||||||||||||||
Beginning balance at January 1 |
$ | 480 | $ | 12 | $ | 492 | $ | 320 | $ | 4 | $ | 324 | ||||||||||||
Provision for lending-related
commitments |
(54 | ) | 1 | (53 | ) | (63 | ) | (1 | ) | (64 | ) | |||||||||||||
Ending balance at June 30 |
$ | 426 | $ | 13 | $ | 439 | (d) | $ | 257 | $ | 3 | $ | 260 | |||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Includes $314 million of asset-specific and $2.3 billion of formula-based allowance. Included
within the formula-based allowance is $1.6 billion related to a statistical calculation, and
adjustments to the statistical calculation of $686 million. |
|
(c) | Includes $3.1 billion and $1.1 billion of the consumer statistical component and adjustments
to the statistical component, respectively. |
|
(d) | Includes $104 million of asset-specific and $335 million of formula-based allowance at June
30, 2005. The formula-based allowance for lending-related commitments is based on statistical
calculation. There is no adjustment to the statistical calculation for lending-related
commitments. |
57
Provision for | ||||||||||||||||||||||||
lending-related | ||||||||||||||||||||||||
Provision for loan losses | commitments | Total provision for credit losses | ||||||||||||||||||||||
Three months ended June 30,(a) (in millions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||
Investment Bank |
$ | (271 | ) | $ | (96 | ) | $ | (72 | ) | $ | (32 | ) | $ | (343 | ) | $ | (128 | ) | ||||||
Commercial Banking |
116 | 23 | 26 | (4 | ) | 142 | 19 | |||||||||||||||||
Treasury & Securities Services |
2 | 3 | | | 2 | 3 | ||||||||||||||||||
Asset & Wealth Management |
(18 | ) | (3 | ) | (2 | ) | (1 | ) | (20 | ) | (4 | ) | ||||||||||||
Corporate |
1 | (27 | ) | | | 1 | (27 | ) | ||||||||||||||||
Total Wholesale |
(170 | ) | (100 | ) | (48 | ) | (37 | ) | (218 | ) | (137 | ) | ||||||||||||
Retail Financial Services |
95 | 78 | (1 | ) | | 94 | 78 | |||||||||||||||||
Card Services reported |
711 | 262 | | | 711 | 262 | ||||||||||||||||||
Total Consumer |
806 | 340 | (1 | ) | | 805 | 340 | |||||||||||||||||
Total provision |
636 | 240 | (49 | ) | (37 | ) | 587 | 203 | ||||||||||||||||
Credit card securitizations |
930 | 486 | | | 930 | 486 | ||||||||||||||||||
Total managed provision |
$ | 1,566 | $ | 726 | $ | (49 | ) | $ | (37 | ) | $ | 1,517 | $ | 689 | ||||||||||
Provision for | ||||||||||||||||||||||||
lending-related | ||||||||||||||||||||||||
Provision for loan losses | commitments | Total provision for credit losses | ||||||||||||||||||||||
Six months ended June 30,(a) (in millions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||
Investment Bank |
$ | (627 | ) | $ | (257 | ) | $ | (82 | ) | $ | (59 | ) | $ | (709 | ) | $ | (316 | ) | ||||||
Commercial Banking |
108 | 8 | 28 | (2 | ) | 136 | 6 | |||||||||||||||||
Treasury & Securities Services |
(3 | ) | 4 | 2 | | (1 | ) | 4 | ||||||||||||||||
Asset & Wealth Management |
(25 | ) | 8 | (2 | ) | (2 | ) | (27 | ) | 6 | ||||||||||||||
Corporate |
(3 | ) | (109 | ) | | | (3 | ) | (109 | ) | ||||||||||||||
Total Wholesale |
(550 | ) | (346 | ) | (54 | ) | (63 | ) | (604 | ) | (409 | ) | ||||||||||||
Retail Financial Services |
187 | 133 | 1 | (1 | ) | 188 | 132 | |||||||||||||||||
Card Services reported |
1,430 | 495 | | | 1,430 | 495 | ||||||||||||||||||
Total Consumer |
1,617 | 628 | 1 | (1 | ) | 1,618 | 627 | |||||||||||||||||
Total provision |
1,067 | 282 | (53 | ) | (64 | ) | 1,014 | 218 | ||||||||||||||||
Credit card securitizations |
1,847 | 959 | | | 1,847 | 959 | ||||||||||||||||||
Total managed provision |
$ | 2,914 | $ | 1,241 | $ | (53 | ) | $ | (64 | ) | $ | 2,861 | $ | 1,177 | ||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
58
2005 | 2004(f) | |||||||||||||||||||||||||||||||
Six months ended June 30, (b) | Average | Minimum | Maximum | At | Average | Minimum | Maximum | At | ||||||||||||||||||||||||
(in millions) | VAR | VAR | VAR | June 30, 2005 | VAR | VAR | VAR | June 30, 2004 | ||||||||||||||||||||||||
By risk type: |
||||||||||||||||||||||||||||||||
Fixed income |
$ | 70.0 | $ | 44.0 | $ | 110.2 | $ | 93.9 | $ | 75.1 | $ | 47.8 | $ | 117.5 | $ | 108.2 | ||||||||||||||||
Foreign exchange |
21.7 | 16.7 | 30.0 | 20.4 | 19.3 | 10.5 | 32.8 | 17.9 | ||||||||||||||||||||||||
Equities |
32.1 | 15.3 | 64.9 | 46.3 | 34.3 | 24.9 | 57.8 | 25.0 | ||||||||||||||||||||||||
Commodities and other |
12.1 | 6.5 | 23.2 | 21.0 | 8.1 | 6.9 | 11.4 | 9.1 | ||||||||||||||||||||||||
Less: portfolio diversification |
(52.3 | )(d) | NM | (e) | NM | (e) | (69.8 | )(d) | (45.9 | )(d) | NM | (e) | NM | (e) | (53.0 | )(d) | ||||||||||||||||
Total trading VAR |
$ | 83.6 | $ | 52.9 | $ | 129.9 | $ | 111.8 | $ | 90.9 | $ | 59.8 | $ | 125.2 | $ | 107.2 | ||||||||||||||||
Credit portfolio VAR(c) |
13.4 | 11.3 | 16.6 | 16.6 | 14.8 | 13.0 | 16.6 | 14.8 | ||||||||||||||||||||||||
Less: portfolio diversification |
(10.8 | )(d) | NM | (e) | NM | (e) | (15.3 | )(d) | (8.0 | )(d) | NM | (e) | NM | (e) | (8.2 | )(d) | ||||||||||||||||
Total trading and credit
portfolio VAR |
$ | 86.2 | $ | 57.4 | $ | 129.9 | $ | 113.1 | $ | 97.7 | $ | 65.0 | $ | 131.6 | $ | 113.8 | ||||||||||||||||
(a) | Includes all mark-to-market trading activities in the IB, plus available-for-sale
securities held for the IBs proprietary purposes (included within Fixed income). Amounts
exclude VAR related to the Firms private equity business. For a discussion of Private equity
risk management, see page 61 of this Form 10Q. |
|
(b) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(c) | Includes VAR on derivative credit valuation adjustments, credit valuation adjustment hedges
and mark-to-market hedges of the accrual loan portfolio, which are all reported in Trading
revenue. This VAR does not include the accrual loan portfolio, which is not marked to market. |
|
(d) | JPMorgan Chases average and period-end VARs are less than the sum of the VARs of its market
risk components, due to risk offsets resulting from portfolio diversification. |
|
(e) | Designated as NM because the minimum and maximum may occur on different days for different
risk components, and hence it is not meaningful to compute a portfolio diversification effect. |
|
(f) | For the six months ended June 30, 2004, amounts have been revised to reflect the
reclassification of hedge fund investments, reclassification of Treasury positions to
portfolios outside the IB, and the inclusion of available-for-sale securities held for the
IBs proprietary purposes. |
59
60
Immediate change in rates | ||||||||||||
(in millions) | +200bp | +100bp | -100bp | |||||||||
June 30, 2005 |
$ | (442 | ) | $ | (139 | ) | $ | 131 | ||||
December 31, 2004 |
(557 | ) | (164 | ) | (180 | ) | ||||||
61
Trading assets | Trading liabilities | |||||||||||||||||||
Securities | Securities | AFS | ||||||||||||||||||
purchased(a) | Derivatives(b) | sold(a) | Derivatives(b) | securities | ||||||||||||||||
Fair value based on: |
||||||||||||||||||||
Quoted market prices |
89 | % | 1 | % | 98 | % | 1 | % | 93 | % | ||||||||||
Internal models with significant
observable market parameters |
9 | 98 | 1 | 98 | 6 | |||||||||||||||
Internal models with significant
unobservable market parameters |
2 | 1 | 1 | 1 | 1 | |||||||||||||||
Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
(a) | Reflected as debt and equity instruments on the Firms Consolidated balance sheets. |
|
(b) | Based on gross mark-to-market valuations of the Firms derivatives portfolio prior to netting
positions pursuant to FIN 39, as cross-product netting is not relevant to an analysis based
upon valuation methodologies. |
62
63
Three months ended June 30, | (a) | Six months ended June 30, | (a) | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Revenue |
||||||||||||||||
Investment banking fees |
$ | 961 | $ | 893 | $ | 1,954 | $ | 1,585 | ||||||||
Trading revenue |
387 | 873 | 2,246 | 2,593 | ||||||||||||
Lending & deposit related fees |
851 | 412 | 1,671 | 826 | ||||||||||||
Asset management, administration and commissions |
2,541 | 1,814 | 5,039 | 3,650 | ||||||||||||
Securities/private equity gains (losses) |
407 | 460 | 362 | 892 | ||||||||||||
Mortgage fees and related income |
336 | 294 | 698 | 488 | ||||||||||||
Credit card income |
1,763 | 631 | 3,497 | 1,236 | ||||||||||||
Other income |
496 | 260 | 697 | 392 | ||||||||||||
Noninterest revenue |
7,742 | 5,637 | 16,164 | 11,662 | ||||||||||||
Interest income |
10,949 | 5,614 | 21,581 | 11,240 | ||||||||||||
Interest expense |
5,948 | 2,620 | 11,355 | 5,260 | ||||||||||||
Net interest income |
5,001 | 2,994 | 10,226 | 5,980 | ||||||||||||
Total net revenue |
12,743 | 8,631 | 26,390 | 17,642 | ||||||||||||
Provision for credit losses |
587 | 203 | 1,014 | 218 | ||||||||||||
Noninterest expense |
||||||||||||||||
Compensation expense |
4,266 | 2,943 | 8,968 | 6,245 | ||||||||||||
Occupancy expense |
580 | 440 | 1,105 | 871 | ||||||||||||
Technology and communications expense |
896 | 786 | 1,816 | 1,605 | ||||||||||||
Professional & outside services |
1,130 | 752 | 2,204 | 1,568 | ||||||||||||
Marketing |
537 | 202 | 1,020 | 401 | ||||||||||||
Other expense |
954 | 511 | 1,759 | 958 | ||||||||||||
Amortization of intangibles |
385 | 79 | 768 | 158 | ||||||||||||
Total noninterest expense before merger costs and litigation
reserve charge |
8,748 | 5,713 | 17,640 | 11,806 | ||||||||||||
Merger costs |
279 | 90 | 424 | 90 | ||||||||||||
Litigation reserve charge |
1,872 | 3,700 | 2,772 | 3,700 | ||||||||||||
Total noninterest expense |
10,899 | 9,503 | 20,836 | 15,596 | ||||||||||||
Income (loss) before income tax expense (benefit) |
1,257 | (1,075 | ) | 4,540 | 1,828 | |||||||||||
Income tax expense (benefit) |
263 | (527 | ) | 1,282 | 446 | |||||||||||
Net income (loss) |
$ | 994 | $ | (548 | ) | $ | 3,258 | $ | 1,382 | |||||||
Net income (loss) applicable to common stock |
$ | 991 | $ | (561 | ) | $ | 3,250 | $ | 1,356 | |||||||
Net income (loss) per common share |
||||||||||||||||
Basic earnings per share |
$ | 0.28 | $ | (0.27 | ) | $ | 0.93 | $ | 0.67 | |||||||
Diluted earnings per share |
0.28 | (0.27 | ) | 0.91 | 0.65 | |||||||||||
Average basic shares |
3,493.0 | 2,042.8 | 3,505.2 | 2,037.6 | ||||||||||||
Average diluted shares |
3,548.3 | 2,042.8 | 3,559.0 | 2,096.3 | ||||||||||||
Cash dividends per common share |
$ | 0.34 | $ | 0.34 | $ | 0.68 | $ | 0.68 | ||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan Chase only. |
64
June 30, | December 31 | , | ||||||
2005 | 2004 | |||||||
Assets |
||||||||
Cash and due from banks |
$ | 35,092 | $ | 35,168 | ||||
Deposits with banks |
9,080 | 21,680 | ||||||
Federal funds sold and securities purchased under resale agreements |
130,785 | 101,354 | ||||||
Securities borrowed |
58,457 | 47,428 | ||||||
Trading assets (including assets pledged of $88,453 at June 30, 2005, and $77,266 at December 31, 2004) |
290,818 | 288,814 | ||||||
Securities: |
||||||||
Available-for-sale (including assets pledged of $19,952 at June 30, 2005, and $26,881 at December 31, 2004) |
58,481 | 94,402 | ||||||
Held-to-maturity (fair value: $96 at June 30, 2005, and $117 at December 31, 2004) |
92 | 110 | ||||||
Interests in purchased receivables |
27,887 | 31,722 | ||||||
Loans |
416,025 | 402,114 | ||||||
Allowance for loan losses |
(6,794 | ) | (7,320 | ) | ||||
Loans, net of Allowance for loan losses |
409,231 | 394,794 | ||||||
Private equity investments |
6,488 | 7,735 | ||||||
Accrued interest and accounts receivable |
24,245 | 21,409 | ||||||
Premises and equipment |
9,354 | 9,145 | ||||||
Goodwill |
43,537 | 43,203 | ||||||
Other intangible assets: |
||||||||
Mortgage servicing rights |
5,026 | 5,080 | ||||||
Purchased credit card relationships |
3,528 | 3,878 | ||||||
All other intangibles |
5,319 | 5,726 | ||||||
Other assets |
53,863 | 45,600 | ||||||
Total assets |
$ | 1,171,283 | $ | 1,157,248 | ||||
Liabilities |
||||||||
Deposits: |
||||||||
U.S. offices: |
||||||||
Noninterest-bearing |
$ | 138,025 | $ | 129,257 | ||||
Interest-bearing |
263,952 | 261,673 | ||||||
Non-U.S. offices: |
||||||||
Noninterest-bearing |
7,289 | 6,931 | ||||||
Interest-bearing |
125,374 | 123,595 | ||||||
Total deposits |
534,640 | 521,456 | ||||||
Federal funds purchased and securities sold under repurchase agreements |
137,350 | 127,787 | ||||||
Commercial paper |
12,842 | 12,605 | ||||||
Other borrowed funds |
12,716 | 9,039 | ||||||
Trading liabilities |
134,280 | 151,207 | ||||||
Accounts payable, accrued expenses and other liabilities (including the Allowance for lending-related
commitments of $439 at June 30, 2005, and $492 at December 31, 2004) |
77,064 | 75,722 | ||||||
Beneficial interests issued by consolidated VIEs |
43,826 | 48,061 | ||||||
Long-term debt |
101,182 | 95,422 | ||||||
Junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities |
11,998 | 10,296 | ||||||
Total liabilities |
1,065,898 | 1,051,595 | ||||||
Commitments
and contingencies (see Note 17 of this Form 10Q) |
||||||||
Stockholders equity |
||||||||
Preferred stock |
139 | 339 | ||||||
Common stock (authorized 9,000,000,000 shares; issued 3,604,060,651 shares and 3,584,747,502 shares
at June 30, 2005, and December 31, 2004, respectively) |
3,604 | 3,585 | ||||||
Capital surplus |
73,911 | 72,801 | ||||||
Retained earnings |
31,032 | 30,209 | ||||||
Accumulated other comprehensive income (loss) |
(61 | ) | (208 | ) | ||||
Treasury stock, at cost (90,117,056 shares at June 30, 2005, and 28,556,534 shares at December 31, 2004) |
(3,240 | ) | (1,073 | ) | ||||
Total stockholders equity |
105,385 | 105,653 | ||||||
Total liabilities and stockholders equity |
$ | 1,171,283 | $ | 1,157,248 | ||||
65
Six months ended June 30, | (a) | |||||||
2005 | 2004 | |||||||
Preferred stock |
||||||||
Balance at beginning of the year |
$ | 339 | $ | 1,009 | ||||
Redemption of preferred stock |
(200 | ) | | |||||
Balance at end of period |
139 | 1,009 | ||||||
Common stock |
||||||||
Balance at beginning of year |
3,585 | 2,044 | ||||||
Issuance of common stock |
19 | 51 | ||||||
Balance at end of period |
3,604 | 2,095 | ||||||
Capital surplus |
||||||||
Balance at beginning of year |
72,801 | 13,512 | ||||||
Shares issued and commitments to issue common stock for employee
stock-based awards and related tax effects |
1,110 | 914 | ||||||
Balance at end of period |
73,911 | 14,426 | ||||||
Retained earnings |
||||||||
Balance at beginning of year |
30,209 | 29,681 | ||||||
Net income |
3,258 | 1,382 | ||||||
Cash dividends declared: |
||||||||
Preferred stock |
(8 | ) | (26 | ) | ||||
Common stock ($0.68 per share each period) |
(2,427 | ) | (1,441 | ) | ||||
Balance at end of period |
31,032 | 29,596 | ||||||
Accumulated other comprehensive income (loss) |
||||||||
Balance at beginning of year |
(208 | ) | (30 | ) | ||||
Other comprehensive income (loss) |
147 | (880 | ) | |||||
Balance at end of period |
(61 | ) | (910 | ) | ||||
Treasury stock, at cost |
||||||||
Balance at beginning of year |
(1,073 | ) | (62 | ) | ||||
Purchase of treasury stock |
(1,910 | ) | | |||||
Share repurchases related to employee stock-based awards |
(257 | ) | (213 | ) | ||||
Balance at end of period |
(3,240 | ) | (275 | ) | ||||
Total stockholders equity at end of period |
$ | 105,385 | $ | 45,941 | ||||
Comprehensive income |
||||||||
Net income |
$ | 3,258 | $ | 1,382 | ||||
Other comprehensive income (loss) |
147 | (880 | ) | |||||
Comprehensive income |
$ | 3,405 | $ | 502 | ||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan Chase only. |
66
Six months ended June 30, | (a) | |||||||
2005 | 2004 | |||||||
Operating activities |
||||||||
Net income |
$ | 3,258 | $ | 1,382 | ||||
Adjustments to reconcile net income to net cash (used in) operating
activities: |
||||||||
Provision for credit losses |
1,014 | 218 | ||||||
Depreciation and amortization |
2,221 | 1,433 | ||||||
Deferred tax (benefit) provision |
(1,038 | ) | (447 | ) | ||||
Investment securities (gains) losses |
752 | (165 | ) | |||||
Private equity unrealized (gains) losses |
(35 | ) | (261 | ) | ||||
Net change in: |
||||||||
Trading assets |
(1,499 | ) | (8,073 | ) | ||||
Securities borrowed |
(11,029 | ) | (3,113 | ) | ||||
Accrued interest and accounts receivable |
(2,787 | ) | (2,694 | ) | ||||
Other assets |
(6,813 | ) | (7,331 | ) | ||||
Trading liabilities |
(18,300 | ) | (6,468 | ) | ||||
Accounts payable, accrued expenses and other liabilities |
1,903 | 12,677 | ||||||
Other operating adjustments |
| (17 | ) | |||||
Net cash
(used in) operating activities |
(32,353) | (12,859 | ) | |||||
Investing activities |
||||||||
Net change in: |
||||||||
Deposits with banks |
12,717 | (28,960 | ) | |||||
Federal funds sold and securities purchased under resale agreements |
(29,273 | ) | (23,983 | ) | ||||
Other change in loans |
(66,577 | ) | (68,381 | ) | ||||
Held-to-maturity securities: |
||||||||
Proceeds |
18 | 40 | ||||||
Available-for-sale securities: |
||||||||
Proceeds from maturities |
17,008 | 4,482 | ||||||
Proceeds from sales |
45,146 | 78,592 | ||||||
Purchases |
(31,731 | ) | (89,692 | ) | ||||
Loans due to sales and securitizations |
51,085 | 56,529 | ||||||
Net cash used in business acquisitions |
(413 | ) | (339 | ) | ||||
All other investing activities, net |
2,489 | (184 | ) | |||||
Net cash provided by (used in) investing activities |
469 | (71,896 | ) | |||||
Financing activities |
||||||||
Net change in: |
||||||||
Deposits |
13,301 | 42,547 | ||||||
Federal funds purchased and securities sold under repurchase agreements |
9,563 | 39,153 | ||||||
Commercial paper and other borrowed funds |
3,914 | 1,303 | ||||||
Proceeds from the issuance of long-term debt and capital debt securities |
23,068 | 11,387 | ||||||
Repayments of long-term debt and capital debt securities |
(14,033 | ) | (5,594 | ) | ||||
Net issuance of stock and stock-based awards |
337 | 752 | ||||||
Redemption of preferred stock |
(200 | ) | | |||||
Treasury stock purchased |
(1,910 | ) | | |||||
Cash dividends paid |
(2,449 | ) | (1,454 | ) | ||||
All other financing activities, net |
435 | (7 | ) | |||||
Net cash provided by financing activities |
32,026 | 88,087 | ||||||
Effect of exchange rate changes on cash and due from banks |
(218 | ) | (75 | ) | ||||
Net increase (decrease) in cash and due from banks |
(76 | ) | 3,257 | |||||
Cash and due from banks at the beginning of the year |
35,168 | 20,268 | ||||||
Cash and due from banks at the end of the period |
$ | 35,092 | $ | 23,525 | ||||
Cash interest paid |
$ | 11,056 | $ | 5,118 | ||||
Cash income taxes paid |
$ | 2,432 | $ | 810 | ||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan Chase only. |
67
68
(in millions, except per share amounts) | July 1, 2004 | |||||||
Purchase price |
||||||||
Bank One common stock exchanged |
1,113 | |||||||
Exchange ratio |
1.32 | |||||||
JPMorgan Chase common stock issued |
1,469 | |||||||
Average purchase price per JPMorgan Chase common share(a) |
$ | 39.02 | ||||||
$ | 57,336 | |||||||
Fair value of employee stock awards and direct acquisition costs |
1,210 | |||||||
Total purchase price |
$ | 58,546 | ||||||
Net assets acquired: |
||||||||
Bank One stockholders equity |
$ | 24,156 | ||||||
Bank One goodwill and other intangible assets |
(2,754 | ) | ||||||
Subtotal |
21,402 | |||||||
Adjustments to reflect assets acquired at fair value: |
||||||||
Loans and leases |
(2,261 | ) | ||||||
Private equity investments |
(72 | ) | ||||||
Identified intangibles |
8,665 | |||||||
Pension plan assets |
(778 | ) | ||||||
Premises and equipment |
(417 | ) | ||||||
Other assets |
(267 | ) | ||||||
Amounts to reflect liabilities assumed at fair value: |
||||||||
Deposits |
(373 | ) | ||||||
Deferred income taxes |
932 | |||||||
Postretirement plan liabilities |
(49 | ) | ||||||
Other liabilities |
(1,162 | ) | ||||||
Long-term debt |
(1,234 | ) | ||||||
24,386 | ||||||||
Goodwill resulting from the Merger |
$ | 34,160 | ||||||
(a) | The value of the Firms common stock exchanged with Bank One shareholders was based on
the average closing prices of the Firms common stock for the two days prior to, and the two
days following, the announcement of the Merger on January 14, 2004. |
(in millions) | July 1, 2004 | |||
Assets |
||||
Cash and cash equivalents |
$ | 14,669 | ||
Securities |
70,512 | |||
Interests in purchased receivables |
30,184 | |||
Loans, net of allowance |
129,650 | |||
Goodwill and other intangible
assets |
42,825 | |||
All other assets |
47,739 | |||
Total assets |
$ | 335,579 | ||
Liabilities |
||||
Deposits |
$ | 164,848 | ||
Short-term borrowings |
9,811 | |||
All other liabilities |
61,494 | |||
Long-term debt |
40,880 | |||
Total Liabilities |
277,033 | |||
Net assets acquired |
$ | 58,546 | ||
69
Three months ended June 30, | Six months ended June 30, | |||||||
(in millions, except per share data) | 2004 | 2004 | ||||||
Noninterest revenue |
$ | 8,005 | $ | 16,501 | ||||
Net interest income |
5,274 | 10,585 | ||||||
Total net revenue |
13,279 | 27,086 | ||||||
Provision for credit losses |
248 | 401 | ||||||
Noninterest expense |
12,629 | 21,741 | ||||||
Income before income tax expense |
402 | 4,944 | ||||||
Net income |
$ | 433 | $ | 3,460 | ||||
Net income per common share: |
||||||||
Basic |
$ | 0.12 | $ | 0.98 | ||||
Diluted |
0.12 | 0.96 | ||||||
Average common shares outstanding: |
||||||||
Basic |
3,509.4 | 3,506.6 | ||||||
Diluted |
3,588.6 | 3,589.0 | ||||||
June 30, | December 31 | , | ||||||
(in millions) | 2005 | 2004 | ||||||
Trading assets |
||||||||
Debt and equity instruments: |
||||||||
U.S. government and federal agency, U.S. government-sponsored enterprise and municipal
securities obligations |
$ | 44,646 | $ | 43,866 | ||||
Certificates of deposit, bankers acceptances and commercial paper |
7,770 | 7,341 | ||||||
Debt securities issued by non-U.S. governments |
62,423 | 50,699 | ||||||
Corporate securities and other |
120,964 | 120,926 | ||||||
Total debt and equity instruments |
235,803 | 222,832 | ||||||
Derivative receivables(a) |
||||||||
Interest rate |
37,086 | 45,892 | ||||||
Foreign exchange |
6,060 | 7,939 | ||||||
Equity |
4,454 | 6,120 | ||||||
Credit derivatives |
3,662 | 2,945 | ||||||
Commodity |
3,753 | 3,086 | ||||||
Total derivative receivables |
55,015 | 65,982 | ||||||
Total trading assets |
$ | 290,818 | $ | 288,814 | ||||
Trading liabilities |
||||||||
Debt and equity instruments(b) |
$ | 83,011 | $ | 87,942 | ||||
Derivative payables:(a) |
||||||||
Interest rate |
33,705 | 41,075 | ||||||
Foreign exchange |
5,984 | 8,969 | ||||||
Equity |
6,818 | 9,096 | ||||||
Credit derivatives |
2,255 | 2,499 | ||||||
Commodity |
2,507 | 1,626 | ||||||
Total derivative payables |
51,269 | 63,265 | ||||||
Total trading liabilities |
$ | 134,280 | $ | 151,207 | ||||
(a) | Included in Trading assets and Trading liabilities are the reported receivables
(unrealized gains) and payables (unrealized losses) related to derivatives. These amounts
include the effect of legally enforceable master netting agreements, including cash paid and
received. |
|
(b) | Primarily represents securities sold, not yet purchased. |
70
Three months ended June 30, (a) | Six months ended June 30,(a) | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Interest income |
||||||||||||||||
Loans |
$ | 6,295 | $ | 2,714 | $ | 12,329 | $ | 5,381 | ||||||||
Securities |
610 | 718 | 1,688 | 1,379 | ||||||||||||
Trading assets |
2,384 | 1,666 | 4,616 | 3,465 | ||||||||||||
Federal funds sold and securities purchased under
resale agreements |
941 | 314 | 1,668 | 621 | ||||||||||||
Securities borrowed |
313 | 89 | 534 | 183 | ||||||||||||
Deposits with banks |
190 | 113 | 344 | 200 | ||||||||||||
Interests in purchased receivables |
216 | | 402 | 11 | ||||||||||||
Total interest income |
10,949 | 5,614 | 21,581 | 11,240 | ||||||||||||
Interest expense |
||||||||||||||||
Interest-bearing deposits |
2,352 | 813 | 4,349 | 1,632 | ||||||||||||
Short-term and other liabilities |
2,262 | 1,365 | 4,476 | 2,744 | ||||||||||||
Long-term debt |
1,015 | 404 | 1,939 | 807 | ||||||||||||
Beneficial interests issued by consolidated VIEs |
319 | 38 | 591 | 77 | ||||||||||||
Total interest expense |
5,948 | 2,620 | 11,355 | 5,260 | ||||||||||||
Net interest income |
5,001 | 2,994 | 10,226 | 5,980 | ||||||||||||
Provision for credit losses |
587 | 203 | 1,014 | 218 | ||||||||||||
Net interest income after provision for credit losses |
$ | 4,414 | $ | 2,791 | $ | 9,212 | $ | 5,762 | ||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan Chase only. |
Other | ||||||||||||||||||||||||
Pension plans | Postretirement | |||||||||||||||||||||||
U.S. | Non-U.S. | benefit plans | ||||||||||||||||||||||
Three months ended June 30, (a) (in millions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||
Components of net periodic benefit costs |
||||||||||||||||||||||||
Defined benefit plans: |
||||||||||||||||||||||||
Benefits earned during the period |
$ | 75 | $ | 49 | $ | 7 | $ | 4 | $ | 4 | $ | 5 | ||||||||||||
Interest cost on benefit obligations |
107 | 67 | 27 | 21 | 21 | 19 | ||||||||||||||||||
Expected return on plan assets |
(173 | ) | (106 | ) | (28 | ) | (22 | ) | (22 | ) | (21 | ) | ||||||||||||
Amortization of unrecognized amounts: |
||||||||||||||||||||||||
Prior service cost |
2 | 4 | | | 1 | | ||||||||||||||||||
Net actuarial loss |
| 13 | 10 | 11 | | | ||||||||||||||||||
Subtotal |
11 | 27 | 16 | 14 | 4 | 3 | ||||||||||||||||||
Other defined benefit pension plans(b) |
6 | 6 | 11 | 11 | | | ||||||||||||||||||
Total defined benefit pension plans |
17 | 33 | 27 | 25 | 4 | 3 | ||||||||||||||||||
Defined contribution plans |
61 | 36 | 43 | 34 | | | ||||||||||||||||||
Total pension and other postretirement benefit expense |
$ | 78 | $ | 69 | $ | 70 | $ | 59 | $ | 4 | $ | 3 | ||||||||||||
71
Other | ||||||||||||||||||||||||
Pension plans | Postretirement | |||||||||||||||||||||||
U.S. | Non-U.S. | benefit plans | ||||||||||||||||||||||
Six months ended June 30, (a) (in millions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||
Components of net periodic benefit costs |
||||||||||||||||||||||||
Defined benefit plans: |
||||||||||||||||||||||||
Benefits earned during the period |
$ | 150 | $ | 98 | $ | 12 | $ | 9 | $ | 8 | $ | 10 | ||||||||||||
Interest cost on benefit obligations |
215 | 134 | 53 | 43 | 42 | 38 | ||||||||||||||||||
Expected return on plan assets |
(346 | ) | (191 | ) | (55 | ) | (44 | ) | (44 | ) | (42 | ) | ||||||||||||
Amortization of unrecognized amounts: |
||||||||||||||||||||||||
Prior service cost |
4 | 8 | | | 2 | | ||||||||||||||||||
Net actuarial loss |
| 21 | 20 | 25 | | | ||||||||||||||||||
Settlement loss |
| | | 6 | | | ||||||||||||||||||
Subtotal |
23 | 70 | 30 | 39 | 8 | 6 | ||||||||||||||||||
Other defined benefit pension plans(b) |
13 | 15 | 20 | 17 | | | ||||||||||||||||||
Total defined benefit pension plans |
36 | 85 | 50 | 56 | 8 | 6 | ||||||||||||||||||
Defined contribution plans |
122 | 72 | 88 | 60 | | | ||||||||||||||||||
Total pension and other postretirement benefit expense |
$ | 158 | $ | 157 | $ | 138 | $ | 116 | $ | 8 | $ | 6 | ||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Includes U.S. defined benefit pension plans not subject to Title IV of the Employee
Retirement Income Security Act of 1974 (e.g., Excess Retirement Plan) and immaterial non-U.S.
defined benefit pension plans. |
Three months ended June 30,(a) | Six months ended June 30,(a) | |||||||||||||||
(in millions, except per share data) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Net income (loss) as reported |
$ | 994 | $ | (548 | ) | $ | 3,258 | $ | 1,382 | |||||||
Add: Employee stock-based compensation expense originally
included in reported net income (loss) |
215 | 176 | 444 | 354 | ||||||||||||
Deduct: Employee stock-based compensation expense determined
under the fair value method for all awards |
(248 | ) | (216 | ) | (537 | ) | (438 | ) | ||||||||
Pro forma net income (loss) |
$ | 961 | $ | (588 | ) | $ | 3,165 | $ | 1,298 | |||||||
Earnings per share: |
||||||||||||||||
Basic: As reported |
$ | 0.28 | $ | (0.27 | ) | $ | 0.93 | $ | 0.67 | |||||||
Pro forma |
0.27 | (0.29 | ) | 0.90 | 0.62 | |||||||||||
Diluted: As reported |
$ | 0.28 | $ | (0.27 | ) | $ | 0.91 | $ | 0.65 | |||||||
Pro forma |
0.27 | (0.29 | ) | 0.89 | 0.60 | |||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan Chase only. |
72
Three months ended June 30, (a) | Six months ended June 30,(a) | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Expense category |
||||||||||||||||
Compensation |
$ | 109 | $ | 65 | $ | 164 | $ | 65 | ||||||||
Occupancy |
25 | 20 | 25 | 20 | ||||||||||||
Technology and communications and other |
145 | 5 | 235 | 5 | ||||||||||||
Total(b) |
$ | 279 | $ | 90 | $ | 424 | $ | 90 | ||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan Chase only. |
|
(b) | With the exception of occupancy-related write-offs, all of the costs in the table require the
expenditure of cash. |
(in millions) | 2005 | |||||||||||||||
Liability balance, January 1 |
$ | 952 | ||||||||||||||
Recorded as merger costs |
424 | |||||||||||||||
Recorded as goodwill |
(460 | ) | ||||||||||||||
Liability utilized |
(496 | ) | ||||||||||||||
Liability balance, June 30 |
$ | 420 | ||||||||||||||
Three months ended June 30,(a) | Six months ended June 30,(a) | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Realized gains |
$ | 137 | $ | 69 | $ | 238 | $ | 256 | ||||||||
Realized losses |
(67 | ) | (30 | ) | (990 | ) | (91 | ) | ||||||||
Net realized securities gains (losses) |
70 | 39 | (752 | ) | 165 | |||||||||||
Private equity gains |
337 | 421 | 1,114 | 727 | ||||||||||||
Total Securities/private equity gains (losses) |
$ | 407 | $ | 460 | $ | 362 | $ | 892 | ||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan Chase only. |
June 30, 2005 | December 31, 2004 | |||||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Amortized | unrealized | unrealized | Fair | Amortized | unrealized | unrealized | Fair | |||||||||||||||||||||||||
(in millions) | cost | gains | losses | value | cost | gains | losses | value | ||||||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||||||||||||||
U.S. government and federal
agency obligations: |
||||||||||||||||||||||||||||||||
U.S. treasuries |
$ | 5,374 | $ | 2 | $ | 68 | $ | 5,308 | $ | 13,621 | $ | 7 | $ | 222 | $ | 13,406 | ||||||||||||||||
Mortgage-backed securities |
223 | 19 | 21 | 221 | 2,405 | 41 | 17 | 2,429 | ||||||||||||||||||||||||
Agency obligations |
84 | 10 | | 94 | 12 | | | 12 | ||||||||||||||||||||||||
Collateralized mortgage obligations |
46 | | | 46 | 71 | 4 | 4 | 71 | ||||||||||||||||||||||||
U.S. government-sponsored enterprise
obligations |
25,773 | 52 | 229 | 25,596 | 46,143 | 142 | 593 | 45,692 | ||||||||||||||||||||||||
Obligations of state and political subdivisions |
720 | 32 | 2 | 750 | 2,748 | 126 | 8 | 2,866 | ||||||||||||||||||||||||
Debt securities issued by non-U.S. governments |
5,089 | 30 | 9 | 5,110 | 7,901 | 59 | 38 | 7,922 | ||||||||||||||||||||||||
Corporate debt securities |
6,480 | 103 | 28 | 6,555 | 7,007 | 127 | 18 | 7,116 | ||||||||||||||||||||||||
Equity securities |
3,166 | 148 | 2 | 3,312 | 5,810 | 39 | 14 | 5,835 | ||||||||||||||||||||||||
Other, primarily asset-backed securities(a) |
11,459 | 62 | 32 | 11,489 | 9,103 | 25 | 75 | 9,053 | ||||||||||||||||||||||||
Total available-for-sale securities |
$ | 58,414 | $ | 458 | $ | 391 | $ | 58,481 | $ | 94,821 | $ | 570 | $ | 989 | $ | 94,402 | ||||||||||||||||
Held-to-maturity securities(b) |
||||||||||||||||||||||||||||||||
Total held-to-maturity securities |
$ | 92 | $ | 4 | $ | | $ | 96 | $ | 110 | $ | 7 | $ | | $ | 117 | ||||||||||||||||
73
(a) | Includes collateralized mortgage obligations of private issuers. |
|
(b) | Consists primarily of mortgage-backed securities issued by U.S. government-sponsored enterprises. |
June 30, 2005 | December 31, 2004 | |||||||||||||||
(in millions) | Carrying value | Cost | Carrying value | Cost | ||||||||||||
Total private equity investments |
$ | 6,488 | $ | 8,005 | $ | 7,735 | $ | 9,103 | ||||||||
(in millions) | June 30, 2005 | December 31, 2004 | ||||||
Securities purchased under resale agreements |
$ | 129,425 | $ | 94,076 | ||||
Securities borrowed |
58,457 | 47,428 | ||||||
Securities sold under repurchase agreements |
$ | 116,344 | $ | 105,912 | ||||
Securities loaned |
12,399 | 6,435 | ||||||
74
(in millions) | June 30, 2005 | December 31, 2004 | ||||||
U.S. wholesale loans: |
||||||||
Commercial and industrial |
$ | 61,390 | $ | 60,223 | ||||
Real estate |
12,671 | 13,038 | ||||||
Financial institutions |
18,015 | 14,060 | ||||||
Lease financing receivables |
2,754 | 4,043 | ||||||
Other |
15,266 | 8,504 | ||||||
Total U.S. wholesale loans |
110,096 | 99,868 | ||||||
Non-U.S. wholesale loans: |
||||||||
Commercial and industrial |
27,953 | 25,115 | ||||||
Real estate |
1,145 | 1,747 | ||||||
Financial institutions |
9,307 | 7,269 | ||||||
Lease financing receivables |
1,087 | 1,068 | ||||||
Total non-U.S. wholesale loans |
39,492 | 35,199 | ||||||
Total wholesale loans:(a) |
||||||||
Commercial and industrial |
89,343 | 85,338 | ||||||
Real estate(b) |
13,816 | 14,785 | ||||||
Financial institutions |
27,322 | 21,329 | ||||||
Lease financing receivables |
3,841 | 5,111 | ||||||
Other |
15,266 | 8,504 | ||||||
Total wholesale loans |
149,588 | 135,067 | ||||||
Total consumer loans:(c) |
||||||||
Home finance |
||||||||
Home equity & other |
72,346 | 67,837 | ||||||
Mortgage |
58,594 | 56,816 | ||||||
Total Home finance |
130,940 | 124,653 | ||||||
Auto & education finance |
52,309 | 62,712 | ||||||
Consumer & small business and other |
14,678 | 15,107 | ||||||
Credit card receivables(d) |
68,510 | 64,575 | ||||||
Total consumer loans |
266,437 | 267,047 | ||||||
Total loans(e)(f)(g) |
$ | 416,025 | $ | 402,114 | ||||
(a) | Includes Investment Bank, Commercial Banking, Treasury & Securities Services and Asset &
Wealth Management. |
|
(b) | Represents credits extended for real estate-related purposes to borrowers who are primarily
in the real estate development or investment businesses and for which the primary repayment is
from the sale, lease, management, operations or refinancing of the property. |
|
(c) | Includes Retail Financial Services and Card Services. |
|
(d) | Includes billed finance charges and fees net of an allowance for uncollectible amounts. |
|
(e) | Loans are presented net of unearned income of $3.3 billion and $4.1 billion at June 30, 2005,
and December 31, 2004, respectively. |
|
(f) | Includes loans held-for-sale (principally mortgage-related loans) of $31.0 billion and $25.7
billion at June 30, 2005, and December 31, 2004, respectively. |
|
(g) | Amounts are presented gross of the Allowance for loan losses. |
Three months ended June 30,(a) | Six months ended June 30,(a) | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Net gains on sales of loans held-for-sale |
$ | 149 | $ | 129 | $ | 301 | $ | 293 | ||||||||
Lower of cost or market adjustments |
9 | 10 | (117 | ) | 10 | |||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan Chase only. |
75
Six months ended June 30,(a) | ||||||||
(in millions) | 2005 | 2004 | ||||||
Allowance for loan losses at January 1 |
$ | 7,320 | $ | 4,523 | ||||
Gross charge-offs |
(2,042 | ) | (1,131 | ) | ||||
Gross recoveries |
453 | 295 | ||||||
Net charge-offs |
(1,589 | ) | (836 | ) | ||||
Provision for loan losses |
1,067 | 282 | ||||||
Other |
(4 | ) | (2 | ) | ||||
Allowance for loan losses at June 30(b) |
$ | 6,794 | $ | 3,967 | ||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage JPMorgan Chase only. |
|
(b) | Includes $314 million of asset-specific and $6.5 billion of formula-based allowance at June
30, 2005. Included within the formula-based allowance is $4.7 billion related to a statistical
calculation and an adjustment to the statistical calculation of $1.8 billion. During the
second quarter of 2005, the Firm refined its historical and market-based inputs used for
estimating the formula-based component of the wholesale allowance. These refinements resulted
in an increase to the statistical calculation and a decrease to the adjustments to the
statistical calculation, the portion of the formula-based allowance that covers estimate
imprecision; these adjustments were largely offsetting. |
Six months ended June 30,(a) | ||||||||
(in millions) | 2005 | 2004 | ||||||
Allowance for lending-related commitments at January 1 |
$ | 492 | $ | 324 | ||||
Provision for lending-related commitments |
(53 | ) | (64 | ) | ||||
Allowance for lending-related commitments at June 30(b) |
$ | 439 | $ | 260 | ||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Includes $104 million of asset-specific and $335 million of formula-based allowance at June
30, 2005. The formula-based allowance for lending-related commitments is based on a
statistical calculation. There is no adjustment to the statistical calculation for
lending-related commitments. |
(in billions) | June 30, 2005 | December 31, 2004 | ||||||
Credit card receivables |
$ | 103.2 | $ | 106.3 | ||||
Residential mortgage receivables |
20.7 | 19.1 | ||||||
Wholesale activities |
53.5 | 44.8 | ||||||
Automobile loans |
5.7 | 4.9 | ||||||
Total |
$ | 183.1 | $ | 175.1 | ||||
76
Three months ended June 30, (a) | ||||||||||||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||||||||||
Wholesale | Wholesale | |||||||||||||||||||||||||||||||
(in millions) | Mortgage | (c) | Credit card | Automobile | Activities | (c)(d) | Mortgage | Credit card | Automobile | Activities | ||||||||||||||||||||||
Principal securitized |
$ | 2,707 | $ | 4,850 | $ | 2,300 | $ | 3,632 | $ | 1,094 | $ | 1,750 | $ | | $ | 2,521 | ||||||||||||||||
Pre-tax gains (losses) |
10 | 33 | 10 | (e) | 18 | 16 | 9 | | 34 | |||||||||||||||||||||||
Cash flow information: |
||||||||||||||||||||||||||||||||
Proceeds from securitizations |
$ | 2,706 | $ | 4,850 | $ | 1,618 | $ | 3,642 | $ | 1,340 | $ | 1,750 | $ | | $ | 2,916 | ||||||||||||||||
Servicing fees collected |
3 | 12 | 2 | | 3 | 11 | | | ||||||||||||||||||||||||
Other cash flows received |
| 51 | | | | 29 | | 9 | ||||||||||||||||||||||||
Proceeds from collections reinvested
in revolving securitizations |
| 31,042 | | | | 14,497 | | | ||||||||||||||||||||||||
Key assumptions (rates per annum): |
||||||||||||||||||||||||||||||||
Prepayment rate(b) |
| 16.7 | % | 1.5 | % | 50 | % | 23.8 | % | 15.7 | % | | 50.0 | % | ||||||||||||||||||
PPR | ABS | CPR | PPR | |||||||||||||||||||||||||||||
Weighted-average life (in years) |
| 0.5 | 1.5 | 1.0 | 3.0 | 0.6 | | 2.3 | ||||||||||||||||||||||||
Expected credit losses |
| 5.3 | % | 0.6 | % | | % | 1.0 | %(f) | 5.5 | % | | | % (f) | ||||||||||||||||||
Discount rate |
| 12.0 | % | 6.3 | % | 0.6 | % | 15.0 | % | 12.0 | % | | 1.5 | % | ||||||||||||||||||
Six months ended June 30, (a) | ||||||||||||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||||||||||
Wholesale | Wholesale | |||||||||||||||||||||||||||||||
(in millions) | Mortgage | (c) | Credit card | Automobile | Activities | (c)(d) | Mortgage | Credit card | Automobile | Activities | ||||||||||||||||||||||
Principal securitized |
$ | 6,281 | $ | 5,275 | $ | 2,300 | $ | 6,396 | $ | 3,809 | $ | 3,250 | $ | 1,600 | $ | 4,481 | ||||||||||||||||
Pre-tax gains (losses) |
20 | 35 | 10 | (e) | 54 | 64 | 19 | (3 | ) | 69 | ||||||||||||||||||||||
Cash flow information: |
||||||||||||||||||||||||||||||||
Proceeds from securitizations |
$ | 6,302 | $ | 5,275 | $ | 1,618 | $ | 6,445 | $ | 3,863 | $ | 3,250 | $ | 1,597 | $ | 4,960 | ||||||||||||||||
Servicing fees collected |
4 | 13 | 2 | | 4 | 13 | 1 | 1 | ||||||||||||||||||||||||
Other cash flows received |
| 55 | | | | 35 | | 12 | ||||||||||||||||||||||||
Proceeds from collections reinvested
in revolving securitizations |
| 62,506 | | | | 29,190 | | | ||||||||||||||||||||||||
Key assumptions (rates per annum): |
||||||||||||||||||||||||||||||||
Prepayment rate(b) |
| 16.7 | % | 1.5 | % | 50 | % | 23.8-25.9 | % | 15.5-15.7 | % | 1.5 | % | 17.0-50.0 | % | |||||||||||||||||
PPR | ABS | CPR | PPR | ABS | ||||||||||||||||||||||||||||
Weighted-average life (in years) |
| 0.5 | 1.5 | 1.0 | 2.8-3.0 | 0.6 | 1.8 | 2.3-4.0 | ||||||||||||||||||||||||
Expected credit losses |
| 5.3-5.7 | % | 0.6 | % | | % | 1.0 | %(f) | 5.5-5.8 | % | 0.6 | % | | %(f) | |||||||||||||||||
Discount rate |
| 12.0 | % | 6.3 | % | 0.6 | % | 15.0-30.0 | % | 12.0 | % | 4.1 | % | 0.6-5.0 | % | |||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the result of heritage
JPMorgan Chase only. |
|
(b) | CPR: constant prepayment rate; ABS: absolute prepayment speed; PPR: principal payment rate. |
|
(c) | No interests other than
servicing assets were retained in Mortgage in the first and second quarters of 2005 and no
interests were retained in wholesale securitizations in the first quarter of 2005. |
|
(d) | Wholesale activities consist of wholesale loans (primarily real estate) originated by the
Investment Bank as well as $1.4 billion and $1.9 billion for the three months and six months
ended June 30, 2005, respectively, of consumer loans purchased from the market, packaged and
securitized by the Investment Bank. |
|
(e) | The auto securitization gain of $10 million does not include the write-down of loans
transferred to held-for-sale in the first quarter of 2005 and risk management activities
intended to protect the economic value of loans while held-for-sale. |
|
(f) | Expected credit losses for prime residential mortgage and certain wholesale securitizations
are minimal and are incorporated into other assumptions. |
77
(in millions) | June 30, 2005 | December 31, 2004 | ||||||
Residential mortgage(a) |
$ | 306 | $ | 433 | ||||
Credit card(a) |
487 | 494 | ||||||
Automobile(a) |
128 | 85 | ||||||
Wholesale activities |
32 | 23 | ||||||
Total |
$ | 953 | $ | 1,035 | ||||
(a) | Pre-tax unrealized gains (losses) recorded in Stockholders equity that relate to
retained securitization interests totaled $97 million and $118 million for Residential
mortgage; $4 million and $(3) million for Credit cards; and $9 million and $11 million for
Automobile at June 30, 2005, and December 31, 2004, respectively. |
June 30, 2005 (in millions) |
Mortgage | Credit card | Automobile | Wholesale activities | ||||||||||||
Weighted-average life (in years) |
0.7-3.3 | 0.4-0.9 | 1.2 | 0.1-4.0 | ||||||||||||
Prepayment rate |
13.9-41.0 | % CPR | 9.1-20.0 | %PPR | 1.5 | %ABS | 17.5-50 | % | ||||||||
Impact of 10% adverse change |
$ | (1 | ) | $ | (37 | ) | $ | (3 | ) | $ | (1 | ) | ||||
Impact of 20% adverse change |
| (74 | ) | (7 | ) | (2 | ) | |||||||||
Loss assumption |
0.0-4.9 | %(b) | 4.7-8.5 | % | 0.6 | % | 0.02.0 | %(b) | ||||||||
Impact of 10% adverse change |
$ | (12 | ) | $ | (110 | ) | $ | (4 | ) | $ | | |||||
Impact of 20% adverse change |
(23 | ) | (220 | ) | (8 | ) | | |||||||||
Discount rate |
13.0-30.0 | %(c) | 4.7-12.0 | % | 6.3 | % | 1.022.9 | % | ||||||||
Impact of 10% adverse change |
$ | (6 | ) | $ | (2 | ) | $ | (1 | ) | $ | | |||||
Impact of 20% adverse change |
(11 | ) | (3 | ) | (2 | ) | | |||||||||
December 31, 2004 (in millions) |
Mortgage | Credit card | Automobile | Wholesale activities | ||||||||||||
Weighted-average life (in years) |
0.8-3.4 | 0.5-1.0 | 1.3 | 0.2-4.0 | ||||||||||||
Prepayment rate |
15.137.1 | % CPR | 8.316.7 | % PPR | 1.4 | % ABS | 0.050.0 | %(a) | ||||||||
Impact of 10% adverse change |
$ | (5 | ) | $ | (34 | ) | $ | (6 | ) | $ | (1 | ) | ||||
Impact of 20% adverse change |
(8 | ) | (69 | ) | (13 | ) | (1 | ) | ||||||||
Loss assumption |
0.05.0 | %(b) | 5.78.4 | % | 0.7 | % | 0.03.0 | % (b) | ||||||||
Impact of 10% adverse change |
$ | (17 | ) | $ | (144 | ) | $ | (4 | ) | $ | | |||||
Impact of 20% adverse change |
(34 | ) | (280 | ) | (8 | ) | | |||||||||
Discount rate |
13.030.0 | %(c) | 4.912.0 | % | 5.5 | % | 1.022.9 | % | ||||||||
Impact of 10% adverse change |
$ | (9 | ) | $ | (2 | ) | $ | (1 | ) | $ | | |||||
Impact of 20% adverse change |
(18 | ) | (4 | ) | (2 | ) | | |||||||||
(a) | Prepayment risk on certain wholesale retained interests are minimal and are incorporated
into other assumptions. |
|
(b) | Expected credit losses for prime residential mortgage and certain wholesale securitizations
are minimal and are incorporated into other assumptions. |
|
(c) | The Firm sells certain residual interests from subprime mortgage securitizations via Net
Interest Margin (NIM) securitizations and retains residual interests in these NIM
transactions, which are valued using a 30% discount rate. |
78
Nonaccrual and 90 days | ||||||||||||||||||||||||||||||||
Total Loans | or more past due | Net loan charge-offs (a) | ||||||||||||||||||||||||||||||
June 30, | Dec. 31, | June 30, | Dec. 31, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||||||||
Loans reported |
||||||||||||||||||||||||||||||||
Home finance |
$ | 130,940 | $ | 124,653 | $ | 662 | $ | 673 | $ | 38 | $ | 28 | $ | 79 | $ | 56 | ||||||||||||||||
Auto & education finance |
52,309 | 62,712 | 190 | 193 | 47 | 31 | 130 | 71 | ||||||||||||||||||||||||
Consumer & small
business and other |
14,678 | 15,107 | 280 | 295 | 29 | 21 | 57 | 38 | ||||||||||||||||||||||||
Credit card receivables |
68,510 | 64,575 | 979 | 1,006 | 711 | 259 | 1,384 | 529 | ||||||||||||||||||||||||
Total consumer loans |
266,437 | 267,047 | 2,111 | 2,167 | 825 | 339 | 1,650 | 694 | ||||||||||||||||||||||||
Total wholesale loans |
149,588 | 135,067 | 1,259 | 1,582 | (52 | ) | 53 | (61 | ) | 142 | ||||||||||||||||||||||
Total loans reported |
416,025 | 402,114 | 3,370 | 3,749 | 773 | 392 | 1,589 | 836 | ||||||||||||||||||||||||
Securitized loans: |
||||||||||||||||||||||||||||||||
Residential
mortgage(b) |
8,607 | 11,533 | 343 | 460 | 27 | 40 | 59 | 80 | ||||||||||||||||||||||||
Automobile |
5,553 | 4,763 | 8 | 12 | 2 | 5 | 7 | 12 | ||||||||||||||||||||||||
Credit card |
68,808 | 70,795 | 1,141 | 1,337 | 930 | 486 | 1,847 | 959 | ||||||||||||||||||||||||
Total consumer loans
securitized |
82,968 | 87,091 | 1,492 | 1,809 | 959 | 531 | 1,913 | 1,051 | ||||||||||||||||||||||||
Securitized wholesale activities |
2,935 | 1,401 | | | | | | | ||||||||||||||||||||||||
Total loan
securitized(c) |
85,903 | 88,492 | 1,492 | 1,809 | 959 | 531 | 1,913 | 1,051 | ||||||||||||||||||||||||
Total loans reported and
securitized(d) |
$ | 501,928 | $ | 490,606 | $ | 4,862 | $ | 5,558 | $ | 1,732 | $ | 923 | $ | 3,502 | $ | 1,887 | ||||||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Includes $7.6 billion and $10.3 billion of outstanding principal balances on securitized
subprime 14 family residential mortgage loans as of June 30, 2005, and December 31, 2004,
respectively. |
|
(c) | Total assets held in securitization-related SPEs were $183.1 billion and $175.1 billion at
June 30, 2005, and December 31, 2004, respectively. The $85.9 billion and $88.5 billion of
loans securitized at June 30, 2005, and December 31, 2004, respectively, excludes: $62.6
billion and $50.8 billion, respectively, of securitized loans in which the Firms only
continuing involvement is the servicing of the assets; $33.9 billion and $35.2 billion,
respectively, of sellers interests in credit card master trusts; and $0.7 billion and $0.6
billion, respectively, of escrow accounts and other assets. |
|
(d) | Represents both loans on the Consolidated balance sheets and loans that have been
securitized, but excludes loans for which the Firms only continuing involvement is servicing
of the assets. |
Consolidated | Nonconsolidated | Total | ||||||||||||||||||||||
June 30, | December 31, | June 30, | December 31, | June 30, | December 31, | |||||||||||||||||||
(in billions) | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||
Total commercial paper issued by conduits |
$ | 30.6 | $ | 35.8 | $ | 8.5 | $ | 9.3 | $ | 39.1 | $ | 45.1 | ||||||||||||
Commitments |
||||||||||||||||||||||||
Asset-purchase agreements |
$ | 44.1 | $ | 47.2 | $ | 15.2 | $ | 16.3 | $ | 59.3 | $ | 63.5 | ||||||||||||
Program-wide liquidity commitments |
4.0 | 4.0 | 1.0 | 2.0 | 5.0 | 6.0 | ||||||||||||||||||
Limited credit enhancements |
1.3 | 1.4 | 1.0 | 1.2 | 2.3 | 2.6 | ||||||||||||||||||
Maximum exposure to loss(a) |
45.1 | 48.2 | 15.7 | 16.9 | 60.8 | 65.1 | ||||||||||||||||||
(a) | The Firms maximum exposure to loss is limited to the amount of drawn commitments (i.e.,
sellers assets held by the multi-seller conduits for which the Firm provides liquidity
support) of $36.6 billion and $42.2 billion at June 30, 2005, and December 31, 2004,
respectively, plus contractual but undrawn commitments of $24.2 billion and $22.9 billion at
June 30, 2005, and December 31, 2004, respectively. Since the Firm provides credit enhancement
and liquidity to these multi-seller conduits, the maximum exposure is not adjusted to exclude
exposure absorbed by third-party liquidity providers. |
79
(in billions) | June 30, 2005 | December 31, 2004 | ||||||
Credit-linked note vehicles(a) |
$ | 16.9 | $ | 17.8 | ||||
Municipal bond vehicles(b) |
10.0 | 7.5 | ||||||
(a) | The fair value of the Firms derivative contracts with credit-linked note vehicles was
not material at June 30, 2005, and December 31, 2004. Assets of $1.9 billion and $2.3 billion
reported in the table above were recorded on the Firms Consolidated balance sheets at June
30, 2005, and December 31, 2004, respectively, due to contractual relationships held by the
Firm that relate to collateral held by the VIE. |
|
(b) | Total amounts consolidated due to the Firm owning residual interests was $2.5 billion and
$2.6 billion at June 30, 2005, and December 31, 2004, and are reported in the table above.
Total liquidity commitments were $4.7 billion and $3.1 billion at June 30, 2005, and December
31, 2004, respectively. The Firms maximum credit exposure to all municipal bond vehicles was
$7.2 billion and $5.7 billion at June 30, 2005, and December 31, 2004, respectively. |
(in billions) | June 30, 2005 | December 31, 2004 | ||||||
Consolidated VIE assets(a) |
||||||||
Investment securities |
$ | 9.3 | $ | 10.6 | ||||
Trading assets(b) |
7.4 | 4.7 | ||||||
Loans |
4.0 | 3.4 | ||||||
Interests in purchased receivables |
27.8 | 31.6 | ||||||
Other assets |
0.5 | 0.4 | ||||||
Total consolidated assets |
$ | 49.0 | $ | 50.7 | ||||
(a) | The Firm also holds $4.1 billion and $3.4 billion of assets, at June 30, 2005, and
December 31, 2004, respectively, primarily as a sellers interest, in certain consumer
securitizations in a segregated entity, as part of a two-step securitization transaction. This
interest is included in the securitization activities disclosed in
Note 12 on pages 76-79 of
this Form 10-Q. |
|
(b) | Includes the fair value of securities and derivatives. |
80
(in millions) | June 30, 2005 | December 31, 2004 | ||||||
Goodwill |
$ | 43,537 | $ | 43,203 | ||||
Mortgage servicing rights |
5,026 | 5,080 | ||||||
Purchased credit card relationships |
3,528 | 3,878 | ||||||
All other intangibles: |
||||||||
Other credit
cardrelated intangibles |
$ | 250 | $ | 272 | ||||
Core deposit intangibles |
3,016 | 3,328 | ||||||
Other intangibles |
2,053 | 2,126 | ||||||
Total All other intangible assets |
$ | 5,319 | $ | 5,726 | ||||
Goodwill resulting | ||||||||||||
(in millions) | June 30, 2005 | December 31, 2004 | from the Merger | |||||||||
Investment Bank |
$ | 3,488 | $ | 3,309 | $ | 1,179 | ||||||
Retail Financial Services |
15,030 | 15,022 | 14,576 | |||||||||
Card Services |
12,817 | 12,781 | 12,802 | |||||||||
Commercial Banking |
2,660 | 2,650 | 2,599 | |||||||||
Treasury & Securities Services |
2,130 | 2,044 | 465 | |||||||||
Asset & Wealth Management |
7,035 | 7,020 | 2,539 | |||||||||
Corporate (Private Equity) |
377 | 377 | | |||||||||
Total goodwill |
$ | 43,537 | $ | 43,203 | $ | 34,160 | ||||||
Six months ended June 30, (a) (in millions) | 2005 | 2004 | ||||||
Balance at January 1 |
$ | 6,111 | $ | 6,159 | ||||
Additions |
763 | 979 | ||||||
Sales |
| | ||||||
Other-than-temporary impairment |
| (108 | ) | |||||
Amortization |
(664 | ) | (653 | ) | ||||
SFAS 133 hedge valuation adjustments |
(510 | ) | 256 | |||||
Balance at June 30 |
5,700 | 6,633 | ||||||
Less: valuation allowance |
674 | 926 | ||||||
Balance at June 30, after valuation allowance |
$ | 5,026 | $ | 5,707 | ||||
Estimated fair value at June 30 |
$ | 5,026 | $ | 5,707 | ||||
Weighted-average prepayment speed assumption (CPR) |
18.13 | % | 14.83 | % | ||||
Weighted-average discount rate |
8.54 | % | 7.19 | % | ||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
81
Six months ended June 30, (a) (in millions) | 2005 | 2004 | ||||||
Balance at January 1 |
$ | 1,031 | $ | 1,378 | ||||
Other-than-temporary impairment |
| (108 | ) | |||||
SFAS 140 impairment (recovery) adjustment |
(357 | ) | (344 | ) | ||||
Balance at June 30 |
$ | 674 | $ | 926 | ||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
June 30, 2005 | December 31, 2004 | |||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||
Gross | Accumulated | carrying | Gross | Accumulated | carrying | |||||||||||||||||||
(in millions) | amount | amortization | value | amount | amortization | value | ||||||||||||||||||
Purchased credit card relationships |
$ | 5,225 | $ | 1,697 | $ | 3,528 | $ | 5,225 | $ | 1,347 | $ | 3,878 | ||||||||||||
All other intangibles: |
||||||||||||||||||||||||
Other credit
cardrelated intangibles |
$ | 295 | $ | 45 | $ | 250 | $ | 295 | $ | 23 | $ | 272 | ||||||||||||
Core deposit intangibles |
3,797 | 781 | 3,016 | 3,797 | 469 | 3,328 | ||||||||||||||||||
Other intangibles |
2,547 | 494 | (a) | 2,053 | 2,528 | 402 | (a) | 2,126 | ||||||||||||||||
Total All other intangibles |
$ | 6,639 | $ | 1,320 | $ | 5,319 | $ | 6,620 | $ | 894 | $ | 5,726 | ||||||||||||
Amortization expense | Three months ended June 30,(b) | Six months ended June 30,(b) | ||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Purchased credit card relationships |
$ | 175 | $ | 60 | $ | 350 | $ | 121 | ||||||||
Other credit
cardrelated intangibles |
11 | | 22 | | ||||||||||||
Core deposit intangibles |
155 | 1 | 312 | 2 | ||||||||||||
Other intangibles |
44 | 18 | 84 | 35 | ||||||||||||
Total amortization expense |
$ | 385 | $ | 79 | $ | 768 | $ | 158 | ||||||||
(a) | Includes $8 million and $7 million of amortization expense related to servicing assets on
securitized automobile loans, which is recorded in Asset management, administration and
commissions, for the six months ended June 30, 2005 and 2004, respectively. |
|
(b) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
82
Purchased | Other credit | Core | ||||||||||||||||||
credit card | card-related | deposit | Other | |||||||||||||||||
For the year: (in millions) | relationships | intangibles | intangibles | intangibles | Total | |||||||||||||||
2005(a) |
$ | 701 | $ | 45 | $ | 624 | $ | 164 | $ | 1,534 | ||||||||||
2006 |
674 | 40 | 531 | 156 | 1,401 | |||||||||||||||
2007 |
606 | 35 | 403 | 139 | 1,183 | |||||||||||||||
2008 |
502 | 33 | 294 | 128 | 957 | |||||||||||||||
2009 |
360 | 29 | 239 | 123 | 751 | |||||||||||||||
2010 |
301 | 27 | 238 | 112 | 678 | |||||||||||||||
(a) | Includes $350 million, $22 million, $312 million and $84 million of amortization expense
related to Purchased credit card relationships, other credit card-related intangibles, core
deposit intangibles and other intangibles, respectively, recognized during the first six
months of 2005. |
Three months ended June 30,(a) | Six months ended June 30, (a) | |||||||||||||||
(in millions, except per share amounts) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Basic earnings per share |
||||||||||||||||
Net income |
$ | 994 | $ | (548 | ) | $ | 3,258 | $ | 1,382 | |||||||
Less: preferred stock dividends |
3 | 13 | 8 | 26 | ||||||||||||
Net income applicable to common stock |
$ | 991 | $ | (561 | ) | $ | 3,250 | $ | 1,356 | |||||||
Weighted-average basic shares outstanding |
3,493.0 | 2,042.8 | 3,505.2 | 2,037.6 | ||||||||||||
Net income per share |
$ | 0.28 | $ | (0.27 | ) | $ | 0.93 | $ | 0.67 | |||||||
Diluted earnings per share |
||||||||||||||||
Net income applicable to common stock |
$ | 991 | $ | (561 | ) | $ | 3,250 | $ | 1,356 | |||||||
Weighted-average basic shares outstanding |
3,493.0 | 2,042.8 | 3,505.2 | 2,037.6 | ||||||||||||
Add: Broad-based options |
3.4 | | (c) | 3.6 | 6.3 | |||||||||||
Restricted stock and key employee options |
51.9 | | (c) | 50.2 | 52.4 | |||||||||||
Weighted-average diluted shares outstanding |
3,548.3 | 2,042.8 | 3,559.0 | 2,096.3 | ||||||||||||
Net income per share(b) |
$ | 0.28 | $ | (0.27 | ) | $ | 0.91 | $ | 0.65 | |||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Options issued under employee benefit plans to purchase 379 million and 208 million shares of
common stock were outstanding for the three months ended June 30, 2005 and 2004, respectively,
but were not included in the computation of diluted EPS because the options exercise prices
were greater than the average market price of the common shares. For the six months ended June
30, 2005 and 2004, options issued under employee benefit plans to purchase common stock
excluded from the computation were 370 million and 208 million shares, respectively. |
|
(c) | Common equivalent shares have been excluded from the computation of diluted loss per share
for the three months ended June 30, 2004, as the effect would be antidilutive. |
Unrealized | Cash | Accumulated other | ||||||||||||||
(in millions) | gains (losses) | Translation | flow | comprehensive | ||||||||||||
Six months ended June 30, 2005(a) | on AFS securities(b) | adjustments | hedges | income (loss) | ||||||||||||
Balance at December 31, 2004 |
$ | (61 | ) | $ | (8 | ) | $ | (139 | ) | $ | (208 | ) | ||||
Net change |
190 | (c) | | (d) | (43) | (e) | 147 | |||||||||
Balance at June 30, 2005 |
$ | 129 | $ | (8 | ) | $ | (182 | ) | $ | (61 | ) | |||||
Six months ended June 30, 2004(a) |
||||||||||||||||
Balance at December 31, 2003 |
$ | 19 | $ | (6 | ) | $ | (43 | ) | $ | (30 | ) | |||||
Net change |
(936 | )(c) | | (d) | 56 | (e) | (880 | ) | ||||||||
Balance at June 30, 2004 |
$ | (917 | ) | $ | (6 | ) | $ | 13 | $ | (910 | ) | |||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
83
(b) | Represents the after-tax difference between the fair value and amortized cost of the AFS
securities portfolio and retained interests in securitizations recorded in Other assets. |
|
(c) | The net change for the six months ended June 30, 2005, was primarily due to sales of
investment securities at losses partially offset by higher interest rates. The net change for
the six months ended June 30, 2004, was primarily due to rising interest rates. |
|
(d) | At June 30, 2005 and 2004, included $(270) million and $(84) million, respectively, of
after-tax gains (losses) on foreign currency translation from operations for which the
functional currency is other than the U.S. dollar, offset by $270 million and $84 million,
respectively, of after-tax gains (losses) on hedges. |
|
(e) | The net change for the six months ended June 30, 2005, included $50 million of after-tax
losses recognized in income and $93 million of after-tax losses representing the net change in
derivative fair values that were recorded in comprehensive income. The net change for the six
months ended June 30, 2004, included $13 million of after-tax losses recognized in income and
$43 million of after-tax gains representing the net change in derivative fair values that were
reported in comprehensive income. |
Three months ended June 30,(a) | Six months ended June 30,(a) | ||||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | |||||||||||||
Fair value hedge ineffective net gains/(losses)(b) |
$ | 60 | $ | (49 | ) | $ | (41 | ) | $ | (100 | ) | ||||||
Cash flow hedge ineffective net gains/(losses)(b) |
| | | (1 | ) | ||||||||||||
Cash flow hedging gains on forecasted transactions that failed to occur |
| | | | |||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(b) | Includes ineffectiveness and the components of hedging instruments that have been excluded
from the assessment of hedge effectiveness. |
84
Allowance for lending- | ||||||||||||||||
Contractual amount | related commitments | |||||||||||||||
June 30, | December 31, | June 30, | December 31, | |||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Consumer |
$ | 608,413 | $ | 601,196 | $ | 13 | $ | 12 | ||||||||
Wholesale: |
||||||||||||||||
Other unfunded commitments to extend credit(a)(b)(c) |
232,622 | 225,152 | 259 | 185 | ||||||||||||
Standby letters of credit and guarantees(a)(d)(e) |
74,834 | 78,084 | 161 | 292 | ||||||||||||
Other letters of credit(a) |
6,578 | 6,163 | 6 | 3 | ||||||||||||
Total wholesale |
314,034 | 309,399 | 426 | 480 | ||||||||||||
Total
offbalance sheet lending-related financial instruments |
$ | 922,447 | $ | 910,595 | $ | 439 | $ | 492 | ||||||||
Customers securities lent(f) |
$ | 234,149 | $ | 215,972 | NA | NA | ||||||||||
(a) | Represents contractual amount net of risk participations totaling $27.0 billion and $26.4
billion at June 30, 2005, and December 31, 2004, respectively. |
|
(b) | Includes unused advised lines of credit totaling $23.6 billion and $22.8 billion at June 30,
2005, and December 31, 2004, respectively, which are not legally binding. In regulatory
filings with the Federal Reserve Board, unused advised lines are not reportable. |
|
(c) | Includes certain asset purchase agreements to the Firms administered multi-seller
asset-backed commercial paper conduits of $31.9 billion and $31.8 billion at June 30, 2005,
and December 31, 2004, respectively; excludes $27.4 billion and $31.7 billion at June 30,
2005, and December 31, 2004, respectively, of asset purchase agreements related to the Firms
administered multi-seller asset-backed commercial paper conduits consolidated in accordance
with FIN 46R, as the underlying assets of the conduits are reported in the Firms Consolidated
balance sheets. It also includes $3.4 billion and $7.5 billion at June 30, 2005, and December
31, 2004, respectively, of asset purchase agreements to structured wholesale loan vehicles and
other third-party entities. The allowance for credit losses on lending-related commitments
related to these agreements was insignificant at June 30, 2005, and December 31, 2004. |
|
(d) | JPMorgan Chase held collateral relating to $8.1 billion and $7.4 billion of these
arrangements at June 30, 2005, and December 31, 2004, respectively. |
|
(e) | Includes unused commitments to issue standby letters of credit of $34.8 billion and $38.4
billion at June 30, 2005, and December 31, 2004, respectively. |
|
(f) | Collateral held by the Firm in support of securities lending indemnification agreements was
$240.6 billion and $221.6 billion at June 30, 2005, and December 31, 2004, respectively. |
85
Retail | Treasury & | Asset | Corporate/ | |||||||||||||||||||||||||||||
(in millions, except ratios) | Investment | Financial | Card | Commercial | Securities | & Wealth | Reconciling | |||||||||||||||||||||||||
Three months ended June 30, 2005(b) | Bank(d) | Services | Services(e) | Banking | Services | Management | Items(d)(e)(f) | Total | ||||||||||||||||||||||||
Net interest income |
$ | 342 | $ | 2,558 | $ | 2,976 | $ | 648 | $ | 510 | $ | 274 | $ | (2,307 | ) | $ | 5,001 | |||||||||||||||
Noninterest revenue |
2,408 | 1,241 | 910 | 252 | 1,078 | 1,069 | 784 | 7,742 | ||||||||||||||||||||||||
Total net revenue |
2,750 | 3,799 | 3,886 | 900 | 1,588 | 1,343 | (1,523 | ) | 12,743 | |||||||||||||||||||||||
Provision for credit losses |
(343 | ) | 94 | 1,641 | 142 | 2 | (20 | ) | (929 | ) | 587 | |||||||||||||||||||||
Credit reimbursement (to)/from TSS(c) |
38 | | | | (38 | ) | | | | |||||||||||||||||||||||
Merger costs |
| | | | | | 279 | (g) | 279 | |||||||||||||||||||||||
Litigation reserve charge |
| | | | | | 1,872 | 1,872 | ||||||||||||||||||||||||
Other noninterest expense |
2,178 | 2,126 | 1,383 | 473 | 1,194 | 917 | 477 | 8,748 | ||||||||||||||||||||||||
Income (loss) before
income tax expense |
953 | 1,579 | 862 | 285 | 354 | 446 | (3,222 | ) | 1,257 | |||||||||||||||||||||||
Income tax expense (benefit) |
347 | 599 | 320 | 111 | 125 | 163 | (1,402 | ) | 263 | |||||||||||||||||||||||
Net income (loss) |
$ | 606 | $ | 980 | $ | 542 | $ | 174 | $ | 229 | $ | 283 | $ | (1,820 | ) | $ | 994 | |||||||||||||||
Average equity |
$ | 20,000 | $ | 13,250 | $ | 11,800 | $ | 3,400 | $ | 1,900 | $ | 2,400 | $ | 52,519 | $ | 105,269 | ||||||||||||||||
Average assets |
592,383 | 225,574 | 140,741 | 55,963 | 26,437 | 42,001 | 92,934 | 1,176,033 | ||||||||||||||||||||||||
Return on average equity |
12 | % | 30 | % | 18 | % | 21 | % | 48 | % | 47 | % | NM | 4 | % | |||||||||||||||||
Overhead ratio |
79 | 56 | 36 | 53 | 75 | 68 | NM | 86 | ||||||||||||||||||||||||
Retail | Treasury & | Asset | Corporate/ | |||||||||||||||||||||||||||||
(in millions, except ratios) | Investment | Financial | Card | Commercial | Securities | & Wealth | Reconciling | |||||||||||||||||||||||||
Three months ended June 30, 2004(b) | Bank(d) | Services | Services(e) | Banking | Services | Management | Items(d)(e)(f) | Total | ||||||||||||||||||||||||
Net interest income |
$ | 307 | $ | 1,211 | $ | 1,271 | $ | 234 | $ | 251 | $ | 117 | $ | (397 | ) | $ | 2,994 | |||||||||||||||
Noninterest revenue |
2,632 | 624 | 316 | 100 | 842 | 711 | 412 | 5,637 | ||||||||||||||||||||||||
Total net revenue |
2,939 | 1,835 | 1,587 | 334 | 1,093 | 828 | 15 | 8,631 | ||||||||||||||||||||||||
Provision for credit losses |
(128 | ) | 78 | 748 | 19 | 3 | (4 | ) | (513 | ) | 203 | |||||||||||||||||||||
Credit reimbursement (to)/from TSS(c) |
2 | | | | (2 | ) | | | | |||||||||||||||||||||||
Merger costs |
| | | | | | 90 | (g) | 90 | |||||||||||||||||||||||
Litigation reserve charge |
| | | | | | 3,700 | 3,700 | ||||||||||||||||||||||||
Other noninterest expense |
2,056 | 1,131 | 565 | 203 | 944 | 681 | 133 | 5,713 | ||||||||||||||||||||||||
Income (loss) before income tax expense |
1,013 | 626 | 274 | 112 | 144 | 151 | (3,395 | ) | (1,075 | ) | ||||||||||||||||||||||
Income tax expense (benefit) |
369 | 230 | 98 | 47 | 43 | 52 | (1,366 | ) | (527 | ) | ||||||||||||||||||||||
Net income (loss) |
$ | 644 | $ | 396 | $ | 176 | $ | 65 | $ | 101 | $ | 99 | $ | (2,029 | ) | $ | (548 | ) | ||||||||||||||
Average equity |
$ | 14,015 | $ | 5,005 | $ | 3,346 | $ | 747 | $ | 3,203 | $ | 5,370 | $ | 15,178 | $ | 46,864 | ||||||||||||||||
Average assets |
439,166 | 146,693 | 51,510 | 17,281 | 21,040 | 35,083 | 92,097 | 802,870 | ||||||||||||||||||||||||
Return on average equity |
18 | % | 32 | % | 21 | % | 35 | % | 13 | % | 7 | % | NM | NM | ||||||||||||||||||
Overhead ratio |
70 | 62 | 36 | 61 | 86 | 82 | NM | 110 | % | |||||||||||||||||||||||
86
Retail | Treasury & | Asset | Corporate/ | |||||||||||||||||||||||||||||
(in millions, except ratios) | Investment | Financial | Card | Commercial | Securities | & Wealth | Reconciling | |||||||||||||||||||||||||
Six months ended June 30, 2005(b) | Bank(d) | Services | Services(e) | Banking | Services | Management | Items(d)(e)(f) | Total | ||||||||||||||||||||||||
Net interest income |
$ | 646 | $ | 5,211 | $ | 5,983 | $ | 1,273 | $ | 1,006 | $ | 556 | $ | (4,449 | ) | $ | 10,226 | |||||||||||||||
Noninterest revenue |
6,284 | 2,435 | 1,682 | 477 | 2,064 | 2,148 | 1,074 | 16,164 | ||||||||||||||||||||||||
Total net revenue |
6,930 | 7,646 | 7,665 | 1,750 | 3,070 | 2,704 | (3,375 | ) | 26,390 | |||||||||||||||||||||||
Provision for credit losses |
(709 | ) | 188 | 3,277 | 136 | (1 | ) | (27 | ) | (1,850 | ) | 1,014 | ||||||||||||||||||||
Credit reimbursement (to)/from TSS(c) |
76 | | | | (76 | ) | | | | |||||||||||||||||||||||
Merger costs |
| | | | | | 424 | (g) | 424 | |||||||||||||||||||||||
Litigation reserve charge |
| | | | | | 2,772 | 2,772 | ||||||||||||||||||||||||
Other noninterest expense |
4,703 | 4,288 | 2,696 | 931 | 2,259 | 1,851 | 912 | 17,640 | ||||||||||||||||||||||||
Income before income tax expense |
3,012 | 3,170 | 1,692 | 683 | 736 | 880 | (5,633 | ) | 4,540 | |||||||||||||||||||||||
Income tax expense (benefit) |
1,081 | 1,202 | 628 | 266 | 262 | 321 | (2,478 | ) | 1,282 | |||||||||||||||||||||||
Net income |
$ | 1,931 | $ | 1,968 | $ | 1,064 | $ | 417 | $ | 474 | $ | 559 | $ | (3,155 | ) | $ | 3,258 | |||||||||||||||
Average equity |
$ | 20,000 | $ | 13,175 | $ | 11,800 | $ | 3,400 | $ | 1,900 | $ | 2,400 | $ | 52,632 | $ | 105,307 | ||||||||||||||||
Average assets |
579,651 | 225,348 | 139,632 | 55,524 | 26,733 | 40,865 | 101,709 | 1,169,462 | ||||||||||||||||||||||||
Return on average equity |
19 | % | 30 | % | 18 | % | 25 | % | 50 | % | 47 | % | NM | 6 | % | |||||||||||||||||
Overhead ratio |
68 | 56 | 35 | 53 | 74 | 68 | NM | 79 | ||||||||||||||||||||||||
Retail | Treasury & | Asset | Corporate/ | |||||||||||||||||||||||||||||
(in millions, except ratios) | Investment | Financial | Card | Commercial | Securities | & Wealth | Reconciling | |||||||||||||||||||||||||
Six months ended June 30, 2004(b) | Bank(d) | Services | Services(e) | Banking | Services | Management | Items(d)(e)(f) | Total | ||||||||||||||||||||||||
Net interest income |
$ | 602 | $ | 2,356 | $ | 2,544 | $ | 461 | $ | 494 | $ | 239 | $ | (716 | ) | $ | 5,980 | |||||||||||||||
Noninterest revenue |
6,101 | 1,090 | 600 | 195 | 1,611 | 1,437 | 628 | 11,662 | ||||||||||||||||||||||||
Total net revenue |
6,703 | 3,446 | 3,144 | 656 | 2,105 | 1,676 | (88 | ) | 17,642 | |||||||||||||||||||||||
Provision for credit losses |
(316 | ) | 132 | 1,454 | 6 | 4 | 6 | (1,068 | ) | 218 | ||||||||||||||||||||||
Credit reimbursement (to)/from TSS(c) |
4 | | | | (4 | ) | | | | |||||||||||||||||||||||
Merger costs |
| | | | | | 90 | (g) | 90 | |||||||||||||||||||||||
Litigation reserve charge |
| | | | | | 3,700 | 3,700 | ||||||||||||||||||||||||
Other noninterest expense |
4,382 | 2,372 | 1,164 | 412 | 1,811 | 1,330 | 335 | 11,806 | ||||||||||||||||||||||||
Income before
income tax expense |
2,641 | 942 | 526 | 238 | 286 | 340 | (3,145 | ) | 1,828 | |||||||||||||||||||||||
Income tax expense (benefit) |
980 | 340 | 188 | 99 | 87 | 119 | (1,367 | ) | 446 | |||||||||||||||||||||||
Net income |
$ | 1,661 | $ | 602 | $ | 338 | $ | 139 | $ | 199 | $ | 221 | $ | (1,778 | ) | $ | 1,382 | |||||||||||||||
Average equity |
$ | 14,550 | $ | 5,091 | $ | 3,369 | $ | 771 | $ | 3,196 | $ | 5,420 | $ | 13,944 | $ | 46,341 | ||||||||||||||||
Average assets |
430,658 | 143,210 | 51,630 | 16,760 | 20,141 | 35,189 | 89,506 | 787,094 | ||||||||||||||||||||||||
Return on average equity |
23 | % | 24 | % | 20 | % | 36 | % | 13 | % | 8 | % | NM | 6 | % | |||||||||||||||||
Overhead ratio |
65 | 69 | 37 | 63 | 86 | 79 | NM | 88 | ||||||||||||||||||||||||
(a) | In addition to analyzing the Firms results on a reported basis, management reviews the
line of business results on an operating basis, which is a non-GAAP financial measure. The
definition of operating basis starts with the reported U.S. GAAP results. In the case of the
Investment Bank, operating basis noninterest revenue includes, in Trading revenue, Net
interest income (NII) related to trading activities. In the case of Card Services, refer to
footnote (e). These adjustments do not change JPMorgan Chases reported net income. Operating
basis also excludes Merger costs and nonoperating Litigation reserve charges, as management
believes these items are not part of the Firms normal daily business operations (and,
therefore, not indicative of trends) and do not provide meaningful comparisons with other
periods. Finally, operating results reflect revenues (Noninterest revenue and NII) on a
tax-equivalent basis. Refer to footnote (f) for the impact of these adjustments. |
|
(b) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
|
(c) | TSS reimburses the IB for credit portfolio exposures the IB manages on behalf of clients the
segments share. At the time of the Merger, the reimbursement methodology was revised to be
based on pre-tax earnings, net of the cost of capital related to those exposures. Prior to the
Merger, the credit reimbursement was based upon pre-tax earnings, plus the allocated capital
associated with the shared clients. |
|
(d) | Segment operating results include the reclassification of NII related to trading activities
to Trading revenue within Noninterest revenue, which primarily impacts the Investment Bank.
Trading-related NII reclassified to Trading revenue was $198 million and $439 million for the
three months ended June 30, 2005 and 2004, respectively, and $526 million and $1,015 million
for the six months ended June 30, 2005 and 2004, respectively. These amounts are eliminated in
Corporate/reconciling items to arrive at NII and Noninterest revenue on a reported GAAP basis
for JPMorgan Chase. |
87
(e) | Operating results for Card Services exclude the impact of credit card securitizations on
revenue, provision for credit losses and average assets, as JPMorgan Chase treats the sold
receivables as if they were still on the balance sheet in evaluating the overall performance
of the credit card portfolio. The related securitization adjustments were as follows: |
Three months ended June 30,(a) | Six months ended June 30,(a) | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Net interest income |
$ | 1,658 | $ | 838 | $ | 3,390 | $ | 1,676 | ||||||||
Noninterest revenue |
(728 | ) | (352 | ) | (1,543 | ) | (717 | ) | ||||||||
Provision for credit losses |
930 | 486 | 1,847 | 959 | ||||||||||||
Average assets |
66,226 | 33,026 | 66,864 | 33,191 | ||||||||||||
(a) 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
||
These adjustments are eliminated in Corporate/reconciling items to arrive at the Firms reported GAAP results. |
||
(f) | Segment operating results reflect revenues on a taxequivalent basis with the corresponding
income tax impact recorded within income tax expense. |
|
Taxequivalent adjustments were as follows: |
Three months ended June 30,(a) | Six months ended June 30,(a) | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Net interest income |
$ | 84 | $ | 18 | $ | 145 | $ | 32 | ||||||||
Noninterest revenue |
143 | 41 | 258 | 75 | ||||||||||||
Income tax expense |
227 | 59 | 403 | 107 | ||||||||||||
(a) 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
||
These adjustments are eliminated in Corporate/reconciling items to arrive at the Firms reported GAAP results. |
||
(g) | Merger costs attributed to the lines of business were as follows: |
Three months ended June 30,(a) | Six months ended June 30,(a) | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Investment Bank |
$ | 9 | $ | 5 | $ | 14 | $ | 5 | ||||||||
Retail Financial Services |
51 | 23 | 77 | 23 | ||||||||||||
Card Services |
74 | 1 | 85 | 1 | ||||||||||||
Commercial Banking |
(3 | ) | 6 | (1 | ) | 6 | ||||||||||
Treasury & Securities Services |
23 | 5 | 43 | 5 | ||||||||||||
Asset & Wealth Management |
24 | | 38 | | ||||||||||||
Corporate |
101 | 50 | 168 | 50 | ||||||||||||
(a) | 2005 reflects the combined Firms results, while 2004 reflects the results of heritage
JPMorgan Chase only. |
88
Heritage JPMC only | ||||||||||||||||||||||||
Three months ended June 30, 2005 | Three months ended June 30, 2004 | |||||||||||||||||||||||
Average | Rate | Average | Rate | |||||||||||||||||||||
Balance | Interest | (Annualized) | Balance | Interest | (Annualized) | |||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
Deposits with Banks |
$ | 18,646 | $ | 190 | 4.08 | % | $ | 26,905 | $ | 113 | 1.68 | % | ||||||||||||
Federal Funds Sold and Securities Purchased
under Resale Agreements |
139,864 | 941 | 2.70 | 87,080 | 314 | 1.45 | ||||||||||||||||||
Securities Borrowed |
60,207 | 313 | 2.08 | 54,233 | 89 | 0.66 | ||||||||||||||||||
Trading Assets Debt Instruments |
193,660 | 2,445 | 5.06 | 153,548 | 1,668 | 4.37 | ||||||||||||||||||
Securities |
67,705 | 636 | 3.77 | (a) | 64,148 | 731 | 4.58 | (a) | ||||||||||||||||
Interests in purchased receivables |
28,082 | 216 | 3.08 | | | NM | ||||||||||||||||||
Loans |
404,318 | 6,293 | 6.24 | 225,344 | 2,717 | 4.85 | ||||||||||||||||||
Total Interest-Earning Assets |
912,482 | 11,034 | 4.85 | 611,258 | 5,632 | 3.71 | ||||||||||||||||||
Allowance for loan losses |
(6,958 | ) | (4,130 | ) | ||||||||||||||||||||
Cash and due from banks |
29,400 | 19,374 | ||||||||||||||||||||||
Trading assets Equity instruments |
43,935 | 38,934 | ||||||||||||||||||||||
Trading assets Derivative receivables |
58,304 | 53,242 | ||||||||||||||||||||||
Other assets |
138,870 | 84,192 | ||||||||||||||||||||||
Total Assets |
$ | 1,176,033 | $ | 802,870 | ||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||
Interest-Bearing Deposits |
$ | 394,455 | $ | 2,352 | 2.39 | % | $ | 254,034 | $ | 813 | 1.29 | % | ||||||||||||
Federal Funds Purchased and Securities Sold
under Repurchase Agreements |
158,268 | 1,061 | 2.69 | 155,335 | 450 | 1.17 | ||||||||||||||||||
Commercial Paper |
12,496 | 76 | 2.42 | 14,283 | 28 | 0.79 | ||||||||||||||||||
Other Borrowings(b) |
98,936 | 1,125 | 4.56 | 80,364 | 887 | 4.44 | ||||||||||||||||||
Beneficial interests issued
by consolidated VIEs |
43,743 | 319 | 2.92 | 7,433 | 38 | 2.04 | ||||||||||||||||||
Long-term debt |
111,858 | 1,015 | 3.64 | 57,019 | 404 | 2.85 | ||||||||||||||||||
Total Interest-Bearing Liabilities |
819,756 | 5,948 | 2.91 | 568,468 | 2,620 | 1.85 | ||||||||||||||||||
Noninterest-Bearing deposits |
127,835 | 83,022 | ||||||||||||||||||||||
Trading liabilities Derivative payables |
55,511 | 44,476 | ||||||||||||||||||||||
All other liabilities, including the allowance
for lending-related commitments |
67,446 | 59,031 | ||||||||||||||||||||||
Total Liabilities |
1,070,548 | 754,997 | ||||||||||||||||||||||
STOCKHOLDERS EQUITY |
||||||||||||||||||||||||
Preferred Stock |
216 | 1,009 | ||||||||||||||||||||||
Common Stockholders Equity |
105,269 | 46,864 | ||||||||||||||||||||||
Total Stockholders Equity |
105,485 | 47,873 | ||||||||||||||||||||||
Total Liabilities, Preferred Stock and
Stockholders Equity |
$ | 1,176,033 | $ | 802,870 | ||||||||||||||||||||
INTEREST RATE SPREAD |
1.94 | % | 1.86 | % | ||||||||||||||||||||
NET INTEREST INCOME AND MARGIN
ON INTEREST-EARNING ASSETS |
$ | 5,086 | 2.24 | % | $ | 3,012 | 1.98 | % | ||||||||||||||||
(a) | For the three months ended June 30, 2005 and 2004, the annualized rate for
available-for-sale securities based on fair value was 3.76% and 4.58%, respectively. For the
three months ended June 30, 2005 and 2004, the annualized rate for available-for-sale
securities based on amortized cost was 3.77% and 4.49%, respectively. |
|
(b) | Includes securities sold but not yet purchased. |
89
Heritage JPMC only | ||||||||||||||||||||||||
Six months ended June 30, 2005 | Six months ended June 30, 2004 | |||||||||||||||||||||||
Average | Rate | Average | Rate | |||||||||||||||||||||
Balance | Interest | (Annualized) | Balance | Interest | (Annualized) | |||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
Deposits with Banks |
$ | 16,948 | $ | 344 | 4.09 | % | $ | 24,220 | $ | 200 | 1.66 | % | ||||||||||||
Federal Funds Sold and Securities Purchased
under Resale Agreements |
130,580 | 1,668 | 2.58 | 84,818 | 621 | 1.47 | ||||||||||||||||||
Securities Borrowed |
56,349 | 534 | 1.91 | 51,421 | 183 | 0.72 | ||||||||||||||||||
Trading Assets Debt Instruments |
190,681 | 4,709 | 4.98 | 159,968 | 3,468 | 4.36 | ||||||||||||||||||
Securities |
80,500 | 1,772 | 4.44 | (a) | 64,070 | 1,401 | 4.40 | (a) | ||||||||||||||||
Interests in purchased receivables |
28,676 | 402 | 2.83 | 1,268 | 11 | 1.79 | ||||||||||||||||||
Loans |
401,422 | 12,298 | 6.18 | 220,143 | 5,388 | 4.92 | ||||||||||||||||||
Total Interest-Earning Assets |
905,156 | 21,727 | 4.84 | 605,908 | 11,272 | 3.74 | ||||||||||||||||||
Allowance for loan losses |
(7,074 | ) | (4,308 | ) | ||||||||||||||||||||
Cash and due from banks |
29,614 | 19,814 | ||||||||||||||||||||||
Trading assets Equity instruments |
43,827 | 29,468 | ||||||||||||||||||||||
Trading assets Derivative receivables |
61,751 | 56,099 | ||||||||||||||||||||||
Other assets |
136,188 | 80,113 | ||||||||||||||||||||||
Total Assets |
$ | 1,169,462 | $ | 787,094 | ||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||
Interest-Bearing Deposits |
$ | 391,422 | $ | 4,349 | 2.24 | % | $ | 246,120 | $ | 1,632 | 1.33 | % | ||||||||||||
Federal Funds Purchased and Securities Sold
under Repurchase Agreements |
154,821 | 1,985 | 2.59 | 150,354 | 901 | 1.20 | ||||||||||||||||||
Commercial Paper |
12,580 | 138 | 2.21 | 13,718 | 51 | 0.76 | ||||||||||||||||||
Other Borrowings(b) |
98,600 | 2,353 | 4.81 | 80,375 | 1,792 | 4.48 | ||||||||||||||||||
Beneficial interests issued
by consolidated VIEs |
44,514 | 591 | 2.68 | 8,598 | 77 | 1.79 | ||||||||||||||||||
Long-term debt |
109,941 | 1,939 | 3.56 | 55,297 | 807 | 2.94 | ||||||||||||||||||
Total Interest-Bearing Liabilities |
811,878 | 11,355 | 2.82 | 554,462 | 5,260 | 1.91 | ||||||||||||||||||
Noninterest-Bearing deposits |
127,622 | 79,585 | ||||||||||||||||||||||
Trading liabilities Derivative payables |
59,603 | 48,849 | ||||||||||||||||||||||
All other liabilities, including the allowance
for lending-related commitments |
64,775 | 56,848 | ||||||||||||||||||||||
Total Liabilities |
1,063,878 | 739,744 | ||||||||||||||||||||||
STOCKHOLDERS EQUITY |
||||||||||||||||||||||||
Preferred Stock |
277 | 1,009 | ||||||||||||||||||||||
Common Stockholders Equity |
105,307 | 46,341 | ||||||||||||||||||||||
Total Stockholders Equity |
105,584 | 47,350 | ||||||||||||||||||||||
Total Liabilities, Preferred Stock and
Stockholders Equity |
$ | 1,169,462 | $ | 787,094 | ||||||||||||||||||||
INTEREST RATE SPREAD |
2.02 | % | 1.83 | % | ||||||||||||||||||||
NET INTEREST INCOME AND MARGIN
ON INTEREST-EARNING ASSETS |
$ | 10,372 | 2.31 | % | $ | 6,012 | 2.00 | % | ||||||||||||||||
(a) | For the six months ended June 30, 2005 and 2004, the annualized rate for
available-for-sale securities based on fair value was 4.43% and 4.39%, respectively. For the
six months ended June 30, 2005 and 2004, the annualized rate for available-for-sale securities
based on amortized cost was 4.42% and 4.36%, respectively. |
|
(b) | Includes securities sold but not yet purchased. |
90
91
92
93
94
95
Total open | Average | Dollar value of | ||||||||||
For the six months ended | market shares | price paid | remaining authorized | |||||||||
June 30, 2005 | repurchased | per share (a) | repurchase program | |||||||||
First quarter |
35,972,000 | $ | 36.57 | $ | 3,946 | |||||||
April |
8,220,000 | 35.12 | 3,657 | |||||||||
May |
7,447,465 | 35.51 | 3,393 | |||||||||
June |
1,140,000 | 35.54 | 3,352 | |||||||||
Second quarter |
16,807,465 | 35.32 | ||||||||||
Year-to-date |
52,779,465 | $ | 36.17 | |||||||||
(a) | Excludes commission costs. |
31.1
|
| Certification | ||
31.2
|
| Certification | ||
31.3
|
| Certification | ||
32
|
| Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
96
JPMORGAN CHASE & CO. (Registrant) |
||||
Date: August 8, 2005 |
||||
By | /s/ Joseph L. Sclafani | |||
Joseph L. Sclafani Executive Vice President and Controller [Principal Accounting Officer] |
97
EXHIBIT NO. | EXHIBITS | PAGE AT WHICH LOCATED | ||||||
31.1 |
Certification | 99 | ||||||
31.2 |
Certification | 100 | ||||||
31.3 |
Certification | 101 |
32 |
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 102 |
98