Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — Q3 2007 Earnings Presentation
19 slides from Jp Morgan Chase &'s earnings presentation, Oct 18, 2007
Slide 1: Third Quarter 2007 Financial Results
O C T O B E R 1 7 , 2 0 0 7 F I N A N C I A L R E S U L T S 3Q07
Slide 2: 3Q07 Highlights
3Q07 Highlights Earnings of $3.4B EPS of $0.97 up 5% from 3Q06 Return on tangible common equity1 of 20% Firmwide results benefited from: Diversified business mix Improvements in operating performance over past several years Strong capital, reserves and liquidity 1 See note 1 on slide 17 1 F I N A N
Slide 3: 3Q07 Managed Results
3Q07 Managed Results1 1 Managed basis presents revenue and credit costs without the effect of credit card securitizations. All references to credit costs refer to managed provision for credit losses 2 Includes merger costs of $61mm in 3Q07, $64mm in 2Q07 and $48mm in 3Q06 3 On October 1, 2006, the F
Slide 4: Investment Bank
Investment Bank Net income of $296mm on revenue of $2.9B IB fees of $1.3B down 6% YoY reflecting lower debt underwriting fees offset partially by record advisory fees Fixed income markets revenue decreased 72% YoY reflecting: Markdowns of $1.3B net of fees on leveraged lending funded and unfunded co
Slide 5: Leveraged lending
Leveraged lending Markdowns of $1.3B net of fees ($1.9B gross of fees) or 4.9% of notional balances were taken on leveraged loans in the quarter1 $16.0B closed during the quarter, of which $14.7B was funded as of 9/30/07 $23.8B represents the future pipeline of deals expected to close including thos
Slide 6: Other Investment Bank Risk Topics
Other Investment Bank Risk Topics CDO warehouse and unsold positions markdowns net of hedges of $339 mm CDO warehouse and unsold positions of $6.8B; mostly loan underlying Subprime warehouse and residuals positions - net P&L impact modestly positive Subprime mortgage warehouse of $2.6B; whole loan u
Slide 7: Retail Financial Services - Drivers
Retail Financial Services - Drivers Average deposits up 10% YoY Branch production statistics YoY Checking accounts up 15% Credit card sales up 59% Mortgage originations up 23% Investment sales up 23% Home equity originations down 16% YoY Mortgage loan originations up 35% YoY Balance sheet strength a
Slide 8: Retail Financial Services
Retail Financial Services Net income of $639mm, down 14% YoY and 19% QoQ NII growth of 9% YoY reflects wider spreads on loans and higher deposit balances Lending and deposit-related fees up 21% YoY due to growth in checking accounts and other deposit-related fees Asset management fees up 3% YoY driv
Slide 9: Home equity allowance for loan losses increase
Increase of $306mm in allowance for loan losses contemplates an increase in net charge-offs to approximately $250mm - $270mm per quarter over the next several quarters (increase to 1.05% - 1.10% home equity net charge-off rate) Discontinued the origination of all subprime home equity loans and tight
Slide 10: Subprime Mortgage
2 Excludes mortgage loans held in the Community Development loan portfolio 1 Delinquency rates excludes government guaranteed mortgages. Includes loans transferred to Corporate in January 2007 Portfolio performance is consistent with 1Q07 expectations Net charge-offs to range from $40mm - $50mm with
Slide 11: Card Services (Managed)
Card Services (Managed) 1 Actual numbers for all periods, not over/under Net income of $786mm up by $75mm, or 11% YoY ROE of 22% ROO of 3.31% Avg Outstandings of $148.7B up 5% YoY and 1% QoQ Charge volume growth of 3% YoY reflects an approximate 10% growth rate in sales volume, offset primarily by r
Slide 12: Commercial Banking
Commercial Banking 1 Actual numbers for all periods, not over/under 2 Includes deposits and deposits swept to on-balance sheet liabilities Net income of $258mm, up 12% YoY Average loans up 15% and liability balances up 22% YoY, both due to organic growth and BNY Revenue of $1B up 8% YoY, primarily d
Slide 13: Treasury & Securities Services
Treasury & Securities Services 1 Actual numbers for all periods, not over/under 2 Includes deposits and deposits swept to on-balance sheet liabilities Record net income of $360mm up 41% YoY Pretax margin of 33% Liability balances up 23% YoY Assets under custody up 21% YoY Record revenue up 17% YoY d
Slide 14: Asset Management
Asset Management 1 Actual numbers for all periods, not over/under 2 Held-for-investment prime mortgage loans that transferred from AM to Corporate during 3Q07 and 1Q07 totaled $1.2B and $5.3B, respectively. There were no transfers during 2Q07 or the full year 2006 Record net income of $521mm up 51%
Slide 15: Corporate
Corporate Total Corporate ($ in millions) Private Equity Private Equity gains of $766mm in 3Q07 EOP Private Equity Portfolio of $6.6B Represents 8.8% of common equity less goodwill Treasury and Other Corporate Gain on sale of MasterCard shares of $71mm (after-tax) Trading gains of $194mm (after-tax)
Slide 16: Capital Management / Fortress Balance Sheet
Capital Management / Fortress Balance Sheet $ in billions Stable or improved capital positions with Tier I capital ratio at 8.4% Repurchased 47.0mm shares for $2.1B in 3Q07 Strong liquidity and funding position Met most of funding requirements for next 3 -6 months In a position to support our client
Slide 17: 3Q07 Summary Assessment
3Q07 Summary Assessment Overall Firm - earned $3.4B or $0.97 per share, up 5% from 3Q06 Results demonstrate benefits of diversified business mix Substantially improved operating margins over past several years Strong capital and liquidity levels Investment Bank - earnings of $0.3B and ROE of 6% Even
Slide 18: Non-GAAP financial measures note
This presentation includes non-GAAP financial measures. TCE as used on slides 1 and 2 for purposes of a return on tangible common equity is defined as common stockholders' equity less identifiable intangible assets (other than MSRs) and goodwill. TCE as used in slide 15 (line 4) in the TCE/Managed R
Slide 19: Forward-looking statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of JPMorgan Chase's management and are subject to significant risks and uncertainties. Actual results