Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — Q3 2008 Earnings Presentation
24 slides from Jp Morgan Chase &'s earnings presentation, Oct 15, 2008
Slide 1: Financial Results 3Q08
OCTOBER 15, 2008 FINANCIAL RESULTS 3Q08
Slide 2: Washington Mutual Transaction Update
Washington Mutual Transaction Update Washington Mutual related items are estimates – expect future refinements as needed $ $ in in millions millions Net income EPS 1 Reported income $527 $0.11 Estimated WaMu merger-related items Conforming loan loss reserve adjustment (1,221) Extraordinary gain 581
Slide 3: 3Q08 Financial highlights
3Q08 Financial highlights Net income of $527mm; EPS of $0.11 Investment Bank results included: Net markdowns of $3.6B due to mortgage-related and leveraged lending exposures Maintained #1 rankings for Global Investment Banking Fees and Global Debt, Equity & Equity- related volumes for the qu
Slide 4: 3Q08 Managed Results
3Q08 Managed Results1 $ $ in in millions millions $ O/(U) O/(U) % 3Q08 2Q08 3Q07 2Q08 3Q07 Results excl. WaMu merger-related items 1 Revenue (FTE) $16,088 ($3,590) ($889) (18)% (5)% 1 Credit Costs 4,684 399 2,321 9% 98% 2 Expense 11,137 (1,040) 1,810 (9)% 19% Net Income $1,167 ($836) ($2,206) (42)%
Slide 5: Investment Bank
Investment Bank Net income of $882mm on revenue of $4.0B; pretax income of $ $16mm $ in in millions millions Reflects benefit from reduced deferred tax liabilities $ O/(U) IB fees of $1.6B up 20% YoY 3Q08 2Q08 3Q07 Fixed Income Markets revenue of $815mm up 19% YoY reflecting: Revenue $4,035
Slide 6: JPMorgan IB league table performance
JPMorgan IB league table performance League League table table results results Thomson Volumes1 Continue to rank #1 in the four most YTD 3Q08 2007 important capital raising league tables for YTD 3Q081 Rank Share Rank Share Global Debt, Equity & Equity-related Global M&A Announced2 #3 24.0% #4 27
Slide 7: IB Key Risk Exposures
IB Key Risk Exposures Legacy Leveraged Lending Net markdowns of $1.0B for the quarter $12.9B of legacy commitments with gross markdowns of $3.8B, or 29% at 9/30/08; market value at 9/30/08 of $9.1B $16.3B of legacy commitments at 6/30/08 ($3.4B) reduction, or 21% of exposure $12.9B of lega
Slide 8: IB Key Risk Exposures
IB Key Risk Exposures Mortgage-related $ $ in in billions billions Exposure as of Exposure Exposure as of 6/30/2008 reduction 9/30/2008 Prime $8.9 ($6.6) $2.3 Alt-A 10.7 (4.9) 5.8 Subprime 1.8 (0.6) 1.2 Subtotal Residential $21.4 ($12.1) $9.3 CMBS 11.6 (2.3) 9.3 Mortgage Exposure $33.0 ($14.4) $18.6
Slide 9: Retail Financial Services—Drivers
Retail Financial Services—Drivers Key Key Statistics¹ Statistics¹ -- $ $ in in billions billions Average deposits up 2% YoY 3Q08 2Q08 3Q07 Regional Banking Branch production statistics YoY Average Deposits $210.2 $213.9 $205.3 Checking accounts up 10% Checking Accts (mm) 11.7 11.3 10.6 Credi
Slide 10: Retail Financial Services
Retail Financial Services $ $ in in millions millions $ O/(U) Net income of $247mm, down 61% YoY driven by increased credit costs and higher noninterest 3Q08 2Q08 3Q07 expense offset partially by revenue growth in all Net Interest Income $3,144 $89 $463 businesses Noninterest Revenue 1,731 (229) 2
Slide 11: Home Equity
Home Equity JPM JPM 30-day 30-day delinquency delinquency trend trend Key Key statistics statistics 3.00% 3Q08 2Q08 3Q07 EOP owned portfolio ($B) $94.6 $95.1 $93.0 2.50% Net charge-offs ($mm) $663 $511 $150 2.00% Net charge-off rate 2.78% 2.16% 0.65% 1.50% Nonperforming loans ($mm) $1,142 $1,008 $55
Slide 12: Subprime Mortgage
Subprime Mortgage JPM JPM 30-day 30-day delinquency delinquency trend trend Key Key statistics statistics 3Q08 2Q08 3Q07 30% Subprime 1 EOP owned portfolio ($B) $13.4 $14.8 $12.1 25% Net charge-offs ($mm) $273 $192 $40 20% 15% Net charge-off rate 7.65% 4.98% 1.62% 10% Nonperforming loans ($mm) $2,38
Slide 13: Prime Mortgage
Prime Mortgage JPM JPM 30-day 30-day Delinquency Delinquency Trend Trend Key Key statistics statistics 3Q08 2Q08 3Q07 5.50% Prime EOP balances in Corporate ($B) $42.0 $42.6 $32.8 5.00% 4.50% EOP balances in RFS 1 ($B) $4.9 $4.6 $2.8 4.00% 3.50% Total EOP balances ($B) $46.9 $47.2 $35.6 3.00% 2.50% C
Slide 14: Card Services (Managed)
Card Services (Managed) $ $ in in millions millions $ O/(U) Net income of $292mm down 63% YoY; decline in results driven by increase in credit costs, 3Q08 2Q08 3Q07 partially offset by lower noninterest expense Revenue $3,887 $112 $20 Credit costs up $866mm or 64% YoY due to higher Credit Costs
Slide 15: Commercial Banking
Commercial Banking $ $ in in millions millions $ O/(U) Net income of $312mm up 21% YoY, driven by record revenue, partially offset by higher 3Q08 2Q08 3Q07 provision for credit losses and noninterest Revenue $1,125 $19 $116 expense Middle Market Banking 729 21 49 Average loans up 18% YoY with gr
Slide 16: Treasury & Securities Services
Treasury & Securities Services $ $ in in millions millions $ O/(U) Net income of $406mm up 13% YoY 3Q08 2Q08 3Q07 Pretax margin of 29% Revenue $1,953 ($66) $205 Liability balances up 10% YoY Treasury Services 897 45 117 Assets under custody down 8% YoY Worldwide Securities Svcs 1,056 (111) 8
Slide 17: Asset Management
Asset Management $ in $ in millions millions $ O/(U) Net income of $351mm down by 33% YoY, largely 3Q08 2Q08 3Q07 driven by lower revenue Pretax margin of 30% Revenue $1,961 ($103) ($244) Private Bank 631 (77) 7 Assets under management of $1.2T, down 1% YoY Institutional 486 14 (117) Market
Slide 18: Corporate/Private Equity
Corporate/Private Equity Corporate/Private Corporate/Private Equity Equity net net income income -- $ $ in in millions millions $ O/(U) Private Equity 3Q08 2Q08 3Q07 Private Equity losses of $206mm Private Equity ($164) ($263) ($573) EOP Private Equity portfolio of $7.5B Corporate (1,064) (1,083
Slide 19: Capital Management
Capital Management $ $ in in billions billions 3Q08 2Q08 3Q07 1 Tier 1 Capital $112 $99 $86 2 Tangible Common Equity $86 $76 $68 1 Risk Weighted Assets $1,255 $1,079 $1,029 Tangible Assets $2,200 $1,724 $1,428 1 Tier 1 Capital Ratio 8.9% 9.2% 8.4% 1 Total Capital Ratio 12.7% 13.4% 12.5% 1 Tier 1 Lev
Slide 20: Washington Mutual Transaction Accounting
Washington Mutual Transaction Accounting Washington Mutual related items are estimates – expect future refinements as needed Estimated Estimated Purchase Purchase Accounting Accounting Adjustments Adjustments -- $ $ in in billions billions Net tangible assets1 $31 Estimated fair value marks on loans
Slide 21: Allowance to loan losses coverage ratios
Allowance to loan losses coverage ratios Rough estimates—illustrative example of WaMu impact on coverage ratios $ $ in in millions millions JPMorgan Chase (excl. WaMu) Washington Mutual JPMorgan Chase Consolidated As of 3Q08 As of 3Q08 As of 3Q08 Loan LLR/ Loan LLR/ Loan LLR/ Balances1 LLR Loans Bal
Slide 22: Washington Mutual merger integration
Washington Mutual merger integration Deposit base stabilizing and increasing since 9/30 Positive net inflows on subsequent 7 out of 9 days1 Customers Chase and WaMu customers given no-fee access to 14,000 combined ATMs less than two weeks after deal announcement Firmwide merger integration o
Slide 23: 4Q08 Outlook
4Q08 Outlook Investment Investment Bank Bank Asset Asset Management Management Continued lower earnings is a reasonable expectation Management and performance fees impacted by lower Higher credit costs expected; reserve additions likely market levels Retail Corporate/Private Corporate/Private
Slide 24: Notes on non-GAAP financial measures and forward-looking statements
Notes on non-GAAP financial measures and forward-looking statements This presentation includes non-GAAP financial measures. 1. TCE as used on slide 3 for purposes of a return on tangible common equity and presented as Tangible Common Equity on slide 18 (line 2) is defined as common stockholders' equ