Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — Q3 2008 Earnings Presentation
23 slides from Jp Morgan Chase &'s earnings presentation, Oct 16, 2008
Slide 1: October 15, 2008 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 millions Net income EPS Reported income 1 $527 $0.11 Estimated WaMu merger-related items Conforming loan loss reserve adjustment (1,221) Extraordinary gain 581 Results excl.
Slide 3: 3Q08 Financial highlights
3Q08 Financial highlights FINANCIAL RESULTSzx . Net income of $527mm; EPS of $0.11zx . Investment Bank results included: . Net markdowns of $3.6B due to mortgage-related and leveraged lending exposureszx . Maintained #1 rankings for Global Investment Banking Fees and Global Debt, Equity & Equity- re
Slide 4: 3Q08 Managed Results
3Q08 Managed Results1 FINANCIAL RESULTS $ in millions 3Q08 2Q08 3Q07 2Q08 3Q07 Results excl. WaMu merger-related items Revenue (FTE)1 $16,088 ($3,590) ($889) (18)% (5)% Credit Costs1 4,684 399 2,321 9% 98% Expense2 11,137 (1,040) 1,810 (9)% 19% Net Income $1,167 ($836) ($2,206) (42)% (65)% EPS $0.28
Slide 5: Investment Bank
Investment Bank 3Q08 2Q08 3Q07 $ O/(U) $ in millions Revenue Investment Banking Fees Fixed Income Markets Equity Markets Credit Portfolio Credit Costs Expense $4,035 1,593 815 1,650 (23) 234 3,816 ($1,435) (142) (1,532) 571 (332) (164) (918) $1,089 263 128 1,113 (415) 7 1,438 Net Income $882 $488 $5
Slide 6: JPMorgan IB league table performance
JPMorgan IB league table performance League table results Thomson Volumes1 YTD 3Q08 2007 Rank Share Rank Share Global M&A Announced2Global Debt, Equity & Equity-related US Debt, Equity & Equity-related Global Equity & Equity-related Global Converts Global Long-term Debt Global Investment Grade Debt
Slide 7: IB Key Risk Exposures: Legacy Leveraged Lending
IB Key Risk Exposures Legacy Leveraged Lendingzx . Net markdowns of $1.0B for the quarterzx . $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
Slide 8: IB Key Risk Exposures: Mortgage-related Exposure
IB Key Risk Exposures Mortgage-related Exposure as of 6/30/2008 Exposure reduction Exposure as of 9/30/2008 $ in billions 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) $18.6 . 3Q08 reduct
Slide 9: Retail Financial Services—Drivers
Retail Financial Services—Drivers Key Statistics 1 -$ in billions 3Q08 2Q08 3Q07 Regional Banking Average Deposits $210.2 $213.9 $205.3 Checking Accts (mm) 11.7 11.3 10.6 # of Branches 3,179 3,157 3,096 # of ATMs 9,308 9,310 8,943 Investment Sales ($mm) $4,389 $5,211 $4,346 Home Equity Originations
Slide 10: Retail Financial Services
Retail Financial Services 3Q08 2Q08 3Q07 $ O/(U) $ in millions Net Interest Income Noninterest Revenue Total Revenue Credit Costs Expense Net Income Regional Banking Consumer and Business Banking Loan Portfolio/Other Mortgage Banking Auto Finance $4,875 1,6782,772$247 $218 723 (505) (50) $79 55% 2.4
Slide 11: Home Equity
Home Equity JPM 30-day delinquency trend Key statistics 3.00% 2.50% 2.00% 1.50% 1.00% Sep-Dec-Mar-Jun-Sep-Dec-Mar-Jun-Sep-Dec-Mar-Jun-Sep050506 0606060707070708 0808 3Q08 2Q08 3Q07 EOP owned portfolio ($B) $94.6 $95.1 $93.0 Net charge-offs ($mm) $511 $150 Net charge-off rate 2.78% 2.16% 0.65% Nonper
Slide 12: Subprime Mortgage
Subprime Mortgage JPM 30-day delinquency trend Key statistics Subprime 3Q08 2Q08 3Q07 30% 25% 20% 15% 10% 5% 0% EOP owned portfolio ($B)1 $13.4 $14.8 $12.1 Net charge-offs ($mm) $192 $40 $273 Net charge-off rate 7.65% 4.98% 1.62% Nonperforming loans ($mm) $2,384 $1,715 $790 1 Excludes mortgage loans
Slide 13: Prime Mortgage
Prime Mortgage 3Q08 2Q08 3Q07 Key statisticsJPM 30-day Delinquency Trend Prime 5.50% EOP balances in Corporate ($B) $42.0 $42.6 $32.8 5.00% 4.50% EOP balances in RFS1 ($B) $4.9 $4.6 $2.8 4.00% 3.50% 3.00% Total EOP balances ($B) $46.9 $47.2 $35.6 Corporate net charge-offs ($mm) $130 $84 $4 2.50% 2.0
Slide 14: Card Services (Managed)
Card Services (Managed) 3Q08 2Q08 3Q07 $ O/(U) $ in millions Revenue $3,887 $112 $20 Credit Costs 2,229 35 866 Expense 1,194 9 (68) Net Income $292 $42 ($494) Key Statistics ($B)1 Avg Outstandings EOP Outstandings Charge Volume Net Accts Opened (mm) Managed Margin Net Charge-Off Rate 30-Day Delinque
Slide 15: Commercial Banking
Commercial Banking FINANCIAL RESULTS 3Q08 2Q08 3Q07 Revenue $1,125 $19 $116 Middle Market Banking 729 21 49 Mid-Corporate Banking 236 1 69 Real Estate Banking 91 (3) (17) Other 69 -15 Credit Costs 126 79 14 Expense 486 10 13 Net Income $312 ($43) $54 Key Statistics1 Avg Loans & Leases ($B) $72.3 $71
Slide 16: Asset Management
Asset Management 3Q08 2Q08 3Q07 $ O/(U) $ in millions Revenue ($103) ($244) Private Bank (77) 7 Institutional 14 (117) Retail (91) (240) Private Wealth Management (4) 13 Bear Stearns Brokerage 55 93 Credit Costs 3 17 Expense (38) (4) Net Income ($44) ($170) Key Statistics ($B)1 Assets under Manageme
Slide 17: Corporate/Private Equity
Corporate/Private Equity FINANCIAL RESULTS Corporate/Private Equity net income -$ in millions 3Q08 2Q08 3Q07 $ O/(U) Private Equity ($164) ($263) ($573) Corporate (1,064) (1,083) (1,206) Merger-related items (735) (195) (697) Net Income1 ($1,963) ($1,541) ($2,476) Merger-Related Itemszx . Washington
Slide 18: Capital Management
Capital Management $ in billions 3Q08 2Q08 3Q07 Tier 1 Capital1 $112 $99 $86 Tangible Common Equity2 $86 $76 $68 Risk Weighted Assets1 $1,255 $1,079 $1,029 Tangible Assets $2,200 $1,724 $1,428 Tier 1 Capital Ratio1 9.2% 8.4% Total Capital Ratio1 12.7% 13.4% 12.5% Tier 1 Leverage Ratio1 7.2% 6.4% 6.0
Slide 19: Washington Mutual Transaction Accounting
Washington Mutual Transaction Accounting Washington Mutual related items are estimates — expect future refinements as needed FINANCIAL RESULTS Net tangible assets1 $31 Estimated Purchase Accounting Adjustments -$ in billions Estimated fair value marks on loans2 ($31) Reversal of loan loss reserve 8
Slide 20: Allowance to loan losses coverage ratios
Allowance to loan losses coverage ratios Rough estimates—illustrative example of WaMu impact on coverage ratios JPMorgan Chase (excl. WaMu) Washington Mutual JPMorgan Chase Consolidated As of 3Q08 As of 3Q08 As of 3Q08 Loan Balances1 LLR LLR/ Loans Loan Balances2 LLR LLR/ Loans Loan Balances LLR LLR
Slide 21: Washington Mutual merger integration
Washington Mutual merger integration Execution / Infrastructure People Customers FINANCI A L R ESU L TS . Deposit base stabilizing and increasing since 9/30 . Positive net inflows on subsequent 7 out of 9 days1zx . Chase and WaMu customers given no-fee access to 14,000 combined ATMs less than two we
Slide 22: 4Q08 Outlook
FINANCIAL RESULTS 4Q08 Outlook Investment Bank . Continued lower earnings is a reasonable expectation . Higher credit costs expected; reserve additions likely Retail Financial Services . Solid underlying growth . Continued deterioration in home equity and subprime portfolios . Prime mortgage—deterio
Slide 23: 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