Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — Merrill Lynch Banking & Financial Services Investor Conference 2008
39 slides from Jp Morgan Chase &'s conference presentation, Nov 12, 2008
Slide 1: Jamie Dimon, Chairman and Chief Executive Officer
Exhibit 99.1 N OV EM B ER 1 2 , 2 0 0 8 Jamie Dimon Chairman and Chief Executive Officer Merrill Lynch Banking & Financial Services Investor Conference
Slide 2: Agenda
Agenda Part I - Firm and line of business update Part II - Key investor topics Bear Stearns and WaMuupdates Consumer credit Commercial Banking credit Capital management Revenue growth drivers Comments on environment 4Q08 outlook recap Conclusions The figures reflected in this presentation refer to h
Slide 3: Part I - Firm and Line of Business Update
P A R T I - F I R M A N D L I N E OF B U S I N E S S U P D A T E 2
Slide 4: 3Q08 Managed Results
1 3Q08 Managed Results $ in millions $ O/(U) O/(U) % 3Q08 2Q08 3Q07 2Q08 3Q07 Results excl. WaMumerger-related items Revenue (FTE) $16,088 ($3,590) ($889) (18)% (5)% Credit Costs 4,684 399 2,321 9% 98% Expense 11,137 (1,040) 1,810 (9)% 19% Net Income $1,167 ($836) ($2,206) (42)% (65)% EPS $0.28 ($0.
Slide 5: Investment Bank
Investment Bank Net income of $882mm on revenue of $4.0B; pretax income of $ in millions $16mm 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 ($1,435) $1,089 Net ma
Slide 6: 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 legacy commitm
Slide 7: IB Key Risk Exposures
IB Key Risk Exposures Mortgage-related $ in 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 3Q08 reductio
Slide 8: Retail Financial Services—Drivers
Retail Financial Services—Drivers Key Statistics¹- $ in 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 Credit card sales up 6% # of Branches 3,179 3
Slide 9: Retail Financial Services
Retail Financial Services $ in 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) 211 Revenue of $4
Slide 10: Home Equity
Home Equity JPM 30-day delinquency trend Key statistics 3.00% 3Q08 2Q08 3Q07 EOP owned portfolio ($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 $556 1.00% Sep- Dec- Mar- Jun- Sep- Dec- Mar- J
Slide 11: Subprime Mortgage
Subprime Mortgage JPM 30-day delinquency trend Key statistics 3 Q08 2Q08 3Q07 30% Subprime 1 EOPowned portfolio ($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) $2,384 $1,715 $790 5% 1 Excludes mortgage loan
Slide 12: Prime Mortgage
Prime Mortgage JPM 30-day Delinquency Trend Key statistics 3Q08 2Q08 3Q07 5.50% Prime EOP balances in Corporate ($B) $42.0 $42.6 $32.8 5.00% 4.50% 1 EOPbalances in RFS ($B) $4.9 $4.6 $2.8 4.00% 3.50% Total EOP balances ($B) $46.9 $47.2 $35.6 3.00% 2.50% Corporate net charge-offs ($mm) $130 $84 $4 2.
Slide 13: Card Services (Managed)
Card Services (Managed) $ in 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 Credit Costs 2,229 35 866 higher net c
Slide 14: Commercial Banking
Commercial Banking $ in 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 Mid-Corporate Banking 236 1 69 Average loans up 18
Slide 15: Treasury & Securities Services
Treasury & Securities Services $ in 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 Worldwide Securities Svcs 1,056 (111) 88 Assets under custody down 8% YoY Expense 1,339 22 205
Slide 16: Asset Management
Asset Management $ in millions $ O/(U) Net income of $351mm down by 33% YoY, largely 3Q08 2Q08 3Q07 driven by lower revenue Revenue $1,961 ($103) ($244) Pretax margin of 30% Private Bank 631 (77) 7 Assets under management of $1.2T, down 1% YoY Institutional 486 14 (117) Market declines drove AUM dow
Slide 17: Corporate/Private Equity
Corporate/Private Equity Corporate/Private Equity net income - $ in 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) (1,206) Represents 7.5% of shareholders’ equity less
Slide 18: Part II - Key Investor Topics
PART II-KEY INVESTOR TOPICS 17
Slide 19: Bear Stearns merger update
Bear Stearns merger update Still expect Bear Stearns’ units to contribute $1B +/- annualized net income (after- tax) by year-end 2009 Some businesses are stronger than previously thought (e.g. Equity prime brokerage) Cost to de-risk is higher than previously thought but largely complete Overall merg
Slide 20: WaMu provides unique opportunity to expand retail banking franchise
WaMu provides unique opportunity to expand retail banking franchise and generate attractive returns for JPMorgan Chase shareholders Strategic Fit Greatly enhances retail banking platform in attractive markets Combined deposits of $911B and 5,410 branches at close1 Expanding into attractive new marke
Slide 21: Combined retail franchise has leading market share in key states
Combined retail franchise has leading market share in key states Adjusted deposits in 10 key states ($B) $85.1 JPMorgan Chase Washington Mutual $77.3 $16.5 $39.0 $77.3 $68.6 $9.7 $24.0 $1.5 $15.6 $1.3 $13.8 $12.6 $29.3 $12.4 $12.4 $22.4 $10.4 $14.4 $13.8 $12.1 $3.4 $12.4 $12.4 $7.0 $0.5 New York Cal
Slide 22: WaMu integration update
WaMu integration update Integrate branch system Current View the Same Close fewer than 10% of combined branches Optimize staffing in the branches Convert Washington Mutual branches to Chase’s platform Bring best sales and business practices to each Leverage Washington Mutual branch footprint for gro
Slide 23: WaMu integration update—on track
WaMu integration update —on track People Senior management decisions within first 5 days Management teams announced across all staff and businesses st On track for full people decisions by December 1 Branches st Conversion timeline to be complete by December 1 All major systems converted by end of 2
Slide 24: Impact of housing on consumer businesses
Impact of housing on consumer businesses Moderate housing-stress states $ in billions U.S. (less CA, NV, FL, AZ) 30+ Day Delinquency Rate Net Charge-off Rate YOY Housing Price Change¹ (11.90)% U.S. (less 3Q08 EOP 2 September 2008 Unemployment Rate 5.80% CA,NV,FL,AZ) 9/30/ 08 9/30/ 07 3Q08 3Q07 Loans
Slide 25: Historical trends in industry credit card net charge-offs and unemployment
Historical trends in industry credit card net charge-offs and unemployment Industry credit card NCO rate¹ vs. U.S. unemployment rate² 9.00 Industry credit card NCO rate (%) U.S. unemployment rate (%) 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Slide 26: Comments on consumer credit
Comments on consumer credit Home equity experiencing continued deterioration; quarterly losses could be as high as $725-$850mm over the next several quarters (net charge-offs of 3.25% to 3.75%) Subprime mortgage quarterly losses could be as high as $375-$425mm in early 2009 Prime mortgage deteriorat
Slide 27: Foreclosure prevention efforts – The Way Forward
Foreclosure prevention efforts –The Way Forward Chase Foreclosure Prevention Program Systematically review the entire mortgage portfolio to determine proactively which homeowners are most likely to require help – and try to provide it before they are unable to make payments Proactively reach out to
Slide 28: Commercial Banking credit quality
Commercial Banking credit quality Majority of NPLs and NCOs continue to come from Real Estate Banking For September 2008 YTD in Real Estate Banking, housing comprises97% of the NPL’s and 95% of NCO’s WaMu Commercial Term Lending1 credit quality in line with Middle Market and Mid-Corporate ratios NPL
Slide 29: Allowance to loan losses coverage ratios
Allowance to loan losses coverage ratios $ in millions As of 3Q08 Loan LLR / Potential 4Q08 1 Balances LLR Loans NCO rate Reserve Build Home Lending (includes prime $154,825 $4,896 3.16% 2.85% $1,200 +/- mortgage balances in Corporate) Card Services 77,565 3,951 5.09 % 5.00% $750 +/- Commercial Bank
Slide 30: Capital management / fortress balance sheet
Capital management / fortress balance sheet Tier 1 Capital under Basel I - $ in billions Risk Weighted Assets under Basel I $- in billions Tier 1 Capital Tier 1 Capital Ratio RWA TCE/Managed RWA¹ 120 112 10.0% 1,400 10.0% 1,261 89 90 99 1,200 1,029 1,052 1,076 100 86 9.0% 1,079 9.0% 9.2% 1,000 80 8.
Slide 31: TARP impact
TARP impact TARP overview Use of TARP capital Received $25B for issuance of 5% preferred Did not need or ask for capital shares to Department of Treasury (after 5 years, dividend rate increases to 9%) Asymmetric benefits to recipients Issued to Treasury warrants to purchase 88.4mm Do not believe JPM
Slide 32: Revenue growth drivers – lending
Revenue growth drivers –lending Loan balances (period averages) -$ in billions O / (U) % 3Q08 3Q07 Commercial Banking Mid-Corporate $16.5 37% Middle Market (Private Sector) 32.6 7% Real Estate 7.5 5% Government, Non-profits, and Hospitals 10.6 45% Total Commercial Banking 1 $72.3 18% 2 Investment Ba
Slide 33: Other revenue growth drivers
Other revenue growth drivers Good underlying momentum in core business drivers propelling organic growth across businesses Key metrics % Change YoY 3Q08 2Q08 1Q08 4Q07 3Q07 Retail Financial Services Regional Banking Average Deposits 2% 3% 4% 4% 10% Credit Cards Originated in Branches 6% 4% 18% 34% 5
Slide 34: JPMorgan IB league table performance
JPMorgan IB league table performance League table results 1 Thomson Volumes Continue to rank #1 in the four most YTD 3Q 08 2007 important capital raising league tables for Rank Share Rank Share YTD 3Q081 2 Global Debt, Equity & Equity-related Global M&A Announced #3 24.0% #4 27.0 % Global Debt Globa
Slide 35: Maintaining leadership and growing market share positions
Maintaining leadership and growing market share positions Retail Financial Services (includes WaMu) Card Services Commercial Banking (includes WaMu) #1 in deposit market share 1 Ranked #1 in outstandings #2 traditional middle market #3 in branch network 1 24% of industry lender in the U.S. 6 #2 in A
Slide 36: Comments on Environment
Comments on Environment Capital Markets Crisis Recession Critical steps taken: We are prepared for a difficult environment Central governments have provided Could be deep powerful medicine to help promote financial stablitiy Could be worse than capital markets crisis Problems known and being resolve
Slide 37: 4Q08 Outlook recap
4Q08 Outlook recap Investment Bank Treasury and Security Services Continued lower earnings is a reasonable expectation Continued underlying growth, although impacted by market Higher credit costs expected; reserve additions likely conditions and levels Asset Management Retail Financial Services Mana
Slide 38: Conclusions
Conclusions Extremely cautious on current environment; expect highly challenging conditions in 2009 Recent government actions should help stabilize the markets and restore economic growth We continue to lend and see evidence of organic growth and increased market share in our businesses; will be cre
Slide 39: 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 is defined as common stockholders' equity less identifiable intangible assets (other than MSRs) and
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