Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — 2007 Sanford Bernstein Strategic Decisions Conference
25 slides from Jp Morgan Chase &'s conference presentation, May 31, 2007
Slide 1: Jamie Dimon, 2007 Sanford Bernstein Strategic Decisions Conference
MAY 31, 2007 JPMorganChase Jamie Dimon Chairman & Chief Executive Officer 2007 Sanford Bernstein Strategic Decisions Conference
Slide 2: Agenda
Agenda @ Overview of firm and lines of business = Comments on credit @ Key investor topics Reaching performance targets Capital management Organic growth Raising productivity Unlocking the value of the franchise ® Conclusions JPMorganChase ©
Slide 3: JPMorgan Chase
JPMorgan Chase Corporate $O/(U) 13% at ~4Q06 1006 Asset M: ent 1007 4Q06 1006 tnager vse Revenue (FTE)"* $19,741 $2,707 $3,900 33% Treasury & | Credit Costs! 1,601 (126) 32 Securities Expense™* 10,628 743 848 Sepues Income from Continuing Ops. $4,787 $881 $1,760 Commercial EPS - Continuing Ops. $1.3
Slide 4: Investment Bank
2007 SANFORD BERNSTEIN STRATEG Investment Bank Financial Results ($mm) 1Q07 Revenue by Business $o/(U) 1907 4Q06 1906 Net Revenue’? $6,254 $1,394 $1,426 Investment Banking Fees 1,729 149.559 Fixed Income Markets 2,592 531516 Equities Markets 1,539 581277 Credit Portfolio 394133 74 Credit Costs 63 --
Slide 5: Revenue volatility continues to decline with flat VAR
2007 SANFORD BERNSTEIN STRATEGIC DECISIONS CONFERENCE Revenue volatility continues to decline with flat VAR Principal Transactions ($mm) mmm Average Daily Revenue —Volatility Index" — = VAR? 116 100 105 ---------—> _- -—— $90 $88 - $69 2003* 2006 1Q07 iy revenue watt none 10 or 203 Toul Guingand uk
Slide 6: Path to achieving IB performance target
Path to achieving IB performance target Progress Next steps Incremental Earnings impact! 1m Americas build-out largely = Complete European build-out $100mm-$160mm complete i= Increased market share across CMBS, MBS and ABS #1 rank in U.S. CMBS? #3 share in ABS?, up from #6 in 2006 Strong 2006 local
Slide 7: Retail Financial Services
Retail Financial Services Financial Results ($mm) Key Statistics? ($B) SOKU) 1907 4Q06 1006 1Q07 _4Q06 1006 Net interest income $2,617 $37 $55 Origination Volumes Net interest revenue 1489 341 ~—-288-~—- Home equity originations $127 $129 $117 S] Net Revenue" $4,106 $378 $343 ~—-Mortgage loan origin
Slide 8: Card Services
Card Services Financial Results! ($mm) $OKU) 1907 __4Q06 1006 Net Revenue $3,680 ($70) ($5) Credit Costs 1,229 (52) 213 Noninterest Expense 1,241 (100) (2) Net Income $765 $46 (5136) Key Statistics (SBP ROE 22% 20% 26% ROO (pre-tax) 3.28% 3.04% 4.19% Managed Margin 8.11% 7.92% 8.85% Net Charge-Off R
Slide 9: New account acquisition and rewards
CONFERENCE Dect 2007 SANFORD BERNSTEIN STRATEGIC New account acquisition and rewards New accounts! Over the past few years we have moved away from a predominately direct mail source to multiple sources that utilize our partner and retail branch channels $114 iE Avg. acquisition a $114 $101 cost per
Slide 10: Commercial Banking
NCE 2007 SANFORD BERNSTEIN STRATEGIC Commercial Banking Financial Results (Smm) SONU) 1907 4Q06 1006 Net Revenue $1,003 ($15) $103 Middle Market Banking 661 - 38 Mid-Corporate Banking 212 14 75 Real Estate 102 (18) (3) Other 28 (1) @ Credit Costs 7 (94) 10 Noninterest Expense 485 - (13) Net Income $
Slide 11: Treasury & Securities Services
2007 SANFORD BERNSTEIN STRATEGIC DECISIONS CONFERENCE Treasury & Securities Services Financial Results (Smm) $OKU) 1907 4006 1006 Net Revenue $1,526 ($11) $41 Treasury Services 689) (11) (4) Worldwide Securities Sves 837 - 45 Noninterest Expense 1075 (29) aT Net Income $2637 st Key Statistics ($B)'
Slide 12: Asset Management
Asset Management Financial Results ($mir 1Q07 Revenue by Client Segment $O(U) 1007 4Q06 1006 ray Prva ak Net Revenue $1,904 ($43) $320 «| Institutional 551 (73) 116 =| Retail 527 (14) 85 Private Bank 560 32119 Private Client Services Private Client Services 266 12 - 14% Retail Credit Costs @ (23) =
Slide 13: Corporate
2007 SANFORD BERNSTEIN STRATEGIC DECISIONS CONFERENCE Corporate Total Corporate ($mm) Private Equity ($mm) $OKU) $O(U) 1Q07 4Q06__1Q06 1Q07 4Q06 1Q06 Net Income $631 ($530) $997 NetIncome $698 $562 $595 Net Income ex. Disc.Ops' 631 90 1,051 Private Equity Gains exSFAS 157? 814 527 577 Private Equity
Slide 14: Comments on Credit
2007 SANFORD BERNSTEIN STRATEG Comments on Credit jet Cl ‘e-off Rates by Business Approximate 2005 2006 1Q07 | through the Cycle| Investment Bank (0.28)% (0.05)% (0.04)% 1.00% Commercial Banking 0.05% 0.05% (0.01)% 0.50% Card Services! 5.21% 3.33% 3.57% 5.00% Home Equity 0.20% 0.18% 0.32% 0.30% Prim
Slide 15: Subprime mortgage and home equity
Subprime mortgage and home equity = Prime Home Equity —Sub-prime _ yoy Subprime mortgage 1907 1906 EOP owned portfolio ($B) $9.0 er 7 $15.4 EOP held-for-sale ($8) $3.7 $4.5 $0.0 Net charge-offs (Smm) $20 S17 9 Net chargo-off rato 0.92% 0.65% 0.26% Home Equity EOP owned portfolio ($B) $87.7 $85.7 $75
Slide 16: Performance targets
2007 SANFORD BERNSTEIN STRATEG Performance targets Financial performance metrics Target 2005 2006 1Q07 Investment Bank 20% ROE through the cycle 18% 18% 30% Retail Financial Services 28%-30% ROE 26% 22% 22% Card Services 23%-25% ROE through the cycle 16% 23% 22% Commercial Banking 45% overhead ratio
Slide 17: Capital generation creates flexibility
ONFERENCE STRATEGIC DECISIONS SANFORD BERNSTEIN Capital generation creates flexibility @ Invest in businesses #1 priority @ Dividends Creates a good discipline ™ Stock buybacks 1Q07 capital initiatives = Quarterly dividend increase of 12% to $0.38 per share* Stock buyback: $4.0B in 1Q07; $3.98 in 20
Slide 18: Organic Revenue Growth - 1Q06 to 1Q07
Organic Revenue Growth - 1Q06 to 1Q07 18% 2% ——————____ —"" (1)% 5 $19.41 £ $16.0 F 1Q06 Adjusted Divestiture? Acquisitions® Organic Growth 1Q07 Adjusted 2 Revenue’ Revenue * |‘ adjusted for treasury and RS portfolio reposting and impact of SEAS 157 S| seiMGe tmumece users nes 1] she not new Yrs ran
Slide 19: Organic Growth - 1Q07 vs. 1Q06
Organic Growth - 1Q07 vs. 1Q06 Investment Bank’ Retail Financial Services = No. 1 rank for the first time in Global m 7% increase in checking accounts? ™_7% increase in end of period Equity & Equity-Related for 1Q07 managed outstandings* with 13% market share, up from No. ™ 6% increase in average de
Slide 20: Raising productivity
Raising productivity Investment Bank Retail Financial Services Card Services Commercial Banking Treasury & Securities Services Asset Management Technology, Operations & Real Estate JPMorganChase © Additional bankers in IB coverage - increased product penetration per client Targeting additional $160m
Slide 21: Unlocking the value of the franchise
Unlocking the value of the franchise IB derives significant benefit from links to the rest of the firm Competitive advantage to IB Benefit to the Firm Growing the mortgage-backed m $17B of RFS/IB joint mortgage flow in “ business with Home Lending 1Q07, up 92% YoY Accessing Middle Market and Mid- =
Slide 22: Unlocking the value of the franchise
Unlocking the value of the franchise Continued growth of retail branch network benefits the Firm Cross LOB Advantages Benefits to the Firm m RFS, CB and TSS are inseparable; integral parts of a regional banking franchise = Comprehensive product offering to satisfy client needs (deposits, investments
Slide 23: Unlocking the value of the franchise
5 CONFERENCE 2007 SANFORD BERNSTEIN STRATEGIC Unlocking the value of the franchise Leveraging extensive product set across broad client base Commercial Banking and Treasury & Securities Services = Leveraging CB client base with TS product offerings CB clients generated $556mm in TS-related revenue i
Slide 24: Conclusions
Conclusions ™ World-class franchises = Effective capital management @ Solid understanding of and disciplined approach to risk Good underlying momentum driving organic growth across businesses Strong evidence of leveraging extensive product set across broad client base Opportunities for increased pro
Slide 25: Disclaimer
Disclaimer 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. Actu
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