Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — FY2002 Earnings Presentation
19 slides from Jp Morgan Chase &'s earnings presentation, Jan 24, 2003
Slide 1: Fourth Quarter and Full Year 2002 Financial Results
Fourth Quarter and Full Year 2002 Financial Results January 22, 2003
Slide 2: Operating Results
4Q02 Trading revenue rebound Lower commercial credit costs Expenses up: incentives & severance Full year 2002 Retail and operating services perform well Weakness in securities business, lending and private equity Fundamental progress - - better operating margin, maintaining leadership positions Larg
Slide 3: 4Q and Full Year EPS
4Q02 Reported Net Income ($0.20) $0.80 Non Operating Charges Merger & Relocation 0.13 0.43 Surety settlement & litigation 0.43 0.43 Operating Earnings $0.36 $1.66 O(U) Prior year $0.19 ($0.19) FY02 4Q and Full Year EPS ($ per share)
Slide 4: 4Q Operating Results
4Q Operating Results ($ in billions) 4Q02 3Q02 4Q01 Revenues $7.9 9% 15% Expenses 5.5 18% 15% Credit Costs 1.4 (38%) (22%) Earnings $0.7 125% 105% ROE 7% 3% 3% O/(U)
Slide 5: 4Q Operating Expenses
4Q Operating Expenses Op Expense Severance & related costs 1Q02 4.997 0.106 2Q02 4.803 0.162 3Q02 4.499 0.122 4Q02 4.987 0.48 $5.1 $5.0 $4.6 $5.5 Severance and related costs, 70% in Investment Banking $500mm or $0.16 a share for 4Q $890mm or $0.29 for full year $250mm or $0.08 a share in 2003 Incent
Slide 6: 4Q Operating Results by Business
4Q01 3Q02 4Q02 TSS 150 214 140 ROE 21% 28% 19% 4Q Operating Results by Business 4Q01 3Q02 4Q02 Ex Severance Investment Bank 382 -250 361 588 ROE 8% NM 8% 12% 4Q01 3Q02 4Q02 RMFFS 324 797 500 ROE 14% 30% 19% 4Q01 3Q02 4Q02 IMPB 103 99 43 ROE 7% 6% 3% 4Q01 3Q02 4Q02 JPMP Gains/Losses ($398) ($299) ($5
Slide 7: Credit Costs
Commercial & Residual $0.6 ($0.8) $2.8 $1.3 Consumer 0.8 0.0 3.0 0.3 Total Credit Costs $1.4 ($0.8) $5.8 $1.6 Loan Loss Reserve $5.4 $0.1 $0.8 Nonperforming Loans 4.2 0.1 1.7 4Q02 FY02 Credit Costs ($ in billions) $O(U) 3Q02 Credit costs related to telecom portfolio were $1.2bn in FY02 Credit Card c
Slide 8: Industry View
Telecom -- exposures down from restructurings Merchant energy -- increase in nonperformers Airlines -- actively reduced & collateralized exposures Industry View
Slide 9: Risk Migration Trends - Commercial Exposure
12/31/2001 9/30/2002 12/31/2002 Contingents 262 259 255 Commercial Loans 105 97 92 MTM 71 88 83 438 444 430 Risk Migration Trends - Commercial Exposure ($ in billions) Total Criticized Exposures* 12/31/2001 9/30/2002 12/31/2002 All Other 9.8 8.6 8.4 Emerging Markets 1.2 1.2 Cable 0.141 2.1 2.2 Telec
Slide 10: Full Year Operating Results
Revenue $31.1 2% Expenses 20.2 (2%) (6%) Operating Margin $10.9 10% 19% Credit Costs 5.8 36% Earnings $3.4 (11%) Full Year Operating Results ($ in billions) FY02 %O/(U) FY01 %O/(U) FY01 Ex.Severance & related Costs ROE 8% 9%
Slide 11: Full Year Operating Results by Business
Full Year Operating Results by Business 2000 2001 2002 RMFFS 1638 1538 2490 ROE 19% 17% 24% 2000 2001 2002 JPMP Gains/Losses $997 ($1,183) ($733) ($ in millions) 2000 2001 2002 TSS 671 632 677 ROE 23% 21% 23% 2000 2001 2002 IMPB 711 479 384 ROE 11% 8% 6% 2000 2001 2002 IB 3586 2918 1365 ROE 18% 15%
Slide 12: Chase Financial Services Key Drivers
Chase Financial Services Key Drivers ROE 24% 17% Adjusted ROE 20% Adjusted Overhead Ratio 50% Operating Earnings FY02 %O/(U) FY01 ($ in billions) Consumer Credit $1.8 80% Regional Bkg & Middle Mkt. 0.8 (1%) Total* $2.5 62% Total Adjusted for MSR Hedge Gains* $2.1 37% *Total includes Other Chase Fina
Slide 13: Investment Bank Results
ROE 7% 15% Overhead 64% 60% Investment Bank Results ($ in billions, operating basis) Revenue $12.4 (15%) Total Expense 8.0 (9%) Credit Costs 2.4 108% Earnings 1.4 (53%) FY02 FY01 %O(U) Weak revenues, high credit and severance Expenses excluding severance down 16%, overhead at 60% residual severance
Slide 14: Investment Bank League Table Summary
Rank Global Syndicated Loans 1 23% U.S. Investment Grade Bonds 2 16% Global High Yield Corp Debt 3 11% Global Announced M&A 5 15% U.S. Equity and Equity Related 6 6% Investment Bank League Table Summary %Share Source: Thomson Financial Full Year 2002
Slide 15: JPMP Private Equity Gains/Losses
JPMP Private Equity Gains/Losses FY02 FY01 FY00 MTM ($0.2) ($0.5) ($1.1) Writedowns/Write-offs (1.1) (1.7) (0.3) Realized Gains 0.6 1.0 2.4 Total Private Equity Gains/Losses ($0.7) ($1.2) $1.0 ($ in billions)
Slide 16: Tier 1 Capital Ratio
Tier 1 Ratio 12/31/2001 0.083 9/30/2002 0.086 12/31/2002 0.082 Assets $694 $742 $759 RWA $455 $443 $458 Total Capital ($ in billions) *estimated * Surety settlement & litigation (20bp) Regulatory changes Capital for securitizations effective 12/02 New FASB on SPE effective 7/03 No change for ratings
Slide 17: 2003 Assumptions
Revenue environment Capital markets - no turnaround, lower loss at JPMP Rates within range, lower mortgage origination & hedging gains Credit Costs Commercial credit remains high but declines from 2002 Consumer increases driven by volumes Operating expenses slightly higher despite Investment Bank sa
Slide 18: 2003 Operating Expense Drivers
2003 Operating Expense Drivers Options & performance stock, pension, & occupancy costs Retail & TSS growth Consolidation of Retirement Plan Services from American Century - - in negotiation Investment Bank Savings Lower severance and related costs Technology outsourcing to IBM Increases Decreases
Slide 19: Summary
Difficult operating environment Continued focus on risk management, expenses, capital Today's cyclical impacts - Future leverage points Credit Capital markets activity JPMorgan Partners Improved operating margin Strong franchise -- determined to win Summary