Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — 2008 Bank Analysts Association of Boston Conference
41 slides from Jp Morgan Chase &'s conference presentation, Nov 7, 2008
Slide 1: Charlie Scharf, Chief Executive Officer, Retail Financial Services
Exhibit 99.1 N OV EM B ER 6 , 2 0 0 8 2 0 0 8 BAN C AN A L Y ST S A SSO CI AT I O N O F B O ST O N C O N F ER EN C E Charlie Scharf Chief Executive Officer, Retail Financial Services
Slide 2: Agenda
Agenda Page RFS financial results 1 Home lending credit and performance 3 Branch banking update 14 Washington Mutual update 22 The figures reflected in this presentation refer to heritage- JPMorgan Chase figures only, except where specifically noted as being pro forma combined for the Washington Mut
Slide 3: Retail Financial Services results
Retail Financial Services results Financial results ($mm) Comments YTD YTD 3Q07 3Q08 $O/(U) Revenue growth of 15% driven by: Revenue $12,664 $14,592 $1,928 Regional Banking up 10% Credit Costs 1,559 5,502 3,943 Mortgage Production up 37% Expense 7,360 8,012 652 Net Income $2,283 $626 ($1,657) Credit
Slide 4: Agenda
Agenda Page RFS financial results 1 Home lending credit and performance 3 Branch banking update 14 Washington Mutual update 22 3
Slide 5: Credit performance
Credit performance Key credit statistics 3Q07 4Q07 1Q08 2Q08 3Q08 Home Lending Portfolio Average Outstandings ($B) 1 $134.3 $144.5 $153.0 $156.4 $155.5 Net Charge-offs ($mm) $199 $336 $646 $807 $1,113 Net Charge-off Rate 0.59% 0.92% 1.70% 2.07% 2.85% Allowance for Loan Losses ($mm) $1,304 $1,833 $3,
Slide 6: Home Lending - Significant credit actions taken
Home Lending -Significant credit actions taken Portfolio Significant credit policy actions Continued business Owner-occupied Exited wholesale broker Retail channel Eliminated Stated Docs Home Equity Full Docs Maximum CLTV range of 50-80% Max CLTV =80% (50% in Exited Investor and Second Homes and Flo
Slide 7: Home Lending production
Home Lending production Home Lending production by product ($B) and YoY % change 50 3Q07 4Q07 1Q08 2Q08 3Q08 40 30 0% 20 255% (77%) 10 (72%) (96%) NM 0 Conventional FHA/VA Prime Jumbo Alt A Subprime Home Equity Conforming Note: Includes Private Banking volume which is included in ranking disclosures
Slide 8: 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 $150 2.00% Net charge-off rate 2.78% 2.16% 0.65% Nonperforming loans ($mm) $1,142 $1,008 $556 1.50% 1.00% Sep- Dec- Mar- Jun- Sep- Dec- Mar- J
Slide 9: Subprime Mortgage
Subprime Mortgage JPM 30-day delinquency trend Key statistics 3Q08 2Q08 3Q07 30% EOP owned portfolio ($B) 1 $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 $790 5% 1 Excludes mortgage loans held in th
Slide 10: Prime Mortgage
Prime Mortgage JPM 30-day delinquency trend Key statistics 3Q08 2Q08 3Q07 5.50% 5.00% EOP balances in Corporate ($B) $42.0 $42.6 $32.8 4.50% EOP balances in RFS1 ($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 $4 2.00% RF
Slide 11: Impact of housing
Impact of housing HPA and credit statistics 30+ Day Delinquency Rate NCO Rate Peak to % YTD Current HPA Sept ‘07 Sept ‘08 Sept ‘07 Sept ‘08 Losses Prime AZ, CA, FL (33%) 2.0% 8.1% 0.1% 3.6% 81% All Other (6%) 1.4% 2.7% 0.0% 0.5% 19% Home Equity AZ, CA, FL (33%) 1.6% 3.8% 1.3% 7.5% 62% All Other (6%)
Slide 12: Emerging impact of unemployment
Emerging impact of unemployment Unemployment and credit statistics Sept ’08 30+ Day Delinquency Rate Unemployment % Sept ’08 % YTD Rate Sept ’07 Sept ’08 Balances Losses Prime AZ, CA, FL 7.2% 2.0% 8.1% 40% 81% IN, MI, OH 7.5% 2.4% 3.3% 4% 3% All Other 5.9% 1.4% 2.6% 56% 16% Home Equity AZ, CA, FL 7.
Slide 13: Foreclosure prevention efforts
Foreclosure prevention efforts Foreclosure prevention –total owned and securitized portfolio Foreclosure Prevention Efforts¹ Number of phone calls 125.5mm “Doors knocked” 205K Borrowers reached 1 6.1mm Total foreclosures prevented 2 250K 1 3Q08 YTD foreclosure prevention efforts and borrowers reache
Slide 14: New actions to help families stay in their homes
New actions to help families stay in their homes Chase Foreclosure Prevention Program Systematically review the entire mortgage portfolio to determine proactively which homeowners are most likely to require help – and try to provide it before they are unable to make payments Proactively reach out to
Slide 15: Agenda
Agenda Page RFS financial results 1 Home lending credit and performance 3 Branch banking update 14 Washington Mutual update 22 14
Slide 16: Branch Banking profitability and growth drivers
Branch Banking profitability and growth drivers Net Income ($mm) 3Q07 4Q07 1Q08 2Q08 3Q08 QoQ YoY Retail Banking (Consumer $591 $561 $545 $674 $723 7% 22% and Business) Loan Portfolio/Other 20 (190) (978) (320) (505) (58%) NM Total $611 $371 ($433) $354 $218 (38%) (64%) 3Q08 Regional Banking key sta
Slide 17: Branch Banking priorities
Branch Banking Priorities Managing margin through the cycle Continue to grow branch presence Growth in salesforce Growth in production and sales Washington Mutual integration 16
Slide 18: Retail Banking: managing through the cycle
Retail Banking: managing through the cycle Balance Sheet mix and margin Highlights Mix has remained fairly consistent Checking Savings 3Q07 thru 3Q08 Time Loan Balances 300 3.06% Product spreads have increased 2.88% 3.00% through the cycle as the Fed has 2.75% 2.73% 2.67% 2.64% reduced rates 250 2.5
Slide 19: Retail Banking new builds
Retail Banking new builds New branches Thru Sep 2003 2004 2005 2006 2007 2008 Total Metro NY - 13 51 22 28 11 125 Chicago 20 54 25 15 21 7 142 Arizona 7 10 19 11 15 9 71 Texas 17 30 26 22 35 15 145 Michigan 2 3 10 35 10 6 66 Colorado 5 2 6 12 9 4 38 Other 8 12 9 8 9 4 50 Total 59 124 146 125 127 56
Slide 20: Deepening growth in branch cross-sell
Deepening growth in branch cross-sell Credit Cards (# units in 000s) Mortgage Sales ($B) $9 $8 1,158 1,068 889 $6 $5 486 3Q05 YTD 3Q06 YTD 3Q07 YTD 3Q08 YTD 3Q05 YTD 3Q06 YTD 3Q07 YTD 3Q08 YTD Investment Sales ($B) Highlights (3Q08 vs. 3Q07) Credit card sales up 6% $14 $14 $11 Investment sales up 1%
Slide 21: Developing and deepening customer relationships
Developing and deepening customer relationships Total core retail households Jan 2006 Jan 2007 Aug 2008 Total Households 8,829,843 9,232,883 10,631,487 Checking Households 81% 82% 85% with Credit Card 48% 53% 54% with Online Banking 42% 54% 65% with Online Billpay 14% 25% 34% Note: Households includ
Slide 22: Innovate to serve customers
Innovate to serve customers Innovation Chase Mobile On-demand, real-time account information Industry-first national launch of account access by texting in U.S. Rapid Cash Free funds transfer to Mexico for Chase checking customers SM Deposit-Friendly ATMs $290mm investment in ATM deposit automation
Slide 23: Agenda
Agenda Page RFS financial results 1 Home lending credit and performance 3 Branch banking update 14 Washington Mutual update 22 22
Slide 24: Key terms of acquisition of Washington Mutual's banks from FDIC
Key terms of acquisition of Washington Mutual’s banks from FDIC acting as receiver Transaction: JPMorgan Chase acquired: Substantially all of the assets of Washington Mutual’s banks All of the deposits and certain liabilities of Washington Mutual’s banks Transaction did not include: Assets and liabi
Slide 25: 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 $911 billion and 5,410 branches at close¹ Expanding into attractive ne
Slide 26: Leader in retail banking and deposit gathering
Leader in retail banking and deposit gathering Branches Deposits ($B) Rank Institution Branches (#) Rank Institution Deposits ($B) 1 Pro forma Wells Fargo 6,675 1 JPMorgan Chase $970 2 Bank of America 6,139 2 Bank of America 874 3 JPMorgan Chase 5,423 3 Citi 780 4 Pro forma PNC 2,576 4 Pro forma Wel
Slide 27: Creates broader branch network
Creates broader branch network Branch map Chase branches —3,179 WaMu branches —2,244 Branch overlap New markets Total JPMorgan Chase–WaMu combined branches — 5,423 Source: 9/30/08 reporting Note: Branch count represents Retail branches only, excluding PCS 26
Slide 28: Adds branch presence in new markets
Adds branch presence in new markets # of branches State Combined JPMorgan Chase Washington Mutual New York 873 629 244 Texas 732 474 258 California 709 - 709 Illinois 461 344 117 Arizona 307 242 65 Michigan 300 300 - Ohio 282 282 - Florida 270 8 262 New Jersey 252 165 87 Indiana 193 193 - Washington
Slide 29: Combined retail franchise has leading market share in key states
Combined retail franchise has leading market share in key states Adjusted deposits in 10 key states ($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 $10.4 $22.4 $14.4 $13.8 $3.4 $12.1 $12.4 $12.4 $7.0 $0.5 New York Cal
Slide 30: Top ranking in the country's largest MSAs
Top 3 ranking in the country’s largest MSAs Select MSAsby deposits ($mm) Deposits in Combined Deposit growth CAGR MSA market Market Share Combined Rank ‘07-‘12 ‘07-‘12 (%) New York, NY $441,222 19.7% 1 $36,209 2.1% Los Angeles, CA $249,907 13.6% 3 $28,970 2.9% Chicago, IL $191,064 12.3% 1 $19,377 2.
Slide 31: Footprint covers 46% of expected population growth
Footprint covers 46% of expected population growth —up from 18% Combined JPMorgan Chase Washington Mutual Network Comparisons U.S. Households 42.3% 25.0% 30.3% Hispanic Households 67.9% 33.9% 58.3% Average Income $72,332 $71,595 $74,747 Businesses 45.6% 26.5% 33.0% Total # of Branches 5,423 3,179 2,
Slide 32: Transaction further strengthens the entire franchise
Transaction further strengthens the entire franchise Rank Size and metrics Retail Banking #2 14,300 ATMs 24.5mm checking accounts Credit cards #1 $187B outstanding Mortgage #31 $1,500B total mortgage loans serviced 2 Commercial Banking $113B loans $106B liabilities 1 Source: IMF 2 Source: Company es
Slide 33: Integration plan: invest to improve franchise, realize efficiencies
Integration plan: invest to improve franchise, realize efficiencies and reduce risk 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
Slide 34: Revenue growth: credit card and investment sales
Revenue growth: credit card and investment sales Branch network provides opportunity to cross-sell more products, particularly credit card and investment sales: Credit card — In 2007, Chase produced 2x the per branch credit card production of WaMu — Achieving this productivity from WaMubrancheswould
Slide 35: Chase has a solid track record in enhancing branch productivity
Chase has a solid track record in enhancing branch productivity Bank of New York branches -credit cards¹ Bank of New York branches -investment sales¹ 1.4x higher 1.0x 20.0x higher 1.0x 2005 BNY 1H08 2005 BNY 1H08 Note: 1H07 and 1H08 are averages of 1Q and 2Q ¹ Based on average of comparable deposit
Slide 36: Branches in new markets create opportunity for Business and Commercial Banking
Branches in new markets create opportunity for Business and Commercial Banking Business Banking Significant opportunity to expand BusinessBanking as WashingtonMutual had limited market penetration Chase has 5x Washington Mutual’s average Business Banking checking balances Chase has 40% more fee inco
Slide 37: Integration update - on track
Integration update —on track People Senior management decisions within first 5 days Management teams announced across all staff and businesses On track for full people decisions by December 1 st Branches st Conversion timeline to be complete by December 1 All major systems converted by end of 2009 –
Slide 38: Allowance to loan losses coverage ratios
Allowance to loan losses coverage ratios Rough estimates—illustrative example of WaMu impact on coverage ratios ($mm) 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 Balances² LLR Loans Balan
Slide 39: Anticipated cost savings and merger costs
Anticipated cost savings and merger costs Cost savings Projected cost savings of approximately $1.5 billion, or approximately 15%-20% of Washington Mutual’s non-interest expense base, net of significant investments in the business Majority of branch combinations to be completed by end of 2010 Merger
Slide 40: Summary / Outlook
Summary / Outlook Washington Mutual integration underway A great strategic fit and a unique opportunity to expand retail banking franchise Cautious about economic environment and braced for increasing loan losses going forward Opportunity to gain share 39
Slide 41: Forward-looking statements and additional information
Forward-looking statements and additional information Forward-looking statements 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 m
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