Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — Q2 2008 Earnings Presentation
25 slides from Jp Morgan Chase &'s earnings presentation, Jul 17, 2008
Slide 1: Financial Results 2Q08
JULY 17, 2008 FINANCIAL RESULTS 2Q08
Slide 2: Bear Stearns Merger-Related Items
Bear Stearns Merger-Related Items No extraordinary gain Merger-related items of ($540mm) are reported in Corporate Equity interest net losses1 of ($423mm) (after-tax) Other merger-related items of ($117mm) (after-tax) Remaining post-2Q08 merger-related costs of approximately $500mm (after-
Slide 3: 2Q08 Financial highlights
2Q08 Financial highlights Net income of $2.0B Excluding $540mm after-tax loss from Bear Stearns merger-related items, net income of $2.5B Increased credit reserves by $1.3B firmwide; loan loss allowance coverage of 2.86% for consumer businesses and 2.13% for wholesale businesses Recorded mar
Slide 4: 2Q08 Managed Results
2Q08 Managed Results1 $ $ in in millions millions $ O/(U) O/(U) % 2Q08 1Q08 2Q07 1Q08 2Q07 Results Excl. Bear Stearns Merger-Related Items 1 Revenue (FTE) $20,098 $2,200 $279 12% 1% 1 Credit Costs 4,275 (830) 2,156 (16)% 102% 2 Expense 11,996 3,065 968 34% 9% Net Income 2,543 $170 ($1,691) 7% (40)%
Slide 5: Investment Bank
Investment Bank $ $ in in millions millions $ O/(U) Net income of $394mm on revenue of $5.5B 2Q08 1Q08 2Q07 Includes June results for Bear Stearns Revenue $5,470 $2,459 ($328) IB fees of $1.7B were second highest quarterly performance, Investment Banking Fees 1,735 529 (165) down 9% from prior
Slide 6: Investment Bank—Fee and Market Share Performance
Investment Bank—Fee and Market Share Performance League League Table Table Results Results Thomson Volumes1 1H082 20072 Ranked #1 in the four most important league tables for capital raising for the Rank Share Rank Share first time in our history for both the Global M&A Announced3 #3 27% #4 27% se
Slide 7: IB Key Risk Exposures
IB Key Risk Exposures Leveraged Lending and Level 3 Leveraged Lending $22.5B of total commitments (funded and unfunded) at 3/31/08 - $18.3B of legacy and $4.2B of current commitments Markdowns of $696mm, net of hedges, for the quarter on the remaining legacy commitments of $16.3B; $2.6B of curre
Slide 8: IB Key Risk Exposures
IB Key Risk Exposures Mortgage-related $ $ in in billions billions JPM JPM+BSC Exposure Exposure 3/31/2008 3/31/2008 Reduction 6/30/2008 Prime $7.1 $11.2 ($2.3) $8.9 Alt-A 5.7 13.8 (3.2) 10.6 Subprime 1.9 2.4 (0.5) 1.9 Subtotal Residential $14.7 $27.4 ($6.0) $21.4 CMBS 13.5 18.4 (6.8) 11.6 Mortgage
Slide 9: Bear Stearns Merger Integration
Bear Stearns Merger Integration People Completed majority of people selection decisions as of merger close on 5/30/08 7,000 Bear Stearns employees have been identified for retention Talent Network has been successful in identifying internal and external job opportunities for employees in trans
Slide 10: Retail Financial Services—Drivers
Retail Financial Services—Drivers Key Key Statistics¹ Statistics¹ -- $ $ in in billions billions Average deposits up 3% YoY 2Q08 1Q08 2Q07 Regional Banking Branch production statistics YoY Average Deposits $213.9 $214.3 $207.3 Checking accounts up 9% Checking Accts (mm) 11.3 11.1 10.4 Credit
Slide 11: Retail Financial Services
Retail Financial Services $ $ in in millions millions $ O/(U) Net income of $606mm down 23% YoY, driven by increased credit costs offset largely by revenue growth in all businesses 2Q08 1Q08 2Q07 Revenue of $5.0B up 15% YoY Net Interest Income $3,055 $44 $382 Credit costs in 2Q08 include a $43
Slide 12: Home Equity
Home Equity JPM JPM 30-day 30-day Delinquency Delinquency Trend Trend Key Key Statistics Statistics 2Q08 1Q08 2Q07 2.25% EOP owned portfolio ($B) $95.1 $95.0 $91.0 2.00% Net charge-offs ($mm) $511 $447 $98 1.75% Net charge-off rate 2.16% 1.89% 0.44% 1.50% 1.25% 1.00% Sep- Dec- M ar- Jun- Oct- Jan- A
Slide 13: Subprime Mortgage
Subprime Mortgage JPM JPM 30-day 30-day Delinquency Delinquency Trend Trend Key Key Statistics Statistics 20% 2Q08 1Q08 2Q07 EOP owned portfolio ($B)1 $14.8 $15.8 $8.7 15% EOP held-for-sale ($B) — — $3.2 10% Net charge-offs ($mm) $192 $149 $26 Net charge-off rate 4.98% 3.82% 1.21% 5% 1 Excludes mort
Slide 14: Prime Mortgage
Prime Mortgage JPM JPM 30-day 30-day Delinquency Delinquency Trend Trend Key Key Statistics Statistics 2Q08 1Q08 2Q07 4.00% EOP balances in Corporate ($B) $42.6 $41.1 $27.3 EOP balances in RFS1 ($B) 4.6 4.0 3.9 3.00% Total EOP balances ($B) $47.2 $45.1 $31.2 2.00% Corporate net charge-offs ($mm) $84
Slide 15: Card Services (Managed)
Card Services (Managed) $ $ in in millions millions $ O/(U) Net income of $250mm down 67% YoY; decline in results driven by an increase in 2Q08 1Q08 2Q07 credit costs Revenue $3,775 ($129) $58 Credit costs up 65% YoY, due to higher Credit Costs 2,194 524 863 net charge-offs and an increase of Ex
Slide 16: Commercial Banking
Commercial Banking $ $ in in millions millions $ O/(U) Record net income of $355mm up 25% YoY, driven by record net revenue and 2Q08 1Q08 2Q07 lower expense Revenue $1,106 $39 $99 Middle Market Banking 708 2 55 Average loans up 19% and liability Mid-Corporate Banking 235 28 38 balances up 18% Yo
Slide 17: Treasury & Securities Services
Treasury & Securities Services $ $ in in millions millions $ O/(U) Record net income of $425mm up 21% YoY Pretax margin of 33% 2Q08 1Q08 2Q07 Results include seasonal activity in Revenue $2,019 $106 $278 securities lending and depositary receipts Treasury Services 852 39 132 Liability balanc
Slide 18: Asset Management
Asset Management $ in $ in millions millions $ O/(U) Net income of $395mm down 20% YoY 2Q08 1Q08 2Q07 Pretax margin of 31% Revenue $2,064 $163 ($73) Revenue of $2.1B down 3% YoY due to lower performance fees and the effect of lower markets Private Bank 765 110 119 offset partially by increased
Slide 19: Corporate/Private Equity
Corporate/Private Equity Corporate/Private Corporate/Private Equity Equity Net Net Income Income -- $ $ in in millions millions $ O/(U) Private Equity 2Q08 1Q08 2Q07 Private Equity gains of $220mm in 2Q08 Private Equity $99 $42 ($603) EOP Private Equity portfolio of $7.7B Represents 8.9% of sh
Slide 20: Capital Management
Capital Management $ $ in in billions billions 2Q08 1Q08 2Q07 Tier 1 Capital1 $98.7 $89.6 $85.1 Tangible Common Equity2 $75.5 $74.0 $67.3 Risk Weighted Assets1 $1,083.2 $1,075.7 $1,016.0 Tangible Assets $1,724.0 $1,591.2 $1,406.1 Tier 1 Capital Ratio1 9.1% 8.3% 8.4% Total Capital Ratio1 13.5% 12.5%
Slide 21: 3Q08 Outlook
3Q08 Outlook Investment Investment Bank Bank Treasury Treasury and and Security Security Services Services Good underlying growth, which includes benefit of Continued lower earnings is a reasonable expectation recent market conditions Strong loan reserves; credit is idiosyncratic 2Q08 result
Slide 22: Appendix
F I N A N C I AL R E S U L T S APPENDIX 21
Slide 23: Significant Items
Significant Items $ $ in in millions millions Net Income Pretax After-tax EPS Results excl. Bear Stearns merger-related items $3,827 $2,543 Addition to credit allowance Wholesale (464) (288) (0.08) Consumer (861) (534) (0.15) IB markdowns (1,101) (683) (0.19) Sale of MasterCard shares $668 $414 $0.1
Slide 24: Bear Stearns Extraordinary Gain
Bear Stearns Extraordinary Gain $ $ in in millions millions 5/12/2008 Change 6/30/2008 BSC Capital at 2/29/08 $11,500 $11,500 Transaction-related costs (after-tax) Operating losses Increase Credit market dislocation/de-risking Minimal client revenue flow coupled with operating expense base V
Slide 25: 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 19 (line 2) is defined as common stockholders' equ