Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — 4Q07 Earnings Presentation
25 slides from Jp Morgan Chase &'s earnings presentation, Jan 16, 2008
Slide 1: Financial Results 4Q07
J A N U A R Y 1 6, 2 0 0 8 FINANCIAL RESULTS 4Q07
Slide 2: FY 2007 & 4Q07 Results
F I N A N C I AL R E S U L T S FY 2007 & 4Q07 RESULTS 1
Slide 3: 2007 Full year financial highlights
2007 Full year financial highlights Record earnings of $15.4B on record revenue of $74.8B Record EPS of $4.38 up 15% from 2006 on continuing operations Return on tangible common equity1 of 23% Total credit reserve increased by $2.3B to $10.1B Wholesale credit reserve strengthened by $769mm
Slide 4: FY 2007 Managed Results
FY 2007 Managed Results1 $ $ in in millions millions $ O/(U) O/(U) % FY 2007 FY 2006 FY 2006 FY 2006 1 Revenue (FTE) $74,812 $65,113 $9,699 15% 1 Credit Costs 9,244 5,480 3,764 69% 2 Expense 41,703 38,843 2,860 7% Income from Continuing Ops. 15,365 13,649 1,716 13% EPS - Continuing Ops. $4.38 $3.82
Slide 5: 4Q07 Managed Results
4Q07 Managed Results1 $ $ in in millions millions $ O/(U) O/(U) % 4Q07 3Q07 4Q06 3Q07 4Q06 1 Revenue (FTE) $18,275 $1,298 $1,241 8% 7% 1 Credit Costs 3,161 798 1,434 34% 83% 2 Expense 10,720 1,393 835 15% 8% Income from Continuing Ops. 2,971 (402) (935) (12)% (24)% EPS - Continuing Ops. $0.86 ($0.11
Slide 6: Investment Bank
Investment Bank $ $ in in millions millions Net income of $124mm on revenue of $3.2B $ O/(U) ROE of 2% IB fees of $1.7B up 5% YoY, driven by record advisory 4Q07 3Q07 4Q06 and equity underwriting fees, largely offset by lower syndication and bond underwriting fees Revenue $3,172 $226 ($1,688)
Slide 7: 2007 IB fee and market share performance
2007 IB fee and market share performance Record IB fees of $6.6B, up 19% YoY League League table table results results #1 in Dealogic fees 2006 2007 #2 in reported fees* Rank Share Rank Share Major Major 2007 2007 Awards Awards Global M&A Announced #4 26% #4 24% Best Overall Investment Bank Gl
Slide 8: Leveraged Lending
Leveraged Lending Modest gain net of hedges for the quarter Comprised of significant realized gains on sale of funded exposure partially offset by additional marks taken on the remaining funded and unfunded commitments $26.4B of funded and unfunded commitments with gross markdowns in excess of
Slide 9: Other Investment Bank Risk Topics
Other Investment Bank Risk Topics Subprime and subprime CDO-related Markdowns net of hedges of $1.3B Remaining exposure actively risk-managed Total subprime and subprime CDO exposure is hedged by approximately $2B of hedges and short positions End End of of period period subprime subprime and
Slide 10: Other Investment Bank Risk Topics
Other Investment Bank Risk Topics CDO warehouse and unsold positions $5.5B of CDO warehouse and unsold positions; 92% corporate credit underlying, negligible subprime Of the $5.5B above, approximately half carries significant funded first-loss protection CMBS $15.5B total gross exposure of whi
Slide 11: Retail Financial Services - Drivers
Retail Financial Services - Drivers Key Key Statistics¹ Statistics¹ ($ ($ in in billions) billions) Average deposits up 4% YoY Branch production statistics YoY: 4Q07 3Q07 4Q06 Checking accounts up 8% Regional Banking Credit card sales up 34% Average Deposits $208.5 $205.3 $200.7 Mortgage o
Slide 12: Retail Financial Services
Retail Financial Services $ $ in in millions millions Net income of $752mm, up 5% YoY and 18% QoQ. $ O/(U) Results impacted by: 4Q06 included net loss on portfolio repositioning of 4Q07 3Q07 4Q06 $215mm Net Interest Income $2,705 $24 $125 NII growth of 5% YoY reflects higher home equity loan b
Slide 13: Home Equity
Home Equity JPM JPM 30-day 30-day delinquency delinquency trend trend Key Key statistics statistics 4Q07 3Q07 4Q06 2.00% EOP owned portfolio ($B) $94.8 $93.0 $85.7 1.75% Net charge-offs ($mm) $248 $150 $51 Net charge-off rate 1.05% 0.65% 0.24% 1.50% 1.25% 1.00% Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun
Slide 14: Subprime Mortgage
Subprime Mortgage JPM JPM 30-day 30-day delinquency delinquency trend¹ trend¹ Key Key statistics statistics 4Q07 3Q07 4Q06 15.00% Subprime Prime EOP owned portfolio ($B)2 $15.5 $12.1 $8.7 12.00% EOP held-for-sale ($B) - - $4.5 9.00% Net charge-offs ($mm) $71 $40 $17 6.00% Net charge-off rate 2.08% 1
Slide 15: Card Services (Managed)
Card Services (Managed) $ in $ in millions millions Net income of $609mm down by $110mm, or 15% YoY; decline in results driven by increase $ O/(U) in credit costs ROE of 17% 4Q07 3Q07 4Q06 ROO of 2.51% Revenue $3,971 $104 $221 Average Outstandings of $151.7B up 3% YoY Credit Costs 1,788 425
Slide 16: Commercial Banking
Commercial Banking $ $ in in millions millions Net income of $288mm up 13% YoY $ O/(U) Average loans up 14% and liability balances up 22% YoY 4Q07 3Q07 4Q06 Revenue $1,084 $75 $66 Record revenue of $1.1B up 6% YoY, Middle Market 695 15 34 primarily due to higher treasury services and lending r
Slide 17: Treasury & Securities Services
Treasury & Securities Services $ $ in in millions millions Record net income of $422mm up $ O/(U) 65% YoY Pretax margin of 35% 4Q07 3Q07 4Q06 Liability balances up 30% YoY Revenue $1,930 $182 $393 Treasury Services 824 44 124 Assets under custody up 15% YoY Worldwide Securities Svcs 1,106 13
Slide 18: Asset Management
Asset Management $ $ in in millions millions Record net income of $527mm up 29% YoY $ O/(U) Pretax margin of 35% 4Q07 3Q07 4Q06 Assets under management of $1.2T, up 18% YoY, including growth of 21% in Revenue $2,389 $184 $442 alternative assets Institutional 754 151 130 Net AUM inflows of $3
Slide 19: Corporate
Corporate Total Total Corporate Corporate ($ ($ in in millions) millions) Private Equity $ O/(U) Private Equity gains of $712mm in 4Q07 EOP Private Equity Portfolio of $7.2B 4Q07 3Q07 4Q06 Represents 9.2% of common equity less Private Equity $356 ($53) $220 goodwill Treasury and Other Corporat
Slide 20: Capital Management / Fortress Balance Sheet
Capital Management / Fortress Balance Sheet $ $ in in billions billions 4Q07 3Q07 4Q06 1 Tangible Common Equity $71.9 $68.3 $63.3 Common Shareholders' Equity less Goodwill $78.0 $74.6 $70.6 2 Tier 1 Capital $88.7 $86.1 $81.1 2 Risk Weighted Assets $1,050.1 $1,028.6 $935.9 2 Tier 1 Capital Ratio 8.4%
Slide 21: 4Q07 Summary Assessment
4Q07 Summary Assessment Overall Firm – earned $3.0B or $0.86 per share, down 21% from 4Q06 on continuing operations Capital remained strong, with Tier 1 capital of $88.7B or 8.4% (estimated); credit reserves further strengthened Investment Bank results declined significantly, results included
Slide 22: 2008 Outlook
F I N A N C I AL R E S U L T S 2008 OUTLOOK 21
Slide 23: 2008 Outlook
2008 Outlook Investment Investment Bank Bank Overall Overall Uncertain environment; substantial risks Expansion of TSS, AM, CB remain Private equity significantly lower Good progress; continue to build/invest Results will be volatile by quarter Comments on normal cyclicality Low visibi
Slide 24: Notes on non-GAAP financial measures
Notes on non-GAAP financial measures This presentation includes non-GAAP financial measures. 1. TCE as used on slides 2, 3 and 4 for purposes of a return on tangible common equity and presented as Tangible Common Equity on slide 19 (line 1) is defined as common stockholders’ equity less identifiable
Slide 25: Forward-looking statements
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 management and are subject to significant risks and unc