Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — UBS Global Financial Services Conference 2008
34 slides from Jp Morgan Chase &'s conference presentation, May 13, 2008
Slide 1: Jamie Dimon, Chairman and CEO, UBS Global Financial Services Conference
Exhibit 99.1 MAY 1 2 , 2 0 0 8 Jamie Dimon Chairman and Chief Executive Officer UBS Global Financial Services Conference
Slide 2: Agenda
Agenda Firm and line of business update Key investor topics Prime mortgage Comments on home lending credit Commercial Banking credit Bear Stearns merger update Capital management 2Q08 Comments on environment 2Q08 outlook Conclusions
Slide 3: Firm and Line of Business Update
F I R M A N D L I N E OF B U S I N E S S U P D A T E
Slide 4: 1Q08 Managed Results
1Q08 Managed Results1 $ in millions $ O/(U) O/(U) % 1Q08 4Q07 1Q07 4Q07 1Q07 Revenue (FTE)1 $17,898 ($377) ($1,843) (2)% (9)% Credit Costs1 5,105 1,944 3,504 61% 219% Expense2 8,931 (1,789) (1,697) (17)% (16)% Reported Net Income $2,373 ($598) ($2,414) (20)% (50)% Reported EPS $0.68 ($0.18) ($0.66)
Slide 5: Investment Bank
Investment Bank $ in millions Net loss of $87mm on revenue of $3.0B, down 52% YoY $ O/(U) IB fees of $1.2B down 30% YoY, driven primarily by a decline in debt underwriting fees 1Q08 4Q07 1Q07 Ranked #1 for total Global Investment Banking Fees³; market share grew from 7.2%³ in 2007 to 7.4%³ in 1Q08 R
Slide 6: 1Q08 IB fee and market share performance
1Q08 IB fee and market share performance Major 2007 Awards League table results 2007 1Q08 Best Overall Investment Bank Rank Share Rank Share 2007 Derivatives Global M&A Announced¹ #4 27% #4 27% House of the Year Best Derivatives House over the Past 20 Global Debt, Equity & Equity-related #2 8% #1 10
Slide 7: Investment Bank Risk Topics (as of 3/31/08)
Investment Bank Risk Topics (as of 3/31/08) Leveraged Lending Net additional markdown of $1.1B in 1Q08 on the remaining funded and unfunded commitments of $22.5B with gross markdowns in excess of 11% at 3/31/08 Mortgage-related Prime / Alt-A exposure of $12.8B - markdowns of $1.1B in 1Q08 Prime - se
Slide 8: Retail Financial Services - Drivers
Retail Financial Services - Drivers Key Statistics¹($ in billions) 1Q08 4Q07 1Q07 Average deposits up 4% YoY Regional Banking Branch production statistics YoY: Average Deposits $214.3 $208.5 $206.5 Checking accounts up 9% Checking Accts (mm) 11.1 10.8 10.2 Credit card sales up 18% # of Branches 3,14
Slide 9: Retail Financial Services
Retail Financial Services $ in millions $ O/(U) Net loss of $227mm driven by increased credit 1Q08 4Q07 1Q07 costs Net Interest Income $3,011 $306 $394 Revenue of $4.7B grew 15% YoY Noninterest Revenue 1,691 (419) 202 Credit costs in 1Q08 include a $1.7B addition to Total Revenue 4,702 (113) 596 all
Slide 10: Home Equity
Home Equity JPM 30-day delinquency trend Key statistics 1Q08 4Q07 1Q07 2.25% EOP owned portfolio ($B) $95.0 $94.8 $87.7 2.00% Net charge-offs ($mm) $447 $248 $68 1.75% Net charge-off rate 1.89% 1.05% 0.32% 1.50% 1.25% 1.00% Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- 05 05 06 06 06 06 07
Slide 11: Subprime Mortgage
Subprime Mortgage JPM 30-day delinquency trend Key statistics 18% Subprime 1Q08 4Q07 1Q07 15% EOP owned portfolio ($B) 1 $15.8 $15.5 $9.0 12% EOP held-for-sale ($B) - - $3.7 9% Net charge-offs ($mm) $149 $71 $20 6% 3% Net charge-off rate 3.82% 2.08% 0.92% 0% 1 Excludes mortgage loans held in the Com
Slide 12: Card Services (Managed)
Card Services (Managed) $ in millions Net income of $609mm down by $156mm, or $ O/(U) 20% YoY; decline in results driven by increase in credit costs 1Q08 4Q07 1Q07 Credit costs up by $441mm, or 36% YoYdue to Revenue $3,904 ($67) $224 a higher level of charge-offs and an $85mm Credit Costs 1,670 (118
Slide 13: Commercial Banking
Commercial Banking $ in millions $ O/(U) Net income of $292mm down 4% YoY 1Q08 4Q07 1Q07 driven by an increase in the provision for credit losses, largely offset by Revenue $1,067 ($17) $64 higher net revenue Middle Market Banking 706 11 45 Mid-Corporate Banking 207 (32) (5) Average loans up 18% and
Slide 14: Treasury & Securities Services
Treasury & Securities Services $ in millions $ O/(U) Net income of $403mm up 53% YoY Pretax margin of 34% 1Q08 4Q07 1Q07 Revenue $1,913 ($17) $387 Liability balances up 21% YoY Treasury Services 813 (11) 124 Assets under custody up 7% YoY Worldwide Securities Svcs 1,100 (6) 263 Expense 1,228 6 153 R
Slide 15: Asset Management
Asset Management $ in millions $ O/(U) Net income of $356mm down 16% YoY and 32% QoQ Pretax margin of 30% 1Q08 4Q07 1Q07 Revenue of $1.9B flat YoY as the benefit from Revenue $1,901 ($488) ($3) higher AUM and deposit and loan growth was offset Private Bank 655 (58) 95 by lower performance fees and l
Slide 16: Corporate/Private Equity
Corporate/Private Equity $ in millions $ O/(U) Private Equity 1Q08 4Q07 1Q07 Private Equity gains of $189mm in 1Q08 Private Equity $57 ($299) ($641) EOP Private Equity portfolio of $6.6B Represents 8.3% of common equity less Corporate ex. Visa 15 108 44 goodwill Visa 955 955 955 Corporate Net income
Slide 17: Capital management / fortress balance sheet
Capital management / fortress balance sheet Current position Capital Ratios 1 Tier 1 Capital Ratio TCE/Managed RWA 1 Strong capital positions with Tier I capital ratio of 8.3% at 3/31/08 8.3% 8.4% 8.4% 8.4% 8.5% Recent preferred stock issuance of $6B 6.8% Provides flexibility to be opportunistic in
Slide 18: Revenue growth drivers
Revenue growth drivers Good underlying momentum in core business drivers propelling organic growth across businesses Key metrics % Change YoY 1Q08 4Q07 3Q07 2Q07 1Q07 Retail Financial Services Regional Banking Average Deposits 4% 4% 10% 10% 12% Mortgage Loan Originations 30% 34% 35% 41% 24% Credit C
Slide 19: Key Investor Topics
UBS GLOBAL FINANCIAL SERVICES CONFERENCE KEYINVESTOR TOPICS JPMorganChase ©) 16
Slide 20: Prime Mortgage
Prime Mortgage JPM 30-day delinquency trend Key statistics Prime 1Q08 4Q07 1Q07 3.50% 3.00% EOP balances in Corporate ($B) $41.1 $36.9 $26.5 EOP balances in RFS¹ ($B) 4.0 3.6 7.4 2.50% 2.00% Total $45.1 $40.5 $33.9 1.50% 1.00% Net charge-offs 2($mm) $50 $17 $3 0.50% Net charge-off rate 0.48% 0.18% 0
Slide 21: Prime Mortgage – 1Q08 Performance
Prime Mortgage –1Q08 Performance Profile of loans charged off in 1Q08 Changes in credit policy High CLTVsat origination (e.g., 80/20 Eliminated Alt-A stackers) Implemented declining markets policy, Limited income documentation limiting CLTVs California and Florida Eliminated stated income/assets in
Slide 22: Comments on Home Lending Credit
Comments on Home Lending Credit Home equity losses could double to $900mm by end of year Expect increase in subprime mortgage losses to approximately $200mm- $250mm in 2Q08 Expect increase in prime mortgage losses to approximately $100mm in 2Q08 Across all home lending portfolios, credit could deter
Slide 23: Commercial Banking - Diversified Real Estate Exposure
Commercial Banking -Diversified Real Estate Exposure Total CB loan portfolio characteristics Real Estate Banking by industry as of 3/31/08 Granular portfolio with 24% in loans below Condos Land $3mm; 5% in loans over $100mm 5% Other 3% Average maturity of less than 3 years 12% Responsible balance sh
Slide 24: Commercial Banking Credit Quality
Commercial Banking Credit Quality Majority of NPLs and NCOs have come from real estate, as expected Credit quality still outperforming peers but expected to continue trending towards normalized levels NPL Ratio by business 3.00% 2006 2007 1Q08 2.44% 2.50% 2.00% 1.50% 1.00% 0.72% 0.44% 0.50% 0.29% 0.
Slide 25: Bear Stearns Merger Integration
Bear Stearns Merger Integration Leadership teams have been announced to approximately 3 levels down within the organization All 14,000+ BSC employees have a manager within the new organization who is responsible for ensuring appropriate decisioning is being made Businesses are 75% complete in making
Slide 26: Bear Stearns Balance Sheet – Estimated Projections
Bear Stearns Balance Sheet –Estimated Projections Risk Weighted Assets (RWA)$- in billions Estimate 3/17/08 6/30/08 Target run-rate Trading $155 $100 $30 Credit 63 60 20 Mortgages 73 20 5 Repo 8 10 0 Other Trading 11 10 5 Prime Services 41 30 50 Other Assets 30 20 15 Total RWA 225 150 95 Total GAAP
Slide 27: Bear Stearns Future Earnings Potential (exit '09)
Bear Stearns Future Earnings Potential (exit ‘09) $ in millions Business Estimated Earnings Equities + Prime Services $600-$750 Energy 50-80 Other Markets 100-200 Corporate Finance 50-100 Total Investment Bank $800-$1,130 Asset Management $0 +/- 24
Slide 28: Bear Stearns Impact on 2Q08 – Extremely Rough Estimates/Illustrative
Bear Stearns Impact on 2Q08 –Extremely Rough Estimates/Illustrative $ in millions Above the line earnings impact in 2Q08 JPM pro rata share of BSC losses through close ($400) and month of June ’08 ($200mm realized to date) - ESTIMATED1 Merger costs – ESTIMATED (100) Total ($500) +/- several hundred
Slide 29: Bear Stearns Impact Post 2Q08 – Rough Estimates
Bear Stearns Impact Post 2Q08 –Rough Estimates Approximately $900mm after-tax merger expense through the end of 2009 IB - approximately $300mm after-tax merger expense Spread evenly through the end of 2009 Primarily related to systems conversion Asset Management Net losses expected through 2009 Incl
Slide 30: Capital Management 2Q08 – Rough Projections
Capital Management 2Q08 –Rough Projections 2Q08 projections: Tier 1 capital ratio projected to be high 8% range +/- Leverage ratio projected to be 6.25% +/- Expect to maintain Tier 1 capital ratio of 8.00% to 8.50% without regulatory relief Committed to maintaining a fortress balance sheet 27
Slide 31: Comments on Environment
Comments on Environment Capital Markets Crisis Recession Possibly 75% done Just starting Hopefully over by year-end Could be deep Could be worse than capital markets crisis Why? Cannot predict outcome Problems resolving: Factors — Mortgage companies, CDOs, SIVs Deep, substantial financial pressure —
Slide 32: 2Q08 Outlook
2Q08 Outlook Investment Bank CB Lower IB fees and trading revenue Good underlying growth Higher comp/revenue ratio anticipated in 2Q08 Strong reserves but credit expected to Credit provisioning likely continue trending toward normalized levels Bear Stearns will add to risk positions TSS Good underly
Slide 33: Conclusions
Conclusions Extremely cautious on 2008 environment and impact on business Deterioration in economic environment will likely lead to increase in loan loss reserves However, we see evidence of continued organic growth and benefits of investments across businesses Fortress balance sheet positions us we
Slide 34: Forward-looking statements and notes on non-GAAP financial measures
Forward-looking statements and notes on non-GAAP financial measures Forward looking statements This presentation contains forward-looking statements within the meaningof the Private Securities Litigation ReformAct of 1995. Suchstatements are basedupon the current beliefs and expectations of JPMorgan
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