JP Morgan Chase 2005 Annual Report Download - page 36

Management’s discussion and analysis
JPMorgan Chase & Co.
34 JPMorgan Chase & Co. /2005 Annual Report
Business segment results
The Firm is managed on a line-of-business basis.The business segment financial
results presented reflect the current organization of JPMorgan Chase. There
are six major business segments: the Investment Bank, Retail Financial Services,
Card Services, Commercial Banking,Treasury & Securities Services and Asset &
Wealth Management, as well as a Corporate segment. The segments are
based upon the products and services provided, or the type of customer
served, and reflect the manner in which financial information is currently
evaluated by management. Results of these lines of business are presented
on an operating basis.
Segment results – Operating basis(a)(b)
(Table continues on next page)
Year ended December 31, Total net revenue Noninterest expense
(in millions, except ratios) 2005 2004 Change 2005 2004 Change
Investment Bank $ 14,578 $ 12,605 16% $ 9,739 $ 8,696 12%
Retail Financial Services 14,830 10,791 37 8,585 6,825 26
Card Services 15,366 10,745 43 4,999 3,883 29
Commercial Banking 3,596 2,374 51 1,872 1,343 39
Treasury & Securities Services 6,241 4,857 28 4,470 4,113 9
Asset & Wealth Management 5,664 4,179 36 3,860 3,133 23
Corporate (1,126) 885 NM 2,024 1,301 56
Total $ 59,149 $ 46,436 27% $ 35,549 $ 29,294 21%
(a) Represents reported results on a tax-equivalent basis and excludes the impact of credit card securitizations; Merger costs, litigation reserve charges and insurance recoveries deemed nonoperating;
and accounting policy conformity adjustments related to the Merger.
(b) 2004 results include six months of the combined Firm’s results and six months of heritage JPMorgan Chase results.
(c) As a result of the Merger, new capital allocation methodologies were implemented during the third quarter of 2004. The capital allocated to each line of business considers several factors: stand-
alone peer comparables, economic risk measures and regulatory capital requirements. In addition, effective with the third quarter of 2004, goodwill, as well as the associated capital, is only allocated
to the Corporate line of business. Prior periods have not been revised to reflect these new methodologies and are not comparable to the presentation beginning in the third quarter of 2004.
In connection with the Merger, business segment reporting was realigned to
reflect the new business structure of the combined Firm. Treasury was transferred
from the IB into Corporate. The segment formerly known as Chase Financial
Services had been comprised of Chase Home Finance, Chase Cardmember
Services, Chase Auto Finance, Chase Regional Banking and Chase Middle
Market; as a result of the Merger, this segment is now called Retail Financial
Services and is comprised of Home Finance, Auto & Education Finance,
Consumer & Small Business Banking and Insurance. Chase Cardmember
Services is now its own segment called Card Services, and Chase Middle
Market moved into Commercial Banking. Investment Management & Private
Banking was renamed Asset & Wealth Management. JPMorgan Partners,
which formerly was a stand-alone business segment, was moved into
Corporate. Corporate currently comprises Private Equity (JPMorgan Partners
and ONE Equity Partners) and Treasury, and the corporate support areas,
which include Central Technology and Operations, Audit, Executive Office,
Finance, Human Resources, Marketing & Communications, Office of the
General Counsel, Corporate Real Estate and General Services, Risk
Management, and Strategy and Development. Beginning January 1, 2006,
TSS will report results for two divisions: TS and WSS.WSS was formed by
consolidating IS and ITS.
Segment results for periods prior to July 1, 2004, reflect heritage JPMorgan
Chase-only results and have been restated to reflect the current business
segment organization and reporting classifications.
Asset &
Wealth
Management
Businesses:
• Treasury Services
• Worldwide
Securities Services:
- Investor Services
- Institutional Trust
Services
JPMorgan Chase
Businesses:
• Middle Market
Banking
• Mid-Corporate
Banking
• Real Estate
• Chase Business
Credit
• Chase Equipment
Leasing
Commercial
Banking
Businesses:
• Investment banking:
- Advisory
- Debt and equity
underwriting
• Market-making
and trading:
- Fixed income
- Equities
• Corporate lending
Investment
Bank
Retail
Financial
Services
Card
Services
Businesses:
• Investment
Management:
- Institutional
- Retail
• Private Banking
• Private Client
Services
Businesses:
• Credit Card
• Merchant Acquiring
Businesses:
• Home Finance
• Consumer & Small
Business Banking
• Auto & Education
Finance
• Insurance
Treasury &
Securities
Services
■JPMorgan is the brand name.
Chase is the brand name.