JP Morgan Chase 2006 Annual Report Download - page 4

Download and view the complete annual report

Please find page 4 of the 2006 JP Morgan Chase annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 156

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

2
JPMorgan Chase made very good progress in 2006. We earned $13.6 billion
from continuing operations, up significantly from the year before; we grew
our major businesses – and the growth was high quality; and we positioned
ourselves extremely well for 2007 and beyond.
In this letter, I will review and assess our 2006 performance and describe key
initiatives and issues we are focusing on this year and in the future to make
our company even better. I hope, after reading this letter, that you will share
my enthusiasm about the emerging power and enormous potential of the
JPMorgan Chase franchise.
First, let’s look at 2006:
I. OUR PERFORMANCE IN 2006: PROGRESS
AND RENEWED FOCUS
At JPMorgan Chase, we analyze our performance against
a broad spectrum of measures, including growth, quality,
risk management, marketing, collaboration, operations,
controls and compliance. We continue to make significant
progress on all these fronts. Although our absolute per-
formance is not yet where it should be, the pace and level
of improvement are extremely good and make us more
confident than ever about our future.
Starting with “financial performance,” we believe there
are six key aspects of our overall 2006 performance that
illustrate the progress we have made.
Strengthened financial performance
Our earnings from continuing operations for the year
were $13.6 billion, up from $8.3 billion in 2005.
Return on equity (excluding goodwill) was 20% versus
13%. Revenue growth – almost all organic – was 14%.
These results, produced with the support of a still-favor-
able credit environment, are good, but not excellent.
And in some cases, we still trail our major competitors.
While we’re not yet top-tier in financial performance, we
feel particularly good about a number of major issues.
We essentially completed a huge, complex merger while
staying focused on business and pursuing growth; we
dramatically cut expenses and waste; and we increased
investment spending. Integration risk – the potential to
suffer major setbacks because of merger-related issues –
is always a big challenge and source of concern. But
superb execution throughout 2005 and 2006 has
enabled us to put that risk mostly behind us.
Increased management discipline and collaboration
Ultimately, we will succeed or fail based upon the talent,
dedication and diligence of our management team and
the people who work with them. On this measure, you,
our shareholders, should be extremely pleased. Your
management team regularly reviews all aspects of our
business in an open and honest way, assessing our
strengths and weaknesses, and our opportunities and
risks. The level of collaboration among business units is
higher than ever and still getting better. Our top man-
agers work well together, respect each other and take
pride in each other’s successes. As I have stressed in prior
shareholder letters, getting people to work together
across all business units is critical to our success.
DEAR FELLOW SHAREHOLDER,