JP Morgan Chase 2006 Annual Report Download - page 6

4
Approaching Asia holistically
Our Operating Committee members traveled to Asia
late last year and reviewed how we were doing, country-
by-country. The reviews spanned all lines of business.
This process shed new light on our businesses, sharpened
our focus on ways we could work together to improve
performance and strengthened our resolve to execute
aggressively. This year, the business plans in each country
are not only appropriately more ambitious, but also
better coordinated and fully supported by the rest of the
company. As this effort is replicated in other parts of the
world, we are confident it will strengthen our operations
and opportunities.
Working better together
There are plenty of other examples where good collabora-
tion has made us better. Our Commercial Banking clients
last year generated over $700 million of investment bank-
ing revenue, up 30% from 2005. The merger made this
possible by bringing top-tier Investment Bank products
to an extensive Commercial Banking customer base. In
addition, our Treasury & Securities Services group does a
significant amount of business with our Commercial
Banking client base. Our Asset Management group calls
on Commercial Banking and Investment Bank customers,
and works with investment bankers to identify clients who
can benefit from our private banking services. Clients
across all of our businesses use our branches. We can use
this kind of disciplined and collaborative approach across
our businesses to continue to build on the distinctive
strength of our extensive capabilities and relationships.
Achieved quality growth, driving future growth
It’s easy to grow short-term earnings: just stop invest-
ing in your company’s future and compromise your
standards on accepting new clients and business.
We won’t do that.
Virtually all of our businesses achieved real, healthy
growth. You can see this described more fully in the
pages ahead, so I’ll just reflect on a few key items.
• Our goal is to accomplish real, sustainable growth, but
not growth at any cost. In the financial services world,
it is easy to stretch for growth by reducing underwriting
standards or taking on increasingly higher levels of risk.
But such an approach is foolish longer term. For exam-
ple, last year we declined to underwrite negative amorti-
zation mortgage loans and option adjustable-rate mort-
gages. That may have hurt our 2006 earnings a bit, but
we believe it was the right decision for the company.
• We’re growing our earnings, but not at the expense of
smart, longer-term investments. We continue to invest
in the areas that drive future growth, such as 125 new
retail branches last year, 900 additional salespeople in
branches, 65 new private bankers to serve our ultra-
high-net-worth clients and stronger trading businesses
in mortgages, energy and other commodities.
• Where it made sense, we went outside our company
and acquired great assets and businesses, such as the
swap of our Corporate Trust business for 339 Bank of
New York retail branches and the bank’s commercial
banking business. We also did smaller deals to supple-
ment our student loan, hedge fund processing, asset
management, trading and credit card businesses.
• These investments are not confined to the front office.
We’ve invested hundreds of millions of dollars in
new and improved systems, which I will discuss next.
While there’s a short-term cost for these investments,
there’s a long-term benefit of increased efficiency and
improved quality.
Materially improved infrastructure and cost structure
We continued a massive investment plan in our systems
and operating infrastructure while simultaneously
reducing expenses.
• We completed major consolidations and mergers of
our platforms: retail (deposit and teller), wholesale
loan and Internet.