JP Morgan Chase 2008 Annual Report Download - page 228

Notes to consolidated financial statements
226 JPMorgan Chase & Co./ 2008 Annual Report
Segment results
The following table provides a summary of the Firm’s segment results for 2008, 2007 and 2006 on a managed basis. The impact of credit card
securitizations and tax-equivalent adjustments have been included in Reconciling items so that the total Firm results are on a reported basis.
Segment results and reconciliation(a) (table continued on next page)
Year ended December 31, Investment Bank Retail Financial Services Card Services Commercial Banking
(in millions, except ratios) 2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007 2006
Noninterest revenue $ 1,930 $ 14,094 $ 18,334 $ 9,355 $ 6,779 $ 4,660 $ 2,719 $ 3,046 $ 2,944 $ 1,481 $ 1,263 $ 1,073
Net interest income 10,284 4,076 499 14,165 10,526 10,165 13,755 12,189 11,801 3,296 2,840 2,727
Total net revenue 12,214 18,170 18,833 23,520 17,305 14,825 16,474 15,235 14,745 4,777 4,103 3,800
Provision for credit losses 2,015 654 191 9,905 2,610 561 10,059 5,711 4,598 464 279 160
Credit reimbursement
(to)/from TSS(b) 121 121 121 —————————
Noninterest expense(c) 13,844 13,074 12,860 12,077 9,905 8,927 5,140 4,914 5,086 1,946 1,958 1,979
Income (loss) from
continuing operations
before income tax
expense (benefit) (3,524) 4,563 5,903 1,538 4,790 5,337 `1,275 4,610 5,061 2,367 1,866 1,661
Income tax expense (benefit) (2,349) 1,424 2,229 658 1,865 2,124 495 1,691 1,855 928 732 651
Income (loss) from
continuing operations (1,175) 3,139 3,674 880 2,925 3,213 780 2,919 3,206 1,439 1,134 1,010
Income from discontinued
operations ————————————
Income (loss) before
extraordinary gain (1,175) 3,139 3,674 880 2,925 3,213 780 2,919 3,206 1,439 1,134 1,010
Extraordinary gain(d) ————————————
Net income (loss) $ (1,175) $ 3,139 $ 3,674 $ 880 $ 2,925 $ 3,213 $ 780 $ 2,919 $ 3,206 $ 1,439 $ 1,134 $ 1,010
Average common equity $ 26,098 $ 21,000 $ 20,753 $ 19,011 $ 16,000 $ 14,629 $ 14,326 $ 14,100 $ 14,100 $ 7,251 $ 6,502 $ 5,702
Average assets 832,729 700,565 647,569 304,442 241,112 231,566 173,711 155,957 148,153 114,299 87,140 57,754
Return on average
common equity (5)% 15% 18% 5% 18% 22% 5% 21% 23% 20% 17% 18%
Overhead ratio 113 72 68 51 57 60 31 32 34 41 48 52
(a) In addition to analyzing the Firm’s results on a reported basis, management reviews the Firm’s results and the results of the lines of business on a “managed basis,” which is a non-GAAP financial
measure.The Firm’s definition of managed basis starts with the reported U.S. GAAP results and includes certain reclassifications that do not have any impact on net income as reported by the lines of
business or by the Firm as a whole.
(b) TSS is charged a credit reimbursement related to certain exposures managed within IB credit portfolio on behalf of clients shared with TSS.
(c) Includes merger costs which are reported in the Corporate/Private Equity segment. Merger costs attributed to the business segments for 2008, 2007 and 2006 were as follows.
Year ended December 31, (in millions) 2008 2007 2006
Investment Bank $183 $ (2) $ 2
Retail Financial Services 90 14 24
Card Services 20 (1) 29
Commercial Banking 4(1) 1
Treasury & Securities Services —121 117
Asset Management 320 23
Corporate/Private Equity 132 58 109
(d) On September 25, 2008, JPMorgan Chase acquired the banking operations of Washington Mutual from the FDIC for $1.9 billion. The fair value of the net assets acquired exceeded the purchase price,
which resulted in negative goodwill. In accordance with SFAS 141, nonfinancial assets that are not held-for-sale, such as premises and equipment and other intangibles, acquired in the Washington
Mutual transaction were written down against that negative goodwill. The negative goodwill that remained after writing down nonfinancial assets was recognized as an extraordinary gain.
(e) Included a $1.5 billion charge to conform Washington Mutual’s loan loss reserve to JPMorgan Chase’s allowance methodology.
Note 37 – Business segments
JPMorgan Chase is organized into six major reportable business seg-
ments — Investment Bank, Retail Financial Services, Card Services,
Commercial Banking, Treasury & Securities Services and Asset
Management, as well as a Corporate/Private Equity segment. The seg-
ments are based upon the products and services provided or the type of
customer served, and they reflect the manner in which financial infor-
mation is currently evaluated by management. Results of these lines of
business are presented on a managed basis. For a definition of man-
aged basis, see Explanation and Reconciliation of the Firm’s use of non-
GAAP financial measures, on pages 50–51 of this Annual Report. For a
further discussion concerning JPMorgan Chase’s business segments, see
Business segment results on pages 52–53 of this Annual Report.