JP Morgan Chase 2008 Annual Report Download - page 54

Management’s discussion and analysis
52 JPMorgan Chase & Co./ 2008 Annual Report
BUSINESS SEGMENT RESULTS
The Firm is managed on a line-of-business basis. The business seg-
ment financial results presented reflect the current organization of
JPMorgan Chase. There are six major reportable business segments:
the Investment Bank, Retail Financial Services, Card Services,
Commercial Banking, Treasury & Securities Services and Asset
Management, as well as a Corporate/Private Equity segment.
The business segments are determined based upon the products and
services provided, or the type of customer served, and they reflect
the manner in which financial information is currently evaluated by
management. Results of these lines of business are presented on a
managed basis.
Asset
Management
Businesses:
• Treasury Services
• Worldwide
Securities Services
JPMorgan Chase
Businesses:
• Middle-Market
Banking
• Commercial Term
Lending
• Mid-Corporate
Banking
• Real Estate
Banking
Commercial
Banking
Businesses:
• Investment
Banking:
- Advisory
- Debt and equity
underwriting
• Market-Making
and Trading:
- Fixed income
- Equities
•
Corporate Lending
• Principal Investing
• Prime Services
• Research
Investment
Bank
Retail
Financial
Services
Card
Services
Businesses:
• Investment
Management:
- Institutional
- Retail
• Private Bank
• Private Wealth
Management
• Bear Stearns
Brokerage
Businesses:
• Credit Card
• Merchant
Acquiring
Businesses:
• Retail Banking:
- Consumer and
Business
Banking (includ-
ing Business
Banking loans)
• Consumer
Lending:
- Loan originations
and balances
(including home
lending, student,
auto and other
loans)
- Mortgage
production
and servicing
Treasury &
Securities
Services
Business segment changes
Commencing October 1, 2008, RFS was reorganized into the follow-
ing two reporting segments: Retail Banking and Consumer Lending.
Previously, RFS consisted of three reporting segments: Regional
Banking, Mortgage Banking and Auto Finance. The new Retail
Banking reporting segment now comprises consumer banking and
business banking activities, which previously were reported in
Regional Banking. The new Consumer Lending reporting segment
now comprises: (a) the prior Mortgage Banking and Auto Finance
reporting segments, (b) the home equity, student and other lending
business activities which were previously reported in the Regional
Banking reporting segment and (c) loan activity related to prime
mortgages that were originated by RFS, but reported in the
Corporate/Private Equity business segment. This reorganization is
reflected in this Annual Report and the financial information for prior
periods has been revised to reflect the changes as if they had been
in effect throughout all periods reported.
Description of business segment reporting methodology
Results of the business segments are intended to reflect each seg-
ment as if it were essentially a stand-alone business. The manage-
ment reporting process that derives business segment results allo-
cates income and expense using market-based methodologies.
Business segment reporting methodologies used by the Firm are dis-
cussed below. The Firm continues to assess the assumptions,
methodologies and reporting classifications used for segment report-
ing, and further refinements may be implemented in future periods.
Revenue sharing
When business segments join efforts to sell products and services to
the Firm’s clients, the participating business segments agree to share
revenue from those transactions. The segment results reflect these
revenue-sharing agreements.
Funds transfer pricing
Funds transfer pricing is used to allocate interest income and
expense to each business and transfer the primary interest rate risk
exposures to the Treasury group within the Corporate/Private Equity
business segment. The allocation process is unique to each business
segment and considers the interest rate risk, liquidity risk and regula-
tory requirements of that segment’s stand-alone peers. This process is
overseen by the Firm’s Asset-Liability Committee (“ALCO”). Business
segments may retain certain interest rate exposures, subject to man-
agement approval, that would be expected in the normal operation
of a similar peer business.