JP Morgan Chase 2009 Annual Report Download - page 127

JPMorgan Chase & Co./2009 Annual Report 125
The calculation of the allowance for loan losses to total retained loans, excluding both home lending purchased credit-impaired loans and loans
held by the Washington Mutual Master Trust, is presented below.
December 31, (in millions, except ratios) 2009 2008
Allowance for loan losses $ 31,602 $ 23,164
Less: Allowance for purchased credit-impaired loans 1,581 —
Adjusted allowance for loan losses $ 30,021 $ 23,164
Total loans retained $ 627,218 $ 728,915
Less: Firmwide purchased credit-impaired loans 81,380 89,088
Loans held by the Washington Mutual Master Trust 1,002 —
Adjusted loans $ 544,836 $ 639,827
Allowance for loan losses to ending loans excluding purchased credit-impaired loans and loans held by
the Washington Mutual Master Trust 5.51% 3.62
%
The following table presents the allowance for credit losses by business segment at December 31, 2009 and 2008.
Allowance for credit losses
2009 2008
December 31,
(in millions) Loan losses
Lending-related
commitments Total Loan losses
Lending-related
commitments Total
Investment Bank $ 3,756 $ 485 $ 4,241 $ 3,444 $ 360 $ 3,804
Commercial Banking 3,025 349 3,374 2,826 206 3,032
Treasury & Securities Services 88 84 172 74 63 137
Asset Management 269 9 278 191 5 196
Corporate/Private Equity 7 — 7 10 — 10
Total Wholesale 7,145 927 8,072 6,545 634 7,179
Retail Financial Services 14,776 12 14,788 8,918 25 8,943
Card Services 9,672 — 9,672 7,692 — 7,692
Corporate/Private Equity 9 — 9 9 — 9
Total Consumer 24,457 12 24,469 16,619 25 16,644
Total $ 31,602 $ 939 $ 32,541 $ 23,164 $ 659 $ 23,823
Provision for credit losses
The managed provision for credit losses was $38.5 billion for the year ended December 31, 2009, up by $13.9 billion from the prior year. The prior-year
included a $1.5 billion charge to conform Washington Mutual’s allowance for loan losses, which affected both the consumer and wholesale portfolios.
For the purpose of the following analysis, this charge is excluded. The consumer-managed provision for credit losses was $34.5 billion for the year
ended December 31, 2009, compared with $20.4 billion in the prior year, reflecting an increase in the allowance for credit losses in the home lending
and credit card loan portfolios. Included in the 2009 addition to the allowance for loan losses was a $1.6 billion increase related to estimated deteriora-
tion in the Washington Mutual purchased credit-impaired portfolio. The wholesale provision for credit losses was $4.0 billion for the year ended Decem-
ber 31, 2009, compared with $2.7 billion in the prior year, reflecting continued weakness in the credit environment.
Year ended December 31, Provision for credit losses
(in millions) Loan losses Lending-related commitments Total
2009 2008 2007 2009 2008 2007 2009 2008 2007
Investment Bank
$ 2,154
$ 2,216 $ 376
$ 125
$ (201) $ 278
$ 2,279
$ 2,015 $ 654
Commercial Banking 1,314 505 230 140 (41) 49 1,454 464 279
Treasury & Securities Services 34 52 11 21 30 8 55 82 19
Asset Management 183 87 (19) 5 (2) 1 188 85 (18 )
Corporate/Private Equity(a)(b) (1) 676 — (1) 5 — (2) 681 —
Total Wholesale 3,684 3,536 598 290 (209) 336 3,974 3,327 934
Retail Financial Services 15,950 9,906 2,620 (10) (1) (10) 15,940 9,905 2,610
Card Services – reported 12,019 6,456 3,331 — — — 12,019 6,456 3,331
Corporate/Private Equity(a)(c)(d) 82 1,339 (11) — (48) — 82 1,291 (11 )
Total Consumer 28,051 17,701 5,940 (10) (49) (10) 28,041 17,652 5,930
Total provision for credit
losses – reported 31,735 21,237 6,538 280 (258) 326 32,015 20,979 6,864
Credit card – securitized 6,443 3,612 2,380 — — — 6,443 3,612 2,380
Total provision for credit
losses – managed $ 38,178
$ 24,849 $ 8,918
$ 280
$ (258) $ 326
$ 38,458
$ 24,591 $ 9,244
(a) Includes accounting conformity provisions related to the Washington Mutual transaction in 2008.
(b) Includes provision expense related to loans acquired in the Bear Stearns merger in the second quarter of 2008.
(c) Includes amounts related to held-for-investment prime mortgages transferred from AM to the Corporate/Private Equity segment.
(d) In November 2008, the Firm transferred $5.8 billion of higher quality credit card loans from the legacy Chase portfolio to a securitization trust previously established by
Washington Mutual (‘‘the Trust’’). As a result of converting higher credit quality Chase-originated on-book receivables to the Trust’s seller’s interest which has a higher
overall loss rate reflective of the total assets within the Trust, approximately $400 million of incremental provision expense was recorded during the fourth quarter. This
incremental provision expense was recorded in the Corporate segment as the action related to the acquisition of Washington Mutual’s banking operations. For further
discussion of credit card securitizations, see Note 15 on pages 206---213 of this Annual Report.