JP Morgan Chase 2009 Annual Report Download - page 55

JPMorgan Chase & Co./2009 Annual Report
53
CONSOLIDATED RESULTS OF OPERATIONS
This following section provides a comparative discussion of JPMorgan
Chase’s Consolidated Results of Operations on a reported basis for
the three-year period ended December 31, 2009. Factors that related
primarily to a single business segment are discussed in more detail
within that business segment. For a discussion of the Critical Ac-
counting Estimates Used by the Firm that affect the Consolidated
Results of Operations, see pages 135–139 of this Annual Report.
Revenue
Year ended December 31,
(in millions) 2009 2008 2007
Investment banking fees $ 7,087 $
5,526
$
6,635
Principal transactions 9,796 (10,699)
9,015
Lending- and deposit-related fees 7,045 5,088
3,938
Asset management, administration
and commissions 12,540 13,943
14,356
Securities gains 1,110 1,560
164
Mortgage fees and related income 3,678 3,467
2,118
Credit card income 7,110 7,419
6,911
Other income 916 2,169
1,829
Noninterest revenue 49,282 28,473 44,9
66
Net interest income 51,152 38,779
26,406
Total net revenue $100,434 $ 67,252 $
71,372
2009 compared with 2008
Total net revenue was $100.4 billion, up by $33.2 billion, or 49%,
from the prior year. The increase was driven by higher principal
transactions revenue, primarily related to improved performance
across most fixed income and equity products, and the absence of net
markdowns on legacy leveraged lending and mortgage positions in
IB, as well as higher levels of trading gains and investment securities
income in Corporate/Private Equity. Results also benefited from the
impact of the Washington Mutual transaction, which contributed to
increases in net interest income, lending- and deposit-related fees,
and mortgage fees and related income. Lastly, higher investment
banking fees also contributed to revenue growth. These increases in
revenue were offset partially by reduced fees and commissions from
the effect of lower market levels on assets under management and
custody, and the absence of proceeds from the sale of Visa shares in
its initial public offering in the first quarter of 2008.
Investment banking fees increased from the prior year, due to higher
equity and debt underwriting fees. For a further discussion of invest-
ment banking fees, which are primarily recorded in IB, see IB segment
results on pages 63–65 of this Annual Report.
Principal transactions revenue, which consists of revenue from trading
and private equity investing activities, was significantly higher com-
pared with the prior year. Trading revenue increased, driven by
improved performance across most fixed income and equity products;
modest net gains on legacy leveraged lending and mortgage-related
positions, compared with net markdowns of $10.6 billion in the prior
year; and gains on trading positions in Corporate/Private Equity,
compared with losses in the prior year of $1.1 billion on markdowns
of Federal National Mortgage Association (“Fannie Mae”) and Fed-
eral Home Loan Mortgage Corporation (“Freddie Mac”) preferred
securities. These increases in revenue were offset partially by an
aggregate loss of $2.3 billion from the tightening of the Firm’s credit
spread on certain structured liabilities and derivatives, compared with
gains of $2.0 billion in the prior year from widening spreads on these
liabilities and derivatives. The Firm’s private equity investments pro-
duced a slight net loss in 2009, a significant improvement from a
larger net loss in 2008. For a further discussion of principal transac-
tions revenue, see IB and Corporate/Private Equity segment results on
pages 63–65 and 82–83, respectively, and Note 3 on pages 156–
173 of this Annual Report.
Lending- and deposit-related fees rose from the prior year, predomi-
nantly reflecting the impact of the Washington Mutual transaction
and organic growth in both lending- and deposit-related fees in RFS,
CB, IB and TSS. For a further discussion of lending- and deposit-
related fees, which are mostly recorded in RFS, TSS and CB, see the
RFS segment results on pages 66–71, the TSS segment results on
pages 77–78, and the CB segment results on pages 75–76 of this
Annual Report.
The decline in asset management, administration and commissions
revenue compared with the prior year was largely due to lower asset
management fees in AM from the effect of lower market levels. Also
contributing to the decrease were lower administration fees in TSS,
driven by the effect of market depreciation on certain custody assets
and lower securities lending balances; and lower brokerage commis-
sions revenue in IB, predominantly related to lower transaction vol-
ume. For additional information on these fees and commissions, see
the segment discussions for TSS on pages 77–78, and AM on pages
79–81 of this Annual Report.
Securities gains were lower in 2009 and included credit losses
related to other-than-temporary impairment and lower gains on the
sale of MasterCard shares of $241 million in 2009, compared with
$668 million in 2008. These decreases were offset partially by
higher gains from repositioning the Corporate investment securities
portfolio in connection with managing the Firm’s structural interest
rate risk. For a further discussion of securities gains, which are
mostly recorded in Corporate/Private Equity, see the Corpo-
rate/Private Equity segment discussion on pages 82–83 of this
Annual Report.
Mortgage fees and related income increased slightly from the prior
year, as higher net mortgage servicing revenue was largely offset by
lower production revenue. The increase in net mortgage servicing
revenue was driven by growth in average third-party loans serviced as
a result of the Washington Mutual transaction. Mortgage production
revenue declined from the prior year, reflecting an increase in esti-
mated losses from the repurchase of previously-sold loans, offset
partially by wider margins on new originations. For a discussion of
mortgage fees and related income, which is recorded primarily in
RFS’s Consumer Lending business, see the Consumer Lending discus-
sion on pages 68–71 of this Annual Report.
Credit card income, which includes the impact of the Washington
Mutual transaction, decreased slightly compared with the prior year,