JP Morgan Chase 2009 Annual Report Download - page 71

JPMorgan Chase & Co./2009 Annual Report
69
down $395 million from the prior year, as an increase in losses
from the repurchase of previously-sold loans was predominantly
offset by wider margins on new originations. Operating revenue,
which represents loan servicing revenue net of other changes in fair
value of the MSR asset, was $1.7 billion, compared with $1.2
billion in the prior year, reflecting growth in average third-party
loans serviced as a result of the Washington Mutual transaction.
MSR risk management results were $1.6 billion, compared with
$1.5 billion in the prior year, reflecting the positive impact of a
decrease in estimated future mortgage prepayments during 2009.
The provision for credit losses was $14.8 billion, compared with
$9.5 billion in the prior year, reflecting continued weakness in the
home equity and mortgage loan portfolios (see Retail Financial
Services discussion of the provision for credit losses, above on page
66 and Allowance for Credit Losses on pages 123–125 of this
Annual Report, for further detail).
Noninterest expense was $6.4 billion, up by $1.5 billion, or 32%,
from the prior year, reflecting higher servicing and default-related
expense and the impact of the Washington Mutual transaction.
2008 compared with 2007
Consumer Lending net loss was $2.1 billion, compared with net
income of $680 million in the prior year. Total net revenue was
$10.9 billion, up $3.6 billion, or 48%, driven by higher mortgage
fees and related income, the impact of the Washington Mutual
transaction, higher loan balances and wider loan spreads.
The increase in mortgage fees and related income was primarily
driven by higher net mortgage servicing revenue. Mortgage produc-
tion revenue of $898 million was up $18 million, as higher mort-
gage origination volume was predominantly offset by an increase in
losses related to the repurchase of previously sold loans and mark-
downs of the mortgage warehouse. Operating revenue, which
represents loan servicing revenue net of other changes in fair value
of the MSR asset was $1.2 billion, an increase of $403 million, or
50%, from the prior year reflecting growth in average third-party
loans serviced which increased 42%, primarily due to the Washing-
ton Mutual transaction. MSR risk management results were $1.5
billion, compared with $411 million in the prior year.
The provision for credit losses was $9.5 billion, compared with $2.5
billion in the prior year. The provision reflected weakness in the
home equity and mortgage portfolios (see Retail Financial Services
discussion of the provision for credit losses for further detail).
Noninterest expense was $4.8 billion, up $1.1 billion, or 30%, from
the prior year, reflecting higher mortgage reinsurance losses, the
impact of the Washington Mutual transaction and higher servicing
expense due to increased delinquencies and defaults.
Selected metrics
Year ended December 31, (in billions) 2009 2008 2007
Business metrics
Loans excluding purchased credit-
impaired loans(a)
End-of-period loans owned
Home equity $ 101.4 $ 114.3 $ 94.8
Prime mortgage 59.4 65.2 34.0
Subprime mortgage 12.5 15.3 15.5
Option ARMs 8.5 9.0 —
Student loans 15.8 15.9 11.0
Auto loans 46.0 42.6 42.3
Other 0.7 1.3 2.1
Total end-of-period loans owned $ 244.3 $ 263.6 $ 199.7
Average loans owned
Home equity $ 108.3 $ 99.9 $ 90.4
Prime mortgage 62.2 45.0 30.4
Subprime mortgage 13.9 15.3 12.7
Option ARMs 8.9 2.3 —
Student loans 16.1 13.6 10.5
Auto loans 43.6 43.8 41.1
Other 1.0 1.1 2.3
Total average loans owned $ 254.0 $ 221.0 $ 187.4
Purchased credit-impaired loans(a)
End-of-period loans owned
Home equity $ 26.5 $ 28.6 $ —
Prime mortgage 19.7 21.8 —
Subprime mortgage 6.0 6.8 —
Option ARMs 29.0 31.6 —
Total end-of-period loans owned $ 81.2 $ 88.8 $ —
Average loans owned
Home equity $ 27.6 $ 7.1 $ —
Prime mortgage 20.8 5.4 —
Subprime mortgage 6.3 1.7 —
Option ARMs 30.5 8.0 —
Total average loans owned $ 85.2 $ 22.2 $ —
Total consumer lending portfolio
End-of-period loans owned
Home equity $ 127.9 $ 142.9 $ 94.8
Prime mortgage 79.1 87.0 34.0
Subprime mortgage 18.5 22.1 15.5
Option ARMs 37.5 40.6 —
Student loans 15.8 15.9 11.0
Auto loans 46.0 42.6 42.3
Other 0.7 1.3 2.1
Total end-of-period loans owned $ 325.5 $ 352.4 $ 199.7
Average loans owned
Home equity $ 135.9 $ 107.0 $
90.4
Prime mortgage 83.0 50.4
30.4
Subprime mortgage 20.2 17.0
12.7
Option ARMs 39.4 10.3 —
Student loans 16.1 13.6
10.5
Auto loans 43.6 43.8
41.1
Other 1.0 1.1
2.3
Total average loans owned(b) $ 339.2 $ 243.2 $ 187.4
(a) Purchased credit-impaired loans represent loans acquired in the Washington
Mutual transaction for which a deterioration in credit quality occurred
between the origination date and JPMorgan Chase acquisition date.
(b) Total average loans owned includes loans held-for-sale of $2.2 billion, $2.8
billion and $10.6 billion for the years ended December 31, 2009, 2008 and
2007, respectively.