JP Morgan Chase 2009 Annual Report Download - page 79

JPMorgan Chase & Co./2009 Annual Report
77
TREASURY & SECURITIES SERVICES
Treasury & Securities Services is a global leader in
transaction, investment and information services.
TSS is one of the world’s largest cash management
providers and a leading global custodian. Treasury
Services provides cash management, trade, whole-
sale card and liquidity products and services to
small and mid-sized companies, multinational cor-
porations, financial institutions and government
entities. TS partners with the Commercial Banking,
Retail Financial Services and Asset Management
businesses to serve clients firmwide. As a result,
certain TS revenue is included in other segments’
results. Worldwide Securities Services holds, values,
clears and services securities, cash and alternative
investments for investors and broker-dealers, and it
manages depositary receipt programs globally.
Selected income statement data
Year ended December 31,
(in millions, except ratio data)
2009 2008 2007
Revenue
Lending- and deposit-related
fees
$ 1,285 $ 1,146 $
923
Asset management, admini-
stration and commissions 2,631 3,133
3,050
All other income
831 917
708
Noninterest revenue
4,747 5,196
4,681
Net interest income 2,597 2,938
2,264
Total net revenue
7,344 8,134
6,945
Provision for credit losses 55 82
19
Credit reimbursement to IB(a) (121) (121)
(121
)
Noninterest expense
Compensation expense
2,544 2,602
2,353
Noncompensation expense
2,658 2,556
2,161
Amortization of intangibles 76 65
66
Total noninterest expense
5,278 5,223
4,580
Income before income tax
expense
1,890 2,708
2,225
Income tax expense 664 941
828
Net income
$ 1,226 $ 1,767 $
1,397
Revenue by business
Treasury Services(b) $ 3,702 $ 3,779 $
3,190
Worldwide Securities Services(b) 3,642 4,355
3,755
Total net revenue
$ 7,344 $ 8,134 $
6,945
Financial ratios
ROE 25% 47%
47
%
Overhead ratio 72 64
66
Pretax margin ratio(c) 26 33
32
Year ended December 31,
(in millions, except headcount)
2009 2008 2007
Selected balance sheet data
(period-end)
Loans(d) $ 18,972 $ 24,508 $ 18,562
Equity 5,000 4,500
3,000
Selected balance sheet data
(average)
Total assets $ 35,963 $ 54,563 $
53,350
Loans(d) 18,397 26,226
20,821
Liability balances(e) 248,095 279,833
228,925
Equity 5,000 3,751
3,000
Headcount 26,609 27,070 25,669
(a) IB credit portfolio group manages certain exposures on behalf of clients
shared with TSS. TSS reimburses IB for a portion of the total cost of manag-
ing the credit portfolio. IB recognizes this credit reimbursement as a compo-
nent of noninterest revenue.
(b) Reflects an internal reorganization for escrow products from Worldwide
Securities Services to Treasury Services revenue of $168 million, $224 mil-
lion and $177 million for the years ended December 31, 2009, 2008 and
2007, respectively.
(c) Pretax margin represents income before income tax expense divided by total
net revenue, which is a measure of pretax performance and another basis by
which management evaluates its performance and that of its competitors.
(d) Loan balances include wholesale overdrafts, commercial card and trade
finance loans.
(e) Liability balances include deposits and deposits swept to on–balance sheet
liabilities, such as commercial paper, federal funds purchased and securities
loaned or sold under repurchase agreements.
2009 compared with 2008
Net income was $1.2 billion, a decrease of $541 million, or 31%,
from the prior year, driven by lower net revenue.
Net revenue was $7.3 billion, a decrease of $790 million, or 10%,
from the prior year. Worldwide Securities Services net revenue was
$3.6 billion, a decrease of $713 million, or 16%. The decrease was
driven by lower securities lending balances, primarily as a result of
declines in asset valuations and demand, lower balances and spreads
on liability products, and the effect of market depreciation on certain
custody assets. Treasury Services net revenue was $3.7 billion, a
decrease of $77 million, or 2%, reflecting spread compression on
deposit products, offset by higher trade revenue driven by wider
spreads and growth across cash management and card product
volumes.
TSS generated firmwide net revenue of $10.2 billion, including $6.6
billion of net revenue in Treasury Services; of that amount, $3.7
billion was recorded in the Treasury Services business, $2.6 billion
was recorded in the Commercial Banking business, and $245 million
was recorded in other lines of business. The remaining $3.6 billion of
net revenue was recorded in Worldwide Securities Services.
The provision for credit losses was $55 million, a decrease of $27
million from the prior year.
Noninterest expense was $5.3 billion, an increase of $55 million from
the prior year. The increase was driven by higher FDIC insurance
premiums, predominantly offset by lower headcount-related expense.