JP Morgan Chase 2009 Annual Report Download - page 80

Management’s discussion and analysis
JPMorgan Chase & Co./2009 Annual Report 78
2008 compared with 2007
Net income was a record $1.8 billion, an increase of $370 million,
or 26%, from the prior year, driven by higher total net revenue.
This increase was largely offset by higher noninterest expense.
Total net revenue was a record $8.1 billion, an increase of $1.2
billion, or 17%, from the prior year. Worldwide Securities Services
posted record net revenue of $4.4 billion, an increase of $600
million, or 16%, from the prior year. The growth was driven by
wider spreads in securities lending, foreign exchange and liability
products, increased product usage by new and existing clients
(largely in custody, fund services, alternative investment services
and depositary receipts) and higher liability balances, reflecting
increased client deposit activity resulting from recent market condi-
tions. These benefits were offset partially by market depreciation.
Treasury Services posted record net revenue of $3.8 billion, an
increase of $589 million, or 18%, reflecting higher liability balances
and volume growth in electronic funds transfer products and trade
loans. Revenue growth from higher liability balances reflects in-
creased client deposit activity resulting from recent market condi-
tions as well as organic growth. TSS firmwide net revenue, which
includes Treasury Services net revenue recorded in other lines of
business, grew to $11.1 billion, an increase of $1.5 billion, or 16%.
Treasury Services firmwide net revenue grew to $6.7 billion, an
increase of $916 million, or 16%.
Noninterest expense was $5.2 billion, an increase of $643 million,
or 14%, from the prior year, reflecting higher expense related to
business and volume growth as well as continued investment in
new product platforms.
Selected metrics
Year ended December 31,
(in millions, except ratio data)
2009
2008
2007
TSS firmwide disclosures
Treasury Services revenue –
reported(a) $ 3,702 $ 3,779 $ 3,190
Treasury Services revenue
reported in CB 2,642 2,648
2,350
Treasury Services revenue
reported in other lines of
business 245 299
270
Treasury Services firmwide
revenue(a)
(b) 6,589 6,726
5,810
Worldwide Securities Services
revenue(a) 3,642 4,355
3,755
Treasury & Securities Ser-
vices firmwide revenue(b)
$ 10,231 $ 11,081 $
9,565
Treasury Services firmwide liability
balances (average)(c)
(d) $ 274,472 $ 264,195 $
217,142
Treasury & Securities Services
firmwide liability balances
(average)(c) 361,247 382,947
316,651
TSS firmwide financial ratios
Treasury Services firmwide
overhead ratio(e)
53
%
50% 55%
Treasury & Securities Services
firmwide overhead ratio(e) 62 57
60
Selected metrics
Year ended December 31,
(in millions, except ratio data
and where othe
rwise noted) 2009 2008 2007
Firmwide business metrics
Assets under custody (in billions) $ 14,885 $ 13,205 $
15,946
Number of:
U.S.$ ACH transactions
originated (in millions) 3,896 4,000 3,870
Total U.S.$ clearing volume
(in thousands) 113,476 115,742
111,036
International electronic funds
transfer volume (in thou-
sands)(f) 193,348 171,036
168,605
Wholesale check volume
(in millions) 2,184 2,408
2,925
Wholesale cards issued
(in thousands)(g) 27,138 22,784
18,722
Credit data and quality
statistics
Net charge-offs/(recoveries) $ 19 $ (2) $ —
Nonperforming loans 14 30 —
Allowance for credit losses:
Allowance for loan losses 88 74 18
Allowance for lending-related
commitments 84 63 32
Total allowance for credit losses 172 137 50
Net charge-off/(recovery) rate 0.10% (0.01)% —%
Allowance for loan losses to
period-end loans 0.46 0.30 0.10
Allowance for loan losses to
average loans 0.48 0.28 0.09
Allowance for loan losses to
nonperforming loans NM 247 NM
Nonperforming loans to period-
end loans 0.07 0.12 —
Nonperforming loans to average
loans 0.08 0.11 —
(a) Reflects an internal reorganization for escrow products from Worldwide
Securities Services to Treasury Services revenue of $168 million, $224 million
and $177 million for the years ended December 31, 2009, 2008 and 2007,
respectively.
(b) TSS firmwide revenue includes FX revenue recorded in TSS and FX revenue
associated with TSS customers who are FX customers of IB. However, some of
the FX revenue associated with TSS customers who are FX customers of IB is
not included in TS and TSS firmwide revenue. These amounts were $661 mil-
lion, $880 million and $552 million, for the years ended December 31, 2009,
2008 and 2007, respectively.
(c) Firmwide liability balances include liability balances recorded in CB.
(d) Reflects an internal reorganization for escrow products, from Worldwide
Securities Services to TS liability balances, of $15.6 billion, $21.5 billion and
$18.1 billion for the years ended December 31, 2009, 2008 and 2007, re-
spectively.
(e) Overhead ratios have been calculated based on firmwide revenue and TSS
and TS expense, respectively, including those allocated to certain other lines
of business. FX revenue and expense recorded in IB for TSS-related FX activity
are not included in this ratio.
(f) International electronic funds transfer includes non-U.S. dollar ACH and
clearing volume.
(g) Wholesale cards issued include domestic commercial, stored value, prepaid
and government electronic benefit card products.