JP Morgan Chase 2009 Annual Report Download - page 81

JPMorgan Chase & Co./2009 Annual Report
79
ASSET MANAGEMENT
Asset Management, with assets under supervision
of $1.7 trillion, is a global leader in investment and
wealth management. AM clients include institutions,
retail investors and high-net-worth individuals in
every major market throughout the world. AM of-
fers global investment management in equities,
fixed income, real estate, hedge funds, private eq-
uity and liquidity, including money market instru-
ments and bank deposits. AM also provides trust
and estate, banking and brokerage services to high-
net-worth clients, and retirement services for corpo-
rations and individuals. The majority of AM’s client
assets are in actively managed portfolios.
Selected income statement data
Year ended December 31,
(in millions, except ratios) 2009 2008 2007
Revenue
Asset management, administration
and commissions $ 5,621 $
6,004
$
6,821
All other income 751 62
654
Noninterest revenue 6,372 6,066
7,475
Net interest income 1,593 1,518
1,160
Total net revenue 7,965 7,584
8,635
Provision for credit losses 188 85
(18
)
Noninterest expense
Compensation expense 3,375 3,216 3,521
Noncompensation expense 2,021 2,000
1,915
Amortization of intangibles 77 82
79
Total noninterest expense 5,473 5,298
5,515
Income before income tax expense 2,304 2,201 3,138
Income tax expense 874 844
1,172
Net income $ 1,430 $ 1,357 $
1,966
Revenue by client segment
Private Bank(a) $ 2,585 $ 2,565 $ 2,362
Institutional 2,065 1,775
2,525
Retail 1,580 1,620 2,408
Private Wealth Management(a) 1,316 1,387 1,340
Bear Stearns Private Client
Services(b) 419
237
—
Total net revenue $ 7,965 $ 7,584 $
8,635
Financial ratios
ROE 20%
24
%
51
%
Overhead ratio 69 70
64
Pretax margin ratio(c) 29 29
36
(a) In 2008, certain clients were transferred from Private Bank to Private Wealth
Management. Prior periods have been revised to conform to this change.
(b) Bear Stearns Private Client Services was renamed to JPMorgan Securities at
the beginning of 2010.
(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.
2009 compared with 2008
Net income was $1.4 billion, an increase of $73 million, or 5%,
from the prior year, due to higher total net revenue, offset largely
by higher noninterest expense and provision for credit losses.
Total net revenue was $8.0 billion, an increase of $381 million, or
5%, from the prior year. Noninterest revenue was $6.4 billion, an
increase of $306 million, or 5%, due to higher valuations of seed
capital investments and net inflows, offset largely by lower market
levels. Net interest income was $1.6 billion, up by $75 million, or
5%, from the prior year, due to wider loan spreads and higher
deposit balances, offset partially by narrower deposit spreads.
Revenue from the Private Bank was $2.6 billion, up 1% from the
prior year due to wider loan spreads and higher deposit balances,
offset partially by the effect of lower market levels. Revenue from
Institutional was $2.1 billion, up 16% due to higher valuations of
seed capital investments and net inflows, offset partially by the
effect of lower market levels. Revenue from Retail was $1.6 billion,
down 2% due to the effect of lower market levels, offset largely by
higher valuations of seed capital investments. Revenue from Private
Wealth Management was $1.3 billion, down 5% due to narrower
deposit spreads and the effect of lower market levels, offset par-
tially by higher deposit balances and wider loan spreads. Bear
Stearns Private Client Services contributed $419 million to revenue.
The provision for credit losses was $188 million, an increase of
$103 million from the prior year, reflecting continued weakness in
the credit environment.
Noninterest expense was $5.5 billion, an increase of $175 million,
or 3%, from the prior year due to the effect of the Bear Stearns
merger, higher performance-based compensation and higher FDIC
insurance premiums, offset largely by lower headcount-related
expense.
2008 compared with 2007
Net income was $1.4 billion, a decline of $609 million, or 31%,
from the prior year, driven by lower total net revenue offset partially
by lower noninterest expense.
Total net revenue was $7.6 billion, a decrease of $1.1 billion, or
12%, from the prior year. Noninterest revenue was $6.1 billion, a
decline of $1.4 billion, or 19%, due to lower performance fees and
the effect of market levels, including the impact of lower market
valuations of seed capital investments. The lower results were
offset partially by the benefit of the Bear Stearns merger and in-
creased revenue from net asset inflows. Net interest income was
$1.5 billion, up $358 million, or 31%, from the prior year, due to
higher deposit and loan balances and wider deposit spreads.
Private Bank revenue grew 9% to $2.6 billion, due to increased
deposit and loan balances and net asset inflows, partially offset by
the effect of lower markets and lower performance fees. Institu-
tional revenue declined 30% to $1.8 billion due to lower perform-
ance fees, partially offset by net liquidity inflows. Retail revenue
declined 33% to $1.6 billion due to the effect of lower markets,
including the impact of lower market valuations of seed capital
investments and net equity outflows. Private Wealth Management
revenue grew 4% to $1.4 billion due to higher deposit and loan
balances. Bear Stearns Brokerage contributed $237 million to
revenue.