JP Morgan Chase 2009 Annual Report Download - page 85

JPMorgan Chase & Co./2009 Annual Report
83
of the Chase Payment Solutions joint venture, partially offset by losses
of $642 million on preferred securities of Fannie Mae and Freddie
Mac and a $248 million charge related to the offer to repurchases
auction-rate securities.
Merger-related items were a net loss of $635 million compared with
a loss of $211 million in the prior year. Bear Stearns net merger-
related costs were $425 million compared with $836 million. The
prior year included a net loss of $423 million, which represented
JPMorgan Chase’s 49.4% ownership in Bear Stearn’s losses from
April 8 to May 30, 2008. Washington Mutual net merger-related
costs were $210 million, which included an extraordinary gain of $76
million, compared with a net gain of $625 million. The prior year
included an extraordinary gain of $1.9 billion, conforming loan loss
reserves of $911 million, credit card related loan loss reserves of
$250 million and net merger-related costs of $120 million.
2008 compared with 2007
Net income for Corporate/Private Equity was $557 million, compared
with net income of $1.9 billion in the prior year.
Net loss for Private Equity was $690 million, compared with net income
of $2.2 billion in the prior year. Net revenue was a loss of $963 million,
a decrease of $4.9 billion, reflecting Private Equity losses of $894
million, compared with gains of $4.1 billion in the prior year. Noninter-
est expense was $120 million, a decrease of $469 million from the prior
year, reflecting lower compensation expense.
Net income for Corporate was $1.5 billion, compared with a net loss of
$150 million in the prior year. 2008 included a gain of $955 million on
the proceeds from the sale of Visa shares in its initial public offering,
$627 million on the dissolution of the Chase Paymentech Solutions joint
venture, and $414 million from the sale of MasterCard shares, partially
offset by losses of $642 million on preferred securities of Fannie Mae
and Freddie Mac and $303 million related to the offer to repurchase
auction-rate securities. 2007 included a gain of $145 million on the sale
of MasterCard shares.
Merger-related items were a net loss of $211 million, compared with a
net loss of $130 million in the prior year. Items related to the Washing-
ton Mutual transaction included a $1.9 billion extraordinary gain,
conforming loan loss reserves of $911 million, credit card related loan
loss reserves of $250 million and net merger-related costs of $120
million. Bear Stearns merger-related items included a net loss of $423
million, which represented JPMorgan Chase’s 49.4% ownership in Bear
Stearn’s losses from April 8 to May 30, 2008 and net merger-related
costs of $413 million. Results for 2007 include merger costs of $130
million related to the Bank One and Bank of New York Transactions.
Selected metrics
Year ended December 31,
(in millions, except headcount)
2009 2008 2007
Total net revenue
Private equity(a) $ 18 $ (963) $ 3,967
Corporate 6,616 1,032 452
Total net revenue $ 6,634 $ 69 $ 4,419
Net income/(loss)
Private equity(a) $ (78) $ (690) $ 2,165
Corporate(b)(c) 3,743 1,458 (150
)
Merger – related items(d) (635) (211) (130
)
Total net income $ 3,030 $ 557 $ 1,885
Headcount 20,199 23,376 22,512
(a) The Firm adopted the new guidance for fair value in the first quarter of 2007.
See Note 3 on pages 156–173 of this Annual Report for additional information.
(b) Included $675 million FDIC special assessment during second quarter of 2009 and
a release of credit card litigation reserves in 2008 and insurance recoveries related to
settlement of the Enron and WorldCom class action litigations.
(c) Includes tax benefits recognized upon resolution of tax audits.
(d) Includes an accounting conformity loan loss reserve provision and an extraordinary
gain related to the Washington Mutual transaction in 2008. 2008 also reflects items
related to the Bear Stearns merger, which included Bear Stearns’ equity earnings,
merger costs, Bear Stearns asset management liquidation costs and Bear Stearns
private client services broker retention expense. 2007 represent costs related to the
Bank One transaction in 2004 and the Bank of New York transaction in 2006.
Private equity portfolio
2009 compared with 2008
The carrying value of the private equity portfolio at December 31,
2009, was $7.3 billion, up from $6.9 billion at December 31, 2008.
The portfolio increase was primarily driven by additional follow-on
investments and net unrealized gains on the existing portfolio,
partially offset by sales during 2009. The portfolio represented
6.3% of the Firm’s stockholders’ equity less goodwill at December
31, 2009, up from 5.8% at December 31, 2008.
2008 compared with 2007
The carrying value of the private equity portfolio at December 31, 2008,
was $6.9 billion, down from $7.2 billion at December 31, 2007. The
portfolio decrease was primarily driven by unfavorable valuation ad-
justments on existing investments, partially offset by new investments,
and the addition of the Bear Stearns portfolios. The portfolio repre-
sented 5.8% of the Firm’s stockholders’ equity less goodwill at Decem-
ber 31, 2008, down from 9.2% at December 31, 2007.
Selected income statement and balance sheet data
Year ended December 31,
(in millions) 2009 2008 2007
Private equity
Realized gains $ 109 $ 1,717 $ 2,312
Unrealized gains/(losses)(a)(b) (81) (2,480) 1,607
Total direct investments 28 (763) 3,919
Third-party fund investments (82) (131) 165
Total private equity gains/(losses)(c) $ (54) $ (894) $ 4,084
Private equity portfolio
information(d)
Direct investments
Publicly held securities
Carrying value $ 762 $ 483 $ 390
Cost 743 792 288
Quoted public value 791 543 536
Privately held direct securities
Carrying value 5,104 5,564 5,914
Cost 5,959 6,296 4,867
Third-party fund investments(e)
Carrying value 1,459 805 849
Cost 2,079 1,169 1,076
Total private equity portfolio – Carrying
value $ 7,325 $ 6,852 $ 7,153
Total private equity portfolio – Cost $ 8,781 $ 8,257 $ 6,231
(a) Unrealized gains/(losses) contain reversals of unrealized gains and losses that were
recognized in prior periods and have now been realized.
(b) The Firm adopted the new guidance for fair value in the first quarter of 2007. For
additional information, see Note 3 on pages 156–173 of this Annual Report.
(c) Included in principal transactions revenue in the Consolidated Statements of Income.
(d) For more information on the Firm’s policies regarding the valuation of the private
equity portfolio, see Note 3 on pages 156–173 of this Annual Report.
(e) Unfunded commitments to third-party equity funds were $1.5 billion, $1.4 billion and
$881 million at December 31, 2009, 2008 and 2007, respectively.