JP Morgan Chase 2010 Annual Report Download - page 86

Management’s discussion and analysis
JPMorgan Chase & Co./2010 Annual Report
86
ASSET MANAGEMENT
Asset Management, with assets under supervision of
$1.8 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 offers
global investment management in equities, fixed
income, real estate, hedge funds, private equity and
liquidity, including money market instruments and
bank deposits. AM also provides trust and estate,
banking and brokerage services to high-net-worth
clients, and retirement services for corporations 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) 2010 2009 2008
Revenue
Asset management,
administration and
commissions $ 6,374 $ 5,621 $
6,004
All other income
1,111
751 62
Noninterest revenue
7,485
6,372 6,066
Net interest income
1,499
1,593 1,518
Total net revenue
8,984
7,965 7,584
Provision for credit losses 86 188 85
Noninterest expense
Compensation expense
3,763
3,375 3,216
Noncompensation expense
2,277
2,021 2,000
Amortization of intangibles
72
77 82
Total noninterest e
x
pense
6,112
5,473 5,298
Income before income tax
expense 2,786 2,304 2,201
Income tax expense
1,076
874 844
Net income
$
1,710
$ 1,430 $ 1,357
Revenue by client se
g
ment
Private Banking
(a)
$ 4,860 $ 4,320 $ 4,189
Institutional
2,180
2,065 1,775
Retail
1,944
1,580 1,620
Total net revenue
$
8,984
$ 7,965 $ 7,584
Financial ratios
ROE
26
%
20%
24
%
Overhead ratio
68
69 70
Pretax margin ratio
31
29 29
(a) Private Banking is a combination of the previously disclosed client segments:
Private Bank, Private Wealth Management and JPMorgan Securities.
2010 compared with 2009
Net income was $1.7 billion, an increase of $280 million, or 20%,
from the prior year, due to higher net revenue and a lower
provision for credit losses, largely offset by higher noninterest
expense.
Net revenue was a record $9.0 billion, an increase of $1.0 billion,
or 13%, from the prior year. Noninterest revenue was $7.5 billion,
an increase of $1.1 billion, or 17%, due to the effect of higher
market levels, net inflows to products with higher margins, higher
loan originations, and higher performance fees. Net interest income
was $1.5 billion, down by $94 million, or 6%, from the prior year,
due to narrower deposit spreads, largely offset by higher deposit
and loan balances.
Revenue from Private Banking was $4.9 billion, up 13% from the
prior year due to higher loan originations, higher deposit and loan
balances, the effect of higher market levels and net inflows to
products with higher margins, partially offset by narrower deposit
spreads. Revenue from Institutional was $2.2 billion, up 6% due to
the effect of higher market levels, partially offset by liquidity
outflows. Revenue from Retail was $1.9 billion, up 23% due to the
effect of higher market levels and net inflows to products with
higher margins, partially offset by lower valuations of seed capital
investments.
The provision for credit losses was $86 million, compared with
$188 million in the prior year, reflecting an improving credit
environment.
Noninterest expense was $6.1 billion, an increase of $639 million,
or 12%, from the prior year, resulting from increased headcount
and higher performance-based compensation.
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 Private Banking was $4.3 billion, up 3% from the
prior year due to wider loan spreads and higher deposit balances,
offset largely 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.
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.