JP Morgan Chase 2003 Annual Report Download - page 117

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J.P. Morgan Chase & Co. / 2003 Annual Report 115
The follow ing table show s the components of the Firm’s Tier 1
and total capital:
December 31, (in millions) 2003 2002
Tier 1 capit al
Common stockholders’ equity $45,168 $40,065
Nonredeemable preferred stock 1,009 1,009
Minority interest (a) 6,882 5,520
Less: Goodwill and investments in certain subsidiaries 8,511 8,122
Nonqualifying intangible assets and other 1,381 902
Tier 1 capital $43,167 $37,570
Tier 2 capit al
Long-term debt and other instruments
qualifying as Tier 2 $12,128 $11,801
Qualifying allowance for credit losses 4,777 5,458
Less: Investment in certain subsidiaries 256 334
Tier 2 capital $16,649 $16,925
Total qualifying capital $59,816 $54,495
(a) Minority interest primarily includes trust preferred stocks of certain business trusts.
The follow ing table presents the risk-based capital ratios for JPM organ Chase and its significant banking subsidiaries:
Risk- Adjusted Tier 1 Total Tier 1
Tier 1 Total weighted average capital(c)(e) capital(c)(e) leverage(c)(f)
December 31, 2003 (in millions) capital(b)(c) capital(c) assets(d) assets ratio ratio ratio
J.P. Morgan Chase & Co.(a) $43,167 $ 59,816 $ 507,456 $ 765,910 8.5% 11.8% 5.6%
JPMorgan Chase Bank 34,972 45,290 434,218 628,076 8.1 10.4 5.6
Chase Manhattan Bank USA, N.A. 4,950 6,939 48,030 34,565 10.3 14.4 14.3
Well capitalized ratios(g) 6.00 10.00 5.00(h)
Minimum capital ratios(g) 4.00 8.00 3.00
(a) Assets and capital amounts for JPMorgan Chase’s banking subsidiaries reflect intercompany transactions, whereas the respective amounts for JPMorgan Chase reflect the elimination of intercompany
transactions.
(b) In accordance with the Federal Reserve Board risk-based capital guidelines, minority interest for JPMorgan Chase includes debentures issued to JPMorgan Chase less the capital securities of the issuer
trusts. For a further discussion, see Note 18 on pages 110-111 of this Annual Report.
(c) The provisions of SFAS 115 do not apply to the calculations of the Tier 1 capital and Tier 1 leverage ratios. The risk-based capital guidelines permit the inclusion of 45% of the pre-tax unrealized gain on
certain equity securities in the calculation of Tier 2 capital.
(d) Includes off-balance sheet risk-weighted assets in the amounts of $174.2 billion, $152.1 billion and $13.3 billion, respectively, at December 31, 2003.
(e) Tier 1 capital or total capital, as applicable, divided by risk-weighted assets. Risk-weighted assets include assets and off-balance sheet positions, weighted by the type of instruments and the risk weight
of the counterparty, collateral or guarantor.
(f) Tier 1 capital divided by adjusted average assets (net of allowance for loan losses, goodwill and certain intangible assets).
(g) As defined by the regulations issued by the Federal Reserve Board, the FDIC and the OCC.
(h) Represents requirements for bank subsidiaries pursuant to regulations issued under the Federal Deposit Insurance Corporation Improvement Act. There is no Tier 1 leverage component in the definition of
a well-capitalized bank holding company.
Commitments and contingencies
At December 31, 2003, JPM organ Chase and its subsidiaries
w ere obligated under a number of noncancelable operating
leases for premises and equipment used primarily for banking
purposes. Certain leases contain rent escalation clauses for real
estate taxes, they may also contain other operating expenses
and renewal option clauses calling for increased rents. No lease
agreement imposes any restrictions on the Firm’s ability to pay
Note 27
dividends, engage in debt or equity financing transactions, or
enter into further lease agreements. Future minimum rental pay-
ments required, under operating leases w ith noncancelable lease
terms that expire after December 31, 2003, w ere as follow s:
Year ended December 31, (in millions)
2004 $ 805
2005 772
2006 695
2007 619
2008 570
After 4,772
Total minimum payments required 8,233
Less: Sublease rentals under noncancelable subleases 283
Net minimum payment required $ 7,950
Total rental expense was as follow s:
Year ended December 31, (in millions) 2003 2002 2001
Gross rentals $1,061 $1,012 $ 804
Sublease rentals (106) (134) (135)
Net rental expense $955 $878 $ 669
At December 31, 2003, assets w ere pledged to secure public
deposits and for other purposes. The significant components of
the assets pledged were as follow s:
December 31, (in billions) 2003 2002
Reverse repurchase/securities borrowing agreements $197 $199
Securities 45 73
Loans 48 40
Other(a) 96 112
Total assets pledged $386 $424
(a) Primarily composed of trading assets.