JP Morgan Chase 2003 Annual Report Download - page 27

J.P. Morgan Chase & Co. / 2003 Annual Report 25
Results of operations
This section discusses JPMorgan Chase’s results
of operations on a reported basis. The accompa-
nying financial data conforms w ith accounting
principles generally accepted in the United States
of America (“GAAP”) and prevailing industry
practices. The section should be read in conjunc-
tion with the Consolidated financial statements
and Notes to consolidated financial statements
beginning on page 82 of this Annual Report.
Investment banking f ees
Investment banking fees of $2.9 billion rose 5% from 2002.
For a discussion of Investment banking fees, w hich are primarily
recorded in IB, see IB segment results on pages 29–31 of this
Annual Report.
Tr ading revenue
Trading revenue in 2003 of $4.4 billion was up 65% from the
prior year. Fixed income and equity capital markets activities drove
grow th in both client and portfolio management revenues.
Portfolio management, in particular, w as up significantly from
2002 as a result of gains in credit, foreign exchange and equity
derivatives activities. Trading revenue, on a reported basis,
excludes the impact of Net interest income (“ NII” ) related to IB’s
trading activities, which is reported in NII. How ever, the Firm
includes trading-related NII as part of Trading revenue for segment
reporting purposes to better assess the profitability of IB’s trading
business. For additional information on Trading revenue, see IB
segment discussion on pages 29–31 of this Annual Report.
Fees and commissions
Fees and commissions of $10.7 billion in 2003 rose 3% from the
prior year as a result of higher credit card servicing fees associated
w ith $5.8 billion in grow th in average securitized credit card receiv-
ables. Also contributing to the increase from 2002 w ere higher cus-
tody, institutional trust and other processing-related service fees.
These fees reflected the more favorable environment for debt and
equity activities.
For a table show ing the components of Fees and
commissions, see Note 4 on pages 88–89 of this Annual Report.
Year ended December 31,
(in millions) 2003 2002 Change
Investment banking fees $2,890 $2,763 5%
Trading revenue 4,427 2,675 65
Fees and commissions 10,652 10,387 3
Private equity gains (losses) 33 (746) NM
Securities gains 1,446 1,563 (7)
Mortgage fees and related income 892 988 (10)
Other revenue 579 458 26
Net interest income 12,337 11,526 7
Total revenue $ 33,256 $29,614 12%
Revenues
For additional information on Fees and commissions, see the
segment discussions of TSS for Custody and institutional trust
service fees, IM PB for Investment management and service fees,
and CFS for consumer-related fees on pages 32–33, 34–35 and
38–43, respectively, of this Annual Report.
Privat e equity gains (losses)
Private equity gains of $33 million in 2003 reflect significant
improvement from losses of $746 million in 2002. For a discussion
of Private equity gains (losses), w hich are primarily recorded in
JPM P, see JPM P results on pages 36–37.
Securities gains
In 2003, Securities gains of $1.4 billion declined 7% from the
prior year. The decline reflected low er gains realized from the
sale of government and agency securities in IB and mortgage-
backed securities in Chase Home Finance (“ CHF” ), driven by the
increasing interest rate environment beginning in the third quar-
ter of 2003. IB uses available-for-sale investment securities to
manage, in part, the asset/liability exposures of the Firm; CHF
uses these instruments to economically hedge the value of
mortgage servicing rights (“ M SRs” ). For a further analysis of
securities gains, see IB and CHF on pages 29–31 and 39–40,
respectively, of this Annual Report.
Mort gage fees and related income
M ortgage fees and related income of $892 million in 2003 declined
10% from 2002. The decline reflects low er mortgage servicing fees
and low er revenues from M SR hedging activities; these were offset
by higher fees from origination and sales activity and other fees
derived from volume and market-share grow th. M ortgage fees and
related income, on a reported basis, excludes the impact of NII and
securities gains and losses related to Chase Home Finance’s mort-
gage banking activities. For a further discussion of mortgage-related
revenue, see the segment discussion for Chase Home Finance on
pages 39–40 and Note 4 on page 89 of this Annual Report.
Other revenue
Other revenue of $579 million in 2003 rose 26% from the prior
year. The increase w as a result of $200 million in gains from the
sale of securities acquired in loan satisfactions (compared w ith $26
million in 2002), partly offset by low er net results from corporate
and bank-ow ned life insurance policies. M any other factors con-
tributed to the change from 2002, including $73 million of w rite-
dow ns taken in 2002 for several Latin American investments.
Net int erest income
NII of $12.3 billion w as 7% higher than in 2002. The increase
reflected the positive impact of low er interest rates on consumer
loan originations and related funding costs. Average mortgage
loans in CHF rose 32% to $74.1 billion, and average automobile
loans and leases in Chase Auto Finance increased 32% to