JP Morgan Chase 2003 Annual Report Download - page 32

Fixed income includes client and portfolio management rev-
enue related to both market-making and proprietary risk-taking
across global fixed income markets, including government and
corporate debt, foreign exchange, interest rate and commodi-
ties markets.
Global Treasury manages the overall interest rate exposure and
investment securities portfolio of the Firm. It creates strategic bal-
ance by providing a diversification benefit to the Firm’s trading,
lending and fee-based activities.
Credit portfolio revenue includes net interest income, fees and
loan sale activity for IB’s commercial credit portfolio. Credit port-
folio revenue also includes gains or losses on securities received as
part of a loan restructuring, and changes in the credit valuation
adjustment (“ CVA” ), w hich is the component of the fair value of
a derivative that reflects the credit quality of the counterparty. See
page 59 of the Credit risk management section of this Annual
Report for a further discussion of the CVA. Credit portfolio rev-
enue also includes the results of single-name and portfolio hedg-
ing arising from the Firm’s lending and derivative activities. See
pages 60–61 of the Credit risk management section of this
Annual Report for a further discussion on credit derivatives.
Equities includes client and portfolio management revenue
related to market-making and proprietary risk-taking across
global equity products, including cash instruments, derivatives
and convertibles.
Reconciliation of Capital markets and lending operating revenue to total-return revenue
Trading-related Fees and Securities NII and Total operating Total-return
Year ended December 31, 2003 (in millions) revenue commissions gains other revenue revenue(a)
Fixed income $5,991 $ 342 $ 56 $ 550 $6,939 $ 7,001
Global Treasury 64 1 1,002 659 1,726 1,684
Credit portfolio (185) 368 1 1,237 1,421 1,421
Equities 548 935 6 10 1,499 1,499
Total $6,418 $ 1,646 $ 1,065 $ 2,456 $11,585 $ 11,605
Year ended December 31, 2002 (in millions)
Fixed income $4,589 $ 345 $ 11 $ 542 $5,487 $ 5,466
Global Treasury 22 — 1,061 732 1,815 1,513
Credit portfolio (143) 358 3 1,288 1,506 1,506
Equities 11 916 1 66 994 994
Total $4,479 $ 1,619 $ 1,076 $ 2,628 $9,802 $ 9,479
(a) Total-return revenue, a non-GAAP financial measure, represents operating revenue plus the change in unrealized gains or losses on investment securities and hedges (included in Other comprehensive income) and
internally transfer-priced assets and liabilities.
The Firm improved its ranking in global equity and equity-related
underw riting to No. 4 from No. 8 in 2002. It also maintained its
No. 2 ranking in underw riting global investment-grade bonds,
its No. 1 ranking in global loan syndications and its No. 5 rank-
ing in global announced M &A.
M anagement’s discussion and analysis
J.P. M organ Chase & Co.
30 J.P. Morgan Chase & Co. / 2003 Annual Report
Capital markets revenue includes Trading revenue, Fees and com-
missions, Securities gains, related Net interest income and Other
revenue. These activities are managed on a total-return revenue
basis, w hich includes operating revenue plus the change in unre-
alized gains or losses on investment securities and hedges (includ-
ed in Other comprehensive income) and internally transfer-priced
assets and liabilities. Capital markets revenue includes client and
portfolio management revenues. Portfolio management reflects
net gains or losses from IB’s proprietary trading and revenue from
risk positions in client-related market-making activities.
Capital markets and lending total-return revenue of
$11.6 billion was up 22% from last year due to strong client
and portfolio management revenue. Excluding Global Treasury,
Capital markets and lending total-return revenue w as $9.9 bil-
lion, up 25% from the prior year.
Fixed income revenue of $7.0 billion was up 28% from last year.
The increase w as driven by strong client driven activity in
European and emerging markets, as w ell as increased portfolio
management revenue in credit and foreign exchange markets.
Global Treasury reported record revenue of $1.7 billion, up 11%
Market shares and rankings(a)
2003 2002
December 31, M arket share Ranking Market share Ranking
•Global syndicated loans 18% #1 23% #1
•Global investment-grade bonds 8#2 9#2
•Euro-denominated corporate
international bonds 5#6 6#4
•Global equity & equity-related 9#4 4#8
• U.S. equity & equity-related 11 #4 6#6
•Global announced M&A 16 #5 14 #5
(a) Derived from Thomson Financial Securities Data, which reflects subsequent updates to prior-period
information. Global announced M&A based on rank value; all others based on proceeds, with full
credit to each book manager/equal if joint. Because of joint assignments, market share of all par-
ticipants will add up to more than 100% .
IB’s Capital markets and lending activities are comprised of the following: