JP Morgan Chase 2003 Annual Report Download - page 44

Business-related metrics
As of or for the year ended December 31,
(in billions, except ratios) 2003 2002 Change
Loan and lease receivables $43.2 $37.4 16%
Average loan and lease receivables 41.7 31.7 32
Automobile origination volume 27.8 25.3 10
Automobile market share 6.1% 5.7% 40bp
30+ day delinquency rate 1.46 1.54 (8)
Net charge-off ratio 0.41 0.51 (10)
Overhead ratio 35 36 (100)
CRB is the No. 1 bank in the New York tri-state area and a top
five bank in Texas (both ranked by retail deposits), providing
payment, liquidity, investment, insurance and credit products
and services to three primary customer segments: small busi-
ness, affluent and retail. Within these segments, CRB serves
326,000 small businesses, 433,000 affluent consumers and
2.6 million mass-market consumers.
CRB’s continued focus on expanding customer relationships
resulted in a 14% increase in core deposits (for this purpose,
core deposits are total deposits less time deposits) from
December 31, 2002, and a 77% increase in the cross-sell of
Chase credit products over 2002. In 2003, mortgage and home
equity originations through CRB’s distribution channels w ere
$3.4 billion and $4.7 billion, respectively. Branch-originated credit
cards totaled 77,000, contributing to 23% of CRB customers
holding Chase credit cards. CRB is compensated by CFS’s credit
businesses for the home finance and credit card loans it origi-
nates and does not retain these balances.
Chase Regional Banking While CRB continues to position itself for grow th, decreased
deposit spreads related to the low -rate environment and
increased credit costs resulted in an 80% decline in CRB
operating earnings from 2002. This decrease w as partly offset
by an 8% increase in total average deposits.
Operating revenue of $2.6 billion decreased by 9% compared
w ith 2002. Net interest income declined by 11% to $1.7 billion,
primarily attributable to the low er interest rate environment.
Noninterest revenue decreased 6% to $927 million due to low er
deposit service fees, decreased debit card fees and one-time
gains in 2002. CRB’s revenue does not include funding profits
earned on its deposit base; these amounts are included in the
results of Global Treasury.
Operating expense of $2.4 billion increased by 7% from 2002.
The increase w as primarily due to investments in technology within
the branch netw ork; also contributing w ere higher compensation
expenses related to increased staff levels and higher severance costs
as a result of continued restructuring. This increase in operating
CAF is the largest U.S. bank originator of automobile loans and
leases, w ith more than 2.9 million accounts. In 2003, CAF had a
record number of automobile loan and lease originations, growing
by 10% over 2002 to $27.8 billion. Loan and lease receivables of
$43.2 billion at December 31, 2003, w ere 16% higher than at the
prior year-end. Despite a challenging operating environment
reflecting slightly declining new car sales in 2003 and increased
competition, CAF’s market share among automobile finance
companies improved to 6.1% in 2003 from 5.7% in 2002. The
increase in market share w as the result of strong organic grow th
and an origination strategy that allies the business w ith manufac-
turers and dealers. CAF’s relationships w ith several major car
manufacturers contributed to 2003 grow th, as did CAF’s dealer
relationships, w hich increased from approximately 12,700 dealers
in 2002 to approximately 13,700 dealers in 2003.
In 2003, operating earnings w ere $205 million, 23% higher
compared w ith 2002. The increase in earnings w as driven by
continued revenue grow th and improved operating efficiency.
In 2003, CAF’s operating revenue grew by 23% to $842 million.
Net interest income grew by 33% compared w ith 2002. The
increase w as driven by strong operating performance due to
higher average loans and leases outstanding, reflecting continued
strong origination volume and low er funding costs.
Operating expense of $292 million increased by 18% compared
w ith 2002. The increase in expenses w as driven by higher average
Chase Auto Finance loans outstanding, higher origination volume and higher perform-
ance-based incentives. CAF’s overhead ratio improved from 36%
in 2002 to 35% in 2003, as a result of strong revenue grow th, con-
tinued productivity gains and disciplined expense management.
Credit costs increased 18% to $205 million, primarily reflecting a
32% increase in average loan and lease receivables. Credit quality
continued to be strong relative to 2002, as evidenced by a low er
net charge-off ratio and 30+ day delinquency rate.
CAF also comprises Chase Education Finance, a top provider of
government-guaranteed and private loans for higher education.
Loans are provided through a joint venture w ith Sallie M ae, a
government-sponsored enterprise and the leader in funding and
servicing education loans. Chase Education Finance’s origination
volume totaled $2.7 billion, an increase of 4% from last year.
M anagement’s discussion and analysis
J.P. M organ Chase & Co.
42 J.P. Morgan Chase & Co. / 2003 Annual Report