JP Morgan Chase 2003 Annual Report Download - page 45

J.P. Morgan Chase & Co. / 2003 Annual Report 43
expense w as partly offset by Six Sigma and other productivity
efforts. CRB’s overhead ratio increased to 93% in 2003 from 79%
in 2002, reflecting both the decline in revenues and an increase of
expenses.
Credit costs of $77 million increased by $88 million compared
w ith 2002 primarily driven by the release of the Allowance for
loan losses in 2002.
Business-related metrics
As of or for the year ended December 31, 2003 2002 Change
Total average deposits (in billions) $75.1 $69.8 8%
Total client assets (a)(in billions) 108.7 103.6 5
Number of branches 529 528 —
Number of ATM s 1,730 1,876 (8)
Overhead ratio 93% 79% 1,400bp
(a) Deposits, money market funds and/or investment assets (including annuities).
CRB 2003 deposit mix – $75 billion
Savings 47%
Time 11%
Money market 10%
Demand deposits 18%
Interest checking 14%
CRB 2002 deposit mix – $70 billion
Savings 46%
Time 15%
Money market 8%
Demand deposits 18%
Interest checking 13%
CM M is a premier provider of commercial banking and corporate
financial services to companies w ith annual sales of $10 million
to $1 billion, as w ell as to not-for-profit, real estate and public-
sector entities. CM M maintains a leadership position in the New
York tri-state market and select Texas markets; it also leverages
its expertise in distinct industry segments, such as Technology,
Corporate mortgage finance, Entertainment and certain regional
markets, such as Chicago, Los Angeles, Boston and Denver.
The CM M relationship management model brings customized
solutions to more than 12,000 middle market companies, utiliz-
ing the products and services of the entire Firm. Products and
services include cash management, lines of credit, term loans,
structured finance, syndicated lending, M &A advisory, risk man-
agement, international banking services, lease financing and
asset-based lending. CM M is organized by geography, industry
and product to deliver greater value to customers. CM M’s 2003
and 2002 results included 100% of the revenues and expenses
attributed to the shared activities w ith Treasury Services. See
Segment results on page 27 of this Annual Report for a discus-
sion of the Firm’s revenue and expense-sharing agreements
among business segments.
CM M ’s operating earnings of $324 million increased by 3%
compared w ith 2002. Operating revenue of $1.4 billion
decreased by 1% compared w ith the prior year. NII w as dow n
5% due to low er spreads, partly offset by 17% higher deposits
Business-related metrics
As of or for the year ended December 31,
(in billions, except ratios) 2003 2002 Change
Total average loans $14.1 $13.7 3%
Total average deposits 28.2 24.1 17
Nonperforming average loans as
a % of total average loans 1.19% 1.89% (70)bp
Net charge-off ratio 0.49 0.78 (29)
Overhead ratio 61 58 300
and 3% higher loans compared w ith 2002. Noninterest revenue
increased by 6% , primarily reflecting higher deposit service and
corporate finance fees. Deposit service fees increased, as the
low er interest rate environment resulted in reduced values of
customers’ compensating balances; consequently, customers
paid incremental fees for deposit services.
Operating expense w as $871 million, an increase of 4% com-
pared w ith 2002. The increase in expenses w as due to higher
severance costs and higher performance-based incentives, partly
offset by savings from Six Sigma and other productivity initiatives.
Credit costs of $7 million were dow n 90% from the prior year.
This decrease w as due to a low er required allow ance and 36%
low er net charge-offs, reflecting strong credit quality.
The focus for 2004 w ill be on generating revenue grow th
through effective cross-selling, the delivery of superior client
service and the management of credit quality and expenses.
Chase Middle Market