JP Morgan Chase 2003 Annual Report Download - page 5

J.P. Morgan Chase & Co. / 2003 Annual Report 3
Against the backdrop of an improving economy and a favorable turn
in the credit cycle, JPMorgan Chase outperformed its peers by most
measures. Among major investment and commercial banks, we ranked
first in total return to shareholders.
2003 year in review
In 2003, our focus was on delivering results. As I said in the closing
words of my 2002 letter to shareholders, “ We have the right model,
the right strategy, and the right people . . . What we need now is better
performance and improved execution. That will be the unrelenting
focus of JPMorgan Chase in 2003.”
Our focus on results was evident in our much improved financial
performance.
On an operating basis in 2003, we delivered:
• Higher revenues – up 13% from 2002, to $35.1 billion
• Higher earnings – $6.7 billion, compared with $3.4 billion in 2002
• A return on average common equity of 16% , compared with
8% in 2002
Against the backdrop of an improving economy and a favorable turn
in the credit cycle, JPMorgan Chase outperformed its peers by most
measures. Among major investment and commercial banks, we ranked
first in total return to shareholders. We strengthened our leadership
positions in key product areas across all of our businesses. We delivered
greater value, in more ways, to a growing number of clients.
Throughout 2003, JPMorgan Chase also recognized the need to
rebuild trust in financial institutions, including our own. We revised
and enhanced our internal risk management processes and policies,
providing better oversight of complex financial transactions and
greater transparency in our financial disclosures. We have also
embraced new regulations in the U.S. from Congress, the Securities
and Exchange Commission and the New York Stock Exchange
strengthening governance.
I want to take this opportunity to thank Larry Fuller, who has retired
from the Board of Directors, for his contributions to our firm since 1985.
We have benefited greatly from the wisdom and experience of our
board members, and we wish Larry well.
Here is a look at how our major businesses performed in 2003.
The Investment Bank demonstrated the value of its global scale,
diverse issuer and investor client franchise, and integrated business
model to deliver a record $3.7 billion in earnings. We achieved
significant gains in revenues (up 16% ) and substantial reductions
in credit costs, resulting in a gain in earnings of 183% and a
return on equity (ROE) of 19% for the year.
The Investment Bank’s impressive showing was driven by strong
equity underwriting, increased capital markets revenues, and record
total return revenues in Global Treasury.
Our success in 2003 was also based upon our intellectual capital,
innovation and expertise in risk management. It is our ability to under-
stand our clients’ needs and then execute extraordinarily well that
helps us win in the marketplace. A very good example of our client focus
is our creation of the first-ever transferable employee stock option
program for Microsoft.
In terms of the outlook for the Investment Bank, we are well positioned
for the next phase of the economic cycle. From 2002 to 2003, we
moved from #8 to #4 in Global Equity and Equity-Related, and we
maintained our #5 position in Global Announced M&A while increasing
our market share. We also continued to rank #1 in Interest Rate and
Credit Derivatives as well as in Global Loan Syndications. Even with the
anticipated shift in market activity, we believe our fixed income
businesses will continue to flourish. More than half of our revenues
are from investor clients who regularly need to adjust their portfolios.
This activity creates a solid foundation for ongoing business and
continued growth.
We are a truly global investment bank, delivering the breadth of the
firm’s capabilities – tailored to the needs of clients in local markets.
We continue to perform well in the Europe, Middle East and Africa
(EMEA) region, where the Investment Bank generated approximately
$1.3 billion in after-tax earnings. We are the only firm in the EMEA
region to finish 2003 ranked #5 or better across the equity, M&A, loan
and bond markets. We want to be the most global of the European
investment banks, and the most European of the global investment
banks. We enjoy strong leadership positions in Latin America, and our
franchise in Asia presents significant growth opportunities for us.
With the completeness and scale of our capabilities, a commitment
to innovation, and a client franchise that includes strong relationships
with over 90% of Fortune 500 companies and equivalent global
penetration, the Investment Bank is well positioned to compete at
the highest level around the world.
Treasury & Securities Services (TSS), which provides financial
transaction processing and information services to wholesale clients,
delivered attractive returns in 2003, generating an ROE of 19% .
Though affected by the downturn in capital markets and low interest
rates, TSS has provided a stable source of revenue year after year,
taking full advantage of its global scale, technological sophistication
and market leadership. Each of the three TSS businesses – Treasury
Services, Investor Services and Institutional Trust Services – is among
the top three in the world.