JP Morgan Chase 2003 Annual Report Download - page 58

M anagement’s discussion and analysis
J.P. M organ Chase & Co.
56 J.P. Morgan Chase & Co. / 2003 Annual Report
Ratings profile of credit exposure Collateral
Noninvestment-grade held
Credit against
As of December 31, 2003 Credit Investment- Criticized Criticized Net derivative derivative
(in millions, except ratios) exposure(a) grade Noncriticized performing nonperforming(b) charge-offs(c) hedges(d) receivables
Top 10 industries
Commercial banks $47,063 96% $ 1,786 $ 8 $ 20 $ 9 $ (10,231) $ (24,740)
Asset managers 21,794 82 3,899 76 13 14 (245) (1,133)
Securities firms and exchanges 15,599 83 2,582 9 13 4 (1,369) (4,168)
Finance companies and lessors 15,589 94 846 99 3 6 (2,307) (82)
Utilities 15,296 82 1,714 415 583 129 (1,960) (176)
Real estate 14,544 70 4,058 232 49 29 (718) (182)
State and municipal governments 14,354 100 36 14 1 — (405) (12)
Media 14,075 65 3,285 1,307 358 151 (1,678) (186)
Consumer products 13,774 71 3,628 313 103 6 (1,104) (122)
Insurance 12,756 95 550 83 — — (2,149) (854)
Other selected industries
Telecom services 10,924 75 2,204 340 227 127 (2,941) (402)
Automotive 7,268 76 1,536 150 82 14 (2,313) —
All other 179,678 80 31,658 3,441 918 327 (9,862) (4,157)
Total $382,714 83% $ 57,782 $ 6,487 $ 2,370 $ 816 $ (37,282) $ (36,214)
Ratings profile of credit exposure Collateral
Noninvestment-grade held
Credit against
As of December 31, 2002 Credit Investment- Criticized Criticized Net derivative derivative
(in millions, except ratios) exposure(a) grade Noncriticized performing nonperforming(b) charge-offs(c) hedges(d) receivables
Top 10 industries(e)
Commercial banks $ 42,247 95% $ 2,188 $ 2 $ 44 $ 43 $ (8,370) $ (18,212)
Asset managers 24,867 78 5,328 172 52 11 (276) (1,153)
Securities firms and exchanges 17,512 90 1,667 16 — 3 (551) (3,680)
Finance companies and lessors 18,977 93 1,220 99 15 1 (2,322) (133)
Utilities 17,717 72 2,096 2,146 746 170 (2,708) (33)
Real estate 11,614 63 3,611 633 71 87 (692) (115)
State and municipal governments 11,973 99 106 — — — (1,273) (8)
Media 17,566 58 4,680 1,918 701 161 (1,178) (611)
Consumer products 12,376 72 3,157 223 70 29 (1,179) (85)
Insurance 14,800 92 768 220 258 18 (2,478) (778)
Other selected industries
Telecom services 15,604 59 5,077 687 706 759 (436) —
Automotive 8,192 71 2,055 298 22 (2) (1,148) —
All other 199,433 80 33,028 6,095 1,384 813 (11,156) (5,602)
Total $ 412,878 80% $ 64,981 $ 12,509 $ 4,069 $ 2,093 $ (33,767) $ (30,410)
(a) Credit exposure is net of risk participations, and excludes the benefit of credit derivative hedges and collateral held against derivative receivables or loans.
(b) Nonperforming assets exclude nonaccrual loans held for sale (“ HFS” ) of $52 million and $18 million at December 31, 2003 and 2002, respectively. HFS loans are carried at the lower of cost or
market, and declines in value are recorded in Other revenue.
(c) Represents net charge-offs on loans and lending-related commitments. Amounts in parentheses represent net recoveries.
(d) Represents notional amounts only; these hedges do not qualify for hedge accounting under SFAS 133.
(e) Based on the 2003 determination of Top 10 industries.
Selected indust ry discussion
Presented below is a discussion of several industries to w hich
the Firm has significant exposure and w hich it continues to
monitor because of actual or potential credit concerns.
• Commercial banks: The industry represents the largest seg-
ment of the Firm’s commercial credit exposure, and 96% of
the credit exposure is rated investment-grade. Collateral held
against $33.3 billion in derivative receivables is valued at
$24.7 billion.
The industry distribution of the Firm’s commercial credit exposure (loans, derivative receivables and lending-related commitments) under
the new industry structure, as of December 31, 2003 and 2002, w as as follow s: