JP Morgan Chase 2005 Annual Report Download - page 57

JPMorgan Chase & Co. /2005 Annual Report 55
Balance sheet analysis
Selected balance sheet data
December 31, (in millions) 2005 2004
Assets
Cash and due from banks $ 36,670 $ 35,168
Deposits with banks and Federal funds sold 26,072 28,958
Securities purchased under resale agreements
and Securities borrowed 204,174 141,504
Trading assets – debt and equity instruments 248,590 222,832
Trading assets – derivative receivables 49,787 65,982
Securities:
Available-for-sale 47,523 94,402
Held-to-maturity 77 110
Loans, net of allowance for loan losses 412,058 394,794
Other receivables 27,643 31,086
Goodwill and other intangible assets 58,180 57,887
All other assets 88,168 84,525
Total assets $ 1,198,942 $ 1,157,248
Liabilities
Deposits $ 554,991 $ 521,456
Securities sold under repurchase agreements
and securities lent 117,124 112,347
Trading liabilities – debt and equity instruments 94,157 87,942
Trading liabilities – derivative payables 51,773 63,265
Long-term debt and capital debt securities 119,886 105,718
All other liabilities 153,800 160,867
Total liabilities 1,091,731 1,051,595
Stockholders’ equity 107,211 105,653
Total liabilities and stockholders’ equity $ 1,198,942 $ 1,157,248
Securities purchased under resale agreements and Securities sold
under repurchase agreements
The increase in Securities purchased under resale agreements was due primarily
to growth in client-driven financing activities in North America and Europe.
Trading assets and liabilities – debt and equity instruments
The Firm’s debt and equity trading instruments consist primarily of fixed income
securities (including government and corporate debt) and equity and convertible
cash instruments used for both market-making and proprietary risk-taking activities.
The increase over December 31, 2004, was primarily due to growth in client-
driven market-making activities across interest rate, credit and equity markets.
For additional information, refer to Note 3 on page 94 of this Annual Report.
Trading assets and liabilities – derivative receivables and payables
The Firm uses various interest rate, foreign exchange, equity, credit and
commodity derivatives for market-making, proprietary risk-taking and risk
management purposes. The decline from December 31, 2004, was primarily
due to the appreciation of the U.S. dollar and, to a lesser extent, higher interest
rates, partially offset by increased commodity trading activity and rising
commodity prices. For additional information, refer to Credit risk management
and Note 3 on pages 63–74 and 94, respectively, of this Annual Report.
Securities
The AFS portfolio declined by $46.9 billion from December 31, 2004, primarily
due to securities sales (as a result of management’s decision to reposition
the Treasury investment portfolio to manage exposure to interest rates) and
maturities, which more than offset purchases. For additional information
related to securities, refer to the Corporate segment discussion and to Note
9 on pages 53–54 and 103–105, respectively, of this Annual Report.
Loans
The $17 billion increase in gross loans was due primarily to an increase of
$15 billion in the wholesale portfolio, primarily from the IB, reflecting higher
balances of loans held-for-sale (“HFS”) related to securitization and syndication
activities, and growth in the IB Credit Portfolio. Wholesale HFS loans were $18
billion as of December 31, 2005, compared with $6 billion as of December 31,
2004. For consumer loans, growth in consumer real estate (primarily home
equity loans) and credit card loans was offset largely by a decline in the auto
portfolio. The increase in credit card loans primarily reflected growth from new
account originations and the acquisition of $1.5 billion of Sears Canada loans
on the balance sheet. The decline in the auto portfolio primarily reflected a
difficult auto lending market in 2005, $3.8 billion of securitizations and was
also the result of a strategic review of the portfolio in 2004 that led to the
decisions to de-emphasize vehicle leasing and sell a $2 billion recreational
vehicle portfolio. For a more detailed discussion of the loan portfolio and the
Allowance for loan losses, refer to Credit risk management on pages 63–74
of this Annual Report.
Goodwill and Other intangible assets
The $293 million increase in Goodwill and Other intangible assets primarily
resulted from higher MSRs due to growth in the servicing portfolio as well
as an overall increase in the valuation from improved market conditions; the
business partnership with Cazenove; the acquisition of the Sears Canada credit
card business; and the Neovest and Vastera acquisitions. Partially offsetting the
increase were declines from the amortization of purchased credit card relation-
ships and core deposit intangibles and the deconsolidation of Paymentech. For
additional information, see Note 15 on pages 114–116 of this Annual Report.
Deposits
Deposits increased by 6% from December 31, 2004. Retail deposits increased,
reflecting growth from new account acquisitions and the ongoing expansion
of the retail branch distribution network. Wholesale deposits were higher,
driven by growth in business volumes. For more information on deposits, refer
to the RFS segment discussion and the Liquidity risk management discussion
on pages 39–44 and 61–62, respectively, of this Annual Report. For more
information on liability balances, refer to the CB and TSS segment discussions
on pages 47–48 and 49–50, respectively, of this Annual Report.
Long-term debt and capital debt securities
Long-term debt and capital debt securities increased by $14.2 billion, or 13%,
from December 31, 2004, primarily due to net new issuances of long-term debt and
capital debt securities. The Firm took advantage of narrow credit spreads globally to
issue opportunistically long-term debt and capital debt securities throughout 2005.
Consistent with its liquidity management policy, the Firm raised funds sufficient to
cover maturing obligations over the next 12 months and to support the less liquid
assets on its balance sheet. Large investor cash positions and increased foreign
investor participation in the corporate markets allowed JPMorgan Chase to diversify
further its funding across the global markets while lengthening maturities. For
additional information on the Firm’s long-term debt activity, see the Liquidity risk
management discussion on pages 61–62 of this Annual Report.
Stockholders’ equity
Total stockholders’ equity increased by $1.6 billion from year-end 2004 to
$107.2 billion at December 31, 2005. The increase was the result of net income
for 2005 and common stock issued under employee plans, partially offset by
cash dividends, stock repurchases, the redemption of $200 million of preferred
stock and net unrealized losses in Accumulated other comprehensive income. For
a further discussion of capital, see the Capital management section that follows.