JP Morgan Chase 2006 Annual Report Download - page 44

MANAGEMENT’S DISCUSSION AND ANALYSIS
JPMorgan Chase & Co.
42 JPMorgan Chase & Co. / 2006 Annual Report
Auto Finance
Selected income statement data
Year ended December 31,
(in millions, except ratios and
where otherwise noted) 2006 2005 2004(b)
Noninterest revenue $ 368 $86 $68
Net interest income 1,171 1,235 1,009
Total net revenue 1,539 1,321 1,077
Provision for credit losses 207 212 210
Noninterest expense 761 671 483
Income before income tax expense 571 438 384
Net income $ 346 $ 268 $ 233
ROE 14% 10% 9%
ROA 0.77 0.50 0.46
Business metrics (in billions)
Auto originations volume $ 19.3 $ 18.1 $ 23.5
End-of-period loans and lease related assets
Loans outstanding $ 39.3 $ 41.7 $ 50.9
Lease financing receivables 1.7 4.3 8.0
Operating lease assets 1.6 0.9 —
Total end-of-period loans and
lease related assets 42.6 46.9 58.9
Average loans and lease related assets
Loans outstanding(a) $ 39.8 $ 45.5 $ 42.3
Lease financing receivables 2.9 6.2 9.0
Operating lease assets 1.3 0.4 —
Total average loans and lease
related assets 44.0 52.1 51.3
Average assets 44.9 53.2 52.0
Average equity 2.4 2.7 2.5
Credit quality statistics
30+ day delinquency rate 1.72% 1.66% 1.64%
Net charge-offs
Loans $ 231 $ 257 $ 219
Lease financing receivables 720 44
Total net charge-offs 238 277 263
Net charge-off rate
Loans(a) 0.59% 0.57% 0.52%
Lease financing receivables 0.24 0.32 0.49
Total net charge-off rate(a) 0.56 0.54 0.51
Nonperforming assets $ 177 $ 236 $ 240
(a) Average loans include loans held-for-sale of $0.5 billion, $0.7 billion and $0.2 billion for 2006,
2005 and 2004, respectively. These amounts are not included in the net charge-off rate.
(b) 2004 results include six months of the combined Firm’s results and six months of heritage
JPMorgan Chase results.
2006 compared with 2005
Total net income of $346 million was up by $78 million from the prior year,
including the impact of a $50 million current-year loss and a $136 million
prior-year loss related to loans transferred to held-for-sale. Total net revenue
of $1.5 billion was up by $218 million, or 17%, reflecting higher automobile
operating lease revenue and wider loan spreads on lower loan and direct
finance lease balances. The provision for credit losses of $207 million
decreased by $5 million from the prior year. Noninterest expense of $761
million increased by $90 million, or 13%, driven by increased depreciation
expense on owned automobiles subject to operating leases, partially offset
by operating efficiencies.
2005 compared with 2004
Total net income of $268 million was up by $35 million from the prior year,
including the impact of a $136 million current-year loss related to loans
transferred to held-for-sale. Total net revenue of $1.3 billion was up by $244
million, or 23%, reflecting higher automobile operating lease revenue and a
benefit of $34 million from the sale of the $2 billion recreational vehicle
loan portfolio. These increases were offset partially by narrower spreads.
Noninterest expense of $671 million increased by $188, or 39%, driven by
increased depreciation expense on owned automobiles subject to operating
leases, offset partially by operating efficiencies.