JP Morgan Chase 2006 Annual Report Download - page 49

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JPMorgan Chase & Co. / 2006 Annual Report 47
Real Estate Banking revenue was $434 million, up $162 million, or 60%. In
addition to the Merger, revenue was higher for each business due to wider
spreads and higher volume related to liability balances and increased invest-
ment banking revenue, partially offset by narrower loan spreads.
Provision for credit losses of $73 million increased by $32 million, primarily
due to a special provision related to Hurricane Katrina, increased loan bal-
ances and refinements in the data used to estimate the allowance for credit
losses. The credit quality of the portfolio was strong with net charge-offs of
$26 million, down $35 million from the prior year, and nonperforming loans
of $272 million were down $255 million, or 48%.
Total noninterest expense of $1.9 billion increased by $530 million, or 40%,
primarily due to the Merger and to an increase in allocated unit costs for
Treasury Services’ products.
Selected metrics
Year ended December 31,
(in millions, except headcount and ratios) 2006 2005 2004(d)
Revenue by product:
Lending $ 1,344 $ 1,215 $ 805
Treasury services 2,243 2,062 1,335
Investment banking 253 206 118
Other (40) 520
Total Commercial Banking revenue $ 3,800 $ 3,488 $ 2,278
IB revenue, gross(a) 716 552 NA
Revenue by business:
Middle Market Banking $ 2,535 $ 2,358 $ 1,497
Mid-Corporate Banking 656 551 368
Real Estate Banking 458 434 272
Other 151 145 141
Total Commercial Banking revenue $ 3,800 $ 3,488 $ 2,278
Selected average balances
Total assets $ 57,754 $ 52,358 $ 32,547
Loans and leases(b) 53,596 48,117 28,914
Liability balances(c) 73,613 66,055 47,646
Equity 5,702 3,400 2,093
Average loans by business:
Middle Market Banking $ 33,225 $ 31,193 $ 17,500
Mid-Corporate Banking 8,632 6,388 4,354
Real Estate Banking 7,566 6,909 4,047
Other 4,173 3,627 3,013
Total Commercial Banking loans $ 53,596 $ 48,117 $ 28,914
Headcount 4,459 4,418 4,527
Credit data and quality statistics:
Net charge-offs $27$26$61
Nonperforming loans 121 272 527
Allowance for loan losses 1,519 1,392 1,322
Allowance for lending-related commitments 187 154 169
Net charge-off rate(b) 0.05% 0.05% 0.21%
Allowance for loan losses to average loans(b) 2.86 2.91 4.57
Allowance for loan losses to
nonperforming loans 1,255 512 251
Nonperforming loans to average loans 0.23 0.57 1.82
(a) Represents the total revenue related to investment banking products sold to CB clients.
(b) Average loans include loans held-for-sale of $442 million and $283 million for 2006 and
2005, respectively. This information is not available for 2004. Loans held-for-sale amounts are
not included in the net charge-off rate or allowance coverage ratios.
(c) Liability balances include deposits and deposits swept to on–balance sheet liabilities.
(d) 2004 results include six months of the combined Firm’s results and six months of heritage
JPMorgan Chase results.
Commercial Banking revenues comprise the following:
Lending includes a variety of financing alternatives, which are often
provided on a basis secured by receivables, inventory, equipment, real
estate or other assets. Products include:
• Term loans
• Revolving lines of credit
• Bridge financing
• Asset-based structures
• Leases
Treasury services includes a broad range of products and services
enabling clients to transfer, invest and manage the receipt and
disbursement of funds, while providing the related information reporting.
These products and services include:
• U.S. dollar and multi-currency clearing
• ACH
• Lockbox
• Disbursement and reconciliation services
• Check deposits
• Other check and currency-related services
• Trade finance and logistics solutions
• Commercial card
• Deposit products, sweeps and money market mutual funds
Investment banking provides clients with sophisticated capital-raising
alternatives, as well as balance sheet and risk management tools,
through:
• Advisory
• Equity underwriting
• Loan syndications
• Investment-grade debt
• Asset-backed securities
• Private placements
• High-yield bonds
• Derivatives
• Foreign exchange hedges
• Securities sales