JP Morgan Chase 2006 Annual Report Download - page 57

JPMorgan Chase & Co. / 2006 Annual Report 55
BALANCE SHEET ANALYSIS
Selected balance sheet data
December 31, (in millions) 2006 2005
Assets
Cash and due from banks $ 40,412 $ 36,670
Deposits with banks 13,547 21,661
Federal funds sold and securities purchased
under resale agreements 140,524 133,981
Securities borrowed 73,688 74,604
Trading assets:
Debt and equity instruments 310,137 248,590
Derivative receivables 55,601 49,787
Securities:
Available-for-sale 91,917 47,523
Held-to-maturity 58 77
Interests in purchased receivables
– 29,740
Loans, net of Allowance for loan losses 475,848 412,058
Other receivables 27,585 27,643
Goodwill 45,186 43,621
Other intangible assets 14,852 14,559
All other assets 62,165 58,428
Total assets $ 1,351,520 $ 1,198,942
Liabilities
Deposits $ 638,788 $ 554,991
Federal funds purchased and securities sold
under repurchase agreements 162,173 125,925
Commercial paper and other borrowed funds 36,902 24,342
Trading liabilities:
Debt and equity instruments 90,488 94,157
Derivative payables 57,469 51,773
Long-term debt and trust preferred capital
debt securities 145,630 119,886
Beneficial interests issued by consolidated VIEs 16,184 42,197
All other liabilities 88,096 78,460
Total liabilities 1,235,730 1,091,731
Stockholders’ equity 115,790 107,211
Total liabilities and stockholders’ equity $ 1,351,520 $ 1,198,942
Balance sheet overview
At December 31, 2006, the Firm’s total assets were $1.4 trillion, an increase
of $152.6 billion, or 13%, from December 31, 2005. Total liabilities were
$1.2 trillion, an increase of $144.0 billion, or 13%, from December 31, 2005.
Stockholders’ equity was $115.8 billion, an increase of $8.6 billion, or 8% from
December 31, 2005. The following is a discussion of the significant changes in
balance sheet items during 2006.
Federal funds sold and securities purchased under resale agreements;
Securities borrowed; Federal funds purchased and securities sold
under repurchase agreements; and Commercial paper and Other bor-
rowed funds
The Firm utilizes Federal funds sold and securities purchased under resale agree-
ments, Securities borrowed, Federal funds purchased and securities sold under
repurchase agreements and Commercial paper and other borrowed funds as
part of its liquidity management activities, in order to manage the Firm’s cash
positions, risk-based capital requirements, and to maximize liquidity access and
minimize funding costs. In 2006, Federal funds sold increased in connection
with higher levels of funds that were available for short-term investments.
Securities sold under repurchase agreements and Commercial paper and other
borrowed funds increased primarily due to short-term requirements to fund
trading positions and AFS securities inventory levels, as well as the result of
growth in volume related to sweeps and other cash management products. For
additional information on the Firm’s Liquidity risk management, see pages
62–63 of this Annual Report.
Trading assets and liabilities – debt and equity instruments
The Firm uses debt and equity trading instruments for both market-making and
proprietary risk-taking activities. These instruments consist primarily of fixed
income securities (including government and corporate debt), equity securities
and convertible cash instruments, as well as physical commodities. The increase
in trading assets over December 31, 2005, was due primarily to the more favor-
able capital markets environment, with growth in client-driven market-making
activities across both products (such as interest rate, credit and equity markets)
and regions. For additional information, refer to Note 4 on page 98 of this
Annual Report.
Trading assets and liabilities – derivative receivables and payables
The Firm utilizes various interest rate, foreign exchange, equity, credit and com-
modity derivatives for market-making, proprietary risk-taking and risk-manage-
ment purposes. The increases in derivative receivables and payables from
December 31, 2005, primarily stemmed from an increase in credit derivatives
and equity contracts. For additional information, refer to Derivative contracts
and Note 4 on pages 69–72 and 98, respectively, of this Annual Report.
Securities
The Firm’s securities portfolio, almost all of which is classified as AFS, is used
primarily to manage the Firm’s exposure to interest rate movements. The AFS
portfolio increased by $44.4 billion from the 2005 year end, primarily due to net
purchases in the Treasury investment securities portfolio, in connection with
repositioning the Firm’s portfolio to manage exposure to interest rates. For addi-
tional information related to securities, refer to the Corporate segment discus-
sion and to Note 10 on pages 53–54 and 108–111, respectively, of this Annual
Report.
Interests in purchased receivables and Beneficial interests issued by
consolidated VIEs
Interests in purchased receivables and Beneficial interests issued by consolidat-
ed VIEs declined from December 2005, as a result of the restructuring during
the second quarter of 2006 of Firm-administered multi-seller conduits. The
restructuring resulted in the deconsolidation of $29 billion of Interests in pur-
chased receivables, $3 billion of Loans and $1 billion of AFS securities, as well
as a corresponding decrease in Beneficial interests issued by consolidated VIEs.
For additional information related to multi-seller conduits, refer to Off–balance
sheet arrangements and contractual cash obligations on pages 59–60 and
Note 15 on pages 118–120 of this Annual Report.