JP Morgan Chase 2006 Annual Report Download - page 69

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JPMorgan Chase & Co. / 2006 Annual Report 67
Net charge-offs/recoveries
Wholesale
Year ended December 31,
(in millions, except ratios) 2006 2005
Loans – reported
Net recoveries $22$77
Average annual net recovery rate(a) 0.01% 0.06%
(a) Excludes average loans HFS of $22 billion and $12 billion for the years ended December 31,
2006 and 2005, respectively.
During both 2006 and 2005, there were no net charge-offs for Derivative receiv-
ables, Interests in purchased receivables or lending-related commitments.
Net recoveries do not include gains from sales of nonperforming loans that were
sold from the credit portfolio (as shown in the following table). Gains from these
sales during 2006 and 2005 were $72 million and $67 million, respectively, and
are reflected in Noninterest revenue.
The following table presents summaries of the maturity and ratings profiles of the wholesale portfolio as of December 31, 2006 and 2005. The ratings scale is based upon
the Firm’s internal risk ratings and is presented on an S&P-equivalent basis.
Wholesale exposure Maturity profile(d) Ratings profile
December 31, 2006 Under 1–5 Over Investment-grade (“IG”) Noninvestment-grade Total %
(in billions, except ratios) 1 year years 5 years Total AAA to BBB- BB+ & below Total of IG
Loans 44% 41% 15% 100% $ 104 $ 57 $ 161 65%
Derivative receivables 16 34 50 100 49 7 56 88
Interests in purchased receivables(a) ———— — — ——
Lending-related commitments(a) 36 58 6 100 338 53 391 86
Total excluding HFS 37% 51% 12% 100% $ 491 $ 117 608 81%
Loans held-for-sale(b) 23
Total exposure $ 631
Net credit derivative hedges notional(c) 16% 75% 9% 100% $ (45) $ (6) $ (51) 88%
Maturity profile(d) Ratings profile
December 31, 2005 Under 1–5 Over Investment-grade (“IG”) Noninvestment-grade Total %
(in billions, except ratios) 1 year years 5 years Total AAA to BBB- BB+ & below Total of IG
Loans 43% 44% 13% 100% $ 87 $ 45 $ 132 66%
Derivative receivables 2 42 56 100 42 8 50 84
Interests in purchased receivables 41 57 2 100 30 — 30 100
Lending-related commitments 36 57 7 100 273 48 321 85
Total excluding HFS 35% 52% 13% 100% $ 432 $ 101 533 81%
Loans held-for-sale(b) 18
Total exposure $ 551
Net credit derivative hedges notional(c) 15% 74% 11% 100% $ (27) $ (3) $ (30) 90%
(a) As a result of restructuring certain multi-seller conduits the Firm administers, JPMorgan Chase deconsolidated $29 billion of Interests in purchased receivables, $3 billion of Loans and $1 billion of
Securities, and recorded a related increase of $33 billion of lending-related commitments during the second quarter of 2006.
(b) HFS loans relate primarily to securitization and syndication activities.
(c) Ratings are based upon the underlying referenced assets.
(d) The maturity profile of Loans and lending-related commitments is based upon the remaining contractual maturity. The maturity profile of Derivative receivables is based upon the maturity profile of
Average exposure. See page 70 of this Annual Report for a further discussion of Average exposure.
Nonperforming loan activity
Wholesale
Year ended December 31,
(in millions) 2006 2005
Beginning balance $ 992 $ 1,574
Additions 480 581
Reductions:
Paydowns and other (578) (520)
Charge-offs (186) (255)
Returned to performing (133) (204)
Sales (184) (184)
Total reductions (1,081) (1,163)
Net additions (reductions) (601) (582)
Ending balance $ 391 $ 992