JP Morgan Chase 2006 Annual Report Download - page 75

JPMorgan Chase & Co. / 2006 Annual Report 73
CONSUMER CREDIT PORTFOLIO
JPMorgan Chase’s consumer portfolio consists primarily of residential mortgages,
home equity loans, credit cards, auto loans and leases, education loans and busi-
ness banking loans and reflects the benefit of diversification from both a product
and a geographic perspective. The primary focus is serving the prime consumer
credit market. There are no products in the real estate portfolios that result in
negative amortization. However, RFS offers Home Equity lines of credit and
Mortgage loans with interest-only payment options to predominantly prime bor-
rowers. The Firm actively manages its consumer credit operation. Ongoing efforts
include continual review and enhancement of credit underwriting criteria and
refinement of pricing and risk management models.
The following table presents managed consumer credit–related information for the dates indicated:
Consumer portfolio
Credit Nonperforming Average annual
As of or for the year ended December 31, exposure assets(e) Net charge-offs net charge-off rate(g)
(in millions, except ratios) 2006 2005 2006 2005 2006 2005 2006 2005
Retail Financial Services
Home equity $ 85,730 $ 73,866 $ 454 $ 422 $ 143 $ 141 0.18% 0.20%
Mortgage 59,668 58,959 769 442 56 25 0.12 0.06
Auto loans and leases(a) 41,009 46,081 132 193 238 277 0.56 0.54
All other loans 27,097 18,393 322 281 139 129 0.65 0.83
Card Services – reported(b) 85,881 71,738 913 2,488 3,324 3.37 4.94
Total consumer loans – reported 299,385 269,037 1,686(f) 1,351(f) 3,064 3,896 1.17 1.56
Card Services – securitizations(b)(c) 66,950 70,527 ——2,210 3,776 3.28 5.47
Total consumer loans – managed(b) 366,335 339,564 1,686 1,351 5,274 7,672 1.60 2.41
Assets acquired in loan satisfactions NA NA 225 180 NA NA NA NA
Total consumer related assets – managed 366,335 339,564 1,911 1,531 5,274 7,672 1.60 2.41
Consumer lending–related commitments:
Home equity 69,559 58,281 NA NA NA NA NA NA
Mortgage 6,618 5,944 NA NA NA NA NA NA
Auto loans and leases 7,874 5,665 NA NA NA NA NA NA
All other loans 6,375 6,385 NA NA NA NA NA NA
Card Services(d) 657,109 579,321 NA NA NA NA NA NA
Total lending-related commitments 747,535 655,596 NA NA NA NA NA NA
Total consumer credit portfolio $ 1,113,870 $ 995,160 $1,911 $ 1,531 $ 5,274 $ 7,672 1.60% 2.41%
Total average HFS loans $ 16,129 $ 15,675 $29 $21 NA NA NA NA
Memo: Credit card – managed 152,831 142,265 913 $ 4,698 $ 7,100 3.33% 5.21%
(a) Excludes operating lease–related assets of $1.6 billion and $858 million at December 31, 2006 and 2005, respectively.
(b) Past-due loans 90 days and over and accruing includes credit card receivables of $1.3 billion and $1.1 billion at December 31, 2006 and 2005, and related credit card securitizations of $962 million
and $730 million at December 31, 2006 and 2005, respectively.
(c) Represents securitized credit card receivables. For a further discussion of credit card securitizations, see Card Services on pages 43–45 of this Annual Report.
(d) The credit card lending–related commitments represent the total available credit to the Firm’s cardholders. The Firm has not experienced, and does not anticipate, that all of its cardholders will utilize
their entire available lines of credit at the same time. The Firm can reduce or cancel a credit card commitment by providing the cardholder prior notice or, in some cases, without notice as permitted
by law.
(e) Includes nonperforming HFS loans of $116 million and $27 million at December 31, 2006 and 2005, respectively.
(f) Excludes nonperforming assets related to (1) loans eligible for repurchase as well as loans repurchased from GNMA pools that are insured by U.S. government agencies and U.S. government-spon sored
enterprises of $1.2 billion and $1.1 billion for December 31, 2006 and 2005, respectively, and (2) education loans that are 90 days past due and still accruing, which are insured by U.S. government
agencies under the Federal Family Education Loan Program of $0.2 billion at December 31, 2006. These amounts for GNMA and education loans are excluded, as reimbursement is proceeding normally.
(g) Net charge-off rates exclude average loans HFS of $16 billion for the years ended December 31, 2006 and 2005.
Total managed consumer loans as of December 31, 2006, were $366.3 bil-
lion, up from $339.6 billion at year-end 2005 reflecting growth in most con-
sumer portfolios. Consumer lending-related commitments increased by 14%,
to $747.5 billion at December 31, 2006, primarily reflecting growth in credit
cards and home equity lines of credit. The following discussion relates to the
specific loan and lending-related categories within the consumer portfolio.
Retail Financial Services:
Average RFS loan balances for 2006 were $203.9 billion. The net charge-off
rate for retail loans in 2006 was 0.31%, which was flat compared with the
prior year, reflecting stable credit trends in most consumer lending portfolios.
New loans originated in 2006 primarily reflect high credit quality consistent
with management’s focus on prime and near-prime credit market segmenta-
tion. The Firm regularly evaluates market conditions and the overall economic
returns of new originations and makes an initial determination of whether to
classify specific new originations as held-for-investment or held-for-sale. The
Firm also periodically evaluates the overall economic returns of its held-for-
investment loan portfolio under prevailing market conditions to determine
whether to retain or sell loans in the portfolio. When it is determined that a
loan that was previously classified as held-for-investment will be sold it is
transferred into a held-for-sale account. Held-for-sale loans are accounted for
at the lower of cost or fair value, with changes in value recorded in
Noninterest revenue.