JP Morgan Chase 2006 Annual Report Download - page 99

JPMorgan Chase & Co. / 2006 Annual Report 97
intangibles of $485 million which will be amortized using an accelerated
method over a 10 year period. JPMorgan Chase recorded an after-tax gain of
$622 million related to this transaction in the fourth quarter of 2006.
JPMorgan Partners management
On August 1, 2006, the buyout and growth equity professionals of JPMorgan
Partners (“JPMP”) formed an independent firm, CCMP Capital, LLC (“CCMP”),
and the venture professionals separately formed an independent firm,
Panorama Capital, LLC (“Panorama”). The investment professionals of CCMP
and Panorama continue to manage the former JPMP investments pursuant to a
management agreement with the Firm.
Sale of insurance underwriting business
On July 1, 2006, JPMorgan Chase completed the sale of its life insurance and
annuity underwriting businesses to Protective Life Corporation for cash pro-
ceeds of approximately $1.2 billion, consisting of $900 million of cash
received from Protective Life Corporation and approximately $300 million of
preclosing dividends received from the entities sold. The after-tax impact of
this transaction was negligible. The sale included both the heritage Chase
insurance business and the insurance business that Bank One had bought
from Zurich Insurance in 2003.
Acquisition of private-label credit card portfolio from Kohl’s
Corporation
On April 21, 2006, JPMorgan Chase completed the acquisition of $1.6 billion
of private-label credit card receivables and approximately 21 million accounts
from Kohl’s Corporation (“Kohl’s”). JPMorgan Chase and Kohl’s have also
entered into an agreement under which JPMorgan Chase will offer private-
label credit cards to both new and existing Kohl’s customers.
Collegiate Funding Services
On March 1, 2006, JPMorgan Chase acquired, for approximately $663 mil-
lion, Collegiate Funding Services, a leader in education loan servicing and
consolidation. This acquisition included $6 billion of education loans and will
enable the Firm to create a comprehensive education finance business.
BrownCo
On November 30, 2005, JPMorgan Chase sold BrownCo, an on-line deep-
discount brokerage business, to E*TRADE Financial for a cash purchase price
of $1.6 billion. JPMorgan Chase recognized an after-tax gain of $752 million
on the sale. BrownCo’s results of operations were reported in the Asset
Management business segment; however, the gain on the sale, which was
recorded in Other income in the Consolidated statements of income, was
reported in the Corporate business segment.
Sears Canada credit card business
On November 15, 2005, JPMorgan Chase purchased Sears Canada Inc.’s
credit card operation, including both private-label card accounts and co-brand-
ed Sears MasterCard®accounts, aggregating approximately 10 million
accounts with $2.2 billion (CAD$2.5 billion) in managed loans. Sears Canada
and JPMorgan Chase entered into an ongoing arrangement under which
JPMorgan Chase will offer private-label and co-branded credit cards to both
new and existing customers of Sears Canada.
Chase Merchant Services, Paymentech integration
On October 5, 2005, JPMorgan Chase and First Data Corp. completed the
integration of the companies’ jointly owned Chase Merchant Services and
Paymentech merchant businesses, to be operated under the name Chase
Paymentech Solutions, LLC. The joint venture is the largest financial transaction
processor in the U.S. for businesses accepting credit card payments via traditional
point of sale, Internet, catalog and recurring billing. As a result of the integration
into a joint venture, Paymentech has been deconsolidated and JPMorgan Chase’s
ownership interest in this joint venture is accounted for in accordance with the
equity method of accounting.
Cazenove
On February 28, 2005, JPMorgan Chase and Cazenove Group plc (“Cazenove”)
formed a business partnership which combined Cazenove’s investment banking
business and JPMorgan Chase’s U.K.-based investment banking business in
order to provide investment banking services in the United Kingdom and
Ireland. The new company is called JPMorgan Cazenove Holdings.
Other acquisitions
During 2004, JPMorgan Chase purchased the Electronic Financial Services
(“EFS”) business from Citigroup and acquired a majority interest in hedge
fund manager Highbridge Capital Management, LLC (“Highbridge”).
Note 3 – Discontinued operations
The transfer of selected corporate trust businesses to The Bank of New York
(see Note 2 above) includes the trustee, paying agent, loan agency and docu-
ment management services businesses. JPMorgan Chase recognized an after-
tax gain of $622 million on this transaction. The results of operations of these
corporate trust businesses were transferred from the Treasury & Securities
Services (“TSS”) segment to the Corporate segment effective with the second
quarter of 2006, and reported as discontinued operations. Condensed finan-
cial information of the corporate trust business follows:
Selected income statements data
Year ended December 31, (in millions) 2006 2005 2004(a)
Other noninterest revenue $ 407 $ 509 $ 491
Net interest income 264 276 234
Gain on sale of discontinued operations 1,081 ——
Total net revenue 1,752 785 725
Noninterest expense 385 409 387
Income from discontinued operations
before income taxes 1,367 376 338
Income tax expense 572 147 132
Income from discontinued
operations $ 795 $ 229 $ 206
(a) 2004 results include six months of the combined Firm’s results and six months of heritage
JPMorgan Chase results.
The following is a summary of the assets and liabilities associated with the
selected corporate trust businesses related to The Bank of New York transac-
tion that closed on October 1, 2006.
Selected balance sheet data (in millions) October 1, 2006
Goodwill and other intangibles $ 838
Other assets 547
Total assets $ 1,385
Deposits $ 24,011
Other liabilities 547
Total liabilities $ 24,558
JPMorgan Chase will provide certain transitional services to The Bank of New
York for a defined period of time after the closing date. The Bank of New York
will compensate JPMorgan Chase for these transitional services.