JP Morgan Chase 2008 Annual Report Download - page 69

JPMorgan Chase & Co./ 2008 Annual Report 67
lending revenue, investment banking revenue, and gains on sales of
securities acquired in the satisfaction of debt. Real Estate Banking
revenue of $421 million decreased $37 million, or 8%.
Provision for credit losses was $279 million, compared with $160 mil-
lion in the prior year. The increase in the allowance for credit losses
reflected portfolio activity including slightly lower credit quality as
well as growth in loan balances. The allowance for loan losses to
average loans retained was 2.81%, compared with 2.86% in the
prior year.
Noninterest expense was $2.0 billion, a decrease of $21 million, or
1%, largely due to lower compensation expense driven by the
absence of prior-year expense from the adoption of SFAS 123R, par-
tially offset by expense growth related to the Bank of New York
transaction.
Selected metrics
Year ended December 31,
(in millions) 2008 2007 2006
Revenue by product:
Lending $ 1,743 $ 1,419 $ 1,344
Treasury services 2,648 2,350 2,243
Investment banking 334 292 253
Other 52 42 (40)
Total Commercial Banking
revenue $ 4,777 $ 4,103 $ 3,800
IB revenue, gross(a) $ 966 $ 888 $ 716
Revenue by business:
Middle Market Banking $ 2,939 $ 2,689 $ 2,535
Commercial Term Lending(b) 243 ——
Mid-Corporate Banking 921 815 656
Real Estate Banking(b) 413 421 458
Other(b) 261 178 151
Total Commercial Banking
revenue $ 4,777 $ 4,103 $ 3,800
Selected balance sheet data
(period-end)
Equity $ 8,000 $ 6,700 $ 6,300
Selected balance sheet data
(average)
Total assets $ 114,299 $87,140 $57,754
Loans:
Loans retained 81,931 60,231 53,154
Loans held-for-sale and loans at
fair value 406 863 442
Total loans $ 82,337 $ 61,094 $53,596
Liability balances(c) 103,121 87,726 73,613
Equity 7,251 6,502 5,702
Year ended December 31,
(in millions, except headcount and ratios) 2008 2007 2006
Average loans by business:
Middle Market Banking $ 42,193 $ 37,333 $33,225
Commercial Term Lending(b) 9,310 ——
Mid-Corporate Banking 16,297 12,481 8,632
Real Estate Banking(b) 9,008 7,116 7,566
Other(b) 5,529 4,164 4,173
Total Commercial Banking
loans $ 82,337 $ 61,094 $53,596
Headcount 5,206 4,125 4,459
Credit data and quality
statistics:
Net charge-offs $ 288 $44$27
Nonperforming loans(d) 1,026 146 121
Nonperforming assets 1,142 148 122
Allowance for credit losses:
Allowance for loan losses(e) $ 2,826 $ 1,695 $ 1,519
Allowance for lending-related
commitments 206 236 187
Total allowance for credit losses $ 3,032 $ 1,931 $ 1,706
Net charge-off rate(f) 0.35% 0.07% 0.05%
Allowance for loan losses to
average loans(d)(f) 3.04(g) 2.81 2.86
Allowance for loan losses to
nonperforming loans(d) 275 1,161 1,255
Nonperforming loans to average loans(d) 1.10(g) 0.24 0.23
(a) Represents the total revenue related to investment banking products sold to CB
clients.
(b) Results for 2008 include total net revenue and average loans acquired in the
Washington Mutual transaction.
(c) Liability balances include deposits and deposits swept to on-balance sheet liabilities
such as commercial paper, federal funds purchased and securities loaned or sold
under repurchase agreements.
(d) Purchased credit-impaired wholesale loans accounted for under SOP 03-3 that were
acquired in the Washington Mutual transaction are considered nonperforming loans
because the timing and amount of expected cash flows are not reasonably
estimable. These nonperforming loans were included when calculating the allowance
coverage ratio, the allowance for loan losses to nonperforming loans ratio, and the
nonperforming loans to average loans ratio. The carrying amount of these purchased
credit-impaired loans was $224 million at December 31, 2008.
(e) Beginning in 2008, the allowance for loan losses included an amount related to
loans acquired in the Washington Mutual transaction and the Bear Stearns merger.
(f) Loans held-for-sale and loans accounted for at fair value were excluded when calcu-
lating the allowance coverage ratio and the net charge-off rate.
(g) The September 30, 2008, ending loan balance of $44.5 billion acquired in the
Washington Mutual transaction is treated as if it had been part of the loan balance
for the entire third quarter of 2008.