JP Morgan Chase 2008 Annual Report Download - page 71

JPMorgan Chase & Co./ 2008 Annual Report 69
Total net revenue was $6.9 billion, an increase of $836 million, or
14%, from the prior year. Worldwide Securities Services net revenue
of $3.9 billion was up $615 million, or 19%. The growth was driven
by increased product usage by new and existing clients (primarily cus-
tody, securities lending, depositary receipts and fund services), market
appreciation on assets under custody, and wider spreads on securities
lending. These gains were offset partially by spread compression on
liability products. Treasury Services net revenue was $3.0 billion, an
increase of $221 million, or 8%, from the prior year. The results were
driven by growth in electronic transaction volumes and higher liability
balances, offset partially by a shift to narrower-spread liability prod-
ucts. TSS firmwide net revenue, which includes Treasury Services net
revenue recorded in other lines of business, grew to $9.6 billion, up
$1.0 billion, or 12%. Treasury Services firmwide net revenue grew to
$5.6 billion, up $391 million, or 7%.
Noninterest expense was $4.6 billion, an increase of $314 million, or
7%, from the prior year, reflecting higher expense related to business
and volume growth, as well as investment in new product platforms.
Treasury & Securities Services firmwide metrics include revenue
recorded in the CB, Retail Banking and AM lines of business and
excludes foreign exchange (“FX”) revenue recorded in IB for TSS-
related FX activity. In order to capture the firmwide impact of TS and
TSS products and revenue, management reviews firmwide metrics
such as liability balances, revenue and overhead ratios in assessing
financial performance for TSS. Firmwide metrics are necessary in order
to understand the aggregate TSS business.
Selected metrics
Year ended December 31,
(in millions, except ratio data) 2008 2007 2006
TSS firmwide disclosures
Treasury Services revenue –
reported $ 3,555 $ 3,013 $ 2,792
Treasury Services revenue
reported in Commercial Banking 2,648 2,350 2,243
Treasury Services revenue
reported in other lines of business 299 270 207
Treasury Services firmwide
revenue(a) 6,502 5,633 5,242
Worldwide Securities Services revenue 4,579 3,932 3,317
Treasury & Securities Services
firmwide revenue(a) $ 11,081 $ 9,565 $ 8,559
Treasury Services firmwide liability
balances (average)(b) $242,706 $199,077 $162,020
Treasury & Securities Services
firmwide liability balances
(average)(b) 382,947 316,651 262,678
TSS firmwide financial ratios
Treasury Services firmwide overhead
ratio(c) 51% 56% 56%
Treasury & Securities Services
firmwide overhead ratio(c) 57 60 62
Year ended December 31,
(in millions, except ratio data
and where otherwise noted) 2008 2007 2006
Firmwide business metrics
Assets under custody (in billions) $ 13,205 $ 15,946 $ 13,903
Number of:
U.S.$ ACH transactions originated
(in millions) 4,000 3,870 3,503
Total U.S.$ clearing volume
(in thousands) 115,742 111,036 104,846
International electronic funds transfer
volume (in thousands)(d) 171,036 168,605 145,325
Wholesale check volume
(in millions) 2,408 2,925 3,409
Wholesale cards issued
(in thousands)(e) 22,784 18,722 17,228
Credit data and quality
statistics
Net charge-offs (recoveries) $ (2) $—$ 1
Nonperforming loans 30 ——
Allowance for loan losses 74 18 7
Allowance for lending-related
commitments
63 32 1
Net charge-off (recovery) rate (0.01)% —% 0.01%
Allowance for loan losses to
average loans 0.28 0.09 0.04
Allowance for loan losses to
nonperforming loans 247 NM NM
Nonperforming loans to average
loans 0.11 ——
(a) TSS firmwide FX revenue, which includes FX revenue recorded in TSS and FX rev-
enue associated with TSS customers who are FX customers of IB, was $880 million,
$552 million and $445 million for the years ended December 31, 2008, 2007 and
2006, respectively.
(b) Firmwide liability balances include TS’ liability balances recorded in the Commercial
Banking line of business.
(c) Overhead ratios have been calculated based upon firmwide revenue and TSS and TS
expense, respectively, including those allocated to certain other lines of business. FX
revenue and expense recorded in IB for TSS-related FX activity are not included in
this ratio.
(d) International electronic funds transfer includes non-U.S. dollar ACH and clearing vol-
ume.
(e) Wholesale cards issued include domestic commercial card, stored value card, pre-
paid card and government electronic benefit card products.