JP Morgan Chase 2010 Annual Report Download - page 46

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Across the industry, treasury and
securities servicing are attractive
businesses with strong fundamental
characteristics. They provide stable
earnings with excellent margins and
high returns on capital. They also
grow as global economies grow, trade
activity increases and clients’ activi-
ties in international markets expand.
And such businesses are hard to repli-
cate: Success requires scale of invest-
ment in people, systems and services.
Having made the necessary invest-
ment, TSS is a leader in each of our
businesses and one of the very few
firms with the financial strength and
resources to maintain that leadership.
That said, we have work to do. Given
TSS’ intrinsic strengths, our perfor-
mance is not where it has the poten-
tial to be. The TSS leadership team
is highly focused on closing this gap
between the quality of our business
and the financial results we deliver.
We will do so by improving our
operating margins through increased
eciency and product innovation;
benefiting, where possible, from
higher interest-rate environments;
and, most critically, extending our
higher-margin international business.
During the six years that I had
the privilege of serving as
JPMorgan Chase’s Chief Financial
Ocer, I gained perspective on all
the firm’s businesses. Treasury &
Securities Services (TSS) is notable
not only for its inherently attrac-
tive business characteristics but
also for its global potential.
TSS has tremendous capacity for
profitable overseas growth like the
firm’s other international wholesale
businesses – Investment Banking
and Asset Management. That
potential resides in both of TSS’
operating units: Treasury Services
(TS), comprising cash manage-
ment, payments and receivables,
liquidity management and trade
finance; and Worldwide Securities
Services (WSS), comprising asset
custody and administration.
Now that I have the equally great
privilege of serving as CEO of TSS,
I would like to talk about the
strengths of this business and
discuss how we are going to realize
its potential.
2010 Results: Volume Up and
Revenue Flat, with Strategic
Investment for the Future
TSS reported 2010 net income of $1.1
billion, down from $1.2 billion in 2009.
Revenue was flat, at $7.4 billion, as
spreads remained low and securities
lending revenue fell by 30%. Expenses
rose on higher business volume and
investment in global expansion.
Revenue was roughly even between
TS and WSS, each at approximately
$3.7 billion. Just under half of total
TSS revenue was generated outside
the United States.
Despite the challenging market envi-
ronment, there was strong growth in
the underlying revenue drivers for
both operating units. In WSS, assets
under custody grew 8% to $16.1
trillion. In TS, deposits or liability
balances totaled $169.2 billion, 5%
higher than in 2009.
To support growth initiatives, we
invested heavily in 2010 in our
people, products and infrastructure,
fueling a 6% rise in expense. Most
notably, we hired nearly 150 new sales
and relationship managers around
the world, bringing our total to nearly
1,100 globally, and we increased tech-
nology expenditures by 23%.
Treasury & Securities Services
“ Treasury & Securities
Services is notable not
only for its inherently
attractive business
characteristics but also
for its global potential.”