JP Morgan Chase 2010 Annual Report Download - page 84

Management’s discussion and analysis
JPMorgan Chase & Co./2010 Annual Report
84
TREASURY & SECURITIES SERVICES
Treasury & Securities Services is a global leader in
transaction, investment and information services.
TSS is one of the world’s largest cash management
providers and a leading global custodian. Treasury
Services provides cash management, trade,
wholesale card and liquidity products and services to
small- and mid-sized companies, multinational
corporations, financial institutions and government
entities. TS partners with IB, CB, RFS and AM
businesses to serve clients firmwide. Certain TS
revenue is included in other segments’ results.
Worldwide Securities Services holds, values, clears
and services securities, cash and alternative
investments for investors and broker-dealers, and
manages depositary receipt programs globally.
Selected income statement data
Year ended December 31,
(in millions, except ratio data) 2010 2009 2008
Revenue
Lending
-
and deposit
-
related
fees $ 1,256 $ 1,285 $
1,146
Asset management,
administration and
commissions
2,697 2,631 3,133
All other income
804
831 917
Noninterest revenue
4,757
4,747 5,196
Net interest income
2,624
2,597 2,938
Total net revenue
7,381
7,344 8,134
Provision for credit losses
(47)
55 82
Credit reimbursement to IB
(a)
(121) (121) (121)
Noninterest expense
Compensation expense
2,734
2,544 2,602
Noncompensation expense
2,790
2,658 2,556
Amortization of intangibles
80
76 65
Total noninterest e
x
pense
5,604
5,278 5,223
Income before income tax
expense 1,703 1,890 2,708
Income tax expense
624
664 941
Net income
$
1,079
$ 1,226 $ 1,767
Revenue by business
Treasury Services
$
3,698
$ 3,702 $ 3,779
Worldwide Securities Services
3,683
3,642 4,355
Total net revenue
$
7,381
$ 7,344 $ 8,134
Financial ratios
ROE 17%
25%
47%
Overhead ratio
76
72 64
Pretax margin ratio
23
26 33
As of or for the y
ear ended
December 31,
(in millions, except headcount) 2010 2009 2008
Selected balance sheet data
(period-end)
Loans
(
b
)
$ 27,168 $ 18,972 $ 24,508
Equity
6,500
5,000 4,500
Selected balance sheet data
(average)
Total assets
$
42,494
$ 35,963 $ 54,563
Loans
(
b
)
23,271 18,397 26,226
Liability balances
248,451
248,095 279,833
Equity
6,500
5,000 3,751
Headcount 29,073 26,609 27,070
(a) IB credit portfolio group manages certain exposures on behalf of clients
shared with TSS. TSS reimburses IB for a portion of the total cost of managing
the credit portfolio. IB recognizes this credit reimbursement as a component
of noninterest revenue.
(b) Loan balances include wholesale overdrafts, commercial card and trade
finance loans.
2010 compared with 2009
Net income was $1.1 billion, a decrease of $147 million, or 12%,
from the prior year. These results reflected higher noninterest
expense partially offset by the benefit from the provision for credit
losses and higher net revenue.
Net revenue was $7.4 billion, an increase of $37 million, or 1%,
from the prior year. Treasury Services net revenue was $3.7 billion,
relatively flat compared with the prior year as lower spreads on
liability products were offset by higher trade loan and card product
volumes. Worldwide Securities Services net revenue was $3.7
billion, relatively flat compared with the prior year as higher market
levels and net inflows of assets under custody were offset by lower
spreads in securities lending, lower volatility on foreign exchange,
and lower balances on liability products.
TSS generated firmwide net revenue of $10.3 billion, including $6.6
billion by Treasury Services; of that amount, $3.7 billion was
recorded in Treasury Services, $2.6 billion in Commercial Banking
and $247 million in other lines of business. The remaining $3.7
billion of firmwide net revenue was recorded in Worldwide
Securities Services.
The provision for credit losses was a benefit of $47 million,
compared with an expense of $55 million in the prior year. The
decrease in the provision expense was primarily due to an
improvement in credit quality.
Noninterest expense was $5.6 billion, up $326 million, or 6%, from
the prior year. The increase was driven by continued investment in
new product platforms, primarily related to international expansion
and higher performance-based compensation.