Jamie Dimon Chairman and Chief Executive Officer May 27, 2009
Bernstein Strategic Decisions Conference
Agenda
Part I - Firm and line of business update Part II - Key investor topics Impact of recent accounting changes Lending update Bank vs. non-bank lending activity Expense and productivity JPM SCAP outcome Outlook
1
Earnings power of franchise and fortress balance sheet position JPM well for the future
Each standalone business has a top 1, 2, or 3 position
Excellent Excellent Franchises Franchises
Leadership positions — very difficult to replicate Significant market share and efficiency gains in each business Continued investment across LOBs drives organic growth Businesses operate stronger together than apart Creates additional revenue opportunities in each business Solid earnings power helps counter impact of economic environment:
Solid Earnings Solid Earnings Power Power
JPM estimates $80B of Resources Other Than Capital to Absorb Losses1 for ‘09-‘10 under Supervisory Capital Assessment Program (SCAP) More Adverse scenario; positions JPM to withstand tough environment On-going, but heightened operating discipline on expense, balance sheet, etc. 1Q09 Tier 1 ratio ex. TARP of 9.3%, Tier 1 Common ratio of 7.3% and Tier 1 Common Capital of $88B $28B in allowance for credit losses as of 3/31/09; firmwide loan loss coverage ratio of 4.53%2
Fortress Fortress Balance Sheet Balance Sheet
Continue to feel great about future prospects of Company
1 2
Resources to absorb losses include pre-provision net revenue less the change in the allowance for losses on loans and leases Excludes the impact of purchased credit-impaired loans acquired as part of the WaMu transaction
2
Consistently investing in revenue growth
Good underlying momentum in core business drivers propelling organic growth across businesses
Growth drivers - % change YoY Growth drivers - % change YoY
1Q09 Retail Financial Services Retail Banking Average Deposits # of ATMs # of Branches # of Branch Bankers & Sales Specialists Credit Cards Originated in Branches Deposit margin1 Card Services (excl. WaMu) Average Outstandings Charge Volume Sales Volume # of New accts opened Commercial Banking Liability Balances2 Average Loans Treasury & Securities Services Liability Balances2 Assets under Custody Asset Management Assets under Management Average Loans Deposits
1 2
4Q08 63% 59% 74% 56% 56% 2.94% 5% (8%) (4%) (25%) 18% 80% 34% (17%) (5%) 13% 19%
3Q08 2% 61% 75% 58% 6% 3.06% 6% 5% 5% (8%) 13% 18% 10% (8%) (1%) 29% 10%
2Q08 3% 8% 2% 9% 4% 2.88% 4% 6% 7% (3%) 18% 19% 23% 2% 7% 37% 25%
1Q08 4% 8% 2% 21% 18% 2.64% 3% 5% 10% 22% 18% 21% 7% 13% 43% 24%
62% 53% 65% 50% 50% 2.85% 1% (16%) (9%) (36%) 16% 67% 9% (14%) (6%) (6%) 20%
3
Actual numbers for all periods, not % change YoY Includes deposits and deposits swept to on-balance sheet liabilities 3 Reflects the transfer in 2007 of held-for-investment prime mortgage loans from AM to Corporate within the Corporate/Private Equity segment
3
1Q09 Managed results1
$ in millions $ in millions
$ O/(U) 1Q09 Results excl. Merger-related items2 Revenue (FTE)1 Credit Costs1 Expense Merger-related items2 (after-tax) Reported Net Income Reported EPS ROE3 ROE Net of GW3 ROTCE3,4
1
4Q08
1Q08
$27,062 10,060 13,136 (234) $2,141 $0.40 5% 7% 8%
$7,740 1,477 2,129 (1,298) $1,439 $0.34 1% 1% 1%
$9,164 4,955 4,205 (234) ($232) ($0.27) 8% 12% 13%
Managed basis presents revenue and credit costs without the effect of credit card securitizations. Revenue is on a fully taxableequivalent (FTE) basis. All references to credit costs refer to managed provision for credit losses. See notes 2 and 3 on slide 30 2 Merger-related items relate to the Bear Stearns and WaMu transactions 3 Actual numbers for all periods, not over/under 4 See note 1 on slide 30
4
Investment Bank
$ in millions $ in millions
$ O/(U) 1Q09 Revenue Investment Banking Fees Fixed Income Markets Equity Markets Credit Portfolio Credit Costs Expense Net Income Key Statistics
1
Leadership positions Leadership positions
4Q08 $8,643 7 6,560 1,867 209 445 2,033 $3,970 NM NM $89.5 $3.4 $1.2 0.47% 4.71% (28)% $327 $33.0
1Q08 $5,330 174 4,423 797 (64) 592 2,221 $1,693 85% 41% $93.7 $1.9 $0.3 0.07% 2.55% (2)% $122 $22.0
Continue to rank #1 in two capital raising league tables for 1Q09 YTD per Thomson Reuters Global Debt, Equity & Equity-related Global Equity & Equity-related Ranked #1 in Global Fees for 1Q09 with 8.3% market share per Dealogic
Comments on key risk exposures (data as of 3/31/09) Comments on key risk exposures (data as of 3/31/09)
$8,341 1,380 4,889 1,773 299 1,210 4,774 $1,606 57% 40% $82.4 $4.7 $1.8 0.21% 6.68% 20% $336 $33.0
Overhead Ratio Comp/Revenue Avg Loans ($B) Allowance for Loan Losses ($B) NPLs ($B) Net Charge-off Rate ALL / Avg Loans ROE VAR
3 4 2 2
Key risk exposures have been reduced substantially from pre-crisis levels Mortgage-related exposure of $12.7B; $214mm of net markdowns in 1Q09, largely driven by commercial Leveraged lending exposure of $5.5B (market value); $711mm of net markdowns in 1Q09
EOP Equity ($B)
1 2
Actual numbers for all periods, not over/under Loans held-for-sale and loans at fair value were excluded when calculating the loan loss coverage ratio and net charge-off rate 3 Calculated based on average equity. 1Q09 average equity was $33.0B 4 Average Trading and Credit Portfolio VAR
5
Retail Financial Services—drivers
Retail Banking ($ in billions) Retail Banking ($ in billions)
1Q09 Key Statistics Average Deposits Deposit Margin Checking Accts (mm) # of Branches # of ATMs Investment Sales ($mm) $345.8 2.85% 25.0 5,186 14,159 $4,398 $339.8 2.94% 24.5 5,474 14,568 $3,956 $214.1 2.64% 11.1 3,146 9,237 $4,084 4Q08 1Q08
Average deposits up 62% YoY and 2% QoQ, while deposit NII is up 69% YoY and down 3% QoQ Branch production statistics: Checking accounts up 126% YoY and 2% or ~485K QoQ Credit card sales up 50% YoY and down 12% QoQ Mortgage originations up 32% YoY and 87% QoQ Investment sales up 8% YoY and 11% or ~$442mm QoQ
Consumer Lending ($ in billions) Consumer Lending ($ in billions)
1Q09 Credit Metrics: Net Charge-off Rate (excl. credit-impaired) Allowance to EOP Loans (excl. creditimpaired) Key Statistics Home Equity Originations Avg Home Equity Loans Owned Mortgage Loan Originations
1,2 1
Total originations of $45.9B
4Q08 2.32% 3.16% 1Q08 1.57% 2.10%
3.12% 3.79%
Mortgage loan originations down 20% YoY and up 34% QoQ – Increase QoQ reflects strong refinancing demand – For 1Q09, greater than 90% of mortgage originations fall under agency and government programs Auto originations down 22% YoY and up 100% QoQ 3rd party mortgage loans serviced up 83% YoY and down 2% QoQ
$0.9 $141.8 $37.7 $148.3 $1,149 $5.6 $42.5
$1.7 $142.8 $28.1 $149.8 $1,173 $2.8 $42.9
$6.7 $95.0 $47.1 $51.3 $627 $7.2 $43.2
Avg Mortgage Loans Owned 3rd Party Mortgage Loans Svc'd Auto Originations Avg Auto Loans
1 2
Includes purchased credit-impaired loans acquired as part of the WaMu transaction Does not include held-for-sale loans
6
Retail Financial Services
$ in millions $ in millions
$ O/(U) 1Q09 Retail Financial Services Net income ROE
1,2 1
Leadership positions Leadership positions
#3 in deposit market share3
1Q08
4Q08
#3 in branch network4 #2 in ATMs4 #1 in Auto Finance (non-captive)5 #2 in Home Equity Originations6 #3 in Mortgage Servicing7 #3 in Mortgage Originations7 8.8% market share in Mortgage Originations7
$474 8% $25 $2,614 $1,718 $4,332 $325 $2,580 $863 $2,624 $1,879 $4,503 $3,552 $1,591 ($389)
($150) 10% $25 ($73) ($116) ($189) $57 $47 ($177) $601 ($261) $340 $244 $78 $27
$785 (7)% $17 $1,069 $752 $1,821 $276 $1,018 $318 $1,095 $1,156 $2,251 $913 $581 $467
EOP Equity ($B)
Retail Banking Net Interest Income Noninterest Revenue Total Revenue Credit Costs Expense Net Income Consumer Lending Net Interest Income Noninterest Revenue Total Revenue Credit Costs Expense Net Income
1 2
Actual numbers for all periods, not over/under Calculated based on average equity. 1Q09 average equity was $25.0B 3 Source: SNL Corporation; market share data as of June 2008, updated for subsequent acquisitions for all banks through March 2009. Includes deposits in domestic offices (50 states and D.C.), Puerto Rico and U.S. Territories only and non-retail branches are not included 4 Source: 1Q09 company reports 5 Source: Autocount (franchise), March 2009 6 Source: National Mortgage News, 4Q08 7 7 Source: Inside Mortgage Finance, 1Q09
Home Lending
Excluding credit-impaired loans
30+ day delinquency trend 30+ day delinquency trend
Subprime Mortgage
28.00% 24.00% 20.00% 16.00% 12.00% Dec-07 Mar-08 Jun-08 Sep-08 Dec-08
Home Equity Home Equity
Home Equity Prime Mortgage
7.00% 6.25% 5.50% 4.75% 4.00% 3.25% 2.50% 1.75% Mar-09
Losses continue to come predominantly from high CLTV loans For new originations, maximum CLTV remains at 50-70% based on geographic location Quarterly losses could be as high as $1.4B Prime Mortgage Prime Mortgage 30+ delinquencies continue to grow, driven in part by foreclosure moratoriums and loss mitigation efforts Losses coming predominantly from CA and FL (80% of losses) and 2006/2007 vintages (86% of losses)
Key statistics—Excluding credit-impaired1 Key statistics—Excluding credit-impaired1
1Q09 EOP owned portfolio ($B) Home Equity Prime Mortgage Subprime Mortgage Net charge-offs ($mm) Home Equity Prime Mortgage Subprime Mortgage Net charge-off rate Home Equity Prime Mortgage Subprime Mortgage Nonperforming loans ($mm) Home Equity Prime Mortgage Subprime Mortgage $1,591 2,691 2,545 $1,394 1,876 2,690 $924 860 1,401 3.93% 1.95% 9.91% 2.67% 1.20% 8.08% 1.89% 0.56% 3.82% $1,098 312 364 $770 195 319 $447 50 149 $111.7 65.4 14.6 $114.3 65.2 15.3 $95.0 38.2 15.8 4Q08 1Q08
New portfolio originations are subject to strict underwriting requirements, especially in areas with the most severe expected home price deterioration and unemployment growth Quarterly losses could be as high as $500mm over the next several quarters Subprime Mortgage Subprime Mortgage Eliminated new production and portfolio is in run-off 30+ day delinquencies are flat for March vs. February Quarterly losses could be as high as $375-$475mm over the next several quarters
1 Excludes the impact of purchased credit-impaired loans acquired as part of the WaMu transaction Note: 30+ day delinquencies prior to September ’08 are heritage Chase. CLTV=Combined Loan to Value. This metric represents how much the borrower owes on the property against the value
8
Deposit customers have significantly lower loss rates across all CLTV segments
Home Equity 2008 net charge-off rate (excluding WaMu) Home Equity 2008 net charge-off rate (excluding WaMu)
Deposit relationship
No Deposit relationship 9.3%
6.5%
4.8% 4.2% 2.7% 1.7% 1.0% 0.2% <=80% 80-90% 90-95% 95-100% >100% Total 1.0% 0.9%
2.5%
2.4%
Note: As ECLTV not available on charge-off accounts, used ECLTV at Dec-07 to bucket charge-off accounts. ECLTV = Effective Combined Loan to Value. This metric represents how much the borrower owes on the property against the estimated value
9
WaMu integration update — on track
Completed rebrand of 708 branches and 1,900 ATMs, and opened 9 regional counseling centers for troubled homeowners in California Consolidated nearly 300 branches during the first quarter; an additional 92 consolidations expected for remainder of 2009 Deposit systems conversions expected to be completed in three waves Conversion 1 - Washington, Oregon, Idaho, Utah – Completed this past weekend Conversion 2 - Florida, Georgia, Connecticut, New Jersey, New York, Illinois, Texas – By the end of August Conversion 3 - California, Nevada, Arizona, Colorado – By the end of December Successfully completed the conversion of the WaMu credit card portfolio to the Chase TSYS processing system Expense reductions of approximately $2.8B (gross) expected, with majority of savings expected to be achieved by the end of 2009 Investment spend of $750mm for sales people, facilities and marketing
10
Card Services (managed)
$ in millions $ in millions
$ O/(U) 1Q09 Revenue Credit Costs Expense Net Income Key Statistics Incl. WaMu ($B) ROO (pretax) ROE EOP Equity Key Statistics Excl. WaMu ($B) Avg Outstandings EOP Outstandings Charge Volume Net Accts Opened (mm) Managed Margin Net Charge-Off Rate 30+Day Delinquency Rate
1 2
Industry outstandings3 — 3/31/09 Industry outstandings3 — 3/31/09
4Q08 $221 687 (143) ($176) (1.16)% (10)% $15.0 $159.6 $162.1 $88.2 3.8 8.18% 5.29% 4.36%
1Q08 $1,225 2,983 74 ($1,156) 2.52% 17% $14.1 $153.6 $150.9 $85.4 3.4 8.34% 4.37% 3.66%
Discover 7% Amex 8%
$5,129 4,653 1,346 ($547)
1
Others 16%
Bank of America 21%
(1.92)% (15)% $15.0
1
2
Capital One 9% Citigroup 15%
Chase 4 24%
$155.8 $150.2 $71.4 2.2 8.75% 6.86% 5.34%
Actual numbers for all periods, not over/under Calculated based on average equity. 1Q09 average equity was $15.0B 3 Domestic General Purpose Credit Card (GPCC) outstandings. Source: 1Q09 Company reports. Bank of America data for U.S. consumer and small business card has been estimated since that disclosure was discontinued starting 3Q08; Citi GPCC data has been estimated as it no longer breaks out GPCC receivables; Cap One new US Card segment data includes US Consumer Credit Card, Small Business Card and Installment loans 4 Chase market share data includes WaMu receivables
11
Impact of unemployment and housing on Card credit performance
Net charge-off rate vs. unemployment rate Net charge-off rate vs. unemployment rate
Net charge-off rate
9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 NCO rate
1
Commentary Commentary
Unemployment rate
Unemployment rate
Regions with higher unemployment rates and higher housing price decline are driving disproportionately high net credit losses In our portfolio, the relationship between losses and unemployment has been less than 1:1 because of our prime/superprime focus, coupled with our co-brand and rewards business model
4Q09 Unemployment Scenarios 9% 10% Projected 4Q09 NCO Rate1,2 9.0% - 9.5% 10.0% - 10.5%
Impact of housing on credit performance Impact of housing on credit performance
Case Shiller 4Q08 (YoY) Severe AZ, CA, FL, NV, VA GA, IL, MD, MI, MN, OR, RI, WA Remaining States (28.7)%
Unemployment 1Q09 10.1%
30+ Delinquency Rate Mar. ‘09 7.2% Mar. ‘08 4.3%
Net Charge-Off Rate 1Q09 9.9% 1Q08 5.5%
Moderate Other
(14.6)%
9.7%
5.0%
3.5%
6.5%
4.1%
(4.1)%
8.2%
4.5%
3.4%
5.7%
4.0%
Source: Bureau of Labor Statistics for unemployment rate; S&P for Case Shiller Home Price Index; based on latest state level data available for housing price change (data as of 4Q08); Internal Chase data 1 Charge-off rate excluding WaMu 2 Assumes receivables are flat relative to 1Q09 12
Commercial Banking
$ in millions $ in millions
$ O/(U) 1Q09 Revenue Middle Market Banking Commercial Term Lending Mid-Corporate Banking Real Estate Banking Other Credit Costs Expense Net Income Key Statistics ($B)
1
Leadership positions Leadership positions
#1 Asset-Based lead left arranger in U.S.5
1Q08 $335 46 228 35 23 3 192 68 $46 $68.0 $99.5 $1.8 $0.4 0.48% 2.65% 17% 45% $7.0
4Q08 ($77) (44) (15) (1) (11) (6) 103 54 ($142) $117.7 $114.1 $2.8 $1.0 0.40% 2.41% 24% 34% $8.0
#2 Large Middle-market lender in U.S.5 #1 originator of multi-family loans in the U.S.6 Among top 3 banks nationally in market penetration and lead share7 #1 ranking in market penetration and lead share in 3 of the top 4 MSAs7
$1,402 752 228 242 120 60 293 553 $338 $113.9 $115.0 $2.9 $1.5
3 3
Avg Loans & Leases 2 Avg Liability Balances Allowance for Loan Losses NPLs Net Charge-Off Rate
4
Comments on credit Comments on credit
Comfortable with general risk profile of loan portfolio Geographically diverse and across industries Granular Short average maturity life Pre-WaMu, Real Estate represented only 12% of CB exposure Increased to 31% with WaMu, a highly granular, term loan portfolio in core markets with stable demand, supply constraints, and moderately priced low volatility properties Commercial constr./develop. remains greatest area of concern with rising NCOs expected in 2009 and beyond Limited exposure at $13.9B with NCO rate of 0.8% in 1Q09
0.48% 2.59% 17% 39% $8.0
ALL / Average Loans ROE Overhead Ratio EOP Equity
1 2
Actual numbers for all periods, not over/under Includes deposits and deposits swept to on-balance sheet liabilities 3 Loans held-for-sale and loans at fair value were excluded when calculating the loan loss coverage ratio and net charge-off rate 4 Calculated based on average equity. 1Q09 average equity was $8.0B 5 Loan Pricing Corporation, 1Q09 6 FDIC and OTS as of 12/31/08 7 TNS Market Study, FY08
13
Treasury & Securities Services
$ in millions $ in millions Leadership positions Leadership positions
$ O/(U) 1Q09 Revenue Treasury Services Worldwide Securities Svcs Expense Net Income Key Statistics
1 2
#1 in ACH Originations4
1Q08 ($92) 71 (163) 91 ($95)
4Q08 ($428) (137) (291) (20) ($225) $336.3 $13.2 37% 47% $3,090 $1,909 $450.4 $4.5
$1,821 931 890 1,319 $308 $276.5 $13.5 26% 25% $2,529 $1,639
2
#1 in U.S. Dollar Treasury Clearing and Commercial Payments5 Named top Global Custodian6 Received more than 110 best in class recognitions7 Named European Cash Management Provider of the Year8 Named Best Cash Management Specialist9
Avg Liability Balances ($B) Assets under Custody ($T) Pretax Margin ROE
3
$254.4 $15.7 34% 46% $2,598 $1,545 $353.8 $3.5
TSS Firmwide Revenue TS Firmwide Revenue TSS Firmwide Avg Liab Bal ($B) EOP Equity ($B)
1 2
$391.5 $5.0
Actual numbers for all periods, not over/under Includes deposits and deposits swept to on-balance sheet liabilities 3 Calculated based on average equity. 1Q09 average equity was $5.0B 4 Ernst & Young 5 FLmetrix’s 6 AsianInvestor, Global Pensions, International Custody & Fund Administration (ICFA), The Asset 7 Global Custodian 8 ICFA 14 9 The Asset
Asset Management
$ in millions $ in millions Leadership positions Leadership positions
$ O/(U) 1Q09 Revenue Private Bank Institutional Private Wealth Management Retail Bear Stearns Brokerage Credit Costs Expense Net Income Key Statistics ($B)
1 2
4Q08 $45 (47) 133 (18) (12) (11) 1 85 ($31) $1,133 $1,496 $36.9 $76.9 25% 14% $7.0
1Q08 ($198) (13) (30) (37) (213) 95 17 (25) ($132) $1,187 $1,569 $36.6 $68.2 30% 29% $5.0
Largest manager of AAA-rated global liquidity funds4 One of the largest managers of Hedge Funds5 % of AUM in 1st and 2nd Quartiles6 1 year = 54% 3 year = 62% 5 year = 66% 42% of customer assets in 4 & 5 star funds 7
$1,703 583 460 312 253 95 33 1,298 $224 $1,115 $1,464 $34.6 $81.7 22% 13% $7.0
Assets under Management Assets under Supervision Average Loans Average Deposits Pretax Margin ROE
3 2
EOP Equity
Actual numbers for all periods, not over/under Reflects $15B for assets under management and $68B for assets under supervision from the Bear Stearns merger on May 30, 2008 3 Calculated based on average equity. 1Q09 average equity was $7.0B 4 iMoneyNet, December 2008 5 Absolute Return Magazine, March 2009 issue (data as of year-end 2008) 6 Quartile rankings sourced from Lipper for the U.S. & Taiwan; Micropal for the UK, Luxembourg, & Hong Kong; & Nomura for Japan 7 Derived from Morningstar for the U.S.; Micropal for the UK, Luxembourg, Hong Kong, & Taiwan; & Nomura for Japan
1 2
15
Corporate/Private Equity
$ in millions $ in millions
$ O/(U) 1Q09 Private Equity Corporate Merger-related items ($280) 252 (234) 4Q08 $402 (911) (1,298) 1Q08 ($337) (802) (234)
Net Income
Private Equity portfolio ($ in billions) Private Equity portfolio ($ in billions)
($262) ($1,807) ($1,373)
EOP Carrying value
$7.5 9.7% $7.0 $6.5 $6.0 $5.5 $5.0 2005 2006 2007 2008 8.6% 9.2% $6.2 $6.1 5.8% $7.2 $6.9
Portfolio as % of equity ex. goodwill
12.0%
$6.6
9.0%
6.0% 5.4%
3.0%
0.0% 1Q09
16
Capital management
Tier 1 Capital ex. TARP ($ in billions) Tier 1 Capital ex. TARP ($ in billions)
Tier 1 Capital ex. TARP $120 $99 $90 $90 9.2% $60 8.3% 8.9% 8.9% 8.0%
$50
Tier 1 Common ($ in billions) Tier 1 Common ($ in billions)
Tier 1 Common Capital $100 $86 7.1% $77 7.3% 6.8% 7.0% 6.0% 7.0% Tier 1 Common Ratio 8.0% $88 $87
$112
Tier 1 Ratio ex. TARP 10.0% $112 $111
9.3%
9.0%
$75
6.9% $75
$30
7.0%
$25
5.0%
$0 1Q08 2Q08 3Q08 4Q08 1Q09
6.0%
$0 1Q08 2Q08 3Q08 4Q08 1Q09
4.0%
Fortress balance sheet strengthened further in 1Q09 Capital ratios well in excess of “government buffers” of Tier 1 ratio of at least 6% and Tier 1 Common ratio of at least 4% Tier 1 ratio (ex. TARP) of 9.3% and Tier 1 Common ratio of 7.3% as of 3/31/09
Note: Firm-wide Level 3 assets are 7% of total firm assets at 3/31/09
17
Substantially increased loan loss reserves, maintaining strong coverage ratios
$ in millions $ in millions
Loan Loss Reserve/Total Loans
45000
Loan Loss Reserve Nonperforming Loans
5.0%
Loan Loss Reserve/NPLs 5%
500%
4%
36000
4.0%
27,381
400%
3%
27000
3.0%
300%
2%
18000
2.0%
9,234 3,282 4Q07 11,746 4,401 1Q08 13,246 19,052
23,164
200%
1%
9000
1.0%
0
7,300 1,907 1Q07
7,633 2,006 2Q07
8,113 2,490 3Q07
5,273 2Q08
6,933 3Q08
8,953
11,401
100%
0%
0.0%
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
4Q08
1Q09
1Q09
0%
Peer comparison Peer comparison
1Q09 JPM Consumer LLR/Total Loans LLR/NPLs Wholesale LLR/Total Loans LLR/NPLs Firmwide LLR/Total Loans LLR/NPLs 4.53% 241% 3.08% 138% 3.43% 219% 2.81% 75% 5.20% 252% 3.46% 173% Peer Avg.1
$27.4B of loan loss reserves in 1Q09, up ~$20B from $7.3B two years ago; loan loss coverage ratio of 4.53% Strong coverage ratios compared to peers LLR/NPLs ratio naturally trends down as we move through credit cycle
Note: Excludes the impact of purchased credit-impaired loans acquired as part of the WaMu transaction. If these loans were included, the loan loss reserve ratio at 1Q09, 4Q08 and 3Q08 would have been 3.95%, 3.18% and 2.56%, respectively 1 Peer average reflects equivalent metrics for key competitors. Consumer and Firmwide peers are defined as C, BAC and WFC. Wholesale peers are defined as C and BAC
18
Naturally strong liquidity position across our businesses
Strong liquidity and funding position Total deposits of $907B across retail and wholesale businesses Deposits and liability balances provide a stable and consistent source of funding – Retail deposits (~41% of total) are less sensitive to interest rate changes or market volatility
1Q09 Customer deposits versus loans ($ in billions) 1Q09 Customer deposits versus loans ($ in billions)
Deposits
Loans
Deposits/loans: 128%
$907 $708
Deposits/loans: 97% Deposits/loans: NM
$370
$383
Deposits/loans: 101%
$276 $20 TSS 1
Deposits/loans: 236%
$115 RFS
$114 CB1
$82 AM
$35 Firm
Note: Line of business data reflects average balances. Firm data is end-of-period. The Firm total includes the remaining lines of businesses (IB and Card). Loans represent reported balances, gross of allowance 1 Includes deposits and deposits swept to on-balance sheet liabilities
19
Agenda
Page
Key Investor Topics 20
Appendix
27
20
Impact of recent accounting changes
Fair Value FSP Fair Value FSP
Addresses determining fair value in inactive markets No significant impact to JPM
Impairment FSP Impairment FSP
Addresses measurement of credit losses for AFS and HTM securities portfolios No impact to JPM in 1Q09 results SFAS 140/FIN46R change – Potential cumulative impact ($ in billions) SFAS 140/FIN46R change – Potential cumulative impact ($ in billions)
1Q10 Cumulative impact on: 1Q09 Balance Credit Card $105 GAAP Assets $65 +/RWA (Basel I) $40 +/Status update Largely consolidated for regulatory capital purposes in 2Q09. Impact on Tier 1 Capital (40) bps+/-; Tier 1 Common ratios (30) bps +/No impact on RWA Impact across various business and asset types
Conduits Other Total Tier 1 Capital ratio Tier 1 Common ratio
KEY INVESTOR TOPICS
36 544 $685
40+/40+/$145 +/-
— 40 +/$80 +/(80) bps +/(70) bps +/-
Estimated impact of SFAS 140/FIN46R rule changes already being factored into balance sheet and capital planning Ultimate impact could differ significantly due to final requirements of the rule and market conditions Impact of expected actions to the CHAIT Trust is included in (and is not additive to) the amounts above Expected actions will add $40B+/- of RWA and decrease Tier 1 Capital ratio by 40 bps in 2Q09
21
JPM continues to support an economic recovery, while adhering to safe and sound lending
Lending update Lending update
JPM extended more than $150B in new loans and lines to retail and wholesale clients during 1Q09, including: $62B in consumer and small business originations. JPM extended over 4.5mm new loans and lines to consumers and small businesses – More than 2mm new credit card lines and 2mm line increases1 – 185,000 new mortgages (including refinancings) and home equity loans and lines – Almost 400,000 auto and education loans – Consumer lending is up 2% from 4Q08 with declines in credit card originations offset by growth in mortgage, auto and student lending ~$95B in new and renewed commitments to mid-sized businesses, large corporates and JPM’s full range of Treasury & Securities Services and Asset Management clients2 – Wholesale lending is down about 15% from 4Q08 due to lower customer demand JPM also purchased over $34B of mortgage-backed and asset-backed securities in 1Q09
$ in billions $ in billions
~$110
~$95 $34 $46 $26 $16
KEY INVESTOR TOPICS
4Q08 1Q09 Wholesale gross new exposure
4Q08 1Q09 Consumer (excl. Card) and small bus. loan orig.
4Q08 1Q09 Card gross new exposure1
1 2
Card figures are US only 1Q09 wholesale gross new exposure includes $0.9B Held-For-Sale/Fair Value loans
22
Bank lending has been fairly constant throughout the crisis
Total loan balances for top 17 banks ($ in billions)1 Total loan balances for top 17 banks ($ in billions)1
$3,703 $3,691 $3,676 $4,239 $4,225 $4,187
65% Percent of total lending assets excl. Fed assets, not seasonally adjusted
Commercial banks and savings institutions share of Commercial banks and savings institutions share of financial sector credit market assets2 financial sector credit market assets2
55%
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
45%
Total new lending for top 17 banks ($ in billions)1 Total new lending for top 17 banks ($ in billions)1
$252 $286 $225
$200
$236
$237
35%
25%
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
1960
1972
1984
1996
2008
Banks have maintained lending levels throughout the period After initial declines due primarily to lower customer demand (and somewhat tighter underwriting as banks try to maintain safe and sound lending practices), originations in March are now above October levels driven largely by a surge in mortgage refinancings
KEY INVESTOR TOPICS
Banks are only responsible for ~30% of the overall lending for the economy. Non-bank lending (which represents the remaining 70%) has declined dramatically Balances of asset-backed securities and asset-backed commercial paper dropped by over $1T in the last 12-18 months Many buyers (foreign investors, insurance companies, corporates, money-market funds, individual investors) exited the market or significantly reduced their holdings
1
The impact of the BofA/Merrill Lynch, Wells Fargo/Wachovia, and PNC/National City mergers are in the Total balances and Total lending for January-March figures, but not October-December Note: Sum of total new lending and balances for each of the 17 banks as submitted. New lending and balances include first mortgages, home equity, US cards managed loans, other consumer balances (typically auto, student and small business) and C&I and CRE loans and leases
2
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Total lending includes debt issued by financial corporations and GSEs in addition to corporate and consumer debt. Taking the percentage on corporate and consumer debt only, share of bank credit was 35% at the end of 2008 Source: Treasury Monthly Intermediation snapshot. Federal Reserve - Flow of Funds Accounts of the United States, public investment research data as of 4Q08
Managing expense and raising productivity
Normalized expense1 up 35% YoY largely driven by growth due to acquisitions Excluding acquisitions/merger and extraordinary items, normalized expense down 8% YoY, including Reduced variable compensation Moderated investment spend, particularly selling and marketing expenditures Lowered IB non-compensation expense, including brokerage, and travel and entertainment expense Merger expense and cost saves related to acquisitions/merger completed in 2008 include: $600mm (after-tax) of merger-related items by end of 2009 $2.0B of cost saves (net) from WaMu integration; approximately 12,000 projected headcount reductions from time of merger announcement
1Q08 – 1Q09 Normalized expense ($ in millions) 1Q08 – 1Q09 Normalized expense ($ in millions)
34%
2,647
9%
672
(8%)
(632)
10,377 7,690
KEY INVESTOR TOPICS
1Q08 Normalized Expense
Headcount
1
1
Acquisitions / Merger
47,245
Extraordinary Items
Efficiencies
(9,842)
2
1Q09 Normalized Expense
219,569
1
182,166
Normalized expense excludes IB compensation of $1,241mm in 1Q08 and $2,996mm in 1Q09. Acquisitions/Merger includes compensation related to the Bear Stearns and WaMu transactions 2 Excludes the impact of Acquisitions/Merger
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Supervisory Capital Assessment Program (SCAP) outcome
($ in billions) ($ in billions)
SCAP Template (12/31/08) Tier 1 Capital Tier 1 Capital (ex. TARP) Tier 1 Common Capital RWA Allowance for Loan Losses Tier 1 Ratio Tier 1 Ratio (ex. TARP) Tier 1 Common Ratio LLR / Loans $136 111 87 1,338 23 10.2% 8.3 6.5 3.6 JPM Actual (3/31/09) $137 112 88 1,207 27 11.4% 9.3 7.3 4.5
JPM Likely Outcome (12/31/10) $151 126 101 1,275 30 11.8% 9.9 7.9 5.0
Current balance sheet pro forma for JPM estimated impact from amendment of FAS 140
Note: Data in gray italics represents approximation by JPM since specific figures not provided under SCAP
JPM’s existing strong capital and loan loss reserves together with extremely strong earnings power allowed us to weather the SCAP stress test with no additional capital required JPM actual Tier 1 ratio (ex. TARP) of 9.3% and Tier 1 Common ratio of 7.3% as of 3/31/09
KEY INVESTOR TOPICS
Project capital levels well in excess of “government buffers” of Tier 1 ratio of at least 6% and Tier 1 Common ratio of at least 4% at year-end 2010, even when excluding TARP We estimate substantial Resources Other Than Capital to Absorb Losses1 for ‘09-‘10 of $80B under the SCAP More Adverse scenario
1
Resources to absorb losses include pre-provision net revenue less the change in the allowance for losses on loans and leases
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Outlook
Investment Bank Investment Bank Treasury & Securities Services Treasury & Securities Services
Trading can be volatile; DVA expected to be negative Uncertain environment, risks still remain Credit costs expected to remain elevated
Retail Financial Services Retail Financial Services
Revenue of $2.0B +/- for next couple of quarters driven by lower assets under custody and lower liability balances and spreads
Asset Management Asset Management
Home lending quarterly losses (incl. WaMu) over the next several quarters could be as high as: Home equity – $1.4B Prime mortgage – $500mm Subprime mortgage – $375mm-$475mm Solid underlying growth in Consumer Banking Strong 1Q09 MSR risk management results – not likely to be repeated
Card Services Card Services
At current market levels, quarterly revenue of $1.8B +/- is a reasonable run rate for the near term
Corporate/Private Equity Corporate/Private Equity
Private Equity At current market levels, expect modest possible writedowns over near term Corporate More sizable investment portfolio; higher net interest income, some trading volatility
Chase losses will approach 9% +/- next quarter; could trend up further depending on unemployment in 2009 WaMu losses to approach 18-24% by end of 2009 Lower charge volume
KEY INVESTOR TOPICS
Overall Overall
Commercial Banking Commercial Banking
Current revenue level is a reasonable expectation Higher credit costs expected
Special FDIC assessment of $700mm to $750mm (pretax) to be finalized and assessed in 2Q09 If economy weakens further, additional reserving actions may be required
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Agenda
Page Key Investor Topics 20
Appendix
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27
IB key risk exposures
Mortgage-related ($ in billions) Mortgage-related ($ in billions)
Exposure as of 12/31/2008 Prime Alt-A Subprime Subtotal Residential Commercial Mortgage Exposure $1.8 4.3 0.9 $7.0 7.7 $14.7
Exposure reduction ($0.3) ($0.3) (0.2) ($0.8) (1.2) ($2.0)
Exposure as of 03/31/2009 $1.5 4.0 0.7 $6.2 6.5 $12.7
1Q09 reductions of 14% on mortgage-related exposures $214mm of net markdowns in 1Q09, largely driven by commercial
Leveraged lending related Leveraged lending related
$11.5B of legacy commitments with gross markdowns of $6.0B, or 52%; market value at 3/31/09 of $5.5B ($1.1B) reduction, or 9% of exposure in 1Q09
APPENDIX
Markdowns of $711mm, net of hedges, on the remaining legacy commitments in 1Q09
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Commercial Banking - Diversified real estate exposure
Total CB portfolio characteristics Total CB portfolio characteristics Geographically diverse and across industries — Middle Market & Mid-Corporate (68% of CB portfolio exposures) 1Q09 EOP Balances ($ in billions) 1Q09 EOP Balances ($ in billions)
Loans Constr/Develop — For Sale Housing Constr/Develop — Commercial Total Real Estate Banking Commercial Term Lending Housing Commercial Total Middle Market & Mid-Corp Community Development Total Real Estate Exposure & Loans $1.5 11.3 $12.8 $36.0 $0.2 3.3 $3.5 $2.6 $54.9 Exposure $2.2 13.9 $16.1 $36.0 $0.3 4.3 $4.6 $4.2 $60.9 0.06% 0.67% 0.67% $0.02 $0.05 $1.10 NCO Rate 18.6% 0.8% 1.75% 0.35% NPLs $0.21 0.26 $0.47 $0.56
Limited exposure to leveraged acquisition finance and highly leveraged companies (2% of CB portfolio) Pre-WaMu, Real Estate represented only 12% of CB exposure Increased to 31% with WaMu, a highly granular, term loan portfolio in core markets with stable demand, supply constraints, and moderately priced low volatility properties Commercial constr./develop. remains greatest area of concern with rising NCOs expected in 2009 and beyond
Real Estate Banking Loans by industry as of 3/31/09 Real Estate Banking Loans by industry as of 3/31/09
Other 12% Multi-Family 23%
Real Estate Banking Loans by geography as of 3/31/09 Real Estate Banking Loans by geography as of 3/31/09
Texas 19% New York 12% Illinois 6% California 30% Arizona 8% Other 25%
Housing 12%
Industrial 10%
APPENDIX
Office 20%
Retail 23%
Total outstanding: $12.8B
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Total outstanding: $12.8B
Notes on non-GAAP financial measures and forward-looking statements
This presentation includes non-GAAP financial measures 1. Tangible Common Equity ("TCE") is calculated, for all purposes, as common stockholders equity (i.e., total stockholders' equity less preferred stock) less identifiable intangible assets (other than MSRs) and goodwill, net of related deferred tax liabilities. TCE is, in management's view, a meaningful measure of capital quality. The TCE measures used in this presentation are not necessarily comparable to similarly titled measures provided by other firms due to differences in calculation methodologies. 2. Financial results are presented on a managed basis, as such basis is described in the firm’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 and Annual Report on Form 10-K for the year ended December 31, 2008. All non-GAAP financial measures included in this presentation are provided to assist readers in understanding certain trend information. Additional information concerning such non-GAAP financial measures can be found in the above-referenced filings, to which reference is hereby made.
3.
APPENDIX
Forward looking statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of JPMorgan Chase & Co.’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause JPMorgan Chase & Co.’s actual results to differ materially from those described in the forward-looking statements can be found in JPMorgan Chase & Co.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 and Annual Report on Form 10-K for the year ended December 31, 2008, which have been filed with the Securities and Exchange Commission and are available on JPMorgan Chase & Co.’s website (www.jpmorganchase.com) and on the Securities and Exchange Commission’s website (www.sec.gov). JPMorgan Chase & Co. does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
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