JPMorgan Chase Reports 2005 First-Quarter Net Income of $2.3 Billion after Litigation Charge of $558 Million and Merger Charge of $90 Million

Business Wire, April 20, 2005

--Nonperforming loans to average loans was 0.87%, down by 73 basis points.

--Allowance for loan losses to average loans was 2.63%.

--Overhead ratio of 54% was consistent with the prior year's first quarter.

TREASURY & SECURITIES SERVICES (TSS)

Operating Results - TSS               1Q04 h- JPMC    1Q04  Proforma
($ millions)                1Q05    $ O/(U)  % O/(U)  $ O/(U)  % O/(U)
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Net Revenue                $1,482     $470      46%    $202      16%
Noninterest Expense         1,065      198      23      (36)     (3)
Operating Earnings           $245     $147     150%    $152     163%
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Discussion of Historical Results:

Operating earnings for the quarter were $245 million, an increase of $147 million, primarily related to the merger.

TSS net revenues of $1.5 billion were up $470 million, or 46%. Revenue growth reflected the benefit of the merger, wider spreads on liability balances, which include deposits and deposits swept into on-balance sheet liabilities, improved product revenues, and growth in average liability balances and assets under custody. Net interest income grew to $496 million, up $253 million, as a result of the merger, wider spreads on liability balances, and average liability balance growth of 49% to $155 billion. Growth in noninterest revenue was driven largely by the merger and an increase in assets under custody to $10.2 trillion. Beginning March 31, 2005, assets under custody include an estimated $400 billion of Institutional Trust Services' assets under custody. Excluding this amount, assets under custody increased $1.8 trillion, or 22%, attributable to new business, increased volumes and market value appreciation. Also contributing to noninterest revenue improvement was growth in commercial card products, securities lending, trade and trust products, including CDO administration. Partially offsetting these improvements were lower service charges on deposits.

Treasury Services net revenue grew to $618 million, Investor Services to $508 million and Institutional Trust Services to $356 million. TSS firmwide net revenue, which includes Treasury Services net revenue recorded in other lines of business, grew to $2.1 billion, up $841 million or 67%, primarily as a result of the merger. TS firmwide net revenue grew to $1.2 billion, up $632 million, or 104%, primarily as a result of the merger.

Credit reimbursement to the Investment Bank was $38 million, up $36 million principally due to the merger and a change in methodology. TSS is charged a credit reimbursement related to certain exposures managed within the Investment Bank credit portfolio on behalf of clients shared with TSS.

Noninterest expense of $1.1 billion was up $198 million, or 23%, due to the merger, increased compensation and technology-related expenses. Offsetting these increases were lower allocations of Corporate segment expenses and higher product unit costs charged to other lines of business, primarily Commercial Banking.