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

Other Highlights Include:

--Mortgage loan originations of $26.6 billion were down 16% from the prior year and down 18% from the prior quarter.

--Home equity loan originations of $11.9 billion were up 8% from the prior year and down 1% from the prior quarter.

--Mortgage loans serviced of $496 billion increased $34 billion, or 7%.

--Average mortgage loans retained of $44.3 billion increased 18%; period end mortgage loans were $46.0 billion.

--Average home equity loans retained of $66.5 billion increased 12%; period end home equity loans were $68.8 billion.

--Nonperforming assets of $841 million declined $379 million, or 31%.

--Net charge-off rate was 0.15%, down from 0.45%. Prior year net charge-off rate was 0.17%, excluding charge-offs associated with the manufactured home portfolio and non-core portfolio actions.

Consumer & Small Business operating earnings totaled $477 million, up $187 million from the prior year. Total net revenue of $2.2 billion increased $150 million, or 7%, reflecting wider spreads on deposits and increased balances. Expenses of $1.3 billion were down 9%, primarily due to cost savings initiatives, partially offset by continued investment in the distribution network. Compared to the prior quarter, operating earnings increased $47 million, or 11%, primarily due to the seasonal impact of tax-refund anticipation lending.

Other Highlights Include:

--Checking accounts grew by 170,000 to 8.4 million, during the quarter. Heritage Chase branches contributed significantly, adding nearly 38,000 accounts, compared to 3,000 accounts in the first quarter of 2004.

--Average core deposits of $149 billion were up 4% from the prior year and up 1% from the prior quarter. Average total deposits increased to $174 billion, up 2% from the prior year and up 1% from the prior quarter.

--Branch sales of credit cards increased by 72% from the prior year and 17% from the prior quarter.

--Overhead ratio decreased to 62% from 74% in the prior year and 65% in the prior quarter.

--Number of branches increased to 2,517, up 108 from the prior year and up 9 from the prior quarter.

Auto & Education Finance operating earnings were $55 million, down $22 million. Total net revenue of $324 million was down $58 million, or 15%, reflecting reduced balances, lower spreads on the loan and lease portfolios, and an $88 million charge associated with the transfer of auto loans to held-for-sale. These decreases were partially offset by a $40 million charge in the first quarter of 2004 related to auto lease residuals and a $24 million gain on the recreational vehicle loan portfolio sold in early 2005. The provision for credit losses declined to $28 million primarily due to favorable credit trends and allowance reductions, totaling $20 million, related to the sale of the recreational vehicle loan portfolio and the transfer of auto loans to held-for sale. Expenses of $205 million increased $45 million primarily due to the $40 million student loan charge. Excluding the after-tax impact of these four items, operating earnings would have been up $5 million versus the prior year, primarily due to improved credit quality. Results continued to reflect lower production volumes and narrower margins, due to the competitive nature of the operating environment.