JPMorgan Chase Reports Second-Quarter 2008 Net Income of $2.0 Billion, or $0.54 Per Share; Net Income of $2.5 Billion Excluding Losses of $540 Million for Bear Stearns Merger-Related Items

Business Wire, July 17, 2008

Private Bank revenue grew 18% to $765 million due to increased deposit and loan balances, higher placement fees and higher assets under management, partially offset by lower performance fees. Retail revenue declined 19% to $490 million due to net equity outflows. Institutional revenue declined 24% to $472 million due to lower performance fees, partially offset by growth in assets under management. Private Client Services revenue grew 10% to $299 million due to higher deposit and loan balances and growth in assets under management. Bear Stearns Brokerage added $38 million to revenue.

Assets under supervision were $1.6 trillion, an increase of $139 billion, or 9%, from the prior year. Assets under management were $1.2 trillion, up $76 billion, or 7%, from the prior year. The increase was due largely to liquidity product inflows across all segments and the Bear Stearns acquisition offset partially by lower equity markets and equity product outflows. Custody, brokerage, administration and deposit balances were $426 billion, up $63 billion, driven by the acquisition of Bear Stearns Brokerage.

The provision for credit losses was $17 million, compared with a benefit of $11 million in the prior year, reflecting an increase in loan balances and a lower level of recoveries.

Noninterest expense was $1.4 billion, up $45 million, or 3%, from the prior year, largely driven by the Bear Stearns acquisition and increased headcount offset partially by lower performance-based compensation.

Key Metrics and Business Updates:

((All comparisons to the prior-year quarter except as noted))

* Pretax margin(2) was 31%, down from 37%.

* Assets under management were $1.2 trillion, up $76 billion, or 7%, including growth of $11 billion, or 9%, in alternative assets and $15 billion from the Bear Stearns acquisition.

* Assets under management net outflows were $3 billion for the second quarter of 2008. Net inflows were $110 billion for the past 12-month period.

* Assets under management that ranked in the top two quartiles for investment performance were 76% over five years, 70% over three years and 51% over one year.

* Customer assets in 4 and 5 Star rated funds were 40%.

* Average loans of $39.3 billion were up $10.6 billion, or 37%.

* Average deposits of $70.0 billion were up $14.0 billion, or 25%.

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Discussion of Results:

Net loss for Corporate / Private Equity was $422 million, compared with net income of $382 million in the prior year.

Net loss included the after-tax effects of Bear Stearns merger-related items amounting to a net loss of $540 million. These items included losses of $423 million, which represent JPMorgan Chase's 49.4% ownership in Bear Stearns' losses from April 8 to May 30, 2008, which were reflected in net revenue. In addition, other merger-related items of $117 million ($188 million pretax) were reflected almost entirely in noninterest expense.

Net income for Private Equity was $99 million, compared with $702 million in the prior year. Net revenue was $197 million, a decrease of $1.1 billion, reflecting Private Equity gains of $220 million, compared with gains of $1.3 billion in the prior year. Noninterest expense was $44 million, a decline of $154 million from the prior year, reflecting lower compensation expense.