JPMorgan Chase Reports Third-Quarter 2008 Net Income of $527 Million, or $0.11 Per Share, Including Estimated Losses of $640 Million or $0.18 Per Share For Washington Mutual Merger-Related Items

Business Wire, Oct 15, 2008

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* Checking accounts totaled 11.7 million, up 1.0 million, or 10%.

* Average total deposits grew to $210.2 billion, up $4.9 billion, or 2%.

* Average home equity loans were $94.8 billion, up $3.0 billion, or 3%. Home equity originations were $2.6 billion, down $8.6 billion, or 77%.

* Average business banking loans were $16.4 billion and originations were $1.2 billion.

* Number of branches grew to 3,179, up 83.

* Branch sales of credit cards increased by 6%.

* Branch sales of investment products increased by 1%.

* Overhead ratio (excluding amortization of core deposit intangibles) decreased to 45% from 49%.

Mortgage Banking reported a net loss of $50 million, compared with a net loss of $48 million in the prior year. Net revenue was $666 million, up $260 million, or 64%. Net revenue comprises production revenue and net mortgage servicing revenue. Production revenue was $254 million, up $78 million, reflecting lower markdowns of $91 million on the mortgage warehouse and pipeline as compared with markdowns of $186 million in the prior year. The current-year result was also affected by an increase in reserves related to the offer to repurchase of previously-sold loans. Net mortgage servicing revenue - which includes loan servicing revenue, MSR risk management results and other changes in fair value - was $412 million, an increase of $182 million, or 79%, from the prior year. Loan servicing revenue was $695 million, an increase of $66 million on growth of 14% in third-party loans serviced. MSR risk management results were $107 million, compared with negative $22 million in the prior year. Other changes in fair value of the MSR asset were negative $390 million compared with negative $377 million in the prior year. Noninterest expense was $747 million, an increase of $262 million, or 54%. The increase reflected higher mortgage reinsurance losses and higher servicing costs due to increased delinquencies and defaults.

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* Mortgage loan originations were $37.7 billion, down 4% from the prior year and down 33% from the prior quarter.

* Total third-party mortgage loans serviced were $681.8 billion, an increase of $81.8 billion, or 14%.

Auto Finance net income was $79 million, an increase of $3 million, or 4%, from the prior year. Net revenue was $506 million, up $59 million, or 13%, driven by higher loan balances and increased automobile operating lease revenue. The provision for credit losses was $124 million, up $28 million, reflecting higher estimated losses. The net charge-off rate was 1.12%, compared with 0.97% in the prior year. Noninterest expense was $252 million, an increase of $28 million, or 13%, driven by increased depreciation expense on owned automobiles subject to operating leases.

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* Auto loan originations were $3.8 billion, down 27%, reflecting industry-wide weakness in auto sales.

* Average loans were $43.8 billion, up 10%.

CARD SERVICES (CS)((a))

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Discussion of Results:

Net income was $292 million, a decline of $494 million, or 63%, from the prior year. The decrease was driven by a higher provision for credit losses, partially offset by lower noninterest expense.