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

End-of-period managed loans were $159.3 billion, an increase of $10.3 billion, or 7%, from the prior year and $3.9 billion, or 3%, from the prior quarter. Average managed loans were $157.6 billion, an increase of $8.9 billion, or 6%, from the prior year and $4.7 billion, or 3%, from the prior quarter. The increase from the prior year in both end-of-period and average managed loans reflects organic portfolio growth.

Managed net revenue was $3.9 billion, an increase of $20 million, or 1%, from the prior year. Net interest income was $3.2 billion, up $133 million, or 4%, from the prior year, driven by higher average managed loan balances and wider loan spreads. These benefits were offset partially by the effect of higher revenue reversals associated with higher charge-offs. Noninterest revenue was $646 million, a decrease of $113 million, or 15%, from the prior year. Interchange income increased, benefiting from a 5% increase in charge volume, but was more than offset by increased rewards expense and higher volume-driven payments to partners (both of which are netted against interchange income), as well as a decrease in securitization income.

The managed provision for credit losses was $2.2 billion, an increase of $866 million, or 64%, from the prior year, due to a higher level of charge-offs and an increase of $250 million in the allowance for loan losses. The managed net charge-off rate for the quarter was 5.00%, up from 3.64% in the prior year and 4.98% in the prior quarter. The 30-day managed delinquency rate was 3.69%, up from 3.25% in the prior year and 3.46% in the prior quarter.

Noninterest expense was $1.2 billion, a decrease of $68 million, or 5%, from the prior year due to lower marketing expense.

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* Return on equity was 8%, down from 22%.

* Pretax income to average managed loans (ROO) was 1.17%, compared with 3.31% in the prior year and 1.04% in the prior quarter.

* Net interest income as a percentage of average managed loans was 8.18%, down from 8.29% in the prior year and up from 7.92% in the prior quarter.

* Net accounts of 3.6 million were opened during the quarter.

* Charge volume was $93.9 billion, an increase of $4.1 billion, or 5%, reflecting an increase of 5% in sales volume and a 2% increase in balance transfers.

* Merchant processing volume was $197.1 billion, an increase of $15.7 billion, or 9%, and total transactions were 5.7 billion, an increase of 713 million, or 14% (data represents 100% of Chase Paymentech Solutions joint venture).

* The termination of Chase Paymentech Solutions, a global payments and merchant-acquiring joint venture between JPMorgan Chase & Co. and First Data Corporation, is expected to be completed in the fourth quarter. JPMorgan Chase & Co. will retain approximately 51% of the business under the Chase Paymentech name.

COMMERCIAL BANKING (CB)

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Discussion of Results:

Net income was $312 million, an increase of $54 million, or 21%, from the prior year, driven by record net revenue, partially offset by an increase in the provision for credit losses and higher noninterest expense.