-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, COmgyhflUoHjDH7HKV0DCX7K2nxBWvILVFyceZM9sionHglUDLy+TOvZuyZeu8h+ 6DZef4d1X6Ah6TNQ0M3hbQ== 0000950123-97-003153.txt : 19970414 0000950123-97-003153.hdr.sgml : 19970414 ACCESSION NUMBER: 0000950123-97-003153 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970410 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970411 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN J P & CO INC CENTRAL INDEX KEY: 0000068100 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 132625764 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05885 FILM NUMBER: 97578719 BUSINESS ADDRESS: STREET 1: 60 WALL ST CITY: NEW YORK STATE: NY ZIP: 10260 BUSINESS PHONE: 2124832323 MAIL ADDRESS: STREET 1: P O BOX 271 STREET 2: C/O WILLIAM D HALL CITY: WILMINGTON STATE: DE ZIP: 19899 8-K 1 FORM 8-K/CURRENT REPORT 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 -------------- Date of Report (Date of earliest event reported) April 10, 1997 J.P. MORGAN & CO. INCORPORATED (Exact name of registrant as specified in its charter) DELAWARE 1-5885 13-2625764 (State or other juris- (Commission (IRS Employer diction of incorporation) File Number) Identification No.)
60 WALL STREET, NEW YORK, NEW YORK 10260-0060 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 483-2323 ----------------------------------------------------------------- (Former name or former address, if changed since last report) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 ITEM 5. OTHER EVENTS On April 10, 1997, the Registrant issued a press release announcing its earnings for the three-month period ended March 31, 1997. A copy of such press release is filed herein as Exhibit 99. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements NONE. The financial statements included in this report are not required to be filed as part of this report. (b) Pro Forma Financial Information NONE. (c) Exhibits 99. Copy of press release of J.P. Morgan & Co. Incorporated dated April 10, 1997. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. J.P. MORGAN & CO. INCORPORATED ------------------------------ (REGISTRANT) /s/ PATRICIA A. JONES ---------------------------- NAME: PATRICIA A. JONES TITLE: MANAGING DIRECTOR DATE: April 10, 1997 4 EXHIBIT INDEX Item No. Description - -------- ----------- 99. Copy of press release of J.P. Morgan & Co. Incorporated dated April 10, 1997. EX-99 2 COPY OF PRESS RELEASE OF J.P. MORGAN & CO. 1 IMMEDIATE April 10, 1997 J.P. MORGAN REPORTS 1997 FIRST QUARTER RESULTS J.P. Morgan & Co. Incorporated reported net income of $424 million in the first quarter of 1997, compared with $439 million in the first quarter of 1996. Earnings per share for the quarter were $2.04 compared with $2.13 a year ago. Douglas A. Warner III, chairman, said: "J.P. Morgan produced good results in the first quarter. Revenues were up, without the exceptional fixed income results of a year ago, thanks to the strength and global diversification of our business. We are spending on capabilities that have clear growth potential. Momentum with clients remains strong." FIRST QUARTER 1997 RESULTS AT A GLANCE
Fourth First quarter quarter ----------------------------------------------------------------------------------------------------- In millions of dollars, except per share data 1997 1996 1996 ----------------------------------------------------------------------------------------------------- Revenues $ 1,833 $ 1,740 $ 1,805 Operating expenses (1,191) (1,085) (1,197) Income taxes (218) (216) (189) ----------------------------------------------------------------------------------------------------- Net income 424 439 419 Net income per share $2.04 $2.13 $2.04 ----------------------------------------------------------------------------------------------------- Dividends declared per share $0.88 $0.81 $0.88
REVENUES rose 5% in the first quarter from a year ago. - Finance and Advisory revenues increased 8% to $451 million, mainly as a result of higher debt and equity underwriting revenues. - Market Making revenues totaled $733 million, a decline of $38 million. Revenues in emerging markets, equities, and foreign exchange were up strongly; fixed income revenues in developed markets were down from the high levels of 1996. - Asset Management and Servicing revenues increased 9% to $375 million, primarily reflecting gains in investment management and private client activities. - Proprietary Investing and Trading revenues, well diversified, rose 28% to $276 million. - Equity Investments revenues declined to $49 million from $66 million. OPERATING EXPENSES rose 10% in the 1997 first quarter from a year ago. The remainder of this release contains information on specific areas of results, a financial summary, and the consolidated financial statements. A summary of business sector results is included on page 9. - -------------------------------------------------------------------------------- Press contact: Joseph M. Evangelisti 212/648-9589 Investor contact: Ann B. Patton 212/648-9446 2 2 REVENUES BY BUSINESS SECTOR REVENUES rose to $1.833 billion, up 5% from the first quarter of 1996. Revenues from client-focused activities, which are reported in the Finance and Advisory, Market Making, and Asset Management and Servicing sectors, totaled $1.559 billion, up from $1.532 billion. Revenues from Equity Investments and Proprietary Investing and Trading activities increased 16% to $325 million. FINANCE AND ADVISORY (Advisory, Debt and Equity Underwriting, and Credit) revenues increased 8% to $451 million. Revenues from debt and equity underwriting in both developed and emerging markets were up sharply, growing 61%, as issuers took advantage of favorable market conditions. Advisory revenues declined 26% from the first quarter of 1996, when fees from several large transactions were recorded. Revenues from global credit activities rose 9% to $230 million, primarily attributable to higher loan syndication revenues. For the first quarter of 1997, Securities Data Co. ranked J.P. Morgan fourth in U.S. debt and equity underwriting, up from eighth a year ago. Morgan ranked fifth in completed mergers and acquisitions transactions worldwide, compared with fourth in the first quarter of 1996. MARKET MAKING (Fixed Income, Equities, Foreign Exchange, and Commodities) revenues totaled $733 million, down from $771 million. While most markets showed strength early in the quarter, activity slowed in mid-March as a result of the directional shift in U.S. monetary policy. Fixed income revenues of $264 million in developed markets declined from the very strong first-quarter 1996 level of $456 million. Revenues in the first quarter of last year benefited from gains on positions arising from client-related swap transactions. Overall, the volume of client transactions grew, but the number of higher-yielding, customized transactions declined. In emerging markets, revenues rose nearly 50% to $186 million, as a result of short-term positioning gains and greater client demand. Market making revenues in equities were up 63% to $152 million, as a result of strong demand in both the cash and derivative markets. Equity derivative revenues grew 64%, and equity commissions were up 47%, reflecting higher volumes and growing market share, primarily on U.S. and European exchanges. Foreign exchange revenues rose 78%, with strong client demand in active markets. Commodities revenues were $12 million, down from $31 million a year ago. ASSET MANAGEMENT AND SERVICING (Investment Management, Private Client Services, Futures and Options Brokerage, and Euroclear System) revenues rose 9% to $375 million in the first quarter. Revenues generated from institutional investment management activities and services for private clients increased 13% to $243 million. Assets under management grew 15% from a year ago to approximately $213 billion at March 31, 1997, due to net new business and, to a lesser extent, market appreciation. EQUITY INVESTMENTS (Equity Portfolio Management for Morgan's own account) reported revenues of $49 million in the first quarter, compared with $66 million a year ago. Included in reported revenues are net gains on equity investments of $33 million in 1997, compared with $64 million in the 1996 first quarter, when gains were realized from the sale of a large investment. On a total return basis, combining reported revenues with the change in net unrealized appreciation, there was a loss of $25 million in the 1997 first quarter, 3 3 reflecting a decline in the market value of the firm's investment portfolio, primarily related to insurance industry investments. This compares with a gain of $54 million a year ago. PROPRIETARY INVESTING AND TRADING (Market Risk Positioning and Capital and Liquidity Management) revenues totaled $276 million for the 1997 first quarter compared with $215 million a year earlier and were broadly diversified across markets. The 28% increase in reported revenues reflects higher trading revenues, partially offset by lower net interest revenue from investing activities as higher-yielding investments, principally interest rate swaps, continue to mature. Total return - reported revenues plus the change in net unrealized appreciation - for the 1997 first quarter increased to $365 million from $106 million, as most trading and investing strategies produced higher returns. CORPORATE ITEMS (Revenues and expenses not allocated to business sectors, intercompany eliminations, the taxable-equivalent adjustment, and results of sold or discontinued businesses) include revenues of $59 million in the first quarter of 1997 related to gains on hedges used to manage nontrading foreign currency exposures, and revenues of $37 million in the first quarter of 1996 related to Morgan's exit from custody and cash processing activities. OPERATING EXPENSES Operating expenses were $1.191 billion in the first quarter, up 10% from a year ago. The increase reflects investments in areas targeted for growth, including investment banking, equities, investment management, and private client services, as well as higher levels of business activity. At March 31, 1997, staff totaled 15,483 employees compared with 15,431 employees at March 31, 1996. Income tax expense in the first quarter totaled $218 million, based on an effective tax rate of 34%, compared with 33% in the first quarter of 1996. ASSETS Total assets were $226 billion at March 31, 1997, compared with $222 billion at December 31, 1996. At March 31, 1997, the aggregate allowance for credit losses was $1.113 billion versus $1.116 billion at December 31, 1996. Nonperforming assets decreased to $110 million at March 31, 1997, from $120 million at December 31, 1996, as assets newly classified as nonperforming were more than offset by assets returned to performing status, repayments, and charge-offs. No provision for credit losses was deemed necessary in the 1997 first quarter. CAPITAL At March 31, 1997, J.P. Morgan's estimated tier 1 and total risk-based capital ratios were 8.9% and 12.6%, respectively, compared with tier 1 and total risk-based capital ratios of 8.8% and 12.2%, respectively, at December 31, 1996. The leverage ratio was 5.9% at both March 31, 1997, and December 31, 1996. At March 31, 1997, stockholders' equity included approximately $402 million of net unrealized appreciation on debt investment and marketable equity investment securities, net the related deferred tax liability of $227 million. This compares with $464 million of net unrealized appreciation at December 31, 1996, net the 4 4 related deferred tax liability of $268 million. The net unrealized appreciation on debt investment securities was $243 million and $255 million at March 31, 1997 and December 31, 1996, respectively. The net unrealized appreciation on marketable equity investment securities was $386 million at March 31, 1997, and $477 million at December 31, 1996. In January 1997, JPM Capital Trust II, a wholly owned subsidiary of J.P. Morgan, issued $400 million qualifying as tier 1 capital under Federal Reserve Board guidelines through an issue of 7.95% trust preferred securities due 2027. The firm purchased $555 million of J.P. Morgan common stock in the open market during the first quarter of 1997, following the Board of Directors' December 1996 authorization of the purchase of up to $750 million of shares. The firm also continued its program of purchasing J.P. Morgan shares to lessen the dilutive impact on earnings per share of the firm's employee benefit plans. # # # J.P. Morgan is a leading global financial firm that meets critical financial needs for business enterprises, governments, financial institutions, and individuals. The firm advises on corporate strategy and structure, raises capital, makes markets in financial instruments, and manages investment assets. Morgan also commits its own capital to promising enterprises and invests and trades to capture markets opportunities. Attached are the financial summary, interim consolidated financial statements, which are unaudited, summary of sector results, trading and investment banking revenue table, and asset quality tables. J.P. Morgan news releases, including quarterly financial results, are available on the Internet (http://www.jpmorgan.com). 5 5 FINANCIAL SUMMARY J. P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- Dollars in millions, except per share data
Fourth First Quarter Quarter ------------------------------- -------------- 1997 1996 1996 -------------------------------------------------- Net Income $424 $439 $419 PER COMMON SHARE Net income (a) $ 2.04 $ 2.13 $ 2.04 Dividends declared 0.88 0.81 0.88 Book value (b) 54.05 51.57 54.43 - ------------------------------------------------------------------------------------------------------ Weighted-average number of common and common equivalent shares outstanding 203,137,598 202,133,593 201,537,658 - ------------------------------------------------------------------------------------------------------ Dividends declared on common stock $160 $152 $163 Dividends declared on preferred stock 9 8 9 SELECTED RATIOS Annualized rate of return on average common stockholders' equity (c) 15.7 % 17.2 % 15.3 % As % of period-end total assets: Common equity 4.6 % 5.0 % 4.8 % Total equity 4.9 5.3 5.2 Regulatory capital ratios (d) Tier 1 risk-based capital ratio 8.9 % 8.3 % 8.8 % Total risk-based capital ratio 12.6 12.2 12.2 Leverage ratio 5.9 6.2 5.9 - ------------------------------------------------------------------------------------------------------ AVERAGE BALANCES Debt investment securities (e) $ 25,452 $ 24,298 $ 26,728 Loans 28,702 27,326 29,267 Total interest-earning assets 189,516 162,606 185,351 Total assets 236,079 204,836 233,985 Total interest-bearing liabilities 182,059 154,804 177,783 Total liabilities 224,684 194,160 222,607 Common stockholders' equity 10,701 10,065 10,684 Total stockholders' equity 11,395 10,676 11,378 Net interest earnings (fully taxable basis) 470 418 505 Net yield on interest-earning assets 1.01 % 1.03 % 1.08 % - ------------------------------------------------------------------------------------------------------ Employees at period-end 15,483 15,431 15,527 - ------------------------------------------------------------------------------------------------------
(a) Earnings per share amounts represent both primary and fully diluted earnings per share, except for the three months ended December 31, 1996. Fully diluted earnings per share for the three months ended December 31, 1996, were $2.03. (b) Excluding the impact of SFAS No. 115, the book value per common share would have been $51.98, $49.18, and $52.08 at March 31, 1997, March 31, 1996, and December 31, 1996, respectively. (c) Excluding the impact of SFAS No. 115, the annualized rate of return on average common stockholders' equity would have been 16.5%, 18.1%, and 15.9% for the three months ended March 31, 1997, March 31, 1996, and December 31, 1996, respectively. (d) In accordance with the Federal Reserve Board guidelines, these ratios exclude the equity, assets and off-balance-sheet exposures of J.P. Morgan Securities, Inc. and the effect of SFAS No. 115. Risk-based capital ratios for March 31, 1997 are estimates. (e) Average debt investment securities are computed based on historical amortized cost, excluding the effects of SFAS No. 115 adjustments. 6 6 CONSOLIDATED STATEMENT OF INCOME J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- In millions, except per share data
Three months ended -------------------------------------------------------------------- March 31 March 31 Increase/ December 31 Increase/ 1997 1996 (Decrease) 1996 (Decrease) -------------------------------------------------------------------- NET INTEREST REVENUE Interest revenue $2,892 $2,554 $338 $2,925 ($33) Interest expense 2,442 2,158 284 2,441 1 - ------------------------------------------------------------------------------------------------------------ Net interest revenue 450 396 54 484 (34) NONINTEREST REVENUE Trading revenue 697 758 (61) 512 185 Investment banking revenue 226 201 25 277 (51) Investment management revenue 184 157 27 182 2 Fees and commissions 148 151 (3) 152 (4) Investment securities revenue 61 78 (17) 84 (23) Other revenue 67 (1) 68 114 (47) - ------------------------------------------------------------------------------------------------------------ Total noninterest revenue 1,383 1,344 39 1,321 62 Total revenue 1,833 1,740 93 1,805 28 OPERATING EXPENSES Employee compensation and benefits 766 730 36 732 34 Net occupancy 73 73 - 73 - Technology and communications 203 158 45 221 (18) Other expenses 149 124 25 171 (22) - ------------------------------------------------------------------------------------------------------------ Total operating expenses 1,191 1,085 106 1,197 (6) Income before income taxes 642 655 (13) 608 34 Income taxes 218 216 2 189 29 - ------------------------------------------------------------------------------------------------------------ Net income 424 439 (15) 419 5 PER COMMON SHARE Net income (a) $2.04 $2.13 ($0.09) $2.04 - Dividends declared 0.88 0.81 0.07 0.88 - - ------------------------------------------------------------------------------------------------------------
(a) See Financial Summary for per common share data assuming full dilution. 7 7 CONSOLIDATED BALANCE SHEET J.P. Morgan & Co. Incorporated - --------------------------------------------------------------------------------
Dollars in millions March 31 December 31 1997 1996 ----------------------- ASSETS Cash and due from banks $ 1,174 $ 906 Interest-earning deposits with banks 1,955 1,908 Debt investment securities available-for-sale carried at fair value (cost: $23,416 at March 1997 and $24,610 at December 1996) 23,659 24,865 Trading account assets, net of allowance for credit losses of $350 89,417 90,980 Securities purchased under agreements to resell ($35,034 at March 1997 and $32,455 at December 1996) and federal funds sold 35,108 32,505 Securities borrowed 31,981 27,931 Loans, net of allowance for credit losses of $563 at March 1997 and $566 at December 1996 28,890 27,554 Customers' acceptance liability 257 212 Accrued interest and accounts receivable 5,569 3,789 Premises and equipment 3,160 3,137 Less: accumulated depreciation 1,313 1,272 - ----------------------------------------------------------------------------------------------------------------------------------- Premises and equipment, net 1,847 1,865 Other assets 6,525 9,511 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets 226,382 222,026 - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Noninterest-bearing deposits: In offices in the U.S. 1,219 1,501 In offices outside the U.S. 806 708 Interest-bearing deposits: In offices in the U.S. 10,293 7,103 In offices outside the U.S. 41,253 43,412 - ----------------------------------------------------------------------------------------------------------------------------------- Total deposits 53,571 52,724 Trading account liabilities 55,338 50,919 Securities sold under agreements to repurchase ($55,448 at March 1997 and $56,117 at December 1996) and federal funds purchased 60,155 61,429 Commercial paper 4,023 4,132 Other liabilities for borrowed money 19,948 19,948 Accounts payable and accrued expenses 4,825 5,935 Liability on acceptances 257 212 Long-term debt not qualifying as risk-based capital 10,855 9,411 Other liabilities, including allowance for credit losses of $200 986 1,442 - ----------------------------------------------------------------------------------------------------------------------------------- 209,958 206,152 Long-term debt qualifying as risk-based capital 4,118 3,692 Company-obligated mandatorily redeemable preferred securities of subsidiaries 1,150 750 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities 215,226 210,594 STOCKHOLDERS' EQUITY Preferred stock (authorized shares: 10,400,000) Adjustable rate cumulative preferred stock, $100 par value (issued and outstanding: 2,444,300) 244 244 Variable cumulative preferred stock, $1,000 par value (issued and outstanding: 250,000) 250 250 Fixed cumulative preferred stock, $500 par value (issued and outstanding: 400,000) 200 200 Common stock, $2.50 par value (authorized shares: 500,000,000; issued: 200,689,373 at March 1997 and 200,688,123 at December 1996) 502 502 Capital surplus 1,413 1,446 Retained earnings 8,883 8,635 Net unrealized gains on investment securities, net of taxes 402 464 Other 864 826 - ----------------------------------------------------------------------------------------------------------------------------------- 12,758 12,567 Less: treasury stock (19,562,782 shares at March 1997 and 15,765,455 shares at December 1996) at cost 1,602 1,135 - ----------------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 11,156 11,432 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity 226,382 222,026 - -----------------------------------------------------------------------------------------------------------------------------------
8 8 CONSOLIDATED STATEMENT OF CONDITION Morgan Guaranty Trust Company of New York - --------------------------------------------------------------------------------
Dollars in millions March 31 December 31 1997 1996 ---------------------------- ASSETS Cash and due from banks $ 1,113 $ 920 Interest-earning deposits with banks 1,958 1,910 Debt investment securities available-for-sale carried at fair value 22,416 23,510 Trading account assets, net of allowance for credit losses of $350 72,600 72,549 Securities purchased under agreements to resell and federal funds sold 34,613 27,762 Loans, net of allowance for credit losses of $561 at March 1997 and $565 at December 1996 28,711 27,378 Customers' acceptance liability 257 212 Accrued interest and accounts receivable 6,385 3,470 Premises and equipment 2,830 2,812 Less: accumulated depreciation 1,152 1,116 - ----------------------------------------------------------------------------------------------------------------------- Premises and equipment, net 1,678 1,696 Other assets 3,207 5,406 - ----------------------------------------------------------------------------------------------------------------------- Total assets 172,938 164,813 - ----------------------------------------------------------------------------------------------------------------------- LIABILITIES Noninterest-bearing deposits: In offices in the U.S. 1,253 1,495 In offices outside the U.S. 845 749 Interest-bearing deposits: In offices in the U.S. 10,304 7,114 In offices outside the U.S. 41,288 43,716 - ----------------------------------------------------------------------------------------------------------------------- Total deposits 53,690 53,074 Trading account liabilities 46,825 44,039 Securities sold under agreements to repurchase and federal funds purchased 31,361 30,787 Other liabilities for borrowed money 12,941 13,215 Accounts payable and accrued expenses 2,833 4,203 Liability on acceptances 257 212 Long-term debt not qualifying as risk-based capital 7,800 5,436 Other liabilities, including allowance for credit losses of $200 4,254 977 - ----------------------------------------------------------------------------------------------------------------------- 159,961 151,943 Long-term debt qualifying as risk-based capital 2,891 2,979 - ----------------------------------------------------------------------------------------------------------------------- Total liabilities 162,852 154,922 STOCKHOLDER'S EQUITY Preferred stock, $100 par value (authorized shares: 2,500,000) - - Common stock, $25 par value (authorized shares: 11,000,000; outstanding: 10,599,027) 265 265 Surplus 3,155 3,155 Undivided profits 6,521 6,334 Net unrealized gains on investment securities, net of taxes 161 149 Foreign currency translation (16) (12) - ----------------------------------------------------------------------------------------------------------------------- Total stockholder's equity 10,086 9,891 - ----------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholder's equity 172,938 164,813 - -----------------------------------------------------------------------------------------------------------------------
Member of the Federal Reserve System and the Federal Deposit Insurance Corporation. 9 9 SUMMARY OF SECTOR RESULTS J.P. Morgan & Co. Incorporated - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Asset TOTAL Finance Manage- CLIENT- Equity Proprietary TOTAL and Market ment and FOCUSED Invest- Investing PROPRIETARY Corporate CONSOL- In millions Advisory Making Servicing ACTIVITIES ments and Trading ACTIVITIES Items IDATED - ------------------------------------------------------------------------------------------------------------------------------------ FIRST QUARTER 1997 Total revenues $451 $733 $375 $1,559 $49 $276 $ 325 ($ 51) $ 1,833 Total expenses 302 474 300 1,076 7 46 53 62 1,191 - ------------------------------------------------------------------------------------------------------------------------------------ Pretax income 149 259 75 483 42 230 272 (113) 642 - ------------------------------------------------------------------------------------------------------------------------------------ FIRST QUARTER 1996 Total revenues 416 771 345 1,532 66 215 281 (73) 1,740 Total expenses 259 410 271 940 8 36 44 101 1,085 - ------------------------------------------------------------------------------------------------------------------------------------ Pretax income 157 361 74 592 58 179 237 (174) 655 - ------------------------------------------------------------------------------------------------------------------------------------
BUSINESS SECTORS: We describe the activities of J.P. Morgan using five business sectors. Three of these sectors - Finance and Advisory, Market Making, and Asset Management and Servicing - focus on services we provide for clients. Two sectors comprise proprietary activities that we conduct exclusively for our own account: Equity Investments and Proprietary Investing and Trading. The Finance and Advisory sector includes results of our Advisory, Debt and Equity Underwriting, and Credit activities. The Market Making sector includes results of our Fixed Income, Equities, Foreign Exchange, and Commodities activities, including positions taken to facilitate client transactions. The Asset Management and Servicing sector includes results of our Investment Management, Private Client Services, Futures and Options Brokerage, and Euroclear System activities. The Equity Investments sector includes results from our proprietary equity investment portfolio management activities and the Proprietary Investing and Trading sector includes results from our market risk positioning and capital and liquidity management activities. Corporate Items includes revenues and expenses that have not been allocated to the five business sectors, intercompany eliminations, the taxable-equivalent adjustment and the results of sold or discontinued businesses. For a complete description of our business sectors, please refer to the J.P. Morgan & Co. Incorporated 1996 Annual Report. METHODOLOGY: The firm's management reporting system and policies were used to determine the revenues and expenses directly attributable to each business sector. Earnings on stockholders' equity were allocated based on management's assessment of the inherent risk of the components of each sector. In addition, certain overhead expenses not allocated for management reporting purposes were allocated to each business sector. Overhead expenses were allocated based primarily on staff levels and represent costs associated with various support functions that exist for the benefit of the firm as a whole. Certain prior year amounts have been reclassified to conform with the 1997 presentation. 10 10 TRADING REVENUE J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- Dollars in millions
- ------------------------------------------------------------------------------------------------ FIXED FOREIGN PROPRIETARY INCOME EQUITIES EXCHANGE COMMODITIES TRADING TOTAL - ------------------------------------------------------------------------------------------------ First Quarter 1997 $346 $111 $120 $13 $107 $697 First Quarter 1996 533 94 68 34 29 758 Fourth Quarter 1996 273 69 84 10 76 512 - ------------------------------------------------------------------------------------------------
INVESTMENT BANKING REVENUE J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- Dollars in millions
- ------------------------------------------------------------------------------------------ ADVISORY AND UNDERWRITING TOTAL INVESTMENT SYNDICATION FEES REVENUE BANKING REVENUE - ------------------------------------------------------------------------------------------ First Quarter 1997 $129 $97 $226 First Quarter 1996 136 65 201 Fourth Quarter 1996 183 94 277 - ------------------------------------------------------------------------------------------
11 11 ASSET QUALITY J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- NONPERFORMING ASSETS
March 31 December 31 March 31 Dollars in millions 1997 1996 1996 ---------- --------------- ----------- Impaired loans: Commercial and industrial $ 55 $ 89 $110 Other 34 29 42 - ------------------------------------------------------------------------------------------------- 89 118 152 Restructuring countries 2 2 4 - ------------------------------------------------------------------------------------------------- Total impaired loans 91 120 156 Other nonperforming assets 19 - - - ------------------------------------------------------------------------------------------------- Total nonperforming assets 110 120 156 - -------------------------------------------------------------------------------------------------
AGGREGATE ALLOWANCE FOR CREDIT LOSSES
March 31 December 31 March 31 Dollars in millions 1997 1996 1996 ----------- ---------------- ----------- Aggregate allowance for credit losses (a) $1,113 $1,116 $1,117 - -------------------------------------------------------------------------------------------------
First Quarter ------------------------------ 1997 1996 ------------------------------ Charge-offs: Commercial and industrial ($13) ($15) Other - (3) Recoveries 10 5 - ----------------------------------------------------------------------------------
(a) Prior to December 31, 1996, the aggregate allowance for credit losses was displayed in the consolidated balance sheet as a reduction of the carrying value of loans. For financial statement reporting purposes, beginning December 31, 1996, in accordance with the American Institute of Certified Public Accountants Banks and Savings Institutions Audit Guide, while we consider it in the aggregate, the total allowance has been apportioned and displayed in the consolidated balance sheet (see page 7) as a reduction of loans, a reduction of trading account assets relating to derivatives, and as other liabilities related to undertakings to extend credit that are not currently reflected in the balance sheet, such as standby letters of credit, guarantees, and commitments. Given the global and diversified nature of our business, expected shifts in the relative level of credit risk among financial instruments, and the numerous estimates and assumptions necessary to derive such allocated amounts, portions of the aggregate allowance may be reclassified from time to time. -----END PRIVACY-ENHANCED MESSAGE-----