-----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, IUmP1NCjIRW3/yvDE5xW92x0pWc/oMMh0Qo+bJnl+2IDPaxfVCMFVUHeDLnuJ7V0 oyX4pLv3Jd/clCtgMZKpmQ== 0000950123-97-005781.txt : 19970714 0000950123-97-005781.hdr.sgml : 19970714 ACCESSION NUMBER: 0000950123-97-005781 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970710 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970711 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: 97639585 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 J.P. MORGAN & CO. INCORPORATED 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) July 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 July 10, 1997, the Registrant issued a press release announcing its earnings for the three-month and six-month periods ended June 30, 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 July 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: July 10, 1997 EX-99 2 PRESS RELEASE 1 IMMEDIATE July 10, 1997 J.P. MORGAN REPORTS 1997 SECOND QUARTER RESULTS J.P. Morgan & Co. Incorporated reported net income of $374 million in the second quarter of 1997, compared with $440 million in the second quarter of 1996. Earnings per share for the quarter were $1.85, compared with $2.14 a year ago. Net income for the first six months of 1997 totaled $798 million, down from $879 million in 1996. Earnings per share in the first six months were $3.89 versus $4.28 a year ago. "Morgan's global business gained momentum through the second quarter, after a slow start," said Douglas A. Warner III, chairman. "While proprietary results were down, revenues from client-related activities rose and investment banking performance was our strongest to date." SECOND QUARTER 1997 RESULTS AT A GLANCE
First Second quarter quarter ----------------------------------------------------------------------------------------- In millions of dollars, except per share data 1997 1996 1997 ----------------------------------------------------------------------------------------- Revenues $ 1,791 $ 1,761 $ 1,833 Operating expenses (1,241) (1,104) (1,191) Income taxes (176) (217) (218) ----------------------------------------------------------------------------------------- Net income 374 440 424 Net income per share $ 1.85 $ 2.14 $ 2.04 ----------------------------------------------------------------------------------------- Dividends declared per share $ 0.88 $ 0.81 $ 0.88
REVENUES were up slightly in the second quarter from a year ago. - Finance and Advisory revenues rose 13% to $481 million on strong results from advisory activities and debt and equity underwriting. - Market Making revenues were $648 million, up from $639 million a year ago, as increases in equities outpaced declines in global fixed income results. - Asset Management and Servicing revenues increased 12% to $392 million, reflecting growth in investment management and private client activities. - Equity Investments revenues were $124 million versus $126 million. - Proprietary Investing and Trading revenues declined to $116 million from $216 million. OPERATING EXPENSES rose 12% in the 1997 second quarter from a year ago. The increase reflected planned spending in areas targeted for growth and included a charge of $28 million incurred in connection with the renovation of office space in New York. 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 10. - -------------------------------------------------------------------------------- Press contact: Joseph M. Evangelisti 212/648-9589 Investor contact: Ann B. Patton 212/648-9446 2 2 REVENUES BY BUSINESS SECTOR REVENUES were $1.791 billion in the second quarter, compared with $1.761 billion in the year-ago quarter. Revenues from client-focused activities, which are reported in the Finance and Advisory, Market Making, and Asset Management and Servicing sectors, totaled $1.521 billion, up 7% from $1.416 billion a year ago. Revenues from Equity Investments and Proprietary Investing and Trading activities declined to $240 million from $342 million in 1996. FINANCE AND ADVISORY (Advisory, Debt and Equity Underwriting, and Credit) revenues increased 13% to $481 million, reflecting continued growth across investment banking activities. Revenues from advisory services and debt and equity underwriting in both developed and emerging markets increased 31% to $255 million. The market for advisory and underwriting activity remained strong, and Morgan assisted clients in a number of the quarter's notable transactions. Revenues from global credit activities were $226 million, essentially unchanged from a year ago. For the first half of 1997, Securities Data Co. ranked J.P. Morgan fifth in U.S. debt and equity underwriting, up from sixth a year ago. Morgan ranked seventh in completed mergers and acquisitions transactions worldwide, unchanged from the first six months of 1996. MARKET MAKING (Fixed Income, Equities, Foreign Exchange, and Commodities) revenues totaled $648 million compared with $639 million a year ago. After a brief slowdown caused by the mid-March directional shift in U.S. monetary policy, financial markets worldwide generally gained strength in the second quarter. Fixed income revenues in developed markets were $267 million, compared with $277 million in the 1996 second quarter. In emerging markets, revenues were $123 million, down from $151 million a year ago. Revenue increases in local market activities in Eastern Europe and Asia were more than offset by lower revenues from external debt trading. In equities, market making revenues were up 20% to $158 million. Equity derivative revenues grew and equity commissions increased sharply, primarily reflecting growing market share on U.S. and European exchanges. Foreign exchange revenues rose 4% to $84 million. Commodities revenues were $16 million versus a loss of $2 million a year ago. ASSET MANAGEMENT AND SERVICING (Investment Management, Private Client Services, Futures and Options Brokerage, and Euroclear System) revenues rose 12% to $392 million in the second quarter from a year ago. Revenues generated from institutional investment management activities and services for private clients increased 10% to $256 million. Assets under management were approximately $234 billion at June 30, 1997. Futures and Options Brokerage as well as Euroclear-related revenues also increased. 3 3 Private clients accounted for approximately $145 million of revenues from the firm's client-focused activities in the second quarter, up 15% from 1996, $45 million of which is recorded in the Finance and Advisory and Market Making sectors. EQUITY INVESTMENTS (Equity Portfolio Management for Morgan's own account) reported revenues of $124 million in the second quarter, compared with $126 million a year ago. Included in reported revenues were net gains of $118 million, primarily related to the sale of equity investments in the communications and insurance industries. A year ago, net gains were also $118 million. On a total return basis, combining reported revenues with the change in net unrealized appreciation, Equity Investments earned $212 million in the 1997 second quarter, primarily related to insurance industry investments. A year ago, total return was $103 million. PROPRIETARY INVESTING AND TRADING (Market Risk Positioning and Capital and Liquidity Management) revenues totaled $116 million for the 1997 second quarter, compared with $216 million a year ago. Trading losses were $17 million, compared with gains of $128 million in the 1996 second quarter. Total return - reported revenues plus the change in net unrealized appreciation - for the 1997 second quarter was $59 million, compared with $89 million in 1996. OPERATING EXPENSES Operating expenses increased 12% to $1.241 billion in the 1997 second quarter and included a charge of $28 million incurred in connection with the renovation of office space in New York. Expense increases were concentrated in two business sectors - Finance and Advisory, and Asset Management and Servicing - where Morgan is investing to expand market share and business capacity. Higher levels of business activity also contributed to the overall rise in expenses, as did initiatives to prepare for the year 2000 and the anticipated conversion to a single European currency. At June 30, 1997, staff totaled 15,776 employees, compared with 15,391 employees at June 30, 1996. Income tax expense in the second quarter totaled $176 million, based on an effective tax rate of 32%, compared with 33% in the year-earlier quarter. ASSETS Total assets were $250 billion at June 30, 1997, compared with $226 billion at March 31, 1997. At June 30, 1997, the aggregate allowance for credit losses was $1.110 billion versus $1.113 billion at March 31, 1997. Nonperforming assets decreased to $108 million at June 30, 1997, from $110 million at March 31, 1997, 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 second quarter. 4 4 CAPITAL At June 30, 1997, J.P. Morgan's estimated tier 1 and total risk-based capital ratios were 8.0% and 11.3%, respectively, compared with tier 1 and total risk-based capital ratios of 8.7% and 12.4%, respectively, at March 31, 1997. The leverage ratio was 5.9% at both June 30, 1997, and March 31, 1997. At June 30, 1997, stockholders' equity included approximately $518 million of net unrealized appreciation on debt investment and marketable equity investment securities, net the related deferred tax liability of $310 million. This compares with $402 million of net unrealized appreciation at March 31, 1997, net the related deferred tax liability of $227 million. The net unrealized appreciation on debt investment securities was $294 million and $243 million at June 30, 1997 and March 31, 1997, respectively. The net unrealized appreciation on marketable equity investment securities was $534 million at June 30, 1997, and $386 million at March 31, 1997. During the second quarter of 1997, the firm completed the purchase of J.P. Morgan common stock in the open market pursuant to the Board of Directors' December 1996 authorization of the purchase of up to $750 million of shares. In addition, the firm continues 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 market opportunities. Attached are the financial summary; interim consolidated financial statements, which are unaudited; summary of sector results; trading and investment banking revenue tables; and asset quality tables. J.P. Morgan news releases, including quarterly financial results, are available on the Internet at www.jpmorgan.com. 5 5 FINANCIAL SUMMARY J. P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- Dollars in millions, except per share data
First Second Quarter Quarter Six Months ---------------------------- ------------ ----------------------------- 1997 1996 1997 1997 1996 ------------------------------------------------------------------------------ Net Income $ 374 $ 440 $ 424 $ 798 $ 879 PER COMMON SHARE Net income (a) $ 1.85 $ 2.14 $ 2.04 $ 3.89 $ 4.28 Dividends declared 0.88 0.81 0.88 1.76 1.62 Book value 55.37 52.40 54.05 - -------------------------------------------------------------------------------------------------------------------------------- Weighted-average number of common and common equivalent shares outstanding 198,148,923 202,063,927 203,137,598 200,750,906 202,048,817 - -------------------------------------------------------------------------------------------------------------------------------- Dividends declared on common stock $ 158 $ 151 $ 160 $ 318 $ 303 Dividends declared on preferred stock 9 8 9 18 16 SELECTED RATIOS Annualized rate of return on average common stockholders' equity 14.1% 17.1% 15.7% 14.9% 17.1% As % of period-end total assets: Common equity 4.3% 5.2% 4.6% Total equity 4.5 5.5 4.9 Regulatory capital ratios (b) Tier 1 risk-based capital ratio 8.0% 8.2% 8.7% Total risk-based capital ratio 11.3 11.7 12.4 Leverage ratio 5.9 6.3 5.9 - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE BALANCES Debt investment securities (c) $ 22,946 $ 25,880 $ 25,452 $ 24,192 $ 25,096 Loans 29,434 28,514 28,702 29,070 27,920 Total interest-earning assets 194,832 167,087 189,516 192,189 164,854 Total assets 243,225 209,691 236,079 239,672 207,284 Total interest-bearing liabilities 185,465 158,123 182,059 183,772 156,448 Total liabilities 232,118 198,807 224,684 228,421 196,504 Common stockholders' equity 10,413 10,190 10,701 10,557 10,127 Total stockholders' equity 11,107 10,884 11,395 11,251 10,780 Net interest earnings (fully taxable basis) 513 419 470 983 837 Net yield on interest-earning assets 1.06% 1.01% 1.01% 1.03% 1.02% - -------------------------------------------------------------------------------------------------------------------------------- Employees at period-end 15,776 15,391 15,483 - --------------------------------------------------------------------------------------------------------------------------------
(a) Earnings per share amounts represent both primary and fully diluted earnings per share, except for the three months ended June 30, 1997 and the six months ended June 30, 1996. Fully diluted earnings per share were $1.84 and $4.27 for the three months ended June 30, 1997 and the six months ended June 30, 1996, respectively. (b) 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 June 30, 1997, are estimates. (c) 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 ---------------------------------------------------------------- June 30 June 30 Increase/ March 31 Increase/ 1997 1996 (Decrease) 1997 (Decrease) ---------------------------------------------------------------- NET INTEREST REVENUE Interest revenue $3,029 $2,559 $ 470 $2,892 $ 137 Interest expense 2,534 2,162 372 2,442 92 - ------------------------------------------------------------------------------------------------------- Net interest revenue 495 397 98 450 45 NONINTEREST REVENUE Trading revenue 477 697 (220) 697 (220) Investment banking revenue 294 210 84 226 68 Investment management revenue 199 172 27 184 15 Fees and commissions 156 142 14 148 8 Investment securities revenue 114 72 42 61 53 Other revenue 56 71 (15) 67 (11) - ------------------------------------------------------------------------------------------------------- Total noninterest revenue 1,296 1,364 (68) 1,383 (87) Total revenue 1,791 1,761 30 1,833 (42) OPERATING EXPENSES Employee compensation and benefits 734 737 (3) 766 (32) Net occupancy 104 76 28 73 31 Technology and communications 240 158 82 203 37 Other expenses 163 133 30 149 14 - ------------------------------------------------------------------------------------------------------- Total operating expenses 1,241 1,104 137 1,191 50 Income before income taxes 550 657 (107) 642 (92) Income taxes 176 217 (41) 218 (42) - ------------------------------------------------------------------------------------------------------- Net income 374 440 (66) 424 (50) PER COMMON SHARE Net income (a) $ 1.85 $ 2.14 ($0.29) $ 2.04 ($0.19) 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 STATEMENT OF INCOME J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- In millions, except per share data
Six months ended --------------------------------- June 30 June 30 Increase/ 1997 1996 (Decrease) --------------------------------- NET INTEREST REVENUE Interest revenue $5,921 $5,113 $ 808 Interest expense 4,976 4,320 656 - ------------------------------------------------------------------------- Net interest revenue 945 793 152 NONINTEREST REVENUE Trading revenue 1,174 1,455 (281) Investment banking revenue 520 411 109 Investment management revenue 383 329 54 Fees and commissions 304 293 11 Investment securities revenue 175 150 25 Other revenue 123 70 53 - ------------------------------------------------------------------------- Total noninterest revenue 2,679 2,708 (29) Total revenue 3,624 3,501 123 OPERATING EXPENSES Employee compensation and benefits 1,500 1,467 33 Net occupancy 177 149 28 Technology and communications 443 316 127 Other expenses 312 257 55 - ------------------------------------------------------------------------- Total operating expenses 2,432 2,189 243 Income before income taxes 1,192 1,312 (120) Income taxes 394 433 (39) - ------------------------------------------------------------------------- Net income 798 879 (81) PER COMMON SHARE Net income (a) $ 3.89 $ 4.28 ($0.39) Dividends declared 1.76 1.62 0.14 - -------------------------------------------------------------------------
(a) See Financial Summary for per common share data assuming full dilution. 8 8 CONSOLIDATED BALANCE SHEET J.P. Morgan & Co. Incorporated - --------------------------------------------------------------------------------
Dollars in millions June 30 March 31 December 31 1997 1997 1996 --------------------------------------- ASSETS Cash and due from banks $ 752 $ 1,174 $ 906 Interest-earning deposits with banks 2,054 1,955 1,908 Debt investment securities available-for-sale carried at fair value (cost: $24,642 at June 1997, $23,416 at March 1997, and $24,610 at December 1996) 24,936 23,659 24,865 Trading account assets, net of allowance for credit losses of $350 105,825 89,417 90,980 Securities purchased under agreements to resell ($36,425 at June 1997, $35,034 at March 1997, and $32,455 at December 1996) and federal funds sold 36,425 35,108 32,505 Securities borrowed 37,837 31,981 27,931 Loans, net of allowance for credit losses of $560 at June 1997, $563 at March 1997, and $566 at December 1996 28,734 28,890 27,554 Customers' acceptance liability 175 257 212 Accrued interest and accounts receivable 4,446 5,569 3,789 Premises and equipment 3,194 3,160 3,137 Less: accumulated depreciation 1,353 1,313 1,272 - -------------------------------------------------------------------------------------------------------------------------------- Premises and equipment, net 1,841 1,847 1,865 Other assets 7,465 6,525 9,511 - -------------------------------------------------------------------------------------------------------------------------------- Total assets 250,490 226,382 222,026 - -------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Noninterest-bearing deposits: In offices in the U.S. 1,235 1,219 1,501 In offices outside the U.S. 641 806 708 Interest-bearing deposits: In offices in the U.S. 9,274 10,293 7,103 In offices outside the U.S. 45,827 41,253 43,412 - -------------------------------------------------------------------------------------------------------------------------------- Total deposits 56,977 53,571 52,724 Trading account liabilities 59,436 55,338 50,919 Securities sold under agreements to repurchase ($64,322 at June 1997, $55,448 at March 1997, and $56,117 at December 1996) and federal funds purchased 67,464 60,155 61,429 Commercial paper 4,289 4,023 4,132 Other liabilities for borrowed money 19,615 19,948 19,948 Accounts payable and accrued expenses 7,025 4,825 5,935 Liability on acceptances 175 257 212 Long-term debt not qualifying as risk-based capital 14,890 10,855 9,411 Other liabilities, including allowance for credit losses of $200 4,000 986 1,442 - -------------------------------------------------------------------------------------------------------------------------------- 233,871 209,958 206,152 Long-term debt qualifying as risk-based capital 4,121 4,118 3,692 Company-obligated mandatorily redeemable preferred securities of subsidiaries 1,150 1,150 750 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities 239,142 215,226 210,594 STOCKHOLDERS' EQUITY Preferred stock (authorized shares: 10,400,000) Adjustable rate cumulative preferred stock, $100 par value (issued and outstanding: 2,444,300) 244 244 244 Variable cumulative preferred stock, $1,000 par value (issued and outstanding: 250,000) 250 250 250 Fixed cumulative preferred stock, $500 par value (issued and outstanding: 400,000) 200 200 200 Common stock, $2.50 par value (authorized shares: 500,000,000; issued: 200,689,973 at June 1997, 200,689,373 at March 1997 and 200,688,123 at December 1996) 502 502 502 Capital surplus 1,402 1,413 1,446 Retained earnings 9,085 8,883 8,635 Net unrealized gains on investment securities, net of taxes 518 402 464 Other 968 864 826 - -------------------------------------------------------------------------------------------------------------------------------- 13,169 12,758 12,567 Less: treasury stock (21,633,098 shares at June 1997, 19,562,782 at March 1997 and 15,765,455 at December 1996) at cost 1,821 1,602 1,135 - -------------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 11,348 11,156 11,432 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity 250,490 226,382 222,026 - --------------------------------------------------------------------------------------------------------------------------------
9 9 CONSOLIDATED STATEMENT OF CONDITION Morgan Guaranty Trust Company of New York - --------------------------------------------------------------------------------
Dollars in millions June 30 December 31 1997 1996 -------------------------- ASSETS Cash and due from banks $ 718 $ 920 Interest-earning deposits with banks 2,056 1,910 Debt investment securities available-for-sale carried at fair value 23,827 23,510 Trading account assets, net of allowance for credit losses of $350 84,442 72,549 Securities purchased under agreements to resell, securities borrowed and federal funds sold 38,468 27,762 Loans, net of allowance for credit losses of $558 at June 1997 and $565 at December 1996 28,560 27,378 Customers' acceptance liability 175 212 Accrued interest and accounts receivable 3,429 3,470 Premises and equipment 2,858 2,812 Less: accumulated depreciation 1,185 1,116 - --------------------------------------------------------------------------------------------------------------------- Premises and equipment, net 1,673 1,696 Other assets 5,144 5,406 - --------------------------------------------------------------------------------------------------------------------- Total assets 188,492 164,813 - --------------------------------------------------------------------------------------------------------------------- LIABILITIES Noninterest-bearing deposits: In offices in the U.S. 1,235 1,495 In offices outside the U.S. 662 749 Interest-bearing deposits: In offices in the U.S. 9,285 7,114 In offices outside the U.S. 46,711 43,716 - --------------------------------------------------------------------------------------------------------------------- Total deposits 57,893 53,074 Trading account liabilities 49,908 44,039 Securities sold under agreements to repurchase and federal funds purchased 35,061 30,787 Other liabilities for borrowed money 12,678 13,215 Accounts payable and accrued expenses 5,063 4,203 Liability on acceptances 175 212 Long-term debt not qualifying as risk-based capital 11,500 5,436 Other liabilities, including allowance for credit losses of $200 3,257 977 - --------------------------------------------------------------------------------------------------------------------- 175,535 151,943 Long-term debt qualifying as risk-based capital 2,817 2,979 - --------------------------------------------------------------------------------------------------------------------- Total liabilities 178,352 154,922 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 6,578 6,334 Net unrealized gains on investment securities, net of taxes 156 149 Foreign currency translation (14) (12) - --------------------------------------------------------------------------------------------------------------------- Total stockholder's equity 10,140 9,891 - --------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholder's equity 188,492 164,813 - ---------------------------------------------------------------------------------------------------------------------
Member of the Federal Reserve System and the Federal Deposit Insurance Corporation. 10 10 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 - --------------------------------------------------------------------------------------------------------------------------------- SECOND QUARTER 1997 Total revenues $481 $648 $392 $1,521 $124 $116 $240 $30 $1,791 Total expenses 351 455 320 1,126 11 45 56 59 1,241 - ---------------------------------------------------------------------------------------------------------------------------------- Pretax income 130 193 72 395 113 71 184 (29) 550 - ---------------------------------------------------------------------------------------------------------------------------------- SECOND QUARTER 1996 Total revenues 426 639 351 1,416 126 216 342 3 1,761 Total expenses 268 441 274 983 8 40 48 73 1,104 - ---------------------------------------------------------------------------------------------------------------------------------- Pretax income 158 198 77 433 118 176 294 (70) 657 - ---------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS 1997 Total revenues 932 1,381 767 3,080 173 392 565 (21) 3,624 Total expenses 653 929 620 2,202 18 91 109 121 2,432 - ---------------------------------------------------------------------------------------------------------------------------------- Pretax income 279 452 147 878 155 301 456 (142) 1,192 - ---------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS 1996 Total revenues 842 1,410 696 2,948 192 431 623 (70) 3,501 Total expenses 527 851 545 1,923 16 76 92 174 2,189 - ---------------------------------------------------------------------------------------------------------------------------------- Pretax income 315 559 151 1,025 176 355 531 (244) 1,312 - ----------------------------------------------------------------------------------------------------------------------------------
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. 11 11 TRADING REVENUE J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- Dollars in millions
- ----------------------------------------------------------------------------------------------------------------------- FIXED FOREIGN PROPRIETARY INCOME EQUITIES EXCHANGE COMMODITIES TRADING TOTAL - ----------------------------------------------------------------------------------------------------------------------- Second Quarter 1997 $250 $170 $72 $2 ($17) $477 Second Quarter 1996 331 124 109 5 128 697 Six Months 1997 596 281 192 15 90 1,174 Six Months 1996 864 218 177 39 157 1,455 - -----------------------------------------------------------------------------------------------------------------------
INVESTMENT BANKING REVENUE J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- Dollars in millions
- ----------------------------------------------------------------------------------------------------------------- ADVISORY AND UNDERWRITING TOTAL INVESTMENT SYNDICATION FEES REVENUE BANKING REVENUE - ----------------------------------------------------------------------------------------------------------------- Second Quarter 1997 $154 $140 $294 Second Quarter 1996 99 111 210 Six Months 1997 283 237 520 Six Months 1996 235 176 411 - -----------------------------------------------------------------------------------------------------------------
12 12 ASSET QUALITY J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- NONPERFORMING ASSETS
June 30 March 31 December 31 June 30 Dollars in millions 1997 1997 1996 1996 -------- --------- ------------ -------- Impaired loans: Commercial and industrial $ 60 $ 55 $ 89 $ 96 Other 44 34 29 36 - ------------------------------------------------------------------------------------------------------------------ 104 89 118 132 Restructuring countries 2 2 2 2 - ------------------------------------------------------------------------------------------------------------------ Total impaired loans 106 91 120 134 Other nonperforming assets 2 19 - - - ------------------------------------------------------------------------------------------------------------------ Total nonperforming assets 108 110 120 134 - ------------------------------------------------------------------------------------------------------------------
AGGREGATE ALLOWANCE FOR CREDIT LOSSES
June 30 March 31 December 31 June 30 Dollars in millions 1997 1997 1996 1996 -------- --------- ------------ ------- Aggregate allowance for credit losses $1,110 $1,113 $1,116 $1,125 - -------------------------------------------------------------------------------------------------------------------
Second Quarter Six Months ---------------------- ----------------------- 1997 1996 1997 1996 ---------------------- ------------------------ Charge-offs: Commercial and industrial ($8) ($1) ($21) ($16) Other (7) - (7) (3) Recoveries 12 9 22 14 - -------------------------------------------------------------------- -----------------------------------------------
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