-----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, BEjbY3hJbx6A+Foh9/srWcbX1jOX1J4jwCpN9C57gvR52bFf6SoLmXHuSYoMzsY5 KFo4wu78JQyHPEVnAjhHMQ== 0000950123-00-000352.txt : 20000202 0000950123-00-000352.hdr.sgml : 20000202 ACCESSION NUMBER: 0000950123-00-000352 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000118 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000119 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: SEC FILE NUMBER: 001-05885 FILM NUMBER: 509183 BUSINESS ADDRESS: STREET 1: 60 WALL ST CITY: NEW YORK STATE: NY ZIP: 10260 BUSINESS PHONE: 2124832323 MAIL ADDRESS: STREET 1: 500 STANTON CHRISTIANA RD STREET 2: ATTN RANDY REDCAY CITY: NEWARK STATE: DE ZIP: 19713 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) January 18, 2000 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 January 18, 2000, the Registrant issued a press release announcing its earnings for the three-month and twelve-month periods ended December 31, 1999. A copy of such press release is filed herein as Exhibit 99a. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements NONE. (b) Pro Forma Financial Information NONE. (c) Exhibits 12. Statement re computation of ratios. 99a. Copy of press release of J.P. Morgan & Co. Incorporated dated January 18, 2000. 99b. Statement of consolidated average balances and net interest earnings for the three and twelve month periods ended December 31, 1999. 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/Grace B. Vogel ---------------------------- NAME: Grace B. Vogel TITLE: Chief Accounting Officer DATE: January 18, 2000 EX-12 2 STATEMENT RE: COMPUTATION OF RATIOS 1 EXHIBIT 12 Computation of Ratio of Earnings to Fixed Charges J.P. Morgan & Co. Incorporated Consolidated
- ----------------------------------------------------------------------- Twelve Months Dollars in millions 1999 - ----------------------------------------------------------------------- Earnings: Net income $ 2 055 Add: income taxes 1 059 Less: equity in undistributed income of all affiliates accounted for by the equity method 71 Add: fixed charges, excluding interest on deposits 7 207 - ----------------------------------------------------------------------- Earnings available for fixed charges, excluding interest on deposits 10 250 Add: interest on deposits 2 253 - ----------------------------------------------------------------------- Earnings available for fixed charges, including interest on deposits 12 503 - ----------------------------------------------------------------------- Fixed charges: Interest expense, excluding interest on deposits 7 176 Interest factor in net rental expense 31 - ----------------------------------------------------------------------- Total fixed charges, excluding interest on deposits 7 207 Add: interest on deposits 2 253 - ----------------------------------------------------------------------- Total fixed charges, including interest on deposits 9 460 - ----------------------------------------------------------------------- Ratio of earnings to fixed charges: Excluding interest on deposits 1.42 Including interest on deposits 1.32 - -----------------------------------------------------------------------
2 EXHIBIT 12 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends J.P. Morgan & Co. Incorporated Consolidated
- ---------------------------------------------------------------------------------- Dollars in millions Twelve Months 1999 - ---------------------------------------------------------------------------------- Earnings: Net income $ 2 055 Add: income taxes 1 059 Less: equity in undistributed income of all affiliates accounted for by the equity method 71 Add: fixed charges, excluding interest on deposits, and preferred stock dividends 7 260 - ---------------------------------------------------------------------------------- Earnings available for fixed charges, excluding interest on deposits 10 303 Add: interest on deposits 2 253 - ---------------------------------------------------------------------------------- Earnings available for fixed charges, including interest on deposits 12 556 - ---------------------------------------------------------------------------------- Fixed charges: Interest expense, excluding interest on deposits 7 176 Interest factor in net rental expense 31 Preferred stock dividends 53 - ---------------------------------------------------------------------------------- Total fixed charges, excluding interest on deposits 7 260 Add: interest on deposits 2 253 - ---------------------------------------------------------------------------------- Total fixed charges, including interest on deposits 9 513 - ---------------------------------------------------------------------------------- Ratio of earnings to fixed charges: Excluding interest on deposits 1.42 Including interest on deposits 1.32 - ----------------------------------------------------------------------------------
EX-99.A 3 COPY OF PRESS RELEASE 1 J.P. Morgan & Co. Incorporated 60 Wall Street New York, NY 10260-0060 NYSE: symbol: JPM - -------------------------------------------------------------------------------- NEWS RELEASE: IMMEDIATE January 18, 2000 J.P. MORGAN REPORTS FOURTH QUARTER AND 1999 FULL YEAR EARNINGS J.P. Morgan today reported fourth quarter net income of $509 million, or $2.63 per share, up from $89 million, or $0.42 per share, in the fourth quarter of 1998. Net income in the 1998 fourth quarter included an after-tax charge of $86 million, or $0.44 per share, related to expense management initiatives. Return on common equity was 18.1% in the quarter. Full year 1999 net income was $2.055 billion or $10.39 per share, compared with 1998 operating earnings before non-recurring gains and special charges of $1.065 billion, or $5.22 per share. Net income in 1998 was $963 million, or $4.71 per share. HIGHLIGHTS FOR 1999: - - Revenues rose 31% on increased client activity across our business globally - - Expenses increased 11% and we achieved our target of reducing core operating expenses before performance-driven compensation by $400 million - - We substantially reduced the risk and the capital requirements of our credit and market activities - - Economic value added (EVA) for the firm increased by more than $1.1 billion and return on common equity increased to 18.4%, driven by revenue growth and expense discipline "We have made significant progress on each of our strategic growth initiatives, and are very pleased with the past year's strong financial results. Going into the new year, we have excellent momentum across our major business lines," said Douglas A. Warner III, chairman. REVENUES BY SEGMENT Revenues were $2.189 billion in the fourth quarter of 1999, up 46% from the 1998 period. For the full year, revenues were $8.856 billion, up 31% from 1998, excluding non-recurring gains related to the sales of certain businesses. Investment Banking revenues were $309 million in the 1999 fourth quarter and $1.196 billion for the year, up 17% and 19%, respectively. The increases were driven primarily by growth in advisory revenues. For the full year, Thomson Financial Securities Data Corporation ranked J.P. Morgan fifth in completed mergers and acquisitions volume worldwide with a market share of 15.6%, up from seventh and a market share of 12.6% in - -------------------------------------------------------------------------------- Press contact: Joseph M. Evangelisti 212/648-9589 Investor contact: Ann B. Patton 212/648-9446 2 J.P. Morgan & Co. Incorporated 2 1998. In the fast growing European and cross-border categories, we ranked fourth in completed transactions, with a market share of 18.0% and 16.7%, respectively. We advised on more than $500 billion announced transactions globally, ranking fifth with a 15.0% market share. Equities revenues were $420 million in the fourth quarter, more than double the year ago quarter, reflecting increases in both our derivatives and cash activities. For the full year, revenues were $1.417 billion, compared with $699 million in 1998. Equity derivatives saw higher client revenues and significant gains in portfolio management. Equity underwriting revenues increased and our share of U.S. equity lead underwritings grew to 5.6% for the year. Higher brokerage commission revenues reflected growth in market share and volumes in Europe and the U.S. Interest Rate and Foreign Exchange Markets revenues of $479 million were essentially flat compared with the year-ago quarter. For the 1999 full year, revenues were down 3% to $2.009 billion. Expanded global client activity in government securities and derivatives, and improved trading results in local markets in Eastern Europe and Asia, were largely offset by substantially lower foreign exchange revenues reflecting lower client demand and trading results. Credit Markets revenues nearly doubled to $264 million in the quarter from a year ago. For the full year, Credit Markets revenues of $1.526 billion rose sharply from $628 million in 1998. This increase reflected a much healthier market environment, particularly in the first half of the year, following the severe dislocations in 1998. Global securities trading revenue rebounded as spreads tightened and market liquidity improved; origination revenues also rose, particularly for structured and high-grade securities. 1999 also included gains related to hedging our economic exposures in Brazil. Credit Portfolio includes revenues from traditional credit products, primarily loans and commitments, and from managing the credit risk associated with the firm's derivatives portfolio. Fourth quarter revenues were $183 million versus $23 million in the year-ago quarter. For the year, Credit Portfolio had revenues of $783 million versus $390 million in 1998. Overall, improvement in the global credit environment and reduced risk in our credit exposures led to significantly higher revenues from changes in the valuation of our derivatives credit risk and from reductions in our allowances for credit losses. Partially offsetting these increases were lower revenues from traditional credit products as we reduced our exposures. The quarter and full year reflected negative provisions for credit losses of $45 million and $175 million, respectively. Asset Management Services revenues in the 1999 fourth quarter increased 27% to $352 million, compared with a year ago; for the full year, revenues increased 16% to $1.354 billion. The increases were primarily driven by higher investment management fees, reflecting asset growth, a shift in asset mix towards higher-fee alternative investment disciplines, and increased performance fees. Higher earnings from our equity investment in American 3 J.P. Morgan & Co. Incorporated 3 Century also contributed to the increase. Assets under management rose 16% to $351 billion at December 31, 1999, driven by market appreciation and new business from institutional and private clients. Equity Investments reported revenues of $313 million in the fourth quarter compared to $42 million a year ago. The increase was mostly attributable to investments in the telecommunications and financial services industries, which included approximately $140 million on the sale of our investment in the Bank of the Philippine Islands. In 1999, Equity Investment revenues were $646 million versus $346 million in 1998, primarily reflecting investments in the telecommunications industry. Proprietary Investing and Trading reported a loss of $127 million in the 1999 fourth quarter, compared with a gain of $203 million in the 1998 quarter. The decrease in the quarter primarily reflected the recognition of $170 million of losses on sales of $10 billion of investment securities as we repositioned our portfolio. It also reflected breakeven results in our Asian portfolio, compared to exceptional returns in the prior year's quarter. Total return - reported revenues and the change in net unrealized value - was $24 million in the quarter, consistent with the year-ago period. For 1999, reported revenues were $29 million versus $663 million in 1998. Total return was $31 million in 1999 compared with $424 million in 1998. The decline in both reported revenues and total return for the year reflected substantial losses in our investment and Asian portfolios. Corporate Items had revenues of negative $4 million for the 1999 fourth quarter and included $64 million of revenues from activities related to Euroclear. Revenues were $95 million higher than the prior year's quarter due in part to the change in the value of hedges of the firm's anticipated net foreign currency revenues and expenses. These hedging results were partially offset by the impact of exchange rate movements on revenues and expenses reported in the business segments. For the full year, revenues were negative $104 million and included $251 million of revenues from activities related to Euroclear. Revenues decreased $104 million from the prior year due in part to gains of $187 million related to business sales in 1998, which were partially offset by more favorable results on foreign currency hedges in 1999. OPERATING EXPENSES Operating expenses were $1.417 billion in the fourth quarter. This compared with operating expenses in the year-ago quarter of $1.391 billion, which included a special charge of $143 million related to cost reduction programs. Excluding the impact of the special charge, operating expenses increased 14% in the quarter. Compensation costs drove the increase as a result of higher bonus accruals. Non-compensation operating expenses were down 12% in the quarter, reflecting capitalization of software costs and continued focus on productivity. The firm's efficiency ratio was 65% in the fourth quarter. 4 J.P. Morgan & Co. Incorporated 4 For the full year, operating expenses were $5.742 billion, compared with $5.538 billion in 1998, which included special charges totaling $358 million. Excluding the charges, operating expenses rose 11% on higher bonus accruals. Before performance-driven compensation and excluding the effect of software capitalization, core operating expenses were down approximately $400 million, as we achieved our expense reduction target for the year. For 1999, the firm's efficiency ratio was 65%. For the full year, costs of preparation for the Year 2000 and European Economic and Monetary Union were $56 million, down from $205 million a year ago. For 1999, software costs of $138 million were capitalized rather than recorded as expenses because of a change in accounting rules. ECONOMIC VALUE ADDED In 1999, J.P. Morgan adopted an economic value added methodology to measure performance and track progress with strategic initiatives. We define economic value added (EVA) as net income, adjusted to reflect certain segments on a total return basis, less a charge for equity capital. The firm's cost of equity capital is currently estimated at 10.5%. We believe there is a close link between increasing EVA over time and maximizing shareholder value, and therefore consider changes in EVA, consistently measured, to be more significant than the absolute EVA reported in a single period. Firm-wide EVA for 1999 increased by over $1.1 billion to $860 million, before non-recurring gains and special charges. The growth in EVA reflects substantial progress on our key strategic initiatives as reflected in our strong revenue growth and disciplined expense management. MARKET AND CREDIT RISK Firm-wide DEaR for our trading activities approximated $29 million at December 31, 1999, versus $33 million at September 30, 1999. This reflected, before diversification benefits, market risk DEaR of $26 million at December 31, 1999 ($26 million at September 30, 1999), and derivatives credit risk DEaR of approximately $12 million at December 31, 1999 ($20 million at September 30, 1999.) DEaR for the firm's investment portfolio was $9 million at December 31, 1999, versus $24 million at September 30, 1999. CAPITAL During the fourth quarter of 1999, the firm purchased approximately $1.4 billion of its common stock or 11 million shares. These purchases were covered under the October 1999 authorization to repurchase up to $3 billion of common stock. For the year, a total of $2.1 billion or 16.3 million shares were purchased. These share repurchases were partially offset by the issuance of 6 million shares to employees under the firm's compensation plans. We intend to repurchase the remaining shares of the October 1999 authorization over the next 12 to 15 months, subject to market conditions, business considerations, and other factors. 5 J.P. Morgan & Co. Incorporated 5 At December 31, 1999, under the Federal Reserve Board market risk capital guidelines for calculation of risk-based capital ratios, J.P. Morgan's estimated tier 1 and total risk-based capital ratios were 8.6% and 12.6%, respectively; the estimated leverage ratio was 4.7%. At September 30, 1999, J.P. Morgan's tier 1 and total risk-based capital ratios were 9.1% and 13.2%, respectively, and the leverage ratio was 4.8%. At December 31, 1999, stockholders' equity of $11.4 billion included $44 million of net unrealized appreciation on investment securities, net of the related tax liability of $12 million. This compares with $108 million of net unrealized depreciation at September 30, 1999, net of the related tax benefit of $89 million. The net unrealized depreciation on debt investment securities was $129 million at December 31, 1999, compared with a net unrealized depreciation of $273 million at September 30, 1999. The decrease primarily related to the realization of losses on sales of investment securities during the quarter as previously discussed. The net unrealized appreciation on marketable equity investment securities was $169 million at December 31, 1999, and $76 million at September 30, 1999. As previously reported, the Board of Directors of J.P. Morgan & Co. Incorporated declared a quarterly dividend of one dollar ($1.00) per share on the company's common stock for the quarter ending December 31, 1999. This is consistent with the Board's previously announced decision to increase the quarterly dividend from $0.99 per share. # # # J.P. Morgan is a leading global financial firm that meets critical financial needs for business enterprises, governments, 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. This release may contain forward-looking statements. Our statements, which reflect management's beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially from these statements. For a discussion of the risks and uncertainties, please refer to the J.P. Morgan & Co. Incorporated 1998 Annual Report. Attached are tables with our segment results; a financial summary; interim consolidated financial statements, which are unaudited; investment banking revenue table; and asset quality tables. J.P. Morgan news releases, including quarterly financial results and historical financial summary, are available on the Internet at www.jpmorgan.com. 6 6 SEGMENT RESULTS J.P. Morgan & Co. Incorporated
Increase / Increase / Increase / Fourth Fourth Third (Decrease), (Decrease), (Decrease), Quarter Quarter Quarter 4Q 1999 vs. 4Q 1999 vs. Full Year Full Year 1999 1999 1998 1999 4Q 1998 3Q 1999 1999 1998 vs. 1998 --------------------------------------------------------------------------------------------------- INVESTMENT BANKING Total revenues $309 $265 $308 $44 $1 $1,196 $1,001 $195 Total expenses 274 184 209 90 65 921 710 211 ---------------------------------------------------------------------------------------------------- Pretax income 35 81 99 (46) (64) 275 291 (16) ---------------------------------------------------------------------------------------------------- EQUITIES Total revenues 420 182 283 238 137 1,417 699 718 Total expenses 264 199 214 65 50 944 776 168 ---------------------------------------------------------------------------------------------------- Pretax income 156 (17) 69 173 87 473 (77) 550 ---------------------------------------------------------------------------------------------------- INTEREST RATE AND FOREIGN EXCHANGE MARKETS Total revenues 479 474 321 5 158 2,009 2,064 (55) Total expenses 264 311 288 (47) (24) 1,232 1,283 (51) ---------------------------------------------------------------------------------------------------- Pretax income 215 163 33 52 182 777 781 (4) ---------------------------------------------------------------------------------------------------- CREDIT MARKETS Total revenues 264 136 187 128 77 1,526 628 898 Total expenses 225 193 156 32 69 850 729 121 ---------------------------------------------------------------------------------------------------- Pretax income 39 (57) 31 96 8 676 (101) 777 ---------------------------------------------------------------------------------------------------- CREDIT PORTFOLIO Total revenues 183 23 278 160 (95) 783 390 393 Total expenses 34 36 34 (2) - 154 145 9 ---------------------------------------------------------------------------------------------------- Pretax income 149 (13) 244 162 (95) 629 245 384 ---------------------------------------------------------------------------------------------------- ASSET MANAGEMENT SERVICES Total revenues 352 278 350 74 2 1,354 1,164 190 Total expenses 356 267 296 89 60 1,192 1,100 92 ---------------------------------------------------------------------------------------------------- Pretax income (4) 11 54 (15) (58) 162 64 98 ---------------------------------------------------------------------------------------------------- EQUITY INVESTMENTS Total revenues 313 42 341 271 (28) 646 346 300 Total expenses 66 9 52 57 14 145 49 96 ---------------------------------------------------------------------------------------------------- Pretax income 247 33 289 214 (42) 501 297 204 --------------------------------------------------------- ----------------------------------------- PROPRIETARY INVESTING AND TRADING Total revenues (127) 203 6 (330) (133) 29 663 (634) Total expenses 40 42 37 (2) 3 152 157 (5) ---------------------------------------------------------------------------------------------------- Pretax income (167) 161 (31) (328) (136) (123) 506 (629) ---------------------------------------------------------------------------------------------------- CORPORATE ITEMS (d) Total revenues (4) (99) (89) 95 85 (104) - (b) (104) Total expenses (106) 150 (a) 55 (256) (161) 152 589 (c) (437) ---------------------------------------------------------------------------------------------------- Pretax income 102 (249) (144) 351 246 (256) (589) 333 ---------------------------------------------------------------------------------------------------- CONSOLIDATED Total revenues 2,189 1,504 1,985 685 204 8,856 6,955 1,901 Total expenses 1,417 1,391 1,341 26 76 5,742 5,538 204 ---------------------------------------------------------------------------------------------------- Pretax income 772 113 644 659 128 3,114 1,417 1,697 ----------------------------------------------------------------------------------------------------
(a) Includes a fourth quarter 1998 pretax charge of $143 million related to cost reduction programs. (b) Includes a third quarter 1998 pretax gain of $56 million related to the sale of the firm's investment management business in Australia, and a second quarter 1998 pretax gain of $131 million related to the sale of the firm's global trust and agency services business. (c) Includes fourth and first quarter 1998 pretax charges of $358 million related to cost reduction programs. (d) Corporate Items includes revenues and expenses related to Euroclear activities, as follows:
Fourth Fourth Third Quarter 1999 Quarter 1998 Quarter 1999 Full Year 1999 Full Year 1998 ------------------------------------------------------------------------------ Total revenues $64 $68 $57 $251 $312 Total expenses 15 9 8 35 51 - --------------------------------------------------------------------------------------------------------- Pretax income 49 59 49 216 261 - ---------------------------------------------------------------------------------------------------------
Note: The table above reflects our current management reporting structure. Results have been restated for all periods, primarily reflecting methodology refinements regarding the allocation of internal funding charges, with no impact on consolidated results. For a description of our segments, please refer to the J.P. Morgan & Co. 1998 Annual Report. 7 7 SEGMENT RESULTS (RESTATED) J.P. Morgan & Co. Incorporated The following table presents our current management reporting structure. Results have been restated for all periods, primarily reflecting methodology refinements regarding the allocation of internal funding charges, with no impact on consolidated results. For a description of our segments, please refer to the J.P. Morgan & Co. 1998 Annual Report.
Fourth Third Second First Fourth Third Quarter Quarter Quarter Quarter Quarter Quarter 1999 1999 1999 1999 1998 1998 -------------------------------------------------------------------------- REVENUES Investment Banking $ 309 $ 308 $ 321 $ 258 $ 265 $ 237 Equities 420 283 427 287 182 139 Interest Rate and Foreign Exchange Markets 479 321 560 649 474 353 Credit Markets 264 187 371 704 136 (133) Credit Portfolio 183 278 165 157 23 60 Asset Management Services 352 350 343 309 278 295 Equity Investments 313 341 6 (14) 42 167 Proprietary Investing and Trading (127) 6 23 127 203 129 Corporate Items (4) (89) (25) 14 (99) 54 (b) -------------------------------------------------------------------------- CONSOLIDATED 2,189 1,985 2,191 2,491 1,504 1,301 -------------------------------------------------------------------------- EXPENSES Investment Banking 274 209 228 210 184 166 Equities 264 214 236 230 199 162 Interest Rate and Foreign Exchange Markets 264 288 321 359 311 280 Credit Markets 225 156 211 258 193 74 Credit Portfolio 34 34 41 45 36 42 Asset Management Services 356 296 276 264 267 273 Equity Investments 66 52 13 14 9 15 Proprietary Investing and Trading 40 37 43 32 42 35 Corporate Items (106) 55 48 155 150 (a) 52 -------------------------------------------------------------------------- CONSOLIDATED 1,417 1,341 1,417 1,567 1,391 1,099 -------------------------------------------------------------------------- PRETAX INCOME Investment Banking 35 99 93 48 81 71 Equities 156 69 191 57 (17) (23) Interest Rate and Foreign Exchange Markets 215 33 239 290 163 73 Credit Markets 39 31 160 446 (57) (207) Credit Portfolio 149 244 124 112 (13) 18 Asset Management Services (4) 54 67 45 11 22 Equity Investments 247 289 (7) (28) 33 152 Proprietary Investing and Trading (167) (31) (20) 95 161 94 Corporate Items 102 (144) (73) (141) (249) 2 -------------------------------------------------------------------------- CONSOLIDATED 772 644 774 924 113 202 --------------------------------------------------------------------------
Second First Full Full Full Quarter Quarter Year Year Year 1998 1998 1999 1998 1997 ------------------------------------------------------- REVENUES Investment Banking $ 248 $ 251 $1,196 $1,001 $ 774 Equities 244 134 1,417 699 459 Interest Rate and Foreign Exchange Markets 620 617 2,009 2,064 1,770 Credit Markets 245 380 1,526 628 842 Credit Portfolio 176 131 783 390 700 Asset Management Services 305 286 1,354 1,164 1,107 Equity Investments 109 28 646 346 413 Proprietary Investing and Trading 88 243 29 663 894 Corporate Items 118 (c) (73) (104) - (e) 261 ------------------------------------------------------- CONSOLIDATED 2,153 1,997 8,856 6,955 7,220 ------------------------------------------------------- EXPENSES Investment Banking 175 185 921 710 686 Equities 225 190 944 776 692 Interest Rate and Foreign Exchange Markets 340 352 1,232 1,283 1,277 Credit Markets 204 258 850 729 719 Credit Portfolio 38 29 154 145 122 Asset Management Services 288 272 1,192 1,100 1,043 Equity Investments 15 10 145 49 48 Proprietary Investing and Trading 40 40 152 157 154 Corporate Items 91 296 (d) 152 589 (f) 325 ------------------------------------------------------- CONSOLIDATED 1,416 1,632 5,742 5,538 5,066 ------------------------------------------------------- PRETAX INCOME Investment Banking 73 66 275 291 88 Equities 19 (56) 473 (77) (233) Interest Rate and Foreign Exchange Markets 280 265 777 781 493 Credit Markets 41 122 676 (101) 123 Credit Portfolio 138 102 629 245 578 Asset Management Services 17 14 162 64 64 Equity Investments 94 18 501 297 365 Proprietary Investing and Trading 48 203 (123) 506 740 Corporate Items 27 (369) (256) (589) (64) ------------------------------------------------------- CONSOLIDATED 737 365 3,114 1,417 2,154 -------------------------------------------------------
(a) Includes a fourth quarter 1998 pretax charge of $143 million related to cost reduction programs. (b) Includes a third quarter 1998 pretax gain of $56 million related to the sale of the firm's investment management business in Australia. (c) Includes a second quarter 1998 pretax gain of $131 million related to the sale of the firm's global trust and agency services business. (d) Includes a first quarter 1998 pretax charge of $215 million related to cost reduction programs. (e) Includes a third quarter 1998 pretax gain of $56 million related to the sale of the firm's investment management business in Australia, and a second quarter 1998 pretax gain of $131 million related to the sale of the firm's global trust and agency services business. (f) Includes fourth and first quarter 1998 pretax charges totaling $358 million related to cost reduction programs. 8 8 J.P. Morgan & Co. Incorporated FINANCIAL SUMMARY J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- Dollars in millions, except share data
Third Fourth Quarter Quarter Twelve Months ------------------------------ --------------- ------------------------------- 1999 1998 1999 1999 1998 ----------------------------------------------------------------------------------- Net Income $509 (a) $89 $442 $2,055 (b) $963 PER COMMON SHARE Net income Basic $2.83 (a) $0.44 $2.39 $11.16 (b) $5.08 Diluted 2.63 (a) 0.42 2.22 10.39 (b) 4.71 Dividends declared 1.00 0.99 0.99 3.97 3.84 Book value (c) $57.83 $55.01 $58.42 - ---------------------------------------------------------------------------------------------------------------------------------- Common shares issued and outstanding at period-end 164,797,558 175,006,281 174,880,978 - ---------------------------------------------------------------------------------------------------------------------------------- Weighted-average number of common and dilutive potential common shares outstanding 190,097,468 194,155,078 194,671,633 194,422,796 197,201,058 - --------------------------------------------------------------------------------------------------------------------------------- Dividends declared on common stock $166 $173 $173 $689 $677 Dividends declared on preferred stock 10 9 7 35 36 - ---------------------------------------------------------------------------------------------------------------------------------- Annualized rate of return on average common stockholders' equity (d) 18.1 % (a) 3.1 % 15.6 % 18.4 % (b) 8.6 % As % of period-end total assets: Common equity 4.1 % 4.0 % 4.4 % Total equity 4.4 4.3 4.7 - ---------------------------------------------------------------------------------------------------------------------------------- Regulatory capital ratios (e) Tier 1 risk-based capital ratio 8.6 % 8.0 % 9.1 % Total risk-based capital ratio 12.6 11.7 13.2 Leverage ratio 4.7 3.9 4.8 Risk-adjusted assets 134,471 140,182 134,941 - ---------------------------------------------------------------------------------------------------------------------------------- AVERAGE BALANCES Debt investment securities (f) $22,257 $30,129 $27,316 $28,195 $24,905 Loans 25,502 28,567 26,026 26,142 30,943 Total interest-earning assets 180,605 205,703 190,178 190,038 207,134 Total assets 247,614 286,486 255,909 259,877 283,184 Total interest-bearing liabilities 170,192 199,579 183,154 183,153 203,195 Total liabilities 235,946 275,379 244,141 248,230 271,675 Common stockholders' equity 10,974 10,413 11,074 10,953 10,815 Total stockholders' equity 11,668 11,107 11,768 11,647 11,509 Net interest earnings before (reversal 356 348 405 1,616 1,357 of provision) / provision for credit Net yield on interest-earning assets 0.78 % 0.67 % 0.84 % 0.85 % 0.66 % - ----------------------------------------------------------------------------------------------------------------------------------- Employees at period-end 15,512 15,674 15,287 - -----------------------------------------------------------------------------------------------------------------------------------
(a) Excluding the 1998 fourth quarter after tax charge of $86 million ($143 million before tax) related to cost reduction programs: net income was $175 million; basic and diluted earnings per share (EPS) were $0.92 and $0.86, respectively; and the annualized rate of return on average common stockholders' equity was 6.4% (including the impact of Statement of Financial Accounting Standards (SFAS) No. 115) and 6.4% (excluding the impact of SFAS No. 115) for the three months ended December 31, 1998. (b) Excluding the after tax charges of $215 million (related to cost reduction programs in the first and fourth quarters of 1998, respectively) and excluding the after tax gains of $113 million (related to business sales in the second and third quarters of 1998, respectively): net income was $1,065 million; basic and diluted EPS were $5.64 and $5.22, respectively; and the annualized rate of return on average common stockholders' equity was 9.5% (including the impact of SFAS No.115) and 9.8% (excluding the impact of SFAS No.115) for the twelve months ended December 31, 1998. (c) Excluding the impact of SFAS No. 115, the book value per common share was $57.60, $54.24, and $58.99, at December 31, 1999, December 31, 1998, and September 30, 1999, respectively. (d) Excluding the impact of SFAS No. 115, the annualized rate of return on average common stockholders' equity was 17.9%, 3.1%, and 15.4% for the three months ended December 31, 1999, December 31, 1998, and September 30, 1999, respectively, and 18.4% and 8.8% for the twelve months ended December 31, 1999 and 1998, respectively. (e) Regulatory capital ratios and risk-adjusted assets are estimates at December 31, 1999. (f) Average debt investment securities are computed on historical amortized cost, excluding the effects of SFAS No. 115 adjustments. 9 9 J.P. Morgan & Co. Incorporated CONSOLIDATED STATEMENT OF INCOME J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- In millions, except share data
Three months ended ------------------------------------------------------------------------- December 31 December 31 Increase/ September 30 Increase/ 1999 1998 (Decrease) 1999 (Decrease) ------------------------------------------------------------------------- NET INTEREST REVENUE Interest revenue $2,717 $3,024 ($307) $2,783 ($66) Interest expense 2,379 2,701 (322) 2,394 (15) - ---------------------------------------------------------------------------------------------------------------------------------- Net interest revenue 338 323 15 389 (51) Provision for loan losses - 85 (85) - - Reversal of provision for loan losses (25) - (25) (45) 20 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest revenue after (reversal of provision)/ provision for loan losses 363 238 125 434 (71) NONINTEREST REVENUES Trading revenue 754 520 234 424 330 Investment banking revenue 385 381 4 398 (13) Investment management revenue 259 220 39 270 (11) Fees and commissions 235 179 56 206 29 Investment securities revenue / (loss) 131 (42) 173 271 (140) Other revenue / (loss) 62 8 54 (18) 80 - ---------------------------------------------------------------------------------------------------------------------------------- Total noninterest revenues 1,826 1,266 560 1,551 275 Total revenues, net 2,189 1,504 685 1,985 204 OPERATING EXPENSES Employee compensation and benefits 937 801 136 889 48 Net occupancy 55 124 (69) 82 (27) Technology and communications 240 305 (65) 229 11 Other expenses 185 161 24 141 44 - ---------------------------------------------------------------------------------------------------------------------------------- Total operating expenses 1,417 1,391 (a) 26 1,341 76 Income before income taxes 772 113 659 644 128 Income taxes 263 24 239 202 61 - ---------------------------------------------------------------------------------------------------------------------------------- Net income 509 89 420 442 67 PER COMMON SHARE Net income Basic $2.83 $0.44 $2.39 $2.39 $0.44 Diluted 2.63 0.42 2.21 2.22 0.41 Dividends declared 1.00 0.99 0.01 0.99 0.01 - ----------------------------------------------------------------------------------------------------------------------------------
(a) Fourth quarter 1998 includes a pretax charge of $143 million ($86 million after tax) related to cost reduction programs which was recorded as follows: $101 million in Employee compensation and benefits, related to severance, and $42 million in Net occupancy, related to real estate write-offs. 10 10 J.P. Morgan & Co. Incorporated CONSOLIDATED STATEMENT OF INCOME J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- In millions, except share data
Twelve months ended -------------------------------------------------- December 31 December 31 Increase/ 1999 1998 (Decrease) -------------------------------------------------- NET INTEREST REVENUE Interest revenue $10,970 $12,641 ($1,671) Interest expense 9,429 11,360 (1,931) - --------------------------------------------------------------------------------------------------------------------- Net interest revenue 1,541 1,281 260 Provision for loan losses - 110 (110) Reversal of provision for loan losses (175) - (175) - --------------------------------------------------------------------------------------------------------------------- Net interest revenue after (reversal of provision) / provision for loan losses 1,716 1,171 545 NONINTEREST REVENUES Trading revenue 3,115 2,362 753 Investment banking revenue 1,630 1,401 229 Investment management revenue 1,035 881 154 Fees and commissions 846 748 98 Investment securities revenue 332 205 127 Other revenue 182 187 (a) (5) - --------------------------------------------------------------------------------------------------------------------- Total noninterest revenues 7,140 5,784 1,356 Total revenues, net 8,856 6,955 1,901 OPERATING EXPENSES Employee compensation and benefits 3,892 3,233 659 Net occupancy 299 437 (138) Technology and communications 947 1,192 (245) Other expenses 604 676 (72) - --------------------------------------------------------------------------------------------------------------------- Total operating expenses 5,742 5,538 (b) 204 Income before income taxes 3,114 1,417 1,697 Income taxes 1,059 454 605 - --------------------------------------------------------------------------------------------------------------------- Net income 2,055 963 1,092 PER COMMON SHARE Net income Basic $ 11.16 $5.08 $6.08 Diluted 10.39 4.71 5.68 Dividends declared 3.97 3.84 0.13 - ---------------------------------------------------------------------------------------------------------------------
(a) Twelve months ended December 31, 1998 includes a third quarter pretax gain of $56 million ($34 million after tax) related to the sale of the firm's investment management business in Australia and a second quarter pretax gain of $131 million ($79 million after tax) related to the sale of the firm's global trust and agency services business. (b) Twelve months ended December 31, 1998 includes charges in the first and fourth quarters totaling $358 million ($215 million after tax) related to cost reduction programs. The charges were recorded as follows: $241 million in Employee compensation and benefits, related to severance; $112 million in Net occupancy, related to real estate write-offs; and $5 million in Technology and communications, related to equipment write-offs. 11 11 J.P. Morgan & Co. Incorporated CONSOLIDATED BALANCE SHEET J.P. Morgan & Co. Incorporated - --------------------------------------------------------------------------------
In millions, except share data December 31 September 30 December 31 1999 1999 1998 ---------------------------------------------- ASSETS Cash and due from banks $ 2,463 $ 1,609 $ 1,203 Interest-earning deposits with banks 2,345 2,145 2,371 Debt investment securities available-for-sale carried at fair value (cost: $14,415 at December 1999, $24,389 at September 1999, and $36,107 at December 1998) 14,286 24,115 36,232 Equity investment securities 1,734 1,528 1,169 Trading account assets (including derivative receivables of $43,642 at December 1999, $43,010 at September 1999, and $48,124 at December 1998) 117,592 106,510 113,896 Securities purchased under agreements to resell ($34,470 at December 1999, $34,705 at September 1999, and $31,056 at December 1998) and federal funds sold 35,970 36,755 31,731 Securities borrowed 34,716 35,518 30,790 Loans, net of allowance for loan losses of $281 at December 1999, $301 at September 1999, and $470 at December 1998 26,568 25,114 25,025 Accrued interest and accounts receivable 10,119 6,826 7,689 Premises and equipment, net of accumulated depreciation of $1,319 at December 1999, $1,325 at September 1999, and $1,350 at December 1998 1,997 1,995 1,881 Other assets 13,108 12,704 9,080 - ------------------------------------------------------------------------------------------------------------------------- Total assets 260,898 254,819 261,067 - ------------------------------------------------------------------------------------------------------------------------- LIABILITIES Noninterest-bearing deposits: In offices in the U.S. 898 850 1,242 In offices outside the U.S. 498 1,183 563 Interest-bearing deposits: In offices in the U.S. 4,209 3,849 7,724 In offices outside the U.S. 39,714 42,941 45,499 - ------------------------------------------------------------------------------------------------------------------------- Total deposits 45,319 48,823 55,028 Trading account liabilities (including derivative payables of $44,976 at December 1999, $39,355 at September 1999, and $44,683 at December 1998) 80,417 72,043 70,643 Securities sold under agreements to repurchase ($58,950 at December 1999, $60,979 at September 1999, and $62,784 at December 1998) and federal funds purchased 59,693 61,779 63,368 Commercial paper 11,854 10,327 6,637 Other liabilities for borrowed money 10,258 9,447 12,515 Accounts payable and accrued expenses 10,621 10,507 9,859 Long-term debt not qualifying as risk-based capital 19,048 20,145 23,037 Other liabilities, including allowance for credit losses of $125 at December 1999, $145 at September 1999, and $125 at December 1998 5,897 3,333 2,999 - ------------------------------------------------------------------------------------------------------------------------- 243,107 236,404 244,086 Liabilities qualifying as risk-based capital: Long-term debt 5,202 5,257 4,570 Company-obligated mandatorily redeemable preferred securities of subsidiaries 1,150 1,150 1,150 - ------------------------------------------------------------------------------------------------------------------------- Total liabilities 249,459 242,811 249,806 STOCKHOLDERS' EQUITY Preferred stock (authorized shares: 10,000,000) 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: 200,998,455 at December 1999, 200,934,737 at September 1999, and 200,873,067 at December 1998) 502 502 502 Capital surplus 1,249 1,241 1,252 Common stock issuable under stock award plans 2,002 1,713 1,460 Retained earnings 10,908 10,586 9,614 Accumulated other comprehensive income: Net unrealized gains/(losses) on investment securities, net of taxes 44 (108) 147 Foreign currency translation, net of taxes (18) (46) (46) - ------------------------------------------------------------------------------------------------------------------------- 15,381 14,582 13,623 Less: treasury stock (36,200,897 shares at December 1999, 26,053,759 shares at September 1999, and 25,866,786 shares at December 1998) at cost 3,942 2,574 2,362 - ------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 11,439 12,008 11,261 - ------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity 260,898 254,819 261,067 - -------------------------------------------------------------------------------------------------------------------------
12 12 J.P. Morgan & Co. Incorporated CONSOLIDATED STATEMENT OF CONDITION Morgan Guaranty Trust Company of New York - --------------------------------------------------------------------------------
In millions, except share data December 31 December 31 1999 1998 ------------------------------- ASSETS Cash and due from banks $ 2,382 $ 1,147 Interest-earning deposits with banks 2,266 2,372 Debt investment securities available-for-sale carried at fair value 4,992 3,634 Trading account assets 84,786 90,770 Securities purchased under agreements to resell and federal funds sold 19,094 33,316 Securities borrowed 9,700 8,193 Loans, net of allowance for loan losses of $280 at December 1999 and $470 at December 1998 26,072 24,876 Accrued interest and accounts receivable 4,426 3,898 Premises and equipment, net of accumulated depreciation of $1,113 at December 1999 and $1,160 at December 1998 1,810 1,703 Other assets 12,138 5,337 - -------------------------------------------------------------------------------------------------------------------------------- Total assets 167,666 175,246 - -------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Noninterest-bearing deposits: In offices in the U.S. 907 1,232 In offices outside the U.S. 501 572 Interest-bearing deposits: In offices in the U.S. 4,256 7,749 In offices outside the U.S. 42,052 46,668 - -------------------------------------------------------------------------------------------------------------------------------- Total deposits 47,716 56,221 Trading account liabilities 72,066 64,776 Securities sold under agreements to repurchase and federal funds purchased 13,610 14,916 Other liabilities for borrowed money 5,482 8,646 Accounts payable and accrued expenses 6,310 6,123 Long-term debt not qualifying as risk-based capital 6,224 10,358 Other liabilities, including allowance for credit losses of $125 at December 1999 and 1998 2,719 542 - -------------------------------------------------------------------------------------------------------------------------------- 154,127 161,582 Long-term debt qualifying as risk-based capital 2,944 3,186 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities 157,071 164,768 STOCKHOLDER'S EQUITY Preferred stock, $100 par value (authorized shares: 2,500,000) - - Common stock, $25 par value (authorized shares: 11,000,000; issued and outstanding: 10,599,027) 265 265 Surplus 3,305 3,305 Undivided profits 6,975 6,836 Accumulated other comprehensive income: Net unrealized gains on investment securities, net of taxes 67 118 Foreign currency translation, net of taxes (17) (46) - -------------------------------------------------------------------------------------------------------------------------------- Total stockholder's equity 10,595 10,478 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholder's equity 167,666 175,246 - --------------------------------------------------------------------------------------------------------------------------------
Member of the Federal Reserve System and the Federal Deposit Insurance Corporation. 13 13 J.P. Morgan & Co. Incorporated INVESTMENT BANKING REVENUE J.P. Morgan & Co. Incorporated
- ------------------------------------------------------------------------------------------------------------------------------ In millions - ------------------------------------------------------------------------------------------------------------------------------ ADVISORY AND UNDERWRITING TOTAL INVESTMENT SYNDICATION FEES REVENUE BANKING REVENUE - ------------------------------------------------------------------------------------------------------------------------------ Fourth Quarter 1999 $241 $144 $385 Fourth Quarter 1998 212 169 381 - ------------------------------------------------------------------------------------------------------------------------------ Third Quarter 1999 258 140 398 - ------------------------------------------------------------------------------------------------------------------------------ Twelve Months 1999 978 652 1,630 Twelve Months 1998 830 571 1,401 - ------------------------------------------------------------------------------------------------------------------------------
14 14 J.P. Morgan & Co. Incorporated ASSET QUALITY IMPAIRED LOANS J.P. Morgan & Co. Incorporated
- ----------------------------------------------------------------------------------------------------------- December 31 September 30 December 31 In millions 1999 1999 1998 - ----------------------------------------------------------------------------------------------------------- Impaired loans: Commercial and industrial $54 (a) $131 $25 Other 23 38 97 - ----------------------------------------------------------------------------------------------------------- Total impaired loans 77 169 122 - -----------------------------------------------------------------------------------------------------------
(a) Decrease in impaired commercial and industrial loans during the fourth quarter of 1999 primarily relates to one counterparty in the Latin American steel industry returning to performing status. ALLOWANCES FOR CREDIT LOSSES J.P. Morgan & Co. Incorporated Allowance for loan losses
- --------------------------------------------------------------------------------------------------------------------------------- Fourth Quarter Twelve Months Ended Fourth Quarter Twelve Months Ended In millions 1999 December 31, 1999 1998 December 31, 1998 - --------------------------------------------------------------------------------------------------------------------------------- Beginning balance $301 $470 $404 $546 - --------------------------------------------------------------------------------------------------------------------------------- (Reversal of provision) / provision for loan losses (25) (175) 85 110 - --------------------------------------------------------------------------------------------------------------------------------- Reclassifications (a) - - - (50) - --------------------------------------------------------------------------------------------------------------------------------- Recoveries 10 33 6 19 Charge-offs: (b) Commercial and industrial - (16) (6) (46) Banks - (1) (17) (83) Other (5) (30) (2) (26) - --------------------------------------------------------------------------------------------------------------------------------- Net recoveries / (charge-offs) 5 (14) (19) (136) - --------------------------------------------------------------------------------------------------------------------------------- Ending balance 281 281 470 470 - ---------------------------------------------------------------------------------------------------------------------------------
(a) Prior to July 1, 1998, changes, excluding charge-offs and recoveries, across balance sheet reserve or allowance captions - which included an adjustment for trading derivatives needed to determine fair value, an allowance for loan losses and an allowance for credit losses on lending commitments - were shown as reclassifications. Reclassifications had no impact on net income, and accordingly, were not shown on the income statement. Subsequent to July 1, 1998, reclassifications across balance sheet captions for allowances are reflected as provisions and reversals of provisions in the "Consolidated statement of income". (b) Charge-offs include losses on loan sales of $16 million for the three months ended December 31, 1998. Charge-offs include losses on loan sales, primarily banks and other financial institutions, of $33 million and $105 million for the twelve months ended December 31, 1999 and 1998, respectively. Components of the allowance for loan losses
- ------------------------------------------------------------------------------------------------------------------------------ December 31 September 30 December 31 In millions 1999 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------ Specific counterparty components in the U.S. $ 11 $ 9 $ 29 Specific counterparty components outside the U.S. 13 23 5 - ------------------------------------------------------------------------------------------------------------------------------ Total specific counterparty 24 32 34 Expected loss (c) 257 269 436 - ------------------------------------------------------------------------------------------------------------------------------ Total allowance 281 301 470 - ------------------------------------------------------------------------------------------------------------------------------
Allowance for credit losses on lending commitments*
- ---------------------------------------------------------------------------------------------------------------------------------- Fourth Quarter Twelve Months Ended Fourth Quarter Twelve Months Ended In millions 1999 December 31, 1999 1998 December 31, 1998 - ---------------------------------------------------------------------------------------------------------------------------------- Beginning balance $145 $125 $185 $185 - ---------------------------------------------------------------------------------------------------------------------------------- (Reversal of provision) / provision for credit losses (20) - (60) (60) - ---------------------------------------------------------------------------------------------------------------------------------- Ending balance 125 125 125 125 - ---------------------------------------------------------------------------------------------------------------------------------
Components of the allowance for credit losses on lending commitments*
- ------------------------------------------------------------------------------------------------------------------------------ December 31 September 30 December 31 In millions 1999 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------ Specific counterparty components in the U.S. $ 19 $ 20 $ 1 Specific counterparty components outside the U.S. 3 3 2 - ------------------------------------------------------------------------------------------------------------------------------ Total specific counterparty 22 23 3 Expected loss (c) 103 122 122 - ------------------------------------------------------------------------------------------------------------------------------ Total allowance 125 145 125 - ------------------------------------------------------------------------------------------------------------------------------
(c) In the fourth quarter of 1999, we revised our model for calculating expected credit losses to incorporate factors for estimating losses previously included in our country, expected loss and general components of our allowances. The impact of the change was not significant. For disclosure purposes, the country, expected loss and general components of prior periods have been aggregated and included in the expected loss component caption in the above tables. * Includes commitments to extend credit, standby letters of credit, and guarantees. 15 15 J.P. Morgan & Co. Incorporated EXPOSURES TO EMERGING COUNTRIES J.P. Morgan & Co. Incorporated (preliminary) The following tables present exposures to certain emerging markets based on management's view of total exposure as of December 31, 1999. The management view takes into account the following cross-border and local exposures: the notional or contract value of loans, commitments to extend credit, securities purchased under agreements to resell, interest-earning deposits with banks; the fair values of trading account assets (cash securities and derivatives, excluding any collateral we hold to offset these exposures) and investment securities; and other monetary assets. It also considers the impact of credit derivatives, at their notional or contract value, where we have bought or sold credit protection outside of the respective country. Trading assets reflect the net of long and short positions of the same issuer. Management's view differs from bank regulatory rules, which are established by the Federal Financial Institutions Examination Council (FFIEC), because of its treatment of credit derivatives, trading account short positions, and the use of fair value versus cost of investment securities. In addition, management does not net local funding or liabilities against any local exposures as allowed by the FFIEC. By type of financial instrument
- ----------------------------------------------------------------------------------------------------------------- In billions Other Credit December 31, 1999 Loans Derivatives outstandings derivatives Commitments - ----------------------------------------------------------------------------------------------------------------- China $ - $ 0.1 $ 0.1 $(0.2) $ - Hong Kong 0.1 0.2 0.2 (0.1) 0.1 Indonesia 0.1 - 0.1 - - Malaysia - - 0.1 0.1 - Philippines - - 0.2 - - Singapore - 0.4 0.1 - - South Korea 0.2 0.5 0.9 (0.3) - Taiwan - - - - - Thailand - 0.1 0.1 - - Other - - - - - - ----------------------------------------------------------------------------------------------------------------- Total Asia, excluding Japan(a) 0.4 1.3 1.8 (0.5) 0.1 - ----------------------------------------------------------------------------------------------------------------- Argentina 0.1 0.2 1.1 (0.4) - Brazil 0.1 - - - - Chile 0.3 - 0.1 (0.1) - Colombia 0.2 - 0.1 - - Mexico 0.4 0.4 0.5 (0.3) - Other 0.2 - 0.2 - 0.1 - ----------------------------------------------------------------------------------------------------------------- Total Latin America, excluding the Caribbean 1.3 0.6 2.0 (0.8) 0.1 - ----------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- In billions Total Local Total December 31, 1999 crossborder exposure exposure - --------------------------------------------------------------------------------- China $ - $ - $ - Hong Kong 0.5 0.2 0.7 Indonesia 0.2 - 0.2 Malaysia 0.2 - 0.2 Philippines 0.2 - 0.2 Singapore 0.5 0.1 0.6 South Korea 1.3 0.2 1.5 Taiwan - - - Thailand 0.2 - 0.2 Other - 0.2 0.2 - -------------------------------------------------------------------------------- Total Asia, excluding Japan(a) 3.1 0.7 3.8 - -------------------------------------------------------------------------------- Argentina 1.0 0.3 1.3 Brazil 0.1 1.4 1.5 Chile 0.3 - 0.3 Colombia 0.3 - 0.3 Mexico 1.0 0.5 1.5 Other 0.5 - 0.5 - -------------------------------------------------------------------------------- Total Latin America, excluding the Caribbean 3.2 2.2 5.4 - --------------------------------------------------------------------------------
By type of counterparty
- ----------------------------------------------------------------------------------------------------- In billions December 31, 1999 Banks Governments Other Total - ----------------------------------------------------------------------------------------------------- China $ - $ - $ - $ - Hong Kong - 0.2 0.5 0.7 Indonesia - - 0.2 0.2 Malaysia 0.1 0.1 - 0.2 Philippines - 0.1 0.1 0.2 Singapore 0.3 0.1 0.2 0.6 South Korea 0.4 0.4 0.7 1.5 Taiwan - - - - Thailand 0.2 - - 0.2 Other - 0.2 - 0.2 - ----------------------------------------------------------------------------------------------------- Total Asia, excluding Japan(a) 1.0 1.1 1.7 3.8 - ----------------------------------------------------------------------------------------------------- Argentina - 0.7 0.6 1.3 Brazil 0.5 0.5 0.5 1.5 Chile - - 0.3 0.3 Colombia - 0.1 0.2 0.3 Mexico - 0.6 0.9 1.5 Other - 0.1 0.4 0.5 - ----------------------------------------------------------------------------------------------------- Total Latin America, excluding the Caribbean 0.5 2.0 2.9 5.4 - -----------------------------------------------------------------------------------------------------
(a) Total exposures to Japan, based upon management's view, were $4.6 billion at December 31, 1999. Total exposures to South Africa, based upon management's view, were $1.9 billion at December 31, 1999. EX-99.B 4 STATEMENT RE: CONSOLIDATED AVERAGE BALANCES 1 J. P. MORGAN & CO. INCORPORATED CONSOLIDATED AVERAGE BALANCES & NET INTEREST EARNINGS Interest and average rates on a taxable-equivalent basis (Dollars in millions)
Three months ended December 31, 1999 ------------------------------------------------------- Average Average Balance Interest Rate ---------------------- ---------------- ------------- Assets - ------ Interest-earning deposits with banks, mainly in offices outside the U.S. $2,257 $33 5.80 % Debt investment securities in offices in the U.S.: (a) U.S. Treasury 353 8 8.99 U.S. state and political subdivision 1,272 38 11.85 Other 17,150 252 5.83 Debt investment securities in offices outside the U.S. (a) 3,482 41 4.67 Trading account assets: In offices in the U.S. 33,643 555 6.54 In offices outside the U.S. 25,059 408 6.46 Securities purchased under agreements to resell and federal funds sold: In offices in the U.S. 21,877 308 5.59 In offices outside the U.S. 11,732 114 3.86 Securities borrowed, mainly in offices in the U.S. 34,364 458 5.29 Loans: In offices in the U.S. 11,959 223 7.40 In offices outside the U.S. 13,543 201 5.89 Other interest-earning assets: (b) In offices in the U.S. 3,074 49 * In offices outside the U.S. 840 47 * - ----------------------------------------------------------------------------------------------------------------- Total interest-earning assets 180,605 2,735 6.01 - ----------------------------------------------------------------------------------------------------------------- Cash and due from banks 949 Other noninterest-earning assets 66,060 - ----------------------------------------------------------------------------------------------------------------- Total assets 247,614 - ----------------------------------------------------------------------------------------------------------------- Three months ended December 31, 1998 ---------------------------------------------------- Average Average Balance Interest Rate ------------------ --------------- --------------- Assets - ------ Interest-earning deposits with banks, mainly in offices outside the U.S. $2,472 $58 9.31% Debt investment securities in offices in the U.S.: (a) U.S. Treasury 664 15 8.96 U.S. state and political subdivision 1,916 51 10.56 Other 26,679 370 5.50 Debt investment securities in offices outside the U.S. (a) 870 14 6.38 Trading account assets: In offices in the U.S. 31,519 419 5.27 In offices outside the U.S. 30,117 488 6.43 Securities purchased under agreements to resell: In offices in the U.S. 24,188 322 5.28 In offices outside the U.S. 15,493 216 5.53 Securities borrowed, mainly in offices in the U.S. 40,797 510 4.96 Loans: In offices in the U.S. 5,931 107 7.16 In offices outside the U.S. 22,636 386 6.77 Other interest-earning assets: (b) In offices in the U.S. 1,646 13 * In offices outside the U.S. 775 80 * - ----------------------------------------------------------------------------------------------------------- Total interest-earning assets 205,703 3,049 5.88 - ----------------------------------------------------------------------------------------------------------- Cash and due from banks 1,639 Other noninterest-earning assets 79,144 - ------------------------------------------------------------------------- Total assets 286,486 - -------------------------------------------------------------------------
Interest and average rates applying to the following asset categories have been adjusted to a taxable-equivalent basis: Debt investment securities in offices in the U.S.; Trading account assets in offices in the U.S.; and Loans in offices in the U.S. The applicable tax rate used to determine these adjustments was approximately 41% for the twelve months ended December 31, 1999 and 1998. (a) For the twelve months ended Decmeber 31, 1999 and 1998, average debt investment securities are computed based on historical amortized cost, excluding the effects of SFAS No. 115 adjustments. (b) Interest revenue includes the effect of certain off-balance-sheet transactions. * Not meaningful 2 J. P. MORGAN & CO. INCORPORATED CONSOLIDATED AVERAGE BALANCES & NET INTEREST EARNINGS Interest and average rates on a taxable-equivalent basis (Dollars in millions)
Three months ended December 31, 1999 ------------------------------------------------------- Average Average Balance Interest Rate ---------------------- ---------------- ------------- Liabilities and stockholders' equity - ------------------------------------ Interest-bearing deposits: In offices in the U.S. $4,590 $68 5.88 % In offices outside the U.S. 38,971 462 4.70 Trading account liabilities: In offices in the U.S. 7,834 119 6.03 In offices outside the U.S. 12,530 190 6.02 Securities sold under agreements to repurchase and federal funds purchased, mainly in offices in the U.S. 60,406 769 5.05 Commercial paper, mainly in offices in the U.S. 11,298 163 5.72 Other interest-bearing liabilities: In offices in the U.S. 7,201 178 9.81 In offices outside the U.S. 2,734 54 7.84 Long-term debt, mainly in offices in the U.S. 24,629 376 6.06 - ----------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 170,193 2,379 5.55 - ----------------------------------------------------------------------------------------------------------------- Noninterest-bearing deposits: In offices in the U.S. 906 In offices outside the U.S. 407 Other noninterest-bearing liabilities 64,440 --------------------- Total liabilities 235,946 Stockholders' equity 11,668 - ----------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity 247,614 - ----------------------------------------------------------------------------------------------------------------- Net yield on interest-earning assets 0.78 Net interest earnings 356 - ----------------------------------------------------------------------------------------------------------------- Three months ended December 31, 1998 ---------------------------------------------------- Average Average Balance Interest Rate ------------------ --------------- --------------- Liabilities and stockholders' equity - ------------------------------------ Interest-bearing deposits: In offices in the U.S. $8,730 $91 4.14 % In offices outside the U.S. 46,052 594 5.12 Trading account liabilities: In offices in the U.S. 7,798 112 5.70 In offices outside the U.S. 16,739 211 5.00 Securities sold under agreements to repurchase and federal funds purchased, mainly in offices in the U.S. 70,497 923 5.19 Commercial paper, mainly in offices in the U.S. 10,527 144 5.38 Other interest-bearing liabilities: In offices in the U.S. 10,468 176 6.67 In offices outside the U.S. 1,657 58 13.89 Long-term debt, mainly in offices in the U.S. 27,011 392 5.76 - ------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 199,579 2,701 5.37 - ------------------------------------------------------------------------------------------------------------- Noninterest-bearing deposits: In offices in the U.S. 896 In offices outside the U.S. 564 Other noninterest-bearing liabilities 74,340 ----------------- Total liabilities 275,379 Stockholders' equity 11,107 - ------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity 286,486 - ------------------------------------------------------------------------------------------------------------- Net yield on interest-earning assets 0.67 Net interest earnings 348 - -------------------------------------------------------------------------------------------------------------
3 J. P. MORGAN & CO. INCORPORATED CONSOLIDATED AVERAGE BALANCES & NET INTEREST EARNINGS Interest and average rates on a taxable-equivalent basis (Dollars in millions)
Twelve Months ended December 31, 1999 -------------------------------------------------------- Average Average Balance Interest Rate ---------------------- ------------------ ------------ Assets - ------ Interest-earning deposits with banks, mainly in offices outside the U.S. $2,494 $254 10.18 % Debt investment securities in offices in the U.S.: (a) U.S. Treasury 504 43 8.53 U.S. state and political subdivision 1,430 167 11.68 Other 23,454 1,315 5.61 Debt investment securities in offices outside the U.S. (a) 2,807 134 4.77 Trading account assets: In offices in the U.S. 32,362 2,037 6.29 In offices outside the U.S. 26,552 1,690 6.36 Securities purchased under agreements to resell and federal funds sold: In offices in the U.S. 21,066 1,077 5.11 In offices outside the U.S. 12,991 532 4.10 Securities borrowed, mainly in offices in the U.S. 37,001 1,833 4.95 Loans: In offices in the U.S. 8,122 567 6.98 In offices outside the U.S. 18,020 1,106 6.14 Other interest-earning assets: (b) In offices in the U.S. 2,317 132 * In offices outside the U.S. 918 157 * - -------------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 190,038 11,044 5.81 - -------------------------------------------------------------------------------------------------------------------------- Cash and due from banks 1,294 Other noninterest-earning assets 68,545 - -------------------------------------------------------------------------------------------------------------------------- Total assets 259,877 - -------------------------------------------------------------------------------------------------------------------------- Twelve Months ended December 31, 1998 --------------------------------------------------- Average Average Balance Interest Rate ------------------- ---------------- ------------ Assets - ------ Interest-earning deposits with banks, mainly in offices outside the U.S. $2,079 $294 14.14 % Debt investment securities in offices in the U.S.: (a) U.S. Treasury 723 61 8.44 U.S. state and political subdivision 1,535 168 10.94 Other 21,128 1,185 5.61 Debt investment securities in offices outside the U.S. (a) 1,519 109 7.18 Trading account assets: In offices in the U.S. 30,394 1,837 6.04 In offices outside the U.S. 36,227 2,509 6.93 Securities purchased under agreements to resell and federal funds sold: In offices in the U.S. 17,372 939 5.41 In offices outside the U.S. 21,478 1,092 5.08 Securities borrowed, mainly in offices in the U.S. 40,680 2,088 5.13 Loans: In offices in the U.S. 6,452 464 7.19 In offices outside the U.S. 24,491 1,650 6.74 Other interest-earning assets: (b) In offices in the U.S. 2,112 122 * In offices outside the U.S. 944 199 * - --------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 207,134 12,717 6.14 - --------------------------------------------------------------------------------------------------------------------- Cash and due from banks 1,429 Other noninterest-earning assets 74,621 - ------------------------------------------------------------------------------------- Total assets 283,184 - -------------------------------------------------------------------------------------
Interest and average rates applying to the following asset categories have been adjusted to a taxable-equivalent basis: Debt investment securities in offices in the U.S.; Trading account assets in offices in the U.S.; and Loans in offices in the U.S. The applicable tax rate used to determine these adjustments was approximately 41% for the twelve months ended December 31, 1999 and 1998. (a) For the twelve months ended Decmeber 31, 1999 and 1998, average debt investment securities are computed based on historical amortized cost, excluding the effects of SFAS No. 115 adjustments. (b) Interest revenue includes the effect of certain off-balance-sheet transactions. * Not meaningful 4 J. P. MORGAN & CO. INCORPORATED CONSOLIDATED AVERAGE BALANCES & NET INTEREST EARNINGS Interest and average rates on a taxable-equivalent basis (Dollars in millions)
Twelve Months ended December 31, 1999 -------------------------------------------------------- Average Average Balance Interest Rate ---------------------- ------------------ ------------ Liabilities and stockholders' equity - ------------------------------------ Interest-bearing deposits: In offices in the U.S. $6,495 $338 5.20 % In offices outside the U.S. 44,000 1,916 4.35 Trading account liabilities: In offices in the U.S. 7,113 470 6.61 In offices outside the U.S. 13,591 704 5.18 Securities sold under agreements to repurchase and federal funds purchased, mainly in offices in the U.S. 61,839 3,030 4.90 Commercial paper, mainly in offices in the U.S. 11,047 581 5.26 Other interest-bearing liabilities: In offices in the U.S. 8,512 681 8.00 In offices outside the U.S. 3,378 204 6.04 Long-term debt, mainly in offices in the U.S. 27,179 1,506 5.43 - -------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 183,154 9,430 5.15 - -------------------------------------------------------------------------------------------------------------------------- Noninterest-bearing deposits: In offices in the U.S. 898 In offices outside the U.S. 552 Other noninterest-bearing liabilities 63,626 ---------------------- Total liabilities 248,230 Stockholders' equity 11,647 - -------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity 259,877 - -------------------------------------------------------------------------------------------------------------------------- Net yield on interest-earning assets 0.85 Net interest earnings 1,614 - -------------------------------------------------------------------------------------------------------------------------- Twelve Months ended December 31, 1999 --------------------------------------------------- Average Average Balance Interest Rate ------------------- ---------------- ------------ Liabilities and stockholders' equity - ------------------------------------ Interest-bearing deposits: In offices in the U.S. $7,674 $397 5.17 % In offices outside the U.S. 49,044 2,426 4.95 Trading account liabilities: In offices in the U.S. 9,424 665 7.06 In offices outside the U.S. 15,085 876 5.81 Securities sold under agreements to repurchase and federal funds purchased, mainly in offices in the U.S. 70,537 3,846 5.45 Commercial paper, mainly in offices in the U.S. 9,682 539 5.57 Other interest-bearing liabilities: In offices in the U.S. 12,323 811 6.58 In offices outside the U.S. 3,360 263 7.83 Long-term debt, mainly in offices in the U.S. 26,066 1,537 5.90 - ------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 203,195 11,360 5.59 - ------------------------------------------------------------------------------------------------------------------- Noninterest-bearing deposits: In offices in the U.S. 884 In offices outside the U.S. 784 Other noninterest-bearing liabilities 66,812 ------------------- Total liabilities 271,675 Stockholders' equity 11,509 - ----------------------------------------------------------------------------------- Total liabilities and stockholders' equity 283,184 - ----------------------------------------------------------------------------------- Net yield on interest-earning assets 0.66 Net interest earnings 1,357 - -------------------------------------------------------------------------------------------------------------------
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