-----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, RHS7VuKEoI3jVZU4pt3slvYlGO5RXeebeH0w2/ttlVZzps4UK7EAadFGWbeSP83S NKVF38CXwoSb2K7C8SV4Kw== 0000950123-97-000259.txt : 19970115 0000950123-97-000259.hdr.sgml : 19970115 ACCESSION NUMBER: 0000950123-97-000259 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970113 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970114 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: 97505702 BUSINESS ADDRESS: STREET 1: 60 WALL ST CITY: NEW YORK STATE: NY ZIP: 10260 BUSINESS PHONE: 2124832323 MAIL ADDRESS: STREET 1: P O BOX 271 STREET 2: C/O WILLIAM D HALL CITY: WILMINGTON STATE: DE ZIP: 19899 8-K 1 FORM 8-K DATED 01-13-97 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 13, 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 January 13, 1997, the Registrant issued a press release announcing its earnings for the three-month and twelve-month periods ended December 31, 1996. 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 January 13, 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: January 13, 1997 EX-99 2 PRESS RELEASE 1 IMMEDIATE January 13, 1997 J.P. MORGAN REPORTS FOURTH QUARTER AND 1996 FULL YEAR RESULTS J.P. Morgan & Co. Incorporated reported net income of $419 million in the fourth quarter of 1996, 14% higher than in the fourth quarter of 1995. Earnings per share for the quarter were $2.04 versus $1.80 a year ago. Net income for 1996 totaled $1.574 billion, up 21% from 1995. Earnings per share were $7.63 in 1996 versus $6.42 in 1995. Douglas A. Warner III, chairman, said: "Our business grew substantially in 1996 and produced strong results across the range of our advisory, capital raising, asset management, risk management, and trading activities. Thanks to the skills of our people and the confidence of our clients, we continue to build on J.P. Morgan's competitive advantages and global business momentum." FOURTH QUARTER AND 1996 FULL YEAR RESULTS AT A GLANCE
Fourth Quarter Year ------------------------------------------------------------------------------------------------- In millions of dollars, except per share data 1996 1995 1996 1995 ------------------------------------------------------------------------------------------------- Revenues $ 1,805 $ 1,518 $ 6,855 $ 5,904 Operating expenses (1,197) (990) (4,523) (3,998) Income taxes (189) (162) (758) (610) ------------------------------------------------------------------------------------------------- Net income $ 419 $ 366 $ 1,574 $ 1,296 Net income per share $ 2.04 $ 1.80 $ 7.63 $ 6.42 ------------------------------------------------------------------------------------------------- Dividends declared per share $ 0.88 $ 0.81 $ 3.31 $ 3.06
REVENUES rose 19% in the fourth quarter from a year ago and were up 16% for 1996. - Trading revenue advanced 39% to $512 million in the fourth quarter on stronger results across the range of trading activities. In 1996, trading revenue rose 80% to $2.477 billion. - Investment banking revenue increased 75% to $277 million in the fourth quarter due to higher levels of advisory, syndication, and underwriting activities. In 1996, investment banking revenue grew 58% to $921 million. - Investment management fees rose 17% to $182 million in the fourth quarter primarily as a result of net new business. In 1996, investment management fees increased 18% to $675 million. - Net interest revenue was flat in the fourth quarter compared with a year earlier. Net interest revenue declined 15% to $1.702 billion in 1996, primarily reflecting the maturing of higher-yielding asset and liability management instruments. - Other revenue decreased 14% to $153 million in the fourth quarter mostly because of lower net equity investment securities revenues. In 1996, other revenue declined 25% to $481 million. OPERATING EXPENSES rose 21% in the fourth quarter and 13% in 1996 due to higher compensation in line with improved earnings and costs associated with increased activity in client businesses. - -------------------------------------------------------------------------------- Press contact: Joseph M. Evangelisti 212/648-9589 Investor contact: Ann B. Patton 212/648-9446 2 2 IN OTHER DEVELOPMENTS, Morgan completed the previously announced sale of its institutional U.S. cash-processing business in December. The sale did not have a material effect on fourth quarter earnings and will have no material effect on Morgan's ongoing financial results. The remainder of this release contains information on specific areas of results, a financial summary, and the consolidated financial statements. 3 3 REVENUES REVENUES in the fourth quarter of 1996 totaled $1.805 billion, up 19% from a year earlier. Revenues increased 16% in 1996 to $6.855 billion. NET INTEREST REVENUE, the aggregate of interest revenue and expense generated primarily by the firm's asset and liability management, credit-related, and trading activities, totaled $484 million in the fourth quarter, compared with $488 million in the year-earlier quarter. In the 1996 fourth quarter, decreases in asset and liability management revenue were offset by increased trading-related net interest revenue. In 1996, net interest revenue declined to $1.702 billion from $2.003 billion in 1995, mostly reflecting lower asset and liability management revenue. In both the quarter and the year, the decline in net interest revenue from asset and liability management was primarily attributable to the maturing of higher-yielding instruments. TRADING REVENUE increased 39% to $512 million in the fourth quarter from $369 million in the year-earlier quarter. Reported trading revenue does not include net interest revenue associated with trading activities, which totaled an estimated $113 million in the 1996 fourth quarter, compared with $16 million in the 1995 fourth quarter. In 1996, trading revenue rose to $2.477 billion from $1.376 billion in 1995. Net interest revenue associated with trading activities totaled an estimated $250 million in 1996, compared with $131 million in 1995. Combined trading and related net interest revenue increased in both the fourth quarter and 1996 from year-earlier levels, reflecting strong client demand across the firm's market-making activities in both developed and emerging markets, and higher revenue from the firm's proprietary trading unit. (For details, see the table of combined trading and related net interest revenue by principal product groupings on page 11.) Combined trading and related net interest revenue in the fourth quarter increased 62% to $625 million from a year earlier. Combined revenue from fixed income rose to $377 million in the fourth quarter from $286 million a year ago. Foreign-exchange combined revenue increased to $89 million from $75 million a year earlier. Combined revenue from equities advanced to $56 million in the 1996 fourth quarter from $4 million in the corresponding 1995 quarter. The proprietary trading unit generated combined revenue of $92 million in the fourth quarter, compared with $17 million a year earlier. For all of 1996, combined trading and related net interest revenue grew to $2.727 billion, up 81% from 1995. INVESTMENT BANKING REVENUE rose 75% to $277 million in the fourth quarter. Advisory and syndication fees in the fourth quarter increased 78% to $183 million, and underwriting revenue was up 71% to $94 million. In 1996, investment banking revenue totaled $921 million, up 58% from 1995. Advisory and syndication fees increased 44% to $568 million in 1996, and underwriting revenue rose 87% to $353 million. For 1996, J.P. Morgan ranked as the sixth largest underwriter of U.S. debt and equity issues, according to Securities Data Co. In advisory activities, Securities Data Co. ranked J.P. Morgan fifth in completed mergers and acquisitions worldwide in 1996. CREDIT-RELATED FEES of $41 million in the fourth quarter were essentially flat compared with the 1995 fourth quarter. Excluding revenues from the custody business, which was sold in 1995, and from the discontinued cash-processing businesses, credit-related fees increased 12% in the fourth quarter from a year earlier. The increase was primarily due to higher volumes of lending 4 4 commitments and stand-by letters of credit. Credit-related fees were $156 million in 1996, down 4% from 1995. Excluding revenues from the custody and cash-processing businesses, credit-related fees rose 8% in 1996. INVESTMENT MANAGEMENT FEES in the fourth quarter totaled $182 million, up 17% from the 1995 fourth quarter. Investment management fees in 1996 rose 18% to $675 million. The quarter and full year increases are primarily due to net new business. Assets under management at December 31, 1996 were approximately $206 billion. OPERATIONAL SERVICE FEES totaled $111 million in the fourth quarter, down 14% from the 1995 fourth quarter. Operational service fees were $426 million in 1996, 22% lower than in 1995. Excluding revenues from the custody and cash-processing businesses, operational service fees for the fourth quarter and full year rose 6%. NET INVESTMENT SECURITIES GAINS were $45 million in the fourth quarter of 1996, compared with $1 million in the year-earlier quarter. In 1996, net investment security gains totaled $17 million, compared with $21 million in 1995. OTHER REVENUE totaled $153 million in the fourth quarter of 1996, compared with $177 million a year ago. Other revenue totaled $481 million in 1996, compared with $638 million in 1995. Net equity investment securities revenues were $31 million in the fourth quarter, compared with $99 million a year earlier, and $269 million in 1996 versus $485 million in 1995. In addition, other revenue in 1996 included a fourth quarter gain of $77 million related to the partial sale of a minority investment. Other revenue for 1995 included a gain of $40 million ($31 million in the fourth quarter) related to the sale of the firm's custody business. OPERATING EXPENSES Operating expenses increased 21% to $1.197 billion in the fourth quarter from a year earlier. For the full year, operating expenses rose 13% to $4.523 billion. This comparison reflects a technology-related special charge of $71 million in the 1996 third quarter, and a severance-related charge of $55 million in the first quarter of 1995. In 1996, continued allocation of resources to areas of strategic importance, including investment banking and asset management activities, more than offset the reduction in expenses resulting from the exit from the custody and cash-processing businesses. Employee compensation and benefits increased as a result of higher incentive compensation - attributable to higher earnings, the increasing proportion of revenue earned in client business areas, and more competitive market conditions. Nonpersonnel expenses also rose with the growth of client-related business. At December 31, 1996, staff totaled 15,527 employees compared with 15,188 employees at September 30, 1996, and 15,613 employees at December 31, 1995. Income tax expense in the fourth quarter totaled $189 million, based on an effective tax rate of 31%, which equaled the effective rate in the year-earlier quarter. Income tax expense of $758 million for 1996 reflects an effective tax rate of 32.5%, compared with an effective tax rate of 32.0% in 1995. 5 5 ASSETS Total assets were $222 billion at December 31, 1996, compared with $212 billion at September 30, 1996. At December 31, 1996, the aggregate allowance for credit losses was $1.116 billion. Nonperforming assets decreased to $120 million at December 31, 1996, from $161 million at September 30, 1996, as assets newly classified as nonperforming were more than offset by repayments and charge-offs. No provision for credit losses was deemed necessary in the 1996 fourth quarter. CAPITAL At December 31, 1996, J.P. Morgan's estimated Tier 1 and total risk-based capital ratios were 8.7% and 12.2%, respectively, compared with Tier 1 and total risk-based capital ratios of 8.1% and 11.7%, respectively, at September 30, 1996. The December 31, 1996, leverage ratio was 5.9%, versus 6.2% at September 30, 1996. At December 31, 1996, stockholders' equity included approximately $464 million of net unrealized appreciation on debt investment and marketable equity investment securities, net the related deferred tax liability of $268 million. This compares with $317 million of net unrealized appreciation at September 30, 1996, net the related deferred tax liability of $178 million. The net unrealized appreciation on debt investment securities was $255 million and $224 million at December 31, 1996, and September 30, 1996, respectively. The net unrealized appreciation on marketable equity investment securities was $477 million at December 31, 1996, and $271 million at September 30, 1996. As previously reported, the Board of Directors in December declared an increase in the regular quarterly dividend to $0.88 per share from $0.81 per share on the company's common stock for the quarter ended December 31, 1996. The Board also approved the purchase of up to 7 million shares of J.P. Morgan common stock to lessen the dilutive impact on earnings per share of the firm's employee benefit plans. These purchases may be made in 1997 or beyond in the open market or through privately negotiated transactions. The firm purchased 7 million shares in 1996. In addition, the Board approved the purchase of up to $750 million of J.P. Morgan common stock in the open market or through privately negotiated transactions. J.P. Morgan raised $750 million qualifying as Tier 1 capital under Federal Reserve guidelines on November 26, 1996 through an issue of 7.54% trust preferred securities due January 15, 2027, by JPM Capital Trust I. The proceeds of this issue will be used principally to finance this stock repurchase, which is expected to be completed in 1997. # # # J.P. Morgan is a global banking firm that serves clients with complex financial needs through an integrated range of advisory, financing, trading, investment, and related capabilities. Attached are the financial summary, the interim consolidated financial statements which are unaudited, the combined trading and related net interest revenue table, and the asset quality tables. J.P. Morgan news releases, including quarterly financial results, are available on the Internet (http://www.jpmorgan.com). 6 6
FINANCIAL SUMMARY J. P. Morgan & Co. Incorporated - ---------------------------------------------------------------------------------------------------------------------------- Dollars in millions, except per share data Third Fourth Quarter Quarter Twelve Months ---------------------------- ------------ ---------------------------- 1996 1995 1996 1996 1995 ---------------------------------------------------------------------------- Net Income $ 419 $ 366 $ 276 $ 1,574 $ 1,296 PER COMMON SHARE Net income (a) $ 2.04 $ 1.80 $ 1.32 $ 7.63 $ 6.42 Dividends declared 0.88 0.81 0.81 3.31 3.06 Book value (b) 54.43 50.71 52.62 - ---------------------------------------------------------------------------------------------------------------------------- Weighted-average number of common and common equivalent shares outstanding 201,537,658 199,829,966 201,755,770 202,010,237 198,654,973 - ---------------------------------------------------------------------------------------------------------------------------- Dividends declared on common stock $ 163 $ 152 $ 151 $ 617 $ 574 Dividends declared on preferred stock 9 6 9 33 24 SELECTED RATIOS Annualized rate of return on average common stockholders' equity (c) 15.3% 14.7% 10.3% 14.9% 13.6% As % of period-end total assets: Common equity 4.8% 5.4% 4.9% Total equity 5.2 5.7 5.2 Regulatory capital ratios (d) Tier 1 risk-based capital ratio 8.7% 8.8% 8.1% Total risk-based capital ratio 12.2 13.0 11.7 Leverage ratio 5.9 6.1 6.2 - ---------------------------------------------------------------------------------------------------------------------------- AVERAGE BALANCES Debt investment securities (e) $ 26,728 $ 23,077 $ 23,171 $ 25,023 $ 21,999 Loans 29,267 24,500 26,976 28,021 24,147 Total interest-earning assets 185,351 147,569 171,409 171,654 136,115 Total assets 233,985 189,724 211,452 215,043 178,510 Total interest-bearing liabilities 177,783 142,575 162,175 163,250 130,139 Total liabilities 222,607 179,570 200,431 204,052 168,651 Common stockholders' equity 10,684 9,660 10,327 10,317 9,365 Total stockholders' equity 11,378 10,154 11,021 10,991 9,859 Net interest earnings (fully taxable basis) 505 511 445 1,787 2,109 Net yield on interest-earning assets 1.08% 1.37% 1.03% 1.04% 1.55% - ---------------------------------------------------------------------------------------------------------------------------- Employees at period-end 15,527 15,613 15,188 - ----------------------------------------------------------------------------------------------------------------------------
(a) Earnings per share amounts represent both primary and fully diluted earnings per share, except for the twelve months ended December 31, 1996 and 1995, and the three months ended December 31, 1996. Fully diluted earnings per share were $7.56, $6.36, and $2.03 for the twelve months ended December 31, 1996 and 1995, and the three months ended December 31, 1996, respectively. (b) Excluding the impact of SFAS No. 115, the book value per common share would have been $52.08, $47.83, and $51.01 at December 31, 1996, December 31, 1995 and September 30, 1996, respectively. (c) Excluding the impact of SFAS No. 115, the annualized rate of return on average common stockholders' equity would have been 15.9% , 15.5%, and 10.6% for the three months ended December 31, 1996, December 31, 1995, and September 30, 1996, respectively, and 15.6% and 14.3% for the twelve months ended December 31, 1996 and 1995, respectively. (d) In accordance with the Federal Reserve Board guidelines, these ratios exclude the equity, assets and off-balance-sheet exposures of J.P. Morgan Securities, Inc. and the effect of SFAS No. 115. Risk-based capital ratios for December 31, 1996 are estimates. (e) Average debt investment securities are computed based on historical amortized cost, excluding the effects of SFAS No. 115 adjustments. 7 7
CONSOLIDATED STATEMENT OF INCOME J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------------------------------- In millions, except per share data Three months ended ----------------------------------------------------------------- December 31 December 31 Increase/ September 30 Increase/ 1996 1995 (Decrease) 1996 (Decrease) ----------------------------------------------------------------- NET INTEREST REVENUE Interest revenue $2,925 $2,609 $ 316 $2,675 $ 250 Interest expense 2,441 2,121 320 2,250 191 - -------------------------------------------------------------------------------------------------------- Net interest revenue 484 488 (4) 425 59 NONINTEREST REVENUE Trading revenue 512 369 143 510 2 Investment banking revenue 277 158 119 233 44 Credit-related fees 41 40 1 39 2 Investment management fees 182 156 26 164 18 Operational service fees 111 129 (18) 98 13 Net investment securities gains 45 1 44 11 34 Other revenue 153 177 (24) 69 84 - -------------------------------------------------------------------------------------------------------- Total noninterest revenue 1,321 1,030 291 1,124 197 Total revenue 1,805 1,518 287 1,549 256 OPERATING EXPENSES Employee compensation and benefits 732 608 124 685 47 Net occupancy 73 76 (3) 74 (1) Technology and communications 221 165 56 248 (27) Other expenses 171 141 30 130 41 - -------------------------------------------------------------------------------------------------------- Total operating expenses 1,197 990 207 1,137 60 Income before income taxes 608 528 80 412 196 Income taxes 189 162 27 136 53 - -------------------------------------------------------------------------------------------------------- Net income 419 366 53 276 143 PER COMMON SHARE Net income (a) $ 2.04 $ 1.80 $0.24 $ 1.32 $0.72 Dividends declared 0.88 0.81 0.07 0.81 0.07 - --------------------------------------------------------------------------------------------------------
(a) See Financial Summary for per common share data assuming full dilution. 8 8 CONSOLIDATED STATEMENT OF INCOME J.P. Morgan & Co. Incorporated - -------------------------------------------------------------------------------- In millions, except per share data
Twelve months ended ---------------------------------------- December 31 December 31 Increase/ 1996 1995 (Decrease) -------------------------------------- NET INTEREST REVENUE Interest revenue $10,713 $9,937 $ 776 Interest expense 9,011 7,934 1,077 - -------------------------------------------------------------------------------- Net interest revenue 1,702 2,003 (301) NONINTEREST REVENUE Trading revenue 2,477 1,376 1,101 Investment banking revenue 921 584 337 Credit-related fees 156 162 (6) Investment management fees 675 574 101 Operational service fees 426 546 (120) Net investment securities gains 17 21 (4) Other revenue 481 638 (157) - -------------------------------------------------------------------------------- Total noninterest revenue 5,153 3,901 1,252 Total revenue 6,855 5,904 951 OPERATING EXPENSES Employee compensation and benefits 2,884 2,498 386 Net occupancy 296 322 (26) Technology and communications 785 671 114 Other expenses 558 507 51 - -------------------------------------------------------------------------------- Total operating expenses 4,523 3,998 525 Income before income taxes 2,332 1,906 426 Income taxes 758 610 148 - -------------------------------------------------------------------------------- Net income 1,574 1,296 278 PER COMMON SHARE Net income (a) $ 7.63 $ 6.42 $ 1.21 Dividends declared 3.31 3.06 0.25 - --------------------------------------------------------------------------------
(a) See Financial Summary for per common share data assuming full dilution. 9 9
CONSOLIDATED BALANCE SHEET J.P. Morgan & Co. Incorporated - ------------------------------------------------------------------------------------------------------------------------------------ Dollars in millions December 31 September 30 December 31 1996 1996 1995 ------------------------------------- ASSETS Cash and due from banks $ 906 $ 1,088 $ 1,535 Interest-earning deposits with banks 1,908 2,193 1,986 Debt investment securities available for sale carried at fair value (Cost: $24,610 at December 1996, $26,341 at September 1996, and $24,154 at December 1995) 24,865 26,565 24,638 Trading account assets, net of allowance for credit losses of $350 at December 1996 (a) 90,980 80,784 69,408 Securities purchased under agreements to resell ($32,455 at December 1996, $34,658 at September 1996, and $32,157 at December 1995) and federal funds sold 32,505 34,686 32,157 Securities borrowed 27,931 25,430 19,830 Loans, net of allowance for credit losses of $566 at December 1996, $1,113 at September 1996, and $1,130 at December 1995 (a) 27,554 28,889 22,323 Customers' acceptance liability 212 287 237 Accrued interest and accounts receivable 3,789 3,585 3,539 Premises and equipment 3,137 3,068 3,339 Less: accumulated depreciation 1,272 1,236 1,412 - ------------------------------------------------------------------------------------------------------------------------------------ Premises and equipment, net 1,865 1,832 1,927 Other assets 9,511 6,309 7,299 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 222,026 211,648 184,879 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Noninterest-bearing deposits: In offices in the U.S. 1,501 2,115 3,287 In offices outside the U.S. 708 917 744 Interest-bearing deposits: In offices in the U.S. 7,103 6,016 2,003 In offices outside the U.S. 43,412 40,860 40,404 - ------------------------------------------------------------------------------------------------------------------------------------ Total deposits 52,724 49,908 46,438 Trading account liabilities 50,919 45,601 45,289 Securities sold under agreements to repurchase ($56,117 at December 1996, $58,318 at September 1996, and $40,803 at December 1995) and federal funds purchased 61,429 61,094 45,099 Commercial paper 4,132 4,448 2,801 Other liabilities for borrowed money 19,948 19,966 15,129 Accounts payable and accrued expenses 5,935 6,255 5,643 Liability on acceptances 212 287 237 Long-term debt not qualifying as risk-based capital 9,411 8,176 5,737 Other liabilities, including allowance for credit losses of $200 at December 1996 (a) 1,442 1,095 4,465 - ------------------------------------------------------------------------------------------------------------------------------------ 206,152 196,830 170,838 Long-term debt qualifying as risk-based capital 3,692 3,740 3,590 Company obligated mandatorily redeemable preferred securities of subsidiary grantor trust holding solely junior subordinated debentures of the Company 750 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 210,594 200,570 174,428 STOCKHOLDERS' EQUITY Preferred stock (authorized shares: 10,400,000 at December 1996 and September 1996, and 10,000,000 at December 1995) 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 at December 200 200 -- and September 1996) Common stock, $2.50 par value (authorized shares: 500,000,000; issued: 200,688,123 at December 1996, 200,684,623 at September 1996, and 200,678,373 at December 1995) 502 502 502 Capital surplus 1,446 1,442 1,430 Retained earnings 8,635 8,392 7,731 Net unrealized gains on investment securities, net of taxes 464 317 566 Other 826 754 552 - ------------------------------------------------------------------------------------------------------------------------------------ 12,567 12,101 11,275 Less: treasury stock (15,765,455 shares at December 1996, 14,767,312 shares at September 1996, and 13,562,755 shares at December 1995) at cost 1,135 1,023 824 - ------------------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 11,432 11,078 10,451 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity 222,026 211,648 184,879 - ------------------------------------------------------------------------------------------------------------------------------------
(a) See Aggregate allowance for credit losses table on page 12. 10 10
CONSOLIDATED STATEMENT OF CONDITION Morgan Guaranty Trust Company of New York - ---------------------------------------------------------------------------------------------------------- Dollars in millions December 31 December 31 1996 1995 ------------------------ ASSETS Cash and due from banks $ 920 $ 1,429 Interest-earning deposits with banks 1,910 1,995 Debt investment securities available for sale carried at fair value 23,510 23,767 Trading account assets, net allowance of credit losses of $350 at December 1996 72,549 55,373 Securities purchased under agreements to resell and federal funds sold 27,762 20,996 Loans, net of allowance for credit losses of $565 at December 1996 and $1,129 at December 1995 27,378 22,190 Customers' acceptance liability 212 237 Accrued interest and accounts receivable 3,470 3,420 Premises and equipment 2,812 2,967 Less: accumulated depreciation 1,116 1,232 - ---------------------------------------------------------------------------------------------------------- Premises and equipment, net 1,696 1,735 Other assets 5,406 4,571 - ---------------------------------------------------------------------------------------------------------- Total assets 164,813 135,713 - ---------------------------------------------------------------------------------------------------------- LIABILITIES Noninterest-bearing deposits: In offices in the U.S. 1,495 3,275 In offices outside the U.S. 749 839 Interest-bearing deposits: In offices in the U.S. 7,114 1,975 In offices outside the U.S. 43,716 40,985 - ---------------------------------------------------------------------------------------------------------- Total deposits 53,074 47,074 Trading account liabilities 44,039 39,197 Securities sold under agreements to repurchase and federal funds purchased 30,787 20,274 Other liabilities for borrowed money 13,215 8,509 Accounts payable and accrued expenses 4,203 4,187 Liability on acceptances 212 237 Long-term debt not qualifying as risk-based capital 5,436 2,786 Other liabilities, including allowance for credit losses of $200 at December 1996 977 3,324 - ---------------------------------------------------------------------------------------------------------- 151,943 125,588 Long-term debt qualifying as risk-based capital 2,979 1,659 - ---------------------------------------------------------------------------------------------------------- Total liabilities 154,922 127,247 STOCKHOLDER'S EQUITY Preferred stock, $100 par value (authorized shares: 2,500,000) -- -- Common stock, $25 par value (authorized shares: 11,000,000 at December 1996, and 10,000,000 at December 1995; outstanding: 10,599,027 at December 1996, and 10,000,000 at December 1995) 265 250 Surplus 3,155 2,820 Undivided profits 6,334 5,136 Net unrealized gains on investment securities, net of taxes 149 264 Foreign currency translation (12) (4) - ---------------------------------------------------------------------------------------------------------- Total stockholder's equity 9,891 8,466 - ---------------------------------------------------------------------------------------------------------- Total liabilities and stockholder's equity 164,813 135,713 - ----------------------------------------------------------------------------------------------------------
Prior period balances were restated to reflect the merger of J.P. Morgan Delaware with Morgan Guaranty Trust Company effective June 1996. Member of the Federal Reserve System and the Federal Deposit Insurance Corporation. 11 11
COMBINED TRADING AND RELATED NET INTEREST REVENUE J.P. Morgan & Co. Incorporated - ---------------------------------------------------------------------------------------------- Dollars in millions Fixed Foreign Proprietary Income Equities Exchange Commodities Unit Total - ---------------------------------------------------------------------------------------------- Fourth Quarter 1996 Trading revenue $ 273 $ 69 $ 84 $ 10 $ 76 $ 512 Net interest revenue* 104 (13) 5 1 16 113 - ---------------------------------------------------------------------------------------------- Combined total 377 56 89 11 92 625 - ---------------------------------------------------------------------------------------------- Fourth Quarter 1995 Trading revenue 248 36 63 5 17 369 Net interest revenue 38 (32) 12 (2) -- 16 - ---------------------------------------------------------------------------------------------- Combined total 286 4 75 3 17 385 - ---------------------------------------------------------------------------------------------- Third Quarter 1996 Trading revenue 403 43 59 (15) 20 510 Net interest revenue 45 (4) 5 4 15 65 - ---------------------------------------------------------------------------------------------- Combined total 448 39 64 (11) 35 575 - ---------------------------------------------------------------------------------------------- Twelve Months 1996 Trading revenue 1,540 330 320 34 253 2,477 Net interest revenue* 272 (69) 20 (2) 29 250 - ---------------------------------------------------------------------------------------------- Combined total 1,812 261 340 32 282 2,727 - ---------------------------------------------------------------------------------------------- Twelve Months 1995 Trading revenue 668 249 253 42 164 1,376 Net interest revenue 201 (112) 22 -- 20 131 - ---------------------------------------------------------------------------------------------- Combined total 869 137 275 42 184 1,507
* Estimated 12 12 ASSET QUALITY J.P. Morgan & Co. Incorporated - --------------------------------------------------------------------------------
NONPERFORMING ASSETS December 31 September 30 December 31 Dollars in millions 1996 1996 1995 ----------- ------------ ----------- Impaired loans: Commercial and industrial $ 89 $125 $ 67 Other 29 34 48 - -------------------------------------------------------------------------------- 118 159 115 Restructuring countries 2 2 2 - -------------------------------------------------------------------------------- Total impaired loans 120 161 117 Other nonperforming assets -- -- 1 - -------------------------------------------------------------------------------- Total nonperforming assets 120 161 118 - --------------------------------------------------------------------------------
AGGREGATE ALLOWANCE FOR CREDIT LOSSES
December 31 September 30 December 31 Dollars in millions 1996 1996 1995 ----------- ------------ ----------- Aggregate allowance for credit losses (a) $1,116 $1,113 $1,130 - -----------------------------------------------------------------------------------------------------
Fourth Quarter Twelve Months ----------------------- ----------------------- 1996 1995 1996 1995 ----------------------- ----------------------- Charge-offs: Commercial and industrial ($2) ($ 8) ($30) ($39) Other (2) (10) (9) (16) Recoveries 7 16 25 54 - -------------------------------------------------------------------------------------------------------------------
(a) Prior to December 31, 1996, the aggregate allowance for credit losses was displayed in the consolidated balance sheet as a reduction of the carrying value of loans. This aggregate allowance is available to absorb losses inherent in our portfolio of loans and other undertakings to extend credit or to make payments to others for which a client is ultimately liable, and for all other credit exposures, including derivatives. For financial statement reporting purposes, beginning December 31, 1996, in accordance with the American Institute of Certified Public Accountants Banks and Savings Institutions Audit Guide, while we consider it in the aggregate, the total allowance has been apportioned and displayed as follows: $566 million as a reduction of loans, $350 million as a reduction of trading account assets relating to derivatives, and $200 million as other liabilities related to undertakings to extend credit which are not currently reflected on the balance sheet such as standby letters of credit and guarantees. Given the global and diversified nature of our business, expected shifts in the relative level of credit risk among financial instruments, and the numerous estimates and assumptions necessary to derive such allocated amounts, it is expected that portions of the aggregate allowance may be reclassified from time to time. Prior period amounts have not been reclassified. 13 13
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS J.P. Morgan & Co. Incorporated - ---------------------------------------------------------------------------------------------------------------------- Dollars in millions, interest and average Three months ended rates on a taxable-equivalent basis --------------------------------------------------------------------- December 31, 1996 December 31, 1995 --------------------------------------------------------------------- Average Average Average Average balance Interest rate balance Interest rate --------------------------------------------------------------------- ASSETS Interest-earning deposits with banks, mainly in offices outside the U.S. $ 2,071 $ 29 5.57% $ 1,953 $ 34 6.91% Debt investment securities in offices in the U.S. (a): U.S. Treasury 3,002 44 5.83 1,255 23 7.27 U.S. state and political subdivision 1,496 43 11.43 1,729 51 11.70 Other 16,708 275 6.55 15,792 272 6.83 Debt investment securities in offices outside the U.S. (a) 5,522 74 5.33 4,301 76 7.01 Trading account assets: In offices in the U.S. 19,100 280 5.83 13,247 196 5.87 In offices outside the U.S. 38,328 740 7.68 25,958 495 7.57 Securities purchased under agreements to resell and federal funds sold, mainly in offices in the U.S. 40,466 515 5.06 36,814 587 6.33 Securities borrowed in offices in the U.S. 27,899 365 5.20 18,297 272 5.90 Loans: In offices in the U.S. 5,546 92 6.60 6,294 124 7.82 In offices outside the U.S. 23,721 371 6.22 18,206 321 7.00 Other interest-earning assets (b): In offices in the U.S. 675 51 * 858 41 * In offices outside the U.S. 817 67 * 2,865 140 * - ---------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 185,351 2,946 6.32 147,569 2,632 7.08 Allowance for credit losses (c) (1,113) (1,126) Cash and due from banks 1,082 1,706 Other noninterest-earning assets 48,665 41,575 - ---------------------------------------------------------------------------------------------------------------------- Total assets 233,985 189,724 - ----------------------------------------------------------------------------------------------------------------------
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 three months ended December 31, 1996 and 1995. (a) For the three months ended December 31, 1996 and 1995, 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. (c) See Aggregate allowance for credit losses table on page 12. * Not meaningful. 14 14
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS J.P. Morgan & Co. Incorporated - ------------------------------------------------------------------------------------------------------------------------- Dollars in millions, interest and average Three months ended rates on a taxable-equivalent basis ---------------------------------------------------------------- December 31, 1996 December 31, 1995 ---------------------------------------------------------------- Average Average Average Average balance Interest rate balance Interest rate ---------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing deposits: In offices in the U.S. $ 7,944 $ 109 5.46% $ 1,882 $ 22 4.64% In offices outside the U.S. 45,049 537 4.74 43,996 644 5.81 Trading account liabilities: In offices in the U.S. 8,127 127 6.22 6,802 99 5.77 In offices outside the U.S. 11,812 218 7.34 13,796 196 5.64 Securities sold under agreements to repurchase and federal funds purchased, mainly in offices in the U.S. 69,511 911 5.21 49,065 735 5.94 Commercial paper, mainly in offices in the U.S. 4,082 56 5.46 3,437 50 5.77 Other interest-bearing liabilities: In offices in the U.S. 15,544 227 5.81 12,639 190 5.96 In offices outside the U.S. 2,856 59 8.22 1,557 42 10.70 Long-term debt, mainly in offices in the U.S. 12,630 193 6.08 9,401 143 6.03 Company obligated mandatorily redeemable preferred securities of subsidiary grantor trust holding solely junior subordinated debentures of the Company 228 4 6.98 -- -- -- - ------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 177,783 2,441 5.46 142,575 2,121 5.90 Noninterest-bearing deposits: In offices in the U.S. 1,872 3,305 In offices outside the U.S. 481 1,319 Other noninterest-bearing liabilities 42,471 32,371 - ------------------------------------------------------------------------------------------------------------------------- Total liabilities 222,607 179,570 Stockholders' equity 11,378 10,154 - ------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity 233,985 189,724 Net yield on interest-earning assets 1.08 1.37 - ------------------------------------------------------------------------------------------------------------------------- Net interest earnings 505 511 - -------------------------------------------------------------------------------------------------------------------------
15 15
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS J.P. Morgan & Co. Incorporated - --------------------------------------------------------------------------------------------------------------------------- Dollars in millions, interest and average Twelve months ended rates on a taxable-equivalent basis ------------------------------------------------------------------------ December 31, 1996 December 31, 1995 ------------------------------------------------------------------------ Average Average Average Average balance Interest rate balance Interest rate ------------------------------------------------------------------------ ASSETS Interest-earning deposits with banks, mainly in offices outside the U.S. $ 2,022 $ 110 5.44% $ 1,796 $ 168 9.35% Debt investment securities in offices in the U.S.(a): U.S. Treasury 1,581 106 6.70 1,983 130 6.56 U.S. state and political subdivision 1,591 183 11.50 1,964 236 12.02 Other 17,399 1,109 6.37 13,619 962 7.06 Debt investment securities in offices outside the U.S.(a) 4,452 271 6.09 4,433 309 6.97 Trading account assets: In offices in the U.S. 16,591 994 5.99 12,802 836 6.53 In offices outside the U.S. 29,656 2,285 7.71 25,560 2,205 8.63 Securities purchased under agreements to resell and federal funds sold, mainly in offices in the U.S. 43,064 2,254 5.23 31,769 1,942 6.11 Securities borrowed in offices in the U.S. 25,310 1,284 5.07 15,222 876 5.75 Loans: In offices in the U.S. 6,227 418 6.71 6,586 479 7.27 In offices outside the U.S. 21,794 1,371 6.29 17,561 1,236 7.04 Other interest-earning assets (b): In offices in the U.S. 940 139 * 1,185 252 * In offices outside the U.S. 1,027 274 * 1,635 412 * - --------------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 171,654 10,798 6.29 136,115 10,043 7.38 Allowance for credit losses (c) (1,119) (1,130) Cash and due from banks 935 1,796 Other noninterest-earning assets 43,573 41,729 - --------------------------------------------------------------------------------------------------------------------------- Total assets 215,043 178,510 - ---------------------------------------------------------------------------------------------------------------------------
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, 1996 and 1995. (a) For the twelve months ended December 31, 1996 and 1995, 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. (c) See Aggregate allowance for credit losses table on page 12. * Not meaningful. 16 16
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS J.P. Morgan & Co. Incorporated - ------------------------------------------------------------------------------------------------------------------------ Dollars in millions, interest and average Twelve months ended rates on a taxable-equivalent basis ---------------------------------------------------------------- December 31, 1996 December 31, 1995 ---------------------------------------------------------------- Average Average Average Average balance Interest rate balance Interest rate ---------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing deposits: In offices in the U.S. $ 3,962 $ 204 5.15% $ 2,048 $ 98 4.79% In offices outside the U.S. 45,148 2,337 5.18 41,762 2,422 5.80 Trading account liabilities: In offices in the U.S. 8,295 522 6.29 6,596 438 6.64 In offices outside the U.S. 11,056 780 7.05 12,222 923 7.55 Securities sold under agreements to repurchase and federal funds purchased, mainly in offices in the U.S. 63,424 3,295 5.20 43,658 2,568 5.88 Commercial paper, mainly in offices in the U.S. 4,133 225 5.44 2,809 169 6.02 Other interest-bearing liabilities: In offices in the U.S. 14,274 815 5.71 10,414 639 6.14 In offices outside the U.S. 2,258 204 9.03 1,869 127 6.80 Long-term debt, mainly in offices in the U.S. 10,643 625 5.87 8,761 550 6.28 Company obligated mandatorily redeemable preferred securities of subsidiary grantor trust holding solely junior subordinated debentures of the Company 57 4 7.02 -- -- -- - ------------------------------------------------------------------------------------------------------------------------ Total interest-bearing liabilities 163,250 9,011 5.52 130,139 7,934 6.10 Noninterest-bearing deposits: In offices in the U.S. 2,298 3,336 In offices outside the U.S. 737 1,354 Other noninterest-bearing liabilities 37,767 33,822 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities 204,052 168,651 Stockholders' equity 10,991 9,859 Total liabilities and stockholders' equity 215,043 178,510 Net yield on interest-earning assets: 1.04 1.55 - ------------------------------------------------------------------------------------------------------------------------ Net interest earnings 1,787 2,109 - ------------------------------------------------------------------------------------------------------------------------
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