JPMORGAN CHASE & CO Quarterly Report for Q3 Ended Sep 30, 2008

Summary

JPMorgan Chase & Co. (JPM) reported a net loss of $54 million, or -$0.06 per diluted share, for the third quarter of 2008, a significant decline from the $3.37 billion net income, or $0.97 per diluted share, reported in the third quarter of 2007. This downturn was primarily driven by a substantial increase in the provision for credit losses, which rose to $3.81 billion from $1.79 billion in the prior year, largely due to higher losses in consumer portfolios like home equity, subprime, and prime mortgages, as well as credit cards. Additionally, markdowns in the Investment Bank related to mortgage-backed positions and leveraged lending, coupled with higher noninterest expenses stemming from the Bear Stearns merger integration, further impacted profitability. Despite the quarterly loss, the nine-month period ending September 30, 2008, saw a net income of $4.90 billion, or $1.32 per diluted share, down from $12.39 billion, or $3.52 per diluted share, in the comparable 2007 period. The company completed the acquisition of Washington Mutual's banking operations in late September, significantly expanding its retail branch network. JPM also participated in the U.S. Treasury's Capital Purchase Program, issuing $25 billion in preferred stock and a warrant to strengthen its capital position amidst the challenging market environment. The company highlighted underlying business momentum in four of its six principal lines of business, with the Investment Bank, Retail Financial Services (driven by branch production), Commercial Banking, and Treasury & Securities Services all showing positive trends despite broader market pressures.

Key Highlights

• 1Net loss of $54 million (-$0.06/share) in Q3 2008, compared to a net income of $3.37 billion ($0.97/share) in Q3 2007.
• 2Provision for credit losses surged to $3.81 billion in Q3 2008 from $1.79 billion in Q3 2007, driven by increased consumer loan losses.
• 3Total net revenue decreased by 9% year-over-year to $14.74 billion in Q3 2008, impacted by markdowns in the Investment Bank.
• 4Acquisition of Washington Mutual's banking operations completed on September 25, 2008, significantly expanding the branch network.
• 5Participated in the U.S. Treasury's Capital Purchase Program, issuing $25 billion in preferred stock and a warrant.
• 6Noninterest expense increased by 19% year-over-year to $11.14 billion in Q3 2008, largely due to Bear Stearns merger integration costs.
• 7Tier 1 capital ratio remained strong at 8.9% as of September 30, 2008, up from 8.4% at September 30, 2007.

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