JPMC_2011_annual_report - 2 0 1 1 AN N UA L REPORT T H E WA Y F O R W A R D \u203a\u203a\u203a JPMorgan Chase Co Financial Highlights As of or for the year

JPMC_2011_annual_report - 2 0 1 1 AN N UA L REPORT T H...

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Unformatted text preview: 2 0 1 1 AN N UA L REPORT T H E WA Y F O R W A R D ››› JPMorgan Chase & Co. Financial Highlights As of or for the year ended December 31, 2011 2010 (in millions, except per share, ratio data and headcount) Reported basis (a) Total net revenue $ Total noninterest expense Pre-provision profit Provision for credit losses Net income $ Per common share data Net income per share: Basic $ Diluted Cash dividends declared Book value 97,234 $ 102,694 62,911 61,196 34,323 41,498 7,574 16,639 18,976 $ 17,370 4.50 $ 3.98 4.48 3.96 1.00 0.20 46.59 43.04 Selected ratios Return on common equity 11% 10 % 15 15 Return on tangible common equity (b) Tier 1 capital ratio 12.3 12.1 Total capital ratio 15.4 15.5 10.1 9.8 Tier 1 common capital ratio(b) Selected balance sheet data (period-end) Total assets $ 2,265,792 $ 2,117,605 692,927 Loans 723,720 Deposits 1,127,806 930,369 Total stockholders’ equity 183,573 176,106 Headcount 260,157 239,831 (a) Results are presented in accordance with accounting principles generally accepted in the United States of America, except where otherwise noted. (b) Non-GAAP financial measure. For further discussion, see “Explanation and reconciliation of the firm’s use of non-GAAP financial measures” and “Regulatory capital” in this Annual Report. JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm and one of the largest banking institutions in the United States, with operations worldwide; the firm has $2.3 trillion in assets and $183.6 billion in stockholders’ equity. The firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan and Chase brands. Information about J.P. Morgan capabilities can be found at jpmorgan.com and about Chase capabilities at chase.com. Information about the firm is available at jpmorganchase.com. Corporate headquarters 270 Park Avenue New York, NY 10017-2070 Telephone: 212-270-6000 jpmorganchase.com Principal subsidiaries JPMorgan Chase Bank, National Association Chase Bank USA, National Association J.P. Morgan Securities LLC J.P. Morgan Securities Ltd. Annual Report on Form 10-K The Annual Report on Form 10-K of JPMorgan Chase & Co. as filed with the U.S. Securities and Exchange Commission will be made available without charge upon request to: Office of the Secretary JPMorgan Chase & Co. 270 Park Avenue New York, NY 10017-2070 Stock listing New York Stock Exchange London Stock Exchange Tokyo Stock Exchange The New York Stock Exchange ticker symbol for the common stock of JPMorgan Chase & Co. is JPM. Financial information about JPMorgan Chase & Co. can be accessed by visiting the Investor Relations website at jpmorganchase.com. Additional questions should be addressed to: Investor Relations JPMorgan Chase & Co. 270 Park Avenue New York, NY 10017-2070 Telephone: 212-270-6000 “JPMorgan Chase,” “J.P. Morgan,” “Chase,” the Octagon Symbol and other words or symbols in this report that identify JPMorgan Chase services are service marks of JPMorgan Chase & Co. Other words or symbols in this report that identify other parties’ goods and services may be trademarks or service marks of those other parties. Directors To contact any of the Board members or committee chairs, the Presiding Director or the non-management directors as a group, please mail correspondence to: JPMorgan Chase & Co. Attention (Board member(s)) Office of the Secretary 270 Park Avenue New York, NY 10017-2070 The Corporate Governance Principles of the Board, the charters of the principal Board committees, the Code of Conduct, the Code of Ethics for Finance Professionals and other governance information can be accessed by visiting our website at jpmorganchase.com and clicking on “Governance” under the “About us” tab. Transfer agent and registrar Computershare Shareowner Services LLC 480 Washington Boulevard Jersey City, NJ 07310-2053 Telephone: 800-758-4651 computershare.com Investor Services Program JPMorgan Chase & Co.’s Investor Services Program offers a variety of convenient, low-cost services to make it easier to reinvest dividends and buy and sell shares of JPMorgan Chase & Co. common stock. A brochure and enrollment materials may be obtained by contacting the Program Administrator, Computershare Shareowner Services LLC, by calling 800-758-4651, by writing to the address indicated above or by visiting its website at bnymellon.com/shareowner/equityaccess. As of the beginning of 2009, JPMorgan Chase & Co. has distributed shareholder information under the U.S. Securities and Exchange Commission “Notice and Access” rule. As a result, the firm prints 700,000 fewer Annual Reports and Proxy Statements, which saves on an annual basis approximately 6,400 trees and 800 metric tons of CO2 emissions. This Annual Report is printed on paper made from well-managed forests and other controlled sources. The paper is independently certified by BVQI to the Forest Stewardship Council (FSC) standards. The paper contains a minimum of 20% post-consumer waste recycled fibers. ©2012 JPMorgan Chase & Co. All rights reserved. Printed in the U.S.A. Direct deposit of dividends For information about direct deposit of dividends, please contact Computershare Shareowner Services LLC. Stockholder inquiries Contact Computershare Shareowner Services LLC: By telephone: Within the United States, Canada and Puerto Rico: 800-758-4651 (toll free) From all other locations: 201-680-6578 (collect) TDD service for the hearing impaired within the United States, Canada and Puerto Rico: 800-231-5469 (toll free) All other locations: 201-680-6610 (collect) By mail: Computershare Shareowner Services LLC 480 Washington Boulevard Jersey City, NJ 07310-2053 Duplicate mailings If you receive duplicate mailings because you have more than one account listing and you wish to consolidate your accounts, please write to Computershare Shareowner Services LLC at the address above. Independent registered public accounting firm PricewaterhouseCoopers LLP 300 Madison Avenue New York, NY 10017-6204 SA TO STRIP IN REVERSED FSC LOGO “The banker is a member of a profession practiced since the Middle Ages. There has grown up a code of professional ethics and customs, on the observance of which depend his reputation, his fortune and his usefulness to the community in which he works.” — J.P. Morgan, Jr., 1933 J.P. Morgan, Jr., spoke these words in 1933 during the heart of the Great Depression. It was those values that guided us through that tremendous challenge. Today, those values continue to guide us through challenges and help us maintain a standing of vitality and strength. And, as always, our commitment to our clients remains first and foremost. We raised $1.8 trillion for businesses and consumers. For small business, we approved more than $17 billion in credit and maintained our position as the nation’s #1 Small Business Administration lender. We also continued our support of communities. We raised $68 billion for not-for-profits and public services. And we hired more than 3,000 military veterans as a proud founding member of the 100,000 Jobs Mission. We began to see some encouraging signs this past year, and our firm helped put more than 17,000 Americans back to work. We saw more businesses and individuals turning to us for loans. We saw credit quality strengthen and confidence return. We are optimistic about the future. Throughout our 200-year history, our belief in responsible leadership, our dedication to our clients and our fortress balance sheet have carried us through the toughest challenges. These are the core values we maintain day after day and the values that will sustain us into the future. Dear Fellow Shareholders, Your company earned a record $19.0 billion in 2011, up 9% from the record earnings of $17.4 billion in 2010. Our return on tangible equity for 2011 was 15% — the same as last year. Relative to our competitors and given the prevailing economic environment, this is a good result. On an absolute and static basis, we believe that our earnings should be $23 billion – $24 billion. The main reason for the difference between what we are earning and what we should be earning continues to be high costs and losses in mortgage and mortgage-related issues. While these losses are increasingly less severe, they will still persist at elevated levels for a while longer. Looking ahead, we believe our earnings power should grow over time, though we always expect volatility in our earnings — it is the nature of the various businesses we operate. 2011 was another year of challenges for JPMorgan Chase, the financial services industry and the economies of many countries around the world. In addition to the ongoing global economic uncertainty, other traumatic events — such as the earthquake and tsunami in Japan, the debt ceiling fiasco in the United States, revolutions in the Middle East and the European debt crisis — have impeded recovery. In the face of these tragic events and unfortunate setbacks, the frustration with — and hostility toward — our industry continues. We acknowledge it and respect people’s right to express themselves. However, we all have an interest in getting the economy and job creation growing again. In the face of many difficult challenges, JPMorgan Chase is trying to do its part. We have not retrenched. Just the opposite — we have stepped up. Over the past year, our people demonstrated once again that the work we do matters. We positively impact the lives of millions of people and the communities in which they live. Our duty is to serve them by stepping into the arena each day and putting our resources and our voices to work on their behalf. For us, standing on the sidelines simply is not an option. 2 Jamie Dimon, Chairman and Chief Executive Officer During 2011, the firm raised capital and provided credit of over $1.8 trillion for our commercial and consumer clients, up 18% from the prior year. We provided more than $17 billion of credit to U.S. small businesses, up 52% over last year. We raised capital or provided credit of $68 billion for more than 1,200 not-for-profit and government entities, including states, municipalities, hospitals and universities. We also issued new credit cards to 8.5 million people and originated more than 765,000 mortgages. To help struggling homeowners, we have offered over 1.2 million mortgage modifications since 2009 and completed more than 450,000. We also bought back $9 billion of stock and recently received permission to buy back an additional $15 billion of stock during the remainder of 2012 and the first quarter of 2013. We reinstated our annual dividend to $1.00 a share in April 2011 and recently announced that we are increasing it to $1.20 a share in April 2012. And we continued to build our business by heavily investing in infrastructure, systems, technology and new products and by adding bankers and branches around the world. 3 New Credit for Our Clients New and and Renewed Renewed Capital Capital and for our Clients Corporate Clients ($ in trillions) Consumer and Commercial Banking ($ in billions) Year-over-year change 13% 11% 20% 4% $17.1 $419.3 $1.4 $379.1 $7.3 $1.2 $11.2 Small Business 55% 52% $91.1 Card & Auto 0% 10% $99.6 Asset Management 19% 48% $110.1 Commercial/ Middle Market 23% 18% Mortgage/ Home Equity 5% (5%) $83.0 $83.2 $1.1 '09 to '10 '10 to '11 $474.2 $67.2 $56.3 $76.0 2009 2010 2011 $93.3 $156.3 $164.6 $156.3 2009 2010 2011 The best way to build shareholder value is to build a great company, with exemplary products and services, excellent systems, quality accounting and reporting, effective controls and outstanding people. If you continually build a great company, the stock price will follow. Normally, we don’t comment on the stock price. However, we make an exception in Section VIII of this letter because we are buying back a substantial amount of stock and because there are many concerns about investing in bank stocks. We believe you own an exceptional company. Each of our businesses is among the best in the world, and record earnings were matched by increased market share in most of our businesses. Most importantly, we have outstanding people working at every level in every business across the economic spectrum and around the world. This is no accident – we work hard to bring people with character, integrity and intelligence into this company. There is always room for improvement, but the strengths that are embedded in this company — our people, client relationships, product capabilities, technology, global presence and fortress balance sheet — provide us with a foundation that is rock solid and an ability to thrive regardless of what the future brings. 4 In this letter, I will focus my comments on the important issues affecting your company, including some of the regulatory and political issues facing us. The main sections of the letter are as follows: I. Our mission and how we operate to fulfill our role in society II. A brief update on our major initiatives III. The new One Chase — strengthening the customer experience IV. An intense focus in 2012 on adapting our businesses successfully to the new regulatory framework V. Comments on global financial reform VI. The mortgage business — the good, the bad and the ugly VII. Comments on the future of investment banking and the critical role of market making VIII. Why would you want to own the stock? IX. Closing 5 I . OU R MISSIO N A N D H OW W E OPE R AT E TO FULF I LL OUR RO L E IN SOC I E T Y We are constantly asked the question of what comes first in your company – customers, employees, shareholder value or being a good corporate citizen – which implies a need to favor one over the other. We disagree with this view. We must serve them all well. If we fail at any one, the whole enterprise suffers. Our customers, employees, shareholder value and communities all come first Many people seem to think that shareholder value means profit and that a company earns more profit by giving customers or employees less. This has not been our experience. Our job is to build a healthy and vibrant company that satisfies clients, invests in its people – through training, opportunity and compensation – and rewards its shareholders. When this is done well, everyone benefits. At the same time, a company needs to be successful financially because if it isn’t, it ultimately will fail. And when a company fails, everyone loses. How we view our customers — we wouldn’t be here without them There would be no company but for our customers. Without our consumer or corporate clients – and satisfied ones at that – there would be no profits, no bankers, no staff and no CEO. At JPMorgan Chase, we believe that customers should be treated like we would want to be treated ourselves. Customers usually don’t mind paying a fair price for a product or service they need, particularly if it is delivered well and accompanied with a smile. We are constantly looking for better ways to provide, combine and deliver products that meet or exceed our customers’ expectations. And we try to listen closely to our customers – even when they complain – because they are doing us a service by telling us how we could do better. It means a lot to a customer when we respond not only by listening but also by actually changing. 6 How we view our employees — they do it all Doing a great job starts with great employees. We look for high-quality people with the capability to do a great job and grow with the firm. Then we train and empower them to do the right thing as best they can; to understand and anticipate their customers’ needs; and, in effect, to be their advocate. To do this, each employee needs help from the rest of the company. There are many employees who work behind the scenes that the customers do not see – such as programmers, assistants, network engineers, operations clerks and others. But these are the professionals we depend upon to help us seamlessly deliver integrated and complex products. And all of our employees drive innovation. They have the knowledge and the deep understanding to find ways – large and small – to improve a system, streamline a process, and save time and money by making things work better for everybody. How we view our communities — they are our hosts, our customers and our future Doing the right thing for shareholders also means being a good corporate citizen. If you owned a small business (e.g., the corner grocery store in a small town), more likely than not, you would be a good citizen by keeping the snow and ice off the sidewalk in front of your store or by contributing to a local Little League team, school or community center. You would participate in the community, and everyone would be better off because of your contributions. As a large company that operates in 2,000 communities around the world, we should act no differently. We participate at the local level by providing corporate support and by asking our associates to get involved in the towns where they live. We also participate in largescale, country-wide and sometimes global projects, but the intent is the same – to improve the world in which we live. In 2011, JPMorgan Chase contributed more than $200 million directly to community organizations and local not-for-profits. Our employees also provided nearly 375,000 hours of volunteer service through our Good Works program in local communities. However, our efforts go well beyond philanthropic works. We finance and advise cities, states, municipalities, hospitals and universities – not just about financial affairs but also in related areas of governance, growth and sustainability. In 2011, we launched The Brookings JPMorgan Chase Global Cities Initiative with a $10 million commitment to help the 100 largest U.S. metropolitan areas become more competitive in the global economy. Our business also provides dedicated expertise and financing for economically challenged areas of the world. For example, we partner with multiple global institutions, such as the U.S. Agency for International Development and the Bill & Melinda Gates Foundation, to help launch and support businesses that directly benefit small and rural farmers in Africa. Additionally, we are able to bring private capital to bear on scale solutions to global health problems such as tuberculosis and malaria. And we have just launched a philanthropic program focusing on entrepreneurship in South Africa. I would like to mention one initiative of which we are particularly proud. After making some embarrassing mistakes with active military personnel, we redoubled our efforts to help military personnel and veterans – men and women to whom we owe a tremendous debt of gratitude for the sacrifices they have made – get jobs and transition out of active service to civilian life. Our efforts are working – over the past 12 months we have hired more than 3,000 veterans. In short, we are part of our communities in every way possible – from the largest countries to the smallest towns. It’s a big responsibility to be a bank — and communities are better off if we do it well If the financial crisis has taught us anything, it has taught us that being a strong bank in good times and, more important, in bad times is critical to the customers, communi- ties and countries we serve around the world. Every day, our customers need us to deliver cash of $600 million and to reliably and quickly move $10 trillion around the world, where and when it is needed. Our customers trust us to safeguard $17 trillion of their assets under custody, manage $1.9 trillion of assets under supervision and protect $1.1 trillion of their deposits. We provide our consumer and business...
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