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MANAGEMENT
 
DISCUSSION
 
SECTION
 
Operator:
 
Good
 
morning.
 
Welcome
 
to
 
JPMorgan
 
Chase
 
third
 
quarter
 
2009
 
earnings
 
conference
 
call.
 
I
 
want
 
to
 
now
 
turn
 
the
 
call
 
over
 
to
 
Mike
 
Cavanaugh,
 
CFO
 
of
 
JPMorgan
 
Chase.
 
Please
 
go
 
ahead,
 
sir
 
Michael
 
J.
 
Cavanagh,
 
Chief
 
Financial
 
Officer,
 
and
 
Executive
 
Vice
 
President:
 
Great.
 
Hey,
 
good
 
morning,
 
everybody.
 
Thanks
 
for
 
joining
 
Jamie
 
and
 
I.
 
We'll
 
go
 
through
 
the
 
usual
 
slide
 
presentation
 
that's
 
available
 
on
 
the
 
web.
 
I
 
just
 
refer
 
you
 
to
 
slide
 
20
 
which
 
gives
 
the
 
usual
 
forward
looking
 
comments
 
disclaimers
 
for
 
read
 
at
 
your
 
own
 
leisure,
 
and
 
with
 
that,
 
let
 
us
 
get
 
started
 
on
 
the
 
overall
 
results
 
on
 
slide
 
one.
 
The
 
highlights
 
here
 
so
 
we
 
had
 
$3.6
 
billion
 
of
 
net
 
income
 
in
 
the
 
quarter.
 
That's
 
earnings
 
per
 
share
 
of
 
82
 
cents
 
on
 
revenues
 
of
 
$28.8
 
billion.
 
I
 
won't
 
spend
 
too
 
much
 
time
 
talking
 
about
 
where
 
the
 
results
 
came
 
from
 
here
 
because
 
we'll
 
go
 
through
 
it
 
business
 
by
 
business,
 
but
 
obviously
 
it
 
was
 
great
 
strength
 
in
 
the
 
investment
 
bank
 
and
 
strong
 
performance
 
in
 
the
 
asset
 
management
 
commercial
 
bank
 
and
 
retail
 
banking
 
businesses
 
as
 
well
 
as
 
very
 
strong
 
results
 
in
 
our
 
corporate
 
investment
 
portfolio.
 
The
 
backdrop
 
is
 
credit
 
cost
 
remain
 
elevated
 
and
 
you
 
will
 
see
 
that
 
by
 
line
 
of
 
business,
 
various
 
degrees
 
of
 
flattening
 
and
 
charge
offs
 
are
 
slowing
 
the
 
pace
 
of
 
increase
 
but
 
nonetheless,
 
continue
 
to
 
be
 
at
 
very
 
high
 
levels.
 
We
 
added
 
$2
 
billion
 
to
 
the
 
consumer
 
credit
 
reserves,
 
though
 
to
 
bring
 
the
 
total
 
credit
 
reserves
 
to
 
$31.5
 
billion
 
which
 
is
 
a
 
very
 
strong
 
number
 
both
 
for
 
the
 
firm
 
and
 
each
 
line
 
of
 
business.
 
I'll
 
point
 
that
 
out
 
as
 
we
 
go
 
through.
 
Overall
 
reserve
 
to
 
loans
 
for
 
the
 
firm
 
of
 
5.3%.
 
Capital,
 
very
 
proud
 
of
 
the
 
capital
 
levels
 
of
 
the
 
company.
 
Tier
 
1
 
common
 
throughout
 
retention
 
of
 
those
 
earnings
 
grows
 
through
 
$100
 
billion
 
to
 
101
 
with
 
a
 
tier
 
1
 
common
 
ratio
 
then
 
of
 
8.2%
 
and
 
tier
 
1
 
capital
 
ratio
 
of
 
10.2%.
 
Obviously,
 
very,
 
very
 
strong
 
capital
 
levels.
 
Slide
 
2
 
has
 
everything
 
I
 
just
 
described
 
on
 
it.
 
So
 
I'm
 
going
 
to
 
skip
 
that
 
and
 
take
 
us
 
to
 
slide
 
3,
 
the
 
investment
 
bank.
 
So
 
here
 
let's
 
walk
 
through
 
the
 
results
 
in
 
the
 
investment
 
bank.
 
You
 
can
 
see
 
the
 
circled
 
number,
 
net
 
income
 
of
 
$1.9
 
billion
 
of
 
revenues
 
of
 
a
 
$7.5
 
billion
 
of
 
the
 
business
 
overall.
 
I'll
 
just
 
make
 
one
 
clarifying
 
statement
 
up
 
front
 
that
 
a
 
cup.
 
The
 
items
 
that
 
you
 
all
 
have
 
been
 
focused
 
on
 
in
 
the
 
past
 
together
 
had
 
an
 
immaterial
 
impact
 
on
 
the
 
overall
 
profit,
 
it's
 
a
 
combination
 
of
 
two
 
items.
 
One
 
is
 
the
 
tightening
 
of
 
credit
 
spreads,
 
spreads
 
on
 
JPMorgan's
 
name
 
and
 
counterparty
 
names,
 
DBA/CBA
 
it's
 
known,
 
together
 
for
 
a
 
modest
 
net
 
negative,
 
and
 
then
 
we
 
had
 
gains
 
of
 
approximately
 
$400
 
million,
 
mostly
 
realized
 
on
 
those
 
legacy
 
leveraged
 
lending
 
and
 
mortgage
 
positions,
 
mostly
 
leverage
 
loans.
 
So
 
moving
 
through
 
with
 
putting
 
that
 
aside,
 
let's
 
move
 
through
 
the
 
underlying
 
real
 
dynamics
 
of
 
the
 
business.
 
So
 
investment
 
banking
 
feline,
 
$1.7
 
billion,
 
up
 
a
 
bit
 
year
 
over
 
year
 
and
 
obviously
 
off
 
some
 
from
 
the
 
record
 
quarter
 
that
 
we
 
had
 
last
 
quarter,
 
second
 
quarter
 
where
 
we
 
booked
 
something
 
like
 
2.2
 
billion
 
of
 
investment
 
banking
 
fees.
 
We
 
maintained
 
the
 
number
 
one
 
year
to
date
 
rankings
 
across
 
all
 
the
 
major
 
capital
 
raise
 
in
 
categories
 
so
 
the
 
investment
 
banking
 
franchise
 
is
 
doing
 
quite
 
well
 
and
 
continues
 
to
 
do
 
so.
 
The
 
fixed
 
income
 
markets
 
line,
 
revenues
 
of
 
$5
 
billion,
 
and
 
that
 
obviously
 
has
 
those
 
gains
 
on
 
leveraged
 
loans
 
that
 
I
 
talked
 
about
 
bringing
 
the
 
total
 
value
 
of
 
the
 
leveraged
 
loans
 
carried
 
on
 
the
 
books
 
down
 
to
 
a
 
market
 
value
 
of
 
$2.2
 
billion
 
or
 
carried
 
it
 
at
 
about
 
less
 
than
 
40
 
cents
 
on
 
the
 
dollar.
 
That's
 
a
 
 
 
26%
 
reduction
 
from
 
last
 
quarter,
 
so
 
we're
 
likely
 
not
 
to
 
be
 
talking
 
about
 
that
 
any
 
more
 
from
 
this
 
stage.
 
And
 
then
 
strong
 
performance
 
across
 
most
 
of
 
the
 
other
 
products
 
really
 
in
 
the
 
fixed
 
income
 
markets
 
area.
 
Equity
 
markets,
 
similar
 
story.
 
$941
 
million
 
worth
 
of
 
revenues
 
in
 
equity
 
markets,
 
particular
 
strengths
 
ongoing
 
in
 
the
 
prime
 
services
 
segment
 
there.
 
Last
 
thing
 
I'll
 
comment
 
on
 
in
 
the
 
investment
 
bank
 
is
 
credit
 
costs.
 
You
 
see
 
credit
 
costs
 
of
 
$379
 
million
 
over
 
on
 
the
 
left
 
and
 
the
 
explanation
 
there
 
is
 
that
 
is
 
charge
offs
 
of
 
$750
 
million,
 
partially
 
offset
 
by
 
release
 
in
 
allowance
 
related
 
to
 
particular
 
loans
 
that
 
are
 
marked
 
down
 
in
 
the
 
quarter
 
for
 
which
 
we
 
previously
 
held
 
our
 
marks
 
in
 
the
 
form
 
of
 
reserves,
 
such
 
as
 
the
 
geography
 
swing
 
leaving
 
us
 
with
 
well
 
marked
 
on
 
a
 
net
 
basis
 
between
 
reserves
 
and
 
marks
 
on
 
those
 
loans.
 
That
 
was
 
a
 
release
 
of
 
371
 
to
 
get
 
to
 
you
 
the
 
379
 
net
 
number.
 
Overall,
 
though,
 
leaves
 
us
 
with
 
8.4%
 
at
 
the
 
end
 
of
 
the
 
quarter
 
of
 
reserve
 
to
 
loans
 
there.
 
Moving
 
on
 
to
 
retail
 
financial
 
services.
 
On
 
the
 
next
 
slide,
 
some
 
of
 
the
 
drivers
 
here,
 
top
 
half
 
of
 
the
 
page
 
is
 
the
 
deposit
taking
 
side,
 
the
 
retail
 
bank.
 
Here
 
as
 
we
 
said,
 
I'll
 
just
 
point
 
you
 
to
 
the
 
circled
 
number,
 
average
 
deposits,
 
339.6
 
billion
 
up
 
obviously
 
versus
 
a
 
year
 
ago.
 
Given
 
Washington
 
Mutual
 
transaction
 
at
 
this
 
time
 
a
 
year
 
ago
 
and
 
declined
 
as
 
expected
 
by
 
about
 
$8
 
billion
 
from
 
last
 
quarter
 
as
 
we
 
let
 
high
 
cost
 
Washington
 
Mutual
 
CDs,
 
one
year
 
CDs
 
are
 
rolling
 
off
 
mostly
 
in
 
the
 
third
 
and
 
the
 
fourth
 
quarter
 
coming
 
up.
 
Everything
 
else
 
in
 
the
 
branch
 
production
 
side
 
we
 
still
 
have
 
underlying
 
good
 
growth
 
in
 
the
 
retail
 
banking
 
franchise.
 
We
 
are
 
inclusive
 
of
 
WaMu
 
and
 
WaMu
 
as
 
well
 
and
 
the
 
WaMu
 
integration
 
continues
 
to
 
go
 
quite
 
well
 
with
 
the
 
last
 
conversion
 
happening
 
in
 
a
 
couple
 
of
 
weeks
 
here.
 
So
 
everything
 
is
 
healthy
 
and
 
on
 
track
 
in
 
the
 
retail
 
bank.
 
Consumer
 
lending
 
side
 
down
 
at
 
the
 
bottom
 
of
 
the
 
page,
 
total
 
firmwide
 
originations
 
and
 
renewals
 
of
 
credit
 
totaled
 
about
 
$140
 
billion
 
in
 
the
 
quarter
 
and
 
46
 
billion
 
of
 
that
 
is
 
what
 
you
 
see
 
down
 
in
 
the
 
bottom
 
of
 
this
 
page
 
in
 
the
 
retail
 
side.
 
That's
 
37
 
billion
 
or
 
so
 
of
 
mortgage
 
loan
 
organizations,
 
about
 
flat
 
year
 
over
 
year
 
and
 
down
 
a
 
bit
 
quarter
 
over
 
quarter.
 
Remember,
 
the
 
real
 
dynamic
 
in
 
that
 
business
 
is
 
our
 
exit
 
of
 
broker
‐‐
the
 
brokerage
 
channel
 
in
 
the
 
past
 
12
 
months
 
helping
 
drive
 
some
 
of
 
those
 
numbers,
 
replaced
 
by
 
activity
 
more
 
directly
 
originated
 
by
 
ourselves,
 
and
 
then
 
exit
 
auto
 
originations,
 
you
 
see
 
about
 
$7
 
billion
 
of
 
auto
 
originations.
 
We've
 
done
 
well
 
in
 
terms
 
of
 
market
 
share
 
in
 
that
 
business
 
on
 
the
 
prime
 
side
 
and
 
particular
 
strength
 
this
 
quarter
 
with
 
the
 
cash
 
for
 
clunkers
 
program.
 
So
 
moving
 
to
 
the
 
next
 
slide,
 
slide
 
5,
 
for
 
the
 
income
 
statement
 
for
 
retail
 
financial
 
services,
 
we'll
 
just
 
take
 
this
 
in
 
two
 
pieces.
 
So
 
if
 
you
 
see
 
in
 
the
 
middle
 
of
 
the
 
left
hand
 
side
 
the
 
retail
 
bank
 
on
 
revenues
 
of
 
about
 
$4.6
 
billion,
 
up
 
substantially
 
from
 
a
 
year
 
ago
 
given
 
Washington
 
Mutual
 
in
 
particular.
 
We
 
had
 
profits
 
of
 
a
 
$1.043
 
billion
 
in
 
the
 
quarter.
 
Very
 
profitable
 
in
 
retail
 
banking
 
consistent
 
enough
 
with
 
a
 
little
 
bit
 
of
 
last
 
quarter
 
and
 
then
 
the
 
other
 
side
 
of
 
RFS
 
is
 
consumer
 
lending
 
at
 
the
 
bottom
 
of
 
the
 
page
 
and
 
driven
 
by
 
the
 
very
 
high
 
level
 
credit
 
costs
 
that
 
I'll
 
go
 
through
 
in
 
the
 
next
 
slide
 
of
 
$3.8
 
billion,
 
which
 
includes
 
some
 
additions
 
about
 
1.4
 
additions
 
to
 
loan
 
loss
 
reserves.
 
We
 
ended
 
up
 
having
 
an
 
after
tax
 
loss
 
of
 
about
 
a
 
billion
 
dollars
 
in
 
consumer
 
lending.
 
So
 
moving
 
to
 
the
 
slide
 
on
 
the
 
credit
 
portfolios
 
in
 
home
 
lending,
 
let
 
me
 
just
 
talk
 
through
 
that
 
for
 
a
 
second
 
so
 
here
 
slide
 
6
 
this
 
is,
 
I
 
will
 
just
 
start
 
on
 
the
 
upper
 
left
 
with
 
some
 
the
 
overall
 
commentary
 
here.
 
So
 
as
 
we
 
said
 
last
 
quarter
 
and
 
then
 
a
 
month
 
ago
 
at
 
a
 
conference,
 
we
 
continue
 
to
 
see
 
initial
 
signs
 
of
 
stability
 
in
 
the
 
early
 
bucket
 
delinquency
 
trends
 
where
 
we're
 
just
 
not
 
ready
 
to
 
declare
 
that's
 
a
 
sustained
 
trend,
 
but
 
it
 
is
 
 
 
continuing
 
to
 
be
 
what
 
we
 
actually
 
observe.
 
Another
 
overall
 
comment
 
is
 
that
 
as
 
far
 
as
 
the
 
impact
 
of
 
foreclosure
 
moratorium,
 
the
 
trial
 
mods
 
which
 
we've
 
been
 
active
 
in
 
doing
 
and
 
just
 
the
 
overall
 
extension
 
of
 
processing
 
of
 
REO
 
through
 
the
 
courts,
 
those
 
things
 
are
 
obviously
 
having
 
an
 
affect
 
on
 
overall
 
delinquency
 
percentages
 
and
 
stats
 
but
 
just
 
wanted
 
to
 
make
 
it
 
clear
 
that
 
we're
 
doing
 
everything
 
we
 
can
 
to
 
stay
 
on
 
top
 
of
 
the
 
income
 
statement
 
taking
 
recognizing
 
losses
 
through
 
charge
offs
 
and
 
adding
 
to
 
reserves
 
without
 
regard
 
for
 
the
 
impact
 
that
 
those
 
factors
 
would
 
be
 
causing
 
the
 
overall
 
delinquency
 
stats.
 
So
 
with
 
that
 
moving
 
over
 
to
 
the
 
left
hand
 
side,
 
you
 
can
 
see
 
the
 
actual
 
charge
offs
 
for
 
the
 
quarter
 
in
 
the
 
circle
 
there.
 
That
 
totals
 
up
 
to
 
about
 
$2.1
 
billion
 
this
 
quarter
 
across
 
these
 
three
 
portfolios
 
down
 
a
 
touch
 
from
 
last
 
quarter.
 
So
 
charge
offs
 
themselves
 
actually
 
stable
 
quarter
 
over
 
quarter
 
but
 
obviously
 
at
 
a
 
very
 
high
 
level,
 
which
 
is
 
driving
 
the
 
business
 
to
 
the
 
after
tax
 
losses
 
we
 
saw.
 
On
 
the
 
right
hand
 
side
 
then
 
in
 
outlook,
 
I
 
won't
 
go
 
through
 
these
 
piece
 
by
 
piece,
 
but
 
it's
 
unchanged.
 
Looking
 
ahead
 
to
 
what
 
we
 
see,
 
we're
 
not
 
changing
 
any
 
of
 
these
 
numbers
 
and
 
obviously
 
whether
 
we
 
advance
 
to
 
these
 
levels
 
is
 
going
 
to
 
be
 
a
 
function
 
of
 
whether
 
some
 
of
 
the
 
early
 
bucket
 
delinquency
 
trends
 
that
 
we
 
described
 
to
 
continue
 
or
 
not,
 
and
 
then
 
the
 
final
 
and
 
important
 
point
 
on
 
the
 
purchase
 
credit
 
impaired
 
loans
 
we
 
acquired
 
from
 
Washington
 
Mutual,
 
about
 
$150
 
billion
 
or
 
so
 
that
 
we
 
wrote
 
down
 
by
 
$30
 
billion
 
through
 
SOP033,
 
at
 
the
 
time
 
we
 
did
 
the
 
transaction,
 
overall
 
that
 
portfolio
 
is
 
behaving
 
in
 
aggregate
 
as
 
we
 
expected,
 
but
 
we
 
measure
 
impairment
 
at
 
subportfolio
 
levels
 
for
 
purposes
 
of
 
account
 
impairments
 
and
 
so
 
as
 
we
 
look
 
at
 
the
 
prime
 
portfolio
 
nonoption
 
ARMs,
 
just
 
the
 
prime
 
mortgage
 
portfolio,
 
we
 
see
 
some
 
weakness.
 
We
 
obviously
 
measure
 
that
 
in
 
terms
 
of
 
expected
 
lifetime
 
losses
 
on
 
that
 
portfolio
 
and
 
have
 
added
 
$1.1
 
billion
 
that
 
is
 
put
 
on
 
the
 
books
 
in
 
the
 
form
 
of
 
loan
 
loss
 
reserve
 
as
 
opposed
 
to
 
incremental
 
mark.
 
So
 
that
 
is
 
1.4
 
billion
‐‐
$1.1
 
billion
 
over
 
the
 
1.4
 
billion
 
over
 
the
 
loan
 
loss
 
addition
 
in
 
RFS
 
or
 
consumer
 
lending
 
in
 
the
 
quarter.
 
So
 
with
 
that,
 
moving
 
on
 
to
 
card
 
services
 
on
 
slide
 
7,
 
you
 
see
 
as
 
expected
 
and
 
unfortunately,
 
a
 
loss
 
of
 
$700
 
million
 
in
 
the
 
quarter.
 
That
 
is
 
fully
 
driven
 
by
 
the
 
continued
 
elevated
 
credit
 
costs,
 
high
 
credit
 
costs
 
in
 
the
 
quarter.
 
Basically
 
coming
 
in
 
consistent
 
with
 
what
 
we
 
talked
 
about
 
last
 
quarter
 
so
 
the
 
charge
off
 
rates
 
on
 
the
 
Chase
 
portfolio,
 
the
 
legacy
 
Chase
 
portfolio
 
versus
 
as
 
opposed
 
to
 
the
 
runoff
 
WaMu
 
subprime
 
portfolio,
 
Chase
 
portfolio
 
is
 
9.41%.
 
Charge
off
 
rate
 
circled
 
there
 
down
 
at
 
the
 
bottom
 
on
 
the
 
left
 
up
 
from
 
897
 
last
 
quarter
 
by
 
turning
 
toward
 
the
 
10%
 
plus
 
or
 
minus
 
that
 
we
 
talked
 
about
 
last
 
time
 
and
 
we
 
were
 
ahead
 
by
 
the
 
end
 
of
 
the
 
year.
 
Let
 
me
 
get
 
to
 
outlook
 
commentary
 
in
 
a
 
minute
 
and
 
we
 
bolstered
 
reserves
 
here
 
by
 
about
 
$600
 
million.
 
On
 
the
 
revenue
 
side,
 
the
 
dynamics
 
here,
 
we
 
continue
 
to
 
see
 
end
 
of
 
period
 
outstandings
 
circled
 
at
 
144
 
billion,
 
trending
 
lower
 
from
 
a
 
year
ago
 
in
 
last
 
quarter
 
and
 
that's
 
the
 
factors
 
that
 
we
 
talked
 
about
 
before,
 
backing
 
away
 
from
 
balanced
 
transfer
 
business
 
on
 
our
 
and
 
part
 
in
 
the
 
marketing
 
side
 
together
 
with
 
lower
 
actual
 
consumer
 
spend
 
on
 
our
 
cards
 
and
 
lower
 
charge
 
volume
 
big
 
driver
‐‐
[
 
Audio
 
difficulty
 
]
 
In
 
the
 
security
 
service
 
side
 
and
 
the
 
custody
 
and
 
investor
 
services
 
business
 
and
 
that's,
 
you
 
know,
 
Abating
 
levels
 
of
 
activity
 
in
 
securities
 
lending
 
business
 
together
 
with
 
overall
 
and
 
have
 
that
 
in
 
that
 
business.
 
A
 
disappointing
 
revenue
 
decline
 
in
 
WSS,
 
CS
 
down
 
a
 
little
 
bit
 
on
 
the
 
revenue
 
side
 
and
 
that
 
drives
 
the
 
overall
 
profit
 
number
 
of
 
about
 
$300
 
million
 
in
 
the
 
business.
 
Asset
 
management
 
on
 
slide
 
10,
 
net
 
income
 
here
 
of
 
$430
 
million,
 
up
 
year
 
over
 
year,
 
23%
 
on
 
revenues
 
of
 
$2.1
 
billion
 
which
 
are
 
up
 
6%
 
year
 
over
 
of 00

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