<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-5885
J.P. MORGAN & CO. INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 13-2625764
(State or other jurisdiction (I.R.S. Employer
of
incorporation or Identification No.)
organization)
60 Wall Street, New York, NY
(Address of principal executive offices)
10260-0060
(Zip Code)
(212) 483-2323
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes..X.. No.....
Number of shares outstanding of each of the registrant's classes of
common stock at April 28, 1995:
Common Stock, $2.50 Par Value 187,566,410 Shares
<PAGE> 2
PART I -- FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Financial statement information is set forth within this document on the
pages indicated:
Page
Three-month Consolidated statement of income
J.P. Morgan & Co. Incorporated 3
Consolidated balance sheet
J.P. Morgan & Co. Incorporated 4
Consolidated statement of changes in stockholders' equity
J.P. Morgan & Co. Incorporated 5
Consolidated statement of cash flows
J.P. Morgan & Co. Incorporated 6
Consolidated statement of condition
Morgan Guaranty Trust Company of New York 7
Notes to Consolidated financial statements
J.P. Morgan & Co. Incorporated 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Discussion of business sector results; Discussion of the
financial condition and results of operations; Statements
of consolidated average balances and net interest earnings
of J.P. Morgan & Co. Incorporated ("J.P. Morgan") for the
three months ended March 31, 1995; and Table of asset and
liability management derivatives are set forth on pages 16
through 27 herein.
PART II -- OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 28
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 29
SIGNATURES 30
<PAGE> 3
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
J.P. Morgan & Co. Incorporated
___________________________________________________________________________
_______
<CAPTION>
In millions,
except per share data Three months ended
______________________________________________
_________
March March Increase December Increase
31 31 / 31 /
1995 1994 (Decreas 1994 (Decreas
e) e)
______________________________________________
_________
<S> <C> <C> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $2,470 $1,837 $633 $2,369 $101
Interest expense 1,970 1,440 530 1,851 119
___________________________________________________________________________
_________
Net interest revenue 500 397 103 518 (18)
NONINTEREST REVENUE
Trading revenue 303 356 (53) 153 150
Corporate finance 114 117 (3) 122 (8)
revenue
Credit-related fees 43 56 (13) 44 (1)
Investment management 130 127 3 130 -
fees
Operational service fees 140 144 (4) 127 13
Net investment
securities 9 91 (82) 23 (14)
gains
Other revenue 149 103 46 111 38
___________________________________________________________________________
_________
Total noninterest 888 994 (106) 710 178
revenue
Total revenue 1,388 1,391 (3) 1,228 160
OPERATING EXPENSES
Employee compensation
and 626 548 78 501 125
benefits
Net occupancy 80 64 16 74 6
Technology and 172 129 43 209 (37)
communications
Other expenses 124 111 13 179 (55)
___________________________________________________________________________
_________
Total operating expenses 1,002 852 150 963 39
Income before income 386 539 (153) 265 121
taxes
Income taxes 131 194 (63) 72 59
___________________________________________________________________________
_________
Net income 255 345 (90) 193 62
PER COMMON SHARE
Net income (a) $1.27 $1.69 ($0.42) $0.96 $0.31
Dividends declared 0.75 0.68 0.07 0.75 -
___________________________________________________________________________
_________
(a) Earnings per share amounts represent both primary and fully diluted
earnings
per share.
See notes to financial statements.
</TABLE>
<PAGE> 4
<TABLE>
CONSOLIDATED BALANCE SHEET
J.P. Morgan & Co. Incorporated
___________________________________________________________________________
_______
<CAPTION>
Dollars in millions March December March
31 31 31
1995 1994 1994
____________________________
____
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ $ 2,210 $
1,153 1,760
Interest-earning deposits with banks 1,650 1,362 2,037
Debt investment securities available-for-
sale
carried at fair value (cost: $21,428
in 21,655 22,657 18,436
March 1995, $22,503 in December 1994,
and
$17,907 in March 1994)
Trading account assets 68,198 57,065 61,875
Securities purchased under agreements to
resell
($27,434 in March 1995, $21,170 in
December 27,478 21,350 30,261
1994, and $30,231 in March 1994) and
federal
funds sold
Securities borrowed 11,073 12,127 10,285
Loans 24,434 22,080 25,388
Less: allowance for credit losses 1,132 1,131 1,143
___________________________________________________________________________
_______
Net loans 23,302 20,949 24,245
Customers' acceptance liability 658 586 610
Accrued interest and accounts receivable 3,011 5,028 4,411
Premises and equipment 3,395 3,318 2,990
Less: accumulated depreciation 1,361 1,302 1,153
___________________________________________________________________________
_______
Premises and equipment, net 2,034 2,016 1,837
Other assets 6,865 9,567 12,983
___________________________________________________________________________
_______
Total assets 167,077 154,917 168,740
___________________________________________________________________________
_______
LIABILITIES
Noninterest-bearing deposits:
In offices in the U.S. 2,889 3,693 4,288
In offices outside the U.S. 682 767 617
Interest-bearing deposits:
In offices in the U.S. 2,015 1,826 2,218
In offices outside the U.S. 41,238 36,799 36,435
___________________________________________________________________________
_______
Total deposits 46,824 43,085 43,558
Trading account liabilities 45,210 36,407 36,576
Securities sold under agreements to
repurchase
($32,884 in March 1995, $30,179 in
December 35,843 35,768 51,522
1994, and $47,158 in March 1994) and
federal
funds purchased
Commercial paper 2,309 3,507 4,539
Other liabilities for borrowed money 11,334 10,900 8,386
Accounts payable and accrued expenses 3,949 6,231 5,651
Liability on acceptances 658 586 617
Long-term debt not qualifying as risk-
based 5,009 3,605 2,563
capital
Other liabilities 3,018 2,063 2,544
___________________________________________________________________________
_______
154,154 142,152 155,956
Long-term debt qualifying as risk-based 3,283 3,197 2,933
capital
___________________________________________________________________________
_______
Total liabilities 157,437 145,349 158,889
STOCKHOLDERS' EQUITY
Preferred stock (authorized shares:
10,000,000):
Adjustable rate cumulative preferred
stock 244 244 244
(issued and outstanding: 2,444,300)
Variable cumulative preferred stock
(issued and 250 250 250
outstanding: 250,000)
Common stock, $2.50 par value
(authorized shares:
500,000,000; issued: 200,672,173 in
March 1995, 502 502 501
200,668,373 in December 1994 and
200,279,108 in
March 1994)
Capital surplus 1,448 1,452 1,439
Retained earnings 7,149 7,044 6,595
Net unrealized gains on investment
securities, 449 456 993
net of taxes
Other 368 367 268
___________________________________________________________________________
_______
10,410 10,315 10,290
Less: treasury stock (13,272,339 shares
in
March 1995, 12,966,917 shares in 770 747 439
December 1994
and 8,019,142 shares in March 1994) at
cost
___________________________________________________________________________
_______
Total stockholders' equity 9,640 9,568 9,851
___________________________________________________________________________
_______
Total liabilities and stockholders' 167,077 154,917 168,740
equity
___________________________________________________________________________
_______
See notes to financial statements.
</TABLE>
<PAGE> 5
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
J.P. Morgan & Co. Incorporated
_____________________________________________________________________________
___________
<CAPTION>
Dollars in millions Three months ended
____________________________
March 31 March 31
1995 1994
____________________________
<S> <C> <C>
PREFERRED STOCK
Adjustable rate cumulative preferred stock
Balance, January 1 and March 31 $ 244 $ 244
Variable cumulative preferred stock
Balance, January 1 and March 31 250 250
___________________________________________________________________________
_____________
Total preferred stock, March 31 494 494
___________________________________________________________________________
_____________
COMMON STOCK
Balance, January 1 502 499
Shares issued under dividend reinvestment plan,
various - 2
employee benefit plans, and conversion of
debentures
___________________________________________________________________________
_____________
Balance, March 31 502 501
___________________________________________________________________________
_____________
CAPITAL SURPLUS
Balance, January 1 1,452 1,393
Shares issued under dividend reinvestment plan,
various
employee benefit plans, and conversion of (4) 46
debentures,
and income tax benefits associated with stock
options
___________________________________________________________________________
_____________
Balance, March 31 1,448 1,439
___________________________________________________________________________
_____________
RETAINED EARNINGS
Balance, January 1 7,044 6,386
Net income 255 345
Dividends declared on adjustable rate cumulative
preferred stock (3) (3)
Dividends declared on variable cumulative
preferred stock (3) (1)
Dividends declared on common stock (141) (131)
Dividend equivalents on common stock issuable (3) (1)
___________________________________________________________________________
_____________
Balance, March 31 7,149 6,595
___________________________________________________________________________
_____________
NET UNREALIZED GAINS ON INVESTMENT SECURITIES, NET
OF TAXES
Balance, January 1 456 1,165
Net change in net unrealized gains, net of taxes (7) (172)
___________________________________________________________________________
_____________
Balance, March 31 449 993
___________________________________________________________________________
_____________
OTHER
COMMON STOCK ISSUABLE UNDER STOCK AWARD PLANS
Balance, January 1 369 253
Accrued deferred stock awards 19 25
Deferred stock awards distributed, net (16) (6)
___________________________________________________________________________
_____________
Balance, March 31 372 272
___________________________________________________________________________
_____________
FOREIGN CURRENCY TRANSLATION
Bala (2) (3)
nce, January 1
Translation adjustments (3) (1)
Income tax benefit 1 -
___________________________________________________________________________
_____________
Balance, March 31 (4) (4)
___________________________________________________________________________
____________
Total other, March 31 368 268
___________________________________________________________________________
_____________
LESS: TREASURY STOCK
Balance, January 1 747 328
Purchases 67 118
Shares distributed under various employee benefit (44) (7)
plans
___________________________________________________________________________
_____________
Balance, March 31 770 439
___________________________________________________________________________
_____________
Total stockholders' equity, March 31 9,640 9,851
___________________________________________________________________________
_____________
See notes to financial statements.
</TABLE>
<PAGE> 6
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
J.P. Morgan & Co. Incorporated
_____________________________________________________________________________
___________
<CAPTION>
Dollars in millions Three months ended
____________________________
March 31 March 31
1995 1994
____________________________
<S> <C> <C>
NET INCOME $ 255 $ 345
Adjustments to reconcile to cash provided by (used
in)
operating activities:
Noncash items: depreciation, amortization,
deferred 80 (142)
income taxes, and stock award plans
(Increase) decrease in assets:
Trading account assets (11,247) (20,481)
Securities purchased under agreements to (6,293) (7,575)
resell
Securities borrowed 1,054 533
Accrued interest and accounts receivable 2,014 529
Increase (decrease) in liabilities:
Trading account liabilities 8,715 18,390
Securities sold under agreements to 2,686 10,863
repurchase
Accounts payable and accrued expenses (2,290) (678)
Other changes in operating assets and 2,847 (6,025)
liabilities, net
Net investment securities gains included in
cash flows from investing activities (9) (91)
___________________________________________________________________________
_____________
CASH USED IN OPERATING ACTIVITIES (2,188) (4,332)
___________________________________________________________________________
_____________
Increase in interest-earning deposits with banks (291) (814)
Debt investment securities:
Proceeds from sales 9,246 12,306
Proceeds from maturities, calls, and
mandatory 747 868
redemptions
Purchases (7,722) (16,683)
Decrease in federal funds sold 136 31
Increase in loans (586) (1,018)
Payments for premises and equipment (53) (44)
Other changes, net (675) 4,220
___________________________________________________________________________
_____________
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 802 (1,134)
___________________________________________________________________________
_____________
Decrease in noninterest-bearing deposits (890) (614)
Increase in interest-bearing deposits 4,559 3,801
Increase (decrease) in federal funds purchased (2,630) 1,258
Increase (decrease) in commercial paper (1,198) 1,966
Other liabilities for borrowed money:
Proceeds 3,853 2,556
Payments (2,733) (4,506)
Long-term debt:
Proceeds 1,729 692
Payments (265) (500)
Capital stock:
Issued - 49
Purchased or redeemed (67) (118)
Dividends paid (147) (136)
Other changes, net (1,977) 1,760
___________________________________________________________________________
_____________
CASH PROVIDED BY FINANCING ACTIVITIES 234 6,208
___________________________________________________________________________
_____________
Effect of exchange rate changes on cash and due 95 10
from banks
___________________________________________________________________________
_____________
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS (1,057) 752
Cash and due from banks at December 31, 1994 and 2,210 1,008
1993
___________________________________________________________________________
_____________
Cash and due from banks at March 31, 1995 and 1994 1,153 1,760
___________________________________________________________________________
_____________
Cash disbursements were made for:
Interest $1,890 $1,425
Income taxes 104 539
___________________________________________________________________________
_____________
See notes to financial statements.
</TABLE>
<PAGE> 7
<TABLE>
CONSOLIDATED STATEMENT OF CONDITION
Morgan Guaranty Trust Company of New
York
___________________________________________________________________________
_______
<CAPTION>
Dollars in millions March 31 December
1995 31
1994
_____________________
____
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,124 $ 2,182
Interest-earning deposits with banks 1,751 1,605
Debt investment securities available-for-
sale 20,370 21,292
carried at fair value
Trading account assets 54,201 45,386
Securities purchased under agreements to
resell 20,303 16,562
and federal funds sold
Loans 21,344 19,397
Less: allowance for credit losses 1,027 1,025
___________________________________________________________________________
_______
Net loans 20,317 18,372
Customers' acceptance liability 628 556
Accrued interest and accounts receivable 2,968 3,594
Premises and equipment 3,031 2,967
Less: accumulated depreciation 1,197 1,149
___________________________________________________________________________
_______
Premises and equipment, net 1,834 1,818
Other assets 5,931 7,360
___________________________________________________________________________
_______
Total assets 129,427 118,727
___________________________________________________________________________
_______
LIABILITIES
Noninterest-bearing deposits:
In offices in the U.S. 2,847 3,698
In offices outside the U.S. 732 770
Interest-bearing deposits:
In offices in the U.S. 1,726 1,480
In offices outside the U.S. 41,849 38,566
___________________________________________________________________________
_______
Total deposits 47,154 44,514
Trading account liabilities 39,396 30,730
Securities sold under agreements to
repurchase 19,217 22,099
and federal funds purchased
Other liabilities for borrowed money 6,023 5,320
Accounts payable and accrued expenses 2,464 2,902
Liability on acceptances 628 556
Long-term debt not qualifying as risk-based
capital
(includes $663 in 1995 and $630 in 1994 of 2,360 1,968
notes
payable to J.P. Morgan)
Other liabilities 3,491 2,080
___________________________________________________________________________
_______
120,733 110,169
Long-term debt qualifying as risk-based
capital
(includes $1,034 in 1995 and $1,030 in 1,233 1,249
1994 of
notes payable to J.P. Morgan)
___________________________________________________________________________
_______
Total liabilities 121,966 111,418
STOCKHOLDER'S EQUITY
Preferred stock, $100 par value
(authorized shares: 2,500,000) - -
Common stock, $25 par value
(authorized and outstanding shares: 250 250
10,000,000)
Surplus 2,670 2,670
Undivided profits 4,398 4,266
Net unrealized gains on investment
securities, net 147 124
of taxes
Foreign currency translation (4) (1)
___________________________________________________________________________
_______
Total stockholder's equity 7,461 7,309
___________________________________________________________________________
_______
Total liabilities and stockholder's equity 129,427 118,727
___________________________________________________________________________
_______
Member of the Federal Reserve System and the Federal Deposit Insurance
Corporation.
See notes to financial statements.
</TABLE>
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OF J.P. MORGAN & CO. INCORPORATED
Supplementary to notes in the 1994 Annual report to stockholders
1. BASIS OF PRESENTATION
The interim financial information in this report has not been audited.
In the opinion of management, all adjustments necessary for a fair
presentation of the financial position and the results of operations for
the interim periods have been made. All adjustments made were of a
normal recurring nature. Management consults with its independent
accountants on significant accounting and reporting matters that arise
during the year.
2. ACCOUNTING CHANGES
ACCOUNTING FOR IMPAIRMENT OF A LOAN
On January 1, 1995, J.P. Morgan adopted Statement of Financial Accounting
Standards (SFAS) No. 114 and subsequent amendment SFAS No. 118, both
entitled, Accounting by Creditors for Impairment of a Loan, which
prescribe criteria for recognition of loan impairment as well as methods
to measure impairment for certain loans, including loans whose terms were
modified in troubled debt restructurings. The standards require that
impaired loans be measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price, or at the
fair value of the collateral if the loan is collateral dependent. In
accordance with these standards, J.P. Morgan defines impaired loans as
those loans on which the accrual of interest is discontinued because the
contractual payment of principal or interest has become 90 days past due
or management has serious doubts about future collectibility of principal
or interest, even though the loans are currently performing (i.e.,
nonaccrual loans). The adoption of these standards did not have a
material impact on J.P. Morgan's financial statements. For additional
information, see Note 9 to the financial statements, Nonperforming assets
and allowance for credit losses.
<PAGE> 9
3. INTEREST REVENUE AND EXPENSE
An analysis of interest revenue and expense derived from on-and off-
balance-sheet financial instruments is presented in the table below.
Interest revenue and expense associated with derivative financial
instruments, such as swaps, forwards, spot, futures, options, and debt
securities forwards, used as hedges or to modify the interest rate
characteristics of assets and liabilities, are attributed to and included
with the related balance sheet instrument. Net interest revenue
associated with risk-adjusting swaps that are used to meet longer-term
asset and liability management objectives, including the maximization of
net interest revenue, is not attributed to a specific balance sheet
instrument, but is included in the Other sources caption in the table
below.
First quarter
In millions 1995 1994
________________________________________________________________________
INTEREST REVENUE
Deposits with banks $ $
59 49
Debt investment securities (a) 399 272
Trading account assets 829 602
Securities purchased under agreements
to resell and federal funds sold 412 372
Securities borrowed 214 115
Loans 415 334
Other sources, primarily risk-adjusting 142 93
swaps
___________________________________________________________________________
_________
Total interest revenue 2,47 1,83
0 7
________________________________________________________________________
INTEREST EXPENSE
Deposits 619 433
Trading account liabilities 428 267
Securities sold under agreements to
repurchase and federal funds purchased 595 557
Other borrowed money 211 125
Long-term debt 117 58
___________________________________________________________________________
_________
Total interest expense 1,97 1,44
0 0
___________________________________________________________________________
_________
Net interest revenue 500 397
________________________________________________________________________
(a) Interest revenue from debt investment securities included taxable
revenue
of $357 million and revenue exempt from U.S. income taxes of $42 million
for the
three months ended March 31, 1995.
For the three months ended March 31, 1995, net interest revenue
associated with asset and liability management derivatives was
approximately $80 million. At March 31, 1995, approximately $100
million of net deferred gains on closed derivative contracts used for
asset and liability management purposes were recorded on the balance
sheet. Such amount is primarily composed of net deferred gains on closed
hedge contracts included in the amortized cost of the debt investment
portfolio, partially offset by net deferred losses on closed hedge
contracts associated with risk-adjusting swaps. Net deferred gains
(losses) are expected to amortize into Net interest revenue as follows:
($2) million - remainder of 1995; $4 million - 1996; $15 million - 1997;
$25 million - 1998; $20 million - 1999; $10 million - 2000; and
approximately $28 million thereafter. The amount of net deferred gains
(losses) on closed derivative contracts will change from period to
period, primarily due to amortization of such amounts to net interest
revenue and the execution of our asset and liability management
strategies, which may result in the sale of the underlying hedged
instruments
and/or termination of hedge contracts.
4. TRADING REVENUE
An analysis of trading revenue for the three months ended March 31, 1995
and 1994, is presented in the following table. Reported Trading revenue
does not include the net interest revenue associated with our trading
activities. As our business objective is to maximize total revenue,
trading-related net interest revenue should be considered when evaluating
results. For additional information related to trading-related net
interest revenue, refer to the trading revenue discussion in Management's
Discussion and Analysis of Financial Condition and Results of Operations.
First quarter
In millions 1995 1994
_____________________________________________________________________
Swaps and other interest rate contracts $ 76 $
266
Debt instruments 94 36
Foreign exchange spot and option 70 10
contracts
Equities and commodities 63 44
____________________________________________________________________________
_____
Trading revenue 303 356
_____________________________________________________________________
<PAGE> 10
5. INVESTMENT SECURITIES
Debt investment securities
A comparison of the cost and carrying values of debt investment securities
available for sale and carried at fair value at March 31, 1995, follows.
Fair and
carrying
In millions Cost value
___________________________________________________________________________
___
U.S. Treasury $ 3,806 $ 3,807
U.S. government agency, principally
mortgage-backed 10,696 10,780
U.S. state and political 2,114 2,275
subdivision
U.S. corporate and bank debt 266 280
Foreign government* 3,411 3,397
Foreign corporate and bank debt 1,032 1,012
Other 103 104
___________________________________________________________________________
___
Total debt investment securities 21,428 21,655
___________________________________________________________________________
___
* Primarily includes debt of countries that are members of the Organization
for Economic Cooperation and Development.
Net unrealized appreciation associated with debt investment securities
available for sale carried at fair value at March 31, 1995, was $227
million, consisting of gross unrealized appreciation of $505 million and
gross unrealized depreciation of $278 million. Such amounts represent the
gross unrealized appreciation or depreciation on each debt security,
including the effects of any related hedge. For additional detail of gross
unrealized gains and losses associated with open derivative contracts used
to hedge debt investment securities, see Note 7 to the financial
statements, Off-balance-sheet financial instruments.
The following table presents the components of Net realized investment
securities gains.
First
quarter
In millions 1995 1994
___________________________________________________________________________
___
Gross realized gains from sales $ $
60 185
Gross realized losses from sales (51) (95)
Net gains on maturities, calls and
mandatory redemptions -
1
___________________________________________________________________________
___
Net investment securities gains 9
91
___________________________________________________________________________
___
Equity investment securities
Net realized gains on the sale of equity investment securities of $163
million included in Other revenue for the three months ended March 31,
1995, include $168 million of gross realized gains. Gross unrealized
gains and losses as well as a comparison of the cost, fair value, and
carrying value of marketable equity investment securities at March 31,
1995, follows.
Gross Gross Fair
and
unreali unreali carryin
zed zed g
In millions Cost gains losses value
_________________________________________________________________________
_____
March 31, 1995 $205 $503 $5 $703
_________________________________________________________________________
_____
Securities without available market quotations:
Nonmarketable equity investment securities, carried at a cost of $433
million, had an estimated fair value of $531 million at March 31, 1995.
<PAGE> 11
6. TRADING ACCOUNT ASSETS AND LIABILITIES
Trading account assets and liabilities, including derivative instruments
used for trading purposes, are carried at fair value. The following
table presents the carrying value of trading account assets and
liabilities at March 31, 1995, and the average balance for the three-
month period ended March 31, 1995.
Carrying Average
In millions value balance
___________________________________________________________________________
___
TRADING ACCOUNT ASSETS
U.S. Treasury $ 6,180 $ 8,290
U.S. government agency 2,805 3,714
Foreign government 19,833 20,754
Corporate debt and equity 8,589 8,083
Other securities 3,540 2,706
Interest rate and currency swaps 13,700 11,779
Foreign exchange contracts 7,462 4,836
Interest rate futures and forwards 254 162
Commodity and equity contracts 1,260 1,345
Purchased option contracts 4,575 3,812
___________________________________________________________________________
___
Total trading account assets 68,198 65,481
___________________________________________________________________________
___
TRADING ACCOUNT LIABILITIES
U.S. Treasury 6,356 8,333
Foreign government 9,717 9,873
Corporate debt and equity 2,577 3,030
Other securities 1,144 1,308
Interest rate and currency swaps 12,809 10,792
Foreign exchange contracts 6,073 3,951
Interest rate futures and forwards 323 188
Commodity and equity contracts 1,350 1,631
Written option contracts 4,861 4,451
___________________________________________________________________________
___
Total trading account liabilities 45,210 43,557
___________________________________________________________________________
___
<PAGE> 12
7. OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Derivatives
Derivatives may be used either for trading or asset and liability
management purposes. Accordingly, the notional amounts presented in the
table below have been identified as relating to either trading or asset and
liability management activities based on management's intent and ongoing
usage. A summary of the credit exposure, which is represented by the
positive market value associated with derivatives, after considering the
benefit of approximately $20.3 billion of master netting agreements in
effect at March 31, 1995, is also presented.
Notional Credit
In billions amounts exposure
___________________________________________________________________________
_______________
Interest rate and currency swaps
Trading $ 872.1
Asset and liability 278.6
management(a)(b)(c)
___________________________________________________________________________
_______________
Total interest rate and currency 1,150.7 $13.7
swaps
___________________________________________________________________________
_______________
Foreign exchange spot, forward, and
futures contracts
Trading 442.3
Asset and liability 20.5
management(a)(b)
___________________________________________________________________________
_______________
Total foreign exchange spot,
forward, 462.8 7.5
and futures contracts
___________________________________________________________________________
_______________
Interest rate futures, forward rate
agreements, and debt securities
forwards
Trading 366.7
Asset and liability management 11.0
___________________________________________________________________________
_______________
Total interest rate futures,
forward
rate agreements, and debt 377.7 0.2
securities
forwards
___________________________________________________________________________
_______________
Commodity and equity swaps, forward,
and 63.2 1.3
futures contracts, all trading
___________________________________________________________________________
_______________
Purchased options(e)
Trading 393.2
Asset and liability management(a) 3.2
___________________________________________________________________________
_______________
Total purchased options 396.4 4.6
___________________________________________________________________________
_______________
Written options, all trading(f) 472.3 -
___________________________________________________________________________
_______________
Total credit exposure recorded as
assets on the balance sheet 27.3 (d
)
___________________________________________________________________________
____
(a) The majority of J.P. Morgan's asset and liability management
derivatives
are transacted with independently managed J.P. Morgan derivatives dealers
that function as intermediaries for credit and administrative purposes.
(b) The notional amounts of asset and liability management derivatives
contracts conducted in the foreign exchange markets, primarily forward
contracts, amounted to $22.9 billion at March 31, 1995, and were primarily
denominated in the following currencies: Deutsche mark $5.0 billion,
Japanese yen $3.0 billion, Italian lira $2.9 billion, Belgian franc $2.7
billion, British pound $1.7 billion, Spanish peseta $1.6 billion, Swiss
franc $1.5 billion, and French franc $1.5 billion.
(c) The notional amount of risk-adjusting swaps was $256.6 billion at March
31, 1995.
(d) Total credit exposure related to derivatives increased from $19.5
billion at December 31, 1994, primarily due to the impact of changes in
foreign exchange rates and the decline in the U.S. dollar during the first
quarter of 1995, partially offset by increased benefit from master netting
agreements at March 31, 1995.
(e) At March 31, 1995, purchased options used for trading purposes
included $290.3 billion of interest rate options, $67.8 billion of
foreign exchange options, and $35.1 billion of commodity and equity
options. Only interest rate options are used for asset and liability
management purposes. Purchased options executed on an exchange amounted
to $147.8 billion and those negotiated over-the-counter amounted to
$248.6 billion at March 31, 1995.
(f) At March 31, 1995, written options used for trading purposes included
$365.8 billion of interest rate options, $70.6 billion of foreign
exchange options, and $35.9 billion of commodity and equity options.
Written option contracts executed on an exchange amounted to $210.9
billion and those negotiated over-the-counter amounted to $261.4 billion
at March 31, 1995.
<PAGE> 13
Asset and liability management derivatives
As an end user, J.P. Morgan utilizes derivative instruments in the
execution of its asset and liability management strategies. Derivatives
used for these purposes primarily include interest rate swaps, foreign
exchange forward contracts, forward rate agreements, interest rate futures,
and debt securities forwards. Derivatives are used to hedge or modify the
interest rate characteristics of debt investment securities, loans,
deposits, other liabilities for borrowed money, long-term debt, and other
financial assets and liabilities. In addition, we utilize derivatives to
adjust our overall interest rate risk profile primarily through the use of
risk-adjusting swaps.
Net unrealized losses associated with open derivative contracts used
to hedge or modify the interest rate characteristics of related balance
sheet instruments amounted to ($217) million at March 31, 1995. Gross
unrealized gains and gross unrealized losses associated with open
derivative contracts used for these purposes at March 31, 1995, are
presented below. Such amounts primarily relate to interest rate and
currency swaps and futures used to hedge or modify the interest rate
characteristics of long-term debt and debt investment securities,
principally mortgage-backed securities. See Note 8 to the financial
statements, Fair value of financial instruments.
Gross Gross Net
unrealize unrealiz unrealized
d ed
In millions gains losses gains/(loss
es)
___________________________________________________________________________
__
Debt investment $ 49 $244 $(195)
securities
Long-term debt 106 100
6
Other financial 65 93 (28)
instruments
___________________________________________________________________________
__
Total 220 437 (217)
___________________________________________________________________________
__
Net unrealized gains associated with risk-adjusting swaps and their related
hedges that are entered into to meet longer-term asset and liability
management objectives approximated $0.7 billion at March 31, 1995. The net
amount is composed of $2.8 billion of gross unrealized gains and $2.1
billion of gross unrealized losses. The unrealized gains and losses
related to the derivative contracts used to hedge these risk-adjusting
swaps were not material at March 31, 1995. There were no material
terminations of risk-adjusting swaps during the three months ended March
31, 1995.
Credit-related financial instruments
Credit-related financial instruments include commitments to extend
credit, standby letters of credit and guarantees, and indemnifications in
connection with securities lending activities. The contractual amounts
of these instruments represent the amounts at risk should the contract be
fully drawn upon, the client default, and the value of any existing
collateral become worthless. The credit risk associated with these
instruments varies depending on the creditworthiness of the client and
the value of any collateral held. The maximum credit risk associated
with credit-related financial instruments is measured by the contractual
amounts of these instruments.
A summary of the contractual amount of credit-related financial
instruments at March 31, 1995, is presented in the following table.
March 31
In billions 1995
_________________________________________________________________________
__
Commitments to extend credit $48.0
Standby letters of credit and guarantees 10.1
Securities lending indemnifications (a) 18.5
_________________________________________________________________________
__
(a) At March 31, 1995, J.P. Morgan held cash and other collateral of
$17.9 billion in support of securities lending indemnifications.
Other
Consistent with industry practice, amounts receivable and payable for
securities that have not reached the contractual settlement dates are
recorded net on the consolidated balance sheet. Amounts receivable for
securities sold of $36.7 billion were netted against amounts payable for
securities purchased of $38.2 billion to arrive at a net trade date
payable of $1.5 billion, which was classified as Other liabilities on the
consolidated balance sheet at March 31, 1995.
<PAGE> 14
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with SFAS No. 107, Disclosures about Fair Value of
Financial Instruments, J.P. Morgan estimates that the aggregate net fair
value of all balance sheet and off-balance-sheet financial instruments
exceeded associated net carrying values at March 31, 1995, by
approximately $2.1 billion before considering income taxes. Such amount
was primarily attributable to net appreciation on net loans and risk-
adjusting swaps of $1.2 billion and $0.7 billion, respectively.
9. NONPERFORMING ASSETS AND ALLOWANCE FOR CREDIT LOSSES
Total nonperforming assets, net of charge-offs, at March 31, 1995, are
presented in the following table.
March 31
In millions 1995
__________________________________________________________________________
Nonaccrual loans:
Commercial and industrial $148
Other 65
__________________________________________________________________________
213
Restructuring countries 3
__________________________________________________________________________
Total nonaccrual loans 216 (a)
__________________________________________________________________________
Other nonperforming assets 1
__________________________________________________________________________
Total nonperforming assets 217
__________________________________________________________________________
An analysis of the effect of nonaccrual loans, net of charge-offs, on
interest revenue in the first quarter of 1995, is presented in the
following table.
First
quarter
In millions 1995
__________________________________________________________________________
Interest revenue that would have been
recorded if accruing $ 5
Less interest revenue recorded 14
__________________________________________________________________________
Positive impact of nonaccrual loans
on interest revenue 9
__________________________________________________________________________
An analysis of the allowance for credit losses at March 31, 1995, is
presented in the following table.
In millions 1995
___________________________________________________________________________
_____________
Balance, January 1 $1,131
___________________________________________________________________________
_____________
Recoveries 9
Charge-offs:
Commercial and industrial (6)
Restructuring countries -
Other (2)
__________________________________________________________________________
Net charge-offs 1
__________________________________________________________________________
Balance, March 31 (b) 1,132 (c)
__________________________________________________________________________
(a) As of March 31, 1995, J.P. Morgan's nonaccrual loan balances do not
require a related impairment allowance, as calculated in accordance with
SFAS No. 114. Thus, the amount of total nonaccrual loans at March 31,
1995, for which there was no related allowance for credit losses in
accordance with SFAS No. 114 was $216 million. For the first quarter of
1995, the average recorded investment in nonaccrual loans was $210 million.
(b) In accordance with SFAS No. 5, Accounting for Contingencies, and SFAS
No. 114, an allowance is maintained that is considered adequate to absorb
losses inherent in the existing portfolios of loans and other undertakings
to extend credit, such as irrevocable unused loan commitments, or to make
payments to others for which a client is ultimately liable, such as standby
letters of credit and guarantees, commercial letters of credit and
acceptances, and all other credit exposures, including derivatives. A
judgment as to the adequacy of the allowance is made at the end of each
quarterly reporting period.
(c) At March 31, 1995, the allocation of the allowance for credit losses
was as follows: Specific allocation - borrowers in the U.S. $72 million,
Specific allocation - borrowers outside the U.S. $111 million, Allocation
to general risk $949 million.
<PAGE> 15
10. CORPORATE FINANCE AND OTHER REVENUE
In the first quarter of 1995 and 1994, Corporate finance revenue of $114
million and $117 million includes $22 million and $45 million of
underwriting revenue, respectively.
Other revenue of $149 million in the 1995 first quarter includes
$163 million of net equity investment securities gains and $40 million of
costs associated with hedging anticipated foreign currency revenues and
expenses. Other revenue of $103 million in the 1994 first quarter
includes net equity investment securities gains of $97 million and $41
million of hedging losses resulting from the management of non-trading
foreign currency exposures.
11. INCOME TAXES
Income tax expense in the 1995 first quarter was based on a 34% effective
tax rate, compared to a 36% effective tax rate in the 1994 first quarter.
Income tax expense related to the net investment securities gains was
approximately $4 million and $37 million for the three months ended March
31, 1995 and 1994, respectively, computed at a rate of approximately 41%.
The valuation allowance to reduce deferred tax assets to the amount
expected to be realized totaled $140 million at December 31, 1994. The
valuation allowance is primarily related to the ability to recognize tax
benefits associated with foreign operations. The balance of the
valuation allowance has not changed materially since December 31, 1994.
12. COMMITMENTS AND CONTINGENT LIABILITIES
Excluding mortgaged properties, assets carried at approximately $49.6
billion in the consolidated balance sheet at March 31, 1995, were pledged
as collateral for borrowings, to qualify for fiduciary powers, to secure
public monies as required by law, and for other purposes.
13. EARNINGS PER COMMON SHARE
In the calculation of primary and fully diluted earnings per common
share, net income is adjusted by adding back to net income the interest
expense on convertible debentures and the expense related to dividend
equivalents on certain deferred incentive compensation awards, net of the
related income tax effects, and deducting the preferred stock dividends.
Primary and fully diluted earnings per common share are computed by
dividing income components by the weighted-average number of common and
common equivalent shares outstanding during the period.
For the primary earnings per share calculation, the weighted-average
number of common and common equivalent shares outstanding includes the
average number of shares of common stock outstanding, the average number
of shares issuable upon conversion of convertible debentures, and the
average number of shares issuable under employee benefit plans that have
a dilutive effect.
The weighted-average number of common and common equivalent shares
outstanding, assuming full dilution, includes the average number of
shares of common stock outstanding, the average number of shares issuable
upon conversion of convertible debentures, and the average number of
shares issuable under various employee benefit plans. The maximum
dilutive effect is computed using the period-end market price of J.P.
Morgan common stock, if it is higher than the average market price used
in calculating primary earnings per share.
First
quarter
Dollars in millions 1995 1994
___________________________________________________________________________
____
Adjusted net income $249 $341
Primary earnings per share:
Weighted-average number of common
and common equivalent shares
outstanding during the period 196,905,10 201,291,9
6 82
Fully diluted earnings per share:
Weighted-average number of common
and common equivalent shares
outstanding during the period 196,998,25 201,192,5
0 72
___________________________________________________________________________
____
<PAGE> 16
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL HIGHLIGHTS
J.P. Morgan & Co. Incorporated reported net income of $255 million in the
first quarter of 1995, 26% lower than in the first quarter of 1994 and up
32% from the fourth quarter. Earnings per share were $1.27 in the first
quarter compared with $1.69 a year earlier. The 1995 first quarter
earnings reflected a previously announced special charge of $55 million
($33 million after tax), or $0.17 per share, related primarily to
severance.
<TABLE>
FIRST QUARTER RESULTS AT A GLANCE
<CAPTION>
In millions of dollars, First quarter Fourth quarter
except per share data 1995 1994 1994
___________________________________________________________________________
_____________
<S> <C> <C> <C>
Revenues $1,388 $1,391 $1,228
Operating expenses (1,002) (852) (963)
Income taxes (131) (194) (72)
___________________________________
_____________________________________________________
Net income $ 255 $ 345 $ 193
___________________________________________________________________________
_____________
Net income per share $1.27 $1.69 $0.96
___________________________________________________________________________
_____________
Dividends declared per share $0.75 $0.68 $0.75
___________________________________________________________________________
_____________
</TABLE>
REVENUES were approximately even with the first quarter of 1994 and
13% higher than in the fourth quarter:
-Trading revenue declined 15% from a year earlier but nearly
doubled from the fourth quarter on strong results in debt
instruments, foreign exchange, and equities and commodities.
-Net interest revenue rose 26% to $500 million from a year
earlier. The rise was mostly attributable to improved results
from asset and liability management.
-Investment management fees, operational service fees, and
corporate finance revenue were in line with levels of a year
ago, while credit-related fees were lower.
OPERATING EXPENSES, excluding the special charge, increased 11% from a
year earlier and were essentially unchanged from the fourth quarter.
The special charge related to an expense management program initiated
during the first quarter to moderate the growth of expenses.
<PAGE> 17
BUSINESS SECTOR RESULTS
The firm reports financial results for five business sectors. Three are
oriented toward client services: Asset Management and Servicing, Finance
and Advisory, and Sales and Trading. The Equity Investments sector
comprises management of the firm's own portfolio of equity securities. The
Asset and Liability Management sector covers the management of the firm's
overall interest rate exposure. These five sectors generally reflect the
way we operate but do not correspond exactly with the firm's organizational
structure. Presented below are the summary results for each sector for
the quarters ended March 31, 1995, March 31, 1994, and December 31, 1994.
<TABLE>
<CAPTION>
Asset Asset
and
Manage- Finance Sales Equity Liabilit
y
ment and and and Invest- Manage- Corpora Consol-
te
In millions Servicin Advisory Trading ments ment Items idated
g
___________________________________________________________________________
_________________
<S> <C> <C> <C> <C> <C> <C> <C>
MARCH 31,
1995
Total $410 $320 $385 $173 $240 ($140) $1,388
revenue
Total 324 276 295 6 23 78 1,002
expenses
___________________________________________________________________________
_________________
Pretax 86 44 90 167 217 (218) 386
income
___________________________________________________________________________
_________________
MARCH 31,
1994
Total 434 292 320 107 281 (43) 1,391
revenue
Total 301 244 257 5 22 23 852
expenses
___________________________________________________________________________
_________________
Pretax 133 48 63 102 259 (66) 539
income
___________________________________________________________________________
_________________
DEC. 31,
1994
Total 384 272 289 118 243 (78) 1,228
revenue
Total 346 262 319 5 23 8 963
expenses
___________________________________________________________________________
_________________
Pretax 38 10 (30) 113 220 (86) 265
income
___________________________________________________________________________
_________________
Notes:
(1) The firm's management reporting system and policies were used to
determine the revenues and expenses directly attributable to each sector on
a taxable-equivalent basis. In addition, earnings on stockholders' equity
and certain overhead expenses not allocated for management reporting
purposes were allocated to each business sector. Earnings on stockholders'
equity were allocated based on management's assessment of the inherent risk
of each sector. Overhead expenses were allocated based primarily on staff
levels and represent costs associated with various support functions that
exist for the benefit of the firm as a whole.
(2) In the quarters ended March 31, 1995 and 1994, and December 31, 1994,
$131 million, $194 million and $72 million respectively, related to income
taxes were not allocated to the business sectors.
</TABLE>
Asset Management and Servicing
The Asset Management and Servicing sector recorded pretax income of $86
million in the first quarter of 1995 compared with $133 million in the year-
earlier period, a decrease of $47 million or 35%. Pretax income in the
fourth quarter of 1994 was $38 million. Total revenue decreased 6% to $410
million in the first quarter compared with $434 million in the first
quarter of 1994. Revenues from custody and securities-related services
declined, while increased revenues associated with higher levels of assets
under management were somewhat offset by lower performance fees. First
quarter 1995 revenue increased $26 million or 7% from the fourth quarter of
1994 primarily because of an increase in the volume of transactions in
exchange traded products and securities processing.
Expenses associated with Asset Management and Servicing were $324
million in the first quarter 1995 compared with $301 million in the first
quarter of 1994. The 8% increase in expenses primarily relates to higher
employee compensation and benefits associated with an increase in staff
levels, and an increase in technology and communications expenses.
Expenses declined 6% from the fourth quarter of 1994.
<PAGE> 18
Finance and Advisory
The Finance and Advisory sector recorded pretax income of $44 million in
the first quarter compared with $48 million a year ago and $10 million in
the 1994 fourth quarter. Total revenue in the first quarter increased 10%
to $320 million from $292 million in the first quarter of 1994 primarily
due to increased revenues related to loan syndications partially offset by
lower underwriting revenues. First quarter revenue increased $48 million
or 18% from the fourth quarter primarily as a result of higher revenues
from municipal finance activities and loan syndication.
Expenses in the first quarter for the Finance and Advisory sector were
$276 million compared with $244 million in the first quarter of 1994, an
increase of 13%. The increase relates primarily to higher technology
expenses and increased salary expense. Expenses increased 5% from the
fourth quarter of 1994.
Sales and Trading
The markets in the first quarter of 1995 were characterized by extreme
volatility in the foreign exchange and emerging markets, and corrective
rallies in most major bond markets, resulting in cautious investor
behavior. The Sales and Trading sector recorded pretax income of $90
million in the first quarter of 1995 up 43% from the $63 million in the
1994 first quarter. The sector recorded a pretax loss of $30 million in the
fourth quarter of 1994. Total revenue in the first quarter of 1995 was $385
million compared with $320 million in the first quarter of 1994. Revenue
associated with market making activities in foreign exchange and
commodities markets increased in the 1995 first quarter compared with the
first quarter 1994. Revenue from proprietary trading activities, primarily
in Europe and Asia, increased significantly in 1995 compared with losses in
the first quarter of 1994. While swaps volumes were comparable, revenues
from structured transactions were below the high level of last year's first
quarter, and losses were recorded on positions arising from some client-
related transactions.
First quarter 1995 revenue increased $96 million or 33% from the
fourth quarter of 1994 reflecting higher proprietary trading revenues and
revenue related to foreign exchange and fixed income activities.
Total expenses for the Sales and Trading sector increased by
approximately 15% to $295 million from $257 million in the first quarter of
1994. The increase was primarily attributable to higher technology and
communications costs. Expenses decreased 8% from the fourth quarter of
1994.
<PAGE> 19
Equity Investments
Equity Investments recorded pretax income of $167 million in the first
quarter of 1995 compared with $102 million in the first quarter of 1994,
and $113 million in the fourth quarter. Total revenue was $173 million,
compared with $107 million in the first quarter of 1994, and $118 million
in the 1994 fourth quarter. The increase is primarily because of higher
net realized gains on equity investment securities. Net unrealized
appreciation on the combined portfolio of marketable and nonmarketable
equity investment securities was $596 million at March 31, 1995, compared
with $672 million at December 31, 1994. The results of the Equity
Investment portfolio are also evaluated on an economic basis using total
return. In the first quarter of 1995, total return was $97 million. As
our investment strategy covers a longer-term horizon, total return viewed
over shorter periods will reflect the impact of short-term market
movements, including industry specific events.
Asset and Liability Management
Asset and Liability Management recorded pretax income of $217 million in
the first quarter of 1995 compared with $259 million in the same period a
year ago and $220 million in the 1994 fourth quarter. Total revenue, which
primarily includes net interest revenue and net investment securities
gains, was $240 million and $281 million for the first quarter of 1995 and
1994 respectively, and $243 million in the fourth quarter. Declines in net
investment securities gains were partially offset by increases in net
interest revenue related principally to U.S. dollar asset and liability
management activities. Total unrealized appreciation on asset and
liability management financial instruments, principally risk adjusting
swaps, was $961 million at March 31, 1995, and $1,072 million at December
31, 1994.
As our objective in Asset and Liability Management is to create longer-
term value through the management of interest rate and liquidity risk
related to J.P. Morgan's assets, liabilities, and off-balance-sheet
activities, the performance of the Asset and Liability Management sector,
similar to that of the Equity Investments sector, is evaluated on an
economic basis using total return. Total return in the first quarter of
1995 was $129 million.
During the twelve months ended March 31, 1995, monthly value at risk
averaged approximately $103 million and ranged from approximately $86
million to $122 million. (This equates to average daily earnings at risk
of approximately $23 million and a range of approximately $19 million to
$27 million.) During the same twelve-month period, monthly total return
was consistently within the range of monthly value at risk.
Corporate Items
Corporate Items consists of certain revenue and expense items that have not
been allocated to the sectors. Also included in Corporate Items are
intercompany eliminations and the taxable equivalent adjustment, which is
calculated to gross-up tax exempt interest on a taxable basis. Because of
the nature of these items, revenues and expenses will vary from period to
period. Included in Corporate Items in the first quarter of 1995 is the
tax equivalent adjustment of $29 million and a $55 million special charge
related primarily to severance. The tax equivalent adjustment in the first
and fourth quarters of 1994 was $29 million and $31 million respectively.
<PAGE> 20
FINANCIAL STATEMENT ANALYSIS
REVENUES
Revenues totaled $1.388 billion in the first quarter of 1995, about the
same as a year earlier.
Net interest revenue rose 26% to $500 million from the first quarter
of 1994, due mostly to improved results from asset and liability
management, principally in the United States, and to an increase in trading-
related net interest revenue. The 1994 quarter included $20 million of
past-due interest payments related to Brazilian and Argentine assets.
The following table provides J.P. Morgan's interest-rate-sensitivity
gap at March 31, 1995, including the asset and liability interest-rate-
sensitivity gap and the effect of derivatives on the gap. The resulting
interest-rate-sensitivity gap is presented by U.S. dollar and non-U.S.
dollar currency components and reflects J.P. Morgan's market outlook at
March 31, 1995. Significant variances in interest rate sensitivity may
exist at other dates not presented in the table. Amounts in parentheses
reflect liability sensitive positions.
By repricing or maturity dates
___________________________________________________________________________
________________________
After After
six one
months year
Within but but After
six within within five
In millions months one five years
year
___________________________________________________________________________
________________________
MARCH 31, 1995
Asset and liability interest-
rate-sensitivity gap $(2,915 $(1,303 $2,901 $10,85
) ) 2
Derivatives affecting interest
rate sensitivity 1,650 3,056 (1,797 (2,938
) )
___________________________________________________________________________
________________________
Interest-rate-sensitivity gap (1,265) 1,753 1,104 7,914
(a)
___________________________________________________________________________
________________________
(a) Components of interest-
rate-
sensitivity gap:
U.S. dollar 5,147 (1,946) (4,792 8,390
)
Non-U.S. dollar* (6,412) 3,699 5,896 (476)
___________________________________________________________________________
________________
Total (1,265) 1,753 1,104 7,914
___________________________________________________________________________
________________
* Primarily yen, deutsche mark, French franc, Belgian franc, and sterling
positions.
<PAGE> 21
Trading revenue declined 15% to $303 million from the first quarter of
1994. Reported trading revenue does not include net interest revenue
associated with trading activities, which was $61 million in the first
quarter of 1995 and $45 million in the first quarter of 1994. The
following presents an analysis of trading results, including the related
amount of net interest revenue, in the principal markets in which we
participate, for the three months ended March 31, 1995 and 1994.
Foreign
Swaps and exchange
other spot and Equities
interest rate Debt option and
In millions contractsinstruments contracts commoditiesTotal
___________________________________
_______________________________________________
[S] [C] [C] [C] [C] [C]
FIRST QUARTER 1995
Trading revenue $ 76 $ 94 $ 70 $ 63 $303
Net interest revenue 7 68 (1) (13) 61
___________________________________________________________________________
_______
Combined total 83 162 69 50 364
___________________________________________________________________________
_______
___________________________________________________________________________
_______
FIRST QUARTER 1994
Trading revenue 266 36 10 44 356
Net interest revenue 9 57 (5) (16) 45
___________________________________________________________________________
_______
Combined total 275 93 5 28 401
___________________________________________________________________________
_______
Combined trading and related net interest revenue declined 9% to $364
million from a year earlier. Combined revenue for swaps and other interest
rate contracts declined to $83 million from the strong $275 million in the
first quarter of 1994. While total swap volumes were comparable, revenues
from structured transactions were below the high level of last year's first
quarter, and losses were recorded on positions arising from some client-
related transactions. Combined revenue from debt instrument trading rose
to $162 million from $93 million a year earlier, mostly from activities in
Europe and Asia. Foreign exchange trading produced combined revenue of $69
million, up from $5 million a year ago, primarily from increased market-
making. Trading in equities and commodities recorded combined revenue of
$50 million, an increase from $28 million in the year-earlier quarter.
Market risk profile
J.P. Morgan employs a value at risk methodology to estimate the potential
losses that could arise from adverse changes in market conditions within a
95% confidence interval, referred to as "Daily Earnings at Risk" (DEaR).
The DEaR estimate for our combined trading activities averaged
approximately $14 million for the twelve-month period ended March 31, 1995,
and ranged from approximately $10 million to $21 million. Daily combined
trading-related revenue averaged $5.9 million during the twelve-month
period ended March 31, 1995. The frequency distribution of daily revenues
around this average, relative to related DEaR estimates, fell within our
expected confidence bands.
<PAGE> 22
Corporate finance revenue was $114 million in the first quarter, in line
with the year-earlier quarter. Underwriting revenue declined 51% to $22
million from 1994's corresponding quarter. Advisory and syndication fees
rose 28% to $92 million from the 1994 first quarter.
Credit-related fees were $43 million in the first quarter, 23% lower
than in the first quarter of 1994, primarily due to lower securities
lending revenue.
Investment management fees were $130 million in the first quarter, up
slightly from a year ago as a result of an increase in assets under
management, partially offset by lower performance fees.
Operational service fees in the first quarter totaled $140 million,
slightly lower than in the 1994 first quarter, due to a decline in custody
and securities clearing fees.
Net investment securities gains were $9 million in the first quarter,
compared with gains of $91 million in the first quarter of 1994. The gains
in the first quarter of 1994 were mostly attributable to the sale of
European government securities.
Other revenue was $149 million in the first quarter, compared with
$103 million in the 1994 first quarter. The 1995 first quarter reflected
net equity investment securities gains of $163 million, versus $97 million
a year ago. Also included in the first quarter of 1995 was $40 million of
costs associated with hedging anticipated foreign currency revenues and
expenses.
OPERATING EXPENSES
Operating expenses were $1.002 billion in the first quarter of 1995, up 18%
from a year earlier. Excluding the $55 million special charge, operating
expenses were up 11% from the first quarter of 1994. Employee compensation
and benefit expenses, excluding the special charge, rose 4% to $571
million, reflecting growth in staff from a year ago. Technology and
communications expenses were higher than in the year-earlier quarter,
primarily due to expenditures on systems support and development. The
weakening in the dollar's value accounted for 3 percentage points of the
increase in operating expenses from the year-earlier quarter.
The firm initiated an expense management program during the first
quarter. While the emphasis was on lowering overall expense growth, staff
was reduced 4% to 16,443 employees at March 31, 1995, from 17,055 employees
at December 31, 1994. Technology and communications expenses were also
down from fourth quarter levels as the firm focused on high-priority
projects. Incentive compensation accruals were higher than in the fourth
quarter.
Income tax expense of $131 million in the first quarter is based on an
effective tax rate of 34%, down from an effective tax rate of 36% in the
first quarter of 1994.
ASSETS
Total assets were $167 billion at March 31, 1995, compared with $155
billion at December 31, 1994. Nonperforming assets decreased by $3 million
to $217 million during the first quarter as new classifications were more
than offset by repayments and charge-offs. No provision for credit losses
was deemed necessary in the 1995 first quarter. The allowance for credit
losses was $1.132 billion at March 31, 1995.
<PAGE> 23
FOREIGN-COUNTRY-RELATED OUTSTANDINGS
Foreign-country-related outstandings represent outstandings to foreign
borrowers that are denominated in U.S. dollars or currencies other than the
borrower's local currency or, in the case of a guarantee, other than the
guarantor's local currency. Countries in which J.P. Morgan's outstandings
exceeded 1.0% of total assets at March 31, 1995, are listed in the
following table. Outstandings include loans, interest-earning deposits
with banks, investment securities, customers' acceptance liability,
securities purchased under agreements to resell, trading account
securities, accrued interest, and other monetary assets. Outstandings
generally are distributed according to the location of the borrower. In
the case of guaranteed outstandings or when tangible, liquid collateral is
held and realizable outside the obligor's country, distribution is
generally made according to the location of the guarantor or the location
where the collateral is held and realizable.
In millions Cross-border outstandings (a
)
_____________________________________________________________________
United Kingdom $7,005
France 1,839
_____________________________________________________________________
At March 31, 1995, Switzerland's cross-border outstandings were $1,546
million, between 0.75% and 1.0% of total assets.
(a) Mexican cross-border outstandings at March 31, 1995, were $1,051
million, less than 0.75% of total assets. Not included in Mexican cross-
border outstandings are United Mexican States (UMS) bonds, substantially
all of which have been sold forward, that are collateralized by U.S.
Treasury securities. If the book value of these bonds, which is discussed
below, had been included, total Mexican cross-border outstandings would
have exceeded 1% of total assets at March 31, 1995.
The UMS bonds are collateralized as to principal by zero-coupon U.S.
Treasury securities with face value equal to the face value of the
underlying bonds. The collateral, which will become available when the UMS
bonds mature, is pledged to the holders of the bonds and is held by the
Federal Reserve Bank of New York.
U.S.
Treasury
In millions UMS collatera
bonds l
___________________________ __________________
Book Face Market Fair
value value value value
___________________________________________________________________________
___________________
MARCH 31, 1995
Due in 2008 $1,087 $1,121 $ 868 $426
Due in 2019 873 1,081 642 163
___________________________________________________________________________
______
<PAGE> 24
<TABLE>
CAPITAL
<CAPTION>
March 31 December March 31
31
Dollars in billions 1995 1994 1994
___________________________________________________________________________
_________
<S> <C> <C> <C>
Total stockholders' equity $ 9.6 $ 9.6 $ 9.9
Annualized rate of return
on
average common 11.1 % 8.1 % 14.7 %
stockholders'
equity (a)
As percent of period-end
total
assets:
Common equity 5.5 5.9 5.6
Total equity 5.8 6.2 5.8
Book value per common $47.19 $46.73 $47.14
share (a)
Risk-based capital:
Tier 1 risk-based capital $ 8.4 $ 8.3 $ 8.1
Total risk-based capital 12.4 12.2 11.8
Risk adjusted assets 94.1 86.2 90.4
Tier 1 ratio 8.9 % 9.6 % 8.9 %
Total ratio 13.2 14.2 13.1
Leverage ratio 5.9 6.5 6.2
___________________________________________________________________________
_____________
(a) Excluding the impact of SFAS No. 115, the annualized rate of return on
average common stockholders' equity would have been 11.7%, 8.6% and 16.9%
for the three months ended March 31, 1995, December 31, 1994, and March 31,
1994 respectively, and the book value per common share would have been
$44.87, $44.39 and $42.14 for the three months ended March 31, 1995,
December 31, 1994, and March 31, 1994 respectively.
J.P. Morgan's risk-based capital and leverage ratios remain well above the
minimum standards set by the Federal Reserve Board. In accordance with
Federal Reserve Board guidelines, the risk-based capital and leverage
ratios exclude the equity, assets and off-balance-sheet exposures of J.P.
Morgan Securities, Inc. and the effect of SFAS No. 115. In addition,
effective December 31, 1994, the risk-based capital ratios reflect Federal
Reserve Board amendments to recognize risk-reducing benefits of bilateral
netting arrangements. The decreases in the first quarter in the risk-based
capital and leverage ratios related primarily to the increase in total
assets.
At March 31, 1995, stockholders' equity included approximately $449
million of net unrealized appreciation on debt investment and marketable
equity investment securities, net the related deferred tax liability of
$276 million. This compares with $456 million of net unrealized
appreciation at December 31, 1994. The unrealized appreciation on debt
investment securities was $227 million and $154 million at March 31, 1995,
and December 31, 1994, respectively. The unrealized appreciation on
marketable equity investment securities was $498 million and $576 million
at March 31, 1995, and December 31, 1994, respectively.
<PAGE> 25
</TABLE>
<TABLE>
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated
___________________________________________________________________________
_________________
<CAPTION>
Dollars in millions, Three months ended
interest and average rates ______________________________________________
_________
on a taxable-equivalent basis March 31, 1995 March 31, 1994
______________________________________________
_________
Avera Averag Avera Avera
ge e ge ge
balan Intere rate balan Intere rate
ce st ce st
______________________________________________
_________
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning deposits with
banks, $ $ 59 10.54 % $2,40 $ 49 8.26 %
mainly in offices outside 2,271 5
the U.S.
Debt investment securities in
offices in the U.S. (a):
U.S. Treasury 1,795 28 6.33 1,201 19 6.42
U.S. state and political
subdivision 2,149 65 12.27 2,224 67 12.22
Other 13,11 230 7.11 8,859 93 4.26
7
Debt investment securities in
offices 5,659 98 7.02 7,072 116 6.65
outside the U.S. (a)
Trading account assets:
In offices in the U.S. 13,33 241 7.33 13,68 190 5.63
9 3
In offices outside the 27,94 590 8.56 23,12 413 7.24
U.S. 6 3
Securities purchased under
agreements
to resell and federal funds 28,20 412 5.92 36,58 372 4.12
sold, 2 2
mainly in offices in the
U.S.
Securities borrowed in offices
in 15,32 214 5.66 15,26 115 3.06
the U.S. 1 1
Loans:
In offices in the U.S. 7,092 131 7.49 8,290 99 4.84
In offices outside the 16,57 288 7.05 16,75 240 5.81
U.S. 5 7
Other interest-earning assets
(b):
In offices in the U.S. 1,237 86 * 593 37 *
In offices outside the 607 57 * 875 56 *
U.S.
___________________________________________________________________________
________________
Total interest-earning assets 135,3 2,499 7.49 136,9 1,866 5.53
10 25
Allowance for credit losses (1,13 (1,15
1) 5)
Cash and due from banks 1,842 1,846
Other noninterest-earning 39,67 38,15
assets 3 3
___________________________________________________________________________
_________________
Total assets 175,6 175,7
94 69
___________________________________________________________________________
_________________
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 March
31, 1995 and 1994.
(a) For the three months ended March 31, 1995 and 1994, 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
</TABLE>
<PAGE> 26
<TABLE>
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated
_____________________________________________________________________________
_______________
<CAPTION>
Dollars in millions, Three months ended
interest and average rates ______________________________________________
_________
on a taxable-equivalent basis March 31, 1995 March 31, 1994
______________________________________________
_________
Avera Averag Avera Averag
ge e ge e
balan Intere rate balan Intere rate
ce st ce st
______________________________________________
_________
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits:
In offices in the U.S. $ $ 24 4.69 % $ $ 27 4.46 %
2,074 2,454
In offices outside the 41,90 595 5.76 35,16 406 4.68
U.S. 9 0
Trading account liabilities:
In offices in the U.S. 7,403 141 7.72 7,442 104 5.67
In offices outside the 12,57 288 9.29 9,873 163 6.70
U.S. 0
Securities sold under
agreements to
repurchase and federal funds
purchased, mainly in offices 43,43 595 5.56 55,22 557 4.09
in 7 6
the U.S.
Commercial paper, mainly in
offices 2,577 39 6.14 3,554 29 3.31
in the U.S.
Other interest-bearing
liabilities:
In offices in the U.S. 9,537 145 6.17 7,703 62 3.26
In offices outside the 2,499 27 4.38 2,770 34 4.98
U.S.
Long-term debt,
mainly in offices in the 7,273 116 6.47 5,449 58 4.32
U.S.
___________________________________________________________________________
_________________
Total interest-bearing 129, 1,970 6.18 129,6 1,440 4.51
liabilities 279 31
Noninterest-bearing deposits:
In offices in the U.S. 3,35 4,347
4
In offices outside the 1,13 1,540
U.S. 3
Other noninterest-bearing
liabilities 32,3 30,40
62 5
___________________________________________________________________________
________________
Total liabilities 166,1 165,9
28 23
Stockholders' equity 9,566 9,846
___________________________________________________________________________
_________________
Total liabilities and
stockholders' 175,6 175,7
equity 94 69
Net yield on interest-earning 1.59 1.26
assets
___________________________________________________________________________
_________________
Net interest earnings 529 426
___________________________________________________________________________
_________________
</TABLE>
<PAGE> 27
ASSET AND LIABILITY MANAGEMENT DERIVATIVES
The objective of asset and liability management is to create longer-term
value through the management of interest rate and liquidity risk related
to J.P. Morgan's assets, liabilities, and off-balance-sheet activities.
J.P. Morgan utilizes a variety of financial instruments, including
derivatives, in an integrated manner to achieve these objectives.
Additional information on asset and liability management derivatives,
primarily interest rate swaps, is provided below. For more information
about asset and liability management activities, see Note 7 to the
financial statements, Off-balance-sheet financial instruments.
The table below summarizes maturities and weighted-average interest
rates to be received and paid on U.S. dollar and non-U.S. dollar asset and
liability management interest rate swaps at March 31, 1995. The majority
of asset and liability management interest rate swaps, as presented below,
are risk-adjusting swaps. Also included in the table are swaps designated
as hedges or used to modify the interest rate characteristics of assets and
liabilities. Variable rates presented are generally based on the London
Interbank Offered Rate (LIBOR) at March 31, 1995, and reset at
predetermined dates. The table was prepared under the assumption that
these variable interest rates remain constant. The variable interest rates
to be received or paid will change to the extent that rates fluctuate.
Such changes may be substantial.
Not included in the table below are other derivatives used for asset
and liability management purposes, such as currency swaps, basis swaps,
foreign exchange contracts, interest rate futures, forward rate agreements,
debt securities forwards, and purchased options, totaling $43.7 billion at
March 31, 1995. The contractual maturities of these derivative contracts
are primarily less than one year.
<TABLE>
<CAPTION>
By expected maturities
___________________________________________________________________________
____________
Aft Aft Aft Aft
er er er er
one two thr fou
Wit yea yea ee r Aft
hin r rs yea yea er
Dollars in billions one but but rs rs fiv Tota
yea wit wit but but e l
r hin hin wit wit yea
two thr hin hin rs
ee fou fiv
r e
___________________________________________________________________________
___________
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE SWAPS -
U.S. DOLLAR
Receive fixed
swaps
Notional amount $16 $14 $ $ $ $ $42.
.7 .7 1.4 3.0 3.0 3.9 7
Weighted average:
Receive rate 6.2 % 6.8 % 6.7 % 8.3 % 7.2 % 7.46 % 6.79 %
5 1 3 8 7
Pay rate 6.2 6.3 6.2 6.4 6.3 6.28 6.30
7 1 9 6 1
Pay fixed swaps
Notional amount $17 $12 $ $ $ $ $51.
.2 .8 7.5 4.7 2.8 6.4 4
Weighted average:
Receive rate 6.2 % 6.2 % 6.3 % 6.3 % 6.3 % 6.32 % 6.30 %
8 9 5 0 1
Pay rate 6.3 6.5 6.0 5.9 7.1 7.13 6.45
2 6 5 7 0
INTEREST RATE SWAPS -
NON-U.S. DOLLAR
Receive fixed
swaps
Notional amount $31 $26 $14 $ $ $ $91.
.7 .4 .4 7.3 5.9 6.1 8
Weighted average:
Receive rate 6.3 % 5.9 % 6.7 % 5.9 % 7.0 % 7.54 % 6.41 %
7 6 8 7 8
Pay rate 5.5 4.7 5.3 4.4 5.4 5.94 5.21
1 6 5 5 2
Pay fixed swaps
Notional amount $28 $20 $14 $ $ $ $83.
.7 .7 .9 7.6 5.2 6.6 7
Weighted average:
Receive rate 5.7 % 5.3 % 5.4 % 4.5 % 5.5 % 5.92 % 5.46 %
0 5 1 0 2
Pay rate 6.3 6.2 6.3 5.5 6.9 7.70 6.38
2 5 4 1 5
___________________________________________________________________________
____________
Total notional amount $94 $74 $38 $22 $16 $23. $269
.3 .6 .2 .6 .9 0 .6
___________________________________________________________________________
____________
There is $2.4 billion and $6.6 billion of notional amounts related to
currency
swaps and basis swaps, respectively, not included in the table above.
</TABLE>
<PAGE> 28
PART II
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
SUMMARY OF J.P. MORGAN'S ANNUAL MEETING
The 1995 annual meeting of stockholders of J.P. Morgan & Co. Incorporated
was held on
Wednesday, May 10, 1995 at the company's 60 Wall Street headquarters;
85.94% of the
187,356,003 shares of common stock outstanding and eligible to be voted was
represented
either in person or by proxy, constituting a quorum. Douglas A. Warner
III, Chairman of the
Board and President, presided.
The stockholders took the following actions:
1. Elected all 14 nominees to one-year terms as members of the Board of
Directors. The
directors are:
Percent Percent
of of
Shares in shares Shares shares
Director favor voting withheld voting
___________________________________________________________________________
___________________________
Douglas A. Warner * 159,395,8 98.99 % 1,622,53 1.01 %
III 98 3
Martin Feldstein 159,419,1 99.01 1,599,23 0.99
93 8
Hanna H. Gray 159,369,8 98.98 1,648,57 1.02
55 6
James R. Houghton 159,416,5 99.01 1,601,91 0.99
21 0
James L. Ketelsen 159,147,4 98.84 1,870,98 1.16
46 5
William S. Lee 159,112,9 98.82 1,905,49 1.18
36 5
Roberto G. Mendoza ** 159,332,8 98.95 1,685,60 1.05
24 7
Lee R. Raymond 159,363,8 98.97 1,654,55 1.03
79 2
Richard D. Simmons 159,456,1 99.03 1,562,29 0.97
35 6
John G. Smale 159,401,4 99.00 1,616,94 1.00
83 8
Kurt F. Viermetz ** 159,391,8 98.99 1,626,54 1.01
86 5
Rodney B. Wagner ** 159,385,6 98.99 1,632,77 1.01
58 3
Dennis 159,429,9 99.01 1,588,44 0.99
Weatherstone 91 0
Douglas C. Yearley 159,456,5 99.03 1,561,90 0.97
22 9
* Chairman of the Board and President
** Vice Chairman of the Board
2. Approved the appointment of Price Waterhouse LLP as independent
accountants to perform auditing functions during 1995. There were
160,087,714 shares in favor, or 99.79% of shares
voting; 340,634 shares against, or 0.21% of shares voting; 590,083 shares
abstained; and no shares reflecting broker nonvotes.
3. Approved the 1995 Stock Incentive Plan. There were 103,472,198 shares
in favor, or 76.15% of shares voting; 32,399,831 shares against, or 23.85%
of shares voting; 2,776,564 shares abstained; and 22,369,838 shares
reflecting broker nonvotes.
4. Approved the 1995 Executive Officer Performance Plan. There were
139,830,035 shares in favor, or 88.66% of shares voting; 17,878,516 shares
against, or 11.34% of shares voting; 3,309,880 shares abstained; and no
shares reflecting broker nonvotes.
5. Defeated the stockholder proposal relating to cumulative voting. There
were 103,765,604 shares against, or 75.97% of shares voting; 32,822,251
shares for, or 24.03% of shares voting; 2,060,738 shares abstained; and
22,369,838 shares reflecting broker nonvotes.
6. Defeated the stockholder proposal relating to political non-
partisanship. There were 121,510,802 shares against, or 93.97% of shares
voting; 7,802,472 shares for, or 6.03% of shares voting; 9,335,319 shares
abstained; and 22,369,838 shares reflecting broker nonvotes.
7. Defeated the stockholder proposal relating to structural adjustment.
There were 126,800,953 shares against, or 95.39% of shares voting;
6,133,515 shares for, or 4.61% of shares voting; 5,714,125 shares
abstained; and 22,369,838 shares reflecting broker nonvotes.
<PAGE> 29
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10h. Stock option award
12. Statement re computation of ratios
(incorporated by reference to Exhibit 12 to J.P. Morgan's
post-effective amendment No. 2 to Form S-3, Registration
No. 33-55851)
27. Financial data schedule
(b) Reports on Form 8-K
The following reports on Form 8-K were filed with the Securities
and Exchange Commission during the quarter ended March 31, 1995:
January 12, 1995 (Items 5 and 7)
Reported the issuance by J.P. Morgan of a press release
announcing
its earnings for the three-month period and fiscal year ended
December 31, 1994.
February 14, 1995 (Items 5 and 7)
Reported the issuance by J.P. Morgan of a press release
responding
to the ratings downgrade by Moody's Investors Service.
February 27, 1995 (Items 5 and 7)
Reported the issuance by J.P. Morgan of a press release
responding
to Standard & Poor's rating announcement.
<PAGE> 30
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 thereunto duly authorized.
(REGISTRANT) J.P. MORGAN & CO. INCORPORATED
BY (SIGNATURE)
/s/ JAMES T. FLYNN
_______________________________________
(NAME AND TITLE) JAMES T. FLYNN
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
DATE: May 15, 1995
<PAGE> 1
LIST OF EXHIBITS
EXHIBIT
10h. Stock option award
27. Financial data schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 1,153
<INT-BEARING-DEPOSITS> 1,650
<FED-FUNDS-SOLD> 27,478
<TRADING-ASSETS> 68,198
<INVESTMENTS-HELD-FOR-SALE> 21,655
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 24,434
<ALLOWANCE> 1,132
<TOTAL-ASSETS> 167,077
<DEPOSITS> 46,824
<SHORT-TERM> 49,486
<LIABILITIES-OTHER> 52,835
<LONG-TERM> 8,292
<COMMON> 502
0
494
<OTHER-SE> 8,644
<TOTAL-LIABILITIES-AND-EQUITY> 167,077
<INTEREST-LOAN> 415
<INTEREST-INVEST> 399
<INTEREST-OTHER> 1,656
<INTEREST-TOTAL> 2,470
<INTEREST-DEPOSIT> 619
<INTEREST-EXPENSE> 1,970
<INTEREST-INCOME-NET> 500
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 9
<EXPENSE-OTHER> 1,002
<INCOME-PRETAX> 386
<INCOME-PRE-EXTRAORDINARY> 255
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 255
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.27
<YIELD-ACTUAL> 1.59
<LOANS-NON> 216
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,131
<CHARGE-OFFS> 8
<RECOVERIES> 9
<ALLOWANCE-CLOSE> 1,132
<ALLOWANCE-DOMESTIC> 72
<ALLOWANCE-FOREIGN> 111
<ALLOWANCE-UNALLOCATED> 949
</TABLE>
1
Exhibit 10(h)
J.P. MORGAN & CO. INCORPORATED
STOCK OPTION AWARD
1. J.P. Morgan & Co. Incorporated (the "Company") on
January 16, 1995 has granted and hereby evidences the grant
to Dennis Weatherstone (the "Optionee"), subject to the
terms and conditions set forth herein, a non-qualified stock
option (the "Option") to purchase from the Company 150,000
shares of Common Stock of the Company at a per share price
of $60.50. Fifty percent of the Option shall be exercisable
beginning January 16, 1996 and one hundred percent of the
Option shall be exercisable beginning January 16, 1997.
Upon exercise of the Option, in whole or in part, the
Company shall cause a certificate for shares of Common Stock
to be issued to the Optionee.
2. Subject to the terms and conditions hereof, the Option
shall be exercisable at the times set forth in paragraph 1.
Shares may be purchased until the Option shall expire or be
canceled or surrendered, by giving the Company written
notice of exercise specifying the number of shares to be
purchased, which number may not be less than five shares.
The notice of exercise shall be accompanied by tender to the
Company of the full purchase price of said shares and the
related amount of income taxes required to be withheld by
the Company, if applicable. Payment of the purchase price
of said shares shall be made in cash, shares of Common
Stock, a combination of cash and such shares, or any
additional method of payment acceptable to the Company's
Committee on Management Development and Executive
Compensation or any successor thereto (the "Committee").
The preceding sentence notwithstanding, the Committee may,
in its sole discretion, prohibit or limit the use of shares
of Common Stock as part or full payment of the purchase
price. Any such shares delivered as part or full payment of
the purchase price shall be valued on the date of exercise
at their fair market value determined in accordance with
procedures established by the Committee.
3. Without limiting the generality of paragraph 1 or 2
hereof, the Option is subject to the following conditions:
(a) the Option shall not in any event be exercisable
after the close of business on January 14, 2005;
(b) the Option shall not be transferred except by will
or the laws of descent and distribution or, during the
lifetime of the Optionee, to one or more members of the
Optionee's immediate family, to a partnership of which the
only partners are members of the Optionee's immediate
family, or to a trust established by the Optionee for the
benefit of one or more members of the Optionee's immediate
family ("immediate family" meaning the Optionee's spouse,
parents, children, grandchildren and the spouses of such
parents, children and grandchildren);
(c) upon the death of the Optionee prior to January 15,
2005, the person or persons to whom the Optionee's
rights under the Option are transferred in accordance with
subparagraph (b) hereof, may, on or prior to January 14,
2005, purchase any or all of the shares remaining subject to
the Option at the time of such death at or after the time
the Optionee would have been entitled to purchase such
shares had the Optionee survived;
(d) upon a "Change in Control" (which term shall have
the same definition as that in Section 9.1 of the 1992
Stock Incentive Plan of J.P. Morgan & Co. Incorporated and
Affiliated Companies), the Option shall, unless the
Committee determines otherwise, immediately become
exercisable in full; and
(e) prior to the occurrence of a Change in Control, but
not thereafter, the Committee may, in its sole discretion
and with or without cause, cancel the Option in whole or in
part to the extent it has not theretofore been exercised.
4. In the event the Committee shall determine that any
stock dividend, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination, exchange of shares,
warrants or rights offering to purchase Common Stock at a
price substantially below fair market value, or other
similar corporate event has affected the Common Stock of the
Company, such adjustment may be made in the number and
option price of the shares subject to the Option as may be
determined to be appropriate by the Committee in its sole
discretion.
5. Any notice given hereunder to the Company shall be
addressed to the Company in the manner specified in the
notice of exercise provided by the Committee, and any notice
given hereunder to the Optionee shall be addressed to him at
his address as shown on the records of the Company.
6. The Optionee shall be bound by the terms and conditions
hereof.
