<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------
Date of Report (Date of earliest event reported) January 15, 1998
J.P. MORGAN & CO. INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 1-5885 13-2625764
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification No.)
60 WALL STREET, NEW YORK, NEW YORK 10260-0060
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 483-2323
-----------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS
On January 15, 1998, the Registrant issued a press release announcing
that Lawrence A. Bossidy has been elected a director of J.P. Morgan &
Co. Incorporated, effective February 1, 1998. A copy of such press
release is attached hereto as Exhibit 99a.
On January 20, 1998, the Registrant issued a press release announcing
its earnings for the three-month and twelve-month periods ended
December 31, 1997. A copy of such press release is filed herein as
Exhibit 99b.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements
NONE. The financial statements included in this report are not
required to be filed as part of this report.
(b) Pro Forma Financial Information
NONE.
(c) Exhibits
99a.Copy of press release of J.P. Morgan & Co. Incorporated
dated January 15, 1998.
99b.Copy of press release of J.P. Morgan & Co. Incorporated
dated January 20, 1998.
99c.Statement of consolidated average balances and net
interest earnings for the three- and twelve-month periods
ended December 31, 1997.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
J.P. MORGAN & CO. INCORPORATED
_________________________________
(REGISTRANT)
/s/ Grace B. Vogel
_________________________________
NAME: Grace B. Vogel
TITLE: Chief Accounting Officer
DATE: January 15, 1998
<PAGE> 4
EXHIBIT INDEX
99a.Copy of press release of J.P. Morgan & Co. Incorporated
dated January 15, 1998.
99b.Copy of press release of J.P. Morgan & Co. Incorporated
dated January 20, 1998.
99c.Statement of consolidated average balances and net
interest earnings for the three- and twelve-month periods
ended December 31, 1997.
<PAGE> 1
[J.P.MORGAN LETTERHEAD]
News release: IMMEDIATE January 15, 1998
J.P. Morgan elects Lawrence Bossidy as a new director
Lawrence A. Bossidy, Chairman and Chief Executive Officer of
AlliedSignal Inc., has been elected a director of J.P. Morgan & Co.
Incorporated. His election becomes effective February 1, 1998.
Mr. Bossidy, 62, has served as Chief Executive of AlliedSignal since
1991 and Chairman since 1992. Prior to joining the company, he worked for 34
years at General Electric Company, where he was Vice Chairman and Executive
Officer from 1984-1991.
"We are very pleased to welcome Larry Bossidy to J.P. Morgan's Board,"
said Douglas A. Warner, chairman and CEO of Morgan. "Larry has been a member of
our International Council for a number of years, offering valuable insight,
perspective, and experience on key issues. We look forward to the contribution
he will make as a director of our firm."
Mr. Bossidy is also a director of Merck & Co. and Champion
International Corporation. He is Chairman of The Business Council and a member
of The Business Roundtable. Mr. Bossidy, who has served on J.P. Morgan's
International Council since 1991, has stepped down from the Council with his
election to Morgan's Board.
Mr. Bossidy graduated in 1957 from Colgate University, where he earned
a Bachelor of Arts degree in Economics. He is married with nine children.
J.P. Morgan is a global banking firm that serves clients with complex
financial needs through an integrated range of advisory, financing, trading,
investment, and related capabilities.
# # #
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Press contact: Joseph Evangelisti 212-648-9589
<PAGE> 1
News release: IMMEDIATE January 20, 1998
J.P. MORGAN REPORTS FOURTH QUARTER AND 1997 FULL YEAR RESULTS
J.P. Morgan & Co. Incorporated reported net income of $271 million in the fourth
quarter of 1997, 35% lower than in the fourth quarter of 1996. Earnings per
share for the quarter were $1.33 versus $2.04 a year ago. Net income for 1997
totaled $1.465 billion, down 7% from 1996. Earnings per share were $7.17 in 1997
versus $7.63 in 1996.
Douglas A. Warner III, chairman, said: "Fourth quarter results set back Morgan's
financial performance for the year. Our momentum with clients is strong,
however, and our strategy remains on track: Capitalize on leadership in global
markets, continue to expand our asset management business, increase investment
banking market share, and improve productivity."
FOURTH QUARTER AND 1997 FULL YEAR RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Fourth Quarter Year
- --------------------------------------------------------------------------------------------
In millions of dollars, except per share data 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 1,680 $ 1,805 $ 7,220 $ 6,855
Operating expenses (1,308) (1,197) (5,066) (4,523)
Income taxes (101) (189) (689) (758)
- --------------------------------------------------------------------------------------------
Net income 271 419 1,465 1,574
Net income per share $ 1.33 $ 2.04 $ 7.17 $ 7.63
- --------------------------------------------------------------------------------------------
Dividends declared per share $ 0.95 $ 0.88 $ 3.59 $ 3.31
</TABLE>
REVENUES were $1.680 billion in the 1997 fourth quarter, down 7% from a year
ago. For 1997, revenues were $7.220 billion, up 5%.
- - Finance and Advisory revenues were $439 million in the fourth quarter, down
7% from the year-ago quarter. Strong increases in advisory and underwriting
activities were more than offset by lower global credit revenues. For the
full year, revenues were up 10% to $1.919 billion.
- - Market Making revenues were $453 million in the fourth quarter, down 24%,
reflecting losses from managing equity derivative positions and declines in
fixed income activities. In 1997, Market Making revenues were $2.503
billion, compared with $2.550 billion in 1996.
- - Asset Management and Servicing revenues rose 20% to $436 million in the
quarter, reflecting growth in investment management and private client
activities. In 1997, Asset Management and Servicing revenues increased 16%
to $1.610 billion.
- - Equity Investments revenues were $164 million versus $45 million in the
year-ago quarter. In 1997, Equity Investments revenues were $403 million,
compared with $296 million for 1996.
- --------------------------------------------------------------------------------
Press contact: Christopher M. Molanphy 212/648-8213
Investor contact: Ann B. Patton 212-648-9446
<PAGE> 2
2
- - Proprietary Investing and Trading revenues were $235 million in the quarter,
versus $264 million a year earlier. In 1997, Proprietary Investing and
Trading revenues were $868 million, compared with $898 million in 1996.
OPERATING EXPENSES rose 9% in the fourth quarter and 12% in 1997.
IN OTHER DEVELOPMENTS, during the fourth quarter of 1997 J.P. Morgan designated
as nonperforming approximately $587 million of exposure to Asian counterparties.
Events in the region have raised credit concerns regarding certain
counterparties in Indonesia, South Korea, and Thailand, countries that are
subject to International Monetary Fund support programs. In the fourth quarter,
the economic impact of events involving these countries on Morgan's results
included a decline in global credit revenues, as the credit quality of swap
counterparties deteriorated, and a decline in the value of securities held in
the firm's proprietary investment portfolio, which is reflected as a decrease to
equity.
In December 1997, Morgan reached an agreement in principle to sell its global
trust and agency services business to Citibank. It is expected that the
transaction will be completed by the second quarter of 1998 and will not have a
material effect on Morgan's ongoing earnings.
In January 1998, Morgan completed the previously announced purchase of a 45%
economic interest in American Century Companies, Inc., the fourth largest
no-load U.S. mutual fund company selling directly to individuals.
The remainder of this release contains information on specific areas of results,
a financial summary, and the consolidated financial statements. A summary of
business sector results is included on pages 12 and 13.
<PAGE> 3
3
REVENUES BY BUSINESS SECTOR
REVENUES were $1.680 billion in the fourth quarter of 1997, down 7% from a year
earlier. Revenues increased 5% for the full year to $7.220 billion.
Revenues from client-focused activities, which are reported in the Finance and
Advisory, Market Making, and Asset Management and Servicing sectors, totaled
$1.328 billion in the fourth quarter of 1997, down 7% from $1.430 billion in the
year-ago quarter. For all of 1997, revenues from client-focused activities rose
6% to $6.032 billion.
FINANCE AND ADVISORY (Advisory, Debt and Equity Underwriting, and Credit)
revenues were $439 million in the fourth quarter of 1997, 7% below the $471
million reported in the 1996 fourth quarter. Full-year 1997 revenues were $1.919
billion, up 10% from 1996.
Revenues from advisory services and debt and equity underwriting rose 20% to
$271 million in the quarter, mainly because of higher levels of equity
underwriting. In 1997, advisory and underwriting revenues were $1.075 billion,
up 32% from 1996, reflecting record levels of investment banking activity.
For 1997, Securities Data Co. ranked J.P. Morgan sixth in U.S. debt and equity
underwriting, unchanged from a year ago; market share grew to 8.0% from 7.1%.
The firm ranked 10th in global equity underwriting, up from 16th; market share
rose to 2.1% from 1.1%. In U.S. initial public offerings, Morgan ranked fifth in
1997, up from 12th in 1996; market share advanced to 5.4% from 2.0%. In
completed mergers and acquisitions worldwide, Morgan ranked seventh in 1997,
with a 10.2% market share, compared with fifth in 1996.
Global credit revenues declined to $168 million in the quarter from $246 million
a year ago, primarily due to the impact on the value of Morgan's swaps portfolio
of a deterioration in the credit quality of Asian counterparties, particularly
in South Korea and Thailand. For the year, global credit revenues were $844
million, down 9% from the previous year.
MARKET MAKING (Fixed Income, Equities, Foreign Exchange, and Commodities)
revenues totaled $453 million in the fourth quarter, down 24% from a year
earlier. In 1997, Market Making revenues were $2.503 billion, compared with
$2.550 billion in 1996.
Fixed income revenues in developed markets fell 20% to $228 million in the
fourth quarter of 1997, mainly the result of lower revenues from market-making
in corporate securities. For the full year, fixed income revenues in developed
markets were $1.092 billion, down from $1.305 billion in 1996. Compared with the
previous year, 1997 results principally reflected lower swaps revenues.
In emerging markets, market-making revenues were $122 million in the fourth
quarter and $542 million for the full year, both essentially unchanged from the
prior year.
Market-making in equities produced a loss of $54 million in the fourth quarter
of 1997, compared with revenues of $83 million a year ago. Losses from managing
equity derivative positions during a period of significant
<PAGE> 4
4
market volatility were primarily responsible for the quarter's result. For the
full year, equities market-making generated revenues of $362 million,
essentially the same as in 1996.
Foreign exchange revenues advanced 45% to $128 million in the fourth quarter and
46% to $430 million in 1997, reflecting strong results across all products.
Commodities revenues were $29 million in the fourth quarter of 1997, up from $19
million in the year-ago quarter. For 1997, commodities revenues were $77
million, more than double the $38 million reported in 1996.
ASSET MANAGEMENT AND SERVICING (Investment Management, Private Client Services,
Futures and Options Brokerage, and Euroclear System) revenues were up 20% to
$436 million in the fourth quarter from a year ago. Asset Management and
Servicing revenues increased 16% to $1.610 billion for the full year.
Revenues generated from institutional investment management activities and
services for private clients increased 14% to $277 million in the fourth quarter
of 1997, and 15% to $1.035 billion in 1997. Assets under management grew 20% to
approximately $250 billion at December 31, 1997, compared with $208 billion at
December 31, 1996. Futures and options brokerage as well as Euroclear-related
revenues also increased in the quarter and full-year periods.
Private clients accounted for approximately $160 million of revenues from
Morgan's client-focused activities in the fourth quarter of 1997, up 34% from
the year-ago quarter. Of this amount, approximately $45 million is recorded in
the Finance and Advisory and Market Making sectors. For 1997, private clients
accounted for approximately $615 million of client-focused revenues, up 28% from
1996, of which approximately $180 million is recorded in the Finance and
Advisory and Market Making sectors.
EQUITY INVESTMENTS (Equity Portfolio Management for Morgan's own account)
reported revenues of $164 million in the fourth quarter, compared with $45
million a year ago. Included in reported revenues were net gains of $161 million
in the current quarter, primarily related to the sale of investments in the
insurance industry, versus net gains of $31 million a year ago. Total return for
Equity Investments, which combines reported revenues with the change in net
unrealized appreciation, was $11 million in the 1997 fourth quarter. This
compares with $254 million in the fourth quarter of 1996, when results benefited
from strong appreciation in investments in the insurance industry.
For 1997, Equity Investments revenues were $403 million, compared with $296
million in 1996. Total return was $374 million for 1997, versus $363 million in
1996.
PROPRIETARY INVESTING AND TRADING (Market and Credit Risk Positioning and
Capital and Liquidity Management) revenues totaled $235 million for the 1997
fourth quarter, compared with $264 million a year ago. Total return reported
revenues plus the change in net unrealized appreciation - for the 1997 fourth
quarter was $22 million, compared with $228 million in the same period a year
ago, as most activities produced lower returns. Approximately 30% of the change
was attributable to declines in the value of securities of obligors in
Indonesia, South Korea, and Thailand.
For the full year, Proprietary Investing and Trading revenues were $868 million,
compared with $898 million in 1996. Total return was $619 million for 1997,
versus $588 million in 1996.
<PAGE> 5
5
CORPORATE ITEMS (Revenues and expenses not allocated to business sectors,
intercompany eliminations, taxable-equivalent adjustment, and results of sold or
discontinued businesses) include a 1996 fourth quarter gain of $77 million
related to the partial sale of a minority investment.
OPERATING EXPENSES
Operating expenses increased 9% to $1.308 billion in the fourth quarter from a
year earlier. For the full year, operating expenses rose 12% to $5.066 billion,
reflecting continued spending on client business capabilities and higher levels
of business activity. Also contributing to the rise were expenditures related to
initiatives to prepare for the Year 2000.
At December 31, 1997, staff totaled 16,943 employees, compared with 16,525
employees at September 30, 1997, and 15,527 employees at December 31, 1996.
Income tax expense in the fourth quarter totaled $101 million, based on an
effective tax rate of 27%, compared with an effective rate of 31% in the
year-earlier quarter. Income tax expense of $689 million for 1997 reflects an
effective tax rate of 32%, compared with an effective tax rate of 32.5% in 1996.
ASSETS
Total assets were $262 billion at December 31, 1997, compared with $270 billion
at September 30, 1997.
CREDIT-RELATED ITEMS
At December 31, 1997, Morgan's outstandings and commitments to counterparties in
Indonesia, South Korea, and Thailand, countries that are subject to
International Monetary Fund support programs, totaled approximately $5.4
billion, primarily consisting of loans, swaps, and debt investment securities.
Exposures arising from swaps and debt investment securities will fluctuate with
market movements. At December 31, 1997, approximate outstandings and commitments
by country were: Indonesia, $900 million; South Korea, $3.4 billion; and
Thailand, $1.1 billion. Of the total amount, $1.1 billion of exposure was to
governments, $3.1 billion to banks (including government-sponsored
institutions), and $1.2 billion to other corporate entities.
During the fourth quarter of 1997, as a result of events in Asia, J.P. Morgan
designated as nonperforming approximately $587 million of assets, primarily
swaps. Nonperforming assets increased to $659 million at December 31, 1997, from
$84 million at September 30, 1997. Charge-offs of $24 million were recorded in
the quarter, related primarily to counterparties in Asia. The firm continues to
actively monitor the effect of evolving events on its exposures.
Morgan considers approximately 60% of the aggregate allowance for credit losses
to relate to exposures to Indonesia, South Korea, and Thailand, as of December
31, 1997. The aggregate allowance, however, remains available to absorb losses
inherent in J.P. Morgan's existing portfolio of loans, as well as other
undertakings to extend credit or make payments, and all other credit exposures,
including derivatives. At December 31, 1997, the aggregate allowance for credit
losses was $1.081 billion, compared with $1.096 billion at September 30, 1997.
In management's judgment, the aggregate allowance for credit losses remains at
an adequate level.
<PAGE> 6
6
CAPITAL
At December 31, 1997, under the new Federal Reserve Board market risk capital
guidelines for calculation of risk-based capital ratios, J.P. Morgan's estimated
tier 1 and total risk-based capital ratios were 7.9% and 11.9%, respectively;
the estimated leverage ratio was 4.4%. At September 30, 1997, under the new
rules, J.P. Morgan's tier 1 and total risk-based capital ratios were 8.1% and
11.6%, respectively, and the leverage ratio was 4.5%.
At December 31, 1997, stockholders' equity included approximately $432 million
of net unrealized appreciation on debt investment and marketable equity
investment securities, net the related deferred tax liability of $256 million.
This compares with $598 million of net unrealized appreciation at September 30,
1997, net the related deferred tax liability of $353 million. The net unrealized
appreciation on debt investment securities was $261 million and $343 million at
December 31, 1997, and September 30, 1997, respectively. The net unrealized
appreciation on marketable equity investment securities was $427 million at
December 31, 1997, and $608 million at September 30, 1997.
As previously reported, the Board of Directors in December declared an increase
in the regular quarterly dividend to $0.95 per share from $0.88 per share on the
company's common stock for the quarter ended December 31, 1997. The Board also
approved the purchase of up to 7 million shares of J.P. Morgan common stock to
lessen the dilutive impact on earnings per share of the firm's employee benefit
plans. These purchases may be made in 1998 or beyond in the open market or
through privately negotiated transactions. During 1997, the firm purchased 14
million J.P. Morgan common shares: approximately 7 million shares to lessen the
dilutive impact on earnings per share of the firm's employee benefit plans, and
approximately 7 million shares pursuant to the Board's December 1996
authorization to buy up to $750 million of common stock, financed principally
with the proceeds of a November 1996 issue of trust preferred securities.
# # #
J.P. Morgan is a leading global financial firm that meets critical financial
needs for business enterprises, governments, and individuals. The firm advises
on corporate strategy and structure, raises capital, makes markets in financial
instruments, and manages investment assets. Morgan also commits its own capital
to promising enterprises and invests and trades to capture market opportunities.
Attached are the financial summary; interim consolidated financial statements,
which are unaudited; summary of sector results; trading and investment banking
revenue tables; and asset quality tables. J.P. Morgan news releases, including
quarterly financial results, are available on the Internet at www.jpmorgan.com.
<PAGE> 7
<TABLE>
<CAPTION>
FINANCIAL SUMMARY
J.P. Morgan & Co. Incorporated
- ------------------------------------------------------------------------------------------------------------------------------
Dollars in millions, except share data
Third
Fourth Quarter Quarter Twelve Months
---------------------------- ------------ ----------------------------
1997 1996 1997 1997 1996
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income $ 271 $ 419 $ 396 $ 1,465 $ 1,574
PER COMMON SHARE
Net income (a)
Basic $ 1.44 $ 2.17 $ 2.10 $ 7.71 $ 8.11
Diluted 1.33 2.04 1.96 7.17 7.63
Dividends declared 0.95 0.88 0.88 3.59 3.31
Book value (b) 55.99 54.43 56.83
- --------------------------------------------------------------------------------------------------------------------------
Weighted-average number of common
and dilutive potential common shares
outstanding 197,357,488 201,537,658 197,776,475 199,318,315 202,010,237
- --------------------------------------------------------------------------------------------------------------------------
Dividends declared on common stock $ 167 $ 163 $ 157 $ 642 $ 617
Dividends declared on preferred stock 8 9 9 35 33
SELECTED RATIOS
Annualized rate of return on average
common stockholders' equity (c) 9.7% 15.3% 14.3% 13.4% 14.9%
As % of period-end total assets:
Common equity 4.1% 4.8% 4.1%
Total equity 4.4 5.2 4.3
Regulatory capital ratios
Tier 1 risk-based capital ratio (d) 7.9% (d) (d) 8.1%
Total risk-based capital ratio (d)11.9 (d) (d)11.6
Leverage ratio (d) 4.4 (d) (d) 4.5
- --------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Debt investment securities (e) $ 21,375 $ 26,728 $ 24,473 $ 23,553 $ 25,023
Loans 33,151 29,267 31,201 30,636 28,021
Total interest-earning assets 209,870 185,351 201,723 199,049 171,654
Total assets 269,692 233,985 262,114 252,895 215,043
Total interest-bearing liabilities 201,381 177,783 196,271 191,361 163,250
Total liabilities 258,224 222,607 250,674 241,542 204,052
Common stockholders' equity 10,774 10,684 10,746 10,659 10,317
Total stockholders' equity 11,468 11,378 11,440 11,353 10,991
Net interest earnings (fully taxable basis) 472 505 489 1,944 1,787
Net yield on interest-earning assets 0.89% 1.08% 0.96% 0.98% 1.04%
- --------------------------------------------------------------------------------------------------------------------------
Employees at period-end 16,943 15,527 16,525
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Effective December 31, 1997, J.P. Morgan adopted Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings per Share. SFAS No. 128 supercedes
Accounting Principles Board Opinion (APB) No. 15 and related pronouncements and
replaces the computations of primary and fully diluted earnings per share (EPS)
with basic and diluted EPS, respectively. Prior period amounts have been
restated. Primary EPS was $1.33, $2.04, and $1.96 for the three months ended
December 31, 1997, December 31, 1996, and September 30, 1997, respectively, and
$7.17 and $7.63 for the twelve months ended December 31, 1997 and 1996,
respectively. Fully diluted EPS was $1.33, $2.03, and $1.95 for the three months
ended December 31, 1997, December 31, 1996 and September 30, 1997, respectively,
and $7.15 and $7.56 for the twelve months ended December 31, 1997 and 1996,
respectively.
(b) Excluding the impact of SFAS No. 115, the book value per common share would
have been $53.74, $52.08, and $53.73 at December 31, 1997, December 31, 1996,
and September 30, 1997, respectively.
(c) Excluding the impact of SFAS No. 115, the annualized rate of return on
average common stockholders' equity would have been 10.2%, 15.9%, and 15.0% for
the three months ended December 31, 1997, December 31, 1996, and September 30,
1997, respectively, and 14.1% and 15.6% for the twelve months ended December 31,
1997 and 1996, respectively.
(d) As of September 30, 1997, J.P. Morgan adopted the Federal Reserve Board's
new market risk capital guidelines for calculation of risk-based capital ratios,
in advance of the mandatory implementation date of January 1, 1998. The new
framework amended the existing guidelines by incorporating a measure of market
risk for trading positions. In addition, the capital and assets of the Section
20 subsidiary, J.P. Morgan Securities Inc., are no longer excluded from the
calculations; however, the effect of SFAS No. 115 continues to be excluded.
Risk-based capital ratios for December 31, 1997 are estimates. Ratios at
December 31, 1996 have not been restated. In accordance with the Federal Reserve
Board's guidelines followed prior to September 30, 1997, ratios at December 31,
1996 exclude the equity, assets, and off-balance sheet exposures of J.P. Morgan
Securities Inc. and the effect of SFAS No. 115. The tier 1 risk-based capital
ratio, total risk-based capital ratio, and leverage ratio computed under such
former guidelines were 8.8%, 12.2%, and 5.9%, respectively, at December 31,
1996.
(e) Average debt investment securities are computed on historical amortized
cost, excluding the effects of SFAS No. 115 adjustments.
<PAGE> 8
8
CONSOLIDATED STATEMENT OF INCOME
J.P. Morgan & Co. Incorporated
In millions, except share data
<TABLE>
<CAPTION>
Three months ended
--------------------------------------------------------------------
December 31 December 31 Increase/ September 30 Increase/
1997 1996 (Decrease) 1997 (Decrease)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $3,271 $2,925 $ 346 $3,161 $ 110
Interest expense 2,816 2,441 375 2,689 127
- ----------------------------------------------------------------------------------------------------------
Net interest revenue 455 484 (29) 472 (17)
NONINTEREST REVENUE
Trading revenue 306 512 (206) 657 (351)
Investment banking revenue 283 277 6 320 (37)
Investment management revenue 208 182 26 201 7
Fees and commissions 179 152 27 164 15
Investment securities revenue 167 84 83 67 100
Other revenue 82 114 (32) 35 47
- ----------------------------------------------------------------------------------------------------------
Total noninterest revenue 1,225 1,321 (96) 1,444 (219)
Total revenue, net of interest expense 1,680 1,805 (125) 1,916 (236)
OPERATING EXPENSES
Employee compensation and benefits 729 732 (3) 798 (69)
Net occupancy 79 73 6 77 2
Technology and communications 305 221 84 277 28
Other expenses 195 171 24 174 21
- ----------------------------------------------------------------------------------------------------------
Total operating expenses 1,308 1,197 111 1,326 (18)
Income before income taxes 372 608 (236) 590 (218)
Income taxes 101 189 (88) 194 (93)
- ----------------------------------------------------------------------------------------------------------
Net income 271 419 (148) 396 (125)
PER COMMON SHARE
Net income
Basic $ 1.44 $ 2.17 ($0.73) $ 2.10 ($0.66)
Diluted 1.33 2.04 (0.71) 1.96 (0.63)
Dividends declared 0.95 0.88 0.07 0.88 0.07
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 9
9
CONSOLIDATED STATEMENT OF INCOME
J.P. Morgan & Co. Incorporated
In millions, except share data
<TABLE>
<CAPTION>
Twelve months ended
---------------------------------------
December 31 December 31 Increase/
1997 1996 (Decrease)
---------------------------------------
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $12,353 $10,713 $ 1,640
Interest expense 10,481 9,011 1,470
- --------------------------------------------------------------------------------
Net interest revenue 1,872 1,702 170
NONINTEREST REVENUE
Trading revenue 2,137 2,477 (340)
Investment banking revenue 1,123 921 202
Investment management revenue 792 675 117
Fees and commissions 647 582 65
Investment securities revenue 409 303 106
Other revenue 240 195 45
- --------------------------------------------------------------------------------
Total noninterest revenue 5,348 5,153 195
Total revenue, net of interest expense 7,220 6,855 365
OPERATING EXPENSES
Employee compensation and benefits 3,027 2,884 143
Net occupancy 333 296 37
Technology and communications 1,025 785 240
Other expenses 681 558 123
- --------------------------------------------------------------------------------
Total operating expenses 5,066 4,523 543
Income before income taxes 2,154 2,332 (178)
Income taxes 689 758 (69)
- --------------------------------------------------------------------------------
Net income 1,465 1,574 (109)
PER COMMON SHARE
Net income
Basic $ 7.71 $ 8.11 ($ 0.40)
Diluted 7.17 7.63 (0.46)
Dividends declared 3.59 3.31 0.28
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 10
10
CONSOLIDATED BALANCE SHEET
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
In millions, except share data December 31 September 30 December 31
1997 1997 1996
---------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,758 $ 813 $ 906
Interest-earning deposits with banks 2,132 1,813 1,908
Debt investment securities available-for-sale carried at fair value (cost: $22,507
at December 1997, $21,915 at September 1997, and $24,610 at December 1996) 22,768 22,258 24,865
Equity investment securities 1,085 1,363 1,290
Trading account assets, net of allowance for credit losses of $350 111,854 115,144 90,980
Securities purchased under agreements to resell ($39,002 at December 1997, $44,040
at September 1997, and $32,455 at December 1996) and federal funds sold 39,002 44,058 32,505
Securities borrowed 38,375 38,824 27,931
Loans, net of allowance for credit losses of $546 at December 1997, $546 at
September 1997, and $566 at December 1996 31,032 31,449 27,554
Accrued interest and accounts receivable 4,962 5,859 6,766
Premises and equipment, net of accumulated depreciation of $1,379 at December
1997, $1,345 at September 1997, and $1,272 at December 1996 1,838 1,815 1,865
Other assets 7,353 6,199 5,456
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 262,159 269,595 222,026
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Noninterest-bearing deposits:
In offices in the U.S. 1,482 1,022 1,501
In offices outside the U.S. 744 749 708
Interest-bearing deposits:
In offices in the U.S. 9,232 8,970 7,103
In offices outside the U.S. 47,421 44,785 43,412
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits 58,879 55,526 52,724
Trading account liabilities 71,141 69,799 50,919
Securities sold under agreements to repurchase ($53,202 at December 1997,
$69,009 at September 1997, and $56,117 at December 1996) and federal funds
purchased 57,804 74,473 61,429
Commercial paper 6,622 5,267 4,132
Other liabilities for borrowed money 17,176 17,477 19,948
Accounts payable and accrued expenses 10,865 9,341 5,935
Long-term debt not qualifying as risk-based capital 18,246 17,229 9,411
Other liabilities, including allowance for credit losses of $185 at December
1997, $200 at September 1997, and $200 at December 1996 4,129 3,538 1,654
- ------------------------------------------------------------------------------------------------------------------------------------
244,862 252,650 206,152
Long-term debt qualifying as risk-based capital 4,743 4,163 3,692
Company-obligated mandatorily redeemable preferred securities of subsidiaries 1,150 1,150 750
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 250,755 257,963 210,594
STOCKHOLDERS' EQUITY
Preferred stock (authorized shares: 10,400,000)
Adjustable rate cumulative preferred stock, $100 par value (issued and
outstanding: 2,444,300) 244 244 244
Variable cumulative preferred stock, $1,000 par value (issued and outstanding: 250,000) 250 250 250
Fixed cumulative preferred stock, $500 par value (issued and outstanding: 400,000) 200 200 200
Common stock, $2.50 par value (authorized shares: 500,000,000; issued: 200,692,673 at
December 1997, 200,691,873 at September 1997, and 200,688,123 at December 1996) 502 502 502
Capital surplus 1,360 1,380 1,446
Retained earnings 9,398 9,308 8,635
Net unrealized gains on investment securities, net of taxes 432 598 464
Other 1,163 1,070 826
- ------------------------------------------------------------------------------------------------------------------------------------
13,549 13,552 12,567
Less: treasury stock (24,374,944 shares at December 1997, 22,487,572 shares at
September 1997, and 15,765,455 shares at December 1996) at cost 2,145 1,920 1,135
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 11,404 11,632 11,432
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 262,159 269,595 222,026
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Certain prior period amounts have been reclassified to conform with the December
31, 1997 presentation.
<PAGE> 11
11
CONSOLIDATED STATEMENT OF CONDITION
Morgan Guaranty Trust Company of New York
<TABLE>
<CAPTION>
In millions, except share data December 31 December 31
1997 1996
----------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,663 $ 920
Interest-earning deposits with banks 2,195 1,910
Debt investment securities available-for-sale carried at fair value 20,539 23,510
Trading account assets, net of allowance for credit losses of $350 88,995 72,549
Securities purchased under agreements to resell and federal funds sold 28,045 21,081
Securities borrowed 13,831 6,681
Loans, net of allowance for credit losses of $545 at December 1997 and $565 at December 1996 30,851 27,378
Accrued interest and accounts receivable 4,534 5,858
Premises and equipment, net of accumulated depreciation of $1,208 at December 1997
and $1,116 at December 1996 1,669 1,696
Other assets 4,096 3,230
- -----------------------------------------------------------------------------------------------------------------------------
Total assets 196,418 164,813
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Noninterest-bearing deposits:
In offices in the U.S. 1,492 1,495
In offices outside the U.S. 752 749
Interest-bearing deposits:
In offices in the U.S. 10,156 7,114
In offices outside the U.S. 48,343 43,716
- -----------------------------------------------------------------------------------------------------------------------------
Total deposits 60,743 53,074
Trading account liabilities 61,562 44,039
Securities sold under agreements to repurchase and federal funds purchased 26,017 30,787
Other liabilities for borrowed money 10,433 13,215
Accounts payable and accrued expenses 7,160 4,203
Long-term debt not qualifying as risk-based capital 14,320 5,436
Other liabilities, including allowance for credit losses of $185 at December 1997
and $200 at December 1996 2,713 1,189
- -----------------------------------------------------------------------------------------------------------------------------
182,948 151,943
Long-term debt qualifying as risk-based capital 3,037 2,979
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 185,985 154,922
STOCKHOLDER'S EQUITY
Preferred stock, $100 par value (authorized shares: 2,500,000) -- --
Common stock, $25 par value (authorized shares: 11,000,000; outstanding: 10,599,027) 265 265
Surplus 3,155 3,155
Undivided profits 6,927 6,334
Net unrealized gains on investment securities, net of taxes 108 149
Foreign currency translation (22) (12)
- -----------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity 10,433 9,891
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity 196,418 164,813
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Member of the Federal Reserve System and the Federal Deposit Insurance
Corporation.
Certain prior year amounts have been reclassified to conform with the 1997
presentation.
<PAGE> 12
12
SUMMARY OF SECTOR RESULTS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Asset TOTAL
Finance Manage- CLIENT- Equity Proprietary TOTAL
and Market ment and FOCUSED Invest- Investing PROPRIETARY Corporate CONSOL-
In millions Advisory Making Servicing ACTIVITIES ments and Trading ACTIVITIES Items IDATED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOURTH QUARTER 1997
Total revenues $ 439 $ 453 $ 436 $ 1,328 $ 164 $ 235 $ 399 $ (47) $ 1,680
Total expenses 320 558 372 1,250 13 38 51 7 1,308
- ----------------------------------------------------------------------------------------------------------------------------------
Pretax income 119 (105) 64 78 151 197 348 (54) 372
- ----------------------------------------------------------------------------------------------------------------------------------
FOURTH QUARTER 1996
Total revenues 471 595 364 1,430 45 264 309 66 1,805
Total expenses 320 468 313 1,101 11 44 55 41 1,197
- ----------------------------------------------------------------------------------------------------------------------------------
Pretax income 151 127 51 329 34 220 254 25 608
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE), FOURTH QUARTER 1997 VS FOURTH QUARTER 1996
Total revenues (32) (142) 72 (102) 119 (29) 90 (113) (125)
Total expenses -- 90 59 149 2 (6) (4) (34) 111
- ----------------------------------------------------------------------------------------------------------------------------------
Pretax income (32) (232) 13 (251) 117 (23) 94 (79) (236)
- ----------------------------------------------------------------------------------------------------------------------------------
THIRD QUARTER 1997
Total revenues 548 669 407 1,624 66 241 307 (15) 1,916
Total expenses 343 528 339 1,210 10 49 59 57 1,326
- ----------------------------------------------------------------------------------------------------------------------------------
Pretax income 205 141 68 414 56 192 248 (72) 590
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE), FOURTH QUARTER 1997 VS THIRD QUARTER 1997
Total revenues (109) (216) 29 (296) 98 (6) 92 (32) (236)
Total expenses (23) 30 33 40 3 (11) (8) (50) (18)
- ----------------------------------------------------------------------------------------------------------------------------------
Pretax income (86) (246) (4) (336) 95 5 100 18 (218)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
BUSINESS SECTORS:
We describe the activities of J.P. Morgan using five business sectors. Three of
these sectors - Finance and Advisory, Market Making, and Asset Management and
Servicing - focus on services we provide for clients, including positions taken
to facilitate client transactions. Two sectors comprise proprietary activities
that we conduct exclusively for our own account: Equity Investments and
Proprietary Investing and Trading. The Finance and Advisory sector includes
results of our Advisory, Debt and Equity Underwriting, and Credit activities.
The Market Making sector includes results of our Fixed Income, Equities, Foreign
Exchange, and Commodities activities. The Asset Management and Servicing sector
includes results of our Investment Management, Private Client Services, Futures
and Options Brokerage, and Euroclear System activities. Corporate Items includes
revenues and expenses that have not been allocated to the five business sectors,
intercompany eliminations, and the taxable-equivalent adjustment. For a complete
description of our business sectors, please refer to the J.P. Morgan & Co.
Incorporated 1996 Annual report.
METHODOLOGY:
The firm's management reporting system and policies were used to determine the
revenues and expenses directly attributable to each business sector. Earnings on
stockholders' equity were allocated based on management's assessment of the
inherent risk of the components of each sector. In addition, certain overhead
expenses not allocated for management reporting purposes were allocated to each
business 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. Certain prior year amounts have been
reclassified to conform with the 1997 presentation. Effective January 1, 1997,
as compensation for managing the firm's credit risk, Global Credit receives fees
from other Morgan businesses. Such fees are included as revenues in the Finance
and Advisory sector and as a reduction in revenues reported by businesses on
whose behalf such credit risk is managed.
<PAGE> 13
13
SUMMARY OF SECTOR RESULTS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Total
Finance Manage- Client- Equity Proprietary Total
and Market ment and Focused Invest- Investing Proprietary Corporate Consol-
In millions Advisory Making Servicing Activities ments and Trading Activities Items idated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TWELVE MONTHS 1997
Total revenues $1,919 $2,503 $1,610 $6,032 $403 $868 $1,271 ($83) $7,220
Total expenses 1,316 2,015 1,331 4,662 41 178 219 185 5,066
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income 603 488 279 1,370 362 690 1,052 (268) 2,154
- ------------------------------------------------------------------------------------------------------------------------------------
TWELVE MONTHS 1996
Total revenues 1,742 2,550 1,390 5,682 296 898 1,194 (21) 6,855
Total expenses 1,108 1,739 1,140 3,987 34 153 187 349 4,523
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income 634 811 250 1,695 262 745 1,007 (370) 2,332
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE), TWELVE MONTHS 1997 VS. TWELVE MONTHS 1996
Total revenues 177 (47) 220 350 107 (30) 77 (62) 365
Total expenses 208 276 191 675 7 25 32 (164) 543
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income (31) (323) 29 (325) 100 (55) 45 102 (178)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fourth Fourth Third Twelve Twelve
Quarter Quarter Increase/ Quarter Increase/ Months Months Increase/
In millions 1997 1996 (Decrease) 1997 (Decrease) 1997 1996 (Decrease)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Advisory & Underwriting $271 $225 $46 $328 ($57) $1,075 $814 $261
Global Credit 168 246 (78) 220 (52) 844 928 (84)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCE AND ADVISORY 439 471 (32) 548 (109) 1,919 1,742 177
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed Income 228 286 (58) 333 (105) 1,092 1,305 (213)
Emerging Markets 122 119 3 111 11 542 547 (5)
Equities (54) 83 (137) 106 (160) 362 366 (4)
Foreign Exchange 128 88 40 99 29 430 294 136
Commodities 29 19 10 20 9 77 38 39
- ------------------------------------------------------------------------------------------------------------------------------------
MARKET MAKING 453 595 (142) 669 (216) 2,503 2,550 (47)
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Management Services (a) 277 242 35 259 18 1,035 902 133
Securities and Futures Services 159 122 37 148 11 575 488 87
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET MANAGEMENT AND
SERVICING 436 364 72 407 29 1,610 1,390 220
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLIENT-FOCUSED
REVENUES 1,328 1,430 (102) 1,624 (296) 6,032 5,682 350
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY INVESTMENTS 164 45 119 66 98 403 296 107
- ------------------------------------------------------------------------------------------------------------------------------------
PROPRIETARY INVESTING AND
TRADING 235 264 (29) 241 (6) 868 898 (30)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL PROPRIETARY REVENUES 399 309 90 307 92 1,271 1,194 77
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE ITEMS (47) 66 (113) (15) (32) (83) (21) (62)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED REVENUES 1,680 1,805 (125) 1,916 (236) 7,220 6,855 365
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes Institutional Investment Management and Private Client Services
The activities of our Fixed Income, Emerging Markets, and Equities businesses
are reflected across several sectors. Aggregate revenues for these businesses
for the twelve months ended December 31 follows: Fixed Income - $1,582 million
(1997) and $1,747 million (1996); Emerging Markets - $630 million (1997) and
$579 million (1996); and, Equities - $700 million (1997) and $579 million
(1996).
<PAGE> 14
14
<TABLE>
<CAPTION>
TRADING REVENUE AND RELATED NET INTEREST REVENUE
J.P. Morgan & Co. Incorporated
- -----------------------------------------------------------------------------------------------------------------------------------
In millions
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL NET
FIXED FOREIGN PROPRIETARY TRADING INTEREST COMBINED
INCOME EQUITIES EXCHANGE COMMODITIES TRADING REVENUE REVENUE TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fourth Quarter 1997 $126 ($142) $202 $32 $88 $306 $110 $416
Fourth Quarter 1996 273 69 84 10 76 512 113 625
- -----------------------------------------------------------------------------------------------------------------------------------
Third Quarter 1997 416 51 78 17 95 657 118 775
- -----------------------------------------------------------------------------------------------------------------------------------
Twelve Months 1997 1,138 190 472 64 273 2,137 509 2,646
Twelve Months 1996 1,540 330 320 34 253 2,477 250 2,727
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT BANKING REVENUE
J.P. Morgan & Co. Incorporated
- ------------------------------------------------------------------------------------------------------------------------------------
In millions
- ------------------------------------------------------------------------------------------------------------------------------------
ADVISORY AND UNDERWRITING TOTAL INVESTMENT
SYNDICATION FEES REVENUE BANKING REVENUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fourth Quarter 1997 $166 $117 $283
Fourth Quarter 1996 183 94 277
Twelve Months 1997 637 486 1,123
Twelve Months 1996 568 353 921
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 15
15
<TABLE>
<CAPTION>
ASSET QUALITY
J.P. Morgan & Co. Incorporated
- --------------------------------------------------------------------------------------
NONPERFORMING ASSETS
December 31 September 30 December 31
In millions 1997 1997 1996
---- --- ----
Impaired loans:
<S> <C> <C> <C>
Commercial and industrial $ 55 $46 $ 89
Banks and other financial institutions 30 5 --
Other 28 29 31
- ---------------------------------------------------------------------------------------
Total impaired loans 113 80 120
Other nonperforming assets,
primarily swaps 546 4 --
- ---------------------------------------------------------------------------------------
Total nonperforming assets 659 84 120
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE ALLOWANCE FOR CREDIT LOSSES
December 31 September 30 December 31
In millions 1997 1997 1996
----------- ------------ -----------
<S> <C> <C> <C>
Aggregate allowance for credit losses $1,081 $1,096 $1,116
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fourth Quarter Twelve Months
--------------- ----------------
1997 1996 1997 1996
---- ---- --- ----
Charge-offs:
<S> <C> <C> <C> <C>
Commercial and industrial ($21) ($2) ($60) ($30)
Banks and other financial institutions (3) -- (17) --
Other -- (2) (2) (9)
Recoveries 9 7 45 25
Translation adjustment -- -- (1) --
- ---------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
1
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated
- ------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions,
Interest and average rates
on a taxable-equivalent basis Three months ended
----------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
----------------------------------------------------------------------------------------
Average Average Average Average
balance Interest rate balance Interest rate
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning deposits with banks,
mainly in offices outside the U.S. $ 2,305 $ 75 12.91% $ 2,071 $ 29 5.57%
Debt investment securities in
offices in the U.S. (a):
U.S. Treasury 1,219 22 7.16 3,002 44 5.83
U.S. state and political
subdivision 1,174 34 11.49 1,496 43 11.43
Other 15,957 247 6.14 16,708 275 6.55
Debt investment securities in offices
outside the U.S. (a) 3,025 57 7.48 5,522 74 5.33
Trading account assets:
In offices in the U.S. 30,292 484 6.34 19,100 280 5.83
In offices outside the U.S. 37,935 676 7.07 38,328 740 7.68
Securities purchased under agreements
to resell and federal funds sold,
In offices in the U.S. 15,372 247 6.37 18,148 250 5.48
In offices outside the U.S. 26,705 310 4.61 22,318 265 4.72
Securities borrowed,
mainly in offices in the U.S. 41,221 500 4.81 27,899 365 5.20
Loans:
In offices in the U.S. 5,712 100 6.95 5,546 92 6.60
In offices outside the U.S. 27,439 455 6.58 23,721 371 6.22
Other interest-earning assets (b):
In offices in the U.S. 943 37 * 675 51 *
In offices outside the U.S. 571 44 * 817 67 *
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 209,870 3,288 6.22 185,351 2,946 6.32
Allowance for credit losses (c) (897) (1,113)
Cash and due from banks 775 1,082
Other noninterest-earning assets 59,944 48,665
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 269,692 233,985
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest and average rates applying to the following asset categories have been
adjusted to a taxable-equivalent basis: Debt investment securities in offices in
the U.S., Trading account assets in offices in the U.S., and Loans in offices in
the U.S. The applicable tax rate used to determine these adjustments was
approximately 41% for the three months ended December 31, 1997 and 1996.
(a) For the three months ended December 31, 1997 and 1996, average debt
investment securities are computed based on historical amortized cost, excluding
the effects of SFAS No. 115 adjustments.
(b) Interest revenue includes the effect of certain off-balance-sheet
transactions.
(c) Average amount at December 31, 1997 is based on the portions of the
aggregate allowance for credit losses related only to loans and trading account
assets. Average amount at December 31, 1996 is substantially based on the
aggregate allowance for credit losses.
* Not meaningful.
<PAGE> 2
2
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated
- -----------------------------------------------------------------------------------------------------------------------------
Dollars in millions,
Interest and average rates Three months ended
on a taxable-equivalent basis ---------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
---------------------------------------------------------------------------------
Average Average Average Average
balance Interest rate balance Interest rate
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
In offices in the U.S. $ 9,900 $ 137 5.49% $ 7,944 $ 109 5.46%
In offices outside the U.S. 47,620 573 4.77 45,049 537 4.74
Trading account liabilities:
In offices in the U.S. 13,142 236 7.12 8,127 127 6.22
In offices outside the U.S. 16,149 238 5.85 11,812 218 7.34
Securities sold under agreements to
repurchase and federal funds
purchased, mainly in offices in
the U.S. 68,364 915 5.31 69,511 911 5.21
Commercial paper, mainly in offices
in the U.S. 6,086 84 5.48 4,082 56 5.46
Other interest-bearing liabilities:
In offices in the U.S. 14,410 234 6.44 15,772 231 5.83
In offices outside the U.S. 3,111 56 7.14 2,856 59 8.22
Long-term debt,
mainly in offices in the U.S. 22,599 343 6.02 12,630 193 6.08
- --------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 201,381 2,816 5.55 177,783 2,441 5.46
Noninterest-bearing deposits:
In offices in the U.S. 1,028 1,872
In offices outside the U.S. 594 481
Other noninterest-bearing
liabilities 55,221 42,471
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 258,224 222,607
Stockholders' equity 11,468 11,378
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity 269,692 233,985
Net yield on interest-earning assets 0.89 1.08
- --------------------------------------------------------------------------------------------------------------------------
Net interest earnings 472 505
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
3
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated
- -----------------------------------------------------------------------------------------------------------------------------------
Dollars in millions,
Interest and average rates Twelve months ended
on a taxable-equivalent basis --------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
--------------------------------------------------------------------------------------
Average Average Average Average
balance Interest rate balance Interest rate
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning deposits with banks,
mainly in offices outside the U.S. $ 2,035 $ 199 9.78% $ 2,022 $ 110 5.44%
Debt investment securities in
offices in the U.S.(a):
U.S. Treasury 1,296 95 7.33 1,581 106 6.70
U.S. state and political
subdivision 1,264 148 11.71 1,591 183 11.50
Other 17,260 1,095 6.34 17,399 1,109 6.37
Debt investment securities in offices
outside the U.S.(a) 3,733 273 7.31 4,452 271 6.09
Trading account assets:
In offices in the U.S. 25,245 1,587 6.29 16,591 994 5.99
In offices outside the U.S. 39,367 2,693 6.84 29,656 2,285 7.71
Securities purchased under agreements
to resell and federal funds sold,
In offices in the U.S. 15,660 895 5.72 24,653 1,269 5.15
In offices outside the U.S. 24,785 1,164 4.70 18,411 985 5.35
Securities borrowed,
mainly in offices in the U.S. 36,287 1,784 4.92 25,310 1,284 5.07
Loans:
In offices in the U.S. 5,146 381 7.40 6,227 418 6.71
In offices outside the U.S. 25,490 1,661 6.52 21,794 1,371 6.29
Other interest-earning assets (b):
In offices in the U.S. 774 168 * 940 139 *
In offices outside the U.S. 707 282 * 1,027 274 *
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 199,049 12,425 6.24 171,654 10,798 6.29
Allowance for credit losses (c) (911) (1,119)
Cash and due from banks 797 935
Other noninterest-earning assets 53,960 43,573
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 252,895 215,043
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest and average rates applying to the following asset categories have been
adjusted to a taxable-equivalent basis: Debt investment securities in offices in
the U.S., Trading account assets in offices in the U.S., and Loans in offices in
the U.S. The applicable tax rate used to determine these adjustments was
approximately 41% for the twelve months ended December 31, 1997 and 1996.
(a) For the twelve months ended December 31, 1997 and 1996, average debt
investment securities are computed based on historical amortized cost, excluding
the effects of SFAS No. 115 adjustments.
(b) Interest revenue includes the effect of certain off-balance-sheet
transactions.
(c) Average amount at December 31, 1997 is based on the portions of the
aggregate allowance for credit losses related only to loans and trading account
assets. Average amount at December 31, 1996 is substantially based on the
aggregate allowance for credit losses.
* Not meaningful.
<PAGE> 4
4
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated
- -----------------------------------------------------------------------------------------------------------------------------
Dollars in millions,
Interest and average rates Twelve months ended
on a taxable-equivalent basis ------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
------------------------------------------------------------------------------------
Average Average Average Average
balance Interest rate balance Interest rate
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
In offices in the U.S. $ 9,676 $ 538 5.56% $ 3,962 $ 204 5.15%
In offices outside the U.S. 46,254 2,215 4.79 45,148 2,337 5.18
Trading account liabilities:
In offices in the U.S. 11,390 785 6.89 8,295 522 6.29
In offices outside the U.S. 14,291 867 6.07 11,056 780 7.05
Securities sold under agreements to
repurchase and federal funds
purchased, mainly in offices in
the U.S. 67,121 3,532 5.26 63,424 3,295 5.20
Commercial paper, mainly in offices
in the U.S. 4,858 262 5.39 4,133 225 5.44
Other interest-bearing liabilities:
In offices in the U.S. 15,590 958 6.14 14,331 819 5.71
In offices outside the U.S. 4,026 227 5.64 2,258 204 9.03
Long-term debt,
mainly in offices in the U.S. 18,155 1,097 6.04 10,643 625 5.87
- --------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 191,361 10,481 5.48 163,250 9,011 5.52
Noninterest-bearing deposits:
In offices in the U.S. 1,033 2,298
In offices outside the U.S. 452 737
Other noninterest-bearing
liabilities 48,696 37,767
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 241,542 204,052
Stockholders' equity 11,353 10,991
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity 252,895 215,043
Net yield on interest-earning assets 0.98 1.04
- --------------------------------------------------------------------------------------------------------------------------
Net interest earnings 1,944 1,787
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
