<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) July 19, 1999
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)
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<PAGE> 2
ITEM 5. OTHER EVENTS
On July 19, 1999, the Registrant issued a press release announcing its
earnings for the three-month and six-month periods ended June 30, 1999.
A copy of such press release is filed herein as Exhibit 99a. Also, the
Registrant made available segment results, reflecting recent management
reporting changes, for the first quarter of 1999, for each of the four
quarters of 1998, and the full years 1998, 1997, and 1996. A copy of
such information is attached hereto as Exhibit 99b.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements
NONE.
(b) Pro Forma Financial Information
NONE.
(c) Exhibits
12. Statement re computation of ratios.
99a. Copy of press release of J.P. Morgan & Co. Incorporated dated
July 19, 1999.
99b. Segment results
<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: July 19, 1999
<PAGE> 1
EXHIBIT 12
Computation of Ratio of Earnings to Fixed Charges
J.P. Morgan & Co. Incorporated
Consolidated
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Six Months
Dollars in millions 1999
- ---------------------------------------------------------------------------------
<S> <C>
Earnings:
Net income $ 1 104
Add: income taxes 594
Less: equity in undistributed income
of all affiliates accounted for by
the equity method 54
Add: fixed charges, excluding interest
on deposits 3 498
- ---------------------------------------------------------------------------------
Earnings available for fixed charges,
excluding interest on deposits 5 142
Add: interest on deposits 1 175
- ---------------------------------------------------------------------------------
Earnings available for fixed charges,
including interest on deposits 6 317
- ---------------------------------------------------------------------------------
Fixed charges:
Interest expense, excluding interest on
deposits 3 481
Interest factor in net rental expense 17
- ---------------------------------------------------------------------------------
Total fixed charges, excluding interest
on deposits 3 498
Add: interest on deposits 1 175
- ---------------------------------------------------------------------------------
Total fixed charges, including interest
on deposits 4 673
- ---------------------------------------------------------------------------------
Ratio of earnings to fixed charges:
Excluding interest on deposits 1.47
Including interest on deposits 1.35
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
EXHIBIT 12
Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
J.P. Morgan & Co. Incorporated
Consolidated
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Dollars in millions Six Months
1999
- ---------------------------------------------------------------------------------
<S> <C>
Earnings:
Net income $ 1 104
Add: income taxes 594
Less: equity in undistributed income
of all affiliates accounted for by
the equity method 54
Add: fixed charges, excluding interest
on deposits, and preferred stock
dividends 3 526
- ---------------------------------------------------------------------------------
Earnings available for fixed charges,
excluding interest on deposits 5 170
Add: interest on deposits 1 175
- ---------------------------------------------------------------------------------
Earnings available for fixed charges,
including interest on deposits 6 345
- ---------------------------------------------------------------------------------
Fixed charges:
Interest expense, excluding interest on
deposits 3 481
Interest factor in net rental expense 17
Preferred stock dividends 28
- ---------------------------------------------------------------------------------
Total fixed charges, excluding interest
on deposits 3 526
Add: interest on deposits 1 175
- ---------------------------------------------------------------------------------
Total fixed charges, including interest
on deposits 4 701
- ---------------------------------------------------------------------------------
Ratio of earnings to fixed charges:
Excluding interest on deposits 1.47
Including interest on deposits 1.35
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 99a
[J.P. MORGAN LETTERHEAD]
________________________________________________________________________________
NEWS RELEASE: IMMEDIATE July 19, 1999
J.P. MORGAN REPORTS SECOND QUARTER 1999 EARNINGS
J.P. Morgan today reported second quarter net income of $504 million, or $2.52
per share, compared with $481 million, or $2.36 per share, in the second quarter
of 1998. Net income rose 25%, excluding last year's $79 million gain on the sale
of our global trust and agency services business. Return on equity was 18% in
the quarter.
Net income for the first half of 1999 was $1.104 billion compared with $718
million in the first six months of 1998. Earnings per share for the 1999
year-to-date were $5.53 versus $3.51 in the same period a year ago.
OTHER HIGHLIGHTS FOR THE SECOND QUARTER:
- - Revenues excluding last year's gain rose 8% and included a 16% rise from
client-focused activities
- - Combined Investment Banking and Equities revenues grew 52% from the
year-ago quarter
- - Asset management and private client revenues rose by 11% versus last
year
- - Core expenses before bonuses for the first half of the year were down by
more than $200 million
- - Economic capital required for our credit portfolio was down 44% from
December 31, 1997, well ahead of schedule to achieve the 50% reduction
targeted for the end of 2000
"Growth and increased profitability in our client businesses, combined with more
progress on productivity initiatives, produced a strong quarter," said Douglas
A. Warner III, chairman.
SECOND QUARTER RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Second quarter First quarter
- -------------------------------------------------------------------------------------
In millions of dollars, except per share data 1999 1998 1999
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 2,191 $ 2,153(a) $ 2,491
Operating expenses (1,417) (1,416) (1,567)
Income taxes (270) (256) (324)
- -------------------------------------------------------------------------------------
Net income 504 481 600
Net income per share $2.52 $2.36 $3.01
Dividends declared per share $0.99 $0.95 $0.99
- -------------------------------------------------------------------------------------
</TABLE>
(a) Includes a gain of $131 million related to the sale of the firm's global
trust and agency services business.
________________________________________________________________________________
Press contact: Michael F. Golden 212/648-3784
Investor contact: Ann B. Patton 212/648-9446
<PAGE> 2
J.P. Morgan & Co. Incorporated 2
REVENUES BY SEGMENT
Revenues from client-focused activities up 16%
Revenues were $2.191 billion in the second quarter of 1999, up 8% from the same
1998 period excluding last year's gain. Revenues from client-focused activities,
reported in the Global Finance and Asset Management and Servicing sectors,
totaled $2.225 billion in the second quarter of 1999, up 16% from $1.911 billion
a year ago. Revenues from Proprietary Investments were $57 million versus $205
million a year ago.
GLOBAL FINANCE revenues of $1.815 billion in the quarter increased 20% over last
year.
- - Investment Banking revenues were $320 million, up 30%, reflecting strong
demand for advisory and capital markets services. Growth was broad-based,
driven by strength in advisory services and origination revenues from
acquisition financing, high yield origination, and risk management
products. For the first half of 1999, Thomson Financial Securities Data
Company Inc. ranked J.P. Morgan sixth in completed merger and acquisitions
worldwide, with a market share of 15.2%.
- - Equities revenues of $427 million rose 75% from a year ago, led by very
strong equity derivatives results and complemented by increases in
underwriting and secondary trading revenues. Morgan ranked eighth in U.S.
equity lead underwriting for the first half of 1999; market share was 4.4%.
Equity commission revenues increased more than 15% in both the United
States and Europe, as we continued to gain market share in both regions.
- - Interest Rate and Foreign Exchange Markets had revenues of $555 million
versus $622 million a year ago. Interest rate markets revenues were higher,
reflecting strength across all regions. These increases were offset by a
decline in foreign exchange revenues, resulting from lower volatility in
both G-7 and emerging markets currencies.
- - Credit Markets revenues increased 52% to $361 million, as all Credit
Markets activities experienced growth. Origination revenues were strong on
increased volumes in both investment grade and high yield markets as well
as in structured finance transactions. Stronger emerging markets revenues
drove increased securities trading results over last year's quarter.
- - Credit Portfolio revenues of $152 million declined 9%. This partially
reflects lower net interest earnings and lower fees as we reduced the
segment's loan exposures and commitments to lend. It also reflects slightly
higher hedging costs and losses on loan sales associated with reducing
exposures. The reduction in revenues was partly offset by a $70 million net
reversal of the provisions for credit losses. The negative provision was
taken in light of better credit market conditions, especially in emerging
markets, and reduced credit risk exposures. We are ahead of schedule to
meet our December 2000 target of a 50% capital reduction in Credit
Portfolio; at June 30, 1999, economic capital in the segment was down 44%
from December 31, 1997, driven by reduced exposures and, to a lesser
extent, improved market spreads.
<PAGE> 3
J.P. Morgan & Co. Incorporated 3
ASSET MANAGEMENT AND SERVICING revenues increased 4% to $410 million. Asset
management and private client revenues were up 11%, driven by higher investment
management fees. Euroclear revenues were lower. Assets under management rose 8%
from a year ago to $326 billion.
PROPRIETARY INVESTMENTS revenues were $57 million, compared with $205 million a
year ago.
- - Proprietary Investing and Trading revenues were $44 million, down from $103
million. Total return - reported revenues and the change in net unrealized
appreciation - was $26 million compared with $79 million. Lower results in
Asia and the United States were partially offset by strong results in the
European markets.
- - Equity Investments revenues were $13 million versus $102 million a year ago,
when we recognized net gains of $101 million related primarily to the sale
of an investment in the insurance industry.
CORPORATE ITEMS had negative revenues of $91 million. This compares with
revenues of $37 million last year, when we recognized the $131 million gain on
the sale of the firm's global trust and agency services business.
OPERATING EXPENSES
Core operating expenses reflect continued productivity discipline.
Operating expenses were $1.417 billion, level with the second quarter last year.
Non-compensation operating expenses were 19% lower this quarter as we continued
our focus on productivity. Compensation expenses rose as a result of increased
bonus accruals. The firm's efficiency ratio was 65% in the second quarter,
compared with 70% a year ago excluding the one-time gain.
Costs associated with preparation for the Year 2000 were $13 million for the
second quarter, down from $55 million last year, which also included preparation
for European Economic and Monetary Union. For the first half of 1999, costs of
preparation for the Year 2000 and European Economic and Monetary Union were $38
million, down $72 million from last year. Second quarter 1999 software costs of
$37 million were capitalized rather than recorded as expenses because of a
change in accounting rules and are not included in the 1999 expenses. For the
six months ended June 30, 1999, $66 million of software costs were capitalized.
Operating expenses for the first half of 1999 were $2.984 billion. Before bonus
accruals and excluding the effect of software capitalization, this represents a
reduction of more than $200 million compared with the first half of last year.
<PAGE> 4
J.P. Morgan & Co. Incorporated 4
MARKET AND CREDIT RISK DEVELOPMENTS
Effective June 30, 1999, we enhanced our measurement of Daily Earnings at Risk
(DEaR) to incorporate credit risk related to counterparty exposure in our
trading derivatives portfolio. Firm-wide market and credit risk DEaR for our
trading activities approximated $45 million at June 30, 1999. This reflects,
before diversification benefits, market risk DEaR of $27 million at June 30,
1999 ($34 million at March 31, 1999) as well as derivative credit risk DEaR of
approximately $35 million at June 30, 1999. We began to measure the credit risk
embedded in derivative trading exposures based on market prices for credit risk.
Previously, these exposures were measured using a combination of historical
default experience derived from public credit ratings and other fair value
adjustments. We continue to refine our risk measurement and reporting
methodology.
DEaR for our investment portfolio, which consists largely of U.S. government
agency securities, was $30 million at June 30, 1999, versus $24 million at March
31, 1999.
CAPITAL
The firm purchased approximately $337 million of its common stock or 2.5 million
shares in the second quarter, for a total of $447 million or 3.4 million shares
in the year to date. These purchases were part of the December 1998
authorization to repurchase $750 million of common stock subject to market
conditions and other factors. These purchases may be made periodically in 1999
or beyond in the open market or through privately negotiated transactions.
At June 30, 1999, under the 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 8.4% and 12.5%, respectively; the estimated
leverage ratio was 4.5%. At March 31, 1999, J.P. Morgan's tier 1 and total
risk-based capital ratios were 8.2% and 12.3%, respectively, and the leverage
ratio was 4.4%.
At June 30, 1999, stockholders' equity of $11.803 billion included $52 million
of net unrealized depreciation on debt investment and marketable equity
investment securities, net of the related tax benefit of $48 million. This
compares with $10 million of net unrealized appreciation at March 31, 1999, net
of the related tax liability of $3 million. The net unrealized depreciation on
debt investment securities was $168 million at June 30, 1999, compared with a
net unrealized depreciation of $26 million at March 31, 1999. The decline
primarily related to decreases in the value of U.S. government and agency
securities. The net unrealized appreciation on marketable equity investment
securities was $68 million at June 30, 1999, and $39 million at March 31, 1999.
# # #
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.
<PAGE> 5
J.P. Morgan & Co. Incorporated 5
This release may contain forward-looking statements. Our statements, which
reflect management's beliefs and expectations, are subject to risks and
uncertainties that may cause actual results to differ materially from these
statements. For a discussion of the risks and uncertainties, please refer to our
1998 Annual Report.
Attached are the segment revenues tables; financial summary; interim
consolidated financial statements, which are unaudited; investment banking
revenue table; and asset quality tables. J.P. Morgan news releases, including
quarterly financial results, are available on the Internet at www.jpmorgan.com.
<PAGE> 6
6
J.P. Morgan & Co. Incorporated
The following table summarizes segment revenues for the quarters ended June 30,
1999 and 1998, and March 31, 1999, respectively.
SUMMARY OF SECTOR RESULTS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Interest Rate
Investment and Credit Credit GLOBAL
In millions Banking Equities FX Markets Markets Portfolio FINANCE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SECOND QUARTER 1999
Total revenues $320 $427 $ 555 $ 361 $152(a) $1,815
Total expenses 228 236 321 210 41 1,036
- --------------------------------------------------------------------------------------------
Pretax income 92 191 234 151 111 779
- --------------------------------------------------------------------------------------------
SECOND QUARTER 1998
Total revenues 247 244 622 238 167 1,518
Total expenses 175 225 339 204 38 981
- --------------------------------------------------------------------------------------------
Pretax income 72 19 283 34 129 537
- --------------------------------------------------------------------------------------------
INCREASE/(DECREASE), SECOND QUARTER 1999 VS. SECOND QUARTER 1998
Total revenues 73 183 (67) 123 (15) 297
Total expenses 53 11 (18) 6 3 55
- --------------------------------------------------------------------------------------------
Pretax income 20 172 (49) 117 (18) 242
- --------------------------------------------------------------------------------------------
FIRST QUARTER 1999
Total revenues 258 288 662 696 154 2,058
Total expenses 210 230 359 259 45 1,103
- --------------------------------------------------------------------------------------------
Pretax income 48 58 303 437 109 955
- --------------------------------------------------------------------------------------------
INCREASE/(DECREASE), SECOND QUARTER 1999 VS. FIRST QUARTER 1999
Total revenues 62 139 (107) (335) (2) (243)
Total expenses 18 6 (38) (49) (4) (67)
- --------------------------------------------------------------------------------------------
Pretax income 44 133 (69) (286) 2 (176)
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
ASSET
MANAGE- Proprietary
MENT AND Equity Investing PROPRIETARY Corporate CONSOL-
In millions SERVICING Investments and Trading INVESTMENTS Items IDATED
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SECOND QUARTER 1999
Total revenues $410 $ 13 $ 44 $ 57 $(91) $2,191
Total expenses 279 13 42 55 47 1,417
- ------------------------------------------------------------------------------------------------
Pretax income 131 0 2 2 (138) 774
- ------------------------------------------------------------------------------------------------
SECOND QUARTER 1998
Total revenues 393 102 103 205 37(b) 2,153
Total expenses 311 15 39 54 70 1,416
- ------------------------------------------------------------------------------------------------
Pretax income 82 87 64 151 (33) 737
- ------------------------------------------------------------------------------------------------
INCREASE/(DECREASE), SECOND QUARTER 1999 VS. SECOND QUARTER 1998
Total revenues 17 (89) (59) (148) (128) 38
Total expenses (32) (2) 3 1 (23) 1
- ------------------------------------------------------------------------------------------------
Pretax income 49 (87) (62) (149) (105) 37
- ------------------------------------------------------------------------------------------------
FIRST QUARTER 1999
Total revenues 371 (22) 119 97 (35) 2,491
Total expenses 280 14 33 47 137 1,567
- ------------------------------------------------------------------------------------------------
Pretax income 91 (36) 86 50 (172) 924
- ------------------------------------------------------------------------------------------------
INCREASE/(DECREASE), SECOND QUARTER 1999 VS. FIRST QUARTER 1999
Total revenues 39 35 (75) (40) (56) (300)
Total expenses (1) (1) 9 8 (90) (150)
- ------------------------------------------------------------------------------------------------
Pretax income 40 36 (84) (48) 34 (150)
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) Second quarter 1999 includes a net reversal of provision for credit losses
$(70) million.
(b) Second quarter 1998 includes a pretax gain of $131 million related to the
sale of the firm's global trust and agency services business.
Note: The table above reflects our current management reporting structure.
Credit Portfolio's results have been restated to reflect the segment's
responsibility for managing the firm's allowances for credit losses as follows:
provisions for credit losses, previously included in Corporate Items, are
included in the segment, and the intercompany credit loss charge previously paid
to Corporate Items in lieu of recording provisions, has been eliminated. Prior
period amounts have been restated. For a description of our segments, please
refer to the J.P. Morgan & Co. 1998 Annual Report.
<PAGE> 7
7
J.P. Morgan & Co. Incorporated
The following table summarizes segment revenues for the six month periods ended
June 30, 1999 and 1998, respectively.
SUMMARY OF SECTOR RESULTS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Interest Rate
Investment and Credit Credit GLOBAL
In millions Banking Equities FX Markets Markets Portfolio FINANCE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS 1999
Total revenues $578 $715 $1,217 $1,057 $306(a) $3,873
Total expenses 438 466 680 469 86 2,139
- -----------------------------------------------------------------------------------------------
Pretax income 140 249 537 588 220 1,734
- -----------------------------------------------------------------------------------------------
SIX MONTHS 1998
Total revenues 498 379 1,235 602 289 3,003
Total expenses 360 416 691 460 67 1,994
- -----------------------------------------------------------------------------------------------
Pretax income 138 (37) 544 142 222 1,009
- -----------------------------------------------------------------------------------------------
INCREASE/(DECREASE), SIX MONTHS 1999 VS. SIX MONTHS 1998
Total revenues 80 336 (18) 455 17 870
Total expenses 78 50 (11) 9 19 145
- -----------------------------------------------------------------------------------------------
Pretax income 2 286 (7) 446 (2) 725
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
ASSET
MANAGE- Proprietary
MENT AND Equity Investing PROPRIETARY Corporate CONSOL-
In millions SERVICING Investments and Trading INVESTMENTS Items IDATED
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS 1999
Total revenues $781 $ (9) $ 163 $ 154 $(126) $4,682
Total expenses 559 27 75 102 184 2,984
- ----------------------------------------------------------------------------------------------------
Pretax income 222 (36) 88 52 (310) 1,698
- ----------------------------------------------------------------------------------------------------
SIX MONTHS 1998
Total revenues 755 128 367 495 (103)(b) 4,150
Total expenses 607 24 79 103 344 (c) 3,048
- ----------------------------------------------------------------------------------------------------
Pretax income 148 104 288 392 (447) 1,102
- ----------------------------------------------------------------------------------------------------
INCREASE/(DECREASE), SIX MONTHS 1999 VS. SIX MONTHS 1998
Total revenues 26 (137) (204) (341) (23) 532
Total expenses (48) 3 (4) (1) (160) (64)
- ----------------------------------------------------------------------------------------------------
Pretax income 74 (140) (200) (340) 137 596
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) Second quarter 1999 includes a net reversal of provision for credit losses
$(70) million.
(b) Second quarter 1998 includes a pretax gain of $131 million related to the
sale of the firm's global trust and agency services business.
(c) First quarter 1998 includes a pretax charge of $215 million related to the
restructuring of business activities.
Note: The table above reflects our current management reporting structure.
Credit Portfolio's results have been restated to reflect the segment's
responsibility for managing the firm's allowances for credit losses as follows:
provisions for credit losses, previously included in Corporate Items, are
included in the segment, and the intercompany credit loss charge previously paid
to Corporate Items in lieu of recording provisions, has been eliminated. Prior
period amounts have been restated. For a description of our segments, please
refer to the J.P. Morgan & Co. 1998 Annual Report.
<PAGE> 8
8
J.P. Morgan & Co. Incorporated
FINANCIAL SUMMARY
J. P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Dollars in millions, except share data
First
Second Quarter Quarter Six Months
------------------------------ ----------- ------------------------------
1999 1998 1999 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income $504 (a) $481 $600 $1,104 (b) $718
PER COMMON SHARE
Net income
Basic $2.71 (a) $2.57 $3.24 $5.94 (b) $3.82
Diluted 2.52 (a) 2.36 3.01 5.53 (b) 3.51
Dividends declared 0.99 0.95 0.99 1.98 1.90
Book value (c) $57.60 $57.26 $56.66
- ---------------------------------------------------------------------------------------------------------------------------
Common shares issued and outstanding
at period-end 175,949,606 176,658,607 176,696,808
- ---------------------------------------------------------------------------------------------------------------------------
Weighted-average number of common and
dilutive potential common shares
outstanding 196,539,342 200,064,207 196,382,735 196,461,040 199,740,026
- ---------------------------------------------------------------------------------------------------------------------------
Dividends declared on common stock $175 $168 $175 $350 $337
Dividends declared on preferred stock 9 9 9 18 18
- ---------------------------------------------------------------------------------------------------------------------------
Annualized rate of return on average
common stockholders' equity (d) 18.0% (a) 17.3% 22.3% 20.1% (b) 13.0%
As % of period-end total assets:
Common equity 4.1% 3.9% 4.1%
Total equity 4.4 4.2 4.3
- ---------------------------------------------------------------------------------------------------------------------------
Regulatory capital ratios (e)
Tier 1 risk-based capital ratio 8.4% 7.7% 8.2%
Total risk-based capital ratio 12.5 11.3 12.3
Leverage ratio 4.5 4.1 4.4
Risk-adjusted assets 142,701 148,930 143,087
- ---------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Debt investment securities (f) $29,512 $23,185 $33,832 $31,660 $23,611
Loans 25,552 32,556 27,513 26,527 32,548
Total interest-earning assets 192,306 208,459 197,243 194,761 209,087
Total assets 266,145 281,864 270,163 268,142 280,767
Total interest-bearing liabilities 189,071 205,868 190,416 189,740 205,867
Total liabilities 254,446 270,218 258,713 256,567 269,199
Common stockholders' equity 11,005 10,952 10,756 10,881 10,874
Total stockholders' equity 11,699 11,646 11,450 11,575 11,568
Net interest earnings before provision
(fully taxable basis) 445 306 410 855 657
Net yield on interest-earning assets 0.93% 0.59% 0.84% 0.89% 0.63%
- ---------------------------------------------------------------------------------------------------------------------------
Employees at period-end 14,902 16,045 15,100
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excluding the 1998 second quarter after tax gain of $79 million ($131
million before tax) related to the sale of the firm's global trust and agency
services business: net income was $402 million; basic and diluted earnings per
share (EPS) were $2.14 and $1.96, respectively; and the annualized rate of
return on average common stockholders' equity was 14.4% (including the impact of
SFAS No. 115) and 15.0% (excluding the impact of SFAS No. 115) for the three
months ended June 30, 1998.
(b) Excluding the 1998 second quarter after tax gain of $79 million ($131
million before tax) related to the sale of the firm's global trust and agency
services business and excluding the 1998 first quarter after tax charge of $129
million ($215 million before tax) related to the restructuring of business
activities: net income was $768 million; basic and diluted EPS were $4.09 and
$3.76, respectively; and the annualized rate of return on average common
stockholders' equity was 13.9% (including the impact of SFAS No. 115) and 14.5%
(excluding the impact of SFAS No. 115) for the six months ended June 30, 1998.
(c) Excluding the impact of SFAS No. 115, the book value per common share was
$57.87, $55.31, and $56.56, at June 30, 1999, June 30, 1998, and March 31, 1999,
respectively.
(d) Excluding the impact of SFAS No. 115, the annualized rate of return on
average common stockholders' equity was 18.1%, 18.0%, and 22.5% for the three
months ended June 30, 1999, June 30, 1998, and March 31, 1999, respectively, and
20.2% and 13.5% for the six months ended June 30, 1999 and 1998, respectively.
(e) Regulatory capital ratios and risk-adjusted assets are estimates at June 30,
1999.
(f) Average debt investment securities are computed on historical amortized
cost, excluding the effects of SFAS No. 115 adjustments.
<PAGE> 9
9
J.P. Morgan & Co. Incorporated
CONSOLIDATED STATEMENT OF INCOME
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
In millions, except share data
Three months ended
-----------------------------------------------------------
June 30 June 30 Increase/ March 31 Increase/
1999 1998 (Decrease) 1999 (Decrease)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $ 2,713 $3,106 ($393) $ 2,757 ($44)
Interest expense 2,288 2,816 (528) 2,368 (80)
- ----------------------------------------------------------------------------------------------------
Net interest revenue 425 290 135 389 36
Reversal of provision for loan losses (105) -- (105) -- (105)
- ----------------------------------------------------------------------------------------------------
Net interest revenue after reversal
of provision for loan losses 530 290 240 389 141
NONINTEREST REVENUES
Trading revenue 803 877 (74) 1,134 (331)
Investment banking revenue 457 362 95 390 67
Investment management revenue 260 226 34 246 14
Fees and commissions 191 197 (6) 214 (23)
Investment securities (loss) / revenue (29) 68 (97) (41) 12
Other (loss) / revenue (21)(a) 133(b) (154) 159 (180)
- ----------------------------------------------------------------------------------------------------
Total noninterest revenues 1,661 1,863 (202) 2,102 (441)
Total revenues, net of interest
expense and net reversal of
provision for credit losses 2,191 2,153 38 2,491 (300)
OPERATING EXPENSES
Employee compensation and benefits 970 862 108 1,096 (126)
Net occupancy 80 78 2 82 (2)
Technology and communications 231 293 (62) 247 (16)
Other expenses 136 183 (47) 142 (6)
- ----------------------------------------------------------------------------------------------------
Total operating expenses 1,417 1,416 1 1,567 (150)
Income before income taxes 774 737 37 924 (150)
Income taxes 270 256 14 324 (54)
- ----------------------------------------------------------------------------------------------------
Net income 504 481 23 600 (96)
PER COMMON SHARE
Net income
Basic $ 2.71 $ 2.57 $0.14 $ 3.24 ($0.53)
Diluted 2.52 2.36 0.16 3.01 (0.49)
Dividends declared 0.99 0.95 0.04 0.99 --
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) Second quarter 1999 includes a provision for credit losses of $35 million
related to the allowance for credit losses on lending commitments.
(b) Second quarter 1998 includes a pretax gain of $131 million ($79 million
after tax) related to the sale of the firm's global trust and agency services
business.
<PAGE> 10
10
J.P. Morgan & Co. Incorporated
CONSOLIDATED STATEMENT OF INCOME
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
In millions, except share data
Six months ended
-----------------------------------
June 30 June 30 Increase/
1999 1998(b) (Decrease)
-----------------------------------
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $ 5,470 $6,368 ($ 898)
Interest expense 4,656 5,742 (1,086)
- ---------------------------------------------------------------------------------
Net interest revenue 814 626 188
Reversal of provision for loan losses (105) -- (105)
- ---------------------------------------------------------------------------------
Net interest revenue after reversal
of provision for loan losses 919 626 293
NONINTEREST REVENUES
Trading revenue 1,937 1,773 164
Investment banking revenue 847 708 139
Investment management revenue 506 437 69
Fees and commissions 405 387 18
Investment securities (loss) / revenue (70) 111 (181)
Other revenue 138(a) 108(c) 30
- ---------------------------------------------------------------------------------
Total noninterest revenues 3,763 3,524 239
Total revenues, net of interest
expense and net reversal of provision
for credit losses 4,682 4,150 532
OPERATING EXPENSES
Employee compensation and benefits 2,066 1,865 201
Net occupancy 162 229 (67)
Technology and communications 478 594 (116)
Other expenses 278 360 (82)
- ---------------------------------------------------------------------------------
Total operating expenses 2,984 3,048(d) (64)
Income before income taxes 1,698 1,102 596
Income taxes 594 384 210
- ---------------------------------------------------------------------------------
Net income 1,104 718 386
PER COMMON SHARE
Net income
Basic $ 5.94 $ 3.82 $ 2.12
Diluted 5.53 3.51 2.02
Dividends declared 1.98 1.90 0.08
- ---------------------------------------------------------------------------------
</TABLE>
(a) Six months ended June 30, 1999 includes a second quarter provision for
credit losses of $35 million related to the allowance for credit losses on
lending commitments.
(b) Prior to July 1, 1998, changes, excluding charge-offs and recoveries, across
balance sheet reserve or allowance captions - which included an adjustment for
trading derivatives needed to determine fair value, an allowance for loan losses
and an allowance for credit losses on lending commitments which include
commitments to extend credit, standby letters of credit, and guarantees - were
shown as reclassifications. Reclassifications had no impact on net income, and
accordingly, were not shown on the income statement. Subsequent to July 1,1998,
reclassifications across balance sheet captions for allowances are reflected as
provisions and reversals of provisions in the "Consolidated statement of
income." If reclassifications prior to July 1, 1998 were included in the
"Consolidated statement of income," the captions on the income statement for the
six months ended June 30, 1998 would change with no impact on net income as
follows: Provision for loan losses would be a negative (revenue) $50 million and
Trading revenue would decrease by $50 million.
(c) Six months ended June 30,1998 includes a second quarter pretax gain of $131
million ($79 million after tax) related to the sale of the firm's global trust
and agency services business.
(d) Six months ended June 30, 1998, includes a first quarter 1998 pretax charge
of $215 million ($129 million after tax) related to the restructuring of
business activities which was recorded as follows: $140 million in Employee
compensation and benefits, related to severance; $70 million in Net occupancy,
related to real estate write-offs; and $5 million in Technology and
Communications, related to equipment write-offs.
<PAGE> 11
11
J.P. Morgan & Co. Incorporated
CONSOLIDATED BALANCE SHEET
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
In millions, except share data June 30 March 31 December 31
1999 1999 1998
------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 2,094 $ 1,450 $ 1,203
Interest-earning deposits with banks 2,058 2,188 2,371
Debt investment securities available-for-sale carried at fair value
(cost: $26,871 at June 1999, $32,132 at March 1999, and $36,107 at
December 1998) 26,702 32,106 36,232
Equity investment securities 1,264 1,096 1,169
Trading account assets (including derivative receivables of $40,391
at June 1999, $51,544 at March 1999, and $48,124 at December 1998) 114,465 119,853 113,896
Securities purchased under agreements to resell ($32,739 at June 1999,
$27,700 at March 1999, and $31,056 at December 1998) and federal
funds sold 33,531 29,430 31,731
Securities borrowed 39,977 39,248 30,790
Loans, net of allowance for loan losses of $335 at June 1999, $447
at March 1999, and $470 at December 1998 28,753 25,785 25,025
Accrued interest and accounts receivable 6,084 6,220 7,689
Premises and equipment, net of accumulated depreciation of $1,322
at June 1999, $1,360 at March 1999, and $1,350 at December 1998 1,893 1,903 1,881
Other assets 12,573 9,791 9,080
- -------------------------------------------------------------------------------------------------------------
Total assets 269,394 269,070 261,067
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
Noninterest-bearing deposits:
In offices in the U.S. 1,222 841 1,242
In offices outside the U.S. 778 557 563
Interest-bearing deposits:
In offices in the U.S. 6,627 7,027 7,724
In offices outside the U.S. 46,708 48,379 45,499
- -------------------------------------------------------------------------------------------------------------
Total deposits 55,335 56,804 55,028
Trading account liabilities (including derivative payables of $37,329
at June 1999, $43,251 at March 1999, and $44,683 at December 1998) 70,129 76,527 70,643
Securities sold under agreements to repurchase ($63,460 at June 1999,
$61,736 at March 1999, and $62,784 at December 1998) and federal
funds purchased 64,554 61,910 63,368
Commercial paper 13,114 9,533 6,637
Other liabilities for borrowed money 10,974 12,413 12,515
Accounts payable and accrued expenses 10,089 7,711 9,859
Long-term debt not qualifying as risk-based capital 22,722 22,916 23,037
Other liabilities, including allowance for credit losses of $160 at
June 1999 and $125 at March 1999 and December 1998 4,116 3,074 2,999
- -------------------------------------------------------------------------------------------------------------
251,033 250,888 244,086
Liabilities qualifying as risk-based capital:
Long-term debt 5,408 5,402 4,570
Company-obligated mandatorily redeemable preferred securities of
subsidiaries 1,150 1,150 1,150
- -------------------------------------------------------------------------------------------------------------
Total liabilities 257,591 257,440 249,806
STOCKHOLDERS' EQUITY
Preferred stock (authorized shares: 10,000,000)
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: 200,934,737 at June 1999 and March 1999, and
200,873,067 at December 1998) 502 502 502
Capital surplus 1,245 1,249 1,252
Common stock issuable under stock award plans 1,540 1,439 1,460
Retained earnings 10,334 10,022 9,614
Accumulated other comprehensive income:
Net unrealized (losses)/gains on investment securities, net
of taxes (52) 10 147
Foreign currency translation, net of taxes (46) (47) (46)
- -------------------------------------------------------------------------------------------------------------
14,217 13,869 13,623
Less: treasury stock (24,985,131 shares at June 1999, 24,237,929
shares at March 1999, and 25,866,786 shares at December 1998)
at cost 2,414 2,239 2,362
- -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 11,803 11,630 11,261
- -------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 269,394 269,070 261,067
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
12
J.P. Morgan & Co. Incorporated
CONSOLIDATED STATEMENT OF CONDITION
Morgan Guaranty Trust Company of New York
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
In millions, except share data June 30 December 31
1999 1998
-----------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,033 $ 1,147
Interest-earning deposits with banks 2,055 2,372
Debt investment securities available-for-sale carried at fair value 2,989 3,634
Trading account assets 80,496 90,770
Securities purchased under agreements to resell and federal funds sold 30,158 33,316
Securities borrowed 11,739 8,193
Loans, net of allowance for loan losses of $334 at June 1999 and $470 at December 1998 28,272 24,876
Accrued interest and accounts receivable 4,722 3,898
Premises and equipment, net of accumulated depreciation of $1,121 at June 1999
and $1,160 at December 1998 1,712 1,703
Other assets 12,335 5,337
- ----------------------------------------------------------------------------------------------------------------
Total assets 176,511 175,246
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES
Noninterest-bearing deposits:
In offices in the U.S. 1,279 1,232
In offices outside the U.S. 782 572
Interest-bearing deposits:
In offices in the U.S. 6,656 7,749
In offices outside the U.S. 50,388 46,668
- ----------------------------------------------------------------------------------------------------------------
Total deposits 59,105 56,221
Trading account liabilities 60,956 64,776
Securities sold under agreements to repurchase and federal funds purchased 16,145 14,916
Other liabilities for borrowed money 6,886 8,646
Accounts payable and accrued expenses 7,921 6,123
Long-term debt not qualifying as risk-based capital 9,600 10,358
Other liabilities, including allowance for credit losses of $160 at June 1999
and $125 at December 1998 1,875 542
- ----------------------------------------------------------------------------------------------------------------
162,488 161,582
Long-term debt qualifying as risk-based capital 3,145 3,186
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 165,633 164,768
STOCKHOLDER'S EQUITY
Preferred stock, $100 par value (authorized shares: 2,500,000) -- --
Common stock, $25 par value (authorized shares: 11,000,000; issued and
outstanding: 10,599,027) 265 265
Surplus 3,305 3,305
Undivided profits 7,269 6,836
Accumulated other comprehensive income:
Net unrealized gains on investment securities, net of taxes 85 118
Foreign currency translation, net of taxes (46) (46)
- ----------------------------------------------------------------------------------------------------------------
Total stockholder's equity 10,878 10,478
- ----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity 176,511 175,246
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Member of the Federal Reserve System and the Federal Deposit Insurance
Corporation.
<PAGE> 13
13
J.P. Morgan & Co. Incorporated
INVESTMENT BANKING REVENUE
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
In millions
- -------------------------------------------------------------------------------
ADVISORY AND UNDERWRITING TOTAL INVESTMENT
SYNDICATION FEES REVENUE BANKING REVENUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Second Quarter 1999 $258 $199 $457
Second Quarter 1998 198 164 362
- -------------------------------------------------------------------------------
First Quarter 1999 221 169 390
- -------------------------------------------------------------------------------
Six Months 1999 479 368 847
Six Months 1998 389 319 708
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
14
J.P. Morgan & Co. Incorporated
ASSET QUALITY
IMPAIRED LOANS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
June 30, March 31, June 30,
In millions 1999 1999 1998(a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Impaired loans:
Commercial and industrial $38 $ 34 $24
Banks -- -- --
Other, primarily other financial
institutions at March 31, 1999 29 67 31
- --------------------------------------------------------------------------------
Total impaired loans 67 101 55
- --------------------------------------------------------------------------------
</TABLE>
(a) Certain reclassifications were made to conform with the categorization used
in Bank regulatory filings.
ALLOWANCES FOR CREDIT LOSSES
J.P. Morgan & Co. Incorporated
Allowance for loan losses
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Second Quarter Six Months Ended Second Quarter Six Months Ended
In millions 1999 June 30, 1999 1998 June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning balance $ 447 $ 470 $ 452 $ 546
- ------------------------------------------------------------------------------------------------------------------------
Reversal of provision for loan losses (105) (105) -- --
- ------------------------------------------------------------------------------------------------------------------------
Reclassifications (a) -- -- -- (50)
- ------------------------------------------------------------------------------------------------------------------------
Recoveries 1 6 -- 9
Charge-offs: (b)
Commercial and industrial (7) (10) (11) (34)
Banks (1) (1) (32) (61)
Other, primarily other financial institutions -- (25) (17) (18)
- ------------------------------------------------------------------------------------------------------------------------
Net charge-offs (7) (30) (60) (104)
- ------------------------------------------------------------------------------------------------------------------------
Ending balance 335 335 392 392
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) See note b on page 10.
(b) Charge-offs include losses on loan sales of $5 million and $52 million for
the three months ended June 30, 1999 and 1998, respectively. Charge-offs include
losses on loan sales, primarily banks and other financial institutions, of $30
million and $78 million for the six months ended June 30, 1999 and 1998,
respectively.
Components of the allowance for loan losses
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
June 30, March 31, June 30,
In millions 1999 1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Specific counterparty components in the U.S. $ 6 $ 7 $ 25
Specific counterparty components outside the U.S. 8 5 12
- ---------------------------------------------------------------------------------
Total specific counterparty 14 12 37
- ---------------------------------------------------------------------------------
Specific country 32 49 83
Expected loss (c) 289 386 272
- ---------------------------------------------------------------------------------
Total allowance 335 447 392
- ---------------------------------------------------------------------------------
</TABLE>
Allowance for credit losses on lending commitments*
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Second Quarter Six Months Ended Second Quarter Six Months Ended
In millions 1999 June 30, 1999 1998 June 30, 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning balance $125 $125 $185 $185
- ---------------------------------------------------------------------------------------------------
Provision for credit losses 35 35 -- --
- ---------------------------------------------------------------------------------------------------
Ending balance 160 160 185 185
- ---------------------------------------------------------------------------------------------------
</TABLE>
Components of the allowance for credit losses on lending commitments*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
June 30, March 31, June 30,
In millions 1999 1999 1998
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Specific counterparty components in the U.S. $ 17 $ 2 $ -
Specific counterparty components outside the U.S. 3 3 2
- -----------------------------------------------------------------------------------
Total specific counterparty 20 5 2
- -----------------------------------------------------------------------------------
Specific country 3 3 13
Expected loss (c) 137 117 170
- -----------------------------------------------------------------------------------
Total allowance 160 125 185
- -----------------------------------------------------------------------------------
</TABLE>
(c) As previously noted in our first quarter Form 10-Q, the general component of
our allowances for credit losses is used to estimate the impact of separately
identified limitations in our expected loss model. Since all factors used to
derive the general component relate to the expected loss component, the general
component is now included as part of the expected loss component for disclosure
purposes. Prior period amounts have been reclassified.
* Includes commitments to extend credit, standby letters of credit, and
guarantees.
<PAGE> 15
15
J.P. Morgan & Co. Incorporated
EXPOSURES TO EMERGING COUNTRIES
J.P. Morgan & Co. Incorporated
(preliminary)
The following tables present exposures to certain emerging markets based on
management's view of total exposure as of June 30, 1999.
The management view takes into account the following cross-border and local
exposures: the notional or contract value of loans, commitments to extend
credit, securities purchased under agreements to resell, interest-earning
deposits with banks; the fair values of trading account assets (cash securities
and derivatives, excluding any collateral we hold to offset these exposures) and
investment securities; and other monetary assets. It also considers the impact
of credit derivatives, at their notional or contract value, where we have bought
or sold credit protection outside of the respective country. Trading assets
reflect the net of long and short positions of the same issuer. Management's
view differs from bank regulatory rules, which are established by the Federal
Financial Institutions Examination Council (FFIEC), because of its treatment of
credit derivatives, trading account short positions, and the use of fair value
versus cost of investment securities. In addition, management does not net local
funding or liabilities against any local exposures as allowed by the FFIEC.
By type of financial instrument
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Credit Total
In billions Deriva- Other out- deriva- Commit- cross- Local Total
June 30, 1999 Loans tives standings tives ments border exposure exposure
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
China -- 0.1 -- (0.1) -- -- -- --
Hong Kong 0.5 0.1 0.2 (0.1) 0.1 0.8 0.3 1.1
Indonesia 0.1 -- -- -- 0.1 0.2 -- 0.2
Malaysia -- -- 0.1 -- -- 0.1 -- 0.1
Philippines -- -- 0.1 -- -- 0.1 -- 0.1
Singapore -- 0.1 0.2 (0.2) -- 0.1 0.1 0.2
South Korea 0.5 1.2 0.5 (0.5) -- 1.7 0.5 2.2
Taiwan -- -- -- -- 0.1 0.1 -- 0.1
Thailand -- 0.1 0.1 -- -- 0.2 -- 0.2
Other -- -- 0.1 -- -- 0.1 0.1 0.2
- ------------------------------------------------------------------------------------------------------------------------------
Total Asia, excluding Japan(a) 1.1 1.6 1.3 (0.9) 0.3 3.4 1.0 4.4
- ------------------------------------------------------------------------------------------------------------------------------
Argentina 0.1 0.3 0.6 (0.5) -- 0.5 0.4 0.9
Brazil 0.3 -- 0.3 (0.3) -- 0.3 1.5 1.8
Chile 0.5 -- -- (0.1) -- 0.4 -- 0.4
Colombia 0.2 -- 0.3 -- -- 0.5 -- 0.5
Mexico 0.4 0.3 0.4 (0.4) -- 0.7 0.7 1.4
Other 0.4 0.1 0.2 (0.1) 0.1 0.7 -- 0.7
- ------------------------------------------------------------------------------------------------------------------------------
Total Latin America, excluding the Caribbean 1.9 0.7 1.8 (1.4) 0.1 3.1 2.6 5.7
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
By type of counterparty
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
In billions Govern-
June 30, 1999 Banks ments Other Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
China -- -- -- --
Hong Kong 0.1 0.2 0.8 1.1
Indonesia -- -- 0.2 0.2
Malaysia 0.1 -- -- 0.1
Philippines 0.1 -- -- 0.1
Singapore 0.1 -- 0.1 0.2
South Korea 0.8 1.1 0.3 2.2
Taiwan 0.1 -- -- 0.1
Thailand 0.2 -- -- 0.2
Other -- 0.2 -- 0.2
- --------------------------------------------------------------------------------
Total Asia, excluding Japan(a) 1.5 1.5 1.4 4.4
- --------------------------------------------------------------------------------
Argentina -- 0.4 0.5 0.9
Brazil 0.6 0.7 0.5 1.8
Chile -- -- 0.4 0.4
Colombia -- 0.1 0.4 0.5
Mexico 0.1 0.4 0.9 1.4
Other 0.1 0.1 0.5 0.7
- --------------------------------------------------------------------------------
Total Latin America, excluding the Caribbean 0.8 1.7 3.2 5.7
- --------------------------------------------------------------------------------
</TABLE>
(a) Total exposures to Japan, based upon management's view, were $4.5 billion at
June 30, 1999.
Total exposures to South Africa, based upon management's view, were $1.9
billion at June 30, 1999.
<PAGE> 1
SUMMARY OF SECTOR RESULTS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Interest Rate
Investment And Credit Credit GLOBAL
In millions Banking Equities FX Markets Markets Portfolio FINANCE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FIRST QUARTER 1999
Total revenues $ 258 $ 288 $ 662 $ 696 $ 154 $ 2,058
Total expenses 210 230 359 259 45 1,103
- -------------------------------------------------------------------------------------------
Pretax income 48 58 303 437 109 955
- -------------------------------------------------------------------------------------------
SECOND QUARTER 1999
Total revenues 320 427 555 361 152(a) 1,815
Total expenses 228 236 321 210 41 1,036
- -------------------------------------------------------------------------------------------
Pretax income 92 191 234 151 111 779
- -------------------------------------------------------------------------------------------
FIRST QUARTER 1998
Total revenues 251 135 613 364 122 1,485
Total expenses 185 191 352 256 29 1,013
- -------------------------------------------------------------------------------------------
Pretax income 66 (56) 261 108 93 472
- -------------------------------------------------------------------------------------------
SECOND QUARTER 1998
Total revenues 247 244 622 238 167 1,518
Total expenses 175 225 339 204 38 981
- -------------------------------------------------------------------------------------------
Pretax income 72 19 283 34 129 537
- -------------------------------------------------------------------------------------------
THIRD QUARTER 1998
Total revenues 238 141 348 (140) 50 637
Total expenses 166 162 280 77 42 727
- -------------------------------------------------------------------------------------------
Pretax income 72 (21) 68 (217) 8 (90)
- -------------------------------------------------------------------------------------------
FOURTH QUARTER 1998
Total revenues 265 180 472 130 29 1,076
Total expenses 184 199 312 193 36 924
- -------------------------------------------------------------------------------------------
Pretax income 81 (19) 160 (63) (7) 152
- -------------------------------------------------------------------------------------------
FULL YEAR 1998
Total revenues 1,001 700 2,055 592 367 4,715
Total expenses 710 777 1,283 730 145 3,645
- -------------------------------------------------------------------------------------------
Pretax income 291 (77) 772 (138) 222 1,070
- -------------------------------------------------------------------------------------------
FULL YEAR 1997
Total revenues 768 465 1,752 841 558 4,384
Total expenses 686 692 1,259 735 123 3,495
- -------------------------------------------------------------------------------------------
Pretax income 82 (227) 493 106 435 889
- -------------------------------------------------------------------------------------------
FULL YEAR 1996
Total revenues 614 419 1,495 1,012 656 4,196
Total expenses 604 513 1,134 638 80 2,969
- -------------------------------------------------------------------------------------------
Pretax income 10 (94) 361 374 576 1,227
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
ASSET Proprietary
MANAGEMENT Equity Investing PROPRIETARY Corporate
IN MILLIONS AND SERVICING Investments and Trading INVESTMENTS Items CONSOLIDATED
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FIRST QUARTER 1999
Total revenues $ 371 ($ 22) $119 $ 97 ($ 35) $2,491
Total expenses 280 14 33 47 137 1,567
- --------------------------------------------------------------------------------------------------------
Pretax income 91 (36) 86 50 (172) 924
- --------------------------------------------------------------------------------------------------------
SECOND QUARTER 1999
Total revenues 410 13 44 57 (91) 2,191
Total expenses 279 13 42 55 47 1,417
- --------------------------------------------------------------------------------------------------------
Pretax income 131 0 2 2 (138) 774
- --------------------------------------------------------------------------------------------------------
FIRST QUARTER 1998
Total revenues 362 26 264 290 (140) 1,997
Total expenses 296 9 40 49 274(b) 1,632
- --------------------------------------------------------------------------------------------------------
Pretax income 66 17 224 241 (414) 365
- --------------------------------------------------------------------------------------------------------
SECOND QUARTER 1998
Total revenues 393 102 103 205 37(c) 2,153
Total expenses 311 15 39 54 70 1,416
- --------------------------------------------------------------------------------------------------------
Pretax income 82 87 64 151 (33) 737
- --------------------------------------------------------------------------------------------------------
THIRD QUARTER 1998
Total revenues 383 160 147 307 (26) 1,301
Total expenses 293 15 35 50 29 1,099
- --------------------------------------------------------------------------------------------------------
Pretax income 90 145 112 257 (55) 202
- --------------------------------------------------------------------------------------------------------
FOURTH QUARTER 1998
Total revenues 353 47 192 239 (164) 1,504
Total expenses 285 10 42 52 130 1,391
- --------------------------------------------------------------------------------------------------------
Pretax income 68 37 150 187 (294) 113
- --------------------------------------------------------------------------------------------------------
FULL YEAR 1998
Total revenues 1,491 335 706 1,041 (292) 6,955
Total expenses 1,185 49 156 205 503 5,538
- --------------------------------------------------------------------------------------------------------
Pretax income 306 286 550 836 (795) 1,417
- --------------------------------------------------------------------------------------------------------
FULL YEAR 1997
Total revenues 1,384 399 895 1,294 158 7,220
Total expenses 1,130 47 154 201 240 5,066
- --------------------------------------------------------------------------------------------------------
Pretax income 254 352 741 1,093 (82) 2,154
- --------------------------------------------------------------------------------------------------------
FULL YEAR 1996
Total revenues 1,187 270 934 1,204 268 6,855
Total expenses 905 38 137 175 474 4,523
- --------------------------------------------------------------------------------------------------------
Pretax income 282 232 797 1,029 (206) 2,332
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) Second quarter 1999 includes a net reversal of provision for credit losses
$(70) million.
(b) First quarter 1998 includes a pretax charge of $215 million related to the
restructuring of business activities.
(c) Second quarter 1998 includes a pretax gain of $131 million related to the
sale of the firm's global trust and agency services business.
Note: The table above reflects our current management reporting structure.
Credit Portfolio's results have been restated to reflect the segment's
responsibility for managing the firm's allowances for credit losses as follows:
provisions for credit losses, previously included in Corporate Items, are
included in the segment, and the intercompany credit loss charge previously paid
to Corporate Items in lieu of recording provisions, has been eliminated. Prior
period amounts have been restated. For a description of our segments, please
refer to the J.P. Morgan & Co. 1998 Annual Report.
