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Transcript of 2 15 11 Investor Day Invest Bank
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February 15, 2011
I N V E S T M E N T B A N K
Jes Staley, Investment Bank Chief Executive Officer
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Business evolution: 2005-2010
2005 2006 2007 2008 2009 2010
Global Markets1 8 8 6 5 3 2
Fixed Income Markets 5 7 5 4 3 1
Equity Markets 8 8 8 5 5 4
Investment Banking2
IB Fees 2 2 2 2 1 1
Advisory 2 2 4 1 3 4
Equity underwriting 4 5 2 2 1 3
Syndicated loans 1 1 1 1 1 1
Long-term debt 2 3 3 3 1 2
Equity Research3
US 7 6 3 2 2 1
Europe 10 10 8 8 4 2
Fixed Income Research3
US 2 2 2 2 2 1Europe 1 1 1 1
1 JPMorgan estimates share using public disclosure of Top 10 competitors; 2010 ranking utilizes available data as of February 11th 2011; 05-07 is heritage JPM. Pro-formas
based on industry mergers: JPM 08-10, competitors 05-102 Source: Dealogic, pro forma for industry mergers. Except for IB fees, rankings are volume based3 Institutional Investor; All-Europe Fixed Income rankings not published for 2009 and 2010
2nd Tier3rd Tier Top 3
Rankings
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2010 Performance: Strength during a recovery year
Near record performance
Revenue: $26.2B
Earnings: $6.6B
ROE of 17% on capital of $40B
Well capitalized (Tier 1 common ratios):
Basel 2: 13.0%
Basel 2.5: 9.2%
Basel 3: 7.2%
1 Dealogic
Investment Banking leadership:
#1 in Global IB Fees: 8% market share1
Record Debt underwriting revenue
Fixed Income Markets: market leader
Asia Pacific: record revenue
Commodities: upside potential
Equities: building electronic platform
Business summary
Financial results
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2010 Accomplishments: Positioned for renewed client growth
Risk Management Trading discipline
Prudent capital management
Strategy
Clients Transitioned from safe harbor to port of opportunity
Strengthened senior client coverage
Expanded in key markets
China JV: First Capital Securities
Global Corporate Bank partnership with TSS
International
Initiatives
Technology
Strategic Re-engineering Program (SRP): on target, in 3rd year
Electronic offering improved: competitive in US and Europe
Strategic derivative solutions in FX and commodities
Sempra acquisition
Oil and base metals expertise; 1,000 new clientsCommodities
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2010 Accomplishments: Comprehensive solutions
Positioned client balance sheets for growth, raised over $500B in debt and equity
Led more equity and equity-related offerings than any another firm
Ranked #1 in both high grade and high yield bonds
Raised ~$90B for U.S. state and local governments, healthcare organizations, educational
institutions and non-profits
Led the largest municipal transaction in 2010 sole bookrunner for the State of California's
$10B Revenue Anticipation Notes
Advised on 311 mergers and acquisitions globally
Led large and complex transactions
Arranged / loaned over $350B for 420 clients globally
Ranked #1 in Global Loan Syndications
First firm to re-enter the North American CMBS market
First deal without government-sponsored lending support
Source: 2010 Dealogic volume-based league tables; lead-left bookrunner basis for loans. US municipal/nonprofit capital raised per Thomson and internal sources
Issuer clients: ~5,000Global IB fees wallet share: 8%
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2010 Accomplishments: A world-class markets franchise
3,500+ Fixed Income and 2,000+ Equities
sales and trading professionals
800+ research analysts
23 global trading centers
110+ global trading desks
3mm average daily trades
Investor clients: ~16,000Global Markets revenue share: 12%
JPM markets reported revenue ($ in billions)
$12$10
$6
$22$20
2006 2007 2008 2009 2010
8% 9%10%
13%12%
2006 2007 2008 2009 3Q10 YTD
JPM markets revenue share1 (%)
Rank: #8 #6 #5 #3 #2
High volumemarkets
Average notional($ in millions)
Annual volume(est. trades per year)
Index Credit
Derivative $50-250 44,300
NYMEX Gas
Swap & Futures $5-20 68,300
G3 IR
Swap $50-200 150,000
Index Equity
Option $50-100 260,000
FX Spot $2-25 68,300,000
1 JPM share of top 10 competitors5I
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2010 Accomplishments: Flow-driven derivatives business
IB average net revenue1: 2006-2010
1 Net revenue excludes net markdowns on legacy positions; revenue approximated to round percentages
Rates40%
Commodities10%
Equities20%
Credit20%
FX10%
Non-Derivative
revenue70%
Derivativerevenue
30%
Flow85%
Exotic15%
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$37 $39
$21
$84$76
$47
0
20
40
60
80
100
120
140
160
180
2005 2006 2007 2008 2009 2010
0
20
40
60
80
100
120
140
160
180Daily Avg. Mkts. Rev. VaR
2010 Accomplishments: Revenue to risk relationship
Note: 2005-2010 IB trading VaR measured at 95% confidence level. 2005-2008 IB trading VaR was previously reported on a 99% confidence level
IB trading
loss days 52 33 46 97 42 8
Daily average markets revenue and VaR ($ in millions)
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2011 Initiatives: Increasing effectiveness for clients with complex needs
Strategy
Clients Vigilant focus on clients long-term interests
360 degree coverage
Technology
Streamlining processes, reducing cost of ownership
Flexible framework supports quick product introduction
Leverage flow, capture internalization, optimize cost
Commodities Unparalleled strength across physical and financial markets
Client flow and structured transactions drive growth
International
Developing markets
Prime Brokerage
Global Corporate Bank 3,200 client initiative
Risk management Credit and market risk discipline
Efficient capital management; ongoing regulatory focus
Initiatives
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2011 Initiatives: International developing markets
37%
14%
49% 52%
40%
62%
37%32%
23%
14%
16%
23%2006-2010 CAGR: Developing markets revenue growing ~1.5x total
9%14%
IB-wide Developing markets
U.S.43%
Non-U.S.Developed 39%
Developing18%
Latin America30%
DevelopingAsia48%
Developing
EMEA 23%
2006-2010 Revenue: Developing markets contribute 18%
LatinAmerica
29%
DevelopingEMEA23%
DevelopingAsia48%
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GlobalCorporate Bank
3,200 client initiative
Banker additions
Extending credit
Increasing product capabilities
PrimeBrokerage
Leveraging U.S. leadership to develop EMEA and Asia
Significant progress developing international core competencies
Clearing infrastructure
Global reporting in local time zones
Global synthetic financing capabilities
New stock borrow loan platform
Hiring experienced talent
Platform extension well-received by existing clients
Strong pipeline
2011 Initiatives: International Prime Brokerage and Global Corporate Bank
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2011 Initiatives: Commodities focus on execution
Principal locations
SolutionsCapabilities
Research Financial Physical
Oil
Power & Gas
Environmental Markets
Metals
Agricultural
Investor products
600 employees
10+ main office locations
100+ warehouses in 11 locations
Over 2,000 active clients including corporates,
investors, and governments
Diversification benefits with Fixed Income and
Equities businesses
Innovative risk management
Commodity linked financing
Asset optimization
Storage and transportation
Product offtake and supply arrangements
Financial and physical
1 Includes oil storage, power & gas assets, metals warehouses, bullion vaults and vessels
Main Office Locations Main Physical Assets1
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2011 Initiatives: Commodities focus on execution
The breadth and depth of our financial and physical capabilities is unparalleled
Full
Requirements
Load Serving for
Electric
Cooperatives
Crude Supply
Intermediation for
Refineries
Jet Fuel Hedging
for Global
Airlines
FinancialCapabilities
PhysicalCapabilities
Market making
Financing
Commodities-linked
financing
Risk management
Research
Product off-take
and supplyarrangements
Commodity
sourcing, storage
and transportation
Asset optimization
(restructuring,rebalancing, and
monetizing)
Client examples
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2011 Initiatives: Technology Strategic Re-engineering Program (SRP)
Efficienc
y
2009 2010 2011 2012 2013
Growth
Leadership and
monetization
Innovation and timeto market
Consolidation and
re-engineering
Creativity
Single client view
Complexity handledeasily
Capacity
Efficiency
Control
Financial Cost savings
Revenue growth
Comprehensive
overhaul of platforms
and client interface
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Risk Management: Well-established, disciplined processes
Conflictsoffice
ReputationalRisk
committee
Clientactivity
10,000 potential conflicts reviewed
1,200 commitments examined
700+ lending transactions approved
Risk committee
Balance Sheetcommittee
Commitmentscommittee
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Derivative receivables, net (12/31/10; $ in billions)
Risk Management: Prudent counterparty credit risk management
152
80 64
(16)
(72)
266
143
Derivative
receivables,
gross of
collateral
Less cash
collateral
Derivative
receivables,
net of cash
collateral
Less other
less liquid
collateral
Derivative
receivables,
net of all
collateral
Note: Derivatives, gross of collateral and net of collateral for 2009 was $146B and $65B, respectively
Risk Group 2010
Investment grade 74%
Sub-investment grade 26%
at12/31/08
Maturity (years) 2010
Less than 1 year 18%
Between 1 and 5 years 38%
Greater than 5 years 44%
79
88
Gross
derivatives
notional
outstanding
($T)
at
12/31/08
at 12/31/10
at 12/31/08
Other
83%
Top
10
17%
$16B~6,000 clients
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Risk Management: IB municipal exposure
2010 US State / municipal exposure
IB data excludes: State and Municipal securities inventory, Not-for-Profit traditional credit products ($6.4B) and derivatives ($1.8B)
Derivatives: $3B
~350 clients
Primarily pay-fixed swaps
hedging variable-rate debt
Traditional Credit Products: $19B
~130 clients
Primarily liquidity back-stops,
Letters of Credit and term loans
AAA to AA-
78%
A+ to A-
14% BBB+ to
BBB-7%
BB+ and
below
1%
AAA to AA-
45%
A+ to A-
39%
BBB+ to
BBB-8%
BB+ and
below
7%
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Risk Management: Basel 3 Tier 1 Common Ratio already at 7.2%
$462
$332
$43$100
$390
$160
$550$490
$289
Basel 14Q08
Basel 14Q10
Basel 2impact
Basel 24Q10
Basel 2.5impact
Basel 2.54Q10
Basel 3impact
Basel 34Q10
Basel 34Q11
Allocated equity ($B)Tier 1 common ratio
4011.8%
4013.0%
407.2%
408.0%
IB Tier 1 common ratio walk forward ($ in billions)
Risk Weighted Assets (RWA)Basel 1
Basel 2
Basel 2.5
409.2%
Basel 3
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Regulation: Continue to serve clients
Update
Strong governance programs already in place:
350 people, 75+ projects
Additional 300 rules to be issued/analyzed
Clearing and Swap Execution Facilities (SEFs):
Mandating clearing of most derivatives with U.S. nexus Meaningful portion of volume; less significant revenue impact
Maintain market leadership, comply before deadlines
Unresolved: margin, capital, non-U.S.
Non-Bank Subsidiary (NBS) swap push out:
Portions of below inv. grade CDS, equity and commodities derivatives affected
May push out additional activities to support client requests
No significant revenue and capital changes expected
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JPM IB: Achieving potential
Cross LOB
Networks (not silos)
Technology
360 coverage
Client franchise
Capital Markets
Fixed Income Markets
North America
Risk management
Commodities
Equity Markets
Electronic trading
International
Investment BankingAdvisory
Asia
Leadership 17% ROEthrough-the-cycle
Share
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