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JP Morgan Chase & Co.Class 2 - Group 2Trn i My - 332966Nguyn Th Tr My 332953Lecturer: Prof. Thomas Bradley

The original bank: Chase Manhattan, was founded in New York in 1799.Purchased JP Morgan Bank in 2000 Changed name: JP Morgan Chase & Co.Operated in more than 50 countries.Leader in investment banking; financial services for consumers, small business and commercial banking; financial transaction processing; asset management; and private equity. Its six major businesses are:- Investment Bank- Retail Financial Services- Card Services- Commercial Banking- Treasury & Securities Services- Asset Management

BACKGROUND

One of the worlds oldest, largest and best-known financial institutions2

OUTLINEFinancial StatementIncome StatementBalance SheetCash Flow Statement3 Significant changesIndustrial RatiosFinancial RatiosLiquidity RatiosFinancial Leverage RatiosAssets Management RatiosProfitability Ratios

Analysis (3 Significant changes from the ratios)Bonds and Bonds InformationWorking Capital ManagementAverage Collection Cycle

Financial Statement1. What are the 3 more significant changes from the 3 financial sheets for your company and for your competitor from 2008-2014, why do you think this happened?

Year ended December 31, (in millions, except per share data)2008 2009 2010 2013 2014 1Revenue2Investment banking fees5,526 7,087 6,190 6,354 6,542 3Principal transactions(10,699)9,796 10,894 10,141 10,531 4Lending- and deposit-related fees5,088 7,045 6,340 5,945 5,801 5Asset management, administration and commissions13,943 12,540 13,499 15,106 15,931 6Securities gains1,560 1,110 2,965 667 77 7Mortgage fees and related income3,467 3,678 3,870 5,205 3,563 8Card income7,419 7,110 5,891 6,022 6,020 9Other income2,169 2,044 3,847 2,106 10Noninterest revenue28,473 49,282 51,693 53,287 50,571 11Interest income73,018 66,350 63,782 52,669 51,531 12Interest expense34,239 15,198 12,781 9,350 7,897 13Net interest income38,779 51,152 51,001 43,319 43,634 14Total net revenue67,252 100,434 102,694 96,606 94,205 15Provision for credit losses20,979 32,015 16,639 225 3,139 16Noninterest expense17Compensation expense22,746 26,928 28,124 30,810 30,160 18Occupancy expense3,038 3,666 3,681 3,693 3,909 19Technology, communications and equipment expense4,315 4,624 4,684 5,425 5,804 20Professional and outside services6,053 6,232 6,767 7,641 7,705

Income Statement

21Marketing1,913 1,777 2,446 2,500 2,550 22Other expense3,740 7,594 14,558 20,398 11,146 23Amortization of intangibles1,263 1,050 936 --24Merger cost432 481 ---25Total noninterest expense43,500 52,352 61,196 70,467 61,274 26Income before income tax expense2,773 16,067 24,859 25,914 29,792 27Income tax expense(926)4,415 7,489 7,991 8,030 28Income before extraordinary gain-11,652 17,370 --29Extraordinary gain-76 ---30Net income5,605 11,728 17,370 17,923 21,762 31Net income applicable to common stockholders4,742 8,774 15,764 16,593 20,093 32Net income per common share data--4 --33Basic earnings per share---4 5 34Income before extraordinary gain1 2 4 --35Net income1 2 4 --36Diluted earnings per share---4 5 37Income before extraordinary gain1 2 4 --38Net income1 2 4 --39Weighted-average basic shares3,501 3,863 3,956 3,782 3,764 40Weighted-average diluted shares3,522 3,880 3,977 3,815 3,798 41Cash dividends declared per common share2 0 0 1 2

Income Statement

December 31, (in millions, except share data)2008 2009 2010 2013 2014 1Assets2Cash and due from banks26,895 26,206 27,567 39,771 27,831 3Deposits with banks138,139 63,230 21,673 316,051 484,477 4Federal funds sold and securities purchased under resale agreements 203,115 195,404 222,554 248,116 215,803 5Securities borrowed 124,000 119,630 123,587 111,465 110,435 6Trading assets 509,983 411,128 489,892 374,664 398,988 7Securities205,943 360,390 316,336 354,003 348,004 8Loans 744,898 633,458 692,927 738,418 757,336 9Allowance for loan losses(23,164)(31,602)32,266 (16,264)(14,185)10Loans, net of allowance for loan losses721,734 601,856 660,661 722,154 743,151 11Accrued interest and accounts receivable60,987 67,427 70,147 65,160 70,079 12Premises and equipment10,045 11,118 13,355 14,891 15,133 13Goodwill48,027 48,367 48,854 48,081 47,647 14Mortgage servicing rights9,403 15,531 13,649 9,614 7,436 15Other intangible assets5,581 1,261 4,039 1,618 1,192 16Other assets111,200 197,091 105,291 110,101 102,950 17Total assets2,175,052 2,031,989 2,117,605 2,415,689 2,573,126

Balance Sheet

18Liabilities19Deposits1,009,277 938,367 930,369 1,287,765 1,363,427 20Federal funds purchased and securities loaned or sold under repurchase agreements192,546 261,413 276,644 181,163 192,101 21Commercial paper37,845 41,794 35,363 57,848 66,344 22Other borrowed funds 132,400 55,740 57,309 27,994 30,222 23Trading liabilities166,878 125,071 146,166 137,744 152,815 24Accounts payable and other liabilities 187,078 162,696 170,330 194,491 206,954 25Beneficial interests issued by consolidated variable interest entities10,561 15,225 77,649 49,617 52,362 26Long-term debt 270,683 266,318 247,669 267,889 276,836 27Total liabilities2,008,168 1,866,624 1,941,499 2,204,511 2,341,061 28Commitments and contingencies 29Stockholders equity30Preferred stock 31,939 8,152 7,800 11,158 20,063 31Common stock39,442 4,105 4,105 4,105 4,105 32Additional paid-in capital92,143 97,982 97,415 93,828 93,270 33Retained earnings54,013 62,481 73,998 115,756 130,315 34Accumulated other comprehensive income(5,687)(91)1,001 1,199 2,189 35Shares held in RSU trust(217)(68)(53)(21)(21)36Treasury stock(9,249)(7,196)(8,160)(14,847)(17,856)37Total stockholders equity166,884 165,265 176,106 211,178 232,065 38Total liabilities and stockholders equity2,175,052 2,031,989 2,117,605 2,415,689 2,573,126

Balance Sheet

Year ended December 31, (in millions)2008 2009 2010 2013 2014 1Operating activities2Net income5,605 11,728 17,370 17,923 21,762 3Adjustments to reconcile net income to net cash provided by/(used in) operating activities:4Provision for credit losses20,979 32,015 16,639 225 3,139 5Depreciation and amortization3,143 2,783 4,029 5,306 4,759 6Amortization of intangibles1,263 1,050 936 7Deferred tax expense(2,637)(3,622)(968)8,003 4,210 8Investment securities gains(1,560)(1,110)(2,965)(667)(77)9Proceeds on sale of investment(1,540)10Stock-based compensation2,637 3,355 3,251 2,219 2,190 11Originations and purchases of loans held-for-sale(34,902)(22,417)(37,085)(75,928)(67,525)12Proceeds from sales, securitizations and paydowns of loans held-for-sale38,036 33,902 40,155 73,566 71,407 13Net change in:14Trading assets(12,787)133,488 (72,082)89,110 (24,814)15Securities borrowed15,408 4,452 (3,926)7,562 1,020 16Accrued interest and accounts receivable10,221 (6,312)443 (2,340)(3,637)17Other assets(33,629)32,182 (12,452)526 (9,166)18Trading liabilities24,061 (79,314)19,344 (9,772)26,818 19Accounts payable and other liabilities1,012 (26,450)17,325 (5,743)6,065 20Other operating adjustments(12,212)6,167 6,234 (2,037)442 21Net cash provided by operating activities23,098 121,897 (3,752)107,953 36,593 22Investing activities23Net change in:24Deposits with banks(118,929)74,289 41,625 (194,363)(168,426)25Federal funds sold and securities purchased under resale agreements(44,597)7,028 (26,925)47,726 30,848 26Held-to-maturity securities:27Proceeds from paydowns and maturities10 9 7 189 4,169 28Purchases(24,214)(10,345)29Available-for-sale securities:30Proceeds from paydowns and maturities44,414 87,712 92,740 89,631 90,664 31Proceeds from sales98,806 114,041 118,600 73,312 38,411

Cash Flow Statement

32Purchases248,599 (346,372)(179,487)(130,266)(121,504)33Proceeds from sales and securitizations of loans held-for-investment27,531 30,434 8,853 12,033 20,115 34Other changes in loans, net(59,123)51,251 1,645 (23,721)(51,749)35Net cash received from/(used in) business acquisitions or dispositions2,128 (97)(4,910)(149)843 36Proceeds from assets sale from the FRBB28,850 ----37Net maturities (purchases) of asset-backed commercial paper guaranteed by the FRBB(11,228)11,228 ---38All other investing activities, net(934)(762)(114)(679)1,338 39Net cash used in investing activities(283,671)29,355 54,002 (150,501)(165,636)40Financing activities41Net change in:42Deposits177,331 (107,700)9,637 81,476 89,346 43Federal funds purchased and securities loaned or sold under repurchase agreements15,250 67,785 15,202 (58,867)10,905 44Commercial paper and other borrowed funds9,186 (76,727)(6,869)2,784 9,242 45Beneficial interests issued by consolidated variable interest entities(2,675)(7,275)2,426 (10,433)(834)46Proceeds from long-term borrowings72,407 51,324 55,181 83,546 78,515 47Payments of long-term borrowings(62,691)(55,713)(99,043)(60,497)(65,275)48Proceeds from issuance of common stock11,500 5,756 26 --49Excess tax benefits related to stock-based compensation148 17 -137 407 50Proceeds from issuance of preferred stock32,746 -(352)3,873 8,847 51Redemption of preferred stock-(25,000)-(1,800)-52Treasury stock and warrants repurchased--(2,999)(4,789)(4,760)53Dividends paid(5,911)3,422 (1,486)(6,056)(6,990)54All other financing activities, net540 1,224 (1,666)(1,050)(1,175)55Net cash provided by financing activities247,831 (152,179)(49,217)28,324 118,228 56Effect of exchange rate changes on cash and due from banks(507)238 328 272 (1,125)57Net decrease in cash and due from banks(13,249)(689)1,316 (13,952)(11,940)58Cash and due from banks at the beginning of the period40,144 26,895 26,206 53,723 39,771 59Cash and due from banks at the end of the period26,895 26,206 27,567 39,771 27,831 60Cash interest paid37,267 16,875 12,404 9,573 8,194 61Cash income taxes paid, net2,280 5,434 9,747 3,502 1,392

Cash Flow Statement

Significant changesNet income20082009201020132014JPM5,605 11,728 17,370 17,923 21,762 BOA4,008 6,276 (2,238)11,431 4,833 Total assetsJPM2,175,052 2,031,989 2,117,605 2,415,689 2,573,126 BOA1,817,943 2,230,232 2,264,909 2,102,273 2,104,534 Net cash provided by operating activitiesJPM23,098 121,897 (3,752)107,953 36,593 BOA4,034 129,731 82,594 92,817 26,739

Industrial ratios2. What is the most significant change in the industry using the financial ratios?

Industrial ratios20082009201020132014Quick Ratio0.230.270.310.330.33Debt Ratio2.912.642.311.361.32Receivable Turnover Ratio0.590.630.692.062.02Total Asset Turnover Ratio0.070.060.060.050.05Profit Margin0.01610.05450.08210.16270.1505Return On Assets0.0010.00320.00330.00750.0071Return On Equity0.01130.03610.03610.07450.0686

830%13

3. Does your company have the same change? If not why do you think this is different? If the same then what is your analysis of why this changed so much?

20082009201020132014Return on Assets0.0030.0060.0080.0070.008

Financial Ratios4. Analyze all the financial ratios for your company, competitor and industry, graph each one and show the trend from 2008-2014.

Financial RatiosFinancial Leverage Ratio20082009201020132014Debt Ratio0.9230.9190.9170.9130.910Times Interest Earned0.8323.2434.0455.6996.404Cash Coverage Ratio0.8323.2434.0455.6996.404

Asset Management Ratios20082009201020132014Receivables Turnover0.4670.7310.7370.8180.722Days' sales in receivables781.802499.388495.302446.326505.800Total asset turnover0.0130.0240.0240.0220.020

Liquidity Ratio20082009201020132014Current Ratio1.1461.1531.1791.1521.162Quick Ratio1.1461.1531.1791.1521.162Cash Ratio0.0150.0160.0160.0210.013

Profitability ratios20082009201020132014Profit Margin0.1970.2380.3360.3360.430Return on Assets0.0030.0060.0080.0070.008Return on Equity0.0340.0710.0990.0850.094

20082009201020132014JPM1.1461.1531.1791.1521.162BOA0.6790.8300.8470.8430.857

20082009201020132014JPM1.1461.1531.1791.1521.162BOA0.6790.8300.8470.8430.857Industry0.230.270.310.330.33

20082009201020132014JPM0.0150.0160.0160.0210.013BOA0.0240.0780.0680.0810.086

20082009201020132014JPM0.9230.9190.9170.9130.910BOA0.9030.8960.8990.8890.884Industry2.912.642.311.361.32

20082009201020132014JPM0.8323.2434.0455.6996.404BOA1.8053.8844.5976.9737.705

20082009201020132014JPM0.8323.2434.0455.6996.404BOA1.8053.8844.5976.9737.705

20082009201020132014JPM0.4670.7310.7370.8180.722BOA0.0001.8351.5661.7111.539Industry0.590.630.692.062.02

20082009201020132014JPM781.802499.388495.302446.326505.800BOA0.000198.927233.110213.364237.163

20082009201020132014JPM0.0130.0240.0240.0220.020BOA0.0620.0670.0590.0480.045Industry0.070.060.060.050.05

20082009201020132014JPM0.1970.2380.3360.3360.430BOA0.0350.042-0.0170.1120.051Industry0.01610.05450.08210.16270.1505

20082009201020132014JPM0.0030.0060.0080.0070.008BOA0.0020.003-0.0010.0050.002Industry0.0010.00320.00330.00750.0071

20082009201020132014JPM0.0340.0710.0990.0850.094BOA0.0230.027-0.0100.0490.020Industry0.01130.03610.03610.07450.0686

Analysis5. Show a graph of the 3 most significant financial ratio changes from 2008-2014, did your competitor have the same change and industry? Why or why not?

JP MORGAN CHASE & CO.BANK OF AMERICA20082009201020132014200820092010201320140.8323.2434.0455.6996.4041.8053.8844.5976.9737.705

JMP: 670%BOA: 327%Significant changeTimes Interest Earned

JPM: 119%BOA: 43%Significant change - Profit MarginJP MORGAN CHASE & CO.BANK OF AMERICA20082009201020132014200820092010201320140.1970.2380.3360.3360.4300.0350.042-0.0170.1120.051

20082009201020132014JPM0.1970.2380.3360.3360.430BOA0.0350.042-0.0170.1120.051Industry0.01610.05450.08210.16270.1505

JPM: 228%BOA: 4%Significant change - Return on AssetsJP MORGAN CHASE & CO.BANK OF AMERICA20082009201020132014200820092010201320140.00260.00580.00820.00740.00850.00220.0028-0.00100.00540.0023

20082009201020132014JPM0.0030.0060.0080.0070.008BOA0.0020.003-0.0010.0050.002Industry0.0010.00320.00330.00750.0071

Total asset, sales Interest expense => EBIT, net income

Reasons

Bonds and bonds Information

Source: http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=jpm

Bonds and bonds InformationNameIssued DateMaturity DateAmount $(Mil)Coupon %Yield to Maturity (%)Jpmorgan Chase 2.6%11/18/20101/15/20161,750.002.60.89Jpmorgan Chase 3.45%2/24/20113/1/20163,000.003.450.95Jpmorgan Chase &Co 2.75%2/1/20132/1/20231,114.002.750.98Jpmorgan Chase &Co 2.625%10/23/20134/23/20211,671.102.6250.98Jpmorgan Chase 3.15%6/29/20117/5/20163,855.003.151.04J P Morgan Chase & Co Mtn Be 1.1%10/18/201210/15/20152,250.001.11.04Jpmorgan Chase &Co 1.375%9/16/20149/16/20211,671.101.3751.04J P Morgan Chase & Co Mtn Be 1.35%2/18/20142/15/20172,500.001.351.22Jpmorgan Chase 5.15%10/4/200510/1/20151,250.005.151.27Jp Morgan Chase Bk Na 2.75%8/24/20128/24/20221,671.102.751.46Jpmorgan Chase 1.8%1/25/20131/25/20181,250.001.81.51J P Morgan Chase & Co Mtn Be 1.7%3/2/20153/1/20182,250.001.71.66Jpmorgan Chase 1.625%5/15/20135/15/20182,000.001.6251.73

Source: http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=jpm

Working Capital Management

JP MORGAN CHASE & CO.BANK OF AMERICA2008200920102013201420082009201020132014Collection cycle159.485210.454262.705294.028270.467Collection cycle-99.4634228.067260.482232.567

Average Collection Cycle

Co., J. C. (n.d.). About Us. Retrieved from https://www.jpmorgan.com/pages/about

Co., J. C. (n.d.). Investor Relations. Retrieved from Annual Report & Proxy: http://investor.shareholder.com/jpmorganchase/annual.cfm

Corporation, B. o. (n.d.). Investor Relations. Retrieved from Annual Reports & Proxy Statements: http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-reportsannual#fbid=oBAcF1FKmqK

CSIMarket, I. (n.d.). Financial. Retrieved from http://csimarket.com/Industry/industry_Financial_Strength_Ratios.php?ind=708

FGATE.com.vn. (n.d.). Tin Tuc. Retrieved from http://fgate.com.vn/

Morningstar, I. (n.d.). Bonds. Retrieved from http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=jpm

VCCorp., C. t. (n.d.). Ti chnh quc t. Retrieved from http://cafef.vn/tai-chinh-quoc-te.chn

References

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