by Calculated Risk on 1/15/2009 10:37:00 AM

Here is the JPMorgan Presentation (PDF)

Notes from Brian:

Investment Bank – Allowance for losses 4.71% vs 3.85% q/q, NPLs 1.175B up $436MM q/q, VAR $327 vs 218 q/q

Dimon comment on Bear acquisition:
“It did cost us net net however you look at it several billion dollars this year.”

Leverage Lending markdowns $1.8B
Mortgage-related markdowns $1.1B (primarily CRE)
Other credit costs $0.8B

Leverage Lending commitments now marked down to 55 cents on the dollar

(Note all charge off rates for Retail Financial Services, Home Equity, Prime Mortgage and Subprime Mortgage are for Heritage JPM portfolios – the assumed WaMu portfolios excluded all the credit impaired loans and have minimal loss rates and thus are excluded from the calculations)

Retail Financial Services Charge off rate 2.98% vs 2.43% q/q
Home Equity Originations $1.7B vs $9.8B y/y
Mortgage Originations $28.1B vs $37.7B q/q vs $40.0 y/y
Auto Loan Originations $2.8B vs $3.8Bq/q vs $5.6B y/y

Home Equity
Charge off rate 3.24% vs 2.78% q/q, vs 1.05% y/y
Charge offs could reach $1B +/- over next few Q’s vs $770 in Q4
Max CLTVs now range from 50-70% vs 80% last quarter

Prime Mortgage
Charge off rate 1.97% vs 1.79% q/q vs .22% y/y
80% of losses from CA & FL, 90% of losses from 06 and 07 vintages
Charge offs could be as high as $400MM over next few Qs vs $195MM in Q4 (or roughly 4% charge off rate!)

Subprime Mortgage
Charge off rate 9.76% vs 7.65% q/q vs 2.08% y/y
Charge offs could be as high as $375-425MM per Q in 2009 vs $319MM in Q4

WaMu Portfolio
At the time of the deal, home price decline assumptions ranged from 25-28% - Economy.com now is forecasting 31%
At the time of the deal, forecasted losses were in the range of $31-37B and are now estimated in the range of $32-36B

Credit Cards
Charge off rate 5.29% vs 5.00% q/q vs 3.89% y/y
30 day delinquency rate 4.36% vs 3.69% q/q vs 3.48% y/y
Charge off rate expected to increase to 7% in Q1 and rise to 8% over the balance of the year

Other
Private Equity investments written down by $1.1B in the quarter
Purchase accounting adjustments (WaMu deal) added $1.1B to net income in the quarter
Mortgage servicing rights business added $900MM to net income in the quarter

Comments by Dimon:
“We owe you comments on the new UDAP (credit card regulations). To suffice to say here, it probably will drive profits lower and reduce the amount of credit you can make and the way you can make it available to consumers ... ”

“Commercial bank, really great results – NPL and credit loss haven't gone up that much. You cannot have an environment (like this) when you don't see a lot of stress and strain ... Expect losses to go up.”

Q&A

Analyst: In terms of the outlook on consumer card balances, consumers delevering, do you expect to grow card balances in this environment?

Dimon: Very hard to tell because what we see is the consumer is spending less, card spend was down dramatic 8% in Q4, payments are way down too, balances, we don't know how the two are going to intercept.

Analyst: A lot of talk going back and forth on loan modification laws and potential principal reductions...just thoughts [from] you guys and really for the industry in general on what potential impact that could have on both acceleration of losses, but also just the state of the securitization markets.

Dimon: We are really trying to figure that out. All I'm going to say at this point is it is legislation. You know we don't know if it will get passed or not get passed. I think it could have a pretty chilling effect on consumer lending in general and drive up bankruptcy in general if people go to bankruptcy court more.

Analyst: ... you talked about the investment bank..how do you resize that business?

Dimon: ... when we added Bear Stearns we said it would add 6000 people to the IB net. The head count looking forward is more like as if you didn't add Bear Stearns at all.