- Average business banking loans were $16.1 billion and originations were $1.7 billion.
- Number of branches grew to 3,157, up 68.
- Branch sales of credit cards increased 4%.
- Branch sales of investment products increased 2%.
- Overhead ratio (excluding amortization of core deposit intangibles) decreased to 47% from 50%.
Mortgage Banking net income was $169 million, an increase of $98 million, or 138% from the prior year.
- Net revenue was $922 million, up $289 million, or 46%.
- Net revenue comprises production revenue and net mortgage servicing revenue.
- Production revenue was $597 million, up $134 million, predominantly benefiting from higher loan originations.
- Net mortgage servicing revenue, which includes loan servicing revenue, MSR risk management results and other changes in fair value, was $325 million, compared with $170 million in the prior year.
- Loan servicing revenue of $678 million increased by $63 million on growth of 15% in third-party loans serviced. MSR risk management results were positive $41 million compared with negative $62 million in the prior year.
- Other changes in fair value of the MSR asset were negative $394 million compared with negative $383 million in the prior year.
- Noninterest expense was $649 million, an increase of $133 million, or 26%. The increase reflected higher mortgage reinsurance losses, higher production expense due in part to growth in origination volume, and higher servicing costs due to increased delinquencies and defaults.
- Mortgage loan originations were $56.1 billion, up 27% from the prior year and 19% from the prior quarter.
- Total third-party mortgage loans serviced were $659.1 billion, an increase of $86.7 billion, or 15%.
- Auto Finance net income was $83 million, a decrease of $2 million, or 2%, from the prior year.
- Net revenue was $498 million, up $48 million, or 11%, driven by higher loan balances and increased automobile operating lease revenue. The provision for credit losses was $117 million, up $25 million, reflecting higher estimated losses.
- The net charge-off rate was 1.07%, compared with 0.61% in the prior year.
- Noninterest expense of $243 million increased by $24 million, or 11%, driven by increased depreciation expense on owned automobiles subject to operating leases.
- Auto loan originations were $5.6 billion, up 6%.
- Average loans were $44.7 billion, up 11%.
Card Services net income was $250 million, a decline of $509 million, or 67%, from the prior year. The decrease was driven by a higher provision for credit losses.
- End-of-period managed loans of $155.4 billion grew by $7.4 billion, or 5%, from the prior year and $4.4 billion, or 3%, from the prior quarter.
- Average managed loans of $152.8 billion increased $5.4 billion, or 4%, from the prior year and were flat from the prior quarter, reflecting seasonal patterning. The increase from the prior year in both end-of-period and average managed loans reflects organic portfolio growth.
- Managed net revenue was $3.8 billion, an increase of $58 million, or 2%, from the prior year.
- Net interest income was $3 billion, up $56 million, or 2%, from the prior year. The increase in net interest income was driven by higher average managed loan balances, an increased level of fees and wider loan spreads. These benefits were offset largely by the effect of higher revenue reversals associated with higher charge-offs.
- Noninterest revenue of $764 million was flat compared with the prior year. Increased interchange income (the result of charge volume growth of 6%), higher revenue from fee-based products, and higher securitization income were offset by increased rewards expense and higher volume-driven payments to partners (both of which are netted against interchange income).
- The managed provision for credit losses was $2.2 billion, an increase of $863 million, or 65%, from the prior year, due to a higher level of charge-offs and an increase of $300 million in the allowance for loan losses. The managed net charge-off rate for the quarter was 4.98%, up from 3.62% in the prior year and 4.37% in the prior quarter. The 30-day managed delinquency rate was 3.46%, up from 3.00% in the prior year and down from 3.66% in the prior quarter, reflecting seasonal patterning.
- Noninterest expense of $1.2 billion was flat compared with the prior year.
- Return on equity was 7%, down from 22%.
- Pretax income to average managed loans (ROO) was 1.04%, compared with 3.26% in the prior year and 2.52% in the prior quarter.
- Net interest income as a percentage of average managed loans was 7.92%, down from 8.04% in the prior year and 8.34% in the prior quarter.
- Net accounts of 3.6 million were opened during the quarter.
- Charge volume was $93.6 billion, an increase of $5.6 billion, or 6%. The growth reflects an increase of 7% in sales volume and a 4% increase in balance transfers.
- Announced the termination of Chase Paymentech Solutions, a global payments and merchant acquiring joint venture between JPMorgan Chase and First Data Corporation. The dissolution is expected to be completed by year-end 2008 and JPMorgan Chase will retain approximately 51% of the business under the Chase Paymentech name.
- Merchant processing volume was $199.3 billion, an increase of $19.6 billion, or 11%, and total transactions were 5.6 billion, an increase of 812 million, or 17%.
Commercial Banking net income was $355 million, an increase of $71 million, or 25%, from the prior year driven by record net revenue and lower noninterest expense.
- Net revenue was a record $1.1 billion, an increase of $99 million, or 10%, from the prior year.
- Net interest income was $723 million, up $28 million, or 4%. The increase was driven by double-digit growth in liability and loan balances, largely offset by spread compression in the liability and loan portfolios and a continued shift to narrower–spread liability products.
- Noninterest revenue was $383 million, an increase of $71 million, or 23%, from the prior year, largely reflecting higher deposit-related fees as well as increases in other fee income.
- Middle Market Banking revenue was $708 million, an increase of $55 million, or 8%, from the prior year.
- Mid-Corporate Banking revenue was $235 million, an increase of $38 million, or 19%.
- Real Estate Banking revenue was $94 million, a decline of $15 million, or 14%.
- The provision for credit losses was $47 million, an increase of $2 million, or 4%, from the prior year. The current-quarter provision largely reflects growth in loan balances.
- The allowance for loan losses to total loans retained was 2.61% for the current quarter, down from 2.63% in the prior year and 2.65% in the prior quarter.
- Nonperforming loans were $486 million, up $351 million from the prior year and up $40 million from the prior quarter, reflecting increases in nonperforming loans in each business segment and the effect of a weakening credit environment.
- Net charge-offs were $49 million (0.28% net charge-off rate), compared with recoveries of $8 million (0.05% net recovery rate) in the prior year and net charge-offs of $81 million (0.48% net charge-off rate) in the prior quarter.
- Noninterest expense was $476 million, a decrease of $20 million, or 4%, from the prior year.
- Overhead ratio was 43%, an improvement from 49%.
- Record gross investment banking revenue (which is shared with the Investment Bank) was $270 million, up by $34 million, or 14%.
- Average loan balances were $71.1 billion, up $11.2 billion, or 19%, from the prior year and up $3.0 billion, or 4%, from the prior quarter.
- Average liability balances were $99.4 billion, up $15.2 billion, or 18%, from the prior year and flat compared with the prior quarter.
Treasury and Securities Services net income was a record $425 million, an increase of $73 million, or 21%, from the prior year, driven by record net revenue, partially offset by higher noninterest expense.
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