BUSINESS SEGMENTS

The Firm is managed on a line of business basis. There are six major reportable business segments – Investment Bank, Retail Financial Services, Card Services & Auto, Commercial Banking, Treasury & Securities Services and Asset Management, as well as a Corporate/Private Equity segment. The business segments are determined based on the products and services provided, or the type of customer served, and they reflect the manner in which financial information is currently evaluated by management. Results of these lines of business are presented on a managed basis. For a definition of managed basis, see the footnotes to the table below. For a further discussion concerning JPMorgan Chase’s business segments, see Business Segment Results on pages 16–17 of this Form 10-Q, and pages 67–68 and Note 34 on pages 290–293 of JPMorgan Chase’s 2010 Annual Report, except for RFS and Card, which are described below.

Business segment changes

Commencing July 1, 2011, the Firm’s business segments have been reorganized as follows:

Auto and Student Lending transferred from the RFS segment and are reported with Card in a single segment. Retail Financial Services continues as a segment, organized in two components: Consumer & Business Banking (formerly Retail Banking) and Mortgage Banking (including Mortgage Production and Servicing, and Real Estate Portfolios).

The business segment information associated with RFS and Card has been revised to reflect the business reorganization retroactive to January 1, 2010.

Retail Financial Services

RFS serves consumers and businesses through personal service at bank branches and through ATMs, online banking and telephone banking. Customers can use nearly 5,400 bank branches (third-largest nationally) and more than 16,700 ATMs (second-largest nationally), as well as online and mobile banking around the clock. Nearly 32,100 branch salespeople assist customers with checking and savings accounts, mortgages, home equity and business loans, and investments across the 23-state footprint from New York and Florida to California.

Card Services & Auto

Card Services & Auto (“Card”) is one of the nation’s largest credit card issuers, with over $127 billion in credit card loans and over 64 million open credit card accounts (excluding the commercial card portfolio). In the nine months ended September 30, 2011, customers used Chase credit cards (excluding the commercial card portfolio) to meet over $250 billion of their spending needs. Through its merchant acquiring business, Chase Paymentech Solutions, Card is a global leader in payment processing and merchant acquiring. Consumers also can obtain loans through more than 16,900 auto dealerships and 1,900 schools and universities nationwide.

Segment results

The following tables provide a summary of the Firm’s segment results for the three and nine months ended September 30, 2011 and 2010, on a managed basis. Total net revenue (noninterest revenue and net interest income) for each of the segments is presented on a tax-equivalent basis. Accordingly, revenue from tax-exempt securities and investments that receive tax credits are presented in the managed results on a basis comparable to taxable securities and investments. This approach allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The corresponding income tax impact related to these items is recorded within income tax expense/(benefit).

Effective January 1, 2011, capital allocated to Card was reduced, largely reflecting portfolio runoff and the improving risk profile of the business; capital allocated to TSS was increased, reflecting growth in the underlying business. The Firm continues to assess the level of capital required for each line of business, as well as the assumptions and methodologies used to allocate capital to the business segments, and further refinements may be implemented in future periods.

Segment results and reconciliation^(a)



Three months ended September 30, 2011 (in millions, except ratios)	Investment Bank			Retail Financial Services			Card Services & Auto			Commercial Banking			Treasury & Securities Services			Asset Management			Corporate/ Private Equity			Reconciling Items^(c)			Total
Noninterest revenue	$	4,293		$	3,473		$	1,254		$	524		$	1,107		$	1,898		$	(140	)	$	(463	)	$	11,946
Net interest income	2,076			4,062			3,521			1,064			801			418			8			(133		)	11,817
Total net revenue	6,369			7,535			4,775			1,588			1,908			2,316			(132		)	(596		)	23,763
Provision for credit losses	54			1,027			1,264			67			(20		)	26			(7		)	—			2,411
Credit allocation income/(expense)^(b)	—			—			—			—			9			—			—			(9		)	—
Noninterest expense	3,799			4,565			2,115			573			1,470			1,796			1,216			—			15,534
Income/(loss) before income tax expense/(benefit)	2,516			1,943			1,396			948			467			494			(1,341		)	(605		)	5,818
Income tax expense/(benefit)	880			782			547			377			162			109			(696		)	(605		)	1,556
Net income	$	1,636		$	1,161		$	849		$	571		$	305		$	385		$	(645	)	$	—		$	4,262
Average common equity	$	40,000		$	25,000		$	16,000		$	8,000		$	7,000		$	6,500		$	71,954		$	—		$	174,454
Average assets	803,667			283,443			199,974			145,195			60,141			78,669			659,458			NA			2,230,547
Return on average common equity	16		%	18		%	21		%	28		%	17		%	24		%	NM			NM			9		%
Overhead ratio	60			61			44			36			77			78			NM			NM			65



Three months ended September 30, 2010 (in millions, except ratios)	Investment Bank			Retail Financial Services			Card Services & Auto			Commercial Banking			Treasury & Securities Services			Asset Management			Corporate/ Private Equity			Reconciling Items^(c)			Total
Noninterest revenue	$	3,462		$	2,534		$	1,060		$	547		$	1,172		$	1,780		$	1,213		$	(446	)	$	11,322
Net interest income	1,891			4,280			4,025			980			659			392			371			(96		)	12,502
Total net revenue	5,353			6,814			5,085			1,527			1,831			2,172			1,584			(542		)	23,824
Provision for credit losses	(142		)	1,397			1,784			166			(2		)	23			(3		)	—			3,223
Credit allocation income/(expense)^(b)	—			—			—			—			(31		)	—			—			31			—
Noninterest expense	3,704			4,170			1,792			560			1,410			1,488			1,274			—			14,398
Income/(loss) before income tax expense/(benefit)	1,791			1,247			1,509			801			392			661			313			(511		)	6,203
Income tax expense/(benefit)	505			531			583			330			141			241			(35		)	(511		)	1,785
Net income	$	1,286		$	716		$	926		$	471		$	251		$	420		$	348		$	—		$	4,418
Average common equity	$	40,000		$	24,600		$	18,400		$	8,000		$	6,500		$	6,500		$	59,962		$	—		$	163,962
Average assets	746,926			309,523			207,474			130,237			42,445			64,911			539,597			NA			2,041,113
Return on average common equity	13		%	12		%	20		%	23		%	15		%	26		%	NM			NM			10		%
Overhead ratio	69			61			35			37			77			69			NM			NM			60



Nine months ended September 30, 2011 (in millions, except ratios)	Investment Bank			Retail Financial Services			Card Services & Auto			Commercial Banking			Treasury & Securities Services			Asset Management			Corporate/ Private Equity			Reconciling Items^(c)			Total
Noninterest revenue	$	15,702		$	7,968		$	3,607		$	1,624		$	3,427		$	6,057		$	3,185		$	(1,365	)	$	40,205
Net interest income	6,214			12,175			10,720			3,107			2,253			1,202			260			(373		)	35,558
Total net revenue	21,916			20,143			14,327			4,731			5,680			7,259			3,445			(1,738		)	75,763
Provision for credit losses	(558		)	3,220			2,561			168			(18		)	43			(26		)	—			5,390
Credit allocation income/(expense)^(b)	—			—			—			—			68			—			—			(68		)	—
Noninterest expense	13,147			14,736			6,020			1,699			4,300			5,250			3,219			—			48,371
Income/(loss) before income tax expense/(benefit)	9,327			2,187			5,746			2,864			1,466			1,966			252			(1,806		)	22,002
Income tax expense/(benefit)	3,264			1,042			2,253			1,140			512			676			(327		)	(1,806		)	6,754
Net income	$	6,063		$	1,145		$	3,493		$	1,724		$	954		$	1,290		$	579		$	—		$	15,248
Average common equity	$	40,000		$	25,000		$	16,000		$	8,000		$	7,000		$	6,500		$	70,167		$	—		$	172,667
Average assets	820,239			289,486			200,803			143,069			53,612			73,967			595,133			NA			2,176,309
Return on average common equity	20		%	6		%	29		%	29		%	18		%	27		%	NM			NM			11		%
Overhead ratio	60			73			42			36			76			72			NM			NM			64



Nine months ended September 30, 2010 (in millions, except ratios)	Investment Bank			Retail Financial Services			Card Services & Auto			Commercial Banking			Treasury & Securities Services			Asset Management			Corporate/ Private Equity			Reconciling Items^(c)			Total
Noninterest revenue	$	14,085		$	7,784		$	3,173		$	1,593		$	3,545		$	5,253		$	3,597		$	(1,333	)	$	37,697
Net interest income	5,919			12,964			12,227			2,836			1,923			1,118			2,194			(282		)	38,899
Total net revenue	20,004			20,748			15,400			4,429			5,468			6,371			5,791			(1,615		)	76,596
Provision for credit losses	(929		)	6,501			7,861			145			(57		)	63			12			—			13,596
Credit allocation income/(expense)^(b)	—			—			—			—			(91		)	—			—			91			—
Noninterest expense	13,064			12,012			5,311			1,641			4,134			4,335			4,656			—			45,153
Income/(loss) before income tax expense/(benefit)	7,869			2,235			2,228			2,643			1,300			1,973			1,123			(1,524		)	17,847
Income tax expense/(benefit)	2,731			966			904			1,089			478			770			(106		)	(1,524		)	5,308
Net income	$	5,138		$	1,269		$	1,324		$	1,554		$	822		$	1,203		$	1,229		$	—		$	12,539
Average common equity	$	40,000		$	24,600		$	18,400		$	8,000		$	6,500		$	6,500		$	55,737		$	—		$	159,737
Average assets	711,277			316,407			215,653			132,176			41,211			63,629			560,803			NA			2,041,156
Return on average common equity	17		%	7		%	10		%	26		%	17		%	25		%	NM			NM			10		%
Overhead ratio	65			58			34			37			76			68			NM			NM			59

(a)

In addition to analyzing the Firm’s results on a reported basis, management reviews the Firm’s lines of business results on a “managed basis,” which is a non-GAAP financial measure. The Firm’s definition of managed basis starts with the reported U.S. GAAP results and includes certain reclassifications as discussed below that do not have any impact on net income as reported by the lines of business or by the Firm as a whole.

(b)

IB manages traditional credit exposures related to the Global Corporate Bank (“GCB”) on behalf of IB and TSS. Effective January 1, 2011, IB and TSS share the economics related to the Firm’s GCB clients. Included within this allocation are net revenue, provision for credit losses, as well as expenses. Prior-year period reflected a reimbursement to IB for a portion of the total costs of managing the credit portfolio. IB recognizes this credit allocation as a component of all other income.


(c)	Segment managed results reflect revenue on a fully tax-equivalent basis, with the corresponding income tax impact recorded within income tax expense/(benefit). These adjustments are eliminated in reconciling items to arrive at the Firm’s reported U.S. GAAP results. Tax-equivalent adjustments for the three and nine months ended September 30, 2011 and 2010, were as follows.



	Three months ended September 30,				Nine months ended September 30,
(in millions)	2011		2010		2011		2010
Noninterest revenue	$	472	$	415	$	1,433	$	1,242
Net interest income	133		96		373		282
Income tax expense	605		511		1,806		1,524