Business Segments

6 Months Ended

Jun. 30, 2011

Business Segments [Abstract]

BUSINESS SEGMENTS

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 17–18 of this Form 10-Q, and pages 67–68 and Note 34 on pages 290–293 of JPMorgan Chase’s 2010Annual Report.

Subsequent 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. RFS 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 that is included in the following Segment results section has been revised to reflect the business reorganization retroactive to January 1, 2010.

Segment results

The following tables provide a summary of the Firm’s segment results for the three and six months ended June 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 June 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	$	5,233		$	3,115		$	1,306		$	598		$	1,183		$	2,139		$	1,847		$	(478	)	$	14,943
Net interest income	2,081			4,027			3,455			1,029			749			398			218			(121		)	11,836
Total net revenue	7,314			7,142			4,761			1,627			1,932			2,537			2,065			(599		)	26,779
Provision for credit losses	(183		)	994			944			54			(2		)	12			(9		)	—			1,810
Credit allocation income/(expense)(b)	—			—			—			—			32			—			—			(32		)	—
Noninterest expense	4,332			5,271			1,988			563			1,453			1,794			1,441			—			16,842
Income/(loss) before income tax expense/(benefit)	3,165			877			1,829			1,010			513			731			633			(631		)	8,127
Income tax expense/(benefit)	1,108			494			719			403			180			292			131			(631		)	2,696
Net income	$	2,057		$	383		$	1,110		$	607		$	333		$	439		$	502		$	—		$	5,431
Average common equity	$	40,000		$	25,000		$	16,000		$	8,000		$	7,000		$	6,500		$	71,577		$	—		$	174,077
Average assets	841,355			287,235			198,044			143,560			52,688			74,206			595,455			NA			2,192,543
Return on average common equity	21		%	6		%	28		%	30		%	19		%	27		%	NM			NM			12		%
Overhead ratio	59			74			42			35			75			71			NM			NM			63

Three months ended June 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	$	4,432		$	2,727		$	1,126		$	546		$	1,227		$	1,699		$	1,103		$	(446	)	$	12,414
Net interest income	1,900			4,237			3,936			940			654			369			747			(96		)	12,687
Total net revenue	6,332			6,964			5,062			1,486			1,881			2,068			1,850			(542		)	25,101
Provision for credit losses	(325		)	1,545			2,391			(235		)	(16		)	5			(2		)	—			3,363
Credit allocation income/(expense)(b)	—			—			—			—			(30		)	—			—			30			—
Noninterest expense	4,522			3,945			1,772			542			1,399			1,405			1,046			—			14,631
Income/(loss) before income tax expense/(benefit)	2,135			1,474			899			1,179			468			658			806			(512		)	7,107
Income tax expense/(benefit)	754			625			363			486			176			267			153			(512		)	2,312
Net income	$	1,381		$	849		$	536		$	693		$	292		$	391		$	653		$	—		$	4,795
Average common equity	$	40,000		$	24,600		$	18,400		$	8,000		$	6,500		$	6,500		$	55,069		$	—		$	159,069
Average assets	710,005			314,020			214,702			133,309			42,868			63,426			565,317			NA			2,043,647
Return on average common equity	14		%	14		%	12		%	35		%	18		%	24		%	NM			NM			12		%
Overhead ratio	71			57			35			36			74			68			NM			NM			58

Six months ended June 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	$	11,409		$	4,495		$	2,353		$	1,100		$	2,320		$	4,159		$	3,325		$	(902	)	$	28,259
Net interest income	4,138			8,113			7,199			2,043			1,452			784			252			(240		)	23,741
Total net revenue	15,547			12,608			9,552			3,143			3,772			4,943			3,577			(1,142		)	52,000
Provision for credit losses	(612		)	2,193			1,297			101			2			17			(19		)	—			2,979
Credit allocation income/(expense)(b)	—			—			—			—			59			—			—			(59		)	—
Noninterest expense	9,348			10,171			3,905			1,126			2,830			3,454			2,003			—			32,837
Income/(loss) before income tax expense/(benefit)	6,811			244			4,350			1,916			999			1,472			1,593			(1,201		)	16,184
Income tax expense/(benefit)	2,384			260			1,706			763			350			567			369			(1,201		)	5,198
Net income	$	4,427		$	(16	)	$	2,644		$	1,153		$	649		$	905		$	1,224		$	—		$	10,986
Average common equity	$	40,000		$	25,000		$	16,000		$	8,000		$	7,000		$	6,500		$	69,259		$	—		$	171,759
Average assets	828,662			292,557			201,225			141,989			50,294			71,577			562,437			NA			2,148,741
Return on average common equity	22		%	—		%	33		%	29		%	19		%	28		%	NM			NM			13		%
Overhead ratio	60			81			41			36			75			70			NM			NM			63

Six months ended June 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	$	10,623		$	5,250		$	2,113		$	1,046		$	2,373		$	3,473		$	2,384		$	(887	)	$	26,375
Net interest income	4,028			8,684			8,202			1,856			1,264			726			1,823			(186		)	26,397
Total net revenue	14,651			13,934			10,315			2,902			3,637			4,199			4,207			(1,073		)	52,772
Provision for credit losses	(787		)	5,104			6,077			(21		)	(55		)	40			15			—			10,373
Credit allocation income/(expense)(b)	—			—			—			—			(60		)	—			—			60			—
Noninterest expense	9,360			7,842			3,519			1,081			2,724			2,847			3,382			—			30,755
Income/(loss) before income tax expense/(benefit)	6,078			988			719			1,842			908			1,312			810			(1,013		)	11,644
Income tax expense/(benefit)	2,226			435			321			759			337			529			(71		)	(1,013		)	3,523
Net income	$	3,852		$	553		$	398		$	1,083		$	571		$	783		$	881		$	—		$	8,121
Average common equity	$	40,000		$	24,600		$	18,400		$	8,000		$	6,500		$	6,500		$	53,590		$	—		$	157,590
Average assets	693,157			319,906			219,812			133,162			40,583			62,978			571,579			NA			2,041,177
Return on average common equity	19		%	5		%	4		%	27		%	18		%	24		%	NM			NM			10		%
Overhead ratio	64			56			34			37			75			68			NM			NM			58

(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 revenues, 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 six months ended June 30, 2011 and 2010, were as follows.

	Three months ended June 30,				Six months ended June 30,
(in millions)	2011		2010		2011		2010
Noninterest revenue	$	510	$	416	$	961	$	827
Net interest income	121		96		240		186
Income tax expense	631		512		1,201		1,013