Business Segments

3 Months Ended

Mar. 31, 2011

Business Segments [Abstract]

BUSINESS SEGMENTS

NOTE 24 — 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 page 15 of this Form 10-Q, and pages 67–68 and Note 34 on pages 290–293 of JPMorgan Chase’s 2010 Annual 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 months ended March 31, 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 fully 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. 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 March 31, 2011	Investment			Retail Financial			Card Services			Commercial
(in millions, except ratios)	Bank			Services			& Auto			Banking
Noninterest revenue	$	6,176		$	1,380		$	1,047		$	502
Net interest income		2,057			4,086			3,744			1,014
Total net revenue		8,233			5,466			4,791			1,516
Provision for credit losses		(429	)		1,199			353			47
Credit allocation income(b)		—			—			—			—
Noninterest expense		5,016			4,900			1,917			563
Income/(loss) before income tax expense/(benefit)		3,646			(633	)		2,521			906
Income tax expense/(benefit)		1,276			(234	)		987			360
Net income/(loss)	$	2,370		$	(399	)	$	1,534		$	546
Average common equity	$	40,000		$	25,000		$	16,000		$	8,000
Average assets		815,828			297,938			204,441			140,400
Return on average common equity		24	%		(6	)%		39	%		28	%
Overhead ratio		61			90			40			37

Three months ended March 31, 2011	Treasury &			Asset			Corporate/			Reconciling
(in millions, except ratios)	Securities Services			Management			Private Equity			Items(c)			Total
Noninterest revenue	$	1,137		$	2,020		$	1,478		$	(424	)	$	13,316
Net interest income		703			386			34			(119	)		11,905
Total net revenue		1,840			2,406			1,512			(543	)		25,221
Provision for credit losses		4			5			(10	)		—			1,169
Credit allocation income/(expense)(b)		27			—			—			(27	)		—
Noninterest expense		1,377			1,660			562			—			15,995
Income before income tax expense/(benefit)		486			741			960			(570	)		8,057
Income tax expense/(benefit)		170			275			238			(570	)		2,502
Net income	$	316		$	466		$	722		$	—		$	5,555
Average common equity	$	7,000		$	6,500		$	66,915		$	—		$	169,415
Average assets		47,873			68,918			529,054		NA				2,104,452
Return on average common equity		18	%		29	%	NM			NM				13	%
Overhead ratio		75			69		NM			NM				63

Three months ended March 31, 2010	Investment			Retail Financial			Card Services			Commercial
(in millions, except ratios)	Bank			Services			& Auto			Banking
Noninterest revenue	$	6,191		$	2,523		$	987		$	500
Net interest income		2,128			4,447			4,266			916
Total net revenue		8,319			6,970			5,253			1,416
Provision for credit losses		(462	)		3,559			3,686			214
Credit allocation income(b)		—			—			—			—
Noninterest expense		4,838			3,897			1,747			539
Income/(loss) before income tax expense/(benefit)		3,943			(486	)		(180	)		663
Income tax expense/(benefit)		1,472			(190	)		(42	)		273
Net income/(loss)	$	2,471		$	(296	)	$	(138	)	$	390
Average common equity	$	40,000		$	24,600		$	18,400		$	8,000
Average assets		676,122			325,856			224,979			133,013
Return on average common equity		25	%		(5	)%		(3	)%		20	%
Overhead ratio		58			56			33			38

Three months ended March 31, 2010	Treasury &			Asset			Corporate/			Reconciling
(in millions, except ratios)	Securities Services			Management			Private Equity			Items(c)			Total
Noninterest revenue	$	1,146		$	1,774		$	1,281		$	(441	)	$	13,961
Net interest income		610			357			1,076			(90	)		13,710
Total net revenue		1,756			2,131			2,357			(531	)		27,671
Provision for credit losses		(39	)		35			17			—			7,010
Credit allocation income/(expense)(b)		(30	)		—			—			30			—
Noninterest expense		1,325			1,442			2,336			—			16,124
Income/(loss) before income tax expense/(benefit)		440			654			4			(501	)		4,537
Income tax expense/(benefit)		161			262			(224	)		(501	)		1,211
Net income	$	279		$	392		$	228		$	—		$	3,326
Average common equity	$	6,500		$	6,500		$	52,094		$	—		$	156,094
Average assets		38,273			62,525			577,912		NA				2,038,680
Return on average common equity		17	%		24	%	NM			NM				8	%
Overhead ratio		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 credit exposures related to the Global Corporate Bank (“GCB”) on behalf of IB and TSS. Effective January 1, 2011, IB and TSS will 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 months ended March 31, 2011 and 2010, were as follows.

	Three months ended March 31,
(in millions)	2011		2010
Noninterest revenue	$	451	$	411
Net interest income		119		90
Income tax expense		570		501