J.P. Morgan Reports Third Quarter 2000 Earnings

J.P. Morgan Reports Third Quarter 2000 Earnings

Business Editors

NEW YORK–(BUSINESS WIRE)–Oct. 18, 2000

J.P. Morgan (NYSE: JPM) today reported third quarter net income of $514 million, up from $442 million in the third quarter of 1999. Earnings per share were $2.77, an increase of 25% from $2.22 a year ago. Return on common equity was 18% in the quarter compared with 16% in the third quarter of 1999.

Net income for the first nine months of 2000 was $1.684 billion compared with $1.546 billion in the same period a year ago. Earnings per share were $9.05 compared with $7.76, an increase of 17%. Return on common equity increased to 20% from 19% in the first nine months of 1999.

Merger Announcement

On September 13, 2000, The Chase Manhattan Corporation and J.P. Morgan & Co. Incorporated announced that they have agreed to merge. The merged firm will be named J.P. Morgan Chase & Co. The transaction is expected to be accounted for as a pooling of interests and to be tax-free to J.P. Morgan and Chase stockholders. The deal is expected to close by the end of the first quarter of 2001 and is subject to approval by shareholders of both companies, as well as by U.S. Federal and state and foreign regulatory authorities.

Highlights for the third quarter:

– Economic value added (EVA) was $227 million, an increase of 170% over the

prior year’s quarter

– Revenues of $2.322 billion rose 17% from a year ago

– Asset Management Services revenues rose 11% on strength in private banking

– Investment Banking revenues increased 16% on growth in capital raising and

advisory fees

– Combined revenues in Equities, Interest Rate Markets, and Credit Markets

increased $222 million

– Proprietary Positioning revenues of $310 million were strong while Equity

Investment revenues of $14 million reflected weakness in the telecommunications

sector

– Expenses of $1.609 billion increased 20%

“The diversification of our franchise across markets, products, and regions produced solid results for the quarter,” said Douglas A. Warner III, chairman. “As the work on our merger with Chase progresses, we are increasingly optimistic about the growth opportunities and synergies we can realize from our complementary strengths and expanded client franchise.”

Business segment results

Asset Management Services revenues in the third quarter were $390 million, an increase of 11% over the prior-year period. Private banking revenues were the primary driver of the increase. Revenues from institutional investment management and our equity investment in American Century also rose. Assets under management grew 15% from a year ago to approximately $373 billion at September 30, 2000. This excludes $114 billion of assets under management at American Century, in which we have a 45% interest.

Investment Banking revenues were $426 million in the quarter, up $60 million from the year-ago quarter. Advisory, capital raising, and derivatives origination activities contributed to the increase. For the first nine months of 2000, Thomson Financial Securities Data ranked J.P. Morgan sixth in completed worldwide mergers and acquisitions, with a market share of 16.2%. This compares with a rank of sixth for the 1999 nine months and a share of 13.1%. We ranked sixth among U.S. lead equity underwriters with a market share of 4.3%, compared with sixth and a market share of 5.5% in the 1999 year-to-date period.

Equities revenues increased 78% to $448 million over the prior-year quarter, with equity derivatives the largest contributor to this sector. Revenues from equity derivatives doubled, reflecting sharply higher trading gains across all regions as well as increased client demand, particularly in Europe. Cash equities increased more than 50% on higher volumes in both the U.S. and Europe.

Interest Rate and Currency Markets revenues increased 33% to $426 million over the prior-year quarter because of significantly improved derivatives trading results, primarily in Europe. In the year-ago quarter we had very weak trading results, mainly associated with European markets. Compared to the prior year’s quarter, client flows were weaker across most interest rate and currency markets.

Credit Markets revenues were $346 million, down 19% from the prior-year period. While revenues from activities in debt capital markets, structured finance, and Latin America rose, this increase was more than offset by lower revenues from managing our credit risk portfolio. This quarter we recognized valuation gains from improved credit quality in our portfolio, although a lower amount than in last year’s quarter, and we recorded mark-to-market losses of approximately $100 million on an equity position taken in a debt restructuring.

Equity Investments revenues were $14 million in the third quarter. The results included realized gains of $118 million on investments in the financial services sector, offset by a reduction of approximately $100 million in unrealized market appreciation, primarily associated with an investment in the telecommunications industry. In the third quarter of 1999, reported revenues were $341 million, mainly as a result of an increase in unrealized appreciation in the portfolio.

Proprietary Positioning revenues were $310 million in the third quarter. Total return – reported revenues and the change in net unrealized value – was $337 million. Proprietary Positioning returns were driven by excellent results in our fixed income and equity relative value portfolios in the U.S. and Europe. In the year-ago quarter Proprietary Positioning revenues were $6 million and total return was a loss of $110 million. The weakness in the year-ago quarter resulted from significant losses in our U.S. government agency investment and Asian portfolios, where we have significantly reduced risk.

Operating expenses

In the third quarter 2000, operating expenses were $1.609 billion, an increase of $268 million from the prior-year period. Compensation expense, the primary driver of the increase, rose because of higher performance-driven compensation and new hires, primarily in Investment Banking, Equities, and our corporate e-finance initiatives. The firm’s efficiency ratio was 69% for the quarter and 67% for the year to date.

Income tax expense in the quarter totaled $199 million, based on an effective tax rate of 28%, compared to an effective rate of 31% in last year’s quarter. The year-to-date effective tax rate is 33%, compared with 34% for the first nine months of 1999.

Capital

The firm purchased approximately $383 million of its common stock (2.8 million shares) in the third quarter under its October 1999 authorization to repurchase up to $3 billion of common stock. The purchases for the first nine months of 2000 totaled $1.5 billion (11.8 million shares). In conjunction with the merger announcement, the Board of Directors cancelled the $142 million remaining under the October 1999 authorization to purchase up to $3 billion of J.P. Morgan common stock and terminated its dividend reinvestment plan. Excess capital averaged $3.8 billion in the quarter compared with $4.1 billion for second quarter of 2000.

At September 30, 2000, under the Federal Reserve Board’s capital adequacy guidelines, J.P. Morgan’s estimated tier 1 and total risk-based capital ratios were 8.8% and 12.4%, respectively; the estimated leverage ratio was 4.5%. At June 30, 2000, J.P. Morgan’s tier 1 and total risk-based capital ratios were 8.4% and 12.1%, respectively, and the leverage ratio was 4.4%.

J.P. Morgan is a leading global financial firm that meets critical financial needs for business enterprises, governments, and individuals. The firm advises on corporate strategy and structure, raises capital, makes markets in financial instruments, and manages investment assets. Morgan also commits its own capital to promising enterprises and invests and trades to capture market opportunities.

This release may contain forward-looking statements. Our statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially from these statements. For a discussion of the risks and uncertainties, please refer to the J.P. Morgan & Co. Incorporated 1999 Annual Report.

J.P. Morgan & Co. Incorporated and The Chase Manhattan Corporation will hold a presentation for investors at 11:00 a.m. (Eastern Daylight Time) on Wednesday, October 18 to review their respective financial results for the quarter ended September 30, 2000. A live audio webcast of the presentation will be available on the Internet at www.jpmorgan.com or www.chase.com. In addition persons interested in listening to the presentation by telephone may dial in at 973-872-3100.

Attached are tables with our segment results; a financial summary; interim consolidated financial statements, which are unaudited; and asset quality tables. J.P. Morgan news releases, including quarterly financial results and a historical financial summary, are available on the Internet at www.jpmorgan.com.

Segment Results

J.P. Morgan & Co. Incorporated

The following table reflects our current management reporting

structure. For a description of our segments, please refer to the

J.P. Morgan & Co. Incorporated 1999 Annual Report.

Third Third Second Nine Nine

Quarter Quarter Quarter Months Months

2000 1999 2000 2000 1999

——————————————-

Investment Banking

Total revenues $426 $366 $426 $1,304 $1,102

Total expenses 368 292 383 1,160 893

——————————————-

Pretax income 58 74 43 144 209

——————————————-

Pretax EVA 22 50 19 57 138

——————————————-

Average required economic

capital 918 517 631 730 521

——————————————-

Equities

Total revenues 448 252 504 1,536 892

Total expenses 263 168 297 821 546

——————————————-

Pretax income 185 84 207 715 346

——————————————-

Pretax EVA 152 51 162 595 241

——————————————-

Average required economic

capital 708 524 762 734 598

——————————————-

Interest Rate & Currency

Markets

Total revenues 426 321 384 1,299 1,530

Total expenses 282 288 280 896 968

——————————————-

Pretax income 144 33 104 403 562

——————————————-

Pretax EVA 64 (65) 15 111 255

——————————————-

Average required economic

capital 1,616 2,012 1,789 1,712 2,042

——————————————-

Credit Markets

Total revenues 346 425 348 1,244 1,752

Total expenses 189 153 164 615 633

——————————————-

Pretax income 157 272 184 629 1,119

——————————————-

Pretax EVA 6 135 76 242 609

——————————————-

Average required economic

capital 4,181 3,716 3,709 3,864 4,225

——————————————-

Equity Investments

Total revenues 14 341 145 312 333

Total expenses 28 52 26 99 79

——————————————-

Pretax income (14) 289 119 213 254

——————————————-

Pretax EVA (115) 164 35 (2) 104

——————————————-

Average required economic

capital 1,523 1,488 1,661 1,689 1,377

——————————————-

Proprietary Positioning

Total revenues 310 6 283 781 156

Total expenses 72 37 53 181 112

——————————————-

Pretax income 238 (31) 230 600 44

——————————————-

Pretax EVA 235 (193) 197 582 (382)

——————————————-

Average required economic

capital 347 1,503 489 444 2,111

——————————————-

Asset Management Services

Total revenues 390 350 409 1,206 1,002

Total expenses 302 276 300 905 801

——————————————-

Pretax income 88 74 109 301 201

——————————————-

Pretax EVA 60 56 87 230 147

——————————————-

Average required economic

capital 620 565 590 595 553

——————————————-

Corporate

Total revenues (38) (76) (20) (45) (100)

Total expenses 105 75 157 447 293

——————————————-

Pretax income (143) (151) (177) (492) (393)

——————————————-

Pretax EVA (112) (97) (207) (559) (258)

——————————————-

Average required economic

capital (1,198) (1,122) (1,273) (1,239) (1,316)

——————————————-

Consolidated

Total revenues 2,322 1,985 2,479 7,637 6,667

Total expenses 1,609 1,341 1,660 5,124 4,325

——————————————-

Pretax income 713 644 819 2,513 2,342

——————————————-

Pretax EVA 312 101 384 1,256 854

——————————————-

Average required economic

capital 8,715 9,203 8,358 8,529 10,111

——————————————-

Increase/ Increase/ Increase/

(Decrease) (Decrease) (Decrease)

3Q 2000 vs. 3Q 2000 vs. YTD 2000 vs.

3Q 1999 2Q 2000 YTD 1999

——————————————-

Investment Banking

Total revenues $60 $ – $202

Total expenses 76 (15) 267

——————————————-

Pretax income (16) 15 (65)

——————————————-

Pretax EVA (28) 3 (81)

——————————————-

Average required economic

capital 401 287 209

——————————————-

Equities

Total revenues 196 (56) 644

Total expenses 95 (34) 275

——————————————-

Pretax income 101 (22) 369

——————————————-

Pretax EVA 101 (10) 354

——————————————-

Average required economic

capital 184 (54) 136

——————————————-

Interest Rate & Currency

Markets

Total revenues 105 42 (231)

Total expenses (6) 2 (72)

——————————————-

Pretax income 111 40 (159)

——————————————-

Pretax EVA 129 49 (144)

——————————————-

Average required economic

capital (396) (173) (330)

——————————————-

Credit Markets

Total revenues (79) (2) (508)

Total expenses 36 25 (18)

——————————————-

Pretax income (115) (27) (490)

——————————————-

Pretax EVA (129) (70) (367)

——————————————-

Average required economic

capital 465 472 (361)

——————————————-

Equity Investments

Total revenues (327) (131) (21)

Total expenses (24) 2 20

——————————————-

Pretax income (303) (133) (41)

——————————————-

Pretax EVA (279) (150) (106)

——————————————-

Average required economic

capital 35 (138) 312

——————————————-

Proprietary Positioning

Total revenues 304 27 625

Total expenses 35 19 69

——————————————-

Pretax income 269 8 556

——————————————-

Pretax EVA 428 38 964

——————————————-

Average required economic

capital (1,156) (142) (1,667)

——————————————-

Asset Management Services

Total revenues 40 (19) 204

Total expenses 26 2 104

——————————————-

Pretax income 14 (21) 100

——————————————-

Pretax EVA 4 (27) 83

——————————————-

Average required economic

capital 55 30 42

——————————————-

Corporate

Total revenues 38 (18) 55

Total expenses 30 (52) 154

——————————————-

Pretax income 8 34 (99)

——————————————-

Pretax EVA (15) 95 (301)

——————————————-

Average required economic

capital (76) 75 77

——————————————-

Consolidated

Total revenues 337 (157) 970

Total expenses 268 (51) 799

——————————————-

Pretax income 69 (106) 171

——————————————-

Pretax EVA 211 (72) 402

——————————————-

Average required economic

capital (488) 357 (1,582)

——————————————-

Segment Results (continued)

J.P. Morgan & Co. Incorporated

Notes to segment results table:

— We define economic value added (EVA) as operating income, adjusted

to reflect certain segments on a total return basis, less preferred

stock dividends and a charge for the cost of equity capital. The

firm’s cost of equity capital is currently estimated at 10.5%.

— Corporate includes revenues and expenses related to Euroclear

activities, as follows:

Third Third Second Nine Nine

Quarter Quarter Quarter Months Months

In millions 2000 1999 2000 2000 1999

======================================================================

Total revenues $87 $58 $81 $244 $188

Total expenses 8 8 4 21 20

———————————————————————-

Pretax income 79 50 77 223 168

======================================================================

Required versus available capital

J.P. Morgan & Co. Incorporated

In millions Third

Quarter Nine Months

2000 2000

=================================================================

Average common equity $11,030 $10,853

Trust preferred securities 1,150 1,150

Fixed and adjustable preferred stock 444 444

Other adjustments (101) (71)

—————————————————————–

Total available capital 12,523 12,376

—————————————————————–

Total required economic capital of

business segments 9,913 9,768

Corporate 1,272 1,282

Diversification (2,470) (2,521)

—————————————————————–

Total required economic capital 8,715 8,529

—————————————————————–

Excess available capital 3,808 3,847

=================================================================

Advisory and underwriting fees

J.P. Morgan & Co. Incorporated

———————————————————————-

Underwriting Total advisory and

Advisory revenue and underwriting fees

In millions fees syndication fees

———————————————————————-

Third Quarter 2000 $ 195 $ 205 $ 400

Third Quarter 1999 204 194 398

Second Quarter 2000 249 219 468

———————————————————————-

Nine Months 2000 680 731 1,411

Nine Months 1999 560 685 1,245

———————————————————————-

Financial Summary

J.P. Morgan & Co. Incorporated

———————————————————————-

Dollars in millions, except share data

Second

Third Quarter Quarter Nine Months

—————– ——— —————–

2000 1999 2000 2000 1999

————————————————-

Net Income $514 $442 $542 $1,684 $1,546

Economic value

added (EVA) –

after taxes 227 84 258 843 564

Per common share:

Net income

Basic $2.97 $2.39 $3.10 $9.64 $8.33

Diluted 2.77 2.22 2.90 9.05 7.76

Dividends

declared 1.00 0.99 1.00 3.00 2.97

Book value $62.31 $58.42 $60.76

——————————————————————–

Common shares

issued and

outstanding

at

period-end 159,770,014 174,880,978 159,869,519

——————————————————————–

Weighted-average

number of

common and

dilutive

potential

common

shares

outstanding 181,478,885 194,671,633 183,730,614 182,933,133 195,864,571

———————————————————————-

Dividends

declared on

common stock $160 $174 $159 $482 $523

Dividends

declared on

preferred

stock 10 7 10 29 25

——————————————————————–

Annualized

rate of

return on

average

common

stockholders’

equity 18.2% 15.6% 19.6% 20.4% 18.6%

As % of period-end

total assets:

Common equity 4.0% 4.4% 4.2%

Total equity 4.3 4.7 4.4

——————————————————————–

Regulatory capital

ratios (a)

Tier 1 risk-based

capital ratio 8.8% 9.1% 8.4%

Total risk-based

capital ratio 12.4 13.2 12.1

Leverage ratio 4.5 4.8 4.4

Risk-adjusted

assets (a) 138,049 134,941 140,354

——————————————————————–

Average balances

Debt investment

securities(b) $5,851 $27,316 $7,263 $8,589 30,196

Loans 26,103 26,026 26,399 26,384 26,358

Total

interest-

earning

assets 195,702 190,178 194,812 192,038 193,217

Total assets 270,425 255,909 271,254 267,390 264,009

Total

interest-

bearing

liabilities 185,267 183,154 184,591 182,066 187,522

Total

liabilities 258,701 244,141 259,663 255,843 252,369

Common

stockholders’

equity 11,030 11,074 10,897 10,853 10,946

Total

stockholders’

equity 11,724 11,768 11,591 11,547 11,640

Net interest

earnings before

credit loss

provisions

(fully taxable

basis) 361 405 393 1,225 1,260

Net yield on

interest-earning

assets 0.73% 0.84% 0.81% 0.85% 0.87%

——————————————————————–

Employees at

period-end 17,044 15,287 15,988

——————————————————————–

(a) Regulatory capital ratios and risk-adjusted assets are estimates

at September 30, 2000.

(b) Average debt investment securities are computed on historical

amortized cost, excluding the effects of SFAS No. 115

adjustments.

Consolidated statement of income

J.P. Morgan & Co. Incorporated

———————————————————————-

In millions, except share data

Three months ended

————————————————-

September September

30 30 Increase/ June 30 Increase/

2000 1999 (Decrease) 2000 (Decrease)

————————————————-

Net interest revenue

Interest revenue $3,354 $2,783 $571 $3,244 $110

Interest expense 3,004 2,394 610 2,865 139

———————————————————————-

Net interest revenue 350 389 (39) 379 (29)

Reversal of provision

for loan losses (7) (45) 38 (4) (3)

———————————————————————-

Net interest revenue

after loan loss

provisions 357 434 (77) 383 (26)

Noninterest revenues

Trading revenue 852 424 428 906 (54)

Advisory and

underwriting fees 400 398 2 468 (68)

Investment management

fees 284 270 14 303 (19)

Fees and commissions 233 206 27 232 1

Investment securities

(loss) / revenue (1) 271 (272) 128 (129)

Other revenue / (loss) 197(a) (18)(a) 215 59(b) 138

———————————————————————-

Total noninterest

revenues 1,965 1,551 414 2,096 (131)

Total revenues, net 2,322 1,985 337 2,479 (157)

Operating expenses

Employee compensation

and benefits 1,118 889 229 1,097 21

Net occupancy 91 82 9 81 10

Technology and

communications 247 229 18 246 1

Other expenses 153 141 12 236 (83)

———————————————————————-

Total operating

expenses 1,609 1,341 268 1,660 (51)

Income before

income taxes 713 644 69 819 (106)

Income taxes 199 202 (3) 277 (78)

———————————————————————-

Net income 514 442 72 542 (28)

Per common share

Net income:

Basic $2.97 $2.39 $0.58 $3.10 ($0.13)

Diluted 2.77 2.22 0.55 2.90 (0.13)

Dividends declared 1.00 0.99 0.01 1.00 –

———————————————————————-

(a) Includes a reversal of provision for credit losses on lending

commitments of $29 million and $15 million for the three months

ended September 30, 2000 and 1999, respectively.

(b) Includes a provision for credit losses on lending commitments of

$37 million for the three months ended June 30, 2000.

Consolidated statement of income

J.P. Morgan & Co. Incorporated

———————————————————————

In millions, except share data

Nine months ended

—————————–

September September

30 30 Increase/

2000 1999 (Decrease)

—————————–

Net interest revenue

Interest revenue $9,629 $8,253 $1,376

Interest expense 8,447 7,050 1,397

———————————————————————

Net interest revenue 1,182 1,203 (21)

Reversal of provision for loan losses (11) (150) 139

———————————————————————

Net interest revenue after loan

loss provisions 1,193 1,353 (160)

Noninterest revenues

Trading revenue 2,708 2,361 347

Advisory and underwriting fees 1,411 1,245 166

Investment management fees 863 776 87

Fees and commissions 749 611 138

Investment securities revenue 284 201 83

Other revenue 429 (a) 120 (a) 309

———————————————————————

Total noninterest revenues 6,444 5,314 1,130

Total revenues, net 7,637 6,667 970

Operating expenses

Employee compensation and benefits 3,515 2,955 560

Net occupancy 254 244 10

Technology and communications 751 707 44

Other expenses 604 419 185

———————————————————————

Total operating expenses 5,124 4,325 799

Income before income taxes 2,513 2,342 171

Income taxes 829 796 33

———————————————————————

Net income 1,684 1,546 138

Per common share

Net income:

Basic $9.64 $8.33 $1.31

Diluted 9.05 7.76 1.29

Dividends declared 3.00 2.97 0.03

———————————————————————

(a) Includes a net provision for credit losses on lending commitments

of $9 million and $20 million for the nine months ended September

30, 2000 and 1999, respectively.

Consolidated balance sheet (preliminary)

J.P. Morgan & Co. Incorporated

———————————————————————-

In millions, except share data September June December

30 30 31

2000 2000 1999

——————————

Assets

Cash and due from banks $ 881 $ 2,498 $ 2,463

Interest-earning deposits with banks 5,156 5,122 2,345

Debt investment securities

available-for-sale 5,050 5,920 14,286

Equity investment securities 1,484 1,738 1,734

Trading account assets (including

derivative receivables of $35,549

at September 2000, $39,115 at June

2000 and $43,658 at December 1999) 140,428 124,391 117,592

Securities purchased under agreements

to resell ($42,713 at September 2000,

$41,910 at June 2000 and $34,470 at

December 1999) and federal funds sold 43,788 43,010 35,970

Securities borrowed 34,874 33,359 34,716

Loans, net of allowance for loan losses

of $258 at September 2000, $283 at June

2000 and $281 at December 1999 26,729 26,898 26,568

Accrued interest and accounts receivable 6,050 6,654 10,119

Premises and equipment, net of

accumulated depreciation of $1,271

at September 2000, $1,361 at June

2000 and $1,319 at December 1999 2,086 2,038 1,997

Other assets 15,155 14,695 13,108

———————————————————————-

Total assets 281,681 266,323 260,898

———————————————————————-

Liabilities

Deposits (including interest-bearing

deposits of $38,402 at September

2000, $43,873 at June 2000 and

$43,922 at December 1999) 40,184 46,511 45,319

Trading account liabilities (including

derivative payables of $37,886 at

September 2000, $40,193 at June 2000

and $44,976 at December 1999) 83,537 81,324 80,417

Securities sold under agreements

to repurchase ($82,748 at September

2000, $67,228 at June 2000 and

$58,950 at December 1999)

and federal funds purchased 83,267 67,600 59,693

Commercial paper 12,124 8,152 11,854

Other liabilities for borrowed money 12,813 9,709 10,258

Accounts payable and accrued expenses 10,366 10,730 10,621

Long-term debt not qualifying as

risk-based capital 16,486 18,025 19,048

Other liabilities, including

allowance for credit losses of

$134 at September 2000, $163 at June

2000 and $125 at December 1999 4,801 6,383 5,897

———————————————————————-

263,578 248,434 243,107

Liabilities qualifying as

risk-based capital:

Long-term debt 4,991 4,988 5,202

Company-obligated mandatorily redeemable

preferred securities of subsidiaries 1,150 1,150 1,150

———————————————————————-

Total liabilities 269,719 254,572 249,459

Stockholders’ equity

Preferred stock (authorized

shares: 10,000,000)

Adjustable rate cumulative

preferred stock, $100 par value

(issued: 2,444,300) 244 244 244

Variable cumulative preferred stock,

$1,000 par value (issued and

outstanding: 250,000) 250 250 250

Fixed cumulative preferred stock,

$500 par value (issued and

outstanding: 400,000) 200 200 200

Common stock, $2.50 par value

(authorized shares: 500,000,000;

issued: 200,998,455 at September 2000,

June 2000 and December 1999) 502 502 502

Capital surplus 1,211 1,229 1,249

Common stock issuable under

stock award plans 2,157 2,152 2,002

Retained earnings 12,052 11,717 10,908

Accumulated other comprehensive income:

Net unrealized gains on investment

securities, net of taxes 25 53 44

Foreign currency translation,

net of taxes (15) (14) (18)

———————————————————————-

16,626 16,333 15,381

Less: treasury stock (41,228,441

common shares and 15,000 preferred

shares at September 2000, 41,128,936

common shares and 15,000 preferred

shares at June 2000 and 36,200,897

common shares at December 1999) at cost 4,664 4,582 3,942

———————————————————————-

Total stockholders’ equity 11,962 11,751 11,439

———————————————————————-

Total liabilities and

stockholders’ equity 281,681 266,323 260,898

———————————————————————-

Credit Exposures (preliminary)

J.P. Morgan & Co. Incorporated

Credit exposure (preliminary)

September 30, 2000 December 31, 1999

—————— —————–

Carrying Fair Carrying Fair

In billions value value value value

———————————————————————

Derivatives $35.5 (a) $35.5 $43.7 (a) $43.7

Loans and lending commitments 26.6 (b) 26.7 26.4 (b) 26.5

———————————————————————-

Total credit exposures (c) 62.1 62.2 70.1 70.2

———————————————————————-

(a) Carried at fair value on the balance sheet with changes in fair

value recorded in the income statement. Includes credit valuation

adjustment as of September 30, 2000 and December 31, 1999 of $617

million and $670 million, respectively.

(b) Amount net of allowance for credit losses of $392 million as of

September 30, 2000 and $406 million as of December 31, 1999.

Carrying value excludes the notional value of lending

commitments, which are off-balance-sheet instruments.

(c) Substantially all credit risk related to derivatives, loans, and

lending commitment exposures are managed by the Credit Markets

segment.

Credit exposure before and after collateral (preliminary)

After collateral

and netting (b)

——————–

September December September December

30, 2000 31, 1999 30, 2000 31, 1999

Gross Gross Net Net

In billions Exposure Exposure Exposure Exposure

———————————————————————-

Derivatives $35.5 (a) $43.7 (a) $30.2 (a) $37.7 (a)

Loans (c) 27.0 26.8 18.8 18.9

———————————————————————-

(a) Includes the benefit of master netting agreements of $79.9

billion and $94.0 billion at September 30, 2000 and December 31,

1999, respectively.

(b) Collateral held consisting of highly rated liquid securities

(U.S. government securities) and cash was as follows: derivatives

– $5.3 billion (September 30, 2000) and $6 billion (December 31,

1999); and loans – $8.2 billion (September 30, 2000) and $7.9

billion (December 31, 1999).

(c) Before allowance for credit losses.

Counterparty credit quality (preliminary)

Loans and lending

Derivatives commitments

——————- ——————-

September December September December

30, 2000 31, 1999 30, 2000 31, 1999

———————————————————————-

AAA, AA 52 % 52 % 42 % 43 %

A 34 31 31 29

BBB 9 12 16 18

BB or below 5 5 11 10

———————————————————————-

100 100 100 100

———————————————————————-

Estimated percentages of credit exposures by counterparty credit

rating based on internal credit ratings. Ratings of AAA, AA, A and BBB

represent investment-grade ratings and are analogous to those of

public rating agencies in the United States. Credit exposures reflect

the benefits of master netting agreements, collateral, and purchased

credit protection (i.e. credit derivatives).

Equity investment securities

J.P. Morgan & Co. Incorporated

The following table shows gross unrealized gains and losses, a

comparison of the cost, fair value and carrying value of marketable,

nonmarketable, and SBIC (small business investment company) securities

portfolios of J.P. Morgan consolidated. A substantial portion of these

are included in our Equity Investments segment.

SBIC

In millions: September 30 Marketable Nonmarketable securities

———————————————————————-

Accounting Fair value Cost Fair value

through equity through

earnings

———————————————————————-

Cost $198 $774 $303

———————————————————————-

Gross unrealized gains 36 88 185

Gross unrealized losses (12) (13) –

———————————————————————-

Net unrealized gains 24 75 185

———————————————————————-

Fair value 222 849 488

———————————————————————-

Carrying value on balance sheet 222 774 488

———————————————————————-

Asset Quality

Impaired loans

J.P. Morgan & Co. Incorporated

———————————————————————-

September June September

In millions 30, 2000 30, 2000 30, 1999

———————————————————————-

Impaired loans:

Commercial and industrial $113 $122 $131

Other 15 18 38

———————————————————————-

Total impaired loans 128 140 169

———————————————————————-

Allowances for credit losses

J.P. Morgan & Co. Incorporated

Allowance for loan losses

———————————————————————-

Third Nine Third Nine

Quarter Months Quarter Months

2000 Ended 1999 Ended

September September

In millions 30, 2000 30, 1999

———————————————————————-

Beginning balance $283 $281 $335 $470

———————————————————————-

(Reversal of provision) for loan losses (7) (11) (45) (150)

———————————————————————-

Recoveries – 12 17 23

Charge-offs: (a)

Commercial and industrial (5) (5) (6) (16)

Other, primarily other financial

institutions (13) (19) – (26)

———————————————————————-

Net (charge-offs) / recoveries (18) (12) 11 (19)

———————————————————————-

Ending balance 258 258 301 301

———————————————————————-

(a) Charge-offs include losses on loan sales of $6 million for the

three and nine months ended September 30, 2000. Charge-offs

include losses on loan sales of $3 million for the three months

ended September 30, 1999. Charge-offs include losses on loan

sales, primarily banks and other financial institutions, of $33

million for the nine months ended September 30, 1999.

Components of the allowance for loan losses

———————————————————————-

September 30, June 30, September 30,

In millions 2000 2000 1999

———————————————————————-

Specific counterparty

components in the U.S. $ 6 $ 9 $ 9

Specific counterparty

components outside the U.S. 65 66 23

———————————————————————-

Total specific counterparty 71 75 32

Expected loss 187 208 269

———————————————————————-

Total allowance 258 283 301

———————————————————————-

Allowance for credit losses on lending commitments (b)

———————————————————————-

Third Nine Third Nine

Quarter Months Quarter Months

2000 Ended 1999 Ended

September September

In millions 30, 2000 30, 1999

———————————————————————-

Beginning balance $163 $125 $160 $125

———————————————————————-

(Reversal of provision) provision

for credit losses (29) 9 (15) 20

———————————————————————-

Ending balance 134 134 145 145

———————————————————————-

Components of the allowance for credit losses on lending commitments(b)

———————————————————————-

September 30, June 30, September 30,

In millions 2000 2000 1999

———————————————————————-

Specific counterparty

components in the U.S. $ 2 $ 19 $ 20

Specific counterparty

components outside the U.S. 4 4 3

———————————————————————-

Total specific counterparty 6 23 23

Expected loss 128 140 122

———————————————————————-

Total allowance 134 163 145

———————————————————————-

(b) Includes commitments to extend credit, standby letters of credit,

and guarantees.

COPYRIGHT 2000 Business Wire

COPYRIGHT 2000 Gale Group