JPMorgan Chase & Co. (JPM
Q3 2008 Earnings Call Transcript
October 15, 2008 9:00 a.m. ET
Michael Cavanagh – Chief Financial Officer
James Dimon – President & Chief Executive Officer
John McDonald - Sanford C. Bernstein
Guy Moszkowski - Merrill Lynch
Mike Mayo - Deutsche Bank
Betsy Graseck - Morgan Stanley
Jeff Harte - Sandler O’Neill & Partners
Meredith Whitney – Oppenheimer & Co.
William Tanona - Goldman Sachs
James Mitchell - Buckingham Research
Glenn Schorr - UBS
Ron Mandel – GIC
Nancy Bush – NAB Research, LLC
Good morning ladies and gentlemen and welcome to the JPMorgan Chase third quarter 2008 earnings call. This call is being recorded.
Today''s presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause JPMorgan Chase’s actual results to differ materially from those described in the forward-looking statements can be found in JPMorgan Chase’s current report on Form 8-K dated September 26, 2008, its Quarterly Reports on Form 10-Q for the quarters ended June 30, 2008 and March 31, 2008 and its Annual Report on Form 10-K for the year ended December 31, 2007, each of which has been filed with the Securities and Exchange Commission and is available on JPMorgan Chase’s website, www.jpmchase.com and on the Securities and Exchange Commission’s website.
JPMorgan Chase does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements. Today’s presentation may also reference non-GAAP financial measures, and you should refer to the information contained in the written slides accompanying this presentation for information about their calculation. The slides are available at JPMorgan Chase’s website.
At the conclusion of the presentation you will have the opportunity to ask questions. If you would like to ask a question, please press “*1”. Again it is “*1” on your telephone to signal for a question. At this time I''d like to turn the call over to JPMorgan Chase''s Chairman and Chief Executive Officer, Jamie Dimon, and Chief Financial Officer, Michael Cavanagh; Mr. Cavanagh please go ahead.
Good morning everybody thanks for joining Jamie and I. Sorry for the long preamble there. So we’re going to go through as usual a slide presentation that is available on our website, as the operator just described. So, if you have that in front of you I hope, let me first like I did last quarter with Bear Stearns just describe upfront the impact in the quarter of the Washington Mutual transaction that closed during the quarter to clear that up before we start talking about what went on in the JPMorgan businesses for the full quarter.
So, I guess the first point I’d make here is the italicized comment up top that the numbers, it’s only been less then three weeks since we announced and closed the Washington Mutual transaction so take the numbers that I’ll talk about here on this page related to Washington Mutual as our best estimates at this stage and do expect us to be working on future refinements if and as needed.
But with that if you go into the table you see that we reported firm-wide net income including Washington Mutual impact of $527 million or $0.11 per share. Then you see the WaMu related merger items which you’re going to see in our corporate segment for the quarter. A conforming loan loss reserve adjustment of $1.221 billion; a little higher then what we said on the WaMu call a couple of weeks back and then an extraordinary gain of $581 million which is actually zero at the time of the call. Those two together are about $0.18 negative, so bring you down to results before WaMu of $1.167 or about $0.28 per share.
Moving down to some of the bullets at the bottom, just to give you a sense for what’s coming in the future, merger-related items ongoing from this point forward, so in the fourth quarter and beyond, will again be booked in corporate the same way you’re going to see what happened with the non-operating results of Bear Stearns. That’s going to include whatever merger costs there are that flow in the future.
We’re giving you an estimate that that could be after-tax about $100 million plus or minus in the fourth quarter and cumulatively as much as $500 million plus or minus over the next several years. In addition the refinements that I talked about to the purchase accounting to the extent that they occur are going to run through P&L and that’s related to the fact that there’s a negative goodwill situation and to the accounting (inaudible) you can follow-up after the call on what all that means. But any refinements will run through P&L but we will count them in this merger-related items line that we’ll show you and talk about in the corporate segment.
Lastly, beginning next quarter we’ll obviously show the ongoing operating results as appropriate in our relevant business segments, retail, card services and commercial banking and we’ll be spending time to improve and refine the reporting methodology we have to capture all the details we want to give you.
Just a high level comment, on the earnings impact we still feel comfortable that about a $0.50 incremental EPS for 2009 is a reasonable expectation and as far as the fourth quarter goes you can pretty much expect our best guess would be pro rata portion of that $0.10, $0.12 of EPS in the fourth quarter related to WaMu.
Moving on to slide two, I won’t comment on the first several items on the page here because we’re going to hit them in the businesses but just some firm-wide items, down toward the middle of the page, you see the results include overall results include, now this is JPMorgan Chase away from Washington Mutual after-tax items that include the slightly larger benefit from reduction of deferred tax liabilities and what I talked about on the WaMu call a couple of weeks ago its $927 million after-tax.
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