JP Morgan Investment Bank CEO Jes Staley 28feb12 Investors Presentation

1. INVESTMENT BANK
Jes Staley, Chief Executive Officer Investment Bank
February 28, 2012

2. Agenda
Page
Performance 1
Markets 4
Business highlights 13
INVESTMENT BANK
1

3. 2011: strength amidst volatility
Performance
Financial results
 Near record performance
 Revenue: $26.3B
 Earnings: $6.8B (second highest)
 ROE of 17% on capital of $40B
 Further strengthened fortress balance sheet (Tier 1 common ratios)
 Basel II: 13.7%
 Basel III: 8.4%
Business summary
 Sustained Investment Banking leadership
 #1 in Global IB Fees (third consecutive year): 8% market share1
 Record loan syndication revenue, advisory fees up 22%
 Fixed Income: historic high revenue market share, 17%2
 Equities: record results
PERFORMANCE
 Commodities: complete franchise
1 Dealogic
2 Estimated using public disclosure of top 10 competitors, excluding DVA
2

4. Strategic initiatives: 2011 progress and 2012 momentum
Performance
2011 2012
 Disciplined, sustained focus
Clients
 Formed International Steering Committee  TS/IB Markets growth with corporates
International  Expanded Markets footprint in 20 countries  Add local market capabilities
 Launched EMEA Prime Brokerage  Build Asia Prime Brokerage
 Achieved targets, increased client activity  Maintain leadership
Initiatives
Commodities
 Completed Sempra integration  Grow developing markets franchise
 Strategic Reengineering Program: over  Execute Strategic Reengineering Program
50% complete, on target
 Rationalize IB/TSS costs and execution
Technology
 Doubled electronic equity internalization (Value for Scale)
 Further reduced errors and cost per trade  Deliver cross-asset platforms for innovation
 Prudent capital management  Efficient capital usage
Capital/risk
 Continued focus on regulation  Control during volatility
management
 Repositioning ahead of new regulations
PERFORMANCE
3

5. Agenda
Page
Performance 1
Markets 4
Business highlights 13
INVESTMENT BANK
4

6. Credit, rates and currencies drive the global financial markets
Markets
Non-bank financial assets outpacing growth of traditional sources of capital…
Financial assets (% of GDP) Capital by source (% of GDP)
450 Public Financial Markets Banks/Govs.
400
350 Global financial assets are Japan
expected to nearly double over
300 the next 10 years U.S.
250
Non-bank financials
200 Korea
(MFs, Insurance, HFs,
150 etc.)
France
100 As countries develop,
Banks/Govs. China banks/govs. are replaced by
50 (J.P. Morgan, Fannie Mae, etc.) public market growth
0 Brazil
1952 1959 1967 1974 1981 1988 1996 2003 2010
0 100 200 300 400
…and Fixed Income markets continue to dominate Equities
Gross U.S. equity and long-term debt issuance ($T) Daily average U.S. trading volume ($B)
Fixed Income1 Equities Fixed Income1 Equities2
6.8 1,034
950
5.9 5.9 893 901
5.3 819
4.6 4.6
630
3.4
2.5 348 358
2.1 274
0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.2 125 115 142 98 103
29 52 70 81
1996 1998 2000 2002 2004 2006 2008 2010 2011 1996 1998 2000 2002 2004 2006 2008 2010 2011
Source: Federal Flow of Funds, Bloomberg, IMF, Bank for International Settlements, CBRC, CSRC, Thomson Reuters, SIFMA, McKinsey Global Institute
MARKETS
Note: “Gross U.S. equity and long-term debt issuance” and “Daily average U.S. trading volume” graphs not shown to scale
1 Municipal, Treasury, MBS, Corporate Debt, and Federal Agency securities
2 Daily average value traded by the NASDAQ and NYSE
5

7. Our client franchise is large, diversified and global
Markets
2011 Markets revenue mix
Corporates Hedge Funds Latam
Asia
13% 23% 2%
10%
Broker-dealers
7%
Other
Financials1
~16,000 North America
8% EMEA
55%
Banks markets clients 33%
16% Insurance
4%
Asset
Managers
29%
2011 IB fees mix
Public
Finance Asia Latam
Consumer & Retail
3% 11% 9% 4%
Tech, Media,
Telecom
18% Diversified
Industrials EMEA
13% 19%
Real Estate ~5,000 North America
7% issuer clients 68%
FIG
14%
Natural
Resources
23% Healthcare
11%
MARKETS
1 Other Financials includes public sector, pension funds, private equity, and SPVs
6

8. We have unmatched scale, diversification and leadership
Markets
Scale Diversity Leadership
How we operate IB revenue (typical quarter) Industry rankings Descriptions
100% 2009 2010 2011
1
Advisory #3
#3 4
# #4 #2
#2  M&A, Corporate Finance advisory
 2,500 salespeople
Banking
Equity
11 33 33  Primary and secondary issuance
Underwriting
 2,000 traders Long-term Debt 11 22 11  Bond underwriting
Syndicated Loans 11 22 11  Loan syndication
 2,000 bankers
Rates 22 11 11  Treasuries, agencies, swaps, futures, options
 800 research analysts
3 3 3
Securitized
2 1 1  Mortgage and asset backed securities
Products
Fixed Income
 4,000 control and risk 2 1 1
professionals
Flow
Emerging
2 3 2  Non G-10 rates, credit, FX
Markets 2 3 2
Credit  Corporate bonds, loans, credit swaps, index
 13,000 tech. & ops. 1 1 1
products
Trading 1 1 1
professionals
Commodities 5 5 3  Swaps, futures, options, physical transactions
5 5 3
FX 2 2 2  Spot foreign exchange swaps, futures, options
 40 countries 2 2 2
Public Finance 33 38 38  Municipal debt trading and issuance
Structured 3– 8 8  Rates and credit
–
N/A 49 49  High touch execution
 110+ trading desks Cash 9 9
N/A
3 3 1  Low touch execution (electronic)
Equities
Flow
Derivatives 3 3 1  Swaps, options, convertibles
 20 trading centers 2 2 2
Prime Services 2 2 2  Financing, execution, clearing
– – –
Structured N/A N/A N/A  Margin financing, structured notes
Source: Dealogic, Coalition
MARKETS
Note: Coalition competitor set: BAC, BARC, C, CS, DB, GS, MS, and UBS
1 Fixed Income and Equities ranking as of 3Q YTD 2011 (Coalition – Revenue); Banking rankings are FY 2011 (Dealogic – Volume)
7

9. Flow driven Markets business
Markets
IB Markets revenue: typical quarter (%)
100% 100% 100%
Rates
Securitized
Products
Fixed Emerging
Flow
Income Markets
70%
Credit Trading
Commodities
FX
Public Finance
Structured Structured
Cash
Derivatives
Equities Flow
30% Prime Services
Structured Structured
Structured
MARKETS
8

10. High volume Markets business model with standardized products
Markets
Examples of major trading Quantity per quarter Average revenue Revenue per
x =
products (# of trades) ($ per trade) quarter ($mm)
 FX Spot/Forwards 5,000,000 70 350
 Credit Trading 250,000 1,500 375
 FX Options 150,000 600 100
 Metals Trading 140,000 600 75
Fixed Income
 Financing 100,000 1,500 150
 Governments 75,000 2,500 200
 Energy Trading 50,000 5,000 250
 Interest Rate Swaps 30,000 12,000 350
 Asset Backed Securities 30,000 10,000 300
 Agencies 11,000 7,000 75
 Loan Trading 10,000 10,000 100
 Cash Equities (N.A.) 10B shares 1.5 cents per share 150
Equities
 Cash Equities (EMEA/Asia) $200B notional 8bps 175
 Equity Swaps and Options 6,000 30,000 200
 F&O and OTC clearing 350mm lots 40 cents per lot 150
Note: Quantity, average revenue and total revenue are estimates based on typical quarter; revenue per quarter rounded
MARKETS
9

11. Over 90% of the Global Fortune 500 use swaps, futures, and options
Markets
Global Fortune 500
Usage by industry Usage by product
98% 88%
97% 83%
95% Total usage across
all industries: 94%
92% 92% 92%
91% 49%
88%
29%
20%
Financial Basic Tech. Industrial Health Utilities Consumer Services FX Interest rate Commodity Equity Credit
materials goods care goods
Source: ISDA 2009 Survey
MARKETS
10

12. Scale driven Markets business model
Markets
Estimated % of total client trades by average revenue per trade (FY 2011)
 High volume (~100,000 daily trades)
98%
 Low spread
 Low volume (~10 daily trades)
 High spread
1.2% 0.6% 0.2% 0.08% 0.06%
$0-$50K $50K-$100K $100K-$250K $250K-$500K $500K-$1mm $1mm+
% of Total Revenue 75% 25%
MARKETS
Note: Represents Fixed Income business
11

13. High turnover Markets business model
Markets
Case study – North America interest rate swaps daily turnover metrics
120
75 77
57
Average daily
turnover: 53 44
36 37
29
24 26
Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8 Day 9 Day 10
Client businesses carry little risk inventory and turn their positions multiple times a day
Note: Turnover defined as daily DV01 risk traded divided by starting DV01. DV01 is the risk position for a desk (amount of money desk makes or loses on a one basis point move
in the yield curve); actual two-week period in 2011
MARKETS
12

14. Agenda
Page
Performance 1
Markets 4
Business highlights 13
INVESTMENT BANK
13

15. Well positioned to adapt to regulation
Business highlights
Impact Concerns Strengths
 Mandated clearing  Unresolved: end-user  Competitive advantage by
Clearing and
Swap  Meaningful volumes margin/extraterritoriality being a scale player with
Execution  Lesser revenue impact
existing connectivity and
 Concentration of
Facilities access to SEFs
exposure to central
(SEFs)
counterparties
 Ban on Bright Line  Could limit liquidity  Long-track record of client-
proprietary trading  Clients focused business model
 Immaterial revenue impact  Markets  Competitors may need to
 Not a large business re-orient their businesses
Volcker  Compliance emphasis
 Limits market may impact costs
making/hedging ability
 Pushing-out portions of below  Complicates risk  Operational excellence:
investment grade CDS, management depth of experience
Non-Bank
equity and commodities managing complex
Subsidiary  Extraterritoriality:
(NBS) swap derivatives migrations
potential impact to scope
“push out”  No significant revenue or
BUSINESS HIGHLIGHTS
capital changes expected
Strong governance programs in place to address regulatory change: 500 people; 65+ projects
14

16. Expense discipline enables investment capacity
Business highlights
J.P. Morgan IB expense ($B) Highlights
Compensation
1
Noncompensation  Disciplined expense management
 Total expense down 4%
 Focus on operating efficiency
16.81
16.1  Best-in-class overhead ratio
15.4
 Lowest comp/revenue ratio
13.8
7.5
6.1 7.2
 Continued investment capacity
6.1  Strategic Reengineering Project (SRP)
 International expansion
 Commodities execution
 International Prime Brokerage
9.3 9.2 8.9
7.7  Value for Scale
 Synergies across wholesale businesses
2008 2009 2010 2011
Overhead ratio2 NM 51% 65% 65%
BUSINESS HIGHLIGHTS
Comp/revenue1,2 75% 31% 36% 36%
1 2010 compensation expense excludes $0.5B of U.K. payroll tax
2 Overhead and comp/revenue ratios exclude DVA impact
15

17. Global Corporate Bank: contributing to IB Markets and Treasury Services
Business highlights
2011 international revenue with corporates
IB Markets Treasury Services
Trade loan growth
47%
Rates 32% Trade 35% revenue
growth
~29% growth ~22% growth
FX 28% YoY Liquidity 19% YoY
1
Commodities 27% Core cash 8%
BUSINESS HIGHLIGHTS
1 Excludes non-recurring items
16

18. Leveraging the J.P. Morgan platform
Business highlights
J.P. Morgan
Investment Bank
Leveraging the wholesale platform
Treasury & Asset IB cross-LOB gross revenue share ($B)
Commercial
Securities Management
Banking
Services
 IB recognized  Expanded client  41 new Private
fees for 147 coverage/footprint Bank clients from
debt and 77 with Global IB referrals AM
32%
equity deals for Corporate Bank CB
 71 Private Bank
CB clients in 50%
 Increased credit referrals to the IB
2011
extension and TSS
 Expanding
 $1.4B gross product 18%
international
revenue in 2011 penetration
referrals and
syndication
access
BUSINESS HIGHLIGHTS
2011 total: $2.7B
17

19. Proven risk management capability
Business highlights
J.P. Morgan Markets revenue and VaR Average revenue over past 12 quarters
JPM Markets revenue JPM VaR
$B $mm JPM ~30% greater than peers
25 180
23.5
160
$5.2
20 19.3 19.3
$3.9
140
120
Peers J.P.Morgan
15
100
12.2
10.2 80 Markets revenue volatility2 of past 12 quarters
10
60
JPM ~40% less than peers
40
5 4.2
20
40%
25%
0 0
2006 2007 2008 2009 2010 2011
BUSINESS HIGHLIGHTS
Market Peers J.P.Morgan
8% 9% 10% 13% 12% 14%
share1
Note: Revenue excludes DVA; peers: BAC, BARC, C, CS, DB, GS, MS and UBS
1 Estimated using public disclosure of top 10 competitors, including DVA
2 Volatility equals standard deviation as a percentage of the period average
~30% higher revenue than peers with ~40% less volatility
18

20. Fortress balance sheet and prudent capital management
Business highlights
2012 walk forward ($B)
Risk Weighted Assets (based on Basel III)
$550
$467
$413
($54)
4Q10 actual 4Q11 actual 4Q12 glidepath
Allocated equity ($B) 40 40 40
Basel III Tier 1 7.2% 8.4% 9.5%
common ratio
BUSINESS HIGHLIGHTS
Note: 2012 RWA reduction is a combination of legacy asset roll-off, risk adjustments, and continued RWA management discipline
19

21. Consistency of results
Business highlights
JPM Investment Bank ROE vs. peers Markets revenue (Equities and FICC, $B)
JPM IB Peer average1
Industry Individual firms YoY
17% 17%
146 JPM 20 2%
14% 131 Peer 1 17 (21%)
Peer 2 17 (3%)
Peer 3 15 (15%)
8% Peer 4 15 (16%)
2
Peer 5 14 36%
Peer 6 13 (25%)
2
Peer 7 11 1%
BUSINESS HIGHLIGHTS
Peer 8 9 (30%)
2010 2011 2010 2011
Source: Company filings
1 Peer average ROE excludes firms without sufficient IB segment-level disclosure
2 Adjusted for non-recurring items
20

22. Performance and outlook
Business highlights
J.P. Morgan IB ROE Outlook
 We are holding 17% target going forward
 Headwinds to consider
 Regulatory burden
 Global market uncertainty
21%  Tougher RWA calculations
18% 18% 17% 17% 17% +/-
17%  Sustained low interest rate environment
15%
 Key drivers
 Scale and diversity of franchise
 Market leadership
(5%)
 Growth initiatives
 Disciplined expense management
2005 2006 2007 2008 2009 2010 2011 Target
 Strong capital position
BUSINESS HIGHLIGHTS
Allocated
capital 20 21 21 26 33 40 40 40
($B)
21