Bo( Kate ) Dong, Stephen Proffer, Gleb Zarkh March 13, 2007

1. JPMorgan Chase Bo(Kate) Dong, Stephen Proffer, Gleb Zarkh March 13, 2007

2. Outline • History • Macroeconomic view • Industry glance • Past performance • Financial analysis • Recommendation

3. Outline • History • Macroeconomic view • Industry glance • Past performance • Financial analysis • Recommendation

4. JP Morgan Chase • One of the oldest and most prestigious financial services firms in the world. • Headquartered in New York City, with assets of $1.3 trillion, JPMorgan Chase is currently the 3rd largest banking institution in US (Behind Citigroup & Bank of American) • Principle Bank subsidiaries: • JPMorgan Chase Bank, National Association • Chase Bank USA, National Association • Principal Non-Bank Subsidiaries: • J.P. Morgan Securities Inc.

5. Chemical Banking Corp. • New York Chemical Manufacturing Company was founded in 1823 as a maker of various chemicals • In 1824, the company amended its charter to perform banking activities and created the Chemical Bank of New York • In 1996, the company acquired the Chase Manhattan Corporation and kept that name • In 2000, the company acquired J.P. Morgan & Co. and changed its name to J.P. Morgan Chase & Co. • JPMorgan Chase retains Chemical Bank's headquarters and stock history.

6. Chase Manhattan Bank • The Chase Manhattan Bank was formed upon the 1955 purchase of Chase National Bank (established in 1877) by the Bank of the Manhattan Company (established in 1799), the company's oldest predecessor institution. Led by David Rockefeller during the 1970s and the 1980s • Chase Manhattan was one of the largest and most prestigious banking concerns, with leadership positions in syndicated lending, treasury and securities services, credit cards, mortgages, and retail financial services • Weakened by the real estate collapse in the early 1990s, it was acquired by Chemical Bank in 1996

7. J.P. Morgan & Company • In 1895, Drexel, Morgan & Co. became J.P. Morgan & Co • It financed the formation of the United States Steel Corporation, which took over the business of Andrew Carnegie and others and was the world's first billion-dollar corporation • In 1892, the company began to finance the New York, New Haven and Hartford Railroad and led it through a series of acquisitions that made it the dominant railroad transporter • In the 1930s, JPMorgan was forced by the Glass-Steagall Act to choose either commercial banking or investment banking: • JPMorgan chose to operate as a commercial bank

8. JPMorgan Chase • In 1990s and following amendments to the Glass-Steagall Act, JPMorgan Chase had turned itself into an investment bank too. It also offered private banking and private equity services. • 2001- Chase Manhattan acquired JPMorgan & Co. to form JPMorgan Chase & Co. • In 2004, JPMorgan Chase & Co. acquired Bank One • Bank One CEO Jamie Dimon becomes president, COO, and designated successor of current JPMorgan Chase CEO William B. Harrison

9. Bank One • Created 1998: Bank One of Ohio merge with First Chicago • Result of over 55 mergers • J.P. Morgan Chase- aggressive acquisition strategy

10. Business under 2 brands Businesses use the JPMorgan brand: • Investment Bank • Worldwide Securities Services • Private Bank • Asset Management • One Equity Partners • Private Client Services • Business under Chase brand: • (The U.S. consumer and commercial banking businesses serve customers under the Chase brand) • Credit card • Small business • Home finance • Auto and education finance • Insurance

11. Business Segments • Investment Bank • Retail Financial Services • Card Services • Commercial Banking • Treasury and Securities Services • Asset Management • Corporate

12. Segment Breakdown J.P. Morgan 2006 Annual Report, Pg. 35

13. Investment Banking Market Share IBED Pg. 34/ Pg. 37

14. Investment Banking Financials Record fees Flat Net Income IBED Pg. 36

15. Retail Financial Services *Additional 339 Branches in New York Tri State (NY, NJ, CT) from Bank of New York Aquisition IBED Pg. 34/ Pg. 40

16. Retail Services Financials Weaker mortgage results Net Income down by 6% IBED Pg. 38

17. Card Services IBED Pg. 34/ Pg. 44

18. Card Services Financials Fewer bankruptcy filings Net Income up 68% IBED Pg. 43

19. Commercial Banking IBED Pg. 34/Pg. 47

20. Commercial Banking Financials Net Income increase by 6% IBED Pg. 46

21. Treasury & Securities Services IBED Pg. 34/ Pg. 49

22. Treasury & Securities Financials Driven by market value appreciation Net Income increased 26% IBED Pg. 48

23. Asset Management $ 1.3 Trillion under management IBED Pg. 34/ Pg. 51

24. Asset Management Financials Driven by market appreciation Net Income Increased 16% IBED Pg. 50

25. Corporate • Private Equity, Treasury, Corporate Staff units & expenses which are centrally managed

26. Corporate Financials Wider net interest spread Litigation expenses IBED Pg. 53

27. Outline • History • Macroeconomic view • Industry glance • Past performance • Financial analysis • Recommendation

28. Economics • Big Picture • Interest Rate

29. Big Picture Projection • Global and domestic GDP growth will remain flat or decline slightly • The U.S. economy showing some weakening because of a challenging housing market • Global economy doing relatively well because of robust activity in Asia and areas of the world that produce oil and raw materials.

30. Big Picture(2)-- GDP U.S. Bureau of Economic Analysis. March 12, 2006. <http://www.bea.gov/briefrm/gdp.htm>

31. Big Picture(3)-- Consumer deposits U.S. Bureau of Economic Analysis. March 12, 2006. <http://www.bea.gov/briefrm/saving.htm>

32. Economics • Big Picture • Interest Rate

33. Interest rate (1)—Long-term interest rate • Longer-term interest rates have risen, contributing to increased borrowing costs for both households and businesses. • Long-term interest rates rose but were still moderate by historical standards, and credit spreads and risk premiums stayed narrow.

34. Interest rates (Mortgage) Bankrate.com. March 12, 2006 <http://bankrate.com/brm/graphs/graph_trend.asp>

35. Interest Rates (Prime) Moneycafe.com. March 12,2006. <http://bankrate.com/brm/graphs/graph_trend.asp>

36. Outline • History • Macroeconomic view • Industry glance • Past performance • Financial analysis • Recommendation

37. Industry glance • Mergers and mega-mergers; top 10 U.S. banks control two-thirds of the lending market and deposits • Advises on corporate strategy and structure, raises capital, etc. • Make markets in financial instruments • Offers sophisticated risk management services • Sales and research across equity, debt, interest rate, foreign exchange and commodity markets • Provides equity and mezzanine capital financing to companies throughout the business development life cycle Sources: JP Morgan 2006 10 K

38. Outline • History • Macroeconomic view • Industry glance • Past performance • Financial analysis • Recommendation

39. RCMP Portfolio History • Purchased on Oct. 6, 1999 as Bank One for 700 shares • Cost of position- $24,237.45 • Market value- $45,128.16 (+86.19%) • Currently own 924 shares

40. JPM on S&P 500

41. Comparable companies Source : Yahoo! Finance

42. Outline • History • Macroeconomic view • Industry glance • Past performance • Financial analysis • Recommendation

43. Model assumptions • Step1:Calculation of Equity Cash Flow • Step2: Calculation of Cost of Equity • Step3:Calculation of ROE • Step4:Calculation of the Equity Value • Step5:Calcualtion of the Price per share

44. Step1:Calculation of Equity Cash

45. Step2: Calculation of Cost of Equity source:http://finance.yahoo.com/q/ks?s=JPM

46. Step3:Calculation of ROE(1)

47. Step3:Calculation of ROE(2)

48. Step4:Calculation of the Equity Value

49. Step5:Calcualtion of the Price per share

50. Outline • History • Macroeconomic view • Industry glance • Past performance • Financial analysis • Recommendation