BASEL II PILLAR 3 DISCLOSURES B A R 3 D I S C L O S U R E S JPMorgan Chase Bank, National Association, Mumbai Branch Half Year ending September 30, 2008
Quantitative disclosures under the New Capital Adequacy Framework (Basel II guidelines) for the half year ended September 30, 2008 The Basel II Pillar 3 disclosures ("Basel P3") included herein are made solely to meet the requirements in India, and relate solely to the activities of the Mumbai Branch of JPMorgan Chase Bank, National Association, a wholly-owned bank subsidiary of JPMorgan Chase & Co. For a comprehensive discussion of risk management at JPMorgan Chase & Co., including its consolidated subsidiaries, please refer to Firm's Annual Report for the year ended December 31, 2007, which is available in the Investor Relations section of www.jpmorganchase.com All quantitative disclosures are reported in rupees thousands. I Scope of application The New Capital Adequacy Framework ("Revised Framework") as prescribed by Reserve Bank of India is applied to the operations of JPMorgan Chase Bank, National Association, (a bank incorporated in the United States of America) in India, i.e. to JPMorgan Chase Bank, National Association, Mumbai Branch ("the Branch"); being its sole branch in India. JPMorgan Chase Bank, National Association is one of the principal subsidiaries of JPMorgan Chase & Co. (collectively, "JPMC", "the Group" or "the Firm"), the financial holding company incorporated in the United States. JPMC operates in India through the Branch and through other subsidiaries owned by one or more of its principal subsidiaries. Presently, the Accounting Standard (AS) 21 on Consolidation Accounting is not applicable to the India operations of JPMC since none of its Indian subsidiaries are owned by the Branch in Mumbai. The Branch does not have any interest in insurance entities.
II Capital Structure The capital of the Branch consists principally of the Head Office account representing Capital remitted by Head Office and remittable surplus retained in India.Composition of Capital funds Tier I capital Head Office account 17,256,354 Statutory reserves 1,543,849 Tier I capital 18,800,203 Tier II capital General provision on standard assets 31,200 General provision for country risk 1,436 Tier II capital 32,636 Other deductions from capital, if any Deferred tax asset 173,255 Total Capital funds 18,659,584 Note: The total capital fund as per Basel I and Basel II is same. III Capital Adequacy Capital requirements for credit risk - Portfolios subject to standardised approach 10,569,276 Capital requirements for market risk Standardised duration method - Interest rate risk 2,722,948 - Foreign exchange risk 920,037 Capital requirements for operational risk - Basic indicator approach 562,734 Capital Adequacy Ratio of the Branch (%) CRAR * 11.31% Tier I CRAR 11.29% Tier II CRAR 0.02% * CRAR as per Basel I is 11.98%
IV Credit Risk Gross credit exposures Fund based* 33,322,774 Non fund based** 363,053,525 Total 396,376,299 Geographic distribution of exposures Fund based domestic * 33,322,774 Non fund based domestic ** 363,053,525 Fund based - overseas Non fund based overseas Total 396,376,299 *Includes Exposure on account of Repo and Forward value sale transactions calculated as prescribed by RBI under the Basel II capital Framework ** In case of Fx and derivative contracts, credit equivalents are computed using the current exposure method which includes two steps as under: - Computation of current credit exposure which is sum of the positive mark -to -mark value of the outstanding contract -Potential future credit exposure which is determined by multiplying the notional principal amounts by the relevant add on factor based on tenor and type of underlying contracts.
Industry type disclosure of exposures Industry Fund Based Non Fund Based Food processing 1,232 599,668 Rubber and rubber products 114,914 - Chemical, dyes, paints - Fertilizers 25,900 - Chemical, dyes, paints - Petro chemicals 244,100 3,988,042 Chemical, dyes, paints - Drugs & Pharma 494,033 9,155,140 Cement 742,857 - Construction 763,857 1,865,245 Automobile incl trucks 214,163 - Computer Software 939,300 4,555,791 Infrastructure 10,000 58,161 Telecommunication 906,551 828,196 Other metal & metal Products 2,348,250 85,009 Iron and Steel - 1,472,342 All engineering electronic 204,141 - Other textiles 9,600 - Banks 20,684,083 327,441,654 NBFC 2,512,810 668,861 Other industries 3,106,983 12,335,416 Total 33,322,774 363,053,525 Residual contractual maturity breakdown of assets Maturity Bucket Investments Advances 1 day 30,000,000 48,034 2-7 days 9,791,631-8 - 14 days - 464,472 15-28 days - 18,684 29 days - 3 months 683,641 2,018,859 3-6 months 10,041,975 3,686,284 6-12 months 17,83,283 1,597,104 1-3 years - 371,429 3-5 years - - Over 5 years Total - 52,300,531 Note: Investments are valued at Mark to Market and advances are net of provision. 243,337 8,448,203
Amount of NPAs (Gross) Substandard 379,674 Doubtful 439,443 Net NPAs 243,337 NPA Ratios Gross NPAs to gross advances 9.08 Net NPAs to net advances 2.88 Movement of NPAs (Gross) Opening balance 1,214,339 Additions 178,333 Reductions 573,555 Closing balance 819,118 Movement of provisions for NPAs Opening balance 990,229 Provisions made during the year 150,581 Write-off - Write-back of excess provisions 565,029 Closing balance 575,780 Amount of Non-Performing Investments Amount of provisions held for non-performing investments Movement of provisions for depreciation on investments Opening balance 145,946 Provisions made during the year - Write-off - Write-back of excess provisions 12,802 Closing balance 133,144 V Credit Risk: Standardised approach Details of Credit Risk Exposure (fund based and non-fund based) based on Risk - Weight: Below 100% risk weight 351,152,014 100% risk weight 36,937,470 More than 100% risk weight 6,505,504 Deducted Total - 394,594,988
VI Credit Risk Mitigation During the half year ended September 30 th, 2008 Branch has not used any financial collateral as risk mitigant for the purpose of calculating capital under Basel II except for repo style transactions. VII Securitisation a) Total outstanding exposures securitised by the Branch as of September 30, 2008 : nil b) For exposure securitised by the Branch - amount of impaired/past due assets securitised: - net loss recognised by the Branch during the current period: Rs. 38,299 ( 000) c) Aggregate amount of securitisation exposures retained / purchased: d) Summary of securitisation activity presenting a comparative position for two years Half year ending Particulars 30-September-08 31-Mar-08 Total number loan assets securitised 7 2 Book value of loan assets securitised 7,050,000 1,395,596 Sale consideration 7,014,240 1,398,379 Gain/loss on sale on account of securitisation (35,760) 2,783 Form and quantum of services provided - - credit enhancement - - - liquidity support - - - post securitisation asset servicing - - VIII Market risk Capital requirements for Interest rate risk 2,722,948 Equity position risk - Foreign exchange risk 920,037 IX Interest rate risk in the banking book (IRRBB) The branch does not have material interest rate risk exposure in the non-trading book.