FORM 10–Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2006		Commission file number 1-5805

JPMORGAN CHASE & CO.

(Exact name of registrant as specified in its charter)

Delaware		13-2624428
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
270 Park Avenue, New York, New York		10017
(Address of principal executive offices)		(Zip Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x   Accelerated filer o  Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

FORM 10–Q
TABLE OF CONTENTS

					Page
Part I – Financial information
Item 1		Consolidated Financial Statements – JPMorgan Chase & Co.:
		Consolidated statements of income (unaudited) for the three and nine months ended September 30, 2006, and September 30, 2005			69
		Consolidated balance sheets (unaudited) at September 30, 2006, and December 31, 2005			70
		Consolidated statements of changes in stockholders’ equity (unaudited) for the nine months ended September 30, 2006, and September 30, 2005			71
		Consolidated statements of cash flows (unaudited) for the nine months ended September 30, 2006, and September 30, 2005			72
		Notes to consolidated financial statements (unaudited)			73
		Consolidated average balance sheets, interest and rates (unaudited) for the three and nine months ended September 30, 2006, and September 30, 2005			98
		Glossary of Terms and Line of Business Metrics			100
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations:
		Consolidated Financial Highlights			3
		Introduction			4
		Executive Overview			6
		Consolidated Results of Operations			9
		Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures			12
		Business Segment Results			15
		Balance Sheet Analysis			44
		Capital Management			46
		Off-Balance Sheet Arrangements and Contractual Cash Obligations			49
		Risk Management			50
		Supervision and Regulation			66
		Critical Accounting Estimates Used by the Firm			67
		Accounting and Reporting Developments			67
		Forward-Looking Statements			104
Item 3		Quantitative and Qualitative Disclosures About Market Risk			105
Item 4		Controls and Procedures			105
Part II – Other information
Item 1		Legal Proceedings			105
Item 1A		Risk Factors			106
Item 2		Unregistered Sales of Equity Securities and Use of Proceeds			106
Item 3		Defaults Upon Senior Securities			107
Item 4		Submission of Matters to a Vote of Security Holders			107
Item 5		Other Information			107
Item 6		Exhibits			107
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATIONS

JPMORGAN CHASE & CO.
CONSOLIDATED FINANCIAL HIGHLIGHTS

(unaudited)
(in millions, except per share, headcount and ratio data)		Nine months ended September 30,
As of or for the period ended		3Q06				2Q06				1Q06				4Q05				3Q05				2006				2005
Selected income statement data
Noninterest revenue		$	10,021			$	9,762			$	10,050			$	8,804			$	9,482			$	29,833			$	25,389
Net interest income			5,379				5,178				4,993				4,678				4,783				15,550				14,877
Total net revenue			15,400				14,940				15,043				13,482				14,265				45,383				40,266
Provision for credit losses			812				493				831				1,224				1,245				2,136				2,259
Noninterest expense			9,651				9,236				9,648				8,430				9,359				28,535				29,996
Income from continuing operations before income tax expense			4,937				5,211				4,564				3,828				3,661				14,712				8,011
Income tax expense			1,705				1,727				1,537				1,186				1,192				4,969				2,399
Income from continuing operations (after-tax)			3,232				3,484				3,027				2,642				2,469				9,743				5,612
Income from discontinued operations (after-tax)(a)			65				56				54				56				58				175				173
Net income		$	3,297			$	3,540			$	3,081			$	2,698			$	2,527			$	9,918			$	5,785
Per common share
Basic earnings per share
Income from continuing operations		$	0.93			$	1.00			$	0.87			$	0.76			$	0.71			$	2.81			$	1.60
Net income			0.95				1.02				0.89				0.78				0.72				2.86				1.65
Diluted earnings per share
Income from continuing operations		$	0.90			$	0.98			$	0.85			$	0.74			$	0.70			$	2.73			$	1.58
Net income			0.92				0.99				0.86				0.76				0.71				2.78				1.62
Cash dividends declared per share			0.34				0.34				0.34				0.34				0.34				1.02				1.02
Book value per share			32.75				31.89				31.19				30.71				30.26				32.75				30.26
Common shares outstanding
Average: Basic			3,469				3,474				3,473				3,472				3,485				3,472				3,498
Diluted			3,574				3,572				3,571				3,564				3,548				3,572				3,555
Common shares at period-end			3,468				3,471				3,473				3,487				3,503
Selected ratios
Return on common equity (“ROE”)(b)			12	%			13	%			12	%			10	%			9	%			12	%			7	%
Return on assets (“ROA”)(b)(c)			1.00				1.06				1.00				0.89				0.84				1.02				0.66
Tier 1 capital ratio			8.6				8.5				8.5				8.5				8.2
Total capital ratio			12.1				12.0				12.1				12.0				11.3
Tier 1 leverage ratio			6.3				5.8				6.1				6.3				6.2
Selected balance sheet data (period-end)
Total assets		$	1,338,029			$	1,328,001			$	1,273,282			$	1,198,942			$	1,203,033
Securities			86,548				78,022				67,126				47,600				68,697
Loans			463,544				455,104				432,081				419,148				420,504
Deposits(d)			582,115				593,716				584,465				554,991				535,123
Long-term debt			126,619				125,280				112,133				108,357				101,853
Common stockholders’ equity			113,561				110,684				108,337				107,072				105,996
Total stockholders’ equity			113,561				110,684				108,337				107,211				106,135
Credit quality metrics
Allowance for credit losses		$	7,524			$	7,500			$	7,659			$	7,490			$	7,615			$	7,524			$	7,615
Nonperforming assets(e)			2,300				2,384				2,348				2,590				2,839				2,300				2,839
Allowance for loan losses to total loans(f)			1.65	%			1.69	%			1.83	%			1.84	%			1.86	%			1.65	%			1.86	%
Net charge-offs		$	790			$	654			$	668			$	1,360			$	870			$	2,112			$	2,459
Net charge-off rate(b)(f)			0.74	%			0.64	%			0.69	%			1.39	%			0.89	%			0.69	%			0.87	%
Wholesale net charge-off (recovery) rate(b)(f)			(0.03	)			(0.05	)			(0.06	)			0.07				(0.12	)			(0.04	)			(0.10	)
Managed card net charge-off rate(b)			3.58				3.28				2.99				6.39				4.70				3.29				4.80
Headcount			171,589				172,423				170,787				168,847				168,955
Share price(g)
High		$	47.49			$	46.80			$	42.43			$	40.56			$	35.95			$	47.49			$	39.69
Low			40.40				39.33				37.88				32.92				33.31				37.88				33.31
Close			46.96				42.00				41.64				39.69				33.93				46.96				33.93

(a)		On October 1, 2006, the Firm completed the exchange of selected corporate trust businesses including trustee, paying agent, loan agency and document management services for the consumer, small-business and middle-market banking businesses of The Bank of New York. The results of operations of these corporate trust businesses are being reported as discontinued operations for each of the periods presented.
(b)		Based upon annualized amounts.
(c)		Represents Net income divided by Total average assets.
(d)		Excludes deposits of $24.0 billion and $26.5 billion at September 30, 2006 and June 30, 2006, respectively, which have been reclassified to Liabilities of discontinued operations held-for-sale.
(e)		Excludes wholesale held-for-sale (“HFS”) loans purchased as part of the Investment Bank’s proprietary activities.
(f)		Excluded from the allowance coverage ratios were end-of-period loans held-for-sale; and excluded from the net charge-off rates were average loans held-for-sale.
(g)		JPMorgan Chase’s common stock is listed and traded on the New York Stock Exchange, the London Stock Exchange Limited and the Tokyo Stock Exchange. The high, low and closing prices of JPMorgan Chase’s common stock are from The New York Stock Exchange Composite Transaction Tape.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Form 10-Q provides management’s discussion and analysis (“MD&A”) of the financial condition and results of operations for JPMorgan Chase & Co. See the Glossary of terms on pages 100–102 for definitions of terms used throughout this Form 10-Q. The MD&A included in this Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. These risks and uncertainties could cause JPMorgan Chase’s results to differ materially from those set forth in such forward-looking statements. See Forward-looking statements on page 104 and Part II, Item 1A: Risk Factors on page 106, of this Form 10-Q.

References to the “2005 Annual Report” in this Form 10-Q are to the Firm’s Annual Report on Form 10–K for the year ended December 31, 2005, as amended by the Form 10-K/A filed on August 3, 2006, and as further amended by the Form 8-K filed on September 18, 2006.

INTRODUCTION
JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”), a financial holding company incorporated under Delaware law in 1968, is a leading global financial services firm and one of the largest banking institutions in the United States, with $1.3 trillion in assets, $114 billion in stockholders’ equity and operations worldwide. The Firm is a leader in investment banking, financial services for consumers and businesses, financial transaction processing, asset and wealth management and private equity. Under the JPMorgan and Chase brands, the Firm serves millions of customers in the United States and many of the world’s most prominent corporate, institutional and government clients.

JPMorgan Chase’s principal bank subsidiaries are JPMorgan Chase Bank, National Association (“JPMorgan Chase Bank”), a national banking association with branches in 17 states; and Chase Bank USA, National Association, a national bank that is the Firm’s credit card issuing bank. JPMorgan Chase’s principal nonbank subsidiary is J.P. Morgan Securities Inc. (“JPMSI”), the Firm’s U.S. investment banking firm.

JPMorgan Chase’s activities are organized, for management reporting purposes, into six business segments, as well as Corporate. The Firm’s wholesale businesses comprise the Investment Bank, Commercial Banking, Treasury & Securities Services and Asset & Wealth Management segments. The Firm’s consumer businesses comprise the Retail Financial Services and Card Services segments. A description of the Firm’s business segments, and the products and services they provide to their respective client bases, follows.

Investment Bank
JPMorgan Chase is one of the world’s leading investment banks, as evidenced by the breadth of the Investment Bank (“IB”) client relationships and product capabilities. The IB has extensive relationships with corporations, financial institutions, governments and institutional investors worldwide. The Firm provides a full range of investment banking products and services in all major capital markets, including advising on corporate strategy and structure, capital raising in equity and debt markets, sophisticated risk management, and market-making in cash securities and derivative instruments. The IB also commits the Firm’s own capital to proprietary investing and trading activities.

Retail Financial Services
Retail Financial Services (“RFS”) realigned its business reporting segments on January 1, 2006, into Regional Banking, Mortgage Banking and Auto Finance. On October 1, 2006, JPMorgan Chase acquired The Bank of New York Company, Inc.’s (“The Bank of New York”) consumer banking business, expanding the Regional Banking branch network, which is one of the largest in the United States, to include 3,016 branches and 8,240 automated teller machines (“ATMs”) covering 17 states. Regional Banking distributes, through its network, a variety of products including checking, savings and time deposit accounts; home equity, residential mortgage, small business banking and education loans; mutual fund and annuity investments; and on-line banking services. Mortgage Banking is a leading provider of mortgage loan products and is one of the largest originators and servicers of home mortgages. Auto Finance is one of the largest noncaptive originators of automobile loans, primarily through a network of automotive dealers across the United States.

Card Services
Card Services (“CS”) is one of the largest issuers of credit cards in the United States, with more than 139 million cards in circulation. CS offers a wide variety of general purpose and private label cards to satisfy the needs of individual consumers, small businesses and partner organizations. The Chase Paymentech Solutions, LLC joint venture is the largest processor of MasterCard^® and Visa^® payments in the world.

Commercial Banking
Commercial Banking (“CB”) has more than 25,000 clients, including corporations, municipalities, financial institutions and not-for-profit entities, with annual revenues generally ranging from $10 million to $2 billion. While most Middle Market clients are located within the RFS footprint, CB also serves larger corporations, as well as local governments and financial institutions, on a national basis. CB serves its clients through its local market presence, offering industry expertise, a dedicated client service team and risk management capabilities. Partnerships with other JPMorgan Chase businesses position CB to deliver broad product capabilities – including lending, treasury services, investment banking, and asset and wealth management – in order to meet its clients’ financial needs. The October 1, 2006, acquisition of The Bank of New York’s middle-market banking business added approximately 2,000 clients, $2.5 billion of loans and $1.3 billion in deposits.

Treasury & Securities Services
Treasury & Securities Services (“TSS”) is a global leader in providing transaction, investment and information services to support the needs of corporations, issuers and institutional investors worldwide. TSS is one of the largest cash management providers in the world and a leading global custodian. The Treasury Services (“TS”) business provides a variety of cash management products, trade finance and logistics solutions, wholesale card products, and short-term liquidity management tools. TS partners with the CB, Regional Banking and Asset & Wealth Management businesses to serve clients firmwide. As a result, certain TS revenues are included in other segments’ results. The Worldwide Securities Services (“WSS”) business provides safekeeping, valuing, clearing and servicing of securities and portfolios for investors and broker-dealers and management of American Depositary Receipts (“ADRs”) programs. On October 1, 2006, the Firm completed the exchange of selected corporate trust businesses, including trustee, paying agent, loan agency and document management services, for the consumer, small-business and middle-market banking businesses of The Bank of New York. These corporate trust businesses, which were previously reported in TSS, have been deemed discontinued operations. The related balance sheet, income statement and assets under custody activity have been transferred to the Corporate segment for all periods presented.

Asset & Wealth Management
Asset & Wealth Management (“AWM”) provides investment advice and management for institutions and individuals. With $1.3 trillion of Assets under supervision, AWM is one of the largest asset and wealth managers in the world. AWM serves four distinct client groups through three businesses: institutions through JPMorgan Asset Management; ultra-high-net-worth clients through the Private Bank; high-net-worth clients through Private Client Services; and retail clients through JPMorgan Asset Management. The majority of AWM’s client assets are in actively managed portfolios. AWM has global investment expertise in equities, fixed income, real estate, hedge funds, private equity and liquidity, including both money market instruments and bank deposits. AWM also provides trust and estate services to ultra-high-net-worth and high-net-worth clients and retirement services for corporations and individuals.

OTHER BUSINESS EVENTS

Acquisition of the consumer, small-business and middle-market banking businesses of The Bank of New York in exchange for selected corporate trust businesses, including trustee, paying agent, loan agency and document management services
On October 1, 2006, JPMorgan Chase completed the acquisition of The Bank of New York’s consumer, small-business and middle-market banking businesses in exchange for selected corporate trust businesses plus a cash payment of $150 million. The Bank of New York businesses acquired were valued at a premium of $2.30 billion; the Firm’s corporate trust businesses that were transferred (i.e., trustee, paying agent, loan agency and document management services) were valued at a premium of $2.15 billion. The Firm also may make a future payment to The Bank of New York of up to $50 million depending on certain new account openings. Reflected in the Firm’s fourth quarter 2006 earnings will be an after-tax gain of approximately $650 million relating to this transaction.

Sale of insurance underwriting business
On July 3, 2006, JPMorgan Chase completed the sale of its life insurance and annuity underwriting businesses to Protective Life Corporation for cash proceeds of approximately $1.2 billion that was comprised of $900 million of cash received from Protective Life Corporation and approximately $300 million of pre-closing dividends from the sold entities. The after-tax impact of this transaction was negligible. The sale included both the heritage Chase insurance business and the insurance business that Bank One had bought from Zurich Insurance in 2003.

EXECUTIVE OVERVIEW
This overview of management’s discussion and analysis highlights selected information and may not contain all of the information that is important to readers of this Form 10-Q. For a more complete understanding of events, trends and uncertainties, as well as the liquidity, capital, credit and market risks, and the critical accounting estimates, affecting the Firm and its various lines of business, this Form 10-Q should be read in its entirety. In the discussion below, information is presented on a managed basis. For more information about managed basis, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 12–15 of this Form 10-Q.

Business overview
The Firm reported 2006 third-quarter net income of $3.3 billion, or $0.92 per share, compared with net income of $2.5 billion, or $0.71 per share, for the third quarter of 2005. Return on common equity for the quarter was 12% compared with 9% in the prior year. The comparison with the prior year benefited from the absence of a special provision for credit losses related to Hurricane Katrina of $248 million after-tax, or $0.07 per share. Results for the current quarter included $30 million of merger charges after-tax, or $0.01 per share, compared with $137 million, or $0.04 per share, in the third quarter of 2005.

Net income for the first nine months of 2006 was $9.9 billion, or $2.78 per share, compared with $5.8 billion, or $1.62 per share, in the prior year. Return on common equity was 12% for the first nine months of 2006 compared with 7% for the prior-year period. Current year-to-date results included insurance recoveries related to certain material litigation of $233 million after-tax, or $0.07 per share, incremental expense of $415 million after-tax, or $0.11 per share, related to the adoption of SFAS 123R; and merger costs of $127 million after-tax, or $0.03 per share. Prior-year results included a litigation reserve charge of $1.7 billion after-tax, or $0.48 per share, a special provision for credit losses related to Hurricane Katrina of $248 million after-tax, or $0.07 per share, and merger costs of $400 million after-tax, or $0.11 per share.

During the quarter, the Firm completed the Tri-State consumer conversion, which linked the Firm’s more than 2,600 branches in 17 states on a common systems platform. In addition, on October 1, 2006, the Firm completed the exchange of selected corporate trust businesses, including trustee, paying agent, loan agency and document management services, for the consumer, small-business and middle-market banking businesses of The Bank of New York, adding $13 billion in deposits, $7.9 billion in loans, 339 branches and more than 400 ATMs.

Global economic and market conditions affected the performance of each of the Firm’s businesses. In the third quarter of 2006, the global economy continued to expand at a strong pace with some variance by region. The European economy continued to grow at a solid pace while growth in Asia and Japan slowed. The U.S. economy continued to slow, and was led by a decline in home construction. The Federal Reserve, after two years of raising interest rates, held the benchmark federal funds rate at 5.25%, anticipating slower U.S. economic growth and lower inflation. The yield curve inverted further, with long-term interest rates falling below the federal funds rate. Global equity markets benefited from the continuing economic expansion with market indices higher versus the prior year, but relatively flat compared with the prior quarter.

The discussion that follows highlights the performance of each business segment during the third quarter of 2006 with the comparable period in the prior year, unless otherwise noted.

Investment Bank net income was driven by record third-quarter revenue. Compared with the prior year, net income decreased as higher compensation expense and an increased provision for credit losses were offset largely by higher revenue. Revenue benefited from continued investments in key business initiatives, increased market share and global capital markets activity. Investment banking fees were at a record level, benefiting from record debt underwriting fees and strong advisory fees. Fixed Income Markets were down slightly from the prior year’s record level. Equity Markets results were also lower from a strong prior-year quarter. The provision for credit losses increased from the prior year’s benefit reflecting portfolio activity and stable credit quality. The increase in expense was due primarily to higher performance-based compensation including the impact of a higher ratio of compensation expense to revenue, and incremental expense related to SFAS 123R.

Retail Financial Services net income increased from the prior year, benefiting from a lower provision for credit losses and improved performance in Regional Banking and Auto Finance, partially offset by lower results in Mortgage Banking. Revenue was down slightly reflecting lower results in Mortgage Banking; the sale of the insurance business; narrower spreads on loans; and narrower spreads on deposits caused by a shift in the deposit mix reflecting the current interest rate and competitive environments. These factors were offset partially by increases in deposit and loan and lease balances, as well as higher fee income in Regional Banking. Also benefiting revenue this quarter was the absence of a prior-year net loss in Auto Finance associated with the transfer of $1.5 billion of loans to held-for-sale and the acquisition of Collegiate Funding Services. The provision for credit losses declined due to the absence of a special provision in the prior year for Hurricane Katrina. Expense decreased due to the sale of the insurance business and merger-related and other operating efficiencies, partially offset by ongoing investment in retail distribution, the acquisition of Collegiate Funding Services and higher depreciation expense on owned automobiles subject to operating leases. Continuing investment in the retail distribution network and the overall strength of the U.S. economy contributed to increases in the number of checking accounts, and average deposit and loan balances, as well as to improved cross-selling of credit cards and mortgages.

Card Services net income increased primarily due to lower credit losses benefiting from a significantly lower level of bankruptcy filings. The current interest rate and competitive environments have contributed to a decrease in managed revenue (excluding the impact of the deconsolidation of Paymentech). Additional factors negatively affecting revenue were: attrition of higher spread balances as a result of higher payment rates; the higher cost of funds on balance growth in promotional, introductory, and transactor loan balances; and higher volume-driven payments to partners. These decreases were offset partially by an increase in average managed loan balances, which benefited from recent portfolio acquisitions, and higher interchange income resulting from higher charge volume. The provision for credit losses benefited from lower bankruptcy-related losses, strong underlying credit quality and the absence, when compared to the prior year, of a special provision related to Hurricane Katrina. Total noninterest expense (excluding the impact of the deconsolidation of Paymentech) increased driven by recent acquisitions and higher marketing spending, partially offset by benefits from merger savings.

Commercial Banking net income was down, primarily due to a higher provision for credit losses. Revenue increased due to higher liability balances and loan volumes, reflecting increased sales efforts and U.S. economic growth. This benefit was offset largely by narrower loan spreads and a shift to lower-margin liability products. The increase in the provision for credit losses reflected growth in the loan portfolio and stable credit quality. Expense increased due largely to higher compensation expense and increased expense related to higher client usage of Treasury Services products.

Treasury & Securities Services net income was up from the prior year benefiting primarily from higher revenue. Revenue growth reflected wider spreads on higher average liability balances, business growth, increased product usage by clients and an increase in assets under custody, all of which benefited from global economic growth and capital markets activity. The increase in expense was due to increased client activity, business growth and investment in new product platforms.

Asset & Wealth Management generated strong net income growth compared with the prior year. Revenue growth was driven by increased assets under management, driven by strong net asset inflows and strength in global equity markets, and higher performance fees. Provision for credit losses was a benefit, reflecting a higher level of recoveries. The increase in expense was due primarily to higher performance-based compensation.

The Corporate segment reported a significantly lower net loss (excluding the impact of discontinued operations, as discussed further below). Revenue benefited from improved Treasury net interest spread and a higher level of available-for-sale securities. These benefits were offset partially by lower private equity gains. Expense decreased due to lower merger-related costs.

During the quarter ended September 30, 2006, approximately $655 million (pretax) of merger savings were realized, which is an annualized rate of approximately $2.6 billion. Management estimates that annualized merger savings will be approximately $2.8 billion by the end of 2006. Merger costs of $48 million were expensed during the third quarter of 2006, bringing the total amount expensed since the merger announcement to $3.3 billion (including capitalized costs). Management currently expects total merger costs to be approximately $4.0 billion. The balance of the merger costs are expected to be incurred by the end of 2007.

On October 1, 2006, the Firm completed the exchange of selected corporate trust businesses, including trustee, paying agent, loan agency and document management services, for the consumer, small-business and middle-market banking businesses of The Bank of New York. These corporate trust businesses, which were previously reported in TSS, have been deemed discontinued operations. The related balance sheet and income statement activity is reflected in the Corporate segment for all periods presented. During the current quarter, these businesses produced $65 million in net income compared with net income of $58 million in the prior year.

Managed credit costs for the Firm were $1.4 billion compared with $2.1 billion in the prior year. The decrease was due primarily to the absence this year of a special provision of $400 million related to Hurricane Katrina and releases of allowance for credit losses in the wholesale businesses, both in the third quarter of 2005, and lower bankruptcy-related filings in CS in the third quarter of 2006. Wholesale credit costs were $35 million compared with a benefit of $99 million in the prior year. The increase reflected loan growth and portfolio activity while credit quality remained stable. Managed consumer credit costs were $1.4 billion compared with $2.2 billion in the prior year. The reduction from the prior year reflected the impact in 2005 of special provisions related to Hurricane Katrina and higher bankruptcy-related filings.

The Firm had, at September 30, 2006, total stockholders’ equity of $113.6 billion and a Tier 1 capital ratio of 8.6%. The Firm purchased $900 million, or 20 million shares, of common stock during the quarter and $2.9 billion, or 69.5 million shares, of common stock during the first nine months of 2006.

Business outlook
The following forward-looking statements are based upon the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. These risks and uncertainties could cause JPMorgan Chase’s results to differ materially from those set forth in such forward-looking statements.

The performance of the Firm’s capital markets and wholesale businesses are affected by overall global economic growth and by financial market movements and activity levels. The Investment Bank enters the fourth quarter of 2006 with a strong fee pipeline and remains focused on continuing to build out new products and capabilities. However, results will be dependent upon market conditions in any given quarter.

In Retail Financial Services, the current interest rate and competitive environments are expected to continue in the fourth quarter, resulting in potential modest net interest margin compression. In Card Services, net interest margin and balances are also expected to experience continued pressure from the interest rate and competitive environments, as well as from high customer payment rates.

The Corporate segment includes Private Equity, Treasury, Corporate Other support units and discontinued operations. The revenue outlook for the Private Equity business is directly related to the strength of the equity markets and the performance of the underlying portfolio investments. If current market conditions persist, the Firm anticipates continued realization of private equity gains, but results can be volatile from quarter to quarter. Management believes that Treasury net interest income will approximate zero over time, but there will be volatility from quarter to quarter, and that Corporate Other, excluding one-time items, will have a net loss in the fourth quarter of 2006 that will be relatively consistent with the third-quarter 2006 level.

Overall credit quality remains stable across the wholesale and consumer portfolios. However, management does not expect the favorable credit environment to continue indefinitely and, therefore, anticipates higher credit losses over time.

CONSOLIDATED RESULTS OF OPERATIONS
The following section provides a comparative discussion of JPMorgan Chase’s consolidated results of operations on a reported basis. Factors that relate primarily to a single business segment are discussed in more detail within that business segment than they are in this consolidated section. Total net revenue, Noninterest expense and Income tax expense for prior periods have been revised to reflect the impact of discontinued operations. For a discussion of the Critical accounting estimates used by the Firm that affect the Consolidated results of operations, see page 67 of this Form 10-Q and pages 81–83 of the JPMorgan Chase 2005 Annual Report.

The following table presents the components of Total net revenue:

Total net revenue		Three months ended September 30,												Nine months ended September 30,
(in millions)		2006				2005				Change				2006				2005				Change
Investment banking fees		$	1,416			$	989				43	%		$	3,955			$	2,943				34	%
Principal transactions			2,636				2,886				(9	)			7,866				6,246				26
Lending & deposit related fees			867				865				—				2,573				2,536				1
Asset management, administration and commissions			2,798				2,500				12				8,580				7,286				18
Securities gains (losses)			40				(44	)		NM					(578	)			(796	)			27
Mortgage fees and related income			62				201				(69	)			516				899				(43	)
Credit card income			1,567				1,855				(16	)			5,268				5,352				(2	)
Other income			635				230				176				1,653				923				79
Noninterest revenue			10,021				9,482				6				29,833				25,389				18
Net interest income			5,379				4,783				12				15,550				14,877				5
Total net revenue		$	15,400			$	14,265				8	%		$	45,383			$	40,266				13	%

Total net revenue for the third quarter of 2006 was $15.4 billion, up by $1.1 billion, or 8%, from the prior year. The increase was due to record Investment banking fees, higher Other income, increased Asset management, administration, and commissions revenue, and higher Net interest income. Offsetting this growth was lower Credit card income; decreased Principal transactions revenue, partly from a decline in Private equity gains; and lower Mortgage Banking results. For the first nine months of 2006, Total net revenue was $45.4 billion, up by $5.1 billion, or 13%, from the prior year. The increase was driven primarily by the aforementioned items, except for Principal transactions, which were higher as a result of stronger trading performance.

Investment banking fees of $1.4 billion in the third quarter and $4.0 billion for the first nine months of 2006 were record levels for the Firm. The results were driven by record debt underwriting, and strong advisory and equity underwriting fees. For a further discussion of Investment banking fees, which are primarily recorded in the IB, see the IB segment results on pages 17–20 of this 10-Q.

Principal transactions revenue consists of realized and unrealized gains and losses from trading activities, including physical commodities inventories that are accounted for at the lower of cost or fair value, as well as Private equity gains. Trading revenue in the third quarter of 2006 declined slightly from last year’s record level. Private equity gains were lower, reflecting large realized gains recognized last year. In the first nine months of 2006, Principal transactions increased over the same period of last year due to stronger trading performance in Equities and Fixed Income, partially offset by lower private equity gains. For a further discussion of Principal transactions, see the IB and Corporate segment results on pages 17–20 and 41–43 , respectively, of this 10-Q.

Lending & deposit related fees rose slightly in comparison with the 2005 third-quarter and year-to-date periods as a result of higher fee income on deposit-related products from business growth in RFS. For a further discussion of Lending & deposit related fees, which are partly recorded in RFS, see the RFS segment results on pages 21–28 of this Form 10-Q.

The increase in Asset management, administration and commissions for the third quarter and first nine months of 2006 were due to increased assets under management and higher performance and placement fees. The growth in assets under management reflected net asset inflows in the retail segment, mainly in equity-related products, institutional flows in liquidity products, and market appreciation. Also contributing to the increase for both periods was an increase in assets under custody driven by market value appreciation and new business; and growth in ADRs, global clearing, and securities lending, which were driven by increased product usage by existing clients and new business. In addition, commissions rose due to higher brokerage transaction volume across regions, partly offset by the sale of the insurance business and BrownCo. For additional information on these fees and commissions, see the segment discussions for the IB on pages 17–20, TSS on pages 34–37 and AWM on pages 37–40, of this Form 10-Q.

The favorable variance in Securities gains (losses) for all periods primarily reflects the results of portfolio repositioning in connection with the Firm’s asset/liability management activities. For a further discussion of Securities gains (losses), which are mostly recorded in the Firm’s Treasury business, see the Corporate segment discussion on pages 41–43 of this Form 10-Q.

Mortgage fees and related income declined in comparison with the third quarter and nine months ended September 30, 2005, reflecting a reduction in the value of the MSR asset, partly offset by increased loan servicing revenue on higher third-party loans serviced. For the quarterly comparison, production revenue declined primarily resulting from lower mortgage originations; and for the year-to-date comparison, productions revenue rose as a result of wider margins. For a discussion of Mortgage fees and related income, which is recorded primarily in RFS’s Mortgage Banking business, see the Mortgage Banking discussion on pages 26–27 of this Form 10-Q.

Credit card income decreased from the third quarter of 2005, primarily from higher volume-driven payments to partners, including Kohl’s, and increased rewards expense, partially offset by increased interchange income related to higher charge volume. On a year-to-date basis, Credit card income decreased due to the aforementioned items. These were offset partially by higher servicing fees, which benefited from lower credit losses incurred on securitized credit card loans, as well as an increase in charge volume. Credit card income also was negatively impacted by the deconsolidation of Paymentech. For a further discussion of Credit card income, see CS’s segment results on pages 28–31 of this Form 10-Q.

The increase in Other income compared with the third quarter of 2005 was due to higher equity investment income, in particular, from a merchant processing joint venture; and increased income from automobile operating leases. For the first nine months of 2006, Other income increased as a result of the aforementioned items as well as a gain of $103 million on the sale of MasterCard shares in its initial public offering.

Net interest income rose from the third quarter and first nine months of 2005 largely due to improvement in Treasury’s net interest spread, increases in consumer loans, wholesale liability balances, consumer deposits and available-for-sale securities. These increases were offset partially by narrower spreads on trading-related assets, consumer loans, including credit cards, and consumer deposits due to a shift in the deposit mix. The Firm’s total average interest-earning assets for the third quarter of 2006 were $992 billion, up 10% from the third quarter of 2005, primarily as a result of an increase in loans, available-for-sale securities and other liquid earning assets, partially offset by a decline in Interests in purchased receivables as a result of the restructuring and deconsolidation during the second quarter of 2006 of certain multi-seller conduits that the Firm administered. The net interest yield on these assets, on a fully taxable-equivalent basis, was 2.17%, an increase of four basis points from the prior year. The Firm’s total average interest-earning assets, for the nine months ended September 30, 2006, were $981 billion, up 10% from 2005 as a result of the aforementioned items, except that available-for-sale securities declined slightly. The net interest yield on these assets, on a fully taxable-equivalent basis, was 2.14%, a decrease of 12 basis points from the prior year. For a further discussion of Net interest income, see the Business Segment Results section on pages 15–43 of this Form 10-Q.

Provision for credit losses
The Provision for credit losses in the third quarter and first nine months of 2006 declined from the respective periods of last year, primarily due to the absence of a special provision of $400 million related to Hurricane Katrina and a decrease in CS reflecting lower bankruptcy-related losses, partly offset by higher contractual net charge offs. The wholesale provision for credit losses increased from both periods of 2005. The current year reflected stable credit quality, loan growth and portfolio activity. The prior year provision was driven by improvement in credit quality reflected in reductions in criticized exposure and nonperforming loans. The total net charge-off rate was 0.74% for the third quarter of 2006 compared with 0.89% in the prior year. The net charge-off rate for the first nine months of 2006 was 0.69% compared with 0.87% for the same period in 2005. The improvements were due primarily to lower bankruptcies in CS. For a more detailed discussion of the loan portfolio and the Allowance for loan losses, refer to Credit risk management on pages 52–63 of this Form 10-Q.

Noninterest expense
The following table presents the components of Noninterest expense:

		Three months ended September 30,												Nine months ended September 30,
(in millions)		2006				2005				Change				2006				2005				Change
Compensation expense		$	5,390			$	4,954				9	%		$	16,206			$	13,828				17	%
Occupancy expense			563				542				4				1,710				1,632				5
Technology, communications and equipment expense			911				892				2				2,656				2,698				(2	)
Professional & outside services			966				1,001				(3	)			2,781				3,177				(12	)
Marketing			550				512				7				1,595				1,532				4
Other expense(a)			877				864				2				2,324				5,360				(57	)
Amortization of intangibles			346				373				(7	)			1,058				1,124				(6	)
Merger costs			48				221				(78	)			205				645				(68	)
Total Noninterest expense		$	9,651			$	9,359				3	%		$	28,535			$	29,996				(5	)%

(a)		Includes litigation reserve charges of $2,772 million in the first nine months of 2005 related to the settlement of the Enron and WorldCom class action litigations and for certain other material legal proceedings. In the third quarter and first nine months of 2006, insurance recoveries relating to certain material litigation of $17 million and $375 million, respectively, were recorded.

Total Noninterest expense for the third quarter of 2006 was $9.7 billion, up by $292 million, or 3%, from the prior year. Excluding in the current quarter incremental expense of $104 million related to SFAS 123R, $48 million of Merger costs, and $17 million of insurance recoveries relating to certain material litigation; and excluding from the prior year $221 million of Merger costs, Total Noninterest expense would have been up by $378 million. The increase was driven by higher performance-based compensation and acquisitions, partially offset by the deconsolidation of Paymentech and the sale of the insurance business. For the first nine months of the year, Noninterest expense of $28.5 billion declined by $1.5 billion, or 5%. Excluding in the current year-to-date, incremental expense of $669 million related to SFAS 123R, $375 million of insurance recoveries relating to certain material litigation, and $205 million of Merger costs; and excluding in the prior year-to-date period material litigation charges of $2.8 billion and $645 million of Merger costs, Total Noninterest expense would have been up by $1.5 billion. The increase was driven primarily by higher performance-based compensation, acquisitions, and investments in businesses. Partially offsetting this increase were the deconsolidation of Paymentech, the sale of the insurance business, merger-related savings and other operating efficiencies.

The increases in Compensation expense from the third quarter and first nine months of 2005 were primarily a result of higher performance-based incentives, SFAS 123R incremental expense of $104 million and $669 million for the three- and nine-months ended September 30, 2006, respectively, and additional headcount in connection with growth in business volume and investments in the businesses. These increases were partially offset by merger-related savings and other operating efficiencies throughout the Firm. For a detailed discussion of the adoption of SFAS 123R and employee stock-based incentives see Note 7 on pages 77–80 of this Form 10-Q.

The increases in Occupancy expense from the third quarter and first nine months of 2005 were due to ongoing investment in the retail distribution network, partially offset by merger-related savings and other operating efficiencies.

The increase in Technology, communications and equipment expense from the third quarter 2005 was due primarily to higher depreciation expense on owned automobiles subject to operating leases and increased technology investments to support business growth. The decline in expense for the first nine months of 2006 was due primarily to merger-related savings and other operating efficiencies, partially offset by higher depreciation expense on owned automobiles subject to operating leases, and increased technology investments to support business growth.

Professional & outside services decreased from the third quarter and first nine months of 2005 due to merger-related savings and other operating efficiencies, the settlement of several legal matters in 2005 and the Paymentech deconsolidation.

Marketing expense was higher when compared with the third quarter and first nine months of 2005, reflecting the costs of campaigns for credit cards and other consumer products.

Other expense increased slightly from the third quarter of 2005 due to the impact of growth in business volume and investments in the businesses, partially offset by the sale of the insurance business. On a year-to-date basis, Other expense was lower due to significant litigation-related charges of $2.8 billion in 2005, associated with the settlement of the Enron and WorldCom class action litigations and certain other material legal proceedings. In addition, in the first nine months of 2006, the Firm recognized insurance recoveries of $375 million pertaining to certain material litigation matters. Also contributing to the decline from the prior year were charges of $93 million in connection with the termination of a client contract in TSS in the second quarter of 2005, and in RFS, the sale of the insurance business in the current quarter. These items were offset partially by higher charges related to other litigation, and the impact of growth in business volume and investments in the businesses.

For discussion of Amortization of intangibles and Merger costs, refer to Note 15 and Note 8 on pages 88–90 and 80, respectively, of this Form 10-Q.

Income tax expense
The Firm’s Income from continuing operations before income tax expense, Income tax expense and effective tax rate were as follows for each of the periods indicated:

		Three months ended September 30,								Nine months ended September 30,
(in millions, except rate)		2006				2005				2006				2005
Income from continuing operations before income tax expense		$	4,937			$	3,661			$	14,712			$	8,011
Income tax expense			1,705				1,192				4,969				2,399
Effective tax rate			34.5	%			32.6	%			33.8	%			29.9	%

The increase in the effective tax rate for the third quarter and first nine months of 2006, as compared with prior-year periods, was primarily the result of higher reported pretax income combined with changes in the proportion of income subject to federal, state and local taxes. Also contributing to the increase in the effective tax rate were the litigation charges in 2005 and lower Merger costs, reflecting a tax benefit at a 38% marginal tax rate. As a result of an audit settlement, approximately $260 million of tax benefits will be recorded in the fourth quarter of 2006.

EXPLANATION AND RECONCILIATION OF THE FIRM’S USE OF NON-GAAP FINANCIAL MEASURES

The Firm prepares its Consolidated financial statements using accounting principles generally accepted in the United States of America (“U.S. GAAP”); these financial statements appear on pages 69 – 72 of this Form 10-Q. That presentation, which is referred to as “reported basis,” provides the reader with an understanding of the Firm’s results that can be tracked consistently from year to year and enables a comparison of the Firm’s performance with other companies’ U.S. GAAP financial statements.

In addition to analyzing the Firm’s results on a reported basis, management reviews the Firm’s and the lines’ of business results on a “managed” basis, which is a non-GAAP financial measure. The Firm’s definition of managed basis starts with the reported U.S. GAAP results and includes certain reclassifications that are adjusted to exclude credit card securitizations and present revenue on a fully taxable equivalent (“FTE”) basis. These adjustments do not have any impact on Net income as reported by the lines of business or by the Firm as a whole. Effective January 1, 2006, JPMorgan Chase’s presentation of “operating earnings” that excluded merger costs and material litigation reserve charges and recoveries from reported results has been eliminated. These items had been previously excluded from operating results because they were deemed nonrecurring; they are now included in the Corporate segment’s results. In addition, trading-related net interest income is no longer reclassified from Net interest income to Principal transactions.

The presentation of CS’ results on a managed basis assumes that loans that have been securitized in accordance with SFAS 140 still remain on the balance sheet and that the earnings on the securitized loans should be classified in the same manner as the earnings on retained loans recorded on the balance sheet. JPMorgan Chase uses the managed basis to evaluate the credit performance and overall financial performance of CS’ entire managed credit card portfolio as operations are funded, and decisions are made about allocating resources such as employees and capital, based upon managed financial information. In addition, the same underwriting standards and ongoing risk monitoring are used for both loans on the balance sheet and securitized loans. Although securitizations result in the sale of credit card receivables to a trust, JPMorgan Chase retains the ongoing customer relationships as the customers may continue to use their credit cards; accordingly, the customer’s credit performance will affect both the securitized loans and the retained loans on the balance sheet. JPMorgan Chase believes managed basis information is useful to investors to enable them to understand the credit risks within the loans reported on the balance sheet as well as the Firm’s retained interests in the securitizations. For a reconciliation of reported to managed basis of CS’ results, see page 31 of this Form 10-Q. For information regarding the securitization process, see Note 1 on page 91 of JPMorgan Chase’s 2005 Annual Report. For information regarding loans and residual interests sold and securitized, see Note 13 on pages 83 – 86 of this Form 10-Q.

Total net revenue for each of the business segments and the Firm is presented on an FTE basis. Accordingly, revenue from tax-exempt securities and investments that receive tax credits is presented in the managed results on a basis comparable to taxable securities and investments. This non-GAAP financial measure allows management to assess the comparability of revenues arising from both taxable and tax-exempt sources. The corresponding income tax impact related to these items is recorded within Income tax expense.

Management uses certain non-GAAP financial measures at the segment level because it believes these non-GAAP financial measures provide information to investors in understanding the underlying operational performance and trends of the particular business segment and facilitate a comparison of the business segment with the performance of competitors.

The following summary table provides a reconciliation from the Firm’s reported U.S. GAAP results to managed basis:

Three months ended September 30,		2006
		Reported				Credit				Tax-equivalent				Managed
(in millions, except per share and ratio data)		results				card(c)				adjustments				basis
Revenue
Investment banking fees		$	1,416			$	—			$	—			$	1,416
Principal transactions			2,636				—				—				2,636
Lending & deposit related fees			867				—				—				867
Asset management, administration and commissions			2,798				—				—				2,798
Securities gains			40				—				—				40
Mortgage fees and related income			62				—				—				62
Credit card income			1,567				(721	)			—				846
Other income			635				—				165				800
Noninterest revenue			10,021				(721	)			165				9,465
Net interest income			5,379				1,328				57				6,764
Total net revenue			15,400				607				222				16,229
Provision for credit losses			812				607				—				1,419
Noninterest expense			9,651				—				—				9,651
Income from continuing operations before income tax expense			4,937				—				222				5,159
Income tax expense			1,705				—				222				1,927
Income from continuing operations (after-tax)			3,232				—				—				3,232
Income from discontinued operations (after-tax)			65				—				—				65
Net income		$	3,297			$	—			$	—			$	3,297
Net income – diluted earnings per share		$	0.92			$	—			$	—			$	0.92
Return on common equity			12	%			—	%			—	%			12	%
Return on equity less goodwill(a)			19				—				—				19
Return on assets(b)			1.00			NM				NM					0.95
Overhead ratio			63			NM				NM					59

Three months ended September 30,		2005
		Reported				Credit				Tax-equivalent				Managed
(in millions, except per share and ratio data)		results				card(c)				adjustments				basis
Revenue
Investment banking fees		$	989			$	—			$	—			$	989
Principal transactions			2,886				—				—				2,886
Lending & deposit related fees			865				—				—				865
Asset management, administration and commissions			2,500				—				—				2,500
Securities gains (losses)			(44	)			—				—				(44	)
Mortgage fees and related income			201				—				—				201
Credit card income			1,855				(733	)			—				1,122
Other income			230				—				155				385
Noninterest revenue			9,482				(733	)			155				8,904
Net interest income			4,783				1,600				67				6,450
Total net revenue			14,265				867				222				15,354
Provision for credit losses			1,245				867				—				2,112
Noninterest expense			9,359				—				—				9,359
Income from continuing operations before income tax expense			3,661				—				222				3,883
Income tax expense			1,192				—				222				1,414
Income from continuing operations (after-tax)			2,469				—				—				2,469
Income from discontinued operations (after-tax)			58				—				—				58
Net income		$	2,527			$	—			$	—			$	2,527
Net income – diluted earnings per share		$	0.71			$	—			$	—			$	0.71
Return on common equity			9	%			—	%			—	%			9	%
Return on equity less goodwill(a)			16				—				—				16
Return on assets(b)			0.84			NM				NM					0.79
Overhead ratio			66			NM				NM					61

Nine months ended September 30,		2006
		Reported				Credit				Tax-equivalent				Managed
(in millions, except per share and ratio data)		results				card(c)				adjustments				basis
Revenue
Investment banking fees		$	3,955			$	—			$	—			$	3,955
Principal transactions			7,866				—				—				7,866
Lending & deposit related fees			2,573				—				—				2,573
Asset management, administration and commissions			8,580				—				—				8,580
Securities gains (losses)			(578	)			—				—				(578	)
Mortgage fees and related income			516				—				—				516
Credit card income			5,268				(2,783	)			—				2,485
Other income			1,653				—				481				2,134
Noninterest revenue			29,833				(2,783	)			481				27,531
Net interest income			15,550				4,400				175				20,125
Total net revenue			45,383				1,617				656				47,656
Provision for credit losses			2,136				1,617				—				3,753
Noninterest expense			28,535				—				—				28,535
Income from continuing operations before income tax expense			14,712				—				656				15,368
Income tax expense			4,969				—				656				5,625
Income from continuing operations (after-tax)			9,743				—				—				9,743
Income from discontinued operations (after-tax)			175				—				—				175
Net income		$	9,918			$	—			$	—			$	9,918
Net income – diluted earnings per share		$	2.78			$	—			$	—			$	2.78
Return on common equity			12	%			—	%			—	%			12	%
Return on equity less goodwill(a)			20				—				—				20
Return on assets(b)			1.02			NM				NM					0.97
Overhead ratio			63			NM				NM					60

Nine months ended September 30,		2005
		Reported				Credit				Tax-equivalent				Managed
(in millions, except per share and ratio data)		results				card(c)				adjustments				basis
Revenue
Investment banking fees		$	2,943			$	—			$	—			$	2,943
Principal transactions			6,246				—				—				6,246
Lending & deposit related fees			2,536				—				—				2,536
Asset management, administration and commissions			7,286				—				—				7,286
Securities gains (losses)			(796	)			—				—				(796	)
Mortgage fees and related income			899				—				—				899
Credit card income			5,352				(2,276	)			—				3,076
Other income			923				—				413				1,336
Noninterest revenue			25,389				(2,276	)			413				23,526
Net interest income			14,877				4,990				212				20,079
Total net revenue			40,266				2,714				625				43,605
Provision for credit losses			2,259				2,714				—				4,973
Noninterest expense			29,996				—				—				29,996
Income from continuing operations before income tax expense			8,011				—				625				8,636
Income tax expense			2,399				—				625				3,024
Income from continuing operations (after-tax)			5,612				—				—				5,612
Income from discontinued operations (after-tax)			173				—				—				173
Net income		$	5,785			$	—			$	—			$	5,785
Net income – diluted earnings per share		$	1.62			$	—			$	—			$	1.62
Return on common equity			7	%			—	%			—	%			7	%
Return on equity less goodwill(a)			12				—				—				12
Return on assets(b)			0.66			NM				NM					0.62
Overhead ratio			74			NM				NM					69

(a)		Represents net income applicable to common stock divided by total average common equity (net of goodwill). The Firm uses Return on equity less goodwill, a non-GAAP financial measure, to evaluate the operating performance of the Firm and to facilitate comparisons to competitors.
(b)		Return on assets on reported results represents Net income (annualized) divided by Total average assets. Return on assets on a managed basis represents Net income (annualized) divided by Total average managed assets, which includes average securitized credit card receivables.
(c)		The impact of credit card securitizations affects CS. See pages 28 – 31 of this Form 10-Q for further information.

Three months ended September 30,		2006												2005
(in millions)		Reported				Securitized				Managed				Reported				Securitized				Managed
Loans – Period-end		$	463,544			$	65,245			$	528,789			$	420,504			$	69,095			$	489,599
Total assets – average			1,309,139				62,971				1,372,110				1,196,045				67,021				1,263,066

Nine months ended September 30,		2006												2005
(in millions)		Reported				Securitized				Managed				Reported				Securitized				Managed
Loans – Period-end		$	463,544			$	65,245			$	528,789			$	420,504			$	69,095			$	489,599
Total assets – average			1,297,344				65,797				1,363,141				1,178,420				66,917				1,245,337

 

BUSINESS SEGMENT RESULTS

The Firm is managed on a line-of-business basis. The business segment financial results presented reflect the organization of JPMorgan Chase. Currently, there are six major reportable business segments: the Investment Bank, Retail Financial Services, Card Services, Commercial Banking, Treasury & Securities Services and Asset & Wealth Management, as well as a Corporate segment. The segments are based upon the products and services provided, or the type of customer served, and they reflect the manner in which financial information is currently evaluated by management. Results of these lines of business are presented on a managed basis. For a further discussion of Business segment results, see pages 34 – 35 of JPMorgan Chase’s 2005 Annual Report.

Description of business segment reporting methodology
Results of the business segments are intended to reflect each segment as if it were essentially a stand-alone business. The management reporting process that derives these results generally allocates income and expense using market-based methodologies. For a further discussion of those methodologies, see page 35 of JPMorgan Chase’s 2005 Annual Report. The Firm continues to assess the assumptions, methodologies and reporting reclassifications used for segment reporting, and further refinements may be implemented in future periods.

Business segment financial disclosures
Effective January 1, 2006, JPMorgan Chase modified certain of its financial disclosures to reflect more closely the manner in which the Firm’s business segments are managed and to provide improved comparability with competitors. These financial disclosure revisions are reflected in this Form 10-Q, and the financial information for prior periods has been revised to reflect the disclosure changes as if they had been in effect throughout 2005. A summary of the changes are described below.

Reported versus Operating Basis Changes
The presentation of operating earnings that excluded merger costs and material litigation reserve charges and recoveries from reported results has been eliminated. These items had been excluded previously from operating results because they were deemed nonrecurring; they are now included in the Corporate business segment’s results. In addition, trading-related net interest income is no longer reclassified from Net interest income to Principal transactions. As a result of these changes, effective January 1, 2006, management has discontinued reporting on an “operating” basis.

Business Segment Disclosures
RFS has been reorganized into the following business segments: Regional Banking, Mortgage Banking and Auto Finance. For more detailed information on the RFS reorganization, see the RFS business segment discussion on page 21 of this Form 10-Q.

TSS firmwide disclosures have been adjusted to reflect a refined set of TSS products and a revised allocation of liability balances and lending-related revenue related to certain client transfers.

Various wholesale banking clients, together with the related revenue and expense, have been transferred among CB, the IB and TSS. In the first quarter of 2006, the primary client transfer was corporate mortgage finance from CB to the IB.

CB’s business metrics now include gross investment banking revenue, which reflects revenue recorded in both CB and the IB.

Corporate’s disclosure has been expanded to include Total net revenue and Net income for Treasury and Other Corporate segments.

Certain expenses that are managed by the business segments, but that had been previously recorded in Corporate and allocated to the businesses, are now recorded as direct expenses within the businesses.

Capital allocation changes
Effective January 1, 2006, the Firm refined its methodology for allocating capital to the business segments. As prior periods have not been revised to reflect the new capital allocations, certain business metrics, such as ROE, are not comparable to the current presentation. For a further discussion of the changes, see Capital Management – Line of business equity on pages 46 – 47 of this Form 10-Q.

Discontinued operations
As a result of the transaction with The Bank of New York, selected corporate trust businesses have been transferred from TSS to the Corporate segment and reported in discontinued operations for all periods reported.

Segment Results – Managed Basis
The following table summarizes the business segment results for the periods indicated.

Three months ended
September 30,		Total net revenue												Noninterest expense												Net income (loss)												Return on equity
(in millions, except ratios)		2006				2005				Change				2006				2005				Change				2006				2005				Change				2006				2005
Investment Bank		$	4,673			$	4,471				5	%		$	3,101			$	2,877				8	%		$	976			$	1,068				(9	)%			18	%			21	%
Retail Financial Services			3,555				3,590				(1	)			2,139				2,156				(1	)			746				656				14				21				19
Card Services			3,646				3,980				(8	)			1,253				1,286				(3	)			711				541				31				20				18
Commercial Banking			933				877				6				500				458				9				231				284				(19	)			17				33
Treasury & Securities Services			1,499				1,380				9				1,064				999				7				256				222				15				46				58
Asset & Wealth Management			1,636				1,449				13				1,115				976				14				346				315				10				39				52
Corporate(a)			287				(393	)		NM					479				607				(21	)			31				(559	)		NM				NM				NM
Total(a)		$	16,229			$	15,354				6	%		$	9,651			$	9,359				3	%		$	3,297			$	2,527				30	%			12	%			9	%

Nine months ended
September 30,		Total net revenue												Noninterest expense												Net income (loss)												Return on equity
(in millions, except ratios)		2006				2005				Change				2006				2005				Change				2006				2005				Change				2006				2005
Investment Bank		$	13,556			$	11,418				19	%		$	9,238			$	7,585				22	%		$	2,665			$	3,007				(11	)%			17	%			20	%
Retail Financial Services			11,097				11,236				(1	)			6,636				6,444				3				2,495				2,624				(5	)			24				26
Card Services			10,995				11,645				(6	)			3,745				3,982				(6	)			2,487				1,605				55				24				18
Commercial Banking			2,782				2,572				8				1,494				1,381				8				754				672				12				18				26
Treasury & Securities Services			4,572				4,103				11				3,162				3,053				4				834				609				37				48				53
Asset & Wealth Management			4,840				4,153				17				3,294				2,827				17				1,002				874				15				38				49
Corporate(a)			(186	)			(1,522	)			88				966				4,724				(80	)			(319	)			(3,606	)			91			NM				NM
Total(a)		$	47,656			$	43,605				9	%		$	28,535			$	29,996				(5	)%		$	9,918			$	5,785				71	%			12	%			7	%

(a)		Net income includes Income from discontinued operations (after-tax) of $65 million and $58 million for the three months ended September 30, 2006 and 2005, respectively, and $175 million and $173 million for the nine months ended September 30, 2006 and 2005, respectively.

For a discussion of the business profile of the IB, see pages 36–38 of JPMorgan Chase’s 2005 Annual Report.

Selected income statement data		Three months ended September 30,												Nine months ended September 30,
(in millions, except ratios)		2006				2005				Change				2006				2005				Change
Revenue
Investment banking fees		$	1,419			$	985				44	%		$	3,957			$	2,935				35	%
Principal transactions			2,449				2,594				(6	)			6,869				4,896				40
Lending & deposit related fees			127				148				(14	)			398				451				(12	)
Asset management, administration and commissions			468				445				5				1,570				1,267				24
All other income			159				40				298				437				419				4
Noninterest revenue			4,622				4,212				10				13,231				9,968				33
Net interest income			51				259				(80	)			325				1,450				(78	)
Total net revenue(a)			4,673				4,471				5				13,556				11,418				19
Provision for credit losses			7				(46	)			NM				128				(755	)			NM
Credit reimbursement from TSS(b)			30				38				(21	)			90				114				(21	)
Noninterest expense
Compensation expense			2,093				1,885				11				6,310				4,696				34
Noncompensation expense			1,008				992				2				2,928				2,889				1
Total noninterest expense			3,101				2,877				8				9,238				7,585				22
Income before income tax expense			1,595				1,678				(5	)			4,280				4,702				(9	)
Income tax expense			619				610				1				1,615				1,695				(5	)
Net income		$	976			$	1,068				(9	)		$	2,665			$	3,007				(11	)
Financial ratios
ROE			18	%			21	%							17	%			20	%
ROA			0.62				0.69								0.55				0.68
Overhead ratio			66				64								68				66
Compensation expense as % of total net revenue(c)			44				42								44				41
Revenue by business
Investment banking fees:
Advisory		$	436			$	300				45			$	1,177			$	922				28
Equity underwriting			275				210				31				851				553				54
Debt underwriting			708				475				49				1,929				1,460				32
Total investment banking fees			1,419				985				44				3,957				2,935				35
Fixed income markets			2,370				2,441				(3	)			6,400				6,165				4
Equity markets			612				713				(14	)			2,355				1,341				76
Credit portfolio			272				332				(18	)			844				977				(14	)
Total net revenue		$	4,673			$	4,471				5			$	13,556			$	11,418				19
Revenue by region
Americas		$	2,700			$	2,700				—			$	6,777			$	6,774				—
Europe/Middle East/Africa			1,678				1,272				32				5,472				3,361				63
Asia/Pacific			295				499				(41	)			1,307				1,283				2
Total net revenue		$	4,673			$	4,471				5			$	13,556			$	11,418				19