JPMorgan Chase this weekend announced an agreement to acquire The Bank of New York Company’s consumer, small-business and middle-market banking businesses in exchange for JPMorgan Chase’s corporate trust business plus a cash payment of $150 million. The Bank of New York businesses being acquired are valued at a premium of $2.30 billion; the JPMorgan Chase corporate trust business being sold is valued at a premium of $2.15 billion. JPMorgan Chase may also make a future payment to The Bank of New York of up to $50 million tied to certain new account openings at Chase.

The Bank of New York business, which includes 338 bank branches serving 600,000 households and over 100,000 businesses, will increase Chase’s core consumer, small-business and middle-market banking businesses in the highly attractive New York City/Tri-State market.

The transaction has been approved by both companies’ boards of directors and is subject to regulatory approvals. It is expected to close in late third quarter or the fourth quarter of 2006.

With the addition of The Bank of New York’s branches, Chase will expand the largest branch network in New York City, will create the largest branch presence both on Long Island and in New York City’s northern suburbs, and will triple its bank locations in New Jersey. In total, the combined business will have more than 750 branch locations and 2,000 ATMs in the New York City/Tri-State area alone.

In the transaction, Chase will also receive consumer, small-business and middle-market loan balances of about $8 billion. And Chase will gain about 2,000 Bank of New York middle-market clients, who will gain access to a full suite of cash management, trade finance and commercial banking services.

JPMorgan Chase CEO Jamie Dimon said, “This is a great addition to our New York City/Tri-State franchise. We fully intend to remain the winner here.” He added, “The transaction reflects our disciplined strategy of investing capital in core businesses where we can leverage scale and expertise for competitive advantage. In addition to being a great strategic fit, the deal is compelling financially.”

Charlie Scharf, head of Chase’s Retail business, added, “This unique opportunity creates an unparalleled platform to deliver a wider array of products to customers in the region. The fit is terrific, and it would have taken many years for either of us alone to forge such a powerful network. The Bank of New York branches bring us a proud history, dedicated employees, loyal customers, and terrific locations, especially in the commuter suburbs. Now, we will begin planning the integration of the new business, which is a top priority.”

Commenting on the sale of the corporate trust business, Dimon said, “We are proud of the outstanding corporate trust business we’ve built, and we are confident it will thrive as part of The Bank of New York, which will continue to invest in it as a core business.”

Dimon affirmed JPMorgan Chase’s commitment to its other processing and securities services businesses: “Our securities processing and cash management franchises are an important and profitable part of our company. These core businesses have meaningful links with our other main business lines and are critical to servicing client needs across the firm. We will continue to make strategic investments to support their technology, product innovation and best-in-class client service.”

Heidi Miller, head of the firm’s Treasury & Securities Services business, added, “We will now concentrate even more on the growth of our securities processing franchise and its connectivity with our treasury services businesses as we aim to be the global provider of choice to all sectors of the market. Our platform, people, product functionality and firmwide partnerships will enable us to achieve this goal.”

Customers of both companies should continue banking as usual. Chase expects to convert The Bank of New York’s consumer, small-business and middle-market banking businesses in the New York City/Tri-State area to the Chase brand and technology platform in 2007. Bank of New York customers should be able to access Chase’s extensive ATM network in late 2006.

JPMorgan Chase expects to recognize an after-tax gain on the sale of the corporate trust business estimated at approximately $600 million to $700 million upon the deal’s closing.

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