e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
March 31, 2011
Commission file number 1-5805
JPMORGAN CHASE & CO.
(Exact name of registrant as specified in its charter)
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Delaware
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13-2624428 |
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(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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270 Park Avenue, New York, New York
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10017 |
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(Address of principal executive offices)
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(Zip Code) |
(Registrants telephone number, including area code) (212) 270-6000
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.
þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer þ |
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Accelerated filer o |
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Non-accelerated filer o |
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
o Yes þ No
Number
of shares of common stock outstanding as of April 30, 2011:
3,973,684,787
FORM 10-Q
TABLE OF CONTENTS
2
JPMORGAN CHASE & CO.
CONSOLIDATED FINANCIAL HIGHLIGHTS
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(unaudited) |
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(in millions, except per share, headcount and ratio data) |
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As of or for the period ended, |
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1Q11 |
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4Q10 |
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3Q10 |
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2Q10 |
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1Q10 |
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Selected income statement data |
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Total net revenue |
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$ |
25,221 |
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$ |
26,098 |
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$ |
23,824 |
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$ |
25,101 |
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$ |
27,671 |
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Total noninterest expense |
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15,995 |
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16,043 |
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14,398 |
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14,631 |
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16,124 |
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Pre-provision profit(a) |
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9,226 |
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10,055 |
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9,426 |
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10,470 |
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11,547 |
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Provision for credit losses |
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1,169 |
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3,043 |
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3,223 |
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3,363 |
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7,010 |
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Income before income tax expense |
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8,057 |
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7,012 |
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6,203 |
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7,107 |
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4,537 |
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Income tax expense |
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2,502 |
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2,181 |
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1,785 |
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2,312 |
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1,211 |
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Net income |
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$ |
5,555 |
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$ |
4,831 |
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$ |
4,418 |
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$ |
4,795 |
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$ |
3,326 |
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Per common share data |
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Net income per share: Basic |
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$ |
1.29 |
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$ |
1.13 |
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$ |
1.02 |
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$ |
1.10 |
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$ |
0.75 |
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Diluted |
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1.28 |
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1.12 |
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1.01 |
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1.09 |
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0.74 |
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Cash dividends declared per share |
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0.25 |
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0.05 |
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0.05 |
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0.05 |
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0.05 |
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Book value per share |
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43.34 |
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43.04 |
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42.29 |
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40.99 |
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39.38 |
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Common shares outstanding |
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Average: Basic |
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3,981.6 |
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3,917.0 |
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3,954.3 |
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3,983.5 |
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3,970.5 |
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Diluted |
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4,014.1 |
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3,935.2 |
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3,971.9 |
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4,005.6 |
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3,994.7 |
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Common shares at period-end |
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3,986.6 |
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3,910.3 |
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3,925.8 |
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3,975.8 |
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3,975.4 |
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Share price(b) |
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High |
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$ |
48.36 |
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$ |
43.12 |
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$ |
41.70 |
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$ |
48.20 |
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$ |
46.05 |
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Low |
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42.65 |
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36.21 |
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35.16 |
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36.51 |
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37.03 |
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Close |
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46.10 |
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42.42 |
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38.06 |
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36.61 |
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44.75 |
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Market capitalization |
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183,783 |
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165,875 |
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149,418 |
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145,554 |
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177,897 |
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Selected ratios |
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Return on common equity (ROE) |
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13 |
% |
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11 |
% |
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10 |
% |
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12 |
% |
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8 |
% |
Return on tangible common equity (ROTCE) |
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18 |
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16 |
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15 |
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17 |
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12 |
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Return on assets (ROA) |
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1.07 |
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0.92 |
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0.86 |
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0.94 |
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0.66 |
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Overhead ratio |
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63 |
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61 |
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60 |
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58 |
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58 |
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Deposits-to-loans ratio |
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145 |
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134 |
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131 |
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127 |
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130 |
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Tier 1 capital ratio |
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12.3 |
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12.1 |
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11.9 |
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12.1 |
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11.5 |
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Total capital ratio |
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15.6 |
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15.5 |
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15.4 |
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15.8 |
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15.1 |
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Tier 1 leverage ratio |
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7.2 |
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7.0 |
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7.1 |
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6.9 |
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6.6 |
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Tier 1 common capital ratio(c) |
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10.0 |
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9.8 |
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9.5 |
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9.6 |
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9.1 |
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Selected balance sheet data (period-end) |
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Trading assets |
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$ |
501,148 |
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$ |
489,892 |
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$ |
475,515 |
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$ |
397,508 |
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$ |
426,128 |
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Securities |
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334,800 |
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316,336 |
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340,168 |
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312,013 |
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344,376 |
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Loans |
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685,996 |
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692,927 |
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690,531 |
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699,483 |
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713,799 |
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Total assets |
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2,198,161 |
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2,117,605 |
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2,141,595 |
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2,014,019 |
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2,135,796 |
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Deposits |
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995,829 |
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930,369 |
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903,138 |
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887,805 |
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925,303 |
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Long-term debt(d) |
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269,616 |
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270,653 |
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271,495 |
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260,442 |
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278,685 |
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Common stockholders equity |
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172,798 |
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168,306 |
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166,030 |
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162,968 |
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156,569 |
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Total stockholders equity |
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180,598 |
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176,106 |
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173,830 |
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171,120 |
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164,721 |
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Headcount |
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242,929 |
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239,831 |
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236,810 |
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232,939 |
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226,623 |
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Credit quality metrics |
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Allowance for credit losses |
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$ |
30,438 |
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$ |
32,983 |
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$ |
35,034 |
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$ |
36,748 |
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$ |
39,126 |
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Allowance for loan losses to total retained loans |
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4.40 |
% |
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4.71 |
% |
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4.97 |
% |
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5.15 |
% |
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5.40 |
% |
Allowance for loan losses to retained loans
excluding purchased credit-impaired
loans(e) |
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4.10 |
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4.46 |
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5.12 |
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5.34 |
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5.64 |
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Nonperforming assets |
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$ |
14,986 |
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$ |
16,557 |
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$ |
17,656 |
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$ |
18,156 |
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$ |
19,019 |
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Net charge-offs(f) |
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3,720 |
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5,104 |
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4,945 |
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5,714 |
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7,910 |
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Net charge-off rate(f) |
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2.22 |
% |
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2.95 |
% |
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2.84 |
% |
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3.28 |
% |
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4.46 |
% |
Wholesale net charge-off rate |
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0.30 |
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0.49 |
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0.49 |
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0.44 |
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1.84 |
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Consumer net charge-off rate(f) |
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3.18 |
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4.12 |
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3.90 |
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4.49 |
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5.56 |
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(a) |
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Pre-provision profit is total net revenue less noninterest expense. The Firm believes
that this financial measure is useful in assessing the ability of a lending institution to
generate income in excess of its provision for credit losses. |
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(b) |
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Share prices shown for JPMorgan Chases common stock are from the New York Stock Exchange.
JPMorgan Chases common stock is also listed and traded on the London Stock Exchange and the
Tokyo Stock Exchange. |
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(c) |
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The Firm uses Tier 1 common capital (Tier 1 common) along with the other capital measures
to assess and monitor its capital position. The Tier 1 common capital ratio (Tier 1 common
ratio) is Tier 1 common divided by risk-weighted assets. For further discussion, see
Regulatory capital on pages 4951 of this Form 10-Q. |
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(d) |
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Effective January 1, 2011, the long-term portion of advances from Federal Home Loan Banks
(FHLBs) was reclassified from other borrowed funds to long-term debt. Prior periods have
been revised to conform with the current presentation. |
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(e) |
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Excludes the impact of home lending purchased credit-impaired (PCI) loans. For further
discussion, see Allowance for credit losses on pages 7981 of this Form 10-Q. |
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(f) |
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Net charge-offs and net charge-off rates for the fourth quarter of 2010 include the effect of
$632 million of charge-offs related to the estimated net realizable value of the collateral
underlying delinquent residential home loans. Because these losses were previously recognized
in the provision and allowance for loan losses, this adjustment had no impact on the Firms
net income. |
3
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section of the Form 10-Q provides managements discussion and analysis (MD&A) of the
financial condition and results of operations of JPMorgan Chase & Co. (JPMorgan Chase or the
Firm). See the Glossary of terms on pages 174177 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 on
the current beliefs and expectations of JPMorgan Chases management and are subject to significant
risks and uncertainties. These risks and uncertainties could cause the Firms actual results to
differ materially from those set forth in such forward-looking statements. For a discussion of such
risks and uncertainties, see Forward-looking Statements on pages
180181 and Part I, Item 1A, Risk Factors, on pages 512 of JPMorgan
Chases Annual Report on Form 10-K for the year ended December 31, 2010, filed with the U.S.
Securities and Exchange Commission (2010 Annual Report or 2010 Form 10-K), to which reference
is hereby made.
INTRODUCTION
JPMorgan Chase & Co., 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 of America (U.S.), with $2.2 trillion in assets, $180.6 billion in stockholders equity
and operations in more than 60 countries as of March 31, 2011. The Firm is a leader in investment
banking, financial services for consumers and small business, commercial banking, financial
transaction processing, asset management and private equity. Under the J.P. Morgan and Chase
brands, the Firm serves millions of customers in the U.S. and many of the worlds most prominent
corporate, institutional and government clients.
JPMorgan Chases principal bank subsidiaries are JPMorgan Chase Bank, National Association
(JPMorgan Chase Bank, N.A.), a national bank with branches in 23 states in the U.S.; and Chase
Bank USA, National Association (Chase Bank USA, N.A.), a national bank that is the Firms credit
card issuing bank. JPMorgan Chases principal nonbank subsidiary is J.P. Morgan Securities LLC
(JPMorgan Securities), the Firms U.S. investment banking firm.
JPMorgan Chases activities are organized, for management reporting purposes, into six business
segments, as well as Corporate/Private Equity. The Firms wholesale businesses comprise the
Investment Bank, Commercial Banking, Treasury & Securities Services and Asset Management segments.
The Firms consumer businesses comprise the Retail Financial Services and Card Services segments. A
description of the Firms business segments, and the products and services they provide to their
respective client bases, follows.
Investment Bank
J.P. Morgan is one of the worlds leading investment banks, with deep client relationships and
broad product capabilities. The clients of the Investment Bank (IB) are corporations, financial
institutions, governments and institutional investors. The Firm offers 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,
market-making in cash securities and derivative instruments, prime brokerage, and research.
Retail Financial Services
Retail Financial Services (RFS) serves consumers and businesses through personal service at bank
branches and through ATMs, online banking and telephone banking, as well as through auto
dealerships and school financial-aid offices. Customers can use nearly 5,300 bank branches
(third-largest nationally) and more than 16,200 ATMs (second-largest nationally), as well as online
and mobile banking around the clock. More than 29,200 branch salespeople assist customers with
checking and savings accounts, mortgages, home equity and business loans, and investments across
the 23-state footprint from New York and Florida to California. Consumers also can obtain loans
through more than 16,300 auto dealerships and 1,300 schools and universities nationwide.
Card Services
Card Services (CS) is one of the nations largest credit card issuers, with over $128 billion in
loans and over 91 million open accounts. In the three months ended March 31, 2011, customers used
Chase cards to meet over $77 billion of their spending needs. Through its merchant acquiring
business, Chase Paymentech Solutions, CS is a global leader in payment processing and merchant
acquiring.
4
Commercial Banking
Commercial Banking (CB) delivers extensive industry knowledge, local expertise and dedicated
service to nearly 24,000 clients nationally, including corporations, municipalities, financial
institutions and not-for-profit entities with annual revenue generally ranging from $10 million to
$2 billion, and nearly 35,000 real estate investors/owners. CB partners with the Firms other
businesses to provide comprehensive solutions, including lending, treasury services, investment
banking and asset management, to meet its clients domestic and international financial needs.
Treasury & Securities Services
Treasury & Securities Services (TSS) is a global leader in transaction, investment and
information services. TSS is one of the worlds largest cash management providers and a leading
global custodian. Treasury Services (TS) provides cash management, trade, wholesale card and
liquidity products and services to small- and mid-sized companies, multinational corporations,
financial institutions and government entities. TS partners with IB, CB, RFS and Asset Management
businesses to serve clients firmwide. Certain TS revenue is included in other segments results.
Worldwide Securities Services holds, values, clears and services securities, cash and alternative
investments for investors and broker-dealers, and manages depositary receipt programs globally.
Asset Management
Asset Management (AM), with assets under supervision of $1.9 trillion, is a global leader in
investment and wealth management. AM clients include institutions, retail investors and
high-net-worth individuals in every major market throughout the world. AM offers global investment
management in equities, fixed income, real estate, hedge funds, private equity and liquidity
products, including money-market instruments and bank deposits. AM also provides trust and estate,
banking and brokerage services to high-net-worth clients, and retirement services for corporations
and individuals. The majority of AMs client assets are in actively managed portfolios.
5
EXECUTIVE OVERVIEW
This executive overview of MD&A highlights selected information and may not contain all of the
information that is important to readers of this Form 10-Q. For a complete description of events,
trends and uncertainties, as well as the capital, liquidity, 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.
Economic environment
The U.S. economic recovery continued in the first quarter of 2011 as the labor market appeared to
strengthen, even though disruptive winter weather appeared to slow the economys momentum. Despite
growing confidence that the U.S. and global economic recovery remains on track, new threats to the
global economy emerged that could disrupt activity, at least for a short while. The earthquake and
tsunami in Japan represented a significant setback to that countrys important economy and probably
disrupted activity elsewhere as well. Furthermore, a surge in oil prices in the wake of political
unrest in the Middle East threatened to slow global demand. Concerns about inflation, driven by
rising commodity prices, including the impact of widespread crop destruction in 2010 on food prices
around the world, resulted in varying actions being taken by several central banks.
The pace
of growth in the U.S. economy, which has been unusually slow for a recovery, has been hampered by the depressed housing market. Growth is
likely to remain moderate as a result of the planned phase-out of the 2008 fiscal stimulus
initiative and additional spending cuts agreed to as part of the
final 2011 federal budget plan.
The Federal Reserve maintained its accommodative stance in the first quarter of 2011, holding the
target range for the federal funds rate steady at zero to one-quarter percent, and continued to
indicate that economic conditions were likely to warrant a low federal funds rate for an extended
period. To promote a stronger pace of economic recovery, the Federal Reserve also decided to
continue expanding its holdings of securities as announced in the fourth quarter of 2010. In
particular, the Federal Reserve is maintaining its existing policy of reinvesting principal
payments from its securities holdings and intends to purchase $600 billion of longer-term Treasury
securities by the end of the second quarter of 2011. The Federal Reserve downplayed recent
commodity pressures as transitory, while noting that it would be monitoring inflation developments
carefully.
Financial performance of JPMorgan Chase
|
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|
Three months ended March 31, |
(in millions, except per share data and ratios) |
|
2011 |
|
2010 |
|
Change |
|
Selected income statement data |
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
$ |
25,221 |
|
|
$ |
27,671 |
|
|
|
(9 |
)% |
Total noninterest expense |
|
|
15,995 |
|
|
|
16,124 |
|
|
|
(1 |
) |
Pre-provision profit |
|
|
9,226 |
|
|
|
11,547 |
|
|
|
(20 |
) |
Provision for credit losses |
|
|
1,169 |
|
|
|
7,010 |
|
|
|
(83 |
) |
Net income |
|
|
5,555 |
|
|
|
3,326 |
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
1.28 |
|
|
|
0.74 |
|
|
|
73 |
|
Return on common equity |
|
|
13 |
% |
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital |
|
|
12.3 |
|
|
|
11.5 |
|
|
|
|
|
Tier 1 common |
|
|
10.0 |
|
|
|
9.1 |
|
|
|
|
|
|
Business overview
JPMorgan Chase reported first-quarter 2011 net income of $5.6 billion, or $1.28 per share, on net
revenue of $25.2 billion. Net income was up 67%, compared with net income of $3.3 billion, or $0.74
per share, in the first quarter of 2010. Return on common equity for the quarter was 13%, compared
with 8% in the prior year. Current-quarter EPS included a $2.0 billion pretax ($0.29 per share
after-tax) benefit from a reduction in the allowance for loan losses for credit card loans; a $1.1
billion pretax ($0.16 per share after-tax) decrease in the fair value of the mortgage servicing
rights asset to reflect higher estimated servicing costs to enhance servicing processes (for additional information
regarding mortgage servicing rights, see Note 16 on pages 149152 of this Form 10-Q); and a $650
million pretax ($0.10 per share after-tax) expense for estimated costs of foreclosure-related
matters.
The increase in net income for the first quarter of 2011 was driven by a significantly lower
provision for credit losses, partially offset by lower net revenue. The decrease in the provision
for credit losses reflected improvements in both the consumer and wholesale provisions. The decline
in net revenue was due to lower net interest income, reflecting a decline in loan and securities
balances, lower mortgage fees and related income in Retail Financial Services and lower securities
gains in the Corporate/Private Equity segment. These declines were partially offset by higher
investment banking fees in the Investment Bank. Noninterest expense was flat compared with the
first quarter of 2010, as lower noncompensation expense offset higher compensation expense.
6
The Firms first-quarter results reflected a strong quarter across the Investment Bank
and solid performance from Card Services, Commercial Banking, Treasury & Securities Services and
Asset Management. Retail Financial Services demonstrated good underlying performance, as the
business continued to invest in building branches and adding to its
sales force. However, RFS
results were more than offset by very high expenses for mortgage-related issues, including the
provision for credit losses, the impact of increased servicing costs on the fair value of the
Firms mortgage servicing rights asset, expense for the estimated costs of foreclosure-related
matters, and mortgage repurchase losses.
The continued improvement in the credit environment during the first quarter of 2011 benefited all
of JPMorgan Chases businesses. Delinquency trends in the consumer businesses were favorable, and
lower estimated losses in the credit card portfolio resulted in a reduction in the allowance for
credit losses in CS. In addition, net charge-offs were lower in most businesses compared with the
prior year. Total firmwide credit reserves at March 31, 2011, were $30.4 billion, resulting in a
firmwide loan loss coverage ratio of 4.10% of total loans.
JPMorgan Chases balance sheet remained strong, ending the first quarter with a Tier 1 Common ratio
of 10.0%. In the quarter, the Firms Board of Directors increased the annual dividend to $1.00 per
share, up from $0.20 per share, and authorized a new $15 billion multi-year common stock repurchase
program, of which up to $8.0 billion of common stock repurchases is approved for 2011. The Firm
intends to operate its business with the objectives of maintaining a Basel I Tier 1 Common ratio of
at least 9.0% and meeting the Basel III requirements substantially ahead of time. Total
stockholders equity at March 31, 2011, was $180.6 billion.
The Firm provided credit to and raised capital for its clients of over $450 billion during the
quarter. These efforts have a meaningful impact on the communities in which the Firm operates.
JPMorgan Chase originated mortgages to over 180,000 people; provided credit cards to approximately
2.6 million people; lent or increased credit to over 7,500 small businesses; lent to over 500
not-for-profit and government entities, including states, municipalities, hospitals and
universities; extended or increased loan limits to approximately 1,500 middle-market companies; and
lent to or raised capital for more than 3,500 corporations. In addition, the Firm added 16,300
employees over the last twelve months, including more than 9,800 in the U.S. JPMorgan Chase remains
committed to helping homeowners and preventing foreclosures. Since the beginning of 2009, the Firm
has offered 1,098,000 trial modifications to struggling homeowners, with 324,000 modifications
completed.
The discussion that follows highlights the performance of each business segment compared with the
prior-year quarter and presents results on a managed basis. For more information about managed
basis, as well as other non-GAAP financial measures used by management to evaluate the performance
of each line of business, see pages 1315 of this Form 10-Q.
Investment Bank net income decreased slightly from the prior-year record, reflecting higher
noninterest expense, slightly lower net revenue and a lower benefit from the provision for credit
losses. Net revenue reflected higher investment banking fees, including record debt underwriting
fees, and strong client revenues in Fixed Income and Equity Markets. Credit Portfolio revenue was a
loss, primarily reflecting the negative net impact of credit-related valuation adjustments, largely offset
by net interest income and fees on retained loans. The provision for credit losses was a smaller
benefit in the first quarter of 2011 compared with the first quarter of 2010, reflecting a
reduction in the allowance for loan losses, primarily as a result of loan sales and net repayments.
Noninterest expense increased, driven by higher compensation expense, partially offset by lower
noncompensation expense.
Retail Financial Services reported a larger net loss compared with the prior year. Net revenue
decreased, driven by lower mortgage fees and related income, lower loan balances due to portfolio
runoff, and narrower loan spreads. The provision for credit losses decreased, as delinquency trends
and net charge-offs improved compared with the prior year. However, the current-quarter provision
continued to reflect elevated losses in the mortgage and home equity portfolios. Noninterest
expense increased, due largely to an expense taken for estimated costs of foreclosure-related
matters.
Card Services reported net income compared with a net loss in the prior year, as a lower provision
for credit losses was partially offset by lower net revenue. The decrease in net revenue was driven
by a decline in net interest income, reflecting lower average loan balances, the impact of
legislative changes and a decreased level of fees. These decreases were largely offset by a
decrease in revenue reversals associated with lower net charge-offs. The provision for credit
losses decreased from the prior year, reflecting lower net charge-offs and a reduction in the
allowance for loan losses due to lower estimated losses. Noninterest expense increased, due to the
transfer of the Commercial Card business to CS from TSS and higher
marketing expense. Sales volume, excluding the Commercial Card
portfolio, was $77.5 billion, an increase of 12% from the prior
year.
Commercial Banking net income increased, driven by a reduction in the provision for credit losses
and higher net revenue. The increase in net revenue was driven by growth in liability balances,
wider loan spreads, and growth in loan balances, partially offset by spread compression on
liability products. The provision for credit losses decreased from the
7
prior year, reflecting stabilization of the credit quality of the loan portfolio. Noninterest
expense increased, primarily reflecting higher headcount-related expense.
Treasury & Securities Services net income increased from the prior year, driven by higher net
revenue, largely offset by higher noninterest expense. Worldwide Securities Services net revenue
increased, driven by net inflows of assets under custody, higher market levels and higher net
interest income. Assets under custody were a record $16.6 trillion, an increase of 9% from the prior year.
Treasury Services net revenue increased as well, driven by higher net interest
income and higher trade loan volumes, offset by the transfer of the Commercial Card business to CS.
Noninterest expense for TSS increased, driven by continued investment in new product platforms,
primarily related to international expansion, partially offset by the transfer of the Commercial
Card business to CS.
Asset Management net income increased from the prior year, reflecting higher net revenue and a
lower provision for credit losses, largely offset by higher noninterest expense. The growth in net
revenue was driven by the effect of higher market levels, net inflows to products with higher
margins and higher loan originations, partially offset by lower performance fees. Assets under
supervision increased 12% from the prior year due to the effect of higher market levels and record
net inflows to long-term products, partially offset by net outflows in liquidity products.
Noninterest expense increased, largely resulting from an increase in headcount.
Corporate/Private Equity net income increased from the prior year, driven by significantly lower
noninterest expense. Noninterest expense in the first quarter of 2010 included significant
additions to litigation reserves. Private equity gains increased compared with the prior year,
while net interest income and securities gains decreased.
2011 Business outlook
The following forward-looking statements are based on the current beliefs and expectations of
JPMorgan Chases management and are subject to significant risks and uncertainties. As noted above,
these risks and uncertainties could cause the Firms actual results to differ materially from those
set forth in such forward-looking statements. See Forward-Looking Statements on pages 180-181 and
Risk Factors on page 181 of this Form 10-Q.
JPMorgan Chases outlook for the remainder of 2011 should be viewed against the backdrop of the
global and U.S. economies, financial markets activity, the geopolitical environment, the
competitive environment, client activity levels, and regulatory, litigation and legislative developments in the
U.S. and other countries where the Firm does business. Each of these linked factors will affect the
performance of the Firm and its lines of business. Economic and macroeconomic factors, such as
market and credit trends, customer behavior, client business strategies and competition, are all
expected to affect the Firms businesses.
In the Mortgage Banking, Auto & Other Consumer Lending business within RFS, if mortgage interest
rates remain at current levels or rise in the future, management anticipates that loan production
and margins will be negatively affected, resulting in lower revenue for this business
for full-year 2011 when compared with 2010. In addition, revenue in 2011 will continue to be negatively
affected by continued elevated levels of repurchases of mortgages previously sold, predominantly to
U.S. government-sponsored entities (GSEs). Management estimates that realized repurchase losses
could be approximately $1.2 billion on an annualized basis for the remainder of 2011.
The Firm
expects noninterest expense in Mortgage Banking, Auto & Other
Consumer Lending to remain at the elevated level seen in the first
quarter of 2011 (excluding the $650 million expense for
foreclosure-related matters) for the remainder of the year reflecting increased
servicing costs to enhance its mortgage servicing processes,
particularly loan modification and foreclosure procedures, and to comply with the Consent Orders
entered into with the banking regulators. (See Note 23 on pages 160169 of this Form 10-Q for
further information about the Consent Orders). In addition to increased
noninterest expense resulting from increased servicing costs, it is
also likely that the Firm will
incur fines and penalties as well as other costs in connection with
the settlement of the governmental
investigations related to its mortgage servicing procedures.
In the Real Estate Portfolios business within RFS, management believes that, based on the current
outlook for delinquencies and loss severity, total quarterly net charge-offs could be
approximately $1.2 billion for the remainder of 2011. Given current origination and production
levels, combined with managements current estimate of portfolio runoff levels, the residential
real estate portfolio is expected to decline by approximately 10% to 15% annually for the
foreseeable future. The annual reduction in the residential real estate portfolio is expected to
reduce net interest income in
8
each period, including a reduction of approximately $700 million for full-year 2011 from the 2010
level, assuming no changes in interest rates during the year. However, over time, the reduction in
net interest income is expected to be more than offset by an improvement in credit costs and lower
expenses. As the portfolio continues to run off, management anticipates that approximately $1.0
billion of capital may become available for redeployment each year, subject to the capital
requirements associated with the remaining portfolio.
In CS, management expects end-of-period outstandings for the Chase portfolio (excluding the
Washington Mutual and Commercial Card portfolios) to stabilize in the second half of 2011, and that
outstandings for such portfolio will be approximately $120 billion by the end of 2011, reflecting a
better mix of customers. However, if current high repayment rates persist,
outstandings could be lower than $120 billion by the end of
2011. Management estimates that the Washington Mutual portfolio could decline to
$10 billion by the end of 2011.
The annual impact of the portfolio runoff will result in an
approximately $1.4 billion reduction in net interest income from
the 2010 level. Net interest income for 2011 will also be reduced by
the full-year impact from implementation of the CARD Act. In addition, if higher repayment rates persist,
as noted above, net
interest income could also be negatively affected.
Net charge-off rates for both the Chase and Washington Mutual credit card portfolios are
anticipated to continue to improve. If current delinquency trends
continue, management anticipates the net charge-off rate
for the Chase portfolio (excluding the Washington Mutual and Commercial Card portfolios) could be
approximately 5.5% for the second quarter of 2011. Furthermore, if current delinquency trends
continue, management believes the net charge-off rate for the Chase portfolio could approach 4.5%
by the middle of 2012, which management believes represents the through-the-cycle net charge off
rate for this portfolio.
Management expectations related to future RFS and CS results depend on the health of the U.S.
economic environment. Although the positive economic data seen in early 2011 seemed to imply that
the U.S. economy is not falling back into recession, high unemployment rates and the difficult
housing market have been persistent. Further declines in U.S. housing prices and increases in the
unemployment rate remain possible; were this to occur, currently anticipated results for both RFS
and CS could be adversely affected.
In IB, TSS and AM, revenue will be affected by market levels, volumes and volatility, which will
influence client flows and assets under management, supervision and custody. In addition, IB and CB
results will be affected by the credit environment, which will influence levels of charge-offs,
repayments and provision for credit losses.
In Private Equity, within the Corporate/Private Equity segment, earnings will likely continue to be
volatile and be influenced by capital markets activity, market levels, the performance of the
broader economy and investment-specific issues. Corporates net interest income levels will
generally trend with the size and duration of the investment securities portfolio. Corporate net
income, excluding Private Equity, and excluding material litigation expense and significant
nonrecurring items, if any, is anticipated to trend toward approximately $300 million per quarter.
Furthermore, continued repositioning of the investment securities portfolio in Corporate, changes
in the mix of loans within the consumer loan portfolio and other factors could result in modest
downward pressure on the Firms net interest margin in the second quarter of 2011.
The Firm faces litigation in its various roles as issuer and/or underwriter in mortgage-backed
securities (MBS) offerings, primarily related to offerings involving third parties other
than the GSEs. The Firm separately evaluates its exposure to such litigation in establishing its
litigation reserves. It is possible
that these matters will take a number of years to resolve; their
ultimate resolution is inherently uncertain and reserves for such
litigation matters may need to be increased in the future.
Regarding regulatory reform, JPMorgan Chase intends to continue to work with its regulators as they
proceed with the extensive rulemaking required to implement financial reform. The Firm will
continue to devote substantial resources to achieving implementation of regulatory reforms to meet
all the new rules and regulations, both in letter and spirit. The Firm expects to make numerous
changes in its business as it implements regulatory reforms in ways that meet the needs and
expectations of its customers. In February 2011, the FDIC issued, pursuant to the Dodd-Frank Act, a
final rule
9
changing its methodology for calculating the assessment rate. Under the new rule, the assessment
base changes from domestic deposits to average consolidated total assets less average tangible
equity. These changes became effective on April 1, 2011, and, based on the Firms understanding of
the final rule, are expected to result in an aggregate annualized increase of approximately $500
million in the assessments that the Firms bank subsidiaries pay to the deposit insurance fund.
Management and the Firms Board of Directors continually evaluate ways to deploy the Firms strong
capital base in order to enhance shareholder value. Such alternatives could include the repurchase
of common stock, increasing the common stock dividend and pursuing alternative investment
opportunities. During the first quarter of 2011, the Firm increased its quarterly dividend to $0.25
per share, an increase of $0.20 per share from the prior-quarter level. The Firm expects to return
to a payout ratio of approximately 30% of normalized earnings over time.
In addition, the Board authorized a
new $15 billion, multi-year repurchase program
for its common stock, of
which up to $8.0 billion is approved for 2011. The Firm expects to utilize the repurchase program to, at a minimum, essentially repurchase
the same amount of shares that it issues for employee stock-based incentive awards. Beyond this,
the Firm intends to repurchase common stock only when it is generating capital in excess of what is needed
to fund its organic growth and when, in managements judgment, such repurchases provide excellent value to the
Firms existing shareholders. Management and the Board will continue to assess and make decisions
regarding alternatives for deploying capital, as appropriate, over the course of the year. Any
planned future dividend increases over the current level, or planned
use of the repurchase program over the repurchases approved for 2011, will be reviewed by the Firm with its banking
regulators before taking action.
10
CONSOLIDATED RESULTS OF OPERATIONS
The following section provides a comparative discussion of JPMorgan Chases Consolidated
Results of Operations on a reported basis for the three months ended March 31, 2011 and 2010.
Factors that relate primarily to a single business segment are discussed in more detail within that
business segment. For a discussion of the Critical Accounting Estimates Used by the Firm that
affect the Consolidated Results of Operations, see pages 8689 of this Form 10-Q and pages
149154 of JPMorgan Chases 2010 Annual Report.
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
(in millions) |
|
2011 |
|
2010 |
|
Change |
|
Investment banking fees |
|
$ |
1,793 |
|
|
$ |
1,461 |
|
|
|
23 |
% |
Principal transactions |
|
|
4,745 |
|
|
|
4,548 |
|
|
|
4 |
|
Lending- and deposit-related fees |
|
|
1,546 |
|
|
|
1,646 |
|
|
|
(6 |
) |
Asset management, administration and commissions |
|
|
3,606 |
|
|
|
3,265 |
|
|
|
10 |
|
Securities gains |
|
|
102 |
|
|
|
610 |
|
|
|
(83 |
) |
Mortgage fees and related income |
|
|
(487 |
) |
|
|
658 |
|
|
NM |
Credit card income |
|
|
1,437 |
|
|
|
1,361 |
|
|
|
6 |
|
Other income |
|
|
574 |
|
|
|
412 |
|
|
|
39 |
|
|
|
|
|
|
Noninterest revenue |
|
|
13,316 |
|
|
|
13,961 |
|
|
|
(5 |
) |
Net interest income |
|
|
11,905 |
|
|
|
13,710 |
|
|
|
(13 |
) |
|
|
|
|
|
Total net revenue |
|
$ |
25,221 |
|
|
$ |
27,671 |
|
|
|
(9 |
)% |
|
Total net revenue for the first quarter of 2011 was $25.2 billion, down by $2.5 billion, or
9%, from the first quarter of 2010. Results were driven by lower net interest income, mortgage fees
and related income in RFS, and securities gains in Corporate/Private Equity. These declines were
partially offset by higher investment banking fees in IB.
Investment banking fees included record debt underwriting fees and higher advisory fees, related to
stronger industry-wide loan syndication and M&A volumes compared with the prior year; these were
partially offset by lower equity underwriting fees. For additional information on investment
banking fees, which are primarily recorded in IB, see IB segment results on pages 1619 of this
Form 10-Q.
Principal transactions revenue, which consists of revenue from trading and private equity investing
activities, increased compared with the first quarter of 2010, driven by higher private equity
gains, as a result of continued improvement in market conditions related to certain portfolio
investments. Trading revenue, although lower than the record level of the prior year, reflected
strong client revenue in IB. For additional information on principal transactions revenue, see IB
and Corporate/Private Equity segment results on pages 1619 and 3839, respectively, and Note 6
on page 113 of this Form 10-Q.
Lending- and deposit-related fees decreased, reflecting lower deposit-related fees in RFS
associated, in part, with legislation on non-sufficient funds and overdraft fees. For additional
information on lending- and deposit-related fees, which are mostly recorded in RFS, CB, TSS and IB,
see RFS on pages 2027, CB on pages 3031, TSS on pages 3234 and IB segment results on pages
1619 of this Form 10-Q.
Asset management, administration and commissions revenue increased from the first quarter of 2010.
The increase largely reflected higher asset management fees in AM, driven by the effect of higher
market levels and net inflows to products with higher margins, partially offset by lower
performance fees. Also contributing to the increase were higher administration fees in TSS,
reflecting net inflows of assets under custody and the effects of higher market levels; and higher
Equity Markets-related commissions revenue in IB. For additional information on these fees and
commissions, see the segment discussions for AM on pages 3437 and TSS on pages 3234 of this
Form 10-Q.
Securities gains decreased from the first quarter of 2010, due to a lower volume of securities
sales in the Firms investment portfolio. For additional information on securities gains, which are
mostly recorded in the Firms Corporate segment, see the Corporate/Private Equity segment
discussion on pages 3839 of this Form 10-Q.
Mortgage fees and related income decreased compared with the first quarter of 2010, driven by an
MSR risk management loss; this loss reflected a $1.1 billion decrease in the fair value of the MSR
asset related to the estimated impact of higher servicing costs to enhance servicing processes,
particularly loan modification and foreclosure procedures, and costs to comply with Consent Orders
entered into with banking regulators. An increase in production revenue, driven by higher mortgage
origination volumes and wider margins, partially offset the decline. For additional information on
mortgage fees and related income, which is recorded primarily in RFS, see RFSs Mortgage Banking,
Auto & Other Consumer
11
Lending discussion on pages 2325 of this Form 10-Q. For additional information on repurchase
losses, see the repurchase liability discussion on pages 4648 and Note 21 on pages 156159 of
this Form 10-Q.
Credit card income increased in the first quarter of 2011, largely reflecting higher customer
charge volume on debit and credit cards. For additional information on credit card income, see the
CS and RFS segment results on pages 2830, and pages 2027, respectively, of this Form 10-Q.
Other income increased compared with the first quarter of 2010, driven by valuation adjustments on
certain assets in IB, as well as higher auto operating lease income in RFS, as a result of growth
in lease volume.
Net interest income decreased in the first quarter of 2011 compared with the prior year. The
decrease was driven by lower yields on securities and lower average securities balances in
Corporate, resulting from investment portfolio repositioning; lower average loan balances,
primarily in CS and RFS, reflecting the expected runoff of credit card balances and residential
real estate loans; and lower fees on credit card receivables, reflecting the impact of legislative
changes. The decrease was offset partially by lower revenue reversals associated with lower credit
card charge-offs, and higher deposit balances. The Firms average interest-earning assets were $1.7
trillion in the first quarter of 2011, and the net yield on those assets, on a fully
taxable-equivalent (FTE) basis, was 2.89%, a decrease of 43 basis points from the first quarter
of 2010. For further information on the impact of the legislative changes on the Consolidated
Statements of Income, see CS discussion on Credit Card Legislation on page 79 of JPMorgan Chases
2010 Annual Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
Three months ended March 31, |
(in millions) |
|
2011 |
|
2010 |
|
Change |
|
Wholesale |
|
$ |
(386 |
) |
|
$ |
(236 |
) |
|
|
(64 |
)% |
Consumer, excluding credit card |
|
|
1,329 |
|
|
|
3,734 |
|
|
|
(64 |
) |
Credit card |
|
|
226 |
|
|
|
3,512 |
|
|
|
(94 |
) |
|
|
|
|
|
Total consumer |
|
|
1,555 |
|
|
|
7,246 |
|
|
|
(79 |
) |
|
|
|
|
|
Total provision for credit losses |
|
$ |
1,169 |
|
|
$ |
7,010 |
|
|
|
(83 |
)% |
|
The provision for credit losses decreased compared with the first quarter of 2010, due to a
decrease in both the consumer and wholesale provisions. The consumer, excluding credit card,
provision was down from the prior year, driven by the absence of additions to the allowance for
loan losses and lower net charge-offs. The credit card provision was down from the prior year,
driven primarily by improved delinquency trends and a reduction in the allowance for loan losses as
a result of lower estimated losses. The wholesale provision reflected a higher benefit compared
with the prior year, primarily reflecting continued improvement in the credit environment from the
prior year. For a more detailed discussion of the loan portfolio and the allowance for credit
losses, see the segment discussions for RFS on pages 2027, CS on pages 2830, IB on pages 1619
and CB on pages 3031, and the Allowance for credit losses section on pages 7981 of this Form
10-Q.
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
(in millions) |
|
2011 |
|
2010 |
|
Change |
|
Compensation expense |
|
$ |
8,263 |
|
|
$ |
7,276 |
|
|
|
14 |
% |
Noncompensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
978 |
|
|
|
869 |
|
|
|
13 |
|
Technology, communications and equipment |
|
|
1,200 |
|
|
|
1,137 |
|
|
|
6 |
|
Professional and outside services |
|
|
1,735 |
|
|
|
1,575 |
|
|
|
10 |
|
Marketing |
|
|
659 |
|
|
|
583 |
|
|
|
13 |
|
Other(a)(b) |
|
|
2,943 |
|
|
|
4,441 |
|
|
|
(34 |
) |
Amortization of intangibles |
|
|
217 |
|
|
|
243 |
|
|
|
(11 |
) |
|
|
|
|
|
Total noncompensation expense |
|
|
7,732 |
|
|
|
8,848 |
|
|
|
(13 |
) |
|
|
|
|
|
Total noninterest expense |
|
$ |
15,995 |
|
|
$ |
16,124 |
|
|
|
(1 |
)% |
|
|
|
|
(a) |
|
Included litigation expense of $1.1 billion and $2.9 billion for the three months ended
March 31, 2011 and 2010, respectively. |
|
(b) |
|
Included foreclosed property expense of $210 million and $303 million for the three months
ended March 31, 2011 and 2010, respectively. |
Total noninterest expense for the first quarter of 2011 was $16.0 billion, down slightly from
$16.1 billion in the first quarter of 2010. A decrease in noncompensation expense, largely due to
lower additions to litigation reserves in the first quarter of 2011, offset the increase in
compensation expense.
12
Compensation expense increased from the prior year, predominantly due to higher salary and benefits
expense in support of on-going initiatives in IB, as well as additions for sales force and
default-related employees in RFS, and front office staff in AM.
The aforementioned decrease in noncompensation expense from the first quarter of 2010 was
predominantly related to a net decline in mortgage-related litigation expense (Corporate and IB
decreased, partially offset by an increase in RFS). The following items in noncompensation expense
were higher in the first quarter of 2011: other expense for the estimated costs of
foreclosure-related matters in RFS; professional services expense, due to continued investments in
new product platforms in the businesses, including those related to international expansion;
occupancy expense, largely reflecting a net increase in charges for excess real estate and higher
depreciation expense; marketing expense in CS; and all other expense, reflecting additional
operating expense related to business activity in IB. For a further discussion of litigation
expense, see the Litigation reserve discussion in Note 23 on pages 160169 of this Form 10-Q. For
a discussion of amortization of intangibles, refer to the Balance Sheet Analysis on pages 4143,
and Note 16 on pages 149152 of this Form 10-Q.
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
(in millions, except rate) |
|
2011 |
|
2010 |
|
Income before income tax expense |
|
$ |
8,057 |
|
|
$ |
4,537 |
|
Income tax expense |
|
|
2,502 |
|
|
|
1,211 |
|
Effective tax rate |
|
|
31.1 |
% |
|
|
26.7 |
% |
|
The increase in the effective tax rate compared with the prior year was primarily the result
of higher reported pretax income and changes in the mix of income subject to U.S. federal and state
and local taxes, as well as significantly lower tax benefits recognized upon the resolution of tax
audits. These factors were partially offset by deferred tax benefits associated with state and
local income taxes. For additional information on income taxes, see Critical Accounting Estimates
Used by the Firm on pages 8689 of this Form 10-Q.
EXPLANATION AND RECONCILIATION OF THE FIRMS USE OF NON-GAAP FINANCIAL MEASURES
The Firm prepares its consolidated financial statements using accounting principles generally
accepted in the U.S. (U.S. GAAP); these financial statements appear on pages 9093 of this Form
10-Q. That presentation, which is referred to as reported basis, provides the reader with an
understanding of the Firms results that can be tracked consistently from year to year and enables
a comparison of the Firms performance with other companies U.S. GAAP financial statements.
In addition to analyzing the Firms results on a reported basis, management reviews the Firms
results and the results of the lines of business on a managed basis, which is a non-GAAP
financial measure. The Firms definition of managed basis starts with the reported U.S. GAAP
results and includes certain reclassifications to present total net revenue for the Firm (and each
of the business segments) on a 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 revenue arising from both taxable and tax-exempt sources. The corresponding income
tax impact related to tax-exempt items is recorded within income tax expense. These adjustments
have no impact on net income as reported by the Firm as a whole or by the lines of business.
Tangible common equity (TCE) represents common stockholders equity (i.e., total stockholders
equity less preferred stock) less identifiable intangible assets (other than MSRs) and goodwill,
net of related deferred tax liabilities. ROTCE, a non-GAAP financial ratio, measures the Firms
earnings as a percentage of TCE and is, in managements view, a meaningful measure to assess the
Firms use of equity.
Management also uses certain non-GAAP financial measures at the business-segment level, because it
believes these other non-GAAP financial measures provide information to investors about the
underlying operational performance and trends of the particular business segment and, therefore,
facilitate a comparison of the business segment with the performance of its competitors. Non-GAAP
financial measures used by the Firm may not be comparable to similarly named non-GAAP financial
measures used by other companies.
13
The following summary table provides a reconciliation from the Firms reported U.S. GAAP results to
managed basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2011 |
|
|
|
|
|
|
Fully |
|
|
|
|
Reported |
|
tax-equivalent |
|
Managed |
(in millions, except per share and ratios) |
|
results |
|
adjustments |
|
basis |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking fees |
|
$ |
1,793 |
|
|
$ |
|
|
|
$ |
1,793 |
|
Principal transactions |
|
|
4,745 |
|
|
|
|
|
|
|
4,745 |
|
Lendingand depositrelated fees |
|
|
1,546 |
|
|
|
|
|
|
|
1,546 |
|
Asset management, administration and commissions |
|
|
3,606 |
|
|
|
|
|
|
|
3,606 |
|
Securities gains |
|
|
102 |
|
|
|
|
|
|
|
102 |
|
Mortgage fees and related income |
|
|
(487 |
) |
|
|
|
|
|
|
(487 |
) |
Credit card income |
|
|
1,437 |
|
|
|
|
|
|
|
1,437 |
|
Other income |
|
|
574 |
|
|
|
451 |
|
|
|
1,025 |
|
|
Noninterest revenue |
|
|
13,316 |
|
|
|
451 |
|
|
|
13,767 |
|
Net interest income |
|
|
11,905 |
|
|
|
119 |
|
|
|
12,024 |
|
|
Total net revenue |
|
|
25,221 |
|
|
|
570 |
|
|
|
25,791 |
|
Noninterest expense |
|
|
15,995 |
|
|
|
|
|
|
|
15,995 |
|
|
Pre-provision profit |
|
|
9,226 |
|
|
|
570 |
|
|
|
9,796 |
|
Provision for credit losses |
|
|
1,169 |
|
|
|
|
|
|
|
1,169 |
|
|
Income before income tax expense |
|
|
8,057 |
|
|
|
570 |
|
|
|
8,627 |
|
Income tax expense |
|
|
2,502 |
|
|
|
570 |
|
|
|
3,072 |
|
|
Net income |
|
$ |
5,555 |
|
|
$ |
|
|
|
$ |
5,555 |
|
|
Diluted earnings per share |
|
$ |
1.28 |
|
|
$ |
|
|
|
$ |
1.28 |
|
Return on assets |
|
|
1.07 |
% |
|
NM |
|
|
1.07 |
% |
Overhead ratio |
|
|
63 |
|
|
NM |
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2010 |
|
|
|
|
Fully |
|
|
|
|
Reported |
|
tax-equivalent |
|
Managed |
(in millions, except per share and ratios) |
|
results |
|
adjustments |
|
basis |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking fees |
|
$ |
1,461 |
|
|
$ |
|
|
|
$ |
1,461 |
|
Principal transactions |
|
|
4,548 |
|
|
|
|
|
|
|
4,548 |
|
Lendingand depositrelated fees |
|
|
1,646 |
|
|
|
|
|
|
|
1,646 |
|
Asset management, administration and commissions |
|
|
3,265 |
|
|
|
|
|
|
|
3,265 |
|
Securities gains |
|
|
610 |
|
|
|
|
|
|
|
610 |
|
Mortgage fees and related income |
|
|
658 |
|
|
|
|
|
|
|
658 |
|
Credit card income |
|
|
1,361 |
|
|
|
|
|
|
|
1,361 |
|
Other income |
|
|
412 |
|
|
|
411 |
|
|
|
823 |
|
|
Noninterest revenue |
|
|
13,961 |
|
|
|
411 |
|
|
|
14,372 |
|
Net interest income |
|
|
13,710 |
|
|
|
90 |
|
|
|
13,800 |
|
|
Total net revenue |
|
|
27,671 |
|
|
|
501 |
|
|
|
28,172 |
|
Noninterest expense |
|
|
16,124 |
|
|
|
|
|
|
|
16,124 |
|
|
Pre-provision profit |
|
|
11,547 |
|
|
|
501 |
|
|
|
12,048 |
|
Provision for credit losses |
|
|
7,010 |
|
|
|
|
|
|
|
7,010 |
|
|
Income before income tax expense |
|
|
4,537 |
|
|
|
501 |
|
|
|
5,038 |
|
Income tax expense |
|
|
1,211 |
|
|
|
501 |
|
|
|
1,712 |
|
|
Net income |
|
$ |
3,326 |
|
|
$ |
|
|
|
$ |
3,326 |
|
|
Diluted earnings per share |
|
$ |
0.74 |
|
|
$ |
|
|
|
$ |
0.74 |
|
Return on assets |
|
|
0.66 |
% |
|
NM |
|
|
0.66 |
% |
Overhead ratio |
|
|
58 |
|
|
NM |
|
|
57 |
|
|
Average tangible common equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
(in millions) |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
Common stockholders equity |
|
$ |
169,415 |
|
|
$ |
166,812 |
|
|
$ |
163,962 |
|
|
$ |
159,069 |
|
|
$ |
156,094 |
|
Less: Goodwill |
|
|
48,846 |
|
|
|
48,831 |
|
|
|
48,745 |
|
|
|
48,348 |
|
|
|
48,542 |
|
Less: Certain identifiable intangible assets |
|
|
3,928 |
|
|
|
4,054 |
|
|
|
4,094 |
|
|
|
4,265 |
|
|
|
4,307 |
|
Add: Deferred tax liabilities(a) |
|
|
2,595 |
|
|
|
2,621 |
|
|
|
2,620 |
|
|
|
2,564 |
|
|
|
2,541 |
|
|
Tangible common equity (TCE) |
|
$ |
119,236 |
|
|
$ |
116,548 |
|
|
$ |
113,743 |
|
|
$ |
109,020 |
|
|
$ |
105,786 |
|
|
|
|
|
(a) |
|
Represents deferred tax liabilities related to tax-deductible goodwill and to identifiable
intangibles created in non-taxable transactions, which are netted against goodwill and other
intangibles when calculating TCE. |
14
Other financial measures
The Firm also discloses the allowance for loan losses to total retained loans, excluding home
lending purchased credit-impaired loans. For a further discussion of this credit metric, see
Allowance for credit losses on pages 7981 of this Form 10-Q.
BUSINESS SEGMENT RESULTS
The Firm is managed on a line of business basis. The business segment financial results
presented reflect the current organization of JPMorgan Chase. There are six major reportable
business segments: the Investment Bank, Retail Financial Services, Card Services, Commercial
Banking, Treasury & Securities Services and Asset Management, as well as a Corporate/Private Equity
segment. The business segments are determined based on the products and services provided, or the
type of customer served, and reflect the manner in which financial information is currently
evaluated by management. Results of these lines of business are presented on a managed basis.
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 business segment results
allocates income and expense using market-based methodologies. For a further discussion of those
methodologies, see Business Segment Results Description of business segment reporting
methodology on pages 6768 of JPMorgan Chases 2010 Annual Report. The Firm continues to assess
the assumptions, methodologies and reporting classifications used for segment reporting, and
further refinements may be implemented in future periods.
Business segment capital allocation changes
Each business segment is allocated capital by taking into consideration stand-alone peer
comparisons, economic risk measures and regulatory capital requirements. The amount of capital
assigned to each business is referred to as equity. Effective January 1, 2011, capital allocated to
CS was reduced and that of TSS was increased. For further information about these capital changes,
see Line of business equity on pages 5253 of this Form 10-Q.
Segment Results Managed Basis(a)
The following table summarizes the business segment results for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|
March 31, |
|
Total net revenue |
|
Noninterest expense |
|
Pre-provision profit |
(in millions, except ratios) |
|
2011 |
|
2010 |
|
Change |
|
2011 |
|
2010 |
|
Change |
|
2011 |
|
2010 |
|
Change |
|
Investment Bank(b) |
|
$ |
8,233 |
|
|
$ |
8,319 |
|
|
|
(1 |
)% |
|
$ |
5,016 |
|
|
$ |
4,838 |
|
|
|
4 |
% |
|
$ |
3,217 |
|
|
$ |
3,481 |
|
|
|
(8 |
)% |
Retail Financial Services |
|
|
6,275 |
|
|
|
7,776 |
|
|
|
(19 |
) |
|
|
5,262 |
|
|
|
4,242 |
|
|
|
24 |
|
|
|
1,013 |
|
|
|
3,534 |
|
|
|
(71 |
) |
Card Services |
|
|
3,982 |
|
|
|
4,447 |
|
|
|
(10 |
) |
|
|
1,555 |
|
|
|
1,402 |
|
|
|
11 |
|
|
|
2,427 |
|
|
|
3,045 |
|
|
|
(20 |
) |
Commercial Banking |
|
|
1,516 |
|
|
|
1,416 |
|
|
|
7 |
|
|
|
563 |
|
|
|
539 |
|
|
|
4 |
|
|
|
953 |
|
|
|
877 |
|
|
|
9 |
|
Treasury & Securities Services |
|
|
1,840 |
|
|
|
1,756 |
|
|
|
5 |
|
|
|
1,377 |
|
|
|
1,325 |
|
|
|
4 |
|
|
|
463 |
|
|
|
431 |
|
|
|
7 |
|
Asset Management |
|
|
2,406 |
|
|
|
2,131 |
|
|
|
13 |
|
|
|
1,660 |
|
|
|
1,442 |
|
|
|
15 |
|
|
|
746 |
|
|
|
689 |
|
|
|
8 |
|
Corporate/Private Equity(b) |
|
|
1,539 |
|
|
|
2,327 |
|
|
|
(34 |
) |
|
|
562 |
|
|
|
2,336 |
|
|
|
(76 |
) |
|
|
977 |
|
|
|
(9 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
25,791 |
|
|
$ |
28,172 |
|
|
|
(8 |
)% |
|
$ |
15,995 |
|
|
$ |
16,124 |
|
|
|
(1 |
)% |
|
$ |
9,796 |
|
|
$ |
12,048 |
|
|
|
(19 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return |
March 31, |
|
Provision for credit losses |
|
Net income/(loss) |
|
on equity |
(in millions, except ratios) |
|
2011 |
|
2010 |
|
Change |
|
2011 |
|
2010 |
|
Change |
|
2011 |
|
2010 |
|
Investment Bank(b) |
|
$ |
(429 |
) |
|
$ |
(462 |
) |
|
|
7 |
% |
|
$ |
2,370 |
|
|
$ |
2,471 |
|
|
|
(4 |
)% |
|
|
24 |
% |
|
|
25 |
% |
Retail Financial Services |
|
|
1,326 |
|
|
|
3,733 |
|
|
|
(64 |
) |
|
|
(208 |
) |
|
|
(131 |
) |
|
|
(59 |
) |
|
|
(3 |
) |
|
|
(2 |
) |
Card Services |
|
|
226 |
|
|
|
3,512 |
|
|
|
(94 |
) |
|
|
1,343 |
|
|
|
(303 |
) |
|
NM |
|
|
42 |
|
|
|
(8 |
) |
Commercial Banking |
|
|
47 |
|
|
|
214 |
|
|
|
(78 |
) |
|
|
546 |
|
|
|
390 |
|
|
|
40 |
|
|
|
28 |
|
|
|
20 |
|
Treasury & Securities Services |
|
|
4 |
|
|
|
(39 |
) |
|
NM |
|
|
316 |
|
|
|
279 |
|
|
|
13 |
|
|
|
18 |
|
|
|
17 |
|
Asset Management |
|
|
5 |
|
|
|
35 |
|
|
|
(86 |
) |
|
|
466 |
|
|
|
392 |
|
|
|
19 |
|
|
|
29 |
|
|
|
24 |
|
Corporate/Private Equity(b) |
|
|
(10 |
) |
|
|
17 |
|
|
NM |
|
|
722 |
|
|
|
228 |
|
|
|
217 |
|
|
NM |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,169 |
|
|
$ |
7,010 |
|
|
|
(83 |
)% |
|
$ |
5,555 |
|
|
$ |
3,326 |
|
|
|
67 |
% |
|
|
13 |
% |
|
|
8 |
% |
|
|
|
|
(a) |
|
Represents reported results on a tax-equivalent basis. |
|
(b) |
|
Corporate/Private Equity includes an adjustment to offset IBs inclusion of a credit
allocation income/(expense) to TSS in total net revenue; TSS reports the credit allocation as
a separate line on its income statement (not within total net revenue). |
15
INVESTMENT BANK
For a discussion of the business profile of IB, see pages 6971 of JPMorgan Chases 2010
Annual Report and Introduction on page 4 of this Form 10-Q.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement data |
|
Three months ended March 31, |
(in millions, except ratios) |
|
2011 |
|
2010 |
|
Change |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking fees |
|
$ |
1,779 |
|
|
$ |
1,446 |
|
|
|
23 |
% |
Principal transactions |
|
|
3,398 |
|
|
|
3,931 |
|
|
|
(14 |
) |
Lending- and deposit-related fees |
|
|
214 |
|
|
|
202 |
|
|
|
6 |
|
Asset management, administration and commissions |
|
|
619 |
|
|
|
563 |
|
|
|
10 |
|
All other income(a) |
|
|
166 |
|
|
|
49 |
|
|
|
239 |
|
|
|
|
|
|
Noninterest revenue |
|
|
6,176 |
|
|
|
6,191 |
|
|
|
|
|
Net interest income |
|
|
2,057 |
|
|
|
2,128 |
|
|
|
(3 |
) |
|
|
|
|
|
Total net revenue(b) |
|
|
8,233 |
|
|
|
8,319 |
|
|
|
(1 |
) |
Provision for credit losses |
|
|
(429 |
) |
|
|
(462 |
) |
|
|
7 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
|
3,294 |
|
|
|
2,928 |
|
|
|
13 |
|
Noncompensation expense |
|
|
1,722 |
|
|
|
1,910 |
|
|
|
(10 |
) |
|
|
|
|
|
Total noninterest expense |
|
|
5,016 |
|
|
|
4,838 |
|
|
|
4 |
|
|
|
|
|
|
Income before income tax expense |
|
|
3,646 |
|
|
|
3,943 |
|
|
|
(8 |
) |
Income tax expense |
|
|
1,276 |
|
|
|
1,472 |
|
|
|
(13 |
) |
|
|
|
|
|
Net income |
|
$ |
2,370 |
|
|
$ |
2,471 |
|
|
|
(4 |
) |
|
|
|
|
|
Financial ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Return on common equity |
|
|
24 |
% |
|
|
25 |
% |
|
|
|
|
Return on assets |
|
|
1.18 |
|
|
|
1.48 |
|
|
|
|
|
Overhead ratio |
|
|
61 |
|
|
|
58 |
|
|
|
|
|
Compensation expense as a percentage of total net revenue |
|
|
40 |
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
Revenue by business |
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking fees: |
|
|
|
|
|
|
|
|
|
|
|
|
Advisory |
|
$ |
429 |
|
|
$ |
305 |
|
|
|
41 |
|
Equity underwriting |
|
|
379 |
|
|
|
413 |
|
|
|
(8 |
) |
Debt underwriting |
|
|
971 |
|
|
|
728 |
|
|
|
33 |
|
|
|
|
|
|
Total investment banking fees |
|
|
1,779 |
|
|
|
1,446 |
|
|
|
23 |
|
Fixed income markets(c) |
|
|
5,238 |
|
|
|
5,464 |
|
|
|
(4 |
) |
Equity markets(d) |
|
|
1,406 |
|
|
|
1,462 |
|
|
|
(4 |
) |
Credit portfolio(a)(e) |
|
|
(190 |
) |
|
|
(53 |
) |
|
|
(258 |
) |
|
|
|
|
|
Total net revenue |
|
$ |
8,233 |
|
|
$ |
8,319 |
|
|
|
(1 |
) |
|
|
|
|
(a) |
|
IB manages credit exposures related to Global Corporate Bank (GCB) on behalf of IB and
TSS. Effective January 1, 2011, IB and TSS will share the economics related to the Firms GCB
clients. IB recognizes this sharing agreement within all other income. The prior-year period
reflected the reimbursement from TSS for a portion of the total costs of managing the credit
portfolio on behalf of TSS. |
|
(b) |
|
Total net revenue included tax-equivalent adjustments, predominantly due to income tax
credits related to affordable housing and alternative energy investments as well as tax-exempt
income from municipal bond investments of $438 million and $403 million for the quarters ended
March 31, 2011 and 2010, respectively. |
|
(c) |
|
Fixed income markets primarily include revenue related to market-making across global fixed
income markets, including foreign exchange, interest rate, credit and commodities markets. |
|
(d) |
|
Equities markets primarily include revenue related to market-making across global equity
products, including cash instruments, derivatives, convertibles and Prime Services. |
|
(e) |
|
Credit portfolio revenue includes net interest income, fees and loan sale activity, as well
as gains or losses on securities received as part of a loan restructuring, for IBs credit
portfolio. Credit portfolio revenue also includes the results of risk management related to
the Firms lending and derivative activities. See pages 5981 of the Credit Risk Management
section of this Form 10-Q for further discussion. |
16
Quarterly results
Net income was $2.4 billion, down 4% from the prior-year record, reflecting higher noninterest
expense, slightly lower net revenue and a lower benefit from the provision for credit losses.
Net revenue was $8.2 billion, compared with $8.3 billion in the prior year. Investment banking fees
were $1.8 billion, up 23% from the prior year; these consisted of record debt underwriting fees of
$971 million (up 33%), equity underwriting fees of $379 million (down 8%), and advisory fees of
$429 million (up 41%). Fixed Income and Equity Markets revenue was $6.6 billion, compared with $6.9
billion in the prior year, reflecting strong client revenues. Credit Portfolio revenue was a loss
of $190 million, primarily reflecting the negative net impact of credit-related valuation adjustments
largely offset by net interest income and fees on retained loans.
The provision for credit losses was a benefit of $429 million, compared with a benefit of $462
million in the prior year. The current-quarter benefit primarily reflected a reduction in the
allowance for loan losses, primarily related to loan sales and net repayments. The ratio of the
allowance for loan losses to end-of-period loans retained was 2.52%, compared with 4.91% in the
prior year, driven by the improved quality of the loan portfolio. Net charge-offs were $123
million, compared with net charge-offs of $697 million in the prior year.
Noninterest expense was $5.0 billion, up 4% from the prior year driven by higher compensation
expense, partially offset by lower noncompensation expense.
ROE was 24% on $40.0 billion of allocated capital.
17
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected metrics |
|
Three months ended March 31, |
(in millions, except headcount and ratios) |
|
2011 |
|
2010 |
|
Change |
|
Selected balance sheet data (period-end) |
|
|
|
|
|
|
|
|
|
|
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans retained(a) |
|
$ |
52,712 |
|
|
$ |
53,010 |
|
|
|
(1 |
)% |
Loans held-for-sale and loans at fair value |
|
|
5,070 |
|
|
|
3,594 |
|
|
|
41 |
|
|
|
|
|
|
Total loans |
|
|
57,782 |
|
|
|
56,604 |
|
|
|
2 |
|
Equity |
|
|
40,000 |
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected balance sheet data (average) |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
815,828 |
|
|
$ |
676,122 |
|
|
|
21 |
|
Trading assetsdebt and equity instruments |
|
|
368,956 |
|
|
|
284,085 |
|
|
|
30 |
|
Trading assetsderivative receivables |
|
|
67,462 |
|
|
|
66,151 |
|
|
|
2 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans retained(a) |
|
|
53,370 |
|
|
|
58,501 |
|
|
|
(9 |
) |
Loans held-for-sale and loans at fair value |
|
|
3,835 |
|
|
|
3,150 |
|
|
|
22 |
|
|
|
|
|
|
Total loans |
|
|
57,205 |
|
|
|
61,651 |
|
|
|
(7 |
) |
Adjusted assets(b) |
|
|
611,038 |
|
|
|
506,635 |
|
|
|
21 |
|
Equity |
|
|
40,000 |
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Headcount |
|
|
26,494 |
|
|
|
24,977 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit data and quality statistics |
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
$ |
123 |
|
|
$ |
697 |
|
|
|
(82 |
) |
Nonperforming assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans retained(a)(c) |
|
|
2,388 |
|
|
|
2,459 |
|
|
|
(3 |
) |
Nonaccrual loans held-for-sale
and loans at fair value |
|
|
259 |
|
|
|
282 |
|
|
|
(8 |
) |
|
|
|
|
|
Total nonperforming loans |
|
|
2,647 |
|
|
|
2,741 |
|
|
|
(3 |
) |
Derivative receivables |
|
|
21 |
|
|
|
363 |
|
|
|
(94 |
) |
Assets acquired in loan satisfactions |
|
|
73 |
|
|
|
185 |
|
|
|
(61 |
) |
|
|
|
|
|
Total nonperforming assets |
|
|
2,741 |
|
|
|
3,289 |
|
|
|
(17 |
) |
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
|
1,330 |
|
|
|
2,601 |
|
|
|
(49 |
) |
Allowance for lending-related commitments |
|
|
424 |
|
|
|
482 |
|
|
|
(12 |
) |
|
|
|
|
|
Total allowance for credit losses |
|
|
1,754 |
|
|
|
3,083 |
|
|
|
(43 |
) |
Net charge-off rate(a)(d) |
|
|
0.93 |
% |
|
|
4.83 |
% |
|
|
|
|
Allowance for loan losses to period-end loans retained(a)(d) |
|
|
2.52 |
|
|
|
4.91 |
|
|
|
|
|
Allowance for loan losses to nonaccrual loans retained(a)(c)(d) |
|
|
56 |
|
|
|
106 |
|
|
|
|
|
Nonaccrual loans to period-end loans |
|
|
4.58 |
|
|
|
4.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market riskaverage trading and credit portfolio VaR 95% confidence level |
|
|
|
|
|
|
|
|
|
|
|
|
Trading activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income |
|
$ |
49 |
|
|
$ |
69 |
|
|
|
(29 |
) |
Foreign exchange |
|
|
11 |
|
|
|
13 |
|
|
|
(15 |
) |
Equities |
|
|
29 |
|
|
|
24 |
|
|
|
21 |
|
Commodities and other |
|
|
13 |
|
|
|
15 |
|
|
|
(13 |
) |
Diversification(e) |
|
|
(38 |
) |
|
|
(49 |
) |
|
|
22 |
|
|
|
|
|
|
Total trading VaR(f) |
|
|
64 |
|
|
|
72 |
|
|
|
(11 |
) |
Credit portfolio VaR(g) |
|
|
26 |
|
|
|
19 |
|
|
|
37 |
|
Diversification(e) |
|
|
(7 |
) |
|
|
(9 |
) |
|
|
22 |
|
|
|
|
|
|
Total trading and credit portfolio VaR |
|
$ |
83 |
|
|
$ |
82 |
|
|
|
1 |
|
|
|
|
|
(a) |
|
Loans retained included credit portfolio loans, leveraged leases and other accrual loans,
and excluded loans held-for-sale and loans at fair value. |
|
(b) |
|
Adjusted assets, a non-GAAP financial measure, equals total assets minus: (1) securities
purchased under resale agreements and securities borrowed less securities sold, not yet
purchased; (2) assets of consolidated variable interest entities (VIEs); (3) cash and
securities segregated and on deposit for regulatory and other purposes; (4) goodwill and
intangibles; (5) securities received as collateral. The amount of adjusted assets is presented
to assist the reader in comparing IBs asset and capital levels to other investment banks in
the securities industry. Asset-to-equity leverage ratios are commonly used as one measure to
assess a companys capital adequacy. IB believes an adjusted asset amount that excludes the
assets discussed above, which were considered to have a low risk profile, provides a more
meaningful measure of balance sheet leverage in the securities industry. |
|
(c) |
|
Allowance for loan losses of $567 million and $811 million were held against these nonaccrual
loans at March 31, 2011 and 2010, respectively. |
|
(d) |
|
Loans held-for-sale and loans at fair value were excluded when calculating the allowance
coverage ratio and net charge-off rate. |
18
|
|
|
(e) |
|
Average value-at-risk (VaR) was less than the sum of the VaR of the components described
above, which is due to portfolio diversification. The diversification effect reflects the fact
that the risks were not perfectly correlated. The risk of a portfolio of positions is
therefore usually less than the sum of the risks of the positions themselves. |
|
(f) |
|
Trading VaR includes substantially all trading activities in IB, including the credit spread
sensitivities of certain mortgage products and syndicated lending facilities that the Firm
intends to distribute; however, particular risk parameters of certain products are not fully
captured, for example, correlation risk. Trading VaR does not include the debit valuation
adjustments (DVA) taken on derivative and structured liabilities to reflect the credit
quality of the Firm. See VaR discussion on pages 8184 and the DVA Sensitivity table on page
84 of this Form 10-Q for further details. |
|
(g) |
|
Credit portfolio VaR includes the derivative credit valuation adjustments (CVA), hedges of
the CVA and mark-to-market (MTM) hedges of the retained loan portfolio, which are all
reported in principal transactions revenue. This VaR does not include the retained loan
portfolio, which is not MTM. |
According to Dealogic, for the first three months of 2011, the Firm was ranked #1 in
Investment Banking fees generated based on revenue, and #1 in Global Announced M&A; #1 in Global
Syndicated Loans; #3 in Global Debt, Equity and Equity-related; #3 in Global Long-Term Debt; and #7
in Global Equity and Equity-related, based on volume.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2011 |
|
Full-year 2010 |
Market shares and rankings(a) |
|
Market Share |
|
Rankings |
|
Market Share |
|
Rankings |
|
Global investment banking fees(b) |
|
|
8.6 |
% |
|
|
#1 |
|
|
|
7.6 |
% |
|
|
#1 |
|
Debt, equity and equity-related |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global |
|
|
6.6 |
|
|
|
3 |
|
|
|
7.2 |
|
|
|
1 |
|
U.S. |
|
|
11.8 |
|
|
|
1 |
|
|
|
11.1 |
|
|
|
1 |
|
Syndicated loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global |
|
|
12.3 |
|
|
|
1 |
|
|
|
8.5 |
|
|
|
1 |
|
U.S. |
|
|
24.5 |
|
|
|
1 |
|
|
|
19.3 |
|
|
|
2 |
|
Long-term debt(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global |
|
|
6.7 |
|
|
|
3 |
|
|
|
7.2 |
|
|
|
2 |
|
U.S. |
|
|
11.8 |
|
|
|
1 |
|
|
|
10.9 |
|
|
|
2 |
|
Equity and equity-related |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global(d) |
|
|
5.7 |
|
|
|
7 |
|
|
|
7.3 |
|
|
|
3 |
|
U.S. |
|
|
9.5 |
|
|
|
4 |
|
|
|
12.6 |
|
|
|
2 |
|
Announced M&A(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global |
|
|
26.8 |
|
|
|
1 |
|
|
|
16.3 |
|
|
|
3 |
|
U.S. |
|
|
44.5 |
|
|
|
1 |
|
|
|
23.0 |
|
|
|
3 |
|
|
|
|
|
(a) |
|
Source: Dealogic. Global Investment Banking fees reflects ranking of fees and market
share. Remainder of rankings reflects transaction volume rank and market share. |
|
(b) |
|
Global IB fees exclude money market, short-term debt and shelf deals. |
|
(c) |
|
Long-term debt tables include investment-grade, high-yield, supranationals, sovereigns,
agencies, covered bonds, asset-backed securities (ABS) and mortgage-backed securities; and
exclude money market, short-term debt, and U.S. municipal securities. |
|
(d) |
|
Equity and equity-related rankings include rights offerings and Chinese A-Shares. |
|
(e) |
|
Global announced M&A is based on transaction value at announcement; all other rankings are
based on transaction proceeds, with full credit to each book manager/equal if joint. Because
of joint assignments, market share of all participants will add up to more than 100%. M&A for
year-to-date 2011 and full-year 2010 reflects the removal of any withdrawn transactions. U.S.
announced M&A represents any U.S. involvement ranking. |
|
|
|
|
|
|
|
|
|
|
|
|
|
International metrics |
|
Three months ended March 31, |
(in millions) |
|
2011 |
|
2010 |
|
Change |
|
Total net revenue:(a) |
|
|
|
|
|
|
|
|
|
|
|
|
Asia/Pacific |
|
$ |
1,122 |
|
|
$ |
988 |
|
|
|
14 |
% |
Latin America/Caribbean |
|
|
327 |
|
|
|
310 |
|
|
|
5 |
|
Europe/Middle East/Africa |
|
|
2,592 |
|
|
|
2,875 |
|
|
|
(10 |
) |
North America |
|
|
4,192 |
|
|
|
4,146 |
|
|
|
1 |
|
|
|
|
|
|
Total net revenue |
|
$ |
8,233 |
|
|
$ |
8,319 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (period-end): (b) |
|
|
|
|
|
|
|
|
|
|
|
|
Asia/Pacific |
|
$ |
5,472 |
|
|
$ |
6,195 |
|
|
|
(12 |
) |
Latin America/Caribbean |
|
|
2,190 |
|
|
|
2,035 |
|
|
|
8 |
|
Europe/Middle East/Africa |
|
|
14,059 |
|
|
|
12,510 |
|
|
|
12 |
|
North America |
|
|
30,991 |
|
|
|
32,270 |
|
|
|
(4 |
) |
|
|
|
|
|
Total loans |
|
$ |
52,712 |
|
|
$ |
53,010 |
|
|
|
(1 |
) |
|
|
|
|
(a) |
|
Regional revenues are based primarily on the domicile of the client and/or location of
the trading desk. |
|
(b) |
|
Includes retained loans based on the domicile of the customer. Excludes loans held-for-sale
and loans at fair value. |
19
RETAIL FINANCIAL SERVICES
For a discussion of the business profile of RFS, see pages 72-78 of JPMorgan Chases 2010
Annual Report and Introduction on page 4 of this Form 10-Q.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement data |
|
Three months ended March 31, |
(in millions, except ratios) |
|
2011 |
|
2010 |
|
Change |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Lending- and deposit-related fees |
|
$ |
746 |
|
|
$ |
841 |
|
|
|
(11 |
)% |
Asset management, administration and commissions |
|
|
487 |
|
|
|
452 |
|
|
|
8 |
|
Mortgage fees and related income |
|
|
(489 |
) |
|
|
655 |
|
|
NM |
Credit card income |
|
|
537 |
|
|
|
450 |
|
|
|
19 |
|
Other income |
|
|
364 |
|
|
|
354 |
|
|
|
3 |
|
|
|
|
|
|
Noninterest revenue |
|
|
1,645 |
|
|
|
2,752 |
|
|
|
(40 |
) |
Net interest income |
|
|
4,630 |
|
|
|
5,024 |
|
|
|
(8 |
) |
|
|
|
|
|
Total net revenue(a) |
|
|
6,275 |
|
|
|
7,776 |
|
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
|
1,326 |
|
|
|
3,733 |
|
|
|
(64 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
|
1,971 |
|
|
|
1,770 |
|
|
|
11 |
|
Noncompensation expense |
|
|
3,231 |
|
|
|
2,402 |
|
|
|
35 |
|
Amortization of intangibles |
|
|
60 |
|
|
|
70 |
|
|
|
(14 |
) |
|
|
|
|
|
Total noninterest expense |
|
|
5,262 |
|
|
|
4,242 |
|
|
|
24 |
|
|
|
|
|
|
Income/(loss) before income tax expense/(benefit) |
|
|
(313 |
) |
|
|
(199 |
) |
|
|
(57 |
) |
Income tax expense/(benefit) |
|
|
(105 |
) |
|
|
(68 |
) |
|
|
(54 |
) |
|
|
|
|
|
Net income/(loss) |
|
$ |
(208 |
) |
|
$ |
(131 |
) |
|
|
(59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Return on common equity |
|
|
(3 |
)% |
|
|
(2 |
)% |
|
|
|
|
Overhead ratio |
|
|
84 |
|
|
|
55 |
|
|
|
|
|
Overhead ratio excluding core deposit intangibles(b) |
|
|
83 |
|
|
|
54 |
|
|
|
|
|
|
|
|
|
(a) |
|
Total net revenue included tax-equivalent adjustments associated with tax-exempt loans to
municipalities and other qualified entities of $3 million and $5 million for the three months
ended March 31, 2011 and 2010, respectively. |
|
(b) |
|
RFS uses the overhead ratio (excluding the amortization of core deposit intangibles (CDI)),
a non-GAAP financial measure, to evaluate the underlying expense trends of the business.
Including CDI amortization expense in the overhead ratio calculation would result in a higher
overhead ratio in the earlier years and a lower overhead ratio in later years; this method
would therefore result in an improving overhead ratio over time, all things remaining equal.
The non-GAAP ratio excluded Retail Bankings CDI amortization expense related to prior
business combination transactions of $60 million and $70 million for the three months ended
March 31, 2011 and 2010, respectively. |
Quarterly results
Retail Financial Services reported a net loss of $208 million, compared with a net loss of $131
million in the prior year.
Net revenue was $6.3 billion, a decrease of $1.5 billion, or 19%, compared with the prior year. Net
interest income was $4.6 billion, down by $394 million, or 8%, reflecting the impact of lower loan
balances due to portfolio runoff and narrower loan spreads. Noninterest revenue was $1.6 billion,
down by $1.1 billion, or 40%, driven by lower mortgage fees and related income.
The provision for credit losses was $1.3 billion, a decrease of $2.4 billion from the prior year.
While delinquency trends and net charge-offs improved compared with the prior year, the
current-quarter provision continued to reflect elevated losses in the mortgage and home equity
portfolios. See page 71 of this Form 10-Q for the net charge-off amounts and rates. To date, no
charge-offs have been recorded on PCI loans.
Noninterest expense was $5.3 billion, an increase of $1.0 billion, or 24%, from the prior year.
20
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected metrics |
|
Three months ended March 31, |
(in millions, except headcount and ratios) |
|
2011 |
|
2010 |
|
Change |
|
Selected balance sheet data (period-end) |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
355,394 |
|
|
$ |
382,475 |
|
|
|
(7 |
)% |
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans retained |
|
|
308,827 |
|
|
|
339,002 |
|
|
|
(9 |
) |
Loans held-for-sale and loans at fair value(a) |
|
|
12,234 |
|
|
|
11,296 |
|
|
|
8 |
|
|
|
|
|
|
Total loans |
|
|
321,061 |
|
|
|
350,298 |
|
|
|
(8 |
) |
Deposits |
|
|
380,494 |
|
|
|
362,470 |
|
|
|
5 |
|
Equity |
|
|
28,000 |
|
|
|
28,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected balance sheet data (average) |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
364,266 |
|
|
$ |
393,867 |
|
|
|
(8 |
) |
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans retained |
|
|
312,543 |
|
|
|
342,997 |
|
|
|
(9 |
) |
Loans held-for-sale and loans at fair value(a) |
|
|
17,519 |
|
|
|
17,055 |
|
|
|
3 |
|
|
|
|
|
|
Total loans |
|
|
330,062 |
|
|
|
360,052 |
|
|
|
(8 |
) |
Deposits |
|
|
372,634 |
|
|
|
356,934 |
|
|
|
4 |
|
Equity |
|
|
28,000 |
|
|
|
28,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Headcount |
|
|
123,550 |
|
|
|
112,616 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit data and quality statistics |
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
$ |
1,326 |
|
|
$ |
2,438 |
|
|
|
(46 |
) |
Nonaccrual loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans retained |
|
|
8,499 |
|
|
|
10,769 |
|
|
|
(21 |
) |
Nonaccrual loans held-for-sale and loans at fair value |
|
|
150 |
|
|
|
217 |
|
|
|
(31 |
) |
|
|
|
|
|
Total nonaccrual loans(b)(c)(d) |
|
|
8,649 |
|
|
|
10,986 |
|
|
|
(21 |
) |
Nonperforming assets(b)(c)(d) |
|
|
9,905 |
|
|
|
12,191 |
|
|
|
(19 |
) |
Allowance for loan losses |
|
|
16,453 |
|
|
|
16,200 |
|
|
|
2 |
|
Net charge-off rate(e) |
|
|
1.72 |
% |
|
|
2.88 |
% |
|
|
|
|
Net charge-off rate excluding PCI loans(e)(f) |
|
|
2.23 |
|
|
|
3.76 |
|
|
|
|
|
Allowance for loan losses to ending loans retained(e) |
|
|
5.33 |
|
|
|
4.78 |
|
|
|
|
|
Allowance for loan losses to ending loans retained excluding PCI loans(e)(f) |
|
|
4.84 |
|
|
|
5.16 |
|
|
|
|
|
Allowance for loan losses to nonaccrual loans retained(b)(e)(f) |
|
|
135 |
|
|
|
124 |
|
|
|
|
|
Nonaccrual loans to total loans |
|
|
2.69 |
|
|
|
3.14 |
|
|
|
|
|
Nonaccrual loans to total loans excluding PCI loans(b) |
|
|
3.46 |
|
|
|
4.05 |
|
|
|
|
|
|
|
|
|
(a) |
|
Loans at fair value consist of prime mortgages originated with the intent to sell that are
accounted for at fair value and classified as trading assets on the Consolidated Balance
Sheets. These loans totaled $12.0 billion and $8.4 billion at March 31, 2011 and 2010,
respectively. Average balances of these loans totaled $17.4 billion and $14.2 billion for the
three months ended March 31, 2011 and 2010, respectively. |
|
(b) |
|
Excludes PCI loans that were acquired as part of the Washington Mutual transaction, which are
accounted for on a pool basis. Since each pool is accounted for as a single asset with a
single composite interest rate and an aggregate expectation of cash flows, the past-due status
of the pools, or that of the individual loans within the pools, is not meaningful. Because the
Firm is recognizing interest income on each pool of loans, they are all considered to be
performing. |
|
(c) |
|
Certain of these loans are classified as trading assets on the Consolidated Balance Sheets. |
|
(d) |
|
At March 31, 2011 and 2010, nonperforming assets excluded: (1) mortgage loans insured by U.S.
government agencies of $9.8 billion and $10.5 billion, respectively, that are accruing at the
guaranteed reimbursement rate; (2) real estate owned insured by U.S. government agencies of
$2.3 billion and $707 million, respectively; and (3) student loans that are 90 days or more
past due and still accruing, which are insured by U.S. government agencies under the Federal
Family Education Loan Program (FFELP), of $615 million and $581 million, respectively. These
amounts were excluded as reimbursement of insured amounts is proceeding normally. |
|
(e) |
|
Loans held-for-sale and loans accounted for at fair value were excluded when calculating the
allowance coverage ratio and the net charge-off rate. |
|
(f) |
|
Excludes the impact of PCI loans that were acquired as part of the Washington Mutual
transaction. These loans were accounted for at fair value on the acquisition date, which
incorporated managements estimate, as of that date, of credit losses over the remaining life
of the portfolio. An allowance for loan losses of $4.9 billion and $2.8 billion was recorded
for these loans at March 31, 2011 and 2010, respectively, which was also excluded from the
applicable ratios. To date, no charge-offs have been recorded for these loans. |
21
RETAIL BANKING
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement data |
|
Three months ended March 31, |
(in millions, except ratios) |
|
2011 |
|
2010 |
|
Change |
|
Noninterest revenue |
|
$ |
1,756 |
|
|
$ |
1,702 |
|
|
|
3 |
% |
Net interest income |
|
|
2,659 |
|
|
|
2,635 |
|
|
|
1 |
|
|
|
|
|
|
Total net revenue |
|
|
4,415 |
|
|
|
4,337 |
|
|
|
2 |
|
Provision for credit losses |
|
|
119 |
|
|
|
191 |
|
|
|
(38 |
) |
Noninterest expense |
|
|
2,802 |
|
|
|
2,577 |
|
|
|
9 |
|
|
|
|
|
|
Income before income tax expense |
|
|
1,494 |
|
|
|
1,569 |
|
|
|
(5 |
) |
|
|
|
|
|
Net income |
|
$ |
891 |
|
|
$ |
898 |
|
|
|
(1 |
) |
|
|
|
|
|
Overhead ratio |
|
|
63 |
% |
|
|
59 |
% |
|
|
|
|
Overhead ratio excluding core deposit intangibles(a) |
|
|
62 |
|
|
|
58 |
|
|
|
|
|
|
|
|
|
(a) |
|
Retail Banking uses the overhead ratio (excluding the amortization of CDI), a non-GAAP
financial measure, to evaluate the underlying expense trends of the business. Including CDI
amortization expense in the overhead ratio calculation would result in a higher overhead ratio
in the earlier years and a lower overhead ratio in later years; this method would therefore
result in an improving overhead ratio over time, all things remaining equal. The non-GAAP
ratio excluded Retail Bankings CDI amortization expense related to prior business combination
transactions of $60 million and $70 million for the three months ended March 31, 2011 and
2010, respectively. |
Quarterly results
Retail Banking reported net income of $891 million, flat compared with the prior year. Net revenue
was $4.4 billion, up 2% from the prior year. The increase was driven by higher debit card and
investment sales revenue, largely offset by lower deposit-related fees. Retail Banking net
charge-offs were $119 million, compared with $191 million in the prior year. Noninterest expense
was $2.8 billion, up 9% from the prior year, resulting from sales force increases and new branch
builds.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected metrics |
|
Three months ended March 31, |
(in billions, except ratios and where otherwise noted) |
|
2011 |
|
2010 |
|
Change |
|
Business metrics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business banking origination volume (in millions) |
|
$ |
1,425 |
|
|
$ |
905 |
|
|
|
57 |
% |
End-of-period loans owned |
|
|
17.0 |
|
|
|
16.8 |
|
|
|
1 |
|
End-of-period deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
Checking |
|
$ |
137.4 |
|
|
$ |
123.8 |
|
|
|
11 |
|
Savings |
|
|
176.3 |
|
|
|
163.4 |
|
|
|
8 |
|
Time and other |
|
|
44.0 |
|
|
|
53.2 |
|
|
|
(17 |
) |
|
|
|
|
|
Total end-of-period deposits |
|
|
357.7 |
|
|
|
340.4 |
|
|
|
5 |
|
Average loans owned |
|
$ |
16.9 |
|
|
$ |
16.9 |
|
|
|
|
|
Average deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
Checking |
|
$ |
132.0 |
|
|
$ |
119.7 |
|
|
|
10 |
|
Savings |
|
|
171.1 |
|
|
|
158.6 |
|
|
|
8 |
|
Time and other |
|
|
45.0 |
|
|
|
55.6 |
|
|
|
(19 |
) |
|
|
|
|
|
Total average deposits |
|
|
348.1 |
|
|
|
333.9 |
|
|
|
4 |
|
Deposit margin |
|
|
2.92 |
% |
|
|
3.02 |
% |
|
|
|
|
Average assets |
|
$ |
28.7 |
|
|
$ |
28.9 |
|
|
|
(1 |
) |
|
|
|
|
|
Credit data and quality statistics
(in millions, except ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
$ |
119 |
|
|
$ |
191 |
|
|
|
(38 |
) |
Net charge-off rate |
|
|
2.86 |
% |
|
|
4.58 |
% |
|
|
|
|
Nonperforming assets |
|
$ |
822 |
|
|
$ |
872 |
|
|
|
(6 |
) |
|
|
|
|
|
Retail branch business metrics |
|
|
|
|
|
|
|
|
|
|
|
|
Investment sales volume (in millions) |
|
$ |
6,584 |
|
|
$ |
5,956 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of: |
|
|
|
|
|
|
|
|
|
|
|
|
Branches |
|
|
5,292 |
|
|
|
5,155 |
|
|
|
3 |
|
ATMs |
|
|
16,265 |
|
|
|
15,549 |
|
|
|
5 |
|
Personal bankers |
|
|
21,875 |
|
|
|
19,003 |
|
|
|
15 |
|
Sales specialists |
|
|
7,336 |
|
|
|
6,315 |
|
|
|
16 |
|
Active online customers (in thousands) |
|
|
18,318 |
|
|
|
16,208 |
|
|
|
13 |
|
Checking accounts (in thousands) |
|
|
26,622 |
|
|
|
25,830 |
|
|
|
3 |
|
|
22
MORTGAGE BANKING, AUTO & OTHER CONSUMER LENDING
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement data |
|
Three months ended March 31, |
(in millions, except ratio) |
|
2011 |
|
2010 |
|
Change |
|
Noninterest revenue |
|
$ |
(119 |
) |
|
$ |
1,018 |
|
|
NM |
Net interest income |
|
|
815 |
|
|
|
893 |
|
|
|
(9 |
)% |
|
|
|
|
|
Total net revenue |
|
|
696 |
|
|
|
1,911 |
|
|
|
(64 |
) |
Provision for credit losses |
|
|
131 |
|
|
|
217 |
|
|
|
(40 |
) |
Noninterest expense |
|
|
2,105 |
|
|
|
1,246 |
|
|
|
69 |
|
|
|
|
|
|
Income/(loss) before income tax expense/(benefit) |
|
|
(1,540 |
) |
|
|
448 |
|
|
NM |
|
|
|
|
|
Net income/(loss) |
|
$ |
(937 |
) |
|
$ |
257 |
|
|
NM |
|
|
|
|
|
Overhead ratio |
|
|
302 |
% |
|
|
65 |
% |
|
|
|
|
|
Quarterly results
Mortgage Banking, Auto & Other Consumer Lending reported a net loss of $937 million, compared with
net income of $257 million in the prior year.
Net revenue was $696 million, a decrease of $1.2 billion, or 64%, from the prior year. Mortgage
Banking net revenue was a loss of $114 million, compared with net revenue of $962 million in the
prior year. Auto & Other Consumer Lending net revenue was $810 million, down by $139 million,
predominantly as a result of the discontinuation of tax refund anticipation lending.
Mortgage Banking net revenue in the first quarter of 2011 included $271 million of net interest
income and $104 million of other noninterest revenue, offset by a loss of $489 million for mortgage
fees and related income. Mortgage fees and related income comprised $259 million of net production
revenue, $489 million of servicing operating revenue and a $1.2 billion MSR risk management loss.
Production revenue, excluding repurchase losses, was $679 million, an increase of $246 million,
reflecting higher mortgage origination volumes and wider margins. Total production revenue was
reduced by $420 million of repurchase losses, compared with repurchase losses of $432 million in
the prior year. Servicing operating revenue declined 3% from the prior year. MSR risk management
revenue declined by $1.4 billion from the prior year, reflecting a $1.1 billion decrease in the
fair value of the MSR asset related to the estimated impact of higher servicing costs to enhance
servicing processes.
The provision for credit losses, predominantly related to the student and auto loan portfolios, was
$131 million, compared with $217 million in the prior year. Auto loan net charge-offs were $47
million, compared with $102 million in the prior year. Student loan and other net charge-offs were
$80 million, compared with $64 million in the prior year.
Noninterest expense was $2.1 billion, up by $859 million, or 69%, from the prior year, driven by
$650 million recorded for estimated costs of foreclosure-related matters, as well as an increase in
default-related expense for the serviced portfolio.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected metrics |
|
Three months ended March 31, |
(in billions, except ratios and where otherwise noted) |
|
2011 |
|
2010 |
|
Change |
|
Business metrics |
|
|
|
|
|
|
|
|
|
|
|
|
End-of-period loans owned: |
|
|
|
|
|
|
|
|
|
|
|
|
Auto |
|
$ |
47.4 |
|
|
$ |
47.4 |
|
|
|
|
% |
Prime mortgage, including option ARMs(a) |
|
|
14.1 |
|
|
|
13.7 |
|
|
|
3 |
|
Student and other |
|
|
14.3 |
|
|
|
17.4 |
|
|
|
(18 |
) |
|
|
|
|
|
Total end-of-period loans owned |
|
|
75.8 |
|
|
|
78.5 |
|
|
|
(3 |
) |
|
|
|
|
|
Average loans owned: |
|
|
|
|
|
|
|
|
|
|
|
|
Auto |
|
$ |
47.7 |
|
|
$ |
46.9 |
|
|
|
2 |
|
Prime mortgage, including option ARMs (a) |
|
|
14.0 |
|
|
|
12.5 |
|
|
|
12 |
|
Student and other |
|
|
14.4 |
|
|
|
18.4 |
|
|
|
(22 |
) |
|
|
|
|
|
Total average loans owned(b) |
|
|
76.1 |
|
|
|
77.8 |
|
|
|
(2 |
) |
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected metrics |
|
Three months ended March 31, |
(in billions, except ratios and where otherwise noted) |
|
2011 |
|
2010 |
|
Change |
|
Credit data and quality statistics (in millions, except ratios) |
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
Auto |
|
$ |
47 |
|
|
$ |
102 |
|
|
|
(54 |
)% |
Prime mortgage, including option ARMs |
|
|
4 |
|
|
|
6 |
|
|
|
(33 |
) |
Student and other |
|
|
80 |
|
|
|
64 |
|
|
|
25 |
|
|
|
|
|
|
Total net charge-offs |
|
|
131 |
|
|
|
172 |
|
|
|
(24 |
) |
|
|
|
|
|
Net charge-off rate: |
|
|
|
|
|
|
|
|
|
|
|
|
Auto |
|
|
0.40 |
% |
|
|
0.88 |
% |
|
|
|
|
Prime mortgage, including option ARMs |
|
|
0.12 |
|
|
|
0.20 |
|
|
|
|
|
Student and other |
|
|
2.25 |
|
|
|
1.64 |
|
|
|
|
|
|
|
|
|
|
Total net charge-off rate(b) |
|
|
0.70 |
|
|
|
0.93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30+ day delinquency rate(c)(d)(e) |
|
|
1.59 |
|
|
|
1.52 |
|
|
|
|
|
Nonperforming assets (in millions)(f) |
|
$ |
931 |
|
|
$ |
1,006 |
|
|
|
(7 |
) |
|
|
|
|
|
Origination volume: |
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage origination volume by channel |
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
21.0 |
|
|
$ |
11.4 |
|
|
|
84 |
|
Wholesale(g) |
|
|
0.2 |
|
|
|
0.4 |
|
|
|
(50 |
) |
Correspondent(g) |
|
|
13.5 |
|
|
|
16.0 |
|
|
|
(16 |
) |
CNT (negotiated transactions) |
|
|
1.5 |
|
|
|
3.9 |
|
|
|
(62 |
) |
|
|
|
|
|
Total mortgage origination volume |
|
|
36.2 |
|
|
|
31.7 |
|
|
|
14 |
|
|
|
|
|
|
Student |
|
|
0.1 |
|
|
|
1.6 |
|
|
|
(94 |
) |
Auto |
|
|
4.8 |
|
|
|
6.3 |
|
|
|
(24 |
) |
|
|
|
|
|
Application volume: |
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage application volume by channel |
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
31.3 |
|
|
$ |
20.3 |
|
|
|
54 |
|
Wholesale(g) |
|
|
0.3 |
|
|
|
0.8 |
|
|
|
(63 |
) |
Correspondent(g) |
|
|
13.6 |
|
|
|
18.2 |
|
|
|
(25 |
) |
|
|
|
|
|
Total mortgage application volume |
|
$ |
45.2 |
|
|
$ |
39.3 |
|
|
|
15 |
|
|
|
|
|
|
Average mortgage loans held-for-sale and loans at fair value(h) |
|
$ |
17.5 |
|
|
$ |
14.5 |
|
|
|
21 |
|
Average assets |
|
|
128.4 |
|
|
|
124.8 |
|
|
|
3 |
|
Repurchase reserve (ending) |
|
|
3.2 |
|
|
|
1.6 |
|
|
|
100 |
|
Third-party mortgage loans serviced (ending) |
|
|
955.0 |
|
|
|
1,075.0 |
|
|
|
(11 |
) |
Third-party mortgage loans serviced (average) |
|
|
958.7 |
|
|
|
1,076.4 |
|
|
|
(11 |
) |
MSR net carrying value (ending) |
|
|
13.1 |
|
|
|
15.5 |
|
|
|
(15 |
) |
Ratio of MSR net carrying value (ending) to third-party mortgage loans serviced (ending) |
|
|
1.37 |
% |
|
|
1.44 |
% |
|
|
|
|
Ratio of annualized loan servicing revenue to third-party mortgage loans serviced (average) |
|
|
0.45 |
|
|
|
0.42 |
|
|
|
|
|
MSR revenue multiple(i) |
|
|
3.04x |
|
|
|
3.43x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental mortgage fees and related income details |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net production revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Production revenue |
|
$ |
679 |
|
|
$ |
433 |
|
|
|
57 |
|
Repurchase losses |
|
|
(420 |
) |
|
|
(432 |
) |
|
|
3 |
|
|
|
|
|
|
Net production revenue |
|
|
259 |
|
|
|
1 |
|
|
NM |
|
|
|
|
|
Net mortgage servicing revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Loan servicing revenue |
|
|
1,052 |
|
|
|
1,107 |
|
|
|
(5 |
) |
Other changes in MSR asset fair value |
|
|
(563 |
) |
|
|
(605 |
) |
|
|
7 |
|
|
|
|
|
|
Total operating revenue |
|
|
489 |
|
|
|
502 |
|
|
|
(3 |
) |
Risk management: |
|
|
|
|
|
|
|
|
|
|
|
|
Changes in MSR asset fair value due to inputs or assumptions in model |
|
|
(751 |
) |
|
|
(96 |
) |
|
NM |
Derivative valuation adjustments and other |
|
|
(486 |
) |
|
|
248 |
|
|
NM |
|
|
|
|
|
Total risk management |
|
|
(1,237 |
) |
|
|
152 |
|
|
NM |
|
|
|
|
|
Total net mortgage servicing revenue |
|
|
(748 |
) |
|
|
654 |
|
|
NM |
|
|
|
|
|
Mortgage fees and related income |
|
$ |
(489 |
) |
|
$ |
655 |
|
|
NM |
|
|
|
|
(a) |
|
Predominantly represents prime loans repurchased from Government National Mortgage
Association (Ginnie Mae) pools, which are insured by U.S. government agencies. See further
discussion of loans repurchased from Ginnie Mae pools in Repurchase liability on pages 4648
of this Form 10-Q. |
|
(b) |
|
For the three months ended March 31, 2011 and 2010, total average loans owned included loans
held-for-sale of $133 million and $2.9 billion, respectively. These amounts were excluded
when calculating the net charge-off rate. |
|
(c) |
|
At March 31, 2011 and 2010, total end-of-period loans owned included loans held-for-sale of
$188 million and $2.9 billion, respectively. These amounts were excluded when calculating the
30+ day delinquency rate. |
24
|
|
|
(d) |
|
At March 31, 2011 and 2010, excluded mortgage loans insured by U.S. government agencies of
$10.4 billion and $11.2 billion, respectively. These amounts were excluded as reimbursement
of insured amounts is proceeding normally. |
|
(e) |
|
At March 31, 2011 and 2010, excluded loans that are 30 days or more past due and still
accruing, which are insured by U.S. government agencies under the FFELP, of $1.0 billion and
$965 million, respectively. These amounts were excluded as reimbursement of insured amounts
is proceeding normally. |
|
(f) |
|
At March 31, 2011 and 2010, nonperforming assets excluded: (1) mortgage loans insured by
U.S. government agencies of $9.8 billion and $10.5 billion, respectively, that are accruing
at the guaranteed reimbursement rate; (2) real estate owned insured by U.S. government
agencies of $2.3 billion and $707 million, respectively; and (3) student loans that are 90
days or more past due and still accruing, which are insured by U.S. government agencies under
the FFELP, of $615 million and $581 million, respectively. These amounts were excluded as
reimbursement of insured amounts is proceeding normally. |
|
(g) |
|
Includes rural housing loans sourced through brokers and correspondents, which are
underwritten under U.S. Department of Agriculture guidelines. |
|
(h) |
|
Loans at fair value consist of prime mortgages originated with the intent to sell that are
accounted for at fair value and classified as trading assets on the Consolidated Balance
Sheets. Average balances of these loans totaled $17.4 billion and $14.2 billion for the three
months ended March 31, 2011 and 2010, respectively. |
|
(i) |
|
Represents the ratio of MSR net carrying value (ending) to third-party mortgage loans
serviced (ending) divided by the ratio of annualized loan servicing revenue to third-party
mortgage loans serviced (average). |
REAL ESTATE PORTFOLIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement data |
|
Three months ended March 31, |
(in millions, except ratio) |
|
2011 |
|
2010 |
|
Change |
|
Noninterest revenue |
|
$ |
8 |
|
|
$ |
32 |
|
|
|
(75 |
)% |
Net interest income |
|
|
1,156 |
|
|
|
1,496 |
|
|
|
(23 |
) |
|
|
|
|
|
Total net revenue |
|
|
1,164 |
|
|
|
1,528 |
|
|
|
(24 |
) |
|
|
|
|
|
Provision for credit losses |
|
|
1,076 |
|
|
|
3,325 |
|
|
|
(68 |
) |
Noninterest expense |
|
|
355 |
|
|
|
419 |
|
|
|
(15 |
) |
|
|
|
|
|
Income/(loss) before income tax expense/(benefit) |
|
|
(267 |
) |
|
|
(2,216 |
) |
|
|
88 |
|
|
|
|
|
|
Net income/(loss) |
|
$ |
(162 |
) |
|
$ |
(1,286 |
) |
|
|
87 |
|
|
|
|
|
|
Overhead ratio |
|
|
30 |
% |
|
|
27 |
% |
|
|
|
|
|
Quarterly results
Real Estate Portfolios reported a net loss of $162 million, compared with a net loss of $1.3
billion in the prior year. The improvement was driven by a lower provision for credit losses.
Net revenue was $1.2 billion, down by $364 million, or 24%, from the prior year. The decrease was
driven by a decline in net interest income as a result of lower loan balances due to portfolio
runoff, and narrower loan spreads.
The provision for credit losses was $1.1 billion, compared with $3.3 billion in the prior year. The
current-quarter provision reflected a $1.0 billion reduction in net charge-offs driven by improved
delinquency trends. Also, the prior-year provision included an addition to the allowance for loan
losses of $1.2 billion for the Washington Mutual PCI portfolios.
Noninterest expense was $355 million, down by $64 million, or 15%, from the prior year, reflecting
a decrease in foreclosed asset expense.
25
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected metrics |
|
Three months ended March 31, |
(in billions) |
|
2011 |
|
2010 |
|
Change |
|
Loans excluding PCI loans(a) |
|
|
|
|
|
|
|
|
|
|
|
|
End-of-period loans owned: |
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
$ |
85.3 |
|
|
$ |
97.7 |
|
|
|
(13 |
)% |
Prime mortgage, including option ARMs |
|
|
48.5 |
|
|
|
55.4 |
|
|
|
(12 |
) |
Subprime mortgage |
|
|
10.8 |
|
|
|
13.2 |
|
|
|
(18 |
) |
Other |
|
|
0.8 |
|
|
|
1.0 |
|
|
|
(20 |
) |
|
|
|
|
|
Total end-of-period loans owned |
|
$ |
145.4 |
|
|
$ |
167.3 |
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans owned: |
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
$ |
86.9 |
|
|
$ |
99.5 |
|
|
|
(13 |
) |
Prime mortgage, including option ARMs |
|
|
49.3 |
|
|
|
56.6 |
|
|
|
(13 |
) |
Subprime mortgage |
|
|
11.1 |
|
|
|
13.8 |
|
|
|
(20 |
) |
Other |
|
|
0.8 |
|
|
|
1.1 |
|
|
|
(27 |
) |
|
|
|
|
|
Total average loans owned |
|
$ |
148.1 |
|
|
$ |
171.0 |
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans(a) |
|
|
|
|
|
|
|
|
|
|
|
|
End-of-period loans owned: |
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
$ |
24.0 |
|
|
$ |
26.0 |
|
|
|
(8 |
) |
Prime mortgage |
|
|
16.7 |
|
|
|
19.2 |
|
|
|
(13 |
) |
Subprime mortgage |
|
|
5.3 |
|
|
|
5.8 |
|
|
|
(9 |
) |
Option ARMs |
|
|
24.8 |
|
|
|
28.3 |
|
|
|
(12 |
) |
|
|
|
|
|
Total end-of-period loans owned |
|
$ |
70.8 |
|
|
$ |
79.3 |
|
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans owned: |
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
$ |
24.2 |
|
|
$ |
26.2 |
|
|
|
(8 |
) |
Prime mortgage |
|
|
17.0 |
|
|
|
19.5 |
|
|
|
(13 |
) |
Subprime mortgage |
|
|
5.3 |
|
|
|
5.9 |
|
|
|
(10 |
) |
Option ARMs |
|
|
25.1 |
|
|
|
28.6 |
|
|
|
(12 |
) |
|
|
|
|
|
Total average loans owned |
|
$ |
71.6 |
|
|
$ |
80.2 |
|
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Real Estate Portfolios |
|
|
|
|
|
|
|
|
|
|
|
|
End-of-period loans owned: |
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
$ |
109.3 |
|
|
$ |
123.7 |
|
|
|
(12 |
) |
Prime mortgage, including option ARMs |
|
|
90.0 |
|
|
|
102.9 |
|
|
|
(13 |
) |
Subprime mortgage |
|
|
16.1 |
|
|
|
19.0 |
|
|
|
(15 |
) |
Other |
|
|
0.8 |
|
|
|
1.0 |
|
|
|
(20 |
) |
|
|
|
|
|
Total end-of-period loans owned |
|
$ |
216.2 |
|
|
$ |
246.6 |
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans owned: |
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
$ |
111.1 |
|
|
$ |
125.7 |
|
|
|
(12 |
) |
Prime mortgage, including option ARMs |
|
|
91.4 |
|
|
|
104.7 |
|
|
|
(13 |
) |
Subprime mortgage |
|
|
16.4 |
|
|
|
19.7 |
|
|
|
(17 |
) |
Other |
|
|
0.8 |
|
|
|
1.1 |
|
|
|
(27 |
) |
|
|
|
|
|
Total average loans owned |
|
$ |
219.7 |
|
|
$ |
251.2 |
|
|
|
(13 |
) |
|
|
|
|
|
Average assets |
|
$ |
207.2 |
|
|
$ |
240.2 |
|
|
|
(14 |
) |
Home equity origination volume |
|
|
0.2 |
|
|
|
0.3 |
|
|
|
(33 |
) |
|
|
|
|
(a) |
|
PCI loans represent loans acquired in the Washington Mutual transaction for which a
deterioration in credit quality occurred between the origination date and JPMorgan Chases
acquisition date. These loans were initially recorded at fair value and accrete interest
income over the estimated lives of the loans as long as cash flows are reasonably estimable,
even if the underlying loans are contractually past due. |
Included within Real Estate Portfolios are PCI loans that the Firm acquired in the Washington
Mutual transaction. For PCI loans, the excess of the undiscounted gross cash flows expected to be
collected over the carrying value of the loans (the accretable yield) is accreted into interest
income at a level rate of return over the expected life of the loans.
The net spread between the PCI loans and the related liabilities are expected to be relatively
constant over time, except for any basis risk or other residual interest rate risk that remains and
for certain changes in the accretable yield percentage (e.g., from extended loan liquidation
periods and from prepayments). As of March 31, 2011, the remaining weighted-average life of the PCI
loan portfolio is expected to be 6.9 years. For further information, see Note 13, PCI loans, on
pages 134136 of this Form 10-Q. The loan balances are expected to decline more rapidly in the
earlier years as the most troubled loans are liquidated, and more slowly thereafter as the
remaining troubled borrowers have limited refinancing opportunities. Similarly, default and
servicing expense are expected to be higher in the earlier years and decline over time as
liquidations slow down.
26
To date the impact of the PCI loans on Real Estate Portfolios net income has been modestly
negative. This is due to the current net spread of the portfolio, the provision for loan losses
recognized subsequent to its acquisition, and the higher level of default and servicing expense
associated with the portfolio. Over time, the Firm expects that this portfolio will contribute
positively to net income.
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit data and quality statistics |
|
Three months ended March 31, |
(in millions, except ratios) |
|
2011 |
|
2010 |
|
Change |
|
Net charge-offs excluding PCI loans(a): |
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
$ |
720 |
|
|
$ |
1,126 |
|
|
|
(36 |
)% |
Prime mortgage, including option ARMs |
|
|
161 |
|
|
|
476 |
|
|
|
(66 |
) |
Subprime mortgage |
|
|
186 |
|
|
|
457 |
|
|
|
(59 |
) |
Other |
|
|
9 |
|
|
|
16 |
|
|
|
(44 |
) |
|
|
|
|
|
Total net charge-offs |
|
$ |
1,076 |
|
|
$ |
2,075 |
|
|
|
(48 |
) |
|
|
|
|
|
Net charge-off rate excluding PCI loans(a): |
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
|
3.36 |
% |
|
|
4.59 |
% |
|
|
|
|
Prime mortgage, including option ARMs |
|
|
1.32 |
|
|
|
3.41 |
|
|
|
|
|
Subprime mortgage |
|
|
6.80 |
|
|
|
13.43 |
|
|
|
|
|
Other |
|
|
4.56 |
|
|
|
5.90 |
|
|
|
|
|
Total net charge-off rate excluding PCI loans |
|
|
2.95 |
|
|
|
4.92 |
|
|
|
|
|
|
|
|
|
|
Net charge-off rate reported: |
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
|
2.63 |
% |
|
|
3.63 |
% |
|
|
|
|
Prime mortgage, including option ARMs |
|
|
0.71 |
|
|
|
1.84 |
|
|
|
|
|
Subprime mortgage |
|
|
4.60 |
|
|
|
9.41 |
|
|
|
|
|
Other |
|
|
4.56 |
|
|
|
5.90 |
|
|
|
|
|
Total net charge-off rate reported |
|
|
1.99 |
|
|
|
3.35 |
|
|
|
|
|
|
|
|
|
|
30+ day delinquency rate excluding PCI loans(b) |
|
|
6.22 |
% |
|
|
7.28 |
% |
|
|
|
|
Allowance for loan losses |
|
$ |
14,659 |
|
|
$ |
14,127 |
|
|
|
4 |
|
Nonperforming assets(c) |
|
|
8,152 |
|
|
|
10,313 |
|
|
|
(21 |
) |
Allowance for loan losses to ending loans retained |
|
|
6.78 |
% |
|
|
5.73 |
% |
|
|
|
|
Allowance for loan losses to ending loans retained excluding PCI loans(a) |
|
|
6.68 |
|
|
|
6.76 |
|
|
|
|
|
|
|
|
|
(a) |
|
Excludes the impact of PCI loans that were acquired as part of the Washington Mutual
transaction. These loans were accounted for at fair value on the acquisition date, which
incorporated managements estimate, as of that date, of credit losses over the remaining life
of the portfolio. An allowance for loan losses of $4.9 billion and $2.8 billion was recorded
for these loans at March 31, 2011 and 2010, respectively, which was also excluded from the
applicable ratios. To date, no charge-offs have been recorded for these loans. |
|
(b) |
|
At March 31, 2011 and 2010, the delinquency rate for PCI loans was 27.36% and 28.49%,
respectively. |
|
(c) |
|
Excludes PCI loans that were acquired as part of the Washington Mutual transaction, which
are accounted for on a pool basis. Since each pool is accounted for as a single asset with a
single composite interest rate and an aggregate expectation of cash flows, the past-due
status of the pools, or that of the individual loans within the pools, is not meaningful.
Because the Firm is recognizing interest income on each pool of loans, they are all
considered to be performing. |
27
CARD SERVICES
For a discussion of the business profile of CS, see pages 7981 of JPMorgan Chases 2010
Annual Report and Introduction on page 4 of this Form 10-Q.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement data(a) |
Three months ended March 31, |
(in millions, except ratios) |
|
2011 |
|
2010 |
|
Change |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Credit card income |
|
$ |
898 |
|
|
$ |
813 |
|
|
|
10 |
% |
All other income(b) |
|
|
(116 |
) |
|
|
(55 |
) |
|
|
(111 |
) |
|
|
|
|
|
Noninterest revenue |
|
|
782 |
|
|
|
758 |
|
|
|
3 |
|
Net interest income |
|
|
3,200 |
|
|
|
3,689 |
|
|
|
(13 |
) |
|
|
|
|
|
Total net revenue |
|
|
3,982 |
|
|
|
4,447 |
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
|
226 |
|
|
|
3,512 |
|
|
|
(94 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
|
364 |
|
|
|
330 |
|
|
|
10 |
|
Noncompensation expense |
|
|
1,085 |
|
|
|
949 |
|
|
|
14 |
|
Amortization of intangibles |
|
|
106 |
|
|
|
123 |
|
|
|
(14 |
) |
|
|
|
|
|
Total noninterest expense |
|
|
1,555 |
|
|
|
1,402 |
|
|
|
11 |
|
|
|
|
|
|
Income/(loss) before income tax expense/(benefit) |
|
|
2,201 |
|
|
|
(467 |
) |
|
NM |
Income tax expense/(benefit) |
|
|
858 |
|
|
|
(164 |
) |
|
NM |
|
|
|
|
|
Net income/(loss) |
|
$ |
1,343 |
|
|
$ |
(303 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial ratios(a) |
|
|
|
|
|
|
|
|
|
|
|
|
Return on common equity |
|
|
42 |
% |
|
|
(8 |
)% |
|
|
|
|
Overhead ratio |
|
|
39 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
(a) |
|
Effective January 1, 2011, the commercial card business that was previously in TSS was
transferred to CS. There is no material impact on the financial data; the prior period was not
revised. The commercial card portfolio is excluded from business metrics and supplemental
information where noted. |
|
(b) |
|
Includes the impact of revenue sharing agreements with other JPMorgan Chase
business segments. |
Quarterly results
Net income was $1.3 billion, compared with a net loss of $303 million in the prior year. The
improved results were driven by a lower provision for credit losses, partially offset by lower net
revenue.
End-of-period loans were $128.8 billion, a decrease of $20.5 billion, or 14%, from the prior year.
Average loans were $132.5 billion, a decrease of $23.3 billion, or 15%, from the prior year. The
declines in both end-of-period and average loans were consistent with expected portfolio runoff.
Net revenue was $4.0 billion, a decrease of $465 million, or 10%, from the prior year. Net interest
income was $3.2 billion, down by $489 million, or 13%. The decrease in net interest income was
driven by lower average loan balances, the impact of legislative changes and a decreased level of
fees. These decreases were largely offset by lower revenue reversals associated with lower
charge-offs. Noninterest revenue was $782 million, an increase of $24 million, or 3%. The increase
was driven by the transfer of the Commercial Card business to CS from TSS in the first quarter of
2011 and higher net interchange income, partially offset by lower revenue from fee-based products.
The provision for credit losses was $226 million, compared with $3.5 billion in the prior year. The
current-quarter provision reflected lower net charge-offs and a reduction of $2.0 billion to the
allowance for loan losses due to lower estimated losses. The prior-year provision included a
reduction of $1.0 billion to the allowance for loan losses. Excluding the Washington Mutual and
Commercial Card portfolios, the net charge-off rate1 was 6.20%, down from 10.54% in the
prior year; and the 30-day delinquency rate1 was 3.25%, down from 4.99% in the prior
year. Including the Washington Mutual and Commercial Card portfolios, the net charge-off rate was
6.97% (6.81% including loans held-for-sale), down from 11.75% in the prior year; the 30-day
delinquency rate was 3.57% (3.55% including loans held-for-sale), down from 5.62% in the
prior year.
Noninterest expense was $1.6 billion, an increase of $153 million, or 11%, due to the transfer of
the Commercial Card business and higher marketing expense.
1. |
|
Includes loans held-for-sale, which are non-GAAP financial measures, to provide more
meaningful measures that enable comparability with the prior period. |
28
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected metrics |
|
Three months ended March 31, |
(in millions, except headcount, ratios and where otherwise noted) |
|
2011 |
|
2010 |
|
Change |
|
Financial ratios(a) |
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of average loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
9.79 |
% |
|
|
9.60 |
% |
|
|
|
|
Provision for credit losses |
|
|
0.69 |
|
|
|
9.14 |
|
|
|
|
|
Noninterest revenue |
|
|
2.39 |
|
|
|
1.97 |
|
|
|
|
|
Risk adjusted margin(b) |
|
|
11.49 |
|
|
|
2.43 |
|
|
|
|
|
Noninterest expense |
|
|
4.76 |
|
|
|
3.65 |
|
|
|
|
|
Pretax income/(loss) (ROO) |
|
|
6.73 |
|
|
|
(1.22 |
) |
|
|
|
|
Net income/(loss) |
|
|
4.11 |
|
|
|
(0.79 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business metrics, excluding Commercial Card(a) |
|
|
|
|
|
|
|
|
|
|
|
|
Sales volume (in billions) |
|
$ |
77.5 |
|
|
$ |
69.4 |
|
|
|
12 |
% |
New accounts opened |
|
|
2.6 |
|
|
|
2.5 |
|
|
|
4 |
|
Open accounts |
|
|
91.9 |
|
|
|
88.9 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchant acquiring business |
|
|
|
|
|
|
|
|
|
|
|
|
Bank card volume (in billions) |
|
$ |
125.7 |
|
|
$ |
108.0 |
|
|
|
16 |
|
Total transactions (in billions) |
|
|
5.6 |
|
|
|
4.7 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected balance sheet data (period-end)(a) |
|
|
|
|
|
|
|
|
|
|
|
|
Loans(c) |
|
$ |
128,803 |
|
|
$ |
149,260 |
|
|
|
(14 |
) |
Equity |
|
|
13,000 |
|
|
|
15,000 |
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected balance sheet data (average)(a) |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
138,113 |
|
|
$ |
156,968 |
|
|
|
(12 |
) |
Loans(d) |
|
|
132,537 |
|
|
|
155,790 |
|
|
|
(15 |
) |
Equity |
|
|
13,000 |
|
|
|
15,000 |
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Headcount(e) |
|
|
21,774 |
|
|
|
22,478 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit quality statistics retained(a) |
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
$ |
2,226 |
|
|
$ |
4,512 |
|
|
|
(51 |
) |
Net charge-off rate(d)(f) |
|
|
6.97 |
% |
|
|
11.75 |
% |
|
|
|
|
Delinquency rates(c) |
|
|
|
|
|
|
|
|
|
|
|
|
30+ day |
|
|
3.57 |
|
|
|
5.62 |
|
|
|
|
|
90+ day |
|
|
1.93 |
|
|
|
3.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
$ |
9,041 |
|
|
$ |
16,032 |
|
|
|
(44 |
) |
Allowance for loan losses to period-end loans(c) |
|
|
7.24 |
% |
|
|
10.74 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information(a)(g)(h) |
|
|
|
|
|
|
|
|
|
|
|
|
Chase, excluding Washington Mutual portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
Loans (period-end) |
|
$ |
116,395 |
|
|
$ |
132,056 |
|
|
|
(12 |
) |
Average loans |
|
|
119,411 |
|
|
|
137,183 |
|
|
|
(13 |
) |
Net interest income(i) |
|
|
9.09 |
% |
|
|
8.86 |
% |
|
|
|
|
Risk adjusted margin(b)(i) |
|
|
10.28 |
|
|
|
2.43 |
|
|
|
|
|
Net charge-off rate |
|
|
6.13 |
|
|
|
10.54 |
|
|
|
|
|
30+ day delinquency rate |
|
|
3.22 |
|
|
|
4.99 |
|
|
|
|
|
90+ day delinquency rate |
|
|
1.71 |
|
|
|
2.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chase, excluding Washington Mutual and Commercial Card portfolios |
|
|
|
|
|
|
|
|
|
|
|
|
Loans (period-end) |
|
$ |
115,016 |
|
|
$ |
132,056 |
|
|
|
(13 |
) |
Average loans |
|
|
118,145 |
|
|
|
137,183 |
|
|
|
(14 |
) |
Net interest income(i) |
|
|
9.25 |
% |
|
|
8.86 |
% |
|
|
|
|
Risk adjusted margin(b)(i) |
|
|
10.21 |
|
|
|
2.43 |
|
|
|
|
|
Net charge-off rate |
|
|
6.20 |
|
|
|
10.54 |
|
|
|
|
|
30+ day delinquency rate |
|
|
3.25 |
|
|
|
4.99 |
|
|
|
|
|
90+ day delinquency rate |
|
|
1.73 |
|
|
|
2.74 |
|
|
|
|
|
|
|
|
|
(a) |
|
Effective January 1, 2011, the commercial card business that was previously in TSS was
transferred to CS. There is no material impact on the financial data; the prior period was not
revised. The commercial card portfolio is excluded from business metrics and supplemental
information where noted. |
|
(b) |
|
Represents total net revenue less provision for credit losses. |
|
(c) |
|
Total period-end loans include loans held-for-sale of $4.0 billion at March 31, 2011. There
were no loans held-for-sale at March 31, 2010. No allowance for loan losses was recorded for
these loans. Loans held-for-sale are excluded when calculating the allowance for loan losses
to period-end loans and delinquency rates. The 30+ day delinquency rate including loans
held-for-sale, which is a non-GAAP financial measure, was 3.55% at March 31, 2011. The 90+ day
delinquency rate including loans held-for-sale, which is a non-GAAP financial measure, was
1.92% at March 31, 2011. |
|
(d) |
|
Total average loans include loans held-for-sale of $3.0 billion for the quarter ended March
31, 2011. There were no loans held-for-sale for the quarter ended March 31, 2010. This amount
is excluded when calculating the net charge-off rate. The net charge-off rate including loans
held-for-sale, which is a non-GAAP financial measure, was 6.81% for the quarter ended March
31, 2011. |
|
(e) |
|
The first quarter of 2011 headcount includes 1,274 employees related to the transfer of the
commercial card business from TSS to CS. |
|
(f) |
|
Results for the quarter ended March 31, 2010 reflect the impact of fair value accounting
adjustments related to the consolidation of the Washington Mutual Master Trust (WMMT) in the
second quarter of 2009. |
|
(g) |
|
Supplemental information is provided for Chase, excluding Washington Mutual and Commercial
Card portfolios and including loans held-for-sale, which are non-GAAP financial measures, to
provide more meaningful measures that enable comparability with prior periods. |
29
|
|
|
(h) |
|
For additional information on loan balances, delinquency rates, and net charge-off rates for
the Washington Mutual portfolio, see Consumer Credit Portfolio on pages 7078, and Note 13 on
pages 122138 of this Form 10-Q. |
|
(i) |
|
As a percentage of average loans. |
COMMERCIAL BANKING
For a discussion of the business profile of CB, see pages 8283 of JPMorgan Chases 2010
Annual Report and Introduction on page 5 of this Form 10-Q.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement data |
|
Three months ended March 31, |
(in millions, except ratios) |
|
2011 |
|
2010 |
|
Change |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Lending- and deposit-related fees |
|
$ |
264 |
|
|
$ |
277 |
|
|
|
(5 |
)% |
Asset management, administration and commissions |
|
|
35 |
|
|
|
37 |
|
|
|
(5 |
) |
All other income(a) |
|
|
203 |
|
|
|
186 |
|
|
|
9 |
|
|
|
Noninterest revenue |
|
|
502 |
|
|
|
500 |
|
|
|
|
|
Net interest income |
|
|
1,014 |
|
|
|
916 |
|
|
|
11 |
|
|
|
Total net revenue(b) |
|
|
1,516 |
|
|
|
1,416 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
|
47 |
|
|
|
214 |
|
|
|
(78 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
|
223 |
|
|
|
206 |
|
|
|
8 |
|
Noncompensation expense |
|
|
332 |
|
|
|
324 |
|
|
|
2 |
|
Amortization of intangibles |
|
|
8 |
|
|
|
9 |
|
|
|
(11 |
) |
|
|
Total noninterest expense |
|
|
563 |
|
|
|
539 |
|
|
|
4 |
|
|
|
Income before income tax expense |
|
|
906 |
|
|
|
663 |
|
|
|
37 |
|
Income tax expense |
|
|
360 |
|
|
|
273 |
|
|
|
32 |
|
|
|
Net income |
|
$ |
546 |
|
|
$ |
390 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by product |
|
|
|
|
|
|
|
|
|
|
|
|
Lending(c) |
|
$ |
837 |
|
|
$ |
658 |
|
|
|
27 |
|
Treasury services(c) |
|
|
542 |
|
|
|
638 |
|
|
|
(15 |
) |
Investment banking |
|
|
110 |
|
|
|
105 |
|
|
|
5 |
|
Other |
|
|
27 |
|
|
|
15 |
|
|
|
80 |
|
|
|
Total Commercial Banking revenue |
|
$ |
1,516 |
|
|
$ |
1,416 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IB revenue, gross(d) |
|
$ |
309 |
|
|
$ |
311 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by client segment |
|
|
|
|
|
|
|
|
|
|
|
|
Middle Market Banking |
|
$ |
755 |
|
|
$ |
746 |
|
|
|
1 |
|
Commercial Term Lending |
|
|
286 |
|
|
|
229 |
|
|
|
25 |
|
Corporate Client Banking(e) |
|
|
290 |
|
|
|
263 |
|
|
|
10 |
|
Real Estate Banking |
|
|
88 |
|
|
|
100 |
|
|
|
(12 |
) |
Other |
|
|
97 |
|
|
|
78 |
|
|
|
24 |
|
|
|
Total Commercial Banking revenue |
|
$ |
1,516 |
|
|
$ |
1,416 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Return on common equity |
|
|
28 |
% |
|
|
20 |
% |
|
|
|
|
Overhead ratio |
|
|
37 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
(a) |
|
CB client revenue from investment banking products and commercial card transactions is
included in all other income. |
|
(b) |
|
Total net revenue included tax-equivalent adjustments from income tax credits related to
equity investments in designated community development entities that provide loans to
qualified businesses in low-income communities as well as tax-exempt income from municipal
bond activity of $65 million and $45 million for the three months ended March 31, 2011 and
2010, respectively. |
|
(c) |
|
Effective January 1, 2011, product revenue from commercial card and standby letters of credit
transactions is included in lending. For the period ending March 31, 2011, the impact of the
change was $107 million. In prior quarters, it was reported in treasury services. |
|
(d) |
|
Represents the total revenue related to investment banking products sold to CB clients. |
|
(e) |
|
Corporate Client Banking was known as Mid-Corporate Banking prior to January 1, 2011. |
Quarterly results
Net income was $546 million, an increase of $156 million, or 40%, from the prior year. The increase
was driven by a reduction in the provision for credit losses and higher net revenue.
Net revenue was $1.5 billion, up by $100 million, or 7%, from the prior year. Net interest income
was $1.0 billion, up by $98 million, or 11%, driven by growth in liability balances, wider loan
spreads, and growth in loan balances, partially offset by spread compression on liability products.
Noninterest revenue was $502 million, flat compared with the prior year.
Revenue from Middle Market Banking was $755 million, an increase of $9 million, or 1%, from the
prior year. Revenue from Commercial Term Lending was $286 million, an increase of $57 million, or
25%. Revenue from Corporate Client Banking (formerly Mid-Corporate Banking) was $290 million, an
increase of $27 million, or 10%. Revenue from Real Estate Banking was $88 million, a decrease of
$12 million, or 12%.
30
The provision for credit losses was $47 million, compared with $214 million in the prior year.
Net charge-offs were $31 million (0.13% net charge-off rate) and were largely related to commercial
real estate; this compared with net charge-offs of $229 million (0.96% net charge-off rate) in the
prior year. The allowance for loan losses to end-of-period loans retained was 2.59%, down from
3.15% in the prior year. Nonaccrual loans were $2.0 billion, down by $1.0 billion, or 35%, from the
prior year, reflecting decreases in commercial real estate.
Noninterest expense was $563 million, an increase of $24 million, or 4%, from the prior year,
primarily reflecting higher headcount-related expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected metrics |
|
Three months ended March 31, |
(in millions, except headcount and ratios) |
|
2011 |
|
2010 |
|
Change |
|
Selected balance sheet data (period-end): |
|
|
|
|
|
|
|
|
|
|
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans retained |
|
$ |
99,334 |
|
|
$ |
95,435 |
|
|
|
4 |
% |
Loans held-for-sale and loans at fair value |
|
|
835 |
|
|
|
294 |
|
|
|
184 |
|
|
|
|
|
|
Total loans |
|
|
100,169 |
|
|
|
95,729 |
|
|
|
5 |
|
Equity |
|
|
8,000 |
|
|
|
8,000 |
|
|
|
|
|
Selected balance sheet data (average): |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
140,400 |
|
|
$ |
133,013 |
|
|
|
6 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans retained |
|
|
98,829 |
|
|
|
96,317 |
|
|
|
3 |
|
Loans held-for-sale and loans at fair value |
|
|
756 |
|
|
|
297 |
|
|
|
155 |
|
|
|
|
|
|
Total loans |
|
|
99,585 |
|
|
|
96,614 |
|
|
|
3 |
|
Liability balances |
|
|
156,200 |
|
|
|
133,142 |
|
|
|
17 |
|
Equity |
|
|
8,000 |
|
|
|
8,000 |
|
|
|
|
|
Average loans by client segment: |
|
|
|
|
|
|
|
|
|
|
|
|
Middle Market Banking |
|
$ |
38,207 |
|
|
$ |
33,919 |
|
|
|
13 |
|
Commercial Term Lending |
|
|
37,810 |
|
|
|
36,057 |
|
|
|
5 |
|
Corporate Client Banking(a) |
|
|
12,374 |
|
|
|
12,258 |
|
|
|
1 |
|
Real Estate Banking |
|
|
7,607 |
|
|
|
10,438 |
|
|
|
(27 |
) |
Other |
|
|
3,587 |
|
|
|
3,942 |
|
|
|
(9 |
) |
|
|
|
|
|
Total Commercial Banking loans |
|
$ |
99,585 |
|
|
$ |
96,614 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Headcount |
|
|
4,941 |
|
|
|
4,701 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit data and quality statistics: |
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
$ |
31 |
|
|
$ |
229 |
|
|
|
(86 |
) |
Nonperforming assets |
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans retained |
|
|
1,925 |
|
|
|
2,947 |
|
|
|
(35 |
) |
Nonaccrual loans held-for-sale and loans at fair value |
|
|
30 |
|
|
|
49 |
|
|
|
(39 |
) |
|
|
|
|
|
Total nonaccrual loans |
|
|
1,955 |
|
|
|
2,996 |
|
|
|
(35 |
) |
Assets acquired in loan satisfactions |
|
|
179 |
|
|
|
190 |
|
|
|
(6 |
) |
|
|
|
|
|
Total nonperforming assets |
|
|
2,134 |
|
|
|
3,186 |
|
|
|
(33 |
) |
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses(b) |
|
|
2,577 |
|
|
|
3,007 |
|
|
|
(14 |
) |
Allowance for lending-related commitments |
|
|
206 |
|
|
|
359 |
|
|
|
(43 |
) |
|
|
|
|
|
Total allowance for credit losses |
|
|
2,783 |
|
|
|
3,366 |
|
|
|
(17 |
) |
Net charge-off rate |
|
|
0.13 |
% |
|
|
0.96 |
% |
|
|
|
|
Allowance for loan losses to period-end loans retained |
|
|
2.59 |
|
|
|
3.15 |
|
|
|
|
|
Allowance for loan losses to nonaccrual loans retained |
|
|
134 |
|
|
|
102 |
|
|
|
|
|
Nonaccrual loans to total period-end loans |
|
|
1.95 |
|
|
|
3.13 |
|
|
|
|
|
|
|
|
|
(a) |
|
Corporate Client Banking was known as Mid-Corporate Banking prior to January 1, 2011. |
|
(b) |
|
Allowance for loan losses of $360 million and $612 million were held against nonaccrual loans
retained for the periods ended March 31, 2011 and 2010, respectively. |
31
TREASURY & SECURITIES SERVICES
For a discussion of the business profile of TSS, see pages 8485 of JPMorgan Chases 2010
Annual Report and Introduction on page 5 of this Form 10-Q.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement data |
|
Three months ended March 31, |
(in millions, except headcount and ratios) |
|
2011 |
|
2010 |
|
Change |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Lending and depositrelated fees |
|
$ |
303 |
|
|
$ |
311 |
|
|
|
(3 |
)% |
Asset management, administration and commissions |
|
|
695 |
|
|
|
659 |
|
|
|
5 |
|
All other income |
|
|
139 |
|
|
|
176 |
|
|
|
(21 |
) |
|
|
|
|
|
Noninterest revenue |
|
|
1,137 |
|
|
|
1,146 |
|
|
|
(1 |
) |
Net interest income |
|
|
703 |
|
|
|
610 |
|
|
|
15 |
|
|
|
|
|
|
Total net revenue |
|
|
1,840 |
|
|
|
1,756 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
|
4 |
|
|
|
(39 |
) |
|
NM |
Credit allocation income/(expense)(a) |
|
|
27 |
|
|
|
(30 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
|
715 |
|
|
|
657 |
|
|
|
9 |
|
Noncompensation expense |
|
|
647 |
|
|
|
650 |
|
|
|
|
|
Amortization of intangibles |
|
|
15 |
|
|
|
18 |
|
|
|
(17 |
) |
|
|
|
|
|
Total noninterest expense |
|
|
1,377 |
|
|
|
1,325 |
|
|
|
4 |
|
|
|
|
|
|
Income before income tax expense |
|
|
486 |
|
|
|
440 |
|
|
|
10 |
|
Income tax expense |
|
|
170 |
|
|
|
161 |
|
|
|
6 |
|
|
|
|
|
|
Net income |
|
$ |
316 |
|
|
$ |
279 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by business |
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Services |
|
$ |
891 |
|
|
$ |
882 |
|
|
|
1 |
|
Worldwide Securities Services |
|
|
949 |
|
|
|
874 |
|
|
|
9 |
|
|
|
|
|
|
Total net revenue |
|
$ |
1,840 |
|
|
$ |
1,756 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by geographic region(b) |
|
|
|
|
|
|
|
|
|
|
|
|
Asia/Pacific |
|
$ |
276 |
|
|
$ |
219 |
|
|
|
26 |
|
Latin America/Caribbean |
|
|
76 |
|
|
|
45 |
|
|
|
69 |
|
Europe/Middle East/Africa |
|
|
630 |
|
|
|
569 |
|
|
|
11 |
|
North America |
|
|
858 |
|
|
|
923 |
|
|
|
(7 |
) |
|
|
|
|
|
Total net revenue |
|
$ |
1,840 |
|
|
$ |
1,756 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade finance loans by geographic region (period-end)(b) |
|
|
|
|
|
|
|
|
|
|
|
|
Asia/Pacific |
|
$ |
14,607 |
|
|
$ |
7,679 |
|
|
|
90 |
|
Latin America/Caribbean |
|
|
4,014 |
|
|
|
2,881 |
|
|
|
39 |
|
Europe/Middle East/Africa |
|
|
5,794 |
|
|
|
2,163 |
|
|
|
168 |
|
North America |
|
|
1,084 |
|
|
|
996 |
|
|
|
9 |
|
|
|
|
|
|
Total trade finance loans |
|
$ |
25,499 |
|
|
$ |
13,719 |
|
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Return on common equity |
|
|
18 |
% |
|
|
17 |
% |
|
|
|
|
Overhead ratio |
|
|
75 |
|
|
|
75 |
|
|
|
|
|
Pretax margin ratio |
|
|
26 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected balance sheet data (period-end) |
|
|
|
|
|
|
|
|
|
|
|
|
Loans(c) |
|
$ |
31,020 |
|
|
$ |
24,066 |
|
|
|
29 |
|
Equity |
|
|
7,000 |
|
|
|
6,500 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected balance sheet data (average) |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
47,873 |
|
|
$ |
38,273 |
|
|
|
25 |
|
Loans(c) |
|
|
29,290 |
|
|
|
19,578 |
|
|
|
50 |
|
Liability balances |
|
|
265,720 |
|
|
|
247,905 |
|
|
|
7 |
|
Equity |
|
|
7,000 |
|
|
|
6,500 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Headcount |
|
|
28,040 |
|
|
|
27,223 |
|
|
|
3 |
|
|
|
|
|
(a) |
|
IB manages credit exposures related to the GCB on behalf of IB and TSS. Effective January 1,
2011, IB and TSS will share the economics related to the Firms GCB clients. Included within
this allocation are net revenues, provision for credit losses, as well as expenses. The
prior-year period reflected a reimbursement to IB for a portion of the total costs of managing
the credit portfolio. IB recognizes this credit allocation as a component of all other income. |
|
(b) |
|
Revenue and trade finance loans are based on TSS managements view of the domicile of
clients. |
|
(c) |
|
Loan balances include trade finance loans, wholesale overdrafts and commercial card.
Effective January 1, 2011, the commercial card loan portfolio (of approximately $1.2 billion)
that was previously in TSS was transferred to CS. There is no material impact on the financial
data; the prior-year period was not revised. |
32
Quarterly results
Net income was $316 million, an increase of $37 million, or 13%, from the prior year.
Net revenue was $1.8 billion, an increase of $84 million, or 5%, from the prior year. Worldwide
Securities Services net revenue was $949 million, an increase of $75 million, or 9%. The increase
was driven by net inflows of assets under custody, higher market levels and higher net interest
income. Treasury Services net revenue was $891 million, an increase of $9 million, or 1%. The
increase was driven by higher net interest income and higher international trade loan volumes,
offset by the transfer of the Commercial Card business to CS in the first quarter of 2011.
TSS generated firmwide net revenue of $2.4 billion, including $1.5 billion by Treasury Services; of
that amount, $891 million was recorded in Treasury Services, $542 million in Commercial Banking and
$63 million in other lines of business. The remaining $949 million of firmwide net revenue was
recorded in Worldwide Securities Services.
Noninterest expense was $1.4 billion, an increase of $52 million, or 4%, from the prior year. The
increase was mainly driven by continued investment in new product platforms, primarily related to
international expansion, partially offset by the transfer of the Commercial Card business to Card
Services.
Results for the current quarter include a $27 million pretax benefit related to the allocation
between IB and TSS associated with credit extended to GCB clients. IB manages credit exposures
related to the GCB on behalf of IB and TSS. Effective January 1, 2011, IB and TSS will share the
economics related to the Firms GCB clients.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected metrics |
|
Three months ended March 31, |
(in millions, except ratios and where otherwise noted) |
|
2011 |
|
2010 |
|
Change |
|
TSS firmwide disclosures |
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Services revenue reported |
|
$ |
891 |
|
|
$ |
882 |
|
|
|
1 |
% |
Treasury Services revenue reported in CB(a) |
|
|
542 |
|
|
|
638 |
|
|
|
(15 |
) |
Treasury Services revenue reported in other lines of business |
|
|
63 |
|
|
|
56 |
|
|
|
13 |
|
|
|
|
|
|
Treasury Services firmwide revenue(b) |
|
|
1,496 |
|
|
|
1,576 |
|
|
|
(5 |
) |
Worldwide Securities Services revenue |
|
|
949 |
|
|
|
874 |
|
|
|
9 |
|
|
|
|
|
|
Treasury & Securities Services firmwide revenue(b) |
|
$ |
2,445 |
|
|
$ |
2,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Services firmwide liability balances (average)(c) |
|
$ |
339,240 |
|
|
$ |
305,105 |
|
|
|
11 |
|
Treasury & Securities Services firmwide liability balances (average)(c) |
|
|
421,920 |
|
|
|
381,047 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSS firmwide financial ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Services firmwide overhead ratio(a)(d) |
|
|
56 |
% |
|
|
55 |
% |
|
|
|
|
Treasury & Securities Services firmwide overhead ratio(a)(d) |
|
|
67 |
|
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Firmwide business metrics |
|
|
|
|
|
|
|
|
|
|
|
|
Assets under custody (in billions) |
|
$ |
16,619 |
|
|
$ |
15,283 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S.$ ACH transactions originated |
|
|
992 |
|
|
|
949 |
|
|
|
5 |
|
Total U.S.$ clearing volume (in thousands) |
|
|
30,971 |
|
|
|
28,669 |
|
|
|
8 |
|
International electronic funds transfer volume (in thousands)(e) |
|
|
60,942 |
|
|
|
55,754 |
|
|
|
9 |
|
Wholesale check volume |
|
|
532 |
|
|
|
478 |
|
|
|
11 |
|
Wholesale cards issued (in thousands)(f) |
|
|
23,170 |
|
|
|
27,352 |
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit data and quality statistics |
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
Nonaccrual loans |
|
|
11 |
|
|
|
14 |
|
|
|
(21 |
) |
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
|
69 |
|
|
|
57 |
|
|
|
21 |
|
Allowance for lending-related commitments |
|
|
48 |
|
|
|
76 |
|
|
|
(37 |
) |
|
|
|
|
|
Total allowance for credit losses |
|
|
117 |
|
|
|
133 |
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-off rate |
|
|
|
% |
|
|
|
% |
|
|
|
|
Allowance for loan losses to period-end loans |
|
|
0.22 |
|
|
|
0.24 |
|
|
|
|
|
Allowance for loan losses to nonaccrual loans |
|
NM |
|
|
407 |
|
|
|
|
|
Nonaccrual loans to period-end loans |
|
|
0.04 |
|
|
|
0.06 |
|
|
|
|
|
|
|
|
|
(a) |
|
Effective January 1, 2011, certain CB revenues were excluded in the TS firmwide metrics; they
are instead directly captured within CBs lending revenue by product. For the three months
ended March 31, 2011, the impact of this change was $107 million. For the three months ended
March 31, 2010, these revenues were included in CBs treasury services revenue by product. |
|
(b) |
|
TSS firmwide revenue includes foreign exchange (FX) revenue recorded in TSS and FX revenue
associated with TSS customers who are FX customers of IB. However, some of the FX revenue
associated with TSS customers who are FX customers of IB is not included in TS and TSS |
33
|
|
|
|
|
firmwide revenue. The total FX revenue generated was $160 million and $137 million for the
three months ended March 31, 2011 and 2010, respectively. |
|
(c) |
|
Firmwide liability balances include liability balances recorded in CB. |
|
(d) |
|
Overhead ratios have been calculated based on firmwide revenue and TSS and TS expense,
respectively, including those allocated to certain other lines of business. FX revenue and
expense recorded in IB for TSS-related FX activity are not included in this ratio. |
|
(e) |
|
International electronic funds transfer includes non-U.S. dollar Automated Clearing House
(ACH) and clearing volume. |
|
(f) |
|
Wholesale cards issued and outstanding include U.S. domestic commercial, stored value,
prepaid and government electronic benefit card products. Effective January 1, 2011, the
commercial card business was transferred from TSS to CS. |
ASSET MANAGEMENT
For a discussion of the business profile of AM, see pages 8688 of JPMorgan Chases 2010
Annual Report and Introduction on page 5 of this Form 10-Q.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement data |
|
Three months ended March 31, |
|
(in millions, except ratios) |
|
2011 |
|
|
2010 |
|
|
Change |
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Asset management, administration and commissions |
|
$ |
1,707 |
|
|
$ |
1,508 |
|
|
|
13 |
% |
All other income |
|
|
313 |
|
|
|
266 |
|
|
|
18 |
|
|
|
|
|
|
Noninterest revenue |
|
|
2,020 |
|
|
|
1,774 |
|
|
|
14 |
|
Net interest income |
|
|
386 |
|
|
|
357 |
|
|
|
8 |
|
|
|
|
|
|
Total net revenue |
|
|
2,406 |
|
|
|
2,131 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
|
5 |
|
|
|
35 |
|
|
|
(86 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
|
1,039 |
|
|
|
910 |
|
|
|
14 |
|
Noncompensation expense |
|
|
599 |
|
|
|
514 |
|
|
|
17 |
|
Amortization of intangibles |
|
|
22 |
|
|
|
18 |
|
|
|
22 |
|
|
|
|
|
|
Total noninterest expense |
|
|
1,660 |
|
|
|
1,442 |
|
|
|
15 |
|
|
|
|
|
|
Income before income tax expense |
|
|
741 |
|
|
|
654 |
|
|
|
13 |
|
Income tax expense |
|
|
275 |
|
|
|
262 |
|
|
|
5 |
|
|
|
|
|
|
Net income |
|
$ |
466 |
|
|
$ |
392 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by client segment |
|
|
|
|
|
|
|
|
|
|
|
|
Private Banking(a) |
|
$ |
1,317 |
|
|
$ |
1,150 |
|
|
|
15 |
|
Institutional |
|
|
549 |
|
|
|
544 |
|
|
|
1 |
|
Retail |
|
|
540 |
|
|
|
437 |
|
|
|
24 |
|
|
|
|
|
|
Total net revenue |
|
$ |
2,406 |
|
|
$ |
2,131 |
|
|
|
13 |
|
|
|
|
|
|
Financial ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Return on common equity |
|
|
29 |
% |
|
|
24 |
% |
|
|
|
|
Overhead ratio |
|
|
69 |
|
|
|
68 |
|
|
|
|
|
Pretax margin ratio |
|
|
31 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
(a) |
|
Private Banking is a combination of the previously disclosed client segments: Private Bank,
Private Wealth Management and JPMorgan Securities. |
Quarterly results
Net income was $466 million, an increase of $74 million, or 19%, from the prior year. These results
reflected higher net revenue and a lower provision for credit losses, largely offset by higher
noninterest expense.
Net revenue was $2.4 billion, an increase of $275 million, or 13%, from the prior year. Noninterest
revenue was $2.0 billion, up by $246 million, or 14%, due to the effect of higher market levels,
net inflows to products with higher margins and higher loan originations, partially offset by lower
performance fees. Net interest income was $386 million, up by $29 million, or 8%, due to higher
deposit and loan balances, partially offset by narrower deposit spreads.
Revenue from Private Banking was $1.3 billion, up 15% from the prior year. Revenue from
Institutional was $549 million, up 1%. Revenue from Retail was $540 million, up 24%.
The provision for credit losses was $5 million, compared with $35 million in the prior year.
Noninterest expense was $1.7 billion, an increase of $218 million, or 15%, from the prior year,
largely resulting from an increase in headcount.
34
|
|
|
|
|
|
|
|
|
|
|
|
|
Business metrics |
|
Three months ended March 31, |
(in millions, except headcount, ranking data, and where otherwise noted) |
|
2011 |
|
2010 |
|
Change |
|
Number of: |
|
|
|
|
|
|
|
|
|
|
|
|
Client advisors(a) |
|
|
2,288 |
|
|
|
1,998 |
|
|
|
15 |
% |
Retirement planning services participants (in thousands) |
|
|
1,604 |
|
|
|
1,651 |
|
|
|
(3 |
) |
JPMorgan Securities brokers |
|
|
431 |
|
|
|
391 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of customer assets in 4 & 5 Star Funds(b) |
|
|
46 |
% |
|
|
43 |
% |
|
|
7 |
|
% of AUM in 1st and 2nd quartiles(c) |
|
|
|
|
|
|
|
|
|
|
|
|
1 year |
|
|
57 |
% |
|
|
55 |
% |
|
|
4 |
|
3 years |
|
|
70 |
% |
|
|
67 |
% |
|
|
4 |
|
5 years |
|
|
77 |
% |
|
|
77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected balance sheet data (period-end) |
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
46,454 |
|
|
$ |
37,088 |
|
|
|
25 |
|
Equity |
|
|
6,500 |
|
|
|
6,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected balance sheet data (average) |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
68,918 |
|
|
$ |
62,525 |
|
|
|
10 |
|
Loans |
|
|
44,948 |
|
|
|
36,602 |
|
|
|
23 |
|
Deposits |
|
|
95,250 |
|
|
|
80,662 |
|
|
|
18 |
|
Equity |
|
|
6,500 |
|
|
|
6,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Headcount |
|
|
17,203 |
|
|
|
15,321 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit data and quality statistics |
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
$ |
11 |
|
|
$ |
28 |
|
|
|
(61 |
) |
Nonaccrual loans |
|
|
254 |
|
|
|
475 |
|
|
|
(47 |
) |
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
|
257 |
|
|
|
261 |
|
|
|
(2 |
) |
Allowance for lending-related commitments |
|
|
4 |
|
|
|
13 |
|
|
|
(69 |
) |
|
|
|
|
|
Total allowance for credit losses |
|
|
261 |
|
|
|
274 |
|
|
|
(5 |
) |
|
Net charge-off rate |
|
|
0.10 |
% |
|
|
0.31 |
% |
|
|
|
|
Allowance for loan losses to period-end loans |
|
|
0.55 |
|
|
|
0.70 |
|
|
|
|
|
Allowance for loan losses to nonaccrual loans |
|
|
101 |
|
|
|
55 |
|
|
|
|
|
Nonaccrual loans to period-end loans |
|
|
0.55 |
|
|
|
1.28 |
|
|
|
|
|
|
|
|
|
(a) |
|
Effective January 1, 2011, the methodology used to determine client advisors was revised.
The prior period has been revised. |
|
(b) |
|
Derived from Morningstar for the U.S., the U.K., Luxembourg, France, Hong Kong and Taiwan;
and Nomura for Japan. |
|
(c) |
|
Quartile ranking sourced from: Lipper for the U.S. and Taiwan; Morningstar for the
U.K., Luxembourg, France and Hong Kong; and Nomura for Japan. |
35
Assets under supervision
Assets under supervision were $1.9 trillion, an increase of $201 billion, or 12%, from the prior
year. Assets under management were $1.3 trillion, an increase of $111 billion, or 9%. Both
increases were due to the effect of higher market levels and record net inflows to long-term
products, partially offset by net outflows in liquidity products. Custody, brokerage,
administration and deposit balances were $578 billion, up by $90 billion, or 18%, due to the effect
of higher market levels and custody and brokerage inflows.
|
|
|
|
|
|
|
|
|
ASSETS UNDER SUPERVISION(a) (in billions) |
|
|
|
|
|
|
As of or for the quarter ended March 31, |
|
2011 |
|
|
2010 |
|
|
Assets by asset class |
|
|
|
|
|
|
|
|
Liquidity |
|
$ |
490 |
|
|
$ |
521 |
|
Fixed income |
|
|
305 |
|
|
|
246 |
|
Equities and multi-asset |
|
|
421 |
|
|
|
355 |
|
Alternatives |
|
|
114 |
|
|
|
97 |
|
|
Total assets under management |
|
|
1,330 |
|
|
|
1,219 |
|
Custody/brokerage/administration/deposits |
|
|
578 |
|
|
|
488 |
|
|
Total assets under supervision |
|
$ |
1,908 |
|
|
$ |
1,707 |
|
|
|
|
|
|
|
|
|
|
|
Assets by client segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Banking(b) |
|
$ |
293 |
|
|
$ |
268 |
|
Institutional |
|
|
696 |
|
|
|
669 |
|
Retail |
|
|
341 |
|
|
|
282 |
|
|
Total assets under management |
|
$ |
1,330 |
|
|
$ |
1,219 |
|
|
|
|
|
|
|
|
|
|
|
Private Banking(b) |
|
$ |
773 |
|
|
$ |
666 |
|
Institutional |
|
|
697 |
|
|
|
670 |
|
Retail |
|
|
438 |
|
|
|
371 |
|
|
Total assets under supervision |
|
$ |
1,908 |
|
|
$ |
1,707 |
|
|
|
|
|
|
|
|
|
|
|
Mutual fund assets by asset class |
|
|
|
|
|
|
|
|
Liquidity |
|
$ |
436 |
|
|
$ |
470 |
|
Fixed income |
|
|
99 |
|
|
|
76 |
|
Equities and multi-asset |
|
|
173 |
|
|
|
150 |
|
Alternatives |
|
|
8 |
|
|
|
9 |
|
|
Total mutual fund assets |
|
$ |
716 |
|
|
$ |
705 |
|
|
|
|
|
(a) |
|
Excludes assets under management of American Century Companies, Inc., in which the
Firm had a 40% and 42% ownership at March 31, 2011 and 2010, respectively. |
|
(b) |
|
Private Banking is a combination of the previously disclosed client segments: Private Bank,
Private Wealth Management and JPMorgan Securities. |
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
(in billions) |
|
2011 |
|
|
2010 |
|
|
Assets under management rollforward |
|
|
|
|
|
|
|
|
Beginning balance, January 1 |
|
$ |
1,298 |
|
|
$ |
1,249 |
|
Net asset flows: |
|
|
|
|
|
|
|
|
Liquidity |
|
|
(9 |
) |
|
|
(62 |
) |
Fixed income |
|
|
16 |
|
|
|
16 |
|
Equities, multi-asset and alternatives |
|
|
11 |
|
|
|
6 |
|
Market/performance/other impacts |
|
|
14 |
|
|
|
10 |
|
|
Ending balance, March 31 |
|
$ |
1,330 |
|
|
$ |
1,219 |
|
|
|
|
|
|
|
|
|
|
|
Assets under supervision rollforward |
|
|
|
|
|
|
|
|
|
Beginning balance, January 1 |
|
$ |
1,840 |
|
|
$ |
1,701 |
|
Net asset flows |
|
|
31 |
|
|
|
(10 |
) |
Market/performance/other impacts |
|
|
37 |
|
|
|
16 |
|
|
Ending balance, March 31 |
|
$ |
1,908 |
|
|
$ |
1,707 |
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
International metrics |
|
2011 |
|
2010 |
|
Change |
|
|
|
|
|
Total net revenue: (in millions)(a) |
|
|
|
|
|
|
|
|
|
|
|
|
Asia/Pacific |
|
$ |
246 |
|
|
$ |
222 |
|
|
|
11 |
% |
Latin America/Caribbean |
|
|
165 |
|
|
|
124 |
|
|
|
33 |
|
Europe/Middle East/Africa |
|
|
439 |
|
|
|
385 |
|
|
|
14 |
|
North America |
|
|
1,556 |
|
|
|
1,400 |
|
|
|
11 |
|
|
|
|
|
|
Total net revenue |
|
$ |
2,406 |
|
|
$ |
2,131 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under management: (in billions) |
|
|
|
|
|
|
|
|
|
|
|
|
Asia/Pacific |
|
$ |
115 |
|
|
$ |
102 |
|
|
|
13 |
|
Latin America/Caribbean |
|
|
35 |
|
|
|
26 |
|
|
|
35 |
|
Europe/Middle East/Africa |
|
|
300 |
|
|
|
265 |
|
|
|
13 |
|
North America |
|
|
880 |
|
|
|
826 |
|
|
|
7 |
|
|
|
|
|
|
Total assets under management |
|
$ |
1,330 |
|
|
$ |
1,219 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under supervision: (in billions) |
|
|
|
|
|
|
|
|
|
|
|
|
Asia/Pacific |
|
$ |
155 |
|
|
$ |
131 |
|
|
|
18 |
|
Latin America/Caribbean |
|
|
88 |
|
|
|
66 |
|
|
|
33 |
|
Europe/Middle East/Africa |
|
|
353 |
|
|
|
310 |
|
|
|
14 |
|
North America |
|
|
1,312 |
|
|
|
1,200 |
|
|
|
9 |
|
|
|
|
|
|
Total assets under supervision |
|
$ |
1,908 |
|
|
$ |
1,707 |
|
|
|
12 |
|
|
|
|
|
(a) |
|
Regional revenue is based on the domicile of clients. |
37
CORPORATE / PRIVATE EQUITY
For a discussion of the business profile of Corporate/Private Equity, see pages 8990 of
JPMorgan Chases 2010 Annual Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement data |
|
Three months ended March 31, |
(in millions, except headcount) |
|
2011 |
|
2010 |
|
Change |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Principal transactions |
|
$ |
1,298 |
|
|
$ |
547 |
|
|
|
137 |
% |
Securities gains |
|
|
102 |
|
|
|
610 |
|
|
|
(83 |
) |
All other income |
|
|
78 |
|
|
|
124 |
|
|
|
(37 |
) |
|
|
|
|
|
Noninterest revenue |
|
|
1,478 |
|
|
|
1,281 |
|
|
|
15 |
|
Net interest income(a) |
|
|
34 |
|
|
|
1,076 |
|
|
|
(97 |
) |
|
|
|
|
|
Total net revenue(b) |
|
|
1,512 |
|
|
|
2,357 |
|
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
|
(10 |
) |
|
|
17 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
|
657 |
|
|
|
475 |
|
|
|
38 |
|
Noncompensation expense(c) |
|
|
1,143 |
|
|
|
3,041 |
|
|
|
(62 |
) |
|
|
|
|
|
Subtotal |
|
|
1,800 |
|
|
|
3,516 |
|
|
|
(49 |
) |
Net expense allocated to other businesses |
|
|
(1,238 |
) |
|
|
(1,180 |
) |
|
|
(5 |
) |
|
|
|
|
|
Total noninterest expense |
|
|
562 |
|
|
|
2,336 |
|
|
|
(76 |
) |
|
|
|
|
|
Income before income tax expense/(benefit) |
|
|
960 |
|
|
|
4 |
|
|
NM |
Income tax expense/(benefit)(d) |
|
|
238 |
|
|
|
(224 |
) |
|
NM |
|
|
|
|
|
Net income |
|
$ |
722 |
|
|
$ |
228 |
|
|
|
217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Private Equity |
|
$ |
699 |
|
|
$ |
115 |
|
|
NM |
Corporate |
|
|
813 |
|
|
|
2,242 |
|
|
|
(64 |
) |
|
|
|
|
|
Total net revenue |
|
$ |
1,512 |
|
|
$ |
2,357 |
|
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
Private Equity |
|
$ |
383 |
|
|
$ |
55 |
|
|
NM |
Corporate |
|
|
339 |
|
|
|
173 |
|
|
|
96 |
|
|
|
|
|
|
Total net income |
|
$ |
722 |
|
|
$ |
228 |
|
|
|
217 |
|
|
|
|
|
|
Headcount |
|
|
20,927 |
|
|
|
19,307 |
|
|
|
8 |
|
|
|
|
|
(a) |
|
Net interest income was $34 million for the three months ended March 31, 2011, a decrease
of $1.0 billion from the prior year, primarily driven by lower yields and lower average
securities balances due to portfolio repositioning. |
|
(b) |
|
Total net revenue included tax-equivalent adjustments, predominantly due to tax-exempt income
from municipal bond investments of $64 million and $48 million for the three months ended
March 31, 2011 and 2010, respectively. |
|
(c) |
|
Includes litigation expense of $363 million and $2.3 billion for the three months ended March
31, 2011 and 2010, respectively. |
|
(d) |
|
Income tax in the first quarter of 2010 includes significantly higher tax benefits recognized
upon the resolution of tax audits. |
Quarterly results
Net income was $722 million, compared with net income of $228 million in the prior year.
Private Equity net income was $383 million, compared with $55 million in the prior year. Net
revenue was $699 million, an increase of $584 million, driven by gains on sales and net increases
in investment valuations. Noninterest expense was $113 million, an increase of $83 million from the
prior year.
Corporate reported net income of $339 million, compared with net income of $173 million in the
prior year. Net revenue was $813 million, including $102 million of securities gains. Noninterest
expense was $449 million, a decrease of $1.9 billion from the prior year; the prior year included
significant additions to litigation reserves.
Treasury and Chief Investment Office (CIO)
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement and |
|
Three months ended March 31, |
balance sheet data |
|
|
|
|
|
|
(in millions) |
|
2011 |
|
2010 |
|
Change |
|
Securities gains(a) |
|
$ |
102 |
|
|
$ |
610 |
|
|
|
(83 |
)% |
Investment securities portfolio (average) |
|
|
313,319 |
|
|
|
330,584 |
|
|
|
(5 |
) |
Investment securities portfolio (ending) |
|
|
328,013 |
|
|
|
337,442 |
|
|
|
(3 |
) |
Mortgage loans (average) |
|
|
11,418 |
|
|
|
8,162 |
|
|
|
40 |
|
Mortgage loans (ending) |
|
|
12,171 |
|
|
|
8,368 |
|
|
|
45 |
|
|
|
|
|
(a) |
|
Reflects repositioning of the Corporate investment securities portfolio. |
38
For further information on the investment securities portfolio, see Note 3 and Note 11 on
pages 94105 and 116120, respectively, of this Form 10-Q. For further information on CIO VaR and
the Firms earnings-at-risk, see the Market Risk Management section on pages 8184 of this Form
10-Q.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected income statement and balance sheet data |
|
Three months ended March 31, |
(in millions) |
|
2011 |
|
2010 |
|
Change |
|
Private equity gains/(losses) |
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains |
|
$ |
171 |
|
|
$ |
113 |
|
|
|
51 |
% |
Unrealized gains/(losses)(a) |
|
|
370 |
|
|
|
(75 |
) |
|
NM |
|
|
|
|
|
Total direct investments |
|
|
541 |
|
|
|
38 |
|
|
NM |
Third-party fund investments |
|
|
186 |
|
|
|
98 |
|
|
|
90 |
|
|
|
|
|
|
Total private equity gains/(losses)(b) |
|
$ |
727 |
|
|
$ |
136 |
|
|
|
435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private equity portfolio information(c) |
|
|
|
|
|
|
|
|
|
Direct investments |
|
|
|
|
|
|
|
|
|
(in millions) |
|
March 31, 2011 |
|
|
December 31, 2010 |
|
|
Change |
|
|
Publicly held securities |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value |
|
$ |
731 |
|
|
$ |
875 |
|
|
|
(16 |
)% |
Cost |
|
|
649 |
|
|
|
732 |
|
|
|
(11 |
) |
Quoted public value |
|
|
785 |
|
|
|
935 |
|
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Privately held direct securities |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value |
|
|
7,212 |
|
|
|
5,882 |
|
|
|
23 |
|
Cost |
|
|
7,731 |
|
|
|
6,887 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party fund investments(d) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value |
|
|
2,179 |
|
|
|
1,980 |
|
|
|
10 |
|
Cost |
|
|
2,461 |
|
|
|
2,404 |
|
|
|
2 |
|
|
|
|
|
|
Total private equity portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value |
|
$ |
10,122 |
|
|
$ |
8,737 |
|
|
|
16 |
|
Cost |
|
$ |
10,841 |
|
|
$ |
10,023 |
|
|
|
8 |
|
|
|
|
|
(a) |
|
Unrealized gains/(losses) contain reversals of unrealized gains and losses that were
recognized in prior periods and have now been realized. |
|
(b) |
|
Included in principal transactions revenue in the Consolidated Statements of Income. |
|
(c) |
|
For more information on the Firms policies regarding the valuation of the private equity
portfolio, see Note 3 on pages 170187 of JPMorgan Chases 2010 Annual Report. |
|
(d) |
|
Unfunded commitments to third-party private equity funds were $943 million and $1.0 billion
at March 31, 2011, and December 31, 2010, respectively. |
The carrying value of the private equity portfolio at March 31, 2011, and December 31, 2010,
was $10.1 billion and $8.7 billion, respectively. The increase in the portfolio during the three
months ended March 31, 2011, is primarily due to net increases
in investment valuations in the portfolio and
incremental new investment. The portfolio represented 7.7% and 6.9% of the Firms stockholders
equity less goodwill at March 31, 2011, and December 31, 2010, respectively.
39
INTERNATIONAL OPERATIONS
During the three months ended March 31, 2011 and 2010, the Firm reported approximately
$6.8 billion of revenue derived from clients, customers and counterparties domiciled outside of
North America. Of that amount, approximately 66% and 71%, respectively, was derived from
Europe/Middle East/Africa (EMEA), approximately 26% and 22%, respectively, from Asia/Pacific, and
approximately 8% and 7%, respectively, from Latin America/Caribbean.
The Firm is committed to further expanding its wholesale business activities outside the United
States, and it intends to add additional client-serving bankers, as well as more product and sales
support personnel, to address the needs of the Firms clients located in these regions. With a
comprehensive and coordinated international business strategy and growth plan, efforts and
investments for growth outside the United States will be accelerated and prioritized.
Set forth below are certain key metrics related to the Firms wholesale international operations
including, for each of EMEA, Asia/Pacific and Latin America/Caribbean, the number of countries in
each such region in which it operates, front office headcount, number of clients, revenue and
selected balance sheet data. For additional information regarding international operations, see
International Operations on page 91, and Note 33 on page 290 of JPMorgan Chases 2010 Annual
Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the three months ended March 31 |
|
EMEA |
|
Asia/Pacific |
|
Latin America/Caribbean |
(in millions, except where otherwise noted) |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
Revenue |
|
$ |
4,490 |
|
|
$ |
4,760 |
|
|
$ |
1,737 |
|
|
$ |
1,508 |
|
|
$ |
569 |
|
|
$ |
480 |
|
Countries with operations |
|
|
34 |
|
|
|
33 |
|
|
|
16 |
|
|
|
15 |
|
|
|
8 |
|
|
|
8 |
|
Total headcount(a) |
|
|
16,268 |
|
|
|
15,552 |
|
|
|
19,511 |
|
|
|
16,825 |
|
|
|
1,253 |
|
|
|
889 |
|
Front office headcount |
|
|
5,898 |
|
|
|
5,346 |
|
|
|
4,126 |
|
|
|
3,758 |
|
|
|
503 |
|
|
|
365 |
|
Significant clients(b) |
|
|
944 |
|
|
|
895 |
|
|
|
459 |
|
|
|
398 |
|
|
|
175 |
|
|
|
157 |
|
Deposits (average)(c) |
|
$ |
146,559 |
|
|
$ |
140,215 |
|
|
$ |
47,392 |
|
|
$ |
54,002 |
|
|
$ |
2,100 |
|
|
$ |
1,331 |
|
Loans (period end)(d) |
|
|
30,360 |
|
|
|
26,640 |
|
|
|
23,144 |
|
|
|
16,385 |
|
|
|
17,745 |
|
|
|
13,294 |
|
Assets under management (in billions) |
|
|
300 |
|
|
|
265 |
|
|
|
115 |
|
|
|
102 |
|
|
|
35 |
|
|
|
26 |
|
Assets under supervision (in
billions) |
|
|
353 |
|
|
|
310 |
|
|
|
155 |
|
|
|
131 |
|
|
|
88 |
|
|
|
66 |
|
|
|
|
|
Note: |
|
Wholesale international operations is comprised of IB, AM,
TSS, CB and CIO/Treasury. |
|
(a) |
|
Total headcount includes all employees, including those in service centers,
located in the region. |
|
(b) |
|
Significant clients are defined as companies with over $1 million in revenue in the region
(excludes private banking clients). |
|
(c) |
|
Deposits are based on booking location. |
|
(d) |
|
Loans outstanding are based predominantly on the domicile of the borrower, and exclude loans
held-for-sale and loans carried at fair value. |
40
BALANCE SHEET ANALYSIS
|
|
|
|
|
|
|
|
|
Selected Consolidated Balance Sheets data (in millions) |
|
March 31, 2011 |
|
|
December 31, 2010 |
|
|
Assets |
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
23,469 |
|
|
$ |
27,567 |
|
Deposits with banks |
|
|
80,842 |
|
|
|
21,673 |
|
Federal funds sold and securities purchased under resale agreements |
|
|
217,356 |
|
|
|
222,554 |
|
Securities borrowed |
|
|
119,000 |
|
|
|
123,587 |
|
Trading assets: |
|
|
|
|
|
|
|
|
Debt and equity instruments |
|
|
422,404 |
|
|
|
409,411 |
|
Derivative receivables |
|
|
78,744 |
|
|
|
80,481 |
|
Securities |
|
|
334,800 |
|
|
|
316,336 |
|
Loans |
|
|
685,996 |
|
|
|
692,927 |
|
Allowance for loan losses |
|
|
(29,750 |
) |
|
|
(32,266 |
) |
|
Loans, net of allowance for loan losses |
|
|
656,246 |
|
|
|
660,661 |
|
Accrued interest and accounts receivable |
|
|
79,236 |
|
|
|
70,147 |
|
Premises and equipment |
|
|
13,422 |
|
|
|
13,355 |
|
Goodwill |
|
|
48,856 |
|
|
|
48,854 |
|
Mortgage servicing rights |
|
|
13,093 |
|
|
|
13,649 |
|
Other intangible assets |
|
|
3,857 |
|
|
|
4,039 |
|
Other assets |
|
|
106,836 |
|
|
|
105,291 |
|
|
Total assets |
|
$ |
2,198,161 |
|
|
$ |
2,117,605 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Deposits |
|
$ |
995,829 |
|
|
$ |
930,369 |
|
Federal funds purchased and securities loaned or sold under repurchase agreements |
|
|
285,444 |
|
|
|
276,644 |
|
Commercial paper |
|
|
46,022 |
|
|
|
35,363 |
|
Other borrowed funds(a) |
|
|
36,704 |
|
|
|
34,325 |
|
Trading liabilities: |
|
|
|
|
|
|
|
|
Debt and equity instruments |
|
|
80,031 |
|
|
|
76,947 |
|
Derivative payables |
|
|
61,362 |
|
|
|
69,219 |
|
Accounts payable and other liabilities |
|
|
171,638 |
|
|
|
170,330 |
|
Beneficial interests issued by consolidated VIEs |
|
|
70,917 |
|
|
|
77,649 |
|
Long-term debt(a) |
|
|
269,616 |
|
|
|
270,653 |
|
|
Total liabilities |
|
|
2,017,563 |
|
|
|
1,941,499 |
|
Stockholders equity |
|
|
180,598 |
|
|
|
176,106 |
|
|
Total liabilities and stockholders equity |
|
$ |
2,198,161 |
|
|
$ |
2,117,605 |
|
|
|
|
|
(a) |
|
Effective January 1, 2011, $23.0 billion of long-term advances from FHLBs were reclassified
from other borrowed funds to long-term debt. The prior-year period has been revised to conform
with the current presentation. For additional information, see Note 3 and Note 18 on pages
94105 and 153, respectively, of this Form 10-Q. |
Consolidated Balance Sheets overview
JPMorgan Chases assets and liabilities increased from December 31, 2010, largely due to a
significant increase in deposit inflows toward the end of the first quarter of 2011. The inflows
contributed to higher deposits with banks in particular, balances due from Federal Reserve
Banks. A higher level of securities and commercial paper also contributed to the increase in assets
and liabilities. The increase in stockholders equity predominantly reflected net income for the
three months ended March 31, 2011.
The following is a discussion of the significant changes in the specific line captions of the
Consolidated Balance Sheets from December 31, 2010. For a description of the specific line captions
discussed below, see pages 9294 of JPMorgan Chases 2010 Annual Report.
Deposits with banks; federal funds sold and securities purchased under resale agreements; and
securities borrowed
Deposits with banks increased significantly and reflected a higher level of balances due from
Federal Reserve Banks; the increase was largely the result of inflows of short-term wholesale
deposits from TSS clients toward the end of March 2011 (see deposits discussion for further
details). Securities purchased under resale agreements and securities borrowed decreased, largely
in IB, reflecting lower client financing needs. For additional information on the Firms Liquidity
Risk Management, see pages 5358 of this Form 10-Q.
41
Trading assets and liabilities debt and equity instruments
Trading assets debt and equity instruments increased, largely driven by growth in customer
demand; market activity, including a significant level of new issuances; and rising global indices.
Trading liabilities debt and equity instruments increased, largely due to growth in customer
demand, market activity and economic hedging activity. For additional information, refer to Note 3
on pages 94105 of this Form 10-Q.
Trading assets and liabilities derivative receivables and payables
Derivative receivables and payables decreased, largely due to a reduction in foreign exchange
derivatives, which declined primarily due to the Japanese yen depreciation relative to the U.S.
dollar. Interest rate contracts also decreased as a result of higher interest rate yields during
the quarter. These items were partially offset by increases in equity derivatives, as a result of
growth in activity in the EMEA and Latin American markets, and commodity derivatives, primarily as
a result of higher oil prices. For additional information, refer to Derivative contracts on pages
6667, and Note 3 and Note 5 on pages 94105 and 107113, respectively, of this Form 10-Q.
Securities
Securities increased, largely due to repositioning of the portfolio in Corporate, in response to
changes in the interest rate environment. The repositioning increased non-U.S. government debt and
mortgage-backed securities, increased corporate debt, and reduced U.S. government agency
securities. For information related to securities, refer to the Corporate/Private Equity segment on
pages 3839, and Note 3 and Note 11 on pages 94105 and 116120, respectively, of this Form
10-Q.
Loans and allowance for loan losses
Loans decreased, reflecting seasonality and higher repayment rates of credit card loans; runoff of
the Washington Mutual credit card portfolio; and lower consumer loans, excluding credit card,
predominantly as a result of paydowns and charge-offs in RFS. The decrease was offset partially by
an increase in wholesale loans, reflecting growth in client activity. The allowance for loan losses
decreased, primarily as a result of lower estimated losses in the credit card loan portfolio, as
well as wholesale loan sales. For a more detailed discussion of the loan portfolio and the
allowance for loan losses, refer to Credit Risk Management on pages 5981, and Notes 3, 4, 13 and
14 on pages 94105, 105106, 122138 and 139140, respectively, of this Form 10-Q.
Accrued interest and accounts receivable
Accrued interest and accounts receivable increased, reflecting higher customer receivables in IBs
Prime Services business due to growth in client activity.
Mortgage servicing rights
MSRs decreased, due to changes to inputs and assumptions in the MSR valuation model; these changes
resulted in a $1.1 billion decrease in the fair value of the MSR asset related to the estimated
impact of higher servicing costs to enhance servicing processes, particularly loan modification and
foreclosure procedures, and costs to comply with Consent Orders entered into with banking
regulators. This decrease was partially offset by increases related to changes in market interest
rates during the quarter. For additional information on MSRs, see Note 3 and Note 16 on pages
94105 and 149152, respectively, of this Form 10-Q.
Other intangible assets
The decrease in other intangible assets was predominantly due to amortization. For additional
information on other intangible assets, see Note 16 on pages 149152 of this Form 10-Q.
Deposits
Deposits increased, largely as a result of inflows toward the end of March 2011 of short-term
wholesale deposits from TSS clients; also contributing were growth in the level of retail deposits,
from the combined effect of seasonal factors, such as tax refunds and bonus payments, and general
growth in business volumes. For more information on deposits, refer to the RFS and AM segment
discussions on pages 2027 and 3437, respectively; the Liquidity Risk Management discussion on
pages 5358; and Note 3 and Note 17 on pages 94105 and 153, respectively, of this Form 10-Q. For
more information on wholesale liability balances, which includes deposits, refer to the CB and TSS
segment discussions on pages 3031 and 3234, respectively, of this Form 10-Q.
Federal funds purchased and securities loaned or sold under repurchase agreements
Securities sold under repurchase agreements increased, due to higher securities financing balances,
in connection with repositioning of the securities portfolio in Corporate. For additional
information on the Firms Liquidity Risk Management, see pages 5358 of this Form 10-Q.
42
Commercial paper and other borrowed funds
Commercial paper and other borrowed funds increased, due to growth in the volume of liability
balances in sweep accounts, in connection with TSSs cash management product, and modest
incremental short-term borrowing by the Firm under cost-effective terms. For additional information
on the Firms Liquidity Risk Management and other borrowed funds, see pages 5358, and Note 18 on
page 153 of this Form 10-Q.
Beneficial interests issued by consolidated VIEs
Beneficial interests decreased, predominantly due to maturities of Firm-sponsored credit card
securitization transactions. For additional information on Firm-sponsored VIEs and loan securitization
trusts, see OffBalance Sheet Arrangements and Contractual Cash Obligations below, and Note 15 on
pages 141149 of this Form 10-Q.
Long-term debt
Long-term debt decreased, due to net repayments of long-term borrowings. For additional information
on the Firms long-term debt activities, see the Liquidity Risk Management discussion on pages
5358 of this Form 10-Q.
Stockholders equity
Total stockholders equity increased, predominantly due to net income and net issuances and
commitments to issue under the Firms employee stock-based compensation plans. The increase was
offset by the declaration of cash dividends on common and preferred stock; a net decrease in
accumulated other comprehensive income, due primarily to decreased market value on pass-through
agency MBS and agency collateralized mortgage obligations, as well as on foreign government debt,
partially offset by the narrowing of spreads on collateralized loan obligations and foreign
residential MBS; and stock repurchases.
43
OFFBALANCE SHEET ARRANGEMENTS
JPMorgan Chase is involved with several types of offbalance sheet arrangements, including
through special-purpose entities (SPEs), which are a type of VIE, and through lending-related
financial instruments (e.g., commitments and guarantees). For further discussion, see OffBalance
Sheet Arrangements and Contractual Cash Obligations on pages 95101 of JPMorgan Chases 2010
Annual Report.
Special-purpose entities
SPEs are the most common type of VIE, used in securitization transactions
in order to isolate certain assets and distribute related cash flows to investors. SPEs continue to
be an important part of the financial markets, including the mortgage- and ABS and commercial paper
markets, as they provide market liquidity by facilitating investors access to specific portfolios
of assets and risks. The Firm holds capital, as deemed appropriate, against all SPE-related
transactions and related exposures, such as derivative transactions and lending-related commitments
and guarantees. For further information on the Firms involvement with SPEs, see Note 15 on pages
141149 of this Form 10-Q; and Note 1 on pages 164165 and Note 15 on pages 244259 of JPMorgan
Chases 2010 Annual Report.
Implications of a credit rating downgrade to JPMorgan Chase Bank, N.A.
For certain liquidity commitments to SPEs, the Firm could be required to provide funding if the
short-term credit rating of JPMorgan Chase Bank, N.A., were downgraded below specific levels,
primarily P-1, A-1 and F1 for Moodys, Standard & Poors and Fitch, respectively. The
aggregate amounts of these liquidity commitments, to both consolidated and nonconsolidated SPEs,
were $33.5 billion and $34.2 billion at March 31, 2011, and December 31, 2010, respectively.
Alternatively, if JPMorgan Chase Bank, N.A., were downgraded, the Firm could be replaced by another
liquidity provider in lieu of providing funding under the liquidity commitment or, in certain
circumstances, the Firm could facilitate the sale or refinancing of the assets in the SPE in order
to provide liquidity.
Special-purpose entities revenue
The following table summarizes certain revenue information related
to consolidated and nonconsolidated VIEs with which the Firm has significant involvement. The
revenue reported in the table below primarily represents contractual servicing and credit fee
income (i.e., income from acting as administrator, structurer or liquidity provider). It does not
include gains and losses from changes in the fair value of trading positions (such as derivative
transactions) entered into with VIEs. Those gains and losses are recorded in principal transactions
revenue.
|
|
|
|
|
|
|
|
|
Revenue from VIEs and securitization entities(a) |
|
Three months ended March 31, |
(in millions) |
|
2011 |
|
2010 |
|
Multi-seller conduits |
|
$ |
48 |
|
|
$ |
67 |
|
Investor intermediation |
|
|
15 |
|
|
|
13 |
|
Other securitization entities(b) |
|
|
412 |
|
|
|
544 |
|
|
Total |
|
$ |
475 |
|
|
$ |
624 |
|
|
|
|
|
(a) |
|
Includes revenue associated with both consolidated VIEs and significant nonconsolidated
VIEs. |
|
(b) |
|
Excludes servicing revenue from loans sold to and securitized by third parties. |
Offbalance sheet lending-related financial instruments, guarantees and other commitments
JPMorgan Chase provides lending-related financial instruments (e.g., commitments and guarantees) to
meet the financing needs of its customers. The contractual amount of these financial instruments
represents the maximum possible credit risk to the Firm should the counterparty draw upon the
commitment or the Firm be required to fulfill its obligation under the guarantee, and should the
counterparty subsequently fail to perform according to the terms of the contract. Most of these
commitments and guarantees expire without being drawn or a default occurring. As a result, the
total contractual amount of these instruments is not, in the Firms view, representative of its
actual future credit exposure or funding requirements. For further discussion of lending-related
commitments and guarantees and the Firms accounting for them, see Lending-related commitments on
page 68 and Note 21 on pages 156159 of this Form 10-Q; and Lending-related commitments on page
128 and Note 30 on pages 275280 of JPMorgan Chases 2010 Annual Report.
44
The following table presents, as of March 31, 2011, the amounts by contractual maturity of
offbalance sheet lending-related financial instruments, guarantees and other commitments. The
amounts in the table for credit card and home equity lending-related commitments represent the
total available credit to borrowers for these products. The Firm has not experienced, and does not
anticipate, that all available lines of credit for these products would be used by borrowers at the
same time. The Firm can reduce or cancel credit card lines of credit by providing the borrower
prior notice or, in some cases, without notice as permitted by law. The Firm may reduce or close
home equity lines of credit when there are significant decreases in the value of the underlying
property or when there has been a demonstrable decline in the creditworthiness of the borrower. The
accompanying table excludes certain guarantees that do not have a contractual maturity date (e.g.,
loan sale and securitization-related indemnification obligations). For further information, see
discussion of Loan sale and securitization-related indemnification obligations in Note 21 on pages
156159 of this Form 10-Q, and Loan sale and securitization-related indemnification obligations in
Note 30 on pages 275280 of JPMorgan Chases 2010 Annual Report.
Offbalance sheet lending-related financial instruments, guarantees and other commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
Dec. 31, 2010 |
|
|
|
|
|
|
|
|
|
|
Due after |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after |
|
3 years |
|
|
|
|
|
|
|
|
By remaining maturity |
|
Due in 1 year |
|
1 year through |
|
through |
|
Due after |
|
|
|
|
|
|
(in millions) |
|
or less |
|
3 years |
|
5 years |
|
5 years |
|
Total |
|
Total |
|
Lending-related |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer, excluding credit card: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity senior lien |
|
$ |
697 |
|
|
$ |
3,560 |
|
|
$ |
5,715 |
|
|
$ |
7,434 |
|
|
$ |
17,406 |
|
|
$ |
17,662 |
|
Home equity junior lien |
|
|
1,407 |
|
|
|
7,739 |
|
|
|
10,294 |
|
|
|
10,706 |
|
|
|
30,146 |
|
|
|
30,948 |
|
Prime mortgage |
|
|
745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
745 |
|
|
|
1,266 |
|
Subprime mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto |
|
|
5,743 |
|
|
|
196 |
|
|
|
1 |
|
|
|
7 |
|
|
|
5,947 |
|
|
|
5,246 |
|
Business banking |
|
|
9,093 |
|
|
|
367 |
|
|
|
70 |
|
|
|
278 |
|
|
|
9,808 |
|
|
|
9,702 |
|
Student and other |
|
|
6 |
|
|
|
5 |
|
|
|
|
|
|
|
497 |
|
|
|
508 |
|
|
|
579 |
|
|
Total consumer, excluding credit card |
|
|
17,691 |
|
|
|
11,867 |
|
|
|
16,080 |
|
|
|
18,922 |
|
|
|
64,560 |
|
|
|
65,403 |
|
|
Credit card |
|
|
565,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
565,813 |
|
|
|
547,227 |
|
|
Total consumer |
|
|
583,504 |
|
|
|
11,867 |
|
|
|
16,080 |
|
|
|
18,922 |
|
|
|
630,373 |
|
|
|
612,630 |
|
|
Wholesale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other unfunded commitments to extend credit(a)(b) |
|
|
63,549 |
|
|
|
96,073 |
|
|
|
41,657 |
|
|
|
5,400 |
|
|
|
206,679 |
|
|
|
199,859 |
|
Standby letters of credit and other financial
guarantees(a)(b)(c)(d) |
|
|
26,233 |
|
|
|
44,633 |
|
|
|
20,091 |
|
|
|
4,404 |
|
|
|
95,361 |
|
|
|
94,837 |
|
Unused advised lines of credit |
|
|
39,796 |
|
|
|
7,412 |
|
|
|
166 |
|
|
|
204 |
|
|
|
47,578 |
|
|
|
44,720 |
|
Other letters of credit(a)(d) |
|
|
3,575 |
|
|
|
1,972 |
|
|
|
395 |
|
|
|
1 |
|
|
|
5,943 |
|
|
|
6,663 |
|
|
Total wholesale |
|
|
133,153 |
|
|
|
150,090 |
|
|
|
62,309 |
|
|
|
10,009 |
|
|
|
355,561 |
|
|
|
346,079 |
|
|
Total lending-related |
|
$ |
716,657 |
|
|
$ |
161,957 |
|
|
$ |
78,389 |
|
|
$ |
28,931 |
|
|
$ |
985,934 |
|
|
$ |
958,709 |
|
|
Other guarantees and commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities lending guarantees(e) |
|
$ |
200,627 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
200,627 |
|
|
$ |
181,717 |
|
Derivatives qualifying as guarantees(f) |
|
|
3,416 |
|
|
|
606 |
|
|
|
47,348 |
|
|
|
35,990 |
|
|
|
87,360 |
|
|
|
87,768 |
|
Unsettled reverse repurchase and securities borrowing agreements |
|
|
47,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,021 |
|
|
|
39,927 |
|
Other guarantees and commitments(g) |
|
|
1,475 |
|
|
|
235 |
|
|
|
311 |
|
|
|
4,352 |
|
|
|
6,373 |
|
|
|
6,492 |
|
|
|
|
|
(a) |
|
At March 31, 2011, and December 31, 2010, represented the contractual amount net of risk
participations totaling $570 million and $542 million, respectively, for other unfunded
commitments to extend credit; $22.8 billion and $22.4 billion, respectively, for standby
letters of credit and other financial guarantees; and $1.3 billion and $1.1 billion,
respectively, for other letters of credit. In regulatory filings with the Federal Reserve
these commitments are shown gross of risk participations. |
|
(b) |
|
At March 31, 2011, and December 31, 2010, included credit enhancements and bond and
commercial paper liquidity commitments to U.S. states and municipalities, hospitals and other
not-for-profit entities of $43.9 billion and $43.4 billion, respectively. |
|
(c) |
|
At March 31, 2011, and December 31, 2010, includes unissued standby letters of credit
commitments of $41.5 billion and $41.6 billion, respectively. |
|
(d) |
|
At March 31, 2011, and December 31, 2010, JPMorgan Chase held collateral relating to $38.0
billion and $37.8 billion, respectively, of standby letters of credit; and $2.0 billion and
$2.1 billion, respectively, of collateral related to other letters of credit. |
|
(e) |
|
At March 31, 2011, and December 31, 2010, collateral held by the Firm in support of
securities lending indemnification agreements totaled $203.4 billion and $185.0 billion,
respectively. Securities lending collateral comprises primarily cash, and securities issued by
governments that are members of the Organisation for Economic Co-operation and Development
(OECD) and U.S. government agencies. |
|
(f) |
|
Represents the notional amounts of derivative contracts qualifying as guarantees. For further
discussion of guarantees, see Note 5 on pages 107113 and Note 21 on pages 156159 of this
Form 10-Q. |
|
(g) |
|
At March 31, 2011, and December 31, 2010, included unfunded commitments of $943 million and
$1.0 billion, respectively, to third-party private equity funds; and $1.3 billion and $1.4
billion, respectively, to other equity investments. These commitments included $885 million
and $1.0 billion, respectively, related to investments that are generally fair valued at net
asset value as discussed in Note 3 on pages 94105 of this Form 10-Q. In addition, at both
March 31, 2011, and December 31, 2010, included letters of credit hedged by derivative
transactions and managed on a market risk basis of $3.8 billion. |
45
Repurchase
liability
In connection with the Firms loan sale and securitization activities with Fannie Mae and Freddie
Mac (the GSEs) and other loan sale and private-label securitization transactions, the Firm has
made representations and warranties that the loans sold meet certain requirements. The Firm may be,
and has been, required to repurchase loans and/or indemnify the GSEs and other investors for losses
due to material breaches of these representations and warranties; however, predominantly all of the
repurchase demands received by the Firm and the Firms losses realized to date are related to loans
sold to the GSEs.
From 2005 to 2008, excluding Washington Mutual, loans sold to the GSEs subject to certain
representations and warranties for which the Firm may be liable were approximately $380 billion;
this amount represents the principal amount sold and has not been adjusted for subsequent activity,
such as borrower repayments of principal or repurchases completed to date. In addition, from 2005
to 2008, Washington Mutual sold approximately $150 billion of loans to the GSEs subject to certain
representations and warranties. Subsequent to the Firms acquisition of certain assets and
liabilities of Washington Mutual from the FDIC in September 2008, the Firm resolved and/or limited
certain current and future repurchase demands for loans sold to the GSEs by Washington Mutual,
although it remains the Firms position that such obligations remain with the FDIC receivership.
For additional information regarding loans sold to the GSEs, see page 98 of JPMorgan Chases 2010
Annual Report.
The Firm also sells loans in securitization transactions with Ginnie Mae; these loans are typically
insured or guaranteed by a government agency. The Firm, in its role as servicer, may elect to
repurchase delinquent loans securitized by Ginnie Mae; however, amounts due under the terms of
these repurchased loans continue to be insured and the reimbursement of insured amounts is
proceeding normally. Accordingly, the Firm has not recorded any repurchase liability related to
these loans.
From 2005
to 2008, the Firm and certain acquired entities made certain loan
level representations and warranties in connection with approximately $450
billion of residential mortgage loans that were sold or deposited into private-label securitizations.
Of the $450 billion originally sold or deposited (including $165 billion by Washington
Mutual, as to which the Firm maintains that certain of the repurchase obligations remain with the FDIC
receivership), approximately $185 billion of principal has been repaid (including $65 billion
related to Washington Mutual). Approximately $85 billion of the principal has been liquidated
(including $30 billion related to Washington Mutual), with an
average loss severity of 57%. The
remaining outstanding principal balance of these loans (including
Washington Mutual) was, as of March 31, 2011, approximately $180
billion of which $65 billion was 60 days or more past due. The remaining outstanding principal
balance of loans related to Washington Mutual was approximately $70 billion of which $24
billion were 60 days or more past due. For additional information regarding loans sold to private
investors, see page 98 of JPMorgan Chases 2010 Annual Report.
To date, loan-level repurchase demands in private-label securitizations have been limited. As a
result, the Firms repurchase reserve primarily relates to loan sales to the GSEs and is
predominantly calculated based on the Firms repurchase activity experience with the GSEs. While it
is possible that the volume of repurchase demands in private-label securitizations will increase in
the future, the Firm cannot offer a reasonable estimate of those future demands based on historical
experience to date. To the extent that repurchase demands are
received related to loans that the Firm
purchased from third parties that remain viable, the Firm typically will have the right to seek a recovery
of related repurchase losses from the related third party.
Thus far, claims related to private-label
securitizations (including claims from
insurers that have guaranteed certain obligations of the securitization trusts) have generally
manifested themselves through securities-related litigation. The Firm separately evaluates its
exposure to such litigation in establishing its litigation reserves. For additional information
regarding litigation, see Note 23 on pages 160169 of this Form 10-Q.
46
Estimated Repurchase Liability
To estimate the Firms repurchase liability arising from breaches of representations and
warranties, the Firm considers:
(i) |
|
the level of current unresolved repurchase demands and mortgage insurance rescission notices, |
|
(ii) |
|
estimated probable future repurchase demands considering historical experience, |
|
(iii) |
|
the potential ability of the Firm to cure the defects identified in the repurchase demands
(cure rate), |
|
(iv) |
|
the estimated severity of loss upon repurchase of the loan or collateral, make-whole
settlement, or indemnification, |
|
(v) |
|
the Firms potential ability to recover its losses from third-party originators, and |
|
(vi) |
|
the terms of agreements with certain mortgage insurers and other parties. |
Based on these factors, the Firm has recognized a repurchase liability of $3.5 billion and $3.3
billion as of March 31, 2011, and December 31, 2010, respectively. For further discussion of the
repurchase demand process and the approach used by the Firm to estimate the repurchase liability,
see Repurchase liability on pages 98101 of JPMorgan Chases 2010 Annual Report.
The following table provides information about outstanding repurchase demands and mortgage
insurance rescission notices, excluding those related to Washington Mutual, at each of the past
five quarter-end dates.
Outstanding repurchase demands and mortgage insurance rescission notices by counterparty type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
(in millions) |
|
2011 |
|
|
2010 |
|
|
2010 |
|
|
2010 |
|
|
2010 |
|
|
GSEs and other |
|
$ |
1,114 |
|
|
$ |
1,071 |
|
|
$ |
1,063 |
|
|
$ |
1,331 |
|
|
$ |
1,358 |
|
Mortgage insurers |
|
|
677 |
|
|
|
624 |
|
|
|
556 |
|
|
|
998 |
|
|
|
1,090 |
|
Overlapping population(a) |
|
|
(83 |
) |
|
|
(63 |
) |
|
|
(69 |
) |
|
|
(220 |
) |
|
|
(232 |
) |
|
Total |
|
$ |
1,708 |
|
|
$ |
1,632 |
|
|
$ |
1,550 |
|
|
$ |
2,109 |
|
|
$ |
2,216 |
|
|
|
|
|
(a) |
|
Because the GSEs may make repurchase demands based on mortgage insurance rescission
notices that remain unresolved, certain loans may be subject to both an unresolved mortgage
insurance rescission notice and an unresolved repurchase demand. |
The following tables show the trend in repurchase demands and mortgage insurance rescission
notices received by loan origination vintage, excluding those related to Washington Mutual, for the
past five quarters. While repurchase demands declined in the first quarter of 2011 relative to
preceding quarters, the Firm does not believe that this represents a trend; instead, the Firm
expects repurchase demands to remain at elevated levels.
Quarterly repurchase demands received by loan origination vintage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
(in millions) |
|
2011 |
|
|
2010 |
|
|
2010 |
|
|
2010 |
|
|
2010 |
|
|
Pre-2005 |
|
$ |
15 |
|
|
$ |
38 |
|
|
$ |
31 |
|
|
$ |
35 |
|
|
$ |
16 |
|
2005 |
|
|
40 |
|
|
|
72 |
|
|
|
67 |
|
|
|
94 |
|
|
|
50 |
|
2006 |
|
|
137 |
|
|
|
195 |
|
|
|
185 |
|
|
|
234 |
|
|
|
189 |
|
2007 |
|
|
367 |
|
|
|
537 |
|
|
|
498 |
|
|
|
521 |
|
|
|
403 |
|
2008 |
|
|
249 |
|
|
|
254 |
|
|
|
191 |
|
|
|
186 |
|
|
|
98 |
|
Post-2008 |
|
|
94 |
|
|
|
65 |
|
|
|
46 |
|
|
|
53 |
|
|
|
20 |
|
|
Total repurchase demands received |
|
$ |
902 |
|
|
$ |
1,161 |
|
|
$ |
1,018 |
|
|
$ |
1,123 |
|
|
$ |
776 |
|
|
Quarterly mortgage insurance rescission notices received by loan origination vintage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
(in millions) |
|
2011 |
|
|
2010 |
|
|
2010 |
|
|
2010 |
|
|
2010 |
|
|
Pre-2005 |
|
$ |
4 |
|
|
$ |
3 |
|
|
$ |
4 |
|
|
$ |
4 |
|
|
$ |
2 |
|
2005 |
|
|
30 |
|
|
|
7 |
|
|
|
5 |
|
|
|
7 |
|
|
|
18 |
|
2006 |
|
|
49 |
|
|
|
40 |
|
|
|
39 |
|
|
|
39 |
|
|
|
57 |
|
2007 |
|
|
125 |
|
|
|
113 |
|
|
|
105 |
|
|
|
155 |
|
|
|
203 |
|
2008 |
|
|
49 |
|
|
|
49 |
|
|
|
44 |
|
|
|
52 |
|
|
|
60 |
|
Post-2008 |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage insurance rescissions received(a) |
|
$ |
258 |
|
|
$ |
213 |
|
|
$ |
197 |
|
|
$ |
257 |
|
|
$ |
340 |
|
|
|
|
|
(a) |
|
Mortgage insurance rescissions may ultimately result in a repurchase demand from the
GSEs on a lagged basis. This table includes mortgage insurance rescissions where the GSEs have
also issued a repurchase demand. |
47
Because the Firm has demonstrated an ability to cure certain types of defects more frequently
than others (e.g., missing documents), trends in the types of defects identified as well as the
Firms historical data are considered in estimating the future cure rate. Since the beginning of
2010, the Firms overall cure rate, excluding Washington Mutual, has been approximately 50%. While
the actual cure rate may vary from quarter to quarter, the Firm expects that the overall cure rate
will remain in the 4050% range for the foreseeable future.
The Firm has not observed a direct relationship between the type of defect that causes the breach
of representations and warranties and the severity of the realized loss. Therefore, the loss
severity assumption is estimated using the Firms historical experience and projections regarding
home price appreciation. Actual loss severities on finalized repurchases and make-whole
settlements to date, excluding any related to Washington Mutual, currently average approximately
50%, but may vary from quarter to quarter based on the characteristics of the underlying loans and
changes in home prices.
When a loan was originated by a third-party correspondent, the Firm typically has the right to seek
a recovery of related repurchase losses from the correspondent originator. Correspondent-originated
loans comprise approximately 40% of loans underlying outstanding repurchase demands, excluding
those related to Washington Mutual. The actual third-party recovery rate may vary from quarter to
quarter based upon the underlying mix of correspondents (e.g., active, inactive, out-of-business
originators) from which recoveries are being sought.
Substantially all of the estimates and assumptions underlying the Firms established methodology
for computing its recorded repurchase liabilityincluding the amount of probable future demands
from purchasers (which is in part based on the historical experience), the ability of the Firm to
cure identified defects, the severity of loss upon repurchase or foreclosure and recoveries from
third partiesrequire application of a significant level of management judgment. Estimating the
repurchase liability is further complicated by limited and rapidly changing historical data and
uncertainty surrounding numerous external factors, including: (i) economic factors (for example,
further declines in home prices and changes in borrower behavior may lead to increases in the
number of defaults, the severity of losses, or both), and (ii) the level of future demands, which
is dependent, in part, on actions taken by third parties, such as the GSEs and mortgage insurers.
While the Firm uses the best information available to it in estimating its repurchase liability,
the estimation process is inherently uncertain, imprecise and potentially volatile as additional
information is obtained and external factors continue to evolve.
The following table summarizes the change in the repurchase liability for each of the periods
presented.
Summary of changes in repurchase liability
|
|
|
|
|
|
|
|
|
Three months ended March 31, (in millions) |
|
2011 |
|
2010 |
|
Repurchase liability at beginning of period |
|
$ |
3,285 |
|
|
$ |
1,705 |
|
Realized losses(a) |
|
|
(231 |
) |
|
|
(246 |
) |
Provision for repurchase losses |
|
|
420 |
|
|
|
523 |
|
|
Repurchase liability at end of period |
|
$ |
3,474 |
|
|
$ |
1,982 |
|
|
|
|
|
(a) |
|
Includes principal losses and accrued interest on repurchased loans, make-whole
settlements, settlements with claimants, and certain related expenses. Make-whole settlements
were $115 million and $105 million at March 31, 2011 and 2010, respectively. |
The following table summarizes the total unpaid principal balance of repurchases during the
periods indicated.
Unpaid principal balance of loan repurchases(a)
|
|
|
|
|
|
|
|
|
Three months ended March 31, (in millions) |
|
2011 |
|
2010 |
|
Ginnie Mae(b) |
|
$ |
1,485 |
|
|
$ |
2,010 |
|
GSEs and other(c)(d) |
|
|
212 |
|
|
|
322 |
|
|
Total |
|
$ |
1,697 |
|
|
$ |
2,332 |
|
|
|
|
|
(a) |
|
Excludes mortgage insurers. While the rescission of mortgage insurance may ultimately
trigger a repurchase demand, the mortgage insurers themselves do not present repurchase
demands to the Firm. |
|
(b) |
|
In substantially all cases, these repurchases represent the Firms voluntary repurchase of
certain delinquent loans from loan pools or packages as permitted by Ginnie Mae guidelines
(i.e., they do not result from repurchase demands due to breaches of representations and
warranties). In certain cases, the Firm repurchases these delinquent loans as it continues to
service them and/or manage the foreclosure process in accordance with applicable requirements
of Ginnie Mae, the FHA, RHA and/or the VA. |
|
(c) |
|
Predominantly all of the repurchases related to GSEs. |
|
(d) |
|
Nonaccrual loans held-for-investment included $347 million and $270 million at March 31,
2011 and 2010, respectively, of loans repurchased as a result of breaches of representations
and warranties. |
48
CAPITAL MANAGEMENT
The following discussion of JPMorgan Chases capital management highlights developments since
December 31, 2010, and should be read in conjunction with Capital Management on pages 102106 of
JPMorgan Chases 2010 Annual Report.
The Firms capital management objectives are to hold capital sufficient to:
|
|
Cover all material risks underlying the Firms business activities; |
|
|
|
Maintain well-capitalized status under regulatory requirements; |
|
|
|
Achieve debt rating targets; |
|
|
|
Retain flexibility to take advantage of future investment opportunities; and |
|
|
|
Build and invest in businesses, even in a highly stressed environment. |
Regulatory capital
The Board of Governors of the Federal Reserve System (the Federal Reserve) establishes capital
requirements, including well-capitalized standards, for the consolidated financial holding company.
The Office of the Comptroller of the Currency (OCC) establishes similar capital requirements and
standards for the Firms national banks, including JPMorgan Chase Bank, N.A. and Chase Bank USA,
N.A. As of March 31, 2011, and December 31, 2010, JPMorgan Chase and all of its banking
subsidiaries were well-capitalized and met all capital requirements to which each was subject.
The following table presents the regulatory capital, assets and risk-based capital ratios for
JPMorgan Chase and its significant banking subsidiaries at March 31, 2011, and December 31, 2010.
These amounts are determined in accordance with regulations issued by the Federal Reserve and/or
OCC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JPMorgan Chase & Co.(i) |
|
JPMorgan Chase Bank, N.A.(i) |
|
Chase Bank USA, N.A.(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Well- |
|
Minimum |
(in millions, |
|
March 31, |
|
Dec. 31, |
|
March 31, |
|
Dec. 31, |
|
March 31, |
|
Dec. 31, |
|
capitalized |
|
capital |
except ratios) |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
ratios(j) |
|
ratios(j) |
|
Regulatory capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1(a) |
|
$ |
147,234 |
|
|
$ |
142,450 |
|
|
$ |
92,594 |
|
|
$ |
91,764 |
|
|
$ |
13,330 |
|
|
$ |
12,966 |
|
|
|
|
|
|
|
|
|
Total |
|
|
186,417 |
|
|
|
182,216 |
|
|
|
131,545 |
|
|
|
130,444 |
|
|
|
16,881 |
|
|
|
16,659 |
|
|
|
|
|
|
|
|
|
Tier 1 common(b) |
|
|
119,598 |
|
|
|
114,763 |
|
|
|
91,810 |
|
|
|
90,981 |
|
|
|
13,330 |
|
|
|
12,966 |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-weighted(c)(d) |
|
|
1,192,536 |
|
|
|
1,174,978 |
|
|
|
980,051 |
|
|
|
965,897 |
|
|
|
107,160 |
|
|
|
116,992 |
|
|
|
|
|
|
|
|
|
Adjusted average(e) |
|
|
2,041,153 |
|
|
|
2,024,515 |
|
|
|
1,621,263 |
|
|
|
1,611,486 |
|
|
|
112,349 |
|
|
|
117,368 |
|
|
|
|
|
|
|
|
|
Capital ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1(a)(f) |
|
|
12.3 |
% |
|
|
12.1 |
% |
|
|
9.4 |
% |
|
|
9.5 |
% |
|
|
12.4 |
% |
|
|
11.1 |
% |
|
|
6.0 |
% |
|
|
4.0 |
% |
Total(g) |
|
|
15.6 |
|
|
|
15.5 |
|
|
|
13.4 |
|
|
|
13.5 |
|
|
|
15.8 |
|
|
|
14.2 |
|
|
|
10.0 |
|
|
|
8.0 |
|
Tier 1 leverage(h) |
|
|
7.2 |
|
|
|
7.0 |
|
|
|
5.7 |
|
|
|
5.7 |
|
|
|
11.9 |
|
|
|
11.0 |
|
|
|
5.0 |
(k) |
|
|
3.0 |
(l) |
Tier 1 common(b) |
|
|
10.0 |
|
|
|
9.8 |
|
|
|
9.4 |
|
|
|
9.4 |
|
|
|
12.4 |
|
|
|
11.1 |
|
|
NA |
|
NA |
|
|
|
|
(a) |
|
At March 31, 2011, for JPMorgan Chase and JPMorgan Chase Bank, N.A., trust preferred capital
debt securities were $19.7 billion and $600 million, respectively. If these securities were
excluded from the calculation at March 31, 2011, Tier 1 capital would be $127.5 billion and
$92.0 billion, respectively, and the Tier 1 capital ratio would be 10.7% and 9.4%,
respectively. At March 31, 2011, Chase Bank USA, N.A. had no trust preferred capital debt
securities. |
|
(b) |
|
The Tier 1 common ratio is Tier 1 common capital divided by risk-weighted assets. Tier 1
common capital is defined as Tier 1 capital less elements of capital not in the form of common
equity, such as perpetual preferred stock, noncontrolling interests in subsidiaries, and trust
preferred capital debt securities. Tier 1 common capital, a non-GAAP financial measure, is
used by banking regulators, investors and analysts to assess and compare the quality and
composition of the Firms capital with the capital of other financial services companies. The
Firm uses Tier 1 common capital along with the other capital measures to assess and monitor
its capital position. |
|
(c) |
|
Risk-weighted assets consist of on and offbalance sheet assets that are assigned to one
of several broad risk categories and weighted by factors representing their risk and potential
for default. Onbalance sheet assets are risk-weighted based on the perceived credit risk
associated with the obligor or counterparty, the nature of any collateral, and the guarantor,
if any. Offbalance sheet assets such as lending-related commitments, guarantees, derivatives
and other offbalance sheet positions are risk-weighted by multiplying the contractual amount
by the appropriate credit conversion factor to determine the onbalance sheet
credit-equivalent amount, which is then risk-weighted based on the same factors used for
onbalance sheet assets. Risk-weighted assets also incorporate a measure for the market risk
related to applicable trading assetsdebt and equity instruments, and foreign exchange and
commodity derivatives. The resulting risk-weighted values for each of the risk categories are
then aggregated to determine total risk-weighted assets. |
|
(d) |
|
Includes offbalance sheet risk-weighted assets at March 31, 2011, of $294.6 billion, $283.3
billion and $31 million, and at December 31, 2010, of $282.9 billion, $274.2 billion and $31
million, for JPMorgan Chase, JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A., respectively. |
|
(e) |
|
Adjusted average assets, for purposes of calculating the leverage ratio, include total
quarterly average assets adjusted for unrealized gains/(losses) on securities, less deductions
for disallowed goodwill and other intangible assets, investments in certain subsidiaries, and
the total adjusted carrying value of nonfinancial equity investments that are subject to
deductions from Tier 1 capital. |
|
(f) |
|
Tier 1 capital ratio is Tier 1 capital divided by risk-weighted assets. Tier 1 capital
consists of common stockholders equity, perpetual preferred stock, noncontrolling interests
in subsidiaries, and trust preferred capital debt securities, less goodwill and certain other
adjustments. |
49
|
|
|
(g) |
|
Total capital ratio is Total capital divided by risk-weighted assets. Total capital is Tier 1
capital plus Tier 2 capital. Tier 2 capital consists of preferred stock not qualifying as Tier
1, subordinated long-term debt and other instruments qualifying as Tier 2, and the aggregate
allowance for credit losses up to a certain percentage of risk-weighted assets. |
|
(h) |
|
Tier 1 leverage ratio is Tier 1 capital divided by adjusted quarterly average assets. |
|
(i) |
|
Asset and capital amounts for JPMorgan Chases banking subsidiaries reflect intercompany
transactions; whereas the respective amounts for JPMorgan Chase reflect the elimination of
intercompany transactions. |
|
(j) |
|
As defined by the regulations issued by the Federal Reserve, OCC and FDIC. |
|
(k) |
|
Represents requirements for banking subsidiaries pursuant to regulations issued under the
FDIC Improvement Act. There is no Tier 1 leverage component in the definition of a
well-capitalized bank holding company. |
|
(l) |
|
The minimum Tier 1 leverage ratio for bank holding companies and banks is 3% or 4%, depending
on factors specified in regulations issued by the Federal Reserve and OCC. |
|
|
|
Note: Rating agencies allow measures of capital to be adjusted upward for deferred tax
liabilities, which have resulted from both nontaxable business combinations and from
tax-deductible goodwill. At March 31, 2011, and December 31, 2010, the Firm had deferred tax
liabilities resulting from nontaxable business combinations totaling $610 million and $647
million, respectively; and deferred tax liabilities resulting from tax-deductible goodwill of
$2.0 billion and $1.9 billion, respectively. |
A reconciliation of Total stockholders equity to Tier 1 common capital, Tier 1 capital and
Total qualifying capital is presented in the table below.
|
|
|
|
|
|
|
|
|
Risk-based capital components and assets |
|
March 31, |
|
December 31, |
(in millions) |
|
2011 |
|
2010 |
|
Total stockholders equity |
|
$ |
180,598 |
|
|
$ |
176,106 |
|
Less: Preferred stock |
|
|
7,800 |
|
|
|
7,800 |
|
|
Common stockholders equity |
|
|
172,798 |
|
|
|
168,306 |
|
Effect of certain items in accumulated other comprehensive income/(loss) excluded from
Tier 1 common equity |
|
|
(434 |
) |
|
|
(748 |
) |
Less: Goodwill(a) |
|
|
46,863 |
|
|
|
46,915 |
|
Fair value DVA on derivative and structured note liabilities related to the Firms
credit quality |
|
|
1,236 |
|
|
|
1,261 |
|
Investments in certain subsidiaries and other |
|
|
1,184 |
|
|
|
1,032 |
|
Other intangible assets(a) |
|
|
3,483 |
|
|
|
3,587 |
|
|
Tier 1 common |
|
|
119,598 |
|
|
|
114,763 |
|
|
Preferred stock |
|
|
7,800 |
|
|
|
7,800 |
|
Qualifying hybrid securities and noncontrolling interests(b) |
|
|
19,836 |
|
|
|
19,887 |
|
|
Total Tier 1 capital |
|
|
147,234 |
|
|
|
142,450 |
|
|
Long-term debt and other instruments qualifying as Tier 2 |
|
|
24,250 |
|
|
|
25,018 |
|
Qualifying allowance for credit losses |
|
|
15,152 |
|
|
|
14,959 |
|
Adjustment for investments in certain subsidiaries and other |
|
|
(219 |
) |
|
|
(211 |
) |
|
Total Tier 2 capital |
|
|
39,183 |
|
|
|
39,766 |
|
|
Total qualifying capital |
|
$ |
186,417 |
|
|
$ |
182,216 |
|
|
Risk-weighted assets |
|
$ |
1,192,536 |
|
|
$ |
1,174,978 |
|
|
Total adjusted average assets |
|
$ |
2,041,153 |
|
|
$ |
2,024,515 |
|
|
|
|
|
(a) |
|
Goodwill and other intangible assets are net of any associated deferred tax liabilities. |
|
(b) |
|
Primarily includes trust preferred capital debt securities of certain business trusts. |
The Firms Tier 1 common capital was $119.6 billion at March 31, 2011, compared with $114.8
billion at December 31, 2010, an increase of $4.8 billion. The increase was predominantly due to
net income (adjusted for DVA) of $5.6 billion, and net issuances and commitments to issue common
stock under the Firms employee stock-based compensation plans of $532 million. The increase was
partially offset by $1.2 billion of dividends on common and preferred stock and $95 million of
repurchases of common stock. The Firms Tier 1 capital was $147.2 billion at March 31, 2011,
compared with $142.5 billion at December 31, 2010, an increase of $4.7 billion. The increase in
Tier 1 capital reflected the increase in Tier 1 common. Additional information regarding the Firms
capital ratios and the federal regulatory capital standards to which it is subject is presented in
Note 29 on pages 273274 of JPMorgan Chases 2010 Annual Report.
Basel II
The minimum risk-based capital requirements adopted by the U.S. federal banking agencies follow the
Capital Accord of the Basel Committee on Banking Supervision (Basel I). In 2004, the Basel
Committee published a revision to the Accord (Basel II). The goal of the Basel II Framework is to
provide more risk-sensitive regulatory capital calculations and promote enhanced risk management
practices among large, internationally active banking organizations. U.S. banking regulators
published a final Basel II rule in December 2007, which requires JPMorgan Chase to implement Basel
II at the holding company level, as well as at certain of its key U.S. bank subsidiaries.
50
Prior to full implementation of the new Basel II Framework, JPMorgan Chase is required to complete
a qualification period of four consecutive quarters during which it needs to demonstrate that it
meets the requirements of the rule to the satisfaction of its primary U.S. banking regulators.
JPMorgan Chase is currently in the qualification period and expects to be in compliance with all
relevant Basel II rules within the established timelines. In addition, the Firm has adopted, and
will continue to adopt, based on various established timelines, Basel II rules in certain non-U.S.
jurisdictions, as required.
Basel III
In addition to the Basel II Framework, on December 16, 2010, the Basel Committee issued the final
version of the Capital Accord, called Basel III, which
revised Basel II by among other things, narrowing the definition of
capital, increasing capital requirements for specific exposures, introducing short-term liquidity
coverage and term funding standards, and establishing an international leverage ratio. The Basel
Committee also announced higher capital ratio requirements under Basel III which provide that the
common equity requirement will be increased to 7%, comprised of a minimum of 4.5% plus a 2.5%
capital conservation buffer.
In addition, the U.S. federal banking agencies have published for public comment proposed
risk-based capital floors pursuant to the requirements of the Dodd-Frank Act to establish a
permanent Basel I floor under Basel II / Basel III capital calculations.
The Firm fully expects to be in compliance with the higher Basel III capital standards when they
become effective on January 1, 2019, as well as any additional Dodd-Frank Act capital requirements
when they are implemented. The Firm estimates that its Tier 1 common ratio under Basel III rules
(including the changes for calculating capital on trading assets and securitizations) would be 7.3%
as of March 31, 2011. Management considers this estimate, which is a non-GAAP financial measure, as
a key measure to assess the Firms capital position in conjunction with its capital ratios under
Basel I requirements, in order to enable management, investors and analysts to compare the Firms capital
under the Basel III capital standards with similar estimates provided by other financial services
companies.
The Firms estimate of its Tier 1 common ratio under Basel III reflect its current understanding of
the Basel III rules and the application of such rules to its businesses as currently conducted. The
Firms understanding of the Basel III rules are based upon information currently published by the
Basel Committee and U.S. federal banking agencies. Accordingly, the Firms estimates will evolve
over time as the Firms businesses change, and as a result of further rule-making on Basel III
implementation from U.S. federal banking agencies. The Firm also believes it may need to modify the
liquidity profile of its assets and liabilities in response to the short-term liquidity coverage
and term funding standards contained in Basel III. Management
believes that the basis for its calculation of its estimates of Tier 1 common
capital and risk-weighted assets under Basel III rules differs so
significantly from the current Tier 1 capital and risk-weighted
assets calculation under the Basel I rules that numerical reconciliation between the
two calculations would not be meaningful.
The Basel III revisions governing liquidity and capital requirements are subject to prolonged
observation and transition periods. The observation periods for both the liquidity coverage ratio
and term funding standards begin in 2011, with implementation in 2015 and 2018, respectively. The
transition period for banks to meet the revised common equity requirement will begin in 2013, with
implementation on January 1, 2019. The Firm will continue to monitor the ongoing rule-making
process to assess both the timing and the impact of Basel III on its businesses and financial
condition.
Broker-dealer regulatory capital
JPMorgan Chases principal U.S. broker-dealer subsidiaries are J.P. Morgan Securities LLC
(JPMorgan Securities), and J.P. Morgan Clearing Corp. (JPMorgan Clearing). JPMorgan Clearing is
a subsidiary of JPMorgan Securities and provides clearing and settlement services. JPMorgan
Securities and JPMorgan Clearing are each subject to Rule 15c3-1 under the Securities Exchange Act
of 1934 (the Net Capital Rule). JPMorgan Securities and JPMorgan Clearing are also registered as
futures commission merchants and subject to Rule 1.17 of the Commodity Futures Trading Commission
(CFTC).
JPMorgan Securities and JPMorgan Clearing have elected to compute their minimum net capital
requirements in accordance with the Alternative Net Capital Requirements of the Net Capital Rule.
At March 31, 2011, JPMorgan Securities net capital, as defined by the Net Capital Rule, was $7.8
billion, exceeding the minimum requirement by $7.3 billion; and JPMorgan Clearings net capital was
$6.1 billion, exceeding the minimum requirement by $4.2 billion.
In addition to its minimum net capital requirement, JPMorgan Securities is required to hold
tentative net capital in excess of $1.0 billion and is also required to notify the Securities and
Exchange Commission (SEC) in the event that tentative net capital is less than $5.0 billion, in
accordance with the market and credit risk standards of Appendix E of the Net Capital Rule. As of
March 31, 2011, JPMorgan Securities had tentative net capital in excess of the minimum and
notification requirements.
51
Economic risk capital
JPMorgan Chase assesses its capital adequacy relative to the risks underlying its business
activities, using internal risk-assessment methodologies. The Firm measures economic capital
primarily based on four risk factors: credit, market, operational and private equity risk.
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic risk capital |
|
Quarterly Averages |
(in billions) |
|
1Q11 |
|
4Q10 |
|
1Q10 |
|
Credit risk |
|
$ |
48.6 |
|
|
$ |
50.9 |
|
|
$ |
49.3 |
|
Market risk |
|
|
15.1 |
|
|
|
14.9 |
|
|
|
13.8 |
|
Operational risk |
|
|
8.3 |
|
|
|
7.3 |
|
|
|
7.4 |
|
Private equity risk |
|
|
7.2 |
|
|
|
6.9 |
|
|
|
5.2 |
|
|
Economic risk capital |
|
|
79.2 |
|
|
|
80.0 |
|
|
|
75.7 |
|
Goodwill |
|
|
48.8 |
|
|
|
48.8 |
|
|
|
48.6 |
|
Other(a) |
|
|
41.4 |
|
|
|
38.0 |
|
|
|
31.8 |
|
|
Total common stockholders equity |
|
$ |
169.4 |
|
|
$ |
166.8 |
|
|
$ |
156.1 |
|
|
|
|
|
(a) |
|
Reflects additional capital required, in the Firms view, to meet its regulatory and
debt rating objectives. |
Line of business equity
Equity for a line of business represents the amount the Firm believes the business would require if
it were operating independently, incorporating sufficient capital to address regulatory capital
requirements (including Basel III Tier 1 common capital requirements) economic risk measures, and
capital levels for similarly rated peers. Capital is also allocated to each line of business for,
among other things, goodwill and other intangibles associated with acquisitions effected by the
line of business. ROE is measured and internal targets for expected returns are established as key
measures of a business segments performance. Effective January 1, 2011, capital allocated to CS
was reduced by $2.0 billion, to $13.0 billion, largely reflecting portfolio runoff and the
improving risk profile of the business; capital allocated to TSS was increased by $500 million, to
$7.0 billion, reflecting growth in the underlying business. The Firm continues to assess the level of capital required for each line of business,
as well as the assumptions and methodologies used to allocate capital to the business segments, and
further refinements may be implemented in future periods.
|
|
|
|
|
|
|
|
|
Line of business equity |
|
|
|
|
(in billions) |
|
March 31, 2011 |
|
December 31, 2010 |
|
Investment Bank |
|
$ |
40.0 |
|
|
$ |
40.0 |
|
Retail Financial Services |
|
|
28.0 |
|
|
|
28.0 |
|
Card Services |
|
|
13.0 |
|
|
|
15.0 |
|
Commercial Banking |
|
|
8.0 |
|
|
|
8.0 |
|
Treasury & Securities Services |
|
|
7.0 |
|
|
|
6.5 |
|
Asset Management |
|
|
6.5 |
|
|
|
6.5 |
|
Corporate/Private Equity |
|
|
70.3 |
|
|
|
64.3 |
|
|
Total common stockholders equity |
|
$ |
172.8 |
|
|
$ |
168.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of business equity |
|
Quarterly Averages |
(in billions) |
|
1Q11 |
|
4Q10 |
|
1Q10 |
|
Investment Bank |
|
$ |
40.0 |
|
|
$ |
40.0 |
|
|
$ |
40.0 |
|
Retail Financial Services |
|
|
28.0 |
|
|
|
28.0 |
|
|
|
28.0 |
|
Card Services |
|
|
13.0 |
|
|
|
15.0 |
|
|
|
15.0 |
|
Commercial Banking |
|
|
8.0 |
|
|
|
8.0 |
|
|
|
8.0 |
|
Treasury & Securities Services |
|
|
7.0 |
|
|
|
6.5 |
|
|
|
6.5 |
|
Asset Management |
|
|
6.5 |
|
|
|
6.5 |
|
|
|
6.5 |
|
Corporate/Private Equity |
|
|
66.9 |
|
|
|
62.8 |
|
|
|
52.1 |
|
|
Total common stockholders equity |
|
$ |
169.4 |
|
|
$ |
166.8 |
|
|
$ |
156.1 |
|
|
Capital actions
Dividends
On March 18, 2011, the Board of Directors increased the Firms quarterly common stock dividend from
$0.05 to $0.25 per share, effective with the dividend paid on April 30, 2011, to shareholders of
record on April 6, 2011. The Firms common stock dividend policy reflects JPMorgan Chases earnings
outlook; desired dividend payout ratio; capital objectives of maintaining a Basel I Tier 1 common
ratio of at least 9.0% and meeting Basel III requirements substantially ahead of time; and
alternative investment opportunities. The Firms current expectation is to return to a payout ratio
of approximately 30% of normalized earnings over time. When management and the Board determine that it
is appropriate to consider further increasing the common stock dividend, the Firm expects to review
those plans with its regulators
52
before taking action. For a further discussion of the Firms
dividend payments, see Dividends on page 106 of JPMorgan Chases 2010 Annual Report.
Stock repurchases
On March 18, 2011, the Board of Directors authorized the repurchase of up to $15.0 billion of the
Firms common stock, of which up to $8.0 billion is approved for 2011.
The authorization commenced on March 22, 2011, and replaced the Firms previous $10.0 billion
repurchase program. During the three months ended March 31, 2011, the Firm repurchased an
aggregate of 2 million shares for $95 million at an average
price per share of $45.66. For the four months ended April 30,
2011, the Firm has repurchased an aggregate of 18 million shares
for $820 million at an average price per share of $45.11. As of March 31, 2011, $14.9 billion
of authorized repurchase capacity remained, of which $7.9 billion of approved capacity remains for
use during 2011.
Management
and the Board will continue to assess and make decisions regarding alternatives for deploying
capital, as appropriate, over the course of the year. Any planned use of the repurchase program over
the repurchases approved for
2011, will be reviewed by the Firm with the banking regulators before taking action. For a further discussion of
the Firms stock repurchase program, see Stock repurchases on page 106 of JPMorgan Chases 2010
Annual Report.
The Firm may, from time to time, enter into written trading plans under Rule
10b5-1 of the Securities Exchange Act of 1934 to facilitate repurchases in accordance with the repurchase program. A Rule 10b5-1 repurchase plan allows the Firm
to repurchase its equity during periods when it would not otherwise be repurchasing common stock
for example during internal trading black-out periods. All purchases under a Rule 10b5-1 plan
must be made according to a predefined plan established when the Firm is not aware of material
nonpublic information. For additional information regarding repurchases of the Firms equity
securities, see Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, on
pages 181182 of this Form 10-Q.
RISK MANAGEMENT
Risk is an inherent part of JPMorgan Chases business activities. The Firms risk management
framework and governance structure are intended to provide comprehensive controls and ongoing
management of the major risks inherent in its business activities. The Firm employs a holistic
approach to risk management to ensure the broad spectrum of risk types are considered in managing
its business activities. The Firms risk management framework is intended to create a culture of
risk awareness and personal responsibility throughout the Firm where collaboration, discussion,
escalation and sharing of information is encouraged.
The Firms overall risk appetite is established in the context of the Firms capital, earnings
power, and diversified business model. The Firm employs a formalized risk appetite framework to
clearly link risk appetite and return targets, controls and capital management. There are
eight major types of risk identified in the business activities of the Firm: liquidity, credit,
market, interest rate, operational, legal and reputation, fiduciary, and private equity risk.
For further discussion of these risks, as well as how they are managed by the Firm, see Risk
Management on pages 107109 of JPMorgan Chases 2010 Annual Report and the information below.
LIQUIDITY RISK MANAGEMENT
The following discussion of JPMorgan Chases liquidity risk management framework highlights
developments since December 31, 2010, and should be read in conjunction with pages 110115 of
JPMorgan Chases 2010 Annual Report.
The ability to maintain surplus levels of liquidity through economic cycles is crucial to financial
services companies, particularly during periods of adverse conditions. The Firms funding strategy
is intended to ensure liquidity and diversity of funding sources to meet actual and contingent
liabilities through both normal and stress periods.
JPMorgan Chases primary sources of liquidity include a diversified deposit base, which was $995.8
billion at March 31, 2011, and access to the equity capital markets and long-term unsecured and
secured funding sources, including through asset securitizations and borrowings from FHLBs.
Additionally, JPMorgan Chase maintains significant amounts of highly liquid, unencumbered assets.
The Firm actively monitors the availability of funding in the wholesale markets across various
geographic regions and in various currencies. The Firms ability to generate funding from a broad
range of sources in a variety of geographic locations and in a range of tenors is intended to
enhance financial flexibility and limit funding concentration risk.
53
Management considers the Firms liquidity position to be strong, based on its liquidity metrics as
of March 31, 2011, and believes that the Firms unsecured and secured funding capacity is
sufficient to meet its on and offbalance sheet obligations. The Firm was able to access the
funding markets as needed during the three months ended March 31, 2011.
Governance
The Firms governance process is designed to ensure that its liquidity position remains strong. The
Asset-Liability Committee reviews and approves the Firms liquidity policy and contingency funding
plan. Corporate Treasury formulates and is responsible for executing the Firms liquidity policy
and contingency funding plan as well as measuring, monitoring, reporting and managing the Firms
liquidity risk profile. JPMorgan Chase centralizes the management of global funding and liquidity
risk within Corporate Treasury to maximize liquidity access, minimize funding costs and enhance
global identification and coordination of liquidity risk. This centralized approach involves
frequent communication with the business segments, disciplined management of liquidity at the
parent holding company, comprehensive market-based pricing of all assets and liabilities,
continuous balance sheet monitoring, frequent stress testing of liquidity sources, and frequent
reporting to and communication with senior management and the Board of Directors regarding the
Firms liquidity position.
Liquidity monitoring
The Firm employs a variety of metrics to monitor and manage liquidity. One set of analyses used by
the Firm relates to the timing of liquidity sources versus liquidity uses (e.g., funding gap
analysis and parent holding company funding, as discussed below). A second set of analyses focuses
on measurements of the Firms reliance on short-term unsecured funding as a percentage of total
liabilities, as well as the relationship of short-term unsecured funding to highly liquid assets,
the deposits-to-loans ratio and other balance sheet measures.
The Firm performs regular liquidity stress tests as part of its liquidity monitoring. The purpose
of the liquidity stress tests is intended to ensure sufficient liquidity for the Firm under both
idiosyncratic and systemic market stress conditions. These scenarios measure the Firms liquidity
position across a full-year horizon by analyzing the net funding gaps resulting from contractual
and contingent cash and collateral outflows versus the Firms ability to generate additional
liquidity by pledging or selling excess collateral and issuing unsecured debt. The scenarios are
produced for the parent holding company and major bank subsidiaries as well as the Firms major
U.S. broker-dealer subsidiaries.
The idiosyncratic stress scenario employed by the Firm is a JPMorgan Chase-specific event that
evaluates the Firms net funding gap after a short-term ratings downgrade to A-2/P-2. The systemic
market stress scenario evaluates the Firms net funding gap during a period of severe market stress
similar to market conditions in 2008 and assumes the Firm is not uniquely stressed versus its
peers. The Firms liquidity position is strong under the Firm-defined stress scenarios described
above.
Parent holding company
Liquidity monitoring of the parent holding company takes into consideration regulatory restrictions
that limit the extent to which bank subsidiaries may extend credit to the parent holding company
and other nonbank subsidiaries. Excess cash generated by parent holding company issuance activity
is used to purchase liquid collateral through reverse repurchase agreements or is placed with both
bank and nonbank subsidiaries in the form of deposits and advances to satisfy a portion of
subsidiary funding requirements. The Firms liquidity management is also intended to ensure that
its subsidiaries have the ability to generate replacement funding in the event the parent holding
company requires repayment of the aforementioned deposits and advances.
The Firm closely monitors the ability of the parent holding company to meet all of its obligations
with liquid sources of cash or cash equivalents for an extended period of time without access to
the unsecured funding markets. The Firm targets pre-funding of parent holding company obligations
for at least 12 months; however, due to conservative liquidity management actions taken by the Firm
in the current environment, the current pre-funding of such obligations is significantly greater
than target.
Global Liquidity Reserve
In addition to the parent holding company, the Firm maintains a significant amount of liquidity
primarily at its bank subsidiaries, but also at its nonbank subsidiaries. The Global Liquidity
Reserve represents consolidated sources of available liquidity to the Firm, including cash on
deposit at central banks, and cash proceeds reasonably expected to be received in secured
financings of highly liquid, unencumbered securities such as government-issued debt, government-
and FDIC-guaranteed corporate debt, U.S. government agency debt and agency mortgage-backed
securities (MBS). The liquidity amount estimated to be realized from secured financings is
based on managements current judgment and assessment of the Firms ability to quickly raise
secured financings. The Global Liquidity Reserve also includes the Firms borrowing capacity at
various FHLBs, the Federal Reserve Bank discount window and various other central banks from
54
collateral pledged by the Firm to such banks. Although considered as a source of available
liquidity, the Firm does not view borrowing capacity at the Federal Reserve Bank discount window
and various other central banks as a primary source of funding. As of March 31, 2011, the Global
Liquidity Reserve was estimated to be approximately $316 billion.
In addition to the Global Liquidity Reserve, the Firm has significant amounts of other
high-quality, marketable securities available to raise liquidity, such as corporate debt and equity
securities.
Funding
Sources of funds
A key strength of the Firm is its diversified deposit franchise through the RFS, CB, TSS and AM
lines of business, which provides a stable source of funding and decreases reliance on the
wholesale markets. As of March 31, 2011, total deposits for the Firm were $995.8 billion, compared
with $930.4 billion at December 31, 2010. Average total deposits for the Firm were $930.4 billion
and $877.5 billion for the three months ended March 31, 2011 and 2010, respectively. The Firm
typically experiences higher customer deposit inflows at period ends. A significant portion of the
Firms deposits are retail deposits (38% and 40% at March 31, 2011, and December 31, 2010,
respectively), which are considered particularly stable as they are less sensitive to interest rate
changes or market volatility. A significant portion of the Firms wholesale deposits are also
considered stable sources of funding due to the nature of the relationships from which they are
generated, particularly customers operating service relationships with the Firm. As of March 31,
2011, the Firms deposits-to-loans ratio was 145%, compared with 134% at December 31, 2010. For
further discussions of deposit and liability balance trends, see the discussion of the results for
the Firms business segments and the Balance Sheet Analysis on page 15 and 4143, respectively, of
this Form 10-Q.
Additional sources of funding include a variety of unsecured and secured short-term and long-term
instruments. Short-term unsecured funding sources include federal funds and Eurodollars purchased,
certificates of deposit, time deposits, commercial paper and other borrowed funds. Long-term
unsecured funding sources include long-term debt, trust preferred capital debt securities,
preferred stock and common stock.
The Firms short-term secured sources of funding consist of securities loaned or sold under
agreements to repurchase and borrowings from the Chicago, Pittsburgh and San Francisco FHLBs.
Secured long-term funding sources include asset-backed securitizations, and borrowings from the
Chicago, Pittsburgh and San Francisco FHLBs.
Funding markets are evaluated on an ongoing basis to achieve an appropriate global balance of
unsecured and secured funding at favorable rates.
Short-term funding
The Firms reliance on short-term unsecured funding sources is limited. Short-term unsecured
funding sources include federal funds and Eurodollars purchased, which represent overnight funds;
certificates of deposit; time deposits; commercial paper, which is generally issued in amounts not
less than $100,000 and with maturities of 270 days or less; and other borrowed funds, which consist
of demand notes, term federal funds purchased, and various other borrowings that generally have
maturities of one year or less.
Total commercial paper liabilities for the Firm were $46.0 billion as of March 31, 2011, compared
with $35.4 billion as of December 31, 2010. However, of those totals, $35.2 billion and $29.2
billion as of March 31, 2011, and December 31, 2010, respectively, originated from deposits that
customers chose to sweep into commercial paper liabilities as a cash management product offered by
the Firm. Therefore, commercial paper liabilities sourced from wholesale funding markets were $10.8
billion as of March 31, 2011, compared with $6.2 billion as of December 31, 2010; in addition, the
average balance of commercial paper liabilities sourced from wholesale funding markets was $8.4
billion for the three months ended March 31, 2011.
Securities loaned or sold under agreements to repurchase, generally mature between one day and
three months, are secured predominantly by high-quality securities collateral, including
government-issued debt, agency debt and agency MBS. The balances of securities loaned or sold under
agreements to repurchase, which constitute a significant portion of the federal funds purchased and
securities loaned or sold under repurchase agreements, was $282.3 billion as of March 31, 2011,
compared with $273.3 billion as of December 31, 2010. There were no material differences between
the average and period-end balances of securities loaned or sold under agreements to repurchase for
the three months ended and as of March 31, 2011. The balances associated with securities loaned or
sold under agreements to repurchase fluctuate over time due to customers investment and financing
activities; the Firms demand for financing; the Firms matched book activity; the ongoing
management of the mix of the Firms liabilities, including its secured and unsecured financing (for
both the investment and trading portfolios); and other market and portfolio factors. For additional
55
information, see the Balance Sheet Analysis on pages 4143, Note 12 on page 121 and Note 18 on
page 153 of this Form 10-Q.
Total other borrowed funds for the Firm was $36.7 billion as of March 31, 2011, compared with $34.3
billion as of December 31, 2010. There were no material differences between the average and
period-end balances of other borrowed funds for the three months ended and as of March 31, 2011.
Long-term funding and issuance
During the three months ended March 31, 2011, the Firm issued $13.0 billion of long-term debt,
including $7.0 billion of senior notes issued in the U.S. market, $2.7 billion of senior notes
issued in the non-U.S. markets, and $3.3 billion of IB structured notes. In addition, in April
2011, the Firm issued $4.4 billion of senior notes in the U.S. market. During the first three
months of 2010, the Firm issued $10.9 billion of long-term debt, including $5.6 billion of senior
notes issued in U.S. markets, $904 million of senior notes issued in non-U.S. markets and $4.4
billion of IB structured notes. During the three months ended March 31, 2011, $18.1 billion of
long-term debt matured or was redeemed, including $5.6 billion of IB structured notes. During the
first three months of 2010, $14.1 billion of long-term debt matured or was redeemed, including $7.4
billion of IB structured notes.
In addition to the unsecured long-term funding and issuances discussed above, the Firm securitizes
consumer credit card loans, residential mortgages, auto loans and student loans for funding
purposes. Loans securitized by the Firms wholesale businesses are related to client-driven
transactions and are not considered to be a source of funding for the Firm. During the three months
ended March 31, 2011 and 2010, respectively, the Firm did not securitize any credit card loans,
residential mortgage loans, auto loans or student loans through consolidated or nonconsolidated
securitization trusts for funding purposes. In April 2011, the Firm securitized $500 million of
credit card loans. During the three months ended March 31, 2011, $6.7 billion of loan
securitizations matured or were redeemed, including $6.6 billion of credit card loan
securitizations, $44 million of residential mortgage loan securitizations and $76 million of
student loan securitizations. During the three months ended
March 31, 2010, $6.7 billion of loan securitizations
matured or were redeemed, including $6.5 billion of credit card
loan securitizations, $43 million of residential mortgage loan
securitizations, $84 million of student loan securitizations,
and $39 million of auto loan securitizations. For further discussion of loan
securitizations, see Note 15 on pages
141149 in this Form 10-Q.
During the three months ended March 31, 2011, the Firm borrowed $4.0 billion of new long-term
advances from the FHLBs, which were partially offset by $2.5 billion of maturities. For the three
months ended March 31, 2010, the Firm borrowed $1.5 billion of new long-term advances from the
FHLBs, which were more than offset by $8.5 billion of maturities.
Cash flows
Cash and due from banks was $23.5 billion and $31.4 billion at March 31, 2011 and 2010,
respectively. These balances decreased by $4.1 billion from December 31, 2010, and increased by
$5.2 billion from December 31, 2009, respectively. The following discussion highlights the major
activities and transactions that affected JPMorgan Chases cash flows for the three months ended
March 31, 2011 and 2010, respectively.
Cash flows from operating activities
JPMorgan Chases operating assets and liabilities support the Firms capital markets and lending
activities, including the origination or purchase of loans initially designated as held-for-sale.
Operating assets and liabilities can vary significantly in the normal course of business due to the
amount and timing of cash flows, which are affected by client-driven activities, market conditions
and trading strategies. Management believes cash flows from operations, available cash balances and
the Firms ability to generate cash through short- and long-term borrowings are sufficient to fund
the Firms operating liquidity needs.
For the three months ended March 31, 2011, net cash used in operating activities was $6.0 billion.
This resulted from a decrease in trading liabilities derivative payables largely due to a
reduction in foreign exchange derivatives, which declined primarily due to the Japanese yen
depreciation relative to the U.S. dollar, and a reduction in interest rate contracts as a result of
higher interest rate yields during the quarter; an increase in trading assets debt and equity
instruments largely driven by growth in customer demand, market activity, including a significant
level of new issuances, and rising global indices; and an increase in accrued interest and accounts
receivable reflecting higher customer receivables in IBs Prime Services business due to growth in
client activity. Partially offsetting these cash outflows were an increase in trading liabilities
debt and equity instruments largely due to growth in customer demand, market activity and
economic hedging activity, and a decrease in trading assets derivative receivables largely due
to reductions in the aforementioned foreign exchange derivatives and interest rate contracts.
Additionally, cash used to acquire loans originated or purchased with an initial intent to sell was
higher than proceeds from sales and paydowns of such loans. Net cash was provided by net income and
from adjustments for non-cash items such as the provision for credit losses, depreciation and
amortization, and stock-based compensation.
56
For the three months ended March 31, 2010, net cash provided by operating activities was $17.4
billion, primarily driven by a net increase in trading liabilities reflecting favorable
developments in financial markets, as well as an increase in business activity in markets outside
of the United States, partially offset by sales of debt securities. Also, net cash generated from
operating activities was higher than net income, largely as a result of adjustments for non-cash
items such as the provision for credit losses, stock-based compensation, and depreciation and
amortization. Proceeds from sales and paydowns of loans originated or purchased with an initial
intent to sell were higher than cash used to acquire such loans.
Cash flows from investing activities
The Firms investing activities predominantly include loans originated to be held for investment,
the available-for-sale securities (AFS) portfolio and other short-term interest-earning assets.
For the three months ended March 31, 2011, net cash of $65.8 billion was used in investing
activities. This resulted from a significant increase in deposits with banks reflecting a higher
level of deposit balances at Federal Reserve Banks largely the result of inflows of short-term
wholesale deposits from TSS clients toward the end of March 2011, net purchases of AFS securities,
largely due to repositioning of the portfolio in Corporate, in response to changes in the interest
rate environment, and an increase in wholesale loans reflecting growth in client activity.
Partially offsetting these cash outflows were a net decrease in loans reflecting seasonality and
higher repayment rates of credit card loans, runoff of the Washington Mutual credit card portfolio,
and lower consumer loans, excluding credit card, predominantly as a result of paydowns in RFS, and
a decline in securities purchased under resale agreements, largely in IB, reflecting lower client
financing needs.
For the three months ended March 31, 2010, net cash of $13.9 billion was used in investing
activities. This was primarily due to an increase in securities purchased under resale agreements
largely due to higher financing volume in IB resulting from increased client flows, partially
offset by a net decrease in the loan portfolio, driven by seasonally lower charge volume on credit
cards, continued runoff in the residential real estate portfolios, and repayments and loan sales,
predominantly in IB. Proceeds from sales and maturities of AFS securities used in the Firms
interest rate risk management activities were slightly higher than cash used to acquire such
securities.
Cash flows from financing activities
The Firms financing activities primarily reflect cash flows related to taking customer deposits,
and issuing long-term debt as well as preferred and common stock. For the three months ended March
31, 2011, net cash provided by financing activities was $67.3 billion. This was largely driven by
an increase in deposits as a result of inflows of short-term wholesale deposits from TSS clients
toward the end of March 2011, also contributing were growth in the level of retail deposits from
the combined effect of seasonal factors such as tax refunds and bonus payments, and general growth
in business volumes; an increase in commercial paper and other borrowed funds due to growth in the
volume of liability balances in sweep accounts in connection with TSSs cash management product,
and modest incremental short-term borrowings by the Firm under cost-effective terms; and an
increase in securities sold under repurchase agreements due to higher securities financing balances
in connection with repositioning of the securities portfolio in Corporate. Partially offsetting
these cash proceeds were net repayments of long-term borrowings, including a decline in long-term
beneficial interests issued by consolidated VIEs due to maturities of Firm-sponsored credit card
securitization transactions; the payments of cash dividends; and repurchases of common stock.
In the first three months of 2010, net cash provided by financing activities was $2.0 billion,
which reflected increased cash proceeds from securities loaned or sold under repurchase agreements
primarily to facilitate the increase in IBs securities purchased under resale agreements. Cash was
used as TSS deposits declined reflecting the normalization of deposit levels; offset partially by
net inflows from existing customers and new business in CB, RFS and AM; a decline in short-term
beneficial interest issued by consolidated VIEs; for net payments of long-term borrowings and trust
preferred capital debt securities as new issuances were more than offset by payments; and for the
payment of cash dividends.
Credit ratings
The cost and availability of financing are influenced by credit ratings. Reductions in these
ratings could have an adverse effect on the Firms access to liquidity sources, increase the cost
of funds, trigger additional collateral or funding requirements and decrease the number of
investors and counterparties willing to lend to the Firm. Additionally, the Firms funding
requirements for VIEs and other third-party commitments may be adversely affected by a decline in
credit ratings. For additional information on the impact of a credit ratings downgrade on the
funding requirements for VIEs, and on derivatives and collateral agreements, see Special-purpose
entities on page 44, and Note 5 on pages 107113, respectively, of this Form 10-Q.
Critical factors in maintaining high credit ratings include a stable and diverse earnings stream,
strong capital ratios, strong credit quality and risk management controls, diverse funding sources,
and disciplined liquidity monitoring procedures.
57
The credit ratings of the parent holding company and each of the Firms significant banking
subsidiaries as of March 31, 2011, were as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
Senior long-term debt |
|
|
Moodys |
|
S&P |
|
Fitch |
|
Moodys |
|
S&P |
|
Fitch |
|
JPMorgan Chase & Co. |
|
P |
-1 |
|
|
|
A-1 |
|
|
|
F1+ |
|
|
Aa3 |
|
|
A+ |
|
|
AA |
JPMorgan Chase Bank, N.A. |
|
P |
-1 |
|
|
|
A-1+ |
|
|
|
F1+ |
|
|
Aa1 |
|
AA |
|
AA |
Chase Bank USA, N.A. |
|
P |
-1 |
|
|
|
A-1+ |
|
|
|
F1+ |
|
|
Aa1 |
|
AA |
|
AA |
|
The senior unsecured ratings from Moodys, S&P and Fitch on JPMorgan Chase and its principal
bank subsidiaries remained unchanged at March 31, 2011, from December 31, 2010. On February 25,
2011, S&P revised its outlook on the Firm from negative to stable. At March 31, 2011, Moodys
outlook was negative, while S&Ps and Fitchs outlook was stable.
If the Firms senior long-term debt ratings were downgraded by one notch, the Firm believes the
incremental cost of funds or loss of funding would be manageable, within the context of current
market conditions and the Firms liquidity resources. JPMorgan Chases unsecured debt does not
contain requirements that would call for an acceleration of payments, maturities or changes in the
structure of the existing debt, provide any limitations on future borrowings or require additional
collateral, based on unfavorable changes in the Firms credit ratings, financial ratios, earnings,
or stock price.
Several rating agencies have announced that they will be evaluating the effects of the financial
regulatory reform legislation in order to determine the extent, if any, to which financial
institutions, including the Firm, may be negatively impacted. There is no assurance the Firms
credit ratings will not be downgraded in the future as a result of any such reviews.
58
CREDIT PORTFOLIO
For a further discussion on the Firms credit risk management framework, see pages 116-118 of
JP Morgan Chases 2010 Annual Report.
The following table presents JPMorgan Chases credit portfolio as of March 31, 2011, and December
31, 2010. Total credit exposure of $1.8 trillion at March 31, 2011, increased by $23.8 billion from
December 31, 2010, reflecting increases in the wholesale and consumer portfolios of $21.4 billion
and $2.4 billion, respectively. During the first three months of 2011, increases in lending-related
commitments and receivables from customers of $27.2 billion and $5.5 billion, respectively were
partly offset by decreases in loans and derivative receivables of $6.9 billion and $1.7 billion,
respectively.
The Firm provided credit to and raised capital of over $450 billion for our clients during the
first three months of 2011. The Firm also originated mortgages to over 180,000 people; provided
credit cards to approximately 2.6 million people; lent or increased credit to over 7,500 small
businesses; lent to over 500 not-for-profit and government entities, including states,
municipalities, hospitals and universities; extended or increased loan limits to approximately
1,500 middle market companies; and lent to or raised capital for more than 3,500 corporations.
In the table below, reported loans include loans retained (i.e., held-for-investment); loans
held-for-sale (which are carried at the lower of cost or fair value, with changes in value recorded
in noninterest revenue); and loans accounted for at fair value. For additional information on the
Firms loans and derivative receivables, including the Firms accounting policies, see Notes 13 and
5 on pages 122138 and 107113, respectively, of this Form 10-Q. Average retained loan balances
are used for net charge-off rate calculations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit |
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
exposure |
|
Nonperforming(e)(f) |
|
|
|
|
|
|
|
|
|
Average annual |
|
|
March 31, |
|
Dec. 31, |
|
March 31, |
|
Dec. 31, |
|
Net charge-offs |
|
net charge-off rate(g) |
(in millions, except ratios) |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
Total credit portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans retained |
|
$ |
675,437 |
|
|
$ |
685,498 |
|
|
$ |
13,152 |
|
|
$ |
14,345 |
|
|
$ |
3,720 |
|
|
$ |
7,910 |
|
|
|
2.22 |
% |
|
|
4.46 |
% |
Loans held-for-sale |
|
|
8,754 |
|
|
|
5,453 |
|
|
|
199 |
|
|
|
341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans at fair value |
|
|
1,805 |
|
|
|
1,976 |
|
|
|
90 |
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans reported |
|
|
685,996 |
|
|
|
692,927 |
|
|
|
13,441 |
|
|
|
14,841 |
|
|
|
3,720 |
|
|
|
7,910 |
|
|
|
2.22 |
|
|
|
4.46 |
|
Derivative receivables |
|
|
78,744 |
|
|
|
80,481 |
|
|
|
21 |
|
|
|
34 |
|
|
NA |
|
NA |
|
NA |
|
NA |
Receivables from customers(a) |
|
|
38,053 |
|
|
|
32,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest in purchased receivables(b) |
|
|
177 |
|
|
|
391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit-related assets |
|
|
802,970 |
|
|
|
806,340 |
|
|
|
13,462 |
|
|
|
14,875 |
|
|
|
3,720 |
|
|
|
7,910 |
|
|
|
2.22 |
|
|
|
4.46 |
|
Lending-related commitments(c) |
|
|
985,934 |
|
|
|
958,709 |
|
|
|
895 |
|
|
|
1,005 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
Assets acquired in loan satisfactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate owned |
|
NA |
|
NA |
|
|
1,467 |
|
|
|
1,610 |
|
|
NA |
|
NA |
|
NA |
|
NA |
Other |
|
NA |
|
NA |
|
|
57 |
|
|
|
72 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
Total assets acquired in loan satisfactions |
|
NA |
|
NA |
|
|
1,524 |
|
|
|
1,682 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
Total credit portfolio |
|
$ |
1,788,904 |
|
|
$ |
1,765,049 |
|
|
$ |
15,881 |
|
|
$ |
17,562 |
|
|
$ |
3,720 |
|
|
$ |
7,910 |
|
|
|
2.22 |
% |
|
|
4.46 |
% |
|
Net credit derivative hedges
notional(d) |
|
$ |
(24,731 |
) |
|
$ |
(23,108 |
) |
|
$ |
(47 |
) |
|
$ |
(55 |
) |
|
NA |
|
NA |
|
NA |
|
NA |
Liquid securities and other cash collateral
held against derivatives |
|
|
(16,185 |
) |
|
|
(16,486 |
) |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
|
|
|
(a) |
|
Represents primarily margin loans to prime and retail brokerage customers, which are
included in accrued interest and accounts receivable on the Consolidated Balance Sheets. |
|
(b) |
|
Represents an ownership interest in cash flows of a pool of receivables transferred by a
third-party seller into a bankruptcy-remote entity, generally a trust. |
|
(c) |
|
The amounts in nonperforming represent unfunded commitments that are risk rated as
nonaccrual. |
|
(d) |
|
Represents the net notional amount of protection purchased and sold of single-name and
portfolio credit derivatives used to manage both performing and non-performing credit
exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. For
additional information, see Credit derivatives on page 67 and Note 5 on pages 107113 of this
Form 10-Q. |
|
(e) |
|
At March 31, 2011, and December 31, 2010, nonperforming assets excluded: (1) mortgage loans
insured by U.S. government agencies of $9.8 billion and $10.5 billion, respectively, that are
accruing at the guaranteed reimbursement rate; (2) real estate owned insured by U.S.
government agencies of $2.3 billion and $1.9 billion, respectively; and (3) student loans that
are 90 days or more past due and still accruing, which are insured by U.S. government agencies
under the FFELP, of $615 million and $625 million, respectively. These amounts were excluded
as reimbursement of insured amounts is proceeding normally. In addition, the Firms policy is
generally to exempt credit card loans from being placed on nonaccrual status as permitted by
regulatory guidance issued by the Federal Financial Institutions Examination Council
(FFIEC). Credit card loans are |
59
|
|
|
|
|
charged off by the end of the month in which the account becomes 180 days past due or within 60
days from receiving notification about a specified event (e.g., bankruptcy of the borrower),
whichever is earlier. |
|
(f) |
|
Excludes PCI loans acquired as part of the Washington Mutual transaction, which are accounted
for on a pool basis. Since each pool is accounted for as a single asset with a single
composite interest rate and an aggregate expectation of cash flows, the past due status of the
pools, or that of individual loans within the pools, is not meaningful. Because the Firm is
recognizing interest income on each pool of loans, they are all considered to be performing. |
|
(g) |
|
For the three months ended March 31, 2011, and 2010, net charge-off rates were calculated
using average retained loans of $680.0 billion and $718.5 billion, respectively. These average
retained loans include average PCI loans of $71.6 billion and $80.3 billion, respectively.
Excluding the impact of PCI loans, the Firms total charge-off rate would have been 2.48% and
5.03% respectively. |
WHOLESALE CREDIT PORTFOLIO
As of March 31, 2011, wholesale exposure (IB, CB, TSS and AM) increased by $21.4 billion from
December 31, 2010. The overall increase was primarily driven by increases of $9.5 billion in
lending-related commitments, $8.4 billion in loans and $5.5 billion of receivables from customers.
The growth in wholesale credit exposure represented increased client activity across all businesses
and all regions. Effective January 1, 2011, the commercial card credit portfolio (of approximately
$5.3 billion of lending-related commitments and $1.2 billion of loans) that was previously in TSS
was transferred to CS.
Wholesale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit |
|
|
|
|
|
|
exposure |
|
|
Nonperforming(e) |
|
|
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|
December 31, |
|
(in millions) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
Loans retained |
|
$ |
229,648 |
|
|
$ |
222,510 |
|
|
$ |
4,578 |
|
|
$ |
5,510 |
|
Loans held-for-sale |
|
|
4,554 |
|
|
|
3,147 |
|
|
|
199 |
|
|
|
341 |
|
Loans at fair value |
|
|
1,805 |
|
|
|
1,976 |
|
|
|
90 |
|
|
|
155 |
|
|
Loans reported |
|
|
236,007 |
|
|
|
227,633 |
|
|
|
4,867 |
|
|
|
6,006 |
|
Derivative receivables |
|
|
78,744 |
|
|
|
80,481 |
|
|
|
21 |
|
|
|
34 |
|
Receivables from customers(a) |
|
|
38,053 |
|
|
|
32,541 |
|
|
|
|
|
|
|
|
|
Interests in purchased receivables(b) |
|
|
177 |
|
|
|
391 |
|
|
|
|
|
|
|
|
|
|
Total wholesale credit-related assets |
|
|
352,981 |
|
|
|
341,046 |
|
|
|
4,888 |
|
|
|
6,040 |
|
Lending-related commitments(c) |
|
|
355,561 |
|
|
|
346,079 |
|
|
|
895 |
|
|
|
1,005 |
|
|
Total wholesale credit exposure |
|
$ |
708,542 |
|
|
$ |
687,125 |
|
|
$ |
5,783 |
|
|
$ |
7,045 |
|
|
Net credit derivative hedges notional(d) |
|
$ |
(24,731 |
) |
|
$ |
(23,108 |
) |
|
$ |
(47 |
) |
|
$ |
(55 |
) |
Liquid securities and other cash collateral held against derivatives |
|
|
(16,185 |
) |
|
|
(16,486 |
) |
|
NA |
|
|
NA |
|
|
|
|
|
(a) |
|
Represents primarily margin loans to prime and retail brokerage customers, which are included
in accrued interest and accounts receivable on the Consolidated Balance Sheets. |
|
(b) |
|
Represents an ownership interest in cash flows of a pool of receivables transferred by a
third-party seller into a bankruptcy-remote entity, generally a trust. |
|
(c) |
|
The amounts in nonperforming represent unfunded commitments that are risk rated as
nonaccrual. |
|
(d) |
|
Represents the net notional amount of protection purchased and sold of single-name and
portfolio credit derivatives used to manage both performing and nonperforming credit
exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. For
additional information, see Credit derivatives on page 67, and Note 5 on pages 107113 of
this Form 10-Q. |
|
(e) |
|
Excludes assets acquired in loan satisfactions. |
60
The following table presents summaries of the maturity and ratings profiles of the wholesale
portfolio as of March 31, 2011, and December 31, 2010. The ratings scale is based on the Firms
internal risk ratings, which generally correspond to the ratings as defined by S&P and Moodys.
Also included in this table is the notional value of net credit derivative hedges; the
counterparties to these hedges are predominantly investment grade banks and finance companies.
Wholesale credit exposure maturity and ratings profile
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity profile(e) |
|
Ratings profile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment- |
|
Noninvestment- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
grade (IG) |
|
grade |
|
|
|
|
|
|
March 31, 2011 |
|
Due in 1 year |
|
Due after 1 year |
|
Due after 5 |
|
|
|
|
|
AAA/Aaa to |
|
BB+/Ba1 |
|
|
|
|
|
Total % |
(in millions, except ratios) |
|
or less |
|
through 5 years |
|
years |
|
Total |
|
BBB-/Baa3 |
|
& below |
|
Total |
|
of IG |
|
|
|
Loans |
|
$ |
89,044 |
|
|
$ |
82,128 |
|
|
$ |
58,476 |
|
|
$ |
229,648 |
|
|
$ |
153,159 |
|
|
$ |
76,489 |
|
|
$ |
229,648 |
|
|
|
67 |
% |
Derivative receivables(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,744 |
|
|
|
|
|
|
|
|
|
|
|
78,744 |
|
|
|
|
|
Less: Liquid securities and other
cash collateral held against
derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,185 |
) |
|
|
|
|
|
|
|
|
|
|
(16,185 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative receivables,
net of all collateral |
|
|
11,894 |
|
|
|
22,351 |
|
|
|
28,314 |
|
|
|
62,559 |
|
|
|
48,871 |
|
|
|
13,688 |
|
|
|
62,559 |
|
|
|
78 |
|
Lending-related commitments |
|
|
133,153 |
|
|
|
212,399 |
|
|
|
10,009 |
|
|
|
355,561 |
|
|
|
285,010 |
|
|
|
70,551 |
|
|
|
355,561 |
|
|
|
80 |
|
|
|
|
Subtotal |
|
|
234,091 |
|
|
|
316,878 |
|
|
|
96,799 |
|
|
|
647,768 |
|
|
|
487,040 |
|
|
|
160,728 |
|
|
|
647,768 |
|
|
|
75 |
|
Loans held-for-sale and loans at
fair value(b)(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,359 |
|
|
|
|
|
|
|
|
|
|
|
6,359 |
|
|
|
|
|
Receivables from
customers(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,053 |
|
|
|
|
|
|
|
|
|
|
|
38,053 |
|
|
|
|
|
Interests in purchased
receivables(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
177 |
|
|
|
|
|
|
|
|
Total exposure net of liquid
securities and other cash
collateral held against derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
692,357 |
|
|
|
|
|
|
|
|
|
|
$ |
692,357 |
|
|
|
|
|
|
|
|
Net credit derivative hedges
notional(d) |
|
$ |
(1,621 |
) |
|
$ |
(14,284 |
) |
|
$ |
(8,826 |
) |
|
$ |
(24,731 |
) |
|
$ |
(24,811 |
) |
|
$ |
80 |
|
|
$ |
(24,731 |
) |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity profile(e) |
|
Ratings profile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment- |
|
Noninvestment- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
grade (IG) |
|
grade |
|
|
|
|
|
|
December 31, 2010 |
|
Due in 1 year |
|
Due after 1 year |
|
Due after 5 |
|
|
|
|
|
AAA/Aaa to |
|
BB+/Ba1 |
|
|
|
|
|
Total % |
(in millions, except ratios) |
|
or less |
|
through 5 years |
|
years |
|
Total |
|
BBB-/Baa3 |
|
& below |
|
Total |
|
of IG |
|
|
|
Loans |
|
$ |
78,017 |
|
|
$ |
85,987 |
|
|
$ |
58,506 |
|
|
$ |
222,510 |
|
|
$ |
146,047 |
|
|
$ |
76,463 |
|
|
$ |
222,510 |
|
|
|
66 |
% |
Derivative receivables(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,481 |
|
|
|
|
|
|
|
|
|
|
|
80,481 |
|
|
|
|
|
Less: Liquid securities and other
cash collateral held against
derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,486 |
) |
|
|
|
|
|
|
|
|
|
|
(16,486 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative receivables,
net of all collateral |
|
|
11,499 |
|
|
|
24,415 |
|
|
|
28,081 |
|
|
|
63,995 |
|
|
|
47,557 |
|
|
|
16,438 |
|
|
|
63,995 |
|
|
|
74 |
|
Lending-related commitments |
|
|
126,389 |
|
|
|
209,299 |
|
|
|
10,391 |
|
|
|
346,079 |
|
|
|
276,298 |
|
|
|
69,781 |
|
|
|
346,079 |
|
|
|
80 |
|
|
|
|
Subtotal |
|
|
215,905 |
|
|
|
319,701 |
|
|
|
96,978 |
|
|
|
632,584 |
|
|
|
469,902 |
|
|
|
162,682 |
|
|
|
632,584 |
|
|
|
74 |
|
Loans held-for-sale and loans at
fair value(b)(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,123 |
|
|
|
|
|
|
|
|
|
|
|
5,123 |
|
|
|
|
|
Receivables from
customers(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,541 |
|
|
|
|
|
|
|
|
|
|
|
32,541 |
|
|
|
|
|
Interests in purchased
receivables(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
391 |
|
|
|
|
|
|
|
|
|
|
|
391 |
|
|
|
|
|
|
|
|
Total exposure net of liquid
securities and other cash
collateral held against derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
670,639 |
|
|
|
|
|
|
|
|
|
|
$ |
670,639 |
|
|
|
|
|
|
|
|
Net credit derivative hedges
notional(d) |
|
$ |
(1,228 |
) |
|
$ |
(16,415 |
) |
|
$ |
(5,465 |
) |
|
$ |
(23,108 |
) |
|
$ |
(23,159 |
) |
|
$ |
51 |
|
|
$ |
(23,108 |
) |
|
|
100 |
% |
|
|
|
|
|
|
(a) |
|
Represents the fair value of derivative receivables as reported on the Consolidated
Balance Sheets. |
|
(b) |
|
Loans held-for-sale and loans at fair value relate primarily to syndicated loans and loans
transferred from the retained portfolio. |
|
(c) |
|
From a credit risk perspective maturity and ratings profiles are not meaningful. |
|
(d) |
|
Represents the net notional amounts of protection purchased and sold of single-name and
portfolio credit derivatives used to manage the credit exposures; these derivatives do not
qualify for hedge accounting under U.S. GAAP. |
|
(e) |
|
The maturity profile of loans and lending-related commitments is based on the remaining
contractual maturity. The maturity profile of derivative receivables is based on the maturity
profile of average exposure. For further discussion of average exposure, see Derivative
receivables marked to market on page 66 of this Form 10-Q. |
61
Customer receivables of $38.1 billion and $32.5 billion at March 31, 2011, and December 31,
2010, respectively, representing primarily margin loans to prime and retail brokerage clients, are
included in the table. These margin loans are collateralized through a pledge of assets maintained
in clients brokerage accounts and are subject to daily minimum collateral requirements. In the
event that the collateral value decreases, a maintenance margin call is made to the client to
provide additional collateral into the account. If additional collateral is not provided by the
client, the clients positions may be liquidated by the Firm to meet the minimum collateral
requirements.
Wholesale credit exposure selected industry exposures
The Firm focuses on the management and diversification of its industry exposures, with particular
attention paid to industries with actual or potential credit concerns. Exposures deemed criticized
generally represent a ratings profile similar to a rating of CCC+"/Caa1 and lower, as defined by
S&P and Moodys. The total criticized component of the portfolio, excluding loans held-for-sale and
loans at fair value, decreased to $20.8 billion at March 31, 2011, from $22.4 billion from December
31, 2010. The decrease was primarily related to loan sales and net repayments.
Below are summaries of the top 25 industry exposures as of March 31, 2011, and December 31, 2010.
Wholesale credit exposure selected industry exposures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 days or |
|
|
|
|
|
|
|
|
|
collateral |
As of or for the year ended |
|
|
|
|
|
|
|
|
|
Noninvestment-grade |
|
more past due |
|
Year-to-date |
|
Credit |
|
held against |
March 31, 2011 |
|
Credit |
|
Investment- |
|
|
|
|
|
Criticized |
|
Criticized |
|
and accruing |
|
net charge-offs/ |
|
derivative |
|
derivative |
(in millions) |
|
exposure(c) |
|
grade |
|
Noncriticized |
|
performing |
|
nonperforming |
|
loans |
|
(recoveries) |
|
hedges(d) |
|
receivables |
|
Top 25 industries(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks and finance companies |
|
$ |
65,982 |
|
|
$ |
55,393 |
|
|
$ |
9,979 |
|
|
$ |
533 |
|
|
$ |
77 |
|
|
$ |
6 |
|
|
$ |
(7 |
) |
|
$ |
(3,097 |
) |
|
$ |
(9,173 |
) |
Real estate |
|
|
62,927 |
|
|
|
34,216 |
|
|
|
20,476 |
|
|
|
5,871 |
|
|
|
2,364 |
|
|
|
294 |
|
|
|
160 |
|
|
|
(42 |
) |
|
|
(52 |
) |
Healthcare |
|
|
39,280 |
|
|
|
32,633 |
|
|
|
6,372 |
|
|
|
237 |
|
|
|
38 |
|
|
|
16 |
|
|
|
|
|
|
|
(730 |
) |
|
|
(105 |
) |
State and municipal
governments |
|
|
34,315 |
|
|
|
33,324 |
|
|
|
781 |
|
|
|
186 |
|
|
|
24 |
|
|
|
6 |
|
|
|
|
|
|
|
(190 |
) |
|
|
(30 |
) |
Asset managers |
|
|
30,393 |
|
|
|
25,898 |
|
|
|
4,040 |
|
|
|
455 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
(3,057 |
) |
Oil and gas |
|
|
28,789 |
|
|
|
20,514 |
|
|
|
8,187 |
|
|
|
86 |
|
|
|
2 |
|
|
|
40 |
|
|
|
|
|
|
|
(114 |
) |
|
|
(90 |
) |
Utilities |
|
|
27,628 |
|
|
|
22,635 |
|
|
|
4,210 |
|
|
|
441 |
|
|
|
342 |
|
|
|
|
|
|
|
4 |
|
|
|
(415 |
) |
|
|
(293 |
) |
Consumer products |
|
|
26,468 |
|
|
|
16,687 |
|
|
|
9,289 |
|
|
|
475 |
|
|
|
17 |
|
|
|
3 |
|
|
|
(1 |
) |
|
|
(870 |
) |
|
|
(2 |
) |
Retail and consumer services |
|
|
20,183 |
|
|
|
12,010 |
|
|
|
7,649 |
|
|
|
367 |
|
|
|
157 |
|
|
|
8 |
|
|
|
1 |
|
|
|
(604 |
) |
|
|
(3 |
) |
Technology |
|
|
13,816 |
|
|
|
9,826 |
|
|
|
3,578 |
|
|
|
370 |
|
|
|
42 |
|
|
|
3 |
|
|
|
1 |
|
|
|
(164 |
) |
|
|
(2 |
) |
Machinery and equipment
manufacturing |
|
|
13,804 |
|
|
|
7,904 |
|
|
|
5,616 |
|
|
|
282 |
|
|
|
2 |
|
|
|
7 |
|
|
|
(1 |
) |
|
|
(73 |
) |
|
|
|
|
Building materials/
construction |
|
|
13,176 |
|
|
|
6,716 |
|
|
|
5,357 |
|
|
|
1,084 |
|
|
|
19 |
|
|
|
4 |
|
|
|
(5 |
) |
|
|
(338 |
) |
|
|
|
|
Media |
|
|
13,165 |
|
|
|
6,251 |
|
|
|
5,668 |
|
|
|
716 |
|
|
|
530 |
|
|
|
56 |
|
|
|
6 |
|
|
|
(205 |
) |
|
|
|
|
Metals/mining |
|
|
12,643 |
|
|
|
6,038 |
|
|
|
6,168 |
|
|
|
419 |
|
|
|
18 |
|
|
|
7 |
|
|
|
(4 |
) |
|
|
(472 |
) |
|
|
|
|
Telecom services |
|
|
12,613 |
|
|
|
9,486 |
|
|
|
2,299 |
|
|
|
818 |
|
|
|
10 |
|
|
|
|
|
|
|
(1 |
) |
|
|
(798 |
) |
|
|
(15 |
) |
Central government |
|
|
12,497 |
|
|
|
12,014 |
|
|
|
469 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,071 |
) |
|
|
(173 |
) |
Chemicals and plastics |
|
|
11,674 |
|
|
|
7,650 |
|
|
|
3,657 |
|
|
|
360 |
|
|
|
7 |
|
|
|
1 |
|
|
|
|
|
|
|
(130 |
) |
|
|
(2 |
) |
Insurance |
|
|
11,634 |
|
|
|
8,563 |
|
|
|
2,775 |
|
|
|
284 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
(1,012 |
) |
|
|
(706 |
) |
Holding companies |
|
|
11,035 |
|
|
|
8,804 |
|
|
|
2,185 |
|
|
|
46 |
|
|
|
|
|
|
|
104 |
|
|
|
(1 |
) |
|
|
|
|
|
|
(358 |
) |
Securities firms and exchanges |
|
|
10,908 |
|
|
|
9,473 |
|
|
|
1,381 |
|
|
|
54 |
|
|
|
|
|
|
|
80 |
|
|
|
|
|
|
|
(37 |
) |
|
|
(1,980 |
) |
Business services |
|
|
10,885 |
|
|
|
6,068 |
|
|
|
4,653 |
|
|
|
133 |
|
|
|
31 |
|
|
|
23 |
|
|
|
8 |
|
|
|
(5 |
) |
|
|
|
|
Transportation |
|
|
9,971 |
|
|
|
7,001 |
|
|
|
2,750 |
|
|
|
178 |
|
|
|
42 |
|
|
|
2 |
|
|
|
1 |
|
|
|
(129 |
) |
|
|
|
|
Automotive |
|
|
9,612 |
|
|
|
4,296 |
|
|
|
5,071 |
|
|
|
242 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
(911 |
) |
|
|
|
|
Agriculture/paper
manufacturing |
|
|
7,140 |
|
|
|
4,510 |
|
|
|
2,405 |
|
|
|
225 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
(62 |
) |
|
|
(7 |
) |
Aerospace |
|
|
6,086 |
|
|
|
5,153 |
|
|
|
832 |
|
|
|
101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(378 |
) |
|
|
|
|
All other(b) |
|
|
147,329 |
|
|
|
129,028 |
|
|
|
15,175 |
|
|
|
2,264 |
|
|
|
862 |
|
|
|
667 |
|
|
|
4 |
|
|
|
(5,884 |
) |
|
|
(137 |
) |
|
Subtotal |
|
|
663,953 |
|
|
|
502,091 |
|
|
|
141,022 |
|
|
|
16,241 |
|
|
|
4,599 |
|
|
|
1,342 |
|
|
|
165 |
|
|
|
(24,731 |
) |
|
|
(16,185 |
) |
|
Loans held-for-sale and loans
at fair value |
|
|
6,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from customers |
|
|
38,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest in purchased
receivables |
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
708,542 |
|
|
$ |
502,091 |
|
|
$ |
141,022 |
|
|
$ |
16,241 |
|
|
$ |
4,599 |
|
|
$ |
1,342 |
|
|
$ |
165 |
|
|
$ |
(24,731 |
) |
|
$ |
(16,185 |
) |
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 days or |
|
|
|
|
|
|
|
|
|
cash collateral |
As of or for the year ended |
|
|
|
|
|
|
|
|
|
Noninvestment-grade |
|
more past due |
|
Year-to-date |
|
Credit |
|
held against |
December 31, 2010 |
|
Credit |
|
Investment- |
|
|
|
|
|
Criticized |
|
Criticized |
|
and accruing |
|
net charge-offs/ |
|
derivative |
|
derivative |
(in millions) |
|
exposure(c) |
|
grade |
|
Noncriticized |
|
performing |
|
nonperforming |
|
loans |
|
(recoveries) |
|
hedges(d) |
|
receivables |
|
Top 25 industries(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks and finance companies |
|
$ |
65,867 |
|
|
$ |
54,839 |
|
|
$ |
10,428 |
|
|
$ |
467 |
|
|
$ |
133 |
|
|
$ |
26 |
|
|
$ |
69 |
|
|
$ |
(3,456 |
) |
|
$ |
(9,216 |
) |
Real estate |
|
|
64,351 |
|
|
|
34,440 |
|
|
|
20,569 |
|
|
|
6,404 |
|
|
|
2,938 |
|
|
|
399 |
|
|
|
862 |
|
|
|
(76 |
) |
|
|
(57 |
) |
Healthcare |
|
|
41,093 |
|
|
|
33,752 |
|
|
|
7,019 |
|
|
|
291 |
|
|
|
31 |
|
|
|
85 |
|
|
|
4 |
|
|
|
(768 |
) |
|
|
(161 |
) |
State and municipal
governments |
|
|
35,808 |
|
|
|
34,641 |
|
|
|
912 |
|
|
|
231 |
|
|
|
24 |
|
|
|
34 |
|
|
|
3 |
|
|
|
(186 |
) |
|
|
(233 |
) |
Asset managers |
|
|
29,364 |
|
|
|
25,533 |
|
|
|
3,401 |
|
|
|
427 |
|
|
|
3 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
(2,948 |
) |
Oil and gas |
|
|
26,459 |
|
|
|
18,465 |
|
|
|
7,850 |
|
|
|
143 |
|
|
|
1 |
|
|
|
24 |
|
|
|
|
|
|
|
(87 |
) |
|
|
(50 |
) |
Utilities |
|
|
25,911 |
|
|
|
20,951 |
|
|
|
4,101 |
|
|
|
498 |
|
|
|
361 |
|
|
|
3 |
|
|
|
49 |
|
|
|
(355 |
) |
|
|
(230 |
) |
Consumer products |
|
|
27,508 |
|
|
|
16,747 |
|
|
|
10,379 |
|
|
|
371 |
|
|
|
11 |
|
|
|
217 |
|
|
|
1 |
|
|
|
(752 |
) |
|
|
(2 |
) |
Retail and consumer services |
|
|
20,882 |
|
|
|
12,021 |
|
|
|
8,316 |
|
|
|
338 |
|
|
|
207 |
|
|
|
8 |
|
|
|
23 |
|
|
|
(623 |
) |
|
|
(3 |
) |
Technology |
|
|
14,348 |
|
|
|
9,355 |
|
|
|
4,534 |
|
|
|
399 |
|
|
|
60 |
|
|
|
47 |
|
|
|
50 |
|
|
|
(158 |
) |
|
|
|
|
Machinery and equipment
manufacturing |
|
|
13,311 |
|
|
|
7,690 |
|
|
|
5,372 |
|
|
|
244 |
|
|
|
5 |
|
|
|
8 |
|
|
|
2 |
|
|
|
(74 |
) |
|
|
(2 |
) |
Building materials/
construction |
|
|
12,808 |
|
|
|
6,557 |
|
|
|
5,065 |
|
|
|
1,129 |
|
|
|
57 |
|
|
|
9 |
|
|
|
6 |
|
|
|
(308 |
) |
|
|
|
|
Media |
|
|
10,967 |
|
|
|
5,808 |
|
|
|
3,945 |
|
|
|
672 |
|
|
|
542 |
|
|
|
2 |
|
|
|
92 |
|
|
|
(212 |
) |
|
|
(3 |
) |
Metals/mining |
|
|
11,426 |
|
|
|
5,260 |
|
|
|
5,748 |
|
|
|
362 |
|
|
|
56 |
|
|
|
7 |
|
|
|
35 |
|
|
|
(296 |
) |
|
|
|
|
Telecom services |
|
|
10,709 |
|
|
|
7,582 |
|
|
|
2,295 |
|
|
|
821 |
|
|
|
11 |
|
|
|
3 |
|
|
|
(8 |
) |
|