JP Morgan Chase 2010 Annual Report Download - page 92

Management’s discussion and analysis
JPMorgan Chase & Co./2010 Annual Report
92
BALANCE SHEET ANALYSIS
Selected Consolidated Balance Sheets data
December 31, (in millions)
2010
2009
Assets
Cash and due from banks
$
27,567
$
26,206
Deposits with banks
21,673
63,230
Federal funds sold and securiti
es
purchased under resale
agreements 222,554
195,404
Securities borrowed
123,587
119,630
Trading assets:
Debt and equity instruments
409,411
330,918
Derivative receivables
80,481
80,210
Securities
316,336
360,390
Loans
692,92
7
633,458
Allowance for loan losses
(32,266)
(31,602
)
Loans, net of allowance for loan
losses 660,661
601,856
Accrued interest and accounts
receivable 70,147
67,427
Premises and equipment
13,355
11,118
Goodwill
48,854
48,35
7
Mortgage servicing rights
13,649
15,531
Other intangible assets
4,039
4,621
Other assets
105,291
107,091
Total assets
$
2,117,605
$
2,031,989
Liabilities
Deposits
$
930,369
$
938,367
Federal funds purchased and
securities loaned or sold under
repurchase agreements 276,644
261,413
Commercial paper
35,363
41,794
Other borrowed funds
57,309
55,740
Trading liabilities:
Debt and equity instruments
76,947
64,946
Derivative payables
69,219
60,125
Accounts payable and other liabilities
170,330
162,696
Beneficial interests issued by
consolidated VIEs 77,649
15,225
Long-term debt
247,669
266,318
Total liabilities
1,941,499
1,866,624
Stockholders’ equity
176,106
165,365
Total li
abilities and
stockholders’ equity $ 2,117,605 $
2,031,989
Consolidated Balance Sheets overview
Total assets were $2.1 trillion, up by $85.6 billion from December
31, 2009. The increase was primarily a result of higher trading
assets – debt and equity instruments, principally due to improved
market activity; higher loans, largely due to the January 1, 2010,
adoption of accounting guidance related to VIEs; and higher federal
funds sold and securities purchased under resale agreements,
predominantly due to higher financing volume in IB. These
increases were partially offset by a reduction in deposits with
banks, as market stress eased from the end of 2009.
Total liabilities were $1.9 trillion, up by $74.9 billion. The increase
was predominantly a result of higher beneficial interests issued by
consolidated VIEs, due to the adoption of the accounting guidance
related to VIEs.
Stockholders’ equity was $176.1 billion, up by $10.7 billion. The
increase was driven predominantly by net income, partially offset by
the cumulative effect of changes in accounting principles as a result
of the adoption of the accounting guidance related to the
consolidation of VIEs.
The following is a discussion of the significant changes in the
specific line captions of the Consolidated Balance Sheets from
December 31, 2009.
Deposits with banks; federal funds sold and securities
purchased under resale agreements; and securities
borrowed
The Firm uses these instruments as part of its liquidity management
activities; to manage its cash positions and risk-based capital
requirements; and to support its trading and risk management
activities. In particular, securities purchased under resale
agreements and securities borrowed are used to provide funding or
liquidity to clients by purchasing and borrowing their securities for
the short term. The decrease in deposits with banks was largely due
to lower deposits with the Federal Reserve Banks and lower
interbank lending, as market stress eased from the end of 2009.
Securities purchased under resale agreements increased,
predominantly due to higher financing volume in IB. For additional
information on the Firm’s Liquidity Risk Management, see pages
110–115 of this Annual Report.
Trading assets and liabilities – debt and equity
instruments
Debt and equity trading instruments are used primarily for market-
making activity. These instruments consist predominantly of fixed-
income securities, including government and corporate debt; equity
securities, including convertible securities; loans, including prime
mortgage and other loans warehoused by RFS and IB for sale or
securitization purposes and accounted for at fair value; and physical
commodities inventories carried at the lower of cost or fair value.
Trading assets – debt and equity instruments increased, principally
due to improved market activity, primarily in equity securities,
foreign debt and physical commodities. Trading liabilities – debt
and equity instruments increased, largely due to higher levels of
positions to facilitate customer trading. For additional information,
refer to Note 3 on pages 170–187 of this Annual Report.
Trading assets and liabilities – derivative receivables and
payables
The Firm uses derivative instruments predominantly for market-
making activity. Derivatives enable customers and the Firm to
manage their exposures to fluctuations in interest rates, currencies
and other markets. The Firm also uses derivative instruments to
manage its credit exposure. Derivative receivables were flat
compared with the prior year. Derivative payables increased,
reflecting tighter credit spreads, appreciation of the U.S. dollar and
higher commodity derivatives balances (driven by increasing
commodity prices and the RBS Sempra acquisition). For additional
information, refer to Derivative contracts on pages 125–128, and
Note 3 and Note 6 on pages 170–187 and 191–199, respectively,
of this Annual Report.