JP Morgan Chase 2014 Annual Report Download - page 122

Management’s discussion and analysis
120 JPMorgan Chase & Co./2014 Annual Report
WHOLESALE CREDIT PORTFOLIO
The Firm’s wholesale businesses are exposed to credit risk
through underwriting, lending and trading activities with
and for clients and counterparties, as well as through
various operating services such as cash management and
clearing activities. A portion of the loans originated or
acquired by the Firm’s wholesale businesses is generally
retained on the balance sheet. The Firm distributes a
significant percentage of the loans it originates into the
market as part of its syndicated loan business and to
manage portfolio concentrations and credit risk.
The wholesale credit environment remained favorable
throughout 2014 driving an increase in client activity.
Growth in loans retained was driven primarily by activity in
Commercial Banking, while growth in lending-related
commitments reflected increased activity in both the
Corporate & Investment Bank and Commercial Banking.
Discipline in underwriting across all areas of lending
continues to remain a key point of focus, consistent with
evolving market conditions and the Firm’s risk management
activities. The wholesale portfolio is actively managed, in
part by conducting ongoing, in-depth reviews of client credit
quality and transaction structure, inclusive of collateral
where applicable; and of industry, product and client
concentrations. During the year, wholesale criticized assets
decreased from 2013, including a reduction in nonaccrual
loans by 40%.
Wholesale credit portfolio
December 31, Credit exposure Nonperforming(d)
(in millions) 2014 2013 2014 2013
Loans retained $324,502 $308,263 $ 599 $ 821
Loans held-for-sale 3,801 11,290 426
Loans at fair value 2,611 2,011 21 197
Loans – reported 330,914 321,564 624 1,044
Derivative receivables 78,975 65,759 275 415
Receivables from
customers and other(a) 28,972 26,744 ——
Total wholesale credit-
related assets 438,861 414,067 899 1,459
Lending-related
commitments(b) 472,056 446,232 103 206
Total wholesale credit
exposure $910,917 $860,299 $ 1,002 $ 1,665
Credit Portfolio
Management derivatives
notional, net(c) $ (26,703) $ (27,996) $ — $ (5)
Liquid securities and
other cash collateral
held against derivatives (19,604) (14,435) NA NA
(a) Receivables from customers and other include $28.8 billion and $26.5
billion of margin loans at December 31, 2014 and 2013, respectively,
to prime and retail brokerage customers; these are classified in
accrued interest and accounts receivable on the Consolidated balance
sheets.
(b) Includes unused advised lines of credit of $105.2 billion and $102.0
billion as of December 31, 2014 and 2013, respectively. An advised
line of credit is a revolving credit line which specifies the maximum
amount the Firm may make available to an obligor, on a nonbinding
basis. The borrower receives written or oral advice of this facility. The
Firm may cancel this facility at any time by providing the borrower
notice or, in some cases, without notice as permitted by law.
(c) Represents the net notional amount of protection purchased and sold
through credit derivatives used to manage both performing and
nonperforming wholesale credit exposures; these derivatives do not
qualify for hedge accounting under U.S. GAAP. For additional
information, see Credit derivatives on page 127, and Note 6.
(d) Excludes assets acquired in loan satisfactions.