JP Morgan Chase 2014 Annual Report Download - page 95

JPMorgan Chase & Co./2014 Annual Report 93
calculated excluding the impact of consolidated Firm-
administered multi-seller conduits and trade finance, to
provide a more meaningful assessment of CIB’s allowance
coverage ratio. These measures are used by management to
assess the underlying performance of the business and for
comparability with peers.
2014 compared with 2013
Net income was $6.9 billion, down 22% compared with
$8.9 billion in the prior year. These results primarily
reflected lower revenue as well as higher noninterest
expense. Net revenue was $34.6 billion, flat compared with
the prior year.
Banking revenue was $11.8 billion, down 3% from the prior
year. Investment banking fees were $6.6 billion, up 4%
from the prior year. The increase was driven by higher
advisory and equity underwriting fees, partially offset by
lower debt underwriting fees. Advisory fees were $1.6
billion up 24% on stronger share of fees for completed
transactions as well as growth in the industry-wide fee
levels, according to Dealogic. Equity underwriting fees were
$1.6 billion up 5%, driven by higher industry wide issuance.
Debt underwriting fees were $3.4 billion, down 4%,
primarily related to lower loan syndication fees on lower
industry-wide fee levels and lower bond underwriting fees.
The Firm also ranked #1 globally in fees and volumes share
across high grade, high yield and loan products. The Firm
maintained its #2 ranking for M&A, and improved share of
fees both globally and in the U.S. compared to the prior
year. Treasury Services revenue was $4.1 billion, down 1%
compared with the prior year, primarily driven by lower
trade finance revenue as well as the impact of business
simplification initiatives, largely offset by higher net
interest income from increased deposits. Lending revenue
was $1.1 billion, down from $1.7 billion in the prior year,
driven by losses, compared with gains in the prior periods,
on securities received from restructured loans, as well as
lower net interest income.
Markets & Investor Services revenue was $22.8 billion, up
1% from the prior year. Fixed Income Markets revenue was
$13.8 billion down 13% from the prior year driven by lower
revenues in Fixed Income primarily from credit-related and
rates products as well as the impact of business
simplification. Equity Markets revenue was $4.9 billion up
1% as higher prime services revenue was partially offset by
lower equity derivatives revenue. Securities Services
revenue was $4.4 billion, up 6% from the prior year,
primarily driven by higher net interest income on increased
deposits and higher fees and commissions. Credit
Adjustments & Other revenue was a loss of $272 million
driven by net CVA losses partially offset by gains, net of
hedges, related to FVA/DVA. The prior year was a loss of
$2.1 billion (including the FVA implementation loss of $1.5
billion and DVA losses of $452 million).
Noninterest expense was $23.3 billion, up 7% compared to
the prior year as a result of higher legal expense and
investment in controls. This was partially offset by lower
performance-based compensation expense as well as the
impact of business simplification, including the sale or
liquidation of a significant part of the physical commodities
business. The compensation expense to net revenue ratio
was 30%.
Return on equity was 10% on $61.0 billion of average
allocated capital.
2013 compared with 2012
Net income was $8.9 billion, up 2% compared with the
prior year.
Net revenue was $34.8 billion, flat compared with the prior
year. Net revenue in 2013 included a $1.5 billion loss as a
result of implementing a FVA framework for OTC derivatives
and structured notes. The FVA framework incorporates the
impact of funding into the Firm’s valuation estimates for
OTC derivatives and structured notes and reflects an
industry migration towards incorporating the market cost of
unsecured funding in the valuation of such instruments. The
loss recorded in 2013 was a one-time adjustment arising on
implementation of the new FVA framework.
Net revenue in 2013 also included a $452 million loss from
DVA on structured notes and derivative liabilities, compared
with a loss of $930 million in the prior year. Excluding the
impact of FVA and DVA, net revenue was $36.7 billion and
net income was $10.1 billion, compared with $35.7 billion
and $9.2 billion, respectively in the prior year.
Banking revenue was $12.2 billion, compared with $11.4
billion in the prior year. Investment banking fees were $6.3
billion, up 10% from the prior year, driven by higher equity
underwriting fees of $1.5 billion (up 46%) and record debt
underwriting fees of $3.5 billion (up 8%), partially offset
by lower advisory fees of $1.3 billion (down 12%). Equity
underwriting results were driven by higher industry-wide
issuance and an increase in share of fees compared with the
prior year, according to Dealogic. Industry-wide loan
syndication volumes and fees increased as the low-rate
environment continued to fuel refinancing activity. The Firm
also ranked #1 in industry-wide fee shares across high
grade, high yield and loan products. Advisory fees were
lower compared with the prior year as industry-wide
completed M&A industry-wide fee levels declined 13%. The
Firm maintained its #2 ranking and improved share for both
announced and completed volumes during the year.
Treasury Services revenue was $4.2 billion, down 2%
compared with the prior year, primarily reflecting lower
trade finance spreads, partially offset by higher net interest
income on higher deposit balances. Lending revenue was
$1.7 billion, up from $1.4 billion, in the prior year
reflecting net interest income on retained loans, fees on
lending-related commitments, and gains on securities
received from restructured loans.
Markets and Investor Services revenue was $22.6 billion
compared to $23.4 billion in the prior year. Combined Fixed
Income and Equity Markets revenue was $20.6 billion, up
from $20.1 billion the prior year. Fixed Income Markets
revenue was $15.8 billion slightly higher reflecting
consistently strong client revenue and lower losses from the
synthetic credit portfolio, which was partially offset by
lower rates-related revenue given an uncertain rate outlook
and low spread environment. Equities Markets revenue was