JP Morgan Chase 2003 Annual Report Download - page 56

M anagement’s discussion and analysis
J.P. M organ Chase & Co.
54 J.P. Morgan Chase & Co. / 2003 Annual Report
Commercial and consumer credit portfolio
Approximate period-end
As of December 31,
Credit exposure Economic credit exposure allocated credit capital
(in millions) 2003 2002 2003 2002 2003 2002
COM M ERCIAL
Loans(a)(b) $83,097(i) $91,548 $83,097 $91,548
Derivative receivables(b) 83,751 83,102 34,130 34,189
Other receivables 108 108 108 108
Total commercial credit-related assets 166,956 174,758 117,335 125,845
Lending-related commitments(a)(c) 215,758(j) 238,120 106,872 115,495
Total commercial credit exposure $ 382,714 $412,878 $224,207 $241,340 $8,200 $13,300
CONSUM ER
Loans – reported(a)(d) $136,421 $124,816 $136,421 $124,816
Loans securitized(d)(e) 34,856 30,722 34,856 30,722
Total managed consumer loans 171,277 155,538 171,277 155,538
Lending-related commitments(f) 176,923 151,138 176,923 151,138
Total consumer credit exposure $ 348,200 $306,676 $348,200 $306,676 $3,400 $3,300
TOTAL CREDIT PORTFOLIO
Managed loans $254,374 $247,086 $254,374 $247,086
Derivative receivables 83,751 83,102 34,130 34,189
Other receivables 108 108 108 108
Total managed credit-related assets 338,233 330,296 288,612 281,383
Total lending-related commitments 392,681 389,258 283,795 266,633
Total credit port folio $ 730,914 $719,554 $572,407 $548,016 $11,600 $16,600
Credit derivative hedges notional(g) $(37,282) $(33,767) $(37,282) $(33,767) $(1,300) $(1,200)
Collateral held against derivative receivables(h) (36,214) (30,410) NA NA
(a) Amounts are presented gross of the allowance for credit losses.
(b) Loans are presented gross of collateral held. Derivative receivables Credit exposure is presented gross of collateral held.
(c) Includes unused advised lines of credit totaling $19 billion at December 31, 2003, and $22 billion at December 31, 2002, w hich are not legally binding. In regulatory filings with the Board of Governors
of the Federal Reserve System, unused advised lines are not reportable.
(d) At December 31, 2003, credit card securitizations included $1.1 billion of accrued interest and fees on securitized credit card loans that were classified in Other assets, consistent with the FASB Staff
Position, Accounting for Accrued Interest Receivable Related to Securitized and Sold Receivables under SFAS 140. Prior to March 31, 2003, this balance was classified in credit card loans.
(e) Represents securitized credit cards. For a further discussion of credit card securitizations, see page 41 of this Annual Report.
(f) Credit exposure and Economic credit exposure to consumer lending–related commitments are presented on the same basis; in the Firm’s view, this is a conservative measure as it represents the Firm’s
maximum exposure.
(g) Represents hedges of commercial credit exposure that do not qualify for hedge accounting under SFAS 133.
(h) On an Economic credit exposure basis, collateral is considered “ NA,” as it is already accounted for in Derivative receivables.
(i) Includes $5.8 billion of exposure related to consolidated VIEs in accordance with FIN 46, of which $4.8 billion is associated with multi-seller asset-backed commercial paper conduits.
(j) Total commitments related to asset-backed commercial paper conduits consolidated in accordance with FIN 46 are $9.8 billion, of which $3.5 billion is included in Lending-related commitments. The
remaining $6.3 billion of commitments to these VIEs is excluded, as the underlying assets of the vehicles are reported as follows: $4.8 billion in Loans and $1.5 billion in Available-for-sale securities.
As of December 31, 2003, total Economic credit exposure w as
$572.4 billion, compared w ith $548.0 billion as of year-end
2002. Economic credit exposure for 2003 w as $572.4 billion
compared w ith 2003 credit exposure of $730.9 billion.
The follow ing table presents JPM organ Chase’s credit portfolio as of December 31, 2003 and 2002:
The Firm’s allocated credit capital (including the benefit from
credit derivative hedges) decreased significantly during 2003, to
$10.3 billion at December 31, 2003, from $15.4 billion at year-
end 2002. The $5.1 billion decrease w as related to low er expo-
sure in the commercial portfolio, hedging and loan sale activities,
and significantly improved credit quality in the loan portfolio.