JP Morgan Chase 2010 Annual Report Download - page 120

Management’s discussion and analysis
120 JPMorgan Chase & Co./2010 Annual Report
WHOLESALE CREDIT PORTFOLIO
As of December 31, 2010, wholesale exposure (IB, CB, TSS and AM)
increased by $36.9 billion from December 31, 2009. The overall
increase was primarily driven by increases of $23.5 billion in loans
and $16.8 billion of receivables from customers, partially offset by
decreases in interests in purchase receivables and lending-related
commitments of $2.5 billion and $1.1 billion, respectively. The de-
crease in lending-related commitments and the increase in loans were
primarily related to the January 1, 2010, adoption of the accounting
guidance related to VIEs, which resulted in the elimination of a net
$17.7 billion of lending-related commitments between the Firm and
its administrated multi-seller conduits upon consolidation. Assets of
the consolidated conduits included $15.1 billion of wholesale loans at
January 1, 2010. Excluding the effect of the accounting guidance,
lending-related commitments and loans would have increased by
$16.6 billion and $8.4 billion, respectively, mainly related to in-
creased client activity. The increase in loans also included the pur-
chase of a $3.5 billion loan portfolio in CB during the third quarter of
2010. The increase of $16.8 billion in receivables from customers was
due to increased client activity, predominantly in Prime Services.
Wholesale
December 31, Credit exposure Nonperforming
(
f
)
(in millions)
2010
2009
2010
2009
Loans retained
$
222,510
$ 200,077
$
5,510
$ 6,559
Loans held-for-sale
3,147
2,734
341
234
Loans at fair value
1,976
1,364
155
111
Loans
–
reported
227,633
204,175
6,006
6,904
Derivative receivables
80,481
80,210
34
529
Receivables from customers
(a)
32,541 15,745 — —
Interests in purchased receivables
(b)
391 2,927 — —
Total wholesale credit
-
related assets
341,046
303,057
6,040
7,433
Lending-related commitments
(c)
346,079 347,155 1,005 1,577
Total wholesale credit exposure
$ 687,125
$ 650,212
$
7,045
$ 9,010
Net credit derivative hedges notional
(d)
$ (23,108) $ (48,376) $ (55) $ (139)
Liquid securities and other cash collateral held against derivatives
(e)
(16,486) (15,519) 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 nonperform-
ing credit exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. For additional information, see Credit derivatives on pages 126–128, and
Note 6 on pages 191–199 of this Annual Report.
(e) Represents other liquid securities collateral and other cash collateral held by the Firm.
(f) Excludes assets acquired in loan satisfactions.
The following table presents summaries of the maturity and ratings profiles of the wholesale portfolio as of December 31, 2010 and 2009. The ratings scale
is based on the Firm’s internal risk ratings, which generally correspond to the ratings as defined by S&P and Moody’s. 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.