JP Morgan Chase 2010 Annual Report Download - page 199

JPMorgan Chase & Co./2010 Annual Report 199
The following tables summarize the notional and fair value amounts of credit derivatives and credit-related notes as of December 31, 2010
and 2009, where JPMorgan Chase is the seller of protection. The maturity profile is based on the remaining contractual maturity of the credit
derivative contracts. The ratings profile is based on the rating of the reference entity on which the credit derivative contract is based. The
ratings and maturity profile of protection purchased are comparable to the profile reflected below.
Protection sold – credit derivatives and credit-related notes ratings(a) /maturity profile
December 31, 2010
(in millions) <1 year 1–5 years >5 years
Total
notional amount Fair value(b)
Risk rating of reference entity
Investment-grade
$
(175,618)
$
(1,194,695)
$
(336,309)
$
(1,706,62
2
)
$
(17,261
)
Noninvestment-grade
(148,434)
(702,638)
(197,330)
(1,048,402)
(59,939
)
Total
$
(324,052)
$
(1,897,
333
)
$
(533,639)
$
(2,755,024)
$
(77,200
)
December 31, 200
9 (in millions) <1 year 1–5 years >5 years
Total
notional amount
Fair value
(b)
Risk rating of reference entity
Investment
-
grade
$
(215,580)
$
(1,140,133)
$
(367,015)
$
(1,722,728)
$
(16,607
)
Noninvestment
-
grade
(150,122)
(806,139)
(273,059)
(1,229,320)
(90,410
)
Total
$ (365,702) $ (1,946,272) $ (640,074) $ (2,952,048) $ (107,017)
(a) The ratings scale is based on the Firm’s internal ratings, which generally correspond to ratings as defined by S&P and Moody’s.
(b) Amounts are shown on a gross basis, before the benefit of legally enforceable master netting agreements and cash collateral held by the Firm.
Note 7 – Noninterest revenue
Investment banking fees
This revenue category includes advisory and equity and debt under-
writing fees. Advisory fees are recognized as revenue when the
related services have been performed and the fee has been earned.
Underwriting fees are recognized as revenue when the Firm has
rendered all services to the issuer and is entitled to collect the fee
from the issuer, as long as there are no other contingencies associ-
ated with the fee (e.g., the fee is not contingent upon the customer
obtaining financing). Underwriting fees are net of syndicate expense;
the Firm recognizes credit arrangement and syndication fees as
revenue after satisfying certain retention, timing and yield criteria.
The following table presents the components of investment bank-
ing fees.
Year ended December 31,
(in millions)
2010 2009 2008
Underwriting:
Equity
$
1,589
$ 2,487 $ 1,477
Debt
3,172
2,739 2,094
Total underwriting
4,761
5,226 3,571
Advisory
(a)
1,429 1,861 1,955
Total i
n
vest
ment banking fees
$
6,190
$ 7,087 $ 5,526
(a) Effective January 1, 2010, the Firm adopted accounting guidance related to VIEs. Upon
adoption of the guidance, the Firm consolidated its Firm-administered multi-seller con-
duits. The consolidation of the conduits did not significantly change the Firm’s net income
as a whole; however, it did affect the classification of items on the Firm’s Consolidated
Statements of Income. As a result, certain advisory fees were considered inter-company
and eliminated, and the fees charged by the consolidated multi-seller conduits to its cus-
tomers were classified as lending-and-deposit-related fees.
Principal transactions
Principal transactions revenue consists of realized and unrealized
gains and losses from trading activities (including physical com-
modities inventories that are generally accounted for at the lower
of cost or fair value), changes in fair value associated with finan-
cial instruments held by IB for which the fair value option was
elected, and loans held-for-sale within the wholesale lines of
business. Principal transactions revenue also includes private
equity gains and losses.
The following table presents principal transactions revenue.
Year ended December 31,
(in millions)
2010 2009 2008
Trading revenue
$
9,
404
$ 9,870 $ (9,791
)
Private equity gains/(losses)
(a)
1,490 (74) (908
)
Principal transactions
$
10,894
$ 9,796 $(10,699
)
(a) Includes revenue on private equity investments held in the Private Equity business
within Corporate/Private Equity, as well as those held in other business segments.
Lending- and deposit-related fees
This revenue category includes fees from loan commitments,
standby letters of credit, financial guarantees, deposit-related fees
in lieu of compensating balances, cash management-related activi-
ties or transactions, deposit accounts and other loan-servicing
activities. These fees are recognized over the period in which the
related service is provided.
Asset management, administration and commissions
This revenue category includes fees from investment management
and related services, custody, brokerage services, insurance premiums
and commissions, and other products. These fees are recognized over
the period in which the related service is provided. Performance-
based fees, which are earned based on exceeding certain benchmarks
or other performance targets, are accrued and recognized at the end
of the performance period in which the target is met.
The following table presents the components of asset management,
administration and commissions.
Year ended December 31,
(in millions)
20
10
2009 2008
Asset manag
e
ment:
Investment management fees
$
5,632
$ 4,997 $ 5,562
All other asset management fees
496
356 432
Total asset management fees
6,128
5,353 5,994
Total administration fees
(a)
2,023 1,927 2,452
Commission and other fees:
Brokerage commissions
2,804
2,904 3,141
All other commissions and fees
2,544
2,356 2,356
Total commi
s
sions and fees
5,348
5,260 5,497
Total asset management
,
administration and commissions $13,499 $12,540 $13,943
(a) Includes fees for custody, securities lending, funds services and securities clearance.