JP Morgan Chase 2010 Annual Report Download - page 275

JPMorgan Chase & Co./2010 Annual Report
275
Note 30 – Off–balance sheet lending-related
financial instruments, guarantees and other
commitments
JPMorgan Chase utilizes lending-related financial instruments (e.g.,
commitments and guarantees) to meet the financing needs of its
customers. The contractual amount of these financial instruments
represents the Firm’s maximum possible credit risk should the
counterparty draw upon the commitment or the Firm be required to
fulfill its obligation under the guarantee, and should the counter-
party subsequently fail to perform according to the terms of the
contract. Most of these commitments and guarantees expire with-
out being drawn or a default occurring. As a result, the total con-
tractual amount of these instruments is not, in the Firm’s view,
representative of its actual future credit exposure or funding re-
quirements.
To provide for the risk of loss inherent in wholesale and consumer
(excluding credit card) related contracts, an allowance for credit
losses on lending-related commitments is maintained. See Note 15
on pages 239–243 of this Annual Report for further discussion
regarding the allowance for credit losses on lending-related com-
mitments.
The following table summarizes the contractual amounts and
carrying values of off-balance sheet lending-related financial in-
struments, guarantees and other commitments at December 31,
2010 and 2009. The amounts in the table below for credit card and
home equity lending-related commitments represent the total
available credit for these products. The Firm has not experienced,
and does not anticipate, that all available lines of credit for these
products will be utilized at the same time. The Firm can reduce or
cancel credit card lines of credit by providing the borrower prior
notice or, in some cases, without notice as permitted by law. The
Firm may reduce or close home equity lines of credit when there are
significant decreases in the value of the underlying property or
when there has been a demonstrable decline in the creditworthi-
ness of the borrower.
Off–balance sheet lending-related financial instruments, guarantees and other commitments
Contractual amount
Carrying value
(
l
)
December 31, (in millions)
2010
2009
2010
2009
Lending
-
related
Consumer, excluding credit card:
Home equity — senior lien
$
16,060
$ 19,246
$
—
$ —
Home equity — junior lien
28,681
37,231
—
—
Prime mortgage
1,266
1,654
—
—
Subprime mortgage
—
—
—
—
Auto
5,246
5,467
2
7
Business banking
9,702
9,040
4
5
Student and other
579
2,189
—
—
Total consumer, excluding credit card
61,534
74,827
6
12
Credit card
547,227
569,113
—
—
Total consumer
608,761
643,940
6
12
Wholesale:
Other unfunded commitments to extend credit
(a)(b)
(c)
199,859 192,145 364 356
Asset purchase agreements
(b)
— 22,685 — 126
Standby letters of credit and other financial guarantees
(a)(c)(d)
(e)
94,837 91,485 705 919
Unused advised lines of credit
44,720
35,673
—
—
Other letters of credit
(a)(
e
)
6,663 5,167 2 1
Total whol
e
sale
346,079
347,155
1,071
1,402
Total lending
-
related
$
954,840
$ 991,095
$
1,077
$ 1,414
Other guara
n
tees and commitments
Securities lending indemnifications
(
f
)
$ 181,717
$ 170,777 $ NA $ NA
Derivatives qualifying as guarantees
(
g
)
87,768 98,052(k) 294
896
(
k)
Unsettled reverse repurchase and securities borrowing agreements
39,927
48,187
—
—
Equity investment commitments
(
h
)
2,468 2,374 — —
Building purchase commitments
258
670
—
—
Other guarantees and commitments
(
i
)
3,766 3,671 6 6
Loan sale and securitization-related indemnifications:
Repurchase liability
(
j
)
NA NA 3,285 1,705
Loans sold with recourse
10,982
13,544
153
271
(a) At December 31, 2010 and 2009, represents the contractual amount net of risk participations totaling $542 million and $643 million, respectively, for other unfunded com-
mitments to extend credit; $22.4 billion and $24.6 billion, respectively, for standby letters of credit and other financial guarantees; and $1.1 billion and $690 million, respec-
tively, for other letters of credit. In regulatory filings with the Federal Reserve Board these commitments are shown gross of risk participations.
(b) Upon the adoption of the accounting guidance related to VIEs, $24.2 billion of lending-related commitments between the Firm and Firm-administered multi-seller
conduits were eliminated upon consolidation. The decrease in lending-related commitments was partially offset by the addition of $6.5 billion of unfunded commit-
ments directly between the multi-seller conduits and clients; these unfunded commitments of the consolidated conduits are now included as off–balance sheet lending-
related commitments of the Firm. The carrying value of asset purchase agreements of $126 million at December 31, 2009 was comprised of $18 million for the allowance for
lending-related commitments; and $108 million for the guarantee liability and corresponding asset.