JP Morgan Chase 2012 Annual Report Download - page 162

Management’s discussion and analysis
172 JPMorgan Chase & Co./2012 Annual Report
Selected European exposure
Several European countries, including Spain, Italy, Ireland, Portugal and Greece, have been subject to continued credit
deterioration due to weaknesses in their economic and fiscal situations. The Firm is closely monitoring its exposures in these
countries and believes its exposure to these five countries is modest relative to the Firm’s aggregate exposures. The Firm
continues to conduct business and support client activity in these countries and, therefore, the Firm’s aggregate net exposures
and sector distribution may vary over time. In addition, the net exposures may be affected by changes in market conditions,
including the effects of interest rates and credit spreads on market valuations.
The following table presents the Firm’s direct exposure to the five countries listed below at December 31, 2012, as measured
under the Firm’s internal country risk management approach. For individual exposures, corporate clients represent
approximately 78% of the Firm’s non-sovereign exposure in these five countries, and substantially all of the remaining 22% of
the non-sovereign exposure is to the banking sector.
December 31, 2012 Lending net of
Allowance(a) AFS securities(b) Trading(c)
Derivative
collateral(d)
Portfolio
hedging(e) Total exposure
(in billions)
Spain
Sovereign $ — $ 0.5 $ (0.4) $ — $ (0.1) $ —
Non-sovereign 3.1 — 5.2 (3.3) (0.3) 4.7
Total Spain exposure $ 3.1 $ 0.5 $ 4.8 $ (3.3) $ (0.4) $ 4.7
Italy
Sovereign $ — $ — $ 11.6 $ (1.4) $ (4.9) $ 5.3
Non-sovereign 2.8 — 1.0 (1.2) (0.4) 2.2
Total Italy exposure $ 2.8 $ — $ 12.6 $ (2.6) $ (5.3) $ 7.5
Ireland
Sovereign $ — $ 0.3 $ — $ — $ (0.3) $ —
Non-sovereign 0.5 — 1.7 (0.3) — 1.9
Total Ireland exposure $ 0.5 $ 0.3 $ 1.7 $ (0.3) $ (0.3) $ 1.9
Portugal
Sovereign $ — $ — $ 0.4 $ — $ (0.3) $ 0.1
Non-sovereign 0.5 — (0.4) (0.4) (0.1) (0.4)
Total Portugal exposure $ 0.5 $ — $ — $ (0.4) $ (0.4) $ (0.3)
Greece
Sovereign $ — $ — $ 0.1 $ — $ — $ 0.1
Non-sovereign 0.1 — 0.7 (0.9) — (0.1)
Total Greece exposure $ 0.1 $ — $ 0.8 $ (0.9) $ — $ —
Total exposure $ 7.0 $ 0.8 $ 19.9 $ (7.5) $ (6.4) $ 13.8
(a) Lending includes loans and accrued interest receivable, deposits with banks, acceptances, other monetary assets, issued letters of credit net of
participations, and undrawn commitments to extend credit. Excludes intra-day and operating exposures, such as from settlement and clearing activities.
Amounts are presented net of the allowance for credit losses of $116 million (Spain), $79 million (Italy), $9 million (Ireland), $15 million (Portugal), and
$12 million (Greece) specifically attributable to these countries. Includes $2.4 billion of unfunded lending exposure at December 31, 2012. These
exposures consist typically of committed, but unused corporate credit agreements, with market-based lending terms and covenants.
(b) The fair value of AFS securities was approximately $0.7 billion at December 31, 2012. The table above reflects AFS securities measured at par value.
(c) Primarily includes: $19.9 billion of counterparty exposure on derivative and securities financings, $3.7 billion of issuer exposure on debt and equity
securities held in trading, $(3.6) billion of net protection from credit derivatives, including $(4.1) billion related to the synthetic credit portfolio managed
by CIB. Securities financings of approximately $17.9 billion were collateralized with approximately $20.2 billion of cash and marketable securities as of
December 31, 2012.
(d) Includes cash and marketable securities pledged to the Firm, of which approximately 97% of the collateral was cash at December 31, 2012.
(e) Reflects net protection purchased through the Firm’s credit portfolio management activities, which are managed separately from its market-making
activities. Predominantly includes single-name CDS and also includes index credit derivatives and short bond positions. It does not include the synthetic
credit portfolio.