JP Morgan Chase 2012 Annual Report Download - page 201

JPMorgan Chase & Co./2012 Annual Report 211
Level 3 analysis
Consolidated Balance Sheets changes
Level 3 assets (including assets measured at fair value on
a nonrecurring basis) were 4.4% of total Firm assets at
December 31, 2012. The following describes significant
changes to level 3 assets since December 31, 2011, for
those items measured at fair value on a recurring basis.
For further information on changes impacting items
measured at fair value on a nonrecurring basis, see Assets
and liabilities measured at fair value on a nonrecurring
basis on page 212 of this Annual Report.
For the year ended December 31, 2012
Level 3 assets were $99.1 billion at December 31, 2012,
reflecting a decrease of $14.3 billion from December 31,
2011, due to the following:
• $11.8 billion decrease in gross derivative receivables,
predominantly driven by a $10.6 billion decrease from
the impact of tightening reference entity credit spreads
and risk reductions of credit derivatives and $1.6 billion
decrease due to fluctuation in foreign exchange rates;
• $7.3 billion decrease in trading assets – debt and equity
instruments, predominantly driven by sales and
settlements of ABS, trading loans, and corporate debt
securities.
The decreases above are partially offset by:
• $3.1 billion increase in asset-backed AFS securities,
predominantly driven by purchases of CLOs.
Gains and Losses
The following describes significant components of total
realized/unrealized gains/(losses) for instruments
measured at fair value on a recurring basis for the years
ended 2012, 2011 and 2010. For further information on
these instruments, see Changes in level 3 recurring fair
value measurements rollforward tables on pages 207–210
of this Annual Report.
2012
• $1.3 billion of net gains on trading assets - debt and
equity instruments, largely driven by tightening of credit
spreads and fluctuation in foreign exchange rates; and
• $1.1 billion of net gains on derivatives, driven by $6.9
billion of net gains predominantly on interest rate lock
commitments due to increased volumes and lower
interest rates, partially offset by $4.5 billion of net
losses on credit derivatives largely as a result of
tightening of reference entity credit spreads.
2011
• $7.1 billion of losses on MSRs. For further discussion of
the change, refer to Note 17 on pages 291–295 of this
Annual Report; and
• $6.1 billion of net gains on derivatives, related to
declining interest rates and widening of reference entity
credit spreads, partially offset by losses due to
fluctuation in foreign exchange rates.
2010
• $2.3 billion of losses on MSRs; For further discussion of
the change, refer to Note 17 on pages 291–295 of this
Annual Report; and
• $1.0 billion gain in private equity largely driven by gains
on investments in the portfolio.