JP Morgan Chase 2012 Annual Report Download - page 82

Management’s discussion and analysis
92 JPMorgan Chase & Co./2012 Annual Report
CORPORATE & INVESTMENT BANK
The Corporate & Investment Bank (“CIB”) offers a broad
suite of investment banking, market-making, prime
brokerage, and treasury and securities products and
services to a global client base of corporations,
investors, financial institutions, government and
municipal entities. Within Banking, the CIB offers a full
range of investment banking products and services in all
major capital markets, including advising on corporate
strategy and structure, capital-raising in equity and
debt markets, as well as loan origination and
syndication. Also included in Banking is Treasury
Services, which includes transaction services, comprised
primarily of cash management and liquidity solutions,
and trade finance products. The Markets & Investor
Services segment of the CIB is a global market-maker in
cash securities and derivative instruments, and also
offers sophisticated risk management solutions, prime
brokerage, and research. Markets & Investor Services
also includes the Securities Services business, a leading
global custodian which holds, values, clears and services
securities, cash and alternative investments for
investors and broker-dealers, and manages depositary
receipt programs globally.
Selected income statement data
Year ended December 31,
(in millions) 2012 2011 2010
Revenue
Investment banking fees $ 5,769 $ 5,859 $ 6,186
Principal transactions(a) 9,510 8,347 8,474
Lending- and deposit-related fees 1,948 2,098 2,075
Asset management,
administration and commissions 4,693 4,955 5,110
All other income 1,184 1,264 1,044
Noninterest revenue 23,104 22,523 22,889
Net interest income 11,222 11,461 10,588
Total net revenue(b) 34,326 33,984 33,477
Provision for credit losses (479) (285) (1,247)
Noninterest expense
Compensation expense 11,313 11,654 12,418
Noncompensation expense 10,537 10,325 10,451
Total noninterest expense 21,850 21,979 22,869
Income before income tax
expense 12,955 12,290 11,855
Income tax expense 4,549 4,297 4,137
Net income $ 8,406 $ 7,993 $ 7,718
(a) Included DVA on structured notes and derivative liabilities measured at
fair value. DVA gains/(losses) were $(930) million, $1.4 billion and
$509 million for the years ended December 31, 2012, 2011 and
2010, respectively.
(b) Included tax-equivalent adjustments, predominantly due to income tax
credits related to affordable housing and alternative energy
investments, as well as tax-exempt income from municipal bond
investments of $2.0 billion, $1.9 billion and $1.7 billion for the years
ended December 31, 2012, 2011 and 2010, respectively.
Selected income statement data
Year ended December 31,
(in millions, except ratios) 2012 2011 2010
Financial ratios
Return on common equity(a) 18% 17% 17%
Overhead ratio 64 65 68
Compensation expense as a
percentage of total net revenue(b) 33 34 37
Revenue by business
Advisory $ 1,491 $ 1,792 $ 1,469
Equity underwriting 1,026 1,181 1,589
Debt underwriting 3,252 2,886 3,128
Total investment banking fees 5,769 5,859 6,186
Treasury Services 4,249 3,841 3,698
Lending 1,331 1,054 811
Total Banking 11,349 10,754 10,695
Fixed Income Markets(c) 15,412 14,784 14,738
Equity Markets 4,406 4,476 4,582
Securities Services 4,000 3,861 3,683
Credit Adjustments & Other(d)(e) (841) 109 (221)
Total Markets & Investor Services 22,977 23,230 22,782
Total net revenue $ 34,326 $ 33,984 $ 33,477
(a) Return on equity excluding DVA, a non-GAAP financial measure, was
19%, 15% and 16% for the years ended December 31, 2012, 2011
and 2010, respectively.
(b) Compensation expense as a percentage of total net revenue excluding
DVA, a non-GAAP financial measure, was 32%, 36% and 38% for the
years ended December 31, 2012, 2011 and 2010, respectively. In
addition, compensation expense as a percent of total net revenue for
the year ended December 31, 2010, excluding both DVA and the
payroll tax expense related to the U.K. Bank Payroll Tax on certain
compensation awarded from December 9, 2009, to April 5, 2010, to
relevant banking employees, which is a non-GAAP financial measure,
was 36%.
(c) Includes results of the synthetic credit portfolio that was transferred
from the CIO effective July 2, 2012.
(d) Primarily includes credit portfolio credit valuation adjustments (“CVA”)
net of associated hedging activities; DVA on structured notes and
derivative liabilities; and nonperforming derivative receivable results
effective in the first quarter of 2012 and thereafter.
(e) Included DVA on structured notes and derivative liabilities measured at
fair value. DVA gains/(losses) were $(930) million, $1.4 billion and
$509 million for the years ended December 31, 2012, 2011 and
2010, respectively.