JP Morgan Chase 2012 Annual Report Download - page 92

Management’s discussion and analysis
102 JPMorgan Chase & Co./2012 Annual Report
CORPORATE/PRIVATE EQUITY
The Corporate/Private Equity segment comprises
Private Equity, Treasury, Chief Investment Office
(“CIO”), and Other Corporate, which includes corporate
staff units and expense that is centrally managed.
Treasury and CIO are predominantly responsible for
measuring, monitoring, reporting and managing the
Firm’s liquidity, funding, capital and structural interest
rate and foreign exchange risks. The corporate staff
units include Central Technology and Operations,
Internal Audit, Executive, Finance, Human Resources,
Legal & Compliance, Global Real Estate, General
Services, Operational Control, Risk Management, and
Corporate Responsibility & Public Policy. Other centrally
managed expense includes the Firm’s occupancy and
pension-related expense that are subject to allocation to
the businesses.
Selected income statement data
Year ended December 31,
(in millions, except headcount) 2012 2011 2010
Revenue
Principal transactions $ (4,268) $ 1,434 $ 2,208
Securities gains 2,024 1,600 2,898
All other income 2,452 595 245
Noninterest revenue 208 3,629 5,351
Net interest income (1,360) 506 2,063
Total net revenue(a) (1,152) 4,135 7,414
Provision for credit losses (37) (36) 14
Noninterest expense
Compensation expense 2,622 2,324 2,276
Noncompensation expense(b) 7,353 6,693 8,641
Subtotal 9,975 9,017 10,917
Net expense allocated to other
businesses (5,379) (4,909) (4,607)
Total noninterest expense 4,596 4,108 6,310
Income before income tax
expense/(benefit) (5,711) 63 1,090
Income tax expense/(benefit) (c) (3,629) (759) (190)
Net income $ (2,082) $ 822 $ 1,280
Total net revenue
Private equity $ 601 $ 836 $ 1,239
Treasury and CIO (3,064) 3,196 6,642
Other Corporate 1,311 103 (467)
Total net revenue $ (1,152) $ 4,135 $ 7,414
Net income
Private equity $ 292 $ 391 $ 588
Treasury and CIO (2,093) 1,349 3,576
Other Corporate (281) (918) (2,884)
Total net income $ (2,082) $ 822 $ 1,280
Total assets (period-end) $728,925 $ 693,108 $ 526,556
Headcount 22,747 21,334 19,419
(a) Included tax-equivalent adjustments, predominantly due to tax-
exempt income from municipal bond investments of $443 million,
$298 million and $226 million for the years ended December 31,
2012, 2011 and 2010, respectively.
(b) Included litigation expense of $3.7 billion, $3.2 billion and $5.7
billion for the years ended December 31, 2012, 2011 and 2010,
respectively.
(c) Includes tax benefits recognized upon the resolution of tax audits.
2012 compared with 2011
Net loss was $2.1 billion, compared with a net income of
$822 million in the prior year.
Private Equity reported net income of $292 million,
compared with net income of $391 million in the prior year.
Net revenue was $601 million, compared with $836 million
in the prior year, due to lower unrealized and realized gains
on private investments, partially offset by higher unrealized
gains on public securities. Noninterest expense was $145
million, down from $238 million in the prior year.
Treasury and CIO reported a net loss of $2.1 billion,
compared with net income of $1.3 billion in the prior year.
Net revenue was a loss of $3.1 billion, compared with net
revenue of $3.2 billion in the prior year. The current year
loss reflected $5.8 billion of losses incurred by CIO from the
synthetic credit portfolio for the six months ended June 30,
2012, and $449 million of losses from the retained index
credit derivative positions for the three months ended
September 30, 2012. These losses were partially offset by
securities gains of $2.0 billion. The current year revenue
reflected $888 million of extinguishment gains related to
the redemption of trust preferred securities, which are
included in all other income in the above table. The
extinguishment gains were related to adjustments applied
to the cost basis of the trust preferred securities during the
period they were in a qualified hedge accounting
relationship. Net interest income was negative $683
million, compared with $1.4 billion in the prior year,
primarily reflecting the impact of lower portfolio yields and
higher deposit balances across the Firm.
Other Corporate reported a net loss of $281 million,
compared with a net loss of $918 million in the prior year.
Noninterest revenue of $1.8 billion was driven by a $1.1
billion benefit for the Washington Mutual bankruptcy
settlement, which is included in all other income in the
above table, and a $665 million gain from the recovery on a
Bear Stearns-related subordinated loan. Noninterest
expense of $3.9 billion was up $943 million compared with
the prior year. The current year included expense of $3.7
billion for additional litigation reserves, largely for
mortgage-related matters. The prior year included expense
of $3.2 billion for additional litigation reserves.