JP Morgan Chase 2013 Annual Report Download - page 61

JPMorgan Chase & Co./2013 Annual Report 67
The Firm’s results reflected strong underlying performance
across its four major reportable business segments, with
strong lending and deposit growth. Consumer & Business
Banking within Consumer & Community Banking was #1 in
deposit growth for the second year in a row and #1 in
customer satisfaction among the largest banks for the
second year in a row as measured by The American
Customer Satisfaction Index (“ACSI”). In Card, Merchant
Services & Auto, credit card sales volume (excluding
Commercial Card) was up 10% for the year. The Corporate
& Investment Bank maintained its #1 ranking in Global
Investment Banking Fees and reported record assets under
custody of $20.5 trillion at December 31, 2013.
Commercial Banking loans increased to a record $137.1
billion, a 7% increase compared with the prior year. Asset
Management achieved nineteen consecutive quarters of
positive net long-term client flows into assets under
management. Asset Management also increased loan
balances to a record $95.4 billion at December 31, 2013.
JPMorgan Chase ended the year with a Basel I Tier 1
common ratio of 10.7%, compared with 11% at year-end
2012. The Firm estimated that its Tier 1 common ratio
under the Basel III Advanced Approach on a fully phased-in
basis, based on the interim final rule issued in October
2013, was 9.5% as of December 31, 2013. Total deposits
increased to $1.3 trillion, up 8% from the prior year. Total
stockholders’ equity at December 31, 2013, was $211.2
billion. (The Basel I and III Tier 1 common ratios are non-
GAAP financial measures, which the Firm uses along with
the other capital measures, to assess and monitor its capital
position. For further discussion of the Tier 1 common
capital ratios, see Regulatory capital on pages 161–165 of
this Annual Report.)
During 2013, the Firm worked to help its customers,
corporate clients and the communities in which it does
business. The Firm provided credit to and raised capital of
more than $2.1 trillion for its clients during 2013; this
included $19 billion lent to small businesses and $79 billion
to nonprofit and government entities, including states,
municipalities, hospitals and universities. The Firm also
originated more than 800,000 mortgages.
The discussion that follows highlights the performance of
each business segment compared with the prior year and
presents results on a managed basis. Managed basis starts
with the reported results under accounting principles
generally accepted in the United States of America (“U.S.
GAAP”) and, for each line of business and the Firm as a
whole, includes certain reclassifications to present total net
revenue on a tax-equivalent basis. For more information
about managed basis, as well as other non-GAAP financial
measures used by management to evaluate the
performance of each line of business, see pages 82–83 of
this Annual Report.
Consumer & Community Banking net income increased
compared with the prior year due to lower provision for
credit losses and lower noninterest expense, predominantly
offset by lower net revenue. Net interest income decreased,
driven by lower deposit margins, lower loan balances due to
net portfolio runoff and spread compression in Credit Card,
largely offset by the impact of higher deposit balances.
Noninterest revenue decreased, driven by lower mortgage
fees and related income, partially offset by higher card
income. The provision for credit losses was $335 million
compared with $3.8 billion in the prior year. The current-
year provision reflected a $5.5 billion reduction in the
allowance for loan losses and total net charge-offs of $5.8
billion. The prior-year provision reflected a $5.5 billion
reduction in the allowance for loan losses and total net
charge-offs of $9.3 billion, including $800 million of
incremental charge-offs related to regulatory guidance.
Noninterest expense decreased compared with the prior
year, driven by lower mortgage servicing expense, partially
offset by investments in Chase Private Client expansion,
higher non-MBS related legal expense in Mortgage
Production, higher auto lease depreciation and costs related
to the control agenda.
Corporate & Investment Bank net income increased by 2%
compared with the prior year. Net revenue included a $1.5
billion loss from the implementation of a funding valuation
adjustment (“FVA”) framework for over-the-counter (“OTC”)
derivatives and structured notes in the fourth quarter, and a
$452 million loss from debit valuation adjustments (“DVA”)
on structured notes and derivative liabilities. The prior year
net revenue included a $930 million loss from DVA. Banking
revenue increased compared with the prior year, reflecting
higher lending and investment banking fees revenue,
partially offset by Treasury Services revenue which was
down slightly from the prior year. Lending revenue
increased driven by gains on securities received from
restructured loans. Investment banking fees revenue
increased compared with the prior year driven by higher
equity and debt underwriting fees, partially offset by lower
advisory fees. Excluding FVA (effective fourth quarter
2013) and DVA, Markets and Investor Services revenue
increased compared with the prior year. The provision for
credit losses was a lower benefit reflecting lower recoveries
compared with the prior year. Noninterest expense was
slightly down from the prior year primarily driven by lower
compensation expense.
Commercial Banking net income was slightly lower for
2013 compared with the prior year, reflecting higher
noninterest expense and an increase in the provision for
credit losses, partially offset by higher net revenue. Net
interest income increased, driven by growth in loan
balances and the proceeds from a lending-related workout,
partially offset by lower purchase discounts recognized on
loan repayments. Noninterest expense increased, primarily
reflecting higher product- and headcount-related expense.