JP Morgan Chase 2013 Annual Report Download - page 74

Management’s discussion and analysis
80 JPMorgan Chase & Co./2013 Annual Report
CASH FLOWS ANALYSIS
For the years ended December 31, 2013, 2012 and 2011,
cash and due from banks decreased $14.0 billion and $5.9
billion, and increased $32.0 billion, respectively. The
following discussion highlights the major activities and
transactions that affected JPMorgan Chase’s cash flows
during 2013, 2012 and 2011, respectively.
Cash flows from operating activities
JPMorgan Chase’s operating assets and liabilities support
the Firm’s capital markets and lending activities, including
the origination or purchase of loans initially designated as
held-for-sale. Operating assets and liabilities can vary
significantly in the normal course of business due to the
amount and timing of cash flows, which are affected by
client-driven and risk management activities, and market
conditions. Management believes cash flows from
operations, available cash balances and the Firm’s ability to
generate cash through short- and long-term borrowings are
sufficient to fund the Firm’s operating liquidity needs.
For the year ended December 31, 2013, net cash provided
by operating activities was $108.0 billion, and it was
significantly higher than net income. This resulted from a
decrease in trading assets - debt and equity instruments
driven by client-driven market-making activity in CIB, which
resulted in lower levels of debt securities; and an increase
in trading liabilities – debt and equity instruments driven by
client-driven market-making activity in CIB, which resulted
in higher levels of short positions in debt and equity
securities. Net cash generated from operating activities also
reflected adjustments for noncash items such as deferred
taxes, depreciation and amortization, and stock-based
compensation. Partially offsetting these cash inflows was
cash used for loans originated and purchased with an initial
intent to sell, which was slightly higher than the cash
proceeds received from sales and paydowns of the loans,
and also reflected significantly higher levels of activities
over the prior-year period.
For the year ended December 31, 2012, net cash provided
by operating activities was $25.1 billion. This resulted from
a decrease in securities borrowed reflecting a shift in the
deployment of excess cash to resale agreements, as well as
lower client activity in CIB, and lower trading assets -
derivative receivables, primarily related to the decline in
the U.S. dollar and tightening of credit spreads. Partially
offsetting these cash inflows was a decrease in accounts
payable and other liabilities predominantly due to lower CIB
client balances, and an increase in trading assets - debt and
equity instruments driven by client-driven market-making
activity in CIB. Net cash generated from operating activities
was higher than net income largely as a result of
adjustments for noncash items such as depreciation and
amortization, provision for credit losses, and stock-based
compensation. Cash used to acquire loans was slightly
higher than cash proceeds received from sales and
paydowns of such loans originated and purchased with an
initial intent to sell, and also reflected a lower level of
activity compared with the prior-year period.
For the year ended December 31, 2011, net cash provided
by operating activities was $95.9 billion, and it was
significantly higher than net income. This resulted from a
net decrease in trading assets and liabilities – debt and
equity instruments, driven by client-driven market-making
activity in CIB; an increase in accounts payable and other
liabilities predominantly due to higher CIB client balances,
and a decrease in accrued interest and accounts
receivables, primarily in CIB, driven by a large reduction in
customer margin receivables due to changes in client
activity. Net cash generated from operating activities also
reflected adjustments for noncash items such as the
provision for credit losses, depreciation and amortization,
and stock-based compensation. Additionally, cash provided
from sales and paydowns of loans originated or purchased
with an initial intent to sell was higher than cash used to
acquire such loans. Partially offsetting these cash proceeds
was an increase in securities borrowed, predominantly in
Corporate due to higher excess cash positions at year-end.
Cash flows from investing activities
The Firm’s investing activities predominantly include loans
originated to be held for investment, the investment
securities portfolio and other short-term interest-earning
assets. For the year ended December 31, 2013, net cash of
$150.5 billion was used in investing activities. This resulted
from an increase in deposits with banks reflecting the
placement of the Firm’s excess funds with various central
banks, predominantly Federal Reserve banks; and
continued growth of wholesale loans. Partially offsetting
this cash outflow was a decrease in securities purchased
under resale agreements predominantly due to a shift in the
deployment of the Firm’s excess cash by Treasury; a
decrease in consumer loans excluding credit card loans,
predominantly due to paydowns and liquidation of
delinquent loans, partially offset by new mortgage and auto
originations; and proceeds from maturities and sales of
investment securities which were higher than the cash used
to acquire new investment securities.
For the year ended December 31, 2012, net cash of $119.8
billion was used in investing activities. This resulted from an
increase in securities purchased under resale agreements
due to deployment of the Firm’s excess cash by Treasury;
higher deposits with banks reflecting placements of the
Firm’s excess cash with various central banks, primarily
Federal Reserve Banks; and higher levels of wholesale
loans, primarily in CB and AM, driven by higher wholesale
activity across most of the Firm’s regions and businesses.
Partially offsetting these cash outflows were a decline in
consumer, excluding credit card, loans predominantly due
to mortgage-related paydowns and portfolio runoff, and a
decline in credit card loans due to higher repayment rates;
and proceeds from maturities and sales of AFS securities,