JP Morgan Chase 2013 Annual Report Download - page 97

JPMorgan Chase & Co./2013 Annual Report 103
COMMERCIAL BANKING
Commercial Banking delivers extensive industry
knowledge, local expertise and dedicated service to
U.S. and U.S. multinational clients, including
corporations, municipalities, financial institutions and
nonprofit entities with annual revenue generally
ranging from $20 million to $2 billion. CB provides
financing to real estate investors and owners.
Partnering with the Firm’s other businesses, CB
provides comprehensive financial solutions, including
lending, treasury services, investment banking and
asset management to meet its clients’ domestic and
international financial needs.
Selected income statement data
Year ended December 31,
(in millions, except ratios) 2013 2012 2011
Revenue
Lending- and deposit-related fees $ 1,033 $ 1,072 $ 1,081
Asset management, administration
and commissions 116 130 136
All other income(a) 1,149 1,081 978
Noninterest revenue 2,298 2,283 2,195
Net interest income 4,675 4,542 4,223
Total net revenue(b) 6,973 6,825 6,418
Provision for credit losses 85 41 208
Noninterest expense
Compensation expense(c) 1,115 1,014 936
Noncompensation expense(c) 1,472 1,348 1,311
Amortization of intangibles 23 27 31
Total noninterest expense 2,610 2,389 2,278
Income before income tax expense 4,278 4,395 3,932
Income tax expense 1,703 1,749 1,565
Net income $ 2,575 $ 2,646 $ 2,367
Revenue by product
Lending $ 3,826 $ 3,675 $ 3,455
Treasury services 2,429 2,428 2,270
Investment banking 575 545 498
Other 143 177 195
Total Commercial Banking revenue $ 6,973 $ 6,825 $ 6,418
Investment banking revenue, gross $ 1,676 $ 1,597 $ 1,421
Revenue by client segment
Middle Market Banking(d) $ 3,019 $ 2,971 $ 2,803
Corporate Client Banking(d) 1,824 1,819 1,603
Commercial Term Lending 1,215 1,194 1,168
Real Estate Banking 549 438 416
Other 366 403 428
Total Commercial Banking revenue $ 6,973 $ 6,825 $ 6,418
Financial ratios
Return on common equity 19% 28% 30%
Overhead ratio 37 35 35
(a) Includes revenue from investment banking products and commercial card
transactions.
(b) Total net revenue included tax-equivalent adjustments from income tax
credits related to equity investments in designated community
development entities that provide loans to qualified businesses in low-
income communities, as well as tax-exempt income from municipal bond
activity of $407 million, $381 million, and $345 million for the years
ended December 31, 2013, 2012 and 2011, respectively.
(c) Effective July 1, 2012, certain Treasury Services product sales staff
supporting CB were transferred from CIB to CB. As a result, compensation
expense for these sales staff is now reflected in CB’s compensation expense
rather than as an allocation from CIB in noncompensation expense. CB’s
and CIB’s previously reported headcount, compensation expense and
noncompensation expense have been revised to reflect this transfer.
(d) Effective January 1, 2013, the financial results of financial institution
clients were transferred to Corporate Client Banking from Middle Market
Banking. Prior periods were revised to conform with this presentation.
CB revenue comprises the following:
Lending includes a variety of financing alternatives, which
are predominantly provided on a basis secured by
receivables, inventory, equipment, real estate or other
assets. Products include term loans, revolving lines of credit,
bridge financing, asset-based structures, leases, commercial
card products and standby letters of credit.
Treasury services includes revenue from a broad range of
products and services that enable CB clients to manage
payments and receipts, as well as invest and manage funds.
Investment banking includes revenue from a range of
products providing CB clients with sophisticated capital-
raising alternatives, as well as balance sheet and risk
management tools through advisory, equity underwriting,
and loan syndications. Revenue from Fixed income and
Equity market products available to CB clients is also
included. Investment banking revenue, gross, represents
total revenue related to investment banking products sold to
CB clients.
Other product revenue primarily includes tax-equivalent
adjustments generated from Community Development
Banking activity and certain income derived from principal
transactions.
Commercial Banking is divided into four primary client
segments for management reporting purposes: Middle
Market Banking, Commercial Term Lending, Corporate
Client Banking, and Real Estate Banking.
Middle Market Banking covers corporate, municipal and
nonprofit clients, with annual revenue generally ranging
between $20 million and $500 million.
Commercial Term Lending primarily provides term financing
to real estate investors/owners for multifamily properties as
well as financing office, retail and industrial properties.
Corporate Client Banking covers clients with annual revenue
generally ranging between $500 million and $2 billion and
focuses on clients that have broader investment banking
needs.
Real Estate Banking provides full-service banking to
investors and developers of institutional-grade real estate
properties.
Other primarily includes lending and investment activity
within the Community Development Banking and Chase
Capital businesses.
2013 compared with 2012
Net income was $2.6 billion, a decrease of $71 million, or
3%, from the prior year, driven by an increase in
noninterest expense and the provision for credit losses
partially offset by an increase in net revenue.