JP Morgan Chase 2014 Annual Report Download - page 204

Notes to consolidated financial statements
202 JPMorgan Chase & Co./2014 Annual Report
Note 5 – Credit risk concentrations
Concentrations of credit risk arise when a number of
customers are engaged in similar business activities or
activities in the same geographic region, or when they have
similar economic features that would cause their ability to
meet contractual obligations to be similarly affected by
changes in economic conditions.
JPMorgan Chase regularly monitors various segments of its
credit portfolios to assess potential concentration risks and
to obtain collateral when deemed necessary. Senior
management is significantly involved in the credit approval
and review process, and risk levels are adjusted as needed
to reflect the Firm’s risk appetite.
In the Firm’s consumer portfolio, concentrations are
evaluated primarily by product and by U.S. geographic
region, with a key focus on trends and concentrations at the
portfolio level, where potential risk concentrations can be
remedied through changes in underwriting policies and
portfolio guidelines. In the wholesale portfolio, risk
concentrations are evaluated primarily by industry and
monitored regularly on both an aggregate portfolio level
and on an individual customer basis. The Firm’s wholesale
exposure is managed through loan syndications and
participations, loan sales, securitizations, credit derivatives,
master netting agreements, and collateral and other risk-
reduction techniques. For additional information on loans,
see Note 14.
The Firm does not believe that its exposure to any
particular loan product (e.g., option adjustable rate
mortgages (“ARMs”)), industry segment (e.g., commercial
real estate) or its exposure to residential real estate loans
with high loan-to-value ratios results in a significant
concentration of credit risk. Terms of loan products and
collateral coverage are included in the Firm’s assessment
when extending credit and establishing its allowance for
loan losses.
The table below presents both on–balance sheet and off–balance sheet consumer and wholesale-related credit exposure by the
Firm’s three credit portfolio segments as of December 31, 2014 and 2013.
2014 2013
Credit
exposure
On-balance sheet Off-balance
sheet(d) Credit exposure
On-balance sheet Off-balance
sheet(d)
December 31, (in millions) Loans Derivatives Loans Derivatives
Total consumer, excluding credit card $ 353,635 $ 295,374 $ — $ 58,153 $ 345,259 $ 289,063 $ — $ 56,057
Total credit card 657,011 131,048 — 525,963 657,174 127,791 — 529,383
Total consumer 1,010,646 426,422 — 584,116 1,002,433 416,854 — 585,440
Wholesale-related
Real Estate 107,386 79,113 333 27,940 87,102 69,151 460 17,491
Banks & Finance Cos 68,203 24,244 22,057 21,902 66,881 25,482 18,888 22,511
Healthcare 57,707 13,793 4,630 39,284 46,934 14,383 2,203 30,348
Oil & Gas 48,315 15,616 1,872 30,827 45,910 13,319 3,202 29,389
Consumer Products 37,818 10,646 593 26,579 35,666 8,708 3,319 23,639
Asset Managers 36,374 8,043 9,569 18,762 34,145 9,099 715 24,331
State & Municipal Govt 31,858 7,593 4,079 20,186 33,506 5,656 7,175 20,675
Retail & Consumer Services 28,258 7,752 361 20,145 28,983 5,582 2,248 21,153
Utilities 28,060 4,843 2,317 20,900 25,068 7,504 273 17,291
Central Govt 21,081 1,081 11,819 8,181 21,403 4,426 1,392 15,585
Technology 20,977 4,727 1,341 14,909 21,049 1,754 9,998 9,297
Machinery & Equipment Mfg 20,573 6,537 553 13,483 19,078 5,969 476 12,633
Transportation 16,365 9,107 699 6,559 17,434 5,825 560 11,049
Business Services 16,201 4,867 456 10,878 14,601 4,497 594 9,510
Metals/Mining 15,911 5,628 601 9,682 13,975 6,845 621 6,509
All other(a) 320,446 120,912 17,695 181,839 308,519 120,063 13,635 174,821
Subtotal 875,533 324,502 78,975 472,056 820,254 308,263 65,759 446,232
Loans held-for-sale and loans at fair value 6,412 6,412 — — 13,301 13,301 — —
Receivables from customers and other(b) 28,972 — — — 26,744 — — —
Total wholesale-related 910,917 330,914 78,975 472,056 860,299 321,564 65,759 446,232
Total exposure(c) $ 1,921,563 $ 757,336 $ 78,975 $ 1,056,172 $ 1,862,732 $ 738,418 $ 65,759 $ 1,031,672
(a) For more information on exposures to SPEs included within All other, see Note 16.
(b) Primarily consists of margin loans to prime brokerage customers that are generally over-collateralized through a pledge of assets maintained in clients’
brokerage accounts and are subject to daily minimum collateral requirements. As a result of the Firm’s credit risk mitigation practices, the Firm did not hold
any reserves for credit impairment on these receivables.
(c) For further information regarding on–balance sheet credit concentrations by major product and/or geography, see Note 6 and Note 14. For information
regarding concentrations of off–balance sheet lending-related financial instruments by major product, see Note 29.
(d) Represents lending-related financial instruments.