JP Morgan Chase 2014 Annual Report Download - page 78

Management’s discussion and analysis
76 JPMorgan Chase & Co./2014 Annual Report
CONSOLIDATED CASH FLOWS ANALYSIS
(in millions)
Year ended December 31,
2014 2013 2012
Net cash provided by/(used in)
Operating activities $ 36,593 $ 107,953 $ 25,079
Investing activities (165,636) (150,501) (119,825)
Financing activities 118,228 28,324 87,707
Effect of exchange rate
changes on cash (1,125) 272 1,160
Net decrease in cash and due
from banks $ (11,940) $ (13,952) $ (5,879)
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. The Firm 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.
Cash provided by operating activities in 2014
predominantly resulted from net income after noncash
operating adjustments and reflected higher net proceeds
from loan securitizations and sales activities when
compared with 2013. In 2013 cash provided reflected a
decrease in trading assets from client-driven market-making
activities in CIB, resulting in lower levels of debt securities.
Cash used in 2013 for loans originated and purchased with
an initial intent to sell was slightly higher than the cash
proceeds received from sales and paydowns of loans and
reflected significantly higher levels of activities over the
prior-year period. Cash provided during 2012 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; partially offset by a decrease in
accounts payable and other liabilities predominantly due to
lower CIB client balances.
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. Cash used in investing activities during 2014, 2013,
and 2012 resulted from increases in deposits with banks,
attributable to higher levels of excess funds; in 2014, cash
was used for growth in wholesale and consumer loans,
while in 2013 and 2012 cash used reflected growth in
wholesale loans. Partially offsetting these cash outflows in
2014 and 2013 was a net decline in securities purchased
under resale agreements due to a shift in the deployment of
the Firm’s excess cash by Treasury, and a net decline in
consumer loans in 2013 and 2012 from paydowns and
portfolio runoff or liquidation of delinquent loans. In 2012,
additional cash was used for securities purchased under
resale agreements. All years reflected cash proceeds from
net maturities and sales of investment securities.
Financing activities
The Firm’s financing activities includes cash from customer
deposits, and cash proceeds from issuing long-term debt,
and preferred and common stock. Cash provided by
financing activities in 2014 predominantly resulted from
higher consumer and wholesale deposits. The increase in
consumer deposits reflected a continuing positive growth
trend resulting from strong customer retention, maturing of
recent branch builds, and net new business. The increase in
wholesale deposits was driven by client activity and deposit
growth. Cash provided in 2013 was driven by growth in
both wholesale and consumer deposits, net proceeds from
long-term borrowings, and net issuance of preferred stock;
partially offset by a decrease in securities loaned or sold
under repurchase agreements, predominantly due to
changes in the mix of the Firm’s funding sources. Cash
provided in 2012 was due to growth in both consumer and
wholesale deposits and an increase in federal funds
purchased and securities loaned or sold under repurchase
agreements due to higher secured financings of the Firm’s
assets. In all periods, cash proceeds were offset by
repurchases of common stock and cash dividends on
common and preferred stock.
* * *
For a further discussion of the activities affecting the Firm’s
cash flows, see Balance Sheet Analysis on pages 72–73.