JP Morgan Chase 2015 Annual Report Download - page 217

JPMorgan Chase & Co./2015 Annual Report 207
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 credit risk
concentrations 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 credit risk concentrations
can be remedied through changes in underwriting policies
and portfolio guidelines. In the wholesale portfolio, credit
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”)), or 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, 2015 and 2014.
2015 2014
Credit
exposure
On-balance sheet Off-balance
sheet(f)
Credit
exposure
On-balance sheet Off-balance
sheet(f)(g)
December 31, (in millions) Loans Derivatives Loans Derivatives
Total consumer, excluding credit card $ 403,424 $ 344,821 $ — $ 58,478 $ 353,635 $ 295,374 $ — $ 58,153
Total credit card 646,981 131,463 — 515,518 657,011 131,048 — 525,963
Total consumer 1,050,405 476,284 — 573,996 1,010,646 426,422 — 584,116
Wholesale-related(a)
Real Estate 116,857 92,820 312 23,725 105,975 79,113 327 26,535
Consumer & Retail 85,460 27,175 1,573 56,712 83,663 25,094 1,845 56,724
Technology, Media & Telecommunications 57,382 11,079 1,032 45,271 46,655 11,362 2,190 33,103
Industrials 54,386 16,791 1,428 36,167 47,859 16,040 1,303 30,516
Healthcare 46,053 16,965 2,751 26,337 56,516 13,794 4,542 38,180
Banks & Finance Cos 43,398 20,401 10,218 12,779 55,098 23,367 15,706 16,025
Oil & Gas 42,077 13,343 1,902 26,832 43,148 15,616 1,836 25,696
Utilities 30,853 5,294 1,689 23,870 27,441 4,844 2,272 20,325
State & Municipal Govt 29,114 9,626 3,287 16,201 31,068 7,593 4,002 19,473
Asset Managers 23,815 6,703 7,733 9,379 27,488 8,043 9,386 10,059
Transportation 19,227 9,157 1,575 8,495 20,619 10,381 2,247 7,991
Central Govt 17,968 2,000 13,240 2,728 19,881 1,103 15,527 3,251
Chemicals & Plastics 15,232 4,033 369 10,830 12,612 3,087 410 9,115
Metals & Mining 14,049 4,622 607 8,820 14,969 5,628 589 8,752
Automotive 13,864 4,473 1,350 8,041 12,754 3,779 766 8,209
Insurance 11,889 1,094 1,992 8,803 13,350 1,175 3,474 8,701
Financial Markets Infrastructure 7,973 724 2,602 4,647 11,986 928 6,789 4,269
Securities Firms 4,412 861 1,424 2,127 4,801 1,025 1,351 2,425
All other(b) 149,117 109,889 4,593 34,635 134,475 92,530 4,413 37,532
Subtotal 783,126 357,050 59,677 366,399 770,358 324,502 78,975 366,881
Loans held-for-sale and loans at fair value 3,965 3,965 — — 6,412 6,412 — —
Receivables from customers and other(c) 13,372 — — — 28,972 — — —
Total wholesale-related 800,463 361,015 59,677 366,399 805,742 330,914 78,975 366,881
Total exposure(d)(e) $ 1,850,868 $ 837,299 $ 59,677 $ 940,395 $ 1,816,388 $ 757,336 $ 78,975 $ 950,997
(a) Effective in the fourth quarter 2015, the Firm realigned its wholesale industry divisions in order to better monitor and manage industry concentrations. Prior period amounts have
been revised to conform with current period presentation. For additional information, see Wholesale credit portfolio on pages 122–129.
(b) All other includes: individuals; SPEs; holding companies; and private education and civic organizations. For more information on exposures to SPEs, see Note 16.
(c) 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.
(d) 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.
(e) Excludes cash placed with banks of $351.0 billion and $501.5 billion, at December 31, 2015 and 2014, respectively, placed with various central banks, predominantly Federal
Reserve Banks.
(f) Represents lending-related financial instruments.
(g) Effective January 1, 2015, the Firm no longer includes within its disclosure of wholesale lending-related commitments the unused amount of advised uncommitted lines of credit
as it is within the Firm’s discretion whether or not to make a loan under these lines, and the Firm’s approval is generally required prior to funding. Prior period amounts have been
revised to conform with the current period presentation.