JP Morgan Chase 2015 Annual Report Download - page 231

JPMorgan Chase & Co./2015 Annual Report 221
Note 7 – Noninterest revenue
Investment banking fees
This revenue category includes equity and debt
underwriting and advisory fees. Underwriting fees are
recognized as revenue when the Firm has rendered all
services to the issuer and is entitled to collect the fee from
the issuer, as long as there are no other contingencies
associated with the fee. Underwriting fees are net of
syndicate expense; the Firm recognizes credit arrangement
and syndication fees as revenue after satisfying certain
retention, timing and yield criteria. Advisory fees are
recognized as revenue when the related services have been
performed and the fee has been earned.
The following table presents the components of investment
banking fees.
Year ended December 31,
(in millions) 2015 2014 2013
Underwriting
Equity $ 1,408 $ 1,571 $ 1,499
Debt 3,232 3,340 3,537
Total underwriting 4,640 4,911 5,036
Advisory 2,111 1,631 1,318
Total investment banking fees $ 6,751 $ 6,542 $ 6,354
Principal transactions
Principal transactions revenue consists of realized and
unrealized gains and losses on derivatives and other
instruments (including those accounted for under the fair
value option) primarily used in client-driven market-making
activities and on private equity investments. In connection
with its client-driven market-making activities, the Firm
transacts in debt and equity instruments, derivatives and
commodities (including physical commodities inventories
and financial instruments that reference commodities).
Principal transactions revenue also includes realized and
unrealized gains and losses related to hedge accounting and
specified risk-management activities, including: (a) certain
derivatives designated in qualifying hedge accounting
relationships (primarily fair value hedges of commodity and
foreign exchange risk), (b) certain derivatives used for
specific risk management purposes, primarily to mitigate
credit risk, foreign exchange risk and commodity risk, and
(c) other derivatives. For further information on the income
statement classification of gains and losses from derivatives
activities, see Note 6.
In the financial commodity markets, the Firm transacts in
OTC derivatives (e.g., swaps, forwards, options) and
exchange-traded derivatives that reference a wide range of
underlying commodities. In the physical commodity
markets, the Firm primarily purchases and sells precious
and base metals and may hold other commodities
inventories under financing and other arrangements with
clients. Prior to the 2014 sale of certain parts of its physical
commodity business, the Firm also engaged in the
purchase, sale, transport and storage of power, gas,
liquefied natural gas, coal, crude oil and refined products.
Physical commodities inventories are generally carried at
the lower of cost or market (market approximates fair
value) subject to any applicable fair value hedge accounting
adjustments, with realized gains and losses and unrealized
losses recorded in principal transactions revenue.
The following table presents all realized and unrealized
gains and losses recorded in principal transactions revenue.
This table excludes interest income and interest expense on
trading assets and liabilities, which are an integral part of
the overall performance of the Firm’s client-driven market-
making activities. See Note 8 for further information on
interest income and interest expense. Trading revenue is
presented primarily by instrument type. The Firm’s client-
driven market-making businesses generally utilize a variety
of instrument types in connection with their market-making
and related risk-management activities; accordingly, the
trading revenue presented in the table below is not
representative of the total revenue of any individual line of
business.
Year ended December 31,
(in millions) 2015 2014 2013
Trading revenue by instrument
type
Interest rate $ 1,933 $ 1,362 $ 284
Credit 1,735 1,880 2,654
Foreign exchange 2,557 1,556 1,801
Equity 2,990 2,563 2,517
Commodity(a) 842 1,663 2,083
Total trading revenue 10,057 9,024 9,339
Private equity gains(b) 351 1,507 802
Principal transactions $ 10,408 $ 10,531 $ 10,141
(a) Commodity derivatives are frequently used to manage the Firm’s risk
exposure to its physical commodities inventories. For gains/(losses) related
to commodity fair value hedges, see Note 6.
(b) Includes revenue on private equity investments held in the Private Equity
business within Corporate, as well as those held in other business
segments.
Lending- and deposit-related fees
This revenue category includes fees from loan
commitments, standby letters of credit, financial
guarantees, deposit-related fees in lieu of compensating
balances, cash management-related activities or
transactions, deposit accounts and other loan-servicing
activities. These fees are recognized over the period in
which the related service is provided.
Asset management, administration and commissions
This revenue category includes fees from investment
management and related services, custody, brokerage
services, insurance premiums and commissions, and other
products. These fees are recognized over the period in
which the related service is provided. Performance-based
fees, which are earned based on exceeding certain
benchmarks or other performance targets, are accrued and
recognized at the end of the performance period in which
the target is met. The Firm has contractual arrangements
with third parties to provide certain services in connection
with its asset management activities. Amounts paid to third-