JP Morgan Chase 2015 Annual Report Download - page 324

Glossary of Terms
314 JPMorgan Chase & Co./2015 Annual Report
Pre-provision profit/(loss): Represents total net revenue
less noninterest expense. The Firm believes that this
financial measure is useful in assessing the ability of a
lending institution to generate income in excess of its
provision for credit losses.
Pretax margin: Represents income before income tax
expense divided by total net revenue, which is, in
management’s view, a comprehensive measure of pretax
performance derived by measuring earnings after all costs
are taken into consideration. It is one basis upon which
management evaluates the performance of AM against the
performance of their respective competitors.
Principal transactions revenue: Principal transactions
revenue includes realized and unrealized gains and losses
recorded on derivatives, other financial instruments, private
equity investments, and physical commodities used in
market making and client-driven activities. In addition,
Principal transactions revenue also includes certain 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 specified risk management purposes,
primarily to mitigate credit risk, foreign exchange risk and
commodity risk, and (c) other derivatives.
Purchased credit-impaired (“PCI”) loans: Represents loans
that were acquired in the Washington Mutual transaction
and deemed to be credit-impaired on the acquisition date in
accordance with the guidance of the Financial Accounting
Standards Board (“FASB”). The guidance allows purchasers
to aggregate credit-impaired loans acquired in the same
fiscal quarter into one or more pools, provided that the
loans have common risk characteristics (e.g., product type,
LTV ratios, FICO scores, past due status, geographic
location). A pool is then accounted for as a single asset with
a single composite interest rate and an aggregate
expectation of cash flows.
Real assets: Real assets include investments in productive
assets such as agriculture, energy rights, mining and timber
properties and exclude raw land to be developed for real
estate purposes.
Real estate investment trust (“REIT”): A special purpose
investment vehicle that provides investors with the ability to
participate directly in the ownership or financing of real-
estate related assets by pooling their capital to purchase
and manage income property (i.e., equity REIT) and/or
mortgage loans (i.e., mortgage REIT). REITs can be publicly-
or privately-held and they also qualify for certain favorable
tax considerations.
Receivables from customers: Primarily represents margin
loans to prime and retail brokerage customers which are
included in accrued interest and accounts receivable on the
Consolidated balance sheets.
Reported basis: Financial statements prepared under U.S.
GAAP, which excludes the impact of taxable-equivalent
adjustments.
Retained loans: Loans that are held-for-investment (i.e.,
excludes loans held-for-sale and loans at fair value).
Revenue wallet: Proportion of fee revenue based on
estimates of investment banking fees generated across the
industry (i.e., the revenue wallet) from investment banking
transactions in M&A, equity and debt underwriting, and
loan syndications. Source: Dealogic, a third party provider
of investment banking competitive analysis and volume-
based league tables for the above noted industry products.
Risk-weighted assets (“RWA”): Basel III establishes two
comprehensive methodologies for calculating RWA (a
Standardized approach and an Advanced approach) which
include capital requirements for credit risk, market risk, and
in the case of Basel III Advanced, also operational risk. Key
differences in the calculation of credit risk RWA between the
Standardized and Advanced approaches are that for Basel
III Advanced, credit risk RWA is based on risk-sensitive
approaches which largely rely on the use of internal credit
models and parameters, whereas for Basel III Standardized,
credit risk RWA is generally based on supervisory risk-
weightings which vary primarily by counterparty type and
asset class. Market risk RWA is calculated on a generally
consistent basis between Basel III Standardized and Basel III
Advanced, both of which incorporate the requirements set
forth in Basel 2.5.
Sales specialists: Retail branch office and field personnel,
including relationship managers and loan officers, who
specialize in marketing and sales of various business
banking products (i.e., business loans, letters of credit,
deposit accounts, Commerce Solutions, etc.) and mortgage
products to existing and new clients.
Seed capital: Initial JPMorgan capital invested in products,
such as mutual funds, with the intention of ensuring the
fund is of sufficient size to represent a viable offering to
clients, enabling pricing of its shares, and allowing the
manager to develop a track record. After these goals are
achieved, the intent is to remove the Firm’s capital from the
investment.
Short sale: A short sale is a sale of real estate in which
proceeds from selling the underlying property are less than
the amount owed the Firm under the terms of the related
mortgage and the related lien is released upon receipt of
such proceeds.
Structural interest rate risk: Represents interest rate risk
of the non-trading assets and liabilities of the Firm.
Structured notes: Structured notes are predominantly
financial instruments containing embedded derivatives.
Where present, the embedded derivative is the primary
driver of risk.