JP Morgan Chase 2015 Annual Report Download - page 84

Management’s discussion and analysis
74 JPMorgan Chase & Co./2015 Annual Report
Noninterest expense
Year ended December 31,
(in millions) 2015 2014 2013
Compensation expense $29,750 $30,160 $30,810
Noncompensation expense:
Occupancy 3,768 3,909 3,693
Technology, communications and
equipment 6,193 5,804 5,425
Professional and outside services 7,002 7,705 7,641
Marketing 2,708 2,550 2,500
Other(a)(b) 9,593 11,146 20,398
Total noncompensation expense 29,264 31,114 39,657
Total noninterest expense $59,014 $61,274 $70,467
(a) Included legal expense of $3.0 billion, $2.9 billion and $11.1 billion
for the years ended December 31, 2015, 2014 and 2013,
respectively.
(b) Included Federal Deposit Insurance Corporation (“FDIC”)-related
expense of $1.2 billion, $1.0 billion and $1.5 billion for the years
ended December 31, 2015, 2014 and 2013, respectively.
2015 compared with 2014
Total noninterest expense decreased by 4% from the prior
year, as a result of lower CIB expense, predominantly
reflecting the impact of business simplification; and lower
CCB expense resulting from efficiencies related to declines
in headcount-related expense and lower professional fees.
These decreases were partially offset by investment in the
businesses, including for infrastructure and controls.
Compensation expense decreased compared with the prior
year, predominantly driven by lower performance-based
incentives and reduced headcount, partially offset by higher
postretirement benefit costs and investment in the
businesses, including for infrastructure and controls.
Noncompensation expense decreased from the prior year,
reflecting benefits from business simplification in CIB; lower
professional and outside services expense, reflecting lower
legal services expense and a reduced number of contractors
in the businesses; lower amortization of intangibles; and the
absence of a goodwill impairment in Corporate. These
factors were partially offset by higher depreciation expense,
largely associated with higher auto operating lease assets in
CCB; higher marketing expense in CCB; and higher FDIC-
related assessments. Legal expense was relatively flat
compared with the prior year. For a further discussion of
legal expense, see Note 31.
2014 compared with 2013
Total noninterest expense decreased by $9.2 billion, or
13%, from the prior year, as a result of lower other expense
(in particular, legal expense) and lower compensation
expense.
Compensation expense decreased compared with the prior
year, predominantly driven by lower headcount in CCB
Mortgage Banking, lower performance-based compensation
expense in CIB, and lower postretirement benefit costs. The
decrease was partially offset by investments in the
businesses, including headcount for controls.
Noncompensation expense decreased compared with the
prior year, due to lower other expense, predominantly
reflecting lower legal expense. Lower expense for
foreclosure-related matters and production and servicing-
related expense in CCB Mortgage Banking, lower FDIC-
related assessments, and lower amortization due to certain
fully amortized intangibles, also contributed to the decline.
The decrease was offset partially by investments in the
businesses, including for controls, and costs related to
business simplification initiatives across the Firm.
Income tax expense
Year ended December 31,
(in millions, except rate) 2015 2014 2013
Income before income tax
expense $30,702 $30,699 $26,675
Income tax expense 6,260 8,954 8,789
Effective tax rate 20.4% 29.2% 32.9%
2015 compared with 2014
The effective tax rate decreased compared with the prior
year, predominantly due to the recognition in 2015 of tax
benefits of $2.9 billion and other changes in the mix of
income and expense subject to U.S. federal, state and local
income taxes, partially offset by prior-year tax adjustments.
The recognition of tax benefits in 2015 was due to the
resolution of various tax audits, as well as the release of
U.S. deferred taxes associated with the restructuring of
certain non-U.S. entities. For further information see
Note 26.
2014 compared with 2013
The decrease in the effective tax rate from the prior year
was largely attributable to the effect of the lower level of
nondeductible legal-related penalties, partially offset by
higher 2014 pretax income in combination with changes in
the mix of income and expense subject to U.S. federal, state
and local income taxes, and lower tax benefits associated
with tax adjustments and the settlement of tax audits.