Annualreport 2019
Annualreport 2019
Financial Highlights
(a) TBVPS and ROTCE are each non-GAAP financial measures. Refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP
Financial Measures and Key Financial Performance Measures on pages 57–59 for additional information on these measures.
(b) Refer to Liquidity Risk Management on pages 93-98 for additional information on this measure.
(c) The ratios presented are calculated under the Basel III Fully Phased-In Approach. Refer to Capital Risk Management on pages 85-92
for additional information on these measures.
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets
of $2.7 trillion and operations worldwide. The firm is a leader in investment banking,
financial services for consumers and small businesses, commercial banking, financial
transaction processing and asset management. A component of the Dow Jones Industrial
Average, JPMorgan Chase & Co. serves millions of customers in the United States and
many of the world’s most prominent corporate, institutional and government clients
under its J.P. Morgan and Chase brands.
Information about J.P. Morgan’s capabilities can be found at jpmorgan.com and about
Chase’s capabilities at chase.com. Information about JPMorgan Chase & Co. is available
at jpmorganchase.com.
$2B ~63M BUSINESS
AFFORDABLE HOUSING U.S. HOUSEHOLDS LEADERSHIP
$2 billion in financing for affordable Serving nearly 63 million U.S. Named to Fortune magazine’s
housing projects in 2019 households, including 4 million small Most Admired Companies and
businesses Change the World lists
~$50B #1 #1
TRADITIONAL
CLEAN FINANCING CONSUMER BANK MIDDLE MARKET LENDER
Facilitated nearly $50 billion in #1 primary bank in our # 1 traditional Middle Market
clean financing in 2019 Consumer Bank footprint Bookrunner in the U.S.
#1
INVESTMENT BANK
#1
CREDIT CARD
88%
RANKED IN TOP TWO QUARTILES
#1 globally in both investment #1 in total U.S. credit card sales 88% of long-term mutual fund
banking fees and Markets revenue volume and outstandings assets under management
ranked in the top two quartiles
over 10 years
#1
MULTIFAMILY LENDER
#1
PRIVATE BANK
90%
YOU INVEST
Jamie Dimon,
Chairman and
Chief Executive Officer
Throughout our history, JPMorgan Chase has built its reputation on being
there for clients, customers and communities in the most critical times. This
unprecedented environment is no different. Our actions during this global crisis
are essential to keeping the global economy going and will be remembered for
years to come.
2
affecting our country. When the time is right and the future is clearer, I will
provide a more complete and current view on how this crisis might change
our strategies around how we run the company, work with our clients and
governments, and develop public policy solutions. However, right now, as we
deal with the spiraling effects of this pandemic, I want to focus on what we as
a bank can do to remain strong, resilient and well-positioned to support our
colleagues, clients, customers and communities across the globe.
Looking back on the last two decades — starting from my time as CEO of Bank
One in 2000 — the firm has weathered some unprecedented challenges, as we
will with this current pandemic, but they did not stop us from accomplishing
some extraordinary things. Once again, you should know how grateful and
proud I am of our more than 200,000 employees around the world. I also want
to thank Daniel Pinto, Gordon Smith, our Operating Committee, our Board of
Directors and our senior leaders for the exceptional leadership they have shown
under the most difficult of circumstances.
We entered this crisis in a position of strength. 2019 was another strong year
for JPMorgan Chase, with the firm generating record revenue and net income,
as well as setting numerous other records across our lines of business. We
earned $36.4 billion in net income on revenue1 of $118.7 billion, reflecting
strong underlying performance across our businesses. We now have delivered
record results in nine of the last 10 years2 and are confident we will continue
to do so in the future, though it should be expected that our earnings will be
down meaningfully in 2020. Our largest businesses grew revenue and net
income for the year, while the firm continued to make significant investments
in products, people and technology. We grew core loans by 2%, increased
deposits overall by 5% and generally broadened market share across our
businesses, all while maintaining credit discipline and a fortress balance sheet.
1
Represents managed revenue.
2
Adjusted net income, a non-GAAP
financial measure, excludes
$2.4 billion from net income in
In total, we extended credit and raised capital of $2.3 trillion for businesses,
2017 as a result of the enactment
of the Tax Cuts and Jobs Act. institutional clients and U.S. customers.
3
Earnings, Diluted Earnings per Share and Return on Tangible Common Equity
2004–2019
($ in billions, except per share and ratio data)
$36.4
$32.5
Adjusted net income1
$10.72
$26.9
$9.00
$24.4 $24.7 $24.4
24%
22% $21.3 $21.7
$19.0
$17.9
$17.4 $6.00 $6.19
15%
19%
$15.4 13% $6.31
11% 17%
15% $14.4 10% 15% 15%
Adjusted
$5.19
$5.29 13% 13% ROTCE1 was
12% 13.6%
10% $11.7
$4.48 $4.34 for 2017
$4.00 $4.33 6% $3.96
$8.5
$2.35 $5.6 $2.26
$4.5 $1.35
$1.52
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Net income Diluted earnings per share Return on tangible common equity (ROTCE)
1
Adjusted net income, a non-GAAP financial measure, excludes $2.4 billion from net income in 2017 as a result of the enactment of the Tax Cuts and Jobs Act.
$92.01
$63.83 $65.62
$58.17
$51.88 $60.98
$47.75 $56.33
$43.93 $53.56
$38.70 $39.83 $40.36 $39.36 $39.22 $51.44
$36.07 $35.49 $48.13
$44.60
$38.68 $40.72
$33.62
$30.12
$27.09
$21.96 $22.52
$15.35 $16.45 $18.88
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
4
JPMorgan Chase stock is owned by large institutions, pension plans, mutual
funds and directly by individual investors. However, it is important to remember
that in almost all cases, the ultimate beneficiaries are individuals in our
communities. Approximately 100 million people in the United States own
stock, and a large percentage of these individuals, in one way or another, own
JPMorgan Chase stock. Many of these people are veterans, teachers, police
officers, firefighters, retirees, or those saving for a home, school or retirement.
Your management team goes to work every day recognizing the enormous
responsibility that we have to perform for our shareholders.
While we don’t run the company worrying about the stock price in the short
run, in the long run our stock price is a measure of the progress we have made
over the years. This progress is a function of continual investments, in good and
bad times, to build our capabilities — our people, systems and products. These
important investments drive the future prospects of our company and position
it to grow and prosper for decades. Whether looking back over five years, 10
years or since the JPMorgan Chase and Bank One merger (15 years ago), our
stock has significantly outperformed the Standard & Poor’s 500 Index and the
Standard & Poor’s Financials Index.
Bank One/JPMorgan Chase & Co. tangible book value per share performance vs. S&P 500 Index
Tangible book value over time captures the company’s use of capital, balance sheet and profitability. In this chart, we are looking at
heritage Bank One shareholders and JPMorgan Chase & Co. shareholders. The chart shows the increase in tangible book value per share;
it is an after-tax number that assumes all dividends were retained vs. the Standard & Poor’s 500 Index (S&P 500 Index), which is a
pretax number that includes reinvested dividends.
1
On March 27, 2000, Jamie Dimon was hired as CEO of Bank One.
5
Stock total return analysis
JPMorgan Chase & Co. S&P 500 Index S&P Financials Index
The results shown above use our stock price as of December 31, 2019. If you
compare that with our stock price as of March 31, 2020, you would see a
dramatic change. For example, the overall stock price gain from the date of the
JPMorgan Chase and Bank One merger was 442% at the end of last year, but
it dropped to 252% three months later. While that’s still far better than many
companies’ performance, it illustrates the volatility of returns.
Unlike past letters, the placement of charts about the performance of our lines
of business and our fortress balance sheet is different — they can be found in an
appendix following this letter to peruse at your leisure. Instead, I am going to
focus my comments in the rest of this letter on issues that relate to our current
crisis. And while I enjoy sharing my opinion on many other matters, I will avoid
doing so this year.
6
Within this letter, I discuss the following:
7
D EAL IN G W I TH AN E XTR AO R DI N A RY C R I SI S
A corporation – essentially any institution – let us make quick and accurate decisions; a
is a living, breathing organism made up of devotion to our customers and communi-
people, technology, institutional knowledge ties; and continuous investing in technology
and relationships and is generally organized to better serve both our employees and our
around mission and purpose. Entering into customers. (These principles also underlie
a crisis is not the time to figure out what an organization’s preparedness for tough
you want to be. You must already be a competition – I was going to write this year
well-functioning organization prepared to that the competition is back in all of its
rapidly mobilize your resources, take your facets. There’ll be more to come on that next
losses and survive another day for the good year.)
of all your stakeholders.
We are there for our customers, employees
No matter the challenge, we manage our and communities in good and bad times
company consistently with principles that – we are a port in the storm. It is in the
have stood the test of time. I have written toughest of times that we need to use our
about these inviolable principles often – the capital and liquidity to help clients – large
need for extremely talented and motivated and small. COVID-19 is one of those extraor-
employees; a fortress balance sheet that dinary times. Below are some of the things
allows us to invest in good times and in bad we are doing to help our company and our
times; clear, comprehensive and accurate customers during this global crisis.
financial, risk and operating reporting to
First and foremost, we have to be prepared to How else would we process $6 trillion in
operate under extremely adverse circumstances. payments or buy and sell approximately
The significant economic fallout from this $2 trillion in securities and foreign exchange
crisis reinforces the critical need to keep the transactions for our clients on a daily basis?
global financial system fully functioning – And how else would we raise more than
and we recognize that our firm is an $2 trillion of credit and capital for our
important part of the global economy. clients each year? Our branches, collectively,
Therefore, we incorporate plans for resil- have 1 million customer visits each day, and
ience in everything we do – resilience for our combined credit card and debit card
hurricanes, data center failures, cyber attacks transaction volume totals $1.1 trillion a year.
and other issues. And while we had not During this crisis, we have been utilizing our
envisioned the effects of a pandemic like disaster recovery sites and implementing
this one, all of this preparation has paid off alternative work arrangements globally.
– and we have been able to accomplish far We now have more than 180,000 employees
more and far more quickly than we origi- working from home (and quite effectively),
nally thought possible. It is absolutely including traders, bankers, portfolio managers,
essential that we be up and functioning for
all of our customers each and every day.
8
DEALING W ITH AN EX TRAORDINARY C RISIS
and operations and call center teams across Of our approximately 5,000 Chase branches,
the globe. We are ensuring they continue we have managed to keep three-quarters of
to operate at the highest standards with the them open – and safe – for our customers
proper technological tools and access so they who need our services. In every one of our
can serve their clients safely and seamlessly. markets, almost all of our 2,300 branches
Over the past few weeks, we have had nearly with drive-up windows have remained open
150,000 concurrent virtual sessions – nearly for business, allowing people to maintain
five times our pre-pandemic average – and we a safe distance. Our 17,000 bankers have
have capacity in reserve to support signifi- continued to take appointments and proac-
cantly more demand if necessary. tively reach out to customers – helping them
manage their finances and use our digital
We’re taking significant steps to help our tools – often letting customers stay home.
consumer customers. In addition, the vast majority of our 16,850
After Superstorm Sandy, Hurricane Harvey ATMs are well-stocked and still functioning
and other devastating natural disasters to provide needed cash to our customers.
around the globe, after wildfires ravaged Our call centers have not fared as well;
California towns and after a number of many of them have been effectively shut
other tragic events, we stepped up for our down by local restrictions. As the volume of
customers. Today, we are doing the same calls has increased from customers seeking
across the country as we work individually assistance, hold times have also increased.
with customers facing COVID-19-related We have mobilized quickly to address this
hardships. issue, reminding customers that our digital
self-service capabilities are always available
We have been helping our customers, who for them to check balances, deposit checks
tell us about their financial struggles as a or make payments. Additionally, we have
result of the crisis, and are offering relief built new tools – digital and electronic – to
measures such as: allow customers to request relief without
• Providing a 90-day grace period for waiting for a specialist. And we are making it
mortgage and auto loan/lease payments possible for our displaced phone specialists
and waiving any associated late fees. to work from home.
• Removing minimum payment require- We are also taking significant action to support
ments on credit cards and waiving businesses — small, midsize and large — and state
associated late fees. and local governments.
• Not reporting payment deferrals such as Clearly, some clients may be much more
late payments to credit bureaus for up-to- vulnerable than others – for example, trans-
date clients. portation companies, hospitality enterprises,
hospitals, utilities and, in particular, small
• Continuing to responsibly lend to businesses that do not have enough capital
qualified consumers. to withstand sudden and sustained down-
turns in income. JPMorgan Chase Institute
• Waiving or refunding some fees, including
research reveals that 50% of small busi-
early withdrawal fees on certificates of
nesses have less than 15 cash buffer days,
deposit.
reinforcing why small businesses are being
You can learn more about our customer heavily disrupted by the current crisis and
response at: www.chase.com/stayconnected.
9
DEALING W I T H A N E XT R AO R D I N A RY C R I S I S
will feel the effects for a significant period of • Continuing to support vital institutions to
time – even as more capital from the recent keep our communities strong: Increased
federal stimulus program reaches them. funding in March included, for example,
$1.9 billion for hospitals and healthcare
To support businesses during this current
companies, $270 million for educational
crisis, we are doing the following:
institutions, $360 million for nonprofits,
• Prudently extending credit to businesses and $240 million for state and local
of all sizes for working capital and general governments.
corporate purposes. For example, in the
• Continuing to fund construction projects
past 60 days alone, we have extended $950
essential to our communities (affordable
million in new loans to small businesses.
housing, food banks and grocery stores)
• Waiving and refunding fees for those through our $5 billion commitment.
businesses in need and finding ways
Recognizing the extraordinary extension of
to help more small businesses through
new credit, mentioned above, and knowing
resources available at the Small Business
there will be a major recession mean that we
Administration.
are exposing ourselves to billions of dollars
• Servicing clients with additional credit of additional credit losses as we help both
through revolving facilities, when appro- consumer and business customers through
priate, and stepping in to try to help with these difficult times. (We will provide more
credit when others can’t or won’t. detail on these actions later in this letter.) Of
course, we are in continual contact with our
• Continuing in the ordinary course of busi- regulators about our actions and efforts.
ness to sustain consumers, businesses and
communities with about $500 billion of We stand ready to assist the government in
credit and capital raised every quarter. implementing stimulus package benefits to
• Continuing to maintain undrawn support the economy.
revolving commitments in our wholesale We applaud the speed with which the federal
businesses, which totaled approximately government and the Federal Reserve (the
$295 billion as of the close of business on Fed), as well as other central banks around
March 31, 2020. Companies have already the world, put together a stimulus package
drawn down more than $50 billion of their and other funding benefits to help individ-
revolvers to prepare themselves for the uals, businesses, and state and local entities
crisis (this already dramatically exceeds across the United States and beyond. Much
what happened in the global financial remains to be done to assure these resources
crisis). Many others have requested addi- can be quickly and effectively rolled out.
tional credit, which we have been offering We hope to be at the forefront of using this
judiciously – more than $25 billion of new assistance to help our customers get through
credit extensions were approved in the what is certain to be a difficult next few
month of March alone. months. We will not use this relief funding
for ourselves.
• Continuing the issuance of bonds for
highly rated companies ($85 billion) – it
may surprise you that the first quarter of
2020 will be our largest quarter for invest-
ment grade issuance, led by J.P. Morgan.
10
DEALING W ITH AN EX TRAORDINARY C RISIS
Times like these reinforce that our employees • A special payment of up to $1,000 has
are our most important asset – they are been granted to full- and part-time
fundamental to the vibrancy and success of employees whose job requires them to
our company. Excellence in everything we do continue working on-site and generally
– from operations and technology to service whose annual cash compensation is less
and reputation – depends upon the abilities than $60,000.
and character of our employees. Our vast and
• All branch employees are being paid for
diverse team of people serves our customers
their regularly scheduled hours even if
and communities, builds the technology,
those hours are reduced or their branch is
makes the strategic decisions, manages the
temporarily closed.
risks, determines our investments and drives
innovation. Setting aside differing views of • For those who must go to work on-site, we
our complex world and the risks and oppor- are reinforcing both basic and enhanced
tunities ahead, it is inarguable that having personal and office hygiene measures
such an extraordinary team – people with to keep them, their colleagues and their
guts, brains and enormous capabilities who clients safe. We have modified business
can navigate whatever circumstances bring – operations, staggered shifts, changed
is what ensures our future prosperity. seating arrangements, closed buildings to
nonessential visitors and provided addi-
In last year’s letter, I wrote about the
tional equipment where possible. We have
many ways we take excellent care of our
also intensified nightly and daily cleaning
employees: competitive wages and compen-
of all offices and branches worldwide that
sation, 401(k) retirement benefits, health
remain open.
benefits and wellness programs, extensive
training programs, volunteer and employee It’s amazing how quickly we have mobilized
engagement opportunities, generous parental and implemented work-from-home and other
leave policies and much more. resiliency measures – in weeks instead of
months or years. There are great lessons to
During this pandemic, we have also taken
be learned from this experience.
extensive steps to protect and support our
employees and their families. For example: While conditions may sometimes be unusual
and difficult, we are functioning smoothly. In
• We continue to pay employees who are
fact, over the last month in certain parts of
at home because they have had potential
our company, we’ve had the highest volume
exposure to the virus or whose health is
and transaction totals we have ever seen.
higher risk. Additionally, we provide paid
medical leave to employees who are unwell. Needless to say, this success would be impos-
sible without our exceptional employees, and
• We have clinical staff internally to support
we recognize our responsibility to support
our employees through this difficult time,
both their professional and personal lives
whether it is fielding general inquiries
now more than ever.
related to COVID-19 or locating testing or
other medical facilities.
• All employees are receiving five additional
paid days off to help manage personal
needs, which may include dependent care,
child care or other issues.
11
A DIVERSE AND INCLUSIVE COMPANY IS A STRONGER COMPANY
While the health crisis we are facing supersedes all other topics in this year’s letter, the subject of
diversity and inclusion is such an important one that I feel compelled to include it. As a firm, we have
an unwavering commitment to integrity, fairness and responsibility. That’s why any instances of racist
behavior and discrimination are so deeply unsettling.
Recently, Daniel Pinto and Gordon Smith, our Co-Presidents and Chief Operating Officers, sent a note to
employees about steps we’re taking to ensure our values reach all corners of our company.
Dear colleagues,
We are managing through uncertain times right now and recognize many of you are focusing much of your day on responding
to the ongoing spread of the COVID-19 coronavirus. While this is a top priority for all of us, we want to make sure you know we
haven’t lost sight of our commitment to keeping you informed about our ongoing efforts to strengthen our culture. Now, more
than ever, we need the best of everyone because only together will we get through these unprecedented times.
As you know, after the media reported on alleged discrimination in our firm last year, Jamie asked Gordon to lead an internal
team to take a hard look at how we do business so that we could gain a deeper understanding of what more we can do to root
out racism and discrimination anywhere it exists.
Challenging our people to be clear-eyed and open to change, we tasked many of our senior leaders from across the firm, from
multiple lines of business and control functions, to evaluate our policies, procedures and programs firmwide, to ensure they are
fair for all employees and customers. To be clear, we are looking across the whole firm and at everything we do.
As a result, we’ve identified a number of areas that, with enhanced, scaled or new programming or processes, would serve to
improve our culture in important ways. For example, we focused on employee and customer complaints — examining common
themes, where they originated and where opportunity exists to improve.
We also looked at how employee discretion may affect product accessibility across lines of business. We found opportunities
to increase awareness about the firm’s Diversity & Inclusion strategy, and we identified a need to expand our diversity
recruitment efforts to help us hire more diverse talent, and to implement mandatory firmwide training.
While this work is ongoing, here are five initial areas where work is now underway, including:
Bolstering our hiring systems to build a more robust pipeline of diverse talent
Attracting the best talent can only be achieved through a dedicated focus on inclusive recruiting, so we are recommitting
ourselves to this effort. We have made progress in this area, with programs such as Advancing Black Leaders, a program
12
focused specifically on increased hiring, retention and development of talent from within the black community. Over the past
four years, we have increased the number of black professionals in our most senior ranks, with the number of black managing
directors and executive directors up by more than 50 percent.
In addition, we are expanding our specialized team dedicated to conducting more targeted outreach to recruit diverse talent.
We will expand on our program to hold hiring managers and recruiters at the highest levels of the company accountable for
hiring a diverse group of professionals.
I can assure you, it did not take one particular story to make us realize that a diverse and inclusive culture
is important.
We know that too many people are being left behind – particularly in the black community. The Civil War
ended more than 150 years ago, and we still have not come even close to parity. We need to do more as a
nation, and we have more to do as a firm.
13
DEALING W I T H A N E XT R AO R D I N A RY C R I S I S
I believe that our shareholders know • We provide small business loans in low-
we make extraordinary efforts to lift up and moderate-income neighborhoods.
our communities, both at a local level –
• We design products and services to
supporting schools and work skills training,
promote the financial health of lower-
for example – and at the national level,
income individuals.
helping to formulate policies that are good
for countries. These policies affect healthcare, • We support a number of employee- and
infrastructure, education and employment, community-based initiatives and philan-
including initiatives such as those that help thropic activities, including:
people with a criminal background get a
second chance. – Office of Military and Veterans Affairs,
which sponsors mentorship, devel-
We know that crises like COVID-19 create opment and recognition programs
further inequities in society so it is even to support the military and veterans
more important that we be present for those working at the firm;
communities hit hard by the pandemic.
JPMorgan Chase made a $50 million – Women on the Move, our global
commitment to help address the immediate firmwide effort that empowers female
humanitarian crisis, as well as the long-term employees, clients and consumers;
economic challenges people face. Funding – The Service Corps, which mobilizes
will be deployed over time with particular employee volunteers to help nonprofit
focus on the most vulnerable people and organizations around the world;
communities, including:
– Advancing Black Pathways, a compre-
• Immediate healthcare, food and other hensive program focused on providing
humanitarian relief globally; more opportunities for black people
• Help for existing nonprofit partners and black-owned businesses because
around the world that are responding to we know that opportunity is not always
the crisis in their communities; created equally;
14
DEALING W ITH AN EX TRAORDINARY C RISIS
• We are huge supporters of regional and example, while many community banks
community banks, which are critical to were seeking more liquidity to serve their
many cities and small towns around the local communities amidst COVID-19 fears,
country. We bank approximately 500 of we were able to help approximately 100
America’s 5,000 regional and commu- community banks secure $775 million in
nity banks. In 2019, we lent or raised a increased cash availability over a three-
total of $2.6 billion in capital for them. In week period in March, delivering $1.9
addition, we provide payment-processing billion of cash to support their branches
services for them, we finance some of their and ATMs. This is not only a win for our
mortgage activities, we advise on acqui- clients but also for the communities in
sitions, and we buy and sell securities which they operate.
for these banks. We also supply interest
rate swaps and foreign exchange both for
themselves – to help them hedge some of
their exposures – and for their clients. For
4. We are transparent with our shareholders: What they should expect regarding our
financial and operating performance in 2020.
Of course, we do not know how this crisis Our 2019 pretax earnings were $48 billion1
will ultimately end, including how long it – a huge and powerful earnings stream that
will last, how much economic damage it will enables us to absorb the loss of revenues and
do, or how fast or slow the recovery will be. the higher credit costs that inevitably follow
We have always been serious about stress a crisis. For comparison, the Comprehensive
testing and run an enormous number of tests Capital Analysis and Review (CCAR) results
per week so that we are prepared for most for 2020 that we submitted to the Federal
crises. But as is often the case, this “actual Reserve in 2019 (which assumed outcomes
new crisis” – while it shares attributes with like U.S. unemployment peaking at 10%
what is being stress tested – is dramatically and the stock market falling 50%) showed a
different from the expected. decline in revenue of almost 20% and credit
costs of approximately $20 billion more than
We stopped buying back our stock: We have
what we experienced in 2019. We believe we
always held the position that the highest
would perform better than this if the Fed’s
and best use of our equity is to reinvest it in
scenario were to actually occur. But even in
our own business and, of course, to be able
the Fed’s scenario, we would be profitable
to withstand tough times. Halting buybacks
in every quarter.2 These stress test results
was simply a very prudent action – we don’t
also show that following such a meaningful
know exactly what the future will hold – but
reduction in our revenue (and assuming we
at a minimum, we assume that it will include
continue to pay dividends), our common
a bad recession combined with some kind of
equity Tier 1 (CET1) ratio would likely hold
financial stress similar to the global financial
at a very strong 10%, and we would have in
crisis of 2008. Our bank cannot be immune
excess of $500 billion of liquid assets.
to the effects of this kind of stress.
Additionally, we have run an extremely
We will share in detail our latest thinking on
adverse scenario that assumes an even
the impact this crisis will have on our finan-
1
Represents managed pretax deeper contraction of gross domestic
cials in our first quarter earnings release in
income. product, down as much as 35% in the
2
We are adjusting these CCAR results mid-April; however, to put it in context, here
for the global market shock trading
second quarter and lasting through the end
losses and operational losses — and
is how our shareholders can think broadly
there have been none in this crisis. about a reasonable range of outcomes.
15
DEALING W I T H A N E XT R AO R D I N A RY C R I S I S
of the year, and with U.S. unemployment needs. Despite this, our capital resources and
continuing to increase, peaking at 14% in liquidity are very strong in both models. We
the fourth quarter. Even under this scenario, have over $500 billion in total liquid assets
the company would still end the year with and an incremental $300+ billion borrowing
strong liquidity and a CET1 ratio of approx- capacity at the Federal Reserve and Federal
imately 9.5% (common equity Tier 1 capital Home Loan Banks, if needed, to support
would still total $170 billion). This scenario is these loans, as well as meet our liquidity
quite severe and, we hope, unlikely. If it were requirements (these numbers do not include
to play out, the Board would likely consider the potential use of some of the Fed’s newly
suspending the dividend even though it is created facilities). We could, of course,
a rather small claim on our equity capital make our capital and liquidity buffer better
base. If the Board suspended the dividend, it by restricting our activities, but we do not
would be out of extreme prudence and based intend to do that – our clients need us.
upon continued uncertainty over what the
I would like to point out that, as we get closer
next few years will bring.
to the extremely adverse scenario, current
It is also important to be aware that in both regulatory constraints will limit additional
our central case scenario for 2020 results actions we can take to help clients – in spite
and in our extremely adverse scenario, we of the extraordinary amount of capital and
are lending – currently or plan to do so – liquidity we could deploy.
an additional $150 billion for our clients’
5. We are working closely with all levels of government during this crisis — and while we will
participate in government programs to address the severe economic challenges, we will
not request any regulatory relief for ourselves.
We are just beginning to analyze and work no impact on safety, soundness or regulatory
with the government on all of their various oversight. We are working with the govern-
programs. For the most part, these initiatives ment to make sure such crisis-relief measures
will need the deep involvement of the private are structured to work effectively – there are
sector to be properly executed. We intend a significant number of details that need to be
to do everything we can – and as soon as resolved, which I will not go into here.
possible – to ensure that government support
While we will aggressively help our
is reaching the people who need it most.
customers take advantage of these new
We applaud and support the recent actions programs (though we must take action
the U.S. Department of the Treasury and the to protect ourselves from ongoing – and,
Federal Reserve have taken to try to miti- more important, future – litigation risk),
gate the economic impact of the COVID-19 we want our shareholders to know that we
turmoil. The Fed’s overwhelming actions have have not requested any regulatory relief
already dramatically reduced the financial for ourselves. Saying that we will not ask
stress in the system, and there is still more for regulatory relief does not mean the
they could do if they need to. For example, government shouldn’t change some rules
balance sheet expansion, additional lending and regulations, however. For example,
facilities, and changes to capital and liquidity some rules can improperly prevent healthy,
requirements are steps designed to ensure well-capitalized banks from lending freely
that more capital will flow through the in times of stress. This can hurt customers
system, which will ultimately allow us to help as the crisis deepens. Leaving high-quality,
more families and small businesses. These available liquidity undeployed in times of
actions would bolster the U.S. economy with need is an opportunity forever lost.
16
DEALING W ITH AN EX TRAORDINARY C RISIS
I have written in detail in past letters that After the crisis subsides (and it will), our
the regulatory system is in need of both country should thoroughly review all aspects
reform and recalibration – not because we of our preparedness and response. And we
want it to happen but because it would be should use the opportunity to closely review
good for a deepening and widening of the the economic response and determine
financial system – something that would whether any additional regulatory changes
benefit all Americans. While a lot of the rules are warranted to improve our financial and
were constructive and made the financial economic system. There will be a time and
system stronger, we are now seeing the place for that – but not now.
impact of poorly coordinated, poorly cali-
brated and poorly organized rulemaking.
It is hoped that the number of new COVID-19 to be tested, and then for those who test
cases will decrease soon and – coupled with negative for the virus, we need to discover
greatly enhanced medical capabilities (more whether virus antibodies appear through
beds, proper equipment where it is needed, serology testing. Both the CDC and private
adequate testing) – the healthcare system is companies are scrambling to produce such
equipped to take care of all Americans, both tests: The U.K. has ordered 3.5 million
minimizing their suffering and maximizing of them, Germany will use them to issue
their chance of living. Once this occurs, immunity certificates to COVID-19 survi-
people can carefully start going back to work, vors, and China and Singapore already are
of course with proper social distancing, using tests to determine how extensively the
vigilant hygiene, proper testing and other virus spread in large populations in order
precautions. There are many jobs that can be to measure the true infection rate. In the
safely done; however, employees in certain United States, the Food and Drug Admin-
companies should return to business as usual istration is allowing doctors to use these
only if the Centers for Disease Control and serology tests to identify recovered patients
Prevention (CDC) and other government whose antibodies could treat emergency
entities deem it safe to do so. cases of the disease.
In addition, this “return to work” process The country was not adequately prepared for
could be accelerated if federal, state and local this pandemic – however, we can and should
governments make tests widely available be more prepared for what comes next. Done
that allow people to certify that they have right, a disciplined transition would maxi-
contracted and recovered from the disease, mize the health of Americans and minimize
have the necessary antibodies to prevent the time, extent and suffering caused by the
them from getting sick again and are not economic downturn.
infectious to anyone. Initially, we need a
buffer period of days or weeks for people
17
DEALING W I T H A N E XT R AO R D I N A RY C R I S I S
Sometimes extraordinary events in history system that cripples small businesses with
can cause a change in the body politic. As a red tape and bureaucracy; ineffective infra-
nation, we were clearly not equipped for this structure planning and investment; and huge
global pandemic, and the consequences have waste and inefficiency at both the state and
been devastating. But it is forcing us to work federal levels. We have failed to put proper
together, and it is improving civility and immigration policies in place; our social
reminding us that we all live on one planet. safety nets are poorly designed; and the
E Pluribus Unum. share of wages for the bottom 30% of
Americans has effectively been going down.
I am hoping that civility, humanity, empathy
We need to acknowledge these problems
and the goal of improving America will
and the damage they have done if we are
break through.
ever going to fix them.
We have the resources to emerge from this
There should have been a pandemic play-
crisis as a stronger country. America is still
book. Likewise, every problem I noted above
the most prosperous nation the world has
should have detailed and nonpartisan solu-
ever seen. We are blessed with the natural
tions. As we have seen in past crises of this
gifts of land; all the food, water and energy
magnitude, there will come a time when we
we need; the Atlantic and Pacific oceans as
will look back and it will be clear how we –
natural borders; and wonderful neighbors in
at all levels of society, government, business,
Canada and Mexico. And we are blessed with
healthcare systems, and civic and humani-
the extraordinary gifts from our Founding
tarian organizations – could have been and
Fathers, which are still unequaled: freedom
will be better prepared to face emergencies
of speech, freedom of religion, freedom
of this scale. While the inclination of some
of enterprise, and the promise of equality
will be to finger-point and look for blame,
and opportunity. These gifts have led to the
I hope we can avoid that. I also hope we can
most dynamic economy the world has ever
avoid people using times of crisis to argue
seen – one that nurtures vibrant businesses
for what they already believe. We need to
large and small, exceptional universities, and
demand more of ourselves and our leaders
a welcoming environment for innovation,
if we want to prevent or mitigate these
science and technology. America was an idea
disasters. This can be a moment when we
borne on principles, not based upon histor-
all come together and recognize our shared
ical relationships and tribal politics. It has
responsibility, acting in a way that reflects
and will continue to be a beacon of hope for
the best of all of us. As President Kennedy
the world and a magnet for the world’s best
historically said, “Ask not what your country
and brightest.
can do for you – ask what you can do for
Of course, America has always had its flaws. your country.”
The current pandemic is only one example
My fervent hope is that America rolls up its
of the bad planning and management that
sleeves and starts to attack these problems.
have hurt our country: Our inner city schools
Fixing them would better prepare us for
don’t graduate half of their students and
future catastrophes, create better economic
don’t give our children an education that
outcomes for everyone (with policies that
leads to a livelihood; our healthcare system
aim to maximize economic growth, driving
is increasingly costly with many of our citi-
the best potential outcomes), improve
zens lacking any access; and nutrition and
income inequality, protect the most vulner-
personal health aren’t even being taught at
able and foster economic growth that is
many schools. Obesity has become a national
more resilient, which would also strengthen
scourge. We have a litigation and regulatory
America’s role in the world. We must never
18
DEALING W ITH AN EX TRAORDINARY C RISIS
forget that America’s economic prosperity can work where you want and for whom you
is a necessary foundation for our military want). At the end of the day, the pursuit of
capability, which keeps us free and strong happiness, our freedoms and free enterprise
and is essential to world peace. These issues are inseparable.
could all be tackled while preserving the
If we acknowledge our problems and work
freedoms ascribed by our Founding Fathers:
together, we can lift up those who need help
life, liberty and the pursuit of happiness,
and society as a whole. Business and govern-
freedom of speech, freedom of religion and
ment collaborating together can conquer our
freedom of enterprise, which means the free
movement of capital and labor (meaning you biggest challenges.
I N C LO S I N G
While I have a deep and abiding faith in the United States of America
and its extraordinary resiliency and capabilities, we do not have
a divine right to success. Our challenges are significant, and we should
not assume they will take care of themselves. Let us all do what
we can to strengthen our exceptional union.
I would like to express my deep gratitude and appreciation for
the employees of JPMorgan Chase, and I’d also like to
thank all of you who shared your good wishes with me while
I was recuperating from my recent heart surgery. From this letter,
I hope shareholders and all readers gain an appreciation for
the tremendous character and capabilities of our people and how
they have helped communities around the world. They have
faced these times of adversity with grace and fortitude. I hope you
are as proud of them as I am. Finally, the countries and citizens of
the global community will get through this unprecedented situation,
undoubtedly stronger for it. Together, we will rise to the challenge.
Jamie Dimon
Chairman and Chief Executive Officer
April 6, 2020
19
A P PEN DIX
Deposits market share1 3.6% 9.3% 9.3% Serve ~63 million U.S. households, including
# of top 50 Chase markets 4.3 million small businesses5
where we are #1 (top 3) 11 (25) 14 (40) 13 (40) 52 million active digital customers6, including
Consumer & Average deposits growth rate 8% 5% 3% 37 million active mobile customers7
Community Active mobile customers growth rate NM 11% 12% #1 primary bank within Chase footprint8
Banking Credit card sales market share2 16% 22% 23% #1 U.S. credit card issuer based on sales and
Merchant processing volume3 ($B) $661 $1,366 $1,512 outstandings9
# of branches 3,079 5,036 4,976 #2 mortgage servicer10
Client investment assets ($B) ~$80 $282 $358 #3 bank auto lender11
Business Banking primary market share4 5.1% 8.8% 9.4% All-time high Net Promoter Score12
Global investment banking fees13 #2 #1 #1 >80% of Fortune 500 companies do business with us
Market share13 8.7% 8.6% 9.0% Presence in over 100 markets globally
Total Markets revenue14 #8 #1 #1 #1 in 16 businesses — compared with 8 in 201415
Corporate & Market share14 6.3% 11.5% 12.0% #1 in global investment banking fees for the 11th
Investment FICC14 #7 #1 #1 consecutive year13
Bank Market share14 7.0% 11.8% 12.3% Consistently ranked #1 in Markets revenue since 201214
Equities14 #8 co–#1 co–#1 #1 in USD payments volume16
Market share14 5.0% 11.0% 11.3% #2 custodian globally17
Assets under custody ($T) $13.9 $23.2 $26.8
# of top 50 MSAs with dedicated teams 26 50 50 142 locations across the U.S. and 30 international
Bankers 1,203 1,922 2,101 locations
New relationships (gross) NA 1,232 1,706 Credit, banking, and treasury services to ~18K
Commercial Average loans ($B) $53.6 $205.5 $207.9 Commercial & Industrial clients and ~34K real estate
Banking Average deposits ($B) $73.6 $170.9 $172.7 owners and investors
Gross investment banking revenue ($B)18 $0.7 $2.5 $2.7 17 specialized industry coverage teams
Multifamily lending19 #28 #1 #1 #1 traditional Middle Market Bookrunner in the U.S.20
26,000 affordable housing units financed in 2019
Ranking of 5-year cumulative net client Serve clients across the entire wealth spectrum
asset flows21 NA #2 #2 Clients include 59% of the world’s largest pension
U.S. Private Bank (Euromoney) #1 #1 #1 funds, sovereign wealth funds and central banks
Client assets ($T) $1.3 $2.7 $3.2 Serves as a fiduciary across all asset classes
Asset & Wealth
Active AUM market share22 1.8% 2.4% 2.5% 88% of Asset Management's 10-year long-term mutual
Management
North America Private Bank client fund AUM performed above peer median25
assets market share23 3% 4% 4% Revenue and long-term AUM grew more than 90%
Average loans ($B) $26.5 $138.6 $149.7 since 2006
# of Wealth Management client advisors 1,506 2,865 2,890
Refer to the 2020 Investor Day presentations for footnoted information, which is available on JPMorgan Chase & Co.’s website under the heading Investor Relations, Events & Presentations,
JPMorgan Chase 2020 Investor Day (www.jpmorganchase.com/corporate/investor-relations/event-calendar.htm), and on Form 8-K as furnished to the U.S. Securities and Exchange
Commission (SEC) on February 25, 2020, which is available on the SEC’s website (www.sec.gov), as follows: Refer to Firm Overview slide 3 for footnotes 1, 5, 9, 16, 17, 18, 22 and 25; refer to
Consumer & Community Banking slides 22, 3, 3, 2, 9, 9 and 7 for footnotes 2, 6, 7, 8, 10, 11 and 12, respectively; refer to Corporate & Investment Bank slides 5 and 4 for footnotes 13 and 15,
respectively; and refer to Asset & Wealth Management slide 3 for footnote 22.
Note: 2018 deposits market share and # of top 50 Chase markets where we are #1 (top 3) have been revised to conform with the 2019 methodology.
3
2006 reflects First Data joint venture.
4
Barlow Research Associates, Primary Bank Market Share Database as of 4Q19. Rolling 8-quarter average of small businesses with revenues of $100,000 – <$25 million.
14
Coalition, preliminary 2019 rank and market share analysis reflects JPMorgan Chase’s share of the global industry revenue pool and is based on JPMorgan Chase’s business structure.
2006 rank analysis is based on JPMorgan Chase analysis.
19
S&P Global Market Intelligence as of December 31, 2019.
20
Refinitiv LPC, 2019.
21
Source: Company filings and JPMorgan Chase estimates. Rankings reflect financial information publically reported by the following peers: Allianz Group, Bank of America Corporation,
Bank of New York Mellon Corporation, BlackRock, Inc., Credit Suisse Group AG, DWS Group, Franklin Resources, Inc., The Goldman Sachs Group, Inc., Invesco Ltd., Morgan Stanley, State
Street Corporation, T. Rowe Price Group, Inc. and UBS Group AG. JPMorgan Chase’s ranking reflects AWM client assets, Chase Wealth Management investments and new-to-the-firm
Chase Private Client deposits.
23
Source: Capgemini World Wealth Report 2019. Market share estimated based on 2018 data (latest available).
NM = Not meaningful B = Billions
NA = Not available T = Trillions
FICC = Fixed Income, Currencies and Commodities K = Thousands
MSAs = Metropolitan statistical areas
AUM = Assets under management
USD = U.S. dollar
20
AP PEN D IX
$167
$167 $136 $1,789
$1,693
$1,621 $1,619
$1,519 $1,525
$1,392 $1,443
$1,264
$1,115 $1,158
$1,088
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Corporate clients Commercial clients Consumer
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Client assets Wholesale deposits Consumer deposits
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1
Represents assets under management, as well as custody, brokerage, administration and deposit accounts.
2
Represents activities associated with the safekeeping and servicing of assets.
21
APPEND I X
While we never expect to be best in class every year in every business, we normally compare
well with our best-in-class peers. The chart below shows our performance generally, by busi-
ness, versus our competitors in terms of efficiency and returns.
JPMorgan Chase Is in Line with Best-in-Class Peers in Both Efficiency and Returns
Efficiency Returns
JPM 2019 Best-in-class JPM medium-term
overhead peer overhead target overhead JPM 2019 Best-in-class JPM medium-term
ratio ratio1 ratio ROTCE peer ROTCE2, 3 target ROTCE
Consumer &
52% 46% 50%+/- 31% 35% 25%+
Community BAC–CB BAC–CB
Banking
Corporate &
56% 54% 54%+/- 14% 15% ~16%
Investment BAC–GB & GM BAC–GB & GM
Bank
22
AP PEN D IX
2008 2019
2019 Basel III
CET1 7.0%1 +540 bps 12.4%2 Advanced is
13.4%, or 18.6%,
excluding $389B
Tangible of operational
$84B +$104B $188B
common equity risk RWA3
Reported HQLA
Liquidity ~$300B +~$560B $860B is $545B4
1
CET1 reflects the Tier 1 common ratio under the Basel I measure. B = Billions
2
Reflects the Basel III Standardized measure, which is the firm's current binding constraint. T = Trillions
3
Operational risk RWA is a component of RWA under the Basel III Advanced measure. bps = basis points
4
Represents quarterly average HQLA included in the liquidity coverage ratio. Refer to Liquidity Coverage Ratio
on page 94 for additional information.
CET1 = C ommon equity Tier 1 ratio. Refer to Regulatory capital on pages 86-90 for additional information
RWA = Risk-weighted assets
Liquidity = HQLA plus unencumbered marketable securities, which includes excess liquidity at JPMorgan Chase Bank, N.A.
HQLA = High quality liquid assets include cash on deposit at central banks and highly liquid securities (predominantly U.S. Treasuries,
U.S. government-sponsored enterprises and U.S. government agency mortgage-backed securities, and sovereign bonds)
LCR = Liquidity coverage ratio
23
Consumer & Community Banking
We continue to make real progress 2019 financial results largest and, on an absolute basis, the
in Consumer & Community Banking, fastest growing among U.S. banks:
In 2019, Consumer & Community
and I am proud of what our great 37 million, up 12% year-over-year.
Banking delivered a 31% return on
team has accomplished. We have
equity on record net income of There was no way to predict that
built multiple market-leading busi-
$16.6 billion. Our $55.9 billion in credit performance would remain as
nesses while de-risking and
revenue was up 7% year-over-year. strong as it has over these last few
simplifying them, and we worked
We reduced our overhead ratio to years, and that has positively contrib-
with regulators to close gaps and
51.7% and self-funded significant uted to the performance we deliv-
make tough decisions. We do the
investments. We grew our customer ered in 2019.
hard work each and every day to
base to nearly 63 million U.S. house-
put our customers first and do the We achieved our 2019 results with
holds, including over 4 million
right thing. continued focus on six strategic prior-
small businesses. This performance
is a direct result of the growth in ities that have remained consistent
Our performance in 2019 is the result
our business drivers and our sus- and have proved to be effective. We
of that discipline and effort. We are
tained focus on investing for the bring in new customers, drive engage-
the #1 U.S. credit card issuer based
medium and long term. ment across multiple channels and
on sales and outstanding balances.
always focus on improving their expe-
We are the #1 primary bank in our
Our average deposits of $694 billion rience with us. We closely manage
footprint. We are the #1 business
were up 3% over 2018, and client expenses and simplify our business,
bank based on primary relationships.
investment assets reached $358 bil- and we seek efficiency and greater
We are the #2 mortgage servicer and
lion, up 27%. We ended the year productivity. We’re intensely focused
the #3 bank auto lender.
with $464 billion in average loans, on the regulatory and risk and control
We take nothing for granted and reflecting $43 billion in loan sales environment. We work to hire the
remain humble and motivated as we over the last two years. Our customer best, diverse talent in the industry
compete to be, or stay, best in class. base of active mobile users is the that also reflects the diverse commu-
nities we serve.
Here are some highlights of what we
accomplished in 2019 in each of
these areas:
#1 #1
compelling value propositions
~63M We’re bringing in new customers
and earning more of their valuable
#1 in total U.S. credit card sales #1 primary bank Nearly 63 million
volume and outstandings within our footprint U.S. households served business. In 2019, we grew the total
number of households we serve and
increased the number of households
that have a relationship with more
than one Chase line of business even
faster than households overall.
Among our consumer households,
25% have a relationship with two or
#1 28M $1.1T more Chase lines of business.
Our lending businesses – Credit
#1 most visited banking 28 million daily visits, calls More than $1 trillion
portal in the U.S. and digital channel logins in credit and debit card Card, Home Lending and Auto – are
sales volume a significant acquisition funnel for
our deepest customer relationships,
24
NEW TOOLS FOR CUSTOMERS
We’ve started to bring together our digital assets; for example, their home. In 2019, we their current home and explore their neighbor-
experiences to engage customers at an earlier rolled out a digital mortgage offering, Chase hood before applying for a new loan.
stage in their financial journey. Doing so can MyHome, allowing customers to apply for a loan
These are just a few examples of how we con-
help them reach their goals faster. Our already- and initiate a mortgage origination digitally.
tinue to do more to help our customers with
established digital tools give customers a clear
Customers can use features such as Credit Jour- their everyday finances. We plan to create
view and understanding of their finances.
ney to receive a detailed view of their finances more of these experiences for customers with
Today, customers can better understand and and borrowing ability; Autosave allows them to similar opportunities, such as buying a car,
manage some of their most important financial set a down payment savings goal. And with saving for a vacation and staying on top of
Chase MyHome, they can review the value of everyday purchases.
1
Reflects percentage of consumer originations that used Chase MyHome for loan fulfillment in the fourth quarter of 2019.
bringing in more than half of all relationships, and we are the #1 channel to interact with us during
new-to-Chase households. Our lend- business bank based on primary the year. We are still committed to
ing customers respond to Consumer bank relationships. The deposits our omnichannel strategy because
Banking marketing at three times the these customers bring to us are the our customers are. And all of our
rate of pure prospects; in branch outcome of that relationship. channels have evolved based upon
expansion markets, the response rate our customers’ preferences and
is even better. Customers with these Drive engagement through expectations. For example, we’re
deeper relationships are more satis- omnichannel, customer-centered able to build branches in new
fied and less likely to leave Chase. experiences markets farther apart than branches
We continually improve and sim- The scale of our distribution gives us in our legacy markets because of
plify the customer experience and a competitive advantage. When we our new tools and capabilities: our
offer new, customer-centered digital bring new products and services to digital account opening functional-
capabilities using our data to benefit the marketplace, we bring them to ity and data about our existing
and protect our customers. nearly 63 million households that customers in those markets.
In Consumer & Business Banking, engage with us on a regular basis. In these newer markets, customers
our focus is to be our customers’ On any given day in 2019, 28 million can choose whether to open an
primary bank. Customers consider a customers visited us, called us or account in a branch or digitally.
wide range of factors when choosing logged in to our digital channels. Until 2018, our checking and sav-
their primary bank. Over 75% of our Two-thirds of our Consumer Bank- ings accounts could only be opened
checking households are primary ing customers used more than one
25
#1 28M $1.1T
#1 most visited banking 28 million daily visits, calls More than $1 trillion
portal in the U.S. and digital channel logins in credit and debit card
sales volume
26
everyday branch transactions per send data that customers choose Over the last few weeks, we have
customer by 49% since 2014 – for us to provide on their behalf. been offering relief to our customers
eliminating transactions that are This reduces risk for all parties and small business clients who are
simple and easy for customers to while giving transparency and struggling financially. We have pro-
manage anywhere and at their con- control to our customers. vided payment relief for credit cards,
venience, such as depositing checks. auto loans and home loans. We also
Attract, develop and retain the best continue to lend money.
Our investments for the long term
talent for today and the future,
have also led to revenue growth. And as we forge ahead through this
harnessing the power of diversity
Examples include the 400 branches challenging time and get through it,
we are in the process of opening in Our talent sets us apart, and we we still see opportunities to help
new markets to extend our reach. work to attract and retain the best, and support more people. Two
Our new branches in existing mar- diverse talent for today and tomor- opportunities that stand out are:
kets break even seven months faster row. Our team must represent and helping a broader range of Ameri-
than they did five years ago, and the reflect the diverse customers we cans manage their financial lives
branches in our newer markets are serve every day. We are proud that and earning the chance to manage
trending even better than that. more than 57% of our employees in investments for the many millions
Consumer & Community Banking of households that work with Chase
Operate a disciplined risk and are female and more than half of our as their primary bank.
control environment, protect the U.S. employees identify as a minor-
ity. The roles with the highest Our Chase franchise is powerful and
firm’s systems, and safeguard
minority representation are dispro- differentiated from our peers. We will
customer and employee privacy
portionately our customer-facing, continue to support our customers,
As always, we are focused on manag- front-line roles rather than executive small business clients, communities
ing risk appropriately and using management. We are mindful of this and employees now and in the future.
well-designed controls. This work is imbalance and are working tirelessly
never done. Investing in these efforts to correct it.
remains our highest priority, and we
have done so consistently over time. Representation is only part of the
We are vigilant and never compla- equation when it comes to attracting
cent in this space. and retaining world-class talent. We
are focused on driving inclusiveness
Over the last five years, for example, and reinforcing the fact that we all
we’ve used technology and machine are responsible for keeping a culture
learning to reduce fraud losses in the where everyone is respected and
credit card business by 50%. valued for who they are and what
We have made great strides to pro- they contribute.
tect customer data, as well as our
own systems, when sharing data. Conclusion
Previously, to share information with We have built tremendous busi-
approved third parties, customers nesses that deliver repeatable reve-
provided their Chase login creden- nue. Each year, we work hard to
tials, giving access to their entire bring in new customers, retain exist-
Chase profile. This enabled third ing ones and generate earnings
parties to obtain information beyond throughout economic cycles. We are
the scope of the customer’s inten- experiencing turbulent times across Gordon Smith
tion. That wasn’t safe for the cus- the country – and the world – as we Co-President and Chief Operating Officer,
tomer or for us. Now we require get set to publish this letter. We are JPMorgan Chase & Co., and
these third parties to abide by our here for our customers in good times CEO, Consumer & Community Banking
data-sharing rules, and we securely and tough times, and that is true
now more than ever.
27
Corporate & Investment Bank
In 2019, the Corporate & Investment New regulations that followed the Having scale has been equally criti-
Bank (CIB) generated earnings of financial crisis helped make the cal to our success. Following the
$11.9 billion on revenue of $38.3 bil- banking system safer overall but also financial crisis, we believed that
lion – a record year for our business. made investment banking more clients would gravitate to the best
expensive. Banks had to hold a lot ideas and offerings, particularly if
This standout performance is the cul-
more capital, which reduced leverage they could be accessed anywhere
mination of a journey that began
and ROE. At the same time, major and at any time.
during the 2008 financial crisis when
investments were needed in technol-
clients turned to J.P. Morgan for capi- Over the years, that scale has become
ogy and compliance.
tal, liquidity and a safe haven. a springboard for growth. In 2010,
This created a predicament for banks we began to expand our interna-
In 2009, 10 years ago, client business
emerging from the crisis, and they tional corporate banking effort to
drove earnings in our investment
chose several different paths. Some include multinational clients around
bank to a record $6.9 billion. By 2019,
decided to cut back on businesses the globe, with 100 bankers dedi-
the CIB’s earnings had topped the
that were less profitable or carried cated to serving 2,200 clients. Today,
entire firm’s net income from 2009.
too much capital. Others retreated our 400 corporate bankers cover
As we close out the decade, it is worth
from traditional investment banking 3,300 companies and their subsidiar-
reflecting on the strategy that brought
businesses altogether. ies worldwide. In addition, we are
us to this point, helping us to gener-
partnering with Commercial Bank-
ate record revenue and profits and a At J.P. Morgan, we believed that cli-
ing to extend our services to middle
consistently strong return on equity ents would always need an array of
market clients internationally.
(ROE) while adding $42 billion to the global banking products even though
CIB’s capital base and investing sub- margins on these products varied. Commitment and consistency
stantially in the business. We looked at our client relationships
holistically and prioritized long-term Supporting clients during periods of
Global, complete and at scale value for them over short-term crisis has always been a hallmark of
profitability for us. That decision – our business. A decade ago, when
The success of our business over the
to continue to provide a full suite investors were worried about bank
last decade has hinged chiefly on our
of products and services for clients exposures in struggling economies
steadfast pursuit of three strategic
across the globe – has proved to be such as Ireland, Greece, Portugal,
goals: being global, complete and at
mutually beneficial. Spain and Italy, we did not retrench.
scale. The benefits of these qualities
On the contrary: In 2009 and 2010,
may seem obvious today but weren’t
we stood by those countries, raising
quite so clear a decade ago.
$36.4 $38.3
$35.3 $34.7
$33.7
Revenue
$10.8 $10.8 $11.8 $11.9
Net income $8.1
1
Reported results for 2015 have been revised to reflect the adoption in 2018 of the new revenue recognition guidance.
28
BANKING MARKETS
#1
#1 DEBT CAPITAL MARKETS #1 13%
#1 in global Investment Banking #1 in global DCM, with #1 in bond #1 in Markets revenue 13%
fees for the 11th consecutive year underwriting for 10 years in a row and globally since 2012 return on equity
#1 in loan syndication since 2016
#1 #1
EQUITY CAPITAL MARKETS
€7.5 billion and €11 billion for Greece Banking have delivered a combined And while we are more efficient
and Italy, respectively. That support ROE ranging from 14% to 18% over than we were five years ago, there is
continues to this day. Last year, we the past five years. Meanwhile, Secu- still more output to be won per dol-
SECURITIES
opened SERVICES
a state-of-the-art office in WHOLESALE
rities Services and Treasury Services, PAYMENTS
lar of investment. As we modernize
Dublin, which is now a thriving the traditional transaction banking our infrastructure and scale our
center of technology and commerce. businesses, have delivered between technology capabilities, we will
10% and 20% during the same continue to make key investments
That commitment and consistency are
period. This means that for the past required to “change the bank” while
#2
now spurring the firm’s expansion in
the world’s fastest-growing economies. $27T five years, the combined CIB has
achieved an average ROE of 15%.
#1
deploying resources needed to “run
the bank” efficiently.
$6T
Ten years ago, regulatory constraints
#2 custodian $27 trillion in assets under custody, #1 in U.S. dollar $6 trillion in payments
on foreign banks
globallyseverely restricted up 16% year-over-year
Equally critical to our long-term suc-volume 2019 performance
payments processed daily
what we could offer clients in China. cess is attracting and, more important,
Today, we have approvals from Chi- retaining top talent to ensure our The CIB’s record 2019 earnings of
nese authorities to open a majority- clients receive best-in-class execution $11.9 billion on record revenue of
owned securities joint venture with a and consistency in their experience. $38.3 billion allowed us to maintain
our position as the world’s top
20,000+
path to 100% ownership. Bringing our This is a particular priority in the
full suite of banking capabilities to Investment Banking business, where #1
investment banking franchise for
China will enable20,000+
its companies to
daily net asset valuations
clients choose us to lead deals because #1the 11th consecutive year. In addition,
merchant acquirer
grow beyond the country’s borders
provided to clients of trust earned over many years. weinearned
the U.S. $7.6 billion in global
and allow more investors to access its investment banking fees, narrowly
Our financial stability and continuity beating our all-time record of $7.5
market. This sets us up for tremen-
of personnel enable us to build effec- billion in 2018.
dous growth in one of the world’s
tively on our progress and invest
largest economies while retaining a In the context of generally flat
year after year. That investment
prudent approach to expansion. industry revenue, the CIB has won
includes a firmwide technology bud-
get of about $12 billion, much of it more business and gained greater
Stable returns and continuity wallet share than any other competi-
directed toward CIB systems. Not
The diversity of our CIB businesses only is technology the structural tor over the last five years, according
has served us well, especially during underpinning of our business, but it to Dealogic. We ended 2019 with a
times of market stress, and we have is also a power that we have learned global wallet share of 9.0%, the
delivered consistent returns through to scale and selectively share with cli- highest attained in a decade.
the entire economic and market
cycle. Our traditional investment $xxx ents who seek the same cutting-edge
analytical and risk mitigation tools
By line of business, we ranked #1 in
wallet share for both Equity and
$XX
banking businesses of Markets and payments
$TBD healthcare that our professionals
sector more easily addressable 16 NEW MARKETS
use
ENTERED
in-house. Debt Capital Markets during 2019,
CLIENT ASSETS with Instamed acquisition
29
SECURITIES SERVICES WHOLESALE PAYMENTS
#2 $27T #1 $6T
#2 custodian $27 trillion in assets under custody, #1 in U.S. dollar $6 trillion in payments
globally up 16% year-over-year payments volume processed daily
20,000+ #1
20,000+ daily net asset valuations #1 merchant acquirer
provided to clients in the U.S.
raising more than $530 billion for tinued to turn to us for complex and Wholesale Payments celebrated its
clients around the world. J.P. Morgan transformative deals. Although the first year as a combined business
was bookrunner on more equity global M&A wallet decreased 10% that brought together the services we
deals than any other bank, a feat we year-over-year, J.P. Morgan gained offer to corporate treasurers with
achieved in eight of the last 10 years. share across regions, earning global those for global merchants. The busi-
And our 9.4% share of the global advisory fees of $2.4 billion, 5% shy ness performed well during a year in
wallet was the highest of any bank of our 2018 record. which the Federal Reserve cut inter-
during the last decade. est rates multiple times and margins
In our Markets business, which
on deposits tightened.
J.P. Morgan brought 79 companies
public in 2019, including several
$xxx serves more than 6,500 clients, reve-
nue totaled nearly $21 billion in Wholesale Payments supports clients
$XX
highly anticipated “unicorns,”
ing the yearCLIENT
as the
finish- payments
$TBD healthcare 2019, up 7% from the prior year. The
sector more easily addressable
#1 underwriter 16 NEWENTERED
business achieved
MARKETS
an overall ROE of
across the bank; within the CIB alone,
Treasury Services revenue was up
ASSETS with Instamed acquisition
of initial public offerings (IPO) by 13% despite the additional capital we 39% since 2015. Cash management
wallet share. At the same time, our invested in our trading businesses in and clearing were among the strong
Private Capital Markets group raised recent years. revenue generators in 2019. In addi-
more than $13 billion for clients, tion, the acquisition of Philadelphia-
Approximately $46 billion of stocks
making it a fast-growing part of our based InstaMed, an innovative health-
cross our Equities Markets trading
business last year. care payments company, was the
desks each day. The business gener-
firm’s largest since the financial crisis.
In a year characterized by cross-border ated $6.5 billion in revenue in 2019,
deals, our Debt Capital Markets busi- making J.P. Morgan the top bank by Ongoing investments in the busi-
ness acted as the world’s leading wallet share, with 11.3%, up from ness, which processed $43 million in
bookrunner and retained its #1 posi- 8.4% in 2015. Our Cash Equities payments per second last year across
tion with 8.7% of global wallet share. business continued to grow revenue more than 120 currencies, helped
The business showed its strength and share, and our balances in drive organic growth and a healthy
across product lines, ranking #1 for Prime Finance finished the year at pipeline. In basic terms, Wholesale
wallet share in high-grade, high-yield all-time highs. Payments enables clients to make,
and investment-grade issuance, as manage and accept payments
It was an exceptional year for our
well as in leveraged loans. securely anytime, anywhere and by
Fixed Income Markets business.
any method. Our opportunity here is
In our Mergers and Acquisitions Revenue rose 13% to $14.4 billion,
tremendous, particularly as business
(M&A) business, J.P. Morgan ranked with a particularly good performance
gravitates to larger banks with
#2 globally in announced dollar vol- in securitized products and a recov-
global scale.
ume and wallet share, as clients con- ery in the credit and rates markets
from the previous year.
30
Securities Services, which provides We have also tightened restrictions on Finally, we must think creatively
post-trade services such as custody certain activities, such as financing for about next-generation transforma-
and fund administration, generated coal mining and Arctic drilling, and tion and ways that our businesses
$4.2 billion in revenue during 2019, are on track to meet our own commit- will change over the next five to 10
down slightly from the previous ment from three years ago to source years. To that end, we are evaluating
year but up 16% since 2015. renewable energy for our entire 2020 emerging technologies and reshap-
Although deposit margins narrowed global power needs. These initiatives ing our approach to data to bring the
due to lower interest rates, we con- are enthusiastically supported by power of artificial intelligence and
tinued to invest in products, sys- our employees, as well as by the next machine learning to all our busi-
tems and services. The business has generation of recruits, who want nesses. We’re also building out our
generated record growth over the J.P. Morgan to lead in this space. infrastructure to reduce friction,
last five years, with assets under improve client service and offer
That said, business alone cannot
custody1 up 41% and assets under access to sophisticated analytics.
ensure the transition to a lower-
administration2 up 55%.
carbon economy. Government policy We have the most solid underpin-
Embedding sustainability is crucial. Recently, we joined the nings for the enduring success of a
Climate Leadership Council, a group world-class business: the capital, the
At J.P. Morgan, a readiness to adapt promoting a bipartisan road map for brainpower and the hard-earned
has always characterized the way we a revenue-neutral, carbon tax-and- experience to get things right.
do business, and our approach to dividend framework for the U.S. Although we will be tested by any
environmental, social and gover- number and variety of uncertainties
nance issues is no different. The Conclusion in the years to come, these qualities
issue of environmental sustainabil- make me confident and optimistic
Our impressive 2019 performance
ity is gaining urgency by the day about our shared future.
was not easily won, as competition
and is among the growing risks
and geopolitical uncertainty intensi-
being evaluated by our business
fied. The year 2020, however, has
and policymakers.
already presented all of us with our
We understand the pressing nature most challenging problem yet: a
of climate change and believe that pandemic of proportions not seen
companies like ours can add tremen- for 100 years.
dous value by helping global compa-
Across the firm, taking care of our
nies – and the global economy –
employees and standing by our
transition to cleaner energy.
clients during events like the corona-
Currently, around 80% of the world’s virus are critical priorities. With so
energy is sourced from fossil fuels, many companies, institutions and
which remain the primary source for governments relying on J.P. Morgan
heating homes and powering cars. for their own operations and eco-
We are working to reduce this nomic well-being, it’s essential that
dependency by committing billions we do the right things day to day,
of dollars to sustainable projects in staying focused on risk, costs and
2020 alone, including green technol- making sure our clients have access to
ogies. Furthermore, we are embed- the capital they need. We must also
ding sustainability into many of our think about optimizing the business Daniel E. Pinto
daily business practices, from assess- for the near future, continuously mak- Co-President and Chief Operating Officer,
ing risk to designing products to ing adjustments to ensure that we are JPMorgan Chase & Co., and
advising clients. as efficient and effective as possible CEO, Corporate & Investment Bank
while closing addressable gaps.
1
Assets under custody: Represents assets held directly or indirectly on behalf of clients under safekeeping, custody and servicing arrangements.
2
Assets under administration: Represents the market value of client assets for which administrative and other related services are performed.
31
Commercial Banking
Across JPMorgan Chase, we measure Our intense client focus and disci- Enormous growth potential
our success not just by our financial plined execution have resulted in The overall potential to expand our
results, but by our ability to make a consistent strong financial perfor- business is tremendous, and as we
positive difference for our clients, mance across our business. In 2019, enter into a new decade, we remain
employees, communities and share- CB generated $9.0 billion in reve- focused on our multifaceted long-term
holders. Over the last several years in nue, $3.9 billion in net income and growth strategy. Our Middle Market
Commercial Banking (CB), we’ve been a return on equity of 17%. While expansion effort is a terrific example
executing a consistent, long-term our overall results were affected by of identifying a market opportunity
strategy focused on doing just that. lower interest rates, the fundamen- and executing with purpose. Since
tals of our business remained out- 2008, we’ve nearly doubled our foot-
Our shareholders: Investing for standing, with record Treasury print across the country, moving into
long-term value Services fee revenue of $1.5 billion 47 metropolitan statistical areas
and steady loan and deposit growth. (MSAs), adding locations in over 20
Strong 2019 financial performance
We continued to benefit from our states and hiring almost 500 bankers.
To create value in CB, we work hard strong partnership with the Corpo- We’ve been able to compete and suc-
every day to add great clients and rate & Investment Bank, delivering ceed in these new markets because of
deepen those relationships over time. record investment banking revenue the quality of our team, the strength
We’ve been making sustained invest- of $2.7 billion, up 10% from 2018. of our brand and JPMorgan Chase’s
ments in our people and capabilities
Our credit discipline has served us unmatched capabilities, delivered at
to drive results across our business.
well, and by maintaining our strict a very local level. To date, we’ve selec-
In the last two years, we’ve hired
underwriting standards, our net tively added almost 3,300 clients,
more than 300 bankers and
charge-off rate in 2019 was 8 basis over $15 billion of loans and over
expanded our presence to 24 high-
points. This marked the eighth $13 billion of deposits.
potential locations. These invest-
ments have led to more client activ- straight year in which net charge-offs We’re equally excited about expand-
ity than ever before, and in 2019, we were less than 10 basis points. ing our business internationally. In
added over 1,700 new client relation- 2019, we hired nearly 80 bankers to
ships, a 60% increase since 2017. serve non-U.S.-headquartered, multi-
Middle Market Expansion Revenue Commercial Banking Gross Investment Banking Revenue1
($ in millions) ($ in billions)
$1,000 $3.0
R 8%
CAG $2.7
$723 $2.2
34%
GR
CA
$1.3
$354
$53
2010 2015 2019 Long-term target 2010 2015 2019 Long-term target
1
Represents total JPMorgan Chase revenue from investment banking products provided to CB clients.
CARG = Compound annual growth rate
32
MAKING A POSITIVE DIFFERENCE IN OUR COMMUNITIES
national companies across 18 coun- funding an important acquisition or from a global exchange to applica-
tries. We have a significant opportu- taking their company public. In 2019, tion programming interfaces. As a
nity to support these clients not across our business, we made more result of the investments we are
only in the U.S. but also in other key than 290,000 client calls and grew making in our comprehensive pay-
geographies around the world. As loans by $2.4 billion, ending the ments platform, we can deliver valu-
CB continues to build internation- year with $208 billion in average able analytics and insights to clients
ally, we benefit greatly from the loan balances. Our long-term view, across all of their treasury activities
firm’s existing local knowledge and unmatched solutions and enduring to optimize their businesses.
well-established risk, compliance commitment to our clients set us
and control infrastructure. Similar apart in the industry. Our communities: Serving as a
to our strategy in the U.S., we are positive force where we live and work
As our clients’ expectations continue
taking a long-term view, focused on In CB, we embrace our obligation to
to evolve, we have dedicated teams
selecting only the best clients, and be a positive force in our communi-
designing new functionality that
will continue to execute with ties. We ended 2019 with over $54
will deliver even greater value to our
patience and discipline. billion in financing to local compa-
clients and enhance their experience.
This design-led approach has informed nies, states and municipalities,
Our clients: Relentlessly focused on schools, nonprofits and healthcare
our investments in technology, data,
delivering solutions and capital to providers. We have dedicated teams
digital and payments. To date, our
drive their success across the country, working hard to
work has resulted in tangible bene-
Clients are at the absolute center of fits, such as faster credit delivery, support these vital institutions so
everything we do, and every day, we reduced account opening time and they can continue to keep our com-
strive to deliver differentiated advice, new integrated solutions. munities strong.
tailored solutions and meaningful
We can uniquely bring our clients Our Commercial Real Estate (CRE)
capital to help them succeed. The
an entire suite of wholly owned, businesses are also at the forefront
breadth and quality of our capabili-
global treasury capabilities, includ- of this important work. As the #1
ties, along with our outstanding
ing merchant acquiring, commercial multifamily lender in the U.S.1,
team, allow us to build deep, valuable
cards and cross-border payments. Commercial Term Lending (CTL)
relationships over time. By being
These integrated solutions allow provides capital to apartment build-
part of JPMorgan Chase, we have the
clients to accept any method of ing and workforce housing owners.
ability to serve clients throughout
payment, in any currency, around In 2019, more than 40% of the loans
the life cycle of their businesses –
the world. Moreover, clients can originated in CTL funded properties
from opening their first operating
connect with us however they want, in low- to moderate-income neighbor-
accounts and expanding overseas to
1
S&P Global Market Intelligence as of December 31, 2019.
33
GROWING
GROWINGOUR
OURCLIENT
CLIENTFRANCHISE
FRANCHISE
hoods. Our Community Development ical knowledge and enable our teams Managing the market challenges
Banking team had a record year, origi- to provide even more value to our emerging in 2020
nating over $2 billion in loans for the clients. Overall, in 2019, CB employ- We have a long history of supporting
construction of affordable housing ees completed more than 350,000 our clients and being a market leader
SECURITIES SERVICES
and extending nearly $200 million in hours of training. through challenging times. Our
financing to critical community devel- approach to the current global crisis
We’re also investing to empower
opment institutions. In total, our CRE
our teams with the best digital tools is no different. As we navigate this
business financed more than 25,000 complex situation, I have never
and data resources to ensure their
housing units for low-income individ- been more proud of the entire CB
uals in 2019. #2
success. Last year, we launched a
$27T
new client management system that team and am so grateful for their
harnesses the power
Across CB, our people best demon- #2 custodian hard work, compassion and tenacity.
$27 of cloud
trillion assetstech-
under custody,
strate the positive impact we create nology and our firmwide up
globally data
16% assets
YoY It’s inspiring to see everyone come
in our communities. Many of our to better support our bankers. This together to support one another,
employees are active civically and platform provides live dashboards and I am confident the work we
serve on philanthropic boards. Last with real-time client information – are doing for our clients and our
year, our team volunteered more alerting our team on service needs, communities right now will be
product usage and the overall health remembered forever.
than 25,000 hours with local organi-
zations. We take great pride in the 20,000+
of their client portfolio. So far, we’ve
work we do to support our commu- received>20,000
tremendous feedback, as
daily net asset
nities and the firm’s commitment the tool meaningfully
valuations increases
(NAVs) provided to clients
to make a difference. efficiency and allows more time
to be spent with our clients.
Our employees: Empowering and
enabling our teams Looking forward: Continuing to
Our success wouldn’t be possible execute with patience and discipline
without our incredible team. As such, Focused on our strategic priorities
we’re focused on having the best, Looking ahead, our attention
diverse talent with the right skills to remains focused on executing our
lead our business forward. We’re long-term strategic priorities. We
making significant investments in will continue to invest and drive
our training and development pro- innovation across our businesses,
grams to enhance our team’s exper-
290+K 290+K 290+K
build deep client relationships,
tise in emerging technologies, data maintain fortress principles, and
and digital solutions. We have cre- attract and retain the best talent.
CLIENT centers that
ated dedicated training CLIENT CLIENT
CALLS MADE Doing all of this with
CALLS patience and
MADE Douglas B. PetnoCALLS MADE
host intensive credit and treasury discipline will allow us to deliver CEO, Commercial Banking
services programs to build upon crit- value for our clients, employees,
communities and shareholders
throughout the cycle.
34
Asset & Wealth Management
$3.7B
tant life events, and for help in navi- to our investment performance,
gating through turbulent times. We our flows are not concentrated in
cherish our clients’ trust and never any one asset class, region or client Record pretax income of $3.7 billion
take it for granted. segment, but come from a well-
$161B
diversified set of businesses.
Strong investment performance for
clients Strong financial performance for
Record end-of-period loan balances
Our success begins with a focus on shareholders of $161 billion
investment performance, which I am proud of our results for our
requires the unwavering, long-term
prioritization and retention of our
clients, while, at the same time, we
continue to deliver strong financial $100B
1,000+ investment professionals. performance for our shareholders. Record long-term AUM flows of
This has led to 88% of 10-year In 2019, Asset & Wealth Manage- $100 billion
long-term mutual fund assets under ment achieved record total client
management above peer median
and 196 mutual funds 4- or 5-star
assets of $3.2 trillion, record revenue
of $14.3 billion, record pretax income
88%
88%
rated1. It’s worth noting that our per- of $3.7 billion and return on equity 88% of 10-year AM long-term mutual
fund AUM above peer median
formance is not concentrated in any of 26%. Our reliable and consistent
asset class or region. It represents growth has been powered by
leading performance across all asset success across our diversified Asset
classes globally. Management (AM) and Wealth
Management (WM) franchises. Retention rate of over 95% of top
Given our long-term approach,88% we talent3 and 39% of AM AUM managed
are even prouder of our sustained 91% managers
by female portfolio
performance over the past 10 years.
2019 % of 10-year J.P. Morgan Asset Management Long-Term Mutual Fund AUM
Above Peer Median4
88%
(net of fees)
91% 81%
Total J.P. Morgan Multi-Asset Solutions
Equity Fixed Income
Asset Management & Alternatives
For footnoted information, refer to slides noted below in the 2020 Asset & Wealth Management Investor Day presentation, which is available at jpmorganchase.com/corporate/investor-relations/event-calendar.htm.
1
See slide 18; 2 See slide 25; 3 See slide 17; 4 See slide 20.
AUM = Assets under management
81% 90% 35
91%
JPMorgan Chase Total Client Asset Flows: 2015-20191
2015 2016 2017 2018 2019
Fixed Income
Equity
ASSET CLASS/PRODUCT
AUM Multi-Asset
Assets= Alternatives
AUM+AUS Liquidity
Brokerage
AUS Custody
Deposits
Wealth Management
CHANNEL
Assets Retail
Institutional
U.S.
REGION
LatAm
Assets
EMEA
Asia
≥$0 <$0
For footnoted information, refer to slides noted below in the 2020 Asset & Wealth Management Investor Day presentation, which is available at jpmorganchase.com/corporate/investor-relations/event-calendar.htm.
1
See slide 25; 2 See slide 18; 3 See slide 19; 4 See slide 20.
AUS = Assets under supervision
Asset Management level. In addition, we’ve grown the internationally, where we have less
Since 2009, AM grew revenue by 2 number of managed accounts by than 2% market share3. We plan to
1.5x to $7.3 billion and pretax 7.6x to a record 730,000. capture share by continuing to be
income by 1.4x to $1.9 billion. That the go-to bank, delivering solutions
success has been driven by a broad, Growth priorities for the next across the balance sheet.
diversified platform. On long-term decade
• Scaling Asset Management: To scale,
AUM, we achieved record levels Looking ahead to the next decade, we need strong, diversified long-
across asset classes (Equity, Fixed we are highlighting five major term investment performance,
Income, Multi-Asset), segments drivers to continue our momentum: which we have with 91% of Equity,
(Retail and Institutional) and geogra- 81% of Fixed Income and 90% of
phies (U.S. and International). We • Focusing on U.S. Wealth Management:
This is one of the firm’s biggest Multi-Asset Solutions & Alternatives
also achieved success in key growth 10-year mutual fund AUM above
areas of the market, with Multi-Asset opportunities with the U.S. repre-
senting approximately $50 trillion peer median. This performance has
AUM growing by 6.4x to $267 billion driven our above-industry growth
and, in particular, Target Date AUS in market size3. For example,
Chase banks half of the 22 million over the last 10 years 4 and will con-
growing by 25x to $125 billion. tinue to be our foundation to scale
households within the $1 million
Wealth Management to $10 million net worth segment 3, over the next 10 years. And with
but only 5% have investments around 2% market share across
Growth since 2009 is an equally asset classes4, we have significant
powerful story in WM, where revenue with us. We have a tremendous
opportunity to capture new clients opportunity to capture share.
grew by 1.8x to a record $7.1 billion
and pretax income by 1.7x to $1.9 bil- and deepen current relationships. • Building Alternatives: We are cele-
lion. We continue to differentiate our- • Expanding the Global Private Bank: brating our 50th anniversary of
selves by providing the advice, solu- Over the last five years, we’ve managing what is now nearly a
tions and client experience that our hired approximately 1,300 advi- quarter of a trillion dollars in Alter-
clients need. As an example of their sors, successfully converted native assets. I am excited about
commitment, we’ve nearly tripled hundreds of referrals from around the opportunities to continue build-
the number of clients with over $100 the firm, attracted over 11,000 net ing our franchise, from expanding
million of total positions to a record new clients and captured around our leading core real estate capabil-
$200 billion in client asset flows. ities to building out our newly con-
x = times
We still have a significant expan- solidated private credit capabilities.
sion opportunity, particularly
36
Client Assets (EOP, $ in trillions) Revenue ($ in billions)1 Pretax Income ($ in billions)
10-yr 10-yr 10-yr
2009 2019 CAGR 2009 2019 CAGR 2009 2019 CAGR
$1.7
AUM
$1.2
$8.6 $2.3
* Record
1
For footnoted information, refer to slide 17 in the 2020 Asset & Wealth Management Investor Day presentation, which is available at jpmorganchase.com/corporate/investor-relations/event-calendar.htm.
• Considering M&A: While we always • Environmental, Social & Governance being impacted concurrently in
prefer organic growth, there are (ESG): With the help of industry 2020, now is the most important time
times when the industry changes experts we have hired, we are to have portfolios actively managed.
drastically, and we need to be on doing more than ever before,
top of it, which is what we are focusing on our clients’ needs In times like these, I’m also reminded
doing now. We are very selective, and delivering across AM and of how fortunate I am to be part of
evaluating every M&A opportunity WM. In AM, we are working JPMorgan Chase. For more than 200
for an adjacent capability. But most toward 100% of AUM being ESG- years, we have been at our best in the
important, we always prioritize our integrated while we launch new most difficult of times. I am proud of,
clients’ needs and increasing share- ESG-focused WM strategies. and inspired by, how our colleagues
holder value. and partners have responded to this
• China: We’ve been in China since the crisis, and I remain incredibly opti-
Continuing to invest in the business 1970s, and we are set to become the mistic about the firm’s future.
first foreign asset manager to fully
Our long-term commitment means own a Chinese fund manager with
that we will continue to serve our China International Fund Manage-
clients and invest in making our ment. Our increased stake will fur-
business better for the future: ther solidify our position in China
• Front office: We will continue to and better address our clients’ needs.
hire top front office talent. Addi- As I write this letter, we are at an
tionally, we will continue to invest unprecedented moment in time.
in our investment capabilities, The global COVID-19 pandemic has
spending around $320 million on caused many people to suffer, created
AM research and making thou- historic volatility and changed how
sands of company visits annually. we work and live. However, we can
• Technology: We are creating and take comfort in knowing that people
leveraging tools, such as You Invest around the world are coming together
and machine learning, to help our to respond to these challenges in
clients and employees focus on powerful and inspiring ways.
higher-value activities and make
As a fiduciary, we view events that
better decisions. We always look to
completely disrupt an industry, coun-
simplify our production processes
try or way of living as the times Mary Callahan Erdoes
so that 50+% of our technology
when active security selection (and CEO, Asset & Wealth Management
spend is dedicated to new and excit-
deselection) is of the utmost impor-
ing capabilities that deliver stronger
tance. With all three of these areas
client outcomes.
37
Corporate Responsibility
As the world faces the health and eco- those most vulnerable as they face economic opportunity to more
nomic consequences of COVID-19, the financial hardship and uncertain people, including by giving those
challenges ahead are a stark reminder work opportunities, including neigh- who have a criminal history a second
that too many people already struggle borhood development, financial chance. We are advocating at the
with economic insecurity every day. health, and jobs and skills. state and federal levels for reforms
This struggle will likely escalate as including “banning the box,”
Our ongoing efforts to help prepare
this public health crisis continues to establishing automatic record
workers for the future of work
disrupt the global economy. expungement for certain offenses
exemplify this strategy in practice.
and promoting fair-chance hiring
Now more than ever, business must As technology alters nearly every
in the financial services sector. In
step up and collaborate with local, facet of work, the education and
2019, our firm gave second chances
civic and government leaders to lend skills that people need are rapidly
to 3,000 people in the U.S. with
our expertise toward solutions that changing. We have combined our
criminal backgrounds.
support our customers, communities resources and reach to give people
and employees in need. Business the education and skills they need to As the world responds to this health
Roundtable’s recent Statement succeed. We have committed $350 and economic crisis, we will need to
on the Purpose of a Corporation million globally to support and scale be nimble and lean into our strengths
made clear that America’s largest the most effective local initiatives to to best support those who have been
companies must operate for the equip people with in-demand skills. most vulnerable to economic disrup-
benefit of all stakeholders, and we This investment will be even more tion. We will continue to apply what
must be there for them in both good critical given the recent unforeseen we learn to scale solutions, deepen
and challenging times. disruption in the global economy and our impact and support our custom-
the longer-term need to rebuild the ers, communities and colleagues.
For JPMorgan Chase, this means
labor market. From Delhi to Detroit, Make no mistake: An inclusive
bringing the full force of our
efforts focused on opportunity and economy is a stronger economy,
business to lift up those we serve
inclusivity, like career and technical and we all have an interest in that.
around the world, focused on where
education in high schools to appren-
we can deliver the greatest impact
ticeships in growing industries, are
and reinvigorate the global economy
preparing more people to launch
to benefit more people.
successful careers. Additionally, in
In response to COVID-19 and in addi- partnership with our Human
tion to efforts across the firm to sup- Resources team, we’re redefining
port our customers and employees in how we train and develop our
need, we made an initial $50 million employees by identifying future-
philanthropic commitment to help critical skills.
those most affected by humanitarian
Scaling the most effective programs
challenges, as well as sustainable and
and creating greater economic oppor-
innovative solutions to help small
tunity for the most vulnerable will
businesses and underserved commu-
require thoughtful and effective pub-
nities recover when the crisis subsides.
lic policy. Last year, we launched the
We will continue to focus on areas
JPMorgan Chase PolicyCenter to
where we can leverage our core busi-
advance policies at the federal, state
ness, philanthropy and policy exper-
and local levels that strengthen com-
tise to help the most vulnerable in
munities and change lives.
the short and long term. In addition Peter L. Scher
Business leadership in developing
to supporting small businesses, this Head of Corporate Responsibility and
policy solutions is critical as we work
approach has effectively informed Chairman of the Mid-Atlantic Region
to address the longer-term impact of
and scaled solutions across pillars
this crisis. We have a track record
that will remain critical to helping
of supporting policies that provide
38
Creating an economy that works for payments affect the financial lives of 4.6 Cultivating thriving neighborhoods
more people million families; how Miami’s small businesses Housing that individuals and families can
turn a profit yet have limited cash buffers; afford, in proximity to economic opportunity
Companies like ours have a responsibility to
and how families are weathering financial and basic services, is the cornerstone of vibrant
step up and help solve pressing challenges.
volatility on a monthly basis. and resilient neighborhoods. Producing, pre-
When communities do well, our firm does well.
This conviction is reflected in how JPMorgan serving and protecting affordable housing is
Preparing workers for the future of work
Chase does business every day. We’re investing essential to our strategy for creating thriving
in our customers, employees and communities Technological change continues to transform neighborhoods. For example, we’re investing
around the world to break down barriers to the world of work. By 2030, more than 30% of $22 million to develop and preserve affordable
opportunity and create an economy that works American workers and 375 million workers housing in San Francisco and Oakland. This
for more people. globally will need to change jobs or upgrade investment, which combines long-term, low-cost
their skills significantly in order to advance loans and philanthropic capital, will provide
We are combining our business and policy within the workforce. We are investing $350 mil- more affordable housing and protect local
expertise, sustainable business practices, data, lion over the next five years to equip young residents from being displaced.
capital and global presence to advance solu- people and adults with the skills they need to be
tions worldwide. Our efforts focus on five key successful in a rapidly changing economy. We Advancing financial health
areas where we believe we can make the are working to create greater economic mobility
greatest impact: jobs and skills, neighborhood Sound financial health is the foundation on
and career pathways for workers both inside which strong and resilient households, com-
development, small business expansion, our firm and in our communities. Our firm is
financial health and sustainability. munities and economies are built. We’re using
investing in our employees through long-term our data, expertise and capital to improve the
training and reskilling efforts. We are also financial health of customers, employees and
Advancing policy solutions
making long-term commitments to boost career communities. In 2019, JPMorgan Chase made
Public policy is a critical tool to scale the most readiness. We invested $7 million in Denver, a $25 million commitment to the Financial
innovative and impactful approaches that bring Colorado’s youth apprenticeship system to Solutions Lab, which supports technology-
about lasting change. In 2019, we launched the develop strong connections between high based innovations that improve financial
JPMorgan Chase PolicyCenter to develop and schools and higher education, focused on well- health. This investment builds on our five-year
advance sustainable, evidence-based policy paying careers in the region’s growing industries. collaboration with the Financial Solutions Lab,
solutions that drive inclusive economic growth
which has supported nearly 40 innovative
in the U.S. and around the world.
financial technology companies (fintechs) that
Through the PolicyCenter, we are advancing pol- have raised over $500 million in capital since
icy changes to remove barriers to employment joining the program, saving U.S. residents
for people with a criminal background and more than $1 billion.
advocating for policy solutions that will enable
more young people — particularly those who Transitioning to a low-carbon economy
lack opportunity — to access high-quality career- JPMorgan Chase is committed to creating a
readiness programs that pave the way to well- more sustainable future for our employees,
paying jobs. In 2020, the PolicyCenter will customers and communities. Our firm has
expand its focus to tackle additional issue areas. committed to facilitate $200 billion in financing
Boosting small business growth in 2020 to support the objectives of the United
Harnessing the power of data Nations’ Sustainable Development Goals, with
Through our long-term investments around the
Sound public policy is informed by timely, a focus on addressing climate change and
world, we have seen firsthand how underserved,
granular data. The JPMorgan Chase Institute is advancing social and economic development.
minority entrepreneurs have the power to lift
dedicated to delivering data-rich analyses and
up entire communities. Yet these populations We are also promoting bipartisan, market-
expert insights for the public good. Leveraging
often face unique barriers that inhibit their suc- based policy solutions — such as a carbon
the firm’s unique assets and proprietary data,
cess. This is why our efforts focus on unleashing tax-and-dividend framework for the U.S. —
the Institute helps policymakers, businesses
their power as drivers of opportunity. We have to reduce carbon emissions and protect
and nonprofit leaders use timely data and
taken many insights learned from innovative consumers. And we’ve expanded restrictions
thoughtful analyses to address critical issues
models, such as the Entrepreneurs of Color on financing for coal mining and coal-fired
and advance global prosperity.
Fund (EOCF), and are applying them to more power and prohibited financing for new oil
Our data allow us to better understand and communities. For example, in Paris, we’re and gas development in the Arctic. Finally,
answer important questions about the finan- working with nonprofit partners to help local we’re on track to source renewable energy
cial health and resilience of U.S. consumers, and diverse entrepreneurs in Seine-Saint-Denis for 100% of our own global power needs by
businesses and communities, as well as study grow their businesses. In London, we’re giving a the end of 2020.
labor and financial markets. In 2019, the boost to female entrepreneurs by providing
Institute shared valuable insights across a technical support and hands-on mentorship.
range of areas, including how student loan
39
2019 HIGHLIGHTS AND ACCOMPLISHMENTS
Awards and recognition — Greater Paris: First year of our across the U.S. As of 2019, the winners
• Ranked Top 10 on Fortune magazine’s $30 million commitment: raised more than $870 million in outside
World’s Most Admired Companies list capital and made over 35,000 loans worth
4,000 people participated in career-
in excess of $475 million dedicated to low-
• Named to Fortune magazine’s Change the readiness programs; 12 small businesses
and moderate-income communities.
World list — third consecutive year received capital or technical assistance
• Small business expansion: We expanded
• Named to the Military Times’ Best for Vets — Greater Washington region: Two years
EOCF to five metros — Detroit, Chicago, the
Employers list into our $25 million commitment:
South Bronx, the Bay Area and the Greater
• Earned 100% on the Human Rights 224 people participated in workforce Washington region — providing minority
Campaign’s Corporate Equality Index — training programs; 955 units of afford- entrepreneurs with access to capital, educa-
17th consecutive year able housing were created or preserved; tion and other resources. Through 2019, we
1,120 jobs were created or retained; and committed over $17 million through EOCF,
• Inducted into the Billion Dollar Roundtable 2,092 small businesses received capital resulting in more than 475 loans, totaling
for attaining at least $1 billion in diverse or technical assistance $17 million in deployed loan capital that
supplier spend created or retained over 3,000 jobs.
40
Table of contents
Financial:
40 Five-Year Summary of Consolidated Financial
Highlights Audited financial statements:
41 Five-Year Stock Performance 142 Management’s Report on Internal Control Over
Financial Reporting
143 Report of Independent Registered Public Accounting
Management’s discussion and analysis: Firm
42 Introduction 146 Consolidated Financial Statements
43 Executive Overview 151 Notes to Consolidated Financial Statements
48 Consolidated Results of Operations
52 Consolidated Balance Sheets and Cash Flows Analysis
55 Off–Balance Sheet Arrangements and Contractual
Cash Obligations
57 Explanation and Reconciliation of the Firm’s Use of
Non-GAAP Financial Measures and Key Performance
Measures Supplementary information:
60 Business Segment Results 287 Selected quarterly financial data (unaudited)
79 Firmwide Risk Management 288 Distribution of assets, liabilities and stockholders’
– equity; interest rates and interest differentials
84 Strategic Risk Management 293 Glossary of Terms and Acronyms
85 Capital Risk Management
93 Liquidity Risk Management
100 Credit and Investment Risk Management
119 Market Risk Management Note:
127 Country Risk Management The following pages from JPMorgan Chase & Co.’s 2019
Form 10-K are not included herein: 1-38, 300-311
129 Operational Risk Management
136 Critical Accounting Estimates Used by the Firm
139 Accounting and Reporting Developments
141 Forward-Looking Statements
December 31,
(in dollars)
The following is Management’s discussion and analysis of the financial condition and results of operations (“MD&A”) of JPMorgan
Chase for the year ended December 31, 2019. The MD&A is included in both JPMorgan Chase’s Annual Report for the year ended
December 31, 2019 (“Annual Report”) and its Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form
10-K”) filed with the Securities and Exchange Commission (“SEC”). Refer to the Glossary of terms and acronyms on pages 293–299
for definitions of terms and acronyms used throughout the Annual Report and the 2019 Form 10-K.
The MD&A contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of
1995. These statements are based on the current beliefs and expectations of JPMorgan Chase’s management and are subject to
significant risks and uncertainties. Refer to Forward-looking Statements on page 141) and Part 1, Item 1A: Risk factors in the
2019 Form 10-K on pages 6–28 for a discussion of certain of those risks and uncertainties and the factors that could cause
JPMorgan Chase’s actual results to differ materially because of those risks and uncertainties.
INTRODUCTION
JPMorgan Chase & Co. (NYSE: JPM), a financial holding For management reporting purposes, the Firm’s activities
company incorporated under Delaware law in 1968, is a are organized into four major reportable business
leading global financial services firm and one of the largest segments, as well as a Corporate segment. The Firm’s
banking institutions in the United States of America consumer business is the Consumer & Community Banking
(“U.S.”), with operations worldwide; JPMorgan Chase had (“CCB”) segment. The Firm’s wholesale business segments
$2.7 trillion in assets and $261.3 billion in stockholders’ are Corporate & Investment Bank (“CIB”), Commercial
equity as of December 31, 2019. The Firm is a leader in Banking (“CB”), and Asset & Wealth Management (“AWM”).
investment banking, financial services for consumers and Refer to Business Segment Results on pages 60–78, and
small businesses, commercial banking, financial transaction Note 32 for a description of the Firm’s business segments,
processing and asset management. Under the J.P. Morgan and the products and services they provide to their
and Chase brands, the Firm serves millions of customers in respective client bases.
the U.S. and globally many of the world’s most prominent
corporate, institutional and government clients.
JPMorgan Chase’s principal bank subsidiary is JPMorgan
Chase Bank, National Association (“JPMorgan Chase Bank,
N.A.”), a national banking association with U.S. branches in
38 states and Washington, D.C. as of December 31, 2019.
JPMorgan Chase’s principal nonbank subsidiary is J.P.
Morgan Securities LLC (“J.P. Morgan Securities”), a U.S.
broker-dealer. The bank and non-bank subsidiaries of
JPMorgan Chase operate nationally as well as through
overseas branches and subsidiaries, representative offices
and subsidiary foreign banks. The Firm’s principal operating
subsidiary outside the U.S. is J.P. Morgan Securities plc, a
U.K.-based subsidiary of JPMorgan Chase Bank, N.A.
• Record Investment Banking revenue of $79 Credit and capital raised for nonprofit and
CB $2.7 billion, up 10% billion U.S. government entities(a)
ROE
• Average loans and deposits each up 1%
17% (a) Includes states, municipalities, hospitals and universities.
• Strong credit quality with NCOs of 8 bps
Business Developments
Departure of the U.K. from the EU
The U.K.’s departure from the EU, which is commonly The Firm is focused on the following key areas to ensure
referred to as “Brexit,” occurred on January 31, 2020. continuation of service to its EU clients: regulatory and legal
entity readiness; client readiness; and business and
Following this departure, the U.K. has entered a transition
operational readiness. Following are the significant updates.
period that is scheduled to expire on December 31, 2020.
The purpose of the transition period is to enable the U.K. Regulatory and legal entity readiness
and the EU to negotiate the terms of their future The Firm’s legal entities in Germany, Luxembourg and
relationship. The transition period can be extended, but Ireland are now prepared and licensed to provide services
both sides need to agree to extend it by July 1, 2020. It is to the Firm’s EU clients, including a branch network
not clear whether the terms of the future relationship can covering locations such as Paris, Madrid and Milan.
be agreed before the end of 2020, and so significant
Client readiness
uncertainty remains about the relationship between the
The agreements covering a significant proportion of the
U.K. and the EU after the end of the transition period.
Firm’s EU client activity have been re-documented to other
The Firm has a long-standing presence in the U.K., which EU legal entities to help facilitate continuation of service.
currently serves as the regional headquarters of the Firm’s The Firm continues to actively engage with clients that have
operations in over 30 countries across Europe, the Middle not completed re-documentation to ensure preparedness
East, and Africa (“EMEA”). In the region, the Firm serves both in terms of documentation and any operational
clients and customers across its business segments. The changes that may be required. The Firm may be negatively
Firm has approximately 17,000 employees in the U.K., of impacted by any operational disruption stemming from
which approximately two-thirds are in London, with delays of or lapses in the readiness of other market
operational and technology support centers in locations participants or market infrastructures.
such as Bournemouth, Glasgow and Edinburgh.
Business and operational readiness
In light of the ongoing uncertainty, the Firm continues to The Firm relocated certain employees during 2019 and
execute the relevant elements of its Firmwide Brexit added specific employees to certain EU legal entities, where
Implementation program with the objective of being able to appropriate, to support the level of client activity that has
continue delivering the Firm’s capabilities to its EU clients. been migrated. The Firm’s longer term staffing plan will
The program covers strategic implementation across all develop in accordance with the increasing level of activity in
impacted businesses and functions and includes an ongoing the EU entities and alongside the future legal and
assessment of implementation risks including political, legal regulatory framework between the U.K. and EU. The Firm
and regulatory risks and plans for addressing and mitigating continues to closely monitor legislative developments, and
those risks under any scenario, including where the U.K. and its implementation plan allows for flexibility given the
the EU fail to reach an agreement on their future continued uncertainties.
relationship by the end of 2020 and the transition period is
not extended.
The principal operational risks associated with Brexit
continue to be the potential for disruption caused by
insufficient preparations by individual market participants
or in the overall market ecosystem, and risks related to
potential disruptions of connectivity among market
participants. There continues to be regulatory and legal
uncertainty with respect to various matters including
contract continuity, access by market participants to
liquidity in certain products, such as products subject to
potentially conflicting U.K. and EU regulatory requirements
in relation to eligible trading venues, including certain
cross-border derivative contracts and equities that are
listed on both U.K. and EU exchanges, as well as ongoing
access to central banks. It is uncertain as to whether any of
these issues will be resolved in the negotiations, or whether
any of the previous temporary solutions will be available at
the end of the transition period to mitigate these risks.
Provision for credit losses The increase in the total consumer provision reflects:
Year ended December 31, • an increase in credit card due to
(in millions) 2019 2018 2017 – higher net charge-offs on loan growth, in line with
Consumer, excluding credit card $ (383) $ (63) $ 620 expectations, and
Credit card 5,348 4,818 4,973 – a $500 million addition to the allowance for loan losses
Total consumer 4,965 4,755 5,593 reflecting loan growth and higher loss rates, as newer
Wholesale 620 116 (303) vintages season and become a larger part of the
Total provision for credit losses $ 5,585 $ 4,871 $ 5,290 portfolio, compared to a $300 million addition in the
prior year
2019 compared with 2018
largely offset by
The provision for credit losses increased driven by both the
wholesale and consumer portfolios. • a decrease in consumer, excluding credit card, in CCB due
to
The increase in the wholesale provision reflects additions to
the allowance for credit losses in the current year on select – a $650 million reduction in the allowance for loan
client downgrades. The prior year reflected a benefit related losses in the purchase credit-impaired (“PCI”)
to a single name in the Oil & Gas portfolio and higher residential real estate portfolio, reflecting continued
recoveries. improvement in home prices and delinquencies, and a
$100 million reduction in the allowance for loan losses
in the non credit-impaired residential real estate
portfolio, compared to a $250 million reduction in the
PCI residential real estate portfolio in the prior year,
and
– a $50 million reduction in the allowance for loan losses
in the business banking portfolio
partially offset by
– lower net recoveries in the residential real estate
portfolio as the prior year benefited from larger
recoveries on loan sales.
Refer to the segment discussions of CCB on pages 62–65,
CIB on pages 66-70, CB on pages 71–73, the Allowance for
Credit Losses on pages 116–117 and Note 13 for further
discussion of the credit portfolio and the allowance for
credit losses.
Cash and due from banks and deposits with banks Investment securities increased primarily due to net
decreased primarily as a result of a shift in the deployment purchases of U.S. Treasuries and U.S. GSE and government
of cash to investment securities, and net maturities of agency MBS in Treasury and CIO. The net purchases were
short-term borrowings and long term debt in Treasury and primarily driven by cash deployment and interest rate risk
CIO, partially offset by an increase in deposits. Deposits with management activities. Refer to Corporate segment results
banks reflect the Firm’s placements of its excess cash with on pages 77–78, Investment Portfolio Risk Management on
various central banks, including the Federal Reserve Banks. page 118 and Notes 2 and 10 for additional information on
Federal funds sold and securities purchased under resale investment securities.
agreements decreased as a result of client-driven market- Loans decreased reflecting loan sales in Home Lending, and
making activities in Fixed Income Markets in CIB and a shift lower loans in CIB, primarily driven by a loan syndication
in the deployment of cash in Treasury and CIO. Refer to and net paydowns, partially offset by growth in AWM and
Liquidity Risk Management on pages 93–98 and Note 10 for Card.
additional information. The allowance for loan losses decreased driven by:
Securities borrowed increased in CIB related to client- • an $800 million reduction in the CCB allowance for loan
driven market-making activities in Fixed Income Markets, losses, which included $650 million in the PCI residential
and to cover customer short positions in prime brokerage. real estate portfolio, reflecting continued improvement in
Refer to Liquidity Risk Management on pages 93–98 and home prices and delinquencies; $100 million in the non
Note 10 for additional information. credit-impaired residential real estate portfolio; and $50
Trading assets was relatively flat, reflecting: million in the business banking portfolio; as well as
• a reduction in short-term instruments associated with • a $151 million reduction for write-offs of PCI loans,
cash deployment activities in Treasury and CIO, largely offset by
offset by • a $500 million addition to the allowance for loan losses in
• growth in client-driven activities in CIB Markets, primarily the credit card portfolio reflecting loan growth and
debt instruments, and higher loss rates as newer vintages season and become a
• in CCB, growth related to originations of mortgage larger part of the portfolio, and
warehouse loans, resulting from the favorable rate • a $115 million addition in the wholesale allowance for
environment. loan losses driven by select client downgrades.
Refer to Notes 2 and 5 for additional information. Refer to Credit and Investment Risk Management on pages
100–118, and Notes 2, 3, 12 and 13 for further discussion
of loans and the allowance for loan losses.
Deposits increased reflecting: Accounts payable and other liabilities increased reflecting:
• continued growth driven by new accounts in CCB • the impact of the adoption of the new lease accounting
• growth in operating deposits in CIB driven by client guidance effective January 1, 2019, and
activity, primarily in Treasury Services, and an increase in • higher client payables related to client-driven activities in
client-driven net issuances of structured notes in Markets, CIB.
and Refer to Note 18 for additional information on Leases.
• higher deposits in CB and AWM from growth in interest- Beneficial interests issued by consolidated VIEs decreased
bearing deposits; for AWM, the growth was partially offset due to:
by migration, predominantly into the Firm’s investment- • maturities of credit card securitizations,
related products.
largely offset by
Refer to the Liquidity Risk Management discussion on pages
93–98; and Notes 2 and 17 for more information. • higher levels of Firm-administered multi-seller conduit
commercial paper issued to third parties.
Federal funds purchased and securities loaned or sold
under repurchase agreements was relatively flat,as the net Refer to Off-Balance Sheet Arrangements on pages 55–56
increase from the Firm’s participation in the Federal and Note 14 and 28 for further information on Firm-
Reserve’s open market operations was offset by client- sponsored VIEs and loan securitization trusts.
driven activities, and lower secured financing of trading Long-term debt increased as a result of client-driven net
assets-debt instruments, all in CIB. Refer to the Liquidity issuances of structured notes in CIB’s Markets business,
Risk Management discussion on pages 93–98 and Note 11 partially offset by net maturities of FHLB advances in
for additional information. Treasury and CIO.
Short-term borrowings decreased reflecting lower Refer to Liquidity Risk Management on pages 93–98 and
commercial paper issuances and short-term advances from Note 20 for additional information on the Firm’s long-term
Federal Home Loan Banks (“FHLB”) in Treasury and CIO, debt activities.
primarily driven by liquidity management. Refer to pages Refer to page 149 for information on changes in
93–98 for information on changes in Liquidity Risk stockholders’ equity, and Capital actions on pages 90–91.
Management.
Trading liabilities decreased due to client-driven market-
making activities in CIB, which resulted in lower levels of
short positions in both debt and equity instruments in
Markets. Refer to Notes 2 and 5 for additional information.
The table below provides an index of where in this 2019 Form 10-K a discussion of the Firm’s various off-balance sheet
arrangements can be found. Refer to Note 1 for additional information about the Firm’s consolidation policies.
(a) Excludes structured notes on which the Firm is not obligated to return a stated amount of principal at the maturity of the notes, but is obligated to return
an amount based on the performance of the structured notes.
(b) Includes noncancelable operating leases for premises and equipment used primarily for business purposes. Excludes the benefit of noncancelable
sublease rentals of $846 million and $825 million at December 31, 2019 and 2018, respectively. Refer to Note 18 for further information on operating
leases.
(c) Primarily includes dividends declared on preferred and common stock, deferred annuity contracts, pension and other postretirement employee benefit
obligations, insurance liabilities and income taxes payable associated with the deemed repatriation under the TCJA.
(d) Refer to unsettled resale and securities borrowed agreements in Note 28 for further information.
(e) Includes accrued interest and future contractual interest obligations. Excludes interest related to structured notes for which the Firm’s payment obligation
is based on the performance of certain benchmarks.
The following summary table provides a reconciliation from the Firm’s reported U.S. GAAP results to managed basis.
2019 2018 2017
Net interest income and net yield excluding CIB’s Markets Calculation of certain U.S. GAAP and non-GAAP financial measures
businesses
Certain U.S. GAAP and non-GAAP financial measures are calculated as
In addition to reviewing net interest income and the net follows:
yield on a managed basis, management also reviews these Book value per share (“BVPS”)
metrics excluding CIB’s Markets businesses, as shown Common stockholders’ equity at period-end /
below; these metrics, which exclude CIB’s Markets Common shares at period-end
businesses, are non-GAAP financial measures. Management Overhead ratio
Total noninterest expense / Total net revenue
reviews these metrics to assess the performance of the
Return on assets (“ROA”)
Firm’s lending, investing (including asset-liability Reported net income / Total average assets
management) and deposit-raising activities. The resulting Return on common equity (“ROE”)
metrics that exclude CIB’s Markets businesses are referred Net income* / Average common stockholders’ equity
to as non-markets-related net interest income and net yield. Return on tangible common equity (“ROTCE”)
CIB’s Markets businesses are Fixed Income Markets and Net income* / Average tangible common equity
Equity Markets. Management believes that disclosure of Tangible book value per share (“TBVPS”)
Tangible common equity at period-end / Common shares at period-end
non-markets-related net interest income and net yield
* Represents net income applicable to common equity
provides investors and analysts with other measures by
which to analyze the non-markets-related business trends
of the Firm and provides a comparable measure to other The Firm also reviews adjusted expense, which is
financial institutions that are primarily focused on lending, noninterest expense excluding Firmwide legal expense and
investing and deposit-raising activities. is therefore a non-GAAP financial measure. Additionally,
certain credit metrics and ratios disclosed by the Firm
Year ended December 31, exclude PCI loans, and are therefore non-GAAP measures.
(in millions, except rates) 2019 2018 2017 Management believes that these measures help investors
Net interest income – understand the effect of these items on reported results
reported $ 57,245 $ 55,059 $ 50,097
and provide an alternate presentation of the Firm’s
Fully taxable-equivalent performance. Refer to Credit and Investment Risk
adjustments 531 628 1,313
Management on pages 100–118 for additional information
Net interest income –
managed basis(a) $ 57,776 $ 55,687 $ 51,410 on credit metrics and ratios excluding PCI loans.
Less: CIB Markets net
interest income(b) 3,120 3,087 4,630
Net interest income
excluding CIB Markets(a) $ 54,656 $ 52,600 $ 46,780
Average interest-earning
assets(c) $2,345,491 $2,212,908 $ 2,170,974
Less: Average CIB Markets
interest-earning assets(b)(c) 672,629 593,355 531,217
Average interest-earning
assets excluding CIB
Markets $1,672,862 $1,619,553 $ 1,639,757
Net yield on average
interest-earning assets –
managed basis(c) 2.46% 2.52% 2.37%
Net yield on average CIB
Markets interest-earning
assets(b)(c) 0.46 0.52 0.87
Net yield on average
interest-earning assets
excluding CIB Markets 3.27% 3.25% 2.85%
Period-end Average
Year ended December 31,
Dec 31, Dec 31,
(in millions, except per share and ratio data) 2019 2018 2019 2018 2017
Common stockholders’ equity $ 234,337 $ 230,447 $ 232,907 $ 229,222 $ 230,350
Less: Goodwill 47,823 47,471 47,620 47,491 47,317
Less: Other intangible assets 819 748 789 807 832
Add: Certain deferred tax liabilities(a) 2,381 2,280 2,328 2,231 3,116
Tangible common equity $ 188,076 $ 184,508 $ 186,826 $ 183,155 $ 185,317
(a) Represents deferred tax liabilities related to tax-deductible goodwill and to identifiable intangibles created in nontaxable transactions, which are netted
against goodwill and other intangibles when calculating TCE.
JPMorgan Chase
Consumer Businesses Wholesale Businesses
• Middle
Consumer & Card, Merchant Markets & • Asset
Business Banking Home Lending Services & Auto Banking Securities Services Market Management
Banking
• Consumer • Home • Card • Investment • Fixed • Corporate • Wealth
Banking/ Lending Services Banking Income Client Management
Chase Wealth Production – Credit Card • Treasury Markets Banking
Management • Home Services(a)
– Merchant • Equity • Commercial
• Business Lending Services(a) • Lending
Banking Servicing Markets Real Estate
• Auto • Securities Banking
• Real Estate
Portfolios Services
• Credit
Adjustments
& Other
(a) Effective in the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business.
The revenue and expenses of the Merchant Services business will be reported across CCB, CIB and CB based primarily on client relationship.
Year ended December 31, Consumer & Community Banking Corporate & Investment Bank Commercial Banking
(in millions, except ratios) 2019 2018 2017 2019 2018 2017 2019 2018 2017
Total net revenue $ 55,883 $ 52,079 $ 46,485 $ 38,298 $ 36,448 $ 34,657 $ 8,984 $ 9,059 $ 8,605
Total noninterest expense 28,896 27,835 26,062 21,519 20,918 19,407 3,500 3,386 3,327
Pre-provision profit/(loss) 26,987 24,244 20,423 16,779 15,530 15,250 5,484 5,673 5,278
Provision for credit losses 4,952 4,753 5,572 277 (60) (45) 296 129 (276)
Net income/(loss) 16,641 14,852 9,395 11,922 11,773 10,813 3,924 4,237 3,539
Return on equity (“ROE”) 31% 28% 17% 14% 16% 14% 17% 20% 17%
Year ended December 31, Asset & Wealth Management Corporate Total
(in millions, except ratios) 2019 2018 2017 2019 2018 2017 2019 2018 2017
Total net revenue $ 14,316 $ 14,076 $ 13,835 $ 1,211 $ (128) $ 1,140 $118,692 $111,534 $104,722
Total noninterest expense 10,515 10,353 10,218 1,067 902 501 65,497 63,394 59,515
Pre-provision profit/(loss) 3,801 3,723 3,617 144 (1,030) 639 53,195 48,140 45,207
Provision for credit losses 61 53 39 (1) (4) — 5,585 4,871 5,290
Net income/(loss) 2,833 2,853 2,337 1,111 (1,241) (1,643) 36,431 32,474 24,441
Return on equity (“ROE”) 26% 31% 25% NM NM NM 15% 13% 10%
Note: Net income in 2019 and 2018 for each of the business segments reflects the favorable impact of the reduction in the U.S. federal statutory income tax
rate as a result of the TCJA.
The following sections provide a comparative discussion of the Firms results by segment as of or for the years ended
December 31, 2019 and 2018.
Consumer & Community Banking offers services to Selected income statement data
consumers and businesses through bank branches, Year ended December 31,
ATMs, digital (including mobile and online) and (in millions, except ratios) 2019 2018 2017
telephone banking. CCB is organized into Consumer & Revenue
Business Banking (including Consumer Banking/Chase Lending- and deposit-related fees $ 3,859 $ 3,624 $ 3,431
Wealth Management and Business Banking), Home
Asset management,
Lending (including Home Lending Production, Home administration and
Lending Servicing and Real Estate Portfolios) and Card, commissions 2,499 2,402 2,212
Merchant Services & Auto. Consumer & Business Mortgage fees and related
Banking offers deposit and investment products and income 2,035 1,252 1,613
services to consumers, and lending, deposit, and cash Card income 4,847 4,554 4,024
management and payment solutions to small All other income 5,402 4,428 3,430
businesses. Home Lending includes mortgage Noninterest revenue 18,642 16,260 14,710
origination and servicing activities, as well as Net interest income 37,241 35,819 31,775
portfolios consisting of residential mortgages and Total net revenue 55,883 52,079 46,485
home equity loans. Card, Merchant Services & Auto
issues credit cards to consumers and small businesses, Provision for credit losses 4,952 4,753 5,572
offers payment processing services to merchants, and Noninterest expense
originates and services auto loans and leases.
Compensation expense 10,700 10,534 10,133
Noncompensation expense (a)
18,196 17,301 15,929
Total noninterest expense 28,896 27,835 26,062
Income before income tax
expense 22,035 19,491 14,851
Income tax expense 5,394 4,639 5,456
Net income $ 16,641 $ 14,852 $ 9,395
Financial ratios
Return on equity 31% 28% 17%
Overhead ratio 52 53 56
Note: In the discussion and the tables which follow, CCB presents certain
financial measures which exclude the impact of PCI loans; these are non-
GAAP financial measures.
(a) Included depreciation expense on leased assets of $4.1 billion, $3.4
billion and $2.7 billion for the years ended December 31, 2019, 2018
and 2017, respectively.
(b) Included MSR risk management results of $(165) million, $(111)
million and $(242) million for the years ended December 31, 2019,
2018 and 2017, respectively.
Home Lending
Mortgage origination volume
by channel
Retail $ 51.0 $ 38.3 $ 40.3
Correspondent 54.2 41.1 57.3
Total mortgage
origination volume(c) $ 105.2 $ 79.4 $ 97.6
Total loans serviced
(period-end) $ 761.4 $ 789.8 $ 816.1
Third-party mortgage loans
serviced (period-end) 520.8 519.6 553.5
MSR carrying value
(period-end) 4.7 6.1 6.0
Ratio of MSR carrying value
(period-end) to third-party
mortgage loans serviced
(period-end) 0.90% 1.17% 1.08%
Card Services
Net revenue rate 11.52% 11.27% 10.57%
Merchant Services
Merchant processing volume $ 1,511.5 $ 1,366.1 $ 1,191.7
Auto
Loan and lease origination
volume $ 34.0 $ 31.8 $ 33.3
Average Auto operating lease
assets 21.6 18.8 15.2
(a) Users of all web and/or mobile platforms who have logged in within the past 90
days.
(b) Users of all mobile platforms who have logged in within the past 90 days.
(c) Firmwide mortgage origination volume was $115.9 billion, $86.9 billion and
$107.6 billion for the years ended December 31, 2019, 2018 and 2017,
respectively.
(d) Represents the ratio of MSR carrying value (period-end) to third-party mortgage
loans serviced (period-end) divided by the ratio of loan servicing-related revenue
to third-party mortgage loans serviced (average).
The Corporate & Investment Bank, which consists of Selected income statement data
Banking and Markets & Securities Services, offers a Year ended December 31,
broad suite of investment banking, market-making, (in millions, except ratios) 2019 2018 2017
prime brokerage, and treasury and securities products Financial ratios
and services to a global client base of corporations, Return on equity 14% 16% 14%
investors, financial institutions, government and Overhead ratio 56 57 56
municipal entities. Banking offers a full range of Compensation expense as
investment banking products and services in all major percentage of total net
revenue 28 28 28
capital markets, including advising on corporate
Revenue by business
strategy and structure, capital-raising in equity and
debt markets, as well as loan origination and Investment Banking $ 7,215 $ 6,987 $ 6,852
syndication. Banking also includes Treasury Services, Treasury Services 4,565 4,697 4,172
which provides transaction services, consisting of cash Lending 1,331 1,298 1,429
management and liquidity solutions. Markets & Total Banking 13,111 12,982 12,453
Securities Services is a global market-maker in cash Fixed Income Markets 14,418 12,706 12,812
securities and derivative instruments, and also offers Equity Markets 6,494 6,888 5,703
sophisticated risk management solutions, prime Securities Services 4,154 4,245 3,917
brokerage, and research. Markets & Securities Services Credit Adjustments & Other(a) 121 (373) (228)
also includes Securities Services, a leading global Total Markets & Securities
custodian which provides custody, fund accounting and Services 25,187 23,466 22,204
administration, and securities lending products Total net revenue $38,298 $36,448 $ 34,657
principally for asset managers, insurance companies
(a) Includes credit valuation adjustments (“CVA”) managed centrally
and public and private investment funds. within CIB and funding valuation adjustments (“FVA”) on derivatives,
which are primarily reported in principal transactions revenue. Results
are presented net of associated hedging activities and net of CVA and
Selected income statement data FVA amounts allocated to Fixed Income Markets and Equity Markets.
Year ended December 31, Refer to Notes 2, 3 and 24 for additional information.
(in millions) 2019 2018 2017
2019 compared with 2018
Revenue
Net income was $11.9 billion, up 1%.
Investment banking fees $ 7,575 $ 7,473 $ 7,356
Principal transactions 14,396 12,271 10,873 Net revenue was $38.3 billion, up 5%.
Lending- and deposit-related fees 1,518 1,497 1,531 Banking revenue was $13.1 billion, up 1%.
Asset management, • Investment Banking revenue was $7.2 billion, up 3%,
administration and commissions 4,545 4,488 4,207
with higher debt underwriting fees, largely offset by
All other income 1,108 1,239 572
lower advisory and equity underwriting fees. The Firm
Noninterest revenue 29,142 26,968 24,539
maintained its #1 ranking for Global Investment Banking
Net interest income 9,156 9,480 10,118
fees with overall share gains, according to Dealogic.
Total net revenue(a) 38,298 36,448 34,657
– Debt underwriting fees were $3.5 billion, up 8%,
Provision for credit losses 277 (60) (45) reflecting wallet share gains and increased activity in
investment-grade and high-yield bonds.
Noninterest expense
– Advisory fees were $2.4 billion, down 5%, and Equity
Compensation expense 10,618 10,215 9,531
underwriting fees were $1.7 billion, down 1%, driven
Noncompensation expense 10,901 10,703 9,876
by a decline in industry-wide fees despite wallet share
Total noninterest expense 21,519 20,918 19,407 gains.
Income before income tax
expense 16,502 15,590 15,295 • Treasury Services revenue was $4.6 billion, down 3%,
Income tax expense 4,580 3,817 4,482 driven by deposit margin compression predominantly
Net income $ 11,922 $ 11,773 $ 10,813
offset by higher balances and fee growth.
• Lending revenue was $1.3 billion, up 3%, with higher net
(a) Includes tax-equivalent adjustments, predominantly due to income tax
credits related to alternative energy investments; income tax credits interest income largely offset by losses on hedges of
and amortization of the cost of investments in affordable housing accrual loans.
projects; and tax-exempt income from municipal bonds of $2.3 billion,
$1.7 billion and $2.4 billion for the years ended December 31, 2019,
2018 and 2017, respectively.
(a) Allowance for loan losses of $110 million, $174 million and $316
million were held against these nonaccrual loans at December 31,
2019, 2018 and 2017, respectively.
(b) Loans held-for-sale and loans at fair value were excluded when
calculating the net charge-off/(recovery) rate.
(c) Management uses allowance for loan losses to period-end loans
retained, excluding trade finance and conduits, a non-GAAP financial
measure, to provide a more meaningful assessment of CIB’s allowance
coverage ratio.
Markets revenue
The following table summarizes select income statement client demand, and changes in the fair value of instruments
data for the Markets businesses. Markets includes both used by the Firm to actively manage the risk exposure
Fixed Income Markets and Equity Markets. Markets revenue arising from such inventory. Principal transactions revenue
comprises principal transactions, fees, commissions and recognized upon executing new transactions with market
other income, as well as net interest income. The Firm participants is driven by many factors including the level of
assesses its Markets business performance on a total client activity, the bid-offer spread (which is the difference
revenue basis, as offsets may occur across revenue line between the price at which a market participant is willing
items. For example, securities that generate net interest and able to sell an instrument to the Firm and the price at
income may be risk-managed by derivatives that are which another market participant is willing and able to buy
recorded in principal transactions revenue. Refer to Notes 6 it from the Firm, and vice versa), market liquidity and
and 7 for a description of the composition of these income volatility. These factors are interrelated and sensitive to the
statement line items. same factors that drive inventory-related revenue, which
include general market conditions, such as interest rates,
Principal transactions reflects revenue on financial
foreign exchange rates, credit spreads, and equity and
instruments and commodities transactions that arise from
commodity prices, as well as other macroeconomic
client-driven market-making activity. Principal transactions
conditions.
revenue includes amounts recognized upon executing new
transactions with market participants, as well as “inventory- For the periods presented below, the predominant source of
related revenue”, which is revenue recognized from gains principal transactions revenue was the amount recognized
and losses on derivatives and other instruments that the upon executing new transactions.
Firm has been holding in anticipation of, or in response to,
2019 2018 2017
Year ended December 31, Fixed Fixed Fixed
(in millions, except where Income Equity Total Income Equity Total Income Equity Total
otherwise noted) Markets Markets Markets Markets Markets Markets Markets Markets Markets
Principal transactions $ 8,786 $ 5,739 $ 14,525 $ 7,560 $ 5,566 $ 13,126 $ 7,393 $ 3,855 $ 11,248
Lending- and deposit-related fees 198 7 205 197 6 203 191 6 197
Asset management,
administration and commissions 407 1,775 2,182 410 1,794 2,204 390 1,635 2,025
All other income 872 8 880 952 22 974 436 (21) 415
Noninterest revenue 10,263 7,529 17,792 9,119 7,388 16,507 8,410 5,475 13,885
Net interest income(a) 4,155 (1,035) 3,120 3,587 (500) 3,087 4,402 228 4,630
Total net revenue $ 14,418 $ 6,494 $ 20,912 $ 12,706 $ 6,888 $ 19,594 $ 12,812 $ 5,703 $ 18,515
Loss days(b) 1 5 4
(a) The decline in Markets net interest income in 2018 was driven by higher funding costs.
(b) Loss days represent the number of days for which Markets posted losses. The loss days determined under this measure differ from the disclosure of daily
market risk-related gains and losses for the Firm in the value-at-risk (“VaR”) back-testing discussion on pages 121–123.
Selected metrics
As of or for the year ended
December 31,
(in millions, except where otherwise noted) 2019 2018 2017
Assets under custody (“AUC”) by asset class (period-end) (in billions):
Fixed Income $ 13,498 $ 12,440 $ 13,043
Equity 10,100 8,078 7,863
Other(a) 3,233 2,699 2,563
Total AUC $ 26,831 $ 23,217 $ 23,469
Client deposits and other third party liabilities (average)(b) $ 464,770 $ 434,422 $ 408,911
(a) Consists of mutual funds, unit investment trusts, currencies, annuities, insurance contracts, options and other contracts.
(b) Client deposits and other third-party liabilities pertain to the Treasury Services and Securities Services businesses.
International metrics
As of or for the year ended
December 31,
(in millions, except where otherwise noted) 2019 2018(c) 2017(c)
Total net revenue(a)
Europe/Middle East/Africa $ 11,718 $ 12,260 $ 11,590
Asia-Pacific 5,330 5,077 4,313
Latin America/Caribbean 1,549 1,473 1,232
Total international net revenue 18,597 18,810 17,135
North America 19,701 17,638 17,522
Total net revenue $ 38,298 $ 36,448 $ 34,657
(in billions)
North America $ 16,855 $ 14,359 $ 13,971
All other regions 9,976 8,858 9,498
Total AUC $ 26,831 $ 23,217 $ 23,469
(a) Total net revenue and loans retained (excluding loans held-for-sale and loans at fair value) are based on the location of the trading desk, booking location,
or domicile of the client, as applicable.
(b) Client deposits and other third-party liabilities pertaining to the Treasury Services and Securities Services businesses, and AUC, are based on the domicile
of the client.
(c) The prior period amounts have been revised to conform with the current period presentation.
Noninterest expense
Compensation expense 1,785 1,694 1,534
Noncompensation expense 1,715 1,692 1,793
Total noninterest expense 3,500 3,386 3,327
CB product revenue consists of the following: Selected income statement data (continued)
Lending includes a variety of financing alternatives, which Year ended December 31,
(in millions, except ratios) 2019 2018 2017
are primarily provided on a secured basis; collateral
includes receivables, inventory, equipment, real estate or Revenue by product
other assets. Products include term loans, revolving lines of Lending $ 4,057 $ 4,049 $ 4,094
credit, bridge financing, asset-based structures, leases, and Treasury services 3,920 4,074 3,444
standby letters of credit.
Investment banking(a) 919 852 805
Treasury services includes revenue from a broad range of Other 88 84 262
products and services that enable CB clients to manage
Total Commercial Banking net
payments and receipts, as well as invest and manage funds. revenue $ 8,984 $ 9,059 $ 8,605
Investment banking includes revenue from a range of
products providing CB clients with sophisticated capital- Investment banking revenue, gross(b) $ 2,744 $ 2,491 $ 2,385
raising alternatives, as well as balance sheet and risk
Revenue by client segment
management tools through advisory, equity underwriting,
and loan syndications. Revenue from Fixed Income and Middle Market Banking $ 3,702 $ 3,708 $ 3,341
Equity Markets products used by CB clients is also included. Corporate Client Banking 2,994 2,984 2,727
Commercial Real Estate Banking(c) 2,169 2,249 2,416
Other product revenue primarily includes tax-equivalent
adjustments generated from Community Development Other(c) 119 118 121
Banking activities and certain income derived from principal Total Commercial Banking net
transactions. revenue $ 8,984 $ 9,059 $ 8,605
Financial ratios
Return on equity 17% 20% 17%
Overhead ratio 39 37 39
(a) Includes CB’s share of revenue from investment banking products sold
to CB clients through the CIB.
(b) Refer to page 60 for a discussion of revenue sharing.
(c) Effective in the first quarter of 2019, client segment data includes
Commercial Real Estate Banking which comprises the former
Commercial Term Lending and Real Estate Banking client segments,
and Community Development Banking (previously part of Other). The
prior period amounts have been revised to conform with the current
period presentation.
(a) Effective in the first quarter of 2019, client segment data includes
Commercial Real Estate Banking which comprises the former
Commercial Term Lending and Real Estate Banking client segments,
and Community Development Banking (previously part of Other). The
prior period amounts have been revised to conform with the current
period presentation.
Financial ratios
Return on common equity 26% 31% 25%
Overhead ratio 73 74 74
Pre-tax margin ratio:
Asset Management 26 26 22
Wealth Management 26 26 30
Asset & Wealth Management 26 26 26
to applicable laws, rules and regulations and for the Risk identification and ownership
implementation of the risk management structure (which Each LOB and Corporate area owns the ongoing
may include policy, standards, limits, thresholds and identification of risks, as well as the design and execution of
controls) established by IRM. controls, inclusive of IRM-specified controls, to manage
those risks. To support this activity, the Firm has a risk
The IRM function is independent of the businesses and is identification process designed to facilitate their
the Firm’s “second line of defense.” The IRM function sets responsibility to identify material risks inherent to the Firm,
and oversees the risk management structure for Firmwide catalog them in a central repository and review the most
risk governance, and independently assesses and challenges material risks on a regular basis. The IRM function reviews
the first line of defense risk management practices. IRM is and challenges the LOB and Corporate’s identification of
also responsible for its own adherence to applicable laws, risks, maintains the central repository and provides the
rules and regulations and for the implementation of policies consolidated Firmwide results to the Firmwide Risk
and standards established by IRM with respect to its own Committee (“FRC”) and Board Risk Committee.
processes.
Risk appetite
The Internal Audit function operates independently from The Firm’s overall appetite for risk is governed by a “Risk
other parts of the Firm and performs independent testing Appetite” framework. The framework and the Firm’s risk
and evaluation of processes and controls across the Firm as appetite are set and approved by the Firm’s CEO, Chief
the “third line of defense.” The Internal Audit Function is Financial Officer (“CFO”) and CRO. Quantitative parameters
headed by the General Auditor, who reports to the Audit and qualitative factors are used to monitor and measure the
Committee and administratively to the CEO. Firm’s capacity to take risk consistent with its stated risk
appetite. Qualitative factors have been established to assess
In addition, there are other functions that contribute to the select operational risks that impact the Firm’s reputation.
Firmwide control environment including Finance, Human Risk Appetite results are reported to the Board Risk
Resources, Legal and Control Management. Committee.
The Firm’s Operating Committee, which consists of the The JPMorgan Chase Bank, N.A. Board of Directors is
Firm’s CEO, CRO, CFO and other senior executives, is responsible for the oversight of management of the bank.
accountable to and may refer matters to the Firm’s Board of The JPMorgan Chase Bank, N.A. Board accomplishes this
Directors. The Operating Committee is responsible for function acting directly and through the principal standing
escalating to the Board the information necessary to committees of the Firm’s Board of Directors. Risk and
facilitate the Board’s exercise of its duties. control oversight on behalf of JPMorgan Chase Bank N.A. is
primarily the responsibility of the Risk Committee and the
Board oversight
Audit Committee, respectively, and, with respect to
The Firm’s Board of Directors provides oversight of risk. The
compensation and other management-related matters, the
Board Risk Committee is the principal committee that
Compensation & Management Development Committee.
oversees risk matters. The Audit Committee oversees the
control environment, and the Compensation & Management
Development Committee oversees compensation and other
management-related matters. Each committee of the Board
oversees reputational risks and conduct risks within its
scope of responsibility.
The Board Risk Committee assists the Board in its oversight Management oversight
of management’s responsibility to implement a global risk The Firm’s senior management-level committees that are
management framework reasonably designed to identify, primarily responsible for key risk-related functions include:
assess and manage the Firm’s risks. The Board Risk The Firmwide Risk Committee (“FRC”) is the Firm’s highest
Committee’s responsibilities include approval of applicable management-level risk committee. It provides oversight of
primary risk policies and review of certain associated the risks inherent in the Firm’s businesses and serves as an
frameworks, analysis and reporting established by escalation point for risk topics and issues raised by
management. Breaches in risk appetite and parameters, underlying committees and/or FRC members.
issues that may have a material adverse impact on the Firm,
including capital and liquidity issues, and other significant The Firmwide Control Committee (“FCC”) is an escalation
risk-related matters are escalated to the Board Risk committee for senior management to review and discuss
Committee, as appropriate. the Firmwide operational risk environment including
identified issues, operational risk metrics and significant
The Audit Committee assists the Board in its oversight of events that have been escalated.
management’s responsibility to ensure that there is an
effective system of controls reasonably designed to The Firmwide Fiduciary Risk Governance Committee
safeguard the Firm’s assets and income, ensure the integrity (“FFRGC”) provides oversight of the governance framework
of the Firm’s financial statements, and maintain compliance for fiduciary risk or fiduciary-related conflict of interest risk
with the Firm’s ethical standards, policies, plans and inherent in each of the Firm’s LOBs. The FFRGC approves
procedures, and with laws and regulations. It also assists risk or compliance policy exceptions and reviews periodic
the Board in its oversight of the Firm’s independent reports from the LOBs and control functions including
registered public accounting firm’s qualifications, fiduciary metrics and control trends.
independence and performance, and of the performance of The Firmwide Estimations Risk Committee (“FERC”) provides
the Firm’s Internal Audit function. oversight of the governance framework for quantitative and
The Compensation & Management Development Committee qualitative estimations and models as specified in the
(“CMDC”) assists the Board in its oversight of the Firm’s Estimations and Model Risk Management Policy. The FERC
compensation principles and practices. The CMDC reviews also has responsibility to set the prioritization of
and approves the Firm’s compensation and benefits estimations and model risk activities and drive consistency
programs. In addition, the Committee reviews Operating through review of LOB activities and escalated issues.
Committee members’ performance against their goals, and The Conduct Risk Steering Committee (“CRSC”) is responsible
approves their compensation awards. The CMDC also for reviewing, calibrating and consolidating Firmwide
reviews the development of and succession for key Conduct Risk Appetite and setting overall direction for the
executives, and provides oversight of the Firm’s culture, Firm’s Conduct Risk Program.
including reviewing updates from management regarding
significant conduct issues and any related employee Line of Business and Regional Risk Committees are
actions, including compensation actions. responsible for providing oversight of the governance,
limits, and controls that are in place through the scope of
The Public Responsibility Committee assists the Board in its their activities. These committees review the ways in which
oversight of the Firm's positions and practices on public the particular LOB or the business operating in a particular
responsibility matters such as community investment, fair region could be exposed to adverse outcomes with a focus
lending, sustainability, consumer practices and other public on identifying, accepting, escalating and/or requiring
policy issues that reflect the Firm's values and character remediation of matters brought to these committees.
and could impact the Firm's reputation among all of its
stakeholders. The Committee also provides guidance on Line of Business and Corporate Control Committees oversee
these matters to management and the Board, as the control environment of their respective business or
appropriate. function. As part of that mandate, they are responsible for
reviewing indicators of elevated or emerging risks and other
The Corporate Governance & Nominating Committee data that may impact the quality and stability of the
exercises general oversight with respect to the governance processes in a business or function, addressing key
of the Board. The Committee evaluates and recommends to operational risk issues, focusing on processes with control
the Board corporate governance practices applicable to the concerns and overseeing control remediation.
Firm. It also appraises the framework for assessing the
Board’s performance and self-evaluation. Line of Business Reputation Risk Committees review and
assess transactions, activities and clients that have the
potential for material reputation risk to the Firm.
On June 27, 2019, the Federal Reserve informed the Firm balance sheet assets and off-balance sheet exposures,
that it did not object to the Firm’s 2019 capital plan. Refer weighted according to risk. Two comprehensive approaches
to Capital actions on pages 90-91 for information on are prescribed for calculating RWA: a standardized
actions taken by the Firm’s Board of Directors following the approach (“Basel III Standardized”), and an advanced
2019 CCAR results. approach (“Basel III Advanced”). Effective January 1, 2019,
Internal Capital Adequacy Assessment Process the capital adequacy of the Firm is evaluated against the
Annually, the Firm prepares the ICAAP, which informs the fully phased-in measures under Basel III and represents the
Board of Directors of the ongoing assessment of the Firm’s lower of the Standardized or Advanced approaches. During
processes for managing the sources and uses of capital as 2018, the required capital measures were subject to the
well as compliance with supervisory expectations for capital transitional rules and as of December 31, 2018 the results
planning and capital adequacy. The Firm’s ICAAP integrates were the same on a fully phased-in and on a transitional
stress testing protocols with capital planning. basis.
The CCAR and other stress testing processes assess the Basel III establishes capital requirements for calculating
potential impact of alternative economic and business credit risk RWA and market risk RWA, and in the case of
scenarios on the Firm’s earnings and capital. Economic Basel III Advanced, operational risk RWA. Key differences in
scenarios, and the parameters underlying those scenarios, the calculation of credit risk RWA between the Standardized
are defined centrally and applied uniformly across the and Advanced approaches are that for Basel III Advanced,
businesses. These scenarios are articulated in terms of credit risk RWA is based on risk-sensitive approaches which
macroeconomic factors, which are key drivers of business largely rely on the use of internal credit models and
results; global market shocks, which generate short-term parameters, whereas for Basel III Standardized, credit risk
but severe trading losses; and idiosyncratic operational risk RWA is generally based on supervisory risk-weightings
events. The scenarios are intended to capture and stress which vary primarily by counterparty type and asset class.
key vulnerabilities and idiosyncratic risks facing the Firm. Market risk RWA is calculated on a generally consistent
However, when defining a broad range of scenarios, actual basis between Basel III Standardized and Basel III
events can always be worse. Accordingly, management Advanced. In addition to the RWA calculated under these
considers additional stresses outside these scenarios, as approaches, the Firm may supplement such amounts to
necessary. These results are reviewed by management and incorporate management judgment and feedback from its
the Board of Directors. regulators.
Contingency capital plan Basel III also includes a requirement for Advanced
The Firm’s contingency capital plan establishes the capital Approach banking organizations, including the Firm, to
management framework for the Firm and specifies the calculate the SLR. Refer to SLR on page 90 for additional
principles underlying the Firm’s approach towards capital information.
management in normal economic conditions and during Key Regulatory Developments
stress. The contingency capital plan defines how the Firm Effective January 1, 2020, the Firm adopted the Financial
calibrates its targeted capital levels and meets minimum Instruments – Credit Losses (“CECL”) guidance under U.S.
capital requirements, monitors the ongoing appropriateness GAAP. As provided by the U.S. banking agencies, the Firm
of planned capital distributions, and sets out the capital elected to phase-in the impact to retained earnings of $2.7
contingency actions that are expected to be taken or billion to regulatory capital, at 25 percent per year in each
considered at various levels of capital depletion during a of 2020 to 2023 (“CECL transitional period”). Based on the
period of stress. Firm’s capital as of December 31, 2019, the estimated
Regulatory capital impact to the Standardized CET1 capital ratio will be a
The Federal Reserve establishes capital requirements, reduction of approximately 4 bps for each transitional year.
including well-capitalized standards, for the consolidated Refer to Accounting and Reporting Developments on pages
financial holding company. The Office of the Comptroller of 139-140 and Note 1 for further information.
the Currency (“OCC”) establishes similar minimum capital
requirements for the Firm’s IDI subsidiaries, including
JPMorgan Chase Bank, N.A. The U.S. capital requirements
generally follow the Capital Accord of the Basel Committee,
as amended from time to time.
Basel III Overview
The capital rules under Basel III establish minimum capital
ratios and overall capital adequacy standards for large and
internationally active U.S. BHCs and banks, including the
Firm and its IDI subsidiaries, including JPMorgan Chase
Bank, N.A. The minimum amount of regulatory capital that
must be held by BHCs and banks is determined by
calculating risk-weighted assets (“RWA”), which are on-
86 JPMorgan Chase & Co./2019 Form 10-K
Risk-based Capital Regulatory Minimums
The following chart presents the Firm’s Basel III minimum CET1 capital ratio during the Basel III transitional periods and on a
fully phased-in basis under the Basel III rules currently in effect.
The Firm’s Basel III Standardized risk-based ratios are “multiplication factor”. The following table presents the
currently more binding than the Basel III Advanced risk- Firm’s GSIB surcharge.
based ratios, and the Firm expects that this will remain the
case for the foreseeable future. 2019 2018
Fully Phased-In:
Additional information regarding the Firm’s capital ratios, as
Method 1 2.50% 2.50%
well as the U.S. federal regulatory capital standards to
Method 2 3.50% 3.50%
which the Firm is subject, is presented in Note 27. Refer to
the Firm’s Pillar 3 Regulatory Capital Disclosures reports, Transitional(a) N/A 2.625%
which are available on the Firm’s website, for further (a) The GSIB surcharge was subject to transition provisions (in 25%
increments) through the end of 2018.
information on the Firm’s Basel III measures.
The Firm’s effective regulatory minimum GSIB surcharge
All banking institutions are currently required to have a
calculated under Method 2 remains unchanged at 3.5% for
minimum CET1 capital ratio of 4.5% of risk-weighted
2020.
assets. Certain banking organizations, including the Firm,
are also required to hold additional amounts of capital to The Federal Reserve's framework for setting the
serve as a “capital conservation buffer”. The capital countercyclical capital buffer takes into account the macro
conservation buffer is intended to be used to absorb losses financial environment in which large, internationally active
in times of financial or economic stress. The capital banks function. As of December 31, 2019, the U.S.
conservation buffer was subject to a phase-in period that countercyclical capital buffer remained at 0%. The Federal
began January 1, 2016 and continued through the end of Reserve will continue to review the buffer at least annually.
2018. The buffer can be increased if the Federal Reserve, FDIC and
OCC determine that systemic risks are meaningfully above
As an expansion of the capital conservation buffer, the Firm
normal and can be calibrated up to an additional 2.5% of
is also required to hold additional levels of capital in the
RWA subject to a 12-month implementation period.
form of a global systemically important bank (“GSIB”)
surcharge and a countercyclical capital buffer. Failure to maintain regulatory capital equal to or in excess
Under the Federal Reserve’s GSIB rule, the Firm is required of the risk-based regulatory capital minimum plus the
to calculate its GSIB surcharge on an annual basis under two capital conservation buffer (inclusive of the GSIB surcharge)
separately prescribed methods, and is subject to the higher and any countercyclical buffer may result in limitations to
of the two. The first (“Method 1”), reflects the GSIB the amount of capital that the Firm may distribute, such as
surcharge as prescribed by the Basel Committee’s through dividends and common equity repurchases.
assessment methodology, and is calculated across five Leverage-based Capital Regulatory Minimums
criteria: size, cross-jurisdictional activity, Supplementary leverage ratio
interconnectedness, complexity and substitutability. The The SLR is defined as Tier 1 capital under Basel III divided
second (“Method 2”), modifies the Method 1 requirements by the Firm’s total leverage exposure. Total leverage
to include a measure of short-term wholesale funding in exposure is calculated by taking the Firm’s total average on-
place of substitutability, and introduces a GSIB score balance sheet assets, less amounts permitted to be
deducted for Tier 1 capital, and adding certain off-balance In addition to meeting the capital ratio requirements of
sheet exposures, such as undrawn commitments and Basel III, the Firm and its IDI subsidiaries also must
derivatives potential future exposure. maintain minimum capital and leverage ratios in order to be
Failure to maintain an SLR ratio equal to or greater than the “well-capitalized” under the regulations issued by the
regulatory minimum may result in limitations on the Federal Reserve and the Prompt Corrective Action (“PCA”)
amount of capital that the Firm may distribute such as requirements of the FDIC Improvement Act (“FDICIA”),
through dividends and common equity repurchases. respectively. Refer to Note 27 for additional information.
Other regulatory capital
The following tables present the Firm’s risk-based and leverage-based capital measures under both the Basel III Standardized
and Advanced approaches.
(a) Adjusted average assets, for purposes of calculating the Tier 1 leverage ratio, includes total quarterly average assets adjusted for on-balance sheet assets
that are subject to deduction from Tier 1 capital, predominantly goodwill and other intangible assets.
(b) The Firm’s capital ratios as of December 31, 2018 were equivalent whether calculated on a transitional or fully phased-in basis.
(c) Represents minimum SLR requirement of 3.0%, as well as supplementary leverage buffer of 2.0%.
The Firm believes that it will operate with a Basel III CET1 capital ratio between 11.5% and 12% over the medium term.
Standardized Total capital 242,589 237,511 Standardized Tier 2 capital at December 31, 2018 28,418
Adjustment in qualifying allowance for Change in long-term debt and other instruments qualifying
credit losses for Advanced Tier 2 as Tier 2 (39)
capital (10,477) (10,076)
Change in qualifying allowance for credit losses (186)
Advanced Tier 2 capital 17,680 18,342
Other (36)
Advanced Total capital $ 232,112 $ 227,435
Change in Standardized Tier 2 capital (261)
(a) Represents deferred tax liabilities related to tax-deductible goodwill Standardized Tier 2 capital at December 31, 2019 28,157
and to identifiable intangibles created in nontaxable transactions,
which are netted against goodwill and other intangibles when Standardized Total capital at December 31, 2019 242,589
calculating CET1 capital. Advanced Tier 2 capital at December 31, 2018 18,342
Change in long-term debt and other instruments qualifying
as Tier 2 (39)
Change in qualifying allowance for credit losses (587)
Other (36)
Change in Advanced Tier 2 capital (662)
Advanced Tier 2 capital at December 31, 2019 17,680
Advanced Total capital at December 31, 2019 $ 232,112
RWA rollforward
The following table presents changes in the components of RWA under Basel III Standardized and Advanced approaches for the
year ended December 31, 2019. The amounts in the rollforward categories are estimates, based on the predominant driver of
the change.
Standardized Advanced
Year ended December 31, 2019 Credit risk Market risk Credit risk Market risk Operational risk
(in millions) RWA RWA Total RWA RWA RWA RWA Total RWA
December 31, 2018 $ 1,423,053 $ 105,863 $ 1,528,916 $ 926,647 $ 105,976 $ 388,582 $ 1,421,205
Model & data changes(a) (6,406) (24,433) (30,839) (34,584) (24,433) — (59,017)
Portfolio runoff(b) (5,800) — (5,800) (5,500) — — (5,500)
Movement in portfolio levels(c) 29,373 (5,781) 23,592 46,385 (5,891) 696 41,190
Changes in RWA 17,167 (30,214) (13,047) 6,301 (30,324) 696 (23,327)
December 31, 2019 $ 1,440,220 $ 75,649 $ 1,515,869 $ 932,948 $ 75,652 $ 389,278 $ 1,397,878
(a) Model & data changes refer to material movements in levels of RWA as a result of revised methodologies and/or treatment per regulatory guidance (exclusive of rule
changes); and an update to the wholesale credit risk Advanced Approach parameters.
(b) Portfolio runoff for credit risk RWA primarily reflects reduced risk from position rolloffs in legacy portfolios in Home Lending.
(c) Movement in portfolio levels (inclusive of rule changes) refers to: changes in book size, composition, credit quality, and market movements for credit risk RWA;
changes in position and market movements for market risk RWA; and updates to cumulative losses for operational risk RWA.
Common equity
The Firm’s Board of Directors has authorized the repurchase
of up to $29.4 billion of gross common equity between July
1, 2019 and June 30, 2020 as part of the Firm’s annual
capital plan. As of December 31, 2019, $15.6 billion of
authorized repurchase capacity remained under this
common equity repurchase program.
The following table sets forth the Firm’s repurchases of
common equity for the years ended December 31, 2019,
2018 and 2017.
Year ended December 31, (in millions) 2019 2018 2017
Total number of shares of common
stock repurchased 213.0 181.5 166.6
Aggregate purchase price of common
stock repurchases $ 24,121 $ 19,983 $ 15,410
The Firm from time to time enters into written trading plans
under Rule 10b5-1 of the Securities Exchange Act of 1934 (a) RWA is the greater of Standardized and Advanced.
to facilitate repurchases in accordance with the common
Failure to maintain TLAC equal to or in excess of the
equity repurchase program. A Rule 10b5-1 repurchase plan
regulatory minimum plus applicable buffers may result in
allows the Firm to repurchase its equity during periods
limitations to the amount of capital that the Firm may
when it may otherwise not be repurchasing common equity distribute, such as through dividends and common equity
— for example, during internal trading blackout periods. repurchases.
The authorization to repurchase common equity is utilized
The following table presents the eligible external TLAC and
at management’s discretion, and the timing of purchases
LTD amounts, as well as a representation of the amounts as
and the exact amount of common equity that may be a percentage of the Firm’s total RWA and total leverage
repurchased is subject to various factors, including market exposure.
conditions; legal and regulatory considerations affecting the
amount and timing of repurchase activity; the Firm’s capital December 31, 2019
position (taking into account goodwill and intangibles);
Eligible
internal capital generation; and alternative investment (in billions, except ratio) external TLAC Eligible LTD
opportunities. The repurchase program does not include Total eligible TLAC & LTD $ 386.4 $ 161.8
specific price targets or timetables; may be executed % of RWA 25.5% 10.7%
through open market purchases or privately negotiated Minimum requirement 23.0 9.5
transactions, or utilizing Rule 10b5-1 plans; and may be
Surplus/(shortfall) $ 37.7 $ 17.8
suspended by management at any time.
% of total leverage exposure 11.3% 4.7%
Refer to Part II, Item 5: Market for Registrant’s Common
Minimum requirement 9.5 4.5
Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities on page 30 of the 2019 Form 10-K for Surplus/(shortfall) $ 61.2 $ 7.8
additional information regarding repurchases of the Firm’s
Refer to Part I, Item 1A: Risk Factors on pages 6–28 of the
equity securities.
2019 Form 10-K for information on the financial
Other capital requirements consequences to holders of the Firm’s debt and equity
Total Loss-Absorbing Capacity (“TLAC”) securities in a resolution scenario.
Effective January 1, 2019, the Federal Reserve’s TLAC rule
requires the U.S. GSIB top-tier holding companies, including
JPMorgan Chase & Co., to maintain minimum levels of
external TLAC and eligible long-term debt (“eligible LTD”).
liquidity requirements, and to manage through periods of The Firm’s average LCR increased during the three months
stress when access to normal funding sources may be ended December 31, 2019, compared with both the three-
disrupted. month periods ended September 30, 2019 and December
31, 2018, due to an increase in HQLA from unsecured long-
Contingency funding plan term debt issuances. Additionally, liquidity in JPMorgan
The Firm’s contingency funding plan (“CFP”), which is Chase Bank, N.A. increased during the fourth quarter and
approved by the firmwide ALCO and the Board Risk from the prior year period primarily due to growth in stable
Committee, is a compilation of procedures and action plans deposits. This increase in excess liquidity is excluded from
for managing liquidity through stress events. The CFP the Firm’s reported LCR under the LCR rule.
incorporates the limits and indicators set by the Liquidity
Risk Oversight group. These limits and indicators are The Firm’s average LCR fluctuates from period to period,
reviewed regularly to identify emerging risks or due to changes in its HQLA and estimated net cash outflows
vulnerabilities in the Firm’s liquidity position. The CFP as a result of ongoing business activity. Refer to the Firm’s
identifies the alternative contingent funding and liquidity U.S. LCR Disclosure reports, which are available on the
resources available to the Firm and its legal entities in a Firm’s website for a further discussion of the Firm’s LCR.
period of stress. Other liquidity sources
Liquidity Coverage Ratio In addition to the assets reported in the Firm’s HQLA above,
The LCR rule requires that the Firm maintain an amount of the Firm had unencumbered marketable securities, such as
unencumbered High Quality Liquid Assets (“HQLA”) that is equity securities and fixed income debt securities, that the
sufficient to meet its estimated total net cash outflows over Firm believes would be available to raise liquidity of
a prospective 30 calendar-day period of significant stress. approximately $315 billion and $226 billion as of
HQLA is the amount of liquid assets that qualify for December 31, 2019 and 2018, respectively. This includes
inclusion in the LCR. HQLA primarily consist of securities included as part of the excess liquidity at
unencumbered cash and certain high-quality liquid JPMorgan Chase Bank, N.A. that are not transferable to non-
securities as defined in the LCR rule. bank affiliates, as described above. The amount of such
securities increased from the prior year.
Under the LCR rule, the amount of HQLA held by JPMorgan
Chase Bank, N.A. that is in excess of its stand-alone 100% The Firm also had available borrowing capacity at FHLBs
minimum LCR requirement, and that is not transferable to and the discount window at the Federal Reserve Bank as a
non-bank affiliates, must be excluded from the Firm’s result of collateral pledged by the Firm to such banks of
reported HQLA. approximately $322 billion and $276 billion as of
December 31, 2019 and 2018, respectively. This borrowing
Estimated net cash outflows are based on standardized capacity excludes the benefit of cash and securities
stress outflow and inflow rates prescribed in the LCR rule, reported in the Firm’s HQLA or other unencumbered
which are applied to the balances of the Firm’s assets, securities that are currently pledged at the Federal Reserve
sources of funds, and obligations. The LCR is required to be Bank discount window and other central banks. Available
a minimum of 100%. borrowing capacity increased from the prior year primarily
The following table summarizes the Firm’s average LCR for as a result of an increase in collateral available to be
the three months ended December 31, 2019, September pledged as a result of the merger of Chase Bank USA, N.A.
30, 2019 and December 31, 2018 based on the Firm’s with and into JPMorgan Chase Bank, N.A., and an increase
interpretation of the finalized LCR framework. in available collateral as a result of maturities of borrowings
from FHLBs. Although available, the Firm does not view this
Three months ended borrowing capacity at the Federal Reserve Bank discount
Average amount December 31, September December 31, window and the other central banks as a primary source of
(in millions) 2019 30, 2019 2018
liquidity.
HQLA
Eligible cash(a) $ 203,296 $ 199,757 $ 297,069
Eligible securities(b)(c)
341,990 337,704 232,201
Total HQLA(d) $ 545,286 $ 537,461 $ 529,270
Net cash outflows $ 469,402 $ 468,452 $ 467,704
LCR 116% 115% 113%
Net excess HQLA (d)
$ 75,884 $ 69,009 $ 61,566
Deposits
The table below summarizes, by LOB, the period-end and average deposit balances as of and for the years ended December 31,
2019 and 2018.
As of or for the year ended December 31, Average
(in millions) 2019 2018 2019 2018
Consumer & Community Banking $ 718,416 $ 678,854 $ 693,550 $ 670,388
Corporate & Investment Bank 511,843 482,084 515,913 477,250
Commercial Banking 184,115 170,859 172,666 170,822
Asset & Wealth Management 147,804 138,546 140,118 137,272
Corporate 253 323 820 729
Total Firm $ 1,562,431 $ 1,470,666 $ 1,523,067 $ 1,456,461
Deposits provide a stable source of funding and reduce the The Firm believes that average deposit balances are
Firm’s reliance on the wholesale funding markets. A generally more representative of deposit trends than period-
significant portion of the Firm’s deposits are consumer end deposit balances.
deposits and wholesale operating deposits, which are both
considered to be stable sources of liquidity. Wholesale Average deposits across the Firm increased for the year
operating deposits are considered to be stable sources of ended December 31, 2019.
liquidity because they are generated from customers that
maintain operating service relationships with the Firm. The increase in CIB reflects growth in operating deposits
driven by client activity, primarily in Treasury Services, and
The table below shows the loan and deposit balances, the an increase in client-driven net issuances of structured notes
loans-to-deposits ratios, and deposits as a percentage of in Markets. The increase in CCB was driven by continued
total liabilities, as of December 31, 2019 and 2018.
growth in new accounts. The increases in AWM and CB were
primarily driven by growth in interest-bearing deposits; for
As of December 31,
(in billions except ratios) 2019 2018
AWM, the growth was partially offset by migration,
predominantly into the Firm’s investment-related products.
Deposits $ 1,562.4 $ 1,470.7
Deposits as a % of total liabilities 64% 62% Refer to the discussion of the Firm’s Business Segment
Loans 959.8 984.6 Results and the Consolidated Balance Sheets Analysis on
Loans-to-deposits ratio 61% 67% pages 60–78 and pages 52–53, respectively, for further
information on deposit and liability balance trends.
The following table summarizes short-term and long-term funding, excluding deposits, as of December 31, 2019 and 2018,
and average balances for the years ended December 31, 2019 and 2018. Refer to the Consolidated Balance Sheets Analysis on
pages 52–53 and Note 20 for additional information.
Maturities/redemptions
Senior notes $ 18,098 $ 19,141 $ 5,367 $ 4,466
Subordinated debt 183 136 — —
Structured notes 2,944 2,678 19,271 15,049
Total long-term unsecured funding – maturities/redemptions $ 21,225 $ 21,955 $ 24,638 $ 19,515
(a) Includes certain TLAC-eligible long-term unsecured debt issued by the Parent Company.
The Firm can also raise secured long-term funding through securitization of consumer credit card loans and advances from the
FHLBs. The following table summarizes the securitization issuance and FHLB advances and their respective maturities or
redemptions for the years ended December 31, 2019 and 2018.
The Firm’s wholesale businesses also securitize loans for client-driven transactions; those client-driven loan securitizations are
not considered to be a source of funding for the Firm and are not included in the table above. Refer to Note 14 for further
description of the client-driven loan securitizations.
Credit ratings
The cost and availability of financing are influenced by which the Firm believes are incorporated in its liquidity risk
credit ratings. Reductions in these ratings could have an and stress testing metrics. The Firm believes that it
adverse effect on the Firm’s access to liquidity sources, maintains sufficient liquidity to withstand a potential
increase the cost of funds, trigger additional collateral or decrease in funding capacity due to ratings downgrades.
funding requirements and decrease the number of investors
and counterparties willing to lend to the Firm. The nature Additionally, the Firm’s funding requirements for VIEs and
and magnitude of the impact of ratings downgrades other third- party commitments may be adversely affected
depends on numerous contractual and behavioral factors, by a decline in credit ratings.
The credit ratings of the Parent Company and the Firm’s principal bank and non-bank subsidiaries as of December 31, 2019,
were as follows.
J.P. Morgan Securities LLC
JPMorgan Chase & Co. JPMorgan Chase Bank, N.A.(a) J.P. Morgan Securities plc
(a) On May 18, 2019, Chase Bank USA, N.A. merged with and into JPMorgan Chase Bank, N.A., with JPMorgan Chase Bank, N.A. as the surviving bank. The
credit rating for JPMorgan Chase Bank, N.A. reflects the credit rating of the merged entity.
JPMorgan Chase’s unsecured debt does not contain liquidity ratios, strong credit quality and risk management
requirements that would call for an acceleration of controls, and diverse funding sources. Rating agencies
payments, maturities or changes in the structure of the continue to evaluate economic and geopolitical trends,
existing debt, provide any limitations on future borrowings regulatory developments, future profitability, risk
or require additional collateral, based on unfavorable management practices, and litigation matters, as well as
changes in the Firm’s credit ratings, financial ratios, their broader ratings methodologies. Changes in any of
earnings, or stock price. these factors could lead to changes in the Firm’s credit
Critical factors in maintaining high credit ratings include a ratings.
stable and diverse earnings stream, strong capital and
CREDIT PORTFOLIO
Credit risk is the risk associated with the default or change
in credit profile of a client, counterparty or customer. Total credit portfolio
Credit exposure Nonperforming(d)(e)
In the following tables, reported loans include loans December 31,
(in millions) 2019 2018 2019 2018
retained (i.e., held-for-investment); loans held-for-sale; and
Loans retained $ 945,601 $ 969,415 $ 3,983 $ 4,611
certain loans accounted for at fair value. The following
Loans held-for-sale 7,064 11,988 7 —
tables do not include loans which the Firm accounts for at
Loans at fair value 7,104 3,151 90 220
fair value and classifies as trading assets; refer to Notes 2 Total loans – reported 959,769 984,554 4,080 4,831
and 3 for further information regarding these loans. Refer Derivative receivables 49,766 54,213 30 60
to Notes 12, 28, and 5 for additional information on the Receivables from
Firm’s loans, lending-related commitments and derivative customers and other(a) 33,706 30,217 — —
The following table presents consumer credit-related information with respect to the credit portfolio held by CCB, scored prime
mortgage and scored home equity loans held by AWM, and scored prime mortgage loans held by Corporate. Refer to Note 12 for
further information about the Firm’s nonaccrual and charge-off accounting policies.
The following table provides a summary of lifetime principal loss estimates included in either the nonaccretable difference or
the allowance for loan losses.
(a) Receivables from customers and other include $33.7 billion and $30.1
billion of brokerage-related held-for-investment customer receivables
at December 31, 2019 and 2018, respectively, to clients in CIB and
AWM; these are classified in accrued interest and accounts receivable
on the Consolidated balance sheets.
(b) Represents the net notional amount of protection purchased and sold
through credit derivatives used to manage both performing and
nonperforming wholesale credit exposures; these derivatives do not
qualify for hedge accounting under U.S. GAAP. Refer to Credit
derivatives on page 115 and Note 5 for additional information.
Due after
1 year
December 31, 2019 Due in 1 through Due after 5 Investment- Noninvestment Total %
(in millions, except ratios) year or less 5 years years Total grade -grade Total of IG
Loans retained $ 128,430 $ 209,397 $ 106,812 $ 444,639 $ 344,199 $ 100,440 $ 444,639 77%
Derivative receivables 49,766 49,766
Less: Liquid securities and other cash collateral
held against derivatives (16,009) (16,009)
Total derivative receivables, net of all collateral 6,561 6,960 20,236 33,757 26,966 6,791 33,757 80
Lending-related commitments 77,298 314,281 12,536 404,115 288,864 115,251 404,115 71
Subtotal 212,289 530,638 139,584 882,511 660,029 222,482 882,511 75
Loans held-for-sale and loans at fair value(a) 11,166 11,166
Receivables from customers and other 33,706 33,706
Total exposure – net of liquid securities and other
cash collateral held against derivatives $ 927,383 $ 927,383
Due after
1 year
December 31, 2018 Due in 1 through Due after 5 Investment- Noninvestment- Total %
(in millions, except ratios) year or less 5 years years Total grade grade Total of IG
Loans retained $ 138,458 $ 196,974 $ 103,730 $ 439,162 $ 339,729 $ 99,433 $ 439,162 77%
Derivative receivables 54,213 54,213
Less: Liquid securities and other cash collateral
held against derivatives (15,322) (15,322)
Total derivative receivables, net of all collateral 11,038 9,169 18,684 38,891 31,794 7,097 38,891 82
Lending-related commitments 79,400 294,855 13,558 387,813 288,724 99,089 387,813 74
Subtotal 228,896 500,998 135,972 865,866 660,247 205,619 865,866 76
Loans held-for-sale and loans at fair value(a) 15,028 15,028
Receivables from customers and other 30,063 30,063
Total exposure – net of liquid securities and other
cash collateral held against derivatives $ 910,957 $ 910,957
(a) Represents loans held-for-sale, primarily related to syndicated loans and loans transferred from the retained portfolio, and loans at fair value.
(b) These derivatives do not qualify for hedge accounting under U.S. GAAP.
(c) The notional amounts are presented on a net basis by underlying reference entity and the ratings profile shown is based on the ratings of the reference
entity on which protection has been purchased. Predominantly all of the credit derivatives entered into by the Firm where it has purchased protection used
in credit portfolio management activities are executed with investment-grade counterparties.
(d) The maturity profile of retained loans, lending-related commitments and derivative receivables is based on remaining contractual maturity. Derivative
contracts that are in a receivable position at December 31, 2019, may become payable prior to maturity based on their cash flow profile or changes in
market conditions.
Wholesale credit exposure – industry exposures categories. The total criticized component of the portfolio,
The Firm focuses on the management and diversification of excluding loans held-for-sale and loans at fair value, was
its industry exposures, and pays particular attention to $14.3 billion at December 31, 2019, compared with $12.1
industries with actual or potential credit concerns. billion at December 31, 2018. The increase was driven by
Exposures deemed criticized align with the U.S. banking select client downgrades.
regulators’ definition of criticized exposures, which consist
of the special mention, substandard and doubtful
Below are summaries of the Firm’s exposures as of December 31, 2019 and 2018. The industry of risk category is generally
based on the client or counterparty’s primary business activity. Refer to Note 4 for additional information on industry
concentrations.
Liquid
Noninvestment-grade securities
and other
30 days or cash
more past collateral
As of or for the year ended due and Net charge- Credit held against
December 31, 2019 Credit Investment- Criticized Criticized accruing offs/ derivative derivative
(in millions) exposure(f) grade Noncriticized performing nonperforming loans (recoveries) hedges(g) receivables
Real Estate $ 149,267 $ 121,283 $ 26,534 $ 1,401 $ 49 $ 98 $ 12 $ (100) $ —
Individuals and Individual Entities(b) 102,292 90,865 11,219 171 37 386 28 — (641)
Consumer & Retail 99,331 57,587 39,524 2,062 158 80 112 (235) (11)
Technology, Media &
Telecommunications 59,021 35,602 20,368 2,923 128 13 26 (658) (17)
Industrials 58,250 38,760 18,264 1,050 176 161 41 (746) (9)
Asset Managers 51,775 45,208 6,550 4 13 18 — — (4,785)
Banks & Finance Cos 50,091 34,599 14,692 795 5 — — (834) (2,112)
Healthcare 46,638 36,231 9,248 1,074 85 79 6 (405) (145)
Oil & Gas 41,570 22,221 17,780 992 577 — 98 (429) (10)
Utilities 34,753 22,196 12,246 301 10 1 39 (414) (50)
State & Municipal Govt(c) 26,697 26,195 502 — — 29 — — (46)
Automotive 17,317 10,000 6,759 558 — 5 — (194) —
Chemicals & Plastics 17,276 11,984 5,080 212 — 3 — (10) (13)
Metals & Mining 15,337 7,020 7,620 658 39 1 (1) (33) (6)
Central Govt 14,843 14,502 341 — — — — (9,018) (1,963)
Transportation 13,917 8,644 4,863 347 63 29 7 (37) (37)
Insurance 12,202 9,413 2,768 17 4 3 — (36) (1,998)
Securities Firms 7,335 5,969 1,339 27 — — — (48) (3,201)
Financial Markets Infrastructure 4,116 3,969 147 — — — — — (6)
All other(d) 76,492 72,565 3,548 376 3 4 1 (4,833) (959)
Subtotal $ 898,520 $ 674,813 $ 209,392 $ 12,968 $ 1,347 $ 910 $ 369 $ (18,030) $ (16,009)
Liquid
Noninvestment-grade securities
and other
30 days or cash
more past collateral
As of or for the year ended due and Net charge- Credit held against
December 31, 2018 Credit Investment- Criticized Criticized accruing offs/ derivative derivative
(in millions) exposure(f) grade Noncriticized performing nonperforming loans (recoveries) hedges(g) receivables
Real Estate $ 143,316 $ 117,988 $ 24,174 $ 1,019 $ 135 $ 70 $ (20) $ (2) $ (1)
Individuals and Individual Entities(b) 97,077 86,581 10,164 174 158 703 12 — (915)
Consumer & Retail 94,815 60,678 31,901 2,033 203 43 55 (248) (14)
Technology, Media &
Telecommunications 72,646 46,334 24,081 2,170 61 8 12 (1,011) (12)
Industrials 58,528 38,487 18,594 1,311 136 171 20 (207) (29)
Asset Managers 42,807 36,722 6,067 4 14 10 — — (5,829)
Banks & Finance Cos 49,920 34,120 15,496 299 5 11 — (575) (2,290)
Healthcare 48,142 36,687 10,625 761 69 23 (5) (150) (133)
Oil & Gas 42,600 23,356 17,451 1,158 635 6 36 (248) —
Utilities 28,172 23,558 4,326 138 150 — 38 (142) (60)
State & Municipal Govt(c) 27,351 26,746 603 2 — 18 (1) — (42)
Automotive 17,339 9,637 7,310 392 — 1 — (125) —
Chemicals & Plastics 16,035 11,490 4,427 118 — 4 — — —
Metals & Mining 15,359 8,188 6,767 385 19 1 — (174) (22)
Central Govt 18,456 18,251 124 81 — 4 — (7,994) (2,130)
Transportation 15,660 10,508 4,699 393 60 21 6 (31) (112)
Insurance 12,639 9,777 2,830 — 32 — — (36) (2,080)
Securities Firms 4,558 3,099 1,459 — — — — (158) (823)
Financial Markets Infrastructure 7,484 6,746 738 — — — — — (26)
All other(d) 68,284 64,664 3,606 12 2 2 2 (1,581) (804)
Subtotal $ 881,188 $ 673,617 $ 195,442 $ 10,450 $ 1,679 $ 1,096 $ 155 $ (12,682) $ (15,322)
(a) The industry rankings presented in the table as of December 31, 2018, are based on the industry rankings of the corresponding exposures at
December 31, 2019, not actual rankings of such exposures at December 31, 2018.
(b) Individuals and Individual Entities predominantly consists of Wealth Management clients within AWM and includes exposure to personal investment
companies and personal and testamentary trusts.
(c) In addition to the credit risk exposure to states and municipal governments (both U.S. and non-U.S.) at December 31, 2019 and 2018, noted above, the
Firm held: $6.5 billion and $7.8 billion, respectively, of trading assets; $29.8 billion and $37.7 billion, respectively, of AFS securities; and $4.8 billion at
both periods of held-to-maturity (“HTM”) securities, issued by U.S. state and municipal governments. Refer to Note 2 and Note 10 for further information.
(d) All other includes: SPEs and Private education and civic organizations, representing approximately 92% and 8%, respectively, at both December 31, 2019
and 2018.
(e) Excludes cash placed with banks of $254.0 billion and $268.1 billion, at December 31, 2019 and 2018, respectively, which is predominantly placed with
various central banks, primarily Federal Reserve Banks.
(f) Credit exposure is net of risk participations and excludes the benefit of credit derivatives used in credit portfolio management activities held against
derivative receivables or loans and liquid securities and other cash collateral held against derivative receivables.
(g) Represents the net notional amounts of protection purchased and sold through credit derivatives used to manage the credit exposures; these derivatives
do not qualify for hedge accounting under U.S. GAAP. The All other category includes purchased credit protection on certain credit indices.
Real Estate
Presented below is additional information on the Real Estate industry, to which the Firm has significant exposure.
Real Estate exposure increased $6.0 billion to $149.3 billion during the year ended December 31, 2019, and the investment
grade percentage of the portfolio remained relatively flat at 81%. Refer to Note 12 for further information on Real Estate
loans.
December 31, 2019
Loans and %
Lending-related Derivative Credit Investment-
(in millions, except ratios) Commitments Receivables exposure grade % Drawn(c)
Multifamily (a)
$ 86,326 $ 58 $ 86,384 91% 92%
Other 62,322 561 62,883 68 59
Total Real Estate Exposure(b) 148,648 619 149,267 81 78
Loans
In its wholesale businesses, the Firm provides loans to a The following table presents net charge-offs/recoveries,
variety of clients, ranging from large corporate and which are defined as gross charge-offs less recoveries, for
institutional clients to high-net-worth individuals. Refer to the years ended December 31, 2019 and 2018. The
Note 12 for a further discussion on loans, including amounts in the table below do not include gains or losses
information about delinquencies, loan modifications and from sales of nonaccrual loans.
other credit quality indicators.
Wholesale net charge-offs/(recoveries)
The following table presents the change in the nonaccrual Year ended December 31,
loan portfolio for the years ended December 31, 2019 and (in millions, except ratios) 2019 2018
2018. Loans – reported
Average loans retained $ 435,876 $ 416,828
Wholesale nonaccrual loan activity
Gross charge-offs 411 313
Year ended December 31, (in millions) 2019 2018
Gross recoveries (42) (158)
Beginning balance $ 1,370 $ 1,734
Net charge-offs/(recoveries) 369 155
Additions 2,141 1,188
Net charge-off/(recovery) rate 0.08% 0.04%
Reductions:
Paydowns and other 1,435 692
Gross charge-offs 376 299
Returned to performing status 556 234
Sales 206 327
Total reductions 2,573 1,552
Net changes (432) (364)
Ending balance $ 938 $ 1,370
(“AVG”). These measures all incorporate netting and exposure to a counterparty (AVG) and the counterparty’s
collateral benefits, where applicable. credit quality. Many factors may influence the nature and
Peak represents a conservative measure of potential magnitude of these correlations over time. To the extent
that these correlations are identified, the Firm may adjust
exposure to a counterparty calculated in a manner that is
the CVA associated with that counterparty’s AVG. The Firm
broadly equivalent to a 97.5% confidence level over the life
risk manages exposure to changes in CVA by entering into
of the transaction. Peak is the primary measure used by the
credit derivative contracts, as well as interest rate, foreign
Firm for setting credit limits for derivative contracts, senior exchange, equity and commodity derivative contracts.
management reporting and derivatives exposure
management. The below graph shows exposure profiles to the Firm’s
current derivatives portfolio over the next 10 years as
DRE exposure is a measure that expresses the risk of calculated by the Peak, DRE and AVG metrics. The three
derivative exposure on a basis intended to be equivalent to measures generally show that exposure will decline after
the risk of loan exposures. DRE is a less extreme measure of the first year, if no new trades are added to the portfolio.
potential credit loss than Peak and is used as an input for
aggregating derivative credit risk exposures with loans and Exposure profile of derivatives measures
December 31, 2019
other credit risk. (in billions)
Finally, AVG is a measure of the expected fair value of the
Firm’s derivative receivables at future time periods,
including the benefit of collateral. AVG over the total life of
the derivative contract is used as the primary metric for
pricing purposes and is used to calculate credit risk capital
and CVA, as further described below.
The fair value of the Firm’s derivative receivables
incorporates CVA to reflect the credit quality of
counterparties. CVA is based on the Firm’s AVG to a
counterparty and the counterparty’s credit spread in the
credit derivatives market. The Firm believes that active risk
management is essential to controlling the dynamic credit
risk in the derivatives portfolio. In addition, the Firm’s risk
management process takes into consideration the potential
impact of wrong-way risk, which is broadly defined as the
potential for increased correlation between the Firm’s
The following table summarizes the ratings profile of the Firm’s derivative receivables, including credit derivatives, net of all
collateral, at the dates indicated. The Firm considers internal ratings equivalent to BBB-/Baa3 or higher as investment grade.
Refer to Note 12 for further information on internal risk ratings.
The Firm also uses credit derivatives as an end-user to The credit derivatives used in credit portfolio management
manage other exposures, including credit risk arising from activities do not qualify for hedge accounting under U.S.
certain securities held in the Firm’s market-making GAAP; these derivatives are reported at fair value, with
businesses. These credit derivatives are not included in gains and losses recognized in principal transactions
credit portfolio management activities. revenue. In contrast, the loans and lending-related
commitments being risk-managed are accounted for on an
accrual basis. This asymmetry in accounting treatment,
between loans and lending-related commitments and the
credit derivatives used in credit portfolio management
activities, causes earnings volatility that is not
representative, in the Firm’s view, of the true changes in
value of the Firm’s overall credit exposure.
The effectiveness of credit default swaps (“CDS”) as a hedge
against the Firm’s exposures may vary depending on a
number of factors, including the named reference entity
(i.e., the Firm may experience losses on specific exposures
that are different than the named reference entities in the
purchased CDS); the contractual terms of the CDS (which
may have a defined credit event that does not align with an
actual loss realized by the Firm); and the maturity of the
Firm’s CDS protection (which in some cases may be shorter
than the Firm’s exposures). However, the Firm generally
seeks to purchase credit protection with a maturity date
that is the same or similar to the maturity date of the
exposure for which the protection was purchased, and
remaining differences in maturity are actively monitored
and managed by the Firm. Refer to Credit derivatives in
Note 5 for a detailed description of credit derivatives.
Note: In the table above, the financial measures which exclude the impact of PCI loans are non-GAAP financial measures.
(a) Write-offs of PCI loans are recorded against the allowance for loan losses when actual losses for a pool exceed estimated losses that were recorded as
purchase accounting adjustments at the time of acquisition. A write-off of a PCI loan is recognized when the underlying loan is removed from a pool.
(b) Includes risk-rated loans that have been placed on nonaccrual status and loans that have been modified in a TDR. The asset-specific credit card allowance
for loan losses modified in a TDR is calculated based on the loans’ original contractual interest rates and does not consider any incremental penalty rates.
(c) The allowance for lending-related commitments is reported in accounts payable and other liabilities on the Consolidated balance sheets.
(d) The Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance.
The following table summarizes the predominant business activities and related market risks, as well as positions which give
rise to market risk and certain measures used to capture those risks, for each LOB and Corporate.
In addition to the predominant business activities, each LOB and Corporate may engage in principal investing activities. To the
extent principal investments are deemed market risk sensitive, they are reflected in relevant risk measures (i.e., VaR or Other
sensitivity-based measures) and captured in the table below. Refer to Investment Portfolio Risk Management on page 118 for
additional discussion on principal investments.
LOBs and Predominant business Related market risks Positions included in Risk Positions included in Positions included in other
Corporate activities Management VaR earnings-at-risk sensitivity-based measures
CCB • Services mortgage • Risk from changes in the • Mortgage commitments, • Retained loan portfolio
loans probability of newly classified as derivatives • Deposits
• Originates loans and originated mortgage • Warehouse loans, classified
takes deposits commitments closing as trading assets – debt
• Interest rate risk and instruments
prepayment risk
• MSRs
• Hedges of mortgage
commitments, warehouse
loans and MSRs, classified
as derivatives
• Interest-only securities,
classified as trading assets
debt instruments, and
related hedges, classified as
derivatives
• Fair value option elected
liabilities
CIB • Makes markets and • Risk of loss from adverse • Trading assets/liabilities – • Retained loan portfolio • Privately held equity and
services clients across movements in market debt and marketable equity • Deposits other investments
fixed income, foreign prices and implied instruments, and measured at fair value
exchange, equities and volatilities across interest derivatives, including • Derivatives FVA and fair
commodities rate, foreign exchange, hedges of the retained loan value option elected
• Originates loans and credit, commodity and portfolio liabilities DVA
takes deposits equity instruments • Certain securities
• Basis and correlation risk purchased, loaned or sold
from changes in the way under resale agreements
asset values move and securities borrowed
relative to one another • Fair value option elected
• Interest rate risk and liabilities
prepayment risk • Derivative CVA and
associated hedges
• Marketable equity
investments
CB • Originates loans and • Interest rate risk and • Marketable equity • Retained loan portfolio
takes deposits prepayment risk investments(a) • Deposits
AWM • Provides initial capital • Risk from adverse • Debt securities held in • Retained loan portfolio • Initial seed capital
investments in movements in market advance of distribution to • Deposits investments and related
products such as factors (e.g., rates and clients, classified as trading hedges, classified as
mutual funds and credit spreads) assets - debt instruments(a) derivatives
capital invested • Interest rate risk and • Capital invested alongside
alongside third-party prepayment risk third-party investors,
investors typically in privately
• Originates loans and distributed collective
takes deposits vehicles managed by AWM
(i.e., co-investments)
Corporate • Manages the Firm’s • Structural interest rate • Derivative positions • Deposits with banks • Privately held equity and
liquidity, funding, risk from the Firm’s measured at fair value • Investment securities other investments
capital, structural traditional banking through noninterest portfolio and related measured at fair value
interest rate and activities revenue in earnings interest rate hedges • Foreign exchange exposure
foreign exchange risks • Structural non-USD • Marketable equity related to Firm-issued non-
• Long-term debt and
foreign exchange risks investments related interest rate USD long-term debt (“LTD”)
hedges and related hedges
(a) The AWM and CB contributions to Firmwide average VaR were not material for the year ended December 31, 2019 and 2018.
Refer to JPMorgan Chase’s Basel III Pillar 3 Regulatory VaR and the other components of market risk regulatory
Capital Disclosures reports, which are available on the capital for the Firm (e.g., VaR-based measure, stressed VaR-
Firm’s website, for additional information on Regulatory based measure and the respective backtesting).
The table below shows the results of the Firm’s Risk Management VaR measure using a 95% confidence level. VaR can vary
significantly as positions change, market volatility fluctuates, and diversification benefits change.
Total VaR
As of or for the year ended December 31, 2019 2018
(in millions) Avg. Min Max Avg. Min Max
CIB trading VaR by risk type
Fixed income $ 40 $ 31 $ 50 $ 33 $ 25 $ 46
Foreign exchange 7 4 15 6 3 15
Equities 20 13 31 17 13 26
Commodities and other 8 6 12 8 4 13
Diversification benefit to CIB trading VaR (33) (a)
NM (b)
NM (b)
(26) (a)
NM (b)
NM (b)
CCB VaR 5 1 11 1 — 3
Corporate and other LOB VaR 10 9 13 12 9 14
(a) (b) (b) (a) (b) (b)
Diversification benefit to other VaR (4) NM NM (1) NM NM
(b) (b) (b) (b)
Other VaR 11 8 17 12 9 14
(a) (b) (b) (a) (b) (b)
Diversification benefit to CIB and other VaR (10) NM NM (10) NM NM
Total VaR $ 43 $ 30 (b)
$ 65 (b)
$ 41 $ 28 (b)
$ 62 (b)
(a) Average portfolio VaR is less than the sum of the VaR of the components described above, which is due to portfolio diversification. The diversification
effect reflects that the risks are not perfectly correlated.
(b) Diversification benefit represents the difference between the total VaR and each reported level and the sum of its individual components. Diversification
benefit reflects the non-additive nature of VaR due to imperfect correlation across LOBs, Corporate, and risk types. The maximum and minimum VaR for
each portfolio may have occurred on different trading days than the components and consequently diversification benefit is not meaningful.
Average Total VaR increased $2 million for the year-ended VaR back-testing
December 31, 2019 as compared with the prior year. This The Firm performs daily VaR model back-testing, which
was predominantly due to increased exposure in the Fixed compares the daily Risk Management VaR results with the
Income risk type, increases in the Equities risk type driven daily gains and losses actually recognized on market-risk
by the inclusion of Tradeweb following its IPO in the second related revenue.
quarter of 2019, and increased volatility in the one-year
historical look-back period, partially offset by increases in The Firm’s definition, of market risk-related gains and losses
diversification benefit. is consistent with the definition used by the banking
regulators under Basel III. Under this definition, market
In addition, average CCB VaR increased by $4 million, driven risk-related gains and losses are defined as: gains and
by MSR risk management activities. losses on the positions included in the Firm’s Risk
Management VaR excluding select components of revenue
such as fees, commissions, certain valuation adjustments,
net interest income, and gains and losses arising from
intraday trading.
Investment activities(a)
Investment management activities Consists of seed capital and related hedges; 10% decline in market $ (68) $ (102)
and fund co-investments value
Other investments Consists of privately held equity and other 10% decline in market (192) (218)
investments held at fair value value
Funding activities
Non-USD LTD cross-currency basis Represents the basis risk on derivatives 1 basis point parallel (17) (13)
used to hedge the foreign exchange risk on tightening of cross currency
the non-USD LTD(b) basis
Non-USD LTD hedges foreign currency Primarily represents the foreign exchange 10% depreciation of 15 17
(“FX”) exposure revaluation on the fair value of the currency
derivative hedges(b)
Derivatives – funding spread risk Impact of changes in the spread related to 1 basis point parallel (5) (4)
derivatives FVA increase in spread
Fair value option elected liabilities – Impact of changes in the spread related to 1 basis point parallel 29 30
funding spread risk fair value option elected liabilities DVA(b) increase in spread
Fair value option elected liabilities – Interest rate sensitivity on fair value option 1 basis point parallel (2) 1
interest rate sensitivity liabilities resulting from a change in the increase in spread
Firm’s own credit spread(b)
(a) Excludes equity securities without readily determinable fair values that are measured under the measurement alternative. Refer to Note 2 for additional
information.
(b) Impact recognized through OCI.
Management of Operational Risk risk to the Firm. Third party cybersecurity incidents such as
The operational risk areas or issues identified through system breakdowns or failures, misconduct by the
monitoring and testing are escalated to the LOBs and employees of such parties, or cyberattacks could affect
Corporate to be remediated through action plans, as their ability to deliver a product or service to the Firm or
needed, to mitigate operational risk. CCOR Management result in lost or compromised information of the Firm or its
may advise the LOBs and Corporate in the development and clients. Clients are also sources of cybersecurity risk to the
implementation of action plans. Firm, particularly when their activities and systems are
beyond the Firm’s own security and control systems. As a
Operational Risk Reporting
result, the Firm engages in regular and ongoing discussions
Escalation of risks is a fundamental expectation for
with certain vendors and clients regarding cybersecurity
employees at the Firm. Risks identified by CCOR
risks and opportunities to improve security. However, where
Management are escalated to the appropriate LOB and
cybersecurity incidents occur as a result of client failures to
Corporate Control Committees, as needed. CCOR
maintain the security of their own systems and processes,
Management has established standards to ensure that
clients are responsible for losses incurred.
consistent operational risk reporting and operational risk
reports are produced on a Firmwide basis as well as by To protect the confidentiality, integrity and availability of
LOBs and Corporate. Reporting includes the evaluation of the Firm’s infrastructure, resources and information, the
key risk indicators and key performance indicators against Firm maintains a cybersecurity program designed to
established thresholds as well as the assessment of prevent, detect, and respond to cyberattacks. The Audit
different types of operational risk against stated risk Committee is updated periodically on the Firm’s Information
appetite. The standards reinforce escalation protocols to Security Program, recommended changes, cybersecurity
senior management and to the Board of Directors. policies and practices, ongoing efforts to improve security,
as well as its efforts regarding significant cybersecurity
Subcategories and examples of operational risks
events. In addition, the Firm has a cybersecurity incident
Operational risk can manifest itself in various ways.
response plan (“IRP”) designed to enable the Firm to
Operational risk subcategories such as Compliance risk,
respond to attempted cybersecurity incidents, coordinate
Conduct risk, Legal risk, and Estimations and Model risk as
such responses with law enforcement and other
well as other operational risks, can lead to losses which are
government agencies, and notify clients and customers, as
captured through the Firm’s operational risk measurement
applicable. Among other key focus areas, the IRP is
processes. Refer to pages 132, 133, and 134, respectively
designed to mitigate the risk of insider trading connected to
for more information on Compliance, Conduct, Legal, and
a cybersecurity incident, and includes various escalation
Estimations and Model risk. Details on other select
points.
examples of operational risks are provided below.
The Cybersecurity and Technology Control functions are
Cybersecurity risk
responsible for governance and oversight of the Firm’s
Cybersecurity risk is an important, continuous and evolving
Information Security Program. In partnership with the
focus for the Firm. The Firm devotes significant resources to
Firm’s LOBs and Corporate, the Cybersecurity and
protecting and continuing to improve the security of its
Technology Control organization identifies information
computer systems, software, networks and other
security risk issues and oversees programs for the
technology assets. The Firm’s security efforts are designed
technological protection of the Firm’s information resources
to protect against, among other things, cybersecurity
including applications, infrastructure as well as confidential
attacks by unauthorized parties attempting to obtain access
and personal information related to the Firm’s customers.
to confidential information, destroy data, disrupt or
The Cybersecurity and Technology organization is
degrade service, sabotage systems or cause other damage.
comprised of business aligned information security
The Firm continues to make significant investments in
managers that are supported within the organization by the
enhancing its cyberdefense capabilities and to strengthen
following products that execute the Information Security
its partnerships with the appropriate government and law
Program for the Firm:
enforcement agencies and other businesses in order to
understand the full spectrum of cybersecurity risks in the • Cyber Defense & Fraud
operating environment, enhance defenses and improve • Data Management, Protection & Privacy
resiliency against cybersecurity threats. The Firm actively • Identity & Access Management
participates in discussions of cybersecurity risks with law
• Governance & Controls
enforcement, government officials, peer and industry
groups, and has significantly increased efforts to educate • Production Management & Resiliency
employees and certain clients on the topic. • Software & Platform Enablement
Third parties with which the Firm does business or that The Global Cybersecurity and Technology Control
facilitate the Firm’s business activities (e.g., vendors, governance structure is designed to identify, escalate, and
exchanges, clearing houses, central depositories, and mitigate information security risks. This structure uses key
financial intermediaries) are also sources of cybersecurity governance forums to disseminate information and monitor
do the points expire, and the points can be redeemed for a that a deferred tax asset is not realizable, a valuation
variety of rewards, including cash (predominantly in the allowance is established. The valuation allowance may be
form of account credits), gift cards and travel. The Firm reversed in a subsequent reporting period if the Firm
maintains a rewards liability which represents the estimated determines that, based on revised estimates of future
cost of rewards points earned and expected to be redeemed taxable income or changes in tax planning strategies, it is
by cardholders. The rewards liability is sensitive to various more likely than not that all or part of the deferred tax
assumptions, including cost per point and redemption rates asset will become realizable. As of December 31, 2019,
for each of the various rewards programs, which are management has determined it is more likely than not that
evaluated periodically. The liability is accrued as the the Firm will realize its deferred tax assets, net of the
cardholder earns the benefit and is reduced when the existing valuation allowance.
cardholder redeems points. This liability was $6.4 billion The Firm adjusts its unrecognized tax benefits as necessary
and $5.8 billion at December 31, 2019 and 2018, when additional information becomes available. Uncertain
respectively, and is recorded in accounts payable and other tax positions that meet the more-likely-than-not recognition
liabilities on the Consolidated balance sheets. threshold are measured to determine the amount of benefit
to recognize. An uncertain tax position is measured at the
Income taxes
largest amount of benefit that management believes is
JPMorgan Chase is subject to the income tax laws of the
more likely than not to be realized upon settlement. It is
various jurisdictions in which it operates, including U.S.
possible that the reassessment of JPMorgan Chase’s
federal, state and local, and non-U.S. jurisdictions. These
unrecognized tax benefits may have a material impact on its
laws are often complex and may be subject to different
effective income tax rate in the period in which the
interpretations. To determine the financial statement
reassessment occurs.
impact of accounting for income taxes, including the
provision for income tax expense and unrecognized tax Refer to Note 25 for additional information on income
benefits, JPMorgan Chase must make assumptions and taxes.
judgments about how to interpret and apply these complex Litigation reserves
tax laws to numerous transactions and business events, as Refer to Note 30 for a description of the significant
well as make judgments regarding the timing of when estimates and judgments associated with establishing
certain items may affect taxable income in the U.S. and litigation reserves.
non-U.S. tax jurisdictions.
JPMorgan Chase’s interpretations of tax laws around the
world are subject to review and examination by the various
taxing authorities in the jurisdictions where the Firm
operates, and disputes may occur regarding its view on a
tax position. These disputes over interpretations with the
various taxing authorities may be settled by audit,
administrative appeals or adjudication in the court systems
of the tax jurisdictions in which the Firm operates.
JPMorgan Chase regularly reviews whether it may be
assessed additional income taxes as a result of the
resolution of these matters, and the Firm records additional
reserves as appropriate. In addition, the Firm may revise its
estimate of income taxes due to changes in income tax
laws, legal interpretations, and business strategies. It is
possible that revisions in the Firm’s estimate of income
taxes may materially affect the Firm’s results of operations
in any reporting period.
The Firm’s provision for income taxes is composed of
current and deferred taxes. Deferred taxes arise from
differences between assets and liabilities measured for
financial reporting versus income tax return purposes.
Deferred tax assets are recognized if, in management’s
judgment, their realizability is determined to be more likely
than not. The Firm has also recognized deferred tax assets
in connection with certain tax attributes, including net
operating loss (“NOL”) carryforwards and foreign tax credit
(“FTC”) carryforwards. The Firm performs regular reviews
to ascertain whether its deferred tax assets are realizable.
These reviews include management’s estimates and
assumptions regarding future taxable income, which also
incorporates various tax planning strategies, including
strategies that may be available to utilize NOLs before they
expire. In connection with these reviews, if it is determined
Management of JPMorgan Chase & Co. (“JPMorgan Chase” Based upon the assessment performed, management
or the “Firm”) is responsible for establishing and concluded that as of December 31, 2019, JPMorgan Chase’s
maintaining adequate internal control over financial internal control over financial reporting was effective based
reporting. Internal control over financial reporting is a upon the COSO 2013 framework. Additionally, based upon
process designed by, or under the supervision of, the Firm’s management’s assessment, the Firm determined that there
principal executive and principal financial officers, or were no material weaknesses in its internal control over
persons performing similar functions, and effected by financial reporting as of December 31, 2019.
JPMorgan Chase’s Board of Directors, management and
The effectiveness of the Firm’s internal control over
other personnel, to provide reasonable assurance regarding
financial reporting as of December 31, 2019, has been
the reliability of financial reporting and the preparation of
audited by PricewaterhouseCoopers LLP, an independent
financial statements for external purposes in accordance
registered public accounting firm, as stated in their report
with accounting principles generally accepted in the United
which appears herein.
States of America (“U.S. GAAP”).
JPMorgan Chase’s internal control over financial reporting
includes those policies and procedures that (1) pertain to
the maintenance of records, that, in reasonable detail,
accurately and fairly reflect the transactions and
dispositions of the Firm’s assets; (2) provide reasonable
assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance
with U.S. GAAP, and that receipts and expenditures of the
Firm are being made only in accordance with authorizations
of JPMorgan Chase’s management and directors; and (3)
provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or
disposition of the Firm’s assets that could have a material James Dimon
effect on the financial statements. Chairman and Chief Executive Officer
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in
conditions, or that the degree of compliance with the
policies or procedures may deteriorate. Management has
completed an assessment of the effectiveness of the Firm’s
internal control over financial reporting as of December 31,
2019. In making the assessment, management used the
“Internal Control — Integrated Framework” (“COSO 2013”)
promulgated by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”). Jennifer Piepszak
Executive Vice President and Chief Financial Officer
significant judgment and estimation by management in estimates. This included, as relevant, evaluating the
determining the modeling techniques utilized in their reasonableness of probabilities of default, loss severities and
statistical credit loss estimates, which in turn led to a high loss given default. Evaluating management’s adjustment to
degree of auditor judgment, subjectivity and effort in the statistical credit loss estimate included evaluating the
performing procedures and in evaluating audit evidence reasonableness of the impacts of model imprecision and
obtained relating to the statistical credit loss estimates and external factors and economic events which have occurred
the appropriateness of the adjustments to the statistical loss but are not yet otherwise reflected in the statistical credit
estimates, and (ii) the audit effort involved professionals with loss estimate. The procedures included the use of
specialized skill and knowledge to assist in evaluating the professionals with specialized skill and knowledge to assist in
audit evidence. evaluating the appropriateness of certain models,
Addressing the matter involved performing procedures and methodologies and inputs into the statistical credit loss
evaluating audit evidence in connection with forming our estimates.
overall opinion on the consolidated financial statements.
These procedures included testing the effectiveness of
controls relating to the Firm’s allowance for loan losses
estimation processes. These procedures also included, among
others, testing management’s process for estimating the
allowance for loan losses, which included evaluating the
appropriateness of the models and methodologies used in the February 25, 2020
statistical credit loss estimates for the wholesale, credit card
and consumer loan portfolios; testing the completeness and
We have served as the Firm’s auditor since 1965.
accuracy of data; and evaluating the reasonableness of
assumptions and judgments used in the statistical credit loss
estimate and the adjustments to the statistical credit loss
Year ended December 31, (in millions, except per share data) 2019 2018 2017
Revenue
Investment banking fees $ 7,501 $ 7,550 $ 7,412
Principal transactions 14,018 12,059 11,347
Lending- and deposit-related fees 6,369 6,052 5,933
Asset management, administration and commissions 17,165 17,118 16,287
Investment securities gains/(losses) 258 (395) (66)
Mortgage fees and related income 2,036 1,254 1,616
Card income 5,304 4,989 4,433
Other income 5,731 5,343 3,646
Noninterest revenue 58,382 53,970 50,608
Interest income(a) 84,040 76,100 63,971
Interest expense(a) 26,795 21,041 13,874
Net interest income 57,245 55,059 50,097
Total net revenue 115,627 109,029 100,705
Noninterest expense
Compensation expense 34,155 33,117 31,208
Occupancy expense 4,322 3,952 3,723
Technology, communications and equipment expense 9,821 8,802 7,715
Professional and outside services 8,533 8,502 7,890
Marketing 3,579 3,290 2,900
Other expense 5,087 5,731 6,079
Total noninterest expense 65,497 63,394 59,515
Income before income tax expense 44,545 40,764 35,900
Income tax expense 8,114 8,290 11,459
Net income $ 36,431 $ 32,474 $ 24,441
Net income applicable to common stockholders $ 34,642 $ 30,709 $ 22,567
Net income per common share data
Basic earnings per share $ 10.75 $ 9.04 $ 6.35
Diluted earnings per share 10.72 9.00 6.31
(a) In the second quarter of 2019, the Firm implemented certain presentation changes that impacted interest income and interest expense, but had no effect
on net interest income. These changes were applied retrospectively and, accordingly, prior period amounts were revised to conform with the current
presentation. Refer to Note 7 for additional information.
The Notes to Consolidated Financial Statements are an integral part of these statements.
The Notes to Consolidated Financial Statements are an integral part of these statements.
The Notes to Consolidated Financial Statements are an integral part of these statements.
Year ended December 31, (in millions, except per share data) 2019 2018 2017
Preferred stock
Balance at January 1 $ 26,068 $ 26,068 $ 26,068
Issuance 5,000 1,696 1,258
Redemption (4,075) (1,696) (1,258)
Balance at December 31 26,993 26,068 26,068
Common stock
Balance at January 1 and December 31 4,105 4,105 4,105
Additional paid-in capital
Balance at January 1 89,162 90,579 91,627
Shares issued and commitments to issue common stock for employee share-based compensation awards, and
related tax effects (591) (738) (734)
Other (49) (679) (314)
Balance at December 31 88,522 89,162 90,579
Retained earnings
Balance at January 1 199,202 177,676 162,440
Cumulative effect of change in accounting principles 62 (183) —
Net income 36,431 32,474 24,441
Dividends declared:
Preferred stock (1,587) (1,551) (1,663)
Common stock ($3.40, $2.72 and $2.12 per share for 2019, 2018 and 2017, respectively) (10,897) (9,214) (7,542)
Balance at December 31 223,211 199,202 177,676
Accumulated other comprehensive income
Balance at January 1 (1,507) (119) (1,175)
Cumulative effect of change in accounting principles — 88 —
Other comprehensive income/(loss), after-tax 3,076 (1,476) 1,056
Balance at December 31 1,569 (1,507) (119)
Shares held in RSU Trust, at cost
Balance at January 1 and December 31 (21) (21) (21)
Treasury stock, at cost
Balance at January 1 (60,494) (42,595) (28,854)
Repurchase (24,121) (19,983) (15,410)
Reissuance 1,566 2,084 1,669
Balance at December 31 (83,049) (60,494) (42,595)
Total stockholders’ equity $ 261,330 $ 256,515 $ 255,693
The Notes to Consolidated Financial Statements are an integral part of these statements.
The Notes to Consolidated Financial Statements are an integral part of these statements.
circumstances, including its role in establishing the VIE and Use of estimates in the preparation of consolidated
its ongoing rights and responsibilities. This assessment financial statements
includes, first, identifying the activities that most The preparation of the Consolidated Financial Statements
significantly impact the VIE’s economic performance; and requires management to make estimates and assumptions
second, identifying which party, if any, has power over those that affect the reported amounts of assets and liabilities,
activities. In general, the parties that make the most revenue and expense, and disclosures of contingent assets
significant decisions affecting the VIE (such as asset and liabilities. Actual results could be different from these
managers, collateral managers, servicers, or owners of call estimates.
options or liquidation rights over the VIE’s assets) or have
Foreign currency translation
the right to unilaterally remove those decision-makers are
JPMorgan Chase revalues assets, liabilities, revenue and
deemed to have the power to direct the activities of a VIE.
expense denominated in non-U.S. currencies into U.S.
To assess whether the Firm has the obligation to absorb dollars using applicable exchange rates.
losses of the VIE or the right to receive benefits from the
Gains and losses relating to translating functional currency
VIE that could potentially be significant to the VIE, the Firm
financial statements for U.S. reporting are included in the
considers all of its economic interests, including debt and
Consolidated statements of comprehensive income. Gains
equity investments, servicing fees, and derivatives or other
and losses relating to nonfunctional currency transactions,
arrangements deemed to be variable interests in the VIE.
including non-U.S. operations where the functional currency
This assessment requires that the Firm apply judgment in
is the U.S. dollar, are reported in the Consolidated
determining whether these interests, in the aggregate, are
statements of income.
considered potentially significant to the VIE. Factors
considered in assessing significance include: the design of Offsetting assets and liabilities
the VIE, including its capitalization structure; subordination U.S. GAAP permits entities to present derivative receivables
of interests; payment priority; relative share of interests and derivative payables with the same counterparty and the
held across various classes within the VIE’s capital related cash collateral receivables and payables on a net
structure; and the reasons why the interests are held by the basis on the Consolidated balance sheets when a legally
Firm. enforceable master netting agreement exists. U.S. GAAP
also permits securities sold and purchased under
The Firm performs on-going reassessments of: (1) whether
repurchase agreements and securities borrowed or loaned
entities previously evaluated under the majority voting-
under securities loan agreements to be presented net when
interest framework have become VIEs, based on certain
specified conditions are met, including the existence of a
events, and are therefore subject to the VIE consolidation
legally enforceable master netting agreement. The Firm has
framework; and (2) whether changes in the facts and
elected to net such balances when the specified conditions
circumstances regarding the Firm’s involvement with a VIE
are met.
cause the Firm’s consolidation conclusion to change.
The Firm uses master netting agreements to mitigate
Refer to Note 14 for further discussion of the Firm’s VIEs.
counterparty credit risk in certain transactions, including
Revenue recognition derivative contracts, resale, repurchase, securities
Interest income borrowed and securities loaned agreements. A master
The Firm recognizes interest income on loans, debt netting agreement is a single agreement with a
securities, and other debt instruments, generally on a level- counterparty that permits multiple transactions governed
yield basis, based on the underlying contractual rate. Refer by that agreement to be terminated or accelerated and
to Note 7 for further discussion of interest income. settled through a single payment in a single currency in the
event of a default (e.g., bankruptcy, failure to make a
Revenue from contracts with customers
required payment or securities transfer or deliver collateral
JPMorgan Chase recognizes noninterest revenue from
or margin when due). Upon the exercise of derivatives
certain contracts with customers, in investment banking
termination rights by the non-defaulting party (i) all
fees, deposit-related fees, asset management
transactions are terminated, (ii) all transactions are valued
administration and commissions, and components of card
and the positive values of “in the money” transactions are
income, when the Firm’s related performance obligations
netted against the negative values of “out of the money”
are satisfied. Refer to Note 6 for further discussion of the
transactions and (iii) the only remaining payment obligation
Firm’s revenue from contracts with customers.
is of one of the parties to pay the netted termination
Principal transactions revenue amount. Upon exercise of default rights under repurchase
JPMorgan Chase carries a portion of its assets and liabilities agreements and securities loan agreements in general (i) all
at fair value. Changes in fair value are reported primarily in transactions are terminated and accelerated, (ii) all values
principal transactions revenue. Refer to Notes 2 and 3 for of securities or cash held or to be delivered are calculated,
further discussion of fair value measurement. Refer to Note and all such sums are netted against each other and (iii) the
6 for further discussion of principal transactions revenue. only remaining payment obligation is of one of the parties
to pay the netted termination amount.
CECL
Off–balance sheet lending-related
December adoption January 1, financial instruments, guarantees and
(in billions) 31, 2019 impact 2020 other commitments Note 28 page 272
Allowance for credit losses Litigation Note 30 page 279
Consumer, excluding credit card $ 3.2 $ 0.2 $ 3.4
Credit card 5.7 5.5 11.2
Wholesale 5.4 (1.4) 4.0
Firmwide $ 14.3 $ 4.3 $ 18.6
Retained earnings
Firmwide allowance increase $ 4.3
Balance sheet reclassification(a) (0.8)
Total pre-tax impact 3.5
Tax effect (0.8)
Decrease to retained earnings $ 2.7
The following table describes the valuation methodologies generally used by the Firm to measure its significant products/
instruments at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.
Private equity direct Fair value is estimated using all available information; the range of Level 2 or 3
investments potential inputs include:
• Transaction prices
• Trading multiples of comparable public companies
• Operating performance of the underlying portfolio company
• Adjustments as required, since comparable public companies are not
identical to the company being valued, and for company-specific
issues and lack of liquidity.
• Additional available inputs relevant to the investment.
Fund investments (e.g., Net asset value
mutual/collective investment • NAV is supported by the ability to redeem and purchase at the NAV Level 1
funds, private equity funds, level.
hedge funds, and real estate
funds) • Adjustments to the NAV as required, for restrictions on redemption Level 2 or 3(a)
(e.g., lock-up periods or withdrawal limitations) or where observable
activity is limited.
Beneficial interests issued by Valued using observable market information, where available. Level 2 or 3
consolidated VIEs In the absence of observable market information, valuations are based
on the fair value of the underlying assets held by the VIE.
(a) Excludes certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient.
(a) At December 31, 2019 and 2018, included total U.S. GSE obligations of $104.5 billion and $92.3 billion, respectively, which were mortgage-related.
(b) At December 31, 2019 and 2018, included within trading loans were $19.8 billion and $13.2 billion, respectively, of residential first-lien mortgages, and
$3.4 billion and $2.3 billion, respectively, of commercial first-lien mortgages. Residential mortgage loans include conforming mortgage loans originated
with the intent to sell to U.S. GSEs and government agencies of $13.6 billion and $7.6 billion, respectively.
(c) Physical commodities inventories are generally accounted for at the lower of cost or net realizable value. “Net realizable value” is a term defined in U.S.
GAAP as not exceeding fair value less costs to sell (“transaction costs”). Transaction costs for the Firm’s physical commodities inventories are either not
applicable or immaterial to the value of the inventory. Therefore, net realizable value approximates fair value for the Firm’s physical commodities
inventories. When fair value hedging has been applied (or when net realizable value is below cost), the carrying value of physical commodities
Level 3 valuations
The Firm has established well-structured processes for In the Firm’s view, the input range and the weighted average
determining fair value, including for instruments where fair value do not reflect the degree of input uncertainty or an
value is estimated using significant unobservable inputs assessment of the reasonableness of the Firm’s estimates and
(level 3). Refer to pages 154–158 of this Note for further assumptions. Rather, they reflect the characteristics of the
information on the Firm’s valuation process and a detailed various instruments held by the Firm and the relative
discussion of the determination of fair value for individual distribution of instruments within the range of
financial instruments. characteristics. For example, two option contracts may have
similar levels of market risk exposure and valuation
Estimating fair value requires the application of judgment.
uncertainty, but may have significantly different implied
The type and level of judgment required is largely dependent
volatility levels because the option contracts have different
on the amount of observable market information available to
underlyings, tenors, or strike prices. The input range and
the Firm. For instruments valued using internally developed
weighted average values will therefore vary from period-to-
valuation models and other valuation techniques that use
period and parameter-to-parameter based on the
significant unobservable inputs and are therefore classified
characteristics of the instruments held by the Firm at each
within level 3 of the fair value hierarchy, judgments used to
balance sheet date.
estimate fair value are more significant than those required
when estimating the fair value of instruments classified For the Firm’s derivatives and structured notes positions
within levels 1 and 2. classified within level 3 at December 31, 2019, interest rate
correlation inputs used in estimating fair value were
In arriving at an estimate of fair value for an instrument
distributed across the range; equity correlation, equity-FX
within level 3, management must first determine the
and equity-IR correlation inputs were concentrated in the
appropriate valuation model or other valuation technique to
middle of the range; commodity correlation inputs were
use. Second, due to the lack of observability of significant
concentrated in the middle of the range; credit correlation
inputs, management must assess relevant empirical data in
inputs were concentrated towards the lower end of the range;
deriving valuation inputs including transaction details, yield
and forward equity prices and the interest rate-foreign
curves, interest rates, prepayment speed, default rates,
exchange (“IR-FX”) correlation inputs were distributed across
volatilities, correlations, prices (such as commodity, equity or
the range. In addition, the interest rate volatility and interest
debt prices), valuations of comparable instruments, foreign
rate spread volatility inputs used in estimating fair value were
exchange rates and credit curves.
distributed across the range; equity volatilities and
The following table presents the Firm’s primary level 3 commodity volatilities were concentrated towards the lower
financial instruments, the valuation techniques used to end of the range; and forward commodity prices used in
measure the fair value of those financial instruments, the estimating the fair value of commodity derivatives were
significant unobservable inputs, the range of values for those concentrated in the middle of the range. Prepayment speed
inputs and, for certain instruments, the weighted averages of inputs used in estimating the fair value of interest rate
such inputs. While the determination to classify an derivatives were concentrated towards the lower end of the
instrument within level 3 is based on the significance of the range. Recovery rate inputs used in estimating the fair value
unobservable inputs to the overall fair value measurement, of credit derivatives were distributed across the range; credit
level 3 financial instruments typically include observable spreads were concentrated towards the lower end of the
components (that is, components that are actively quoted range; conditional default rates and loss severity inputs were
and can be validated to external sources) in addition to the concentrated towards the upper end of the range and price
unobservable components. The level 1 and/or level 2 inputs inputs were concentrated towards the lower end of the range.
are not included in the table. In addition, the Firm manages
the risk of the observable components of level 3 financial
instruments using securities and derivative positions that are
classified within levels 1 or 2 of the fair value hierarchy.
The range of values presented in the table is representative
of the highest and lowest level input used to value the
significant groups of instruments within a product/instrument
classification. Where provided, the weighted averages of the
input values presented in the table are calculated based on
the fair value of the instruments that the input is being used
to value.
(a) The categories presented in the table have been aggregated based upon the product type, which may differ from their classification on the Consolidated
balance sheets. Furthermore, the inputs presented for each valuation technique in the table are, in some cases, not applicable to every instrument valued
using the technique as the characteristics of the instruments can differ.
(b) Comprises U.S. GSEs and government agency securities of $797 million, nonagency securities of $24 million and trading loans of $155 million.
(c) Comprises nonagency securities of $4 million and trading loans of $95 million.
(d) Comprises trading loans.
(e) Long-term debt, short-term borrowings and deposits include structured notes issued by the Firm that are financial instruments that typically contain
embedded derivatives. The estimation of the fair value of structured notes includes the derivative features embedded within the instrument. The significant
unobservable inputs are broadly consistent with those presented for derivative receivables.
(f) Includes level 3 assets and liabilities that are insignificant both individually and in aggregate.
(g) Price is a significant unobservable input for certain instruments. When quoted market prices are not readily available, reliance is generally placed on price-
based internal valuation techniques. The price input is expressed assuming a par value of $100.
(h) Forward equity price is expressed as a percentage of the current equity price.
Changes in and ranges of unobservable inputs underlying borrower, and the remaining tenor of the
The following discussion provides a description of the impact obligation as well as the level and type (e.g., fixed or floating)
on a fair value measurement of a change in each of interest rate being paid by the borrower. Typically
unobservable input in isolation, and the interrelationship collateral pools with higher borrower credit quality have a
between unobservable inputs, where relevant and significant. higher prepayment rate than those with lower borrower
The impact of changes in inputs may not be independent, as a credit quality, all other factors being equal.
change in one unobservable input may give rise to a change
Conditional default rate – The conditional default rate is a
in another unobservable input. Where relationships do exist
measure of the reduction in the outstanding collateral
between two unobservable inputs, those relationships are
balance underlying a collateralized obligation as a result of
discussed below. Relationships may also exist between
defaults. While there is typically no direct relationship
observable and unobservable inputs (for example, as
between conditional default rates and prepayment speeds,
observable interest rates rise, unobservable prepayment
collateralized obligations for which the underlying collateral
rates decline); such relationships have not been included in
has high prepayment speeds will tend to have lower
the discussion below. In addition, for each of the individual
conditional default rates. An increase in conditional default
relationships described below, the inverse relationship would
rates would generally be accompanied by an increase in loss
also generally apply.
severity and an increase in credit spreads. An increase in the
The following discussion also provides a description of conditional default rate, in isolation, would result in a
attributes of the underlying instruments and external market decrease in a fair value measurement. Conditional default
factors that affect the range of inputs used in the valuation of rates reflect the quality of the collateral underlying a
the Firm’s positions. securitization and the structure of the securitization itself.
Based on the types of securities owned in the Firm’s market-
Yield – The yield of an asset is the interest rate used to
making portfolios, conditional default rates are most typically
discount future cash flows in a discounted cash flow
at the lower end of the range presented.
calculation. An increase in the yield, in isolation, would result
in a decrease in a fair value measurement. Loss severity – The loss severity (the inverse concept is the
recovery rate) is the expected amount of future realized
Credit spread – The credit spread is the amount of additional
losses resulting from the ultimate liquidation of a particular
annualized return over the market interest rate that a market
loan, expressed as the net amount of loss relative to the
participant would demand for taking exposure to the credit
outstanding loan balance. An increase in loss severity is
risk of an instrument. The credit spread for an instrument
generally accompanied by an increase in conditional default
forms part of the discount rate used in a discounted cash flow
rates. An increase in the loss severity, in isolation, would
calculation. Generally, an increase in the credit spread would
result in a decrease in a fair value measurement.
result in a decrease in a fair value measurement.
The loss severity applied in valuing a mortgage-backed
The yield and the credit spread of a particular mortgage-
security investment depends on factors relating to the
backed security primarily reflect the risk inherent in the
underlying mortgages, including the LTV ratio, the nature of
instrument. The yield is also impacted by the absolute level of
the lender’s lien on the property and other instrument-
the coupon paid by the instrument (which may not
specific factors.
correspond directly to the level of inherent risk). Therefore,
the range of yield and credit spreads reflects the range of risk
inherent in various instruments owned by the Firm. The risk
inherent in mortgage-backed securities is driven by the
subordination of the security being valued and the
characteristics of the underlying mortgages within the
collateralized pool, including borrower FICO scores, LTV ratios
for residential mortgages and the nature of the property and/
or any tenants for commercial mortgages. For corporate debt
securities, obligations of U.S. states and municipalities and
other similar instruments, credit spreads reflect the credit
quality of the obligor and the tenor of the obligation.
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. GSEs and government
agencies $ 549 $ (62) $ 773 $ (310) $ (134) $ 1 $ (20) $ 797 $ (58)
Residential – nonagency 64 25 83 (86) (20) 15 (58) 23 2
Commercial – nonagency 11 2 20 (26) (14) 15 (4) 4 1
Total mortgage-backed
securities 624 (35) 876 (422) (168) 31 (82) 824 (55)
U.S. Treasury, GSEs and
government agencies — — — — — — — — —
Obligations of U.S. states and
municipalities 689 13 85 (159) (8) — (610) 10 13
Non-U.S. government debt
securities 155 1 290 (287) — 14 (18) 155 4
Corporate debt securities 334 47 437 (247) (52) 112 (73) 558 40
Loans 1,706 132 727 (708) (562) 625 (538) 1,382 51
Asset-backed securities 127 — 37 (93) (40) 28 (22) 37 (3)
Total debt instruments 3,635 158 2,452 (1,916) (830) 810 (1,343) 2,966 50
Equity securities 232 (41) 58 (103) (22) 181 (109) 196 (18)
Other 301 (36) 50 (26) (54) 2 (5) 232 91
Total trading assets – debt and
equity instruments 4,168 81 (c) 2,560 (2,045) (906) 993 (1,457) 3,394 123 (c)
Available-for-sale securities:
Mortgage-backed securities 1 — — — — — — 1 —
Asset-backed securities — — — — — — — — —
Total available-for-sale securities 1 — — — — — — 1 —
Loans 122 4 (c) — — (125) — (1) — —
Mortgage servicing rights 6,130 (1,180) (d)
1,489 (789) (951) — — 4,699 (1,180) (d)
Other assets 927 (198) (c) 194 (165) (33) 6 (7) 724 (180) (c)
Deposits $ 4,169 $ 278 (c)(e) $ — $ — $ 916 $ (806) $ 12 $ (1,209) $ 3,360 $ 307 (c)(e)
Short-term borrowings 1,523 229 (c)(e) — — 3,441 (3,356) 85 (248) 1,674 155 (c)(e)
Change in
unrealized
gains/(losses)
Total related to
Fair realized/ Fair financial
Year ended value at unrealized Transfers Transfers value at instruments held
December 31, 2018 January gains/ into (out of) Dec. 31, at Dec. 31,
(in millions) 1, 2018 (losses) Purchases(f) Sales Settlements(g) level 3(h) level 3(h) 2018 2018
Assets:(a)
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. GSEs and government
agencies $ 307 $ (23) $ 478 $ (164) $ (73) $ 94 $ (70) $ 549 $ (21)
Residential – nonagency 60 (2) 78 (50) (7) 59 (74) 64 1
Commercial – nonagency 11 2 18 (18) (17) 36 (21) 11 (2)
Total mortgage-backed
securities 378 (23) 574 (232) (97) 189 (165) 624 (22)
U.S. Treasury, GSEs and
government agencies 1 — — — — — (1) — —
Obligations of U.S. states and
municipalities 744 (17) 112 (70) (80) — — 689 (17)
Non-U.S. government debt
securities 78 (22) 459 (277) (12) 23 (94) 155 (9)
Corporate debt securities 312 (18) 364 (309) (48) 262 (229) 334 (1)
Loans 2,719 26 1,364 (1,793) (658) 813 (765) 1,706 (1)
Asset-backed securities 153 28 98 (41) (55) 45 (101) 127 22
Total debt instruments 4,385 (26) 2,971 (2,722) (950) 1,332 (1,355) 3,635 (28)
Equity securities 295 (40) 118 (120) (1) 107 (127) 232 9
Other 690 (285) 55 (40) (118) 3 (4) 301 (301)
Total trading assets – debt and
equity instruments 5,370 (351) (c) 3,144 (2,882) (1,069) 1,442 (1,486) 4,168 (320) (c)
Available-for-sale securities:
Mortgage-backed securities 1 — — — — — — 1 —
Asset-backed securities 276 1 — — (277) — — — —
Total available-for-sale securities 277 1 (i)
— — (277) — — 1 —
Loans 276 (7) (c) 123 — (196) — (74) 122 (7) (c)
Other assets 1,265 (328) (c) 61 (37) (37) 4 (1) 927 (340) (c)
Short-term borrowings 1,665 (329) (c)(e) — — 3,455 (3,388) 272 (152) 1,523 (131) (c)(e)
Change in
unrealized
gains/(losses)
Total related to
Fair realized/ Fair financial
Year ended value at unrealized Transfers Transfers value at instruments held
December 31, 2017 January gains/ into (out of) Dec. 31, at Dec. 31,
(in millions) 1, 2017 (losses) Purchases(f) Sales Settlements(g) level 3(h) level 3(h) 2017 2017
Assets:(a)
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. GSEs and government
agencies $ 392 $ (11) $ 161 $ (171) $ (70) $ 49 $ (43) $ 307 $ (20)
Residential – nonagency 83 19 53 (30) (64) 132 (133) 60 11
Commercial – nonagency 17 9 27 (44) (13) 64 (49) 11 1
Total mortgage-backed
securities 492 17 241 (245) (147) 245 (225) 378 (8)
U.S. Treasury, GSEs and
government agencies — — — — — 1 — 1 —
Obligations of U.S. states and
municipalities 649 18 152 (70) (5) — — 744 15
Non-U.S. government debt
securities 46 — 559 (518) — 62 (71) 78 —
Corporate debt securities 576 11 872 (612) (497) 157 (195) 312 18
Loans 4,837 333 2,389 (2,832) (1,323) 806 (1,491) 2,719 43
Asset-backed securities 302 32 354 (356) (56) 75 (198) 153 —
Total debt instruments 6,902 411 4,567 (4,633) (2,028) 1,346 (2,180) 4,385 68
Equity securities 231 39 176 (148) (4) 59 (58) 295 21
Other 761 100 30 (46) (162) 17 (10) 690 39
Total trading assets – debt and
equity instruments 7,894 550 (c) 4,773 (4,827) (2,194) 1,422 (2,248) 5,370 128 (c)
Available-for-sale securities:
Mortgage-backed securities 1 — — — — — — 1 —
Asset-backed securities 663 15 — (50) (352) — — 276 14
Other assets 2,223 244 (c) 66 (177) (870) — (221) 1,265 74 (c)
Short-term borrowings 1,134 42 (c)(e) — — 3,289 (2,748) 150 (202) 1,665 7 (c)(e)
Level 3 analysis
Consolidated balance sheets changes • $1.4 billion of long-term debt as a result of an increase in
Level 3 assets (including assets measured at fair value on a observability and a decrease in the significance of
nonrecurring basis) were 0.6% of total Firm assets at unobservable inputs.
December 31, 2019. The following describes significant During the year ended December 31, 2018, significant
changes to level 3 assets since December 31, 2018, for those transfers from level 2 into level 3 included the following:
items measured at fair value on a recurring basis. Refer to
• $1.4 billion of total debt and equity instruments, the
Assets and liabilities measured at fair value on a
majority of which were trading loans, driven by a decrease
nonrecurring basis on page 172 for further information on
in observability.
changes impacting items measured at fair value on a
nonrecurring basis. • $1.0 billion of gross equity derivative receivables and
$1.6 billion of gross equity derivative payables as a result
For the year ended December 31, 2019
of a decrease in observability and an increase in the
Level 3 assets were $13.5 billion at December 31, 2019,
significance of unobservable inputs.
reflecting a decrease of $3.6 billion from December 31,
2018, partially due to a $1.4 billion decrease in MSRs. Refer • $1.1 billion of long-term debt driven by a decrease in
to the Gains and losses section below for additional observability and an increase in the significance of
information. unobservable inputs for certain structured notes.
Transfers between levels for instruments carried at During the year ended December 31, 2018, significant
fair value on a recurring basis transfers from level 3 into level 2 included the following:
During the year ended December 31, 2019, significant • $1.5 billion of total debt and equity instruments, the
transfers from level 2 into level 3 included the following: majority of which were trading loans, driven by an
increase in observability.
• $993 million of total debt and equity instruments, the
majority of which were trading loans, driven by a decrease • $1.2 billion of gross equity derivative receivables and
in observability. $1.5 billion of gross equity derivative payables as a result
of an increase in observability and a decrease in the
• $904 million of gross equity derivative payables as a significance of unobservable inputs.
result of a decrease in observability and an increase in the
significance of unobservable inputs. During the year ended December 31, 2017, significant
transfers from level 2 into level 3 included the following:
During the year ended December 31, 2019, significant
transfers from level 3 into level 2 included the following: • $1.0 billion of gross equity derivative receivables and
$2.5 billion of gross equity derivative payables as a result
• $1.5 billion of total debt and equity instruments, the of a decrease in observability and an increase in the
majority of which were obligations of U.S. states and significance of unobservable inputs.
municipalities and trading loans, driven by an increase in
observability. • $1.7 billion of long-term debt driven by a decrease in
observability and an increase in the significance of
• $1.1 billion of gross equity derivative receivables and unobservable inputs for certain structured notes.
$1.3 billion of gross equity derivative payables as a result
of an increase in observability and a decrease in the During the year ended December 31, 2017, significant
significance of unobservable inputs. transfers from level 3 into level 2 included the following:
• $962 million of gross commodities derivative payables as • $1.5 billion of trading loans driven by an increase in
a result of an increase in observability. observability.
• $1.2 billion of deposits as a result of an increase in • $1.2 billion of gross equity derivative payables as a result
observability and a decrease in the significance of of an increase in observability and a decrease in the
unobservable inputs. significance of unobservable inputs.
There were no liabilities measured at fair value on a nonrecurring basis at December 31, 2019 and 2018.
Nonrecurring fair value changes
The following table presents the total change in value of
assets and liabilities for which a fair value adjustment has
been recognized for the years ended December 31, 2019,
2018 and 2017, related to assets and liabilities held at
those dates.
December 31, (in millions) 2019 2018 2017
Loans $ (274) (a)
$ (68) $ (159)
Other assets 168 (b)
132 (b)
(148)
Accounts payable and other
liabilities — — (1)
Total nonrecurring fair value
gains/(losses) $ (106) $ 64 $ (308)
(a)Primarily includes the impact of certain mortgage loans that were
reclassified to held-for-sale.
(b)Included $187 million and $149 million for the years ended December
31, 2019 and 2018, respectively, of net gains as a result of the
measurement alternative.
Included in other assets above is the Firm’s interest in approximately 40 million Visa Class B shares, recorded at a nominal
carrying value. These shares are subject to certain transfer restrictions currently and will be convertible into Visa Class A
shares upon final resolution of certain litigation matters involving Visa. The conversion rate of Visa Class B shares into Visa
Class A shares is 1.6228 at December 31, 2019, and may be adjusted by Visa depending on developments related to the
litigation matters.
The following table presents by fair value hierarchy classification the carrying values and estimated fair values at
December 31, 2019 and 2018, of financial assets and liabilities, excluding financial instruments that are carried at fair value
on a recurring basis, and their classification within the fair value hierarchy.
December 31, 2019 December 31, 2018
Estimated fair value hierarchy Estimated fair value hierarchy
Total Total
Carrying estimated Carrying estimated
(in billions) value Level 1 Level 2 Level 3 fair value value Level 1 Level 2 Level 3 fair value
Financial assets
Cash and due from banks $ 21.7 $ 21.7 $ — $ — $ 21.7 $ 22.3 $ 22.3 $ — $ — $ 22.3
Deposits with banks 241.9 241.9 — — 241.9 256.5 256.5 — — 256.5
Accrued interest and accounts
receivable 71.3 — 71.2 0.1 71.3 72.0 — 71.9 0.1 72.0
Federal funds sold and
securities purchased under
resale agreements 234.6 — 234.6 — 234.6 308.4 — 308.4 — 308.4
Securities borrowed 133.5 — 133.5 — 133.5 106.9 — 106.9 — 106.9
Investment securities, held-to-
maturity 47.5 0.1 48.8 — 48.9 31.4 — 31.5 — 31.5
Loans, net of allowance for
loan losses(a) 939.5 — 214.1 734.9 949.0 968.0 — 241.5 728.5 970.0
Other 61.3 — 60.6 0.8 61.4 60.5 — 59.6 1.0 60.6
Financial liabilities
Deposits $ 1,533.8 $ — $ 1,534.1 $ — $ 1,534.1 $ 1,447.4 $ — $ 1,447.5 $ — $ 1,447.5
Federal funds purchased and
securities loaned or sold
under repurchase agreements 183.1 — 183.1 — 183.1 181.4 — 181.4 — 181.4
Short-term borrowings 35.0 — 35.0 — 35.0 62.1 — 62.1 — 62.1
Accounts payable and other
liabilities 164.0 0.1 160.0 3.5 163.6 160.6 0.2 157.0 3.0 160.2
Beneficial interests issued by
consolidated VIEs 17.8 — 17.9 — 17.9 20.2 — 20.2 — 20.2
Long-term debt and junior
subordinated deferrable
interest debentures 215.5 — 218.3 3.5 221.8 227.1 — 224.6 3.3 227.9
(a) Fair value is typically estimated using a discounted cash flow model that incorporates the characteristics of the underlying loans (including principal,
contractual interest rate and contractual fees) and other key inputs, including expected lifetime credit losses, interest rates, prepayment rates, and
primary origination or secondary market spreads. For certain loans, the fair value is measured based on the value of the underlying collateral. The
difference between the estimated fair value and carrying value of a financial asset or liability is the result of the different methodologies used to
determine fair value as compared with carrying value. For example, credit losses are estimated for a financial asset’s remaining life in a fair value
calculation but are estimated for a loss emergence period in the allowance for loan losses calculation; future loan income (interest and fees) is
incorporated in a fair value calculation but is generally not considered in the allowance for loan losses.
The majority of the Firm’s lending-related commitments are not carried at fair value on a recurring basis on the Consolidated
balance sheets. The carrying value of the wholesale allowance for lending-related commitments and the estimated fair value of
these wholesale lending-related commitments were as follows for the periods indicated.
December 31, 2019 December 31, 2018
Estimated fair value hierarchy Estimated fair value hierarchy
Total Total
Carrying estimated Carrying estimated
(in billions) value(a) Level 1 Level 2 Level 3 fair value value(a) Level 1 Level 2 Level 3 fair value(b)
Wholesale lending-
related commitments $ 1.2 $ — $ — $ 1.9 $ 1.9 $ 1.0 $ — $ — $ 2.2 $ 2.2
(a) Excludes the current carrying values of the guarantee liability and the offsetting asset, each of which is recognized at fair value at the inception of the
guarantees.
(b) The prior period amounts have been revised to conform with the current period presentation.
The Firm does not estimate the fair value of consumer lending-related commitments. In many cases, the Firm can reduce or
cancel these commitments by providing the borrower notice or, in some cases as permitted by law, without notice. Refer to
page 156 of this Note for a further discussion of the valuation of lending-related commitments.
Determination of instrument-specific credit risk for items • Long-term debt: Changes in value attributable to
for which a fair value election was made instrument-specific credit risk were derived principally
The following describes how the gains and losses that are from observable changes in the Firm’s credit spread as
attributable to changes in instrument-specific credit risk, observed in the bond market.
were determined. • Securities financing agreements: Generally, for these
• Loans and lending-related commitments: For floating- types of agreements, there is a requirement that
rate instruments, all changes in value are attributed to collateral be maintained with a market value equal to or
instrument-specific credit risk. For fixed-rate in excess of the principal amount loaned; as a result,
instruments, an allocation of the changes in value for the there would be no adjustment or an immaterial
period is made between those changes in value that are adjustment for instrument-specific credit risk related to
interest rate-related and changes in value that are these agreements.
credit-related. Allocations are generally based on an
analysis of borrower-specific credit spread and recovery
information, where available, or benchmarking to similar
entities or industries.
Nonaccrual loans
Loans reported as trading assets $ 3,717 $ 1,111 $ (2,606) $ 4,240 $ 1,350 $ (2,890)
Loans 178 139 (39) 39 — (39)
Subtotal 3,895 1,250 (2,645) 4,279 1,350 (2,929)
All other performing loans
Loans reported as trading assets 48,570 47,318 (1,252) 42,215 40,403 (1,812)
Loans 7,046 6,965 (81) 3,186 3,151 (35)
Total loans $ 59,511 $ 55,533 $ (3,978) $ 49,680 $ 44,904 $ (4,776)
Long-term debt
Principal-protected debt $ 40,124 (c) $ 39,246 $ (878) $ 32,674 (c) $ 28,718 $ (3,956)
Nonprincipal-protected debt(b) NA 36,499 NA NA 26,168 NA
Total long-term debt NA $ 75,745 NA NA $ 54,886 NA
Long-term beneficial interests
Nonprincipal-protected debt(b) NA $ 36 NA NA $ 28 NA
Total long-term beneficial interests NA $ 36 NA NA $ 28 NA
(a) There were no performing loans that were ninety days or more past due as of December 31, 2019 and 2018.
(b) Remaining contractual principal is not applicable to nonprincipal-protected structured notes and long-term beneficial interests. Unlike principal-protected
structured notes and long-term beneficial interests, for which the Firm is obligated to return a stated amount of principal at maturity, nonprincipal-
protected structured notes and long-term beneficial interests do not obligate the Firm to return a stated amount of principal at maturity, but for structured
notes to return an amount based on the performance of an underlying variable or derivative feature embedded in the note. However, investors are
exposed to the credit risk of the Firm as issuer for both nonprincipal-protected and principal-protected notes.
(c) Where the Firm issues principal-protected zero-coupon or discount notes, the balance reflects the contractual principal payment at maturity or, if
applicable, the contractual principal payment at the Firm’s next call date.
At December 31, 2019 and 2018, the contractual amount of lending-related commitments for which the fair value option was
elected was $4.6 billion and $6.9 billion, respectively, with a corresponding fair value of $(94) million and $(92) million,
respectively. Refer to Note 28 for further information regarding off-balance sheet lending-related financial instruments.
2019 2018
On-balance sheet On-balance sheet
Credit Off-balance Credit Off-balance
December 31, (in millions) exposure(g) Loans Derivatives sheet(h) exposure(g) Loans Derivatives sheet(h)
Consumer, excluding credit card $ 386,452 $ 335,040 $ — $ 51,412 $ 419,798 $ 373,732 $ — $ 46,066
Receivables from customers — — — — 154 — — —
Total Consumer, excluding credit card 386,452 335,040 — 51,412 419,952 373,732 — 46,066
Credit card 819,644 168,924 — 650,720 762,011 156,632 — 605,379
Total consumer-related 1,206,096 503,964 — 702,132 1,181,963 530,364 — 651,445
Wholesale-related(a)
Real Estate 149,267 116,244 619 32,404 143,316 115,737 164 27,415
Individuals and Individual Entities(b)
102,292 91,980 694 9,618 97,077 86,586 1,017 9,474
Consumer & Retail 99,331 30,879 1,424 67,028 94,815 36,921 1,093 56,801
Technology, Media & Telecommunications 59,021 14,680 2,766 41,575 72,646 16,980 2,667 52,999
Industrials 58,250 19,096 878 38,276 58,528 19,126 958 38,444
Asset Managers 51,775 23,939 7,160 20,676 42,807 16,806 9,033 16,968
Banks & Finance Cos 50,091 30,639 5,165 14,287 49,920 28,825 5,903 15,192
Healthcare 46,638 13,951 2,078 30,609 48,142 16,347 1,874 29,921
Oil & Gas 41,570 13,064 852 27,654 42,600 13,008 559 29,033
Utilities 34,753 5,085 2,573 27,095 28,172 5,591 1,740 20,841
State & Municipal Govt(c) 26,697 9,924 2,000 14,773 27,351 10,319 2,000 15,032
Automotive 17,317 5,408 368 11,541 17,339 5,170 399 11,770
Chemicals & Plastics 17,276 4,710 459 12,107 16,035 4,902 181 10,952
Metals & Mining 15,337 5,202 402 9,733 15,359 5,370 488 9,501
Central Govt 14,843 2,818 10,477 1,548 18,456 3,867 12,869 1,720
Transportation 13,917 4,804 715 8,398 15,660 6,391 1,102 8,167
Insurance 12,202 1,269 2,282 8,651 12,639 1,356 2,569 8,714
Securities Firms 7,335 752 4,507 2,076 4,558 645 2,029 1,884
Financial Markets Infrastructure 4,116 9 2,482 1,625 7,484 18 5,941 1,525
All other(d) 76,492 50,186 1,865 24,441 68,284 45,197 1,627 21,460
Subtotal 898,520 444,639 49,766 404,115 881,188 439,162 54,213 387,813
Loans held-for-sale and loans at fair value 11,166 11,166 — — 15,028 15,028 — —
Receivables from customers and other(e) 33,706 — — — 30,063 — — —
Total wholesale-related 943,392 455,805 49,766 404,115 926,279 454,190 54,213 387,813
Total exposure(f)(g) $2,149,488 $ 959,769 $ 49,766 $1,106,247 $2,108,242 $ 984,554 $ 54,213 $1,039,258
(a) The industry rankings presented in the table as of December 31, 2018, are based on the industry rankings of the corresponding exposures at December 31,
2019, not actual rankings of such exposures at December 31, 2018.
(b) Individuals and Individual Entities predominantly consists of Wealth Management clients within AWM and includes exposure to personal investment companies
and personal and testamentary trusts.
(c) In addition to the credit risk exposure to states and municipal governments (both U.S. and non-U.S.) at December 31, 2019 and 2018, noted above, the Firm
held: $6.5 billion and $7.8 billion, respectively, of trading assets; $29.8 billion and $37.7 billion, respectively, of AFS securities; and $4.8 billion at both
periods of held-to-maturity (“HTM”) securities, issued by U.S. state and municipal governments. Refer to Note 2 and Note 10 for further information.
(d) All other includes: SPEs and Private education and civic organizations, representing approximately 92% and 8%, respectively, at both December 31, 2019
and 2018. Refer to Note 14 for more information on exposures to SPEs.
(e) Receivables from customers primarily represent held-for-investment margin loans to brokerage clients in CIB and AWM that are collateralized by assets
maintained in the clients’ brokerage accounts (e.g., cash on deposit, liquid and readily marketable debt or equity securities), as such no allowance is held
against these receivables. To manage its credit risk the Firm establishes margin requirements and monitors the required margin levels on an ongoing basis,
and requires clients to deposit additional cash or other collateral, or to reduce positions, when appropriate. These receivables are reported within accrued
interest and accounts receivable on the Firm’s Consolidated balance sheets.
(f) Excludes cash placed with banks of $254.0 billion and $268.1 billion, at December 31, 2019 and 2018, respectively, which is predominantly placed with
various central banks, primarily Federal Reserve Banks.
(g) Credit exposure is net of risk participations and excludes the benefit of credit derivatives used in credit portfolio management activities held against derivative
receivables or loans and liquid securities and other cash collateral held against derivative receivables.
(h) Represents lending-related financial instruments.
The following table outlines the Firm’s primary uses of derivatives and the related hedge accounting designation or disclosure
category.
Affected Page
Type of Derivative Use of Derivative Designation and disclosure segment or unit reference
Manage specifically identified risk exposures in qualifying hedge accounting relationships:
• Interest rate Hedge fixed rate assets and liabilities Fair value hedge Corporate 188
• Interest rate Hedge floating-rate assets and liabilities Cash flow hedge Corporate 190
• Foreign exchange Hedge foreign currency-denominated assets and liabilities Fair value hedge Corporate 188
• Foreign exchange Hedge foreign currency-denominated forecasted revenue and Cash flow hedge Corporate 190
expense
• Foreign exchange Hedge the value of the Firm’s investments in non-U.S. dollar Net investment hedge Corporate 191
functional currency entities
• Commodity Hedge commodity inventory Fair value hedge CIB 188
Manage specifically identified risk exposures not designated in qualifying hedge accounting
relationships:
• Interest rate Manage the risk associated with mortgage commitments, warehouse Specified risk management CCB 191
loans and MSRs
• Credit Manage the credit risk associated with wholesale lending exposures Specified risk management CIB 191
• Interest rate and Manage the risk associated with certain other specified assets and Specified risk management Corporate 191
foreign exchange liabilities
Market-making derivatives and other activities:
• Various Market-making and related risk management Market-making and other CIB 191
• Various Other derivatives Market-making and other CIB, AWM, 191
Corporate
(a) Refer to the Credit derivatives discussion on pages 191–194 for more
information on volumes and types of credit derivative contracts.
(b) Represents the sum of gross long and gross short third-party notional
derivative contracts.
(a) Balances exclude structured notes for which the fair value option has been elected. Refer to Note 3 for further information.
(b) As permitted under U.S. GAAP, the Firm has elected to net derivative receivables and derivative payables and the related cash collateral receivables and
payables when a legally enforceable master netting agreement exists.
2019 2018
Amounts Amounts
Gross netted on the Net Gross netted on the Net
derivative Consolidated derivative derivative Consolidated derivative
December 31, (in millions) payables balance sheets payables payables balance sheets payables
U.S. GAAP nettable derivative payables
Interest rate contracts:
OTC $ 267,311 $ (260,229) $ 7,082 $ 233,404 $ (228,369) $ 5,035
OTC–cleared 10,217 (10,138) 79 7,163 (6,494) 669
Exchange-traded (a)
365 (303) 62 210 (135) 75
Total interest rate contracts 277,893 (270,670) 7,223 240,777 (234,998) 5,779
Credit contracts:
OTC 11,570 (10,080) 1,490 13,412 (11,895) 1,517
OTC–cleared 3,390 (3,389) 1 6,716 (6,714) 2
Total credit contracts 14,960 (13,469) 1,491 20,128 (18,609) 1,519
Foreign exchange contracts:
OTC 142,360 (131,792) 10,568 160,930 (152,161) 8,769
OTC–cleared 186 (152) 34 274 (268) 6
Exchange-traded(a) 12 (6) 6 16 (3) 13
Total foreign exchange contracts 142,558 (131,950) 10,608 161,220 (152,432) 8,788
Equity contracts:
OTC 27,594 (21,778) 5,816 29,437 (25,544) 3,893
Exchange-traded(a) 20,216 (18,426) 1,790 16,285 (15,490) 795
Total equity contracts 47,810 (40,204) 7,606 45,722 (41,034) 4,688
Commodity contracts:
OTC 8,714 (6,235) 2,479 8,930 (4,838) 4,092
OTC–cleared 30 (30) — — — —
Exchange-traded(a) 6,012 (5,862) 150 8,259 (8,208) 51
Total commodity contracts 14,756 (12,127) 2,629 17,189 (13,046) 4,143
Derivative payables with appropriate legal opinion 497,977 (468,420) 29,557 (d)
485,036 (460,119) 24,917 (d)
(a) Exchange-traded derivative balances that relate to futures contracts are settled daily.
(b) Represents liquid security collateral as well as cash collateral held at third-party custodians related to derivative instruments where an appropriate legal
opinion has been obtained. For some counterparties, the collateral amounts of financial instruments may exceed the derivative receivables and derivative
payables balances. Where this is the case, the total amount reported is limited to the net derivative receivables and net derivative payables balances with
that counterparty.
(c) Derivative collateral relates only to OTC and OTC-cleared derivative instruments.
(d) Net derivatives receivable included cash collateral netted of $65.9 billion and $55.2 billion at December 31, 2019 and 2018, respectively. Net derivatives
payable included cash collateral netted of $54.4 billion and $43.3 billion at December 31, 2019 and 2018, respectively. Derivative cash collateral relates
to OTC and OTC-cleared derivative instruments.
The following table shows the impact of a single-notch and two-notch downgrade of the long-term issuer ratings of JPMorgan
Chase & Co. and its subsidiaries, predominantly JPMorgan Chase Bank, N.A., at December 31, 2019 and 2018, related to OTC
and OTC-cleared derivative contracts with contingent collateral or termination features that may be triggered upon a ratings
downgrade. Derivatives contracts generally require additional collateral to be posted or terminations to be triggered when the
predefined threshold rating is breached. A downgrade by a single rating agency that does not result in a rating lower than a
preexisting corresponding rating provided by another major rating agency will generally not result in additional collateral
(except in certain instances in which additional initial margin may be required upon a ratings downgrade), nor in termination
payments requirements. The liquidity impact in the table is calculated based upon a downgrade below the lowest current rating
of the rating agencies referred to in the derivative contract.
(a) Primarily consists of hedges of the benchmark (e.g., London Interbank Offered Rate (“LIBOR”)) interest rate risk of fixed-rate long-term debt and AFS
securities. Gains and losses were recorded in net interest income.
(b) Excludes the amortization expense associated with the inception hedge accounting adjustment applied to the hedged item. This expense is recorded in net
interest income and substantially offsets the income statement impact of the excluded components. Also excludes the accrual of interest on interest rate
swaps and the related hedged items.
(c) Primarily consists of hedges of the foreign currency risk of long-term debt and AFS securities for changes in spot foreign currency rates. Gains and losses
related to the derivatives and the hedged items due to changes in foreign currency rates and the income statement impact of excluded components were
recorded primarily in principal transactions revenue and net interest income.
(d) Consists of overall fair value hedges of physical commodities inventories that are generally carried at the lower of cost or net realizable value (net
realizable value approximates fair value). Gains and losses were recorded in principal transactions revenue.
(e) Hedge ineffectiveness is the amount by which the gain or loss on the designated derivative instrument does not exactly offset the gain or loss on the
hedged item attributable to the hedged risk.
(f) The assessment of hedge effectiveness excludes certain components of the changes in fair values of the derivatives and hedged items such as forward
points on foreign exchange forward contracts, time values and cross-currency basis spreads. Excluded components may impact earnings either through
amortization of the initial amount over the life of the derivative or through fair value changes recognized in the current period.
(g) Represents the change in value of amounts excluded from the assessment of effectiveness under the amortization approach, predominantly cross-currency
basis spreads. The amount excluded at inception of the hedge is recognized in earnings over the life of the derivative.
(a) Excludes physical commodities with a carrying value of $6.5 billion and $6.8 billion at December 31, 2019 and 2018, respectively, to which the Firm
applies fair value hedge accounting. As a result of the application of hedge accounting, these inventories are carried at fair value, thus recognizing
unrealized gains and losses in current periods. Since the Firm exits these positions at fair value, there is no incremental impact to net income in future
periods.
(b) Excludes hedged items where only foreign currency risk is the designated hedged risk, as basis adjustments related to foreign currency hedges will not
reverse through the income statement in future periods. At December 31, 2019 and 2018, the carrying amount excluded for available-for-sale securities
is $14.9 billion and $14.6 billion, respectively, and for long-term debt is $2.8 billion and $7.3 billion, respectively.
(c) Carrying amount represents the amortized cost.
(d) Represents hedged items no longer designated in qualifying fair value hedging relationships for which an associated basis adjustment exists at the balance
sheet date.
(a) Primarily consists of hedges of LIBOR-indexed floating-rate assets and floating-rate liabilities. Gains and losses were recorded in net interest income.
(b) Primarily consists of hedges of the foreign currency risk of non-U.S. dollar-denominated revenue and expense. The income statement classification of gains
and losses follows the hedged item – primarily noninterest revenue and compensation expense.
(c) Represents the effective portion of changes in value of the related hedging derivative. Hedge ineffectiveness is the amount by which the cumulative gain or
loss on the designated derivative instrument exceeds the present value of the cumulative expected change in cash flows on the hedged item attributable to
the hedged risk. The Firm did not recognize any ineffectiveness on cash flow hedges during 2017.
The Firm did not experience any forecasted transactions that failed to occur for the years ended 2019, 2018 and 2017.
Over the next 12 months, the Firm expects that approximately $(8) million (after-tax) of net losses recorded in AOCI at
December 31, 2019, related to cash flow hedges will be recognized in income. For cash flow hedges that have been
terminated, the maximum length of time over which the derivative results recorded in AOCI will be recognized in earnings is
approximately five years, corresponding to the timing of the originally hedged forecasted cash flows. For open cash flow
hedges, the maximum length of time over which forecasted transactions are hedged is approximately seven years. The Firm’s
longer-dated forecasted transactions relate to core lending and borrowing activities.
(a) Certain components of hedging derivatives are permitted to be excluded from the assessment of hedge effectiveness, such as forward points on foreign
exchange forward contracts. The Firm elects to record changes in fair value of these amounts directly in other income.
(b) Excludes amounts reclassified from AOCI to income on the sale or liquidation of hedged entities. The Firm reclassified net pre-tax gains/(losses) of $18
million to other income, $(17) million and $50 million to other expense related to the liquidation of certain legal entities during the years ended
December 31, 2019, 2018 and 2017, respectively. Refer to Note 24 for further information.
(c) Represents the effective portion of changes in value of the related hedging derivative. The Firm did not recognize any ineffectiveness on net investment
hedges directly in income during 2017.
(a) Other credit derivatives predominantly consist of credit swap options and total return swaps.
(b) Represents the total notional amount of protection purchased where the underlying reference instrument is identical to the reference instrument on
protection sold; the notional amount of protection purchased for each individual identical underlying reference instrument may be greater or lower than
the notional amount of protection sold.
(c) Does not take into account the fair value of the reference obligation at the time of settlement, which would generally reduce the amount the seller of
protection pays to the buyer of protection in determining settlement value.
(d) Represents protection purchased by the Firm on referenced instruments (single-name, portfolio or index) where the Firm has not sold any protection on
the identical reference instrument.
The following tables summarize the notional amounts by the ratings, maturity profile, and total fair value, of credit derivatives
and credit-related notes as of December 31, 2019 and 2018, where JPMorgan Chase is the seller of protection. The maturity
profile is based on the remaining contractual maturity of the credit derivative contracts. The ratings profile is based on the
rating of the reference entity on which the credit derivative contract is based. The ratings and maturity profile of credit
derivatives and credit-related notes where JPMorgan Chase is the purchaser of protection are comparable to the profile
reflected below.
December 31, 2018 Total notional Fair value of Fair value of Net fair
(in millions) <1 year 1–5 years >5 years amount receivables(b) payables(b) value
Risk rating of reference entity
Investment-grade $ (115,443) $ (402,325) $ (43,611) $ (561,379) $ 5,720 $ (2,791) $ 2,929
Noninvestment-grade (45,897) (119,348) (11,840) (177,085) 4,719 (5,660) (941)
Total $ (161,340) $ (521,673) $ (55,451) $ (738,464) $ 10,439 $ (8,451) $ 1,988
(a) The ratings scale is primarily based on external credit ratings defined by S&P and Moody’s.
(b) Amounts are shown on a gross basis, before the benefit of legally enforceable master netting agreements and cash collateral received by the Firm.
Year ended December 31, The following table presents the components of Firmwide
(in millions) 2019 2018 2017 asset management, administration and commissions.
Trading revenue by instrument
type Year ended December 31,
(in millions) 2019 2018 2017
Interest rate $ 2,552 $ 1,961 $ 2,479
Asset management fees
Credit 1,611 1,395 1,329
Investment management fees(a) $ 10,865 $ 10,768 $ 10,434
Foreign exchange 3,171 3,222 2,746
All other asset management fees(b) 315 270 296
Equity 5,812 4,924 3,873
Total asset management fees 11,180 11,038 10,730
Commodity 1,122 906 661
Total trading revenue 14,268 12,408 11,088 Total administration fees (c)
2,197 2,179 2,029
Private equity gains/(losses) (250) (349) 259 Commissions and other fees
Brokerage commissions(d) 2,439 2,505 2,239
Principal transactions $ 14,018 $ 12,059 $ 11,347
All other commissions and fees 1,349 1,396 1,289
Principal transactions revenue is earned primarily by CIB. Total commissions and fees 3,788 3,901 3,528
Refer to Note 32 for segment results. Total asset management,
administration and
Lending- and deposit-related fees commissions $ 17,165 $ 17,118 $ 16,287
Lending-related fees include fees earned from loan (a) Represents fees earned from managing assets on behalf of the Firm’s
commitments, standby letters of credit, financial clients, including investors in Firm-sponsored funds and owners of
guarantees, and other loan-servicing activities. Deposit- separately managed investment accounts.
related fees include fees earned in lieu of compensating (b) Represents fees for services that are ancillary to investment
balances, and fees earned from performing cash management services, such as commissions earned on the sales or
distribution of mutual funds to clients. These fees are recorded as
management activities and other deposit account services. revenue at the time the service is rendered or, in the case of certain
Lending- and deposit-related fees in this revenue category distribution fees based on the underlying fund’s asset value and/or
are recognized over the period in which the related service investor redemption, recorded over time as the investor remains in the
is provided. fund or upon investor redemption.
(c) Predominantly includes fees for custody, securities lending, funds
The following table presents the components of lending- services and securities clearance. These fees are recorded as revenue
and deposit-related fees. over the period in which the related service is provided.
(d) Represents commissions earned when the Firm acts as a broker, by
Year ended December 31, (in millions) 2019 2018 2017 facilitating its clients’ purchases and sales of securities and other
financial instruments. Brokerage commissions are collected and
Lending-related fees $ 1,184 $ 1,117 $ 1,110
recognized as revenue upon occurrence of the client transaction. The
Deposit-related fees 5,185 4,935 4,823 Firm reports certain costs paid to third-party clearing houses and
Total lending- and deposit-related fees $ 6,369 $ 6,052 $ 5,933 exchanges net against commission revenue.
The following table presents the changes in benefit obligations, plan assets, the net funded status, and the pretax pension and
OPEB amounts recorded in AOCI on the Consolidated balance sheets for the Firm’s defined benefit pension and OPEB plans, and
the weighted-average actuarial annualized assumptions for the projected and accumulated postretirement benefit obligations.
Defined benefit
As of or for the year ended December 31, pension plans OPEB plans
(in millions) 2019 2018 2019 2018
Change in benefit obligation
Benefit obligation, beginning of year $ (15,512) $ (16,700) $ (612) $ (684)
Benefits earned during the year (356) (354) — —
Interest cost on benefit obligations (596) (556) (24) (24)
Plan amendments (5) (29) — —
Plan curtailment — 123 — —
Employee contributions (8) (7) (14) (15)
Net gain/(loss) (1,296) (g) 938 (g) (51) 40
Benefits paid 820 873 67 69
Plan settlements — 15 — —
Foreign exchange impact and other (116) 185 (2) 2
Benefit obligation, end of year (a)
$ (17,069) $ (15,512) $ (636) $ (612)
Change in plan assets
Fair value of plan assets, beginning of year $ 18,052 $ 19,603 $ 2,633 $ 2,757
Actual return on plan assets 2,932 (548) 454 (28)
Firm contributions 80 75 2 2
Employee contributions 8 7 14 15
Benefits paid (820) (873) (110) (113)
Plan settlements — (15) — —
Foreign exchange impact and other 121 (197) — —
Fair value of plan assets, end of year (a)(b) $ 20,373 $ 18,052 $ 2,993 $ 2,633
Net funded status (c)(d) $ 3,304 $ 2,540 $ 2,357 $ 2,021
Accumulated benefit obligation, end of year $ (17,047) $ (15,494) NA NA
Pretax pension and OPEB amounts recorded in AOCI
Net gain/(loss) $ (2,260) $ (3,134) $ 470 $ 184
Prior service credit/(cost) (26) (23) — —
Accumulated other comprehensive income/(loss), pretax, end of year $ (2,286) $ (3,157) $ 470 $ 184
Weighted-average actuarial assumptions used to determine benefit obligations
Discount rate (e) 0.20 - 3.30% 0.60 - 4.30 % 3.20% 4.20%
Rate of compensation increase (e) 2.25 - 3.00 2.25 – 3.00 NA NA
Interest crediting rate(e) 1.78 - 4.65% 1.81 - 4.90% NA NA
Health care cost trend rate(f)
Assumed for next year NA NA 5.00 5.00
Ultimate NA NA 5.00 5.00
Year when rate will reach ultimate NA NA 2020 2019
(a) At December 31, 2019 and 2018, included non-U.S. benefit obligations of $(3.8) billion and $(3.3) billion, and plan assets of $4.0 billion and $3.5 billion,
respectively, predominantly in the U.K.
(b) At December 31, 2019 and 2018, defined benefit pension plan amounts that were not measured at fair value included $1.3 billion and $340 million, respectively, of
accrued receivables, and $1.7 billion and $503 million, respectively, of accrued liabilities.
(c) Represents plans with an aggregate overfunded balance of $6.3 billion and $5.1 billion at December 31, 2019 and 2018, respectively, and plans with an aggregate
underfunded balance of $618 million and $547 million at December 31, 2019 and 2018, respectively.
(d) For pension plans with a projected benefit obligation exceeding plan assets, the projected benefit obligation and fair value of plan assets was $1.5 billion and $885
million at December 31, 2019, respectively and $1.3 billion and $762 million at December 31, 2018, respectively. For pension plans with an accumulated benefit
obligation exceeding plan assets, the accumulated benefit obligation and fair value of plan assets was $1.4 billion and $885 million at December 31, 2019,
respectively, and $1.3 billion and $762 million at December 31, 2018, respectively. For OPEB plans with a projected benefit obligation exceeding plan assets, the
projected benefit obligation was $43 million and $26 million at December 31, 2019 and 2018, respectively, and they had no plan assets.
(e) For the U.S. defined benefit pension plans, the discount rate assumption was 3.30% and 4.30%, and the interest crediting rate was 4.65% and 4.90%, for 2019
and 2018, respectively. The rate of compensation increase was not applicable to the U.S. plan in 2019 due to the Plan Freeze, and was 2.30% in 2018. The rate of
compensation increase presented in the table for 2019 applies to the non-U.S. plans.
(f) Excludes participants whose benefits under the plan are capped.
(g) At December 31, 2019 and 2018, the gain/(loss) was primarily attributable to the change in the discount rate.
The following table presents the components of net periodic benefit costs reported in the Consolidated statements of income
for the Firm’s U.S. and non-U.S. defined benefit pension, defined contribution and OPEB plans, and in other comprehensive
income for the defined benefit pension and OPEB plans, and the weighted-average annualized actuarial assumptions for the
net periodic benefit cost.
Pension plans OPEB plans
Year ended December 31, (in millions) 2019 2018 2017 2019 2018 2017
Components of net periodic benefit cost
Benefits earned during the year $ 356 $ 354 $ 330 $ — $ — $ —
Interest cost on benefit obligations 596 556 598 24 24 28
Expected return on plan assets (915) (981) (968) (112) (103) (97)
Amortization:
Net (gain)/loss 167 103 250 — — —
Prior service (credit)/cost 3 (23) (36) — — —
Curtailment (gain)/loss — 21 — — — —
Settlement (gain)/loss — 2 2 — — —
Net periodic defined benefit cost(a) $ 207 $ 32 $ 176 $ (88) $ (79) $ (69)
Other defined benefit pension plans(b) 25 20 24 NA NA NA
Total defined benefit plans $ 232 $ 52 $ 200 $ (88) $ (79) $ (69)
Total defined contribution plans 952 872 814 NA NA NA
Total pension and OPEB cost included in noninterest expense $ 1,184 $ 924 $ 1,014 $ (88) $ (79) $ (69)
Changes in plan assets and benefit obligations recognized in other comprehensive income
Prior service (credit)/cost arising during the year 5 29 — — — —
Net (gain)/loss arising during the year (719) 467 (669) (286) 91 (133)
Amortization of net loss (167) (103) (250) — — —
Amortization of prior service (cost)/credit (3) 23 36 — — —
Curtailment gain/(loss) — (21) — — — —
Settlement gain/(loss) — (2) (2) — — —
Foreign exchange impact and other 13 (30) 54 — (4) —
Total recognized in other comprehensive income $ (871) $ 363 $ (831) $ (286) $ 87 $ (133)
Total recognized in net periodic benefit cost and other
comprehensive income $ (664) $ 395 $ (655) $ (374) $ 8 $ (202)
Weighted-average assumptions used to determine net periodic benefit costs
Discount rate(c) 0.60 - 4.30% 0.60 - 4.50 % 0.60 - 4.30 % 4.20% 3.70% 4.20%
Expected long-term rate of return on plan assets (c) 0.00 - 5.50 0.70 - 5.50 0.70 - 6.00 4.30 4.00 5.00
Rate of compensation increase (c) 2.25 - 3.00 2.25 - 3.00 2.25 - 3.00 NA NA NA
Interest crediting rate(c) 1.81 - 4.90% 1.81- 4.90% 1.81- 4.90% NA NA NA
Health care cost trend rate(d)
Assumed for next year NA NA NA 5.00 5.00 5.00
Ultimate NA NA NA 5.00 5.00 5.00
Year when rate will reach ultimate NA NA NA 2019 2018 2017
(a) Benefits earned during the year are reported in compensation expense; all other components of net periodic defined benefit costs are reported within
other expense in the Consolidated statements of income.
(b) Includes various defined benefit pension plans which are individually immaterial.
(c) The rate assumptions for the U.S. defined benefit pension plans are at the upper end of the range, except for the rate of compensation increase, which was
2.30% for 2019, 2018 and 2017, respectively.
(d) Excludes participants whose benefits under the plan are capped.
Plan assumptions
The discount rate used in determining the benefit obligation
The Firm’s expected long-term rate of return for defined
under the U.S. defined benefit pension and OPEB plans was
benefit pension and OPEB plan assets is a blended weighted
provided by the Firm’s actuaries. This rate was selected by
average, by asset allocation of the projected long-term
reference to the yields on portfolios of bonds with maturity
returns for the various asset classes, taking into
dates and coupons that closely match each of the plan’s
consideration local market conditions and the specific
projected cash flows. The discount rate for the U.K. defined
allocation of plan assets. Returns on asset classes are
benefit pension plan represents a rate of appropriate
developed using a forward-looking approach and are not
duration from the analysis of yield curves provided by the
strictly based on historical returns. Consideration is also
Firm’s actuaries.
given to current market conditions and the short-term
portfolio mix of each plan. At December 31, 2019, the Firm decreased the discount
rates used to determine its benefit obligations for the U.S.
(a) Represents the U.S. defined benefit pension plan only, as that is the most significant plan.
(b) Debt securities primarily includes cash and cash equivalents, corporate debt, U.S. federal, state, local and non-U.S. government, asset-backed and
mortgage-backed securities.
(c) Alternatives primarily include limited partnerships.
(d) Represents the U.S. OPEB plan only, as the U.K. OPEB plan is unfunded.
Pension and OPEB plan assets and liabilities measured at fair value
Defined benefit pension plans
2019 2018
December 31, Total fair Total fair
(in millions) Level 1 Level 2 Level 3 value Level 1 Level 2 Level 3 value
Cash and cash equivalents $ 157 $ 1 $ — $ 158 $ 343 $ 1 $ — $ 344
Equity securities 3,240 184 2 3,426 5,342 162 2 5,506
Collective investment funds(a) 265 — — 265 161 — — 161
Limited partnerships (b)
187 — — 187 40 — — 40
Corporate debt securities(c) — 7,090 2 7,092 — 3,540 3 3,543
U.S. federal, state, local and non-U.S.
government debt securities 1,790 1,054 — 2,844 1,191 743 — 1,934
Mortgage-backed securities 314 701 4 1,019 82 272 3 357
Derivative receivables — 337 — 337 — 143 — 143
Other(d) 785 132 250 1,167 885 80 302 1,267
Total assets measured at fair value(e) $ 6,738 $ 9,499 $ 258 $ 16,495 $ 8,044 $ 4,941 $ 310 $ 13,295
Derivative payables $ — $ (118) $ — $ (118) $ — $ (96) $ — $ (96)
Total liabilities measured at fair value(e) $ — $ (118) $ — $ (118) $ — $ (96) $ — $ (96)
(a) At December 31, 2019 and 2018, collective investment funds primarily included a mix of short-term investment funds, U.S. and non-U.S. equity
investments (including index) and real estate funds.
(b) Unfunded commitments to purchase limited partnership investments for the plans were $451 million and $521 million for 2019 and 2018,
respectively.
(c) Corporate debt securities include debt securities of U.S. and non-U.S. corporations.
(d) Other consists primarily of mutual funds, money market funds and participating annuity contracts. Mutual funds and money market funds are
primarily classified within level 1 of the fair value hierarchy given they are valued using market observable prices. Participating annuity contracts
are classified within level 3 of the fair value hierarchy due to a lack of market mechanisms for transferring each policy and surrender restrictions.
(e) At December 31, 2019 and 2018, excludes $4.4 billion and $5.0 billion of certain investments that are measured at fair value using the net asset
value per share (or its equivalent) as a practical expedient, which are not required to be classified in the fair value hierarchy, $1.3 billion and $340
million of defined benefit pension plan receivables for investments sold and dividends and interest receivables, $1.7 billion and $479 million of
defined benefit pension plan payables for investments purchased, and $25 million and $24 million of other liabilities, respectively.
At December 31, 2019 and 2018, the assets of the U.S. OPEB plan consisted of $562 million and $561 million,
respectively, in cash and cash equivalents, corporate debt securities, U.S. federal, state, local and non-U.S. government
debt securities and other assets classified in level 1 and level 2 of the valuation hierarchy and $2.4 billion and $2.1
billion, respectively, of COLI policies classified in level 3 of the valuation hierarchy.
The total fair value of RSUs that vested during the years ended December 31, 2019, 2018 and 2017, was $2.9 billion, $3.6
billion and $2.9 billion, respectively. The total intrinsic value of options exercised during the years ended December 31, 2019,
2018 and 2017, was $503 million, $370 million and $651 million, respectively.
(a) Includes AFS U.S. GSE obligations with fair values of $78.5 billion and $50.7 billion, and HTM U.S. GSE obligations with amortized cost of $31.6 billion and
$20.9 billion, at December 31, 2019 and 2018, respectively. As of December 31, 2019, mortgage-backed securities issued by Fannie Mae and Freddie
Mac each exceeded 10% of JPMorgan Chase’s total stockholders’ equity; the amortized cost and fair value of such securities were $69.4 billion and $71.4
billion, and $38.7 billion and $39.6 billion, respectively.
Other-than-temporary impairment
AFS and HTM debt securities in unrealized loss positions are agency; the volatility of the fair value changes; and the
analyzed as part of the Firm’s ongoing assessment of OTTI. Firm’s intent and ability to hold the security until recovery.
The Firm considers a decline in fair value to be other-than-
The Firm’s cash flow evaluations take into account the
temporary when the Firm does not expect to recover the
factors noted above and expectations of relevant market
entire amortized cost basis of the security.
and economic data as of the end of the reporting period.
For AFS debt securities, the Firm recognizes OTTI losses in When assessing securities issued in a securitization for OTTI,
earnings if the Firm has the intent to sell the debt security, the Firm estimates cash flows considering underlying loan-
or if it is more likely than not that the Firm will be required level data and structural features of the securitization, such
to sell the debt security before recovery of its amortized as subordination, excess spread, overcollateralization or
cost basis. In these circumstances the impairment loss is other forms of credit enhancement, and compares the
equal to the full difference between the amortized cost losses projected for the underlying collateral (“pool losses”)
basis and the fair value of the securities. against the level of credit enhancement in the securitization
structure to determine whether these features are sufficient
For debt securities in an unrealized loss position that the
to absorb the pool losses, or whether a credit loss exists.
Firm has the intent and ability to hold, the securities are
The Firm also performs other analyses to support its cash
evaluated to determine if a credit loss exists. In the event of
flow projections, such as first-loss analyses or stress
a credit loss, only the amount of impairment associated
scenarios.
with the credit loss is recognized in income. Amounts
relating to factors other than credit losses are recorded in For beneficial interests in securitizations that are rated
OCI. below “AA” at their acquisition, or that can be contractually
prepaid or otherwise settled in such a way that the Firm
Factors considered in evaluating potential OTTI include
would not recover substantially all of its recorded
adverse conditions specifically related to the industry,
investment, the Firm considers an impairment to be other-
geographic area or financial condition of the issuer or
than-temporary when there is an adverse change in
underlying collateral of a security; payment structure of the
expected cash flows.
security; changes to the rating of the security by a rating
The Firm recognizes unrealized losses on investment Investment securities gains and losses
securities that it intends to sell as OTTI. The Firm does not The following table presents realized gains and losses and
intend to sell any of the remaining investment securities OTTI from AFS securities that were recognized in income.
with an unrealized loss in AOCI as of December 31, 2019,
Year ended December 31,
and it is not likely that the Firm will be required to sell these (in millions) 2019 2018 2017
securities before recovery of their amortized cost basis. Realized gains $ 650 $ 211 $ 1,013
Further, the Firm did not recognize any credit-related OTTI Realized losses (392) (606) (1,072)
losses during the year ended December 31, 2019. Based on OTTI losses(a) — — (7)
its assessment, the Firm believes that the investment Net investment securities gains/
securities with an unrealized loss in AOCI as of December (losses) 258 (395) (66)
31, 2019, are not other-than-temporarily impaired. (a) Represents OTTI losses recognized in income on investment securities
the Firm intends to sell. Excludes realized losses on securities sold of
$22 million and $6 million for the years ended December 31, 2018
and 2017, respectively, that had been previously reported as an OTTI
loss due to the intention to sell the securities.
By remaining maturity Due in one Due after one year Due after five years Due after
December 31, 2019 (in millions) year or less through five years through 10 years 10 years(b) Total
Available-for-sale securities
Mortgage-backed securities
Amortized cost $ 1 $ 58 $ 11,073 $ 114,516 $ 125,648
Fair value 1 58 11,251 116,985 128,295
Average yield(a) 1.99% 2.78% 2.76% 3.40% 3.34%
U.S. Treasury and government agencies
Amortized cost $ 10,687 $ 92,805 $ 26,353 $ 9,317 $ 139,162
Fair value 10,700 93,039 26,446 9,251 139,436
Average yield(a) 1.82% 1.84% 1.90% 1.98% 1.86%
Obligations of U.S. states and municipalities
Amortized cost $ 123 $ 193 $ 825 $ 26,552 $ 27,693
Fair value 124 202 883 28,601 29,810
Average yield(a) 4.13% 4.68% 5.28% 4.86% 4.87%
Certificates of deposit
Amortized cost $ 77 $ — $ — $ — $ 77
Fair value 77 — — — 77
Average yield(a) 0.50% —% —% —% 0.50%
Non-U.S. government debt securities
Amortized cost $ 6,672 $ 11,544 $ 2,898 $ 313 $ 21,427
Fair value 6,682 11,791 3,001 313 21,787
Average yield(a) 2.17% 1.84% 1.29% 1.67% 1.87%
Corporate debt securities
Amortized cost $ 205 $ 206 $ 412 $ — $ 823
Fair value 207 212 426 — 845
Average yield(a) 4.49% 4.14% 3.50% —% 3.91%
Asset-backed securities
Amortized cost $ 17 $ 2,352 $ 7,184 $ 20,923 $ 30,476
Fair value 17 2,353 7,177 20,902 30,449
Average yield(a) 0.62% 2.78% 2.86% 2.77% 2.79%
Total available-for-sale securities
Amortized cost $ 17,782 $ 107,158 $ 48,745 $ 171,621 $ 345,306
Fair value 17,808 107,655 49,184 176,052 350,699
Average yield(a) 1.99% 1.87% 2.27% 3.47% 2.73%
Held-to-maturity securities
Mortgage-backed securities
Amortized Cost $ — $ — $ 5,850 $ 30,673 $ 36,523
Fair value — — 6,114 31,512 37,626
Average yield(a) —% —% 3.06% 3.10% 3.10%
U.S. Treasury and government agencies
Amortized cost $ — $ 51 $ — $ — $ 51
Fair value — 50 — — 50
Average yield(a) —% 1.47% —% —% 1.47%
Obligations of U.S. states and municipalities
Amortized cost $ — $ — $ 99 $ 4,698 $ 4,797
Fair value — — 106 4,990 5,096
Average yield(a) —% —% 3.91% 4.04% 4.04%
Asset-backed securities
Amortized cost $ — $ — $ 5,296 $ 873 $ 6,169
Fair value — — 5,296 873 6,169
Average yield(a) —% —% 3.19% 3.11% 3.18%
Total held-to-maturity securities
Amortized cost $ — $ 51 $ 11,245 $ 36,244 $ 47,540
Fair value — 50 11,516 37,375 48,941
Average yield(a) —% 1.47% 3.13% 3.23% 3.20%
(a) Average yield is computed using the effective yield of each security owned at the end of the period, weighted based on the amortized cost of each security. The effective yield
considers the contractual coupon, amortization of premiums and accretion of discounts, and the effect of related hedging derivatives. Taxable-equivalent amounts are used
where applicable. The effective yield excludes unscheduled principal prepayments; and accordingly, actual maturities of securities may differ from their contractual or
expected maturities as certain securities may be prepaid.
(b) Substantially all of the Firm’s U.S. residential MBS and collateralized mortgage obligations are due in 10 years or more, based on contractual maturity. The estimated
weighted-average life, which reflects anticipated future prepayments, is approximately 6 years for agency residential MBS, 3 years for agency residential collateralized
mortgage obligations and 3 years for nonagency residential collateralized mortgage obligations.
2019
Amounts netted Amounts Amounts not
on the presented on the nettable on the
Consolidated Consolidated Consolidated
December 31, (in millions) Gross amounts balance sheets balance sheets balance sheets(b) Net amounts(c)
Assets
Securities purchased under resale agreements $ 628,609 $ (379,463) $ 249,146 $ (233,818) $ 15,328
Securities borrowed 166,718 (26,960) 139,758 (104,990) 34,768
Liabilities
Securities sold under repurchase agreements $ 555,172 $ (379,463) $ 175,709 $ (151,566) $ 24,143
Securities loaned and other(a) 36,649 (26,960) 9,689 (9,654) 35
2018
Amounts netted Amounts Amounts not
on the presented on the nettable on the
Consolidated Consolidated Consolidated
December 31, (in millions) Gross amounts balance sheets balance sheets balance sheets(b) Net amounts(c)
Assets
Securities purchased under resale agreements $ 691,116 $ (369,612) $ 321,504 $ (308,854) $ 12,650
Securities borrowed 132,955 (20,960) 111,995 (79,747) 32,248
Liabilities
Securities sold under repurchase agreements $ 541,587 $ (369,612) $ 171,975 $ (149,125) $ 22,850
Securities loaned and other (a)
33,700 (20,960) 12,740 (12,358) 382
(a) Includes securities-for-securities lending agreements of $3.7 billion and $3.3 billion at December 31, 2019 and 2018, respectively, accounted for at fair
value, where the Firm is acting as lender. In the Consolidated balance sheets, the Firm recognizes the securities received at fair value within other assets
and the obligation to return those securities within accounts payable and other liabilities.
(b) In some cases, collateral exchanged with a counterparty exceeds the net asset or liability balance with that counterparty. In such cases, the amounts
reported in this column are limited to the related net asset or liability with that counterparty.
(c) Includes securities financing agreements that provide collateral rights, but where an appropriate legal opinion with respect to the master netting
agreement has not been either sought or obtained. At December 31, 2019 and 2018, included $11.0 billion and $7.9 billion, respectively, of securities
purchased under resale agreements; $31.9 billion and $30.3 billion, respectively, of securities borrowed; $22.7 billion and $21.5 billion, respectively, of
securities sold under repurchase agreements; and $7 million and $25 million, respectively, of securities loaned and other.
The tables below present as of December 31, 2019 and 2018 the types of financial assets pledged in securities financing
agreements and the remaining contractual maturity of the securities financing agreements.
Gross liability balance
2019 2018
Securities sold Securities sold
under repurchase Securities loaned under repurchase Securities loaned
December 31, (in millions) agreements and other agreements and other
Mortgage-backed securities:
U.S. GSEs and government agencies $ 34,119 $ — $ 34,311 (a)
$ —
Residential - nonagency 1,239 — 2,165 —
Commercial - nonagency 1,612 — 1,390 —
U.S. Treasury, GSEs and government agencies 334,398 29 317,578 (a)
69
Obligations of U.S. states and municipalities 1,181 — 1,150 —
Non-U.S. government debt 145,548 1,528 154,900 4,313
Corporate debt securities 13,826 1,580 13,898 428
Asset-backed securities 1,794 — 3,867 —
Equity securities 21,455 33,512 12,328 28,890
Total $ 555,172 $ 36,649 $ 541,587 $ 33,700
(a) The prior period amounts have been revised to conform with the current period presentation.
Wholesale loans, risk-rated business banking loans and risk- Loans held-for-sale
rated auto loans are charged off when it is highly certain Loans held-for-sale are measured at the lower of cost or fair
that a loss has been realized, including situations where a value, with valuation changes recorded in noninterest
loan is determined to be both impaired and collateral- revenue. For consumer loans, the valuation is performed on
dependent. The determination of whether to recognize a a portfolio basis. For wholesale loans, the valuation is
charge-off includes many factors, including the performed on an individual loan basis.
prioritization of the Firm’s claim in bankruptcy, expectations
Interest income on loans held-for-sale is accrued and
of the workout/restructuring of the loan and valuation of
recognized based on the contractual rate of interest.
the borrower’s equity or the loan collateral.
Loan origination fees or costs and purchase price discounts
When a loan is charged down to the estimated net realizable
or premiums are deferred in a contra loan account until the
value, the determination of the fair value of the collateral
related loan is sold. The deferred fees or costs and
depends on the type of collateral (e.g., securities, real
discounts or premiums are an adjustment to the basis of the
estate). In cases where the collateral is in the form of liquid
loan and therefore are included in the periodic
securities, the fair value is based on quoted market prices
determination of the lower of cost or fair value adjustments
or broker quotes. For illiquid securities or other financial
and/or the gain or loss recognized at the time of sale.
assets, the fair value of the collateral is generally estimated
using a discounted cash flow model. Because these loans are recognized at the lower of cost or
fair value, the Firm’s allowance for loan losses and charge-
For residential real estate loans, collateral values are based
off policies do not apply to these loans. However, loans
upon external valuation sources. When it becomes likely
held-for-sale are subject to the nonaccrual policies
that a borrower is either unable or unwilling to pay, the
described above.
Firm utilizes a broker’s price opinion, appraisal and/or an
automated valuation model of the home based on an Loans at fair value
exterior-only valuation (“exterior opinions”), which is then Loans used in a market-making strategy or risk managed on
updated at least every twelve months, or more frequently a fair value basis are measured at fair value, with changes
depending on various market factors. As soon as practicable in fair value recorded in noninterest revenue.
after the Firm receives the property in satisfaction of a debt
Interest income on these loans is accrued and recognized
(e.g., by taking legal title or physical possession), the Firm
based on the contractual rate of interest. Changes in fair
generally obtains an appraisal based on an inspection that
value are recognized in noninterest revenue. Loan
includes the interior of the home (“interior appraisals”).
origination fees are recognized upfront in noninterest
Exterior opinions and interior appraisals are discounted
revenue. Loan origination costs are recognized in the
based upon the Firm’s experience with actual liquidation
associated expense category as incurred.
values as compared with the estimated values provided by
exterior opinions and interior appraisals, considering state- Because these loans are recognized at fair value, the Firm’s
specific factors. allowance for loan losses and charge-off policies do not
apply to these loans. However, loans at fair value are
For commercial real estate loans, collateral values are
subject to the nonaccrual policies described above.
generally based on appraisals from internal and external
valuation sources. Collateral values are typically updated Refer to Note 3 for further information on the Firm’s
every six to twelve months, either by obtaining a new elections of fair value accounting under the fair value
appraisal or by performing an internal analysis, in option. Refer to Note 2 and Note 3 for further information
accordance with the Firm’s policies. The Firm also considers on loans carried at fair value and classified as trading
both borrower- and market-specific factors, which may assets.
result in obtaining appraisal updates or broker price
PCI loans
opinions at more frequent intervals.
PCI loans held-for-investment are initially measured at fair
value. PCI loans have evidence of credit deterioration since
the loan’s origination date and therefore it is probable, at
acquisition, that all contractually required payments will not
be collected. Because PCI loans are initially measured at fair
value, which includes an estimate of future credit losses, no
allowance for loan losses related to PCI loans is recorded at
the acquisition date. Refer to page 229 of this Note for
information on accounting for PCI loans subsequent to their
acquisition.
Loan portfolio
The Firm’s loan portfolio is divided into three portfolio segments, which are the same segments used by the Firm to determine
the allowance for loan losses: Consumer, excluding credit card; Credit card; and Wholesale. Within each portfolio segment the
Firm monitors and assesses the credit risk in the following classes of loans, based on the risk characteristics of each loan class.
(a) Includes loans held in CCB, scored prime mortgage and scored home equity loans held in AWM and scored prime mortgage loans held in Corporate.
(b) Predominantly includes prime loans (including option ARMs).
(c) Includes senior and junior lien home equity loans.
(d) Includes certain business banking and auto dealer risk-rated loans for which the wholesale methodology is applied for determining the allowance for loan
losses; these loans are managed by CCB, and therefore, for consistency in presentation, are included with the other consumer loan classes.
(e) Predominantly includes Business Banking loans.
(f) Includes loans held in CIB, CB, AWM and Corporate. Excludes scored prime mortgage and scored home equity loans held in AWM and scored prime
mortgage loans held in Corporate. Classes are internally defined and may not align with regulatory definitions.
(g) Includes loans to: individuals and individual entities (predominantly consists of Wealth Management clients within AWM and includes loans to personal
investment companies and personal and testamentary trusts), SPEs and Private education and civic organizations. Refer to Note 14 for more information
on SPEs.
The following tables summarize the Firm’s loan balances by portfolio segment.
December 31, 2019
Consumer, excluding
(in millions) credit card Credit card(a) Wholesale Total
Retained $ 332,038 $ 168,924 $ 444,639 $ 945,601 (b)
(a) Includes accrued interest and fees net of an allowance for the uncollectible portion of accrued interest and fee income.
(b) Loans (other than PCI loans and those for which the fair value option has been elected) are presented net of unamortized discounts and premiums and net
deferred loan fees or costs. These amounts were not material as of December 31, 2019 and 2018.
2018
Year ended December 31, Consumer, excluding
(in millions) credit card Credit card Wholesale Total
Purchases $ 2,543 (a)(b)
$ — $ 2,354 $ 4,897
Sales 9,984 — 16,741 26,725
Retained loans reclassified to held-for-sale 36 — 2,276 2,312
2017
Year ended December 31, Consumer, excluding
(in millions) credit card Credit card Wholesale Total
Purchases $ 3,461 (a)(b)
$ — $ 1,799 $ 5,260
Sales 3,405 — 11,063 14,468
(c)
Retained loans reclassified to held-for-sale 6,340 — 1,229 7,569
(a) Purchases predominantly represent the Firm’s voluntary repurchase of certain delinquent loans from loan pools as permitted by Government National
Mortgage Association (“Ginnie Mae”) guidelines. The Firm typically elects to repurchase these delinquent loans as it continues to service them and/or
manage the foreclosure process in accordance with applicable requirements of Ginnie Mae, FHA, RHS, and/or VA.
(b) Excludes purchases of retained loans sourced through the correspondent origination channel and underwritten in accordance with the Firm’s standards.
Such purchases were $16.6 billion, $18.6 billion and $23.5 billion for the years ended December 31, 2019, 2018 and 2017, respectively.
(c) Includes the Firm’s student loan portfolio which was sold in 2017.
(a) Individual delinquency classifications include mortgage loans insured by U.S. government agencies as follows: current included $17 million and $2.8 billion; 30–149
days past due included $20 million and $2.1 billion; and 150 or more days past due included $26 million and $2.0 billion at December 31, 2019 and 2018,
respectively.
(b) At December 31, 2019 and 2018, residential mortgage loans excluded mortgage loans insured by U.S. government agencies of $46 million and $4.1 billion,
respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.
(c) These balances are excluded from nonaccrual loans as the loans are guaranteed by U.S government agencies. Typically the principal balance of the loans is insured
and interest is guaranteed at a specified reimbursement rate subject to meeting agreed-upon servicing guidelines. At December 31, 2019 and 2018, these balances
included $34 million and $999 million, respectively, of loans that are no longer accruing interest based on the agreed-upon servicing guidelines. For the remaining
balance, interest is being accrued at the guaranteed reimbursement rate. There were no loans that were not guaranteed by U.S. government agencies that are 90 or
more days past due and still accruing interest at December 31, 2019 and 2018.
(d) Represents the aggregate unpaid principal balance of loans divided by the estimated current property value. Current property values are estimated, at a minimum,
quarterly, based on home valuation models using nationally recognized home price index valuation estimates incorporating actual data to the extent available and
forecasted data where actual data is not available. These property values do not represent actual appraised loan level collateral values; as such, the resulting ratios
are necessarily imprecise and should be viewed as estimates. Current estimated combined LTV for junior lien home equity loans considers all available lien positions,
as well as unused lines, related to the property.
(e) Refreshed FICO scores represent each borrower’s most recent credit score, which is obtained by the Firm on at least a quarterly basis.
(f) The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2019.
(g) At December 31, 2019 and 2018, included mortgage loans insured by U.S. government agencies of $63 million and $6.9 billion, respectively. These amounts have
been excluded from the geographic regions presented based upon the government guarantee.
Approximately 37% of the home equity portfolio are senior lien loans; the remaining balance are junior lien HELOANs or
HELOCs. The following table provides the Firm’s delinquency statistics for junior lien home equity loans and lines as of
December 31, 2019 and 2018.
(a) These HELOCs are predominantly revolving loans for a 10-year period, after which time the HELOC converts to a loan with a 20-year amortization period,
but also include HELOCs that allow interest-only payments beyond the revolving period.
(b) The Firm manages the risk of HELOCs during their revolving period by closing or reducing the undrawn line to the extent permitted by law when borrowers
are experiencing financial difficulty.
HELOCs beyond the revolving period and HELOANs have higher delinquency rates than HELOCs within the revolving period.
That is primarily because the fully-amortizing payment that is generally required for those products is higher than the
minimum payment options available for HELOCs within the revolving period. The higher delinquency rates associated with
amortizing HELOCs and HELOANs are factored into the Firm’s allowance for loan losses.
Impaired loans
The table below provides information about the Firm’s residential real estate impaired loans, excluding PCI loans. These loans
are considered to be impaired as they have been modified in a TDR. All impaired loans are evaluated for an asset-specific
allowance as described in Note 13.
Total residential real estate
Residential mortgage Home equity – excluding PCI
December 31,
(in millions) 2019 2018 2019 2018 2019 2018
Impaired loans
With an allowance $ 2,851 $ 3,381 $ 1,042 $ 1,151 $ 3,893 $ 4,532
Without an allowance(a) 1,154 1,184 879 907 2,033 2,091
Total impaired loans(b)(c) $ 4,005 $ 4,565 $ 1,921 $ 2,058 $ 5,926 $ 6,623
Allowance for loan losses related to impaired loans $ 52 $ 88 $ 13 $ 45 $ 65 $ 133
Unpaid principal balance of impaired loans(d) 5,438 6,207 3,301 3,531 8,739 9,738
Impaired loans on nonaccrual status(e) 1,367 1,459 965 963 2,332 2,422
(a) Represents collateral-dependent residential real estate loans that are charged off to the fair value of the underlying collateral less costs to sell. The Firm
reports, in accordance with regulatory guidance, residential real estate loans that have been discharged under Chapter 7 bankruptcy and not reaffirmed
by the borrower (“Chapter 7 loans”) as collateral-dependent nonaccrual TDRs, regardless of their delinquency status. At December 31, 2019, Chapter 7
residential real estate loans included approximately 9% of residential mortgages and approximately 7% of home equity that were 30 days or more past
due.
(b) At December 31, 2019 and 2018, $14 million and $4.1 billion, respectively, of loans modified subsequent to repurchase from Ginnie Mae in accordance
with the standards of the appropriate government agency (i.e., FHA, VA, RHS) are not included in the table above. When such loans perform subsequent to
modification in accordance with Ginnie Mae guidelines, they are generally sold back into Ginnie Mae loan pools. Modified loans that do not re-perform
become subject to foreclosure.
(c) Predominantly all impaired loans in the table above are in the U.S.
(d) Represents the contractual amount of principal owed at December 31, 2019 and 2018. The unpaid principal balance differs from the impaired loan
balances due to various factors including charge-offs, net deferred loan fees or costs, and unamortized discounts or premiums on purchased loans.
(e) As of December 31, 2019 and 2018, nonaccrual loans included $1.9 billion and $2.0 billion, respectively, of TDRs for which the borrowers were less than
90 days past due. Refer to the Loan accounting framework on pages 217–219 of this Note for additional information about loans modified in a TDR that
are on nonaccrual status.
(a) Generally, interest income on loans modified in TDRs is recognized on a cash basis until the borrower has made a minimum of six payments under the new
terms, unless the loan is deemed to be collateral-dependent.
Loan modifications
Modifications of residential real estate loans, excluding PCI The following table presents new TDRs reported by the
loans, are generally accounted for and reported as TDRs. Firm.
There were no additional commitments to lend to
Year ended December 31,
borrowers whose residential real estate loans, excluding PCI (in millions) 2019 2018 2017
loans, have been modified in TDRs. Residential mortgage $ 234 $ 401 $ 373
Home equity 256 335 383
Total residential real estate – excluding PCI $ 490 $ 736 $ 756
Number of loans permanently modified 1,448 2,907 2,628 3,470 4,946 5,624 4,918 7,853 8,252
Concession granted:(a)
Interest rate reduction 66% 40% 63% 81% 62% 59% 77% 54% 60%
Term or payment extension 90 55 72 64 66 69 71 62 70
Principal and/or interest deferred 26 44 15 7 20 10 13 29 12
Principal forgiveness 6 8 16 5 7 13 5 7 14
Other(b) 45 38 33 70 58 31 63 51 32
(a) Represents concessions granted in permanent modifications as a percentage of the number of loans permanently modified. The sum of the percentages
exceeds 100% because predominantly all of the modifications include more than one type of concession. Concessions offered on trial modifications are
generally consistent with those granted on permanent modifications.
(b) Includes variable interest rate to fixed interest rate modifications for the years ended December 31, 2019, 2018 and 2017. Also includes forbearances
that meet the definition of a TDR for the years ended December 31, 2019 and 2018. Forbearances suspend or reduce monthly payments for a specific
period of time to address a temporary hardship.
(c) The prior period amounts have been revised to conform with the current period presentation. This revision also impacted home equity impaired loans and
new TDRs in this note, as well as loans by impairment methodology in Note 13.
At December 31, 2019, the weighted-average estimated Active and suspended foreclosure
remaining lives of residential real estate loans, excluding At December 31, 2019 and 2018, the Firm had non-PCI
PCI loans, permanently modified in TDRs were 9 years for residential real estate loans, excluding those insured by U.S.
residential mortgage and 8 years for home equity. The government agencies, with a carrying value of $529 million
estimated remaining lives of these loans reflect estimated and $653 million, respectively, that were not included in
prepayments, both voluntary and involuntary (i.e., REO, but were in the process of active or suspended
foreclosures and other forced liquidations). foreclosure.
(a) There were no loans that were 90 or more days past due and still accruing interest at December 31, 2019 and December 31, 2018.
(b) The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2019.
(c) For risk-rated business banking and auto loans, the primary credit quality indicator is the internal risk rating of the loan, including whether the loans are
considered to be criticized and/or nonaccrual.
(a) Carrying value includes the effect of fair value adjustments that were applied to the consumer PCI portfolio at the date of acquisition.
(b) Represents the aggregate unpaid principal balance of loans divided by the estimated current property value. Current property values are estimated, at a
minimum, quarterly, based on home valuation models using nationally recognized home price index valuation estimates incorporating actual data to the
extent available and forecasted data where actual data is not available. These property values do not represent actual appraised loan level collateral
values; as such, the resulting ratios are necessarily imprecise and should be viewed as estimates. Current estimated combined LTV for junior lien home
equity loans considers all available lien positions, as well as unused lines, related to the property.
(c) Refreshed FICO scores represent each borrower’s most recent credit score, which is obtained by the Firm on at least a quarterly basis.
(d) The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2019.
(a) In general, these HELOCs are revolving loans for a 10-year period, after which time the HELOC converts to an interest-only loan with a balloon payment at
the end of the loan’s term. Substantially all HELOCs are beyond the revolving period.
(b) Includes loans modified into fixed rate amortizing loans.
The table below presents the accretable yield activity for the Firm’s PCI consumer loans for the years ended December 31,
2019, 2018 and 2017, and represents the Firm’s estimate of gross interest income expected to be earned over the remaining
life of the PCI loan portfolios. The table excludes the cost to fund the PCI portfolios, and therefore the accretable yield does not
represent net interest income expected to be earned on these portfolios.
Total PCI
Year ended December 31,
(in millions, except ratios) 2019 2018 2017
Beginning balance $ 8,422 $ 11,159 $ 11,768
Accretion into interest income (1,093) (1,249) (1,396)
Changes in interest rates on variable-rate loans (575) (109) 503
Other changes in expected cash flows(a) (589) (1,379) 284
Balance at December 31 $ 6,165 $ 8,422 $ 11,159
Accretable yield percentage 5.28% 4.92% 4.53%
(a) Other changes in expected cash flows may vary from period to period as the Firm continues to refine its cash flow model, for example cash flows expected
to be collected due to the impact of modifications and changes in prepayment assumptions.
(a) The geographic regions presented in the table are ordered based on
the magnitude of the corresponding loan balances at December 31,
2019.
% of total
criticized to
total retained
loans 4.13% 3.54% 0.90% 0.65% 1.02% 0.32% —% 0.01% 0.34% 0.26% 1.56% 1.33%
% of criticized
nonaccrual to
total retained
loans 0.64 0.66 0.04 0.12 0.01 0.01 — — 0.03 0.12 0.19 0.26
Loans by
geographic
distribution(a)
Total non-U.S. $ 28,253 $ 29,572 $ 4,123 $ 2,967 $ 16,800 $ 18,524 $ 2,232 $ 3,150 $ 49,966 $ 48,433 $ 101,374 $ 102,646
Total U.S. 88,626 100,234 112,121 112,770 39,808 29,124 10,510 11,037 92,200 83,351 343,265 336,516
Total retained
loans $116,879 $129,806 $ 116,244 $115,737 $ 56,608 $ 47,648 $ 12,742 $ 14,187 $142,166 $131,784 $ 444,639 $ 439,162
Net charge-offs/
(recoveries) $ 329 $ 165 $ 12 $ (20) $ — $ — $ — $ — $ 28 $ 10 $ 369 $ 155
% of net
charge-offs/
(recoveries) to
end-of-period
retained loans 0.28% 0.13% 0.01% (0.02)% —% —% —% —% 0.02% 0.01% 0.08% 0.04%
Loan
delinquency(b)
Current and less
than 30 days
past due and
still accruing $115,753 $128,678 $ 116,098 $115,533 $ 56,583 $ 47,622 $ 12,713 $ 14,165 $141,739 $130,918 $ 442,886 $ 436,916
30–89 days past
due and still
accruing 339 109 94 67 20 12 28 18 387 702 868 908
90 or more days
past due and
still accruing(c) 35 168 4 3 2 10 1 4 — 3 42 188
Criticized
nonaccrual 752 851 48 134 3 4 — — 40 161 843 1,150
Total retained
loans $116,879 $129,806 $ 116,244 $115,737 $ 56,608 $ 47,648 $ 12,742 $ 14,187 $142,166 $131,784 $ 444,639 $ 439,162
(a) The U.S. and non-U.S. distribution is determined based predominantly on the domicile of the borrower.
(b) The credit quality of wholesale loans is assessed primarily through ongoing review and monitoring of an obligor’s ability to meet contractual obligations
rather than relying on the past due status, which is generally a lagging indicator of credit quality.
(c) Represents loans that are considered well-collateralized and therefore still accruing interest.
(d) Other includes individuals and individual entities (predominantly consists of Wealth Management clients within AWM and includes loans to personal
investment companies and personal and testamentary trusts), SPEs and Private education and civic organizations. Refer to Note 14 for more information
on SPEs.
The following table presents additional information on the real estate class of loans within the Wholesale portfolio for the
periods indicated, which consists primarily of secured commercial loans, of which multifamily is the largest segment.
Multifamily lending finances acquisition, leasing and construction of apartment buildings, and includes loans to real estate
investment trusts (“REITs”). Other commercial lending largely includes financing for acquisition, leasing and construction,
largely for office, retail and industrial real estate, and includes loans to REITs. Included in real estate loans is $8.2 billion and
$10.5 billion as of December 31, 2019 and 2018, respectively, of construction and development loans originally purposed
for construction and development, general purpose loans for builders, as well as loans for land subdivision and pre-
development.
Multifamily Other Commercial Total real estate loans
December 31,
(in millions, except ratios) 2019 2018 2019 2018 2019 2018
Real estate retained loans $ 79,402 $ 79,184 $ 36,842 $ 36,553 $ 116,244 $ 115,737
Criticized 407 388 642 366 1,049 754
% of total criticized to total real estate retained loans 0.51% 0.49% 1.74% 1.00% 0.90% 0.65%
Criticized nonaccrual $ 38 $ 57 $ 10 $ 77 $ 48 $ 134
% of criticized nonaccrual loans to total real estate retained loans 0.05% 0.07% 0.03% 0.21% 0.04% 0.12%
(a) When the discounted cash flows, collateral value or market price equals or exceeds the recorded investment in the loan, the loan does not require an
allowance. This typically occurs when the impaired loans have been partially charged-off and/or there have been interest payments received and applied
to the loan balance.
(b) Represents the contractual amount of principal owed at December 31, 2019 and 2018. The unpaid principal balance differs from the impaired loan
balances due to various factors, including charge-offs; interest payments received and applied to the carrying value; net deferred loan fees or costs; and
unamortized discount or premiums on purchased loans.
(c) Based upon the domicile of the borrower, largely consists of loans in the U.S.
The following table presents the Firm’s average impaired Certain loan modifications are considered to be TDRs as
retained loans for the years ended 2019, 2018 and 2017. they provide various concessions to borrowers who are
experiencing financial difficulty. All TDRs are reported as
Year ended December 31, (in millions) 2019 2018 2017 impaired loans in the tables above. TDRs were $460 million
Commercial and industrial $ 1,086 $ 1,027 $ 1,256 and $576 million as of December 31, 2019 and 2018,
Real estate 94 133 165 respectively. The impact of these modifications, as well as
Financial institutions 11 57 48
new TDRs, were not material to the Firm for the years
Other 168 199 241
ended December 31, 2019, 2018 and 2017.
Total(a) $ 1,359 $ 1,416 $ 1,710
(a) The related interest income on accruing impaired loans and interest
income recognized on a cash basis were not material for the years
ended December 31, 2019, 2018 and 2017.
Formula-based component - Wholesale loans and lending- factors. Historical experience of both LGD and PD are
related commitments considered when estimating these adjustments. Factors
The Firm’s methodology for determining the allowance for related to concentrated and deteriorating industries also
loan losses and the allowance for lending-related are incorporated where relevant. These estimates are based
commitments involves the early identification of credits that on management’s view of uncertainties that relate to
are deteriorating. The formula-based component of the current macroeconomic conditions, quality of underwriting
allowance for wholesale loans and lending-related standards and other relevant internal and external factors
commitments is calculated by applying statistical credit loss affecting the credit quality of the current portfolio.
factors (estimated PD and LGD) to the recorded investment
Asset-specific component
balances or loan-equivalent over a loss emergence period to
The asset-specific component of the allowance relates to
arrive at an estimate of incurred credit losses in the
loans considered to be impaired, which includes loans that
portfolio. Estimated loss emergence periods may vary by
have been modified in TDRs as well as risk-rated loans that
the funded versus unfunded status of the instrument and
have been placed on nonaccrual status. To determine the
may change over time.
asset-specific component of the allowance, larger risk-rated
The Firm assesses the credit quality of a borrower or loans (primarily loans in the wholesale portfolio segment)
counterparty and assigns an internal risk rating. Risk are evaluated individually, while smaller loans (both risk-
ratings are assigned at origination or acquisition, and if rated and scored) are evaluated as pools using historical
necessary, adjusted for changes in credit quality over the loss experience for the respective class of assets.
life of the exposure. In assessing the risk rating of a
The Firm generally measures the asset-specific allowance as
particular loan or lending-related commitment, among the
the difference between the recorded investment in the loan
factors considered are the obligor’s debt capacity and
and the present value of the cash flows expected to be
financial flexibility, the level of the obligor’s earnings, the
collected, discounted at the loan’s original effective interest
amount and sources for repayment, the level and nature of
rate. Subsequent changes in impairment are reported as an
contingencies, management strength, and the industry and
adjustment to the allowance for loan losses. In certain
geography in which the obligor operates. These factors are
cases, the asset-specific allowance is determined using an
based on an evaluation of historical and current information
observable market price, and the allowance is measured as
and involve subjective assessment and interpretation.
the difference between the recorded investment in the loan
Determining risk ratings involves significant judgment;
and the loan’s fair value. Collateral-dependent loans are
emphasizing one factor over another or considering
charged down to the fair value of collateral less costs to
additional factors could affect the risk rating assigned by
sell. For any of these impaired loans, the amount of the
the Firm.
asset-specific allowance required to be recorded, if any, is
A PD estimate is determined based on the Firm’s history of dependent upon the recorded investment in the loan
defaults over more than one credit cycle. (including prior charge-offs), and either the expected cash
flows or fair value of collateral. Refer to Note 12 for more
LGD estimate is a judgment-based estimate assigned to
information about charge-offs and collateral-dependent
each loan or lending-related commitment. The estimate
loans.
represents the amount of economic loss if the obligor were
to default. The type of obligor, quality of collateral, and the The asset-specific component of the allowance for impaired
seniority of the Firm’s lending exposure in the obligor’s loans that have been modified in TDRs (including forgone
capital structure affect LGD. interest, principal forgiveness, as well as other concessions)
incorporates the effect of the modification on the loan’s
The Firm applies judgment in estimating PD, LGD, loss
expected cash flows, which considers the potential for
emergence period and loan-equivalent used in calculating
redefault. For residential real estate loans modified in TDRs,
the allowance for credit losses. Estimates of PD, LGD, loss
the Firm develops product-specific probability of default
emergence period and loan-equivalent used are subject to
estimates, which are applied at a loan level to compute
periodic refinement based on any changes to underlying
expected losses. In developing these probabilities of
external or Firm-specific historical data. Changes to the
default, the Firm considers the relationship between the
time period used for PD and LGD estimates could also affect
credit quality characteristics of the underlying loans and
the allowance for credit losses. The use of different inputs,
certain assumptions about home prices and unemployment,
estimates or methodologies could change the amount of the
based upon industry-wide data. The Firm also considers its
allowance for credit losses determined appropriate by the
own historical loss experience to-date based on actual
Firm.
redefaulted modified loans. For credit card loans modified
In addition to the statistical credit loss estimates applied to in TDRs, expected losses incorporate projected redefaults
the wholesale portfolio, management applies its judgment based on the Firm’s historical experience by type of
to adjust the statistical estimates for wholesale loans and modification program. For wholesale loans modified in
lending-related commitments, taking into consideration TDRs, expected losses incorporate management’s
model imprecision, external factors and economic events expectation of the borrower’s ability to repay under the
that have occurred but are not yet reflected in the loss modified terms.
238 JPMorgan Chase & Co./2019 Form 10-K
Estimating the timing and amounts of future cash flows is PCI loans
highly judgmental as these cash flow projections rely upon In connection with the acquisition of certain PCI loans,
estimates such as loss severities, asset valuations, default which are accounted for as described in Note 12, the
rates (including redefault rates on modified loans), the allowance for loan losses for the PCI portfolio is based on
amounts and timing of interest or principal payments quarterly estimates of the amount of principal and interest
(including any expected prepayments) or other factors that cash flows expected to be collected over the estimated
are reflective of current and expected market conditions. remaining lives of the loans.
These estimates are, in turn, dependent on factors such as
These cash flow projections are based on estimates
the duration of current overall economic conditions,
regarding default rates (including redefault rates on
industry-, portfolio-, or borrower-specific factors, the
modified loans), loss severities, the amounts and timing of
expected outcome of insolvency proceedings as well as, in
prepayments and other factors that are reflective of current
certain circumstances, other economic factors, including
and expected future market conditions. These estimates are
the level of future home prices. All of these estimates and
dependent on assumptions regarding the level of future
assumptions require significant management judgment and
home prices, and the duration of current overall economic
certain assumptions are highly subjective.
conditions, among other factors. These estimates and
assumptions require significant management judgment and
certain assumptions are highly subjective.
$ 196 $ 440 (c) $ 297 $ 933 $ 246 $ 383 (c) $ 461 $ 1,090
2,162 4,744 3,818 10,724 2,108 4,501 3,680 10,289
1,788 — — 1,788 2,225 — — 2,225
$ 4,146 $ 5,184 $ 4,115 $ 13,445 $ 4,579 $ 4,884 $ 4,141 $ 13,604
$ 24 $ — $ 21 $ 45 $ 64 $ — $ 31 $ 95
2,080 — 202 2,282 2,133 — 233 2,366
$ — $ — $ 99 $ 99 $ — $ — $ 187 $ 187
33 — 923 956 33 — 848 881
$ 33 $ — $ 1,022 $ 1,055 $ 33 $ — $ 1,035 $ 1,068
The Firm’s other business segments are also involved with VIEs (both third-party and Firm-sponsored), but to a lesser extent,
as follows:
• Asset & Wealth Management: AWM sponsors and manages certain funds that are deemed VIEs. As asset manager of the
funds, AWM earns a fee based on assets managed; the fee varies with each fund’s investment objective and is competitively
priced. For fund entities that qualify as VIEs, AWM’s interests are, in certain cases, considered to be significant variable
interests that result in consolidation of the financial results of these entities.
• Commercial Banking: CB provides financing and lending-related services to a wide spectrum of clients, including certain
third-party-sponsored entities that may meet the definition of a VIE. CB does not control the activities of these entities and
does not consolidate these entities. CB’s maximum loss exposure, regardless of whether the entity is a VIE, is generally
limited to loans and lending-related commitments which are reported and disclosed in the same manner as any other third-
party transaction.
• Corporate: Corporate is involved with entities that may meet the definition of VIEs; however these entities are generally
subject to specialized investment company accounting, which does not require the consolidation of investments, including
VIEs. In addition, Treasury and CIO invest in securities generally issued by third parties which may meet the definition of
VIEs (e.g., issuers of asset-backed securities). In general, the Firm does not have the power to direct the significant
activities of these entities and therefore does not consolidate these entities. Refer to Note 10 for further information on the
Firm’s investment securities portfolio.
In addition, CIB also invests in and provides financing and other services to VIEs sponsored by third parties. Refer to page 247
of this Note for more information on the VIEs sponsored by third parties.
Significant Firm-sponsored variable interest entities
Credit card securitizations losses and gives the Firm the right to receive certain
CCB’s Card business may securitize originated credit card benefits from these VIEs that could potentially be
loans, primarily through the Chase Issuance Trust (the significant.
“Trust”). The Firm’s continuing involvement in credit card
The underlying securitized credit card receivables and other
securitizations includes servicing the receivables, retaining
assets of the securitization trusts are available only for
an undivided seller’s interest in the receivables, retaining
payment of the beneficial interests issued by the
certain senior and subordinated securities and maintaining
securitization trusts; they are not available to pay the Firm’s
escrow accounts.
other obligations or the claims of the Firm’s creditors.
The Firm is considered to be the primary beneficiary of
The agreements with the credit card securitization trusts
these Firm-sponsored credit card securitization trusts based
require the Firm to maintain a minimum undivided interest
on the Firm’s ability to direct the activities of these VIEs
in the credit card trusts (generally 5%). As of December 31,
through its servicing responsibilities and other duties,
2019 and 2018, the Firm held undivided interests in Firm-
including making decisions as to the receivables that are
sponsored credit card securitization trusts of $5.3 billion
transferred into those trusts and as to any related
and $15.1 billion, respectively. The Firm maintained an
modifications and workouts. Additionally, the nature and
average undivided interest in principal receivables owned
extent of the Firm’s other continuing involvement with the
by those trusts of approximately 50% and 37% for the
trusts, as indicated above, obligates the Firm to absorb
years ended December 31, 2019 and 2018. The Firm did
The following table presents the total unpaid principal amount of assets held in Firm-sponsored private-label securitization
entities, including those in which the Firm has continuing involvement, and those that are consolidated by the Firm. Continuing
involvement includes servicing the loans, holding senior interests or subordinated interests (including amounts required to be
held pursuant to credit risk retention rules), recourse or guarantee arrangements, and derivative contracts. In certain
instances, the Firm’s only continuing involvement is servicing the loans. The Firm’s maximum loss exposure from retained and
purchased interests is the carrying value of these interests. Refer to Securitization activity on page 248 of this Note for further
information regarding the Firm’s cash flows associated with and interests retained in nonconsolidated VIEs, and pages 248–
249 of this Note for information on the Firm’s loan sales and securitization activity related to U.S. GSEs and government
agencies.
(a) Excludes U.S. GSEs and government agency securitizations and re-securitizations, which are not Firm-sponsored. Refer to pages 248–249 of this Note for
information on the Firm’s loan sales and securitization activity related to U.S. GSEs and government agencies.
(b) Consists of securities backed by commercial real estate loans and non-mortgage-related consumer receivables purchased from third parties.
(c) Excludes the following: retained servicing (refer to Note 15 for a discussion of MSRs); securities retained from loan sales and securitization activity related
to U.S. GSEs and government agencies; interest rate and foreign exchange derivatives primarily used to manage interest rate and foreign exchange risks of
securitization entities (refer to Note 5 for further information on derivatives); senior and subordinated securities of $106 million and $94 million,
respectively, at December 31, 2019, and $87 million and $28 million, respectively, at December 31, 2018, which the Firm purchased in connection with
CIB’s secondary market-making activities.
(d) Includes interests held in re-securitization transactions.
(e) As of December 31, 2019 and 2018, 63% and 60%, respectively, of the Firm’s retained securitization interests, which are predominantly carried at fair
value and include amounts required to be held pursuant to credit risk retention rules, were risk-rated “A” or better, on an S&P-equivalent basis. The
retained interests in prime residential mortgages consisted of $1.1 billion and $1.3 billion of investment-grade, and $72 million and $16 million of
noninvestment-grade at December 31, 2019 and 2018, respectively. The retained interests in commercial and other securitizations trusts consisted of
$1.2 billion of investment-grade for both periods, and $575 million and $623 million of noninvestment-grade retained interests at December 31, 2019
and 2018, respectively.
perform is conditional and is limited by certain events Holders of the floaters may “put,” or tender, their floaters
(“Termination Events”), which include bankruptcy or failure to the TOB trust. If the remarketing agent cannot
to pay by the municipal bond issuer or credit enhancement successfully remarket the floaters to another investor, the
provider, an event of taxability on the municipal bonds or liquidity provider either provides a loan to the TOB trust for
the immediate downgrade of the municipal bond to below the TOB trust’s purchase of the floaters, or it directly
investment grade. In addition, the liquidity provider’s purchases the tendered floaters.
exposure is typically further limited by the high credit
TOB trusts are considered to be variable interest entities.
quality of the underlying municipal bonds, the excess
The Firm consolidates non-customer TOB trusts because as
collateralization in the vehicle, or, in certain transactions,
the Residual holder, the Firm has the right to make
the reimbursement agreements with the Residual holders.
decisions that significantly impact the economic
performance of the municipal bond vehicle, and it has the
right to receive benefits and bear losses that could
potentially be significant to the municipal bond vehicle.
Assets Liabilities
Beneficial
December 31, 2018 Trading Total interests in Total
(in millions) assets Loans Other(b) assets(c) VIE assets(d) Other(e) liabilities
VIE program type
Firm-sponsored credit card trusts $ — $ 31,760 $ 491 $ 32,251 $ 13,404 $ 12 $ 13,416
Firm-administered multi-seller conduits — 24,411 300 24,711 4,842 33 4,875
Municipal bond vehicles 1,779 — 4 1,783 1,685 3 1,688
Mortgage securitization entities(a) 53 3,285 40 3,378 308 161 469
Other 134 — 178 312 2 103 105
Total $ 1,966 $ 59,456 $ 1,013 $ 62,435 $ 20,241 $ 312 $ 20,553
(a) Includes residential and commercial mortgage securitizations.
(b) Includes assets classified as cash and other assets on the Consolidated balance sheets.
(c) The assets of the consolidated VIEs included in the program types above are used to settle the liabilities of those entities. The assets and liabilities include
third-party assets and liabilities of consolidated VIEs and exclude intercompany balances that eliminate in consolidation.
(d) The interest-bearing beneficial interest liabilities issued by consolidated VIEs are classified in the line item on the Consolidated balance sheets titled,
“Beneficial interests issued by consolidated variable interest entities.” The holders of these beneficial interests generally do not have recourse to the
general credit of JPMorgan Chase. Included in beneficial interests in VIE assets are long-term beneficial interests of $6.7 billion and $13.7 billion at
December 31, 2019 and 2018, respectively. Refer to Note 20 for additional information on interest-bearing long-term beneficial interests.
(e) Includes liabilities classified as accounts payable and other liabilities on the Consolidated balance sheets.
Securitization activity
The following table provides information related to the Firm’s securitization activities for the years ended December 31, 2019,
2018 and 2017, related to assets held in Firm-sponsored securitization entities that were not consolidated by the Firm, and
where sale accounting was achieved at the time of the securitization.
2019 2018 2017
Year ended December 31, Residential Commercial Residential Commercial Residential Commercial
(in millions) mortgage(e) and other(f) mortgage(e) and other(f) mortgage(e) and other(f)
Principal securitized $ 9,957 $ 9,390 $ 6,431 $ 10,159 $ 5,532 $ 10,252
All cash flows during the period:(a)
Proceeds received from loan sales as financial
instruments(b)(c) $ 10,238 $ 9,544 $ 6,449 $ 10,218 $ 5,661 $ 10,340
Servicing fees collected(d) 287 2 319 2 338 3
Cash flows received on interests 507 237 411 301 463 918
(a) Excludes re-securitization transactions.
(b) Predominantly includes Level 2 assets.
(c) The carrying value of the loans accounted for at fair value approximated the proceeds received upon loan sale.
(d) The prior period amounts have been revised to conform with the current period presentation.
(e) Includes prime mortgages only. Excludes loan securitization activity related to U.S. GSEs and government agencies.
(f) Includes commercial mortgage and other consumer loans.
Key assumptions used to value retained interests originated Loans and excess MSRs sold to U.S. government-
during the year are shown in the table below. sponsored enterprises and loans in securitization
transactions pursuant to Ginnie Mae guidelines
Year ended December 31, 2019 2018 2017 In addition to the amounts reported in the securitization
Residential mortgage retained interest: activity tables above, the Firm, in the normal course of
Weighted-average life (in years) 4.8 7.6 4.8 business, sells originated and purchased mortgage loans
Weighted-average discount rate 7.4% 3.6% 2.9% and certain originated excess MSRs on a nonrecourse basis,
Commercial mortgage retained interest: predominantly to U.S. GSEs. These loans and excess MSRs
Weighted-average life (in years) 6.4 5.3 7.1 are sold primarily for the purpose of securitization by the
Weighted-average discount rate 4.1% 4.0% 4.4% U.S. GSEs, who provide certain guarantee provisions (e.g.,
credit enhancement of the loans). The Firm also sells loans
into securitization transactions pursuant to Ginnie Mae
guidelines; these loans are typically insured or guaranteed
by another U.S. government agency. The Firm does not
consolidate the securitization vehicles underlying these
transactions as it is not the primary beneficiary. For a
limited number of loan sales, the Firm is obligated to share
a portion of the credit risk associated with the sold loans
with the purchaser. Refer to Note 28 for additional
information about the Firm’s loan sales- and securitization-
related indemnifications. Refer to Note 15 for additional
information about the impact of the Firm’s sale of certain
excess MSRs.
The fair value of MSRs is sensitive to changes in interest those for which the Firm receives fixed-rate interest
rates, including their effect on prepayment speeds. MSRs payments) increase in value when interest rates decline.
typically decrease in value when interest rates decline JPMorgan Chase uses combinations of derivatives and
because declining interest rates tend to increase securities to manage the risk of changes in the fair value of
prepayments and therefore reduce the expected life of the MSRs. The intent is to offset any interest-rate related
net servicing cash flows that comprise the MSR asset. changes in the fair value of MSRs with changes in the fair
Conversely, securities (e.g., mortgage-backed securities), value of the related risk management instruments.
principal-only certificates and certain derivatives (i.e.,
The following table summarizes MSR activity for the years ended December 31, 2019, 2018 and 2017.
As of or for the year ended December 31, (in millions, except where otherwise noted) 2019 2018 2017
Fair value at beginning of period $ 6,130 $ 6,030 $ 6,096
MSR activity:
Originations of MSRs 1,384 931 1,103
Purchase of MSRs 105 315 —
Disposition of MSRs(a) (789) (636) (140)
Net additions 700 610 963
(a) Includes excess MSRs transferred to agency-sponsored trusts in exchange for stripped mortgage backed securities (“SMBS”). In each transaction, a
portion of the SMBS was acquired by third parties at the transaction date; the Firm acquired the remaining balance of those SMBS as trading securities.
(b) Represents both the impact of changes in estimated future prepayments due to changes in market interest rates, and the difference between actual and
expected prepayments.
(c) Represents changes in prepayments other than those attributable to changes in market interest rates.
(d) Represents amounts the Firm pays as the servicer (e.g., scheduled principal and interest, taxes and insurance), which will generally be reimbursed within
a short period of time after the advance from future cash flows from the trust or the underlying loans. The Firm’s credit risk associated with these servicer
advances is minimal because reimbursement of the advances is typically senior to all cash payments to investors. In addition, the Firm maintains the right
to stop payment to investors if the collateral is insufficient to cover the advance. However, certain of these servicer advances may not be recoverable if
they were not made in accordance with applicable rules and agreements.
(e) The decrease in projected cash flows was largely related to default servicing assumption updates.
All other 1 2 3
Mortgage fees and related income $ 2,036 $ 1,254 $ 1,616
Note 16 – Premises and equipment At December 31, 2019, the maturities of interest-bearing
Premises and equipment, including leasehold time deposits were as follows.
improvements, are carried at cost less accumulated
December 31, 2019
depreciation and amortization. JPMorgan Chase computes (in millions) U.S. Non-U.S. Total
depreciation using the straight-line method over the 2020 $ 60,614 $ 49,443 $ 110,057
estimated useful life of an asset. For leasehold 2021 3,700 123 3,823
improvements, the Firm uses the straight-line method 2022 709 89 798
computed over the lesser of the remaining term of the 2023 175 13 188
leased facility or the estimated useful life of the leased 2024 534 357 891
asset. After 5 years 301 39 340
JPMorgan Chase capitalizes certain costs associated with Total $ 66,033 $ 50,064 $ 116,097
the acquisition or development of internal-use software.
Once the software is ready for its intended use, these costs Note 18 - Leases
are amortized on a straight-line basis over the software’s Lease commitments
expected useful life and reviewed for impairment on an Effective January 1, 2019, the Firm adopted new guidance
ongoing basis. that requires lessees to recognize on the Consolidated
balance sheets all leases with lease terms greater than
Note 17 – Deposits twelve months as a lease liability with a corresponding
At December 31, 2019 and 2018, noninterest-bearing and right-of-use (“ROU”) asset. Accordingly, the Firm recognized
interest-bearing deposits were as follows. operating lease liabilities and ROU assets of $8.2 billion and
$8.1 billion, respectively. The adoption of the new lease
December 31, (in millions) 2019 2018
guidance did not have a material impact on the Firm’s
U.S. offices
Consolidated statements of income. The change in
Noninterest-bearing (included $22,637 accounting due to the adoption of the new lease guidance
and $17,204 at fair value)(a)(b) $ 395,667 $ 386,709
did not result in a material change to the future net
Interest-bearing (included $2,534 and
$2,487 at fair value)(a)(b) 876,156 813,881 minimum rental payments/receivables or to the net rental
Total deposits in U.S. offices 1,271,823 1,200,590 expense when compared to December 31, 2018.
Non-U.S. offices Firm as lessee
Noninterest-bearing (included $1,980 and At December 31, 2019, JPMorgan Chase and its
$2,367 at fair value)(a)(b) 20,087 21,459 subsidiaries were obligated under a number of
Interest-bearing (included $1,438 and noncancelable leases, predominantly operating leases for
$1,159 at fair value)(a)(b) 270,521 248,617
premises and equipment used primarily for business
Total deposits in non-U.S. offices 290,608 270,076
purposes. These leases generally have terms of 20 years or
Total deposits $ 1,562,431 $1,470,666
less, determined based on the contractual maturity of the
(a) Includes structured notes classified as deposits for which the fair value
option has been elected. Refer to Note 3 for further discussion. lease, and include periods covered by options to extend or
(b) In the second quarter of 2019, the Firm reclassified balances related terminate the lease when the Firm is reasonably certain
to certain structured notes from interest-bearing to noninterest- that it will exercise those options. None of these lease
bearing deposits as the associated returns are recorded in principal agreements impose restrictions on the Firm’s ability to pay
transactions revenue and not in net interest income. This change was
applied retrospectively and, accordingly, prior period amounts were dividends, engage in debt or equity financing transactions
revised to conform with the current presentation. or enter into further lease agreements. Certain of these
leases contain escalation clauses that will increase rental
At December 31, 2019 and 2018, time deposits in payments based on maintenance, utility and tax increases,
denominations of $250,000 or more were as follows. which are non-lease components. The Firm elected not to
separate lease and non-lease components of a contract for
December 31, (in millions) 2019 2018
its real estate leases. As such, real estate lease payments
U.S. offices $ 44,127 $ 25,119
represent payments on both lease and non-lease
Non-U.S. offices 50,840 41,661
components.
Total $ 94,967 $ 66,780
December 31,
(in millions) 2019 2018
Year ended December 31,
(in millions) 2019 Carrying value of assets subject to
operating leases, net of accumulated
Rental expense depreciation $ 23,587 $ 21,428
Gross rental expense $ 2,057 Accumulated depreciation 6,121 5,303
Sublease rental income (184)
Net rental expense $ 1,873 The following table presents the Firm’s operating lease
income and the related depreciation expense on the
The following table presents future payments under Consolidated statements of income:
operating leases as of December 31, 2019:
Year ended December 31,
Year ended December 31, (in millions) (in millions) 2019 2018 2017
2020 $ 1,604 Operating lease income $ 5,455 $ 4,540 $ 3,611
2021 1,447 Depreciation expense 4,157 3,522 2,808
2022 1,257
2023 1,081 The following table presents future receipts under operating
2024 944 leases as of December 31, 2019:
After 2024 3,757
Total future minimum lease payments 10,090 Year ended December 31, (in millions)
Less: Imputed interest (1,585) 2020 $ 4,168
Total $ 8,505 2021 2,733
2022 1,025
In addition to the table above, as of December 31, 2019, 2023 86
the Firm had additional future operating lease 2024 37
commitments of $1.2 billion that were signed but had not
After 2024 52
yet commenced. These operating leases will commence
Total future minimum lease receipts $ 8,101
between 2020 and 2022 with lease terms up to 25 years.
(a) Includes credit card rewards liability of $6.4 billion and $5.8 billion at
December 31, 2019 and 2018, respectively.
(a) The interest rates shown are the range of contractual rates in effect at December 31, 2019 and 2018, respectively, including non-U.S. dollar fixed- and
variable-rate issuances, which excludes the effects of the associated derivative instruments used in hedge accounting relationships, if applicable. The use
of these derivative instruments modifies the Firm’s exposure to the contractual interest rates disclosed in the table above. Including the effects of the
hedge accounting derivatives, the range of modified rates in effect at December 31, 2019, for total long-term debt was (0.02)% to 9.43%, versus the
contractual range of 0.15% to 9.43% presented in the table above. The interest rate ranges shown exclude structured notes accounted for at fair value.
(b) Included long-term debt of $32.0 billion and $47.7 billion secured by assets totaling $186.1 billion and $207.0 billion at December 31, 2019 and 2018,
respectively. The amount of long-term debt secured by assets does not include amounts related to hybrid instruments.
(c) Included $75.7 billion and $54.9 billion of long-term debt accounted for at fair value at December 31, 2019 and 2018, respectively.
(d) Included $13.6 billion and $11.2 billion of outstanding zero-coupon notes at December 31, 2019 and 2018, respectively. The aggregate principal amount
of these notes at their respective maturities is $39.3 billion and $37.4 billion, respectively. The aggregate principal amount reflects the contractual
principal payment at maturity, which may exceed the contractual principal payment at the Firm’s next call date, if applicable.
(e) Included on the Consolidated balance sheets in beneficial interests issued by consolidated VIEs. Also included $36 million and $28 million accounted for at
fair value at December 31, 2019 and 2018, respectively. Excluded short-term commercial paper and other short-term beneficial interests of $11.1 billion
and $6.5 billion at December 31, 2019 and 2018, respectively.
(f) At December 31, 2019, long-term debt in the aggregate of $141.3 billion was redeemable at the option of JPMorgan Chase, in whole or in part, prior to
maturity, based on the terms specified in the respective instruments.
(g) The aggregate carrying values of debt that matures in each of the five years subsequent to 2019 is $38.3 billion in 2020, $45.8 billion in 2021, $19.6
billion in 2022, $29.7 billion in 2023 and $25.9 billion in 2024.
Fixed-to-floating-rate:
Series I 293,375 430,375 2,934 4,304 4/23/2008 LIBOR + 3.47% 4/30/2018 LIBOR + 3.47% $593.23 $646.38 $790.00 (f)
Series Q 150,000 150,000 1,500 1,500 4/23/2013 5.150 5/1/2023 LIBOR + 3.25 515.00 515.00 515.00
Series R 150,000 150,000 1,500 1,500 7/29/2013 6.000 8/1/2023 LIBOR + 3.30 600.00 600.00 600.00
Series S 200,000 200,000 2,000 2,000 1/22/2014 6.750 2/1/2024 LIBOR + 3.78 675.00 675.00 675.00
Series U 100,000 100,000 1,000 1,000 3/10/2014 6.125 4/30/2024 LIBOR + 3.33 612.50 612.50 612.50
Series V 250,000 250,000 2,500 2,500 6/9/2014 LIBOR + 3.32% 7/1/2019 LIBOR + 3.32 534.09 500.00 500.00 (g)
Series X 160,000 160,000 1,600 1,600 9/23/2014 6.100 10/1/2024 LIBOR + 3.33 610.00 610.00 610.00
Series Z 200,000 200,000 2,000 2,000 4/21/2015 5.300 5/1/2020 LIBOR + 3.80 530.00 530.00 530.00
Series CC 125,750 125,750 1,258 1,258 10/20/2017 4.625 11/1/2022 LIBOR + 2.58 462.50 462.50 129.76
Series FF 225,000 — 2,250 — 7/31/2019 5.000 8/1/2024 SOFR + 3.38 251.39 — — (h)
Total
preferred
stock 2,699,250 2,606,750 $ 26,993 $ 26,068
(a) Represented by depositary shares.
(b) Fixed-to-floating rate notes convert to a floating rate at the earliest redemption date.
(c) Dividends are declared quarterly. Dividends are payable quarterly on fixed-rate preferred stock. Dividends are payable semiannually on fixed-to-floating-
rate preferred stock while at a fixed rate, and payable quarterly after converting to a floating rate.
(d) Dividends in the amount of $211.67 per share were declared on April 12, 2019 and include dividends from the original issue date of January 24, 2019
through May 31, 2019. Dividends in the amount of $150.00 per share were declared thereafter on July 10, 2019 and October 9, 2019.
(e) No dividends were declared for Series GG from the original issue date of November 7, 2019 through December 31, 2019.
(f) The dividend rate for Series I preferred stock became floating and payable quarterly starting on April 30, 2018; prior to which the dividend rate was fixed
at 7.90% or $395.00 per share payable semi annually.
(g) The dividend rate for Series V preferred stock became floating and payable quarterly starting on July 1, 2019; prior to which the dividend rate was fixed at
5% or $250.00 per share payable semi annually. The Firm declared a dividend of $144.11 and $139.98 per share on outstanding Series V preferred
stock on August 15, 2019 and November 15, 2019, respectively.
(h) Dividends in the amount of $126.39 per share were declared on September 9, 2019 and include dividends from the original issue date of July 31, 2019
through October 31, 2019. Dividends in the amount of $125.00 per share were declared thereafter on December 10, 2019.
Each series of preferred stock has a liquidation value and On January 23, 2020, the Firm issued $3.0 billion of fixed-
redemption price per share of $10,000, plus accrued but to-floating rate non-cumulative preferred stock, Series HH.
unpaid dividends. The aggregate liquidation value was
$27.3 billion at December 31, 2019. On December 1, 2019, the Firm redeemed all $900 million
of its 5.45% non-cumulative preferred stock, Series P.
On February 24, 2020, the Firm issued $1.5 billion of fixed-
to- floating rate non-cumulative preferred stock, Series II. On November 7, 2019, the Firm issued $900 million of
4.75% non-cumulative preferred stock, Series GG.
On January 31, 2020, the Firm announced that it will
redeem all $1.43 billion of its 6.125% non-cumulative On October 30, 2019, the Firm redeemed $1.37 billion of
preferred stock, Series Y on March 1, 2020. its fixed-to-floating rate non-cumulative perpetual preferred
stock, Series I.
Unrealized Accumulated
Year ended gains/(losses) Translation DVA on fair value other
December 31, on investment adjustments, Fair value Cash flow Defined benefit pension option elected comprehensive
(in millions) securities net of hedges hedges hedges and OPEB plans liabilities income/(loss)
Balance at
December 31,
2016 $ 1,524 $ (164) NA $ (100) $ (2,259) $ (176) $ (1,175)
Net change 640 (306) NA 176 738 (192) 1,056
Balance at
December 31,
2017 $ 2,164 $ (470) $ — $ 76 $ (1,521) $ (368) $ (119)
Cumulative effect of
changes in
accounting
principles:(a) 896 (277) (54) 16 (414) (79) 88
Net change (1,858) 20 (107) (201) (373) 1,043 (1,476)
Balance at
December 31,
2018 $ 1,202 $ (727) $ (161) $ (109) $ (2,308) $ 596 $ (1,507)
Net change 2,855 20 30 172 964 (965) 3,076
Balance at
December 31,
2019 $ 4,057 $ (707) $ (131) $ 63 $ (1,344) $ (369) $ 1,569
(a) Represents the adjustment to AOCI as a result of the accounting standards adopted in the first quarter of 2018. Refer to Note 1 for additional information.
The following table presents the pre-tax and after-tax changes in the components of OCI.
2019 2018 2017
Tax Tax Tax
Year ended December 31, (in millions) Pre-tax effect After-tax Pre-tax effect After-tax Pre-tax effect After-tax
Unrealized gains/(losses) on investment securities:
Net unrealized gains/(losses) arising during the period $ 4,025 $ (974) $ 3,051 $ (2,825) $ 665 $ (2,160) $ 944 $ (346) $ 598
Reclassification adjustment for realized (gains)/losses
included in net income(a) (258) 62 (196) 395 (93) 302 66 (24) 42
Net change 3,767 (912) 2,855 (2,430) 572 (1,858) 1,010 (370) 640
Translation adjustments(b):
Translation (49) 33 (16) (1,078) 156 (922) 1,313 (801) 512
Hedges 46 (10) 36 1,236 (294) 942 (1,294) 476 (818)
Net change (3) 23 20 158 (138) 20 19 (325) (306)
Fair value hedges, net change(c): 39 (9) 30 (140) 33 (107) NA NA NA
Cash flow hedges:
Net unrealized gains/(losses) arising during the period 122 (28) 94 (245) 58 (187) 147 (55) 92
Reclassification adjustment for realized (gains)/losses
included in net income(d) 103 (25) 78 (18) 4 (14) 134 (50) 84
Net change 225 (53) 172 (263) 62 (201) 281 (105) 176
Defined benefit pension and OPEB plans:
Prior service credit/(cost) arising during the period (5) 1 (4) (29) 7 (22) — — —
Net gain/(loss) arising during the period 1,005 (169) 836 (558) 102 (456) 802 (160) 642
Reclassification adjustments included in net income(e):
Amortization of net loss 167 (36) 131 103 (24) 79 250 (90) 160
Amortization of prior service cost/(credit) 3 (1) 2 (23) 6 (17) (36) 13 (23)
Curtailment (gain)/loss — — — 21 (5) 16 — — —
Settlement (gain)/loss — — — 2 — 2 2 (1) 1
Foreign exchange and other (13) 12 (1) 34 (9) 25 (54) 12 (42)
Net change 1,157 (193) 964 (450) 77 (373) 964 (226) 738
DVA on fair value option elected liabilities, net change: $ (1,264) $ 299 $ (965) $ 1,364 $ (321) $ 1,043 $ (303) $ 111 $ (192)
Total other comprehensive income/(loss) $ 3,921 $ (845) $ 3,076 $ (1,761) $ 285 $ (1,476) $ 1,971 $ (915) $ 1,056
(a) The pre-tax amount is reported in investment securities gains/(losses) in the Consolidated statements of income.
(b) Reclassifications of pre-tax realized gains/(losses) on translation adjustments and related hedges are reported in other income/expense in the
Consolidated statements of income. During the year ended December 31, 2019, the Firm reclassified net pre-tax gains of $7 million to other income and
$1 million to other expense, respectively. These amounts, which related to the liquidation of certain legal entities, are comprised of $18 million related to
net investment hedge gains and$10 million related to cumulative translation adjustments. During the year ended December 31, 2018, the Firm
reclassified a net pre-tax loss of $168 million to other expense related to the liquidation of certain legal entities, $17 million related to net investment
hedge losses and $151 million related to cumulative translation adjustments. During the year ended December 31, 2017, the Firm reclassified a net pre-
tax loss of $25 million to other expense related to the liquidation of a legal entity, $50 million related to net investment hedge gains and $75 million
related to cumulative translation adjustments.
(c) Represents changes in fair value of cross-currency swaps attributable to changes in cross-currency basis spreads, which are excluded from the assessment
of hedge effectiveness and recorded in other comprehensive income. The initial cost of cross-currency basis spreads is recognized in earnings as part of
the accrual of interest on the cross-currency swap.
(d) The pre-tax amounts are primarily recorded in noninterest revenue, net interest income and compensation expense in the Consolidated statements of
income.
(e) The pre-tax amount is reported in other expense in the Consolidated statements of income.
Periods under
examination Status
JPMorgan Chase – U.S. 2011 – 2013 Field Examination
completed; JPMorgan
Chase intends to file
amended returns
JPMorgan Chase – U.S. 2014 - 2016 Field Examination
JPMorgan Chase – New 2012 - 2014 Field Examination
York State
JPMorgan Chase – New 2012 - 2014 Field Examination
York City
JPMorgan Chase – 2011 – 2012 Field Examination
California
JPMorgan Chase – U.K. 2006 – 2017 Field examination of
certain select entities
Basel III Standardized Fully Phased-In Basel III Advanced Fully Phased-In
December 31, 2019 JPMorgan JPMorgan JPMorgan JPMorgan
(in millions, except ratios) Chase & Co. Chase Bank, N.A. Chase & Co. Chase Bank, N.A.
Regulatory capital
CET1 capital $ 187,753 $ 206,848 $ 187,753 $ 206,848
Tier 1 capital 214,432 206,851 214,432 206,851
Total capital 242,589 224,390 232,112 214,091
Assets
Risk-weighted 1,515,869 1,457,689 1,397,878 1,269,991
Adjusted average(a) 2,730,239 2,353,432 2,730,239 2,353,432
Capital ratios(b)
CET1 12.4% 14.2% 13.4% 16.3%
Tier 1 14.1 14.2 15.3 16.3
Total 16.0 15.4 16.6 16.9
Tier 1 leverage(c) 7.9 8.8 7.9 8.8
Assets
Risk-weighted 1,528,916 1,446,529 1,421,205 1,283,146
Adjusted average(a) 2,589,887 2,250,480 2,589,887 2,250,480
Capital ratios(b)
CET1 12.0% 14.6% 12.9% 16.5%
Tier 1 13.7 14.6 14.7 16.5
Total 15.5 15.9 16.0 17.1
Tier 1 leverage (c)
8.1 9.4 8.1 9.4
(a) Adjusted average assets, for purposes of calculating the Tier 1 leverage ratio, includes total quarterly average assets adjusted for on-balance sheet assets
that are subject to deduction from Tier 1 capital, predominantly goodwill and other intangible assets.
(b) For each of the risk-based capital ratios, the capital adequacy of the Firm and JPMorgan Chase Bank, N.A. is evaluated against the lower of the two ratios
as calculated under Basel III approaches (Standardized or Advanced).
(c) The Tier 1 leverage ratio is not a risk-based measure of capital.
(d) On May 18, 2019, Chase Bank USA, N.A. merged with and into JPMorgan Chase Bank, N.A., with JPMorgan Chase Bank, N.A as the surviving entity. The
December 31, 2018 amounts reported for JPMorgan Chase Bank, N.A. retrospectively reflect the impact of the merger.
(a) On May 18, 2019, Chase Bank USA, N.A. merged with and into JPMorgan Chase Bank, N.A., with JPMorgan Chase Bank, N.A as the surviving entity. The
December 31, 2018 amounts reported for JPMorgan Chase Bank, N.A. retrospectively reflect the impact of the merger.
Other unfunded commitments to extend credit types of guarantees, the Firm records this fair value amount
Other unfunded commitments to extend credit generally in other liabilities with an offsetting entry recorded in cash
consist of commitments for working capital and general (for premiums received), or other assets (for premiums
corporate purposes, extensions of credit to support receivable). Any premium receivable recorded in other
commercial paper facilities and bond financings in the event assets is reduced as cash is received under the contract, and
that those obligations cannot be remarketed to new the fair value of the liability recorded at inception is
investors, as well as committed liquidity facilities to clearing amortized into income as lending and deposit-related fees
organizations. The Firm also issues commitments under over the life of the guarantee contract. For indemnifications
multipurpose facilities which could be drawn upon in provided in sales agreements, a portion of the sale
several forms, including the issuance of a standby letter of proceeds is allocated to the guarantee, which adjusts the
credit. gain or loss that would otherwise result from the
transaction. For these indemnifications, the initial liability is
Guarantees
amortized to income as the Firm’s risk is reduced (i.e., over
U.S. GAAP requires that a guarantor recognize, at the
time or when the indemnification expires). Any contingent
inception of a guarantee, a liability in an amount equal to
liability that exists as a result of issuing the guarantee or
the fair value of the obligation undertaken in issuing the
indemnification is recognized when it becomes probable
guarantee. U.S. GAAP defines a guarantee as a contract that
and reasonably estimable. The contingent portion of the
contingently requires the guarantor to pay a guaranteed
liability is not recognized if the estimated amount is less
party based upon: (a) changes in an underlying asset,
than the carrying amount of the liability recognized at
liability or equity security of the guaranteed party; or (b) a
inception (adjusted for any amortization). The contractual
third party’s failure to perform under a specified
amount and carrying value of guarantees and
agreement. The Firm considers the following off–balance
indemnifications are included in the table on page 273. For
sheet arrangements to be guarantees under U.S. GAAP:
additional information on the guarantees, see below.
standby letters of credit and other financial guarantees,
securities lending indemnifications, certain indemnification Standby letters of credit and other financial guarantees
agreements included within third-party contractual Standby letters of credit and other financial guarantees are
arrangements, certain derivative contracts and the conditional lending commitments issued by the Firm to
guarantees under the sponsored member repo program. guarantee the performance of a client or customer to a
third party under certain arrangements, such as
As required by U.S. GAAP, the Firm initially records
commercial paper facilities, bond financings, acquisition
guarantees at the inception date fair value of the obligation
financings, trade and similar transactions.
assumed (e.g., the amount of consideration received or the
net present value of the premium receivable). For certain
The following table summarizes the contractual amount and carrying value of standby letters of credit and other financial
guarantees and other letters of credit arrangements as of December 31, 2019 and 2018.
Standby letters of credit, other financial guarantees and other letters of credit
2019 2018
December 31, Standby letters of credit and Other letters Standby letters of credit and Other letters
(in millions) other financial guarantees of credit other financial guarantees of credit
Investment-grade(a) $ 26,647 $ 2,136 $ 26,420 $ 2,079
Noninvestment-grade(a) 7,261 821 7,078 746
Total contractual amount $ 33,908 $ 2,957 $ 33,498 $ 2,825
Allowance for lending-related commitments $ 216 $ 4 $ 167 $ 3
Guarantee liability 402 — 354 —
Total carrying value $ 618 $ 4 $ 521 $ 3
Commitments with collateral $ 17,582 $ 726 $ 17,400 $ 583
(a) The ratings scale is based on the Firm’s internal risk ratings. Refer to Note 12 for further information on internal risk ratings.
In August 2018, the United States District Court for the various governmental agencies and entities around the
Southern District of New York granted final approval to the world relating primarily to the British Bankers Association’s
Firm’s settlement of a consolidated class action brought by London Interbank Offered Rate (“LIBOR”) for various
U.S.-based plaintiffs, which principally alleged violations of currencies and the European Banking Federation’s Euro
federal antitrust laws based on an alleged conspiracy to Interbank Offered Rate (“EURIBOR”). The Swiss Competition
manipulate foreign exchange rates and also sought Commission’s investigation relating to EURIBOR, to which
damages on behalf of persons who transacted in FX futures the Firm and other banks are subject, continues. In
and options on futures. Certain members of the settlement December 2016, the European Commission issued a
class filed requests to the Court to be excluded from the decision against the Firm and other banks finding an
class, and certain of them filed a complaint against the Firm infringement of European antitrust rules relating to
and a number of other foreign exchange dealers in EURIBOR. The Firm has filed an appeal of that decision with
November 2018. A number of these actions remain the European General Court, and that appeal is pending.
pending. Further, putative class actions have been filed
In addition, the Firm has been named as a defendant along
against the Firm and a number of other foreign exchange
with other banks in a series of individual and putative class
dealers on behalf of certain consumers who purchased
actions related to benchmarks, including U.S. dollar LIBOR
foreign currencies at allegedly inflated rates and purported
during the period that it was administered by the BBA and,
indirect purchasers of FX instruments; these actions also
in a separate consolidated putative class action, during the
remain pending in the District Court. In addition, some FX-
period that it was administered by ICE Benchmark
related individual and putative class actions based on
Administration. These actions have been filed, or
similar alleged underlying conduct have been filed outside
consolidated for pre-trial purposes, in the United States
the U.S., including in the U.K., Israel and Australia.
District Court for the Southern District of New York. In these
Interchange Litigation. Groups of merchants and retail actions, plaintiffs make varying allegations that in various
associations filed a series of class action complaints alleging periods, starting in 2000 or later, defendants either
that Visa and Mastercard, as well as certain banks, individually or collectively manipulated various benchmark
conspired to set the price of credit and debit card rates by submitting rates that were artificially low or high.
interchange fees and enacted related rules in violation of Plaintiffs allege that they transacted in loans, derivatives or
antitrust laws. In 2012, the parties initially settled the cases other financial instruments whose values are affected by
for a cash payment, a temporary reduction of credit card changes in these rates and assert a variety of claims
interchange, and modifications to certain credit card including antitrust claims seeking treble damages. These
network rules. In 2017, after the approval of that actions are in various stages of litigation.
settlement was reversed on appeal, the case was remanded
In actions related to U.S. dollar LIBOR during the period that
to the District Court for further proceedings consistent with
it was administered by the BBA, the District Court dismissed
the appellate decision.
certain claims, including antitrust claims brought by some
The original class action was divided into two separate plaintiffs whom the District Court found did not have
actions, one seeking primarily monetary relief and the other standing to assert such claims, and permitted certain claims
seeking primarily injunctive relief. In September 2018, the to proceed, including antitrust, Commodity Exchange Act,
parties to the class action seeking monetary relief finalized Section 10(b) of the Securities Exchange Act and common
an agreement which amends and supersedes the prior law claims. The plaintiffs whose antitrust claims were
settlement agreement. Pursuant to this settlement, the dismissed for lack of standing have filed an appeal. The
defendants collectively contributed an additional $900 District Court granted class certification of antitrust claims
million to the approximately $5.3 billion previously held in related to bonds and interest rate swaps sold directly by the
escrow from the original settlement. In December 2019, the defendants and denied class certification motions filed by
amended agreement was approved by the District Court. other plaintiffs. The Firm’s settlements of putative class
Certain merchants filed notices of appeal of the District actions related to Swiss franc LIBOR, the Singapore
Court’s approval order. Based on the percentage of Interbank Offered Rate and the Singapore Swap Offer Rate
merchants that opted out of the amended class settlement, (“SIBOR”), the Australian Bank Bill Swap Reference Rate,
$700 million has been returned to the defendants from the and certain of the putative class actions related to U.S.
settlement escrow in accordance with the settlement dollar LIBOR remain subject to court approval. In the class
agreement. The class action seeking primarily injunctive actions related to SIBOR and Swiss franc LIBOR, the District
relief continues separately. Court concluded that the Court lacked subject matter
jurisdiction, and plaintiffs’ appeals of those decisions are
In addition, certain merchants have filed individual actions pending.
raising similar allegations against Visa and Mastercard, as
well as against the Firm and other banks, and those actions Metals and U.S. Treasuries Investigations and Litigation and
are proceeding. Related Inquiries. Various authorities, including the
Department of Justice’s Criminal Division, are conducting
LIBOR and Other Benchmark Rate Investigations and investigations relating to trading practices in the metals
Litigation. JPMorgan Chase has responded to inquiries from markets and related conduct. The Firm also is responding to
280 JPMorgan Chase & Co./2019 Form 10-K
related requests concerning similar trading-practices issues The Firm has established reserves for several hundred of its
in markets for other financial instruments, such as U.S. currently outstanding legal proceedings. In accordance with
Treasuries. The Firm continues to cooperate with these the provisions of U.S. GAAP for contingencies, the Firm
investigations and is currently engaged in discussions with accrues for a litigation-related liability when it is probable
various regulators about resolving their respective that such a liability has been incurred and the amount of
investigations. There is no assurance that such discussions the loss can be reasonably estimated. The Firm evaluates its
will result in settlements. Several putative class action outstanding legal proceedings each quarter to assess its
complaints have been filed in the United States District litigation reserves, and makes adjustments in such reserves,
Court for the Southern District of New York against the Firm upwards or downward, as appropriate, based on
and certain former employees, alleging a precious metals management’s best judgment after consultation with
futures and options price manipulation scheme in violation counsel. The Firm’s legal expense/(benefit) was $239
of the Commodity Exchange Act. Some of the complaints million, $72 million and $(35) million for the years ended
also allege unjust enrichment and deceptive acts or December 31, 2019, 2018 and 2017, respectively. There is
practices under the General Business Law of the State of no assurance that the Firm’s litigation reserves will not need
New York. The Court consolidated these putative class to be adjusted in the future.
actions in February 2019. The Firm is also a defendant in a
In view of the inherent difficulty of predicting the outcome
consolidated action filed in the United States District Court
of legal proceedings, particularly where the claimants seek
for the Southern District of New York alleging
very large or indeterminate damages, or where the matters
monopolization of silver futures in violation of the Sherman
present novel legal theories, involve a large number of
Act.
parties or are in early stages of discovery, the Firm cannot
Wendel. Since 2012, the French criminal authorities have state with confidence what will be the eventual outcomes of
been investigating a series of transactions entered into by the currently pending matters, the timing of their ultimate
senior managers of Wendel Investissement (“Wendel”) resolution or the eventual losses, fines, penalties or
during the period from 2004 through 2007 to restructure consequences related to those matters. JPMorgan Chase
their shareholdings in Wendel. JPMorgan Chase Bank, N.A., believes, based upon its current knowledge and after
Paris branch provided financing for the transactions to a consultation with counsel, consideration of the material
number of managers of Wendel in 2007. JPMorgan Chase legal proceedings described above and after taking into
has cooperated with the investigation. The investigating account its current litigation reserves and its estimated
judges issued an ordonnance de renvoi in November 2016, aggregate range of possible losses, that the other legal
referring JPMorgan Chase Bank, N.A. to the French tribunal proceedings currently pending against it should not have a
correctionnel for alleged complicity in tax fraud. No date for material adverse effect on the Firm’s consolidated financial
trial has been set by the court. In January 2018, the Paris condition. The Firm notes, however, that in light of the
Court of Appeal issued a decision cancelling the mise en uncertainties involved in such proceedings, there is no
examen of JPMorgan Chase Bank, N.A. The Court of assurance that the ultimate resolution of these matters will
Cassation, France’s highest court, ruled in September 2018 not significantly exceed the reserves it has currently
that a mise en examen is a prerequisite for an ordonnance accrued or that a matter will not have material reputational
de renvoi and in January 2020 ordered the annulment of consequences. As a result, the outcome of a particular
the ordonnance de renvoi referring JPMorgan Chase Bank, matter may be material to JPMorgan Chase’s operating
N.A. to the French tribunal correctionnel. In addition, a results for a particular period, depending on, among other
number of the managers have commenced civil proceedings factors, the size of the loss or liability imposed and the level
against JPMorgan Chase Bank, N.A. The claims are separate, of JPMorgan Chase’s income for that period.
involve different allegations and are at various stages of
proceedings.
* * *
In addition to the various legal proceedings discussed
above, JPMorgan Chase and its subsidiaries are named as
defendants or are otherwise involved in a substantial
number of other legal proceedings. The Firm believes it has
meritorious defenses to the claims asserted against it in its
currently outstanding legal proceedings and it intends to
defend itself vigorously. Additional legal proceedings may
be initiated from time to time in the future.
Segment results
The following table provides a summary of the Firm’s Business segment capital allocation
segment results as of or for the years ended December 31, Each business segment is allocated capital by taking into
2019, 2018 and 2017, on a managed basis. The Firm’s consideration a variety of factors including capital levels of
definition of managed basis starts with the reported U.S. similarly rated peers and applicable regulatory capital
GAAP results and includes certain reclassifications to requirements. ROE is measured and internal targets for
present total net revenue for the Firm (and each of the expected returns are established as key measures of a
reportable business segments) on an FTE basis. Accordingly, business segment’s performance.
revenue from investments that receive tax credits and tax-
The Firm’s allocation methodology incorporates Basel III
exempt securities is presented in the managed results on a
Standardized RWA, Basel III Advanced RWA, leverage, the
basis comparable to taxable investments and securities.
GSIB surcharge, and a simulation of capital in a severe
This allows management to assess the comparability of
stress environment. Periodically, the assumptions and
revenue from year-to-year arising from both taxable and
methodologies used to allocate capital are assessed and as
tax-exempt sources. The corresponding income tax impact
a result, the capital allocated to the LOBs may change.
related to tax-exempt items is recorded within income tax
expense/(benefit). These adjustments have no impact on
net income as reported by the Firm as a whole or by the
LOBs.
Net interest income 37,241 35,819 31,775 9,156 9,480 10,118 6,554 6,716 6,083 3,500 3,537 3,379
Total net revenue 55,883 52,079 46,485 38,298 36,448 34,657 8,984 9,059 8,605 14,316 14,076 13,835
Provision for credit losses 4,952 4,753 5,572 277 (60) (45) 296 129 (276) 61 53 39
Noninterest expense 28,896 27,835 26,062 21,519 20,918 19,407 3,500 3,386 3,327 10,515 10,353 10,218
Income tax expense/(benefit) 5,394 4,639 5,456 4,580 3,817 4,482 1,264 1,307 2,015 907 817 1,241
Net income/(loss) $ 16,641 $ 14,852 $ 9,395 $ 11,922 $ 11,773 $ 10,813 $ 3,924 $ 4,237 $ 3,539 $ 2,833 $ 2,853 $ 2,337
Average equity $ 52,000 $ 51,000 $ 51,000 $ 80,000 $ 70,000 $ 70,000 $ 22,000 $ 20,000 $ 20,000 $ 10,500 $ 9,000 $ 9,000
Total assets 539,090 557,441 552,601 908,153 903,051 826,384 220,514 220,229 221,228 182,004 170,024 151,909
Return on equity 31% 28% 17% 14% 16% 14% 17% 20% 17% 26% 31% 25%
Overhead ratio 52 53 56 56 57 56 39 37 39 73 74 74
Net interest income 1,325 135 55 (531) (628) (1,313) 57,245 55,059 50,097
Total net revenue 1,211 (128) 1,140 (3,065) (2,505) (4,017) 115,627 109,029 100,705
Overhead ratio NM NM NM NM NM NM 57 58 59
(a) Segment results on a managed basis reflect revenue on a FTE basis with the corresponding income tax impact recorded within income tax expense/
(benefit). These adjustments are eliminated in reconciling items to arrive at the Firm’s reported U.S. GAAP results.
(b) Included $375 million related to tax-oriented investments as a result of the enactment of the TCJA.
(a) TBVPS and ROTCE are non-GAAP financial measures. Refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance
Measures on pages 57–59 for further discussion of these measures.
(b) Quarterly ratios are based upon annualized amounts.
(c) The percentage represents the Firm’s reported average LCR.
(d) The Basel III capital rules became fully phased-in effective January 1, 2019. Prior to this date, the required capital measures were subject to the transitional rules
which, as of December 31, 2018 and September 30, 2018, were the same on a fully phased-in and transitional basis. Refer to Capital Risk Management on pages
85–92 for additional information on these measures.
(e) The Basel III rule for the SLR became fully phased-in effective January 1, 2018. Refer to Capital Risk Management on pages 85–92 for additional information on
these measures.
(f) This ratio is a non-GAAP financial measure as it excludes the impact of residential real estate PCI loans. Refer to Explanation and Reconciliation of the Firm’s Use of
Non-GAAP Financial Measures and Key Performance Measures on pages 57–59, and the Allowance for credit losses on pages 116–117 for further discussion of this
measure.
Consolidated average balance sheets, interest and rates adjusted to present interest income and rates earned on
Provided below is a summary of JPMorgan Chase’s assets exempt from income taxes (i.e., federal taxes) on a
consolidated average balances, interest and rates on a basis comparable with other taxable investments. The
taxable-equivalent basis for the years 2017 through 2019. incremental tax rate used for calculating the taxable-
Income computed on a taxable-equivalent basis is the equivalent adjustment was approximately 24% in both
income reported in the Consolidated statements of income, 2019 and 2018, and 37% in 2017.
(i)
Loans 954,539 50,532 5.29
All other interest-earning assets(a)(c) 50,084 1,967 3.93
Total interest-earning assets(a) 2,345,491 84,571 3.61
Allowance for loan losses (13,331)
Cash and due from banks 20,645
Trading assets – equity and other instruments(a) 114,323
Trading assets – derivative receivables 53,786
Goodwill, MSRs and other intangible assets 53,683
All other noninterest-earning assets 167,244
Total assets $ 2,741,841
Liabilities
Interest-bearing deposits(a) $ 1,115,848 $ 8,957 0.80%
Federal funds purchased and securities loaned or sold under repurchase agreements 227,994 4,630 2.03
Short-term borrowings(a)(d) 52,426 1,248 2.38
Trading liabilities – debt and all other interest-bearing liabilities(a)(e)(f) 182,105 2,585 1.42
Beneficial interests issued by consolidated VIEs 22,501 568 2.52
Long-term debt(a) 247,968 8,807 3.55
Total interest-bearing liabilities(a) 1,848,842 26,795 1.45
Noninterest-bearing deposits(a) 407,219
Trading liabilities – equity and other instruments(a)(f) 31,085
Trading liabilities – derivative payables 42,560
All other liabilities, including the allowance for lending-related commitments(a) 151,717
Total liabilities 2,481,423
Stockholders’ equity
Preferred stock 27,511
Common stockholders’ equity 232,907
Total stockholders’ equity 260,418 (g)
(a) In the second quarter of 2019, the Firm implemented certain presentation changes that impacted interest income and interest expense, but had no effect on net
interest income. These changes were made to align the accounting treatment between the balance sheet and the related interest income or expense, primarily by
offsetting interest income and expense for certain prime brokerage-related held-for-investment customer receivables and payables that are currently presented as a
single margin account on the balance sheet. In addition, the Firm reclassified balances related to certain instruments and structured notes from interest-earning/
bearing to noninterest-earning/bearing assets and liabilities as the associated returns are recorded in principal transactions revenue and not in net interest income.
These changes were applied retrospectively and, accordingly, prior period amounts were revised to conform with the current presentation.
(b) Represents securities that are tax-exempt for U.S. federal income tax purposes.
(c) Includes prime brokerage-related held-for-investment customer receivables, which are classified in accrued interest and accounts receivable, and all other interest-
earning assets, which are classified in other assets on the Consolidated Balance Sheets.
(d) Includes commercial paper.
(e) All other interest-bearing liabilities include prime brokerage-related customer payables.
(i) (i)
944,885 47,796 5.06 906,397 41,296 4.56
48,818 1,890 3.87 41,504 1,312 3.16
2,212,908 76,728 3.47 2,170,974 65,284 3.01
(13,269) (13,453)
21,694 20,432
118,152 125,530
60,734 59,588
54,669 53,999
154,010 138,992
$ 2,608,898 $ 2,556,062
26,249 26,212
229,222 230,350
255,471 (g)
256,562 (g)
$ 2,608,898 $ 2,556,062
2.25% 2.19%
$ 55,687 2.52 $ 51,410 2.37
(f) The combined balance of trading liabilities – debt and equity instruments was $101.0 billion, $107.0 billion and $90.7 billion for the years ended December 31,
2019, 2018 and 2017, respectively.
(g) The ratio of average stockholders’ equity to average assets was 9.5%, 9.8% and 10.0% for the years ended December 31, 2019, 2018 and 2017, respectively.
The return on average stockholders’ equity, based on net income, was 14.0%, 12.7% and 9.5% for the years ended December 31, 2019, 2018 and 2017,
respectively.
(h) Interest includes the effect of related hedging derivatives. Taxable-equivalent amounts are used where applicable.
(i) Fees and commissions on loans included in loan interest amounted to $1.2 billion each for the years ended December 31, 2019 and 2018, and $1.0 billion for
2017.
(j) The annualized rate for securities based on amortized cost was 3.05%, 3.25% and 3.13% for the years ended December 31, 2019, 2018 and 2017, respectively,
and does not give effect to changes in fair value that are reflected in AOCI.
Presented below is a summary of interest and rates the location of the office recording the transaction.
segregated between U.S. and non-U.S. operations for the Intercompany funding generally consists of dollar-
years 2017 through 2019. The segregation of U.S. and non- denominated deposits originated in various locations that
U.S. components is based on are centrally managed by Treasury and CIO.
24.7 22.5
22.3 21.1
The table below presents an attribution of net interest income between volume and rate. The attribution between volume and rate
is calculated using annual average balances for each category of assets and liabilities shown in the table and the corresponding
annual rates (refer to pages 288–292 for more information on average balances and rates). In this analysis, when the change
cannot be isolated to either volume or rate, it has been allocated to volume. The annual rates include the impact of changes in
market rates, as well as the impact of any change in composition of the various products within each category of asset or liability.
This analysis is calculated separately for each category without consideration of the relationship between categories (for example,
the net spread between the rates earned on assets and the rates paid on liabilities that fund those assets). As a result, changes in
the granularity or groupings considered in this analysis would produce a different attribution result, and due to the complexities
involved, precise allocation of changes in interest rates between volume and rates is inherently complex and judgmental.
2019 versus 2018 2018 versus 2017
Increase/(decrease) due Increase/(decrease) due
(Unaudited) to change in: to change in:
Year ended December 31, Net Net
(On a taxable-equivalent basis; in millions) Volume Rate change Volume Rate change
Interest-earning assets
Deposits with banks:
U.S. $ (3,030) $ 915 $ (2,115) $ (1,141) $ 2,751 $ 1,610
Non-U.S. 35 60 95 59 — 59
Federal funds sold and securities purchased under resale
agreements:
U.S. 1,304 337 1,641 267 800 1,067
Non-U.S. 168 518 686 173 252 425
Securities borrowed:(a)
U.S. 236 362 598 106 654 760
Non-U.S. 2 61 63 26 33 59
Trading assets – debt instruments:
U.S. 2,646 (589) 2,057 446 436 882
Non-U.S. 216 (188) 28 187 (20) 167
Investment securities:
U.S. 2,723 (703) 2,020 (770) 223 (547)
Non-U.S. (79) 36 (43) (189) 73 (116)
Loans:
U.S. 628 2,074 2,702 1,710 4,246 5,956
Non-U.S. (71) 105 34 212 332 544
All other interest-earning assets, predominantly U.S.(a) 48 29 77 283 295 578
Change in interest income(a) 4,826 3,017 7,843 1,369 10,075 11,444
Interest-bearing liabilities
Interest-bearing deposits:
U.S. 407 1,927 2,334 184 2,155 2,339
Non-U.S. 165 485 650 44 733 777
Federal funds purchased and securities loaned or sold under
repurchase agreements:
U.S. 1,133 294 1,427 46 1,167 1,213
Non-U.S. (85) 222 137 5 237 242
Trading liabilities – debt, short-term and all other interest-bearing
liabilities: (a)(b)
U.S. (5) 354 349 203 1,095 1,298
Non-U.S. 30 (77) (47) 158 (75) 83
Beneficial interests issued by consolidated VIEs, predominantly
U.S. 37 38 75 (266) 256 (10)
Long-term debt:
U.S. 93 719 812 (762) 1,971 1,209
Non-U.S. 17 — 17 16 — 16
Intercompany funding:
U.S. 293 (961) (668) (704) (17) (721)
Non-U.S. (293) 961 668 704 17 721
Change in interest expense(a) 1,792 3,962 5,754 (372) 7,539 7,167
Change in net interest income $ 3,034 $ (945) $ 2,089 $ 1,741 $ 2,536 $ 4,277
(a) In the second quarter of 2019, the Firm implemented certain presentation changes that impacted interest income and interest expense, but had no effect on net interest
income. These changes were made to align the accounting treatment between the balance sheet and the related interest income or expense, primarily by offsetting
interest income and expense for certain prime brokerage-related held-for-investment customer receivables and payables that are currently presented as a single margin
account on the balance sheet. These changes were applied retrospectively and, accordingly, prior period amounts were revised to conform with the current presentation.
(b) Includes commercial paper.
2019 Form 10-K: Annual report on Form 10-K for year CFP: Contingency funding plan
ended December 31, 2019, filed with the U.S. Securities
Chase Bank USA, N.A.: Chase Bank USA, National
and Exchange Commission.
Association
ABS: Asset-backed securities
CIB: Corporate & Investment Bank
AFS: Available-for-sale
CIO: Chief Investment Office
ALCO: Asset Liability Committee
Client assets: Represent assets under management as well
AWM: Asset & Wealth Management as custody, brokerage, administration and deposit accounts.
AOCI: Accumulated other comprehensive income/(loss) Client deposits and other third-party liabilities: Deposits,
as well as deposits that are swept to on-balance sheet
ARM: Adjustable rate mortgage(s)
liabilities (e.g., commercial paper, federal funds purchased
AUC: Assets under custody and securities loaned or sold under repurchase
agreements) as part of client cash management programs.
AUM: “Assets under management”: Represent assets
managed by AWM on behalf of its Private Banking, CLO: Collateralized loan obligations
Institutional and Retail clients. Includes “Committed capital
CLTV: Combined loan-to-value
not Called.”
Collateral-dependent: A loan is considered to be collateral-
Auto loan and lease origination volume: Dollar amount of
dependent when repayment of the loan is expected to be
auto loans and leases originated.
provided solely by the underlying collateral, rather than by
Beneficial interests issued by consolidated VIEs: cash flows from the borrower’s operations, income or other
Represents the interest of third-party holders of debt, resources.
equity securities, or other obligations, issued by VIEs that
Commercial Card: provides a wide range of payment
JPMorgan Chase consolidates.
services to corporate and public sector clients worldwide
Benefit obligation: Refers to the projected benefit through the commercial card products. Services include
obligation for pension plans and the accumulated procurement, corporate travel and entertainment, expense
postretirement benefit obligation for OPEB plans. management services, and business-to-business payment
solutions.
BHC: Bank holding company
Core loans: Represents loans central to the Firm’s ongoing
Card Services includes the Credit Card and Merchant
businesses; core loans exclude loans classified as trading
Services businesses.
assets, runoff portfolios, discontinued portfolios and
CB: Commercial Banking portfolios the Firm has an intent to exit.
CBB: Consumer & Business Banking Credit cycle: A period of time over which credit quality
improves, deteriorates and then improves again (or vice
CCAR: Comprehensive Capital Analysis and Review
versa). The duration of a credit cycle can vary from a couple
CCB: Consumer & Community Banking of years to several years.
CCO: Chief Compliance Officer Credit derivatives: Financial instruments whose value is
derived from the credit risk associated with the debt of a
CCP: “Central counterparty” is a clearing house that
interposes itself between counterparties to contracts traded third-party issuer (the reference entity) which allow one
in one or more financial markets, becoming the buyer to party (the protection purchaser) to transfer that risk to
every seller and the seller to every buyer and thereby another party (the protection seller). Upon the occurrence
ensuring the future performance of open contracts. A CCP of a credit event by the reference entity, which may include,
becomes a counterparty to trades with market participants among other events, the bankruptcy or failure to pay its
through novation, an open offer system, or another legally obligations, or certain restructurings of the debt of the
binding arrangement. reference entity, neither party has recourse to the reference
entity. The protection purchaser has recourse to the
CDS: Credit default swaps protection seller for the difference between the face value
CECL: Current Expected Credit Losses of the CDS contract and the fair value at the time of settling
the credit derivative contract. The determination as to
CEO: Chief Executive Officer whether a credit event has occurred is generally made by
CET1 Capital: Common equity Tier 1 capital the relevant International Swaps and Derivatives
Association (“ISDA”) Determinations Committee.
CFTC: Commodity Futures Trading Commission
Criticized: Criticized loans, lending-related commitments
CFO: Chief Financial Officer and derivative receivables that are classified as special
mention, substandard and doubtful categories for FFIEC: Federal Financial Institutions Examination Council
regulatory purposes.
FHA: Federal Housing Administration
CRO: Chief Risk Officer
FHLB: Federal Home Loan Bank
CRSC: Conduct Risk Steering Committee
FICC: The Fixed Income Clearing Corporation
CTC: CIO, Treasury and Corporate
FICO score: A measure of consumer credit risk provided by
CVA: Credit valuation adjustment credit bureaus, typically produced from statistical models
by Fair Isaac Corporation utilizing data collected by the
Debit and credit card sales volume: Dollar amount of card
credit bureaus.
member purchases, net of returns.
Firm: JPMorgan Chase & Co.
Deposit margin/deposit spread: Represents net interest
income expressed as a percentage of average deposits. Forward points: Represents the interest rate differential
between two currencies, which is either added to or
Distributed denial-of-service attack: The use of a large
subtracted from the current exchange rate (i.e., “spot rate”)
number of remote computer systems to electronically send
to determine the forward exchange rate.
a high volume of traffic to a target website to create a
service outage at the target. This is a form of cyberattack. FRC: Firmwide Risk Committee
Dodd-Frank Act: Wall Street Reform and Consumer Freddie Mac: Federal Home Loan Mortgage Corporation
Protection Act
Free standing derivatives: a derivative contract entered
DVA: Debit valuation adjustment into either separate and apart from any of the Firm’s other
financial instruments or equity transactions. Or, in
EC: European Commission
conjunction with some other transaction and is legally
Eligible LTD: Long-term debt satisfying certain eligibility detachable and separately exercisable.
criteria
FSB: Financial Stability Board
Embedded derivatives: are implicit or explicit terms or
FTE: Fully taxable equivalent
features of a financial instrument that affect some or all of
the cash flows or the value of the instrument in a manner FVA: Funding valuation adjustment
similar to a derivative. An instrument containing such terms
FX: Foreign exchange
or features is referred to as a “hybrid.” The component of
the hybrid that is the non-derivative instrument is referred G7: Group of Seven nations: Countries in the G7 are
to as the “host.” For example, callable debt is a hybrid Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
instrument that contains a plain vanilla debt instrument
G7 government bonds: Bonds issued by the government of
(i.e., the host) and an embedded option that allows the
one of the G7 nations.
issuer to redeem the debt issue at a specified date for a
specified amount (i.e., the embedded derivative). However, Ginnie Mae: Government National Mortgage Association
a floating rate instrument is not a hybrid composed of a
GSIB: Global systemically important banks
fixed-rate instrument and an interest rate swap.
Headcount-related expense: Includes salary and benefits
ERISA: Employee Retirement Income Security Act of 1974
(excluding performance-based incentives), and other
EPS: Earnings per share noncompensation costs related to employees.
ETD: “Exchange-traded derivatives”: Derivative contracts HELOAN: Home equity loan
that are executed on an exchange and settled via a central
HELOC: Home equity line of credit
clearing house.
Home equity – senior lien: Represents loans and
EU: European Union
commitments where JPMorgan Chase holds the first
Fannie Mae: Federal National Mortgage Association security interest on the property.
FASB: Financial Accounting Standards Board Home equity – junior lien: Represents loans and
commitments where JPMorgan Chase holds a security
FCA: Financial Conduct Authority
interest that is subordinate in rank to other liens.
FCC: Firmwide Control Committee
Households: A household is a collection of individuals or
FDIA: Federal Depository Insurance Act entities aggregated together by name, address, tax
identifier and phone number.
FDIC: Federal Deposit Insurance Corporation
HQLA: High-quality liquid assets
Federal Reserve: The Board of the Governors of the Federal
Reserve System HTM: Held-to-maturity
294 JPMorgan Chase & Co./2019 Form 10-K
Glossary of Terms and Acronyms
Mortgage product types: Net Capital Rule: Rule 15c3-1 under the Securities
Exchange Act of 1934.
Alt-A
Alt-A loans are generally higher in credit quality than Net charge-off/(recovery) rate: Represents net charge-
subprime loans but have characteristics that would offs/(recoveries) (annualized) divided by average retained
disqualify the borrower from a traditional prime loan. Alt-A loans for the reporting period.
lending characteristics may include one or more of the
Net interchange income includes the following
following: (i) limited documentation; (ii) a high CLTV ratio;
components:
(iii) loans secured by non-owner occupied properties; or (iv)
a debt-to-income ratio above normal limits. A substantial • Interchange income: Fees earned by credit and debit
proportion of the Firm’s Alt-A loans are those where a card issuers on sales transactions.
borrower does not provide complete documentation of his
• Reward costs: The cost to the Firm for points earned by
or her assets or the amount or source of his or her income.
cardholders enrolled in credit card rewards programs.
Option ARMs
• Partner payments: Payments to co-brand credit card
The option ARM real estate loan product is an adjustable-
partners based on the cost of loyalty program rewards
rate mortgage loan that provides the borrower with the
earned by cardholders on credit card transactions.
option each month to make a fully amortizing, interest-only
or minimum payment. The minimum payment on an option Net mortgage servicing revenue: Includes operating
ARM loan is based on the interest rate charged during the revenue earned from servicing third-party mortgage loans,
introductory period. This introductory rate is usually which is recognized over the period in which the service is
significantly below the fully indexed rate. The fully indexed provided; changes in the fair value of MSRs; the impact of
rate is calculated using an index rate plus a margin. Once risk management activities associated with MSRs; and gains
the introductory period ends, the contractual interest rate and losses on securitization of excess mortgage servicing.
charged on the loan increases to the fully indexed rate and Net mortgage servicing revenue also includes gains and
adjusts monthly to reflect movements in the index. The losses on sales and lower of cost or fair value adjustments
minimum payment is typically insufficient to cover interest of certain repurchased loans insured by U.S. government
accrued in the prior month, and any unpaid interest is agencies.
deferred and added to the principal balance of the loan.
Net production revenue: Includes fees and income
Option ARM loans are subject to payment recast, which
recognized as earned on mortgage loans originated with the
converts the loan to a variable-rate fully amortizing loan
intent to sell, and the impact of risk management activities
upon meeting specified loan balance and anniversary date
associated with the mortgage pipeline and warehouse
triggers.
loans. Net production revenue also includes gains and
Prime losses on sales and lower of cost or fair value adjustments
Prime mortgage loans are made to borrowers with good on mortgage loans held-for-sale (excluding certain
credit records who meet specific underwriting repurchased loans insured by U.S. government agencies),
requirements, including prescriptive requirements related and changes in the fair value of financial instruments
to income and overall debt levels. New prime mortgage measured under the fair value option.
borrowers provide full documentation and generally have
Net revenue rate: Represents Card Services net revenue
reliable payment histories.
(annualized) expressed as a percentage of average loans for
Subprime the period.
Subprime loans are loans that, prior to mid-2008, were
Net yield on interest-earning assets: The average rate for
offered to certain customers with one or more high risk
interest-earning assets less the average rate paid for all
characteristics, including but not limited to: (i) unreliable or
sources of funds.
poor payment histories; (ii) a high LTV ratio of greater than
80% (without borrower-paid mortgage insurance); (iii) a NM: Not meaningful
high debt-to-income ratio; (iv) an occupancy type for the
NOL: Net operating loss
loan is other than the borrower’s primary residence; or (v) a
history of delinquencies or late payments on the loan. Nonaccrual loans: Loans for which interest income is not
recognized on an accrual basis. Loans (other than credit
MSA: Metropolitan statistical areas
card loans and certain consumer loans insured by U.S.
MSR: Mortgage servicing rights government agencies) are placed on nonaccrual status
when full payment of principal and interest is not expected,
Multi-asset: Any fund or account that allocates assets under
regardless of delinquency status, or when principal and
management to more than one asset class.
interest have been in default for a period of 90 days or
NA: Data is not applicable or available for the period more unless the loan is both well-secured and in the
presented. process of collection. Collateral-dependent loans are
typically maintained on nonaccrual status.
NAV: Net Asset Value
296 JPMorgan Chase & Co./2019 Form 10-K
Glossary of Terms and Acronyms
Nonperforming assets: Nonperforming assets include Pre-provision profit/(loss): Represents total net revenue
nonaccrual loans, nonperforming derivatives and certain less noninterest expense. The Firm believes that this
assets acquired in loan satisfaction, predominantly real financial measure is useful in assessing the ability of a
estate owned and other commercial and personal property. lending institution to generate income in excess of its
provision for credit losses.
NOW: Negotiable Order of Withdrawal
Pretax margin: Represents income before income tax
OAS: Option-adjusted spread
expense divided by total net revenue, which is, in
OCC: Office of the Comptroller of the Currency management’s view, a comprehensive measure of pretax
performance derived by measuring earnings after all costs
OCI: Other comprehensive income/(loss)
are taken into consideration. It is one basis upon which
OPEB: Other postretirement employee benefit management evaluates the performance of AWM against
the performance of their respective competitors.
OTTI: Other-than-temporary impairment
Principal transactions revenue: Principal transactions
Over-the-counter (“OTC”) derivatives: Derivative contracts
revenue is driven by many factors, including:
that are negotiated, executed and settled bilaterally
between two derivative counterparties, where one or both • the bid-offer spread, which is the difference between the
counterparties is a derivatives dealer. price at which a market participant is willing and able to
sell an instrument to the Firm and the price at which
Over-the-counter cleared (“OTC-cleared”) derivatives: another market participant is willing and able to buy it
Derivative contracts that are negotiated and executed from the Firm, and vice versa; and
bilaterally, but subsequently settled via a central clearing • realized and unrealized gains and losses on financial
house, such that each derivative counterparty is only instruments and commodities transactions, including
exposed to the default of that clearing house. those accounted for under the fair value option, primarily
Overhead ratio: Noninterest expense as a percentage of used in client-driven market-making activities, and on
total net revenue. private equity investments.
– Realized gains and losses result from the sale of
Parent Company: JPMorgan Chase & Co. instruments, closing out or termination of transactions,
Participating securities: Represents unvested share-based or interim cash payments.
compensation awards containing nonforfeitable rights to – Unrealized gains and losses result from changes in
dividends or dividend equivalents (collectively, “dividends”), valuation.
which are included in the earnings per share calculation In connection with its client-driven market-making
using the two-class method. JPMorgan Chase grants RSUs to activities, the Firm transacts in debt and equity
certain employees under its share-based compensation instruments, derivatives and commodities, including
programs, which entitle the recipients to receive physical commodities inventories and financial instruments
that reference commodities.
nonforfeitable dividends during the vesting period on a
basis equivalent to the dividends paid to holders of common Principal transactions revenue also includes realized and
stock. These unvested awards meet the definition of unrealized gains and losses related to:
participating securities. Under the two-class method, all • derivatives designated in qualifying hedge accounting
earnings (distributed and undistributed) are allocated to relationships, primarily fair value hedges of commodity
each class of common stock and participating securities, and foreign exchange risk;
• derivatives used for specific risk management purposes,
based on their respective rights to receive dividends.
primarily to mitigate credit risk and foreign exchange
PCA: Prompt corrective action risk.
PCI: “Purchased credit-impaired” loans represents certain PSUs: Performance share units
loans that were acquired and deemed to be credit-impaired
REIT: “Real estate investment trust”: A special purpose
on the acquisition date in accordance with the guidance of
investment vehicle that provides investors with the ability to
the FASB. The guidance allows purchasers to aggregate
participate directly in the ownership or financing of real-
credit-impaired loans acquired in the same fiscal quarter
estate related assets by pooling their capital to purchase
into one or more pools, provided that the loans have
and manage income property (i.e., equity REIT) and/or
common risk characteristics(e.g., product type, LTV ratios,
mortgage loans (i.e., mortgage REIT). REITs can be publicly
FICO scores, past due status, geographic location). A pool is
or privately held and they also qualify for certain favorable
then accounted for as a single asset with a single composite
tax considerations.
interest rate and an aggregate expectation of cash flows.
Regulatory VaR: Daily aggregated VaR calculated in
PD: Probability of default
accordance with regulatory rules.
PRA: Prudential Regulation Authority
REO: Real estate owned
Reported basis: Financial statements prepared under U.S.
JPMorgan Chase & Co./2019 Form 10-K 297
Glossary of Terms and Acronyms
GAAP, which excludes the impact of taxable-equivalent Securities financing agreements: Include resale,
adjustments. repurchase, securities borrowed and securities loaned
agreements
Retained loans: Loans that are held-for-investment (i.e.,
excludes loans held-for-sale and loans at fair value). Seed capital: Initial JPMorgan capital invested in products,
such as mutual funds, with the intention of ensuring the
Revenue wallet: Proportion of fee revenue based on
fund is of sufficient size to represent a viable offering to
estimates of investment banking fees generated across the
clients, enabling pricing of its shares, and allowing the
industry (i.e., the revenue wallet) from investment banking
manager to develop a track record. After these goals are
transactions in M&A, equity and debt underwriting, and
achieved, the intent is to remove the Firm’s capital from the
loan syndications. Source: Dealogic, a third-party provider
investment.
of investment banking competitive analysis and volume-
based league tables for the above noted industry products. Shelf Deals: Shelf offerings are SEC provisions that allow
issuers to register for new securities without selling the
RHS: Rural Housing Service of the U.S. Department of entire issuance at once. Since these issuances are filed with
Agriculture the SEC but are not yet priced in the market, they are not
Risk-rated portfolio: Credit loss estimates are based on included in the league tables until the actual securities are
estimates of the probability of default (“PD”) and loss issued.
severity given a default. The probability of default is the Single-name: Single reference-entities
likelihood that a borrower will default on its obligation; the
SLR: Supplementary leverage ratio
loss given default (“LGD”) is the estimated loss on the loan
that would be realized upon the default and takes into SMBS: Stripped mortgage-backed securities
consideration collateral and structural support for each SOFR: Secured Overnight Financing Rate
credit facility.
SPEs: Special purpose entities
ROA: Return on assets
Structural interest rate risk: Represents interest rate risk
ROE: Return on equity of the non-trading assets and liabilities of the Firm.
ROTCE: Return on tangible common equity Structured notes: Structured notes are financial
ROU assets: Right-of-use assets instruments whose cash flows are linked to the movement
in one or more indexes, interest rates, foreign exchange
RSU(s): Restricted stock units
rates, commodities prices, prepayment rates, or other
RWA: “Risk-weighted assets”: Basel III establishes two market variables. The notes typically contain embedded
comprehensive approaches for calculating RWA (a (but not separable or detachable) derivatives. Contractual
Standardized approach and an Advanced approach) which cash flows for principal, interest, or both can vary in
include capital requirements for credit risk, market risk, and amount and timing throughout the life of the note based on
in the case of Basel III Advanced, also operational risk. Key non-traditional indexes or non-traditional uses of traditional
differences in the calculation of credit risk RWA between the interest rates or indexes.
Standardized and Advanced approaches are that for Basel
Taxable-equivalent basis: In presenting results on a
III Advanced, credit risk RWA is based on risk-sensitive
managed basis, the total net revenue for each of the
approaches which largely rely on the use of internal credit
business segments and the Firm is presented on a tax-
models and parameters, whereas for Basel III Standardized,
equivalent basis. Accordingly, revenue from investments
credit risk RWA is generally based on supervisory risk-
that receive tax credits and tax-exempt securities is
weightings which vary primarily by counterparty type and
presented in managed basis results on a level comparable
asset class. Market risk RWA is calculated on a generally
to taxable investments and securities; the corresponding
consistent basis between Basel III Standardized and Basel III
income tax impact related to tax-exempt items is recorded
Advanced.
within income tax expense.
S&P: Standard and Poor’s 500 Index
TBVPS: Tangible book value per share
SAR(s): Stock appreciation rights
TCE: Tangible common equity
Scored portfolio: The scored portfolio predominantly
TDR: “Troubled debt restructuring” is deemed to occur
includes residential real estate loans, credit card loans and
when the Firm modifies the original terms of a loan
certain auto and business banking loans where credit loss
agreement by granting a concession to a borrower that is
estimates are based on statistical analysis of credit losses
experiencing financial difficulty.
over discrete periods of time. The statistical analysis uses
portfolio modeling, credit scoring and decision-support TLAC: Total loss-absorbing capacity
tools.
U.K.: United Kingdom
SEC: Securities and Exchange Commission
Unaudited: Financial statements and information that have
Operating Committee
James Dimon Ashley Bacon Robin Leopold
Chairman and Chief Risk Officer Head of Human Resources
Chief Executive Officer
Lori A. Beer Douglas B. Petno
Daniel E. Pinto Chief Information Officer CEO, Commercial Banking
Co-President and
Chief Operating Officer; Mary Callahan Erdoes Jennifer A. Piepszak
CEO, Corporate & Investment Bank CEO, Asset & Wealth Management Chief Financial Officer
Australia and New Zealand Austria Saudi Arabia Andean, Caribbean and Central
Robert Bedwell Anton J. Ulmer Bader Alamoudi America
Moises Mainster
China Bahrain, Egypt and Lebanon Sub-Saharan Africa
Mark Leung Ali Moosa Kevin Latter Colombia
Angela Hurtado
Hong Kong Belgium Switzerland
Filippo Gori Tanguy A. Piret Nick Bossart Argentina
Facundo D. Gómez Minujin
Japan France Turkey
Steve Teru Rinoie Kyril Courboin Mustafa Bagriacik Brazil
José Berenguer
Korea Germany
Tae Jin Park Dorothee Blessing Chile
Alfonso Eyzaguirre
South and South East Asia Iberia
Kalpana Morparia Ignacio de la Colina Mexico
Felipe García-Moreno
Indonesia Ireland
Haryanto T. Budiman Carin Bryans
Malaysia Israel North America
Steve R. Clayton Roy Navon
Canada
Philippines Italy
David E. Rawlings
Carlos Ma. G Mendoza Francesco Cardinali
Singapore Luxembourg
Edmund Y. Lee Pablo Garnica
Thailand Middle East and North Africa
M.L. Chayotid Kridakon Khaled Hobballah
Karim Tannir
Taiwan
Carl K. Chien The Netherlands
Cassander Verwey
Vietnam
Van Bich Phan Russia and Kazakhstan
Yan Tavrovsky
Rt. Hon. Tony Blair Ignacio S. Galán The Hon. Henry A. Kissinger Ratan Naval Tata
Chairman of the Council Chairman and Chief Executive Officer Chairman Chairman Emeritus
Former Prime Minister of Great Britain Iberdrola, S.A. Kissinger Associates, Inc. Tata Sons Ltd
and Northern Ireland Madrid, Spain New York, New York Mumbai, India
*Ex-officio
“JPMorgan Chase,” “J.P. Morgan,” “Chase,” This Annual Report is printed on paper made
the Octagon symbol and other words from well-managed forests and other controlled
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of JPMorgan Chase & Co. Other words or Forest Stewardship Council ® standards.
symbols in this report that identify other
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