Net Promoter Score1 Household Attrition2 by Business Line
Source: Internal data
1 Net Promoter Score (NPS) represents the percentage of customers who say they would deinitely recommend Chase to a friend or colleague (promoter who gave Chase a rating of 9 or 10 on a 10-point scale) vs. those who would not (detractors who gave Chase a rating of 0 to 6); a higher NPS signiies greater customer loyalty
Source: Internal data PPT = Percentage points
2 Households that close all Chase accounts
The future is here
Chase reopened its Water Street branch in downtown New York City after looding from Superstorm Sandy destroyed it. The new Chase branch design uses some of the most advanced technology for customers. Chase has been redesigning many of its new locations to this format, about 400 in total.
• Record credit card sales and client investment assets
• #2 mortgage originator and servicer
• #1 ATM and #2 retail branch network for the second year in a row
• #2 wholly owned merchant acquirer
• #3 non-captive auto lender
• #5 in customer satisfaction by J.D. Power and Associates in mortgage originations and servicing
• 135,000 homeowner foreclosure preventions
• 360,000 downloads of the Chase My New HomeSM mobile app
Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 Jun-12 Mar-12 Dec-11 Sep-11
61 61
43
32 70
42
23
6
Consumer Banking Card Business Banking Mortgage Banking
Card Consumer Banking
Business Banking
2010 2013 (5) PPT
(4) PPT
(2) PPT
40
tricts and nonproits, providing them with necessary funds to build schools, roads and college facilities and to support other infrastructure projects.
Markets revenue of $20 billion was up materially from the level in 2006, at $12 billion. More than 85% of the 2013 markets revenue was attribut-able to client-driven, low-oriented products.
On the processing side of the CIB’s operations, J.P. Morgan continues to rank as the #1 U.S. dollar clearer, processing up to $4 trillion of U.S.
dollar payments daily. In our custodial business, clients entrusted the irm with a record $20.5 trillion in assets under custody, up 9% from 2012.
When J.P. Morgan combined the strengths of the heritage Investment Bank and Treasury & Securities Ser-vices in 2012, the aim was to ensure that clients beneit from the most efective mix of products, delivered in the most integrated way. Now organized within the CIB as Banking and Markets & Investor Services, the businesses have been aligned to promote their working together across sales, products and services, a structure that makes cohesive sense for our clients.
That collaborative structure enables the CIB to cover clients more compre-hensively. Recognizing that trust is the cornerstone of our client relation-ships, we are committed to recom-mending only the solutions that serve our clients’ long-term objectives. We never forget that their success is the best measure of our own.
We also know that our work for clients helps support a healthy global economy. Our deep and broad relationships enable us to connect investors looking for promising opportunities with the corporations and governments looking to access capital.
By raising money or by guiding a business through its initial public ofering, we are providing clients with the resources they need to grow, to develop new products or to extend their footprint into new markets.
When our Treasury Services business provides clients with liquidity man-agement solutions for cash balances or helps clients secure trade inancing, we’re helping those clients enhance their operational eiciency. And when our Public Finance business provides inancing for a metropolitan transit system, we’re helping cities work bet-ter and improve the environment.
Those positive results ripple through the global economy. Ultimately, they help raise standards of living, expand job opportunities and create innova-tive technologies. We are proud of our accomplishments and look for-ward to continuing our work in 2014.
Our 2013 inancial performance The CIB’s product strength and client focus were evident in our lead-ership roles on some of the major landmark transactions of 2013:
• J.P. Morgan advised Verizon on its
$130 billion buyout of Vodafone’s
Corporate & Investment Bank
As the world’s economy regained momentum in 2013, J.P. Morgan’s Corporate & Investment Bank (CIB) solidiied its leadership in an increas-ingly global inancial market.
A truly global business, the CIB has 52,250 employees in 60 countries with a mission to serve 7,700 of the world’s most signiicant companies, governments and institutions. To provide those clients with the range of services they need, more than 13,000 employees are in front oice lines of business such as banking, markets, investor services and research. The remainder is primarily dedicated to technology, operations, risk and inance to ensure we have best-in-class controls and a robust operating infrastructure.
Demonstrating our ability to deliver strategic solutions, we helped clients raise nearly $500 billion in the public equity and bond capital markets in 2013, according to Dealogic. Overall, the CIB provided credit and raised capital for clients of more than $1.5 trillion1 in 2013. Of that, $65 billion2 was raised on behalf of states, local governments, hospitals, school
dis-Daniel Pinto
41
45% stake in Verizon Wireless, serving as global coordinator, joint lead arranger, joint bookrunner and administrative agent on Verizon’s
$61 billion bridge facility, the larg-est corporate debt facility ever, and as joint bookrunner on the subse-quent $49 billion bond. This trans-formational deal drew on the expertise of J.P. Morgan’s franchise across multiple product and cover-age groups globally.
• Just two days later, we followed that up with another signiicant trans-action for a telecommunications company – a $6.5 billion bond ofering for Sprint, the largest high-yield transaction ever sold to inves-tors. The two transactions, coming within days of each other, made it a week the Technology, Media and Telecommunications team will long remember.
• In equities, Facebook closed out 2013 with a $3.9 billion follow-on ofering, with J.P. Morgan acting as joint bookrunner. This was the largest follow-on ofering of 2013 and the second-largest technology follow-on since 2006.
• In Public Finance, we came through for public agencies around the U.S. During the year, it led a $656 million series of bonds to modern-ize housing for New York City’s lowest income residents and to refund previously outstanding debt. It served as senior manager on a $1.5 billion bond ofering for JobsOhio, a unique program aimed at growing existing jobs and attract-ing new ones to the state, and was lead manager on $1.3 billion in revenue bonds for the University of California in a reinancing
transaction that produced more than $200 million in debt service savings for the university system.
What distinguishes the CIB further, beyond our strong product capabili-ties, is how our integrated model works for our clients.
Because of that integrated approach, a leading European insurance company, after assigning a custody mandate to our Investor Services unit, also ultimately beneited from a credit facility from J.P. Morgan.
And when a large asset manager, with a historically long relationship with the irm across Markets, Bank-ing and Custody, needed prime bro-kerage services, it chose J.P. Morgan.
Turning to our inancial results, 2013 was a strong year for the CIB, which reported net income of $8.5 billion
CIB Integrated Client Coverage Model Markets Revenue Dominated by Client-Driven Flow Business Markets revenue by low vs. structured ($ in billions)
Strong Earnings Power Net income1($ in billions) Liquidity,
Cash Management
Fixed Income Banking
CLIENT
Investor
Services Markets Lending,
Trade Finance
Custody Fund Services
Clearing &
Collateral Research
Equities Prime
Brokerage Financing
Advisory, Capital Markets
$12.2
$20.2
Flow
Structured 2013
2006
2013 2012
2011 2010
$7.4 $7.1
$9.0
$9.7 32%
%Δ 2010-2013:
1
e 4Q 2013)
and debit valuation adjustments (DVA)
42
on revenue of $34.2 billion and a reported return on equity of 15%.
Excluding the impact of funding and debit valuation adjustments (FVA and DVA), the CIB delivered net revenue of $36.1 billion3; net income of $9.7 billion3, an increase from last year’s $9.0 billion3 and up 32%
from 2010; and a return on equity in 2013 of 17%3, one of the strongest in the industry.
Our share of total industry revenue continues to grow. We put more distance between ourselves and our competitors with market share gains, as measured by both fee wallet and markets revenue share.
In an industry where investment banking fee wallet grew by 11%
compared with the previous year, J.P. Morgan’s wallet share advanced 110 basis points, according to Dea-logic, more than what most other large irms experienced. Along with our #1 ranking in Global Investment Banking fee wallet share, Dealogic ranked J.P. Morgan, based on volume,
#1 in Global Debt, Equity and Equity-Related; #1 in Global Long-Term Debt; and #1 in Global Loan Syndica-tions. J.P. Morgan also earned a strong position in Global Equity and Equity-Related and Global M&A Announced, ranking #2 in both categories. Our M&A teams advised on eight of the top 10 transactions announced glob-ally in 2013, ranking #1 in the U.S.
and #2 in the Europe, Middle East and Africa (EMEA) region.
On the Markets side, we are a leader in ixed income, with an 18.6%
market share in 2013, up from 15.6%
in 20124. We also earned a strong market position in Equity Markets this year, and we continue to be focused on moving from our current
#4 equity markets overall revenue position4 to a top three ranking as we
build out key areas within our fran-chise. The CIB’s Equity Markets performance in 2013 was materially strengthened by our #2 position in derivatives, according to Coalition, and the investments made in our electronic capabilities, which now are on par with the market leaders.
As noted above, our markets revenue is well-diversiied, with the majority derived from client-driven, low- oriented products. The remainder is driven by structured products, which are geared toward helping clients with their more complex risk management and other needs.
Across the spectrum of products in Banking and Markets & Investor Services, the CIB ranked among the top three in 15 out of 16 key product categories in 20135.While we take pride in those rankings, we never are complacent about them. Nor do we take them for granted. The rankings are not the goal; they’re a relection of the quality of our product ofer-ings, the dedication of our people to serving clients around the globe and a demonstration of our clients’ increas-ing interest in workincreas-ing with us.
International reach
We are committed to having a presence where our multinational clients need us to be. And we intend to actively assist developing corpo-rations in pursuing their growth aspirations so they, too, can take their place among the next genera-tion of multinagenera-tionals. Virtually half of the CIB’s revenue today stems from international business activi-ties and has grown at a compound annual growth rate of 5%3 since 2010. More than 60% of our clients are international. Of our total employees, close to 60% are based in oices throughout EMEA, Asia Paciic and Latin America.
This international platform lays the foundation necessary to provide our multinational clients with the cover-age to serve their needs, both in their headquarters and in subsidiary loca-tions. Our international focus is not new. We’ve been in China for 93 years; we’ve done business in the United Kingdom since the mid-1800s; we’ve been in Mexico for more than 100 years. We are one of the few institutions that has the com-mitment and resources required to maintain a global client and product network of this magnitude. Although we continue to see growth in our existing international platform, the pace of that growth may slow in the near future as we ensure that we have best-in-class controls.
Being invested globally requires a long-term view as inevitable periods of volatility will arise from time to time. It’s during those times, when capital is more scarce or when market-making becomes more challenged, that our clients need us the most.
That’s when our steady presence helps cement client relationships in a way that’s lasting years later.
Our 2014 priorities
In 2013, our leadership across the breadth of Banking and Markets &
Investor Services positioned us well to build on our strengths and pro-vide clients with the inancial tools to seed their growth and economic vitality into the future.
In support of these objectives, the CIB’s 2014 priorities are focused on three broad pillars:
• Optimizing our business mix while investing in core growth opportunities;
• Adapting to the evolving regulatory landscape and market structure changes; and
43
Daniel Pinto
CEO, Corporate & Investment Bank
• Maintaining expense discipline while absorbing increased regula-tory and controls costs.
As the CIB, we strive to be at the forefront of market structure changes. As a major custody bank and leading broker-dealer, we are well-positioned to act as the agent of choice for clients – taking them from execution to clearing and custody.
By our estimate, we have a top-three share in over-the-counter clearing and are connected with all the major swap venues. We also are assisting our clients to adapt to market struc-ture changes through creative, new oferings such as Collateral Central.
Launched in 2013, the service helps clients manage their collateral across multiple venues and enables them to continually track and optimize the use of their available assets against their obligations across all counterparties. And inally, also in the Investor Services space, our international prime brokerage platform has seen signiicant growth from EMEA-based managers since its 2011 launch, and as our Asia core platform now is live, we expect to ramp up meaningfully over the next several years.
Across Markets, we continue to develop our electronic market- making capabilities in equities, as well as in ixed income. We’ve seen signiicantly greater e-trading volume in both foreign exchange and equities since 2011, and we were the top-ranked bank by volume in U.S.
Treasuries trading on electronic interdealer platforms in 2013.
While we are investing in these growth opportunities, we are selec-tively exiting certain activities – such as the Global Special Opportunities Group and our physical commodities business – having determined that they are not core oferings to our clients or no longer it our desired risk proile. We do not expect these exits to meaningfully afect the CIB’s return proile.
Our integrated platform of core busi-nesses provides us with signiicant economies of scale, and our inancial strength allows us to make the investments necessary to ensure compliance with an expanding set of regulations. By maintaining a disci-plined approach in expenses, we have been able to largely ofset increased spending on regulatory assessments and controls. In fact, the market share gains achieved during
2013 occurred even as the CIB’s overhead ratio was reduced from 62%3 in 2012 to 60%3 in 2013.
Closing thoughts
Deep market knowledge, a global platform and long-lasting client rela-tionships built on trust have served our irm and our clients well. We are a market leader because we set the standards for what can be done, not what has been done before.
Our top priority remains helping our clients achieve their objectives with the best possible advice and products we can provide. Since the formation of the CIB, clients have shown they are embracing our model and actively seek the range of capabilities and expertise we possess. With the contin-ued energy and commitment that our employees demonstrate, we expect to earn our clients’ business again this year, setting new standards for their success – and for ours.
2013 HIGHLIGHTS AND ACCOMPLISHMENTS
• The CIB provided credit and raised capital of more than $1.5 trillion1 for clients in 2013, up 20% from 2012
• The CIB produced net income of $9.7 billion3 in 2013, up 32% from 2010, and a return on equity of 17%3
• The CIB ranked among the top three market positions in 15 out of 16 major products5
• J.P. Morgan ranked #1 in Global Investment Banking fees, with an 8.6% share, up from 7.5% in 2012, according to Dealogic
• Assets under custody reached a record $20.5 trillion, a 9% gain over 2012
• There are 52,250 employees globally, serving approximately 7,700 clients in 60 countries
1 Dealogic and internal reporting
2 Thomson Financial, internal sources
3 Net revenue, net income, return on equity and overhead ratio, excluding FVA (efective fourth quarter 2013) and DVA, are non-GAAP inancial measures.
These measures are used by management to assess the underlying performance of the business
4 Represents rank and share of J.P. Morgan Fixed Income Markets and Equity Markets revenue of 10 leading competitors based on reported information, excluding FVA and DVA
5 Dealogic, Fedwire & Clearing House for Interbank Payments System, Coalition and internal reporting
• Key growth initiatives include global prime brokerage, electronic trading and market structure changes
44
Our people
The strength of our business starts and ends with our people – integrity, fortitude, compassion and partner-ship are the values they bring to work every day. These are what power our long-standing relation-ships and drive our success. Our 1,300 bankers1, who average more than 20 years of experience, have deep local perspective and tested credit judgment.
Across Commercial Banking, our nearly 7,000 employees are dedicated to their communities, working with chambers of commerce, sitting on local boards, and staying active in school and service organizations.
Over the past year, our people have made a diference in many ways, including volunteering their time to provide job counseling to military vet-erans, serving meals to families at a Ronald McDonald house in Chicago, stuing backpacks for underprivi-leged children in Dallas and painting a community center in Brooklyn. I am inspired by our team’s passion for their clients and communities.
Our model
Commercial Banking’s proven busi-ness model provides the lexibility to manage challenging market condi-tions, regulatory changes and evolv-ing client needs. Experienced teams in 29 states, 119 U.S. cities and 13 major international locations give us broad reach, and we serve approxi-mately 59,000 clients, owners and investors in more than 40 of the top 50 U.S. metropolitan areas. Our bankers understand their markets, which enables them to make deci-sions locally and react quickly and proactively for clients. Rigorous client selection is one of the pillars of our model and results in a high-quality client base. Our industry expertise coupled with our local perspective allow us to select the best clients in the markets we serve.
Being a part of JPMorgan Chase means we can ofer a broad range of unique capabilities. There are many examples of how we work across lines of business to deliver the irm to our clients. Our partnership with the Corporate & Investment Bank has never been stronger. We were extremely active last year, leading 833 inancing transactions, including 31 initial public oferings, and advis-ing clients on 67 merger and acquisi-tion (M&A) transacacquisi-tions. In addiacquisi-tion, the Corporate & Investment Bank’s treasury services products are essen-tial to our business, generating $2.4 billion in revenue last year.
The Consumer & Community Banking network has been critical to the success of our Middle Market Banking business. Our clients used Chase branches almost 18 million times last year. Increasingly, they use our commercial card and merchant processing services, and we see an opportunity to bring specialized pay-ments solutions to even more clients.
Commercial Banking
In Commercial Banking, serving our clients is at the heart of everything we do. Each day, we come to work to generate ideas, deliver solutions and provide capital to help them grow and succeed. We take a long-term view and stand by our clients in tough times.
It is diicult to capture in words the strength of our relationships. There are so many incredible stories that I could share, but one of the most memorable came from a small busi-ness owner in Cleveland. He described how his international operations were crippled by the tsunami in Japan in 2011, and when – despite their 40-year relationship – his former bank refused to help, he turned to our team. In a matter of days, we were able to raise the needed capital to help him make it through a very diicult time. Today, the client’s business is thriving again, and we have found additional ways to support him along the way. His emotional testament to our partnership was quite moving – and spoke to the power of our fran-chise and the quality of our bankers across the country.
Douglas Petno