• Managed expenses tightly through, among other things, creating economies of scale through consolidation of jobs in strategic locations and estab-lishment of preferred vendors
• Matured our eforts to further strengthen controls, including transitioning many enterprise-wide programs to business-as-usual
• For the sixth consecutive year, invested 8%-9% of the irm’s annual revenue in global technology capabilities and digital innovation
• Processed an average of approximately $6 trillion in payments daily
• Spent more than $250 million in 2014 to protect the irm from cyber attacks and will increase cyber spend by nearly 80% over the next two years
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grow over time without happy cus-tomers. And in our business, where customers have extensive choices across all of our products, that’s acutely true.
We’re pleased with our progress. I don’t think anyone can ever declare victory on the customer experience, but we can celebrate the success we’ve had. One key measure that we track is our Net Promoter Score (NPS), which simply is how many customers say they would refer a friend to Chase.
Since mid-2011, our NPS has roughly doubled in Consumer Banking and Card and tripled in Business Banking.
In fact, nearly all CCB businesses are at or close to all-time highs.
We also received validation from respected outside groups. The Ameri-can Customer Satisfaction Index named Chase #1 in customer satis-faction among large banks in 2014.
J.D. Power ranked us #3 in Highest Customer Satisfaction in Mortgage Originations (up from #12 in 2010) and #2 in Mortgage Servicing (up from #13 in 2010). In Business Bank-ing, we are #1 or #2 in every region (up from #22 in 2010).
Building stronger relationships with customers has led to measurable improvement in our leadership posi-tions. This year, the Federal Deposit Insurance Corporation (FDIC) named us #1 in deposit growth among the largest 50 U.S. banks. We are the #1 credit card issuer, #1 in total U.S.
credit and debit payments volume, the #2 mortgage originator and servicer, and the #3 non-captive auto lender. Chase is #1 in ATMs and #2 in branches, and chase.com is the #1 online banking portal. Forrester Research named us #1 in mobile banking functionality for the third consecutive year.
With our combination of scale, leading products and outstanding service, we wouldn’t trade our franchise for anyone’s.
2014 inancial results
Across CCB, our businesses delivered strong underlying results throughout 2014 despite market and industry headwinds. Our net income was $9.2 billion, down from $11.1 billion in 2013. Our revenue of $44.4 billion was down 5% from $46.5 billion in 2013, primarily due to the smaller mortgage originations market during 2014. In 2014, we also experienced lower reserve releases across the Mortgage and Credit Card businesses and felt the continued impact of lower deposit margins. While credit performance still is very strong, the rate of improvement compared with last year has slowed. Overall, we ended the year with a strong return on equity (ROE) of 18%, just under our long-term target of 20% ROE.
We particularly are pleased that we achieved this positive momentum while hitting our aggressive expense target. Since 2012, we have taken
Consumer & Community Banking
I’m proud to say that Consumer &
Community Banking (CCB) has grown stronger in 2014, adding more customers, building market share and improving the customer experi-ence across all of our channels.
Today, we’ve earned relationships with nearly half of all U.S. households and 3.9 million small businesses.
In 2014, we added approximately 600,000 new CCB households, bring-ing our total to almost 58 million.
As important, we’ve deepened the relationships with our existing customers. More people consider Chase their primary bank than any other bank in our footprint, and customer attrition has reached historic lows. More customers are doing business with Chase, and they are staying with us for the long term.
Leading the industry
Our core strategy for CCB for the past four years has been to build life-time, engaged relationships with our customers. That begins and ends with a consistent and outstanding customer experience across Chase. I have yet to see any business that can
Gordon Smith
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$3.2 billion of expense out of CCB, and we are on track to reduce expenses by an additional $2 billion by the end of 2016. Staying disci-plined and being as eicient as pos-sible allow us to invest back into our businesses and create strong returns for all of you who have chosen to invest in our company.
CCB demonstrated signiicant growth in nearly every business in 2014.
Here are some highlights from our businesses:
Consumer & Business Banking
Consumer & Business Banking depos-its were up 8% to nearly half a trillion dollars by the end of the year. We talked about customer attrition reach-ing historic lows – it is down 4%
since 2010. To put this in perspective, that equates to 1 million Consumer Banking households and an incre-mental $15 billion in deposits.
Chase Private Client (CPC) continues to be a notable success. We have grown to more than 325,000 CPC clients, up 51% from 2013. Client investment assets were up 13%. Since 2012, we’ve tripled our net new CPC deposits and investments, with 60%
of new investments coming from customers who are investing with Chase for the irst time. With 55%
of aluent households living within two miles of a Chase branch or ATM, we feel well-positioned to continue that growth.
Business Banking loan originations were up 28% in 2014. Loans were up 6%, and deposits were up 12%.
And we are extremely proud that we were the #1 Small Business Administration lender for women and minorities in the United States for the third year in a row.
Mortgage
The 2014 mortgage market was one of the most challenging we have faced. We have been very focused on transforming our Mortgage franchise to a simpler, higher quality and less volatile business. In 2014, Mortgage originations were down 53% from 2013 due to the challenging rate environment. But we didn’t forget the industry lessons learned over the past several years and remained disciplined. We ceded some market share to focus on our strategy of acquiring high-quality loans. And we actively reduced our foreclosure inventory from roughly 170,000 in 2013 to 90,000 in 2014.
One of the lessons we learned from the industry crisis in Mortgage is that complexity kills. We have reduced the number of mortgage products from 37 to 18, and by the end of 2015, it will be down to 15.
Yet those 15 products still will meet 97% of customers’ needs. I’m sure the 22 products we are exiting were developed with good intentions to help customers, but they created unnecessary complexity for employ-ees and more expense and execution risk than we needed.
Mortgage Banking also has made tremendous progress in reducing expenses. Mortgage expenses were down 30% over 2013.
Credit Card and Payments
Card Services sales volume of $465.6 billion was up 11% year-over-year, outperforming the industry for the 28th consecutive quarter. Credit trends continue to improve, and credit card net charge-ofs were down 12% from 2013. Our Merchant Services business processes nearly half of the total e-commerce pay-ment volume in the United States.
Our processing volume was $847.9 billion, up 13% year-over-year.
Payments is one of the most inter-esting areas in our business as con-sumers are adapting to new ways to pay. We like our strategic position as both a bank that issues cards for consumers and a payment processor for merchants. Through ChaseNet, we also have our own network and can complete every aspect of the payment transaction.
One of the most exciting develop-ments of the year was Apple PayTM. Chase participated as both a consumer issuer and a merchant acquirer.
Chase cardholders can register their cards in Apple PayTM and make digi-tal payments simply by hitting a in-gerprint button on their iPhone® 6.
Our merchant customers will be able to use our software development kit to enable payments online, in-app and in-store. Tokenization will make those payments safe and secure.
Auto
In Auto, we continue to grow while maintaining our credit discipline. Our originations volume of $27.5 billion was up 5%, with our average loans up 4%. Here, too, we have stayed disci-plined by retaining high credit stan-dards. Our average FICO score on loan originations was 32 points higher than the industry average.
Digital
Digital is transforming our industry.
We’ve seen tremendous growth rates in customer adoption of our digital services. The number of customers who are active on Chase mobile went from 8.2 million in 2011 to 19.1 million in 2014. On average, we added about 18,000 new mobile users per day throughout 2014.
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• 30 million Mobile Chase QuickPaySM transactions, up 80%
• 60 million in Mobile Bill Pay, up 30%
• 200 million deposits made in a Chase ATM, up 10%
Providing a best-in-class digital experience also is more eicient for the bank. It costs us 3 cents to accept a deposit made from a smartphone and 8 cents for one at an ATM. With our new technologies, we have low-ered our costs per deposit by ~50%
in 2014 versus 2007.
Our 5,600 branch network is one of our most important assets for acquir-ing and deepenacquir-ing relationships. Last year, our branches helped nearly 20,000 irst-time homebuyers and 400,000 new small businesses and approved more than 1 million credit cards for customers. We’ve built a footprint that covers the highest growth markets in the United States.
But now that our buildout is com-plete, we won’t open as many new branches over the next few years. As all efective retailers do, we continu-ally review locations to determine where we can consolidate and still remain convenient for customers. As a result, our overall branch count will be down slightly from prior years.
Controls: Strengthen and simplify our business
Over the past two years, we have made signiicant investments in improving our controls. We hired dedicated teams to focus on de-risking the business and invested in technol-ogy to automate more processes and reduce manual errors. As one exam-ple, we have strengthened our Anti-Money Laundering (AML) procedures with a technology ix. Employees must ill out every data ield before complet-ing a new customer application.
Throughout 2014, we made excellent progress on our control agenda.
We exited 5,000 Politically Exposed Person relationships and 4,000 rela-tionships with small businesses in high-risk geographies and industries.
And we closed more than 100,000 accounts through AML screening and monitoring processes. We hope that by the end of 2015, we will have closed most of our legacy issues and invested in a stronger, simpler and safer business for the long term.
As we move forward into 2015, our core strategy is focused on three key areas: customers, controls and proit-ability. We will continue to focus on a great customer experience while investing in the best mobile and digi-tal capabilities in the industry. We will continue to further simplify our business by reducing the number of non-core products we have and investing in automation. And to deliver shareholder value, we will meet our expense targets and drive out unnecessary costs while continu-ing to invest in our business.
Conclusion
Across CCB, we feel very well- positioned for the future. The CCB Leadership Team and I are so proud to serve our customers and share-holders and to lead this exceptional business. Thank you for your invest-ment in our company.
Quite simply, we plan to be the bank of choice for digitally savvy custom-ers. Digital is core to our commit-ment to an outstanding customer experience. We’re bringing digital service to everything from routine deposits to credit card applications, rewards redemptions and mortgage application tracking.
Today’s customers expect to be able to transact with us whenever and wherever they choose, whether that’s through a superior digital experi-ence, a convenient ATM or a neigh-borhood branch. Every experience needs to be personal, easy and fast.
With advances in technology, cus-tomers will be able to complete 90%
of teller transactions at our smart ATMs by the end of 2016. We have made things easier by increasing withdrawal limits and allowing cus-tomers to receive their cash in any bill denomination they choose.
Mobile also is changing quickly.
Customers now can securely view their balances without having to log in and print statements directly from their phone.
Customers aren’t choosing between digital and branches – they are using both. When our customers use digi-tal, we see lower attrition, and we’re more likely to be their primary bank.
We know that our customers still want to come into the branch when they need advice or support, but for a basic transaction, they increasingly prefer to do it themselves.
Here are some of the indicators of the rapid growth in digital in just one year:
• 19 million mobile app users, up 20%
• 45 million Mobile QuickDepositSM transactions, up 25%
Gordon Smith
CEO, Consumer & Community Banking
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• Consumer relationships with almost half of U.S. households
• #1 among large banks in the 2014 American Customer Satisfaction Index survey for the third year in a row
• #1 primary banking relationship share in our footprint
• #1 in deposit growth among the largest 50 U.S. banks by the FDIC
• Outpaced the industry in deposit growth for the third consecutive year
• #1 in deposit share in three of the largest deposit markets
• #1 most visited banking portal in the United States — chase.com;
#1 mobile banking functionality
2014 HIGHLIGHTS AND ACCOMPLISHMENTS
Net Promoter Score1 Chase Household Attrition Rates3
• #1 Small Business Administration lender for women and minorities in the United States for the third year in a row
• #1 credit card issuer in the United States based on loans outstanding
• #1 U.S. co-brand credit card issuer
• #1 in total U.S. credit and debit payments volume
• #1 wholly-owned merchant acquirer in the United States
• #2 mortgage originator;
#2 mortgage servicer
• #3 non-captive auto lender
Source: Internal data
1 Note: Net Promoter Score (NPS) = % promoters minus % detractors
2 Auto NPS score tracked beginning in January 2012
Source: Internal data
3 Includes households that close all Chase accounts; average of annualized monthly attrition rates over 12 months for 2010 and 2014
PPT = Percentage points Nov-14
May-14 Nov-13 May-13 Nov-12 May-12 Nov-11 May-11 53
60 61
43
35 63
32
37
15 12
C onsumer Banking B usiness Banking C ard Mortgage Banking Auto2
Card Consumer Banking
Business Banking
2010 2014 (6) PPT
(4) PPT
(1) PPT
The Branch of the Future is here today In our branches, state-of-the-art smart ATMs allow customers to self-serve for transactions. Today, 50%
of all transactions can be made at an ATM. By the end of 2016, that number will be 90%.
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our top-tier rankings across the CIB’s spectrum of products and services.
Last year, J.P. Morgan helped clients raise $1.6 trillion in capital, a 7%
increase over the previous year. Of that amount, $61 billion was raised on behalf of states, local govern-ments, hospitals, universities, school districts and nonproits. Those funds were earmarked to build research facilities, construct children’s hospi-tals, inance clean water projects through green bonds and extend new rail lines in cities to alleviate traic congestion, among other pub-lic service projects. The CIB also was the #1 irm in U.S. dollar clearing for clients with a 19% share on Fedwire and the Clearing House Interbank Payments System (CHIPS).
It is a franchise that would be extremely diicult to replicate, espe-cially in the regulatory and economic environment we encounter today.
But we are not complacent. Nor do we take our top rankings for granted. In an evolving industry, we must be will-ing to anticipate and embrace change, operate eiciently and be vigilant in ensuring that our conduct doesn’t just meet high standards – it sets them.
In a year marked by uneven eco-nomic recovery in Europe, low mar-ket volatility and the implementation of additional capital standards, the ability to embrace change and adapt enabled the CIB to maintain its lead-ing market share across all business lines and generate strong returns on
$34.6 billion in net revenue – the highest among our corporate and investment bank peers.
With an improving global economy in 2015, I am conident that many of the headwinds we encountered last year will turn into tailwinds. As the recovery spreads throughout regions, countries and industry sectors, we foresee CEOs gaining conidence to pursue more opportunities. We remain one of the few truly global banks that can provide the complete array of products and services to fuel corporate growth, which, in turn, underpins economic expansion.
Earnings
For the year, the CIB reported net income of $6.9 billion on net revenue of $34.6 billion with a reported return on equity (ROE) of 10%. Excluding legal expense, the CIB earned $8.7 bil-lion with an ROE of 13%. Investment Banking fees of $6.6 billion were up 4% from the year before. And since 2010, the CIB’s Global Investment Banking fees have risen by 25%
compared with 17% for the rest of the industry, according to Dealogic.
Combined revenue in Treasury Services and Securities Services rose by 15% during the past ive years, far outpacing the rest of the top players’
2% gain.
The Corporate & Investment Bank’s broad range of products and services has the positive efect of smoothing out business luctuations in diferent market and economic environments.
For example, since 2010, the CIB
Corporate & Investment Bank
In 2014, the Corporate & Investment Bank (CIB) continued to deliver for clients on the strength of its unique scale, its complete range of oferings and its global reach.
By any measure, the J.P. Morgan CIB is an outstanding franchise. No other irm places so consistently among the top ranks of products across Invest-ment Banking, Markets and Investor Services. Our 2014 performance stands as an example of our ability to adapt to new capital and regulatory rules while optimizing our business, capturing eiciencies and targeting expense reductions – even as we continued to invest for the future.
With a global roster of 7,200 clients, counting more than 80% among the Fortune 500, the CIB ofers an inven-tory of integrated inancial products and services. To serve that client base, the CIB has more than 51,000 employees and a presence in 60 countries. Our expertise runs the gamut across investment banking, market-making, investor services, treasury services and research. The work we accomplished in 2014 on behalf of our clients is relected in
Daniel Pinto
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experienced overall volatility in annual revenue of just 4% compared with 6% for its top competitors. That stability, across ixed income and equity markets, is rooted in our tradi-tion of strong risk management.
What’s more, this year’s ROE is calculated on $61 billion of allocated capital, which is $13.5 billion, or 28%, greater today than it was in 2012.
But strong results going forward depend upon our maintaining a disciplined approach to expenses.
Since 2010, we have reduced front oice costs by more than $2 billion.
Although much of that reduction has been ofset by cost increases in controls, litigation and regulatory fees, we believe those areas are reaching a peak and will normalize over time.
Over the next three years, we have targeted expense reductions of $2.8 billion, partly coming from more end-to-end eiciencies in technology and operations and a better allocation of resources according to the depth of client relationships. We also expect to
capture cost savings from divestitures and simpliication eforts already undertaken in 2014.
Serving clients = gaining share J.P. Morgan gained share and contin-ued to hold top-tier positions across our lines of business, a testament to the irm’s client focus and resiliency.
In a diicult year, the CIB share of Investment Banking fee revenue led the industry at 8.1%, maintaining its
#1 ranking for the sixth year in a row, according to Dealogic.
Also impressive is our ability to work collaboratively across business lines, making it easier for clients to realize their strategic growth plans. For instance, by collaborating across the irm, the CIB once again was able to facilitate client strategies through its partnerships, notably with Asset Management and Commercial Banking. In fact, more Commercial Banking business lowed to the CIB during 2014 than ever before, generating a record $2 billion in Investment Banking revenue, up by
18% compared with the year before.
The power of our partnership with Commercial Banking has been an important factor in bolstering J.P. Morgan’s market share, even as the overall industry wallet has declined in recent years.
In 2014, our client demographic continued its shift toward interna-tional business. Since 2010, the CIB’s combined revenue from Europe, the Middle East and Africa (EMEA), Asia Paciic and Latin America grew by
Net Revenue and Overhead Ratio1,2 ($ in billions)
Net Income1,2,3 ($ in billions)
ROE1,3 (%) and Capital ($ in billions)
Optimizing the Businesses under Multiple Constraints
1 Net revenue, net income, ROE and overhead (O/H) ratio, exclude FVA (efective 2013) and DVA, non-GAAP inancial measures, for 2013 and prior years. These measures are used by management for assessment of the underlying performance of the business and for comparability with peers
2 All years have been revised for preferred dividends
3 All years exclude the impact of legal expense
DVA = debit valuation adjustment; FVA = funding valuation adjustment; GAAP = generally accepted accounting principles in the U.S.; LCR = liquidity coverage ratio;
NSFR = net stable funding ratio; SLR = supplementary leverage ratio 2014 2013 2012 2011 2010
$33.4 $33.0
$35.7 $36.7
$34.6 O/H ratio1,3
64% 66% 61% 58% 62%
5-year average: $34.7
2014 2013 2012 2011 2010
$8.5
$7.5
$9.3
$10.4
$8.7 5-year average: $8.9
2014 2013 2012 2011 2010 18%
$46.5 15%
$47.0 19%
$47.5 18%
$56.5 13%
$61.0
+$13.5 (up 28%)
● ● ●
●
●
5-year average: 17%
CCAR stress test
Capital (e.g., SLR, G–SIB) Portfolio
optimization Proitability constraints
Balance sheet
Liquidity (e.g., LCR, NSFR)