Commercial Banking delivers extensive industry knowledge, local expertise and dedicated service to U.S. and U.S. multinational clients, including
corporations, municipalities, financial institutions and nonprofit entities with annual revenue generally ranging from $20 million to $2 billion. CB provides financing to real estate investors and owners.
Partnering with the Firm’s other businesses, CB provides comprehensive financial solutions, including lending, treasury services, investment banking and asset management to meet its clients’ domestic and international financial needs.
Selected income statement data
Year ended December 31,
(in millions, except ratios) 2014 2013 2012
Revenue
Lending- and deposit-related fees $ 978 $ 1,033 $ 1,072 Asset management, administration
and commissions 92 116 130
All other income(a) 1,279 1,149 1,081
Noninterest revenue 2,349 2,298 2,283
Net interest income 4,533 4,794 4,629
Total net revenue(b) 6,882 7,092 6,912
Provision for credit losses (189) 85 41
Noninterest expense
Compensation expense 1,203 1,115 1,014
Noncompensation expense 1,492 1,495 1,375
Total noninterest expense 2,695 2,610 2,389 Income before income tax expense 4,376 4,397 4,482
Income tax expense 1,741 1,749 1,783
Net income $ 2,635 $ 2,648 $ 2,699
Revenue by product
Lending $ 3,576 $ 3,945 $ 3,762
Treasury services 2,448 2,429 2,428
Investment banking 684 575 545
Other 174 143 177
Total Commercial Banking net
revenue $ 6,882 $ 7,092 $ 6,912
Investment banking revenue, gross $ 1,986 $ 1,676 $ 1,597 Revenue by client segment
Middle Market Banking $ 2,838 $ 3,075 $ 3,010
Corporate Client Banking 1,935 1,851 1,843
Commercial Term Lending 1,252 1,239 1,206
Real Estate Banking 495 561 450
Other 362 366 403
Total Commercial Banking net
revenue $ 6,882 $ 7,092 $ 6,912
Financial ratios
Return on common equity 18% 19% 28%
Overhead ratio 39 37 35
Note: As discussed on pages 79–80, effective with the fourth quarter of 2014 the Firm changed its methodology for allocating the cost of preferred stock to its reportable business segments. Prior periods have been revised to conform with the current period presentation.
(a) Includes revenue from investment banking products and commercial card transactions.
(b) Total net revenue included tax-equivalent adjustments from income tax credits related to equity investments in designated community development entities that provide loans to qualified businesses in low-income communities, as well as tax-exempt low-income from municipal bond activity of $462 million, $407 million and $381 million for the years ended December 31, 2014, 2013 and 2012, respectively.
2014 compared with 2013
Net income was $2.6 billion, flat compared with the prior year, reflecting lower net revenue and higher noninterest expense, predominantly offset by a lower provision for credit losses.
Net revenue was $6.9 billion, a decrease of $210 million, or 3%, compared with the prior year. Net interest income was
$4.5 billion, a decrease of $261 million, or 5%, reflecting yield compression, the absence of proceeds received in the prior year from a lending-related workout, and lower purchase discounts recognized on loan repayments, partially offset by higher loan balances. Noninterest revenue was $2.3 billion, up $51 million, or 2%, reflecting higher investment banking revenue largely offset by business simplification and lower lending fees.
Noninterest expense was $2.7 billion, an increase of $85 million, or 3%, from the prior year, largely reflecting higher investments in controls.
2013 compared with 2012
Net income was $2.6 billion, a decrease of $51 million, or 2%, from the prior year, driven by an increase in
noninterest expense and the provision for credit losses, partially offset by an increase in net revenue.
Net revenue was a record $7.1 billion, an increase of $180 million, or 3%, from the prior year. Net interest income was
$4.8 billion, up by $165 million, or 4%, driven by higher loan balances and proceeds from a lending-related workout, partially offset by lower purchase discounts recognized on loan repayments. Noninterest revenue was $2.3 billion, flat compared with the prior year.
Noninterest expense was $2.6 billion, an increase of $221 million, or 9%, from the prior year, reflecting higher product- and headcount-related expense.
Management’s discussion and analysis
98 JPMorgan Chase & Co./2014 Annual Report
CB revenue comprises the following:
Lending includes a variety of financing alternatives, which are predominantly secured by receivables, inventory, equipment, real estate or other assets. Products include term loans, revolving lines of credit, bridge financing, asset-based structures, leases, commercial card products and standby letters of credit.
Treasury services includes revenue from a broad range of products and services that enable CB clients to manage payments and receipts, as well as invest and manage funds.
Investment banking includes revenue from a range of products that provide CB clients with sophisticated capital-raising alternatives, as well as balance sheet and risk management tools through advisory, equity underwriting, and loan syndications. Revenue from Fixed income and Equity market products used by CB clients is also included.
Investment banking revenue, gross, represents total revenue related to investment banking products sold to CB clients.
Other product revenue primarily includes tax-equivalent adjustments generated from Community Development Banking activities and certain income derived from principal transactions.
CB is divided into four primary client segments: Middle Market Banking, Corporate Client Banking, Commercial Term Lending, and Real Estate Banking.
Middle Market Banking covers corporate, municipal and nonprofit clients, with annual revenue generally ranging between $20 million and $500 million.
Corporate Client Banking covers clients with annual revenue generally ranging between $500 million and $2 billion and focuses on clients that have broader investment banking needs.
Commercial Term Lending primarily provides term financing to real estate investors/owners for multifamily properties as well as office, retail and industrial properties.
Real Estate Banking provides full-service banking to investors and developers of institutional-grade real estate investment properties.
Other primarily includes lending and investment activities within the Community Development Banking and Chase Capital businesses.
Selected metrics
As of or for the year ended December 31, (in millions,
except headcount) 2014 2013 2012
Selected balance sheet data (period-end)
Total assets $ 195,267 $ 190,782 $ 181,502
Loans:
Loans retained 147,661 135,750 126,996
Loans held-for-sale and
loans at fair value 845 1,388 1,212
Total loans $ 148,506 $ 137,138 $ 128,208
Equity 14,000 13,500 9,500
Period-end loans by client segment
Middle Market Banking $ 53,635 $ 52,289 $ 50,552 Corporate Client Banking 22,695 20,925 21,707
Commercial Term Lending 54,038 48,925 43,512
Real Estate Banking 13,298 11,024 8,552
Other 4,840 3,975 3,885
Total Commercial Banking
loans $ 148,506 $ 137,138 $ 128,208
Selected balance sheet data (average)
Total assets $ 191,857 $ 185,776 $ 165,111
Loans:
Loans retained 140,982 131,100 119,218
Loans held-for-sale and
loans at fair value 782 930 882
Total loans $ 141,764 $ 132,030 $ 120,100 Client deposits and other
third-party liabilities 204,017 198,356 195,912
Equity 14,000 13,500 9,500
Average loans by client segment
Middle Market Banking $ 52,444 $ 51,830 $ 47,009 Corporate Client Banking 21,608 20,918 19,572
Commercial Term Lending 51,120 45,989 40,872
Real Estate Banking 12,080 9,582 8,562
Other 4,512 3,711 4,085
Total Commercial Banking
loans $ 141,764 $ 132,030 $ 120,100
Headcount 7,262 6,848 6,117
JPMorgan Chase & Co./2014 Annual Report 99
Selected metrics (continued)
As of or for the year ended December 31, (in millions,
except ratios) 2014 2013 2012
Credit data and quality statistics
Net charge-offs/(recoveries) $ (7) $ 43 $ 35 Nonperforming assets
Nonaccrual loans:
Nonaccrual loans retained(a) 317 471 644
Nonaccrual loans held-for-sale
and loans at fair value 14 43 29
Total nonaccrual loans 331 514 673
Assets acquired in loan
satisfactions 10 15 14
Total nonperforming assets 341 529 687
Allowance for credit losses:
Allowance for loan losses 2,466 2,669 2,610 Allowance for lending-related
commitments 165 142 183
Total allowance for credit
losses 2,631 2,811 2,793
Net charge-off/(recovery) rate(b) —% 0.03% 0.03%
Allowance for loan losses to
period-end loansretained 1.67 1.97 2.06
Allowance for loan losses to
nonaccrual loans retained(a) 778 567 405
Nonaccrual loans to total
period-end loans 0.22 0.37 0.52
(a) An allowance for loan losses of $45 million, $81 million and $107 million was held against nonaccrual loans retained at December 31, 2014, 2013 and 2012, respectively.
(b) Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.
Management’s discussion and analysis
100 JPMorgan Chase & Co./2014 Annual Report